B-136892, JULY 29, 1958, 38 COMP. GEN. 79

B-136892: Jul 29, 1958

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WHICH WAS ADDED TO THE ARMED SERVICES PROCUREMENT REGULATION IN MARCH 1957 TO PRECLUDE THE INCLUSION IN FACILITIES CONTRACTS OF AN AUTHORIZATION FOR THE USE OF GOVERNMENT OWNED INDUSTRIAL FACILITIES WITHOUT CHARGE TO PERFORM CONTRACTS ENTERED INTO BY FORMAL ADVERTISING. IN RESPONSE TO AN INVITATION WHICH REQUIRES INFORMATION CONCERNING THE USE OF GOVERNMENT-OWNED FACILITIES AND PROVIDES THAT BIDS SUBMITTED CONTINGENT UPON THE USE OF SUCH PROPERTY ON A NO-CHARGE BASIS WILL BE REJECTED. 1958: REFERENCE IS MADE TO YOUR LETTER OF JULY 22. BIDS WERE REQUESTED FOR THE PRODUCTION AND FURNISHING OF 862 AIRCRAFT NICKEL CADMIUM STORAGE BATTERIES. THE BIDDER WILL SO STATE ON THE BID. " "RENT-FREE" OR OTHER NO CHARGE BASIS WILL BE CONSIDERED NON-RESPONSIVE TO THE IFB AND WILL BE REJECTED.

B-136892, JULY 29, 1958, 38 COMP. GEN. 79

BIDS - EVALUATION - GOVERNMENT-OWNED EQUIPMENT - RETROACTIVE EFFECT OF REGULATIONS SECTION 13-407 (A), WHICH WAS ADDED TO THE ARMED SERVICES PROCUREMENT REGULATION IN MARCH 1957 TO PRECLUDE THE INCLUSION IN FACILITIES CONTRACTS OF AN AUTHORIZATION FOR THE USE OF GOVERNMENT OWNED INDUSTRIAL FACILITIES WITHOUT CHARGE TO PERFORM CONTRACTS ENTERED INTO BY FORMAL ADVERTISING, MAY NOT BE GIVEN RETROACTIVE EFFECT TO PREVENT A CONCERN WHICH, PRIOR TO MARCH 1957, HAD ACQUIRED THE RIGHT TO USE GOVERNMENT-OWNED FACILITIES WITHOUT PAYMENT OF RENT IN PRESENT AND FUTURE CONTRACTS FROM BIDDING ON AN ADVERTISED PROCUREMENT. A LOW BIDDER WHO, IN RESPONSE TO AN INVITATION WHICH REQUIRES INFORMATION CONCERNING THE USE OF GOVERNMENT-OWNED FACILITIES AND PROVIDES THAT BIDS SUBMITTED CONTINGENT UPON THE USE OF SUCH PROPERTY ON A NO-CHARGE BASIS WILL BE REJECTED, ADVISED THAT PART OF THE WORK WOULD BE PERFORMED AT A GOVERNMENT-OWNED PLANT RENT FREE PURSUANT TO A PREVIOUSLY EXECUTED FACILITIES CONTRACT, WHICH AUTHORIZED SUCH USE ON A NON-CHARGE BASIS, HAS NOT CONDITIONED THE BID UPON OBTAINING THE RIGHT TO USE GOVERNMENT-OWNED FACILITIES BUT HAS COMPLIED WITH THE REQUIREMENT OF THE INVITATION FOR INFORMATION CONCERNING THE USE OF GOVERNMENT-OWNED FACILITIES AND THEREFORE THE BID MAY BE CONSIDERED FOR AWARD.

TO THE SECRETARY OF THE AIR FORCE, JULY 29, 1958:

REFERENCE IS MADE TO YOUR LETTER OF JULY 22, 1958, RELATIVE TO A PROTEST RECEIVED BY YOUR DEPARTMENT FROM GULTON INDUSTRIES, INC., METUCHEN, NEW JERSEY, AGAINST AN AWARD TO SONOTONE CORPORATION, ELMSFORD, NEW YORK, UNDER INVITATION FOR BIDS NO. 101-601-58-380, ISSUED BY MOBILE AIR MATERIEL AREA, BROOKLEY AIR FORCE BASE, ALABAMA.

BIDS WERE REQUESTED FOR THE PRODUCTION AND FURNISHING OF 862 AIRCRAFT NICKEL CADMIUM STORAGE BATTERIES, TOGETHER WITH CERTAIN CONNECTOR PLUGS, SPARE PARTS AND DATA.

