B-166237, AUG. 15, 1969

B-166237: Aug 15, 1969

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SINCE NEGOTIATED SOLE-SOURCE AWARD WAS MADE AT A TIME WHEN PROTESTANT HAD NOT BEEN ESTABLISHED AS A COMPETENT PRODUCER UNDER AN EXISTING CONTRACT AND SINCE THERE IS NOTHING TO DISCLOSE ABUSE OF DISCRETION BY THE CONTRACTING OFFICER TO AFFECT THE LEGALITY OF THE CONTRACT. ESQUIRE: FURTHER REFERENCE IS MADE TO THE TELEGRAM OF FEBRUARY 19. THE SUBJECT SOLICITATION WAS ISSUED ON JUNE 3. TO FULFILL THE FISCAL YEAR 1969 (FY 69) REQUIREMENTS OF THE NAVY AND AIR FORCE FOR HIGHLY TECHNICAL ELECTRONIC DEVICES (MK 3 MOD 0 AND/OR MK 3 MOD 1) WHICH ARE IMPORTANT INTEGRAL PARTS UTILIZED IN THE SHRIKE AND STANDARD ARM MISSILES. THE FIRST PRODUCTION CONTRACT FOR THE SUBJECT ITEMS WAS AWARDED TO ITT FOR A QUANTITY OF 1.

B-166237, AUG. 15, 1969

BID PROTEST - NEGOTIATED SOLE-SOURCE AWARD DECISION DENYING PROTEST OF COMPUTRONICS, INC. AGAINST NEGOTIATED SOLE- SOURCE AWARD TO ITT FOR FURNISHING ELECTRONIC DEVICES FOR SHRIKE MISSILES FOR NAVAL AIR SYSTEMS COMMAND. SINCE NEGOTIATED SOLE-SOURCE AWARD WAS MADE AT A TIME WHEN PROTESTANT HAD NOT BEEN ESTABLISHED AS A COMPETENT PRODUCER UNDER AN EXISTING CONTRACT AND SINCE THERE IS NOTHING TO DISCLOSE ABUSE OF DISCRETION BY THE CONTRACTING OFFICER TO AFFECT THE LEGALITY OF THE CONTRACT, PROTEST MUST BE DENIED.

TO JOHN F. WOLF, ESQUIRE:

FURTHER REFERENCE IS MADE TO THE TELEGRAM OF FEBRUARY 19, 1969, FROM YOUR CLIENT, COMPUTRONICS, INC. (COMPUTRONICS), AND SUBSEQUENT CORRESPONDENCE FROM YOUR OFFICE IN SUPPORT OF ITS PROTEST AGAINST AWARD OF A CONTRACT TO ANOTHER OFFEROR UNDER REQUEST FOR PROPOSALS (RFP) NO. N00019-68-R-0234, ISSUED BY THE NAVAL AIR SYSTEMS COMMAND (NAVAIR).

THE SUBJECT SOLICITATION WAS ISSUED ON JUNE 3, 1968, TO FULFILL THE FISCAL YEAR 1969 (FY 69) REQUIREMENTS OF THE NAVY AND AIR FORCE FOR HIGHLY TECHNICAL ELECTRONIC DEVICES (MK 3 MOD 0 AND/OR MK 3 MOD 1) WHICH ARE IMPORTANT INTEGRAL PARTS UTILIZED IN THE SHRIKE AND STANDARD ARM MISSILES.

ACCORDING TO THE REPORT FURNISHED THIS OFFICE BY NAVAIR, THE FIRST PRODUCTION CONTRACT FOR THE SUBJECT ITEMS WAS AWARDED TO ITT FOR A QUANTITY OF 1,606 UNITS IN DECEMBER 1965, AND ALL SUBSEQUENT PRODUCTION CONTRACTS WERE AWARDED TO ITT AS A SOLE SOURCE UNTIL IT WAS CONSIDERED FEASIBLE TO DEVELOP AN ADDITIONAL SOURCE FOR THE COMPONENT IN QUESTION. IN NOVEMBER 1967, PURSUANT TO THE NEGOTIATION AUTHORITY CONTAINED IN 10 U.S.C. 2304 (A) (16), A CLASS DETERMINATION AND FINDINGS WAS SIGNED BY THE ASSISTANT SECRETARY OF THE NAVY, AUTHORIZING SOLICITATION OF PROPOSALS FROM 47 SOURCES FOR A PRODUCTION QUANTITY OF 1,503 UNITS, SET ASIDE FROM THE FY 68 REQUIREMENT, FOR THE DEVELOPMENT OF A SECOND SOURCE MANUFACTURER FOR THE MK 3 MOD 0 ELECTRONIC ASSEMBLY. FOURTEEN FIRMS RESPONDED AND THE AWARD WAS MADE ON FEBRUARY 8, 1968, TO COMPUTRONICS (THEN WILLIAM WALTER, INC.) AT A UNIT PRICE OF $149.25. UNDER THIS AWARD, PREPRODUCTION QUALIFICATION UNITS WERE SCHEDULED FOR DELIVERY ON JUNE 7, 1968, AND DELIVERY OF PRODUCTION UNITS WAS REQUIRED TO START IN AUGUST 1968 AND BE COMPLETED IN FEBRUARY 1969 AT A RATE OF APPROXIMATELY 226 PER MONTH.

