B-159151, OCT. 6, 1966

B-159151: Oct 6, 1966

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TO DYNAMICS CORPORATION OF AMERICA: REFERENCE IS MADE TO YOUR LETTERS DATED MAY 6 AND SEPTEMBER 19. THIS IFB WAS ISSUED TO REPROCURE 424 HYDROPHONES WHICH THE BUREAU OF SHIPS PREVIOUSLY HAD BEEN UNABLE TO PROCURE AS A 50 PERCENT LABOR SURPLUS SET ASIDE UNDER IFB NO. 600-132 66-S. THE BASIS FOR YOUR PROTEST IS AS FOLLOWS: "1. THE ITEMS ADVERTISED IN THE SUBJECT IFB WERE ORIGINALLY INCLUDED IN A PREVIOUS IFB. THIS COMPANY WAS THE LOWEST OF NINE BIDDERS AT A UNIT PRICE OF $289.50 AND TOTAL PRICE OF $122. THE HIGHEST BIDDER WAS $595 EACH AND TOTAL PRICE OF $252. THE UNDERSIGNED WAS CALLED BY MR. TO VERIFY OUR LOW BID WHICH WAS DONE IN A LETTER DATED DECEMBER 17. IT WAS DETERMINED THAT THE CONTRACTING OFFICER HAD RECEIVED NO BIDS IN THE AREA OF CONSIDERATION FOR THE LABOR SURPLUS SET ASIDE QUANTITY OF AN ADDITIONAL 424 UNITS.

B-159151, OCT. 6, 1966

TO DYNAMICS CORPORATION OF AMERICA:

REFERENCE IS MADE TO YOUR LETTERS DATED MAY 6 AND SEPTEMBER 19, 1966, PROTESTING AGAINST AN AWARD TO THE EDO WESTERN CORPORATION (EDO) UNDER IFB NO. 600-764-66-S. THIS IFB WAS ISSUED TO REPROCURE 424 HYDROPHONES WHICH THE BUREAU OF SHIPS PREVIOUSLY HAD BEEN UNABLE TO PROCURE AS A 50 PERCENT LABOR SURPLUS SET ASIDE UNDER IFB NO. 600-132 66-S.

THE BASIS FOR YOUR PROTEST IS AS FOLLOWS:

"1. THE ITEMS ADVERTISED IN THE SUBJECT IFB WERE ORIGINALLY INCLUDED IN A PREVIOUS IFB, REFERENCE (A), AS A LABOR SURPLUS SET ASIDE QUANTITY. THE ORIGINAL BID OPENING OF REFERENCE (A) (IFB NO. 600-132-66-S) ON DECEMBER 15, 1965, THIS COMPANY WAS THE LOWEST OF NINE BIDDERS AT A UNIT PRICE OF $289.50 AND TOTAL PRICE OF $122,748, AND THE HIGHEST BIDDER WAS $595 EACH AND TOTAL PRICE OF $252,280. FOLLOWING THE BID OPENING, THE UNDERSIGNED WAS CALLED BY MR. UHLIG BUSHIPS CONTRACT NEGOTIATOR, TO VERIFY OUR LOW BID WHICH WAS DONE IN A LETTER DATED DECEMBER 17, 1965, ENCLOSURE (4). DURING THE SUBSEQUENT PHONE CONVERSATION, IT WAS DETERMINED THAT THE CONTRACTING OFFICER HAD RECEIVED NO BIDS IN THE AREA OF CONSIDERATION FOR THE LABOR SURPLUS SET ASIDE QUANTITY OF AN ADDITIONAL 424 UNITS.

