B-154956, MAR. 22, 1965

TO ZERO MANUFACTURING COMPANY:

IN YOUR LETTER OF NOVEMBER 13, 1964, WITH ENCLOSURES, YOUR TELEGRAM OF NOVEMBER 16, 1964, AND YOUR LETTER OF FEBRUARY 9, 1965, YOU PROTEST THE MODIFICATION AND PARTIAL CANCELLATION OF A CONTRACT AWARDED BY THE DEFENSE SUPPLY AGENCY TO ROIS MANUFACTURING COMPANY UNDER INVITATION FOR BIDS NO. DSA-2-64-1231.

THE SUBJECT IFB WAS ISSUED ON MAY 18, 1964, BY THE DEFENSE MEDICAL SUPPLY CENTER (DMSC) IN BROOKLYN, NEW YORK, FOR CERTAIN QUANTITIES OF MEDICAL INSTRUMENT AND SUPPLY FIELD CHEST NOS. 3 AND 6, AND FOR THE REPAIR AND RECRATING OF GOVERNMENT-OWNED TOOLING WITHIN 30 DAYS AFTER DELIVERY OF THE CHESTS IN JANUARY OF 1965. IT ALSO ADVISED THAT ONLY ONE CONTRACT FOR THE ENTIRE JOB WOULD BE AWARDED.

PARAGRAPH 60.1 OF THE INVITATION LISTED 51 ITEMS OF SPECIAL TOOLING WHICH WOULD BE FURNISHED TO THE CONTRACTOR BY THE GOVERNMENT FOR USE IN CONNECTION WITH THE CONTRACT, AND PROVIDED THAT THE TOOLING WOULD BE SUITABLE FOR SUCH USE AND DELIVERED IN SUFFICIENT TIME TO ENABLE THE CONTRACTOR TO MEET SPECIFIED DELIVERY DATES. IT FURTHER PROVIDED THAT ADJUSTMENTS IN THE DELIVERY SCHEDULE OR THE CONTRACT PRICE, OR BOTH, WOULD BE MADE IF THE TOOLING RECEIVED BY THE CONTRACTOR WAS IN A CONDITION NOT SUITABLE FOR ITS INTENDED USE, OR WAS NOT RECEIVED IN SUFFICIENT TIME TO ENABLE THE CONTRACTOR TO MEET THE DELIVERY SCHEDULE. THE INVITATION ALSO PROVIDED THAT THE SPECIAL TOOLING COULD BE INSPECTED BY BIDDERS PRIOR TO BID OPENING AT THE PLANT OF THE PRIOR CONTRACTOR, I.E., ZERO MANUFACTURING COMPANY.

BID OPENING ON JUNE 8, 1964, DISCLOSED THE FOLLOWING PRICES FROM THE THREE BIDDERS WHO RESPONDED TO THE INVITATION:

TABLE

ROIS GERARD METAL ZERO CHEST NO. 3 $656,583.35 $680,540.85 $746,959.99 CHEST NO. 6 64,575.64 84,570.58 111,467.26 REPAIR AND RECRATING 497.50 2,089.50 7,263.50 TRANS. OF TOOLING 784.40 2,886.00 0.00

$722,440.89 $773,086.93 $865,690.75

ON JUNE 26, 1964, ROIS WAS REQUESTED TO AND DID CONFIRM IN WRITING ITS BID PRICES FOR ALL ITEMS. ON JULY 9, MR. JOHN B. GILBERT OF YOUR CORPORATION EXPRESSED HIS CONCERN TO LIEUTENANT COMMANDER J. V. MULLEN OF THE DMSC THAT ROIS WOULD NOT BE ABLE TO PERFORM ACCORDING TO THE CONTRACT TERMS WITHOUT A PRICE INCREASE, SINCE IT DID NOT HAVE THE NECESSARY EQUIPMENT, AND SINCE THE GOVERNMENT-FURNISHED TOOLING MIGHT NOT BE ADAPTABLE TO THE EQUIPMENT IT DID HAVE. YOU ALLEGE THAT COMMANDER MULLEN WAS ALSO TOLD THAT THE GOVERNMENT TOOLING WAS NOT ONLY IN NEED OF RECONDITIONING, BUT WAS INCOMPLETE IN THE SENSE THAT ONE NEW DRAW DIE, NOT LISTED AS GOVERNMENT-FURNISHED TOOLING, WAS REQUIRED TO FABRICATE THE NO. 6 CHEST.

