B-172496, JUL 6, 1971

B-172496: Jul 6, 1971

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BECAUSE ARL WAS AN INDEPENDENT CONTRACTOR. THE AWARD TO DRANETZ WAS PROPERLY APPROVED BY THE RESPONSIBLE CONTRACTING PERSONNEL. THE PROCUREMENT IS WITHIN THE SCOPE OF THE UNDERLYING RESEARCH PROJECT PURSUANT TO ASPR 3- 205.2(I) OR 10 U.S.C. 2304(A)(5). TO OCEAN DATA EQUIPMENT CORPORATION: REFERENCE IS MADE TO YOUR LETTER OF APRIL 1. AN HISTORICAL EXPLANATION IS NECESSARY TO A COMPLETE UNDERSTANDING OF THE INSTANT PROTEST. WAS NEGOTIATED PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304(A)(5). THE ONLY RESIDUE OF CONTROL THE DEPARTMENT OF THE NAVY RETAINED OVER THE SUBCONTRACTING PROCESS IN THE CONTRACT WAS THE PROVISION PRESCRIBED BY PARAGRAPH 7-402.8(A) AND (C) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR).

B-172496, JUL 6, 1971

BID PROTEST - SUBCONTRACTS - LIMITED GOVERNMENT CONTROL DECISION DENYING PROTEST AGAINST THE AWARD OF A SUBCONTRACT TO DRANETZ ENGINEERING LABORATORIES, INC., FOR 20 TRANSDUCER MEASUREMENT SYSTEMS UNDER AN RFB ISSUED BY THE UNIVERSITY OF TEXAS AT AUSTIN, APPLIED RESEARCH LABORATORIES (ARL), AS PRIME CONTRACTOR WITH THE DEPARTMENT OF THE NAVY. BECAUSE ARL WAS AN INDEPENDENT CONTRACTOR, NOT A PURCHASING AGENT OF THE U.S., THE AWARD TO DRANETZ WAS PROPERLY APPROVED BY THE RESPONSIBLE CONTRACTING PERSONNEL, CONSIDERING THE GOVERNMENT'S LIMITED INVOLVEMENT UNDER THE PROVISIONS OF ASPR 7-402.8(A) AND (C). FURTHER, THE PROCUREMENT IS WITHIN THE SCOPE OF THE UNDERLYING RESEARCH PROJECT PURSUANT TO ASPR 3- 205.2(I) OR 10 U.S.C. 2304(A)(5).

TO OCEAN DATA EQUIPMENT CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF APRIL 1, 1971, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AWARD OF A SUBCONTRACT TO ANOTHER FIRM UNDER REQUEST FOR BIDS (RFB) NO. 32646 DATED FEBRUARY 22, 1971, ISSUED BY THE UNIVERSITY OF TEXAS AT AUSTIN, APPLIED RESEARCH LABORATORIES (ARL), UNDER PRIME CONTRACT NO. N00024-70-C-1117, WITH THE DEPARTMENT OF THE NAVY, NAVAL SHIP SYSTEMS COMMAND.

