B-158857, MAY 31, 1966, 45 COMP. GEN. 742

B-158857: May 31, 1966

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- A DIVERSION THAT WILL NOT AFFECT DELIVERIES UNDER THE EARLIER CONTRACT. THE IMPLEMENTING REGULATIONS PROMULGATED BY THE BUSINESS AND DEFENSE SERVICES ADMINISTRATION AUTHORIZING THE RESCHEDULING OF DELIVERIES UNDER DMS RATINGS TO MEET EMERGENCY NEEDS AND PRESCRIBING IN SECTION 17 (A) FOR THE USE OR DISPOSITION OF MATERIAL OBTAINED UNDER A RATED ORDER THAT IS SUSCEPTIBLE TO THE INTERPRETATION THAT A RATED ORDER MAY BE DIVERTED FOR USE FOR THE SAME PURPOSE UNDER ANY CONTRACT THE CONTRACTOR HAS WITH THE GOVERNMENT. ANY POSSIBLE VIOLATION OF THE REGULATIONS IS FOR RESOLUTION BY BDSA OR THE CONTRACTING AGENCY. BIDDERS - QUALIFICATIONS - PREAWARD SURVEYS - ADEQUACY NOTWITHSTANDING A PREAWARD SURVEY WAS HASTILY PREPARED.

B-158857, MAY 31, 1966, 45 COMP. GEN. 742

CONTRACTS - PRIORITY RATED ORDERS - DIVERSION PROPRIETY AN AWARD OF A CONTRACT FOR TRUCKS NEGOTIATED ON THE BASIS OF A PUBLIC EXIGENCY UNDER 10 U.S.C. 2304 (A) (2) WITH THE SECOND LOW BIDDER OFFERING EARLIER DELIVERY DATES PREDICATED ON THE DIVERSION OF RATED DMS PRIORITY ORDERS FOR AXLE ASSEMBLIES UNDER A PRIOR CONTRACT FOR AN IDENTICAL ITEM--- A DIVERSION THAT WILL NOT AFFECT DELIVERIES UNDER THE EARLIER CONTRACT--- DOES NOT COMPROMISE THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, NOTWITHSTANDING THE RATING REQUIRED ON THE CURRENT PROCUREMENT HAD NOT BEEN ASSIGNED AT THE TIME OF THE DIVERSION, THE IMPLEMENTING REGULATIONS PROMULGATED BY THE BUSINESS AND DEFENSE SERVICES ADMINISTRATION AUTHORIZING THE RESCHEDULING OF DELIVERIES UNDER DMS RATINGS TO MEET EMERGENCY NEEDS AND PRESCRIBING IN SECTION 17 (A) FOR THE USE OR DISPOSITION OF MATERIAL OBTAINED UNDER A RATED ORDER THAT IS SUSCEPTIBLE TO THE INTERPRETATION THAT A RATED ORDER MAY BE DIVERTED FOR USE FOR THE SAME PURPOSE UNDER ANY CONTRACT THE CONTRACTOR HAS WITH THE GOVERNMENT, AND ANY POSSIBLE VIOLATION OF THE REGULATIONS IS FOR RESOLUTION BY BDSA OR THE CONTRACTING AGENCY. BIDDERS - QUALIFICATIONS - PREAWARD SURVEYS - ADEQUACY NOTWITHSTANDING A PREAWARD SURVEY WAS HASTILY PREPARED, THE AWARD OF A CONTRACT ON THE BASIS THAT CURRENT PRODUCTION UNDER AN EXISTING CONTRACT FOR AN ITEM IDENTICAL TO THE ONE TO BE PROCURED IS SATISFACTORY AND THAT DELIVERIES WERE ON SCHEDULE AT DATE OF THE AWARD WAS PROPER, AND THE CONTRACTING OFFICER HAVING THE BENEFIT OF THE PREAWARD SURVEY, AS WELL AS KNOWLEDGE THAT THE CONTRACTOR WAS CURRENT IN HIS DELIVERIES ON THE EARLIER CONTRACT, EXERCISED REASONABLE PRUDENCE IN MAKING THE AWARD, AND THE POSSIBILITY THAT THE CONTRACTOR MAY BE UNABLE TO MEET DELIVERY COMMITMENTS ON THE EARLIER CONTRACT, HAVING DIVERTED DMS PRIORITY ORDERS TO THE NEW CONTRACT CONSTITUTES NO BASIS TO DISTURB AN AWARD PROPER WHEN MADE.

