B-170544(3), JAN 22, 1971

B-170544(3): Jan 22, 1971

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SECTION 3-409.2(B) ASPR STATES THAT A REQUIREMENTS CONTRACT IS APPROPRIATE WHERE THE ITEM IS COMMERCIAL OR MODIFIED COMMERCIAL. THE SOLICITATION PROVIDES FOR THE USE OF AN ALTERNATIVE GENERATOR ASSEMBLY AND GOVERNING SYSTEM OTHER THAN THAT PRESENTLY EMPLOYED BY THE CURRENT SUPPLIER AND ANY ADVANTAGE TO THE CURRENT PRODUCER IS THEREFORE MINIMAL. THERE IS NO LEGAL OBJECTION TO THE PROCUREMENT PROCEDURE AND THEREFORE THE PROTEST MUST BE DENIED. T. MURRAY TOOMEY: FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 14. DSA-400-70-R-8075 WAS STRUCTURED. THE PROCUREMENT WAS UNDERTAKEN TO SATISFY THE REQUIREMENTS OF A MILITARY INTERDEPARTMENTAL PURCHASE REQUEST (MIPR) FROM THE AIR FORCE REFLECTING THAT THE REQUIREMENTS TO BE COVERED ARE BASICALLY THOSE OF FISCAL YEAR 1971.

B-170544(3), JAN 22, 1971

BID PROTEST - REQUIREMENTS CONTRACT DENIAL OF PROTEST BY LIBBY WELDING COMPANY, INC., AGAINST THE STRUCTURING OF AN RFP ISSUED BY THE DEFENSE GENERAL SUPPLY CENTER FOR 10 DIFFERENT TYPES OF DIESEL-ELECTRIC GENERATOR SETS, IN CONNECTION WITH A REQUIREMENTS CONTRACT. PROTESTANT BASES ITS OBJECTION ON TWO GROUNDS; FIRST, THAT THE SUBJECT PROCUREMENT EMPLOYS A REQUIREMENTS CONTRACT AND SECOND, SUCH A CONTRACT PLACES THE CURRENT PRODUCER AT A DISTINCT ADVANTAGE OVER ANY OTHER SUPPLIER. SECTION 3-409.2(B) ASPR STATES THAT A REQUIREMENTS CONTRACT IS APPROPRIATE WHERE THE ITEM IS COMMERCIAL OR MODIFIED COMMERCIAL; THE ADMINISTRATIVE CONCLUSION THAT THE SUBJECT GENERATOR SETS MAY BE REGARDED AS MODIFIED COMMERCIAL ITEMS HAS ALREADY BEEN ACCEPTED. THE SOLICITATION PROVIDES FOR THE USE OF AN ALTERNATIVE GENERATOR ASSEMBLY AND GOVERNING SYSTEM OTHER THAN THAT PRESENTLY EMPLOYED BY THE CURRENT SUPPLIER AND ANY ADVANTAGE TO THE CURRENT PRODUCER IS THEREFORE MINIMAL. CONSEQUENTLY, THERE IS NO LEGAL OBJECTION TO THE PROCUREMENT PROCEDURE AND THEREFORE THE PROTEST MUST BE DENIED.

TO MR. T. MURRAY TOOMEY:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 14, 1970, PROTESTING ON BEHALF OF LIBBY WELDING COMPANY, INC., THE MANNER IN WHICH REQUEST FOR PROPOSAL NO. DSA-400-70-R-8075 WAS STRUCTURED.

THE INSTANT SOLICITATION, ISSUED BY THE DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA, ON JUNE 30, 1970, REQUESTED OFFERS FOR DEPARTMENT OF THE AIR FORCE REQUIREMENTS FOR TEN DIFFERENT TYPES OF DIESEL-ELECTRIC GENERATOR SETS, ALL BELONGING TO THE FAMILIES OF TYPES MB-15 THROUGH MB- 19, FURNISHING 150, 100, 60, 30 AND 15 KW OF POWER, RESPECTIVELY. THE PROCUREMENT WAS UNDERTAKEN TO SATISFY THE REQUIREMENTS OF A MILITARY INTERDEPARTMENTAL PURCHASE REQUEST (MIPR) FROM THE AIR FORCE REFLECTING THAT THE REQUIREMENTS TO BE COVERED ARE BASICALLY THOSE OF FISCAL YEAR 1971, WITH THE AIR FORCE FURNISHING ITS BEST ESTIMATE FOR THE QUANTITY OF EACH OF THE GENERATOR SETS IT ANTICIPATES WILL BE PURCHASED, THE TOTAL QUANTITY IN ASSORTED SIZES AMOUNTING TO 1176 UNITS.

