B-153336, APR. 15, 1964

B-153336, APR. 15, 1964

TO WAYCROSS MACHINE SHOPS:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 22, 1964, AS SUPPLEMENTED BY YOUR LETTERS OF JANUARY 28 AND FEBRUARY 3, 1964, PROTESTING AGAINST THE AWARD OF A CONTRACT FOR FURNISHING 180,000 PRACTICE BOMBS TO AMERICAN ELECTRIC INC., PARAMOUNT, CALIFORNIA, UNDER INVITATION FOR BIDS NO. 195- 342-64 (C), ISSUED BY THE U.S. NAVY ORDNANCE SUPPLY OFFICE, MECHANICSBURG, PENNSYLVANIA, AND TO THE PROPOSED NEGOTIATION WITH THAT CONCERN OF A CONTRACT FOR FURNISHING AN ADDITIONAL QUANTITY OF 180,000 PRACTICE BOMBS AS THE LABOR SURPLUS AREA SET-ASIDE PORTION OF THE PROCUREMENT.

UNDER THE INVITATION, BIDS WERE INVITED TO BE OPENED DECEMBER 27, 1963, FOR FURNISHING 180,000 EACH, BOMB, PRACTICE, 25 LB., MK 76 MOD 5, ON AN F.O.B. DESTINATION ON AN F.O.B. ORIGIN BASIS, OR BOTH, PACKAGING CHARGES INCLUDED. BIDDERS WERE ADVISED THAT THE GOVERNMENT RESERVED THE RIGHT TO AWARD ON SUCH BASIS AS THE CONTRACTING OFFICER DETERMINED TO BE MOST ADVANTAGEOUS TO THE GOVERNMENT. BIDDERS WERE ALSO ADVISED OF THE SPECIFIC QUANTITIES OF BOMBS (TOTALING 180,000) WHICH WERE BEING PROCURED FOR EACH OF NINE USING ACTIVITIES, AND THE NINE DIFFERENT DESTINATIONS TO WHICH THE BOMBS WERE ULTIMATELY TO BE SHIPPED.

IT APPEARS FROM THE RECORD NOW BEFORE US THAT AMERICAN ELECTRIC, INC., SUBMITTED A BID OFFERING TO FURNISH THE BOMBS ON AN F.O.B. DESTINATION BASIS AT A TOTAL PRICE OF $779,400, WITH DISCOUNT OF ONE QUARTER PERCENT FOR PAYMENT WITHIN 30 DAYS, OR FOR THE NET AMOUNT OF $777,451.50, AND THAT YOU SUBMITTED A BID OFFERING TO FURNISH THE BOMBS F.O.B. YOUR PLANT AT WAYCROSS, GEORGIA, AT A TOTAL PRICE OF $649,800. AMERICAN ELECTRIC, INC., WAS THE ONLY CONCERN TO SUBMIT A BID ON AN F.O.B. DESTINATION BASIS, AND YOUR BID WAS THE LOWEST, IN DOLLAR AMOUNT AT LEAST, OF THE REMAINING BIDS, WHICH WERE SUBMITTED ON AN F.O.B. ORIGIN BASIS.

USING A WEIGHT OF 53.68 POUNDS FOR THE REQUIRED PACKAGES OF TWO BOMBS EACH, THE CONTRACTING OFFICER DETERMINED THAT TRANSPORTATION COSTS OF $130,200.84 SHOULD BE ADDED TO YOUR BID FOR EVALUATION PURPOSES, WHICH RESULTED IN A TOTAL COST TO THE GOVERNMENT OF $780,000.84. AMERICAN ELECTRIC WAS THEREFORE AWARDED THE CONTRACT FOR FURNISHING THE 180,000 BOMBS ON JANUARY 17, 1964, AS THE LOWEST RESPONSIVE BIDDER.

