B-164525, FEB. 17, 1969

B-164525, FEB. 17, 1969

TO BURDETT OXYGEN COMPANY:

REFERENCE IS MADE TO THE LETTERS OF NOVEMBER 21, 1968, OCTOBER 11, 1968, WITH ENCLOSURES, AND THE OTHER CORRESPONDENCE, REGARDING THE PROTEST BY BURDETT OXYGEN COMPANY AGAINST THE AWARD OF A MULTI-YEAR CONTRACT UNDER INVITATION FOR BIDS NO. F41608-68-B-2817, ISSUED ON APRIL 3, 1968, BY THE DEPARTMENT OF THE AIR FORCE, DIRECTORATE, PROCUREMENT AND PRODUCTION, SAN ANTONIO AIR MATERIEL AREA, KELLY AIR FORCE BASE, TEXAS.

BIDS WERE SOLICITED FOR PROPELLANT PRESSURIZING AGENT NITROGEN (LIN), ON AN INDEFINITE QUANTITY BASIS. ITEM 1 WAS FOR LIN IN ACCORDANCE WITH AFPID 9135-7, DATED JULY 15, 1967, AND ITEM 2 WAS FOR LIN IN ACCORDANCE WITH AFPID 9135-10, DATED MARCH 31, 1967. BOTH OF THE ITEMS WERE TO BE SHIPPED F.O.B. DESTINATION TO THE LANGLEY RESEARCH CENTER OF THE NATIONAL AERONAUTICS AND SPACE ADMINISTRATION, HAMPTON, VIRGINIA.

THE BEST ESTIMATED QUANTITY WAS 1,230 TONS FOR EACH QUARTER-YEAR OF THE PROGRAM (1,050 TONS UNDER ITEM 1 AND 180 TONS UNDER ITEM 2); THE MINIMUM QUANTITY WAS 2,460 TONS FOR EACH YEAR OF THE PROGRAM (2,100 TONS UNDER ITEM 1 AND 360 TONS UNDER ITEM 2) AND THE ESTIMATED MAXIMUM YEARLY QUANTITY WAS 7,380 TONS FOR EACH YEAR OF THE PROGRAM (6,300 TONS UNDER ITEM 1 AND 1,080 TONS UNDER ITEM 2). THE MULTI-YEAR PROGRAM WAS TO RUN FOR THREE YEARS. THE INVITATION PROVIDED THAT ITEMS 1 AND 2 WOULD BE AWARDED ON AN AGGREGATE BASIS.

BIDDERS WERE REQUIRED TO INSERT PRICES FOR THE REQUIREMENTS OF THE FIRST YEAR. THE SUBMISSION OF PRICES FOR THE MULTI-YEAR ALTERNATIVE WAS LEFT TO THE OPTION OF BIDDERS. THE INVITATION WAS SENT TO 35PROSPECTIVE BIDDERS AND SIX BIDS WERE RECEIVED INCLUDING FOUR BIDS FROM SMALL BUSINESS CONCERNS. THE SMALL BUSINESS FIRMS BID ONLY FOR THE ONE-YEAR REQUIREMENTS WHEREAS ALL FOUR LARGE BUSINESS FIRMS BID FOR BOTH THE ONE-YEAR AND THE THREE-YEAR REQUIREMENTS. IT WAS PROVIDED THAT THE GOVERNMENT COULD MAKE AN AWARD ON EITHER THE MULTI YEAR BASIS OR THE ONE-YEAR BASIS AS DETERMINED TO BE THE MOST ADVANTAGEOUS TO THE GOVERNMENT. THE EVALUATION CRITERIA WERE SET FORTH ON PAGE 4 OF THE SOLICITATION.

THE TWO LOWEST BIDS RECEIVED WERE AS FOLLOWS:

ONE YEAR CONTRACT THREE YEAR CONTRACT

----------------- ------------------- AIRCO INDUSTRIAL GASES DIV. $30.36 PER TON $28.43 PER TON AIR REDUCTION CO., INC. FOR ITEM 1 AND FOR ITEM 1 AND

(LARGE BUSINESS) $30.36 PER TON $28.43 PER TON

FOR ITEM 2. FOR ITEM 2. BURDETT OXYGEN CO.

