B-167554, DEC. 9, 1969 - CON.

B-167554: Dec 9, 1969

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ON GROUND PART LABOR SURPLUS SET-ASIDE THEREUNDER IS INCOMPATIBLE WITH MULTI-YEAR PROCEDURE WHEN HIGH STARTUP COSTS ARE INVOLVED UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-322.1 (E). IS DENIED SINCE USE OF MULTI- YEAR PROCEDURES WAS NOT SELECTED BY BUYING ACTIVITY ON BASIS OF HIGH STARTUP COSTS. SET-ASIDE ACTION WAS TAKEN WITH CONCURRENCE OF AIR FORCE SMALL BUSINESS SPECIALIST. IS DENIED PROTEST SINCE ASPR 1- 1504 (A) REQUIREMENT FOR APPROVAL BY HEAD OF PROCURING ACTIVITY. IS NOT APPLICABLE TO LRFTP WHICH EXCLUDES PRICE. THERE WAS NO VIOLATION OF ASPR. WERE PREJUDICIAL TO PROTESTANT. AIR FORCE DECISION TO SUSPEND QPL REQUIREMENT AND SUBSTITUTE FIRST ARTICLE TESTING FOR QUALITY ASSURANCE TO OBTAIN NECESSARY QUANTITY UNDER FIRM DELIVERY SCHEDULE WAS CONSISTENT WITH APPLICABLE ASPR SINCE GOVT.

B-167554, DEC. 9, 1969 - CON.

MULTI-YEAR PROCUREMENTS--LABOR SURPLUS SET-ASIDE--COMPATIBILITY REQUEST OF DEVELOPMENT CONTRACTOR ON QUALIFIED PRODUCTS LIST (QPL) FOR CANCELLATION OF LETTER REQUEST FOR TECHNICAL PROPOSAL UNDER TWO STEP PROCEDURE FOR PROCUREMENT OF MULTI-YEAR REQUIREMENTS FOR CPU-46/A COMPUTER ALTITUDE ENCODERS, AND SUBSTITUTION OF QPL PROCEDURES, ON GROUND PART LABOR SURPLUS SET-ASIDE THEREUNDER IS INCOMPATIBLE WITH MULTI-YEAR PROCEDURE WHEN HIGH STARTUP COSTS ARE INVOLVED UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-322.1 (E), IS DENIED SINCE USE OF MULTI- YEAR PROCEDURES WAS NOT SELECTED BY BUYING ACTIVITY ON BASIS OF HIGH STARTUP COSTS, AND SET-ASIDE ACTION WAS TAKEN WITH CONCURRENCE OF AIR FORCE SMALL BUSINESS SPECIALIST, PURSUANT TO APPLICABLE ASPR, AFTER NECESSARY QUANTITY AND EXPECTED PARTICIPATION DETERMINATIONS. OPTIONS-- LIMITATION DEVELOPMENT CONTRACTOR OBJECTING TO 100-PERCENT OPTION PROVISION IN AIR FORCE LETTER REQUEST FOR TECHNICAL PROPOSAL (LRFTP), AS FIRST-STEP IN TWO- STEP PROCUREMENT OF ENCODERS, ON GROUND ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1504 (A) GENERALLY PRECLUDES OPTIONS IN EXCESS OF 50 PERCENT OF INITIAL PROCUREMENT QUANTITY, IS DENIED PROTEST SINCE ASPR 1- 1504 (A) REQUIREMENT FOR APPROVAL BY HEAD OF PROCURING ACTIVITY, IS NOT APPLICABLE TO LRFTP WHICH EXCLUDES PRICE. ACCORDINGLY, RESPECTING FIRST STEP, ABSENT EVIDENCE CONTRACTING OFFICER ACTED ARBITRARILY OR IN BAD FAITH IN DETERMINATION RESPECTING OPTION QUANTITY, THERE WAS NO VIOLATION OF ASPR. UNDER SECOND STEP, HOWEVER, SHOULD OPTION PROVISION COVER QUANTITY IN EXCESS OF 50 PERCENT OF INITIAL, SUCH APPROVAL WOULD BE REQUIRED. SPECIFICATIONS--QUALIFIED PRODUCTS--ADMINISTRATIVE DETERMINATION TO USE NOTWITHSTANDING ALLEGATION OF CONTRACTOR ON QUALIFIED PRODUCTS LIST (QPL) THAT USE OF TWO-STEP PROCEDURE FOR MULTI-YEAR REQUIREMENTS OF ENCODERS AND WAIVER OF QPL REQUIREMENT VIOLATED ARMED SERVICES PROCUREMENT REGULATION (ASPR), AND WERE PREJUDICIAL TO PROTESTANT, IN VIEW OF TIME AND MONEY SPENT TO QUALIFY FOR DEVELOPMENT CONTRACTS, AIR FORCE DECISION TO SUSPEND QPL REQUIREMENT AND SUBSTITUTE FIRST ARTICLE TESTING FOR QUALITY ASSURANCE TO OBTAIN NECESSARY QUANTITY UNDER FIRM DELIVERY SCHEDULE WAS CONSISTENT WITH APPLICABLE ASPR SINCE GOVT. MAY ELECT, UNDER ASPR 1-1109, NOT TO USE QPL, WHICH IS ESTABLISHED SOLELY FOR GOVT.'S BENEFIT, AND PERFORMANCE RECORD OF TWO SOURCES, UNDER EXISTING PRODUCTION CONTRACTS, INDICATES QPL ACTION IS NOT IN GOVT.'S BEST INTEREST.

