B-161700, SEP. 5, 1967

B-161700, SEP. 5, 1967

BIDS - NEGOTIATION - SOLE SOURCE DECISION TO ELECTRONIC INSTRUMENTATION DIV., SYSTRON-DONNER CORP., PROTESTING SOLE SOURCE PROCUREMENT OF ELECTRONIC EQUIPMENT FROM HEWLETT PACKARD CO. BY NAVY. NEGOTIATION OF CONTRACT FOR NINE ELECTRONIC COUNTER SYSTEMS TO BE USED IN CONJUNCTION WITH PRESENT 167 SYSTEMS ON BASIS OF SOLE SOURCE PROCUREMENT WHEN COST OF PROCURING FROM ANOTHER SOURCE WITH RESULTANT NEED TO RETRAIN PERSONNEL AND REWRITE OPERATION MANUALS IS SHOWN TO BE PROHIBITIVE WAS A REASONABLE DETERMINATION. WITH RESPECT TO NUMEROUS OTHER CONTENTIONS OF PROTESTANT, EACH WAS ANSWERED AND DID NOT INDICATE BASIS FOR QUESTIONING AWARD.

TO ELECTRONIC INSTRUMENTATION DIVISION SYSTRON-DONNER CORPORATION:

REFERENCE IS MADE TO YOUR TRANSMITTAL TO OUR OFFICE OF COPIES OF CERTAIN OF YOUR LETTERS TO THE NAVY PURCHASING OFFICE, LOS ANGELES, CALIFORNIA, PROTESTING ANY SOLE SOURCE PROCUREMENT OF ELECTRONIC COUNTER SYSTEMS UNDER PROCUREMENT SCHEDULES NOS. 2660 AND 2725.

SCHEDULE NO. 2660 COVERED A REQUIREMENT FOR FIVE ELECTRONIC COUNTER SYSTEMS CONSISTING OF THE BASIC COUNTER MODEL NO. 5245L OF THE HEWLETT PACKARD COMPANY, NORTH HOLLYWOOD, CALIFORNIA, PLUS THREE ACCESSORIES. SCHEDULE NO. 2725 COVERED A SIMILAR REQUIREMENT FOR FOUR ELECTRONIC COUNTER SYSTEMS, PLUS TWO ACCESSORIES. THE NAVY PURCHASING OFFICE, LOS ANGELES, CALIFORNIA, WAS ADVISED OF THE PURCHASE REQUIREMENTS BY THE NAVY PLANT REPRESENTATIVE, POMONA, CALIFORNIA, AND THE TWO PROCUREMENT SCHEDULES WERE COMBINED IN CONNECTION WITH THE NEGOTIATION OF CONTRACT NO. N00123-67-C-2660, DATED JUNE 30, 1967, WITH THE HEWLETT-PACKARD COMPANY.

PURCHASE OF THE NINE ELECTRONIC COUNTER SYSTEMS AND THE SPECIFIED ACCESSORIES WAS REQUESTED ON A NONCOMPETITIVE BASIS AND THE INTENT TO NEGOTIATE "SOLE SOURCE" WITH THE HEWLETT-PACKARD COMPANY ON SCHEDULE NO. 2660 WAS PUBLICIZED IN THE COMMERCE BUSINESS DAILY. A COPY OF THE REQUEST FOR PROPOSAL WAS SENT TO YOU AT YOUR REQUEST WITH THE INFORMATION THAT THE EQUIPMENT MUST BE COMPATIBLE IN ALL RESPECTS WITH THE 167 SYSTEMS ALREADY IN USE IN THE PROGRAM TO INSURE ACCURACY OF ALL MEASUREMENTS AND MEASURING OF TEST EQUIPMENT.

