B-158528, APR. 26, 1967

B-158528: Apr 26, 1967

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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO LETTER DATED MAY 9. REFERENCE IS ALSO MADE TO LETTER DATED OCTOBER 26. TWO PREPRODUCTION SAMPLES WERE REQUIRED TO BE FURNISHED WITHIN 90 DAYS AFTER DATE OF AWARD DOCUMENT (ADAD). DELIVERIES OF PRODUCTION QUANTITIES WERE REQUIRED TO BE MADE AS FOLLOWS. OFFERORS WERE AUTHORIZED TO OFFER AN EARLIER DELIVERY SCHEDULE AND IT WAS STATED THAT IF A DELIVERY SCHEDULE EARLIER THAN THAT SPECIFIED IN THE RFP WAS OFFERED. OFFERORS WERE REQUIRED TO BID ON ALL ITEMS DESCRIBED IN THE RFP. WHICH WERE TO BE AWARDED AS A UNIT ON THE BASIS OF THE TOTAL PRICE QUOTED. PRICES WERE TO BE EVALUATED ON THE BASIS OF COST OF TRANSPORTATION OF THE SUPPLIES. " OFFERORS WERE INFORMED.

B-158528, APR. 26, 1967

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO LETTER DATED MAY 9, 1966, FROM THE DIRECTOR OF PROCUREMENT AND PRODUCTION, FURNISHING US A REPORT ON THE PROTEST OF DAYTON ELECTRONIC PRODUCTS COMPANY (DEPCO) AGAINST THE AWARD OF A CONTRACT TO CANADIAN COMMERCIAL CORPORATION UNDER REQUEST FOR PROPOSALS NO. AMC/E/- 36-039-66-10652-1, ISSUED BY THE PHILADELPHIA PROCUREMENT DIVISION, PROCUREMENT AND DIRECTORATE, U.S. ARMY ELECTRONICS COMMAND (USAECOM), UNDER DATE OF NOVEMBER 19, 1965. REFERENCE IS ALSO MADE TO LETTER DATED OCTOBER 26, 1966, FROM THE DIRECTOR OF PROCUREMENT AND PRODUCTION, FURNISHING US COMMENTS ON DEPCO'S LETTERS OF MAY 20, 1966, AND JULY 7, 1966, IN SUPPORT OF ITS PROTEST.

THE REQUEST FOR PROPOSALS (RFP), AS MODIFIED BY AMENDMENT NO. 1, DATED DECEMBER 15, 1965, REQUESTED PROPOSALS, TO BE RECEIVED UNTIL THE CLOSE OF BUSINESS ON JANUARY 3, 1966, FOR FURNISHING "67 EA. RADIO SET AN/VRC-24" AND "224 EA. RADIO SET AN/TRC-68," DESIGNATED AS ITEMS (1) AND (5), RESPECTIVELY, TOGETHER WITH RELATED SUB-ITEMS AND ANCILLARY ITEMS.

IN THE CASE OF BOTH MAIN ITEMS, TWO PREPRODUCTION SAMPLES WERE REQUIRED TO BE FURNISHED WITHIN 90 DAYS AFTER DATE OF AWARD DOCUMENT (ADAD), AND DELIVERIES OF PRODUCTION QUANTITIES WERE REQUIRED TO BE MADE AS FOLLOWS, F.O.B. CONTRACTOR'S SHIPPING POINT:

CHART

10 EACH - 180 DAYS ADAD 20 EACH - 180 DAYS ADAD

10 EACH - 210 DAYS ADAD 40 EACH - 210 DAYS ADAD

10 EACH - EACH MONTH 40 EACH - 240 DAYS ADAD

THEREAFTER UNTIL COMPLETE

40 EACH - 270 DAYS ADAD

40 EACH - 300 DAYS ADAD

44 EACH - 330 DAYS ADAD

HOWEVER, OFFERORS WERE AUTHORIZED TO OFFER AN EARLIER DELIVERY SCHEDULE AND IT WAS STATED THAT IF A DELIVERY SCHEDULE EARLIER THAN THAT SPECIFIED IN THE RFP WAS OFFERED, THE GOVERNMENT RESERVED THE RIGHT TO AWARD EITHER IN ACCORDANCE WITH THE REQUIRED SCHEDULE OR THE SCHEDULE SO OFFERED.

THE RFP ALSO PROVIDED, IN ARTICLE N OF THE SCHEDULE, THAT GOVERNMENT RESERVED THE RIGHT TO WAIVE THE REQUIREMENT FOR PREPRODUCTION SAMPLES AS TO THOSE OFFERORS OFFERING A PRODUCT WHICH HAD BEEN PREVIOUSLY PROCURED OR TESTED BY THE GOVERNMENT AND INVITED OFFERORS MEETING THAT CONDITION TO SET FORTH ANY DECREASE IN UNIT PRICES AND THE EARLIER DELIVERY SCHEDULE OFFERED IN THE EVENT OF SUCH WAIVER.

TO BE ELIGIBLE FOR AWARD, OFFERORS WERE REQUIRED TO BID ON ALL ITEMS DESCRIBED IN THE RFP, WHICH WERE TO BE AWARDED AS A UNIT ON THE BASIS OF THE TOTAL PRICE QUOTED. PRICES WERE TO BE EVALUATED ON THE BASIS OF COST OF TRANSPORTATION OF THE SUPPLIES, IN THE QUANTITIES SPECIFIED, TO FOUR LOCATIONS DESIGNATED IN THE RFP.

