B-169894, JAN 5, 1971

B-169894: Jan 5, 1971

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AN IFB WHICH PROVIDES FOR AMORTIZATION OF PREPRODUCTION COSTS OVER ALL PRODUCTION ITEMS IN A MULTI-YEAR PROCUREMENT IS WITHIN THE DISCRETION OF THE CONTRACTING AGENCY TO ISSUE ALTHOUGH ASPR 1-322 DOES NOT REQUIRE SUCH A PROVISION. THAT MULTI- YEAR PROCUREMENTS AND AMORTIZATION OF PREPRODUCTION COST OVER SEVERAL YEARS IS NOT UNDULY RESTRICTIVE OF COMPETITION FROM SMALL BUSINESS FIRMS BUT RATHER ALLOWS SMALL BUSINESS FIRMS TO COMPETE MORE EFFECTIVELY. WHEN THE CANCELLATION OF ITEM CLAUSE IS APPLICABLE TO THE BEST ESTIMATED QUANTITY (BEQ). IT IS UNNECESSARY FOR BIDDERS TO PUT CONTINGENCIES IN THEIR BID SO AS TO RECOVER THEIR NONRECURRING AMORTIZED COST IN THE EVENT THERE ARE FEWER PURCHASES THAN THE BEQ IN THE SECOND AND THIRD PROGRAM YEARS.

B-169894, JAN 5, 1971

BID PROTEST DENIAL OF PROTEST OF A.G. SCHOONMAKER COMPANY, INC., AGAINST INVITATION ISSUED BY MCCLELLAN AFB., FOR ENGINE-DRIVEN GENERATOR SETS WITH CERTAIN REQUIRED DATA ITEMS AND SPECIFIED ANCILLARY MATERIALS, AND AWARD OF ADVERTISED CONTRACT TO CONSOLIDATED DIESEL ELECTRIC COMPANY. AN IFB WHICH PROVIDES FOR AMORTIZATION OF PREPRODUCTION COSTS OVER ALL PRODUCTION ITEMS IN A MULTI-YEAR PROCUREMENT IS WITHIN THE DISCRETION OF THE CONTRACTING AGENCY TO ISSUE ALTHOUGH ASPR 1-322 DOES NOT REQUIRE SUCH A PROVISION. FURTHER, GAO HAS HELD, 43 COMP. GEN. 657 (1964), THAT MULTI- YEAR PROCUREMENTS AND AMORTIZATION OF PREPRODUCTION COST OVER SEVERAL YEARS IS NOT UNDULY RESTRICTIVE OF COMPETITION FROM SMALL BUSINESS FIRMS BUT RATHER ALLOWS SMALL BUSINESS FIRMS TO COMPETE MORE EFFECTIVELY. ALSO, WHEN THE CANCELLATION OF ITEM CLAUSE IS APPLICABLE TO THE BEST ESTIMATED QUANTITY (BEQ), IT IS UNNECESSARY FOR BIDDERS TO PUT CONTINGENCIES IN THEIR BID SO AS TO RECOVER THEIR NONRECURRING AMORTIZED COST IN THE EVENT THERE ARE FEWER PURCHASES THAN THE BEQ IN THE SECOND AND THIRD PROGRAM YEARS. FOR THE ABOVE REASONS, THE PROTEST IS DENIED.

TO A. G. SCHOONMAKER COMPANY, INC.:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF MAY 25, 1970, AND SUBSEQUENT CORRESPONDENCE PROTESTING AGAINST AN AWARD TO CONSOLIDATED DIESEL ELECTRIC COMPANY (CONSOLIDATED), UNDER IFB NO. F04606-70-B-0162, ISSUED BY THE MCCLELLAN AIR FORCE BASE, CALIFORNIA.

THE INVITATION WAS THE SECOND STEP OF A TWO-STEP FORMALLY ADVERTISED, MULTI-YEAR PROCUREMENT (3 YEARS) FOR THE "BEST ESTIMATED QUANTITY" (BEQ) OF 5 MODELS OF 100KW AND 200KW ENGINE-DRIVEN GENERATOR SETS WITH CERTAIN REQUIRED DATA ITEMS AND SPECIFIED ANCILLARY MATERIALS.

