B-156392, MAY 10, 1965

B-156392: May 10, 1965

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INC.: REFERENCE IS MADE TO YOUR LETTER OF MARCH 23. THE REQUEST FOR PROPOSALS (RFP) WAS ISSUED ON FEBRUARY 15. THE POWER SUPPLY IS A COMPONENT OF THE GUIDED MISSILE LAUNCHER LAU-7/A. WHICH IS AN AIRCRAFT LAUNCHER FOR USE WITH SIDEWINDER MISSILES. THIS POWER SUPPLY IS A DENSELY PACKAGED. THE REQUEST CONTAINED THE FOLLOWING DELIVERY SCHEDULE: TABLE "DELIVERY REQUIRED - QUANTITY DELIVERY DATE 3 EA. 9 MARCH 1965 20 EA.9 APRIL 1965 20 EA. 16 APRIL 1965 40 EA. 23 APRIL 1965 40 EA. 30 APRIL 1965 40 EA. 7 MAY 1965 40 EA. 14 MAY 1965 40 EA. 21 MAY 1965 40 EA. 28 MAY 1965 40 EA. 4 JUNE 1965 40 EA. 11 JUNE 1965 40 EA. 18 JUNE 1965 40 EA. 25 JUNE 1965 40 EA. 2 JULY 1965 17 EA. 9 JULY 1965" THE REQUIREMENT COVERED BY THE REQUEST WAS SYNOPSIZED IN THE COMMERCE BUSINESS DAILY ON FEBRUARY 18.

B-156392, MAY 10, 1965

TO VARO, INC.:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 23, 1965, AND FURTHER CORRESPONDENCE, REGARDING YOUR PROTEST AGAINST THE AWARD OF A CONTRACT TO THE BENRUS WATCH COMPANY UNDER REQUEST FOR PROPOSALS NO. A-858-1-828 ISSUED BY THE UNITED STATES NAVAL AVIONICS FACILITY, INDIANAPOLIS, INDIANA.

THE REQUEST FOR PROPOSALS (RFP) WAS ISSUED ON FEBRUARY 15, 1965, WITH THE PROVISION THAT PROPOSALS WOULD BE RECEIVED UNTIL 2 P.M., MARCH 2, 1965, AND CALLED FOR THE FURNISHING OF 500 UNITS OF POWER SUPPLIES PP2315/A TO MILITARY SPECIFICATIONS MIL-P-22621A/WEPS), WITH SUBSTANTIALLY ALL MATERIAL AND PARTS TO BE FURNISHED BY THE GOVERNMENT WITH THE CONTRACTOR'S EFFORT TO CONSIST PRIMARILY OF ASSEMBLY AND FINAL CHECKOUT. THE POWER SUPPLY IS A COMPONENT OF THE GUIDED MISSILE LAUNCHER LAU-7/A, WHICH IS AN AIRCRAFT LAUNCHER FOR USE WITH SIDEWINDER MISSILES. THIS POWER SUPPLY IS A DENSELY PACKAGED, POTTED DEVICE. THE REQUEST CONTAINED THE FOLLOWING DELIVERY SCHEDULE:

TABLE

"DELIVERY REQUIRED - QUANTITY DELIVERY DATE

3 EA. 9 MARCH 1965

20 EA.9 APRIL 1965

20 EA. 16 APRIL 1965

40 EA. 23 APRIL 1965

40 EA. 30 APRIL 1965

40 EA. 7 MAY 1965

40 EA. 14 MAY 1965

40 EA. 21 MAY 1965

40 EA. 28 MAY 1965

40 EA. 4 JUNE 1965

40 EA. 11 JUNE 1965

40 EA. 18 JUNE 1965

40 EA. 25 JUNE 1965

40 EA. 2 JULY 1965

17 EA. 9 JULY 1965"

THE REQUIREMENT COVERED BY THE REQUEST WAS SYNOPSIZED IN THE COMMERCE BUSINESS DAILY ON FEBRUARY 18, 1965, STATING THAT IT WAS SYNOPSIZED FOR INFORMATION ONLY AND THAT THE RFP WOULD BE ISSUED TO BENRUS WATCH ONLY DUE TO THE URGENCY OF THE REQUIREMENT AND THE AVAILABILITY OF CHECKOUT AND SPECIAL TEST EQUIPMENT. THE RFP WAS ORIGINALLY ISSUED TO BENRUSONLY. FEBRUARY 19, 1965, VARO ORALLY REQUESTED AND WAS FURNISHED A COPY OF THE RFP. THE RFP WAS OPENED ON MARCH 2, 1965, AND RESPONSIVE PROPOSALS WERE RECEIVED FROM BENRUS WATCH COMPANY AND VARO, INC., WITH VARO INDICATING ON THE FACE OF ITS PROPOSAL IN THE BOX PROVIDED THEREFOR THAT IT WAS A SMALL BUSINESS CONCERN. THE PROPOSED PRICES WERE AS FOLLOWS:

TABLE

"BENRUS VARO $382.04 UNIT

PRICE $273.00 UNIT PRICE $191,019.81 TOTAL

$136,500.00 TOTAL"

NEITHER BIDDER TOOK EXCEPTION TO THE DELIVERY SCHEDULE OF THE RFB, ALTHOUGH BY THE DATE OF OPENING IT WAS OBVIOUSLY IMPOSSIBLE TO BE MET.

BY TELEGRAM DATED MARCH 8, 1965, VARO MODIFIED ITS PROPOSAL TO OFFER THE FOLLOWING DELIVERY SCHEDULE:

CHART

"3 UNITS 5 DAYS AFTER RECEIPT OF GFP, 20 UNITS 25 DAYS

AFTER RECEIPT OF GFP, 40 UNITS 32 DAYS, 40 UNITS 39 DAYS,

40 UNITS 45 DAYS, 60 UNITS 52 DAYS, 60 UNITS 59 DAYS,

60 UNITS 66 DAYS, 60 UNITS 73 DAYS, 60 UNITS 80 DAYS,

60 UNITS 87 DAYS.'

ON MARCH 12, 1965, THE CONTRACTING OFFICER DETERMINED THAT VARO, INC., WAS NOT A RESPONSIBLE SUPPLIER FOR THIS PARTICULAR PROCUREMENT. NEGOTIATIONS WERE CONTINUED WITH BENRUS WHICH RESULTED IN THEIR UNIT PRICE BEING REDUCED TO $354.25 AND THE DELIVERY SCHEDULE BEING CHANGED. THE BENRUS PROPOSAL WAS ACCEPTED ON MARCH 15, 1965, RESULTING IN CONTRACT NO. N163-12989/X). UNDER THAT NEGOTIATED CONTRACT THE DELIVERY SCHEDULE IS AS FOLLOWS:

CHART

"DELIVERY

WITHIN CALENDAR DAYS AFTER DATE OF ACCEPTANCE

QTY. 17 52 59 66 73 80 87 94 101 108 115 122 129 136 143

500 EA. 3 20 20 30 40 40 40 40 40 40 40 40 40 40 27"

BY LETTER DATED MARCH 16, 1965, THE CONTRACTING OFFICER ADVISED VARO THAT THE AWARD HAD BEEN MADE TO BENRUS.

THE CONTRACTING OFFICER EXPLAINS THAT, WHILE VARO DID INDICATE IN ITS PROPOSAL THAT IT WAS A SMALL BUSINESS CONCERN, DETERMINATION THAT VARO WAS NONRESPONSIBLE WAS NOT REFERRED TO THE SMALL BUSINESS ADMINISTRATION (SBA) BECAUSE OF AN OVERSIGHT. HE SAYS THAT THE MATTER WAS FIRST BROUGHT TO HIS ATTENTION BY A TELEPHONE CALL FROM A REPRESENTATIVE OF SBA ON MARCH 17, 1965. ON MARCH 18, 1965, THREE DAYS AFTER THE AWARD TO BENRUS, THE CONTRACTING OFFICER MADE THE FOLLOWING CERTIFICATION:

"ALTHOUGH THE REQUIREMENT FOR REFERRAL TO SBA WAS OVERLOOKED, THE DETERMINATION THAT VARO WAS NONRESPONSIBLE IS STILL TRUE IN THE JUDGMENT AND DETERMINATION OF THE CONTRACTING OFFICER, AND IF THE REQUIREMENT FOR REFERRAL TO SBA HAD NOT BEEN OVERLOOKED, THE CONTRACTING OFFICER WOULD HAVE CERTIFIED THEN AND DOES SO CERTIFY NOW, AS AUTHORIZED BY ASPR 1-705.4 (B) (1), THAT AWARD MUST BE MADE WITHOUT DELAY.'

VARO'S PROTEST IS BASED ON THE CONTENTION THAT THE SUBJECT AWARD VIOLATED THE EXPRESS PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION AND IS THEREFORE INVALID, SINCE VARO'S LOWER PROPOSAL WAS REFUSED BECAUSE OF ALLEGED LACK OF CAPACITY WITHOUT GIVING THE SBA THE OPPORTUNITY TO ISSUE A CERTIFICATE OF COMPETENCY.

THE RECORD SHOWS THAT THE PROCUREMENT OF THE 500 POWER SUPPLIES ON RFP A- 858-1-828 WAS MADE AS A REPURCHASE ACTION FOR THE COMPLETION, PLUS OTHER OPERATIONS, OF WORK COMMENCED BY WESTERN ELECTRODYNAMICS, INC., OF COLORADO SPRINGS, COLORADO, UNDER CONTRACT NO. N163-12413/X) WHICH WAS AWARDED ON JUNE 11, 1964, AND WAS TERMINATED FOR DEFAULT ON JANUARY 26, 1965, WITH THE GOVERNMENT TAKING TITLE TO THE GOVERNMENT FURNISHED MATERIAL WHICH INCLUDED THE WESTERN WORK-IN-PROCESS.

THE TERMINATED CONTRACT WAS FOR 500 POWER SUPPLIES PP2315/A TO BE IN ACCORDANCE WITH BUWEPS DWG. 59A44J211, EXCEPT FOR COVERS, POTTING, NAMEPLATES, THE ASSEMBLY OF SELECTED RESISTORS AND FINAL CHECKOUT, WITH SUBSTANTIALLY ALL THE PARTS AS GOVERNMENT-FURNISHED MATERIAL. THE CONTRACT WAS FOR $44,575, LATER CHANGED TO $49,350, AND THE VALUE OF THE GOVERNMENT-FURNISHED MATERIAL WAS APPROXIMATELY $350,000. DELIVERY WAS ORIGINALLY REQUIRED TO COMMENCE IN AUGUST OF 1964 AND TO BE COMPLETED IN NOVEMBER OF 1964. THE RFP UNDER CONSIDERATION HERE REQUIRES THE CONTRACTOR TO TAKE THE REPOSSESSED GOVERNMENT-FURNISHED MATERIAL RESULTING FROM THE TERMINATED CONTRACT AND COMPLETELY ASSEMBLE THE POWER SUPPLIES AND PERFORM THE FINAL CHECKOUT. IN ADDITION, THERE WAS A FURTHER CHANGE IN SPECIFICATIONS REQUIRING AN ADDITIONAL RADIO FREQUENCY INTERFERENCE FIX.

THE RECORD FURTHER SHOWS THAT VARO CURRENTLY HAS CONTRACT NO. N600/19/61910 WITH THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., FOR LAU- 7/A LAUNCHERS INCLUDING 4,800 SIMILAR POWER SUPPLIES. THAT CONTRACT WAS AWARDED MARCH 19, 1964. BECAUSE OF CHANGES IN SPECIFICATIONS AND DIFFICULTIES ENCOUNTERED IN PRODUCING ACCEPTABLE PREPRODUCTION SAMPLES, DELIVERIES THEREUNDER ARE SUBSTANTIALLY BEHIND SCHEDULE. REPORTEDLY, ON THE BASIS OF THE DELAY IN THE DELIVERY SCHEDULE UNDER CONTRACT NO. N600/19/61910 AND THE GOVERNMENT'S EXPERIENCE WITH VARO THEREUNDER, THE CONTRACTING OFFICER DETERMINED THAT VARO DOES NOT HAVE THE CAPABILITY TO SUCCESSFULLY MANUFACTURE POWER SUPPLIES OF THE QUALITY AND QUANTITY AND IN THE TIME REQUIRED FOR DELIVERY UNDER RFP NO. A-858-1-828.