IN CLAUSE 7 OF THE "TERMS AND CONDITIONS OF REQUEST FOR PROPOSALS," OFFERORS WERE INFORMED, AMONG OTHER THINGS, THAT A CONTRACT WOULD BE AWARDED TO THAT RESPONSIBLE OFFEROR WHOSE PROPOSAL WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED, AND THE RIGHT WAS RESERVED TO ACCEPT OTHER THAN THE LOWEST PROPOSAL; ALSO THAT, PURSUANT TO 10 U.S.C 2304 (G), THE GOVERNMENT MIGHT AWARD A CONTRACT, BASED ON INITIAL PROPOSALS RECEIVED, WITHOUT DISCUSSION OF SUCH PROPOSALS. ACCORDINGLY, PROSPECTIVE OFFERORS WERE ADVISED THAT EACH INITIAL PROPOSAL SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR COULD SUBMIT TO THE GOVERNMENT. A NEARLY IDENTICAL STATEMENT APPEARED AT PAGE 21 AS FOLLOWS:

"NOTICE TO OFFERORS:

"OFFERORS ARE HEREBY NOTIFIED THAT BARGAINING WILL BE KEPT TO THE MINIMUM REQUIRED TO ESTABLISH A FAIR AND REASONABLE PRICE. THERE IS A POSSIBILITY THAT THE AWARD MAY BE MADE WITHOUT DISCUSSION OF THE INITIAL OFFERS WITH OFFERORS. THEREFORE, PROPOSALS SHOULD BE SUBMITTED OFFERING THE MOST FAVORABLE TERMS AND LOWEST PRICE, INITIALLY.'

PROPOSALS FOR FURNISHING THE SUPPLIES BEING PROCURED WERE SOLICITED FROM THREE FIRMS, NAMELY DEPCO, STEWART-WARNER ELECTRONICS, AND BEACONING OPTICAL AND PRECISION MATERIALS CO., LTD., A CANADIAN CONCERN SPONSORED BY CANADIAN COMMERCIAL CORPORATION.

BY LETTER OF DECEMBER 31, 1965, DEPCO SUBMITTED A PROPOSAL OFFERING TO FURNISH ITEMS (1) AND (5), TOGETHER WITH THE ANCILLARY ITEMS, FOR THE AGGREGATE AMOUNT OF $1,384,764, LESS 1/2 OF 1 PERCENT DISCOUNT FOR PAYMENT WITHIN 10 DAYS.

THE ABOVE AMOUNT WAS STATED TO BE BASED UPON THE FURNISHING OF PRE PRODUCTION SAMPLES AND DELIVERY OF PRODUCTION QUANTITIES OF THE SUPPLIES IN ACCORDANCE WITH THE DELIVERY SCHEDULE SET OUT IN THE RFP. PURSUANT TO PROVISION N, DEPCO OFFERED, IF PRE-PRODUCTION SAMPLES WERE NOT REQUIRED, TO DECREASE THE UNIT PRICE PROPOSED TO BE CHARGED FOR ITEM (1) FROM $3,678, TO $3,658, AND THAT PROPOSED TO BE CHARGED FOR ITEM (5) FROM $5,012 TO $4,962, THUS REDUCING THE AGGREGATE AMOUNT PROPOSED TO BE CHARGED TO $1,372,224, LESS THE REFERRED-TO DISCOUNT FOR PROMPT PAYMENT, AND ALSO OFFERED TO DELIVER THE SUPPLIES IN ACCORDANCE WITH THE FOLLOWING ACCELERATED DELIVERY SCHEDULE:

CHART

ITEM 1 ITEM 5

10 EACH -90 DAYS ADAD 20 EACH - 90 DAYS ADAD

10 EACH - 120 DAYS ADAD 40 EACH - 120 DAYS ADAD

10 EACH - 150 DAYS ADAD 40 EACH - 150 DAYS ADAD

10 EACH - 180 DAYS ADAD 40 EACH - 180 DAYS ADAD

10 EACH - 210 DAYS ADAD 40 EACH - 210 DAYS ADAD

17 EACH - 240 DAYS ADAD 44 EACH - 240 DAYS ADAD

PROPOSALS WERE ALSO RECEIVED FROM STEWART-WARNER ELECTRONICS AND BEACONING OPTICAL AND PRECISION MATERIALS CO., LTD., WHOSE PROPOSAL WAS SUBMITTED BY CANADIAN COMMERCIAL CORPORATION.

IN ITS PROPOSAL DATED NOVEMBER 29, 1965, BEACONING OPTICAL AND PRECISION MATERIALS CO., LTD. (BOP), OFFERED TO FURNISH ITEMS (1) AND (5) AT UNIT PRICES OF $3,469 AND $4,701.30, RESPECTIVELY, AND ALL OF THE ITEMS OF SUPPLIES AND SERVICES DESCRIBED IN THE RFP FOR THE AGGREGATE AMOUNT OF $1,335,885.55.

THE ABOVE AMOUNT WAS BASED UPON FURNISHING PRE-PRODUCTION SAMPLES AND DELIVERY OF THE SUPPLIES IN ACCORDANCE WITH THE DELIVERY SCHEDULE SET OUT IN THE RFP. DECREASES OF $2.00 PER UNIT IN THE UNIT PRICES OF $3,469 AND $4,701.30 QUOTED IN ITS PROPOSAL FOR ITEMS (1) AND (5) WERE OFFERED IF IT WAS NOT REQUIRED TO FURNISH PRE-PRODUCTION SAMPLES OF THE ITEMS, BUT NO ACCELERATION OF DELIVERIES WAS PROPOSED.

PURSUANT TO THE TERMS OF THE INVITATION, AN AMOUNT DETERMINED TO BE THE PROPER ADJUSTMENT FOR RENT-FREE USE OF GOVERNMENT-OWNED TOOLING WAS ADDED TO THE DEPCO BID, TOGETHER WITH THE COST OF TRANSPORTATION OF THE RADIO SETS TO THE DESIRED DESTINATIONS, AND THE ADJUSTED PRICES AFTER DEDUCTION OF THE DISCOUNT OFFERED FOR PROMPT PAYMENT AND ADDITION OF THE ABOVE ITEMS, WERE EVALUATED AT $1,389,553.19 AND $1,377,075.89, WITH AND WITHOUT PRE-PRODUCTION SAMPLES, RESPECTIVELY.