TO AIRESEARCH MANUFACTURING COMPANY:

WE REFER TO YOUR PROTEST BY LETTERS DATED JULY 21 AND OCTOBER 23, 1969, AGAINST THE USE OF TWO-STEP PROCUREMENT PROCEDURES BY THE DEPARTMENT OF THE AIR FORCE FOR THE PROCUREMENT OF MULTI-YEAR REQUIREMENTS FOR CPU-46/A COMPUTER ALTITUDE ENCODERS. THE PROCUREMENT WAS INITIATED UNDER LETTER REQUEST FOR TECHNICAL PROPOSAL (LRFTP) F33657-69-R-1036, DATED MAY 27, 1969, ISSUED BY HEADQUARTERS AERONAUTICAL SYSTEMS DIVISION, AIR FORCE SYSTEMS COMMAND (AFSC), WRIGHT PATTERSON AIR FORCE BASE, OHIO.

THE LRFTP STATES THAT THE DEPARTMENT ANTICIPATES A REQUIREMENT FOR 3,000 UNITS, WHICH ARE TO BE MANUFACTURED IN ACCORDANCE WITH SPECIFICATION MIL-C -27889C, DATED JUNE 5, 1967, AND AMENDMENT NO. 2, DATED SEPTEMBER 5, 1968, AND SPECIFICATION CHANGE NOTICE NO. 14, DATED JUNE 12, 1969, ALL INCORPORATED IN THE LRFTP BY REFERENCE. THE PROBABLE DELIVERY SCHEDULE CALLS FOR FIRST ARTICLE TEST REPORT BY MAY 1970 AND FOR DELIVERY IN MONTHLY INSTALLMENTS COMMENCING WITH A QUANTITY OF 25 UNITS IN JULY 1971 AND INCREASING GRADUALLY TO 140 UNITS FOR EACH MONTH FROM JANUARY 1972 UNTIL COMPLETION. IN ADDITION TO A 50 PERCENT LABOR SURPLUS SET-ASIDE, THE IFB WILL INCLUDE AN OPTION PROVISION FOR 100 PERCENT OF THE PROCUREMENT QUANTITY.

A FORM INCLUDED IN THE LRFTP AS ATTACHMENT NO. 1 READS, IN PART, AS FOLLOWS:

"THE OFFEROR SHALL SUBMIT THE FOLLOWING CERTIFICATE WHICH SHALL BE CONSIDERED AS A REQUIREMENT HEREUNDER:

"THE OFFEROR SHALL INSERT AN X IN THE APPROPRIATE BOX:

") ( TECHNICAL PROPOSAL IS SUBMITTED AS A PART OF THIS LETTER

REQUEST FOR TECHNICAL PROPOSAL.

") ( TECHNICAL PROPOSAL IS NOT SUBMITTED AS PART OF THIS LETTER

REQUEST FOR TECHNICAL PROPOSAL. CONTRACTOR SHALL BE CONSIDERED

AS PROPOSING DESIGN APPROVED UNDER QUALIFIED PRODUCTS LIST

27889-2 DATED 12 JULY 1968 IN LIEU OF NEW DESIGN.

") ( CHANGES TO DESIGN PREVIOUSLY ACCEPTED UNDER QUALIFIED PRODUCTS

LIST 27889-2 DATED 12 JULY 1968 ARE SUBMITTED, AND SUCH

DESIGN AS SO CHANGED SHALL BE CONSIDERED TO BE CONTRACTOR'S

TECHNICAL PROPOSAL HEREUNDER.'

ALTHOUGH YOU SUBMITTED A PROPOSAL IN RESPONSE TO THE LRFTP WITHOUT MAKING ANY COMPLAINT AGAINST ITS TERMS, YOU NOW CLAIM THAT THE ITEM SHOULD BE PURCHASED ONLY FROM SOURCES SUCH AS YOU AND THE KOLLSMAN CORPORATION (KOLLSMAN), WHO ARE ON THE CURRENT QPL FOR THE CPU-46/A; THAT AN INEXPERIENCED PRODUCER CANNOT BE EXPECTED TO ACCOMPLISH IN THE PERIOD SET FORTH IN THE LRFTP WHAT THE THREE SOURCES WHICH HAVE EITHER QUALIFIED OR PREVIOUSLY PRODUCED THE ITEM HAVE TAKEN NEARLY EIGHT YEARS TO ACCOMPLISH; AND THAT THE PROCUREMENT IS PREJUDICIAL AND DISCRIMINATORY WITH RESPECT TO YOU IN VIEW OF THE SUBSTANTIAL INVESTMENT OF TIME AND MONEY WHICH YOU MADE TO ATTAIN QUALIFICATION.