ON THE OTHER HAND AS STATED IN THEIR TELEGRAM OF MARCH 8, 1965, VARO CONTENDS NOT ONLY THAT IT CAN MAKE DELIVERIES AS OFFERED UNDER THE RFP IN QUESTION BUT THAT, BY REASON OF THE IMMEDIATE FURNISHING OF THE GOVERNMENT -FURNISHED MATERIAL FROM THE DEFAULTING CONTRACTOR, IT ALSO COULD ACCELERATE DELIVERIES UNDER THE NAVY PURCHASING OFFICE CONTRACT BEYOND THE 100 PER MONTH REQUIRED.

IN HIS REPORT DATED APRIL 7, 1965, THE CONTRACTING OFFICER STATED THAT THE BASIS FOR CERTIFYING THAT AWARD SHOULD BE MADE WITHOUT DELAY WAS THAT CONSIDERABLE SLIPPAGE IN AN ORIGINAL BUWEPS SCHEDULE OF SEPTEMBER 1964 FOR COMPLETION TO A PRESENT SCHEDULE FOR COMPLETION OF JUNE 1965 HAD ALREADY BEEN EXPERIENCED DUE TO TECHNICAL DIFFICULTIES IN THE SPECIFICATION AND TO THE DEFAULT BY WESTERN ELECTRODYNAMICS; THAT BOTH THE NAVY AND THE AIR FORCE HAD ADVISED THAT A CRITICAL LAUNCHER SHORTAGE EXISTED IN COMBAT AIRCRAFT; AND THAT 307 OF THE POWER SUPPLIES ARE REQUIRED BY NAVAL AVIONICS FOR INCORPORATION IN LAUNCHERS AND 193 UNITS THEREOF ARE REQUIRED FOR SHIPMENT AS INSTALLATION SPARES. BY SUPPLEMENTAL LETTER DATED APRIL 22, 1965, THE CONTRACTING OFFICER MADE THE FURTHER STATEMENT IN REGARD TO THE URGENCY OF THE MATTER AS FOLLOWS:

"THE REQUIREMENT INVOLVED IN THIS PROTEST WAS ON MARCH 12, 1965, AND IS TODAY, ONE OF UNQUESTIONED URGENCY. THIS URGENCY IS CENTERED UPON A UNIT OF UTMOST IMPORTANCE TO COMBAT AIRCRAFT AND THE LACK OF THESE UNITS HAS RESULTED IN THE INABILITY OF THE AIR FORCE AND THE NAVY TO USE THE SIDEWINDER MISSILE SYSTEM ON A SUBSTANTIAL NUMBER OF SUCH AIRCRAFT. THE CONDITION PREVAILING AT THE TIME OF THIS PROPOSED AWARD WAS THAT THE PREVIOUS CONTRACTOR FOR A QUANTITY OF 500 POWER SUPPLIES HAD BEEN TERMINATED FOR DEFAULT AND VARO, THE ONLY OTHER COMMERCIAL SOURCE, WAS MONTHS DELINQUENT IN ITS DELIVERIES. IN FACT, AT THE TIME OF THE PROPOSED AWARD, VARO HAD YET TO PRODUCE AN ACCEPTABLE PREPRODUCTION SAMPLE.'

