B-158550, MAR. 21, 1967

B-158550, MAR. 21, 1967

TO THE SECRETARY OF DEFENSE:

REFERENCE IS MADE TO A LETTER DATED SEPTEMBER 2, 1966, FROM THE DEPUTY ASSISTANT SECRETARY OF DEFENSE (PROCUREMENT), RESPONDING TO A LETTER DATED JUNE 29, 1966, FROM OUR OFFICE IN CONNECTION WITH THE PROCUREMENT OF GAS ANESTHESIA APPARATUS BY THE DEFENSE SUPPLY AGENCY (OSC CASE NO. 2487).

OUR LETTER OF JUNE 29, 1966, WAS PROMPTED BY THE PROTEST OF THE FOREGGER COMPANY, INCORPORATED, AGAINST A SOLE-SOURCE PROCUREMENT OF GAS ANESTHESIA APPARATUS FROM THE OHIO CHEMICAL AND SURGICAL EQUIPMENT COMPANY BY DSA. ALTHOUGH DENYING THE PROTEST IN A LETTER OF THE SAME DATE TO FOREGGER, WE EXPRESSED CONCERN IN OUR LETTER TO YOU OVER THE SITUATION WHICH NECESSITATED THE SOLE-SOURCE PROCUREMENT. IT WAS OUR OBSERVATION THAT THIS RESULTED FROM INAPPROPRIATE PROCUREMENT METHODS BY THE DEFENSE MEDICAL MATERIEL COMMAND (DMMC) AT THE TIME THIS APPARATUS WAS DEVELOPED IN 1959. WE POINTED OUT THAT HAD THE INITIAL CONTRACT WITH OHIO CHEMICAL PROVIDED FOR ACQUISITION OF TECHNICAL DATA AS CONTEMPLATED BY ASPR 9-202, OR, IF OHIO CHEMICAL WAS UNWILLING TO SUPPLY SUCH DATA, HAD OTHER METHODS FOR SECURING COMPETITION BEEN EMPLOYED, THE INSTANT PROCUREMENT AND FUTURE PROCUREMENTS MIGHT WELL BE ECONOMICALLY AND TECHNICALLY MORE ADVANTAGEOUS TO THE GOVERNMENT. WE CONCLUDED BY RECOMMENDING THAT:

"* * * PROCUREMENT OFFICERS BE MADE AWARE OF THE ADVANTAGES WHICH INURE TO THE GOVERNMENT WHEN TECHNICAL DATA IS ACQUIRED IN DEVELOPMENT SITUATIONS SUCH AS THIS ONE, AND THE "SOLE SOURCE" DISADVANTAGE WHICH MAY DEVELOP OTHERWISE.'

IN HIS LETTER OF SEPTEMBER 2, 1966, THE DEPUTY ASSISTANT SECRETARY TAKES EXCEPTION TO THIS RECOMMENDATION AND POINTS TO OHIO CHEMICAL'S UNWILLINGNESS TO SUPPLY COMPLETE TECHNICAL DATA IN CONNECTION WITH THE INSTANT PROCUREMENT AND THE LACK OF A FINDING BY OUR OFFICE THAT THE PRICE PAID IN THE INSTANT PROCUREMENT IS UNREASONABLE. HE ALSO CITES THE DEPARTMENT OF DEFENSE POLICY OF ENCOURAGING PRIVATE FIRMS TO INVEST IN THE DEVELOPMENT OF EQUIPMENT OF MILITARY USEFULNESS AND THE PROPRIETARY RIGHTS OF SUCH FIRMS IN THE EQUIPMENT SO DEVELOPED AS JUSTIFICATION FOR THE SOLE- SOURCE PROCUREMENT HERE INVOLVED. HE ALSO TAKES THE POSITION THAT OUR RECOMMENDATION IS NOT APPROPRIATE WITH RESPECT TO PROCUREMENT OF THIS APPARATUS SINCE THE GOVERNMENT DID NOT FINANCE ITS DEVELOPMENT AND THERE IS NOT A CLEAR ECONOMIC ADVANTAGE TO THE GOVERNMENT IN ACQUIRING DATA RIGHTS FOR USE IN COMPETITIVE PROCUREMENT.

SINCE THERE APPEARS TO BE SOME MISUNDERSTANDING OF OUR POSITION IN THIS MATTER, WE BELIEVE A FURTHER EXPLANATION IS IN ORDER. THE REPORT FURNISHED UNDER TRANSMITTAL LETTER OF MAY 9, 1966, INDICATES THAT A DETERMINATION WAS MADE IN EARLY 1958 TO REDESIGN THE FIELD ANESTHESIA APPARATUS. HOWEVER, ONLY THE THEN CURRENT SUPPLIER, OHIO CHEMICAL, WAS CONSULTED ON OR, SO FAR AS APPEARS, INFORMED OF THE DESIRED REDESIGN. THINK THAT OTHER INTERESTED MANUFACTURERS SHOULD HAVE BEEN INVITED AT THAT TIME TO SUBMIT THEIR OWN DESIGNS TO MEET THE GOVERNMENT'S NEEDS. IF SUCH INVITATIONS PROVED UNSUCCESSFUL, SOME EFFORT SHOULD HAVE BEEN MADE IN 1959 TO ACQUIRE THE NECESSARY TECHNICAL DATA FROM OHIO CHEMICAL TO PROCURE THIS EQUIPMENT ON A COMPETITIVE BASIS. ALTHOUGH WE RECOGNIZE THE VALUE OF ENCOURAGING PRIVATE DEVELOPMENT OF EQUIPMENT OF MILITARY USEFULNESS, IT SHOULD ALSO BE BORNE IN MIND THAT COMPETITIVE PROCUREMENT GENERALLY RESULTS IN SUBSTANTIAL SAVINGS TO THE GOVERNMENT AND EVERY EFFORT SHOULD BE MADE IN THIS DIRECTION. OHIO CHEMICAL IS NOW UNWILLING TO FURNISH COMPLETE DATA NECESSARY TO ACCOMPLISH PROCUREMENT BY FORMAL ADVERTISING; WE DO NOT BELIEVE THIS JUSTIFIES DMMC IN HAVING MADE NO EFFORT TO OBTAIN SUCH DATA EARLIER, OR IN FAILING TO OPEN THIS FIELD TO COMPETITIVE PROCUREMENT BY SUCH MEANS AS QUALIFIED PRODUCTS, TWO STEP ADVERTISING OR BRAND NAME OR EQUAL. IT SHOULD ALSO BE NOTED THAT WHILE DMMC HAS APPARENTLY SATISFIED ITSELF THAT THE PRICE PAID IN THE INSTANT PROCUREMENT IS FAIR AND REASONABLE, THERE IS NO GUARANTEE THAT THIS SITUATION WILL PREVAIL IN THE FUTURE IN THE ABSENCE OF COMPETITION. IN ADDITION TO THE ECONOMIC ADVANTAGES WHICH MAY BE REALIZED BY COMPETITION, THERE MAY WELL BE TECHNICAL ADVANTAGES ENGENDERED THEREBY.

IT IS THEREFORE OUR CONCLUSION THAT THE ADMONITION OF OUR EARLIER LETTER, QUOTED HERETOFORE, IS APPROPRIATE, AND IF THERE IS A CONTINUING NEED FOR THIS EQUIPMENT, EVERY EFFORT SHOULD BE MADE TO ENCOURAGE COMPETITION BY THE MEANS OF PROCUREMENT NOTED ABOVE.