B-152980, DEC. 20, 1963

B-152980: Dec 20, 1963

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TO THE SECRETARY OF DEFENSE: REFERENCE IS MADE TO A MEMORANDUM DATED NOVEMBER 23. AS YOU MAY BE AWARE THIS OFFICE IS IN RECEIPT OF A PROTEST BY FEDERAL AGAINST THE ACTION OF THE AIR FORCE IN AWARDING A CONTRACT FOR THIS WORK TO PAGE. IN CONNECTION WITH OUR CONSIDERATION OF THE MERITS OF SUCH PROTEST WE HAVE BEEN INFORMALLY ADVISED BY REPRESENTATIVES OF YOUR DEPARTMENT THAT THE NOVEMBER 23. MEMORANDUM IS BASED UPON A DETERMINATION THAT CONSIDERATION OF FEDERAL'S BARTER BID IN THE INSTANT PROCUREMENT WAS NOT NECESSARY OR PROPER UNLESS AND UNTIL IT WAS DETERMINED THAT "DOMESTIC" BIDS SUBMITTED IN ACCORDANCE WITH THE BALANCE OF PAYMENTS POLICY AND PROCEDURES SET OUT IN YOUR MEMORANDUM OF JULY 16.

B-152980, DEC. 20, 1963

TO THE SECRETARY OF DEFENSE:

REFERENCE IS MADE TO A MEMORANDUM DATED NOVEMBER 23, 1963, COPY ENCLOSED, IN WHICH THE DEPUTY SECRETARY OF DEFENSE DIRECTED THE DEPARTMENT OF THE AIR FORCE TO AWARD A CONTRACT FOR CONSTRUCTION OF THE WET WASH COMMUNICATION SYSTEM TO PAGE COMMUNICATIONS ENGINEERS, INC., BASED UPON ITS ,DOMESTIC" BID OF $9,499,326 AND NOTWITHSTANDING RECEIPT OF A LOWER "FOREIGN" BID FROM ITT FEDERAL ELECTRIC CORPORATION IN THE AMOUNT OF $7,350,000 BASED UPON THE BARTER OF SURPLUS AGRICULTURAL COMMODITIES VALUED AT $5,363,703.

AS YOU MAY BE AWARE THIS OFFICE IS IN RECEIPT OF A PROTEST BY FEDERAL AGAINST THE ACTION OF THE AIR FORCE IN AWARDING A CONTRACT FOR THIS WORK TO PAGE. IN CONNECTION WITH OUR CONSIDERATION OF THE MERITS OF SUCH PROTEST WE HAVE BEEN INFORMALLY ADVISED BY REPRESENTATIVES OF YOUR DEPARTMENT THAT THE NOVEMBER 23, 1963, MEMORANDUM IS BASED UPON A DETERMINATION THAT CONSIDERATION OF FEDERAL'S BARTER BID IN THE INSTANT PROCUREMENT WAS NOT NECESSARY OR PROPER UNLESS AND UNTIL IT WAS DETERMINED THAT "DOMESTIC" BIDS SUBMITTED IN ACCORDANCE WITH THE BALANCE OF PAYMENTS POLICY AND PROCEDURES SET OUT IN YOUR MEMORANDUM OF JULY 16, 1962, TO MILITARY DEPARTMENTS AND AGENCIES, WERE UNACCEPTABLE.

FROM OUR ANALYSIS OF (1) A REPORT DATED DECEMBER 16, 1963, FROM THE DEPARTMENT OF THE AIR FORCE, COPY ENCLOSED; (2) THE DUTIES AND RESPONSIBILITIES WITH RESPECT TO THE BARTER OF SURPLUS AGRICULTURAL COMMODITIES WHICH ARE IMPOSED UPON THE DEPARTMENT OF AGRICULTURE AND THE DEPARTMENT OF DEFENSE BY SECTION 303 OF THE AGRICULTURAL TRADE DEVELOPMENT ACT OF 1954, AS AMENDED BY PUBLIC LAW 85-931; AND (3) THE VARIOUS PRONOUNCEMENTS OF THE PRESIDENT RELATIVE TO THE MEASURES WHICH ARE TO BE TAKEN TO IMPROVE OUR BALANCE OF PAYMENTS, IT WOULD APPEAR TO BE EXTREMELY QUESTIONABLE WHETHER EITHER THE STATUTORY DIRECTIVE WITH RESPECT TO BARTER OR THE EXECUTIVE POLICY WITH RESPECT TO BALANCE OF PAYMENTS HAS BEEN COMPLIED WITH IN THE INSTANT PROCUREMENT.

