B-151351, NOV. 13, 1963

B-151351, NOV. 13, 1963

TO MR. EUGENE CARUSI:

REFERENCE IS MADE TO A LETTER DATED APRIL 19, 1963, FROM YOUR CLIENT, WALTHAM PRECISION INSTRUMENT COMPANY (WALTHAM), AND YOUR LETTER DATED APRIL 22, 1963, PROTESTING AGAINST THE AWARD OF A CONTRACT TO ANY MANUFACTURER WHICH USES IMPORTED MOVEMENTS FOR AIRCRAFT CLOCKS BEING PROCURED UNDER INVITATION FOR BIDS NO. AMC/A/36 038-63-363 (M) ISSUED BY FRANKFORD ARSENAL, PHILADELPHIA, PENNSYLVANIA.

THE SUBJECT INVITATION FOR BIDS WAS ISSUED ON FEBRUARY 11, 1963, AND CALLED FOR BIDS ON AN ESTIMATED QUANTITY OF 3,000 AIRCRAFT CLOCKS, TYPE ABU-9/A WITH A FIRM REQUIREMENT FOR A QUANTITY OF 1,432 CLOCKS. THE PROCUREMENT WAS TOTALLY SET ASIDE FOR SMALL BUSINESS PARTICIPATION AND THE INVITATION CONTAINED THE FOLLOWING DEFINITION OF A SMALL BUSINESS CONCERN:

"/B) DEFINITION. A "SMALL BUSINESS CONCERN" IS A CONCERN THAT (I) IS CERTIFIED AS A SMALL BUSINESS CONCERN BY THE SMALL BUSINESS ADMINISTRATION, OR (II) IS INDEPENDENTLY OWNED AND OPERATED, IS NOT DOMINANT IN THE FIELD OF OPERATION IN WHICH IT IS BIDDING ON GOVERNMENT CONTRACTS AND, WITH ITS AFFILIATES, EMPLOYS NOT MORE THAN 500 EMPLOYEES. IN ADDITION TO MEETING THESE CRITERIA, A MANUFACTURER OR REGULAR DEALER SUBMITTING BIDS OR PROPOSALS IN HIS OWN NAME MUST AGREE TO FURNISH IN THE PERFORMANCE OF THE CONTRACT END ITEMS MANUFACTURED OR PRODUCED IN THE UNITED STATES, ITS POSSESSIONS, OR PUERTO RICO, BY SMALL BUSINESS CONCERNS; PROVIDED, THAT THIS ADDITIONAL REQUIREMENT DOES NOT APPLY IN CONNECTION WITH CONSTRUCTION OR SERVICE CONTRACTS.'

BIDS WERE OPENED ON MARCH 13, 1963, AS SCHEDULED, AND THE FOLLOWING FOUR BIDS WERE RECEIVED:

* * * * * * * * * * * * * * (TABLE OMITTED) * * * * * * * * * * * * * *

IN ITS LETTER OF APRIL 19 WALTHAM CONTENDS THAT ANY BIDDER WHICH USES IMPORTED MOVEMENTS MUST BE CONSIDERED NONRESPONSIVE. WALTHAM'S ALLEGATIONS OF NONRESPONSIVENESS TO THE PROVISIONS AND REQUIREMENTS OF THE INVITATION FOR BIDS FALL INTO THREE SPECIFIC AREAS:

1. QUALITY ASSURANCE SPECIFICATION MIL-I-45208

2. DOMESTIC JEWEL BEARINGS REQUIREMENTS

3. SMALL BUSINESS PROVISIONS

WITH RESPECT TO THE QUALITY ASSURANCE ASPECTS, WALTHAM NOTES THAT PARAGRAPH 4 OF MIL-I-45208, WHICH WAS MADE A PART OF THE INVITATION, PROVIDES, INTER ALIA, THAT ALL INSPECTION OPERATIONS PERFORMED BY THE CONTRACTOR WILL BE SUBJECT TO GOVERNMENT VERIFICATION AT SCHEDULED AND UNSCHEDULED INTERVALS. SUCH VERIFICATION WILL CONSIST OF (A) SURVEILLANCE OF THE OPERATIONS TO DETERMINE THAT PRACTICES, METHODS AND PROCEDURES OF THE CONTRACTOR'S WRITTEN INSPECTION PLAN ARE BEING PROPERLY APPLIED, AND (B) GOVERNMENT PRODUCT INSPECTION TO DETERMINE, PRIOR TO ACCEPTANCE, THAT THE PRODUCT COMPLIES WITH ALL THE CONTRACTUAL QUALITY ASSURANCE PROVISIONS. WALTHAM CONTENDS, IN EFFECT, THAT A FOREIGN SUBCONTRACTOR CAN IGNORE THE ABOVE QUALITY ASSURANCE PROVISIONS SINCE THE GOVERNMENT DOES NOT HAVE ADEQUATE MEANS OF INVESTIGATING THE CONTROLS USED IN THE MANUFACTURE OR INSPECTION OF THE CLOCK MOVEMENT AND, THEREFORE, CANNOT INSIST ON, OR EVALUATE, ANY CORRECTIVE ACTION THAT MAY BE REQUIRED TO IMPROVE THE END ITEM. WALTHAM ALSO CONTENDS THAT WITHOUT SURVEILLANCE IN THE FOREIGN PLANT BY A GOVERNMENT REPRESENTATIVE, IT WOULD BE IMPOSSIBLE FOR THE CONTRACTING OFFICER TO APPLY THE PRODUCTION PROGRESS REPORTS CLAUSE WHICH APPEARS ON PAGE 8 OF THE INVITATION AND READS AS FOLLOWS:

"THE CONTRACTOR SHALL COMPLETE AND DELIVER A MONTHLY PROGRESS REPORT * * * ON THE SECOND WORKING DAY OF EACH MONTH. SUCH REPORTS SHALL BE SIGNED BY THE CONTRACTOR. WHERE A GOVERNMENT INSPECTOR IS LOCATED AT THE CONTRACTOR'S PLANT, HE SHALL SIGN AS A SERVICE REPRESENTATIVE. IN ALL OTHER CASES, THE GOVERNMENT CONTRACTOR SHALL SIGN. * * *"

WALTHAM FURTHER CONTENDS THAT FOREIGN MANUFACTURERS CANNOT COMPLY WITH DELIVERY SCHEDULES UNTIL THEIR QUALITY ASSURANCE PLAN IS SUBMITTED AND APPROVED BY THE GOVERNMENT IN ACCORDANCE WITH MIL-I 45208.

WITH REFERENCE TO WALTHAM'S CONTENTIONS AS TO THE REQUIRED SOURCE FOR JEWEL BEARINGS, THE FOLLOWING PROVISION APPEARS ON PAGE 7 OF THE INVITATION:

"IT HAS BEEN DETERMINED THAT AN ADEQUATE FACILITY FOR THE MANUFACTURE OF JEWEL BEARINGS IS ESSENTIAL TO MEET MOBILIZATION REQUIREMENTS. EXCEPT FOR BEARINGS INCORPORATED IN STANDARD COMMERCIAL ITEMS NOT ACQUIRED SPECIFICALLY FOR GOVERNMENT CONTRACTS, JEWEL BEARINGS REQUIRED IN THE PERFORMANCE OF THIS CONTRACT SHALL BE PROCURED FROM THE TURTLE MOUNTAIN PROCUREMENT PLANT, ROLLA, NORTH DAKOTA, PROVIDED, THE REQUIREMENT OF THE CONTRACT CAN BE MET. THE PURCHASE OF JEWEL BEARINGS FROM ANY OTHER SOURCE SHALL BE MADE ONLY WITH THE APPROVAL OF THE CONTRACTING OFFICER AND WITH SUCH ADJUSTMENT IN PRICE OR FEE AS MAY BE EQUITABLE.'

WALTHAM CONTENDS THAT ALL BIDDERS ARE REQUIRED BY THE TERMS OF THE ABOVE PROVISIONS, AND BY THE SPECIFICATIONS, TO USE DOMESTIC JEWEL BEARINGS PROCURED EXCLUSIVELY FROM THE TURTLE MOUNTAIN PLANT. WITHOUT GOVERNMENT SURVEILLANCE IN PRODUCTION, WALTHAM STATES THAT THE GOVERNMENT CANNOT DETERMINE WHETHER OR NOT THE FOREIGN SUBCONTRACTORS WILL FULLY UTILIZE TURTLE MOUNTAIN JEWELS.

WITH RESPECT TO THE SMALL BUSINESS ASPECTS, WALTHAM CONTENDS THAT SINCE THE CLOCK MOVEMENT WILL NOT BE MANUFACTURED IN THE UNITED STATES, ITS POSSESSIONS, OR PUERTO RICO, BY SMALL BUSINESS CONCERNS, THE DEFINITION OF SMALL BUSINESS INCLUDED IN THE INVITATION, QUOTED ABOVE, AUTOMATICALLY PRECLUDES WAKMANN AND MACLEOD FROM QUALIFYING AS SMALL BUSINESS CONCERNS FOR PURPOSES OF THIS PROCUREMENT.

