B-161137, B-164384, SEP 9, 1969

B-161137,B-164384: Sep 9, 1969

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NOTIFICATION BY GENERAL SERVICES ADMINISTRATION THAT PROCUREMENT OF SINGLE SPEED RECORDERS UNDER PARTICULAR FSS CONTRACT SHOULD NOT BE MADE AT HIGHER PRICE ABSENT FULL JUSTIFICATION ON BASIS OF DEMONSTRATED ACTUAL NEED FOR A SINGLE SPEED RECORDER THAT CANNOT BE SATISFIED WITH THE TWO- SPEED MACHINE AT A LOWER PRICE IS PROPER UNDER FEDERAL PROCUREMENT MANAGEMENT REGULATION 101-26.408-3. THE SUBSTANCE OF YOUR PROTEST IS THAT GSA REQUIRED YOU TO CEASE DELIVERY OF A TWO-SPEED TAPE RECORDER ON ORDERS FOR AN ITEM INCLUDED IN YOUR CONTRACT GS-00S-76334 AS A SINGLE-SPEED RECORDER. ON THE GROUNDS THAT THE CONTRACT SPECIFICATIONS WERE NOT BEING SATISFACTORILY MET. YOU CLAIM THAT WHILE YOU WERE BEING DIRECTED TO MAKE A COSTLY CHANGE IN THE SPECIFICATIONS OF YOUR CONTRACT.

B-161137, B-164384, SEP 9, 1969

BID PROTEST - FEDERAL SUPPLY SCHEDULE CONTRACTS DECISION TO MINNESOTA MINING AND MANUFACTURING CO. DENYING PROTEST AGAINST PROCEDURES USED BY FEDERAL SUPPLY SERVICE WITH RESPECT TO SOUND RECORDING AND REPRODUCING EQUIPMENT PROCUREMENT. NOTIFICATION BY GENERAL SERVICES ADMINISTRATION THAT PROCUREMENT OF SINGLE SPEED RECORDERS UNDER PARTICULAR FSS CONTRACT SHOULD NOT BE MADE AT HIGHER PRICE ABSENT FULL JUSTIFICATION ON BASIS OF DEMONSTRATED ACTUAL NEED FOR A SINGLE SPEED RECORDER THAT CANNOT BE SATISFIED WITH THE TWO- SPEED MACHINE AT A LOWER PRICE IS PROPER UNDER FEDERAL PROCUREMENT MANAGEMENT REGULATION 101-26.408-3.

TO MINNESOTA MINING & MANUFACTURING CO.:

WE REFER TO YOUR LETTERS OF JANUARY 17 AND FEBRUARY 6, 1969, PROTESTING AGAINST PROCEDURES EMPLOYED BY THE FEDERAL SUPPLY SERVICE (FSS), GENERAL SERVICES ADMINISTRATION (GSA) WITH RESPECT TO THE PROCUREMENT OF SOUND RECORDING AND REPRODUCING EQUIPMENT AND AGAINST THE ADMINISTRATION OF CONTRACTS THEREFOR.

THE SUBSTANCE OF YOUR PROTEST IS THAT GSA REQUIRED YOU TO CEASE DELIVERY OF A TWO-SPEED TAPE RECORDER ON ORDERS FOR AN ITEM INCLUDED IN YOUR CONTRACT GS-00S-76334 AS A SINGLE-SPEED RECORDER, ON THE GROUNDS THAT THE CONTRACT SPECIFICATIONS WERE NOT BEING SATISFACTORILY MET. YOU STATE THAT THE UNIT HAD RECEIVED PREPRODUCTION SAMPLE INSPECTION AND APPROVAL AND HAD BEEN DELIVERED TO, AND SATISFACTORILY USED BY, NUMEROUS GOVERNMENT AGENCIES DURING THE EARLY MONTHS OF THE CONTRACT PERIOD. ACCORDINGLY, YOU URGE THAT THIS UNILATERAL CHANGE IN CONTRACT SPECIFICATION TERMS WITHOUT VALUABLE CONSIDERATION MIGHT BE VIEWED AS A BREACH OF CONTRACT ON THE PART OF THE GOVERNMENT FOR WHICH APPROPRIATE DAMAGES WOULD LIE. FURTHER, IN VIEW OF ASSERTED CONTRASTING TREATMENT ACCORDED COMPETITIVE CONTRACTORS, YOU CLAIM SUCH ACTION REPRESENTS, AT BEST, EVIDENCE OF FAILURE TO DEAL IN GOOD FAITH.