"THIS COMPANY IN A TELEGRAM DATED JANUARY 19, 1966, ENCLOSURE (6) OFFERED TO PROVIDE THIS ADDITION "LABOR SURPLUS" QUANTITY OF 424 AT THE SAME UNIT PRICE OF $289.50 AS QUOTED FOR THE BASIC QUANTITIES IN THE ORIGINAL IFB, REFERENCE (A). THIS COMPANY WAS THEN ADVISED IN A LETTER FROM THE CONTRACTING OFFICER, BUSHIPS DATED FEBRUARY 10, 1966, THAT "LABOR-SURPLUS- SET-ASIDE PORTION OF THE ORIGINAL IFB IS BEING CANCELLED AND READVERTISED DUE TO THE FACT THAT NONE OF THE BIDDERS WERE WITHIN THE AREA OF CONSIDERATION....' IN A LETTER ADDRESSED TO MR. PYREK, CONTRACT SECTION BUSHIPS, ENCLOSURE (5), THIS COMPANY POINTED OUT SPECIFICALLY IN PARAGRAPH 4 "IT APPEARS THAT READVERTISEMENT CAN ONLY BE COSTLY TO THE GOVERNMENT, ENTAIL LOSS OF TIME ...' AND THAT "THERE IS LITTLE REASON TO BELIEVE THAT ... A LOWER BID THAN THE PRICE OFFERED BY MASSA IS NOT LIKELY," AND THAT "IT WOULD APPEAR IN THE GOVERNMENT'S BEST INTEREST TO NEGOTIATE THE ADDITIONAL QUANTITY WITH MASSA DIVISION.'

"2. A SECOND REASON FOR PROTESTING THE AWARD IS THAT THE DIFFERENCE IN PRICE BETWEEN THE EDO $307 UNIT PRICE AND THIS COMPANY'S $310 UNIT PRICE AMOUNTED TO ONLY $1,272 OUT OF THE TOTAL PROCUREMENT OF APPROXIMATELY $131,000. IT WAS POINTED OUT SPECIFICALLY IN ENCLOSURE (5) THAT IT WOULD BE NECESSARY FOR THE GOVERNMENT TO EXPEND AN AMOUNT FAR IN EXCESS OF $1,272 PRICE DIFFERENTIAL IN THE GOVERNMENTS EXECUTION OF A SECOND CONTRACT FOR IDENTICAL UNITS, ESPECIALLY WHERE THE SECOND SOURCE WOULD HAVE TO HAVE PREPRODUCTION TEST APPROVAL, POSSIBLY INCREASED COST TO THE GOVERNMENT IN SHIPPING, AND IN THE NEEDLESS ADMINISTRATION OF AN ADDITIONAL CONTRACT FOR THE SAME ITEMS OF EQUIPMENT AND DATA CURRENTLY BEING SUPPLIED UNDER CONTRACT NOBSR 95155 WHICH WAS ISSUED TO THIS COMPANY ON JANUARY 24, 1966 AS A RESULT OF IFB 600-132-66-S.'

THE DEPARTMENT OF THE NAVY HAS REPLIED TO YOUR PROTEST IN REPORT DATED JUNE 8, 1966, IN PART, AS FOLLOWS:

"MASSA WAS THE LOW BIDDER UNDER IFB-132 FOR THE NON-SET-ASIDE PORTION AND WAS AWARDED CONTRACT NOBSR-95155 ON 24 JANUARY 1966. NONE OF THE BIDDERS WHO RESPONDED TO IFB-132 QUALIFIED FOR NEGOTIATION OR AWARD FOR THE LABOR SURPLUS SET-ASIDE PORTION UNDER THE TERMS OF THE IFB. MASSA OFFERED TO FURNISH THE LABOR SURPLUS SET-ASIDE QUANTITY AT THE SAME UNIT PRICE AT WHICH IT WAS AWARDED THE NON-SET-ASIDE PORTION. HOWEVER, SINCE UNDER THE TERMS OF THE IFB MASSA DID NOT QUALIFY FOR NEGOTIATION OF THE SET-ASIDE PORTION, THE GOVERNMENT DID NOT ACCEPT THE OFFER. MASSA WAS SO ADVISED BY LETTER DATED 10 FEBRUARY 1966, ENCLOSURE (3). THE LETTER ALSO ADVISED THAT A NEW IFB FOR THIS QUANTITY WOULD BE ISSUED IN THE NEAR FUTURE. THE MATTER WAS AGAIN DISCUSSED DURING A TELEPHONE CONVERSATION ON FEBRUARY 16, 1966, BETWEEN MR. MASSA AND MR. PYREK, HEAD, ELECTRONICS PURCHASE BRANCH, CONTRACT DIVISION, BUREAU OF SHIPS. BY LETTER DATED FEBRUARY 17, 1966, (ENCLOSURE (5) TO THE MASSA LETTER TO YOU, DATED MAY 6, 1966) MASSA PROTESTED AGAINST THE PROPOSED READVERTISEMENT, AS FOLLOWS:

"IT APPEARS THAT READVERTISEMENT CAN ONLY BE COSTLY TO THE GOVERNMENT, ENTAIL LOSS OF TIME AND LEAD TO FUTURE PROBLEMS. THERE IS LITTLE REASON TO BELIEVE THAT ANY OF THE OTHER BIDDERS COULD REDUCE THEIR COSTS IN THE RELATIVELY SHORT INTERVAL BETWEEN THE TWO INVITATIONS TO BID. THEREFORE, A LOWER BID THAN THE PRICE OFFERED BY MASSA IS NOT LIKELY. MASSA, OBVIOUSLY, CAN BID AT A HIGHER PRICE WHICH, IF LOW, WOULD ONLY RESULT IN THE GOVERNMENT PAYING MORE THAN NECESSARY FOR THE HYDROPHONES. NATURALLY, IF ANY BIDDER IS LOWER THAN MASSA IN HIS RESPONSE, BUT ABOVE THE PRICE OFFERED IN ENCLOSURE (2), MASSA WILL PROTEST. ASIDE FROM THESE CONSIDERATIONS, THE EXPENSE OF PROCESSING AND READVERTISING THE IFB COULD BE SAVED. IT WOULD APPEAR IN THE GOVERNMENT'S BEST INTEREST TO NEGOTIATE THE ADDITIONAL QUANTITY WITH MASSA DIVISION.'

"THE WRITER OF THE LETTER, MR. THOMAS D. MCGRATH, MANAGER, MILITARY CONTRACTS FOR MASSA, REQUESTED AN APPOINTMENT TO DISCUSS THE MATTER. MEETING WAS HELD ON FEBRUARY 24, 1966, BETWEEN MR. MCGRATH AND MR. PYREK. MR. PYREK AGAIN EXPLAINED THAT UNDER THE TERMS OF THE IFB THERE WAS NO BASIS FOR NEGOTIATION WITH MASSA FOR THE LABOR SURPLUS SET ASIDE PORTION.

"IT IS INTERESTING TO NOTE THAT MASSA HAS FULFILLED THE NOT-SO-VERY VEILED THREATS UNDERSCORED IN THE QUOTATION ABOVE FROM THE LETTER OF FEBRUARY 17, 1966. UNDER SUBJECT IFB-764 MASSA DID BID A HIGHER UNIT PRICE THAN IT BID UNDER IFB-132, AND THE PRESENT PROTEST HAS FULFILLED THE FORECAST OF "LOSS OF TIME" AND "FUTURE PROBLEMS," AND THE PROMISE TO PROTEST IF MASSA WAS UNSUCCESSFUL UNDER THE READVERTISED PROCUREMENT.

"AS NOTED IN THE LETTER OF MAY 5, 1966 (ENCLOSURE (2) ( REPLYING TO MASSA'S TELEGRAPHIC PROTESTS AGAINST AWARD UNDER SUBJECT IFB-764, THE BASIS OF THE MASSA PROTEST IS NOT UNDERSTOOD. EDO SUBMITTED THE LOWEST RESPONSIVE BID UNDER SUBJECT IFB-764. EDO IS A RESPONSIBLE BIDDER. ACCORDINGLY, UNDER ALL STANDARDS OF PROCUREMENT, AWARD TO EDO IS OBLIGATORY. MASSA'S COMPLAINT IS THAT THE GOVERNMENT IS NOT PAYING MORE FOR THE EQUIPMENT THAN THE PRICE MASSA OFFERED PREVIOUSLY. MASSA'S EXPRESSED CONCERN FOR THE GOVERNMENT'S BEST INTEREST IS PRAISEWORTHY BUT SOMEWHAT MISPLACED. MASSA COULD HAVE ASSURED THIS INTEREST BY BIDDING UNDER SUBJECT IFB-764 A UNIT PRICE NOT GREATER THAN THE UNIT PRICE THAT IT BID IN PREVIOUS IFB-132. HAD MASSA DONE SO, IT WOULD HAVE BEEN THE LOW BIDDER UNDER SUBJECT IFB-764 AND WOULD HAVE BEEN AWARDED THE RESULTING CONTRACT. HOWEVER, AS IT FORECAST IN ITS LETTER OF FEBRUARY 17, MASSA CHOSE TO INCREASE ITS UNIT PRICE BY ABOUT 14 PERCENT FROM $289.50 TO $310. EDO, ON THE OTHER HAND, DECREASED ITS UNIT PRICE BY ABOUT 48 PERCENT FROM THE PRICE IT BID UNDER IFB 132, REDUCING ITS UNIT PRICE FROM $591.52 TO $307. MASSA, HAVING LOST ITS GAMBLE, NOW SEEKS TO BLOCK THE PROCUREMENT BY PROTESTING THAT THE AWARD IS NOT IN THE GOVERNMENT'S BEST INTEREST.