THE CONTRACTING OFFICER REPORTS THE FOLLOWING BACKGROUND FACTS AND CIRCUMSTANCES SURROUNDING THE PROCUREMENT. CURRENTLY, WALTHAM IS THE SOLE DOMESTIC PRODUCER OF THE ABU-9/A CLOCK. (THE SOLE FOREIGN SOURCE FOR THE CLOCK MOVEMENT IS THE FIRM OF LEMANIA LOCATED IN ORIENT, SWITZERLAND, AND REPRESENTED IN THE UNITED STATES BY WAKMANN.) WALTHAM MANUFACTURES THE CLOCK MOVEMENT AND ALSO PRODUCES AND INSTALLS THE LIGHTING FEATURES. HOWEVER, WALTHAM OCCASIONALLY SUBCONTRACTS THE LIGHTING WHEN IT FINDS IT MORE ECONOMICAL TO DO SO. OTHER DOMESTIC CLOCK AND WATCH MANUFACTURERS SUCH AS BULOVA, HAMILTON, ELGIN, U.S. TIME, ETC., LACK THE NECESSARY TOOLING; HENCE, THEY CANNOT BE COMPETITIVE OR MEET DELIVERY SCHEDULES AND AS A RESULT DO NOT BID ON AIRCRAFT CLOCK REQUIREMENTS.

THE PROCUREMENT WAS SET ASIDE EXCLUSIVELY FOR SMALL BUSINESS PARTICIPATION IN ACCORDANCE WITH PARAGRAPH 1-706.5 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) ON THE POSSIBILITY THAT DOMESTIC SMALL BUSINESS FIRMS SPECIALIZING IN THE LIGHTING SYSTEM WOULD BID AS PRIME CONTRACTORS USING A WALTHAM OR OTHER MANUFACTURED MOVEMENT, IN WHICH EVENT, WALTHAM WOULD BECOME A SUBCONTRACTOR RATHER THAN A PRIME. HOWEVER,NONE OF THE BIDDERS, WITH THE EXCEPTION OF WALTHAM, SUBMITTED BIDS WITH THE INTENTION OF USING THE WALTHAM MOVEMENT. THE OTHER BIDDERS INTEND TO USE A LEMANIA MOVEMENT AND INSTALL THEIR OWN LIGHTING SYSTEM FOR DELIVERY OF A FINISHED ABU-9/A CLOCK.

THE CONTRACTING OFFICER REPORTS THAT ELM MANUFACTURING CO., INC., WAS DETERMINED TO BE NONRESPONSIBLE AFTER REFUSING PERMISSION TO THE GOVERNMENT TO PERFORM A SURVEY OF ITS PLANT. IT IS FURTHER REPORTED THAT THE DEPARTMENT OF THE ARMY CONSIDERS THE BIDS SUBMITTED BY MACLEOD AND WAKMANN TO BE RESPONSIVE, BUT THERE IS SOME QUESTION AS TO THE RESPONSIBILITY OF MACLEOD. IT IS STATED MACLEOD'S RESPONSIBILITY HAS YET TO BE DETERMINED. WAKMANN IS CONSIDERED TO BE RESPONSIBLE.

WE ARE INFORMED BY THE CONTRACTING OFFICER THAT BOTH MACLEOD AND WAKMANN WOULD IMPORT THE CLOCK MOVEMENT FROM LEMANIA. THE MOVEMENT WOULD CONTAIN DOMESTIC JEWELS PURCHASED BY MACLEOD AND WAKMANN FROM THE TURTLE MOUNTAIN PLANT AND SUPPLIED TO LEMANIA. MACLEOD WOULD INSTALL THE LIGHTING AND OTHER DOMESTIC COMPONENTS AND DELIVER THE COMPLETED CLOCK AT ITS PLANT FOR INSPECTION AND ACCEPTANCE BY THE GOVERNMENT. WAKMANN WOULD SUBCONTRACT THE LIGHTING AND OTHER WORK TO THE AEROSONIC CORPORATION, CLEARWATER, FLORIDA, A SMALL BUSINESS FIRM. THE FINISHED CLOCKS ARE THEN RETURNED TO WAKMANN IN NEW YORK FOR DELIVERY TO THE GOVERNMENT AFTER INSPECTION AND ACCEPTANCE BY THE NEW YORK PROCUREMENT DISTRICT. BOTH FIRMS CLAIM TO OFFER A DOMESTIC END PRODUCT SINCE THE COST OF DOMESTIC COMPONENTS, IN EACH CASE, EXCEEDS 50 PERCENT OF THE COST OF ALL COMPONENTS AND THE CLOCKS ARE MANUFACTURED (ASSEMBLED) IN THE UNITED STATES. (IN THE CASE OF MACLEOD, THE COST OF THE SWISS MOVEMENT, INCLUDING DUTY AND TRANSPORTATION, IS $32.50 WHEREAS THE COST OF DOMESTIC COMPONENTS IS $47.62. IN THE CASE OF WAKMANN, THE COST OF THE SWISS MOVEMENT, INCLUDING DUTY AND TRANSPORTATION, IS $32.50 WHEREAS THE COST OF DOMESTIC COMPONENTS IS $58.52.)

