B-193001.2, B-197279, SEP 29, 1980

B-193001.2,B-197279: Sep 29, 1980

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PROTESTS OF CANCELLATION OF SOLICITATION PRIOR TO DATE FOR RECEIPT OF PROPOSALS ARE DENIED SINCE LACK OF NEED UPON WHICH CANCELLATION WAS BASED RESULTED FROM PROPER REINSTATEMENT OF DEFAULTED FIXED-PRICE CONTRACT FOR SAME ITEMS EVEN THOUGH DAR SEC. 8-203(D). THEY DO SO ONLY WHERE AGENCY DETERMINES CONTRACTOR WAS NOT IN DEFAULT OR DEFAULT WAS EXCUSABLE. NEITHER OF WHICH IS APPLICABLE HERE. 3. THE RFP WAS CANCELED BY THE AIR FORCE IN ORDER TO REINSTATE A PRIOR FIXED-PRICE CONTRACT WITH VIDEO RESEARCH CORPORATION (VRC) FOR ESSENTIALLY THE SAME ITEMS CALLED FOR BY THE RFP. THESE PROTESTS ARE DENIED. THIS PROTEST WAS DISMISSED BY OUR OFFICE ON GROUNDS THAT "BUYING IN" IS NOT ILLEGAL AND THAT SUCH ALLEGATIONS CONSTITUTE A PROTEST OF THE AGENCY'S AFFIRMATIVE DETERMINATION OF RESPONSIBILITY WHICH.

B-193001.2, B-197279, SEP 29, 1980

DIGEST: 1. PROTESTS OF CANCELLATION OF SOLICITATION PRIOR TO DATE FOR RECEIPT OF PROPOSALS ARE DENIED SINCE LACK OF NEED UPON WHICH CANCELLATION WAS BASED RESULTED FROM PROPER REINSTATEMENT OF DEFAULTED FIXED-PRICE CONTRACT FOR SAME ITEMS EVEN THOUGH DAR SEC. 8-203(D), UPON WHICH AGENCY RELIED FOR AUTHORITY TO REINSTATE CONTRACT, ITSELF PROVIDES NO SUCH AUTHORITY WITH RESPECT TO DEFAULTED FIXED-PRICE CONTRACTS. 2. WHILE DAR SEC. 8-601(B) AND DEFAULT CLAUSE IN DAR SEC. 7-103(11) USED IN FIXED-PRICE CONTRACTS PERMIT CONVERSION OF DEFAULT TERMINATION TO ONE FOR CONVENIENCE OF GOVERNMENT, THEY DO SO ONLY WHERE AGENCY DETERMINES CONTRACTOR WAS NOT IN DEFAULT OR DEFAULT WAS EXCUSABLE, NEITHER OF WHICH IS APPLICABLE HERE. 3. ABSENCE OF EXPLICIT REGULATORY PROVISION PERMITTING REINSTATEMENT OF DEFAULTED FIXED-PRICE CONTRACT DOES NOT PRECLUDE REINSTATEMENT SINCE AGENCY HAS INHERENT AUTHORITY TO REINSTATE DEFAULTED CONTRACT IF IT DETERMINES BASIS FOR DEFAULT NO LONGER EXISTS.

THE STANCIL-HOFFMAN CORPORATION MAGNASYNC/MOVIOLA CORPORATION:

THE STANCIL-HOFFMAN CORPORATION (SHC) AND MAGNASYNC/MOVIOLA CORPORATION (MMC) PROTEST THE CANCELLATION OF REQUEST FOR PROPOSALS (RFP) NO. F04606- 80-R-0094 ISSUED BY MCCLELLAN AIR FORCE BASE, UNITED STATES AIR FORCE (AIR FORCE). THE RFP WAS CANCELED BY THE AIR FORCE IN ORDER TO REINSTATE A PRIOR FIXED-PRICE CONTRACT WITH VIDEO RESEARCH CORPORATION (VRC) FOR ESSENTIALLY THE SAME ITEMS CALLED FOR BY THE RFP. THE AGENCY TERMINATED THAT CONTRACT FOR DEFAULT BECAUSE OF VRC'S FAILURE TO MEET THE DELIVERY SCHEDULE. THE PROTESTERS CONTEND THAT A DEFAULTED FIXED-PRICE CONTRACT CANNOT BE REINSTATED AS SUCH REINSTATEMENT CONSTITUTES AN IMPROPER SOLE- SOURCE PROCUREMENT. FOR REASONS DISCUSSED BELOW, THESE PROTESTS ARE DENIED.

