B-156802, JUL. 12, 1965

B-156802, JUL. 12, 1965

TO SELLERS, CONNER AND CUNEO:

BY LETTERS DATED MAY 26 AND JUNE 18, 1965, YOU PROTESTED, ON BEHALF OF ITT GILFILAN INC., AGAINST THE AWARD OF A CONTRACT TO THE CURTISS WRIGHT CORPORATION, ELECTRONICS DIVISION, UNDER INVITATION FOR BIDS NO. 600-215- 65-S, ISSUED ON JANUARY 11, 1965, BY THE UNITED STATES NAVY PURCHASING OFFICE, FOR THE FURNISHING OF AN/TPN-8 SPECIAL PURPOSE RADAR SETS.

TWELVE BIDS WERE RECEIVED AND OPENED ON FEBRUARY 18, 1965, AND CURTISS- WRIGHT SUBMITTED THE APPARENT LOW BID, ITT SUBMITTING THE NEXT LOW BID. THE DIFFERENCE BETWEEN THE TWO BIDS AMOUNTED TO $42,911. ATTACHED TO AND MADE A PART OF THE INVITATION WAS THE STANDARD AUTHORIZATION AND CONSENT CLAUSE PRESCRIBED BY ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1- 902.1. ADDITIONALLY, THE INVITATION ON PAGE 24 CONTAINED THE FOLLOWING PROVISION:

"THIS INVITATION DOES NOT AUTHORIZE THE USE, IN PERFORMING THE WORK BID UPON UNDER THIS INVITATION, OF ANY GOVERNMENT PROPERTY EXCEPT THOSE ITEMS, IF ANY, OF GOVERNMENT-FURNISHED PROPERTY SPECIFIED IN THIS INVITATION. THE BIDDER REQUIRES THE USE, IN PERFORMING THE WORK BID UPON UNDER THIS INVITATION, OF ANY OTHER ITEMS OF GOVERNMENT PROPERTY IN THE BIDDER'S POSSESSION OR OTHERWISE, UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT INDEPENDENT OF THIS INVITATION, THEN THE BIDDER SHALL SO STATE AND SUBMIT WITH HIS BID EVIDENCE OF HIS RIGHT TO USE SUCH GOVERNMENT PROPERTY ON THE WORK BID UPON UNDER THIS INVITATION. IF THE BIDDER DOES NOT SO STATE IN HIS BID, THEN HIS BID SHALL BE REGARDED AS NOT REQUIRING THE USE OF ANY GOVERNMENT PROPERTY EXCEPT GOVERNMENT-FURNISHED PROPERTY, IF ANY, SPECIFIED IN THIS INVITATION.'

IN RESPONDING TO THIS INVITATION PROVISION, CURTISS-WRIGHT ADVISED:

"IT IS REQUESTED THAT ANY CONTRACT RESULTING FROM THIS PROPOSAL INCLUDE AUTHORITY TO USE "RENT FREE" GOVERNMENT OWNED FACILITIES AS PRESENTLY PROVIDED UNDER CONTRACT AF 33-/609/16988. THE CURRENT VALUE AS OF JUNE 30, 1964 OF THE GOVERNMENT OWNED FACILITIES ON LOAN TO THIS CONTRACTOR IS APPROXIMATELY $87,000.'

YOU PROTEST AGAINST THE AWARD MADE TO CURTISS-WRIGHT ON MAY 25, 1965, ON THREE BASES:

1. THAT THE PROCUREMENT OFFICE MUST ADD AN EVALUATION FACTOR OF $64,380 TO CURTISS-WRIGHT'S BID ON ACCOUNT OF ITS REQUEST FOR RENT-FREE USE OF GOVERNMENT PROPERTY;

2. THAT A ROYALTY FACTOR OF $89,974 MUST BE ADDED TO CURTISS WRIGHT'S BID BECAUSE PERFORMANCE WOULD INFRINGE ITT'S PATENTS AND BECAUSE THE INVITATION DID NOT CONTAIN A PATENT INDEMNITY CLAUSE; AND

3. THAT SUBSEQUENT TO BID OPENING CURTISS-WRIGHT MAY NOT BE PERMITTED TO WITHDRAW ITS QUALIFYING REQUEST FOR RENT-FREE USE OF GOVERNMENT PROPERTY NOR MAY IT AGREE TO ACCEPT A PATENT INDEMNITY CLAUSE IN ITS CONTRACT.

