B-146398, NOVEMBER 29, 1961, 41 COMP. GEN. 351

B-146398: Nov 29, 1961

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- CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - ADMINISTRATIVE DETERMINATION IN A NEGOTIATED MILITARY PROCUREMENT IN WHICH PRICE AND DELIVERY WERE OF EQUAL IMPORTANCE AND ALL BIDDERS WERE CLEARLY INFORMED DURING NEGOTIATIONS OF THE REQUIRED DATE FOR COMPLETION OF DELIVERIES. WHILE COST BREAKDOWNS ARE IMPORTANT IN DETERMINING WHETHER PRICES QUOTED IN A NEGOTIATED PROCUREMENT ARE FAIR AND REASONABLE AND SHOULD BE FURNISHED WHEN REQUESTED BY THE GOVERNMENT. WHICH AFFORDED A BASIS FOR A DETERMINATION THAT THE PRICE WAS FAIR AND REASONABLE. IN A NEGOTIATED MILITARY PROCUREMENT IN WHICH DELIVERY WAS AN IMPORTANT FACTOR THE ESTABLISHMENT OF A CUTOFF DATE FOR NEGOTIATIONS WITH THE OFFERORS TWO MONTHS IN ADVANCE OF THE FIRST DELIVERY DATE BASED ON NORMAL LEAD TIME FOR PRODUCTION OF THE ITEM TO ASSURE THAT URGENT DELIVERIES WOULD BE TIMELY MET MAY BE REGARDED AS A REASONABLE TIME FOR TERMINATION OF NEGOTIATIONS UNDER PARAGRAPHS 3-801.3 (IV) AND 3-804 OF THE ARMED SERVICES PROCUREMENT REGULATIONS WHICH RECOGNIZES THAT THERE HAS TO BE SOME EVENTUAL CUTOFF DATE.

B-146398, NOVEMBER 29, 1961, 41 COMP. GEN. 351

BIDS - EVALUATION - DELIVERY PROVISIONS - TIME LIMITATION--- CONTRACTS - NEGOTIATION - COST, ETC., DATA--- CONTRACTS - NEGOTIATION - DURATION, ETC. --- CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - ADMINISTRATIVE DETERMINATION IN A NEGOTIATED MILITARY PROCUREMENT IN WHICH PRICE AND DELIVERY WERE OF EQUAL IMPORTANCE AND ALL BIDDERS WERE CLEARLY INFORMED DURING NEGOTIATIONS OF THE REQUIRED DATE FOR COMPLETION OF DELIVERIES, AN OFFEROR WHO CONDITIONED HIS ALTERNATE PROPOSAL ON DELIVERY BEYOND THE MAXIMUM TIME OFFERED TO ALL OTHERS HAD HIS PROPOSAL PROPERLY REJECTED. WHILE COST BREAKDOWNS ARE IMPORTANT IN DETERMINING WHETHER PRICES QUOTED IN A NEGOTIATED PROCUREMENT ARE FAIR AND REASONABLE AND SHOULD BE FURNISHED WHEN REQUESTED BY THE GOVERNMENT, NEITHER THE ARMED SERVICES PROCUREMENT ACT, 10 U.S.C. 2301, ET SEQ., NOR THE PROCUREMENT REGULATIONS MAKES THE FAILURE TO FURNISH SUCH BREAKDOWN FATAL TO THE CONTRACT SUBSEQUENTLY AWARDED; THEREFORE, THE FAILURE OF A SUCCESSFUL OFFEROR TO FURNISH A COST BREAKDOWN INCIDENT TO A NEGOTIATED MILITARY PROCUREMENT IN WHICH THE CONTRACTING OFFICER HAD KNOWLEDGE OF FEDERAL SUPPLY SCHEDULE PRICES AND INFORMATION FROM THE COMPETITION, WHICH AFFORDED A BASIS FOR A DETERMINATION THAT THE PRICE WAS FAIR AND REASONABLE, DOES NOT CONSTITUTE A LEGAL BASIS FOR CANCELLATION OF THE CONTRACT. IN A NEGOTIATED MILITARY PROCUREMENT IN WHICH DELIVERY WAS AN IMPORTANT FACTOR THE ESTABLISHMENT OF A CUTOFF DATE FOR NEGOTIATIONS WITH THE OFFERORS TWO MONTHS IN ADVANCE OF THE FIRST DELIVERY DATE BASED ON NORMAL LEAD TIME FOR PRODUCTION OF THE ITEM TO ASSURE THAT URGENT DELIVERIES WOULD BE TIMELY MET MAY BE REGARDED AS A REASONABLE TIME FOR TERMINATION OF NEGOTIATIONS UNDER PARAGRAPHS 3-801.3 (IV) AND 3-804 OF THE ARMED SERVICES PROCUREMENT REGULATIONS WHICH RECOGNIZES THAT THERE HAS TO BE SOME EVENTUAL CUTOFF DATE. ALTHOUGH THE DETERMINATION OF WHETHER A MILITARY PROCUREMENT SHOULD BE SET ASIDE IN WHOLE OR IN PART FOR SMALL BUSINESS IS A MATTER WITHIN THE PROVINCE OF THE ADMINISTRATIVE AGENCY AND THE SMALL BUSINESS ADMINISTRATION, A DETERMINATION BY A MILITARY PROCUREMENT AGENCY, MADE PRIOR TO THE TIME THE REGULATIONS AUTHORIZED A SMALL BUSINESS SET ASIDE, THAT A LARGE VOLUME PROCUREMENT WOULD NOT BE SPLIT UP IN SMALL LOTS BUT WOULD RESERVE TO BIDDERS THE RIGHT TO OFFER PROPOSALS ON PARTIAL QUANTITIES WILL NOT BE QUESTIONED AND THE ONLY SMALL BUSINESS CONCERN TO PARTICIPATE IN NEGOTIATIONS MAY NOT BE REGARDED AS HAVING BEEN PREJUDICED BY THE FACT THAT THERE WAS NO SET-ASIDE IN VIEW OF THE OPPORTUNITY WHICH EXISTED TO OBTAIN A PARTIAL AWARD IF HIS BID HAD BEEN LOW AND MET THE DELIVERY REQUIREMENTS.

TO THE FRANK G. SCHENUIT RUBBER COMPANY, NOVEMBER 29, 1961:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF JULY 12, 1961, AND SUBSEQUENT CORRESPONDENCE PROTESTING AGAINST AN AWARD BY THE DEPARTMENT OF THE AIR FORCE ( AF) OF CONTRACT NO. AF 33/600/-43527 FOR FURNISHING A QUANTITY OF B-52 AIRCRAFT TIRES MADE TO THE B. F. GOODRICH AVIATION PRODUCTS DIVISION OF THE B. F. GOODRICH COMPANY, AT A PRICE HIGHER THAN SCHENUIT OFFERED OF $420 PER TIRE UNDER A REQUEST FOR PROPOSALS ( RFP) SUPERSEDING INVITATION FOR BIDS ( IFB) 33-600-61-165, ISSUED JANUARY 20, 1961, BY THE AERONAUTICAL SYSTEMS CENTER, WRIGHT-PATTERSON AIR FORCE BASE, OHIO.