TO SELLERS, CONNER AND CUNEO, MAY 31, 1966:

BY LETTER DATED APRIL 5, 1966, AND SUBSEQUENT CORRESPONDENCE, YOU PROTESTED ON BEHALF OF PAUL R. MINICH, JR., AUTHORIZED GOVERNMENT REPRESENTATIVE FOR THE GROVE MANUFACTURING COMPANY, AGAINST THE AWARD OF A CONTRACT TO THE PETTIBONE MULLIKEN CORPORATION UNDER TELEGRAPHIC REQUEST FOR PROPOSAL (RFP) NO. DSA 4-66-3726, ISSUED ON MARCH 1, 1966, BY THE DEFENSE GENERAL SUPPLY CENTER (DGSC) FOR 106 ROUGH TERRAIN FORKLIFT TRUCKS, INCLUDING AN OPTION QUANTITY OF 106 UNITS AND ANCILLARY ITEMS.

THE RFP WAS ISSUED TO NINE POTENTIAL SUPPLIERS FOR NEGOTIATION ON A PUBLIC EXIGENCY BASIS (10 U.S.C. 2304 (A) (2) AND ASPR 3-202.2 (VI) (AND ADVISED THAT AWARD MAY BE MADE WITHOUT DISCUSSION PROVIDED THAT IT COULD BE DEMONSTRATED CLEARLY FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN A FAIR AND REASONABLE PRICE. THE RFP DELIVERY SCHEDULE CALLED FOR 7 UNITS BY MAY 30, 1966; 8 UNITS BY JUNE 30, 1966; 30 UNITS BY JULY 31, 1966; 30 UNITS BY AUGUST 31, 1966; AND 31 UNITS BY SEPTEMBER 30, 1966. THE TRUCKS WERE TO BE FURNISHED IN ACCORDANCE WITH MIL-T-40632 DATED SEPTEMBER 28, 1962, AND AMENDMENT 1 THERETO DATED NOVEMBER 23, 1965. UNDER THIS SPECIFICATION, THE ONLY AXLE ASSEMBLIES WHICH COULD BE FURNISHED WERE THOSE MANUFACTURED BY THE ROCKWELL STANDARD CORPORATION. OFFERS UNDER THE RFP WERE REQUESTED EITHER ON AN F.O.B. ORIGIN OR ON A DESTINATION BASIS. AFTER THE RFP DELIVERY WAS CONFIRMED TO MR. MINICH, HE REQUESTED ON MARCH 4, 1966, THAT DGSC CHANGE THE DELIVERY DATES SPECIFIED TO A MORE REALISTIC SCHEDULE BECAUSE DELIVERY OF THE REQUIRED AXLES--- THE LARGEST LEAD TIME COMPONENT- -- AS QUOTED BY ROCKWELL STANDARD WOULD BE 220 TO 250 DAYS. BY AMENDMENT NO. 1 TO THE RFP, PROSPECTIVE OFFERORS WERE ADVISED THAT THE DELIVERY SCHEDULE CITED IN THE RFP WAS THAT REQUIRED BY THE GOVERNMENT, BUT THAT OFFERORS WHO COULD NOT MEET THE REQUIRED SCHEDULE COULD OFFER THEIR BEST DELIVERY SCHEDULE. AMENDMENT NO. 3 TO THE RFP PROVIDED THAT PREPRODUCTION TESTING MAY BE WAIVED PROVIDED THE CONTRACTOR HAS SATISFACTORILY FURNISHED AN IDENTICAL UNIT AND THAT ALTERNATIVE PROPOSALS BASED ON WAIVER OF ALL OR PART OF SUCH TESTING WERE ALSO SOLICITED FROM FIRMS WHICH HAVE NOT PREVIOUSLY FURNISHED THE ITEM TO THE GOVERNMENT.

