B-152074, AUG. 30, 1963

B-152074, AUG. 30, 1963

TO TUNG-SOL ELECTRIC, INC.:

REFERENCE IS MADE TO YOUR LETTER OF JULY 24, 1963, TO OUR OFFICE AND TO YOUR TELEGRAM OF MAY 22, 1963, TO THE DEFENSE ELECTRONICS SUPPLY CENTER, DAYTON, OHIO, PROTESTING THE AWARD OF A CONTRACT TO KUTHE LABORATORIES, INC., UNDER INVITATION FOR BIDS NO. DSA-9-63-420.

THE CITED INVITATION REQUESTED BIDS--- TO BE OPENED MAY 17, 1963--- FOR FURNISHING VARIOUS QUANTITIES OF CERTAIN ITEMS OF ELECTRON TUBES. THE ONLY ITEMS INVOLVED IN THE PROTEST ARE ITEMS 2 AND 4. PARAGRAPH 12 (G) OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS PROVIDED AS FOLLOWS:

"GOVERNMENT PROPERTY IN BIDDER'S POSSESSION: BIDDERS MAY USE, IN PERFORMING THE WORK BID UPON, ANY ITEMS OF GOVERNMENT PROPERTY IN THE BIDDER'S POSSESSION UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT INDEPENDENT OF THIS INVITATION FOR BIDS AT THE RENTAL RATES STIPULATED IN SUCH FACILITIES CONTRACT OR OTHER AGREEMENT, PROVIDED SUCH FACILITIES CONTRACT OR OTHER AGREEMENT AUTHORIZES SUCH USE. IF THE BIDDER PLANS TO USE SUCH GOVERNMENT PROPERTY, THE BIDDER WILL SO STATE IN THE BID. SUCH EVENT THE BIDDER AGREES TO FURNISH, UPON REQUEST OF THE CONTRACTING OFFICER, EVIDENCE THAT A FACILITIES CONTRACT OR OTHER SEPARATE AGREEMENT AUTHORIZES THE BIDDER TO USE EACH ITEM OF SUCH GOVERNMENT PROPERTY FOR PERFORMING THE WORK BID UPON. BIDS SUBMITTED CONTINGENT UPON THE USE OF SUCH PROPERTY ON A "NO-CHARGE FOR USE," "RENT-FREE" OR OTHER NO CHARGE BASIS WILL BE CONSIDERED NONRESPONSIVE TO THIS INVITATION FOR BIDS AND WILL BE REJECTED.'

THREE BIDS FOR FURNISHING ITEMS 2 AND 4 WERE RECEIVED. KUTHE LABORATORIES, INC., WAS THE LOW BIDDER ON BOTH ITEMS AND YOU WERE THE SECOND LOW BIDDER. KUTHE STATED IN ITS BID THAT "WE WILL USE GOVERNMENT PROPERTY IF AWARDED CONTRACT.' YOU STATED IN YOUR BID THAT "GOVERNMENT- OWNED PRODUCTION FACILITIES WILL BE USED BY AUTHORIZATION OF EXISTING LEASE AGREEMENT.' IT IS YOUR CONTENTION THAT KUTHE'S RIGHT TO USE GOVERNMENT PROPERTY (FACILITIES) HAD IN FACT EXPIRED AND FOR THIS REASON ITS BID WAS CONDITIONED UPON FUTURE AUTHORIZATION TO USE THE FACILITIES AND WAS THEREFORE NONRESPONSIVE. YOU CITE IN SUPPORT OF YOUR CONTENTION OUR DECISION, B-136892, JULY 29, 1958, 38 COMP. GEN. 79.

