B-170155, OCT. 20, 1970

B-170155: Oct 20, 1970

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WHERE PROCURING AGENCY SHOWS THAT CONTRACT WAS NOT A RENEGOTIATION BUT A BONA FIDE FIRM-FIXED-PRICE CONTRACT NEGOTIATED SOLE-SOURCE ON A ONE-TIME BASIS TO PRODUCE DEFINITE REQUIREMENTS WHICH WOULD NOT PERMIT THE DELAY INCIDENT TO FORMAL ADVERTISING AND SUBSEQUENT PROCUREMENTS WERE REQUIRED BY PUBLIC EXIGENCY AND SUPPORTED BY DETERMINATIONS AND FINDINGS IN ACCORDANCE WITH 10 U.S.C. 2310. SUCH RULING IS FINAL. YOU CONTEND THAT THESE RENEGOTIATIONS HAVE BEEN AT SIGNIFICANTLY HIGHER PRICES THAN THOSE PRICES WHICH HAVE BEEN BID DURING THE BIDDING PERIODS. AS FOLLOWS: " *** YOU HAD INDICATED THAT THE RENEGOTIATIONS WERE ACCEPTABLE FOR SEVERAL REASONS. YOU INDICATED ON PAGE 3 OF YOUR LETTER THAT 'GEL INSISTED THAT ITS PRODUCTION COSTS HAD RISEN TO THE POINT THAT IT COULD NOT ACCEPT ANY ORDERS OVER AND ABOVE WHAT IT WAS REQUIRED TO ACCEPT BY THE CONTRACT WITHOUT AN UPWARD REVISION OF THE CONTRACT PRICE'.

B-170155, OCT. 20, 1970

BID PROTEST - RENEGOTIATION AFTER AWARD DENIAL OF PROTEST AGAINST DEFENSE SUPPLY SERVICE IN AWARDING A NEGOTIATED CONTRACT TO GENERAL ELECTRONIC LABORATORIES TO PROVIDE LANGUAGE TRAINING EQUIPMENT ON BASIS THAT OPPORTUNITY TO BID ARISES ONLY ONCE EVERY SECOND YEAR, WHILE SUCCESSFUL BIDDER HAS RENEGOTIATED AT HIGHER PRICE IN THE INTERIM. WHERE PROCURING AGENCY SHOWS THAT CONTRACT WAS NOT A RENEGOTIATION BUT A BONA FIDE FIRM-FIXED-PRICE CONTRACT NEGOTIATED SOLE-SOURCE ON A ONE-TIME BASIS TO PRODUCE DEFINITE REQUIREMENTS WHICH WOULD NOT PERMIT THE DELAY INCIDENT TO FORMAL ADVERTISING AND SUBSEQUENT PROCUREMENTS WERE REQUIRED BY PUBLIC EXIGENCY AND SUPPORTED BY DETERMINATIONS AND FINDINGS IN ACCORDANCE WITH 10 U.S.C. 2310, SUCH RULING IS FINAL, AND AFFORDS NO BASIS FOR PROTEST.

TO INSTRUCTOMATIC, INCORPORATED:

WE REFER TO YOUR TELEGRAM OF JUNE 25, 1970, AND LETTER OF JULY 24, 1970, PROTESTING AGAINST THE AWARD OF A CONTRACT BY THE DEFENSE SUPPLY SERVICE TO GENERAL ELECTRONIC LABORATORIES (GEL), UNDER SOLICITATION NO. DAHC-15- 70-B-0067.

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

" *** YOU HAD INDICATED THAT THE RENEGOTIATIONS WERE ACCEPTABLE FOR SEVERAL REASONS. FIRST, THAT THEY HAD JUSTIFIED A PUBLIC EXIGENCY, THEREFORE ELIMINATING THE POSSIBILITY OF REBIDDING, AND IN THE SECOND POINT, YOU INDICATED ON PAGE 3 OF YOUR LETTER THAT 'GEL INSISTED THAT ITS PRODUCTION COSTS HAD RISEN TO THE POINT THAT IT COULD NOT ACCEPT ANY ORDERS OVER AND ABOVE WHAT IT WAS REQUIRED TO ACCEPT BY THE CONTRACT WITHOUT AN UPWARD REVISION OF THE CONTRACT PRICE'.

"I WOULD LIKE TO SUBMIT THAT I FIND IT DIFFICULT TO UNDERSTAND HOW A COMMODITY SUCH AS A LABORATORY COULD, IN THE FIRST PLACE, BE DECLARED A PUBLIC EXIGENCY - BLOOD PLASMA I CAN UNDERSTAND - LANGUAGE TRAINING EQUIPMENT, I CANNOT.