OF THE SIX FIRMS WHICH QUALIFIED UNDER STEP I, FIVE SUBMITTED THEIR BIDS FOR OPENING ON APRIL 3, 1970. THEIR EVALUATED BIDS, INCLUDING COST OF TRANSPORTATION, WERE AS FOLLOWS:

CONSOLIDATED $19,275,930.49

SCHOONMAKER 21,568,012.99

BOGUE 22,519,053.61

FERMONT 22,855,570.38

GENERAL DYNAMICS 28,888,315.95

CONSEQUENTLY, APPROVAL FOR AWARD TO CONSOLIDATED, AS THE LOW RESPONSIVE, RESPONSIBLE BIDDER WAS MADE ON MAY 22, 1970, AND THE CONTRACT WAS MAILED TO CONSOLIDATED ON MAY 27, 1970, PRIOR TO THE RECEIPT OF NOTICE BY THE CONTRACTING OFFICER OF YOUR PROTEST.

THE IFB REQUIRED, AFTER THE LISTING OF EACH SCHEDULE OF ITEMS IN THE MULTI-YEAR PERIOD, THAT:

"THE UNIT PRICES REFLECTED FOR THE MULTI-YEAR PERIOD SHALL BE THE SAME FOR ALL PROGRAM YEARS THEREIN. THE UNIT PRICE DEPICTED ABOVE THE BEQ WILL NOT INCLUDE ANY COSTS OF A START UP OR NON-RECURRING NATURE, WHICH COSTS HAVE BEEN FULLY PROVIDED FOR IN THE BEQ (SEE PART XL & XXIV)." THE PREPRODUCTION MODELS, REFERRED TO AS "FIRST ARTICLES," WERE NOT LISTED AS SEPARATE LINE ITEMS, WITH A REQUEST FOR SEPARATE PRICES, BUT CONSISTED OF A CERTAIN NUMBER OF THE MULTI-YEAR ITEMS DESIGNATED AS FIRST ARTICLES AFTER EACH ITEM WHICH REQUIRED THEM.

THE SEVERAL ARGUMENTS YOU HAVE SUBMITTED IN SUPPORT OF YOUR CONTENTION THAT THE INSTANT PROCUREMENT AND RESULTANT CONTRACT WAS DEFECTIVE, MAY BE SUMMARIZED, IN TWO PARTS, THE FIRST OF WHICH IS AS FOLLOWS:

I - THAT THE INVITATION WAS IMPROPERLY STRUCTURED SO AS TO REQUIRE IDENTICAL UNIT PRICES FOR PREPRODUCTION ITEMS AS FOR PRODUCTION ITEMS, THUS REQUIRING BIDDERS TO INCLUDE IN THEIR BID PRICES FINANCING COSTS AND CONTINGENCIES WHICH WOULD NOT HAVE OTHERWISE BEEN INCLUDED IN THE PRICES, THUS RESULTING IN HIGHER BID PRICES THAN NECESSARY AND RESTRICTING COMPETITION, PARTICULARLY AS BETWEEN SMALL BUSINESSES AND LARGE BUSINESSES.

YOU URGE THAT THE NET EFFECT OF THIS SCHEME IS TO REQUIRE BIDDERS TO AMORTIZE COSTS OVER PRODUCTION UNITS, AND POSTPONE RECOVERY OF VERY SUBSTANTIAL DEVELOPMENT AND TESTING COSTS UNTIL THE END OF THE MULTI YEAR PROGRAM. YOU ALLEGE THAT THIS OCCURRED BECAUSE OF THE CONTRACTING OFFICER'S COMPLETE MISAPPREHENSION OF THE PROVISIONS OF ASPR 1-322 CONCERNING THE NECESSITY OF IDENTICAL PRICING, WHICH HAS CAUSED GREAT CONFUSION AND RESULTED IN POOR PRICES. SPECIFICALLY, ASPR 1 322.2(C)(IV) PROVIDES THAT SOLICITATION SHALL INCLUDE:

"(IV) A PROVISION THAT THE UNIT PRICE OF EACH ITEM IN THE MULTI-YEAR REQUIREMENT SHALL BE THE SAME FOR ALL PROGRAM YEARS INCLUDED THEREIN."

