B-160318, FEB. 16, 1967

B-160318: Feb 16, 1967

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TO KLAGSBRUNN AND HANES: FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF OCTOBER 25. THE SUBJECT INVITATION WAS ISSUED ON AUGUST 25. THE NON-SET-ASIDE QUANTITY IS DIVIDED INTO 10 ITEMS WITH DELIVERY REQUIRED AS FOLLOWS: CHART ITEM NO. 700 1 OCTOBER 1967 THE SET-ASIDE IS THE SAME AS ITEMS 3 THROUGH 10. THREE BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 26. LADDS ESSLER COMPANY'S BID WAS QUALIFIED AND REJECTED AS NONRESPONSIVE. ON THE SAME DATE HART WAS AWARDED A CONTRACT FOR ITEMS 3 THROUGH 10 INCLUSIVE. WE UNDERSTAND THAT THE ENTIRE SET-ASIDE WILL BE AWARDED TO VALLEY. YOU HAVE PROTESTED THE AWARD TO HART ON THE GROUNDS THAT IS BID WAS NONRESPONSIVE AND IT WAS A NONRESPONSIBLE BIDDER.

B-160318, FEB. 16, 1967

TO KLAGSBRUNN AND HANES:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF OCTOBER 25, 1966, AND LETTERS OF NOVEMBER 23, 1966, DECEMBER 27, 1966, AND FEBRUARY 1, 1967, WITH ENCLOSURES, PROTESTING ON BEHALF OF VALLEY METALLURGICAL PROCESSING COMPANY, INCORPORATED, AGAINST THE AWARD OF A CONTRACT TO HART METALS, INCORPORATED, BY THE DEFENSE SUPPLY AGENCY, DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA, UNDER INVITATION FOR BIDS NO. DSA-400-67-B- 1092.

THE SUBJECT INVITATION WAS ISSUED ON AUGUST 25, 1966, AND CALLED FOR BIDS ON SUPPLYING 5,213,700 POUNDS OF ATOMIZED MAGNESIUM POWDER IN ACCORDANCE WITH SPECIFICATION, MIL-P-14067A, TYPE I, WITH STATED EXCEPTIONS AND DEVIATIONS. THE INVITATION ALSO INCLUDED A LABOR SURPLUS AREA SET-ASIDE OF 4,463,700 POUNDS. THE NON-SET-ASIDE QUANTITY IS DIVIDED INTO 10 ITEMS WITH DELIVERY REQUIRED AS FOLLOWS:

CHART

ITEM NO. QUANTITY TIME

1 300,000 LBS 1 JANUARY 1967

2 450,000 1 FEBRUARY 1967

3 500,000 1 MARCH 1967

4 500,000 1 APRIL 1967

5 550,000 1 MAY 1967

6 600,000 1 JUNE 1967

7 600,000 1 JULY 1967

8 600,000 1 AUGUST 1967

9 600,000 1 SEPTEMBER 1967

10 513,700 1 OCTOBER 1967

THE SET-ASIDE IS THE SAME AS ITEMS 3 THROUGH 10, INCLUSIVE, ABOVE.

THREE BIDS WERE RECEIVED AND OPENED ON SEPTEMBER 26, 1966. LADDS ESSLER COMPANY'S BID WAS QUALIFIED AND REJECTED AS NONRESPONSIVE. VALLEY BID ON ALL ITEMS AT A UNIT PRICE OF $0.7961 FOR A TOTAL BID OF (NUMBER ILLEGIBLE) ON THE NON-SET-ASIDE. HART BID ON ITEMS 3 THROUGH 10, (WORD ILLEGIBLE), ON AN ALL OR NONE BASIS, AT A UNIT PRICE OF $0.75, FOR A TOTAL BID OF $3,910,275 ON THE NON-SET-ASIDE. ON OCTOBER 21 VALLEY RECEIVED AN AWARD FOR ITEMS 1 AND 2. ON THE SAME DATE HART WAS AWARDED A CONTRACT FOR ITEMS 3 THROUGH 10 INCLUSIVE.

AT THE TIME WE RECEIVED THE ADMINISTRATIVE REPORT NO AWARD HAD BEEN MADE ON THE SET-ASIDE PORTION. SINCE THE CONTRACTING OFFICER FOUND HART NONRESPONSIBLE AS TO CAPACITY ON THE SET-ASIDE, AND SINCE HART DID NOT OBTAIN A CERTIFICATE OF COMPETENCY FROM THE SMALL BUSINESS ADMINISTRATION, WE UNDERSTAND THAT THE ENTIRE SET-ASIDE WILL BE AWARDED TO VALLEY.

