B-164633, OCT. 14, 1968

B-164633, OCT. 14, 1968

TO GADSBY AND HANNAH:

REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF LAVOIE LABORATORIES, DIVISION OF SPEDCOR ELECTRONICS, INCORPORATED, CONCERNING THE AWARD OF A CONTRACT UNDER IFB N00039-68-B-2028 ISSUED BY THE NAVAL ELECTRONIC SYSTEMS COMMAND, WASHINGTON, D.C., FOR QUANTITIES OF AN/USM-117 OSCILLOSCOPES AND ASSOCIATED PARTS.

THE ITEMS SPECIFIED ON THIS PROCUREMENT ARE QUALIFIED PRODUCTS. THE INVITATION ACCORDINGLY RESTRICTED AWARD TO ITEMS WHICH HAD BEEN TESTED AND WERE QUALIFIED FOR INCLUSION ON THE QUALIFIED PRODUCTS LIST (QPL) AT THE TIME SET FOR OPENING OF BIDS. SEE ASPR 1-1107.2 (A). BIDS WERE REQUESTED ON THE BASIS OF ALTERNATE "A" (SINGLE-YEAR REQUIREMENTS) AND ALTERNATE "B" (MULTI-YEAR REQUIREMENTS), WITH THE STIPULATION THAT AWARD WOULD BE MADE TO ONLY ONE OFFEROR FOR ALL THE UNITS ON WHICHEVER ALTERNATE BID WAS LOWEST.

THE FOLLOWING BIDS WERE OPENED ON THE SCHEDULED DATE OF MAY 28, 1968:

ALTERNATE "A" ALTERNATE "B"

BIDDER SINGLE YEAR MULTI YEAR

------ ----------- ---------- SPEDCOR ELECTRONICS, INCORPORATED $1,340,088 $2,484,838 GENERAL ATRONICS $1,515,399 $3,151,815 THIRD BIDDER $1,735,510 ----

THE NAVY PROPOSES TO REJECT SPEDCOR'S LOW BID AND TO MAKE AWARD TO GENERAL ATRONICS ON ITS ALTERNATE BID "A" ($1,515,399). ITS REASON FOR REJECTING SPEDCOR IS THAT LAVOIE LABORATORIES WAS THE FIRM ORIGINALLY PLACED ON THE QPL FOR THE USM-117 OSCILLOSCOPES AND SPEDCOR, BY MERELY PURCHASING LAVOIE LABORATORIES' FACILITIES AFTER LAVOIE'S BANKRUPTCY, HAS NOT QUALIFIED FOR INCLUSION ON THE QPL.

IT APPEARS THAT LAVOIE LABORATORIES, INCORPORATED, WAS GRANTED QUALIFICATION FOR THE USM-117 OSCILLOSCOPE IN MAY 1964. IT WAS ALSO GRANTED QUALIFICATION AT THE SAME TIME FOR CERTIN OF THE COMPONENTS AND ACCESSORIES OF THE USM-117 (BUT NOT INCLUDING THE MX-2995 DUAL PREAMPLIFIER). THE QUALIFICATION APPLIED TO LAVOIE'S MORGANVILLE, NEW JERSEY PLANT, AND WAS GRANTED UNDER THE SAME SPECIFICATIONS WHICH GOVERN THE INSTANT PROCUREMENT.

