B-135078, APR. 8, 1958

B-135078, APR. 8, 1958

TO MR. HENRY S. MAUK, PRESIDENT, PLANT ENGINEERING, INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF JANUARY 30, 1958, PROTESTING THE AWARD OF A NEGOTIATED CONTRACT FOR THE OPERATION AND MAINTENANCE OF A POWER PLANT AT THE SAGE FACILITY AT GUNTER AIR FORCE BASE TO THE M AND T COMPANY, PHILADELPHIA, PENNSYLVANIA.

YOUR PROTEST IS BASED ON THE CONTENTIONS THAT THE PROCUREMENT SHOULD HAVE BEEN ADVERTISED RATHER THAN NEGOTIATED; THAT A COST-PLUS-A-FIXED FEE CONTRACT WAS INAPPROPRIATE IN THIS CASE; AND THAT THE AIR FORCE COMMITTED AN ERROR WHICH OPERATED TO THE PREJUDICE OF BIDDERS WHEN IT REQUESTED THAT THE SUCCESSFUL CONTRACTOR PROVIDE A SUPERVISORY UTILITIES ENGINEER. ADDITION, YOU CONTEND THAT THE DOLLAR AMOUNT OF THIS PROCUREMENT IS NOT SUBSTANTIAL ENOUGH TO WARRANT THE ADMINISTRATIVE COSTS OF A CPFF TYPE OF CONTRACT.

THE CONTRACT IS REPORTED TO HAVE BEEN NEGOTIATED PURSUANT TO SECTION 2304/A) (10) OF TITLE 10, U.S. CODE, WHICH AUTHORIZES THE AGENCY HEAD TO NEGOTIATE WITHOUT FORMAL ADVERTISING A PURCHASE OR A CONTRACT IF THE PURCHASE OR CONTRACT IS FOR PROPERTY OR SERVICES FOR WHICH IT IS IMPRACTICABLE TO OBTAIN COMPETITION. REQUESTS FOR PROPOSALS WERE ISSUED TO 26 POTENTIAL CONTRACTORS AND OFFERS WERE RECEIVED FROM 13 COMPANIES WHOSE TOTAL ESTIMATED COSTS RANGED FROM $31,347 TO $196,127.

IN RESPONSE TO OUR INQUIRY CONCERNING THE MATTER, THE SECRETARY OF THE AIR FORCE REPORTS THAT, WHILE 13 FIRMS SUBMITTED OFFERS, THIS FACT ALONE WOULD NOT PRECLUDE A NEGOTIATION OF THE CONTRACT IF OTHER FACTORS SUCH AS THE TYPE OF CONTRACT CONTEMPLATED, THE NATURE OF THE SERVICES TO BE PROCURED, THE TIME REQUIREMENTS INVOLVED, AND THE INVOCATION OF APPROPRIATE STATUTORY AND IMPLEMENTING AUTHORITY WERE PRESENT WHICH INDICATED THAT THE CHOICE TO PROCEED BY NEGOTIATION WAS A REASONABLE ONE. WE ARE IN AGREEMENT WITH THIS VIEW.

IT IS REPORTED THAT THE NATURE OF THE WORK, WHICH IS DESCRIBED IN PARAGRAPH 16 OF THE REQUEST FOR PROPOSALS, WAS FIRST CONSIDERED BY THE CONTRACTING OFFICER. IN THIS REGARD, THE ADMINISTRATIVE REPORT STATES:

"* * * BECAUSE OF THE NECESSITY FOR CONTROLLING THE OUTPUT LEVELS OF THE POWER PRODUCTION AND AIR CONDITIONING SYSTEMS WITHIN VERY NARROW TOLERANCES, THE SERVICES OF HIGHLY SKILLED ENGINEERS, TECHNICIANS AND SUPERVISORY PERSONNEL ARE REQUIRED IN THE OPERATION OF MAINTENANCE OF THIS SAGE POWER PLANT. FURTHERMORE, THE CONTRACTOR IS REQUIRED TO PROVIDE THE NECESSARY INSTRUCTION AND INDOCTRINATION TO SELECTED GOVERNMENT EMPLOYEES IN ORDER TO QUALIFY THEM TO TAKE OVER THE MANAGEMENT OF THE FACILITY AT A FUTURE DATE. I CALL YOUR ATTENTION TO PARAGRAPH VI B 1. A, B, AND C OF THE REQUEST FOR PROPOSALS, EXHIBIT "H," WHICH REQUESTS VERY DETAILED INFORMATION ON THE EXPERIENCE AND TRAINING OF THE CONTRACTOR'S ENGINEERING STAFF.'

