B-167424, FEB. 12, 1970

B-167424: Feb 12, 1970

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WHILE PROCURING AGENCY SHOULD HAVE INCLUDED A NOTATION IN A PRESOLICITATION SYNOPSIS THAT SECURITY CLEARANCE WAS REQUIRED OF PROSPECTIVE OFFERORS. THE FAILURE OF INCLUSION OF SUCH VIOLATION WAS NOT DUE TO BAD FAITH AND THEREFORE MAY NOT BE A BASIS FOR OBJECTION. INCLUSION OF FORFEITURE PROVISIONS IS PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY. THE NAMES OF TWO ATAC REPRESENTATIVES AND TWO TELEPHONE NUMBERS WERE LISTED IN THE ANNOUNCEMENT FOR THE PURPOSE OF SECURING FURTHER INFORMATION REGARDING THE PROPOSED PROCUREMENT. " WHICH WAS POSTED IN THE ATAC PROCURING ACTIVITY LOBBY WITH OTHER SOLICITATIONS. " AND BLOCK 2 OF THE FORM INDICATED THAT THE SOLICITATION WAS ADVERTISED AND IDENTIFIED IT AS IFB NO.

B-167424, FEB. 12, 1970

BIDS--DATA PACKAGE DEPOSIT--REFUND DECISION DISALLOWING CLAIM OF NAPCO INDUSTRIES, INC; FOR REFUND OF DEPOSIT OF $5,000 PAID TO ARMY TANK AUTOMOTIVE COMMAND FOR TECHNICAL DATA PACKAGE REQUIRED INCIDENT TO SUBMISSION OF PROPOSAL IN TWO-STEP MULTIYEAR $100 MILLION PROCUREMENT FOR MILITARY VEHICLES. WHILE PROCURING AGENCY SHOULD HAVE INCLUDED A NOTATION IN A PRESOLICITATION SYNOPSIS THAT SECURITY CLEARANCE WAS REQUIRED OF PROSPECTIVE OFFERORS, THE FAILURE OF INCLUSION OF SUCH VIOLATION WAS NOT DUE TO BAD FAITH AND THEREFORE MAY NOT BE A BASIS FOR OBJECTION. AN OFFEROR WHO, AFTER DEPOSIT FOR TECHNICAL DATA PACKAGE WAITED 3 WEEKS BEFORE APPRISING PROCURING AGENCY THAT IT COULD NOT SUBMIT PROPOSAL BECAUSE OF NOT HAVING SECURITY CLEARANCE MAY NOT BE REFUNDED FORFEITURE DEPOSIT. IN VIEW OF COST TO GOVERNMENT OF PREPARING DATA PACKAGES, INCLUSION OF FORFEITURE PROVISIONS IS PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY.

TO STRASSER, SPIEGELBERG, FRIED, FRANK & KAMPELMAN:

WE REFER TO YOUR LETTER OF JULY 3, 1969, AND SUBSEQUENT CORRESPONDENCE, FILING A CLAIM WITH OUR OFFICE ON BEHALF OF NAPCO INDUSTRIES, INC. (NAPCO) OF HOPKINS, MINNESOTA, AND WARREN, MICHIGAN, FOR REFUND OF A DEPOSIT OF $5,000 WHICH NAPCO PAID TO THE UNITED STATES ARMY TANK AUTOMOTIVE COMMAND (ATAC), WARREN, FOR A TECHNICAL DATA PACKAGE REQUIRED FOR USE IN CONNECTION WITH SUBMISSION OF A TECHNICAL PROPOSAL IN A TWO-STEP PROCUREMENT OF MULTI-YEAR REQUIREMENTS FOR MILITARY VEHICLES.

ON OCTOBER 10, 1968, THE COMMERCE BUSINESS DAILY CARRIED AN ANNOUNCEMENT BY ATAC OF THE PROPOSED PROCUREMENT STATING, AMONG OTHER THINGS, THAT THE FIRST-STEP SOLICITATION WOULD BE ISSUED APPROXIMATELY OCTOBER 14; THAT NOVEMBER 25, 1968, WOULD BE THE OPENING DATE FOR TECHNICAL PROPOSALS UNDER THE FIRST STEP; AND THAT A DEPOSIT OF $5,000 WOULD BE REQUIRED FOR A TECHNICAL DATA PACKAGE (INCLUDING DRAWINGS, QUALITY ASSURANCE REQUIREMENTS, ETC.) FOR PREPARATION AND SUBMISSION OF TECHNICAL PROPOSALS. THE NAMES OF TWO ATAC REPRESENTATIVES AND TWO TELEPHONE NUMBERS WERE LISTED IN THE ANNOUNCEMENT FOR THE PURPOSE OF SECURING FURTHER INFORMATION REGARDING THE PROPOSED PROCUREMENT.

ON OCTOBER 16, ATAC ISSUED THE FIRST-STEP SOLICITATION ON STANDARD FORM 33, "SOLICITATION, OFFER, AND AWARD," WHICH WAS POSTED IN THE ATAC PROCURING ACTIVITY LOBBY WITH OTHER SOLICITATIONS. THE FACE OF THE FORM BORE THE PARENTHETICAL NOTATION "STEP ONE," AND BLOCK 2 OF THE FORM INDICATED THAT THE SOLICITATION WAS ADVERTISED AND IDENTIFIED IT AS IFB NO. DAAE07-69-B-0300. BLOCK 9 OF THE FORM STATED THAT OFFERS WOULD BE ACCEPTED UNTIL NOVEMBER 25, 1968, AND INCORPORATED IN THE SOLICITATION BY REFERENCE VARIOUS OTHER DOCUMENTS, INCLUDING STANDARD FORM 33A, "SOLICITATION INSTRUCTIONS AND CONDITIONS." PARAGRAPH 3 OF STANDARD FORM 33A CAUTIONED OFFERORS THAT ANY EXPLANATION REGARDING THE MEANING OR INTERPRETATION OF THE SOLICITATION SHOULD BE REQUESTED IN WRITING IN SUFFICIENT TIME TO PERMIT A REPLY TO REACH OFFERORS BEFORE SUBMISSION OF THEIR OFFERS.

