B-165088, MARCH 18, 1969 48 COMP. GEN. 605

B-165088: Mar 18, 1969

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WHOSE ALLEGATION OF PROPRIETARY DATA VIOLATION WAS NOT SUBSTANTIATED. WHOSE OFFER WAS IN A COMPETITIVE RANGE AND THE ONLY OFFER COMPLYING WITH THE REQUIRED DELIVERY DATE. WAS CONTRARY TO THE ADEQUATE COMPETITION AND ACCURATE PRIOR COST EXPERIENCE PRESCRIBED BY 10 U.S.C. 2304 (G) TO INSURE FAIR AND REASONABLE PRICES. ALTHOUGH THE AWARDS WILL NOT BE DISTURBED IN VIEW OF THE BROAD NEGOTIATION AUTHORITIES UNDER WHICH THEY WERE MADE. THE DETERMINATION IN ACCORDANCE WITH 10 U.S.C. 2310 (B) MUST BE SUPPORTED BY WRITTEN FINDINGS TO SHOW THE FACTS AND CIRCUMSTANCES THAT "CLEARLY AND CONVINCINGLY ESTABLISH THAT FORMAL ADVERTISING WOULD NOT HAVE BEEN FEASIBLE AND PRACTICABLE. THE ADMINISTRATIVE DETERMINATION TO NEGOTIATE IS FINAL PURSUANT TO 10 U.S.C. 2310 (A).

B-165088, MARCH 18, 1969 48 COMP. GEN. 605

CONTRACTS--NEGOTIATION--COMPETITION--AWARD UNDER INITIAL PROPOSALS THE ACCEPTANCE UNDER THE AUTHORITY OF 10 U.S.C. 2304 (G) OF INITIAL LOW PROPOSALS NEGOTIATED PURSUANT TO SECTION 2304 (A) (10) WITHOUT DISCUSSION WITH THE OFFEROR FROM WHOM THE VALVE BEING SOLICITED HAD BEEN PROCURED FOR MANY YEARS AS A BRAND NAME ITEM ON A SOLE-SOURCE BASIS, WHOSE ALLEGATION OF PROPRIETARY DATA VIOLATION WAS NOT SUBSTANTIATED, BUT WHOSE OFFER WAS IN A COMPETITIVE RANGE AND THE ONLY OFFER COMPLYING WITH THE REQUIRED DELIVERY DATE, WAS CONTRARY TO THE ADEQUATE COMPETITION AND ACCURATE PRIOR COST EXPERIENCE PRESCRIBED BY 10 U.S.C. 2304 (G) TO INSURE FAIR AND REASONABLE PRICES. HOWEVER, ALTHOUGH THE AWARDS WILL NOT BE DISTURBED IN VIEW OF THE BROAD NEGOTIATION AUTHORITIES UNDER WHICH THEY WERE MADE, THE IMPROPER NEGOTIATION PROCEDURE UNDER THE CONCEPT OF "ACCEPTANCE OF AN INITIAL PROCUREMENT WITHOUT DISCUSSION" SHOULD BE BROUGHT TO THE ATTENTION OF THE PROCUREMENT OFFICIALS. CONTRACTS--NEGOTIATION--DETERMINATION AND FINDINGS--BASIS OF NEGOTIATION WHEN A PROCUREMENT INVOLVES A DETERMINATION TO NEGOTIATE UNDER 10 U.S.C. 2304 (A) (10) DUE TO THE UNAVAILABILITY OF DATA TO DESCRIBE THE REQUIRED SUPPLIES, THE DETERMINATION IN ACCORDANCE WITH 10 U.S.C. 2310 (B) MUST BE SUPPORTED BY WRITTEN FINDINGS TO SHOW THE FACTS AND CIRCUMSTANCES THAT "CLEARLY AND CONVINCINGLY ESTABLISH THAT FORMAL ADVERTISING WOULD NOT HAVE BEEN FEASIBLE AND PRACTICABLE," AND A COPY OF SUCH A DETERMINATION AND FINDINGS (D&F) SHOULD ACCOMPANY ANY ADMINISTRATIVE REPORT TO THE UNITED STATES GENERAL ACCOUNTING OFFICE ON THE PROCUREMENT. WHEN SUPPORTED BY A D&F, THE ADMINISTRATIVE DETERMINATION TO NEGOTIATE IS FINAL PURSUANT TO 10 U.S.C. 2310 (A).

