B-161448, FEB. 7, 1968

B-161448, FEB. 7, 1968

BIDS - NEGOTIATION - PROCEDURE PROPRIETY DECISION TO SECY. OF ARMY SUSTAINING PROTEST OF UNIVERSAL INDUSTRIES, INC., AND RECOMMENDING CANCELLATION OF NEGOTIATED CONTRACT WITH RADALAB, INC., FOR TELEPHONE TERMINALS FOR ARMY ELECTRONICS COMMAND IF FEASIBLE. REVIEW OF PROTEST INDICATES THAT EVENTS BEFORE AWARD DEMONSTRATE FAILURE TO COMPLY WITH LAW AND REGULATIONS AND EVIDENCE OF POOR JUDGMENT. OFFEROR WHO WAS ASKED TO EXTEND TIME FOR ACCEPTANCE AFTER ITS "LATE" MODIFICATION MADE IT THE LOW OFFEROR WITHOUT ANY KNOWLEDGE THAT THE MODIFICATION WAS INELIGIBLE FOR CONSIDERATION SHOULD HAVE HAD THE REQUEST FOR EXTENSION CONSIDERED EXTENSION OF ITS MODIFIED OFFER. FAILURE OF CONTRACTING OFFICER TO REQUIRE SUCCESSFUL OFFEROR TO SUBMIT CERTIFIED COST OR PRICING DATA WAS INCONSISTENT WITH 10 U.S.C. 2306 (F). THE PROTESTANT SHOULD NOT HAVE BEEN PENALIZED FOR PROPOSING AN EARLIER DELIVERY DATE. RECORD SHOWS THAT SUCCESSFUL OFFEROR WAS PERMITTED TO REFUTE OR EXPLAIN AREAS OF DEFICIENCY BUT SAME OPPORTUNITY WAS NOT GIVEN TO PROTESTANT. ALTHOUGH NEGOTIATION WAS JUSTIFIED ON BASIS OF URGENT NEED, AWARD WAS MADE ON SOLE-BASIS OF PRICE AND NO ATTEMPT WAS MADE TO NEGOTIATE THE PRICE. BECAUSE OF HIGH PRIORITY EMERGENCY OF PROCUREMENT GAO WILL NOT DIRECT CANCELLATION IF SUCH ACTION WILL DELAY DELIVERIES. IF CONTRACT CAN BE CANCELLED WITHOUT ANY ADVERSE EFFECT ON MILITARY POSTURE, SUCH ACTION IS REQUIRED.

TO MR. SECRETARY:

REFERENCE IS MADE TO LETTER DATED AUGUST 14, 1967, WITH ENCLOSURES, FROM THE ACTING DEPUTY DIRECTOR OF PROCUREMENT AND PRODUCTION, AND OTHER MATERIAL SUBSEQUENTLY FORWARDED HERE, IN REPLY TO OUR REQUEST FOR AN ADMINISTRATIVE REPORT ON THE PROTEST OF UNIVERSAL INDUSTRIES, INCORPORATED, AGAINST THE AWARD OF CONTRACT NO. DAAB-05-67-C-1223 UNDER REQUEST FOR PROPOSALS NO. DAAB-05-67-R-1221-0002 FOR 550 EACH AN/TCC-50 TERMINAL TELEPHONES.

THE SOLICITATION FOR BIDS WAS ISSUED ON DECEMBER 13, 1966, BY THE UNITED STATES ARMY ELECTRONICS COMMAND, PHILADELPHIA, PENNSYLVANIA, FOR 81 AN/TCC -50 TELEPHONE TERMINALS. THE SOLICITATION STATED THAT THIS WAS A NEGOTIATED PROCUREMENT PURSUANT TO 10 U.S.C. 2304 (A) (2) - ,THE PUBLIC EXIGENCY WILL NOT PERMIT THE DELAY INCIDENT TO ADVERTISING.' THE SOLICITATION WAS MODIFIED TWICE: THE SECOND MODIFICATION EXTENDED THE PROPOSAL RECEIPT TIME TO CLOSE OF BUSINESS ON JANUARY 26, 1967, INCREASED THE NUMBER OF TELEPHONE TERMINALS REQUIRED TO 550, AND SET FORTH A NEW DELIVERY SCHEDULE REQUIRING FIRST ARTICLE TEST REPORT FOR APPROVAL 270 DAYS AFTER DATE OF AWARD DOCUMENT, WITH DELIVERY OF A STATED NUMBER OF PRODUCTION QUANTITIES EVERY THIRTY DAYS, THE INITIAL DELIVERY TO BE MADE 480 DAYS AFTER DATE OF AWARD DOCUMENT AND FINAL DELIVERY 810 DAYS AFTER DATE OF AWARD DOCUMENT. THE SOLICITATION ALSO RESERVED TO THE GOVERNMENT THE RIGHT, WITH RESPECT TO OFFERORS WHO OFFERED PRODUCTS PREVIOUSLY ACCEPTED OR TESTED BY THE GOVERNMENT, TO WAIVE THE REQUIREMENT FOR FIRST ARTICLE TESTS. IN THE EVENT OF A WAIVER BY THE GOVERNMENT, THE OFFEROR WAS TO SET FORTH THE DECREASE IN PRICE FOR EACH UNIT, AND THE DELIVERY SCHEDULE EARLIER THAN THE REQUIRED SCHEDULE. IT FURTHER PROVIDED THAT IF FIRST ARTICLE TESTING WAS WAIVED BY THE GOVERNMENT, OFFERS WOULD BE EVALUATED ON THE BASIS OF THE DECREASED PRICE AND EARLIER DELIVERY OFFERED. THE CONTRACTING OFFICER'S DETERMINATION AND FINDINGS, DATED JANUARY 9, 1967, IN SUPPORT OF HIS AUTHORITY TO NEGOTIATE A CONTRACT RATHER THAN MAKE THE PROCUREMENT BY FORMAL ADVERTISING, STATES AS HIS FINDING THAT THE ESTIMATED COST OF EACH TELEPHONE TERMINAL IS $5,248; THAT PROCUREMENT BY NEGOTIATION OF THE ITEM IS JUSTIFIED BECAUSE THE ITEM BEARS UMMIPS PRIORITY DESIGNATION 02 AND IS URGENTLY NEEDED FOR SOUTHEAST ASIA AND AS REPAYMENT TO FILL EXISTING PRIORITY ARMY REQUISITIONS; AND THAT USE OF FORMAL ADVERTISING FOR THIS PROCUREMENT WAS IMPRACTICABLE BECAUSE SOLICITATION BY FORMAL ADVERTISING PROCEDURES AND AWARD THEREUNDER COULD NOT BE EFFECTED IN TIME TO ASSURE DELIVERY OF SUPPLIES AT THE EARLIEST POSSIBLE DATE. UPON THE BASIS OF THESE FINDINGS, THE CONTRACTING OFFICER DETERMINED THAT THE PUBLIC EXIGENCY WOULD NOT PERMIT THE DELAY INCIDENT TO FORMAL ADVERTISING, AND THAT SUBJECT TO THE AVAILABILITY OF FUNDS, THE PROPERTY COULD BE PROCURED BY NEGOTIATION PURSUANT TO 10 U.S.C. 2304 (A) (2) AND PARAGRAPH 3-202.2 (VI) OF THE ARMED SERVICES PROCUREMENT REGULATION.