(SMALL BUSINESS) $29.537 PER TON NO BID

FOR ITEM 1 AND

$29.537 PER TON

FOR ITEM 2. ALL OF THE OTHER BIDDERS ALSO QUOTED THE SAME PER TON PRICES FOR ITEMS 1 AND 2. BIDS WERE EVALUATED PURSUANT TO THE EVALUATION CRITERIA IN THE INVITATION AND IT WAS DETERMINED THAT THE MULTI-YEAR BID FROM AIRCO WAS MOST ADVANTAGEOUS TO THE UNITED STATES. AN AWARD HAS BEEN MADE TO THAT CONCERN.

COUNSEL FOR BURDETT AND THE SMALL BUSINESS ADMINISTRATION (SBA) CONTEND THAT THE AWARD ON A MULTI-YEAR BASIS VIOLATED THE CRITERIA IN SUBPARAGRAPHS (B) AND (C) OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-322.1. IT IS ARGUED THAT THE ITEMS IN THE INSTANT PROCUREMENT ARE COMMERCIALLY AVAILABLE; THAT A MULTI-YEAR PROCUREMENT WOULD NOT RESULT IN SIGNIFICANT COST SAVINGS AND THAT THE MULTI-YEAR PROCEDURE WAS THEREFORE INCONSISTENT WITH THE REGULATION. VARIOUS TECHNICAL ARGUMENTS INCLUDING THE STATEMENTS OF AN ENGINEER WITH A PRIVATE INDUSTRY CONCERN HAVE BEEN SUBMITTED BY BURDETT'S COUNSEL. IT IS URGED BY COUNSEL FOR BURDETT THAT THE MULTI-YEAR AWARD SHOULD BE CANCELLED AND AN AWARD SHOULD BE DIRECTED TO BURDETT ON A SINGLE-YEAR BASIS.

A LIST OF NEW FACILITIES WHICH ARE BEING CONSTRUCTED IN THE PROCUREMENT AREA HAS BEEN FURNISHED TO OUR OFFICE BY COUNSEL FOR BURDETT AND IN THIS CONNECTION IT IS URGED THAT BY MAY 1969 THE DAILY CAPACITY OF NITROGEN PRODUCTION WILL HAVE INCREASED BY 73 PERCENT TO 2,350 TONS. THE CONTENTION IS MADE THAT THESE NEW FACILITIES WILL BE ABLE TO SUPPLY THE ENTIRE ANNUAL REQUIREMENT OF THIS PROCUREMENT WITH APPROXIMATELY THREE DAYS' PRODUCTION AND THAT THE COMBINED EXISTING AND NEW FACILITES WILL BE ABLE TO SUPPLY THE ANNUAL REQUIREMENT WITH APPROXIMATELY ONE AND ONE-HALF DAYS OF PRODUCTION. IT IS URGED THAT IT IS REASONABLE TO EXPECT THE COST OF LIQUID NITROGEN IN THE AREA OF LANGLEY RESEARCH CENTER WILL DECLINE IN THE NEAR FUTURE BY AS MUCH AS $5.00 PER TON.

ASPR 1-322.1 (B) (4) PROVIDES:

"WHEN THE ITEMS BEING PROCURED ARE REGULARLY MANUFACTURED AND OFFERED FOR SALE IN SUBSTANTIAL QUANTITIES IN THE COMMERCIAL MARKET, THIS PROCEDURE WILL NOT NORMALLY BE USED. HOWEVER, (I) WHEN QUANTITIES TO BE PROCURED BY THE GOVERNMENT REPRESENT A SUBSTANTIAL PORTION OF THE TOTAL MARKET AND WOULD REQUIRE SPECIAL MANUFACTURING RUNS OF ALL OR SUBSTANTIALLY ALL OF THE GOVERNMENT'S REQUIREMENTS AND (II) SIGNIFICANT COST SAVINGS WOULD RESULT FROM MULTI-YEAR PROCUREMENT, THIS PROCEDURE MAY BE AUTHORIZED BY THE HEAD OF A PROCURING ACTIVITY OR HIS DESIGNEE. IN SUCH CASES THE PROCUREMENT FILE SHALL BE FULLY DOCUMENTED WITH REASONS WHY THE EXPECTED SUBSTANTIAL SAVINGS ARE NOT OBTAINABLE UNDER ANNUAL PROCUREMENTS.'