TO THE DIRECTOR, DEFENSE SUPPLY AGENCY, MARCH 18, 1969:

WE REFER TO LETTERS DATED SEPTEMBER 30, NOVEMBER 13, 1968, AND FEBRUARY 28, 1969, FROM MR. WILLARD J. HURLEY, ASSISTANT COUNSEL, FORWARDING, RESPECTIVELY, A REPORT AND TWO SUPPLEMENTAL REPORTS ON THE PROTEST OF THE AUTOMATIC SPRINKLER CORPORATION AGAINST AWARDS MADE TO ANOTHER COMPANY UNDER REQUESTS FOR PROPOSALS (RFP) NOS. DSA 700-68-R 3713 AND -6852, ISSUED BY THE DEFENSE CONSTRUCTION SUPPLY CENTER, DIRECTORATE OF PROCUREMENT AND PRODUCTION, ON JANUARY 8 AND APRIL 12, 1968.

BOTH PROCUREMENTS WERE NEGOTIATED UNDER 10 U.S.C. 2304 (A) (10) AND ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-210.2 (XIII) BECAUSE OF THE ASSERTED UNAVAILABILITY OF DATA WITH WHICH TO DESCRIBE THE REQUIRED SUPPLIES. THE DETERMINATIONS AND FINDINGS (D&F), WHICH UNDER 10 U.S.C. 2310 (B) MUST SUPPORT A DECISION TO NEGOTIATE UNDER 2304 (A) (10), WERE EXECUTED ON DECEMBER 16, 1967, AND APRIL 1, 1968. THAT SUBPARAGRAPH PROVIDES THAT A DECISION TO NEGOTIATE UNDER 10 U.S.C. 2304 (A) (10) MUST BE BASED ON A WRITTEN FINDING BY THE PERSON MAKING THE DECISION SHOWING THE FACTS AND CIRCUMSTANCES WHICH "CLEARLY AND CONVINCINGLY ESTABLISH * * * THAT FORMAL ADVERTISING WOULD NOT HAVE BEEN FEASIBLE AND PRACTICABLE." WE WOULD COMMENT, PARENTHETICALLY, THAT COPIES OF THE D&FS WERE NOT MADE AVAILABLE TO US AS PART OF EITHER THE ORIGINAL OR THE SUPPLEMENTAL REPORT, AND WERE SUPPLIED ONLY AFTER A SPECIFIC REQUEST FOR THEM. IT WOULD BE APPRECIATED IF, IN THE FUTURE, REPORTS CONCERNING NEGOTIATED CONTRACTS INVOLVING D&FS EXECUTED PURSUANT TO SECTION 2310 WOULD INCLUDE A COPY OF EACH D&F.

AUTOMATIC SPRINKLER HAS PROTESTED THAT ITS ALLEGED RIGHTS IN PROPRIETARY DATA WERE INFRINGED BY THE GOVERNMENT. IT CLAIMS THAT THE PILOT VALVE WHICH WAS THE SUBJECT OF THESE PROCUREMENTS WAS DEVELOPED BY IT IN 1948 FOR USE IN FIRE CONTROL SYSTEMS IN MAGAZINES ABOARD U.S. NAVY SHIPS. IS ALSO CLAIMED THAT, ALTHOUGH AUTOMATIC HAS VOLUNTARILY GIVEN THE GOVERNMENT COURTESY COPIES OF ITS DRAWING, IT WAS NEVER CONTRACTUALLY OBLIGATED TO DO SO AND WAS NEVER PAID ANY CONSIDERATION THEREFOR. THE FACT THAT NO RESTRICTIVE LEGEND APPEARS ON ITS DRAWING IS COUNTERED BY THE ARGUMENT THAT SUCH WAS UNNECESSARY AT THE TIME THE DRAWING WAS FURNISHED BECAUSE THIS WAS PRIOR TO THE PROMULGATION OF ASPR 9-202.3 (C) WHICH REQUIRES SUCH A RESTRICTIVE LEGEND. CERTAIN ADDITIONAL CLAIMS ARE MADE, BUT WE DO NOT BELIEVE IT NECESSARY TO RECITE THEM ALL SINCE, EVEN ASSUMING THE EXISTENCE OF PROPRIETARY RIGHTS IN THESE DRAWINGS, WE CANNOT CONCLUDE THAT THERE HAS BEEN ANY VIOLATION OF PROPRIETARY RIGHTS.

