B-157736, MAR. 11, 1966

B-157736: Mar 11, 1966

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EACH ITEM WAS FOR 20 OF THE SPECIFIED BLANKETS AND ONE PREPRODUCTION SAMPLE. BIDS WERE OPENED ON AUGUST 13. THE FOLLOWING BIDS WERE RECEIVED: CHART BIDDER PRICE TERMS ITEM 1 ITEM 2 THERMAL SYSTEMS. ADVISES THAT IT APPEARS THAT THERMAL'S BID WAS PREDICATED ON THE USE OF RENT-FREE GOVERNMENT-FURNISHED EQUIPMENT AND THAT THIS BID SHOULD THEREFORE BE DETERMINED TO BE NONRESPONSIVE. SECTIONS 13-501 AND 13-407/A) (III) OF THE ARMED SERVICES PROCUREMENT REGULATION HAVE BEEN CITED. THE LETTER FROM YOUR ATTORNEY ALSO CONTENDS THAT THE AWARD TO THERMAL WAS IN CONTRAVENTION OF DEPARTMENT OF DEFENSE DIRECTIVE 5500.10 OF JUNE 1. ENTITLED "RULES FOR THE AVOIDANCE OF ORGANIZATIONAL CONFLICTS OF INTEREST" WHICH IS APPENDIX G OF ASPR.

B-157736, MAR. 11, 1966

TO AERO/SPACE DEVICES, INCORPORATED:

WE REFER TO THE TELEGRAM OF SEPTEMBER 24, 1965, AND LETTERS OF OCTOBER 12, 1965, AND FEBRUARY 3, 1966, FROM I. H. WACHTEL, ATTORNEY AT LAW, ON YOUR BEHALF, PROTESTING THE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. AMC (Z/-01-021-66-505, ISSUED BY UNITED STATES ARMY MISSILE COMMAND, REDSTONE ARSENAL, ALABAMA, FOR THE PROCUREMENT OF TWO ITEMS OF ELECTRONICALLY HEATED BLANKETS TO BE USED IN CONNECTION WITH GUIDED MISSILE BODY SECTIONS IN ACCORDANCE WITH APPLICABLE SPECIFICATIONS. EACH ITEM WAS FOR 20 OF THE SPECIFIED BLANKETS AND ONE PREPRODUCTION SAMPLE.

BIDS WERE OPENED ON AUGUST 13, 1965, AND THE FOLLOWING BIDS WERE RECEIVED:

CHART

BIDDER PRICE TERMS

ITEM 1 ITEM 2

THERMAL SYSTEMS, $ 839.00 $ 949.00 NET

INC.

AERO/SPACE DEVICES, $1,042.10 $1,060.20 1/4 PERCENT,

INC. 20 DAYS

HOOVER AIRCRAFT $1,218.07 $1,284.54 1 PERCENT,

PRODUCTION CO.20 DAYS

SECURITY PARACHUTE CO. $1,825.00 $2,060.00 NET

EACH BIDDER QUOTED THE SAME PRICE FOR THE PREPRODUCTION MODEL AS THE UNIT PRICES ABOVE FOR EACH ITEM.

