B-159878, FEBRUARY 6, 1967, 46 COMP. GEN. 651

B-159878, FEBRUARY 6, 1967, 46 COMP. GEN. 651

CONTRACTS - NEGOTIATION - SOLE-SOURCE BASIS - JUSTIFICATION THE CANCELLATION OF AN INVITATION FOR BIDS TO PERMIT REVISION OF THE DELIVERY SCHEDULE ON URGENTLY NEEDED TRUCKS AND THE SUBSEQUENT NEGOTIATION OF A SOLE-SOURCE PROCUREMENT WITH A CONTRACTOR DELINQUENT UNDER CURRENT CONTRACTS ALTHOUGH JUSTIFIED ON THE BASIS THAT A FORMAL DETERMINATIONS AND FINDINGS AUTHORIZED THE SOLE-SOURCE PROCUREMENT PURSUANT TO 10 U.S.C. 2304 (A) (13) AND (A) (14), AS THE CONTRACTOR EVEN THOUGH INCAPABLE OF MEETING THE REVISED SCHEDULE COULD PRODUCE THE EQUIPMENT SOONER THAN ANY OTHER BIDDER, AND AS TIME DID NOT PERMIT THE UPDATING OF INADEQUATE DRAWINGS THAT HAD BEEN MODIFIED TO CONFORM WITH THE PRODUCTION DRAWINGS OF THE CONTRACTOR, THE AWARD VIOLATES THE LETTER AND SPIRIT OF PROCUREMENT STATUTES AND REGULATIONS, AND FUTURE PROCUREMENTS, AFTER REVIEW OF THE SUITABILITY OF THE MODIFIED DRAWINGS, SHOULD BE SECURED ON A COMPETITIVE BASIS. CONTRACTS - DELIVERIES - FAILURE TO MEET SCHEDULE - EFFECT WHERE A CONTRACTING OFFICER BEFORE CANCELING AN INVITATION FOR BIDS WAS COGNIZANT THAT THE PRODUCER UNDER CURRENT CONTRACTS WAS DELINQUENT AND COULD NOT MEET THE REVISED DELIVERY SCHEDULE OF THE INVITATION, HE INSTEAD OF VERIFYING THE EMERGENCY NEED FOR THE REVISED SCHEDULE AND NEGOTIATING A SOLE-SOURCE PROCUREMENT WITH THE PRODUCER SHOULD HAVE POINTED OUT TO THE REQUIRING AGENCY, IN ACCORDANCE WITH PARAGRAPHS 1 305.2 AND 5-1106.4 OF THE ARMED SERVICES PROCUREMENT REGULATION, THE IMPOSSIBILITY OF MEETING THE REVISED SCHEDULE, AND THE EARLIEST POSSIBLE SCHEDULE ON WHICH DELIVERIES COULD BE REASONABLY ANTICIPATED, AND, IF IT APPEARED THAT THE CURRENT PRODUCER COULD OFFER EARLIER DELIVERY ONLY THEN WOULD IT HAVE BEEN PROPER TO CANCEL THE INVITATION FOR BIDS AND NEGOTIATE A SOLE-SOURCE PROCUREMENT WITH THE PRODUCER. CONTRACTS - SPECIFICATIONS - DEVIATIONS - WAIVER - APPROVAL ERRONEOUS THE FACT THAT THE CONTRACTING OFFICER OF A PROCURING AGENCY, WHO UNDER PARAGRAPH 14-205 OF THE ARMED SERVICES PROCUREMENT REGULATION IS REQUIRED TO OBTAIN FROM A USING ACTIVITY APPROVAL FOR THE WAIVER OF SPECIFICATION DEVIATIONS THAT ARE REPORTED BY AN INSPECTOR, WAS UNAWARE OF THE INADEQUACY OF A DATA PACKAGE UNTIL TOO LATE TO HAVE ANY EFFECT IN A CURRENT PROCUREMENT DOES NOT JUSTIFY THE SOLE-SOURCE PROCUREMENT SITUATION CREATED BY THE CONTRACTOR UNDER OTHER PROCUREMENTS BY MEANS OF UNILATERAL SPECIFICATION CHANGES, AND SUBSECTION (D) OF PARAGRAPH 1 1202, WHICH PROVIDES FOR THE MANDATORY USE OF APPLICABLE FEDERAL OR COORDINATED MILITARY SPECIFICATIONS, REQUIRING THE REVISION OF INADEQUATE SPECIFICATIONS "TO OBVIATE THE NECESSITY FOR REPEATED DEPARTURES FROM ECIFICATIONS," NONCOMPLIANCE WITH PARAGRAPH 1-1202 (D) WAS PREJUDICIAL TO OTHER BIDDERS. BIDDERS - QUALIFICATIONS - DELIVERY CAPABILITIES WHILE THE DETERMINATION OF BIDDER RESPONSIBILITY IS PRIMARILY AN ADMINISTRATIVE FUNCTION THAT WILL NOT BE DISTURBED BY THE GENERAL ACCOUNTING OFFICE ABSENT A SHOWING THAT THE DETERMINATION IS ARBITRARY, CAPRICIOUS, OR WITHOUT SUBSTANTIAL BASIS IN FACT, PRIOR DELINQUENCIES OF WHATEVER NATURE ON THE PART OF A BIDDER SHOULD BE ONE OF THE IMPORTANT FACTORS CONSIDERED IN DETERMINING PRESENT RESPONSIBILITY, ESPECIALLY IN A CASE WHERE THE EARLIEST POSSIBLE DELIVERY OF A PROCUREMENT IS STATED TO BE CRUCIAL.

