B-162437, AUG. 6, 1968

B-162437: Aug 6, 1968

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MARTIN AND OPPENHEIMER: FURTHER REFERENCE IS MADE TO YOUR LETTERS OF SEPTEMBER 7. NORTHERN RADIO COMPANY QUALIFIED A PROTOTYPE OF THE EQUIPMENT FROM PRINTS FURNISHED BY THE GOVERNMENT AND ALONG WITH TELE-SIGNAL WAS SOLICITED FOR THE PHASE III PROCUREMENT. ON THE SAME DAY THE SUBCONTRACT WITH NORTHERN WAS SUBMITTED FOR APPROVAL. WILL BE UTILIZED ON PHASE III. THIS EQUIPMENT MUST BE IDENTICAL TO THAT WHICH HAS ALREADY BEEN INSTALLED OR IS BEING INSTALLED. REGENERATIVE REPEATERS TO BE FURNISHED UNDER PHASE III WILL BE THE AN/UGA-5 WITH AUTOMATIC SWITCHING BETWEEN SYNCHRONOUS AND START-TOP OPERATION ON THE BASIS OF FOUR PER DC PATCH BAY VICE THREE PER DC PATCH BAY AS PREVIOUSLY ADVISED. THIS EQUIPMENT IS ALREADY IN THE GOVERNMENT INVENTORY AND CAN BE SUPPORTED WITH MINIMAL ADDED COST TO THE IWCS PROGRAM FOR PROVISIONING.

B-162437, AUG. 6, 1968

TO LEVA, HAWES, SYMINGTON, MARTIN AND OPPENHEIMER:

FURTHER REFERENCE IS MADE TO YOUR LETTERS OF SEPTEMBER 7, 1967, WITH ENCLOSURES, AND JULY 12, 1968, ON BEHALF OF NORTHERN RADIO COMPANY, INCORPORATED, PROTESTING AGAINST REJECTION OF PROPOSALS AND RESOLICITATION OF A PROCUREMENT OF AN/FCC 19 AND 25 TERMINAL TELEGRAPH EQUIPMENT AND ANCILLARY EQUIPMENT FOR THE PHASE III IWCS SYSTEM BY PAGE COMMUNICATION ENGINEERS, THE GOVERNMENT'S PRIME CONTRACTOR UNDER A COST-TYPE CONTRACT. THIS EQUIPMENT HAD PREVIOUSLY BEEN PURCHASED FROM A SOLE-SOURCE, TELE- SIGNAL CORPORATION, FOR PHASE I AND II. NORTHERN RADIO COMPANY QUALIFIED A PROTOTYPE OF THE EQUIPMENT FROM PRINTS FURNISHED BY THE GOVERNMENT AND ALONG WITH TELE-SIGNAL WAS SOLICITED FOR THE PHASE III PROCUREMENT.

PAGE INITIATED PROCUREMENT OF THIS EQUIPMENT IN MAY 1967 ON A COMPETITIVE NEGOTIATION BASIS AND RECEIVED PROPOSALS FROM BOTH NORTHERN AND TELE- SIGNAL IN THE AMOUNTS OF $1,097,915 AND $1,123,982, RESPECTIVELY. SUBSEQUENT NEGOTIATIONS WITH THE TWO OFFERORS RESULTED IN NORTHERN REDUCING ITS PROPOSAL TO $893,000 AND TELE-SIGNAL $895,000. PAGE SELECTED NORTHERN FOR AWARD OF THE SUBCONTRACT AND PURSUANT TO ITS CONTRACT WITH THE GOVERNMENT SUBMITTED THE SUBCONTRACT TO THE ADMINISTRATIVE CONTRACTING OFFICER (ACO) FOR APPROVAL ON AUGUST 17, 1967.

