B-158717, MAY 20, 1966

B-158717, MAY 20, 1966

TO THE SECRETARY OF THE ARMY:

WE REFER TO LETTER DATED MARCH 15, 1966, WITH ENCLOSURES, FILE REFERENCE: AMCPP-EE, RECEIVED FROM THE COMMANDING GENERAL, ARMY MATERIEL COMMAND, WHICH WAS SUPPLEMENTED BY A LETTER BEARING THE SAME DATE AND FILE REFERENCE FROM THE DIRECTOR OF PROCUREMENT AND PRODUCTION, ARMY MATERIEL COMMAND, CONCERNING THE PROTEST OF GENERAL ELECTRIC COMPANY (GE) AGAINST AWARD OF A CONTRACT FOR TWO MICROWAVE COMMUNICATIONS SYSTEMS FOR THE REPUBLIC OF KOREA TO COLLINS RADIO COMPANY (COLLINS) UNDER RFP NO. AMC 28- 043-66-00040 (E) ISSUED BY THE FORT MONMOUTH PROCUREMENT DIVISION OF THE ARMY ELECTRONICS COMMAND. IN THE CONCLUDING PARAGRAPH OF THE COMMANDING GENERAL'S LETTER IT IS STATED:

"HAVING COMPLETED A VERY COMPREHENSIVE REVIEW OF THE PROTEST, I HAVE CONCLUDED THAT THERE IS NO BASIS FOR ISSUING A STOP WORK ORDER OR TERMINATING THE CONTRACT AWARDED TO COLLINS. SINCE THE PROTEST HAS CONTINUED TO BE THE SUBJECT OF INQUIRIES FROM SENATOR HENRY M. JACKSON,CONGRESSMAN DANIEL J. FLOOD AND STAFF MEMBERS OF THE HOUSE APPROPRIATIONS COMMITTEE, IT IS REQUESTED THAT YOU REVIEW THE PROTEST AND ISSUE A DECISION ON THIS MATTER.'

WE WERE ALSO INFORMALLY ADVISED ON MARCH 15 THAT ADDITIONAL CONGRESSIONAL INTEREST HAD BEEN EXPRESSED IN THIS PROCUREMENT, AND WHILE THE REPORT OF THE INSPECTOR GENERAL'S INVESTIGATION OF THE PROCUREMENT WOULD NOT BE FURNISHED THIS OFFICE AS A MATTER OF POLICY, WE WOULD BE FURNISHED A FULL SUMMARY THEREOF.

BY LETTER OF MARCH 15, THE COMMANDING GENERAL ALSO REPLIED TO GE'S LETTERS OF JANUARY 7 AND 22, 1966, WHICH PROTESTED THE AWARD TO COLLINS, AND ADVISED THAT:

"ON REVIEWING ALL ASPECTS OF YOUR PROTEST, I HAVE CONCLUDED THAT THERE IS NO BASIS FOR CANCELLING THE CONTRACT AWARDED TO THE COLLINS RADIO COMPANY. IN ORDER THAT YOUR PROTEST IS AFFORDED EVERY POSSIBLE CONSIDERATION, I HAVE REQUESTED THE COMPTROLLER GENERAL OF THE UNITED STATES TO CONDUCT AN INDEPENDENT REVIEW.'

IN THIS CONNECTION IT IS OBSERVED THAT GE MADE THE FOLLOWING STATEMENT IN ITS LETTER OF JANUARY 7:

"WHY THE PERIOD OF TIME IN WHICH OFFERS COULD BE MADE WAS EXTENDED TO MONDAY; WHY COLLINS, WITHOUT THE BENEFIT OF ANY NEGOTIATIONS ON SUBSTANTIAL CHANGES IN SCOPE, ELECTED TO MAKE A VERY LARGE PRICE REDUCTION; WHY THAT REDUCTION PRODUCED A PRICE ONLY SLIGHTLY UNDER GENERAL LECTRIC-S; AND WHY SUCH AN OFFER WAS EVEN CONSIDERED ARE QUESTIONS FOR WHICH WE DO NOT HAVE ANSWERS. WE SUBMIT THAT THESE QUESTIONS SHOULD BE ANSWERED.'

