B-164694, OCT. 31, 1968

B-164694: Oct 31, 1968

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CASEY AND LOOMIS: FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF THE YORK DIVISION OF BORG-WARNER CORPORATION AGAINST AWARD OF A CONTRACT TO THE CARRIER CORPORATION FOR 18 CENTRIFUGAL AIR CONDITIONERS PURSUANT TO INVITATION FOR BIDS NO. THE SUBJECT INVITATION WAS ISSUED ON MAY 24. THE FIRST STEP WAS ISSUED ON APRIL 3. 937 AND YORK'S BID WAS IN THE AMOUNT OF $1. THESE AIR CONDITIONING UNITS ARE BEING FURNISHED BY THE GOVERNMENT FOR INSTALLATION IN NINE NUCLEAR SUBMARINES AND THE FIRST TWO UNITS ARE TO BE DELIVERED TO THE SHIPBUILDER ON SEPTEMBER 15. ALTHOUGH YORK'S PROTEST AGAINST AWARD OF A CONTRACT TO CARRIER WAS MADE BEFORE AWARD. THE CONTRACTING OFFICER DETERMINED PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-407.9 (B) (3) (I) THAT AN AWARD SHOULD BE MADE PRIOR TO RESOLUTION OF THE PROTEST AS THE AIR CONDITIONERS WERE URGENTLY NEEDED AND DELIVERY WOULD BE UNDULY DELAYED UNLESS AN IMMEDIATE AWARD WAS MADE.

B-164694, OCT. 31, 1968

TO COUNIHAN, CASEY AND LOOMIS:

FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF THE YORK DIVISION OF BORG-WARNER CORPORATION AGAINST AWARD OF A CONTRACT TO THE CARRIER CORPORATION FOR 18 CENTRIFUGAL AIR CONDITIONERS PURSUANT TO INVITATION FOR BIDS NO. N00024-68-B-7753, ISSUED BY THE UNITED STATES NAVY.

THE SUBJECT INVITATION WAS ISSUED ON MAY 24, 1968, AS THE SECOND STEP OF A TWO-STEP PROCUREMENT. THE FIRST STEP WAS ISSUED ON APRIL 3, 1968, WITH A CLOSING DATE OF MAY 3, 1968. BOTH YORK AND CARRIER QUALIFIED TECHNICAL PROPOSALS ON THE FIRST STEP AND SUBMITTED BIDS ON THE SECOND STEP ON JUNE 12, 1968. CARRIER SUBMITTED THE LOW BID OF $1,329,937 AND YORK'S BID WAS IN THE AMOUNT OF $1,418,388.93. THESE AIR CONDITIONING UNITS ARE BEING FURNISHED BY THE GOVERNMENT FOR INSTALLATION IN NINE NUCLEAR SUBMARINES AND THE FIRST TWO UNITS ARE TO BE DELIVERED TO THE SHIPBUILDER ON SEPTEMBER 15, 1969. ALTHOUGH YORK'S PROTEST AGAINST AWARD OF A CONTRACT TO CARRIER WAS MADE BEFORE AWARD, THE CONTRACTING OFFICER DETERMINED PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-407.9 (B) (3) (I) THAT AN AWARD SHOULD BE MADE PRIOR TO RESOLUTION OF THE PROTEST AS THE AIR CONDITIONERS WERE URGENTLY NEEDED AND DELIVERY WOULD BE UNDULY DELAYED UNLESS AN IMMEDIATE AWARD WAS MADE. THEREFORE, CARRIER WAS AWARDED THE CONTRACT ON JULY 15, 1968, AFTER NOTIFICATION TO OUR OFFICE.

IT IS REPORTED THAT MOST OF THE PRESENT NUCLEAR SUBMARINES ARE EQUIPPED WITH ONE LITHIUM BROMIDE AIR CONDITIONER AND TWO CENTRIFUGAL AIR CONDITIONERS. WITH THE EXCEPTION OF ONE UNIT, ALL OF THE LITHIUM BROMIDE UNITS HAVE BEEN MANUFACTURED BY CARRIER AND ALL OF THE CENTRIFUGAL UNITS HAVE BEEN MANUFACTURED BY YORK. THE SPECIFICATIONS FOR THE CENTRIFUGAL UNITS WERE REVISED ABOUT TWO YEARS AGO AND AN EFFORT WAS THEN MADE TO GENERATE COMPETITION BY MEANS OF TWO-STEP FORMAL ADVERTISING. BOTH YORK AND CARRIER SUBMITTED ACCEPTABLE TECHNICAL PROPOSALS. HOWEVER, CARRIER DID NOT SUBMIT A BID ON THE SECOND STEP OF THAT PROCUREMENT AND YORK WAS AWARDED A CONTRACT FOR 12 UNITS IN 1966. CARRIER REPORTEDLY DID NOT SUBMIT A BID AS ITS PRODUCTION CAPABILITY WAS FULLY ENGAGED. HOWEVER, IN JANUARY 1968, CARRIER ADVISED THAT ITS CAPACITY HAD BEEN EXPANDED AND EXPRESSED AN INTEREST IN ANY FUTURE PROCUREMENTS OF THE UNITS. CONSEQUENTLY, CARRIER WAS FURNISHED A PROPOSAL FOR THE SUBJECT PROCUREMENT.

