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B-165953, OCT. 27, 1969

B-165953 Oct 27, 1969
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OR DEFICIENCIES IN PRODUCT SPECIFICATIONS OR TECHNICAL DATA AT NO COST INCREASE OR DELAY IN DELIVERY IS UNREASONABLE AND UNFAIR. SINCE CLAUSE IS ATTEMPT TO ASSIGN RISK OF DEFECTIVE SPECIFICATIONS TO CONTRACTOR. IF CORRECTION OF DEFECT IS SUBSTANTIALLY MORE THAN CONTEMPLATED. THIS CLAUSE WAS CONSIDERED BY OUR OFFICE IN B-165953. (A COPY OF THIS DECISION WAS FURNISHED TO YOUR FIRM ON JUNE 2. A CONTRACT WAS AWARDED ON JUNE 11. YOU NOW RAISE CERTAIN ISSUES WHICH WERE NOT SPECIFICALLY DISCUSSED IN OUR PRIOR DECISION. YOU QUESTION WHETHER IT IS REASONABLE OR FAIR TO EXPECT A CONTRACTOR TO BE RESPONSIBLE FOR CORRECTING LATENT DEFECTS IN SPECIFICATIONS PROVIDED BY THE GOVERNMENT. EVAPORATOR FAN OR CONDENSOR FAN) DOES NOT OR WILL NOT PERMIT THE UNIT TO MEET THE PERFORMANCE SPECIFICATION.

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B-165953, OCT. 27, 1969

SPECIFICATIONS--DEFECTIVE--CONTRACTOR V GOVERNMENT RESPONSIBILITY UNDER REQUEST FOR PROPOSALS FOR AIR CONDITION UNITS, UNSUCCESSFUL OFFEROR'S ALLEGATION THAT SPECIFICATION CLAUSE CALLING FOR CONTRACTOR TO CORRECT ALL DISCREPANCIES, OR DEFICIENCIES IN PRODUCT SPECIFICATIONS OR TECHNICAL DATA AT NO COST INCREASE OR DELAY IN DELIVERY IS UNREASONABLE AND UNFAIR, DOES NOT JUSTIFY DISTURBING AWARD TO LOW OFFEROR, SINCE CLAUSE IS ATTEMPT TO ASSIGN RISK OF DEFECTIVE SPECIFICATIONS TO CONTRACTOR, AND PREVENT LITIGATION WHICH HAS RESULTED IN PAST; HOWEVER, CONTRACTOR SHOULD NOT BE EXPECTED TO ASSUME UNREASONABLE RISKS, AND IF CORRECTION OF DEFECT IS SUBSTANTIALLY MORE THAN CONTEMPLATED, IT COULD BE ARGUED THAT CORRECTION OF DEFICIENCIES CLAUSE DOES NOT BAR AN EQUITABLE ADJUSTMENT.

TO AMERICAN AIR FILTER COMPANY, INCORPORATED:

WE REFER TO YOUR LETTER OF JULY 1, 1969, AND PRIOR CORRESPONDENCE, PROTESTING THE PROVISIONS OF ARTICLE 1, PARAGRAPH C, OF REQUEST FOR PROPOSALS NO. DAAK01-69-R-4062, ISSUED BY THE UNITED STATES ARMY MOBILITY EQUIPMENT COMMAND, AT ST. LOUIS, MISSOURI, FOR AIR CONDITION UNITS.

ARTICLE 1 OF THE RFP ENTITLED "PREPRODUCTION AND PRODUCTION EVALUATION OF TECHNICAL DATA" CALLS UPON THE CONTRACTOR TO CORRECT ALL DISCREPANCIES, ERRORS OR DEFICIENCIES IN THE PRODUCT SPECIFICATIONS OR TECHNICAL DATA WITHOUT INCREASE IN CONTRACT PRICE OR DELAY IN DELIVERY. THIS CLAUSE WAS CONSIDERED BY OUR OFFICE IN B-165953, DATED MAY 23, 1969, IN CONNECTION WITH A PROTEST FILED BY ANOTHER FIRM UNDER THE SUBJECT RFP. (A COPY OF THIS DECISION WAS FURNISHED TO YOUR FIRM ON JUNE 2, 1969.) WE HELD THAT OUR OFFICE HAD NO BASIS TO OBJECT TO THE INCLUSION OF ARTICLE 1 IN THE RFP AND RESULTING CONTRACT. FOLLOWING OUR DECISION, A CONTRACT WAS AWARDED ON JUNE 11, 1969, TO THE TRANE COMPANY AS THE LOW OFFEROR ON THE RFP. YOU NOW RAISE CERTAIN ISSUES WHICH WERE NOT SPECIFICALLY DISCUSSED IN OUR PRIOR DECISION.