LIFT PARTS MFG; INC; THE CONTRACTOR UNDER BOTH OF THE SOLICITATIONS, SUBMITTED DRAWINGS OF THE VALVE OFFERED BY IT. THE RFPS DESCRIBED THE VALVE IN THE FOLLOWING MANNER:

FSN 4210-399-2532.

VALVE.

MANUFACTURED OR SUPPLIED UNDER THE FOLLOWING PART NUMBERS)---.

AUTOMATIC SPRINKLER CORP. OF AMERICA---P/N 1241000.

THE ITEM OFFERED BY LIFT PARTS WAS DESCRIBED IN ITS PROPOSAL AS "P/N: CP- 1241000," WHICH LIFT PARTS SAID THAT IT MANUFACTURED. ON MARCH 20, 1968, DURING THE COURSE OF THE EARLIER OF THESE TWO PROCUREMENTS, THE CONTRACTING OFFICER WROTE A LETTER TO LIFT PARTS IN WHICH HE SAID THAT THE QUALITY ASSURANCE CERTIFICATION ATTACHED TO THE LIFT PARTS' OFFER WAS INSUFFICIENT TO DESCRIBE THE ITEM CLEARLY OR TO FORM A BASIS FOR EVALUATION, AND THAT FURTHER INFORMATION WOULD THEREFORE BE REQUIRED. LIFT PARTS WAS REQUESTED IN THIS LETTER TO FURNISH "COMPLETE DRAWINGS SHOWING THE DEGREE OF INTERCHANGEABILITY BETWEEN THE ITEM BEING OFFERED AND THE AUTOMATIC SPRINKLER PART NUMBER 1241000."

THE RESPONSE OF LIFT PARTS WAS DATED APRIL 10, 1968, AND RELATED THE MANNER IN WHICH THAT COMPANY DETERMINED WHAT THE GOVERNMENT DESIRED TO BUY. LIFT PARTS DESCRIBED A "REVERSE ENGINEERING" PROCESS IN WHICH SAMPLES OF THE AUTOMATIC SPRINKLER PART WERE PURCHASED AND WERE DISASSEMBLED TO REVEAL THE VARIOUS COMPONENTS AND THE WAY THEY FIT TOGETHER. THE LETTER ALSO CONTAINED ASSURANCES THAT THE LIFT PARTS' VALVE WAS COMPLETELY INTERCHANGEABLE WITH AUTOMATIC SPRINKLER'S FOR FORM, FIT, AND FUNCTION. ATTACHED TO THIS LETTER WERE DRAWINGS BEARING THE LIFT PARTS' LEGEND. WE HAVE COMPARED THESE TO A COPY OF THE DRAWING PREVIOUSLY SUBMITTED BY AUTOMATIC SPRINKLER BUT IT IS NOT APPARENT TO US THAT LIFT PARTS COPIED THE AUTOMATIC DRAWING.

THE ORIGINAL REPORT STATES FLATLY THAT "THE GOVERNMENT DID NOT KNOWINGLY OR UNKNOWINGLY USE A PROPRIETARY DRAWING OF 'AUTOMATIC'S' TO SOLICIT PROPOSALS FROM OTHER SOURCES," MAKING REFERENCE FOR SUBSTANTIATION TO THE LIFT PARTS' LETTER OF APRIL 10. THE QUESTION WHETHER THE GOVERNMENT MADE AUTOMATIC SPRINKLER'S DRAWINGS AVAILABLE TO LIFT PARTS IS FACTUAL IN NATURE. IN DISPUTES AS TO FACTS, WE ARE OBLIGED TO ACCEPT AS CORRECT THE AGENCY'S POSITION. 40 COMP. GEN. 178 (1960). IT IS, MOREOVER, OUR OPINION THAT NO VIOLATION OF PROPRIETARY RIGHTS IS APPARENT ON THIS RECORD. TO THE CONTRARY, THE EVIDENCE INDICATES A LIKELIHOOD THAT LIFT PARTS GAINED ITS KNOWLEDGE BY MEANS OF THE LEGITIMATE PROCESS OF REVERSE ENGINEERING RATHER THAN BY RECEIPT FROM THE GOVERNMENT OF CONFIDENTIAL DRAWINGS SUPPLIED BY AUTOMATIC SPRINKLER.

