B-159458, OCTOBER 21, 1966, 46 COMP. GEN. 349

B-159458: Oct 21, 1966

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THE DETERMINATION AND NOTIFICATION SUBSEQUENT TO ISSUANCE OF AN INVITATION FOR BIDS TO PRECLUDE CONTRACTORS WITH WHOM ORDERS HAD BEEN PLACED FOR A PIECE OF EQUIPMENT ESSENTIAL TO THE OPERATION OF BONNEVILLE POWER ADMINISTRATION (BPA) PROJECT FROM A CURRENT PROCUREMENT IN ORDER TO DIVERSIFY PURCHASES AND TEST THE PERFORMANCE RELIABILITY OF AVAILABLE EQUIPMENT ON THE MARKET IS WITHIN THE BROAD AUTHORITY OF THE BPA ADMINISTRATOR TO IMPROVE THE BONNEVILLE POWER SYSTEM. 16 U.S.C. 832G PRESCRIBING THE MANNER IN WHICH SUPPLIES ARE TO BE PURCHASED NOT LIMITED BY ANY OTHER ADVERTISING STATUTES. THE "OPPORTUNITY FOR COMPETITION" PROVISION OF THE SECTION WAS MET BY THE BIDS RECEIVED FROM OTHER THAN THE PRECLUDED CONTRACTORS.

B-159458, OCTOBER 21, 1966, 46 COMP. GEN. 349

BIDS - COMPETITIVE SYSTEM - EXCLUSION OF CURRENT CONTRACTORS. THE DETERMINATION AND NOTIFICATION SUBSEQUENT TO ISSUANCE OF AN INVITATION FOR BIDS TO PRECLUDE CONTRACTORS WITH WHOM ORDERS HAD BEEN PLACED FOR A PIECE OF EQUIPMENT ESSENTIAL TO THE OPERATION OF BONNEVILLE POWER ADMINISTRATION (BPA) PROJECT FROM A CURRENT PROCUREMENT IN ORDER TO DIVERSIFY PURCHASES AND TEST THE PERFORMANCE RELIABILITY OF AVAILABLE EQUIPMENT ON THE MARKET IS WITHIN THE BROAD AUTHORITY OF THE BPA ADMINISTRATOR TO IMPROVE THE BONNEVILLE POWER SYSTEM, AND 16 U.S.C. 832G PRESCRIBING THE MANNER IN WHICH SUPPLIES ARE TO BE PURCHASED NOT LIMITED BY ANY OTHER ADVERTISING STATUTES, THE "OPPORTUNITY FOR COMPETITION" PROVISION OF THE SECTION WAS MET BY THE BIDS RECEIVED FROM OTHER THAN THE PRECLUDED CONTRACTORS. ALTHOUGH THE INVITATION SHOULD HAVE PROVIDED NOTICE THAT EQUIPMENT OF THE SAME TYPE ON ORDER WOULD BE UNACCEPTABLE, NO ONE HAVING BEEN PREJUDICED BY THE OMISSION, THERE IS NO OBJECTION TO THE REJECTION OF THE BID OF A PRECLUDED CONTRACTOR.

TO THE SECRETARY OF THE INTERIOR, OCTOBER 21, 1966:

REFERENCE IS MADE TO LETTERS OF JUNE 30, AUGUST 12 AND SEPTEMBER 14, 1966, FROM THE DEPUTY ASSISTANT SECRETARY, REQUESTING OUR DECISION CONCERNING THE LEGALITY OF THE DETERMINATION MADE BY THE ADMINISTRATOR, BONNEVILLE POWER ADMINISTRATION (GPA), TO SPREAD 500-KV. CIRCUIT BREAKER PURCHASES AMONG A NUMBER OF MANUFACTURERS UNTIL THE CIRCUIT BREAKERS HAVE BEEN IN SERVICE FOR A SUFFICIENT PERIOD OF TIME TO ASSURE BPA THAT THEY ARE FREE FROM DEFECTS, AND TO REJECT BIDS ON INVITATION FOR BIDS (IFB) 470 OFFERING EQUIPMENT OF THE SAME TYPE AS IS NOW ON ORDER IN SUBSTANTIAL QUANTITIES BUT NOT YET DELIVERED OR PROVEN.