AS BACKGROUND INFORMATION, YOU STATE THAT THE CPU-46/A IS THE PRODUCT OF A DESIGN AND DEVELOPMENT COMPETITION CONDUCTED BY THE AIR FORCE IN 1961, IN WHICH KOLLSMAN AND ONE OTHER FIRM WERE AWARDED DEVELOPMENT CONTRACTS. YOU FURTHER STATE THAT IN OCTOBER 1964, PRIOR TO THE INITIAL PRODUCTION PROCUREMENT OF THE ITEM, YOUR PARENT COMPANY, THE GARRETT CORPORATION, REQUESTED PERMISSION OF THE AIR FORCE TO PARTICIPATE IN THE INITIAL PRODUCTION PROCUREMENT UNDER FIRST ARTICLE TEST PROCEDURES AND THAT THE REQUEST WAS DENIED BY AFSC ON THE GROUND THAT A QUALIFIED ITEM WAS DESIRED AND THEREFORE PROCUREMENT WOULD BE MADE FROM THE QPL ON WHICH THE TWO DEVELOPMENT CONTRACTORS HAD BEEN PLACED IN 1964. ACCORDINGLY, YOU STATE, YOUR PARENT COMPANY PROCEEDED WITH IN-HOUSE SPONSORED DEVELOPMENT AND 30 MONTHS LATER SUCCESSFULLY QUALIFIED ITS BASIC PART NO. 808236 AND WAS PLACED ON THE QPL ON APRIL 11, 1967.

IN ADDITION, YOU STATE THAT A PERIOD OF 30 TO 36 MONTHS WAS REQUIRED FOR EACH OF THE DEVELOPMENT CONTRACTORS TO QUALIFY ITS CPU-46/A DESIGN; THAT ONE OF THE CONTRACTORS, WHO HAS HAD A PRODUCTION CONTRACT FOR MORE THAN 39 MONTHS, IS NEITHER CURRENTLY ON THE QPL NOR DELIVERING ACCEPTABLE PRODUCTION UNITS; AND THAT THE OTHER PRODUCTION CONTRACTOR, KOLLSMAN, WAS REMOVED FROM THE JULY 1968 QPL BUT WAS AGAIN PLACED ON THE QPL IN SEPTEMBER 1969.

IN SUPPORT OF YOUR POSITION THAT THE ITEM SHOULD CONTINUE TO BE PROCURED UNDER QPL PROCEDURES, YOU CLAIM THAT THE PROCURING ACTIVITY HAS FAILED TO COMPLY WITH THE REQUIREMENTS OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). IN THIS REGARD, YOU STATE THAT (1) THE JUSTIFICATION FOR QUALIFICATION REQUIREMENTS UNDER ASPR 1-1103 WHICH APPLIED IN 1964 STILL EXISTS; (2) NEITHER THE LRFTP NOR THE PROCUREMENT SYNOPSIS IN THE COMMERCE BUSINESS DAILY INCLUDED A WAIVER OF QUALIFICATION REQUIREMENTS (PARAGRAPH 3.1 OF THE MILITARY SPECIFICATION) AS REQUIRED BY ASPR -1108; (3) UNDER ASPR 1-1109, RELATING TO INADEQUATE COMPETITION ON THE QPL, TIME COULD BE ALLOWED IN A SOLICITATION FOR COMPLETION OF TESTS BY CONTRACTORS CURRENTLY IN THE PROCESS OF QUALIFYING UNITS TO THE QPL; (4) THE PARTIAL LABOR SURPLUS SET-ASIDE IS QUESTIONABLE UNDER THE LANGUAGE OF ASPR 1-322.1 (E) STATING THAT LABOR SURPLUS SET-ASIDES ARE NOT GENERALLY COMPATIBLE WITH MULTI-YEAR PROCEDURE WHEN HIGH STARTUP COSTS ARE INVOLVED; AND (5) ASPR 1- 1504 (A) PRECLUDES OPTIONS IN EXCESS OF 50 PERCENT OF THE INITIAL PROCUREMENT QUANTITY EXCEPT UNDER UNUSUAL CIRCUMSTANCES. ACCORDINGLY, YOU REQUEST THAT THE TWO-STEP PROCUREMENT BE CANCELLED AND THAT QPL PROCEDURES BE EMPLOYED.