IN CONNECTION WITH THAT PART OF WALTHAM'S PROTEST DEALING WITH QUALITY ASSURANCE, THE CONTRACTING OFFICER CONCEDES THAT THERE ARE NO UNITED STATES GOVERNMENT RESIDENT INSPECTORS AT SWISS FACILITIES, BUT, HE NOTES, THAT SINCE THE GOVERNMENT DOES NOT FURNISH DRAWINGS FOR THE COMPONENT PARTS OF THE CLOCK MOVEMENT AND HAS NO PART (RESPONSIBILITY) IN THEIR DESIGN, IT (THE GOVERNMENT) IS ONLY INTERESTED IN THOSE REQUIREMENTS ENUMERATED IN THE ASSOCIATED DETAIL SPECIFICATION. THE CONTRACTING OFFICER STATES THAT ALL OF THE REQUIREMENTS OF MIL-I-45208 CAN BE MET AND WILL BE ENFORCED BY THE GOVERNMENT WHETHER THE CONTRACTOR IS A MANUFACTURER OR DEALER AND THAT AFTER AWARD THE CONTRACTOR WOULD BE REQUIRED TO PREPARE AND CARRY OUT A WRITTEN INSPECTION PLAN IN ACCORDANCE WITH MIL-I-45208. THIS PLAN, IT IS STATED, CAN BE ADEQUATELY IMPLEMENTED BY THE CONTRACTOR AT ITS PLANT AND AT ITS LIGHTING SUBCONTRACTOR'S FACILITY. THE CONTRACTING OFFICER STATES THAT WALTHAM IS EVIDENTLY REFERRING TO ITS OWN PRODUCTION LINE QUALITY CONTROL SYSTEM WHICH IT HAS INSTALLED FOR ITS CONVENIENT CONTROL AND USE BUT IS NOT REQUIRED BY THE CONTRACT SINCE THE MOVEMENT (BLACK BOX CONCEPT) IS THE CONTRACTOR'S AND NOT THE GOVERNMENT'S DESIGN.

PARAGRAPHS 3.2 AND 3.2.1 OF MIL-I-45208 PROVIDE AS FOLLOWS:

"3.2 CONTRACTOR INSPECTION. THE CONTRACTOR IS RESPONSIBLE FOR THE PERFORMANCE OF ALL INSPECTION AS SPECIFIED HEREIN. EXCEPT AS OTHERWISE SPECIFIED, THE CONTRACTOR MAY UTILIZE HIS OWN OR ANY OTHER INSPECTION FACILITIES AND SERVICES ACCEPTABLE TO THE CONTRACTING OFFICER. INSPECTION RECORDS OF THE EXAMINATIONS AND TESTS SHALL BE KEPT COMPLETE AND AVAILABLE TO THE CONTRACTING OFFICER AS SPECIFIED IN THE CONTRACT OR ORDER. THE CONTRACTING OFFICER RESERVES THE RIGHT TO PERFORM ANY OF THE INSPECTION SET FORTH IN THE SPECIFICATION WHERE SUCH INSPECTIONS ARE DEEMED NECESSARY TO ASSURE THAT SUPPLIES AND SERVICES CONFORM TO PRESCRIBED REQUIREMENTS. SUCH INSPECTIONS ARE IN ADDITION TO THAT REQUIRED BY THE CONTRACTOR, AND ARE NOT TO BE PERFORMED IN LIEU OF CONTRACTOR INSPECTION.