BY LETTER OF JANUARY 20, 1964, THE CONTRACTING OFFICER ADVISED YOU WITH REFERENCE TO THE MANNER IN WHICH THE UNIT WEIGHT OF 53.68 POUNDS HAD BEEN DERIVED AS FOLLOWS:

"* * * THIS WEIGHT WAS DERIVED FROM THE INFORMATION ON THE DRAWINGS FURNISHED WITH THE INVITATION FOR BIDS AND A RECAPITULATION IS AS FOLLOWS:

CHART

POUNDS WT. WAYCROSS DWG. SK7368 PER BOMB

BOMB ASSEMBLY 21.50

TAIL 2.85

FIRING PIN .04

SUBTOTAL 24.39

(2 BOMBS PER BOX) TIMES 2

WT. OF 2 BOMBS WITHOUT SIGNALS 48.78 BUWEPS DWG. 2185734

BOX 4.90

TOTAL WEIGHT 2 BOMBS 53.68 POUNDS

"SINCE THE FOREGOING WEIGHTS ON WAYCROSS MACHINE SHOP DRAWING SK7368 AND BUREAU OF NAVAL WEAPONS DRAWING 2185734 WERE THE ONLY WEIGHTS SUPPLIED WITH THE INVITATION FOR BIDS AND THE ONLY WEIGHTS KNOWN TO THE BIDDERS, NO OTHER WEIGHT FACTOR COULD BE UTILIZED IN EVALUATING THE TRANSPORTATION COSTS.'

IN COMMENTING IN YOUR LETTER OF JANUARY 28, 1964, ON THE STATEMENT CONTAINED IN THE LAST SENTENCE OF THE ABOVE-QUOTED LETTER, YOU STATE:

"THIS IS AN INCORRECT STATEMENT INASMUCH AS THE INVITATION INCLUDED DRAWING NO. SK7636 AS WELL AS THE DRAWING SK7368. WE ARE ENCLOSING A COPY OF DRAWING 7636 AS ENCLOSURE B. THIS DRAWING SHOWS AS NOTE 5: "WEIGHT OF BODY EQUALS 21.20 LBS. PLUS OR MINUS .50 LBS.' IT MIGHT BE NOTED THAT THIS WEIGHT SHOWN ON SK7636 IS THE ONLY ACTUAL WEIGHT SUPPLIED TO THE BIDDERS ON THE DRAWINGS INASMUCH AS THE WEIGHT SUPPLIED ON DRAWING SK7638 (7368) IS STATED TO BE "THE APPROXIMATE WEIGHT" OF THE BOMB. IT SHOULD FURTHER BE NOTED THAT THE WEIGHTS GIVEN AS THE APPROXIMATE WEIGHT OF SK7368 ARE MERELY ESTIMATED WEIGHTS.

"WE SUBMIT THAT ANY ENGINEER IN DETERMINING THE WEIGHT OF THIS BOMB WOULD BE REQUIRED TO UTILIZE THE WEIGHT GIVEN ON THE BOMB BODY DRAWING SK7636 AND THAT HE WOULD NOT KNOW WHETHER TO USE THE MINIMUM OF 20.70 LBS. THROUGH THE MAXIMUM OF 21.70 LBS.

"IN VIEW OF THIS LETTER, ENCLOSURE A, FROM THE CONTRACTING OFFICER INDICATING THAT THE WEIGHTS SHOWN ON SK7368 WERE THE ONLY WEIGHTS SUPPLIED TO THE BIDDERS WHERE IN FACT THE DRAWING SK7636 GIVES DIFFERENT WEIGHTS, THIS SHOWS THAT AT THE TIME THE AWARD WAS MADE THE CONTRACTING OFFICER WAS NOT AWARE OF THIS AMBIGUITY IN THE WEIGHTS AND APPARENTLY BASED HIS DECISION WITH RESPECT TO THE AWARD SOLELY ON THE APPROXIMATE WEIGHTS SHOWN ON SK7368.

"TO SHOW THE IMPORTANCE OF THE SMALL DIFFERENCES IN WEIGHTS BETWEEN THE TWO DRAWINGS, WE WISH TO PRESENT THE FOLLOWING ANALYSIS OF THE BIDS BASED ON THE DIFFERENCE BETWEEN USING A WEIGHT PER BOMB BODY ASSEMBLY OF 21.50 LBS. (WEIGHT OF TWO BOMBS 53.68 LBS.) AS SHOWN ON SK7368 VERSUS A WEIGHT OF 20.7 LBS. (WEIGHT OF TWO BOMBS 52.08 LBS.) AS SHOWN ON SK7636:

CHART BASED ON WEIGHT OF 53.68 LBS. FOR 2 PACKAGED BOMBS TOTAL FREIGHT COST EQUALS

$130,200.84 FREIGHT COST PER BOMB EQUALS 0.723 WAYCROSS BID FOB DESTINATION EQUALS 3.61 PLUS 0.723 EQUALS

$4.333 BASED ON WEIGHT OF 52.08 LBS. FOR 2 PACKAGED BOMBS TOTAL FREIGHT COST EQUALS $126,320.04 FREIGHT COST PER BOMB EQUALS 0.702 WAYCROSS BID FOB DESTINATION EQUALS 3.61 PLUS 0.702 EQUALS

