B-222421, JUN 17, 1986, 86-1 CPD 557

B-222421: Jun 17, 1986

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PROTEST OF AGENCY'S DETERMINATION TO RESTRICT TO DOMESTIC SOURCES 50 PERCENT OF AGENCY'S SPARE ROADWHEEL ACQUISITIONS IN ORDER TO PROVIDE FOR AN ADEQUATE MOBILIZATION BASE IS DENIED WHERE. ALLEGATION THAT AGENCY DETERMINATION TO RESTRICT TO DOMESTIC SOURCES 50 PERCENT OF AGENCY'S SPARE ROADWHEEL ACQUISITIONS WAS BASED ON POLITICAL PRESSURE IS DENIED SINCE CONTRACTING OFFICIALS ARE PRESUMED TO ACT IN GOOD FAITH AND PROTESTER HAS FAILED TO PROVIDE ANY SUBSTANTIATING EVIDENCE TO SUPPORT ITS ALLEGATION. COULD OFFER A LOWER PRICE IF ALLOWED TO COMPETE PROVIDES NO BASIS TO OBJECT TO AGENCY'S PARTIAL RESTRICTION OF ACQUISITION TO DOMESTIC SOURCES WHERE SUCH RESTRICTION IS NOT FOUND IMPROPER. URDAN ARGUES THAT THE MOBILIZATION BASE RESTRICTION IS UNWARRANTED.

B-222421, JUN 17, 1986, 86-1 CPD 557

BIDS - INVITATION FOR BIDS - DOMESTIC SOURCE REQUIREMENTS DIGEST: 1. PROTEST OF AGENCY'S DETERMINATION TO RESTRICT TO DOMESTIC SOURCES 50 PERCENT OF AGENCY'S SPARE ROADWHEEL ACQUISITIONS IN ORDER TO PROVIDE FOR AN ADEQUATE MOBILIZATION BASE IS DENIED WHERE, DESPITE AGENCY'S EARLIER DETERMINATION TO PROCURE SPARE ROADWHEELS ON AN UNRESTRICTED BASIS, AGENCY PROVIDES SUPPORT FOR ITS DECISION TO IMPOSE ADDITIONAL RESTRICTIONS. CONTRACTS - PROTESTS - ALLEGATIONS - UNSUBSTANTIATED 2. ALLEGATION THAT AGENCY DETERMINATION TO RESTRICT TO DOMESTIC SOURCES 50 PERCENT OF AGENCY'S SPARE ROADWHEEL ACQUISITIONS WAS BASED ON POLITICAL PRESSURE IS DENIED SINCE CONTRACTING OFFICIALS ARE PRESUMED TO ACT IN GOOD FAITH AND PROTESTER HAS FAILED TO PROVIDE ANY SUBSTANTIATING EVIDENCE TO SUPPORT ITS ALLEGATION. CONTRACTS - PROTESTS - BASIS FOR PROTEST REQUIREMENT 3. ALLEGATION THAT PROTESTER, A FOREIGN FIRM, COULD OFFER A LOWER PRICE IF ALLOWED TO COMPETE PROVIDES NO BASIS TO OBJECT TO AGENCY'S PARTIAL RESTRICTION OF ACQUISITION TO DOMESTIC SOURCES WHERE SUCH RESTRICTION IS NOT FOUND IMPROPER.

URDAN INDUSTRIES, LTD.:

URDAN INDUSTRIES, LTD., AN ISRAELI FIRM, PROTESTS THE DOMESTIC SOURCE RESTRICTION CONTAINED IN INVITATION FOR BIDS (IFB) NO. DAAE07-86 B-A051 ISSUED BY THE DEPARTMENT OF THE ARMY FOR THE PROCUREMENT OF SPARE ROADWHEELS FOR THE M113 TRACKED COMBAT VEHICLE. THE ARMY RESTRICTED 50 PERCENT OF THE PROCUREMENT TO DOMESTIC SOURCES TO PROVIDE FOR AN ADEQUATE INDUSTRIAL MOBILIZATION BASE. URDAN ARGUES THAT THE MOBILIZATION BASE RESTRICTION IS UNWARRANTED.

