B-180025, MAY 14, 1974

B-180025: May 14, 1974

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GAO WILL TAKE NO FURTHER ACTION ON PROTEST WHERE PROTESTER REQUESTS TERMINATION FOR CONVENIENCE OF EXISTING CONTRACT. SINCE LEGALITY OF CONTRACT IS BEING INDEPENDENTLY CHALLENGED IN COURT ACTION BY THIRD PARTY. IF COURT DECIDES AWARD IS ILLEGAL. GAO'S POLICY OF REFUSING TO RULE ON PROTEST WHERE MATTER INVOLVED IS SUBJECT OF LITIGATION PRECLUDES CONSIDERATION OF PROTEST EVEN THOUGH PROTESTER. WAS EVENTUALLY ESTABLISHED FOR RECEIPT OF PROPOSALS. THAT THE CONTRACTING OFFICER MADE A DETERMINATION THAT AVIEN WAS NONRESPONSIBLE FOR THE REQUIREMENT. WERE SUBSEQUENTLY CONCLUDED WITH RAYMOND ENGINEERING ON OCTOBER 24. THAT CONTRACT DAAA21-74-C 0181 WAS AWARDED TO THAT COMPANY ON NOVEMBER 1. THAT IT COULD HAVE COMPETED FOR THE AWARD AND DID.

B-180025, MAY 14, 1974

GAO WILL TAKE NO FURTHER ACTION ON PROTEST WHERE PROTESTER REQUESTS TERMINATION FOR CONVENIENCE OF EXISTING CONTRACT, ALLEGEDLY AWARDED IMPROPERLY ON SOLE-SOURCE BASIS, SINCE LEGALITY OF CONTRACT IS BEING INDEPENDENTLY CHALLENGED IN COURT ACTION BY THIRD PARTY, NOT BEFORE GAO. IF COURT DECIDES AWARD IS ILLEGAL, GAO WOULD BE PRECLUDED FROM MAKING RECOMMENDATION THAT CONTRACT SHOULD BE TERMINATED FOR CONVENIENCE SINCE RECOMMENDATION SUPPOSES LEGALITY OF CONTRACT IN QUESTION. ACCORDINGLY, GAO'S POLICY OF REFUSING TO RULE ON PROTEST WHERE MATTER INVOLVED IS SUBJECT OF LITIGATION PRECLUDES CONSIDERATION OF PROTEST EVEN THOUGH PROTESTER, TO GAO'S KNOWLEDGE, HAS NOT BECOME A PARTY TO LITIGATION.

TO KDI PRECISION PRODUCTS, INC.:

THE DEPARTMENT OF THE ARMY ISSUED SOLICITATION DAAA21-73-R-0124 ON DECEMBER 8, 1972, FOR A REQUIREMENT OF ARMING DEVICES. A FINAL CLOSING DATE OF MAY 11, 1973, WAS EVENTUALLY ESTABLISHED FOR RECEIPT OF PROPOSALS.

ARMY REPORTS THAT KDI PRECISION PRODUCTS, INC. (KDI), DECLINED TO SUBMIT A PROPOSAL; THAT THE LOW OFFEROR THEREAFTER WITHDREW ITS PROPOSAL FROM FURTHER CONSIDERATION; THAT THE SECOND LOW OFFEROR RECEIVED A NEGATIVE PREAWARD SURVEY AND REFUSED TO EXTEND ITS OFFER; THAT AVIEN, INC., THE THIRD LOWEST OFFEROR, ALSO RECEIVED A NEGATIVE PREAWARD SURVEY; AND THAT THE CONTRACTING OFFICER MADE A DETERMINATION THAT AVIEN WAS NONRESPONSIBLE FOR THE REQUIREMENT. AVIEN THEN REQUESTED A COPY OF THE PREAWARD SURVEY. ARMY REFUSED THE REQUEST.

