B-168274, JUNE 11, 1970, 49 COMP. GEN. 840

B-168274: Jun 11, 1970

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PRICE COMPETITION TO LIMIT THE NEGOTIATIONS OF A PROCUREMENT FOR ELECTRIC BOMB FUZES TO PLANNED PRODUCERS IN ORDER TO SUSTAIN THE MOBILIZATION BASE ESTABLISHED AND TO EVALUATE QUANTITY COMBINATIONS FOR AWARD ON A BASIS THAT WILL BEST SERVE THE INTERESTS OF THE GOVERNMENT TO PROTECT THE MOBILIZATION BASE. IS A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY UNDER 10 U.S.C. 2304(A)(16). THE DETERMINATION THAT THE CONTRACTORS SELECTED ARE ESSENTIAL SOURCES OF SUPPLY IN THE EVENT OF A NATIONAL EMERGENCY WAS IN ACCORD WITH PARAGRAPH 3 -216.2(I) OF THE ARMED SERVICES PROCUREMENT REGULATION. THE FACT THAT DELIVERIES AS YET HAVE NOT BEEN MADE UNDER PRIOR CONTRACTS WITH THE SUPPLIERS DOES NOT AFFECT THE PROPRIETY OF THE NEGOTIATIONS.

B-168274, JUNE 11, 1970, 49 COMP. GEN. 840

CONTRACTS -- NEGOTIATION -- NATIONAL EMERGENCY AUTHORITY -- PRICE COMPETITION TO LIMIT THE NEGOTIATIONS OF A PROCUREMENT FOR ELECTRIC BOMB FUZES TO PLANNED PRODUCERS IN ORDER TO SUSTAIN THE MOBILIZATION BASE ESTABLISHED AND TO EVALUATE QUANTITY COMBINATIONS FOR AWARD ON A BASIS THAT WILL BEST SERVE THE INTERESTS OF THE GOVERNMENT TO PROTECT THE MOBILIZATION BASE, REGARDLESS OF PRICE, IS A PROPER EXERCISE OF ADMINISTRATIVE AUTHORITY UNDER 10 U.S.C. 2304(A)(16), WHICH PERMITS THE GOVERNMENT TO ASSUME ADDITIONAL COSTS WITHOUT REGARD TO PRICES AVAILABLE FROM OTHER SOURCES. THE DETERMINATION THAT THE CONTRACTORS SELECTED ARE ESSENTIAL SOURCES OF SUPPLY IN THE EVENT OF A NATIONAL EMERGENCY WAS IN ACCORD WITH PARAGRAPH 3 -216.2(I) OF THE ARMED SERVICES PROCUREMENT REGULATION, AND THE FACT THAT DELIVERIES AS YET HAVE NOT BEEN MADE UNDER PRIOR CONTRACTS WITH THE SUPPLIERS DOES NOT AFFECT THE PROPRIETY OF THE NEGOTIATIONS.

TO DEFENSE PRODUCTS DIVISION, JUNE 11, 1970:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 9, 1970, PROTESTING AGAINST THE AWARD OF A CONTRACT TO ANY OTHER OFFEROR UNDER REQUEST FOR PROPOSALS (RFP) NO. N00019-70-R-0062 FOR THE FURNISHING OF ELECTRICAL BOMB FUZES MK 344 MOD 0 AND MK 376 MOD 0 AND RELATING DATA ISSUED BY THE NAVAL AIR SYSTEMS COMMAND ON OCTOBER 27, 1969.

THE RECORD SHOWS THAT THIS PROCUREMENT WAS NEGOTIATED PURSUANT TO 10 U.S.C. 2304(A)(16) WHICH PROVIDES IN PART THAT THE HEAD OF A MILITARY AGENCY MAY NEGOTIATE A PURCHASE OR CONTRACT IF HE DETERMINES THAT 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 THE INTEREST OF INDUSTRIAL MOBILIZATION IN CASE OF SUCH AN EMERGENCY.