"MASSA'S STATED SECOND REASON FOR PROTESTING THE AWARD IS "THAT THE DIFFERENCE IN PRICE BETWEEN THE EDO $307 UNIT PRICE AND THIS COMPANY'S $310 UNIT PRICE AMOUNT TO ONLY $1,272 OUT OF THE TOTAL PROCUREMENT OF APPROXIMATELY $131,000" IS NOT CONSIDERED TO BE MERITORIOUS. IT IS APPARENT, EVEN FROM THE MASSA ACCOUNT, THAT THE PROCUREMENTS UNDER BOTH IFB-132 AND IFB-764 WERE CONDUCTED STRICTLY IN ACCORDANCE WITH THEIR PROVISIONS AND APPLICABLE REGULATIONS, AND THAT THE RESULTING CONTRACTS WERE PROPERLY AWARDED UNDER THEIR RESPECTIVE PROVISIONS.'

THE STATUTORY LAW APPLICABLE TO THE TWO PROCUREMENTS IN QUESTION IS FOUND IN 10 U.S.C. 2304 (A), WHICH REQUIRES PURCHASES TO BE MADE BY FORMAL ADVERTISING UNLESS ONE OF A NUMBER OF GIVEN EXCEPTIONS IS PROPERLY INVOKED. IN THIS CASE THE EXCEPTION AT 10 U.S.C. 2304 (A) (1) WAS INVOKED IN ORDER TO NEGOTIATE FOR THE PURCHASE OF THE LABOR SURPLUS SET-ASIDE PORTION OF IFB NO. 600-132-66-S. IN THIS CONNECTION 10 U.S.C. 2304 (A) (1) READS AS FOLLOWS:

"/A) PURCHASES OF AND CONTRACTS FOR PROPERTY OR SERVICES COVERED BY THIS CHAPTER SHALL BE MADE BY FORMAL ADVERTISING IN ALL CASES IN WHICH THE USE OF SUCH METHOD IS FEASIBLE AND PRACTICABLE UNDER THE EXISTING CONDITIONS AND CIRCUMSTANCES. IF THE USE OF SUCH METHOD IS NOT FEASIBLE AND PRACTICABLE, THE HEAD OF AN AGENCY, SUBJECT TO THE REQUIREMENTS FOR DETERMINATIONS AND FINDINGS IN SECTION 2310 MAY NEGOTIATE SUCH A PURCHASE OR CONTRACT, IF---

"/1) IT IS DETERMINED THAT SUCH ACTION IS NECESSARY IN THE PUBLIC INTEREST DURING A NATIONAL EMERGENCY DECLARED BY CONGRESS ON THE PRESIDENT; "

IN THIS CONNECTION ASPR 3-201-2 (B) PROVIDES:

"/B) FOR THE DURATION OF THAT NATIONAL EMERGENCY DECLARED PURSUANT TO PRESIDENTIAL PROCLAMATION 2914, DATED DECEMBER 16, 1950, THE ASSISTANT SECRETARY OF DEFENSE (INSTALLATIONS AND LOGISTICS) HAS DETERMINED THAT ONLY THE FOLLOWING PROCUREMENTS MAY BE MADE PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304 (A) (1):

"/I) PROCUREMENTS MADE IN KEEPING WITH (A) LABOR SURPLUS SET-ASIDE PROGRAMS (INCLUDING, WHEN NO OTHER NEGOTIATING AUTHORITY IS APPROPRIATE AND THE USE OF FORMAL ADVERTISING IS NOT FEASIBLE AND PRACTICABLE THE PLACEMENT OF CONTRACTS FOR THE TOTAL OR ANY PART OF THE REQUIREMENTS SET- ASIDE WHICH ARE NOT FILLED BY AWARDS MADE IN ACCORDANCE WITH THE PROVISIONS OF THE NOTICE OF LABOR SURPLUS AREA SET ASIDE (SEE 1-804) * *

