B-160332, JANUARY 9, 1967, 46 COMP. GEN. 600

B-160332: Jan 9, 1967

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THE FAILURE TO SOLICIT QUOTATIONS FROM THE MANUFACTURER OF THE EQUIPMENT SPECIFIED IN THE BRAND NAME OR EQUAL PROVISION OF THE INVITATION FOR THE PROCUREMENT RESERVED FOR SMALL BUSINESS CONCERNS WITHOUT GIVING THE MANUFACTURER AN OPPORTUNITY TO PROTEST THE SIZE CLASSIFICATION THAT EXCLUDED CONSIDERATION OF ITS BRAND NAME PRODUCT WAS INCONSISTENT WITH 10 U.S.C. 2304 (G) AND PARAGRAPH 3- 202.2 OF THE ARMED SERVICES PROCUREMENT REGULATION. 1967: REFERENCE IS MADE TO THE LETTER OF OCTOBER 27. BOTH REQUISITIONS WERE ASSIGNED AN ISSUE PRIORITY DESIGNATOR 2 UNDER THE UNIFORM MATERIEL MOVEMENT AND ISSUE SYSTEM. STATES THAT BOTH REQUISITIONS WERE REVIEWED AS TO THE APPROPRIATENESS OF A SMALL BUSINESS SET-ASIDE.

B-160332, JANUARY 9, 1967, 46 COMP. GEN. 600

CONTRACTS - SPECIFICATIONS - RESTRICTIVE - PARTICULAR MAKE - BRAND NAME MANUFACTURER EXCLUDED FROM PARTICIPATION ALTHOUGH THE ASSIGNMENT OF A PRIORITY DESIGNATION PERMITS THE USE OF THE "PUBLIC EXIGENCY" EXCEPTION TO FORMAL ADVERTISING AUTHORIZED BY 10 U.S.C. 2304 (A) (2) WITHOUT FURTHER JUSTIFICATION, AND THE CONTRACTING OFFICER HAS CONSIDERABLE DISCRETION TO DETERMINE THE EXTENT OF THE NEGOTIATION CONSISTENT WITH THE EXIGENCY OF THE SITUATION, THE FAILURE TO SOLICIT QUOTATIONS FROM THE MANUFACTURER OF THE EQUIPMENT SPECIFIED IN THE BRAND NAME OR EQUAL PROVISION OF THE INVITATION FOR THE PROCUREMENT RESERVED FOR SMALL BUSINESS CONCERNS WITHOUT GIVING THE MANUFACTURER AN OPPORTUNITY TO PROTEST THE SIZE CLASSIFICATION THAT EXCLUDED CONSIDERATION OF ITS BRAND NAME PRODUCT WAS INCONSISTENT WITH 10 U.S.C. 2304 (G) AND PARAGRAPH 3- 202.2 OF THE ARMED SERVICES PROCUREMENT REGULATION, THE MAXIMUM COMPETITION REQUIRED NOT HAVING BEEN OBTAINED DUE TO THE FAILURE TO SOLICIT A PROPOSAL FROM THE BRAND NAME MANUFACTURER. BIDS - ORAL - PROCEDURE THE ASSIGNMENT OF A HIGH PRIORITY DESIGNATION TO A PROCUREMENT DOES NOT OF ITSELF JUSTIFY THE ORAL, INCLUDING TELEPHONIC, SOLICITATION OF PROPOSALS OR QUOTATIONS PERMITTED PURSUANT TO PARAGRAPH 3-501 (C) (II) OF THE ARMED SERVICES PROCUREMENT REGULATION AND, THEREFORE, THE DOCUMENTATION CONSIDERED A PREREQUISITE TO ORAL SOLICITATION, AS WELL AS THE PRIOR APPROVAL OF THE ORAL SOLICITATION AT A LEVEL HIGHER THAN THE CONTRACTING OFFICER MAY NOT BE DISREGARDED.

