B-149186, JULY 11, 1962, 42 COMP. GEN. 36

B-149186, JULY 11, 1962, 42 COMP. GEN. 36

CONTRACTS - SPECIFICATIONS - DEVIATIONS - INFORMAL V. SUBSTANTIVE - SPECIAL TOOLING REQUIREMENTS. BIDDERS - INVITATION RIGHT. CONTRACTS - SPECIFICATIONS - DEVIATION - INFORMAL V. SUBSTANTIVE - INFORMATION. CONTRACTS - PROPRIETARY, ETC., ITEMS - USE BY GOVERNMENT A QUALIFYING NOTE IN THE LOW BID THAT TOOLING COSTS OF SEVERAL COMPONENTS OF THE END ITEM OF PRODUCTION ARE NOT CLASSIFIED AS SPECIAL TOOLING AND ARE NOT INCLUDED IN THE UNIT PRICE, WHICH NOTE IS DIRECTED TO THE SPECIAL TOOLING REQUIREMENTS OF THE INVITATION THAT BOTH THE PRIME CONTRACTOR AND THE SUBCONTRACTOR MAY BE REQUIRED TO TRANSFER TITLE, WITHOUT COST TO THE GOVERNMENT, TO THE SPECIAL TOOLING NEEDED TO PERFORM THE CONTRACT, THE COST OF WHICH HAD BEEN INCLUDED IN THE CONTRACT PRICE, OR PARTIALLY INCLUDED, WITH AN OPTION TO THE GOVERNMENT TO ELECT TO PAY THE BALANCE, OPERATES TO PRECLUDE THE GOVERNMENT FROM CLAIMING TITLE TO ANY SPECIAL TOOLING USED AND THE NOTE CONSTITUTING SUCH A SUBSTANTIAL DEVIATION FROM THE REQUIREMENTS OF THE INVITATION AS TO BE PREJUDICIAL TO OTHER BIDDERS MAY NOT BE WAIVED AS AN INFORMALITY AND, THEREFORE, THE BID MAY NOT BE CONSIDERED FOR AWARD. THE FAILURE TO INCLUDE THE NAME OF A BIDDER ON THE BIDDER'S LIST, ALTHOUGH HIS REMOVAL BY THE ADMINISTRATIVE OFFICE BECAUSE HIS WORK IN CONSTRUCTING AN EXPERIMENTAL PROTOTYPE WAS CONSIDERED UNSATISFACTORY MAY BE OPEN TO QUESTION, DOES NOT CONSTITUTE SUFFICIENT JUSTIFICATION FOR CANCELING THE INVITATION, THE PROCUREMENT HAVING BEEN PROPERLY ADVERTISED. AS THE REQUIREMENT IN AN INVITATION FOR BIDS THAT A BIDDER "PRINT OR TYPE HIS NAME ON THE SCHEDULE AND EACH CONTINUATION SHEET THEREOF ON WHICH HE MAKES AN ENTRY" IS FOR THE PROTECTION OF THE GOVERNMENT RATHER THAN OTHER BIDDERS, THE ACCEPTANCE OF A BID WHICH DID NOT CONTAIN THE BIDDER'S NAME ON EACH PAGE ON WHICH THE BIDDER HAS MADE AN ENTRY WOULD NEVERTHELESS CONSTITUTE A BINDING CONTRACT; THEREFORE, THE FAILURE OF BIDDERS TO COMPLY WITH THE REQUIREMENT IS AN INFORMALITY THAT MAY BE WAIVED BY THE CONTRACTING AGENCY. THE RIGHT OF THE GOVERNMENT TO USE THE DRAWINGS OF THE SECOND LOW BIDDER IN BOTH THE CURRENT AND IN FUTURE PROCUREMENTS SHOULD BE RESOLVED PRIOR TO AWARD OF A CONTRACT UPON DETERMINATION OF THE ADMINISTRATIVE AGENCY, WHO WILL NOT CONSIDER THE LOW BID, NOT TO CANCEL THE INVITATION FOR BIDS AND TO AWARD THE CONTRACT TO THE SECOND LOW BIDDER, NOTWITHSTANDING THE SUBSTANTIAL DIFFERENCE IN PRICE BETWEEN THE LOW AND SECOND LOW BIDS.