AFTER RECEIPT OF YOUR TELEGRAM OF MAY 22, 1963, THE CONTRACTING OFFICER PROCEEDED TO ASCERTAIN THE FACTS WITH REGARD TO THE GOVERNMENT OWNED FACILITIES THAT KUTHE INTENDED TO USE. HIS STATEMENT OF JUNE 25, 1963, IN REGARD TO THIS MATTER IS IN PERTINENT PART AS FOLLOWS:

"4. A CALL WAS PLACED TO KUTHE IN ACCORDANCE WITH PARAGRAPH 12 (G) OF THE IFB TO ESTABLISH WHAT FACILITIES WOULD BE INVOLVED IF AWARD WAS MADE, THE FACILITIES CONTRACT NUMBER AND THE EXPIRATION DATE. MR. MEYERS OF KUTHE STATED THAT SEVEN (7) PIECES OF TEST EQUIPMENT WERE INVOLVED UNDER FACILITIES ORDER NO. 50784-PP-56-81-81, CONTRACT NO. DA 36-039-SC-72676. HE WAS NOT SURE OF THE EXPIRATION DATE AND TOLD HIM THAT WE WOULD OBTAIN THIS INFORMATION FROM USAEMA.

"5. A CALL WAS PLACED TO THE USAEMA TO VERIFY EXISTENCE OF THE FACILITIES CONTRACT AND ITS EXPIRATION DATE. THIS WAS FOLLOWED BY A WRITTEN REQUEST FOR THIS INFORMATION WHICH RESULTED IN A LETTER REPLY FROM LEONA MISDIAL, CONTRACTING OFFICER, STATING THAT KUTHE HAD BEEN GRANTED THE FACILITIES UNDER THE STATED FACILITIES CONTRACT, BUT THAT THE CONTRACT HAD EXPIRED 22 MAY 1963. THE LETTER FURTHER POINTED OUT THAT KUTHE HAD MADE WRITTEN REQUEST ON 14 DECEMBER 1962 TO EXTEND THE EXISTING CONTRACT, BUT BECAUSE THE CONTRACT CALLED FOR RENT FREE USE OF FACILITIES, A DEVIATION TO ASPR 13-407 HAD BEEN REQUESTED BY THE ARMY AT PHILADELPHIA FROM HIGHER HEADQUARTERS. THIS REQUEST WAS FORWARDED ON 16 APRIL 1963 BUT NO REPLY HAD BEEN RECEIVED BY 22 MAY AND AS YET THE CONTRACT HAD NOT BEEN EXTENDED.

"6. IN ADDITION KUTHE HAD CALLED THE CONTRACTING OFFICER FOR GUIDANCE IN SUBMITTING THEIR BID ON THIS IFB IN VIEW OF THE IMPENDING EXPIRATION DATE OF 22 MAY. KUTHE WAS ADVISED TO SUBMIT THEIR BID PREDICATED UPON RENT FREE USE OF THE FACILITIES AS THE CONTRACT WOULD BE EXTENDED, ESPECIALLY IN VIEW OF THE FACT THAT KUTHE'S COMPETITOR FOR THIS TUBE, TUNG-SOL, HAS SUBSTANTIALLY THE SAME FACILITIES ON A RENT FREE BASIS. THE INFORMATION CONTAINED IN THIS LETTER CLEARLY INDICATES THAT KUTHE HAD ACTED IN ACCORDANCE WITH INFORMATION RECEIVED FROM THE GOVERNMENT, AND THAT THE ENSUING DIFFICULTIES WERE NOT OF THEIR MAKING. IN ADDITION, A TWX SENT TO KUTHE ON 18 JUNE 1963 AND SIGNED BY THE COMMANDING GENERAL AT USAEMA STATES THAT THEIR FACILITIES CONTRACT HAD BEEN EXTENDED TO 19 MAY 1967.

"7. I BELIEVE THAT THE FACTS INVOLVED IN THIS CASE CLEARLY INDICATE THAT KUTHE HAS ACTED IN ACCORDANCE WITH ADVICE RECEIVED FROM THE GOVERNMENT. FURTHER SINCE THE FACILITIES CONTRACT INVOLVED WAS ACTIVE AT THE TIME OF BID OPENING AND IS NOW EXTENDED TO 19 MAY 1967, I RECOMMEND THAT THE CONTEMPLATED AWARD TO KUTHE LABORATORIES INC. BE ALLOWED AND THAT THE PROTEST FROM TUNG-SOL, INC. BE DISALLOWED.'