TO THE SECRETARY OF THE NAVY, JANUARY 9, 1967:

REFERENCE IS MADE TO THE LETTER OF OCTOBER 27, 1966, FROM THE ACTING DEPUTY COMMANDER, PURCHASING, NAVAL SUPPLY SYSTEMS COMMAND, REFERENCE SUP 0242A, TRANSMITTING FOR OUR REVIEW AND DECISION THE PROTEST OF THE DIALIGHT CORPORATION AGAINST THE AWARD OF PURCHASE ORDERS NOS. N00600 67-M -0001 AND N00600-67-M-0002 TO THE ELDEMA CORPORATION, TOGETHER WITH A FILE ON THE MATTER.

IT APPEARS THAT ON MAY 31, 1966, THE NAVY PURCHASING OFFICE, WASHINGTON, D.C., RECEIVED TWO REQUISITIONS FOR SUPPLIES FROM THE NAVAL ELECTRONICS SYSTEMS COMMAND. REQUISITION NO. 63133-6146-4458 REQUESTED THE PROCUREMENT OF 4,600 LAMPHOLDERS, DIALCO CORPORATION NO. 7538 OR EQUAL. REQUISITION NO. 63133-6146-4459 REQUESTED THE PURCHASE OF 2,600 NEON PLUG- IN LAMPS DIALCO CORPORATION NO. 38-931 OR EQUAL. BOTH REQUISITIONS WERE ASSIGNED AN ISSUE PRIORITY DESIGNATOR 2 UNDER THE UNIFORM MATERIEL MOVEMENT AND ISSUE SYSTEM.

THE CONTRACTING OFFICER IN HIS REPORT DATED OCTOBER 24, 1966, STATES THAT BOTH REQUISITIONS WERE REVIEWED AS TO THE APPROPRIATENESS OF A SMALL BUSINESS SET-ASIDE. FOR THE PURPOSES OF THIS REVIEW THE SIZE STANDARD FOR DETERMINING THE SMALL BUSINESS STATUS OF A CONCERN MANUFACTURING LAMPHOLDERS WAS ESTABLISHED AT 750 EMPLOYEES BASED ON THE MANUFACTURING INDUSTRY STANDARD FOR THIS EQUIPMENT AS LISTED IN PARAGRAPH 1-701.4, ARMED SERVICES PROCUREMENT REGULATION, AS FOR "RADIO AND TELEVISION TRANSMITTING, SIGNALING AND DETECTION EQUIPMENT AND APPARATUS" (STANDARD INDUSTRIAL CLASSIFICATION CODE 3662). THE SIZE STANDARD FOR THE LAMPS WAS ESTABLISHED AT 1,000 EMPLOYEES AS FOR "ELECTRIC LAMPS" (STANDARD INDUSTRIAL CLASSIFICATION CODE 3641). THE NAVY PURCHASING OFFICE THEN DETERMINED THAT THE PROCUREMENT OF THE LAMPHOLDERS WOULD BE SET ASIDE 100 PERCENT FOR PARTICIPATION OF SMALL BUSINESS CONCERNS, WHEREAS PROCUREMENT OF THE LAMPS WOULD BE MADE ON AN UNRESTRICTED BASIS.

THE CONTRACTING OFFICER FURTHER REPORTS THAT BECAUSE OF THE URGENT NATURE OF THE REQUIREMENTS IT WAS DETERMINED TO NEGOTIATE THE LAMP REQUIREMENT IN LIEU OF FORMALLY ADVERTISING IT AND THAT IT WAS ALSO DETERMINED TO USE NEGOTIATION IN LIEU OF SMALL BUSINESS RESTRICTED ADVERTISING IN THE CASE OF THE LAMPHOLDERS. QUOTATIONS FOR THE LAMPHOLDERS WERE SOLICITED FROM FOUR SMALL BUSINESS FIRMS BY TELEPHONE ON JULY 11, 1966.