ON THE SAME DAY THE SUBCONTRACT WITH NORTHERN WAS SUBMITTED FOR APPROVAL, A REPRESENTATIVE OF TELE-SIGNAL ADVISED THE ACO THAT NORTHERN, UNLIKE TELE -SIGNAL, HAD BEEN PERMITTED TO SUBMIT A PROPOSAL FOR ITEMS 1, 2, 12, AND 13, ON THE BASIS OF "EQUIVALENT" EQUIPMENT AND THAT HAD TELE-SIGNAL BEEN AFFORDED THE OPPORTUNITY TO SUBMIT ON AN "EQUIVALENT" BASIS ITS PRICE WOULD BE $604,658. IN VIEW OF THIS DEVELOPMENT, THE ACO DECIDED TO WITHHOLD APPROVAL OF THE SUBCONTRACT UNTIL HE HAD AN OPPORTUNITY TO CONSULT WITH THE PROJECT MANAGEMENT OFFICE AND THE PROCURING ACTIVITY.

ON AUGUST 21, 1967, THE PROJECT MANAGEMENT OFFICE ISSUED THE FOLLOWING DIRECTIVE TO PAGE:

"IDENTICAL ANCILLARY EQUIPMENT MADE BY THE SAME MANUFACTURER AS THAT USED ON PHASES I AND II, WILL BE UTILIZED ON PHASE III. THIS EQUIPMENT MUST BE IDENTICAL TO THAT WHICH HAS ALREADY BEEN INSTALLED OR IS BEING INSTALLED, IN THE IWCS TRAINING FACILITY AT FORT MONMOUTH AND BEING PROVISIONED BY THE ARMY. REGENERATIVE REPEATERS TO BE FURNISHED UNDER PHASE III WILL BE THE AN/UGA-5 WITH AUTOMATIC SWITCHING BETWEEN SYNCHRONOUS AND START-TOP OPERATION ON THE BASIS OF FOUR PER DC PATCH BAY VICE THREE PER DC PATCH BAY AS PREVIOUSLY ADVISED. THIS EQUIPMENT IS ALREADY IN THE GOVERNMENT INVENTORY AND CAN BE SUPPORTED WITH MINIMAL ADDED COST TO THE IWCS PROGRAM FOR PROVISIONING, DOCUMENTATION, AND SOFTWEAR.'

IN VIEW OF THIS DIRECTIVE AND TELE-SIGNAL'S OFFER TO SUPPLY "EQUIVALENT" EQUIPMENT AT A REDUCTION OF APPROXIMATELY $288,000, PAGE DEEMED IT ADVISABLE TO RESOLICIT PROPOSALS FOR THE AN/FCC 19 AND 25 EQUIPMENT AND THE ANCILLARY EQUIPMENT IN SEPARATE PROCUREMENTS. PROPOSALS WERE RESOLICITED ON SEPTEMBER 6, 1967, AND RESULTED IN NORTHERN RADIO COMPANY SUBMITTING THE LOW PROPOSAL OF $572,082.18 FOR THE AN/FCC 19 AND 25 AND BREAKOUT MONITORS, AND TELE-SIGNAL SUBMITTING THE LOW PROPOSAL FOR THE POWER SUPPLIES IN THE AMOUNT OF $63,458. SUBCONTRACTS AS ABOVE WERE APPROVED ON SEPTEMBER 21, 1967.

