B-132859, FEBRUARY 14, 1958, 37 COMP. GEN. 524

B-132859: Feb 14, 1958

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CONTRACTS - ADVERTISING - NECESSITY OR NONNECESSITY - SPECIFICATION CHANGES - ITEMS WHICH HAVE TO BE DESIGNED NEITHER THE AWARD OF A CONTRACT MADE ON THE BASIS OF SUBSEQUENTLY AMENDED SPECIFICATIONS NOR THE MODIFICATION OF AN EXISTING CONTRACT TO INCORPORATE AMENDED SPECIFICATIONS IS IN COMPLIANCE WITH THE ADVERTISING STATUTES WHICH REQUIRE THAT THE SAME SPECIFICATIONS BE OFFERED TO ALL PROSPECTIVE BIDDERS TO PERMIT FULL AND FREE COMPETITION FOR GOVERNMENT BUSINESS. THE EXCEPTION TO THE ADVERTISING STATUTES WHICH PERMITS AWARDS IN CASES WHERE NO USEFUL PURPOSE WOULD BE SERVED BY ADVERTISING MAY NOT BE RESORTED TO WHERE THE ORIGINAL SPECIFICATIONS ARE SO ALTERED AS TO MAKE THE AMOUNT OF CHANGE TO BE EXPECTED IN BID PRICES CONJECTURAL.

B-132859, FEBRUARY 14, 1958, 37 COMP. GEN. 524

CONTRACTS - ADVERTISING - NECESSITY OR NONNECESSITY - SPECIFICATION CHANGES - ITEMS WHICH HAVE TO BE DESIGNED NEITHER THE AWARD OF A CONTRACT MADE ON THE BASIS OF SUBSEQUENTLY AMENDED SPECIFICATIONS NOR THE MODIFICATION OF AN EXISTING CONTRACT TO INCORPORATE AMENDED SPECIFICATIONS IS IN COMPLIANCE WITH THE ADVERTISING STATUTES WHICH REQUIRE THAT THE SAME SPECIFICATIONS BE OFFERED TO ALL PROSPECTIVE BIDDERS TO PERMIT FULL AND FREE COMPETITION FOR GOVERNMENT BUSINESS. THE EXCEPTION TO THE ADVERTISING STATUTES WHICH PERMITS AWARDS IN CASES WHERE NO USEFUL PURPOSE WOULD BE SERVED BY ADVERTISING MAY NOT BE RESORTED TO WHERE THE ORIGINAL SPECIFICATIONS ARE SO ALTERED AS TO MAKE THE AMOUNT OF CHANGE TO BE EXPECTED IN BID PRICES CONJECTURAL. THE GOVERNMENT'S NEED FOR UNIFORMITY IN THE PROCUREMENT OF AN ITEM TO BE PRODUCED AFTER A MODEL HAD BEEN ACCEPTED AND IN THE PROCUREMENT OF ADDITIONAL QUANTITIES, WHICH WERE ADVERTISED UNDER A SEPARATE INVITATION, IS NOT A SUFFICIENT BASIS FOR DETERMINING THAT THE CONTRACTOR WHO PRODUCED AN ACCEPTABLE MODEL, WHICH DIFFERED MATERIALLY AND IMPROVED ON THE SPECIFICATIONS, IS THE SOLE SOURCE OF SUPPLY AND FOR DISPENSING WITH THE REQUIREMENT FOR READVERTISING FOR ADDITIONAL QUANTITIES AFTER THE DESIGN AND PERFORMANCE REQUIREMENTS WERE DEFINITELY ESTABLISHED.

TO THE SECRETARY OF COMMERCE, FEBRUARY 14, 1958:

BY LETTERS DATED OCTOBER 8 AND DECEMBER 5, 1957, THE ASSISTANT SECRETARY FORWARDED CERTAIN INFORMATION AND MATERIAL IN CONNECTION WITH A PROTEST FILED BY KAAR ENGINEERING CORPORATION AGAINST THE ACTION OF THE CIVIL AERONAUTICS ADMINISTRATION IN AMENDING CONTRACT NO. CCA-32022 WITH THE WESTINGHOUSE ELECTRIC CORPORATION TO PROVIDE FOR THE ADDITIONAL PROCUREMENT OF 804 VHF GROUND-AIR TRANSMITTERS.

