B-171025, FEB 9, 1971

B-171025: Feb 9, 1971

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THE GAO WILL NOT DISTURB THE AWARD AND CONSIDERS IT THE RESPONSIBILITY OF THE CONTRACTING AGENCY TO DETERMINE WHEN THE NEEDS OF THE GOVERNMENT REQUIRE A SOLE-SOURCE PROCUREMENT. INC.: REFERENCE IS MADE TO YOUR LETTER OF JANUARY 18. THE SUBJECT RFQ WAS ISSUED ON JULY 30. THE RFQ WAS INITIATED PURSUANT TO A PURCHASE REQUEST DATED JUNE 2. WHILE TELEDYNE WAS THE ONLY SOURCE SOLICITED FOR THIS REQUIREMENT. YOU CONTEND THAT JET POWER IS OVERHAULING A SIMILAR ENGINE (141-B) TO THE J69 AND THAT YOUR FIRM COULD PERFORM SIMILAR SERVICES ON THE J69 IF GIVEN THE OPPORTUNITY. YOU STATE THAT JET POWER WAS LED TO BELIEVE THAT ITS UNSOLICITED PROPOSAL WAS UNDER CONSIDERATION. THIS BELIEF WAS BASED ON A LETTER DATED OCTOBER 21.

B-171025, FEB 9, 1971

BID PROTEST - SOLE-SOURCE AWARD DENIAL OF PROTEST BY JET POWER, INC. AGAINST THE AWARD OF A CONTRACT FOR REPAIR AND OVERHAUL OF ENGINES, ISSUED BY AIR MATERIEL AREA, KELLY AIR FORCE BASE, TEXAS, TO TELEDYNE INDUSTRIES, INC., THE PRIME ENGINE MANUFACTURER, ON A SOLE-SOURCE BASIS. SINCE THE AIR FORCE CONSIDERS THE SITUATION TO BE SO CRITICAL THAT IT MUST REQUIRE THE IMMEDIATE WORK TO BE ACCOMPLISHED BY THE ENGINE MANUFACTURER TO INSURE THE RELIABILITY OF THE ENGINES, THE GAO WILL NOT DISTURB THE AWARD AND CONSIDERS IT THE RESPONSIBILITY OF THE CONTRACTING AGENCY TO DETERMINE WHEN THE NEEDS OF THE GOVERNMENT REQUIRE A SOLE-SOURCE PROCUREMENT.

TO JET POWER, INC.:

REFERENCE IS MADE TO YOUR LETTER OF JANUARY 18, 1971, AND PRIOR CORRESPONDENCE, PROTESTING THE AWARD OF A CONTRACT ON A SOLE-SOURCE BASIS TO TELEDYNE CAE DIVISION OF TELEDYNE INDUSTRIES, INC., UNDER REQUEST FOR QUOTATIONS (RFQ) NO. F41608-71-Q-7025, ISSUED BY HEADQUARTERS SAN ANTONIO AIR MATERIEL AREA (AFLC), KELLY AIR FORCE BASE, TEXAS.

THE SUBJECT RFQ WAS ISSUED ON JULY 30, 1970, SOLICITING QUOTATIONS FOR THE GOVERNMENT'S ESTIMATED REQUIREMENTS FOR REPAIR AND OVERHAUL OF THE J69 -T25/T29/T41A ENGINES AND RELATED COMPONENT PARTS FOR THE PERIOD FEBRUARY 25, 1971, THROUGH FEBRUARY 24, 1972. THE RFQ WAS INITIATED PURSUANT TO A PURCHASE REQUEST DATED JUNE 2, 1970, REQUESTING THAT THE CONTRACT BE AWARDED ON A SOLE-SOURCE BASIS TO TELEDYNE, THE PRIME ENGINE MANUFACTURER. WHILE TELEDYNE WAS THE ONLY SOURCE SOLICITED FOR THIS REQUIREMENT, JET POWER SUBMITTED AN UNSOLICITED PROPOSAL BY TELEGRAM ON SEPTEMBER 22, 1970.

BY LETTER DATED NOVEMBER 13, 1970, THE PROCURING ACTIVITY FURNISHED JET POWER WITH A COPY OF RFQ -7025 AND ALSO OUTLINED THE REASONS FOR LIMITING THIS PROCUREMENT TO TELEDYNE.