$4.312

"THE ABOVE ANALYSIS SHOWS THAT USING THE WEIGHT OF 53.68 LBS. FOR TWO BOMBS (21.50 LBS. FOR THE BOMB BODY) OUR PRICE, PER BOMB, FOB DESTINATION, WOULD BE $4.333 AS COMPARED TO THE AMERICAN ELECTRIC, INC. OF $4.330 (LESS DISCOUNT) PER BOMB, FOB DESTINATION. ON THE OTHER HAND, WHEN USING THE WEIGHT OF 20.70 LBS. PER BOMB BODY (52.08 LBS. FOR 2 PACKAGED BOMBS) IS USED, OUR BID PRICE BECOMES $4.312 PER BOMB, FOB DESTINATION, AS COMPARED TO THE AMERICAN ELECTRIC, INC. $4.330 PER BOMB, FOB DESTINATION, LESS A DISCOUNT OF 1/4 PERCENT, OR A FINAL PRICE OF $4.319. THUS, A CHANGE IN WEIGHT WITHIN THE TOLERANCE PER BOMB BODY IN THE ANALYSIS OF THE BID RESULTS IN A REVERSAL OF THE LOW BIDDER.'

IN YOUR LETTER OF JANUARY 22, 1964, WHEREIN YOU FIRST ADVANCED THE CONTENTION THAT THE CONTRACTING OFFICER WAS NOT JUSTIFIED IN USING A UNIT WEIGHT OF 53.68 POUNDS IN DETERMINING THE TRANSPORTATION COSTS TO BE ADDED TO AN F.O.B. ORIGIN BID FOR THE PURPOSE OF EVALUATING THE BIDS, YOU DRAW ATTENTION TO THE FACT THAT PARAGRAPH 1-1305.1 OF THE ARMED SERVICES PROCUREMENT REGULATION, REV. AS OF JANUARY 1, 1963, 32 CFR 1.305-1, PROVIDES THAT, IF SHIPPING WEIGHTS OF ITEMS TO BE PROCURED "ARE NOT SHOWN IN THE SOLICITATION" AND MAY VARY AMONG PROSPECTIVE SUPPLIERS WITH A RESULTANT VARIATION IN TRANSPORTATION COSTS AND SUCH COSTS ARE MADE A FACTOR IN BID EVALUATION, THE SCHEDULE "WILL PROVIDE" FOR INSERTION BY THE SUPPLIER OF THE APPLICABLE GUARANTEED MAXIMUM SHIPPING WEIGHTS, AND A PROVISION SUBSTANTIALLY AS SET FORTH IN PARAGRAPH 2-201 (B) (XIII) OF THE REGULATION "SHALL ALSO BE INCLUDED.' THAT PARAGRAPH SETS FORTH A "GUARANTEED MAXIMUM SHIPPING WEIGHTS," ETC., CLAUSE. THE SUBJECT INVITATION, HOWEVER, DID NOT CONTAIN SUCH CLAUSE.

YOU ARGUE THAT SINCE THE INVITATION INVOLVED MADE NO PROVISION FOR THE INSERTION BY BIDDERS OFFERING TO FURNISH THE BOMBS ON AN F.O.B. ORIGIN BASIS OF APPLICABLE GUARANTEED SHIPPING WEIGHTS, AND SINCE, AS YOU CONTEND, THE INVITATION WAS AT LEAST AMBIGUOUS WITH RESPECT TO APPRISING BIDDERS OF THE UNIT SHIPPING WEIGHT WHICH WOULD BE USED, THE AWARD TO AMERICAN ELECTRIC SHOULD BE CANCELLED AND THE PROCUREMENT READVERTISED UNDER AN INVITATION CONTAINING NO AMBIGUITIES AS TO THE WEIGHT OF THE ARTICLE TO BE SHIPPED.