YOUR BASIC CONTENTIONS ARE:

"THE SUBJECT PROCUREMENT IS ATTEMPTING TO EMPLOY A 'REQUIREMENTS CONTRACT' METHOD OF PROCUREMENT. REQUIREMENTS CONTRACT ARE TO BE USED ACCORDING TO THE ARMED SERVICES PROCUREMENT REGULATIONS WHEN THE ITEMS TO BE SUPPLIED IS COMMERCIAL OR A MODIFIED COMMERCIAL VERSION. *** IN THIS CASE, THE ITEMS ARE NOT COMMERCIAL NOR ARE THEY MODIFIED COMMERCIAL ITEMS AND NO MANUFACTURER MAINTAINS A LIMITED STOCK OF ANY OF THE TEN ITEMS BEING PROCURED HEREUNDER.

"THE ASPR FURTHER STATES THAT, 'CARE SHOULD BE USED IN WRITING AND ADMINISTERING THIS TYPE OF CONTRACT TO AVOID IMPOSITION OF AN IMPOSSIBLE BURDEN ON THE CONTRACTOR.' IN THE SUBJECT PROCUREMENT THERE ARE NO MINIMUM REQUIREMENTS SET FORTH. UNDER THE CIRCUMSTANCES, SUCH A PROCURING PROCEDURE *** DOES PLACE AN IMPOSITION ON THE ULTIMATE CONTRACTOR AND TENDS TO MAKE ITS BURDEN IMPOSSIBLE. *** ."

IN RESPONSE TO SIMILAR OBJECTIONS RAISED BY THE A. G. SCHOONMAKER COMPANY, IT HAS BEEN REPORTED BY THE CONTRACTING OFFICER IN PERTINENT PART:

"THE PROTESTANT INDICATES THAT IT APPEARS TO IT THAT NO REQUIREMENTS EXIST IF NO MINIMUM IS GUARANTEED. THE MIPR REQUESTS THAT A REQUIREMENTS CONTRACT BE ISSUED, THE SECRETARIAL D & F SPEAKS IN TERMS OF REQUIREMENTS RATHER THAN FIXED QUANTITIES AND THE PROJECT MANAGER SPECIFICALLY APPROVED THE ISSUANCE OF A NEW REQUIREMENTS TYPE CONTRACT IN THE EARLY PLANNING STAGES FOR THIS PROCUREMENT *** . THERE IS A CONTINUING NEED FOR THE GENERATOR SETS WITH 5,613 SETS HAVING BEEN PURCHASED UNDER THE THREE CONTRACTS MADE SINCE COMPTROLLER GENERAL'S DECISION B-153145 (APRIL 27, 1964). HOWEVER, THE AIR FORCE HAS INFORMALLY ADVISED THAT AT THIS TIME ONLY A SMALL NUMBER OF THE GENERATOR SETS INVOLVED IN THIS PROCUREMENT HAVE BEEN FUNDED. EFFORTS ARE NOW BEING MADE BY THE AIR FORCE TO DETERMINE IF A SUFFICIENT NUMBER OF GENERATOR SETS IN ALL SIZES CAN BE FUNDED TO MAKE AN INDEFINITE QUANTITY CONTRACT MORE DESIRABLE TO PROSPECTIVE OFFERORS THAN A REQUIREMENTS CONTRACT. IF SO, THIS CENTER WILL CONSIDER REISSUING THE RFP TO PROVIDE FOR OFFERS COVERING A SPECIFIED MINIMUM TO MAXIMUM QUANTITY.

"THE PROTEST ALSO QUESTIONS AGAIN THE FACT THAT A REQUIREMENT CONTRACT IS BEING SOUGHT *** AS STATED IN PARAGRAPH 8 OF THE ORIGINAL REPORT THE AIR FORCE WAS ATTEMPTING TO ASCERTAIN WHETHER A SUFFICIENT QUANTITY OF THE ANTICIPATED REQUIREMENTS COULD BE FUNDED AT THIS TIME TO MAKE AN INDEFINITE QUANTITY CONTRACT WHICH STATED MINIMUM AND MAXIMUM QUANTITIES MORE ATTRACTIVE TO POTENTIAL OFFERORS THAN A REQUIREMENTS CONTRACT. REPRESENTATIVE OF THE PROJECT MANAGER'S OFFICE ADVISED THE UNDERSIGNED IN A MEETING HELD AT THIS CENTER ON 9, 10 AND 11 SEPTEMBER 1970 THAT THE REQUIREMENTS WERE CONSIDERED FIRM AND THAT SEVERAL REVIEWS HAD NOT RESULTED IN THE BELIEF THAT ANY CHANGE SHOULD BE MADE IN THE QUANTITIES BEING USED AS THE ESTIMATED REQUIREMENT. HOWEVER, SINCE ONLY SEVENTY UNITS IN ASSORTED SIZES WERE CONSIDERED FUNDED AT THIS TIME, IT WAS BELIEVED THAT ANY ATTEMPT TO CHANGE THE PROCUREMENT TO SEEK AN INDEFINITE QUANTITY CONTRACT RATHER THAN A REQUIREMENTS CONTRACT WOULD SERVE NO USEFUL PURPOSE.