THE RECORD SHOWS THAT IFB 33-600-61-165 WHICH WAS SCHEDULED FOR OPENING ON MARCH 1, 1961, REQUESTED BIDS FOR ACCEPTANCE BY MARCH 31, 1961, ON FOUR ITEMS OF B-52 AIRCRAFT TIRES CONFORMING WITH THE DRAWINGS AND SPECIFICATIONS CITED IN THE SCHEDULE TO BE DELIVERED PURSUANT TO A STIPULATED SCHEDULE AND EXPRESSLY PROVIDING "ACCELERATED DELIVERY NOT ACCEPTABLE.' THE REQUIREMENTS AS MODIFIED BY AMENDMENT NO. 1 ADDING TWO OTHER ITEMS WERE AS FOLLOWS:

* * * * CHART OMITTED * * * *

IT WAS PROVIDED IN THE IFB THAT THE STIPULATED DELIVERY REQUIREMENTS WERE BASED ON THE ASSUMPTION THAT THE AWARD WOULD BE MADE BY MARCH 31, 1961, AND THAT " EACH DELIVERY DATE IN THE DELIVERY SCHEDULE SET FORTH HEREIN WILL BE EXTENDED BY THE NUMBER OF CALENDAR DAYS AFTER THE ABOVE DATE THAT THE CONTRACT IS IN FACT AWARDED.' BY AMENDMENT NO. 2 THE PROVISIONS FOR DELIVERY WERE AMENDED BY ADDING THE FOLLOWING PARAGRAPH 3:

3. IF PURSUANT TO PARAGRAPH 8 (C) OF THE TERMS AND CONDITIONS

OF THIS IFB, THE GOVERNMENT MAKES ANY AWARD FOR A QUANTITY

LESS THAN THE QUANTITY SPECIFIED IN A GIVEN ITEM, THE GOVERNMENT

WILL PRORATE THE QUANTITIES REQUIRED TO BE DELIVERED.

AT THE BID OPENING ON MARCH 1, 1961, IT WAS FOUND THAT ALL BIDDERS APPARENTLY HAD QUOTED PRICES SUBSTANTIALLY THE SAME AS THE CURRENT GENERAL SERVICES ADMINISTRATION ( GSA) FEDERAL SUPPLY SCHEDULE PRICES WHICH WERE $625.93 FOR 36 PLY TIRES AND $681.56 FOR 38 PLY TIRES WITH ADJUSTMENTS FOR FREIGHT ALLOWANCES BY SOME OF THE BIDDERS.

BY AF LETTER DATED MARCH 10, 1961--- " IFB 33-600-61-165 AND AMEND NRS 1 AND 2, NOTICE OF INTENTION TO NEGOTIATE"--- THE BIDDERS ON THE IFB, INCLUDING THE FRANK G. SCHENUIT RUBBER COMPANY, WHICH IS THE ONLY SMALL BUSINESS FIRM IN THE INDUSTRY, FIRESTONE TIRE AND RUBBER COMPANY, GENERAL TIRE AND RUBBER COMPANY, B. F. GOODRICH AVIATION PRODUCTS, A DIVISION OF THE B. F. GOODRICH COMPANY, GOODYEAR TIRE AND RUBBER COMPANY AND UNITED STATES RUBBER COMPANY, WERE NOTIFIED THAT ALL BIDS RECEIVED HAD BEEN REJECTED "FOR THE REASON THAT THE AIR FORCE DOES NOT CONSIDER THAT THE BID PRICES WERE INDIVIDUALLY REACHED IN OPEN COMPETITION; " THAT THE AF INTENDED TO ACCOMPLISH THIS PROCUREMENT BY NEGOTIATION AND THAT AN OPPORTUNITY WOULD BE AFFORDED THE BIDDERS TO PARTICIPATE IN THE FORTHCOMING NEGOTIATION.

A " REQUEST FOR PROPOSALS SUPERSEDING INVITATION FOR BIDS 33-600-61 165 AND AMENDMENTS 1 AND 2" WAS ACCORDINGLY ISSUED MARCH 15, 1961, IN WHICH THE PROSPECTIVE BIDDERS WERE ADVISED THAT, AS STATED IN THE MARCH 10 LETTER, THE REQUIREMENTS OF THE IFB WOULD BE PROCURED THROUGH NEGOTIATION AND THAT THE "ITEMS, QUANTITIES, DELIVERY REQUIREMENTS, AND OTHER APPLICABLE TERMS AND CONDITIONS ARE THE SAME AS SPECIFIED IN IFB 33-600-61 -165 AND AMENDMENTS 1 AND 2 THERETO.' THE PROSPECTIVE BIDDERS WERE ALSO NOTIFIED IN THIS LETTER THAT A "COST BREAKDOWN IN ACCORDANCE WITH THE ATTACHED DD FORM 633 IS REQUIRED, TOGETHER WITH ALL PERTINENT PRICING INFORMATION TO PROPERLY SUPPORT THE VARIOUS ELEMENTS OF COST CONTAINED IN THE COST BREAKDOWN.' THEY WERE NOTIFIED FURTHER THAT PROPOSALS SHOULD BE SUBMITTED TO REACH THE CENTER ON OR BEFORE APRIL 3, 1961. BY A SUPPLEMENT TO THE RFP DATED MARCH 24, 1961, IFB 33-600-61 165 WAS AMENDED IN MATERIAL PART SO AS TO CHANGE THE DESCRIPTIONS AND SPECIFICATIONS OF THE TIRES REQUIRED UNDER ITEMS 1.1 AND 1.2 FROM 36 PLY AND THE DATE FOR RECEIPT OF PROPOSALS WAS EXTENDED TO APRIL 5, 1961. INASMUCH AS THE REVISED PROPOSALS SUBMITTED BY SCHENUIT DID NOT INCLUDE ITEM 3.1 FOR SIZE 49 X 17 TIRES, THIS ITEM IS NOT INVOLVED IN THE PROTEST.

UNDER DATE OF APRIL 12, 1961, A WIRE EMPHASIZING THE COST BREAKDOWN REQUIREMENT IDENTICAL TO THE FOLLOWING WITH THE EXCEPTION OF THE ADDRESSEE DESIGNATED WAS DISPATCHED TO THE SIX COMPETING COMPANIES:

FROM XLMEAEM-4-8IE. FOR: MR. A. E. WALLACH, GOVERNMENT CONTRACTS ADMINISTRATOR. COST BREAKDOWNS REQUIRED BY RFP SUPERSEDING IFB 33-600 61- 165 AND AMENDMENTS 1 AND 2 WERE NOT SUBMITTED WITH YOUR PROPOSAL DATED 3 APRIL 1961. THE BREAKDOWNS ARE REQUIRED TO SUPPORT THE REASONABLENESS OF PROPOSED PRICES AND ARE FOR INTERNAL AF USE ONLY. THE DATA DESIRED WILL BE HELD IN THE STRICTEST CONFIDENCE AND WILL NOT BE REVEALED TO OR DISCUSSED WITH COMPETITORS. BREAKDOWN MAY BE SUBMITTED IN ANY FORMAT WHICH WILL SUBSTANTIATE PROPOSED PRICES. YOUR ESTABLISHED METHOD OF COSTING MAY BE USED AND SHOULD BE DESCRIBED. PLEASE SUBMIT BREAKDOWNS TO REACH THIS DIVISION, MEAN, NO LATER THAN 17 APR 61.

