B-145438, NOV. 13, 1961

B-145438: Nov 13, 1961

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TO STROOCK AND STROOCK AND LAVAN: REFERENCE IS MADE TO YOUR LETTER DATED MARCH 23. THE USE OF GOVERNMENT FACILITIES ACCOUNTABLE UNDER BUREAU OF NAVAL WEAPONS CONTRACTS NOA-5865 AND NORD (F/-1571 IS INTENDED IN THE PERFORMANCE THEREOF. 034.11 IS INCLUDED IN THE TOTAL AMOUNT OF THIS BID. IF THE FACILITIES ARE NOT AND WILL NOT BE AUTHORIZED TO BE USED ON A "NO-CHARGE" BASIS.'. YOUR PROTEST AGAINST THE AWARDS TO MONTROSE IS BASED UPON YOUR BELIEF THAT THE DEPARTMENT OF THE NAVY WAS WITHOUT AUTHORITY UNDER EXISTING REGULATIONS TO LEASE THE FACILITIES IN QUESTION TO MONTROSE. YOU ADVISE THAT PRIVATELY-OWNED FACILITIES ARE ADEQUATE AND AVAILABLE TO MEET THE PRESENT NEEDS OF THE DEPARTMENT OF DEFENSE FOR MANIFOLD PRESSURE TRANSMITTERS.

B-145438, NOV. 13, 1961

TO STROOCK AND STROOCK AND LAVAN:

REFERENCE IS MADE TO YOUR LETTER DATED MARCH 23, 1961, AND SUBSEQUENT CORRESPONDENCE WRITTEN IN BEHALF OF UNITED STATES GAUGE DIVISION OF AMERICAN MACHINE AND METALS, INC., AND PROTESTING AGAINST THE ACTION OF THE DEPARTMENT OF THE NAVY IN AWARDING CONTRACTS TO MONTROSE DIVISION OF BENDIX CORPORATION UNDER IFB-383-667-61, IFB-383 580-61 AND RFQ 383/219010/61.

YOU ADVISE THAT ON IFB-383-667-61, FOR THE SUPPLY OF 869 MANIFOLD PRESSURE TRANSMITTERS, MONTROSE BID $73.94 PER UNIT FOR A TOTAL PRICE OF $64,253.86, WHILE UNITED STATES GAUGE BID $74.70 PER UNIT FOR A TOTAL PRICE OF $64,914.30. ON IFB-383-580-61 MONTROSE BID A TOTAL PRICE OF $237,444.61, WHILE UNITED STATES GAUGE BID A TOTAL PRICE OF $246,930.80, AND ON RFQ 383/219010/61 MONTROSE PROPOSED A TOTAL PRICE OF $45,390 AND UNITED STATES GAUGE PROPOSED A TOTAL PRICE OF $48,076.

IN ITS BID ON IFB-383-667-61 MONTROSE STATED AS FOLLOWS:

"IF THIS PROPOSAL, BID OR QUOTATION RESULTS IN A CONTRACT OR SUBCONTRACT AWARD, THE USE OF GOVERNMENT FACILITIES ACCOUNTABLE UNDER BUREAU OF NAVAL WEAPONS CONTRACTS NOA-5865 AND NORD (F/-1571 IS INTENDED IN THE PERFORMANCE THEREOF. THE ESTIMATED ALLOCABLE CHARGE, RELATING TO THE USE OF SUCH FACILITIES UNDER ANY AWARDED CONTRACT OR SUBCONTRACT, HAS BEEN DETERMINED IN ACCORDANCE WITH THE APPLICABLE SECTIONS OF CONTRACT NOA-5865 AND NORD (F/-1571, AND SUCH CHARGE IN THE AMOUNT OF $1,034.11 IS INCLUDED IN THE TOTAL AMOUNT OF THIS BID, PROPOSAL OR QUOTATION. ANY CONTRACT OR SUBCONTRACT AWARDED MUST BE FOR SUCH TOTAL AMOUNT, INCLUSIVE OF SUCH CHARGE, IF THE FACILITIES ARE NOT AND WILL NOT BE AUTHORIZED TO BE USED ON A "NO-CHARGE" BASIS.'