YOU HAVE PROTESTED THE AWARD TO HART ON THE GROUNDS THAT IS BID WAS NONRESPONSIVE AND IT WAS A NONRESPONSIBLE BIDDER. WITH REGARD TO THE QUESTION OF RESPONSIVENESS, YOU CONTEND THAT THE PRE-AWARD SURVEY SHOWS THAT IT WILL BE IMPOSSIBLE FOR HART TO MEET THE REQUIRED DELIVERY SCHEDULE FOR ITEM 3, WHICH IS NOW MARCH 11 BY THE TERMS OF THE INVITATION AS AWARD WAS NOT MADE UNTIL 10 DAYS AFTER THE DATE STATED IN THE DELIVERY REQUIREMENTS; THAT THE INFORMATION SHOWING HART'S INABILITY TO MEET THE DELIVERY SCHEDULE WAS REQUIRED TO BE FURNISHED BY THE PROVISION OF THE INVITATION REQUIRING THAT AWARD BE MADE TO A RESPONSIBLE BIDDER; THAT THE HART BID IS THEREFORE NONRESPONSIVE TO THE REQUIRED DELIVERY SCHEDULE OF THE INVITATION FOR ITEM 3. FINALLY, SINCE ITS BID WAS NONRESPONSIVE TO ITEM 3 AND WAS ON AN ALL OR NONE BASIS IT MUST BE REJECTED IN ITS ENTIRETY. IN SUPPORT OF YOUR CONTENTIONS IN THIS REGARD, YOU CITE THE FOLLOWING DECISIONS OF OUR OFFICE: B-159842, OCTOBER 13, 1966; B-159833, OCTOBER 7, 1966; AND B 147968, MARCH 19, 1962.

AS TO THE MATTER OF RESPONSIBILITY, YOU CONTEND THAT THE CONTRACTING OFFICER DID NOT MAKE THE SPECIFIC AFFIRMATIVE DETERMINATION OF RESPONSIBILITY, SUPPORTED BY SUFFICIENT EVIDENCE, CONTEMPLATED AND REQUIRED BY ARMED SERVICES PROCUREMENT REGULATION 1-900, ET SEQ. BASICALLY, YOUR ARGUMENT ON THIS POINT IS TO THE EFFECT THAT THE PROCESS OF ATOMIZING MAGNESIUM POWDER IS SO HIGHLY TECHNICAL, COMPLEX AND HAZARDOUS AS TO REQUIRE EITHER PAST PRODUCTION EXPERIENCE OR EXTENSIVE PILOT PLANT OPERATIONS IF THERE IS TO BE ANY REASONABLE EXPECTATION OF MEETING THE REQUIREMENTS OF THE CONTRACT; THAT THERE IS NOT SUFFICIENT TIME BEFORE DELIVERY IS SCHEDULED TO BEGIN FOR A CONSULTING ENGINEER FIRM, WHICH HAS NOT HAD EXPERIENCE IN DESIGNING AND CONSTRUCTING A PLANT TO PRODUCE THIS PRODUCT, TO DESIGN AND CONSTRUCT SUCH A PLANT WITH THE CAPACITY TO PRODUCE AT A RATE SUFFICIENT TO MEET THE DELIVERY SCHEDULE; THAT HART METALS MUST RELY UPON THE EXPERIENCE AND KNOW-HOW OF ITS FOUNDER, ROBERT J. HART, TO BE CAPABLE OF PRODUCING THE SPECIFICATION RODUCT; THAT HART IS PRECLUDED FROM USING THE ONLY PROVEN METHOD AND PROCESS FOR PRODUCING THE SPECIFICATION PRODUCT ON TIME BY PATENTS OWNED BY VALLEY AND BY HIS CONTRACTUAL PROMISE NOT TO DISCLOSE OR USE VALLEY'S TRADE SECRETS; THAT HART'S STATEMENT TO THE PROCURING ACTIVITY THAT HE WILL NOT USE OR DISCLOSE ANY PROPRIETARY INFORMATION PROTECTED BY HIS CONTRACT WITH VALLEY, IF ACCEPTED AS TRUE, DISQUALIFIES HIM BECAUSE HE CANNOT COMPLY WITH THE GOVERNMENT CONTRACT WITHOUT THE USE OF SUCH KNOWLEDGE; THAT THIS STATEMENT IS A MERE CONCLUSION WITHOUT ANY FACTUAL SUPPORT AND IS NOT OTHERWISE RELIABLE IN LIGHT OF THE RULE ESTABLISHED IN CITED COURT CASES THAT THERE IS PRESUMPTION TRADE SECRETS WILL BE JEOPARDIZED IN THE CIRCUMSTANCES PRESENT HERE; AND THAT TO PERMIT HART TO PERFORM UNDER THE CONTRACT WOULD BE CONTRARY TO THE GOVERNMENT POLICY TO PROTECT PROPRIETARY RIGHTS. FURTHERMORE, YOU CONTEND THAT THE ONLY VALID DETERMINATION OF HART'S TECHNICAL AND PRODUCTIVE CAPACITY WAS IN CONNECTION WITH A FINDING THAT IT WAS A MANUFACTURER WITHIN THE MEANING OF THE WALSH-HEALEY ACT AND ASPR 12-603.1, AND THAT THE AFFIRMATIVE DETERMINATION THEREUNDER DOES NOT SATISFY THE ASPR REQUIREMENT FOR AN AFFIRMATIVE DETERMINATION THAT THE PROSPECTIVE CONTRACTOR HAS THE NECESSARY ORGANIZATION, EXPERIENCE, OPERATIONAL CONTROL, TECHNICAL SKILLS AND ABILITY, AND FACILITIES, OR THE ABILITY TO OBTAIN THEM. THEREFORE, YOU CONTEND THAT IN THE ABSENCE OF A SPECIFIC AFFIRMATIVE DETERMINATION OF THESE FACTORS, THERE IS DOUBT AS TO HART'S PRODUCTIVE CAPACITY WHICH REQUIRES A DETERMINATION OF NONRESPONSIBILITY PURSUANT TO ASPR 1-902.

