B-156301, JUN. 14, 1965, 44 COMP. GEN. 784

B-156301: Jun 14, 1965

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THE AWARD MADE WAS THE MOST ADVANTAGEOUS TO THE GOVERNMENT. SIX PROPOSALS WERE RECEIVED AND OPENED ON FEBRUARY 1. WAS SUBMITTED BY AIR LOGISTICS CORPORATION. WAS SUBMITTED BY THE SPACE CORPORATION. YOUR PRICE PROPOSAL APPARENTLY WAS THE NEXT LOWEST BEFORE APPLICATION OF TRANSPORTATION COSTS. IT WAS DETERMINED THAT THE OFFER OF THE SPACE CORPORATION WAS THE LOWEST. AWARD WAS MADE TO SUCH OFFEROR ON MARCH 10. THE AIR FORCE WOULD HAVE BEEN JUSTIFIED. SHOULD HAVE. IS POINTED OUT THAT SPACE IS REQUIRED UNDER ITS CONTRACT TO MANUFACTURE THE EQUIPMENT IN ACCORDANCE WITH COMPUDYNE DRAWINGS UNDER WHICH CERTAIN NAMED COMPONENTS MUST BE USED WITHOUT SUBSTITUTION. THAT THESE COMPONENTS ARE PRODUCED EITHER BY COMPUDYNE OR BY SOME OF ITS SUBCONTRACTORS.

B-156301, JUN. 14, 1965, 44 COMP. GEN. 784

CONTRACTS - SPECIFICATIONS - DEVIATIONS - PERMITTED UNDER INVITATION THE INCLUSION IN A CONTRACT OF THE PROVISIONS IN THE REQUEST FOR PROPOSALS FROM SMALL BUSINESS CONCERNS THAT AUTHORIZED THE SUBSTITUTION OF SOME BRAND NAME OR EQUAL COMPONENTS AND THE SUBMISSION AFTER AWARD OF ENGINEERING PROPOSALS ON OTHER THAN THE "OR EQUAL" COMPONENTS, PREPARED AT CONTRACTOR COST, TOGETHER WITH A VALUE ENGINEERING INCENTIVE CLAUSE AUTHORIZING AFTER AWARD APPROVED SPECIFICATION DEVIATIONS PURSUANT TO PART 17, SECTION I OF THE ARMED SERVICES PROCUREMENT REGULATION, DOES NOT REQUIRE THE AWARD TO BE DISTURBED, ALL OFFERORS HAVING HAD ACTUAL NOTICE THAT THE SUCCESSFUL OFFEROR WOULD BE ENCOURAGED TO DEVELOP AND SUBMIT COST REDUCTION PROPOSALS INVOLVING SPECIFICATION CHANGES IN FURTHERANCE OF THE DEPARTMENT OF DEFENSE COST REDUCTION PROGRAM AND DIRECTIVE NO. 5010.8, DATED AUGUST 6, 1963; THEREFORE, THE VALUE ENGINEERING PROPOSALS HAVING BEEN PROPERLY EXCLUDED IN EVALUATING THE SUCCESSFUL OFFER THAT CONFORMED TO THE REQUEST FOR PROPOSALS, THE AWARD MADE WAS THE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED.

TO THE COMPUDYNE CORPORATION, JUNE 14, 1965:

BY LETTER DATED MARCH 12, 1965, WITH ENCLOSURE, AND SUBSEQUENT CORRESPONDENCE, YOU PROTESTED AGAINST THE AWARD OF A CONTRACT TO THE SPACE CORPORATION BY THE DEPARTMENT OF THE AIR FORCE UNDER REQUEST FOR PROPOSALS NO. 33-657-65-5052.

