B-199880, JUN 2, 1981

B-199880, JUN 2, 1981

DIGEST: 1. FACT THAT PROTESTER'S OFFER WAS FOR LESSER QUANTITY THAN THAT SOLICITED IS NOT DETERMINATIVE OF PROTEST BECAUSE ALTHOUGH RFP CONTAINED CLAUSE INDICATING THAT OFFERS FOR PARTIAL QUANTITIES ARE NOT SOLICITED IT ALSO CONTAINED CLAUSE INDICATING THAT PARTIAL OFFER WOULD BE ACCEPTED AND IN FACT PROTESTER'S OFFER WAS REJECTED BECAUSE IT WAS FOR SURPLUS PROPERTY. 2. AGENCY'S POLICY THAT SURPLUS PROPERTY BE MORE THAN $3,000 OR 5 PERCENT, WHICHEVER IS GREATER, LESS THAN PRICE OF NEWLY MANUFACTURED PROPERTY BEFORE AGENCY WILL CONSIDER BUYING IT IMPOSES IN THIS CASE UNDUE RESTRICTION ON COMPETITION, BECAUSE AGENCY HAS NOT SHOWN THERE IS A LEGITIMATE NEED TO PERFORM ADDITIONAL TESTS ON SURPLUS PROPERTY, COST OF WHICH $3,000/5 PERCENT FACTOR IS INTENDED TO EVALUATE.

D. MOODY & CO., INC.:

D. MOODY & CO. INC., PROTESTS THE REJECTION BY THE NAVY AVIATION SUPPLY OFFICE (ASO) OF ITS LOW OFFER TO SUPPLY 18 OF THE 52 VALVES CALLED FOR BY REQUEST FOR PROPOSALS NO. N00383-80-R-1582. MOODY CONTENDS THE NAVY IMPROPERLY REJECTED ITS OFFER PURSUANT TO THE AGENCY'S UNPUBLISHED AND IMPROPER POLICY OF REFUSING TO CONSIDER OFFERS OF SURPLUS AIRCRAFT PARTS UNLESS THE PRICE OFFERED IS LOWER THAN AN OFFER FOR NEWLY MANUFACTURED PARTS BY A MARGIN OF $3,000 OR 5 PERCENT, WHICHEVER IS GREATER. WE AGREE WITH MOODY.

THE NAVY STATES THAT ONLY THE HYDRO-AIRE DIVISION OF THE CRANE COMPANY WAS SOLICITED BECAUSE IT WAS THE DEVELOPER AND ONLY KNOWN PRODUCER OF THE VALVE AND THAT THE NAVY LACKED ADEQUATE TECHNICAL DATA FOR A COMPETITIVE PROCUREMENT. HYDRO-AIRE OFFERED TO SUPPLY THE 52 VALVES FOR A UNIT PRICE OF $436 AND WAS AWARDED THE CONTRACT. ALTHOUGH MOODY WAS NOT SOLICITED, IT SUBMITTED AN OFFER FOR 18 OF THE 52 VALVES AT A UNIT PRICE OF $369, STATING THAT THE VALVES HAD BEEN OBTAINED FROM THE DEFENSE PROPERTY DISPOSAL SERVICE IN 1975 AND WERE "NEW SURPLUS CERTIFIED AIRWORTHY BY A DULY AUTHORIZED FAA FACILITY" AND CERTIFYING THAT THE PARTS "MEET APPLICABLE SPECIFICATIONS." AFTER APPLYING ITS $3,000/5 PERCENT TEST, THE NAVY REJECTED MOODY'S OFFER AND INFORMED THE FIRM THAT THE DIFFERENCE IN PRICE WAS NOT SUFFICIENT TO WARRANT THE COST OF A TECHNICAL REVIEW TO DETERMINE IF TEST CRITERIA COULD BE DEVELOPED FOR THE ACCEPTANCE OF SURPLUS MATERIAL.