YOU HAVE ALSO SUBMITTED INFORMATION WHICH INDICATES, CONTRARY TO THE IMPLICATION OF THE ADMINISTRATIVE REPORT, THAT VALLEY HAS THE CAPACITY TO SUPPLY BOTH THE NON-SET ASIDE AND SET ASIDE REQUIREMENTS IN ACCORDANCE WITH ALL THE TERMS OF THE INVITATION. THIS INFORMATION SHOWS THAT AT THE TIME THE AWARD WAS MADE TO HART, VALLEY WAS SUPPLYING GOVERNMENT REQUIREMENTS FOR ATOMIZED MAGNESIUM POWDER IN EXCESS OF 900,000 POUNDS PER MONTH. IN ADDITION, YOU ALLEGE THAT DSA KNEW, OR SHOULD HAVE KNOWN, THAT A NEW PLANT IN CALIFORNIA HAVING A 300,000 POUND PER MONTH CAPACITY WOULD SOON BE IN PRODUCTION. FURTHERMORE, YOU STATE THAT THERE HAS BEEN A BUILD -UP IN CAPACITY DURING THE PAST 12 MONTHS TO A RATED MONTHLY CAPACITY OF OVER 2,000,000 POUNDS, AND THAT THIS WAS ACCOMPLISHED LARGELY AT THE URGING OF THE GOVERNMENT. YOU ALSO POINT OUT THAT THE REFERENCE IN THE ADMINISTRATIVE FILE TO SLIPPAGE IN DELIVERIES TO DSA IN THE SUMMER AND FALL OF 1966, WAS DUE TO AN EXPLOSION IN ONE SYSTEM AND THIS HAS BEEN REBUILT WITH A LARGER CAPACITY. THIS INFORMATION IS SUPPLIED TO SHOW THAT THE CONTRACTING OFFICER ERRONEOUSLY CONCLUDED THAT TIMELY DELIVERY OF THE QUANTITIES AWARDED TO HART IS MORE LIKELY THAN HAD THESE QUANTITIES BEEN AWARDED TO VALLEY.

SINCE AN AWARD HAS ALREADY BEEN MADE TO HART, THE BASIC QUESTION RAISED BY YOUR PROTEST IS THE VALIDITY OF THE CONTRACT. WHETHER THE CONTRACT IS VALID DEPENDS UPON COMPLIANCE WITH THE STATUTE GOVERNING PROCUREMENT BY FORMAL ADVERTISING, 10 U.S.C. 2304 (A), WHICH REQUIRES THAT AWARD BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IT IS CLEAR THAT HART SUBMITTED THE LOWEST BID. WE BELIEVE IT IS EQUALLY CLEAR THAT THE HART BID WAS RESPONSIVE TO THE INVITATION, AND THE ONLY QUESTION IS THE VALIDITY OF THE CONTRACTING OFFICER'S CONCLUSION THAT HART WAS A RESPONSIBLE PROSPECTIVE CONTRACTOR.

THE TEST TO BE APPLIED IN DETERMINING THE RESPONSIVENESS OF A BID IS WHETHER THE BID AS SUBMITTED IS AN OFFER TO PERFORM, WITHOUT EXCEPTION, THE EXACT THING CALLED FOR IN THE INVITATION, AND UPON ACCEPTANCE WILL BIND THE CONTRACTOR TO PERFORM IN ACCORDANCE WITH ALL THE TERMS AND CONDITIONS THEREOF. UNLESS SOMETHING ON THE FACE OF THE BID, OR SPECIFICALLY A PART THEREOF, EITHER LIMITS, REDUCES OR MODIFIES THIS OBLIGATION OF THE PROSPECTIVE CONTRACTOR TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE INVITATION, IT IS RESPONSIVE. THE HART BID IS REGULAR IN ALL RESPECTS AND, THEREFORE, MEETS THE TEST OF RESPONSIVENESS. THE DECISIONS OF OUR OFFICE YOU CITED IN SUPPORT OF YOUR ARGUMENT OF NONRESPONSIVENESS ARE READILY DISTINGUISHABLE FROM THE INSTANT CASE. IN BOTH B-159842, OCTOBER 13, 1966, AND B-147968, MARCH 19, 1962, THE NUMBER OF DAYS INSERTED IN THE BIDS BY THE BIDDERS FOR DELIVERY OF THE PRELIMINARY MANUAL AND PREPRODUCTION SAMPLE, RESPECTIVELY, PLUS THE TIME PERMITTED THE GOVERNMENT TO INSPECT, CORRECT AND APPROVE, WOULD RESULT IN LATE DELIVERIES IF BOTH THE CONTRACTOR AND THE GOVERNMENT UTILIZED THE FULL TIME ALLOWED. THEREFORE, IT WAS DETERMINABLE FROM THE BIDS, WITHOUT REFERENCE TO ANY INFORMATION DEVELOPED IN DETERMINING THE BIDDERS' ABILITY TO PERFORM, THAT THEY WERE NOT RESPONSIVE. THE OTHER DECISION CITED, B- 159833, OCTOBER 7, 1966, WAS APPARENTLY CITED FOR THE PROPOSITION THAT AN "ALL OR NONE" BID MUST BE REJECTED IN ITS ENTIRETY EVEN IF IT IS NONRESPONSIVE AS TO ONLY ONE OF SEVERAL ITEMS BID ON. THIS RULE WOULD BE APPLICABLE IN THE INSTANT CASE ONLY IF THE HART BID WAS NONRESPONSIVE TO ANY OF THE ITEMS, WHICH WE BELIEVE IS NOT THE CASE. HART HAS OFFERED AND IS BOUND TO DELIVER THE SPECIFICATION MATERIAL AT THE TIMES STATED. WHETHER IT CAN AND WILL IS A MATTER OF RESPONSIBILITY, THE ABILITY TO PERFORM IN ACCORDANCE WITH THE SPECIFICATIONS.

