B-149531, AUGUST 9, 1962, 42 COMP. GEN. 102

B-149531: Aug 9, 1962

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CONTRACTS - SPECIFICATIONS - RESTRICTIVE - MOBILIZATION NEEDS A RESTRICTION IN A TWO-STEP ADVERTISED PROCUREMENT FOR MILITARY ARMORED PERSONNEL CARRIERS AND RELATED VEHICLES REQUIRING BIDDERS FOR THE TOTAL PROCUREMENT TO MANUFACTURE EACH ITEM IN SEPARATE AND INDEPENDENTLY OPERATED PLANTS WHICH RESTRICTION IS REQUIRED BECAUSE MOBILIZATION NEEDS CANNOT BE MET BY PRODUCTION IN A SINGLE FACILITY IS WITHIN THE AUTHORITY OF THE MILITARY DEPARTMENTS UNDER 10 U.S.C. 2305 (A). WHICH ONLY REQUIRES SUCH FULL AND FREE COMPETITION AS IS CONSISTENT WITH THE PROCUREMENT OF THE PROPERTY NEEDED. INDEPENDENT" ARE ADEQUATELY DEFINED IN THE INVITATION AND THE RESTRICTION IS RELATED TO MOBILIZATION NEEDS. 1962: REFERENCE IS MADE TO A LETTER DATED JULY 24.

B-149531, AUGUST 9, 1962, 42 COMP. GEN. 102

CONTRACTS - SPECIFICATIONS - RESTRICTIVE - MOBILIZATION NEEDS A RESTRICTION IN A TWO-STEP ADVERTISED PROCUREMENT FOR MILITARY ARMORED PERSONNEL CARRIERS AND RELATED VEHICLES REQUIRING BIDDERS FOR THE TOTAL PROCUREMENT TO MANUFACTURE EACH ITEM IN SEPARATE AND INDEPENDENTLY OPERATED PLANTS WHICH RESTRICTION IS REQUIRED BECAUSE MOBILIZATION NEEDS CANNOT BE MET BY PRODUCTION IN A SINGLE FACILITY IS WITHIN THE AUTHORITY OF THE MILITARY DEPARTMENTS UNDER 10 U.S.C. 2305 (A), WHICH ONLY REQUIRES SUCH FULL AND FREE COMPETITION AS IS CONSISTENT WITH THE PROCUREMENT OF THE PROPERTY NEEDED, AND SINCE THE RESTRICTION DOES NOT PRECLUDE A MANUFACTURER WHO PROPOSES TO PRODUCE IN SEPARATE FACILITIES FROM BIDDING ON THE TOTAL REQUIREMENT THE RESTRICTION DOES NOT VIOLATE THE PRINCIPLES OF FORMAL ADVERTISING SO LONG AS THE TERMS "SEPARATE" AND ,INDEPENDENT" ARE ADEQUATELY DEFINED IN THE INVITATION AND THE RESTRICTION IS RELATED TO MOBILIZATION NEEDS.

TO THE SECRETARY OF THE ARMY, AUGUST 9, 1962:

REFERENCE IS MADE TO A LETTER DATED JULY 24, 1962, FROM THE ACTING ASSISTANT SECRETARY, INSTALLATIONS AND LOGISTICS, REQUESTING OUR OPINION ON THE PROPRIETY OF THE PLAN PROPOSED TO BE FOLLOWED IN THE NEXT PROCUREMENT OF M113 ARMORED PERSONNEL CARRIERS AND RELATED VEHICLES.