THIS IS THE FOURTH PROCUREMENT SINCE THE INITIAL DEVELOPMENT OF THE FUZES, ALL OF WHICH HAVE BEEN TO DEVELOP AND THEN MAINTAIN A SOUND MOBILIZATION BASE. THE FIRST CONTRACT WHICH WAS AWARDED TO F. W. SICKLES, DIVISION OF GENERAL INSTRUMENT CORPORATION (GIC), ON NOVEMBER 19, 1968, WAS PURSUANT TO ADVERTISING. IN ADDITION A REQUEST FOR PROPOSALS HAD BEEN ISSUED PURSUANT TO 10 U.S.C. 2304(A)(16), SUPRA, FOR AN ADDITIONAL QUANTITY OF THE FUZES. AWARD UNDER THE REQUEST FOR PROPOSALS WAS TO BE MADE ON THE BASIS OF PRICE UNLESS THE SUCCESSFUL BIDDER UNDER THE ADVERTISED PROCUREMENT WAS ALSO LOW ON THE REQUEST FOR PROPOSALS, IN WHICH CASE AWARD WOULD BE MADE TO THE NEXT LOW OFFEROR. THE PURPOSE OF THIS PROCEDURE WAS TO ESTABLISH A BROADENED MOBILIZATION BASE OF TWO SOURCES. AWARD UNDER THE REQUEST WAS MADE TO FAIRCHILD SPACE AND DEFENSE SYSTEMS (FAIRCHILD). SUBSEQUENTLY, A THIRD SOURCE WAS DEVELOPED BY AWARD OF A CONTRACT TO VARO, INC. (VARO), ON JULY 14, 1969, ALSO NEGOTIATED PURSUANT TO 10 U.S.C. 2304(A)(16).

THE ADMINISTRATIVE OFFICE REPORTS THAT BY THE ABOVE PROCUREMENTS, THREE SOURCES WERE MADE AVAILABLE FOR THE CONTINUED PRODUCTION OF THE FUZES AND AVAILABILITY FOR EXPANSION IN THE EVENT OF MOBILIZATION. IN ADDITION, GEOGRAPHICAL DISPERSAL WAS OBTAINED BY SETTING CRITERIA FOR A MINIMUM DISTANCE OF EACH PRODUCER FROM OTHER PRODUCERS. THIS WAS INTENDED TO TAKE INTO ACCOUNT ENEMY ATTACK OR NATURAL DISASTERS SUCH AS FLOODS, HURRICANES AND THE LIKE. THE CURRENT PLANS ARE TO MAINTAIN THE MOBILIZATION BASE OF THREE PRODUCERS BY DIRECTING A PORTION OF THE ANNUAL REQUIREMENTS TO THE THREE CURRENT PRODUCERS. ANY ANNUAL REQUIREMENTS IN EXCESS OF THIS DIRECTED PORTION WILL BE PROCURED BY FORMAL ADVERTISING OR BY NEGOTIATION UNDER ANOTHER APPROPRIATE NEGOTIATION EXCEPTION. IN THIS REGARD, AN INVITATION FOR BIDS WAS ISSUED FOR THE CURRENT REQUIREMENTS IN EXCESS OF THOSE SET FORTH IN THE SUBJECT RFP, AND AN AWARD WAS MADE ON MARCH 3, 1970, TO FAIRCHILD AS THE LOW BIDDER THEREON.

IT IS FURTHER POINTED OUT THAT IN THE RFP UNDER CONSIDERATION THE NAVAL AIR SYSTEMS COMMAND STATED IN PARAGRAPH 48 OF THE ADDITIONAL SOLICITATION INSTRUCTIONS AND CONDITIONS THAT THE PROCUREMENT WAS LIMITED TO PLANNED PRODUCERS IN ORDER TO SUSTAIN THE ESTABLISHED MOBILIZATION BASE AND THAT IN ADDITION, ALTHOUGH NONE OF THE PLANNED PRODUCERS WAS ADVISED OF THE SPECIFIC QUANTITY FOR WHICH IT WOULD BE CONSIDERED, THE RFP STATED ON PAGE 3 AS FOLLOWS:

AWARD WILL BE MADE ON THE COMBINATION OF THE ABOVE QUANTITIES OR PORTIONS THEREOF WHICH BEST SERVES THE INTERESTS OF THE GOVERNMENT TO PROTECT THE MOBILIZATION BASE.

