B-174633, AUG 29, 1972

B-174633: Aug 29, 1972

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WHILE SOME OF THE QUESTIONED ITEMS HAVE BEEN REVERSE ENGINEERED. THE ESTABLISHMENT OF PROCEDURES TO QUALIFY A SOURCE TO MANUFACTURE A PART TO ANOTHER MANUFACTURER'S SPECIFICATIONS IS DISCRETIONARY AND WITHIN THE AMBIT OF THE EXPERTISE OF THE COGNIZANT TECHNICAL ACTIVITY. INCORPORATED: REFERENCE IS MADE TO YOUR LETTER DATED NOVEMBER 29. WE DENIED YOUR PROTEST AGAINST THE REJECTION OF YOUR UNSOLICITED PROPOSALS UNDER CERTAIN RFQS FOR SPARE PARTS FOR KC-135 AIRCRAFT ON THE BASIS THAT SINCE THE AIR FORCE DID NOT POSSESS ADEQUATE DRAWINGS AND SINCE THE DRAWINGS YOU FURNISHED WERE NOT ACCEPTABLE. THERE WAS NO BASIS FOR DISTURBING THE AWARDS MADE. AN ALMOST IDENTICAL FACTUAL SITUATION WAS CONSIDERED IN B-173992.

B-174633, AUG 29, 1972

PROCUREMENT PROCEDURES - REVERSE ENGINEERING - DATA PACKAGES DECISION CONCERNING A CONTINUING CONTROVERSY BETWEEN FARWEST SPECIAL PRODUCTS DIVISION, INC., AND THE OKLAHOMA CITY AIR MATERIEL AREA, TINKER AFB, OKLA., REGARDING THE SPARE PARTS BREAKOUT PROGRAM FOR THE KC-135 AIRCRAFT. WHILE SOME OF THE QUESTIONED ITEMS HAVE BEEN REVERSE ENGINEERED, IT HAS BEEN DETERMINED UNDER AFR 57-6, SECTION 3-201.4(H)(8), THAT THIS WOULD NOT BE JUSTIFIED FROM A COST STANDPOINT FOR OTHER ITEMS. GAO HAS NO BASIS TO QUESTION THESE DETERMINATIONS. THE ESTABLISHMENT OF PROCEDURES TO QUALIFY A SOURCE TO MANUFACTURE A PART TO ANOTHER MANUFACTURER'S SPECIFICATIONS IS DISCRETIONARY AND WITHIN THE AMBIT OF THE EXPERTISE OF THE COGNIZANT TECHNICAL ACTIVITY. B-172901, OCTOBER 14, 1971.

TO FARWEST SPECIAL PRODUCTS DIVISION, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTER DATED NOVEMBER 29, 1971, AND SUBSEQUENT CORRESPONDENCE, CONCERNING YOUR CONTROVERSY WITH TINKER AIR FORCE BASE AND OKLAHOMA CITY AIR MATERIEL AREA (OCAMA), REGARDING THE SPARE PARTS BREAKOUT PROGRAM FOR THE KG-135 AIRCRAFT.

THIS CONTROVERSY HAS BEEN THE SUBJECT OF PRIOR CONSIDERATION BY THIS OFFICE. IN B-173063, SEPTEMBER 22, 1971, WE DENIED YOUR PROTEST AGAINST THE REJECTION OF YOUR UNSOLICITED PROPOSALS UNDER CERTAIN RFQS FOR SPARE PARTS FOR KC-135 AIRCRAFT ON THE BASIS THAT SINCE THE AIR FORCE DID NOT POSSESS ADEQUATE DRAWINGS AND SINCE THE DRAWINGS YOU FURNISHED WERE NOT ACCEPTABLE, THERE WAS NO BASIS FOR DISTURBING THE AWARDS MADE. HOWEVER, WE DID SUGGEST TO THE AIR FORCE THAT CONSIDERATION BE GIVEN TO INITIATING EFFORTS TO BROADEN COMPETITION. AN ALMOST IDENTICAL FACTUAL SITUATION WAS CONSIDERED IN B-173992, APRIL 20, 1972, AND THE CONCLUSION THEREIN WAS THE SAME AS IN THE PRIOR CASE. PART OF THE AIR FORCE'S RESPONSE TO YOUR PROTEST IN B-173992, SUPRA, DEALT WITH THE EFFORTS THAT HAD BEEN MADE BY THE AIR FORCE TO COMPLY WITH THE SUGGESTION IN B-173063, SUPRA.

