B-147220, DECEMBER 29, 1961, 41 COMP. GEN. 424

B-147220, DECEMBER 29, 1961, 41 COMP. GEN. 424

BIDS - SUBCONTRACTS - QUALIFIED PRODUCTS EVEN THOUGH THE LOW BIDDER ON A SUBCONTRACT QUALIFIED THE COMPONENT HE OFFERED FOR INSTALLATION IN A WEAPONS SYSTEM UNDER OTHER THAN THE GOVERNMENT PREQUALIFYING PROGRAM, THE APPROVAL OF THE SUBCONTRACT AWARD BY THE CONTRACTING OFFICER, AS PROVIDED BY THE PRIME CONTRACT, WOULD NOT BE PREJUDICIAL TO THE INTEREST OF THE GOVERNMENT, THE PRIME CONTRACTOR HAVING BEEN AUTHORIZED TO SOLICIT PROPOSALS ON COMPONENTS FROM MANUFACTURERS WHICH HAD NOT QUALIFIED UNDER THE GOVERNMENT PREQUALIFYING PROGRAM, SUBJECT TO THE CONDITION THAT THE COMPONENTS MUST QUALIFY PRIOR TO INSTALLATION AND ALSO THAT THE CONTRACTING OFFICER WOULD APPROVE THE SUBCONTRACT, AND THE SOLICITATION FOR BIDS BY THE PRIME CONTRACTOR NOT BEING STRICTLY LIMITED TO GOVERNMENT PREQUALIFIED SOURCES, THE PARTICIPATION OF AN UNSUCCESSFUL SUBCONTRACTOR IN THE GOVERNMENT'S PREQUALIFICATION TESTING PROGRAM DOES NOT GIVE RISE TO A CLAIM AGAINST THE GOVERNMENT FOR DAMAGES ON THE BASIS OF HAVING BEEN MISLED.

TO THE ALLIS-CHALMERS MANUFACTURING COMPANY, DECEMBER 29, 1961:

WE REFER TO YOUR LETTER OF SEPTEMBER 18, 1961, WITH ENCLOSURE, AND SUBSEQUENT CORRESPONDENCE, INCLUDING MEMORANDUM OF DECEMBER 14, 1961, SUBMITTED IN YOUR BEHALF BY PLEDGER AND EDGERTON, PROTESTING THE AWARD OF A SUBCONTRACT TO THE CARTER PUMP COMPANY BY THE PRIME CONTRACTOR, PAUL HARDEMAN, INC., IN CONNECTION WITH THE TITAN II PROPELLANT TRANSFER SYSTEM PROGRAM OF THE DEPARTMENT OF THE AIR FORCE.

ON JULY 28, 1961, LETTER CONTRACT NO. AF 104/694/-37 WAS AWARDED BY BALLISTIC SYSTEMS DIVISION, DEPARTMENT OF THE AIR FORCE, TO PAUL HARDEMAN, INC., IN CONTEMPLATION OF A COST-PLUS-A-FIXED-FEE CONTRACT FOR THE TITAN II PROPELLANT TRANSFER SYSTEM PROGRAM. UNDER THE CONTRACT THE PRIME CONTRACTOR HAS THE RESPONSIBILITY FOR FURNISHING CERTAIN COMPONENTS, INCLUDING PUMPS, THROUGH ITS OWN RESOURCES OR BY SUBCONTRACT. THE CONTRACT CLAUSE ENTITLED " SUBCONTRACTS" APPEARING AT PART 7, PARAGRAPH 203.8 OF THE ARMED SERVICES PROCUREMENT REGULATION (AT THE CONTRACT DATE OF JULY 28, 1961) IS INCORPORATED BY REFERENCE INTO THIS CONTRACT. THAT CLAUSE PROVIDES IN PART AS FOLLOWS:

(A) THE CONTRACTOR SHALL GIVE ADVANCE NOTIFICATION TO THE CONTRACTING OFFICER OF ANY PROPOSED SUBCONTRACT HEREUNDER WHICH (I) IS ON A COST OR COST-PLUS-A-FIXED-FEE BASIS, * * *.