CONSIDERING THE SAME FACTORS, TOOLING USE AND TRANSPORTATION, BOP'S PRICES FOR PERFORMING THE CONTRACT ON THE BASIS OF FURNISHING PRE PRODUCTION SAMPLES AND WITHOUT FURNISHING SUCH SAMPLES WERE EVALUATED AT $1,341,892.57 AND $1,341,310.57, RESPECTIVELY.

STEWART-WARNER'S PROPOSAL OFFERED TO FURNISH ALL OF THE ITEMS OF SUPPLIES AND SERVICES DESCRIBED IN THE RFP, WITH THE EXCEPTION OF THE SO-CALLED ANCILLARY ITEMS (3) AND (9), REFERRED TO ABOVE, FOR THE AGGREGATE AMOUNTS (DEPENDING UPON WHETHER OR NOT PRE-PRODUCTION SAMPLES WERE TO BE FURNISHED) OF $1,688,426.40 AND $1,633,360.40, RESPECTIVELY. STEWART- WARNER INDICATED IN ITS PROPOSAL THAT THE CHARGES TO BE MADE WITH RESPECT TO ITEMS (3) AND (9) WERE "TO BE NEGOTIATED.'

BY MEMORANDUM OF JANUARY 5, 1966 (COMMENT NO. 1),"SUBJECT: REVIEW OF QUOTE ON PROPOSED AWARD TO BEACONING OPTICAL AND PRECISION MATERIALS CO., LTD. - RFP NO. AMC/E/-36-039-66-10652-1," THE CONTRACTING OFFICER FORWARDED THE THREE PROPOSALS TO THE CHIEF, ECONOMICS BRANCH, USAECOM, WITH THE REQUEST THAT HE "BE ADVISED RELATIVE TO NEGOTIATIONS.' IN A MEMORANDUM DATED JANUARY 13, 1966 (COMMENT NO. 2), FROM THE CHIEF, ECONOMICS BRANCH, TO THE CONTRACTING OFFICER, THE PRICES PAID FOR EQUIPMENT SIMILAR TO THAT HERE INVOLVED IN THE CASE OF PRIOR PROCUREMENTS WERE SET FORTH, AND THE CONTRACTING OFFICER WAS ADVISED AS FOLLOWS:

"4. PRICE ANALYSIS

"THE OVERALL PRICE QUOTED BY CANADIAN COMMERCIAL CORPORATION (BEACONING OPTICAL AND PRECISION MATERIALS CO., LTD.) IS CONSIDERED FAIR AND REASONABLE ON THE BASIS OF A PRICE ANALYSIS PER ASPR 3-807.1 (B) (1/A AND 3-807.2 (B) (1) (I).

"CONCLUSION

"BASED UPON THE FOREGOING, THE PROPOSED PROCUREMENT UNDER SUBJECT RFP NO AMC/E/-36-039-66-10652-1 FROM CANADIAN COMMERCIAL CORPORATION (BEACONING OPTICAL AND PRECISION MATERIALS CO., LTD) FOR A TOTAL PRICE OF $1,335,885.55, TERMS: NET, ON A FIRM FIXED-PRICE BASIS IS CONSIDERED FAIR AND REASONABLE AND IS RECOMMENDED FOR ACCEPTANCE. THIS RECOMMENDATION IS BEING MADE IN ACCORDANCE WITH THE FOREGOING ASPR PARAGRAPHS CITED AND HOLDS VALID REGARDLESS OF WHETHER OR NOT PREPRODUCTION SAMPLES ARE WAIVED UNDER THIS PROPOSED PROCUREMENT. THE CONTRACTING OFFICER/CONTRACT SPECIALIST SHOULD MAINTAIN A RECORD OF NEGOTIATIONS OTHER THAN PRICE AND INCLUDE SUCH RECORD IN THE CONTRACT FILE.'

EXCEPT FOR THE LAST QUOTED SENTENCE THERE WAS NO REFERENCE TO, OR RECOMMENDATION FOR ANY FURTHER NEGOTIATIONS OF ANY KIND.

ALSO, UNDER DATE OF JANUARY 5, 1966, THE CONTRACTING OFFICER FILED WITH THE CONTRACTOR EVALUATION BOARD, USAECOM, A THREE-PART FORM EMBODYING, IN PART I, A "REQUEST FOR DETERMINATION OF CONTRACTOR RESPONSIBILITY; " IN PART II, A "RECOMMENDATION; " AND IN PARTIII, A "STATEMENT OF THE CONTRACTING OFFICER.' THE CONTRACTING OFFICER INDICATED THAT A REPORT AND RECOMMENDATION WAS DESIRED CONCERNING THE ABILITY OF BOP TO FURNISH PRE- PRODUCTION SAMPLES OF ITEMS (1) AND (5) AND DELIVER THE PRODUCTION QUANTITIES OF THOSE ITEMS, AS WELL AS THE ANCILLARY ITEMS DESCRIBED IN THE RFP, WITHIN THE TIME REQUIRED BY THE DELIVERY SCHEDULE CONTAINED THEREIN. THE FORM WAS SUBSEQUENTLY RETURNED TO THE CONTRACTING OFFICER BEARING THE SIGNATURE OF THE CHAIRMAN OF THE CONTRACT EVALUATION BOARD. UNDER THE HEADING "RECOMMENDATION," THE FORM, AS EXECUTED, INDICATED THAT BOP WAS CONSIDERED RESPONSIBLE PURSUANT TO THE STANDARDS SET FORTH IN PARAGRAPH 1- 903 OF THE ARMED SERVICES PROCUREMENT REGULATION AND THEREFORE CAPABLE OF ASSURING SATISFACTORY PERFORMANCE ON THE PROPOSED AWARD, AND THAT THE BOARD'S EVALUATION HAD INCLUDED THE FACTORS OF TECHNICAL CAPABILITY, PRODUCTION CAPABILITY, PLANT FACILITIES AND EQUIPMENT, FINANCIAL CAPABILITY, QUALITY ASSURANCE CAPABILITY, LABOR RESOURCES, PERFORMANCE RECORD, AND ABILITY TO MEET REQUIRED SCHEDULE. ON FEBRUARY 2, 1966, THE CONTRACTING OFFICER SIGNED THE "STATEMENT OF THE CONTRACTING OFFICER" THAT THE FOREGOING EVALUATION CONSTITUTED EXPERT OPINION OF PERSONNEL OF USAECOM QUALIFIED TO EVALUATE CONTRACTOR RESPONSIBILITY, AND THAT HE CONCURRED WITH THE REPORT AND THEREFORE DETERMINED BOP TO BE RESPONSIBLE. ON THE BASIS OF INFORMATION RECEIVED BY HIS OFFICE ON JANUARY 24, 1966, THE CONTRACTING OFFICER DETERMINED THAT PRE-PRODUCTION SAMPLES COULD BE WAIVED FOR BOP IN THE CASE OF ITEM (1), BUT NOT IN THE CASE OF ITEM (5).

