B-153229, FEB. 5, 1964

B-153229: Feb 5, 1964

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COLSON AND MORIN: REFERENCE IS MADE TO YOUR TELEGRAM DATED JANUARY 8. OF WHICH 633 WERE TO BE SET ASIDE FOR NEGOTIATION UNDER LABOR SURPLUS SET-ASIDE PROCEDURES. THE CONTRACTING OFFICER REPORTS THAT THE ITEM IN QUESTION IS A PORTABLE. GUYED MAST WHICH IS USED FOR SUPPORT OF RADIO ANTENNA AS WELL AS OTHER GENERAL PURPOSE EQUIPMENT. AB 16-00-3172- 3-300 WAS INITIATED ON JUNE 26. PROCUREMENT DATA COVERING THE TECHNICAL REQUIREMENTS FOR THE MASTS WERE SET FORTH BY THE U.S. IT SHOULD BE NOTED THAT SPECIFICATION MIL-M-55220/EL) REFERRED TO IN THE ABOVE LETTER WAS INTENDED ONLY TO COVER A NORMALLY 50 FOOT GUYED MAST. THE CONTRACTING OFFICER STATES THAT THERE IS NO PREVIOUS PROCUREMENT HISTORY OF THE MAST EXTENSION KIT (SUB-ITEM 1-22) AS A SEPARATE PRICED-OUT ITEM AND THAT IT IS BEING PROCURED FROM THE RADIO CORPORATION OF AMERICA AS PART OF RADIO SET AN/GRC-50 AS A FIRST TIME PROCUREMENT.

B-153229, FEB. 5, 1964

TO GADSBY, HANNAH, COLSON AND MORIN:

REFERENCE IS MADE TO YOUR TELEGRAM DATED JANUARY 8, 1964, AND CORRESPONDENCE OF JANUARY 9, 1964, SUBMITTED IN BEHALF OF YOUR CLIENT, THE J. AND H. SMITH MANUFACTURING COMPANY OF NEWBURGH, NEW YORK, PROTESTING CANCELLATION OF INVITATION FOR BIDS NO. AMC/E/-36-039-64-17 A2.

THE RECORD DISCLOSES THAT ON SEPTEMBER 10, 1963, THE U.S. ARMY ELECTRONICS MATERIEL AGENCY (USAEMA) ISSUED INVITATION FOR BIDS NO. AMC/E/ -36-039-64-17-A2 INTENDING TO PROCURE 1,265 UNITS OF A MAST, AB/577 ( ( (GRC (75 FEET), OF WHICH 633 WERE TO BE SET ASIDE FOR NEGOTIATION UNDER LABOR SURPLUS SET-ASIDE PROCEDURES. THE CONTRACTING OFFICER REPORTS THAT THE ITEM IN QUESTION IS A PORTABLE, UNIFORMLY SECTIONALIZED, GUYED MAST WHICH IS USED FOR SUPPORT OF RADIO ANTENNA AS WELL AS OTHER GENERAL PURPOSE EQUIPMENT. WE UNDERSTAND THAT THE UNITED STATES ARMY EUROPE (USAREUR) HAD REQUESTED THE 75 FOOT MAST FOR USE WITH RADIO SET AN/TRC-24 TYPE EQUIPMENT. PURSUANT THERETO,PROCUREMENT DIRECTIVE NO. AB 16-00-3172- 3-300 WAS INITIATED ON JUNE 26, 1963. PROCUREMENT DATA COVERING THE TECHNICAL REQUIREMENTS FOR THE MASTS WERE SET FORTH BY THE U.S. ARMY ELECTRONICS MATERIEL SUPPORT AGENCY (USAEMSA) IN A LETTER DATED JULY 30, 1963. IT SHOULD BE NOTED THAT SPECIFICATION MIL-M-55220/EL) REFERRED TO IN THE ABOVE LETTER WAS INTENDED ONLY TO COVER A NORMALLY 50 FOOT GUYED MAST, RATHER THAN A 75 FOOT MAST AS REQUESTED. IN THE REPORT SUBMITTED TO THIS OFFICE, THE CONTRACTING OFFICER STATES THAT THERE IS NO PREVIOUS PROCUREMENT HISTORY OF THE MAST EXTENSION KIT (SUB-ITEM 1-22) AS A SEPARATE PRICED-OUT ITEM AND THAT IT IS BEING PROCURED FROM THE RADIO CORPORATION OF AMERICA AS PART OF RADIO SET AN/GRC-50 AS A FIRST TIME PROCUREMENT.