IN YOUR LETTER OF DECEMBER 27, IN CONNECTION WITH YOUR CONTENTIONS CONCERNING RESPONSIVENESS, YOU QUESTION THE GOVERNMENT'S RIGHT TO ENFORCE THE DELIVERY SCHEDULE "IN THE FACE OF THE GOVERNMENT'S ACTUAL KNOWLEDGE * * * THAT HE COULD NOT MEET THE DELIVERY SCHEDULE * * *.' IN SUPPORT OF THIS ARGUMENT YOU HAVE CITED AN ARTICLE BY GILBERT A. CUNEO, WAIVER OF DUE DATE IN GOVERNMENT CONTRACTS, 43 VIRGINIA LAW REVIEW 1, AND CRYO-SONICS, INC., ASBCA NO. 11483,66-2BCA 5890. WE DO NOT BELIEVE EITHER OF THESE REFERENCES IS APPLICABLE TO THE ISSUE BEFORE US, WHICH IS THE VALIDITY OF THE CONTRACT. CUNEO'S ARTICLE IS CONCERNED WITH THE EFFECT OF THE GOVERNMENT'S PERMITTING A CONTRACTOR TO CONTINUE PERFORMANCE AFTER THE DUE DATE HAS PASSED. THE ASBCA CASE HELD THAT THE CONTRACTOR'S FAILURE TO MAKE TIMELY DELIVERY WAS AN EXCUSABLE DELAY WHERE THE DELAY WAS OCCASIONED BY LACK OF SPECIALIZED KNOWLEDGE WHICH A COMPETENT AND QUALIFIED CONTRACTOR WOULD NOT BE EXPECTED TO HAVE, BUT WHICH KNOWLEDGE THE GOVERNMENT HAD AND FAILED TO CONVEY TO THE CONTRACTOR. IN THE INSTANT CASE THE GOVERNMENT HAS NO KNOWLEDGE CONCERNING HART'S ABILITY TO MANUFACTURE AND MAKE TIMELY DELIVERY OF WHICH HART IS NOT COGNIZANT. MOREOVER, AS A GENERAL PROPOSITION THE GOVERNMENT IS ENTITLED TO RELY UPON A BIDDER'S PROMISE TO PERFORM IN ACCORDANCE WITH THE INVITATION. SEE APPEAL OF TRAND PLASTICS CO., ASBCA 3708, 57-1 BCA 1186 (1957); APPEAL OF BURKETTE, ASBCA 6283, 61-1 BCA 3050, (1961). IT SHOULD BE NOTED AT THIS POINT THAT WE BELIEVE THE QUESTION OF HART'S ABILITY TO MEET THE DELIVERY SCHEDULE IS A MATTER OF RESPONSIBILITY AND WILL BE CONSIDERED MORE FULLY HEREAFTER. WITH FULL KNOWLEDGE OF THE CIRCUMSTANCES CONCERNING ITS ABILITY TO MEET THE DELIVERY SCHEDULE HART HAS AGREED TO BE BOUND BY THE SPECIFIED DELIVERY SCHEDULE, AND THE GOVERNMENT IS ENTITLED TO RELY UPON THIS PROMISE.