ITS BID ON IFB-383-580-61 CONTAINED IDENTICAL LANGUAGE, BUT WITH AN ESTIMATED ALLOCABLE CHARGE IN THE AMOUNT OF $4,594.32. TO ITS PROPOSAL UNDER RFQ 383/219010/61, MONTROSE ATTACHED A STATEMENT, SIMILAR TO THAT QUOTED ABOVE, ADVISING THAT ITS OFFERED PRICE INCLUDED A RENTAL CHARGE OF $741.20.

YOUR PROTEST AGAINST THE AWARDS TO MONTROSE IS BASED UPON YOUR BELIEF THAT THE DEPARTMENT OF THE NAVY WAS WITHOUT AUTHORITY UNDER EXISTING REGULATIONS TO LEASE THE FACILITIES IN QUESTION TO MONTROSE. IN THIS CONNECTION, YOU ADVISE THAT PRIVATELY-OWNED FACILITIES ARE ADEQUATE AND AVAILABLE TO MEET THE PRESENT NEEDS OF THE DEPARTMENT OF DEFENSE FOR MANIFOLD PRESSURE TRANSMITTERS, AND THAT USE OF GOVERNMENT OWNED FACILITIES IS ENJOINED BY DEFENSE MOBILIZATION ORDER VII-4 AND BUREAU OF THE BUDGET BULLETIN 60-2. FURTHER, YOU ALLEGE THAT NO ALLOCABLE CHARGE FOR USE OF GOVERNMENT-OWNED FACILITIES WAS MADE AGAINST THE PROPOSAL OF MONTROSE UNDER RFQ 383/219010/61 AND THAT THE CHARGE AGAINST ITS BIDS ON THE ADVERTISED PROCUREMENTS WAS INSUFFICIENT TO ELIMINATE THE COMPETITIVE ADVANTAGE ACCRUING FROM SUCH USE, AS REQUIRED BY THE PROVISIONS OF ASPR 13 -407 AND 13-601.

WITH RESPECT TO THE AUTHORITY OF THE DEPARTMENT OF THE NAVY TO FURNISH THE FACILITIES INCLUDED IN CONTRACTS NOA-5865 AND NORD (F/-1571 TO MONTROSE, WE ARE ADVISED THAT THE FACILITIES COVERED BY NOA-5865 WERE INITIALLY PROVIDED TO BENDIX'S SCINTILLA DIVISION AT SYDNEY, NEW YORK, AS PART OF THE FACILITIES PROVIDED FOR THE PRODUCTION OF AIRCRAFT IGNITION COILS AND LEADS DURING THE KOREAN HOSTILITIES. WHEN GOVERNMENT PRODUCTION DEMANDS SUBSEQUENTLY INCREASED TO A POINT BEYOND THE CAPACITY OF THE SCINTILLA PLANT, BENDIX WAS AUTHORIZED TO TRANSFER A PORTION OF THESE FACILITIES TO ITS MONTROSE PLANT. AS OF DECEMBER 1960 FACILITIES WITH AN ACQUISITION COST OF ABOUT $704,658 WERE LOCATED AT MONTROSE AND INCLUDED UNDER CONTRACT NOA-5865. THE FACILITIES UNDER CONTRACT NORD (F/-1571 ARE ALL LOCATED AT THE MONTROSE PLANT. AS OF DECEMBER 1960 THESE FACILITIES WERE REPORTED AT AN ACQUISITION VALUE OF ABOUT $660,889. THE BULK OF THIS EQUIPMENT WAS FURNISHED TO BENDIX FOLLOWING EXECUTION OF THE CONTRACT ON MARCH 25, 1952, AS PART OF A PROGRAM FOR OVERCOMING SHORTAGE OF INDUSTRIAL CAPACITY TO MEET EXPANDING NEEDS FOR PRODUCING SYNCHRO MOTORS FOR MILITARY EQUIPMENT. APPROXIMATELY $69,000 OF ADDITIONAL ITEMS OF EQUIPMENT WERE ADDED IN 1957 AND 1958 TO ENABLE BENDIX TO PERFORM CERTAIN BUREAU OF ORDNANCE CONTRACTS.