BY JULY 10, 1964, THE GOVERNMENT HAD COMPLETED A PREAWARD SURVEY OF ROIS AND ITS SUBCONTRACTOR, WHICH CONCLUDED THAT ROIS, WITH THE ASSISTANCE OF ITS SUBCONTRACTOR, WOULD HAVE THE EQUIPMENT AND CAPABILITY NEEDED TO PRODUCE THE CHESTS. ALTHOUGH THE PREAWARD SURVEY NOTED THAT A QUALIFIED CONTRACTOR OR SUBCONTRACTOR SHOULD HAVE, AND THAT ROIS AND ITS SUBCONTRACTOR DID HAVE, CERTAIN BASIC STANDARD MACHINE TOOLS AND FACILITIES NEEDED TO MANUFACTURE THE CHEST, IT APPARENTLY DID NOT CONSIDER WHETHER A QUALIFIED CONTRACTOR WOULD ALSO REQUIRE ANY SPECIAL TOOLING IN ADDITION TO THOSE ITEMS LISTED IN THE INVITATION AS GOVERNMENT-FURNISHED PROPERTY.

IN A LETTER TO COMMANDER MULLEN DATED JULY 13, 1964, YOU RESTATED THE REASONS FOR YOUR CONCERN OVER THE PROPOSED AWARD TO ROIS. SINCE NO VENDOR HAD VISITED YOUR PLANT TO INSPECT THE TOOLING, YOU QUESTIONED WHETHER ANY BIDDER WAS AWARE OF THE CONDITION OF THE TOOLING AND THE SIZE OF THE EQUIPMENT NEEDED TO MANUFACTURE THE ITEMS. IN VIEW OF THE PRICE WHICH ROIS BID FOR CHEST NO. 6, YOU ALSO QUESTIONED WHETHER ROIS MAY HAVE MISUNDERSTOOD WHAT IT WAS ACTUALLY QUOTING ON. ONE OF THE THINGS YOU SUSPECTED ROIS MAY HAVE MISUNDERSTOOD WAS "THAT A SPECIAL DRAW MUST BE MADE FOR THE COVER" OF THE NO. 6 CHEST.

NOTWITHSTANDING THE FAVORABLE CONCLUSION OF THE PREAWARD SURVEY, THE DSMC DETERMINED TO CONFER WITH THE PRESIDENT OF ROIS IN ORDER TO ASSURE ITSELF THAT THE LOW BIDDER FULLY UNDERSTOOD THE REQUIREMENTS OF THE CONTRACT, AND COULD COMPLY WITH THE REQUIRED DELIVERY SCHEDULE. ON JULY 20, 1964, IN A MEETING WITH REPRESENTATIVE OF DMSC, THE CONTRACTOR WAS APPRISED THAT THE CONDITION AND ADAPTABILITY OF THE GOVERNMENT TOOLING WOULD CONSTITUTE THE KEY ELEMENT AFFECTING ITS PERFORMANCE. THE PRESIDENT OF ROIS STATED THAT SINCE HE KNEW THE EXACT PRODUCTION OPERATIONS OF THE COMPANY WHICH HAD MANUFACTURED THE SPECIAL TOOLING TO BE FURNISHED BY THE GOVERNMENT, IT WAS UNNECESSARY FOR HIM TO PHYSICALLY INSPECT SUCH TOOLING, SO LONG AS HE COULD BE ASSURED THAT IT WOULD BE COMPLETE TO MANUFACTURE THE CHESTS. REPRESENTATIVES OF DSMC EXPRESSED THE UNDERSTANDING OF THE CONTRACTING OFFICER THAT THE LIST OF GOVERNMENT-FURNISHED MATERIAL IN THE INVITATION WAS COMPLETE TO PRODUCE THE SPECIFIED ITEMS. IN A LETTER OF JULY 21, 1964, ROIS CONFIRMED ITS UNDERSTANDING THAT THE SET OF DIES AND FIXTURES SHIPPED TO THE SUCCESSFUL BIDDER WOULD BE COMPLETE TO MANUFACTURE THE ITEMS SPECIFIED IN THE INVITATION. A CONTRACT WAS AWARDED TO ROIS ON JULY 24, 1964.