SIX PAGES WHICH WERE INCLUDED IN THE SOLICITATION UNDER THE HEADING, "INFORMATION FOR BIDDERS," PLACED PROSPECTIVE OFFERORS ON NOTICE THAT THE STANDARD FORM 33 WITH ENCLOSED EXHIBITS CONSTITUTED A REQUEST FOR TECHNICAL PROPOSALS, THE ACCEPTABILITY OF WHICH WOULD DETERMINE WHICH OFFERORS WOULD PARTICIPATE IN THE SECOND STEP OF THE PROCUREMENT. THE FOLLOWING PARAGRAPHS WERE INCLUDED IN THESE PAGES:

"3. THE TECHNICAL PROPOSALS MUST INCLUDE, WITHOUT EXCEPTION, THE REQUIREMENTS SET FORTH IN EXHIBIT 'A'. THE CRITERIA ESTABLISHED FOR EVALUATION OF THE TECHNICAL PROPOSALS ARE DESCRIBED IN EXHIBIT 'B'. EXHIBIT 'C', THE SCHEDULE OF REQUIREMENTS, TERMS, CONDITIONS, AND PROVISIONS, IS THE PROPOSED FORMAL INVITATION FOR BIDS TO BE ISSUED AS STEP TWO, AS MAY BE MODIFIED AS THE RESULT OF EVALUATION AND DISCUSSION OF TECHNICAL PROPOSALS RECEIVED UNDER STEP ONE. IT WILL CONTAIN ALL MANDATORY PROVISIONS PRESCRIBED BY STATUTE, EXECUTIVE ORDER, OR REGULATION IN EFFECT AS OF THE DATE OF ISSUANCE OF STEP TWO.

"7. THE TECHNICAL PACKAGE (INCLUDING DRAWINGS, SUPPLEMENTAL QUALITY ASSURANCE PROVISIONS, ETC.), WILL BE DELIVERED UPON RECEIPT OF A DEPOSIT OF $5,000.00 IN THE FORM OF A CERTIFIED OR CASHIER'S CHECK, PAYABLE TO THE TREASURER OF THE UNITED STATES OF AMERICA. THE CHECK SHALL BE DELIVERED TO THE CONTRACTING OFFICER, ARMY TANK-AUTOMOTIVE COMMAND, PROCUREMENT AND PRODUCTION DIRECTORATE, 38111 VAN DYKE, WARREN, MICHIGAN 48090; ATTN: AMSTA-IMBV, MR. K. BLACK. DEPOSIT WILL BE REFUNDED ONLY TO OFFERORS WHO SUBMIT A TIMELY TECHNICAL PROPOSAL.

"8. TECHNICAL PACKAGES AND DRAWINGS FURNISHED BY THE GOVERNMENT FOR USE BY OFFERORS IN THE PREPARATION OF A TECHNICAL PROPOSAL ARE FURNISHED SOLELY FOR THAT PURPOSE AND SHALL REMAIN THE PROPERTY OF THE GOVERNMENT. THE USE OF THESE DOCUMENTS FOR ANY OTHER PURPOSE IS PROHIBITED. SPECIFICATIONS, DETROIT ARSENAL PURCHASE DESCRIPTIONS (DAPD), AND QUALIFIED PRODUCTS LISTS (QPL) ARE NOT INCLUDED IN THE TECHNICAL PACKAGE AND MAY BE OBTAINED FROM YOUR LOCAL DEFENSE CONTRACT ADMINISTRATIONS SERVICES OFFICE. OFFERORS WHO SUBMIT PROPOSALS WILL RETAIN THE TECHNICAL PACKAGE AND DRAWINGS UNTIL RECEIPT OF DISPOSITION INSTRUCTIONS FROM THIS COMMAND.

"9. A COMPLETE TECHNICAL PACKAGE WILL BE AVAILABLE FOR REVIEW AT THE US ARMY TANK-AUTOMOTIVE COMMAND WITHOUT CHARGE OR DEPOSIT. PROSPECTIVE OFFERORS WHO DESIRE TO REVIEW SUCH PACKAGE SHOULD DIRECT INQUIRIES TO THE ABOVE ADDRESS INDICATED ATTENTION: MR. K. BLACK, AREA CODE 313,264-1100, EXT. 2681.

"10. IT IS CONTEMPLATED THAT STEP TWO OF THIS INVITATION FOR BIDS WILL BE ISSUED ON OR ABOUT 20 DECEMBER 1968. BIDDERS WILL BE AFFORDED APPROXIMATELY 25 DAYS FOR PREPARATION AND SUBMISSION OF FORMAL STEP TWO BIDS. IT IS ANTICIPATED THAT THE RESULTANT CONTRACT WILL BE AWARDED ON OR ABOUT 1 FEBRUARY 1969.

"16. THIS PROCUREMENT INVOLVES INFORMATION WHICH IS 'CLASSIFIED' FOR MILITARY SECURITY PURPOSES. THEREFORE, IT IS NECESSARY THAT BIDDERS SUBMIT SATISFACTORY EVIDENCE THROUGH THEIR COGNIZANT SECURITY OFFICE OF MILITARY SECURITY CLEARANCE OF 'SECRET' OR HIGHER. DD FORM 254, 'DEPARTMENT OF DEFENSE SECURITY REQUIREMENTS CHECK LIST', SPECIFIES THE AREAS OF 'CLASSIFIED INFORMATION'. CLASSIFIED INFORMATION WILL NOT BE MADE AVAILABLE TO ANY BIDDER UNLESS AND UNTIL SECURITY CLEARANCE HAS BEEN ESTABLISHED.

"17. INQUIRIES REGARDING THIS REQUEST FOR TECHNICAL PROPOSALS SHOULD BE DIRECTED TO US ARMY TANK-AUTOMOTIVE COMMAND, PROCUREMENT AND PRODUCTION DIRECTORATE, 38111 VAN DYKE AVENUE, WARREN, MICHIGAN 48090; ATTENTION: AMSTA-IMBV, MR. K. BLACK."

EXHIBIT "A" TO THE SOLICITATION READS, IN PART, AS FOLLOWS:

"1". GENERAL

THE FOLLOWING GENERAL INSTRUCTIONS PROVIDE GUIDANCE IN THE PREPARATION OF TECHNICAL PROPOSALS FOR STEP 1 SUBMITTED PURSUANT TO THIS SOLICITATION. THE PURPOSE IS TO ESTABLISH THE ACCEPTABLE MINIMUM REQUIREMENTS FOR THE FORMAT AND CONTENT OF PROPOSALS (1) TO ASSURE THE PROPOSALS ARE COMPLETE AND CONTAIN ALL OF THE ESSENTIAL INFORMATION REQUIRED BY THE GOVERNMENT, AND (2) TO ASSURE A DEGREE OF UNIFORMITY IN PRESENTATION WHICH WILL FACILITATE APPRAISAL AND EVALUATION OF THE PROPOSALS BY THE GOVERNMENT.

