B-162103, OCT. 13, 1967

B-162103: Oct 13, 1967

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BIDDER WHO CONTENDS THAT "ALL OR NONE" PROCUREMENT WAS RESTRICTIVE BECAUSE ONLY ONE PROSPECTIVE BIDDER MANUFACTURED ALL COMPONENTS AND THAT MANUFACTURER BIDDERS WOULD QUOTE HIGHER PRICES TO THEIR COMPETITORS THAN TO GOVERNMENT MAY NOT HAVE PROTEST SUSTAINED SINCE RECORD DOES NOT SHOW THAT MANUFACTURER BIDDERS QUOTED HIGHER PRICES AND EVIDENCE OF COMPETITION IS ILLUSTRATED BY FACT THAT PROTESTANT WAS LOW ON TWO OF THREE OPTIONS. RECORD DOES NOT SHOW THAT BREAKOUT OF CERTAIN COMPONENTS WOULD HAVE RESULTED IN LOWER PRICES AND THEREFORE REQUIREMENT FOR ONE CONTRACTOR TO PROVIDE ALL EQUIPMENT AND INSTALLATION APPEARS PROPER. INC.: FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND CONFIRMING LETTER OF JULY 21.

B-162103, OCT. 13, 1967

BIDS - SPECIFICATIONS - RESTRICTIVE DECISION TO SARKES TARZIAN, INC., RE PROTEST TO RESTRICTIVE SPECIFICATIONS AND PROCUREMENT PROCEDURE USED BY BROOKE ARMY MEDICAL CENTER, FORT SAM HOUSTON FOR CLOSED-CIRCUIT TELEVISION SYSTEM. BIDDER WHO CONTENDS THAT "ALL OR NONE" PROCUREMENT WAS RESTRICTIVE BECAUSE ONLY ONE PROSPECTIVE BIDDER MANUFACTURED ALL COMPONENTS AND THAT MANUFACTURER BIDDERS WOULD QUOTE HIGHER PRICES TO THEIR COMPETITORS THAN TO GOVERNMENT MAY NOT HAVE PROTEST SUSTAINED SINCE RECORD DOES NOT SHOW THAT MANUFACTURER BIDDERS QUOTED HIGHER PRICES AND EVIDENCE OF COMPETITION IS ILLUSTRATED BY FACT THAT PROTESTANT WAS LOW ON TWO OF THREE OPTIONS. RECORD DOES NOT SHOW THAT BREAKOUT OF CERTAIN COMPONENTS WOULD HAVE RESULTED IN LOWER PRICES AND THEREFORE REQUIREMENT FOR ONE CONTRACTOR TO PROVIDE ALL EQUIPMENT AND INSTALLATION APPEARS PROPER.

TO SARKES TARZIAN, INC.:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM AND CONFIRMING LETTER OF JULY 21, 1967, PROTESTING THE ALLEGED RESTRICTIVENESS OF SPECIFICATIONS AND PROCUREMENT PROCEDURE IN CONNECTION WITH INVITATION FOR BIDS (IFB) DADA11- 67-B-0056, AS AMENDED, ISSUED BY BROOKE ARMY MEDICAL CENTER, FORT SAM HOUSTON, TEXAS.

THE ABOVE IFB INITIALLY REQUESTED BIDS FOR FURNISHING A CLOSED CIRCUIT TELEVISION SYSTEM IN ACCORDANCE WITH BASIC SPECIFICATIONS AND SUBJECT TO CERTAIN OPTIONS AS FOLLOWS: "OPTION A: AS SPECIFIED IN BASIC SPECIFICATIONS. OPTION B: VTR'S EQUIPPED FOR COLOR. OPTION C: VTR'S EQUIPPED FOR COLOR AND HIGH BAND. OPTION D: BASIC SPECIFICATION LESS STUDIO MONOCHROME CAMERAS AND TO INCLUDE A TOTAL OF THREE (3) EACH STUDIO COLOR CAMERAS OF THE TYPE SPECIFIED IN OPTION A.' AWARD WAS REQUIRED TO BE MADE ON AN "ALL OR NONE" BASIS. AMENDMENT NO. 3 TO THE IFB, DATED JUNE 14, 1967, DELETED OPTION "B" AND CHANGED OPTION "C" TO READ: "BASIC SPECIFICATIONS TO INCLUDE VTR'S EQUIPPED FOR COLOR AND HIGH BAND.' FIVE BIDS WERE RECEIVED AND OPENED JULY 27, 1967, AS FOLLOWS:

BIDDER OPTION A OPTION C OPTION D

UNIVERSAL MAGNETICS $574,370.00 $673,063.00 $619,176.00

F AND M SYSTEMS 578,757.00 664,851.00 620,952.00

SARKES-TARZIAN 455,120.40 534,973.00 480,007.40

RCA 463,980.00 505,780.00 497,500.00

GENERAL ELECTRIC 498,500.00 574,244.00 533,500.00 WE HAVE BEEN ORALLY ADVISED BY THE DEPARTMENT OF THE ARMY THAT THE LISTING OF OPTIONS WAS NECESSITATED BY THE FACT THAT FUNDS FOR THE PURCHASE WERE LIMITED AND THAT IT WOULD NOT BE KNOWN UNTIL BIDS WERE OPENED WHICH OPTION COULD BE AWARDED, BUT THAT IT WAS THE INTENTION TO MAKE THE AWARD UNDER OPTION C, IF POSSIBLE, AND THAT FUNDS ARE AVAILABLE.

YOU CONTEND THAT THE SPECIFICATIONS AND PROCUREMENT PROCEDURE ARE RESTRICTIVE AND REDUCE COMPETITION BECAUSE THE ONLY MANUFACTURERS OF THE VIDEO TAPE RECORDERS ARE AMPEX AND RCA, AND THE ONLY MANUFACTURERS OF THE CAMERAS ARE GE, SARKES-TARZIAN AND RCA, AND THAT RCA WOULD THEREFORE BE THE ONLY PROSPECTIVE BIDDER WHO WOULD NOT HAVE TO BUY ONE OF THESE COMPONENTS FROM ANOTHER MANUFACTURER. YOU ADVISE THAT THIS WOULD PLACE ALL OTHER BIDDERS IN A NONCOMPETITIVE POSITION WITH RCA, WHO WOULD BE QUOTING ITS OWN PRODUCTS COMPLETELY, AND WOULD HAVE THE EFFECT OF LEAVING RCA AS THE ONLY POSSIBLE BIDDER WHO COULD QUOTE THE ENTIRE REQUIREMENT WITH ANY REASONABLE PROSPECT OF BEING THE LOW BIDDER. IN REACHING THIS CONCLUSION YOU ALLEGE THAT THE MANUFACTURERS OF THESE COMPONENTS WOULD QUOTE HIGHER PRICES TO THEIR COMPETITORS THAN THEY WOULD QUOTE DIRECTLY TO THE GOVERNMENT AND THAT THE RESULTING MARK UPFOR RESALE WOULD HAVE THE EFFECT OF ALLOWING RCA TO QUOTE A HIGHER PRICE THAN TRUE COMPETITION WOULD NORMALLY PERMIT IT TO QUOTE, WITH THE END RESULT THAT THE GOVERNMENT WILL PAY MORE FOR THE TOTAL PROCUREMENT THAN IT WOULD IF THE CAMERAS AND TAPE RECORDERS WERE BID SEPARATELY. YOU STATE FURTHER THAT THE TWO ARGUMENTS MADE BY THE GOVERNMENT FOR REQUIRING A COMBINED BID ARE THAT THEY WANT A "TURNKEY," OR TOTAL BID RESPONSIBILITY QUOTATION, AND THAT BOTH RCA AND AMPEX WOULD BE RELUCTANT TO QUOTE THEIR BOTTOM PRICES ON TAPE RECORDERS BECAUSE IT WOULD BE TOO REVEALING OF WHAT THEY ARE CAPABLE OF DOING.

