B-160394, JAN. 4, 1967

B-160394: Jan 4, 1967

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INC.: REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 8. BIDDERS WERE ADVISED IN PERTINENT PART ON PAGE 21 OF THE INVITATION AS FOLLOWS: "GOVERNMENT-OWNED TOOLING "BIDS/OFFERS SUBMITTED ON THE BASIS OF UTILIZATION OF GOVERNMENT OWNED TOOLING. TWO SETS OF GOVERNMENT-OWNED TOOLING ARE AVAILABLE FOR THE MANUFACTURE OF THE CABINET. "B. THE GOVERNMENT HAS ONE SET OF TOOLS THAT WILL PRODUCE THE BURNER UNIT. THE TOOLS ARE NOW IN USE AT ARMSTRONG PRODUCTS CORPORATION. WILL NOT BE AVAILABLE FOR PRODUCTION CALLED HEREIN EXCEPT BY THE PRESENT USER.'. RENTAL CHARGES FOR USE OF AVAILABLE GOVERNMENT-OWNED TOOLING WERE STATED ON PAGE 23 OF THE INVITATION AS FOLLOWS: "ATTACHMENT "A" CFA SET $3. TWO BIDS WERE RECEIVED AND OPENED ON OCTOBER 31.

B-160394, JAN. 4, 1967

TO BOOTZ MANUFACTURING COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 8, 1966, WITH ENCLOSURE, IN WHICH YOU PROTEST THE MAKING OF ANY AWARD UNDER INVITATION FOR BIDS NO. DSA-400-67-B-1654, ISSUED BY THE DIRECTORATE OF PROCUREMENT AND PRODUCTION, DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA, ON SEPTEMBER 12, 1966.

THE INVITATION, AS AMENDED, REQUESTED BIDS FOR FURNISHING 8,600 BURNER UNITS, GASOLINE, FIELD RANGE OUTFIT M-2, F.O.B. ORIGIN (ITEM "A"), AND 4,300 RANGE OUTFITS, FIELD GASOLINE, EITHER F.O.B. ORIGIN OR F.O.B. THREE DESTINATIONS (ITEM "B"). WITH REFERENCE TO THE USE OF GOVERNMENT-OWNED TOOLING IN THE PRODUCTION OF THE END ITEMS, BIDDERS WERE ADVISED IN PERTINENT PART ON PAGE 21 OF THE INVITATION AS FOLLOWS:

"GOVERNMENT-OWNED TOOLING

"BIDS/OFFERS SUBMITTED ON THE BASIS OF UTILIZATION OF GOVERNMENT OWNED TOOLING, AS HEREINAFTER SPECIFIED, MUST OFFER THE TOTAL QUANTITY LISTED IN THE INVITATION/REQUEST FOR PROPOSALS.

"1. AVAILABILITY

"A. TWO SETS OF GOVERNMENT-OWNED TOOLING ARE AVAILABLE FOR THE MANUFACTURE OF THE CABINET, RANGE OUTFIT, FIELD, GASOLINE. ONE SET AS LISTED IN ATTACHMENT A MAY BE INSPECTED BY PROSPECTIVE BIDDERS AT: BOOTZ MANUFACTURING COMPANY, 1400 PARK STREET, EVANSVILLE, INDIANA, FROM 20 SEPTEMBER 1966 TO 5 OCTOBER 1966. ONE SET AS LISTED AND DESCRIBED IN ATTACHMENT B MAY BE INSPECTED BY PROSPECTIVE BIDDERS AT: TRACY DEFENSE DEPOT, WAREHOUSE 15, TRACY, CALIFORNIA.

"B. THE GOVERNMENT HAS ONE SET OF TOOLS THAT WILL PRODUCE THE BURNER UNIT, M-2, RANGE OUTFIT, FIELD, GASOLINE. THE TOOLS ARE NOW IN USE AT ARMSTRONG PRODUCTS CORPORATION, HUNTINGTON, WEST VIRGINIA, CONTRACT DSA-4- 072546, AND WILL NOT BE AVAILABLE FOR PRODUCTION CALLED HEREIN EXCEPT BY THE PRESENT USER.'

