B-150013, JAN. 22, 1963

B-150013: Jan 22, 1963

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TO ASTRONAUTICS CORPORATION OF AMERICA: REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 1. WAS SET ASIDE UNDER THE INVITATION FOR PROCUREMENT BY NEGOTIATION WITH CONCERNS LOCATED IN LABOR SURPLUS AREAS (WITH PREFERENCE TO SMALL BUSINESS CONCERNS IN SUCH AREAS). NEGOTIATIONS WERE TO BE CONDUCTED ONLY WITH RESPONSIBLE LABOR SURPLUS AREA CONCERNS. PERSISTENT LABOR SURPLUS AREA CONCERNS WHICH ARE ALSO SMALL BUSINESS CONCERNS. SUBSTANTIAL LABOR SURPLUS AREA CONCERNS WHICH ARE ALSO SMALL BUSINESS CONCERNS. SMALL BUSINESS CONCERNS WHICH ARE NOT LABOR SURPLUS AREA CONCERNS. MANUFACTURERS WERE ADVISED (PAGE 31 OF THE INVITATION) THAT AWARDS WOULD BE MADE ONLY FOR PRODUCTS THAT HAD. IT APPEARS FROM THE REPORT WHICH HAS BEEN FURNISHED TO US BY THE ADMINISTRATIVE OFFICE IN THIS MATTER THAT WHEN BIDS WERE OPENED AT THE TIME SPECIFIED IN THE INVITATION.

B-150013, JAN. 22, 1963

TO ASTRONAUTICS CORPORATION OF AMERICA:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 1, 1962, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE NEGOTIATION OF A CONTRACT WITH ANY OTHER CONCERN FOR THE LABOR SURPLUS SET-ASIDE UNDER INVITATION FOR BIDS NO. 383-8-63, ISSUED BY THE AVIATION SUPPLY OFFICE, DEPARTMENT OF THE NAVY.

THE INVITATION, ISSUED ON JULY 9, 1962, INVITED BIDS, TO BE OPENED AUGUST 6, 1962, FOR A TOTAL OF 839 INDICATORS, TYPE ID-663/U, WITH SUPPORTING ITEMS OF DRAWINGS, DATA AND PUBLICATIONS. IN ADDITION, A TOTAL QUANTITY OF 837 OF THE INDICATORS, WITH SUPPORTING ITEMS, WAS SET ASIDE UNDER THE INVITATION FOR PROCUREMENT BY NEGOTIATION WITH CONCERNS LOCATED IN LABOR SURPLUS AREAS (WITH PREFERENCE TO SMALL BUSINESS CONCERNS IN SUCH AREAS). NEGOTIATIONS WERE TO BE CONDUCTED ONLY WITH RESPONSIBLE LABOR SURPLUS AREA CONCERNS, AS DEFINED IN THE INVITATION, OR SMALL BUSINESS CONCERNS, WHO SUBMITTED RESPONSIVE BIDS ON THE NON-SET-ASIDE PORTION AT A UNIT PRICE WITHIN 120 PERCENT OF THE HIGHEST AWARD MADE ON THE NON-SET-ASIDE PORTION, IN THE FOLLOWING ORDER OF PRIORITY.

GROUP 1. PERSISTENT LABOR SURPLUS AREA CONCERNS WHICH ARE ALSO SMALL BUSINESS CONCERNS.

GROUP 2. OTHER PERSISTENT LABOR SURPLUS AREA CONCERNS.

GROUP 3. SUBSTANTIAL LABOR SURPLUS AREA CONCERNS WHICH ARE ALSO SMALL BUSINESS CONCERNS.

GROUP 4. OTHER SUBSTANTIAL LABOR SURPLUS AREA CONCERNS.

GROUP 5. SMALL BUSINESS CONCERNS WHICH ARE NOT LABOR SURPLUS AREA CONCERNS.

THE INVITATION ALSO CALLED FOR "QUALIFIED PRODUCTS.' MANUFACTURERS WERE ADVISED (PAGE 31 OF THE INVITATION) THAT AWARDS WOULD BE MADE ONLY FOR PRODUCTS THAT HAD, PRIOR TO THE TIME SET FOR OPENING OF BIDS, BEEN TESTED AND QUALIFIED FOR INCLUSION IN THE QUALIFIED PRODUCTS LIST OF PRODUCTS QUALIFIED UNDER MILITARY SPECIFICATION MIL-I-22075/WEP).

