B-175254(1), APR 4, 1973, 52 COMP GEN 640

B-175254(1): Apr 4, 1973

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PROVISIONS THE BIDDER CONTENDED WERE DESIGNED TO ELIMINATE COMPETITION. WAS NOT PREJUDICED BY USE OF THE CLAUSES AS THEY WERE DEVELOPED TO PROTECT THE GOVERNMENT'S INTEREST IN VIEW OF THE RESPONSES TO THE INITIAL SOLICITATION FROM RELATIVELY INEXPERIENCED FIRMS AND. THE USE OF SUCH CLAUSES IS NOT IMPROPER OR UNDULY RESTRICTIVE OF COMPETITION BECAUSE ONE OR MORE BIDDERS OR POTENTIAL BIDDERS CANNOT COMPLY WITH THEIR REQUIREMENTS. TWO LIQUIDATED DAMAGE CLAUSES IN ORDER TO PROTECT THE INTERESTS OF THE GOVERNMENT IS NOT RESTRICTIVE OF COMPETITION WHERE THE EXPERIENCE CLAUSE IS INTENDED TO ESTABLISH PRIOR EXPERIENCE - A MATTER OF BIDDER RESPONSIBILITY AND NOT BID RESPONSIVENESS - AND ITS USE IS APPROPRIATE TO SUBSTANTIATE PRODUCT RELIABILITY AND MANUFACTURING CAPABILITY.

B-175254(1), APR 4, 1973, 52 COMP GEN 640

BIDS - COMPETITIVE SYSTEM - SPECIFICATIONS - DEVELOPMENT TO ENABLE COMPETITION THE LOW BIDDER UNDER A CANCELED AMBIGUOUS INVITATION FOR BIDS ON 2,000 KW GAS TURBINE ENGINE DRIVEN POWER PLANTS AND RELATED DATA PACKAGES WHO DID NOT SUBMIT A BID UNDER THE REISSUED INVITATION BECAUSE IT INCLUDED A REVISED, MORE BROADENED EXPERIENCE CLAUSE, A REQUIREMENT FOR A 100 PERCENT PERFORMANCE BOND, AND TWO LIQUIDATED DAMAGE CLAUSES AT DIFFERENT PER DIEM RATES, PROVISIONS THE BIDDER CONTENDED WERE DESIGNED TO ELIMINATE COMPETITION, WAS NOT PREJUDICED BY USE OF THE CLAUSES AS THEY WERE DEVELOPED TO PROTECT THE GOVERNMENT'S INTEREST IN VIEW OF THE RESPONSES TO THE INITIAL SOLICITATION FROM RELATIVELY INEXPERIENCED FIRMS AND, FURTHERMORE, THE USE OF SUCH CLAUSES IS NOT IMPROPER OR UNDULY RESTRICTIVE OF COMPETITION BECAUSE ONE OR MORE BIDDERS OR POTENTIAL BIDDERS CANNOT COMPLY WITH THEIR REQUIREMENTS. BIDS - COMPETITIVE SYSTEM - RESTRICTIONS ON COMPETITION - PROTECT INTERESTS OF GOVERNMENT THE INCLUSION IN AN INVITATION FOR BIDS TO PROCURE GAS TURBINE UNITS OF AN EXPERIENCE, PERFORMANCE BOND, AND TWO LIQUIDATED DAMAGE CLAUSES IN ORDER TO PROTECT THE INTERESTS OF THE GOVERNMENT IS NOT RESTRICTIVE OF COMPETITION WHERE THE EXPERIENCE CLAUSE IS INTENDED TO ESTABLISH PRIOR EXPERIENCE - A MATTER OF BIDDER RESPONSIBILITY AND NOT BID RESPONSIVENESS - AND ITS USE IS APPROPRIATE TO SUBSTANTIATE PRODUCT RELIABILITY AND MANUFACTURING CAPABILITY; WHERE THE PERFORMANCE BOND IS A NECESSARY AND PROPER MEANS TO SECURE THE CONTRACTOR'S OBLIGATION UNDER THE CONTRACT, EVEN THOUGH A 100 PERCENT PERFORMANCE BOND WAS REQUIRED; AND WHERE THE LIQUIDATED DAMAGES AT DIFFERENT PER DIEM RATES FOR DELAYED DELIVERY AND FAILURE OF THE UNITS TO OPERATE EACH DAY FOR THE FIRST YEAR WAS WARRANTED ON THE BASIS OF ADMINISTRATIVE NEEDS AND PRIOR EXPERIENCES, AND FURTHERMORE, THE DETERMINATION OF WHETHER A PENALTY IS INVOLVED DEPENDS ON FACTS AS THEY ARISE. ADVERTISING - ADVERTISING V. NEGOTIATION - SPECIFICATIONS AVAILABILITY THE USE OF FORMAL ADVERTISING PROCEDURES BY THE NAVAL FACILITIES ENGINEERING COMMAND TO PROCURE 2,000 KW GAS TURBINE ENGINE DRIVEN POWER PLANTS AND RELATED DATA PACKAGES WAS PROPER SINCE ADEQUATE SPECIFICATIONS WERE AVAILABLE AND THE USE OF THE TWO-STEP FORMAL ADVERTISING PROCEDURE IS AUTHORIZED PURSUANT TO PARAGRAPH 2-501 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) ONLY WHEN THERE ARE NO ADEQUATE SPECIFICATIONS TO PERMIT FORMAL ADVERTISING. MOREOVER, THE RECORD DOES NOT INDICATE THAT NEGOTIATION OF THE PROCUREMENT SHOULD HAVE BEEN AUTHORIZED UNDER THE CIRCUMSTANCES SPELLED OUT IN ASPR 3-200 ET SEQ. AND ASPR 3-102(B)(1). CONTRACTS - AWARDS - ABEYANCE - PENDING GENERAL ACCOUNTING OFFICE DECISION THE AWARD OF A CONTRACT DURING THE PENDENCY OF A PROTEST ALLEGING RESTRICTIVE SPECIFICATIONS WAS PROPER WHERE THE DETERMINATIONS AND FINDINGS OF THE CONTRACTING OFFIER TO JUSTIFY THE AWARD MET THE CRITERIA IN PARAGRAPH 2-407.8(B)(3) OF THE ARMED SERVICES PROCUREMENT REGULATION TO THE EFFECT THAT THE PROCUREMENT WAS URGENTLY NEEDED, OR THAT DELIVERY OR PERFORMANCE WILL BE UNDULY DELAYED BY FAILURE TO MAKE AWARD PROMPTLY, OR THAT A PROMPT AWARD WILL OTHERWISE BE ADVANTAGEOUS TO THE GOVERNMENT.

