B-120381, JUN. 14, 1955

B-120381: Jun 14, 1955

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MORRISON: FURTHER REFERENCE IS MADE TO YOUR LETTER OF JUNE 8. A CONTRACT FOR EXPENDABLE SUPPLIES WHICH ARE MANUFACTURED BY AT LEAST TWO OTHER COMPETENT MANUFACTURERS. YOU FURTHER ALLEGE THAT THE CORPS OF ENGINEERS NOT ONLY IS PAYING OUTRAGEOUS PRICES TO WALLACE AND TIERNAN. PATENT ON THE EQUIPMENT ARE VIRTUALLY PARALLEL. WE HAVE MADE A DETAILED INVESTIGATION OF THE MATTERS COMPLAINED OF IN YOUR LETTER AND OUR FINDINGS ARE AS FOLLOWS: YOUR PROTEST CONCERNS TWO CONTRACTS AWARDED TO WALLACE AND TIERNAN. WAS NEGOTIATED WITH WALLACE AND TIERNAN. THIRTY OF THESE ITEMS WERE FOR A PURIFICATION UNIT OF THE TYPE PROCURED UNDER INVITATION FOR BIDS NO. THE CONTRACT WAS A "CALL TYPE" CONTRACT AND DID NOT OBLIGATE THE CORPS OF ENGINEERS TO BUY EITHER A MINIMUM OR MAXIMUM QUANTITY OF THE PARTS LISTED.

B-120381, JUN. 14, 1955

TO MR. ORVILLE C. MORRISON:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JUNE 8, 1954, PROTESTING THE ACTION OF THE DEPARTMENT OF THE ARMY IN MAKING AN AWARD TO WALLACE AND TIERNAN, INC., OF A CONTRACT FOR WATER PURIFICATION EQUIPMENT PURSUANT TO INVITATION NO. ENG-36-109-54-202.

IN YOUR LETTER YOU ALLEGE THAT THE GOVERNMENT AWARDED, WITHOUT COMPETITION, A CONTRACT FOR EXPENDABLE SUPPLIES WHICH ARE MANUFACTURED BY AT LEAST TWO OTHER COMPETENT MANUFACTURERS, AND THEN INVITED BIDS FOR THE EQUIPMENT EMPLOYING THE EXPENDABLE SUPPLIES ALREADY CONTRACTED FOR. YOU SUGGEST THAT WE OBTAIN THE FILE CONCERNING THE MATTER FROM THE CORPS OF ENGINEERS AND CONTACT THE JUSTICE DEPARTMENT FOR THEIR FILE ON WALLACE AND TIERNAN, INC. YOU FURTHER ALLEGE THAT THE CORPS OF ENGINEERS NOT ONLY IS PAYING OUTRAGEOUS PRICES TO WALLACE AND TIERNAN, INC., BUT THAT A MONOPOLISTIC RELATIONSHIP EXISTS BETWEEN THE CORPS OF ENGINEERS AND WALLACE AND TIERNAN, INC., WHICH HAS VIRTUALLY ARRESTED ALL DEVELOPMENT OF SUPERIOR WATER PURIFICATION EQUIPMENT SINCE WORLD WAR I. FINALLY, YOU STATE THAT THE MILITARY SPECIFICATION AND THE WALLACE AND TIERNAN, INC., PATENT ON THE EQUIPMENT ARE VIRTUALLY PARALLEL.

WE HAVE MADE A DETAILED INVESTIGATION OF THE MATTERS COMPLAINED OF IN YOUR LETTER AND OUR FINDINGS ARE AS FOLLOWS: YOUR PROTEST CONCERNS TWO CONTRACTS AWARDED TO WALLACE AND TIERNAN, NC., BY THE CORPS OF ENGINEERS, PHILADELPHIA DISTRICT OFFICE. THE FIRST CONTRACT DATED MARCH 3, 1954, WAS NEGOTIATED WITH WALLACE AND TIERNAN, INC., UNDER THE AUTHORITY OF SECTION 2/C) (1) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947, 62 STAT. 21. THE CONTRACT PROVIDED FOR THE FURNISHING OF 618 ITEMS OF SPARE PARTS, WHEN ORDERED, FOR ALL TYPES OF WATER PURIFICATION EQUIPMENT PREVIOUSLY BOUGHT FROM THIS FIRM. THIRTY OF THESE ITEMS WERE FOR A PURIFICATION UNIT OF THE TYPE PROCURED UNDER INVITATION FOR BIDS NO. ENG-36-109-54-202. THE CONTRACT WAS A "CALL TYPE" CONTRACT AND DID NOT OBLIGATE THE CORPS OF ENGINEERS TO BUY EITHER A MINIMUM OR MAXIMUM QUANTITY OF THE PARTS LISTED. THE SECOND CONTRACT DATED JUNE 9, 1954, WAS AWARDED TO WALLACE AND TIERNAN, INC., AS THE LOWEST BIDDER IN RESPONSE TO BID INVITATION ENG- 36-109-54-202. THIS CONTRACT PROVIDED FOR FURNISHING 3088 WATER PURIFICATION UNITS, ONE-FOURTH GALLON PER MINUTE, AND GAVE THE GOVERNMENT THE OPTION TO PURCHASE SPARE PARTS NOT IN EXCESS OF 10 PERCENT OF THE CONTRACT PRICE. SINCE THE CONTRACT DATED MARCH 3, 1954, WAS NEGOTIATED IN ACCORDANCE WITH THE LAW AND CONSIDERING THE FACT THAT THE PRINCIPAL POTENTIAL NEED FOR THE SPARE PARTS WAS FOR THE MAINTENANCE OF EQUIPMENT ALREADY IN SERVICE, WE PERCEIVE NO LEGAL OR PROPER BASIS UPON WHICH WE CAN QUESTION THE CONTRACT OR THE MANNER IN WHICH IT WAS ENTERED INTO. ALSO, SINCE THE SECOND CONTRACT WAS AWARDED AFTER COMPETITIVE BIDDING TO THE LOWEST RESPONSIBLE BIDDER, THERE IS NO LEGAL BASIS FOR QUESTIONING THAT CONTRACT.