A FURTHER WIRE DATED JUNE 8, 1961, FIXING JUNE 14, 1961, AS THE FINAL DATE FOR CONSIDERATION OF PROPOSALS WAS SENT TO THE SAME PARTIES AS FOLLOWS:

THIS WILL CONFIRM TELECON ON 8 JUNE 1961. FINAL DATE FOR CONSIDERATION OF PROPOSALS SUBMITTED IN RESPONSE TO RFP SUPERSEDING IFB 33-600-61-165 IS 14 JUNE 1961. PROPOSALS RECEIVED AFTER THAT DATE WILL NOT BE CONSIDERED. PLEASE REVIEW YOUR PROPOSAL AND ADVISE NO LATER THAN 5:00 P.M. EST 14 JUNE 1961 OF ANY CHANGES TO YOUR PROPOSAL OR CONFIRM THAT PREVIOUS PROPOSAL IS FIRM.

THE RECORD SUBMITTED SHOWS THAT IN RESPONSE TO THE RFP B. F. GOODRICH AVIATION PRODUCTS SUBMITTED A PROPOSAL DATED APRIL 3, 1961, TO FURNISH EACH ITEM OF THE 8,570 TIRE REQUIREMENT AT THE SAME UNIT PRICE OF $667.92 PER TIRE (SLIGHTLY LESS THAN THE GSA FEDERAL SUPPLY SCHEDULE PRICE OF $681.56) STATING THAT THE PRICES QUOTED WERE "NO GREATER THAN THOSE CHARGED OUR "MOST FAVORED CUSTOMERS" AND ARE BASED ON PRICE LISTS NOW IN EFFECT.' IT WAS STATED THAT ALL OTHER TERMS AND CONDITIONS OF IFB 165 AND ITS AMENDMENTS WOULD APPLY.

APPARENTLY IN REPLY TO THE AF WIRE OF APRIL 12, 1961, EMPHASIZING THE COST BREAKDOWN REQUIREMENT, BY WIRE DATED APRIL 17, 1961, GOODRICH ADVISED AF THAT THE PRICES QUOTED IN ITS PROPOSAL WERE NOT HIGHER THAN THOSE CHARGED "OUR MOST FAVORED CUSTOMER AND ARE BASED ON PRICE LISTS NOW IN EFFECT; " ALSO THAT " SINCE ITEMS INVOLVED IN THIS RFP ARE PRICE LIST ITEMS NO COST BREAKDOWN WILL BE FURNISHED" AND THAT " SIGNED CONFIRMATION FOLLOWS ALONG WITH COPIES OF PRICE LISTS AND CERTIFICATES OF CURRENT PRICING DATA.'

BY LETTER DATED MAY 3, 1961, CONFIRMING WIRE OF THE SAME DATE AND DISCUSSIONS AT WRIGHT FIELD IN MAY 1, 1961, GOODRICH ADVISED AF THAT TIRES INCORPORATING THE LATEST AF REVISIONS WOULD BE FURNISHED AT THE SAME PRICE, STATING THAT:

TRANSPORTATION COSTS INCURRED BY THE GOVERNMENT WILL NOT EXCEED THE COST OF TRANSPORTING THE LOWEST AIRPLANE TIRE WEIGHT AND SMALLEST CUBE ON THE SAME SIZE TIRE OFFERED BY ANY VENDOR FROM THE NEAREST VENDOR'S F.O.B. POINT TO THE ULTIMATE DESTINATION, AND CREDIT FOR ANY EXCESS ACTUALLY INCURRED IN SHIPMENT WILL BE PASSED BY B. F. GOODRICH, AS A CREDIT ON THE INVOICE, TO THE GOVERNMENT.

GOODRICH ALSO ADVISED IN THIS LETTER THAT THE DELIVERY REQUIREMENTS OF THE RFP COULD BE MET ,PROVIDING A NOTICE OF AWARD IS RECEIVED PRIOR TO 15 MAY 1961; " THAT AN ACCELERATION OF THE SCHEDULE MIGHT BE POSSIBLE WHICH COULD BE EVALUATED ON RECEIPT OF A CONTRACT, AND THAT " IF AN AWARD IS TO BE MADE AFTER THIS DATE, REQUIREMENTS FOR JUNE AND THE BALANCE OF SCHEDULE WILL HAVE TO BE REEVALUATED ON THE BASIS OF THE TIMING OF THE NEW AWARD.'

GOODRICH SUBMITTED A SECOND PROPOSAL DATED MAY 11, 1961, SUPERSEDING ALL PREVIOUS QUOTATIONS, OFFERING A UNIT PRICE OF $599.79 PER TIRE FOR THE 8,570 REQUIREMENT OF 38-PLY TIRES, NET F.O.B. AKRON, NO FREIGHT ALLOWED WITH A PROVISION THAT " IF REQUIRED, DELIVERIES CAN BE MADE AT A RATE UP TO 1,900 PER MONTH STARTING THIRTY DAYS AFTER RECEIPT OF THE ORDER.' THIS PROPOSAL WAS AMENDED BY LETTER DATED JUNE 14, 1961, REDUCING THE UNIT PRICE TO A NET OF $427.79 PER TIRE, F.O.B. AKRON, OHIO, WITH NO DISCOUNT AND NO FREIGHT ALLOWANCE, DELIVERIES TO START 30 DAYS AFTER NOTIFICATION OF AWARD OR RECEIPT OF CONTRACT UP TO 1,900 UNITS MONTHLY.

CONTRACT AF 33/600/-43527 WAS ENTERED INTO WITH GOODRICH EFFECTIVE JUNE 20, 1961, SIGNED BY GOODRICH AND THE CONTRACTING OFFICER ON JUNE 24 AND JUNE 27, 1961, RESPECTIVELY, APPROVED BY THE AF DIRECTOR OF PROCUREMENT AND PRODUCTION ON JUNE 30, 1961. THE CONTRACT CALLS FOR FURNISHING 8,570, 56 X 16, 38-PLY TIRES AS SPECIFIED AT A UNIT PRICE OF $427.79 PER TIRE FOR FINAL INSPECTION AND ACCEPTANCE AT THE GOODRICH PLANT, AKRON, OHIO, AND SHIPMENT AT THE RATE OF 1,714 PER MONTH BEGINNING IN AUGUST AND EXTENDING THROUGH DECEMBER 1961, IN ACCORDANCE WITH CONSIGNMENT INSTRUCTIONS TO BE FURNISHED BY WRIGHT-PATTERSON AIR FORCE BASE.

