B-162196, FEB. 19, 1969

B-162196, FEB. 19, 1969

TO CORBIN MANUFACTURING CO., INC.:

WE REFER TO YOUR PROTEST AGAINST THE AWARD BY THE DEPARTMENT OF THE NAVY OF CONTRACT N00383-67-C-2962 TO VARO, INC. (VARO) FOR THE FURNISHING OF NITROGEN RECEIVERS FOR USE IN THE LAU-7/A LAUNCHER SYSTEM.

ON OCTOBER 7, 1966, THE AVIATION SUPPLY OFFICE (ASO), PHILADELPHIA, PENNSYLVANIA, ISSUED TO YOU, TO VARO, AND TO THE BRUNSWICK CORPORATION (BRUNSWICK), REQUEST FOR QUOTATION N00383-67-709703 FOR THE FURNISHING OF 1,800 UNITS OF THE RECEIVER IN COMPLIANCE WITH MILITARY SPECIFICATION MIL- R-81202/WP), FEBRUARY 1, 1965, AND NAVY ASSEMBLY DRAWING 58A164D553, WHICH DESCRIBES A RUBBER-LINED RECEIVER. THE SPECIFICATION WAS MODIFIED IN THE RFQ TO PERMIT USE OF ANY SUITABLE LINER IN THE RECEIVER IN LIEU OF RUBBER; TO CHANGE THE MAXIMUM ALLOWABLE WEIGHT FROM 8.75 TO 11.0 POUNDS AND THE DIAMETER DIMENSION FROM 3.47 TO 3.50 INCHES; AND TO CLARIFY PREPRODUCTION GUNFIRE TEST PERFORMANCE PROCEDURES BY REQUIRING THAT THE RECEIVER BE TESTED WHILE ENCASED IN A HOUSING SIMILAR TO THAT USED IN THE LAUNCHER. FURTHER PROVISION STATED THAT THE GUNFIRE TEST WAS NOT REQUIRED IN PRODUCTION TESTING AFTER AWARD, AND THE RFQ ALSO INCLUDED A CLAUSE NOTIFYING OFFERORS OF THE POSSIBILITY THAT AWARD MIGHT BE MADE WITHOUT DISCUSSION OF PROPOSALS AND THEREFORE PROPOSALS SHOULD BE SUBMITTED ON THE MOST FAVORABLE TERMS TO THE GOVERNMENT.

ON THE DATE THE RFQ WAS ISSUED, YOU WERE THE ONLY ONE OF THE SOLICITED SOURCES WHO HAD MANUFACTURED A RECEIVER WHICH THE NAVY HAD APPROVED FOR USE IN THE LAUNCHER. BY WAY OF BACKGROUND, YOU HAD PREVIOUSLY CONTACTED VARO, WHO HELD NAVY CONTRACTS FOR THE LAU-7/A LAUNCHER SYSTEMS, IN CONNECTION WITH VARO'S SEARCH FOR A SATISFACTORY RECEIVER, AND VARO HAD ARRANGED FOR THE TESTING BY DAYTON T. BROWN, INC., A CONTRACTOR USED BY THE NAVY TO TEST THE RECEIVERS, OF A NICKEL LINED, FIBERGLASS-WOUND RECEIVER DEVELOPED BY YOU. ON AUGUST 17, 1966, BASED ON INFORMATION RECEIVED FROM THE TESTING CONTRACTOR BY THE NAVAL AIR SYSTEMS COMMAND (NASC), THE ACTIVITY WITH TECHNICAL RESPONSIBILITY FOR THE RECEIVER, THE NAVY APPROVED YOUR VESSEL. BRUNSWICK, AS THE DEVELOPER OF A RUBBER-LINED RECEIVER FOR THE NAVY, AND VARO, AS THE MANUFACTURER OF COMPLETE LAUNCHER SYSTEMS UNDER OTHER CONTRACTS WITH THE NAVY, WERE BOTH CONSIDERED AS POTENTIAL SOURCES.

BY OCTOBER 21, 1966, THE FINAL DATE FOR SUBMISSION OF QUOTATIONS, ASO HAD RECEIVED OFFERS FROM YOU AND BOTH OF THE OTHER FIRMS. VARO WAS LOWEST WITH AN OFFER WHICH INDICATED THAT IT WOULD SUPPLY AN ITEM SIMILAR TO UNITS APPROVED BY THE NAVY AND WHICH REFERRED TO A TEST REPORT WHICH DESCRIBED A NICKEL-LINED RECEIVER. BRUNSWICK WAS SECOND WITH AN OFFER TO SUPPLY THE RUBBER-LINED RECEIVER DEVELOPED UNDER ITS NAVY CONTRACT. (BRUNSWICK ALSO TENDERED A LOWER PRICED ALTERNATE PROPOSAL, BUT THIS PROPOSAL WAS NOT CONSIDERED BECAUSE THE DELIVERY SCHEDULE DID NOT COMPLY WITH THE RFQ REQUIREMENTS.) YOU WERE HIGHEST WITH AN OFFER TO SUPPLY YOUR APPROVED NICKEL-LINED RECEIVER.