AT THIS JUNCTURE, THE PROCURING ACTIVITY PROCEEDED TO NEGOTIATE WITH BOP IN AN EFFORT TO OBTAIN MORE FAVORABLE DELIVERY TERMS THAN THOSE WHICH HAD BEEN OFFERED, IN CONSIDERATION OF THE GOVERNMENT'S AGREEMENT TO WAIVE PRE- PRODUCTION SAMPLES WITH RESPECT TO ITEM (1). BY TELEGRAM OF JANUARY 26, 1966, BOP ADVISED THE PROCURING ACTIVITY THAT IT WOULD DELIVER 10 UNITS OF ITEM (1) WITHIN 165 DAYS ADAD AND 10 UNITS PER MONTH THEREAFTER, PROVIDED IT WAS NOT REQUIRED TO FURNISH PRE PRODUCTION SAMPLES OF THE ITEM, AND THAT IT WOULD FURNISH PRE PRODUCTION SAMPLES AND DELIVER PRODUCTION QUANTITIES OF ITEM (5) IN ACCORDANCE WITH THE DELIVERY SCHEDULE CONTAINED IN THE RFP. HOWEVER, IN A TELEGRAM DISPATCHED BY CCC TO THE PHILADELPHIA PROCUREMENT DIVISION, PROCUREMENT AND PRODUCTION DIRECTORATE, ON JANUARY 31, 1966, CCC ADVISED THAT BOP'S PROPOSAL WAS REVISED AS FOLLOWS: DELIVERIES OF PRODUCTION QUANTITIES OF ITEM (1), PRE-PRODUCTION SAMPLES OF WHICH WERE TO BE WAIVED, WOULD START 120 DAYS ADAD AND WOULD BE MADE AT THE RATE OF 10 UNITS PER MONTH. TWO PRE-PRODUCTION SAMPLES OF ITEM (5) WOULD BE FURNISHED FOR APPROVAL WITHIN 45 DAYS ADAD, AND DELIVERIES OF PRODUCTION QUANTITIES OF THE ITEM WOULD BE MADE AT THE RATE OF 20 UNITS WITHIN 150 DAYS ADAD, 40 WITHIN 180 DAYS ADAD, 40 WITHIN 210 DAYS ADAD, 40 WITHIN 240 DAYS ADAD, 40 WITHIN 270 DAYS ADAD, AND 44 WITHIN 300 DAYS ADAD. THE TELEGRAM STATED THAT, IN CONSIDERATION OF THE ACCELERATION OF DELIVERIES, THE UNIT PRICE FOR ITEM (1) WOULD BE INCREASED $5.00 TO $3,474.00 AND THE UNIT PRICE FOR ITEM (5) WOULD BE INCREASED $20.00 TO $4,721.30. HOWEVER, IN A TELEGRAM OF FEBRUARY 2, 1966, CCC ADVISED THAT THE REVISED PRICE OF $3,474.00, STATED IN ITS TELEGRAM OF JANUARY 31, 1966, SHOULD BE CORRECTED TO $3,472.00. ON FEBRUARY 9, 1966, A CONTRACT WAS ENTERED INTO WITH CCC FOR FURNISHING THE SUPPLIES IN ACCORDANCE WITH THE PRICE AND DELIVERY TERMS OFFERED IN BOP'S PROPOSAL, AS MODIFIED AND CLARIFIED BY CCC'S TELEGRAMS OF JANUARY 31, 1966, AND FEBRUARY 2, 1966.

BY TELEGRAM DATED FEBRUARY 14, 1966, DEPCO ADVISED OUR OFFICE OF ITS PROTEST AGAINST THE AWARD MADE. SUBSEQUENT CORRESPONDENCE FROM THE PROTESTOR AND REPORTS AND COMMENTS FROM YOUR DEPARTMENT HAVE FULLY DEVELOPED THE SEVERAL GROUNDS OF PROTEST RELIEF UPON AND THE POSITION OF THE PROCURING ACTIVITY AND HEADQUARTERS, AMC, WITH RESPECT THERETO. THE POINTS WHICH GIVE US THE MOST CONCERN ARE THOSE CONCERNING THE CONDUCT OF THE NEGOTIATED PROCUREMENT AND THE CONFUSING AND SOMEWHAT CONFLICTING PROVISIONS AND ACTIONS WITH RESPECT TO THE DELIVERY SCHEDULES.

THE PROCUREMENT UNDER CONSIDERATION WAS ASSIGNED A MILSTRIP PRIORITY RATING OF 02, AND THIS APPEARS TO BE THE ONLY JUSTIFICATION IN THE RECORD BEFORE US FOR USE OF THE NEGOTIATION PROCEDURE. URGENCY WAS FURTHER INDICATED BY THE FIXING OF A CLOSING DATE OF DECEMBER 3, 1965, BY THE RFP ISSUED ON NOVEMBER 19, ALTHOUGH IT WAS SUBSEQUENTLY FOUND NECESSARY TO EXTEND THE CLOSING DATE TO JANUARY 3, 1966.

