B-173157, OCT 26, 1971, 51 COMP GEN 233

B-173157: Oct 26, 1971

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THE CONCLUSION OF NEGOTIATIONS UPON RECEIPT OF BEST AND FINAL OFFERS WAS CONSISTENT WITH PARAGRAPH 3-805.1 OF THE ARMED SERVICES PROCUREMENT REGULATION IN THE ABSENCE OF A REQUIREMENT TO CONTINUE NEGOTIATIONS TO DEFINE OPERATING PROCEDURES OR EQUIPMENT DESIGN. THE PILOT PROJECT WAS NOT SPECIFICALLY DETAILED. BIDDERS - QUALIFICATIONS - BUSINESS AFFILIATES - EVIDENCE A CONTRACTING OFFICER'S DETERMINATION THAT A WHOLLY OWNED AFFILIATE UNDER THE DIRECTION OF THE PARENT COMPANY CONSISTING OF COMPANIES HAVING SPECIALIZED ABILITIES THAT HAD SUCCESSFULLY PERFORMED GOVERNMENT CONTRACTS WAS A RESPONSIBLE OFFEROR CAPABLE OF SATISFACTORILY PERFORMING A CONTRACT FOR THE DISPOSAL OF UNSERVICEABLE EXPLOSIVE FUSES BY INCINERATION IS AN ACCEPTABLE DETERMINATION UNLESS IT CAN BE SHOWN BY CONVINCING EVIDENCE THAT THE FINDING WAS ARBITRARY.

B-173157, OCT 26, 1971, 51 COMP GEN 233

CONTRACTS - NEGOTIATION - PILOT PROJECTS - METHOD OF CONDUCTING NEGOTIATIONS IN THE NEGOTIATION OF A PILOT PROCUREMENT FOR THE DISPOSAL OF UNSERVICEABLE EXPLOSIVE FUSES BY INCINERATION UNDER A REQUEST FOR QUOTATIONS THAT PLACED ON THE CONTRACTOR THE RESPONSIBILITY FOR PROVIDING AND REMOVING THE INCINERATOR DEVICE, PREPARATION AND RESTORATION OF THE SITE, AND INCINERATION OF THE FUSES AND REMOVAL OF SCRAP RESIDUE, THE CONCLUSION OF NEGOTIATIONS UPON RECEIPT OF BEST AND FINAL OFFERS WAS CONSISTENT WITH PARAGRAPH 3-805.1 OF THE ARMED SERVICES PROCUREMENT REGULATION IN THE ABSENCE OF A REQUIREMENT TO CONTINUE NEGOTIATIONS TO DEFINE OPERATING PROCEDURES OR EQUIPMENT DESIGN. HOWEVER, AS A DETONATION DEMONSTRATION FOR A PROSPECTIVE OFFEROR, ALTHOUGH NOT PREJUDICIAL, CREATED AN APPEARANCE OF FAVORITISM, AND THE PILOT PROJECT WAS NOT SPECIFICALLY DETAILED, FUTURE PROCUREMENTS SHOULD INSURE ADEQUATE COMPETITION BY INCLUDING AS APPROPRIATE MORE DEFINITE SPECIFICATIONS, DEMONSTRATIONS, AND PREBID CONFERENCES. BIDDERS - QUALIFICATIONS - BUSINESS AFFILIATES - EVIDENCE A CONTRACTING OFFICER'S DETERMINATION THAT A WHOLLY OWNED AFFILIATE UNDER THE DIRECTION OF THE PARENT COMPANY CONSISTING OF COMPANIES HAVING SPECIALIZED ABILITIES THAT HAD SUCCESSFULLY PERFORMED GOVERNMENT CONTRACTS WAS A RESPONSIBLE OFFEROR CAPABLE OF SATISFACTORILY PERFORMING A CONTRACT FOR THE DISPOSAL OF UNSERVICEABLE EXPLOSIVE FUSES BY INCINERATION IS AN ACCEPTABLE DETERMINATION UNLESS IT CAN BE SHOWN BY CONVINCING EVIDENCE THAT THE FINDING WAS ARBITRARY, CAPRICIOUS, OR NOT BASED ON SUBSTANTIVE EVIDENCE.