THE SECOND BASIS, AND THE MOST SIGNIFICANT, FOR AUTOMATIC'S PROTEST IS THE FAILURE TO CONDUCT DISCUSSIONS WITH THAT COMPANY AFTER RECEIPT OF PROPOSALS AND PRIOR TO AWARD. THE ORIGINAL REPORT JUSTIFIES THE FAILURE TO CONDUCT DISCUSSIONS WITH AUTOMATIC SPRINKLER ON THE GROUND THAT OFFERORS WERE ADVISED THAT AWARD MIGHT BE MADE ON THE BASIS OF INITIAL OFFERS RECEIVED, WITHOUT DISCUSSION, WHERE ACCEPTANCE IN THIS MANNER WOULD RESULT IN FAIR AND REASONABLE PRICES. THE STATUTORY AUTHORIZATION FOR SUCH ACTION WAS BASED ON 10 U.S.C. 2304 (G), WHICH PROVIDED AS FOLLOWS:

(G) IN ALL NEGOTIATED PROCUREMENTS IN EXCESS OF $2,500 IN WHICH RATES OR PRICES ARE NOT FIXED BY LAW OR REGULATION AND IN WHICH TIME OF DELIVERY WILL PERMIT, PROPOSALS SHALL BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SUPPLIES OR SERVICES TO BE PROCURED, AND WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE, AND OTHER FACTORS CONSIDERED: PROVIDED, HOWEVER, THAT THE REQUIREMENTS OF THIS SUBSECTION WITH RESPECT TO WRITTEN OR ORAL DISCUSSIONS NEED NOT BE APPLIED TO PROCUREMENTS IN IMPLEMENTATION OF AUTHORIZED SET-ASIDE PROGRAMS OR TO PROCUREMENTS WHERE IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT, THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN FAIR AND REASONABLE PRICES AND WHERE THE REQUEST FOR PROPOSALS NOTIFIES ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION. THE LIFTS PARTS' PROPOSAL OFFERED THE VALVES AT $32.85 EACH, WHILE AUTOMATIC SPRINKLER'S PRICE WAS $34.03 PER VALVE.

THERE SEEMS TO BE NO QUESTION THAT AUTOMATIC SPRINKLER'S OFFER WAS WITHIN A COMPETITIVE RANGE, AS CONTEMPLATED BY THE ABOVE-QUOTED STATUTE, AND THEREFORE DISCUSSIONS WITH THAT COMPANY WOULD HAVE BEEN MANDATORY UNLESS ONE OF THE ENUMERATED STATUTORY EXCEPTIONS WAS APPLICABLE.

THE REPORT STATES THAT THE LIFT PARTS' PRICE WAS CONSIDERED FAIR AND REASONABLE BASED UPON THE PRIOR COST EXPERIENCE WITH AUTOMATIC SPRINKLER. THE RELIABILITY OF SUCH COST EXPERIENCE IS QUESTIONABLE SINCE THE PRIOR HISTORY OF THE PROCUREMENT WAS NONCOMPETITIVE. FURTHER DOUBT IS CAST UPON THE REASONABLENESS OF THE PRICE INASMUCH AS THE TWO D&FS STATED THAT THE ESTIMATED COST OF THE FIRST PROCUREMENT OF 600 VALVES WAS $16,620, WHILE THAT OF THE SECOND WAS $51,688.20 FOR 1,866 VALVES. THE ESTIMATED UNIT PRICE FOR BOTH PROCUREMENTS IS THEREFORE ABOUT $27.70. CONSIDERING ALSO THAT THE TWO OFFERS DIFFERED BY $1.18, WE DO NOT THINK IT WAS "CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT, THAT ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN FAIR AND REASONABLE PRICES." WE THINK THAT SERIOUS CONSIDERATION SHOULD HAVE BEEN GIVEN TO THE POSSIBILITY OF NEGOTIATING WITH BOTH OFFERORS TO BRING THEIR PRICES MORE IN LINE WITH THE GOVERNMENT ESTIMATE.

IN ADDITION, THE FIRST RFP STATED A DESIRED DELIVERY TIME OF 120 DAYS. LIFT PARTS OFFERED 270-DAY DELIVERY WHILE AUTOMATIC SPRINKLER OFFERED TO MAKE DELIVERY IN 120 DAYS. THE SECOND RFP STATED THAT DELIVERY WAS DESIRED WITHIN 60 DAYS. AGAIN, LIFT PARTS OFFERED 270 DAY DELIVERY. ALTHOUGH WE DO NOT HAVE THE SECOND PROPOSAL OF AUTOMATIC SPRINKLER, THAT COMPANY ADVISED US IN A LETTER DATED DECEMBER 13, 1968, THAT IT OFFERED TO DELIVER WITHIN 90 DAYS UNDER THE SECOND RFP. THE RESULTING CONTRACTS WITH LIFT PARTS BOTH SPECIFIED 270-DAY DELIVERY. NEITHER RFP STATED A MAXIMUM ACCEPTABLE DELIVERY PERIOD.

