B-158005, B-158488, APR. 19, 1966, 45 COMP. GEN. 642

B-158005,B-158488: Apr 19, 1966

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ON THE BASIS THE MANUFACTURER HAD NOT QUALIFIED A FIRST PREPRODUCTION SAMPLE AND WAS IN DEFAULT UNDER A CURRENT CONTRACT IS A PROCEDURE THAT ENFORCES A DETERMINATION OF RESPONSIBILITY THAT IS NOT WITHIN THE SCOPE OF THE CONTRACTING OFFICER'S AUTHORITY. DATA - PRICE NEGOTIATION TECHNIQUES ALTHOUGH A CONTRACTING OFFICER IS AUTHORIZED UNDER PARAGRAPH 3-807.1 (B) (1) A OF THE ARMED SERVICES PROCUREMENT REGULATION TO DETERMINE THE ADEQUACY OF PRICING COMPETITION. WHERE THROUGH THE MEDIUM OF FORMAL ADVERTISING ON PAST REQUIREMENTS THE PRICING HISTORY OF THE PROCUREMENT IS KNOWN AND MIGHT REASONABLY HAVE BEEN CONSTRUED TO CAST DOUBT UPON THE REASONABLENESS OF THE PRICES NEGOTIATED PURSUANT TO THE PUBLIC EXIGENCY AUTHORITY EXCEPTION IN 10 U.S.C. 2304 (A) (2).

B-158005, B-158488, APR. 19, 1966, 45 COMP. GEN. 642

BIDDERS - INVITATION RIGHT - NEGOTIATED PROCUREMENT THE FAILURE TO SOLICIT PROPOSALS FROM AN INCUMBENT CONTRACTOR, KNOWN AS A SMALL BUSINESS CONCERN, ON A LABOR SURPLUS SET-ASIDE AND THE UNRESERVED PORTION OF THE PROCUREMENT, NOT SYNOPSIZED IN THE COMMERCIAL BUSINESS DAILY, AND NEGOTIATED PURSUANT TO THE PUBLIC EXIGENCY EXCEPTION IN 10 U.S.C. 2304 (A) (2), ON THE BASIS THE MANUFACTURER HAD NOT QUALIFIED A FIRST PREPRODUCTION SAMPLE AND WAS IN DEFAULT UNDER A CURRENT CONTRACT IS A PROCEDURE THAT ENFORCES A DETERMINATION OF RESPONSIBILITY THAT IS NOT WITHIN THE SCOPE OF THE CONTRACTING OFFICER'S AUTHORITY, GIVES THE APPEARANCE OF A BOYCOTT, AND TENDS TO UNDERMINE THE PURPOSES BEHIND 15 U.S.C. 637 (B) (7), EMPOWERING THE ADMINISTRATOR OF THE SMALL BUSINESS ADMINISTRATION TO CONCLUSIVELY CERTIFY TO THE CAPACITY AND CREDIT OF A SMALL BUSINESS CONCERN TO PERFORM A SPECIFIC GOVERNMENT CONTRACT, AND IN PROCURING FUTURE REQUIREMENTS, THE COMPANY SHOULD BE SOLICITED FOR PROPOSALS, AND IN THE EVENT TIME DOES NOT PERMIT REFERRAL TO THE SMALL BUSINESS ADMINISTRATION, THE CONTRACTING OFFICER HAS AUTHORITY TO EXECUTE THE CERTIFICATE DESCRIBED IN PARAGRAPH 1-705.4 (C) (IV) OF THE ARMED SERVICES PROCUREMENT REGULATION. CONTRACTS - NEGOTIATION - COST, ETC., DATA - PRICE NEGOTIATION TECHNIQUES ALTHOUGH A CONTRACTING OFFICER IS AUTHORIZED UNDER PARAGRAPH 3-807.1 (B) (1) A OF THE ARMED SERVICES PROCUREMENT REGULATION TO DETERMINE THE ADEQUACY OF PRICING COMPETITION, WHERE THROUGH THE MEDIUM OF FORMAL ADVERTISING ON PAST REQUIREMENTS THE PRICING HISTORY OF THE PROCUREMENT IS KNOWN AND MIGHT REASONABLY HAVE BEEN CONSTRUED TO CAST DOUBT UPON THE REASONABLENESS OF THE PRICES NEGOTIATED PURSUANT TO THE PUBLIC EXIGENCY AUTHORITY EXCEPTION IN 10 U.S.C. 2304 (A) (2), THE CONTRACTING OFFICER WOULD HAVE BEEN JUSTIFIED IN USING HIS DISCRETION TO REQUIRE COST AND PRICING DATA AND TO IGNORE THE LITERAL WORDING OF THE DEFINITION OF ADEQUATE PRICE COMPETITION.