YOU QUESTION WHETHER IT IS REASONABLE OR FAIR TO EXPECT A CONTRACTOR TO BE RESPONSIBLE FOR CORRECTING LATENT DEFECTS IN SPECIFICATIONS PROVIDED BY THE GOVERNMENT. AS AN EXAMPLE, YOU CITE A CASE WHERE ONE OF THE SPECIFIED SINGLE-SOURCE COMPONENTS (YOU SAY IT COULD BE THE COMPRESSOR, FAN MOTOR, EVAPORATOR FAN OR CONDENSOR FAN) DOES NOT OR WILL NOT PERMIT THE UNIT TO MEET THE PERFORMANCE SPECIFICATION. YOU STATE THAT EVEN IF THE CONTRACTOR DETERMINES INITIALLY THAT THE SPECIFIED COMPONENT IS INADEQUATE, AND HE SELECTS ANOTHER COMPONENT, THE CONTRACTING OFFICER FOR VARIOUS REASONS MIGHT CALL FOR A REDESIGN OF THE UNIT WITH THE ORIGINALLY SELECTED COMPONENT RATHER THAN APPROVE THE NEW COMPONENT SELECTED BY THE CONTRACTOR; BUT THAT IN EITHER CASE THE CONTRACTOR MUST ABSORB THE COSTS. THUS, YOU CONCLUDE THAT UNDER THIS CLAUSE A CONTRACTOR COULD BE REQUIRED TO PERFORM MAJOR REDESIGNING TO CORRECT LATENT DEFECTS IN GOVERNMENT- FURNISHED SPECIFICATIONS, WITHOUT RECEIVING ANY INCREASE IN PRICE. YOU PROTEST SUCH A PROVISION, AND REQUEST A RECONSIDERATION OF THE CONTRACT AWARD AND ELIMINATION OF THE PROVISION IN QUESTION BEFORE A NEW AWARD IS MADE.

THE DEPARTMENT OF THE ARMY CONFIRMS THAT THERE ARE SOURCE-CONTROLLED ITEMS SPECIFIED IN THE SUBJECT SOLICITATION. IT CONSIDERS THIS TO BE ADVANTAGEOUS TO BOTH THE GOVERNMENT AND THE CONTRACTOR BECAUSE IT MEANS THAT THE COMPONENTS HAVE BEEN TESTED AS MEETING THE SPECIFICATIONS. ALSO THE DEPARTMENT RECOGNIZES THAT SHOULD THE CONTRACTOR QUESTION THE ADEQUACY OF A SOURCE-CONTROLLED ITEM, HE MAY RUN HIS OWN TEST AND SUBMIT AN ENGINEERING CHANGE PROPOSAL (ECP) AS PROVIDED IN THE CLAUSE.

LEGAL COUNSEL FOR THE DEPARTMENT OF THE ARMY STATES THAT IF A SPECIFIED COMPONENT'S DESIGN IS FOUND TO BE INADEQUATE (WHICH HE DOUBTS WILL BE THE CASE IN VIEW OF THE TESTING), HE BELIEVES IT IS NOT UNFAIR TO PLACE THE BURDEN OF RESPONSIBILITY UPON THE CONTRACTOR FOR ANY REDESIGNING WHICH MAY BE NECESSARY. HE FURTHER STATES THAT IN THE HYPOTHETICAL SITUATION YOU POSE WHERE THE GOVERNMENT UNREASONABLY REFUSES TO APPROVE A ALTERNATE PROPOSED BY ECP TO CORRECT THE INADEQUATE DESIGN OF A SPECIFIED COMPONENT, A CONTRACTOR COULD TREAT SUCH A REFUSAL AS A CONSTRUCTIVE CHANGE TO THE CONTRACT AND MIGHT RECEIVE AN EQUITABLE ADJUSTMENT FOR THE ADDITIONAL EXPENSE INCURRED. COUNSEL CITES APPEAL OF BARKSDALE BROTHERS CORPORATION, ASBCA NO. 7214, WHERE THE PRECLUSION OF A CONTRACTOR'S FREEDOM OF CHOICE WAS HELD TO DISCHARGE ITS OBLIGATIONS, AND APPEAL OF NOONAN CONSTRUCTION COMPANY, ASBCA NO. 8320, WHICH RECOGNIZED THAT "GOVERNMENT REPRESENTATIVES, AS WELL AS CONTRACTORS, MUST, WITHIN THE CONFINES OF CONTRACTUAL OBLIGATIONS, ALWAYS ACT AS REASONABLE MEN WOULD UNDER THE SAME CIRCUMSTANCES," AS SUPPORTING SUCH A RESULT.

IT APPEARS TO US THAT ARMY COUNSEL RECOGNIZES THE NEED TO INTERPRET ARTICLE 1 IN A REASONABLE MANNER. BUT HE BELIEVES THAT IT IS FAIR TO PLACE THE BURDEN OF CORRECTING DEFECTIVE SPECIFICATIONS UPON THE CONTRACTOR AND NOT THE GOVERNMENT. EXTENSIVE LITIGATION HAS RESULTED IN THE PAST BECAUSE OF DEFECTIVE SPECIFICATIONS. THE CURRENT CLAUSE IS AN ATTEMPT SPECIFICALLY TO ASSIGN THE RISK OF DEFECTIVE SPECIFICATIONS TO THE CONTRACTOR. HOWEVER, WE DO NOT BELIEVE THAT THE CONTRACTOR SHOULD BE EXPECTED TO ASSUME AN UNREASONABLE RISK. IF, FOR EXAMPLE, THE AMOUNT OF REDESIGNING NECESSARY TO CORRECT A DEFECT IS SUBSTANTIALLY GREATER THAN COULD REASONABLY HAVE BEEN CONTEMPLATED AT THE TIME OF BIDDING, IT COULD WELL BE ARGUED, WE THINK, THAT THE CORRECTION OF DEFICIENCIES CLAUSE DOES NOT BAR AN EQUITABLE ADJUSTMENT IN SUCH A CASE.

IN ANY CASE, WE DO NOT INTEND TO DISTURB THE IMMEDIATE AWARD. INDICATED IN OUR PRIOR DECISION, ONLY EXPERIENCE WILL REVEAL WHETHER THE USE OF THE CLAUSE IN QUESTION IS WARRANTED FOR PURPOSES OF GOVERNMENT PROCUREMENT. YOUR PROTEST AGAINST THE AWARD AND THE USE OF THIS CLAUSE IS THEREFORE DENIED.

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