WE DENY THE PROTEST.

IN JULY 1984, THE ARMY CONDUCTED A REVIEW OF THE MOBILIZATION BASE REQUIREMENTS FOR ROADWHEELS. THE ARMY DETERMINED THAT A DOMESTIC SOURCE RESTRICTION ON ROADWHEELS PRODUCED AS ORIGINAL EQUIPMENT FOR NEW VEHICLES WAS SUFFICIENT TO MAINTAIN THE MOBILIZATION BASE. THE PROCUREMENT OF SPARE ROADWHEELS WAS NOT CONSIDERED AS SIGNIFICANT A CONTRIBUTOR TO THE BASE AND, IN ADDITION, INDUSTRIAL CAPACITY AT THAT TIME WAS DEEMED SUFFICIENT TO MEET THE ARMY'S REQUIREMENTS FROM A COLD BASE. /1/ BASED ON THIS REVIEW, THE ASSISTANT SECRETARY OF THE ARMY CONCLUDED THAT THERE WAS INSUFFICIENT JUSTIFICATION FOR RESTRICTING PROCUREMENT OF SPARE ROADWHEELS AND THAT NO SIGNIFICANT CHANGE WAS FORESEEN WHICH WOULD ALTER THIS CONCLUSION.

DURING FISCAL YEAR 1985, NINE SOLICITATIONS WERE ISSUED FOR THE PROCUREMENT OF SPARE ROADWHEELS. ALL EXCEPT ONE WERE AWARDED ON AN UNRESTRICTED BASIS AND, OF THOSE NOT RESTRICTED, ALL BUT ONE WERE AWARDED TO URDAN. /2/ BECAUSE OF CONCERN THAT DOMESTIC FIRMS MIGHT NOT MAINTAIN THE TOOLING NECESSARY FOR THE PRODUCTION OF SPARE ROADWHEELS IN VIEW OF URDAN'S MARKET DOMINANCE, THE ARMY THEN REVIEWED ITS MOBILIZATION BASE REQUIREMENTS FOR SPARE ROADWHEELS. IN DECEMBER 1985, NEW GUIDANCE WAS ISSUED BY THE ARMY WHICH INDICATED THAT 50 PERCENT OF THE SPARE ROADWHEELS PROCURED SHOULD BE RESTRICTED TO DOMESTIC SOURCES.

THE PRESENT IFB WAS ISSUED ON JANUARY 31, 1986 AND IS FOR 61,000 SPARE ROADWHEELS. CONTRACT LINE ITEM NUMBER 0001, FOR 30,500 SPARE ROADWHEELS, WAS RESTRICTED TO DOMESTIC SOURCES IN ACCORDANCE WITH THE DEPARTMENT OF DEFENSE FEDERAL ACQUISITION REGULATION SUPPLEMENT (DFARS), SEC. 8.7802 (DAC 84-13, AUG. 30, 1985), WHICH GOVERNS THE RESTRICTION OF CERTAIN FORGED ITEMS TO DOMESTIC SOURCES. AFTER A REVIEW PROMPTED BY URDAN, IT WAS DISCOVERED THAT THE ROADWHEELS BEING PROCURED WERE NOT "FORGED" ROADWHEELS AND AMENDMENT NO. 0002, DATED MARCH 10, 1986, CHANGED THE AUTHORITY FOR THE RESTRICTION TO SECTION 6.302-3 OF THE FEDERAL ACQUISITION REGULATION (FAC 84-5, APR. 1, 1985), WHICH AUTHORIZES AGENCIES TO DEVIATE FROM FULL AND OPEN COMPETITION "WHEN IT IS NECESSARY TO ... CREATE OR MAINTAIN THE REQUIRED DOMESTIC CAPABILITY FOR PRODUCTION OF CRITICAL SUPPLIES. ..." URDAN'S PROTEST WAS FILED WITH OUR OFFICE ON MARCH 18, 1986.