ON JANUARY 22, 1965, THE AERONAUTICAL SYSTEMS DIVISION, AIR FORCE SYSTEMS COMMAND, REQUESTED OFFERS FROM SMALL BUSINESS CONCERNS ONLY UNDER THE REQUEST FOR PROPOSALS FOR 22 TYPE A/M 37T-6 AIRCRAFT ENGINE TEST STANDS IN ACCORDANCE WITH SPECIFICATION MIL-T-26289D, COMPUDYNE DRAWING NO. 110025- 01 AND THE DETAILED DRAWINGS THEREUNDER. SIX PROPOSALS WERE RECEIVED AND OPENED ON FEBRUARY 1, 1965. THE LOWEST PRICE PROPOSALS, WITHOUT CONSIDERING THE COST OF TRANSPORTATION TO THE GOVERNMENT FROM ORIGIN TO POINTS OF DESTINATIONS, WAS SUBMITTED BY AIR LOGISTICS CORPORATION. THE NEXT LOWEST PROPOSAL, WITHOUT CONSIDERATION OF TRANSPORTATION COSTS, WAS SUBMITTED BY THE SPACE CORPORATION. YOUR PRICE PROPOSAL APPARENTLY WAS THE NEXT LOWEST BEFORE APPLICATION OF TRANSPORTATION COSTS, AND REMAINED IN THAT CATEGORY AFTER TRANSPORTATION COST EVALUATION. UPON EVALUATION OF THE OTHER TWO PROPOSALS IN THE LIGHT OF TRANSPORTATION COSTS, IT WAS DETERMINED THAT THE OFFER OF THE SPACE CORPORATION WAS THE LOWEST. AWARD WAS MADE TO SUCH OFFEROR ON MARCH 10, 1965, AS THE LOWEST RESPONSIVE OFFEROR, PRICE AND OTHER FACTORS CONSIDERED.

YOU PROTEST AGAINST SUCH AWARD ON THE BASIS THAT THE SPACE CORPORATION CANNOT PRODUCE AND DELIVER THE END ITEM IN ACCORDANCE WITH COMPUDYNE CONFIGURATION AND DRAWINGS WITHIN THE REQUIRED DELIVERY SCHEDULE. FACT, YOU ALLEGE THAT COMPUDYNE AND NO OTHER OFFEROR CAN MEET THE INITIAL DELIVERY SCHEDULE OF JUNE 1965 AND THAT BECAUSE OF THE EXPRESSED URGENCY FOR THIS EQUIPMENT, THE AIR FORCE WOULD HAVE BEEN JUSTIFIED, AND SHOULD HAVE, PROCURED THE EQUIPMENT FROM COMPUDYNE ON A ,SOLE SOURCE" BASIS. IS POINTED OUT THAT SPACE IS REQUIRED UNDER ITS CONTRACT TO MANUFACTURE THE EQUIPMENT IN ACCORDANCE WITH COMPUDYNE DRAWINGS UNDER WHICH CERTAIN NAMED COMPONENTS MUST BE USED WITHOUT SUBSTITUTION, THAT THESE COMPONENTS ARE PRODUCED EITHER BY COMPUDYNE OR BY SOME OF ITS SUBCONTRACTORS, AND THAT SUCH COMPONENTS CANNOT BE DELIVERED TO THE SPACE CORPORATION IN TIME TO MEET THE URGENT DELIVERY SCHEDULE.

EXHIBIT "A" TO THE REQUEST FOR PROPOSALS PROVIDED IN PERTINENT PART:

"2. THE CONTRACTOR MAY SUBSTITUTE OTHER COMPONENTS, AS CLASS II CHANGES UNDER ANA BULLETIN 445, FOR (I) THE COMPONENTS IDENTIFIED ON AN "OR EQUAL" BASIS IN PARAGRAPHS 3.8.6, 3.9.6, 3.10.4.3.1, 3.19.1.1.2 AND 3.19.1.1.3 OF SPECIFICATION MIL-T-26289D AND (II) THE COMPONENTS SPECIFIED ON THE COMPUDYNE CORPORATION DRAWING ENUMERATED BELOW; PROVIDED, HOWEVER, ANY CHANGES TO DRAWINGS OR TECHNICAL ORDERS NECESSITATED BY SUCH SUBSTITUTIONS SHALL BE FURNISHED AT THE EXPENSE OF THE CONTRACTOR, AND THE CONTRACTOR SHALL ASSUME RESPONSIBILITY FOR ASSURING THAT SUCH SUBSTITUTIONS MEET CONTRACT REQUIREMENTS.

