B-179730, APR 3, 1974

B-179730: Apr 3, 1974

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

WAS NOT OBJECTIONABLE AS BEING ARBITRARY. SOLE SOURCE PROCUREMENT FROM ONLY QUALIFIED SOURCE NOT REQUIRING TESTING WAS NOT IMPROPER. THE REPROCUREMENT WAS NECESSITATED BY THE TERMINATION FOR DEFAULT OF THE PREVIOUS CONTRACT FOR THOSE ITEMS WITH THE CLAVIER CORPORATION (CLAVIER). THE EVENTS LEADING TO THE SOLE-SOURCE PROCUREMENT ARE AS FOLLOWS. TERMINATION FOR DEFAULT OF THE CLAVIER CONTRACT WAS RECOMMENDED ON MAY 16. THE CONTRACT WAS SUBSEQUENTLY TERMINATED ON THAT BASIS. THE DETERMINATION AND FINDINGS RECOMMENDING THE SOLE-SOURCE PROCUREMENT FROM COLLINS WAS APPROVED. ON THE SAME DATE THE REQUEST FOR PROPOSALS COVERING THE PURCHASE WAS ISSUED. THE CONTRACTING OFFICER HAD DETERMINED IN THIS REGARD THAT A SOLE-SOURCE NEGOTIATED PROCUREMENT PURSUANT TO 10 U.S.C. 2304(A)(10) WAS NECESSARY BECAUSE COLLINS WAS THE ONLY QUALIFIED SOURCE WHO COULD MEET THE REQUIRED DELIVERY SCHEDULE.

B-179730, APR 3, 1974

1. DECISION REQUIRING FIRST ARTICLE TESTING OF PRODUCT BY FIRM WHICH HAD NOT FOR SIX YEARS MANUFACTURED ITEMS IN QUESTION, BUT WHICH HAD SHORTLY BEFORE SOLE-SOURCE PROCUREMENT FROM ANOTHER PARTY REACQUIRED FACILITIES, PLANS, AND PERSONNEL FOR SUCH MANUFACTURE FROM CONTRACTOR DEFAULTED ON LATEST CONTRACT FOR THESE ITEMS BECAUSE OF TECHNICAL DEFICIENCIES AND LATE DELIVERIES, WAS NOT OBJECTIONABLE AS BEING ARBITRARY, CAPRICIOUS, OR WITHOUT SUBSTANTIAL BASIS IN FACT. 2.WHEN URGENT NEED FOR ITEMS EXISTS AND FIRST ARTICLE TESTING FOR PROTESTER'S ITEMS MAY REQUIRE EIGHT-MONTH DELAY IN PROCUREMENT, SOLE SOURCE PROCUREMENT FROM ONLY QUALIFIED SOURCE NOT REQUIRING TESTING WAS NOT IMPROPER.

TO DERO INDUSTRIES, INC.:

THE PRESENT PROTEST BY DERO INDUSTRIES, INC. (DERO), CONCERNS A REPROCUREMENT OF 66 R-843A/ARN-58A AND 36 R-844A/ARN-58A RADIO RECEIVERS, INCLUDING SPARE PARTS AND DATA, AND A NEW PROCUREMENT OF 6 R 844A/ARN-58A RECEIVERS, INCLUDING DATA, ON A SOLE-SOURCE BASIS FROM THE COLLINS RADIO COMPANY (COLLINS) BY THE AERONAUTICAL SYSTEMS DIVISION, WRIGHT-PATTERSON AIR FORCE BASE. THE REPROCUREMENT WAS NECESSITATED BY THE TERMINATION FOR DEFAULT OF THE PREVIOUS CONTRACT FOR THOSE ITEMS WITH THE CLAVIER CORPORATION (CLAVIER).

