B-166726, JUN. 24, 1970

B-166726, JUN. 24, 1970

CONTRACTS--SPECIFICATIONS--CONFORMABILITY OF EQUIPMENT, ETC; OFFERED- ADMINISTRATIVE DETERMINATION REQUEST FOR QUOTATIONS SOLICITED OFFERS FOR PROPELLER PROFILING AND CONTOURING MACHINE, COMPUTER PROGRAMS, PERSONNEL TRAINING, DATA, ETC. LOW OFFEROR WHOSE OFFER WAS REJECTED BECAUSE PROPOSAL WAS DETERMINED TECHNICALLY NONCONFORMING AND UNACCEPTABLE AND WHO HAS PROPOSED TO HAVE JAPANESE SUBCONTRACTOR WITH NAVY PERSONNEL TRAINING AND INSPECTION IN JAPAN, OFFERS NO BASIS FOR OBJECTION SINCE DRAFTING OF SPECIFICATIONS AND DETERMINATION OF PRODUCTS' CONFORMABILITY ARE PRIMARILY FOR DETERMINATION BY AGENCY. INSPECTION AT CONTRACTOR'S SITE WAS REQUIRED WHEREAS PROTESTANT'S MACHINE WOULD NOT BE COMPLETE UNTIL FINAL ASSEMBLY AT SHIPYARD. SEE COMP. GEN. DECS. CITED. BIDDERS--QUALIFICATIONS- EXPERIENCE--ADMINISTRATIVE DETERMINATION UNDER REQUEST FOR QUOTATIONS FOR PROPELLER PROFILING AND CONTOURING MACHINE, COMPUTER PROGRAMS, PERSONNEL TRAINING, DATA, ETC; LOW OFFEROR WHOSE OFFER WAS REJECTED FOR TECHNICAL UNACCEPTABILITY, AND WHO CONTENDS THAT SUCCESSFUL OFFEROR'S CAPABILITY TO BUILD MACHINE OF QUALITY REQUIRED IS QUESTIONABLE, OFFERS NO BASIS FOR OBJECTION SINCE NAVY AND DEFENSE CONTRACT ADMINISTRATION SERVICES DETERMINED AFTER PREAWARD SURVEY THAT SUCCESSFUL OFFEROR HAD RESOURCES, EXPERIENCE AND "KNOW-HOW" TO PERFORM AS REQUIRED. AFFIRMATIVE DETERMINATION OF RESPONSIBILITY WILL NOT BE UPSET UNLESS IT IS FOUND TO BE ARBITRARY, CAPRICIOUS OR NOT BASED ON SUBSTANTIAL EVIDENCE. SEE COMP. GEN. DECS. CITED.

TO EASTERN RESEARCH GROUP:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF CONTRACT NO. N600-69-C-0436 TO ONSRUD MACHINE WORKS, INC; BY THE UNITED STATES NAVY PURSUANT TO REQUEST FOR QUOTATIONS (RFQ) NO. N00600-69-Q 0052.

THE SUBJECT RFQ, SOLICITING QUOTATIONS ON A FIVE-AXIS NUMERICALLY CONTROLLED PROPELLER PROFILING AND CONTOURING MACHINE, ASSORTED COMPUTER PROGRAMS, PERSONNEL TRAINING, DATA AND OPTIONAL ACCESSORY EQUIPMENT, WAS ISSUED ON AUGUST 21, 1968, WITH A CLOSING DATE OF SEPTEMBER 24, 1968. BECAUSE OF THE COMPLEX NATURE OF THE MACHINE, A PRE-QUOTATION MEETING WAS HELD AT THE WASHINGTON NAVY YARD ON SEPTEMBER 4, 1968, AS A RESULT OF WHICH AN AMENDMENT WAS ISSUED MODIFYING THE SPECIFICATIONS AND EXTENDING THE CLOSING DATE TO OCTOBER 8, 1968. THREE QUOTATIONS WERE RECEIVED WITH PRICES, EXCLUSIVE OF OPTION ITEMS, AS FOLLOWS:

EASTERN RESEARCH GROUP $1,132,595

ONSRUD MACHINE WORKS, INC. 1,472,024

JOHN T. PARSONS CO. 2,937,099

ALTHOUGH THE RFQ PROVIDED THAT AWARD MIGHT BE MADE WITHOUT FURTHER DISCUSSION PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3 501(B)(XIV), NEGOTIATIONS WERE UNDERTAKEN WITH ALL THREE FIRMS TO ASSURE THAT THEY WERE FULLY AWARE OF ALL THE SPECIFICATION REQUIREMENTS. AS A RESULT OF THESE DISCUSSIONS, THE SPECIFICATIONS WERE FURTHER AMENDED AND REVISED QUOTATIONS REQUESTED. REVISED QUOTATIONS WERE RECEIVED ON DECEMBER 2, 1968, AND THE PRICES, INCLUDING THE OPTION ITEMS, WERE AS FOLLOWS:

EASTERN RESEARCH GROUP $1,192,295

ONSRUD MACHINE WORKS, INC. 1,531,351

JOHN T. PARSONS CO. 1,741,360

AFTER FINAL TECHNICAL EVALUATION, AWARD WAS MADE TO ONSRUD ON DECEMBER 23, 1968, AS THE LOWEST ACCEPTABLE OFFEROR.

THE DECISION NOT TO ACCEPT YOUR LOWER OFFER WAS BASED UPON A DETERMINATION THAT YOUR PROPOSAL WAS TECHNICALLY UNACCEPTABLE. THE TECHNICAL EVALUATION WAS MADE BY THE NAVAL SHIP RESEARCH AND DEVELOPMENT CENTER AND ITS NEGATIVE RECOMMENDATION WAS BASED ON REVIEW OF YOUR PROPOSAL AND A CONFERENCE WITH YOUR REPRESENTATIVES ON DECEMBER 3, 1968. THE BASIS FOR THE CENTER'S DETERMINATION IS SET FORTH IN A MEMORANDUM DATED DECEMBER 4, 1968, FROM WHICH WE QUOTE THE FOLLOWING:

"(1) THE FIRST LOW BIDDER, EASTERN RESEARCH GROUP, IS TECHNICALLY UNACCEPTABLE AS FOLLOWS:

"(A) ITEM ID OF THEIR FINAL QUOTATION, DATED 29 NOVEMBER 1968, PROPOSES TO INCLUDE FINAL MACHINING, WELDING AND INTERFACE OPERATION AS WELL AS FINAL ASSEMBLY OF CONDUITS, ELECTRICAL CABLES AND SUPPORT OF THE COMPONENTS ON THE COMMON BASE FOR THE FIRST TIME. SITE IS PHILADELPHIA NAVAL SHIPYARD. AN ESTIMATE OF FIFTEEN MAN MONTHS IS CITED FOR THIS OPERATION.

"(B) THE LEGAL OPINION OF E.R.G.'S ATTORNEYS, LEWIS, MACDONALD AND VARIAN (ENCLOSURE TO E.R.G.'S FINAL QUOTATION) FURTHER DEFINES THIS MANUFACTURING TO INCLUDE MAJOR COMPONENTS, HAD RAILS, WALKS, CAT WALKS AND, SINCE OPTION ITEMS 5 AND 6 WILL BE REQUIRED, WILL ALSO INCLUDE THE SCANNER AND CHIP CONVEYOR. OPERATIONS ARE DEFINED AS MACHINING, WELDING, POLISHING, DEBURRING, CLEANING AND FINAL PAINTING OPERATIONS.

"(C) PAGE 27, PARAGRAPH 3.8 OF THE SUBJECT R.F.Q; SPECIFIES 'INSTALLATION - THE PROFILER UPON COMPLETION SHALL BE INSTALLED IN THE PHILADELPHIA NAVAL SHIPYARD --- .'