IN ACCORDANCE WITH YOUR SUGGESTION WE CHECKED THE FILES OF THE CORPS OF ENGINEERS AND THE DEPARTMENT OF JUSTICE WHICH REVEALED THAT IN JULY 1954 AN ANTITRUST ACTION WAS BROUGHT AGAINST WALLACE AND TIERNAN, INC., IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND. THERE IS NOTHING IN THE RECORD TO INDICATE THAT THESE CONTRACTS WERE INVOLVED IN THAT CASE.

REGARDING YOUR ALLEGATION THAT THE GOVERNMENT PAID EXORBITANT PRICES TO WALLACE AND TIERNAN, INC., FOR WATER PURIFICATION EQUIPMENT, WE FOUND THAT THE PRICE OF THE 1/4-GPM WATER PURIFICATION EQUIPMENT HAS STEADILY DECREASED SINCE 1951. PRIOR TO 1951 THE GOVERNMENT PAID $108.72 FOR A SET, CONSISTING OF A UNIT WITH 12 ACCESSORIES, 248 PACKS OF FILTER PADS, AND 100 BOTTLES OF 100 CHLORINE TABLETS EACH. THE PRICE WAS THEREAFTER REDUCED TO $76.13 A SET. IN SEPTEMBER 1951, THE GOVERNMENT PAID THE SUNROC COMPANY $56.40, NET, FOR A UNIT OF U2 ACCESSORIES. WALLACE AND TIERNAN, INC., IS NOW SUPPLYING THE UNIT AND 12 ACCESSORIES FOR $36.26. CONSIDERING THESE FACTS IT DOES NOT APPEAR THAT THE GOVERNMENT IS PAYING EXORBITANT PRICES NOR DOES IT APPEAR THAT WALLACE AND TIERNAN, INC., HAS A MONOPOLY ON WATER PURIFICATION EQUIPMENT.

IN REGARD TO THE MILITARY SPECIFICATION PARALLELING THE WALLACE AND TIERNAN, INC., PATENT, WE FOUND THAT THE 1/4-GPM UNIT WAS DEVELOPED BY WALLACE AND TIERNAN, INC., ABOUT 1943 AND THAT THEY SUPPLIED LARGE QUANTITIES OF THIS UNIT TO THE MILITARY DEPARTMENTS DURING WORLD WAR II. THE MILITARY SPECIFICATION WAS WRITTEN IN DECEMBER 1944 AS CORPS OF ENGINEERS SPECIFICATION T-2090-A, WHICH WAS SUPERSEDED BY SPECIFICATION MIL-W-3361 IN NOVEMBER 1950. SINCE THE UNIT OF WALLACE AND TIERNAN, INC., WAS THE ONLY ONE IS EXISTENCE AT THAT TIME, THE MILITARY SPECIFICATION UNDOUBTEDLY WAS SIMILAR TO THEIR UNIT. IT HAS BEEN RECOGNIZED BY THE COURTS, AND THIS OFFICE AS WELL, THAT SPECIFICATIONS SHOULD BE SO DRAWN AS TO PERMIT PROSPECTIVE BIDDERS TO COMPETE UPON A COMMON BASIS. WE HAVE TAKEN THE POSITION, HOWEVER, THAT SPECIFICATIONS WHICH SET OUT THE MINIMUM NEEDS OF THE GOVERNMENT IN GENERAL TERMS WITHOUT REFERENCE TO ANY PATENTED DEVICE, TRADE NAME, OR PROPRIETARY ARTICLE, ARE NOT RESTRICTIVE OF COMPETITION MERELY BECAUSE THEY INCLUDE ARTICLES WHICH CAN BE MANUFACTURED ONLY UNDER A PATENTED PROCESS. IT MAY BE POINTED OUT THAT THE GOVERNMENT CANNOT BE LIMITED IN ITS PROCUREMENT ONLY TO THOSE ITEMS WHICH ARE NOT PATENTED, OR AS TO WHICH NO PATENTED PROCESSES OR DEVICES ARE INVOLVED IN THEIR MANUFACTURE. IF THE GOVERNMENT PROCUREMENT AGENCIES WERE RESTRICTED TO THE PURCHASE OF ONLY NONPATENTED ARTICLES, THEIR SOURCE OF SUPPLY OF NEEDED ARTICLES WOULD INDEED BE LIMITED, ESPECIALLY IN THE PRESENT DAY OR MODERN FIELD OF COMMERCIAL MANUFACTURE.

IN VIEW OF THE FACTS RELATED ABOVE WE MUST CONCLUDE THAT THE AWARD OF THE CONTRACT TO WALLACE AND TIERNAN, INC., BASED ON INVITATION FOR BIDS NO. ENG-36-109-54-202, WAS LEGAL AND PROPER.