B-159575, AUG. 31, 1966

B-159575, AUG. 31, 1966

TO MACLEOD INSTRUMENT CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 23, 1966, PROTESTING THE REJECTION OF THE LOW BID SUBMITTED BY YOUR COMPANY UNDER INVITATION FOR BIDS IFB-383-1147-66 ISSUED BY THE U.S. NAVY AVIATION SUPPLY OFFICE.

THE PROCUREMENT COVERED BY THE INVITATION FOR BIDS IS A REPURCHASE FOLLOWING THE DEFAULT TERMINATION OF A CONTRACT WITH THE AEROSONIC CORPORATION BECAUSE THE UNITS FURNISHED BY IT FOR PREPRODUCTION TESTING FAILED TO MEET THE CONTRACT REQUIREMENTS. YOUR COMPANY WAS THE LOW BIDDER ON THE REPURCHASE. THE CONTRACTING OFFICER OBSERVED THAT YOUR COMPANY STATED IN ITS BID THAT IT WAS A WHOLLY OWNED SUBSIDIARY OF THE AEROSONIC CORPORATION AND INDEPENDENT INVESTIGATION SHOWED:

A. THAT THE AEROSONIC CORPORATION OWNS ALL OF THE 135,600 SHARES OF THE VOTING STOCK OF THE MACLEOD INSTRUMENT CORPORATION;

B. THAT IN ADDITION, THE AEROSONIC CORPORATION OWNS VIRTUALLY ALL OF THE NON-VOTING STOCK OF THE MACLEOD INSTRUMENT CORPORATION;

C. THAT THE FINANCIAL STATEMENTS OF MACLEOD INSTRUMENT CORPORATION, FOR ACCOUNTING AND REPORTING PURPOSES, ARE CONSOLIDATED WITH AND MADE A PART OF THE FINANCIAL STATEMENTS OF THE AEROSONIC CORPORATION;

D. THAT THE PRESIDENT OF THE AEROSONIC CORPORATION, HERBERT J. FRANK, OWNS THE LARGEST SINGLE BLOCK OF SHARES OF THE AEROSONIC CORPORATION;

E. THAT HERBERT J. FRANK, AS AN OFFICER AND DIRECTOR OF THE AEROSONIC CORPORATION, IS ALSO ONE OF THE FIVE DIRECTORS OF THE MACLEOD INSTRUMENT CORPORATION;

F. THAT THE VICE-PRESIDENT OF THE AEROSONIC CORPORATION IS ALSO ONE OF THE FIVE DIRECTORS OF THE MACLEOD INSTRUMENT CORPORATION;

G. THAT MOST OF MACLEOD SALES ARE MADE TO AEROSONIC; AND

H. THAT THE TWO CORPORATIONS ARE ENGAGED IN SIMILAR PRODUCT LINES.

IN VIEW THEREOF, THE CONTRACTING OFFICER CONSIDERED THAT THE BID FROM YOUR COMPANY WAS FOR ALL INTENT AND PURPOSE A BID OF THE AEROSONIC CORPORATION AND HE CONSIDERED IT UNDESIRABLE TO AWARD A REPURCHASE CONTRACT TO YOUR COMPANY IN VIEW OF THE RECENT DEFAULT BY THE AEROSONIC CORPORATION ON THE IDENTICAL REQUIREMENTS. AS A RESULT, THE AWARD WAS MADE TO THE NEXT LOW BIDDER.

YOU CONTEST THE REJECTION OF YOUR COMPANY'S LOW BID ESSENTIALLY ON THE BASIS THAT, WHILE YOUR COMPANY IS A SUBSIDIARY OF THE AEROSONIC CORPORATION, IT IS SEPARATED PHYSICALLY BY 250 MILES FROM AND ACTS INDEPENDENT OF AND IN COMPETITION WITH THE AEROSONIC CORPORATION AND THAT IT HAD JOINED WITH ANOTHER COMPANY FOR THE PRESENT PROCUREMENT.

THE STATUTES PROVIDING FOR FORMAL ADVERTISING PROCEDURES FOR PROCUREMENTS BY THE UNITED STATES REQUIRE GENERALLY THAT AWARDS BE MADE TO THE LOWEST RESPONSIBLE BIDDERS. HOWEVER, SECTION ASPR 1-904.3 OF THE ARMED SERVICES PROCUREMENT REGULATION AUTHORIZES THE CONTRACTING OFFICER TO CONSIDER THE PERFORMANCE RECORD OF AFFILIATED CONCERNS WHICH MAY ADVERSELY AFFECT THE RESPONSIBILITY OF A BIDDER. FURTHERMORE, THE IMMEDIATE PROCUREMENT IS NOT AN ORIGINAL PURCHASE FOR THE GOVERNMENT. IT IS INSTEAD A REPLACEMENT FOR A CONTRACT PREVIOUSLY DEFAULTED. IN SUCH A SITUATION, THE PROCUREMENT ACTUALLY IS FOR THE ACCOUNT OF THE DEFAULTED CONTRACTOR WHICH THE CONTRACTING OFFICER IS FREE TO MAKE IN THE OPEN MARKET OR OTHERWISE, AND THE STATUTORY REQUIREMENT IS NOT CONSIDERED TO CONTROL IN THAT CIRCUMSTANCE. SEE 42 COMP. GEN. 493, 494.

ACCORDINGLY, OUR OFFICE CANNOT CONCLUDE THAT THE AWARD AS MADE WAS LEGALLY OBJECTIONABLE. YOUR PROTEST IS THEREFORE DENIED.