TO THE ABBOTT POWER CORPORATION, APRIL 4, 1973:

REFERENCE IS MADE TO YOUR TELEFAX OF OCTOBER 25, 1972, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST ALLEGEDLY RESTRICTIVE PROVISIONS OF INVITATIONS FOR BIDS N62742-73-B-6001 AND N62742-73-B-6006, ISSUED BY THE NAVAL FACILITIES ENGINEERING COMMAND (NAVFAC), SAN BRUNO, CALIFORNIA.

THE SOLICITATIONS WERE FOR 2,000 KW GAS TURBINE ENGINE DRIVEN POWER PLANTS AND RELATED DATA PACKAGES, AND WERE ISSUED SUBSEQUENT TO OUR DECISION OF AUGUST 16, 1972, 52 COMP. GEN. 87, IN WHICH WE RECOMMENDED CANCELLATION OF A PREVIOUS IFB FOR 12 SUCH GAS TURBINE UNITS. YOUR COMPANY SUBMITTED THE LOWEST BID IN RESPONSE TO THAT EARLIER SOLICITATION AND HAD A CERTIFICATE OF COMPETENCY (COC) FROM THE SMALL BUSINESS ADMINISTRATION. WE RECOMMENDED CANCELLATION OF THE IFB, HOWEVER, BECAUSE ANOTHER BIDDER ESTABLISHED THAT IT HAD BEEN PREJUDICED BY AN AMBIGUOUS SPECIFICATION PROVISION DEALING WITH THE GEAR BOX TO BE USED WITH THE POWER PLANT.

IFB-6001, ISSUED ON SEPTEMBER 18, 1972, AND CALLING FOR BIDS ON 12 GENERATOR UNITS, CONTAINED SEVERAL PROVISIONS THAT WERE NOT PRESENT IN THE ORIGINAL IFB. THESE PROVISIONS INCLUDED A REVISED EXPERIENCE CLAUSE, A REQUIREMENT FOR A PERFORMANCE BOND, AND TWO LIQUIDATED DAMAGES CLAUSES. YOU DID NOT SUBMIT A BID IN RESPONSE TO THIS SOLICITATION. INSTEAD, ON OCTOBER 2, 1972, YOU FILED A PROTEST WITH THE NAVY, CLAIMING THAT THESE NEW PROVISIONS WERE ILLEGAL BECAUSE THEY WERE DESIGNED TO ELIMINATE YOU FROM COMPETITION, AND THEN FILED A SIMILAR PROTEST WITH THIS OFFICE ON OCTOBER 25, 1972, THE DAY SET FOR BID OPENING. ON OCTOBER 30, 1972, THE NAVY ADVISED US THAT IT WOULD MAKE AWARD NOTWITHSTANDING YOUR PROTEST, AND THE NEXT DAY AWARDED A CONTRACT TO CUSTOM APPLIED POWER CORPORATION (CAPCO), THE THIRD LOW BIDDER.