TWO PROPOSALS WERE RECEIVED ON MARCH 18, 1966, ONE FROM PETTIBONE MULLIKEN AND THE OTHER FROM C AND M INDUSTRIAL ASSOCIATES, INC. (MINICH). PETTIBONE SUBMITTED ORIGIN UNIT PRICES OF $18,950 FOR TRUCKS REQUIRING LEVEL "C" PRESERVATION AND $19,150 FOR TRUCKS REQUIRING LEVEL "B" PRESERVATION. MR. MINICH SUBMITTED THE LOWEST UNIT PRICES RANGING FROM $17,650 FOR 70 UNITS EACH, LEVEL "C," F.O.B. ORIGIN, SHADY GROVE, PENNSYLVANIA, TO $18,457 EACH FOR 18 UNITS, LEVEL "B," F.O.B. OAKLAND, CALIFORNIA. MR. MINICH OFFERED DELIVERY DURING THE PERIOD NOVEMBER 30, 1966, THROUGH MARCH 15, 1967, WHILE PETTIBONE MULLIKEN OFFERED DELIVERY FOR THE PERIOD MAY THROUGH OCTOBER 1966, PROVIDED PREPRODUCTION TESTING WAS WAIVED. ON MARCH 22, 1966, C AND M WAS REQUESTED TO FURNISH THE NAME AND ADDRESS OF ITS PRODUCTION FACILITY AND TO ADVISE UNDER WHAT CIRCUMSTANCES, IF ANY, THE OFFERED DELIVERY SCHEDULE COULD BE SHORTENED. C AND M ADVISED ON MARCH 22, 1966, THAT THE MANUFACTURER WOULD BE GROVE AT SHADY GROVE, PENNSYLVANIA, AND THAT TIME OF DELIVERY WOULD BE DEPENDENT UPON DELIVERY OF THE AXLES FROM ROCKWELL STANDARD. MR. MINICH, ON BEHALF OF C AND M, STATED IN THIS REGARD THAT:

I REITERATE THE STATEMENT MADE IN OUR PROPOSAL OF MARCH 16, 1966, THAT ALL BIDDERS ARE IN THE SAME CONDITION CONCERNING DELIVERY SINCE NO BIDDER HAD AXLES ON ORDER WITHOUT THESE AXLES BEING ASSIGNED TO A PARTICULAR GOVERNMENT CONTRACT. THIS WAS CAREFULLY CHECKED OUT AND THERE WERE NO AXLES IN INVENTORY AT ANY OF THE OFFERORS' PLANTS THAT WERE NOT COMMITTED TO A PARTICULAR GOVERNMENT CONTRACT WITH A SPECIFIC DEFENSE ORDER RATING AND A SPECIFIC DELIVERY.

MR. MINICH FOLLOWED THIS ADVICE WITH A TELEGRAM RECEIVED BY DGSC ON MARCH 23, 1966:

IF AN AWARD IS TO BE MADE AND THE BASIS OF SUCH AN AWARD ON THIS REQUEST IN WHICH ANY MANUFACTURER IS PROMISING DELIVERY IN LESS THAN 250 DAYS FROM RECEIPT OF A CONTRACT, WE WOULD LIKE THIS WIRE CONSIDERED AS AN OFFICIAL PROTEST AND THAT NO AWARD BE MADE UNTIL THE DELIVERY OF THE LONGEST LEAD TIME ITEM IS RESOLVED. TIMKEN AXLES ARE THE LONGEST LEAD TIME ITEM AND OUR DELIVERY IS PREDICATED UPON THE RECEIPT OF THESE AXLES. ALL OF OUR TESTING AND MANUFACTURING WILL BE COMPLETED FOR THE FIRST TWO MONTHS PRODUCTION AND MERELY BE AWAITING THESE AXLES. * * *

PETTIBONE MULLIKEN BY TELEGRAM OF MARCH 24, 1966, FURNISHED THE FOLLOWING INFORMATION REGARDING THE LONG LEAD TIME AXLES:

RE TELEPHONE CONVERSATION OF MARCH 23, THIS WILL CONFIRM INFORMATION ON OUR PRESENT ORDERS FOR AXLES REQUIRED FOR 6000 LB ROUGH TERRAIN FORK TRUCKS.

ORDER (83098 FOR A TOTAL OF 134 SETS.

BALANCE DUE AS OF 3/16/66--- 39 SETS.

SCHEDULED 15 FOR 3/15/66 AND 24 FOR 4/5/66.

ORDER (92608 FOR A TOTAL OF 85 SETS.

BALANCE DUE AS OF 3/23/66--- 85 SETS.

SCHEDULED 31 FOR 5/2/66, 30 FOR 6/1/66 AND 24 FOR 7/1/66.

ORDER (12670 FOR A TOTAL OF 106 SETS.

BALANCE DUE AS OF 3/23/66--- 106 SETS.

SCHEDULED 50 FOR 8/2/66, 50 FOR 9/20/66 AND 6 FOR 10/10/66.