"3.2.1 THE CONTRACTOR SHALL BE RESPONSIBLE FOR THE COMPLIANCE WITH THE APPLICABLE REQUIREMENTS OF THE CONTRACT, THE DRAWINGS AND SPECIFICATIONS UPON THE PART OF ALL SUBCONTRACTORS. THE CONTRACTOR SHALL PROVIDE OBJECTIVE EVIDENCE OF SUCH COMPLIANCE WHEN REQUESTED BY THE CONTRACTING OFFICER.'

THESE PROVISIONS CLEARLY PLACE PRIMARY RESPONSIBILITY FOR INSPECTION AND COMPLIANCE WITH APPLICABLE REQUIREMENTS OF THE CONTRACT ON THE CONTRACTOR. THE CONTRACTOR IS ALSO RESPONSIBLE FOR COMPLIANCE WITH THE APPLICABLE REQUIREMENTS OF THE CONTRACT, THE DRAWINGS AND SPECIFICATIONS UPON THE PART OF ALL SUBCONTRACTORS. WHILE IT IS TRUE THAT THE GOVERNMENT HAS RESERVED THE RIGHT TO INSPECT THERE IS NO REQUIREMENT THAT THE GOVERNMENT MUST AS A MATTER OF LAW INSPECT DURING ALL, OR ANY, OF THE MANUFACTURING STEPS OF THE CONTRACTOR OR ITS SUBCONTRACTORS.

THE QUESTION OF WHETHER A PARTICULAR BIDDER HAS, OR CAN FURNISH,ADEQUATE PROCEDURES AND FACILITIES FOR INSPECTION OF PRODUCTS IS ONE GOING TO THE RESPONSIBILITY OF THAT BIDDER AND, AS SUCH, IS PRIMARILY FOR THE DETERMINATION OF THE PROCUREMENT AGENCY INVOLVED. A DETERMINATION TO THE EFFECT THAT A PARTICULAR BIDDER CAN MEET REQUIRED INSPECTION PROVISIONS IN THE INVITATION FOR BIDS, AND FURTHER, THAT THE NECESSARY GOVERNMENT INSPECTION CAN BE ACCOMPLISHED IF AWARD IS MADE TO THAT BIDDER, WILL NOT BE LIGHTLY QUESTIONED BY OUR OFFICE SINCE, OBVIOUSLY, THE PROCUREMENT AGENCY, WHICH IS RESPONSIBLE FOR ADMINISTRATION OF THE CONTRACT, IS IN THE BEST POSITION TO KNOW THE AMOUNT AND TYPE OF INSPECTION NEEDED TO INSURE QUALITY OF THE PRODUCT AND CONFORMANCE TO THE APPLICABLE SPECIFICATIONS. HERE, IT IS REPORTED THAT THE GOVERNMENT IS ONLY INTERESTED IN THOSE REQUIREMENTS IN THE ASSOCIATED DETAIL SPECIFICATIONS SINCE IT DOES NOT FURNISH DRAWINGS FOR THE COMPONENT PARTS OF THE CLOCK MOVEMENT AND HAS NO RESPONSIBILITY FOR THEIR DESIGN. IT IS ALSO REPORTED THAT ALL OF THE REQUIREMENTS OF MIL-I-45208 WILL BE ENFORCED AND THE SUCCESSFUL CONTRACTOR WILL BE REQUIRED TO PREPARE AND CARRY OUT A WRITTEN INSPECTION PLAN WHICH PLAN CAN BE ADEQUATELY IMPLEMENTED BY THE CONTRACTOR AT ITS PLANT AND AT ITS LIGHTING SUBCONTRACTOR'S FACILITY. IN VIEW OF THESE CONSIDERATIONS AND ASSURANCES WE CAN FIND NO LEGAL BASIS FOR OBJECTION TO THE CONTRACTING OFFICER'S POSITION ON THIS MATTER. NOR DO WE SEE ANY MERIT IN WALTHAM'S CONTENTION THAT WITHOUT SURVEILLANCE IN THE FOREIGN PLANT BY A GOVERNMENT REPRESENTATIVE IT WOULD BE IMPOSSIBLE FOR THE CONTRACTING OFFICER TO APPLY THE PRODUCTION PROGRESS REPORTS CLAUSE, QUOTED ABOVE. AS IN THE CASE OF INSPECTION, PRIMARY RESPONSIBILITY FOR FURNISHING A MONTHLY PROGRESS REPORT IS, BY THE EXPRESS TERMS OF THE CLAUSE, PLACED UPON THE CONTRACTOR. THE CLAUSE FURTHER PROVIDES THAT ONLY WHERE A GOVERNMENT INSPECTOR IS LOCATED AT THE CONTRACTOR'S PLANT SHALL HE SIGN THE REPORT AS A SERVICE REPRESENTATIVE. THERE IS NO REQUIREMENT IN THE CLAUSE THAT THERE MUST BE GOVERNMENT SURVEILLANCE OR VERIFICATION OF THE PROGRESS REPORT.