MEANWHILE, IN JUNE 1968 THE INSTANT RFP WAS ISSUED, ALSO UNDER THE NEGOTIATING AUTHORITY OF 10 U.S.C. 2304 (A) (16), AND THE CLASS DETERMINATION OF NOVEMBER 1967, REFERRED TO ABOVE. IT WAS SENT TO BOTH COMPUTRONICS AND TO ITT. THE RFP ASKED FOR PROPOSALS ON QUANTITIES RANGING FROM 1,040 TO 3,400 UNITS, WITH THE FOLLOWING DELIVERY SCHEDULES, COMMENCING IN DECEMBER 1968:

1,040 - 94 EACH MONTH THROUGH SEPTEMBER 1969; 104 FOR OCTOBER 1969

2,200 - 200 EACH MONTH THROUGH OCTOBER 1969

3,400 - 309 EACH MONTH THROUGH SEPTEMBER 1969; 310 FOR OCTOBER 1969

PROPOSALS WERE SUBMITTED BY JULY 3, 1968, AND COMPUTRONICS PROPOSED PRICES ON ALL QUANTITIES WHICH WERE SUBSTANTIALLY LOWER THAN THOSE QUOTED BY ITT.

LATER IN JULY 1968, THE SHRIKE REQUIREMENTS WERE REDUCED BY THE SECRETARY OF DEFENSE TO 2,400 UNITS, AND THE DELIVERY SCHEDULE WAS REVISED IN ACCORDANCE WITH THE FORMULA OF SECTION D, ENTITLED ,DELIVERIES" AT PAGE 5 OF THE RFP AS FOLLOWS: COMMENCING DECEMBER 1968, 211 EACH MONTH THROUGH SEPTEMBER 1969; 290 FOR OCTOBER 1969

NO AMENDMENT WAS ISSUED AND NO DISCUSSIONS WERE HELD WITH EITHER OFFEROR ON THE NEW FY 69 REQUIREMENTS. HOWEVER, BECAUSE OF THE NECESSITY FOR OBTAINING PROMPT DELIVERIES BY DECEMBER, AND IN VIEW OF THE FACT THAT COMPUTRONICS HAD NOT AT THAT TIME RECEIVED APPROVAL FOR PROCEEDING WITH PRODUCTION UNDER ITS EXISTING CONTRACT, ON AUGUST 28, 1968, NAVAIR APPROVED ISSUANCE OF A LETTER CONTRACT AWARD TO ITT FOR 1,200 UNITS WITH A CEILING PRICE OF $347.55, WHICH WAS MATERIALLY HIGHER THAN COMPUTRONICS PRICES SUBMITTED IN RESPONSE TO THE RFP. NO NOTICE OF THIS AWARD WAS GIVEN TO COMPUTRONICS.

WE WERE ADVISED BY NAVY THAT THE APPROVAL TO ISSUE THE LETTER CONTRACT IN AUGUST 1968 DEALT ONLY WITH THE FORM OF THE LEGAL INSTRUMENT TO BE EMPLOYED IN MAKING THE AWARD TO ITT; THE JUSTIFICATION AND APPROVAL FOR ENTERING INTO THE LETTER CONTRACT WAS NOT GIVEN UNTIL OCTOBER 15, 1968. THE JUSTIFICATION GIVEN FOR SUCH APPROVAL STATED IN PART: "* * * BASED ON THE ABOVE PRICES, WILLIAM WALTERS WAS THE LOW BIDDER ON ALL QUANTITIES, HOWEVER, DUE TO THE FACT THAT THEY HAVE NOT RECEIVED A FULL RELEASE TO PRODUCTION, A QUANTITY OF 1,200 IS BEING AWARDED TO ITT OUT OF A TOTAL FY 69 PROCUREMENT OF 2,229 UNITS WITH OPTIONS TO COVER THE REMAINING FY 69 REQUIREMENT, AND THE QUANTITY FOR FY 68 UNDER CONTRACT N00019-68-C-0382 WITH WILLIAM WALTERS, IF FOR TECHNICAL REASONS THEY DO NOT RECEIVE AN UNCONDITIONAL RELEASE TO PRODUCTION. IF WILLIAM WALTERS QUALIFIES AFTER SUBMISSION OF LOT ONE (1), A CEILING PRICE LETTER CONTRACT WILL BE ISSUED AT A UNIT PRICE OF $261.00, A SAVINGS OF $86.75 PER UNIT.

* * * * * * * "AT PRESENT ITT IS THE ONLY FULLY QUALIFIED SOURCE FOR THIS PROCUREMENT. IN VIEW OF THIS AND UNTIL WILLIAM WALTERS IS A FULLY QUALIFIED PRODUCER THE PRIORITY OF THE SHRIKE MISSILE REQUIREMENTS FOR SEA REQUIRES THAT A MINIMUM AWARD OF 1,200 BE MADE TO ITT TO MEET THE CURRENT RFI SCHEDULE.'