"(D) THE PHILADELPHIA NAVAL SHIPYARD CANNOT UNDER ANY CIRCUMSTANCES, BE PLACED IN A POSITION OF HAVING COMPONENTS FOR A MACHINE OF THIS MAGNITUDE SHIPPED INTO ITS FACILITY, WHEN THESE COMPONENTS HAVE NOT BEEN COMPLETED AND TESTED AS A COMPLETE MACHINE IN ITS ENTIRETY. THE BASE ALONE, WHICH MUST SUPPORT ALL MAJOR COMPONENTS OF THE PROFILER (ESTIMATED TO WEIGH 300 TONS), WHICH MUST THEN MACHINE A PROPELLER TO WITHIN T.002", IS A GREAT UNDERTAKING. THE PROBLEMS OF FINAL MACHINING AND MATCHING OF THIS HUGE COMPONENT FOR THE FIRST TIME COULD BE EXTREMELY TIME-CONSUMING AND COULD EASILY EXTEND BEYOND THE CAPACITY OF PORTABLE MACHINING EQUIPMENT, THEREBY POSSIBLY INVOLVING THE SHIPYARD'S MACHINING CAPABILITIES. THE FIRST-TIME OPERATION OF THE SCANNER AND CHIP CONVEYOR COULD ALSO CREATE CONSIDERABLE PROBLEMS.

"(E) THE LEGAL OPINION ENCLOSED IN THE CONTRACTOR'S QUOTATION REFERS ALSO TO QUALITY CONTROL TESTS BEING PERFORMED IN JAPAN. THE REQUIREMENT OF THE SUBJECT R.F.Q. SPECIFIES, UNDER QUALITY ASSURANCE PROVISIONS, PAGE 29, SUBPARAGRAPH 4.1, 'INSPECTION - THE MACHINE SHALL BE GIVEN A GENERAL INSPECTION -- .' THE MACHINE MUST BE CONSTRUED TO BE A COMPLETE MACHINE, AND THIS WILL NOT BE THE CASE. THE MACHINE (PROFILER) WILL NOT BE COMPLETE UNTIL FINAL MACHINING AT THE PHILADELPHIA NAVAL SHIPYARD.

"(F) THE LEGAL OPINION ENCLOSED IN THE CONTRACTOR'S QUOTATION FURTHER REFERS TO PERFORMING PRELIMINARY TESTS (IN ACCORDANCE WITH PARAGRAPH 4.3.2. OF THE R.F.Q.) AT THE PHILADELPHIA NAVAL SHIPYARD.

"(G) PARAGRAPH 4.3.2. OF THE SUBJECT R.F.Q. SPECIFIES UPON COMPLETION OF THE N/C PROPELLER PROFILER THE FOLLOWING STEPS MUST BE TAKEN AT THE CONTRACTOR'S TEST SITE -- .'

"(H) THE PROFILER AS PROPOSED WILL NOT BE COMPLETED UNTIL FINAL MACHINING AT THE PHILADELPHIA NAVAL SHIPYARD, AND THE PHILADELPHIA NAVAL SHIPYARD CANNOT BE CONSTRUED AS THE CONTRACTOR'S TEST SITE.

"B. AWARD OF CONTRACT IS NOT RECOMMENDED TO THE LOW BIDDER, EASTERN RESEARCH GROUP, FOR THE ABOVE TECHNICALLY NONCONFORMING AND TECHNICALLY NONACCEPTABLE REASONS AND, FURTHER, FOR THE FOLLOWING REASONS WHICH HAVE A DIRECT EFFECT ON GOVERNMENT ECONOMY AND THE NAVY PROPELLER PROGRAM:

"(1) TRAINING FOR NAVY PERSONNEL IN MECHANICAL MAINTENANCE WILL BE PROVIDED IN JAPAN, REQUIRING EXPENSIVE TRAVEL. INSTRUCTING WILL BE PERFORMED BY JAPANESE PERSONNEL, WHO MAY BE PROFICIENT IN THE ENGLISH LANGUAGE; HOWEVER, THE ABOVE BIDDERS' CONFERENCE WITH JAPANESE ENGINEERS HAS PROVEN THAT TECHNICAL TRANSLATION IS UNSATISFACTORY.

"(2) INSPECTION OF THE MACHINE DURING ITS MANUFACTURE WILL BE OF PARTICULAR IMPORTANCE AND, BY NATURE OF THE MACHINE'S COMPLEXITY, INSPECTION WILL BE A CONTINUING EFFORT DURING THE ENTIRE MANUFACTURING CYCLE. SINCE THE MACHINE IS NOT A STANDARD PRODUCT, NORMAL DCAS INSPECTION WILL NOT BE ACCEPTABLE. THEREFORE, NAVY PERSONNEL FAMILIAR WITH U. S. NAVY PROPELLER MANUFACTURING TECHNIQUES AND THE SPECIFICATION REQUIREMENTS WILL BE REQUIRED TO TRAVEL TO AND FROM JAPAN AT REGULAR INTERVALS.