THE RECORD SHOWS THAT AS OF OCTOBER 1968, WHEN THE PURCHASE REQUEST FOR THE PROCUREMENT NEED HERE INVOLVED WAS RECEIVED BY THE CONTRACTING OFFICER, YOU WERE THE ONLY SOURCE LISTED ON THE QPL DATED JULY 1968; THAT ACTION ON THE PROCUREMENT WAS ACCORDINGLY DELAYED BY THE CONTRACTING OFFICER IN THE HOPE THAT A SECOND SOURCE WOULD SOON QUALIFY; AND THAT ABSENT ANY INDICATION OF A NEW SOURCE BY FEBRUARY 1969, THE CONTRACTING OFFICER, IN A MEMORANDUM DATED FEBRUARY 11, REQUESTED THE ENGINEERING ACTIVITY, WHICH IS RESPONSIBLE FOR QUALIFICATION OF THE CPU-46/A, TO RENDER A REPORT AS TO ALL SOURCES CURRENTLY ON THE QPL AND SUCH ADDITIONAL SOURCES AS MIGHT QUALIFY TOGETHER WITH THE ANTICIPATED QUALIFICATION DATES. THE ENGINEERING ACTIVITY'S REPLY, BY MEMORANDUM DATED MARCH 4, STATED THAT YOU WERE STILL THE ONLY SOURCE ON THE JULY 1968 QPL; HOWEVER, REQUALIFICATION MIGHT BE REQUIRED OF YOU IN CONNECTION WITH TEMPERATURE CYCLING TESTS REQUIRED BY THE MILITARY SPECIFICATION, WHICH HAD NOT BEEN COMPLETED WHEN YOU WERE QUALIFIED TO THE SPECIFICATION. THE BASIS FOR SUCH ACTION, IT WAS STATED, WAS THE RECENT DISCOVERY OF ELECTRONIC COMPONENT FAILURES IN CPU-46/A'S WHEN SUBJECTED TO RELIABILITY TEMPERATURE CYCLING REQUIREMENTS OF MIL-STD-781 (SEE PARAGRAPH 4.6.27 OF THE MILITARY SPECIFICATION). THE ANTICIPATED DATE OF YOUR REQUALIFICATION, IF DEEMED NECESSARY, WAS STATED TO BE JULY 1, 1969. FOR KOLLSMAN, QUALIFICATION WAS ANTICIPATED ON SEPTEMBER 1, 1969, AND FOR THE OTHER DEVELOPMENT CONTRACTOR THE ANTICIPATED QUALIFICATION DATE WAS NOVEMBER 1, 1969.

THE RECORD FURTHER SHOWS THAT AFTER RECEIPT OF THE ABOVE INFORMATION THE CONTRACTING OFFICER REVIEWED THE HISTORY OF PERFORMANCE BY KOLLSMAN AND THE OTHER DEVELOPMENT CONTRACTOR UNDER THEIR RESPECTIVE PRODUCTION CONTRACTS, AND TOOK NOTE OF THE FACTS THAT BOTH CONTRACTORS HAD TAKEN MORE THAN 30 MONTHS IN EXCESS OF THE 6-MONTH PRODUCTION LEAD TIME IN THEIR CONTRACTS TO PRODUCE ACCEPTABLE ITEMS AND THAT THE INABILITY OF THE CONTRACTORS TO RESOLVE THE TECHNICAL DIFFICULTIES ENCOUNTERED DURING SUCH PERIOD HAD RESULTED IN THEIR REMOVAL FROM THE QPL. SUCH FACTORS, THE CONTRACTING OFFICER CONSIDERED, WOULD SUPPORT THE CONCLUSION THAT THE QUALIFYING UNITS (WHICH HAD BEEN SUBMITTED UNDER THE DEVELOPMENT CONTRACTS) WERE PURELY ENGINEERING MODELS WHICH WERE EXTREMELY DIFFICULT TO PRODUCE IN QUANTITY WITH ACCEPTABLE QUALITY. HEADQUARTERS UNITED STATES AIR FORCE (USAF) CONCURS WITH SUCH VIEW AND STATES THAT WHILE REMOVAL OF THE QUALIFICATION REQUIREMENT FROM THE SPECIFICATION WAS CONSIDERED BUT NOT EFFECTED (I.E., AT THE TIME THIS PROCUREMENT WAS INITIATED), PERMANENT REMOVAL OF THE QPL REQUIREMENT FROM THE MILITARY SPECIFICATION IS CURRENTLY UNDER CONSIDERATION.

BASED ON HIS REVIEW OF THE PROCUREMENT HISTORY OF THE ITEM, THE CONTRACTING OFFICER CONCLUDED THAT THERE WAS NO ASSURANCE THAT EITHER OF THE PRODUCTION CONTRACTORS WOULD MEET THE ANTICIPATED REQUALIFICATION DATES. ACCORDINGLY, AND WITH A VIEW TO ELIMINATING A POSSIBLE SOLE SOURCE PROCUREMENT UNDER THE QPL PROCEDURES AND TO OBTAINING THE BROADEST COMPETITION POSSIBLE UNDER ASPR 1-1109 (A), THE CONTRACTING OFFICER OBTAINED CONCURRENCE OF THE ENGINEERING ACTIVITY WITH THE USE OF TWO-STEP ADVERTISING PROCEDURES UTILIZING A FIRST ARTICLE APPROVAL PROVISION PRIOR TO PRODUCTION IN QUANTITY TO PROVIDE QUALITY ASSURANCE. THE PROCUREMENT PLAN, CALLING FOR TWO-STEP MULTI YEAR PROCEDURES AND AWARD OF A FIRM FIXED -PRICE INCENTIVE CONTRACT, WAS SUBMITTED TO AND APPROVED BY THE DIRECTOR, DOD AIMS SYSTEM PROGRAM OFFICE, WHO IS RESPONSIBLE FOR THE PROGRAM UTILIZING THE CPU-46/A AND WHO HAS FINAL AUTHORITY WITH RESPECT TO QPL SPECIFICATIONS. THE PLAN, WHICH SPECIFIED THE MULTI-YEAR NEED AS 3,081 UNITS, STATED THAT INCREMENTAL QUANTITIES WOULD BE ESTABLISHED THROUGH 6,000 UNITS TO COVER FUTURE ANTICIPATED SPARES REQUIREMENTS UNDER A 100- PERCENT OPTION PROVISION AND INDICATED, UNDER SPECIAL CONDITIONS AND CONSIDERATIONS, THAT THERE WOULD BE A DOWNWARD PRICE ADJUSTMENT IN THE EVENT OF EXERCISE OF THE OPTION. IN ADDITION, THE PLAN PROVIDED FOR THE USE OF A CORRECTION OF DEFICIENCIES CLAUSE AND LIQUIDATED DAMAGES PROVISIONS.

