B-154818, NOV. 16, 1964

B-154818: Nov 16, 1964

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TO FENESTRA INCORPORATED: FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JULY 23. DESIGN AND KNOW HOW WERE INCORPORATED INTO THE IFB WITHOUT YOUR PERMISSION AND THAT YOUR FIRM SHOULD ALSO BE AWARDED COMPENSATION FOR SUCH UNAUTHORIZED USE AND RESULTING PUBLIC DISCLOSURE. YOU HAVE ADVISED THAT YOUR FIRM WAS THE LOW BIDDER ON THE REQUIREMENTS COVERED BY THE IFB AND HAS BEEN AWARDED THE CONTRACT. DESIGN AND KNOW-HOW WERE INCORPORATED INTO THE IFB WITHOUT YOUR PERMISSION AND YOU AGAIN URGE THAT YOU SHOULD BE COMPENSATED THEREFOR. 200 FOR WHICH "FENESTRA WILL IN RETURN PROVIDE DETAILED EXTRUSION DRAWINGS. WHEN PARTIES BARGAIN AT ARM'S LENGTH AND TRADE SECRETS ARE DISCLOSED IN CONFIDENCE. COMPLIANCE WITH THE ESSENTIALS OF FAIR DEALING IS A REASONABLY NECESSARY REQUIREMENT.

B-154818, NOV. 16, 1964

TO FENESTRA INCORPORATED:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JULY 23, 1964, WHEREIN YOU URGED THAT ONLY YOUR FIRM SHOULD BE CONSIDERED FOR AWARD OF A CONTRACT FOR THE PROCUREMENT OF EXTRUSION-TYPE PORTABLE RAMPS FOR AIRCRAFT CARRIERS UNDER INVITATION FOR BIDS (IFB) NO. 156-025-65, ISSUED JULY 13, 1964, BY THE NAVAL AIR ENGINEERING CENTER (NAEC), PHILADELPHIA, PENNSYLVANIA, ON THE BASIS YOUR IDEAS, DESIGN AND KNOW HOW WERE INCORPORATED INTO THE IFB WITHOUT YOUR PERMISSION AND THAT YOUR FIRM SHOULD ALSO BE AWARDED COMPENSATION FOR SUCH UNAUTHORIZED USE AND RESULTING PUBLIC DISCLOSURE.

IN YOUR SUPPLEMENTAL LETTER OF AUGUST 14, 1964, YOU HAVE ADVISED THAT YOUR FIRM WAS THE LOW BIDDER ON THE REQUIREMENTS COVERED BY THE IFB AND HAS BEEN AWARDED THE CONTRACT. YOU RENEW YOUR CONTENTION IN THIS LETTER, HOWEVER, THAT YOUR IDEAS, DESIGN AND KNOW-HOW WERE INCORPORATED INTO THE IFB WITHOUT YOUR PERMISSION AND YOU AGAIN URGE THAT YOU SHOULD BE COMPENSATED THEREFOR, I.E., IN THE SUM OF $4,200 FOR WHICH "FENESTRA WILL IN RETURN PROVIDE DETAILED EXTRUSION DRAWINGS, DATA AND PROPRIETARY "RIGHTS.'"

AS A GENERAL RULE, WHEN PARTIES BARGAIN AT ARM'S LENGTH AND TRADE SECRETS ARE DISCLOSED IN CONFIDENCE, COMPLIANCE WITH THE ESSENTIALS OF FAIR DEALING IS A REASONABLY NECESSARY REQUIREMENT. AND IT SEEMS WELL ESTABLISHED THAT A RELATIONSHIP OF TRUST AND CONFIDENCE MAY NATURALLY RESULT FROM THE CIRCUMSTANCES SURROUNDING THE DEALINGS BETWEEN THE PARTIES, THAT IS, AN EXPRESS NONDISCLOSURE AGREEMENT MAY BE MADE OR SUCH A CONTRACT MAY BE IMPLIED. CF. HEYMAN V. AR. WINARICK, INC. (2D C.A. 1963), 325 F.2D 584. THESE PRINCIPLES HAVE BEEN RECOGNIZED AND APPLIED IN RECENT DECISIONS OF OUR OFFICE FOLLOWING THE RATIONALE OF THE RULE STATED BY MR. JUSTICE DOUGLAS FOR THE SUPREME COURT IN UNITED STATES V. STANDARD RICE CO., INC. (1944), 323 U.S. 106, THAT THE UNITED STATES AS A CONTRACTOR GENERALLY MUST BE TREATED AS OTHER CONTRACTORS UNDER ANALOGOUS SITUATIONS. SEE 41 COMP. GEN. 148, 42 ID. 346 AND 43 ID. 193; AND, ALSO, B-153941, AUGUST 27, 1964, AND B-154079, OCTOBER 14, 1964.