FROM THE ABOVE IT IS APPARENT THAT THE FACILITIES WERE SUBSTANTIALLY FURNISHED TO BENDIX DURING THE PERIOD OF THE KOREAN EMERGENCY AND SHORTLY THEREAFTER BECAUSE OF INADEQUATE PRIVATELY-OWNED PRODUCTION CAPACITY AT THAT TIME. IN VIEW OF THE FACT THAT THE FACILITIES WERE FURNISHED TO BENDIX PRIOR TO ISSUANCE OF DMO VII-4, AND DURINGA PERIOD OF INADEQUATE PRIVATELY-OWNED FACILITIES, IT WOULD APPEAR THAT THE PROVISIONS OF THAT REGULATION WHICH ARE DIRECTED TO FURNISHING OF GOVERNMENT-OWNED FACILITIES ARE NOT FOR APPLICATION TO THE INSTANT LEASES.

WITH RESPECT TO BUREAU OF THE BUDGET BULLETIN 60-2, IT SHOULD BE NOTED THAT THIS REGULATION IS DIRECTED SOLELY TO COMMERCIAL-INDUSTRIAL ACTIVITIES OF GOVERNMENTAL AGENCIES, AND HAS NO APPLICATION TO LEASES OF PRODUCTION EQUIPMENT OF THE TYPE HERE INVOLVED.

IN VIEW OF THE ABOVE, AND SINCE THE AUTHORITY OF DEFENSE AGENCIES TO LEASE GOVERNMENT-OWNED FACILITIES APPEARS TO HAVE BEEN CLEARLY SET OUT, BOTH AT THE TIME THE LEASES WERE EXECUTED AND AT PRESENT (SEE SECTION 1, PUBLIC LAW 364, 80TH CONGRESS, NOW CODIFIED AT 10 U.S.C. 2667, AND 50 APP. U.S.C. 1173), WE SEE NO VALID BASIS ON WHICH TO QUESTION THE NAVY'S ACTION IN FURNISHING THE FACILITIES IN QUESTION TO BENDIX, OR IN EXECUTING THE LEASES AND THE SEVERAL AMENDMENTS THERETO UNDER WHICH BENDIX TOOK AND RETAINED POSSESSION THEREOF.

THERE REMAINS FOR CONSIDERATION WHETHER THE RENTAL RATES ASSESSED AGAINST BENDIX HAVE BEEN ESTABLISHED IN ACCORDANCE WITH EXISTING REGULATIONS WHICH ARE DESIGNED TO ELIMINATE ANY COMPETITIVE ADVANTAGE OTHERWISE ACCRUING TO MANUFACTURERS IN POSSESSION OF GOVERNMENT-OWNED FACILITIES, AND WHETHER SUCH RENTAL CHARGES HAVE BEEN PROPERLY INCLUDED IN, OR EVALUATED AGAINST, MONTROSE'S BIDS ON THE PROCUREMENTS TO WHICH YOUR PROTEST IS DIRECTED.

CONTRACT NOA-5865 AUTHORIZES USE OF THE FACILITIES ON ALL GOVERNMENT CONTRACTS AND SUBCONTRACTS DURING ANY CONTRACT PERIOD IN WHICH 75 PERCENT OR MORE OF TOTAL SALES DOLLARS (THE SUM OF ALL PRICES PAID BY ALL OF BENDIX'S CUSTOMERS) RESULTING FROM GOODS PRODUCED IN WHOLE OR IN PART BY THE FACILITIES WERE IN PAYMENT FOR MILITARY END ITEMS OR COMPONENTS. FOR EACH CALENDAR MONTH IN WHICH BENDIX IS AUTHORIZED TO USE THE FACILITIES, IT IS ASSESSED RENTAL AT THE FOLLOWING RATES:

(A) FOR PRODUCTION EQUIPMENT OF THE TYPES LISTED IN DMO VII-4 AND ASPR 13 -603, AT THE SAME RATES PRESCRIBED BY SUCH REGULATIONS.