THE PRESENT INVITATION WAS ISSUED ON APRIL 26, 1968. ON MAY 27, 1968 (ONE DAY BEFORE BID OPENING), SPEDCOR SENT TELEGRAMS TO THE NAVY ELECTRONIC SYSTEMS COMMAND, WASHINGTON, D.C., STATING THAT IT HAD ACQUIRED THE TOTAL ASSETS AND FACILITIES OF LAVOIE LABORATORIES, INCORPORATED; HAD CONTINUED THE OPERATION OF THE FACILITY AS THE LAVOIE LABORATORIES DIVISION OF SPEDCOR ELECTRONICS, INCORPORATED; AND THAT THE UNITS WHICH IT PROPOSED TO SUPPLY WOULD BE IDENTICAL TO THOSE PREVIOUSLY SUPPLIED BY LAVOIE LABORATORIES. ON MAY 29, 1968, THE ELECTRONIC SYSTEMS COMMAND RESPONDED STATING THAT THE LAVOIE PRODUCTS WOULD REMAIN ON THE QPL'S BUT MODIFIED TO REFERENCE LAVOIE LABORATORIES DIVISION OF SPEDCOR ELECTRONICS, INCORPORATED, IN LIEU OF LAVOIE LABORATORIES, INCORPORATED. SOME CONFUSION DEVELOPED AS TO THE INTENDED MEANING OF THE MAY 29 NAVY DISPATCH, BECAUSE SPEDCOR ACTUALLY SENT TWO TELEGRAMS ON MAY 29, THE LATER ONE REQUESTING QPL STATUS ON THE 117 OSCILLOSCOPE, THE FIRST ONE REQUESTING QPL STATUS FOR THE MX 7006/U PROBE, AN ACCESSORY OF THE USM-140 OSCILLOSCOPE AND ALSO USED AS AN "OR EQUAL" ITEM FOR THE 117 OSCILLOSCOPE SPECIFICATION. (THERE WAS A PENDING NAVY PROCUREMENT FOR A QUANTITY OF THESE PROBES.) WE SHALL DISCUSS THIS MAY 29 NAVY LETTER AGAIN LATER.

IN ANY EVENT, A QUESTION AROSE WITHIN THE NAVY WHETHER SPEDCOR'S LACK OF QPL STATUS ON THE DUAL TRACE PREAMPLIFIERS (ITEM 4, CALLING FOR 3 UNITS EACH) PREVENTED AWARD TO THAT FIRM. YOU PROTESTED IN BEHALF OF SPEDCOR CONTENDING THAT SPEDCOR'S QUALIFICATION TO PRODUCE THE OSCILLOSCOPE INCLUDED ALSO QUALIFICATION TO PRODUCE OR MANUFACTURE THE MX-2995 COMPONENT. AS YOU KNOW, ON JUNE 26, 1968, GENERAL ATRONICS, THE SECOND LOW BIDDER, PROTESTED THAT SPEDCOR WAS NOT A QUALIFIED SUPPLIER FOR EVEN THE OSCILLOSCOPE BECAUSE (1) LAVOIE HAD NEVER PRODUCED ANY USM-117'S FOR ANY DEFENSE AGENCIES SINCE IT HAD QUALIFIED IN 1964; AND (2) AFTER LAVOIE'S BANKRUPTCY, SPEDCOR HAD DISPOSED OF CERTAIN PARTS OF LAVOIE'S PLANT INCLUDING FABRICATION AND MACHINE SHOP PARTS, AND CERTAIN KEY LAVOIE PERSONNEL INVOLVED IN THE QUALIFICATION OF LAVOIE FOR THE OSCILLOSCOPE ARE NOT AND HAVE NOT BEEN EMPLOYED BY SPEDCOR.

IN RESPONSE TO THESE PROTESTS THE ELECTRONIC SYSTEMS COMMAND UNDERTOOK A REVIEW OF SPEDCOR'S QUALIFICATIONS FOR THE 117 OSCILLOSCOPE. A TEAM OF ENGINEERS WAS SENT TO THE MORGANVILLE PLANT OF THE LAVOIE DIVISION ON JUNE 27, 1968. THEY REPORTED THAT:

"/1) LAVOIE DIVISION OF SPEDCOR HAS, AT MOST, PART OF ONE OF THE MODELS OF THE AN/USM-117 THAT WERE USED TO QUALIFY FOR THE RELEVANT QUALIFIED PRODUCTS LIST.

"/2) THREE OF THE KEY MEN WHO HELPED DESIGN THE AN/USM-117 AND WHO WERE INSTRUMENTAL IN OBTAINING QPL LISTING, NO LONGER ARE EMPLOYED BY LAVOIE DIVISION.' THEY STATED THAT "ALTHOUGH SPEDCOR COULD PROBABLY PRODUCE THIS EQUIPMENT AFTER FIRST BUILDING PRODUCTION PROTOTYPES, IT WOULD BE A VIRTUAL MIRACLE IF THEY COULD MEET DELIVERY REQUIREMENTS OF SEVEN MONTHS AFTER CONTRACT. ESTIMATE OF THEIR DELIVERY WOULD BE CLOSER TO 14 TO 16 MONTHS".