TO THE SECRETARY OF THE ARMY, JULY 11, 1962:

REFERENCE IS MADE TO A LETTER DATED JUNE 15, 1962, FROM THE CHIEF, CONTRACTS DIVISION, OFFICE OF THE DEPUTY CHIEF OF STAFF FOR LOGISTICS, TRANSMITTING CORRESPONDENCE FROM THREE BIDDERS AND ONE NON-BIDDER WHO PROTEST, RESPECTIVELY, ON VARIOUS GROUNDS, AGAINST AN AWARD UNDER IFB NO. CML-30-070-62-155 TO EITHER THE LOW BIDDER, THE FIRST, SECOND OR THIRD LOW BIDDER, OR TO ANY BIDDER, AND REQUEST OUR DECISION ON THE MERITS OF THESE PROTESTS.

IFB NO. CML-30-070-62-155 REQUESTED BIDS ON 5,706 HEATERS, AIR ELECTRIC, FILTER UNIT, M3, WITH AN ADDITIONAL QUANTITY OF 5,706 UNITS DESIGNATED FOR PROCUREMENT UNDER LABOR SURPLUS SET-ASIDE PROCEDURES. FIVE BIDS, AT UNIT PRICES AS FOLLOWS, WERE RECEIVED:

$48.94 INDUSTRIAL DESIGN LABORATORIES, INC.

$64.12 VAP-AIR DIVISION, VAPOR CORP.

$70.50 STANDARD DESIGN, INC.

$93.75 T.D. ASSOCIATES, INC.

$96.00 VALAD ELECTRONICS

A PROTEST WAS RECEIVED FROM TRUHEAT CORPORATION BASED UPON THE FACT THAT IT WAS NOT INCLUDED ON THE BIDDER'S MAILING LIST; ALLEGING IT WAS NOT INFORMED OF THE PROCUREMENT UNTIL AFTER BID PENING; AND CONTENDING THAT ITS DRAWINGS WERE USED IN PREPARING THE SPECIFICATIONS AND DRAWINGS INCLUDED IN THE INVITATION. OUR REVIEW OF THE FILES FORWARDED WITH THE REQUEST FOR OUR DECISION INDICATES THAT TRUHEAT CORPORATION WAS INCLUDED ON THE BIDDER'S LIST PRIOR TO OCTOBER 1961 BUT THAT ITS NAME WAS DELETED BECAUSE THE CRDL PROJECT ENGINEER WAS NOT SATISFIED WITH THE WORKMANSHIP ON 10 PROTOTYPES PREVIOUSLY DELIVERED BY THE CORPORATION. REQUESTS FOR PROPOSALS FOR THE PROCUREMENT OF EIGHT PROTOTYPES OF A DIFFERENT DESIGN WERE THEREFORE NOT FORWARDED TO TRUHEAT ON OCTOBER 10, 1961, AND THE CORPORATION THEREFORE WAS NOT ON THE BIDDER'S LIST WHEN IFB NO. CML-30-070 -62-155 WAS ISSUED ON APRIL 13, 1962.

WHILE THE REMOVAL OF A BIDDER FROM THE BIDDER'S LIST BECAUSE HIS WORK IN CONSTRUCTING A PROTOTYPE OF A DIFFERENT, AND APPARENTLY EXPERIMENTAL, DESIGN WAS CONSIDERED UNSATISFACTORY BY THE PROJECT ENGINEER WOULD APPEAR TO BE OPEN TO QUESTION, THE RECORD INDICATES THAT THE PROCUREMENT WAS ADVERTISED IN THE DEPARTMENT OF COMMERCE BUSINESS DAILY. IN VIEW THEREOF WE ARE OF THE OPINION THAT FAILURE TO INCLUDE TRUHEAT ON THE BIDDER'S LIST, OR OTHERWISE ADVISE IT PERSONALLY OF THE PROCUREMENT, WOULD NOT CONSTITUTE A SUFFICIENT JUSTIFICATION FOR CANCELING THE INVITATION.

