B-167932, JAN. 15, 1970

B-167932: Jan 15, 1970

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A CONTRACTOR WHO DID NOT RESTRICT THE USE OF HIS ALTERNATE DESIGN SUBMITTED PURSUANT TO ASPR 1-707.2 UNDER A PRIOR CONTRACT TERMINATED FOR CONVENIENCE OF THE GOVERNMENT MAY BE REGARDED AS WAIVING ANY RIGHTS IT MAY HAVE HAD TO THE DESIGN PARTICULARLY SINCE THE CONTRACTOR HAD BEEN ADVISED UNDER THE PRIOR CONTRACT THAT THE ALTERNATE DESIGN UNDER THE VALUE ENGINEERING CLAUSE WAS NOT USED FOR ANY ITEMS OF THE CONTRACT. INC.: THIS IS IN REFERENCE TO THE TELEGRAM OF SEPTEMBER 17. THE CONTRACT IS TO BE EFFECTIVE AS OF THE DATE OF AWARD TO CONTINUE FOR A PERIOD OF ONE CALENDAR YEAR THEREAFTER. AWARD IS TO BE MADE TO ONE OFFEROR BASED ON THE LOWEST OVERALL COST TO THE GOVERNMENT. AWARD WILL NOT BE MADE UNTIL WE HAVE RENDERED OUR DECISION ON THE MATTER.

B-167932, JAN. 15, 1970

BID PROTEST--VALUE ENGINEERING CLAUSE DESIGN--USE DECISION TO APEX METAL STAMPING CO; DENYING PROTEST AGAINST USES OF PROTESTANT'S VALUE ENGINEERING PROPOSAL WHICH HAD BEEN SUBMITTED WITHOUT RESTRICTION UNDER A PRIOR PROCUREMENT THAT HAD BEEN TERMINATED FOR CONVENIENCE IN PROCUREMENT OF MAGAZINE ASSEMBLIES BY ROCK ISLAND ARSENAL. A CONTRACTOR WHO DID NOT RESTRICT THE USE OF HIS ALTERNATE DESIGN SUBMITTED PURSUANT TO ASPR 1-707.2 UNDER A PRIOR CONTRACT TERMINATED FOR CONVENIENCE OF THE GOVERNMENT MAY BE REGARDED AS WAIVING ANY RIGHTS IT MAY HAVE HAD TO THE DESIGN PARTICULARLY SINCE THE CONTRACTOR HAD BEEN ADVISED UNDER THE PRIOR CONTRACT THAT THE ALTERNATE DESIGN UNDER THE VALUE ENGINEERING CLAUSE WAS NOT USED FOR ANY ITEMS OF THE CONTRACT.

TO APEX METAL STAMPING COMPANY, INC.:

THIS IS IN REFERENCE TO THE TELEGRAM OF SEPTEMBER 17, 1969, FROM APEX METAL STAMPING COMPANY, INC; (APEX) AND THE LETTER OF OCTOBER 15, 1969, OF SOLICITATION NO. DAAF01-70-B-0045, BY ROCK ISLAND ARSENAL, ILLINOIS, DEPARTMENT OF THE ARMY.

THE PROCUREMENT, A TOTAL SMALL BUSINESS SET-ASIDE, SOLICITED BIDS FOR AN INDEFINITE QUANTITY CONTRACT FOR "* * * MAGAZINE ASSEMBLY IN ACCORDANCE WITH U. S. ARMY DRAWING C5508694. (SEE PAGE A8.)" THE ITEM DESCRIPTION ON PAGE A8 OF THE SOLICITATION PROVIDED AS FOLLOWS:

"MAGAZINE ASSEMBLY: IN ACCORDANCE WITH U. S. ARMY DRAWINGC5508694 REVISION B DATED 67 APR 21 AND ALL DRAWINGS, SPECIFICATIONS AND EXCEPTIONS AS REFERENCED HEREIN.

"DELIVERY SHALL BE F.O.B. CARRIER'S EQUIPMENT, WHARF, OR FREIGHT STATION (AT THE GOVERNMENT'S OPTION) AT OR NEAR THE CONTRACTOR'S PLANT AT A SPECIFIED CITY OR SHIPPING POINT. MIN. QTY. 128,100 EA. - MAX QTY. 326,100 EA." THE CONTRACT IS TO BE EFFECTIVE AS OF THE DATE OF AWARD TO CONTINUE FOR A PERIOD OF ONE CALENDAR YEAR THEREAFTER. AWARD IS TO BE MADE TO ONE OFFEROR BASED ON THE LOWEST OVERALL COST TO THE GOVERNMENT. AWARD WILL NOT BE MADE UNTIL WE HAVE RENDERED OUR DECISION ON THE MATTER.