IN AUGUST 1973, AVIEN FILED A CIVIL ACTION AGAINST ARMY IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF NEW YORK (CIVIL ACTION NO. 73C1274). BEFORE THE ARMY COULD MAKE AWARD TO RAYMOND ENGINEERING, THE CONCERN FINALLY DETERMINED BY THE CONTRACTING OFFICER TO BE ELIGIBLE FOR AWARD, AVIEN OBTAINED A COURT ORDER RESTRAINING ANY AWARD UNDER SOLICITATION -0124 PENDING RESOLUTION OF AVIEN'S REQUEST FOR RELEASE OF THE PREAWARD SURVEY REPORT.

THE CONTRACTING OFFICER REPORTS THAT HE SUBSEQUENTLY RECEIVED AN URGENT REQUIREMENT FOR 943 ADDITIONAL ARMING DEVICES; THAT ALTHOUGH THE PROCUREMENT OF THE NEW REQUIREMENT DID NOT APPEAR TO BE A LITERAL VIOLATION OF THE COURT ORDER, HE DECIDED TO OBTAIN COURT CLEARANCE TO BE SURE THAT IT DID NOT VIOLATE THE SPIRIT OF THE RESTRAINING ORDER; THAT A REVIEW OF THE LIST OF KNOWN PROSPECTIVE PRODUCERS RESULTED IN A NARROWING OF PROSPECTIVE CONTRACTORS TO ONE, NAMELY RAYMOND ENGINEERING; THAT NEGOTIATIONS, UNDER AUTHORITY OF 10 U.S.C. 2304(A)(2) AS IMPLEMENTED BY ASPR 3-202.2(VI), WERE SUBSEQUENTLY CONCLUDED WITH RAYMOND ENGINEERING ON OCTOBER 24, 1973; AND THAT CONTRACT DAAA21-74-C 0181 WAS AWARDED TO THAT COMPANY ON NOVEMBER 1, 1973, AFTER THE CONTRACTING OFFICER OBTAINED ADVICE OF COUNSEL THAT HE COULD PROCEED WITH AWARD.

KDI CONTENDS THAT THE DEPARTMENT "VIOLATED ASPR" BY MAKING THE NOVEMBER 1 SOLE-SOURCE AWARD TO RAYMOND; THAT IT COULD HAVE COMPETED FOR THE AWARD AND DID, IN FACT, SUBMIT AN UNSOLICITED PROPOSAL FOR THE REQUIREMENT; AND THAT CONTRACT -0181 SHOULD BE TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT AND AWARDED TO KDI.

WHILE WE WERE REQUESTING ADDITIONAL INFORMATION FROM ARMY ON KDI'S PROTEST, WE WERE ADVISED THAT AVIEN HAD FILED A SUPPLEMENTAL COMPLAINT IN THE LITIGATION PENDING IN FEDERAL DISTRICT COURT. THE SUPPLEMENTAL COMPLAINT REQUESTS THE COURT, AMONG OTHER THINGS, TO TERMINATE CONTRACT - 0181 ON THE BASIS THAT THE ARMY UNLAWFULLY RESTRICTED COMPETITION FOR THE CONTRACT, TO DECREE THAT THE CONTRACT IS ILLEGAL, AND TO DIRECT THE ARMY TO RESOLICIT THE PROCUREMENT OF THE 943 DEVICES WITH COMPETITION TO THE MAXIMUM EXTENT POSSIBLE.

AVIEN'S SUPPLEMENTAL COMPLAINT PRESENTS THE COURT WITH THE QUESTION OF THE LEGALITY OF THE SUBJECT AWARD. IN THIS REGARD, SINCE AVIEN REQUESTS THE COURT TO FIND CONTRACT -0181 NULL AND VOID AND OF NO LEGAL EFFECT, ITS PRAYER FOR "TERMINATION" MUST NECESSARILY BE CONSTRUED TO MEAN A REQUEST THAT THE CONTRACT SHOULD BE RESCINDED. THIS IS IN LINE WITH THE OBSERVATION OF THE COURT OF CLAIMS IN JOHN REINER & COMPANY V. UNITED STATES, 163 CT. CL. 381 (1963), CERT. DENIED, 377 U.S. 931 (1964), WHEN THE COURT SAID:

"*** COURTS *** ARE RESTRICTED *** TO DECIDING THE ROCK-BOTTOM ISSUE OF WHETHER THE CONTRACT PURPORTED TO BE MADE BY THE GOVERNMENT WAS INVALID AND THEREFORE NO CONTRACT AT ALL - ***"

BY CONTRAST, THE COURT OBSERVED THAT BECAUSE OF OUR CONCERN WITH THE PROPER OPERATION OF COMPETITIVE BIDDING IN GOVERNMENT PROCUREMENT, WE "CAN *** RENDER DECISIONS THAT, AS A MATTER OF PROCUREMENT POLICY, AWARDS SHOULD BE *** WITHDRAWN EVEN THOUGH THEY WOULD NOT BE HELD INVALID IN COURT." JOHN REINER & COMPANY V. UNITED STATES, SUPRA, AT 386.

KDI'S REQUEST THAT WE TERMINATE THE CONTRACT FOR THE CONVENIENCE OF THE GOVERNMENT SUGGESTS THAT IT DOES NOT QUESTION THE LEGALITY OF THE AWARD. AN ILLEGAL CONTRACT IS ONE THAT IS "INVALID AND OF NO EFFECT" (SCHOENBROD V. UNITED STATES, 187 CT. CL. 627, 635 (1969)); CONSEQUENTLY, A TERMINATION FOR CONVENIENCE CLAUSE IN AN ILLEGALLY AWARDED CONTRACT IS OF NO EFFECT. SINCE KDI RECOGNIZES THE VALIDITY OF THE TERMINATION FOR CONVENIENCE CLAUSE IN CONTRACT -0181, WE THINK IT ALSO RECOGNIZES THE VALIDITY OF THE CONTRACT. NOTWITHSTANDING ITS RECOGNITION OF THE VALIDITY OF THE AWARD, KDI CONSIDERS THE AWARD TO HAVE BEEN IMPROPERLY MADE AND REQUESTS THAT GAO RENDER A DECISION THAT IT SHOULD BE TERMINATED FOR THE GOVERNMENT'S CONVENIENCE.

IT IS CLEAR, HOWEVER, THAT A DECISION BY THE COURT ON AVIEN'S SUPPLEMENTAL COMPLAINT HOLDING THE AWARD TO HAVE BEEN ILLEGALLY MADE WOULD PRECLUDE US FROM RECOMMENDING A CONVENIENCE TERMINATION OF THE CONTRACT, AS KDI REQUESTS, SINCE THE RECOMMENDATION SUPPOSES THE LEGALITY OF THE CONTRACT IN QUESTION.

BECAUSE WE HAVE RECOGNIZED THE POSSIBILITY OF A COURT DECISION PRECLUDING US FROM TAKING ACTION, WE HAVE HELD THAT WE WILL NOT RENDER A DECISION ON A PROTEST WHEN IT IS ALSO THE SUBJECT OF PENDING LITIGATION, UNLESS THE COURT INDICATES A DESIRE FOR A DETERMINATION BY OUR OFFICE. SEE 53 COMP. GEN. (B-178224, B-179173, MARCH 29, 1974). AVIEN HAS NOT FILED A PROTEST WITH GAO ON THE VALIDITY OF CONTRACT -0181, AND WE ARE NOT AWARE OF ANY DESIRE ON THE PART OF THE COURT FOR OUR DECISION ON WHETHER THE CONTRACT WAS ILLEGALLY OR IMPROPERLY AWARDED.

THEREFORE, OUR POLICY OF REFUSING TO RULE ON A PROTEST WHERE THE MATTER INVOLVED IS THE SUBJECT OF LITIGATION PRECLUDES US FROM CONSIDERING KDI'S PROTEST EVEN THOUGH THAT PARTY, TO OUR KNOWLEDGE, HAS NOT BECOME A PARTY TO THE LITIGATION. SEE 53 COMP. GEN., SUPRA.

ACCORDINGLY, WE WILL TAKE NO FURTHER ACTION ON KDI'S PROTEST.