THE BASIC PURPOSE OF THE JULY 16, 1962, MEMORANDUM WAS CONCEDEDLY TO IMPROVE OUR UNFAVORABLE BALANCE OF PAYMENTS. BY THE MEMORANDUM A POLICY WAS ESTABLISHED DIRECTING ADDITIONAL PAYMENTS OF UP TO 50 PERCENT TO PREVENT THE EXPENDITURE OF APPROPRIATED DOLLARS ABROAD. IN THIS CONNECTION WE ARE ESPECIALLY CONCERNED BY THE FACT THAT AWARD WAS MADE TO PAGE AT AN APPROPRIATED DOLLAR COST SOME $2.15 MILLION IN EXCESS OF FEDERAL'S BARTER BID. UNDER THE POLICY SET FORTH IN THE MEMORANDUM, THIS ADDITIONAL DOLLAR DRAIN ON THE TREASURY WOULD APPEAR TO BE PROPER ONLY IF ACCEPTANCE OF FEDERAL'S BID WOULD HAVE ADVERSELY AFFECTED OUR BALANCE OF PAYMENTS SUBSTANTIALLY MORE THAN THE ACCEPTANCE OF PAGE'S BID. IT IS OUR PRESENT BELIEF THAT A DECISION TO SPEND AN ADDITIONAL $2.15 MILLION OF APPROPRIATED DOLLARS TO PROTECT BALANCE OF PAYMENTS COULD NOT PROPERLY BE MADE WITHOUT A SPECIFIC AND INDEPENDENT DETERMINATION, BASED UPON THE BIDS AS SUBMITTED AND ADVICE FROM THE DEPARTMENT OF AGRICULTURE WITH RESPECT TO THE EFFECT, IF ANY, WHICH THE BARTER PROPOSED BY FEDERAL'S BID WOULD HAVE UPON THE BALANCE OF PAYMENTS, THAT A MORE FAVORABLE BALANCE OF PAYMENTS WOULD RESULT FROM ACCEPTANCE OF PAGE'S BID THAN WOULD RESULT FROM ACCEPTANCE OF FEDERAL'S BARTER BID. HOWEVER, OUR REVIEW OF THE MATTER TO DATE FAILS TO INDICATE THAT SUCH DETERMINATION WAS MADE IN THIS PROCUREMENT, AND WE FIND NO BASIS FOR CONCLUSION THAT ACCEPTANCE OF FEDERAL'S BID WOULD HAVE HAD THIS EFFECT. CONVERSELY, UNDER PAGE'S BID, IT WOULD BE PERMITTED TO EXPEND SUBSTANTIAL DOLLAR AMOUNTS ABROAD, AND WE HAVE BEEN GIVEN NO EVIDENCE TO SHOW THAT THE ACCEPTANCE OF FEDERAL'S BARTER BID WOULD HAVE RESULTED EITHER IN THE EXPENDITURE OF GREATER NUMBER OF DOLLARS ABROAD THAN UNDER THE PAGE BID, OR IN A COMPARABLE ADVERSE EFFECT ON OUR BALANCE OF PAYMENTS.

IN VIEW OF THE FOREGOING, IT IS REQUESTED THAT YOU FURNISH THIS OFFICE A COMPLETE RESUME OF THE POINTS, AUTHORITIES, AND REASONING, TOGETHER WITH COPIES OF ALL PERTINENT DOCUMENTS, UPON WHICH YOUR DEPARTMENT RELIED IN DIRECTING AN AWARD TO PAGE IN THE INSTANT PROCUREMENT.

BECAUSE OF OUR UNDERSTANDING THAT IT IS NOT DEEMED FEASIBLE TO DELAY PERFORMANCE BY PAGE UNTIL WE ARE ABLE TO RULE ON THE PROTEST, A REPORT IN THE MATTER WITHIN TEN DAYS WILL BE APPRECIATED.