THE LETTER FROM YOUR ATTORNEY DATED OCTOBER 12, 1965, ADVISES THAT IT APPEARS THAT THERMAL'S BID WAS PREDICATED ON THE USE OF RENT-FREE GOVERNMENT-FURNISHED EQUIPMENT AND THAT THIS BID SHOULD THEREFORE BE DETERMINED TO BE NONRESPONSIVE. IN THIS CONNECTION B-152801, FEBRUARY 3, 1964, 44 COMP. GEN. 412, AND SECTIONS 13-501 AND 13-407/A) (III) OF THE ARMED SERVICES PROCUREMENT REGULATION HAVE BEEN CITED. THE LETTER FROM YOUR ATTORNEY ALSO CONTENDS THAT THE AWARD TO THERMAL WAS IN CONTRAVENTION OF DEPARTMENT OF DEFENSE DIRECTIVE 5500.10 OF JUNE 1, 1963, ENTITLED "RULES FOR THE AVOIDANCE OF ORGANIZATIONAL CONFLICTS OF INTEREST" WHICH IS APPENDIX G OF ASPR. IN THIS CONNECTION YOUR ATTORNEY ADVISES THAT THERMAL WAS: "* * * EITHER THE PRIME CONTRACTOR AND/OR THE AGENT OR SUBCONTRACTOR, OR WAS AFFILIATED WITH THE PRIME CONTRACTOR UNDER GOVERNMENT RESEARCH AND DEVELOPMENT, SYSTEMS ENGINEERING AND TECHNICAL DIRECTIONS CONTRACTS FOR THE GOODS INVOLVED HEREIN * * *.' YOUR COUNSEL ADVISES THAT THE MOCK-UPS OF THE TWO BODY SECTIONS OF THE MISSILE WHICH THERMAL WILL BE REQUIRED TO FURNISH FOR TESTING OF THE BLANKETS WERE PAID FOR BY THE GOVERNMENT UNDER PRIOR RESEARCH AND DEVELOPMENT CONTRACTS AND WERE THEREFORE GOVERNMENT PROPERTY. ALSO, YOUR COUNSEL CONTENDS THAT THERMAL DOES NOT OWN AND WILL NOT CONSTRUCT A COLD TEST CHAMBER FOR TESTING BUT WILL USE A TEST CHAMBER WHICH IS A GOVERNMENT-OWNED FACILITY WITHOUT THE PAYMENT OF RENTAL.

THE RECORD INDICATES THAT THERMAL WAS A SUBCONTRACTOR TO MARTIN MARIETTA CORPORATION UNDER PURCHASE ORDER NO. MA 529, 105 VP. UNDER THIS PURCHASE ORDER THERMAL WAS TO FURNISH MARTIN WITH QUANTITIES OF ELECTRIC BLANKETS, COLD TEST CHAMBERS AND MOCK-UPS FOR THE G AND C STAGE, FIRST STAGE AND SECOND STAGE FOR THE PERSHING MISSILE. WITH RESPECT TO THE MARTIN SOLICITATION THE ADMINISTRATIVE REPORT ADVISES AS FOLLOWS:

"* * * QUOTATIONS WERE REQUESTED FROM TWO BIDDERS, ONE OF WHICH WAS THERMAL SYSTEMS, INC.

"2. THE TWO BIDDERS WERE BROUGHT TO MARTIN FACILITIES FOR DISCUSSIONS OF STATEMENT OF WORK, ABMA SPECIFICATIONS, TESTING REQUIREMENTS AND/OR UNDERSTANDING OF ALL AREAS CONCERNING THE MARTIN DESIGN. ALL OF THE FOREGOING POINTS FOR DISCUSSION, WITH EXCEPTION OF THE ABMA SPECIFICATIONS ISSUED BY THE ARMY, WERE GENERATED SOLELY BY MARTIN COMPANY INCLUDING IDENTIFICATIONS AND SOLUTION OF INTERFACES BETWEEN PARTS OF THE SYSTEM PLANS AND EVALUATIONS OF TEST DATA, DEVELOPMENT OF TEST REQUIREMENTS AND OF THE DESIGN WORK. IN ADDITION, MARTIN EXCLUSIVELY SUPPLIED THE TECHNICAL DIRECTIONS, INCLUDING THE PREPARATION OF WORK STATEMENTS FOR CONTRACTOR'S DETERMINATION OF PARAMETERS DISCUSSION OF CONTRACTOR'S OPERATION AND RESULT OF TECHNICAL CONTROVERSIES, THE TECHNIQUES OF MANUFACTURE AND FABRICATION. TO ACCOMPLISH ALL OF THE FOREGOING REQUIREMENTS WAS THE RESPONSIBILITY OF THERMAL SYSTEMS, INC.

