B-170542, DEC. 31, 1970

B-170542: Dec 31, 1970

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WHERE AFTER THE FINDING AND DETERMINATION STATING THAT USE OF A SOLE SOURCE NEGOTIATED PROCUREMENT WAS JUSTIFIED BECAUSE IT IS IMPRACTICABLE TO OBTAIN COMPETITION BY FORMAL ADVERTISING WAS ISSUED AND A PROPOSAL RECEIVED FROM DERO WAS DEEMED UNREASONABLY HIGH AN UNSOLICITED PROPOSAL WAS RECEIVED. THE PROCURING ACTIVITY WAS JUSTIFIED IN CANCELLING THE NEGOTIATIONS AND PROCEEDING BY FORMAL ADVERTISING. RESOLICITATION BY THE METHOD OF FORMAL ADVERTISING WAS A PROPER CHOICE BECAUSE COMPETITION EXISTED IN THE AREA OF PRICE AND THERE WAS NO TECHNICAL AREA TO BE NEGOTIATED. THE GRANTING OF A FIRST ARTICLE TESTING WAIVER TO WESTERN WAS BASED ON ITS PREVIOUS PRODUCTION OF SIMILAR EQUIPMENT AND THE MINIMIZING OF THE EFFECT OF A SIX YEAR LAPSE IN PRODUCTION WAS A MATTER OF ADMINISTRATIVE DISCRETION WHICH THE GAO WILL NOT UPSET ABSENT A SHOWING THAT IT WAS ARBITRARY OR CAPRICIOUS.

B-170542, DEC. 31, 1970

BID PROTEST - SOLE-SOURCE AWARD - FIRST ARTICLE APPROVAL DENIAL OF PROTEST OF DERO RESEARCH AND DEVELOPMENT CORP., AGAINST THE PROPOSED AWARD OF A CONTRACT FOR RADAR SETS TO WESTERN COMPONENTS DIVISION OF WESTERN INSTRUMENTS, INC., UNDER A FORMALLY ADVERTISED IFB ISSUED SUBSEQUENT TO THE CANCELLATION OF A SOLE-SOURCE RFP ISSUED BY THE NAVAL SHIP SYSTEMS COMMAND TO DERO. WHERE AFTER THE FINDING AND DETERMINATION STATING THAT USE OF A SOLE SOURCE NEGOTIATED PROCUREMENT WAS JUSTIFIED BECAUSE IT IS IMPRACTICABLE TO OBTAIN COMPETITION BY FORMAL ADVERTISING WAS ISSUED AND A PROPOSAL RECEIVED FROM DERO WAS DEEMED UNREASONABLY HIGH AN UNSOLICITED PROPOSAL WAS RECEIVED, THE PROCURING ACTIVITY WAS JUSTIFIED IN CANCELLING THE NEGOTIATIONS AND PROCEEDING BY FORMAL ADVERTISING. RESOLICITATION BY THE METHOD OF FORMAL ADVERTISING WAS A PROPER CHOICE BECAUSE COMPETITION EXISTED IN THE AREA OF PRICE AND THERE WAS NO TECHNICAL AREA TO BE NEGOTIATED. THE GRANTING OF A FIRST ARTICLE TESTING WAIVER TO WESTERN WAS BASED ON ITS PREVIOUS PRODUCTION OF SIMILAR EQUIPMENT AND THE MINIMIZING OF THE EFFECT OF A SIX YEAR LAPSE IN PRODUCTION WAS A MATTER OF ADMINISTRATIVE DISCRETION WHICH THE GAO WILL NOT UPSET ABSENT A SHOWING THAT IT WAS ARBITRARY OR CAPRICIOUS.

TO MR. JACOB H. FISCHMAN:

REFERENCE IS MADE TO YOUR LETTERS DATED AUGUST 20, SEPTEMBER 28, OCTOBER 23, NOVEMBER 25, AND DECEMBER 1, 1970, ON BEHALF OF THE DERO RESEARCH AND DEVELOPMENT CORPORATION (DERO), PROTESTING AGAINST THE PROPOSED AWARD OF A CONTRACT TO WESTON COMPONENTS DIVISION OF WESTERN INSTRUMENTS, INC. (WESTON), UNDER FORMALLY ADVERTISED INVITATION FOR BIDS (IFB) NO. N00024- 71-B-3015, ISSUED SUBSEQUENT TO THE CANCELLATION OF REQUEST FOR PROPOSALS (RFP) NO. N00024-70-R-3385(S), ISSUED BY THE DEPARTMENT OF THE NAVY, NAVAL SHIP SYSTEMS COMMAND (NSSC), WASHINGTON, D.C.

THE RFP WAS ISSUED ON MARCH 25, 1970, TO DERO FOR AN/SPS-10F RADAR SETS ON A SOLE-SOURCE BASIS IN ACCORDANCE WITH A CONTRACTING OFFICER'S DETERMINATION AND FINDINGS (D&F) PERMITTING NEGOTIATION PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304(A)(10). THE D&F STATES, IN PERTINENT PART, AS FOLLOWS:

"FINDINGS

"1. THE PROPOSED PROCUREMENT PROVIDES FOR THE FURNISHING OF APPROXIMATELY TWELVE (12) AN/SPS-10F RADAR SETS PLUS AN OPTION QUANTITY OF FIVE (5) (EACH CONSISTING OF ONE (1) AN/SPS-10 RADAR SET AND ONE (1) FC- 5/SPS-10 PEDESTAL); REPAIR PARTS, TECHNICAL DOCUMENTATION AND REPORTS.

