B-150662, FEB. 28, 1963

B-150662: Feb 28, 1963

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TO THE SECRETARY OF THE NAVY: REFERENCE IS MADE TO LETTER DATED JANUARY 18. MBA'S PROPOSAL WAS RETURNED BY NAVAL RESEARCH LABORATORY (NRL) LETTER DATED AUGUST 14. ADVISING THAT NEGOTIATIONS WERE CURRENTLY IN PROGRESS WITH ANOTHER GROUP TO INVESTIGATE A GUN SYSTEM SIMILAR TO THE ONE PROPOSED BY MBA. ENCLOSED WITH THE PROTEST WAS A COPY OF A RELEASE AGREEMENT BETWEEN MBA AND DR. IT WAS POINTED OUT THAT DR. ALSO THAT THE AGREEMENT "SPECIFICALLY AND CLEARLY STATES HE IS NOT RELIEVED FROM HIS PATENT OBLIGATIONS NOR USE OR PROPRIETARY INFORMATION OBTAINED DURING SAID CONSULTANCY" AND FURTHER THAT THIS "INCLUDES THE SPECIFIC CONTRACTS AND PROPOSALS MENTIONED AS WELL AS OTHER WORK OR PROPOSALS IN WHICH MB ASSOCIATES WAS INVOLVED DURING THE CONSULTING PERIOD OF WELL OVER A YEAR.'.

B-150662, FEB. 28, 1963

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO LETTER DATED JANUARY 18, 1963, FROM MR. E. BLEDSOE, ADMINISTRATOR FOR PROCUREMENT, OFFICE OF NAVAL RESEARCH, SUBMITTING FOR OUR CONSIDERATION A PROTEST BY MB ASSOCIATES (MBA), WALNUT CREEK, CALIFORNIA, AGAINST THE AWARD OF A CONTRACT TO PHYSICS INTERNATIONAL, INC. (PI), BERKELEY, CALIFORNIA, BY THE OFFICE OF NAVAL RESEARCH, WASHINGTON, D.C.

THE PROTEST HAS ARISEN AS A RESULT OF ADMINISTRATIVE NEGOTIATIONS AND CONSIDERATIONS WHEREBY MBA'S UNSOLICITED PROPOSAL DATED JUNE 20, 1962, FOR FURNISHING A COMPLETE ENGINEERING DESIGN SUGGESTED FOR A HYPERVELOCITY LIGHT GAS GUN SYSTEM AND FOR THE REDUCTION TO PRACTICE OF THE SUGGESTED DESIGN BY FABRICATING A LABORATORY PROTOTYPE OF THE HYPERVELOCITY GUN PROPOSED AND TESTING IT EXPERIMENTALLY, WOULD BE REJECTED, AND PI'S PROPOSAL DATED AUGUST 1, 1962, COVERING A SIMILAR PROGRAM OF ESSENTIALLY RESEARCH AND DEVELOPMENT WORK, WOULD BE ACCEPTED INSTEAD. MBA'S PROPOSAL WAS RETURNED BY NAVAL RESEARCH LABORATORY (NRL) LETTER DATED AUGUST 14, 1962, ADVISING THAT NEGOTIATIONS WERE CURRENTLY IN PROGRESS WITH ANOTHER GROUP TO INVESTIGATE A GUN SYSTEM SIMILAR TO THE ONE PROPOSED BY MBA, WHEREUPON MBA SUBMITTED ITS PROTEST DATED AUGUST 26, 1962.

