B-170080, AUG. 31, 1970

B-170080: Aug 31, 1970

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A REQUIREMENT THAT A CONTRACTOR HAVE A CAPABILITY TO OVERHAUL A MINIMUM OF 15 ENGINES PER WEEK AFTER AN INITIAL 4-WEEK BUILDUP IS SHOWN FROM THE RECORD TO BE A NECESSARY REQUIREMENT AND THEREFORE IT WILL NOT BE QUESTIONED. TO LOU CONDE COMPANY: REFERENCE IS MADE TO YOUR LETTER OF JUNE 15. THE IFB REQUIRED THAT A PROSPECTIVE CONTRACTOR HAVE THE CAPABILITY TO OVERHAUL A MINIMUM OF 15 ENGINES PER WEEK AFTER AN INITIAL 4-WEEK BUILDUP PERIOD. YOU CONTEND THAT THE 15 ENGINE REQUIREMENT IS UNFAIR AND UNREASONABLE SINCE THE CONTRACTOR WOULD HAVE TO HAVE THIS CAPABILITY REGARDLESS OF WHETHER HE HAD RECEIVED ANY ENGINES TO WORK ON PRIOR TO RECEIVING A WORK ORDER FOR 15 ENGINES. TOLD YOU THE 15-ENGINE CAPACITY REQUIREMENT IS RIDICULOUS.

B-170080, AUG. 31, 1970

BID PROTEST -- REQUIREMENTS DENIAL OF PROTEST AGAINST AN INVITATION FOR AN AWARD OF A REQUIREMENTS TYPE CONTRACT FOR ENGINE OVERHAUL SERVICES FOR NAVY PURCHASING OFFICE ON BASIS OF AN UNREASONABLE REQUIREMENT. A REQUIREMENT THAT A CONTRACTOR HAVE A CAPABILITY TO OVERHAUL A MINIMUM OF 15 ENGINES PER WEEK AFTER AN INITIAL 4-WEEK BUILDUP IS SHOWN FROM THE RECORD TO BE A NECESSARY REQUIREMENT AND THEREFORE IT WILL NOT BE QUESTIONED.

TO LOU CONDE COMPANY:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 15, 1970, WITH ENCLOSURES, PROTESTING CERTAIN MATTERS RELATING TO INVITATION FOR BIDS (IFB) NO. N00123-70-B-1839, ISSUED BY THE NAVY PURCHASING OFFICE (NPO), LOS ANGELES, CALIFORNIA.

THE ABOVE IFB ANTICIPATED THE AWARD OF A REQUIREMENTS TYPE CONTRACT FOR THE OVERHAUL AND REPAIR OF A QUANTITY OF DIESEL ENGINES. THE IFB REQUIRED THAT A PROSPECTIVE CONTRACTOR HAVE THE CAPABILITY TO OVERHAUL A MINIMUM OF 15 ENGINES PER WEEK AFTER AN INITIAL 4-WEEK BUILDUP PERIOD.

IN YOUR LETTER OF JUNE 5, 1970, TO NPO, YOU CONTEND THAT THE 15 ENGINE REQUIREMENT IS UNFAIR AND UNREASONABLE SINCE THE CONTRACTOR WOULD HAVE TO HAVE THIS CAPABILITY REGARDLESS OF WHETHER HE HAD RECEIVED ANY ENGINES TO WORK ON PRIOR TO RECEIVING A WORK ORDER FOR 15 ENGINES. YOU ALSO STATE THAT AN UNIDENTIFIED REPRESENTATIVE OF THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT, LOS ANGELES (DCASD), TOLD YOU THE 15-ENGINE CAPACITY REQUIREMENT IS RIDICULOUS. IN THIS CONNECTION, YOU STATE THAT NPO'S INTERPRETATION OF THE REQUIREMENT IS THAT AFTER THE FOURTH WEEK OF THE CONTRACT, THE CONTRACTOR WOULD BE REQUIRED TO OVERHAUL 15 ENGINES PER WEEK REGARDLESS OF THE PREVIOUS WEEK'S REQUIREMENTS. YOU STATE THAT DCASD'S INTERPRETATION IS THAT THE ESCALATION PERIOD (4 WEEKS) IS TO BE INSTITUTED WITH EVERY WORK ORDER ISSUED CALLING FOR 15 ENGINES PER WEEK.