TWO SHEETS OF DRAWINGS WERE FURNISHED WITH THE SOLICITATION. SHEET 1 PROVIDED FOR THE BASIC DESIGN FOR THE MAGAZINE TUBES AND SHEET 2 GAVE AN ALTERNATIVE DESIGN FOR THE MAGAZINE TUBES.

A LETTER DATED AUGUST 18, 1969, WHICH ACCOMPANIED APEX'S BID STATED AS FOLLOWS:

"PLEASE BE ADVISED THAT THE USE AND INCLUSION OF ALTERNATE DESIGN METHOD FOR TUBE, MAGAZINE, DRAWING #5508695 IS HEREBY PROTESTED.

"THIS WAS A VALUE ENGINEERING PROPOSAL MADE BY THIS COMPANY ON A PREVIOUS BID AND WAS ACCORDING TO OUR RECORDS NEVER ACCEPTED BY THE GOVERNMENT. BELIEVE YOU HAVE NO RIGHT TO THIS DESIGN." APEX'S BID OF $1.08, WHICH WAS THIRD LOW, STATED THAT IT WAS NOT BASED ON THE ALTERNATIVE DESIGN OF THE MAGAZINE TUBE.

THE VALUE ENGINEERING CHANGE PROPOSAL (VECP) REFERRED TO IN APEX'S ACCOMPANYING LETTER OF AUGUST 18, 1969, WAS SUBMITTED BY THAT CONCERN UNDER ITS CONTRACT NO. DAAG25-68-C-0929, WITH THE NEW YORK PROCUREMENT DETACHMENT, UNITED STATES ARMY. THIS CONTRACT WAS NEGOTIATED EFFECTIVE JANUARY 9, 1968, PURSUANT TO 10 U.S.C. 2304 (A) (2) FOR 466,900 MAGAZINE ASSEMBLIES IN ACCORDANCE WITH DRAWING C5508694.

THE CONTRACTING OFFICER'S REPORT PROVIDES THE FOLLOWING DETAILS WITH REGARD TO THE VECP SUBMITTED BY APEX UNDER ITS PRIOR CONTRACT:

"4. UNDER THE TERMS OF THIS CONTRACT (DAAG25-68-C-0929) APEX HAD SUBMITTED A VALUE ENGINEERING CHANGE PROPOSAL TO THE NEW YORK PROCUREMENT DETACHMENT * * *. AFTER EVALUATION THEREOF BY ROCK ISLAND ARSENAL TECHNICAL PERSONNEL, THE NEW YORK PROCUREMENT DETACHMENT WAS INFORMED ON 19 NOVEMBER 1968, THAT THE VALUE ENGINEERING CHANGE PROPOSAL WAS ACCEPTABLE * * *. HOWEVER, IN THE INTERIM, THE CONTRACT HAD BEEN PARTIALLY TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT BY TELEGRAM DATED 13 SEPTEMBER 1968, CONFIRMED IN MODIFICATION P0003 DATED 23 SEPTEMBER 1968 * * *. ACCORDINGLY, ON 29 JANUARY 1969, APEX WAS INFORMED THAT 'IN VIEW OF THE PARTIAL TERMINATION OF QUANTITY AND THE CURRENT UNDELIVERED BALANCE DUE, IT IS NOT CONSIDERED ECONOMICAL OR ADVANTAGEOUS TO ACCEPT THE VECP AT THIS TIME.' * * * THEREFORE, THE SAID CONTRACT WAS COMPLETED WITHOUT IMPLEMENTING THE VECP AND WITHOUT ANY MONETARY SAVINGS ACCRUING, AS THE CONTRACTOR CONTINUED TO PRODUCE THE ITEM IN ACCORDANCE WITH THE ORIGINAL SPECIFICATIONS. AS THE VECP HAD BEEN SUBMITTED WITHOUT ANY RESTRICTIONS, THE SAID PROPOSAL WAS INCORPORATED INTO THE TECHNICAL DATA PACKAGE AS AN ALTERNATE METHOD OF MANUFACTURE OF THE TUBE (DRAWING #5508695, * * *), AND WAS INCLUDED IN THE SPECIFICATIONS APPLIED TO IFB DAAF01-70-B 0045, WHICH IS THE SUBJECT OF APEX'S PROTEST.

THE VALUE ENGINEERING CLAUSE AS CONTAINED IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1707.2 (OCTOBER 1964) WAS INCLUDED IN CONTRACT NO. DAAG25-68-C-0929, EXCEPT THAT PARAGRAPH (J), UNDER WHICH THE CONTRACTOR MAY SHARE IN SAVINGS ON FUTURE ACQUISITIONS RESULTING FROM THE ADOPTION OF HIS VECP, WAS DELETED.