ON NOVEMBER 13, 1972, IFB-6006, FOR THE PROCUREMENT OF 12(SUBSEQUENTLY AMENDED TO 9) SKID MOUNTED POWER PLANTS, WAS ISSUED. BY LETTER OF DECEMBER 12, 1972, YOU PROTESTED THIS NEW SOLICITATION, CLAIMING THAT IT CONTAINED SIMILAR RESTRICTIVE PROVISIONS. ON DECEMBER 26, 1972, THE NAVY ADVISED US THAT AWARD WOULD BE MADE PRIOR TO RESOLUTION OF THE PROTEST, AND A CONTRACT WAS AWARDED TO WILLIAMS AND LANE, INCORPORATED, THE LOW BIDDER, ON OR ABOUT JANUARY 4, 1973.

SOLICITATION-6001 AS ISSUED CONTAINED THE FOLLOWING SPECIFICATION PROVISIONS:

1A.6 PERFORMANCE BOND. WITHIN 10 DAYS AFTER AWARD OR NOTICE TO PROCEED, THE CONTRACTOR SHALL FURNISH A PERFORMANCE BOND (U.S. STANDARD FORM 25). THE PERFORMANCE BOND, SHALL BE IN THE PENAL SUM EQUAL TO 100 PERCENT OF THE CONTRACT PRICE.***.

1A.7 DAMAGES FOR DELAY. FIXED, AGREED AND LIQUIDATED DAMAGES FOR EACH CALENDAR DAY *** SHALL BE AT THE RATE OF $125.00 PER CALENDAR DAY FOR EACH UNIT.

1A.11 EXPERIENCE CLAUSE

A.*** THE POWER PLANT OFFERED MUST BE DESIGNED, FABRICATED, AND ASSEMBLED BY A FIRM WHICH HAS BEEN REGULARLY ENGAGED FOR AT LEAST ONE YEAR IN THE DESIGN FABRICATION AND ASSEMBLY OF POWER PLANTS RATED AT LEAST 500 KILOWATTS CONTINUOUS DUTY AND HAVE OPERATED SUCCESSFULLY AT LEAST 1,000 HOURS WITHIN A PERIOD OF NO MORE THAN TWO YEARS ON LIQUID PETROLEUM FUEL.

SECTION IA.18, CAPTIONED "LOSS OF GENERATING CAPABILITY," ALSO PROVIDED THAT THE "SUM OF $63,000 PER POWER PLANT WILL BE RETAINED UNTIL THE UNIT HAS OPERATED WITHOUT DEFECT IN DESIGN AND MATERIAL TO PRODUCE 5,250,000 KW OF ELECTRICITY FROM THE DATE OF DELIVERY BUT NOT LONGER THAN ONE YEAR." IT FURTHER PROVIDED THAT 1.2 CENTS PER KILOWATT HOUR FOR ALL HOURS LESS THAN 5,250,000 KILOWATT HOURS PRODUCED IN THE FIRST YEAR WOULD BE DEDUCTED FROM THE CONTRACT PRICE FOR ANY UNIT THAT FAILED BEFORE PRODUCING THAT MUCH POWER.

SUBSEQUENT TO RECEIPT OF YOUR OCTOBER 2, 1972, LETTER, NAVFAC AMENDED THE SPECIFICATIONS, DELETING THE WORDS "ON LIQUID PETROLEUM FUEL" FROM SECTION 1A.11 AND REVISING SECTION 1A.18 TO READ AS FOLLOWS:

IN THE EVENT ANY UNIT FAILS FROM DEFECT IN DESIGN AND/OR MATERIAL WITHIN THE FIRST YEAR FROM DATE OF DELIVERY OF THE UNIT, THE SUM OF $150.00 PER DAY FOR EACH CALENDAR DAY THE PARTICULAR UNIT IS NOT ABLE TO OPERATE WILL BE DEDUCTED FROM THE CONTRACT PRICE. THIS WARRANTY IS IN ADDITION TO ALL OTHER WARRANTY PROVISIONS OF THE CONTRACT.

SOLICITATION-6006 CONTAINED THE SAME PERFORMANCE BOND, DAMAGES FOR DELAY, AND REVISED LOSS OF GENERATING CAPABILITY CLAUSES. THE EXPERIENCE CLAUSE, HOWEVER, WAS BROADENED TO INCLUDE THE MANUFACTURE OF PUMPING PLANTS OF AT LEAST 675 HORSEPOWER AS AN ALTERNATIVE TO HAVING MANUFACTURED 500 KW POWER PLANTS.