WITH RESPECT TO QUALIFICATION OF SOURCES OTHER THAN YOU AFTER THE PROCUREMENT WAS INITIATED, THE RECORD CONFIRMS YOUR STATEMENT THAT KOLLSMAN WAS LISTED ON THE QPL IN SEPTEMBER 1969 AND INDICATES THAT SUCH ACTION WAS BASED ON DELIVERIES BY KOLLSMAN OF COMPUTERS UNDER A MARCH 1966 PRODUCTION CONTRACT. THE RECORD ALSO INDICATES, HOWEVER, THAT THE SECOND CONTRACTOR, WHOSE REQUALIFICATION WAS ANTICIPATED ON NOVEMBER 1, 1969, ACCORDING TO THE MARCH 4 MEMORANDUM OF THE ENGINEERING ACTIVITY, IS NOT EXPECTED TO QUALIFY UNTIL THE FIRST QUARTER OF THE CALENDAR YEAR 1970.

WITH REGARD TO THE LABOR SURPLUS SET-ASIDE, THE CONTRACTING OFFICER STATES THAT SUCH ACTION WAS TAKEN WITH THE CONCURRENCE OF THE USAF SMALL BUSINESS SPECIALIST, PURSUANT TO ASPR 1-804.1 (A) (1) (I) AND (II), UPON DETERMINATION THAT THE DESIGNATED QUANTITY OF 3,000 COMPUTERS AND ASSOCIATED MOUNTINGS IS LARGE ENOUGH TO PROVIDE TWO ECONOMIC PRODUCTION RUNS OR REASONABLE LOTS AND THAT THERE IS A REASONABLE EXPECTATION THAT ONE OR MORE LABOR SURPLUS AREA CONCERNS WITH THE NECESSARY TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY WILL SUBMIT BIDS. FURTHER, THE CONTRACTING OFFICER STATES THAT SINCE THE USE OF MULTI-YEAR PROCEDURES WAS NOT SELECTED BY THE BUYING ACTIVITY ON THE BASIS OF HIGH STARTUP COSTS, THERE IS NO INCOMPATABILITY WITH THE STATEMENT IN ASPR 1-322.1 TO THE EFFECT THAT PARTIAL SET-ASIDES GENERALLY ARE NOT COMPATIBLE WITH THE MULTI -YEAR PROCEDURE WHEN HIGH STARTUP COSTS ARE INVOLVED.

WITH RESPECT TO THE 100-PERCENT OPTION, THE CONTRACTING OFFICER STATES THAT NEITHER ASPR 1-1504 (A) NOR ASPR 1-322 HAS BEEN VIOLATED IN THIS CASE. IN THIS CONNECTION, IT IS URGED THAT SINCE THE LRFTP EXCLUDES PRICING AND THE NOTICE OF 100-PERCENT OPTION PLACES NO RESTRICTION ON PRICING, APPROVAL OF THE HEAD OF THE PROCURING ACTIVITY (UNDER ASPR 1-1504 (A) ( IS NOT A REQUIREMENT FOR THE 100-PERCENT OPTION. FURTHER, IT IS STATED THAT BASED ON PAST EXPERIENCE OF DOD AIMS SYSTEM PROGRAM OFFICE WITH PROCUREMENTS INVOLVING 100-PERCENT OPTIONS, AND IN LIGHT OF INDUSTRY ACCEPTANCE OF SUCH OPTIONS, THE CONTRACTING OFFICER HAS DETERMINED THAT A 100-PERCENT OPTION IS NOT DISPROPORTIONATELY LARGE IN RELATION TO KNOWN REQUIREMENTS (WITHIN THE MEANING OF ASPR 1-322.1 (E) (.

AS TO THE ABSENCE OF ANY LANGUAGE IN THE LRFTP AND THE PROCUREMENT SYNOPSIS IN THE COMMERCE BUSINESS DAILY WAIVING THE QPL REQUIREMENT, THE PROCUREMENT OFFICE STATES THAT IN VIEW OF THE USE OF TWO-STEP PROCUREMENT PROCEDURES ALL PROPOSERS, INCLUDING YOU, WERE AWARE THAT THE QUALIFICATION PROVISION IN THE SPECIFICATION WAS WAIVED. FURTHER, IT IS STATED, THE NECESSARY STEPS TO DELETE THE QPL LANGUAGE IN THE SPECIFICATION WILL BE TAKEN PRIOR TO INSTITUTION OF STEP TWO OF THE PROCUREMENT.