CONCERNING YOUR CONTENTION THAT THE MACHINERY AT THE INSTALLATION IS NEITHER "HIGHLY TECHNICAL" OR "SPECIALIZED," WITHIN THE PURVIEW OF ASPR 3- 210.2 (VII) UPON WHICH THE CONTRACTING OFFICER BASED HIS AUTHORITY TO NEGOTIATE THE CONTRACT, IT IS REPORTED THAT THE EQUIPMENT IS INTEGRATED INTO A HIGHLY COMPLEX AND TECHNICAL SYSTEM WHICH IS DESIGNED TO SUPPORT ALL OF THE ACTIVITIES WITHIN THE DIRECTION CENTER AND, IN PARTICULAR, THE ELECTRONIC COMPUTERS LOCATED THEREIN, AS A RESULT OF WHICH THE EQUIPMENT IS DEEMED TO BE "SPECIALIZED" IN ITS APPLICATION TO THE ENTIRE SYSTEM. THIS WERE NOT SO, IT IS OBSERVED, THE STRINGENT REQUIREMENTS FOR THE SELECTION OF ENGINEERING PERSONNEL WOULD NOT HAVE BEEN NECESSARY.

REGARDING THE TIME FACTOR AS CONSIDERED BY THE CONTRACTING OFFICER IN THE SELECTION OF THE NEGOTIATED TYPE CONTRACT, IT IS REPORTED THAT THE REQUIREMENT FOR THE OPERATION AND MAINTENANCE OF THE SAGE POWER PLANT WAS RECEIVED BY THE CONTRACTING AGENCY AT THE END OF NOVEMBER 1957, AND THAT CONTRACTOR PERSONNEL WERE SCHEDULED TO BE PHASED INTO THE PROJECT NO LATER THAN FEBRUARY 1, 1958, TO WITNESS MECHANICAL ELECTRICAL TEST RUNS AND TO BECOME FAMILIAR WITH THE UTILITIES SYSTEM.

IT IS REPORTED FURTHER THAT ADVERTISING AND PROCUREMENT WOULD HAVE PRECLUDED THE USE OF A CPFF ARRANGEMENT WHICH THE CONTRACTING OFFICER DEEMED NECESSARY BECAUSE THE EXACT NATURE AND EXTENT OF THE WORK COVERED BY THE CONTRACT AND THE PRECISE METHOD OF ACCOMPLISHING THE WORK COULD NOT HAVE BEEN ESTABLISHED IN ADVANCE, THE PROJECT BEING SUBJECT TO IMPROVISATION AND CHANGE AS IT PROGRESSED. SEE, FOR EXAMPLE, PARAGRAPH 14 OF THE SPECIAL PROVISIONS OF THE REQUEST FOR PROPOSALS. IN THE CIRCUMSTANCES, AND IN ACCORDANCE WITH ARMED SERVICES PROCUREMENT REGULATION 3-404/C) PERTAINING TO THE SELECTION OF THE COST-REIMBURSEMENT TYPE OF CONTRACT, THE CONTRACTING OFFICER PREPARED A DETERMINATION AND FINDING SETTING FORTH HIS DECISION TO USE A COST PLUS-A-FIXED-FEE CONTRACT, STATING THAT IT WAS IMPRACTICAL TO SECURE SERVICES OF THE KIND OR QUALITY DESIRED WITHOUT THE USE OF SUCH A CONTRACT.