IN ADDITION, YOU CLAIM THAT WHILE YOU WERE BEING DIRECTED TO MAKE A COSTLY CHANGE IN THE SPECIFICATIONS OF YOUR CONTRACT, GSA ISSUED NOTICE TO GOVERNMENT ORDERING OFFICES "THAT A ONE-SPEED UNIT (FSN 5835-764 4388) SHOULD BE ORDERED FROM A COMPETITOR, FIDELITY SOUND COMPANY (FIDELITY) UNDER CONTRACT GS-00S-76333, RATHER THAN A SINGLE-SPEED 3M COMPANY UNIT AUTHORIZED FOR PURCHASE IN THIS PARTICULAR CATEGORY." THE BASIS FOR SUCH ACTION WAS THAT YOUR PRICE OF $144 PER UNIT WAS HIGHER THAN THE PRICE OF THE FIDELITY UNIT. IN THIS CONNECTION, YOU STATE THAT YOU ARE READY, ABLE AND WILLING TO PROVIDE A UNIT IN ACCORDANCE WITH THE REQUIRED SPECIFICATIONS, AND YOU THEREFORE OFFER TAPE RECORDER FSN 5835-764-4375, WHICH YOU CORRECTED IN YOUR LETTER OF FEBRUARY 6 TO FSN 5835-764-4388, FOR THE PRICE OF $118.25.

FINALLY, YOU ASSERT THAT GSA HAS NOT ENFORCED PERFORMANCE OF FIDELITY'S CONTRACT IN ACCORDANCE WITH THE APPLICABLE SPECIFICATIONS. IN SUPPORT OF THIS CHARGE YOU FURNISH A LIST OF SPECIFICATION DISCREPANCIES WHICH YOU STATE AROSE UNDER FIDELITY CONTRACT -76333.

THE CONTRACTS INVOLVED WERE AWARDED BY FSS UNDER INVITATION FOR BIDS (IFB) FPNHO-K-27628-A-5-10-68, ISSUED APRIL 16, 1968, WHICH SOLICITED BIDS FOR THE FURNISHING OF ITEMS OF COMMUNICATION EQUIPMENT IN FEDERAL SUPPLY CATALOG CLASS 5835, SOUND RECORDING AND REPRODUCING EQUIPMENT, FOR THE FISCAL YEAR 1969; THAT IS, FROM JULY 1, 1968, THROUGH JUNE 30, 1969. YOUR PROTEST IS CONCERNED WITH FOUR CLASSES OF SINGLE-CHANNEL, SEMI- PROFESSIONAL, DUAL TRACK, PORTABLE TAPE RECORDERS, ON WHICH BIDS WERE REQUESTED FOR EACH CLASS. THE CLASSES, NUMBERED FROM 1 TO 4, COVERED SPEEDS RANGING FROM 1 TO 4, RESPECTIVELY; THAT IS, CLASS 1 WAS A SINGLE- SPEED RECORDER (7 1/2 INCHES PER SECOND); CLASS 2 WAS A TWO SPEED RECORDER (7 1/2 AND 3 3/4 INCHES PER SECOND), ETC. CLASS 1 RECORDERS WERE IDENTIFIED BY FEDERAL STOCK NO. (FSN) 5835-764-4375, AND CLASS 2 RECORDERS WERE ASSIGNED FSN 5835-764-4388.

ON JUNE 18, 1968, FSS NOTIFIED YOU OF THE AWARD TO YOU OF CONTRACT GS 00S -76334 FOR THE CLASS 1 RECORDERS, FSN 5835-764-4375, ON WHICH YOU HAD BID $144 PER UNIT. ON THE SAME DATE, FIDELITY SOUND COMPANY (FIDELITY), WHICH HAD NOT BID ON CLASS 1, WAS NOTIFIED OF AWARD OF CONTRACT GS-00S-76333 FOR CLASS 2, FSN 5835-764-4388, AND CLASS 3, FSN 5835-764-4400, RECORDERS AT ITS RESPECTIVE UNIT BID PRICES OF $118.25 AND $118.95.