YOUR FIRM PROTESTED AGAINST THE NEGOTIATION OF THIS PROCUREMENT WITH TELEDYNE TO THE EXCLUSION OF JET POWER. IN THIS REGARD, YOU CONTEND THAT JET POWER IS OVERHAULING A SIMILAR ENGINE (141-B) TO THE J69 AND THAT YOUR FIRM COULD PERFORM SIMILAR SERVICES ON THE J69 IF GIVEN THE OPPORTUNITY.

IN YOUR LETTER OF DECEMBER 17, YOU STATE THAT JET POWER WAS LED TO BELIEVE THAT ITS UNSOLICITED PROPOSAL WAS UNDER CONSIDERATION. APPARENTLY, THIS BELIEF WAS BASED ON A LETTER DATED OCTOBER 21, 1970, FROM THE PROCURING ACTIVITY ACKNOWLEDGING RECEIPT OF YOUR UNSOLICITED PROPOSAL. WHILE THIS LETTER DID STATE THAT "EVALUATION OF SUBJECT PROPOSAL HAS BEEN INITIATED," IT IS REPORTED THAT THE PURPOSE OF SUCH LETTER WAS TO TRANSMIT TO YOU A COPY OF AFLC FORM 908, WHICH IS A POLICY AGREEMENT FOR EVALUATION, BUT NOT NEGOTIATION, OF UNSOLICITED SUBMISSIONS.

THE RECORD SUBMITTED HERE BY THE DEPARTMENT OF THE AIR FORCE SHOWS THAT THIS PROCUREMENT IS BEING NEGOTIATED PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304(A)(10) WHICH, AS IMPLEMENTED BY PARAGRAPH 3-210 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), PROVIDES THAT PURCHASES AND CONTRACTS MAY BE NEGOTIATED IF "FOR PROPERTY OR SERVICES FOR WHICH IT IS IMPRACTICABLE TO OBTAIN COMPETITION." AS ILLUSTRATIVE OF CIRCUMSTANCES PERMITTING NEGOTIATION PURSUANT TO THIS AUTHORITY, ASPR 3 210.2(I) AND (IX) CITE AS EXAMPLES THE SITUATIONS, RESPECTIVELY, WHEN THE SUPPLIES OR SERVICE CAN BE OBTAINED FROM ONLY ONE PERSON OR FIRM (SOLE SOURCE OF SUPPLY), AND WHEN THE PROCUREMENT INVOLVES CONSTRUCTION, MAINTENANCE, REPAIRS, ALTERATIONS OR INSPECTION, IN CONNECTION WITH ANY ONE OF WHICH THE EXACT NATURE OR AMOUNT OF THE WORK TO BE DONE IS NOT KNOWN.

WHILE THE CONTRACTING OFFICER INITIALLY ISSUED A DETERMINATION AND FINDINGS (D&F) UNDER ASPR 3-210.2(IX) AUTHORIZING NEGOTIATION UNDER 10 U.S.C. 2304(A)(10), HE SUBSEQUENTLY REISSUED THE D&F IN CONFORMANCE WITH ASPR 3-210.2(I) JUSTIFYING NEGOTIATION WITH TELEDYNE AS FOLLOWS:

"I HEREBY FIND THAT THE USE OF FORMAL ADVERTISING WOULD BE IMPRACTICABLE FOR THE FOLLOWING REASONS:

"(A) TO ASSURE ADEQUATE TIME TO COMPLETELY RECYCLE THE TOTAL ATC J69 T25 ENGINE INVENTORY AT LEAST ONCE THROUGH THE PRIME ENGINE MANUFACTURER FOR OVERHAUL. THE ATC INVENTORY CONSISTS OF 1,438 ENGINES, SOME OF WHICH HAVE NOT BEEN OVERHAULED SINCE THEIR CONVERSION FROM THE J69-T9 SERIES TO THE J69-T25 SERIES DURING A CONVERSION PROGRAM COMPLETED IN JUL 1961. UNTIL THE OVERHAUL PROGRAM WAS INSTIGATED, APPROXIMATELY FIVE YEARS AGO TO PROVIDE IMPROVED ENGINE RELIABILITY, THESE J69-T25 ENGINES WERE MAINTAINED AT BASE LEVEL BY THE JET ENGINE BASE MAINTENANCE (JEBM) CONCEPT. THE ENTIRE ATC ENGINE INVENTORY WILL BE COMPLETELY RECYCLED DURING THE LIFE OF THE PROPOSED CONTRACT COVERED BY THIS ACTION.

