B-145279, FEB. 2, 1962

B-145279, FEB. 2, 1962

TO AIRFLOW COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF NOVEMBER 7, 1961, CONCERNING THE AWARD OF NAVY CONTRACT NO. N600/19/56527, DATED MARCH 9, 1961, TO HARVEY W. HOTTEL, INC., SILVER SPRING, MARYLAND, AS THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER UNDER INVITATION FOR BIDS NO. 600-385-61, ISSUED NOVEMBER 16, 1960, BY THE NAVY PURCHASING OFFICE.

YOUR PROTEST AGAINST THE AWARD ACTION TAKEN IN THIS CASE WAS DENIED IN OUR DECISION TO YOU OF MAY 10, 1961. WE CONSIDERED THAT YOUR LOW BID WAS PROPERLY REJECTED SINCE SOME OF THE DESCRIPTIVE LITERATURE FURNISHED WITH THE BID WAS INCOMPLETE AND BIDDERS WERE PLACED ON NOTICE THAT A FAILURE TO SUBMIT THE SPECIFIED DESCRIPTIVE LITERATURE WOULD REQUIRE REJECTION OF A BID.

IT IS ALLEGED IN YOUR LETTER OF NOVEMBER 7, 1961, THAT THE CONTRACTOR FURNISHED END PRODUCTS WHICH UTILIZED COMPONENTS THAT WERE DIFFERENT FROM AND LESS EXPENSIVE THAN THOSE DESCRIBED IN THE TECHNICAL DATA SUBMITTED WITH THE CONTRACTOR'S BID. WITH REFERENCE TO ONE OF THE ALLEGED SUBSTITUTIONS OF COMPONENTS, IT IS STATED THAT YOUR PROPOSAL WAS BASED UPON THE VERY COMPONENT WHICH WAS SUBSTITUTED AND WAS PART OF THE REASON THAT YOUR PRICE WAS LOWER THAN THAT OF THE SUCCESSFUL BIDDER. YOU SUGGEST THE POSSIBILITIES THAT THE NAVY HAS PREFERRED BIDDERS, THAT IT ENGAGES IN THE PRACTICE OF OBTAINING NEW AND FRESH APPROACHES FROM THE PROPOSALS OF UNSUCCESSFUL BIDDERS, AND THEN PASSES THEM ON TO THE SUCCESSFUL BIDDER IN AN EFFORT TO INCREASE HIS PROFIT MARGIN. YOU ALSO QUESTION THE REASONABLENESS OF REQUIRING BIDDERS TO SUBMIT DESCRIPTIVE LITERATURE WITH THEIR BIDS IF THE DESCRIPTIVE LITERATURE IS TO BE HANDLED IN A CASUAL MANNER AFTER THE AWARD OF A CONTRACT.

OUR INVESTIGATION OF THE MATTER HAS DISCLOSED THAT THE CONTRACTOR HAD A PREVIOUS CONTRACT WITH THE DEPARTMENT OF THE NAVY FOR THE FURNISHING OF EQUIPMENT SIMILAR TO THAT AS DESCRIBED IN INVITATION FOR BIDS NO. 600-385- 61. WE HAVE ASCERTAINED THAT THE EQUIPMENT DELIVERED UNDER THE SECOND CONTRACT DIFFERED FROM THAT WHICH WAS FURNISHED UNDER THE FIRST CONTRACT WITH RESPECT TO THE SUBSTITUTION OF FOUR COMPONENTS. THREE OF THE SUBSTITUTIONS WERE OF A RELATIVELY MINOR NATURE AND THE FOURTH SUBSTITUTION INVOLVED THE USE OF A CARRIER COMPRESSOR, MODEL 6D73, AS A REPLACEMENT FOR ANOTHER TYPE COMPRESSOR UTILIZED IN THE EQUIPMENT FURNISHED UNDER THE FIRST CONTRACT. THE COST DIFFERENTIAL WAS APPROXIMATELY $215 PER UNIT WHICH REPRESENTS A SAVING TO THE CONTRACTOR OF ABOUT $5,590 ON THE 26 ITEMS OF EQUIPMENT DELIVERED TO THE NAVY UNDER THE SECOND CONTRACT. HOWEVER, THE CONTRACTOR INDICATED IN ITS DESCRIPTIVE LITERATURE SUBMITTED WITH THE BID UNDER INVITATION FOR BIDS NO. 600-385-61 THAT A CARRIER COMPRESSOR WAS TO BE FURNISHED AS ONE OF THE COMPONENTS OF THE OFFERED EQUIPMENT AND, FOR SUCH REASON, THE NAVY DETERMINED THAT NO ADJUSTMENT IN CONTRACT PRICE WAS REQUIRED.

THE CONTRACTOR'S BID ALSO WAS ACCOMPANIED BY A LETTER WHICH STATED IN PART THAT "THE UNIT WILL BE CONSTRUCTED THE SAME AS THE UNITS WE MANUFACTURED UNDER OUR PREVIOUS CONTRACT N600/17/54924, EXCEPT IN SOME INSTANCES, WE HAVE LEARNED BY EXPERIENCE WHERE SOME IMPROVEMENTS MAY BE MADE.' THAT STATEMENT MIGHT ORDINARILY BE REGARDED AS BEING SOMEWHAT IN CONFLICT WITH AN INTENTION TO UTILIZE A CONSIDERABLY LESS EXPENSIVE COMPRESSOR COMPONENT THAN WAS INCORPORATED IN EQUIPMENT PREVIOUSLY FURNISHED BY THE CONTRACTOR TO THE NAVY. NEVERTHELESS, SINCE INFORMATION CONCERNING THE CARRIER COMPRESSOR, MODEL 6D73, WAS INCLUDED IN THE DESCRIPTIVE LITERATURE MADE A PART OF THE CONTRACTOR'S BID, IT IS APPARENT THAT ITS USE AS ONE OF THE COMPONENTS OF THE END PRODUCT WAS PERMISSIBLE UNDER A REASONABLE INTERPRETATION OF THE CONTRACT INVOLVED.

WE HAVE NO REASON TO BELIEVE THAT THE NAVY HAS PREFERRED BIDDERS OR ENGAGES IN ANY PRACTICE WHICH IS DESIGNED TO INCREASE A SUCCESSFUL BIDDER'S PROFIT MARGIN. THE CONTRACTOR IN THIS CASE HAD THE RIGHT TO UTILIZE THE CARRIER COMPRESSOR, MODEL 6D73, AND THE RECORD SHOWS THAT THE THREE RELATIVELY MINOR SUBSTITUTIONS OF COMPONENTS WERE MADE ON THE CONTRACTOR'S OWN INITIATIVE AFTER THE CONTRACT WAS AWARDED. THIS WOULD NOT, IN OUR OPINION, WARRANT A CONCLUSION THAT NO USEFUL PURPOSE WAS SERVED IN REQUIRING BIDDERS TO SUBMIT DESCRIPTIVE LITERATURE WITH THEIR BIDS. A TECHNICAL REVIEW OF THE DATA ACCOMPANYING THE BID OF HARVEY W. HOTTEL, INC., RESULTED IN AN ADMINISTRATIVE DETERMINATION THAT THE BIDDER COULD MEET THE SPECIFICATION REQUIREMENTS AND THE NAVY HAS REPORTED THAT THE BIDDER DID IN FACT MEET SUCH REQUIREMENTS WHEN PERFORMING ITS CONTRACT WITH THE GOVERNMENT.

ACCORDINGLY, WE WOULD NOT BE JUSTIFIED IN TAKING FURTHER ACTION IN THE MATTER.