RENTAL CHARGES FOR USE OF AVAILABLE GOVERNMENT-OWNED TOOLING WERE STATED ON PAGE 23 OF THE INVITATION AS FOLLOWS:

"ATTACHMENT "A" CFA SET $3,000.00 PER MONTH

"ATTACHMENT "B" INV SET NONE

"BURNER UNIT, M-2 (NOT LISTED) BU-A SET $4,500.00 PER MONTH.'

TWO BIDS WERE RECEIVED AND OPENED ON OCTOBER 31, 1966. THE LOWEST BID WAS SUBMITTED BY THE ARMSTRONG PRODUCTS CORPORATION WHICH SUBMITTED FIRM BID PRICES ON ALL ITEMS WITHOUT QUALIFICATION OR CONDITION. YOUR FIRM SUBMITTED THE ONLY OTHER BID WITH THE FOLLOWING QUALIFICATIONS AND ALTERNATES:

ITEM "A" - BURNER UNIT:

$93.63 EACH - "FIRST ARTICLE APPROVAL NOT AVAILABLE

WITH 240 DAYS AFTER AWARD OF CONTRACT," OR

$87.23 EACH - "PRICE BASED ON GOVERNMENT FURNISHED

TOOLING FOR BURNER UNIT (M-2) B.U.-A SET

AT $4500.00) MONTH RENTAL.'

ITEM "B" - RANGE OUTFIT:

$224.75 EACH, F.O.B. ORIGIN.

$228.25 - $234.83 EACH, F.O.B. DESTINATIONS.

ALTERNATE BID:

$304.98 EACH - "COMBINATION OF BURNER UNIT, GASOLINE,

FIELD RANGE OUTFIT M-2 AND BURNER UNIT,

RANGE OUTFIT, FIELD GASOLINE M-2 AND

RANGE OUTFIT GASOLINE F.O.B. SHIPPING

POINT WITH GOVERNMENT SUPPLIED TOOLING

ON BOTH ITEMS"

IT IS REPORTED THAT ON SEPTEMBER 23, 1966, PRIOR TO THE OPENING OF BIDS, MR. MOSER OF YOUR FIRM VISITED THE DEFENSE GENERAL SUPPLY CENTER FOR THE PURPOSE OF ASCERTAINING WHY THE BURNER UNIT TOOLING WAS RESTRICTED FOR USE BY ARMSTRONG ONLY; THAT THE CONTRACTING OFFICER EXPLAINED TO MR. MOSER THAT THE PROCUREMENT COULD NOT BE DELAYED UNTIL AFTER ARMSTRONG COMPLETED PRODUCTION OF THE BURNER UNITS UNDER ITS PRESENT CONTRACTS; AND THAT MR. MOSER INDICATED AT THAT TIME THAT HE WAS SATISFIED WITH THE EXPLANATION.

BY TELEGRAMS DATED NOVEMBER 2 AND 4, 1966, YOUR FIRM PROTESTED AGAINST THE PROCUREMENT PROCEDURE BECAUSE OF THE ADVANTAGE ACCRUING TO ARMSTRONG FROM THE OPPORTUNITY TO USE THE BURNER UNIT TOOLING, WHICH WAS NOT AVAILABLE FOR USE BY ANY OTHER BIDDER. IN A LETTER DATED NOVEMBER 7, 1966, TO THE CONTRACTING OFFICE, YOU STATED---

"ALTHOUGH WE OBJECTED BY "PHONE CONVERSATION AND PERSONAL VISITS TO THE RESTRICTIONS PLACED UPON US WITH RESPECT TO TOOL INSPECTION, WE MUST NOW FORMALLY PROTEST ANY AWARD UNDER I.F.B. NO. DSA-400-67-B-1654 SETTING OUT ADVERSE FACTORS IN WRITING BY LISTING THE FOLLOWING:

"/1) THE VALUE OF THE BURNER TOOLS IS SET AT $150,000.00. IT IS, THEREFORE, REASONABLE TO ASSUME THAT ANYONE WHO HAS EXCLUSIVE USE OF THE TOOLS WILL HAVE THAT MUCH ADVANTAGE IN MONEY TOWARD A CONTRACT. ACTUALLY THE TOOLS WOULD POSSIBLY COST CONSIDERABLY MORE THAN $150,000.00 BECAUSE ALL TOOL SHOPS HAVE INCREASED DELIVERY TIME AND ARE TODAY QUOTING HIGHER PRICES. FOR OUR COMPANY TO COMPETE WITH THIS FACT ON I.F.B., IT WOULD BE NECESSARY FOR US TO ADD A TOOLING FIGURE IN OUR BID OR ABSORB THE TOOL COST.