IN ITS PROTEST MBA MADE REFERENCE TO THE CONFIDENTIAL RELATIONSHIP WHICH HAD EXISTED BETWEEN MBA AND DR. FRANKLIN C. FORD WHO HAD BEEN EMPLOYED AS A CONSULTANT BEGINNING ABOUT APRIL 3, 1961, AND ENDING ABOUT MAY 1, 1962, WHEN HE HAD REQUESTED A RELEASE ON OBLIGATIONS DUE TO HIS CONSULTANCY WITH MBA AND INDICATED HIS INTENTION OF TERMINATING SUCH CONSULTANCY TO ENGAGE IN HIS OWN PRIVATE BUSINESS. ENCLOSED WITH THE PROTEST WAS A COPY OF A RELEASE AGREEMENT BETWEEN MBA AND DR. FORD DATED MAY 11, 1962, APPARENTLY SIGNED BY DR. FORD ON MAY 17, 1962. IT WAS POINTED OUT THAT DR. FORD REQUESTED THE RELEASE AGREEMENT APPARENTLY BEFORE BECOMING A FULL-TIME EMPLOYEE, FOUNDER AND PRINCIPAL OFFICER OF PI; ALSO THAT THE AGREEMENT "SPECIFICALLY AND CLEARLY STATES HE IS NOT RELIEVED FROM HIS PATENT OBLIGATIONS NOR USE OR PROPRIETARY INFORMATION OBTAINED DURING SAID CONSULTANCY" AND FURTHER THAT THIS "INCLUDES THE SPECIFIC CONTRACTS AND PROPOSALS MENTIONED AS WELL AS OTHER WORK OR PROPOSALS IN WHICH MB ASSOCIATES WAS INVOLVED DURING THE CONSULTING PERIOD OF WELL OVER A YEAR.' THE RECORD SHOWS THAT DR. FORD IS ONE OF THE COFOUNDERS AND DIRECTOR OF RESEARCH AT PI.THUS THE BASIS OF MBA'S PROTEST AS ASSERTED BY ITS COUNSEL BY SUPPLEMENTAL LETTER DATED OCTOBER 26, 1962, IS MBA'S BELIEF THAT THE PI PROPOSAL EMBODIES CONCEPTS, IDEAS AND PROPRIETARY DATA WHICH ARE THE PROPERTY OF MBA AND WHICH WITHOUT MBA'S CONSENT OR CONCURRENCE HAVE BEEN MADE AVAILABLE TO PI BY DR. FORD IN VIOLATION OF THE CONFIDENTIAL RELATIONSHIP WHICH HAD EXISTED AND THE TERMS OF THE RELEASE AGREEMENT.

THE RELEASE AGREEMENT PROVIDES AS FOLLOWS:

"PURSUANT TO YOUR REQUEST OF A FEW DAY'S AGO FOR A RELEASE ON OBLIGATIONS DUE TO YOUR CONSULTANCY WITH MB ASSOCIATES AND YOUR INTENTION OF TERMINATING SUCH CONSULTANCY DUE TO YOUR INTENT TO ENGAGE IN YOUR OWN PRIVATE BUSINESS, THIS LETTER IS INTENDED TO FULFILL YOUR REQUIREMENT.

"WE HEREBY RELEASE YOU FROM ALL OBLIGATIONS, AND YOUR SIGNATURE AFFIXED BELOW RELEASES US FROM ALL OBLIGATIONS RELATIVE TO THE AFOREMENTIONED CONSULTANCY. SUCH MUTUAL RELEASE DOES NOT RELIEVE EITHER PARTY OF AGREEMENTS MADE DURING SAID CONSULTANCY. SPECIFICALLY, IT DOES NOT RELEASE MB ASSOCIATES FROM CONSULTING FEES PAID, AND DOES NOT RELIEVE FRANKLIN C. FORD FROM PATENT OBLIGATIONS NOR THE USE OF PROPRIETARY INFORMATION OBTAINED DURING SAID CONSULTANCY. THE LATTER PARTICULARLY PERTAINS TO THE HYPERVELOCITY GUN (NASA CONTRACT), THE PORTABLE X-RAY UNITS (SURGEON GENERAL PROPOSAL), THE MICRO-MHD GENERATOR (ARMY SIGNAL CORPS PROPOSAL), OR OTHER WORK OR PROPOSALS THAT MB ASSOCIATES MAY HAVE PURSUED, INVESTED TIME, EFFORT AND FUNDS IN STUDYING OR DEVELOPING.

"WE HOPE THE ABOVE WILL SUFFICE FOR YOUR PURPOSES, AND WISH YOU THE BEST OF LUCK IN YOUR FORTHCOMING BUSINESS VENTURE.'

IT IS THE POSITION OF PI AS STATED BY ITS COUNSEL IN LETTER DATED DECEMBER 28, 1962, THAT THE EVIDENCE OF RECORD "TO DATE PRETTY CLEARLY NEGATES THE CLAIM THAT PHYSICS INTERNATIONAL'S PROPOSAL RESTS ON INFORMATION ACQUIRED BY DR. FORD DURING THE TIME HE WAS ACTING AS CONSULTANT FOR MB ASSOCIATES.' THIS IS SUPPORTED BY AN OPINION OF COUNSEL THAT THE "RELEASE IS FREE OF AMBIGUITY AND PROVIDES IN CLEAR AND UNEQUIVOCAL TERMS THAT DR. FORD IS ENTIRELY FREE TO APPLY HIS APTITUDES, SKILL AND POWERS OF INVENTION WITH REGARD TO ANY AND ALL DATA AND INFORMATION EXCEPT INFORMATION WHICH HE OBTAINED DURING THE COURSE OF HIS CONSULTING ARRANGEMENT WITH MB ASSOCIATES," AND FURTHER THAT UNDER THE TERMS OF THE RELEASE "DR. FORD WOULD BE ENTITLED TO CONDUCT FURTHER EXPERIMENTS IN THE HYPERVELOCITY GUN UNDER THE NASA CONTRACT REFERRED TO IN THE RELEASE OR ANY OTHER HYPERVELOCITY GUN UNDER THE NASA CONTRACT REFERRED TO IN THE RELEASE OR ANY OTHER HYPERVELOCITY DESIGN WHICH WAS DISCLOSED TO HIM OR WHICH HE DISCLOSED TO MB ASSOCIATES DURING THE PERIOD OF THE CONSULTING ARRANGEMENT.'

