B-128460, OCT. 1, 1956

B-128460: Oct 1, 1956

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TO GIBBS MANUFACTURING AND RESEARCH CORPORATION: REFERENCE IS MADE TO YOUR TELEFAX OF JUNE 29. IN THE TELEFAX IT WAS STATED THAT YOUR PROTEST WAS BASED ON AN UNJUSTIFIABLE EVALUATION OF GOVERNMENT-OWNED TOOLING AND A DISREGARD OF MANDATORY SET ASIDE FOR SMALL BUSINESS. THE DEPARTMENT STATES THAT THE PROCUREMENT IN QUESTION WAS INITIALLY SET ASIDE BY JOINT DETERMINATION FOR SMALL BUSINESS AND WAS A "TOTAL SET ASIDE" AS DEFINED IN PARAGRAPH 10C (1) OF AR 715-3. REQUEST FOR PROPOSALS WERE THEREAFTER SOLICITED FROM LOMPCO PRODUCTS. ALL OF WHICH WERE PRESUMED TO BE SMALL BUSINESS CONCERNS. AN ADDITIONAL PROPOSAL WAS SUBSEQUENTLY RECEIVED FROM EVANS REAMER AND MACHINE CO. WHICH WAS DETERMINED TO BE A WHOLLY OWNED SUBSIDIARY OF LEMPCO PRODUCTS.

B-128460, OCT. 1, 1956

TO GIBBS MANUFACTURING AND RESEARCH CORPORATION:

REFERENCE IS MADE TO YOUR TELEFAX OF JUNE 29, 1956, AND LETTER OF SEPTEMBER 12, 1956, RELATIVE TO YOUR PROTEST IN CONNECTION WITH PROPOSAL APO 519-56 2 BY THE ORDNANCE AMMUNITION COMMAND, JOLIET, ILLINOIS, FOR FURNISHING MINES, AP, M16E3.

IN THE TELEFAX IT WAS STATED THAT YOUR PROTEST WAS BASED ON AN UNJUSTIFIABLE EVALUATION OF GOVERNMENT-OWNED TOOLING AND A DISREGARD OF MANDATORY SET ASIDE FOR SMALL BUSINESS.

IN RESPONSE TO OUR REQUEST, THE DEPARTMENT OF THE ARMY HAS FURNISHED A DETAILED REPORT OF THE FACTS IN THE MATTER OF THE PROCUREMENT. THE DEPARTMENT STATES THAT THE PROCUREMENT IN QUESTION WAS INITIALLY SET ASIDE BY JOINT DETERMINATION FOR SMALL BUSINESS AND WAS A "TOTAL SET ASIDE" AS DEFINED IN PARAGRAPH 10C (1) OF AR 715-3. REQUEST FOR PROPOSALS WERE THEREAFTER SOLICITED FROM LOMPCO PRODUCTS, INC., DALTON FOUNDRIES, INC., AND YOUR COMPANY, THE GIBBS MANUFACTURING AND RESEARCH CORPORATION, ALL OF WHICH WERE PRESUMED TO BE SMALL BUSINESS CONCERNS. AN ADDITIONAL PROPOSAL WAS SUBSEQUENTLY RECEIVED FROM EVANS REAMER AND MACHINE CO., WHICH WAS DETERMINED TO BE A WHOLLY OWNED SUBSIDIARY OF LEMPCO PRODUCTS. AT THE APPROXIMATE TIME THAT PROPOSALS WERE RECEIVED AT THE ORDNANCE AMMUNITION COMMAND, IT WAS DISCOVERED THAT LEMPCO PRODUCTS DID NOT QUALIFY AS SMALL BUSINESS. AFTER AN EVALUATION OF THE VARIOUS PROPOSALS, IT WAS DETERMINED BY THE CONTRACTING OFFICER, AND CONCURRED IN BY THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE, THAT IT WAS IN THE INTEREST OF THE GOVERNMENT TO WITHDRAW THE JOINT DETERMINATION OF TOTAL SET ASIDE FOR SMALL BUSINESS. THIS WITHDRAWAL ACTION WAS DEEMED TO BE NECESSARY BECAUSE OF THE WIDE PRICE DIFFERENTIAL BETWEEN LEMPCO PRODUCTS, INC., AND YOUR COMPANY.