YOU PROTEST THE AWARD OF A CONTRACT TO CARRIER ON TWO GROUNDS. FIRST, YOU CONTEND THAT ALTHOUGH CARRIER'S BID IS APPROXIMATELY $88,000 LESS THAN YORK'S BID, IT WILL RESULT IN GREATER OVERALL COST AND, THEREFORE, IS NOT THE MOST ADVANTAGEOUS TO THE GOVERNMENT. SECOND, YOU CONTEND THAT THE TREMENDOUS TECHNICAL, SCIENTIFIC AND ENGINEERING PROBLEMS, AS WELL AS THE REQUIRED LEVEL OF PERFORMANCE AND EXTREMELY DIFFICULT TESTING PROCEDURES, PRESENT ALMOST INSURMOUNTABLE OBSTACLES TO TIMELY PERFORMANCE BY A FIRM NOT HAVING THE EXPERIENCE IN PRODUCING THE CENTRIFUGAL UNIT THAT YORK HAS.

THE ARGUMENT THAT AN AWARD TO CARRIER WILL RESULT IN GREATER OVERALL COST IS BASED ON THE PREMISE THAT SINCE ALL CENTRIFUGAL AIR CONDITIONING SYSTEMS PRESENTLY IN USE ON SUBMARINES HAVE BEEN BUILT AND SUPPLIED BY YORK, ANOTHER MANUFACTURER'S SYSTEM WILL REQUIRE THE INTRODUCTION OF NEW PARTS AND ADDITIONAL EXPENDITURES FOR TRAINING AND INSTRUCTION OF NAVY PERSONNEL. YOU CONTEND THAT A CONSERVATIVE COST FIGURE FOR INTRODUCING THE APPROXIMATELY 99 NEW PARTS IN THE FEDERAL SUPPLY SYSTEM WILL BE $148,500. IN ADDITION, YOU STATE THAT IT WILL BE NECESSARY TO PURCHASE A MINIMUM OF $104,285.32 IN SPARE AND REPLACEMENT PARTS. FURTHER, YOU POINT OUT THAT THESE COSTS DO NOT TAKE INTO ACCOUNT THE INVENTORY OF EXISTING PARTS WHICH WILL GO UNUSED OR THE UNCALCULABLE COSTS OF SAFETY, EFFICIENCY, PERFORMANCE AND DISTRIBUTION OF THE NEW PARTS.

YOU ALSO CONTEND THAT THERE WILL BE UNDETERMINABLE REDESIGN COSTS AND POSSIBLE DELAY IN COMPLETION OF THE SUBMARINES AS A RESULT OF THE AWARD TO CARRIER BECAUSE THE SUBMARINE CONTRACTOR HAD ALREADY WRITTEN THE YORK UNIT INTO THE SPECIFICATIONS. IN ADDITION TO THE FOREGOING COSTS, YOU CONTEND THAT THE COSTS OF TRAINING AND INSTRUCTING NAVY PERSONNEL WILL BE CONSIDERABLE AND IT WILL BE NECESSARY TO EXPEND $184,841.98 FOR CARRIER TRAINING EQUIPMENT. WHEN ALL OF THE ABOVE COSTS ARE CONSIDERED, IT IS YOUR POSITION THAT AN AWARD TO CARRIER WILL COST THE GOVERNMENT $349,225.37 MORE THAN AN AWARD TO YORK.

