B-174915, MAY 18, 1972, 51 COMP GEN 755

B-174915: May 18, 1972

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CONTRACTS - NEGOTIATION - BASIC ORDERING AGREEMENTS - PROPRIETY BECAUSE A REQUEST FOR QUOTATIONS TO PROCURE AIRCRAFT ENGINE IDLER PULLEYS ISSUED PURSUANT TO 10 U.S.C. 2304(A)(10) ALLOWING NEGOTIATIONS WHEN FORMAL COMPETITIVE PROCEDURES ARE IMPRACTICABLE ON THE BASIS OF A DETERMINATION AND FINDINGS THAT FULLY ADEQUATE DATA AND QUALITY ASSURANCE PROCEDURES WERE NOT AVAILABLE CONTAINED THE REQUIREMENT THAT A PROPOSAL SHOULD INCORPORATE THE CURRENT BASIC ORDERING AGREEMENT DOES NOT MAKE THE CONTRACT AWARDED ILLEGAL BECAUSE THE TERMS AND CONDITIONS OF AGREEMENTS MAY VARY WITH EACH FIRM SINCE PARAGRAPH 3-410.2 OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES THE GENERAL TERMS OF EACH AGREEMENT.

B-174915, MAY 18, 1972, 51 COMP GEN 755

CONTRACTS - NEGOTIATION - BASIC ORDERING AGREEMENTS - PROPRIETY BECAUSE A REQUEST FOR QUOTATIONS TO PROCURE AIRCRAFT ENGINE IDLER PULLEYS ISSUED PURSUANT TO 10 U.S.C. 2304(A)(10) ALLOWING NEGOTIATIONS WHEN FORMAL COMPETITIVE PROCEDURES ARE IMPRACTICABLE ON THE BASIS OF A DETERMINATION AND FINDINGS THAT FULLY ADEQUATE DATA AND QUALITY ASSURANCE PROCEDURES WERE NOT AVAILABLE CONTAINED THE REQUIREMENT THAT A PROPOSAL SHOULD INCORPORATE THE CURRENT BASIC ORDERING AGREEMENT DOES NOT MAKE THE CONTRACT AWARDED ILLEGAL BECAUSE THE TERMS AND CONDITIONS OF AGREEMENTS MAY VARY WITH EACH FIRM SINCE PARAGRAPH 3-410.2 OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES THE GENERAL TERMS OF EACH AGREEMENT, AND THE SPECIFIC TERMS OF THE CONTRACT ARE DEFINED BY THE CONTRACT REQUIREMENTS. HOWEVER, OF IMPORTANCE IS THE FACT THAT THE OFFEROR WHOSE FINAL PRICE WAS 60 PERCENT LOWER THAN THE SUCCESSFUL CONTRACTOR WAS NOT GIVEN AN EQUAL OPPORTUNITY TO COMPETE AS REQUIRED BY 10 U.S.C. 2304(G), A SITUATION TO BE AVOIDED IN FUTURE PROCUREMENTS.

TO THE SECRETARY OF THE AIR FORCE, MAY 18, 1972:

WE REFER TO LETTER LGPM, FEBRUARY 29, 1972, FROM THE CHIEF, CONTRACT MANAGEMENT DIVISION, DIRECTORATE OF PROCUREMENT POLICY, DEPUTY CHIEF OF STAFF, SYSTEMS & LOGISTICS, REPORTING ON THE PROTEST OF ARTKO CORPORATION (ARTKO) AGAINST AWARD OF A CONTRACT UNDER REQUEST FOR QUOTATIONS (RFQ) PR72-03259, ISSUED BY THE OKLAHOMA CITY AIR MATERIEL AREA (OCAMA), TINKER AIR FORCE BASE, OKLAHOMA, FOR PURCHASE OF A QUANTITY OF AIRCRAFT ENGINE IDLER PULLEYS DESIGNATED AT HONEYWELL PART NO. 944136-1.