YOU OBJECT TO THE EXPERIENCE CLAUSE PROVISIONS BECAUSE YOU CLAIM THAT NAVFAC KNEW YOU WOULD NOT BE ABLE TO COMPLY WITH THEIR CONDITIONS AND THEREFORE WOULD BE FOUND NONRESPONSIVE. YOU CONTEND THAT NAVFAC DEVELOPED THE CLAUSE TO AVOID THE THRUST OF OUR AUGUST 16, 1972, DECISION, WHEREIN WE SAID THAT YOUR COC FORECLOSED ANY QUESTION AS TO YOUR ABILITY TO COMPLY WITH THE EXPERIENCE CLAUSE USED IN THE EARLIER IFB. WITH RESPECT TO THE PERFORMANCE BOND REQUIREMENT, YOU STATE:

*** THE GOVERNMENT KNOWS FULL WELL THAT WE HAVE THE CAPACITY AND CREDIT TO PERFORM THE CONTRACT. HOWEVER, DUE TO THE DISCLOSURE OF OUR SIZE AND FINANCIAL STRUCTURE, WHICH WAS REVEALED IN THE DOCUMENTATION REQUIRED TO OBTAIN THE C.O.C., THEY ALSO KNOW THAT WE COULD NOT OBTAIN A PERFORMANCE BOND IN THE TOTAL AMOUNT OF THIS CONTRACT WITHOUT STRAINING OUR BONDING CAPACITY TO A POINT WHERE WE WOULD BE UNABLE TO OBTAIN BONDS ON THE OTHER SMALLER CONTRACTS WHICH ARE A REGULAR PART OF OUR BUSINESS AND THUS WE COULD NOT AFFORD TO BID ON THIS SOLICITATION.

YOU FURTHER ASSERT THAT THE PROVISION FOR LOSS OF GENERATING CAPABILITY WAS "COMPLETELY ILLEGAL AND WILL RESULT IN AN ENORMOUS UNWARRANTED COST TO THE GOVERNMENT." YOU ALSO POINT TO COMMENTS MADE BY NAVFAC'S ASSISTANT COUNSEL AT A MEETING AT OUR OFFICE ON JANUARY 23, 1973, TO THE EFFECT THAT NAVFAC DID NOT WANT TO MAKE AN AWARD TO YOUR FIRM AND THAT THE EXPERIENCE CLAUSE WAS REWRITTEN TO PRECLUDE AWARD TO COMPANIES LIKE ABBOTT. YOU ALSO POINT TO THE OMISSION OF THESE "PROTECTIVE" CLAUSES FROM THE ORIGINAL SOLICITATION AS EVIDENCE THAT THEY WERE USED TO ELIMINATE YOU FROM COMPETITION AND NOT TO PROTECT THE GOVERNMENT'S INTEREST.

THE NAVY CLAIMS THAT EACH OF THE CLAUSES WAS A NECESSARY REQUIREMENT TO PROPERLY PROTECT ITS INTERESTS. IT POINTS OUT, IN SUPPORT OF ITS USE OF THE EXPERIENCE CLAUSE, THAT GENERATOR UNIT MANUFACTURERS "ARE FREE TO PUT TOGETHER THEIR OWN COMBINATIONS OF ENGINES, GEAR BOXES, ALTERNATIORS, AND CONTROLS" AND THAT THE GOVERNMENT "MUST RELY UPON THE KNOWLEDGE AND SUCCESSFUL EXPERIENCE OF THE MANUFACTURERS THEMSELVES." IT STATES THAT THE PERFORMANCE BOND WAS REQUIRED BECAUSE THE CONTRACTOR COULD RECEIVE SUBSTANTIAL PROGRESS PAYMENTS "AND FAIL TO DELIVER OR COULD DELIVER UNITS THAT FAILED IN PERFORMANCE," AND THAT IT HAS NO KNOWLEDGE REGARDING YOUR ABILITY TO OBTAIN BONDS. IT FURTHER STATES THAT THE LIQUIDATED DAMAGES PROVISION FOR DELAY IN DELIVERY WAS REQUIRED BECAUSE ITS DAMAGES IN THE EVENT OF DELAY WOULD LIKELY BE "UNFORESEEABLE AND LEGALLY UNPROVABLE." FINALLY, THE NAVY REPORTS THAT IN RESPONSE TO YOUR PROTEST IT ELIMINATED THE WITHHOLDING PROVISION FROM THE LOSS OF GENERATING CAPABILITY CLAUSE AND ESTABLISHED $150 PER DAY DAMAGES "BASED ON 50% UTILIZATION AND 60% LOAD FACTOR AT 1.2[ KWH ROUNDED DOWN." IT FURTHER STATES THAT THE REQUIREMENTS FOR BONDS AND FOR LIQUIDATED DAMAGES COVERING DELAYS AND BREAKDOWNS ARE BASED ON NAVFAC'S "PREVIOUS EXPERIENCES."

