B-173146, JUN 15, 1972, 51 COMP GEN 803

B-173146, JUN 15, 1972, 51 COMP GEN 803

CONTRACTS - DATA, RIGHTS, ETC. - SUBCONTRACTORS - GOVERNMENT'S STATUS THE PROPRIETARY DATA, DRAWINGS OF A LASER SYSTEM, FURNISHED BY A SUBCONTRACTOR AS PART OF PHASE I OF THE "PAVE NAIL PROGRAM" FOR THE MODIFICATION OF THE OV-10 AIRCRAFT, WHICH BECAME THE BASIS FOR THE PROCUREMENT OF PHASE II, WAS NOT WRONGFULLY USED BY THE GOVERNMENT WHERE THE DRAWINGS WERE NOT IDENTIFIED AS A TRADE SECRET OR BORE NO PROPRIETARY LEGEND, HAD PREVIOUSLY BEEN FURNISHED WITHOUT LIMITATION, AND WERE DIFFICULT TO CATEGORIZE AS PROPRIETARY, AS THE GOVERNMENT IS ENTITLED TO DISCLOSE AND USE TECHNICAL DATA PURCHASED FOR VALUE FROM THE PRIME CONTRACTOR WITHOUT RESTRICTION OR KNOWLEDGE OF A THIRD PARTY'S PROPRIETARY RIGHTS. FURTHERMORE, THE COMPTROLLER GENERAL WILL NOT ADJUDICATE DISPUTES REGARDING VIOLATIONS OF PROPRIETARY RIGHTS WHICH ARISE UNDER ARRANGEMENTS TO WHICH THE GOVERNMENT IS NOT A DIRECT PARTY, AND UNTIL SUCH RIGHTS ARE ESTABLISHED IN COURTS, THERE IS NO JUSTIFICATION TO DISTURB ANY PROGRAM OR GRANT ANY RELIEF TO A PROTESTING PARTY. CONTRACTS - PROTESTS - SUBCONTRACTOR PROTESTS UNLESS A PRIME CONTRACTOR IS ACTING AS A PURCHASING AGENT, THE BID PROTEST PROCEDURES OF THE UNITED STATES GENERAL ACCOUNTING OFFICE (GAO) DO NOT PROVIDE FOR THE ADJUDICATION OF PROTESTS AGAINST SUBCONTRACT AWARDS MADE BY PRIME CONTRACTORS. FURTHERMORE, WHERE THE AWARD OF A SUBCONTRACT HAS BEEN MADE AND NEITHER FRAUD NOR BAD FAITH ON THE PART OF THE CONTRACTING OFFICER IN APPROVING THE AWARD IS ALLEGED, THE POSSIBILITY OF FINDING ADEQUATE JUSTIFICATION TO SUPPORT CANCELLATION OF THE SUBCONTRACT IS SO REMOTE THAT CONSIDERATION OF SUCH PROTESTS UNDER GAO'S BID PROTEST PROCEDURES WOULD BE UNWARRANTED. HOWEVER, IN THE AUDIT OF THE PRIME CONTRACT, ATTENTION WILL BE GIVEN TO ANY EVIDENCE INDICATING THE COST TO THE GOVERNMENT WAS UNDULY INCREASED BECAUSE OF IMPROPER PROCUREMENT ACTIONS BY THE PRIME CONTRACTOR. FURTHERMORE, WHEN A PRIME CONTRACTOR IS NOT ACTING AS A GOVERNMENT AGENT, THE BID PREPARATION EXPENSES OF THE SUBCONTRACTOR ARE NOT REIMBURSABLE.

TO MORGAN, LEWIS & BOCKIUS, JUNE 15, 1972:

THIS IS IN RESPONSE TO YOUR PROTEST ON BEHALF OF THE KORAD DEPARTMENT OF UNION CARBIDE CORPORATION RELATING TO A SUBCONTRACT FOR LASERS AWARDED ON MAY 28, 1971, TO THE MARTIN MARIETTA CORPORATION BY LTV ELECTROSYSTEMS, INC. (LTV-E), UNDER ITS PRIME (COST-REIMBURSABLE) CONTRACT WITH THE UNITED STATES AIR FORCE.