IN THIS CASE KUTHE'S BID AND YOUR BID FELL IN THE SAME CATEGORY INSOFAR AS THE USE OF GOVERNMENT-OWNED PROPERTY WAS CONCERNED AND WHILE NEITHER KUTHE NOR YOU PAID A CASH RENTAL FOR SUCH USE YOU ASSUMED THE MAINTENANCE AND OTHER EXPENSES IN CONNECTION WITH SUCH EQUIPMENT. AS YOU STATED, OUR DECISION OF AUGUST 4, 1960, B-143219, CONSIDERED SUCH EXPENSES IN LIEU OF REMUNERATION TO THE GOVERNMENT AND APART FROM THIS DECISION, THE DEPARTMENT OF THE ARMY HAD OBTAINED APPROPRIATE DEVIATIONS FROM THE ARMED SERVICES PROCUREMENT REGULATION PERMITTING THE USE OF FACILITIES ON A RENT -FREE BASIS. SUCH AUTHORITY PROVIDED, THAT, WHERE AS IN THIS CASE, THE ONLY COMPETING CONCERNS POSSESS SUBSTANTIALLY THE SAME AMOUNT OF GOVERNMENT TOOLING, A RENTAL OR USE CHARGE, OR AN EVALUATION FACTOR NEED NOT BE APPLIED. IN THIS REGARD ITEMS 2 AND 4 WERE ,QUALIFIED PRODUCTS" AND AT THE TIME OF OPENING OF BIDS KUTHE AND YOU WERE THE ONLY PROCUREMENT SOURCES. IF KUTHE WERE TO BE DISQUALIFIED BECAUSE HIS RIGHT TO USE GOVERNMENT OWNED PROPERTY EXPIRED FIVE DAYS AFTER THE BID OPENING DATE, IT WOULD APPARENTLY LEAVE THE PROCUREMENT, AS A SOLE SOURCE PROCUREMENT. KUTHE HAD TAKEN AMPLE AND TIMELY STEPS TO HAVE ITS RIGHT TO USE SUCH PROPERTY EXTENDED AND THE GOVERNMENT EXTENDED SUCH RIGHT FOR A PERIOD OF FIVE YEARS FROM THE EXPIRATION DATE OF MAY 22, 1963, UNDER THE PRIOR AUTHORIZATION. THIS CASE CANNOT BE REGARDED AS ONE WHERE THE BIDDER (KUTHE) HAS CONDITIONED HIS BID UPON THE USE OF GOVERNMENT-OWNED PROPERTY FREE OF CHARGE WITHIN THE PROHIBITION DISCUSSED IN 38 COMP. GEN. 79 IN THAT THE BIDDER STATED IN ITS BID MERELY THAT "WE WILL USE GOVERNMENT PROPERTY IF AWARDED CONTRACT.' NO OTHER INFORMATION WAS REQUIRED TO BE FURNISHED WITH ITS BID. IF THE CONTRACT HAD BEEN AWARDED TO KUTHE, WITHOUT REQUIRING ANY FURTHER INFORMATION IN THIS MATTER, THE GOVERNMENT WOULD NOT HAVE BEEN LEGALLY OBLIGATED TO AUTHORIZE THE USE OF GOVERNMENT PROPERTY IN THE PERFORMANCE OF SUCH CONTRACT ON A RENT-FREE BASIS. CANCELLATION OF THE PROCUREMENT NOW THAT BID PRICES HAVE BEEN DISCLOSED TO CURE WHAT AMOUNTS TO A MATTER OF FORM WOULD SERVE NO USEFUL PURPOSE AS ANY RESOLICITATION, IN VIEW OF THE AUTHORITY REFERRED TO HEREINABOVE, WOULD PERMIT USE OF THE TOOLING RENT-FREE AND CONTAIN NO EVALUATION FACTOR.

IN VIEW OF THE FOREGOING WE FIND NO BASIS FOR DISAGREEING WITH THE RECOMMENDATION OF THE DEPARTMENT THAT THE AWARD OF A CONTRACT FOR FURNISHING ITEMS 2 AND 4 BE MADE TO KUTHE, IF OTHERWISE PROPER, AND YOUR PROTEST IS DENIED.