THE ACCEPTABILITY OF DELIVERY PERIODS WHICH, IN THE EARLIER PROCUREMENT, WAS MORE THAN TWICE AS LONG AS THAT STATED AS DESIRABLE AND, IN THE LATER PROCUREMENT, OVER FOUR TIMES LONGER INDICATES TO US THAT THE DESIRE FOR 120 AND 60-DAY DELIVERY WAS NOT ACCORDED ANY SIGNIFICANT WEIGHT IN THE EVALUATION OF PROPOSALS. INDEED, THE FACT THAT NO ATTEMPT WAS MADE TO NEGOTIATE SUCH DISPROPORTIONATELY LONG DELIVERIES OFFERED BY LIFT PARTS, WITH A VIEW TO THEIR REDUCTION, WOULD INCLINE US TO CONCLUDE THAT THERE WAS NO REAL DESIRE FOR DELIVERY WITHIN 120 DAYS OR 60 DAYS. YET AUTOMATIC SPRINKLER APPEARS TO HAVE MADE AN EFFORT TO MEET THE STATED SCHEDULES WHILE LIFT PARTS SEEMINGLY IGNORED THEM. IN ENDEAVORING TO SATISFY THE REQUESTED DELIVERY DATES, AUTOMATIC SPRINKLER ACTED REASONABLY, FOR BY SPECIFYING DESIRED DELIVERY PERIODS THE GOVERNMENT WAS PUTTING PROSPECTIVE OFFERORS ON NOTICE THAT FAIRLY URGENT DELIVERIES WERE REQUIRED.

THE CONTRACTING OFFICIALS ARE, OF COURSE, THE BEST JUDGES OF THE DELIVERY NEEDS OF THE GOVERNMENT. A POTENTIAL CONTRACTOR DOES WELL TO OBSERVE THOSE NEEDS, AS STATED IN THE SOLICITATION, AND TO MAKE A BONA FIDE EFFORT TO SATISFY THEM. WHEN THE SOLICITATION INDICATES THAT DELIVERY WITHIN 4 MONTHS OR 2 MONTHS IS DESIRED, THE GOVERNMENT HAS THEREBY GIVEN OFFERORS SOME MEASURE OF THE RANGE OF ACCEPTABLE DELIVERY DATES. TO AGREE TO 9- MONTH DELIVERIES, WITHOUT QUESTION OR DISCUSSION, SHOWS THAT THE OFFEROR WHO HAS ACTED REASONABLY IN OFFERING ALMOST COMPLETE COMPLIANCE TO THE STATED DELIVERY REQUIREMENTS HAS COMPLIED WITH A RELATIVELY MEANINGLESS REQUEST, WITHOUT HAVING HAD AN OPPORTUNITY TO REVISE HIS PROPOSAL IN LIGHT OF ACTUAL ACCEPTABLE DELIVERY PERIODS WHICH EXCEEDED THOSE SPECIFIED.

CONSIDERING BOTH THE DISPARITY IN THE DELIVERY SCHEDULES OFFERED BY THE TWO OFFERORS AND THE CLOSE PRICING OF BOTH OFFERS, WE BELIEVE THAT THE INTERESTS OF THE GOVERNMENT REQUIRED RESORT TO NEGOTIATION PROCEDURES. THAT IS TO SAY, SINCE 270-DAY DELIVERY WAS ACCEPTABLE TO THE GOVERNMENT, DISCUSSIONS WITH AUTOMATIC SPRINKLER ON THE BASIS OF THE SUBSTANTIALLY LONGER DELIVERY PERIOD MAY HAVE RESULTED IN A REDUCTION IN AUTOMATIC SPRINKLER'S PRICE PROPOSAL. ADDITIONALLY, SINCE THE GOVERNMENT STATED DESIRED DELIVERY SCHEDULES AND SINCE LIFT PARTS CONSIDERABLY EXCEEDED THEM, DISCUSSIONS WITH LIFT PARTS MAY HAVE REVEALED WHETHER THAT COMPANY WAS IN A POSITION TO APPROXIMATE MORE CLOSELY THE STATED DELIVERY PERIODS. IF IT DEVELOPED THAT LIFT PARTS COULD HAVE DONE SO, FURTHER DISCUSSION COULD HAVE DISCLOSED WHETHER A REDUCTION IN DELIVERY SCHEDULES WOULD HAVE AFFECTED THE PRICES OF THE OFFERS.

