B-164756, APR. 3, 1969

B-164756: Apr 3, 1969

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TO CLINTON ENGINES CORPORATION: FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF DECEMBER 6. THE CLOSING DATE OF THE RFP WAS JULY 18. THE PURPOSE OF THE PROCUREMENT WAS TO ESTABLISH. PROPOSALS WERE REQUESTED ON TWO BASES. OFFERORS WERE ADVISED IN THE RFP SOLICITATION THAT FUNDS WERE NOT PRESENTLY AVAILABLE FOR THE PROCUREMENT AND THAT THE GOVERNMENT'S OBLIGATION UNDER THE SOLICITATION WAS CONTINGENT UPON THE AVAILABILITY OF APPROPRIATED FUNDS FROM WHICH PAYMENT COULD BE MADE. PROPOSALS WERE RECEIVED FROM THE FRUEHAUF CORPORATION. IT IS REPORTED THAT AN AWARD TO ANY OF THE OFFERORS WAS WITHHELD BECAUSE OF LACK OF FUNDS AND FURTHER EVALUATION OF THE REQUIREMENTS AND THAT THE REMAINING OFFERORS WERE REQUESTED AT VARIOUS TIMES TO EXTEND THE PERIOD FOR ACCEPTANCE OF THEIR OFFERS.

B-164756, APR. 3, 1969

TO CLINTON ENGINES CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF DECEMBER 6, 1968, PROTESTING AGAINST THE ACTION OF THE DEPARTMENT OF THE ARMY IN AWARDING NEGOTIATED CONTRACT NO. DAAK01-69-C-3413 TO THE CHRYSLER OUTBOARD CORPORATION UNDER REQUEST FOR PROPOSALS (RFP) NO. DAAK01-67-R A360, ISSUED BY THE U.S. ARMY MOBILITY EQUIPMENT COMMAND, DIRECTORATE OF PROCUREMENT AND PRODUCTION, ST. LOUIS, MISSOURI.

THE RFP ISSUED ON MAY 26, 1967, REQUESTED PROPOSALS FOR THE PROCUREMENT OF SPECIFIED QUANTITIES OF 1-1/2, 3, AND 6 HORSEPOWER MILITARY STANDARD GASOLINE ENGINES. THE CLOSING DATE OF THE RFP WAS JULY 18, 1967. THE PURPOSE OF THE PROCUREMENT WAS TO ESTABLISH, UNDER THE NEGOTIATION AUTHORITY OF 10 U.S.C. 2304 (A) (16) AND ASPR 3-216, IN ADDITION TO THE CONTINENTAL MOTORS CORPORATION, A SECOND AND CONCURRENT PRODUCER OF SUCH ENGINES FOR CURRENT REQUIREMENTS IN THE INTEREST OF INDUSTRIAL MOBILIZATION. PROPOSALS WERE REQUESTED ON TWO BASES. ALTERNATE "A" COVERED THE ,MULTI-YEAR" REQUIREMENTS FOR THE ENGINES AND ALTERNATE "B" COVERED THE FIRST PROGRAM YEAR REQUIREMENTS. OFFERORS WERE ADVISED IN THE RFP SOLICITATION THAT FUNDS WERE NOT PRESENTLY AVAILABLE FOR THE PROCUREMENT AND THAT THE GOVERNMENT'S OBLIGATION UNDER THE SOLICITATION WAS CONTINGENT UPON THE AVAILABILITY OF APPROPRIATED FUNDS FROM WHICH PAYMENT COULD BE MADE. PROPOSALS WERE RECEIVED FROM THE FRUEHAUF CORPORATION, DETROIT ENGINE CORPORATION, LEAR SIEGLER, INC., AND YOUR FIRM. LEAR SIEGLER SUBSEQUENTLY WITHDREW ITS OFFER. IT IS REPORTED THAT AN AWARD TO ANY OF THE OFFERORS WAS WITHHELD BECAUSE OF LACK OF FUNDS AND FURTHER EVALUATION OF THE REQUIREMENTS AND THAT THE REMAINING OFFERORS WERE REQUESTED AT VARIOUS TIMES TO EXTEND THE PERIOD FOR ACCEPTANCE OF THEIR OFFERS.