AN HISTORICAL EXPLANATION IS NECESSARY TO A COMPLETE UNDERSTANDING OF THE INSTANT PROTEST. CONTRACT N00024-70-C-1117 DATED JANUARY 28, 1970, WAS NEGOTIATED PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304(A)(5), THE EXCEPTION TO THE PUBLIC ADVERTISING STATUTES FOR SERVICE BY A UNIVERSITY, COLLEGE OR OTHER EDUCATIONAL INSTITUTION. THE CONTRACT REQUIREMENTS FOR ARL INCLUDED THE PERFORMANCE OF VARIOUS RESEARCH AND DEVELOPMENT FUNCTIONS ON A COST-REIMBURSEMENT BASIS. THE TASKS SPECIFICALLY OUTLINED THEREIN INCLUDED:(1) "ESTABLISHING AND MAINTAINING EFFECTIVE, EFFICIENT STANDARDIZED TRANSDUCER TESTS AT ALL STAGES OF THE TRANSDUCER'S LIFE CYCLE"; (2) "EFFECT THE PRACTICABLE IN SITU MEASUREMENT OF SONAR SYSTEM PERFORMANCE (ESPECIALLY TRANSDUCER PERFORMANCE)"; (3) "ASCERTAIN THE VALUE OF THE CONCEPT (SONAR TRANSDUCER MEASUREMENT)"; AND (4) "EVALUATE THE (NEAR FIELD BEARING AND RANGE ACCURACY CHECK SYSTEM) NEFBRACS DEVELOPMENTAL MODEL FULLY ABOARD SHIP" AND "CONSTRUCT A NEFBRACS PROTOTYPE MODEL *** TO GENERATE CONSTRUCTION SPECIFICATIONS TO WHICH NAVSHIPS COULD PROCURE A PRODUCTION MODEL." THE ONLY RESIDUE OF CONTROL THE DEPARTMENT OF THE NAVY RETAINED OVER THE SUBCONTRACTING PROCESS IN THE CONTRACT WAS THE PROVISION PRESCRIBED BY PARAGRAPH 7-402.8(A) AND (C) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), "SUBCONTRACTS," REQUIRING PRIOR WRITTEN CONSENT OF THE CONTRACTING OFFICER FOR A SUBCONTRACT ABOVE $25,000 OR 5 PERCENT OF THE TOTAL ESTIMATED COST OF THE CONTRACT.

UNDER AUTHORITY OF THIS CONTRACT, ON APRIL 8, 1970, ARL ISSUED RFB NO. 29702 REQUESTING BIDS ON A "PORTABLE SONAR TRANSDUCER MEASUREMENT SYSTEM," WHICH WAS SENT TO FOUR FIRMS: DRANETZ ENGINEERING LABORATORIES, INC. (DRANETZ), GENERAL RADIO COMPANY, OCEAN DATA EQUIPMENT CORP. (ODEC), AND SCIENTIFIC-ATLANTA, INCORPORATED. THREE BIDS WERE RECEIVED, GENERAL RADIO COMPANY CHOOSING NOT TO COMPETE, AND ODEC WAS AWARDED THE SUBCONTRACT, PURCHASE ORDER NO. U-5661, AS LOW BIDDER, FOR THE PROTOTYPE TRANSDUCER MEASUREMENT SYSTEM, WITH AN OPTION FOR AN ADDITIONAL 20 SYSTEMS. THEREAFTER, ODEC SUCCESSFULLY COMPLETED AND TESTED THE SYSTEM, WHICH WAS ASSIGNED MILITARY NOMENCLATURE AN/WQM 5.

SUBSEQUENTLY, THE DECISION WAS MADE NOT TO EXERCISE THE OPTION FOR THE ADDITIONAL QUANTITIES AND ARL ISSUED RFB NO. 32646 FOR "TWENTY (20) EACH AN/WQM-5 PORTABLE SONAR TEST SETS." ONCE AGAIN FOUR CONCERNS WERE SOLICITED AND TWO BIDS WERE RECEIVED: DRANETZ $590,344.40 AND ODEC $727,240, WHICH PRICES WERE PUBLICLY ANNOUNCED AT THE BID OPENING PURSUANT TO THE TEXAS STATE PURCHASING ACT, VERNON'S TEXAS CIVIL STATUTES, VOL. 1B, ARTICLE 664-3. AFTER THE OPENING, DRANETZ WAS REQUESTED TO UNDERTAKE A TECHNICAL PRESENTATION TO ARL TECHNICAL PERSONNEL TO DETERMINE THE FEASIBILITY OF THE APPROACH BEING UTILIZED AND EQUIPMENT ACCEPTABILITY. IT IS REPORTED THAT ODEC WAS NOT ASKED TO PREPARE SUCH A PRESENTATION BECAUSE IT HAD BEEN ASKED TO AND WAS BIDDING THE EXACT PROTOTYPE UNIT WHICH HAD BEEN THOROUGHLY EVALUATED. WE HAVE BEEN ADVISED THAT DRANETZ'S PROPOSAL WAS CONSIDERED ADEQUATE AND AWARD, WHICH HAS BEEN UPHELD PENDING RESOLUTION OF THE PROTEST BY OUR OFFICE, HAS BEEN RECOMMENDED BY ARL AND DEPARTMENT OF THE NAVY TO DRANETZ FOR THE 20 SYSTEMS.

