B-150681, MAY 16, 1963

B-150681: May 16, 1963

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THE REQUEST FOR PROPOSALS COVERED A ONE-TIME PROCUREMENT OF REPAIR STATION EQUIPMENT FOR A GYRO WHICH IS A CRITICAL COMPONENT OF THE ATLAS MISSILE. IT WAS ORIGINALLY DETERMINED THAT THE EQUIPMENT SHOULD BE PROCURED FROM THE KEARFOTT DIVISION OF GENERAL PRECISION. OF THE FIRMS CONTACTED ONLY YOURS EXPRESSED AN INTEREST IN THE PROCUREMENT AND WAS ACCORDINGLY FURNISHED A COPY OF THE REQUEST FOR PROPOSALS. TWO PROPOSALS WERE RECEIVED. MAINTENANCE T.O.'S AND TEST EQUIPMENT PERFORMANCE REQUIREMENTS WHICH WERE NOT AVAILABLE. THE LATTER FIRM WAS AWARDED A CONTRACT FOR THE WORK ON OCTOBER 12. THE AWARD IS SAID. TO HAVE BEEN BASED ON THE FOLLOWING FACTS: "A. KEARFOTT DIVISION IS THE ONLY CONTRACTOR THAT HAS DESIGNED AND BUILT THE GYRO THAT IS TO BE OVERHAULED.

B-150681, MAY 16, 1963

TO GYROTRON CORPORATION:

WE REFER TO YOUR LETTERS OF JANUARY 14 AND APRIL 5, 1963, BOTH WITH ENCLOSURES, ON A CLAIM FOR $24,399.90, ARISING OUT OF THE SUBMISSION BY YOUR FIRM OF A PROPOSAL PURSUANT TO REQUEST FOR PROPOSALS NO. 36-600 63- 5021, ISSUED JULY 3, 1962, BY THE MIDDLETOWN AIR MATERIEL AREA OF THE DEPARTMENT OF THE AIR FORCE.

THE REQUEST FOR PROPOSALS COVERED A ONE-TIME PROCUREMENT OF REPAIR STATION EQUIPMENT FOR A GYRO WHICH IS A CRITICAL COMPONENT OF THE ATLAS MISSILE. IT WAS ORIGINALLY DETERMINED THAT THE EQUIPMENT SHOULD BE PROCURED FROM THE KEARFOTT DIVISION OF GENERAL PRECISION, INCORPORATED, WHICH HAD ORIGINALLY DEVELOPED THE GYRO AND HAD BEEN SUCCESSFULLY OVERHAULING IT, ON A SOLE SOURCE BASIS. THE AIR FORCE BUYER CONTACTED SEVERAL OTHER FIRMS IN AN ATTEMPT TO OBTAIN COMPETITION. OF THE FIRMS CONTACTED ONLY YOURS EXPRESSED AN INTEREST IN THE PROCUREMENT AND WAS ACCORDINGLY FURNISHED A COPY OF THE REQUEST FOR PROPOSALS.

TWO PROPOSALS WERE RECEIVED, YOURS AND KEARFOTT-S. AIR FORCE TECHNICAL PERSONNEL CONCLUDED, HOWEVER, THAT THE AIR FORCE COULD NOT TECHNICALLY DETERMINE THE ADEQUACY OF GYROTRON CORPORATION'S PROPOSAL BECAUSE OF THE LACK OF GYRO DRAWINGS, MAINTENANCE T.O.-S, TEST EQUIPMENT PERFORMANCE REQUIREMENTS, SPECIAL TOOLS DESIGN AND SPECIAL JIG DESIGN. THEY ALSO DETERMINED THAT NO CONTRACTOR OTHER THAN THE MANUFACTURER OF THE GYRO COULD POSSIBLY DESIGN MAINTENANCE AND OVERHAUL STATIONS, SPECIAL TOOLS AND SPECIAL JIG WITHOUT GYRO DRAWINGS, SPECIFICATIONS, MAINTENANCE T.O.'S AND TEST EQUIPMENT PERFORMANCE REQUIREMENTS WHICH WERE NOT AVAILABLE. THEREFORE, EVEN THOUGH YOU OFFERED TO PERFORM FOR $159,227 AS COMPARED TO KEARFOOT'S PRICE OF $519,548.74, THE LATTER FIRM WAS AWARDED A CONTRACT FOR THE WORK ON OCTOBER 12, 1962. THE AWARD IS SAID, IN A LETTER OF OCTOBER 13, 1962, FROM THE MIDDLETOWN AIR MATERIEL AREA TO HEADQUARTERS USAF, TO HAVE BEEN BASED ON THE FOLLOWING FACTS:

"A. KEARFOTT DIVISION IS THE ONLY CONTRACTOR THAT HAS DESIGNED AND BUILT THE GYRO THAT IS TO BE OVERHAULED.

