B-153012, FEB. 24, 1964

B-153012, FEB. 24, 1964

TO LINOCHINE PRODUCTS CORP.:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF DECEMBER 4, 1963, PROTESTING THE REJECTION OF ALL BIDS SUBMITTED UNDER INVITATION FOR BIDS NO. 197-84-64 ISSUED BY THE UNITED STATES NAVAL ORDNANCE PLANT,LOUISVILLE, KENTUCKY.

THE RECORD SHOWS THAT ORDERS FOR THE MANUFACTURE OF A QUANTITY OF 1,617 EACH OF TWO TYPES OF GENERATOR BODIES WERE RECEIVED BY THE LOUISVILLE NAVAL ORDNANCE PLANT. DELIVERIES OF A PORTION OF EACH TYPE OF GENERATOR BODIES WERE TO COMMENCE IN NOVEMBER 1963. DUE TO A HEAVY PLANT WORKLOAD IT WAS CONSIDERED DESIRABLE TO CONTRACT FOR THE TOTAL QUANTITY OF THESE GENERATOR BODIES; HOWEVER, BASED ON PAST EXPERIENCE IN THE MANUFACTURE OF THESE ITEMS IT WAS THEIR CONSIDERED OPINION THAT IT WOULD NOT BE POSSIBLE TO OBTAIN A CONTRACT WITH A COMMERCIAL SOURCE WITH DELIVERIES STARTING IN LESS THAN FIVE MONTHS. THEREFORE, IT WAS DECIDED TO LIMIT THE CONTRACTING TO A TOTAL OF 800 EACH AND TO MANUFACTURE THE REMAINING QUANTITY OF 817 EACH IN THE ORDNANCE PLANT WHERE TOOLING AND MANUFACTURING KNOW-HOW WERE AVAILABLE FROM PREVIOUS MANUFACTURE OF THESE ITEMS AND ON ACCOUNT OF WHICH AN EARLIER DELIVERY COULD BE EXPECTED.

IN ACCORDANCE WITH THE ABOVE DETERMINATION INVITATION FOR BIDS NO. 197-84 -64 WAS ISSUED FOR 800 OF EACH OF THE TWO TYPES OF THE GENERATOR BODIES. YOU SUBMITTED A BID OFFERING TO FURNISH BOTH TYPES FOR A PRICE OF $77 EACH, WHICH WAS THE LOWEST OF THE FOUR BIDS RECEIVED. HOWEVER, IT WAS DETERMINED THAT YOUR PRICE WAS EXCESSIVE; THAT ALL BIDS SHOULD BE REJECTED AND THAT THE TOTAL QUANTITY OF THE GENERATOR BODIES SHOULD BE MANUFACTURED IN THE NAVAL ORDNANCE PLANT. THE RECORD SHOWS THAT THIS DETERMINATION WAS BASED ON PAST EXPERIENCE IN THE MANUFACTURE OF THE ITEMS PLUS A COMPLETE REVIEW OF THE ESTIMATED COST FOR THE PRODUCTION OF THE ITEMS WHICH INDICATED THAT THE ESTIMATED IN-HOUSE MANUFACTURING COST OF BODY L1616864 WAS $64 EACH AND $55 EACH FOR BODY L1616866. IT IS FURTHER REPORTED THAT BASED UPON AN AUDIT MADE ON JANUARY 13, 1964, THE ORDNANCE PLANT'S COST ESTIMATE TO PRODUCE THESE PARTS IF $48.03 AND $45.11 EACH, RESPECTIVELY. THESE LATER ESTIMATES ARE REPORTED TO BE BASED ON A QUANTITY OF 1,617 FOR EACH PART AND INCLUDES THE COST OF MATERIALS, LABOR, OVERHEAD, AND TOOLING.

IN YOUR LETTER OF DECEMBER 4, 1963, PROTESTING THE ACTION TAKEN IT IS STATED THAT YOUR PRICE OF $77 PER UNIT IS NOT EXORBITANT AND THAT THE ORDNANCE PLANT ESTIMATES DO NOT INCLUDE PROFIT OR AMORTIZATION OF TOOLING COSTS. IT IS FURTHER STATED THAT:

"WE DO NOT FEEL IT IS THE POLICY OF THE GOVERNMENT PURCHASING AGENCY TO TAKE UNFAIR ADVANTAGE OF SMALL BUSINESS BY CAUSING THEM TO INVEST THEIR TIME, EFFORT AND MONEY IN MAKING CONSCIENTIOUS BIDS ONLY TO FIND THEM WITHDRAWN WITHOUT VERIFICATION AS TO REASON. WE FEEL WE MADE AN HONEST BID AND AS A QUALIFIED SOURCE TO MAKE A QUALITY PART AT A FAIR PRICE WE FEEL THIS AWARD SHOULD HAVE BEEN PLACED. WE FIND IT HARD TO UNDERSTAND HOW THE OFFICER IN CHARGE CAN MAKE AWARDS TO WHOM EVER HE LIKES WHEN THE RESULTS OF A SEALED BID ARE TO HIS LIKING AND REFRAIN FROM DOING SO WHEN THE LOW BIDDER IS NOT.'

IT IS THE POLICY OF THE GOVERNMENT TO ISSUE AN INVITATION FOR BIDS ONLY WHEN THERE IS A BONA FIDE INTENT AT THE TIME TO GO THROUGH WITH THE PROCUREMENT. HOWEVER, THE GOVERNMENT DOES RESERVE THE RIGHT TO REJECT ANY OR ALL BIDS AS ITS INTEREST MAY LATER DEMAND. WHILE IT MAY BE THAT YOUR PRICE OF $77 PER UNIT WAS REASONABLE CONSIDERING YOUR POSITION, IT WAS NOT CONSIDERED REASONABLE WHEN COMPARED WITH THE COST FOR WHICH THE PARTS COULD BE MANUFACTURED IN THE NAVAL ORDNANCE PLANT, WHICH WAS LESS BY OVER $28,000.

SINCE THE DETERMINATION TO REJECT ALL BIDS AND TO MANUFACTURE THE PARTS IN-PLANT WAS IN THE INTEREST OF THE GOVERNMENT AND APPEARS TO HAVE BEEN MADE IN GOOD FAITH, WE FIND NO BASIS TO OBJECT TO THE ADMINISTRATIVE ACTION TAKEN. SEE 36 COMP. GEN. 364. ACCORDINGLY, YOUR PROTEST MUST BE DENIED.