THE EVENTS LEADING TO THE SOLE-SOURCE PROCUREMENT ARE AS FOLLOWS. TERMINATION FOR DEFAULT OF THE CLAVIER CONTRACT WAS RECOMMENDED ON MAY 16, 1973. THE CONTRACT WAS SUBSEQUENTLY TERMINATED ON THAT BASIS. ON MAY 29, THE DETERMINATION AND FINDINGS RECOMMENDING THE SOLE-SOURCE PROCUREMENT FROM COLLINS WAS APPROVED, AND ON THE SAME DATE THE REQUEST FOR PROPOSALS COVERING THE PURCHASE WAS ISSUED. THE CONTRACTING OFFICER HAD DETERMINED IN THIS REGARD THAT A SOLE-SOURCE NEGOTIATED PROCUREMENT PURSUANT TO 10 U.S.C. 2304(A)(10) WAS NECESSARY BECAUSE COLLINS WAS THE ONLY QUALIFIED SOURCE WHO COULD MEET THE REQUIRED DELIVERY SCHEDULE. IT WAS NOTED AS CONCERNS THE DELIVERY SCHEDULE THAT THE ITEMS, WHICH WERE TO HAVE BEEN FURNISHED UNDER THE DEFAULTED CONTRACT, WERE URGENTLY NEEDED AT CERTAIN AIRFRAME PLANTS. FURTHER, THE SPECIFICATION (MIL-R-26644C) GOVERNING THE RECEIVERS REQUIRED FIRST ARTICLE TESTING UNLESS WAIVED, AND THE ESTIMATED EIGHT-MONTH DELAY INCIDENT TO THE TESTING AND QUALIFICATION OF AN UNAPPROVED SOURCE WAS DEEMED UNACCEPTABLE DUE TO THE URGENCY OF THE PROCUREMENT. THE PROCUREMENT ACTIVITY ADMITS THAT IT WAS TARDY IN NOT PUBLISHING A SYNOPSIS OF THE PROPOSED PROCUREMENT IN THE COMMERCE BUSINESS DAILY UNTIL AUGUST 31, 1973, BUT NOTES THAT THIS HAD ABSOLUTELY NO EFFECT ON THE PROCUREMENT, SINCE FIRST ARTICLE APPROVAL WOULD HAVE REMAINED A REQUIREMENT AND DERO WOULD HAVE REMAINED AN UNQUALIFIED SOURCE. NEGOTIATIONS, CONDUCTED WITH COLLINS FROM AUGUST 29 TO SEPTEMBER 6, CULMINATED IN AN AWARD TO COLLINS ON SEPTEMBER 11.

DERO CONTENDS THAT IT IS A QUALIFIED SOURCE FOR THESE ITEMS AND, THEREFORE, SHOULD HAVE BEEN SOLICITED. IT IS NOTED THAT DERO SUPPLIED BOTH RADIO RECEIVERS UNDER ITS 1967 CONTRACT NO. F33657-67-C-0632. FURTHER, CLAVIER UNDER VARIOUS CONTRACTS SINCE 1967 HAS SUPPLIED THE SAME RADIO RECEIVERS IN ACCORDANCE WITH THE LATEST AMENDMENTS TO THE SPECIFICATION, AND IN AUGUST OF 1973, AFTER CLAVIER HAD FILED A PETITION IN BANKRUPTCY, DERO TOOK OVER ACTIVE CONTROL OF CLAVIER BY EXERCISING ITS RIGHTS IN A PERFECTED LIEN ON CLAVIER'S PROPERTIES. THUS, COMBINED WITH ITS PREVIOUS EXPERIENCE IN MAKING THESE ITEMS, DERO IS IN CONTROL OF ALL THE DRAWINGS, STANDARD OPERATING PROCEDURES, TEST EQUIPMENT AND PROCEDURES, MANUFACTURING OPERATION SHEETS, BILLS OF MATERIALS, AS WELL AS THE NECESSARY LONG LEAD ITEMS, AND ACCESS TO THE VENDORS OF CLAVIER WITH WHOM ORDERS HAD BEEN PLACED UNDER THE DEFAULTED CONTRACT. IN ADDITION TO ITS CONTENTION THAT IT IS A QUALIFIED SOURCE, DERO ALSO ALLEGES THAT IT WAS MISLED BY PERSONNEL OF THE CONTRACTING ACTIVITY INTO BELIEVING THAT IT WOULD BE ALLOWED TO PARTICIPATE IN THE PROCUREMENT (INSTEAD DERO WAS SENT THE SOLICITATION ONLY FOR INFORMATIONAL PURPOSES) AND THUS WAS DETERRED BY THIS EXPECTATION FROM FILING A PROTEST BEFORE AWARD WITH OUR OFFICE.

FIRST, IT IS NOTED THAT THE CONTRACTING ACTIVITY DENIES ANY DECEPTION REGARDING THE LATTER ALLEGATION. NOTWITHSTANDING THE CONFLICTING STATEMENTS MADE BY BOTH PARTIES, WE DO NOT BELIEVE THAT THIS ARGUMENT HAS ANY BEARING ON THE DISPOSITIVE ISSUE OF THE PROTEST, AND DOES NOT THEREFORE NEED TO BE CONSIDERED.

