B-170584, FEB 9, 1971, 50 COMP GEN 540

B-170584: Feb 9, 1971

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CONTRACTS - MODIFICATION - CHANGE ORDERS - WITHIN SCOPE OF CONTRACT A VALUE ENGINEERING CHANGE SUBSTITUTING SOLID STATE TUNERS FOR ELECTRO- MECHANICAL TUNERS INTENDED AS REPLACEMENT COMPONENTS FOR ELECTRONIC COUNTERMEASURES SETS PROPERLY WAS EFFECTED BY THE ISSUANCE OF A CHANGE ORDER TO THE SOLE PRODUCER OF THE SETS SINCE COMPETITIVE PROCUREMENT WAS NOT REQUIRED AS THE CHANGE WAS WITHIN THE CHANGES CLAUSE CONTAINED IN THE LETTER CONTRACT FOR THE TUNERS AND DOES NOT CONSTITUTE A "CARDINAL CHANGE" WITHIN THE MEANING OF 10 U.S.C. 2304(G) AND PARAGRAPH 3-805 OF THE ARMED SERVICES PROCUREMENT REGULATION. THE CHANGE ALSO IS IN ACCORD WITH THE RULE IN KECO INDUSTRIES. THAT IN DETERMINING WHETHER A CHANGE IS WITHIN THE GENERAL SCOPE OF THE CONTRACT.

B-170584, FEB 9, 1971, 50 COMP GEN 540

CONTRACTS - MODIFICATION - CHANGE ORDERS - WITHIN SCOPE OF CONTRACT A VALUE ENGINEERING CHANGE SUBSTITUTING SOLID STATE TUNERS FOR ELECTRO- MECHANICAL TUNERS INTENDED AS REPLACEMENT COMPONENTS FOR ELECTRONIC COUNTERMEASURES SETS PROPERLY WAS EFFECTED BY THE ISSUANCE OF A CHANGE ORDER TO THE SOLE PRODUCER OF THE SETS SINCE COMPETITIVE PROCUREMENT WAS NOT REQUIRED AS THE CHANGE WAS WITHIN THE CHANGES CLAUSE CONTAINED IN THE LETTER CONTRACT FOR THE TUNERS AND DOES NOT CONSTITUTE A "CARDINAL CHANGE" WITHIN THE MEANING OF 10 U.S.C. 2304(G) AND PARAGRAPH 3-805 OF THE ARMED SERVICES PROCUREMENT REGULATION. THE CHANGE ALSO IS IN ACCORD WITH THE RULE IN KECO INDUSTRIES, INC. V UNITED STATES, 364 F. 2D 838, THAT IN DETERMINING WHETHER A CHANGE IS WITHIN THE GENERAL SCOPE OF THE CONTRACT, CONSIDERATION SHOULD BE GIVEN TO BOTH THE MAGNITUDE AND QUALITY OF A CHANGE AND WHETHER THE ORIGINAL PURPOSE OF THE CONTRACT HAD BEEN SUBSTANTIALLY ALTERED.

TO LORAL ELECTRONIC SYSTEMS, FEBRUARY 9, 1971:

WE REFER TO YOUR LETTER OF AUGUST 25, 1970, AND THE PRIOR CORRESPONDENCE, PROTESTING THE ISSUANCE OF A CHANGE ORDER TO REPLACE ELECTRO-MECHANICAL TUNERS WITH SOLID STATE TUNERS UNDER LETTER CONTRACT NO. N00019-70-C-0587 BETWEEN THE UNITED STATES NAVY, NAVAL AIR SYSTEMS COMMAND, AND THE BUNKER- RAMO CORPORATION.

THE SUBJECT LETTER CONTRACT DATED JUNE 27, 1970, REQUIRES REPLACEMENT COMPONENTS FOR THE ALQ-86 ELECTRONIC COUNTER MEASURES SET. WE ARE ADVISED BY THE DEPARTMENT OF THE NAVY THAT BUNKER-RAMO WAS THE ONLY KNOWN PRODUCER OF THE ALQ-86 AND THAT THE SUBJECT CONTRACT WAS ENTERED INTO WITH THAT FIRM IN ORDER TO ASSURE THAT THE REPLACEMENT COMPONENTS BEING PROCURED WILL PERFORM THE SAME FUNCTION IN THE EQUIPMENT AS THE COMPONENT IT WILL REPLACE.