AS BACKGROUND, WE WILL REVIEW SOME OF THESE EFFORTS. A REPORT ON PROCUREMENT OF KC-135 PANEL AND WINDOW ASSEMBLIES INDICATES THAT DURING JANUARY 3 THROUGH 6 REPRESENTATIVES OF AIR FORCE HEADQUARTERS AND HEADQUARTERS, AIR FORCE LOGISTICS COMMAND VISITED OCAMA TO CONSIDER (1) OVERALL EFFORTS TO BREAK OUT SPARE PARTS FOR COMPETITIVE PROCUREMENT OR PROCUREMENT DIRECTLY FROM THE ACTUAL MANUFACTURER; (2) EFFORTS TO DETERMINE THE EFFECT OF RESTRICTIVE LEGENDS ON KC-135 PARTS; (3) EFFORTS TO PROCURE DATA FROM THE BOEING COMPANY FOR REPROCUREMENT PURPOSES AND (4) PROBLEMS ASSOCIATED WITH QUALIFYING SOURCES WHEN AN ADEQUATE DATA PACKAGE IS NOT AVAILABLE.

THE REPORT STATES AS FOLLOWS:

"2. THE PERCENT OF ITEMS SCREENED BY OCAMA FOR BREAKOUT UNDER AFR 57 6, AS RELATED TO THE TOTAL ITEMS MANAGED, IS HIGHER THAN FOR OTHER AIR MATERIEL AREAS (AMAS). THIRTY-ONE PERCENT (31%) OF THE ITEMS SCREENED WERE CODED FOR COMPETITIVE PROCUREMENT. FIFTY-NINE PERCENT (59%) WERE CODED FOR DIRECT PURCHASE FROM THE ACTUAL MANUFACTURER AND 10% FROM PRIME WEAPON SYSTEMS CONTRACTORS. THE EFFORT EXPENDED DURING OCTOBER 1970 THROUGH SEPTEMBER 1971 RESULTED IN THE SCREENING OR RESCREENING OF 20,361 ITEMS. OF THESE, 39% WERE CODED FOR COMPETITIVE PROCUREMENT AND 55% FOR PURCHASE DIRECTLY FROM THE ACTUAL MANUFACTURER. THIS IS IN LINE WITH OVERALL AIR FORCE ACCOMPLISHMENTS. THE PERCENT OF COMPETITIVE PROCUREMENT DOLLARS FOR REPLENISHMENT SPARE PARTS INCREASED TO 26% IN 1971 OVER 15% IN 1970. DIRECT PURCHASE FROM THE ACTUAL MANUFACTURERS INCREASED FROM 53% TO 67%, WHILE PURCHASES FROM THE PRIME CONTRACTORS DECREASED FROM 32% TO 7%. IT IS CONCLUDED THAT OCAMA IS AGGRESSIVELY PURSUING THE BROADENING OF COMPETITIVE PROCUREMENT WITH GOOD RESULTS.

"3. A MAJOR EFFORT HAS BEEN MADE BY OCAMA IN REVIEWING THE GOVERNMENT'S RIGHTS TO DATA IN ALL KC-135 CONTRACTS, GOING BACK TO THE INITIAL PROCUREMENT OF THE WEAPON SYSTEM IN THE EARLY 1950S. THE OCAMA JUDGE ADVOCATE GENERAL'S OFFICE IS CURRENTLY EVALUATING THE FINDINGS OF THE REVIEW, WHICH SHOULD DETERMINE FURTHER COURSES OF ACTION. IF THIS EVALUATION SUPPORTS THE GOVERNMENT'S RIGHTS TO DATA CLAIMED TO BE PROPRIETARY BY BOEING, THE MATTER WILL BE AGGRESSIVELY PURSUED UNTIL IT IS RESOLVED. FARWEST SPECIAL PRODUCTS HAS INDICATED IN CORRESPONDENCE TO THE GAO AND AIR FORCE THAT PROCUREMENT DATA FOR PARTS COULD BE PURCHASED FROM BOEING UNDER OCAMA CONTRACTS. EFFORTS WERE MADE BY OCAMA TO PURCHASE PROPRIETARY DATA FROM BOEING FOR PROCUREMENT PURPOSES, HOWEVER, THESE EFFORTS WERE UNSUCCESSFUL.