AGAINST ABOVE QUANTITIES OF 230 AXLE SETS, THERE ARE OBLIGATIONS FOR 124 SETS WITH CONTRACT DELIVERY REQUIREMENTS AS FOLLOWS)

CHART

5 MARCH 1966

31 APRIL 1966

20 MAY 1966

20 JUNE 1966

20 JULY 1966

20 AUGUST 1966

8 SEPTEMBER 1966

ROCKWELL STANDARD CONFIRMED THE DELIVERY OF THE AXLES AS STATED BY PETTIBONE MULLIKEN ON MARCH 29, 1966, AS FOLLOWS:

CHART

15 SETS 3-15 31 SETS 6-1 50 SETS 9-20

24 " 4-523 " 7-1 6 " 10-6

31 " 5-2 50 " 8-2

A PREAWARD SURVEY WAS REQUESTED OF PETTIBONE MULLIKEN'S FACILITIES AND CAPABILITIES ON MARCH 29, 1966, WITH A REPORT RETURN DATE OF MARCH 31, 1966. AWARD TO PETTIBONE WAS RECOMMENDED ON THE BASIS OF ITS CURRENT PRODUCTION OF THE IDENTICAL TRUCK UNDER A PREVIOUS CONTRACT. A PREAWARD SURVEY WAS NOT MADE OF GROVE'S FACILITIES OR CAPABILITIES EVEN THOUGH IT (MR. MINICH) HAD SUBMITTED THE LOWEST OFFER. TELEGRAPHIC NOTICE OF AWARD WAS SENT TO PETTIBONE MULLIKEN ON MARCH 31, 1966, FOR THE TOTAL AMOUNT OF $2,024,366.32. CONTRACT NO. DSA-4 0A4814-TM552 CONFIRMED THE AWARD ON APRIL 23, 1966, AND INCORPORATED ESSENTIALLY THE DELIVERY SCHEDULE PROPOSED BY THE SUCCESSFUL OFFEROR. THE CONTRACT PROVIDED THAT:

THIS PRODUCT IS CERTIFIED FOR NATIONAL DEFENSE UNDER THE DEFENSE MATERIALS SYSTEMS AS CLASS A AND BEARS A DO RATING C-9D.

PARAGRAPH 28 OF THE CONTRACT ADDITIONAL GENERAL PROVISIONS REQUIRES THAT:

THE CONTRACTOR SHALL FOLLOW THE PROVISIONS OF DMS REG. 1 AND ALL OTHER APPLICABLE REGULATIONS AND ORDERS OF THE BUSINESS AND DEFENSE SERVICE ADMINISTRATION IN OBTAINING CONTROLLED MATERIALS AND OTHER PRODUCTS AND MATERIALS NEEDED TO FILL THIS ORDER.

ALSO, LIQUIDATED DAMAGES AT THE RATE OF $10 PER UNIT FOR EACH CALENDAR DAY OF DELAY WERE PROVIDED FOR IN THE CONTRACT.

UPON BEING NOTIFIED OF THE AWARD, MR. MINICH ADVISED DGSC ON MARCH 31, 1966, THAT:

BDSA REGULATION 2 FORMERLY NPA REGULATION 2, SECTION 4, PARAGRAPH C --

NO PERSON MAY PLACE RATED ORDERS FOR MORE MATERIALS THAN HE IS AUTHORIZED TO RATE EVEN THOUGH HE INTENDS TO CANCEL SOME OF THE ORDERS OR REDUCE THE QUANTITY OF MATERIAL ORDERED TO THE AUTHORIZED AMOUNT BEFORE IT IS ALL DELIVERED.

I CHECKED TIMKEN AXLE COMPANY AND WAS INFORMED BY THIS COMPANY AT THE TIME OF BIDDING AND AGAIN THIS DAY AFTER NOTICE OF YOUR AWARD, THAT ALL ORDERS ON THEIR BOOKS AT THAT TIME WERE ASSIGNED TO PARTICULAR CONTRACTS WITH PARTICULAR PRIORITY NUMBERS. THEREFORE, THESE AXLES ARE BEING PROCURED ILLEGALLY AND WERE PROCURED ILLEGALLY BY THE PETTIBONE-MULLIKEN COMPANY IN DIRECT VIOLATION OF THE DEFENSE PRODUCTION ACT. I HEREBY REQUEST IMMEDIATE CANCELLATION OF THE AWARD SINCE THE PETTIBONE-MULLIKEN CORPORATION'S OR ANYONE ELSES ABILITY TO MEET DELIVERY SCHEDULE OUTLINED IN YOUR REQUEST FOR PROPOSAL COULD ONLY HAVE BEEN MADE AS A RESULT OF THE ILLEGAL PROCUREMENT OF AXLES THROUGH THE ILLEGAL USE OF PRIORITIES. SINCE NO ONE HAD A PRIORITY OR A CONTRACT UNTIL 3/31/66, AND THEREFORE NO AXLES COULD HAVE BEEN ON ORDER WITH A PRIORITY. REPEAT, PLEASE REMEMBER ALL AXLES ON ORDER AS OF 3/31/66, BEFORE AWARD WERE COVERED WITH PRIORITIES AND CONTRACTS. WE ARE THE LOW RESPONSIVE PROPOSAL TO THE TUNE OF OVER $100,000 AND CAN DELIVER THIS EQUIPMENT IN THE SAME LENGTH OF TIME AS ANY OTHER OFFEROR UNLESS THE MATERIAL WAS PROCURED IN AN ILLEGAL MANNER AS OUTLINED ABOVE. * * *