"3. EXCEPT FOR THE COMPONENTS LISTED IN PARAGRAPH 2 ABOVE, ANY "OR EQUAL" TYPE PHRASES APPEARING IN SPECIFICATION MIL-T-26289D, COMPUDYNE CORPORATION DRAWING NO. 110025-01 AND ITS DETAIL DRAWINGS AND/OR SPACE CORPORATION DRAWING NO. 15-4-1 ARE HEREWITH DELETED. SUBSTITUTIONS ARE NOT AUTHORIZED FOR SPECIFICATION OR SOURCE CONTROL DRAWING ITEMS, EXCEPT AS PERMITTED IN PARAGRAPH 2 ABOVE.

"5. DURING THE LIFE OF THIS CONTRACT, THE CONTRACTOR MAY SUBMIT VALUE ENGINEERING PROPOSALS ON COMPONENTS (OTHER THAN THOSE COVERED IN PARAGRAPH 2 ABOVE) OF THE A/M37T-6 ENGINE TEST STAND PURSUANT TO THE SCHEDULE PROVISION HEREOF ENTITLED "VALUE ENGINEERING.' SUCH PROPOSALS ARE ENCOURAGED; HOWEVER, THE NUMEROUS TEST WAIVERS GRANTED IN THIS EXHIBIT ARE BASED ON THE RESULTS OF PAST TEST PROGRAMS WHICH HAVE PROVEN THE CAPABILITY OF THE PRESENT A/M37T-6 DESIGN. THE CONTRACTOR MUST CONSIDER IN ANY SUCH VALUE ENGINEERING PROPOSAL THE VARIOUS POSSIBLE COSTS ASSOCIATED WITH DEPARTURE FROM A PROVEN DESIGN, SUCH AS RETESTING UNDER ENVIRONMENTAL OR OTHER PREPRODUCTION TESTS, REVISIONS TO DRAWINGS AND TECHNICAL ORDERS AND ESTABLISHMENT OF NEW FEDERAL STOCK NUMBERS.'