ON JULY 19, 1968, THE NAVY WROTE SPEDCOR ADVISING THAT ITS PRIOR DISPATCH OF MAY 29, 1968, WAS NEVER INTENDED TO EXTEND PRODUCT QUALIFICATION TO SPEDCOR FOR ANY LAVOIE PRODUCT OTHER THAN THE MX 7006/U PROBE. BUT APPARENTLY THE NAVY HAD SOME QUESTION WHETHER ITS JULY 19 LETTER DISPOSED OF THE MATTER, FOR THEY LATER NOTIFIED YOU THAT SPEDCOR IN FACT HAD BEEN REMOVED FROM THE SUBJECT QPL ON THE BASIS OF SECTION 111.1 (D) OF SD-6 ENTITLED "PROVISIONS GOVERNING QUALIFICATIONS". THAT SECTION PROVIDES FOR REMOVAL FOR THE REASON THAT: "THE CONDITIONS UNDER WHICH QUALIFICATION WAS GRANTED HAVE BEEN VIOLATED". SECTION 111.2 OF SD-6 FURTHER PROVIDES THAT "IF REMOVAL IS FOR REASONS * * * (D) OF 111.1, THE MANUFACTURER WILL BE INVITED TO FURNISH COMMENT".

IT IS CLEAR, IN ANY EVENT, THAT BY JULY 1968, THE NAVAL ELECTRONIC SYSTEMS COMMAND, AFTER INVESTIGATING SPEDCOR'S LAVOIE DIVISION PLANT, HAD CONCLUDED THAT THE BIDDER WAS NOT A QUALIFIED SOURCE FOR THE INSTANT PROCUREMENT. YOU THEN REQUESTED AND WERE GRANTED AN OPPORTUNITY TO COMMENT ON SPEDCOR'S QUALIFICATIONS. IN THIS CONNECTION YOU STATE THAT UNDER A COURT ORDER, A COPY OF WHICH WAS FURNISHED WITH SPEDCOR'S BID, SPEDCOR ACQUIRED ALL OF THE ASSETS AND FACILITIES OF LAVOIE; THAT SPEDCOR CONTINUES TO OPERATE AND MANAGE THE LAVOIE FACILITY, INCLUDING PROPRIETARY RIGHTS, TRADE SECRETS AND CONFIDENTIAL INFORMATION; THAT LAVOIE DIVISION OF SPEDCOR IS CURRENTLY MANUFACTURING AND ENGINEERING ELECTRONIC EQUIPMENT CONSIDERABLY MORE SOPHISTICATED AND DEMANDING THAN THE SUBJECT OSCILLOSCOPE. AS FOR EMPLOYEES, YOU STATE THAT SPEDCOR HAS RETAINED OR REHIRED ALMOST ALL OF THE KEY ENGINEERS FORMERLY EMPLOYED BY LAVOIE LABORATORIES. YOU FURTHER STATE THAT SPEDCOR "HAS A COMPLETE BILL OF MATERIALS ON THE QUALIFIED PRODUCT, A SET OF MANUFACTURING DRAWINGS, A PREVIOUS INSTRUCTION BOOK AND A MODEL OF THE SCOPE WHICH WAS QUALIFICATION TESTED AND ACCEPTED BY THE NAVY".

HOWEVER, THE COMMANDER, NAVAL ELECTRONIC SYSTEMS COMMAND, ON SEPTEMBER 3, 1968, RULED AGAINST QUALIFYING SPEDCOR ON THIS PROCUREMENT. HE STATED IN PART AS FOLLOWS:

"PRIOR TO THE CESSATION OF OPERATIONS IN 1966, THE QUALITY OF WORK AT LAVOIE HAD DETERIORATED TO THE POINT THAT DEFAULT ACTIONS WERE INITIATED BY THE NAVY AGAINST THE FIRM. ACTION TO WITHDRAW QPL QUALIFICATION SHOULD HAVE BEEN TAKEN AT THAT TIME AND WE CERTAINLY CANNOT HOLD THAT ANY REASONABLE QUALIFICATION EXISTED TO BE ACQUIRED.'