ESSENTIALLY YOUR PROTEST IS MADE ON TWO GROUNDS. FIRST, YOU CONTEND THAT THE SOLICITATION'S SPECIFICATIONS AND DRAWINGS ISSUED BY LTV-E INCORPORATED YOUR PROPRIETARY DATA. YOU ALSO HAVE QUESTIONED THE PROPRIETY OF THE AWARD TO MARTIN FOR SEVERAL REASONS PERTAINING, GENERALLY, TO THE COMPETITIVE NATURE OF THIS PROCUREMENT.

THE PROTEST RELATES TO A PROGRAM, REFERRED TO AS THE "PAVE NAIL PROGRAM," THE GENERAL PURPOSE OF WHICH IS TO MAKE A NUMBER OF MODIFICATIONS TO THE OV-10 AIRCRAFT. THE LASER, ONE SYSTEM WITHIN THE PROGRAM, HAS BEEN DESIGNATED AND IS REFERRED TO HEREAFTER, AS A PART OF THE "PAVE SPOT SYSTEM." DURING PHASE I OF THE PAVE NAIL PROGRAM, LTV-E WAS THE PRIME AIR FORCE CONTRACTOR RESPONSIBLE FOR SYSTEMS INTEGRATION AND VARO, INC., WAS A FIRST TIER SUBCONTRACTOR FOR MAJOR PAVE SPOT COMPONENTS, INCLUDING THE LASER. AS A PART OF PHASE I LTV-E WAS REQUIRED TO FURNISH THE AIR FORCE A PROPOSAL WHICH WAS TO, AND IN FACT DID, FOR MTHE BASIS FOR PROCUREMENT BY LTV-E IN PHASE II FOR THE VARIOUS SYSTEMS. VARO, IN TURN WAS REQUIRED UNDER PHASE I TO PROVIDE LTV-E THE NECESSARY DRAWINGS FOR THE PAVE SPOT SYSTEM TO BE PROCURED FOR AND INTEGRATED INTO PHASE II.

IT IS YOUR POSITION THAT THE SOLICITATION'S SPECIFICATIONS AND DRAWINGS, FIGURE 3.2-1, SHEETS 1 AND 2, INCORPORATED EXTENSIVE DESIGN DATA FROM YOUR PROPRIETARY INTERFACE DRAWING. YOU STATE THAT VARO TASKED KORAD TO REDEFINE THE INTERFACE ON THE ORAL ASSURANCE KORAD WOULD GET THE PHASE I LASER CONTRACT. IT IS ALLEGED THE WORK PRODUCT OF THIS EFFORT APPEARS IN KORAD INTERFACE DRAWING 910188-651, REVISION A, AND KORAD SPECIFICATION CONTROL DRAWING 270094, REVISION A, BOTH OF WHICH WERE FURNISHED VARO WITH LIMITED RIGHTS DURING AUGUST 1970. IT IS NOTED IN YOUR PROTEST THAT SINCE THE PHASE I LASER CONTRACT WAS AWARDED TO MARTIN ON OCTOBER 11, 1970, YOU WERE NOT COMPENSATED FOR YOUR EFFORT AND THAT BY LETTER OF OCTOBER 13, 1970, YOU REQUESTED RETURN OF THE DRAWINGS WHICH WAS EFFECTED BY VARO ON OCTOBER 16. YOU TAKE THE POSITION THAT VARO DRAWING 675-052, DATED OCTOBER 12, 1970, FROM WHICH THE SPECIFICATION FIGURE 3.2-1 WAS TAKEN, IS AN EXACT OVERLAY COPY OF KORAD DRAWING 910188-651, REVISION A, WITH THE RESTRICTIVE LEGEND REMOVED. ACCORDINGLY, IT IS ALLEGED THAT THE USE OF VARO DRAWING 675-052 IN THE PHASE II SOLICITATION BY LTV-E EXCEEDS THE LIMITED RIGHTS TO YOUR DRAWINGS WHICH YOU RELINQUISHED TO VARO AND YOU REQUEST, IRRESPECTIVE OF WHETHER THE SUBCONTRACT IS CANCELED, THAT WE FIND YOU ENTITLED TO THE FAIR VALUE OF THE PROPRIETARY DRAWINGS USED BY LTV-E FOR PHASE II.