"(3) MAINTENANCE SERVICE WILL BE SUPPLIED BY E.R.G. PERSONNEL AND, AS CONFIRMED BY THE BIDDERS' CONFERENCE, WILL BE AVAILABLE FROM CHICAGO, ILLINOIS. CONTACT WITH E.R.G. REVEALS NO EVIDENCE OF AVAILABILITY OF THIS TYPE PERSONNEL, AND IT APPEARS UNREALISTIC TO ASSUME SUCH PERSONNEL WOULD BE HIRED MERELY TO STAND BY UNTIL SERVICE WAS REQUIRED BY THE RECEIVING ACTIVITY. SERVICE REQUIRING DETAILED KNOWLEDGE OF THE MACHINE WILL OF NECESSITY BE REQUIRED FROM JAPAN. THE EFFECT ON THE UP-TIME OF THE MACHINE BY THIS DELAY COULD BE CONSIDERABLE.

"(4) E.R.G. HAS CONFIRMED VERBALLY THAT A SUPPLY OF REPAIR PARTS WILL BE MAINTAINED IN THE CONTINENTAL UNITED STATES. IT IS OUR OPINION THAT THE IDEA OF MAINTAINING REPAIR PARTS FOR A NONSTANDARD PRODUCT IS VERY UNREALISTIC; ALSO, IT IS OUR CONCERN THAT REPAIR PARTS, OTHER THAN THOSE FOR THE DOMESTIC-FURNISHED COMPONENTS, WOULD REQUIRE MANUFACTURE ON DEMAND FROM THE JAPANESE MANUFACTURER."

YOU CONTEND THAT THE ABOVE EVALUATION IS ERRONEOUS. IN THIS REGARD YOU POINT OUT THAT YOUR OFFER STATED THAT "THIS RESPONSE IS BASED ON CONFORMING TO ALL SOLICITATION AS WELL ASPR REQUIREMENTS,"; THAT "FIFTEEN MAN MONTHS" FOR INSTALLATION OF MACHINE ON BASE IS NOT TOTAL ELAPSED TIME, WHICH WOULD BE SEVERAL WEEKS; THAT TESTING OF THE MAJOR MACHINE COMPONENTS IN JAPAN IN THE SUBCONTRACTOR'S PLANT CONFORMS TO THE RFQ REQUIREMENT; THAT THE REQUIREMENT FOR TESTING THE COMPLETE MACHINE WILL BE ACCOMPLISHED IN JAPAN AND IT WILL BE REASSEMBLED AT PHILADELPHIA; THAT ASSEMBLY OF THE MACHINE TO THE BASE IS NOT NECESSARY TO CONSTITUTE A "COMPLETE" MACHINE; AND THAT THE EXPENSE OF TRAINING NAVAL PERSONNEL AND INSPECTION OF THE MACHINE IN JAPAN IS MORE THAN OFFSET BY YOUR LOWER PRICE.

THE DRAFTING OF SPECIFICATIONS WHICH REFLECT THE MINIMUM NEEDS OF THE GOVERNMENT, AS WELL AS THE DETERMINATION OF WHETHER PRODUCTS OFFERED MEET THOSE SPECIFICATIONS, IS PRIMARILY FOR DETERMINATION BY THE ADMINISTRATIVE AGENCY CONCERNED, TO BE QUESTIONED BY OUR OFFICE ONLY WHEN NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. 38 COMP. GEN. 190 (1958). HERE THE NAVY FOUND YOUR PROPOSAL UNACCEPTABLE PRIMARILY BECAUSE IT FAILED TO COMPLY WITH THE REQUIREMENTS FOR INSPECTION OF THE COMPLETE MACHINE AT THE CONTRACTOR'S SITE AND INSTALLATION OF THE COMPLETE MACHINE AT THE SHIPYARD. AFTER RECONSIDERATION OF YOUR VIEWS AS TO WHAT CONSTITUTES COMPLIANCE WITH THESE REQUIREMENTS, THE NAVY REAFFIRMED ITS POSITION IN A MEMORANDUM DATED JUNE 12, 1969, IN THESE WORDS:

"C. NAVSHIPS, ANNAPOLIS, CODE 703A, DOES NOT MISUNDERSTAND. THE R.F.Q. SPECIFIED ON PAGE 27, PARAGRAPH 3.8 - 'THE PROFILER UPON COMPLETION SHALL BE INSTALLED IN THE PHILADELPHIA NAVAL SHIPYARD. E.R.G.'S FINAL PROPOSAL CLEARLY INDICATES THAT THE MACHINE WOULD NOT BE COMPLETE UNTIL AFTER FINAL ASSEMBLY AT THE PHILANAVSHIPYD (ENCLOSURE (1) APPLIES).

"D. NAVSHIPS, ANNAPOLIS, CODE 703A, AGAIN, DOES NOT MISUNDERSTAND. THE R.F.Q. SPECIFIED, UNDER QUALITY ASSURANCE PROVISIONS, PAGE 29, 'THE MACHINE SHALL BE GIVEN A GENERAL INSPECTION.' THE MACHINE CANNOT BE INSPECTED UNTIL IT IS A COMPLETE MACHINE WHICH WOULD NOT BE UNTIL AFTER FINAL ASSEMBLY AT PHILANAVSHIPYD (ENCLOSURE (1) APPLIES). PERFORMANCE OF BOTH THE SCANNER AND THE CHIP CONVEYOR AFTER ASSEMBLY IS A SERIOUS CONCERN WITH REGARD TO THE SUBJECT CONTRACT. THESE COMPONENTS MUST BE INSPECTED AS A COMPLETE MACHINE AT THE MANUFACTURER'S PLANT BEFORE ACCEPTANCE BY NAVY."

WE SEE NO BASIS FOR OUR OFFICE TO QUESTION THE NAVY IN THIS REGARD.

YOU ALSO CONTEND THAT ONSRUD DID NOT AGREE TO COMPLY WITH THE SPECIFICATION REQUIREMENTS, AND THAT ONSRUD'S CAPABILITY TO BUILD A MACHINE OF THE QUALITY REQUIRED IS QUESTIONABLE. WITH REGARD TO THE FIRST CONTENTION, THE REPORTS WE HAVE RECEIVED FROM THE NAVY INDICATE THAT WHILE ONSRUD TOOK CERTAIN EXCEPTIONS TO SOME OF THE SPECIFICATIONS IN ITS INITIAL RESPONSE, IT AGREED DURING NEGOTIATIONS PRIOR TO AWARD OF THE CONTRACT TO COMPLY IN ALL RESPECTS. FURTHER, WE ARE ADVISED THAT PERFORMANCE TO DATE HAS BEEN IN ACCORDANCE WITH THE SPECIFICATIONS, WITHOUT REQUEST FOR ANY DEVIATIONS, AND THAT THE NAVY INTENDS TO ENFORCE COMPLIANCE WITH ALL REQUIREMENTS. AS FOR ONSRUD'S CAPABILITY, BOTH THE NAVAL SHIP SYSTEMS COMMAND AND THE DEFENSE CONTRACT ADMINISTRATION SERVICES DETERMINED, AFTER A PREAWARD SURVEY CONDUCTED, NOVEMBER 19-22, 1968, THAT ONSRUD HAD THE RESOURCES, EXPERIENCE AND "KNOW-HOW" TO PERFORM AS REQUIRED. OUR OFFICE WILL NOT UPSET AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY UNLESS IT IS FOUND TO BE ARBITRARY, CAPRICIOUS, OR NOT BASED ON SUBSTANTIAL EVIDENCE. 45 COMP. GEN. 4 (1965); 43 ID. 257 (1963).

ON JUNE 18, 1969, WE RECEIVED A MEMORANDUM FROM SENATOR JAVITS TRANSMITTING A LIST OF QUESTIONS PREPARED BY YOU. A RESTATEMENT OF THE QUESTIONS BY THE NAVY AND ITS ANSWERS THERETO ARE QUOTED BELOW:

"A. CONTRACT COSTS AND SPECIFICATIONS

"(1) HAVE THERE BEEN ANY CONTRACT AMENDMENTS OR SPECIFICATION CHANGES SINCE CONTRACT STARTED OR ANY PENDING?