CONCERNING TRUHEAT'S CONTENTION THAT ITS DRAWINGS WERE USED IN PREPARING THE INVITATION, THE FILE APPEARS TO CLEARLY ESTABLISH THAT THE DRAWINGS USED WERE ADAPTED FROM DRAWINGS PRODUCED BY THE VAPOR CORPORATION.

IN VIEW OF THE FOREGOING, IT IS OUR OPINION THAT TRUHEAT'S PROTEST FAILS TO PRESENT ANY FACTS OR CIRCUMSTANCES WHICH WOULD PRECLUDE AN AWARD UNDER THE INVITATION, AND SUCH PROTEST MUST BE DENIED.

THE PROTEST SUBMITTED BY T.D. ASSOCIATES, INC., IS BASED UPON SEVERAL GROUNDS. HOWEVER, IN VIEW OF OUR CONCLUSIONS AS STATED BELOW, IT WOULD APPEAR NECESSARY TO CONSIDER ONLY THAT PORTION OF THE PROTEST WHICH ALLEGES THAT ALL BIDS SUBMITTED BY OTHER BIDDERS WERE NONRESPONSIVE BECAUSE SUCH BIDDERS FAILED TO "PRINT OR TYPE HIS NAME ON THE SCHEDULE AND EACH CONTINUATION SHEET THEREOF ON WHICH HE MAKES AN ENTRY," AS REQUIRED BY PARAGRAPH 1 (B) OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS. SINCE THIS REQUIREMENT IS FOR THE PROTECTION OF THE GOVERNMENT, RATHER THAN THE PROTECTION OF OTHER BIDDERS, AND SINCE IT WOULD APPEAR THAT ACCEPTANCE OF A BID WHICH DID NOT CONTAIN THE BIDDER'S NAME ON EACH PAGE ON WHICH THE BIDDER HAD MADE AN ENTRY WOULD CONSTITUTE A BINDING CONTRACT (SEE 36 COMP. GEN. 523 AND CASES CITED THEREIN), SUCH FAILURES MAY PROPERLY BE CONSIDERED AS INFORMALITIES BY YOUR DEPARTMENT. AS SUCH, THE FAILURES WOULD NOT CONSTITUTE A VALID BASIS FOR REJECTING THE BIDS.

THE PROTESTS BY THE SECOND, THIRD AND FOURTH LOW BIDDERS ALL ALLEGE THAT THE LOW BIDDER, INDUSTRIAL DESIGN LABORATORIES, INC., QUALIFIED ITS BID BY INSERTING THE FOLLOWING COMMENT AT PAGE 5 OF THE BID:

NOTE: TOOLING COST FOR CONTROLLER AND THERMOSTAT NOT TO BE CLASSIFIED AS SPECIAL TOOLING. COST WILL BE ABSORBED BY INDUSTRIAL DESIGN LABORATORIES, INC.--- NOT INCLUDED IN UNIT PRICE.

THIS NOTE IS DIRECTED TO THE REQUIREMENTS OF GENERAL PROVISION NO. 33, SPECIAL TOOLING, UNDER WHICH THE CONTRACTOR MAY BE REQUIRED TO TRANSFER TITLE, WITHOUT COST TO THE GOVERNMENT, TO ALL USABLE ITEMS OF SPECIAL TOOLING ACQUIRED OR MANUFACTURED BY THE CONTRACTOR FOR USE IN THE PERFORMANCE OF THE CONTRACT. AS INDICATED IN THE LETTER DATED JUNE 15 FROM THE CHIEF, CONTRACTS DIVISION, THE PURPOSE OF GENERAL PROVISION NO. 33 IS TO PROTECT THE GOVERNMENT WHERE IT HAS, AS A PART OF THE CONTRACT PRICE, PAID FOR THE COST OF THE TOOLING, AND THE RETENTION OF SUCH TOOLING BY THE CONTRACTOR WOULD THEREFORE REPRESENT AN UNWARRANTED BENEFIT TO THE CONTRACTOR AND RESULTING DETRIMENT TO THE GOVERNMENT. THAT SUCH INTENT AND PURPOSE IS APPLICABLE ALSO TO SUBCONTRACTS IS MADE EVIDENT BY PARAGRAPH (K) OF GENERAL PROVISION NO. 33, WHICH READS AS FOLLOWS:

(K) THE CONTRACTOR AGREES THAT, IN PLACING ANY SUBCONTRACTS OR PURCHASE ORDERS UNDER THIS CONTRACT WHICH INVOLVE THE USE OF SPECIAL TOOLING, THE FULL COST OF WHICH IS CHARGED TO SUCH SUBCONTRACT OR PURCHASE ORDER, HE WILL INCLUDE THEREIN APPROPRIATE PROVISIONS TO OBTAIN RIGHTS COMPARABLE TO THOSE GRANTED TO THE GOVERNMENT BY THIS CLAUSE, AND AGREES THAT HE WILL EXERCISE SUCH RIGHTS FOR THE BENEFIT OF THE GOVERNMENT, AS THE CONTRACTING OFFICER MAY DIRECT.

ADDITIONALLY, PARAGRAPH 7 (A) OF THE SCHEDULE IN IFB NO. CML 30-070 62- 155 PROVIDED AS FOLLOWS:

A. WITH REFERENCE TO SUB-CLAUSE (K) OF GENERAL PROVISION NO. 33, ENTITLED "SPECIAL TOOLING," UNLESS THE SUBCONTRACT OR PURCHASE ORDER WHICH INVOLVES THE USE OF SPECIAL TOOLING EXPRESSLY SHOWS ON THE FACE THEREOF WHAT PART OF THE PURCHASE PRICE REPRESENTS THE COST OF SPECIAL TOOLING, THE FULL COST OF SUCH SPECIAL TOOLING WILL BE CONSIDERED TO BE INCLUDED IN THE PURCHASE PRICE OF SUCH SUBCONTRACT OR PURCHASE ORDER. IN THE EVENT LESS THAN THE FULL COST OF ANY SPECIAL TOOLING REQUIRED TO PERFORM THE SUBCONTRACT OR PURCHASE ORDER IS INCLUDED IN THE PRICE, THE GOVERNMENT RESERVES THE RIGHT TO ELECT TO PAY THE BALANCE OF THE COST OF THE SPECIAL TOOLING AND EXERCISE ITS RIGHTS AS IF THE FULL PRICE WERE INCLUDED IN THE SUBCONTRACT OR PURCHASE ORDER.

AFTER BID OPENING THE LOW BIDDER OFFERED THE FOLLOWING EXPLANATION OF THE ABOVE-QUOTED NOTE IN ITS BID:

WE INCLUDED A FOOTNOTE TO OUR BID PRICE THAT WAS INTENDED TO INDICATE THAT WE DID NOT ANTICIPATE THAT SPECIAL TOOLING WOULD BE INVOLVED IN THE MANUFACTURE OF THE CONTROLLER AND THE THERMOSTAT UNITS AND THAT IF SPECIAL TOOLING SHOULD BE REQUIRED, ITS COST WOULD BE BORNE BY US BECAUSE THE COST OF SUCH TOOLING WAS NOT INCLUDED IN THE BID PRICE FOR THE HEATERS. THE PURPOSE OF THIS NOTE WAS TO ADVISE THE CHEMICAL CORPS THAT ANY SUBCONTRACTS OR PURCHASE ORDERS FOR CONTROLLER OR THERMOSTAT UNITS WOULD EXCLUDE THE COST OF THE TOOLING AND THE TOOLING WOULD THEREFORE REMAIN THE PROPERTY OF THE MANUFACTURER, SUBJECT OF COURSE TO THE GOVERNMENT'S RIGHT UNDER PARAGRAPH 7A OF THE SCHEDULE TO ELECT TO PAY THE COST OF ANY TOOLING THAT MAY BE DETERMINED TO BE SPECIAL TOOLING. OUR CONCERN WHICH LED TO THE INCLUSION OF THIS NOTE WAS THAT TOOLING WHICH WE WOULD NOT REGARD AS SPECIAL TOOLING AND THE COST OF WHICH WAS NOT INCLUDED IN OUR COST ESTIMATES MIGHT ACTUALLY BE CONSIDERED SPECIAL TOOLING UNDER THE CONTRACT AND WE WOULD THEREFORE BE OBLIGATED TO ACQUIRE THIS TOOLING FROM THE SUBCONTRACTOR FOR THE CHEMICAL CORPS UNLESS WE EXPRESSLY EXCLUDED ITS COSTS. AFTER AN EXHAUSTIVE STUDY OF THE INVITATION FOR BIDS WE NOW BELIEVE THAT THE INVITATION DOES NOT REQUIRE A COMMITMENT AS TO WHETHER SUBCONTRACTS FOR SPECIFIC ITEMS WILL OR WILL NOT INCLUDE THE COSTS OF TOOLING. IF THIS CONCLUSION IS CORRECT THE NOTE COULD WELL HAVE BEEN OMITTED AND WE THEREFORE OFFER, FOR THE ACCEPTANCE AS PROVIDED IN THE LAST SENTENCE OF SECTION 20 OF THE TERMS AND CONDITIONS OF THE INVITATION FOR BIDS, TO MODIFY OUR BID BY DELETING THE NOTE REFERRED TO ABOVE.

THE NOTE WAS QUICKLY DRAWN AND TO THE EXTENT THAT IT IS UNCLEAR, IT SHOULD BE READ AS FOLLOWS: ANY TOOLING COSTS FOR THE CONTROLLER AND THERMOSTAT WILL NOT BE TREATED AS SPECIAL TOOLING COSTS (WHICH ARE NORMALLY AMORTIZED, IN THE UNIT PRICE) BUT WILL BE BORNE BY INDUSTRIAL DESIGN LABORATORIES, INC., AND NO TOOLING COSTS ARE INCLUDED IN THE UNIT PRICE BID.

OBJECTIONS TO THIS NOTE ON THE BASIS THAT IT SOMEHOW PREVENTS OUR BID FROM BEING RESPONSIVE ARE WITHOUT MERIT. THE NOTE DOES NOT ATTEMPT TO DEPRIVE THE GOVERNMENT OF ANY RIGHTS WHICH THE INVITATION FOR BIDS REQUIRES IN SPECIAL TOOLING, BUT ONLY DEALS WITH THE CLASSIFICATION OF TOOLING COSTS. THE CLASSIFICATION OF TOOLING COSTS ONLY AFFECTS THE GOVERNMENT'S RIGHT TO SPECIAL TOOLING WHEN A SUBCONTRACT OR PURCHASE ORDER IS INVOLVED, AND IN SUCH A CASE ITS EXCLUSION FROM THE PRICE DOES NOT DEPRIVE THE GOVERNMENT OF THE RIGHT TO ACQUIRE THE SPECIAL TOOLING, BUT ONLY REQUIRES THAT THE GOVERNMENT PAY THE COST OF SPECIAL TOOLING IF IT DESIRES TO ACQUIRE IT.

A BID IS EQUALLY RESPONSIVE WHICH INCLUDES NO SUBCONTRACTORS' SPECIAL TOOLING COSTS AS ONE WHICH INCLUDES ALL OF THEM, BECAUSE THE INVITATION FOR BIDS DOES NOT STATE THAT SUBCONTRACTOR'S SPECIAL TOOLING COSTS SHOULD BE INCLUDED NOR THAT THE GOVERNMENT DESIRES OR INTENDS TO ACQUIRE ALL SPECIAL TOOLING OF SUBCONTRACTORS, BUT MERELY REQUIRES THAT THE GOVERNMENT BE ABLE TO ELECT TO PURCHASE ANY SPECIAL TOOLING WHICH IT DOES NOT ACQUIRE UNDER THE CONTRACT. MOREOVER NOTHING IN ANY OF THE OTHER BIDS PREVENTS THE BIDDER FROM PLACING PURCHASE ORDERS OR SUBCONTRACTS WHICH EXPRESSLY EXCLUDE THE COST OF SPECIAL TOOLING.