TURNING TO THE FIRST POINT OF PROTEST, WE NOTE THAT CURTISS-WRIGHT DID NOT LIST OR DESCRIBE THE GOVERNMENT PROPERTY IT INTENDED TO USE; NEITHER DID IT OBTAIN WRITTEN PERMISSION TO USE SUCH PROPERTY FROM THE COGNIZABLE CONTRACTING OFFICER, NOR DID IT STATE THE AMOUNT OF USE AND A RENTAL EVALUATION FACTOR. IN THIS REGARD, YOU REFER TO ASPR 13 502.1 AND TO OUR DECISION B-154899 OF APRIL 26, 1965, 44 COMP. GEN. -- - , AND CONCLUDE THEREFROM THAT CURTISS-WRIGHT'S BID WAS NONRESPONSIVE. WE DO NOT AGREE.

THE INVITATION PROVISION, QUOTED ABOVE, RESPECTING THE USE OF GOVERNMENT PROPERTY IS CLEARLY DISTINGUISHABLE FROM THE PROVISION CONTEMPLATED BY ASPR 13-502.2 AND FROM THE PROVISION CONSIDERED IN OUR CITED DECISION OF APRIL 26, 1965. THE PROVISION HERE INVOLVED DID NOT REQUIRE THE BIDDER TO FURNISH THE VARIOUS CATEGORIES OF INFORMATION CONTEMPLATED BY ASPR 13- 502.2. RATHER, BIDDERS WERE REQUESTED MERELY TO SUBMIT EVIDENCE OF THEIR RIGHT TO USE GOVERNMENT PROPERTY IN THEIR POSSESSION UNDER A FACILITIES CONTRACT OR OTHER AGREEMENT. TO THE EXTENT REQUIRED BY THE INVITATION PROVISION, WE FEEL THAT CURTISS WRIGHT REASONABLY COMPLIED WITH THE REQUIREMENTS. WHILE WE HAVE HELD THAT ORDINARILY A BID TO BE RESPONSIVE MUST COMPLY FULLY WITH AN INVITATION GOVERNMENT PROPERTY DATA REQUIREMENT, THOSE CASES CONSIDERED GOVERNMENT PROPERTY CLAUSES WHEREUNDER DEVIATIONS FROM THEIR REQUIREMENTS WERE MATERIAL BECAUSE OF THE PARTICULAR LANGUAGE EMPLOYED. SEE 43 COMP. GEN. 604; 41 ID. 701; B-154759 DATED NOVEMBER 16, 1964; B-155943 DATED APRIL 30, 1965; B-154899, SUPRA.

ALTHOUGH IT MIGHT APPEAR THAT ASPR 13-502.2 REQUIRED, IN MANDATORY TERMS, THAT THE PROCEDURES PRESCRIBED THEREIN SHOULD HAVE BEEN FOLLOWED TO EQUALIZE THE COMPETITIVE ADVANTAGE OF A BIDDER, SUCH AS CURTISS WRIGHT, TO USE GOVERNMENT PROPERTY, THE MANDATORY EFFECTIVE DATE OF THAT REGULATION WAS JULY 1, 1965, OR SUBSEQUENT TO THE ISSUANCE OF THIS INVITATION. SEE DEFENSE PROCUREMENT CIRCULAR NO. 26 DATED APRIL 8, 1965. THE PROCUREMENT OFFICE HAS REPORTED THAT THE INFORMATION FURNISHED BY CURTISS-WRIGHT AS TO THE RENT-FREE USE OF PROPERTY WAS SUFFICIENT, ESPECIALLY SINCE THE CITED FACILITIES CONTRACT CLEARLY AUTHORIZED SUCH USE. WE ARE NOT DISPOSED TO QUESTION THE MONETARY VALUE OF THE EVALUATION FACTOR REPORTED TO US BY THE PROCUREMENT OFFICE IN ITS LETTER OF JUNE 7, 1965, A COPY OF WHICH WAS FURNISHED TO YOU, FOR SEVERAL REASONS; FIRST, THE APPLICATION OF AN EVALUATION FACTOR AT THIS DATE WOULD BE MEANINGLESS SINCE CURTISS-WRIGHT'S BID WAS CONSIDERED, AND AWARD MADE, ON THE BASIS OF NON-USE OF PROPERTY; SECONDLY, NO EVALUATION FORMULA WAS PROVIDED FOR SPECIFICALLY OR BY IMPLICATION; AND THIRDLY, WE BELIEVE THAT CURTISS-WRIGHT'S BID COULD NOT HAVE BEEN LEGALLY REJECTED AS NONRESPONSIVE FOR FAILURE TO COMPLY WITH THE PROPERTY CLAUSE. SEE 38 COMP. GEN. 79.