THE CONTRACT CALLED FOR 42 ELECTRO-MECHANICAL TUNERS AND 40 AMPLIFIERS AS COMPONENTS FOR THE ALQ-86. IT IS REPORTED THAT ON JULY 10, 1970, BUNKER- RAMO SUBMITTED A VALUE ENGINEERING CHANGE PROPOSAL TO DELIVER 42 SOLID STATE TUNERS IN LIEU OF THE 42 ELECTRO-MECHANICAL TUNERS AND 40 AMPLIFIERS. THE NAVY STATES THAT IT WAS EXTREMELY INTERESTED IN THIS PROPOSED CHANGE TO SOLID TUNERS BECAUSE OF COST SAVINGS AS WELL AS TECHNICAL ADVANTAGES, INCLUDING IMPROVED PERFORMANCE AND GREATER RELIABILITY.

YOU STATE THAT ON JULY 24, 1970, YOUR FIRM, THE PRODUCER OF THE ELECTRO- MECHANICAL TUNERS FOR BUNKER-RAMO, SUBMITTED AN UNSOLICITED PROPOSAL TO THE NAVY FOR A SEMI-SOLID STATE TUNER. IN THIS CONNECTION, YOU ADVISE THAT PRIOR TO THE AWARD OF THE LETTER CONTRACT TO BUNKER RAMO, YOUR FIRM HAD A SERIES OF DISCUSSIONS WITH NAVY CONCERNING THE USE OF SOLID STATE TUNERS FOR THE ALQ-86; THAT AS A RESULT OF THESE DISCUSSIONS LORAL SUBMITTED A TECHNICAL PROPOSAL FOR SOLID STATE TUNERS ON JUNE 17, 1970, AND A PRICE PROPOSAL ON JULY 24, 1970, AND THAT THIS PROPOSAL WAS FOR A TWO-CHANNEL TUNER WITH A PROVISION FOR GROWTH TO A THIRD CHANNEL AT A LATER DATE. YOU REPORT THAT FOLLOWING RECEIPT OF YOUR JULY 24, 1970, PROPOSAL, THE NAVY ADVISED YOU THAT IT WAS PLANNING TO ISSUE A REQUEST FOR QUOTATIONS FOR A THREE-CHANNEL SOLID STATE TUNER, AND THAT WHILE YOUR FIRM WAS PREPARING TECHNICAL SPECIFICATIONS FOR THE THREE-CHANNEL TUNER THE NAVY DECIDED TO ALLOW BUNKER-RAMO TO DEVELOP A TWO-CHANNEL SOLID STATE TUNER UNDER A CHANGE ORDER.

THE NAVY REPORTS, HOWEVER, THAT YOUR JULY 24, 1970, PROPOSAL WAS CONSIDERED TECHNICALLY UNACCEPTABLE BECAUSE IT CONTINUED TO UTILIZE ELECTRO-MECHANICAL COMPONENTS IN THE SERVO-DRIVE SECTION. BY LETTER DATED AUGUST 13, 1970, YOUR FIRM WAS NOTIFIED OF THIS OBJECTION. ALSO BY LETTER OF AUGUST 13, 1970, YOUR FIRM ADVISED THE NAVY THAT LORAL WOULD SUBMIT A PROPOSAL WITHIN A FEW DAYS TO REPLACE THE ELECTRO MECHANICAL COMPONENTS WITH SOLID STATE COMPONENTS. BUT ON THE SAME DATE, AUGUST 13, 1970, THE CHANGE ORDER WAS ISSUED TO BUNKER-RAMO EFFECTING ITS VALUE ENGINEERING CHANGE PROPOSAL. NAVY'S DETERMINATION NOT TO CONDUCT A COMPETITIVE PROCUREMENT FOR SOLID STATE TUNERS UNDER THE CONTRACT WAS BASED ON THE FOLLOWING REPORTED REASONS:

(1) THE ALQ-86 IS A HIGHLY SPECIALIZED EQUIPMENT AND THE NAVY DESIRED THAT THE RESPONSIBILITY FOR OVERALL SYSTEM COMPATIBILITY REMAIN WITH THE MANUFACTURER OF THE EQUIPMENT.

