B-178890(1), OCT 12, 1973

B-178890(1): Oct 12, 1973

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FOR THE REASONS CITED BELOW WE BELIEVE THAT THE PROPOSED TRANSFER IS NOT CONTRARY TO LAW OR REGULATION. WAS AWARDED TO DEI ON AUGUST 11. DEI WAS IN THE PROCESS OF PERFORMING THE SUBJECT CONTRACT ALONG WITH SEVERAL OTHER GOVERNMENT CONTRACTS WHEN. YOU OBJECT TO THE PROPOSED TRANSFER OF THE CONTRACTS TO ATO BECAUSE YOU STATE THAT DEI'S ASSETS HAVE NOT BEEN PURCHASED BY ATO BUT ARE BEING SOLD AT AUCTION. YOU NOTE THAT ATO IS NOT A SMALL BUSINESS CONCERN WHILE SEVERAL OF THE CONTRACTS WERE ORIGINALLY AWARDED TO DEI UNDER SMALL BUSINESS SET ASIDES. YOU HAVE OFFERED TO COMPLETE THE UNFINISHED CONTRACTS. THAT ALL OF DEI'S GOVERNMENT CONTRACTS FOR THESE PRODUCT LINES ALSO WILL BE TRANSFERRED TO ATO.

B-178890(1), OCT 12, 1973

DENIAL OF PROTEST AGAINST THE PROPOSED TRANSFER OF CERTAIN GOVERNMENT CONTRACTS AWARDED TO DEFENSE ELECTRONICS INDUSTRIES, INCLUDING CONTRACT NO. N00123-73-C-0308 AWARDED TO DEI BY THE NAVAL REGIONAL PROCUREMENT OFFICE, LOS ANGELES, CALIFORNIA.

TO DYNAMIC ELECTRO SYSTEMS, INCORPORATED:

BY LETTER DATED JUNE 12, 1973, YOU PROTESTED AGAINST THE PROPOSED TRANSFER OF CERTAIN GOVERNMENT CONTRACTS AWARDED TO DEFENSE ELECTRONICS INDUSTRIES, INCORPORATED (DEI), INCLUDING CONTRACT NO. N00123-73-C 0308, AWARDED TO DEI BY THE NAVAL REGIONAL PROCUREMENT OFFICE, LOS ANGELES, CALIFORNIA.

FOR THE REASONS CITED BELOW WE BELIEVE THAT THE PROPOSED TRANSFER IS NOT CONTRARY TO LAW OR REGULATION.

THE SUBJECT CONTRACT, FOR A TELEMETRY RECEIVER SYSTEM AND RELATED DATA, WAS AWARDED TO DEI ON AUGUST 11, 1972, AT A PRICE OF $888,308.75. YOUR FIRM DID NOT SUBMIT AN OFFER IN RESPONSE TO THE ORIGINAL SOLICITATION. DEI WAS IN THE PROCESS OF PERFORMING THE SUBJECT CONTRACT ALONG WITH SEVERAL OTHER GOVERNMENT CONTRACTS WHEN, IN THE SPRING OF 1973, MERCANTILE FINANCIAL CORPORATION (MERCANTILE), PURSUANT TO A FINANCING AGREEMENT WITH DEI, TOOK POSSESSION OF ALL OF THAT FIRM'S ASSETS USED IN PERFORMING THESE CONTRACTS.

THE INTERNATIONAL ENGINEERING COMPANY, A DIVISION OF A-T-O INCORPORATED (ATO), THE NAVY AND DEI PROPOSED TO ENTER INTO A NOVATION AGREEMENT TRANSFERRING CERTAIN OF DEI'S GOVERNMENT CONTRACTS (INCLUDING THE SUBJECT CONTRACT) TO ATO. MERCANTILE PROPOSES TO TRANSFER TO ATO ALL OF THE FORMER ASSETS OF DEI WHICH PERTAIN TO THE PERFORMANCE OF THE CONTRACTS TO BE NOVATED.

YOU OBJECT TO THE PROPOSED TRANSFER OF THE CONTRACTS TO ATO BECAUSE YOU STATE THAT DEI'S ASSETS HAVE NOT BEEN PURCHASED BY ATO BUT ARE BEING SOLD AT AUCTION. IN ADDITION, YOU NOTE THAT ATO IS NOT A SMALL BUSINESS CONCERN WHILE SEVERAL OF THE CONTRACTS WERE ORIGINALLY AWARDED TO DEI UNDER SMALL BUSINESS SET ASIDES. IN THIS CONNECTION, YOU HAVE OFFERED TO COMPLETE THE UNFINISHED CONTRACTS.

THE RECORD SHOWS THAT ATO PROPOSES TO PURCHASE ALL OF DEI'S ASSETS ASSOCIATED WITH ITS PROPRIETARY TELEMETRY AND COMMUNICATIONS PRODUCT LINES, AND THAT ALL OF DEI'S GOVERNMENT CONTRACTS FOR THESE PRODUCT LINES ALSO WILL BE TRANSFERRED TO ATO. FURTHERMORE, WE ARE ADVISED BY THE NAVY THAT NONE OF THE CONTRACTS TO BE NOVATED WAS AWARDED TO DEI UNDER A SMALL BUSINESS SET ASIDE.

ENCLOSED IS A COPY OF OUR DECISION OF TODAY TO MICRODYNE CORPORATION REGARDING THE LEGALITY OF THE TRANSACTION. FOR THE REASONS STATED THEREIN AND IN LIGHT OF THE FOREGOING DISCUSSION, WE FIND NO REASON TO OBJECT TO THE PROPOSED NOVATION. ACCORDINGLY, YOUR PROTEST IS DENIED.