"A. FORMAT

1. APPRAISAL, EVALUATION, AND SELECTION OF ACCEPTABLE PROPOSALS, AS WELL AS SUBSEQUENT DISCUSSIONS WILL BE BASED UPON THE INFORMATION SUBMITTED IN THE TECHNICAL PROPOSAL. CONTENT, RATHER THAN MERE FORMAT, WILL BE THE PRIMARY CONSIDERATION. CERTAIN MINIMUM REQUIREMENTS RELATING TO FORMAT ARE STIPULATED TO FACILITATE TREATMENT, HANDLING AND EVALUATION." OTHER PARAGRAPHS OF EXHIBIT "A" REQUESTED OFFERORS TO FURNISH CERTAIN INFORMATION PERTAINING TO TECHNICAL PACKAGE AND DRAWING CONTENT, PROPOSED PLAN OF MANUFACTURE, AND BUSINESS OPERATIONS (E.G; PURCHASING METHODS) AND SPECIFIC INFORMATION RELATING TO THE OFFEROR'S QUALIFICATIONS, ONE ITEM OF WHICH WAS EVIDENCE OF SECURITY CLEARANCE.

DD FORM 254, "SECURITY REQUIREMENTS CHECK LIST," WHICH WAS ALSO INCLUDED IN THE BID PACKAGE, IDENTIFIED THE AREAS TO BE COVERED BY THE SECURITY CLEARANCE, ALL OF WHICH RELATE TO THE CONTRACT; I.E; POST AWARD MATTERS. FURTHER, ON PAGE 4 OF THE FORM THE NAME OF J. A. LOGAN, CHIEF, COMBAT VEHICLE SECTION, MAJOR ITEMS DIVISION, PROCUREMENT AND PRODUCTION DIRECTORATE, ATAC, WAS SIGNED AS THE APPROVING OFFICIAL TO WHOM ALL QUESTIONS PERTAINING TO THE CHECK LIST WERE TO BE REFERRED. (MR. LOGAN WAS ALSO THE CONTRACTING OFFICER FOR THE PROCUREMENT.)

NAPCO WAS NOT INCLUDED ON THE MAILING LIST FOR THE SOLICITATION. HOWEVER, ON OCTOBER 23, EXACTLY ONE WEEK AFTER THE SOLICITATION WAS ISSUED AND POSTED AT ATAC, MR. RICHARD C. JONES, WHO HOLDS THE POSITION OF FIELD MANAGER - ORDNANCE OPERATIONS WITH NAPCO AND WHO IS A FREQUENT VISITOR TO ATAC, PAID A VISIT TO ATAC. ON THE SAME DATE, A SECRETARIAL EMPLOYEE OF NAPCO'S OFFICE IN WARREN HAND-DELIVERED TO ATAC A DEPOSIT OF $5,000 FOR THE TECHNICAL DATA PACKAGE FOR THE PROCUREMENT IN QUESTION, FOLLOWING WHICH THE PACKAGE WAS PLACED IN THE MAIL AND WAS RECEIVED BY NAPCO ON OR ABOUT NOVEMBER 1.

IN ADDITION TO NAPCO, FIVE OTHER CONCERNS REQUESTED THE TECHNICAL DATA PACKAGE, WHICH WAS FURNISHED TO EACH REQUESTER UPON RECEIPT OF THE REQUISITE DEPOSIT.

UNDER DATE OF NOVEMBER 22, MR. JONES ADDRESSED A LETTER FROM NAPCO'S OFFICE IN WARREN TO ATAC, ATTENTION OF MR. K. BLACK, THE BUYER WHOSE NAME WAS SHOWN ON THE FACE SHEET OF THE SOLICITATION, READING AS FOLLOWS:

"BASED ON YOUR PHONE CALL WITH REGARD TO THE LACK OF SECURITY CLEARANCE FOR NAPCO INDUSTRIES AND ORDNANCE CORPORATION OF AMERICA, THE MANAGEMENT OF NAPCO HAS DECIDED THAT BECAUSE OF THE LENGTHY PROCEDURE INVOLVED IN SECURING THIS CLEARANCE, WE WILL BE UNABLE TO PREDICATE A QUOTATION WITHIN THE TIME REQUIRED. BASED ON THIS DETERMINATION, NAPCO IS RETURNING THE COMPLETE BID PACKAGE TO THE GOVERNMENT AND REQUESTS THAT YOU MAKE ARRANGEMENTS FOR THE RETURN OF OUR DEPOSIT."

IN CONNECTION WITH THE REFERENCE BY MR. JONES TO A PRIOR TELEPHONE CALL BY ATAC TO NAPCO CONCERNING THE SECURITY CLEARANCE REQUIREMENT, MR. BLACK, WHO HOLDS THE POSITION OF CONTRACT SPECIALIST WITH ATAC, HAS EXECUTED AN AFFIDAVIT REGARDING A TELEPHONE CONVERSATION HE HAD WITH MR. JONES PRIOR TO NOVEMBER 25, 1968, THE FINAL DATE FOR SUBMISSION OF TECHNICAL PROPOSALS. THE AFFIDAVIT STATES THAT MR. BLACK INFORMED MR. JONES THAT AN INVESTIGATION HAD REVEALED THAT NAPCO DID NOT HAVE THE SECURITY CLEARANCE REQUIRED BY THE SOLICITATION; THAT MR. JONES EXPRESSED SURPRISE AND STATED HE WOULD ADVISE MR. BLACK FURTHER AFTER INVESTIGATING THE MATTER; AND THAT NO STATEMENT WAS MADE BY MR. BLACK TO MR. JONES WHICH WOULD INDICATE THAT THE LACK OF SECURITY CLEARANCE WOULD PRECLUDE NAPCO FROM SUBMITTING A BID (PROPOSAL). THE AFFIDAVIT FURTHER STATES THAT MR. BLACK HAD NO FURTHER CONVERSATION ON THE SECURITY CLEARANCE FACTOR WITH NAPCO REPRESENTATIVES, THE NEXT REFERENCE TO THE MATTER BEING CONTAINED IN NAPCO'S LETTER DATED NOVEMBER 22 TO ATAC.