ALTHOUGH NOT ENTIRELY PERTINENT, YOU ALLEGE THAT THE AIR FORCE FACILITIES CONTRACT DID NOT GIVE CURTISS-WRIGHT THE RIGHT TO USE THE PROPERTY FOR PURPOSES OF THIS PROCUREMENT. THIS IS INCORRECT SINCE SUPPLEMENTAL AGREEMENT NO. 1 TO THE CONTRACT AUTHORIZED THE USE OF THE FACILITIES IN THE PERFORMANCE OF GOVERNMENT PRIME CONTRACTS ENTERED INTO AFTER JUNE 1, 1959.

YOU CONTEND THAT CURTISS-WRIGHT WAS GIVEN AN ILLEGAL OPTION BY PERMITTING IT TO WITHDRAW ITS REQUEST FOR RENT-FREE USE OF FACILITIES AFTER BID OPENING IN CONTRAVENTION OF THE PRINCIPLES GOVERNING COMPETITIVE PROCUREMENT, CITING 40 COMP. GEN. 644; ID. 668; 36 ID. 759. THE CASES CITED STAND FOR THE PROPOSITION THAT A PURPORTED AWARD DIFFERING IN A MATERIAL RESPECT FROM THE CONTRACT ADVERTISED IS INVALID UNDER THE STATUTORY ADVERTISING STATUTES. A CAREFUL ANALYSIS OF THE GOVERNMENT PROPERTY PROVISION IN THE INVITATION LEADS US TO THE CONCLUSION THAT IT DID NOT REPRESENT EITHER AN ESSENTIAL OR A MATERIAL REQUIREMENT OF THE INVITATION. THE PROVISION REQUESTED INFORMATION RESPECTING AUTHORITY TO USE GOVERNMENT PROPERTY, BUT IT DID NOT IDENTIFY THE CHARACTER OF USE, THAT IS, RENTAL OR RENT-FREE, OR WHAT RESULT WOULD OBTAIN IF INFORMATION WAS, OR WAS NOT, FURNISHED OR WHETHER SUCH USES WOULD BE EVALUATED IN ACCORDANCE WITH SOME UNDISCLOSED STANDARD. THUS, THERE WAS NOT INVOLVED HERE A DEVIATION FROM A MATERIAL REQUIREMENT OF THE INVITATION OR A WAIVER OF AN ESSENTIAL REQUIREMENT TO THE PREJUDICEOF OTHER BIDDERS OR THE COMPETITIVE BIDDING PROCEDURES. CF. 42 COMP. GEN. 434. THE DECISIONS CITED BY YOU ARE THEREFORE DISTINGUISHABLE AND ARE NOT DETERMINATIVE OF THE SITUATION HEREIN DISCUSSED. YOUR FIRST POINT OF PROTEST AND THE APPLICABLE PORTION OF YOUR THIRD POINT OF PROTEST IS DENIED.

CONCERNING THE NECESSITY OF ADDING A ROYALTY FACTOR TO CURTISS WRIGHT'S BID TO COVER THE POSSIBLE LIABILITY OF THE GOVERNMENT IN THE EVENT OF INFRINGEMENT OF SIX BACKGROUND PATENTS OWNED BY ITT, YOU CONTEND THAT SUCH INFRINGEMENT IS INEVITABLE IF PERFORMANCE OF THE RESULTING CONTRACT BY CURTISS-WRIGHT IS IN STRICT ACCORDANCE WITH THE ADVERTISED SPECIFICATIONS. IT IS POINTED OUT THAT THE AN/TPN-8 WAS ORIGINALLY CONSTRUCTED USING THE SIX PATENTS AND THE SPECIFICATIONS FOR THIS PROCUREMENT REQUIRE THAT "COMPONENTS AND PARTS OF THE EQUIPMENT SHALL BE PHYSICALLY, MECHANICALLY AND ELECTRICALLY INTERCHANGEABLE WITH THE CORRESPONDING COMPONENTS AND PARTS OF THE GOVERNMENT-FURNISHED AN/TPN-8

"AUTHORIZATION AND CONSENT (MAR. 1964) SPECIAL PURPOSE RADAR SET.'