IT IS YOUR CONTENTION THAT THE NAVY HAS NEVER CLEARLY OR RATIONALLY SUPPORTED ITS CONCLUSION THAT SPEDCOR WAS NOT A QUALIFIED MANUFACTURER OF THE USM-117 OSCILLOSCOPE AT DATE OF BID OPENING. YOU SAY IT IS NOT CERTAIN WHETHER NAVY IS PROPOSING TO REJECT SPEDCOR SOLELY BECAUSE THEY DENY THE BIDDER'S STATUS AS A QPL SUPPLIER OR RATHER BECAUSE THEY DOUBT THE BIDDER'S CAPACITY TO MANUFACTURE AND DELIVER THE ITEMS AS REQUIRED. YOU STATE THAT IF THE QUESTION IS ONE OF QPL STATUS, THEN NAVY "SHOULD NOT BE ALLOWED, IN JULY OF 1968, RETROACTIVELY TO REVERSE ITS EARLIER QPL DECISION OF MARCH 1964 AND MAY 1968 PRIMARILY ON THE BASIS OF A -FEELING- OR -QUESTIONING- WHICH THEY HAVE CONCERNING THE LOW BIDDER'S ABILITY TO MEET THE DELIVERY SCHEDULE". IT IS YOUR POSITION THAT THE NAVY CANNOT REMOVE SPEDCOR'S LAVOIE DIVISION FROM THE QPL ON THE GROUNDS OF ANY LACK OF FAITH WHICH IT MAY HAVE IN SPEDCOR'S ABILITY TO MEET THE DELIVERY SCHEDULE, SINCE THIS IS A QUESTION OF CAPACITY FOR THE CONTRACT AND CAN BE RESOLVED BY THE SBA CERTIFICATE OF COMPETENCY PROCEDURE.

WE DO NOT BELIEVE THAT THE SBA CERTIFICATE OF COMPETENCY PROCEDURE IS APPLICABLE TO THIS PROCUREMENT. THE USM-117 OSCILLOSCOPE IS A QUALIFIED PRODUCT. AS DEFINED IN ASPR 1-1101 (B), A ,QUALIFIED PRODUCT" IS A PRODUCT WHICH, IN ACCORDANCE WITH THE SPECIFICATION, HAS BEEN SUBJECTED TO EXAMINATION AND TESTS AND HAS BEEN FOUND TO SATISFY ALL REQUIREMENTS OF THE APPLICABLE SPECIFICATION. THE RESULTS OF SUCH TESTING AND APPROVAL ARE SET FORTH IN A QUALIFIED PRODUCTS LIST. THE LIST IDENTIFIES THE SPECIFICATION, MANUFACTURER, THE ITEM BY NUMBER OR NAME, PLACE OF MANUFACTURE, AND THE TEST REPORT INVOLVED. QPL'S ARE MAINTAINED ON PRODUCTS WHICH REQUIRE TESTING AND APPROVAL IN ADVANCE OF THEIR PROCUREMENT IN ORDER FOR THE GOVERNMENT TO OBTAIN A PRODUCT OF REQUISITE QUALITY WITHIN A REASONABLE TIME. ASPR 1-1101 (A); 1-1103. WHENEVER A QUALIFIED PRODUCT IS TO BE PROCURED AS AN END ITEM UNDER AN INVITATION, ONLY BIDS OFFERING PRODUCTS WHICH ARE QUALIFIED FOR LISTING ON THE APPLICABLE QPL AT THE TIME SET FOR OPENING OF BIDS MAY BE CONSIDERED IN MAKING AWARDS. ASPR 1-1107.1 (A). ALTHOUGH THE USE OF THE QPL PROCEDURE DOES REPRESENT A RESTRICTION ON COMPETITION AND DOES TO SOME DEGREE RESTRICT THE SCOPE OF THE CERTIFICATE OF COMPETENCY PROCEDURE, WE GAVE OUR APPROVAL TO THE ESTABLISHMENT OF THE QPL PROCEDURE ON THE BASIS THAT AN ACCEPTABLE PRODUCT COULD NOT OTHERWISE BE EXPEDITIOUSLY OBTAINED. COMP. GEN. 809; 38 ID. 357; 43 ID. 465, 474.