NOTE 12 OF THE INVITATION FOR BIDS PROVIDES AS FOLLOWS:

GOVERNMENT PROPERTY IN BIDDER'S POSSESSION. BIDDERS MAY USE, IN PERFORMING THE WORK BID UPON, ANY ITEMS OF GOVERNMENT PROPERTY IN THE BIDDERS POSSESSION UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT INDEPENDENT OF THIS IFB AT THE RENTAL RATES STIPULATED IN SUCH FACILITIES CONTRACT OR OTHER AGREEMENT PROVIDED SUCH FACILITIES CONTRACT OR OTHER AGREEMENT AUTHORIZES SUCH USE. IF THE BIDDER PLANS TO USE SUCH GOVERNMENT PROPERTY, THE BIDDER WILL SO STATE ON THE BID. IN SUCH EVENT THE BIDDER AGREES TO FURNISH, UPON REQUEST OF THE CONTRACTING OFFICER, EVIDENCE THAT A FACILITIES CONTRACT OR OTHER SEPARATE AGREEMENT AUTHORIZES THE BIDDER TO USE EACH ITEM OF SUCH GOVERNMENT PROPERTY FOR PERFORMING THE WORK BID UPON. BIDS SUBMITTED CONTINGENT UPON THE USE OF SUCH PROPERTY ON A "NO- CHARGE FOR USE," "RENT-FREE" OR OTHER NO CHARGE BASIS WILL BE CONSIDERED NON-RESPONSIVE TO THE IFB AND WILL BE REJECTED.

FIVE BIDS WERE RECEIVED, THE THREE LOWEST TOTAL BID PRICES BEING IN THE AMOUNTS OF $362,146, $410,182.76, AND $429,276. IN REPLY TO NOTE 12 OF THE INVITATION FOR BIDS, THE SONOTONE CORPORATION, WHOSE BID WAS THE LOWEST RECEIVED, STATED THAT:

PART OF THE WORK WILL BE PERFORMED IN THE COLD SPRING, NEW YORK PLANT WHICH IS GOVERNMENT-OWNED AND WHICH WE ARE AUTHORIZED TO USE UNDER THE TERMS OF FACILITIES CONTRACT DA-36-039-SC-26606, ORDER NO. 4828- PHILA-52- 81.

THE THIRD LOWEST BIDDER, GULTON INDUSTRIES, INC., MADE FORMAL PROTEST AGAINST CONSIDERATION OF THE LOW BID BY LETTER DATED JUNE 20, 1958, STATING THAT:

IT HAS COME TO OUR ATTENTION THAT SONOTONE INTENDS TO USE THE COLD SPRING FACILITY WHICH IS GOVERNMENT PROPERTY. THIS FACILITY WAS GIVEN TO THEM RENT-FREE; THEREFORE, WE MAINTAIN THAT THE SONOTONE BID IS NON RESPONSIVE UNDER NOTE NO. 12 OF THE SUBJECT IFB.

IN REQUESTING OUR OPINION AS TO WHETHER THE SONOTONE BID MAY BE CONSIDERED RESPONSIVE, ATTENTION HAS BEEN INVITED TO THE FACT THAT SUCH BID WAS NOT CONTINGENT OR CONDITIONED UPON OBTAINING OR USING GOVERNMENT- OWNED FACILITIES ON A RENT-FREE BASIS, SINCE THE SONOTONE CORPORATION HAD ALREADY BEEN AUTHORIZED, UNDER THE TERMS OF ITS ARMY FACILITIES CONTRACT NO. DA-36-039-SC-26606, DATED JUNE 17, 1952, THE USE OF THE FACILITIES WITHOUT A SPECIFIC RENTAL CHARGE WHEN PERFORMING UNDER GOVERNMENT BATTERY CONTRACTS AWARDED TO THE SONOTONE CORPORATION. HOWEVER, YOUR LETTER DISCUSSES WHAT EFFECT, IF ANY, A REQUIREMENT IN SECTION 13-407 (A) (1), ARMED SERVICES PROCUREMENT REGULATION, MIGHT HAVE UPON A DETERMINATION AS TO WHETHER OR NOT THE BID MAY BE CONSIDERED RESPONSIVE TO THE INVITATION.