TO REAVIS, POGUE, NEAL & ROSE, OCTOBER 26, 1971:

REFERENCE IS MADE TO A LETTER DATED JUNE 1, 1971, WITH ENCLOSURE, FROM THE METAL BANK OF AMERICA, AND YOUR LETTER DATED JULY 21, 1971, PROTESTING THE AWARD OF A CONTRACT TO THERMAL REDUCTION CORPORATION, UNDER REQUEST FOR QUOTATIONS NO. N00140-71-Q-1330, ISSUED BY THE NAVAL REGIONAL PROCUREMENT OFFICE, PHILADELPHIA, PENNSYLVANIA.

THE SUBJECT SOLICITATION, ISSUED MARCH 10, 1971, CALLED FOR THE DISPOSAL OF 500 GROSS TONS OF UNSERVICEABLE EXPLOSIVE FUSES BY INCINERATION AT THE NAVAL AMMUNITION DEPOT - EARLE, COLTS NECK, NEW JERSEY (NAD EARLE). UNDER THE TERMS OF THE SOLICITATION, THE CONTRACTOR WOULD BE RESPONSIBLE FOR PROVIDING THE INCINERATION DEVICE, PREPARATION OF THE SITE, INCINERATION OF THE FUSES, REMOVAL OF SCRAP RESIDUE, REMOVAL OF INCINERATION DEVICE UPON COMPLETION OF THE SERVICES, AND RESTORATION OF THE SITE. THE SOLICITATION REQUESTED A FIRM FIXED-PRICE QUOTATION AND A DETAILED TECHNICAL PROPOSAL INDICATING THE METHOD AND MANNER IN WHICH THE SERVICES WOULD BE PERFORMED.

YOU ALLEGE THAT PREFERENTIAL TREATMENT AND TECHNICAL ASSISTANCE WERE GIVEN TO THERMAL REDUCTION CORPORATION PRIOR TO THE SUBMISSION OF QUOTATIONS. THE CONTRACTING OFFICER'S STATEMENT, INCLUDED IN THE ADMINISTRATIVE FILE, REPORTS IN THIS REGARD THAT YOUR ALLEGATION RELATES TO A DEMONSTRATION INVOLVING DETONATION OF SOME FUSES HELD AT NAD EARLE ON SEPTEMBER 18, 1970, ATTENDED BY REPRESENTATIVES OF THERMAL REDUCTION CORPORATION. IT IS STATED THAT OBSERVING THE DETONATION OF A FEW FUSES WOULD BE OF NO SIGNIFICANCE TO THE PARTICULAR REQUIREMENT COVERED BY THE SUBJECT SOLICITATION SINCE IT PROVIDES FOR DISPOSAL BY INCENERATION (NOT DETONATION) AND THAT DETONATION OF FUSES HAS LITTLE OR NO RELATIONSHIP TO AN INCINERATION OPERATION. IT IS FURTHER REPORTED THAT YOUR COMPANY WAS OFFERED THE OPPORTUNITY TO ATTEND AN IDENTICAL DEMONSTRATION, BUT DID NOT CHOOSE TO DO SO.

YOU CONTEND THAT THE TRUE NATURE OF THE DEMONSTRATION WAS A TEST BY INCINERATION (NOT DETONATION) WHEREBY THE FUSES WERE BURNED BY THE USE OF THERMITE GRENADES. THE CONTRACTING OFFICER STATES IN THE SUPPLEMENTAL ADMINISTRATIVE REPORT THAT THERE WAS NO INCINERATION BUT RATHER THE FUSES WERE EXPLODED BY HEAT FROM THE THERMITE GRENADES.