IT IS ALSO REPORTED THAT AWARD OF SOME QUANTITY OF FUZES WAS REQUIRED TO BE MADE TO SICKLES AND FAIRCHILD IN ORDER TO MAINTAIN THEIR PRODUCTION CAPACITIES FOR MOBILIZATION PURPOSES AND TO PROVIDE FUZES NECESSARY FOR OPERATIONAL USE, SINCE IT WAS ESTIMATED THAT THEIR CURRENT CONTRACTS WOULD BE COMPLETED BY JUNE OR JULY 1970. THE PRODUCTION LINE OF VARO, INC. WAS NOT IN JEOPARDY SINCE IT WAS CONSIDERED THAT DELIVERY UNDER VARO'S CURRENT CONTRACT WOULD NOT BE COMPLETED UNTIL THE END OF 1970.

THE THREE PLANNED PRODUCERS WERE REQUESTED TO SUBMIT PROPOSALS ON THE BELOW-LISTED TOTAL QUANTITIES AND VARIATIONS THEREOF:

ITEM 1 TOTAL QUANTITY 362,250 MK 344 FUZES

ITEM 2 TOTAL QUANTITY 40,250 MK 376 FUZES

VARIATION

OFFER ITEM QUANTITY

A 1 115,590 EACH

2 12,843 EACH

B 1 162,225 EACH

2 18,025 EACH

C 1 208,860 EACH

2 23,207 EACH

D 1 37,800 EACH

2 4,200 EACH

AFTER REVIEW OF THE OFFERS RECEIVED, IT WAS CONCLUDED THAT SUBMISSION OF PRICES FOR DIFFERENT COMBINATIONS COULD WELL PROVE ADVANTAGEOUS TO THE GOVERNMENT. HENCE, THE THREE OFFERORS WERE REQUESTED ON JANUARY 16, 1970, TO SUBMIT THEIR BEST AND FINAL OFFERS ON THE ORIGINAL BASIS, ALSO, SHOULD THEY DESIRE TO DO SO, ON ANY COMBINATION OF THE ABOVE ALTERNATIVES.

REVISED PROPOSALS WERE RECEIVED. ACCORDING TO THE NAVY REPORT, THE ANTICIPATED DELIVERY SCHEDULES OF THE THREE OFFERORS' CURRENT CONTRACTS WERE COMBINED WITH THE RFP DELIVERY SCHEDULE IN ORDER TO ASCERTAIN WHAT CONTRACT AWARD QUANTITIES WOULD BE MOST ADVANTAGEOUS TO THE GOVERNMENT. THIS CONSOLIDATION DEMONSTRATED THAT VARO DID NOT HAVE THE CAPABILITY TO DELIVER A QUANTITY OTHER THAN OFFER D WHEN ADDED TO THE QUANTITY REQUIRED UNDER ITS PRESENT CONTRACT, COMPLETION OF WHICH WAS NOT ANTICIPATED BEFORE DECEMBER 1970, SINCE VARO HAD NOT YET SUBMITTED FIRST ARTICLE SAMPLES FOR GOVERNMENT TESTING AND HAD ADVISED THAT IT WAS HAVING DIFFICULTY WITH ONE COMPONENT.

IN VIEW OF THE ABOVE, IT WAS CONSIDERED MOST ADVANTAGEOUS TO THE GOVERNMENT THAT VARO BE ELIGIBLE ONLY FOR A CONTRACT AWARD OF 42,000 FUZES, AND THEN ONLY IF ITS PRICE REPRESENTED THE MOST FAVORABLE DEAL TO THE GOVERNMENT.