ON JANUARY 26, 1967, YOU WERE AWARDED CONTRACT N00383-67-C-2961 FOR 300 UNITS, EVEN THOUGH YOUR PRICE WAS HIGHEST, JUSTIFICATION FOR THE PURCHASE BEING AN URGENT NEED BY THE NAVY FOR THE ITEMS. ON FEBRUARY 23, 1967, THE REMAINING 1,500 UNITS WERE AWARDED TO VARO UNDER CONTRACT N00383-67-C- 2962.

BY LETTER OF JULY 24, 1967, YOU PROTESTED TO ASO THAT, AMONG OTHER THINGS, THE VARO RECEIVER DID NOT MEET THE GUNFIRE REQUIREMENTS OF THE MILITARY SPECIFICATION; THAT YOU WERE THE ONLY MANUFACTURER WHO HAD PRODUCED A SATISFACTORILY TESTED RECEIVER; THAT VARO HAD BEEN PERMITTED TO DEVIATE SUBSTANTIALLY FROM CERTAIN REQUIREMENTS OF THE SPECIFICATION, INCLUDING THE WEIGHT OF THE RECEIVER; AND THAT THE VARO RECEIVER WAS NOT SAFE. THIS LAST POINT WAS APPARENTLY MADE IN THE BELIEF THAT VARO OFFERED A COLD STEEL-LINED RECEIVER WHICH HAD PREVIOUSLY BEEN PROVEN UNSAFE.

ON AUGUST 11, 1967, AT THE REQUEST OF A MEMBER OF CONGRESS WHO ONE WEEK EARLIER HAD ASKED OUR OFFICE TO INVESTIGATE THE PROCUREMENT OF THE RECEIVERS, REPRESENTATIVES OF OUR OFFICE WERE PRESENT AT A MEETING AT ASO CONCERNING THE AWARD TO VARO. OUR RECORD OF THE MEETING SHOWS THAT YOU WERE IN ATTENDANCE WITH YOUR FORMER ATTORNEY; THAT YOU CHALLENGED WAIVER OF A REQUIREMENT OF A PREPRODUCTION SAMPLE UNDER THE VARO CONTRACT ON THE BASIS THAT VARO'S RECEIVER HAD NOT PASSED THE GUNFIRE TEST REQUIRED BY THE MILITARY SPECIFICATION AND VARO THEREFORE WAS NOT A QUALIFIED PRODUCER; AND THAT YOU CLAIMED YOU WERE THE ONLY MANUFACTURER TO DATE WHO HAD MET ALL OF THE REQUIREMENTS OF THE SPECIFICATION. ASO RESPONDED TO YOUR ASSERTIONS WITH THE STATEMENT THAT AWARD TO VARO HAD BEEN BASED ON VERBAL ADVICE RECEIVED BY ASO IN DECEMBER 1966 FROM THE NAVAL AIR SYSTEMS COMMAND THAT VARO HAD PASSED THE PREPRODUCTION REQUIREMENTS AND THAT WRITTEN TEST DATA WERE AVAILABLE IN ASO'S FILES.

IN ADDITION TO THE ABOVE, YOU STATED THAT SPECIFICATION DEVIATIONS WHICH VARO WAS PERMITTED TO MAKE IN ITS RECEIVER WERE MORE THAN MINOR CHANGES AS ASO REPORTED, AND YOU THEREFORE ASSERTED THAT YOU SHOULD HAVE BEEN AFFORDED AN OPPORTUNITY TO RESUBMIT PRICE QUOTATIONS USING THE SPECIFICATIONS AS SO MODIFIED.

OUR REPORT TO THE CONGRESSMAN OF OUR REVIEW OF THE PROCUREMENT OF THE RECEIVERS WAS DATED JULY 25, 1968, AND COPIES WERE MADE AVAILABLE TO YOU AT THE REQUEST OF THE CONGRESSMAN. HOWEVER, ONLY SO MUCH OF THE REPORT AS IS PERTINENT TO RESOLUTION OF THE ISSUES RAISED IN YOUR PROTEST WILL BE DISCUSSED HEREIN.