"/2) BECAUSE OF THE EXCLUSIVE USE OF THE TOOLS, OUR COMPETITOR IS VIRTUALLY GUARANTEED THE AWARD OF 8600 BURNER UNITS AND THE ACCOMPANYING SERVICE PARTS.

"/3) SINCE HE HAS EXCLUSIVE USE OF THE TOOLS, HE FURTHER DOES NOT HAVE TO INCLUDE THE COST OF PLACING THE BURNER UNIT IN THE CARTON, THE COST OF THE CARTON, THE FREIGHT OF THE GOVERNMENT FURNISHED BURNER UNIT AS IN THE PREVIOUS CONTRACT, THE REMOVAL OF THE BURNER UNIT FROM THE CARTON, AND THE DISPOSING OF THE CARTON.

"/4) FINALLY, THE EXCLUSIVE USE OF THE TOOLS GIVES OUR COMPETITOR THE EXTREME ADVANTAGE OF CONTROLLING PRODUCTION. EVEN THOUGH THIS PROGRAM IS SPREAD OUT OVER 10 MONTHS, HE COULD PRODUCE THEM IN A MUCH SHORTER PERIOD OF TIME. WE DID NOT HAVE THIS LUXURY, AND REQUIRED US TO ADD TO OUR BID THE FULL TOOL RENTAL. BY PRODUCING ALL ITEMS IN A SHORTER PERIOD OF TIME OBVIOUSLY THERE WOULD BE LESS TOOL RENTAL COST. AGAIN WE DID NOT HAVE THIS OPPORTUNITY TO MODIFY OUR BID TO INCLUDE ACCELERATED DELIVERIES. WOULD LIKE TO POINT OUT THAT WE WERE ABLE TO, AND DID DELIVER, AT THE GOVERNMENT'S REQUEST FAR AHEAD OF SCHEDULE ON THE PREVIOUS RANGE OUTFIT CONTRACT. WE FEEL THAT THIS IS A MOST IMPORTANT POINT IN THIS REQUEST.

"/5) THERE IS ONLY ONE BIDDER WHO CAN QUOTE THE LOWEST POSSIBLE PRICE FOR BOTH UNITS AND THAT IS THE CONTRACTOR WHO HAS EXCLUSIVE USE OF BURNER UNIT TOOLS.

"WE STRONGLY PROTEST A PROCUREMENT PROCEDURE WHICH APPEARS TO FAVOR ONE BIDDER OVER ANOTHER, AND DESPITE THE STATEMENTS THAT THIS PROCEDURE IS ALLOWABLE, WHICH WE DO NOT AGREE WITH FOR PROPER EXAMINATION OF A.S.P.R. REGULATIONS WILL PROVE THIS POINT, WE FEEL THAT WHEN WE HAVE BEEN PREVENTED FROM INSPECTING AND USING THE BURNER TOOLS WHICH ARE THE PROPERTY OF THE U.S. GOVERNMENT BECAUSE OF THE FACT THAT THEY ARE PRESENTLY IN USE IS NOT FAIR TREATMENT WHEN THE RANGE OUTFIT TOOLS, WHICH ARE ALSO THE PROPERTY OF THE U.S. GOVERNMENT, ARE AVAILABLE FOR INSPECTION FOR COMPETITORS BECAUSE WE HAVE COMPLETED PRODUCTION AHEAD OF SCHEDULE AT THE GOVERNMENT'S REQUEST.'

