B-173523, DEC 28, 1971

B-173523, DEC 28, 1971

BID PROTEST - ALLEGATIONS OF NON-COMPLIANCE - UNFOUNDED DECISION DENYING PROTEST OF OKLAHOMA AEROTRONICS, INC. AGAINST THE AWARD OF A CONTRACT FOR THE MANUFACTURE AND SUPPLY OF TELEMETRY TRANSMITTERS TO DORSETT ELECTRONICS, DIVISION OF LABARGE, INC., LOW BIDDER, UNDER AN RFP ISSUED BY THE NAVAL AIR SYSTEMS COMMAND. AEROTRONICS ALLEGES THAT DORSETT INTENTIONALLY BID BELOW ACTUAL COST AND THAT THEIR PROPOSAL VIOLATES THE SPECIFICATIONS OF THE PROCUREMENT. SINCE THERE ARE SUFFICIENT SAFEGUARDS WITHIN THE CONTRACT TO PREVENT THE RECOVERY OF "BUY-IN" LOSSES AND SINCE THERE IS NO EVIDENCE THAT AEROTRONICS WAS MISLED AS TO THE SPECIFICATIONS OF THE PROCUREMENT, THE PROTEST IS DENIED.

TO OKLAHOMA AEROTRONICS, INC.:

REFERENCE IS MADE TO YOUR LETTERS OF JULY 6, AUGUST 10, AND AUGUST 11, 1971, PROTESTING THE AWARD OF CONTRACT N00019-72-C-0043 TO DORSETT ELECTRONICS, DIVISION OF LABARGE, INC. (DORSETT), PURSUANT TO REQUEST FOR PROPOSALS (RFP) N00019-71-R-0187, ISSUED JUNE 15, 1971, BY THE NAVAL AIR SYSTEMS COMMAND, WASHINGTON, D.C.

THE SUBJECT CONTRACT REQUIRES THE MANUFACTURE AND SUPPLY OF TELEMETRY TRANSMITTERS, OA 1208, SPARE AND REPAIR PARTS, AND RELATED DATA. THE PROCUREMENT WAS NEGOTIATED UNDER 10 U.S.C. 2304(A)(2), PURSUANT TO A DETERMINATION AND FINDINGS, DATED MAY 18, 1971, THAT THE PUBLIC EXIGENCY WOULD NOT PERMIT THE DELAY INCIDENT TO A FORMAL ADVERTISEMENT OF THE PROCUREMENT.

THE RECORD INDICATES THAT FOUR FIRMS WERE FURNISHED COPIES OF THE SUBJECT RFP AND, UPON THE DATE SPECIFIED FOR RECEIPT AND OPENING OF OFFERS PROPOSALS WERE RECEIVED FROM YOUR FIRM AND DORSETT, AT $253,078.50 AND $184,409.60, RESPECTIVELY, FOR THE CONTEMPLATED FIXED PRICE CONTRACT. CONTRACT WAS EXECUTED JULY 1, 1971, WITH DORSETT, ON THE BASIS OF ITS LOWEST OVERALL PRICE TO THE GOVERNMENT.

YOU CONTEND THAT DORSETT KNOWINGLY AND INTENTIONALLY SUBMITTED A PRICE SUBSTANTIALLY BELOW THE ACTUAL COST TO BE INCURRED DURING PRODUCTION OF THE ARTICLES, AND SINCE ITS PROPOSED UNIT COST WAS APPROXIMATELY 1/3 LESS THAN ESTIMATES SUBMITTED FOR THE IDENTICAL ITEMS IN PREVIOUS PROCUREMENTS, YOU CLAIM THAT DORSETT CANNOT VALIDLY CERTIFY THAT THE COST AND PRICING DATA SUBMITTED IN ITS DD FORMS 633 WAS ACCURATE, COMPLETE AND CURRENT.

YOU ALSO QUESTION WHETHER DORSETT IS ABLE TO COMPLY WITH THE INITIAL DELIVERY SCHEDULE.

FINALLY, YOU CONTEND THAT THE FIRST ARTICLES, AS SUBMITTED BY DORSETT, VIOLATE THE SPECIFICATIONS IN A MATERIAL MANNER SINCE THE SPECIFICATIONS LIMIT THE TRANSMITTER TO A TUBE-TYPE, AND DORSETT'S FIRST ARTICLES HAVE SUBSTITUTED A SOLID STATE COMPONENT.

ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-311 ADDRESSES THE SITUATION WHERE AN OFFEROR KNOWINGLY OFFERS A PRICE SUBSTANTIALLY BELOW ANTICIPATED COST WITH THE EXPECTATION OF RECOUPING THE LOSS BY AN INCREASE IN PRICE THROUGH CHANGE ORDERS DURING PERFORMANCE OR BY RECEIVING FOLLOW- ON CONTRACTS AT PRICES HIGH ENOUGH TO RECOVER THE LOSS ON THE ORIGINAL "BUY-IN". THE ACT OF WILFULLY BIDDING BELOW COST IS NOT EXPRESSLY PROHIBITED. HOWEVER, WHEN THERE IS REASON TO BELIEVE THAT THIS HAS OCCURRED, THE CONTRACTING OFFICER IS REQUIRED BY THAT REGULATION TO ASSURE THAT THE DIFFERENCE IS NOT RECOVERED IN THE PRICING OF CHANGE ORDERS OR THROUGH FOLLOW-ON PROCUREMENTS.