"2. THE EQUIPMENT TO BE PROCURED IS OF A HIGHLY TECHNICAL AND SPECIALIZED NATURE AND IS REQUIRED FOR CVAN-69, LHA'S, DHLH'S NAVELEK AND MAP REQUIREMENTS. DERO-CLAVIER CORPORATION HAS BEEN THE SOLE MANUFACTURER OF THE AN/SPS-10F AND HAS RECENTLY COMPLETED PRODUCTION UNDER CONTRACT N00024 -68-C-1182 FOR 36 SETS. SINCE DERO-CLAVIER HAS BEEN THE ONLY PRODUCER, PROCUREMENT FROM ANOTHER SOURCE WOULD INVOLVE THE DUPLICATION OF COSTS FOR DESIGN, PREPRODUCTION MODEL AND PREPRODUCTION TESTING. THESE ARE ESTIMATED AT $150,000. APPROXIMATELY 50 EQUIPMENTS ARE REQUIRED FOR AN ECONOMIC PRODUCTION RUN. THE TOTAL ESTIMATED COST OF THE PRESENT PROCUREMENT OF 12 SETS IF BOUGHT FROM DERO-CLAVIER CORPORATION IS $379,000. THUS THE 12 EQUIPMENTS UNDER PROCUREMENT CONSTITUTE AN UNECONOMICAL QUANTITY FOR ANY PRODUCER OTHER THAN DERO-CLAVIER.

"3. THIS PROCUREMENT CONSTITUTES SUCH AN UNECONOMICAL QUANTITY THAT IS UNREASONABLE TO EXPECT ANY FIRM OTHER THAN THE CURRENT PRODUCER, DERO- CLAVIER, TO BID ON THIS PROCUREMENT. MOREOVER, IF, IN THE UNLIKELY EVENT THAT SOME OTHER FIRM DID RESPOND, THE POSSIBILITY OF WHICH IS EXTREMELY REMOTE, ITS PRICE WOULD NECESSARILY BE HIGH MEASURED AGAINST WHAT WOULD BE A REASONABLE PRICE FOR DERO-CLAVIER. THUS, UNDER FORMAL ADVERTISING, DERO -CLAVIER WOULD BE IN A POSITION TO SHADE THE BID OF ANY OTHER FIRM WITH THE RESULT THAT DERO-CLAVIER'S BID, ALTHOUGH LOWER THAN ANY OTHER BID, MIGHT BE UNREASONABLY HIGHER THAN IT SHOULD BE. HENCE, FORMAL ADVERTISING IS NEITHER FEASIBLE NOR PRACTICABLE, SINCE THE GOVERNMENT COULD NOT OBTAIN COST OR PRICING DATA NOR COULD IT NEGOTIATE WITH THE LOW BIDDER. IN THESE CIRCUMSTANCES, IT IS IMPOSSIBLE TO OBTAIN EFFECTIVE COMPETITION, PARTICULARLY THROUGH FORMAL ADVERTISING, AND NEGOTIATION IS NECESSARY TO PROVIDE THE GOVERNMENT WITH THE OPPORTUNITY TO DETERMINE AND SECURE A FAIR AND REASONABLE PRICE. AT THE SAME TIME, THE PUBLICIZING OF THE PROPOSED PROCUREMENT WILL BRING FORWARD COMPETITION IN THE UNLIKELY EVENT THAT ANY SHOULD EXIST.

"4. THE PRICE OF THE PROPOSED PROCUREMENT IS NOT FIXED BY LAW OR REGULATION.

"DETERMINATION

"THE USE OF A NEGOTIATED PROCUREMENT IS JUSTIFIED BECAUSE IT IS IMPRACTICABLE TO OBTAIN COMPETITION BY FORMAL ADVERTISING."

ON APRIL 14, 1970, DERO SUBMITTED A PROPOSAL IN THE AMOUNT OF $722,642.92. SUBSEQUENTLY, ON MAY 18, 1970, WESTON SUBMITTED AN UNSOLICITED PROPOSAL FOR THE RADAR SETS TO BE PURCHASED UNDER THE RFP IN THE AMOUNT OF $570,000. WESTON STATED IN ITS PROPOSAL THAT IT "IS PREDICATED ON A FIRST ARTICLE NOT BEING REQUIRED BY WESTON SINCE OUR COMPANY (FORMERLY DAYSTROM) IS A PREVIOUS APPROVED SUPPLIER OF SPS-10 EQUIPMENT." THEREAFTER, ON MAY 20, 1970, THE CONTRACTING OFFICER REQUESTED A TECHNICAL EVALUATION OF WESTON'S PROPOSAL FROM THE NAVAL SHIP ENGINEERING CENTER (NSEC). NSEC REPORTED ON MAY 25, 1970, THAT (1) WESTON'S PROPOSAL WAS CONSIDERED TO BE TECHNICALLY ACCEPTABLE, AND (2) THAT THE REQUIREMENT FOR FIRST ARTICLE APPROVAL COULD BE WAIVED FOR THAT FIRM'S PRODUCT.