FORTY-FOUR COMPANIES WERE SOLICITED, BUT ONLY THREE SUBMITTED PROPOSALS: RADALAB, NCORPORATED; UNIVERSAL INDUSTRIES, INCORPORATED; AND VIEWLEX, INCORPORATED. THESE THREE PROPOSALS WERE FOUND RESPONSIVE TO THE REQUEST FOR PROPOSALS. OF THESE THREE COMPANIES, ONLY UNIVERSAL INDUSTRIES OFFERED A REDUCTION (OF $5 PER UNIT) FOR WAIVER OF FIRST ARTICLE TESTING AND ALSO AN EARLIER DELIVERY SCHEDULE IF A WAIVER WAS GRANTED. THE UNIT PRICES WERE $9,650 FOR RADALAB, $10,100 (OR $10,095 WITH WAIVER OF FIRST ARTICLE TESTING) FOR UNIVERSAL, AND $14,850 FOR VIEWLEX. THE EARLIER DELIVERY SCHEDULE OFFERED BY UNIVERSAL, IF WAIVER WAS GRANTED, WAS FOR AN INITIAL DELIVERY OF 10 UNITS, INCREASING EACH 30 DAYS TO THE MAXIMUM NUMBER OF 55 UNITS EACH 30 DAYS FOR THE LAST SEVEN 30-DAY PERIODS, WITH FIRST PRODUCTION DELIVERY 300 DAYS AFTER DATE OF AWARD DOCUMENT AND FINAL DELIVERY 630 DAYS AFTER DATE OF AWARD DOCUMENT. IT MAY BE NOTED AT THIS POINT THAT UNIVERSAL INDUSTRIES WAS CURRENTLY PRODUCING UNITS OF AN/TCC-50 UNDER CONTRACT NO. DA-36-0390 AMC-09018 (E).

THE CONTRACTING OFFICER REQUESTED THE CONTRACT EVALUATION BOARD (CEB) TO CONDUCT EVALUATIONS ON EACH OF THE OFFERORS. THE CEB REQUESTED PRE-AWARD SURVEYS ON EACH OF THE OFFERORS FROM DEFENSE CONTRACT ADMINISTRATIVE SERVICE (DCAS). THE REQUESTS ON RADALAB AND VIEWLEX WERE DIRECTED TO DCAS AT GARDEN CITY, NEW YORK, AND ON UNIVERSAL TO DCAS, CHICAGO, ILLINOIS.

THE DCAS REPORT ON UNIVERSAL WAS DATED FEBRUARY 28, 1967, AND RECEIVED BY CEB ON MARCH 2, 1967. THE REPORT ON RADALAB WAS DATED MARCH 1, 1967, AND RECEIVED BY CEB ON MARCH 3, 1967. THE REPORT ON VIEWLEX WAS RECEIVED BY CEB ON MARCH 4, 1967. ALL THREE REPORTS WERE NEGATIVE AND RECOMMENDED AGAINST AWARD. IN CONNECTION WITH VIEWLEX, CEB HAD RECEIVED ON FEBRUARY 23, 1967, A TECHNICAL ABILITY EVALUATION IN WHICH VIEWLEX WAS FOUND TO LACK THE REQUISITE TECHNICAL ABILITY TO PERFORM.

THE GARDEN CITY DCAS SURVEY ON RADALAB RECOMMENDED NO AWARD TO RADALAB BECAUSE OF THE FOLLOWING DEFICIENT AREAS:

(1) PRODUCTION CAPABILITY.

(2) PLANT FACILITIES AND EQUIPMENT.

(3) PURCHASING AND SUB-CONTRACTING.

(4) PERFORMANCE RECORD.