SOLICITATION CLAUSES CONTAINING EXPERIENCE REQUIREMENTS GOING TO BOTH PRODUCT RELIABILITY AND THE CAPABILITY OF A MANUFACTURER HAVE BEEN RECOGNIZED AS APPROPRIATE FOR CERTAIN TYPES OF PROCUREMENTS, INCLUDING PROCUREMENTS OF DIESEL GENERATOR UNITS. 48 COMP. GEN. 291(1968). NAVFAC'S ORIGINAL SOLICITATION FOR THESE GAS TURBINE GENERATORS CONTAINED AN EXPERIENCE REQUIREMENT. 52 COMP. GEN. 87, SUPRA. YOU CLAIM, HOWEVER, THAT IN THESE SUBSEQUENT SOLICITATIONS THE NAVY ADDED A PROVISION GOING TO THE PERFORMANCE HISTORY OF A PRODUCT SO AS TO ELIMINATE YOUR FIRM FROM THE COMPETITION. WE DO NOT AGREE THAT THE INCLUSION OF THE PROVISION AUTOMATICALLY ELIMINATED YOU FROM COMPETITION. THESE EXPERIENCE CLAUSES REQUIRE ONLY THAT BIDDERS OFFERING TO SUPPLY 2,000 KW GENERATORS HAVE PREVIOUS EXPERIENCE IN MANUFACTURING SOME SMALLER, ALBEIT RELATED, GENERATOR UNITS THAT HAVE OPERATED SUCCESSFULLY, AND THEREFORE COMPLIANCE WITH SUCH REQUIREMENTS IS A MATTER OF BIDDER RESPONSIBILITY AND NOT BID RESPONSIVENESS. SEE, IN THIS REGARD, OUR LETTER OF TODAY TO COUNSEL FOR STEWART AND STEVENSON SERVICES, INC., COPY ENCLOSED. WE THINK THE RECORD ADEQUATELY ESTABLISHES THAT NAVFAC HAD A LEGITIMATE PURPOSE IN SEEKING TO LIMIT AWARD TO BIDDERS WITH SUCCESSFUL EXPERIENCE IN SUPPLYING OPERATIONAL GENERATING UNITS.

WITH REGARD TO THE PERFORMANCE BOND REQUIREMENT, ARMED SERVICES PROCUREMENT REGULATION (ASPR) 10-104.2 STATES THAT PERFORMANCE BONDS MAY BE REQUIRED IN INDIVIDUAL PROCUREMENTS WHEN "THE CONTRACTING OFFICER DETERMINES THE NEED THEREFOR," AND WE HAVE RECOGNIZED THAT A DETERMINATION REGARDING SUCH A REQUIREMENT IS WITHIN THE CONTRACTING OFFICER'S DISCRETION. B-170069, APRIL 23, 1971. WE HAVE ALSO RECOGNIZED THAT WHILE "THE REQUIREMENT FOR A PERFORMANCE BOND MAY IN SOME CIRCUMSTANCES RESULT IN A RESTRICTION OF COMPETITION, IT IS NEVERTHELESS A NECESSARY AND PROPER MEANS OF SECURING TO THE GOVERNMENT FULFILLMENT OF A CONTRACTOR'S OBLIGATIONS UNDER HIS CONTRACT." B 175458(2), JUNE 28, 1972. IN THAT CASE WE REJECTED THE ARGUMENT THAT A 100 PERCENT PERFORMANCE BOND REQUIREMENT WAS UNREASONABLE BECAUSE IT WAS DIFFICULT FOR SMALL BUSINESS TO COMPLY WITH IT OR THAT THE REQUIREMENT MUST HAVE BEEN INCLUDED IN A SOLICITATION TO FAVOR A PARTICULAR FIRM BECAUSE PRIOR SOLICITATIONS DID NOT CONTAIN SUCH A REQUIREMENT. ACCORDINGLY, IN VIEW OF THE NAVY'S EXPLANATION REGARDING THE REQUIREMENT FOR A PERFORMANCE BOND, WE CANNOT CONCLUDE THAT THE PERFORMANCE BOND REQUIREMENT IN THESE SOLICITATIONS WAS UNREASONABLE.