"ON THE SECOND POINT, I HAD PRESUMED THAT THE GENERAL ACCOUNTING OFFICE HAD JUSTIFIED THE VENDOR'S INCREASE IN PRICE, WHICH IN SOME CASES WAS IN EXCESS OF 100%. SINCE HE IS NOW CAPABLE OF BIDDING AT PRICES ALMOST IDENTICAL AND IN SOME CASES LOWER THAN HIS 1968 BID, I PRESUME THAT HE HAS EITHER TAKEN THIS CONTRACT ON AN ANTICIPATION OF A LATER RENEGOTIATION UPWARD; OR, SECONDLY THAT HIS CLAIM IN 1969 WAS INVALID AS TO THE ACTUAL CONDITION OF HIS COSTS."

THE FACTUAL BACKGROUND OF THE SEVERAL PROCUREMENT ACTIONS YOU HAVE CHALLENGED ARE REPORTED BY THE DEFENSE SUPPLY SERVICE - WASHINGTON (DSS W) AS FOLLOWS.

ON APRIL 4, 1966, THE UNITED STATES ARMY ELECTRONICS COMMAND ISSUED A REQUEST FOR TECHNICAL PROPOSALS FOR PORTABLE TAPE RECORDERS AND LANGUAGE LABORATORIES. THIS WAS THE FIRST STEP OF A TWO-STEP FORMALLY ADVERTISED PROCUREMENT. FIFTY-EIGHT FIRMS WERE SOLICITED INCLUDING INSTRUCTOMATIC. SIX PROPOSALS WERE RECEIVED, NONE OF WHICH WAS FROM INSTRUCTOMATIC. THESE SIX, ONLY TWO PROPOSALS WERE FOUND TO BE TECHNICALLY ACCEPTABLE AND GEL WAS AWARDED THE CONTRACT ON JUNE 28, 1966, AS THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER.

RESPONSIBILITY FOR PROCUREMENT OF THE DEFENSE LANGUAGE INSTITUTE'S (DLI) REQUIREMENTS WAS TRANSFERRED TO DSS-W IN EARLY 1967. IN MARCH 1967 DLI INFORMED DSS-W OF URGENT REQUIREMENTS FOR LANGUAGE LABORATORIES IN EXCESS OF THE 1966 CONTRACT MAXIMUM LIMITATIONS. THE URGENCY OF THE SITUATION PRECLUDED THE DELAY INHERENT IN TWO-STEP FORMAL ADVERTISING (105 DAYS AS EXPERIENCED IN 1966). FURTHER, ACCORDING TO DSS-W, EXPERIENCE HAD SHOWN THAT UP TO ONE YEAR COULD BE REQUIRED FOR A NEW CONTRACTOR TO TOOL-UP, PRODUCE, AND DELIVER ACCEPTABLE LANGUAGE LABORATORY EQUIPMENT OF THE TYPE REQUIRED BY DLI SINCE STANDARD COMMERCIAL EQUIPMENT DOES NOT MEET ITS SPECIFICATIONS. ON MAY 23, 1967, THE CONTRACTING OFFICER EXECUTED A DETERMINATION AND FINDINGS, APPROVED BY THE DEPUTY DIRECTOR OF PROCUREMENT (DSS-W), IN ACCORDANCE WITH 10 U.S.C. 2304(A)(10) AND PARAGRAPH 3-210.2(I) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) THAT IT WAS IMPRACTICABLE TO FORMALLY ADVERTISE THE PROCUREMENT. ACCORDINGLY, GEL WAS REQUESTED TO SUBMIT A PROPOSAL WITH SUPPORTING COST AND PRICING DATA. GEL'S PROPOSAL WAS REVIEWED BY THE DEFENSE CONTRACT SERVICES REGION, BOSTON, WHICH RECOMMENDED ACCEPTANCE.

DSS-W STATES THAT ALTHOUGH THERE WAS AN INCREASE IN PRICE OVER THE 1966 CONTRACT, THE PRICES WERE CONSIDERED FAIR AND REASONABLE BECAUSE (1) THIS WAS A ONE-TIME PROCUREMENT OF A SMALLER QUANTITY THAN THAT COVERED BY THE 1966 CONTRACT, AND (2) THE COST OF LABOR AND MATERIAL HAD INCREASED. THEREFORE, ACCORDING TO DSS-W, THE 1967 CONTRACT WAS NOT A RE-NEGOTIATION, AS ALLEGED BY YOU, BUT A BONA FIDE FIRM FIXED PRICE CONTRACT NEGOTIATED SOLE SOURCE ON A ONE-TIME BASIS TO PROCURE DEFINITE REQUIREMENTS WHICH WOULD NOT PERMIT THE DELAY INCIDENT TO FORMAL ADVERTISING.

