B-171798(3), AUG 18, 1971

B-171798(3): Aug 18, 1971

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TRADE IN VALUE OF ADP EQUIPMENT IS A LESS DESIREABLE REPRESENTATION OF RESIDUAL VALUE BECAUSE IT WOULD BE REALIZED ONLY IF TURNED IN AT THE END OF THE CONTRACT. INC.: REFERENCE IS MADE TO YOUR LETTER OF APRIL 13. ENCLOSED ARE COPIES OF OUR DECISIONS OF TODAY TO STORAGE TECHNOLOGY CORPORATION (STC) AND MEMOREX CORPORATION. WERE RAISED INITIALLY BY STC AND ARE DISPOSED OF IN OUR DECISION TO THAT CORPORATION. YOUR PROTEST IS DENIED. THAT THE RESIDUAL VALUE EVALUATION CREDIT WAS IMPROPERLY EXPRESSED AS A PERCENTAGE OF PURCHASE PRICE. YOU ARE CORRECT IN MAINTAINING THAT BUREAU OF THE BUDGET CIRCULAR A-54 STATES THAT TRADE IN ALLOWANCES QUOTED BY MANUFACTURERS MAY BE USED AS A REPRESENTATION OF THE RESIDUAL VALUE.

B-171798(3), AUG 18, 1971

BID PROTEST - ADP EQUIPMENT - TRADE IN VALUE AS RESIDUAL VALUE DENIAL OF PROTEST BY CALIFORNIA COMPUTER PRODUCTS, INC. AGAINST THE AWARD OF A CONTRACT TO POTTER INSTRUMENT CO., INC. UNDER AN RFP ISSUED BY THE DEFENSE SUPPLY AGENCY. TRADE IN VALUE OF ADP EQUIPMENT IS A LESS DESIREABLE REPRESENTATION OF RESIDUAL VALUE BECAUSE IT WOULD BE REALIZED ONLY IF TURNED IN AT THE END OF THE CONTRACT. THIS WOULD PRECLUDE CONSIDERATION OF OTHER POSSIBLE USES TO WHICH THE EQUIPMENT COULD BE PUT.

TO CALIFORNIA COMPUTER PRODUCTS, INC.:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 13, 1971, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST THE AWARD OF A CONTRACT TO POTTER INSTRUMENT COMPANY, INC., UNDER REQUEST FOR PROPOSALS (RFP) NO. DSAH00 71- R-0010, ISSUED BY THE DEFENSE SUPPLY AGENCY (DSA), DIRECTORATE OF PROCUREMENT & PRODUCTION, CAMERON STATION, ALEXANDRIA, VIRGINIA.

ENCLOSED ARE COPIES OF OUR DECISIONS OF TODAY TO STORAGE TECHNOLOGY CORPORATION (STC) AND MEMOREX CORPORATION, DENYING THEIR RESPECTIVE PROTESTS AGAINST THE AWARD TO POTTER. YOUR OBJECTIONS TO THE COURSE OF THIS PROCUREMENT, IN THE MAIN, WERE RAISED INITIALLY BY STC AND ARE DISPOSED OF IN OUR DECISION TO THAT CORPORATION. WE SHALL DISCUSS YOUR PROTEST TO THE EXTENT THAT OUR OTHER DECISIONS OF TODAY DO NOT COVER YOUR SPECIFIC ALLEGATIONS OF IMPROPRIETY. IN ANY EVENT, FOR THE REASONS SET FORTH BELOW, YOUR PROTEST IS DENIED.

YOU ARGUE, AS DID STC AND MEMOREX, THAT THE RESIDUAL VALUE EVALUATION CREDIT WAS IMPROPERLY EXPRESSED AS A PERCENTAGE OF PURCHASE PRICE, RATHER THAN A FIXED AMOUNT. FURTHERMORE, YOU ARE CORRECT IN MAINTAINING THAT BUREAU OF THE BUDGET CIRCULAR A-54 STATES THAT TRADE IN ALLOWANCES QUOTED BY MANUFACTURERS MAY BE USED AS A REPRESENTATION OF THE RESIDUAL VALUE. YOU QUESTION WHETHER DSA IN DETERMINING THE RESIDUAL VALUE FACTOR EXAMINED ANY EXISTING TRADE-IN POLICIES OF THE VARIOUS OFFERS, CITING YOUR FIRM'S ESTABLISHED TRADE-IN POLICY EFFECTIVE SINCE NOVEMBER 1967. IN THIS REGARD, DSA CONSIDERS TRADE-IN VALUE TO BE THE LEAST DESIRABLE REPRESENTATION OF RESIDUAL VALUE, SINCE IT CAN ONLY BE REALIZED IF ADDITIONAL EQUIPMENT IS PURCHASED AT THE END OF THE CONTRACT.

IN OUR REPORT TO THE DEPARTMENT OF DEFENSE, B-163074, APRIL 21, 1971, ON "PROBLEMS IN DEVELOPING THE CORPS OF ENGINEERS' AUTOMATED MANAGEMENT INFORMATION SYSTEM," WE RECOGNIZED THAT ADP EQUIPMENT HAS A USEFUL LIFE THAT EXTENDS OVER A NUMBER OF YEARS. WE POINTED OUT THAT FREQUENTLY, AS IS THE CASE HERE, THIS USEFUL LIFE IS LONGER THAN THE PERIOD THAT THE EQUIPMENT IS NEEDED FOR THE PURPOSE FOR WHICH INITIALLY REQUIRED. NOTED THAT AT THE TIME OF ITS REPLACEMENT, THE EQUIPMENT COULD BE TRANSFERRED TO ANOTHER USE WITHIN THE GOVERNMENT, TRADED IN FOR NEW EQUIPMENT, OR SOLD. THUS, WE BELIEVE THAT THE EXPRESSION OF RESIDUAL VALUE AS TRADE-IN VALUE UNREALISTICALLY PRECLUDES CONSIDERATION OF OTHER USES TO WHICH THE EQUIPMENT COULD BE PUT.

YOU QUESTION THE LEGALITY OF DSA'S CITING ONE SPECIFIC MONTH, THE 18TH, TO EXERCISE THE PURCHASE OPTION IN THE AWARDED CONTRACT. IT IS THE CONSIDERED JUDGMENT OF DSA THAT THE TIME WHEN IT IS MOST ADVANTAGEOUS TO EXERCISE THE PURCHASE OPTION IS AT THE 18TH MONTH. IF EXERCISED AFTER THE 18TH MONTH, POTTER'S RENTAL CREDITS FOR THE 18 MONTHS WOULD NOT BE FORFEITED. IN THESE CIRCUMSTANCES, AND FOR THE REASONS SET OUT IN OUR DECISION TO STC, WE CONCUR WITH DSA'S JUDGMENT.