AFTER SUBMISSION BY YOU TO FSS OF A PREPRODUCTION SAMPLE OF THE CLASS 1 RECORDER WHICH YOU HAD OFFERED TO FURNISH AND UPON APPROVAL BY FSS OF THE UNIT, WHICH WAS ACTUALLY A TWO-SPEED RECORDER, YOU PROCEEDED TO DELIVER THE ITEM UNDER YOUR CONTRACT. IN OCTOBER 1968, HOWEVER, FOLLOWING A PROTEST BY FIDELITY TO FSS IN SEPTEMBER 1968 THAT THE AWARD OF A CONTRACT TO YOU FOR SINGLE-SPEED EQUIPMENT BASED ON A BID TO SUPPLY TWO-SPEED EQUIPMENT WAS INVALID, FSS REQUESTED YOU TO CEASE DELIVERY OF THE TWO- SPEED ITEM AND TO FURNISH ONLY SINGLE-SPEED EQUIPMENT UNDER YOUR CONTRACT. IN A TELEGRAM DATED OCTOBER 31, 1968, YOU ADVISED GSA THAT YOU WOULD COMPLY WITH ITS REQUEST TO SUPPLY ONE SPEED TAPE RECORDERS UNDER YOUR CONTRACT FOR ITEM FSN 5835-764-4375.

ON DECEMBER 26, 1968, FSS ISSUED THE NOTIFICATION TO THE ORDERING OFFICES, TO WHICH YOU REFER IN YOUR PROTEST, CONCERNING PURCHASE OF EQUIPMENT FROM FIDELITY TO MEET ONE-SPEED RECORDER NEEDS IN LIEU OF PURCHASE OF RECORDERS FROM YOU UNDER CONTRACT -76334 AT THE UNIT PRICE OF $144. NO MENTION WAS MADE OF A ONE-SPEED RECORDER OFFERED BY FIDELITY; RATHER, THE NOTIFICATION STATED THAT THE TWO-SPEED FSN 5835 764-4388 RECORDER OFFERED BY FIDELITY UNDER CONTRACT -76333 AT A UNIT PRICE OF $118.25 WOULD FULLY SATISFY IN ALL, OR VIRTUALLY ALL, CASES REQUIREMENTS FOR A SINGLE-SPEED RECORDER. ACCORDINGLY, IT WAS STATED, NO PROCUREMENT OF SINGLE-SPEED FSN 5835-764-4375 RECORDERS SHOULD BE MADE FROM YOU AT YOUR UNIT PRICE OF $144 ABSENT FULL JUSTIFICATION ON THE BASIS OF A DEMONSTRATED ACTUAL NEED FOR A SINGLE-SPEED MACHINE WHICH CANNOT BE SATISFIED BY THE TWO-SPEED MACHINE OFFERED BY FIDELITY.

BY LETTER DATED JANUARY 17, 1969, WHICH OBVIOUSLY HAD NOT BEEN RECEIVED BY YOU AT THE TIME YOUR PROTEST LETTER OF THE SAME DATE WAS ADDRESSED TO OUR OFFICE, FSS ADVISED YOU THAT AFTER FURTHER REVIEW AND CONSIDERATION OF YOUR CONTRACT, DELIVERY OF EITHER A ONE-SPEED OR TWO SPEED RECORDER WOULD BE ACCEPTABLE FOR ANY ORDER PLACED UNDER CONTRACT 76334 FOR FSN 5835-764- 4375.

WHILE WE WERE DEVELOPING THE FACTS AND CIRCUMSTANCES WHICH GAVE RISE TO YOUR PROTEST, GSA FURNISHED OUR OFFICE WITH A REPORT DATED MARCH 14, 1969, ON THE PROTEST BY FIDELITY AGAINST THE ACTION OF GSA IN PERMITTING YOU TO FURNISH TWO-SPEED RECORDERS UNDER YOUR CONTRACT 76334 FOR ONE-SPEED RECORDER REQUIREMENTS. CERTAIN PORTIONS OF THE GSA REPORT AND OF OUR ENSUING DECISION TO FIEDLITY'S ATTORNEYS DENYING THE PROTEST, WHICH ARE PERTINENT TO OUR CONSIDERATION OF YOUR PROTEST, WILL THEREFORE BE DISCUSSED BELOW.