THERE IS AN ADDITIONAL REASON WHY WE BELIEVE THAT NEGOTIATIONS SHOULD HAVE BEEN CONDUCTED. BOTH RFPS, AS WE HAVE ALREADY NOTED, DESCRIBED THE VALVE BY REFERENCE TO THE FEDERAL STOCK NUMBER AND THE AUTOMATIC SPRINKLER PART NUMBER. THERE WAS NO EXPRESSION IN THE RFPS TO INDICATE THAT AN EQUIVALENT PRODUCT WOULD BE ACCEPTABLE. OF COURSE, THE ABSENCE OF SUCH AN EXPRESSION DOES NOT PRECLUDE CONSIDERATION OF AN OFFER OF AN "OR EQUAL" PRODUCT AND AWARD TO A COMPANY OFFERING SUCH A PRODUCT MAY BE PROPERLY MADE. B-164848, OCTOBER 15, 1968. HOWEVER, THE ABSENCE OF THE "OR EQUAL" PHRASE IN THE ITEM DESCRIPTION MAY BE RELEVANT IN CONSIDERING THE PROPRIETY OF A FAILURE TO NEGOTIATE WITH THE OFFEROR WHICH MAKES THE NAME- BRAND ITEM. SEE 47 COMP. GEN. 778, JUNE 25, 1968.

ALTHOUGH WE HAVE NO DEFINITIVE INFORMATION CONCERNING THE PRIOR PROCUREMENTS OF THIS VALVE, ALL THE EVIDENCE INDICATES THAT IT HAS BEEN PROCURED IN THE PAST ON A "SOLE-SOURCE" BASIS. IN A LETTER DATED DECEMBER 13, 1968, THE ATTORNEYS FOR AUTOMATIC SPRINKLER REPRESENTED THAT FOR 20 YEARS THE PROCUREMENTS HAD BEEN "SOLE SOURCE." THIS, TOGETHER WITH THE COMPANY'S BELIEF THAT IT HAD PROPRIETARY RIGHTS IN THE MECHANICAL DRAWINGS OF ITS VALVE, WOULD SUGGEST THAT AUTOMATIC SPRINKLER CONTEMPLATED NONCOMPETITIVE PROCUREMENT UNDER THESE RFPS.

THE PARALLELS BETWEEN THE PRESENT CASE AND THE ABOVE-CITED DECISION 47 COMP. GEN. 778, JUNE 25, 1968, ARE STRIKING. IN THAT CASE, THE NAVAL SUPPLY SYSTEMS COMMAND ISSUED A REQUEST FOR QUOTATIONS ON 71 DIGITAL VOLTMETERS DESCRIBED AS CIMRON DIVISION PART NUMBER 7300A 631. COMPETITOR OF CIMRON OFFERED ALLEGEDLY "EQUAL" EQUIPMENT MANUFACTURED BY THE COMPETITOR. NO DISCUSSIONS WERE CONDUCTED WITH CIMRON AND A CONTRACT WAS AWARDED TO THE COMPETITOR AFTER THE PROCUREMENT OFFICIALS HAD SATISFIED THEMSELVES THAT THE COMPETITOR'S EQUIPMENT WAS ACCEPTABLE. THE CONTRACTING OFFICER JUSTIFIED HIS ACTION UNDER ASPR 3-805.1 (A) (V) WHICH IS SUBSTANTIALLY A RESTATEMENT OF THAT PART OF 10 U.S.C. 2304 (G) RELATING TO ACCEPTANCE ON THE BASIS OF INITIAL PROPOSALS WHERE IT CAN BE CLEARLY DEMONSTRATED THROUGH ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE THAT SUCH ACTION WOULD RESULT IN FAIR AND REASONABLE PRICES. IN THE ABOVE-CITED DECISION, WE MADE THE FOLLOWING OBSERVATIONS AND HOLDING:

FROM THE FOREGOING IT IS APPARENT THAT THE RFQ SOLICITED A QUOTATION FROM CIMRON FOR AN ITEM MANUFACTURED ONLY BY CIMRON, AND IT MUST THEREFORE BE ASSUMED CIMRON'S QUOTATION WAS SUBMITTED IN THE BELIEF THAT ONLY ITEMS MANUFACTURED BY CIMRON WOULD BE ACCEPTABLE AND THAT THE PROCUREMENT WAS THEREFORE NONCOMPETITIVE. IT FOLLOWS THAT THE DECISION TO CONSIDER QUOTATIONS BASED UPON ITEMS DETERMINED TO BE EQUAL TO THOSE MANUFACTURED BY CIMRON OPERATED NOT ONLY TO RELAX THE SPECIFICATION REQUIREMENTS BUT ALSO TO TRANSFORM THE PROCUREMENT FROM A NONCOMPETITIVE TO A COMPETITIVE ONE. IN SUCH CIRCUMSTANCES, IT IS OUR OPINION THAT THE PROVISIONS OF ASPR 3-805.1 (B) AND (E) REQUIRE AMENDMENT OF THE RFQ, NOTICE OF THE AMENDMENT TO THE SUPPLIER INITIALLY SOLICITED, AND AN EQUITABLE OPPORTUNITY FOR THE SUPPLIER TO AMEND HIS QUOTATION TO REFLECT SUCH CHANGES AS HE MAY CONSIDER APPROPRIATE IN THE LIGHT OF THE CHANGES ACCOMPLISHED BY THE AMENDMENT TO THE RFQ. THAT THE FAILURE TO PERMIT CIMRON TO AMEND ITS QUOTATION CANNOT BE CONSIDERED THE "EQUITABLE OPPORTUNITY TO NEGOTIATE" CONTEMPLATED BY ASPR 3-805.1 (B) APPEARS TO BE ESTABLISHED BY THE FACT THAT CIMRON, UNLIKE ITS COMPETITOR, WAS NOT GIVEN AN OPPORTUNITY TO SUBMIT A QUOTATION ON AN ITEM "EQUAL TO" CIMRON PART NUMBER 7300-A 631, OR TO SUBMIT A QUOTATION BASED ON SUPPLYING THE NAMED PART NUMBER ON A COMPETITIVE BASIS.

WE THINK THAT WHAT WE SAID IN THE FOREGOING CASE IS EQUALLY APPLICABLE HERE. THE CONTRACTING OFFICER IN HIS INITIAL REPORT DISTINGUISHED THAT DECISION ON THE BASIS THAT THE PRODUCTS THERE WERE "EQUAL" WHILE THESE ARE "IDENTICAL." WE THINK THAT THIS IS A DIFFERENCE BUT NOT A DISTINCTION. THE EMPHASIS IN 47 COMP. GEN. 778 WAS ON THE TRANSFORMATION OF THE PROCUREMENT FROM NONCOMPETITIVE TO COMPETITIVE WITH THE NECESSARY RESULT THAT THE NAMED MANUFACTURER'S REASONABLE BELIEF THAT ONLY ITS PRODUCT WOULD BE ACCEPTABLE WAS ERRONEOUS. WHETHER THE OTHER MANUFACTURER OFFERED ITS PRODUCT AS "IDENTICAL" OR "EQUAL" WAS NOT OF CRUCIAL SIGNIFICANCE. OFFERS MUST BE EVALUATED ON AN EQUAL BASIS. AUTOMATIC SPRINKLER'S OFFER WAS SUBMITTED UNDER A MISAPPREHENSION THAT THERE WAS TO BE NO COMPETITION WHILE LIFT PARTS KNEW THAT ITS OFFER NECESSARILY IMPLIED COMPETITION. THE INITIAL OFFERS WERE NOT SUBMITTED ON AN EQUAL BASIS AND COULD NOT HAVE BEEN EQUALLY EVALUATED UNLESS AUTOMATIC SPRINKLER WAS NOTIFIED OF THE COMPETITION AND GIVEN AN OPPORTUNITY TO RESPOND TO IT. IF THAT COMPANY, ARMED WITH THE KNOWLEDGE THAT IT WAS IN FACT COMPETING WITH ANOTHER, WOULD BE WILLING TO OFFER THE GOVERNMENT A BETTER BARGAIN THAN THAT IN ITS ORIGINAL PROPOSAL, IT WOULD BE IN THE GOVERNMENT'S INTEREST TO PROVIDE THE COMPANY WITH THAT KNOWLEDGE.