THE AVAILABLE RECORD DISCLOSES THAT UNDER AN ORDER DATED MARCH 19, 1964, ISSUED BY THE ENGINEERING OFFICER OF THE NATIONAL AIR ENGINEERING LABORATORY (NAEL), THE FABRICATION OF TWO BARRICADE RAMP PROTOTYPES USING ALUMINUM SHEET AND A CONTINUOUS WELD METHOD WAS REQUESTED FOR USE IN TEST EVALUATIONS. UPON RECEIPT OF THIS ORDER IN THE INDUSTRIAL DEPARTMENT (NAEL) IT WAS DETERMINED THAT AN IMPROVED DESIGN WHICH WOULD REDUCE THE COST OF MANUFACTURE WAS REQUIRED. AN INVESTIGATION WAS INITIATED RESULTING IN A DETERMINATION ON MARCH 31, 1964, THAT A RAMP MADE FROM AN ALUMINUM ALLOY EXTRUSION WOULD MEET THE DESIGN REQUIREMENTS AND BE LESS EXPENSIVE TO PRODUCE. UPON FINDING THAT AN ALUMINUM RAMP WAS BEING MARKETED BY YOUR FIRM UNDER THE TRADENAME "FERMAT"--- GENERALLY UTILIZED BY THE CONSTRUCTION INDUSTRY- - HAD CERTAIN CHARACTERISTICS SIMILAR TO THE NAEL REQUIREMENTS, A TELEPHONE CALL WAS MADE BY THE INDUSTRIAL DEPARTMENT (NAEL) ON APRIL 1, 1964, REQUESTING ADDITIONAL INFORMATION FROM YOUR FIRM ON THIS PRODUCT. A REQUEST WAS ALSO MADE ON THIS DATE FOR DESIGN EXPLORATION AND MANUFACTURE OF AN EXTRUSION-TYPE RAMP WHICH PROVIDED FOR THE PROCUREMENT OF MATERIALS AND MANUFACTURE OF TWO PROTOTYPE BARRICADE RAMPS OF A DESIGN UTILIZING COMMERCIALLY AVAILABLE STRUCTURAL SECTIONS.

ON APRIL 2, 1964, MR. B. C. COTTER, REPRESENTING YOUR FIRM, VISITED NAEL AND WAS SHOWN THE RAMP DESIGN CURRENTLY IN USE, THE DESIGN OF THE TWO RAMPS UNDER MANUFACTURE AS INDICATED ABOVE, AS WELL AS THE LOADING REQUIREMENTS AND OTHER PERTINENT DATA. MR. COTTER AGREED THAT THE MANUFACTURE OF AN EXTRUDED RAMP IN TWO OR THREE SECTIONS WITH THE SECTIONS WELDED TOGETHER WAS FEASIBLE. HE ALSO AGREED TO PROVIDE A SKETCH THEREOF AND A COST ESTIMATE.

