B-146035, OCT. 28, 1965

B-146035: Oct 28, 1965

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TO THE SECRETARY OF DEFENSE: REFERENCE IS MADE TO THE LETTER OF THE DEPUTY ASSISTANT SECRETARY (PROCUREMENT) DATED MARCH 25. WE HAVE CAREFULLY REVIEWED OUR REPORT AND THE SUPPORTING RECORD IN THE LIGHT OF YOUR DEPARTMENT'S POSITION STATEMENT AND THE MEMORANDUM FILED IN OUR OFFICE ON MAY 6. NO FURTHER QUESTIONS WILL BE RAISED BY OUR OFFICE WITH RESPECT TO THE LEGALITY OF THE CONTRACT. WE STILL ARE NOT SATISFIED THAT THE NAVY FULLY CONSIDERED THE PREVIOUSLY VESTED CONTRACT RIGHTS OF THE GOVERNMENT WHEN IT NEGOTIATED THIS CONTRACT. THE GOVERNMENT WAS PLACED IN THE POSITION OF PURCHASING AGAIN SOME OF THE TECHNICAL INFORMATION AND DATA WHICH IT ALREADY OWNED UNDER PREVIOUS CONTRACTS BUT WHICH WERE FOUND TO BE IRRETRIEVABLE AT A LATER DATE WHEN THE NEED THEREFOR BECAME URGENT.

B-146035, OCT. 28, 1965

TO THE SECRETARY OF DEFENSE:

REFERENCE IS MADE TO THE LETTER OF THE DEPUTY ASSISTANT SECRETARY (PROCUREMENT) DATED MARCH 25, 1964, AND TO THE ACCOMPANYING POSITION STATEMENT OF THE DEPARTMENT ON OUR REPORT TO THE CONGRESS ENTITLED "ERRONEOUS PURCHASE OF A TECHNICAL DATA PACKAGE FROM WESTINGHOUSE ELECTRIC CORPORATION FOR $1,010,000" DATED DECEMBER 31, 1963 (OSD CASE NO. 1588). THE LETTER REQUESTED, IN VIEW OF THE POSITION STATEMENT, THAT WE REMOVE THE NOTICE OF EXCEPTION STATED AGAINST THE NAVY DISBURSING OFFICER FOR PAYMENTS MADE OR TO BE MADE TO WESTINGHOUSE UNDER CONTRACT NO. NOW 61-0171 -F.

WE HAVE CAREFULLY REVIEWED OUR REPORT AND THE SUPPORTING RECORD IN THE LIGHT OF YOUR DEPARTMENT'S POSITION STATEMENT AND THE MEMORANDUM FILED IN OUR OFFICE ON MAY 6, 1965, BY HEDRICK AND LANE, ATTORNEYS FOR WESTINGHOUSE. BASED UPON SUCH REVIEW, AND IN CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES INVOLVED IN THE NEGOTIATION OF CONTRACT NO. NOW 61-0171-F, NO FURTHER QUESTIONS WILL BE RAISED BY OUR OFFICE WITH RESPECT TO THE LEGALITY OF THE CONTRACT. WHILE IN VIEW OF THE STATEMENTS MADE BY YOUR DEPARTMENT AND THE ATTORNEYS FOR WESTINGHOUSE WE FIND NO LEGAL BASIS TO QUESTION THE LEGALITY OF THE CONTRACT, WE STILL ARE NOT SATISFIED THAT THE NAVY FULLY CONSIDERED THE PREVIOUSLY VESTED CONTRACT RIGHTS OF THE GOVERNMENT WHEN IT NEGOTIATED THIS CONTRACT. IN OUR OPINION, THE GOVERNMENT WAS PLACED IN THE POSITION OF PURCHASING AGAIN SOME OF THE TECHNICAL INFORMATION AND DATA WHICH IT ALREADY OWNED UNDER PREVIOUS CONTRACTS BUT WHICH WERE FOUND TO BE IRRETRIEVABLE AT A LATER DATE WHEN THE NEED THEREFOR BECAME URGENT. IN THAT LIGHT, IT IS HOPED THAT OUR REPORT AND THE POLICIES ENUNCIATED BY ARMED SERVICES PROCUREMENT REGULATION 9-202.1 AND 9-202.2 (REVISION 10, APRIL 1, 1965) WILL SERVE TO PRECLUDE A RECURRENCE OF THIS SITUATION.

WE BELIEVE THAT THE RECORD NOW REASONABLY ESTABLISHES THAT THE NAVY WAS BUYING (IN ADDITION TO A TECHNICAL DATA PACKAGE, CUTAWAY DISPLAY AND HOSE J34 ENGINES) "KNOW HOW" OR TECHNICAL ASSISTANCE FROM WESTINGHOUSE EVEN THOUGH THE CONTRACT DID NOT SPECIFICALLY PROVIDE FOR THE PURCHASE OF TECHNICAL KNOWLEDGE RELATING TO THE J34 ENGINES. WHILE WE ARE OF THE OPINION THAT THE VALUE OF THIS "KNOW HOW" OR TECHNICAL ASSISTANCE WAS, AND STILL IS, CONJECTURAL, WE HAVE GIVEN CONSIDERABLE WEIGHT TO THE UNQUALIFIED ASSERTION OF BOTH PARTIES TO THE CONTRACT THAT IT WAS MUTUALLY INTENDED TO ALSO CONVEY AND PURCHASE J34 ENGINE TECHNICAL ASSISTANCE. ALTHOUGH THE RELATIVE VALUES OF THE CONSIDERATION SUPPORTING CONTRACT NO NOW 61-0171-F REMAIN UNCERTAIN, WE PERCEIVE NO LEGAL BASIS TO QUESTION THE ADEQUACY OF SUCH CONSIDERATION. SEE WESTMORELAND MANGANESE CORP. V. UNITED STATES, 246 F.2D 351 (1957); UNITED STATES V. SCHAEFFER, 319 F.2D 907 (1963); BLACK INDUSTRIES, INC. V. BUSH, 110 F.SUPP. 801 (1953); WILLISTON ON CONTRACTS, THIRD EDITION, SECTION 115.

ACCORDINGLY, YOU ARE ADVISED THAT PAYMENT OF THE CONSIDERATION SPECIFIED IN CONTRACT NOW 61-0171-F MAY BE MADE TO THE WESTINGHOUSE ELECTRIC CORPORATION IF OTHERWISE PROPER. WE ARE FURNISHING COPIES OF THIS LETTER TO THE INTERESTED MEMBERS OF THE CONGRESS, THE APPROPRIATE COMMITTEES THEREOF, TO OTHER INTERESTED AGENCIES OF THE GOVERNMENT, AND TO THE WESTINGHOUSE ELECTRIC CORPORATION AND THE UNITED AIRCRAFT CORPORATION.