AS INDICATED IN THE LETTER OF JULY 24, IT IS DESIRED THAT MAXIMUM COMPETITION BE OBTAINED IN THE FORTHCOMING PROCUREMENT, AND THAT FORMAL ADVERTISING BE UTILIZED FOR THE FIRST TIME IN THE PROCUREMENT OF THE VEHICLES TO ACHIEVE THIS OBJECTIVE. HOWEVER, THE ACTING ASSISTANT SECRETARY ADVISES THAT THE SPECIFICATIONS AVAILABLE AT THE PRESENT TIME, WHILE ADEQUATE FOR AN EXPERIENCED PRODUCER, WOULD PROBABLY NOT BE ADEQUATE FOR AN INEXPERIENCED PRODUCER. ADDITIONALLY, THE ARTICLES TO BE PRODUCED ARE EXCEEDINGLY COMPLEX AND EXISTING GOVERNMENT SPECIAL TOOLING AND INDUSTRIAL FACILITIES WILL BE OFFERED UNDER ARRANGEMENTS INTENDED TO PLACE ALL PROSPECTIVE CONTRACTORS ON AN EQUAL BASIS. IT IS THEREFORE PROPOSED TO FOLLOW THE TWO-STEP ADVERTISING PROCEDURES SET OUT IN SECTION II, PART 5, OF ARMED SERVICES PROCUREMENT REGULATION, SINCE IT IS BELIEVED SUCH PROCEDURES WOULD PERMIT CLARIFICATION OF ANY QUESTIONS CONCERNING EITHER THE SPECIFICATIONS OR THE AVAILABILITY OF EXISTING GOVERNMENT-OWNED INDUSTRIAL FACILITIES AND TOOLING.

UNDER THE SECOND STEP OF THE TWO-STEP FORMAL ADVERTISING PROCEDURE IT IS PROPOSED TO ISSUE AN INVITATION IN WHICH THE TOTAL REQUIREMENT FOR M113 VEHICLES WILL BE DIVIDED INTO TWO EQUAL PARTS AS ITEM 1 AND ITEM 2, WITH AN OPTION, TO BE EXERCISED PRIOR TO AWARD OR SHORTLY THEREAFTER, TO INCREASE THE NUMBER OF VEHICLES UNDER ITEMS 1 AND 2 TO COVER ADDITIONAL REQUIREMENTS WHICH ARE NOT YET FIRM. THE INVITATION WILL ALSO STATE THAT, FOR REASONS OF NATIONAL DEFENSE AND INDUSTRIAL MOBILIZATION, IT IS NECESSARY THAT ITEM 1 BE PRODUCED IN A PLANT OR FACILITY WHICH IS ENTIRELY SEPARATE AND OPERATED INDEPENDENTLY OF THE PLANT OR FACILITY IN WHICH ITEM 2 WILL BE PRODUCED. ,SEPARATE" AND "INDEPENDENT" ARE TO BE DEFINED IN THE INVITATION IN A MANNER DESIGNED TO ASSURE PRODUCTION IN SEPARATE FACILITIES WHICH COULD BE EXPANDED TO SATISFY THE REQUIREMENTS THAT MIGHT EXIST IN THE EVENT OF MOBILIZATION. ADDITIONALLY, THE INVITATION WILL STATE THAT ALL-OR-NONE BIDS WILL BE CONSIDERED NONRESPONSIVE AND THAT, IF A SINGLE FIRM DESIRES TO SUBMIT BIDS ON ITEMS 1 AND 2 IT MUST, TO BE RESPONSIVE, OFFER TO PRODUCE EACH ITEM IN PLANTS AND FACILITIES WHICH ARE SEPARATELY AND INDEPENDENTLY OPERATED. A QUANTITY OF VEHICLES IN THE SAME FAMILY AS THE M113 WILL BE INCLUDED AS ITEM 3, AND BIDDERS WILL BE PERMITTED TO BID ON ITEM 3 SEPARATELY OR COMBINED WITH EITHER ITEM 1 OR ITEM 2.

THE TWO-STEP ADVERTISING PROCEDURE WAS APPROVED BY THIS OFFICE IN OUR DECISIONS B-143277, JULY 20, 1960, 40 COMP. GEN. 35; ID. 40. THE JUSTIFICATION SET OUT IN THE ASSISTANT SECRETARY'S LETTER OF JULY 24 FOR UTILIZING THIS METHOD, AND THE PROCEDURES TO BE FOLLOWED IN THE FIRST STEP, WOULD APPEAR TO BE WITHIN THE CONDITIONS AND PRESCRIBED PROCEDURES SET OUT IN ASPR 2-502 AND 503. TO THAT EXTENT, IT WOULD THEREFORE APPEAR THERE IS NO OBJECTION TO THE PROCUREMENT PLAN PROPOSED BY THE ASSISTANT SECRETARY.