"3. GOVERNMENT FURNISHED TOOLING USED PURSUANT TO THIS PURCHASE ORDER AND SUBSEQUENT PURCHASE ORDER GA 606, 580 V, DATED 1 OCTOBER 1962, WAS A COLD TEST CHAMBER IN THE POSSESSION OF NORAIR DIVISION, NORTHRUP CORPORATION, 1001 BROADWAY, HAWTHORNE, CALIFORNIA, WITH WRITTEN AUTHORIZATION FROM THE AIR FORCE FOR A NO-CHARGE USE. IN ADDITION, INSOFAR AS THE INSTANT BUY IS CONCERNED, THE FIRST AND SECOND STAGE MOCK-UPS KNOWN AND NUMBERED AS T0753581 AND T0753583 WERE GOVERNMENT PROPERTY GENERATED UNDER THE COST CONTRACT BY MARTIN, THE PRIME CONTRACTOR. ALSO, THE ABOVE LAST KNOWN AND NUMBERED MOCK-UPS NO LONGER CONFORM TO THE CONFIGURATION OF THE PERSHING MISSILE AND ARE, THEREFORE, NOT USABLE IN PRESENT CONTRACT.'

WITH RESPECT TO THE MOCK-UPS THE ADMINISTRATIVE REPORT CONCLUDES:

"* * * IT IS THE FURTHER OPINION OF THE CONTRACTING OFFICER THAT THE MOCK -UP BODY SECTION TO BE USED BY THERMAL SYSTEMS, INC., IS NOT IN FACT THE AFOREMENTIONED (MOCK-UPS NUMBERED T0753581 AND T0753583) AND GOVERNMENT TOOLING, BUT BODY SECTIONS FABRICATED BY THERMAL AND, THEREFORE, THERMAL PROPERTY EXCLUSIVE OF THEIR SUB-CONTRACT WITH MARTIN * * *.'

A TELEGRAM DATED NOVEMBER 17, 1965, FROM THE LOS ANGELES PROCUREMENT DISTRICT CONFIRMS THAT THE MOCK-UP BODY SECTION WAS THERMAL'S OWN TOOLING. WITH REGARD TO THE COLD TEST CHAMBER, THE TELEGRAM FROM THE LOS ANGELES PROCUREMENT DISTRICT ADVISES THAT THERMAL'S COLD TEST CHAMBER REQUIREMENTS WILL NOT BE PERFORMED AT NORAIR BUT BY A LOCAL INDEPENDENT TEST LABORATORY.

A PRE-AWARD SURVEY ON THERMAL DATED AUGUST 24, 1965, BY THE COMMANDING OFFICER, LOS ANGELES PROCUREMENT DISTRICT STATES THAT NO GOVERNMENT- FURNISHED EQUIPMENT WOULD BE INVOLVED IN THE INSTANT PROCUREMENT. THIS MATTER WAS RECHECKED AND ON SEPTEMBER 24, 1965, THE LOS ANGELES PROCUREMENT DISTRICT AGAIN ADVISED THAT NO GOVERNMENT FURNISHED EQUIPMENT WOULD BE INVOLVED IN THE INSTANT PROCUREMENT. ON SEPTEMBER 24 AND 29, 1965, THERMAL CONFIRMED THAT IT DID NOT CONTEMPLATE THE USE OF ANY GOVERNMENT-FURNISHED EQUIPMENT IN FULFILLING ITS PROPOSED CONTRACT.

ON PAGE 13 OF ITS BID, THERMAL SPECIFICALLY INDICATED IT DID NOT CONTEMPLATE THE USE OF ANY GOVERNMENT-FURNISHED EQUIPMENT IN FULFILLING THE PROCUREMENT. WE ARE ADVISED THAT THE ITEMS IN THE INSTANT PROCUREMENT WERE URGENTLY REQUIRED AND THAT AN AWARD WAS MADE TO THERMAL ON SEPTEMBER 30, 1965.