SHC PROTESTED THE AWARD OF A CONTRACT TO VRC ON SEPTEMBER 18, 1978, FOR MULTI-CHANNEL VOICE RECORDERS, ALLEGING VRC COULD NOT PERFORM AT ITS BELOW -COST PRICE. THIS PROTEST WAS DISMISSED BY OUR OFFICE ON GROUNDS THAT "BUYING IN" IS NOT ILLEGAL AND THAT SUCH ALLEGATIONS CONSTITUTE A PROTEST OF THE AGENCY'S AFFIRMATIVE DETERMINATION OF RESPONSIBILITY WHICH, GENERALLY, WILL NOT BE REVIEWED BY OUR OFFICE. STANCIL-HOFFMAN CORPORATION, B-193001, OCTOBER 30, 1978, 78-2 CPD 308.

ON OCTOBER 5, 1979, THE AIR FORCE TERMINATED VRC'S CONTRACT FOR DEFAULT. VRC ASKED THAT THE CONTRACT BE REINSTATED WITH A NEW DELIVERY SCHEDULE AT NO ADDITIONAL COST TO THE GOVERNMENT. ON OCTOBER 29, THE AIR FORCE REFUSED TO REINSTATE THE CONTRACT BECAUSE OF ITS UNCERTAINTY WHETHER VRC'S PRODUCTION CAPABILITY WAS SUFFICIENT TO INSURE TIMELY DELIVERY. VRC THEN APPEALED THE DEFAULT TO THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA). THE AIR FORCE ISSUED THE SUBJECT SOLICITATION ON NOVEMBER 28, TO REPROCURE ESSENTIALLY THE SAME ITEMS. THE NEW SPECIFICATIONS REQUIRED THE RECORDERS TO OPERATE AT A POWER SOURCE FREQUENCY OF 47-420HZ RATHER THAN 50-60HZ. THE PROPOSAL DUE DATE WAS DECEMBER 28.

ON DECEMBER 6, VRC CONTACTED THE AIR FORCE IN ANOTHER EFFORT TO OBTAIN REINSTATEMENT. THE AIR FORCE THEN DETERMINED IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO CONTINUE THE ORIGINAL CONTRACT BECAUSE THE AGENCY FOUND THAT VRC HAD TAKEN CORRECTIVE ACTION WITH RESPECT TO THE CAUSE FOR DEFAULT AND THE RECORDERS COULD PROBABLY BE OBTAINED SOONER FROM VRC THAN THROUGH THE NEW PROCUREMENT. ON DECEMBER 18, BEFORE ANY PROPOSALS HAD BEEN SUBMITTED, THE SOLICITATION WAS CANCELED AND ON JANUARY 7, 1980, THE AIR FORCE, RELYING ON DEFENSE ACQUISITION REGULATION (DAR) SEC. 8-203(D) (DPC 76-6, JANUARY 31, 1977), REINSTATED VRC'S CONTRACT BY A MODIFICATION WITH A NEW DELIVERY SCHEDULE. THE REINSTATEMENT INCLUDED THE ORIGINAL REQUIREMENT THAT THE RECORDERS OPERATE OVER THE 50-60HZ FREQUENCY RANGE. THE AIR FORCE EXPLAINS THIS REVERSION TO THE ORIGINAL SPECIFICATION BY POINTING OUT THAT THE UNIT DESIGNED BY VRC USES DIRECT CURRENT POWER SUPPLIES RATHER RELYING ON POWER "DIRECTLY FROM THE POWER LINE" AND THEREFORE MEETS THE AIR FORCE'S NEEDS FOR A UNIT WHICH CAN OPERATE ON POWER FROM MOBILE GENERATOR PLANTS AT 400HZ AND FROM FOREIGN ELECTRICAL SYSTEMS WHICH OPERATE BETWEEN 47 AND 420HZ WITHOUT THE SPECIFICATION CHANGE.