IN HIS COMMENTS ON YOUR JUNE 5, 1970, LETTER, THE CONTRACTING OFFICER STATES:

"MR. LOU CONDE'S NAME DOES NOT APPEAR ON THE VISITORS LOG AT EITHER THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGIONAL OFFICE IN LOS ANGELES OR THE DCAS DISTRICT OFFICE IN ANAHEIM WHERE COGNIZANT GOVERNMENT OFFICIALS RESPONSIBLE FOR THE ADMINISTRATION OF LAST YEAR'S CONTRACT RESIDE. AFTER MANY DAYS OF INTERROGATION OF VARIOUS GOVERNMENT PERSONNEL, IT IS BELIEVED THAT IT IS MR. E. S. FATHERINGHAM, AN INDUSTRIAL SPECIALIST WITH WHOM MR. LOU CONDE HAD A PASSING CONVERSATION WITH BY HAPPENSTANCE AT ANOTHER CONTRACTOR'S OFFICE. THIS OFFICE IS UNABLE TO IDENTIFY THROUGH INQUIRIES ANY GOVERNMENT PERSONNEL WITHIN THE DCASD ANAHEIM OFFICE OR SUPERVISOR OF SHIPBUILDING, CONVERSION AND REPAIR OFFICE IN SAN DIEGO WHO INTERPRET THE ORDERING REQUIREMENTS OF THE IFB ANY DIFFERENT THAN PERSONNEL OF THIS OFFICE. THERE IS NO DISSENSION AMONG VARIOUS GOVERNMENT OFFICES OVER THE REASONABLENESS OF THE REQUIREMENT OF A CAPACITY TO OVERHAUL 15 ENGINES PER WEEK IF REQUIRED. THE REQUIREMENT WHICH A BIDDER MUST SATISFY TO BE RESPONSIVE IS THAT THE 'CONTRACTOR'S FACILITIES SHALL BE CAPABLE OF OVERHAULING A MINIMUM OF FIFTEEN ENGINES PER WEEK'. AS SET FORTH IN PARAGRAPH F.2 ON PAGE 39 OF THE IFB. TO A NEW SUCCESSFUL BIDDER OBTAINING THE AWARD OF THE CONTRACT HE IS AFFORDED UP TO FOUR WEEKS AFTER AWARD TO EXPAND HIS FACILITIES TO BE ABLE TO MEET THE MINIMUM QUANTITY OF 15 ENGINES PER WEEK. SEE PARAGRAPH F.3 ON PAGE 40 OF THE IFB. OBVIOUSLY, IF THERE IS NO URGENT ORDER REQUIREMENTS FOR 15 OR MORE ENGINES AT TIME OF THE AWARD OF THE BASIC CONTRACT, THE CONTRACTOR WILL NOT BE FORCED TO PRODUCE A SMALLER QUANTITY AT A HIGHER CORRESPONDING RATE. HOWEVER, IF, IN THE SECOND MONTH OF THE CONTRACT PERIOD, THERE IS AN URGENT REQUIREMENT TO SAY OVERHAUL 60 ENGINES, THEN THE CONTRACTOR MUST PRODUCE IMMEDIATELY (NO FOUR WEEK BUILDUP) AT THE RATE OF 15 ENGINES PER WEEK.

"IT IS SAFE TO ASSUME THAT ALL PRUDENT BIDDERS INCLUDED THE CONTINGENCY FOR SOME OVERTIME LABOR COSTS IN THEIR UNIT LABOR PRICES IN ORDER TO PROVIDE FOR SUDDEN URGENT WEEKLY DEMANDS. IF IT APPEARED IN THE MIDDLE OF THE YEAR THAT THE SIZE OF THE ORDER (60 OR MORE ENGINES) WOULD REQUIRE PRODUCTION FOR SEVERAL CONTINUOUS WEEKS OR MONTHS, THEN A PRUDENT BUSINESS COMPANY WOULD HIRE AND SUPPLEMENT THEIR WORK FORCE TO REDUCE OVERTIME PREMIUMS. HOWEVER, A COMPANY WHICH DOES NOT ALREADY HAVE A LARGE ENOUGH WORK FORCE TO IMMEDIATELY ABSORB THE NEED FOR SUDDEN ADDITIONAL PRODUCTION MAN HOURS DURING THE FIRST WEEK (AFTER FIRST MONTH OF CONTRACT) AT A RATE OF 15 ENGINES PER WEEK THROUGH USE OF OVERTIME DOES NOT HAVE SUFFICIENT CAPABILITIES OF MEETING THE MINIMUM REQUIREMENTS OF THE IFB. *** "

FOR HIS PART, MR. E. S. FATHERINGHAM DENIES EVER MAKING A STATEMENT THAT THE 15-ENGINE PER WEEK REQUIREMENT WAS RIDICULOUS AND INDICATES THAT THE CURRENT CONTRACTOR DID, IN FACT, DELIVER AS HIGH AS 60 ENGINES IN 1 MONTH.