PAGES 23 THROUGH 26 OF THE REQUEST FOR PROPOSALS CONTAINED A VALUE ENGINEERING INCENTIVE CLAUSE AS AUTHORIZED BY PART 17, SECTION I, OF THE ARMED SERVICES PROCUREMENT REGULATION, WHICH APPLIED TO COST REDUCTION PROPOSALS INITIATED AND DEVELOPED BY THE CONTRACTOR FOR "CHANGING THE DRAWINGS, DESIGNS, SPECIFICATIONS, OR OTHER REQUIREMENTS" OF THE CONTRACT. BOTH EXHIBIT "A" AND THE VALUE ENGINEERING INCENTIVE CLAUSE WERE MADE A PART OF THE CONTRACT AWARDED TO THE SPACE CORPORATION. THUS, ALL OFFERORS WERE ON ACTUAL NOTICE THAT THE SUCCESSFUL OFFEROR WOULD BE ENCOURAGED TO DEVELOP AND SUBMIT TO THE PROCUREMENT AGENCY COST REDUCTION PROPOSALS WHICH WOULD INVOLVE CHANGES IN CONTRACT SPECIFICATIONS, ETC., INCLUDING THE ELIMINATION OR MODIFICATION OF ANY REQUIREMENT FOUND TO BE IN EXCESS OF ACTUAL NEEDS. THE APPLICATION OF VALUE ENGINEERING TO THIS PROCUREMENT WAS IN FURTHERANCE OF THE DEPARTMENT OF DEFENSE COST REDUCTION PROGRAM AND DEPARTMENT OF DEFENSE DIRECTIVE NO. 5010.8 DATED AUGUST 6, 1963. IN OUR VIEW, THE VALUE ENGINEERING INCENTIVE CLAUSE PROVIDES AUTHORITY FOR PERMISSIVE APPROVED DEVIATIONS FROM SPECIFICATIONS, ETC., AFTER CONTRACT AWARD TO AN OFFEROR WHICH WAS OTHERWISE RESPONSIVE TO THE REQUIREMENTS OF THE GOVERNMENT. WHILE WE WOULD QUESTION WHETHER CONTEMPLATED VALUE ENGINEERING PROPOSALS SHOULD BE CONSIDERED IN THE EVALUATION OF A RESPONSE TO A REQUEST FOR PROPOSALS WITHOUT GIVING THE SAME OPPORTUNITY TO ALL COMPETITIVELY QUALIFIED OFFERORS, IT DOES NOT APPEAR FROM THE RECORD BEFORE US THAT THE SPACE CORPORATION OFFER DEVIATED FROM THE SPECIFICATIONS OR THAT CONTEMPLATED VALUE ENGINEERING PROPOSALS WERE CONSIDERED IN MAKING THE AWARD. RATHER, THE RECORD DEMONSTRATES THAT THE AWARD WAS MADE TO THE SPACE CORPORATION ON THE BASIS THAT ITS PROPOSAL CONFORMING TO THE REQUEST WAS MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. SEE PARAGRAPH 7 OF THE TERMS AND CONDITIONS OF THE REQUEST FOR PROPOSALS, AND 10 U.S.C. 2304 (G).

IT IS CONCEDED BY THE AIR FORCE THAT THE SPACE CORPORATION SUBMITTED A VALUE ENGINEERING CHANGE PROPOSAL ON MARCH 13, 1965, PROPOSING A CHANGE FROM PERFORMANCE MEASUREMENT COMPANY NONSUBSTITUTION INSTRUMENTATION TO INSTRUMENTATION OF ITS OWN MANUFACTURE. THIS IS CLEARLY PERMITTED UNDER THE TERMS OF ITS CONTRACT. IN THIS CONNECTION, THE AIR FORCE REPORTED THAT:

"THE SPACE CORP. CONTRACT SPECIFICATION CALLS FOR THE FURNISHING OF CERTAIN INSTRUMENTS MANUFACTURED BY PERFORMANCE MEASUREMENT CO. SPACE CORP. SUBMITTED A VALUE ENGINEERING CHANGE PROPOSAL DATED 13 MAR 65, WHICH PROPOSES A CHANGE FROM THE PERFORMANCE MEASUREMENT CO. INSTRUMENTS TO INSTRUMENTS MANUFACTURED BY SPACE CORP. THE SPACE CORP. INSTRUMENTS ARE THE SAME AS THOSE USED IN THE A/M37T-4 ENGINE TEST STANDS WHICH ARE CURRENTLY BEING DELIVERED BY SPACE CORP. UNDER CONTRACT AF 33/657/-13031. THE VECP ALSO PROPOSES A CHANGE IN THE OPERATOR'S CAB FROM THE CONTRACT SPECIFICATION CAB MANUFACTURED BY ECKLE CORP. TO A CAB TO BE MANUFACTURED BY SPACE CORP. THE A/M37T-4 INSTRUMENTS HAVE UNDERGONE OPERATIONAL AND ENVIRONMENTAL TESTS, AND THE TEST REPORTS THEREON WERE DELIVERED TO OUR PROJECT ENGINEER ON 22 MAR 65. IF THESE TESTS SHOW THE A/M37T-4 INSTRUMENTS TO BE SATISFACTORY, THERE IS A POTENTIAL VE SAVINGS OF ABOUT $55,000 (THE GOVERNMENT'S SHARE) ON THE INSTANT CONTRACT. INTRODUCTION OF SPACE CORP. AS A COMPETITOR TO PERFORMANCE MEASUREMENT CO. IN THE FUTURE REPLACEMENT SPARES PROCUREMENTS WOULD ALSO BE VALUABLE. SPACE, HOWEVER, HAS DELAYED PLACING ANY ORDER WITH PERFORMANCE MEASUREMENT CO. AND THE ECKLE CORP. PENDING CONTRACTING OFFICER'S ACTION ON THE VECP, WHICH MAY POSSIBLY JEOPARDIZE THE CONTRACT DELIVERY SCHEDULE IN THE EVENT THE VALUE ENGINEERING CHANGE PROPOSAL IS NOT APPROVED. IF THE VECP IS ACCEPTED, SPACE CORP. CAN BE READY, INSTRUMENTATION-WISE, TO COMMENCE PREPRODUCTION TESTS WITHIN 90 DAYS AFTER VECP APPROVAL. THE BUYING OFFICE SENT SPACE A CURE NOTICE ON 16 MAR 65, REMINDING THEM THAT DELAYING TO AWAIT EVALUATION OF VECP'S IS NOT PERMISSIBLE UNDER THE CONTRACT. * * *