AS STATED ABOVE, THE RFP CONTAINED A SCHEDULE OF REQUIRED DELIVERY TIMES, WITH PERMISSION FOR OFFERORS TO OFFER EARLIER DELIVERIES, THE RIGHT BEING RESERVED BY THE GOVERNMENT TO ACCEPT IN THAT EVENT EITHER THE REQUIRED SCHEDULE OR THE EARLIER SCHEDULE OFFERED. THE PROVISIONS OF ARTICLE N INVITING OFFERS OF BOTH EARLIER DELIVERY AND LOWER PRICES IN THE EVENT OF WAIVER OF THE PRE-PRODUCTION SAMPLE REQUIREMENT INCLUDED THE STATEMENT,"WHEN THE GOVERNMENT DECIDES TO EXERCISE ITS RIGHT TO WAIVE PREPRODUCTION SAMPLES, BIDS/OFFERS WILL BE EVALUATED ON THE BASIS OF THE DECREASED UNIT PRICE AND EARLIER DELIVERY SO OFFERED. SEE THE "DELIVERY" PROVISION CONTAINED ELSEWHERE HEREIN.'

IN ITS ORIGINAL PROTEST TO THE PHILADELPHIA PROCUREMENT DIVISION, BY LETTER OF FEBRUARY 16, 1966, DEPCO COMPLAINED THAT ITS SUBSTANTIALLY EARLIER DELIVERY HAD NOT BEEN CONSIDERED IN EVALUATION OF ITS PROPOSAL, DESPITE THE URGENCY OF THE PROCUREMENT; AND THAT NORMAL PROCEDURES HAD NOT BEEN OBSERVED IN THAT NO NOTICE OF A CUT-OFF DATE FOR NEGOTIATION HAD BEEN GIVEN.

THE CONTRACTING OFFICER'S STATEMENT DATED MARCH 8, 1966, INCLUDED THE FOLLOWING COMMENTS PERTINENT TO THE ABOVE POINTS:

"11. IN VIEW OF THE PRICE DIFFERENTIAL (BETWEEN THE DEPCO AND BOP PROPOSALS AS SUBMITTED) IT WAS DETERMINED TO BE IN THE BEST INTEREST OF THE GOVERNMENT TO FIRST NEGOTIATE WITH CANADIAN COMMERCIAL AND TO ATTEMPT TO OBTAIN A BETTER DELIVERY.'

AFTER STATING THE REVISED DELIVERY TERMS OFFERED AS A RESULT OF THESE NEGOTIATIONS, AND THE REVISED PRICE RESULTING FROM WAIVER OF PREPRODUCTION SAMPLE OF ITEM 1, WHICH SHOWED A DIFFERENCE OF $37,363.44 BETWEEN THE EVALUATED OFFERS OF DEPCO AND BOP, THE STATEMENT CONTINUED:

"14. WITH THE DIFFERENCE IN COST AND THE ACCELERATED DELIVERY (OVER AND ABOVE THE REQUIRED DELIVERY SET FORTH IN THE SOLICITATION), OFFERED BY CCC, THE CONTRACTING OFFICER DETERMINED THAT, PRICE AND OTHER FACTS (SIC) CONSIDERED, IT WAS IN THE BEST INTEREST OF THE GOVERNMENT TO ISSUE AN AWARD TO CCC. * * *

"16. * * *

"/H) REGARDING THE FIRST PARAGRAPH STARTING ON PAGE 3, WHICH STATES "THE ARBITRARY PROCEDURES FOLLOWED BY THE GOVERNMENT IN DISREGARDING ESTABLISHED PROCUREMENT PRACTICES IN MAKING THIS RD.' ALL ESTABLISHED PROCEDURES AND REGULATIONS WERE FOLLOWED IN EVALUATION AND AWARD OF THIS PROCUREMENT. * * *

"/1) REGARDING THE SUMMARY OF DEPCO'S VALID REASONS FOR PROTESTING THE AWARD, PARAGRAPHS 1 THRU 5 HAVE BEEN ANSWERED IN THE ABOVE PARAGRAPHS 16 (A) THRU 16 (K). WITH RESPECT TO PARAGRAPH 6 OF THE SUMMARY, NORMAL PROCEDURES PROVIDE THAT ONLY FIRMS WITH WHOM NEGOTIATIONS HAVE BEEN CONDUCTED ARE ADVISED OF CLOSING OF NEGOTIATIONS (ASPR 3-805.1 (B) ).'

COMMENT NO. 1 FROM THE OFFICE OF GENERAL COUNSEL, PHILADELPHIA, ATTACHED TO THE CONTRACTING OFFICER'S STATEMENT, CONTAINS FURTHER REMARKS AS FOLLOWS:

"B. WITH REGARD TO THE FIRST ALLEGATION, THE PROCUREMENT REGULATIONS SPECIFICALLY PRESCRIBE THE CONSIDERATION THAT MAY BE GIVEN. ASPR 1-1903 (A) PROVIDES THAT "TO PERMIT PROPER EVALUATION OF BIDS OR OFFERS WHERE ONE OR MORE BIDDERS OR OFFERORS MAY BE ELIGIBLE TO HAVE FIRST ARTICLE APPROVAL TESTS WAIVED, THE SOLICITATION SHALL PERMIT THE SUBMISSION OF ALTERNATIVE BIDS OR OFFERS--- ONE INCLUDING FIRST ARTICLE APPROVAL TESTS AND THE OTHER EXCLUDING SUCH TESTS; .... THE DELIVERY SCHEDULES--- MAY PROVIDE FOR A SHORTER DELIVERY SCHEDULE WHERE THE FIRST ARTICLE APPROVAL IS WAIVED AND EARLIER DELIVERY IS IN THE INTERESTS OF THE GOVERNMENT, PROVIDED THAT IN THE LATTER CASE ANY DIFFERENCE IN DELIVERY SCHEDULES RESULTING FROM A WAIVER OF FIRST ARTICLE APPROVAL SHALL NOT BE A FACTOR IN EVALUATION FOR AWARD. ...' IT WAS NOTED THAT DOCUMENTATION IN THE CONTRACT FILE INDICATED THAT THE REQUIRED DELIVERY SCHEDULE (PRODUCTION TO BEGIN 180 DAYS ADAD) WOULD MEET THE NEEDS OF THE GOVERNMENT. IT WAS NOT NECESSARY THEREFORE TO REVISE THE DELIVERY SCHEDULE IN THE SOLICITATION IN ORDER TO NEGOTIATE WITH ALL OFFERORS. THE CONTRACTING OFFICER'S DETERMINATION NOT TO ACCEPT THE ACCELERATED DELIVERY WAS PROPER AND RESULTED IN AN EVALUATION ON AN EQUAL BASIS DELIVERY-WISE.