TO THE SECRETARY OF THE NAVY, APRIL 19, 1966:

REFERENCE IS MADE TO LETTERS DATED DECEMBER 21, 1965, AND MARCH 4, 1966, SIGNED BY THE ASSISTANT CHIEF FOR PURCHASING, BUREAU OF SUPPLIES AND ACCOUNTS (SANDA 642), FORWARDING REPORTS ON THE PROTEST OF LINOCHINE PRODUCTS CORPORATION AGAINST THE OMISSION OF THE AVIATION SUPPLY OFFICE, PHILADELPHIA, PENNSYLVANIA, TO SOLICIT THE COMPANY FOR AN OFFER IN CONNECTION WITH REQUEST FOR QUOTATION 383/603139/66 ISSUED ON OCTOBER 1, 1965. WE ALSO REFER TO A LETTER DATED MARCH 16, 1966, FROM THE SAME OFFICE, FORWARDING A REPORT ON LINOCHINE'S PROTEST AGAINST THE FAILURE OF ASO TO REQUEST AN OFFER FROM THEM PURSUANT TO REQUEST FOR QUOTATION 383/603290/66 ISSUED ON DECEMBER 15, 1965. THE SOLICITATIONS, AS AMENDED, SOUGHT PROPOSALS TO FURNISH 1231 (615 ON A LABOR SURPLUS SET-ASIDE BASIS AND 616 UNRESERVED) AND 1246 UNITS, RESPECTIVELY, OF THE AERO 7A-1 BOMB EJECTOR RACK. BOTH PROCUREMENTS WERE NEGOTIATED PURSUANT TO THE PUBLIC EXIGENCY EXCEPTION SET FORTH AT 10 U.S.C. 2304 (A) (2) AND NEITHER WAS SYNOPSIZED IN THE COMMERCE BUSINESS DAILY BECAUSE IT WAS DEEMED THAT THE GOVERNMENT COULD NOT AFFORD THE DELAY INCIDENT TO THE PUBLICATION. COMPARE ARMED SERVICES PROCUREMENT REGULATION 1-1003.1 (C) (IV).

IT APPEARS FROM THE RECORD THAT ONLY FIVE COMPANIES HAVE EVER HELD CONTRACTS FOR DELIVERY OF THIS PARTICULAR TYPE OF BOMB RACK: DOUGLAS AIRCRAFT COMPANY; SINGER MANUFACTURING COMPANY; COURTER PRODUCTS DIVISION, MODEL ENGINEERING AND MANUFACTURING COMPANY; STANDARD ARMAMENT CORPORATION; AND THE PROTESTANT, LINOCHINE PRODUCTS CORPORATION. THE FIRST FOUR COMPANIES RECEIVED COPIES OF BOTH REQUESTS FOR QUOTATION. AFTER EXPIRATION OF THE REVISED CLOSING DATE FOR RECEIPT OF PROPOSALS ON THE FIRST MENTIONED SOLICITATION, VIZ OCTOBER 22, 1965, LINOCHINE REPRESENTATIVES FIRST BECAME AWARE OF THE EXISTENCE OF THAT PROCUREMENT. A COPY OF THE RFQ WAS REQUESTED FROM ASO BUT WAS REFUSED ON THE GROUND THAT THE CLOSING DATE FOR RECEIPT OF PROPOSALS HAD PASSED. SUBSEQUENTLY THE FIRST SOLICITATION RESULTED IN TWO AWARDS TO COURTER; THE FIRST, DATED NOVEMBER 23, IN THE AMOUNT OF $920,920, AND THE SECOND DATED NOVEMBER 26 IN THE AMOUNT OF $919,425, COVERING THE LABOR SURPLUS SET-ASIDE PORTION. THE SECOND SOLICITATION RESULTED IN AN AWARD ON JANUARY 4, 1966, TO STANDARD ARMAMENTS CORPORATION.