AS PREVIOUSLY STATED, THE SOLE VESTIGE OF CONTROL RESERVED TO THE DEPARTMENT OF THE NAVY UNDER THE PRIME CONTRACT WAS THE AUTHORITY TO CONSENT OR NOT TO ANY SUBCONTRACT ABOVE $25,000 OR 5 PERCENT OF THE TOTAL ESTIMATED COST OF THE CONTRACT. THE GOVERNMENT'S DEGREE OF INVOLVEMENT IN THE PROCEDURES EMPLOYED BY ARL IN ITS SUBCONTRACTING PROCESS WAS MINIMAL. IN FACT, ARL WAS AN INDEPENDENT CONTRACTOR, NOT A PURCHASING AGENT OF THE UNITED STATES. WITH REGARD TO OUR OFFICE'S SCOPE OF REVIEW CONCERNING THE PROCUREMENT POLICY OF PRIME CONTRACTORS OF THE UNITED STATES IN AWARDING SUBCONTRACTS, OUR VIEWS WERE STATED IN 49 COMP. GEN. 668 (1970) AS FOLLOWS:

"WITH RESPECT TO THE SCOPE OF OUR REVIEW, IT MUST BE ACKNOWLEDGED AT THE OUTSET, *** CHAMBERLAIN IS AN INDEPENDENT CONTRACTOR AND NOT A PURCHASING AGENT OF THE UNITED STATES. IN VIEW OF THIS STATUS, WE HAVE RECOGNIZED THAT THE CONTRACTING PRACTICES AND PROCEDURES EMPLOYED BY PRIME CONTRACTORS OF THE UNITED STATES IN THE AWARD OF SUBCONTRACTS ARE GENERALLY NOT SUBJECT TO THE STATUTORY AND REGULATORY REQUIREMENTS WHICH WOULD GOVERN DIRECT PROCUREMENT BY THE UNITED STATES. 41 COMP. GEN. 424 (1961); 47 ID. 223 (1967). CHAMBERLAIN'S STATUS MUST, OF COURSE, BE CONSIDERED IN LIGHT OF THE PROVISIONS OF THE CONTRACT. IN ACCORDANCE WITH PARAGRAPHS 23-201.2 AND 7-702.33 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), CHAMBERLAIN'S CONTRACT WITH APSA CONTAINS THE CLAUSE ENTITLED 'SUBCONTRACTS (1967 APR),' PRESCRIBED IN ASPR 7-203.8(A). THIS CLAUSE REQUIRES GOVERNMENT APPROVAL PRIOR TO CHAMBERLAIN'S AWARD OF A SUBCONTRACT OF THE MAGNITUDE INVOLVED IN THIS PROCUREMENT.

"WE HAVE EXPRESSED THE VIEW THAT APPROVAL SHOULD NOT BE GRANTED IF THE AWARD WOULD BE PREJUDICIAL TO THE INTERESTS OF THE UNITED STATES, PARTICULARLY SINCE THE COST OF THE PROCUREMENT WILL ULTIMATELY BE BORNE BY THE UNITED STATES. 37 COMP. GEN. 315 (1957); 36 ID. 311 (1956). SUCH DETERMINATION WILL NOT BE QUESTIONED BY OUR OFFICE IN THE ABSENCE OF ILLEGALITY OR A SHOWING THAT A PROPOSED AWARD IS DEFINITELY AGAINST THE INTERESTS OF THE UNITED STATES. 37 COMP. GEN. 315, SUPRA, AT PAGE 318.