ESSENTIALLY, BOTH SHC AND MMC TAKE THE POSITION THAT THE CANCELLATION OF THE SOLICITATION WAS IMPROPER BECAUSE THE REINSTATEMENT OF THE VRC CONTRACT WAS UNAUTHORIZED. IN THIS REGARD, THE PROTESTERS ARGUE THAT DAR SEC. 8-203(D), THE AUTHORITY WHICH THE AIR FORCE USED TO JUSTIFY REINSTATEMENT, DOES NOT APPLY TO THE DEFAULT TERMINATION OF A FIXED-PRICE CONTRACT. THUS, THE PROTESTERS ARGUE THE REINSTATEMENT OF THE VRC CONTRACT IS ACTUALLY A SOLE-SOURCE PROCUREMENT OF THESE ITEMS. FURTHER, THEY CONTEND THAT EVEN IF DAR SEC. 8-203(D) WERE APPLICABLE, THE REINSTATEMENT WAS NOT, AS THE REGULATION REQUIRES, IN THE BEST INTEREST OF THE GOVERNMENT BECAUSE VRC'S PRODUCT IS TECHNICALLY DEFICIENT AND THE AIR FORCE'S DETERMINATION THAT REPROCUREMENT OF THE ITEMS WOULD BE MORE COSTLY THAN THE REINSTATEMENT OF THE VRC CONTRACT IS ERRONEOUS. SHC ALSO ARGUES THAT THE AIR FORCE DID NOT OBTAIN ADEQUATE CONSIDERATION FOR ITS AGREEMENT TO RELAX THE DELIVERY SCHEDULE UNDER THE REINSTATED CONTRACT.

WITH RESPECT TO FORMALLY ADVERTISED PROCUREMENTS, DAR SECS. 2-209 (1976 ED.) AND 2-404.1(B)(III) (DAC 76-17, SEPTEMBER 1, 1978) PERMIT CANCELLATIONS OF INVITATIONS FOR BIDS EITHER BEFORE OR AFTER BID OPENING WHEN IT IS DETERMINED THAT THE SUPPLIES OR SERVICES ARE NO LONGER NEEDED. THIS PRINCIPLE IS EQUALLY APPLICABLE TO THE CANCELLATIONS OF SOLICITATIONS IN NEGOTIATED PROCUREMENTS. B-175138, JANUARY 3, 1973; FEDERAL LEASING, INC., 54 COMP.GEN. 872, 877 (1975), 75-1 CPD 236.

WHILE THE PROTESTERS CONTEND THE AIR FORCE HAS AN ONGOING NEED FOR THE RECORDERS AS SHOWN BY THE CONTRACT REINSTATED WITH VRC, THE AIR FORCE CONTENDS THAT SINCE THE ORIGINAL CONTRACT WITH VRC WAS PROPERLY REINSTATED, THERE WAS NO LONGER A NEED FOR ADDITIONAL RECORDERS AND THE SOLICITATION WAS PROPERLY CANCELED. THE VALIDITY OF THIS POSITION DEPENDS UPON WHETHER THE REINSTATEMENT WHICH ELIMINATED THE NEED WAS LEGALLY PROPER.

THE PROTESTERS CORRECTLY POINT OUT THAT DAR SEC. 8-203(D) PROVIDES NO DIRECT AUTHORITY FOR THE REINSTATEMENT OF A DEFAULTED FIXED-PRICE CONTRACT. THAT REGULATION APPLIES ONLY TO CONTRACTS TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT AND TO COST-REIMBURSEMENT TYPE CONTRACTS TERMINATED FOR DEFAULT. IT PERMITS THEIR REINSTATEMENT WHERE THE TERMINATED ITEMS ARE CLEARLY NEEDED AND REINSTATEMENT IS ADVANTAGEOUS TO THE GOVERNMENT. WE FIND NO SUPPORT FOR THE AIR FORCE'S POSITION THAT THE REINSTATEMENT PROVISION OF DAR SEC. 8-203(D) EXTENDS TO DEFAULTED FIXED- PRICE SUPPLY CONTRACTS WHICH ARE SPECIFICALLY TREATED IN DAR SECTION 8, PART 6.