THE COSTS OF THE TOOLING INVOLVED IN THE MANUFACTURE OF THE CONTROLLER AND THERMOSTAT, WHICH MIGHT BE REGARDED AS SPECIAL TOOLING, DOES NOT EXCEED $3,000.00, WHEREAS THE DIFFERENCE BETWEEN OUR BID AND THE NEXT LOWEST BID IS SUBSTANTIALLY GREATER.

THE LETTER DATED JUNE 15 FROM THE CHIEF, CONTRACTS DIVISION, ADVISES IT IS THE POSITION OF YOUR DEPARTMENT THAT THE ABOVE-QUOTED NOTE ON THE LOW BID DOES NOT DENY THE GOVERNMENT THE OPTION TO ACQUIRE ANY SPECIAL TOOLING WHICH RESULTS FROM THE CONTRACT AND WHICH IS INCLUDED IN THE CONTRACT PRICE; THAT NO OTHER BIDDER IS ADVERSELY AFFECTED BY THE NOTE; AND THAT THE WHOLE PURPOSE OF THE SPECIAL TOOLING CLAUSE WOULD BE DEFEATED IF THE NOTE IS CONSIDERED AS MAKING THE LOW BID NONRESPONSIVE. THE LETTER ALSO POINTS OUT THAT ASPR 13-303 (VI) STATES THAT THE AMOUNT OFFERED BY THE CONTRACTOR FOR THE RIGHT TO RETAIN ITEMS OF SPECIAL TOOLING IS A FACTOR TO BE CONSIDERED IN DECIDING WHETHER THE GOVERNMENT SHOULD TAKE TITLE TO, AND POSSESSION OF, SUCH ITEMS, AND CONTENDS THAT THE LOW BIDDER IN THIS PROCUREMENT HAS, IN EFFECT, OFFERED A SUBSTANTIAL BENEFIT TO THE GOVERNMENT IN THE FORM OF ITS LOW BID PRICE FOR THE RIGHT TO RETAIN A RELATIVELY MINOR ITEM OF WHAT MIGHT OR MIGHT NOT BE SPECIAL TOOLING. THE CHIEF, CONTRACTS DIVISION, THEREFORE TAKES THE POSITION THAT THE BID SHOULD BE CONSIDERED RESPONSIVE.

THERE CAN BE NO DOUBT THAT THE PROVISIONS OF GENERAL PROVISION NO. 33 AND PARAGRAPH 7 (A) OF THE SCHEDULE WERE INTENDED TO VEST IN THE GOVERNMENT THE RIGHT TO DEMAND AND TAKE TITLE TO ALL SPECIAL TOOLING NECESSARY TO PERFORMANCE OF THE CONTRACT. THUS, PARAGRAPHS (A) THROUGH (J) OF GENERAL PROVISION NO. 33 OBLIGATE THE PRIME CONTRACTOR TO TRANSFER TITLE TO ALL SPECIAL TOOLING ACQUIRED OR MANUFACTURED BY THE PRIME CONTRACTOR, WHILE PARAGRAPH (K) REQUIRES THE PRIME CONTRACTOR TO OBTAIN SIMILAR RIGHTS FROM ITS SUBCONTRACTORS IF THE FULL COST OF SPECIAL TOOLING ACQUIRED OR MANUFACTURED BY SUCH SUBCONTRACTORS FOR PERFORMANCE OF ITS SUBCONTRACT IS INCLUDED IN ITS SUBCONTRACT PRICE. SINCE THESE PROVISIONS DO NOT OPERATE TO VEST ANY RIGHTS IN THE GOVERNMENT TO ACQUIRE TITLE TO SPECIAL TOOLING ACQUIRED BY SUBCONTRACTORS IF EITHER NONE OF THE COST, OR LESS THAN THE FULL COST, OF SUCH TOOLING IS INCLUDED IN ITS SUBCONTRACT PRICE, IT WOULD APPEAR THAT PARAGRAPH 7 (A) OF THE SCHEDULE WAS INTENDED TO CORRECT THIS DEFICIENCY.