THE REQUEST THAT THE EQUIPMENT BE PURCHASED FROM THE HEWLETT-PACKARD COMPANY WAS ACCOMPANIED BY A STATEMENT OF JUSTIFICATION FOR SOLE SOURCE PROCUREMENT WHICH SET FORTH:

1. THAT THE NAVY CALIBRATION PROGRAM WAS ESTABLISHED TO INSURE THE MAINTENANCE OF ACCURACY OF ALL MEASUREMENTS AND MEASURING OF TEST EQUIPMENT UTILIZED AT RESEARCH AND DEVELOPMENT, PRODUCTION, INSPECTION, STORAGE AND TACTICAL ACTIVITIES; AND THAT THERE HAD BEEN IN THE PAST A LACK OF SIMILARITY OF MEASUREMENTS OR MEASUREMENT DATA ON AN IDENTICAL WEAPON COMPONENT WHEN TESTED OR MEASURED AT VARIOUS LOCATIONS, AND THE LACK OF SUCH SIMILARITY HAD RESULTED IN UNNECESSARY EXPENSE IN REWORK, REINSPECTION, COMPONENT FAILURE AND POSSIBLE DEGRADATION OF TACTICAL EFFECTIVENESS DUE TO ERRONEOUS OR INCOMPATIBLE TESTING DATA.

2. THAT IT IS IMPERATIVE THAT EQUIPMENT LOCATED IN EACH NAVY LABORATORY BE IDENTICAL IN EACH AND EVERY RESPECT IN ORDER THAT CALIBRATION AT ONE LABORATORY WILL BE IDENTICAL TO THOSE PERFORMED AT ANY OTHER NAVY LABORATORY; AND THAT THE FAILURE TO ACHIEVE SUCH IDENTITY WOULD NEGATE THE EXPENDITURE OF FUNDS AND EFFORTS TO ESTABLISH AND OPERATE THE STANDARDS AND CALIBRATION LABORATORIES, WOULD ALLOW INCOMPATIBILITY TO REAPPEAR AND WOULD ALLOW FOR THE FAILURE OF THE ENTIRE MISSION OF THE NAVY CALIBRATION PROGRAM.

3. THAT THE EQUIPMENT MANUFACTURED BY THE HEWLETT-PACKARD COMPANY WAS SELECTED AS THE RESULT OF SEVERAL YEARS OF INTENSIVE ENGINEERING AND/OR LABORATORY EVALUATION OF COMPETITIVE EQUIPMENT TO DETERMINE ITS SUITABILITY FROM VARIOUS STANDPOINTS; RECOMMENDATIONS OF PERSONNEL OPERATING STANDARDS LABORATORIES, BOTH GOVERNMENT AND PRIVATE, BASED ON APPROXIMATELY TEN YEARS OF EXPERIENCE, WERE ALSO CONSIDERED.

4. THAT APPROXIMATELY 50 CALIBRATION PROCEDURES AND TECHNIQUES HAVE BEEN PREPARED UTILIZING THE EQUIPMENT SPECIFIED FOR PROCUREMENT AND ANY CHANGE IN EQUIPMENT WOULD REQUIRE THE DEVELOPMENT OF NEW OR REVISED PROCEDURES AT A CONSIDERABLE COST TO THE GOVERNMENT.

5. THAT ALMOST $500,000 IS EXPENDED ANNUALLY IN THE TRAINING OF THE NAVY'S CALIBRATION TECHNICIANS, MILITARY AND CIVILIAN, AND A CHANGE IN EQUIPMENT WOULD SERIOUSLY REDUCE THE EFFECTIVENESS OF THE TRAINING PROGRAM AS WELL AS CREATING AN ALMOST IMPOSSIBLE TASK OF TEACHING DIFFERENT MEASUREMENT SYSTEMS TO ACCOMPLISH THE SAME MEASUREMENT.