LINOCHINE PRODUCTS CORPORATION IS AN INCUMBENT CONTRACTOR ON THE ITEM HAVING BEEN AWARDED ITS FIRST CONTRACT FOR PRODUCTION OF THE AERO 7A-1 BOMB EJECTOR RACK, CONTRACT NO. N600 (19) 62604, BY THE UNITED STATES NAVY PURCHASING OFFICE, WASHINGTON, D.C., ON JULY 30, 1964. THAT CONTRACT, AT A UNIT PRICE OF $1,259, COVERED 286 UNITS TO BE DELIVERED AS FOLLOWS: TWO PREPRODUCTION PROTOTYPES 150 DAYS AFTER THE CONTRACT DATE AND 30 UNITS PER MONTH BEGINNING 300 DAYS AFTER AWARD. THE AFOREMENTIONED REPORTS FROM THE CONTRACTING OFFICER STATE THAT LINOCHINE WAS NOT SOLICITED BECAUSE AS OF OCTOBER 1, 1965, WHEN THE FIRST REQUEST FOR QUOTATIONS WAS ISSUED, LINOCHINE HAD YET TO QUALIFY ITS FIRST PREPRODUCTION SAMPLE AND WAS IN DEFAULT ON ITS DELIVERIES OF PRODUCTION UNITS, A SITUATION WHICH WAS COMPROMISING THE ABILITY OF YOUR DEPARTMENT TO SATISFY THE USER. THE REQUIREMENTS COVERED BY THE NEGOTIATED SOLICITATIONS WERE URGENTLY NEEDED FOR INSTALLATION IN NEW AIRCRAFT AND FOR THE RETROFIT OF CERTAIN OTHER AIRCRAFT STARTING IN JANUARY 1966 UNTIL THE SCHEDULED COMPLETION DATE OF THE PROGRAMS IN NOVEMBER 1967.

THE PROTEST IS BASED UPON THE CONTENTION THAT BOTH PROCUREMENTS WERE CONDUCTED WITHOUT MEANINGFUL COMPETITION IN CONTROVENTION OF THE EXPRESS STATUTORY MANDATE ENACTED BY THE 1962 AMENDMENT TO THE ARMED SERVICES PROCUREMENT ACT AND SET FORTH AT 10 U.S.C. 2304 (G), BECAUSE LINOCHINE, AN ALLEGEDLY RESPONSIBLE SUPPLIER OF THE ITEMS BEING PURCHASED, WAS NOT SOLICITED FOR AN OFFER.