AS TO THE DOLLAR AMOUNT OF THE PROCUREMENT, THE SECRETARY OF THE AIR FORCE STATES THAT, WHILE THE TOTAL CONTRACT PRICE WAS BELOW $100,000, THE VARIOUS FACTORS REFERRED TO ABOVE MADE IT IMPERATIVE TO DEPART FROM A FIXED-PRICE TYPE OF CONTRACT. IN ADDITION, HE DIRECTS ATTENTION TO ASPR 3 -404/B) WHICH PROVIDES AS FOLLOWS:

"WHILE COST-REIMBURSEMENT CONTRACTS ARE PARTICULARLY USEFUL FOR PROCUREMENT INVOLVING SUBSTANTIAL AMOUNTS, I.E., ESTIMATED COSTS OF $25,000 OR MORE, THE CONTRACTING OFFICER MAY DETERMINE IN A GIVEN CASE TO UTILIZE THIS TYPE OF CONTRACT TO COVER TRANSACTIONS IN WHICH THE ESTIMATED COSTS ARE LESS THAN $25,000.'

REGARDING YOUR ALLEGATION THAT PARAGRAPH 20 OF THE SPECIAL PROVISIONS OF THE RFP IS IN ERROR, IT IS STATED IN THE REPORT THAT---

"PARAGRAPH 20, THE "SUPERVISION" CLAUSE OF EXHIBIT "H," REQUIRES THE CONTRACTOR TO PROVIDE THE SERVICES OF A SUPERVISING UTILITIES ENGINEER WITH PROFESSIONAL ENGINEERING QUALIFICATIONS FOR THE DURATION OF THE CONTRACT. HIS FUNCTION IS TO DIRECT AND SUPERVISE ALL THE UTILITIES OPERATING ON A UNIFORM BASIS FOR 1-6 SAGE DIRECTION CENTER AND COMBAT CENTER UNITS. THIS PROVISION OF THE REQUEST FOR PROPOSALS IS NOT IN ERROR AS THE PROTESTOR CONTENDS. THE POSITION OF A SUPERVISING UTILITIES ENGINEER WITH A SPAN OF CONTROL OF 1-6 DIRECTION CENTER OR COMBAT CENTER UNITS WAS ESTABLISHED AS A FIRM REQUIREMENT FOR THIS CONTRACT BY RESPONSIBLE AIR FORCE OFFICIALS. FURTHER, THE CONTENTION THAT THIS SITUATION GIVES A COMPETITIVE ADVANTAGE TO BIDDERS ALREADY HAVING ONE OR MORE SAGE UNITS IS UNTENABLE IN VIEW OF THE COST-PLUS-A-FIXED-FEE ARRANGEMENT IN THIS CASE. WE CALL YOUR ATTENTION TO THE FACT, IN THIS CONNECTION, THAT THE CONTRACTOR, M AND T COMPANY, DOES NOT PRESENTLY HAVE AN OPERATING AND MAINTENANCE CONTRACT FOR ANY OTHER SAGE FACILITY, BUT IS NEVERTHELESS SUPPLYING A SUPERVISING UTILITIES ENGINEER, IN ACCORDANCE WITH THE SPECIFICATION.'

WHEN THE AUTHORITY TO NEGOTIATE APPLIES AND IS USED THE TERMS AND CONDITIONS UPON WHICH PROPOSALS ARE REQUESTED AND EVALUATED ARE MATTERS PRIMARILY FOR DETERMINATION BY THE DEPARTMENT OF THE AIR FORCE. UNDER THE AUTHORITY TO NEGOTIATE, THE AUTHORIZED CONTRACTING OFFICIALS LEGALLY MAY TAKE INTO CONSIDERATION NOT ONLY PRICE BUT ALL FACTORS AFFECTING THE NEEDS AND INTERESTS OF THE GOVERNMENT AND THE RULES AND PROCEDURES APPLICABLE TO PROCUREMENT BY FORMAL ADVERTISING DO NOT APPLY.

WHILE THE BASIS FOR NEGOTIATING THE INSTANT PROCUREMENT--- THAT IS, THE IMPRACTICABILITY OF OBTAINING COMPETITION--- MIGHT SEEM QUESTIONABLE IN VIEW OF THE FACT THAT THIRTEEN APPARENTLY RESPONSIVE COMPETITIVE PROPOSALS WERE OBTAINED, WE FEEL THAT, BASED UPON ALL OF THE ATTENDANT FACTORS MENTIONED ABOVE, THE DETERMINATION OF THE CONTRACTING OFFICER TO NEGOTIATE THE CONTRACT WAS A REASONABLE ONE AND WE PRECEIVE NO LEGAL BASIS FOR QUESTIONING THE AWARD AS MADE.