AS TO DELAYING THE PROCUREMENT UNTIL OTHER SOURCES HAVE QUALIFIED AND HAVE BEEN PLACED ON THE QPL, THE CONTRACTING OFFICER POINTS OUT THAT QPL PROCUREMENT ACTION HAS NOT BEEN IN THE BEST INTERESTS OF THE GOVERNMENT IN LIGHT OF THE PERFORMANCE RECORD OF THE OTHER TWO SOURCES UNDER THEIR EXISTING PRODUCTION CONTRACTS. CONVERSELY, IT IS NOTED, COMPETITION FROM A NEW SOURCE HAS BEEN OBTAINED UNDER THE LRFTP IN ADDITION TO PROPOSALS FROM ALL OF THE SOURCES WHICH HAVE PREVIOUSLY QUALIFIED OR PRODUCED CPU- 46/A-S. IN THE CIRCUMSTANCES, IT IS STATED, THE COMPETITIVE SITUATION REMAINS ESSENTIALLY THE SAME AS IF QPL PROCEDURES WERE USED BUT WITH THE ADVANTAGE THAT ADEQUATE CONTROLS WILL BE PROVIDED TO ASSURE REQUISITE QUALITY THROUGH (1) ENGINEERING EVALUATION OF TECHNICAL PROPOSALS; (2) FIRST ARTICLE TESTING PROVISIONS; (3) CONFIGURATION MANAGEMENT PRELIMINARY DESIGN REVIEW, CRITICAL DESIGN REVIEW AND FIRST ARTICLE CONFIGURATION INSPECTION; (4) FIRM DELIVERY SCHEDULES FOR FIRST ARTICLES AND PRODUCTION UNITS AND ALTERNATIVE SCHEDULES FOR QUALIFIED (QPL) SOURCES WITH PROVISIONS FOR ACCELERATED DELIVERY; (5) LIQUIDATED DAMAGES; AND (6) CORRECTION OF DEFICIENCIES. WITH REGARD TO YOUR CLAIM THAT THE TWO-STEP PROCEDURES ARE PREJUDICIAL TO YOU IN VIEW OF YOUR INVESTMENT IN QUALIFYING A CPU 46/A, THE PROCURING ACTIVITY OBSERVES THAT BY REASON OF SUCH QUALIFICATION YOU HAVE BEEN EXEMPTED BY THE LRFTP FROM THE REQUIREMENT FOR SUBMISSION OF AN ACCEPTABLE TECHNICAL PROPOSAL IN ORDER TO QUALIFY FOR PARTICIPATION IN THE SECOND STEP OF THE PROCUREMENT. FURTHER, THE PROCURING ACTIVITY STATES, WHILE COMPETITION EXISTED WHEN THE EARLIER QPL PROCUREMENTS WERE EFFECTED, THE SITUATION CHANGED BY REASON OF THE PRODUCTION DIFFICULTIES AND THE SUBSEQUENT DISQUALIFICATION OF THE TWO ORIGINALLY QUALIFIED PRODUCERS WITH THE RESULT THAT AT THE TIME THIS PROCUREMENT WAS INITIATED ONLY YOUR COMPANY REMAINED ON THE QPL.

IN SUPPORT OF ITS POSITION THAT THERE WAS SUFFICIENT COMPLIANCE WITH ASPR 1-1108 AND 1-1109 AND THAT THE PROCUREMENT SHOULD NOT BE FURTHER DELAYED TO ACCOMMODATE THE GOVERNMENT'S DELIVERY REQUIREMENTS TO THE DIFFICULTIES, DELAYS AND DISTINCTIVE CIRCUMSTANCES OF CERTAIN SOURCES, THE PROCURING ACTIVITY QUOTES FROM OUR DECISION B-158096, MARCH 8, 1966, AS FOLLOWS: "THE ESTABLISHMENT OF A QUALIFIED PRODUCTS LIST IS SOLELY FOR THE GOVERNMENT'S BENEFIT, AND THE GOVERNMENT MAY ELECT UNDER ASPR 1-1109 NOT TO USE IT. THERE ARE NO ASSURANCES MADE TO QUALIFIED FIRMS THAT THE GOVERNMENT WILL PURCHASE QPL ITEMS ONLY FROM SUCH FIRMS. HENCE, WHEN THE GOVERNMENT ELECTS NOT TO USE A QPL AS THE BASIS FOR PROCUREMENT, A QUALIFIED SOURCE CANNOT HAVE AN AWARD SET ASIDE AS BEING INVALID NOTWITHSTANDING THE LACK OF PRECISE COMPLIANCE WITH ADMINISTRATIVE PROCEDURES.'IN VIEW OF THE RESTRICTIVE NATURE OF THE QUALIFIED PRODUCTS SYSTEM OF PROCUREMENT, AND IN VIEW OF THE PAST HISTORY IN THE USE OF THAT SYSTEM, WE BELIEVE THAT INVITATION PROVISIONS REQUIRING PRODUCT QUALIFICATION SHOULD NOT BE NARROWLY CONSTRUED SO AS TO ELIMINATE AN ACCEPTABLE PRODUCT WHICH, AS IN THE INSTANT CASE, HAS BEEN DETERMINED BY THE PROCUREMENT AGENCY TO MEET THE ESSENTIAL REQUIREMENTS OF THE SPECIFICATIONS. A NARROW CONSTRUCTION OF SUCH INVITATION PROVISIONS IS EVEN LESS JUSTIFIED WHEN IT IS CONSIDERED THAT THE MERE LISTING OF A PRODUCT ON A QUALIFIED PRODUCT LIST DOES NOT RELIEVE A CONTRACTOR FROM HIS OBLIGATION TO DELIVER AN ITEM WHICH MEETS THE SPECIFICATIONS. SEE 43 COMP. GEN. 223, 41 COMP. GEN. 124, 40 COMP. GEN. 352.' AND FROM 40 COMP. GEN. 35, 40 (1960) THE FOLLOWING: "OBVIOUSLY, PROCUREMENTS CANNOT BE LEFT OPEN INDEFINITELY NOR BIDDERS PERMITTED TO ENGAGE IN ACTIVITY WHICH WOULD BRING ABOUT THAT RESULT. IN 36 COMP. GEN. 809 ... WE HELD THAT AN AWARD WAS NOT RENDERED ILLEGAL BECAUSE SOME BIDDERS WERE NOT ABLE TO QUALIFY THEIR PRODUCTS IN TIME FOR THE AWARD.'

