B-235019, B-235019.2, Jul 20, 1989, 89-2 CPD 67

B-235019,B-235019.2: Jul 20, 1989

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Protest that agency's determination not to require first article testing for off-the-shelf air cylinders in an emergency situation is inconsistent with previous General Accounting Office bid protest decision requiring first article testing is denied where that decision applied to a non-emergency situation for cylinders not yet built. Protest that agency fabricated an urgent situation to justify a sole- source procurement is denied where the record demonstrates that an emergency did exist so as to justify the agency's decision to limit competition and not to require first article testing. Where a sole-source award is appropriate. It is not necessary for a modification to a contract that is beyond the scope of the original contract to be competitively procured.

B-235019, B-235019.2, Jul 20, 1989, 89-2 CPD 67

PROCUREMENT - Bid Protests - Allegation substantiation - Lacking - GAO review DIGEST: 1. Protest that agency's determination not to require first article testing for off-the-shelf air cylinders in an emergency situation is inconsistent with previous General Accounting Office bid protest decision requiring first article testing is denied where that decision applied to a non-emergency situation for cylinders not yet built. PROCUREMENT - Noncompetitive Negotiation - Use - Justification - Urgent needs 2. Protest that agency fabricated an urgent situation to justify a sole- source procurement is denied where the record demonstrates that an emergency did exist so as to justify the agency's decision to limit competition and not to require first article testing. PROCUREMENT - Noncompetitive Negotiation - Contract awards - Sole sources - Propriety PROCUREMENT - Contract Management - Contract modification - Cardinal change doctrine - Effects - Resolicitation 3. Where a sole-source award is appropriate, it is not necessary for a modification to a contract that is beyond the scope of the original contract to be competitively procured. PROCUREMENT - Bid Protests - Bias allegation - Allegation substantiation - Evidence sufficiency 4. Where the record does not show that contracting officials had a specific and malicious intent to harm the protester, protest alleging bad faith because of the agency's alleged interference with the protester's ability to compete for subcontracts for air cylinders is denied.

Corbin Superior Composites, Inc.:

Corbin Superior Composites, Inc., protests the award of contract No. N00104-89-C-D148 to Comdyne I, Inc., for 150 air cylinders for inflatable ship lifeboats, and the modification to contract No. N00104 87-C-0296 with Rubber Crafters, Inc. (RCI), for 1194 Comdyne air cylinders by the Navy Ships Parts Control Center. Corbin contends that the Navy's decision not to require first article testing for Comdyne is inconsistent with our decision in Comdyne I, Inc., B-232574, Dec. 21, 1988, 88-2 CPD Para. 611; that a bona fide urgent situation did not exist so as to justify sole- source awards to Comdyne and RCI; that the modification to RCI's lifeboat contract constituted a cardinal change, outside the scope of the original contract, and should have been a new procurement; and that the Navy illegally interfered with Corbin's ability to compete for subcontracts for air cylinders on prime lifeboat contracts.

We deny the protests.

The Navy issued a sole-source oral solicitation to Comdyne on December 16, 1988, for 150 aluminum, spun seamless construction cylinders wrapped in fiberglass with an internal volume of 455 cubic inches with serial numbers 19304 and above. The Navy also issued a modification to RCI's lifeboat contract on January 20, 1989, for 1194 Comdyne cylinders of like specifications. The Navy supported the emergency procurement and modification with a statement of urgency and a justification for other than full and open competition dated December 20, 1988. That document indicated that, due to failures of lifeboat cylinders in the fleet with serial numbers 19303 and below, the Navy decided to suspend the use of air cylinders in specific production lots with those serial numbers and procure 150 acceptable cylinders from Comdyne, plus 1194 additional acceptable Comdyne cylinders from RCI, based on the urgent and compelling need for the cylinders on Navy lifeboats. Because of the critical shortage of air cylinders in the fleet due to the removal of the defective cylinders, the Navy did not require first article testing for the cylinders, but relied on the results of hydrostatic burst testing of the cylinders by a Navy research and development center that was conducted in connection with the Navy's investigation of the cylinder failures and on the fact that Comdyne had changed its cylinder design and had lot testing data to show that the new design had increased strength.

The contract with Comdyne was finalized on January 3, 1989, and delivery of 150 Comdyne cylinders with serial numbers between 26603 and 26758 was completed on February 1. The award to Comdyne was published in the Commerce Business Daily on February 23; Corbin protested to the Navy on March 6 and to our Office on March 31.

The modification to RCI's contract was finalized on January 20, 1989, and delivery of 1194 Comdyne cylinders with serial numbers between 23469 and 26074 was completed on January 31. Corbin protested the modification to our Office on April 13, after receipt of the Navy's response to Corbin's Freedom of Information Act request.

With respect to the award to Comdyne, Corbin first objects to any acquisition of Comdyne cylinders without a first article test, asserting that the Navy fabricated the emergency situation here in order to justify sole-source awards to both Comdyne and RCI, and that Corbin had acceptable cylinders available that the Navy did not solicit.