THE GSA REPORT OF MARCH 14 STATED THAT THE IFB REQUIREMENT FOR A SINGLE- SPEED RECORDER WAS A MINIMUM REQUIREMENT WHICH COULD BE MET BY MULTIPLE- SPEED MACHINES; THAT YOUR BID WAS COMPLETELY RESPONSIVE TO THE IFB REQUIREMENTS; AND THAT ISSUANCE OF THE DECEMBER 26, 1968, NOTIFICATION TO THE ORDERING AGENCIES REGARDING JUSTIFICATION FOR PURCHASE OF YOUR ITEM WAS MOTIVATED SOLELY BY THE FINANCIAL SAVING WHICH COULD ACCRUE TO THE GOVERNMENT BY PURCHASE OF THE LOWER-PRICED EQUALLY ACCEPTABLE TWO-SPEED RECORDER OFFERED BY FIDELITY. GSA FURTHER STATED THAT AT THE TIME SUCH NOTIFICATION WAS ISSUED, GSA BELIEVED THAT YOU WOULD MODIFY YOUR EQUIPMENT TO OPERATE AT A SINGLE SPEED, AND WHEN IT BECAME CLEAR THAT YOU WOULD NOT TAKE SUCH ACTION, THE JANUARY 17, 1969, LETTER WAS ISSUED AUTHORIZING RESUMPTION OF DELIVERY OF TWO-SPEED RECORDERS FOR ANY ORDERS ISSUED AGAINST YOUR CONTRACT.

IN SUPPORT OF GSA'S POSITION THAT THE CLASS 1 CONTRACT AWARD TO YOU WAS LEGALLY PROPER AND THAT GSA COULD NOT REQUIRE YOU TO MODIFY THE EQUIPMENT OFFERED THEREUNDER, GSA STATED THAT THE IFB DID NOT REQUIRE THAT THE CLASS 1 RECORDER OPERATE AT ONLY ONE SPEED; THAT YOUR BID TOOK NO EXCEPTION TO THE IFB REQUIREMENTS; AND THAT THE ITEM OFFERED BY YOU IS AT LEAST EQUAL TO THAT REQUIRED BY THE SPECIFICATION AND IS SUPERIOR AS TO THE NUMBER OF SPEEDS AT WHICH IT WILL OPERATE. FURTHER, GSA CITED OUR DECISIONS B- 155733, JANUARY 4, 1965, AND 38 COMP. GEN. 830 (1959) FOR THE PROPOSITION THAT A BIDDER IS NOT PRECLUDED FROM OFFERING A PRODUCT WHICH IN ADDITION TO COMPLYING WITH THE SPECIFICATION REQUIREMENTS IS SUPERIOR THERETO AND MEETS THE NEEDS OF THE GOVERNMENT.

IN ADDITION TO THE FOREGOING, GSA'S REPORT OF MARCH 14 TOOK NOTE OF THE OFFER YOU MADE IN YOUR LETTER OF JANUARY 17 TO OUR OFFICE REGARDING THE FURNISHING OF FSN 5835-764-4375 EQUIPMENT AT A UNIT PRICE OF $118.25 AND STATED THAT IF SUCH OFFER WERE FORMALLY MADE AND ACCEPTED, GSA WOULD PROPOSE TO RESCIND THE DECEMBER 26, 1968, NOTIFICATION TO THE ORDERING OFFICES.

IN OUR DECISION B-164384, APRIL 23, 1969, TO FIDELITY'S ATTORNEYS, WE UPHELD THE VALIDITY OF YOUR CONTRACT IN VIEW OF THE REPORTED RESPONSIVENESS OF YOUR BID AND THE RIGHT OF THE GOVERNMENT TO ACCEPT SUPERIOR EQUIPMENT AT NO ADDITIONAL CHARGE WHEN IT IS DETERMINED TO BE ACCEPTABLE. WE OBSERVED, HOWEVER, THAT IT WOULD NOT BE PRACTICAL FOR THE GOVERNMENT TO ORDER TWO-SPEED EQUIPMENT IN LIEU OF ONE-SPEED EQUIPMENT AT YOUR BID PRICE FOR CLASS 1 EQUIPMENT WHERE THE FIDELITY TWO-SPEED EQUIPMENT WOULD MEET THE SAME NEED AND WAS AVAILABLE AT A LOWER PRICE.