(5) ABILITY TO MEET SCHEDULE. IN ADDITION TO THE ABOVE, THE CEB RECEIVED ON MARCH 3, 1967, MEMORANDUM REPORTS FROM ARMY ELECTRONICS COMMAND (ECOM) TECHNICAL PERSONNEL WHICH CITED PROBLEMS RADALAB WAS ENCOUNTERING IN ITS PERFORMANCE ON AN AN/TCC-3 (AN UNSOPHISTICATED COMPONENT OF THE AN/TCC-50) CONTRACT AND INDICATED THAT RADALAB DID NOT POSSESS THE TECHNICAL CAPABILITY TO PERFORM ON THE PROPOSED CONTRACT FOR AN/TCC-50-S. IT WAS ALSO NOTED THAT RADALAB PROPOSED TO SUBCONTRACT 50 PERCENT OF THE WORK TO INSTRUMENT SYSTEMS CORPORATION (ISC) AND IF RADALAB WAS STILL TO BE CONSIDERED AS A POSSIBLE CONTRACTOR, A SURVEY SHOULD BE MADE ON ISC.

THE CHICAGO DCAS REPORT ON UNIVERSAL RECOMMENDED NO AWARD BECAUSE OF THE FOLLOWING DEFICIENT AREAS:

(1) PURCHASING AND SUB-CONTRACTING.

(2) PERFORMANCE RECORD.

(3) ABILITY TO MEET REQUIRED SCHEDULE.

BY LETTER DATED FEBRUARY 28, 1967, TO THE CONTRACTING OFFICER,RADALAB REQUESTED THAT A SURVEY BE CONDUCTED AT INSTRUMENT SYSTEMS CORPORATION, STATING THAT INSTRUMENT SYSTEMS HAD INDICATED ITS WILLINGNESS TO SUPPORT RADALAB IN THE MANUFACTURE OF AN/TCC-50-S.

ON MARCH 7, 1967, CEB FORWARDED A COPY OF RADALAB'S LETTER TO DCAS, GARDEN CITY FOR ADVICE AS TO WHETHER RADALAB'S INTENTION OF SUBCONTRACTING 50 PERCENT OF THE WORK TO INSTRUMENT SYSTEMS (RADALAB TO SUPPLY ALL MATERIAL) WOULD HAVE ANY EFFECT ON THE INITIAL PRE-AWARD SURVEY FINDINGS.

THE CEB PREPARED A DRAFT OF COMMENTS FOR NEGATIVE FINDING ON UNIVERSAL ON MARCH 11, 1967. A COPY OF THE DRAFT WAS FORWARDED TO THE CONTRACTING OFFICER, BUT A FINAL FINDING OR RECOMMENDATION WAS NOT SUBMITTED.

ON MARCH 19, 1967, THE CONTRACTING OFFICER SENT A TELEGRAM TO UNIVERSAL INDUSTRIES REQUESTING AN EXTENSION OF THE ACCEPTANCE PERIOD TO APRIL 27, 1967. UNIVERSAL INDUSTRIES AGREED TO AN EXTENSION OF ITS PROPOSAL.

ON MARCH 21, 1967, IN CONNECTION WITH THE SURVEY OF RADALAB, A SECONDARY TECHNICAL SURVEY OF INSTRUMENT SYSTEMS WAS MADE, TO EVALUATE THE CAPABILITY OF INSTRUMENT SYSTEMS TO FURNISH ADEQUATE ENGINEERING AND TECHNICAL PERSONNEL AND SUPPORT TO RADALAB. IT SHOULD BE NOTED THAT THIS FURTHER SURVEY OF RADALAB WAS CONCERNED WITH "PRODUCTION CAPABILITY" AND "PLANT FACILITIES AND EQUIPMENT" - ONLY TWO OF THE FIVE NEGATIVE POINTS IN THE DCAS RECOMMENDATION OF "NO AWARD" TO RADALAB. THE REMAINING THREE POINTS WERE UNCHANGED. IT ALSO SHOULD BE NOTED HERE THAT THE FORT MONMOUTH PROCUREMENT AND PRODUCTION DIRECTORATE, ARMY ELECTRONICS COMMAND (ECOM), IN A REPORT MEMORANDUM DATED APRIL 3, 1967, AFTER A SECONDARY TECHNICAL ABILITY SURVEY OF INSTRUMENT SYSTEMS, STATED THAT IT DID NOT BELIEVE THAT THE COMBINED EFFORTS OF RADALAB AND INSTRUMENT SYSTEMS WERE CAPABLE OF PRODUCING THE FIRST ARTICLE PRE-PRODUCTION SAMPLE TEST REPORT, REQUIRED IN THE REQUEST FOR PROPOSAL, WITHIN 270 DAYS OF AWARD. THIS OPINION WAS PREDICATED UPON THE FACT THAT REGARDLESS OF THE CAPABILITIES OF INSTRUMENT SYSTEMS, THE SUPPLY OF ALL MATERIALS AND COMPONENTS WAS THE RESPONSIBILITY OF RADALAB; THAT MANY OF THE MATERIAL AND SUPPLIES WOULD HAVE LEAD TIMES OF SIX MONTHS AND POSSIBLY LONGER; AND THAT THIS, COUPLED WITH LACK OF EXPERIENCE ON THIS TYPE OF EQUIPMENT, PRECLUDED COMPLIANCE WITH THIS REQUIREMENT OF THE REQUEST FOR PROPOSAL.