* * * * * * * "A LETTER CONTRACT WITH A CEILING PRICE IS THE ONLY METHOD OF CONTRACTING THAT WILL PROTECT THE MANDATORY DELIVERY SCHEDULE WHICH REQUIRES DELIVERIES COMMENCING IN DECEMBER 1968. THE LETTER CONTRACT WILL BE DEFINITIZED WITHIN 180 DAYS TO A FIRM FIXED PRICE CONTRACT.'

THE PROPOSED LETTER CONTRACT WAS TENDERED TO ITT ON OCTOBER 24, 1968. HOWEVER, ITT DID NOT RETURN THE LETTER CONTRACT UNTIL NOVEMBER 13, 1968, AND ITS OFFER CONTAINED CERTAIN CONDITIONS. THE RESOLUTION OF THESE CONDITIONS AND CERTAIN ADMINISTRATIVE PROBLEMS REGARDING FUNDING DELAYED THE EXECUTION OF THE LETTER CONTRACT UNTIL DECEMBER 30, 1968; HOWEVER, IT APPEARS THAT ITT HAD COMMENCED WORK AT ITS OWN RISK UPON RECEIPT OF THE TENDERED LETTER CONTRACT, AND IT WAS THEREFORE ABLE TO MEET THE DECEMBER 1968 DELIVERY REQUIREMENT. IN THIS REGARD, THE DELIVERY SCHEDULE FOR THE 1,200 UNITS UNDER THE LETTER CONTRACT WAS AS FOLLOWS:

DECEMBER 1968 JANUARY 1969 FEBRUARY 1969 MARCH 1969 APRIL 1969

138 261 267 267 267 WE ARE ADVISED THAT DELIVERIES WERE COMPLETED ON APRIL 25, 1969.

WHILE THE EXACT DATES ARE UNCLEAR, IT APPEARS THAT FY 69 REQUIREMENTS WERE AGAIN REVISED BY THE SECRETARY OF DEFENSE BY REDUCTION FROM 2,400 TO 2,229. COMPUTRONICS WAS REQUESTED ON SEPTEMBER 15, 1968, TO SUBMIT A QUOTATION FOR THE BALANCE OF 1,029 UNITS, AND RESPONDED ON SEPTEMBER 30, 1968, WITH A PRICE OF $261.07 PER UNIT. IN DECEMBER 1968, THE QUANTITY OF 1,029 WAS INCREASED TO 1,928. AT THIS POINT, NEW QUOTES WERE REQUESTED FROM BOTH COMPANIES. AFTER NEGOTIATIONS, A UNIT PRICE OF $245 WAS ESTABLISHED WITH COMPUTRONICS, AND A MEMORANDUM OF NEGOTIATION WAS SIGNED BY NAVY AND COMPUTRONICS ON JANUARY 8, 1969, WITH AN ESTIMATE BY THE NAVY NEGOTIATOR THAT ONE OR TWO WEEKS WOULD BE REQUIRED BEFORE THE CONTRACT WAS ISSUED. HOWEVER, BEFORE A CONTRACT COULD BE FORMALLY AWARDED, THE QUANTITY WAS ONCE AGAIN REVISED DUE TO A REDUCTION IN AIR FORCE REQUIREMENTS, THIS TIME TO 1,463 UNITS. BECAUSE OF THE TIME THAT HAD ELAPSED SINCE THE ORIGINAL PROPOSALS, NAVY DECIDED TO REQUEST NEW PROPOSALS COVERING THIS LATEST QUANTITY. IN RESPONSE TO THIS REQUEST, IN JANUARY 1969 ITT SUBMITTED A PRICE OF $223 AND COMPUTRONICS A PRICE OF $240, DELIVERIES TO BE IN MONTHLY INSTALLMENTS FROM MARCH THROUGH JULY 1969.

ON THE BASIS OF ITT'S LOWER PRICE, AND THE FACT THAT COMPUTRONICS WAS AT THAT TIME APPROXIMATELY 1,100 UNITS BEHIND SCHEDULE ON ITS PRODUCTION CONTRACT, NAVAIR DECIDED TO AWARD A CONTRACT TO ITT FOR THE 1,463 UNITS. HOWEVER, AT THIS STAGE OF THE PROCUREMENT COMPUTRONICS FILED ITS PROTEST WITH OUR OFFICE. DESPITE THIS, ON A FINDING OF URGENCY FOR THE REQUIREMENT, A DETERMINATION WAS MADE, PURSUANT TO SECTION 2-407.9 (B) (2) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), BY THE VICE COMMANDER OF NAVAIR TO PROCEED WITH AN AWARD TO ITT. AWARD WAS POSTPONED, HOWEVER, FOR REVIEW OF THE PROCUREMENT BY NAVAIR IN THE LIGHT OF THE QUESTIONS RAISED IN THE PROTEST. THEREAFTER, ON APRIL 2, 1969, THE DECISION TO AWARD WAS COMMUNICATED TO OUR OFFICE AND THE AWARD TO ITT WAS MADE EFFECTIVE ON THAT DATE, AND INCLUDED AS A PART OF THE DEFINITIZATION OF THE DECEMBER 30, 1968, LETTER CONTRACT. AT THE SAME TIME, THE DELIVERY SCHEDULE FOR THE 1,463 UNITS WAS EXTENDED BY ONE MONTH.