WITH RESPECT TO THE BASIS USED BY THE CONTRACTING OFFICER IN DETERMINING THE SHIPPING WEIGHT PER PACKAGE WHICH WAS TO BE USED IN DETERMINING TRANSPORTATION COSTS TO BE ADDED TO AN F.O.B. ORIGIN BID FOR THE PURPOSE OF EVALUATING BIDS, THE IFB PROVIDED, AMONG OTHER THINGS, THAT BIDDERS WERE TO FURNISH BOMBS EITHER IN ACCORDANCE WITH DEPARTMENT OF THE NAVY, BUREAU OF WEAPONS (BUWEPS), GENERAL ARRANGEMENT DRAWING NO. 2193779, OR, AS "ALTERNATE METHOD OF MANUFACTURE," WAYCROSS MACHINE SHOPS GENERAL ARRANGEMENT DRAWING NO. SK 7368. THESE DRAWINGS, UNDER THE HEADING "APPROXIMATE WEIGHTS," GIVE THE FOLLOWING INFORMATION RELATIVE TO THE WEIGHT OF THE COMPLETE BOMB:

CHART

2193779 SK 736A

"BUWEPS DRAWING WAYCROSS DRAWING BODY ASSEMBLY

21.10 LBS. 21.50 LBS. TAIL ASSEMBLY 3.25 LBS. 2.85 LBS. FIRING PIN ASSEMBLY .04 LBS. .04 LBS. SIGNAL

.16 LBS. .16 LBS.

24.55 LBS. 24.55 LBS.'

BUWEPS DRAWING NO. 2185734 (THE DRAWING SPECIFYING HOW THE BOMBS WERE TO BE PACKAGED) INDICATES THAT THE BOMBS ARE TO BE PACKED TWO TO THE PACKAGE, AND CONTAINS THE FOLLOWING INFORMATION UNDER THE HEADING"ESTIMATED WEIGHTS: "

CHART "ONE BOMB 24.5 LBS.

BOX 4.9 LBS.

BOX WITH TWO BOMBS 53.9 LBS.'

WHILE WAYCROSS MACHINE SHOPS GENERAL ARRANGEMENT DRAWING NO. SK 7368 REFERS TO BUWEPS BODY DRAWING NO. 2193777, THE INVITATION PROVIDED FOR THE DELETION OF THAT DRAWING UNDER THE "ALTERNATE METHOD OF MANUFACTURE," AND THE SUBSTITUTION THEREFOR OF WAYCROSS MACHINE SHOPS BODY DRAWING NO. SK 7636. AS INDICATED IN YOUR ABOVE-QUOTED LETTER OF JANUARY 28, 1964, NOTE 5 ON THE DRAWING STATES: "WEIGHT OF BODY IS 21.20 LBS.--- .50 LBS.'

IT SEEMS ENTIRELY APPROPRIATE, AND INDEED NECESSARY FROM THE STANDPOINT OF FAIRNESS TO ALL BIDDERS, FOR THE CONTRACTING OFFICER TO HAVE USED THE INFORMATION REGARDING THE APPROXIMATE WEIGHT OF THE COMPLETE BOMB, AS SET OUT ON BUWEPS GENERAL ARRANGEMENT DRAWING NO. 2193779 AND WAYCROSS MACHINE SHOPS GENERAL ARRANGEMENT DRAWING SK 7368 (THE INFORMATION AS TO WEIGHT SHOWN ON THESE DRAWINGS BEING IDENTICAL EVEN THOUGH THE DRAWINGS RELATED TO ALTERNATE METHODS OF MANUFACTURE), TOGETHER WITH THE INFORMATION AS TO ESTIMATED WEIGHT OF THE PACKAGED BOMBS SHOWN ON BUWEPS DRAWING 2185734, IN DETERMINING SHIPPING WEIGHTS FOR THE PURPOSE OF EVALUATING F.O.B. ORIGIN BIDS. WE DO NOT BELIEVE THAT THE INVITATION PROPERLY MAY BE SAID TO BE AMBIGUOUS AND MISLEADING TO BIDDERS IN RESPECT TO THE "WEIGHT" SUPPLIED THEREIN, AS YOU CONTEND. IT IS NOTED THAT IN THE "TRANSPORTATION EVALUATION QUESTIONAIRE" FORM FURNISHED TO BIDDERS WITH THE INVITATION YOU VOLUNTARILY SUPPLIED THE INFORMATION IN THE SPACE PROVIDED FOR SHOWING "GROSS SHIPPING WEIGHT OF INDIVIDUAL CONTAINER, PACKAGE OR UNIT (INCLUDING CONTENTS OF CONTAINER OR PACKAGE AS PACKED FOR SHIPMENT)," THAT THE PACKAGED UNITS INVOLVED WEIGHED "53.9 LBS.' WHILE YOU ARGUE THAT THE FORM CALLED FOR INFORMATION AS CHECKED, AND NONE OF THE ITEMS WERE CHECKED, IT SEEMS OBVIOUS THAT ALL OF THE INFORMATION LISTED ON THE FORM WAS MATERIAL EXCEPT THAT SPECIFIED FOR "PALLETIZED MATERIAL.' THE FACT THAT YOU UNDERTOOK TO FURNISH THE INFORMATION INDICATES THAT YOU SO REGARDED IT, AND WE THINK THE CONTRACTING OFFICER WOULD HAVE BEEN JUSTIFIED IN USING THE WEIGHT INSERTED BY YOU.