THE DAMAGES FOR DELAY AND LOSS OF GENERATING CAPABILITY SECTIONS OF THE SOLICITATIONS ARE BOTH LIQUIDATED DAMAGES PROVISIONS. ASPR 1 310(A) PROVIDES THAT SUCH PROVISIONS MAY BE USED WHEN THE TIME OF DELIVERY OR PERFORMANCE IS SUCH AN IMPORTANT FACTOR THAT THE GOVERNMENT MAY EXPECT TO SUFFER DAMAGES IF THE DELIVERY OR PERFORMANCE IS DELINQUENT AND THE EXTENT OF SUCH DAMAGES WOULD BE DIFFICULT TO ASCERTAIN. THE DAMAGES FOR DELAY PROVISION (SEC. 1A.7 OF BOTH INVITATIONS) SPECIFIES PER DIEM LIQUIDATED DAMAGES FOR DELAY IN DELIVERY; THE OTHER PROVISION (SEC. 1A.18, AS AMENDED, OF IFB-6001 AND SEC. 1A.17 OF IFB-6006) SPECIFIES A PER DIEM AMOUNT TO BE DEDUCTED FROM THE CONTRACT PRICE FOR EACH DAY A GENERATOR UNIT FAILS TO PERFORM DURING THE FIRST YEAR. WE HAVE RECOGNIZED THE USE OF LIQUIDATED DAMAGES PROVISIONS GOING BOTH TO DELAY IN SHIPMENT AND TO FAILURE OF PERFORMANCE. 47 COMP. GEN. 263(1967). ALTHOUGH YOU CLAIM THAT THE DELAY IN DELIVERY PROVISION WOULD BE SUFFICIENT TO PROTECT THE GOVERNMENT'S INTERESTS AND THAT THE USE OF THE OTHER PROVISION IS ILLEGAL AND WOULD ADD UNWARRANTED COSTS TO THE PROCUREMENTS, THE NAVY, BASED ON ITS NEEDS AND PRIOR EXPERIENCE, APPEARS TO HAVE REASONABLE GROUNDS FOR BELIEVING THE USE OF BOTH THESE CLAUSES IS NECESSARY. THE RECORD PROVIDES NO BASIS FOR OUR QUESTIONING ITS JUDGMENT IN THIS RESPECT. FURTHERMORE, YOUR ANALYSIS OF THE LOSS OF GENERATING CAPABILITY CLAUSE, TO SHOW THAT UNDER CERTAIN CIRCUMSTANCES THE CLAUSE WOULD REQUIRE A PENALTY, PROVIDES NO BASIS FOR OUR OBJECTING TO THE CLAUSE, SINCE THE QUESTION WHETHER A PENALTY WAS REALLY INTENDED WILL DEPEND UPON THE FACTS OF THE CASE AS THEY ARISE AND "NOT UPON A CONJECTURAL SITUATION THAT MIGHT" ARISE UNDER THE CONTRACT. 47 COMP. GEN. 263, 270, SUPRA.

IN THIS CONNECTION, WE DO NOT BELIEVE, AS YOU ASSERT, THAT THE CLAUSE ASSESSES A PENALTY ON ITS FACE BECAUSE IT PROVIDES FOR $150 PER DAY DAMAGES FOR FAILURE OF PERFORMANCE WHILE THE DAMAGES FOR DELAY CLAUSE ESTABLISHES PER DIEM DAMAGES OF $125 IN THE EVENT OF LATE DELIVERY. THE $125 FIGURE IS BASED ON THE PROVISIONS OF A NAVFAC CONTRACT ADMINISTRATION MANUAL CONCERNING A $300,000 CONTRACT (THE APPROXIMATE PRICE OF EACH UNIT) WHILE THE $150 AMOUNT IS BASED ON THE ESTIMATED DAILY LOSS TO THE NAVY, COMPUTED AS INDICATED ABOUT ("50% UTILIZATION AND 60% LOAD FACTOR AT 1.2[ KWH ROUNDED DOWN").