BY LETTER DATED APRIL 6, 1964, YOUR FIRM SUBMITTED TWO PROPOSALS FOR "PROPOSED PORTABLE RAMP. UNIVERSAL TYPE ARMORED DECK CARRIER," TOGETHER WITH "TWO SEPARATE DRAWINGS SHOWING ADAPTATIONS OF FENESTRA COMMERCIAL MATTING AND RAMPING" FOR EVALUATION. THESE PROPOSALS EMBRACED TWO SUGGESTED METHODS OF CONSTRUCTION; I.E., "PROPOSAL NO. 1.: FENMAT MATTING AND ADAPTED RAMPS," AND "PROPOSAL NO. 2 ADAPTATION OF FENMAT RAMP SYSTEMS.' PRICES WERE QUOTED UNDER EACH PROPOSAL FOR FURNISHING TWO SAMPLES AND ALSO PRICES IF ORDERED IN QUANTITIES OF 240 OR MORE. DIE CHARGES (REFUNDABLE ON QUANTITY ORDERS), ENGINEERING LABOR AND OVERHEAD AND ADMINISTRATIVE EXPENSES WERE ITEMIZED, STATING THAT THE PRICES QUOTED WERE "BASED ON FENESTRA STANDARD LIST PRICES WITH DISTRIBUTORS DISCOUNTS INCLUDED.' NO OTHER CHARGES, RESTRICTIONS OR LIMITATIONS OF ANY KIND WERE STIPULATED IN THE LETTER OR ON THE DRAWINGS.

AN NAEL PROCUREMENT MEMORANDUM DATED APRIL 15, 1964, WAS SUBMITTED TO THE SUPPLY OFFICER REQUESTING PROCUREMENT FOR TEST AND EVALUATION OF TWO RAMPS FROM YOUR FIRM AS OUTLINED IN PROPOSAL NO. 2 IN YOUR LETTER OF APRIL 6, 1964. A FURTHER REQUEST WAS MADE IN THIS MEMORANDUM THAT ALL RIGHTS, DRAWINGS, TOOLS, ETC., USED IN THE FABRICATION OF THE TWO RAMPS BE PROCURED FOR USE IN FUTURE PURCHASES.

ON OR ABOUT APRIL 22, 1964, MR. COTTER OF YOUR FIRM TELEPHONED MR. JOHN ARMENTO, A BUYER IN THE SUPPLY DEPARTMENT (NAEL) TO INQUIRE ABOUT THE STATUS OF YOUR PROPOSAL. MR. COTTER WAS ADVISED THAT IF THE NAVY PROCURED RAMPS IT WOULD ALSO DESIRE TO PROCURE THE PRODUCTION DRAWINGS WITH USE RIGHTS AND THE TOOLING USED IN THE RAMP FABRICATION. MR. COTTER THEREUPON ADDRESSED A LETTER TO THE CONTRACTING OFFICER, NAVAL AIR ENGINEERING CENTER, DATED APRIL 22, 1964, WITH REFERENCE TO YOUR PROPOSAL NO. 2 OF APRIL 6, 1964, STATING AS FOLLOWS:

"FOLLOWING TELEPHONE CONVERSATION WITH MR. ARMENTO WE ARE RESUBMITTING THIS PROPOSAL TO COVER NAVY "RIGHTS," ETC. PROPOSAL NO. 2 REVISED IS SUBMITTED ON PAGE 2, DRAWINGS IN YOUR POSSESSION. THE PROPOSAL AMOUNT DOES NOT COVER "RIGHTS" TO REPRODUCE IN ANY WAY, SHAPE OR FORM, NOR DOES IT CONVEY PERMISSION TO USE THE IDEAS SUBMITTED.

" "RIGHTS"

IF NAEC FINDS THIS ADAPTATION OF FENESTRA'S COMMERCIAL PRODUCT ACCEPTABLE, FENESTRA AGREES TO TRANSFER TO NAEC THE RIGHTS TO EXTRUSION TOOLING AND PRODUCTION DRAWINGS AND OPEN PURCHASING WITHIN CONTINENTAL U.S.A. FOR NAVY MILITARY PURPOSES ONLY, FOR THE FOLLOWING:

"MINIMUM PRODUCTION ORDER FOR 350 RAMPS PER DRAWINGS SUBMITTED AT FENESTRA'S PUBLISHED PRICE OF $27.00 PER LINEAR FOOT LESS 20 PERCENT DISCOUNT ALLOWED AUTHORIZED DISTRIBUTOR.

"UNIT PRICE TO BE 5 FT. AT $27.00 EQUALS $135.00 LESS 20 PERCENT OR NET PRICE $108.00 EA. PRODUCTION PRICE FOR 350 UNITS TO BE $37,800.00 F.O.B. LIMA, OHIO.