NAVAL AIR SYSTEMS COMMAND COMPUTED POSSIBLE COMBINATIONS OF THE OFFERS SUBMITTED IN ORDER TO ARRIVE AT THE BEST DEAL FOR THE GOVERNMENT. THE FIRST TEN COMBINATIONS WERE AS FOLLOWS:

CONTRACTOR FAIRCHILD SICKLES VARO

3-8-5 TOOLING 22,000 43,800 43,800 AMOUNT

CAPABILITY

COMBINATION NO. QUAN QUAN QUAN

1 402,500 $24,311,000.00

2 402,500 24,753,750.00

3 402,500 24,834,250.00

4 360,500 42,000 24,965,325.00

5 360,500 42,000 24,983,350.00

6 360,500 42,000 25,059,825.00

7 42,000 360,000 25,245,850.00

8 170,433 232,067 25,348,555.54

9 180,250 22,250 25,371,920.00

10 232,067 170,433 25,373,680.79

THE COUNSEL, NAVAL AIR SYSTEMS COMMAND EXPLAINS THE ACTION TAKEN AS FOLLOWS:

THE OBJECTIVE OF THIS PROCUREMENT WAS TO PROVIDE A MOBILIZATION CAPABILITY BEGINNING IN 1971 OF APPROXIMATELY 110,000 FUZES PER MONTH. ANY ACTION THAT ELIMINATED SICKLES OR FAIRCHILD WOULD NOT MEET THIS OBJECTIVE SINCE THEIR PRESENT PRODUCTION DELIVERIES WERE PROJECTED FOR COMPLETION IN JULY AND JUNE 1970 RESPECTIVELY. THE DELIVERIES UNDER THE VARO CONTRACT HAD BEEN PROJECTED BY THE CONTRACTOR TO BE COMPLETED BY SEPTEMBER 1970 BUT SINCE THE FAS SAMPLES HAVE NOT YET BEEN COMPLETED, MUCH LESS SAMPLE TESTING, THE FORECAST IS COMPLETION NOT BEFORE DECEMBER 1970. THEREFORE, FAILURE TO AWARD TO VARO WILL NOT DISTURB THEIR MOBILIZATION CAPABILITY AS OF 1 JANUARY 1971. FOR THESE REASONS COMBINATIONS 1 THROUGH 5 WERE NOT ACCEPTABLE.

COMBINATIONS 6 AND 7 DID NOT INVOLVE VARO BUT THE AWARD OF A QUANTITY OF ONLY 42,000 TO EITHER FAIRCHILD OR SICKLES WOULD DISTURB THE MOBILIZATION BASE OF 1 JANUARY 1971 TO AN ALARMING DEGREE. OF THE 42,000 QUANTITY OF OFFER D ONLY 17,000 IS SCHEDULED FOR DELIVERY IN 1970 OVER A FOUR MONTH PERIOD. THIS 17,000 QUANTITY IS ONLY 75% OF ONE MONTH'S PRODUCTION CAPABILITY FOR FAIRCHILD AND 40% OF ONE MONTH'S CAPABILITY FOR SICKLES. IF EITHER SICKLES OR FAIRCHILD RECEIVED OFFER D AND PRODUCED THE ENTIRE 42,000 AT THE END OF THEIR PRESENT CONTRACTS, THEIR PRODUCTION WOULD BE COMPLETED IN AUGUST 1970 AND THEIR MOBILIZATION CAPABILITY WOULD BE LOST. FOR THESE REASONS COMBINATIONS 6 AND 7 WERE FOUND TO BE UNACCEPTABLE.

COMBINATION 8 IS THE FIRST COMBINATION THAT MEETS THE REQUIREMENT OF AN AWARD TO BOTH FAIRCHILD AND SICKLES SO AS TO PROTECT THE MOBILIZATION BASE. FAIRCHILD WOULD BE REQUIRED TO AVERAGE 19,000 PER MONTH AND SICKLES 33,000 PER MONTH AND THESE QUANTITIES REQUIRE AT LEAST 2-8-5 OPERATION, SO THE BASIC BASE WAS PROTECTED. COMBINATIONS 9 AND 10 PROVIDED SIMILAR MOBILIZATION BASE PROTECTION BUT AT HIGHER PRICES.