WITH RESPECT TO DERO'S PROPOSAL, NSSC STATED AS FOLLOWS:

"UPON RECEIPT OF DERO'S PROPOSAL, THIS COMMAND COMMENCED EVALUATION THEREOF AND REQUESTED A PRE-AWARD AUDIT, RECEIVED ON 23 JUNE 1970, IN PREPARATION FOR NEGOTIATION. DISCUSSIONS WERE HELD FROM 23 APRIL THROUGH 25 JUNE 1970 BETWEEN REPRESENTATIVES OF DERO AND OF THIS COMMAND. THESE DISCUSSIONS THIS COMMAND'S REPRESENTATIVES INDICATED THAT DERO'S PROPOSED PRICES WERE MUCH IN EXCESS OF THE GOVERNMENT ESTIMATE AND, IN FACT, WERE IN EXCESS OF WHAT THIS COMMAND COULD FUND. FURTHER, DERO WAS ADVISED THAT A SECOND SOURCE HAD COME FORWARD AND THE GOVERNMENT WAS CONSIDERING CANCELING THE RFP AND RESOLICITING BY FORMAL ADVERTISING. ***

ON JUNE 26, 1970, DERO SUBMITTED A REVISED PROPOSAL IN THE AMOUNT OF $544,800. THE NSSC REPORT SUMMARIZES THE EVENTS TRANSPIRING SUBSEQUENT TO THE DETERMINATION THAT ANOTHER SOURCE (WESTON) COULD BE CONSIDERED FOR AWARD AS FOLLOWS:

"IN THIS SITUATION, THIS COMMAND DETERMINED THAT WESTON, AS WELL AS DERO, SHOULD BE CONSIDERED FOR AWARD. FOLLOWING CONSIDERATION OF VARIOUS METHODS FOR CONSIDERING BOTH DERO'S AND WESTON'S PROPOSALS, INCLUDING RE- OPENING THE RFP FOR SUBMISSION OF PROPOSALS, THIS COMMAND DETERMINED THAT AS THERE WERE NO TECHNICAL AREAS TO BE NEGOTIATED AND AS PRICE COMPETITION NOW EXISTED, THE REQUIRED METHOD WAS TO CANCEL THE RFP AND RESOLICIT BY FORMAL ADVERTISING. ACCORDINGLY, THE RFP WAS CANCELLED BY LETTER DATED 23 JULY 1970 *** AND THE PROCUREMENT RESOLICITED BY (INVITATION FOR BIDS (IFB) NO. N00024-71-B-3015) *** THE IFB WAS NOT SYNOPSIZED IN THE COMMERCE BUSINESS DAILY, IN ACCORDANCE WITH ASPR 1-1003.1(C)(IV), BECAUSE OF THE URGENCY OF THE PROCUREMENT."

SECTION "D" OF THE IFB, ENTITLED "EVALUATION AND AWARD FACTORS," PROVIDES FOR WAIVER OF FIRST ARTICLE TESTING APPROVAL REQUIREMENTS FOR PREVIOUS SUPPLIERS AS FOLLOWS:

"(A) THE PREVIOUS SUPPLIERS LISTED BELOW HAVE (HAS) SUPPLIED ONE (1) OR MORE AN/SPS-10 RADAR SET FIRST ARTICLE OR PRODUCTION EQUIPMENTS, WHICH IN THE CASE OF A FIRST ARTICLE HAS BEEN APPROVED OR CONDITIONALLY APPROVED BY THE GOVERNMENT AND IN THE CASE OF PRODUCTION EQUIPMENT HAS BEEN ACCEPTED BY THE GOVERNMENT. THE LISTED PREVIOUS SUPPLIERS ARE (IS) THE ONLY PROSPECTIVE OFFERORS WHO ARE (IS) ELIGIBLE FOR WAIVER OF THE FIRST ARTICLE REQUIREMENTS OF THIS SOLICITATION.

"PREVIOUS SUPPLIERS

"DERO RESEARCH AND DEVELOPMENT CORP PARK AVENUE

HUNTINGTON, NEW YORK 11743

"WESTON INSTRUMENTS, INC.

WESTON COMPONENTS DIVISION ARCHIBALD, PENNSYLVANIA 18403

"THE GOVERNMENT WILL WAIVE THE FIRST ARTICLE REQUIREMENTS FOR OFFERORS WHO ARE (IS) LISTED ABOVE BUT WILL NOT WAIVE SAID REQUIREMENTS FOR ANY OTHER OFFER."

THE IFB WAS FORWARDED TO BOTH DERO AND WESTON AND, ALTHOUGH TWO OTHER PROSPECTIVE BIDDERS REQUESTED AND APPARENTLY RECEIVED COPIES OF THE IFB, ONLY DERO AND WESTON SUBMITTED BIDS AS FOLLOWS:

DERO $546,550

WESTON 538,800

YOUR LETTERS SET FORTH FOUR PRINCIPAL BASES OF PROTEST:

"(1) THE PROCURING AGENCY ACTED IN AN ARBITRARY AND CAPRICIOUS MANNER WHEN IT, WITHOUT ADEQUATE EXPLANATION, ABRUPTLY DISCONTINUED FURTHER NEGOTIATIONS WITH DERO ON RFP N00024-70-R-3385(S) DESPITE THE FACT DERO WAS THE GOVERNMENT'S SOLE SOURCE DESIGNATED SUPPLIER FOR THE RFP. THIS RFP CALLED FOR THE SAME EQUIPMENT AND QUANTITY AS IS SET FORTH IN THE SUBJECT IFB.