BECAUSE FULLY ADEQUATE DATA AND QUALITY ASSURANCE PROCEDURES WERE NOT AVAILABLE, A DETERMINATION AND FINDINGS WAS MADE TO PROCURE THE PULLEYS UNDER 10 U.S.C. 2304(A)(10), ALLOWING THE NEGOTIATION OF A PURCHASE WHEN FORMAL COMPETITIVE PROCEDURES ARE IMPRACTICAL. ALTHOUGH THE PULLEY HAD BEEN CATEGORIZED "3Y," "ITEM ALREADY DIRECT PURCHASE MANUFACTURER," UNDER AIR FORCE REGULATIONS (AFR) 57-6 (ALSO DEFENSE SUPPLY AGENCY (DSAM) 4105.2), THE AGENCY HOPED TO REALIZE SAVINGS IN THE PURCHASE BY PLACING THE PULLEY IN CATEGORY "2Y," "ITEM CODED COMPETITIVE," IF OTHER SOURCES COULD QUALIFY EQUIVALENT ITEMS. ON SEPTEMBER 17, 1971, TWX SOLICITATIONS FOR OFFERS TO SUPPLY ON AN URGENT BASIS 2,838 PULLEYS DESCRIBED AS HONEYWELL PART NO. 944136 WERE SENT TO SEVERAL SOURCES, INCLUDING ARTKO AND U.S. DYNAMICS CORPORATION (DYNAMICS). THE SOLICITATION PROVIDED THAT THE PROPOSAL, TO BE SUBMITTED NO LATER THAN SEPTEMBER 30, 1971, SHOULD INCORPORATE THE TERMS AND CONDITIONS OF THE CURRENT BASIC ORDERING AGREEMENT (BOA). OTHER REQUIREMENTS IN THE SOLICITATION WERE A FIRM UNIT PRICE, DISCOUNT TERMS, A SPECIFIC DELIVERY SCHEDULE, AND PACKAGING STANDARDS.

AFTER RECEIVING OFFERS UNDER THE SOLICITATION, PROCUREMENT OFFICIALS DISCOVERED THAT HONEYWELL PART NO. 944136 HAD BEEN SUPERSEDED BY HONEYWELL PART NO. 944136-1. IN A TWX SOLICITATION OF OCTOBER 19, 1971, OCAMA REQUESTED THE OFFERORS TO SUBMIT QUOTATIONS BASED UPON THE SUBSTITUTE PART WITH ALL OTHER REQUIREMENTS REMAINING THE SAME AS THOSE IN THE FIRST SOLICITATION.

ON NOVEMBER 1, 1971, ARTKO WAS NOTIFIED BY TWX THAT NEGOTIATIONS WERE BEING CONDUCTED WITH IT AS ONE OF THE RESPONSIBLE OFFERORS WHO SUBMITTED A QUOTATION UNDER THE SOLICITATION AND THAT IT WAS REQUESTED TO SUBMIT ITS BEST AND FINAL OFFER BY NOVEMBER 5, 1971. THE TWX STATED THAT DELIVERY AS WELL AS PRICE WOULD BE A FACTOR FOR CONSIDERATION SINCE THE PROCUREMENT WAS URGENT. ON NOVEMBER 2, 1971, A TWX WAS SENT TO ALL THE OFFERORS ADVISING THAT THE QUANTITY HAD BEEN INCREASED BY 951 UNITS AND REQUESTING THAT THE BEST AND FINAL OFFERS BE BASED UPON THE NEW QUANTITY.

IN ITS QUOTATION OF OCTOBER 29, 1971, SUBMITTED IN RESPONSE TO THE SOLICITATION OF OCTOBER 19, 1971, ARTKO OFFERED THE PULLEYS AT $17.96 EACH. ON NOVEMBER 5, 1971, ARTKO SUBMITTED ITS BEST AND FINAL OFFER AT $14.41 EACH WITH DELIVERY OF FIRST ARTICLE 5 WEEKS AFTER RECEIPT OF THE ORDER AND DELIVERY OF 1,500 UNITS PER WEEK BEGINNING 3 WEEKS AFTER APPROVAL OF THE FIRST ARTICLE. IN A TWX OF NOVEMBER 8, 1971, OCAMA REQUESTED THAT BY NOVEMBER 12, 1971, ARTKO FURNISH A COPY OF ITS DRAWINGS OF THE PULLEY FOR EVALUATION OF ITS OFFER. ON NOVEMBER 15, 1971, ARTKO'S DRAWINGS WERE REFERRED TO THE OCAMA PROCUREMENT ENGINEERING BRANCH. THE REFERENCE STATED THAT ARTKO QUOTED A LOWER PRICE AND BETTER DELIVERY SCHEDULE THAN HONEYWELL AND REQUESTED APPROVAL OR DISAPPROVAL OF ARTKO AS A SUPPLIER WHO HAD NOT PREVIOUSLY BEEN APPROVED ON THE ITEM. ON THE FOLLOWING DAY, THE DRAWINGS WERE RETURNED TO THE AIR FORCE BUYER WITHOUT ACTION BECAUSE "NO HEAT TREAT OR HARDNESS" WAS SPECIFIED. THE ENGINEERING BRANCH SUGGESTED TO THE BUYER THAT ARTKO SHOULD BE REQUESTED TO SUPPLY MORE COMPLETE DATA AND ATTEMPT TO BE QUALIFIED FOR A SUBSEQUENT PURCHASE OF THE SAME ITEM IN ORDER TO AVOID DELAY OF THE CURRENT PURCHASE. AFTER ARTKO PROVIDED ADDITIONAL INFORMATION, INCLUDING REVISED DRAWINGS AND SPECIFICATIONS FOR HEAT TREATMENT, THE ENGINEERING BRANCH ON NOVEMBER 17, 1971, AGAIN REJECTED ARTKO'S PROPOSAL AS "INADEQUATE." IN RESPONSE TO ARTKO'S PROTEST, THE ENGINEERING BRANCH ISSUED THE FOLLOWING STATEMENT ON JANUARY 14, 1972, IN SUPPORT OF ITS REJECTION ON THE BASIS OF THE TECHNICAL INADEQUACY OF ARTKO'S PROPOSAL:

1. PPLE DISAPPROVED THE DATA ARTKO FURNISHED IN SUPPORT OF FURNISHING HONEYWELL P/N 944136-1 BECAUSE THE DATA FURNISHED WAS INCOMPLETE, INACCURATE, AND THERE WAS NO ASSURANCE THE GOVERNMENT WOULD RECEIVE A SATISFACTORY ITEM IF THE PART WAS MANUFACTURED TO THE DATA FURNISHED.

2. BECAUSE THE REQUIREMENT WAS URGENT WE SUGGESTED ARTKO FURNISH COMPLETE DATA AND ATTEMPT TO GET APPROVED FOR NEXT PROCUREMENT.

3. THE FOLLOWING ARE SOME OF THE DEFICIENCIES IN DATA SUBMITTED:

A. THE MATERIAL SPECIFIED IN AMS5349 WHICH IS STEEL CASTING, INVESTMENT CORROSION RESISTANT (SAE60416) WHICH WOULD REQUIRE A CASTING DRAWING, AND NONE WAS FURNISHED.

B. SECTION A-A WHICH IS A CROSS-SECTION OF AN IMPORTANT FEATURE OF THIS ITEM IS INCORRECT AS SHOWN ON FURNISHED DRAWING.

C. NOTE 3 SPECIFIES "PASSIVATE PER SPEC 4834." THIS SPECIFICATION WAS NOT FURNISHED.

D. A TOLERANCE CHANGE WAS MADE ON DRAWING BY OBLITERATING AN EXISTING FIGURE AND WRITING IN ANOTHER FIGURE. THIS IS NOT AN ACCEPTABLE ENGINEERING PRACTICE ON ENGINEERING CHANGES AS NO AUTHENTICITY IS EVIDENT.

E. AFTER ARTKO WAS INFORMED IN OUR LETTER OF 16 NOVEMBER 1971, THERE WAS NO HEAT TREAT OR HARDNESS SHOWN ON DRAWING, SOMEONE PRINTED BY HAND A HEAT TREAT SPECIFICATION ON SECOND COPY OF DRAWING FURNISHED, AND AGAIN NO DATA OR SIGNATURE TO SHOW AUTHENTICITY WAS EVIDENT.

F. FLAG NOTE 2 STATES "BEFORE CUTOFF TO .42(2) REF DIM" AND FLAG NOTE 2 REFERS TO .500R AND .0930 DIAMETER, YET THERE IS NO MATERIAL TO BE CUT OFF. THIS IS CONFUSING AS TO JUST WHAT IS MEANT OR INTENDED.

G. THE DRAWING AND HEAT TREAT SPECIFICATIONS DOES NOT SHOW COMPANY ADDRESS, NOR SIGNATURE OF DRAFTSMAN, AND ENGINEER. THERE IS NO PROOF THESE DOCUMENTS ARE OFFICIAL COMPANY DOCUMENTS.