IN OUR DECISION B-151854 DATED OCTOBER 7, 1963, 43 COMP. GEN. 327,AFTER DISCUSSING (FIRST) THE STATUTORY REQUIREMENT IN 10 U.S.C. 2305 (C) THAT ADVERTISED CONTRACTS BE AWARDED TO THAT RESPONSIBLE BIDDER WHOSE BID WILL BE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED; AND (SECOND) THE DEPARTMENT OF DEFENSE POLICY, AS SET OUT IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 13 407 (A) (3), NOW SECTION XIII, PART 5, ASPR, THAT A SUITABLE METHOD FOR ELIMINATING ANY COMPETITIVE ADVANTAGE SHALL BE EMPLOYED TO INSURE THAT A CONCERN POSSESSING GOVERNMENT FACILITIES WITHOUT CHARGE IS NOT THEREBY PLACED IN A FAVORED POSITION IN COMPETING FOR GOVERNMENT BUSINESS, WE CONCLUDED AS FOLLOWS:

"AS PREVIOUSLY INDICATED, THE PROVISIONS OF 10 U.S.C. 2305 (C) REQUIRE THE AWARD OF ADVERTISED CONTRACTS TO THAT RESPONSIBLE BIDDER WHOSE BID WILL RESULT IN THE MOST ADVANTAGEOUS CONTRACT FOR THE GOVERNMENT. ELEMENTS OF COST OR SAVINGS TO THE GOVERNMENT WHICH ARE NOT INCLUDED IN THE BID PRICES, SUCH AS COST OF TRANSPORTATION OF THE CONTRACT END ITEMS, OR COSTS IN CONNECTION WITH USE OF GOVERNMENT-OWNED EQUIPMENT, MAY PROPERLY BE CONSIDERED IN EVALUATING BID PRICES TO DETERMINE WHICH BID WILL RESULT IN THE MOST ADVANTAGEOUS CONTRACT. HOWEVER, IT IS OUR OPINION THAT ANY AMOUNTS WHICH ARE PROPERLY FOR APPLICATION IN SUCH EVALUATION MUST BE FAIRLY REPRESENTATIVE ON AN ACTUAL OR ESTIMATED BASIS, OF TRUE COSTS OR SAVINGS TO THE GOVERNMENT.'

"WHILE THE POLICY OF COMPLETE EQUALIZATION OF COMPETITIVE ADVANTAGE, TO WHICH THE ABOVE-REFERENCED PROVISIONS OF THE ASPR ARE DIRECTED, IS A DESIRABLE OBJECTIVE IN PROCUREMENTS INVOLVING THE USE OF GOVERNMENT OWNED EQUIPMENT, TO THE EXTENT THAT SUCH POLICY MAY CONFLICT WITH 10 U.S.C. 2305 (C), THE STATUTE MUST PREVAIL. IN THE INSTANT PROCUREMENT, IT IS APPARENT THAT ADDITIONAL COSTS FOR TRANSPORTING, MODIFYING, INSTALLING, ETC., THE INDUSTRIAL FACILITIES AND SPECIAL TOOLING LOCATED IN CONTINENTAL'S PLANT WOULD NECESSARILY RESULT IF AN AWARD WERE MADE TO ANY OTHER BIDDER WHO PROPOSED TO USE SUCH FACILITIES AND TOOLING, WHILE NO SUCH COSTS WOULD RESULT FROM AN AWARD TO CONTINENTAL. IT NECESSARILY FOLLOWS THAT IN EVALUATING BIDS FOR THE PURPOSE OF DETERMINING THE MOST ADVANTAGEOUS BID UNDER 10 U.S.C. 2305 (C), THESE CIRCUMSTANCES WERE REQUIRED TO BE CONSIDERED AND RECOGNIZED IN ANY BID EVALUATION PROCEDURE. THE METHOD OF EVALUATION ADOPTED IN THE INSTANT CASE (I.E., EXCLUDING ANY ADDITIONAL COSTS OF TRANSPORTING, MODIFYING, INSTALLING, ET., FROM THE EVALUATION BY REQUIRING EACH BIDDER TO EITHER ABSORB THEM OR INCLUDE THEM IN HIS BID PRICE) WAS ONE METHOD OF ARRIVING AT EVALUATED BID PRICES WHICH WOULD REFLECT TRUE COST TO THE GOVERNMENT. CONVERSELY, IT IS OBVIOUS THAT IF THE INVITATION HAD ADVISED BIDDERS THAT THE GOVERNMENT WOULD ASSUME SUCH ADDITIONAL COSTS, A PROPER EVALUATION OF CONTINENTAL'S BID WOULD HAVE REQUIRED THE DEDUCTION OF AN AMOUNT REPRESENTING SUCH COSTS, IN EVALUATING CONTINENTAL'S BID. UNDER EITHER EVALUATION METHOD, IT IS APPARENT THAT WHILE THE LOW EVALUATED BID PRICE WOULD REPRESENT THE MOST ADVANTAGEOUS BID TO THE GOVERNMENT, A COMPETITIVE ADVANTAGE WOULD RESULT TO CONTINENTAL FROM ITS POSSESSION OF GOVERNMENT EQUIPMENT.'