THE SUBJECT INVITATION, ISSUED MAY 24, 1966, SOLICITED BIDS FOR FURNISHING THIRTEEN 500-KV. CIRCUIT BREAKERS. BY LETTERS DATED MAY 26, 1966, THE CHIEF OF SUPPLY, BPA, ADVISED COGENEL, INC; AND MERLIN AND GERIN THAT BPA HAS 39 500-KV. CIRCUIT BREAKERS ON ORDER AND ONE IN SERVICE AND THAT OF THE 39, COGENEL HAS CONTRACTED TO FURNISH 18 AND MERLIN AND GERIN 21. THE LETTERS STATED FURTHER THAT, UNDER THE AUTHORITY OF 16 U.S.C. 832A (C) OF THE BONNEVILLE PROJECT ACT, IT WAS DECIDED THAT AWARD OF A CONTRACT AT THIS TIME TO EITHER FIRM OR ITS LICENSEES FOR ADDITIONAL 500- KV. BREAKERS WAS NOT APPROPRIATE FOR THE BEST INTERESTS OF THE BPA SYSTEM AND ITS CUSTOMERS. THE LETTERS ALSO STATED THE BASIS FOR THE CONCLUSION. THEY EXPLAINED THAT THE 500-KV. BREAKERS CONSTITUTE A CRITICAL PART OF THE POWER NETWORK AND THAT THEIR RELIABILITY IS ESSENTIAL TO BPA'S POWER COMMITMENTS; THAT BPA DOES NOT CONSIDER THAT THE 500-KV. BREAKERS OF ANY MANUFACTURER HAVE BEEN IN SERVICE FOR A SUFFICIENT PERIOD OF TIME TO ASSURE THAT A PARTICULAR DESIGN IS FREE FROM DEFECTS; AND THAT, THEREFORE, SOUND ENGINEERING JUDGMENT DICTATES SPREADING THE 500-KV. BREAKER PURCHASES AMONG A NUMBER OF MANUFACTURERS SO THAT IF A PARTICULAR DESIGN HAS SOME SERIOUS DEFECTS, THE WHOLE SYSTEM WILL NOT BE FACED WITH WHAT COULD AMOUNT TO CATASTROPHIC CONSEQUENCES. THE LETTER CONCLUDES WITH A STATEMENT THAT THE BPA FINDING APPLIES ONLY TO IFB 470, AND THAT DECISIONS AS TO FUTURE PROCUREMENTS OF 500-KV. BREAKERS WILL BE MADE IN ACCORDANCE WITH THE REQUIREMENTS OF THE BPA SYSTEM AT THE TIME.

MERLIN AND GERIN DID NOT BID ON IFB 470. HOWEVER, COGENEL DISREGARDED THE LETTER OF MAY 26, 1966, AND BID UPON THE INVITATION. BIDS WERE OPENED ON JUNE 17, 1966. OF THE FOUR BIDS RECEIVED, COGENEL'S UNSOLICITED BID IN THE AMOUNT OF $3,060,000 WAS THE LOW BID BY NEARLY ONE MILLION DOLLARS. THE BREAKERS WHICH COGENEL PROPOSED TO SUPPLY WERE OF THE SAME GENERAL DESIGN AS THOSE WHICH IT HAD PREVIOUSLY CONTRACTED TO FURNISH BPA.

COGENEL HAS PROTESTED TO OUR OFFICE AGAINST AN AWARD TO ANY OTHER BIDDER. IT CONTENDS THAT BPA BASES ITS CASE ENTIRELY ON THE PREMISE THAT LEGAL AUTHORITY EXISTS FOR A RANDOM SPREADING OF RISK, WITHOUT CONCERN WHATSOEVER FOR ANY EVALUATION OF EITHER (1) THE COMPARATIVE RISKS REFLECTED IN THE VARIOUS BIDS OR BIDDERS OR (2) THE COST OF SUCH ALLEGED BLIND DIVERSIFICATION. IT CONTENDS FURTHER THAT NO SUCH AUTHORITY EXISTS AND THAT THE AGENCY'S DETERMINATION IS ARBITRARY, CAPRICIOUS AND UNLAWFUL UNLESS IT IS REASONABLY RELATED TO THE AGENCY'S ENABLING LEGISLATION, THAT THIS LEGISLATION DOES NOT CONTEMPLATE ANY SUCH BLIND DIVERSIFICATION, AND THAT DIVERSIFICATION (IF PERMITTED AT ALL AS A LEGITIMATE MAJOR OBJECTIVE OF PROCUREMENT POLICY) SHOULD BE ACHIEVED THROUGH THE AGENCY'S SPECIFICATIONS AND WITH DUE REGARD FOR THE STATUTORY STANDARDS SPECIFICALLY GOVERNING THE MAKING OF AWARDS. MOREOVER, COGENEL STATES THAT A DETERMINATION IS ARBITRARY AND CAPRICIOUS IF IT IS BASED ON A FINDING MADE IN DISREGARD OF THE KNOWN OR READILY ASCERTAINABLE FACTS.