IT IS REPORTED BY THE DEPARTMENT OF THE NAVY THAT THE CONTRACTING OFFICER CONTACTED THE REQUISITIONING ACTIVITY TO VERIFY THE NEED FOR EQUIPMENT WHICH WOULD BE IDENTICAL TO THAT IN USE RATHER THAN EQUIPMENT EQUAL TO OR COMPATIBLE WITH THE EQUIPMENT. THE NEED FOR IDENTICAL EQUIPMENT FOR THE REASONS SET FORTH IN THE STATEMENT OF JUSTIFICATION FOR SOLE SOURCE PROCUREMENT WAS AFFIRMED. THE REQUISITIONING ACTIVITY ALSO ADVISED THE CONTRACTING OFFICER THAT AN EVALUATION OF SYSTRON DONNER EQUIPMENT, FURNISHED AS SAMPLES IN CONNECTION WITH THE AWARD OF A CONTRACT TO THAT FIRM IN NOVEMBER 1964, SHOWED THAT IT WAS NOT COMPATIBLE IN SEVERAL AREAS.

AS THE RESULT OF THE RECEIPT OF LETTERS FROM YOUR COMPANY, A COMPLETE REVIEW OF THE PROCUREMENT REQUIREMENT WAS MADE AND IT WAS DETERMINED THAT THE EQUIPMENT SHOULD BE PURCHASED FROM THE HEWLETT PACKARD COMPANY AS ORIGINALLY PLANNED. YOU WERE ADVISED OF SUCH DETERMINATION IN A LETTER DATED JUNE 6, 1967, FROM THE CONTRACTING OFFICER, WHICH STATES, IN PART, AS FOLLOWS: "AT THE PRESENT TIME THERE ARE 167 IDENTICAL SYSTEMS IN USE IN VARIOUS NAVAL WEAPONS AND SHIPS LABORATORIES. IT IS IMPERATIVE THAT THE UNITS IN THE CALIBRATION SYSTEM BE IDENTICAL IN ALL RESPECTS IN ORDER THAT THE CALIBRATIONS AT ONE LABORATORY ARE IDENTICAL TO THOSE PERFORMED AT ANOTHER. FAILURE TO ACHIEVE THIS IDENTITY WOULD VOID THE SUCCESSFUL ACCOMPLISHMENT OF THE ENTIRE NAVY CALIBRATION PROGRAM. "EVEN THOUGH ANOTHER MANUFACTURER'S UNIT MAY MEET THE BROAD SPECIFICATION REQUIREMENTS (AND QUALIFY FOR OTHER INTENDED MILITARY USES) THERE ARE INHERENT TRADE DIFFERENCES WHICH PREVENT ONE UNIT FROM CONFORMING IDENTICALLY TO THAT OF ANOTHER MANUFACTURER.'

THE CONTRACT, DATED JUNE 30, 1967, WAS AWARDED TO THE HEWLETT PACKARD COMPANY BEFORE THE RECEIPT OF YOUR LETTER DATED JULY 5, 1967, TO THE NAVY PURCHASING OFFICE, LOS ANGELES, CALIFORNIA, IN WHICH YOU SUGGESTED THAT THE FOLLOWING FIVE POINTS BE CONSIDERED BY RESPONSIBLE AUTHORITIES:

"1. ITEM 1 SPECIFIES THE HEWLETT-PACKARD MODEL 5245L. HOWEVER, THE SPECIFICATIONS OF THE HP-5245L DO NOT MEET THE MINIMUM SALIENT REQUIREMENTS.

"2. THE ORIGINAL JUSTIFICATION FOR ELIMINATION OF OPEN COMPETITION WAS - COMPATIBLE-; NOW THIS JUSTIFICATION IS -IDENTICAL-. WE CHALLANGE SUCH TERMS AS THE POSTMASTER GENERAL DEEMS JUST AND EXPEDIENT, MAY-- BOTH STATEMENTS ON THE BASIS THAT THE EQUIPMENT IS NOT IDENTICAL EXCEPT FOR THE MANUFACTURER'S NAME, AND IF ANY IDENTICAL REQUIREMENT EXISTS, IT MUST BE WITHIN THE CONTEXT OF SPECIFICATIONS UNDER PARAGRAPH 2.