(B) FOR ALL OTHER EQUIPMENT AT THE RATE OF 1 PERCENT PER MONTH OF ITS ACQUISITION COST.

HOWEVER, ON CERTAIN CLASSES OF NEGOTIATED CONTRACTS THIS FACILITIES CONTRACT AUTHORIZES RENT-FREE USE OF THE FACILITIES. TO DETERMINE THE ACTUAL RENTAL PAYABLE BY BENDIX THE TOTAL CHARGE AS ESTABLISHED ABOVE IS THEREFORE MULTIPLIED BY A FRACTION WHOSE NUMERATOR IS THE SALES DOLLARS RESULTING FROM NO-CHARGE USE AND WHOSE DENOMINATOR IS THE TOTAL SALES DOLLARS RESULTING FROM USE OF THE FACILITIES, AND THE RESULTING FIGURE IS SUBTRACTED FROM THE TOTAL RENTAL CHARGE.

CONTRACT NORD (F/-1571, AS AMENDED ON MAY 29, 1959, AUTHORIZES USE OF THE FACILITIES INCLUDED THEREIN ON GOVERNMENT PRIME AND SUBCONTRACTS, PROVIDED THAT DURING THE 12-MONTH PERIOD COMMENCING ON THE EFFECTIVE DATE OF THE AMENDMENT AND ANY SUCCESSIVE 12-MONTH PERIOD USE OF THE FACILITIES IS LIMITED TO THE PERFORMANCE OF SUCH CONTRACTS AND SUBCONTRACTS AS SHALL HAVE TOTAL SALES DOLLAR VALUE NOT IN EXCESS OF $6,000,000, AND THAT 75 PERCENT OR MORE OF THE TOTAL SALES DOLLARS MUST CONSIST OF MILITARY ITEMS OR COMPONENTS WHICH ARE TO BE PHYSICALLY INCORPORATED INTO MILITARY ITEMS. WHILE THIS CONTRACT ALSO AUTHORIZES RENT-FREE USE OF THE FACILITIES IN VARIOUS CLASSES OF NEGOTIATED CONTRACTS, FOR THE PERFORMANCE OF ALL OTHER CLASSES OF CONTRACTS IN WHICH THE FACILITIES ARE USED, BENDIX IS REQUIRED TO PAY RENTAL AT THE RATE OF .639 PERCENT OF THE TOTAL AMOUNT OF SUCH CONTRACTS.

TURNING THEN TO THE BIDS SUBMITTED BY MONTROSE UNDER IFBS 580 AND 667, THE STATEMENTS OF ESTIMATED RENTAL INCLUDED IN SUCH BIDS, AS PREVIOUSLY QUOTED, APPEAR TO HAVE BEEN INCLUDED SOLELY BECAUSE OF A REQUIREMENT TO THAT EFFECT IN THE FACILITIES CONTRACTS. WHILE SUCH INFORMATION MAY HAVE ACCOUNTING VALUE TO THE NAVY, IT IS APPARENT THAT MONTROSE WAS REQUIRED BY THE TERMS OF ITS FACILITIES CONTRACTS TO PAY RENTAL AT THE RATES PRESCRIBED IN SUCH CONTRACTS IF IT USED SUCH FACILITIES IN MANUFACTURING THE ARTICLES CONTEMPLATED BY THE INVITATIONS. WHETHER THE ACTUAL AMOUNTS OF SUCH RENTAL EVENTUALLY PAYABLE BY MONTROSE WERE INCLUDED IN EITHER ITS BID PRICES OR IN THE STATEMENTS OF ESTIMATED RENTAL SUBMITTED WITH ITS BIDS WOULD THEREFORE BE IMMATERIAL IN EVALUATING THE BIDS, AND WOULD HAVE NO EFFECT UPON THE COMPETITIVE POSITION ON MONTROSE AS COMPARED TO OTHER BIDDERS.