IN SUPPORT OF YOUR ARGUMENT THAT THESE COST FACTORS SHOULD HAVE BEEN TAKEN INTO CONSIDERATION IN EVALUATING THE BIDS, YOU POINT OUT THAT ON AUGUST 7, 1968, THE FIRST STEP OF A TWO-STEP PROCUREMENT FOR NINE LITHIUM BROMIDE AIR CONDITIONERS WAS ISSUED AND THAT IT PROVIDES FOR NEW PARTS PENALTY CLAUSES IN THE AMOUNT OF $219 FOR EACH NEW ALLOWANCE PARTS LIST AND $1,100 FOR EACH PART ASSIGNED A FEDERAL STOCK NUMBER. YOU POINT OUT THAT IF THIS PROVISION WAS APPLICABLE TO THE SUBJECT PROCUREMENT, AND THE CARRIER BID INCLUDED 100 NEW PARTS, THERE WOULD BE OVER $100,000 IN ADDITIONAL COSTS TO BE ADDED TO CARRIER'S BID PRICE. YOU CONTEND THAT TO INTRODUCE THESE COST FACTORS IN THE LITHIUM BROMIDE PROCUREMENT WHEN THEY WERE NOT INCLUDED IN THE CENTRIFUGAL PROCUREMENT IS AN UNFAIR IMPEDIMENT TO YORK'S ABILITY TO SUCCESSFULLY COMPETE.

IT IS THE NAVY'S POSITION THAT ALTHOUGH THERE WILL BE COSTS NOT INCLUDED IN THE CONTRACT PRICE ASSOCIATED WITH USE OF THE CARRIER UNITS RATHER THAN THE YORK UNITS, THEY WERE NOT PROPERLY FOR CONSIDERATION IN EVALUATING THE BIDS AS THE INVITATION DID NOT SO PROVIDE. FURTHERMORE, THE NAVY SAYS THAT THESE ADDITIONAL COSTS WILL NOT EXCEED $75,000, WHICH IS SOME $13,000 BELOW THE DIFFERENCE BETWEEN THE BIDS. THEY CONTEND THAT THERE IS NO NECESSITY TO REDESIGN THE SUBMARINE MACHINERY SPACE TO ACCOMMODATE THE CARRIER EQUIPMENT AS THE SPECIFICATIONS REQUIRE THAT THE UNITS BE EXTERNALLY CONFIGURED SO AS TO BE INTERCHANGEABLE WITH THE EQUIPMENT PRODUCED BY YORK. IT IS REPORTED THAT THE TECHNICAL ASPECTS OF CARRIER'S BEING ABLE TO ACHIEVE THE REQUIRED INTERCHANGEABILITY WERE EXPLORED AND SATISFACTORILY RESOLVED.

THE NAVY STATES THAT THE REAL OR LIFE CYCLE COST METHOD OF EVALUATION WAS NOT USED IN THE SUBJECT INVITATION AS REALISTIC AND QUANTITATIVE FACTORS FOR SUCH COSTS HAD NOT BEEN FULLY DEVELOPED AT THE TIME OF ISSUANCE ON MAY 24, 1968, ALTHOUGH THEY WERE THEN IN THE PROCESS OF BEING DEVELOPED. HOWEVER, IT IS REPORTED THAT BY THE TIME THE FIRST STEP OF THE LITHIUM BROMIDE PROCUREMENT WAS INITIATED ON AUGUST 7, 1968, AT LEAST TWO FACTORS OF REAL OR LIFE CYCLE COSTS HAD BEEN DEVELOPED. THEREFORE, THE CONTRACT PRICE ADJUSTMENT (CPA) PROVISION YOU REFER TO WAS INCLUDED. ACCORDING TO THE NAVY, THE CPA IS AN APPROPRIATE TOOL FOR BALANCING THE INTERESTS OF BOTH THE GOVERNMENT AND COMPETITION, INCLUDING THE PREVIOUS SUPPLIER AND A POTENTIAL NEW SUPPLIER, WITH RESPECT TO THE LOWEST OVERALL REAL COST FOR EACH NEW ALLOWANCE PARTS LIST THAT HAS TO BE ISSUED AND FOR EACH NEW FEDERAL STOCK NUMBER THAT IS REQUIRED. IN ADDITION, THE LATEST INVITATION REQUIRES THE BIDDERS TO INCLUDE A COST FACTOR FOR TRAINING MATERIALS IN THEIR BID PRICE.

