B-171469, APR 20, 1971

B-171469, APR 20, 1971

BID PROTEST - BID RESPONSIVENESS - USE OF GOVERNMENT PROPERTY DENYING PROTEST OF BEECH AIRCRAFT CORPORATION AGAINST THE AWARD OF CONTRACT TO RAYTHEON COMPANY, LOW BIDDER, UNDER AN IFB ISSUED BY THE NAVAL AIR SYSTEMS COMMAND, WASHINGTON, D.C., FOR THE PROCUREMENT OF MISSILE TARGETS. PROTESTANT'S CLAIM THAT RAYTHEON'S BID DID NOT DESCRIBE IN SUFFICIENT DETAIL THE GOVERNMENT PROPERTY TO BE USED IN THE PERFORMANCE OF THE CONTRACT AS REQUIRED BY THE REGULATIONS SO AS TO ELIMINATE THE COMPETITIVE ADVANTAGE POSSIBLE IN SUCH USE, FAILS BECAUSE RAYTHEON STATED THAT IT PLANNED TO USE CERTAIN GOVERNMENT-OWNED FACILITIES AND THAT IT WAS AUTHORIZED TO DO SO. THE SOLICITATION INSTRUCTIONS REQUIRED NO MORE.

TO BEECH AIRCRAFT CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST AWARD OF A CONTRACT TO THE RAYTHEON COMPANY (RAYTHEON) UNDER IFB NO. N00019-70-B-0249, ISSUED ON AUGUST 14, 1970, BY THE NAVAL AIR SYSTEMS COMMAND, WASHINGTON, D.C.

THE SUBJECT INVITATION SOLICITED BIDS FOR THE MANUFACTURE AND SUPPLY OF 432 MODEL AQM-37A MISSILE TARGETS, WITH DATA, EQUIPMENT AND SERVICES RELATED THERETO. PRODUCTION DELIVERIES WERE REQUIRED 360 DAYS AFTER AWARD AND FIRST ARTICLE APPROVAL TESTS WERE TO BE MADE WITHIN 180 DAYS FROM DATE OF THE CONTRACT.

BIDS WERE REQUESTED IN THE ALTERNATIVE FROM THOSE FIRMS WHICH HAD PREVIOUSLY FURNISHED ACCEPTABLE SUPPLIES WHICH WERE IDENTICAL OR SIMILAR TO THOSE SOLICITED IN THE INSTANT IFB. ALTERNATIVE A INCLUDED FIRST ARTICLE APPROVAL, WHILE ALTERNATIVE B EXCLUDED FIRST ARTICLE APPROVAL. FIRMS WHICH HAD NOT FURNISHED SUCH SUPPLIES WERE REQUESTED TO BID ONLY ON ALTERNATIVE A. FOUR BIDS WERE RECEIVED AND OPENED ON OCTOBER 13, 1970. THE BIDS SUBMITTED BY YOUR FIRM AND RAYTHEON, THE TWO LOWEST BIDDERS, WERE AS FOLLOWS:

ALTERNATIVE A ALTERNATIVE B

BEECH NO BID $6,277,341

RAYTHEON$5,960,439 5,807,511 SINCE YOUR FIRM WAS CURRENTLY IN PRODUCTION OF THE TARGETS, FIRST ARTICLE APPROVAL TESTING WAS NOT REQUIRED. HOWEVER, FIRST ARTICLE APPROVAL WAS REQUIRED FOR RAYTHEON AND AWARD TO IT COULD BE MADE ONLY ON THE ALTERNATIVE A BASIS.