THE FOLLOWING COMMENT WAS CONTAINED IN GE'S LETTER OF JANUARY 22:

"* * * OUR MEETINGS HAVE NOT ATTEMPTED TO ANSWER THE TROUBLESOME QUESTIONS SURROUNDING THE DRAMATIC PRICE CHANGE. BUT THAT ASIDE, IF THIS METHOD OF ACQUIRING NEGOTIATED CONTRACTS IS ALLOWED TO STAND, IT WILL CAST SERIOUS DOUBTS ON THE FUTURE USE OF THIS NECESSARY MEANS OF LETTING LARGE, COMPLICATED CONTRACTS. ANY BIDDER SHOULD LOOK ON NEGOTIATIONS WITH A JAUNDICED EYE, AND REFUSE ALL EFFORTS TO UNNECESSARILY INCREASE HIS PRICE, NO MATTER HOW STRONG THE DIRECTIVE. HE NEED ONLY WAIT TO THE LAST, HOPING TO GET INFORMATION ON THE PRICE LEVEL, AND MOVE SLIGHTLY UNDER IT. * * *"

AFTER RECEIPT OF THE COMMANDING GENERAL'S LETTER OF MARCH 15, GE NOTED THE REFERRAL OF THE MATTER TO THE COMPTROLLER GENERAL OF THE UNITED STATES AND PRESENTED ITS PROTEST TO THIS OFFICE BY LETTER DATED MARCH 24, 1966 (CARBON COPY TO THE COMMANDING GENERAL OF ARMY MATERIEL COMMAND). ADDITION TO CONSIDERATIONS OF THE TECHNICAL ISSUES INVOLVED, REFERENCE IS MADE IN THAT LETTER TO ALLEGEDLY UNUSUAL CIRCUMSTANCES CONCERNING THE DETERMINATION AND PRESENTATION OF COLLINS' FINAL PRICE. BEGINNING ON PAGE FIVE OF ITS LETTER OF MARCH 24 GE STATES:

"IT IS NOT IN DISPUTE THAT WITHIN FIVE MINUTES BEFORE THAT DEADLINE, COLLINS REDUCED ITS PRICE BY OVER $600,000 TO AN AMOUNT WHICH WAS NOW $123,610 LOWER THAN THE FINAL PRICE OF GENERAL ELECTRIC AND THEY WERE AWARDED THE CONTRACT AT $9,045,290. THE FINAL COLLINS PRICE REDUCTION WAS UNRELATED TO ANY CHANGE IN THE SCOPE OF WORK--- IT WAS A SO-CALLED "MANAGEMENT CONCESSION.'

"A PRICE REDUCTION OF OVER ONE HALF MILLION DOLLARS, VIEWED SEPARATELY, MAY NOT BE CONSIDERED TO BE UNUSUAL. UNDER THE CIRCUMSTANCES RELATED ABOVE, HOWEVER, WHERE NEGOTIATIONS HAD ALREADY RESULTED IN SUBSTANTIAL CHANGES IN THE PRICE (AND PRESUMABLY THE PROPOSAL) OF COLLINS; WHERE EACH CHANGE OF GENERAL ELECTRIC'S PROPOSAL WAS CAREFULLY AUDITED TO BE CERTAIN THAT THERE WERE SPECIFICALLY ALLOCATED MONIES TO SUPPORT IT; AND, WHERE FINAL MEETINGS HAD BEEN HELD WITH BOTH PARTIES AT WHICH FINAL PRICES HAD BEEN ELICITED, THE CONSIDERATION OF THE CHANGE IS MOST UNUSUAL. WE HAVE NOT LEARNED WHY THE CLOSING DATE WAS SET FOR MONDAY, DECEMBER 20, FIVE DAYS AFTER THE FINAL NEGOTIATING SESSION. NOR DO WE KNOW IF ANY EFFORT HAS BEEN MADE TO DETERMINE HOW THIS SUBSTANTIAL "MANAGEMENT REDUCTION" WAS MADE BY COLLINS.'