YOUR COMPANY SUBMITTED A PROPOSAL DATED APRIL 5, 1961, QUOTING A UNIT PRICE OF $659.57 ON ITEMS 1.1 THROUGH 2.3 WHICH PRICE WOULD BE REDUCED TO $652.89 IF YOU WERE AWARDED ITEM 1.1 UNDER IFB 185, WHICH PRICES IT WAS STATED WERE LESS THAN THE LOWEST PRICE OFFERED TO ANY CUSTOMER AS SUPPORTED BY PUBLISHED PRICE LIST ON FILE WITH THE GOVERNMENT. A PROMPT- PAYMENT DISCOUNT OF 1 PERCENT 10 DAYS, ONE-HALF OF 1 PERCENT 20 DAYS, WAS OFFERED, DELIVERY TO BE MADE AT THE RATE OF 500 DURING JUNE, JULY AND AUGUST, AND THEN AT A RATE OF 800 PER MONTH.

FOLLOWING RECEIPT OF THE AF WIRE OF APRIL 12, 1961, REGARDING THE FURNISHING OF A COST BREAKDOWN, YOU MADE REFERENCE IN LETTER DATED APRIL 19, 1961, TO TELEPHONE CONVERSATIONS HELD APRIL 18, 1961, AND EXPLAINED THAT "THIS MANUFACTURER BEING A SMALL BUSINESS DOES NOT HAVE A COST ANALYSIS DEPARTMENT.' IT WAS STATED IN THIS LETTER THAT ATTACHED "ARE THE COST AND PRICE INFORMATION PERTINENT TO THE SUBJECT PROPOSAL.' THE DELIVERY PREVIOUSLY OFFERED WAS CHANGED TO PROVIDE AS FOLLOWS: " ITEMS 1.1 THROUGH 2.3 CAN BE DELIVERED AT THE RATE OF 300 PER MONTH STARTING JUNE 1961, CONTINUING THROUGH AUGUST 1961; THEN AT A RATE OF 400 PER MONTH STARTING SEPTEMBER 1961, AND CONTINUING THROUGH FEBRUARY 1962; THEN AT A RATE OF 800 PER MONTH STARTING MARCH 1962 AND CONTINUING AT THAT RATE THROUGH JULY 1962.' YOU EMPHASIZED THE IMPORTANCE OF AVOIDING DELAY IN COMPLETING NEGOTIATIONS STATING THAT THE PRICES MIGHT REQUIRE REVISION IF NEGOTIATIONS WERE NOT COMPLETED SUFFICIENTLY EARLY TO PERMIT PROTECTION OF YOUR COMPANY BY PURCHASE OF FUTURES AS "THE PRICES OFFERED ARE (AND WILL BE) FIRM, BUT ARE BASED IN PART ON EXISTING PRICES OF RUBBER.' THE COST AND PRICE INFORMATION ATTACHED TO THIS LETTER CONTAINED A BREAKDOWN OF THE ITEMS MAKING UP THE UNIT PRICE OFFERED OF $652.89 PER TIRE, ASSUMING YOU RECEIVED AN AWARD UNDER IFB 185.

UPON REVIEW OF THE FORMAT OF A LETTER CONTRACT WHICH AF REPRESENTATIVES APPARENTLY HAD SUGGESTED MIGHT BE NECESSARY IN THE EVENT INSUFFICIENT TIME REMAINED TO ARRIVE AT A DEFINITIVE CONTRACT, YOU ADVISED AF IN LETTER DATED APRIL 25, 1961, THAT A LETTER CONTRACT WOULD BE UNACCEPTABLE. YOU URGED IN THIS LETTER THAT ONLY A DETERMINATION AS TO THE REASONABLENESS OF THE PRICES OFFERED REMAINED TO PERMIT AN AWARD OF A FIXED-PRICE CONTRACT.

BY LETTER DATED JUNE 13, 1961, YOU STATED THAT AS SUGGESTED IN A CONFERENCE WITH AF ON JUNE 7, 1961, YOUR PROPOSAL OF APRIL 19, 1961, HAD BEEN REVIEWED USING THE MOST CURRENT AVAILABLE INFORMATION WHICH INCLUDED THE RECENTLY COMPLETED FISCAL YEAR-END STATEMENT AND ENCLOSED A COPY OF ITS " CONDENSED STATEMENT OF INCOME AND EXPENSE FISCAL YEAR ENDED APRIL 30, 1961.' IN THIS LETTER YOU AMENDED YOUR PROPOSAL OF APRIL 19, 1961,"TO REVISE THE UNIT PRICE FOR ITEMS 1.1 THROUGH 2.3 TO $511.00, F.O.B. CARRIER'S EQUIPMENT, BALTIMORE, MARYLAND, WITH A PROMPT PAYMENT DISCOUNT OF 1 PERCENT--- 10 DAYS.' COPIES OF A " PRICE ANALYSIS" OF THE 56 X 16, 38-PLY TIRES AND AN " EXPLANATION OF COST EXPECTED DURING THE PERIOD JULY 1, 1961 THROUGH DECEMBER 31, 1961 NOT HERETOFORE INCURRED" WERE ATTACHED IN SUPPORT OF THIS REVISED PROPOSAL. YOU ALSO STATED IN THIS LETTER THAT YOUR FIRM WAS A SMALL BUSINESS CONCERN AND WOULD FACE SERIOUS OPERATING PROBLEMS WITHOUT AN AWARD UNDER THE SUBJECT PROCUREMENT, AND IN VIEW OF THE COOPERATION EXTENDED DURING THESE NEGOTIATIONS URGED AF "TO CONSIDER A 50 PERCENT SMALL BUSINESS SET ASIDE CONSISTENT WITH THE 1 MAY 1961 REVISION TO THE ARMED SERVICE PROCUREMENT REGULATION.' ( ASPR 1-706.6)

THE ABOVE PROPOSAL OF JUNE 13 WAS SUBMITTED IN PERSON ON JUNE 14, 1961. DURING THE NEGOTIATIONS ON THAT DATE AF NEGOTIATORS OFFERED CERTAIN COMMENTS CONCERNING YOUR METHOD OF COMPUTING THE PRICE UNDER YOUR REVISED PROPOSAL AND SUGGESTED THAT YOU SHOULD OFFER AN ALTERNATE PROPOSAL FOR DELIVERIES BEYOND DECEMBER 1961. ON THE FOLLOWING DAY YOU SUBMITTED A FURTHER REVISED PROPOSAL DATED JUNE 15, 1961, AGREEING TO ACCEPT THE AF METHOD OF COMPUTING LABOR COST AND REDUCING THE UNIT PRICE OFFERED TO $428.60 PER TIRE, NET F.O.B. BALTIMORE, MARYLAND, WITH DELIVERY OF 300 EACH IN JULY AND AUGUST AND THEN AT A MONTHLY RATE OF 620 PER MONTH THROUGH DECEMBER 1961. THIS PROPOSAL ALSO INCLUDED THE FOLLOWING ALTERNATE OFFER: AN ALTERNATE OFFER IS MADE TO SUPPLY ANY QUANTITY IN EXCESS OF 5,000 AT A FIXED PRICE OF $420.00. IF THIS OFFER IS ACCEPTED THE DELIVERY RATE FOR JANUARY AND FEBRUARY WOULD REMAIN 620 PER MONTH FOLLOWED BY A 700 PER MONTH RATE UNTIL COMPLETION.

