B-175399, JUN 28, 1972

B-175399: Jun 28, 1972

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THE NOTICE IN THE COMMERCE BUSINESS DAILY MAY HAVE BEEN MISLEADING IN THAT USASA MERELY INTENDED TO RENEGOTIATE ITS LEASE AGREEMENT WITH IBM FOR PRESENTLY INSTALLED EQUIPMENT. THE PROTEST IS DENIED AND NO FURTHER ACTION WILL BE TAKEN IN THIS MATTER. TO SUMMIT COMPUTER CORPORATION: THIS IS IN REPLY TO YOUR LETTER OF MARCH 1. IT IS YOUR POSITION THAT IN ACQUIRING THIS COMPUTER THE ARMY HAS FAILED TO TAKE ADVANTAGE OF THE USED COMPUTER MARKET WHICH. THE SUMMIT COMPUTER CORPORATION PROTEST WAS GENERATED BY THE FOLLOWING NOTICE IN THE COMMERCE BUSINESS DAILY. NEGOTIATIONS WILL BE CONDUCTED WITH INTERNATIONAL BUSINESS MACHINES CORP. THIS NOTICE IS FOR INFORMATION PURPOSES ONLY. REQUEST FOR PROPOSAL IS NOT AVAILABLE ...

B-175399, JUN 28, 1972

BID PROTEST - ALLEGED LACK OF COMPETITION DECISION DENYING THE PROTEST OF THE SUMMIT COMPUTER CORPORATION AGAINST THE LACK OF COMPETITION FOR THE ACQUISITION OF AN IBM 360, MODEL 40, COMPUTER BY THE U.S. ARMY SECURITY AGENCY. THE NOTICE IN THE COMMERCE BUSINESS DAILY MAY HAVE BEEN MISLEADING IN THAT USASA MERELY INTENDED TO RENEGOTIATE ITS LEASE AGREEMENT WITH IBM FOR PRESENTLY INSTALLED EQUIPMENT. IN VIEW OF THE AGENCY'S UNSUCCESSFUL ATTEMPTS TO OBTAIN COMPETITIVE OFFERS SUBSEQUENT TO FISCAL YEAR 1972, THE PROTEST IS DENIED AND NO FURTHER ACTION WILL BE TAKEN IN THIS MATTER.

TO SUMMIT COMPUTER CORPORATION:

THIS IS IN REPLY TO YOUR LETTER OF MARCH 1, 1972, PROTESTING AGAINST THE LACK OF COMPETITION FOR THE ACQUISITION FROM INTERNATIONAL BUSINESS MACHINES CORPORATION OF AN IBM 360, MODEL 40, COMPUTER BY THE U.S. ARMY SECURITY AGENCY (USASA).

IT IS YOUR POSITION THAT IN ACQUIRING THIS COMPUTER THE ARMY HAS FAILED TO TAKE ADVANTAGE OF THE USED COMPUTER MARKET WHICH, YOU ALLEGE, WOULD SAVE SUBSTANTIAL SUMS OF MONEY OVER THE PRICES OFFERED FOR SUCH EQUIPMENT BY IBM.

THE DEPARTMENT OF THE ARMY HAS FURNISHED US A REPORT CONCERNING THIS MATTER WHICH ADVISES, IN PERTINENT PART, AS FOLLOWS:

"1. THE SUMMIT COMPUTER CORPORATION PROTEST WAS GENERATED BY THE FOLLOWING NOTICE IN THE COMMERCE BUSINESS DAILY, FEBRUARY 24, 1972:

'LEASE/PURCHASE OF 1 EA MODEL 360/40 COMPUTER SYSTEM. NEGOTIATIONS WILL BE CONDUCTED WITH INTERNATIONAL BUSINESS MACHINES CORP. THIS NOTICE IS FOR INFORMATION PURPOSES ONLY. REQUEST FOR PROPOSAL IS NOT AVAILABLE ... USASA CENTRAL PROCUREMENT ACTIVITY, VINT HILL FARMS STATION, WARRENTON, VA. 22086.'