"(B) TO ASSURE ESSENTIAL MISSION PERFORMANCE OF THE J69-T29 AND J69 T41A ENGINES WHICH ARE USED IN DRONE MISSILES TO SUPPORT CLASSIFIED PROJECT 146. THE PROPULSION SYSTEM IS SO CRITICAL FOR MISSION PERFORMANCE THAT TELEDYNE CAE'S AND THEIR VENDOR'S ENGINEERING STAFF ARE STILL REQUIRED TO PROVIDE TECHNICAL GUIDANCE DURING THE OVERHAUL OF THESE ENGINES. THE DESIGN OF THE J69-T41A ENGINE HAS NOT PROVEN TO BE STABLE ENOUGH TO REMOVE FROM THE PRIME MANUFACTURER.

"DETERMINATION"

"THE PROPOSED CONTRACT IS FOR PROPERTY OR SERVICES FOR WHICH IT IS IMPRACTICABLE TO OBTAIN COMPETITION BY FORMAL ADVERTISING."

IN AMPLIFICATION OF THE FOREGOING D&F, THE AIR FORCE HAS SUMMARIZED THE PROCUREMENT BACKGROUND OF THE J69 SERIES AIRCRAFT ENGINE MAINTENANCE AND OVERHAUL PROGRAM AS FOLLOWS:

"(1) TELEDYNE CAE DIV OF TELEDYNE INDUSTRIES, INC, FORMERLY CONTINENTAL AVIATION AND ENGINEERING CORP, IS THE PRIME ENGINE MANUFACTURER OF THE J69 MODEL TURBOJET ENGINE. THE J69 MODEL ENGINE HAS SEVERAL SERIES: (A) THE J69-T25 ENGINE USED ON T-37 TRAINER AIRCRAFT WITH THE AIR TRAINING COMMAND (ATC) BEING THE PRINCIPAL USER, (B) THE J69-T29 ENGINE USED ON THE BQM-34A RYAN DRONE, AND (C) THE J69 T41A ENGINE ALSO USED AS A DRONE ENGINE WITH BOTH OF THE LATTER SERIES SUPPORTING CLASSIFIED 'PROJECT 146.' THE T25 CONFIGURATION OF THE ENGINE CONSTITUTES THE BULK OF OUR REQUIREMENT. SINCE IT IS USED TO POWER THE BASIC JET TRAINER AIRCRAFT FOR THE ATC UNDERGRADUATE PILOT TRAINING PROGRAM, MAXIMUM RELIABILITY OF THE OVERHAULED ENGINE IS ESSENTIAL SINCE INEXPERIENCED STUDENT PILOTS UTILIZE THE AIRCRAFT. ACCORDINGLY, SAFETY OF PERSONNEL AND EQUIPMENT IS OF PARTICULAR SIGNIFICANCE. FAILURE OF AN OVERHAUL CONTRACTOR TO PERFORM SATISFACTORILY IN EITHER THE AREAS OF QUALITY OR TIMELINESS WOULD SERIOUSLY IMPACT UNDERGRADUATE PILOT TRAINING.

"(2) THE J69-T9 SERIES ENGINES WERE CONVERTED TO THE J69-T25 CONFIGURATION DURING A CONVERSION PROGRAM STARTING IN 1959 AND COMPLETED IN 1961. AT THIS TIME DEPOT LEVEL MAINTENANCE WAS NOT ANTICIPATED. THE MAINTENANCE OF THESE ENGINES WAS LIMITED TO JET ENGINE BASE MAINTENANCE IN THE FIELD. IN 1966 A DECISION WAS MADE TO RETURN ALL OF THESE ENGINES TO THE PRIME MANUFACTURER FOR A ONE-TIME RECYCLING TO UPGRADE THE QUALITY AND RELIABILITY OF THE ENGINE. THIS DECISION WAS MADE BECAUSE OF UNFORESEEN MAINTENANCE DIFFICULTIES AND ENGINE FATIGUE. THESE ENGINES HAD BEEN MAINTAINED AT FIELD LEVEL FOR 5 TO 8 YEARS AND THE QUALITY HAD DETERIORATED TO A DEGREE WHERE THE RELIABILITY OF THE ENGINE TO PERFORM ITS ASSIGNED MISSION WAS QUESTIONABLE.