THEREAFTER, ON APRIL 4, 1966, PETTIBONE MULLIKEN ADVISED DGSC THAT ALL ORDERS FOR AXLES WITH ROCKWELL STANDARD HAD PRIORITY RATINGS EXCEPT THE ORDER FOR 106 AXLES ON WHICH A RATING WAS BEING PLACED THAT DAY. IN THIS REGARD, PETTIBONE MULLIKEN WAS TELEPHONICALLY ADVISED OF THE APPROPRIATE DEFENSE MATERIALS SYSTEM (DMS) RATING ON APRIL 4, 1966, SINCE THIS INFORMATION WAS NOT INCLUDED IN THE TELEGRAPHIC RFP OR NOTICE OF AWARD AS REQUIRED BY MEMORANDA OF THE ASSISTANT SECRETARY OF DEFENSE (INSTALLATIONS AND LOGISTICS) DATED FEBRUARY 4 AND MARCH 1, 1966, AND BY DEFENSE PROCUREMENT CIRCULAR NO. 40, AMPLIFYING THE ABOVE MEMORANDA.

THE AWARD AS MADE TO PETTIBONE REPRESENTS A PREMIUM PAYMENT BY THE GOVERNMENT FOR EARLIER DELIVERY OF $151,410.64 IF THE ENTIRE OPTION QUANTITY OF 106 UNITS IS EXERCISED BY THE GOVERNMENT.

IT IS CONTENDED THAT PETTIBONE'S OFFER WAS PREDICATED ON THE DIVERSION OF RATED DMS PRIORITY ORDERS UNDER A PRIOR CONTRACT FOR THE IDENTICAL TRUCKS TO THE INSTANT PROCUREMENT BEFORE THE AWARD OF THE CONTRACT AND ASSIGNMENT OF THE PROPER DMS RATED ORDER. THROUGH THIS ALLEGED ILLEGAL DIVERSION, IT IS ARGUED THAT PETTIBONE WAS ABLE TO OFFER EARLIER DELIVERY DATES THAN OFFERED BY MR. MINICH WHO HAD PREDICATED HIS OFFER UPON THE DELIVERY OF THE LONG LEAD TIME AXLES UNDER A RATED DMS ORDER WITHIN 220 TO 250 DAYS FROM AWARD. IT IS POINTED OUT THAT SINCE ALL THE AXLES IN THE INVENTORY OF ROCKWELL STANDARD OR ON ORDER AT THE TIME QUOTATIONS WERE INVITED WERE ALREADY COVERED BY SPECIFIC CONTRACT NUMBERS AND RATED DMS ORDERS, ALL INTERESTED OFFERORS WERE IN THE SAME POSITION WITH RESPECT TO TIME OF DELIVERY. ON THESE BASES, YOU CONTEND THAT THE AWARD VIOLATED THE DEFENSE PRODUCTION ACT OF 1950, AS AMENDED, 50 U.S.C. 2061 ET SEQ., AND THE IMPLEMENTING REGULATIONS PROMULGATED BY THE BUSINESS AND DEFENSE SERVICES ADMINISTRATION (BDSA), DEPARTMENT OF COMMERCE, AT 32A CFR, CHAPTER VI. YOU SPECIFICALLY CONTEND THAT THE DIVERSION OF AXLES RATED FOR OTHER DEFENSE CONTRACTS FOR USE IN THIS PROCUREMENT IS PROHIBITED BY THE PROVISIONS OF SECTION 17 (A) OF BDSA REGULATION 2, WHICH PROVIDES IN PERTINENT PART AS FOLLOWS:

ANY PERSON WHO GETS MATERIAL WITH A RATING OR THROUGH A SPECIFIC AUTHORIZATION OR A DIRECTIVE OF BDSA MUST, IF POSSIBLE, USE OR DISPOSE OF IT (OR OF THE PRODUCT INTO WHICH IT HAS BEEN INCORPORATED) FOR THE PURPOSE FOR WHICH THE ASSISTANCE WAS GIVEN. * * *