ON JANUARY 23, 1968, A REQUEST FOR TECHNICAL PROPOSALS WAS ISSUED TO 28 FIRMS FOR DLI'S REQUIREMENTS FOR THE PERIOD JUNE 25, 1968, THROUGH JUNE 24, 1969. TWELVE PROPOSALS WERE RECEIVED INCLUDING ONE FROM INSTRUCTOMATIC. HOWEVER, AFTER TECHNICAL EVALUATION, ONLY THE PROPOSALS OF GEL AND INSTRUCTOMATIC WERE FOUND ACCEPTABLE. THE SECOND STEP OF THE PROCUREMENT RESULTED IN A CONTRACT AWARD NO. DAHC 15-68-D 0383 TO GEL AS THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER. GEL'S AGGREGATE BID WAS $1,914,857 WHILE THAT OF INSTRUCTOMATIC WAS $2,295,853.50. THEREAFTER, YOU PROTESTED THE AWARD OF THIS CONTRACT TO OUR OFFICE ALLEGING THAT GEL HAD, IN PRIOR YEARS, DEMONSTRATED AN INABILITY TO MANUFACTURE THE EQUIPMENT IN ACCORDANCE WITH SPECIFICATIONS AND, ALSO, THAT GEL'S LOW BID WAS UNREALISTIC AND WAS INDICATIVE OF A SIGNIFICANTLY DIFFERENT INTERPRETATION OF SPECIFICATION COMPLIANCE THAN THAT IMPARTED TO YOU THROUGHOUT THE PROCUREMENT. WE DENIED YOUR PROTEST IN B-164792, SEPTEMBER 9, 1968, ON THE BASIS THAT THE RECORD DID NOT SUPPORT YOUR ASSERTIONS, NOTING THAT AS THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER GEL COULD NOT BE DENIED THE CONTRACT ON THE BASIS OF UNSUPPORTED ASSERTIONS CONCERNING ITS FUTURE PERFORMANCE.

DURING THE PERIOD MAY 23 THROUGH JUNE 5, 1969, DSS-W RECEIVED 5 REQUISITIONS FROM DLI FOR URGENT REQUIREMENTS WHICH EXCEEDED THE MAXIMUM ORDER LIMITATIONS OF THE THEN EXISTING CONTRACT DAHC 15-68-D 0383. DSS-W REPORTS, AS WAS MORE FULLY DETAILED IN OUR DECISION TO YOU OF SEPTEMBER 22, 1969, (B-164792), THAT THE URGENT NEED FOR THE EQUIPMENT DICTATED THAT THE PROCUREMENT BE MADE BY THE MOST EXPEDITIOUS MEANS IN THE INTEREST OF NATIONAL DEFENSE. IN THIS CONNECTION, IT IS FURTHER REPORTED, THE IMPORTANCE OF THE MISSION OF DLI BOTH TO THE SUCCESS OR FAILURE OF THE MILITARY ASSISTANCE PROGRAM AND TO THE COMBAT TROOPS OF VIETNAM WAS THE DETERMINING FACTOR IN THE DECISION TO UTILIZE THE "PUBLIC EXIGENCY" AUTHORITY OF 10 U.S.C. 2304(A)(2). IT WAS AGAIN EVIDENT, ACCORDING TO DSS -W, THAT THE MOST EXPEDITIOUS METHOD OF PROCUREMENT WAS TO NEGOTIATE WITH GEL SINCE NO OTHER CONTRACTOR AT THAT TIME HAD A COMPARABLE PRODUCTION CAPABILITY. A DETERMINATION AND FINDINGS, AS REQUIRED BY 10 U.S.C. 2310(B), WAS EXECUTED ON JUNE 17, 1969, JUSTIFYING NEGOTIATION OF THE PROCUREMENT WITH GEL UNDER 10 U.S.C. 2304(A)(2). NEGOTIATIONS WITH GEL RESULTED IN MODIFICATION P007 TO THE EXISTING CONTRACT. WHILE THE PRICES ON THIS ADDITIONAL QUANTITY WERE HIGHER THAN THOSE IN THE BASIC CONTRACT, DSS-W FOUND THAT THEY WERE FAIR AND REASONABLE ON THE BASIS THAT (1) THIS WAS IN ESSENCE A NEW ONE-TIME PROCUREMENT OF A SMALLER QUANTITY THAN THAT COVERED IN THE BASIC CONTRACT, (2) THE COST OF LABOR AND MATERIAL HAD CONTINUED TO INCREASE, AND (3) THE PRICES NEWLY NEGOTIATED WITH GEL WERE SUBSTANTIALLY LESS THAN THOSE BID BY INSTRUCTOMATIC, THE ONLY OTHER BIDDER, NEARLY A YEAR BEFORE.