BY TWX DATED OCTOBER 30, 1963, USAEMSA RECOMMENDED CANCELLATION OF THE INVITATION STATING AS A BASIS THEREOF THE FOLLOWING:

"A. THE BAG (ITEM 1-22-8) IS INCORRECTLY DESCRIBED IN THE IFB. IT WOULD BE MORE APPROPRIATE TO CALL ITEM 1-22-8 A CARRIER. THIS CARRIER MUST SATISFY SOME VERY RESTRICTIVE SPACE REQUIREMENTS AND MUST SATISFY THE "SERVICE CONDITIONS PARAGRAPH 3.10" OF MIL-M-55220. A CARRIER WHICH IS DESIGNED TO MEET THE ABOVE REQUIREMENTS IS PRESENTLY BEING DEVELOPED BY RCA. AN APPROVED MODEL AND/OR DRAWINGS FROM RCA CONTRACT SHOULD BE USED AS PROCUREMENT DATA FOR ITEM 1-22-8

"B. MAST AB-577 ( ( (GRC IS A 50 FOOT MAST AND IS AN ENTIRELY SEPARATE ITEM FROM MAST EXTENSION KIT (ITEM 1-22 IN IFB). SINCE EXTENSION KIT IS A "USED WITH" AND NOT "PART OF" THE AB-577, PROCUREMENT DATA IS SET UP TO MAINTAIN INDIVIDUALITY OF THESE ITEMS, IFB DOES NOT MAINTAIN THE SEPARATION OF THESE ITEMS

"C. SINCE MAST AB-577 AND MAST EXTENSION KIT ARE SEPARATE ITEMS, STANDARD CLAUSE 58/1 PROVISION 46 FOR ASSIGNMENT OF NOMENCLATURE APPLIES TO BOTH.'

ON NOVEMBER 1, 1963, USAEMSA CHANGED THE PROCUREMENT DATA AS PREVIOUSLY SET FORTH IN ITS LETTER OF JULY 30, 1963. THIS HAD THE RESULT OF CHANGING MAST AB-577 ( ( (GRC (75 FEET) TO MAST AB-577 ( ( (GRC (50 FEET). ACCORDINGLY, BY LETTER DATED NOVEMBER 7, 1963, ALL BIDDERS WERE NOTIFIED THAT IFB NO. AMC/E/-36-039-64-17-A2 HAD BEEN CANCELLED INASMUCH AS THE REQUIREMENTS WERE BEING REVISED.

IN YOUR LETTER DATED JANUARY 9, 1964, YOU CONTEND THAT CANCELLATION WAS UNJUSTIFIED AND THAT THIS OFFICE SHOULD ORDER REINSTATEMENT. ON PAGES 8 AND 9 OF YOUR MEMORANDUM, YOUR ARGUMENT IS SUMMARIZED AS FOLLOWS:

"1. SMITH HAS FOR 18 YEARS BEEN A HIGHLY RELIABLE SUPPLIER TO THE ARMY OF ELECTRO-MECHANICAL EQUIPMENT, KNOWN IN THE INDUSTRY FOR THE QUALITY OF ITS WORK AND FOR ITS EFFICIENCY AND ABILITY IN MEETING CONTRACT REQUIREMENTS. IT IS IN THE PUBLIC INTEREST, AND THE INTEREST OF NATIONAL SECURITY, THAT THE GOVERNMENT TAKES NO ACTION WHICH WILL HAVE THE EFFECT OF UNJUSTIFIABLY IMPAIRING SMITH'S CAPABILITY TO SERVE IN THE FUTURE AS SUPPLIER TO THE GOVERNMENT.

"2. THE CHANGE IN REQUIREMENT WAS NOT A TECHNICAL CHANGE, BUT A CHANGE IN SUPPLY REQUIREMENTS; THE ITEMS DELETED WERE SEPARABLE AND DEFINABLE, ALLOWING FOR RELATIVE EASE IN ADJUSTMENT OF CONTRACT PRICE AND, AS A RESULT, CANCELLATION OF THE IFB WAS NOT JUSTIFIED.

"3. BECAUSE OF UNUSUAL AND NON-RECURRING CIRCUMSTANCES, THERE WERE PARTICULAR ADVANTAGES TO THE GOVERNMENT IN THE AREAS OF PRICE AND JOB EFFICIENCY WHICH COULD BE OBTAINED BY AWARDING THE PROCUREMENT TO SMITH, AND WHICH CANNOT BE OBTAINED ON RE-ADVERTISEMENT.