THE CONTRACTING OFFICER ADVISES THAT THE DIALIGHT CORPORATION WAS NOT SOLICITED IN THE CASE OF THE LAMPHOLDERS SINCE ITS STATUS AS A LARGE BUSINESS CONCERN (OVER 1,000 EMPLOYEES) EXCLUDED IT FROM PARTICIPATION. SOLICITATION OF OFFERS FOR SUPPLYING THE LAMPS WAS MADE BY TELEPHONE ON THE SAME DATE, AND WAS LIMITED TO THE SAME FOUR SMALL BUSINESS FIRMS. EXPLANATION IS GIVEN AS TO WHY DIALIGHT WAS NOT SOLICITED WITH REGARD TO THE PROCUREMENT OF LAMPS.

THE PROSPECTIVE OFFERORS WERE ADVISED THAT QUOTATIONS WOULD BE CONSIDERED IF RECEIVED NOT LATER THAN JULY 19, 1966, AND THAT THE REQUIREMENTS FOR THE LAMPHOLDERS WAS RESTRICTED TO SMALL BUSINESS CONCERNS, WITH THE APPROPRIATE SIZE STANDARD BEING INDICATED.

IT IS REPORTED THAT ON JULY 14, 1966, THE NAVY PURCHASING OFFICE RECEIVED A TELEPHONE CALL FROM THE PRESIDENT OF DIALIGHT ADVISING THAT HE HAD RECEIVED INFORMATION FROM A DEALER IN HIS PRODUCTS THAT THE NAVY PURCHASING OFFICE WAS SOLICITING QUOTATIONS FOR EQUIPMENT CITING A DIALCO BRAND OR EQUAL, AND THAT HIS FIRM AS THE MANUFACTURER OF THAT BRAND WAS EXCLUDED FROM THE COMPETITION; THAT HE REQUESTED A REVIEW OF THE SET-ASIDE DETERMINATION BE MADE AND THAT HE BE INFORMED OF THE RESULTS; AND THAT ON JULY 20, 1966, DIALIGHT WAS NOTIFIED BY TELEPHONE THAT PAST PROCUREMENT HISTORY OF THE LAMPHOLDERS INDICATED THAT THE SET-ASIDE WAS APPROPRIATE.

THREE QUOTATIONS WERE RECEIVED ON EACH OF THE PROCUREMENTS. THE ELDEMA CORPORATION, A SMALL BUSINESS CONCERN, SUBMITTED THE LOWEST QUOTATION IN EACH CASE AND IT APPEARS THAT ON AUGUST 4, 1966, AWARD WAS MADE. IT IS REPORTED THAT THE ORDERED SUPPLIES HAVE BEEN DELIVERED.

BY LETTER DATED JULY 27, 1966, TO THE CONTRACTING OFFICER DIALIGHT CORPORATION STATED, IN PART, AS FOLLOWS: THE INFORMATION CONCERNING THIS PROCUREMENT WAS RECEIVED BY US THROUGH OUR MANUFACTURER'S REPRESENTATIVE WHO HAD A DISCUSSION WITH ONE OF OUR DISTRIBUTORS IN WASHINGTON. OUR RECORDS DO NOT INDICATE THAT WE EVER RECEIVED A FORMAL BID FOR THESE ITEMS WHICH ARE OF OUR BASIC MANUFACTURE. WE WERE NEVER GIVEN AN OPPORTUNITY BY THE CONTRACTING OFFICER TO PROTEST THE SIZE CLASSIFICATION THAT WAS USED FOR THIS PROCUREMENT. BIDS FROM YOUR ACTIVITY HAVE BEEN THE FIRST INSTANCE WHERE PRODUCTS CLASSIFIED AS INDICATOR LIGHTS AND LAMPHOLDERS, WHICH ARE THE INDICATOR LIGHT WITH LENS CAP ASSEMBLY, HAVE EVER RECEIVED A SIZE CLASSIFICATION OVER 500 EMPLOYEES. THE WRITER PERSONALLY CHECKED BACK THROUGH OVER 1,000 QUOTATION REQUESTS RECEIVED FROM EVERY ACTIVITY IN THE MILITARY ESTABLISHMENT AND COULD FIND ABSOLUTELY NOTHING--- NOT EVEN ONE QUOTE-- THAT INDICATED THAT "SMALL BUSINESS" DIFFERED FROM THE FOLLOWING DEFINITION: "A SMALL BUSINESS CONCERN IS A CONCERN--- WITH ITS AFFILIATES EMPLOYS NOT MORE THAN 500 EMPLOYEES.'