VARO'S OFFER ON THE 42,000 QUANTITY (OFFER D) WAS LOW TAKEN BY ITSELF. HOWEVER, WHEN VARO'S PRICE FOR 42,000 FUZES WAS COMBINED WITH THE LOWEST PRICES SUBMITTED BY SICKLES AND FAIRCHILD FOR THE BALANCE OF THE FUZES REQUIRED UNDER THE SOLICITATION, THE TOTAL PRICE OF THE PROCUREMENT WAS $299,370 HIGHER THAN THE COMBINED SICKLES AND FAIRCHILD PRICES FOR THE TOTAL BUY OF 402,500.

IN VIEW OF THE ABOVE, IN ORDER TO PROTECT THE MOBILIZATION BASE AT THE LOWEST PRICE TO THE GOVERNMENT, NAVAIR DETERMINED THAT A SPLIT AWARD OF A CONTRACT QUANTITY OF 232,067 FUZES TO SICKLES AND 170,433 FUZES TO FAIRCHILD WAS PROPER. *** THE TWO CONTRACTS WERE AWARDED ON 2 FEBRUARY 1970.

YOU CONTEND THAT IF VARO'S OFFER ON ITEM A AND D AND ITS OFFER ON ITEM C HAD BEEN ACCEPTED THE GOVERNMENT WOULD HAVE SAVED $484,276.35. IN THIS REGARD IT IS WELL ESTABLISHED THAT WHERE THE SETTING UP OF SEVERAL PRODUCERS OR SOURCES OF SUPPLY IS IN THE INTEREST OF NATIONAL DEFENSE, A CONTRACT MAY BE NEGOTIATED UNDER 10 U.S.C. 2304(A)(16) AND UNDER THAT AUTHORITY ANY ADDITIONAL COSTS INVOLVED PROPERLY MAY BE ASSUMED BY THE GOVERNMENT WITHOUT REGARD TO PRICES AVAILABLE FROM OTHER SOURCES. COMP. GEN. 717 (1963).

ADDITIONALLY, VARO CONTENDS THAT THE ENTIRE PROCUREMENT IS DEFECTIVE BECAUSE THE AWARDS MADE ARE INCONSISTENT WITH THE CRITERIA SET FORTH IN ARMED SERVICES PROCUREMENT REGULATION 3-216.2, WHICH READS AS FOLLOWS:

3-216.2 APPLICATION. THE AUTHORITY OF THIS PARAGRAPH 3-216 MAY BE USED TO EFFECTUATE SUCH PLANS AND PROGRAMS AS MAY BE EVOLVED UNDER THE DIRECTION OF THE SECRETARY TO PROVIDE INCENTIVES TO MANUFACTURERS TO MAINTAIN, AND KEEP ACTIVE, ENGINEERING AND DESIGN STAFFS AND MANUFACTURING FACILITIES AVAILABLE FOR MASS PRODUCTION. THE FOLLOWING ARE ILLUSTRATIVE OF CIRCUMSTANCES WITH RESPECT TO WHICH THIS AUTHORITY MAY BE USED:

(I) WHEN PROCUREMENT BY NEGOTIATION IS NECESSARY TO KEEP VITAL FACILITIES OR SUPPLIERS IN BUSINESS; OR TO MAKE THEM AVAILABLE IN THE EVENT OF A NATIONAL EMERGENCY;

(II) WHEN PROCUREMENT BY NEGOTIATION WITH SELECTED SUPPLIERS IS NECESSARY IN ORDER TO TRAIN THEM IN THE FURNISHING OF CRITICAL SUPPLIES TO PREVENT THE LOSS OF THEIR ABILITY AND EMPLOYEE SKILLS, OR TO MAINTAIN ACTIVE ENGINEERING, RESEARCH, AND DEVELOPMENT WORK; OR

(II) WHEN PROCUREMENT BY NEGOTIATION IS NECESSARY TO MAINTAIN PROPERLY BALANCED SOURCES OF SUPPLY FOR MEETING THE REQUIREMENTS OF PROCUREMENT PROGRAMS IN THE INTEREST OF INDUSTRIAL MOBILIZATION. (WHEN THE QUANTITY REQUIRED IS SUBSTANTIALLY LARGER THAN THE QUANTITY WHICH MUST BE AWARDED IN ORDER TO MEET THE OBJECTIVES OF THIS AUTHORITY, THAT PORTION NOT REQUIRED TO MEET SUCH OBJECTIVES WILL ORDINARILY BE PROCURED BY FORMAL ADVERTISING OR BY NEGOTIATION UNDER ANOTHER APPROPRIATE NEGOTIATION EXCEPTION.)