IT APPEARS FROM THE REPORT WHICH HAS BEEN FURNISHED TO US BY THE ADMINISTRATIVE OFFICE IN THIS MATTER THAT WHEN BIDS WERE OPENED AT THE TIME SPECIFIED IN THE INVITATION, ASTRONAUTICS CORPORATION OF AMERICA, A SMALL BUSINESS CONCERN, WAS FOUND TO HAVE SUBMITTED THE LOW BID (IN THE TOTAL AMOUNT OF $461,011) FOR THE NON-SET-ASIDE PORTION OF THE INVITATION AND THAT AWARD WAS MADE TO YOU FOR THE 839 INDICATOR UNITS INVOLVED ON SEPTEMBER 14, 1962, FOLLOWING THE RESULTS OF A PREAWARD SURVEY. SUBSEQUENT TO THE OPENING OF BIDS, IT WAS DETERMINED THAT ONLY ONE LABOR SURPLUS AREA CONCERN, DAYSTROM, INCORPORATED (WESTON INSTRUMENTS DIVISION), A LARGE BUSINESS CONCERN, WAS ELIGIBLE FOR CONSIDERATION FOR THE LABOR SURPLUS AREA SET-ASIDE PORTION. DAYSTROM, THE SECOND LOW BIDDER (IN THE AMOUNT OF $470,511.20) UNDER THE NON-SET ASIDE PORTION, HAD INDICATED IN ITS BID OF AUGUST 3, 1962, THAT IT WISHED TO BE CONSIDERED FOR THE SET-ASIDE PORTION OF THE INVITATION, THE BID SETTING FORTH THAT THE SUPPLIES INVOLVED WERE TO BE MANUFACTURED AT DAYSTROM'S PLANT IN NEWARK, NEW JERSEY, A SUBSTANTIAL LABOR SURPLUS AREA. THE THEN AVAILABLE (JULY 1962) AREA LABOR MARKET TRENDS PUBLICATION ISSUED BY THE U.S. DEPARTMENT OF LABOR SUBSTANTIATED THAT THE NEWARK, NEW JERSEY, AREA WAS AN AREA OF SUBSTANTIAL LABOR SURPLUS.

NEGOTIATIONS WERE THEREFORE ENTERED INTO WITH DAYSTROM BY THE PROCURING ACTIVITY FOR THE PURPOSE OF ARRIVING AT A SATISFACTORY CONTRACT FOR THE FURNISHING OF THE 837 UNITS IN QUESTION. HOWEVER, YOUR VICE-PRESIDENT, MR. N. Z. PAIGE, ADVISED THE AVIATION SUPPLY OFFICE BY TELEPHONE ON SEPTEMBER 11, 1962, THAT THE SECRETARY OF LABOR HAD MADE AN ANNOUNCEMENT WHICH RECLASSIFIED THE NEWARK, NEW JERSEY, AREA FROM AN AREA OF SUBSTANTIAL LABOR SURPLUS (GROUP D) TO AN AREA OF MODERATE UNEMPLOYMENT (GROUP C), WHICH, MR. PAIGE CONTENDED, MADE DAYSTROM INELIGIBLE FOR AWARD OF A CONTRACT FOR FURNISHING THE SET ASIDE PORTION OF THE INVITATION. THE AVIATION SUPPLY OFFICE RECEIVED THE ADVICE THE SAME DAY FROM THE DEPARTMENT OF LABOR, DIVISION OF EMPLOYMENT SECURITY, TRENTON, NEW JERSEY, THAT THE SECRETARY OF LABOR HAD MADE AN ANNOUNCEMENT ON SEPTEMBER 7, 1962, WHICH RECLASSIFIED THE NEWARK, NEW JERSEY, AREA AS ONE OF MODERATE UNEMPLOYMENT.