THE RECORD BEFORE US INDICATES THAT THE ADMINISTRATOR'S DETERMINATION TO EXCLUDE COGENEL FROM SUBMITTING A BID UNDER IFB 470 FOR ADDITIONAL 500-KV. BREAKERS OF THE GENERAL DESIGN MANUFACTURED BY COGENEL, OR ITS LICENSEES, WAS BASED UPON HIS CONCERN WITH SYSTEM RELIABILITY. THE LETTER OF JUNE 30, 1966, FROM THE DEPUTY ASSISTANT SECRETARY, STATES THAT AS A RESULT OF EXPERIMENTS CONDUCTED IN THE EARLY 1960-S, BPA DETERMINED THAT THE BACKBONE ALTERNATING CURRENT TRANSMISSION LINES OF THE FUTURE IN THE PACIFIC NORTHWEST SHOULD OPERATE AT 500,000 VOLTS AND THAT BPA'S VENTURE INTO THIS FIELD OF 500,000-VOLT TRANSMISSION WAS OF A PIONEERING NATURE. DURING THE EARLY PHASE, MOST OF THE EFFORT BY BPA WAS IN THE NATURE OF RESEARCH AND DEVELOPMENT. FOR EXAMPLE, BPA PURCHASED SIX SEPARATE DESIGNS OF ALUMINUM-CONDUCTOR- STEEL-REINFORCED (ACSR) AND ASSOCIATED HARDWARE FROM VARIOUS ALUMINUM CONDUCTOR MANUFACTURERS.

IT IS STATED THAT NUMEROUS PROBLEMS OF PERFORMANCE AND RELIABILITY WERE ENCOUNTERED IN CONDUCTOR AND HARDWARE DESIGN, TOWER DESIGN AND EQUIPMENT. ONE OF THE MOST SERIOUS PROBLEMS PRESENTED WAS THAT OF POWER CIRCUIT BREAKERS. THESE ITEMS OF EQUIPMENT ARE NOT ONLY MASSIVE AND COMPLEX, BUT MUST OPERATE AT AN EXTREMELY HIGH DEGREE OF RELIABILITY TO PROTECT, NOT ONLY THE SERVICE TO CUSTOMERS, BUT THE MILLIONS OF DOLLARS OF ASSOCIATED EQUIPMENT WHICH MUST BE DISCONNECTED IN EMERGENCIES. TO ILLUSTRATE THE STRINGENT DEMANDS, THE OPERATING TIME ALLOCATED FOR THESE MASSIVE MACHINES TO PERFORM THEIR SEQUENCES OF MECHANICAL FUNCTIONS MUST BE LESS THAN 1/30 OF 1 SECOND. OTHER PERFORMANCE REQUIREMENTS ARE EQUALLY SEVERE.

IT IS STATED THAT ON THE BASIS OF ITS EXPERIENCE, NORMALLY, BPA IS ABLE TO INSURE HIGH RELIABILITY OF THE EQUIPMENT IT PURCHASES, AND TO WEED OUT UNDESIRABLE FEATURES OF EARLIER EQUIPMENT BY A CONSTANT REVIEW AND REVISION OF ITS SPECIFICATIONS. HOWEVER, UNDER THE ACCELERATED PROGRAM, BPA FINDS ITSELF FACED WITH MAKING THIRD AND FOURTH GENERATION PURCHASES BEFORE GAINING EXPERIENCE WITH FIRST GENERATION EQUIPMENT, OR BEFORE HAVING ANY MEANINGFUL EXPERIENCE OF OTHER UTILITIES TO DRAW UPON.

THE CONCERN OF BPA'S ENGINEERS OVER THE ENTRUSTING OF THE OPERATION OF THE MAJORITY OF ITS 500,000-VOLT LINES TO THE RELIABILITY OF UNTRIED BREAKERS OF A NEW MODEL AND A SINGLE TECHNOLOGY CULMINATED IN THE MEMORANDUM OF MAY 24, 1966, FROM THE ASSISTANT ADMINISRATOR FOR ENGINEERING TO THE ADMINISTRATOR OF BPA. THE MEMORANDUM PROPOSED THAT NEITHER OF THE TWO FIRMS WITH LARGE BUT UNDELIVERED ORDERS FOR BPA 500,000 -VOLT CIRCUIT BREAKERS BE CONSIDERED FOR AWARD OF A THIRD LARGE GROUP OF CIRCUIT BREAKERS TO BE PURCHASED ON IFB 470. THE ACTING ADMINISTRATOR APPROVED THE MEMORANDUM, AND MADE THE FINDING UNDER THE AUTHORITY OF THE BONNEVILLE PROJECT ACT WHICH CHARGES HIM WITH THE ACQUISITION OF SUCH PROPERTY AS HE FINDS NECESSARY OR APPROPRIATE TO CARRY OUT THE PURPOSES OF THAT ACT. A MEMORANDUM OF JUNE 24, 1966, FROM THE ASSISTANT ADMINISTRATOR TO THE ADMINISTRATOR STATES THAT THE MEMORANDUM OF MAY 24 INDICATED THAT SERVICE TO THE REGION AND RELIABILITY OF SUCH SERVICE ARE PARAMOUNT TO ANY CONSIDERATION OF PRICE OR COMPETITIVE POSITIONS.