"PRIOR TO AWARD, THE BUYING OFFICE ASKED THAT THE FACILITY SURVEY TEAM FROM THE DALLAS CONTRACT MANAGEMENT DISTRICT OBTAIN SPACE'S PLANS FOR FABRICATION OF THE FIRST SEVERAL UNITS AS WELL AS ACCOMPLISHING THE PREPRODUCTION TESTS, AND THEN REQUIRE SPACE TO PRODUCE QUOTATIONS OR CORRESPONDENCE INDICATING A REASONABLE LIKELIHOOD THAT THEY WOULD HAVE THE TWENTY-FIVE LONGEST LEAD-TIME COMPONENTS. (ASD FURNISHED THIS TWENTY-FIVE ITEM LIST, NOT SPACE). THE SURVEY FIRST SHOWED MARGINAL AREAS, WITH REGARD TO SOME COMPONENTS SUPPLIED BY U.S. MOTORS, ECKLE CORP. AND PERFORMANCE MEASUREMENT CO. FURTHER INVESTIGATION AT THE BEHEST OF THE BUYING OFFICE BROUGHT OUT THAT SPACE CORP. HAD PLANNED USE OF AIR FREIGHT AND SUBCONTRACTOR OVERTIME IN THESE AREAS, AND THAT AIR FREIGHT WAS CONTEMPLATED ON ALL COMPONENTS HAVING OVER 90-DAY LEAD TIMES. SPACE STATES THAT THESE COSTS ARE INCLUDED IN THEIR PROPOSAL (AND NOW CONTRACT) PRICES.'

FROM THE FOREGOING, IT APPEARS EVIDENT THAT THE AWARD IS NOT SUBJECT TO LEGAL OBJECTION BY OUR OFFICE. WHETHER THE SPACE CORPORATION WILL PERFORM THE CONTRACT IN A TIMELY MANNER IN ACCORDANCE WITH ITS TECHNICAL TERMS AND PROVISIONS ARE MATTERS OF CONTRACT ADMINISTRATION FOR WHICH THE AIR FORCE IS SOLELY RESPONSIBLE. HENCE, WE ARE NOT IN A POSITION TO PREJUDGE THE CONTRACT ERFORMANCE; RATHER, OUR RESPONSIBILITY IN THE MATTERS COMPLAINED OF IS TO DETERMINE WHETHER, AS A MATTER OF LAW AND REGULATION, THE AWARD WAS PROPERLY MADE. WHILE WE FEEL THAT THE OTHER ISSUES RAISED BY YOU DO NOT GO TO THE VALIDITY OF THE AWARD, THEY ARE CONSIDERED BELOW.