THAT DECISION COVERED A SITUATION SIMILAR IN SOME RESPECTS TO THE SITUATION PRESENT IN THE INSTANT CASE, NAMELY, THE FACT THAT ONE OF THE BIDDERS WAS CURRENTLY MANUFACTURING THE ITEM IN QUESTION WITH THE USE OF GOVERNMENT-OWNED SPECIAL TOOLING. IN THIS PROCUREMENT, THE COMPETITIVE ADVANTAGE TO ARMSTRONG ARISING FROM THE OPPORTUNITY TO USE THE GOVERNMENT- OWNED TOOLING ALREADY BEING USED IN CURRENT PRODUCTION IS SUBSTANTIALLY ELIMINATED BY THE MONTHLY RENTAL CHARGE OF $4,500. IN THIS REGARD, SEE ASPR 13-502 CONCERNING THE ELIMINATION OF COMPETITIVE ADVANTAGE WHEN THE USE OF GOVERNMENT PRODUCTION PROPERTY IS CONTEMPLATED.

IN REGARD TO YOUR CONTENTION THAT THE EXCLUSIVE USE OF ONE SET OF BURNER UNIT TOOLS BY ONE BIDDER IS CONTRARY TO THE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION, YOUR ATTENTION IS SPECIFICALLY INVITED TO ASPR 13-310 WHICH PROVIDES THAT IF IT IS NOT FEASIBLE TO MAKE GOVERNMENT PRODUCTION PROPERTY AVAILABLE TO ALL BIDDERS OR PROPOSERS, SOLICITATIONS OFFERING TO FURNISH SUCH PROPERTY MAY LIMIT THE OFFER ACCORDINGLY. THE RECORD SHOWS THAT THE PROCURING AGENCY DETERMINED THAT IT WAS NOT FEASIBLE TO MAKE AVAILABLE TO ALL BIDDERS THE BURNER UNIT TOOLING BECAUSE OF THE INSUFFICIENT TIME BETWEEN THE COMPLETION DATE OF ARMSTRONG'S EXISTING CONTRACTS AND THE DATE FIRST ARTICLE APPROVAL TEST REPORT WOULD BE DUE UNDER THE SUBJECT PROCUREMENT. SUCH BEING THE CASE, WE FIND NO BASIS TO QUESTION THIS DETERMINATION.

IN VIEW OF THE FOREGOING, WE CANNOT CONCLUDE THAT THE BID OF THE ARMSTRONG PRODUCTS CORPORATION BASED UPON THE USE OF GOVERNMENT PRODUCTION PROPERTY CURRENTLY BEING USED BY IT UNDER SIMILAR GOVERNMENT CONTRACTS WAS IMPROPER, OR THAT THE METHOD OF EVALUATION SET OUT IN THE INVITATION RESULTED IN AN UNFAIR COMPETITIVE ADVANTAGE SO AS TO BE IN VIOLATION OF ASPR, SECTION XIII.

ACCORDINGLY, SINCE THE METHOD OF BID EVALUATION PROVIDED IN THE INVITATION WAS IN ACCORD WITH THE PROCUREMENT REGULATIONS CITED ABOVE, WE FIND NO LEGAL BASIS TO QUESTION THE SUFFICIENCY OF THE INVITATION OR THE PROPRIETY OF THE BID OF ARMSTRONG PRODUCTS CORPORATION SUBMITTED THEREUNDER. YOUR PROTEST IS THEREFORE DENIED.