"(2) THE PROCURING AGENCY ACTED IMPROPERLY WHEN IT DECIDED TO CANCEL THE AFORESAID RFP AND OBTAIN THE NEEDED SUPPLIES BY ADVERTISED PROCUREMENT PROCEDURES RATHER THAN BY COMPETITIVE NEGOTIATION.

"(3) THE PROCURING AGENCY VIOLATED THE INTENT OF ASPR 1-1903 (A) (I) (B) WHEN BY THE TERMS OF THE SUBJECT IFB IT PERMITTED A WAIVER OF FIRST ARTICLE REQUIREMENTS TO THE WESTON INSTRUMENTS INC., WESTON COMPONENTS DIVISION, HEREINAFTER WESTON.

"(4) *** THE FACT THAT THE NAVY DID NOT SYNOPSIZE THE IFB IN THE COMMERCE BUSINESS DAILY MAKES IT CLEAR THAT THE NAVY DELIBERATELY VIOLATED ASPR 2- 202.1."

WITH RESPECT TO YOUR LAST CONTENTION, ASPR 2-202.1 PROVIDES, AS A GENERAL RULE, THAT BIDDING TIME SHALL NOT BE LESS THAN 15 CALENDAR DAYS WHEN PROCURING STANDARD COMMERCIAL ARTICLES AND NOT LESS THAN 30 CALENDAR DAYS WHEN PROCURING OTHER THAN STANDARD COMMERCIAL ARTICLES. HOWEVER, AN EXCEPTION IS PROVIDED WHERE THE URGENCY FOR THE SUPPLIES DOES NOT PERMIT SUCH DELAY. YOU ARGUE THAT THE PROCUREMENT, INVOLVING OTHER THAN STANDARD COMMERCIAL ARTICLES, SHOULD HAVE DICTATED A BIDDING TIME OF NOT LESS THAN 30 DAYS, WHILE THE IFB REQUIRED BIDS TO BE SUBMITTED WITHIN 14 DAYS. ALSO, YOU CONTEND THAT THE NAVY CANNOT JUSTIFY THE SHORTENED BIDDING TIME ON THE BASIS OF URGENCY SINCE WESTON HAD BEEN APPROVED AS A QUALIFIED SUPPLIER ON MAY 22, 1970, AND THE IFB WAS NOT ISSUED UNTIL JULY 24, 1970, THUS PROVIDING AMPLE OPPORTUNITY TO AFFORD A LONGER BIDDING PERIOD. NSSC HAS REPEATEDLY ASSERTED ITS POSITION OF URGENCY AND HAS DETAILED ITS ACCOUNT OF THE OCCURRENCES LEADING TO THE CANCELLATION OF THE SOLE-SOURCE RFP AND THE ISSUANCE OF THE IFB CITING INTERNAL ADMINISTRATIVE PROCUREMENT PROCEDURES AND EXCESSIVE WORKLOAD AS THE CAUSE FOR THE DELAY. WE HAVE REVIEWED THE BASIS FOR NSSC'S UTILIZATION OF A SHORTENED BIDDING TIME AND WE CAN FIND NO BASIS UPON WHICH TO QUESTION ITS DETERMINATION OF URGENCY.

THE FAILURE TO SYNOPSIZE THE PROCUREMENT IN THE COMMERCE BUSINESS DAILY HAS BEEN JUSTIFIED BY NSSC BY REFERENCE TO ASPR 1-1003.1(C)(IV) WHICH PERMITS SUCH ACTION WHEN, DUE TO URGENCY, THE GOVERNMENT WOULD BE SERIOUSLY INJURED BY THE DELAY SET FOR RECEIPT OF BIDS TO BE MORE THAN 15 CALENDAR DAYS FROM THE DATE OF TRANSMITTAL OF THE SYNOPSIS OR THE DATE OF ISSUANCE OF THE SOLICITATION, WHICHEVER IS EARLIER. AS PREVIOUSLY STATED, WE CANNOT CONTROVERT THE ADMINISTRATIVE POSITION AS TO THE URGENCY OF THE PROCUREMENT. BUT, EVEN ASSUMING THAT THE NAVY HAD NOT ESTABLISHED " "URGENCY," THE FACT THAT DERO WAS NOT PRECLUDED FROM BIDDING BY THE FAILURE TO PUBLICIZE AND THAT ADEQUATE COMPETITION WAS GENERATED BY THE SUBMISSION OF TWO BIDS FROM FOUR PROSPECTIVE BIDDERS, NO LEGAL BASIS WOULD EXIST UPON WHICH TO UPSET AN AWARD UNDER THOSE CIRCUMSTANCES. SEE B- 168753, AUGUST 14, 1970.