TO THE DIRECTOR, DEFENSE SUPPLY AGENCY, FEBRUARY 6, 1967:

REFERENCE IS MADE TO LETTERS AND ENCLOSURES DATED SEPTEMBER 28 AND NOVEMBER 17, 1966, FROM THE ASSISTANT COUNSEL, DEFENSE SUPPLY AGENCY (DSA), FURNISHING OUR OFFICE WITH BASIC AND SUPPLEMENTAL REPORTS ON THE PROTEST OF THE GROVE MANUFACTURING COMPANY AGAINST THE CANCELLATION OF INVITATION FOR BIDS (IFB) DSA-4-66-4460 AND THE SUBSEQUENT SOLE-SOURCE PROCUREMENT OF THE EQUIPMENT CALLED FOR UNDER THAT INVITATION FROM THE PETTIBONE MULLIKEN CORPORATION.

THE SUBJECT INVITATION WAS ISSUED ON MARCH 8, 1966, TO FULFILL A PORTION OF A MILITARY INTERDEPARTMENTAL PROCUREMENT REQUEST (MIPR) ISSUED BY THE DEPARTMENT OF THE NAVY AND, AFTER AMENDMENT, COVERED QUANTITIES OF 100 AND 150 6,000-POUND ROUGH TERRAIN FORKLIFT TRUCKS TO BE CONSTRUCTED IN ACCORDANCE WITH SPECIFICATION MIL-T-40632 AND MARINE CORPS DRAWINGS SERIES 5117.

THE AMENDED BID OPENING DATE WAS JULY 6, 1966, AND THE AMENDED DELIVERY SCHEDULE CALLED FOR 30 UNITS PER MONTH, COMMENCING 330 DAYS AFTER AWARD. BIDS WERE RECEIVED FROM THE GROVE MANUFACTURING COMPANY, THE CLARK EQUIPMENT COMPANY AND THE PETTIBONE MULLIKEN CORPORATION. THE GROVE BID WAS LOW AND A PREAWARD SURVEY DATED JULY 25, 1966, CONCLUDED THAT GROVE WAS A RESPONSIBLE BIDDER AND RECOMMENDED THAT AWARD BE MADE TO GROVE.

BEFORE ANY AWARD COULD BE MADE, HOWEVER, AN AMENDMENT TO THE MIPR WAS ISSUED BY THE DEPARTMENT OF THE NAVY ON JULY 29, 1966, WHICH CHANGED THE NUMBER OF TRUCKS TO BE PROCURED TO 129 AND REVISED THE DELIVERY SCHEDULE AS FOLLOWS:

NUMBER

OF

TRUCKS DATE

8 OCTOBER 1966

8 DECEMBER 1966

30 JANUARY 31, 1967

33 FEBRUARY 28, 1967

34 MARCH 31, 1967

8 MAY 31, 1967

8 AUGUST 31, 1967 THE REASON GIVEN FOR THIS AMENDMENT TO THE MIPR WAS THAT "MILITARY OPERATIONAL COMMITMENTS NOT HERETOFORE KNOWN OR FORECAST REQUIRE REVISED DELIVERY SCHEDULES FOR SUBJECT TRUCKS.' AFTER CONFIRMING THE NECESSITY OF THE REVISED DELIVERY SCHEDULE WITH THE NAVY, DSA CANCELED THE INVITATION AND NOTIFIED THE BIDDERS ACCORDINGLY BY TELEGRAM DATED AUGUST 5, 1966. THIS ACTION WAS IMMEDIATELY PROTESTED BY GROVE IN A TELEGRAM ALSO DATED AUGUST 5.

THE SUBSTANCE OF GROVE'S PROTEST UPON CANCELLATION OF THE IFB WAS THAT THE REVISED DELIVERY SCHEDULE WAS IMPOSSIBLE OF PERFORMANCE BECAUSE OF LONG LEAD-TIME REQUIREMENTS FOR AXLES, ENGINES, TRANSMISSIONS AND HYDRAULICS, AND THAT NOT ONLY WAS THE CANCELLATION OF THE IFB THEREFORE ERRONEOUS, BUT THAT ANY LATER PROCUREMENT OF THE TRUCKS COVERED BY THE IFB BY MEANS OF READVERTISEMENT OR NEGOTIATION WOULD ALSO BE ERRONEOUS. THE PROTEST ALSO MAINTAINED THAT THE PROCUREMENT HISTORY OF BOTH 6,000-POUND AND 10,000-POUND ROUGH TERRAIN FORKLIFT TRUCKS SHOWED A PATTERN OF PURCHASES FROM ONE CONTRACTOR, PETTIBONE, IN WHICH PREMIUM PRICES WERE PAID FOR EARLY DELIVERY WHICH WAS NOT BEING ACHIEVED BECAUSE OF PERSISTENT DELINQUENCIES IN DELIVERIES. GROVE SUBMITTED CHARTS INDICATING PETTIBONE DELINQUENCIES ON FOUR CURRENT CONTRACTS FOR 6,000-POUND TRUCKS AND TWO CURRENT CONTRACTS FOR 10,000-POUND TRUCKS, CONCLUDING THEREFROM THAT PETTIBONE'S DELINQUENCIES EVIDENCED ITS NONRESPONSIBILITY. IT WAS ALSO CONTENDED THAT AN AWARD TO PETTIBONE FOR THE REQUIREMENTS OF THE CANCELLED IFB WOULD RESULT IN ADDITIONAL DELINQUENCIES BECAUSE THE PETTIBONE FACILITIES WOULD HAVE TO WORK AT FULL CAPACITY TO MERELY KEEP ABREAST OF CURRENT CONTRACT REQUIREMENTS AND, THEREFORE, WOULD BE INCAPABLE OF MEETING ANY NEW CONTRACTUAL REQUIREMENTS IN ADDITION TO THOSE ALREADY IN EXISTENCE.

