B-156358, APR. 28, 1965

B-156358: Apr 28, 1965

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TO THE HICKS CORPORATION: REFERENCE IS MADE TO YOUR LETTERS OF MARCH 19. THE INVITATION WAS ISSUED ON FEBRUARY 19. CLAUSE 9.0 OF THE INVITATION IS ENTITLED "GOVERNMENT PRODUCTION AND RESEARCH PROPERTY IN POSSESSION OF BIDDERS OR SUBCONTRACTOR OF BIDDER. TWO BIDS WERE RECEIVED AND OPENED ON MARCH 12. "YOU WILL FIND ENCLOSED OUR LIST OF TOOLING AND MACHINE TOOLS TO BE USED IN THE PERFORMANCE OF THIS CONTRACT FOR WHICH WE REQUEST RENT FREE USE.'. IT IS FURTHER REPORTED THAT THE EXISTING FACILITIES CONTRACTS UNDER WHICH YOUR COMPANY AND CAMERON USED GOVERNMENT FACILITIES PROVIDE FOR THE PAYMENT OF A USE CHARGE AND THAT THEY CONTAIN NO AUTHORIZATION FOR RENT FREE USE OF THE FACILITIES IN PERFORMING CONTRACTS AWARDED PURSUANT TO FORMAL ADVERTISING.

B-156358, APR. 28, 1965

TO THE HICKS CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS OF MARCH 19, 1965 AND APRIL 19, 1965, REFERENCE: 1B 1448 E-399, PROTESTING AN AWARD UNDER INVITATION FOR BIDS NO. 197-285-65, ISSUED AT THE NAVAL ORDNANCE PLANT, LOUISVILLE, KENTUCKY, AS BEING UNFAIR TO COMPETITION AND NOT IN THE BEST INTERESTS OF THE GOVERNMENT.

THE INVITATION WAS ISSUED ON FEBRUARY 19, 1965, AMENDED ON FEBRUARY 26, 1965, AND COVERS A QUANTITY OF 238 GUIDED MISSILE BOOSTERS MK12, MOD 1 (INERT METAL PARTS) AND A QUANTITY OF 23 INERT IGNITER ASSEMBLIES, MK200, MOD 0.

CLAUSE 9.0 OF THE INVITATION IS ENTITLED "GOVERNMENT PRODUCTION AND RESEARCH PROPERTY IN POSSESSION OF BIDDERS OR SUBCONTRACTOR OF BIDDER," WHICH REQUIRED BIDDERS WHO PLANNED TO USE ANY ITEMS OF GOVERNMENT PROPERTY ON A RENT FREE BASIS TO LIST SUCH ITEMS, THEIR ACQUISITION COST, AND AN EVALUATION FACTOR, BASED UPON SPECIFIED PERCENTAGES OF SUCH ACQUISITION COST, TO BE ADDED TO THE UNIT BID PRICE FOR BID EVALUATION PURPOSES. THE CLAUSE ALSO REQUIRED THE BIDDER TO IDENTIFY THE FACILITIES CONTRACT OR OTHER AGREEMENT UNDER WHICH USE OF SUCH PROPERTY ON A RENT FREE BASIS WOULD BE AUTHORIZED, AND THE AMOUNT OF USE TO BE MADE OF SUCH PROPERTY.

TWO BIDS WERE RECEIVED AND OPENED ON MARCH 12, 1965; ONE FROM CAMERON IRON WORKS, INC. AND THE OTHER FROM THE HICKS CORPORATION. NEITHER BIDDER INDICATED THAT IT INTENDED TO USE GOVERNMENT PRODUCTION AND RESEARCH PROPERTY ON A RENT FREE BASIS ALTHOUGH THE HICKS CORPORATION ATTACHED A LETTER TO ITS BID WHICH STATES, IN PART,"YOU WILL FIND ENCLOSED OUR LIST OF TOOLING AND MACHINE TOOLS TO BE USED IN THE PERFORMANCE OF THIS CONTRACT FOR WHICH WE REQUEST RENT FREE USE.' IT IS FURTHER REPORTED THAT THE EXISTING FACILITIES CONTRACTS UNDER WHICH YOUR COMPANY AND CAMERON USED GOVERNMENT FACILITIES PROVIDE FOR THE PAYMENT OF A USE CHARGE AND THAT THEY CONTAIN NO AUTHORIZATION FOR RENT FREE USE OF THE FACILITIES IN PERFORMING CONTRACTS AWARDED PURSUANT TO FORMAL ADVERTISING. IT IS POINTED OUT IN THE ADMINISTRATIVE OFFICE REPORT THAT:

"IT IS NOT CLEAR AS TO WHETHER THE HICKS CORPORATION PREDICATED ITS BID PRICES ON THE USE OF THE GOVERNMENT-OWNED PROPERTY IN ITS POSSESSION ON A RENT FREE BASIS REQUIRING THAT THE RENTAL CHARGE BE ADDED TO ITS BID PRICES IN THE BID EVALUATION AS PROVIDED BY PARAGRAPH B OF THE ABOVE QUOTED CLAUSE. (CLAUSE 9 OF IFB) IT IS TO BE NOTED THAT THE HICKS CORPORATION IS NOT THE LOW BIDDER IN ANY EVENT.'

YOUR PROTEST AGAINST AN AWARD UNDER THE INVITATION HERE CONSIDERED IS DIRECTED TO THE METHOD OF EVALUATING BIDS TO ELIMINATE THE COMPETITIVE ADVANTAGE THAT MIGHT OTHERWISE ARISE FROM THE USE OF GOVERNMENT- OWNED"SPECIAL TOOLING" IN THE BIDDER'S POSSESSION. YOU PROPOSE THAT A PROPER BASIS FOR EVALUATION OF BIDS UNDER THESE CIRCUMSTANCES SHOULD BE:

"THE TOTAL VALUE OF THE SPECIAL TOOLING (ACQUISITION, INSTALLATION, ETC.) SHOULD BE ADDED TO THE BIDDER'S PROPOSAL TOTAL, IN ORDER TO DETERMINE THE FAIR ACCURATE AND EQUITABLE COST OF THE ITEM BEING PROCURED.

"THIS NEW TOTAL (SPECIAL TOOLS PLUS ITEM TOTAL) THEN SHOULD BE USED TO DETERMINE THE LOWEST QUALIFIED CAPABLE PRODUCER. THE CONTRACT AWARD SHOULD BE TO THAT PROPOSER. ANY OTHER METHOD OF EVALUATION GIVES THE POSSESSOR OF "GOVERNMENT OWNED SPECIAL TOOLING" A COMPLETE, DISTINCT UNFAIR ADVANTAGE. ANY OTHER METHOD OF EVALUATION WILL ACCORDINGLY LIMIT COMPETITION COMPLETELY AND PERMANENTLY FOR THE PARTICULAR END ITEM.'

UNDER THE PROVISIONS OF 10 U.S.C. 2667 THE MILITARY DEPARTMENTS ARE AUTHORIZED TO LEASE GOVERNMENT-OWNED PROPERTY, WITH OR WITHOUT PAYMENT OF CASH RENTAL. PRIMARY REGULATIONS GOVERNING THE AVAILABILITY OF GOVERNMENT -OWNED PROPERTY FOR USE IN THE PERFORMANCE OF GOVERNMENT CONTRACTS AND THE MANNER IN WHICH RENTAL IS TO BE ESTABLISHED, OR EVALUATED AGAINST BIDS PROPOSING SUCH USE, HAVE BEEN ISSUED AS SECTION XIII OF THE ARMED SERVICES PROCUREMENT REGULATION. OF THIS REGULATION, IT WOULD APPEAR THAT PARAGRAPH 13-502 MAY BE MOST DIRECTLY RELATED TO YOUR PROTEST. THAT PARAGRAPH PROVIDES IN EFFECT THAT BIDS BASED UPON USE OF GOVERNMENT-OWNED PROPERTY SHALL BE CONSIDERED IN A FORMALLY ADVERTISED PROCUREMENT ONLY IF SUCH PROPERTY IS HELD UNDER A LEASE WHICH REQUIRES PAYMENT OF A CASH RENTAL, OR SOME OTHER EVALUATION FACTOR IS USED.