THE INVITATION CONTAINED THE STANDARD AUTHORIZATION AND CONSENT CLAUSE PRESCRIBED BY ASPR 9-102.1 WHICH READS AS FOLLOWS:

"THE GOVERNMENT GIVES ITS AUTHORIZATION AND CONSENT (WITHOUT PREJUDICE TO ANY RIGHTS OF INDEMNIFICATION) FOR ALL USE AND MANUFACTURE IN THE PERFORMANCE OF THIS CONTRACT OR ANY PART HEREOF OR ANY AMENDMENT HERETO OR ANY SUBCONTRACT HEREUNDER (INCLUDING ANY LOWER TIER SUBCONTRACT OF ANY INVENTION DESCRIBED IN AND COVERED BY A PATENT OF THE UNITED STATES (I) EMBODIED IN THE STRUCTURE OR COMPOSITION OF ANY ARTICLE THE DELIVERY OF WHICH IS ACCEPTED BY THE GOVERNMENT UNDER THIS CONTRACT, OR (II) UTILIZED IN THE MACHINERY, TOOLS, OR METHODS THE USE OF WHICH NECESSARILY RESULTS FROM COMPLIANCE BY THE CONTRACTOR OR THE USING SUBCONTRACTOR WITH (A) SPECIFICATIONS OR WRITTEN PROVISIONS NOW OR HEREAFTER FORMING A PART OF THIS CONTRACT, OR (B) SPECIFIC WRITTEN INSTRUCTIONS GIVEN BY THE CONTRACTING OFFICER DIRECTING THE MANNER OF PERFORMANCE. THE ENTIRE LIABILITY TO THE GOVERNMENT FOR INFRINGEMENT OF A PATENT OF THE UNITED STATES SHALL BE DETERMINED SOLELY BY THE PROVISIONS OF THE INDEMNITY CLAUSES, IF ANY, INCLUDED IN THIS CONTRACT OR ANY SUBCONTRACT HEREUNDER (INCLUDING ANY LOWER-TIER SUBCONTRACT), AND THE GOVERNMENT ASSUMES LIABILITY FOR ALL OTHER INFRINGEMENT TO THE EXTENT OF THE AUTHORIZATION AND CONSENT HEREINABOVE GRANTED.'

THE PROCUREMENT OFFICE REPORTS THAT THE EXTENT OF LIABILITY, IF ANY, FOR INFRINGEMENT OF THE ITT PATENTS BY CURTISS-WRIGHT IS HIGHLY SPECULATIVE AND, CONSIDERING THE HISTORY OF THE DEVELOPMENT OF THE ITEM, IT IS POSSIBLE THAT THE GOVERNMENT MAY HAVE A ROYALTY-FREE LICENSE TO USE SOME OR ALL OF THE PATENTS. SUCH OFFICE FURTHER REPORTS THAT EVEN IF THE GOVERNMENT DOES NOT HAVE A LICENSE, IT WILL STILL HAVE TO BE PROVED THAT THE PATENTS WERE IN FACT INFRINGED. CONTRARY TO YOUR POSITION, IT IS REPORTED THAT PERFORMANCE IN ACCORDANCE WITH THE SPECIFICATIONS WILL NOT NECESSARILY RESULT IN USE OF THE PATENTS OR INFRINGEMENT OF THE PATENT CLAIMS AND THAT THE SPECIFICATIONS DO NOT REQUIRE USE OF ITT'S PATENTS BUT THAT THEY DEFINE PERFORMANCE WITHOUT PRESCRIBING EQUIPMENT DESIGN OR PRODUCTION METHODS.

WHILE IT MAY BE THAT APPLICATIONS FOR ALL SIX PATENTS WERE FILED BEFORE COMMENCEMENT OF THE DEVELOPMENT CONTRACT FOR THE AN/TPN-8 AND THAT THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MASSACHUSETTS IN DECEMBER 1964 BY DECLARATORY JUDGMENT UPHELD THE VALIDITY OF THREE OF THE SIX PATENTS AND RECOGNIZED THE INFRINGEMENT THEREOF IN THE MANUFACTURE OF A AN/TPN-12 RADAR SET, WE DO NOT FEEL THAT THESE FACTS WOULD HAVE WARRANTED THE APPLICATION OF A ROYALTY FACTOR OF $89,974 IN THE EVALUATION OF CURTISS-WRIGHT'S BID TO COVER POSSIBLE PATENT INFRINGEMENT LIABILITY OF THE GOVERNMENT.