REMAINING FOR CONSIDERATION IS THE QUESTION OF HART'S RESPONSIBILITY AS A PROSPECTIVE CONTRACTOR, THE DETERMINATION OF WHICH, AS POINTED OUT HERETOFORE, IS A PREREQUISITE TO AWARD. SECTION 1, PART 9, OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) SETS FORTH THE POLICY AND REQUIREMENTS OF THE DEPARTMENT OF DEFENSE IN THIS REGARD. ASPR 1-902 PROVIDES THAT A PROSPECTIVE CONTRACTOR MUST MAKE AN AFFIRMATIVE DEMONSTRATION OF HIS RESPONSIBILITY AND THAT UNLESS THE INFORMATION CONCERNING THIS MATTER CLEARLY INDICATES HE IS RESPONSIBLE, THE CONTRACTING OFFICER MUST MAKE A DETERMINATION OF NON-RESPONSIBILITY. FURTHER PROVIDES THAT DOUBT IN THIS REGARD WHICH CANNOT BE RESOLVED AFFIRMATIVELY REQUIRES A NEGATIVE DETERMINATION. PARAGRAPH 1-903 PRESCRIBES THE MINIMUM STANDARDS OF RESPONSIBILITY WHICH INCLUDE, AMONG OTHER THINGS, THE ABILITY TO MEET THE REQUIRED DELIVERY SCHEDULE, THE NECESSARY ORGANIZATION, EXPERIENCE, OPERATIONAL CONTROLS, AND TECHNICAL SKILLS, EQUIPMENT AND FACILITIES, OR THE ABILITY TO OBTAIN THEM. THE REGULATION ALSO PROVIDES THAT SUCH INFORMATION SHALL BE OBTAINED ON AS CURRENT A BASIS AS FEASIBLE FROM THE FILES OF THE DEPARTMENT OF DEFENSE, WHERE AVAILABLE, OR THROUGH PRE-AWARD SURVEY CONDUCTED BY THE CONTRACT ADMINISTRATION OFFICE, AND THAT SUCH INFORMATION SHALL BE SUFFICIENT TO SATISFY THE CONTRACTING OFFICER THAT THE PROSPECTIVE CONTRACTOR MEETS THE MINIMUM STANDARDS OF RESPONSIBILITY. IT HAS LONG BEEN OUR POSITION THAT IT IS NEITHER THE PROVINCE NOR THE INTENTION OF OUR OFFICE TO DETERMINE THE RESPONSIBILITY OF PROSPECTIVE CONTRACTORS, SUCH DETERMINATION BEING A QUESTION OF FACT PRIMARILY FOR DETERMINATION BY THE CONTRACTING OFFICER CONCERNED. SEE 45 COMP. GEN. 4; 43 ID. 257; 38 ID. 131; 37 ID. 430. THESE AND OTHER DECISIONS WE HAVE TAKEN THE POSITION THAT A DETERMINATION OF RESPONSIBILITY NECESSARILY INVOLVES THE EXERCISE OF A CONSIDERABLE RANGE OF DISCRETION AND JUDGMENT, WHICH SHOULD NOT BE DISTURBED BY OUR OFFICE IN THE ABSENCE OF CONVINCING EVIDENCE THAT THE DETERMINATION WAS ARBITRARY, CAPRICIOUS, OR NOT BASED UPON SUBSTANTIAL EVIDENCE. IT IS, HOWEVER, THE PROVINCE AND FUNCTION OF OUR OFFICE TO REVIEW THE RECORD BEFORE US TO DETERMINE IF IT REASONABLY SUPPORTS THE CONTRACTING OFFICER'S FINDING. 45 COMP. GEN. 4, SUPRA. IN VIEW OF YOUR ALLEGATION COVERING HART'S RESPONSIBILITY. WE HAVE CAREFULLY REVIEWED AND CONSIDERED THE INFORMATION RELIED UPON BY THE CONTRACTING OFFICER IN CONCLUDING THAT HART WAS A RESPONSIBLE PROSPECTIVE CONTRACTOR AND THEREFORE ELIGIBLE FOR THE NON-SET-ASIDE PORTION OF THE PROCUREMENT.

SINCE HART METALS WAS A NEWLY ORGANIZED CORPORATION WITHOUT ANY HISTORY OF PERFORMANCE, THE CONTRACTING OFFICER REQUESTED ON SEPTEMBER 26 THAT THE APPROPRIATE CONTRACT ADMINISTRATION OFFICE CONDUCT A PRE AWARD SURVEY PURSUANT TO ASPR 1-905.4. UNDER DATE OF OCTOBER 13, 1966, THE SURVEY TEAM REPORTED THE RESULTS OF THEIR INVESTIGATION AND MADE THEIR RECOMMENDATION, WHICH WAS APPROVED BY THE CHAIRMAN, PRE AWARD SURVEY BOARD. THE RECOMMENDATION WAS THAT NO AWARD BE MADE AS THE INDUSTRIAL LABOR RELATIONS MEMBER OF THE TEAM CONCLUDED THAT HART WAS NOT A MANUFACTURER WITHIN THE MEANING OF THE WALSH-HEALEY ACT AND ASPR 12-603.1. IN ALL OF THE OTHER 10 FACTORS OF RESPONSIBILITY CONSIDERED, HART RECEIVED A SATISFACTORY RATING. BECAUSE OF THE ONE NEGATIVE RATING THE CONTRACTING OFFICER WAS UNABLE TO FIND HART RESPONSIBLE, AND HE THEREFORE UNDERTOOK A REVIEW OF HART'S MANUFACTURING ARRANGEMENT. IT WAS CONCLUDED THAT HART'S AGREEMENT WITH STONE AND WEBSTER TO CONSTRUCT AND EQUIP A MANUFACTURING PLANT WAS NOT SUFFICIENTLY DEFINITE. MR. HART WAS ADVISED OF THIS DEFICIENCY AND HE THEREAFTER ENTERED INTO A MORE DEFINITE AGREEMENT WITH STONE AND WEBSTER, WHICH WAS REVIEWED AND APPROVED BY LEGAL COUNSEL FOR THE PROCURING ACTIVITY AS QUALIFYING HART AS A MANUFACTURER. BASED UPON THE PRE-AWARD SURVEY AND THIS AGREEMENT WITH STONE AND WEBSTER, THE CONTRACTING OFFICER CONCLUDED HART WAS RESPONSIBLE WITHIN THE MEANING OF APPLICABLE REGULATIONS AND AWARDED HART THE CONTRACT FOR THE NON-SET-ASIDE PORTIONS OF THE PROCUREMENT. WITH REGARD TO THE SET-ASIDE, HE FOUND HART NON- RESPONSIBLE BECAUSE OF LACK OF CAPACITY TO PRODUCE BOTH.