YOU HAVE INFORMALLY ADVISED US THAT IN A DISCUSSION WITH THE CONTRACTING OFFICER CONCERNING THIS PROPOSAL, AN INQUIRY WAS MADE AS TO WHETHER ANY REPLY HAD BEEN RECEIVED FROM OGDEN MATERIEL AREA ON THE QUESTION OF DELIVERY SCHEDULES, AND THAT THE AF REFUSED TO ENTER INTO ANY FURTHER DISCUSSIONS. ALSO, THAT YOU SUBSEQUENTLY LEARNED FROM THE COMMERCE PROCUREMENT SYNOPSIS ITEM 3.1 OF THE RFP HAD BEEN AWARDED TO THE UNITED STATES RUBBER COMPANY, BUT NO INFORMATION COULD BE OBTAINED WITH RESPECT TO THE AWARD OF THE OTHER ITEMS, AND ON JULY 11, 1961, BELIEVING THE CONTRACT ON THESE ITEMS REMAINED OPEN, YOU ADDRESSED THE FOLLOWING WIRE TO WRIGHT-PATTERSON AIR FORCE BASE:

RE RFP 33-600-61-165 AIR FORCE COGNIZANT SCHENUIT COSTS AND CAPACITY AND FURTHERMORE NEED AS ONLY SMALL BUSINESS IN MILITARY TIRE INDUSTRY FOR MAINTAINING REASONABLE PRODUCTION URGE AWARD SCHENUIT REASONABLE PORTION THIS HIGH PROCUREMENT AT PRICE WHICH YOU DETERMINE WILL COVER OUR COST AND PROVIDE SMALL BUT REASONABLE PROFIT.

YOU HAVE INFORMED US FURTHER THAT ON THE FOLLOWING DAY, JULY 12, 1961, A LETTER DATED BY RUBBER STAMP JUNE 30, 1961, WAS RECEIVED FROM THE AF CONTRACTING OFFICER ADVISING THAT THE REMAINING ITEMS HAD BEEN AWARDED TO B. F. GOODRICH. YOU PROTESTED THIS AWARD AND YOUR PROTEST WAS DENIED BY THE AF IN LETTER DATED JULY 24, 1961, FOR THE REASONS STATED THEREIN.

YOU ALLEGE THAT ON JUNE 14, 1961, AF ADVISED THAT THE DELIVERY REQUIREMENT WOULD BE CHECKED AND THAT IF ALL DELIVERIES WERE NOT REQUIRED BY DECEMBER 31, 1961, YOUR ALTERNATE PROPOSAL WOULD BE CONSIDERED. YOU STATE, HOWEVER, THAT AWARD WAS MADE TO GOODRICH BEFORE THIS CHECK WAS MADE. IT IS URGED THAT THIS WAS A VIOLATION OF TRUST, AS WELL AS OF THE GOVERNMENT'S BEST INTEREST AND THE RIGHTS OF YOUR COMPANY. YOU ALLEGE ALSO THAT THE AF DID NOT CONDUCT THE NEGOTIATIONS IN ACCORDANCE WITH THE ARMED SERVICES PROCUREMENT REGULATION AND THAT THE BASIC DIFFERENCES BETWEEN YOU AND THE AF AND THE ULTIMATE DIFFICULTIES ENCOUNTERED WHICH WERE ADVERSE TO THE INTERESTS OF THE AF AS WELL AS TO YOU, STEMMED FROM THE ATTITUDE OF THE OTHER COMPANIES BIDDING ON THIS PROCUREMENT RATHER THAN ANY ADVERSE ATTITUDE ON THE PART OF AF OFFICIALS. YOU ALLEGE FURTHER THAT THIS MIGHT HAVE BEEN AVOIDED IF THE OTHER FIVE INTERESTED MANUFACTURERS ENTERED INTO THE NEGOTIATION PROPERLY IN A COOPERATIVE MANNER AND IN ACCORDANCE WITH THE REGULATION. YOUR CONTENTIONS IN SUPPORT OF YOUR PROTEST MAY BE SUMMARIZED AS FOLLOWS:

(1) SCHENUIT SUBMITTED THE LOWEST NEGOTIATED PRICE OF $420 PER

TIRE ON A QUANTITY IN EXCESS OF 5,000 TIRES WITH DELIVERY

EXTENDED BEYOND DECEMBER 31, 1961, AS PROVIDED BY THE RFP;

(2) A REQUIREMENT THAT DELIVERY BE COMPLETED BY DECEMBER 31,

1961, HAD NOT BEEN ESTABLISHED AS OF JUNE 15, 1961, WHEN THE

DELIVERY REQUIREMENT PRESUMABLY WAS STILL OPEN TO NEGOTIATION,

AND WAS NOT DETERMINED UNTIL AFTER JUNE 20, 1961, THE EFFECTIVE

DATE OF THE AWARD TO GOODRICH;

(3) SCHENUIT WAS THE ONLY FIRM WHICH COMPLIED WITH THE AF

REQUIREMENT FOR FURNISHING COST DATA AND ALONE NEGOTIATED IN THE

MANNER PROVIDED BY ASPR;

(4) NEGOTIATIONS WITH SCHENUIT SHOULD NOT HAVE BEEN DISCONTINUED

UNTIL AFTER THE DECEMBER 31, 1961, DELIVERY REQUIREMENT HAD BEEN

ESTABLISHED AND SCHENUIT AFFORDED AN OPPORTUNITY TO FURNISH ITS

CAPACITY OF 3,000 TIRES AT THE LOWEST NEGOTIATED PRICE OFFERED

IN ITS ALTERNATE PROPOSAL OF $420 PER TIRE; AND

(5) THIS WAS A "VOLUME PROCUREMENT" A PORTION OF WHICH SHOULD

HAVE BEEN AWARDED TO SCHENUIT IN CONSIDERATION OF ITS "SMALL

BUSINESS" STATUS AND TO INSURE A DUAL SOURCE OF SUPPLY FOR B 52

TIRES AS REQUIRED BY ASPR.