As a general rule, procurements must be conducted using competitive procedures. 10 U.S.C. Sec. 2304(a)(1) (Supp. IV 1986). However, an agency may use other than competitive procedures where the agency's needs are of such an unusual and compelling urgency that the government would be seriously injured if the agency did not limit the number of sources from which bids or proposals are solicited. 10 U.S.C. Sec. 2304(c)(2); Federal Acquisition Regulation (FAR) Sec. 6.302-2(a)(2). When using other than competitive procedures based on unusual and compelling urgency, the agency is required to request offers from as many potential sources as is practicable under the circumstances. 10 U.S.C. Sec. 2304(e); FAR Sec. 6.302-2(c)(2). An agency therefore has the authority to limit the procurement to the only firm or firms it reasonably believes can properly perform the work in the available time. Honeycomb Co. of America, B-225685, June 8, 1987, 87-1 CPD Para. 579. We will object to the agency's determination to limit competition based on unusual and compelling urgency only when the agency's decision lacks a reasonable basis. Colbar, Inc., B-230754, June 13, 1988, 88-1 CPD Para. 562. In this regard, we have recognized that a military agency's assertion that there is a critical need for certain supplies which impact military operations carries considerable weight. Honeycomb Co. of America, B-225685, supra.

Here, we find that the record supports the Navy's determination that an emergency situation existed which justified its decision to limit competition and not require first article testing.

As a preliminary matter, we do not agree with Corbin's contention that the Navy's decision not to require first article testing is inconsistent with our decision in Comdyne I, Inc., B-232574, supra. That decision concerned a non-emergency award to Corbin on July 5, 1988, of 889 air cylinders that were not yet built. The Navy refused to waive first article testing for the protester, Comdyne, citing the potentially explosive nature of the cylinder, a safety-related item; we upheld the Navy's decision, noting that both offerors, Corbin and Comdyne, were required to submit first article test reports. In the contracts now at issue, the Navy did not require first article testing since this was an emergency procurement of off-the-shelf air cylinders of certain serial numbers, the reliability of which was ascertained by the Navy's own testing facility and contractor testing reports, as will be explained further below. The record further demonstrates that the emergency condition cited by the Navy was precipitated by the explosions of two air cylinders on Navy ships in late summer/early fall of 1988, and the discovery of faulty hoop wrappings in the cylinders in inspections conducted with more stringent pass/fail criteria instituted in June 1987. These findings led the Navy to suspend from use all cylinders with serial numbers 19303 and below in October 1988, creating a shortage of cylinders in the Navy fleet with 1557 unfilled backorder requisitions and an inventory of only six cylinders, an emergency situation since Navy ships cannot deploy without a full complement of lifeboats, and lifeboats cannot be certified as safe for the required 4 year cycle without acceptable air cylinders.

As of November 1988, the Navy states, neither Corbin nor Comdyne had passed first article testing. However, as part of its investigation of explosions of cylinders already in the fleet of varying serial numbers and manufacturers, the Navy's research facility tested nine of Comdyne's cylinders with numbers 20823 and above on November 8, 1988, and issued a report on November 15, stating that all of Comdyne's cylinders of those serial numbers had passed testing. /1/ In addition, the Navy learned that Comdyne had improved its manufacturing process starting in mid-1986 for cylinders with serial numbers 19303 and above, and that, beginning with serial number 20360, according to contractor lot testing, Comdyne's modified design of its fiberglass wrap had increased the pressure at which the cylinder would burst. Facing the cylinder shortage, the Navy immediately attempted to locate acceptable air cylinders with serial numbers 19304 and above, based on the information acquired from Comdyne's test reports and the Navy's research laboratory's testing.

In view of the Navy's urgent and compelling need for the cylinders, and its efforts to test the cylinders consistent with procuring them on a timely basis, we see no basis to object to the Navy's decision not to require first article testing.

The Navy also asserts that it did not look to Corbin to fulfill the emergency requirement because, in August 1988, Corbin's cylinder, which was being tested in connection with the award at issue in Comdyne I, Inc., B-232574, supra, had failed to meet first article test requirements; and, on September 6, the Navy had advised Corbin that it would have to correct certain design deficiencies and resubmit six redesigned cylinders for first article testing in order to be technically acceptable. At the time of the emergency procurement in December 1988, the Navy had not received a new first article test report from Corbin and therefore did not have an acceptable Corbin cylinder available. In fact, the Navy did not receive Corbin's first article test report until April 5, 1989; on April 10 and May 5, because Corbin's test report was not acceptable, the Navy advised Corbin of test failures and deficiencies, noting the corrective action required.

In this regard, Corbin maintains that its 1988 first article test report was acceptable because it was approved by the Defense Contract Administration Services Management Area (DCASMA) representative. However, the Navy asserts that the function of the DCASMA representative is merely to verify that testing was performed in accordance with the appropriate military specification, not to approve test results. It is the Navy's function to approve or disapprove the first article test results with reference to the requirements of the military specification. By letter to Corbin of September 6, the Navy informed Corbin, with a detailed explanation, of why its first article test was not acceptable and delineated the steps Corbin needed to take to become acceptable.