MEANWHILE, ON NOVEMBER 3, 1971, DYNAMICS SUBMITTED ITS BEST AND FINAL OFFER OF $19.75 PER UNIT WITH DELIVERY OF FIVE ITEMS IMMEDIATELY AND DELIVERIES OF 1,000 UNITS 30 DAYS AFTER AWARD, 1,000, 60 DAYS AFTER AWARD, AND 1,789 UNITS 90 DAYS AFTER AWARD. COPIES OF DRAWINGS SUBMITTED BY DYNAMICS WERE SENT FOR TECHNICAL EVALUATION ON NOVEMBER 8, 1971, ALSO WITH THE COMMENTS THAT ITS PRICE WAS LOWER AND ITS DELIVERY SCHEDULE BETTER THAN THAT OF HONEYWELL. IN AN EVALUATION OF NOVEMBER 15, 1971, IT WAS STATED THAT "THE CONTRACTOR HAS NOT SUPPLIED ALL OF THE DATA THAT IS NEEDED FOR AN ENGINEERING EVALUATION; MATERIAL SPECIFICATION USD NO. 17739 IS NEEDED." IN A MEMO OF NOVEMBER 30, 1971, ANOTHER REQUEST WAS SUBMITTED FOR TECHNICAL EVALUATION OF DYNAMICS AS A NEW SUPPLIER OF THE PULLEY. SAVINGS IN BOTH TIME AND COST WERE CITED AS REASONS FOR QUALIFYING DYNAMICS. IN A RESPONSE OF DECEMBER 2, 1971, TO THE LATTER REQUEST, THE OCAMA TECHNICAL OPERATIONS SECTION STATED THAT THE EVALUATION WAS "EXPECTED TO TAKE SEVERAL MONTHS" AND SUGGESTED THAT THE ITEM BE PURCHASED IMMEDIATELY FROM THE ORIGINAL MANUFACTURER. IN A MEMORANDUM OF DECEMBER 8, 1971, WITH RESPECT TO THE SAMPLE PARTS AND DRAWINGS PREVIOUSLY SUBMITTED BY DYNAMICS, THE TECHNICAL OPERATIONS SECTION STATED:

THE FOLLOWING ITEMS ARE NEEDED TO COMPLETE THE EVALUATION:

A. HEAT TREAT SPECIFICATION - 14662

B. PASSIVATE SPECIFICATION - 14834

C. MATERIAL SPECIFICATION - 17739

D. A MATERIAL CERTIFICATION

E. A HEAT TREAT CERTIFICATION

F. EXPLAIN THE MEANINGS OF REFERENCES B1, B2, C1, C2 AND E1 ON U.S. DYNAMICS CORPORATION DRAWING 1944135.

IN A LETTER OF DECEMBER 9, 1971, DYNAMICS SUBMITTED THE INFORMATION AND DRAWINGS REQUESTED. THE TECHNICAL EVALUATION OF DYNAMICS WAS RETURNED IN A MEMORANDUM OF JANUARY 4, 1972, STATING THAT THE SAMPLE PARTS HAD BEEN INSPECTED AND THAT DYNAMICS HAS BEEN APPROVED AS A SUPPLIER OF THE PULLEYS. THE MEMORANDUM STATED FURTHER:

THE PARTS ARE ACCEPTABLE EXCEPT FOR INSUFFICIENT PASSIVATION FINISH. ***

IF U.S. DYNAMICS CORPORATION IS AWARDED A CONTRACT FOR A QUANTITY OF SUBJECT PARTS, GOVERNMENT INSPECTORS SHOULD BE REQUESTED TO ASSURE COMPLIANCE WITH THE SPECIFICATION FOR PASSIVATED SURFACE FINISH ALONG WITH OTHER ACCEPTANCE INSPECTIONS.

AN AWARD TO DYNAMICS FOR MANUFACTURE OF THE PART WAS SIGNED BY BOTH THE CONTRACTING OFFICER AND A REPRESENTATIVE OF DYNAMICS ON JANUARY 7, 1972, AND AWARD BECAME EFFECTIVE ON THAT DAY WHEN THE CONTRACT WAS HAND DELIVERED TO THE REPRESENTATIVE OF DYNAMICS. ALTHOUGH THE FILE COPY OF THE CONTRACT WAS NOT MAILED UNTIL JANUARY 10, 1972, IT IS ATTESTED IN A MEMORANDUM SIGNED BY THE CONTRACTING OFFICER AND A CLERK WHO MADE A COPY OF THE CONTRACT FOR THE REPRESENTATIVE OF DYNAMICS THAT THE AWARD WAS ACTUALLY MADE ON JANUARY 7 IN ORDER TO EXPEDITE PERFORMANCE OF THE URGENT REQUIREMENTS OF THE CONTRACT. ON THE BASIS OF THE ABOVE EVIDENCE CONCERNING THE CIRCUMSTANCES OF THE AWARD, WE ARE UNABLE TO AGREE WITH ARTKO'S ALLEGATION THAT THE CONTRACT WAS AWARDED AFTER ITS PROTEST WAS SUBMITTED ON JANUARY 10, 1972.

