B-174759, MAR 30, 1972

B-174759: Mar 30, 1972

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THE PRIMARY GROUND OF WAKMANN'S PROTEST IS THAT THE DEPARTMENT OF DEFENSE POLICY REQUIRING DOMESTIC COMPONENTS IN THE INTERESTS OF THE NATIONAL DEFENSE. IS UNABLE TO CONCLUDE THAT THE DECISION TO MAKE AWARD PRIOR TO RESOLUTION OF THE SUBJECT PROTEST WAS ARBITRARY AND NOT IN THE BEST INTERESTS OF THE GOVERNMENT. IT APPEARS THAT THE DOD POLICY IS WELL AUTHORIZED BY EXECUTIVE ORDER 11490. GAO HAS BEEN INFORMED THAT THE NEW POLICY WILL FOSTER SERIOUS COMPETITION FROM DOMESTIC FIRMS NOT PRESENTLY MANUFACTURING SUCH CLOCKS. THERE IS NO LEGAL BASIS FOR OBJECTION TO THE AWARD AND THE PROTEST MUST BE DENIED. THE RFP WAS ISSUED BY THE FRANKFORD ARSENAL. THE AWARD WAS MADE ON FEBRUARY 2. THE RFP INCLUDED AT PAGE 41 A CLAUSE ENTITLED "REQUIRED SOURCES FOR PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES" WHEREBY THE CONTRACTOR AGREES THAT END ITEMS AND COMPONENTS THEREOF DELIVERED UNDER THE CONTRACT WILL CONTAIN PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES THAT ARE OF DOMESTIC MANUFACTURE ONLY (I.E.

B-174759, MAR 30, 1972

BID PROTEST - NONRESPONSIVENESS - DOMESTIC SOURCE REQUIREMENT DECISION DENYING PROTEST OF WAKMANN WATCH COMPANY, INC., AGAINST AWARD OF A CONTRACT TO WALTHAM PRECISION INSTRUMENTS UNDER AN RFP ISSUED BY THE FRANKFORD ARSENAL, PHILADELPHIA, PA., FOR A PROCUREMENT OF AIRCRAFT CLOCKS. THE PRIMARY GROUND OF WAKMANN'S PROTEST IS THAT THE DEPARTMENT OF DEFENSE POLICY REQUIRING DOMESTIC COMPONENTS IN THE INTERESTS OF THE NATIONAL DEFENSE, VIOLATES THE PROVISIONS OF ASPR 1-300.1 AND 1-304.1 FOR MAXIMIZING COMPETITION, AND RENDERS WALTHAM THE SOLE SOURCE OF AIRCRAFT CLOCKS FOR FUTURE PROCUREMENTS. IN VIEW OF THE URGENCY OF THE PROCUREMENT, THE COMP. GEN. IS UNABLE TO CONCLUDE THAT THE DECISION TO MAKE AWARD PRIOR TO RESOLUTION OF THE SUBJECT PROTEST WAS ARBITRARY AND NOT IN THE BEST INTERESTS OF THE GOVERNMENT. IT APPEARS THAT THE DOD POLICY IS WELL AUTHORIZED BY EXECUTIVE ORDER 11490, THE PROVISIONS OF 10 U.S.C. 2304(A)(16), AND THE BUY AMERICAN ACT. FURTHER, GAO HAS BEEN INFORMED THAT THE NEW POLICY WILL FOSTER SERIOUS COMPETITION FROM DOMESTIC FIRMS NOT PRESENTLY MANUFACTURING SUCH CLOCKS. ACCORDINGLY, THERE IS NO LEGAL BASIS FOR OBJECTION TO THE AWARD AND THE PROTEST MUST BE DENIED.

TO SALON, ORTNER, YAVERS, DERSHOWITZ AND RAYBIN:

WE REFER TO YOUR LETTER OF DECEMBER 13, 1971, AND SUBSEQUENT CORRESPONDENCE, PROTESTING ON BEHALF OF WAKMANN WATCH COMPANY, INC. (WAKMANN), AGAINST AWARD BY THE DEPARTMENT OF THE ARMY OF A CONTRACT TO WALTHAM PRECISION INSTRUMENTS (WALTHAM) FOR THE FURNISHING OF A13A-1 AIRCRAFT CLOCKS UNDER REQUEST FOR PROPOSALS (RFP) DAAA25-72-R0140, DATED SEPTEMBER 30, 1971. THE RFP WAS ISSUED BY THE FRANKFORD ARSENAL, PHILADELPHIA, PENNSYLVANIA, AND THE AWARD WAS MADE ON FEBRUARY 2, 1972, UPON APPROVAL BY HEADQUARTERS, UNITED STATES ARMY MATERIEL COMMAND (AMC), IN ORDER TO MEET AN URGENT MILITARY NEED FOR THE EQUIPMENT.