IN LIGHT OF THE FOREGOING, THE CONTRACTING OFFICER STATES THAT HE DETERMINED THAT FORMAL ADVERTISING USING QPL PROCEDURES WAS NEITHER FEASIBLE NOR PRACTICABLE AND THAT TWO-STEP ADVERTISED PROCEDURES WOULD PROVIDE THE MAXIMUM CONTROL OF THE PROCUREMENT SITUATION AND HOLD THE BEST PROMISE FOR ACHIEVING THE REQUIRED DELIVERY SCHEDULE. USAF CONCURS WITH THE CONTRACTING OFFICER'S POSITION WITH THE ADDED OBSERVATION THAT USAF DOES NOT CONSIDER IT TO BE IN THE GOVERNMENT'S BEST INTEREST, IN VIEW OF THE PROCUREMENT HISTORY AND THE INADEQUACY OF QUALIFIED SOURCES, TO LIMIT COMPETITION TO FIRMS WHICH ARE OR HAVE BEEN ON THE QPL.

ASPR 1-1109 (A) PROVIDES AS FOLLOWS:

"/A) PRE-SOLICITATION. IN CONNECTION WITH PROCUREMENT OF A QUALIFIED PRODUCT AS AN END ITEM, THE CONTRACTING OFFICER SHALL REVIEW THE APPLICABLE QUALIFIED PRODUCTS LIST PRIOR TO SOLICITATION TO ASCERTAIN WHETHER THE NUMBER OF SOURCES IS ADEQUATE FOR COMPETITION. IF, IN THE OPINION OF THE CONTRACTING OFFICER, THE NUMBER OF SOURCES IS INADEQUATE, ACTION SHALL BE TAKEN AS PRESCRIBED BELOW UNLESS HE ALREADY HAS THE NECESSARY INFORMATION.

"/1) THE CONTRACTING OFFICER SHALL REQUEST THE ACTIVITY THAT PREPARED THE SPECIFICATION TO PROVIDE INFORMATION CONCERNING THE STATUS OF TESTS ON ADDITIONAL PRODUCTS, INCLUDING THE ANTICIPATED DATES WHEN SUCH TESTS WILL BE COMPLETED SO THAT OPENING OF BIDS OR SUBMISSION OF PROPOSALS MAY BE SO SCHEDULED AS TO ALLOW COMPLETION OF THE TESTS.

"/2) IF NO TESTS ARE BEING CONDUCTED OR CONTEMPLATED, THE CONTRACTING OFFICER SHALL FURTHER REQUEST THE PREPARING ACTIVITY TO ADVISE WHETHER A MEANS OF QUALITY ASSURANCE OTHER THAN QUALIFICATION APPROVAL MAY BE SUBSTITUTED IN THE PROCUREMENT.'

THE FACTS OF RECORD SHOW THAT THE CONTRACTING OFFICER COMPLIED WITH THE ABOVE REGULATION WHEN HE CONFERRED WITH THE ENGINEERING ACTIVITY IN FEBRUARY 1969 REGARDING QUALIFIED SOURCES FOR THE COMPUTERS AND AGAIN IN SUBSEQUENT MONTHS REGARDING A MEANS OF QUALITY ASSURANCE OTHER THAN QPL APPROVAL. FURTHER, HIS DECISION NOT TO EMPLOY QPL PROCEDURES HAD THE APPROVAL OF BOTH THE ENGINEERING ACTIVITY AND THE DIRECTOR OF THE SYSTEM PROGRAM OFFICE. ACCORDINGLY, WE ARE UNABLE TO CONCLUDE THAT THE RECORD SUBSTANTIATES YOUR ASSERTION THAT THERE WAS A VIOLATION OF ASPR 1-1109 IN THIS PROCUREMENT.