"D. THE SOLICITATION CONTAINED A NOTE NOTIFYING THE OFFERORS THAT BARGAINING WOULD BE KEPT TO A MINIMUM REQUIRED TO ESTABLISH A FAIR AND REASONABLE PRICE. INASMUCH AS NEGOTIATIONS WERE HELD WITH BEACONING ONLY, THE NOTIFICATION OF CLOSE OF NEGOTIATIONS TO BEACONING ALONE WAS PROPER AND IN ACCORDANCE WITH ECOM 715 3-805 (D) WHICH SO PRESCRIBES. (ALSO SEE ASPR 3-805.1 (B) ).'

FINALLY, BY LETTER DATED OCTOBER 26, 1966, THE DIRECTOR OF PROCUREMENT AND PRODUCTION FORWARDED A SUPPLEMENTAL ADMINISTRATIVE REPORT FROM THE CONTRACTING OFFICER, IN REPLY TO DEPCO'S LETTERS OF MAY 20 AND JULY 7, 1966. IN THIS REPORT THE CONTRACTING OFFICER REPEATED THE ABOVE-QUOTED PARAGRAPHS B. AND D. FROM THE GENERAL COUNSEL'S COMMENTS, AND ADDED THE FOLLOWING STATEMENT:

"/C) THE PROTESTED AWARD WAS SOLICITED UNDER NEGOTIATED PROCEDURES. EVEN EMPLOYING THE STRICT RULES OF FORMAL ADVERTISING, AS STATED BY THE COMPTROLLER GENERAL IN 37 COMP GEN 251,"IT IS TRUE, AS A GENERAL RULE, THAT BIDDERS MAY NOT VARY THEIR PROPOSALS AFTER BIDS ARE OPENED SINCE TO PERMIT THEM TO DO SO WOULD NULLIFY THE PURPOSES FOR LETTING PUBLIC CONTRACTS ON AN OPEN COMPETITIVE BASIS. 17 COMP GEN 554. THE REASON FOR THE RULE IS TO PUT ALL BIDDERS ON AN EQUAL BASIS AND TO PREVENT ANY BIDDER FROM OBTAINING AN ADVANTAGE BY BEING PERMITTED TO VARY ITS BID AFTER THE OTHER BIDS WERE DISCLOSED. IT IS WELL ESTABLISHED, HOWEVER, THAT WHERE A BIDDER HAS SUBMITTED THE OTHERWISE LOW ACCEPTABLE BID, THERE IS NO REASON WHY HE MAY NOT, AFTER OPENING, VOLUNTARILY DECREASE THE AMOUNT OF HIS BID SINCE THE RULE THAT AMENDMENTS TO BIDS RECEIVED AFTER OPENING SHOULD BE DISREGARDED DOES NOT APPLY WHERE THE BID IS ALREADY THE LOWEST. ALECK LEITMAN V UNITED STATES, 104 CCLS 324; B-74013, MARCH 9, 1948. IT FOLLOWS FROM THESE DECISIONS THAT THE ACCEPTANCE BY THE CONTRACTING AGENCY OF AN OFFER BY THE LOW BIDDER IN THIS CASE TO REDUCE ITS TIME OF PERFORMANCE RESULTS IN NO UNFAIRNESS OR DISADVANTAGES TO THE OTHER BIDDERS.' ACCORDINGLY, AFTER DETERMINING THE LOWEST RESPONSIBLE AND RESPONSIVE BIDDER, THE ACCELERATED SCHEDULE WAS ACCEPTED AS AN INCIDENT TO NEGOTIATIONS.'

THE STATUTE WHICH FURNISHES THE BASIS FOR THE SUBJECT PROCUREMENT, 10 U.S.C. 2304, WAS AMENDED BY PUBLIC LAW 87-653, SEPTEMBER 10, 1962, BY THE ADDITION OF SUBSECTION (G), WHICH INCLUDES THE FOLLOWING PROVISIONS PERTINENT TO THE QUESTIONS PRESENTED BY THE ABOVE STATEMENTS:

"IN ALL NEGOTIATED PROCUREMENTS * * * WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED: PROVIDED, HOWEVER, THAT THE REQUIREMENTS OF THIS SUBSECTION WITH RESPECT TO WRITTEN OR ORAL DISCUSSIONS NEED NOT BE APPLIED TO PROCUREMENTS IN IMPLEMENTATION OF AUTHORIZED SET-ASIDE PROGRAMS OR TO PROCUREMENTS WHERE IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT, THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN FAIR AND REASONABLE PRICES AND WHERE THE REQUEST FOR PROPOSALS NOTIFIES ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION.'

THE POSITION OF THE CONTRACTING OFFICER AND OF THE ARMY MATERIAL COMMAND, AS WE UNDERSTAND IT FROM THE RECORD BEFORE US IN THIS CASE, IS THAT WHEN A REQUEST FOR PROPOSALS NOTIFIES ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION, AND IT IS DETERMINED THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN FAIR AND REASONABLE PRICES, THE REQUIREMENT OF WRITTEN OR ORAL DISCUSSIONS WITH ALL RESPONSIBLE OFFERORS WITHIN A REASONABLE PRICE RANGE MAY BE IGNORED EVEN THOUGH THAT INITIAL PROPOSAL IS NOT IN FACT ACCEPTED. IN OTHER WORDS, A DETERMINATION THAT ONE PROPOSAL MAY BE ACCEPTED AS SUBMITTED JUSTIFIES FURTHER "WRITTEN OR ORAL DISCUSSIONS" WITH ONLY THE OFFEROR OF THAT PROPOSAL, WITHOUT REGARD TO ANY OTHER PROPOSALS, HOWEVER COMPETITIVE THEY MAY BE.