REGARDING YOUR CONTENTIONS NOS. 1 AND 2, THE CONTRACTING OFFICER TAKES THE POSITION THAT THOSE CONTENTIONS ARE WITHOUT MERIT STATING THAT " THIS AWARD WAS MADE AS A RESULT OF COMPETITIVE NEGOTIATION PURSUANT TO 10 U.S.C. 2304 (A) (15) AND PRICE WAS ONLY ONE OF THE FACTORS TO BE CONSIDERED IN MAKING AN AWARD.' HE POINTS OUT THAT "IT IS TRUE THAT PRICE WAS A VERY IMPORTANT CONSIDERATION * * * BUT THE GOVERNMENT'S REQUIRED DELIVERY SCHEDULE WAS ALSO AN IMPORTANT FACTOR.' ALSO, THAT " ASIDE FROM THE FACT THAT THE BID PRICE OF $420 PER TIRE BY SCHENUIT WAS NOT RESPONSIVE TO THE GOVERNMENT'S REQUIRED DELIVERY SCHEDULE IT SHOULD BE RECOGNIZED THAT ANY STRICT RULES THAT MIGHT BE APPLICABLE TO A FORMALLY ADVERTISED PROCUREMENT ARE NOT NECESSARILY APPLICABLE TO A NEGOTIATED PROCUREMENT.' HE THEN REVIEWS THE "QUESTION OF DELIVERY SCHEDULE, SINCE IT IS CERTAINLY A FACTOR AFFECTING PRICE AND ALSO A CONDITION OF SCHENUIT'S $420 UNIT PRICE.'

THE CONTRACTING OFFICER STATES THAT " SCHENUIT WAS CLEARLY INFORMED DURING THE NEGOTIATIONS THAT THE GOVERNMENT HAD A FINAL CUT-OFF OF 31 DECEMBER 1961, OF THE TOTAL REQUIREMENT OF THE RFP.' ALSO, THAT WHILE IT IS TRUE SCHENUIT WAS ADVISED THEY COULD QUOTE ON A DELIVERY SCHEDULE COMPATIBLE WITH THEIR PRODUCTION CAPABILITY,"AT NO TIME DID THE GOVERNMENT INDICATE THAT DELIVERIES PAST 31 DECEMBER 1961, WOULD BE ACCEPTABLE AND IN ACCORDANCE WITH THE GOVERNMENT'S REQUIREMENTS.' THE CONTRACTING OFFICER ASSERTS THAT " IF SCHENUIT HAD BID ON THE DELIVERY OF A CERTAIN QUANTITY THROUGH DECEMBER 31 AND WOULD HAVE BEEN LOW ON THAT QUANTITY THEY WOULD HAVE BEEN CONSIDERED FOR AWARD.' HOWEVER, AS IT TURNED OUT, SCHENUIT CONDITIONED THEIR $420 PRICE ON RECEIVING A MINIMUM ORDER OF 5,000 TIRES. IF THE GOVERNMENT WOULD HAVE ACCEPTED THIS OFFER IT WOULD HAVE INVOLVED DELIVERIES BEYOND DECEMBER 31. THEREFORE, ACCORDING TO THE CONTRACTING OFFICER " SCHENUIT'S SO-CALLED ALTERNATE PROPOSAL WAS CLEARLY NOT IN ACCORDANCE WITH THE DELIVERY REQUIREMENTS OF THE GOVERNMENT.'

IN RESPONSE TO YOUR CONTENTION THAT THE DELIVERY REQUIREMENT HAD NOT BEEN ESTABLISHED PRIOR TO JUNE 23, 1961, AFTER THE EFFECTIVE DATE OF AWARD TO GOODRICH, THE CONTRACTING OFFICER EXPLAINS THAT "IN FACT, THE BUYER HAD VERBALLY VERIFIED THE DELIVERY REQUIREMENT PRIOR TO 23 JUNE BUT HAD NOT MADE A WRITTEN RECORD OF HAVING DONE SO.' HE URGES THAT " ONCE THE IFB WAS CONVERTED TO A NEGOTIATED PROCUREMENT, DELIVERY SCHEDULE, AS WELL AS OTHER TERMS, BECAME THE SUBJECT OF NEGOTIATION WITH THE FOLLOWING TWO LIMITATIONS: (1) THE DELIVERY SCHEDULE FINALLY AGREED UPON, HAD TO MEET THE GOVERNMENT NEEDS AND (2) THE SAME DELIVERY SCHEDULE HAD TO BE OFFERED TO ALL BIDDERS SO THEY WOULD BE ON AN EQUAL BASIS IN QUOTING PRICES.' STATES THAT "ALL BIDDERS WERE ADVISED DURING THE NEGOTIATIONS OF THE REQUIREMENT FOR DELIVERY TO BE COMPLETED IN DECEMBER 1961, AND NEGOTIATIONS WERE CONTINUED ON THAT BASIS; " THAT IN ASCERTAINING THE REQUIRED DELIVERY SCHEDULE EVERY EFFORT WAS MADE "TO STRETCH IT OUT AS FAR AS POSSIBLE, RECOGNIZING THAT SCHENUIT WAS SMALL BUSINESS AND HAD LIMITED PRODUCTION CAPACITY COMPARED TO THE OTHER BIDDERS; " AND THAT "WHAT WAS ASCERTAINED TO BE THE MAXIMUM LIMITS ON DELIVERY WAS OFFERED TO ALL BIDDERS.'

WITH PARTICULAR REFERENCE TO THE NEGOTIATIONS ON JUNE 14, 1961, THE CONTRACTING OFFICER STATES ,THE AF NEGOTIATORS OFFERED TO REAFFIRM THE VALIDITY OF REQUIREMENT FOR DELIVERY TO BE COMPLETED IN DECEMBER 1961, IN ORDER TO OFFER SCHENUIT EVERY POSSIBILITY TO BID ON A LARGER QUANTITY OF TIRES" AND THAT IT WAS POINTED OUT DURING THESE NEGOTIATIONS AND AGAIN AT THE TIME THE JUNE 15 PROPOSAL WAS PRESENTED THAT SCHENUIT'S ALTERNATE PROPOSAL COULD NOT BE CONSIDERED "IF COMPLETION OF DELIVERIES IN DECEMBER 1961 REMAINED A VALID REQUIREMENT.' THE CONTRACTING OFFICER CONCLUDES THAT , IN THIS CASE PRICE AND DELIVERY WERE OF EQUAL IMPORTANCE AND THE AWARD WAS MADE TO THE BIDDER WHO OFFERED THE LOWEST PRICE AND DELIVERY WITHIN THE PERIOD REQUIRED.'

IN VIEW OF THE ADMINISTRATIVE EXPLANATION THAT YOU WERE CLEARLY INFORMED DURING NEGOTIATIONS THAT COMPLETION OF DELIVERIES OF THE TIRES WAS REQUIRED IN DECEMBER 1961, AND CONSIDERING THAT YOUR FIRST OFFER OF $428.60 WAS NOT LOW AND YOUR ALTERNATE OFFER TO DELIVER ANY QUANTITY IN EXCESS OF 5,000 TIRES AT A UNIT PRICE OF $420 WAS CONDITIONED UPON YOUR BEING PERMITTED TO MAKE DELIVERY OF ALL QUANTITIES IN EXCESS OF 3,080 DURING 1962, WHICH DID NOT MEET THE CRITICAL AF DELIVERY REQUIREMENT, WE SEE NO LEGAL BASIS FOR QUESTIONING THE ADMINISTRATIVE ACTION IN REJECTING YOUR BID.