A REVIEW OF THE VECP CONFIRMS THAT APEX DID NOT RESTRICT ITS USE IN ANY MANNER. THE RECORD ALSO SUBSTANTIATES THE CONTRACTING OFFICER'S FACTUAL FINDINGS THAT CONTRACT NO. DAAG25-68-C-0929, WAS PARTIALLY TERMINATED FOR CONVENIENCE; THAT THE VECP WAS EVALUATED AND THE DRAWING WAS FOUND TO BE ACCEPTABLE; AND THAT APEX WAS ADVISED ON JANUARY 29, 1969, THAT IT WAS NOT CONSIDERED ECONOMICAL OR ADVANTAGEOUS TO INCORPORATE THE DESIGN OF THE VECP FOR ANY OF THE ITEMS FURNISHED UNDER CONTRACT NO. DAAG 25-68-C-0929.

THE LETTER OF OCTOBER 15, 1969, ASKS THAT THE CONTRACTOR AT LEAST BE PERMITTED TO PARTICIPATE IN THE SAVINGS ACCRUING UNDER THE PRIOR CONTRACT AND ASPR 1-1701, OCTOBER 9, 1964, IS CITED IN SUPPORT OF THIS PROPOSITION. THE OTHER REQUEST IN THE LETTER OF OCTOBER 15, IS THAT APEX SHOULD BE PERMITTED TO SUBMIT A POST-OPENING OFFER ON THE ALTERNATIVE DESIGN.

THE FOLLOWING INFORMATION WHICH APPEARS IN A MEMORANDUM DATED NOVEMBER 7, 1969, PREPARED BY HEADQUARTERS, UNITED STATES ARMY WEAPONS COMMAND, ROCK ISLAND, ILLINOIS, HAS ALSO BEEN FURNISHED TO OUR OFFICE IN CONNECTION WITH THIS MATTER.

* * * ANOTHER PROCUREMENT FOR THE SAME ITEM, UNDER THE IDENTICAL SPECIFICATIONS, WAS CONSUMMATED BY THE NEW YORK PROCUREMENT AGENCY UNDER CONTRACT NUMBER DAAG25-69-R-0431 FOR A QUANTITY OF APPROXIMATELY 307,000 MAGAZINES. THIS CONTRACT WITH AN EFFECTIVE DATE OF 28 MAY 1969 WAS NEGOTIATED UNDER THE AUTHORITY OF 10 U.S.C. 2304 (A) (2), AND AWARDED TO APEX METAL STAMPING COMPANY AT A PRICE OF $1.10 EACH. ELEVEN OFFERORS PARTICIPATED IN THIS REQUEST FOR PROPOSALS. THE ORIGINAL PRICE OF APEX WAS $1.18, HOWEVER, BASED ON NEGOTIATIONS, APEX SUBMITTED A LETTER UNDER DATE OF 8 MAY 1969, STATING IN PART AS FOLLOWS: BASED ON AN ALL OR NOTHING AWARD FOR EITHER METHOD UNDER WHICH WE MAY CHOOSE TO DELIVER, WE QUOTE A PRICE OF $1.10 EACH ... .' THE 'EITHER METHOD' REFERRED TO IS IN REFERENCE TO AMENDMENT 1 TO THEREQUEST FOR PROPOSALS WHICH STATED 'UNIT PRICE OFFERS FOR ITEMS 0001 AND 0002 ARE TO BE ON METHODS SHOWN UNDER DWG. #5508695, SHEET 1 AND ALTERNATE METHOD DWG. #5508695, SHEET 2. AT THAT TIME, APEX MADE NO REPRESENTATIONS OR COMMENTS WITH REFERENCE TO THEIR CURRENT ALLEGATIONS RELATING TO THE VALUE ENGINEERING CHANGE PROPOSAL SUBMITTED BY THEM UNDER CONTRACT DAAG25-68-C-0929.

IN OUR REVIEW WE WILL CONSIDER WHETHER THE GOVERNMENT WAS ENTITLED TO USE THE VECP IN THE INSTANT PROCUREMENT AND WHETHER APEX IS ENTITLED TO ANY COMPENSATION FOR THE USE THEREOF.