THE INITIAL REPORT OF SEPTEMBER 28 SUBMITTED TO OUR OFFICE ADVISED THAT WHILE THE ORIGINAL REASON FOR CANCELLATION OF THE IFB WAS THE REVISED DELIVERY SCHEDULE, IT WAS ASCERTAINED AFTER CANCELLATION OF THE IFB THAT THE DATA PACKAGE REFERENCED IN THE CANCELED IFB WAS INADEQUATE FOR THE PURPOSES OF COMPETITIVE PROCUREMENT. PRESUMABLY THIS FACTOR WAS ADVANCED AS AN ADDITIONAL JUSTIFICATION FOR CANCELLATION OF THE IFB. THE REPORT ADVISED THAT TELEGRAMS WERE RECEIVED FROM PETTIBONE WITH REGARD TO CONTRACT DSA-400-66-C-1382 TM 552 ON JULY 29 AND AUGUST 2, 1966. THESE TELEGRAMS ADVISED THAT MARINE CORPS DRAWINGS SERIES 5117 WERE INADEQUATE AS TRUCKS FURNISHED UNDER PETTIBONE'S PRIOR CONTRACTS HAD BEEN INSPECTED AND ACCEPTED IN ACCORDANCE WITH ITS PRODUCTION DRAWINGS WHICH DIFFERED MATERIALLY FROM SERIES 5117, AND INQUIRED WHETHER SERIES 5117 DRAWINGS OR PETTIBONE PRODUCTION DRAWINGS WERE TO BE USED. WHILE THESE TELEGRAMS WERE RECEIVED PRIOR TO THE IFB CANCELLATION, THE REPORT STATED THAT THEIR SIGNIFICANCE WAS NOT REALIZED UNTIL AFTER CANCELLATION. THE INADEQUACY OF THE SERIES 5117 DRAWINGS WAS VERIFIED AT THE POST AWARD CONFERENCE CONDUCTED AT THE PETTIBONE PLANT BY THE NAVY ON CONTRACT DSA-400-66-C-1382 TM 552, AND WE ARE ADVISED THAT EXISTING CONTRACTS WITH PETTIBONE FOR THE TRUCKS HAVE SINCE BEEN MODIFIED WITH NO CHANGES IN CONTRACT PRICES TO REQUIRE CONFORMANCE TO THE PETTIBONE PRODUCTION DRAWINGS.

THE END RESULT OF THE CHANGED DELIVERY SCHEDULE AND THE DETERMINATION THAT THE USE OF PETITBONE PRODUCTION DRAWINGS WAS MANDATORY WAS THE ISSUANCE OF A FORMAL DETERMINATIONS AND FINDINGS BY THE ASSISTANT SECRETARY OF THE NAVY (INSTALLATIONS AND LOGISTICS), AUTHORIZING THE SOLE- SOURCE PROCUREMENT OF THE TRUCKS FROM PETTIBONE UNDER THE NEGOTIATION AUTHORITY OF 10 U.S.C. 2304 (A) (13) AND 10 U.S.C. 2304 (A) (14). THESE REPRESENT EXCEPTIONS TO THE FORMAL ADVERTISING RULES WHICH PROVIDE FOR NEGOTIATION IN THE CASE OF TECHNICAL EQUIPMENT WHERE STANDARDIZATION AND INTERCHANGEABILITY OF PARTS IS NECESSARY AND WHERE ADVERTISING WOULD RESULT IN DUPLICATION OF INVESTMENT OR PREPARATION TIME. THE PRIMARY REASON FOR THE DETERMINATION TO NEGOTIATE WITH PETTIBONE WAS THAT IT WAS FELT THAT THERE WAS INSUFFICIENT TIME FOR UPDATING THE MARINE CORPS DRAWINGS BY EITHER THE GOVERNMENT OR ANOTHER BIDDER AND THAT EARLIEST DELIVERY COULD BE OBTAINED BY NEGOTIATION WITH PETTIBONE WHICH ARE ALREADY IN POSSESSION OF THE DRAWINGS. IT IS NOTED, HOWEVER, THAT NOT EVEN PETTIBONE WAS CAPABLE OF MEETING THE REVISED DELIVERY SCHEDULE--- THE REASON ORIGINALLY GIVEN FOR CANCELING THE IFB. ALTHOUGH GROVE ALSO PROTESTED THE SOLE-SOURCE PROCUREMENT AND MAINTAINED THAT IT COULD ACCOMPLISH THE REQUIRED DRAWING REVISION WITHIN 2 WEEKS, IT WAS THE OPINION OF THE CONTRACTING OFFICER, AFTER CONSULTATION WITH PETTIBONE AND DSA ENGINEERING PERSONNEL, THAT A MINIMUM OF 90 DAYS WOULD BE REQUIRED TO REVISE THE DRAWINGS AND THAT 120 DAYS WOULD BE A MORE REALISTIC ESTIMATE. THIS FACT, COUPLED WITH THE LONGER LEAD TIME REQUIRED OF A NEW PRODUCER OF ROUGH TERRAIN TRUCKS, LED TO THE CONCLUSION THAT PETTIBONE COULD PRODUCE TRUCKS AT LEAST 6 MONTHS EARLIER THAN ANY OTHER CONTRACTOR. A CONTRACT WAS THEREFORE AWARDED TO PETTIBONE ON OCTOBER 28, 1966, WITH A DELIVERY SCHEDULE BEGINNING JULY 31, 1967, AND CONCLUDING NOVEMBER 30, 1967. SINCE AWARD TO GROVE ON THE CANCELED IFB WOULD MOST PROBABLY HAVE BEEN MADE BY AUGUST 31, 1966, THE SCHEDULE REQUIRED OF GROVE WOULD HAVE BEEN APPROXIMATELY THE SAME AS THE ONE CURRENTLY REQUIRED OF PETTIBONE.