THE RECORD PRESENTLY BEFORE US INDICATES THAT CONTRACT NO. CCA-32022 WAS EXECUTED ON SEPTEMBER 13, 1956, PURSUANT TO BIDS SUBMITTED UNDER INVITATION NO. 6784. UNDER SCHEDULE I OF THIS INVITATION UNIT BIDS WERE REQUESTED ON QUANTITIES OF 200, 600, 900 AND 1,200, 50-WATT AMPLITUDE, VHF GROUND-AIR TRANSMITTER. AMENDMENT NO. 1, DATED JULY 13, 1956, TO INVITATION NO. 6784 REQUESTED ADDITIONAL BIDS ON QUANTITIES OF 1,800 AND 2,500. HOWEVER, THE GOVERNMENT'S RIGHT TO AVAIL ITSELF OF PRICES QUOTED UNDER ANY OF THESE OPTIONAL QUANTITY BIDS WAS LIMITED BY THE LANGUAGE OF SCHEDULE II AS FOLLOWS:

ADDITIONAL ORDERS: UNLESS OTHERWISE STATED BY THE BIDDER IN HIS PROPOSAL HE HEREBY GRANTS TO THE GOVERNMENT THE RIGHT AND OPTION TO PLACE ADDITIONAL ORDERS FOR QUANTITIES OF ANY ITEM CONTAINED IN THIS INVITATION WITHIN THE MAXIMUM QUANTITIES SPECIFIED DURING A PERIOD OF 60 DAYS FROM AND INCLUDING THE EFFECTIVE DATE OF NOTICE TO PROCEED ON THE ORIGINAL ORDER. * * *

THE CONTRACTOR WAS NOTIFIED TO PROCEED, EFFECTIVE OCTOBER 6, 1956, WITH AN INITIAL ORDER OF 1,727 TRANSMITTERS AND 173 SETS OF SPARE PARTS. AMENDMENT NO. 2 DATED FEBRUARY 26, 1957, THE TOTAL QUANTITY ORDERED WAS RAISED TO 1,748 TRANSMITTERS, THE 60-DAY TIME LIMIT ON ADDITIONAL ORDERS HAVING BEEN PREVIOUSLY EXTENDED TO FEBRUARY 28.

ARTICLE XV OF THE SPECIFICATIONS REQUIRED AN ENGINEERING MODEL TO BE SUBMITTED FOR INSPECTION, TESTS, AND APPROVAL WITHIN 154 CALENDAR DAYS AFTER RECEIPT OF NOTICE TO PROCEED, WITH DELIVERIES AT THE RATE OF 35 UNITS PER WEEK STARTING WITHIN 60 CALENDAR DAYS AFTER APPROVAL OF THE ENGINEERING MODEL. ALTHOUGH VARIOUS AMENDMENTS TO THE SPECIFICATIONS WERE MADE BY MODIFICATION NO. 3, DATED MAY 14, 1957, AT LEAST SOME OF WHICH WOULD APPEAR TO FACILITATE THE CONTRACTOR'S PRODUCTION OF AN ACCEPTABLE ENGINEERING MODEL UNDER THE SPECIFICATIONS, NO SUCH MODEL HAD BEEN PRODUCED AS OF JUNE 18, 1957, WHICH WAS MORE THAN 100 DAYS AFTER IT WAS REQUIRED UNDER ARTICLE XV OF THE SPECIFICATIONS.