YOU CITE OUR DECISION B-169205, MAY 22, 1970, AS SUPPORT FOR YOUR POSITION THAT ASPR DOES NOT REQUIRE IDENTICAL PRICES FOR PRODUCTION AND PREPRODUCTION ITEMS. AT PAGE 10 OF THAT DECISION WE STATED:

"THE ASPR DOES NOT SPECIFICALLY REQUIRE THAT PREPRODUCTION COSTS BE AMORTIZED OVER ALL PRODUCTION ITEMS, AND THERE IS NO EXPRESS PROHIBITION AGAINST ONE TIME COSTS, WHICH ARE ASSOCIATED WITH THE TESTING OF PREPRODUCTION MODELS AND SEPARATELY DESCRIBED AND IDENTIFIED IN THE IFB, AS FIRST YEAR COSTS ONLY ... "

IF, AS YOU CONTEND, THE CONTRACTING OFFICER STRUCTURED THE INSTANT IFB IN THE BELIEF THAT ASPR 1-322 REQUIRES AMORTIZATION OF PREPRODUCTION COSTS OVER ALL PRODUCTION ITEMS IN ALL MULTI-YEAR PROCUREMENTS, IT IS OUR OPINION HE WAS MISTAKEN IN SUCH BELIEF. ASSUMING, HOWEVER, THAT YOUR CONTENTION IS CORRECT, WE SEE NO BASIS ON WHICH IT MAY BE CONTENDED THAT THE IFB WAS LEGALLY DEFECTIVE, OR THAT THE CONTRACT AWARDED THEREUNDER IS ILLEGAL, SINCE WE BELIEVE IT WAS WITHIN THE DISCRETION OF THE CONTRACTING AGENCY AS TO WHETHER SUCH COSTS SHOULD, OR SHOULD NOT, BE AMORTIZED OVER ALL PRODUCTION UNITS. THERE IS NO EVIDENCE IN THE RECORD TO REQUIRE OR SUPPORT A CONCLUSION THAT A DIFFERENT METHOD (E.G., BREAKING OUT FIRST ARTICLES AS PREPRODUCTION MODELS ON A SEPARATE LINE ITEM BASIS) WOULD HAVE BEEN ADOPTED IF THE CONTRACTING OFFICER HAD INTERPRETED ASPR 1-322 DIFFERENTLY.

WHILE THERE MAY BE A DIFFERENCE OF OPINION AS TO WHETHER THE AGENCY CORRECTLY DETERMINED THAT IT NEEDED IDENTICAL PRICES, SUCH CONCLUSIONS WOULD APPEAR TO INVOLVE MANAGEMENT DECISIONS REGARDING WHICH THE AGENCY HAS A WIDE RANGE OF DISCRETION, AND WHICH WOULD NOT BE SUBJECT TO REVERSAL EXCEPT ON THE GROUND THAT THE DECISION WAS ARBITRARY OR CAPRICIOUS OR IN VIOLATION OF LAW, NONE OF WHICH ARE PRESENT HERE.

YOUR FURTHER CONTENTION, THAT MULTI-YEAR PROCUREMENTS AND AMORTIZATION OF PREPRODUCTION COSTS OVER SEVERAL YEARS WAS UNDULY RESTRICTIVE OF COMPETITION FROM SMALL BUSINESS FIRMS, WAS PREVIOUSLY CONSIDERED AND REJECTED IN 43 COMP. GEN. 657 (1964) WHEREIN WE STATED:

"IT WOULD APPEAR THAT THE OPPORTUNITY GIVEN TO SPREAD START-UP COSTS OVER SEVERAL YEARS SHOULD MAKE THE MULTI-YEAR PROCUREMENT PROCEDURE ATTRACTIVE TO SMALL BUSINESS CONCERNS. IT IS OUR UNDERSTANDING THAT, IN MANY SINGLE YEAR PROCUREMENTS HIGH START-UP COSTS AND 'MAKE READY' EXPENSES TEND TO DISCOURAGE FIRMS - PARTICULARLY SMALLER ONES WITH LIMITED FINANCIAL RESOURCES - WHERE THEY MUST COMPETE WITH A PRODUCING FIRM THAT HAS ALREADY RECOVERED THESE COSTS. THE CAPITAL INVESTMENT FREQUENTLY REQUIRED FOR NEW PRODUCERS ALSO DISCOURAGES COMPETITION IN ANNUAL PROCUREMENTS BECAUSE OF THE RISK OF LOSING SUCCEEDING AWARDS, WITH NO ASSURANCE OF FUTURE DEPRECIATION RECOVERY. IN VIEW THEREOF IT WOULD APPEAR THAT SMALL BUSINESS CONCERNS IN MANY INSTANCES SHOULD BE ABLE TO COMPETE MORE EFFECTIVELY FOR PROCUREMENTS ON A MULTI-YEAR BASIS THAN ON AN ANNUAL BASIS."