DAR SECTION 8, PART 6 SETS FORTH THE PRINCIPLES APPLICABLE TO THE DEFAULT TERMINATION OF FIXED-PRICE CONTRACTS. WHILE PART 6 DOES NOT SPECIFICALLY MENTION THE REINSTATEMENT OF DEFAULTED FIXED-PRICE CONTRACTS, DAR SEC. 8- 601(B) AND THE DEFAULT CLAUSE AT DAR SEC. 7 103.11, WHICH IS USED IN FIXED -PRICE CONTRACTS, PERMIT THE CONVERSION OF A DEFAULT TERMINATION TO ONE FOR THE CONVENIENCE OF THE GOVERNMENT IF IT IS ESTABLISHED THAT THE CONTRACTOR WAS NOT IN DEFAULT OR THAT THE DEFAULT WAS EXCUSABLE. IF SUCH A CONVERSION IS PROPERLY MADE, THE CONTRACT, AS ONE TERMINATED FOR CONVENIENCE, COULD THEN BE REINSTATED IF THE REQUIREMENTS OF DAR SEC. 8- 203(D) ARE MET. HOWEVER, THE AIR FORCE MADE NO ATTEMPT TO CONVERT THE DEFAULT TERMINATION TO A TERMINATION FOR CONVENIENCE AND THE RECORD IS DEVOID OF EVIDENCE THAT GROUNDS FOR SUCH A CONVERSION EXISTED. THUS, AS PRESENTLY WRITTEN, DAR SECTION 8, PROVIDES NO EXPLICIT AUTHORITY TO REINSTATE A DEFAULTED CONTRACT WHERE, AS HERE, THERE IS NO DETERMINATION THAT THE DEFAULT WAS NOT PROPER OR, IF PROPER, EXCUSABLE.

NONETHELESS, WE BELIEVE THE ABSENCE OF A REGULATORY PROVISION IS NOT CONTROLLING. JUST AS AGENCIES HAVE INHERENT POWER TO SETTLE CONTRACTOR CLAIMS RESULTING FROM "SUSPENSION" OF WORK, SEE UNITED STATES V. CORLISS STEAM - ENGINE CO., 91 U.S. 321 (1875), WE BELIEVE THEY HAVE THE INHERENT AUTHORITY TO REINSTATE A DEFAULTED CONTRACT WHEREVER THEY DETERMINE IN GOOD FAITH THAT THE BASIS FOR THE DEFAULT NO LONGER EXISTS AND THAT IT IS REASONABLE TO EXPECT SATISFACTORY COMPLETION OF CONTRACT PERFORMANCE UPON REINSTATEMENT. THE FACT THAT EXISTING REGULATIONS SPECIFICALLY PROVIDE FOR REINSTATING CERTAIN CONTRACTS BUT NOT OTHERS DOES NOT, IN OUR VIEW, ELIMINATE THIS INHERENT AUTHORITY OR PRECLUDE ITS EXERCISE. CF., GOULD, INC. ADVANCED TECHNOLOGY GROUP, B-181448, OCTOBER 15, 1974, 74-2 CPD 205.

THE AIR FORCE DENIES THE PROTESTERS' CONTENTION THAT VRC'S RECORDER IS TECHNICALLY DEFICIENT AND THAT REINSTATEMENT OF THE VRC CONTRACT WILL BE MORE COSTLY TO THE GOVERNMENT THAN A REPROCUREMENT. THE AIR FORCE ASSERTS THAT VRC'S DESIGN IS "INNOVATIVE AND EFFECTIVE", THAT VRC HAD OVERCOME ITS PREVIOUS PROBLEMS AND THAT THE RECORDERS WILL BE OBTAINED SUBSTANTIALLY SOONER AND AT LESS COST THROUGH REINSTATEMENT THAN WOULD BE POSSIBLE FROM A REPROCUREMENT. AGENCY'S TECHNICAL DETERMINATIONS AND JUDGMENTS IN MATTERS SUCH AS ARE INVOLVED HERE ARE GIVEN GREAT WEIGHT BY THIS OFFICE AND WE WILL NOT QUESTION THEM IN THE ABSENCE OF A SHOWING THAT THE DETERMINATIONS AND JUDGMENTS ARE ARBITRARY, UNREASONABLE OR OTHERWISE IMPROPER. SEE SOGITEC, INCORPORATED, B-196158, JANUARY 24, 1980, 80-1 CPD 70. WHILE THE PROTESTERS STRONGLY DISAGREE, WE FIND NO BASIS IN THE RECORD FOR CONCLUDING THE AIR FORCE'S DETERMINATIONS IN THESE MATTERS WERE UNREASONABLE OR OTHERWISE IMPROPER.

THE ISSUE AS TO ADEQUACY OF THE CONSIDERATION RECEIVED BY THE AIR FORCE FOR RELAXING THE DELIVERY SCHEDULE OF VRC'S CONTRACT PERTAINS TO A MATTER OF CONTRACT ADMINISTRATION SINCE THE REINSTATEMENT OF THE CONTRACT HAS BEEN FOUND TO BE PROPER. AS SUCH, IT IS NOT FOR RESOLUTION WITHIN OUR BID PROTEST FUNCTION. SEE ACADIAN AIR MOTIVE, INC., B-196414, APRIL 17, 1980, 80-1 CPD 270.