WITH REFERENCE TO THE LAST MENTIONED ARGUMENT, THE CONTRACTING OFFICER STATES THAT HE NEVER MADE ANY STATEMENT TO SARKES-TARZIAN OR ANY OTHER PROSPECTIVE BIDDER TO THE EFFECT THAT THE GOVERNMENT FELT AMPEX OR RCA WOULD BE RELUCTANT TO QUOTE THEIR BOTTOM PRICES ON TAPE RECORDERS, NOR DID HE MAKE ANY STATEMENT THAT COULD HAVE BEEN MISUNDERSTOOD TO MEAN THIS. NEITHER DOES IT APPEAR, AS ALLEGED BY YOU, THAT THE OTHER MANUFACTURERS OF THE INVOLVED COMPONENTS QUOTE HIGHER PRICES TO THEIR COMPETITORS THAN TO THE GOVERNMENT, THEREBY RESULTING IN HIGHER COST TO THE GOVERNMENT ON A PACKAGE DEAL. IN THIS CONNECTION THE ARMY REPORTS THAT THE AMOUNT INCLUDED BY SARKES-TARZIAN FOR TAPE RECORDERS UNDER OPTION "A" WAS $75,137.40, WHEREAS THE AMOUNT QUOTED BY AMPEX, ONE OF THE MANUFACTURERS, FOR THE TAPE RECORDERS UNDER OPTION "A," WAS $82,130, OR ALMOST $7,000 MORE THAN SARKES TARZIAN. LIKEWISE SARKES-TARZIAN'S BID ON THE TAPE RECORDERS FOR OPTION ,C" WAS COMPUTED AT $154,990 (OPTION "A-S" TAPE RECORDERS AT $75,137.40 PLUS $79,852.60 FOR OPTION "C"). AMPEX'S BID FOR THE SAME ITEM WAS IDENTICAL, $154,990. IF ANY FURTHER EVIDENCE OF COMPETITION IS NEEDED, IT APPEARS TO BE FURNISHED BY THE TOTAL BID PRICES, WHICH DISCLOSE THAT SARKES-TARZIAN WAS LOW ON BOTH OPTIONS "A" AND "D," AND THAT RCA WAS LOW ONLY ON OPTION "C.'

SECTION 1-326 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) SETS FORTH DETAILED GUIDELINES FOR DETERMINING WHETHER COMPONENTS SHOULD BE PURCHASED BY THE GOVERNMENT DIRECTLY AND FURNISHED TO AN END ITEM CONTRACTOR AS GOVERNMENT-FURNISHED EQUIPMENT FOR INCORPORATION IN THE END ITEM. THE RECORDS INDICATE THAT THE CONTRACTING OFFICER REVIEWED ALL OF THESE FACTORS, INCLUDING WHETHER THE BREAKOUT WOULD RESULT IN SUBSTANTIAL NET COST SAVINGS WHICH, AS INDICATED ABOVE, WAS ANSWERED IN THE NEGATIVE. HIS CONSIDERATION OF THE REMAINING FACTORS LIKEWISE FAILED TO FURNISH ANY BASIS FOR DETERMINING THAT BREAKOUT OF THE INVOLVED COMPONENTS WOULD BE IN THE GOVERNMENT'S INTEREST. IT WAS ALSO LEARNED THAT SIMILAR PROCUREMENTS WITHOUT BREAKOUT HAD BEEN MADE AT FORT BENJAMIN HARRISON, WEST POINT, FORT RICHIE AND OTHER INSTALLATIONS.

AS STATED IN YOUR PROTEST, IT WAS THE GOVERNMENT'S DESIRE TO HAVE ONE CONTRACTOR PROVIDE ALL EQUIPMENT AND MAKE ALL INSTALLATIONS. SUCH ACTION WOULD APPEAR TO BE IN ACCORD WITH THE ACCEPTED PRACTICE THAT, IN THE ABSENCE OF COMPELLING REASONS TO THE CONTRARY, THE GOVERNMENT WILL USE THE SINGLE CONTRACT METHOD, UNDER WHICH THE PRIME CONTRACTOR IS SOLELY RESPONSIBLE FOR ALL ASPECTS OF PERFORMANCE, AND THE GOVERNMENT NEED LOOK ONLY TO HIM FOR ANY NECESSARY REDRESS. BASED ON THE PRESENT RECORD, AND FOR THE REASONS STATED, WE CANNOT CONCLUDE THAT IT HAS BEEN ESTABLISHED THAT BREAKING OUT THE VIDEO TAPE RECORDERS OR CAMERAS FOR DIRECT PURCHASE WOULD BE IN THE GOVERNMENT'S INTEREST, FINANCIAL OR OTHERWISE, AND YOUR PROTEST IS THEREFORE DENIED.