CONCERNING THE MATTER OF TESTING AND APPROVAL OF THE VARIOUS RECEIVERS, WE FOUND THAT DAYTON T. BROWN, INC., HAD PERFORMED THE ACCEPTANCE TESTS ON ALL THREE MAKES OF RECEIVERS. ALTHOUGH WE NOTED IN OUR REPORT THAT THE TESTS WERE NOT CONDUCTED AND DOCUMENTED IN STRICT COMPLIANCE WITH THE SPECIFICATION, WE ATTACHED TO THE REPORT A STATEMENT BY THE NAVY THAT ALL THREE RECEIVERS HAD PASSED 13 OF THE REQUIRED 15 TESTS, INCLUDING GUNFIRE TESTS WITH THE RECEIVERS ENCASED IN HOUSING SIMILAR TO THE LAUNCHER AS REQUIRED BY THE MILITARY SPECIFICATION. IN THIS CONNECTION, THE NAVY FURTHER STATED THAT WHILE ITS POLICY FOR QUALIFICATION OF PRODUCTS IS TO REQUIRE FULL COMPLIANCE WITH THE PARTICULAR SPECIFICATION, UNDER EXTENUATING CIRCUMSTANCES THE COGNIZANT ENGINEER MAY WAIVE NONCRITICAL PORTIONS OF THE TESTS. IN THIS CASE, IT IS EXPLAINED, THE NAVY HAD AN URGENT NEED FOR THE RECEIVERS, KNEW OF THREE POTENTIAL SUPPLIERS, AND DESIRED TO MAXIMIZE COMPETITION; THEREFORE, THE COGNIZANT ENGINEER WAIVED TWO OF THE TESTS TO MINIMIZE TESTING TIME, AND THE RESULTS OF THE 13 TESTS MADE WERE SUCH THAT THERE WAS NO QUESTION IN THE MIND OF THE ENGINEER AS TO THE SUITABILITY OF THE PRODUCTS, BASED ON THE RESULTS OF THE TESTS AND THE QUANTITIES OF RECEIVERS TESTED. AFTER SUCH TESTING, AS OUR REPORT STATES, BRUNSWICK'S RECEIVER WAS APPROVED ON OCTOBER 26, 1966, AND VARO'S ON DECEMBER 20, 1966, AND COPIES OF THE TEST REPORTS WERE FURNISHED TO THE NAVY.

AS TO THE ELEMENT OF SAFETY, OUR INVESTIGATION DISCLOSED THAT IN AUGUST 1967, FOLLOWING YOUR CHARGE THAT NO RECEIVER BUT YOURS WAS SAFE, THE NAVY REQUESTED DAYTON T. BROWN, INC. TO MAKE GUNFIRE RETESTS ON ALL THREE MAKES OF RECEIVERS. PRODUCTION LOT SAMPLES OF EACH RECEIVER WERE SELECTED AT RANDOM, AND THE TESTS WERE PERFORMED WITH THE RECEIVERS MOUNTED OUTSIDE THE LAUNCHER HOUSING. THE VARO AND BRUNSWICK RECEIVERS SUCCESSFULLY PASSED THESE TESTS, WHICH EXCEEDED THE SPECIFICATION REQUIREMENT, BUT YOUR RECEIVER FAILED. IN THIS CONNECTION, THE RECORD SHOWS THAT YOU FILED A COMPLAINT WITH THE DEPARTMENT OF JUSTICE CHARGING THAT THE RETESTS HAD BEEN CONDUCTED FRAUDULENTLY. WE HAVE SINCE BEEN INFORMED BY THAT DEPARTMENT THAT THE UNITED STATES ATTORNEY AT PHILADELPHIA HAS CONCLUDED, AFTER EVALUATION OF A REPORT OF AN INVESTIGATION OF THE MATTER BY THE FEDERAL BUREAU OF INVESTIGATION, THAT THERE IS NO BASIS FOR CRIMINAL PROSECUTION.

WITH FURTHER REFERENCE TO THE SAFETY OF THE VARO RECEIVER, OUR REPRESENTATIVES WERE ADVISED BY DEFENSE CONTRACT ADMINISTRATION SERVICES REGION (DCASR) PERSONNEL AT DALLAS, TEXAS, WHO HAD RESPONSIBILITY FOR PERFORMANCE OF QUALITY ASSURANCE INSPECTIONS OF THE RECEIVERS MANUFACTURED UNDER CONTRACT -2962 (WHICH WAS COMPLETED IN JANUARY 1968) AND ON RECEIVERS USED BY VARO IN LAU-7/A LAUNCHERS MANUFACTURED UNDER THREE OTHER NAVY CONTRACTS, THAT NO PROBLEMS WERE ENCOUNTERED DURING THE INSPECTIONS. FURTHER, BOTH DCASR AND VARO OFFICIALS ADVISED OUR REPRESENTATIVES THAT NO ADVERSE REPORTS HAD BEEN RECEIVED ON THE STAINLESS STEEL-LINED RECEIVERS SHIPPED FROM VARO'S PLANT. IN THE LIGHT OF SUCH INFORMATION, WE MUST CONCLUDE THAT THE RECORD DOES NOT SUPPORT YOUR ASSERTION THAT THE VARO RECEIVER IS NOT SAFE.