WITH RESPECT TO THE COMMERCIAL AVAILABILITY OF THE ITEMS, THE BASIC TECHNICAL ARGUMENTS ON BEHALF OF BURDETT ARE PRESENTED IN TWO LETTERS DATED OCTOBER 8 AND NOVEMBER 20, 1968, SUBMITTED BY AN ENGINEER FROM A PRIVATE INDUSTRY CONCERN. THE LETTER OF OCTOBER 8, 1968, DEALS WITH SPECIFICATION NO. AFPID 9135-10 (ITEM 2), AS FOLLOWS:

"WITH REGARD TO THE SPECIFICATION (REFERRING TO AFPID 9135-10, DATED MARCH 31, 1967) AS WRITTEN, THE ONLY INSTRUMENTS REQUIRED TO CONFIRM THE SPECIFICATION ARE A TRACE OXYGEN ANALYZER, A HYDROGEN ANALYZER, AND A HYGROMETER. EVERY PLANT I KNOW OF PRODUCING LIQUID OXYGEN AND NITROGEN IS EQUIPPED WITH THESE INSTRUMENTS. THERE IS NOTHING SOPHISTICATED ABOUT THEM AND THEY ARE EXTREMELY INEXPENSIVE. THE TRACE OXYGEN ANALYZER COSTING AS LOW AS $1,000, THE HYDROGEN ANALYZER IN THE SAME RANGE AND THE HYGROMETER IN THE $200 TO $300 RANGE.

"AS I SAID BEFORE, I AM AMAZED AT THE ABSENCE OF ANY SPECIFIC PARTICULATE REQUIREMENTS, TO ALL THREE MICRON MAXIMUM. IN ADDITION, I WOULD EXPECT A TOTAL PURITY ANALYSIS REQUIREMENT AS A DIRECT READING AS OPPOSED TO THE SPECIFIED PURITY BY DIFFERENCE.

"I CANNOT UNDERSTAND A STATEMENT INDICATING THAT THIS MATERIAL, LIQUID NITROGEN PROPELLANT PRESSURIZING AGENT, IS COMMERCIALLY UNAVAILABLE, AS VIRTUALLY EVERY MANUFACTURER OF LIQUID OXYGEN AND NITROGEN COULD MEET THESE REQUIREMENTS. IF YOU HAVE ANY FURTHER QUESTIONS, PLEASE ADVISE.'

THE LETTER OF NOVEMBER 20, 1968, CONSIDERS THE REQUIREMENTS OF AFPID 9135 -7 (APPLICABLE TO ITEM 1):

"MY CONTENTION IS THAT THIS PRODUCT IS READILY AVAILABLE COMMERCIALLY FOR REASONS INDICATED IN MY PREVIOUS LETTER. THE ONLY DIFFERENCE BETWEEN THE TWO SPECIFICATIONS IS THE PARTICULATE REQUIREMENT OF AFPID 9135-7. AFPID 9135-10 HAS A HIGHER PURITY REQUIREMENT WITH NO PARTICULATE REQUIREMENT. THEREFORE, I SHALL CONFINE MY COMMENTS WITH REGARD TO THE FILTERS NECESSARY TO CONFORM TO THIS PARTICULATE REQUIREMENT.