AS TO ASPR 1-1108, SINCE THE SUBSTITUTION OF FIRST ARTICLE TESTING FOR THE SPECIFICATION REQUIREMENT FOR QUALIFICATION CONSTITUTED A WAIVER OF SUCH REQUIREMENT, TECHNICALLY, COMPLIANCE WITH THE REGULATION NECESSITATED INCLUSION IN THE PROCUREMENT SYNOPSIS PUBLISHED IN THE COMMERCE BUSINESS DAILY AND IN THE LRFTP LANGUAGE ADVISING PROSPECTIVE OFFERORS THAT THE QUALIFICATION REQUIREMENT WOULD NOT BE APPLICABLE TO THE PROCUREMENT. THE PROCUREMENT OFFICE HAS STATED, HOWEVER, THE USE OF TWO-STEP PROCEDURES SERVED AS NOTICE TO ALL PROSPECTIVE OFFERORS THAT THE QUALIFICATION REQUIREMENT OF THE SPECIFICATION WAS WAIVED, AND THE IFB IN THE SECOND STEP WILL DELETE THE REQUIREMENT TO PRECLUDE ANY AMBIGUITY IN THE CONTRACT AWARDED THEREUNDER. ACCORDINGLY, WE ARE UNABLE TO CONCLUDE THAT THE OMISSION OF NOTICE OF THE WAIVER FROM THE SYNOPSIS AND THE LRFTP RENDERED THE PROCUREMENT DEFECTIVE SO AS TO JUSTIFY DISCARDING OF THE PROPOSALS AND RESOLICITATION OF THE PROCUREMENT NEED.

CONCERNING THE 100-PERCENT OPTION, THE REQUIREMENT IN ASPR 1-1504 (A) FOR APPROVAL BY THE HEAD OF THE PROCURING ACTIVITY OR HIS DESIGNEE OF OPTION QUANTITIES IN EXCESS OF 50 PERCENT OF THE INITIAL QUANTITY APPLIES ONLY TO A SOLICITATION WHICH CONTAINS AN OPTION WHICH BINDS THE OFFEROR TO FURNISH SUCH QUANTITIES AT UNIT PRICES NO HIGHER THAN THE PRICES FOR THE INITIAL QUANTITIES. IN THIS CASE, THE ONLY SOLICITATION WHICH HAS BEEN ISSUED IS THE LRFTP, THE PURPOSE OF WHICH IS TO OBTAIN UNPRICED TECHNICAL PROPOSALS TO DETERMINE THE ACCEPTABILITY OF THE ITEMS OFFERED. SEE ASPR 2-501 (I). FURTHER, THE LANGUAGE IN THE LRFTP RELATING TO THE OPTION DOES NOT CONSTITUTE AN OPTION PROVISION SUCH AS IS SET FORTH IN ASPR 1-1506. THE CIRCUMSTANCES, AND SINCE THERE IS NO EVIDENCE OF RECORD THAT THE CONTRACTING OFFICER, IN EXERCISING HIS AUTHORITY UNDER ASPR 1-322.1 (E) (1) TO MAKE THE DETERMINATION THAT THE OPTION QUANTITY IS NOT DISPROPORTIONATELY LARGE IN RELATION TO THE KNOWN REQUIREMENTS, ACTED ARBITRARILY OR IN OTHER THAN GOOD FAITH, WE ARE UNABLE TO CONCLUDE THAT THERE HAS BEEN ANY VIOLATION OF THE ASPR PROVISIONS WITH RESPECT TO OPTIONS IN THE FIRST STEP OF THE PROCUREMENT. AS TO THE SECOND STEP OF THE PROCUREMENT, IN THE EVENT THE OPTION PROVISION INCLUDED IN THE ADVERTISED SOLICITATION COVERS AN OPTION QUANTITY IN EXCESS OF 50 PERCENT OF THE INITIAL QUANTITY, APPROVAL BY THE HEAD OF THE PROCURING ACTIVITY OR HIS DESIGNEE AT THAT TIME WILL BE A NECESSARY PREREQUISITE UNDER THE PROVISIONS OF ASPR 1 1504 (A).

THE FACTS OF RECORD ESTABLISH THAT ALTHOUGH THREE SOURCES, OF WHICH YOU WERE ONE, QUALIFIED SOMETIME AGO UNDER THE MILITARY SPECIFICATION BY SUBMITTING ACCEPTABLE MODELS OF THE CPU-46/A, NO SOURCE HAS TO DATE PRODUCED THE ITEM WITH THE REQUISITE QUALITY IN SIGNIFICANT QUANTITY. FURTHER, WHILE WE ARE MINDFUL THAT YOU HAVE NEVER HELD A PRODUCTION CONTRACT, THERE IS NOTHING OF RECORD TO INDICATE THAT YOU WOULD BE SPARED THE PROBLEMS WHICH HAVE BESET THE OTHER TWO QPL SOURCES IN PRODUCTION. THE CIRCUMSTANCES, IT IS OUR VIEW THAT THE DECISION OF THE AIR FORCE TO SUSPEND THE QPL REQUIREMENT IN THIS PROCUREMENT AND TO SUBSTITUTE, FOR QUALITY ASSURANCE PURPOSES, FIRST ARTICLE TESTING IN AN EFFORT TO OBTAIN THE NECESSARY QUANTITY OF COMPUTERS UNDER A FIRM DELIVERY SCHEDULE IS CONSISTENT WITH THE ASPR PROVISIONS RELATING TO QUALIFIED PRODUCTS. 164780, SEPTEMBER 12, 1968; AFFIRMED NOVEMBER 4, 1968. FOR SUCH REASONS, AS WELL AS THE OTHERS STATED ABOVE, YOUR PROTEST IS DENIED.