THE SITUATION WITH WHICH NRL WAS THUS CONFRONTED IS SUMMARIZED IN THE LETTER OF JANUARY 18, 1963, FROM MR. BLEDSOE, WHO IS THE CONTRACTING OFFICER, AS FOLLOWS:

"THE BASIC ISSUE IN THIS CASE APPEARS TO REVOLVE AROUND THE QUESTION OF WHETHER OR NOT PHYSICS INTERNATIONAL, INC., HAS IN FACT SUBMITTED TO THE GOVERNMENT A PROPOSAL WHICH EMBODIES CONCEPTS, IDEAS, AND PROPRIETARY DATA WHICH ARE THE PROPERTY OF M.B. ASSOCIATES. THE OFFICE OF NAVAL RESEARCH IS NOT IN A POSITION TO RESOLVE THE CONFLICTING CLAIMS OF THE TWO ORGANIZATIONS NOR DOES IT CONSIDER THAT THE FINAL RESOLUTION OF THE CLAIMS OF PROPRIETARY RIGHTS UNDER THESE CIRCUMSTANCES IS A RESPONSIBILITY OF THIS OFFICE. IT WOULD SEEM THAT THIS IS A MATTER OF PRIVATE PROPERTY RIGHTS WHICH MUST BE RESOLVED BETWEEN THE TWO COMMERCIAL ORGANIZATIONS. HOWEVER, THE OFFICE OF NAVAL RESEARCH HAS NO DESIRE TO PROCEED WITH THE AWARD OF A CONTRACT BASED UPON AN UNSOLICITED PROPOSAL IF THE ORGANIZATIONS. HOWEVER, THE OFFICE OF NAVAL RESEARCH HAS NO DESIRE TO PROCEED WITH THE AQARD OF A CONTRACT BASED UPON AN UNSOLICITED PROPOSAL IF THE EVIDENCE IS REASONABLY CLEAR THAT SUCH PROPOSAL IS BASED UPON DATE BELONGING TO ANOTHER COMPANY. FOR THIS REASON WE HAVE EVIDENCE IS REASONABLY CLEAR THAT SUCH PROPOSAL IS BASED UPON DATA BELONGING TO ANOTHER COMPANY. FOR THIS REASON WE HAVE CAREFULLY AND AT SOME LENGTH CONSIDERED THE CLAIMS OF THE TWO COMPANIES, NOT WITH THE INTENTION OF RESOLVING THE QUESTION OF SUBSTANTIVE PROPERTY RIGHTS BUT RATHER IN AN ATTEMPT TO DETERMINE WHETHER OR NOT IT IS IN THE BEST INTEREST OF THE GOVERNMENT TO PROCEED WITH THE AWARD OF THE CONTRACT.'

FROM A CAREFUL CONSIDERATION OF THE ENTIRE MATTER, AND IN THE LIGHT OF THE ADDITIONAL FACTS AND CIRCUMSTANCES WHICH HAVE BEEN DISCLOSED BY INFORMAL CONFERENCES WITH REPRESENTATIVES OF YOUR DEPARTMENT AND OF THE PARITES CONCERNED, WE DO NOT BELIEVE THAT A RESOLUTION OF THE PROPRIETARY RIGHTS ISSUE IS REQUIRED BECAUSE, IN OUR OPINION, THIS WOULD NOT BE DETERMINATIVE OF THE BASIC QUESTION WE FEEL IS PRESENTED IN THIS CASE; THAT IS, WHETHER THE AWARD OF A CONTRACT NEGOTIATED ON A SOLE-SOURCE BASIS IS REASONABLY JUSTIFIED OR REQUIRED. WE THINK NOT AS IT SEEMS QUITE CLEAR THAT THE NRL REQUIREMENTS MAY BE PROCURED ON A COMPETITIVE BASIS IN ACCORDANCE WITH THE GENERAL POLICY PRESCRIBED IN SECTION 1-300.1 OF THE ARMED SERVICES PROCUREMENT REGULATIONS (ASPR), WHICH PROVIDES THAT "ALL PROCUREMENTS, WHETHER BY FORMAL ADVERTISING OR BY NEGOTIATION, SHALL BE MADE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICABLE EXTENT.'

