B-155135, OCT. 23, 1964

B-155135: Oct 23, 1964

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TO THE RADIO CORPORATION OF AMERICA: REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 8. YOU SUGGEST THAT SUCH STUDY IS IMPROPER AND IS INHIBITIVE OF FREE AND OPEN COMPETITION. THE BACKGROUND OF THE SITUATION OF WHICH YOU COMPLAIN IS STATED AS FOLLOWS: "1. IBM EQUIPMENT WAS SELECTED. "3. IS ON A RENTAL BASIS. THIS WORK IS OF GREAT POTENTIAL VALUE. MORE THAN ONE STUDY OF THE POTENTIAL IS DESIRABLE. "6. IT IS FURTHER REPORTED THAT THE IBM WORK INVOLVED IS NOT BEING DONE UNDER THE AUSPICES OF THE POST OFFICE DEPARTMENT. THAT THE WORK IS BEING DONE AT THE INITIATIVE OF IBM. PERIODIC REPORTS OF FINDINGS WILL BE MADE TO THE POST OFFICE DEPARTMENT. THE WORK INVOLVED IS NOT A JOINT EFFORT. NEITHER IS SUCH WORK A PART OF THE PROCUREMENT PROCESSES.

B-155135, OCT. 23, 1964

TO THE RADIO CORPORATION OF AMERICA:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 8, 1964, AND ENCLOSURES, CONCERNING THE PROPRIETY OF A STUDY OF ELECTRONIC DATA PROCESSING SYSTEMS TAKING PLACE AT THE ST. LOUIS POST OFFICE BY INTERNATIONAL BUSINESS MACHINE CORPORATION (IBM). YOU SUGGEST THAT SUCH STUDY IS IMPROPER AND IS INHIBITIVE OF FREE AND OPEN COMPETITION.

IN RESPONSE TO OUR REQUEST, THE POST OFFICE DEPARTMENT SUBMITTED A FULL REPORT IN THE MATTER. THE BACKGROUND OF THE SITUATION OF WHICH YOU COMPLAIN IS STATED AS FOLLOWS:

"1. IN 1962 THE DEPARTMENT DEVELOPED SPECIFICATIONS FOR ITS DATA PROCESSING REQUIREMENTS AND SOLICITED PROPOSALS FROM INDUSTRY.

"2. AFTER EVALUATION OF THE PROPOSALS RECEIVED, IBM EQUIPMENT WAS SELECTED.

"3. THE IBM EQUIPMENT, NOW BEING USED, IS ON A RENTAL BASIS. FROM THE FEES IT RECEIVES, IBM NORMALLY PROVIDES THE SERVICES OF CUSTOMER SERVICE PERSONNEL.

"4. FOR APPROXIMATELY THE PAST TWO YEARS THE DEPARTMENT HAS BEEN CONDUCTING A MAJOR STUDY OF THE POSSIBLE APPLICATION OF AUTOMATIC DATA PROCESSING TO POSTAL OPERATIONS IN POST OFFICES. THIS WORK IS OF GREAT POTENTIAL VALUE. IT HAS BEEN CONDUCTED BY POSTAL PERSONNEL.

"5. BECAUSE OF THE IMPORTANCE OF THIS WORK, INVOLVING AS IT DOES POSSIBLE MAJOR INVESTMENT IN EQUIPMENT AND POSSIBLE MAJOR BENEFITS IN POSTAL SERVICE AND COST REDUCTIONS, MORE THAN ONE STUDY OF THE POTENTIAL IS DESIRABLE.

"6. IBM ON ITS OWN INITIATIVE PROPOSED USING CUSTOMER SERVICE PERSONNEL TO CONDUCT A STUDY AT THE POST OFFICE LEVEL. THIS STUDY WOULD PROVIDE A CHECK ON THE WORK BEING DONE BY POSTAL PERSONNEL.

"7. THE DEPARTMENT AUTHORIZED IBM TO START THIS WORK IN AUGUST OF 1964.'

IT IS FURTHER REPORTED THAT THE IBM WORK INVOLVED IS NOT BEING DONE UNDER THE AUSPICES OF THE POST OFFICE DEPARTMENT, BUT THAT THE WORK IS BEING DONE AT THE INITIATIVE OF IBM. PERIODIC REPORTS OF FINDINGS WILL BE MADE TO THE POST OFFICE DEPARTMENT, BUT THE WORK INVOLVED IS NOT A JOINT EFFORT, AND NEITHER IS SUCH WORK A PART OF THE PROCUREMENT PROCESSES.