AS TO THE DEVIATIONS WHICH VARO WAS PERMITTED, AFTER AWARD, TO MAKE FROM THE SPECIFICATIONS, WHICH INCLUDE A CHANGE IN WEIGHT OF THE RECEIVER FROM 11.0 TO 13.5 POUNDS, NAVY TECHNICAL PERSONNEL HAVE STATED THAT THE DIFFERENCES ARE MINOR CHANGES WHICH DO NOT AFFECT THE FORM, FIT, OR FUNCTION OF THE RECEIVER. WE FIND NOTHING IN THE RECORD TO REFUTE SUCH STATEMENTS. IN THE CIRCUMSTANCES, WE ARE UNABLE TO CONCLUDE THAT SUCH MINOR DEVIATIONS WOULD HAVE REQUIRED RESOLICITATION OF BOTH YOU AND BRUNSWICK.

ONE FURTHER POINT, WHICH YOU PRESSED AFTER YOU HAD READ A DRAFT OF OUR PROPOSED REPORT TO THE CONGRESSMAN, WAS THE IDENTITY OF THE DRAWING USED BY VARO TO MANUFACTURE THE RECEIVERS. OUR DRAFT REPORT STATED THAT VARO HAD INFORMED THE NAVY PRIOR TO THE AWARD THAT VARO WOULD USE VARO DRAWING 58A164D556, REVISION B, WHICH DEPICTS A METAL LINED RECEIVER WITHOUT IDENTIFYING THE METAL, IN LIEU OF NAVY DRAWING 58A164D553 CITED IN THE RFQ, AND THAT OUR REPRESENTATIVES FOUND THAT VARO ACTUALLY WAS PRODUCING RECEIVERS IN ACCORDANCE WITH REVISION COF THE VARO DRAWING, WHICH DEPICTS A STAINLESS STEEL-LINED RECEIVER. YOU NEVERTHELESS INSISTED THAT VARO USED A NAVY DRAWING WHICH INCORPORATES INFORMATION PROPRIETARY TO YOU AND THAT A RECEIVER MANUFACTURED IN ACCORDANCE WITH THE NAVY DRAWING WOULD NOT MEET THE SPECIFICATION REQUIREMENTS. OUR REPRESENTATIVES ASCERTAINED THAT VARO HAD PREVIOUSLY PRODUCED A COLD STEEL-LINED RECEIVER UNDER REVISION A OF ITS OWN DRAWING -D556, WHICH DID NOT PASS THE REQUIRED GUNFIRE TESTS, AND IT WOULD APPEAR THAT THIS WAS THE RECEIVER WHICH YOU BELIEVED VARO OFFERED UNDER THE RFQ.

AS OUR FINAL REPORT TO THE CONGRESSMAN INDICATES, VARO DID HAVE A REVISION B TO ITS OWN DRAWING -D556, WHICH THE NAVY APPROVED BEFORE AWARD, AND A REVISION C, WHICH WAS FORMALLY APPROVED BY THE NAVY FIVE DAYS AFTER THE AWARD. FURTHER, VARO'S EXPLANATION FOR CITING REVISION B BEFORE AWARD WAS THE DELAY BY THE NAVY OF FORMAL APPROVAL OF REVISION C. IN ANY EVENT, THE IDENTITY OF THE PARTICULAR VERSION OF THE DRAWING IS OF LITTLE SIGNIFICANCE, IN OUR OPINION, SINCE IT IS CLEAR THAT VARO OFFERED A METAL- LINED RECEIVER, AND HAS FURNISHED A RECEIVER ANSWERING THAT DESCRIPTION (STAINLESS STEEL-LINED) WHICH PASSED THE REQUIRED PRODUCT-APPROVAL TESTS BEFORE AWARD.

FROM THE FOREGOING, IT IS APPARENT THAT VARO'S CONTRACT DID NOT REQUIRE OR CONTEMPLATE THAT VARO WOULD FURNISH A RECEIVER IN ACCORDANCE WITH NAVY DRAWING 58A164D553, AND THERE IS NO EVIDENCE THAT EITHER OF THE VARO DRAWINGS, OR THE RECEIVERS DELIVERED, INCORPORATED ANY INFORMATION PROPRIETARY TO YOU. ACCORDINGLY, AND SINCE THE RECEIVER WHICH VARO OFFERED AND FURNISHED HAS PASSED THE NECESSARY TESTS AND HAS OTHERWISE MET ALL MATERIAL REQUIREMENTS OF THE SPECIFICATION, WE SEE NO LEGAL BASIS ON WHICH THE VALIDITY OF THE CONTRACT NEGOTIATED WITH VARO CAN BE QUESTIONED. YOUR PROTEST IS THEREFORE DENIED.