"MODIFICATION A001 WAS ISSUED BY DCASR, CHICAGO, 11 MARCH 1969 TO DELETE THE REQUIREMENT FOR DD-375 MONTHLY PROGRESS REPORT AND SUBSTITUTE THEREFOR THE CONTRACTOR'S MONTHLY PROGRESS REPORT (ONSRUD SCHEDULE AND PROGRESS REPORT). ON 10 FEBRUARY 1969 A LETTER WAS ISSUED EXERCISING THE GOVERNMENT'S OPTION FOR ITEM 4 OF THE CONTRACT INVOLVING SOFTWARE AND PROGRAMMING.

"(2) HAS ANY DELAY BEEN ENCOUNTERED WHICH WILL AFFECT CONTRACT DELIVERY SCHEDULES:

"ON 18 JUNE 1969, NPO WASHINGTON SENT A MESSAGE TO ONSRUD ADVISING ONSRUD THAT THE CONTRACTING OFFICER UNDERSTOOD THAT DIFFICULTIES MIGHT EXIST IN OBTAINING SOFTWARE PROGRAMS FROM THE AMERICAN COMPUTER SERVICES. THE FIRM HAS BEEN PROPOSED AS SUBCONTRACTOR DURING THE AWARD PHASE OF THE CONTRACT. AS A RESULT OF THIS UNDERSTANDING, ONSRUD WAS REQUESTED TO ADVISE THE CONTRACTING OFFICER REGARDING THE STATUS OF SUBCONTRACTING PROGRAMMING FOR ITEM 2 AND 4 OF THIS CONTRACT. ON 23 JUNE 1969 ONSHUD ADVISED THE CONTRACTING OFFICER THAT INFORMATION REGARDING THE STATUS OF PROGRAMMING, ITEMS 2 AND 4, WOULD BE FORWARDED THE WEEK OF 7 JULY 1969 AND, FURTHER, THAT THE SOFTWARE PROGRAM IN NO WAY AFFECTED THE DELIVERY OF PERFORMANCE OF THE CONTRACT AS SCHEDULED.

"NPO IS FURTHER ADVISED BY THE NAVAL SHIPS SYSTEMS COMMAND THAT THERE WILL BE NO COSTS PLANNED IN THE 1970 BUDGET CONCERNING ANY ASPECT OF THIS PROCUREMENT, INCLUDING COSTS FOR SHIPYARD INSTALLATION.

"C. WHY WAS THE PREVIOUS PROPELLER CONTRACT FOR THE MACHINE CANCELLED (N00600-67-C-0560)?

"THE PREVIOUS CONTRACT WAS CANCELLED ESSENTIALLY BECAUSE, WHILE ITEM 1, THE PROFILER ITSELF, WAS ON A FIRM FIXED-PRICE BASIS, ITEM 2, THE SOFTWARE, WAS ON A COST-PLUS-FIXED-FEE BASIS AS A RESULT OF APPROVAL OF THE FIRST STEP PROPOSAL UNDER A TWO-STEP PROCUREMENT. "SINCE, THEREFORE, ITEM 2 WAS ON A BEST-EFFORTS BASIS, MORTON MANUFACTURING CO; THE CONTRACTOR, COULD NOT ENSURE THE DELIVERY OF ITEM 1 NOR COULD IT GET THE REQUIRED PERFORMANCE BOND BECAUSE THE ACCEPTANCE OF ITEM 1 WAS, IN FACT, CONDITIONAL UPON SUCCESSFUL COMPLETION OF ITEM 1."

IN FURTHER REFERENCE TO QUESTION 2 ABOVE, WE WERE ADVISED BY THE NAVY IN LETTERS DATED SEPTEMBER 19, 1969, AND MARCH 3, 1970, THAT THE SOFTWARE WILL BE DELIVERED ON SCHEDULE.

IN VIEW OF THE FOREGOING, WE SEE NO BASIS FOR FURTHER ACTION BY OUR OFFICE.