YOU PROTESTED THIS AWARD ON AUGUST 11, ON THE BASIS THAT ROIS WAS NOT A RESPONSIBLE CONTRACTOR. BASED ON A REPORT FROM THE DMSC PREPARED ON OR BEFORE SEPTEMBER 1, AND FURNISHED TO THIS OFFICE ON SEPTEMBER 10, WE ISSUED A DECISION DENYING YOUR PROTEST. SEE B 154956, DATED SEPTEMBER 22, 1964. WE OBSERVED THAT THE DMSC WAS AWARE OF YOUR CONTENTIONS, AND HAD ADVISED US THAT IT WOULD INSIST THAT THE CONTRACT BE PERFORMED IN ACCORDANCE WITH ITS TERMS.

THE SPECIAL TOOLING TO BE FURNISHED BY THE GOVERNMENT WAS SHIPPED FROM YOUR PLANT TO ROIS LATE IN AUGUST. ON AUGUST 31, ROIS TELEPHONED THE PROCURING ACTIVITY TO ADVISE THAT MOST OF THE TOOLING APPEARED TO BE IN POOR CONDITION, AND THAT SOME OF THE TOOLING NEEDED FOR THE MANUFACTURE OF THE NO. 6 CHEST WAS MISSING. IN A LETTER DATED SEPTEMBER 11, 1964, THE CONTRACTOR CONFIRMED THAT WHILE ALL 51 ITEMS OF TOOLING HAD BEEN RECEIVED, 31 OF THEM WERE IN POOR CONDITION, AND THAT ADDITIONAL TOOLING WAS NECESSARY FOR THE NO. 6 CHEST.

SINCE THE CONTRACTING OFFICER WAS UNDER THE IMPRESSION THAT ALL NECESSARY TOOLS HAD BEEN FURNISHED, AN INVESTIGATION OF ROIS' ALLEGATIONS WAS REQUIRED. AFTER THE INVESTIGATION, THE GOVERNMENT DETERMINED THAT REPAIRS TO THE FURNISHED TOOLING WERE NECESSARY, THAT ADDITIONAL TOOLING WAS NEEDED TO MANUFACTURE CHEST NO. 6, AND THAT THE ADDITIONAL TOOLING WAS STORED AT A GOVERNMENT DEPOT IN MECHANICSBURG, PENNSYLVANIA. THE DMSC CONSIDERED REFORMING THE CONTRACT TO PROVIDE FOR THE FURNISHING OF ALL TOOLING NECESSARY TO FABRICATE BOTH CHESTS, BUT DECIDED THAT SUCH ACTION WAS UNDESIRABLE SINCE EITHER OF THE OTHER TWO BIDDERS MIGHT HAVE INCLUDED THE COST OF THE EXTRA TOOLING IN ITS BID PRICE FOR THE NO. 6 CHESTS, AND THEREFORE THERE WAS NO ASSURANCE THAT ROIS WOULD HAVE REMAINED THE LOW BIDDER FOR THE PROCUREMENT IF ITS BID HAD INCLUDED SUCH COST. AS AN ALTERNATIVE, THE DMSC NEGOTIATED A NO-COST ELIMINATION OF THE NO. 6 CHESTS FROM THE CONTRACT, SINCE ROIS WAS THE APPARENT LOW BIDDER FOR THE NO. 3 AS WELL AS THE NO. 6 CHESTS.