ASPR 1-804.2 (C) (1) PROVIDES IN PERTINENT PART:

"* * * IF THE ENTIRE SET-ASIDE PORTION CANNOT BE AWARDED BY THE METHOD DESCRIBED HEREIN, ANY UNAWARDED PORTION MAY BE PROCURED BY ADVERTISING OR NEGOTIATIONS, AS APPROPRIATE, IN ACCORDANCE WITH EXISTING REGULATIONS (SEE 3-201.2 (B) (I) AND 3-210.3 AS TO NEGOTIATION).'

YOU URGE THAT UNDER THE CIRCUMSTANCES OF THIS MATTER IT WAS IN THE GOVERNMENT'S BEST INTERESTS TO NEGOTIATE THE AWARD OF THE SET-ASIDE QUANTITY OF IFB NO. 600-132-66'S WITH YOUR FIRM. HOWEVER, AS INDICATED ABOVE, 10 U.S.C. 2304 (A) REQUIRES ALL PURCHASES TO BE MADE BY FORMAL ADVERTISING, UNLESS ONE OF A NUMBER OF GIVEN EXCEPTIONS IS PROPERLY INVOKED. IN THE ABSENCE OF A SHOWING OF JUSTIFICATION FOR THE INVOCATION OF ANY OTHER EXCEPTION TO THE FORMAL ADVERTISING REQUIREMENT, THE ONLY AUTHORITY FOR NEGOTIATION WAS THAT SET OUT IN 10 U.S.C. 2034 (A) (1) AND ASPR 3-201.2 (B) (I), WHICH PROVIDED AUTHORITY TO NEGOTIATE (1) WITH QUALIFYING LABOR SURPLUS AREA BIDDERS AND (2) WITH OTHERWISE NON- QUALIFYING LABOR SURPLUS AREA BIDDERS WHEN NO OTHER NEGOTIATING AUTHORITY WAS APPROPRIATE AND THE USE OF FORMAL ADVERTISING WAS NOT FEASIBLE AND PRACTICABLE. SINCE YOUR FIRM IS NOT A LABOR SURPLUS AREA CONCERN THE AUTHORITY PROVIDED BY ASPR 3-201.2 (B) (I) WAS NOT AVAILABLE FOR NEGOTIATION WITH YOUR COMPANY IN ANY EVENT.

THE FACT THAT THE CONTRACTING OFFICER DID NOT NEGOTIATE UNDER THE PROVISIONS OF ASPR 3-201.2 (B) (I) WITH ANY OF THE NON-QUALIFYING LABOR SURPLUS AREA BIDDERS APPEARS TO HAVE BEEN BASED ON A DETERMINATION THAT THE USE OF FORMAL ADVERTISING PROCEDURES WAS FEASIBLE AND PRACTICABLE, WHICH OPERATED TO YOUR ADVANTAGE SINCE YOU WERE THUS AFFORDED AN OPPORTUNITY TO SUBMIT A SEALED BID ON AN EQUAL BASIS FOR THE REQUIREMENTS PREVIOUSLY SET ASIDE FOR AWARD TO LABOR SURPLUS AREA CONCERNS. WHILE THE ULTIMATE COST TO THE GOVERNMENT THROUGH USE OF FORMAL ADVERTISING WAS LARGER THAN IF THE AWARD OF THE SET-ASIDE QUANTITY HAD BEEN NEGOTIATED WITH YOUR FIRM, SUCH HIGHER COST DOES NOT PRESENT A SUFFICIENT BASIS FOR THIS OFFICE TO QUESTION THE PROCEDURE FOLLOWED, OR THE VALIDITY OF THE CONTRACT AWARDED TO EDO UNDER THE INVITATION IN QUESTION.

ACCORDINGLY, WE FIND NO BASIS TO OBJECT TO THE ADMINISTRATIVE ACTION IN THIS PROCUREMENT, AND YOUR PROTEST MUST THEREFORE BE DENIED.