THE CONTRACTING OFFICER BELIEVED THAT IT WOULD BE APPROPRIATE TO ADVISE THE TWO MANUFACTURERS BY LETTER THAT OFFERS OF THEIR PRODUCTS WOULD NOT BE CONSIDERED FOR AWARD IN VIEW OF THE ENGINEERING JUDGMENT. THIS WAS IN PREFERENCE TO MAKING A STATEMENT AS A PART OF IFB 470 THAT THE PRODUCTS OF THESE TWO MANUFACTURERS AND THEIR LICENSEES WOULD NOT BE ACCEPTED IF OFFERED. THIS ADVANCE NOTICE TO THE TWO MANUFACTURERS WAS ALSO INTENDED TO SAVE THEM THE EXPENSE OF PREPARING BIDS WHICH BPA HAD NO INTENTION TO ACCEPT.

COGENEL WOULD DISPUTE THE BPA DETERMINATION THAT ITS BREAKER IS NOT A PROVEN PRODUCT, BUT BPA DOES NOT REGARD ANY 500-KV. BREAKER AVAILABLE FROM ANY MANUFACTURER TO BE A PROVEN PRODUCT, SINCE THE LONGEST SERVICE EXPERIENCE ON PRESENT DESIGNS CAN BE COUNTED ONLY IN MONTHS. BPA'S EXPERIENCE WITH 230-KV. POWER CIRCUIT BREAKERS AND THOSE OF LOWER VOLTAGE HAS SHOWN THAT SERIOUS DESIGN DEFECTS ARE NOT NECESSARILY DISCOVERED DURING FACTORY TESTS, DURING FIELD ACCEPTANCE TESTS, NOR EVEN IN THE FIRST FEW MONTHS OF SERVICE ON THE SYSTEM. BPA HAS NUMEROUS CASES ON RECORD IN THE 230-KV. AND 115-KV. CLASS POWER CIRCUIT BREAKERS WHERE SERIOUS DESIGN DEFECTS DID NOT APPEAR UNTIL AFTER MORE THAN 1 YEAR OF SERVICE. OTHER UTILITIES ARE SAID TO HAVE HAD SIMILAR EXPERIENCE.

IT IS INDICATED THAT SUCCESSFUL OPERATION OF THE ENTIRE BPA SYSTEM WILL BE CONTINGENT UPON SATISFACTORY PERFORMANCE OF A LARGE NUMBER OF 500-KC. POWER CIRCUIT BREAKERS. THEREFORE, UNTIL SUCH TIME AS THE BREAKERS OF ONE OR MORE MANUFACTURERS HAVE BEEN IN ACTUAL SERVICE AND HAVE BEEN OPERATED AND TESTED TO SUCH AN EXTENT THAT IT IS REASONABLY CERTAIN THAT NO MAJOR DEFECTS HAVE BEEN EMBODIED IN THE DESIGN, IT IS CONSIDERED THAT THE BEST INTERESTS OF BPA AND THE REGION SERVED DEMAND THAT PURCHASE OF THESE BREAKERS BE SPREAD AMONG SEVERAL MANUFACTURERS. IN THIS MANNER IT IS EXPECTED THAT THE DIVERSITY OF RESEARCH AND DIFFERING APPROACHES TO ENGINEERING AND TECHNOLOGICAL PROBLEMS WILL PRODUCE DIFFERENT DESIGNS AND MINIMIZE THE POSSIBILITY OF A DESIGN DEFECT COMMON TO ALL 500-KV. POWER CIRCUIT BREAKERS, AS MAY HAPPEN IF ALL THE POWER CIRCUIT BREAKERS ARE PROCURED FROM ONE OR TWO SOURCES.

IN FURTHER SUPPORT OF THE ADMINISTRATOR'S POSITION, IT IS STATED THAT THE 500-KV. BREAKERS MUST PERFORM IN A MANNER NOT PREVIOUSLY REQUIRED OF ANY BREAKERS OF THIS VOLTAGE CLASS. THE STABILITY LIMITS OF THE BONNEVILLE SYSTEM AND OF THE PACIFIC NORTHWEST-SOUTHWEST INTERTIE ARE PREDICATED UPON THE FAST AND SUCCESSFUL PERFORMANCE OF THESE BREAKERS. THE 1/30 OF 1 SECOND INTERRUPTING TIME HAS NOT PREVIOUSLY BEEN BUILT INTO THIS CLASS OF BREAKER. THE INSULATION LEVELS OF THE SYSTEM HAVE BEEN CHOSEN PREDICATED UPON THE PERFORMANCE OF THESE BREAKERS IN A MANNER NOT PREVIOUSLY REQUIRED OF ANY BREAKERS OF THIS OR ANY OTHER CLASS. THESE AND CERTAIN OTHER REQUIREMENTS CALL FOR THE PRODUCTION OF BREAKER DESIGNS NEW TO THE INDUSTRY, THUS REQUIRING CONSIDERABLE PIONEERING IN MANY PHASES OF DESIGN AND PRODUCTION.