URDAN CONTENDS THAT NO LEGITIMATE MOBILIZATION BASE NEED WILL BE SERVED BY RESTRICTING THE PROCUREMENT OF SPARE ROADWHEELS. URDAN ARGUES THAT THE ARMY HAS PRESENTED NO EVIDENCE WHICH JUSTIFIES THE CHANGE FROM THE DECISION MADE IN 1984 WHICH AUTHORIZED THE PROCUREMENT OF SPARE ROADWHEELS ON AN UNRESTRICTED BASIS. URDAN CONTENDS THAT THERE HAS BEEN NO CHANGE IN INDUSTRIAL CAPACITY IN THE INTERVENING TWELVE MONTHS AND THAT THERE ARE MANY KNOWN DOMESTIC PRODUCERS WITH EXISTING CAPACITY TO PRODUCE ROADWHEELS. URDAN COMPLAINS THAT THE DOMESTIC FIRMS RESORTED TO POLITICAL PRESSURE BECAUSE THEY WERE UNABLE TO COMPETE ON THE BASIS OF PRICE AND THAT THE ARMY'S UNWARRANTED RESTRICTION HAS RESULTED IN THE GOVERNMENT'S PAYING A HIGHER PRICE FOR ROADWHEELS.

THE ARMY INDICATES THAT DOMESTIC FIRMS CANNOT BE RELIED ON TO MAINTAIN THE NECESSARY MANUFACTURING EQUIPMENT FOR THE PRODUCTION OF ROADWHEELS IN VIEW OF THE RECENT PROCUREMENT HISTORY WHERE ALL BUT ONE UNRESTRICTED PROCUREMENT FOR SPARE ROADWHEELS WERE AWARDED TO URDAN. THE ARMY ARGUES THAT WITHOUT SOME RESTRICTION, INDUSTRIAL CAPACITY WILL BE SERIOUSLY DIMINISHED, JEOPARDIZING THE NATION'S SECURITY INTEREST. IN ADDITION, THE ARMY INDICATES THAT ITS DECISION IN 1984 OVERLOOKED THE IMPACT ON DOMESTIC PRODUCERS OF A REDUCTION IN THE NUMBER OF NEW VEHICLES BEING PROCURED, AND THE CONCOMITANT DECREASE IN THE NUMBER OF ROADWHEELS PRODUCED AS ORIGINAL EQUIPMENT. THE ARMY INDICATES THAT BECAUSE OF THIS REDUCTION, THE IMPOSITION OF A 50 PERCENT DOMESTIC RESTRICTION ON SPARE ROADWHEELS WILL RESULT IN THE SAME NUMBER OF ROADWHEELS BEING RESTRICTED TO DOMESTIC SOURCES AS EXISTED IN 1985 WHEN SPARES WERE PROCURED ON AN UNRESTRICTED BASIS. THE ARMY ARGUES THAT THE CURRENT RESTRICTION IS THEREFORE IN LINE WITH THE ARMY'S PAST ESTIMATES REGARDING THE OVERALL QUANTITY OF ROADWHEELS WHICH NEED TO BE RESTRICTED IN ORDER TO MAINTAIN THE MOBILIZATION BASE, AND THAT URDAN'S PROTEST IS WITHOUT MERIT.