WITH RESPECT TO YOUR OFFER TO FURNISH, AT A PRICE OF $118.25 PER UNIT, EQUIPMENT WHICH WOULD MEET THE ONE-SPEED REQUIREMENT, WE INFORMED GSA THAT SUCH OFFER CAME WITHIN THE PURVIEW OF THE PRICE REDUCTION CLAUSE IN YOUR CONTRACT AND THEREFORE COULD PROPERLY BE ACCEPTED BY GSA. WE STATED, HOWEVER, THAT GSA SHOULD ADVISE THE ORDERING AGENCIES IN THE NOTIFICATION OF THE PRICE REDUCTION THAT THE EQUIPMENT BEING OFFERED BY YOU IS TWO- SPEED EQUIPMENT, AS IS THE FIDELITY EQUIPMENT, IN ORDER THAT THE ORDERING OFFICES MIGHT BE AWARE OF THE ACTUAL CIRCUMSTANCES IN MAKING A SELECTION OF EQUIPMENT. THIS LAST STATEMENT WAS MADE ON THE BASIS THAT THE NEW RECORDER IS A TWO-SPEED MODEL SINCE FSN 5835-764-4388, WHICH YOUR LETTER OF FEBRUARY 6, 1969, STATES IS APPLICABLE TO THE REDUCED PRICE RECORDER OFFERED IN YOUR LETTER OF JANUARY 17, IS ASSIGNED BY FSS TO TWO-SPEED RECORDERS, THE FSN FOR SINGLE-SPEED RECORDERS BEING 5835-764-4375.

IN A LETTER DATED MAY 6 TO OUR OFFICE, YOU STATED THAT THERE WERE CERTAIN FACTUAL MISSTATEMENTS IN OUR DECISION OF APRIL 30. CONCERNING THE STATEMENT BY GSA THAT YOU HAD DECLINED TO CONVERT A TWO-SPEED TAPE RECORDER TO A ONE-SPEED UNIT, AS REQUESTED BY GSA, YOU STATED THAT AFTER CERTAIN REWORK THE TWO-SPEED UNIT WHICH YOU WERE DELIVERING UNDER CONTRACT -76334 WAS IN FACT MODIFIED BY YOU AND WAS SUBSEQUENTLY PROVIDED AS A ONE- SPEED RECORDER TO THE SATISFACTION OF GSA. IN ADDITION, YOU STATED THAT THE ITEM TO WHICH YOUR OFFER QUOTING A UNIT PRICE OF $118.25 APPLIES IS YOUR MODEL 9508, WHICH IS NOT THE MODEL 9503 UNIT ON WHICH THE AWARD OF CONTRACT -76334 WAS BASED. HOWEVER, YOU FURTHER STATED, MODEL 9508 MEETS ALL OF THE REQUIREMENTS OF TAPE RECORDER FSN 5835-764-4375 AND HAS BEEN APPROVED AND PROCURED BY GSA IN SUBSTANTIAL QUANTITIES SINCE THE EARLY PART OF THE YEAR IN FULFILLING REQUIREMENTS UNDER THE FISCAL YEAR 1969 CONTRACT.

ON MAY 23 WE FORWARDED A COPY OF YOUR LETTER OF MAY 6 TO THE ADMINISTRATOR, GSA, WITH ADVICE TO THE EFFECT THAT THE RECOMMENDATION IN OUR DECISION OF APRIL 30 CONCERNING NOTIFICATION TO THE ORDERING OFFICES THAT YOUR REDUCED PRICE EQUIPMENT WAS TWO-SPEED EQUIPMENT BE DISREGARDED IF GSA SHOULD FIND THAT ONE-SPEED EQUIPMENT HAS BEEN FURNISHED AS YOU REPRESENT.