SOLICITATION NO. DAHC 15-70-B-0067 WAS ISSUED ON MAY 15, 1970, TO GEL AND TO INSTRUCTOMATIC AS THE SECOND STEP OF TWO-STEP FORMAL ADVERTISING. THE FIRST STEP A REQUEST FOR PROPOSALS WAS DISTRIBUTED TO 56 FIRMS. FOUR PROPOSALS WERE RECEIVED, ONLY TWO OF WHICH WERE TECHNICALLY ACCEPTABLE AND RESULTED IN THE ABOVE SOLICITATION. BIDS WERE PUBLICLY OPENED ON JUNE 15, 1970. THE LOW AGGREGATE BID OF $965,498.30 WAS SUBMITTED BY GEL. INSTRUCTOMATIC'S BID WAS $1,072,413.60 LESS 1/2% FOR A NET OF $1,067,051.30. CONTRACT NO. DAHC 15-70-D-0287 WAS AWARDED TO GEL ON JUNE 17, 1970, AS THE LOWEST BIDDER.

DSS-W TAKES THE POSITION THAT THE FOREGOING FACTS DEMONSTRATE THAT THE 1967 AND 1969 PROCUREMENTS WERE NOT RE-NEGOTIATIONS, AS YOU ALLEGE, BUT WERE FIRM FIXED-PRICE CONTRACTS NEGOTIATED SOLE SOURCE TO PROCURE DEFINITE REQUIREMENTS WHICH WOULD NOT PERMIT THE DELAY INCIDENT TO ADVERTISING. INSOFAR AS THE ALLEGATION THAT ADDITIONAL REQUIREMENTS HAVE BEEN NEGOTIATED AT A "CONTINUOUS SIGNIFICANTLY HIGHER PRICE THAN THOSE PRICES WHICH HAVE BEEN BID DURING THE BIDDING PERIOD" IS CONCERNED, DSS-W STATES THAT IN EACH INSTANCE NEARLY A YEAR HAD ELAPSED SINCE THE BIDDING PERIOD AND THAT THE REQUIREMENTS WERE SMALLER AND SOME DELIVERIES WERE ACCELERATED. FURTHERMORE, DSS-W NOTES THAT GEL'S PRICES ON BOTH COMPETITIVE AND NON-COMPETITIVE PROCUREMENTS HAVE BEEN LOWER THAN INSTRUCTOMATIC'S. IN SUMMARY DSS-W STATES:

" *** IT IS OUR CONTENTION THAT ALL POSSIBLE COMPETITION WAS OBTAINED IN EACH INSTANCE. WHEN THE PUBLIC EXIGENCY WOULD NOT PERMIT THE DELAYS INVOLVED WITH A COMPETITIVE PROCUREMENT, THE PURCHASE WAS KEPT TO THE ABSOLUTE MINIMUM TO MEET THE EMERGENCY REQUIREMENT. THE PRICES PAID ON THE SOLE SOURCE PROCUREMENTS WERE FAIR AND REASONABLE UNDER THE THEN EXISTING CIRCUMSTANCES. THE ALLEGATIONS OF THE PROTESTANT ARE WITHOUT VALIDITY AND I RECOMMEND THE PROTEST BE DENIED."

YOU CONTEND THAT THE FORM OF BIDDING AND NEGOTIATION WHICH HAS BEEN TAKING PLACE WITH THIS PROCUREMENT FOR THE LAST FOUR YEARS HAS PREVENTED ANY COMPETITION FROM ENTERING THE FIELD AND HAS FORCED THE GOVERNMENT TO DEAL WITH A SOLE SUPPLIER FOR A VERY SIGNIFICANT CONTRACT IN YOUR INDUSTRY.