SINCE APEX DID NOT RESTRICT THE USE OF THE VECP IN ANY MANNER, WE FIND NO BASIS TO QUESTION THE GOVERNMENT'S USE OF DESIGN IN THE INSTANT PROCUREMENT. SEE B-162399, MAY 3, 1968. IN ANY EVENT, APEX APPARENTLY TOOK NO AFFIRMATIVE ACTION WHEN THE NEW YORK PROCUREMENT DETACHMENT ISSUED AMENDMENT NO. 1 WHICH INCORPORATED THE VECP DESIGN TO THE SOLICITATION FOR THE PROCUREMENT CITED ABOVE. IN THESE CIRCUMSTANCES, APEX COULD BE HELD TO HAVE WAIVED WHATEVER RIGHTS IT MAY HAVE HAD WHEN IT FAILED TO PROTEST THE GOVERNMENT'S USE OF ITS VECP IN THE INTERIM PROCUREMENT. SEE FERROLINE CORPORATION V. GENERAL ANILINE & FILM CORPORATION, 207 F. 2D 912 (7TH CIR. 1953) AND B-167020, AUGUST 26, 1969, 49 COMP. GEN. .

WE HAVE BEEN ADVISED THAT THE TUBES WHICH APEX FURNISHED UNDER CONTRACT NO. DAAG 25-69-R-0431 WERE IN ACCORDANCE WITH THE BASIC DESIGN RATHER THAN THE ALTERNATIVE DESIGN. A CHECK WITH HEADQUARTERS, ARMY MATERIEL COMMAND, HAS INDICATED THAT IT IS NOT POSSIBLE AT THIS TIME TO DETERMINE WHETHER ANY USE WILL BE MADE OF THE ALTERNATIVE DESIGN IN THIS PROCUREMENT. CONSEQUENTLY, IT CANNOT NOW BE ASCERTAINED WHETHER THERE WILL BE ANY SAVINGS AS A RESULT OF THE USE OF APEX'S VECP.

THE ASPR PROVISIONS APPLICABLE TO THE SOLICITATION PURSUANT TO WHICH APEX WAS AWARDED CONTRACT NO. DAAG 25-68-C-0929, WERE CONTAINED IN REVISION 23 OF ASPR DATED JUNE 1, 1967, WHICH SUPERSEDED DEFENSE PROCUREMENT CIRCULAR NO. 11, OCTOBER 9, 1964. UNDER ASPR 1.1703.3 OF REVISION 23, IT IS NOT MANDATORY THAT A CONTRACTOR SHARE IN SAVINGS UNDER FUTURE ACQUISITIONS WHICH EMPLOY A VECP SUBMITTED BY HIM. THEREFORE, THE DELETION OF CLAUSE (J) FROM THE VALUE ENGINEERING CLAUSE IN CONTRACT NO. DAAG 25-68-C-0929, WAS NOT IN VIOLATION OF THE THEN APPLICABLE ASPR PROVISIONS. ASPR 1- 1703.3 IN ITS PRESENT FORM CONTAINS MUCH STRONGER LANGUAGE WITH RESPECT TO A CONTRACTOR'S RIGHT TO SHARE IN SAVINGS UNDER FUTURE ACQUISITIONS WHICH UTILIZE HIS VECP.

THE SUBMISSION OF THE VECP DID NOT RESULT IN ANY SAVINGS UNDER CONTRACT NO. DAAG 25-68-C-0929 SINCE THE ITEMS WHICH WERE FURNISHED UNDER THAT CONTRACT WERE MANUFACTURED IN ACCORDANCE WITH BASIC DESIGN; THEREFORE, THERE IS NO BASIS FOR HOLDING THAT APEX IS ENTITLED TO SHARE IN ANY SAVINGS UNDER THAT CONTRACT. IN THESE CIRCUMSTANCES WE FIND THAT APEX IS NOT ENTITLED TO ANY COMPENSATION FOR ITS VECP SUBMISSION.

WITH RESPECT TO THE REQUEST THAT APEX SHOULD BE PERMITTED TO SUBMIT AN OFFER ON THE ALTERNATIVE DESIGN AT THIS TIME, ASPR 1-706.5 (B) PROVIDES THAT "SMALL BUSINESS RESTRICTED ADVERTISING" INCLUDING AWARDS THEREUNDER SHALL BE CONDUCTED IN THE MANNER PRESCRIBED FOR FORMAL ADVERTISING EXCEPT THAT BIDS AND AWARDS SHALL BE RESTRICTED TO SMALL BUSINESS CONCERNS. PERMIT APEX TO SUBMIT AN OFFER AFTER THE OTHER OFFERS HAVE BEEN OPENED WOULD BE CONTRARY TO THE RULES OF FORMALLY ADVERTISED PROCUREMENTS; THEREFORE, APEX MAY NOT BE PERMITTED TO SUBMIT AN OFFER AT THIS TIME.