THE MAJOR ARGUMENTS PRESENTED IN SUPPORT OF THE INSTANT PROTEST MAY BE SUMMARIZED AS FOLLOWS:

1. NAVAIR'S FAILURE TO CONDUCT DISCUSSIONS WITH COMPUTRONICS CONCERNING ITS NONRESPONSIBILITY BECAUSE OF ALLEGED DEFICIENCES UNDER CURRENT CONTRACTS, AND NAVAIR'S FAILURE TO DISCUSS OR TO NEGOTIATE WITH BOTH OFFERORS ON THE SAME BASIS, WHEN COMPUTRONICS PROPOSAL WAS IN A COMPETITIVE RANGE, WAS IN VIOLATION OF 10 U.S.C. 2304 (G). IN ADDITION YOU STATE THAT ITT WAS NOT THE LOW OFFEROR ON THE DECEMBER 30, 1968, AWARD, NOR DID THE ADDITION OF 1,463 UNITS TO THAT CONTRACT AVERAGE OUT TO MAKE IT A LOW OFFEROR.

2. THE CONTRACTING OFFICER WAS REQUIRED BY SECTION 1-705.4 OF ASPR TO REFER THE QUESTION OF COMPUTRONICS' CAPABILITY TO MEET THE DELIVERY SCHEDULE OF THE DECEMBER 30, 1968, AWARD TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR A DETERMINATION OF ITS CAPACITY TO PERFORM UNDER SBA'S CERTIFICATE OF COMPETENCY (COC) PROCEDURE.

3. COMPUTRONICS WAS ENTITLED, PURSUANT TO THE PROVISIONS OF ASPR 3 505.2, TO NOTICE OF THE DECEMBER 30 AWARD TO ITT.

4. THE TRUTH IN NEGOTIATIONS ACT (PUBLIC LAW 87-653) 10 U.S.C. 2306 (F), WAS VIOLATED WHEN CURRENT COST AND PRICING DATA WERE NOT FURNISHED BY ITT.

5. THERE WAS NO EMERGENCY CONCERNING THE AWARD OF EITHER CONTRACT.

6. THERE IS NOTHING IN THE RECORD TO REFLECT THAT THE CONTRACTING OFFICER OBTAINED APPROVAL FROM "HIGHER AUTHORITY," AS REQUIRED BY ASPR 2-407.9 (B) (3), BEFORE MAKING THE APRIL AWARD WITH THE PROTEST PENDING IN OUR OFFICE.

AS WE HAVE ALREADY NOTED, THE JUSTIFICATION CITED FOR NEGOTIATING THE CONTRACT, RATHER THAN EMPLOYING ADVERTISED BIDDING PROCEDURES, WAS SECTION 2304 (A) (16) OF TITLE 10 OF THE UNITED STATES CODE, WHICH PROVIDES THAT WHERE FORMAL ADVERTISING IS NOT FEASIBLE AND PRACTICABLE, THE HEAD OF THE AGENCY MAY NEGOTIATE A PURCHASE WHEN: "* * * HE DETERMINES THAT (A) IT IS IN THE INTEREST OF NATIONAL DEFENSE TO HAVE A PLANT, MINE, OR OTHER FACILITY, OR A PRODUCER, MANUFACTURER, OR OTHER SUPPLIER, AVAILABLE FOR FURNISHING PROPERTY OR SERVICES IN CASE OF A NATIONAL EMERGENCY; OR (B) THE INTEREST OF INDUSTRIAL MOBILIZATION IN CASE OF SUCH AN EMERGENCY, OR THE INTEREST OF NATIONAL DEFENSE IN MAINTAINING ACTIVE ENGINEERING, RESEARCH, AND DEVELOPMENT, WOULD OTHERWISE BE BE SERVED.'

YOU CONTEND THAT NAVAIR'S FAILURE TO DISCUSS WITH COMPUTRONICS ITS ABILITY TO PERFORM THE JOB, ESPECIALLY IN VIEW OF GOVERNMENT CAUSED DELAYS IN GRANTING CLEARANCE FOR PRODUCTION UNDER ITS PRIOR CONTRACT, WAS IN VIOLATION OF 10 U.S.C. 2304 (G), AND, THEREFORE, THE CONTRACTS WERE ILLEGALLY AWARDED. SINCE YOU CONCLUDE THAT ACTIVE COMPETITION WAS NOT PRESENT, AND THERE WAS NO DISCUSSION OF A CUT-OFF DATE FOR RECEIPT OF PROPOSALS, ESPECIALLY UNDER THE APRIL AWARD, YOU CONTEND THE CONTRACTS MUST BE CANCELLED.

THE CITED STATUTORY PROVISION, 10 U.S.C. 2304 (G), REQUIRES THAT THE SELECTION OF A CONTRACTOR IN A NEGOTIATED PROCUREMENT BE MADE (1) AFTER OBTAINING MAXIMUM COMPETITION CONSISTENT WITH THE NEEDS OF THE PROCUREMENT, AND (2) AFTER DISCUSSIONS ARE CONDUCTED WITH ALL RESPONSIBLE OFFERORS SUBMITTING PROPOSALS WITHIN A COMPETITIVE RANGE; WITH THE EXCEPTION THAT AWARD MAY BE MADE ON THE BEST INITIAL PROPOSAL IF IT BE DETERMINED THAT THE PRICE IS REASONABLE, AND IF SUCH RIGHT IS RESERVED IN THE SOLICITATION.