YOU STATE THAT NEGOTIATION AUTHORITY UTILIZED HERE WAS 10 U.S.C. 2304 (A) (2), PUBLIC EXIGENCY, AND THAT ONLY COMPUDYNE CAN MEET THE FIRM DELIVERY DATE. THE FACE SHEET OF THE "ACCEPTANCE OF PROPOSAL" SHOWS THE NEGOTIATION AUTHORITY USED IN THIS INSTANCE TO HAVE BEEN "10 U.S.C. 2304 (A) (17) AND SECTION 15 OF THE SMALL BUSINESS ACT, P.L. 85-536.' POINTED OUT ABOVE, THIS WAS A SMALL BUSINESS RESTRICTED PROCUREMENT. UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3 217.2, THE AUTHORITY IN 10 U.S.C. 2304 (A) (17) IS REQUIRED TO BE UTILIZED IN THE CASE OF A TOTAL SMALL BUSINESS SET-ASIDE UNDER SECTION 15 OF THE SMALL BUSINESS ACT. WE ARE ADVISED THAT THE DELIVERY SCHEDULE IS FIRM, AND THAT THE AIR FORCE REASONABLY EXPECTS THE SPACE CORPORATION TO MEET THE DELIVERY SCHEDULE.

THE QUESTION RAISED AS TO THE ALLEGED RESTRICTIVE CHARACTER OF THE REQUEST FOR PROPOSALS MAY BE ANSWERED BY REFERENCE TO THE FACT THAT SIX PROPOSALS WERE RECEIVED AND EVALUATED WITH THE RESULT THAT AWARD WAS MADE TO THE LOWEST RESPONSIVE, RESPONSIBLE OFFEROR. THE FACT THAT SOME COMPONENTS WERE SPECIFIED ON A NONSUBSTITUTION BASIS IS NOT UNUSUAL, RATHER IT IS PERMITTED BY ASPR 1-1206.1 (A) UNDER CIRCUMSTANCES SUCH AS WERE PRESENT HERE. MOREOVER, IT WOULD SEEM THAT THE NONSUBSTITUTION OF CERTAIN COMPONENTS REQUIREMENT WAS TEMPERED TO SOME EXTENT BY THE VALUE ENGINEERING INCENTIVE PROVISION.

WITH REFERENCE TO NONSUBSTITUTE CONTROL CAB, WE ARE ADVISED THAT THE SPACE CORPORATION HAD SUBMITTED A VALUE ENGINEERING PROPOSAL BUT THAT SUCH PROPOSAL WAS REJECTED WITH THE RESULT THAT A PURCHASE ORDER WAS ISSUED BY SPACE TO THE ECKLE CORPORATION--- THE SPECIFIED VENDOR--- FOR DELIVERY BY JUNE 15, 1965. CONCERNING THE INSTRUMENTATION REQUIRED TO BE PROCURED FROM THE PERFORMANCE MEASUREMENTS COMPANY, WE ARE ADVISED THAT A VALUE ENGINEERING PROPOSAL HAS BEEN SUBMITTED BY SPACE BUT THAT DECISION THEREON HAS NOT BEEN MADE (SEE THE COMMENT QUOTED ABOVE).