"B. THE AIR FORCE DOES NOT HAVE GYRO MANUFACTURING DRAWINGS, GYRO MAINTENANCE T.O.-S, GYRO TEST EQUIPMENT PERFORMANCE REQUIREMENTS, SPECIAL TOOL AND SPECIAL JIG DRAWINGS REQUIRED BY THE OVERHAUL OF THE GYRO.

"C. KEARFOTT DIVISION IS THE ONLY CONTRACTOR THAT HAS GYRO MANUFACTURING DRAWINGS, GYRO MAINTENANCE T.O.-S, GYRO TEST EQUIPMENT PERFORMANCE REQUIREMENTS, SPECIAL TOOL AND SPECIAL JIG DRAWINGS REQUIRED FOR THE OVERHAUL OF THE GYRO.

"D. KEARFOTT DIVISION HAS BEEN ACCOMPLISHING GYRO OVERHAUL FOR SIX (6) YEARS AND IS THE ONLY CONTRACTOR THAT HAS EVER OVERHAULED THE REFERENCED GYRO.

"E. THE AIR FORCE WILL RECEIVE AN ACCEPTABLE PRODUCT FROM KEARFOTT DIVISION BECAUSE OF KEARFOTT DIVISION'S INTEGRITY, GYRO MANUFACTURING EXPERIENCE, AND THE GYRO OVERHAUL EXPERIENCE GAINED DURING THE PAST SIX (6) YEARS.'

YOUR CLAIM, REPRESENTING $4,399.90 IN COST OF PROPOSAL AND DATA PREPARATION AND NEGOTIATION EXPENSES, AND $20,000 IN LOSS OF ANTICIPATED PROFITS, IS BASED ON THE CONTENTION THAT YOU WERE INDUCED TO EXPEND TIME AND MONEY IN THE PREPARATION OF A PROPOSAL AND DATA AND IN NEGOTIATING IN CONNECTION THEREWITH WHEN THE GOVERNMENT TAKES THE POSITION THAT IT HAD IN FACT NO ALTERNATIVE TO AWARD TO KEARFOTT. YOUR POSITION IS SET OUT IN YOUR LETTER OF JANUARY 14 AS FOLLOWS:

"ONCE A DECISION HAS BEEN MADE TO SECURE COMPETITIVE QUOTATIONS, AND SUBSEQUENT RECEIPT OF RESPONSIVE QUOTATIONS HAS JUSTIFIED SUCH A DECISION, TO THEN REVERSE THE DECISION AND PROCURE ON A SOLE SOURCE BASIS PLACES THE GOVERNMENT IN A POSITION OF LIABILITY THAT A FORMAL LETTER OF APOLOGY DOES NOT NEGATE AND THEREFORE WE REQUEST RECOMPENSATION FOR OUR EXPENSES, AND DAMAGE TO OUR COMPANY GROWTH AND PROFIT RELATIONSHIP FOR ALL BUSINESS WHICH WE WERE FORCED TO REJECT DURING THE LONG PERIOD OF NEGOTIATIONS IN ORDER TO HAVE ADEQUATE CAPACITY TO PERFORM THE ANTICIPATED CONTRACT WHICH BY ALL LEGAL AND MORAL RIGHTS SHOULD HAVE BEEN AWARDED TO GYROTRON CORPORATION.'

IT IS A WELL ESTABLISHED RULE THAT AN UNSUCCESSFUL BIDDER IN A FEDERAL GOVERNMENT PROCUREMENT HAS NO STANDING TO SUE BECAUSE THE STATUTES GOVERNING THE AWARD OF CONTRACTS BY FEDERAL AGENCIES WERE ENACTED SOLELY FOR THE PROTECTION OF THE PUBLIC AND NOT THE BIDDERS. IT HAS BEEN HELD, HOWEVER, AT LEAST WITH RESPECT TO FORMALLY ADVERTISED PROCUREMENTS, THAT, ALTHOUGH THE GENERAL RULE PRECLUDES RECOVERY OF ANTICIPATED PROFITS UNDER THE CONTRACT IN QUESTION, THE BIDDER MAY RECOVER THE COSTS OF PREPARING THE BID. HEYER PRODUCTS COMPANY, INC. V. UNITED STATES, 135 CT.CL. 63 (1956). THE CIRCUMSTANCES UNDER WHICH RECOVERY MAY BE HAD ARE DESCRIBED IN THE OPINION (PAGE 71) AS FOLLOWS:

"IT GOES WITHOUT SAYING THAT NOT EVERY UNSUCCESSFUL BIDDER IS ENTITLED TO RECOVER THE COST OF PUTTING IN HIS BID. RECOVERY CAN BE HAD IN ONLY THOSE CASES WHERE IT CAN BE SHOWN BY CLEAR AND CONVINCING PROOF THAT THERE HAS BEEN A FRAUDULENT INDUCEMENT FOR BIDS, WITH THE INTENTION, BEFORE THE BIDS WERE INVITED OR LATER CONCEIVED, TO DISREGARD THEM ALL EXCEPT THE ONES FROM BIDDERS TO ONE OF WHOM IT WAS INTENDED TO LET THE CONTRACT, WHETHER HE WAS THE LOWEST RESPONSIBLE BIDDER OT NOT. IN OTHER WORDS, IT MUST BE SHOWN THAT BIDS WERE NOT INVITED IN GOOD FAITH, BUT AS A PRETENSE TO CONCEAL THE PURPOSE TO LET THE CONTRACT TO SOME FAVORED BIDDER, OR TO ONE OF A GROUP OF PREFERRED BIDDERS, AND WITH THE INTENT TO WILFULLY, CAPRICIOUSLY, AND ARBITRARILY DISREGARD THE OBLIGATION TO LET THE CONTRACT TO HIM WHOSE BID WAS MOST ADVANTAGEOUS TO THE GOVERNMENT.'

THE COURT REGARDED SUCH RECOVERY AS DAMAGES FOR BREACH OF AN IMPLIED CONTRACT THAT EACH BID OR OFFER SOLICITED WOULD BE HONESTLY CONSIDERED AND THAT ONE ACCEPTED WHICH IN THE HONEST OPINION OF THE CONTRACTING OFFICER WAS MOST ADVANTAGEOUS TO THE GOVERNMENT.

AS INDICATED ABOVE, THE ONLY LEGAL AUTHORITY WE HAVE BEEN ABLE TO FIND TO SUPPORT YOUR CLAIM--- AND THAT ONLY TO THE EXTENT THAT ANTICIPATED PROFITS ARE EXCLUDED--- IS THE HEYER PRODUCTS CASE. THERE ARE SIGNIFICANT DIFFERENCES IN THE TWO SITUATIONS WHICH MIGHT WELL REQUIRE A DIFFERENT RESULT. SINCE THE PROCUREMENT HERE UNDER CONSIDERATION WAS NEGOTIATED THE CONTRACTING AGENCY COULD EXERCISE A MUCH BROADER DEGREE OF DISCRETION THAN WOULD BE PERMITTED UNDER FORMAL ADVERTISING. IN ADDITION, AND MORE SIGNIFICANTLY, IT DOES NOT APPEAR THAT YOUR PROPOSAL WAS SOLICITED IN OTHER THAN GOOD FAITH, AND WHILE IT MAY BE THAT YOU WERE NEEDLESSLY PUT TO A FRUITLESS EXPENSE, THERE IS NO INDICATION THAT THE SOLICITATION WAS ACCOMPANIED BY THE FRAUDULENT DESIGN WHICH APPEARS TO BE AN INTEGRAL PART OF THE QUOTED RULE SET OUT IN THE HEYER PRODUCTS CASE.

IN ANY CASE, AS INDICATED ABOVE, THE RIGHT OF ACTION IS PREMISED ON THE BREACH OF AN IMPLIED CONTRACT. IT HAS BEEN THE CONSISTENT POLICY OF OUR OFFICE TO DISALLOW CLAIMS FOR DAMAGES BASED ON A BREACH OF CONTRACT BY THE GOVERNMENT AND TO LEAVE THE MATTER FOR DETERMINATION BY A COURT OF COMPETENT JURISDICTION IF THE CLAIMANT CHOOSES TO INITIATE SUCH ACTION. COMP. GEN. 104; 19 COMP. DEC. 409. THE POSITION RESULTS FROM OUR LACK OF ORGANIZATION TO PROVIDE FOR THE TAKING OF TESTIMONY, CROSS-EXAMINATION OF WITNESSES AND THE WEIGHING OF CONFLICTING EVIDENCE NECESSARY TO REACH AN ACCURATE DETERMINATION IN SUCH MATTERS.