(B) THE CONTRACTOR SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE CONTRACTING OFFICER, PLACE ANY SUBCONTRACT WHICH (I) IS ON A COST OR COST- PLUS-A-FIXED-FEE BASIS, * * *.

ITEM 3.A., ON PAGE 2 OF EXHIBIT B TO THE LETTER CONTRACT PROVIDES AS FOLLOWS:

ALL COMPONENTS OF THE PROPELLANT TRANSFER SYSTEM SO IDENTIFIED BY THE ABOVE REFERENCED SPECIFICATIONS SHALL BE SELECTED FROM THE VENDOR LIST TO BE FURNISHED BY THE GOVERNMENT OR OTHERWISE QUALIFIED IN ACCORDANCE WITH ITEM 4 BELOW.

ITEM 4 PROVIDES IN PART AS FOLLOWS:

THE CONTRACTOR SHALL CONDUCT QUALIFICATION TESTS ON COMPONENTS AS IDENTIFIED BY THE SPECIFICATIONS REFERENCED ABOVE THAT HAVE NOT BEEN PREVIOUSLY PREQUALIFIED FOR USE IN THE PROPELLANT TRANSFER SYSTEM. SUCH TESTS WILL BE CONDUCTED THROUGH THE SERVICE OF AN INDEPENDENT TESTING LABORATORY AS APPROVED BY THE CONTRACTING OFFICER AND SHALL CONFORM TO THE STANDARDS, PROCEDURES AND SPECIFICATIONS ESTABLISHED FOR PREQUALIFICATION OF VENDOR PRODUCTS. THE TEST RESULTS SHALL BE SUBMITTED TO THE CONTRACTING OFFICER FOR REVIEW AND APPROVAL PRIOR TO THE INSTALLATION OF THE EQUIPMENT IN THE PROPELLANT TRANSFER SYSTEM. ITEMS OF EQUIPMENT THAT HAVE NOT BEEN PREQUALIFIED SHALL BE PURCHASED FROM MANUFACTURERS REGULARLY ENGAGED IN PRODUCING EQUIPMENT COMPLYING WITH SIMILAR SPECIFICATIONS THEREFOR AND ABLE TO SHOW SUCCESSFUL RECORD OF EQUIPMENT IN SERVICE.

PARAGRAPH 1-03 OF THE SPECIFICATION FOR THE PROPELLANT TRANSFER SYSTEM PROVIDES THAT:

1-03 QUALIFIED MANUFACTURERS. ALL COMPONENTS LISTED IN PARAGRAPH 3-03 OF SECTION 3 SHALL BE PROVIDED BY MANUFACTURERS WHICH HAVE BEEN APPROVED BY MEANS OF PREQUALIFICATION TESTING OF THEIR PRODUCTS. CERTAIN MANUFACTURERS HAVE BEEN APPROVED AS ELIGIBLE TO FURNISH ITEMS OF EQUIPMENT TO BE USED IN THE PROPELLANT TRANSFER SYSTEM. QUALIFIED PRODUCT LISTS ARE INCORPORATED IN THE ATTACHMENTS OF SECTION 3 FOR THE FOLLOWING CATEGORIES OF EQUIPMENT:

ITEM ATTACHMENT

PUMPS A

* * * * * * PRODUCTS OF OTHER MANUFACTURERS MAY BE FURNISHED, BUT EACH ITEM MUST BE TESTED BY THE PREQUALIFICATION TEST PROCEDURES SPECIFIED IN THE COMPONENT VALIDATION TEST PROCEDURES. TESTING OF THESE PRODUCTS SHALL BE DONE BY AN APPROVED LABORATORY AT NO EXPENSE TO THE GOVERNMENT.