INVITATION NO. 7115, REQUESTING BIDS ON ADDITIONAL QUANTITIES OF 700, 900, 1,200 AND 1,500 " TRANSMITTERS, VHF, 50 WATTS," WAS ISSUED ON JUNE 18, 1957. THE SPECIFICATIONS APPLICABLE TO INVITATION NO. 7115 WERE SIMILAR TO, BUT NOT IDENTICAL WITH, EITHER THE ORIGINAL OR AMENDED SPECIFICATIONS APPLICABLE TO CONTRACT NO. CCA-32022. BIDS UNDER THIS INVITATION WERE OPENED ON JULY 9, 1957, AND THE LOW BID, BASED ON COMPLIANCE WITH THE SPECIFICATIONS AS ADVERTISED, WAS SUBMITTED BY WESTINGHOUSE ELECTRIC CORPORATION.

THE RECORDS YOU HAVE FORWARDED TO US INDICATE THAT PRIOR TO AUGUST 2, 1957, WESTINGHOUSE ELECTRIC CORPORATION SUBMITTED UNDER ITS CONTRACT OF SEPTEMBER 13, 1956, THREE ENGINEERING MODELS, NONE OF WHICH WAS ACCEPTED. THE EXACT DATE ON WHICH THE FOURTH MODEL WAS SUBMITTED TO THE ADMINISTRATION IS NOT SHOWN BY THE RECORD SUBMITTED; HOWEVER, ON AUGUST 2, 1957, THE CONTRACTOR SUBMITTED TWO LETTERS OUTLINING PROPOSED CHANGES AND ACTIONS IN CONNECTION WITH THE PRODUCTION OF THE 1,748 VHF TRANSMITTERS IT WAS OBLIGATED TO FURNISH UNDER CONTRACT NO. CCA-32022. MODIFICATION NO. 4 TO THE CONTRACT WAS ISSUED ON AUGUST 12, 1957. THIS MODIFICATION EFFECTS THIRTY SEPARATE CHANGES "IN THE CONTRACT SPECIFICATION REQUIREMENTS APPLICABLE TO THE 1748 VHF, 50-WATT, GROUND AIR, TRANSMITTERS COVERED BY THE SUBJECT CONTRACT AS WELL AS ALL ADDITIONAL TRANSMITTERS SUBSEQUENTLY ORDERED THEREUNDER * * *," AND YOUR LETTER DATED SEPTEMBER 5, 1957, ADVISES THAT THE CONTRACTOR'S FOURTH ENGINEERING MODEL NOW MEETS THE CONTRACT SPECIFICATIONS AS AMENDED BY MODIFICATION NO. 4.

MODIFICATION NO. 5 TO CONTRACT NO. CCA-32022 WAS EXECUTED ON OCTOBER 11, 1957, AND PROVIDED FOR ,AN ADDITIONAL 804 TRANSMITTERS AND 80 SETS OF SPARE PARTS, CONFORMING TO THE REQUIREMENTS OF SPECIFICATION NO. CAA R- 1063 DATED MAY 1, 1956, AS AMENDED PREVIOUSLY AND MODIFIED HEREIN * * *.' THE MODIFICATION ALSO RECITES THE PRIOR ISSUANCE OF INVITATION NO. 7115, THE SUBMISSION OF THE LOW BID THEREUNDER BY WESTINGHOUSE ELECTRIC CORPORATION, AND THE ADMINISTRATIVE DETERMINATION THAT IT WOULD BE "IN THE BEST INTEREST OF THE GOVERNMENT TO COMBINE THESE REQUIREMENTS WITH THOSE COVERED BY CONTRACT CCA-32022 IN ORDER TO MAINTAIN A CONTINUITY OF PRODUCTION AND IN ORDER TO PROVIDE FOR ACCELERATED DELIVERY.' IT IS OUR UNDERSTANDING FROM YOUR LETTERS AND THE MATERIAL SUBMITTED THEREWITH THAT YOUR DETERMINATION TO COMBINE REQUIREMENTS UNDER CONTRACT NO. CCA-32022 IN ORDER TO MAINTAIN A CONTINUITY OF PRODUCTION AND PROVIDE FOR ACCELERATED DELIVERY WAS INFLUENCED BY ADVICE FROM THE CONTRACTOR THAT, IN THE EVENT IT RECEIVED THE ORDER FOR AN ADDITIONAL 804 UNITS UNDER INVITATION NO. 7115, PRODUCTION COULD BE SCHEDULED AT 125 UNITS PER WEEK BEGINNING DURING DECEMBER OF 1957, BUT, IN THE ABSENCE OF AN ORDER FOR THE ADDITIONAL 804 UNITS, THE MAXIMUM DELIVERY RATE FOR WHICH THE CONTRACTOR COULD AFFORD TO STAFF WOULD BE 75 TO 80 UNITS PER WEEK. BE THAT AS IT MAY, THE EFFECT OF MODIFICATION NO. 5 WAS TO AWARD THE ADDITIONAL 804 UNITS CONTEMPLATED BY INVITATION NO. 7115 TO WESTINGHOUSE ELECTRIC CORPORATION, UNDER SPECIFICATIONS WHICH WERE AMENDED BY THE CHANGES INCORPORATED INTO MODIFICATION NO. 4 TO CONTRACT NO. CCA-32022. THAT SUCH AMENDMENTS WERE MATERIAL TO THE QUESTION OF COMPLIANCE WITH COMPETITIVE BIDDING PROCEDURES IS ADEQUATELY ESTABLISHED BY YOUR ADVICE THAT SPECIFIC COST INCREASES AND DECREASES RESULTED TO THE CONTRACTOR FROM THE AMENDMENTS AND THAT IT WOULD BE IMPOSSIBLE TO ESTIMATE THE BID PRICES WHICH THE REMAINING BIDDERS WOULD HAVE SUBMITTED HAD THEY BEEN AFFORDED AN OPPORTUNITY TO BID ON THE SPECIFICATIONS AS AMENDED.