CONCERNING THE PROPRIETARY CHARACTER OF CERTAIN VENDOR ITEMS, THE AIR FORCE HAS ADVISED THAT:

"THE BUYING OFFICE HAS QUERIED PERFORMANCE MEASUREMENT CO. AND ECKLE CORP. AS TO WHETHER THEY PLAN TO USE ANY COMPUDYNE-OWNED TOOLING TO MANUFACTURE INSTRUMENTS AND CABS FOR SPACE. EACH FIRM ASSURED THAT THEIR QUOTATIONS, WITH RESPECT TO BOTH PRICE AND DELIVERY, CONTEMPLATED BUILDING ANOTHER SET OF TOOLING AND NOT USING COMPUDYNE'S TOOLING. WITH REGARD TO THE PROPRIETARY ASPECTS, COMPUDYNE'S CONTRACT UNDER WHICH THEY SUPPLIED THE FIRST 31 EACH A/M37T-6'S WAS AN AWARD UNDER A MOAMA IFB. AS SUCH, THE CONTRACT CONTAINED THE MAR 60 VERSION OF THE DATA CLAUSE PRESCRIBED AT THAT TIME BY ASPR 9-203.1 AND 9-203.2; THUS SUBMISSION OF ANY PROPRIETARY DATA WAS NOT REQUIRED. THE COMPUDYNE DRAWINGS SHOW ONLY LIMITED INFORMATION (SUCH AS ENVELOPE DIMENSIONS, MOUNTING PROVISIONS, ETC.) WITH RESPECT TO A NUMBER OF COMPONENTS SUCH AS THE ECKLE CAB AND PERFORMANCE MEASUREMENTS. WE ASSUME THESE TO BE AT LEAST TWO OF THE ALLEGED PROPRIETARY ITEMS; IN FACT, COMPUDYNE HAS ADMITTED THAT THEY DO NOT KNOW, FOR INSTANCE, THE EXACT CONSTRUCTION DETAILS WHICH GIVE THE ECKLE CAB ITS HIGH ACOUSTICAL PROTECTION FOR OCCUPANTS OF THE CAB. THE AIR FORCE CONTRACT WITH COMPUDYNE DID NOT RESERVE THE USE OF ANY PROPRIETARY VENDOR COMPONENTS TO COMPUDYNE'S EXCLUSIVE USE.' IN COMMENTING ON YOUR CONTENTION THAT THE AIR FORCE INSISTED AT A BIDDERS' CONFERENCE ON NOVEMBER 16, 1964, THAT THE TEST STANDS BE FURNISHED IN THE "EXACT CONFIGURATION DEPICTED ON COMPUDYNE DRAWINGS WITHOUT SUBSTITUTION" AND THAT ABOUT $1 MILLION WAS THE ADDED LOGISTICS COST TO THE AIR FORCE IF DIFFERENT TEST STANDS WERE TO BE PROCURED, THE AIR FORCE STATED AS FOLLOWS: "BASICALLY NO DISAGREEMENT, EXCEPT THAT THE "NO SUBSTITUTION" PRONOUNCEMENTS WERE TEMPERED BY THE VALUE ENGINEERING ASPECTS. IT WAS ALSO STATED THAT EVALUATION OF VALUE ENGINEERING PROPOSALS WOULD PROBABLY BE TEMPERED BY "REAL COST" CONSIDERATIONS, PARTICULARLY IN THE LOGISTICS AREA. FURTHER, IT WAS STATED THAT SAAMA, NOT AFLC, HAD COMPUTED THE $1,000,000 REAL COST ESTIMATE. (THIS FIGURE WAS NEITHER ACCEPTED NOR REJECTED BY HQ AFLC, AND IT WAS BASED IN LARGE PART ON A REAL COST PARAMETER OF $1100 PER NEW FEDERAL STOCK NUMBER, WHICH IS NOW OUTMODED.)"