THE DECISION TO MODIFY THE CONTRACT IN THE MANNER INDICATED, AND TO AUTHORIZE ROIS'"MINOR" REPAIRS OF THE GOVERNMENT-FURNISHED TOOLING AT A COST NOT EXCEEDING $5,000, WAS NOT EXECUTED UNTIL NOVEMBER 6, 1964. THE DEFINITION OF "MINOR" REPAIRS WAS NOT REACHED UNTIL NOVEMBER 24, AND THE GOVERNMENT'S EXAMINATION OF THE TOOLING WAS NOT COMPLETED UNTIL DECEMBER 15. THE DMSC SUBSEQUENTLY DETERMINED THAT ONE DIE WAS NOT ECONOMICALLY REPARABLE, AND IS PRESENTLY NEGOTIATING THE COST AND METHOD OF CORRECTING THIS DEFICIENCY. ESTIMATES OF THE COST RANGE FROM $300 TO $6,900. VIEW OF THE DELAYS CAUSED BY THE GOVERNMENT, AND ALLOWING A REASONABLE TIME FOR EFFECTING THE REQUIRED REPAIRS, IT IS EXPECTED THAT THE DELIVERY DATE WILL BE EXTENDED APPROXIMATELY EIGHT MONTHS TO SEPTEMBER 30, 1965.

YOU OBJECT TO A $5,000 INCREASE IN THE CONTRACT PRICE BASED ON AN ORAL ASSURANCE BY GOVERNMENT OFFICIALS THAT THE FURNISHED TOOLING WOULD PRODUCE THE CONTRACT ITEMS; YOU ARGUE THAT BEFORE AWARD ROIS SHOULD HAVE KNOWN, AND THAT THE GOVERNMENT DID KNOW, THAT THE FABRICATION OF THE NO. 6 CHESTS WOULD REQUIRE ONE NEW DRAW DIE WHICH WAS NOT LISTED AMONG THE TOOLS TO BE FURNISHED BY THE GOVERNMENT; AND FINALLY, YOU ASSERT THAT THE NO-COST ELIMINATION OF THE NO. 6 CHESTS FROM THE CONTRACT VIOLATED THE "SINGLE AWARD" PROVISION OF THE BIDDER FOR ALL ITEMS. YOU INSIST THAT THE ENTIRE CONTRACT SHOULD NOW BE CANCELLED, OR ALTERNATIVELY, THAT ROIS SHOULD BE REQUIRED TO PERFORM THE CONTRACT IT RECEIVED.

THE JUSTIFICATION FOR THE $5,000 INCREASE IN THE CONTRACT PRICE WAS NOT BASED ON THE ORAL ASSURANCES THAT THE GOVERNMENT-FURNISHED TOOLING WOULD BE COMPLETE FOR THE FABRICATION OF THE NO. 6 CHEST, BUT RATHER ON LANGUAGE ON PAGE 31 OF THE CONTRACT THAT THE TOOLING WOULD BE "SUITABLE FOR USE," AND IF NOT SUITABLE, THAT THE CONTRACTING OFFICER WOULD "EQUITABLY ADJUST THE DELIVERY OR PERFORMANCE DATES OR THE CONTRACT PRICE, OR BOTH," IN ACCORDANCE WITH THE "CHANGES" CLAUSE. ACCORDINGLY, THERE APPEARS TO BE NO LEGAL OBJECTION TO THE PRICE INCREASE IN THE CONTRACT FOR PURPOSES OF PUTTING THE GOVERNMENT FURNISHED TOOLING IN A CONDITION "SUITABLE FOR USE.'

THE RECORD DOES NOT FULLY EXPLAIN THE REASONS FOR THE VARIOUS DELAYS NOTED ABOVE. HOWEVER, THERE IS NO DISPUTE THAT THEY WERE CAUSED BY THE GOVERNMENT, AND THEREFORE, IT IS CLEAR THAT UNDER THE CONTRACT LANGUAGE QUOTED ABOVE, ROIS IS ENTITLED TO TIME EXTENSIONS WHICH WILL COMPENSATE FOR THOSE DELAYS.

