B-141886, MAR. 18, 1960

B-141886, MAR. 18, 1960

TO AMPERAX ELECTRONIC COMPANY:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. 33-604-60-22, ISSUED BY DAYTON AIR FORCE DEPOT, GENTILE AIR FORCE STATION, DAYTON, OHIO.

THE INVITATION REQUESTED BIDS FOR FURNISHING 16 ITEMS OF ELECTRON TUBES OF VARIOUS DESCRIPTIONS AND SPECIFICATIONS, UP TO SPECIFIED MAXIMUM QUANTITIES, AS REQUIRED AND ORDERED BY THE GOVERNMENT DURING THE PERIOD OF 1 YEAR FROM THE DATE OF THE CONTRACT. IN ORDER TO BE CONSIDERED FOR AWARD THE INVITATION REQUIRED THAT THE ELECTRON TUBES BID UPON MUST HAVE BEEN TESTED AND APPROVED FOR INCLUSION IN THE QUALIFIED PRODUCTS LIST PRIOR TO THE TIME SET FOR THE OPENING OF BIDS.

TWELVE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. EITEL MCCULLOUGH, INC. (EIMAC), BID ON ITEMS 3 THROUGH 10. THE BID WAS ACCOMPANIED BY A LETTER WHICH OFFERED THE FOLLOWING DISCOUNT:

"WE WISH TO OFFER FOR YOUR CONSIDERATION THE DISCOUNT OF 1 PERCENT IF AWARDED ALL EIGHT OF THE ITEMS UPON WHICH WE HAVE BID. IF WE ARE NOT AWARDED ALL ITEMS, WE OFFER 3/4 OF 1 PERCENT DISCOUNT FOR ITEMS 3 THROUGH 8. IF NEITHER OF THE ABOVE SITUATIONS ARE APPLICABLE AND WE ARE AWARDED ITEMS 3 AND 5, WE OFFER 1/2 OF 1 PERCENT DISCOUNT.

"THIS DISCOUNT IS NOT IN ANY WAY TO BE CONSIDERED AS AN EXCEPTION TO THE TERMS OF THE BID. THEREFORE, SHOULD IT BE DETERMINED BY THE AIR FORCE TO BE IN CONFLICT WITH EXISTING REGULATIONS, THE OFFER IS WITHDRAWN.'

EVALUATION OF THE BIDS RECEIVED FOR THE 8 ITEMS ON WHICH EIMAC BID DISCLOSES THAT THE PRICE TO THE GOVERNMENT, COMPUTED ON THE BASIS OF THE ESTIMATED REQUIREMENTS FOR THE TUBES AND TAKING THE 1 PERCENT DISCOUNT OFFER BY THE BIDDER, RESULTS IN THE LOWEST TOTAL PRICE TO THE GOVERNMENT. ACCORDINGLY, THE PROCUREMENT ACTIVITY PROPOSED TO AWARD A CONTRACT FOR ALL 8 ITEMS TO EIMAC. HOWEVER, THE AWARD WAS WITHHELD PENDING THE DISPOSITION OF A PROTEST MADE BY YOU.

YOU SUBMITTED A BID ON 3 ITEMS; ITEMS 5, 6, AND 7. YOUR UNIT PRICE BID ON ITEM 5 WAS $15.88 PER TUBE AS AGAINST $15.90 BID BY EIMAC. THIS WAS THE ONLY ITEM ON WHICH YOU SUBMITTED THE LOWEST UNIT PRICE, WITHOUT CONSIDERING DISCOUNTS. HOWEVER, IF THE 1 PERCENT "PACKAGE DISCOUNT" OFFERED BY EIMAC IS CONSIDERED, YOUR BID IS NOT LOW EVEN WITH RESPECT TO THIS ITEM.

YOU PROTEST AN AGGREGATE AWARD TO EIMAC WHICH WOULD INCLUDE ITEMS 5, 6, AND 7, ON WHICH YOU SUBMITTED BIDS AND PARTICULARLY WITH RESPECT TO ITEM 5 ON WHICH YOUR BID IS LOW IF THE DISCOUNT OFFERED BY EIMAC IS NOT CONSIDERED. FIVE SPECIFIC ARGUMENTS ARE ADVANCED IN SUPPORT OF YOUR PROTEST. TWO OF THEM CONCERN THE ACCEPTANCE OF THE UNSOLICITED "PACKAGE DISCOUNT" OFFERED BY EIMAC AND THE REMAINING THREE PERTAIN TO THE USE OF AN INDEFINITE QUANTITY REQUIREMENTS TYPE CONTRACT FOR THE TYPE OF ELECTRON TUBES INVOLVED.