ON NOVEMBER 25, THE CLOSING DATE FOR THE FIRST STEP OF THE PROCUREMENT, ATAC HAD RECEIVED TECHNICAL PROPOSALS FROM FOUR OF THE SIX CONCERNS TO WHICH TECHNICAL DATA PACKAGES HAD BEEN FURNISHED. NAPCO AND ONE OTHER FIRM WERE NOT AMONG THE OFFERORS.

IN A LETTER DATED DECEMBER 9, 1968, THE CONTRACTING OFFICER RESPONDED TO MR. JONES' LETTER OF NOVEMBER 22 AS FOLLOWS:

"BY YOUR LETTER DATED 22 NOVEMBER 1968, YOU HAVE INDICATED THAT AS A RESULT OF CERTAIN REQUIREMENTS YOUR COMPANY WOULD BE UNABLE TO PREDICATE A QUOTATION WITHIN THE TIME REQUIRED.

"YOUR ATTENTION IS DIRECTED TO PARAGRAPH 7 OF IFB DAAE07-69-B-0300, PAGE 4, IN WHICH IT IS STATED THAT THE DEPOSIT OF $5,000.00 WILL BE REFUNDED ONLY TO OFFERORS WHO SUBMIT A TIMELY TECHNICAL PROPOSAL.

"AS A TECHNICAL PROPOSAL WAS NOT SUBMITTED BY YOUR COMPANY IN ACCORDANCE WITH THE REQUIREMENT STATED ABOVE, A REFUND OF YOUR DEPOSIT IN THE AMOUNT OF $5,000.00 CANNOT BE MADE BY THIS COMMAND."

AN ATAC MEMORANDUM DATED JANUARY 16, 1969, OF A TELEPHONE CONVERSATION OF JANUARY 15 BETWEEN NAPCO'S VICE PRESIDENT, MR. LOU KUZIN, AND THE CONTRACTING OFFICER REGARDING NAPCO'S CLAIM INCLUDES THE FOLLOWING PERTINENT INFORMATION:

"IN THE ABSENCE OF MR. JONES, I TALKED WITH MR. LOU KUZIN, VICE PRESIDENT OF NAPCO. MR. KUZIN SAID THAT THEY WERE INTERESTED IN RECOVERING THE DEPOSIT THEY MADE FOR THE TDP FOR THE ABOVE IFB. HE WENT ON TO SAY IT WAS HIS UNDERSTANDING THAT THEY COULD NOT BID BECAUSE THEIR COMPANY DID NOT HAVE SECURITY CLEARANCE AND THAT IF THIS WAS NOT THE CASE THEY WOULD STILL BE WILLING TO SUBMIT A BID. I TOLD MR. KUZIN THAT WE BELIEVE HE HAD BEEN MISINFORMED; THAT IT HAD BEEN EXPLAINED TO HIS PEOPLE THAT THEIR COMPANY WOULD HAVE TO OBTAIN SECURITY CLEARANCE BEFORE ANY AWARD WAS MADE TO THEM BUT THAT THEY HAD NOT BEEN TOLD THEY COULD NOT BID; FURTHER, THAT ANY BID SUBMITTED NOW WOULD BE COMPLETELY OUT OF PHASE FROM A TIMING STANDPOINT - THAT THERE WAS AN URGENT NEED FOR THE VEHICLES AND THAT WE HAVE GONE TOO FAR DOWN THE ROAD ON THE IFB TO CONSIDER A NEW BID AT THIS LATE DATE.

"MR. KUZIN WAS TOLD THAT WE HAD NOT CHANGED OUR POSITION AS EXPRESSED IN OUR LETTER OF 9 DECEMBER 1968 IN RESPONSE TO THEIR LETTER OF 22 NOVEMBER 1968; ALSO THAT THE TECH DATA PACKAGE HAD NOT BEEN RETURNED TO US ALTHOUGH THEIR LETTER OF 22 NOVEMBER STATED THAT IT WAS BEING RETURNED. EXPLAINED THAT RETURN OF THE TECH DATA WAS REQUIRED AND THE IFB WAS EXPLICIT ON THE POINT THAT ALL TECH DATA PACKAGES REMAIN THE PROPERTY OF THE GOVERNMENT; ALSO, THAT THE IFB WAS CLEAR WITH REGARD TO THE FACT THAT THE DEPOSIT WOULD ONLY BE RETURNED TO BIDDER WHO SUBMITTED A STEP ONE PROPOSAL, AND THAT RETURN FOR THE TDP DID NOT RELATE TO WHETHER OR NOT THEIR DEPOSIT WAS REFUNDED. WITH REGARD TO THE FOREGOING, MR. KUZIN WAS REFERRED SPECIFICALLY TO PARAGRAPHS 7 AND 8 ON PAGE 4 OF 'INFORMATION FOR BIDDERS' OF THE IFB. "MR. KUZIN SAID HE HAD HAD INQUIRIES FROM HIS PRINCIPALS IN MINNEAPOLIS REGARDING THE REFUND OF THEIR DEPOSIT AND THAT HE WOULD LIKE TO HAVE US LEAVE A 'LOOP HOLE' SO THAT THEY MIGHT BE ABLE TO PRESS FOR ITS RECOVERY. I TOLD HIM THAT I KNEW OF NO SUCH 'LOOP HOLE' AND OUR POSITION IS THAT THERE CAN BE NO REFUND MADE BASED ON THE TERMS OF THE IFB. I EXPLAINED THAT IF WE DEVIATED FROM SUCH TERMS THAT ANY FUTURE DEALS WHERE DEPOSITS WERE REQUIRED WOULD BE MEANINGLESS SINCE THE WORD WOULD GET AROUND AND EVERYONE WOULD DEMAND HIS MONEY BACK. "MR. KUZIN SAID HE WOULD PASS THE WORD ON TO MINNEAPOLIS AND THAT PROBABLY THEIR LAWYERS WOULD REVIEW THE SITUATION. HE APPEARED TO BE SATISFIED WITH OUR EXPLANATION."