IT IS ADMITTED BOTH BY DGSC AND PETTIBONE MULLIKEN THAT AXLES PROCURED FROM ROCKWELL STANDARD UNDER RATED ORDERS ISSUED IN FURTHERANCE OF THE PRIOR CONTRACT (NO. DSA-4-070654-MP302) FOR THE IDENTICAL TRUCK WILL BE DIVERTED FROM THAT PRODUCTION TO PRODUCTION UNDER THE CONTRACT QUESTIONED. WE UNDERSTAND THAT DELIVERY OF THE AXLES RATED UNDER THE PRIOR CONTRACT WERE ACCELERATED BY ROCKWELL STANDARD AT THE REQUEST OF PETTIBONE MULLIKEN AS EARLY AS SEPTEMBER 1965. WE HAVE ASCERTAINED THAT SUCH ACCELERATION BY PETTIBONE MULLIKEN WAS AUTHORIZED BY CONTRACT NO. DSA -4-070654-MP302 AND THAT SUCH ACCELERATION WAS UNDERTAKEN AT THE BEHEST OF DGSC. WHILE PERFORMANCE UNDER THAT CONTRACT MAY HAVE TO BE DECELERATED TO PERMIT TIMELY DELIVERY UNDER THE DISPUTED CONTRACT, DELIVERIES UNDER THE EARLIER CONTRACT WILL BE MADE IN ACCORDANCE WITH THE CONTRACT DELIVERY SCHEDULE AS UNACCELERATED. IN THIS REGARD, WE HAVE ASCERTAINED FROM THE DEFENSE SUPPLY AGENCY (DSA) THAT DELIVERIES UNDER CONTRACT NO. 070654 WERE CURRENT AS OF MARCH 31, 1966, THE DATE OF AWARD, AND THAT PETTIBONE MULLIKEN WAS TWO TRUCKS AHEAD OF SCHEDULE AT THAT TIME.

WHILE THE LANGUAGE OF SECTION 17 (A) QUOTED ABOVE CAN BE INTERPRETED AS YOU URGE, WE THINK THAT THE LANGUAGE IS ALSO SUSCEPTIBLE OF THE INTERPRETATION THAT THE MATERIAL OBTAINED UNDER A RATED ORDER MAY BE DIVERTED FOR USE FOR THE SAME PURPOSE UNDER ANY CONTRACT THE CONTRACT HAS WITH THE GOVERNMENT. SINCE THE LANGUAGE IS AMBIGUOUS AND IS SUBJECT TO DIFFERENT INTERPRETATIONS WE CANNOT CONCLUDE THAT THE ADMINISTRATIVE ACTION IN PERMITTING SUCH DIVERSION WAS CLEARLY ERRONEOUS IN THE ABSENCE OF AN AUTHORITATIVE RULING ON THE POINT BY BDSA. WE HAVE CAREFULLY REVIEWED THE DEFENSE PRODUCTION ACT AND THE REGULATIONS ISSUED PURSUANT THERETO IN THE LIGHT OF THE WRITTEN RECORD AND INFORMAL CONSULTATIONS WITH OFFICIALS OF DSA, BDSA, MR. MINICH AND MEMBERS OF YOUR FIRM. IN OUR CONSIDERED JUDGMENT, WE BELIEVE THAT NEITHER THE ACT NOR THE APPLICABLE BDSA REGULATIONS WERE COMPROMISED IN MAKING THE AWARD TO PETTIBONE MULLIKEN. IT IS QUITE EVIDENT FROM A READING OF THE BDSA REGULATIONS THAT THEY PRESCRIBE POLICIES AND PROCEDURES FOR APPLICATION OF THE DMS INCIDENT TO CONTRACT PERFORMANCE. IN OUR VIEW, A QUESTION WHETHER THERE HAS BEEN A VIOLATION OF BDSA REGULATIONS IS FOR RESOLUTION BY THAT AGENCY OR BY THE PROCUREMENT ACTIVITY AS PART OF ITS OVERALL PROCUREMENT MANAGEMENT RESPONSIBILITIES. THE SUPERVISION OF CONTRACT PERFORMANCE AND MANAGEMENT IS UNDER THE JURISDICTION OF THE PROCUREMENT AGENCY AND NOT THIS OFFICE. HENCE, EVEN IF SOME DEVIATION FROM BDSA REGULATIONS MAY RESULT FROM PETTIBONE MULLIKEN'S PERFORMANCE OF THE DISPUTED CONTRACT, WE WILL NOT UNDERTAKE TO IMPOSE OUR JUDGMENT PROSPECTIVELY WITH REFERENCE THERETO.