THE BASIC QUESTION YOU HAVE RAISED WITH REGARD TO HART'S RESPONSIBILITY IS THE LACK OF A SUFFICIENT FACTUAL BASIS TO SUPPORT AN AFFIRMATIVE DETERMINATION. IN THIS CONNECTION, IT IS YOUR POSITION THAT THE ONLY REQUISITE EXPERIENCE, SKILL AND "KNOW-HOW" THE NEW ENTERPRISE HAS IS THAT WHICH WAS GAINED BY MR. HART WHILE AN EMPLOYEE OF VALLEY, AND THIS CANNOT BE CONSIDERED BECAUSE OF HIS NONDISCLOSURE AGREEMENT WITH VALLEY. STATED HERETOFORE, 10 FACTORS OF RESPONSIBILITY WERE CONSIDERED BY THE SURVEY TEAM AND HART WAS RATED SATISFACTORY IN EACH OF THESE AREAS, WHICH ARE THE FOLLOWING:

1. TECHNICAL CAPABILITY

2. PRODUCTION CAPABILITY

3. PLANT FACILITIES AND EQUIPMENT

4. FINANCIAL CAPABILITY

5. PURCHASING AND SUBCONTRACTING

6. QUALITY ASSURANCE CAPABILITY

7. TRANSPORTATION

8. PLANT SAFETY

9. LABOR RESOURCE

10. ABILITY TO MEET REQUIRED SCHEDULE

THE TEAM WAS COMPRISED OF FIVE MEN CONSIDERED BY THE GOVERNMENT TO BE COMPETENT IN ONE OR MORE OF THESE FACTORS OF RESPONSIBILITY. AT THE TIME OF THE SURVEY THEY WERE COGNIZANT OF THE FACT THAT HART METALS WAS A NEWLY FORMED CORPORATION WITHOUT ANY PAST PRODUCTION EXPERIENCE, FACILITIES, EQUIPMENT, PERSONNEL, MATERIALS, AND OTHER THINGS NECESSARY TO SUCCESSFUL OPERATION OF THE JOB IT WAS BIDDING ON. THEY WERE ALSO AWARE OF THE FACT THAT VALLEY HAD QUESTIONED HART'S RESPONSIBILITY AND HAD INDICATED THAT ITS PATENTS WOULD BE INFRINGED AND TRADE SECRETS VIOLATED IF HART UNDERTOOK PERFORMANCE OF THE CONTRACT. IT WAS IN THIS ATMOSPHERE THAT THESE MEN INVESTIGATED HART'S CAPABILITY TO PERFORM THE SUBJECT CONTRACT, RATED HART ON THE ABOVE FACTORS OF RESPONSIBILITY, AND CONCLUDED THAT---

"IN CONCERT WITH STONE AND WEBSTER INC. CONSULTANTS, 90 BROAD STREET, N.Y.C., BIDDER HAS DEVELOPED COMPLETE PLANS FOR PROCURING FACILITIES, EQUIPMENT, TECHNICAL AND PRODUCTION PERSONNEL AS WELL AS SECURING MATERIAL COMMITMENTS AND DEVELOPING COMPLETE SAFETY AND QUALITY CONTROL PROGRAMS.'

WITH REGARD TO VALLEY'S ALLEGATION THAT INFRINGEMENT OF ITS PATENTS AND ILLEGAL DISCLOSURE OF ITS TRADE SECRETS WOULD RESULT IF HART WERE TO TO PRODUCE THE SPECIFICATION MATERIAL ON SCHEDULE, TECHNICAL PERSONNEL OF THE TEAM CONCLUDED THAT THE SPECIFICATIONS DID NOT REQUIRE A PRODUCT HAVING ALL THE CHARACTERISTICS OF THE PRODUCT COVERED BY VALLEY'S PATENTS AND THAT THE PROCESS TO BE USED BY HART FOR ATOMIZING THE MAGNESIUM POWDER WAS DIFFERENT FROM VALLEY'S PROCESS AND EMPLOYED KNOWLEDGE AVAILABLE TO ANYONE. THESE CONCLUSIONS WERE NOT REACHED ONLY, WE ARE TOLD, ON THE BASIS OF MR. HART'S STATEMENT TO THIS EFFECT, BUT UPON AN INDEPENDENT EXAMINATION AND EVALUATION OF THE PROBLEM BY TECHNICAL PERSONNEL OF THE SURVEY TEAM.