THE RFP INCLUDED AT PAGE 41 A CLAUSE ENTITLED "REQUIRED SOURCES FOR PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES" WHEREBY THE CONTRACTOR AGREES THAT END ITEMS AND COMPONENTS THEREOF DELIVERED UNDER THE CONTRACT WILL CONTAIN PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES THAT ARE OF DOMESTIC MANUFACTURE ONLY (I.E., MANUFACTURE IN THE UNITED STATES OR CANADA). THE CLAUSE ALSO INCLUDES A PROVISION FOR WAIVER AFTER AWARD OF THE ABOVE REQUIREMENT IN WHOLE OR IN PART BY THE CONTRACTING OFFICER WHEN DETERMINED TO BE IN THE GOVERNMENT'S INTEREST ON CONDITION THAT THE CONTRACTOR AGREES TO ACQUIRE FOR NON-GOVERNMENT USE DOMESTICALLY MANUFACTURED PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES OF A LIKE QUANTITY AND TYPE.

IN ADDITION, THERE WAS INCLUDED ON PAGES 46 AND 47 OF THE RFP A STATEMENT OF THE POLICY OF THE DEPARTMENT OF DEFENSE THAT PROCUREMENT OF DEFENSE REQUIREMENTS FOR PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES BE MADE FROM DOMESTIC MANUFACTURING SOURCES (UNITED STATES OR CANADA) TO THE MAXIMUM EXTENT PRACTICABLE WITH CERTAIN EXCEPTIONS NOT HERE PERTINENT. THIS STATEMENT ALSO PRESCRIBED THE CLAUSE INCLUDED ON PAGE 41 OF THE RFP FOR USE IN PROCUREMENT SOLICITATIONS, AND STIPULATED THE EXCEPTIONS TO THE USE OF THE CLAUSE AND THE CONDITIONS UNDER WHICH THE WAIVER PROVISIONS OF THE CLAUSE COULD BE EXERCISED.

THE INCLUSION OF THE FOREGOING PROVISIONS IN THE RFP WAS PURSUANT TO A MEMORANDUM DATED AUGUST 12, 1971, ISSUED BY THE ASSISTANT SECRETARY OF DEFENSE (INSTALLATIONS AND LOGISTICS), ENTITLED "PRECISION COMPONENTS FOR MECHANICAL TIMING DEVICES." THE LANGUAGE OF THE RFP PROVISIONS COMPARES WITH THE SUBSEQUENTLY ISSUED INTERIM ASPR PROVISIONS WHICH WERE SET OUT IN DEFENSE PROCUREMENT CIRCULAR NO. 92, OCTOBER 15, 1971 (ISSUED PURSUANT TO THE AUTHORITY CONTAINED IN 5 U.S.C. 301, 10 U.S.C. 2202, AND ASPR 1-106), AND WITH THE CURRENT ASPR PROVISIONS ADDED BY ASPR REVISION 10, NOVEMBER 30, 1971.

FIVE PROPOSALS WERE RECEIVED BY THE CLOSING DATE FOR RECEIPT OF OFFERS, NOVEMBER 15, 1971, FOR THE FURNISHING OF THE ORIGINALLY SPECIFIED QUANTITY OF 4,377 CLOCKS. ALTHOUGH WAKMANN'S PROPOSAL OFFERED THE LOWEST PRICE, THE PROPOSAL WAS DETERMINED TO BE NONRESPONSIVE TO THE RFP IN VIEW OF THE FACT THAT WAKMANN OFFERED CLOCKS CONTAINING BASIC MOVEMENTS MADE IN SWITZERLAND. WAKMANN WAS SO INFORMED ON NOVEMBER 18, 1971.

SUBSEQUENT TO THE RECEIPT OF THE FIVE PROPOSALS, THERE WAS AN INCREASE OF 3,200 UNITS IN THE GOVERNMENT'S REQUIREMENTS FOR THE CLOCK. THE PROCURING ACTIVITY THEREUPON AMENDED THE RFP ON DECEMBER 1, 1971, TO COVER THE TOTAL REQUIREMENT OF 7,577 UNITS AND RESOLICITED ALL OF THE OFFERORS WHICH HAD SUBMITTED PROPOSALS ON THE ORIGINAL QUANTITY. ONLY TWO PROPOSALS WERE RECEIVED ON THE INCREASED QUANTITY BY THE CLOSING DATE, DECEMBER 13, 1971, AND, OF THESE, WALTHAM'S PROPOSAL WAS LOW.