"4. THE TEAM DISCUSSED, WITH THE OCAMA ENGINEERING STAFF, THE PROBLEMS ASSOCIATED WITH PROCURING CERTAIN PARTS FROM VARIOUS SOURCES WHEN A PROCUREMENT DATA PACKAGE IS NOT AVAILABLE. DATA REQUIRED TO MANUFACTURE MANY OF THE PANEL AND WINDOW ASSEMBLIES INCLUDES STABLE BASE DRAWINGS (MYLARS NON-DIMENSIONAL DRAWINGS) WHICH ARE MADE FROM METAL ETCHINGS. COMPLETE DATA PACKAGE ALSO INCLUDES INFORMATION ON THE TYPE OF METALS AND GAUGES, FINISHES, BONDING REQUIREMENTS, TOLERANCES, CONTOUR INFORMATION, IF APPROPRIATE, ETC. WHEN AN UNQUALIFIED SOURCE CLAIMS TO HAVE SUCH DATA, AND THE SAME DATA USED BY THE PRIME CONTRACTOR IS NOT AVAILABLE, THE ENGINEER CANNOT ALWAYS DETERMINE THAT THE DATA IS CORRECT. IF THE DATA WAS A REPRODUCTION OF THE DATA DEVELOPED BY THE PRIME CONTRACTOR, IT COULD BE DISTORTED THROUGH REPRODUCTION IF IT IS NOT REPRODUCED BY DIRECT CONTACT. PROPER ENGINEERING CONTROL CANNOT BE MAINTAINED ON MANY PARTS WHEN THEY ARE MADE FROM SAMPLE ITEMS. ONE IMPORTANT POINT WITH RESPECT TO SKIN PANELS IS THE NEED FOR THEM TO FIT SMOOTHLY WITH PARTS MADE BY OTHER SOURCES. IF THE SKIN PANEL IS TOO THICK, MOISTURE CAN BUILD UP BETWEEN THE JOINTS AND AFFECT PERFORMANCE. THE AERODYNAMICS CAN BE AFFECTED BY THE DISRUPTIVE FLOW OF AIR AND VIBRATION CAN CAUSE THE PART TO DISENGAGE OR REQUIRE REPAIR. IF THE ITEM DOES NOT FIT PROPERLY, THEN INSTALLATION LABOR IS WASTED AND THE PART MAY HAVE TO BE SCRAPPED. SOME AIRCRAFT PARTS CAN BE REVERSE-ENGINEERED TO DEVELOP A DATA PACKAGE, OR THE ITEMS CAN BE MADE FROM SAMPLE PARTS. THESE PRACTICES, HOWEVER, INVOLVE CERTAIN RISKS, AND IT IS A MATTER OF PROFESSIONAL JUDGMENT ON THE PART OF THE ENGINEER AS TO WHETHER THEY CAN BE APPLIED TO A SPECIFIC PART. ***

"5. ALTHOUGH THE AMOUNT OF COMPETITION ON KC-135 PARTS COULD NOT BE READILY DETERMINED, A CONSIDERABLE AMOUNT OF SUCH ITEMS ARE BEING PROCURED FROM FARWEST SPECIAL PRODUCTS. FROM 1 JULY 1970 TO 1 NOVEMBER 1971, 43 AWARDS WERE MADE TO FARWEST, TOTALING $287,124.36. ***"

YOUR LETTERS HAVE BROUGHT SEVERAL PROCUREMENTS TO OUR ATTENTION. WITH RESPECT TO THE AWARDS MADE TO THE BOEING COMPANY UNDER SOLICITATIONS NOS. F 34601-72-Q-1297 AND -1298 FOR THE SPARE PARTS NUMBERED 5-96299-1 AND -2, YOU ADVISE THAT YOU HAD OFFERED THESE ITEMS TO THE AIR FORCE AT SOME $18,000 LESS THAN THE BOEING CONTRACTS.

