B-153790, JUN. 24, 1964

B-153790, JUN. 24, 1964

TO AVIEN, INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED MARCH 19, 1964, PROTESTING THE ACTION TAKEN BY THE DEPARTMENT OF THE AIR FORCE IN CONNECTION WITH THE AWARD OF CONTRACT NO. AF33/657/-12871, DATED DECEMBER 31, 1963, TO YOUR COMPANY, TERMINATION OF THAT CONTRACT FOR THE CONVENIENCE OF THE GOVERNMENT ON MARCH 6, 1964, AND THE AWARD OF A CONTRACT ON THE SAME DATE TO TUNG-SOL ELECTRIC, INCORPORATED, FOR THE FURNISHING OF THE ITEMS REQUIRED UNDER THE TERMINATED CONTRACT. WE HAVE RECEIVED AN ADMINISTRATIVE REPORT FROM THE DEPARTMENT OF THE AIR FORCE RELATIVE TO YOUR PROTEST.

THE RECORD NOW SHOWS THAT ON OCTOBER 22, 1963, THE AIR FORCE SYSTEMS COMMAND, AERONAUTICAL SYSTEMS DIVISION, ISSUED INVITATION FOR BIDS NO. 33- 657-64-111 FOR THE PROCUREMENT OF POWER SUPPLY UNITS, TYPE ECU 45/A, FOR F/RF-4C AIRCRAFT. AS A RESULT OF AN AMENDMENT TO THE INVITATION THE FINAL QUANTITY TO BE PROCURED WAS ESTABLISHED AS 834 UNITS. THE INVITATION WAS ISSUED FOR A QUALIFIED PRODUCT IN ACCORDANCE WITH SECTION 1, PART 11, OF THE ARMED SERVICES PROCUREMENT REGULATION. THREE BIDS WERE RECEIVED IN THE RESPECTIVE TOTAL AMOUNTS OF $266,511, $274,386, AND $349,537.74 FROM YOUR COMPANY, TUNG-SOL ELECTRIC, INCORPORATED, AND THE WESTINGHOUSE ELECTRIC CORPORATION. SINCE YOUR COMPANY WAS THE LOW BIDDER AND WAS CURRENTLY LISTED ON THE APPLICABLE QUALIFIED PRODUCTS LIST, THE CONTRACT AWARD WAS MADE TO YOUR COMPANY AFTER REVIEW OF AN AFFIRMATIVE CAPABILITY REPORT WHICH HAD REFERENCE TO THE QUESTION AS TO YOUR QUALIFICATIONS AS A RESPONSIBLE PROSPECTIVE CONTRACTOR IN THE PARTICULAR CASE.

TUNG-SOL ELECTRIC, INCORPORATED, PROTESTED THE AWARD, ALLEGING THAT YOUR COMPANY WAS IMPROPERLY LISTED ON THE APPLICABLE QUALIFIED PRODUCTS LIST BECAUSE IT HAD NOT QUALIFIED ITS PRODUCT IN ACCORDANCE WITH THE 1,500- HOURS ENDURANCE TEST REQUIRED BY MILITARY SPECIFICATION MIL-P-26517A/USAF) DATED APRIL 5, 1961. THE AIR FORCE DETERMINED THAT THIS ALLEGATION WAS TRUE AND THAT THE PROJECT ENGINEER WHO EVALUATED THE TEST REPORTS SUBMITTED FOR QUALIFICATION OF FIRMS AS SOURCES OF SUPPLY FOR THE TYPE ECU -45/A POWER SUPPLY UNITS HAD IMPROPERLY ALLOWED YOUR COMPANY AND THE WESTINGHOUSE ELECTRIC CORPORATION TO SUBSTITUTE A TEST REPORT OF THE MOTOR MANUFACTURER, GLOBE INDUSTRIES, IN LIEU OF RUNNING THE TESTS SPECIFIED BY THE MILITARY SPECIFICATION. CONSEQUENTLY, THE AIR FORCE BELIEVED THAT THE PRODUCTS OFFERED BY YOUR COMPANY AND THE WESTINGHOUSE ELECTRIC CORPORATION SHOULD NOT HAVE BEEN CONSIDERED IN THE MAKING OF A CONTRACT AWARD UNDER INVITATION FOR BIDS NO. 33-657-64-111.

