B-162736, AUG. 16, 1968

B-162736, AUG. 16, 1968

TO MR. BURTON I. MANIS:

WE REFER TO THE TELEGRAM OF OCTOBER 18, 1967, FROM FERMONT DIVISION, DYNAMICS CORPORATION OF AMERICA (FERMONT), AND SUBSEQUENT CORRESPONDENCE ALLEGING THAT THE SUCCESSFUL OFFEROR UNDER REQUEST FOR PROPOSALS NO. DAAK01-67-R-A373, ISSUED APRIL 19, 1967, BY THE DIRECTORATE OF PROCUREMENT AND PRODUCTION, UNITED STATES ARMY MOBILITY EQUIPMENT COMMAND, ST. LOUIS, MISSOURI, TO PROCURE 3 KW GENERATOR SETS, THE JOHN R. HOLLINGSWORTH COMPANY (HOLLINGSWORTH) DOES NOT SATISFY THE SPECIAL EXPERIENCE REQUIREMENTS SET OUT IN THE SOLICITATION. IN ADDITION, FERMONT CONTENDS THAT THIS PROCUREMENT SHOULD HAVE BEEN MADE THROUGH FORMAL ADVERTISING RATHER THAN THROUGH NEGOTIATION.

THE SUBJECT SOLICITATION ISSUED APRIL 19, 1967, PURSUANT TO A PURCHASE ORDER BEARING A PRIORITY DESIGNATOR 02 UNDER THE UNIFORM MATERIAL MOVEMENT AND ISSUE PRIORITY SYSTEM, WAS SENT TO A TOTAL OF 47 PROSPECTIVE CONTRACTORS WITH A CLOSING DATE FOR OFFERS OF MAY 10, 1967.

TWO AMENDMENTS WERE ISSUED PRIOR TO THE AMENDED CLOSING DATE OF MAY 19, 1967, AND TWO MORE, WITH SEPTEMBER 5, 1967, CLOSING DATES, WERE ISSUED DURING THE COURSE OF NEGOTIATIONS. THESE LATER AMENDMENTS INCORPORATED TECHNICAL CHANGES TO THE SPECIFICATIONS BROUGHT ABOUT BY THE NEGOTIATIONS.

THE FINAL PROPOSALS RESULTED IN THE THREE LOW OFFERS WHICH FOLLOW:

KURZ AND ROOT COMPANY, INCORPORATED $11,371,120.00

JOHN R. HOLLINGSWORTH COMPANY 14,879,003.50

FERMONT DIVISION 15,071,094.89

THE CONTRACTING OFFICER DETERMINED THAT KURZ AND ROOT COMPANY, INCORPORATED, LACKED THE NECESSARY TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB WITHIN THE TIME LIMITATION AND THEREFORE REJECTED ITS OFFER. WE ARE ENCLOSING FOR YOUR INFORMATION A COPY OF OUR LETTER OF TODAY TO KURZ AND ROOT COMPANY, INCORPORATED, DENYING ITS PROTEST AGAINST BOTH ITS REJECTION AND THE SUBJECT AWARD ACTION.

THE ELIMINATION OF KURZ AND ROOT COMPANY, INCORPORATED, LEFT HOLLINGSWORTH IN LINE FOR AWARD AND ON OCTOBER 18, 1967, AFTER APPROPRIATE ADMINISTRATIVE REVIEWS AND SURVEYS, AWARD WAS MADE TO THAT FIRM. HOLLINGSWORTH WAS SCHEDULED TO COMMENCE PRODUCING AND DELIVERING GENERATOR SETS TO THE GOVERNMENT IN MAY OF 1968 UNDER THE TERMS OF THE SUBJECT CONTRACT.

FERMONT, IN ITS LETTER OF OCTOBER 24, 1967, ALLEGES THAT THIS AWARD IS IMPROPER IN THAT HOLLINGSWORTH DOES NOT SATISFY THE SPECIAL PRIOR PRODUCTION EXPERIENCE CRITERION SET OUT IN PARAGRAPH "A" , PAGE 6, "ADDITIONAL SOLICITATION INSTRUCTION AND CONDITIONS" , WHICH REQUIRES PROSPECTIVE CONTRACTORS TO POSSESS THE FOLLOWING:

"A PROVEN RECORD OF ACTUAL PRODUCTION FOR AT LEAST THREE CONSECUTIVE MONTHS AND DELIVERY OF NOT LESS THAN 450 PER MONTH OF ANY COMBINATION OF GENERATOR SETS, ELECTRIC MOTORS, OR MOTOR-GENERATORS ON A ONE SHIFT 8-HOUR DAY, OR 900 PER MONTH ON A TWO SHIFT BASIS. SAID PRODUCTION RATE MUST HAVE BEEN ESTABLISHED WITH EXISTING ORGANIZATION, PRODUCTION, AND STORAGE FACILITIES WITHIN THE LAST 36 MONTHS.'