"THE REQUIREMENTS CONTRACT HAS NO SPECIFIC MAXIMUM ON THE QUANTITY THAT CAN BE ORDERED BUT IT DOES HAVE A MAXIMUM DELIVERY ORDER LIMITATION (AS SHOWN ON THE PAGE NUMBERED 43 IN AMENDMENT NO. 6) WHICH PROTECTS A CONTRACTOR FROM NEEDING TO KEEP AN UNLIMITED CAPACITY OPEN TO MEET THE GOVERNMENT'S REQUIREMENTS WHATEVER THEY MAY BE. THE CONTRACT WOULD NOT HAVE BEEN FOR AN INDEFINITE PERIOD, BUT THE PERIOD WOULD HAVE BEEN DIFFICULT TO ASCERTAIN WITH PRECISENESS PRIOR TO THE APPROVAL OF INITIAL PRODUCTION UNITS. TO OBVIATE THIS OBJECTION THE ORDERING PERIOD HAS BEEN CHANGED IN AMENDMENT NO. 6 TO END ON 28 FEBRUARY 1972. IT IS ANTICIPATED THAT THIS CALENDAR DATE WILL GIVE THE GOVERNMENT BASICALLY A YEAR TO ORDER PRODUCTION GENERATOR SETS BUT GIVE THE CONTRACTOR AN ADDITIONAL NUMBER OF DAYS (APPROXIMATELY 90 DAYS) TO DO A PORTION OF THE REQUIRED FIRST ARTICLE TESTING."

THE INSTANT PROCUREMENT CONTEMPLATES A REQUIREMENTS TYPE CONTRACT, AND THE COURTS AND OUR OFFICE HAVE CONSIDERED SUCH CONTRACTS VALID PROVIDED THE ESTIMATE OF THE PROBABLE AMOUNT OF GOODS OR SERVICES TO BE GENERATED WAS DETERMINED IN GOOD FAITH. SEE SHADER CONTRACTORS, INC. V UNITED STATES, 149 CT. CL. 539 (1960), 276 F. 2D 1; 47 COMP. GEN. 365 (1968); 37 ID. 688 (1958). SHADER ALSO STANDS FOR THE PROPOSITION THAT THERE NEED BE NO MINIMUM GUARANTEES, AND THAT AN AGREEMENT TO PROCURE ALL OF AN AGENCY'S REQUIREMENTS, WITHOUT MINIMUM GUARANTEES, CONSTITUTES ADEQUATE CONSIDERATION. THERE IS NO EVIDENCE HERE THAT THE ESTIMATE OF THE PROBABLE NEEDS (BEQ) OF THE GOVERNMENT WAS ARRIVED AT IN BAD FAITH.

SECTION 3-409.2(B) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), AS PRESENTLY STRUCTURED, STATES:

"(B) APPLICABILITY. A REQUIREMENTS CONTRACT MAY BE USED FOR PROCUREMENTS WHERE IT IS IMPOSSIBLE TO DETERMINE IN ADVANCE THE PRECISE QUANTITIES OF THE SUPPLIES OR SERVICES THAT WILL BE NEEDED BY DESIGNATED ACTIVITIES DURING A DEFINITE PERIOD OF TIME. ***

"GENERALLY, THE REQUIREMENTS CONTRACT IS APPROPRIATE FOR USE WHEN THE ITEM OR SERVICE *** IS COMMERCIAL OR MODIFIED COMMERCIAL IN TYPE AND WHEN A RECURRING NEED IS ANTICIPATED."

WE HAVE PREVIOUSLY ACCEPTED THE ADMINISTRATIVE CONCLUSION THAT GENERATOR SETS IN THE 15 TO 150 KW SIZES MAY BE REGARDED AS MODIFIED COMMERCIAL ITEMS WITHIN THE MEANING OF ASPR 3-409.2(B), AND THAT THE LANGUAGE OF THAT PROVISION IS PERMISSIVE IN NATURE AND SHOULD NOT BE CONSTRUED AS AN ABSOLUTE PROHIBITION AGAINST THE PURCHASE OF THESE ITEMS THROUGH A REQUIREMENTS TYPE CONTRACT. B-154594, SEPTEMBER 22, 1964, DECEMBER 18, 1964.