OF THE THREE ORIGINAL OFFERORS WHICH DID NOT SUBMIT PROPOSALS UNDER THE AMENDED RFP, ONE INDICATED THAT IT LACKED THE CAPACITY TO SUPPLY THE INCREASED QUANTITY, ANOTHER OFFERED NO EXPLANATION FOR NOT QUOTING ON THE AMENDED RFP, AND WAKMANN SUBMITTED A PROTEST AGAINST ANY AWARD UNDER THE RFP TO WALTHAM. WAKMANN CONTENDED THAT THE AUGUST 12, 1971, MEMORANDUM ISSUED BY THE ASSISTANT SECRETARY OF DEFENSE (I&L), PURSUANT TO WHICH THE DOMESTIC COMPONENT PROVISIONS WERE INCORPORATED IN THE RFP, VIOLATES ASPR 1-300.1 AND ASPR 1-304.1, WHICH REQUIRE THAT ALL PROCUREMENTS BE MADE ON A COMPETITIVE BASIS TO THE MAXIMUM PRACTICABLE EXTENT. FURTHER, WAKMANN STATED THAT FOR THE PAST FIVE YEARS WAKMANN AND WALTHAM HAVE BEEN THE ONLY SOURCES FOR THE A13A-1 AIRCRAFT CLOCKS, AND THAT BY RESTRICTING THE PROCUREMENT TO CLOCKS CONTAINING ONLY DOMESTIC MOVEMENTS WALTHAM WILL BE THE SOLE SOURCE FOR THE CLOCKS SINCE WAKMANN USES ONLY SWISS MOVEMENTS IN ITS CLOCKS.

IN SUPPLEMENTING WAKMANN'S PROTEST, YOU CONTEND THAT AGAINST THE NECESSITY FOR INSURING A DOMESTIC SOURCE FOR CRITICALLY NEEDED SUPPLIES, WHICH WOULD JUSTIFY MAINTENANCE OF WALTHAM AS AN EFFECTIVE SUPPLIER, THE GOVERNMENT SHOULD WEIGH THE PROBABILITY THAT THERE WILL BE BUT A SINGLE SOURCE (WALTHAM) FOR THE CLOCKS UNLESS THE REQUIREMENTS SET FORTH IN THE AUGUST 12, 1971, MEMORANDUM ISSUED BY ASSISTANT SECRETARY OF DEFENSE (I&L) ARE WAIVED AS TO THE CLOCKS. FURTHER, YOU STATE THAT THE PROTEST IS BASED ON THE PROVISIONS OF ASPR 1-1109(A) (QUALIFIED PRODUCTS); ASPR 2-404 (REJECTION OF BIDS); AND ASPR 3 210.2(II) (COMPETITION PRECLUDED BY CONTROL OF MATERIALS) AS WELL AS THE ASPR PROVISIONS CITED BY WAKMANN.

THE RECORD BEFORE OUR OFFICE INCLUDES A MEMORANDUM RELATING TO A PREPROPOSAL CONFERENCE AT FRANKFORD ARSENAL ON OCTOBER 14, 1971, AT WHICH REPRESENTATIVES OF WAKMANN WERE PRESENT. IN RESPONSE TO THE QUESTION WHETHER THE GOVERNMENT COULD WAIVE THE "PURCHASE" OF THE DOMESTIC PRECISION COMPONENTS, AS OPPOSED TO THE "USE" THEREOF IN THE DELIVERED CLOCKS, OFFERORS WERE ADVISED THAT THE "PURCHASE" REQUIREMENT COULD NOT BE WAIVED BY THE CONTRACTING OFFICER. IN ADDITION, IN RESPONSE TO A COMMENT THAT THE CLOCKS SHOULD BE REMOVED FROM THE QUALIFIED PRODUCTS LIST (QPL), OFFERORS WERE SPECIFICALLY INFORMED THAT THE A13A-1 AIRCRAFT CLOCK IS NOT A QPL ITEM. OFFERORS WERE ALSO INFORMED THAT IN ADDITION TO WALTHAM TWO OTHER FIRMS HAD INDICATED THAT THEY WERE DOMESTIC SOURCES FOR THE SPECIFIED MOVEMENTS.