WE BELIEVE THIS INTERPRETATION IS A WHOLLY UNWARRANTED DISTORTION OF THE MEANING OF THE STATUTE, DIRECTLY CONTRARY TO THE STATED INTENT OF THE CONGRESS, AND THAT WIDESPREAD USE OF SUCH AN INTERPRETATION WOULD TO A GREAT EXTENT NULLIFY THE SUBSECTION.

THE SUPREME COURT IN PAUL V. UNITED STATES, 371 U.S. 245, CONSIDERED AT LENGTH THE PROCUREMENT POLICY OF THE GOVERNMENT AS SET OUT IN THE ARMED SERVICES PROCUREMENT REGULATION AND IN THE PERTINENT STATUTES, AND ITS DECISION IN THAT CASE WAS BASED SQUARELY UPON ITS CONCLUSION THAT THE DECLARED AND SETTLED POLICY WAS TO REQUIRE COMPETITIVE BIDDING OR NEGOTIATIONS INVOLVING THE MAXIMUM OF ACTIVE COMPETITION. SEE THE DISCUSSION OF THIS POINT, PP. 250-260. THE THE LEGISLATIVE HISTORY OF SECTION 2304 (G) AS ADDED BY THE 1962 AMENDMENT WAS SPECIFICALLY CONSIDERED AND REFERRED TO BY THE COURT, AND A FOOTNOTE DEVOTED TO THAT SECTION INCLUDED THE FOLLOWING STATEMENT (FOOTNOTE 21, P. 257):

"THE ILL WHICH SEC. 2304 (G) WAS DESIGNED TO CURE WAS A SERVICE EMPLOYED NEGOTIATING PROCESS WHICH DID NOT ALWAYS PRODUCE LOW ENOUGH PRICES. INFORMAL QUOTATIONS, USUALLY ACCOMPANIED BY A BREAKDOWN OF COST ELEMENTS, WERE FIRST SECURED FROM AS MANY SOURCES AS PRACTICABLE. SEPARATE NEGOTIATIONS WITH ONLY A FEW LOW BIDDERS WERE THEN UNDERTAKEN IN ORDER TO REDUCE THE PRICE BY ELIMINATING UNNECESSARY OR UNJUSTIFIED CHANGES.'

IN THE LIGHT OF THESE OBSERVATIONS WE CONCLUDE THAT THE PROVISION IN 10 U.S.C. 2304 (G) OPERATES ONLY TO PERMIT ACCEPTANCE OF A PROPOSAL EXACTLY AS IT WAS INITIALLY RECEIVED, WITHOUT ANY DISCUSSIONS WRITTEN OR ORAL, AND CANNOT BE RELIED UPON AS JUSTIFICATION FOR CONDUCTING DISCUSSIONS WITH ONLY ONE OFFEROR WHERE OTHER OFFERS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED, WERE RECEIVED. TO THE SAME EFFECT, SEE OUR DECISION TO YOU OF SEPTEMBER 2, 1966, B 158686, 46 COMP. GEN. -.

WE FIND IN THE RECORD NO SUGGESTION THAT THE DEPCO PROPOSAL WAS NOT WITHIN A COMPETITIVE RANGE WITH BOP-S, PRICE AND OTHER FACTORS CONSIDERED. IN VIEW OF THE FACT THAT THE FORMER OFFER PROVIDED (IF PREPRODUCTION SAMPLES WERE WAIVED, WHICH WAS FOUND PROPER) FOR DELIVERIES TO COMMENCE 90 DAYS, AND BE COMPLETED THREE TO FOUR MONTHS, EARLIER THAN THE GOVERNMENT'S REQUIRED SCHEDULE, AT A PRICE APPROXIMATELY THREE PERCENT HIGHER THAN BOP-S, WE DO NOT THINK IT COULD REASONABLY BE CONCLUDED THAT THE TWO PROPOSALS WERE NOT WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED. FURTHER, THE FACT THAT THE CONTRACTING OFFICER ENTERED INTO NEGOTIATION WITH BOP TO ACCELRATE THE DELIVERY SCHEDULE, AND WAS WILLING TO PAY AN INCREASED PRICE TO OBTAIN EARLIER DELIVERIES, PROVES THAT DELIVERY IN ADVANCE OF THE REQUIREMENTS STATED IN THE RFP WAS CONSIDERED TO BE DESIRABLE AND IN THE GOVERNMENT'S INTEREST. WE FIND NOTHING IN THE RECORD TO EXPLAIN OR INDICATE THE BASIS FOR THE CONTRACTING OFFICER'S APPARENT DETERMINATION THAT THE STILL EARLIER DELIVERY OFFERED BY DEPCO WAS NOT EVEN MORE IN THE GOVERNMENT'S INTEREST THAN THE SLIGHT ACCELERATION NEGOTIATED WITH BOP. HOWEVER, ASSUMING THAT SUCH CONCLUSION WAS JUSTIFIABLE,PROPER ACTION UNDER THE CONTROLLING STATUTE WOULD HAVE BEEN TO ADVISE DEPCO OF THE DELIVERY SCHEDULE WHICH WAS CONSIDERED TO BE FULLY ADEQUATE FOR THE GOVERNMENT'S NEEDS AND AFFORD THAT OFFEROR AN OPPORTUNITY TO OFFER A PRICE REDUCTION ON THE BASIS OF THE LATER DELIVERY SO SPECIFIED. WE BELIEVE THAT THE COMMENT (1.B.) QUOTED ABOVE FROM THE GENERAL COUNSEL'S MEMORANDUM, INDICATES A MISUNDERSTANDING OR MISINTERPRETATION OF THE INTENT OF ASPR 1-1903 (A), IN THAT IT SEEMS TO CONSTRUE THE UNDERLINED PROVISO AS PRECLUDING CONSIDERATION AS AN EVALUATION FACTOR IN THIS CASE OF DELIVERY PROVISIONS DIFFERING FROM THOSE STATED IN THE RFP AS BEING REQUIRED. THE CITED PARAGRAPH DEALS WITH THE PROVISIONS TO BE INCLUDED IN A SOLICITATION OF PROPOSALS FOR A FIXED PRICE CONTAINING A REQUIREMENT FOR FIRST ARTICLE APPROVAL. THE SIGNIFICANT LANGUAGE PERTINENT TO THIS SITUATION IS THAT THE SOLICITATION "SHALL PROVIDE FOR: (I) DELIVERY SCHEDULES * * * AS APPROPRIATE, THE DELIVERY SCHEDULES -