THE CONTRACTING OFFICER REQUESTED ON APRIL 5, 1967, THAT A PRICE ANALYSIS BE MADE BY THE ECONOMICS BRANCH, PRICING SECTION, ON THE PRICE PROPOSALS OF THE THREE RESPONSIVE PROPOSERS. THE FORM USED FOR THE REQUEST CONTAINED A SECTION FOR USE IN ADVISING THE PRICE ANALYSTS OF PREVIOUS PRICE HISTORY AND STATED THAT THE LAST THREE PURCHASES SHOULD BE LISTED. IN THIS INSTANCE ONLY ONE PURCHASE WAS LISTED, WHICH WAS SUBSTANTIALLY IN EXCESS OF THE PRICES QUOTED BY RADALAB AND UNIVERSAL INDUSTRIES IN THE CURRENT PROCUREMENT. THE PROCUREMENT LISTED WAS THE CURRENT CONTRACT WITH UNIVERSAL INDUSTRIES. IT WAS NOT NOTED THAT THIS CONTRACT WITH UNIVERSAL INDUSTRIES WAS A SOLE-SOURCE PROCUREMENT WITH A MUCH SHORTER DELIVERY TIME THAN PREVIOUS PROCUREMENTS. NOR DID THE CONTRACTING OFFICER LIST OTHER PROCUREMENTS FOR THE SAME ITEM MADE PRIOR TO THE SOLE-SOURCE PROCUREMENT, WHEREIN THE PRICE PAID PER UNIT (EVEN WHEN ADJUSTED TO INCLUDE POST- CONTRACT CLAIMS OF CONTRACTORS) WAS VERY CONSIDERABLY BELOW THE CURRENT PRICE QUOTATIONS.

BY LETTER DATED APRIL 4, 1967, UNIVERSAL INDUSTRIES ADDRESSED A LETTER TO THE CONTRACTING OFFICER MODIFYING THE PRICE PER UNIT IN ITS PROPOSAL. THE REDUCED UNIT PRICE WAS $9,554 WITH WAIVER OF PRE PRODUCTION SAMPLES AND ACCELERATED DELIVERY. THIS OFFER WAS $96 PER UNIT LOWER THAN THAT OF RADALAB'S $9,650 PER UNIT.

ON APRIL 6, 1967, THE CONTRACT EVALUATION BOARD RECEIVED FROM DCAS, GARDEN CITY, THE SECOND PRE-AWARD SURVEY ON RADALAB, WHICH FOUND THAT RADALAB, WITH THE TECHNICAL AND PRODUCTION ASSISTANCE OF INSTRUMENT SYSTEMS AND WITH UPGRADED PLANT FACILITIES, WOULD BE ABLE TO PERFORM AND CHANGED ITS RECOMMENDATION FROM "NO AWARD" TO "COMPLETE AWARD.'

THE PRICE ANALYSIS REPORT WAS MADE TO THE CONTRACTING OFFICER APRIL 10, 1967. THIS REPORT APPEARS TO REFLECT ONLY THE INFORMATION FURNISHED BY THE CONTRACTING OFFICER, NAMELY, THAT THE LOW OFFEROR'S PRICE WAS FAIR AND REASONABLE WHEN COMPARED TO THE CURRENT PROCUREMENT FROM UNIVERSAL INDUSTRIES, WHICH WAS, AS STATED ABOVE, A SOLE-SOURCE PROCUREMENT WITH A RATHER SHORT DELIVERY TIME. THE REPORT MADE NO MENTION OF EARLIER PROCUREMENTS AT SUBSTANTIALLY LOWER PRICES.

THE CONTRACT EVALUATION BOARD ISSUED ITS SUMMARY OF EVALUATION ON APRIL 15, 1967, AND FOUND RADALAB TO BE RESPONSIBLE AND RECOMMENDED AWARD TO THIS COMPANY.

ON THE FOLLOWING DAY, APRIL 16, 1967, THE CONTRACTING OFFICER AGAIN REQUESTED UNIVERSAL TO EXTEND THE ACCEPTANCE PERIOD OF ITS PROPOSAL (WHICH PROPOSAL WAS THEN THE LOWEST IN PRICE) TO MAY 29, 1967, WHICH UNIVERSAL AGREED TO DO IN ITS WIRE OF APRIL 19, 1967.

ON APRIL 25, 1967, A PUBLICITY RELEASE WAS PREPARED SETTING THE TIME AND DATE OF AWARD TO RADALAB AS 4 P.M., APRIL 28, 1967. HOWEVER, ON APRIL 28, 1967, IT WAS DISCOVERED THAT THE PUBLICITY RELEASE WAS PREMATURE, RESULTING FROM AN ADMINISTRATIVE ERROR, SINCE FUNDS FOR THE PROCUREMENT HAD NOT BEEN FULLY COMMITTED. RADALAB WAS NOTIFIED ON THE FOLLOWING DAY THAT NO AWARD HAD BEEN MADE.

BY TELEGRAM DATED MAY 4, 1967, UNIVERSAL PROTESTED AWARD OF A CONTRACT TO ANY OFFEROR OTHER THAN ITSELF WITHOUT CONDUCTING PRICE NEGOTIATION. PROTEST AGAINST AWARD WAS TELEGRAPHED TO OUR OFFICE THE FOLLOWING DAY, WITH A DETAILED LETTER OF PROTEST FILED HERE ON MAY 10, 1967.

ON MAY 5, 1967, AWARD OF A CONTRACT WAS MADE TO RADALAB ON THE BASIS OF THE ORIGINAL PROPOSALS OF THE THREE OFFERORS AFTER RECEIPT OF INFORMATION ON THAT DAY THAT FUNDS FOR THE PROCUREMENT HAD BEEN COMMITTED.

THE RECORD BEFORE US DOES NOT SHOW THAT UNIVERSAL WAS ADVISED THAT IT HAD BEEN DETERMINED NONRESPONSIBLE OR THAT ITS MODIFIED PRICE PROPOSAL WAS CONSIDERED A "LATE MODIFICATION" UNTIL SOME TIME FOLLOWING AWARD TO RADALAB.