WITH RESPECT TO THE PROVISIONS TO BE INCLUDED IN THE INVITATION FOR BIDS UNDER THE SECOND STEP OF THE PROCUREMENT, THE PRIMARY QUESTION WOULD APPEAR TO BE WHETHER THE PERMISSION TO BID ON BOTH ITEM 1 AND ITEM 2, WHICH WOULD BE GRANTED TO A COMPANY HAVING SEPARATE FACILITIES OPERATED INDEPENDENTLY OF EACH OTHER, WHILE PROHIBITING BIDS ON BOTH ITEMS 1 AND 2 BY A COMPANY HAVING ONLY A SINGLE FACILITY, ONE HAVING SEPARATE FACILITIES WHICH ARE NOT OPERATED INDEPENDENTLY, OR ONE HAVING INDEPENDENTLY OPERATED FACILITIES WHICH ARE NOT SEPARATE, OPERATES AS A RESTRICTION WHICH VIOLATES THE CONCEPT OF FULL AND FREE COMPETITION WHICH IS BASIC TO FORMALLY ADVERTISED PROCUREMENTS.

IT IS WELL ESTABLISHED THAT LEGITIMATE RESTRICTIONS ON COMPETITION IN ADVERTISED PROCUREMENTS ARE VALID WHEN THERE IS NO REASONABLE ASSURANCE THAT THE NEEDS OF THE AGENCY WILL BE MET IN THE ABSENCE OF SUCH RESTRICTIONS. THUS, IN 17 COMP. GEN. 1073 THIS OFFICE INTERPOSED NO OBJECTION TO AN INVITATION FOR THE CONSTRUCTION OF 12 VESSELS, ISSUED BY THE MARITIME COMMISSION, WHICH LIMITED BIDDING BY A COMPANY WITH ONLY ONE SHIPYARD TO SIX VESSELS, BUT PERMITTED A COMPANY WITH TWO SEPARATE SHIPYARDS TO BID ON THE TOTAL REQUIREMENT. SEE, ALSO, 36 COMP. GEN. 809, APPROVING USE OF QUALIFIED PRODUCTS LISTS, AND OUR DECISION OF MAY 2, 1958, B-135504, APPROVING USE OF QUALIFIED MANUFACTURERS LISTS.