IT WAS ADMINISTRATIVELY DETERMINED THAT IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO TERMINATE YOUR CONTRACT FOR THE GOVERNMENT'S CONVENIENCE AND TO MAKE AN IMMEDIATE CONTRACT AWARD TO TUNG-SOL ELECTRIC, INCORPORATED, AS A SOLE SOURCE UNDER THE NEGOTIATION AUTHORITY OF SECTION 2304 (A) (10) OF TITLE 10, UNITED STATES CODE. THE AIR FORCE CONSIDERED THAT THE CONTRACT WITH YOUR COMPANY SHOULD NOT BE TERMINATED BECAUSE OF APPARENT ILLEGALITY BUT, RATHER, ON THE BASIS THAT THE CIRCUMSTANCES OF THE CASE WOULD REASONABLY PERMIT A TERMINATION FOR THE CONVENIENCE OF THE GOVERNMENT SO THAT CONSIDERATION COULD BE GIVEN ADMINISTRATIVELY TO ANY CLAIM WHICH YOU MIGHT SUBMIT FOR REIMBURSEMENT OF COSTS INCURRED IN THE PERFORMANCE OF THE TERMINATED CONTRACT.

YOU PROTESTED THE MAKING OF THE CONTRACT AWARD TO TUNG-SOL ELECTRIC, INCORPORATED, FOR THE FOLLOWING REASONS: (A) AVIEN WAS NOT SOLICITED OR ALLOWED TO COMPETE, ALTHOUGH AVIEN WAS STILL LISTED AS A QUALIFIED SOURCE; (B) A REPROCUREMENT AWARD TO AVIEN WOULD HAVE SAVED SIZEABLE TERMINATION COSTS AND MINIMIZED THE FINANCIAL IMPACT TO AVIEN AND ITS PRODUCTION EMPLOYEES AT THE CRITICAL TIME WHEN IN-PRODUCTION VS. ENGINEERING BUSINESS VOLUME IS LOW; (C) AVIEN'S BID PRICING HISTORY ON THIS POWER SUPPLY SHOWS IT TO BE THE LOWEST AND AVIEN'S IN-PRODUCTION STATUS (TWO MONTHS AND A WEEK AFTER AWARD OF CONTRACT NO. AF 33 (657/ 12871) PROMISED EARLIER DELIVERY; (D) AVIEN IS A SMALL BUSINESS AND SHOULD BE GIVEN AT LEAST AN EQUAL OPPORTUNITY TO BID; (E) AVIEN'S CONTRACT WAS NOT TERMINATED FOR DEFAULT AND A CONVENIENCE TERMINATION WOULD NOT HAVE LEFT THE DOOR OPEN TO CONSIDER OTHER BIDS RECEIVED UNDER INVITATION NO. 33-657-64-111; AND (F) THE GOVERNMENT BY ITS ACTION APPEARS TO CONDONE ACQUISITION AND USE OF UNAUTHORIZED DISCLOSURES TO GAIN ADVANTAGE ON THE PART OF ONE PARTY OVER ANOTHER.

THE DEPARTMENT OF THE AIR FORCE HAS REPORTED THAT THE DECISION TO TERMINATE YOUR CONTRACT AND TO MAKE AN AWARD TO TUNG-SOL ELECTRIC, INCORPORATED, WAS BASED ON THE FOLLOWING FACTORS: (1) AVIEN DID NOT HAVE A QUALIFIED PRODUCT AT THE TIME CONTRACT NO. AF 33/657/-12871 WAS AWARDED NOR WHEN THE CONTRACT WAS TERMINATED; (2) THE AWARD TO AVIEN WAS IN ERROR AND CONTRARY TO PROCUREMENT REGULATIONS; (3) ALTHOUGH AVIEN WAS RUNNING THE REQUIRED TESTS, THERE WAS NO ASSURANCE THAT ITS PRODUCT WOULD QUALIFY; (4) TUNG-SOL ELECTRIC, INCORPORATED, HAD A QUALIFIED PRODUCT AND WAS ABLE TO MAKE DELIVERIES IN TIME TO MEET THE URGENT REQUIREMENTS OF THE AIR FORCE; AND (5) THE COST OF TERMINATING THE AVIEN CONTRACT WAS GIVEN VERY SERIOUS CONSIDERATION BUT WAS NOT CONSIDERED SO LARGE AS TO OUTWEIGH THE OTHER FACTORS.