IN HIS ADMINISTRATIVE REPORT THE CONTRACTING OFFICER STATES THAT THE TELEGRAPHIC PROTEST OF UNIVERSAL INDUSTRIES TO HIM WAS ON THE BASIS THAT AWARD TO ANY OTHER OFFEROR WAS NOT IN THE BEST INTERESTS OF THE GOVERNMENT, AND THAT HE WAS NOT AWARE THAT A PROTEST HAD BEEN MADE TO OUR OFFICE UNTIL AFTER AWARD HAD BEEN MADE. IT IS STATED THAT AWARD WAS MADE TO RADALAB ON THE BASIS THAT IT WAS THE LOWEST RESPONSIBLE OFFEROR AND UPON THE DETERMINATION THAT THE PRICE WAS FAIR AND REASONABLE IN ACCORDANCE WITH ASPR 3-807.1 (B) (1) A AND 3 807.2 (B) (1) I. THE CONTRACTING OFFICER POINTS OUT THAT THE DELIVERY PROVISION CONTAINED IN THE REQUEST FOR PROPOSALS INDICATED THAT ALL OFFERS WOULD BE EVALUATED UPON THE ABILITY OF THE OFFEROR TO MEET THE DELIVERY SCHEDULE INDICATED, AND THAT THE PROPER INTERPRETATION OF THE PROVISION IS THAT OFFERS OF EARLIER DELIVERY WOULD BE CONSIDERED EQUALLY AND THAT NO PREFERENCE WOULD BE GIVEN FOR EARLIER DELIVERY. IT IS ALSO POINTED OUT THAT ALL OFFERORS WERE AWARE OF THE SOLICITATION PROVISION THAT THERE WAS A POSSIBILITY THAT AWARD MIGHT BE MADE WITHOUT DISCUSSION OF THE INITIAL OFFERS, AND THAT INITIAL PROPOSALS SHOULD OFFER THE MOST FAVORABLE TERMS AND LOWEST PRICE. THE REPORT FURTHER STATES THAT ON A NUMBER OF OCCASIONS BETWEEN PROPOSAL OPENING DATE AND DATE OF AWARD, IN RESPONSE TO INQUIRIES, UNIVERSAL WAS ADVISED THAT NO DECISION HAD BEEN MADE REGARDING INSTITUTION OF NEGOTIATION WITH THE OFFERORS AND THAT UNIVERSAL'S OFFER WAS STILL UNDER EVALUATION. WHEN ADVISED BY THE CONTRACT EVALUATION BOARD THAT RADALAB, WITH THE SUPPORT OF INSTRUMENT SYSTEMS, WAS RECOMMENDED FOR AWARD, THE CONTRACTING OFFICER CONCLUDED:

"BASED ON THE FACTS INDICATED ABOVE, IT IS CONCLUDED THAT THE CONTRACTING OFFICER HAD THE AUTHORITY TO ELECT NOT TO UNDERTAKE NEGOTIATIONS AFTER RECEIPT OF INITIAL PROPOSALS; THAT RADALAB, INC., WAS DETERMINED TO BE A RESPONSIBLE OFFEROR WITHIN THE MEANING OF ASPR SECTION I, PART 9; THAT THE PRICE QUOTED BY RADALAB, INC., WAS DETERMINED TO BE FAIR AND REASONABLE ON THE BASIS OF A PRICE ANALYSIS PER ASPR 3-807.1 (B) (1/A AND 3-807.2 (B) (1) (I); UNIVERSAL'S LETTER OF 4 APRIL 1967 * * * WAS DETERMINED TO BE A LATE MODIFICATION TO THEIR PROPOSAL WITHIN THE MEANING OF ASPR 3-506 AND THEREFORE NOT ACCEPTABLE; AND, INASMUCH AS THE AWARD PRICE HAD, THROUGH ADMINISTRATIVE ERROR, BEEN RELEASED TO THE PUBLIC AND RADALAB, INC., HAD BEEN NOTIFIED THROUGH CONGRESSIONAL CHANNELS THAT THEY WERE THE SUCCESSFUL CONTRACTOR, PRIOR TO ACTUAL AWARD, IT WOULD HAVE BEEN UNFAIR TO RADALAB, INC., TO OPEN NEGOTIATIONS.'

THE CIRCUMSTANCES AND EVENTS OCCURRING BEFORE THE MAKING OF THE AWARD, AS SET OUT ABOVE, DEMONSTRATE A FAILURE TO COMPLY WITH THE LAW AND APPLICABLE PROCUREMENT REGULATIONS, AND EVIDENCE, IN OUR OPINION, EXTREMELY POOR JUDGMENT IN OTHER RESPECTS.

AS TO THE FAILURE TO COMPLY WITH APPLICABLE REGULATIONS, WE NOTE THAT SECTION 3-506 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) REQUIRES THAT ALL LATE OFFERORS BE PROMPTLY NOTIFIED THAT THEIR OFFERS OR MODIFICATIONS ARE LATE AND WILL NOT BE CONSIDERED. IN THE INSTANT CASE UNIVERSAL WAS ASKED TO EXTEND THE TIME FOR ACCEPTANCE OF ITS PROPOSAL AFTER ITS SO-CALLED "LATE" MODIFICATION, WHICH MADE IT THE LOW OFFEROR, WITHOUT ANY PRIOR NOTIFICATION THAT SUCH MODIFICATION WAS CONSIDERED INELIGIBLE FOR CONSIDERATION BECAUSE OF LATENESS. THERE CAN BE NO DOUBT THAT THE LEGAL EFFECT OF THAT REQUEST FOR EXTENSION AMOUNTED TO A REQUEST FOR EXTENSION OF ITS MODIFIED OFFER, WHICH WAS THE LOWEST OFFER.