IN THE USUAL CASE THE CONTRACTING AGENCY HAS BOTH PRICE AND OTHER FACTORS, SUCH AS TECHNICAL KNOW-HOW, DELIVERY CAPABILITY, AND THE LIKE BEFORE IT WHEN IT DETERMINES WHICH PROPOSALS ARE WITHIN COMPETITIVE RANGE. HOWEVER, THERE ARE SITUATIONS IN WHICH FACTORS OTHER THAN PRICE MAY BE DETERMINATIVE IN DECIDING WHETHER A PARTICULAR PROPOSAL IS WITHIN A COMPETITIVE RANGE.

YOU VEHEMENTLY DISAGREE WITH THE REASONS GIVEN BY NAVAIR FOR NOT AWARDING THE CONTRACTS TO YOUR CLIENT, ESPECIALLY INSOFAR AS IT CONCERNS COMPUTRONICS' DELIVERY PROBLEMS UNDER THE PRODUCTION CONTRACT OF 1968. THIS REGARD NAVAIR'S REPORT OF JUNE 18, 1969, STATED IN PART: "THE NEGOTIATIONS THAT WERE BEING CONDUCTED WITH COMPUTRONICS COVERED DELIVERIES OVER THE PERIOD MARCH THROUGH JULY 1969 FOR THE COMPETITIVE PORTION (1,463 UNITS) OF THE FY 1969 PROCUREMENT. THE PROCUREMENT OF THE 1,200 UNITS FOR WHICH ITT WAS CONSIDERED TO BE THE SOLE SOURCE- WAS TO BE DELIVERED DURING THE PERIOD DECEMBER 1968 B 166237 THROUGH APRIL 1969. THUS THE DECISION TO AWARD THE -SOLE SOURCE PROCUREMENT TO ITT HAD TO BE MADE IN MID-OCTOBER 1968 IN ORDER TO MEET THE DECEMBER DELIVERY REQUIREMENT. (EVEN THOUGH THE CONTRACT WAS NOT EXECUTED UNTIL DECEMBER 1968, ITT PROCEEDED ON ITS OWN AFTER RECEIPT OF NAVAIR'S SOLICITATION OF AN OFFER TO ENTER INTO A LETTER CONTRACT LATE IN OCTOBER 1968.) AT THIS TIME, COMPUTRONICS HAD JUST RECENTLY (8 OCTOBER 1968) RESUBMITTED ITS PREPRODUCTION QUALIFICATION SAMPLES UNDER ITS FY 1968 PRODUCTION CONTRACT. BY MUTUAL AGREEMENT THESE WERE 30 TEST SAMPLES FROM LOT 1. REQUESTING AN EXPEDITIOUS EVALUATION FROM THE QUALITY EVALUATION LABORATORY, CRANE, INDIANA, AND BY AUTHORIZING OVERTIME THEREFOR, NAVAIR WAS ABLE TO REDUCE THE TESTING TIME FROM 8 WEEKS TO 6 WEEKS. THIS MEANT THAT THE RESULTS OF THE TESTING WOULD NOT BE AVAILABLE UNTIL APPROXIMATELY 19 NOVEMBER 1968. IT SHOULD BE NOTED THAT THIS WOULD BE THE EARLIEST POSSIBLE DATE; IF PROBLEMS AROSE, FURTHER DELAYS WOULD RESULT. IN LATE NOVEMBER, THE FORMAL TEST RESULTS WERE RECEIVED. THESE RESULTS INDICATED THAT PROBLEMS HAD BEEN ENCOUNTERED, WHICH HAD TO BE RESOLVED.'OBVIOUSLY, NAVAIR IN MID-OCTOBER 1968 WAS NOT CERTAIN THAT COMPUTRONICS' QUALIFICATION UNITS WOULD BE ACCEPTABLE. SINCE ACCEPTABLE UNITS WERE URGENTLY NEEDED BY THE MISSILE MANUFACTURERS, AND SINCE ITT WAS THE ONLY SOURCE KNOWN TO BE ABLE TO PRODUCE ACCEPTABLE UNITS, THE DECISION WAS MADE IN MID-OCTOBER TO AWARD A PORTION OF THE FY 1969 -BUY- TO ITT. OF THE TOTAL OF 2,663 UNITS, ONLY 1,200 WERE AWARDED ON THE -SOLE SOURCE- BASIS BECAUSE NAVAIR HAD HOPES THAT COMPUTRONICS WOULD QUALIFY ITS UNITS IN TIME TO PRODUCE THE REMAINING 1,463. THUS THE NEGOTIATIONS THAT TOOK PLACE WITH COMPUTRONICS WERE FOR THE REMAINING 1,463 UNITS THAT WERE TO BE DELIVERED STARTING IN MARCH 1969.