IN JUSTIFICATION OF THIS AWARD AND IN REBUTTAL OF GROVE'S ALLEGATIONS THAT THE PETTIBONE FACILITIES WERE INADEQUATE TO MEET BOTH THE OBLIGATIONS ALREADY INCURRED UNDER EARLIER CONTRACTS FOR 6,000- AND 10,000-POUND TRUCKS AND THE NEWLY ASSUMED OBLIGATIONS UNDER THE CONTRACT IN QUESTION AND THAT PETTIBONE IS THEREFORE NONRESPONSIBLE, THE REPORT SETS OUT THE PETTIBONE PRODUCTION CAPABILITY AND THE NUMBER OF TRUCKS FROM ALL CONTRACTS WHICH WILL BE DUE DURING THE PERIOD FROM JULY 31, 1966, TO NOVEMBER 30, 1967. THE REPORT STATES, RELYING UPON A LETTER FROM THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGION (DCASR), CHICAGO, DATED SEPTEMBER 9, 1966, THAT PETTIBONE HAS THREE PRODUCTION LINES SET UP FOR THE PRODUCTION OF ROUGH TERRAIN TRUCKS, TWO OF WHICH ARE CURRENTLY BEING USED FOR 10,000-POUND TRUCKS DUE UNDER CONTRACTS DA-11-184-AMC-597/T) AND DA-23-195-AMC-916/T), THUS LEAVING ONE LINE FOR THE PRODUCTION OF THE 6,000-POUND TRUCKS. IT IS REPORTED THAT, WITH PRIORITY ASSISTANCE, CONTRACTS DSA-4-070654-MP302 AND DSA-4-044814-TM552 WILL BE COMPLETED BY MARCH 1967, LEAVING ONLY CONTRACT DSA-400-67-C-1382 TM552 AND THE CONTRACT IN QUESTION REQUIRING DELIVERIES OF 6,000-POUND TRUCKS DURING THE PERIOD FROM JULY 31 TO NOVEMBER 30, 1967. DELIVERIES UNDER BOTH OF THESE CONTRACTS AS SCHEDULED WILL NOT EXCEED 50 TRUCKS PER MONTH, THE STATED PRODUCTION CAPABILITY OF THE 6,000-POUND TRUCK ASSEMBLY LINE. IT IS NOTED, HOWEVER, THAT WHILE PRODUCTION CAPABILITY IS CURRENTLY STATED AS 50 TRUCKS PER MONTH, THE PREAWARD SURVEY CONDUCTED ON CONTRACT DSA-400-66 C- 1382 TM552 STATED "CONTRACTOR HAS PREVIOUSLY PRODUCED AS MANY AS 40- - 6,000 POUND TRUCKS IN ONE MONTH ON THE SINGLE ASSEMBLY LINE," AND ACTUAL PRODUCTION IN THE PAST HAS FREQUENTLY BEEN SUBSTANTIALLY LESS THAN 40. THE OTHER TWO LINES WILL BE PRODUCING 30 TRUCKS PER MONTH FOR A PORTION OF THIS TIME FOR DELIVERY IN ACCORDANCE WITH THE SCHEDULE OF CONTRACT DA-23- 195-AMC-916/T) FOR 10,000-POUND TRUCKS. AS AN ADDITIONAL JUSTIFICATION FOR THE SOLE-SOURCE AWARD, THE REPORT STATES THAT UPDATED DRAWINGS ARE REQUIRED UNDER CONTRACTS DSA-400-66-C 1382 TM552 AND DSA-400-66-C- 3279/TM559, AND WERE SCHEDULED TO BE DELIVERED UNDER CONTRACT DSA-400-66-C -3279/TM559 IN DECEMBER 1966. THEREFORE, THE REPORT CONCLUDES THAT ANY FUTURE PROCUREMENTS WILL BE ON A COMPETITIVE BASIS.

BECAUSE OF THE FORMAL DETERMINATIONS AND FINDINGS ISSUED BY THE ASSISTANT SECRETARY OF THE NAVY (INSTALLATIONS AND LOGISTICS) AUTHORIZING THE PROCUREMENT FROM PETTIBONE, AND BECAUSE IN THE PRESENT SITUATION IT APPEARS THAT PETTIBONE CAN ACTUALLY PRODUCE THE TRUCKS REQUIRED UNDER THE CONTRACT SOONER THAN ANY OTHER BIDDER, WE CONCLUDE THAT THE SOLE-SOURCE AWARD IS NOT SUBJECT TO QUESTION BY OUR OFFICE. HOWEVER, WE ALSO CONCLUDE THAT THE ACTIONS OF BOTH THE NAVY AND DSA WHICH CULMINATED IN THE PRESENT SOLE-SOURCE SITUATION VIOLATE BOTH THE LETTER AND THE SPIRIT OF THE PROCUREMENT STATUTES AND REGULATIONS.