THE SPECIFICATION COVERING THE ELECTRICAL WORK ( SECTION 11) PROVIDES IN PARAGRAPH 11-03 THAT:

GENERAL. THE ELECTRICAL INSTALLATION SHALL CONFORM TO THE RULES OF THE NATIONAL ELECTRICAL CODE, EXCEPT WHERE HIGHER REQUIREMENTS ARE SPECIFIED OR INDICATED. ELECTRICAL MATERIALS SHALL BE APPROVED BY THE UNDERWRITERS' LABORATORIES, INC., WHEREVER STANDARDS HAVE BEEN ESTABLISHED BY THAT AGENCY. THE LABEL OR LISTING OF THE UNDERWRITERS' LABORATORIES, INC., WILL BE ACCEPTED AS EVIDENCE OF COMPLIANCE. IN LIEU OF THE UNDERWRITERS' LABORATORIES, INC., APPROVAL, CONSIDERATION WILL BE GIVEN TO CERTIFIED TEST REPORTS OF AN APPROVED TESTING LABORATORY, INDICATING CONFORMANCE WITH ALL REQUIREMENTS OF THE APPLICABLE UNDERWRITERS' LABORATORIES, INC., STANDARD.

ON JULY 31, 1961, PAUL HARDEMAN, INC., THE CONTRACTOR, ISSUED A REQUEST FOR PROPOSALS FOR THE REQUIRED PUMPS, STATING THAT PROPOSALS WERE DUE NO LATER THAN AUGUST 4, 1961. GOVERNMENT SPECIFICATIONS WERE ATTACHED TO THE REQUEST. THE GOVERNMENT FURNISHED THE CONTRACTOR THE NAMES OF TWO PREQUALIFIED SOURCES; NAMELY, ALLIS-CHALMERS AND CHEMPUMP, A DIVISION OF FOSTORIA CORPORATION. THE CONTRACTOR SOLICITED PROPOSALS FROM THESE TWO SOURCES AND ALSO THE CARTER PUMP COMPANY. BY LETTER OF AUGUST 4, 1961, CARTER QUOTED A TOTAL PRICE OF $441,780 ON A REQUIRED QUANTITY OF 264 PUMPS, WHILE ALLIS-CHALMERS QUOTED A PRICE OF $457,300 AND CHEMPUMP QUOTED A PRICE OF $537,120. CARTER STATED IN ITS PROPOSAL THAT QUALIFICATION TESTS WERE IN PROGRESS AND WOULD BE COMPLETED IN OCTOBER.

ON AUGUST 11, 1961, THE CONTRACTOR SENT A TELEGRAM PURCHASE ORDER TO CARTER, STATING THAT " THIS PURCHASE ORDER IS SUBJECT IN ALL RESPECTS TO THE APPROVAL OF THE CONTRACTING OFFICER.' BY TELEGRAM OF AUGUST 15, 1961, CARTER ACKNOWLEDGED THE PURCHASE ORDER--- "1SUBJECT TO APPROVAL OF CONTRACTING OFFICER.'

WE ARE ADVISED BY THE DEPARTMENT OF THE AIR FORCE THAT THE PUMP OFFERED BY CARTER HAS BEEN TESTED BY WYLIE LABORATORIES AND THAT IT IS FULLY QUALIFIED TO THE SATISFACTION OF THE AIR FORCE. HOWEVER, APPROVAL OF THE SUBCONTRACT IS BEING HELD IN ABEYANCE PENDING DECISION ON YOUR PROTEST.

THE FACTS GIVING RISE TO YOUR PROTEST ARE ALLEGED AS FOLLOWS:

BY LETTER DATED JULY 25, 1960, FROM HEADQUARTERS, AIR FORCE BALLISTIC MISSILE DIVISION, LOS ANGELES, CALIFORNIA, YOU WERE INVITED TO PARTICIPATE IN THE PROPELLANT TRANSFER SYSTEM COMPONENTS TEST PROGRAM. ATTACHED TO THE LETTER WAS AN OUTLINE OF THE PROGRAM, STATING ON PAGE 1 AS FOLLOWS: TO ASSURE OPERATIONAL UNIFORMITY, COMPLIANCE WITH NECESSARY QUALITY STANDARDS AND TO MEET OPERATIONAL SCHEDULES, THE AIR FORCE CONTEMPLATES SUBJECTING ALL CRITICAL PTS COMPONENTS TO PREQUALIFYING TESTS. THE TEST PROGRAM WILL ASSURE THAT THE FINAL PTS SYSTEM WILL CONTAIN ONLY FULLY QUALIFIED COMPONENTS. TO ACCOMPLISH THIS RESULT, THE AIR FORCE REQUESTS POTENTIAL VENDORS FOR EQUIPMENT IN THE CATEGORIES OF VALVES, PUMPS, FILTERS, FLOW METERS, AND INSTRUMENTATION (SEE ATTACHED CRITICAL ITEMS LIST) TO PROVIDE SAMPLE EQUIPMENT ITEMS FOR TESTING BY THE GOVERNMENT. ONLY THOSE COMPONENTS THAT ARE PROVEN ADEQUATE IN THE TESTS WILL BE CONSIDERED AS ACCEPTABLE FOR USE IN THE CONSTRUCTION OF THE OPERATIONAL SITES.