IN FURTHERANCE OF NAPCO'S CLAIM, A LETTER DATED JANUARY 20, 1969, WAS ADDRESSED BY NAPCO'S COUNSEL TO ATAC. THE LETTER READS IN PART AS FOLLOWS:

"IT HAS BEEN BROUGHT TO MY ATTENTION THAT THERE IS SOME PROBLEM IN OUR OBTAINING A REFUND OF THE $5,000 WHICH WE DEPOSITED IN ORDER TO OBTAIN THE ABOVE-REFERENCED BID PACKAGE.

"MY UNDERSTANDING OF THE SITUATION IS THAT SUBSEQUENT TO OUR RECEIVING THE BID PACKAGE WE WERE INFORMED THAT WE WOULD NOT BE ABLE TO SUBMIT A BID INASMUCH AS OUR COMPANY DID NOT HAVE PROPER SECURITY CLEARANCE. NATURALLY, WE HAD NO WAY OF KNOWING THAT SECURITY CLEARANCE WAS REQUIRED UNTIL WE OBTAINED THE BID PACKAGE, AND IT IS OUR FEELING THAT IF THE BID PACKAGE HAD NOT BEEN RELEASED BY YOUR OFFICE THIS INCIDENT WOULD NOT HAVE OCCURRED.

"UPON FINDING THAT SECURITY CLEARANCE WAS REQUIRED, WEIMMEDIATELY INFORMED YOUR OFFICE THAT WE WOULD NOT BE ABLE TO SUBMIT A BID; AND IT MUST BE OBVIOUS TO ANYONE THAT OUR REASONS WERE BASED UPON THE FACT THAT WITHOUT SECURITY CLEARANCE WE WERE NOT IN A POSITION TO SUBMIT A BID."

ATAC'S RESPONSE TO THE ABOVE LETTER FROM NAPCO'S COUNSEL WAS BY LETTER DATED FEBRUARY 26, 1969, WHICH STATED:

"WE APPRECIATE YOUR INTEREST IN OBTAINING THE RETURN OF YOUR DEPOSIT FOR THE TECHNICAL DATA PACKAGE ON IFB DAAE07-69-B-0300 FOR THE M113 FAMILY OF VEHICLES AS EXPRESSED IN YOUR LETTER OF 20 JANUARY 1969. HOWEVER, IT WOULD APPEAR THAT YOU HAVE BEEN MISINFORMED WITH REGARD TO GUIDANCE FURNISHED YOUR PEOPLE INSOFAR AS SECURITY CLEARANCE IS CONCERNED. OUR POSITION WAS, AND STILL IS, THAT THOUGH APPROPRIATE SECURITY CLEARANCE WOULD HAVE TO BE OBTAINED BEFORE MAKING ANY AWARD, IT WAS NOT A PRE- REQUISITE FOR BIDDING. IT WAS BELIEVED THAT THIS MATTER WAS CLOSED BY OUR LETTER OF 9 DECEMBER 1968 IN RESPONSE TO YOUR LETTER OF 22 NOVEMBER 1968.

"WE STILL HAVE NOT RECEIVED THE TECHNICAL DATA PACKAGE WHICH YOUR LETTER OF 22 NOVEMBER 1968 STATES IS BEING RETURNED. TO ELIMINATE ANY MISUNDERSTANDING, THERE IS NO RELATIONSHIP BETWEEN THE RETURN OF THE TDP AND THE REFUND OF THE DEPOSIT. PARAGRAPH 8 OF PAGE 4 'INFORMATION TO BIDDERS' OF THE IFB IS CLEAR THAT TDP'S REMAIN THE PROPERTY OF THE GOVERNMENT AND THAT DISPOSITION INSTRUCTIONS WILL BE GIVEN BY THE GOVERNMENT. THE DEPOSIT COVERS EXPENSES IN THE PREPARATION AND REPRODUCTION OF THE TECHNICAL DATA PACKAGE, NOT THE TECHNICAL DATA PACKAGE ITSELF.

"PROMPT RETURN OF THE TECHNICAL DATA PACKAGE BY YOUR COMPANY WILL BE APPRECIATED." (THE TECHNICAL DATA PACKAGE WAS ULTIMATELY RECEIVED BY ATAC WITH A NAPCO COVER LETTER DATED APRIL 26, 1969.)

THE IFB IN THE SECOND STEP OF THE PROCUREMENT WAS ISSUED ON JANUARY 24, 1969, AND AWARD WAS MADE ON MARCH 6, 1969, IN THE AMOUNT OF $93,811,550.64. FURTHER, THE DEPOSITS WHICH HAD BEEN RECEIVED FROM THE FOUR FIRMS WHICH SUBMITTED TECHNICAL PROPOSALS IN THE FIRST STEP OF THE PROCUREMENT WERE REFUNDED TO THOSE FIRMS AS PROVIDED IN THE FIRST STEP SOLICITATION.

THERE IS NO INDICATION IN THE RECORD THAT ANY ONE OF THE FIVE FIRMS, EACH OF WHICH, LIKE NAPCO, REQUESTED AND RECEIVED A TECHNICAL DATA PACKAGE, RAISED ANY QUESTION CONCERNING THE TERMS OF THE FIRST STEP SOLICITATION, NOR IS THERE ANY RECORD OF ANY COMPLAINT BY THE OTHER FIRM, WHICH, LIKE NAPCO, DID NOT SUBMIT A TECHNICAL PROPOSAL, AGAINST THE FORFEITURE OF ITS DEPOSIT.

IN YOUR LETTERS TO OUR OFFICE YOU STATE THAT NAPCO FIRST LEARNED THAT A SECURITY CLEARANCE "WAS REQUIRED IN ORDER TO SUBMIT A TECHNICAL PROPOSAL" UNDER THE FIRST-STEP SOLICITATION WHEN NAPCO RECEIVED THE BID PACKAGE ON OR ABOUT NOVEMBER 1 AND THAT SINCE NAPCO DID NOT AT THAT TIME HAVE A SECURITY CLEARANCE NAPCO BELIEVED THAT AN APPLICATION THEREFOR COULD NOT BE PROCESSED BY THE GOVERNMENT IN TIME FOR NAPCO TO MEET THE NOVEMBER 25 CLOSING DATE FOR SUBMISSION OF A TECHNICAL PROPOSAL. YOU FURTHER STATE THAT NAPCO THEREUPON NOTIFIED ATAC BY TELEPHONE AND BY LETTER BEFORE NOVEMBER 25 THAT NAPCO WOULD BE UNABLE TO SUBMIT A TECHNICAL PROPOSAL; THAT NAPCO INTENDED TO RETURN THE TECHNICAL DATA PACKAGE TO ATAC IN ITS ENTIRETY; AND THAT NAPCO ACCORDINGLY REQUESTED REFUND OF ITS $5,000 DEPOSIT.