WE TURN NEXT TO YOUR ALLEGATION THAT THE CANCELLATION OF THE SOLE SOURCE RFP DIRECTED TO DERO WAS IMPROPER. THE RECORD DISCLOSES THAT SUBSEQUENT TO THE RECEIPT OF YOUR SOLE-SOURCE PROPOSAL AND EVALUATION THEREOF, WESTON SUBMITTED AN UNSOLICITED PROPOSAL. SHORTLY THEREAFTER, WITHIN ONE WEEK, THE CONTRACTING OFFICIALS WERE ADVISED BY NSSC'S TECHNICAL EVALUATION BRANCH THAT THE UNSOLICITED PROPOSAL WAS TECHNICALLY ACCEPTABLE, ELIGIBLE FOR A WAIVER OF FIRST ARTICLE APPROVAL, AND REPRESENTED A SUBSTANTIAL COST SAVINGS TO THE GOVERNMENT. IN VIEW OF THIS INTRODUCTION OF A NEW SOURCE OF SUPPLY, NSSC NOT ONLY PROPERLY DECIDED TO CANCEL THE SOLE-SOURCE RFP BUT WE BELIEVE THAT THE CIRCUMSTANCES REQUIRED NSSC'S COURSE OF ACTION TO BROADEN COMPETITION. SEE 10 U.S.C. 2304(A).

YOU QUESTION NSSC'S CHOICE OF RESOLICITING THE REQUIREMENT BY MEANS OF FORMAL ADVERTISING RATHER THAN EMPLOYING COMPETITIVE NEGOTIATION. ABOVE INDICATED, NSSC CONSIDERED THE VARIOUS METHODS AT ITS DISPOSAL TO CONTINUE THE PROCUREMENT: I.E. (1) RESOLICITATION BY FORMAL ADVERTISING, (2) AMENDMENT OF THE D&F AND RFP, AND NEGOTIATION WITH DERO AND WESTON AND (3) NEGOTIATION WITH DERO ALONE. IN CHOOSING THE FORMAL ADVERTISING METHOD, NSSC SUPPORTED ITS DECISION BY REFERRING TO THE EXISTENCE OF COMPETITION AND THE ABSENCE OF TECHNICAL AREAS TO BE NEGOTIATED, WHICH, CUMULATIVELY, PRECLUDED A JUSTIFIABLE BASIS UPON WHICH TO CONTINUE TO NEGOTIATE. WHILE YOU CITED A PRIOR PROCUREMENT FOR SIMILAR EQUIPMENT INVOLVING THE SAME PARTIES WHICH WAS EFFECTED BY COMPETITIVE NEGOTIATION, WE DO NOT BELIEVE THAT SUCH FACT IS PERTINENT TO THIS PROCUREMENT. CONTRACTING OFFICIALS ARE AFFORDED WIDE LATITUDE IN DETERMINING WHETHER OR NOT TO CANCEL A PARTICULAR PROCUREMENT AND THE METHOD OF RESOLICITATION. SINCE WE DO NOT FIND THAT THE ADMINISTRATIVE DISCRETION IN THESE AREAS WAS ABUSED, WE WOULD NOT BE JUSTIFIED IN QUESTIONING THE ACTION TAKEN IN THAT REGARD. SEE B 168000, NOVEMBER 26, 1969; B-169492, JULY 17, 1970; B- 160385, MARCH 6, 1967; 39 COMP. GEN. 94 (1959). SEE ALSO ASPR 2-102.1(A) DIRECTING THAT PROCUREMENTS SHALL BE MADE BY FORMAL ADVERTISING WHENEVER SUCH METHOD IS FEASIBLE AND PRACTICABLE UNDER THE EXISTING CONDITIONS AND CIRCUMSTANCES EVEN THOUGH SUCH CONDITIONS AND CIRCUMSTANCES MIGHT OTHERWISE JUSTIFY NEGOTIATION.

YOU FURTHER CONTEND THAT THE NSSC NEGOTIATOR IMPROPERLY CONTINUED TO NEGOTIATE WITH DERO AS A SOLE SOURCE WITH FULL KNOWLEDGE THAT A SECOND SOURCE FOR THE REQUIRED ITEMS HAD BEEN DISCOVERED, AND "COMPOUNDED ITS (NSSC'S) IMPROPER ACTION CONCERNING THE RFP BY GULLING DERO INTO BIDDING ON AN IFB PROCUREMENT." ACCOUNTS OF THE CONVERSATIONS BETWEEN THE NEGOTIATOR AND DERO'S ASSISTANT GENERAL MANAGER CONFLICT IN MANY PERTINENT DETAILS. NSSC CHARACTERIZES THE NEGOTIATIONS AS CONSTANT REQUESTS BY DERO FOR NEGOTIATION AFTER HE HAD PREVIOUSLY INDICATED THAT DERO'S PRICE WAS EXCESSIVE. IN A STATEMENT SUBMITTED TO OUR OFFICE, THE NEGOTIATOR DETAILS THE CONVERSATIONS IN QUESTION: "1. ON NUMEROUS OCCASIONS PRIOR TO THE 22 JUNE 1970 MEETING BETWEEN MESSERS. LOECHER AND CYLVICK OF DERO AND SMITH AND SPUND OF NSSC, THIS NEGOTIATOR WAS CALLED BY CYLVICK AND ASKED IF THE NAVY WAS READY TO NEGOTIATE. EACH TIME HE WAS INFORMED THAT NEGOTIATIONS COULD NOT BE INITIATED UNTIL (1) AN AUDIT REPORT WAS RECEIVED AND (2) FUNDS WERE AVAILABLE TO COVER THE CONTRACTOR'S PROPOSAL.