"4. THE ARMY'S REASONS FOR CANCELLATION ARE NOT "COMPELLING" UNDER THE REQUIREMENTS OF ASPR 2-404.1.

"5. THE REVELATION OF BID PRICE AND SUBSEQUENT CANCELLATION HAS PLACED SMITH IN A HIGHLY DISADVANTAGEOUS POSITION IN REGARD TO ANY FURTHER PROCUREMENT OF THE SUPPLIES, AND MAKES IT VIRTUALLY IMPOSSIBLE FOR SMITH TO BID SUCCESSFULLY ON BOTH PORTIONS OF THE PROCUREMENT.'

REGARDING YOUR CONTENTION THAT THE ITEMS WERE SEPARABLE AND DEFINITE AND THAT IT WOULD BE RELATIVELY EASY FOR ADJUSTMENT OF THE CONTRACT PRICE, THE CONTRACTING OFFICER REPORTS:

"THE CHANGE FROM A 75 FOOT MAST WAS CONSIDERED TO BE A SIGNIFICANT CHANGE IN TECHNICAL SPECIFICATIONS WHICH WOULD HAVE A SIGNIFICANT BUT NOT NECESSARILY PROPORTIONATE CHANGE IN BID PRICES. ALTHOUGH THE COMPONENTS OF THE MAST EXTENSION KIT ARE DELINEATED UNDER SUB-ITEM 1 22, SEPARATE PRICES WERE NOT RECEIVED FOR THESE COMPONENTS OR ANY OTHER COMPONENTS MAKING UP THE ENTIRE 75 FOOT MAST. COSTS FOR THESE COMPONENTS, THEREFORE, WERE NOT CLEARLY DEFINED AND SEVERABLE. EXHIBIT "B" TO J AND H. SMITH'S PROTEST CLEARLY ESTABLISHES THAT A SIGNIFICANT CHANGE IN QUANTITIES OF MAST COMPONENTS ARE REQUIRED BY THE ELIMINATION OF THE MAST EXTENSION KIT.'

IN CONFERENCE WITH REPRESENTATIVES OF THIS OFFICE ON MONDAY, FEBRUARY 3, 1964, YOU AGAIN ASSERT THE CLAIM THAT DELETION OF THE MAST EXTENSION KIT (I.E. ITEMS 1-22-1 THROUGH 1-22-7) DID NOT AMOUNT TO A "TECHNICAL CHANGE.' ON THE CONTRARY YOU VIGOROUSLY CONTEND THAT SINCE THE EXTENSION KIT WAS COMPOSED SOLELY OF COMPONENTS INCLUDED IN THE BASIC 50 FOOT MAST, THAT THE ELIMINATION OF THE ITEMS IN QUESTION MERELY HAD THE EFFECT OF REDUCING THE QUANTITY OF CERTAIN COMPONENTS AND THAT THE AGENCY SHOULD HAVE ENTERED INTO NEGOTIATION WITH YOUR CLIENT FOR A DOWNWARD ADJUSTMENT. WHILE WE ARE INCLINED TO AGREE THAT THE CHANGE IN QUESTION WAS NOT A "TECHNICAL CHANGE," PER SE, WE ARE UNABLE TO CONCEDE THAT THIS NECESSARILY WOULD FURNISH A VALID BASIS FOR NEGOTIATION. IT IS THE POSITION OF THIS OFFICE THAT CANCELLATION IS PROPER WHERE THERE IS A SUBSEQUENT DETERMINATION TO EFFECT A MATERIAL REDUCTION IN QUANTITY IN A GIVEN PROCUREMENT. IN A SOMEWHAT ANALOGOUS CASE, B-134424, DATED DECEMBER 19, 1957, THIS OFFICE HELD:

"IN THIS INSTANCE, THE DECISION MADE AFTER OPENING TO EFFECT A MATERIAL REDUCTION IN THE QUANTITY OF THE PROCUREMENT CLEARLY INDICATES THAT THE AGENCY'S ACTUAL NEEDS WERE NOT ACCURATELY EXPRESSED IN THE INVITATION. ACCORDINGLY, SINCE ONLY A LUMP SUM BID WAS CALLED FOR AND NO UNIT PRICES WERE SHOWN IN THE BID, WE REGARD THE REJECTION OF ALL BIDS NOT MERELY AS PERMISSIBLE BUT AS MANDATORY.'