THE DECEMBER 16, 1967, REPORT UPON THIS PROTEST FROM THE ACTING DEPUTY DIRECTOR OF PROCUREMENT AND PRODUCTION, HEADQUARTERS, UNITED STATES ARMY MATERIEL COMMAND, DEPARTMENT OF THE ARMY, STATES THAT THE PREAWARD SURVEY INDICATES HOLLINGSWORTH DID IN FACT SATISFY THE PRIOR PRODUCTION EXPERIENCE REQUIREMENTS.

THE PREAWARD SURVEY, NO. DCRP-67-6-19, ON AN ATTACHED SHEET LABELED "SURVEYOR COMMENTS" STATES:

"* * * THE J. R. HOLLINGSWORTH CO. PRODUCED 3KW ENG GEN SETS ON CONTRACT DA11-184-AMG-829 (T) IN THE FOLLOWING QUANTITIES 1/66 - 501, 2/66 - 487 3/66 - 476 (MIN REQ 450 FOR 3 CONSECUTIVE MONTHS) ON A ONE SHEET BASIS"

HOWEVER, BECAUSE FERMONT FURNISHED STATEMENTS FROM FORMER HOLLINGSWORTH EMPLOYEES CASTING DOUBT UPON THE PREAWARD SURVEY FINDINGS REGARDING HOLLINGSWORTH'S PRIOR PRODUCTION, THE MATTER HAS BEEN INVESTIGATED FURTHER. IN PARTICULAR, FERMONT ALLEGES THAT THE SURVEY TOTALS REPRESENT A BACKLOG OF UNACCEPTABLE UNITS BUILT DURING 1965 AND RELEASED FOR DELIVERY DURING THE FIRST THREE MONTHS OF 1966 AFTER THE CORRECTION OF DEFECTS WHICH PREVENTED THEIR PASSING INSPECTION AS BUILT.

REPRESENTATIVES OF THIS OFFICE VISITED HOLLINGSWORTH AND ITS RECORDS SHOW THAT THE NUMBER OF UNITS PRODUCED DURING THE MONTHS OF JANUARY, FEBRUARY AND MARCH OF 1966 SATISFY THE PRODUCTION EXPERIENCE REQUIREMENTS. MOREOVER, OUR AUDITORS FOUND THAT ALTHOUGH HOLLINGSWORTH HAD A PRODUCTION BACKLOG OF 157 UNDELIVERED UNITS ON JANUARY 2, 1966, THEY ALSO FOUND THAT THE FIRM HAD A BACKLOG OF 182 UNDELIVERED UNITS ON HAND APRIL 3, 1966, WHICH INDICATES THAT 25 UNITS IN EXCESS OF THOSE SHOWN ON THE PERTINENT FORMS DD250, MATERIEL INSPECTION AND RECEIVING REPORTS, WERE ACTUALLY PRODUCED DURING THE QUALIFYING PERIOD. IT THEREFORE APPEARS THAT THE FACTUAL ALLEGATIONS OF THE EX EMPLOYEES OF HOLLINGSWORTH REGARDING THAT FIRM'S FAILURE TO QUALIFY AS AN EXPERIENCED PRODUCER CANNOT BE SUBSTANTIATED. ACCORDINGLY, WE CONCLUDE THAT HOLLINGSWORTH'S PRIOR PRODUCTION DOES IN FACT SATISFY THE EXPERIENCE REQUIREMENTS OF THE SOLICITATION.

FERMONT FURTHER CONTENDS THAT IN VIEW OF THE EXTENSIVE TIME ELAPSED BETWEEN THE ISSUANCE OF THE SOLICITATION ON APRIL 19, 1967, AND THE DATE OF AWARD, OCTOBER 18, 1967, NEGOTIATION UNDER 10 U.S.C. 2304 (A) (2) AND ASPR 3-202.2 WAS IMPROPER.

FERMONT'S LETTER OF OCTOBER 24, 1967, POINTS OUT THAT UNDER THE CITED STATUTE THE GOVERNMENT'S AUTHORITY TO NEGOTIATE DEPENDS UPON THE EXISTENCE OF A "PUBLIC EXIGENCY" WHICH "WILL NOT PERMIT THE DELAY INCIDENT TO ADVERTISING" , WHILE UNDER THE CITED REGULATION, IN ORDER FOR A NEGOTIATION TO BE VALID, THE GOVERNMENT'S "NEED MUST BE COMPELLING AND OF UNUSUAL URGENCY, AS WHEN THE GOVERNMENT WOULD BE SERIOUSLY INJURED, FINANCIALLY OR OTHERWISE, IF THE SUPPLIES OR SERVICES WERE NOT FURNISHED BY A CERTAIN DATE, AND WHEN THEY COULD NOT BE PROCURED BY THAT DATE BY MEANS OF FORMAL ADVERTISING" .