WITH RESPECT TO THE PROPOSALS SUBMITTED UNDER RFQ 383/219010/61, UNITED STATES GAUGE PROPOSED A TOTAL PRICE OF $48,076, WHILE MONTROSE PROPOSED A TOTAL PRICE OF $46,131.20 AND ADVISED THAT THIS PRICE INCLUDED A RENTAL CHARGE OF $741.20. SINCE THE RENT-INCLUSIVE PRICE OF MONTROSE WAS LOWER THAN THE PRICE QUOTED BY UNITED STATES GAUGE, THE CONTRACTING OFFICER CONCLUDED THAT AN AWARD TO MONTROSE AT ITS EVEN LOWER RENT-FREE PRICE WOULD NOT PLACE MONTROSE IN A FAVORED COMPETITIVE POSITION.

WHILE THE ACCEPTANCE OF MONTROSE'S ESTIMATE OF RENT, AND SUBSEQUENT AWARD ON A RENT-FREE BASIS AT A PRICE REDUCED BY SUCH ESTIMATED RENTAL, MAY BE OPEN TO QUESTION ON A MANAGEMENT BASIS, THE FACT REMAINS THAT MONTROSE'S OFFER ON A RENT-INCLUSIVE BASIS WAS THE LOWEST OFFER RECEIVED, AND THE GOVERNMENT APPEARS TO HAVE HAD THE OPTION TO AWARD MONTROSE A CONTRACT ON THAT BASIS. UNDER THE CIRCUMSTANCES, THE AWARD TO MONTROSE ON A RENT-FREE BASIS DID NOT, IN ITSELF, RESULT IN ANY COMPETITIVE ADVANTAGE TO MONTROSE, AND A PROTEST BASED THEREON CANNOT BE SUSTAINED.

THE REMAINING QUESTION PRESENTED BY YOUR PROTEST IS WHETHER THE RENTAL RATES ESTABLISHED BY THE FACILITIES CONTRACTS ARE IN ACCORD WITH EXISTING REGULATIONS. IN THIS CONNECTION ASPR 13-601.2 PROVIDES THAT, WITH CERTAIN EXCEPTIONS, RENTAL SHALL BE CHARGED FOR INDUSTRIAL FACILITIES LISTED IN ASPR 13-603 AND USED ON COMMERCIAL WORK AT RATES VARYING FROM 1 3/4 PERCENT OF ACQUISITION COST PER MONTH ON NEW FACILITIES TO 3/4 PERCENT PER MONTH ON FACILITIES OVER 10 YEARS OLD. ON OTHER PROPERTY AND EQUIPMENT RENT SHALL BE CHARGED AT THE RATE OF NOT LESS THAN 1 PERCENT PER MONTH OF THE ORIGINAL ACQUISITION COST. ASPR 13-407 MAKES SUCH RATES APPLICABLE TO USE ON GOVERNMENT WORK AS WELL.

AS PREVIOUSLY STATED, CONTRACT NOA-5865 REQUIRES THE PAYMENT OF RENT ON EQUIPMENT LISTED IN ASPR 13-603 AT THE SAME RATES PRESCRIBED IN ASPR 13- 601.2/1), AND ON OTHER EQUIPMENT AT THE SAME RATE PRESCRIBED IN ASPR 13- 601.2/II). WE THEREFORE SEE NO VALID GROUND UPON WHICH AN OBJECTION TO THE RENTAL RATES IN THIS CONTRACT MAY BE BASED.