AS WE INDICATED IN B-161782, NOVEMBER 21, 1967 (47 COMP. GEN. ---- ), COPY ENCLOSED, WE DO NOT BELIEVE SUCH SO-CALLED "LATE" MODIFICATIONS SHOULD BE IGNORED. WE SEE NO JUSTIFICATION FOR FAILURE TO CONSIDER MODIFICATIONS OF AN OFFER PRIOR TO THE TIME OFFERORS HAVE BEEN NOTIFIED THAT NO FURTHER MODIFICATIONS WILL BE CONSIDERED. IF THE CONTRACTING OFFICER IS FREE TO DECIDE, AFTER SUCH MODIFICATIONS HAVE BEEN RECEIVED, WHETHER HE WILL OR WILL NOT CONDUCT FURTHER NEGOTIATIONS, AND CONSEQUENTLY WHETHER SUCH MODIFICATIONS ARE OR ARE NOT TO BE CONSIDERED BECAUSE OF LATENESS, THE DOOR IS OPENED TO POSSIBLE FAVORITISM. IT IS OUR BELIEF THAT THE CUTOFF TIME FOR SUBMISSION OF MODIFICATIONS AS WELL AS ORIGINAL OFFERS SHOULD BE MADE KNOWN IN ADVANCE TO PROSPECTIVE CONTRACTORS, AND THAT THE WARNING TO OFFERORS THAT FURTHER NEGOTIATIONS MAY NOT BE CONDUCTED SHOULD NOT PRECLUDE THE SUBMISSION AND CONSIDERATION OF MODIFICATIONS TO OTHERWISE TIMELY ORIGINAL OFFERS SUBMITTED PRIOR TO A TIME MADE KNOWN TO ALL OFFERORS AS A CUTOFF TIME, EITHER ON THE BASIS OF FURTHER NEGOTIATIONS OR AFTER A DETERMINATION THAT FURTHER NEGOTIATIONS WILL NOT BE CONDUCTED.

MORE SERIOUS IS THE FAILURE OF THE CONTRACTING OFFICER TO REQUIRE THE SUBMISSION OF CERTIFIED COST OR PRICING DATA BY RADALAB. WE UNDERSTAND, INFORMALLY, THAT HE HAS JUSTIFIED HIS FAILURE TO CONDUCT NEGOTIATIONS WITH ALL RESPONSIBLE OFFERORS "WITHIN A COMPETITIVE RANGE" , AS REQUIRED BY 10 U.S.C. 2304 (G) AND WHICH IN OUR OPINION WOULD HAVE INCLUDED BOTH UNIVERSAL AND RADALAB, ON THE BASIS THAT RADALAB WAS THE ONLY RESPONSIBLE" OFFEROR. WHILE WE HAVE SERIOUS DOUBT THAT UNIVERSAL SHOULD HAVE BEEN DETERMINED NONRESPONSIBLE IF RADALAB WAS TO BE CONSIDERED RESPONSIBLE, THE RESULT OF THE DETERMINATIONS MADE WAS TO LEAVE RADALAB AS THE SOLE RESPONSIBLE OFFEROR. IN SUCH CASE 10 U.S.C. 2306 (F) REQUIRES THAT CERTIFIED COST OR PRICING DATA BE SUBMITTED BY THE CONTRACTOR BEFORE AWARD. THE FAILURE TO REQUIRE SUCH DATA SEEMS PARTICULARLY SIGNIFICANT WHEN THE CONTRACT PRICE OF $9,650 PER UNIT IS COMPARED TO THE ESTIMATED COST PER UNIT OF $5,248 IN THE PROCUREMENT REQUEST AND THE PRIOR PROCUREMENT HISTORY OF LESS THAN $6,000 PER UNIT.