ALSO, PAGE 2, PARAGRAPH 6.1 STATES THAT:

SPECIFICATIONS WILL INCLUDE, BY MAKE AND MODEL, THE PREQUALIFIED COMPONENTS AND WILL PERMIT INSTALLATION OF THESE COMPONENTS ONLY INTO THE COMPLETED SYSTEMS.

PAGE 3 SETS FORTH THE FOLLOWING SCHEDULE: A. INTERESTED VENDORS BRIEFING AT AFBMD 9 AUGUST 1960 B. RECEIPT OF VENDORS PROPOSALS BY 19 AUGUST 1960 C. TESTING PROGRAM SEPTEMBER THRU NOVEMBER 1960 D. RELEASE OF BID PACKAGES FOR PTS

JANUARY 1961 E. AWARD CONTRACTS FEBRUARY 1961 F. DELIVERY OF FIRST PRODUCTION ITEMS JULY 1961 G. DELIVERY OF LAST PRODUCTION ITEMS (75TH SET) WITH JULY 1962

PROPORTIONATE SCHEDULES BETWEEN FIRST AND LAST SETS

YOU STATE AS FOLLOWS:

ON 9 AUGUST 1960 AN ENGINEERING BRIEFING MEETING WAS HELD IN INGLEWOOD, CALIFORNIA TO OUTLINE THIS PREQUALIFICATION TESTING PROGRAM, TO BE CONDUCTED BY THE RALPH M. PARSONS COMPANY, IN ORDER TO EVALUATE THE COMPONENTS TO BE USED IN THE TITAN II MISSILE PROPELLANT TRANSFER SYSTEM FOR RELIABILITY, MATERIAL COMPATIBILITY AND FUNCTIONAL PERFORMANCE. PARSONS WERE ACTING UNDER CONTRACT WITH THE BALLISTIC MISSILES DIVISION.

ALLIS-CHALMERS WAS TOLD AT THIS MEETING, THAT DUE TO THE EXTREME URGENCY OF THIS PROJECT AND THE URGENCY AND IMPORTANCE OF NATIONAL DEFENSE, THIS PROJECT WOULD BE HANDLED IN AN ENTIRELY DIFFERENT MANNER. WE WERE TOLD THAT ALL COMPANIES WHO WERE POTENTIAL MANUFACTURERS OF COMPONENTS FOR THIS SYSTEM WOULD BE INVITED TO PARTICIPATE IN A PREQUALIFICATION TESTING PROGRAM. THIS PROGRAM WAS TO BE SET UP ON SUCH A WAY THAT EACH AND EVERY COMPONENT, NO MATTER WHAT SIZE, TYPE OF MATERIAL, ETC., WOULD BE TESTED, AND NO COMPONENT WOULD BE USED WITHOUT FIRST PASSING THE PREQUALIFICATION TESTING PROGRAM AS OUTLINED IN THIS ENGINEERING BRIEFING CONFERENCE. ITALICS SUPPLIED.)