"IT SHOULD BE NOTED THAT COMPUTRONICS STILL HAS NOT DELIVERED 599 OF THE 1,503 UNITS UNDER ITS FY 1968 CONTRACT EVEN THOUGH THE ORIGINAL CONTRACT SCHEDULE CALLED FOR COMPLETION IN FEBRUARY 1969, AND THE REVISED SCHEDULE REQUESTED BY COMPUTRONICS IN ITS LETTER OF 9 SEPTEMBER 1968 CALLED FOR COMPLETION IN MARCH 1969. B-166237 "BY SPLITTING THE BUY INTO -SOLE SOURCE- AND -COMPETITIVE- PORTIONS, NAVAIR WAS ABLE TO OBTAIN THE BENEFITS OF COMPETITION ON OVER HALF THE -BUY-. AFTER THE SPLIT, THE PROCUREMENT OF THE 1,463 UNITS BECAME A SEPARATE CONTRACTUAL ACTION. THE CONTRACT FOR THE 1,463 UNITS WAS AWARDED TO ITT ON THE BASIS OF ITS LOW PRICE AND ITS DEMONSTRATED ABILITY TO MEET THE URGENT DELIVERY SCHEDULES.'

IT DOES APPEAR FROM THE RECORD THAT AFTER THE DECISION WAS MADE AND APPROVAL WAS GRANTED FOR AWARDING THE LETTER CONTRACT, BUT BEFORE IT WAS ACTUALLY AWARDED, COMPUTRONICS' LOT 1 UNDER THE 68 FY PRODUCTION CONTRACT WAS ACCEPTED, ON DECEMBER 20, 1968. HOWEVER, IN VIEW OF THE FACT THAT COMPUTRONICS' DELIVERIES UNDER THE FY 68 CONTRACT HAD NOT BEEN COMPLETED AS OF JUNE 1969, IT IS CLEAR THAT, REGARDLESS OF THE REASONS THEREFOR, COMPUTRONICS WAS EXPERIENCING DIFFICULTIES IN MEETING THE DELIVERY REQUIREMENTS UNDER THE FY 68 CONTRACT, AND CANNOT NOW BE HEARD TO CONTEND THAT IT COULD HAVE DELIVERED ADDITIONAL UNITS BEGINNING IN DECEMBER 1968 UNDER A FY 69 CONTRACT. WE NOTE IN THIS REGARD THAT YOU STATE THAT THE FY 68 CONTRACT SHOULD HAVE BEEN AMENDED SO AS TO GRANT EXTENSIONS OF TIME, AND THAT THIS IS A SEPARATE MATTER WHICH YOU ARE DISCUSSING WITH NAVAIR. NEVERTHELESS, UP TO DECEMBER 20 COMPUTRONICS HAD NOT ESTABLISHED ITS ABILITY TO PRODUCE THE ITEMS IN THE MANNER REQUIRED BY ITS EXISTING CONTRACT, AND COULD NOT THEREFORE HAVE BEEN AUTHORIZED TO PROCEED WITH PRODUCTION UNDER A NEW CONTRACT FOR THE SAME ITEMS.

WITH RESPECT TO YOUR CONTENTION THAT THE QUESTION OF COMPUTRONICS' (A SMALL BUSINESS) CAPACITY TO MEET THE DELIVERY SCHEDULE OF THE DECEMBER 30 AWARD, SHOULD HAVE BEEN SUBMITTED TO SBA FOR A POSSIBLE CERTIFICATE OF COMPETENCY (COC) UNDER THE PROCEDURES OUTLINED IN ASPR 1 705.4, BOTH THAT REGULATION AND THE REGULATIONS OF SBA (13 CFR 124.8 16) WITH RESPECT TO THE COC PROCEDURE MAKE IT CLEAR THAT SBA'S AUTHORITY IN THAT RESPECT IS NOT TO BE INVOKED UNTIL THE CONTRACTING OFFICER HAS DETERMINED THAT A SMALL BUSINESS QUALIFIES FOR AWARD IN ALL RESPECTS OTHER THAN CAPACITY OR CREDIT TO PERFORM THE CONTRACT. CLEARLY, SUCH A DETERMINATION IS NOT TO BE MADE WITH RESPECT TO SMALL BUSINESS CONCERNS FROM WHICH OFFERS HAVE NOT BEEN SOLICITED BECAUSE OF A DETERMINATION THAT ONLY ONE FIRM CAN MEET THE REQUIRED DELIVERY SCHEDULE, AND WE SEE NO VALID BASIS FOR IMPOSING ANY ADDITIONAL OR DIFFERENT REQUIREMENTS ON THE CONTRACTING OFFICER IN THE INSTANT CASE.

IN THESE CIRCUMSTANCES, WE ARE FORCED TO CONCLUDE THAT THE NAVY WAS JUSTIFIED AT THE TIME THE LETTER CONTRACT WAS ISSUED TO ITT IN CONSIDERING THAT FIRM AS THE SOLE AVAILABLE SOURCE FOR IMMEDIATE DELIVERIES OF THE SUPPLIES REQUIRED. FOR THE SAME REASON WE DO NOT FEEL THAT THE FAILURE OF NAVAIR TO CONDUCT FURTHER DISCUSSIONS WITH COMPUTRONICS FOR THE IMMEDIATE REQUIREMENTS MAY PROPERLY BE CONSIDERED AS A VIOLATION OF THE REQUIREMENTS OF 10 U.S.C. 2304 (G). WHILE THERE MIGHT BE SOME QUESTION AS TO WHETHER THE AWARD FOR THE IMMEDIATE REQUIREMENTS SHOULD HAVE INCLUDED FIVE MONTHS' DELIVERIES, OR SOME SMALLER NUMBER, WE FIND NO INDICATION THAT THE DETERMINATION IN THIS RESPECT WAS NOT MADE IN ENTIRE GOOD FAITH AND WITH DUE REGARD TO PRESERVING COMPUTRONICS' RIGHTS TO FULL CONSIDERATION FOR THE REMAINING NEEDS OF THE FISCAL YEAR.