AS TO WALTHAM'S CONTENTION THAT FOREIGN MANUFACTURERS CANNOT COMPLY WITH DELIVERY SCHEDULES UNTIL THEIR QUALITY ASSURANCE PLAN IS SUBMITTED AND APPROVED BY THE GOVERNMENT IN ACCORDANCE WITH MIL-I 45208, MUCH OF WHAT HAS BEEN SAID IN REGARD TO INSPECTION AND PROGRESS REPORTING IS EQUALLY APPLICABLE TO THIS CONTENTION. WE CAN FIND NOTHING IN MIL-I-45208 WHICH REQUIRES THE SUPPLIER OF A COMPONENT PART TO SUBMIT A QUALITY ASSURANCE PLAN FOR APPROVAL BY THE GOVERNMENT. PARAGRAPH 3.3 OF MIL-I-45208 DOES REQUIRE THE CONTRACTOR TO SUBMIT A "WRITTEN CURRENT DESCRIPTION OF THE INSPECTION SYSTEM" AND IT IS TRUE, ALSO, THAT PARAGRAPH 3.2.1 OF MIL-I- 45208 MAKES THE CONTRACTOR RESPONSIBLE FOR SUBCONTRACTOR COMPLIANCE WITH THE APPLICABLE REQUIREMENTS OF THE CONTRACT, DRAWINGS AND SPECIFICATIONS, BUT NOWHERE IN MIL-I-45208 IS THERE A REQUIREMENT THAT SUPPLIERS AND SUBCONTRACTORS SUBMIT A "QUALITY ASSURANCE PLAN" OR "DESCRIPTION OF INSPECTION SYSTEM.'

IN REGARD TO THE DOMESTIC JEWEL BEARINGS ASPECTS OF WALTHAM'S PROTEST, WE NOTED THAT BOTH WAKMANN AND MACLEOD WOULD PROCURE THE JEWEL BEARINGS FROM THE TURTLE MOUNTAIN PLANT AND SHIP THEM TO THE SWISS MANUFACTURER OF THE MOVEMENT TO BE SET THEREIN. THE JEWEL BEARING CLAUSE, QUOTED ABOVE, WAS INCLUDED IN THE SUBJECT INVITATION FOR BIDS IN ACCORDANCE WITH THE PROVISIONS OF ASPR 1-315. THE EXPRESS PURPOSE OF THE CLAUSE IS TO MAINTAIN AN ADEQUATE FACILITY FOR THE MANUFACTURE OF JEWEL BEARINGS TO MEET MOBILIZATION REQUIREMENTS. IN VIEW OF THIS PURPOSE THE CONTRACTING OFFICER CONTENDS, AND WE AGREE, THAT THERE IS NO MANDATE IN THE CLAUSE FOR USE OF THE BEARINGS PURCHASED FROM THE TURTLE MOUNTAIN PLANT IN THE CLOCK MOVEMENT, PROVIDED, OF COURSE, THAT THE BEARINGS ACTUALLY USED ARE COMPARABLE IN QUALITY TO THOSE OBTAINED FROM TURTLE MOUNTAIN. THIS INTERPRETATION OF THE LEGAL REQUIREMENTS OF THE CLAUSE IS SUPPORTED BY PARAGRAPH "XI" DEPARTMENT OF THE ARMY CIRCULAR NO. 715-2-11 DATED OCTOBER 25, 1962, WHICH READS AS FOLLOWS:

"XI. JEWEL BEARINGS, ASPR 1-315--- INTERPRETATION. IF A CONTRACTOR PURCHASED THE SAME TYPE AND QUANTITY OF BEARINGS USED IN ITEMS PROCURED BY THE DEPARTMENT OF DEFENSE FROM THE TURTLE MOUNTAIN ORDNANCE PLANT AT ROLLA, NORTH DAKOTA, SUCH BEARINGS DID NOT HAVE TO BE SEGREGATED AND USED ONLY IN MILITARY ITEMS. THE BASIS FOR THE JEWEL BEARING CLAUSES WAS TO MAINTAIN AN ADEQUATE FACILITY FOR THE MANUFACTURE OF JEWEL BEARINGS TO MEET MOBILIZATION REQUIREMENTS, AND AS LONG AS THE CONTRACTOR OBTAINED BEARINGS, IDENTICAL WITH THE BEARINGS USED IN ITEMS PROCURED BY THE MILITARY, ASSURANCE THAT ONLY BEARINGS FROM THE TURTLE MOUNTAIN ORDNANCE PLANT WERE USED IN MILITARY ITEMS WAS NOT NECESSARY. A REVISION OF THE CLAUSES INVOLVED, INCORPORATING THIS CONCEPT, WILL BE ISSUED IN A SUBSEQUENT REVISION TO ASPR.'