"THE QUESTION OF WHETHER SUBCONTRACT APPROVAL WOULD BE PREJUDICIAL TO THE INTERESTS OF THE UNITED STATES IS ONE THAT MUST BE RESOLVED BY THE RESPONSIBLE CONTRACTING OFFICIALS OF THE GOVERNMENT AFTER A THOROUGH CONSIDERATION OF THE PARTICULAR FACTS AND CIRCUMSTANCES OF EACH PROCUREMENT. 46 COMP. GEN. 142 (1966). GENERALLY, WE BELIEVE THAT THE FRAME OF REFERENCE GUIDING SUCH DETERMINATION SHOULD BE THE FEDERAL NORM THAT IS EMBODIED IN THE PROCUREMENT STATUTES AND IMPLEMENTING REGULATIONS. CF. ASPR 23-202. NEVERTHELESS, IT IS EVIDENT FROM THE EXISTENCE OF PERMISSIBLE VARIATIONS IN PRIME CONTRACTING PRACTICES AND PROCEDURES THAT EVERY DETAIL OF THE FEDERAL NORM IS NOT FOR APPLICATION. (THIS IS NOT TO SAY, HOWEVER, THAT WHERE, AS A RESULT OF GOVERNMENT INTERVENTION, THE PRIME CONTRACTOR'S PROCUREMENT PRACTICES AND PROCEDURES MIRROR FEDERAL PROCUREMENT PROCEDURES, THE FEDERAL NORM SHOULD NOT BE APPLIED (CF. 36 COMP. GEN. 311, SUPRA), OR, FOR THAT MATTER, THAT THIS NORM SHOULD NOT BE ADOPTED AND APPLIED WHEREVER FEASIBLE AND PRACTICABLE UNDER THE CIRCUMSTANCES AND CONDITIONS OF THE PRIME CONTRACT.)"

IN VIEW OF THE LIMITED INVOLVEMENT OF THE GOVERNMENT AND THE USE OF IDENTICAL PROCEDURES IN BOTH SUBCONTRACTING EFFORTS, INDICATING A FAMILIARITY WITH THE PECULIAR METHODS OF ARL ON THE PART OF BOTH PARTIES HERE INVOLVED, WE CANNOT INQUIRE INTO PRACTICES EMPLOYED BY ARL AGAINST A DETAILED FEDERAL FRAME OF REFERENCE. WHILE THE GUIDELINE IS THAT OF THE FEDERAL NORM, AFTER A REVIEW OF THE RECORD, CONSIDERING PRICE AND THE OVERALL PROCUREMENT EFFORT, WE CANNOT FIND THAT THE RESPONSIBLE CONTRACTING PERSONNEL OF THE GOVERNMENT WILL NOT EXERCISE IN A REASONABLE MANNER THEIR RIGHT OF APPROVAL OF AN AWARD UNDER THE CONTRACT. SINCE WE CANNOT FIND A BASIS TO OBJECT TO THE PROPOSED AWARD, WE WILL NOT QUESTION THE SUBCONTRACT AWARD TO DRANETZ.

WITH REGARD TO YOUR FURTHER ALLEGATION THAT THE PROCUREMENT OF 20 AN/WQM- 5 TEST SETS IS BEYOND THE SCOPE OF THE UNDERLYING RESEARCH AND DEVELOPMENT NATURE OF THE PRIME CONTRACT AND THAT THE APPROPRIATIONS THEREFOR ARE NOT BEING EXPENDED IN CONSONANCE WITH THEIR PURPOSE, WE HAVE BEEN ADVISED BY THE NAVY BY LETTER DATED JUNE 25, 1971:

"ASPR 3-205.2(I) LISTS 'EDUCATIONAL OR VOCATIONAL TRAINING SERVICES TO BE RENDERED ... IN CONNECTION WITH THE TRAINING AND EDUCATION OF PERSONNEL', AND 'NECESSARY MATERIAL, SERVICES AND SUPPLIES IN CONNECTION THEREWITH' AS A PROPER USE OF THE AUTHORITY TO CONTRACT WITH EDUCATIONAL INSTITUTIONS AND ASPR 3-205.2(II) LISTS 'EXPERIMENTAL, DEVELOPMENTAL OR RESEARCH WORK (INCLUDING SERVICES, TESTS, AND REPORTS NECESSARY OR INCIDENTAL THERETO)' AS PROPER FOR PROCUREMENT UNDER THIS AUTHORITY. WE CONSIDER THAT THE PROCUREMENT IN QUESTION IS CLEARLY WITHIN THIS AUTHORITY.