PARAGRAPH 1-305.2, ARMED SERVICES PROCUREMENT REGULATION (ASPR), PROVIDES IN PART AS FOLLOWS:

(A) THE TIME OF DELIVERY OR PERFORMANCE IS AN ESSENTIAL ELEMENT FOR INCLUSION IN A CONTRACT AND MUST BE CLEARLY SET FORTH IN INVITATIONS FOR BIDS AND REQUESTS FOR PROPOSALS. DELIVERY AND PERFORMANCE SCHEDULES SHALL BE DESIGNED TO MEET THE REQUIREMENTS OF THE PARTICULAR PROCUREMENT, WITH DUE REGARD TO ALL RELEVANT FACTORS, AND MUST BE REALISTIC. DELIVERY AND PERFORMANCE SCHEDULES WHICH ARE UNREASONABLY TIGHT OR DIFFICULT OF ATTAINMENT ARE INIMICAL TO FULL COMPETITION, * * * AND MAY RESULT IN HIGHER CONTRACT PRICES. THEREFORE, PRIOR TO ISSUING AN INVITATION FOR BIDS OR REQUEST FOR PROPOSALS, THE CONTRACTING OFFICER SHALL QUESTION ANY DELIVERY REQUIREMENT WHICH APPEARS UNREALISTIC, AND, IF NECESSARY, INITIATE ACTION TO MAKE APPROPRIATE ADJUSTMENTS, * * * ASPR 5-1106.4 APPLIES THE SAME REQUIREMENTS TO COORDINATED PROCUREMENTS, AND ALSO PROVIDES THAT THE PROCURING DEPARTMENT CAN EITHER REFUSE TO ACCEPT AN UNREALISTIC DELIVERY SCHEDULE OR CAN REQUEST THAT THE UNREALISTIC SCHEDULE BE CHANGED.

WHILE THE FIGURES SUPPLIED BY GROVE CONCERNING PETTIBONE DELINQUENCIES ON EARLIER TRUCK CONTRACTS DIFFER FROM THOSE FURNISHED BY DSA AND PETTIBONE, IT IS ADMITTED THAT PETTIBONE HAS EXPERIENCED FREQUENT DELAYS OF VARYING DEGREE ON VIRTUALLY ALL RECENT CONTRACTS ALLEGEDLY CAUSED BY THE UNAVAILABILITY OF COMPONENTS. THE STATE OF COMPONENT AVAILABILITY OR NONAVAILABILITY, AS WELL AS PETTIBONE'S OBLIGATIONS UNDER OTHER CURRENT TRUCK CONTRACTS AND THE EFFECT OF THOSE OBLIGATIONS ON PETTIBONE'S ABILITY TO MEET THE DELIVERY SCHEDULE AS REVISED, WAS WITHIN THE COGNIZANCE OF THE CONTRACTING OFFICER WHEN THE IFB WAS CANCELED. THE INESCAPABLE CONCLUSION TO BE DRAWN FROM THIS INFORMATION IS, IN OUR OPINION, THAT NOT EVEN PETTIBONE, WHICH WAS THE ONLY CONTRACTOR IN CURRENT PRODUCTION AND WHICH THEREFORE WOULD BE THE CONTRACTOR FROM WHICH EARLIEST DELIVERY COULD LOGICALLY BE ANTICIPATED, COULD MEET THE REVISED SCHEDULE. INSTEAD OF VERIFYING THE EMERGENCY NEED FOR THE REVISED SCHEDULE, THE IMPOSSIBILITY OF MEETING THE REVISED SCHEDULE SHOULD HAVE BEEN POINTED OUT TO THE NAVY IN ACCORDANCE WITH THE ABOVE-QUOTED ASPR PROVISIONS AND THE EARLIEST POSSIBLE SCHEDULE ON WHICH DELIVERIES COULD BE REASONABLY ANTICIPATED SHOULD HAVE BEEN DETERMINED. IF, AT THAT POINT, IT HAD APPEARED THAT PETTIBONE COULD HAVE OFFERED MUCH EARLIER DELIVERY, CANCELLATION OF THE IFB AND NEGOTIATION WITH PETTIBONE WOULD HAVE BEEN PROPER. HOWEVER, THE DELIVERY SCHEDULE REQUIRED OF GROVE IN THE IFB WAS SUBSTANTIALLY THE SAME AS THAT AGREED TO BY PETTIBONE IN THE LATER NEGOTIATED CONTRACT, AND IF IT WERE NOT FOR THE PROBLEM OF THE INADEQUATE DATA PACKAGE, GROVE APPARENTLY COULD HAVE MET THE DELIVERIES PROMISED BY PETTIBONE. IT SHOULD BE POINTED OUT THAT GROVE WOULD HAVE HAD THE BENEFIT OF THE SAME PRIORITY ASSISTANCE RELIED UPON BY PETTIBONE TO ASSIST ITS PERFORMANCE. WE THEREFORE CONCLUDE THAT CANCELLATION OF THE IFB ON THE GROUND OF THE REVISED DELIVERY SCHEDULE DEMONSTRATED POOR PROCUREMENT MANAGEMENT. WITH REGARD TO THE INADEQUACY OF THE DATA PACKAGE, WE CAN SEE NO JUSTIFICATION FOR THE DEVELOPMENT OF THE PRESENT SITUATION IN WHICH A SINGLE CONTRACTOR BY MEANS OF UNILATERAL CHANGES IN SPECIFICATIONS HAS BEEN ABLE TO CREATE A SOLE- SOURCE SITUATION RESULTING IN AWARDS TO THAT CONTRACTOR AT PRICES SIGNIFICANTLY HIGHER THAN THOSE OFFERED BY ANOTHER OTHERWISE QUALIFIED BIDDER. THE SUPPLEMENTAL REPORT MAINTAINS THAT ALL CHANGES MADE BY PETTIBONE WERE IN THE NATURE OF STRUCTURAL IMPROVEMENTS OR WERE CORRECTIONS OF OBVIOUS DRAWING ERRORS. WE HAVE NO REASON TO DOUBT THAT THIS IS THE CASE. HOWEVER, CHANGES OF THIS NATURE MUST BE MADE IN ACCORDANCE WITH THE TERMS OF THE CONTRACT. THE REPORT ALSO ADVISES THAT TRUCKS PRODUCED ON ALL CONTRACTS SINCE 1962, INCLUDING CONTRACT N600/292/58077, TO CONTRACT UNDER WHICH PETTIBONE ORIGINALLY SUPPLIED THE DRAWINGS CONTAINED IN SERIES 5117, HAVE BEEN INSPECTED TO PETTIBONE PRODUCTION DRAWINGS RATHER THAN TO THE SPECIFICATION DRAWINGS. THE GOVERNMENT INSPECTOR HAS STATED THAT THE PETTIBONE PRODUCTION DRAWINGS WERE INITIALLY USED ON CONTRACT N600/292/58077 BEFORE THE SERIES 5117 DRAWINGS WERE OBTAINED BY THE GOVERNMENT. SINCE ALL LATER CONTRACTS CONTAINED STATEMENTS THAT TRUCKS PRODUCED WOULD BE IDENTICAL TO THOSE PRODUCED UNDER PREVIOUS CONTRACTS, IT WAS ASSUMED THAT USE OF THE PRODUCTION DRAWINGS WAS PROPER. IT WAS ALSO ASSUMED THAT PETTIBONE WAS NOTIFYING THE CONTRACTING OFFICERS ON THE VARIOUS LATER CONTRACTS OF THE DRAWING CHANGES. FOR REASONS GIVEN BELOW, WE CONCLUDE THAT THE INSPECTOR WAS WITHOUT AUTHORITY TO ACCEPT TRUCKS NOT CONFORMING TO THE CONTRACTUALLY REQUIRED SERIES 5117 DRAWINGS.