CONCERNING CONTRACT NORD (F/-1571, WE ARE ADVISED THAT THE RENTAL RATE OF .639 PERCENT OF TOTAL SALES DOLLARS INCLUDED THEREIN WAS COMPUTED IN THE FOLLOWING MANNER. DURING 1958 BENDIX SUBMITTED DATA SHOWING THAT THE SALES VOLUME IT HAD EXPERIENCED DURING 1954, USING THE FACILITIES UNDER CONTRACT 1571 IN CONJUNCTION WITH ITS OWN FACILITIES ON A TWO-SHIFT BASIS, WAS $14,400,000. THE ACQUISITION COST OF THE FACILITIES COVERED BY CONTRACT 1571 WAS COMPUTED AT $736,286.71, CONSISTING OF $40,460 ADDED BY AMENDMENT NO. 4 IN NOVEMBER 1957, AND $695,826 FURNISHED SUBSTANTIALLY UNDER THE ORIGINAL CONTRACT. COMPUTING RENTAL ON THE EQUIPMENT ADDED IN 1957 AT THE 1 3/4 PERCENT PER MONTH RATE FOR EQUIPMENT LESS THAN TWO YEARS OLD AND ON THE REMAINING EQUIPMENT AT THE 1 PERCENT PER MONTH RATE, AS PRESCRIBED BY ASPR 13-603 AND IMO VII-4, WOULD THUS RESULT IN AN ANNUAL RENTAL CHARGE OF APPROXIMATELY $92,000. THIS IS THE EQUIVALENT OF .639 PERCENT OF THE $14,400,000 VALUE OF THE PRODUCTION CAPACITY OF THE GOVERNMENT-OWNED EQUIPMENT OPERATED IN CONJUNCTION WITH BENDIX'S EQUIPMENT AS OUTLINED ABOVE.

WHILE THE METHOD OF ASSESSING RENTAL UNDER CONTRACT 1571 IS NOT SPECIFICALLY AUTHORIZED BY THE APPLICABLE REGULATIONS, WE ARE ADVISED THAT SUCH METHOD WAS ADOPTED UNDER THE PROVISIONS OF ASPR 13-601.3/II) (B) IN EFFECT DURING THE PERIOD OF NEGOTIATIONS, WHICH EXEMPTED FACILITIES CONTRACTS FROM THE REQUIREMENTS OF ASPR 13-601/2 WHERE:

"/II) WITH RESPECT TO GOVERNMENT-OWNED INDUSTRIAL FACILITIES WHICH A PROCURING ACTIVITY, IN AID OF THE GOVERNMENT'S PROGRAM FOR MAINTAINING CAPACITY FOR ESSENTIAL MILITARY PRODUCTION NEEDS IN THE EVENT OF MOBILIZATION, DESIRES TO MAKE OR KEEP AVAILABLE AT ANY PLANT FOR USE BY A CONTRACTOR: PROVIDED THAT, AS TO ANY MACHINE TOOLS AND METALWORKING EQUIPMENT INVOLVED, EITHER OR BOTH OF THE FOLLOWING CONDITIONS PREVAIL:

"/B) THE ITEMS OF MACHINE TOOLS AND METALWORKING EQUIPMENT ARE CONTAINED IN A COMPLETE COMPLEMENT OF PRODUCTION EQUIPMENT AND TOOLS CAPABLE OF PRODUCING MILITARY END ITEMS OR COMPONENTS THEREOF, AND PROVIDED UNDER A FACILITIES CONTRACT, LEASE, OR CONTRACT FOR OPERATION OF A GOVERNMENT- OWNED PLANT AND BEING USED FOR CURRENT PRODUCTION OR BEING ADMINISTERED UNDER STANDBY PROVISIONS SUCH AS THOSE REFERRED TO IN ASPR 13-414.'