ASIDE FROM THE PURELY ADMINISTRATIVE MATTER OF COMPLIANCE WITH BDSA REGULATIONS, YOU URGE THAT THE CONTRACT IS VOID SINCE IT CONTRAVENES PUBLIC POLICY--- APPARENTLY RELATING TO THE MODE OF AWARDING GOVERNMENT CONTRACTS--- AND SINCE ITS FORMATION OR PERFORMANCE IS PROHIBITED BY STATUTE. WE HAVE ALREADY DECIDED THAT THE DEFENSE PRODUCTION ACT (AND ITS REGULATIONS) DID NOT PROHIBIT THE AWARD OR EXECUTION OF THE CONTRACT. AND WHILE PERFORMANCE OF THE CONTRACT MAY REQUIRE THE DIVERSION OF EARLIER RATED ORDERS TO A LATER CONTRACT, THE BDSA REGULATIONS AND THE DEPARTMENT OF DEFENSE PRIORITIES AND ALLOCATIONS MANUAL (PAM) AUTHORIZES BDSA TO RESCHEDULE DELIVERIES MATERIALS UNDER DMS RATINGS TO MEET EMERGENCY NEEDS. SINCE A REGULATORY REMEDY IS THEREBY PROVIDED, THE FACT THAT A DIVERSION MAY BE MADE WOULD NOT PROVIDE A PRESENT LEGAL BASIS TO QUESTION THE AWARD. IN THIS REGARD, OUR RECORD IN THE CASE NOW SHOWS THAT BY LETTER DATED MAY 17, 1966, DSA REQUESTED BDSA TO APPROVE THE DIVERSION OF THE MANDATORY AXLES AND THAT BY LETTER OF MAY 20, 1966, IN ACCORDANCE WITH THAT REQUEST, BDSA AUTHORIZED SUCH DIVERSION.

WE HAVE ALREADY RECOGNIZED THAT DGSC DID NOT FOLLOW THE DEPARTMENTAL DIRECTIVES CONCERNING THE NOTICE TO BE GIVEN IN THE RFP THAT THE RESULTING CONTRACT WOULD BE ASSIGNED A PARTICULAR DMS RATING. BUT BOTH OFFERORS WERE FULLY AWARE OF THE DMS RATING SYSTEM AND OF THE FACT THAT A DMS RATING WOULD BE PRESCRIBED BY THE CONTRACT. SINCE NO PREJUDICE RESULTED, WE SEE NO CAUSE FOR OBJECTION.

WE FIND NOTHING IN THE RECORD WHICH WOULD LEND SUPPORT TO YOUR ARGUMENT THAT THE AWARD VIOLATED "PROCUREMENT POLICIES SET BY HIGHER AUTHORITY" WHICH MAY "NOT BE AVOIDED OR EVADED (DELIBERATELY OR NEGLIGENTLY) BY LESSER OFFICIALS, OR BY A CONCERT OF CONTRACTOR AND CONTRACTING OFFICER.' G. L. CHRISTIAN AND ASSOCIATES V. UNITED STATES, 320 F.2D 345, 351, 160 CT.CL. 1, 58. NEITHER MAY IT BE SAID THAT THE AWARD CONTRAVENED THE SPIRIT OF THE ARMED SERVICES PROCUREMENT REGULATION WHERE, IN AT ASPR 1- 307, THE USE OF RATED ORDERS FOR APPROVED PROGRAMS IS MANDATORY AND THE INCLUSION OF AN APPROPRIATE CLAUSE IN CONTRACTS IS REQUIRED. THE CONTRACT AWARDED TO PETTIBONE MULLIKEN CONFORMED TO THESE REGULATIONS. HOWEVER, THE REGULATIONS OR DIRECTIVES RESPECTING COMPLIANCE WITH DMS AFFECT OR GOVERN PERFORMANCE, AND THEY DO NOT IMPOSE PREREQUISITES OR CONDITIONS TO AN AWARD. WE, THEREFORE, FEEL THAT THE DECISION OF THE SUPREME COURT IN UNITED STATES V. MISSISSIPPI VALLEY GENERATING CO., 364 U.S. 520, IS DISTINGUISHABLE SINCE SUCH CASE INVOLVED A VIOLATION OF A STATUTE DESIGNED TO PRODUCT THE PUBLIC FROM THE CORRUPTION (CONFLICT OF INTERESTS) WHICH MIGHT LIE UNDETECTED BELOW THE SURFACE OF A CONTRACT "CONCEIVED IN A TAINTED TRANSACTION.'