ON OCTOBER 21, 1971, THE PROCURING ACTIVITY TRANSMITTED TO ALL PROSPECTIVE OFFERORS AN ADVISORY LISTING OF 26 FIRMS IN THE UNITED STATES AND CANADA WHICH HAD EXPRESSED AN INTEREST IN SUPPLYING PRECISION COMPONENTS FOR GOVERNMENT MECHANICAL TIMING DEVICES. OFFERORS WERE CAUTIONED, HOWEVER, THAT EACH PRIME CONTRACTOR OF AIRCRAFT CLOCKS WOULD BE SOLELY RESPONSIBLE FOR THE CAPABILITY, CAPACITY, CREDIT, ETC., OF ANY SUBCONTRACTOR OR SUPPLIER USED BY THE CONTRACTOR IN PERFORMING A GOVERNMENT CONTRACT.

ON JANUARY 24, 1972, THE CONTRACTING OFFICER REQUESTED PERMISSION FROM HEADQUARTERS, AMC, PURSUANT TO ASPR 2-407.8(B)(3), TO MAKE THE AWARD TO WALTHAM, WITHOUT WAITING FOR A DECISION BY OUR OFFICE ON THE WAKMANN PROTEST, BECAUSE OF A CRITICAL NEED FOR THE CLOCKS. THE REQUEST ALSO STATED THAT THE BACK ORDER REQUIREMENTS FOR THE CLOCKS ALREADY INVOLVED A TOTAL OF 3,068 UNITS, WAS INCREASING BY 300 UNITS PER MONTH AND WOULD REACH 5,168 UNITS BY THE TIME WALTHAM MAKES ITS FIRST DELIVERY IN AUGUST 1972. IN VIEW OF THESE FACTORS WE CANNOT CONCLUDE THAT THE DECISION TO MAKE THE AWARD, PRIOR TO A RESOLUTION OF THE PROTEST, WAS AN ARBITRARY ACTION OR NOT IN THE BEST INTEREST OF THE GOVERNMENT AS YOU SUGGEST.

THE DEPARTMENT OF THE ARMY REPORTS THAT THE DOMESTIC PRECISION COMPONENTS POLICY, WHICH IS BEING IMPLEMENTED ON A TWO-YEAR TRIAL BASIS, IS THE RESULT OF A SERIES OF STUDIES CONDUCTED BY THE DEPARTMENT SINCE 1966 ON THE MOBILIZATION BASE FOR PRECISION COMPONENTS AND TIMERS. BASED ON THE STUDIES, THE DEPARTMENT OF DEFENSE HAS CONCLUDED THAT DEPENDENCE ON FOREIGN SOURCES FOR AMMUNITION FUZES AND MILITARY AIRCRAFT CLOCKS IS UNDESIRABLE FROM THE STANDPOINT OF NATIONAL DEFENSE. WHILE THE NEW POLICY WILL EFFECT RETENTION OF WALTHAM AS A SOURCE FOR THE PRECISION COMPONENTS OF THE CLOCKS, THE DEPARTMENT STATES THAT IT WILL ALSO FOSTER SERIOUS COMPETITION FROM DOMESTIC FIRMS WHO DO NOT PRESENTLY HAVE FACILITIES AND TOOLING FOR THE CLOCKS.

WE HAVE BEEN FURNISHED A COPY OF A MEMORANDUM SIGNED BY THE DEPUTY SECRETARY FOR DEFENSE REQUIRING THE ASSISTANT SECRETARY OF DEFENSE (I&L) TO PROMULGATE APPROPRIATE PROCEDURES TO ASSURE THE ACCOMPLISHMENT OF THE DOMESTIC MOBILIZATION PROGRAM, WHICH INCLUDES THE RESTRICTING OF PROCUREMENTS OF PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES TO DOMESTIC OR CANADIAN MANUFACTURING SOURCES. THE MEMORANDUM CITES THE AUTHORITY FOR SUCH ACTION AS EXECUTIVE ORDER 11490, WHICH ASSIGNS TO THE SECRETARY OF DEFENSE THE RESPONSIBILITY FOR DEVELOPING INDUSTRY PLANS TO FULFILL MILITARY REQUIREMENTS; THE CRITERIA ESTABLISHED IN DEFENSE MOBILIZATION ORDER VII-7, MAINTENANCE OF THE MOBILIZATION BASE; 10 U.S.C. 2304(A)(16); AND THE BUY AMERICAN ACT (41 U.S.C. 10A-D) WITH ITS IMPLEMENTING EXECUTIVE ORDER 10582.