THE MOST RECENT REPORT ON THESE PROCUREMENTS CONCERNS DISCUSSIONS DATING BACK TO OCTOBER 16, 1968, WHEN THE COMMANDER OF THE NAVAL SHIP ENGINEERING CENTER WROTE TO THE CHIEF OF THE DEFENSE CONSTRUCTION SUPPLY CENTER RECOMMENDING TERMINATION OF THE LIFT PARTS' CONTRACTS FOR THE CONVENIENCE OF THE GOVERNMENT. TWO REASONS WERE GIVEN IN SUPPORT OF SUCH RECOMMENDATION. FIRST, AUTOMATIC SPRINKLER HAD ALWAYS SUPPLIED THE VALVE AND ALSO HAD THE ANNUAL MAINTENANCE CONTRACTS WITH THE NAVY FOR INSPECTION AND ADJUSTMENT OF THE VALVES. SECOND, THE NAVY CONSIDERED IT POSSIBLE THAT LIFT PARTS "MIGHT PRODUCE INDISCERNIBLE DEVIATIONS WHICH WOULD CAUSE DIFFICULTY IN OPERATION AND MAINTENANCE."

SUBSEQUENT CONTACT BETWEEN THE NAVY AND THE DEFENSE CONSTRUCTION SUPPLY CENTER LED TO THE FORMULATION OF A 100-PERCENT TEST TO BE INCORPORATED INTO THE LIFT PARTS' CONTRACTS BY MEANS OF CHANGE ORDERS. THIS APPARENTLY ALLEVIATED THE APPREHENSIONS OF THE NAVY. IT IS NOTEWORTHY THAT AUTOMATIC SPRINKLER CLAIMED THAT THE INSTANT RFPS WERE MISLEADING BECAUSE THAT COMPANY HAD ALWAYS TESTED EACH VALVE BEFORE DELIVERY TO THE NAVY AND THEREFORE ASSUMED THAT REFERENCE TO ITS PART NUMBER INDICATED THAT SUCH TESTING WAS EXPECTED UNDER THESE PROCUREMENTS. IT IS CLEAR THAT HAD NEGOTIATIONS BEEN CONDUCTED WITH AUTOMATIC SPRINKLER, THE TESTING PROBLEM MIGHT HAVE BEEN BROUGHT TO LIGHT EARLY ENOUGH FOR TRULY EQUAL EVALUATION OF OFFERS. AS IT IS, A UNIT PRICE OF $32.85 FOR UNTESTED VALVES WAS MATCHED AGAINST A TESTED UNIT PRICE OF $34.03. WE DO NOT KNOW HOW MUCH OF THE $34.03 REPRESENTS TESTING COSTS OR HOW MUCH THE CHANGE ORDERS WILL COST THE GOVERNMENT, BUT IT IS CONCEIVABLE THAT THE BARGAIN PRICE OF $32.85 WILL TURN OUT TO BE NO "BARGAIN" AT ALL.

SUBSEQUENT TO ITS INITIAL LETTER OF PROTEST, AUTOMATIC SPRINKLER WROTE ANOTHER LETTER EXPANDING UPON SOME POINTS AND RAISING A NEW ISSUE. THE NEW QUESTION CONCERNED THE PROPRIETY OF PROCURING THESE VALVES BY NEGOTIATION RATHER THAN BY FORMAL ADVERTISING.

BOTH PROCUREMENTS WERE INITIATED BY WRITTEN D&FS TO WHICH WE HAVE ALREADY MADE REFERENCE. UNDER THE PROVISION IN 10 U.S.C. 2310 (A) AN ADMINISTRATIVE DECISION TO NEGOTIATE IS FINAL. WE THEREFORE ARE UNABLE TO CONSIDER THE PROTESTANT'S CONTENTIONS CONCERNING THIS QUESTION.

ALTHOUGH WE THINK THAT AUTOMATIC SPRINKLER AND LIFT PARTS SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO REVISE THEIR INITIAL PROPOSALS, IN VIEW OF THE BROAD NEGOTIATION AUTHORITIES UNDER WHICH THESE AWARDS WERE MADE, WE DO NOT CONSIDER THAT THE GOVERNMENT'S BEST INTERESTS WOULD BE SERVED IF THE AWARDS WERE DISTURBED AT THIS TIME. WE SUGGEST, HOWEVER, THAT THIS PROTEST BE BROUGHT TO THE ATTENTION OF PROCUREMENT OFFICIALS AS AN EXAMPLE OF IMPROPER NEGOTIATION PROCEDURES UNDER THE CONCEPT OF "ACCEPTANCE OF AN INITIAL PROPOSAL WITHOUT DISCUSSION."