"(3) A FEW EXAMPLES OF SPECIFIC PARTS WHERE DIFFICULTIES AND FATIGUE WERE BEING EXPERIENCED ARE: (A) THE CONSTANT WELD REPAIR OF THE REAR FLANGE OF THE TURBINE HOUSING RESULTED IN THE INABILITY TO HOLD THE CENTER LINE OF THE ENGINE WHICH IN TURN DIRECTLY AFFECTED THE CRITICAL ALIGNMENT OF THE TURBINE SHAFT, (B) CRACKS APPEARING AT THE 7 AND 11 O'CLOCK POSITIONS IN THE COMPRESSOR HOUSINGS, AND (C) NUMEROUS CRACKS FOUND IN THE TURBINE NOZZLES, EXHAUST DIFFUSERS, AND THE OUTER COMBUSTOR SHELLS.

"(4) THE J69 IS A FRENCH-DESIGNED ENGINE PRODUCED UNDER LICENSE BY TELEDYNE CAE. IT HAS NO COMMERCIAL APPLICATION. WHILE THEY MAY BE DEVELOPED IN TIME, REQUIRED CONTRACTOR SKILLS, KNOW-HOW, SPECIALIZED TOOLING AND TEST EQUIPMENT ARE NOT IMMEDIATELY AVAILABLE ON THE OPEN MARKET. IF AWARD TO A NEW SOURCE IS MADE, THE PRIME CONTRACTOR WOULD DISCONTINUE HIS OVERHAUL LINE AND IF THE COMPETITIVE SOURCE SHOULD FAIL, BACK-UP CAPABILITY IS NOT READILY AVAILABLE.

"(5) IT IS ESSENTIAL ALL ENGINES BE RECYCLED THROUGH THE PRIME CONTRACTOR FOR FIRST OVERHAUL TO PROVIDE A HIGH QUALITY ENGINE WITH MAXIMUM RELIABILITY. THE CONDITION OF ENGINES INPUT FOR OVERHAUL WILL BE EXTREMELY VARIED. SOME MAY REQUIRE EXTENSIVE REPAIR AND/OR REPLACEMENT OF SUBSTANTIAL NUMBERS OF COMPONENTS AND PARTS WHILE OTHERS MAY REQUIRE ONLY NORMAL REPAIRS. IN ADDITION, TOLERANCES AT TIME OF OVERHAUL ARE MUCH MORE CRITICAL THAN THOSE INVOLVED IN JET ENGINE BASE MAINTENANCE. WEAR FACTORS VARY FROM ENGINE TO ENGINE. THE ENGINEERING DESIGN BACKGROUND AND EXPERTISE OF THE PRIME CONTRACTOR IS IMPERATIVE TO ACHIEVE A UNIFORMLY HIGH DEGREE OF QUALITY AND RELIABILITY AT FIRST OVERHAUL. THE REMAINING ENGINES PROPOSED TO BE RECYCLED URGENTLY REQUIRE OVERHAUL BY THE PRIME CONTRACTOR SINCE THEY HAVE ACCUMULATED HIGH OPERATING HOURS INCREASING PROBABILITY OF FAILURE. THIS PROPOSED CONTRACT WITH TELEDYNE CAE CONSTITUTES THE FINAL RECYCLING EFFORT FOR THESE ENGINES."

IN YOUR LETTER OF JANUARY 18, 1971, YOU DISAGREE WITH THE JUSTIFICATION ADVANCED BY THE AIR FORCE FOR SOLE-SOURCE NEGOTIATION WITH TELEDYNE. YOU STATE THAT JET POWER CAN OFFER THE GOVERNMENT A SUBSTANTIAL REDUCTION IN THE PRICE OF THE OVERHAUL; THAT JET POWER IS A SECOND SOURCE OF SUPPLY IN THE EVENT UNFORESEEN CIRCUMSTANCES CAUSE THE INTERRUPTION OF TELEDYNE PRODUCTION; AND THAT FRESH IDEAS EMANATING FROM JET POWER FOR THE ENGINE OVERHAUL PROGRAM MAY POSSIBLY IMPROVE THE RELIABILITY OF THE ENGINE. HOWEVER, AS INDICATED ABOVE, THE AIR FORCE CONSIDERS THE SITUATION TO BE SO CRITICAL THAT IT MUST REQUIRE THE IMMEDIATE WORK TO BE ACCOMPLISHED BY THE ENGINE MANUFACTURER TO INSURE THE RELIABILITY OF THE ENGINES. IN THAT REGARD, OUR OFFICE HAS HELD THAT IT IS THE RESPONSIBILITY OF THE CONTRACTING AGENCIES OF THE GOVERNMENT TO DETERMINE, AS HERE, WHEN THE NEEDS OF THE GOVERNMENT REQUIRE A SOLE-SOURCE PROCUREMENT UNDER 10 U.S.C. 2304(A)(10). B 170855, DECEMBER 21, 1970, AND B-156448, JULY 9, 1965. FURTHER, UNDER 10 U.S.C. 2310(B), THE FINDINGS ISSUED BY THE CONTRACTING OFFICER AS A BASIS FOR DETERMINING THAT THE PROCUREMENT SHOULD BE NEGOTIATED WITH TELEDYNE PURSUANT TO 10 U.S.C. 2304(A)(10) ARE FINAL.