"3. THE SPECIFICATIONS AS WRITTEN WERE GENERATED BY HIGHLY QUALIFIED AND RESPONSIBLE PERSONNEL TO DEFINE THE REQUIREMENTS OF THE NAVY PROGRAMS. A DIRECT RESULT OF THE QUALIFICATION OF SYSTRON-DONNER PRODUCTS ON THE FIRST PROCUREMENT, AGAINST THIS SPECIFICATION AND IN OPEN BIDDING AMONG TESTED AND QUALIFIED SUPPLERS, (SIC) A COST SAVING OF APPROXIMATELY 28 PERCENT OR $75,000.00 WAS ENJOYED BY THE U.S. NAVY.

"4. VARIOUS NAVAL WEAPONS AND SHIP LABORATORIES HAVE SEVENTY-FIVE (75) COUNTERS AND ONE HUNDRED FOUR (104) PLUG-INS OF SYSTRON-DONNER MANUFACTURE IN OPERATION AND HAVE SUCCESSFULLY OVERCOME THE PROBLEM ATTENDANT TO THE FACT THAT THE EQUIPMENT IS NOT MANUFACTURED BY THE HEWLETT-PACKARD COMPANY.

"5. THE POSSIBILITY OF VOIDING THE ENTIRE NAVY CALIBRATION PROGRAM OVER A SINGLE BRAND-NAME INSTRUMENT IS A VERY SERIOUS STATEMENT. IT WOULD SEEM THAT IF INDEED THIS SITUATION EXISTS, DIRECT ACTION IS REQUIRED TO ELIMINATE IT AS NO ONE INSTRUMENT OR SINGLE MANUFACTURER SHOULD HAVE THE ABILITY, AT WILL, TO EFFECT THE U.S. NAVY'S PERFORMANCE.'

THE REPORT WHICH WE RECEIVED FROM THE DEPARTMENT OF THE NAVY DOES NOT COMMENT ON YOUR LETTER OF JULY 5, 1967, AND A COPY OF THAT LETTER IS NOT INCLUDED AMONG THE EXHIBITS SUBMITTED WITH THE REPORT.

WITH REFERENCE TO THE FIRST POINT MADE IN THAT LETTER, IT WAS REPORTED THAT THE EQUIPMENT PREVIOUSLY PURCHASED FROM THE HEWLETT PACKARD COMPANY MET ALL CRITICAL SPECIFICATIONS AND IT IS APPARENT THAT THE NAVY DOES NOT AGREE WITH YOUR STATEMENT THAT THE SPECIFICATIONS OF THE HEWLETT-PACKARD MODEL 5245L DO NOT MEET THE MINIMUM SALIENT REQUIREMENTS OF SECTION 2.0 OF THE REQUEST FOR PROPOSALS WHICH WAS FORWARDED TO YOUR COMPANY FOR INFORMATION ONLY.

IN REGARD TO THE SECOND POINT, THE CONTRACTING OFFICER REFERRED TO A REQUIREMENT OF COMPATIBILITY BUT THE REQUISITIONING ACTIVITY DETERMINED IN THE FIRST INSTANCE THAT IT IS IMPERATIVE THAT THE EQUIPMENT LOCATED IN EACH NAVY LABORATORY BE IDENTICAL IN ALL RESPECTS TO THE EQUIPMENT PREVIOUSLY PURCHASED FROM THE HEWLETT-PACKARD COMPANY.