YOU REPORT THAT AS A RESULT OF THE INFORMATION RECEIVED AT THIS MEETING, YOU SUPPLIED, AT NO CHARGE TO THE GOVERNMENT, 6 PUMP TEST UNITS, THE SERVICES OF A DESIGN ENGINEER FOR 39 DAYS, AND THE SERVICES OF VARIOUS OTHER PERSONNEL DURING THE TESTING PERIOD FROM OCTOBER 15, 1960, TO MAY 30, 1961, ALL OF WHICH COST YOU IN EXCESS OF $30,000. YOU PROTEST THE AWARD OF THE PUMP SUBCONTRACT TO CARTER ON THE BASIS THAT THAT COMPANY IS A NON-PREQUALIFIED BIDDER AND, THEREFORE, IN ACCORDANCE WITH THE CONDITIONS OUTLINED AT THE AUGUST 9, 1960, MEETING BY THE AIR FORCE, IT SHOULD NOT BE APPROVED FOR AWARD.

UNDER THE LETTER CONTRACT BETWEEN THE GOVERNMENT AND PAUL HARDEMAN, INC., IT IS CLEAR THAT THE CONTRACTOR WAS AUTHORIZED TO SOLICIT PROPOSALS ON COMPONENTS FROM MANUFACTURERS WHICH HAD NOT QUALIFIED UNDER THE GOVERNMENT PREQUALIFYING PROGRAM, SUBJECT TO THE CONDITION THAT THEY MUST QUALIFY THEIR COMPONENT PRIOR TO INSTALLATION. THE CONTRACT PROVIDES, HOWEVER, THAT THE CONTRACTOR MUST OBTAIN APPROVAL OF ALL SUBCONTRACTS FROM THE CONTRACTING OFFICER. WHILE IT IS RECOGNIZED THAT THE SUBCONTRACT AWARD IS NOT SUBJECT TO THE LIMITATIONS IMPOSED BY THE PUBLIC ADVERTISING STATUTES, INASMUCH AS THE COSTS OF THE SUBCONTRACT WILL ULTIMATELY BE BORNE BY THE GOVERNMENT UNDER THE PROVISIONS OF THE COST REIMBURSEMENT PRIME CONTRACT, IT SEEMS CLEAR THAT THE CONTRACTING OFFICER SHOULD NOT APPROVE A SUBCONTRACT ENTERED INTO BY THE PRIME CONTRACTOR IF THE EXECUTION OF SUCH SUBCONTRACT WOULD BE PREJUDICIAL TO THE INTEREST OF THE GOVERNMENT. 138830, JUNE 19, 1959; SEE 37 COMP. GEN. 315; 36 ID. 311. IT IS ALSO APPARENT THAT A CONDITION PREJUDICIAL TO THE GOVERNMENT WOULD ARISE IF THE CONTRACTING OFFICER WERE TO APPROVE A SUBCONTRACT ENTERED INTO AT AN UNREASONABLY HIGH PRICE.

YOU CONTEND THAT AN AWARD TO CARTER WOULD BE PREJUDICIAL TO THE GOVERNMENT, SINCE IT WOULD SANCTION PROCEDURES WHEREBY YOU WERE ENTICED INTO THE PREQUALIFICATION TESTING PROGRAM. THIS, YOU STATE, COULD HAVE A HARMFUL EFFECT ON THE GOVERNMENT PROCUREMENT PROGRAM, AND GIVE RISE TO A CLAIM FOR DAMAGES BY MISLED BIDDERS, CITING HEYER PRODUCTS COMPANY INC. V. UNITED STATES, 135 CT. CL. 63, 140 F.1SUPP. 409.