WHILE WE CANNOT CONCLUDE THAT THERMAL REDUCTION CORPORATION WAS AFFORDED PREFERENTIAL TREATMENT BY THE GOVERNMENT, WE DO BELIEVE THE CIRCUMSTANCES SURROUNDING THE DEMONSTRATION CERTAINLY MIGHT CREATE THE APPEARANCE OF FAVORITISM. THE REPORT OF THE EXPLOSIVE ORDNANCE DISPOSAL OFFICER INCLUDED IN THE SUPPLEMENTAL ADMINISTRATIVE REPORT INDICATES THAT REPRESENTATIVES OF THERMAL REDUCTION CORPORATION REQUESTED THE DEMONSTRATION, AND ADDITIONALLY, REQUESTED THAT A HIGH HEAT SOURCE BE USED AS THE DESTRUCTIVE ELEMENT. IN HIS OPINION, THE DEMONSTRATION PROVIDED NO INFORMATION OF VALUE RELATIVE TO THE SUBJECT PROCUREMENT. WHETHER "INCINERATION" OR "DETONATION" WAS USED IN THE DEMONSTRATION, THE FACT REMAINS THAT A PROSPECTIVE OFFEROR WAS AFFORDED AN OPPORTUNITY AT ITS REQUEST TO VIEW DESTRUCTION OF THESE EXPLOSIVE FUSES BY A HIGH HEAT SOURCE. WHILE IT IS REPORTED THAT METAL BANK WAS OFFERED THE OPPORTUNITY TO WITNESS A DEMONSTRATION INVOLVING DETONATION OF FUSES, YOU INDICATE THEY WERE NOT MADE AWARE OF THE FACT THAT THE FUSES WERE TO BE DESTROYED BY A HIGH HEAT SOURCE AND NOT MERELY DETONATED. THE NAVY'S SUPPLEMENTAL REPORT RECOGNIZES THE PROBLEMS GENERATED BY SUCH COMMUNICATIONS WITH PROSPECTIVE OFFERORS AND INDICATES THAT SUCH PRACTICES WILL NOT BE REPEATED IN FUTURE PROCUREMENTS.

IT IS ALLEGED THAT THERMAL REDUCTION CORPORATION IS NOT A RESPONSIBLE CONTRACTOR AND THAT IT IS A NON-EXISTENT COMPANY. THE CONTRACTING OFFICER STATES IN THIS REGARD AS FOLLOWS:

*** THERMAL REDUCTION WAS ESTABLISHED IN JULY 1970. IT IS A WHOLLY OWNED AFFILIATE OF LAPADULA & VILLANI INC., SHARING COMMON OWNERSHIP AND UNDER THE DIRECTION OF THE PARENT COMPANY'S EXECUTIVE BOARD. LAPADULA & VILLANI, INC. IS A DIVERSIFIED FIRM CONSISTING OF A GROUP OF COMPANIES, EACH HAVING SPECIALIZED ABILITIES. TECHNICAL PERSONNEL FROM THE REQUIRING ACTIVITY HAVE VISITED THERMAL REDUCTION AND ARE AWARE OF THE RESOURCES AVAILABLE TO THIS FIRM FOR THE PERFORMANCE OF THE CONTRACT. THEY HAVE ADVISED THE CONTRACTING OFFICER THAT THEY CONSIDER THERMAL REDUCTION CAPABLE OF SATISFACTORILY PERFORMING THE CONTRACT. LAPADULA & VILLANI, INC. HAVE SUCCESSFULLY PERFORMED SEVERAL GOVERNMENT CONTRACTS AWARDED BY THE UNITED STATES NAVAL SHIPYARD, PHILADELPHIA, PA. THE CONTRACTING OFFICER HAS DETERMINED THAT THERMAL REDUCTION IS A RESPONSIBLE QUOTER.

IT HAS LONG BEEN THE RULE OF OUR OFFICE TO ACCEPT THE CONTRACTING OFFICER'S DETERMINATION OF RESPONSIBILITY, UNLESS IT IS SHOWN BY CONVINCING EVIDENCE THAT THE FINDING WAS ARBITRARY, CAPRICIOUS, OR NOT BASED ON SUBSTANTIAL EVIDENCE. 45 COMP. GEN. 4 (1965) AND CASES CITED THEREIN. WE FIND NO SUCH EVIDENCE IN THE RECORD, AND HAVE NO REASON TO QUESTION THE QUALIFICATIONS OF THERMAL REDUCTION CORPORATION.