UNDER THE COMPETITION IN CONTRACTING ACT, AGENCIES CONTINUE TO HAVE AUTHORITY TO CONDUCT PROCUREMENTS IN A MANNER THAT ENABLES THEM TO ESTABLISH OR MAINTAIN SOURCES OF SUPPLY FOR A PARTICULAR ITEM IF THE AGENCY DETERMINES THAT TO DO SO WOULD BE IN THE INTEREST OF THE NATIONAL DEFENSE IN HAVING FACILITIES AVAILABLE TO FURNISH SUCH ITEMS FOR INDUSTRIAL MOBILIZATION PURPOSES. SEE 10 U.S.C.A. SECS. 2304(B)(1)(B) AND 2304(C)(3) (WEST SUPP. 1986). AGENCIES THEREFORE NEED NOT OBTAIN FULL AND OPEN COMPETITION WHERE THE PROCUREMENT IS CONDUCTED FOR INDUSTRIAL MOBILIZATION PURPOSES AND MAY USE OTHER THAN COMPETITIVE PROCEDURES WHERE IT IS NECESSARY TO AWARD THE CONTRACT TO A PARTICULAR SOURCE OR SOURCES. DECISIONS AS TO THE PRODUCERS THAT SHOULD BE INCLUDED IN THE MOBILIZATION BASE AND THE RESTRICTIONS REQUIRED TO MEET THE NEEDS OF INDUSTRIAL MOBILIZATION MUST BE LEFT TO THE DISCRETION OF THE MILITARY AGENCIES, AND OUR OFFICE QUESTIONS THOSE DECISIONS ONLY IF THE EVIDENCE CONVINCINGLY SHOWS THAT THE AGENCY HAS ABUSED ITS DISCRETION. MARTIN ELECS., INC., B-219803, NOV. 1, 1985, 65 COMP.GEN. ***, 85-2 CPD PARA. 504.

IN OUR VIEW, THE RECORD FAILS TO SHOW THAT THE ARMY ABUSED ITS DISCRETION IN RESTRICTING 50 PERCENT OF ITS SPARE ROADWHEELS REQUIREMENTS TO DOMESTIC SOURCES. ALTHOUGH URDAN ARGUES THAT NOTHING HAS CHANGED SINCE THE ARMY ITSELF DETERMINED THAT THE PROCUREMENT OF SPARE ROADWHEELS SHOULD NOT BE RESTRICTED, URDAN DOES NOT REBUT THE FACT THAT THE ARMY'S EARLIER DETERMINATION WAS BASED IN LARGE PART ON THE SIGNIFICANT CONTRIBUTION TO THE MOBILIZATION BASE OF ROADWHEELS PROCURED AS ORIGINAL EQUIPMENT FOR NEW VEHICLES, NOR DOES URDAN TAKE ISSUE WITH THE ARMY'S POSITION THAT DECREASED NEW VEHICLE PRODUCTION FOR FY 1986 WOULD RESULT IN A SUBSTANTIAL DECREASE IN THE OVERALL NUMBER OF ROADWHEELS RESTRICTED TO DOMESTIC SOURCES IF ADDITIONAL RESTRICTIONS WERE NOT INITIATED. THE ARMY EFFECTIVELY DECIDED TO MAINTAIN THE SAME PERCENTAGE RESTRICTION AS IN PREVIOUS YEARS UNDER THESE CIRCUMSTANCES.

EVEN THOUGH THE ARMY PREVIOUSLY HAD DETERMINED THAT THE EXISTING CAPACITY WAS CAPABLE OF MEETING THE ARMY'S MOBILIZATION NEEDS FROM A COLD BASE, THERE IS REASONABLE SUPPORT FOR THE ARMY'S ASSERTION THAT DOMESTIC FIRMS COULD NOT BE EXPECTED TO MAINTAIN ADEQUATE INDUSTRIAL CAPACITY WITHOUT ADDITIONAL RESTRICTIONS ON THE PROCUREMENT OF SPARES. WITH THE REDUCTION OF NEW VEHICLE PRODUCTION AND THE SUBSTANTIAL LIKELIHOOD THAT UNRESTRICTED ACQUISITIONS OF SPARE ROADWHEELS WOULD BE AWARDED TO FOREIGN FIRMS, WE FIND THAT THE ARMY HAD A REASONABLE BASIS TO SHIFT FROM ITS EARLIER POSITION. TO THE EXTENT URDAN MERELY DISAGREES WITH THE ARMY'S JUDGMENT AND ARGUES THAT THE MOBILIZATION BASE WOULD NOT BE ADVERSELY AFFECTED IF THE ARMY REDUCED THE OVERALL PERCENTAGE OF ROADWHEELS RESTRICTED TO DOMESTIC SOURCES, WE AGAIN POINT OUT WHAT RESTRICTIONS ARE REQUIRED TO PROVIDE FOR AN ADEQUATE MOBILIZATION BASE INVOLVES A COMPLEX JUDGMENT WHICH MUST BE LEFT TO THE DISCRETION OF THE MILITARY AGENCIES. WAYNE H. COLONEY CO., INC., 64 COMP.GEN. 260 (1985), 85-1 CPD PARA. 186. THE RECORD DOES NOT DEMONSTRATE THAT THE ARMY ABUSED ITS DISCRETION IN THIS CASE.