FERMONT CONTENDS THAT THESE STANDARDS ARE NOT MET BY THE PRESENT CASE, WHICH INVOLVES A DELAY OF SEVEN MONTHS BETWEEN THE ISSUANCE OF A SOLICITATION AND THE TIME OF AWARD.

WE NOTE THAT AMENDMENTS NO. 3 AND 4 TO THE SUBJECT SOLICITATION WERE ISSUED ON AUGUST 24 AND 31, 1967, WELL AFTER THE AMENDED CLOSING DATE FOR THE RECEIPT OF OFFERS, MAY 19, 1967. THESE TWO AMENDMENTS INCORPORATE A NUMBER OF SUBSTANTIAL CHANGES IN THE SPECIFICATIONS, WHICH CHANGES WERE FOUND TO BE NECESSARY ONLY AFTER THE SUBMISSION OF PROPOSALS. HAD THIS BEEN A FORMALLY ADVERTISED PROCUREMENT, THE ARMY WOULD HAVE BEEN FORCED TO CANCEL AND READVERTISE IN ORDER TO TAKE INTO ACCOUNT THESE CHANGES FOUND NECESSARY AFTER THE RECEIPT OF OFFERS. UNDER THE FACTS HERE, THIS WOULD HAVE MEANT THE ISSUANCE OF A NEW SOLICITATION LATE IN AUGUST OR IN SEPTEMBER, WITH BID OPENING, BID EVALUATION AND PREAWARD SURVEYS SOMETIME THEREAFTER. IT THEREFORE APPEARS THAT THE USE OF THE NEGOTIATION TECHNIQUE, WITH AN AWARD ON OCTOBER 18, 1967, EFFECTED A TIME SAVING IN THIS CASE.

THE ARMY REPORT OF DECEMBER 16, 1967, DETAILS VARIOUS OTHER REASONS FOR THE DELAY INCIDENT TO THE SUBJECT AWARD, INCLUDING SUCH FACTORS AS THE TIME NEEDED TO EVALUATE ALTERNATIVE OFFERS AND THE NECESSITY TO CONDUCT EXTENSIVE PREAWARD SURVEYS. THESE PROCEDURES WOULD HAVE ENTAILED THE SAME AMOUNT OF DELAY REGARDLESS OF WHETHER THE PROCUREMENT WAS ADVERTISED OR NEGOTIATED.

IN ANY EVENT, UNDER 10 U.S.C. 2310 (B), THE ARMY'S DETERMINATION TO NEGOTIATE PURSUANT TO 10 U.S.C. 2304 (A) (2), THE PUBLIC EXIGENCY EXCEPTION TO ADVERTISED BIDDING, IS FINAL AND CONCLUSIVE UPON THIS OFFICE. 45 COMP. GEN. 374.

FURTHERMORE, THIS PROCUREMENT HAS AN 02 PRIORITY DESIGNATOR. UNDER ASPR 2-203.3, FOR PROCUREMENTS BEARING PRIORITY DESIGNATOR 01 THROUGH 06, THE CONTRACTING OFFICER NEED ONLY CITE SAID DESIGNATOR TO JUSTIFY THE DETERMINATION REQUIRED BY 10 U.S.C. 2310 (B). 44 COMP. GEN. 590.

IN ADDITION, FERMONT CONTENDS THAT THE SOLICITATION DELIVERY DATES WERE UNREASONABLE BECAUSE THE DELIVERY DATES WERE NEVER REVISED EVEN THOUGH THE DATE OF AWARD WAS OCTOBER 18, 1967, RATHER THAN THE PLANNED DATE OF JULY 1, 1967.

THE ARMY REPORT STATES THAT THE DELIVERY SCHEDULE WAS APPROPRIATELY MODIFIED DURING THE COURSE OF NEGOTIATIONS WHEN IT BECAME APPARENT THAT AWARD WOULD NOT BE MADE AT THE CONTEMPLATED TIME.

THE CONTRACT AWARDED HOLLINGSWORTH CONTAINS A REVISED DELIVERY SCHEDULE, WITH DELIVERY COMMENCING IN MAY 1968, APPROXIMATELY SIX MONTHS AFTER THE DATE OF AWARD. THIS SIX-MONTH INTERVAL BETWEEN AWARD AND FIRST DELIVERY IS THE SAME AS THAT CONTEMPLATED IN THE ORIGINAL SOLICITATION.