IT APPEARS FROM THE REPORT SUBMITTED BY THE CONTRACTING OFFICER IN CONNECTION WITH YOUR PROTEST THAT THE WEIGHT OF 24.39 LBS. PER BOMB, REFERRED TO IN THE CONTRACTING OFFICER'S ABOVE-QUOTED LETTER OF JANUARY 20, 1964, WAS USED IN CALCULATING THE SHIPPING WEIGHT OF THE PACKAGED BOMBS, RATHER THAN THE 24.55 POUND FIGURE SHOWN IN BUWEPS GENERAL ARRANGEMENT DRAWING 2193779 AND WAYCROSS MACHINE SHOPS GENERAL ARRANGEMENT DRAWING SK 7368, SUPRA, BECAUSE THE "SIGNAL," SHOWN IN THESE DRAWINGS AS WEIGHING " .16 LBS., " WAS OMITTED FROM THE UNIT BEING PROCURED. THE TOTAL SHIPPING WEIGHT FIGURE THUS DERIVED, AND USED IN EVALUATING YOUR BID, WAS 53.68 POUNDS, WHICH APPEARS TO HAVE BEEN CORRECT IN ALL RESPECTS.

IN VIEW OF THE FOREGOING, YOUR CONTENTION THAT THE ADVERTISED PORTION OF THE PROCUREMENT WAS IMPROPERLY AWARDED IS UNTENABLE. FURTHERMORE, THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, IN FURNISHING US A REPORT IN THIS MATTER BY LETTER OF FEBRUARY 25, 1964, STATES THAT, EVEN IF THE CONTRACTING OFFICER HAD USED THE BODY WEIGHT OF 21.20 LESS THE TOLERANCE OF .5 POUNDS SHOWN ON WAYCROSS MACHINE SHOPS DRAWING SK 7636, AS SUGGESTED IN YOUR ABOVE QUOTED LETTER OF JANUARY 28, 1964, THE MINIMUM SHIPPING WEIGHT OF THE TWO BOMBS WOULD AMOUNT TO 52.68 POUNDS, NOT 52.08, AS YOU CONTEND. THE BASIS FOR THIS CONCLUSION, AND THE ASSISTANT CHIEF FOR PURCHASING'S DETERMINATION THAT, IF THE 52.68-FIGURE HAD BEEN USED, AMERICAN ELECTRIC'S BID STILL WOULD HAVE BEEN LOWER THAN YOURS, IS SET FORTH IN HIS LETTER AS FOLLOWS: "* * * WAYCROSS ARRIVED AT THE WEIGHT OF 52.08 AS FOLLOWS: CHART

WAYCROSS DWG SK 7636

21.20

MINUS .5

20.70

TAIL ASSEMBLY WAYCROSS DWG 7368 2.85

FIRING PIN ASSEMBLY DWG 7368 .04

23.59

NUMBER OF BOMBS PER BOX 2 TIMES 23.59 47.18

BOX BUWEPS DWG 2185734 4.90

52.08

"YOU WILL NOTE THE ABOVE COMPUTATION DOES NOT INCLUDE THE WEIGHT FOR THE SUSPENSION LUG, PLUG AND COTTER PIN COVERED BY BUWEPS DRAWING 155268, BUWEPS DRAWING 1588260, BUWEPS DRAWING 1508260 AND MILITARY STANDARD PART MS-24665-363, RESPECTIVELY.