WHILE ASPR PERMITS ACCEPTANCE OF GOODS NOT CONFORMING TO SPECIFICATIONS UNDER CERTAIN CIRCUMSTANCES, IT DOES NOT AUTHORIZE THE WAIVER OF SPECIFICATION REQUIREMENTS BY GOVERNMENT INSPECTORS WITHOUT THE APPROVAL OF THE CONTRACTING OFFICER OR OTHER HIGHER AUTHORITY. ASPR 14-205 REQUIRES THAT PRIOR TO ACCEPTANCE OF NONCONFORMING GOODS OR SERVICES---

* * * THE CONTRACTING OFFICER SHALL OBTAIN THE APPROVAL OF THE REQUIRING ACTIVITY WHERE THE NONCOMFORMITY WITH CONTRACT REQUIREMENTS (I) AFFECTS MATTERS SUCH AS SAFETY, DURABILITY, PERFORMANCE, OR INTERCHANGEABILITY OF PARTS OR ASSEMBLIES, (II) RESULTS IN MATERIAL INCREASES IN WEIGHT, WHERE WEIGHT IS A SIGNIFICANT CONSIDERATION, OR (III) AFFECTS THE BASIC OBJECTIVES OF THE SPECIFICATIONS. ACCEPTANCE OF THESE TYPES OF NONCONFORMING SUPPLIES OR SERVICES SHALL BE COVERED BY AN APPROPRIATE MODIFICATION OF THE CONTRACT. ACCEPTANCE OF OTHER TYPES OF NONCONFORMING SUPPLIES AND SERVICES SHALL BE COVERED BY CONTRACT MODIFICATION IF DETERMINED NECESSARY BY THE CONTRACTING OFFICER.

IN ORDER FOR THE CONTRACTING OFFICER TO MAKE THE DETERMINATIONS REQUIRED OF HIM BY ASPR 14-205, IT IS OBVIOUS THAT THE INSPECTOR MUST ADVISE HIM OF ANY SEPCIFICATION DEVIATIONS. IT IS EQUALLY AS OBVIOUS THAT THE INSPECTOR CANNOT WAIVE SPECIFICATION REQUIREMENTS ON HIS OWN MOTION OR THAT OF THE CONTRACTOR.