WE SEE NO REASON TO QUESTION THE PROCURING ACTIVITY'S AUTHORITY TO MAKE SUCH REASONABLE ADJUSTMENTS TO THE DELIVERY SCHEDULE DURING NEGOTIATIONS, ESPECIALLY WHERE, AS HERE, ALL OFFERORS WERE GIVEN AN EQUAL OPPORTUNITY TO REVISE THEIR DELIVERY DATES. IN THIS REGARD, A SEPTEMBER 4, 1967, LETTER FROM FERMONT TO THE PROCURING ACTIVITY REFLECTS FERMONT'S ACCEPTANCE OF JUST SUCH A POSTPONEMENT OF THE DELIVERY SCHEDULE.

YOUR MORE RECENT LETTER OF JULY 16, 1968, STATES THAT THE CONTRACTING OFFICER ADVISED YOU THAT HOLLINGSWORTH HAS NOT COMMENCED DELIVERY OF GENERATOR SETS UNDER THE SUBJECT CONTRACT TO DATE OF YOUR LETTER ALTHOUGH THE MODIFIED DELIVERY SCHEDULE CALLED FOR DELIVERIES BEGINNING IN MAY 1968. FROM THIS YOU CONCLUDE THAT HOLLINGSWORTH SHOULD HAVE BEEN REJECTED AS AN UNQUALIFIED PRODUCER LACKING THE NECESSARY DEGREE OF RESPONSIBILITY REQUIRED FOR AWARD. ACCORDINGLY, YOU REQUEST THAT HOLLINGSWORTH BE DECLARED A NONRESPONSIBLE BIDDER, THAT THE EXISTING CONTRACT WITH HOLLINGSWORTH BE CANCELLED, AND THAT THE GOVERNMENT'S FURTHER REQUIREMENTS UNDER THE MULTI-YEAR CONTRACT BE AWARDED TO WHAT WOULD THEN BE THE LOW RESPONSIVE, RESPONSIBLE BIDDER UNDER THE ORIGINAL SOLICITATION, FERMONT DIVISION.

ALTHOUGH THE POSSIBILITY EXISTS THAT EVENTS WILL PROVE OUT YOUR FACTUAL ALLEGATIONS REGARDING YOUR COMPETITOR'S INABILITY TO SATISFACTORILY PERFORM THE SUBJECT CONTRACT IN A TIMELY FASHION, SO FAR AS THE QUESTION OF DETERMINING A BIDDER'S QUALIFICATION IS CONCERNED, IN THE ABSENCE OF FRAUD OR COLLUSION, THIS OFFICE WILL NOT QUESTION AN AWARD ACTION, PROPER AT THE TIME OF AWARD, REGARDLESS OF SUBSEQUENT EVENTS TENDING TO SHOW THE GOVERNMENT'S ORIGINAL FACTUAL EVALUATION TO BE MISTAKEN.

IF, IN FACT, HOLLINGSWORTH FAILS TO PERFORM UNDER THE CONTRACT BY PROVIDING UNTIMELY DELIVERIES OR OTHERWISE, THEN THE CONTRACTING OFFICER'S EARLIER JUDGMENT OF THAT FIRM'S PRODUCTION CAPABILITIES WILL BE SHOWN TO BE MISTAKEN. IF THIS EVENTUALITY BECOMES A FACT, THE GOVERNMENT'S PROBLEM THEN WILL BE ONE OF ADMINISTERING AN EXISTING, LEGALLY SUFFICIENT CONTRACT, WHICH WOULD NOT RETROACTIVELY AFFECT THE ORIGINAL AWARD ACTION.

FURTHERMORE, EVEN IF THE ARMY IN ITS DISCRETION UNDER THE EXISTING CONTRACT, WERE TO TERMINATE THE CONTRACT FOR CAUSE OR FOR CONVENIENCE, A FURTHER AWARD OF THE GOVERNMENT'S REMAINING REQUIREMENTS FOR THESE GENERATOR SETS UPON THE BASIS OF THE ORIGINAL SOLICITATION WOULD NOT BE PERMISSIBLE, FOR THE TIME ELAPSED SINCE THE CONCLUSION OF THE ORIGINAL NEGOTIATIONS IS SUCH THAT A NEW PROCUREMENT ACTION WOULD BE REQUIRED.

IN VIEW OF THE ABOVE, THIS OFFICE HAS NO LEGAL OBJECTION TO THE SUBJECT CONTRACT AWARDED TO THE JOHN R. HOLLINGSWORTH COMPANY TO PRODUCE 3 KW GENERATOR SETS.