"/B) MAY PROVIDE FOR A SHORTER DELIVERY SCHEDULE WHEN THE FIRST ARTICLE APPROVAL IS WAIVED AND EARLIER DELIVERY IS IN THE INTEREST OF THE GOVERNMENT, PROVIDED THAT IN THE LATTER CASE ANY DIFFERENCE IN DELIVERY SCHEDULES RESULTING FROM A WAIVER OF FIRST ARTICLE APPROVAL SHALL NOT BE A FACTOR IN EVALUATION FOR AWARD.'

AS WE READ THIS, IT MEANS THAT THE SHORTER DELIVERY SCHEDULE APPLICABLE IN EVENT OF WAIVER OF FIRST ARTICLE APPROVAL IS TO BE FIXED BY THE GOVERNMENT RATHER THAN BY INDIVIDUAL OFFERORS. THAT WAS DONE IN THE CASE INVOLVED IN OUR DECISION OF JUNE 5, 1962, 41 COMP. GEN. 788, IN WHICH WE SUSTAINED THE VALIDITY OF THE DUAL DELIVERY SCHEDULES SO PRESCRIBED, AND WE FIND NOTHING IN THE LANGUAGE OF THE CITED REGULATION (WHICH WAS SUBSEQUENTLY PROMULGATED) INDICATING ANY INTENT TO PRESCRIBE OR AUTHORIZE ANY DIFFERENT PROCEDURE. IT IS CLEAR FROM THE DECISION REFERRED TO THAT THE ESSENTIAL BASIS FOR OUR APPROVAL WAS THE FACT THAT THE ISSUING AGENCY HAD FIXED, BY THE TERMS OF THE INVITATION, AN EXACT TIME WHICH WOULD BE CONSIDERED TO EQUALIZE THE BIDDERS BY OFFSETTING THE ADVANTAGE DERIVED FROM THE FIRST ARTICLE WAIVER. IT IS EQUALLY CLEAR THAT THE PROVISIONS IN ARTICLE N OF THE RFP NOW BEFORE US, WHICH INVITED OFFERORS TO PROPOSE THEIR OWN EARLIER DELIVERY SCHEDULE AND SAID THAT "BIDS/OFFERS WILL BE EVALUATED ON THE BASIS OF THE DECREASED UNIT PRICES AND EARLIER DELIVERY SO OFFERED," WERE SQUARELY IN CONFLICT WITH THE PRINCIPLES STATED IN OUR DECISION OF MARCH 20, 1962, 41 COMP. GEN. 599.

INSOFAR AS THE PROCURING ACTIVITY RELIES UPON LEITMAN V. UNITED STATES, 104 C.CLS. 324, AND OFFICE DECISION B-74013, MARCH 9, 1948, WE HAVE IN A RECENT SERIES OF DECISIONS ANNOUNCED OUR CONCLUSION THAT WE WILL NOT APPROVE CONSIDERATION OF A LOW BIDDER'S OFFER OF MORE FAVORABLE TERMS, TENDERED AFTER BID OPENING, UNLESS THE OFFER WAS IN FACT VOLUNTEERED BY THE BIDDER WITHOUT ANY REQUEST OR SOLICITATION BY THE GOVERNMENT. SEE B- 157055, FEBRUARY 17, 1967, AND CASES THERE CITED.

FOR THE REASONS STATED, WE MUST CONCLUDE THAT THE NEGOTIATION AND AWARD OF THE SUBJECT CONTRACT TO CANADIAN COMMERCIAL CORPORATION WERE NOT IN CONFORMITY WITH THE REQUIREMENTS OF THE APPLICABLE STATUTE AND REGULATIONS. SINCE THE CONTRACTING OFFICER APPEARS TO HAVE ACTED IN GOOD FAITH AND IN RELIANCE UPON THE ADVICE AND RECOMMENDATIONS OF THE AUTHORITIES DESIGNATED BY YOUR DEPARTMENT FOR THAT PURPOSE, AND SINCE AT THE TIME OF AWARD THE INTERPRETATION WHICH WE HAVE SINCE PLACED UPON 10 U.S.C. 2304 (G) IN OUR DECISION OF SEPTEMBER 2, 1966, B 158686, HAD NOT BEEN ANNOUNCED, WE DO NOT FEEL WE WOULD BE JUSTIFIED IN CONSIDERING THE CONTRACT AWARDED IN THIS CASE TO BE A NULLITY. HOWEVER, PLEASE BE ADVISED THAT ANY FUTURE AWARD MADE WITHOUT COMPLIANCE WITH OUR UNDERSTANDING OF THE MANDATE OF 10 U.S.C. 2304 (G), AS SET OUT ABOVE, WILL BE CONSIDERED VOID AB INITIO BY THIS OFFICE.

THE FILES FORWARDED WITH THE DIRECTOR OF PROCUREMENT AND PRODUCTION'S LETTERS OF MAY 9 AND OCTOBER 26, AND WITH THE LETTER OF NOVEMBER 30 FROM THE CHIEF, MISSILES AND ELECTRONICS DIVISION, ARE RETURNED.