THUS, THE QUESTION HERE IS SOLELY ONE OF QPL STATUS. SPEDCOR WAS NOT LISTED ON THE APPLICABLE QPL AT THE TIME OF BID OPENING. BUT THE BIDDER WAS THE NEW OWNER OF A PLANT WHICH HAD BEEN QUALIFIED UNDER A FORMER MANUFACTURER (LAVOIE LABORATORIES), AND IT REQUESTED TO BE LISTED ON THE QPL IN LIEU OF THE FORMER MANUFACTURER. AT FIRST, PERHAPS, THE NAVY MAY HAVE BEEN WILLING TO EXTEND QPL STATUS TO SPEDCOR BASED ON LAVOIE LABORATORIES' PRIOR QUALIFICATION. ADDITIONAL FACTS BEARING ON THE MATTER OF SPEDCOR'S QUALIFICATION CAME TO NAVY'S ATTENTION DURING THIS PRE-AWARD PERIOD, HOWEVER, AND IT IS NAVY'S OPINION AT THIS TIME THAT THE BIDDER SHOULD NOT BE INCLUDED ON THE QPL WITHOUT UNDERGOING QUALIFICATION TESTING. WE FIND NO BASIS TO QUESTION THIS DETERMINATION.

AS YOU KNOW, THE MATTER OF EXTENDING PRODUCT QUALIFICATION TO A NEW OWNER HAS BEEN CONSIDERED BY OUR OFFICE BEFORE. IN B-161414 DATED SEPTEMBER 5, 1967, WE CONSIDERED A PROTEST BASED ON AN AIR FORCE DETERMINATION TO EXTEND PRODUCT QUALIFICATION UNDER CIRCUMSTANCES SOMEWHAT SIMILAR TO THIS CASE. THE PROTESTING BIDDER CONTENDED THAT THE REGULATIONS DID NOT AUTHORIZE EXTENDING PRODUCT QUALIFICATION TO THE NEW OWNER OF THE PLANT WITHOUT REQUIRING HIM TO PRODUCE AND SUBMIT HIS PRODUCT FOR TESTING AND ACCEPTANCE BEFORE THE TIME OF BID OPENING. ALTHOUGH WE FOUND THAT THE QPL REGULATIONS DID NOT SPECIFICALLY PROVIDE FOR SUCH A SITUATION, WE AGREED WITH THE AIR FORCE THAT A CHANGE IN MANAGEMENT AT A PLANT PRODUCING A QUALIFIED PRODUCT NEED NOT RESULT IN A LOSS OF PRODUCT QUALIFICATION AT THE PLANT. WE SUSTAINED THE AIR FORCE'S DETERMINATION TO EXTEND PRODUCT QUALIFICATION TO THE NEW OWNER. AT THE SAME TIME, IN A LETTER TO THE SECRETARY OF THE AIR FORCE, WE NOTED THAT THE PLANT IN QUESTION HAD NOT PRODUCED THE REQUIRED UNITS (TEST SET, GENERATOR, TACHOMETER TYPE TTV- 27/E) FOR A NUMBER OF YEARS, AND WE SUGGESTED THAT HERE MIGHT BE A NEED TO MAINTAIN A CLOSER SURVEILLANCE ON QPL-S.

IT APPEARS THE DEPARTMENT OF DEFENSE QPL REGULATIONS HAVE NOT BEEN AMENDED TO CLARIFY THE SITUATION OF BIDDERS SUCH AS SPEDCOR. IN THE ABSENCE OF A SPECIFIC REGULATION, WE THINK IT IS REASONABLE FOR THE ADMINISTRATIVE OFFICE TO DECIDE THE QUESTION OF QPL STATUS IN THE MANNER IT WAS DECIDED BY THE NAVY. AN INVESTIGATION OF THE SPEDCOR FACILITY WAS MADE AND, IN ADDITION, YOU WERE GIVEN THE OPPORTUNITY TO COMMENT TO THE NAVY ON SPEDCOR'S QUALIFICATIONS. IN THE CIRCUMSTANCES, WE MUST DENY YOUR PROTEST AGAINST THE PROPOSED AWARD TO GENERAL ATRONICS.