(2) IN ORDER TO MEET SYSTEMS COMPATIBILITY REQUIREMENTS, ANOTHER CONTRACTOR WOULD NEED EITHER AN ALQ-86 OR A SPECIFICATION FOR THE TUNER. AN ALQ-86 WAS NOT AVAILABLE TO BE FURNISHED ANOTHER CONTRACTOR AND A SPECIFICATION FOR THE TUNERS WAS NOT IN EXISTENCE.

(3) IT WAS NECESSARY TO ISSUE THE CHANGE ORDER BY 13 AUGUST 1970 SO THAT BUNKER-RAMO WOULD NOT INCUR COSTS ON ELECTRO-MECHANICAL TUNERS AND WOULD BE ABLE TO DELIVER SOLID STATE TUNERS IN ACCORDANCE WITH THE CONTRACT DELIVERY SCHEDULE IN THE PLACE OF ELECTRO-MECHANICAL TUNERS. THE DELIVERY SCHEDULE IS TAILORED TO MEET URGENT FLEET REQUIREMENTS.

YOU QUESTION NAVY'S RIGHT TO UTILIZE THE "CHANGES" CLAUSE OF THE LETTER CONTRACT TO ACCOMPLISH THIS PROCUREMENT. IT IS YOUR CONTENTION THAT THESE SOLID STATE TUNERS CONSTITUTED A NEW PROCUREMENT AND THAT THE LORAL PROPOSAL SHOULD HAVE RECEIVED CONSIDERATION IN ACCORDANCE WITH THE PROVISIONS OF 10 U.S.C. 2304(G), AND ARMED SERVICES PROCUREMENT REGULATION (ASPR), 3-805, WHICH REQUIRE THAT DISCUSSIONS BE HELD WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED.

WE BELIEVE THE PROPRIETY OF THE CONTRACTING OFFICER'S ACTION DEPENDS ON WHETHER THE CHANGE COMES WITHIN THE CHANGES CLAUSE INCORPORATED IN THE LETTER CONTRACT OR WHETHER IT CONSTITUTES A "CARDINAL CHANGE" OUTSIDE THE SCOPE OF THE CLAUSE. IF THE CHANGE IS CARDINAL WE AGREE THAT THE PROVISIONS OF 10 U.S.C. 2304(G) AND ASPR 3-805 APPLY.

THE APPLICABLE CHANGES CLAUSE PERMITS CHANGES IN THE "DRAWINGS, DESIGNS OR SPECIFICATIONS"; HOWEVER, THE CHANGE MUST BE "WITHIN THE GENERAL SCOPE OF THE CONTRACT." WHETHER A CHANGE IS WITHIN THE GENERAL SCOPE OF THE CONTRACT IS NOT ALWAYS EASY TO DETERMINE. WE BELIEVE THERE ARE SUFFICIENT SIMILARITIES BETWEEN THIS SITUATION AND THAT CONSIDERED BY THE COURT OF CLAIMS IN KECO INDUSTRIES, INC. V UNITED STATES, 176 CT. CL. 983, 364 F. 2D 838 (1966), TO WARRANT FOLLOWING THE LOGIC OF THAT CASE IN THE PRESENT SITUATION. IN KECO A CHANGE FROM ELECTRIC REFRIGERATORS TO GASOLINE- DRIVEN REFRIGERATORS WAS HELD TO BE A CHANGE WITHIN THE SCOPE OF THE CHANGES CLAUSE. THE COURT THERE STATED THAT CONSIDERATION SHOULD BE GIVEN BOTH THE MAGNITUDE AND QUALITY OF THE CHANGE AND WHETHER THE ORIGINAL PURPOSE OF THE CONTRACT HAD BEEN SUBSTANTIALLY CHANGED.

IN LIGHT OF ALL OF THE CIRCUMSTANCES, WE CANNOT CONCLUDE THAT THE ORIGINAL PURPOSE OF THE CONTRACT WAS SO CHANGED HERE AS TO REQUIRE A CONCLUSION THAT THE CHANGE WAS BEYOND THE SCOPE OF THE CONTRACT.

ACCORDINGLY, YOUR PROTEST AGAINST THE ISSUANCE OF THE CHANGE ORDER IN THIS CASE IS DENIED.