"2. AT THE TIME OF THIS NOTICE THE US ARMY SECURITY AGENCY (USASA) ALREADY HAD LEASED EQUIPMENT FROM IBM INSTALLED IN ITS ARLINGTON HALL STATION, VA, FACILITY. THE AGENCY'S NEED FOR EQUIPMENT OF THIS TYPE HAD BEEN PROCESSED IN ACCORDANCE WITH ARMY, GSA, AND OFFICE OF MANAGEMENT AND BUDGET PROCEDURES AND HAD RESULTED IN THE REUTILIZATION OF EQUIPMENT FORMERLY INSTALLED AT THE DEPARTMENT OF HEALTH, EDUCATION AND WELFARE. THE EQUIPMENT WAS RECEIVED BY USASA IN NOVEMBER, 1970, UNDER A FEDERAL SUPPLY SCHEDULE (FSS) LEASE.

"3. IN OCTOBER OF 1971, IBM CAME TO USASA WITH A LEASE-PURCHASE PROPOSAL COVERING THE INSTALLED EQUIPMENT. THIS PROPOSAL OFFERED TWO PRINCIPAL ADVANTAGES TO THE GOVERNMENT. FIRST, THE ANNUAL COST OF THE USE OF THE EQUIPMENT WOULD BE SUBSTANTIALLY LESS THAN UNDER THE FSS. (LEASE). SECOND, AT THE END OF THE FIVE YEAR PERIOD, IF THE AGREEMENT WAS RENEWED FOR THAT LENGTH OF TIME, THE GOVERNMENT WOULD TAKE TITLE TO THE EQUIPMENT. *** THE CONTRACT WAS SIGNED 24 FEB 72.

"4. IT WAS TOWARD THIS 24 FEB 72 AGREEMENT THAT MR. GEORGE S. MCLAUGHLIN, JR; OF SUMMIT COMPUTER CORPORATION DIRECTED HIS LETTERS OF PROTEST. IT IS UNDERSTANDABLE, FROM THE COMMERCE BUSINESS DAILY ITEM QUOTED ABOVE, HOW HE WOULD CONCLUDE THAT USASA WAS ABOUT TO ACQUIRE EQUIPMENT. INSTEAD, USASA AND HQDA MERELY INTENDED TO RENEGOTIATE THE TERMS UNDER WHICH PRESENTLY INSTALLED EQUIPMENT WOULD BE LEASED. THE NEW CONTRACT RESULTED IN SUBSTANTIAL SAVINGS BY THE GOVERNMENT. BUT, ACCORDING TO MR. MCLAUGHLIN, EVEN GREATER AMOUNTS WOULD HAVE BEEN SAVED IF THERE HAD BEEN A COMPETITIVE SELECTION OF EQUIPMENT AT THAT TIME. HOWEVER, THIS ALTERNATIVE WAS SIMPLY NOT CONSIDERED. USASA, IN THE MIDDLE OF ITS FISCAL YEAR, WAS MERELY IMPROVING AN EXISTING AGREEMENT, NOT EVALUATING THE POSSIBILITY OF REPLACEMENT OF EQUIPMENT. ACCORDINGLY, THE MARKET WAS NOT TESTED AT THAT TIME. THE APPROACHING END OF THIS FISCAL YEAR, IS AN APPROPRIATE TIME TO CONSIDER OTHER ALTERNATIVES. ASSURANCES HAVE BEEN RECEIVED FROM USASA THAT THE PRESENT IBM AGREEMENT WILL NOT BE EXTENDED UNLESS AFTER OTHER QUOTATIONS ARE SOLICITED, RECEIVED, AND EVALUATED NO OFFER MORE FAVORABLE TO THE GOVERNMENT IS FOUND."

WE HAVE ALSO BEEN INFORMALLY ADVISED THAT YOUR FIRM, ALONG WITH OTHERS, WAS RECENTLY SOLICITED BY USASA FOR THE SUBJECT REQUIREMENT BUT THAT YOU FAILED TO SUBMIT AN OFFER.

IN VIEW OF THE ATTEMPT BY USASA TO OBTAIN COMPETITIVE OFFERS FOR ITS REQUIREMENTS SUBSEQUENT TO FISCAL YEAR 1972, WE FIND NO BASIS FOR REQUIRING ANY FURTHER CORRECTIVE ACTION. ACCORDINGLY, YOUR PROTEST MUST BE DENIED, AND WE DO NOT CONTEMPLATE TAKING ANY FURTHER ACTION IN THIS MATTER.