THUS, WE CANNOT CONCLUDE THAT THE USE OF ANY OF THE CLAUSES TO WHICH YOU OBJECT WAS IMPROPER OR UNDULY RESTRICTIVE OF COMPETITION. AS WE NOTED ABOVE, SOLICITATION PROVISIONS CANNOT BE REGARDED AS UNDULY RESTRICTIVE MERELY BECAUSE ONE OR MORE BIDDERS OR POTENTIAL BIDDERS CANNOT COMPLY WITH THE REQUIREMENTS. B-175221, SEPTEMBER 20, 1972. WHILE YOU APPARENTLY BELIEVED THAT YOU COULD NOT COMPLY AND THEREFORE DID NOT BID, WE NOTE THAT TEN BIDS WERE RECEIVED IN RESPONSE TO IFB 6001 AND THREE BIDS WERE RECEIVED ON IFB-6006. DESPITE YOUR ASSERTION THAT THE USE OF THESE CLAUSES LIMITED EFFECTIVE COMPETITION TO DETROIT DIESEL ALLISON (A MAJOR GAS TURBINE MANUFACTURER) DISTRIBUTORS, AWARDS IN BOTH INSTANCES WERE MADE TO COMPANIES NOT AFFILIATED WITH ALLISON. HOWEVER, ALTHOUGH YOU DO NOT SERIOUSLY DISPUTE THAT THERE WAS COMPETITION ON THESE PROCUREMENTS, YOU CLAIM THAT THE SOLICITATIONS WERE NEVERTHELESS DEFECTIVE BECAUSE NAVFAC "DELIBERATELY" WROTE THEM TO EXCLUDE ABBOTT AND OTHER SIMILAR FIRMS, THEREBY "INTRODUCING THEIR PERSONAL PREFERENCE INTO THE BIDDING PROCESS AND EFFECTIVELY BARRING ABBOTT." WE THINK IT IS CLEAR FROM THE RECORD THAT NAVFAC PERSONNEL BELIEVED THAT ABBOTT COULD NOT SATISFY ITS NEEDS AND THEREFORE PREFERRED THAT AWARD NOT BE MADE TO YOUR COMPANY. HOWEVER, THE RECORD DOES NOT ESTABLISH THAT THE SOLICITATIONS WERE PREPARED AS A RESULT OF A SPECIFIC BAD FAITH EFFORT TO KEEP YOU FROM BIDDING. RATHER, IT APPEARS FROM THE RECORD THAT NAVFAC PROCUREMENT OFFICIALS, AWARE FROM THE RESPONSE TO THE INITIAL SOLICITATION THAT RELATIVELY INEXPERIENCED FIRMS WERE INTERESTED IN BIDDING ON THESE PROCUREMENTS ALONG WITH THE LARGER COMPANIES WITH WHICH THEY WERE FAMILIAR, DEVELOPED SOLICITATION CLAUSES TO REQUIRE SOME MINIMUM PRIOR EXPERIENCE IN PRODUCING GENERATORS AND TO AFFORD THE GOVERNMENT ADEQUATE PROTECTION IN THE EVENT OF DELAY OR PERFORMANCE FAILURE OF THE EQUIPMENT. THIS IT WAS ENTITLED TO DO. WE THINK ANY ORAL COMMENTS OF NAVFAC PERSONNEL MUST BE TAKEN IN THIS LIGHT, RATHER THAN AS AN ADMISSION OF ANY IMPROPER, PREJUDICIAL ACTION AGAINST YOUR FIRM. FURTHERMORE, AS POINTED OUT ABOVE, THE REWRITTEN EXPERIENCE CLAUSE IS STILL A MATTER OF RESPONSIBILITY RATHER THAN RESPONSIVENESS, AND HAD YOU SUBMITTED A BID, A COC COULD HAVE BEEN CONCLUSIVE AS TO YOUR COMPLIANCE WITH THAT CLAUSE. B-175254, SUPRA. THE OTHER CLAUSES, THE USE OF WHICH IN THESE PROCUREMENTS YOU DESCRIBE AS "OVER-KILL," NEITHER PREVENTED OTHER SMALL COMPANIES FROM BIDDING NOR FROM RECEIVING AWARDS. THE FACT THAT YOUR FINANCIAL RESOURCES AND BONDING CAPACITY MIGHT HAVE KEPT YOU FROM BIDDING DOES NOT ESTABLISH BAD FAITH OR IMPROPRIETY ON THE PART OF NAVFAC.

YOU ALSO SUGGEST THAT COMPETITIVE NEGOTIATION OR TWO-STEP ADVERTISING WOULD HAVE BEEN A MORE APPROPRIATE PROCUREMENT METHOD THAN FORMAL ADVERTISING. HOWEVER, TWO-STEP FORMAL ADVERTISING MAY BE USED WHEN THERE IS NO ADEQUATE SPECIFICATION TO PERMIT FORMAL ADVERTISING, ASPR 2 501, AND IT IS CLEAR THAT NAVFAC HAD A VERY DETAILED SPECIFICATION FOR THE DESIRED 2,000 KW POWER PLANTS. COMPETITIVE NEGOTIATION MAY BE USED IN LIEU OF FORMAL ADVERTISING ONLY IF THE "CONTEMPLATED PROCUREMENT COMES WITHIN ONE OF THE CIRCUMSTANCES PERMITTING NEGOTIATION" AS SPELLED OUT IN ASPR 3-200 ET SEQ. ASPR 3-102(B)(1). THE RECORD DOES NOT INDICATE THAT NEGOTIATION OF THESE PROCUREMENTS SHOULD HAVE BEEN AUTHORIZED UNDER ANY OF THE CIRCUMSTANCES SET FORTH IN THOSE SECTIONS. WHILE YOU CITE OUR DECISION B- 154487, AUGUST 3, 1964, FOR THE PROPOSITION THAT NEGOTIATION RATHER THAN FORMAL ADVERTISING IS THE PROPER PROCUREMENT METHOD WHEN THE INVITATION RESTRICTS AWARD TO PREVIOUS SUPPLIERS, THESE PROCUREMENTS WERE OPEN TO ANY RESPONSIBLE FIRM THAT COULD MEET THE REQUIREMENTS OF THE INVITATIONS.