THE NAVY HAS FURNISHED THE FOLLOWING INFORMATION WITH REGARD TO ITS ESTIMATE THAT THE REAL OR LIFE CYCLE COSTS WILL BE APPROXIMATELY $75,000 AS OPPOSED TO YOUR ASSERTION OF ALMOST $350,000. IT IS THE NAVY'S POSITION THAT, CONTRARY TO YOUR ASSUMPTION, ONLY A SMALL MINORITY OF THE 98 OR 99 CARRIER PARTS WILL REQUIRE NEW FEDERAL STOCK NUMBERS. THE NAVY SAYS THAT THE BIG MAJORITY OF THE CARRIER PARTS HAVE ALREADY BEEN GIVEN FSN'S AS THEY HAVE BEEN USED IN OTHER EQUIPMENT CARRIER HAS PREVIOUSLY FURNISHED. THEY DO NOT STATE WHAT PART OF THE $75,000 ESTIMATE IS ATTRIBUTABLE TO THIS FACTOR.

THE NAVY HAS NOT INCLUDED ANY FIGURE IN ITS ESTIMATE FOR SPARE AND REPLACEMENT PARTS. THE NAVY SAYS THAT IT WILL NOT BE NECESSARY TO PURCHASE SOME OF THE CARRIER PARTS BECAUSE, AS NOTED ABOVE, THEY ALREADY ARE IN STOCK. IT IS ALSO THE NAVY'S POSITION THAT EVEN IF IT WAS NECESSARY TO PURCHASE AN INVENTORY OF ALL 98 OR 99 CARRIER PARTS, THIS WOULD NOT REPRESENT A LIFE CYCLE COST WHICH COULD HAVE BEEN AVOIDED BY AN AWARD TO YORK. THIS IS SO, THE NAVY SAYS, BECAUSE IT WOULD ALSO BE NECESSARY TO STOCK ADDITIONAL YORK INVENTORY FOR THE ADDITIONAL 18 UNITS AS THE PRESENT INVENTORY OF YORK PARTS IS NEEDED TO SUPPORT THE YORK EQUIPMENT ALREADY IN USE.

WITH REGARD TO TRAINING COSTS, THE NAVY CONTENDS THAT IT WILL ONLY BE NECESSARY TO SUPPLEMENT ITS PRESENT TRAINING PROGRAM AND TRAINING MATERIALS, THE ESTIMATED COST OF WHICH IS FAR BELOW YOUR FIGURE. THE NAVY POINTS OUT THAT IT HAS BEEN BUYING BOTH YORK AND CARRIER AIR CONDITIONING EQUIPMENT FOR OVER 30 YEARS AND ITS TRAINING PROGRAMS HAVE BEEN ORIENTED TO BOTH CARRIER AND YORK EQUIPMENT. MOREOVER, IT IS STATED THAT MUCH OF THE TRAINING MATERIALS PRESENTLY IN USE CAN READILY BE UTILIZED FOR TRAINING ON CENTRIFUGAL TYPES OF AIR CONDITIONING PLANTS WHETHER BUILT BY CARRIER OR YORK. IT IS ALSO REPORTED THAT SOME YEARS AGO THE NAVY PURCHASED A SET OF TRAINING EQUIPMENT AND AIDS WHICH ARE COMPARABLE TO WHAT IS EXPECTED WILL BE NEEDED IN CONNECTION WITH THE 18 CENTRIFUGAL AIR CONDITIONERS AND COMPARABLE TO WHAT IS BEING PROVIDED FOR IN THE LITHIUM BROMIDE PROCUREMENT. THE NAVY TOOK THE PRICE PAID FOR THIS EQUIPMENT, FACTORED IT FOR INCREASE IN COST OVER THE INTERVENING PERIOD, DOUBLED THE RESULT BECAUSE TWO SETS ARE NOW REQUIRED, AND USED THE RESULTING FIGURE AS THEIR ESTIMATE FOR THE ADDED COST FOR TRAINING MATERIAL BY REASON OF AN AWARD TO CARRIER. ALTHOUGH STATING THE ESTIMATE IS FAR BELOW YOUR FIGURE, THE NAVY HAS NOT DISCLOSED THE AMOUNT BECAUSE THIS WOULD REVEAL THE GOVERNMENT'S ESTIMATE FOR THE TWO SETS OF TRAINING MATERIALS CALLED FOR IN THE LITHIUM BROMIDE PROCUREMENT.