THE RECORD ALSO INCLUDES A COPY OF A DETERMINATION AND FINDINGS (D&F) ISSUED BY THE ASSISTANT SECRETARY OF THE ARMY (INSTALLATIONS AND LOGISTICS), AUTHORIZING NEGOTIATION OF PROCUREMENTS OF PRECISION COMPONENTS FROM QUALIFIED SELECTED DOMESTIC SUPPLIERS, PURSUANT TO 10 U.S.C. 2304(A)(16), FOR THE FISCAL YEAR 1972 IN THE INTEREST OF INDUSTRIAL MOBILIZATION.

SINCE THE PROCEDURES IN QUESTION WERE BASED ON A NEW DEPARTMENT OF DEFENSE PROGRAM WHICH HAD BEEN IN EFFECT FOR SEVERAL WEEKS, WE DO NOT CONSIDER IT TO HAVE BEEN AN UNREASONABLE ACTION FOR THE CONTRACTING OFFICER TO FOLLOW THE NEW POLICY BY INCLUDING IN THE RFP THE CLAUSE REQUIRING DOMESTIC PRECISION COMPONENTS FOR MECHANICAL TIME DEVICES. FURTHER, THE WRITTEN DETERMINATION ISSUED BY THE ASSISTANT SECRETARY OF THE ARMY IN SUPPORT OF NEGOTIATION UNDER 10 U.S.C. 2304(A)(16) IS MADE FINAL BY 10 U.S.C. 2310. IN THE CIRCUMSTANCES, WE SEE NO LEGAL BASIS FOR OBJECTION TO THE PROCEDURES EMPLOYED IN THE SUBJECT PROCUREMENT.

AS TO AN EXERCISE BY THE CONTRACTING OFFICER OF THE WAIVER PERMITTED BY THE CLAUSE IN QUESTION, IT IS TO BE NOTED THAT BY THE TERMS OF ASPR 1- 315.4(C)(2), THE WAIVER APPLIES ONLY AFTER AWARD; I.E., AFTER AWARD OF A CONTRACT TO AN OFFEROR WHO HAS TENDERED A RESPONSIVE OFFER. INASMUCH AS WAKMANN DID NOT OFFER CLOCKS WITH DOMESTIC MOVEMENTS, THAT FIRM DID NOT QUALIFY FOR AWARD AND IT WAS THEREFORE NOT ENTITLED TO RECEIVE CONSIDERATION AS TO A WAIVER OF THE REQUIREMENT FOR USE OF DOMESTIC COMPONENTS IN THE CLOCKS TO BE FURNISHED UNDER THE CONTRACT.

IN SUMMARY, WE BELIEVE THE RECORD REASONABLY ESTABLISHES THAT COMPETITION FOR THE PROCUREMENT WAS OBTAINED BY THE DEPARTMENT OF THE ARMY TO THE MAXIMUM PRACTICABLE EXTENT, AS CONTEMPLATED BY ASPR 1-300.1 AND ASPR 1- 304.1; THAT THE AIRCRAFT CLOCKS WERE NOT QUALIFIED LIST PRODUCTS AND THEREFORE DID NOT COME WITHIN THE PROVISIONS OF ASPR 1 1109(A); THAT THE NEGOTIATION AUTHORITY IN ASPR 3-210.2 WAS NOT INVOKED IN THIS PROCUREMENT AND THEREFORE ASPR 3-210.2(II) IS NOT APPLICABLE; THAT THE CONTRACTING OFFICER WAS WARRANTED IN OBSERVING IN THE RFP THE NEW DEFENSE POLICY OF REQUIRING DOMESTIC COMPONENTS FOR THE CLOCKS IN THE INTEREST OF PRESERVING A DOMESTIC MOBILIZATION BASE FOR SUCH COMPONENTS; AND THAT THE PROCEDURES RELATING TO REJECTION OF BIDS AND AWARDS PRIOR TO RESOLUTION OF BID PROTESTS WERE FOLLOWED BY THE PROCURING ACTIVITY.

IN THE CIRCUMSTANCES, WE SEE NO LEGAL BASIS FOR OBJECTION TO THE AWARD WHICH WAS MADE TO WALTHAM. ACCORDINGLY, YOUR PROTEST IS DENIED.