WHILE YOU PROTESTED TO THIS OFFICE ON DECEMBER 5, 1970, AGAINST THE PROPOSED AWARD TO RAYTHEON, THE DEPARTMENT OF THE NAVY CONSIDERED BOTH THE LEAD TIME REQUIRED TO MEET THE DELIVERY SCHEDULES AND THE DEPLETION OF THE TARGET INVENTORIES, AND DETERMINED IN ACCORDANCE WITH PARAGRAPH 2- 407.8(B)(3)(I) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), THAT THE ITEMS TO BE PROCURED WERE URGENTLY REQUIRED. AS AUTHORIZED BY ASPR, THE AWARD WAS THEREAFTER MADE TO RAYTHEON, ON DECEMBER 31, 1970, EVEN THOUGH THE PROTEST HAD NOT BEEN RESOLVED.

YOUR PROTEST IS BASED ON SEVERAL GROUNDS, ALL OF WHICH WE HAVE CAREFULLY CONSIDERED. HOWEVER, WE THINK THE DECISIVE ISSUES CAN BE SUMMARIZED AS FOLLOWS:

1. RAYTHEON'S BID FAILED TO COMPLY WITH PARAGRAPH 62 OF THE ADDITIONAL SOLICITATION INSTRUCTIONS AND CONDITIONS ENTITLED "USE OF GOVERNMENT PRODUCTION AND RESEARCH PROPERTY" IN SUFFICIENT FORM AND DETAIL SO AS TO ELIMINATE ITS COMPETITIVE ADVANTAGE FROM THE USE OF GOVERNMENT OWNED FACILITIES ON A RENT-FREE BASIS.

2. THE ASSIGNED EVALUATION FACTORS IN THE AMOUNT OF $126,000 AS THE COST TO THE NAVY TO ACCOMPLISH TESTING FOR FIRST ARTICLE APPROVAL IS UNREASONABLY LOW, AND THE ACTUAL COST FOR SUCH TESTS WILL BE SUBSTANTIALLY IN EXCESS OF THIS AMOUNT, WHICH WAS USED IN THE EVALUATION OF BIDS.

3. THE REQUIRED DELIVERY SCHEDULE CANNOT BE COMPLIED WITH BY ANY MANUFACTURE OTHER THAN YOUR FIRM.

4. SINCE RAYTHEON ALSO MANUFACTURES THE SPARROW III MISSILE WHICH USES THE AQM-37A AS ITS MISSILE TARGET, THE AWARD OF A CONTRACT TO RAYTHEON FOR THE TARGETS CREATES AN INHERENT CONFLICT OF INTEREST WHICH IS IN VIOLATION OF DEPARTMENT OF DEFENSE DIRECTIVE NUMBER 5500.10, DATED JUNE 1, 1963.

IN SUPPORT OF YOUR FIRST CONTENTION YOU SAY THAT RAYTHEON'S LIST OF GOVERNMENT PROPERTY, WHICH IT HELD UNDER A FACILITIES CONTRACT (NO. N00019 -68-C-9051) AND PROPOSED TO USE, DID NOT INCLUDE GOVERNMENT-OWNED BUILDINGS AND LAND, AND THAT OTHER REFERENCES IN THE BID DOCUMENTS TO SUCH PROPERTY SHOULD NOT BE CONSIDERED AS MEETING THE IFB'S REQUIREMENT FOR LISTING. THE PERTINENT IFB PROVISION (SUBPARAGRAPH IVA)(I) OF PARAGRAPH 62) ACTUALLY REQUIRES THE BIDDER TO SUBMIT WITH HIS BID A LIST "OR DESCRIPTION" OF THE PROPERTY INVOLVED. WE ARE THEREFORE OF THE VIEW THAT OTHER REFERENCES IN RAYTHEON'S BID, OUT-SIDE THE LIST, TO THOSE FACILITIES AND THE RENTAL CHARGES THEREFOR WERE PROPERLY RECOGNIZED BY THE CONTRACTING OFFICER IN CONSIDERING THIS REQUIREMENT.