IT SHOULD ALSO BE NOTED THAT THE FAILURE TO GUARANTEE THAT THE DOMESTIC JEWELS PURCHASED FROM THE TURTLE MOUNTAIN PLANT ARE ACTUALLY CONTAINED IN A FOREIGN CLOCK MOVEMENT DOES NOT LIMIT THE OBLIGATION OF WAKMANN OR MACLEOD TO THE GOVERNMENT TO FURNISH CLOCKS FULLY MEETING THE APPLICABLE SPECIFICATIONS. ACCORDINGLY, THE FACT THAT THE GOVERNMENT CANNOT DETERMINE WHETHER OR NOT FULL UTILIZATION OF TURTLE MOUNTAIN JEWELS WILL BE ACCOMPLISHED DOES NOT AFFORD A LEGAL BASIS FOR OBJECTING TO AN AWARD OF A CONTRACT TO EITHER WAKMANN OR MACLEOD.

IN CONNECTION WITH THE SMALL BUSINESS ASPECTS OF THE PROTEST, WE REQUESTED THE SMALL BUSINESS ADMINISTRATION TO ACCOMPLISH SIZE DETERMINATIONS ON MACLEOD AND WAKMANN AND TO ADVISE US OF THE CRITERIA FOR USE IN DETERMINING WHETHER A PARTICULAR CONCERN WHICH PROPOSES TO FURNISH A FOREIGN-MADE COMPONENT IS, OR IS NOT, A SMALL BUSINESS CONCERN. LETTER DATED OCTOBER 17, 1963, THE OFFICE OF SMALL BUSINESS SIZE STANDARDS, SMALL BUSINESS ADMINISTRATION, ADVISED US, IN PERTINENT PART, AS FOLLOWS:

"THE ITEM BEING PROCURED IS AN AIRCRAFT CLOCK AND IS CLASSIFIED IN SIC INDUSTRY 3871, WATCHES, CLOCKS, AND PARTS EXCEPT WATCHCASES. THE APPLICABLE SIZE STANDARD FOR A MANUFACTURER BIDDER FOR A PRODUCT CLASSIFIED IN SIC INDUSTRY 3871 IS THAT A CONCERN, INCLUDING ITS AFFILIATES, HAVE A TOTAL AVERAGE EMPLOYMENT OF 500 EMPLOYEES OR LESS FOR THE PRECEDING FOUR QUARTERS. UNDER SEC. 121.3-8 (C) OF THE SMALL BUSINESS SIZE STANDARD REGULATION (REVISION 3), AS AMENDED, A NONMANUFACTURER BIDDER MUST HAVE LESS THAN 500 EMPLOYEES AND FURNISH THE PRODUCT OF A SMALL MANUFACTURER.

"WE UNDERSTAND THAT BOTH WAKMANN AND MACLEOD ARE BIDDERS ON THE ABOVE- MENTIONED IFB. WE ALSO UNDERSTAND THAT NEITHER WAKMANN OR MACLEOD MAKE THE TIMING MECHANISM, BUT SUCH MECHANISM IS IMPORTED FROM A SWISS CONCERN. WAKMANN PURCHASES THE MOVEMENT, THEN HAS THE MOVEMENT SHIPPED DIRECTLY FROM SWITZERLAND TO AEROSONIC CORPORATION (AEROSONIC) FOR INSTALLATION OF THE LIGHTING AND OTHER DOMESTIC COMPONENTS TO COMPLETE THE CLOCK. THEREFORE, ALTHOUGH WAKMANN LISTS ITSELF AS A MANUFACTURER FOR THE ITEM BEING PROCURED, IT WOULD APPEAR THAT AEROSONIC, RATHER THAN WAKMANN, IS THE MANUFACTURER OF THE END ITEM.