Accordingly, the record clearly does not support Corbin's assertion that its cylinder had passed first article testing in September 1988. Moreover, while Comdyne also had not passed first article testing, the Navy had sufficient information from testing the Comdyne cylinders already in use, as well as from Comdyne's own lot testing data, to conclude that, in the context of its emergency need for the items, the Comdyne cylinders were acceptable.

Further, the record does not support Corbin's challenge to the adequacy of the Navy's testing of Comdyne's cylinders or its contention that the cylinder failures in the fleet were due to the use of an unacceptable aluminum alloy cylinder liner.

With regard to testing, Corbin argues that the Navy procured cylinders of sub-standard design because the testing of Comdyne's cylinders did not comply with the relevant military specification requirement for pressurization. However, the Navy's research laboratory conducted tests as a result of the failures in the fleet that, the Navy concluded, yielded comparable results to the specification's requirement of pressurizing the air cylinders for three minutes at 15,000 psi, then increasing pressure until the cylinder bursts. Accordingly, for the Navy's emergency purposes, the testing of air cylinders by pressurizing them for five minutes at 7,500 psi, and then increasing the pressure until they burst, was acceptable, despite the lack of exact compliance with the military specification.

In addition, the Navy does not consider the aluminum alloy used in the Comdyne cylinders to be unacceptable. Contrary to Corbin's belief, the Navy does not consider the explosions of the air cylinders in the fleet to be traceable to the aluminum alloy cylinder liner material, noting that the flaws cited by Corbin in other aluminum cylinders manufactured in a different manner from the cylinders for the Navy did not appear in composite cylinders such as Comdyne's, which utilize an aluminum alloy liner wrapped with fiberglass windings.

With respect to Corbin's challenge to the Navy's modification to RCI's contract, as a general rule, our Office will not consider protests against contract modifications, as they involve matters of contract administration that are the responsibility of the contracting agency. 4 C.F.R. Sec. 21.3(m)(1) (1988). We will, however, consider a protest that a modification is beyond the scope of the original contract. If a contract as modified is materially different from the contract for which a competition was held, the subject of the modification should be competitively procured, unless a sole-source award is appropriate. See Indian and Native American Employment and Training Coalition, 64 Comp.Gen. 460 (1985), 85-1 CPD Para. 432.

The validity of the modification to RCI's contract thus rests on the validity of the underlying sole-source award, an issue we have already considered with reference to the sole-source award to Comdyne. The same reasoning clearly applies here with respect to the modification to RCI's contract. The Navy was faced with an emergency situation due to the suspension of certain unsafe cylinders from use in the fleet, and, having established via its own laboratory testing that certain cylinders were acceptable, and that such cylinders were available from RCI, a modification to RCI's contract was an appropriate vehicle to secure 1194 of those cylinders immediately, just as a sole-source award to Comdyne was an appropriate method to secure an additional 150 cylinders to meet the Navy's emergency needs. Again, with respect to Corbin's cylinders, the only information available to the Navy in December 1988 was that Corbin had failed its initial first article test, and, no matter how many cylinders it had available, it was not yet an acceptable source. Corbin further argues that the Navy interfered with the selection of subcontractors for the air cylinders on RCI's prime lifeboat contract and on two other lifeboat contracts, essentially an allegation of bad faith on the part of Navy officials. In this regard, where a protester alleges that procurement officials acted intentionally to preclude the protester from competing for an award, the protester must submit convincing proof that the officials had a specific and malicious intent to harm the protester, since contracting officials are presumed to act in good faith. Afftrex, Ltd., B-231033, Aug. 12, 1988, 88-2 CPD Para. 143.

Here, the Navy categorically denies, in an affidavit from the technical director with responsibility for the lifeboat program, that the agency is engaged in a conspiracy or vendetta against Corbin to prevent the firm from getting air cylinder contracts or subcontracts, as is alleged. Rather, the Navy states that it is committed to expanding its sources for air cylinders within the strictures of compliance with the standards for the item. Indeed, the record demonstrates that the Navy awarded the July 5, 1988, contract for air cylinders to Corbin; defended the award against a protest filed by Comdyne in our Office; and, as its communications with Corbin illustrate, continued to show an interest in assisting the firm in getting its cylinders to pass first article testing expeditiously, taking, for example, only five of the allotted 45 days to consider Corbin's first article test report, in order to enable Corbin to compete in future air cylinder procurements.

For the reasons discussed above, we conclude that the Navy properly justified its decision to limit competition without requiring first article testing for the acquisition of the air cylinders because of unusual and compelling urgency; that the emergency situation was not fabricated by agency officials; and that those officials did not act in bad faith with respect to Corbin's air cylinders passing first article testing so as to allow the firm to compete for other contracts or subcontracts.

The protests are denied.

/1/ Cylinders had to be capable of being pressurized above 15,000 pounds per square inch (psi) in order to pass the Navy's test; Comdyne's cylinders of those serial numbers failed at 15,900 to 17,600 psi.