YOU ALSO CONTEND THAT THE NEGOTIATION PROCEDURES UNDER THE SOLICITATION WERE UNFAIR. METAL BANK'S LETTER OF JUNE 1, 1971, STATES AS FOLLOWS:

4. THE PROCEDURE USED IN ARRIVING AT A FINAL BID PRICE WAS MOST UNFAIR. ON 8 APRIL BY TELEPHONE AND CONFIRMED BY LETTER ON 9 APRIL, WE WERE ASKED FOR A AMPLIFICATION OF OUR TECHNICAL PROPOSAL AND A REVIEW OF OUR PRICE. IT WAS POINTED OUT THAT OUR PROPOSAL CONTAINED VARIOUS QUALITATIVE OPTIONS. WE WERE TOLD THAT FURTHER NEGOTIATIONS WOULD BE CONDUCTED AT WHICH TIME THE OPTIONS WOULD BE REDUCED. THIS LULLED US INTO REPLYING ON 13 APRIL ... "WE WOULD BE AMENDABLE TO FURTHER NEGOTIATIONS ON COSTS WHEN THE FULL REQUIREMENTS OF THE PROJECT AND EQUIPMENT ARE AGREED UPON. DEPENDING ON THIS, A COST REDUCTION MAY BE IN ORDER."

THEREFORE, WE WERE SHOCKED WHEN ADVISED ON 6 MAY THAT NO FURTHER NEGOTIATIONS WOULD BE CARRIED ON AND WOULD BE AMENABLE TO REDUCING OUR PRICE. SINCE WE WERE UNABLE TO ASCERTAIN WHICH QUALITATIVE EXTREMES OF OUR PROPOSAL WERE DESIRED BY THE NAVY, WE WERE UNABLE TO FAIRLY CONSIDER A REDUCTION IN PRICE. HAD THIS BEEN HANDLED IN ACCORDANCE WITH THE FORMAT TRANSMITTED TO US ON 8 APRIL, WE HAVE NO DOUBT THAT A FINAL BID PRICE WOULD HAVE BEEN ARRIVED AT THAT WAS AS LOW OR LOWER THAN THE ONE FINALLY ACCEPTED.

THE CONTRACTING OFFICER STATES THAT ONLY ULTIMATE OBJECTIVES WERE SPECIFIED IN THE SOLICITATION AND THAT DEVELOPMENT OF OPERATING PROCEDURES AND THE SELECTION AND DESIGN OF EQUIPMENT WHICH WOULD ACCOMPLISH THE ULTIMATE OBJECTIVE WERE ENTIRELY THE RESPONSIBILITY OF THE CONTRACTOR. THE CONTRACTING OFFICER STATES THAT METAL BANK WAS NEVER TOLD THAT NEGOTIATIONS WOULD BE CONDUCTED TO DEFINE OPERATING PROCEDURES OR EQUIPMENT DESIGN. THE CONTRACTING OFFICER STATES FURTHER THAT METAL BANK'S ORIGINAL PROPOSAL (LETTER OF APRIL 13, 1971) CONTAINS ONLY FOUR REFERENCES TO ANY VARIABLES IN PROCEDURES OR EQUIPMENT AS FOLLOWS:

ON PAGE 3 IT STATES:

(4) WE DO NOT CONSIDER IT NECESSARY TO WALL IN THE INCINERATORS WITH SAND BAGS, BUT SUBJECT TO FURTHER NEGOTIATIONS WITH YOU, THIS COULD BE DONE IF CONSIDERED NECESSARY.