WITH FURTHER REFERENCE TO THE SECURITY CLEARANCE FACTOR, YOU STATE THAT SINCE PERFORMANCE COULD NOT COMMENCE WITHOUT SUCH CLEARANCE NAPCO COULD NOT ESTABLISH A DELIVERY SCHEDULE WITHOUT EITHER A CLEARANCE OR KNOWLEDGE OF WHEN ONE WOULD BE FORTHCOMING.

ON THE BASIS THAT THE COMMERCE BUSINESS DAILY SYNOPSIS OF THE PROCUREMENT DID NOT INCLUDE THE REQUIREMENT FOR SECURITY CLEARANCE AND THE PROVISIONS RELATING TO FORFEITURE OF THE DEPOSIT ABSENT SUBMISSION OF A TECHNICAL PROPOSAL, YOU URGE THAT NAPCO CANNOT BE SAID, AS A MATTER OF FACT OR LAW, TO HAVE AGREED TO SUCH PROVISIONS BECAUSE THE GOVERNMENT WITHHELD A COPY OF THE SOLICITATION INCLUDING SUCH PROVISIONS UNTIL THE BID DEPOSIT HAD ALREADY BEEN PAID BY NAPCO. IN THIS CONNECTION, YOU ASSERT THAT ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1003.9 (E), WHICH LISTS SECURITY REQUIREMENTS AS AN EXAMPLE OF SPECIAL REQUIREMENTS FOR PROSPECTIVE CONTRACTORS WHICH SHOULD BE NOTED IN PROCUREMENT SYNOPSES IN THE COMMERCE BUSINESS DAILY, IS MANDATORY ON THE PROCURING ACTIVITY. ABSENT SUCH NOTATION IN THE SYNOPSIS OF THIS PROCUREMENT, YOU STATE THAT NAPCO HAD A RIGHT TO ASSUME THAT THE DEPARTMENT OF THE ARMY HAD FOLLOWED ITS OWN REGULATIONS AND NAPCO COULD THEREFORE RELY ON THE LAWFULNESS OF THE SOLICITATION PROCEDURES. ACCORDINGLY, YOU CLAIM, NAPCO, IN RELIANCE ON THE SYNOPSIS, DID NOT CHECK THE SECURITY CLEARANCE REQUIREMENT PROVISIONS OF THE DISPLAYED SOLICITATION.

WITH REFERENCE TO THE FORFEITURE PROVISION, YOU FURTHER CLAIM THAT SUCH PROVISION IS CONTRARY TO THE REQUIREMENT FOR MAXIMUM COMPETITION IN THE PROCUREMENT STATUTES AND REGULATIONS SINCE ONLY OFFERORS WHO ARE ABSOLUTELY CERTAIN THAT THEY WILL SUBMIT A TECHNICAL PROPOSAL CAN AFFORD TO REVIEW THE CONTRACT SPECIFICATIONS. IN ADDITION, YOU CHARGE THAT RETENTION OF NAPCO'S DEPOSIT BY THE DEPARTMENT OF THE ARMY UNJUSTLY ENRICHES THE GOVERNMENT.

HEADQUARTERS UNITED STATES ARMY MATERIEL COMMAND (AMC) TAKES THE POSITION THAT NAPCO'S DEPOSIT HAS BEEN PROPERLY RETAINED BY THE GOVERNMENT AND SHOULD NOT BE REFUNDED TO NAPCO FOR THE REASONS DISCUSSED BELOW.

AS TO THE CONTENT OF THE SYNOPSIS IN THE COMMERCE BUSINESS DAILY, AMC ASSERTS THAT THE SYNOPSIS IS BUT ONE OF SEVERAL ALTERNATE MEANS OF PUBLICIZING PROCUREMENTS IN LINE WITH THE POLICY OF THE DEPARTMENT OF DEFENSE OF INCREASING COMPETITION AS SET FORTH IN SECTION I, PART 10, OF ASPR. NOTHING IN SUCH POLICY, AMC OBSERVES, REQUIRES THE VIEW THAT AN INSUFFICIENCY IN ONE METHOD OF PUBLICATION SHALL PREVENT THE GOVERNMENT FROM ENFORCING VALID PROVISIONS IN ITS SOLICITATION, PARTICULARLY IN A PROCUREMENT SUCH AS THIS IN WHICH THE OFFEROR HAD ACTUAL OR CONSTRUCTIVE NOTICE OF THE SOLICITATION PROVISIONS THROUGH ANOTHER METHOD OF PUBLICATION (I.E; THE POSTING OF THE SOLICITATION AT ATAC, WHERE MR. JONES OF NAPCO VISITED ON THE DATE NAPCO PAID ITS DEPOSIT FOR THE TECHNICAL DATA PACKAGE AND COULD HAVE EXAMINED THE DISPLAYED SOLICITATION AS ANNOUNCED IN THE SYNOPSIS).

WITH RESPECT TO THE SECURITY CLEARANCE REQUIREMENT, AMC CONCEDES THAT THE PROVISIONS IN THE INFORMATION TO BIDDERS PORTION OF THE SOLICITATION WERE NOT CLEAR AS TO WHETHER SUCH REQUIREMENT WAS TO BE MET PRIOR TO PARTICIPATING IN STEP ONE OF THE PROCUREMENT OR AT SOME LATER TIME PRIOR TO CONTRACT PERFORMANCE. FURTHER, AMC TAKES NOTE OF A STATEMENT BY THE CONTRACTING OFFICER THAT CLEARANCE COULD NOT HAVE BEEN OBTAINED BY THE NOVEMBER 25 CLOSING DATE OF STEP ONE, AND AMC THEREFORE OBSERVES THAT IF SECURITY CLEARANCE WERE IN FACT NECESSARY FOR PARTICIPATION IN STEP ONE, NAPCO WOULD HAVE BEEN ENTITLED TO A REASONABLE TIME TO OBTAIN SUCH CLEARANCE. SEE 46 COMP. GEN. 841 (1967). HOWEVER, AS ATAC URGES, HAD NAPCO DISCUSSED THE TIMING OF THE CLEARANCE REQUIREMENTS WITH ATAC, AS IS PERMITTED BY ASPR 2-501 (I), RELATING TO TWO-STEP PROCUREMENTS, IN LIEU OF WAITING UNTIL NOVEMBER 22 TO MAKE KNOWN TO ATAC ITS INTENTION NOT TO PARTICIPATE IN THE PROCUREMENT, THE MATTER COULD HAVE BEEN SETTLED.