ON JUNE 19, 1968, AMENDMENT 0003 TO THE RFP WAS ISSUED AND THIS AMENDMENT COMPLETELY REVISED THE RFP AND INCLUDED CHANGES IN QUANTITIES, SPECIFICATIONS, AND DRAWINGS. OFFERORS WERE REQUESTED TO SUBMIT PROPOSALS UNDER THE REVISED RFP AND ADVISED THAT THE CLOSING DATE FOR RECEIPT OF PROPOSALS WAS JULY 25, 1968. QUANTITIES FOR THE THREE SIZES OF ENGINES COVERED BY THE RFP WERE:

ALTERNATE "A"

MULTI-YEAR

SIZE QUANTITY

1-1/2 HP 15,800 EACH

3 HP 15,100 EACH

6 HP 15,100 EACH

ALTERNATE "B"

FIRST PROGRAM YEAR

SIZE QUANTITY

1-1/2 HP 5,800 EACH

3 HP 6,200 EACH

6 HP 5,100 EACH

ARTICLE 28 OF THE RFP, ENTITLED "PRODUCTION EQUIPMENT," PROVIDED THAT THE SUCCESSFUL OFFEROR MAY BE AUTHORIZED TO ACQUIRE FOR THE ACCOUNT OF THE GOVERNMENT ADDITIONAL PRODUCTION EQUIPMENT AS REQUIRED TO ESTABLISH A PLANNED PRODUCTION CAPABILITY OF 1,500 ENGINES PER MONTH ON A SINGLE-SHIFT BASIS AND 2,500 ENGINES PER MONTH ON A MULTI SHIFT BASIS. IT ALSO PROVIDED THAT THE OFFEROR SHALL INCLUDE A LIST OF ALL ITEMS HE PROPOSES TO ACQUIRE FOR THE ACCOUNT OF THE GOVERNMENT SUBJECT TO AVAILABILITY FROM THE DEFENSE INDUSTRIAL PLANT EQUIPMENT CENTER COSTING $1,000 OR MORE AND SHALL SET FORTH SEPARATELY THE ESTIMATED COST OF EACH ITEM, AND OTHER ELEMENTS OF COST SUCH AS TRANSPORTATION, INSTALLATION, AND OTHERWISE MAKING THE EQUIPMENT READY FOR USE. THE ARTICLE FURTHER PROVIDES THAT THESE COSTS WILL BE EVALUATION FACTORS AND WILL BE ADDED TO THE OFFEROR'S TOTAL PRICES.

IN RESPONSE TO THE REVISED RFP, PROPOSALS WERE RECEIVED FROM THE CHRYSLER OUTBOARD CORPORATION AND YOUR FIRM. IT IS REPORTED THAT NEGOTIATIONS WERE CONDUCTED WITH BOTH CHRYSLER AND YOUR FIRM AND THAT THE EVALUATION OF THE FINAL PROPOSALS DISCLOSED THAT CHRYSLER'S OFFER ON A MULTI-YEAR BASIS RESULTED IN THE LOWEST OVERALL COST TO THE GOVERNMENT. WHILE CHRYSLER'S PRICE FOR THE ENGINES AND ANCILLARY ITEMS AND ITS EVALUATED TRANSPORTATION COSTS WERE HIGHER THAN YOUR FIRM-S, ITS OVERALL EVALUATED COST WAS LOWER BECAUSE OF ITS LOWER ESTIMATED COST OF THE PRODUCTION EQUIPMENT TO BE ACQUIRED FOR THE ACCOUNT OF THE GOVERNMENT. ON NOVEMBER 29, 1968, A CONTRACT FOR FURNISHING ENGINES CALLED FOR UNDER ALTERNATE "A" (MULTI- YEAR) WAS AWARDED TO THE CHRYSLER OUTBOARD CORPORATION.

IN YOUR TELEGRAM SEVEN REASONS ARE GIVEN AS TO WHY YOU BELIEVE THAT THE CONTRACT IN QUESTION SHOULD HAVE BEEN AWARDED TO YOUR FIRM.