WITH RESPECT TO URDAN'S ALLEGATION THAT THE ARMY DECIDED TO RESTRICT THE ACQUISITION OF SPARE ROADWHEELS BECAUSE OF POLITICAL PRESSURE, URDAN'S SPECULATIVE STATEMENTS, WITHOUT ANY SUBSTANTIATING EVIDENCE, PROVIDE NO BASIS FOR US TO QUESTION THE PROPRIETY OF ARMY'S DETERMINATION IN THIS REGARD. CENTRO MANAGEMENT, INC., B-215295, JUNE 20, 1984, 84-1 CPD PARA. 651. CONTRACTING OFFICIALS ARE PRESUMED TO ACT IN GOOD FAITH AND, IN ORDER TO SHOW OTHERWISE, THE PROTESTER MUST SUBMIT VIRTUALLY IRREFUTABLE PROOF THAT THEY HAD A MALICIOUS AND SPECIFIC INTENT TO HARM THE PROTESTER. J.F. BARTON CONTRACTING CO., B-210663, FEB. 22, 1983, 83-1 CPD PARA. 177. URDAN HAS FAILED TO MEET THE HIGH STANDARD OF PROOF REQUIRED.

FINALLY, THE FACT THAT URDAN COULD OFFER A LOWER PRICE FOR SPARE ROADWHEELS IF IT WERE ALLOWED TO COMPETE PROVIDES NO BASIS TO OBJECT TO THE ARMY'S DETERMINATION SINCE WE FIND THE PARTIAL RESTRICTION TO DOMESTIC SOURCES PROPER. IN THIS REGARD, WE ALSO NOTE THAT URDAN HAS COMPLAINED THAT THE DOMESTIC FIRMS ARE ARTIFICIALLY REDUCING THEIR PRICES ON THE PORTION OF THE ACQUISITION ON WHICH URDAN IS ALLOWED TO COMPETE WHILE RAISING THEIR PRICES ON THAT PORTION WHICH IS RESTRICTED TO DOMESTIC SOURCES. WE POINT OUT THAT ADEQUATE COMPETITION EXISTS ON THAT PORTION OF THE SOLICITATION RESTRICTED TO DOMESTIC SOURCES AND THE EXTENT TO WHICH DOMESTIC FIRMS ADJUST THEIR PRICES ON THE UNRESTRICTED PORTION IS CLEARLY A MATTER OF THEIR OWN BUSINESS JUDGMENT THAT DOES NOT AFFECT THE VALIDITY OF THE PROCUREMENT. SEE THE AERIAL IMAGE CORP., COMCORPS, B-219174, SEPT. 23, 1985, 85-2 CPD PARA. 319; SYOSSET LABORATORIES, INC., B-212139, SEPT. 23, 1983, 83-2 CPD PARA. 369.

THE PROTEST IS DENIED.

/1/ A "COLD BASE" REFERS TO AN EXISTING ALTHOUGH UNUSED INDUSTRIAL CAPACITY.

/2/ UNDER ONE IFB, SPARE ROADWHEELS WERE PROCURED ON AN EMERGENCY BASIS AND FOREIGN SOURCES WERE EXCLUDED DUE TO URGENT DELIVERY REQUIREMENTS.