IN ADDITION, THE CONTRACTING OFFICER POINTS OUT THAT THE BID PACKAGE, WHICH INCLUDED COMPLETE INFORMATION FOR PREPARATION OF THE PROPOSAL, WAS UNCLASSIFIED; THEREFORE, NO CLASSIFIED INFORMATION WOULD HAVE BEEN INVOLVED IN PREPARATION OF THE TECHNICAL PROPOSAL. AS TO ESTABLISHMENT OF A DELIVERY SCHEDULE BY NAPCO WITHOUT SECURITY CLEARANCE, THE CONTRACTING OFFICER FURTHER POINTS OUT THAT A DELIVERY SCHEDULE, CALLING FOR DELIVERIES COMMENCING IN JULY 1970, WAS PRESCRIBED IN THE SOLICITATION AND NAPCO HAD ONLY TO INDICATE IN THE MANUFACTURING PLAN REQUIRED BY EXHIBIT "A" OF THE SOLICITATION THAT IT COULD MEET SUCH SCHEDULE. AS TO THE PERIOD REQUIRED FOR PROCESSING A SECURITY CLEARANCE, THE CONTRACTING OFFICER REPORTS THAT THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT, TWIN CITIES (MINNESOTA), HAS INDICATED THAT CLEARANCE COULD HAVE BEEN EFFECTED WITHIN A PERIOD OF SIX WEEKS (PRESUMABLY FROM THE DATE OF REQUEST BY THE PROCURING ACTIVITY). ACCORDINGLY, THE CONTRACTING OFFICER CONTENDS, NAPCO WAS NOT PRECLUDED BY THE LACK OF A SECURITY CLEARANCE FROM PARTICIPATING IN THE FIRST STEP OF THE PROCUREMENT, AND THE DELIVERY SCHEDULE IN THE SOLICITATION AFFORDED SUFFICIENT LEAD TIME FOR PROCESSING OF A SECURITY CLEARANCE IN THE SECOND STEP.

WITH RESPECT TO THE PROPRIETY OF THE REQUIREMENT FOR A BID PACKAGE DEPOSIT AND THE RELATED FORFEITURE PROVISIONS, ATAC OBSERVES THAT SUCH PRACTICE HAS BECOME WELL ESTABLISHED AND HAS AS ITS PURPOSE CURBING REQUESTS FOR BID DATA PACKAGES PRODUCED AT A SUBSTANTIAL COST BY CONCERNS WHICH DO NOT HAVE A GENUINE INTEREST IN BIDDING. IN LIGHT OF THE NEARLY $100 MILLION VALUE OF THIS PROCUREMENT AND THE FACT THAT PROPOSAL AND BID PREPARATION COSTS WOULD RUN FROM FIVE TO TWENTY TIMES THE AMOUNT OF THE DATA PACKAGE DEPOSIT, ATAC ASSERTS, THE REQUIREMENT IN THIS CASE CAN ONLY BE CONSIDERED AS A REASONABLE EXERCISE OF ADMINISTRATIVE DISCRETION AND AS NOT HINDERING THE GOVERNMENT FROM OBTAINING MAXIMUM COMPETITION FROM SOURCES INTERESTED IN THE PROCUREMENT.

AS TO NAPCO'S PURPOSE IN SECURING THE TECHNICAL DATA PACKAGE, ATAC QUESTIONS WHETHER NAPCO HAD ANY REAL INTENTION OF SUBMITTING A TECHNICAL PROPOSAL OR ONLY INTENDED TO GAIN ACCESS TO THE ENGINEERING DATA WHICH WAS CONTAINED IN THE PACKAGE FOR USE IN NAPCO'S REGULAR BUSINESS OF SUPPLYING VEHICLE COMPONENTS. IN THIS REGARD, IT IS STATED THAT WHILE NAPCO IS A SMALL BUSINESS SUPPLIER OF MILITARY VEHICLE COMPONENTS AND HAS PERFORMED CONTRACTS OF SUCH NATURE SATISFACTORILY FOR ATAC, NAPCO IS NOT A VEHICLE MANUFACTURER, WHICH RAISES A FURTHER QUESTION AS TO WHETHER NAPCO COULD BE CONSIDERED A RESPONSIBLE PROSPECTIVE CONTRACTOR FOR A REQUIREMENT OF THE MAGNITUDE OF THE INSTANT PROCUREMENT. FURTHER, THE CONTRACTING OFFICER STATES, THE SIX MONTHS DURING WHICH NAPCO HAD POSSESSION OF THE DATA PACKAGE WAS A SUFFICIENT PERIOD TO PERMIT COMPLETE REPRODUCTION BY NAPCO OF THE DATA. ON THE ISSUE OF UNJUST ENRICHMENT, THEREFORE, ATAC CONTENDS NAPCO COULD BE THE BENEFICIARY IF A REFUND IS MADE SINCE IT MIGHT GAIN AN ADVANTAGE OVER ITS COMPETITORS BY HAVING ACQUIRED DATA AT NO COST TO ITSELF. CONVERSELY, IT IS STATED, THE GOVERNMENT HAS BEEN REQUIRED TO PRODUCE A DATA PACKAGE IN EXCESS OF ITS NEEDS AT A COST WHICH BEARS A REASONABLE RELATIONSHIP TO THE PACKAGE DEPOSIT, AND RETENTION OF THE DEPOSIT WOULD CONSTITUTE NOT UNJUST ENRICHMENT BUT FAIR CONSIDERATION TO THE GOVERNMENT FOR SUCH UNNECESSARY COST.