"USING THE BODY WEIGHT OF 21.20 AND THE MINIMUM TOLERANCE OF .5 POUNDS, THE WEIGHT OF THE TWO BOMBS IS AS FOLLOWS:

CHART

WAYCROSS DWG SK 7636

21.20

.5 LESS

20.70

SUSPENSION LUG, PLUG AND COTTER PIN .30

21.00 POUNDS

TAIL ASSEMBLY 2.85

FIRING PIN ASSEMBLY .04

23.89

2

47.78

BOX 4.90

52.68 POUNDS

"BASED ON USING THE MINIMUM WEIGHT OF 52.68 POUNDS, THE TRANSPORTATION COST TO BE ADDED TO WAYCROSS MACHINE SHOP'S BID WOULD BE $127,775.34 MAKING A TOTAL OF $777,575.34 AS COMPARED WITH AMERICAN ELECTRIC'S BID PRICE OF $777,451.50 (INCLUDING DISCOUNT).'

YOU ALSO CONTEND THAT AMERICAN ELECTRIC IS NOT ELIGIBLE FOR AWARD OF THE SET-ASIDE PORTION OF THE PROCUREMENT BECAUSE THE INFORMATION SUPPLIED IN ITS BID HAVING A BEARING UPON ITS ELIGIBILITY DID NOT MEET THE REQUIREMENTS OF THE INVITATION. RELATIVE TO THIS PART OF YOUR PROTEST, BIDDERS WERE ADVISED AT PAGE 13 OF THE SCHEDULE OF THE INVITATION THAT, IF THE BIDDER SHOULD BE A LABOR SURPLUS AREA CONCERN " AS DEFINED IN PARAGRAPH 1-801.1 OF THE ARMED SERVICES PROCUREMENT REGULATION, AND THUS ELIGIBLE FOR PREFERENCE IN THE EVENT OF A LABOR SURPLUS SET-ASIDE, HE WAS REQUIRED TO SET FORTH: "1. LOCATION OF PLANT AT WHICH THE SUPPLIES WILL BE MANUFACTURED," AND ,2. IF MORE THAN ONE PLANT IS INVOLVED (EITHER ITS OWN OR ITS SUBCONTRACTOR-S) STATE WHAT PERCENTAGE OF THE CONTRACT PRICE IS REPRESENTED BY THE COSTS INCURRED ON ACCOUNT OF MANUFACTURING OR PRODUCTION OF THE SUPPLIES AT EACH PLANT.'

IN THE SPACE PROVIDED FOR SUPPLYING THE FIRST ITEM OF INFORMATION, AMERICAN ELECTRIC INSERTED ,DAYTON, TENNESSEE (PERSISTENT AREA)," AND IN THE SPACE, AND UNDER THE HEADINGS, PROVIDED FOR SUPPLYING THE SECOND ITEM OF INFORMATION, AMERICAN ELECTRIC GAVE THE FOLLOWING INFORMATION:

CHART

COST OF

MANUFACTURING PERCENT OF

CITY AND OR CONTRACT "NAME OF PLANT STATE

QUANTITY PRODUCTION PRICE AMERICAN ELECTRIC, MINIMUM INC. PERSISTENT AREA DAYTON, TENN 180,000 $225,000 28.8 PERCENT WHELAND FDRY CHATTANOOGA, MINIMUM SUBSTANTIAL AREA TENNESSEE 180,000 $245,000 31.4 PERCENT LAKEVIEW FORGE ERIE, PA. MINIMUM PERSISTENT AREA 180,000 $ 50,000 6.4 PERCENT METAL ENG. GREENVILLE, 2 ITEMS MINIMUM PERSISTENT AREA TENNESSEE 180,000 $ 40,000 5.1 PERCENT

TOTAL 71.7 PERCENT "

IN CONTENDING THAT THE ABOVE INFORMATION DID NOT MEET THE REQUIREMENTS OF THE INVITATION, YOU STATE:

"IT SHOULD BE NOTED THAT THE INFORMATION SUBMITTED TOTALS ONLY 71.7 PERCENT OF THE CONTRACT PRICE AND THEREFORE IS NOT A LISTING OF THE PERCENT OF THE CONTRACT PRICE REPRESENTED BY THE COSTS INCURRED ON ACCOUNT OF MANUFACTURING OR PRODUCTION OF SUPPLIES AT EACH PLANT.