YOU FURTHER CONTEND THAT THE AIR FORCE STATED AT THE BIDDERS' CONFERENCE THAT ONLY COMPUDYNE COULD MEET THE INITIAL DELIVERIES TO SATISFY THE GOVERNMENT'S URGENT REQUIREMENTS AND THAT, IN ORDER TO STIMULATE COMPETITION, DELIVERY SCHEDULE RELIEF WAS EXTENDED TO FIRMS BIDDING ON NONPREQUALIFIED UNITS IN ADDITION TO THE GRANTING OF WAIVERS ON PREPRODUCTION TESTING, LEAVING INTACT HOWEVER THE URGENT REQUIREMENT FOR FIVE UNITS IN MAY 1965. IN REPLY TO THIS, THE AIR FORCE HAS STATED THAT:

"COMPUDYNE HAS EFFECTIVELY REARRANGED, TO THEIR BENEFIT, THE STATEMENT MADE IN THE BIDDERS' CONFERENCE. IT WAS STATED THAT (I) THE GOVERNMENT BELIEVED (NOT "RECOGNIZED," BUT "BELIEVED") THAT ONLY COMPUDYNE COULD PROBABLY MEET THE 120 DAY SCHEDULE FOR THE FIRST FIVE UNITS; (II) BY CLOSE ADHERENCE TO THE COMPUDYNE CONFIGURATION, THE GOVERNMENT WAS WILLING TO REDUCE PREPRODUCTION TESTING TO A BARE MINIMUM FOR NEW PRODUCERS; (III) THE SCHEDULE FOR NEW PRODUCERS WOULD REQUIRE DELIVERY OF PREPRODUCTION UNIT BY 1 MAY 65 (BASED ON THE THEN PREDICTED AWARD DATE OF 31 DEC 64) AND COMMENCEMENT OF DELIVERIES IN JUN 65 (BASED ON SUCCESSFUL PREPRODUCTION TESTING); AND (IV) JUN 65 WAS ONLY ONE MONTH BEHIND THE MAY 65 NEED DATE FOR THE INITIAL UNITS. IT WAS THEN RE-EMPHASIZED THAT IF THE COMPUDYNE CONFIGURATION WERE NOT USED, FULL PREPRODUCTION TESTING WOULD BE REQUIRED, WHICH WOULD ELIMINATE EVERYONE BUT COMPUDYNE AND WOULD RESULT IN A SOLE SOURCE PROCUREMENT. THE PURPOSE OF THIS CLARIFICATION DURING THE BIDDERS' CONFERENCE WAS TO EXPLAIN TO INDUSTRY WHY THE GOVERNMENT WAS USING COMPUDYNE DRAWINGS AND POSSIBLY ELIMINATE PROTESTS.'

WE UNDERSTAND THAT THE AIR FORCE WILL HAVE ABOUT 24 DAYS TO REVIEW OPERATIONAL TESTS AFTER COMPLETION OF PREPRODUCTION TESTING AND THAT IT EXPECTS TO EXPERIENCE LITTLE OR NO DIFFICULTY WITH RESPECT TO SPACE MEETING THE DELIVERY SCHEDULE.

RESPECTING THE PROBLEM OF SPARE PARTS FOR THE TEST STANDS THAT ARE IN YOUR POSSESSION WHICH YOU ALLEGE WILL BE WASTED IF "EQUAL" COMPONENTS ARE UTILIZED BY SPACE, WE UNDERSTAND THAT A LARGE PERCENTAGE OF THE COMPONENTS OF THE TEST STANDS BEING PRODUCED BY SPACE WILL BE IDENTICAL WITH THOSE USED IN THE COMPUDYNE STANDS. HENCE, THE AIR FORCE DOES NOT ANTICIPATE MAJOR INTERCHANGEABILITY DIFFICULTIES.

IN CONCLUSION, IT MAY BE POINTED OUT THAT "SOLE SOURCE" PROCUREMENT UNDER 10 U.S.C. 2304 (A) (10) IS SIGNIFICANTLY LIMITED UNDER THE PROCUREMENT REGULATIONS WHICH EMPHASIZE THE NECESSITY FOR EFFECTIVE COMPETITION IN NEGOTIATED PROCUREMENTS. ASPR 1-300.1 AND 3-102 (C).

UPON REVIEW OF THE ENTIRE MATTER, WE FIND NO LEGAL BASIS TO DISTURB THE AWARD MADE TO THE SPACE CORPORATION.