WE HAVE CONSISTENTLY TAKEN THE POSITION THAT SPECULATIVE AND UNCERTAIN FACTORS MAY NOT BE INTRODUCED INTO THE EVALUATION OF BIDS. 43 COMP. GEN. 60; 35 ID. 282. THIS IS PARTICULARLY TRUE HERE WHERE NO PROVISION FOR POSSIBLE INFRINGEMENT LIABILITY WAS INCLUDED IN THE INVITATION, AND, UNDER WELL-ESTABLISHED PRINCIPLES, SUCH AN UNDECLARED EVALUATION FACTOR MAY NOT BE USED TO DETERMINE THE LOWEST BID. SEE, IN THIS CONNECTION, 39 COMP. GEN. 760, AND THE POLICY ENUNCIATED IN ASPR 9-102 (A).

WHILE CURTISS-WRIGHT AGREED, AFTER BID OPENING, TO ACCEPT AT NO INCREASE IN PRICE A PATENT INDEMNITY CLAUSE IN ITS CONTRACT WHEN IT HAD NO LEGAL OBLIGATION UNDER ITS BID TO DO SO, SUCH CIRCUMSTANCE DOES NOT AFFECT THE LEGALITY OF THE AWARD. THIS UNDERTAKING BY CURTISS WRIGHT AS LOW BIDDER WAS EXPRESSLY AUTHORIZED BY ASPR 9-103 (II) (B) WHICH PROVIDES THAT A PATENT INDEMNITY CLAUSE MAY BE USED:

"* * * (B) IN THE CASE OF CONTRACTS TO BE AWARDED EITHER BY FORMAL ADVERTISING (SEE 2-407.8) OR NEGOTIATION, A PATENT OWNER CONTENDS THAT THE PROSPECTIVE PROCUREMENT WOULD INFRINGE HIS PATENT AND THE LOW BIDDER OR OFFEROR IS WILLING TO INDEMNIFY THE GOVERNMENT AS TO SUCH PATENT EITHER (1) WITHOUT INCREASE IN PRICE ON THE BASIS THAT THE PATENT IS INVALID OR NOT INFRINGED, OR (2) FOR OTHER GOOD REASONS; "

IT IS TRUE, OF COURSE, THAT BIDDERS MAY NOT VARY THEIR BIDS AFTER BIDS ARE OPENED ON A COMPETITIVE BASIS. ONCE A BIDDER HAS BEEN DETERMINED TO HAVE SUBMITTED THE LOWEST RESPONSIVE BID, HOWEVER, WE KNOW OF NO REASON WHY IT WOULD BE DETRIMENTAL TO OTHER BIDDERS TO PERMIT THE LOW BIDDER TO OFFER A FURTHER GUARANTEE TO THE GOVERNMENT WITHOUT AN INCREASE IN PRICE. THIS, IN OUR OPINION, IS REPRESENTATIVE OF THE TYPE OF VOLUNTARY ACTION ON THE PART OF A LOW BIDDER WHICH HAS BEEN RECOGNIZED AS LEGALLY EFFECTIVE UNDER THE COMPETITIVE BIDDING STATUTES. SEE ALECK LEITMAN V. UNITED STATES, 104 CT.CL. 324; 37 COMP. GEN. 251; 42 ID.170.

CONCERNING THE PRIOR AWARD OF AN/TPN-8 RADAR TO THE S.S. HUNTER DIVISION OF INTERNATIONAL SYSTEMS RESEARCH CORPORATION, WE HAVE ASCERTAINED FROM THE BUREAU OF SHIPS THAT POSSIBLE INFRINGEMENT CLAIMS WERE NOT CONSIDERED IN THE EVALUATION OF BIDS, AND THAT THE AWARD MADE UNDER THAT SOLICITATION REPRESENTED A PRICE DIFFERENTIAL OF 26.6 PERCENT IN UNIT PRICE BETWEEN THE BID BY HUNTER AND THAT OF ITT. WE BELIEVE THAT THE FOREGOING SUBSTANTIALLY DISPOSES OF YOUR REMAINING POINTS OF PROTEST. ACCORDINGLY, ON THE RECORD BEFORE US, WE FIND NO LEGAL BASIS TO OBJECT TO THE AWARD MADE TO CURTISS- WRIGHT.