UNDER PARAGRAPH 7 (A) THE ADDITIONAL RIGHT IS VESTED IN THE GOVERNMENT TO TAKE TITLE, WITHOUT ADDITIONAL COMPENSATION, TO ANY SPECIAL TOOLING ACQUIRED BY SUBCONTRACTORS UNLESS THE SUBCONTRACT OR PURCHASE ORDER SHOWS WHAT PART OF THE PURCHASE PRICE REPRESENTS THE COST OF SPECIAL TOOLING. IN THE EVENT LESS THAN THE FULL COST OF SUCH SPECIAL TOOLING IS SHOWN IN THE SUBCONTRACT OR PURCHASE ORDER THE GOVERNMENT MAY TAKE TITLE BY PAYING THE BALANCE. THUS IT IS APPARENT THAT IFB NO. CML-30-070-62-155 CONTEMPLATED THE GOVERNMENT WOULD OBTAIN THE RIGHT TO TAKE TITLE FROM BOTH THE PRIME CONTRACTOR AND ALL SUBCONTRACTORS TO ALL SPECIAL TOOLING NEEDED TO PERFORM THE CONTRACT.

THE BASIC QUESTION PRESENTED BY THE PROTESTS AGAINST THE NOTE ON PAGE 5 OF THE BID SUBMITTED BY INDUSTRIAL DESIGN LABORATORIES THEREFORE IS WHETHER THE NOTE WOULD OPERATE TO PRECLUDE THE GOVERNMENT FROM CLAIMING TITLE TO ANY SPECIAL TOOLING WHICH MAY BE MANUFACTURED OR ACQUIRED BY INDUSTRIAL OR ITS SUBCONTRACTORS IN FABRICATING THE CONTROLLERS AND THERMOSTATS WHICH ARE TO BE INCORPORATED INTO THE CONTRACT END ITEMS. IS CLEAR THAT THE NOTE WAS INTENDED TO ADVISE THE GOVERNMENT THAT NO AMOUNT HAD BEEN INCLUDED IN THE BID PRICE TO COVER THE COST OF TOOLING WHICH MIGHT BE ACQUIRED OR MANUFACTURED FOR THE PURPOSE OF FABRICATING CONTROLLERS AND THERMOSTATS AND, FOR THAT REASON, ANY TOOLING WHICH MIGHT BE FOUND NECESSARY FOR SUCH FABRICATION SHOULD NOT BE CLASSIFIED AS SPECIAL TOOLING BY THE GOVERNMENT. SINCE THE ONLY PROVISIONS OF THE INVITATION RELATING TO SPECIAL TOOLING ARE CONTAINED IN GENERAL PROVISION NO. 33 AND PARAGRAPH 7 OF THE SCHEDULE, IT IS EQUALLY CLEAR THAT THE INTENT AND EFFECT OF THE NOTE WAS TO EXEMPT FROM THESE PROVISIONS OF THE INVITATION AND FROM ANY CONTRACT AWARDED TO THE BIDDER ALL TOOLING, REGARDLESS OF WHETHER THE GOVERNMENT MIGHT CONSIDER IT SPECIAL TOOLING, WHICH MIGHT BE FOUND NECESSARY TO FABRICATION OF CONTROLLERS AND THERMOSTATS. SINCE THE ONLY RIGHT OF THE GOVERNMENT TO REQUIRE EITHER A PRIME CONTRACTOR OR A SUBCONTRACTOR TO TRANSFER TITLE TO SPECIAL TOOLING, WITH OR WITHOUT COMPENSATIONS, IS THE CONTRACTUAL RIGHT ARISING OUT OF THE PROVISIONS OF GENERAL PROVISION NO. 33, AND PARAGRAPH 7 OF THE SCHEDULE, IT WOULD NECESSARILY APPEAR THAT THE GOVERNMENT COULD NOT COMPEL INDUSTRIAL DESIGN LABORATORIES OR ANY OF ITS SUBCONTRACTORS TO TRANSFER TITLE TO SPECIAL TOOLING USED IN FABRICATING CONTROLLERS AND THERMOSTATS BY PAYING THE ACTUAL COST OF SUCH TOOLING, AS INTENDED BY PARAGRAPH 7 (A) OF THE SCHEDULE, OR ANY OTHER PRICE. IN THIS CONNECTION IT SHOULD BE NOTED THAT WHILE THE BIDDER, AFTER BID OPENING, ADVISED OF HIS INTENTION TO SUBCONTRACT THE FABRICATION OF THESE COMPONENTS, THERE DOES NOT APPEAR TO BE ANY BINDING COMMITMENT TO THAT EFFECT AND, IN THE EVENT THE BIDDER ELECTED TO FABRICATE THE COMPONENTS IN-HOUSE, THE GOVERNMENT WOULD APPEAR TO BE DEPRIVED OF ITS RIGHT TO TRANSFER OF TITLE AT NO ADDITIONAL COST UNDER PARAGRAPH (F) OF GENERAL PROVISION NO. 33.