FINALLY, YOU QUESTION THE "URGENCY" CLAIMED BY NAVFAC AS A BASIS FOR MAKING AWARDS DURING THE PENDENCY OF THE PROTEST. YOU POINT OUT THAT A LOW PRIORITY HAD BEEN ASSIGNED ORIGINALLY TO THE PROCUREMENTS, AND SUGGEST THAT THE URGENCY "ONLY EXISTS AS AN EXPEDIENT MEANS TO FINALIZE THE EFFECTIVE DEBARMENT OF ABBOTT AND THEN TO HIDE BEHIND THE DIFFICULTY AND RELUCTANCE OF (GAO) TO UPSET THE FACT ACCOMPLISHED." YOU FURTHER POINT TO THE VERBAL COMMENTS OF NAVFAC'S ASSISTANT COUNSEL REGARDING THE POTENTIAL LOSS OF FUNDING AUTHORITY FOR THE PROCUREMENTS IF AWARDS HAD NOT BEEN MADE, AND REQUEST OUR RULING AS TO WHETHER LOSS OF FUNDING IS A PROPER BASIS FOR AN URGENCY DETERMINATION.

ASPR 2-407.8(B)(3) PROVIDES THAT AN AWARD WILL NOT BE MADE DURING THE PENDENCY OF A PROTEST UNLESS THE CONTRACTING OFFICER DETERMINES THAT THE ITEMS TO BE PROCURED ARE URGENTLY REQUIRED, OR THAT DELIVERY OR PERFORMANCE WILL BE UNDULY DELAYED BY FAILURE TO MAKE AWARD PROMPTLY, OR THAT A PROMPT AWARD WILL OTHERWISE BE ADVANTAGEOUS TO THE GOVERNMENT. THE DETERMINATION AND FINDINGS INCLUDED WITH THE PROCUREMENT FILE ON IFB-6001 STATES THAT THE UNITS COVERED BY THE IFB WERE URGENTLY REQUIRED BECAUSE:

A. ALL SLACK-TIME IN THE NAVY'S PROCUREMENT SCHEDULING FOR THESE UNITS HAS BEEN EXHAUSTED IN THE EIGHT MONTH HOLD-UP ON THE ORIGINAL SOLICITATION, AND NAVY OPERATING COMMANDERS ARE DEMANDING EARLY UNIT AVAILABILITY.

B. THE NAVY'S NEED FOR MOBILE GENERATING UNITS WILL BE MUCH INCREASED BY THE "COLD-IRON" NEEDS OF THE FLEET AS OPERATING UNITS PUT IN LESS TIME AT SEA WITH THE CESSATION OF FAR EASTERN HOSTILITIES. TIE-UP OF FLEET UNITS ON "COLD-IRON", I.E., WITH POWER NEEDS SATISFIED BY EXTERNAL UNITS, IS ESSENTIAL TO REDUCE COSTS AND MAINTENANCE AND MAINTAIN MORALE BY REDUCING POWER PLANT OPERATIONS BY WATCH SEAMEN WHILE IN PORT.

C. NAVY RESERVES OF MOBILE POWER PLANTS HAVE BEEN FULLY DEPLOYED TO SATISFY UNPLANNED POWER REQUIREMENTS.

D. ALL OF THE TWELVE UNITS TO BE OBTAINED UNDER THIS CONTRACT HAVE ALREADY BEEN COMMITTED TO KNOWN FUTURE NEEDS, E.G., FIVE IN LATE '73 AND EARLY '74 FOR SUPPORT OF THE NUCLEAR CARRIER NIMITZ AT NORFOLK.

THE DETERMINATION AND FINDINGS AUTHORIZING AWARD UNDER IFB-6006 CONTAINS JUSTIFICATION SIMILAR TO THAT STATED IN SUBPARAGRAPHS B, C, AND D ABOVE, ALONG WITH THE ADDITIONAL COMMENT THAT REDUCING THE NEED FOR WATCH SEAMEN "GIVES MORE OPPORTUNITY TO GRANT LIBERTY TO SEAMEN AND THEREBY ENHANCES ATTAINMENT OF THE ALL-VOLUNTEER ARMED FORCES CONCEPT." THESE DETERMINATIONS WERE APPROVED IN ACCORDANCE WITH ASPR 2 407.8(B)(2). THUS, WHILE THERE MAY HAVE BEEN CONCERN OVER THE POSSIBLE LOSS OF FUNDS, THE RECORD INDICATES THAT THE DECISIONS TO MAKE AWARDS NOTWITHSTANDING THE PROTEST WERE BASED ON THE ABOVE CONSIDERATIONS AND THE LENGTHY LEAD TIME REQUIRED FOR THESE GENERATOR UNITS (365 DAYS FOR DELIVERY OF THE FIRST UNIT). THE RECORD INDICATES THAT THE NAVY SENT YOU WRITTEN NOTICE OF ITS DECISIONS TO PROCEED WITH THE AWARDS.

FOR THE FOREGOING REASONS, YOUR PROTESTS ARE DENIED.

AS INDICATED ABOVE, WE ARE ENCLOSING A COPY OF OUR LETTER OF TODAY TO COUNSEL FOR STEWART AND STEVENSON SERVICES, INCORPORATED, WHICH ALSO FILED PROTESTS AGAINST THE TWO AWARDS.