ALTHOUGH CONCEDING THAT LITTLE, IF ANYTHING, CAN BE DONE WITH RESPECT TO THE SUBJECT PROCUREMENT IN VIEW OF THE ULTIMATE AWARD TO YOUR CLIENT, YOU ASK THAT WE RENDER A DECISION WHICH WILL LESSEN THE LIKELIHOOD OF A REPETITION OF WHAT YOU CONSIDER IMPROPER PROCUREMENT PROCEDURES. SPECIFICALLY, YOU QUESTION WHETHER THERE WAS A SUFFICIENT BASIS FOR THE GOVERNMENT'S REQUIRING PROCUREMENT OF THE ANCILLARY EQUIPMENT FROM A PARTICULAR COMPANY, AND CONTEND THAT RESOLICITATION AFTER PRICES WERE EXPOSED HAD THE EFFECT OF TURNING THE PROCUREMENT INTO AN AUCTION. THIS REGARD, YOU STATE THAT OVER THE YEARS NORTHERN RADIO COMPANY HAS HAD THE EXPERIENCE OF SPECIFICATIONS LIMITING PROCUREMENT TO A PARTICULAR COMPANY EVEN THOUGH IT ULTIMATELY DEVELOPS THAT NORTHERN'S EQUIPMENT IS AT LEAST AS GOOD. YOU BELIEVE THIS RESULTS FROM INCOMPLETE EVALUATION, UNJUSTIFIED PREFERENCES FOR A PARTICULAR PRODUCT, OR, AS IN THIS CASE,FROM LOGISTICAL SUPPORT CONSIDERATIONS OF QUESTIONABLE VALIDITY.

WHILE THE STATUTES GOVERNING DIRECT GOVERNMENT PROCUREMENT ARE GENERALLY NOT APPLICABLE TO CONTRACTS, AWARDED BY A GOVERNMENT PRIME CONTRACTOR, WHERE THE COSTS OF THE SUBCONTRACT WILL ULTIMATELY BE BORNE BY THE GOVERNMENT UNDER THE PROVISIONS OF A COST-TYPE PRIME CONTRACT AND WHERE, AS HERE, THE PRIME CONTRACT PROVIDES FOR APPROVAL OF SUBCONTRACTS BY THE CONTRACTING OFFICER, APPROVAL SHOULD NOT BE PRO FORMA. 46 COMP. GEN. 142, 145. THE CONTRACTING OFFICER SHOULD NOT APPROVE A SUBCONTRACT ENTERED INTO BY THE PRIME CONTRACTOR IF THE EXECUTION OF SUCH SUBCONTRACT WOULD BE PREJUDICIAL TO THE INTEREST OF THE GOVERNMENT. 41 COMP. GEN. 424, 427.

IN THE INSTANT CASE, TELE-SIGNAL PROTESTED TO THE CONTRACTING OFFICER THAT IT HAD NOT BEEN ADVISED THAT OFFERS OF "EQUIVALENT" EQUIPMENT WOULD BE CONSIDERED AND HAD IT KNOWN THAT ITS PRICE WOULD HAVE BEEN $288,000 LESS. IN ADDITION, THE PROCURING ACTIVITY ADVISED THE CONTRACTING OFFICER THAT SOME OF THE EQUIPMENT INCLUDED IN THE SUBCONTRACT BEFORE HIM FOR APPROVAL SHOULD BE PROCURED FROM A PARTICULAR SOURCE. ALTHOUGH YOU QUESTION THE VALIDITY OF THIS, THERE IS NO EVIDENCE IN THE RECORD BEFORE US TO INDICATE THAT IT WAS NOT NECESSARY. WE THINK YOU WILL AGREE THAT ANY COMPETITIVE PROCUREMENT SYSTEM CAN LOGICALLY BE EXPECTED TO SERVE ITS PURPOSES ONLY IF BIDS ARE SUBMITTED ON THE SAME BASIS AND SPECIFICATIONS REFLECT THE REASONABLE REQUIREMENTS OF THE ORGANIZATION FOR WHOM THE PURCHASE HAS BEEN UNDERTAKEN. IN THESE CIRCUMSTANCES, WE FIND NO BASIS FOR CONCLUDING THAT THE CONTRACTING OFFICER'S FAILURE TO APPROVE THE ORIGINAL SUBCONTRACT WAS OTHER THAN IN THE BEST INTEREST OF THE GOVERNMENT.

ACCORDINGLY, WE WOULD NOT BE JUSTIFIED IN TAKING EXCEPTION TO THE REJECTION OF PROPOSALS AND RESOLICITATION OF THE REQUIREMENT.