ON PAGE 5 IT STATES:

WE HAVE NOT AT THIS TIME ESTABLISHED A PROCEDURE DEALING WITH NON INERT FUSES IN THE BURNED RESIDUE. IN VIEW OF THE COMMENTS SET FORTH IN QUESTION NO. 3, WE DO NOT FEEL THIS SITUATION WILL EXIST. WE ARE AMENABLE TO VISUALLY INSPECTING THE BURNED RESIDUE AT THE TIME IT IS REMOVED ON A BATCH BASIS, BUT OTHER EFFORTS IN THIS VEIN WOULD BE SUBJECT TO FUTURE NEGOTIATIONS.

ON PAGE 6 IT STATES:

IT IS POSSIBLE TO INCLUDE IN THE DESIGN AN ENTRY DOOR THAT IS SIMILAR IN DESIGN TO A BANK NIGHT DEPOSITORY DOOR. THIS WOULD BE A MULTI-SIDED REVOLVING AFFAIR THAT WOULD MEAN THAT AS THE BOXES ROLLED THROUGH, ONE SIDE OF THE DOOR WOULD ALWAYS BE IN THE CLOSED POSITION. WE DO NOT CONSIDER THIS A DESIRABLE ITEM, BUT COULD PROVIDE IF REQUIRED.

ON PAGE 8 IT STATES:

WE FEEL THAT THE DESIRED FUNCTION WILL BE ACCOMPLISHED BY 3/4" PLATE. ARE ABLE TO PLATE THIS WITH NAVAL ARMOR PLATE OF ANY SIZE UP TO 4" THICK IF FURTHER NEGOTIATION SHOULD INDICATE THE DESIRABILITY OF THIS. WE ALSO RECOGNIZE THAT IT MIGHT BE NECESSARY TO REPLACE THE PLATING DURING THE PROJECT, AND, IF SO, THIS WILL BE DONE PROMPTLY AT OUR EXPENSE.

NOTWITHSTANDING THE ABOVE-QUOTED PARAGRAPHS, THE CONTRACTING OFFICER STATES THAT THE METAL BANK PROPOSAL WAS INTERPRETED AS A PROMISE TO EFFECTIVELY MEET ALL CONTINGENCIES AND ACCOMPLISH THE OBJECTIVE AT A FIRM FIXED-PRICE BECAUSE OF THE FOLLOWING STATEMENT MADE ON PAGE 8 OF ITS APRIL 13, 1971, LETTER:

IN CONSIDERATION OF THE VARIABLES INVOLVED IN THIS PROPOSAL (SIZE OF ARMOR PLATE, AMOUNT OF SAND BAGGING, ETC.), WE COULD NOT AT THIS TIME MAKE ANY CHANGES IN OUR BID PRICE. HOWEVER, EVEN IF ALL THE VARIABLE OPTIONS WE HAVE MENTIONED IN THIS LETTER ARE REQUESTED BY YOU AT THE MAXIMUM DEGREE, WE CAN ABSORB THEM AT NO INCREASE IN THE OFFERED PRICES. FURTHER THAN THIS, WE WOULD BE AMENABLE TO FURTHER NEGOTIATIONS ON COSTS WHEN THE FULL REQUIREMENTS OF THE PROJECT AND EQUIPMENT ARE AGREED UPON. DEPENDING ON THIS, A COST REDUCTION MAY BE IN ORDER.

IT IS REPORTED THAT SINCE METAL BANK HAD SUBMITTED AN ACCEPTABLE TECHNICAL PROPOSAL, IT, ALONG WITH OTHER FIRMS SUBMITTING ACCEPTABLE PROPOSALS, WAS REQUESTED TO STATE ITS BEST AND FINAL PRICE BY LETTER DATED MAY 6, 1971, FROM THE CONTRACTING OFFICER. THE LETTER STATED THAT AWARD OF THE PROPOSED CONTRACT WOULD BE BASED ON THE QUOTED PRICES ON RECORD OR AS REVISED IN REPLY TO THE SUBJECT LETTER; IT STATED FURTHER THAT NO REVISION OF PRICES WOULD BE ACCEPTED UNLESS RECEIVED ON OR BEFORE MAY 17, 1971. BY LETTER DATED MAY 14, 1971, TO THE CONTRACTING OFFICER, METAL BANK RECONFIRMED ITS PRICE CONTAINED IN THE ORIGINAL QUOTATION.