IT IS THE POLICY OF THE DEPARTMENT OF THE ARMY THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR SUPPLIES AND SERVICES FOR THE ARMY WILL BE PLACED WITH SMALL BUSINESS CONCERNS. THE PROCEDURES FOR CARRYING OUT THIS POLICY ARE CONTAINED IN ARMY REGULATIONS NO. 715-3, DATED FEBRUARY 29, 1956. PARAGRAPH 10C (4) OF THOSE REGULATIONS SPECIFICALLY PROVIDES THAT IN ANY CASE WHERE THE CONTRACTING OFFICER CONSIDERS THAT A CONTRACT CANNOT BE MADE WITH A SMALL BUSINESS CONCERN WITHOUT DETRIMENT TO THE GOVERNMENT'S INTEREST, (E.G., BECAUSE OF UNREASONABLE PRICE) THE CONTRACTING OFFICER MAY INITIATE WITHDRAWAL OF THE SET-ASIDE. SINCE A WIDE PRICE DIFFERENTIAL EXISTED BETWEEN YOUR BID AND THAT OF LEMPCO PRODUCTS, INC., THE CONTRACTING OFFICER WAS AUTHORIZED, WITH THE CONCURRENCE OF THE SMALL BUSINESS ADMINISTRATION, TO WITHDRAW THE SET- ASIDE UNDER THE AUTHORITY CONTAINED IN AR 715-3, PARAGRAPH 10C (4).

WITH REGARD TO YOUR STATEMENT THAT THERE WAS AN UNJUSTIFIABLE EVALUATION OF GOVERNMENT-OWNED TOOLING, THE DEPARTMENT OF THE ARMY HAS REPORTED THAT IN ACCORDANCE WITH ITEM NO. 8 OF THE REQUEST FOR PROPOSAL, THE OFFEROR WAS REQUESTED TO INCLUDE IN HIS QUOTED UNIT PRICE THE COST OF SPECIAL TOOLING, SUCH TOOLING BEING DEFINED FOR OFFEROR IN A SPECIAL CLAUSE ATTACHED AS AN EXHIBIT TO THE PROPOSAL. IN ADDITION, OFFEROR WAS REQUIRED TO FURNISH AN ITEMIZED LIST OF SUCH TOOLING AND SHOW ITS TOTAL COST AS A SEPARATE ITEM ON DD FORM'S 633 WHICH WERE ALSO ATTACHED AS EXHIBITS TO THE PROPOSAL. THE DEPARTMENT OF THE ARMY FURTHER REPORTS AS FOLLOWS:

"IN RESPONSE, THE GIBBS MANUFACTURING AND RESEARCH CORPORATION MADE THE FOLLOWING ENTRIES WITHIN THEIR SUBMITTED PROPOSAL RELATIVE TO TOOLING:

TABLE

FORM ENTRY DD FORM 746-1 OFFEROR INDICATED THE TOTAL COST OF

"TOOLING-DD-633 AND OAC-170" AS A

SEPARATE ITEM IN LIEU OF INCLUDING

SAME IN UNIT PRICE. DD FORM 633 OFFEROR INDICATED IN LINE 24 AS AN

ITEM OF COST THE "SPECIAL TOOLING

COST FROM REVERSE SIDE OF FORM," THE

REVERSE SIDE INDICATING AN "ANALYSIS

OF TOTAL ESTIMATED COST OF SPECIAL

TOOLING.' IN ADDITION, OFFEROR

INDICATED IN LINE 25 THE "UNIT

SELLING PRICE INCLUDING SPECIAL

TOOLING" WHICH WAS CONSIDERED IN THE

GOVERNMENT'S EVALUATION AS OFFEROR'S

BASIC UNIT CONTRACT PRICE. OAC FORM 170 OFFEROR CHANGED TITLE BLOCK NO. 15

OF FORM "COST PER MACH. WITH (1) SET

OF TOOLING" TO READ "COST (1) SET OF

TOOLING.' THE TOTAL COST OF TOOLING

INDICATED ON THIS FORM EQUALED THE

TOTAL AMOUNTS LISTED BY OFFEROR ON

THE ABOVE OTHER TWO FORMS.

"5. IN VIEW OF THE ABOVE ENTRIES AND THE LACK OF ANY CONTRARY REASONS TO DO OTHERWISE, THE ORDNANCE AMMUNITION COMMAND CONSIDERED THE OFFEROR'S QUOTED BASIC CONTRACT PRICE TO BE THE SUM OF THE QUOTED PRICE PLUS QUOTED TOOLING PRICE INDICATED BY OFFEROR ON DD FORM 746 1. THE QUOTED BASIC UNIT CONTRACT PRICE WAS DETERMINED BY DIVIDING THE TOTAL BASIC CONTRACT PRICE BY THE PROPOSED CONTRACT QUANTITY. THIS METHOD WAS ALSO UTILIZED BY THE CHICAGO ORDNANCE DISTRICT IN ITS EVALUATION OF OFFEROR'S PROPOSAL.

"6. THE GIBBS' PROPOSAL WAS RE-EVALUATED FOR INFORMATIONAL PURPOSES ONLY, BASED ON THE INTERPRETATION OF THE OFFEROR THAT THE REPORTED TOOLING VALUE CONSISTED OF 90 PERCENT SCHEDULE "A" EQUIPMENT AND 10 PERCENT SPECIAL TOOLING. IF SUCH AN EVALUATION HAD BEEN COMPETITIVELY USED, IT WOULD NOT HAVE CHANGED THE ACTION WHICH FINALLY RESULTED. RE EVALUATIONS WERE ALSO MADE CONSIDERING OTHER POSSIBLE COMBINATIONS OF AWARDS BASED ON THE DIFFERENT DESIGNS. THIS INFORMATION WILL BE FURNISHED IF REQUIRED. IN NO CASE DID SUCH RE-EVALUATIONS INDICATE A SAVING TO ORDNANCE OVER THAT COMBINATION FINALLY SELECTED.

"7. BASED ON THE ORIGINAL PROPOSALS FOR THE LEMPCO'S DESIGN, ON 29 JUNE 1956, CONTRACT ORD-2237 WAS AWARDED DALTON FOUNDRIES, INC. (FOR A QUANTITY OF 581,400 UNITS AT A COST OF $1,016,868.60) AND ON 30 JUNE 1956, CONTRACT ORD-2231 WAS AWARDED LEMPCO PRODUCTS, INC. (FOR A QUANTITY OF 581,400 UNITS AT A COST OF $938,030.76.). BASED ON THEIR AWARD, LEMPCO GRANTED THE GOVERNMENT A ROYALTY-FREE, IRREVOCABLE LICENSE TO PRACTICE, AND CAUSE TO BE PRACTICED BY OR FOR THE GOVERNMENT, THROUGHOUT THE WORLD, THE M16E3 DESIGN.'

THE RECORD FURNISHED IN THIS INSTANCE CONTAINS NOTHING TENDING TO INDICATE THAT THE ACTION TAKEN WAS INFLUENCED BY ANY CONSIDERATION OTHER THAN THE BEST JUDGMENT OF THE CONTRACTING OFFICIALS CONCERNED OR THAT IT WAS IN ANY RESPECT CONTRARY TO LAW. ACCORDINGLY, WE WOULD NOT BE JUSTIFIED IN QUESTIONING THE AWARDS AS MADE.