"WE CONSIDER THAT THE DEVELOPMENT, PREPARATION OF SPECIFICATIONS, PROCUREMENT, TESTING, PROVIDING THE INSTRUMENTATION, AND TRAINING OF PERSONNEL IN THE USE OF THE PORTABLE SONAR TRANSDUCER MEASUREMENT SYSTEMS (AN/WQM-5 SONAR TEST SETS) IS A VITAL PART OF THIS SUPPORT AND TRAINING AT SHIPYARD AND TRANSDUCER REPAIR FACILITIES IN CONNECTION WITH SONAR MAINTENANCE. ARL HAS CONDUCTED EXTENSIVE WORK LEADING UP TO THE DEVELOPMENT OF THIS TEST SET. IT PROCURED THE PROTOTYPE EQUIPMENT UNDER THE EARLIER CONTRACT WITH ODEC, WHICH IT SHOULD BE NOTED, CONTAINED AN OPTION FOR 20 TEST SETS. IN THIS COMMAND'S JUDGMENT, ARL HAS SPECIAL TECHNICAL COMPETENCE TO MONITOR THE PRODUCTION OF THIS HIGHLY SPECIALIZED EQUIPMENT AND TO ASSURE THAT THE SPECIFICATIONS ARE MET. THE PROVISIONS OF THESE EQUIPMENTS AND THE TRAINING OF SHIPYARD AND TRANSDUCER REPAIR FACILITY PERSONNEL IN THEIR USE IS AN INTEGRAL PART OF ARL'S RESEARCH, DEVELOPMENT, AND TRAINING TASK UNDER THE CONTRACT.

"THESE EQUIPMENTS REPRESENT, IN PART, A 'STATE-OF-THE-ART' LEVEL OF DEVELOPMENT. WE BELIEVE THAT ARL'S TECHNICAL EXPERTISE IS REQUIRED TO MONITOR THE FABRICATION OF THESE EQUIPMENTS AND TO TRAIN THE FUTURE USERS OF THE SETS. UNDER ITS PRIME CONTRACT WITH ARL THIS COMMAND HAS PLACED RESPONSIBILITY UPON ARL FOR RESEARCH AND DEVELOPMENT AND TRAINING FOR THE OVERALL IMPROVEMENT AND STANDARDIZATION OF THE PROCEDURES AND FACILITIES USED FOR SONAR MAINTENANCE AND REPAIR AT SHIPYARDS AND TRANSDUCER REPAIR FACILITIES. THE EQUIPMENTS UNDER PROCUREMENT ARE ESSENTIAL TO THE FULFILLMENT OF THAT RESPONSIBILITY.

"THUS, UNDER THE SPECIAL CIRCUMSTANCES OF THE PRESENT CASE, WHERE THE ITEM BEING PROCURED IS TEST EQUIPMENT, ESSENTIAL FOR THE RESEARCH AND DEVELOPMENT AND TRAINING FUNCTION OF THE PRIME CONTRACTOR, THIS COMMAND CONSIDERS THAT THE INSTANT PROCUREMENT IS PROPER AND SHOULD BE CONCLUDED."

ASIDE FROM THE FOREGOING RECITATION BY THE NAVY, IT IS NOTED THAT UNDER 10 U.S.C. 2304(A)(5), THE CONTRACTING AGENCY HAS AUTHORITY TO NEGOTIATE "FOR ANY SERVICE BY A UNIVERSITY, COLLEGE OR OTHER EDUCATIONAL INSTITUTION." IN THIS CASE, THE NAVY HAS INDICATED THAT IT IS UTILIZING ARL'S SERVICES TO PROCURE THE EQUIPMENT BECAUSE OF ARL'S SPECIAL COMPETENCE. IN VIEW OF THE ABOVE AUTHORITY, THERE IS NO LEGAL OBJECTION OUR OFFICE COULD ASSERT AS TO THE VALIDITY OF THE PROCUREMENT.

IN THE CIRCUMSTANCES, THE PROTEST IS DENIED.