THE AIR FORCE REPORT IN THIS MATTER PRESENTS SEVERAL REASONS FOR THE DEPARTMENT'S CONCLUSION THAT THERE WAS NO WRONGFUL USE OF YOUR DATA BY THE AIR FORCE. BRIEFLY STATED, THE REASONS GIVEN IN THE REPORT ARE THAT THE ALLEGED PROPRIETARY DRAWING DOES NOT DISCLOSE ANYTHING THAT CAN BE CLASSIFIED AS A TRADE SECRET AND THAT INTERFACE DRAWINGS, IN GENERAL, ARE DIFFICULT TO CATEGORIZE AS PROPRIETARY, PARTICULARY SINCE SUCH DRAWING COULD NOT HAVE BEEN PRODUCED EXCLUSIVELY BY KORAD WITHOUT PREVIOUS GUIDELINES REGARDING POD SHAPE, SIZE, ETC. THE CONTRACTING OFFICER ALSO CONTENDS THAT A DRAWING, MARKED VARO SK580-9065, WHICH WAS FURNISHED BY VARO WITHOUT LIMITATION PRIOR TO THE AUGUST 1970 DATE, IS SIMILAR TO THE ONE IN THE SOLICITATION WHICH YOU CLAIM IS PROPRIETARY. FURTHERMORE, THE AIR FORCE STATES THAT AT NO TIME DID THE GOVERNMENT RECEIVE THE KORAD DRAWING WITH A PROPRIETARY LEGEND ATTACHED FROM EITHER VARO OR LTV-E UNDER EITHER OF VARO'S PAVE SPOT CONTRACTS OR UNDER THE PAVE NAIL CONTRACT WITH LTV-E. WHILE LTV-E HAS REPORTED THAT THE SOLICITATION DATA WHICH YOU ALLEGE TO BE PROPRIETARY WAS EXTRACTED FROM VARO DRAWING 675-052, THE RECORD SHOWS THAT THIS DRAWING WAS FURNISHED BY VARO WITH UNLIMITED RIGHTS AS REQUIRED BY ITS SUBCONTRACT. THE AIR FORCE REPORT ALSO POINTS OUT THAT NOTWITHSTANDING YOUR RESPONSES DATED APRIL 15, 20, 23 AND MAY 10, 1971, TO THE APRIL 5 SOLICITATION BY LTV-E, NO EXCEPTION TO THE UTILIZATION OF THE DATA IN THE SOLICITATION WAS TAKEN UNTIL SOMETIME THEREAFTER AND THAT YOUR PROTEST TO THIS OFFICE WAS MADE AFTER AWARD OF THE SUBCONTRACTS TO MARTIN.

WE BELIEVE IT IS SIGNIFICANT AND CONTROLLING FOR PURPOSES OF THIS DECISION THAT THE AIR FORCE OBTAINED THE ALLEGED PROPRIETARY DRAWING WITHOUT A PROPRIETARY LEGEND ATTACHED PURSUANT TO A CONTRACT WITH LTV-E AND PROCEEDED IN GOOD FAITH TO ALLOW THE DRAWING TO BE USED AS CONTEMPLATED, THAT IS, FOR SOLICITATION OF COMPETITIVE OFFERS FOR THE ITEM UNDER PHASE II. MOREOVER, AT THE TIME LTV-E RECEIVED THE VARO DRAWINGS AND USED THEM IN THE PHASE II SOLICITATION, IT HAD NO NOTICE OF ANY PROPRIETARY RIGHTS, ACTUAL OR ALLEGED, IN THE DRAWINGS INVOLVED. WE HAVE HELD THAT THE GOVERNMENT IS ENTITLED TO DISCLOSE AND USE FOR ANY PURPOSE TECHNICAL DATA WHICH IT PURCHASES FOR VALUE FROM A CONTRACTOR (PRIME) WITHOUT RESTRICTION AND WITHOUT NOTICE OF ANOTHER (THIRD) PARTY'S PROPRIETARY RIGHTS IN THE DATA. SEE B-156727, OCTOBER 7, 1965, B-165111, FEBRUARY 26, 1969, AND THE AUTHORITIES CITED THEREIN.