IN THE OPINION OF OUR OFFICE CONTRACTING OFFICERS ARE WITHOUT AUTHORITY TO UTILIZE THE PROCEDURE OF DELIBERATELY NEGLECTING TO SOLICIT AN INCUMBENT CONTRACTOR, WHO IS KNOWN TO BE A SMALL BUSINESS, FOR AN OFFER ON A NEGOTIATED PROCUREMENT AS A MEANS OF ENFORCING A DETERMINATION OF NONRESPONSIBILITY. THE COUNTENANCING OF SUCH A PROCEDURE WOULD TEND TO UNDERMINE THE PURPOSES BEHIND SECTION 8 (B) (7) OF THE ACT OF JULY 18, 1958, 72 STAT. 389, 15 U.S.C. 637 (B) (7), EMPOWERING THE ADMINISTRATOR OF THE SMALL BUSINESS ADMINISTRATION TO CERTIFY IN A MANNER CONCLUSIVE UPON OFFICERS OF THE GOVERNMENT HAVING PROCUREMENT POWERS AS TO THE CAPACITY AND CREDIT OF A SMALL BUSINESS CONCERN TO PERFORM A SPECIFIC GOVERNMENT CONTRACT. NO FINDINGS HAVE BEEN MADE THAT THE DEFECTS IN LINOCHINE'S PERFORMANCE UNDER CONTRACT NO. N600 (19) 62604 WERE DUE TO FACTORS OTHER THAN "CAPACITY" SET FORTH AT ASPR 1-705.4. THE PROPER METHOD FOR THE CONTRACTING OFFICER TO HAVE VINDICATED ANY DOUBTS ABOUT LINOCHINE'S QUALIFICATIONS AS A PROSPECTIVE CONTRACTOR WOULD HAVE BEEN TO SOLICIT THE COMPANY FOR PROPOSALS IN THE FIRST INSTANCE AND THEN TO PROMULGATE A DETERMINATION OF NONRESPONSIBILITY, IF SUCH ACTION WERE STILL DEEMED APPROPRIATE, DURING THE EVALUATION PERIOD. IF AWARD COULD NOT BE HELD UP PENDING A REFERRAL TO SBA THE CONTRACTING OFFICER'S REMEDY WOULD HAVE BEEN TO EXECUTE THE CERTIFICATE DESCRIBED IN ASPR 1-705.4 (C) (IV). WE CANNOT CONDONE THE PRACTICES FOLLOWED ON THE TWO SOLICITATIONS IN POINT WHICH IN THIS CASE DENIED THE COMPANY RESORT TO STATUTORY PROCEDURES CREATED BY CONGRESS FOR THE BENEFIT OF JUST SUCH A SMALL BUSINESS ENTITY AS LINOCHINE, AND WHICH GAVE THE APPEARANCE OF A BOYCOTT OF THE COMPANY'S PRODUCTS.

PROTESTANT HAS ALSO ALLEGED THAT THE THREE CONTRACTS UNDER DISCUSSION WERE AWARDED AT EXORBITANT UNIT PRICES; A FACT WHICH THEY SAY IS SUPPORTED BY THE RECENT PRICING HISTORY OF AERO 7A-1 BOMB EJECTOR RACK PROCUREMENTS. THE FOLLOWING CHART ILLUSTRATES THE UPWARD TREND IN THE UNIT PRICE PAID FOR THE RACK DESPITE THE INCREASE IN THE NUMBER OF UNITS PER CONTRACT AND THE EXPECTED MODERATING INFLUENCE OF THE MANUFACTURER'S LEARNING CURVE.

TABLE

DATE WINNING BIDDERS NO. UNITS UNIT PRICE

12/63 STANDARD ARMAMENT 534 $1,364

COURTER PRODUCTS 534 1,364

4/64 LINOCHINE PRODUCTS 284 1,259

11/65 COURTER PRODUCTS 1,231 1,495

1/66 STANDARD ARMAMENT 1,246 1,595

IN HIS EXPLANATION OF THIS THE CONTRACTING OFFICER MAKES NO MENTION OF THE EFFECT UPON THE PRICE OF THE EMERGENCY DELIVERY SCHEDULE SO IT CAN ONLY BE ASSUMED THAT IT IS NOT SIGNIFICANT. HE HAS ADVISED OUR OFFICE THAT BOTH COURTER AND STANDARD ARMAMENT HAVE LET IT BE KNOWN THAT THEY EXPERIENCED LOSSES PERFORMING CONTRACTS LET AT A UNIT PRICE OF $1,364 AND CONCLUDED THAT THE MOST RECENT AWARDS WERE AT FAIR AND REASONABLE PRICES.