THE STATUTE GOVERNING THIS PROCUREMENT, 10 U.S.C. 2305 (C), PROVIDES THAT AWARD SHALL BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. WE HAVE HELD, WITH CERTAIN EXCEPTIONS NOT HERE APPLICABLE, THAT PROVISION TO REQUIRE AWARD TO THE LOW BIDDER. 47 COMP. GEN. 233. FURTHER, THIS OFFICE HAS RECOGNIZED, AS A CARDINAL RULE OF COMPETITIVE BIDDING PROCEDURES, THAT THE INVITATION FOR BIDS MUST ADVISE BIDDERS OF ANY FACTOR OTHER THAN BID PRICE WHICH IS TO BE CONSIDERED IN DETERMINING THE LOW BIDDER. 45 COMP. GEN. 433; 47 ID. 233, 235. THIS PRINCIPLE IS RECOGNIZED IN ARMED SERVICES PROCUREMENT REGULATION 2-201 (A) (XX).

THE SUBJECT INVITATION DID NOT PROVIDE FOR THE CONSIDERATION OF FACTORS OTHER THAN THE BID PRICE. WITH REGARD TO THE NAVY'S REASON FOR NOT INCLUDING SUCH COST FACTORS IN THE EVALUATION FORMULA, WE HAVE HELD THAT COSTS WHICH MAY BE DIFFICULT TO QUANTIFY SHOULD NOT BE USED AS A FACTOR IN BID EVALUATION EXCEPT AFTER THOROUGH STUDY AND CONSIDERATION, ESTABLISHMENT OF PROPER CRITERIA FOR THE USE OF THE FACTOR, AND SPECIFIC NOTICE TO THE BIDDERS IN THE INVITATION. 45 COMP. GEN. 433, 435. IN THE CIRCUMSTANCES REPORTED HERE, IT APPEARS THAT THERE IS NO BASIS FOR OUR OFFICE TO TAKE EXCEPTION TO THE NAVY'S POSITION THAT REALISTIC AND QUANTITIATIVE FACTORS HAD NOT BEEN SUFFICIENTLY DEVELOPED AT THE TIME THE INVITATION WAS ISSUED.

REMAINING FOR CONSDIERATION IS YOUR CONTENTION THAT CARRIER IS NOT CAPABLE OF TIMELY PERFORMANCE. THE NAVY REPORTS THAT ALTHOUGH THERE WAS NO QUESTION ABOUT CARRIER'S CAPABILITY TO ULTIMATELY DELIVER ACCEPTABLE 150 TON CENTRIFUGAL AIR CONDITIONERS, THERE WAS SOME QUESTION ABOUT ITS ABILITY TO DO SO WITHIN THE TIGHT DELIVERY SCHEDULE REQUIRED. THEREFORE, A PREAWARD SURVEY WAS CONDUCTED AT CARRIER'S PLANT ON JULY 8 AND 9, 1968, BY THE DEFENSE CONTRACT ADMINISTRATION SERVICE OFFICE, SYRACUSE, NEW YORK, IN CONJUNCTION WITH PERSONNEL FROM THE NAVAL SHIP ENGINEERING CENTER AND THE NAVAL SHIP SYSTEMS COMMAND. THE SURVEY TEAM CONCLUDED THAT CARRIER POSSESSED THE TECHNICAL AND PRODUCTION CAPABILITY TO PRODUCE THE AIR CONDITIONERS IN ACCORDANCE WITH THE TERMS OF THE INVITATION, INCLUDING THE DELIVERY SCHEDULE, AND RECOMMENDED AWARD TO IT.

IT HAS LONG BEEN OUR POSITION THAT IT IS NEITHER THE PROVINCE NOR THE INTENTION OF OUR OFFICE TO DETERMINE THE RESPONSIBILITY OF PROSPECTIVE CONTRACTORS, SUCH DETERMINATION BEING A QUESTION OF FACT PRIMARILY FOR DETERMINATION BY THE CONTRACTING OFFICER CONCERNED. 45 COMP. GEN. 4; 43 ID. 257; 38 ID. 131. IN THESE AND OTHER DECISIONS WE HAVE TAKEN THE POSITION THAT SUCH A DETERMINATION NECESSARILY INVOLVES THE EXERCISE OF A CONSIDERABLE RANGE OF DISCRETION AND JUDGMENT, WHICH SHOULD NOT BE DISTURBED BY OUR OFFICE IN THE ABSENCE OF CONVINCING EVIDENCE THAT THE DETERMINATION WAS ARBITRARY, CAPRICIOUS, OR NOT BASED UPON SUBSTANTIAL EVIDENCE. IN THE INSTANT CASE WE FIND NO SUCH EVIDENCE AND MUST, THEREFORE, ACCEPT THE AFFIRMATIVE DETERMINATION OF RESPONSIBILITY. ACCORDINGLY, WE FIND NO BASIS UPON WHICH WE MAY PROPERLY DISTURB THE AWARD TO CARRIER.