"THERE IS NO INDICATION WHERE THE REMAINING 28.3 PERCENT OF THE CONTRACT IS TO BE MANUFACTURED. THERE IS NO INDICATION AS TO WHETHER THIS BIDDER INTENDS TO FURNISH THE PACKAGING AS REQUIRED BY THE DRAWINGS, AND, IF HE DOES INTEND TO FURNISH THE PACKAGING REQUIRED BY THE DRAWINGS, THERE IS NO LISTING OF THE CONTRACTOR AND PLACE OF MANUFACTURE AND DOLLAR VALUE INVOLVED. FURTHER, THERE IS NO INDICATION AS TO THE TOTAL DOLLAR VALUE BEING SUPPLIED FROM THE PLANT OF THE BIDDER, AMERICAN ELECTRIC, INC. OF PARAMOUNT, CALIFORNIA.'

THE PERTINENT REGULATION (ASPR 1-801.1) PROVIDES THAT A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT SUBSTANTIALLY IN " "AREAS OF SUBSTANTIAL AND PERSISTENT LABOR SURPLUS" " IF THE COSTS THAT IT INCURS ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS SUBCONTRACTORS) IN SUCH AREAS AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE; AND THAT A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT SUBSTANTIALLY IN " "AREAS OF SUBSTANTIAL LABOR SURPLUS" " IF THE COSTS THAT IT INCURS ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS SUBCONTRACTORS) IN SUCH AREAS OF IN " "AREAS OF SUBSTANTIAL OR PERSISTENT LABOR SURPLUS" " AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE. THE FOREGOING DEFINITION OF A "LABOR SURPLUS AREA CONCERN" WAS ALSO SET FORTH IN SUBSTANCE IN THE PROVISIONS RELATING TO THE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE" APPEARING AT PAGE 12 OF THE SCHEDULE OF THE INVITATION.

SINCE IT IS ONLY NECESSARY TO SHOW THAT COSTS TO BE INCURRED BY A COMPANY ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS SUBCONTRACTORS) IN THE CRITICAL AREAS WILL AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE IN ORDER TO QUALIFY IT AS A LABOR SURPLUS AREA CONCERN IT MUST BE ASSUMED THAT THE INFORMATION WHICH BIDDERS WERE REQUIRED TO SUPPLY PURSUANT TO QUESTION-ITEMS 1 AND 2 ON PAGE 13 OF THE SCHEDULE WAS ELICITED FOR THE PURPOSE OF ESTABLISHING WHETHER OR NOT THE PARTICULAR BIDDER MET THE MORE THAN 50 PERCENT OF THE CONTRACT PRICE REQUIREMENT REFERRED TO ABOVE AND WAS THUS ELIGIBLE FOR AWARD OF THE SET- ASIDE PORTION OF THE PROCUREMENT. THE INFORMATION SUPPLIED BY AMERICAN ELECTRIC, SUPRA, INDICATED THAT THE COSTS TO BE INCURRED BY IT ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS SUBCONTRACTORS) IN CONNECTION WITH FURNISHING THE SET-ASIDE PORTION OF THE PROCUREMENT WOULD AMOUNT TO 71.7 PERCENT OF THE CONTRACT PRICE, AND HENCE, IS ENTIRELY ADEQUATE TO ESTABLISH, PRIMA FACIE AT LEAST, THE CONCERN'S ELIGIBILITY TO BE AWARDED THE SET ASIDE.

IN REGARD TO THE SUBJECT MATTER OF THE SECOND PARAGRAPH OF THE ABOVE QUOTE FROM YOUR LETTER OF JANUARY 22, 1964, IT IS TRUE THAT AMERICAN ELECTRIC DID NOT SHOW ANY UNIT PRICE OR TOTAL AMOUNT FOR "PACKAGING CHARGES" IN THE SPACES PROVIDED ON PAGE 1 OF THE SCHEDULE OF THE INVITATION FOR SHOWING SUCH INFORMATION. HOWEVER, SINCE THE AMOUNTS OF $4.33 AND $779,400, RESPECTIVELY, WERE INSERTED BY AMERICAN ELECTRIC IN THE SPACES PROVIDED (IMMEDIATELY ABOVE THE SPACES FOR INDICATING PACKAGING CHARGES) FOR A BIDDER TO INDICATE THE UNIT AND TOTAL PRICE FOR WHICH HE OFFERED TO FURNISH THE 180,000 PRACTICE BOMBS ON AN "FOB DESTINATION" DELIVERY BASIS, WHICH WOULD NECESSARILY REQUIRE THE BOMBS TO BE PACKAGED FOR SHIPMENT FROM THE CONTRACTOR'S PLANT TO THE VARIOUS DESTINATIONS, IT WOULD BE UNREASONABLE TO ASSUME THAT THE REFERRED-TO AMOUNTS OF $4.33 AND $779,400 DID NOT INCLUDE THE COST OF PACKAGING. AMERICAN ELECTRIC'S FAILURE TO SHOW THE PRICE FOR THE PACKAGING MAY NOT, THEREFORE, BE CONSIDERED TO HAVE BEEN OF A MATERIAL NATURE. THERE WAS NO REQUIREMENT IN THE INVITATION THAT BIDDERS SUPPLY THE NAME AND LOCATION OF THE CONTRACTOR WHICH WAS TO PACKAGE THE BOMBS. MOREOVER, THERE WAS NO REQUIREMENT IN THE SET-ASIDE PROVISIONS RELATING TO THE INVITATION, AND AMERICAN ELECTRIC DID NOT REPRESENT IN ITS BID, THAT ANY PORTION OF THE 180,000 BOMBS INVOLVED WOULD BE MANUFACTURED AT AMERICAN ELECTRIC'S PLANT AT PARAMOUNT, CALIFORNIA.