YOUR ARGUMENT THAT ROIS SHOULD HAVE KNOWN THAT THE GOVERNMENT FURNISHED TOOLING WAS NOT COMPLETE FOR THE FABRICATION OF THE NO. 6 CHESTS IS BASED ON THE BELIEF THAT INSPECTION OF SUCH TOOLING AT YOUR PLANT, TOGETHER WITH AN ANALYSIS OF THE SPECIFICATIONS, WOULD HAVE DISCLOSED THE NEED FOR ONE MORE DRAW DIE. THE ADMINISTRATIVE REPORT IMPLIES THAT WHILE A DISCLOSURE OF THE INCOMPLETENESS OF THE LISTED TOOLS WAS THEORETICALLY POSSIBLE, THE VISUAL INSPECTION CONTEMPLATED BY THE GOVERNMENT WOULD HAVE BEEN TOTALLY INADEQUATE FOR THE PURPOSE OF DETERMINING ITS SUFFICIENCY OR CONDITION. IN ORDER TO HAVE MADE SUCH A DETERMINATION A BIDDER WOULD HAVE HAD TO UNCRATE, UNPACK, ASSORT AND THEN STUDY THE TOOLING IN RELATION TO THE SPECIFICATIONS. THE STUDY WOULD HAVE BEEN COMPLICATED BY THE FACT THAT ONE TOOL MAY PERFORM ON DIFFERENT SIZE CHESTS, AND THAT A FUNCTION-TYPE ANALYSIS WOULD HAVE BEEN NECESSARY TO DETERMINE THE PRODUCTION DETAIL ACCOMPLISHED BY EACH DIE AND ITS COMPONENTS. MOREOVER, EVEN THE UNPACKING OF THE TOOLING WAS IMPRACTICAL SINCE SOME DIES WEIGHED OVER 2,000 POUNDS, AND SINCE MECHANICAL HOISTS WOULD HAVE BEEN NEEDED TO SEPARATE MALE AND FEMALE COMPONENTS OF DIES WHICH WERE MATED AND STEEL STRAPPED TOGETHER. FROM THE ABOVE, IT APPEARS THAT SINCE YOU HAD HAD POSSESSION OF THE TOOLING FOR THE PRIOR CONTRACT, AND SINCE THE IFB DID NO MORE THAN LIST THE TOOLING THE GOVERNMENT WOULD FURNISH, YOUR FIRM WAS THE ONLY ONE FOR WHICH A DETERMINATION OF THE SUFFICIENCY AND CONDITION OF SUCH TOOLING WAS FEASIBLE.

COMMANDER MULLEN DENIES THAT MR. GILBERT ORALLY ADVISED IN A CONFERENCE ON JULY 9 THAT THE 51 TOOLS LISTED IN THE IFB WERE NOT COMPLETE FOR THE MANUFACTURE OF THE NO. 6 CHEST, AND WOULD REQUIRE THE USE OF ANOTHER DRAW DIE. HE ALSO ADVISES THAT THAT PORTION OF YOUR LETTER OF JULY 13 TO HIM, WHICH STATED "THAT A SPECIAL DRAW MUST BE MADE FOR THE COVER" OF THE NO. 6 CHEST, WAS UNDERSTOOD TO REFER TO THE DRAW PROCESS FOR MAKING THE CHEST WHICH WOULD REQUIRE SPECIAL MACHINE EQUIPMENT ROIS ALLEGEDLY DID NOT POSSESS. FURTHERMORE, THE PROCURING ACTIVITY DISAGREES WITH YOUR OPINION THAT ONLY ONE ADDITIONAL DRAW DIE WAS REQUIRED TO MAKE THE NO. 6 CHEST, AND LISTS A TOTAL OF AT LEAST TEN ADDITIONAL TOOLS WHICH ARE REGARDED AS ESSENTIAL FOR ITS FABRICATION. AS YOU ARE AWARE, IN THE ABSENCE OF CONVINCING EVIDENCE OF FRAUD OR GROSS ERROR, WE ACCEPT AS ESTABLISHED THE FACTS REPORTED TO US BY THE ADMINISTRATIVE AGENCY.