IN ADDITION, THE COMPTROLLER GENERAL WILL NOT ADJUDICATE DISPUTES REGARDING VIOLATIONS OF PROPRIETARY RIGHTS ARISING UNDER ARRANGEMENTS TO WHICH THE GOVERNMENT IS NOT A DIRECT PARTY (E.G., VARO'S RELATION WITH KORAD) AND UNTIL SUCH RIGHTS HAVE BEEN ESTABLISHED IN COURTS, OR OTHERWISE, WE ARE NOT JUSTIFIED IN DISTURBING ANY PROGRAM OR GRANTING ANY RELIEF TO THE PROTESTING PARTY. B-156727, OCTOBER 7, 1965. YOU HAVE NOTED THAT IN OUR DECISION B-166022, MAY 22, 1969, WE DID NOT REQUIRE CANCELLATION OF THE CONTRACT BUT POINTED OUT THE STATUTORY AUTHORITY TO THE SECRETARY INVOLVED FOR ADMINISTRATIVE SETTLEMENT OF THE CLEAR BREACH OF CONFIDENCE FOUND IN THAT CASE. HOWEVER, THAT DECISION MUST BE DISTINGUISHED FROM THE PRESENT SITUATION IN THAT THE DATA THERE INVOLVED HAD BEEN DIRECTLY FURNISHED TO THE GOVERNMENT, IT HAD BEEN MARKED WITH A PROPRIETARY LEGEND WHEN RECEIVED BY THE GOVERNMENT, AND THE GOVERNMENT HAD ASSURED THE PROTESTOR BY LETTER THAT ITS PROPRIETARY RIGHTS WOULD BE PROTECTED. ACCORDINGLY, YOUR CLAIM FOR THE VALUE OF THE DRAWINGS IS DISALLOWED.

IN CONNECTION WITH THAT PORTION OF YOUR PROTEST QUESTIONING THE COMPETITIVE ASPECTS OF LTV-E'S SELECTION OF MARTIN FOR THE AWARD OF THE SUBCONTRACT FOR LASERS ON MAY 28, 1971, THE BID PROTESTS PROCEDURES OF THIS OFFICE IN EFFECT AT THAT TIME, 4 CFR 20.1-20.3 (AS WELL AS THOSE FOR CURRENT APPLICATION, COPY ENCLOSED) DID NOT PROVIDE FOR THE ADJUDICATION OF PROTESTS BY BIDDERS AGAINST SUBCONTRACT AWARDS MADE BY PRIME CONTRACTORS WHO ARE NOT ACTING AS PURCHASING AGENTS FOR THE GOVERNMENT. WHILE WE HAVE, ON OCCASIONS, ENTERTAINED SUCH PROTESTS, WE BELIEVE THAT IN SITUATIONS SUCH AS ARE PRESENT IN THE INSTANT PROCUREMENT - WHERE THE PRIME CONTRACTOR IS NOT ACTING AS A PURCHASING AGENT, AND WHERE THE AWARD HAS BEEN MADE AND NEITHER FRAUD NOR BAD FAITH ON THE PART OF THE CONTRACTING OFFICER IN APPROVING THE AWARD IS ALLEGED - THE POSSIBILITY OF FINDING ADEQUATE JUSTIFICATION TO SUPPORT CANCELLATION OF THE SUBCONTRACT IS SO REMOTE THAT CONSIDERATION OF SUCH PROTESTS UNDER OUR BID PROTEST PROCEDURES WOULD BE UNWARRANTED. WHILE WE WILL, OF COURSE, GIVE APPROPRIATE ATTENTION IN OUR AUDIT FUNCTIONS INVOLVING THE PRIME CONTRACT TO ANY EVIDENCE INDICATING THAT THE COST TO THE GOVERNMENT WAS UNDULY INCREASED BECAUSE OF IMPROPER PROCUREMENT ACTIONS BY THE PRIME CONTRACTOR, IN VIEW OF THE FOREGOING WE MUST DECLINE TO PASS UPON THE MERITS OF YOUR PROTEST AGAINST THE AWARD OF THE SUBCONTRACT TO MARTIN.

WE MUST ALSO DENY YOUR REQUEST THAT THIS OFFICE DIRECT THE AIR FORCE TO PAY KORAD ITS BID PREPARATION EXPENSES SINCE, IRRESPECTIVE OF THE MERITS INVOLVED, WE ARE NOT AWARE OF ANY AUTHORITY (AND YOU HAVE CITED NONE) WHICH WOULD PERMIT THE EXPENDITURE OF FEDERAL FUNDS FOR EXPENSES INCURRED BY A BIDDER IN RESPONDING TO A SOLICITATION BY A PRIME CONTRACTOR ISSUED IN ITS CAPACITY AS A PRIVATE CONCERN AND NOT AS AN AGENT OF THE GOVERNMENT.