WE DO NOT BELIEVE THAT THE FACTUAL BACKGROUND OUTLINED ABOVE SUPPORTS YOUR ASSERTION. THE PROCUREMENT OF THE SUBJECT EQUIPMENT HAS BEEN FORMALLY ADVERTISED UNDER THE TWO-STEP PROCEDURE ON 3 SEPARATE OCCASIONS SINCE 1966. YOUR COMPANY PARTICIPATED IN THIS COMPETITION IN 1968 AND 1970. ON ALL 3 OCCASIONS (WHICH WERE FORMALLY ADVERTISED) GEL WAS AWARDED THE CONTRACT ON THE BASIS THAT IT WAS THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER. GEL COULD NOT HAVE BEEN DENIED THESE CONTRACTS ON THE BASIS OF UNSUPPORTED ASSERTIONS THAT IT HAS DEMONSTRATED A PAST INABILITY TO MANUFACTURE THE ITEMS IN QUESTION OR THAT ITS PRICES ARE INDICATIVE OF A DIFFERENT INTERPRETATION AS TO SPECIFICATION COMPLIANCE, B-164792, SEPTEMBER 9, 1968. NOR CAN IT BE DENIED A CONTRACT, AS YOU CONTEND, ON AN UNSUBSTANTIATED PRESUMPTION THAT IT HAS TAKEN THE CONTRACT ON AN ANTICIPATION OF A LATER RE-NEGOTIATION UPWARD. IN THIS CONNECTION, DSS- W'S ACTION IN NEGOTIATING SOLE-SOURCE FOR ADDITIONAL UNANTICIPATED REQUIREMENTS IN 1967 AND 1969 WAS BASED UPON AUTHORITY CONFERRED BY THE ARMED SERVICES PROCUREMENT ACT, 10 U.S.C. 2304(A)(2) AND (10). THESE TWO PROCUREMENTS WERE SUPPORTED BY DETERMINATIONS AND FINDINGS AS REQUIRED BY 10 U.S.C. 2310. EVEN IF WE WERE DISPOSED TO DO SO WE COULD NOT QUESTION THEM SINCE, AS EXPLAINED TO YOU IN OUR DECISION OF SEPTEMBER 22, 1969 (B- 164792), A DETERMINATION AND FINDINGS UNDER 10 U.S.C. 2304(A)(2) OR (10) IS MADE FINAL BY THE PROVISIONS OF 10 U.S.C. 2310(B). NOR CAN WE AGREE WITH YOUR CONTENTION THAT A COMMODITY SUCH AS A LANGUAGE LABORATORY COULD NOT BE CONSIDERED SUBJECT TO A PUBLIC-EXIGENCY NEED. WHILE THE CHARACTER AND FUNCTION OF A PARTICULAR COMMODITY IS RELEVANT IN ANY DETERMINATION TO NEGOTIATE ON THE BASIS OF A PUBLIC EXEGINCY, CHARACTER AND FUNCTION ARE NOT THE SOLE CRITERIA. THE ARMED SERVICES PROCUREMENT ACT INFERENTIALLY RECOGNIZES THIS FACT SINCE THE CATEGORY OF MEDICINE OR MEDICAL SUPPLIES, SUCH AS BLOOD PLASMA, CARRIES ITS OWN NEGOTIATION EXCEPTION TO FORMAL ADVERTISING. 10 U.S.C. 2304(A)(7).

DSS-W ALSO REPORTS THAT THE DEFENSE LANGUAGE INSTITUTE HAS MADE AND IS CONTINUING TO MAKE EVERY EFFORT TO NEGOTIATE WITH THE GENERAL SERVICES ADMINISTRATION TO HAVE ITS REQUIREMENTS MADE AVAILABLE THROUGH THE FEDERAL SUPPLY SCHEDULE. QUALIFIED ENGINEERS HAVE BEEN ASSIGNED THE MISSION OF RE -WRITING THE SPECIFICATIONS TO INSURE THAT ONLY THE CURRENT MINIMUM ESSENTIAL REQUIREMENTS ARE SET FORTH IN THE HOPE THAT A NEW SPECIFICATION MAY SERVE TO BROADEN THE FIELD OF COMPETITION FOR FUTURE REQUIREMENTS.

ON THE BASIS OF THE RECORD BEFORE US WE CANNOT CONCLUDE THAT THE PROCUREMENTS IN QUESTION HAVE BEEN ACCOMPLISHED IN VIOLATION OF APPLICABLE LAW AND REGULATIONS. ACCORDINGLY, YOUR PROTEST IS DENIED.