* * * * * * * IN VIEW OF THE FACT THAT WE DID NOT RECEIVE A COPY OF THE QUOTATION REFERRED TO AND AS A RESULT WERE UNABLE TO PROTEST THE SIZE CLASSIFICATION, WE RESPECTFULLY REQUEST THAT STEPS BE TAKEN TO CANCEL THE AWARD AND A NEW INVITATION FOR BID BE SUBMITTED. THIS WOULD GIVE US THE OPPORTUNITY OF MAKING A FORMAL PROTEST BASED UPON RECEIPT OF A COPY OF THE BID AND OF PRESENTING OUR CASE BASED UPON TWENTY EIGHT YEARS OF MANUFACTURING INDICATOR LIGHTS.

* * * * * * * UPON RECEIPT OF INFORMATION AS TO WHY WE DID NOT RECEIVE A FORMAL REQUEST FOR QUOTATION ON PRODUCTS OF OUR MANUFACTURE, WHICH WE ARE GIVEN TO UNDERSTAND WERE CALLED OUT UNDER THE SPECIFICATION, WE WILL CONTACT THE GENERAL ACCOUNTING OFFICE, COMPTROLLER GENERAL IN WASHINGTON AND FILE A FORMAL PROTEST.

AS INDICATED ABOVE THE BASIC ELEMENT OF DIALIGHT'S PROTEST WAS THAT IT HAD NOT RECEIVED A REQUEST FOR A QUOTATION ON PRODUCTS OF ITS OWN MANUFACTURE. THE NAVY PURCHASING OFFICE, HOWEVER, BY LETTER DATED AUGUST 4, 1966, DISREGARDING THE BASIC ELEMENT OF THE PROTEST, SUMMARILY RETURNED THE LETTER TO DIALIGHT WITH THE NONRESPONSIVE EXPLANATION THAT IT WOULD NOT BE CONSIDERED BECAUSE THE PROTEST AGAINST THE SIZE CLASSIFICATION HAD NOT BEEN MADE IN TIME UNDER ASPR 1-703. IN THAT REGARD ASPR 1-703 (C) (2) (II) PROVIDES THAT AN APPEAL FROM A PRODUCT CLASSIFICATION DETERMINATION BY A CONTRACTING OFFICER MUST BE TAKEN NOT LESS THAN 5 WORKING DAYS BEFORE THE BID OPENING OR THE DEADLINE FOR SUBMITTING PROPOSALS OR QUOTATIONS WHERE THIS DATE OR DEADLINE IS 30 OR LESS DAYS AFTER THE ISSUANCE OF THE INVITATION FOR BIDS OR REQUEST FOR PROPOSALS OR QUOTATIONS. (AS DETAILED ABOVE THE DEADLINE FOR SUBMITTING QUOTATIONS IN THIS INSTANCE WAS JULY 19, 1966.) DIALIGHT ANSWERED BY LETTER DATED AUGUST 5, 1966, REITERATING THE PROTEST AGAINST THE FACT THAT THEY WERE NOT GIVEN CONSIDERATION IN REQUESTING A FORMAL OR EVEN AN INFORMAL BID FOR THEIR OWN PRODUCT, STATING "HOW COULD WE POSSIBLY HAVE APPEALED A CLASSIFICATION IF WE WEREN-T EVEN GIVEN AN OPPORTUNITY OF MAKING SUCH A PROTEST WITHIN THE TIME PERMITTED?