THE DEPARTMENT CONSIDERS THAT THE DECISION TO TERMINATE YOUR CONTRACT IS BASIC TO THE USE OF A QUALIFIED PRODUCTS LIST IN ADVERTISING FOR BIDS AND THAT, ALTHOUGH IN THIS CASE IT MAY SEEM UNFAIR TO A COMPANY WHICH HAS RELIED ON STATEMENTS OF AIR FORCE PERSONNEL TO THE EFFECT THAT A PARTICULAR TEST IS UNNECESSARY, THE WAIVING OF MATERIAL TEST REQUIREMENTS SET FORTH IN THE SPECIFICATIONS IS NOT AUTHORIZED AND DEFEATS THE ENTIRE PURPOSE OF THE QUALIFIED PRODUCTS LISTING PROCEDURE. BECAUSE YOUR COMPANY WAS NOT ENTIRELY RESPONSIBLE FOR THE MISTAKE INVOLVED, THE DEPARTMENT BELIEVED THAT A TERMINATION FOR CONVENIENCE, INSTEAD OF CONSIDERING THAT NO CONTRACT EXISTED AT ALL, WOULD BE ONLY FAIR TO YOUR COMPANY AND WOULD AT THE SAME TIME PROTECT THE INTERESTS OF THE GOVERNMENT.

IT IS ADMINISTRATIVELY REPORTED THAT YOUR COMPANY WAS NOT SOLICITED FOR THE REQUIREMENT AFTER TERMINATION OF CONTRACT NO. AF 33/657/-12871, AND THAT NO CONSIDERATION COULD HAVE BEEN GIVEN TO YOUR UNSOLICITED PROPOSAL DATED MARCH 9, 1964, BECAUSE ALL OF THE REQUIRED TESTS FOR QUALIFICATION OF YOUR PRODUCT HAD NOT BEEN COMPLETED AND THE PRIOR FINAL APPROVAL THEREOF WOULD HAVE BEEN NECESSARY TO MAKE ANY PROPOSAL OF YOUR COMPANY RESPONSIVE TO THE GOVERNMENT'S REQUIREMENTS AND, AS SUCH, ELIGIBLE FOR AWARD.

THE NAME OF YOUR COMPANY AND THAT OF THE WESTINGHOUSE ELECTRIC CORPORATION REMAINED ON THE APPLICABLE QUALIFIED PRODUCTS LIST AS OF MARCH 6, 1964, WHEN YOUR CONTRACT WAS TERMINATED AND AWARD MADE TO TUNG-SOL ELECTRIC, INCORPORATED. HOWEVER, THE RECORD SHOWS THAT BOTH AVIEN AND WESTINGHOUSE WERE ADVISED BY DEPARTMENTAL LETTERS DATED FEBRUARY 12, 1964, THAT THEIR PRODUCTS HAD NOT BEEN QUALIFIED IN ACCORDANCE WITH THE MILITARY SPECIFICATION AND NOTIFIED THAT ACTION WOULD BE TAKEN TO REMOVE THEIR NAMES FROM THE QUALIFIED PRODUCTS LIST UNLESS THEY SUBMITTED WITHIN 120 DAYS TEST DATA SHOWING THAT THEIR POWER SUPPLY UNITS HAD MET THE REQUIREMENTS OF THE ENDURANCE TEST CONDUCTED IN EXACT ACCORDANCE WITH PARAGRAPHS 4.6.11 AND 4.6.11.1 OF SPECIFICATION MIL-P-26517A.

EVIDENTLY NEITHER COMPANY SUBMITTED THE REQUIRED TEST DATA BEFORE MARCH 6, 1964, WHEN THE CONTRACT WAS AWARDED TO TUNG-SOL ELECTRIC, INCORPORATED, AS A SOLE SOURCE FOR THE DESIRED ITEM. THUS, FOR ALL PRACTICAL PURPOSES, NEITHER YOUR COMPANY NOR THE WESTINGHOUSE ELECTRIC CORPORATION COULD HAVE SUBMITTED A RESPONSIVE BID AS OF THAT DATE UNLESS THE TERMS AND CONDITIONS OF THE ORIGINAL ADVERTISEMENT WERE CHANGED TO PERMIT BIDDING BY FIRMS WHICH HAD NOT PREVIOUSLY QUALIFIED THE PRODUCTS WHICH THEY PROPOSED TO FURNISH AND WOULD NOT BE ABLE TO DO SO BEFORE THE TIME OF MAKING A CONTRACT AWARD.

IT IS TRUE THAT THE USE OF A QUALIFIED PRODUCTS LIST IN ADVERTISING FOR BIDS MAKES IT IMPOSSIBLE FOR CERTAIN FIRMS TO COMPETE. HOWEVER, SUCH METHOD OF PROCUREMENT IS NOT LEGALLY OBJECTIONABLE UNDER CERTAIN CONDITIONS AND GIVES ASSURANCE TO THE CONTRACTING AGENCY THAT IN ALL PROBABILITY IT WILL OBTAIN TIMELY DELIVERY OF ITEMS MEETING ITS MINIMUM NEEDS, WITHOUT HAVING FIRST TO UNDERTAKE TO FIELD TEST AND EVALUATE EQUIPMENT OFFERED BY VARIOUS COMPANIES IMMEDIATELY PRIOR TO THE MAKING OF A CONTRACT AWARD.