AS INDICATED HERETOFORE, INFORMATION DEVELOPED IN THE COURSE OF CHECKING HART'S RESPONSIBILITY REVEALED A PROBLEM WITH RESPECT TO ITS ABILITY TO MEET THE DELIVERY DATE FOR ITEM 3. HART PROPOSED TO USE A FIVE-ACRE PLOT OF LAND WITH BUILDINGS THEREON, ON WHICH HE HELD AN OPTION TO PURCHASE FROM THE CENTRAL RAILROAD COMPANY OF NEW JERSEY, AS THE SITE OF HIS PLANT. STONE AND WEBSTER MADE A SURVEY OF THE LAND AND BUILDINGS AND IN THEIR PRELIMINARY STUDY OF SEPTEMBER 12 OF THE PROPOSED PLANT THEY GAVE A PROJECTED OPERATION DATE OF MARCH 1, 1967. RECOGNIZING THE PROBLEM THIS POSED WITH REGARD TO DELIVERY OF ITEM 3, THE SURVEY TEAM MET WITH MR. HART AND REPRESENTATIVES OF STONE AND WEBSTER ON OCTOBER 3, 1966. AS A RESULT OF THE INFORMATION DEVELOPED AT THIS MEETING, THE SURVEY TEAM CONCLUDED THAT "THERE IS A STRONG POSSIBILITY OF BETTERING THIS DATE (MARCH 1) BY 2 WEEKS.' IT MUST BE NOTED, HOWEVER, THAT THIS CONCLUSION AS TO THE POSSIBILITY OF PLANT OPERABILITY TWO WEEKS BEFORE MARCH 1, 1967, WAS PREDICATED UPON THE ASSUMPTION THAT AWARD WOULD BE MADE BY OCTOBER 11, 1966, AND FIRM COMMITMENTS MADE BETWEEN HART AND STONE AND WEBSTER AFTER AWARD. THERECORD BEFORE US SUPPORTS THE ASSUMPTION THAT FULL SCALE OPERATIONS WOULD NOT BE COMMENCED BY STONE AND WEBSTER UNTIL IT RECEIVED A FIRM COMMITMENT FROM HART, AND FURTHER THAT HART WOULD NOT ENTER INTO SUCH A COMMITMENT UNTIL THE QUESTION AS TO ITS RESPONSIBILITY HAD BEEN RESOLVED IN ITS FAVOR. CONSEQUENTLY, THE FACT THAT DELIVERY OF ITEM 3 IS NOT NOW DUE UNTIL MARCH 11, BECAUSE OF THE 10-DAY DELAY IN MAKING AWARD, MUST, WE THINK, BE IGNORED IN OUR CONSIDERATION OF THE VALIDITY OF THE CONTRACTING OFFICER'S DETERMINATION THAT HART WAS A RESPONSIBLE BIDDER. CONSIDERED, WE HAVE A SITUATION WHERE HART, WHO HAD PROMISED DELIVERY OF 500,000 POUNDS BY A DATE CERTAIN, ADDUCED EVIDENCE ONLY THAT HE WOULD HAVE A NEWLY BUILT PLANT READY FOR OPERATION BY THAT DATE, WITH A "STRONG POSSIBILITY" THAT SUCH PLANT WOULD BE READY TWO WEEKS EARLIER. THE PROPOSED PLANT HAD A MAXIMUM PRODUCTION CAPABILITY OF 900,000 POUNDS A MONTH, SO THAT EVEN IF THE POSSIBILITY OF EARLIER READINESS BY THE FULL TWO WEEKS WERE REALIZED, THE MOST THAT HART COULD DELIVER BY THE DUE DATE WAS 450,000 POUNDS OR LESS. ON THE BASIS OF THIS RECORD, WE CANNOT FIND SUBSTANTIAL EVIDENCE TO SUPPORT THE CONTRACTING OFFICER'S DETERMINATION THAT HART DEMONSTRATED A CAPABILITY TO DELIVER ITEM 3 (500,000 POUNDS) AS HE HAD PROMISED IN HIS BID.