REGARDING YOUR CONTENTION THAT OTHER THAN YOUR FIRM NO BIDDER FURNISHED THE COST DATA REQUESTED BY THE AF, THE CONTRACTING OFFICER ASSERTS THAT " IN THE CASE AT HAND IT WAS NOT CONSIDERED THAT THE PRACTICE OF THE OTHER BIDDERS IN FAILING TO SUBMIT COST BREAKDOWN WAS SUCH AS TO WARRANT A NEGATIVE FCR.'

IN NEGOTIATING PRICES FOR SUPPLIES IT IS THE DUTY OF THE GOVERNMENT NEGOTIATORS TO PROCURE SUCH SUPPLIES AT FAIR AND REASONABLE PRICES. CONSEQUENTLY, THE PRIMARY PURPOSE OF REQUIRING THE SUBMISSION OF COST DATA IN SUPPORT OF A PROPOSAL IS TO ASSIST THE CONTRACTING OFFICER IN MAKING A DETERMINATION THAT THE PRICES QUOTED ARE FAIR AND REASONABLE.

WE FEEL STRONGLY THAT IN NEGOTIATED PROCUREMENTS COST BREAKDOWNS SHOULD BE FURNISHED WHEN REQUESTED BY THE GOVERNMENT. OBVIOUSLY, THEY ARE AN IMPORTANT TOOL IN DETERMINING THAT THE PRICES QUOTED ARE FAIR AND REASONABLE. IF OTHER COURSES OF ACTION CONSISTENT WITH THE GOVERNMENT'S INTERESTS ARE OPEN, WE HAVE CONSIDERABLE RESERVATION THAT THE GOVERNMENT SHOULD ENTER INTO A NEGOTIATED CONTRACT WITH ANYONE WHO REFUSES TO FURNISH A COST BREAKDOWN. HOWEVER, THERE IS NOTHING IN THE ARMED SERVICES PROCUREMENT ACT, 10 U.S.C. 2301, ET SEQ., OR IN THE PROCUREMENT REGULATIONS WHICH WOULD HAVE THE EFFECT OF MAKING A FAILURE TO FURNISH A COST BREAKDOWN FATAL TO THE CONTRACT WHICH IS SUBSEQUENTLY ENTERED INTO BY THE GOVERNMENT. IN THIS PARTICULAR CASE THE CONTRACTING OFFICER HAD KNOWLEDGE OF THE GSA SCHEDULE PRICES TOGETHER WITH THE INFORMATION ACQUIRED FROM THE COMPETITION. THIS AFFORDED AT LEAST SOME BASIS FOR A DETERMINATION THAT THE CONTRACT PRICE AGREED UPON WAS FAIR AND REASONABLE. ACCORDINGLY, WHILE WE THINK THE AIR FORCE SHOULD HAVE INSISTED UPON GOODRICH FURNISHING COST DATA BEFORE ENTERING INTO THE CONTRACT WE CANNOT CONCLUDE THAT THE FAILURE TO DO SO CONSTITUTES A LEGAL BASIS FOR DIRECTING CANCELLATION.

CONCERNING YOUR CONTENTION THAT NEGOTIATIONS SHOULD HAVE BEEN CONTINUED WITH YOUR FIRM, THE RECORD SHOWS THAT THE CUTOFF DATE FOR NEGOTIATIONS WAS CLEARLY INDICATED IN A TWK DATED JUNE 8, 1961, WHICH WAS SENT TO ALL BIDDERS. THE ASPR (SEE ASPR 3-801.3 (IV) AND 3-804) CLEARLY RECOGNIZES THAT IN A NEGOTIATED PROCUREMENT THERE HAS TO BE SOME EVENTUAL CUTOFF DATE AS TO THE CONTINUING OF NEGOTIATIONS. IT IS THE AIR FORCE'S POSITION, WITH WHICH WE AGREE, THAT A REASONABLE CUTOFF DATE CAN BE APPLIED IN A NEGOTIATED PROCUREMENT, THIS BEING DETERMINED MAINLY BY THE REQUIREMENTS FOR DELIVERY AND WHEN AN AWARD MUST BE MADE IN ORDER TO MEET THE REQUIRED DELIVERY SCHEDULE. IN THAT CONNECTION THE AF STATES THAT " IT WILL BE ABSOLUTELY NECESSARY THAT AUGUST 1961 DELIVERY ON THE 38 PR TIRE BE COMPLIED WITH IN ORDER TO INSURE SUPPORT OF THE B-52 AIRCRAFT.' WE ARE ADVISED THAT THE NORMAL LEAD TIME FOR TIRE PRODUCTION IS APPROXIMATELY 2 MONTHS; CONSEQUENTLY, IT WAS NECESSARY TO PLACE AN AWARD IN JUNE TO ASSURE THAT URGENT AUGUST 1961 DELIVERIES WOULD BE MET. ACCORDINGLY, WE CANNOT AGREE WITH YOUR CONTENTION THAT NEGOTIATIONS SHOULD HAVE BEEN CONTINUED WITH YOUR FIRM AFTER THE CUTOFF DATE FIXED BY THE AIR FORCE.

WITH RESPECT TO CONTENTION NO. 5, THE CONTRACTING OFFICER RECOGNIZES THAT THIS WAS A "LARGE VOLUME PROCUREMENT" BUT ASSERTS THAT THE " RFP DID NOT INVOLVE ANY SET-ASIDE TO SMALL BUSINESS SINCE SUCH SET-ASIDE WAS NOT AUTHORIZED UNDER ASPR AND AIR FORCE PROCUREMENT INSTRUCTIONS ( AFPI) REGULATIONS CURRENT AT THE TIME THE PROCUREMENT WAS INITIATED," ON THE BASIS THERE WAS ONLY ONE SMALL BUSINESS PARTICIPATING AND NO AUTHORITY EXISTED TO MAKE A SET-ASIDE UNDER SUCH CIRCUMSTANCES. HOWEVER, THE CONTRACTING OFFICER POINTS OUT THAT SINCE AWARD ON AN "ALL OR NONE" BASIS WAS NOT A CONDITION OF THE RFP " THE FACT THAT SCHENUIT WAS NOT IN A POSITION TO BID ON A LARGE VOLUME PROCUREMENT AND MEET THE DELIVERY SCHEDULES WHICH OTHER LARGE BUSINESSES WERE CAPABLE OF DOING DOES NOT MEAN THAT SCHENUIT WAS PRECLUDED FROM BIDDING ON SUBJECT PROCUREMENT.' AT THE SAME TIME HE STATES THAT AN AF LETTER TO SCHENUIT DATED FEBRUARY 3, 1961,"DID NOT MAKE ANY GUARANTEE THAT SCHENUIT WOULD BE GIVEN A SHARE OF THE AF TIRE PROCUREMENT BUSINESS.' " RATHER THEY WERE TOLD," HE STATES,"THAT UNDER THE COMPETITIVE BID SYSTEM THERE WAS NO REASON WHY THEY COULD NOT SHARE IN SAID BUSINESS IF THEIR PRICES WERE COMPETITIVE AND THEY WERE ABLE TO MEET DELIVERY AND OTHER REQUIREMENTS OF THE GOVERNMENT UNDER THE INVITATION FOR BIDS.' PARAGRAPHS 3 AND 7 OF THIS LETTER WHICH ARE QUOTED IN PART BY THE CONTRACTING OFFICER ARE AS FOLLOWS:

3. I CAN APPRECIATE THE CONCERN THAT YOU MAY FEEL SINCE YOUR COMPANY IS THE ONLY SMALL BUSINESS IN THE AIRCRAFT TIRE INDUSTRY. HOWEVER, I BELIEVE YOU WILL FIND THAT YOUR COMPANY'S SIZE SHOULD PROVIDE A DEFINITE COMPETITIVE ADVANTAGE. OVER A PERIOD OF YEARS THE AF HAS FOUND THAT IN THE MAJORITY OF INSTANCES, WHERE SMALL BUSINESS CONCERNS ARE CAPABLE OF PRODUCING AN ITEM, THEY HAVE BEEN ABLE TO DO SO MORE ECONOMICALLY THAN THEIR LARGER COMPETITORS. THEY ARE USUALLY MORE EFFICIENT AND OPERATE WITH LOWER OVERHEAD COSTS. UNDER PRESENT PROCUREMENT REGULATIONS IT IS IMPOSSIBLE TO APPLY SMALL BUSINESS SET ASIDE PROCEDURES TO THE PROCUREMENT OF AIRCRAFT TIRES SINCE YOUR FIRM IS THE ONLY QUALIFIED SMALL BUSINESS SUPPLIER. I WISH TO ASSURE YOU THAT WE RECOGNIZE YOUR UNIQUE POSITION IN THE INDUSTRY AND THAT IT IS OUR INTENT TO HANDLE THE PROCUREMENT OF AIRCRAFT TIRES IN A MANNER THAT WILL PROVIDE YOUR COMPANY WITH AN EQUITABLE OPPORTUNITY TO COMPETE. 7. STILL REFERRING TO YOUR PARAGRAPH 5, THE CONCLUSION THAT ONLY BIDS WHICH QUOTED ON OR COULD MEET THE DELIVERY SCHEDULE ON THE TOTAL QUANTITY IN AN INVITATION TO BID OR REQUEST FOR PROPOSAL WOULD BE RESPONSIVE IS ERRONEOUS. WE WILL NORMALLY USE AN "ALL OR ANY PART" CLAUSE ON ANY REQUEST WHICH EXCEEDS THE CAPABILITY OF OUR SOURCES. FROM OUR EXPERIENCE WITH YOUR COMPANY WE ARE QUITE AWARE OF HOW MUCH YOU CAN HANDLE AND ARE SURE THAT YOU WILL ADVISE USE FROM TIME TO TIME OF YOUR CAPABILITY. IN PROCUREMENT OF NORMAL PRODUCTS FROM A NORMAL SPAN OF INDUSTRY WE CAN NOT GEAR OUR AWARDS TO INCLUDE THE SMALLEST CAPABILITY BUT IF YOUR COMPANY CONTINUES TO BE AS GOOD A PRODUCER AS YOU HAVE BEEN IN THE PAST AND ARE PRICE COMPETITIVE, YOU HAVE NO PROBLEM UNDER OUR NEW PROCEDURE. ( ITALICS SUPPLIED.)

THE CONTRACTING OFFICER STATES FURTHER THAT THE QUESTION OF WHETHER THE GOVERNMENT SHOULD SPLIT A REQUIREMENT INTO SMALL LOTS IS A MATTER OF JUDGMENT; THAT DUE "TO DIFFERING CAPACITIES OF THE VARIOUS COMPANIES, IT IS IN THE JUDGMENT OF THE AF MORE PRACTICAL TO ALLOW THE BIDDER TO BID ON PARTIAL QUANTITIES RATHER THAN ISSUE SEVERAL IFB-S; AND THAT " IT IS THE AIR FORCE'S POSITION THAT ON THE SUBJECT PROCUREMENT THERE WAS NO ABUSE OF DISCRETION GIVEN BY THE ASPR AND AFPI GULATIONS.'

THE CONTRACTING OFFICER ALSO ASSERTS,"IT MUST BE RECOGNIZED THAT THE BIDDER OR BIDDERS WHO QUOTED ON A "STRETCH-OUT" DELIVERY WOULD ONLY BE ELIGIBLE FOR AWARD ON THE QUANTITY THEY BID ON PROVIDED THEY WERE LOW ON THAT QUANTITY AND PROVIDED THE QUANTITY BID UPON AT THE LOW PRICE WOULD MEET THE DELIVERY REQUIREMENT OF THE GOVERNMENT.' " IN OTHER WORDS, THE GOVERNMENT INSTEAD OF SPLITTING THE PROCUREMENT UP PRIOR TO ISSUING AN IFB OR RFP INTENDED TO HANDLE THE SITUATION OF A BIDDER HAVING LIMITED PRODUCTION CAPACITIES BY RESERVING THE RIGHT TO MAKE MORE THAN ONE AWARD ON THE REQUIREMENT.'

THE DECISION AS TO WHETHER A PROCUREMENT SHOULD BE SET ASIDE IN WHOLE OR IN PART FOR SMALL BUSINESS CONCERNS IS WITHIN THE PROVINCE OF THE ADMINISTRATIVE AGENCY AND THE SMALL BUSINESS ADMINISTRATION. THE GENERAL POLICY OF THE DEPARTMENT OF DEFENSE REGARDING THE PLACEMENT OF CONTRACTS WITH SMALL BUSINESS CONCERNS IS CONTAINED IN PART 7 OF SECTION 1 OF ASPR. NEITHER THOSE REGULATIONS NOR THE PROVISIONS OF THE SM BUSINESS ACT MAKE IT MANDATORY THAT THERE BE SET ASIDE FOR SMALL BUSINESS ANY PARTICULAR PROCUREMENT. IN VIEW THEREOF AND SINCE AT THE TIME THE INSTANT PROCUREMENT WAS INITIATED A SMALL BUSINESS SET-ASIDE WAS NOT AUTHORIZED UNDER THE REGULATIONS, THERE EXISTS NO LEGAL BASIS FOR QUESTIONING THE ACTION TAKEN. MOREOVER, WE FEEL THAT YOUR COMPANY WAS NOT PREJUDICED BECAUSE THERE WAS NOT SET-ASIDE FOR SMALL BUSINESS SINCE AMPLE OPPORTUNITY EXISTED FOR YOUR COMPANY TO OBTAIN A PARTIAL AWARD HAD YOU BID SUFFICIENTLY LOW AND OTHERWISE MET THE DELIVERY REQUIREMENTS.

WHILE WE DO NOT CONDONE ALL ACTIONS TAKEN IN THIS PROCUREMENT, PARTICULARLY THE FAILURE OF GOODRICH TO FURNISH A COST BREAKDOWN, THERE IS NO BASIS FOR US TO HOLD THE CONTRACT INVALID AND WE MUST DENY YOUR PROTEST.

A COPY OF THIS LETTER IS BEING FURNISHED TO THE SECRETARY OF THE AIR FORCE.

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