CONSIDERING FIRST THE EFFECT OF THE ABSENCE FROM THE PRESOLICITATION SYNOPSIS IN THE COMMERCE BUSINESS DAILY OF INFORMATION PERTAINING TO THE SECURITY CLEARANCE REQUIREMENT AND THE CONDITIONS APPLICABLE TO REFUND OF THE DATA PACKAGE DEPOSIT, IT MAY BE STATED THAT SUCH A SYNOPSIS DOES NOT PURPORT TO STATE ALL OF THE TERMS AND CONDITIONS OF THE BIDDING AND THE RESULTANT CONTRACT. RATHER, THE SYNOPSIS, LIKE A PRESS RELEASE OR A PAID ADVERTISEMENT IN A NEWSPAPER OR TRADE JOURNAL (ALTERNATIVE METHODS AUTHORIZED BY ASPR 1-1002 FOR PUBLICIZING PROCUREMENTS), IS BUT A NOTICE OF A PROCUREMENT WHICH WILL BE THE SUBJECT OF A SOLICITATION THAT WILL BE MADE AVAILABLE UPON REQUEST, AS PROVIDED IN ASPR 1-1002.1, TO INTERESTED PARTIES NOT INITIALLY SOLICITED. SUCH PARTIES ARE NOT THEREFORE RELIEVED, MERELY BECAUSE OF THE PUBLICATION OF A SYNOPSIS, FROM THEIR RESPONSIBILITY TO READ THE SOLICITATION BEFORE COMMITTING THEMSELVES TO ITS TERMS. ACCORDINGLY, WHILE THE PROCURING ACTIVITY, IN OUR VIEW, WAS REMISS, AT LEAST TO THE EXTENT THAT IT FAILED TO COMPLY WITH THE INSTRUCTIONS IN ASPR 1-1003.9 (E) REGARDING INCLUSION IN THE SYNOPSIS OF A NOTATION RESPECTING THE SECURITY CLEARANCE REQUIREMENT, WE SEE NO EVIDENCE OF ANY BAD FAITH ON THE PART OF THE GOVERNMENT AND ARE THEREFORE UNABLE TO CONCLUDE THAT THE OMISSIONS FROM THE SYNOPSIS RENDERED THE SOLICITATION PROVISIONS IN QUESTION INAPPLICABLE. TURNING TO NAPCO'S CLAIM THAT THE DEPOSIT WAS PAID TO ATAC WITHOUT AGREEMENT BY NAPCO TO ANY FORFEITURE PROVISIONS, WE FIND IT DIFFICULT TO ACCEPT THE PROPOSITION THAT NAPCO'S MR. JONES, A FREQUENT VISITOR TO ATAC, HAD NOT READ THE SOLICITATION ON DISPLAY AT ATAC SOMETIME BETWEEN OCTOBER 16, THE DATE THE SOLICITATION WAS ISSUED, AND OCTOBER 23, THE DATE NAPCO'S SECRETARIAL EMPLOYEE DELIVERED THE DEPOSIT TO ATAC. ASSUMING, HOWEVER, FOR THE SAKE OF ARGUMENT, THAT NAPCO WAS NOT AWARE OF THE FORFEITURE PROVISIONS, AS WELL AS THE SECURITY CLEARANCE REQUIREMENT, UNTIL IT RECEIVED THE BID PACKAGE ABOUT NOVEMBER 1, NAPCO WAS IN POSSESSION OF THE PACKAGE FOR THREE FULL WEEKS BEFORE IT APPRISED ATAC THAT IT WOULD NOT SUBMIT A TECHNICAL PROPOSAL AND DESIRED REFUND OF ITS DEPOSIT. FURTHER, DURING THAT PERIOD NAPCO MADE NO OBJECTION TO OR INQUIRY OF ATAC REGARDING THE PROVISIONS OF THE SOLICITATION OR THE SECURITY REQUIREMENTS CHECK LIST AS INSTRUCTED IN THE SOLICITATION. CONVERSELY, FOUR OF THE CONCERNS WHICH ALSO RECEIVED DATA PACKAGES SUBMITTED TECHNICAL PROPOSALS, THE COST OF WHICH ATAC HAS INDICATED WOULD HAVE RANGED FROM $25,000 TO $100,000 FOR EACH CONCERN, AND THE ONE OTHER CONCERN WHICH FAILED TO SUBMIT A TECHNICAL PROPOSAL MADE NO OBJECTION TO THE FORFEITURE OF ITS DEPOSIT.

IN THE CIRCUMSTANCES, WE BELIEVE THAT TO ALLOW NAPCO REFUND OF ITS DEPOSIT BASED ON ITS OWN INTERPRETATION OF THE SOLICITATION, WHICH WOULD REQUIRE COMPLETE DISREGARD OF THE PROVISIONS OF THE SOLICITATION RELATING TO RETENTION OF DEPOSITS BY THE GOVERNMENT AND EXPLANATIONS TO OFFERORS, WOULD BE COMPLETELY UNFAIR TO THE FIVE COMPETING CONCERNS AND WOULD THEREFORE BE DETRIMENTAL TO THE COMPETITIVE BIDDING SYSTEM. ACCORDINGLY, WE CONCUR WITH ATAC AND AMC THAT THE RETENTION OF NAPCO'S DEPOSIT BY THE GOVERNMENT WAS PROPER.

AS TO THE PROPRIETY OF THE USE OF FORFEITURE PROVISIONS OF THE TYPE IN QUESTION, IT IS OUR OPINION THAT IN VIEW OF THE REPORTED SUBSTANTIAL COST TO THE GOVERNMENT OF PREPARING THE DATA PACKAGES FOR THE PROCUREMENT, THE INCLUSION OF THE PROVISIONS IN THE SOLICITATION IN THIS CASE, FOR THE PURPOSE OF DISCOURAGING REQUESTS FOR DATA PACKAGES FROM FIRMS WHICH HAD NO REAL INTEREST IN THE PROCUREMENT, WAS A REASONABLE EXERCISE OF ADMINISTRATIVE AUTHORITY BY ATAC. FURTHER, SINCE ANY GENUINELY INTERESTED CONCERN HAD BUT TO MAKE THE REQUIRED DEPOSIT AND TO SUBMIT A TIMELY TECHNICAL PROPOSAL, AS DID FOUR OF THE CONCERNS, IN ORDER TO OBTAIN RETURN OF ITS DEPOSIT, WE ARE UNABLE TO CONCUR WITH YOUR CONTENTION THAT SUCH PROVISIONS HAD ANY ADVERSE EFFECT ON THE COMPETITION FOR THE PROCUREMENT.