NOR DO WE CONSIDER VALID ARTKO'S CONTENTION THAT AN AWARD MADE UNDER A BOA IS ILLEGAL BECAUSE THE TERMS AND CONDITIONS OF SUCH AGREEMENTS MAY VARY WITH EACH FIRM. THE PARTIES AGREED TO BASIC ORDERING AGREEMENTS UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-410.2 WHICH PROVIDES THE GENERAL TERMS OF EACH AGREEMENT. FURTHERMORE, THE SPECIFIC TERMS OF A CONTRACT AWARDED UNDER A BOA ARE DEFINED BY THE REQUIREMENTS OF THE CONTRACT. FINALLY, THERE IS NO EVIDENCE THAT PROCUREMENT REGULATIONS GOVERNING THE BOA WERE VIOLATED NOR THAT ANY BIDDER WAS PREJUDICED BY USE OF THE BOA.

HOWEVER, WE ARE IN FULL AGREEMENT WITH ARTKO THAT AIR FORCE PROCUREMENT OFFICIALS FAILED TO PROVIDE ARTKO AN EQUAL OPPORTUNITY TO COMPETE FOR THE AWARD. UNDER 10 U.S.C. 2304(G), PROCUREMENT OFFICIALS ARE REQUIRED TO CONDUCT WRITTEN OR ORAL DISCUSSIONS WITH ALL RESPONSIBLE OFFERORS SUBMITTING COMPETITIVE PROPOSALS. OUR OFFICE HAS RULED REPEATEDLY THAT COMPETITIVE OFFERORS SHOULD BE GIVEN EQUAL OPPORTUNITY FOR DISCUSSIONS. SEE 46 COMP. GEN. 191 (1966); B-170181, FEBRUARY 22, 1971.

THE FINAL PRICE OFFERED BY DYNAMICS WAS NEARLY 60 PERCENT HIGHER THAN ARTKO'S. FURTHERMORE, THE DELIVERY SCHEDULE PROPOSED BY ARTKO WAS NOT SIGNIFICANTLY DIFFERENT FROM THAT OF DYNAMICS. IN ANY CASE, IT DID NOT ACT AS A DETERRENT AGAINST INVITING ARTKO TO FURNISH TECHNICAL DATA AND WAS NOT RELIED UPON AS ONE OF THE BASES FOR REJECTION UNTIL AFTER THE OFFEROR'S TECHNICAL DATA WAS CONSIDERED TO BE DEFICIENT. NEVERTHELESS, IN THE MEMORANDUM OF JANUARY 14, 1972, SUBMITTED BY OCAMA IN SUPPORT OF ITS DETERMINATION THAT ARTKO'S PROPOSAL WAS NOT RESPONSIVE, THE MATERIAL DEFICIENCIES IN ARTKO'S DRAWINGS WERE LISTED, ALTHOUGH THESE DEFICIENCIES WERE NEVER DISCLOSED TO ARTKO. A CURSORY REVIEW OF OCAMA'S OWN EVALUATIONS OF THE DATA FROM ARTKO AND DYNAMICS, QUOTED ABOVE, INDICATES THAT SOME OF THE SAME DEFICIENCIES EXISTED IN THE ORIGINAL DATA FURNISHED BY BOTH OFFERORS. YET DYNAMICS WAS PROVIDED WITH AN ADDITIONAL OPPORTUNITY AND ADDITIONAL TIME NOT PROVIDED TO ARTKO TO ESTABLISH ITSELF AS A SOURCE FOR THE ITEM. THE ONLY REASONABLE CONCLUSION WHICH MAY BE DRAWN FROM THESE FINDINGS IS THAT PROCUREMENT OFFICIALS FAILED TO CONDUCT NEGOTIATIONS IN A MANNER GIVING ALL COMPETITORS AN EQUAL OPPORTUNITY TO COMPETE FOR THE AWARD.

IN VIEW OF THE FACT THAT PERFORMANCE BY DYNAMICS HAS NOW BEEN COMPLETED, NO RECOMMENDATION FOR CORRECTIVE ACTION IS BEING MADE IN THE PRESENT CASE. HOWEVER, BASED ON THE FINDINGS ABOVE, WE RECOMMEND THAT APPROPRIATE STEPS BE TAKEN TO PRECLUDE A RECURRENCE OF THE SAME SITUATION.