"TODAY'S STANDARD AIR SEPARATION PLANTS PROVIDE FOR HIGH PURITY PRODUCTS AND LOW PARTICULATE. ALL PLANTS ARE EQUIPPED WITH 10 MICRON FILTERS ABSOLUTE, AS PROVIDED IN PARAGRAPH 3.2 IN THE SPECIFICATION. THE PLANTS ARE EQUIPPED WITH A LABORATORY INCLUDING BALANCES, MICROSCOPES AND ANALYTICAL EQUIPMENT. AN ADDITIONAL PURPOSE FOR THE LABORATORY IS TO ALLOW FOR THE PLANT OPERATING STAFF TO SAMPLE AND ANALYZE VARIOUS STREAMS IN THE PLANTS TO INSURE THE SAFETY OF THE PLANT OPERATION IN THE CASE OF HYDROCARBONS AND TO PROLONG THE OPERATING RUN TO MINIMIZE PRESSURE DROPS DUE TO PARTICULATE BUILD UPS. PARTICULATE BUILD-UP, IF RECOGNIZED IN TIME, CAN BE REDUCED BY SELECTIVE PURGING AND FILTERING.' THE LETTER OF NOVEMBER 20, 1968, GIVES THE NAMES OF CERTAIN CONCERNS WHICH PURPORTEDLY HAVE THE EQUIPMENT NECESSARY TO PRODUCE THE REQUIREMENTS OF THE SPECIFICATIONS.

WE REQUESTED THE COMMENTS OF THE DEPARTMENT OF THE AIR FORCE ON THE TECHNICAL ARGUMENTS ADVANCED BY THE ENGINEER FROM THE PRIVATE INDUSTRY CONCERN IN THE ABOVE LETTERS AND BY LETTER DATED JANUARY 7, 1969, THE AIR FORCE REAFFIRMED ITS POSITION THAT "THE PRODUCTS AS REQUIRED FOR THIS PROCUREMENT WERE NOT REGULARLY MANUFACTURED AND OFFERED FOR SALE IN THE COMMERCIAL MARKET.' A REPORT DATED NOVEMBER 1, 1968, PREPARED BY SAN ANTONIO AIR MATERIEL AREA (AFLC), ENCLOSED WITH AIR FORCE'S REPORT TO OUR OFFICE OF JANUARY 7, 1969, STATES:

"1. THE REQUIREMENTS OF THE PROPELLANT PRESSURIZING AGENT DESCRIBED IN PURCHASE DESCRIPTION AFPID 9135-10 ARE PECULIAR TO THE NASA LANGLEY RESEARCH CENTER. THE AIR FORCE HAS NO OTHER USER OF THIS PRODUCT. AS CAN BE SEEN IN THE COMPARISON BELOW, THE PROPELLAND PRESSURIZING AGENT, AFPID 9135-7, WHICH IS MANUFACTURED IN LARGE QUANTITIES, IS NOT AN ACCEPTABLE SUBSTITUTE.

AFPID-7 AFPID-10

------- -------- PURITY, PERCENT, MINIMUM

99.99 99.995 OXYGEN, PPM MAXIMUM 50 5 TOTAL HYDROCARBONS, PPM MAXIMUM 5 NO TEST HYDROGEN, PPM MAXIMUM NO TEST 0.5 MOISTURE, PPM MAXIMUM

11.5 5.7 PARTICULATE, MG/LITER MAXIMUM 1 NO TEST FILTER RATING MICRONS ABSOLUTE 40 100

"2. THE EMPHASIS ON OXYGEN CONTENT IN THE SUBJECT CONTRACT, PART XVIII, (D) IS NOT A NORMAL REQUIREMENT IN COMMERCIAL CONTRACTS. AGAIN, THIS IS A PECULIARITY OF THE PRODUCT USED BY NASA LANGLEY RESEARCH CENTER.

"3. * * * OBTAINING ACCURATE CALIBRATION OF THE TEST METHOD FOR A MINIMUM HYDROGEN CONTENT OF 0.5 PARTS PER MILLION IS NOT A PROCEDURE TO BE FOUND AT EVERY PLANT.'