SECONDLY, ASPR 5-1106.5, WHICH DEALS WITH COORDINATED PROCUREMENTS, PROVIDES THAT SPECIFICATION CHANGES ARE THE SOLE RESPONSIBILITY OF THE REQUIRING DEPARTMENT AND THAT "UNDER NO CIRCUMSTANCES SHALL THE PROCURING DEPARTMENT DIRECT OR AUTHORIZE DEVIATIONS OR WAIVERS FROM THE SPECIFICATIONS, DRAWINGS, OR OTHER PURCHASE DATA INCLUDED IN THE MIPR WITHOUT EXPRESS AUTHORITY OF THE REQUIRING DEPARTMENT.' THE DCASR WAS CHARGED WITH THE INSPECTION RESPONSIBILITIES ON THE CONTRACTS IN QUESTION AND THIS ORGANIZATION IS A BRANCH OF DSA, THE PROCURING AGENCY. NOT ONLY WAS THERE NO AUTHORITY PERMITTING DCASR TO AUTHORIZE SPECIFICATION CHANGES, THERE WAS A SPECIFIC PROHIBITION AGAINST SPECIFICATION CHANGES BY ANY ARM OF THE PROCURING AGENCY.

FINALLY, ASPR 1-1202, WHICH REQUIRES THE MANDATORY USE OF APPLICABLE FEDERAL OR COORDINATED MILITARY SPECIFICATIONS, UNLESS THE PROCUREMENT FALLS WITHIN ONE OF SEVEN LISTED EXCEPTIONS WHICH DO NOT APPEAR TO APPLY IN THE PRESENT CASE, REQUIRES IN SUBSECTION (D) THAT IMMEDIATE ACTION BE TAKEN TO AMEND OR REVISE INADEQUATE SPECIFICATIONS "TO OBVIATE THE NECESSITY FOR REPEATED DEPARTURES FROM THE SPECIFICATION.' APPARENTLY THROUGH POOR CONTRACT ADMINISTRATION AND POOR COMMUNICATIONS, THE CONTRACTING OFFICER WAS UNAWARE THAT THE DRAWINGS WERE INADEQUATE SO THAT ACTION WAS NOT INITIATED TO CORRECT THE SPECIFICATIONS IN ACCORDANCE WITH SUBSECTION (D) UNTIL IT WAS TOO LATE TO HAVE ANY EFFECT IN THE CURRENT PROCUREMENT. IN THIS REGARD, THE CONTRACTING OFFICER STATES THAT HIS FIRST NOTICE OF THE DRAWING INADEQUACY WAS THE RECEIPT OF THE PETTIBONE TELEGRAMS OF JULY 29 AND AUGUST 2, 1966. IT IS NOTED, HOWEVER, THAT CONTRACT NO. DSA-400-66-C 1382 TM552--- PRIOR TO THE ISSUANCE OF IFB DSA-4 -66-4460--- CALLED FOR UPDATING OF DRAWINGS SERIES 5117. WE CAN THINK OF NO VALID REASON FOR REQUIRING REVISED DRAWINGS OTHER THAN THAT THE UNREVISED DRAWINGS WERE INADEQUATE. WE THEREFORE CONCLUDE THAT THE CONTRACTING OFFICER FAILED TO ADMINISTER THE DRAWING PROBLEM AS HE WAS REQUIRED TO DO UNDER ASPR 1-1202 AND 14-205.

THE LOGIC AND NECESSITY OF THE ABOVE ASPR PROVISIONS ARE UNDERSCORED BY THE FACTS OF THE PRESENT CASE. WHAT IN EFFECT HAPPENED WAS THAT PETTIBONE WAS PERMITTED TO MANEUVER ITSELF INTO A POSITION WHERE IT HAD THE OPTION OF ACCEPTING AN AWARD WITHOUT COMMENT IF IT WAS THE LOW QUALIFIED BIDDER OR POINTING OUT THAT TRUCKS FURNISHED UNDER PRIOR CONTRACTS WERE NOT PRODUCED TO THE REQUIRED SPECIFICATIONS THEREBY FORCING A NEGOTIATED PROCUREMENT IF IT WAS NOT THE LOW QUALIFIED BIDDER ON THE BASIS OF ITS BID AS SUBMITTED. CLEARLY, THIS WAS PREJUDICIAL TO OTHER BIDDERS AND CONTRARY TO THE BASIC PHILOSOPHY OF THE PROCUREMENT STATUTES.