REQUIREMENTS CONTRACTS ARE, OF COURSE, LEGALLY ACCEPTABLE MEANS OF OBTAINING NECESSARY SUPPLIES AND SERVICES TO MEET GOVERNMENT DEMANDS. SEE PARAGRAPHS 2-104.4 AND 3-409.2 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). MOREOVER, IT IS THE POSITION OF OUR OFFICE THAT THE DRAFTING OF SPECIFICATIONS TO MEET THOSE NEEDS IS A FUNCTION PRIMARILY WITHIN THE PROVINCE OF THE PROCURING ACTIVITY. 17 COMP. GEN. 554 (1938). INTERVENTION BY OUR OFFICE INTO THIS AREA IS WARRANTED ONLY IN THOSE SITUATIONS WHERE THE SPECIFICATIONS AS DRAFTED IMPERIL THE COMPETITIVE BIDDING SYSTEM. THAT SITUATION DOES NOT EXIST HERE. WE CONCLUDE, THEREFORE, THAT IN VIEW OF THE FOREGOING AND OUR REVIEW OF THE SPECIFICATIONS INVOLVED, THERE EXISTS NO BASIS UPON WHICH WE MAY INTERPOSE A LEGAL OBJECTION TO THE 15-ENGINE PER WEEK REQUIREMENT.

YOU NEXT CONTEND THAT THE IFB PROVISION WITH REGARD TO REPLACEMENT PARTS TO BE USED IN THE OVERHAULS IS AMBIGUOUS. SPECIFICALLY, YOU POINT OUT THAT SPECIFICATION F.1.1.B CONTAINS THE STATEMENT, "EVERY ATTEMPT WILL BE MADE TO USE GOVERNMENT FURNISHED PARTS," WHILE F.1.1.C STATES IN PART, "ONLY NEW, UNUSED, GENUINE ORIGINAL MANUFACTURER'S PARTS OR COMPONENTS *** SHALL BE USED FOR REPLACEMENT IN THE ENGINES SPECIFIED HEREIN UNLESS CONTRACTOR IS DIRECTED BY THE COGNIZANT INSPECTOR TO USE GOVERNMENT FURNISHED MATERIAL. *** NO SUBSTITUTE MANUFACTURER'S PARTS WILL BE ACCEPTED." IN VIEW OF THESE STATEMENTS YOU ASK:

" *** THE NAVY BUYS MILLIONS OF DOLLARS WORTH OF REPLACEMENT PARTS FOR THESE ENGINES AND CARRY THEM IN STOCK ON EVERY BASE AND SHIP. ARE THEY ACCEPTABLE OR NOT ACCEPTABLE? IF THE NAVY GIVES THE CONTRACTOR A REPLACEMENT PART TO INSTALL IN THE ENGINE IS THE CONTRACTOR IN VIOLATION OF ABOVE SECTION IF HE DOES SO? AND WHAT EFFECT DOES THE USE OF THAT 'UNACCEPTABLE' PART HAVE ON THE WARRANTEE ON THE ENGINE?"

IN COMMENTING ON THIS MATTER, THE CONTRACTING OFFICER STATES:

"THE SPECIFICATIONS PERTAINING TO THE USE OF EITHER GOVERNMENT FURNISHED PARTS OR NEW CONTRACTOR FURNISHED PARTS ARE PRECISELY CLEAR AS TO WHAT IS ACCEPTABLE. THE GOVERNMENT FURNISHED PARTS ARE USED AND THE CONTRACTOR'S FURNISHED PARTS ARE NEW BUT IN BOTH INSTANCES THE PARTS ARE THOSE THAT ARE TRACEABLE BACK AS BEING EITHER MANUFACTURED BY THE ORIGINAL MANUFACTURER OF THE ENGINE INVOLVED OR OTHERWISE RECOMMENDED OR APPROVED BY SUCH MANUFACTURER FOR USE IN SUCH ENGINE. THE GOVERNMENT FURNISHED PARTS ARE THE USED PARTS OBTAINED FROM ENGINES TORN DOWN BY THE CONTRACTOR FOR INSPECTION AS TO ECONOMICAL FEASIBILITY TO OVERHAUL OR SURVEY THE ENGINE. IF THE ENGINE IS NOT TO BE BUILT BACK UP THROUGH A COMPLETE OVERHAUL PROCEDURE, THEN THE CONTRACTOR WILL INSPECT, CLEAN PRESERVE, MARK AND STORE VARIOUS REUSABLE USED PARTS AND COMPONENTS AS GOVERNMENT MATERIAL WHICH MAY BE USED IN SUBSEQUENT OVERHAULS. MR. LOU CONDE IS PERSONALLY FAMILIAR WITH THE ROLE AND RESPONSIBILITIES OF THE OVERHAUL CONTRACTOR IN OBTAINING CUSTODY AND ACCOUNTING FOR SUCH USED GOVERNMENT MATERIAL BOTH ON A GOVERNMENT BASE AND IN A CONTRACTOR'S FACILITY. FOR VARIOUS ADMINISTRATIVE AND ECONOMICAL REASONS THIS MAJOR OVERHAUL CONTRACT IS NOT PREDICATED UPON RELYING ON THE GOVERNMENT TO BE RESPONSIBLE TO FURNISH NEW REPLACEMENT PARTS IN THE RIGHT QUANTITIES AT THE RIGHT TIME TO THE CONTRACTOR TO INSURE THAT THE ENGINES ARE OVERHAULED ON SCHEDULE. THE REPLACEMENT PARTS THAT ARE DISTRIBUTED THROUGH THE SUPPLY SYSTEM ARE PREDICATED FOR USE BY MILITARY PERSONNEL IN INTERIM OVERHAUL SITUATIONS THROUGHOUT THE WORLD. IF THE NAVY WAS TO REVERT BACK TO HAVING THE MAJOR OVERHAULS PERFORMED BY MILITARY OR CIVIL SERVICE PERSONNEL AT A SHIPYARD AS IN THE PAST, THEN NATURALLY, HUGE INVESTMENT OF GOVERNMENT-PURCHASED PARTS TO SUSTAIN SUCH AN OPERATION WOULD BE MADE TO POSITION IN DEPTH ALL POSSIBLE REQUIRED PARTS. UNDER THE TERMS OF THIS COMMERCIAL OVERHAUL CONTRACT, THE CONTRACTOR COULD NOT BE HELD RESPONSIBLE FOR THE QUALITY OF PARTS USED IF HE COMPLIES WITH THE REQUIREMENTS OF USING ONLY THOSE THAT WERE IN THE ENGINE WHEN RECEIVED PLUS REPLACEMENT PARTS THAT ARE GFM OR CFM IN ACCORDANCE WITH THE PROCEDURES FOR IDENTIFIABLE TRACEABILITY AS TO ORIGIN AS ACCEPTABLE PARTS."

WE ARE OF THE OPINION THAT THE ABOVE COMMENTS CONSTITUTE ADEQUATE RESPONSES TO YOUR QUESTIONS. MOREOVER, WE FIND NOTHING IN THE IFB WHICH REQUIRES THE GOVERNMENT TO FURNISH NEW REPLACEMENT PARTS. ON THE CONTRARY, IN VIEW OF SPECIFICATION E-2 REQUIRING PARTS FROM ENGINES NOT OVERHAULED TO BE CLEANED, PRESERVED, IDENTIFIED AND STORED IN A SEPARATE GOVERNMENT MATERIAL HOLDING AREA FOR FUTURE USE, WE MUST CONCLUDE THAT THESE USED PARTS FORM THE PARTS POOL FROM WHICH GOVERNMENT-FURNISHED REPLACEMENT PARTS WILL BE DRAWN. IF A PART IS REQUIRED WHICH CANNOT BE SUPPLIED FROM THIS PARTS POOL, THEN THE CONTRACTOR HAS THE OBLIGATION TO OBTAIN A NEW, ORIGINAL MANUFACTURER'S PART TO MEET THE REQUIREMENT. THUS, YOUR INTERPRETATION OF THE SPECIFICATIONS ANTICIPATING THAT GOVERNMENT- FURNISHED PARTS WILL BE NEW PARTS FROM A SUBSTITUTE MANUFACTURER IS NOT CORRECT. ALSO, WE NOTE THAT IN SPECIFICATION F.1.1.B, THE SENTENCE PRECEDING THE SENTENCE YOU QUOTE INDICATES THAT THE GOVERNMENT INSPECTOR IS TO DETERMINE WHETHER REPLACEMENT PARTS SHALL BE NEW CONTRACTOR- FURNISHED OR USED GOVERNMENT FURNISHED PARTS. ADDITIONALLY, SPECIFICATION C-27, "GOVERNMENT FURNISHED MATERIAL," SPECIFICALLY STATES THAT THE GOVERNMENT WILL FURNISH USED DIESEL PARTS.

IN VIEW OF THE FOREGOING, AND AFTER REVIEWING THE OTHER MATTERS YOU RAISED, WE CAN FIND NO BASIS TO SUPPORT A LEGAL OBJECTION TO THE SUBJECT PROCUREMENT. ACCORDINGLY, YOUR PROTEST IS DENIED.