AS YOU CONTEND, RAYTHEON'S BID DID NOT CONTAIN PRORATION INFORMATION AS SPECIFIED IN SUBPARAGRAPH IVA)(III). SUCH INFORMATION WAS FURNISHED TO THE COGNIZANT ADMINISTRATIVE CONTRACTING OFFICER, PRIOR TO THE SUBMISSION OF BIDS, WITH RAYTHEON'S REQUEST FOR REVIEW AND VERIFICATION OF ITS RENTAL COMPUTATIONS FOR THE GOVERNMENT PROPERTY WHICH IT PROPOSED TO USE IF IT WAS AWARDED THE CONTRACT. RAYTHEON'S COMPUTATIONS WERE REVIEWED AND APPROVED BY THE COGNIZANT CONTRACTING OFFICER. A COPY OF THE APPROVAL SHOWING THE VERIFIED RENTAL AMOUNT APPLICABLE TO THE GOVERNMENT PROPERTY WAS SUBMITTED WITH RAYTHEON'S BID, AND SUCH AMOUNT WAS USED IN THE EVALUATION OF THAT BID. SINCE THE ADMINISTRATIVE CONTRACTING OFFICER HAD PREVIOUSLY REVIEWED THE BACKUP MATERIAL, WHICH MATERIAL WAS RETAINED BY NAVY, IT DOES NOT APPEAR THAT A RESUBMISSION OF THAT INFORMATION WITH THE BID WOULD HAVE SERVED ANY USEFUL PURPOSE AND, UNDER THE CIRCUMSTANCES, WE BELIEVE THE REQUIREMENT MAY BE WAIVED AS A MINOR INFORMALITY.

WHILE YOU SUGGEST THAT THE ADMINISTRATIVE CONTRACTING OFFICER SHOULD HAVE REQUIRED SUFFICIENT ADDITIONAL INFORMATION FROM WHICH HE COULD HAVE ASCERTAINED WHETHER THE PERCENTAGE OF USAGE ALLOCATED BY RAYTHEON TO THE SUBJECT CONTRACT WAS CORRECT, WE DO NOT FIND SUCH A REQUIREMENT EITHER IN THE IFB OR THE PERTINENT PROVISIONS OF ASPR. IN FACT, CONSIDERING THE UNCERTAINTIES INTRINSIC TO THE MANUFACTURING PROCESSES, WE DO NOT PERCEIVE IN WHAT MANNER THE ACTUAL AMOUNT TO WHICH THE GOVERNMENT PROPERTY WOULD BE USED IN THE PERFORMANCE OF THE ANTICIPATED CONTRACT COULD HAVE BEEN DETERMINED IN ADVANCE WITH COMPLETE ACCURACY. ALTHOUGH YOU ASSERT THAT THE RENTAL SHOULD HAVE BEEN COMPUTED OVER A 24 MONTH PERIOD, INSTEAD OF OVER A 12-MONTH PERIOD, WE NOTE THAT EVEN HAD THE LONGER PERIOD BEEN USED IN THE EVALUATION OF RAYTHEON'S BID THE INCREASED RENTAL WOULD NOT HAVE BEEN SUFFICIENT TO MAKE BEECH THE LOW BIDDER.

YOU ALSO URGE THAT RAYTHEON DID NOT SUBMIT WRITTEN PERMISSION FOR USE OF THE FACILITIES AND EQUIPMENT UPON WHICH ITS BID WAS BASED, AS REQUIRED BY SUBPARAGRAPH IVA)(II) OF PARAGRAPH 62, AND YOU CITE B 154598, NOVEMBER 16, 1964, AS AUTHORITY FOR REJECTING RAYTHEON'S BID AS BEING NONRESPONSIVE. THE SUBPARAGRAPH IN QUESTION REQUIRED THE SUBMISSION OF INFORMATION WITH THE BIDS AND PROVIDED: "WITH RESPECT TO SUCH PROPERTY ALREADY IN THE POSSESSION OF BIDDER AND HIS ANTICIPATED SUBCONTRACTORS, IDENTIFICATION OF THE CONTRACT OR CONTRACTS UNDER WHICH THE PROPERTY IS HELD, AND WRITTEN PERMISSION FOR SUCH USE BY THE CONTRACTING OFFICER HAVING COGNIZANCE OF THE PROPERTY; *** ." IN RESPONSE TO THE REQUIREMENTS OF THIS SUBPARAGRAPH RAYTHEON LISTED THE FACILITIES IN QUESTION AND ATTACHED REPRODUCED PAGES FROM THE REFERENCED FACILITIES CONTRACT, WHICH CONTAINED THE FOLLOWING PROVISION TAKEN FROM ASPR 7-702.12:

"(A) THE CONTRACTOR MAY USE THE FACILITIES WITHOUT CHARGE IN THE PERFORMANCE OF: (I) PRIME CONTRACTS WITH THE GOVERNMENT WHICH SPECIFICALLY AUTHORIZE USE WITHOUT CHARGE *** ." AND THE FOLLOWING PROVISIONS WHICH RAYTHEON ARGUES AUTHORIZED IT TO USE THE FACILITIES WITHOUT ADDITIONAL APPROVAL:

"IN ADDITION TO THE RENT-FREE USE AUTHORIZED BY PARAGRAPH (A) OF THE CLAUSE OF THE CONTRACT, ENTITLED 'USE AND CHARGES', THE FACILITIES SHALL BE AVAILABLE FOR THE CONTRACTOR'S USE DURING THE PERIOD OF THIS CONTRACT FOR THE PERFORMANCE OF CONTRACTS WITH AGENCIES OF THE FEDERAL GOVERNMENT AND SUBCONTRACTS THEREUNDER PROVIDED THAT THE CONTRACTOR SHALL PAY RENT FOR SUCH ADDITIONAL AVAILABILITY AND RIGHT TO USE IN ACCORDANCE WITH THE CHARGES PRESCRIBED BY THE CLAUSE HEREOF ENTITLED 'USE AND CHARGES'."

UNDER THE TERMS OF SUBPARAGRAPH IVA)(II) RAYTHEON'S BID MUST BE CONSIDERED TO HAVE COMPLIED WITH SUCH TERMS BY STATING THAT THE COMPANY PLANNED TO USE CERTAIN GOVERNMENT-OWNED FACILITIES AND THAT IT WAS AUTHORIZED TO DO SO UNDER THE TERMS OF FACILITIES CONTRACT NO. N00019 68-C -9051. THE FACTS PRESENT HERE ARE CLEARLY DISTINGUISHABLE FROM THOSE IN B -154598, SUPRA. IN THAT CASE THE REJECTED BIDDER'S GOVERNMENT FACILITIES CONTRACT CONTAINED A PROVISION WHICH SPECIFICALLY REQUIRED THE CONTRACTOR TO OBTAIN WRITTEN APPROVAL TO USE THE FACILITIES PRIOR TO BIDDING ON AN INVITATION. HERE, RAYTHEON'S FACILITIES CONTRACT DID NOT REQUIRE SUCH ADDITIONAL APPROVAL. IT IS ALSO CLEAR THAT THE CONTRACTING OFFICER HAVING COGNIZANCE OVER THE FACILITY IN QUESTION SO INTERPRETED THE PROVISIONS OF THE FACILITIES CONTRACT, SINCE HE VERIFIED RAYTHEON'S RENTAL COMPUTATION FOR USE OF THE PROPERTY FOR THE PURPOSES OF THE SUBJECT IFB. CF. 38 COMP. GEN. 79 (1958).