THE REASONS FOR THE PROTEST WHICH PERTAIN TO THE ACCEPTANCE OF "PACKAGE DISCOUNT" WERE CONSIDERED AND REJECTED BY THE DIRECTOR OF PROCUREMENT POLICY, OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE, IN LETTERS TO YOU OF DECEMBER 16, 1959, AND JANUARY 22, 1960. IT IS REPORTED THAT THE DEPARTMENT OF THE AIR FORCE CONCURS WITH THE VIEWS EXPRESSED BY THE DIRECTOR FOR PROCUREMENT POLICY, OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE, AND THAT IN ADDITION THERETO IT IS THE AIR FORCE'S POSITION THAT THE OFFER OF "PACKAGE DISCOUNTS" IS, FOR ALL INTENTS AND PURPOSES, NO DIFFERENT FROM A BID MADE ON AN "ALL OR NONE" BASIS. THE FACT THAT, IN THIS INSTANCE, THE BIDDERS ARE OFFERING BIDS ON QUALIFIED PRODUCTS DOES NOT CHANGE THE RULE THAT BIDS ON SUCH A BASIS ARE RESPONSIVE AND MUST BE ACCEPTED, IF THEY OFFER THE LOWEST AGGREGATE PRICE, IN THE ABSENCE OF A PROVISION IN THE INVITATION TO THE CONTRARY. THE AIR FORCE REPORTS THAT IT IS BELIEVED A PROVISION TO EXCLUDE SUCH AGGREGATE BIDS WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT IN PROCUREMENTS OF THE TYPE OF TUBES HERE INVOLVED. WE PERCEIVE NO BASIS FOR DIFFERING WITH THE VIEWS EXPRESSED BY THE DEPARTMENT OF DEFENSE AND BY THE AIR FORCE, WHICH ARE IN ACCORDANCE WITH THE DECISIONS OF THIS OFFICE. 35 COMP. GEN. 383; 37 ID. 814; AND 38 ID. 550.

THE OTHER REASONS ADVANCED BY YOU AGAINST THE PROPOSED AWARD ARE BASED PRIMARILY ON THE PROPOSITIONS THAT SECTIONS 3.405.5 (B) (2) AND (E) (2) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) PRECLUDE THE MILITARY DEPARTMENTS FROM ENTERING INTO REQUIREMENTS TYPE CONTRACTS FOR FURNISHING THE ELECTRON TUBES INVOLVED, AND THAT THIS TYPE OF CONTRACT IS NOT IN THE BEST INTEREST OF THE GOVERNMENT.

THE ASPR PROVIDES THAT "GENERALLY, THE REQUIREMENTS CONTRACT IS APPROPRIATE FOR USE WHEN THE ITEM OR SERVICE IS COMMERCIAL OR MODIFIED COMMERCIAL IN TYPE AND WHEN A RECURRING NEED IS ANTICIPATED.' YOU CONTEND THAT THE TUBES INVOLVED CANNOT, OR SHOULD NOT, BE CLASSIFIED AS ,COMMERCIAL OR MODIFIED COMMERCIAL" TYPE ITEMS. HOWEVER, THE DIRECTOR FOR PROCUREMENT POLICY, OFFICE OF THE ASSISTANT SECRETARY OF DEFENSE AND THE AIR FORCE HAVE DETERMINED THAT THE TUBES SHOULD BE CLASSIFIED AS "COMMERCIAL OR MODIFIED COMMERCIAL" TYPE ITEMS AND THAT THE PROPOSED CONTRACT, WHICH DOES NOT REPRESENT ALL THE MILITARY REQUIREMENTS FOR THE ELECTRON TUBES, IS NOT DETRIMENTAL TO THE INTEREST OF THE GOVERNMENT.

THE QUESTION WHETHER THE TUBES INVOLVED SHOULD BE CLASSIFIED AS "COMMERCIAL OR MODIFIED COMMERCIAL" ITEMS IS PRIMARILY FOR ADMINISTRATIVE DETERMINATION. ON THE BASIS OF THE FACTS REPORTED WE WOULD NOT BE WARRANTED IN QUESTIONING THE ADMINISTRATIVE DETERMINATION MADE. FURTHERMORE, IN VIEW OF THE FACT THAT THE GENERAL RULE STATED IN ASPR DOES NOT PROHIBIT THE USE OF A REQUIREMENTS CONTRACT, EVEN IF THE ITEMS PROCURED ARE NOT OF A COMMERCIAL OR MODIFIED COMMERCIAL TYPE, THE LEGALITY OF AN AWARD UNDER IFB NO. 33-604-60-22 WOULD NOT BE SUBJECT TO QUESTION REGARDLESS OF THE STATUS OF THE TUBES AS COMMERCIAL OR MODIFIED COMMERCIAL TYPES. SO FAR AS CONCERNS THE DESIRABILITY OF MAINTAINING MORE THAN ONE CURRENT SOURCE OF SUPPLY FOR THE TUBES IN QUESTION, IT IS OBVIOUS THAT THIS IS A MATTER SOLELY FOR ADMINISTRATIVE DETERMINATION WHICH HAS NO BEARING ON THE LEGALITY OF ANY AWARD.

IN VIEW OF THE FOREGOING, THERE IS NO BASIS UPON WHICH WE COULD QUESTION THE PROPOSED AWARD OF A CONTRACT TO EITEL-MCCULLOUGH, INC., ON THE BASIS OF ITS LOW BID.