"MANY MILITARY, STATE AND LOCAL AGENCIES HAVE FOUND FENESTRA-FENMAT RAMPING TO BE VERY ACCEPTABLE FOR SIMILAR PURPOSES AS YOUR INTENDED USE AND AT NO TIME HAVE WE HAD TO GIVE SPECIAL DISCOUNTS FOR THIS FINE PRODUCT.

"FENESTRA WILL OFFER AS AN ALTERNATIVE THE TERMS OFFERED IN OUR PROPOSAL DATED 6 APRIL 1964, IF PERMITTED TO RETAIN "RIGHTS.'"

WITH FURTHER REFERENCE TO THE PROPOSALS ORIGINALLY SUBMITTED APRIL 6, 1964, AS AMENDED APRIL 22, 1964, MR. COTTER ADDRESSED A LETTER DATED MAY 6, 1964, TO THE CONTRACTING OFFICER SUBMITTING IN EFFECT A FINAL AMENDED PROPOSAL AS FOLLOWS:

"I HAD A VERY INFORMATIVE TALK WITH MR. TOM ELLIS, PROGRAM MANAGEMENT DIVISION ABOUT THE PROPOSAL. THE PROBLEM IT SEEMS, IS THE "RIGHTS.' CONVERSATIONS WITH MR. ARMENTO AND MR. ELLIS THE PURCHASING CONCEPTS OF THE DEPT. OF DEFENSE WAS STRESSED AND I AM BETTER INFORMED ON THE PURCHASING PROBLEMS.

"THEREFORE, WE AMEND OUR PREVIOUS PROPOSALS OF 6 APRIL 1964 AND 22 APRIL 1964 AS FOLLOWS:

"FENESTRA PROPOSES TO SUPPLY TWO SAMPLE RAMPS AS SHOWN ON FORMER PROPOSALS FOR THE PRICE OF $3727.31. IT WILL RELEASE ALL RIGHTS, PRODUCTION DRAWINGS, AND EXTRUSION TOOLING FOR THE SUM OF $6,500.00. THIS MAKES A TOTAL PRICE OF $10,227.31.

"WE FEEL THAT THIS TESTED PRODUCT WILL PROVIDE FOR YOUR NEEDS AS IT HAS IN SLIGHTLY DIFFERENT FORM FOR OTHER VALUED CUSTOMERS.'

FOLLOWING RECEIPT OF MR. COTTER'S LETTER OF MAY 6, 1964, NAEL ADVISED THE CONTRACTING OFFICER BY MEMORANDUM DATED MAY 11, 1964, TO CANCEL THE PROCUREMENT OF THE TWO RAMPS FROM FENESTRA REQUESTED IN ITS PRIOR MEMORANDUM OF APRIL 15, 1964. THEREAFTER, PURSUANT TO NAEL REQUEST DATED MAY 28, 1964, THE CONTRACTING OFFICER ISSUED IFB NO. 156 025-65 DATED JULY 13, 1964, TO BE OPENED JULY 27, 1964, CALLING FOR "PORTABLE RAMP: EXTRUDED TYPE, ARMORED DECK CARRIERS AND LANDING MAT" AND "NAEL PART NO. 611887-1" TO BE IN ACCORDANCE WITH NAEL DRAWING NO. 611887 WHICH ACCOMPANIED THE IFB AND THE SPECIFICATIONS CITED IN THE SCHEDULE AND THE DRAWINGS. BY LETTER TO THE CONTRACTING OFFICER DATED JULY 15, 1964, CONCERNING THIS IFB MR. COTTER EXPRESSED THE VIEW THAT THE IDEAS AND DESIGN USED INFRINGED ON THE "RIGHTS" OF THE FENESTRA PROPOSALS SUBMITTED, POINTING OUT THAT DRAWINGS HAD BEEN SUBMITTED WITH YOUR PROPOSAL OF APRIL 6, 1964,"TO MR. PAUL BOWDEN, VALUE ENGINEERING. NAEL AND HE STARTED PROCUREMENT PROCEEDINGS ON OUR PROPOSAL NUMBER 2; " ALSO, THAT HIS LETTER OF APRIL 22, 1964, HAD INCLUDED THE PHRASE "THE PROPOSAL AMOUNT DOES NOT COVER ,RIGHTS" TO REPRODUCE IN ANY WAY, SHAPE OR FORM, NOR DOES IT CONVEY PERMISSION TO USE THE IDEAS SUBMITTED.' THE LETTER CONCLUDED AS FOLLOWS:

"FENESTRA WAS INVITED TO VISIT NAEL TO DISCUSS THIS PRODUCT BECAUSE FENESTRA IS IN THE COMMERCIAL RAMP BUSINESS AND OUR EXTRUDED RAMPS ARE NATIONALLY DISTRIBUTED WITH OUR MATTING PRODUCTS. FENESTRA HAS DEVELOPED THE EXTRUDED RAMP AT GREAT EXPENSE AND WE FEEL THAT WE HAVE NOT BEEN TREATED FAIRLY IN THIS INSTANCE.'

ON JULY 23, 1964, MR. COTTER MADE A TELEPHONE INQUIRY TO NAEL AS TO THE PROCEDURE WHICH MIGHT BE FOLLOWED TO PROTEST AGAINST THE AWARD OF A CONTRACT UNDER THE IFB TO ANY BIDDER OTHER THAN YOUR FIRM AND ALSO ASKED THE PROCEDURE WHICH MIGHT BE FOLLOWED TO COLLECT DAMAGES FOR MISUSE OF FENESTRA DATA AND IDEAS. INFORMATION THEREON WAS FURNISHED BY MR. GARNETT, LEGAL COUNSEL AT THE NAVAL AIR ENGINEERING CENTER. THE FOLLOWING DAY FENESTRA SUBMITTED ITS BID DATED JULY 24, 1964, WHICH WAS THE LOWEST OF EIGHT BIDS RECEIVED UNDER THE INVITATION, AND FENESTRA WAS AWARDED THE CONTRACT ON JULY 30, 1964.

IN YOUR LETTER OF PROTEST TO OUR OFFICE DATED JULY 23, 1964, IT IS STATED THAT WHEN NO WORD WAS RECEIVED ON YOUR PROPOSAL YOU BECAME SUSPICIOUS AND REQUESTED THAT YOUR DRAWINGS BE RETURNED; THAT THE NAVY ASKED IF IT COULD RETAIN ONE COPY OF THE DRAWINGS FOR ITS FILE AND YOU PERMITTED THIS. IS ALSO STATED IN THIS LETTER THAT ON ONE OF YOUR DRAWINGS "WE NOTICED THAT THE ENGINEERS HAD USED IT AS A WORK SHEET TO SKETCH OUT SOME VARIATIONS TO OUR DESIGN" AND THAT "THIS VARIATION WAS USED IN THE IFB DESIGN.'

MR. W. J. KAUFMAN, SUPERINTENDENT, RECOVERY DIVISION, NAEL/SI) ENGINEERING DEPARTMENT, STATES IN HIS MEMORANDUM DATED SEPTEMBER 1, 1964, TO THE NAEC SUPPLY OFFICER THAT NAEL DRAWING 611701 OF THE SUBJECT BARRICADE RAMP WAS ISSUED IN PRELIMINARY FORM ON FEBRUARY 27, 1964; THAT PURSUANT TO THIS DRAWING THREE RAMPS WERE MANUFACTURED FROM ALUMINUM PLATES WELDED TOGETHER BECAUSE THIS SEEMED TO BE THE CHEAPEST METHOD FOR EXPERIMENTAL PRODUCTION; THAT YOUR COMPANY WAS CONTACTED ON APRIL 1, 1964, WITH THE VIEW YOU MIGHT PRODUCE AN ACCEPTABLE PRODUCT CHEAPLY; THAT YOUR COMPANY SUGGESTED USING THREE OF YOUR EXTRUDED SECTIONS LOCKED TOGETHER WITH YOUR PATENTED LOCKING METHOD AND IT WAS FOUND THAT YOUR STANDARD SECTIONS WOULD NOT WORK TO PROVIDE THE SHAPE REQUIRED, AND THAT YOU THEREUPON "PROPOSED, VIA A PROPOSAL DRAWING, TO EXTRUDE NEW SECTIONS (AFTER MAKING NEW DIES) AND LOCK THEM TOGETHER WITH THEIR PATENTED LOCK.' THUS, IT WAS LEARNED, MR. KAUFMAN ALSO STATES IN HIS MEMORANDUM, THAT IT WAS POSSIBLE TO OBTAIN EXTRUDED SECTIONS FOR SMALL QUANTITIES CHEAPLY AND IT WAS DETERMINED BY A CANVAS OF THE EXTRUDING PRODUCERS " THAT IT WAS QUITE TRUE THAT EXTRUSIONS WOULD NOT BE TOO COSTLY FOR SMALL QUANTITY PRODUCTION," AND ACCORDINGLY THERE WAS ,PREPARED AND ISSUED ON 28 MAY 1964 A DRAWING (NAEL 611887) SHOWING AN EXTRUSION (OR AS AN ALTERNATE, TWO EXTRUSIONS WELDED TOGETHER) BUT NOT USING FENESTRA'S LOCKING METHOD OR ANY OF FENESTRA'S SHAPES.' IT IS STATED FURTHER IN MR. KAUFMAN'S MEMORANDUM AS FOLLOWS:

"4. IF FENESTRA HAD NOT COME INTO THE PICTURE, WE WOULD (AFTER TESTING THE FIRST WELDED TOGETHER RAMP) HAVE CHECKED ON THE VARIOUS METHODS OF PRODUCTION FOR THE FINAL QUANTITIES OF RAMPS. THIS WOULD HAVE INCLUDED WELDING PLATES, CASTING SECTIONS OR ENTIRE RAMPS AND EXTRUDING SECTIONS OR ENTIRE RAMPS. WE PROBABLY WOULD HAVE FOUND THEN THAT EXTRUSIONS WERE CHEAP.

"5. WE MAY CONCLUDE, THUS, THAT FENESTRA PROVIDED US WITH THE KNOWLEDGE, AND ONLY THIS KNOWLEDGE, THAT THE EXTRUSION PROCESS COULD BE CHEAP ENOUGH (INCLUDING NEW DIE COSTS) TO ALLOW FOR SMALL QUANTITY PRODUCTION.' SEEMS REASONABLY CLEAR FROM THE FOREGOING THAT THE INFORMATION OBTAINED DURING THE NEGOTIATIONS PRIOR TO THE AWARD OF THE CONTRACT TO YOUR FIRM WHICH YOU CONTEND SHOULD NOT HAVE BEEN DISCLOSED BY THE IFB RELATES PRIMARILY TO THE USE OF THE EXTRUSION PROCESS OF PRODUCTION. THE NEGOTIATIONS WITH YOU INDICATED THAT THIS PROCESS COULD BE CHEAP ENOUGH TO ALLOW FOR SMALL QUANTITY PRODUCTION MEETING THE REQUESTED PROCUREMENT REQUIREMENTS. THE RECORD DOES NOT SHOW, HOWEVER, AND YOU HAVE NOT ALLEGED, THAT THE EXTRUSION PROCESS IS SECRET OR THAT ITS USE IS EXCLUSIVE WITH YOUR FIRM. IN FACT, THIS METHOD APPARENTLY IS ONE OF THE SEVERAL METHODS OF PRODUCTION GENERALLY KNOWN AND PRACTICED IN THE INDUSTRY. YOUR DESIGN, LOCKING METHOD AND SHAPES WERE NOT DISCLOSED. HENCE, THE ISSUANCE OF THE IFB, IN OUR OPINION, DID NOT CONSTITUTE A BREACH OF CONFIDENCE OR CONTRACTUAL OBLIGATION BY THE PROCURING AGENCY UNDER THE FACTS AND CIRCUMSTANCES OF THIS CASE. CF. THE AUTHORITIES CITED ABOVE.

FROM A CAREFUL REVIEW AND CONSIDERATION OF THE ENTIRE MATTER, THEREFORE, IT IS OUR VIEW THAT THE AVAILABLE EVIDENCE AND INFORMATION DOES NOT AFFORD A REASONABLE BASIS ON WHICH OUR OFFICE WOULD BE JUSTIFIED IN CERTIFYING THE PAYMENT OF ANY PART OF YOUR CLAIM FROM APPROPRIATED FUNDS.