CONCERNING YOUR ARGUMENT THAT THE ASSIGNED EVALUATION FACTOR IN THE AMOUNT OF $126,000, AS THE COST TO THE NAVY TO ACCOMPLISH TESTING FOR FIRST ARTICLE APPROVAL, IS UNREASONABLY LOW AND AWARD TO RAYTHEON WOULD RESULT IN HIGHER COSTS TO THE GOVERNMENT, THERE IS NO EVIDENCE TO SUGGEST THAT THE APPROPRIATE GOVERNMENT OFFICIALS' DETERMINATION OF THAT AMOUNT WAS ARBITRARY OR THAT THEY DID NOT MAKE GOOD FAITH ATTEMPTS TO PROPERLY ESTIMATE THE COST FOR FIRST ARTICLE TESTING. CONSEQUENTLY, WE WILL NOT ATTEMPT TO SUBSTITUTE OUR JUDGMENT IN THE MATTER FOR THAT OF THE AGENCY WHICH HAS THE PRINCIPAL RESPONSIBILITY FOR MAKING SUCH DECISIONS.

YOUR THIRD ARGUMENT, AS SUMMARIZED ABOVE, APPEARS TO BE DIRECTED TO THE RESPONSIBILITY AND CAPACITY OF THE LOW BIDDER. BASED ON ESTIMATES OF COGNIZANT GOVERNMENT PERSONNEL, THE DELIVERY SCHEDULE WAS CONSIDERED REASONABLE AND ACHIEVABLE EVEN FOR THOSE FIRMS WHICH MUST SUBMIT FIRST ARTICLES. SPECIFICALLY IN REFERENCE TO RAYTHEON, THAT FIRM'S FACILITIES, ETC., WERE APPRAISED BY A GOVERNMENT PREAWARD SURVEY TEAM WHICH CONCLUDED WITHOUT RESERVATION THAT THE COMPANY WAS CAPABLE OF MEETING THE DELIVERY REQUIREMENTS. IN THIS CONNECTION IT SHOULD BE UNDERSTOOD THAT DETERMINATIONS OF THE QUALIFICATIONS OF PROSPECTIVE CONTRACTORS ARE PRIMARILY THE RESPONSIBILITY OF THE CONTRACTING OFFICIALS CONCERNED, AND WE WILL NOT INTERFERE WITH SUCH DETERMINATIONS UNLESS IT IS CLEARLY ESTABLISHED THAT THE AGENCY'S ACTIONS WERE ARBITRARY OR NOT SUPPORTABLE BY THE RECORD.

IT APPEARS FROM THE RECORD THAT THE PROCEDURES FOLLOWED IN THE PREAWARD SURVEY AND IN REVIEWING RAYTHEON'S QUALIFICATIONS WERE PROPER AND NO BASIS EXISTS FOR THIS OFFICE TO TAKE EXCEPTION TO THE ADMINISTRATIVE DETERMINATION THAT RAYTHEON WAS SUFFICIENTLY QUALIFIED TO RECEIVE THE AWARD. 37 COMP. GEN. 430, 435 (1957).

WE NOW TURN TO YOUR ARGUMENT THAT THE AWARD TO RAYTHEON FOR PRODUCTION OF THE MISSILE TARGETS WOULD CREATE AN INHERENT CONFLICT OF INTEREST AND WOULD BE IN VIOLATION OF DOD DIRECTIVE NO. 5500.10, SINCE RAYTHEON IS THE CURRENT PRODUCER OF THE SPARROW III MISSILES. YOU DO NOT CONTEND THAT RAYTHEON HAD AN UNFAIR COMPETITIVE ADVANTAGE AS PRODUCER OF THE MISSILE, BUT YOU SAY THAT ASSIGNMENT OF THE RESPONSIBILITY FOR BOTH THE MISSILE AND THE MISSILE TARGET USED TO DETERMINE THE MISSILE'S EFFECTIVENESS TO THE SAME MANUFACTURER IS NOT ONLY UNDESIRABLE BUT IN VIOLATION OF THE DIRECTIVE. YOU ARGUE THAT SUBJECTIVE JUDGMENTS WILL BE REQUIRED WHICH CANNOT BE OBJECTIVELY MADE WHEN BOTH THE WEAPON SYSTEM AND TARGET PRODUCTION ARE BEING MADE BY THE SAME MANUFACTURER. IN RESPONSE TO THIS CONTENTION THE NAVY HAS REPORTED THAT BOTH CONTRACTS ARE PRODUCTION CONTRACTS, AND THAT NO JUDGMENT BY THE CONTRACTOR IS INVOLVED IN MEETING THE REQUIREMENTS OF EITHER CONTRACT. THE SUBJECT CONTRACT REQUIRES THAT THE TARGETS BE PRODUCED IN ACCORDANCE WITH THE SPECIFICATIONS DESIGNATED THEREIN, AND RAYTHEON CAN MEET ITS CONTRACTUAL OBLIGATIONS ONLY BY COMPLYING WITH THOSE SPECIFICATIONS.