IN THE LIGHT OF EXPERIENCE, IT IS STATED THAT IT IS LOGICAL TO CONCLUDE THAT SOME OF THE INITIAL EQUIPMENT UNDER CONSIDERATION MAY BE FOUND INADEQUATE AFTER IT HAS BEEN DELIVERED AND PLACED IN SERVICE. IF ALL OF THE BREAKERS ARE OF THE SAME DESIGN, IT IS STATED THAT AN ENTIRE REGION SEVERAL TIMES THE AREA INVOLVED IN THE NORTHEAST POWER FAILURE OF 1965 COULD BE AFFECTED---NOT FOR JUST A FEW HOURS, OR A FEW DAYS, BUT FOR A PERIOD OF MONTHS---AND THAT THE IMPACT WOULD BE TREMENDOUS. IT IS STATED THAT ANY SUCH RISK, WHETHER REMOTE OR IMMEDIATE, MUST BE CAREFULLY EXAMINED AND ANALYZED TO DETERMINE ITS POTENTIAL AND THE STEPS WHICH SHOULD BE TAKEN TO MINIMIZE OR ELIMINATE IT.

IT IS ALSO STATED THAT COGNIZANCE MUST BE GIVEN TO EVERY FACTOR WHICH COULD ADVERSELY AFFECT THE PERFORMANCE OF BPA'S RESPONSIBILITY TO PROVIDE A STABLE SYSTEM CAPABLE, NOT ONLY OF UNINTERRUPTED DELIVERY OF POWER TO ITS OWN CUSTOMERS, BUT OF WHEELING POWER FOR UTILITIES IN A SERVICE AREA EXTENDING FROM CANADA TO THE MEXICAN BORDER AND FROM THE PACIFIC OCEAN TO THE ROCKY MOUNTAINS AND BEYOND.

IT IS REPORTED ALSO THAT QUEBEC HYDRO, A PUBLIC ORGANIZATION WORLD FAMED FOR ITS SUPERIOR MANAGEMENT, FOLLOWED A PROCUREMENT POLICY FOR ITS NEW 735 -KV. SYSTEM SIMILAR TO THAT ADVOCATED BY BPA. THAT ORGANIZATION SPREAD ITS ORDERS FOR BREAKERS FOR THE REASON THAT IT DID NOT WISH TO ACCEPT THE RISK OF DISASTER IF ALL BREAKERS WERE IDENTICAL AND MAJOR DEFECTS SUBSEQUENTLY BECAME APPARENT.

WHILE COGENEL WOULD DISPUTE THE JUDGMENT OF THE BPA ADMINISTRATOR TO DIVERSIFY 500-KV. CIRCUIT BREAKERS, IN OUR REVIEW OF THE MATTER, WE DO NOT FIND THAT THE DETERMINATION TO DIVERSIFY IS WITHOUT REASON OR WITHOUT REGARD FOR THE NEEDS OF THE SERVICE. THEREFORE, WE DO NOT CONSIDER THE DETERMINATION TO BE ARBITRARY OR CAPRICIOUS. THE QUESTION, AS WE SEE IT, IS WHETHER THE ADMINISTRATOR IS AUTHORIZED BY THE BONNEVILLE PROJECT ACT, 16 U.S.C. 832, ET SEQ; TO PRECLUDE, FOR THE REASONS STATED, CERTAIN MANUFACTURERS FROM OFFERING EQUIPMENT WHICH WOULD OTHERWISE MEET THE BPA PERFORMANCE SPECIFICATIONS.

SUBSECTION (B) OF SECTION 832A OF THE ACT PROVIDES:

IN ORDER TO ENCOURAGE THE WIDEST POSSIBLE USE OF ALL ELECTRIC ENERGY THAT CAN BE GENERATED AND MARKETED AND TO PROVIDE REASONABLE OUTLETS THEREFOR, AND TO PREVENT THE MONOPOLIZATION THEREOF BY LIMITED GROUPS, THE ADMINISTRATOR IS AUTHORIZED AND DIRECTED TO PROVIDE, CONSTRUCT, OPERATE, MAINTAIN, AND IMPROVE SUCH ELECTRIC TRANSMISSION LINES AND SUBSTATIONS, AND FACILITIES AND STRUCTURES APPURTENANT THERETO, AS HE FINDS NECESSARY, DESIRABLE, OR APPROPRIATE FOR THE PURPOSE OF TRANSMITTINNG ELECTRIC ENERGY, AVAILABLE FOR SALE, FROM THE BONNEVILLE PROJECT TO EXISTING AND POTENTIAL MARKETS, AND, FOR THE PURPOSE OF INTERCHANGE OF ELECTRIC ENERGY, TO INTERCONNECT THE BONNEVILLE PROJECT WITH OTHER FEDERAL PROJECTS AND PUBLICLY OWNED POWER SYSTEMS CONSTRUCTED ON OR AFTER AUGUST 20, 1937. SUBSECTION (C) OF SECTION 832A PROVIDES IN PERTINENT PART AS FOLLOWS:

THE ADMINISTRATOR IS AUTHORIZED, IN THE NAME OF THE UNITED STATES, TO ACQUIRE, BY PURCHASE, LEASE, CONDEMNATION, OR DONATION, SUCH REAL AND PERSONAL PROPERTY, OR ANY INTEREST THEREIN, INCLUDING LANDS, EASEMENTS, RIGHTS-OF-WAY, FRANCHISES, ELECTRIC TRANSMISSION LINES, SUBSTATIONS, AND FACILITIES AND STRUCTURES APPURTENANT THERETO, AS THE ADMNISTRATOR FINDS NECESSARY OR APPROPRIATE TO CARRY OUT THE PURPOSES OF THIS CHAPTER. * *

SUBSECTION (F) OF SECTION 832A PROVIDES:

SUBJECT ONLY TO THE PROVISIONS OF THIS CHAPTER, THE ADMINISTRATOR IS AUTHORIZED TO ENTER INTO SUCH CONTRACTS, AGREEMENTS, AND ARRANGEMENTS, INCLUDING THE AMENDMENT, MODIFICATION, ADJUSTMENT, OR CANCELLATION THEREOF AND THE COMPROMISE OR FINAL SETTLEMENT OF ANY CLAIM ARISING THEREUNDER, AND TO MAKE SUCH EXPENDITURES, UPON SUCH TERMS AND CONDITIONS AND IN SUCH MANNER AS HE MAY DEEM NECESSARY.

SECTION 832G PROVIDES AS FOLLOWS WITH RESPECT TO PURCHASES OF SUPPLIES AND SERVICES:

NOTWITHSTANDING ANY OTHER PROVISION OF LAW, ALL PURCHASES AND CONTRACTS MADE BY THE ADMINISTRATOR OR THE SECRETARY OF THE ARMY FOR SUPPLIES OR FOR SERVICES EXCEPT FOR PERSONAL SERVICES, SHALL BE MADE AFTER ADVERTISING, IN SUCH MANNER AND AT SUCH TIMES, SUFFICIENTLY IN ADVANCE OF OPENING BIDS, AS THE ADMINISTRATOR OR SECRETARY OF THE ARMY, AS THE CASE MAY BE, SHALL DETERMINE TO BE ADEQUATE TO INSURE NOTICE AND OPPORTUNITY FOR COMPETITION. SUCH ADVERTISEMENT SHALL NOT BE REQUIRED, HOWEVER, WHEN (1) AN EMERGENCY REQUIRES IMMEDIATE DELIVERY OF THE SUPPLIES OR PERFORMANCE OF THE SERVICES; OR (2) REPAIR PARTS, ACCESSORIES, SUPPLEMENTAL EQUIPMENT, OR SERVICES ARE REQUIRED FOR SUPPLIES OR SERVICES PREVIOUSLY FURNISHED OR CONTRACTED FOR; OR (3) THE AGGREGATE AMOUNT INVOLVED IN ANY PURCHASE OF SUPPLIES OR PROCUREMENT OF SERVICES DOES NOT EXCEED $500; IN WHICH CASES SUCH PURCHASES OF SUPPLIES OR PROCUREMENT OF SERVICES MAY BE MADE IN THE OPEN MARKET IN THE MANNER COMMON AMONG BUSINESSMEN. IN COMPARING BIDS AND IN MAKING AWARDS, THE ADMINISTRATOR OR THE SECRETARY OF THE ARMY, AS THE CASE MAY BE, MAY CONSIDER SUCH FACTORS AS RELATIVE QUALITY AND ADAPTABILITY OF SUPPLIES OR SERVICES, THE BIDDER'S FINANCIAL RESPONSIBILITY, SKILL, EXPERIENCE, RECORD OF INTEGRITY IN DEALING, AND ABILITY TO FURNISH REPAIRS AND MAINTENANCE SERVICES, THE TIMES DELIVERY OR PERFORMANCE OFFERED, AND WHETHER THE BIDDER HAS COMPLIED WITH THE SPECIFICATIONS.