DAYSTROM ADVISED THE CONTRACTING OFFICER BY LETTER OF SEPTEMBER 14, 1962, AS SUPPLEMENTED BY LETTER OF SEPTEMBER 17, 1962, THAT, IN VIEW OF THE CHANGE IN CLASSIFICATION OF THE NEWARK AREA, MORE THAN 50 PERCENT OF THE WORK (AS MEASURED BY COST IN RELATION TO THE CONTRACT PRICE) INCIDENT TO THE PRODUCTION OF THE INDICATORS BY ITS WESTON INSTRUMENTS DIVISION OR ITS FIRST-TIER SUBCONTRACTOR WOULD BE PERFORMED IN OTHER AREAS OF SUBSTANTIAL LABOR SURPLUS. DAYSTROM EXPLAINED THAT 43 PERCENT, OR MORE, OF THE WORK WOULD BE PERFORMED IN THE PHILADELPHIA AREA, WHICH WAS CLASSIFIED AS A SUBSTANTIAL LABOR SURPLUS AREA, AND 12 PERCENT THEREOF WOULD BE PERFORMED IN PONCE, PUERTO RICO, WHICH WAS CLASSIFIED AS A PERSISTENT LABOR SURPLUS AREA; AND THAT FINAL ASSEMBLY, INSPECTION AND TESTS WOULD BE PERFORMED AT ITS NEWARK, NEW JERSEY, PLANT. UNDER THE ,NOTICE OF LABOR SURPLUS AREA SET-ASIDE" CLAUSE OF THE INVITATION, A "SUBSTANTIAL LABOR SURPLUS AREA CONCERN" WAS DEFINED AS "A CONCERN THAT AGREES TO PERFORM, OR CAUSE TO BE PERFORMED, A SUBSTANTIAL PROPORTION OF A CONTRACT IN SUBSTANTIAL LABOR SURPLUS AREAS," AND THE CLAUSE PROVIDED THAT A CONCERN WAS TO BE DEEMED TO PERFORM A SUBSTANTIAL PROPORTION OF A CONTRACT IN SUBSTANTIAL LABOR SURPLUS AREAS IF THE COSTS THAT THE CONCERN WOULD INCUR ON ACCOUNT OF MANUFACTURING OR PRODUCTION PERFORMED IN SUBSTANTIAL AND PERSISTENT LABOR SURPLUS AREAS (BY ITSELF OR ITS FIRST-TIER SUBCONTRACTORS) AMOUNTED TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE. ALSO, THE CLAUSE PROVIDED AS FOLLOWS:

"* * * IF THE DEPARTMENT OF LABOR CLASSIFICATION OF ANY SUCH AREA CHANGES AFTER THE BIDDER HAS SUBMITTED HIS BID, THE BIDDER MAY CHANGE THE AREAS IN WHICH HE PROPOSES TO PERFORM, PROVIDED, THAT HE SO NOTIFIES THE CONTRACTING OFFICER BEFORE AWARD OF THE SET-ASIDE PORTION. PRIORITY FOR NEGOTIATION WILL BE BASED UPON THE LABOR SURPLUS CLASSIFICATION OF THE DESIGNATED PRODUCTION AREAS AS OF THE TIME OF THE PROPOSED AWARD.'

BY LETTERS OF SEPTEMBER 17 AND SEPTEMBER 28, 1962, ADDRESSED TO THE CONTRACTING OFFICER, AVIATION SUPPLY OFFICE, PHILADELPHIA, PENNSYLVANIA, YOU PROTESTED AGAINST THE "POSSBILE AWARD" OF CONTRACT TO DAYSTROM FOR THE SET-ASIDE, CONTENDING THAT YOU, AS A SMALL BUSINESS CONCERN, WERE ENTITLED TO PRIORITY UNDER THE CIRCUMSTANCES. IN THIS CONNECTION, YOU CONTENDED THAT THE DEPARTMENT OF LABOR HAD CERTIFIED THAT NEWARK, NEW JERSEY, CEASED TO BE A LABOR SURPLUS AREA "AS OF AUGUST 1, 1962," AND, HENCE, DAYSTROM (WESTON INSTRUMENTS DIVISION) WAS NOT AT THE TIME OF THE OPENING OF BIDS LOCATED IN A LABOR SURPLUS AREA, SO AS TO BE PERMITTED TO CHANGE THE AREA IN WHICH IT PROPOSED TO PERFORM AND THUS QUALIFY FOR AWARD OF A CONTRACT UNDER THE ABOVE-QUOTED PROVISION OF THE INVITATION. ALSO, IN YOUR LETTER OF SEPTEMBER 28, 1962, IN ELABORATING UPON A SECOND CONTENTION ADVANCED IN YOUR EARLIER LETTER, YOU STATED:

"WE ALSO RESPECTFULLY INVITED YOUR ATTENTION TO THE FACT THAT AWARD UNDER THE SUBJECT IFB IS LIMITED TO FIRMS APPEARING ON A QUALIFIED PRODUCTS LIST. THE NOTICE OF QUALIFICATION OF THE BUREAU OF NAVAL WEAPONS OF THE DEPARTMENT OF THE NAVY SETS FORTH IN PART, AS FOLLOWS:

" "QUALIFICATION OF THE PRODUCT APPLIED ONLY TO THE PRODUCT MANUFACTURED AT THE PLANT WHICH PRODUCED THE SAMPLE TESTED. IF EXTENSION OF QUALIFICATION IS DESIRED TO THE PRODUCT AS MANUFACTURED AT ANY OTHER OF YOUR PLANTS, REQUEST FOR SUCH EXTENSION SHOULD BE MADE TO THE CHIEF OF THE BUREAU OF NAVAL WEAPONS.