ALTHOUGH ASO REJECTED MOODY'S OFFER SOLELY ON THE BASIS THAT IT FAILED TO QUALIFY FOR CONSIDERATION UNDER THE $3,000/5 PERCENT TEST, ASO ASSERTS THAT MOODY'S OFFER ALSO COULD HAVE BEEN REJECTED BECAUSE IT WAS FOR ONLY 18 OF THE 52 PARTS REQUIRED. IN SUPPORT OF THIS VIEW ASO CITES CLAUSE 320 OF THE SOLICITATION WHICH STATED THAT AWARD WOULD BE MADE FOR THE TOTAL QUANTITY OF EACH ITEM AND THAT OFFERS FOR PARTIAL QUANTITIES WERE NOT SOLICITED. ON THE OTHER HAND, PARAGRAPH 10 OF STANDARD FORM 33-A ALSO INCLUDED IN THE SOLICITATION STATED THAT UNLESS OTHERWISE PROVIDED IN THE SCHEDULE, OFFERS COULD BE SUBMITTED FOR ANY QUANTITIES LESS THAN THOSE SPECIFIED. AS CLAUSE 320 WAS NOT LOCATED IN THE SCHEDULE PORTION OF THE SOLICITATION, IT IS NOT CLEAR THAT ASO ACTUALLY INTENDED THAT OFFERS FOR LESS THAN THE TOTAL QUANTITY BE REJECTED, PARTICULARLY SINCE ONLY ONE COMPANY WAS SOLICITED. ACCORDINGLY, AND SINCE THE AGENCY DID NOT REJECT MOODY'S OFFER FOR THIS REASON, WE DO NOT VIEW THIS ISSUE AS DISPOSITIVE OF THE PROTEST.

THE PRIMARY ISSUE IS THE PROPRIETY OF THE $3,000/5 PERCENT TEST UNDER WHICH THE PRICE OF SURPLUS PROPERTY MUST BE $3,000 OR 5 PERCENT (WHICHEVER IS GREATER) BELOW THE PRICE OF NEWLY MANUFACTURED PROPERTY BEFORE THE AGENCY WILL CONSIDER ACQUIRING THE SURPLUS PROPERTY. MOODY ASSERTS THE TEST IS UNAUTHORIZED, UNPUBLISHED AND CONSTITUTES AN IMPROPER PREQUALIFICATION FOR SURPLUS DEALERS.

ALTHOUGH MOODY HAD BEEN PREVIOUSLY INFORMED BY ASO OF THE EXISTENCE OF THE TEST, THE SOLICITATION CONTAINED NO NOTICE OF ITS POSSIBLE APPLICATION. THE NAVY CONTENDS THE TEST, WHICH IS APPLIED WHENEVER ASO LACKS ADEQUATE TECHNICAL DATA FOR A COMPETITIVE PROCUREMENT, FAIRLY REFLECTS ITS ESTIMATE OF THE AVERAGE EXTRA COST IT INCURS WHENEVER SURPLUS PROPERTY IS CONSIDERED FOR ACQUISITION. THESE COSTS INCLUDE THOSE INCURRED IN A SEARCH FOR, OR THE DEVELOPMENT OF, DOCUMENTS ADEQUATE FOR ACCEPTANCE CRITERIA, PREAWARD EVALUATION OF THE SURPLUS PROPERTY AND TESTING AT A GOVERNMENT SITE. THE NAVY STATES THAT SUCH GOVERNMENT TESTING COSTS ARE NOT INCURRED WHEN NEWLY MANUFACTURED PROPERTY IS OBTAINED SINCE THE NEW PROPERTY IS SUBJECTED TO IN-PROCESS AND ACCEPTANCE TESTING BY THE CONTRACTOR PRIOR TO DELIVERY ALTHOUGH THE GOVERNMENT MAY REVIEW AND VERIFY SUCH TESTING. IN ADDITION, THE AGENCY STATES THAT THERE IS AN INHERENT RISK IN THE ACQUISITION OF SURPLUS PROPERTY SINCE THE SPECIALIZED CRITERIA DEVELOPED FOR ITS ACCEPTANCE ARE NOT THE SAME AS THOSE IMPOSED BY THE MANUFACTURER. IN THIS REGARD, THE NAVY POINTS OUT THAT SURPLUS PROPERTY CANNOT BE SUBJECTED TO IN PROCESS TESTS PERFORMED BY THE MANUFACTURER AND UNLESS EVIDENCE THAT THE SURPLUS PROPERTY SUCCESSFULLY PASSED ALL IN-PROCESS TESTS WAS AVAILABLE, SURPLUS PROPERTY WOULD BE ACCEPTED WITH LESS THAN THE FULL RANGE OF TESTS APPLIED TO NEWLY- MANUFACTURED MATERIAL.

IT IS A FUNDAMENTAL PRINCIPLE OF COMPETITIVE PROCUREMENT THAT OFFERORS MUST BE TREATED EQUALLY AND BE PROVIDED WITH A COMMON BASIS FOR THE SUBMISSION OF THEIR PROPOSALS. HOST INTERNATIONAL, INC., B-187529, MAY 17, 1977, 77-1 CPD 346. WE HAVE, HOWEVER, APPROVED SPECIAL AGENCY PROCEDURES LIKE THE ONE IN THIS CASE WHICH MAY OPERATE TO LIMIT COMPETITION TO CERTAIN TYPES OF OFFERS IF THE RESTRICTIVE PROCEDURE SERVES A BONA FIDE NEED OF GOVERNMENT SUCH AS THE NEED TO MAINTAIN THE HIGH LEVEL OF QUALITY AND RELIABILITY NECESSITATED BY THE CRITICALITY OF THE PRODUCT. ROTAIR INDUSTRIES; D. MOODY & CO., INC., 58 COMP.GEN. 149 (1978), 78-2 CPD 410.