WITH RESPECT TO YOUR CONTENTION THAT ANY METHOD OF EVALUATING USE OF GOVERNMENT-OWNED EQUIPMENT, SHORT OF ADDING THE FULL ACQUISITION COST OF SUCH EQUIPMENT TO THE BID PRICE, WOULD BE DISCRIMINATORY IN THE INSTANT PROCUREMENT, ATTENTION IS INVITED TO THE FACT THAT THE EVALUATION RENTAL RATES SET OUT IN THE INVITATION ARE IN SUBSTANTIAL AGREEMENT WITH THE RENTAL RATES PRESCRIBED BY ASPR 7-702.12. ADDITIONALLY, IT SHOULD BE NOTED THAT ASPR 13-401 AND 13-501 PROVIDE AS FOLLOWS:

"13-401 POLICY. IT IS THE POLICY OF THE DEPARTMENT OF DEFENSE TO PUT GOVERNMENT PRODUCTION AND RESEARCH PROPERTY WHICH IS IN THE POSSESSION OF A CONTRACTOR OR SUBCONTRACTOR TO THE GREATEST POSSIBLE USE IN THE PERFORMANCE OF GOVERNMENT CONTRACTS OR SUBCONTRACTS, SO LONG AS SUCH USE DOES NOT CONFER A COMPETITIVE ADVANTAGE ON THE CONTRACTOR OR SUBCONTRACTOR CONTRARY TO THE POLICIES SET FORTH IN PART 5.'

AND

"13-501 POLICY. IT IS THE POLICY OF THE DEPARTMENT OF DEFENSE TO ELIMINATE THE COMPETITIVE ADVANTAGE THAT MIGHT OTHERWISE ARISE FROM THE ACQUISITION OR USE OF GOVERNMENT PRODUCTION AND RESEARCH PROPERTY. THIS IS ACCOMPLISHED BY CHARGING RENTAL OR BY USE OF RENTAL EQUIVALENTS IN EVALUATING BIDS AND PROPOSALS AS PROVIDED IN 13-502 AND 13-503. IT IS ALSO DEPARTMENT OF DEFENSE POLICY THAT COSTS OR SAVINGS TO THE GOVERNMENT RELATED TO PROVIDING SUCH PROPERTY TO CONTRACTORS BE CONSIDERED IN DETERMINING THE LOWEST COST TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. THEREFORE, RELATED COSTS AND SAVINGS SHALL BE CONSIDERED, AS PROVIDED IN 13-504 AND 13-505, EVEN THOUGH AN ADVANTAGE MAY ACCRUE TO ONE CONTRACTOR TO THE DISADVANTAGE OF ANOTHER.'

IN VIEW OF THE FOREGOING, WE SEE NO VALID BASIS FOR CONTENDING THAT BIDS BASED UPON USE OF GOVERNMENT-OWNED PROPERTY IN THE INSTANT PROCUREMENT WERE IMPROPER, OR THAT THE METHOD OF EVALUATION SET OUT IN THE INVITATION RESULTED IN AN UNFAIR COMPETITIVE ADVANTAGE SO AS TO BE IN VIOLATION OF APPLICABLE REGULATIONS.

ACCORDINGLY, SINCE THE METHOD OF EVALUATION PROVIDED IN THE INVITATION WAS IN ACCORD WITH THE REGULATIONS, AND NO REGULATORY PROVISION HAS BEEN MADE FOR EVALUATION UNDER YOUR PROPOSED METHOD, YOUR PROTEST MUST BE DENIED.

YOUR LETTER OF APRIL 19, 1965, CONTAINS IN DETAIL THE REASONS FOR YOUR BELIEF THAT YOUR PROPOSED METHOD OF EVALUATION IS SUPERIOR TO THE METHOD NOW USED BY THE GOVERNMENT AND WOULD ACHIEVE FAIR COMPETITION AND LOWER OVERALL COST TO THE GOVERNMENT. HOWEVER THAT MAY BE, WE MAY NOT CHANGE THE REGULATIONS APPERTAINING TO PROCUREMENTS. THAT AUTHORITY, IN THIS INSTANCE, RESTS IN THE DEPARTMENT OF DEFENSE. OUR FUNCTION IS TO SEE THAT THE REGULATIONS ARE IN ACCORD WITH PERTINENT STATUTES AND THAT PROCUREMENT INVITATIONS ARE IN ACCORD WITH THE PERTINENT STATUTES AND REGULATIONS. SHOULD YOU WISH TO PURSUE THE MATTER OF YOUR SUGGESTION FURTHER, WE SUGGEST THAT YOU COMMUNICATE WITH THE ARMED SERVICES PROCUREMENT REGULATION COMMITTEE, DEPARTMENT OF DEFENSE, WASHINGTON, D.C. ..END :