WE ALSO THINK THE AUTHORITIES CITED BY YOU IN SUPPORT OF YOUR REQUEST FOR CANCELLATION OF THE PETTIBONE MULLIKEN CONTRACT, DEALING WITH ILLEGAL BARGAINS, BARGAINS IN VIOLATION OF STATUTES, AND BARGAINS IN VIOLATION OF PUBLIC POLICY, ARE INAPPLICABLE SINCE WE FIND NO ILLEGALITY IN THE AWARD.

A QUESTION ALSO HAS BEEN RAISED AS TO WHETHER PETTIBONE MULLIKEN HAD THE MANUFACTURING CAPABILITY TO PRODUCE THE URGENTLY NEEDED TRUCKS IN VIEW OF ITS DELINQUENCIES UNDER PRIOR TRUCK CONTRACT AND THE FACT THAT THE MANDATORY AXLES WERE IN TIGHT SUPPLY. WE ARE AWARE OF THE INADEQUACY OF THE PREAWARD SURVEY CONDUCTED OF PETTIBONE MULLIKEN'S CAPABILITIES AND OF THE FACT THAT THE SURVEY STATED:

AWARD WAS RECOMMENDED BASED ONLY UPON THE FINDINGS AND INFORMATION DEVELOPED UP TO THE TIME INVOLVED--- ONE DAY. THE BIDDER'S VENDOR QUOTES HAVE NOT BEEN CONFIRMED DUE TO LACK OF TIME; NOR WAS IT POSSIBLE TO ANALYZE HIS PAST PERFORMANCE AND RECORD OF DELINQUENCIES. IT IS TO BE RECOGNIZED THAT UNSATISFACTORY FINDINGS IN THESE AREAS COULD RENDER A POSSIBLE "NO AWARD" RECOMMENDATION. ALSO, NO DETERMINATION WAS MADE AS TO THE BIDDER'S CAPABILITY OF ANY OTHER ITEMS, OTHER THAN THE LIFT TRUCKS, THAT MAY BE ON THE PROPOSED CONTRACT SUCH AS SPARE PARTS, TECH. DATA OR PRE-PRODUCTION TESTS.

SINCE PETTIBONE MULLIKEN'S PERFORMANCE UNDER ITS PRIOR CONTRACT WAS SATISFACTORY AND DELIVERIES WERE ON SCHEDULE AT THE DATE OF AWARD, WE ARE UNAWARE OF ANY BASIS WHEREBY OUR OFFICE COULD AT THIS DATE SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER AND ARRIVE AT A DIFFERENT DETERMINATION AS TO THE ENTITLEMENT OF PETTIBONE MULLIKEN TO THE AWARD. AT THE DATE OF AWARD, THE CONTRACTING OFFICER HAD THE BENEFIT OF A PREAWARD SURVEY, ALBEIT HASTILY PREPARED. HOWEVER, HE WAS AWARE OF THE FACT THAT PETTIBONE MULLIKEN WAS CURRENT ON CONTRACT NO. -070654. THEREFORE, WE CANNOT SAY THAT HIS ACTIONS AT THAT TIME WERE IMPROPER OR THAT HE DID NOT EXERCISE REASONABLE PRUDENCE IN MAKING THE AWARD. IN OUR OPINION, THE POSSIBILITY THAT PETTIBONE MULLIKEN MAY BE UNABLE TO MEETS ITS DELIVERY COMMITMENTS UNDER ITS PRIOR CONTRACT CONSTITUTES NO BASIS FOR OUR OFFICE TO DISTURB THE AWARD SINCE, IN THE FINAL ANALYSIS, THE PROCUREMENT AGENCY IS SOLELY RESPONSIBLE FOR THE ADMINISTRATION OF ITS CONTRACTS IN THE BEST INTERESTS OF THE GOVERNMENT. IN THIS CONNECTION, WE NOTE THAT BDSA REGULATION 2, SECTION 22, 32A CFR, CHAPTER VI, PROVIDES RELIEF IN THE EVENT A CONTRACTOR DEFAULTS IN PERFORMANCE BY REASON OF OPERATION OF THE DMS. WE MAY NOT PROJECT THE POSSIBLE DEFAULT OF A CONTRACTOR UNDER ANOTHER CONTRACT TO AFFORD A BASIS FOR CHARGING THE CONTRACTING OFFICER WITH BREACH OF HIS DUTY FOR THE PURPOSE OF QUESTIONING AN AWARD OTHERWISE PROPER WHEN MADE.

ACCORDINGLY, THE PROTEST IS DENIED.