IN ITS ARGUMENTS CONCERNING PETTIBONE'S ALLEGED NONRESPONSIBILITY, THE GROVE PROTEST POINTS OUT THAT CONTRACT NO. DSA-4-0A4814-TM552, WHICH WAS THE SUBJECT OF A PROTEST BY GROVE TO THIS OFFICE CONSIDERED IN 45 COMP. GEN. 742, MAY 31, 1966, WAS AWARDED TO PETTIBONE ON THE BASIS OF EARLIER DELIVERIES PROMISED BY PETTIBONE ALTHOUGH THE PREAWARD SURVEY ADMITTEDLY DID NOT CONSIDER, BECAUSE OF THE SHORTAGE OF TIME, SUCH THINGS AS VENDOR QUOTES OR THE BIDDER'S PAST PERFORMANCE AND RECORD OF DELINQUENCIES. WHILE THE ADEQUACY OF THE PREAWARD SURVEY WAS CONSIDERED IN OUR EARLIER DECISION AND IS NOT NOW QUESTIONED BY GROVE, THE PROTEST STATES THAT SINCE THAT TIME TWO ADDITIONAL TRUCK CONTRACTS HAVE BEEN AWARDED TO PETTIBONE, APPARENTLY WITHOUT ANY FURTHER CONSIDERATION WHETHER PETTIBONE'S PRIOR DELINQUENCIES AFFECTED ITS RESPONSIBILITY. THE CONTRACTING OFFICER'S REPORT STATES THAT PREAWARD SURVEYS ON CONTRACTS DSA-4-0A4814-TM552, MENTIONED ABOVE, AND DSA-400-66-C-1382 TM552 FOUND PETTIBONE TO BE RESPONSIBLE AND CONCLUDES THAT PAST DELINQUENCIES WERE CAUSED BY COMPONENT NONAVAILABILITY NOT AFFECTING PETTIBONE'S RESPONSIBILITY. WHILE THE DETERMINATION OF RESPONSIBILITY IS PRIMARILY AN ADMINISTRATIVE FUNCTION AND WILL NOT BE DISTURBED BY THIS OFFICE ABSENT A SHOWING THAT THE DETERMINATION IS ARBITRARY, CAPRICIOUS OR WITHOUT SUBSTANTIAL BASIS IN FACT, AND WE THEREFORE DO NOT QUESTION THE DETERMINATION CONCERNING PETTIBONE'S RESPONSIBILITY, WE CANNOT HELP BUT NOTE THAT PRIOR DELINQUENCIES OF WHATEVER NATURE ARE ONE OF THE IMPORTANT FACTS TO BE CONSIDERED IN DETERMINING RESPONSIBILITY, ESPECIALLY IN A CASE WHERE EARLIEST POSSIBLE DELIVERY IS STATED TO BE CRUCIAL. IT IS NOTED THAT DELIVERIES UNDER CONTRACT NO. DSA-4-0A4814-TM552 HAVE NOT BEEN MADE ON TIME AND WE FEEL THAT THIS FACT POINTS UP THE NECESSITY OF VERIFYING A PROSPECTIVE CONTRACTOR'S PRESENT ABILITY TO MEET THE REQUIREMENTS OF THE PROPOSED CONTRACT. PETTIBONE'S INABILITY TO GET COMPONENTS HAS RESULTED IN THE PAYMENT OF A PREMIUM PRICE FOR EARLY DELIVERY WHICH THUS FAR, TO OUR KNOWLEDGE, HAS NOT BEEN ACCOMPLISHED. AWARD TO GROVE ON CONTRACT NO. DSA-4-0A4814-TM552 WOULD HAVE REQUIRED COMPLETION BY MARCH 1967, THE COMPLETION DATE CURRENTLY ESTIMATED FOR PETTIBONE, AT A LOWER PRICE.

IN A LETTER DATED OCTOBER 4, 1966, GROVE STRONGLY PROTESTED THE FORWARDING OF ITS CHARTS NAD OTHER INFORMATION CONCERNING PETTIBONE DELINQUENCIES TO PETTIBONE FOR COMMENT. WHILE WE REALIZE THAT COMMENTS BY A SUCCESSFUL CONTRACTOR ON A PROTEST FILED BY AN UNSUCCESSFUL BIDDER ARE SOMETIMES DESIRABLE OR EVEN NECESSARY, WE FEEL THAT THE DUTY OF DETERMINING AND REPORTING ON THE STATUS OF PETTIBONE CONTRACTS WAS MORE PROPERLY THAT OF THE CONTRACTING AGENCY THAN OF THE CURRENT CONTRACTOR.

WHILE, AS STATED ABOVE, IT IS OUR OPINION THAT THE SOLE-SOURCE AWARD TO PETTIBONE MAY NOT BE DISTURBED, WE FEEL THAT IT IS IMPERATIVE THAT IMMEDAITE STEPS BE TAKEN TO ASSURE HTAT ANY FUTURE PROCUREMENTS FOR THESE ROUGH TERRAIN TRUCKS BE ON A COMPETITIVE BASIS. IN THIS REGARD, WE FEEL THAT THE UPDATED DRAWINGS RECENTLY PROCURED FROM PETTIBONE SHOULD BE COMPLETELY REVIEWED TO DETERMINE THEIR SUITABILITY FOR COMPETITIVE USE. ALSO, IN ADDITION TO THE INVESTIGATION INTO EARILER PETTIBONE DELINQUENCIES TO DETERMINE WHETHER OR NOT LIQUIDATED DAMAGES SHOULD BE ASSESSED, AS PROPOSED BY THE REPORT DATED NOVEMBER 17, 1966, WE FEEL THAT A COMPLETE REVIEW OF ALL OF THE CHANGES MADE IN THE PETTIBONE PRODUCTION DRAWINGS AND FORMALLY MADE A REQUIREMENT OF EXISTING CONTRACTS BY MEANS OF THE MODIFICATION ISSUED AFTER THE DRAWING INADEQUACY WAS REALIZED SHOULD BE MADE IN ORDER TO DETERMINE WHETHER ANY OF THE CHANGES SHOULD RESULT IN PRICE ADJUSTMENTS. IF THIS IS FOUND TO BE THE CASE, APPROPRIATE MODIFICATIONS SHOULD BE MADE UNDER THE CHANGES CLAUSES OF THE RESPECTIVE CONTRACTS. SALEM PRODUCTS CORPORATION V. UNITED STATES, 298 F.2D 808.

FINALLY, IT IS REQUESTED THAT OUR OFFICE BE ADVISED OF THE RESULTS OF THE INVESTIGATION PERFORMED RELATIVE TO THE ASSESSMENT OF LIQUIDATED DAMAGES AS WELL AS THE AMOUNTS OF ANY PRICE REDUCTIONS TO WHICH THE GOVERNMENT IS ENTITLED AS A RESULT OF THE DRAWING CHANGES.