"2. ON APPROXIMATELY 17 JUNE 1970, CYLVICK CALLED AND REQUESTED A MEETING WITH MESSERS. CYLVICK, LOECHER, SMITH AND SPUND TO DISCUSS THE PROCUREMENT. HE WAS TOLD THAT THE NAVY WAS STILL NOT IN A POSITION TO NEGOTIATE WITH DERO. NEVERTHELESS, CYLVICK REQUESTED THAT THE MEETING TAKE PLACE AND THE DATE OF 22 JUNE 1970 WAS AGREED UPON.

"3. IN THE DERO PROTEST LETTER OF 20 AUGUST 1970, DERO STATES THAT 'NOW THAT SPUND KNEW DERO WAS ABOUT TO SUBMIT ITS REVISED PRICE HE REQUESTED THAT IN ADDITION TO SENDING THE PRICE THROUGH USUAL CHANNELS, DERO ALSO SEND A COPY TO HIS HOME.' THIS STATEMENT IMPLIES THAT THIS NEGOTIATOR WAS SOLICITING A REVISED RESPONSE FROM THE CONTRACTOR. AT NO TIME DURING OR AFTER THE 22 JUNE 1970 MEETING DID I SOLICIT A REVISED PROPOSAL FROM DERO. EVEN THOUGH DERO WAS AWARE OF THE POTENTIAL CHANGE OF THE PROCUREMENT FROM A 'SOLE-SOURCE' TO A COMPETITIVE STATUS, THE SUBMITTAL OF A REVISED PROPOSAL AT THIS TIME WAS INITIATED SOLELY BY DERO. ADDITION, THERE WAS NO FIRM COMMITMENT THAT A REVISED PRICE WOULD BE SUBMITTED, ONLY A STATEMENT BY DERO THAT THEIR PRICE WOULD BE REVIEWED TO SEE IF IT COULD BE REDUCED. THIS NEGOTIATOR HAS ALWAYS ENCOURAGED THE USE OF HIS HOME ADDRESS FOR EXPEDITING CORRESPONDENCE FROM BOTH GOVERNMENTAL AND NON-GOVERNMENT CORRESPONDENTS, AND DERO HAS UTILIZED THIS EXPEDITIOUS METHOD SEVERAL TIMES IN THE PAST.

"4. DURING TELEPHONE CONVERSATIONS 29 AND 30 JUNE 1970 I INFORMED DERO OF THE NAVY'S DECISION TO MAKE THE PROCUREMENT COMPETITIVE. DERO WAS INFORMED THAT THEIR REVISED PRICE HAD BEEN RECEIVED AND THAT AS THE PROCUREMENT WOULD NOW BE COMPETITIVE THE REVISED PRICE WOULD NOT BE DIVULGED. *** "

WE NOTE FROM PAGE 5 OF YOUR AUGUST 20 LETTER THAT YOU DISCUSS THE JUNE 22 MEETING, AND STATE THAT:

"DERO WAS REMINDED THAT IF IT WERE UNABLE TO OFFER A MORE ATTRACTIVE PRICE, THE GOVERNMENT MIGHT BE FORCED TO FOREGO FURTHER NEGOTIATIONS, AND MIGHT HAVE TO OPEN THE BID TO FORMAL ADVERTISING."

SINCE THE APPROVAL TO CANCEL THE RFP WAS NOT OBTAINED UNTIL JUNE 30, 1970, DERO COULD NOT HAVE BEEN INFORMED BY THE NEGOTIATOR OF AN OFFICIAL CANCELLATION. HOWEVER, IT IS CLEAR THAT, AT THE VERY LEAST, 4 DAYS BEFORE DERO SUBMITTED ITS REVISED PROPOSAL, IT WAS AWARE OF THE FACT THAT ANOTHER SOURCE WAS INVOLVED, AND OF THE POSSIBILITY THAT THE RFP WOULD BE CANCELLED. WE DO NOT FIND THAT THE NEGOTIATION PROCEDURES SUBSEQUENT TO THE APPROVAL OF WESTON AS A SOURCE WERE UNFAIR TO DERO. THEREFORE, WE SEE NO PREJUDICE RESULTING TO DERO BY THE SUBMISSION OF ITS REVISED PRICE WHICH, ON THE RECORD, WAS NOT REVEALED TO WESTON OR TO OTHER THAN NSSC PERSONNEL WITH A "NEED TO KNOW."