AS TO THE APRIL 2, 1969, AWARD, THIS WAS BASED ON THE LOW PRICE AND DOES NOT APPEAR TO BE OPEN TO QUESTION ON THAT BASIS. WE CANNOT ACCEPT YOUR ARGUMENT THAT ITT'S PRICE SHOULD HAVE BEEN CONSIDERED TO BE THE AVERAGE OF THE TOTAL QUANTITY INCLUDING THE 1,200 UNDER THE LETTER CONTRACT. THE GOVERNMENT WAS ALREADY OBLIGATED UNDER THAT CONTRACT, AND AWARD TO YOU OF THE REMAINING 1,463 UNITS WOULD HAVE RESULTED IN AN EVEN HIGHER COST FOR THE TOTAL REQUIREMENT. WITH REFERENCE TO YOUR ARGUMENT THAT COMPUTRONICS WAS NEVER TOLD OF A CUT-OFF DATE FOR THE SUBMISSION OF PROPOSALS FOR THE APRIL 2, 1969, AWARD, THE RECORD SHOWS THAT NAVAIR IN ITS LETTER OF JANUARY 24, 1969, TO YOUR CLIENT STATED IN PART: " IN VIEW OF THE URGENCY FOR CONTRACTUAL COVERAGE, IT IS REQUESTED THAT YOUR RESPONSE BE FURNISHED BY 28 JANUARY 1969, SAID RESPONSE TO BE VALID FOR A PERIOD OF 30 DAYS AND TO BE IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE SUBJECT RFP AS MAY BE HEREBY MODIFIED.'

THE SAME SUBMITTAL DATE WAS FIXED IN THE SIMULTANEOUS REQUEST TO ITT.

IT DOES NOT APPEAR THAT ANY DISCUSSIONS WERE CONDUCTED WITH EITHER OFFEROR AFTER RECEIPT OF THE PROPOSALS SUBMITTED IN RESPONSE TO THAT REQUEST, OR THAT EITHER ONE OFFERED ANY FURTHER PROPOSAL OR MODIFICATION, AND IT THEREFORE CANNOT BE CONSIDERED THAT ANY FURTHER CUT-OFF DATE WAS REQUIRED.

IN ANSWER TO YOUR OBSERVATIONS AND OUR QUESTION TO THE AGENCY CONCERNING THE FACT THAT IN HIS LETTERS OF JANUARY 24, 1969, TO COMPUTRONICS AND ITT THE CONTRACTING OFFICER USED DIFFERENT SUBJECTS, I.E., IN HIS LETTER TO COMPUTRONICS THE INSTANT RFP WAS REFERENCED, WHILE IN THE LETTER TO ITT THE LETTER CONTRACT WAS REFERENCED, NAVAIR REPLIED: "SINCE THE LETTER CONTRACT WITH ITT WAS ISSUED AS A RESULT OF SOLICITATION RFP N00019-68-R- 0234, AND THE OPTION QUANTITIES INCLUDED THEREIN AT THAT TIME, SOLICITATION OF PRICES UTILIZING THE OPTION PROVISIONS OF THE LETTER CONTRACT PROVIDED THE PREFERABLE MEANS OF OBTAINING PRICES FROM THAT COMPANY FOR THE COMPETITIVE PORTION OF THE FY 1969 PROCUREMENT WITHOUT ISSUING A NEW SOLICITATION, AND WAS CONSIDERED AN APPROPRIATE METHOD OF SOLICITING PRICES.'SINCE NO CONTRACT HAD BEEN ISSUED TO COMPUTRONICS UNDER THE BASIC SOLICITATION (N00019-68-R-0234), THAT WAS, IN THE OPINION OF NAVAIR, THE APPROPRIATE DOCUMENT TO CITE IN OBTAINING PRICING FOR THE REVISED QUANTITY. NAVAIR REGRETS THAT FORMAL NOTICE OF THE -SOLE SOURCE- AWARD TO ITT WAS NEVER GIVEN TO COMPUTRONICS; HOWEVER, PERSONNEL IN THE CONTRACTS GROUP OF NAVAIR DID INFORMALLY NOTIFY REPRESENTATIVES OF COMPUTRONICS OF A PROPOSED -SOLE SOURCE- AWARD TO ITT IN OCTOBER 1968. FURTHER, ON 8 JANUARY 1969, THE NAVAIR NEGOTIATOR DURING THE NEGOTIATIONS COVERING THE COMPETITIVE BUY DID NOTIFY THE COMPUTRONICS REPRESENTATIVES OF THE ACTUAL AWARD.'