AS STATED IN YOUR LETTER, THE ARMY FACILITIES CONTRACT GRANTS TO THE CONTRACTOR THE RIGHT TO USE CERTAIN SPECIFIED GOVERNMENT-OWNED FACILITIES AND PLANT SOLELY FOR THE PRODUCTION OF ELECTRIC BATTERIES IN FULFILLMENT OF ANY PRESENT OR FUTURE CONTRACTS WITH THE GOVERNMENT FOR SUCH SUPPLIES WITHOUT THE PAYMENT OF RENTAL THEREFOR, FOR A PERIOD OF FIVE YEARS FROM THE DATE OF BENEFICIAL OCCUPANCY OF THE PLANT, SO DETERMINED BY THE CONTRACTING OFFICER. IT IS REPORTED THAT THIS WAS DETERMINED TO HAVE BEEN JUNE 1957, SO THAT THE PERIOD OF THE CONTRACT EXTENDS TO JUNE 1962.

ALTHOUGH ASPR 13-407 (A) (1) PROVIDES THAT "FACILITIES CONTRACTS SHALL NOT AUTHORIZE THE USE OF INDUSTRIAL FACILITIES WITHOUT CHARGE TO PERFORM CONTRACTS ENTERED INTO BY FORMAL ADVERTISING," YOU POINT OUT THAT, ACCORDING TO THE FILE, THE ARMY BELIEVES THAT THIS REQUIREMENT HAS BEEN SATISFIED AS A RESULT OF THE CONTRACTOR'S OBLIGATION TO PROTECT, PRESERVE, MAINTAIN AND REPAIR THE FACILITY IN LIEU OF RENTS THAT IT MIGHT PAY. THE CONTRACTOR IS REQUIRED TO PROVIDE "NORMAL" MAINTENANCE AND IT IS INDICATED THAT THE CONTRACTOR EXPENDS BETWEEN $8,500 TO $10,000 PER MONTH FOR UPKEEP, WHICH EXPENSES MUST CONTINUE REGARDLESS OF WHETHER THE FACILITIES ARE BEING USED.

WE ARE FURTHER ADVISED THAT THE CURRENT ASPR PROVISION IN SECTION 13 407 (A) (1) FIRST APPEARED IN MARCH 1957 AND WAS NOT INTENDED TO AFFECT CONTRACTS WHICH WERE EXECUTED PRIOR TO ITS EFFECTIVE DATE. IN THIS CONNECTION, IT IS OUR OPINION THAT THE REGULATION COULD NOT LEGALLY BE APPLIED RETROACTIVELY AND THEREBY PREVENT A CONCERN WHICH HAD PREVIOUSLY ACQUIRED THE RIGHT TO USE GOVERNMENT-OWNED FACILITIES WITHOUT PAYMENT OF RENTAL FROM BIDDING ON AN ADVERTISED PROCUREMENT, SOLELY BECAUSE IT PROPOSED TO USE A PART OR ALL OF SUCH FACILITIES IN THE PRODUCTION OF THE ITEMS REQUIRED TO BE FURNISHED UNDER THE TERMS OF THE GOVERNMENT'S INVITATION FOR BIDS. UNDER THE LITERAL WORDING OF NOTE 12, THE SONOTONE CORPORATION MUST BE CONSIDERED TO HAVE COMPLIED WITH ALL THE REQUIREMENTS THEREOF BY STATING THAT THE CORPORATION PLANNED TO USE CERTAIN GOVERNMENT- OWNED FACILITIES AND THAT IT WAS AUTHORIZED TO DO SO UNDER THE TERMS OF FACILITIES CONTRACT NO. DA-36 039-SC-26606. THE BID WAS NOT STATED TO BE CONTINGENT UPON SUCH USE, OR UPON SUCH USE BEING RENT FREE, AND WE SEE NO NEED TO CONSTRUE IT AS BEING SO CONDITIONED.

THE SITUATION HERE IS CLEARLY DISTINGUISHABLE FROM ONE IN WHICH A BIDDER HAVING GOVERNMENT-OWNED FACILITIES OR EQUIPMENT IN ITS POSSESSION, BUT NOT AUTHORIZED TO USE SUCH FACILITIES FOR THE PROCUREMENT BID UPON, CONDITIONS ITS BID UPON OBTAINING THE RIGHT TO THEIR USE ON A RENT-FREE BASIS.

FOR THE REASONS STATED, YOU ARE ADVISED THAT THE SONOTONE BID MAY PROPERLY BE CONSIDERED IN MAKING AN AWARD UNDER INVITATION NO. 101-601 58- 380.

AS REQUESTED, THE FILE OF DOCUMENTS AND CORRESPONDENCE FORWARDED WITH YOUR LETTER IS RETURNED HEREWITH.