IT IS NOTEWORTHY THAT THE CONTRACTING OFFICER DID NOT REQUIRE EITHER COURTER OR STANDARD ARMAMENT TO SUBMIT IN WRITING COST OR PRICING DATA AND TO CERTIFY THAT SUCH DATA WAS ACCURATE, COMPLETE, AND CURRENT, PRIOR TO MAKING AWARD UNDER THE TWO PROTESTED SOLICITATIONS. COMPARE ASFR 3-807.3 (A) (II). THE REASON FOR THIS IS THAT ADEQUATE PRICE COMPETITION WAS DETERMINED TO EXIST IN CONNECTION WITH THE PROCUREMENTS. COMPARE ASFR 3- 807.3 (C). THE CONTRACTING OFFICER RELIES ON ASFR 3-807.1 (B) (1) A WHICH STATES IN PERTINENT PART:

A. PRICE COMPETITION EXISTS IF OFFERS ARE SOLICITED AND (I) AT LEAST RESPONSIBLE OFFERORS (II) WHO CAN SATISFY THE PURCHASER'S * * * REQUIREMENTS (III) INDEPENDENTLY CONTEND FOR A CONTRACT TO BE AWARDED TO THE RESPONSIVE AND RESPONSIBLE OFFEROR SUBMITTING THE LOWEST EVALUATED PRICE (IV) BY SUBMITTING PRICED OFFERS RESPONSIVE TO THE EXPRESSED REQUIREMENTS OF THE SOLICITATION. WHETHER THERE IS PRICE COMPETITION FOR A GIVEN PROCUREMENT IS A MATTER OF JUDGMENT TO BE BASED ON EVALUATION OF WHETHER EACH OF THE FOREGOING CONDITIONS (I) THROUGH (IV) IS SATISFIED.

WE ARE INCLINED TO THINK THAT THE CONTRACTING OFFICER WOULD HAVE BEEN JUSTIFIED IN USING HIS DISCRETION TO REQUIRE COST AND PRICING DATA AND TO IGNORE THE LITERAL WORDING OF THE DEFINITION OF ADEQUATE PRICE COMPETITION IN THIS INSTANCE. IN OUR VIEW SUCH WOULD HAVE BEEN THE PREFERABLE PROCEDURE. AS HAS BEEN POINTED OUT, PAST REQUIREMENTS OF THE AERO 7A-1 BOMB RACKS HAD BEEN SATISFIED THROUGH THE MEDIUM OF FORMAL ADVERTISING AND THE KNOWN PRICING HISTORY OF THE ITEM MIGHT REASONABLY HAVE BEEN CONSTRUED AS CASTING DOUBT UPON THE REASONABLENESS OF COURTER AND STANDARD ARMAMENT QUOTATIONS.

SINCE BOTH COURTER PRODUCTS AND STANDARD ARMAMENT ARE IN PRODUCTION OF THE RACKS THERE HAS NOT BEEN POINTED OUT TO US ANY VALID REASON WHY THE AWARDS DID NOT RESULT IN BINDING AND SUBSISTING CONTRACTS WE ARE CONSTRAINED TO ADVISE ATTORNEYS FOR PROTESTANT OF OUR INABILITY TO REDRESS THE COMPANY'S GRIEVANCES IN THE MATTER. NEVERTHELESS, ESPECIALLY SINCE THE FIRST PRODUCTION LOT DELIVERED UNDER CONTRACT NO. N600 (19) 62604 APPEARS TO HAVE BEEN ACCEPTED AND PAID FOR ON MARCH 12, 1966, WE MUST ADVISE YOU THAT OUR OFFICE WOULD BE COMPELLED TO OBJECT TO ANY FURTHER FAILURE ON THE PART OF AGENCIES OF YOUR DEPARTMENT TO SOLICIT LINOCHINE IN CONNECTION WITH THE PROCUREMENT OF FURTHER REQUIREMENTS OF THE AERO 7A-1 BOMB EJECTOR RACK.

THE DOCUMENTS REQUESTED ARE RETURNED HEREWITH.