THE REASONS FOR REJECTING YOUR UNSOLICITED PROPOSALS TO THE ABOVE TWO SOLICITATIONS ARE STATED IN A LETTER TO YOU FROM OCAMA DATED NOVEMBER 17, 1971 - (A) THE DRAWINGS SUBMITTED BY YOUR CONCERN DID NOT APPEAR TO BE EXACT DUPLICATES OF THE DESIGN ACTIVITIES STABLE BASE DRAWINGS REQUIRED TO MANUFACTURE PANEL ASSEMBLIES AND (B) DATA TO VERIFY THE ACCURACY OF YOUR DRAWINGS WERE NOT AVAILABLE TO THE GOVERNMENT.

YOU IDENTIFY A NUMBER OF NONCOMPETITIVE AWARDS WHICH YOU REPORT WERE MADE TO BOEING DURING 1972. YOU CONTEND THAT THE PARTS INVOLVED (PANEL ASSEMBLIES) COULD HAVE BEEN REVERSED ENGINEERED THEREBY EFFECTING SUBSTANTIAL SAVINGS TO THE GOVERNMENT.

AIR FORCE ADVISES THAT EACH OF THE ITEMS INVOLVED HAVE BEEN ASSIGNED A PROCUREMENT METHOD CODE OF 3H, WHICH PROVIDES FOR PROCUREMENT DIRECTLY FROM THE ACTUAL VENDOR OR SUPPLIER. THIS APPARENTLY WAS DISCUSSED WITH YOU AT A MEETING WITH AIR FORCE ON JANUARY 11, 1972, WHEN YOU WERE ADVISED THAT YOU HAD BEEN DETERMINED TO BE A QUALIFIED SOURCE FOR OTHER DASH NUMBERS FOR THE KC-135. THE AIR FORCE DETERMINED THAT IT WOULD NOT BE COST EFFECTIVE TO REVERSE ENGINEER THE ABOVE ITEMS.

YOU ALSO QUESTION THE SOLE-SOURCE AWARD MADE TO BOEING ON FEBRUARY 8, 1972, AT A PRICE WHICH WAS $684.20 PER UNIT IN EXCESS OF YOUR PRICE QUOTED UNDER RFQ F34601-72-R-4557, A SOLICITATION DATED OCTOBER 14, 1971, FOR THE SAME PARTS INVOLVED IN THE SOLE-SOURCE AWARD. YOU ADVISE THAT NO AWARD WAS MADE UNDER THE SOLICITATION. YOU FURTHER ADVISE THAT THE SOLE-SOURCE AWARD WAS MADE WHILE THERE WAS OUTSTANDING AN INVITATION FOR BIDS (IFB NO. F 34601-72-B-0113) APPARENTLY FOR IDENTICAL TYPE PARTS.

TINKER AIR FORCE BASE REPORTS THAT RFQ-4557 FOR 6 EACH, FITTING ASSEMBLIES, WAS ISSUED TO THE BOEING COMPANY AND ROHR INDUSTRIES, ITS VENDOR, WITH A CLOSING DATE OF DECEMBER 1, 1971. YOUR CONCERN SUBMITTED AN UNSOLICITED PROPOSAL WHILE BOEING AND ROHR DID NOT QUOTE. TINKER ADVISES THAT AT THE TIME RFQ-4557 WAS ISSUED THE DRAWING PACKAGE WAS NOT COMPLETE AND THAT OCAMA PERSONNEL WERE IN THE PROCESS OF GETTING THE DRAWING PACKAGE UPDATED TO A LEVEL THAT WOULD PERMIT ITS USE FOR UNRESTRICTED COMPETITIVE PROCUREMENT. THIS WAS ACCOMPLISHED ON NOVEMBER 27, 1971, AND THE BUYER WAS SO ADVISED ON DECEMBER 14, PURSUANT TO HIS REQUEST TO EVALUATE YOUR CONCERN AS A POSSIBLE SOURCE FOR THIS REQUIREMENT. THEREAFTER THE RFQ WAS CANCELLED AND THE 6 UNITS WERE COMBINED WITH AN ADDITIONAL REQUIREMENT FOR 16 UNITS UNDER IFB 34601-72-B- 0113, WITH JANUARY 26, 1972, AS THE BID OPENING DATE.