AS REGARDS THIS ISSUE, THE CONTENTION THAT DERO SHOULD HAVE BEEN CONSIDERED A QUALIFIED SOURCE FOR THE PROCUREMENT, DERO CITES B-170542, DECEMBER 31, 1970, AS BEING ANALOGOUS TO, AND CONTROLLING ON, THE PRESENT SITUATION. IN B-170542 FIRST ARTICLE TESTING WAS WAIVED BY THE CONTRACTING ACTIVITY FOR A FIRM THAT HAD NOT PRODUCED THE ITEM FOR SIX YEARS BECAUSE THE ACTIVITY'S TECHNICAL PERSONNEL DETERMINED THAT NOTWITHSTANDING THIS SIX-YEAR LAPSE OF TIME, THE FIRM WHICH HAD PREVIOUSLY MANUFACTURED THE ITEM IN A SATISFACTORY MANNER, COULD OFFER ITEMS WHICH WOULD SATISFY THE GOVERNMENT'S INTENDED USE. WE DID NOT TAKE EXCEPTION TO THE DETERMINATION, NOTING THAT THE QUESTION OF WHETHER FIRST ARTICLE TESTING MAY BE WAIVED AS TO A PARTICULAR BIDDER IS A PROCUREMENT RESPONSIBILITY WHICH OUR OFFICE WILL NOT DISTURB UNLESS THE DETERMINATION IS SHOWN TO BE ARBITRARY, CAPRICIOUS, OR WITHOUT SUBSTANTIAL BASIS IN FACT, CITING B-162438, FEBRUARY 15, 1968; 46 COMP. GEN. 123, 127 (1966).

WE DO NOT BELIEVE THAT THE FACTS IN B-170542 ARE ANALOGOUS TO THE PRESENT ONES. FIRST, THE CONTRACTING ACTIVITY AS PART OF THE REASONING BEHIND ITS DECISION TO GO SOLE-SOURCE FELT THAT THE RECEIVERS MANUFACTURED BY DERO UNDER ITS PRIOR CONTRACTS HAD BEEN OF POOR QUALITY AND HAD EXPERIENCED HIGH FAILURE RATES. IT WAS ALSO NOTED THAT COMPLETE FIRST ARTICLE TESTING HAD BEEN REQUIRED OF DERO ON ONLY ONE OF THE TWO RECEIVERS. SECONDLY, UNDER CONTRACT NO. F33657-72-C-0475, THE CLAVIER CONTRACT HELD PRIOR TO AND SIMULTANEOUSLY WITH THE CONTRACT TERMINATED, THE CONTRACTING ACTIVITY HAD BEEN EXPERIENCING A SIGNIFICANT NUMBER OF REJECTIONS OF CLAVIER RECEIVERS. THESE REJECTIONS, PARTIALLY ATTRIBUTABLE TO FAULTY EQUIPMENT USED BY THE FIRM RESPONSIBLE FOR TESTING THE RECEIVERS, WERE IN PART CAUSED BY CLAVIER'S INTERPRETATION OF THE SPECIFICATION IN SUCH A MANNER AS TO LESSEN THE THRESHOLD SENSITIVITY MICROVOLT LEVEL WHICH ALLOWED TWICE THE SIGNAL LEVEL DURING ACCEPTANCE TESTING AS THAT ALLOWED BY OTHER RECEIVER MANUFACTURERS. CLAVIER WAS ALSO UNABLE TO MEET REVISED DELIVERY SCHEDULE, AND AS REGARDS THE TERMINATED CONTRACT WAS UNABLE TO MEET THE MILESTONES AND TIME PHASINGS IT HAD BEEN REQUIRED TO ESTABLISH SO AS TO ENSURE TIMELY DELIVERY IN MAY OF 1973. IT WOULD APPEAR ALSO THAT CRYSTAL SELECTIVITY PROBLEMS WERE ENCOUNTERED, AND IT WAS ALSO NECESSARY TO WAIVE THE FLAG ALARM CHARACTERISTICS OF THE SPECIFICATION. SOME PERSONNEL INVOLVED IN THE DEFAULTED CONTRACT WERE AT LEAST TEMPORARILY DISMISSED DUE TO STOPPAGE OF ONE OF CLAVIER'S COMMERCIAL CONTRACTS AND DUE TO THE FACT THAT CLAVIER WAS HAVING DIFFICULTY IN OBTAINING THE NECESSARY RECEIVER PARTS FROM ITS VENDORS.

IN VIEW OF THE TECHNICAL PROBLEMS EXPERIENCED BY CLAVIER IN PERFORMANCE OF THESE TWO CONTRACTS, AND NOTWITHSTANDING THE FACT THAT CLAVIER FELT ALL TECHNICAL PROBLEMS TO HAVE BEEN RESOLVED WITH WAIVER OF THE FLAG ALARM CHARACTERISTICS, WE ARE UNABLE TO SAY THAT THE DECISION NOT TO WAIVE FIRST ARTICLE TESTING FOR DERO WAS ARBITRARY, CAPRICIOUS, OR WITHOUT SUBSTANTIAL BASIS IN FACT. AND IN VIEW OF THIS CONCLUSION, WE CANNOT SAY THAT CONSUMMATION OF THE PROCUREMENT ON A SOLE-SOURCE BASIS DUE TO THE URGENT NEED FOR THE ITEMS WAS INCORRECT, ESPECIALLY IN VIEW OF THE WIDE LATITUDE GIVEN PROCUREMENT OFFICIALS IN AWARDING REPLACEMENT CONTRACTS.

ACCORDINGLY THE PROTEST IS DENIED.