IN D. MOODY & CO., INC., 56 COMP.GEN. 1005 (1977), 77-2 CPD 233, WE RECOGNIZED AN AGENCY HAS A LEGITIMATE CONCERN AS TO WHERE, WHEN, WHY AND HOW AN ITEM BECAME SURPLUS BUT THAT SUCH CONCERN, WITHOUT MORE, IS NOT SUFFICIENT TO PRECLUDE PROCUREMENT OF PARTS FROM SURPLUS DEALERS. WE ALSO CONCLUDED THAT ONCE THE HISTORICAL DATA ON A NEW, UNUSED ITEM FROM THE TIME IT LEFT THE MANUFACTURER'S PLANT HAD BEEN SUPPLIED, THERE WAS NO DISTINCTION BETWEEN THE PART FURNISHED BY THE MANUFACTURE AND THE PART FURNISHED BY A SURPLUS DEALER. WE FURTHER FOUND THAT SINCE THE SURPLUS PARTS HAD PASSED ALL THE INSPECTION PROCEDURES REQUIRED OF NEW PARTS PRIOR TO INITIAL ACCEPTANCE. IN THIS INSTANCE THE AGENCY HAS NOT BASED ITS REJECTION OF MOODY'S OFFER ON THE LACK OF SUCH HISTORICAL DATA AND THE AGENCY HAS NOT INDICATED THAT THE FACTS DIFFER FROM THOSE IN D. MOODY & CO., INC., SUPRA.

HERE, IN EMPHASIZING ITS BELIEF IN THE NECESSITY FOR DEVELOPING SPECIAL TESTS AND ACCEPTANCE CRITERIA ADEQUATE FOR THE INSPECTION OF SURPLUS PROPERTY, THE NAVY APPARENTLY OVERLOOKS THE FACT THAT THE SUBJECT ITEMS SUCCESSFULLY PASSED THROUGH THE ACCEPTANCE PROCEDURE ONCE. WHILE IT MAY BE TRUE THAT SOME ITEMS HAVE BEEN ACCEPTED UNDER WAIVERS OR DEVIATIONS FROM THE SPECIFICATIONS OR WERE NOT INCLUDED IN THE SAMPLE INSPECTED WHERE SAMPLING TECHNIQUES WERE USED, THE NAVY HAS NOT SHOWN THAT SUCH WAIVERS, DEVIATIONS OR TECHNIQUES ARE INCOMPATIBLE WITH GOOD INSPECTION AND ACCEPTANCE PROCEDURES SUCH AS IT USES IN THE PURCHASE OF NEWLY MANUFACTURED EQUIPMENT. MOREOVER, IT HAS NOT SHOWN THAT ITS EXPERIENCE WITH NEW, UNUSED AND UNDETERIORATED SURPLUS PROPERTY WARRANTS SPECIAL TREATMENT AFTER THE PART NUMBER HAS BEEN VERIFIED ALONG WITH THE FACTS PERTAINING TO THE GOVERNMENT'S SURPLUS SALE OF THE ITEM.

IT IS OUR VIEW, THEREFORE, THAT THE AGENCY HAS NOT SHOWN THAT IN THIS CASE THERE IS A LEGITIMATE NEED TO PERFORM ADDITIONAL TESTS ON THE NONDETERIORABLE SURPLUS PARTS OFFERED BY MOODY. CONSEQUENTLY, THERE WAS NO REASON TO APPLY THE $3,000/5 PERCENT TEST OR ANY OTHER EVALUATION PENALTY TO OFFERS OF SURPLUS PROPERTY AND IF OTHERWISE ACCEPTABLE, MOODY'S OFFER SHOULD HAVE BEEN CONSIDERED.

FOR THE REASONS STATED ABOVE THE PROTEST IS SUSTAINED. HOWEVER, SINCE ALL OF THE ITEMS HAVE BEEN DELIVERED, NO CORRECTIVE ACTION IS FEASIBLE WITH RESPECT TO THIS PROCUREMENT. WE ARE RECOMMENDING HOWEVER, THAT THE $3,000/5 PERCENT TEST NOT BE UTILIZED IN THE FUTURE UNDER CIRCUMSTANCES SIMILAR TO THOSE OF THIS CASE.