REGARDING SUCH COSTS, IN THE INSTANT PROCUREMENT IT IS REPORTED THAT THE MAJOR COST OF TESTING FIRST ARTICLES, OTHER THAN NORMAL PERFORMANCE TESTS, IS AT GOVERNMENT EXPENSE. WE FURTHER NOTE THAT PROGRESS PAYMENTS ARE PROVIDED FOR IN THE CONTRACT WHEREBY THE SUCCESSFUL CONTRACTOR MAY RECOVER 80 PERCENT, OR 85 PERCENT IN THE CASE OF A SMALL BUSINESS CONCERN, OF THE TOTAL COSTS INCURRED.

WE ARE THEREFORE UNABLE TO CONCLUDE THAT THE INSTANT INVITATION WAS STRUCTURED IN SUCH A WAY AS TO RESULT IN HIGHER PRICES TO THE GOVERNMENT OR TO UNDERLY RESTRICT COMPETITION FROM SMALL BUSINESS CONCERNS.

THE SECOND PART OF YOUR CONTENTIONS CAN BE SUMMARIZED AS FOLLOWS:

II - THE CONTRACTING OFFICER'S UTILIZATION OF A REQUIREMENT TYPE CONTRACT IN A MULTI-YEAR PROCUREMENT REQUIRES BIDDERS TO ASSUME UNNECESSARY RISKS, AND THE CONTRACT RESULTING FROM THIS IFB WILL OBLIGATE FUNDS FOR A FISCAL YEAR LATER THAN THAT IN WHICH THE NEED FOR GENERATORS ARISES, IN VIOLATION OF THE ANTI-DEFICIENCY ACT.

IN SUPPORT OF THIS ARGUMENT YOU ASSERT THAT IF NO REQUIREMENTS MATERIALIZE IN A TIMELY FASHION THERE WILL BE NO BUYS, OR LESSER BUYS THAN THE BEQ, IN THE SECOND AND THIRD PROGRAM YEARS OVER WHICH THE NONRECURRING COSTS HAVE BEEN AMORTIZED. YOU FURTHER STATE THAT RECOVERY OF THE NONRECURRING COSTS WHICH HAVE BEEN AMORTIZED OVER THE SECOND AND THIRD PROGRAM YEAR QUANTITIES IS NOT POSSIBLE UNDER THE CANCELLATION OF ITEMS CLAUSE (PART XXIII) BECAUSE THERE IS NO REQUIREMENT "FOR ITEMS AS SET FORTH IN THE SCHEDULE" WITHIN THE MEANING OF PARAGRAPH (B) OF THAT CLAUSE, AND PART XIX OF THE CONTRACT ENTITLED "REQUIREMENTS (1966 OCT.) ASPR 7- 1102.2(B)" PROHIBITS SUCH PAYMENT. THE END RESULT, YOU CONTEND, IS THAT CONTRACTORS MUST RECOVER THEIR NONRECURRING AMORTIZED COSTS, IF THEY CAN, BY PUTTING CONTINGENCIES IN THE BID. THUS, IF A CONTRACTOR HAS BUILT A CONTINGENCY INTO HIS FIRST YEAR UNIT PRICES TO COVER POSSIBLE UNRECOVERED COSTS IN THE EVENT OF CANCELLATION, HE WOULD RECEIVE A VERY LARGE WINDFALL PROFIT WHEN THE GOVERNMENT ORDERS THE FULL ESTIMATED QUANTITY OF THE SECOND AND THIRD PROGRAM YEARS.