CONCERNING THE VALIDITY OF THE $14,400,000 SALES POTENTIAL FIGURE, YOU ARE ADVISED THAT ALL EFFORTS TO LOCATE THE DATA ON WHICH THIS FIGURE WAS BASED IN THE FILES OF THE BUREAU OF WEAPONS HAVE BEEN UNSUCCESSFUL. VIEW THEREOF, IT APPEARS TO BE IMPRACTICABLE TO ESTABLISH A DETAILED ANALYSIS OF ALL OF THE FACTORS APPLIED IN DETERMINING SUCH SALES POTENTIAL OR TO ESTABLISH THE EXACT VARIATIONS IN SUCH FACTORS WHICH HAVE SUBSEQUENTLY OCCURRED FOR THE PURPOSE OF ACCURATELY ASCERTAINING ANY REVISIONS OF THE RENTAL RATE, EITHER UPWARD OR DOWNWARD, WHICH WOULD PRESENTLY BE JUSTIFIED BY SUCH VARIATIONS. HOWEVER, AN ANALYSIS BY THE DEPARTMENT OF THE NAVY OF PRICES PAID BENDIX FOR SYNCHROS SINCE AUGUST 1958 INDICATES A DECREASE OF ABOUT 4 PERCENT IN THE AVERAGE UNIT PRICE. CONVERSELY, DURING THE CORRESPONDING PERIOD THE FACILITIES ACCOUNTABLE UNDER CONTRACT 1571 HAVE DIMINISHED, IN TERMS OF ACQUISITION COST, FROM ABOUT $736,286 TO $618,298, OR A REDUCTION OF ABOUT 16 PERCENT. APPLICATION OF THESE VARIATIONS ALONE TO THE $14,400,000 SALES POTENTIAL WOULD, OF COURSE, RESULT IN A SUBSTANTIAL DECREASE IN THE PRESENT RENTAL RATE. IN VIEW OF THE ABOVE, TOGETHER WITH THE FACT THAT THE FACILITIES CONTRACT LIMITS BENDIX'S USE OF THE FACILITIES TO THE PRODUCTION OF ARTICLES HAVING AN ANNUAL SALES DOLLAR VALUE OF $6,000,000, WE ARE UNABLE TO CONCLUDE THAT THE RENTAL RATE OF .639 FAILS TO FULLY REMOVE ANY COMPETITIVE ADVANTAGE TO BENDIX, AS CONTEMPLATED BY EXISTING REGULATIONS. YOUR PROTEST AGAINST THE AWARDS TO MONTROSE MUST THEREFORE BE DENIED.

WE ARE OF THE OPINION, HOWEVER, THAT THE UNAVAILABILITY OF ALL DATA NECESSARY TO SUBSTANTIATE THE REASONABLENESS OF THE RENTAL RATE WHEN ORIGINALLY ESTABLISHED, AND TO ADJUST SUCH RATE TO REFLECT ANY CHANGES IN USE OR CONDITIONS WHICH MIGHT AFFECT THE PRESENT VALIDITY OF SUCH RATE, MAKES IT IMPERATIVE THAT THE CONTRACT BE REEXAMINED AND A RENTAL BE ESTABLISHED IN CONFORMITY WITH EXISTING REGULATIONS. TO THIS END, WE ARE ADVISED THAT THE BUREAU OF WEAPONS HAS INSTITUTED NEGOTIATIONS WITH BENDIX TO COVER ALL BUREAU EQUIPMENT LOCATED AT THE MONTROSE PLANT UNDER A SINGLE FACILITIES CONTRACT AND TO PROVIDE FOR THE PAYMENT OF RENTAL ON A BASIS COMPATIBLE WITH THE PROVISIONS OF ASPR 13 601.2. WE UNDERSTAND THESE NEGOTIATIONS ARE DIRECTED TO ARRANGEMENTS, SIMILAR TO THOSE PRESENTLY EMBODIED IN CONTRACT NOA-5865, FOR PAYMENT OF RENTAL COMPUTED BASICALLY ON THE AVAILABILITY OF THE FACILITIES FOR USE. MOREOVER, IN DETERMINING USE OF THE FACILITIES FOR WORK ON BOTH A RENTAL AND NO-CHARGE BASIS, IT IS CONTEMPLATED THAT ACTUAL SALES WILL BE APPLIED AND THAT USE OF A POTENTIAL SALES FIGURE WILL BE DISCARDED ENTIRELY. WE ARE TODAY ADVISING THE SECRETARY OF THE NAVY OF OUR CONCURRENCE IN THE NEED FOR REEXAMINATION OF THESE FACILITIES AND OF THE NECESSITY FOR FULL DOCUMENTATION OF THE DATA AND FACTORS EMPLOYED OR CONSIDERED IN NEGOTIATING ANY NEW RENTAL AGREEMENTS.