3-216.3 LIMITATION. THE AUTHORITY OF THIS PARAGRAPH 3-216 SHALL NOT BE USED UNLESS AND UNTIL THE SECRETARY HAS DETERMINED, IN ACCORDANCE WITH THE REQUIREMENTS OF PART 3 OF THIS SECTION III, THAT:

(I) IT IS IN THE INTEREST OF NATIONAL DEFENSE TO HAVE A PARTICULAR PLANT, MINE, OR OTHER FACILITY OR A PARTICULAR PRODUCER, MANUFACTURER, OR OTHER SUPPLIER AVAILABLE FOR FURNISHING SUPPLIES OR SERVICES IN CASE OF A NATIONAL EMERGENCY, AND NEGOTIATION IS NECESSARY TO THAT END;

(II) THE INTEREST OF INDUSTRIAL MOBILIZATION, IN CASE OF A NATIONAL EMERGENCY WOULD BE SUBSERVED BY NEGOTIATION WITH A PARTICULAR SUPPLIER; OR

(III) THE INTEREST OF NATIONAL DEFENSE IN MAINTAINING ACTIVE ENGINEERING, RESEARCH, AND DEVELOPMENT, WOULD BE SUBSERVED BY NEGOTIATION WITH A PARTICULAR SUPPLIER.

THE BASIS FOR YOUR CONTENTION IS AS FOLLOWS:

(A) WITH REFERENCE TO ASPR 3-216.2(I), HOW CAN A PROCUREMENT BE JUSTIFIED TO ... "KEEP VITAL FACILITIES OR SUPPLIERS IN BUSINESS" ... WHEN CURRENT CONTRACTORS HAVE THE TOTAL QUANTITIES UNDER PRIOR CONTRACTS UNDELIVERED?

(B) CAN THIS PROCUREMENT BE JUSTIFIED TO "TRAIN" WITHIN THE MEANING OF ASPR 3-216.2(II) THE EMPLOYEES OF GI AND FAIRCHILD? IT WOULD SEEM THAT THE ENTIRE UNDELIVERED QUANTITIES UNDER THE PRIOR CONTRACT WOULD BE SUFFICIENT FOR THIS PURPOSE. (C) THE QUANTITIES AWARDED UNBALANCE, RATHER THAN BALANCE, THE SOURCES OF SUPPLY. THAT IS, THE AWARD OF QUANTITIES OF 232,067 UNITS TO GI AND 170,433 UNITS TO FAIRCHILD RESULT IN TOTAL AWARDS TO THE THREE SUPPLIERS THAT ARE GREATLY UNBALANCED. HOW THEN MAY THE AWARDS BE SHOWN TO ... "MAINTAIN PROPERLY BALANCED SOURCES OF SUPPLY" ... AS IN ASPR 3-216.2(III)?

IT MUST BE NOTED THAT EACH OF THE THREE ILLUSTRATIONS SET OUT IN SECTION 3-216.2 IS A SEPARATE AND DISTINCT BASIS FOR USE OF THE NEGOTIATING AUTHORITY, AND IT THEREFORE IS NOT NECESSARY THAT MORE THAN ONE BE PRESENT IN ANY PARTICULAR CASE. IT IS OUR UNDERSTANDING FROM THE REPORT FURNISHED BY THE PROCURING AGENCY THAT THE PROCUREMENTS PREVIOUSLY CONDUCTED, AS WELL AS THE ONE HERE INVOLVED, WERE BASED PRIMARILY UPON A DETERMINATION THAT DEVELOPMENT OF THE THREE PRODUCING SOURCES TO WHICH CONTRACTS HAVE BEEN AWARDED IS NECESSARY TO HAVE THEM AVAILABLE IN THE EVENT OF A NATIONAL EMERGENCY. THIS CLEARLY MEETS THE STANDARD STATED IN 3-216.2(I), AND THE FACT THAT NO DELIVERIES HAVE YET BEEN MADE UNDER PRIOR CONTRACTS DOES NOT APPEAR TO AFFECT THE PROPRIETY OF CONDUCTING FURTHER PROCUREMENTS TO ATTAIN THE DESIRED ENDS.