AS INDICATED IN THE ADMINISTRATIVE REPORT OF THE DEPARTMENT OF THE AIR FORCE, A COPY OF WHICH HAS BEEN FURNISHED TO YOU, ASPR IS SILENT WITH RESPECT TO THE USE OF MULTI-YEAR PROCUREMENT PROCEDURES IN REQUIREMENTS TYPE CONTRACTS. THEREFORE, THE PROCUREMENT WAS STRUCTURED PURSUANT TO THE INSTRUCTIONS AND GUIDELINES ESTABLISHED FOR MULTI-YEAR REQUIREMENTS CONTRACTS BY THE DIRECTOR OF PROCUREMENT AND PRODUCTION AT AIR FORCE HEADQUARTERS, LOGISTICS COMMAND, ON JUNE 8, 1966, WHICH ALL PROCUREMENT OFFICES IN THE VARIOUS AIR MATERIAL AREAS WERE AUTHORIZED TO EMPLOY. THE INSTRUCTIONS AND GUIDELINES PROVIDED IN PERTINENT PART:

"UTILIZATION OF THE MULTI-YEAR REQUIREMENTS CONCEPT IS PREDICATED UPON THE ABILITY OF THE REQUIRING ACTIVITY TO PROPERLY SELECT THE MULTI YEAR CANDIDATES AND TO PROJECT WITH REASONABLE SURETY ANNUAL REQUIREMENTS OVER SUCCESSIVE YEARS. THE ANNUAL REQUIREMENTS SHALL BE KNOWN AS THE BEST ESTIMATED QUANTITY (BEQ). THE BEQ SHOULD CONSTITUTE THAT QUANTITY WHICH WOULD BE PROCURED TO MEET ANNUAL REQUIREMENTS ON A ONCE A YEAR BASIS WERE OTHER FACTORS NOT TO BE CONSIDERED SUCH AS FUNDS AVAILABILITY, STORAGE COSTS, COMPUTATION CYCLE, ETC.

"APPROVAL OF THIS CONTRACT COMBINATION WAS SOUGHT AS A MEANS OF PROVIDING A SATISFACTORY MEASURE OF FLEXIBILITY WITHIN MULTI-YEAR PROCEDURES. SUCCESS OF ITS APPLICATION AND ACCEPTANCE WILL DEPEND UPON THE ABILITY OF PROCURING ACTIVITIES TO IMPRESS POTENTIAL CONTRACTORS THAT THEY ARE BEING PROVIDED WITH THE BEST POSSIBLE PROJECTIONS OF ANNUAL REQUIREMENTS. THEREFORE, IT IS WITHIN OUR BEST INTERESTS, ESPECIALLY FROM A PRICE STANDPOINT, TO SATISFY OURSELVES THAT A BEQ IS EXACTLY WHAT WE SAY IT IS.

"THE REQUIRING ACTIVITY SHALL FURNISH PROCUREMENT ITS BEQ WHICH WILL BE PROCURED DURING THE CURRENT FISCAL YEAR AND EACH OF THE SUBSEQUENT 2, 3, OR 4 YEARS, AS THE CASE MAY REQUIRE. THE SOLICITATION SHALL FOLLOW ASPR 1 -322.2(B) (NOW 1-322.2(C)) EXCEPT THAT THE RESULTANT CONTRACT SHALL BE A REQUIREMENTS MULTI-YEAR TYPE AND SUBJECT TO THE FOLLOWING. THE TERM 'REQUIREMENTS' AS USED IN ASPR 1-322.2 SHALL BE DEEMED TO MEAN THE BEQ SET FORTH IN THE SOLICITATION. ACCORDINGLY, THE AWARD AND CANCELLATION CEILING SHALL BE COMPUTED ON THE BEQ. BID EVALUATION WILL BE BASED UPON A SINGLE UNIT PRICE SUBMITTED FOR THE BEQ. MINIMUM (AND MAXIMUM WHERE FEASIBLE) LIMITATIONS ON THE QUANTITIES WHICH MAY BE ORDERED ON ANY ORDER, AS WELL AS REASONABLE RATES OF DELIVERY, SHALL ALSO BE SET FORTH IN THE SOLICITATION (ASPR 7 1102.2(A)).