IN ITS REPORT BY LETTER DATED MAY 28 ON YOUR PROTEST, GSA HAS ADVISED OUR OFFICE THAT, WHILE YOU HAVE BEEN AWARDED A DEFINITE QUANTITY CONTRACT FOR A TWO-SPEED RECORDER DESIGNATED AS FSN 5835-770-2843, NO DELIVERIES HAVE YET BEEN MADE UNDER SUCH CONTRACT AND GSA IS NOT AWARE THAT THE UNIT IN QUESTION HAS BEEN EITHER OFFERED OR DELIVERED BY YOU UNDER CONTRACT - 76334. REFERENCE TO THE SUPPLY SCHEDULE SHOWS THAT FSN -2843 IS A FOUR- TRACK MONAURAL AND STEREOPHONIC RECORDER, WHEREAS NUMBERS 4375 AND 4388 ARE DUAL-TRACK MONAURAL UNITS.

WITH RESPECT TO YOUR OFFER TO SUPPLY YOUR NEW MODEL 9508 AT THE PRICE OF $118.25 PER UNIT UNDER CONTRACT -76334, GSA STATES THAT ACCEPTANCE AT THIS TIME OF SUCH OFFER WOULD NOT SERVE ANY USEFUL PURPOSE FOR THE REASON THAT THE NECESSARY TESTING OF THE MODEL AND THE SUBSEQUENT DISTRIBUTION OF NOTICES OF THE ORDERING AGENCIES OF ITS AVAILABILITY COULD NOT BE ACCOMPLISHED BEFORE THE EXPIRATION OF CONTRACT -76334 ON JUNE 30, 1969.

FEDERAL PROCUREMENT MANAGEMENT REGULATION 101-26.408-3, RELATING TO MULTIPLE-AWARD FEDERAL SUPPLY SCHEDULE CONTRACTS, REQUIRES THAT JUSTIFICATIONS OF PURCHASES AT OTHER THAN THE LOWEST DELIVERED PRICE AVAILABLE BE BASED ON SPECIFIC OR DEFINITE NEEDS WHICH ARE CLEARLY ASSOCIATED WITH THE ACHIEVEMENT OF PROGRAM OBJECTIVES. SINCE THE EFFECT OF GSA'S POSITION THAT YOUR TWO-SPEED RECORDER MAY BE ACCEPTED ON ORDERS FOR FSN -4375 WAS TO ESTABLISH BOTH YOUR FIRM AND FIDELITY AS SOURCES FOR TWO-SPEED RECORDERS OF THE CLASS DESCRIBED AS FSN -4388, THE INSTRUCTIONS ISSUED BY GSA IN ITS NOTIFICATION OF DECEMBER 26, 1968, TO THE ORDERING OFFICES CONCERNING THE NEED FOR ADEQUATE JUSTIFICATION FOR THE PURCHASE OF YOUR CLASS 1 TAPE RECORDER WERE IN ACCORD WITH SUCH REGULATION.

IN THE CIRCUMSTANCES, WE MUST CONCLUDE THAT THE ACTIONS TAKEN BY GSA TO INSURE AGAINST PAYMENT IN EXCESS OF $118.25 PER UNIT FOR TWO-SPEED RECORDERS MEETING THE DESCRIPTION OF FSN -4388 ARE PROPER.

WITH RESPECT TO THE ISSUE OF THE ADMINISTRATION OF CONTRACT -76333 WITH FIDELITY, GSA REPORTS THAT AFTER RECEIPT OF YOUR WRITTEN PROTEST, TESTS WERE MADE ON RECORDERS SUPPLIED BY FIDELITY AND CORRECTIONS WILL BE MADE IN SUCH RECORDERS AS WERE FOUND TO HAVE DEFECTS. IN ADDITION, FIDELITY WAS NOTIFIED BY LETTER DATED JANUARY 28, 1969, THAT EFFECTIVE IMMEDIATELY ALL ORDERS PLACED AGAINST CONTRACT -76333 MUST BE INSPECTED BY GSA QUALITY CONTROL PERSONNEL BEFORE SHIPMENT. GSA THEREFORE TAKES THE POSITION THAT IT HAS DONE ALL THAT CAN REASONABLY BE DONE TO INSURE THAT FIDELITY WILL DELIVER ONLY EQUIPMENT WHICH MEETS ALL APPLICABLE SPECIFICATION REQUIREMENTS. IN THE CIRCUMSTANCES, WE CONCUR WITH GSA'S VIEW ON THIS ISSUE. FOR THE REASONS STATED, YOUR PROTEST IS DENIED.