" "NEW QUALIFICATION TESTS WILL BE REQUIRED IF ANY CHANGES ARE MADE TO THE APPROVED PRODUCT OR TO THE METHOD OF PRODUCTION UNLESS PRIOR APPROVAL HAS BEEN OBTAINED FROM THE CHIEF OF THE BUREAU OF NAVAL WESTON.'

"THEREFORE, UNDER THE TERMS OF QUALIFICATION, WESTON MAY NOT CHANGE THE AREA IN WHICH IT PROPOSED TO PERFORM OR MAKE ANY CHANGES IN THE APPROVED PRODUCT OR ITS METHOD OF PRODUCTION.'

COPIES OF YOUR LETTERS OF SEPTEMBER 17 AND SEPTEMBER 28, 1962, WERE SUBSEQUENTLY FURNISHED TO US ON YOUR BEHALF IN SUPPORT OF YOUR PROTEST TO THIS OFFICE.

ON OR ABOUT SEPTEMBER 20, 1962, THE AVIATION SUPPLY OFFICE RECEIVED THE AUGUST 1962 SUPPLEMENT TO AREA LABOR MARKET TRENDS (THE DEPARTMENT OF LABOR PUBLICATION MENTIONED AT PAGE 14 OF THE INVITATION), WHICH SHOWED THAT THE NEWARK, NEW JERSEY, AREA HAD BEEN RECLASSIFIED TO ONE OF MODERATE UNEMPLOYMENT. THE AVIATION SUPPLY OFFICE IS REPORTED TO HAVE ESTABLISHED THAT THE DEPARTMENT OF LABOR, IN ACCORDANCE WITH NORMAL PROCEDURE, HAD NOTIFIED THE ASSISTANT SECRETARY OF DEFENSE (MANPOWER) THAT THE EFFECTIVE DATE OF THE CHANGES IN CLASSIFICATIONS APPEARING IN THE AUGUST 1962 SUPPLEMENT WAS AUGUST 31, 1962.

IN VIEW OF THE ABOVE INFORMATION, WHICH ESTABLISHED THAT THE NEWARK, NEW JERSEY, AREA WAS CLASSIFIED AS A SUBSTANTIAL LABOR SURPLUS AREA AT THE TIME BIDS WERE OPENED--- WITH THE RESULTING RIGHT IN DAYSTROM TO CHANGE ITS AREA OF CONTRACT PERFORMANCE--- THE CONTRACTING OFFICER AWARDED A CONTRACT TO DAYSTROM (WESTON INSTRUMENTS DIVISION) FOR FURNISHING THE SET- ASIDE QUANTITY OF 837 INDICATORS FOR THE TOTAL AMOUNT OF $457,215.46 ON OCTOBER 4, 1962, THE AWARD HAVING BEEN MADE AT THAT TIME, NOTWITHSTANDING THE PENDENCY OF YOUR PROTEST, BECAUSE OF THE URGENT DELIVERY REQUIREMENTS OF THE PROCUREMENT, AFTER COMPLIANCE WITH THE PROCEDURES REQUIRED IN SUCH CASES BY PARAGRAPH 2-407.9 (B) (3) OF THE ARMED SERVICES PROCUREMENT REGULATION. IN ADVISING YOU OF THE ACTION TAKEN BY LETTER OF OCTOBER 5, 1962, THE AVIATION SUPPLY OFFICE, AFTER POINTING OUT THAT NO BASIS EXISTED FOR YOUR PROTEST ON THE FIRST GROUND, NAMELY, THAT RECLASSIFICATION OF THE NEWARK, NEW JERSEY, AREA TOOK PLACE PRIOR TO THE DATE FIXED FOR OPENING BIDS, STATED, WITH REFERENCE TO YOUR SECOND CONTENTION:

"* * * ADDITIONALLY, SINCE THE REMAINING EFFORT SUCH AS, BALANCE OF MANUFACTURE, ASSEMBLY, TESTING, AND INSPECTION IS BEING PERFORMED AT WESTON'S PLANT AT NEWARK, NEW JERSEY, WHERE THE PRODUCT IS BEING OFFERED TO THE GOVERNMENT, THE CRITERIA CONCERNING THE QUALIFIED PRODUCTS LIST IS SATISFIED.'

FOR THE REASON HEREINABOVE INDICATED, WE PERCEIVE NO LEGAL BASIS FOR DISTURBING THE AWARD. WE HAVE BY LETTER OF TODAY, COPY ENCLOSED, CALLED TO THE ATTENTION OF THE SECRETARY OF THE NAVY THE QUESTION OF COMPLIANCE BY DAYSTROM WITH THE CONTRACT REQUIREMENTS CONCERNING PERFORMANCE IN LABOR