THE RULE IS SETTLED THAT WHERE A BID DEVIATES FROM THE REQUIREMENTS SET OUT IN THE INVITATION, AND SUCH DEVIATION AFFECTS EITHER THE BID PRICE OR THE KIND OR QUANTITY OF THE ITEMS TO BE DELIVERED UNDER THE CONTRACT, SUCH DEVIATION MUST BE CONSIDERED PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS AND MAY NOT BE WAIVED AS AN INFORMALITY. 30 COMP. GEN. 179. IT IS OUR OPINION THAT THE NOTE ON PAGE 5 OF THE BID SUBMITTED BY INDUSTRIAL DESIGN LABORATORIES, INC., IN THE INSTANT PROCUREMENT CONSTITUTES SUCH A DEVIATION, AND THAT THE BID THEREFORE MAY NOT BE CONSIDERED FOR AWARD.

IN VIEW THEREOF, AND SINCE ALL PROTESTS APPLICABLE TO ACCEPTANCE OF THE SECOND LOW BID SUBMITTED BY VAP-AIR DIVISION, VAPOR CORPORATION, WERE CONSIDERED AND DENIED IN THE INITIAL PORTION OF THIS LETTER, IT WOULD APPEAR TO BE UNNECESSARY AT THIS TIME TO CONSIDER THE MERITS OF ANY OF THE REMAINING PROTESTS.

IN VIEW OF THE SUBSTANTIAL DIFFERENTIAL BETWEEN THE LOW AND SECOND LOW BID PRICES IT WOULD APPEAR TO BE WITHIN THE SOUND DISCRETION OF YOUR DEPARTMENT TO DETERMINE WHETHER AN AWARD SHOULD BE MADE UNDER IFB NO. CML- 30-070-62-155 OR WHETHER THE INVITATION SHOULD BE CANCELED. IN THE EVENT IT IS DECIDED TO AWARD UNDER THE INSTANT INVITATION, IT IS SUGGESTED THAT, PRIOR TO SUCH AWARD, FURTHER EFFORTS BE MADE TO RESOLVE THE DIFFERENCE OF OPINION WITH VAPOR CORPORATION RELATIVE TO THE GOVERNMENT'S RIGHT TO USE SUCH DRAWINGS IN BOTH THE SET-ASIDE PORTION OF THIS PROCUREMENT AND ANY FUTURE PROCUREMENTS.

YOUR ATTENTION IS INVITED TO THE ENCLOSED COPY OF OUR LETTER OF TODAY TO THE SECRETARY OF DEFENSE RELATIVE TO FUTURE USE OF GENERAL PROVISION NO. 33 IN ADVERTISED PROCUREMENTS.