IN THIS CASE IT WAS BELIEVED THAT AT LEAST THREE CONCERNS WOULD SUBMIT FULLY RESPONSIVE BIDS BUT IT DEVELOPED THAT ONLY ONE OF THOSE FIRMS HAD MET ALL OF THE REQUIREMENTS FOR HAVING ITS NAME PLACED ON THE APPLICABLE QUALIFIED PRODUCTS LIST. AN ERRONEOUS CONTRACT AWARD WAS MADE TO YOUR COMPANY AND WHEN THE ERROR WAS DISCOVERED A TERMINATION OF YOUR CONTRACT APPEARED TO BE REQUIRED IN PROTECTION OF THE INTEREST OF THE AIR FORCE IN OBTAINING AN ACCEPTABLE PRODUCT AND FOR THE REASON THAT ANOTHER FIRM WAS ACTUALLY ENTITLED TO THE AWARD.

AS YOU CONTEND, A TERMINATION OF A CONTRACT FOR THE CONVENIENCE OF THE GOVERNMENT GENERALLY SIGNIFIES A REQUIREMENT CHANGE INSTEAD OF A PURPOSE TO CONSIDER OTHER BIDS SUBMITTED IN RESPONSE TO THE ADVERTISEMENT UNDER WHICH THE TERMINATED CONTRACT WAS AWARDED. HOWEVER, IT DOES NOT APPEAR THAT A NEW SOLICITATION FOR BIDS WAS NECESSARY IN THE CIRCUMSTANCES HERE INVOLVED, SINCE THE MILITARY DEPARTMENTS ARE AUTHORIZED BY LAW TO NEGOTIATE A CONTRACT WHEN IT IS DETERMINED THAT THE PROSPECTIVE CONTRACTOR IS IN FACT A SOLE SOURCE FOR THE PROCUREMENT OF A DESIRED ITEM. SUCH A DETERMINATION WAS MADE WITH RESPECT TO THE CONTRACT AWARDED TO TUNG-SOL ELECTRIC, INCORPORATED, AND UNDER THE PROVISIONS OF 10 U.S.C. 2310, AS AMENDED BY P.L. 87-653, 76 STAT. 528, THE FINDINGS OF THE DEPARTMENT ARE ACCORDED FINALITY, AND ARE THEREFORE NOT SUBJECT TO QUESTION BY US. WE MIGHT ADD, ALSO, THAT THE POSITION COULD WELL BE TAKEN BY THE GOVERNMENT THAT AWARD TO YOU CREATED NO VALID CONTRACT AND CREATED NO OBLIGATION TO MAKE PAYMENT TO YOU IN ANY AMOUNT WHATEVER.

WE ARE ADVISED THAT AIR FORCE PERSONNEL INVOLVED IN THE SUBJECT PROCUREMENT HAVE NO KNOWLEDGE OF HOW TUNG-SOL ELECTRIC, INCORPORATED, OBTAINED THE INFORMATION CONCERNING YOUR TEST REPORT. DISCLOSURE OF THIS TYPE OF INFORMATION IS IN DIRECT VIOLATION OF AIR FORCE REGULATION 80-84 WHICH PROVIDES, IN PART, THAT "THE AIR FORCE WILL NOT FURNISH COPIES OF TEST REPORTS TO THIRD PARTIES (EXCEPT OTHER MILITARY SERVICES).' THE AERONAUTICAL SYSTEMS DIVISION OF THE AIR FORCE SYSTEMS COMMAND HAS BEEN INSTRUCTED TO TAKE APPROPRIATE ACTION TO PRECLUDE THE RECURRENCE OF A SIMILAR SITUATION. WE NEVERTHELESS BELIEVE THAT THIS FEATURE OF THE CASE SHOULD NOT AFFECT A DETERMINATION AS TO THE PROPRIETY OF THE TERMINATION FOR CONVENIENCE AND THE SUBSEQUENT CONTRACT AWARD TO TUNG-SOL ELECTRIC, INCORPORATED.

IN THE CIRCUMSTANCES, IT IS OUR OPINION THAT THE CONTRACT AWARD TO TUNG- SOL ELECTRIC, INCORPORATED, WAS PROPER AND YOUR PROTEST IN THE MATTER MUST BE, AND IS, HEREBY DENIED.