THE RULE THAT AN AWARD UNDER AN ADVERTISED PROCUREMENT MUST BE MADE UPON THE SAME SPECIFICATIONS THAT WERE OFFERED TO ALL BIDDERS IS SETTLED. OP.ATTY.GEN. 555; 11 COMP. GEN. 220; 16 ID. 21; 17 ID. 409. THE RECORD BEFORE US LEAVES NO DOUBT THAT THE SPECIFICATIONS UNDER WHICH WESTINGHOUSE ELECTRIC CORPORATION WAS AWARDED THE ADDITIONAL 804 TRANSMITTERS UNDER CONTRACT NO. CCA-32022, AS AMENDED BY MODIFICATION NO. 4, ARE NOT THE SAME SPECIFICATIONS WHICH WERE OFFERED TO ALL BIDDERS UNDER INVITATION NO. 7115. IT IS THEREFORE CLEAR THAT THE AWARD OF A SEPARATE CONTRACT TO WESTINGHOUSE UNDER THAT INVITATION WOULD NOT HAVE COMPLIED WITH THE ADVERTISING REQUIREMENTS OF R.S. 3709, 41 U.S.C. 5. THIS PRINCIPLE IS WELL STATED IN THE CASE OF DIAMOND V. CITY OF MANKATO 89 MINN. 48, 61 LRA 448, 451, WHERE THE COURT SAID:

* * * THE LAW IS WELL SETTLED THAT WHERE, AS IN THIS CASE, MUNICIPAL AUTHORITIES CAN ONLY LET A CONTRACT FOR PUBLIC WORK TO THE LOWEST RESPONSIBLE BIDDER, THE PROPOSALS AND SPECIFICATIONS THEREFOR MUST BE SO FRAMED AS TO PERMIT FREE AND FULL COMPETITION. NOR CAN THEY ENTER INTO A CONTRACT WITH THE BEST BIDDER CONTAINING SUBSTANTIAL PROVISIONS BENEFICIAL TO HIM, NOT INCLUDED IN OR CONTEMPLATED IN THE TERMS AND SPECIFICATIONS UPON WHICH BIDS WERE INVITED. THE CONTRACT MUST BE THE CONTRACT OFFERED TO THE LOWEST RESPONSIBLE BIDDER BY ADVERTISEMENT. * * *