UNDER THE PROVISIONS OF SECTION 8/B) (7) OF THE SMALL BUSINESS ACT, AS AMENDED BY PUBLIC LAW 85-836, 15 U.S.C. 637/B) (7), THE ISSUANCE OF A CERTIFICATE OF COMPETENCY BY THE SBA IS CONCLUSIVE UPON GOVERNMENT PROCUREMENT OFFICERS WITH RESPECT TO THE COMPETENCY AS TO CAPACITY AND CREDIT, OF ANY SMALL BUSINESS CONCERN TO PERFORM A GOVERNMENT CONTRACT. THE GOVERNING ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-705.4/B) REQUIRES THAT AN OTHERWISE ACCEPTABLE BID OR PROPOSAL SUBMITTED BY A SMALL BUSINESS CONCERN SHALL NOT BE REJECTED BY REASON OF LACK OF CAPACITY OR CREDIT UNTIL THE MATTER SHALL HAVE BEEN REFERRED TO THE SBA FOR THE POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY. ASPR 1-705.4/B) (I), HOWEVER, PROVIDES THAT:

"/1) THIS PROCEDURE IS NOT MANDATORY WHERE THE CONTRACTING OFFICER CERTIFIES IN WRITING THAT AWARD MUST BE MADE WITHOUT DELAY, INCLUDES THIS CERTIFICATION AND SUPPORTING INFORMATION IN THE CONTRACT FILE, AND PROMPTLY FURNISHES A COPY TO THE SBA REPRESENTATIVE.'

THERE CAN BE NO DOUBT THAT DELIVERY OF THE POWER SUPPLIES COVERED BY THE RFP WAS AND IS URGENTLY NEEDED. HOWEVER, VARO HAD OFFERED A DELIVERY SCHEDULE WHICH, EVEN TAKING INTO ACCOUNT THE 15 DAY DELAY INVOLVED IN THE PROCESSING OF A POSSIBLE CERTIFICATE OF COMPETENCY, APPEARED TO BE MORE FAVORABLE THAN THAT OFFERED BY BENRUS. UNDER THE CIRCUMSTANCES WE ARE FACED WITH THE QUESTION WHETHER THE CONTRACTING OFFICER COULD HAVE REASONABLY CONCLUDED THAT AN AWARD MUST BE MADE TO BENRUS WITHOUT DELAY. IN OUR VIEW, THE URGENCY IN THIS MATTER WAS OF SUCH NATURE AS TO HAVE JUSTIFIED A DETERMINATION BY THE CONTRACTING OFFICER THAT AN AWARD COULD NOT BE DELAYED FOR ANY PERIOD OF TIME, EVEN THOUGH THERE EXISTED THE POSSIBILITY THAT VARO MIGHT BE FOUND BY SBA TO HAVE THE CAPACITY TO DELIVER IN ACCORD WITH ITS OFFERED SCHEDULE OF DELIVERIES. THEREFORE, IF THE CONTRACTING OFFICER HAD CERTIFIED AS TO THE URGENCY OF THE MATTER AND NOTIFIED SBA THEREOF PRIOR TO THE AWARD TO BENRUS, THERE WOULD HAVE BEEN NO QUESTION AS TO THE PROPRIETY OF THE PROCEDURE. THERE CAN BE NO QUESTION, OF COURSE, BUT THAT THE NAVY SHOULD HAVE FOLLOWED THE CERTIFICATE-OF-URGENCY PROCEDURE REQUIRED BY ASPR 1-705.4/B) (I). HOWEVER, SINCE IT WOULD APPEAR THAT IN THIS INSTANCE THE TECHNICAL FAILURE TO COMPLY STRICTLY WITH THE REQUIREMENTS OF ASPR 1-705.4/B) (I) RESULTED FROM AN INADVERTENCE, RATHER THAN FROM AN INTENT TO CIRCUMVENT THE SMALL BUSINESS ACT OR THE ARMED SERVICES PROCUREMENT REGULATION, WE WOULD NOT BE JUSTIFIED IN QUESTIONING THE VALIDITY OF THE AWARD IN QUESTION.

WE MUST THEREFORE CONCLUDE THAT NO LEGAL BASIS EXISTS FOR DISTURBING THE AWARD MADE TO BENRUS WATCH COMPANY UNDER THE SUBJECT PROPOSAL. ACCORDINGLY, YOUR PROTEST AGAINST SUCH AWARD MUST BE DENIED.