IN OUR OPINION THE PROCEDURES FOLLOWED IN THE CONDUCT OF NEGOTIATIONS WERE PROPER. METAL BANK WAS ADVISED BY THE LETTER OF MAY 6, 1971, THAT ITS FINAL PRICE WAS REQUESTED. ITS RESPONSE ON MAY 14, 1971, WAS UNEQUIVOCAL AND RECONFIRMED ITS QUOTED PRICE. THE OBVIOUS INTENT OF THIS CORRESPONDENCE WAS TO CONCLUDE NEGOTIATIONS. SUCH A PROCEDURE IS CONSISTENT WITH THE PROVISIONS OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) AND OUR DECISIONS. SEE ASPR 3-805.1 AND 48 COMP. GEN. 536 (1969).

YOU ALLEGE THAT OFFERORS SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO SUBMIT REVISED PRICES ON THE SAME LEVEL OF PERFORMANCE. YOU STATE THAT IF THE NAVY HAD SPECIFIED A MINIMUM LEVEL OF PERFORMANCE DEEMED TO BE SATISFACTORY, THE QUOTERS, INCLUDING METAL BANK, WOULD HAVE BEEN IN A POSITION TO RE-EVALUATE THEIR EARLIER OFFERS, AND REVISE THEIR QUOTED PRICES DOWNWARD. WE FIND NO REASON TO OBJECT TO THE NAVY'S POSITION IN THIS MATTER. IT SIMPLY WANTED THE CONTRACTOR TO INCINERATE FIVE HUNDRED TONS OF EXPLOSIVES FUSES IN A SAFE AND POLLUTION-FREE MANNER, AND IT COULD NOT TELL OFFERORS THE SPECIFIC EQUIPMENT, THE DESIGN FEATURES AND THE OPERATING PROCEDURES WHICH WOULD ASSURE SUCCESSFUL ACCOMPLISHMENT OF THIS TASK.

WE NOTE IN THIS REGARD THAT THE SUPPLEMENTAL ADMINISTRATIVE REPORT CONTAINS A LETTER DATED AUGUST 24, 1971, FROM THE OFFICER IN CHARGE, NAVAL REGIONAL PROCUREMENT OFFICE, WHICH STATES THAT METAL BANK WILL BE FURNISHED AT ITS REQUEST DATA DELIVERED UNDER THE CONTRACT IN ACCORDANCE WITH APPLICABLE LAWS AND REGULATIONS GOVERNING RELEASE OF INFORMATION TO THE PUBLIC WHICH MAY BE ESPECIALLY APPLICABLE TO FUTURE PROCUREMENTS. VIEW OF THE FACT THAT THIS PROCUREMENT FOR DETONATION OF EXPLOSIVE FUSES IS THE FIRST OF ITS KIND, SINCE FUSES WERE PREVIOUSLY DUMPED AT SEA, THE REQUIREMENTS FOR SUCH A PILOT PROJECT COULD NOT BE SPECIFICALLY DETAILED. HOWEVER, WE AGREE WITH YOUR CONTENTION THAT ANY FOLLOW-ON PROCUREMENTS SHOULD BE CONDUCTED AS COMPETITIVELY AS POSSIBLE. THEREFORE, WE ARE RECOMMENDING TO THE SECRETARY OF THE NAVY BY SEPARATE LETTER DATED TODAY THAT ANY REASONABLE STEPS BE TAKEN TO INSURE ADEQUATE COMPETITION IN FUTURE PROCUREMENTS OF THIS TYPE INCLUDING AS APPROPRIATE MORE DEFINITIVE SPECIFICATIONS, DEMONSTRATIONS AND PRE-BID CONFERENCES.

FOR THE REASONS STATED, WE FIND NO BASIS TO CONCLUDE THAT THE NEGOTIATION PROCEDURE FOLLOWED UNDER SUBJECT SOLICITATION WOULD NOT RESULT IS A VALID AWARD. ACCORDINGLY, YOUR PROTEST IS DENIED.