THE RECORD DISCLOSES THAT FOR A PERIOD EXTENDING BACK ABOUT 10 YEARS THE HYPERVELOCITY PROJECTILE FIELD HAS BEEN THE SUBJECT OF RESEARCH AND EXPERIMENTATION CONCERNING WHICH A NUMBER OF SCIENTIFIC PUBLICATIONS HAVE BEEN ISSUED. WORK IN THIS FIELD HAS BEEN UNDERTAKEN AND SPONSORED PRIMARILY BY AGENCIES OF THE GOVERNMENT PURSUANT TO COST REIMBURSABLE CONTRACTS WITH THE LAWRENCE RADIATION LABORATORY (LRL) OF THE UNIVERSITY OF CALIFORNIA WHERE EMINENT PHYSICISTS AND ENGINEERS HAVE BEEN EMPLOYED ON THE LABORATORY'S STAFF OR RETAINED AS CONSULTANTS. INCLUDED AMONG THOSE WHO HAVE BEEN ASSOCIATED IN THIS WORK AT LRL ARE DR. ARTHUR T. BIEHL OF MBA, ONE OF LRL'S FOUNDERS, AND DR. FRANKLIN C. FORD OF THE NEWLY ORGANIZED PI FIRM. THE MBA COMPANY WAS ORGANIZED IN 1960 BY DR. BIEHL WITH MR. ROBERT MAINHARDT AS GENERAL MANAGER, AND MBA HAS BEEN ENGAGED FROM ITS INCEPTION IN THE SUPERSONIC VELOCITY PROJECTILE FIELD. A NUMBER OF OTHER FIRMS HAVING SCIENTISTS OF OUTSTANDING ABILITY ON THEIR STAFFS ALSO HAVE PERFORMED WORK IN THE HYPERVELOCITY FIELD. IT SEEMS LIKELY THAT ALL OF THESE FIRMS MAY BE INTERESTED IN SUBMITTING PROPOSALS ON GOVERNMENT REQUIREMENTS.

WE UNDERSTAND THAT AT THE EXISTING STAGE OF DEVELOPMENT, NRL'S REQUIREMENTS CALL FOR THE FURNISHING OF WHAT MAY BE DESCRIBED AS A RESEARCH AND DEVELOPMENT TOOL TO BE USED IN STUDYING THE EFFECT OF HIGH VELOCITIES ON PELLETS, AND THAT THESE REQUIREMENTS MAY BE SET OUT ADEQUATELY FOR THE PURPOSE OF OBTAINING COMPETITIVE CONSIDERATION. ALSO UNDERSTAND THAT NO DEFINITE BASIS FOR THE PREFERENCE OF ANY ONE PARTICULAR FIRM HAS BEEN ESTABLISHED PURSUANT TO THE MANDATORY PROCEDURES SET OUT IN SECTION 3-102 OF ASPR WHICH REEMPHASIZES THAT NEGOTIATED PROCUREMENTS "SHALL BE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICAL EXTENT.' FURTHERMORE, MBA HAS INDICATED ITS WILLINGNESS, AS STATED IN MR. MAINHARDT'S LETTER OF OCTOBER 9, 1962, TO RELINQUISH ALL PROPRIETARY RIGHTS IN THE SEVERAL PROPOSALS SUBMITTED BY MBA CONCERNING THE HYPERVELOCITY GUN SO AS TO ENABLE PROCUREMENT OF THE REQUIRED PROGRAM ON A COMPETITIVE BASIS.

UNDER THE FACTS AND CIRCUMSTANCES APPEARING, WE BELIEVE YOU WILLAGREE THAT PROCUREMENT OF THE REQUIREMENTS ON THE BASIS OF AFFORDING ALL INTERESTED PARTIES AN EQUAL OPPORTUNITY TO SUBMIT PROPOSALS IN ACCORDANCE WITH THE ESTABLISHED POLICY AND PROCEDURE WILL BEST SERVE THE INTEREST OF THE UNITED STATES. IT SEEMS REASONABLE TO CONCLUDE THEREFORE THAT THE NEGOTIATION OF A CONTRACT ON A SOLE-SOURCE BASIS WITH EITHER OF THE TWO COMPANIES IMMEDIATELY CONCERNED IS NOT WARRANTED.