THE FIRST TWO REASONS GIVEN BY YOU IS THAT YOUR FIRM IS CLASSIFIED AS SMALL BUSINESS AND THAT ALSO YOUR FIRM IS CLASSIFIED BY THE DEPARTMENT OF LABOR AS A FIRM LOCATED IN A PERSISTENT UNEMPLOYMENT AREA. IN CONNECTION WITH THE FOREGOING, YOU REFER TO VARIOUS ARMED SERVICES PROCUREMENT REGULATION (ASPR) REVISIONS. IT IS REPORTED THAT CONSIDERATION WAS GIVEN, PRIOR TO THE ISSUANCE OF THE ORIGINAL RFP, TO THE POSSIBILITY OF MAKING THE PROCUREMENT A LABOR SURPLUS OR SMALL BUSINESS SET-ASIDE. IT WAS DETERMINED THAT THE PROCUREMENT SHOULD NOT BE SET ASIDE; HOWEVER, THE RECORD INDICATES THAT SMALL BUSINESS CONCERNS AND CONCERNS IN LABOR SURPLUS AREAS WERE GIVEN AN OPPORTUNITY TO COMPETE. IN AWARDING CONTRACTS UNDER AN UNRESTRICTIVE RFP, AS INVOLVED HERE, NO PREFERENCE IS GIVEN TO SMALL BUSINESS OR LABOR SURPLUS AREA CONCERNS. IN REGARD TO THE ASPR REVISIONS CITED BY YOU, IT IS ASSUMED THAT YOU HAVE REFERENCE TO THOSE CONTAINED IN ITEM II,"PLACEMENT OF SUBCONTRACTS AND LOCATION OF CONTRACTOR FACILITIES IN LABOR SURPLUS AREAS," IN DEFENSE PROCUREMENT CIRCULAR NUMBER 64 DATED OCTOBER 28, 1968. SINCE THIS CIRCULAR WAS ISSUED AFTER THE CLOSING DATE OF THE RFP THOSE REVISIONS WERE NOT APPLICABLE TO THIS RFP. THE DECISION, HOWEVER, AS TO WHETHER A PROCUREMENT SHOULD BE SET ASIDE FOR SMALL BUSINESS OR LABOR SURPLUS AREA CONCERNS IS WITHIN THE PROVINCE OF THE PROCUREMENT AGENCY AND THE SMALL BUSINESS ADMINISTRATION. NO SUCH SET -ASIDE ACTION WAS TAKEN HERE. MOREOVER, PARTS 7 AND 8 OF SECTION 1 OF ASPR DO NOT REQUIRE THAT THERE BE A LABOR SURPLUS AREA OR SMALL BUSINESS SET-ASIDE IN ANY PARTICULAR PROCUREMENT. SEE 41 COMP. GEN. 351, 362.

THE THIRD AND SIXTH BASES FOR YOUR PROTEST ARE THAT YOUR FIRM INTENDED TO MANUFACTURE THE MAJORITY OF THE CONTRACT ITEMS IN-HOUSE AND THAT IT IS YOUR UNDERSTANDING THAT CHRYSLER INTENDS TO MANUFACTURE ONLY A SMALL PERCENT IN-HOUSE WITH THE BALANCE CONTRACTED OUTSIDE, WHICH, YOU STATE, WAS NOT THE ORIGINAL INDICATED INTENT OF THE RFP. WHILE THE RFP DID CONTAIN THE REQUIRED CLAUSES PERTAINING TO "SMALL BUSINESS SUBCONTRACTING PROGRAM" AND "LABOR SURPLUS AREA SUBCONTRACTING PROGRAM," IT DID NOT SET A LIMIT ON THE AMOUNT OF SUBCONTRACTING. ON THE OTHER HAND, ARTICLE ,"PRODUCTION EQUIPMENT," OF THE RFP DID LIMIT THE USE OF PRODUCTION EQUIPMENT AND SPECIAL TOOLING. PARAGRAPH D (2) OF THIS ARTICLE PROVIDES THAT ALL PRODUCTION EQUIPMENT ACQUIRED FOR THE ACCOUNT OF THE GOVERNMENT SHALL BE USED SOLELY BY THE PRIME CONTRACTOR. PARAGRAPH F (2) OF THE SAME ARTICLE PROVIDES THAT THE USE OF SPECIAL TOOLING AS DEFINED IN THE CLAUSE ENTITLED "SPECIAL TOOLING," SHALL BE LIMITED TO THE PRIME CONTRACTOR AND HIS FIRST TIER SUBCONTRACTOR IN PERFORMANCE OF THE CONTRACT RESULTING FROM THEIR PROPOSAL. WITH FURTHER REFERENCE TO SUBCONTRACTING, ARTICLE 10 OF THE RFP REQUIRES THAT EXCEPT FOR SOURCE CONTROLLED ITEMS AND IEMS AVAILABLE COMMERCIALLY, OFFERORS SHALL DEVELOP SECOND SOURCES TO THOSE EXISTING SUBCONTRACTORS/VENDORS OF THE PRESENT PRODUCER WHO ARE CURRENTLY PRODUCING COMPONENTS FOR 1-1/2, 3, AND 6 HP MILITARY STANDARD ENGINES. THE CONTRACTING OFFICER REPORTS THAT NO ASSURANCE WAS REQUIRED OR FURNISHED BY EITHER YOUR FIRM OR CHRYSLER THAT A CERTAIN PERCENTAGE OF THE CONTRACT WORK WOULD BE PERFORMED IN-HOUSE.