EIGHT BIDS WERE RECEIVED UNDER THE ADVERTISED SOLICITATION INCLUDING ONE FROM YOUR CONCERN. BOEING DID NOT BID ON THIS SOLICITATION. AN AWARD UNDER THE IFB WAS DELAYED IN ORDER TO PROCESS MISTAKE IN BIDS AND IN ORDER TO OBTAIN TWO PREAWARD SURVEYS. THE LOW BIDDER, APPARENTLY A SMALL BUSINESS CONCERN, OBTAINED A NEGATIVE PREAWARD SURVEY, WHICH REQUIRED A REFERRAL TO THE SMALL BUSINESS ADMINISTRATION (SBA) UNDER THE CERTIFICATE OF COMPETENCY (COC) PROCEDURES. SBA INITIALLY ADVISED A COC WAS IN PROCESS, BUT SOMETIME LATER ADVISED THAT A COC WOULD NOT BE ISSUED TO THE LOW BIDDER. THE NEXT LOW BIDDER, ANOTHER SMALL BUSINESS CONCERN, ALSO RECEIVED A NEGATIVE PREAWARD SURVEY AGAIN NECESSITATING REFERRAL TO SBA. FOR THESE REASONS TINKER'S JUDGMENT WAS THAT AWARD WOULD NOT BE MADE UNDER THE SOLICITATION UNTIL THE END OF MAY 1972. ACTUALLY AWARD UNDER THE IFB WAS EVENTUALLY MADE ON APRIL 26, 1972, TO MARINE IRON WORKS, INCORPORATED. YOUR FIRM WAS NOT LOW BIDDER.

IN THE MEANWHILE, THERE WAS AN URGENT REQUIREMENT FOR 15 FITTING ASSEMBLIES TO SUPPORT THE SOUTHEAST ASIA EFFORT. SINCE THERE WAS UNCERTAINTY AS TO WHEN AN AWARD WOULD BE MADE UNDER THE IFB, AN ORDER FOR THE URGENT REQUIREMENT WAS PLACED WITH BOEING ON FEBRUARY 8, 1972. THE AIR FORCE STATES THAT THE DIFFERENCE OF $684.20 PER UNIT MENTIONED IN YOUR LETTER CONSISTS OF A COMPARISON OF YOUR QUOTED PRICE UNDER RFQ 4557 AND BOEING'S ESTIMATED UNIT PRICE. THE AIR FORCE ADVISES THAT THE ACTUAL BOEING UNIT PRICE FOR THE QUANTITY OF 15 EACH WAS LESS THAN YOUR UNIT PRICE FOR 22 EACH OF THE SAME TYPE PART UNDER IFB-0113.

WE HAVE REVIEWED EACH OF THE PROCUREMENTS YOU HAVE BROUGHT TO OUR ATTENTION AND WE DO NOT FIND THAT THE AIR FORCE HAS ABUSED ITS DISCRETION IN THOSE INSTANCES.

WITH REGARD TO YOUR ARGUMENT THAT THE GOVERNMENT SHOULD REVERSE ENGINEER CERTAIN PARTS WE INVITE YOUR ATTENTION TO AFR 57-6, SECTION 3 201.4(H)(8), WHICH PROVIDES FOR COST COMPARISONS BEFORE DECIDING TO REVERSE ENGINEER. WHILE SOME OF THE ITEMS HAVE BEEN REVERSE ENGINEERED, IT HAS BEEN DETERMINED THAT THIS WOULD NOT BE JUSTIFIED FROM A COST STANDPOINT FOR OTHER ITEMS. WE HAVE NO BASIS FOR QUESTIONING THESE DETERMINATIONS. THIS CONNECTION, THE ESTABLISHMENT OF PROCEDURES TO QUALIFY A SOURCE TO MANUFACTURE A PART TO ANOTHER MANUFACTURER'S SPECIFICATIONS IS DISCRETIONARY AND WITHIN THE AMBIT OF THE EXPERTISE OF THE COGNIZANT TECHNICAL ACTIVITY. B 172901, B-173039, B-173087, OCTOBER 14, 1971.

WITH RESPECT TO THE GOVERNMENT'S ACQUIRING DATA UNDER THE BOEING CONTRACTS, IT SEEMS THAT THE AIR FORCE IS PURSUING THIS ALTERNATIVE AS INDICATED IN THE ABOVE QUOTED BACKGROUND INFORMATION.

IN THE CIRCUMSTANCES, IT DOES NOT SEEM THAT ANY ACTION BY OUR OFFICE IS WARRANTED.