IN REGARD TO YOUR VIEW THAT THE PARTIAL CANCELLATION OF THE SUBJECT VIOLATED THE "SINGLE AWARD" PROVISION OF THE INVITATION, IT SHOULD BE OBSERVED THAT IN FACT A SINGLE AWARD FOR ALL ITEMS WAS MADE IN GOOD FAITH AND IN COMPLIANCE WITH THE INVITATION TO ONE BIDDER. THE PROPRIETY OF SUBSEQUENTLY CANCELLING ONE OF THE ITEMS FROM THE AWARDED CONTRACT, AND INNOCENTLY DEFEATING THE PURPOSE FOR WHICH THE "SINGLE AWARD" PROVISION HAD BEEN INCLUDED IN THE IFB, WOULD NECESSARILY BE CONSIDERED A LEGAL ISSUE DISTINGUISHABLE FROM THE ONE WHICH WOULD ARISE IF THE PROCURING ACTIVITY HAD NOT MADE A SINGLE AWARD. WE ALSO NOTE THAT IF THE PROCURING ACTIVITY HAD NOT MISUNDERSTOOD THE IMPORT OF ITS OWN SPECIFICATIONS AND HAD CORRECTLY ANSWERED ROIS' QUESTION CONCERNING THE SUFFICIENCY OF THE GOVERNMENT-FURNISHED TOOLING, ROIS' ERROR PROBABLY WOULD HAVE BEEN DISCOVERED AND ESTABLISHED, WHEREUPON ITS ERRONEOUS BID COULD HAVE BEEN WITHDRAWN PRIOR TO AWARD. IN THIS RESPECT, WE WISH TO POINT OUT THAT THE RECORD GIVES NO INDICATION THAT YOU WOULD HAVE BEEN AWARDED THE CONTRACT EVEN IF ROIS' ERROR HAD BEEN TIMELY DISCLOSED, AND ITS BID WITHDRAWN, SINCE YOU WERE NOT THE SECOND LOW BIDDER. IN VIEW OF THE FOREGOING CIRCUMSTANCES, WE MUST CONCLUDE THAT YOU HAVE NOT PRESENTED A SUFFICIENT LEGAL BASIS FOR OBJECTING TO THE ACTION TAKEN BY THE ADMINISTRATIVE AGENCY. ACCORDINGLY, YOUR PROTEST IS DENIED.

ON THE OTHER HAND, YOUR PROTEST HAS INDICATED THAT MORE PRUDENT ADMINISTRATION BY THE PROCURING ACTIVITY WOULD HAVE REMOVED THE NECESSITY FOR THE ACTION IT DID TAKE, AND WOULD HAVE SAVED THE GOVERNMENT TIME AND MONEY. SPECIFICALLY, SINCE INSPECTION OF THE TOOLING AT YOUR PLANT WAS OF LITTLE OR NO HELP IN DETERMINING ITS SUFFICIENCY, THE INVITATION APPARENTLY SHOULD HAVE PROVIDED FOR THE FURNISHING OF ADDITIONAL TOOLING FROM THE GOVERNMENT DEPOT, AND CERTAINLY SHOULD HAVE ADVISED BIDDERS, TO THE BEST OF THE GOVERNMENT'S KNOWLEDGE, WHICH NECESSARY TOOLS WOULD NOT BE FURNISHED. IN ADDITION, IT APPEARS THAT THE PROCURING ACTIVITY DID NOT TAKE ADVANTAGE OF THE OPPORTUNITY TO SUPPLEMENT ITS REPORT TO THIS OFFICE ON YOUR FIRST PROTEST, BEFORE WE ISSUED OUR DECISION OF SEPTEMBER 22, BY ADVISING THAT ROIS MIGHT NOT BE REQUIRED TO PERFORM THE CONTRACT ACCORDING TO ITS TERMS, NOR DID THE ACTIVITY SUBSEQUENTLY INQUIRE AS TO THE LEGAL SUFFICIENCY OF THE CONTRACTING OFFICER'S AUTHORITY TO REFORM THE CONTRACT. THESE MATTERS WILL BE BROUGHT TO THE ATTENTION OF THE DIRECTOR OF THE DEFENSE SUPPLY AGENCY SO THAT APPROPRIATE STEPS MAY BE TAKEN TO PREVENT SIMILAR PRACTICES IN FUTURE PROCUREMENTS.