WITH REFERENCE TO THE THIRD POINT, IT APPEARS, AS YOU SUGGEST, THAT THE GOVERNMENT MAY HAVE OBTAINED SOME BENEFITS AS THE RESULT OF ADVERTISING FOR BIDS ON THE FIRST PROCUREMENT OF THE TYPES OF EQUIPMENT LISTED IN SCHEDULES NOS. 2660 AND 2725. HOWEVER, THE REPORT OF THE DEPARTMENT OF THE NAVY SHOWS THAT THE ORIGINAL PROCUREMENT WAS EVENTUALLY EFFECTED THROUGH A CONTRACT AWARD TO THE HEWLETT-PACKARD COMPANY, ALTHOUGH ITS BID WAS THE FOURTH LOWEST OF THE FIVE BIDS RECEIVED. THE LOWEST BIDDER DEFAULTED AND AN AWARD WAS MADE TO YOUR COMPANY ON NOVEMBER 16, 1964. THREE DAYS LATER THAT CONTRACT WAS TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT ON A NO-COST BASIS IN VIEW OF A DISPUTE WHICH AROSE WITH RESPECT TO THE RESULTS OF THE TESTS MADE ON TWO REQUIRED SAMPLES OF YOUR EQUIPMENT. AFTER IT WAS FOUND THAT THE THIRD LOWEST BIDDER WAS NOT IN A POSITION TO MEET THE REQUIRED DELIVERY SCHEDULES, AN AWARD WAS MADE FOR 76 UNITS (LATER INCREASED TO 114), TO THE HEWLETT-PACKARD COMPANY WHICH PERFORMED SATISFACTORILY.

SOLICITATION ON A COMPETITIVE BASIS IN APRIL 1966 FOR 61 ADDITIONAL COUNTERS RESULTED IN AN AWARD TO THE LOW OFFEROR, THE HEWLETT-PACKARD COMPANY.

WITH REFERENCE TO THE FOURTH POINT, IT APPEARS THAT ELECTRONIC COUNTER SYSTEMS OF YOUR MANUFACTURE WERE PURCHASED BY THE NAVY FOR PURPOSES OTHER THAN THOSE BEING SERVED BY THE 167 ELECTRONIC COUNTER SYSTEMS PURCHASED FROM THE HEWLETT-PACKARD COMPANY.

IN REGARD TO THE FIFTH POINT, WE AGREE THAT MAXIMUM COMPETITION SHOULD BE OBTAINED CONSISTENT WITH THE GOVERNMENT'S NEEDS AND 10 U.S.C. 2304 (G) REQUIRES THAT:

"IN ALL NEGOTIATED PROCUREMENTS IN EXCESS OF $2,500 IN WHICH RATES OR PRICES ARE NOT FIXED BY LAW OR REGULATION AND IN WHICH TIME OF DELIVERY WILL PERMIT, PROPOSALS SHALL BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES CONSISTENT WITH THE NATURE AND REQUIREMENTS OF THE SUPPLIES OR SERVICES TO BE PROCURED * * *.'

NOTWITHSTANDING THE EMPHASIS ON OBTAINING THE MAXIMUM COMPETITION, IT MUST BE RECOGNIZED THAT THE PRIMARY OBJECTIVE OF SPECIFICATIONS IS TO REFLECT THE ACTUAL NEEDS OF THE GOVERNMENT. NECESSARILY, THE PROCURING AGENCY HAS THE PRIMARY RESPONSIBILITY FOR DRAFTING SPECIFICATIONS WHICH IN FACT REFLECT THOSE NEEDS. WHERE THE LEGITIMATE NEEDS OF THE GOVERNMENT CAN BE SATISFIED FROM ONLY A SINGLE SOURCE, WE DO NOT THINK THE LAW REQUIRES THAT THEY BE COMPROMISED TO OBTAIN COMPETITION.

IN THIS INSTANCE, IT HAS BEEN DETERMINED THAT THE COST OF PROCURING FROM ANOTHER SOURCE ONLY NINE ADDITIONAL SYSTEMS FOR USE IN CONJUNCTION WITH THE PRESENT 167 WOULD BE PROHIBITIVE BECAUSE OF THE RESULTING NEED TO RETRAIN PERSONNEL AND REWRITE OPERATIONAL MANUALS. THEREFORE, THE DETERMINATION OF THE DEPARTMENT OF THE NAVY THAT IT WOULD NOT BE FEASIBLE OR PRACTICABLE TO SOLICIT BIDS ON THE NINE ADDITIONAL ELECTRONIC COUNTER SYSTEMS APPEARS REASONABLE.

ACCORDINGLY, WE FIND NO LEGAL BASIS FOR TAKING EXCEPTION TO THE CONTRACT NEGOTIATED WITH THE HEWLETT-PACKARD COMPANY.