AS TO YOUR QUESTION (B), THE NEGOTIATIONS IN QUESTION WERE NOT, AS ABOVE INDICATED, REFERRED TO 3-216.2(II), AND IT IS NOT NECESSARY TO MEET THAT CRITERION. IT MAY BE NOTED, HOWEVER, THAT THE CITED SECTION WOULD PERMIT NEGOTIATION FOR THE PURPOSE OF MAINTAINING ACTIVE ENGINEERING, RESEARCH AND DEVELOPMENT WORK, AS WELL AS TO PREVENT LOSS OF THE SKILLS OF ALREADY TRAINED EMPLOYEES.

SUBSECTION 3-216.2(III) REFERS TO "PROPERLY" BALANCED SOURCES OF SUPPLY. THIS DOES NOT APPEAR NECESSARILY TO BE EQUIVALENT TO "EQUALLY" BALANCED, AND IT IS OUR VIEW THAT THE DETERMINATION OF WHAT IS A PROPER BALANCE IS A MATTER INVOLVING A CONSIDERABLE RANGE OF ADMINISTRATIVE DISCRETION. THE RECORD WE FIND NO BASIS FOR CONCLUDING THAT THE BALANCE ATTAINED BY THE AWARDS MADE IS IMPROPER, INASMUCH AS IT APPEARS TO BE REASONABLY CALCULATED TO KEEP ALL THREE SOURCES IN OPERATION THROUGHOUT THE REMAINDER OF THE CALENDAR YEAR. IT IS ALSO TRUE, OF COURSE, THAT SINCE THE PROCUREMENTS IN QUESTION ARE BASED PRIMARILY UPON THE SITUATION EMBRACED BY SUBSECTION (I) IT IS NOT NECESSARY TO FIND CONFORMITY WITH SUBSECTION (III).

ADDITIONALLY, IN ITS REPORT DATED MARCH 26, 1970, THE ADMINISTRATIVE OFFICE HAS ADVISED AS FOLLOWS:

VARO NOTES IN ITS LETTER OF 9 FEBRUARY 1970 TO THE COMPTROLLER GENERAL THAT NEIGHER SICKLES NOR FAIRCHILD HAS PASSED FIRST ARTICLE TESTING. THE TIME OF CONTRACT AWARD, THE PROGRESS OF THE TESTS INDICATED THAT THE FIRST ARTICLE UNITS WOULD COMPLETE THE TESTS SATISFACTORILY AND THAT BOTH COMPANIES WOULD BE AUTHORIZED TO PROCEED WITH QUANTITY PRODUCTION. SUBSEQUENTLY. SICKLES WAS GIVEN A RELEASE TO FULL PRODUCTION ON 16 MARCH 1970. IT IS ANTICIPATED THAT FAIRCHILD WILL ALSO RECEIVE APPROVAL IN THE NEAR FUTURE. IT SHOULD BE NOTED THAT VARO HAS NOT YET SUBMITTED FIRST ARTICLE SAMPLES FOR TESTING AND ITS MOST RECENT PROGNOSTICATION OF SUBMISSION IS A MINIMUM OF FOUR WEEKS EVEN UNDER THE MOST FAVORABLE CIRCUMSTANCES.

ON THE BASIS OF THE FACTS REPORTED WE ARE UNABLE TO CONCLUDE THAT THE AWARDS WERE NOT PROPERLY MADE UNDER THE APPLICABLE REGULATIONS, AND UNDER THE DISCRETIONARY AUTHORITY RESERVED BY THE NAVAL AIR SYSTEMS COMMAND TO MAKE AWARDS ON SUCH COMBINATIONS OR PORTIONS OF THE TOTAL QUANTITIES AS MIGHT BEST SERVE THE INTEREST OF THE GOVERNMENT TO PROTECT THE MOBILIZATION BASE.

ACCORDINGLY, YOUR PROTEST MUST BE DENIED.