IN YOUR LETTER OF FEBRUARY 3, 1964, YOU CONTEND THAT IT WILL BE IMPOSSIBLE FOR AMERICAN ELECTRIC TO PERFORM WORK REPRESENTING 28.8 PERCENT OF THE CONTRACT PRICE IN ITS DAYTON, TENNESSEE, PLANT, OR WORK REPRESENTING 31.4 PERCENT OF THE CONTRACT PRICE AT THE PLANT OF THE WHELAND FOUNDRY IN CHATTANOOGA, TENNESSEE, WITHIN THE TIME REQUIRED TO MEET THE DELIVERY SCHEDULE OF THE CONTRACT FOR THE REASONS WHICH YOU INDICATE.

RELATIVE TO YOUR CONTENTIONS IN THE PREMISES, THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, HAS SUPPLIED US WITH A MEMORANDUM PREPARED BY THE CONTRACTING OFFICER ON BEHALF OF THE COMMANDING OFFICER, U.S. NAVY ORDNANCE SUPPLY OFFICE, MECHANICSBURG, PENNSYLVANIA, UNDER DATE OF FEBRUARY 11, 1964. THE MEMORANDUM, WHICH IS DIRECTED TO THE CHIEF, BUREAU OF SUPPLIES AND ACCOUNTS, IS AS FOLLOWS:

"1. * * *. IN THE ADDITIONAL PROTEST, WAYCROSS MACHINE SHOP CONTENDS THAT THE AMERICAN ELECTRIC COMPANY CANNOT PERFORM THE 28.8 PERCENT IN THE AMERICAN ELECTRIC COMPANY PLANT IN DAYTON, TENNESSEE NOR THE 31.4 PERCENT IN THE WHELAND FOUNDRY COMPANY IN CHATTANOOGA, TENNESSEE WITHIN THE DELIVERY SCHEDULE OF THE INVITATION FOR BIDS.

"2. BASED ON A PRE-AWARD SURVEY CONDUCTED BY THE INSPECTOR OF NAVAL MATERIAL, ENCLOSURE (1), THE AMERICAN ELECTRIC COMPANY HAS ADEQUATE FIRM COMMITMENTS TO PERFORM THE WORK IN THE LABOR SURPLUS AREA FIRMS INDICATED AND CAN MEET THE DELIVERY SCHEDULE OF THE INVITATION FOR BIDS.'

IN HIS LETTER OF FEBRUARY 25, 1964, THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS, STATES THAT THE SET-ASIDE PORTION OF THE PROCUREMENT INVOLVED HAS NOT BEEN AWARDED, BUT, ON THE BASIS OF THE INFORMATION CONTAINED IN THE INITIAL REPORT SUBMITTED BY THE CONTRACTING OFFICER IN CONNECTION WITH YOUR PROTEST, AND THAT CONTAINED IN THE ABOVE- QUOTED MEMORANDUM OF FEBRUARY 11, 1964, THE DEPARTMENT OF THE NAVY IS OF THE OPINION THAT AMERICAN ELECTRIC, INC., QUALIFIES AS A LABOR SURPLUS AREA CONCERN.

ON THE BASIS OF THE RECORD HEREINABOVE SET OUT, AND FOR THE REASONS INDICATED, WE FEEL THAT YOUR PROTEST, IN BOTH ASPECTS, IS WITHOUT MERIT AND MUST BE DENIED.