YOU APPARENTLY FEEL THAT THE IBM WORK IN QUESTION IS IN VIOLATION OF BUREAU OF BUDGET CIRCULAR A-54, DATED OCTOBER 14, 1961, BUREAU OF THE BUDGET BULLETIN 60-6, DATED MARCH 18, 1960, AND POST OFFICE DEPARTMENT HANDBOOK SERIES M-25, DATED JANUARY 29, 1962. ALSO, YOU SEEM CONCERNED THAT IBM, BY GAINING INFORMATION ABOUT THE POSTAL OPERATIONS AS A RESULT OF ITS STUDY, WILL BE IN AN UNFAIR COMPETITIVE SITUATION IN THE EVENT A PROCUREMENT DOES TAKE PLACE IN THE FUTURE.

OF COURSE, IT IS TRUE, AS STATED BY THE POST OFFICE DEPARTMENT, THAT SINCE IBM WAS THE SUCCESSFUL BIDDER AND IS PRESENTLY THE PRINCIPAL SUPPLIER OF DATA PROCESSING EQUIPMENT FOR THE POST OFFICE DEPARTMENT, IT IS ALREADY IN A DISTINCTIVE POSITION. EVEN IF IBM WERE NOT DOING WORK IN ST. LOUIS, IBM WOULD ALREADY HAVE THE ADVANTAGE OF GREATER POSTAL OPERATIONS KNOWLEDGE BY VIRTUE OF ITS PRIME CONTRACT WITH THE POST OFFICE DEPARTMENT. WITH REGARD TO YOUR CONTENTION THAT THE IBM WORK IS IN VIOLATION OF THE CITED BUREAU OF THE BUDGET AND POST OFFICE ADMINISTRATIVE REGULATIONS, WE HAVE EXAMINED SUCH REGULATIONS (WHICH DEAL WITH SELECTION AND ACQUISITION OF AUTOMATIC DATA PROCESSING EQUIPMENT) AND FIND NOTHING THEREIN RESTRICTING OR PROHIBITING THE PRACTICES OF WHICH YOU COMPLAIN. IN FACT, AS POINTED OUT IN BUREAU OF THE BUDGET CIRCULAR NO. A-54, DATED OCTOBER 14, 1961, IN PARAGRAPH 3,"THE POLICIES HEREIN APPLY TO ADP EQUIPMENT ACQUIRED BY THE GOVERNMENT AND TO THAT ADP EQUIPMENT WHICH IS ACQUIRED AND OPERATED BY GOVERNMENT CONTRACTORS SOLELY TO PROCESS GOVERNMENT DATA AT GOVERNMENT EXPENSE.' THE RECORD IN THIS CASE SHOWS THAT THE STUDY TO WHICH YOU OBJECT IS NOT PART OF THE PROCUREMENT PROCEDURE COVERED BY THE CITED ADMINISTRATIVE REGULATIONS, AND IN THE EVENT THE POST OFFICE DEPARTMENT CONCLUDES THAT THE APPLICATION OF COMPUTERS AT THE POST OFFICE LEVEL IS DESIRABLE FROM A POSTAL POINT OF VIEW, THE DEPARTMENT THEN WILL BEGIN A PROCESS THAT ULTIMATELY MAY LEAD TO PROCUREMENT OF EQUIPMENT. THIS PROCESS WOULD INCLUDE DEVELOPING REQUIREMENT SPECIFICATIONS AND INVITING BIDS FROM THE SUPPLIERS OF EQUIPMENT. ALL INTERESTED SUPPLIERS WOULD BE GIVEN EVERY OPPORTUNITY TO INFORM THEMSELVES ABOUT POST OFFICE DEPARTMENT REQUIREMENTS AND TO SUBMIT PROPOSALS. THE POST OFFICE DEPARTMENT FURTHER HAS STATED THAT SUCH PROCUREMENT PROCESS WOULD TAKE PLACE IN THE MANNER PRESCRIBED BY APPLICABLE BUREAU OF THE BUDGET CIRCULARS AND POST OFFICE DEPARTMENT POLICY, AND THE POST OFFICE WILL WELCOME HELP FROM RCA OR ANY OTHER COMPANY THAT MIGHT WISH TO PROVIDE ASSISTANCE IN FINDING WAYS TO IMPROVE POSTAL OPERATIONS AND REDUCE POSTAL COSTS.

IN VIEW OF THE FOREGOING, WE FIND NO LEGAL BASIS TO OBJECT TO THE ACTION TAKEN BY THE POST OFFICE DEPARTMENT IN THIS CASE. IF, HOWEVER, IN ANY FUTURE PROCUREMENT, YOU FEEL THAT THE PRESENT PRACTICE OF THE POST OFFICE DEPARTMENT HAS INFLUENCED ITS JUDGMENT IN AN IMPROPER MANNER, WE WOULD APPRECIATE YOUR ADVISING OUR OFFICE IN THE MATTER.