THE ARGUMENT ADVANCED BY BURDETT IS THAT A REVIEW OF THE ANALYTICAL COMPOSITION OF THE ITEMS INDICATES THAT ALL PLANTS HAVE THE TYPE OF EQUIPMENT WHICH IS NECESSARY TO PRODUCE THE ITEMS SPECIFIED IN THIS PROCUREMENT. AIR FORCE'S POSITION, AT LEAST WITH RESPECT TO ITEM 2,IS THAT THE REQUIREMENTS OF THIS SPECIFICATION ARE UNIQUE TO THE LANGLEY RESEARCH CENTER AND THAT COMMERCIAL PLANTS WOULD NOT HAVE THE NECESSARY EQUIPMENT TO MANUFACTURE THIS ITEM. WHAT WE HAVE BEFORE US, THEREFORE, IS A DIFFERENCE OF TECHNICAL OPINION REGARDING A FACTUAL MATTER -- THE COMMERCIAL AVAILABILITY OF ITEM 2. IT IS NOT WITHIN OUR SPHERE OF COMPETENCE OR AUTHORITY TO MAKE TECHNICAL ENGINEERING DETERMINATIONS; CONSEQUENTLY, IN A CASE SUCH AS THIS OUR OFFICE WILL ACCEPT THE ADMINISTRATIVE REPORT. B-152996, APRIL 8, 1964. WE WILL THEREFORE NOT QUESTION AIR FORCE'S POSITION WITH RESPECT TO ITEM 2.

THE REPORT DATED NOVEMBER 1, 1968, FROM AFLC, INDICATES THAT ITEM 1 IS MANUFACTURED IN LARGE QUANTITIES. THE SITUATION IN THIS CASE IS ONE WHERE ONE ITEM (ITEM 1) OF AN AGGREGATE MULTI-YEAR PROCUREMENT IS COMMERCIALLY AVAILABLE WHILE A SECOND ITEM (ITEM 2) WHICH IS RELATED TO THE FIRST ITEM IS NOT COMMERCIALLY AVAILABLE. WHILE WE DO NOT HAVE SUFFICIENT INFORMATION TO CONCLUDE THAT THE MANUFACTURERS OF ITEM 1 WILL BE ABLE TO PRODUCE ITEM 2, IT IS INTERESTING TO NOTE THAT ALL OF THE BIDDERS OFFERED THE SAME PER TON PRICES FOR ITEMS 1 AND 2. CONSIDERING THE PROPORTION OF THE QUANTITIES OF ITEM 1 TO BE PURCHASED COMPARED TO THOSE OF ITEM 2 AND THE REASONABLE POSSIBILITY THAT THERE WILL BE DEVELOPMENT OF NEW FACILITIES IN THE AREA OF LANGLEY RESEARCH CENTER WHICH WILL BE CAPABLE OF MANUFACTURING ITEM 1 THEREBY SUBSTANTIALLY REDUCING THE COST OF THIS ITEM, THERE IS SOME QUESTION WHETHER AN ALL OR NONE PROCUREMENT FOR BOTH ITEMS WAS THE MOST PRACTICABLE FORM OF PROCUREMENT UNDER THE CIRCUMSTANCES, UNLESS SUPPLIERS OF ITEM 1 COULD ALSO SUPPLY ITEM 2.

IN VIEW OF THE MATTERS WHICH HAVE BEEN BROUGHT TO OUR ATTENTION REGARDING THE POSSIBLE COST REDUCTION AT LEAST OF ITEM 1, WE HAVE SUGGESTED TO THE SECRETARY OF THE AIR FORCE THAT A STUDY BE MADE TO DETERMINE IF IT MIGHT BE IN THE GOVERNMENT'S BEST INTEREST NOT TO TAKE THE SECOND AND THIRD PROGRAM YEARS OF THIS PROCUREMENT AND TO READVERTISE FOR THESE REQUIREMENTS. WE HAVE RECOMMENDED THAT THIS STUDY INCLUDE A CONSIDERATION WHETHER IT WOULD BE IN THE GOVERNMENT'S BEST INTEREST NOT TO EXERCISE THE OPTION. WE ARE ENCLOSING A COPY OF OUR LETTER TO THE SECRETARY.