WHETHER TWO SOURCES OF SUPPLY FOR THE M113, LOCATED IN DIFFERENT GEOGRAPHICAL AREAS, ARE NECESSARY FOR MOBILIZATION PURPOSES, AND WHETHER MOBILIZATION NEEDS CAN BE MET BY PRODUCTION IN TWO SEPARATELY LOCATED PLANTS OWNED AND OPERATED BY THE SAME COMPANY, ARE NOT QUESTIONS FOR DETERMINATION BY THIS OFFICE. IF, AS INDICATED BY THE ACTING ASSISTANT SECRETARY'S LETTER, IT IS YOUR OPINION THAT MOBILIZATION NEEDS CANNOT BE MET BY PRODUCTION IN A SINGLE FACILITY, WE ARE AWARE OF NO VALID BASIS FOR OBJECTING TO AN APPROPRIATE RESTRICTION IN THE INVITATION UPON THE PORTION OF THE TOTAL REQUIREMENT ON WHICH A BIDDER WHO PROPOSES TO USE ONLY A SINGLE FACILITY MAY BID. SUCH AUTHORITY IN THE MILITARY DEPARTMENTS WOULD APPEAR TO BE NECESSARILY IMPLIED IN THE PROVISIONS OF 10 U.S.C. 2305 (A), WHICH ONLY REQUIRE INVITATIONS FOR BIDS TO PERMIT SUCH FULL AND FREE COMPETITION AS IS CONSISTENT WITH THE PROCUREMENT OF THE PROPERTY NEEDED. SIMILARLY, IF IT IS YOUR DETERMINATION THAT PRODUCTION IN SEPARATE FACILITIES OWNED AND OPERATED BY THE SAME PRODUCER WOULD, UNDER SPECIFIED CIRCUMSTANCES, MEET MOBILIZATION REQUIREMENTS, IT WOULD APPEAR THAT THE GOVERNMENT SHOULD RECEIVE THE BENEFIT OF THE BROADEST COMPETITION WHICH IS PRACTICABLE. UNDER SUCH CIRCUMSTANCES, WE ARE AWARE OF NO VALID BASIS IN A FORMALLY ADVERTISED PROCUREMENT FOR PRECLUDING A MANUFACTURER, WHO PROPOSES TO PRODUCE IN SEPARATE FACILITIES UNDER CONDITIONS WHICH WOULD SATISFY MOBILIZATION REQUIREMENTS, FROM COMPETING ON THE TOTAL NUMBER OF VEHICLES TO BE PROCURED. IT IS THEREFORE OUR OPINION THAT RESTRICTIONS ON BIDDING OF THE TYPE PROPOSED BY THE ACTING ASSISTANT SECRETARY WOULD NOT VIOLATE THE PRINCIPLES OF FORMAL ADVERTISING, SO LONG AS THE TERMS "SEPARATE" AND "INDEPENDENT" ARE ADEQUATELY DEFINED IN THE INVITATION AND ANY RESTRICTIONS IMPOSED BY SUCH DEFINITIONS ARE REASONABLY RELATED TO MOBILIZATION REQUIREMENTS.

WITH RESPECT TO THE REMAINING PROVISIONS WHICH ARE TO BE INCLUDED IN THE INVITATION AS DESCRIBED ABOVE, SUCH AS THE METHOD OF EVALUATING GOVERNMENT -OWNED EQUIPMENT WHICH BIDDERS MAY PROPOSE TO USE, WE ARE UNABLE TO PASS UPON THEIR VALIDITY ON THE BASIS OF THE INFORMATION FURNISHED, AND IT IS OUR UNDERSTANDING THAT THE LETTER OF JULY 24 WAS NOT INTENDED AS A REQUEST FOR OUR OPINION ON THESE MATTERS. WE SHOULD LIKE, HOWEVER, TO INVITE YOUR PARTICULAR ATTENTION TO OUR DECISION 41 COMP. GEN. 682, B-148109, APRIL 20, 1962, TO THE SECRETARY OF THE NAVY, WHICH REFERS TO THE USE OF OPTIONS WHERE ADDITIONAL NEEDS ARE EITHER KNOWN OR REASONABLY FORESEEABLE AT THE TIME OF CONTRACT AWARD. SINCE IT WOULD APPEAR THAT ADDITIONAL REQUIREMENTS IN THE INSTANT PROCUREMENT ARE REASONABLY CERTAIN, YOU MAY WISH TO CONSIDER THE ADVISABILITY OF REQUESTING BIDS ON BOTH THE KNOWN REQUIREMENTS AND ON AMOUNTS SUFFICIENT TO INCLUDE THE ESTIMATED ADDITIONAL REQUIREMENTS, IN ORDER TO OBTAIN FOR THE GOVERNMENT THE BENEFITS OF ANY DECREASES IN UNIT PRICES WHICH MIGHT RESULT FROM BIDS BASED UPON SUCH GREATER QUANTITIES. IN THE EVENT ADDITIONAL REQUIREMENTS WERE NOT FIRM AT TIME OF AWARD, IT WOULD APPEAR THAT PROVISION MIGHT ALSO BE MADE FOR SUBSEQUENT ADDITION OF SUCH REQUIREMENTS TO THE CONTRACTS AWARDED, AND FOR ADJUSTMENT IN THE UNIT PRICES TO CORRESPOND TO THE UNIT PRICE BID ON THE TOTAL AMOUNT FINALLY PRODUCED UNDER EACH CONTRACT.