WE HAVE INDICATED ABOVE THAT THE CHICAGO DCAS SURVEY REPORT FOUND UNIVERSAL INDUSTRIES DEFICIENT IN THE FOLLOWING AREAS: PURCHASING AND SUBCONTRACTING; PERFORMANCE RECORD, AND ABILITY TO MEET REQUIRED SCHEDULE. THE GARDEN CITY DCAS INITIAL SURVEY REPORT ON RADALAB, FOUND THIS COMPANY DEFICIENT NOT ONLY IN THE SAME THREE AREAS BUT ALSO AS TO PRODUCTION CAPABILITY AND PLANT FACILITIES AND EQUIPMENT. THE SECONDARY SURVEY AT A LATER DATE ELIMINATED THE LAST TWO AREAS OF DEFICIENCY ON THE REPRESENTATION THAT INSTRUMENT SYSTEMS CORPORATION WOULD BE A SUBCONTRACTOR AND WOULD ELIMINATE THESE DEFICIENCIES. HOWEVER, THE RECORD DOES NOT INDICATE THAT THE REMAINING THREE DEFICIENT AREAS, WHICH WERE ALSO APPLICABLE TO UNIVERSAL INDUSTRIES, WERE CORRECTED. YET RADALAB WAS RECOMMENDED BY THE CEB FOR AWARD, BUT UNIVERSAL INDUSTRIES WAS CONSIDERED NONRESPONSIBLE. UNIVERSAL INDUSTRIES WAS CONSIDERED DEFICIENT IN PURCHASING AND SUBCONTRACTING, YET UNIVERSAL INDUSTRIES HAS SUBMITTED DOCUMENTED EVIDENCE THAT IT HAD FIRM PRICE AND DELIVERY COMMITMENTS FROM SUPPLIERS, ETC., PRIOR TO THE SUBMISSION OF ITS PROPOSAL ON JANUARY 26, 1967. THE RECORD HAS NO INDICATION THAT RADALAB HAD FIRM COMMITMENTS OF ANY KIND. IN ADDITION IT IS NOTED THAT BOTH COMPANIES WERE ENGAGED IN CURRENT GOVERNMENT CONTRACTS. UNIVERSAL INDUSTRIES WAS MAKING DELIVERIES OF THE AN/TCC 50'S BUT WAS IN A DELINQUENT STATUS, WHILE ON THE OTHER HAND, RADALAB, IN TWO YEARS FROM THE DATE OF AWARD ON ITS CONTRACT FOR AN UNSOPHISTICATED ITEM HAD NOT FURNISHED THE PRE-PRODUCTION SAMPLE. THE RECORD SHOWS THAT RADALAB AT THE TIME OF THE SECOND SURVEY SUPPLIED INFORMATION TO THE EFFECT THAT ITS CONTRACT ITEM HAD NOT BEEN CLASSIFIED AS A PRIORITY ITEM AND ITS SUPPLIERS HELD HIGH PRIORITY CONTRACTS TO COMPLETE BEFORE THEY COULD FILL RADALAB'S ORDERS. UNIVERSAL INDUSTRIES WAS IN EXACTLY THE SAME SITUATION AND HAD REQUESTS ON FILE FOR EXTENSIONS OF DELIVERY DATES, BUT THIS INFORMATION WAS EITHER OVERLOOKED OR DISREGARDED IN THE DETERMINATION OF UNIVERSAL INDUSTRIES' RESPONSIBILITY. ALSO IN CONNECTION WITH THE DCAS REPORTS THE FILE BEFORE US SHOWS THAT BOTH RADALAB (WITHOUT THE ASSISTANCE OF INSTRUMENT SYSTEMS) AND UNIVERSAL INDUSTRIES WERE CONSIDERED UNABLE TO MEET THE REQUIRED SCHEDULE OF DELIVERY, YET IT DOES NOT APPEAR THAT THE SAME STANDARD WAS APPLIED TO BOTH COMPANIES. THE GARDEN CITY DCAS REPORT SHOWS THAT RADALAB WAS SURVEYED ON THE BASIS OF A COMPLETED CONTRACT IN 810 DAYS, WHEREAS THE CHICAGO DCAS SURVEY ON UNIVERSAL INDUSTRIES INDICATES A SURVEY ON THE BASIS OF UNIVERSAL INDUSTRIES' ACCELERATED DELIVERY PROPOSAL, BASED ON WAIVER OF FIRST PRODUCT, OF COMPLETION IN 630 DAYS. THIS LATTER SURVEY HAS NO INDICATION THAT UNIVERSAL INDUSTRIES COULD NOT COMPLETE DELIVERY IN 810 DAYS.

IN HIS REPORT THE CONTRACTING OFFICER STATES THAT:

"THE DELIVERY PROVISION CONTAINED IN THE REQUEST FOR PROPOSALS * * * INDICATED THAT ALL OFFERS WOULD BE EVALUATED BASED UPON THE ABILITY OF THE OFFEROR TO MEET THE DELIVERY SCHEDULE INDICATED. THE GOVERNMENT'S INTERPRETATION IS THAT OFFERS OF EARLIER DELIVERY WOULD BE CONSIDERED EQUALLY AND THAT NO PREFERENCE WOULD BE GIVEN FOR EARLIER DELIVERY. * *

THE REQUEST FOR PROPOSALS, AT PAGE 33, UNDER ARTICLE H, DELIVERY, OF THE SCHEDULE AFTER SETTING OUT THE SCHEDULE OF DELIVERY OF THE EQUIPMENT, STATES:

"ANY OTHER TIME OF DELIVERY OFFERED MUST BE EXPRESSED IN THE SAME MANNER AS THE SCHEDULE SPECIFIED ABOVE FOR THE RESPECTIVE QUANTITY OR ITEM AND MUST BEAR THE SAME RELATIONSHIP IN DELIVERY BETWEEN THE END ITEM AND ANCILLARY ITEMS AS SPECIFIED ABOVE. OFFERS OF DELIVERY OF EACH QUANTITY WITHIN THE APPLICABLE PERIODS SPECIFIED ABOVE WILL BE EVALUATED EQUALLY WITH RESPECT TO DELIVERY. OFFERS OF DELIVERY OF ANY QUANTITY UNDER SUCH TERMS OR CONDITIONS THAT DELIVERY WILL NOT CLEARLY FALL WITHIN THE APPLICABLE PERIODS SPECIFIED ABOVE ARE NOT ACCEPTABLE AND WILL NOT NORMALLY BE CONSIDERED BY THE GOVERNMENT. IF A DELIVERY SCHEDULE EARLIER THAN THAT SPECIFIED ABOVE IS OFFERED, THE GOVERNMENT RESERVES THE RIGHT TO AWARD EITHER IN ACCORDANCE WITH THE REQUIRED TIME OF DELIVERY SPECIFIED ABOVE OR THE TIME OF DELIVERY SO OFFERED. IF THE OFFEROR OFFERS NO OTHER DELIVERY SCHEDULE, THE REQUIRED TIME OF DELIVERY SPECIFIED ABOVE SHALL APPLY. THE TIME OF DELIVERY WILL BE CONVERTED TO A SPECIFIC CALENDAR DATE IN THE RESULTING CONTRACT.'