"THE SOLICITATION SHALL ALSO PROVIDE THAT THE CANCELLATION CHARGES PAYABLE, IF ANY, SHALL BE BASED ON THE AGGREGATE BEQ FOR ALL YEARS AND THAT THE RATIO BETWEEN THE TOTAL QUANTITY ORDERED AT TIME OF CANCELLATION AND THE TOTAL BEQ SHALL BE USED TO DETERMINE THE AMOUNT OF CANCELLATION CHARGES. IF THE TOTAL BEQ HAS NOT BEEN ORDERED AT THE END OF THE CONTRACT TERM, SUCH FAILURE TO HAVE ORDERED THE FULL QUANTITIES SHALL BE DEEMED TO BE A CANCELLATION, AND CANCELLATION CHARGES SHALL BE COMPUTED AS PROVIDED ABOVE. IF AVAILABLE FUNDS ARE INSUFFICIENT TO FINANCE THE REQUIRED QUANTITIES PLUS THE CANCELLATION CHARGES, THEN THE SINGLE YEAR ALTERNATIVE SHOULD BE EXERCISED. FUNDS SET ASIDE FOR THE CANCELLATION CEILING SHOULD BE DECOMMITTED BY THE POO IN A PROPORTIONATE RATIO OF THE CEILING PERCENTAGE, TO THE DOLLARS OBLIGATED AT THE TIME EACH ORDER IS PLACED AGAINST THE CONTRACT.

"THE CLAUSE SET FORTH IN ASPR 1-322.5(A) SHALL BE OMITTED AND THE CLAUSES SET FORTH IN ASPR 7-1102.2(B) SHALL BE USED IN LIEU THEREOF."

IT IS CLEAR THEN THAT THESE INSTRUCTIONS REQUIRED THAT CANCELLATION CEILING COSTS SHALL BE COMPUTED ON THE BEQ. IN KEEPING WITH THESE INSTRUCTIONS, THE PROTESTED INVITATION'S CANCELLATION COSTS ARE CLEARLY SET FORTH UNDER EACH CONTRACT LINE ITEM BY PARTS XXIII, XXIV AND XXVI TO THE EFFECT THAT THE NONRECURRING COSTS ARE TO BE INCLUDED IN THE AGGREGATE BEQ FOR EACH MULTI-YEAR ITEM AND THE SUCCESSFUL CONTRACTOR WOULD BE PERMITTED TO RECOVER ANY REASONABLE NONRECURRING COSTS ASSOCIATED WITH THE BEQ THAT IS UNORDERED OR TERMINATED.

TURNING TO YOUR ARGUMENT THAT THESE PARAGRAPHS ARE IN CONFLICT WITH PART XIX, ENTITLED "REQUIREMENTS," IT IS TO BE OBSERVED THAT THE RESTRICTION IN THAT PART ON AN EQUITABLE PRICE ADJUSTMENT FOR UNORDERED ESTIMATED QUANTITIES IS EXPRESSLY QUALIFIED BY THE WORDS "EXCEPT AS MAY BE OTHERWISE PROVIDED HEREIN." IN ADDITION, WE DO NOT AGREE WITH YOUR CONTENTION THAT THE SCHEDULE DOES NOT SET OUT DEFINITE QUANTITIES SO AS TO BRING THE REQUIREMENTS WITHIN THE MEANING OF THE CANCELLATION OF ITEMS CLAUSE. THE SCHEDULE ASKED FOR UNIT PRICES BASED ON DEFINITE NUMBERS OF ITEMS DESIGNATED AS THE BEST ESTIMATED QUANTITY AND, AS OBSERVED IN YOUR LETTER OF OCTOBER 26, 1970, NOTE B ON PAGE 34A OF THE SCHEDULE SPECIFICALLY STATED THAT ORDERS WOULD BE ISSUED FOR THE ENTIRE BEQ. CONTRARY TO YOUR VIEW, WE FIND NOTHING IN THE CONTRACTING OFFICER'S STATEMENT INDICATING THAT THE GOVERNMENT INTENDS TO PURCHASE LESS THAN THE AGGREGATE BEQ FOR THE ITEMS. THAT PART XXIII, CANCELLATION OF ITEMS CLAUSE, IS APPLICABLE TO THE TOTAL BEQ IS FURTHER EVIDENCED BY PART XXIVB) WHICH PROVIDES: "WITH RESPECT TO PARAGRAPH (C) OF PART XXIII, IN THE EVENT THAT THE GOVERNMENT DOES NOT HAVE REQUIREMENTS IN AN AMOUNT EQUAL TO THAT IDENTIFIED AS THE TOTAL BEST ESTIMATED QUANTITY FOR THE 100 KW GENERATOR SETS OR FOR THE 200 KW GENERATOR SETS, IT IS UNDERSTOOD THAT THE TERMINATION OF ONE KW GENERATOR SET RATING SHALL NOT CONSTITUTE A TERMINATION OF THE OTHER AND THE TERMINATION FOR CONVENIENCE WILL APPLY TO THAT KW GENERATOR SET RATING ONLY."