THE FOURTH AND FIFTH GROUNDS FOR YOUR PROTEST ARE THAT IF THE CONTRACT IS AWARDED TO YOUR FIRM MANY UNEMPLOYED PEOPLE IN YOUR AREA WOULD BE EMPLOYED BY YOUR CORPORATION AND THAT IF YOUR FIRM IS NOT AWARDED THIS CONTRACT IT WILL BECOME NECESSARY FOR YOUR CORPORATION TO MAKE FURTHER LAYOFFS OF EMPLOYEES. YOUR FIRM'S CONCERN FOR THE WELFARE OF THE UNEMPLOYED IN YOUR AREA IS UNDERSTANDABLE; HOWEVER, WE BELIEVE THAT THE CONTRACTING OFFICER COULD NOT CONSIDER THESE FACTS IN HIS EVALUATION OF THE OFFERS. IN THIS CONNECTION, YOUR ATTENTION IS INVITED TO SECTION 523 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT FOR THE FISCAL YEAR 1969, PUBLICC LAW 90-580, OCTOBER 17, 1968, 82 STAT. 1120, 1134, WHICH CONTAINS A PROVISO TO THE EFFECT THAT NO FUNDS SHALL BE USED FOR THE PAYMENT OF A PRICE DIFFERENTIAL ON CONTRACTS MADE FOR THE PURPOSE OF RELIEVING ECONOMIC DISLOCATIONS. THE FOREGOING PROVISION PROHIBITING PAYMENT OF A PRICE DIFFERENTIAL HAS BEEN IN DEPARTMENT OF DEFENSE APPROPRIATION ACTS SINCE THE DEFENSE APPROPRIATION ACT, 1954, 67 STAT. 377. WE CONSIDERED THIS STATUTORY RESTRICTION AT 40 COMP. GEN. 489, 490-491, STATING IN PART:

"ON THE RECORD WE MUST CONSTRUE THE LIMITATION IN QUESTION AS PRECLUDING THE EXPENDITURE BY THE DEFENSE ESTABLISHMENT OF APPROPRIATED FUNDS UNDER ANY CONTRACT AWARDED ON THE BASIS OF A LABOR SURPLUS AREA SITUATION AT A PRICE IN EXCESS OF THE LOWEST OBTAINABLE ON AN UNRESTRICTED SOLICITATION OF BIDS OR PROPOSALS.' YOUR ATTENTION IS ALSO INVITED TO ASPR 1-802 WHICH PROVIDES WITH RESPECT TO SET-ASIDES FOR LABOR SURPLUS AREAS,"BUT IN NO CASE WILL PRICE DIFFERENTIALS BE PAID FOR THE PURPOSE OF CARRYING OUT THIS POLICY.'

THE RECORD ESTABLISHES THAT YOU DID NOT SUBMIT THE LOWEST PRICED PROPOSAL ON THE ENGINES. ACCORDINGLY, THE AWARD OF A CONTRACT ON THE BASIS OF YOUR HIGHER PROPOSAL BASED ON THE CONSIDERATIONS OF BUSINESS SIZE OR LOCATION IN AN AREA OF UNEMPLOYMENT WOULD HAVE BEEN IMPROPER.

YOUR FINAL CONTENTION IS THAT YOUR FIRM HAS AMPLE FINANCIAL RESOURCES TO PERFORM THE CONTRACT. WHILE A QUESTION OF YOUR FINANCIAL RESPONSIBILITY WAS BROUGHT UP DURING A PREAWARD SURVEY OF THE FACILITIES OF YOUR FIRM AND YOU LATER INDICATED THAT YOU COULD OBTAIN ADDITIONAL FINANCIAL RESOURCES, IT IS REPORTED THAT THE MATTER OF THE ADEQUACY OF YOUR FINANCIAL RESPONSIBILITY WAS NOT PURSUED SINCE YOUR FIRM HAD NOT SUBMITTED THE LOWEST EVALUATED PROPOSAL AND, THEREFORE, COULD NOT RECEIVE AN AWARD.