ON PAGE 46 OF THE REQUEST FOR PROPOSALS, ARTICLE M, WAIVER OF FIRST ARTICLE TESTING, OF THE SCHEDULE, PROVIDES IN PERTINENT PART, AS FOLLOWS:

"THE GOVERNMENT RESERVES THE RIGHT, WITH RESPECT TO BIDDERS/OFFERORS WHO OFFER PRODUCTS PREVIOUSLY ACCEPTED OR TESTED BY THE GOVERNMENT, TO WAIVE THE REQUIREMENT FOR FIRST ARTICLE TESTS. BIDDERS/OFFERORS WHO OFFER SUCH PRODUCTS AND WISH TO RELY ON SUCH PREVIOUS ACCEPTANCE OR TEST MUST FURNISH WITH THEIR BIDS/OFFERS, EVIDENCE THAT PRIOR GOVERNMENT ACCEPTANCE OR APPROVAL IS APPLICABLE TO THE PRODUCTS/S) PROPOSED TO BE FURNISHED HEREUNDER. BIDDERS/OFFERORS SHALL SET FORTH BELOW THE DECREASE IN UNIT PRICE AND EARLIER DELIVERY OFFERED IN EVENT OF SUCH WAIVER BY THE GOVERNMENT. IF THE GOVERNMENT ELECTS TO EXERCISE ITS RIGHT TO WAIVE FIRST ARTICLE TESTING, BIDS/OFFERS WILL BE EVALUATED ON THE BASIS OF THE DECREASED UNIT PRICE AND EARLIER DELIVERY SO OFFERED. * * *"

WE BELIEVE THAT NOTWITHSTANDING THE OPINION THAT UNIVERSAL INDUSTRIES COULD NOT DELIVER THE ITEM IN 630 DAYS, THE ABOVE-QUOTED PROVISIONS REQUIRED THAT CONSIDERATION SHOULD HAVE BEEN GIVEN TO ITS ABILITY TO MAKE DELIVERY IN 810 DAYS OR LESS, WITHOUT WAIVER OF PRE PRODUCTION SAMPLE. OTHER WORDS, UNIVERSAL INDUSTRIES SHOULD NOT HAVE BEEN PENALIZED FOR PROPOSING AN EARLIER DELIVERY.

ONE FURTHER MATTER REQUIRES COMMENT ON OUR PART, AND THAT IS THE FACT THAT RADALAB WAS PERMITTED TO REFUTE OR EXPLAIN AWAY THE AREAS OF DEFICIENCY IN ITS INITIAL SURVEY, BUT UNIVERSAL WAS NOT GIVEN THE SAME OPPORTUNITY. WE NOTE THAT RADALAB'S RECORD OF DELINQUENCY IN DELIVERY WAS UPDATED FROM THE INITIAL REPORT AND WAS FOUND TO HAVE DECREASED THE DELINQUENCIES SUBSTANTIALLY. UNIVERSAL'S RECORD WAS NOT SIMILARLY UPDATED. UNIVERSAL HAS FURNISHED INFORMATION THAT IF THE REPORT HAD BEEN UPDATED, UNIVERSAL WOULD HAVE BEEN FOUND CURRENT ON ITS CONTRACTS, DUE TO EXTENSIONS OF DELIVERY DATES GRANTED BY THE GOVERNMENT, AS IN THE CASE OF RADALAB.

IN THIS MATTER THE CONTRACTING OFFICER CHOSE THE METHOD OF PROCUREMENT BY NEGOTIATION ON THE BASIS OF THE URGENT NEED FOR THE ITEM, YET IT APPEARS TO US THAT THE AWARD WAS MADE ON THE SOLE-BASIS OF PRICE, AND AS SHOWN ABOVE THERE WAS NO ATTEMPT TO NEGOTIATE THE PRICE. THE FACT THAT THIS WAS A NEGOTIATED PROCUREMENT DOES NOT ELIMINATE THE NEED FOR COMPETITION. THE CONTRACTING OFFICER AND THE CEB COULD HAVE AND SHOULD HAVE CONDUCTED DISCUSSIONS WITH UNIVERSAL, CONCURRENTLY WITH RADALAB, CONCERNING ITS NONRESPONSIBILITY, IN AN EFFORT TO OBTAIN A SECOND RESPONSIBLE OFFEROR SO THAT COMPETITION COULD HAVE BEEN ESTABLISHED. SEE B-158528, APRIL 26, 1967.

FROM WHAT HAS PREVIOUSLY BEEN SAID IT IS CLEAR THAT THE PROCUREMENT WAS DEFICIENT IN AT LEAST THREE RESPECTS. 1. THE SAME STANDARDS WERE NOT APPLIED IN DETERMINING THE RESPONSIBILITY OF RADALAB AND UNIVERSAL. 2. IF RADALAB WAS IN FACT THE ONLY RESPONSIBLE OFFEROR, CERTIFIED COST AND PRICING DATA SHOULD HAVE BEEN OBTAINED PURSUANT TO PUBLIC LAW 87-653. UNIVERSAL SHOULD AT LEAST HAVE BEEN ADVISED THAT ITS "LATE" MODIFICATION WOULD NOT BE CONSIDERED PURSUANT TO ASPR 3-506.

THE PROCUREMENT DEVIATED FROM REQUIREMENTS OF THE LAW AND REGULATION IN MATTERS MATERIAL ENOUGH TO WARRANT CANCELLATION OF THE AWARD UNDER ORDINARY CIRCUMSTANCES. HOWEVER, WE ARE NOT UNMINDFUL OF THE FACT THAT THIS IS A HIGH PRIORITY EMERGENCY PROCUREMENT. THEREFORE, WE WOULD NOT DIRECT CANCELLATION IF SUCH ACTION WOULD RESULT IN DELAYING DELIVERIES OF THE END ITEMS. IF, ON THE OTHER HAND, THE INSTANT CONTRACT CAN BE CANCELLED WITHOUT ANY ADVERSE EFFECT ON MILITARY POSTURE, WE THINK SUCH ACTION IS REQUIRED. IN THIS CONNECTION WE ENCLOSE A COPY OF A LETTER DATED JANUARY 26, 1968, FROM UNIVERSAL.

PLEASE ADVISE US PROMPTLY OF YOUR DETERMINATION AS TO THE EFFECT OF CANCELLATION IN THIS INSTANCE.