THUS, WE REJECT YOUR CONTENTION THAT IT WAS NECESSARY FOR BIDDERS TO PUT CONTINGENCES IN THEIR BID SO AS TO RECOVER THEIR NONRECURRING AMORTIZED COSTS IN THE EVENT THERE ARE LESS PURCHASES THAN THE BEQ IN THE SECOND AND THIRD PROGRAM YEARS.

WITH REGARD TO THE OBLIGATION OF FUNDS, THE PERTINENT PROVISIONS OF THE ANTI-DEFICIENCY ACT, SECTION 3679 R.S., AS AMENDED, 31 U.S.C. 665(A) AND THE DECISIONS OF OUR OFFICE WHICH YOU CITE IN CONNECTION THEREWITH, CONCERN THE MAKING OF CONTRACTS INVOLVING THE GOVERNMENT IN OBLIGATIONS FOR EXPENDITURES BEYOND THOSE AUTHORIZED FOR THE PERIOD OF AVAILABILITY OF, AND WITHIN THE AMOUNT OF, THE APPROPRIATIONS UNDER WHICH THEY ARE MADE.

IN 43 COMP. GEN. 657 (1964), SUPRA, WE RECOGNIZED THAT MULTI-YEAR PROCUREMENTS DID NOT FALL UNDER SUCH PROHIBITIONS, WE STATED AT PAGE 661,

"THE MULTI-YEAR PROCUREMENT PROCEDURE, HOWEVER, WOULD NOT BE USED WHERE FUNDS COVERING THE PROCUREMENT ARE LIMITED BY STATUTE FOR OBLIGATION DURING THE FISCAL YEAR IN WHICH THE CONTRACT IS EXECUTED. IN OTHER WORDS THE FUNDS TO BE OBLIGATED THEREBY ARE NO-YEAR FUNDS. WHERE CONGRESS EXPRESSLY PROVIDES IN AN APPROPRIATION, THAT IT SHALL 'REMAIN AVAILABLE UNTIL EXPENDED' THEREBY MAKING IT A NO-YEAR APPROPRIATION, ALL STATUTORY TIME LIMITS AS TO WHEN THE FUNDS MAY BE OBLIGATED AND EXPENDED ARE REMOVED. *** IN THE INSTANT CASE THERE WOULD BE NO OBLIGATION FOR SUBSEQUENT YEARS' REQUIREMENTS UNTIL FUNDS HAVE BEEN MADE AVAILABLE AND THE CONTRACTOR NOTIFIED THEREOF."

IN THIS CONNECTION, WE HAVE BEEN ADVISED THAT, SINCE THE AWARD OF THE CONTRACT, NINE ORDERS HAVE BEEN ISSUED BY THE DEPARTMENT OF THE AIR FORCE BASED UPON PURCHASE ORDERS OF THAT DEPARTMENT, THE DEPARTMENT OF THE ARMY AND THE DEPARTMENT OF THE NAVY, ALL CITING THE OBLIGATION OF NO-YEAR FUNDS.

WITH RESPECT TO THE CANCELLATION COSTS, ASPR 1-322.2(F) STATES THAT THE REQUIREMENT FOR THE FUNDING OF CANCELLATION CHARGES IS NO LONGER NECESSARY. IN VIEW THEREOF, THE PRESENT RECORD AFFORDS NO BASIS FOR CONCLUDING THAT THE PROCUREMENT IS VIOLATIVE OF THE PROVISIONS OF THE ANTI -DEFICIENCY ACT.

ACCORDINGLY, WE FIND NO LEGAL REQUIREMENT FOR CANCELLING CONSOLIDATED'S CONTRACT, AND YOUR PROTEST IS THEREFORE DENIED.