"MACLEOD ADMITS THAT IT DOES NOT MANUFACTURE THE BASIC TIMING MECHANISM, BUT STATES THAT THE BASIC TIMING MECHANISM, TOGETHER WITH MANY OTHER COMPONENTS, IS ASSEMBLED BY MACLEOD AND PLACED INTO A CASE. ASSEMBLING OF CLOCKS IS CLASSIFIED AS MANUFACTURING IN THE STANDARD INDUSTRIAL CLASSIFICATION MANUAL AND, EVEN THOUGH MACLEOD DOES NOT MAKE THE TIMING MECHANISM, IT WOULD BE CONSIDERED AS THE MANUFACTURER OF THE END ITEM. THEREFORE, THE QUESTION TO BE RESOLVED IS WHETHER MACLEOD AND AEROSONIC ARE SMALL BUSINESS MANUFACTURERS WITHIN THE MEANING OF OUR REGULATION AND WHETHER WAKMANN IS A SMALL BUSINESS NONMANUFACTURER WITHIN THE MEANING OF OUR REGULATION.

"MACLEOD IS A WHOLLY-OWNED SUBSIDIARY OF AEROSONIC. MR. H. FRANK IS PRESIDENT AND OWNS OVER 50 PERCENT OF THE VOTING STOCK OF AEROSONIC. MR. FRANK, THROUGH HIS STOCK OWNERSHIP, HAS THE POWER TO CONTROL AEROSONIC AND, THROUGH AEROSONIC, ALSO HAS THE POWER TO CONTROL MACLEOD. THEREFORE, THESE CONCERNS ARE AFFILIATED WITHIN THE MEANING OF SEC. 121.3-2 (A) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION (REVISION 3), AS AMENDED. MACLEOD AND AEROSONIC HAVE A TOTAL AVERAGE EMPLOYMENT OF 250 EMPLOYEES FOR THE PAST FOUR QUARTERS ENDING SEPTEMBER 30, 1963. THEREFORE, EACH OF THESE COMPANIES IS A SMALL BUSINESS MANUFACTURER FOR THE PROCUREMENT INVOLVED.

"WAKMANN HAS NO AFFILIATES WITHIN THE MEANING OF OUR REGULATION AND ITS TOTAL AVERAGE EMPLOYMENT FOR THE PRECEDING FOUR QUARTERS ENDING SEPTEMBER 30, 1963, IS 17 EMPLOYEES.

"BASED ON THE FOREGOING, WE FIND THAT WAKMANN IS A SMALL BUSINESS NONMANUFACTURER FOR THE PURPOSE OF BIDDING ON THE ABOVE-MENTIONED IFB, SINCE IT HAS LESS THAN 500 EMPLOYEES AND IS FURNISHING THE PRODUCT OF A SMALL MANUFACTURER (AEROSONIC).

"IN ANSWER TO YOUR REQUEST FOR OUR COMMENTS WITH RESPECT TO THE CRITERIA FOR USE IN DETERMINING WHETHER A PARTICULAR CONCERN WHICH PROPOSES TO FURNISH A FOREIGN-MADE COMPONENT IS, OR IS NOT, A SMALL BUSINESS, WE WISH TO ADVISE THAT SBA LOOKS ONLY TO THE END PRODUCT IN DETERMINING WHO IS A SMALL BUSINESS MANUFACTURER WITHIN THE MEANING OF OUR REGULATION. THERE IS NOTHING IN OUR REGULATION WHICH PRECLUDES THE MANUFACTURER FROM USING FOREIGN-MADE COMPONENTS.'

SECTION 8 (B) (6) OF THE SMALL BUSINESS ACT, AS AMENDED BY PUBLIC LAW 85- 536, 72 STAT. 390, 15 U.S.C. 637 (B) (6), AUTHORIZES THE SMALL BUSINESS ADMINISTRATION TO DETERMINE WHICH BUSINESS ENTERPRISES ARE TO BE DESIGNATED AS SMALL BUSINESS CONCERNS AND MAKES ITS DETERMINATIONS IN THESE MATTERS CONCLUSIVE. SPECIFICALLY, THAT SECTION PROVIDES THAT "OFFICES OF THE GOVERNMENT * * * SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S DETERMINATION AS TO WHICH ENTERPRISES ARE TO BE DESIGNATED "SMALL-BUSINESS CONCERNS.'" IN VIEW OF THE DETERMINATIONS MADE BY THE SMALL BUSINESS ADMINISTRATION IN THIS MATTER, IT MUST BE CONCLUDED THAT BOTH WAKMANN AND MACLEOD ARE SMALL BUSINESS CONCERNS FOR PURPOSES OF BIDDING ON THE SUBJECT PROCUREMENT.