THE FACT REMAINS, HOWEVER, THAT AWARD HAS BEEN MADE TO HART. WHILE WE WOULD NOT HAVE REACHED THE CONCLUSION THAT HART WAS A RESPONSIBLE BIDDER, AS DID THE CONTRACTING OFFICER, WE ARE FACED WITH THE QUESTION WHETHER, BECAUSE OF THIS, THE AWARD MADE IS VOID OR MERELY VOIDABLE BY THE GOVERNMENT. IF THE AWARD SHOULD BE CONSIDERED VOID, AS URGED BY YOUR CLIENT, IT IS POSSIBLE THAT THERE WOULD BE NO LIABILITY ON THE PART OF THE GOVERNMENT IN THE EVENT SUCH AWARD WERE CANCELLED. IF, ON THE OTHER HAND, IT SHOULD BE HELD TO BE MERELY VOIDABLE, THERE SEEMS NO DOUBT AS TO THE GOVERNMENT'S LIABILITY FOR AT LEAST CONVENIENCE TERMINATION DAMAGES. LIABILITY ON THIS BASIS WOULD BEYOND QUESTION BE OF CONSIDERABLE MAGNITUDE IN THE CIRCUMSTANCES OF THIS CASE. WE CANNOT AGREE WITH THE CONTENTIONS MADE IN YOUR LETTER OF FEBRUARY 1, 1967, TO THE EFFECT THAT THE AWARD TO HART WAS VOID RATHER THAN VOIDABLE. AS STATED ABOVE, WE BELIEVE THE QUESTION INVOLVED IS NOT ONE OF THE RESPONSIVENESS OF HART'S BID BUT OF HIS RESPONSIBILITY, WHICH WE FEEL SURE WOULD RESULT IN A FINDING BY THE COURTS THAT THE CONTRACT IS, AT THE MOST, VOIDABLE RATHER THAN VOID.

FOR THIS REASON, WE MUST REFUSE YOUR REQUEST THAT THE AWARD BE CANCELLED.

NOR DO WE BELIEVE THE COURT CASES CONCERNING TRADE SECRETS YOU HAVE CITED REQUIRE A DIFFERENT CONCLUSION. THESE CASES RECOGNIZE, AS A GENERAL PROPOSITION, THE RIGHT OF THE OWNER OF A TRADE SECRET TO REASONABLE PROTECTION THEREOF, AND THE OBLIGATION OF THOSE TO WHOM THE TRADE SECRET IS CONVEYED IN TRUST NOT TO BREACH THE CONFIDENCE REPOSED IN THEM BY DISCLOSURE OR USE OF IT. WHERE THE DEGREE OF PROBABILITY OF DISCLOSURE IS SUFFICIENT UNDER THE ATTENDANT FACTS AND CIRCUMSTANCES TO INDICATE A REAL AND SUBSTANTIAL THREAT OF UNLAWFUL DISCLOSURE, THE COURTS WILL GRANT INJUNCTIVE RELIEF. E.I. DU PONT DE NEMOURS AND COMPANY V. AMERICAN POTASH AND CHEMICAL CORPORATION AND DONALD E. HIRSCH, 200 A.2D 428. ALTHOUGH RECOGNIZING A POLICY OF PROTECTING TRADE SECRETS, THE COURTS ALSO RECOGNIZE A POLICY OF FREE COMPETITION AND THE RIGHT OF AN EMPLOYEE TO USE THE KNOWLEDGE AND SKILL OF HIS EMPLOYMENT FOR HIS AND THE PUBLIC BENEFIT PROVIDED HE DOES NOT VIOLATE HIS CONTRACTUAL OR FIDUCIARY DUTY TO HIS FORMER EMPLOYER. E.I. DU PONT DE NEMOURS AND COMPANY V. AMERICAN POTASH AND CHEMICAL CORPORATION AND DONALD E. HIRSCH, SUPRA. WHILE THE COURTS MAY PRESUME AS YOU STATE, A REAL AND SUBSTANTIAL THREAT OF DISCLOSURE OF A TRADE SECRET, FOR WHICH AN INJUNCTION WILL BE GRANTED, FROM THE CIRCUMSTANCES OF EMPLOYMENT, WE DO NOT BELIEVE IT IS OUR PROVINCE TO MAKE SUCH A PRESUMPTION TO INVALIDATE AN OTHERWISE PROPER DETERMINATION OF RESPONSIBILITY. THIS IS PARTICULARLY TRUE WHERE, AS HERE, THERE IS SUBSTANTIAL EVIDENCE THAT NO VIOLATION OF A TRADE SECRET IS INVOLVED AND OUR OFFICE LACKS THE NECESSARY PROCEDURE AND TECHNICAL EXPERTISE TO DECIDE SUCH AN ISSUE AND MUST RELY UPON THE FINDINGS OF TECHNICAL PERSONNEL OF THE PROCURING AGENCY.

IT IS TRUE, AS YOU STATE, THAT OUR OFFICE RECOGNIZES THE IMPORTANCE OF PROTECTING PROPRIETARY DATA, AS EVIDENCED BY THE DECISIONS OF OUR OFFICE WHICH YOU CITE. HOWEVER, THESE WERE CASES WHERE THE PROCURING AGENCIES OF THE GOVERNMENT WERE DISCLOSING INFORMATION IN THEIR POSSESSION WHICH WE FELT PROPRIETARY IN NATURE AND TO WHICH THE GOVERNMENT HAD NOT ACQUIRED RIGHTS. WE BELIEVE THESE CASES ARE DISTINGUISHABLE FROM THE SITUATION WHERE, AS HERE, THE GOVERNMENT IS SEEKING AN END PRODUCT IN ACCORDANCE WITH CERTAIN SPECIFICATIONS AND THERE IS A DISPUTE BETWEEN PRIVATE PARTIES AS TO WHETHER ONE OF THEM CAN PRODUCE IT WITHOUT VIOLATING A TRADE SECRET.