IT GOES WITHOUT SAYING THAT THE GOVERNMENT SHOULD NOT BE COMPELLED TO MAKE AN AWARD FOR AN ITEM OR FOR QUANTITIES OF AN ITEM WHICH IT NO LONGER NEEDS OR WANTS. IN 17 COMP. GEN. 554, 559-560, WE STATED:

"* * * NOT ONLY DID THE INVITATION FOR BIDS EXPRESSLY STATE A RESERVATION OF THE RIGHT TO REJECT ANY AND ALL PROPOSALS, BUT A REQUEST FOR BIDS OR OFFERS, IRRESPECTIVE OF ANY SUCH RESERVATION, DOES NOT IMPORT ANY OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED, AND CERTAINLY IT CANNOT BE CONCEDED THAT A PUBLIC OFFICER, ACTING FOR THE GENERAL WELFARE, IS BOUND TO ACCEPT A BID, WHERE HE DETERMINES THAT THE PUBLIC INTEREST WOULD BE SERVED BY A REJECTION OF ALL BIDS AND A READVERTISEMENT OF THE CONTRACT ON SPECIFICATIONS STATED TO REFLECT MORE ACCURATELY THE ACTUAL NEEDS TO BE MET, * * *.'

THIS OFFICE HAS GENERALLY HELD THAT REJECTION OF ALL BIDS AFTER OPENING IS A SERIOUS MATTER WHICH SHOULD BE DONE ONLY FOR COGENT REASONS SINCE IT RESULTS IN A DISCLOSURE OF PRICES TO A BIDDER'S COMPETITOR. B-140452, NOVEMBER 9, 1959, AND B-129059, NOVEMBER 30, 1956. HOWEVER, IT IS AXIOMATIC THAT INVITATIONS AND SPECIFICATIONS ARE REQUIRED TO REFLECT ACCURATELY THE MINIMUM NEEDS OF THE AGENCY. SEE 13 COMP. GEN. 284 AND 36 COMP. GEN. 759. IN THE PRESENT CASE, THE DECISION TO ELIMINATE THE MAST EXTENSION KIT CLEARLY INDICATES THAT THE AGENCY'S ACTUAL NEEDS WERE NOT ACCURATELY EXPRESSED IN THE ORIGINAL IFB.

ADDRESSING OURSELVES TO PARAGRAPH 4 OF YOUR MEMORANDUM, YOU CONTEND THAT THE ARMY'S REASONS FOR CANCELLATION ARE NOT "COMPELLING" UNDER THE REQUIREMENTS OF ASPR 2-404.1. THE SHORT ANSWER TO THIS CONTENTION IS THAT THE AGENCY DID IN FACT FEE COMPELLED TO READVERTISE AFTER THE PROCURING ACTIVITY DISCOVERED THAT THE GOVERNMENT'S NEED FOR ONE OF THE MAJOR COMPONENTS OF THE ARTICLE WAS ALREADY BEING SATISFIED ELSEWHERE. CERTAINLY, YOU MUST RECOGNIZE THAT THE DETERMINATION OF WHAT IS OR IS NOT A COMPELLING REASON MUST BE DECIDED ON THE BASIS OF THE FACTS IN EACH CASE. IT IS OUR VIEW THAT WHERE A MAJOR COMPONENT OR PORTION OF AN ARTICLE IS NO LONGER REQUIRED THAT THIS OF ITSELF MAY BE A SUFFICIENTLY COMPELLING REASON FOR READVERTISING.

WHILE THIS OFFICE MUST AGREE THAT THERE IS SOME QUESTION AS TO WHETHER THE CONTRACTING AGENCY MADE A SUFFICIENT EFFORT TO ANTICIPATE A CHANGE OF REQUIREMENTS PRIOR TO THE SCHEDULED BID OPENING AS PROVIDED FOR IN SECTION 2-404.1 (A) OF THE ARMED SERVICES PROCUREMENT REGULATION, NONETHELESS, WE FEEL THAT READVERTISING IN THIS SITUATION WOULD BE FAR LESS PREJUDICIAL TO THE OTHER BIDDERS AND THE COMPETITIVE BIDDING SYSTEM, THAN TO MAKE AN AWARD ON AN IRREGULAR SPECIFICATION.

FOR THE REASONS ABOVE INDICATED, THIS OFFICE WOULD NOT BE JUSTIFIED IN OBJECTING TO THE ACTION TAKEN BY THE DEPARTMENT OF THE ARMY IN THIS MATTER.