WE OBSERVE FIRST THAT SECTION 832A/B) OF THE ACT AUTHORIZES AND DIRECTS THE ADMINISTRATOR, AMONG OTHER THINGS, TO DO WHAT HE FINDS IS "NECESSARY, DESIRABLE, OR APPROPRIATE" TO "IMPROVE" THE POWER TRANSMITTING FACILITIES. FROM WHAT HAS BEEN REPORTED ABOVE, WE BELIEVE IT IS SELF- EVIDENT THAT THE BPA CONSIDERS THAT DIVERSIFICATION IS DESIRABLE BECAUSE IT RESULTS IN AN IMPROVED SYSTEM SINCE THE RISK OF FAILURE IS NOT CONCENTRATED, BUT SPREAD OUT OVER THE PRODUCTS OF SEVERAL MANUFACTURERS. SUBSECTION (B) INDICATES THE PURPOSE OF THE ACT AND WHAT THE ADMINISTRATOR IS TO ACCOMPLISH. THEREFORE, THE MODES OF ACCOMPLISHMENT PROVIDED BY THE ACT SHOULD BE READ AGAINST THAT BACKGROUND. SINCE THE ADMINISTRATOR IS AUTHORIZED TO DO WHAT HE BELIEVES IS DESIRABLE TO IMPROVE THE POWER SYSTEM, SECTION 832G OF THE ACT WHICH PROVIDES THE MANNER IN WHICH SUPPLIES ARE TO BE PURCHASED SHOULD BE CONSTRUED WITH THAT AUTHORITY IN MIND. IN THAT CONNECTION, IT SHOULD BE OBSERVED THAT SECTION 832G WAS NOT INTENDED TO BE LIMITED BY ANY OTHER ADVERTISING STATUTE IN THAT AT THE OUTSET IT INDICATES THAT IT IS NOT CONTROLLED BY ANY OTHER PROVISION OF LAW. THE SECTION DOES PROVIDE FOR AN "OPPORTUNITY FOR COMPETITION", BUT SUCH COMPETITION, OBVIOUSLY IN VIEW OF THE AUTHORITY IN SECTION 832A/B), CAN BE LIMITED BY WHAT THE ADMINISTRATOR SEEKS TO ACCOMPLISH. IN THIS CASE, SINCE THERE WERE THREE BIDDERS OTHER THAN COGENEL WHO COULD AND DID BID UPON THE PROCUREMENT, THE "OPPORTUNITY FOR COMPETITION" WAS MET.

WE OBSERVE FURTHER THAT SECTION 832A/C), WHICH AUTHORIZES THE ADMINISTRATOR TO ACQUIRE PROPERTY, IS ALSO TIED INTO THE "PURPOSES OF THIS CHAPTER", WHICH AS PREVIOUSLY NOTED CAN BE FOUND IN SECTION 832A/B).

WE OBSERVE TOO THAT IN A REPORT FROM THE DEPARTMENT OF THE INTERIOR ON H.R. 2690 AND H.R. 2693, DUPLICATE BILLS TO AMEND THE BONNEVILLE PROJECT ACT, CONTAINED AT PAGE 13 OF S. REPT. NO. 469, 79TH CONG; 1ST SESS; THE SECRETARY MADE THE FOLLOWING COMMENTS:

FURTHERMORE, THE BONNEVILLE POWER ADMINISTRATION IS NOT ENGAGED IN A GOVERNMENTAL REGULATORY PROGRAM. IT OPERATES A BUSINESS ENTERPRISE FROM WHICH THE GOVERNMENT DERIVES A RETURN OF NO SMALL PROPORTIONS. GOVERNMENT PROCEDURE WAS NOT DESIGNED FOR SUCH AN AGENCY, AND IN MANY INSTANCES IT HAS HINDERED THE OPERATIONS OF THE ADMINISTRATOR TO AN UNWARRANTED EXTENT. THE BILLS UNDER CONSIDERATION RECOGNIZE THESE CHARACTERISTICS OF THE BONNEVILLE POWER ADMINISTRATION AND WILL FACILITATE ITS OPERATIONS AS A REGUIONAL AND BUSINESS AGENCY.

THE PURPOSE OF THE BILL WHICH AMENDED SECTION 832A/F) OF THE BONNEVILLE PROJECT ACT, AS STATED ON PAGE 4 OF S. REPT. NO. 469, IS---

* * * TO PERMIT THE BONNEVILLE POWER ADMINISTRATOR TO USE BETTER METHODS OF ADMINISTRATION IN CARRYING OUT HIS PRESENT FUNCTIONS. IT WOULD NOT EXTEND HIS AUTHORITY IN THE POWER FIELD AND IS CONCERNED CHIEFLY WITH THE RELATIONSHIPS OF THE ADMINISTRATOR WITH HIS EMPLOYEES AND WITH OTHER FEDERAL AGENICES. THEY WOULD ENABLE THE ADMINISTRATOR TO EMPLOY BUSINESS PRINCIPLES AND METHODS IN THE OPERATION OF A BUSINESS ENTERPRISE AND WOULD ELIMINATE SOME HAMPERING PROCEDURES DESIGNED PRIMARILY FOR AGENCIES CONDUCTING GOVERNMENTAL REGULATORY PROGRAMS.