YOU HAVE ALSO QUESTIONED THE SOLE-SOURCE PROCUREMENT BECAUSE YOU STATE THAT THE SMALL BUSINESS ADMINISTRATION (SBA) IS PREPARED TO ISSUE A CERTIFICATE OF COMPETENCY TO JET POWER. BY ENACTMENT OF SECTION 8(B)(7) OF THE SMALL BUSINESS ACT, 15 U.S.C. 637(B)(7), THE CONGRESS HAS LIMITED THE AUTHORITY OF ADMINISTRATIVE OFFICERS TO MAKE FINAL DETERMINATIONS OF RESPONSIBILITY OF SMALL BUSINESS BIDDERS BY PROVIDING THAT WHERE A SMALL BUSINESS CONCERN IS CERTIFIED BY SBA TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT, THE PROCURING OFFICERS OF THE GOVERNMENT MUST ACCEPT SUCH CERTIFICATION AS CONCLUSIVE. HOWEVER, THIS LIMITATION OF THE ADMINISTRATIVE AUTHORITY RELATES ONLY TO DETERMINATIONS OF "CAPACITY AND CREDIT." IN THIS CONNECTION, IT SHOULD BE NOTED THAT ASPR 1-705.4(C), IN RECOGNITION OF THE SBA AUTHORITY, PROVIDES THAT IF A BID OR PROPOSAL OF A SMALL BUSINESS CONCERN IS TO BE REJECTED "SOLELY" BECAUSE THE CONTRACTING OFFICER HAS DETERMINED THE CONCERN TO BE NONRESPONSIBLE AS TO CAPACITY OR CREDIT, THE MATTER SHALL BE REFERRED TO SBA. THE REGULATION OBVIOUSLY CONTEMPLATES REFERRAL TO SBA WHEN LACK OF CAPACITY OR CREDIT OF THE OFFEROR IS THE SOLE BASIS FOR REJECTION OF THE OFFER. THAT IS NOT THE SITUATION IN THE INSTANT CASE. HERE, THE CONTRACTING AGENCY HAS DETERMINED THAT THE PROCUREMENT REQUIRES THE SERVICES OF THE MANUFACTURER OF THE ENGINES TO THE EXCLUSION OF ALL OTHERS AND SHOULD BE RESTRICTED TO THAT FIRM IN ACCORDANCE WITH ASPR 3-210.2(I). ON THAT BASIS, THE PROCUREMENT HAS BEEN SET ASIDE FOR TELEDYNE ALONE. THEREFORE, THE CERTIFICATE OF COMPETENCY PROCEDURES ARE INAPPLICABLE TO THIS PROCUREMENT.

IN THE CIRCUMSTANCES, WE FIND NO LEGAL BASIS TO OBJECT TO THE SOLE SOURCE PROCUREMENT FROM TELEDYNE AND YOUR PROTEST IS ACCORDINGLY DENIED.

HOWEVER, IT IS OUR UNDERSTANDING THAT THE IMMEDIATE PROCUREMENT WILL COMPLETE THE RECYCLING OF THE J69 ENGINE INVENTORY AND THAT FUTURE AIR FORCE CONTRACTS FOR MAINTENANCE OF THE J69 ENGINE WILL BE MADE ON A COMPETITIVE BASIS. THE SOLICITATION FOR A COMPETITIVE PROCUREMENT UNDER THE AFLC 5-YEAR POLICY IS TARGETED FOR ISSUANCE IN FEBRUARY 1971, WITH AWARD OF A CONTRACT CONTEMPLATED IN AUGUST 1971.