THE PROPELLANT TRANSFER SYSTEM COMPONENTS TEST PROGRAM DESCRIPTION SHEETS WHICH YOU RECEIVED AS ATTACHMENT TO THE LETTER OF JULY 25, 1960, FROM THE DEPARTMENT OF THE AIR FORCE, STATE UNDER PARAGRAPH 6.1, THAT " SPECIFICATIONS WILL INCLUDE * * * THE PREQUALIFIED COMPONENTS AND WILL PERMIT INSTALLATION OF THESE COMPONENTS ONLY INTO THE COMPLETED SYSTEMS.' ( ITALICS SUPPLIED.) INCLUDED ALSO WAS A SCHEDULE WHICH INDICATES THAT TESTING WOULD PRECEDE RELEASE OF BID PACKAGES AND AWARD. FROM THIS INFORMATION WE DO NOT CONCLUDE THAT ONLY GOVERNMENT PREQUALIFIED SOURCES MUST BE USED. RATHER, WE INTERPRET THE LANGUAGE AS MEANING THAT ONLY QUALIFIED COMPONENTS WILL BE INSTALLED IN THE PROPELLANT TRANSFER SYSTEMS. IT MAY BE THAT YOU WERE MISLED BY INFORMATION YOU RECEIVED AT THE AUGUST 9, 1960, BRIEFING CONFERENCE; HOWEVER, THERE IS NO CLEAR EVIDENCE IN THE RECORD TO INDICATE WHAT WAS SAID AT THAT CONFERENCE. THE BASIS OF THE PRESENT RECORD WE ARE UNABLE TO SAY YOU WERE FULLY JUSTIFIED IN CONCLUDING THAT SOLICITATIONS FOR COMPONENTS WOULD BE STRICTLY LIMITED TO GOVERNMENT PREQUALIFIED SOURCES. IT MAY BE MENTIONED, ALSO, THAT QUALIFICATION OF YOUR COMPONENT MAY BENEFIT YOU IN FUTURE PROCUREMENT.

IN HEYER PRODUCTS COMPANY, SUPRA, THE COURT OF CLAIMS STATES AS FOLLOWS:

IT GOES WITHOUT SAYING THAT NOT EVERY UNSUCCESSFUL BIDDER IS ENTITLED TO RECOVER THE COST OF PUTTING IN HIS BID. RECOVERY CAN BE HAD IN ONLY THOSE CASES WHERE IT CAN BE SHOWN BY CLEAR AND CONVINCING PROOF THAT THERE HAS BEEN A FRAUDULENT INDUCEMENT FOR BIDS, WITH THE INTENTION, BEFORE THE BIDS WERE INVITED OR LATER CONCEIVED, TO DISREGARD THEM ALL EXCEPT THE ONES FROM BIDDERS TO ONE OF WHOM IT WAS INTENDED TO LET THE CONTRACT, WHETHER HE WAS THE LOWEST RESPONSIBLE BIDDER OR NOT. IN OTHER WORDS, IT MUST BE SHOWN THAT BIDS WERE NOT INVITED IN GOOD FAITH, BUT AS A PRETENCE TO CONCEAL THE PURPOSE TO LET THE CONTRACT TO SOME FAVORED BIDDER, OR TO ONE OF A GROUP OF PREFERRED BIDDERS, AND WITH THE INTENT TO WILLFULLY, CAPRICIOUSLY, AND ARBITRARILY DISREGARD THE OBLIGATION TO LET THE CONTRACT TO HIM WHOSE BID WAS MOST ADVANTAGEOUS TO THE GOVERNMENT. ASIDE FROM THE FACT THAT A PRIME CONTRACTOR SOLICITED THESE PROPOSALS, AND NOT THE GOVERNMENT, IT IS NOT SHOWN, OR ALLEGED, THAT YOUR PROPOSAL HAS NOT BEEN FULLY CONSIDERED FOR AWARD. IT NEED BE POINTED OUT THAT IN NO WAY HAS IT BEEN ESTABLISHED THAT YOU WERE DENIED FULL OPPORTUNITY TO SUBMIT A COMPETITIVE PROPOSAL. FOR EVEN IF YOU WERE NOT AWARE AT THE TIME YOU MADE YOUR PROPOSAL THAT OUTSIDE SOURCES MIGHT BE SOLICITED, YOU WERE AWARE THAT ANOTHER POTENTIAL SOURCE ( CHEMPUMP) HAD PREQUALIFIED. IN OUR VIEW THESE FACTS DISTINGUISH THIS CASE FROM THE HEYER PRODUCTS CASE. ON THE BASIS OF THE PRESENT RECORD WE CONCLUDE THAT APPROVAL OF AWARD TO CARTER PUMP COMPANY WOULD NOT BE PREJUDICIAL TO THE INTERESTS OF THE GOVERNMENT, AND WE OFFER NO OBJECTION TO SUCH APPROVAL. ACCORDINGLY, YOUR PROTEST IS DENIED.