YOU DO NOT SPECIFY THE PROVISION OF DOD DIRECTIVE NO. 5500.10 WHICH WOULD BE VIOLATED BY AWARDING THE TARGET CONTRACT TO RAYTHEON, NOR ARE WE ABLE TO DETERMINE THAT THE DIRECTIVE HAS APPLICATION TO THE CONTRACTS HERE INVOLVED. AS INDICATED IN THE PREAMBLE OF THAT DIRECTIVE THE RULES OF THE DIRECTIVE WERE DEVELOPED TO PROVIDE A "CODE OF CONDUCT" FOR ORGANIZATIONS IN THE RESEARCH AND DEVELOPMENT FIELD, AND TO GUIDE CONTRACTING OFFICERS IN THE SELECTION OF A CONTRACTOR FOR A PARTICULAR RESEARCH AND DEVELOPMENT CONTRACT, WHEREAS BOTH THE MISSILE CONTRACT AND THE TARGET CONTRACT ARE PRODUCTION CONTRACTS RATHER THAN RESEARCH AND DEVELOPMENT CONTRACTS. ANY EVENT, WE HAVE HELD THAT THE DIRECTIVE IS NOT SELF-EXECUTING, BUT SPECIFICALLY PROVIDES THAT PROSPECTIVE CONTRACTORS WILL BE ADVISED OF THE APPLICABILITY OF THE ORGANIZATIONAL CONFLICT OF INTEREST RULES BY A NOTICE IN THE SOLICITATION AND BY A CLAUSE IN THE RESULTING CONTRACT. 49 COMP. GEN. 463 (1970).

THERE IS NO INDICATION THAT THE CONTRACT AWARDED TO RAYTHEON FOR THE PRODUCTION OF THE MISSILES CONTAINED A CLAUSE RESTRICTING ITS ACTIVITIES IN ANY MANNER IN COMPETITING FOR CONTRACTS FOR THE PRODUCTION OF TARGETS FOR THOSE MISSILES. EVEN IF THE TARGET CONTRACT COULD BE REGARDED AS A FOLLOW-ON PROCUREMENT TO THE MISSILE CONTRACT, ASPR 1-113.2(C) SPECIFICALLY PROVIDES THAT THE CONTRACTING OFFICER SHALL NOT IMPOSE RESTRICTIONS UNDER THE DIRECTIVE IN FOLLOW-ON PROCUREMENTS ON ANY PROSPECTIVE CONTRACTOR IN THE ABSENCE OF A SPECIFIC CONTRACTUAL AGREEMENT WITH THAT CONTRACTOR. SINCE THERE DOES NOT APPEAR TO BE AN APPROPRIATE CONTRACT CLAUSE IN RAYTHEON'S MISSILE CONTRACT PRECLUDING THAT FIRM FROM COMPETITING FOR TARGET CONTRACTS, THE AWARD TO RAYTHEON MAY NOT BE CONSIDERED AS VIOLATING THE PROVISIONS OF THE DIRECTIVE. IN VIEW OF THE FOREGOING, WE SEE NO LEGAL BASIS TO QUESTION THE AWARD OF THE CONTRACT TO RAYTHEON AS THE LOW, RESPONSIVE AND RESPONSIBLE BIDDER, AND YOUR PROTEST IS THEREFORE DENIED.