BY LETTER DATED FEBRUARY 3, 1966, YOUR ATTORNEY ADVISED OUR OFFICE THAT YOU WOULD NOT FILE A REBUTTAL TO THE MATTERS IN THE ADMINISTRATIVE REPORT.

IT IS THE WELL ESTABLISHED RULE OF OUR OFFICE TO ACCEPT THE ADMINISTRATIVE REPORT IN THE ABSENCE OF EVIDENCE SUFFICIENT TO OVERCOME THE PRESUMPTION OF ITS CORRECTNESS. SEE 37 COMP. GEN. 568. IT IS THE POSITION OF THE ADMINISTRATIVE OFFICE THAT RENT-FREE GOVERNMENT-FURNISHED EQUIPMENT WILL NOT BE FURNISHED IN THE INSTANT PROCUREMENT. ALSO, THE ADMINISTRATIVE REPORT INDICATES THAT THERMAL DID NOT HAVE SYSTEMS ENGINEERING OR TECHNICAL RESPONSIBILITY IN ITS SUBCONTRACT WITH MARTIN. IN VIEW OF THE RECORD PRESENTED WE FIND THAT THE PRESUMPTION OF CORRECTNESS OF THE ADMINISTRATIVE REPORT ON THESE ISSUES HAS NOT BEEN OVERCOME.

IN B-152801, FEBRUARY 3, 1964, AND 44 COMP. GEN. 412, CITED BY YOUR COUNSEL, THE BIDS IN EACH INSTANCE WERE SPECIFICALLY CONDITIONED ON THE USE OF RENT-FREE GOVERNMENT-FURNISED EQUIPMENT. THIS WAS IN CONTRAVENTION OF THE "USE AGREEMENTS GOVERNMENT-OWNED PROPERTY" CLAUSES IN EACH OF THOSE INVITATIONS WHICH PROVIDED IN SUBSTANCE THAT A FAIR RENTAL VALUE MUST BE PAID FOR GOVERNMENT-FURNISHED EQUIPMENT WHICH WOULD BE USED IN THE PRODUCTION OF THE ITEM BEING PROCURED. IN EACH OF THE CITED DECISIONS WE HELD THAT THE BIDS WHICH WERE CONDITIONED ON THE USE OF GOVERNMENT- FURNISHED EQUIPMENT WITHOUT THE PAYMENT OF RENTAL WERE NONRESPONSIVE.

SECTION 13-501 OF ASPR STATES THAT IT IS THE GENERAL 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 BY CHARGING RENTAL OR RENTAL EQUIVALENTS IN EVALUATING BIDS OR PROPOSALS WHERE EXISTING GOVERNMENT PRODUCTION AND RESEARCH PROPERTY WILL BE USED. IN THE INSTANT CASE THERMAL'S BID INDICATED THAT IT DID NOT CONTEMPLATE THE USE OF GOVERNMENT-FURNISHED EQUIPMENT. IT IS THE FINDING OF THE ADMINISTRATIVE OFFICE, WHICH FOR THE REASONS STATED ABOVE WILL BE ACCEPTED BY OUR OFFICE, THAT NO GOVERNMENT-FURNISHED EQUIPMENT WOULD BE USED IN THE INSTANT PROCUREMENT. FOR THESE REASONS WE FIND THAT THE AWARD TO THERMAL WAS NOT INCONSISTENT WITH B-152801, FEBRUARY 3, 1964, 44 COMP. GEN. 412 OR SECTION 13-501 OF ASPR.

SECTION 13-407 OF ASPR CITED IN AERO/SPACE'S TELEGRAM OF SEPTEMBER 24, 1965, IS ENTITLED: "USE OF GOVERNMENT PRODUCTION AND RESEARCH PROPERTY WITHOUT CHARGE BY NONPROFIT ORGANIZATIONS.' THIS SECTION OF ASPR WOULD HAVE NO APPLICATION TO THE INSTANT CASE.