WE SEE NO SOUND BASIS UPON WHICH IT MAY BE CONTENDED THAT THE EXECUTION OF A MODIFICATION, INCORPORATING SUCH AMENDED SPECIFICATIONS, TO AN EXISTING CONTRACT WITH THE LOW BIDDER WOULD COMPLY WITH THE STATUTORY REQUIREMENT. NO COMPETITIVE BIDS WOULD HAVE BEEN SOLICITED OR RECEIVED UPON THE AMENDED SPECIFICATIONS IN EITHER CASE, AND THE DECISIONS OF THIS OFFICE HAVE CONSISTENTLY HELD THAT PURCHASES IN EXCESS OF THE AMOUNT STIPULATED IN THE ORIGINAL CONTRACT SHOULD BE SEPARATELY CONTRACTED FOR, AFTER ADVERTISING, NOTWITHSTANDING THE PROBABILITY OF THE EXCESS QUANTITY BEING OBTAINABLE UNDER THE ORIGINAL CONTRACT AT A LESSER PRICE. 11 COMP. GEN. 183; 15 ID. 954; 19 ID. 980. NOR DOES AN ADMINISTRATIVE CONCLUSION THAT A PARTICULAR FIRM WOULD HAVE AN ADVANTAGE IN BIDDING BY REASON OF ITS ASSOCIATION WITH THE ORIGINAL PRODUCTION OF AN ITEM JUSTIFY AWARD OF A CONTRACT TO SUCH FIRM WITHOUT ADVERTISING FOR BIDS. 18 COMP. GEN. 579, 23 ID. 395. TO THE SAME EFFECT ARE DECISIONS OF THIS OFFICE HOLDING THAT AN EXISTING CONTRACT MAY NOT BE EXPANDED SO AS TO INCLUDE ADDITIONAL WORK OF ANY CONSIDERABLE MAGNITUDE WITHOUT ADVERTISING, UNLESS IT CLEARLY APPEARS THAT IT IS SUCH AN INSEPARABLE PART OF THE ORIGINAL WORK AS TO RENDER IT REASONABLY IMPOSSIBLE OF PERFORMANCE BY OTHER THAN THE ORIGINAL CONTRACTOR. 5 COMP. GEN. 508; ID. 642; 14 ID. 466; 15 ID. 573; 17 ID. 427; 19 ID. 662; 30 ID. 34.

WITH RESPECT TO THE CONTENTION THAT A READVERTISEMENT FOR BIDS UNDER SPECIFICATIONS WHICH INCLUDED THE CHANGES INCORPORATED BY MODIFICATION NO. 4 WOULD HAVE SERVED NO USEFUL PURPOSE BECAUSE OF THE SPREAD IN PRICES BETWEEN THE WESTINGHOUSE BID AND THAT SUBMITTED BY THE SECOND LOWEST RESPONSIBLE BIDDER, WE ARE OF THE OPINION THAT THE EXCEPTION TO THE ADVERTISING STATUTES UPON WHICH THIS CONTENTION IS BASED HAS NO APPLICATION WHERE, AS HERE, THE ORIGINAL SPECIFICATIONS ARE ALTERED IN SUCH MANNER AS TO MAKE THE AMOUNT OF CHANGE TO BE EXPECTED IN BID PRICES CONJECTURAL. NOR ARE WE ABLE TO AGREE THAT THE GOVERNMENT'S NEED FOR UNIFORMITY IN THE TRANSMITTERS TO BE PROCURED FROM WESTINGHOUSE UNDER CONTRACT NO. 32022 AND THOSE CONTEMPLATED UNDER IFB 7115 CONSTITUTED WESTINGHOUSE A SOLE SOURCE OF THESE TRANSMITTERS ONCE ITS ENGINEERING MODEL WAS ACCEPTED. WHILE WE UNDERSTAND THAT IT IS THE POLICY OF THE ADMINISTRATION TO DRAW SPECIFICATIONS ON ARTICLES OF THIS TYPE IN AS GENERAL AND UNRESTRICTIVE A MANNER AS POSSIBLE IN ORDER TO TAKE ADVANTAGE OF SUCH IMPROVEMENTS AND NEW IDEAS AS THE INDUSTRY MAY ADVANCE, AND THAT IT WOULD HAVE BEEN, FOR ALL PRACTICAL PURPOSES, IMPOSSIBLE FOR ANY OTHER MANUFACTURER TO HAVE DUPLICATED THE WESTINGHOUSE MODEL FROM SUCH GENERAL SPECIFICATIONS, WE SEE NO JUSTIFICATION FOR ADHERENCE TO SUCH POLICY AFTER DESIGN AND PERFORMANCE REQUIREMENTS ARE FROZEN. THE RULE IS WELL SETTLED THAT SPECIFICATIONS MUST BE DRAWN WITH SUFFICIENT DEFINITENESS TO PERMIT ALL BIDDERS TO COMPETE ON THE SAME ARTICLE AND IT IS INCUMBENT UPON YOUR ADMINISTRATION, ONCE YOUR REQUIREMENTS ARE ESTABLISHED, TO SUBMIT SPECIFICATIONS TO PROSPECTIVE BIDDERS WHICH WILL PERMIT FULL AND FREE COMPETITION.