UNDER 10 U.S.C. 2304 (A) (2) SUPPLIES MAY BE PURCHASED BY NEGOTIATION WHEN THE PUBLIC EXIGENCY WILL NOT PERMIT THE DELAY INCIDENT TO ADVERTISING. AS NOTED ABOVE, THE PURCHASE REQUISITIONS IN QUESTION WERE ASSIGNED AN ISSUE PRIORITY DESIGNATOR 2 UNDER THE UNIFORM MATERIEL MOVEMENT AND ISSUE PRIORITY SYSTEM. WHEN THIS IS THE CASE ASPR 3-202.2 (VI) PROVIDES THAT THE "PUBLIC XIGENCY" EXCEPTION TO FORMAL ADVERTISING MAY BE USED WITH NO FURTHER JUSTIFICATION BEING REQUIRED. WHILE THE "PUBLIC EXIGENCY" JUSTIFICATION FOR NEGOTIATION CLOTHES THE CONTRACTING OFFICER WITH A CONSIDERABLE DEGREE OF DISCRETION IN DETERMINING THE EXTENT OF THE NEGOTIATION CONSISTENT WITH THE EXIGENCY OF THE SITUATION, 10 U.S.C. 2304 (G) AND ASPR 3 202.2 REQUIRE THAT EVEN WHERE AUTHORITY EXISTS TO NEGOTIATE PROCUREMENTS, PROPOSALS SHOULD BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SUPPLIES OR SERVICES TO BE PROCURED. IT IS OBVIOUS THAT, EXCEPT IN UNUSUAL CIRCUMSTANCES, WHERE SUPPLIES ARE DESCRIBED IN SPECIFICATIONS BY A BRAND NAME OR EQUAL MAXIMUM COMPETITION CANNOT BE OBTAINED UNLESS BIDS, PROPOSALS, OR QUOTATIONS ARE SOLICITED FROM THE MANUFACTURER OF THAT BRAND. IN THIS INSTANCE THE CONTRACTING OFFICER HAS NOT GIVEN ANY REASON FOR FAILING TO GIVE DIALIGHT THE OPPORTUNITY TO COMPETE IN THE PROCUREMENT OF THE LAMPS, AND WE MUST THEREFORE CONCLUDE THAT DIALIGHT WAS IMPROPERLY DENIED THE OPPORTUNITY TO COMPETE IN THAT PROCUREMENT. FURTHER, IT WOULD APPEAR THAT THE CONTRACTING OFFICER, BY SOLICITING QUOTATIONS FOR THE LAMPS ONLY FROM SMALL BUSINESS CONCERNS, ALSO MADE THAT PROCUREMENT A 100 PERCENT SMALL BUSINESS SET ASIDE CONTRARY TO THE AGENCY DETERMINATION THAT THE PROCUREMENT SHOULD NOT BE SET ASIDE.

ADDITIONALLY, WHILE ASPR 3-501 (C) (II) PERMITS THE ORAL (INCLUDING TELEPHONIC) SOLICITATION OF PROPOSALS OR QUOTATIONS IN APPROPRIATE CASES, THAT REGULATION PROVIDES THAT ORAL SOLICITATION IS NOT JUSTIFIED SOLELY BECAUSE OF THE ASSIGNMENT OF A HIGH ISSUE PRIORITY DESIGNATOR; THAT CERTAIN DOCUMENTATION IS REQUIRED AS A PREREQUISITE TO ORAL SOLICITATION; AND THAT THE ORAL METHOD OF SOLICITATION SHALL NOT BE USED WITHOUT PRIOR APPROVAL AT A LEVEL HIGHER THAN THE CONTRACTING OFFICER. IN THIS REGARD, THE FILE TRANSMITTED HERE DID NOT CONTAIN SUCH REQUIRED DOCUMENTATION OR IN ANY WAY INDICATE THAT THE ORAL METHOD OF SOLICITATION HAD BEEN PREVIOUSLY APPROVED AT A HIGHER LEVEL.

THEREFORE, WHILE PRACTICAL CONSIDERATIONS PRECLUDE OUR DISTURBING THE AWARD MADE TO ELDEMA CORPORATION, WE RECOMMEND THAT ALL PROPER AND NECESSARY ACTIONS BE TAKEN TO PRECLUDE A RECURRENCE OF THIS SITUATION, AND TO ASSURE THAT THE MAXIMUM COMPETITION ENVISAGED BOTH BY LAW AND REGULATION WILL BE OBTAINED.