LASTLY, YOU ARGUE THAT WESTON IS NOT ENTITLED TO A WAIVER OF FIRST ARTICLE TESTING APPROVAL. YOU SPECIFICALLY RELY ON ASPR 1 1902(A)(I)(B), ARGUING THAT WESTON HAS NOT PRODUCED THE RADAR SETS TO BE PURCHASED SINCE 1964, A FACT WHICH HAS BEEN CONFIRMED BY NSSC. ASPR 1-1902(A) STATES AS FOLLOWS:

"(A) A REQUIREMENT FOR FIRST ARTICLE APPROVAL IS DESIGNED TO ASSURE THAT THE CONTRACTOR CAN FURNISH A PRODUCT THAT IS SATISFACTORY FOR ITS INTENDED USE AND, THEREFORE, MINIMIZES RISKS FOR BOTH THE CONTRACTOR AND THE GOVERNMENT. IN DETERMINING WHETHER FIRST ARTICLE APPROVAL IS TO BE REQUIRED, CONSIDERATION SHALL BE GIVEN TO INCREASED COST AND TIME OF DELIVERY BY REASON OF THE TEST, THE RISK TO THE GOVERNMENT OF FOREGOING SUCH TESTS, AND THE AVAILABILITY TO THE GOVERNMENT OF OTHER LESS COSTLY METHODS OF ACHIEVING THE DESIRED QUALITY. FIRST ARTICLE APPROVAL TESTS ARE PARTICULARLY APPROPRIATE WHEN:

"(I) THE INTEREST OF THE GOVERNMENT REQUIRES ASSURANCE THAT A PRODUCT IS SATISFACTORY FOR ITS INTENDED USE WHEN THE PRODUCT--

"(A) HAS NOT BEEN PREVIOUSLY FURNISHED BY THE CONTRACTOR TO THE GOVERNMENT; OR

"(B) HAS BEEN PREVIOUSLY FURNISHED BY THE CONTRACTOR TO THE GOVERNMENT BUT THERE HAVE BEEN SUBSEQUENT CHANGES IN PROCESSES OR SPECIFICATIONS, OR PRODUCTION HAS BEEN DISCONTINUED FOR AN EXTENDED PERIOD OF TIME; OR

"(C)IS DESCRIBED BY A PERFORMANCE SPECIFICATION; OR

"(II) IT IS ESSENTIAL TO HAVE AN APPROVED FIRST ARTICLE TO SERVE AS A MANUFACTURING STANDARD."

THE NSSC BASIS FOR GRANTING A FIRST ARTICLE TESTING WAIVER TO WESTON IN THE FACE OF A SIX YEAR LACK OF PRODUCTION WAS SUMMARIZED BY THE TECHNICAL EVALUATION BRANCH AS FOLLOWS:

"1. WESTON INSTRUMENTS INCORPORATED IS A PREVIOUS SUPPLIER OF AN/SPS 10 RADAR SETS AND IS FULLY QUALIFIED TO PRODUCE AN/SPS-10 RADARS WITHOUT A 'FIRST ARTICLE' OR PREPRODUCTION MODEL AS STATED IN SECTION D OF 'EVALUATION AND AWARD FACTORS' OF REQUISITION/PURCHASE REQUEST NO. PR 6175 -6274-0-7410.

"2. THIS COMPANY UNDER THE OLD NAME OF DAYSTROM INCORPORATED AND LOCATED IN ARCHBALD, PENNSYLVANIA HAS PRODUCED A 'FIRST ARTICLE' OR PREPRODUCTION MODEL OF AN/SPS-10 RADAR FOLLOWED BY A PRODUCTION RUN OF 74 RADAR SETS (AN/SPS-10D) UNDER CONTRACT NOBSR-75672. THIS PRODUCTION WAS ACCOMPLISHED WITH ACCELERATION OF DELIVERY OF APPROXIMATELY 6 MONTHS AS REQUESTED BY BUREAU OF SHIPS. A SECOND PRODUCTION RUN UNDER NOBSR-81445 PRODUCED 22 AN/SPS-10D RADARS. THESE CONTRACTS EXTENDED FROM 1959 TO 1964.

"3. THE SAME BASIC SPECIFICATION APPLIES FOR BOTH AN/SPS-10D AND AN/SPS- 10F MODELS. IN FACT THE CAPEHART-CLAVIER-DERO 'COMPLEX' USED AN/SPS-10D AS A MODEL WHEN AN/SPS-10F WAS FIRST PRODUCED BY CAPEHART.

"4. WESTON HAS THE SAME KEY TECHNICAL STAFF AT THE ARCHBALD PLANT THAT DID THE NOBSR-76572 AND NOBSR-81445 PRODUCTION."

WE HAVE HELD THAT THE ADMINISTRATIVE DECISION WHETHER FIRST ARTICLES MAY BE WAIVED AS TO A PARTICULAR BIDDER IS A PROCUREMENT RESPONSIBILITY WHICH WE WILL NOT DISTURB UNLESS THE DETERMINATION IS SHOWN TO BE ARBITRARY, CAPRICIOUS OR WITHOUT SUBSTANTIAL BASIS IN FACT. B-162438, FEBRUARY 15, 1968; 46 COMP. GEN. 123, 127 (1966). AT THE OUTSET, WE NOTE THAT SECTION DA) OF THE IFB, IN CONSONANCE WITH ASPR 1-1903(A), PROVIDES FOR A WAIVER OF FIRST ARTICLE REQUIREMENTS FOR "PREVIOUS SUPPLIERS" OF THE AN/SPS-10 RADAR SET WHICH HAS BEEN "APPROVED OR CONDITIONALLY APPROVED BY THE GOVERNMENT" AS TO FIRST ARTICLES AND "ACCEPTED BY THE GOVERNMENT" IN THE CASE OF PRODUCTION EQUIPMENT. SIMILARLY, ASPR 1-1903(A) IN PERTINENT PART STATES AS FOLLOWS:

"(A) THE SOLICITATION FOR A FIXED-PRICE TYPE CONTRACT WHICH IS TO CONTAIN A REQUIREMENT FOR FIRST ARTICLE APPROVAL SHALL INFORM BIDDERS OR OFFERORS THAT WHERE SUPPLIES IDENTICAL OR SIMILAR TO THOSE CALLED FOR HAVE BEEN PREVIOUSLY FURNISHED BY THE BIDDER OR OFFEROR AND HAVE BEEN ACCEPTED BY THE GOVERNMENT, THE REQUIREMENT FOR FIRST ARTICLE APPROVAL MAY BE WAIVED BY THE GOVERNMENT. *** "

NSSC'S TECHNICAL PERSONNEL HAVE ADVISED THAT THE RADAR SET BEING PROCURED BY THE IFB IS SIMILAR TO THE RADAR SET PREVIOUSLY PRODUCED BY WESTON OR ITS PREDECESSOR, THEREBY PLACING WESTON'S WAIVER CLEARLY WITHIN THE TERMS OF THE IFB AND THE PROCUREMENT REGULATIONS. SEE B 167227, AUGUST 1, 1969.

WHILE NSSC DOES NOT REFUTE YOUR CONTENTION THAT WESTON HAS NOT PRODUCED THE RADAR SET FOR AN EXTENDED PERIOD OF TIME, IT HAS ASCERTAINED, FROM A TECHNICAL ENGINEERING STANDPOINT, THAT WAIVER OF FIRST ARTICLE PROPERLY MAY BE GRANTED TO WESTON UNDER THE GUIDELINES OF ASPR 1-1900. IN THIS REGARD, ASPR 1-1902(A) STATES THAT SUCH WAIVER REQUIREMENTS ARE "DESIGNED TO ASSURE THAT THE CONTRACTOR CAN FURNISH A PRODUCT THAT IS SATISFACTORY FOR ITS INTENDED USE." THE SECTION SETS FORTH INSTANCES WHERE FIRST ARTICLE APPROVAL TESTS ARE PARTICULARLY APPROPRIATE. ONE OF THESE INSTANCES IS WHEN THE INTEREST OF THE GOVERNMENT REQUIRES ASSURANCE THAT A PRODUCT IS SATISFACTORY FOR ITS INTENDED USE WHEN THE PRODUCT HAS BEEN PREVIOUSLY FURNISHED BY THE CONTRACTOR TO THE GOVERNMENT BUT PRODUCTION HAS BEEN DISCONTINUED FOR AN EXTENDED PERIOD OF TIME. COGNIZANT TECHNICAL PERSONNEL OF THE NAVY ARE CONVINCED THAT THE RADAR SETS OFFERED BY WESTON WILL SATISFY THE GOVERNMENT'S INTENDED USE. WE DO NOT READ INTO THE REGULATIONS DIRECTIONS OF A MANDATORY NATURE REQUIRING A PROCURING ACTIVITY TO SUBMIT A PROPOSED CONTRACTOR TO FIRST ARTICLE TESTING MERELY BECAUSE ITS PRODUCTION HAS BEEN DISCONTINUED FOR AN EXTENDED PERIOD OF TIME, ESPECIALLY WHERE THAT PROPOSED CONTRACTOR HAS DEMONSTRATED TO THE SATISFACTION OF THE NAVY THAT ITS PRESENT CAPABILITIES JUSTIFY WAIVER OF FIRST ARTICLE TESTING. TO HOLD OTHERWISE WOULD DEPRIVE THE GOVERNMENT OF THE FLEXIBILITY INHERENT IN THE REGULATIONS. THEREFORE, WE CANNOT SAY, AS A MATTER OF LAW, THAT WESTON IS NOT ENTITLED TO A WAIVER OF FIRST ARTICLE APPROVAL TESTING IN THIS PROCUREMENT.

WE ALSO HAVE YOUR LETTER OF DECEMBER 18, 1970, WHEREIN YOU STATE THAT THE ARMY ELECTRONICS COMMAND HAS AN "'IN-HOUSE' RULE THAT WHERE A PREVIOUS MANUFACTURER HAS NOT SUPPLIED EQUIPMENT TO THE GOVERNMENT FOR A PERIOD OF TWO (2) YEARS WILL AUTOMATICALLY BE REQUIRED, IF BIDDING FOR THE SAME EQUIPMENT, TO FURNISH A FIRST ARTICLE." HOWEVER, THE PROPRIETY OF THE ADMINISTRATIVE DECISION TO WAIVE FIRST ARTICLE TESTING HERE MUST BE RESOLVED ON THE BASIS OF THE FACTS APPLICABLE TO THIS PROCUREMENT AND IS NOT AFFECTED BY AN "IN-HOUSE" POLICY PROMULGATED FOR REASONS WHICH MAY BE PECULIAR TO THE ARMY ELECTRONICS COMMAND. IN ANY EVENT, THE RECORD DISCLOSES THAT SUCH POLICY HAS NOT BEEN ADOPTED BY THE NAVAL SHIP ENGINEERING CENTER.

IN VIEW OF THE FOREGOING, YOUR PROTEST IS DENIED.