WE ARE INCLINED TO DISAGREE WITH THE ABOVE CONCLUSION AS TO THE PROPER BASIS FOR REQUESTING ITT'S PROPOSAL FOR THE ADDITIONAL QUANTITY, PARTICULARLY IN VIEW OF THE FACT THAT THE OPTION PROVISIONS OF THE LETTER CONTRACT APPEAR TO HAVE BEEN IN VIOLATION OF ASPR 1-1504 (A) WHICH RESTRICTS OPTIONS TO QUANTITIES NOT IN EXCESS OF 50 PERCENT OF THE BASIC QUANTITY. HOWEVER, WE CANNOT SEE THAT THIS ERROR HAD ANY MATERIAL EFFECT IN THE AWARD OF THE CONTRACT OR WAS IN ANY WAY PREJUDICIAL TO COMPUTRONICS.

AS TO YOUR CONTENTION THAT COMPUTRONICS WAS NOT PROMPTLY NOTIFIED OF THE DECEMBER 30, 1968, AWARD TO ITT AS REQUIRED BY ASPR 3-508.2, IT IS ADMITTED BY NAVAIR THAT TIMELY FORMAL NOTICE AS REQUIRED BY THE ABOVE CITED ASPR PROVISION WAS NOT GIVEN COMPUTRONICS. FROM THE RECORD BEFORE US IT ALSO APPEARS THAT NO POST AWARD NOTICE WAS GIVEN AS CONTEMPLATED BY ASPR 3-508.3. THE STATEMENT IN YOUR LETTER OF FEBRUARY 27, 1969,"THE MAIN PURPOSE OF THIS PROTEST IS TO ASCERTAIN THE STATUS, ONLY, OF THIS PROCUREMENT, NEGOTIATIONS FOR WHICH BEGAN AS FAR BACK AS JUNE 3, 1968," IS ILLUSTRATIVE OF THE NEED FOR COMMUNICATION BETWEEN THE PARTIES IN NEGOTIATED PROCUREMENTS. HOWEVER, WHILE YOU SHOULD HAVE BEEN ADVISED OF THE DECISION TO MAKE THE AWARD TO ITT, THE NOTICE REQUIREMENTS OF ASPR ARE PROCEDURAL AND DO NOT GO TO THE LEGAL ESSENCE OF THE AWARD. 47 COMP. GEN. 373, 377. SINCE DELIVERIES UNDER THE DECEMBER 30, 1968, AWARD HAD BEEN MORE THAN HALF COMPLETED AT THE TIME OF YOUR PROTEST, AND WERE FULLY COMPLETED IN APRIL, NO EFFECTIVE REMEDIAL ACTION WOULD NOW BE AVAILABLE EVEN IF WE WERE TO CONCLUDE THAT THE AWARD WAS IMPROPER.

IN YOUR FOURTH ARGUMENT YOU OBSERVE THAT ITT DID NOT SUBMIT ACCURATE, COMPLETE, AND CURRENT COST AND PRICING DATA AS REQUIRED BY PUBLIC LAW 87- 653 (TRUTH IN NEGOTIATIONS) AND ASPR 3-807. 10 U.S.C. 2306 (F) REQUIRES THAT WHERE THERE IS INADEQUATE COMPETITION, CERTIFIED COST OR PRICING DATA SHALL BE SUBMITTED BY THE CONTRACTOR BEFORE AWARD. WE HAVE BEEN ADVISED BY NAVAIR THAT SUCH A CERTIFICATE WAS OBTAINED FROM ITT ON THE DECEMBER 30, 1968, AWARD. NO CERTIFICATE WAS REQUIRED FOR THE APRIL 2, 1969, AWARD BECAUSE OF THE PROVISION OF ASPR 3-807.3 (C) WHICH STATES IN PART: "WHEN THERE IS ADEQUATE PRICE COMPETITION, COST OR PRICING DATA SHALL NOT BE REQUESTED REGARDLESS OF THE DOLLAR AMOUNT INVOLVED.' NAVAIR FOUND THAT THERE WAS ADEQUATE PRICE COMPETITION FOR THAT AWARD, AND WE FIND NO REASON TO DISAGREE.

YOU ALSO CONTEND THAT NAVAIR DID NOT RECEIVE APPROVAL FROM HIGHER AUTHORITY TO AWARD THE APRIL 2 CONTRACT PENDING RESOLUTION OF THE PROTEST THAT HAD BEEN FILED IN OUR OFFICE, AS IS REQUIRED BY ASPR 2 407.9 (B) (3). WHILE NOT MADE A PART OF THE ORIGINAL RECORD, WE HAVE BEEN FURNISHED A COPY OF THE APPROVAL GIVEN BY THE VICE COMMANDER OF NAVAIR ON FEBRUARY 25, 1969, TO MAKE THE AWARD IN QUESTION. THUS THE PROCEDURES APPEAR TO HAVE BEEN FOLLOWED.

IT IS OUR VIEW THAT THE CIRCUMSTANCES SURROUNDING THE AWARDS TO ITT DO NOT DISCLOSE SUCH A CLEAR ABUSE OF DISCRETION BY THE CONTRACTING OFFICER AS TO AFFECT THE LEGALITY OF THE CONTRACT AWARDED TO THAT FIRM, OR THAT THERE IS ANY BASIS FOR IMPUTATION OF BAD FAITH ON HIS PART.