BY LETTER OF APRIL 18, 1966, THE DIRECTOR OF PROCUREMENT AND PRODUCTION, ARMY MATERIEL COMMAND, FORWARDED TO THIS OFFICE A COPY OF A DOCUMENT ENTITLED "SUMMARY OF REPORT OF INVESTIGATION OF PROTEST BY GENERAL ELECTRIC COMPANY ON THE AWARD OF CONTRACT NO. DA 28-043-AMC 01913 (E) TO THE COLLINS RADIO COMPANY.' ON PAGE 3, PARAGRAPH 8, OF THAT SUMMARY IT IS STATED THAT "GE HAS NEVER ALLEGED, NOR IS THEIR PROTEST BASED IN ANY WAY UPON ALLEGATIONS OF IMPROPRIETY IN THE GOVERNMENT'S RELATIONSHIP WITH THE COLLINS RADIO COMPANY IN THIS PROCUREMENT.' THE SUMMARY DOES NOT INDICATE THAT ANY INQUIRY WAS MADE INTO THE POSSIBILITY OF AN UNAUTHORIZED DISCLOSURE BY GOVERNMENT PERSONNEL OF GE'S PRICE AS OFFERED AT THE CLOSE OF NEGOTIATION SESSIONS ON DECEMBER 15, 1965. WE HAVE BEEN INFORMALLY ADVISED THAT THE SUMMARY IS A COMPLETE SUMMARY OF THE INSPECTOR GENERAL'S REPORT AND THAT THE QUESTION OF A PRICE LEAK WAS NOT INVESTIGATED FOR THE REASON THAT IT WAS NEVER ALLEGED BY GE.

WHILE IT DOES NOT APPEAR THAT GE HAS SPECIFICALLY ALLEGED IN ITS LETTERS THAT A DISCLOSURE OF GE'S NEGOTIATED PRICE BY GOVERNMENT PERSONNEL WAS INVOLVED IN COLLINS' FINAL PRICE REDUCTION, WE BELIEVE THE QUESTION IS NECESSARILY RAISED BY INFERENCE IN THE ABOVE-QUOTED PORTIONS OF GE'S LETTERS. IT IS OUR FURTHER UNDERSTANDING THAT A GE REPRESENTATIVE PRESENTED INFORMALLY THE QUESTION AT A MEETING WITH OFFICIALS OF YOUR DEPARTMENT, WHICH RESULTED IN ADDITIONAL INQUIRY BY YOUR DEPARTMENT. UNDER THE CIRCUMSTANCES, WE BELIEVE THE CONGRESSIONAL INTEREST AS TO THE PROPRIETY OF THE AWARD NECESSARILY ENCOMPASSES THE QUESTION OF WHETHER THERE WAS A DISCLOSURE TO COLLINS OF GE'S PRICE BY GOVERNMENT PERSONNEL, AND THAT ANY REVIEW BY THIS OFFICE OF THE PROCUREMENT WILL BE REQUIRED TO CONSIDER AND DISPOSE OF THAT POINT.

IT IS THEREFORE REQUESTED THAT WE BE ADVISED WHETHER THE INSPECTOR GENERAL'S INVESTIGATION DID, OR DID NOT, IN ANY WAY EMBRACE THE POSSIBILITY OF A PRICE LEAK BY GOVERNMENT PERSONNEL, OR WHETHER YOUR DEPARTMENT MADE ANY OTHER INQUIRY INTO THIS ASPECT OF THE MATTER. IN THE EVENT YOUR DEPARTMENT DID INVESTIGATE, OR OTHERWISE EXAMINE THE POSSIBILITY OF, A PRICE LEAK IN THE SUBJECT PROCUREMENT IT IS REQUESTED THAT WE BE ADVISED AS TO THE EXTENT OF SUCH INQUIRY AND OF YOUR DEPARTMENT'S FINDINGS AND CONCLUSIONS WITH RESPECT THERETO.