WE KNOW, FROM CONFERENCES WITH MEMBERS OF YOUR ENGINEERING STAFF, THAT THEY ARE FIRMLY OF THE OPINION THAT THE TRANSMITTERS TO BE RECEIVED UNDER THE MODIFIED SPECIFICATIONS ARE FROM A PRACTICAL STANDPOINT AS GOOD AS, OR BETTER THAN, THOSE THEY HAD ENVISAGED WHEN THE ORIGINAL SPECIFICATIONS WERE DRAWN UP, AND WE DO NOT QUESTION THE GOOD FAITH OF THEIR BELIEF THAT THE OVERALL EFFECT OF THE MODIFICATIONS WAS IN THE BEST INTEREST OF THE GOVERNMENT FROM THE STANDPOINT OF MOST EFFECTIVELY SERVING THE ACTUAL EXISTING NEEDS IN THE MOST EXPEDITIOUS WAY. WE CANNOT, HOWEVER, OVERLOOK THE FACT THAT THE MODIFICATIONS DID IN FACT CONSTITUTE RELAXATIONS IN SEVERAL RESPECTS OF ADVERTISED SPECIFICATIONS, BOTH IN THE STATED PERFORMANCE REQUIREMENTS AND IN THE TECHNICAL STANDARDS PRESCRIBED.

IN THE CIRCUMSTANCES IT IS OUR OPINION THAT THE ACTION OF YOUR ADMINISTRATOR IN EXECUTING MODIFICATION NO. 5 TO CONTRACT NO. CCA-32 WAS IN CONTRAVENTION OF THE ADVERTISING STATUTES. HOWEVER, IN VIEW OF ORAL ASSURANCES FROM THE CIVIL AERONAUTICS ADMINISTRATION THAT THE TRANSMITTERS PRESENTLY BEING PROCURED FROM WESTINGHOUSE UNDER CONTRACT NO. CCA-32022 ARE ADEQUATE TO THE NEEDS OF THE SAFETY PROGRAM FOR WHICH THEY WERE PROCURED; THAT FUTURE PROCUREMENT PRACTICES WILL BE CORRECTED TO PREVENT A REPETITION OF THE CIRCUMSTANCES HERE INVOLVED; AND THAT A READVERTISEMENT AT THIS TIME WOULD SERIOUSLY HANDICAP THE AIR SAFETY PROGRAM AND WOULD RENDER COMPLIANCE IMPOSSIBLE WITH THE CONGRESSIONALLY APPROVED SCHEDULE FOR SUCH PROGRAM, NO FURTHER ACTION BY THIS OFFICE IN THE MATTER IS CONTEMPLATED.

THE ENCLOSURES FORWARDED TO THIS OFFICE BY THE CIVIL AERONAUTICS ADMINISTRATION IN THIS MATTER ARE ENCLOSED.