MOREOVER, OUR OFFICE IN B-105397, SEPTEMBER 21, 1951, MADE THE FOLLOWING OBSERVATION CONCERNING THE IMPACT OF SECTION 832A/F):

THE LEGISLATIVE HISTORY OF THE FOREGOING PROVISION OF LAW INDICATES THAT ITS PURPOSE WAS TO FREE THE ADMINISTRATION FROM THE REQUIREMENTS AND RESTRICTIONS ORDINARILY APPLICABLE TO THE CONDUCT OF GOVERNMENT BUSINESS AND TO ENABLE THE ADMINISTRATOR TO CONDUCT THE BUSINESS OF THE PROJECT WITH A FREEDOM SIMILAR TO THAT WHICH HAS BEEN CONFERRED ON PUBLIC CORPORATIONS CARRYING ON SIMILAR OR COMPARABLE ACTIVITIES. * * *

THE BONNEVILLE PROJECT ACT CONTAINS POWERS BROADER THAN THOSE CUSTOMARILY VESTED IN GOVERNMENT AGENCIES, AND THESE POWERS WERE PRESERVED WHEN CONGRESS ENACTED PUBLIC LAW 89-343 (ACT OF NOVEMBER 8, 1965, 79 STAT. 1303, 41 U.S.C. 252) EXTENDING THE MANDATORY CHARACTER OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT. THE PUBLIC LAW SPECIFICALLY PRESERVED FROM IMPAIRMENT THE AUTHORITY OF THE SECRETARY OF THE INTERIOR WITH RESPECT TO PROCUREMENT FOR PROGRAM OPERATIONS UNDER THE BONNEVILLE PROJECT ACT. THIS RECENT AMENDMENT TO THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT RECOGNIZES THE SPECIAL AND EXCEPTIONAL PROCUREMENT AUTHORITY OVER THESE MATTERS WHICH HAS HITHERTO BEEN CONFERRED BY LAW. IN THAT REGARD, COMMENTS FOUND IN H. REPT. NO. 1166, 89TH CONG; 1ST SESS; STATE THAT THE AMENDMENT WILL PROVIDE THE ADMINISTRATOR ,SUFFICIENT AUTHORITY TO ENABLE THE AGENCY TO OPERATE IN BUSINESS MATTERS AS A PUBLIC UTILITY WITH POWERS AND EFFECTIVENESS SIMILAR TO THOSE OF A CORPORATE ENTITY;, IT IS UNDERSTOOD THAT ADMINISTRATIVE AND HOUSEKEEPING ITEMS ARE EXCLUDED FROM THE TERM "PROGRAM OPERATIONS" AND THAT, TO THE EXTENT THAT THESE PROCUREMENT PROGRAMS WOULD NOT BE IMPAIRED BY COMPLIANCE WITH THE ADMINISTRATOR'S REGULATIONS, SUCH REGULATIONS WILL BE OBSERVED, AS HERETOFORE CONTEMPLATED BY THE CONGRESS AND THE PRESIDENT. (H. REPT. NO. 670, 81ST CONG; 1ST SESS; 28; PRESIDENTIAL DIRECTIVE OF JULY 1, 1949, 14 F.R. 3699).

OUR CONSIDERATION OF THE BONNEVILLE PROJECT ACT AS A WHOLE LEADS US TO THE CONCLUSION THAT THE ADMINISTRATOR WAS AUTHORIZED IN THE CIRCUMSTANCES OF THE CASE TO PRECLUDE COGENEL AND MERLIN AND GERIN EQUIPMENT FROM THE IMMEDIATE PROCUREMENT. WHILE RELIANCE ON THE ACT IS SUFFICIENT TO ARRIVE AT THIS CONCLUSION, THE LEGISLATIVE HISTORY, DISCUSSED ABOVE, SUPPORTS THIS VIEW.

IT IS SUGGESTED THAT THE INVITATION SHOULD HAVE PROVIDED SOME NOTICE TO ALL PROSPECTIVE BIDDERS THAT EQUIPMENT OF THE SAME TYPE AS THAT NOW ON ORDER WOULD NOT BE CONSIDERED RESPONSIVE TO THE INVITATION. OTHERWISE A BIDDER OFFERING SUCH EQUIPMENT WOULD BE RESPONSIVE TO THE INVITATION. HOWEVER, APPARENTLY NO BIDDER OTHER THAN COGENEL MADE SUCH AN OFFER, AND COGENEL AND MERLIN AND GERIN WERE ON NOTICE BY THE MAY 26 LETTERS THAT SUCH OFFERS WERE NOT ACCEPTABLE. THUS COGENEL WAS NOT PREJUDICED BY THE OMISSION.

ACCORDINGLY, IN VIEW OF THE FOREGOING, OUR OFFICE WILL NOT OBJECT TO THE REJECTION OF THE BID OF COGENEL ON THE IMMEDIATE PROCUREMENT.