IN ANSWER TO YOUR OBSERVATIONS THAT BY EMPLOYING A REQUIREMENTS CONTRACT THE CURRENT PRODUCER IS PLACED AT A DISTINCT ADVANTAGE OVER ANY OTHER SUPPLIER, THE ADMINISTRATIVE REPORT TO OUR OFFICE ADVISES:

"THE *** POINT SET FORTH IN THE PROTEST IS THAT CERTAIN ELECTRONIC EQUIPMENT MUST BE BOUGHT FROM ONE MANUFACTURER, NAMELY THAT CONTRACTOR WHO IS PRESENTLY PRODUCING THE GENERATOR SETS FOR THE AIR FORCE. FERMONT DIVISION, DYNAMICS CORPORATION OF AMERICA IS THE CURRENT CONTRACTOR. APPEARS THAT THE PROTESTANT HAS NOT CONSIDERED THE PROVISION ON PAGE 3 OF AMENDMENT NO. 2 TO THE RFP. IT IS SPECIFICALLY STATED THEREIN THAT THE USE OF THE GENERAL ELECTRIC COMPANY GENERATOR ASSEMBLY AND THE WOODWARD HYDRAULIC GOVERNING SYSTEM IN LIEU OF THE KATO GENERATOR ASSEMBLY AND ELECTRONIC GOVERNING SYSTEM IS PERMISSABLE. THE FILES FURNISHED THIS CENTER REFLECT THAT THE GENERAL ELECTRIC COMPANY GENERATOR ASSEMBLY AND THE WOODWARD HYDRAULIC GOVERNING SYSTEM WERE IN THE ORIGINALLY STANDARDIZED SETS AND THE USE OF THE KATO GENERATOR AND FERMONT GOVERNOR AROSE THROUGH ACCEPTANCE OF A VALUE ENGINEERING PROPOSAL MADE BY FERMONT. IT WAS CONSIDERED THAT THIS REDESIGNATION OF TWO COMPONENTS DID NOT AFFECT INTERCHANGEABILITY OF PARTS AND CONSEQUENTLY PURSUANT TO ASPR 3-213.2(E) DID NOT REQUIRE REVISION OF THE STANDARDIZATION APPROVAL PREVIOUSLY GIVEN IN D & F 67 13-3."

THIS PROCUREMENT, SIMILAR TO MOST STANDARDIZATION PROCUREMENTS, HAS SOME RESTRICTIVE FEATURES, AND TO THAT EXTENT THE CURRENT CONTRACTOR MAY HAVE SOME ADVANTAGE OVER OTHER PROSPECTIVE PRODUCERS. HOWEVER, WE DO NOT FEEL THERE IS ANY REASON WHY ASSEMBLY OF THE ITEMS COULD NOT BE DONE BY ANY RESPONSIBLE CONTRACTOR USING THE RESTRICTED COMPONENTS, AND IF YOUR STATEMENT THAT "NO MANUFACTURER MAINTAINS A LIMITED STOCK OF ANY OF THE ITEMS BEING PROCURED HEREUNDER," IS CORRECT, WE FAIL TO SEE HOW FERMONT (THE PRESENT CONTRACTOR) HAS A DISTINCT ADVANTAGE OVER OTHER OFFERORS.

CONSEQUENTLY, WE CAN FIND NO LEGAL OBJECTION TO THE PROCUREMENT PROCEDURES HEREIN EMPLOYED, AND YOUR PROTEST MUST BE DENIED.

WE ARE, HOWEVER, SUGGESTING TO THE SECRETARY OF DEFENSE AND THE DIRECTOR OF THE DEFENSE SUPPLY AGENCY THAT CONSIDERATION BE GIVEN TO AMENDING THE APPLICABLE REGULATIONS SO AS TO REQUIRE, WHERE FUNDS ARE AVAILABLE AND THE AGENCY'S NEEDS HAVE BEEN ASCERTAINED WITH REASONABLE CERTAINTY, USE OF MORE DEFINITIVE TYPE OF CONTRACT WHICH WOULD OPERATE TO GIVE ASSURANCE TO THE CONTRACTOR THAT FIRM MINIMUM QUANTITIES, COMMENSURATE TO THE MAXIMUM EXTENT WITH ESTIMATED REQUIREMENTS, WILL BE ..END :