THE OTHER QUESTION PRESENTED IS WHETHER THE AWARD TO THERMAL WAS IN CONTRAVENTION OF THE RULES FOR THE AVOIDANCE OF ORGANIZATIONAL CONFLICTS OF INTERESTS CONTAINED IN APPENDIX G OF ASPR, THE DEPARTMENT OF DEFENSE DIRECTIVE CITED ABOVE. IT IS THE PURPOSE OF APPENDIX G OF ASPR TO PREVENT PLACING A CONTRACTOR IN A POSITION WHERE HIS JUDGMENT MAY BE BIASED. FOR EXAMPLE, THIS SECTION WOULD PROHIBIT A SINGLE CONTRACTOR WHO IS ENGAGED IN DRAFTING OF COMPLETE SPECIFICATIONS FROM COMPETING FOR PRODUCTION BASED ON THESE SPECIFICATIONS FOR A REASONABLE TIME. IT IS ALSO THE PURPOSE OF APPENDIX G TO PROHIBIT AN UNFAIR COMPETITIVE ADVANTAGE. IN THIS CONNECTION IT CANNOT BE SAID THAT EVERY DISPARITY BETWEEN BIDDERS IS AN UNFAIR COMPETITIVE ADVANTAGE. FOR EXAMPLE, THE HEADNOTE AT 42 COMP. GEN. 717 STATES:

"A REQUIREMENT IN AN INVITATION THAT ONLY NEW SUPPLIERS HAVE TO FURNISH PREPRODUCTION SAMPLES AND TESTING, WHILE CREATING A DISPARITY AMONG BIDDERS, IS NOT IN VIOLATION OF THE COMPETITIVE BIDDING PRINCIPLES, IF THE ACCEPTABILITY OF THE PRODUCT CANNOT BE DETERMINED WITHOUT SUCH ACTUAL DEMONSTRATION OR TESTING AND PROVIDED, THAT, THE TERMS OF THE COMPETITION ARE CLEARLY SET FORTH IN THE INVITATION.'

SECTION 2-22.4 (F) OF ASPR PROVIDES FOR A WAIVER OF BID SAMPLES IN CASES OF PRIOR PRODUCERS. SECTION 2-202.5/E) OF ASPR PROVIDES FOR A WAIVER OF DESCRIPTIVE LITERATURE REQUIREMENTS IN CASES OF PRIOR PRODUCERS. THESE WAIVER SITUATIONS MAY CAUSE DISPARITIES BETWEEN BIDDERS; HOWEVER, WE WOULD NOT SAY THAT THIS WOULD BY ITSELF GIVE ONE BIDDER AN UNFAIR COMPETITIVE ADVANTAGE OVER ANOTHER BIDDER. CF. B 152578, OCTOBER 31, 1963. PARAGRAPH 2 OF THE ADMINISTRATIVE REPORT, QUOTED ABOVE, INDICATES THAT THERMAL'S RELATIONSHIP TO MARTIN WAS THAT OF A SUPPLIER TO A PRIME CONTRACTOR. THERE IS NO INDICATION IN THE RECORD THAT THERMAL HAD SYSTEMS ENGINEERING OR TECHNICAL RESPONSIBILITY IN ITS SUBCONTRACT WITH MARTIN. IN THESE CIRCUMSTANCES WE CANNOT SAY THAT THERMAL'S SUBCONTRACT RELATIONSHIP WITH MARTIN GAVE IT AN UNFAIR COMPETITIVE ADVANTAGE IN THE INSTANT PROCUREMENT. ALSO, WE CANNOT SAY THAT THERMAL'S SUBCONTRACT RELATIONSHIP WITH MARTIN PLACED THERMAL IN A POSITION WHERE ITS JUDGMENT WOULD BE BIASED IN LATER PROCUREMENTS. CONSEQUENTLY, WE FIND THAT THE AWARD TO THERMAL WAS NOT IN CONTRAVENTION OF APPENDIX G OF ASPR.