THE RECORD INDICATES THAT THE PROCURING ACTIVITY CONSIDERED THIS POSSIBILITY, AND EXPRESSES NAVAL AIR'S BELIEF THAT THE CONTRACT, AS CONSTITUTED, EMBODIES SUFFICIENT SAFEGUARDS TO PREVENT THE RECOVERY OF ANY "BUY-IN" LOSSES, EITHER ACTUAL OR SPECULATED, IN THE PRICING OF CHANGE ORDERS (IF ANY) UNDER THIS CONTRACT. ADDITIONALLY, THE RECORD STATES THAT PROJECTED FUTURE REQUIREMENTS INDICATE THIS CONTRACT IS TO BE THE LAST PROCUREMENT OF THE SUBJECT ITEMS, THEREBY PRECLUDING ANY OPPORTUNITY TO RECOUP "BUY-IN" LOSSES IN FOLLOW-ON PROCUREMENTS. IN VIEW THEREOF, WE ARE SATISFIED THAT THE PROCURING ACTIVITY ADEQUATELY CONSIDERED THE POSSIBILITY OF A "BUY-IN", AND FULFILLED THE REQUIREMENTS OF THE REFERENCED ASPR SECTION.

WITH REGARD TO YOUR ALLEGATION THAT DORSETT CANNOT VALIDLY CERTIFY THE ACCURACY OF THE COST AND PRICING DATA SHOWN ON ITS DD FORMS 633, ASPR 3- 807.3(E)(2) STIPULATES THAT COST AND PRICING DATA SHALL NOT BE REQUIRED WHERE THE PRICE NEGOTIATED IS BASED ON ADEQUATE COMPETITION. ADEQUATE PRICE COMPETITION IS DEFINED IN ASPR 3-807.1(B)(1), AND THAT REGULATION STIPULATES THAT PRICE COMPETITION EXISTS IF OFFERS ARE SOLICITED AND AT LEAST TWO RESPONSIBLE OFFERORS INDEPENDENTLY SUBMIT RESPONSIVE PROPOSALS.

IN THE INSTANT PROCUREMENT, IT IS THE DEPARTMENT'S POSITION THAT THE AWARD OF CONTRACT N00019-72-C-0043 WAS MADE ON THE BASIS OF ADEQUATE COMPETITION, AS CONTEMPLATED BY ASPR 3-805.1(A)(V), AND THAT DORSETT'S DD 633 THEREFORE WAS NOT RELIED UPON, NOR WAS DORSETT REQUIRED TO SUBMIT A CERTIFICATE OF CURRENT COST OR PRICING DATA. IN VIEW THEREOF, AND SINCE SUCH A CERTIFICATE IS DIRECTED TO THE PREVENTION OF OVERPRICING, RATHER THAN UNDERPRICING, WE MUST AGREE WITH THE DEPARTMENT'S POSITION THAT THE QUESTION OF WHETHER DORSETT'S PRICING DATA WAS DEFECTIVE IS IMMATERIAL.

IN CONJUNCTION WITH YOUR ALLEGATION THAT THE FIRST ARTICLES SUBMITTED BY DORSETT CONSTITUTE A MATERIAL VIOLATION OF THE SPECIFICATIONS IN THAT THEY INCORPORATE A SOLID STATE TRANSMITTER WHILE THE SPECIFICATIONS, YOU CONTEND, REQUIRE A TUBE-TYPE TRANSMITTER, YOU STATE THAT, PRIOR TO SUBMISSION OF YOUR PROPOSAL ON THE SUBJECT RFP, YOU QUESTIONED NAVAL AIR REGARDING MODIFICATION OF THE TRANSMITTER TO SOLID STATE AND WERE APPRISED THAT THE GOVERNMENT HAD PREVIOUSLY CONSIDERED AND REJECTED THIS CHANGE, AND WOULD NOT WELCOME FURTHER SUCH PROPOSAL.

OUR PERUSAL OF THE SUPPLEMENTAL ADMINISTRATIVE REPORT, DATED SEPTEMBER 23, 1971, (WITH COPY FURNISHED TO YOU FOR POSSIBLE REBUTTAL) REVEALS THAT THE INCIDENT TO WHICH YOU ALLUDED OCCURRED IN JANUARY 1968, WITH REFERENCE TO A PREVIOUS PROCUREMENT. IT IS STATED THAT YOU OFFERED A SOLID STATE DESIGN AT AN INCREASED PRICE OVER YOUR TUBE-TYPE TRANSMITTER, AND THIS INFORMAL PROPOSAL WAS REJECTED ON THE BASIS OF THE INCREASE IN PRICE, AND YOU WERE SO ADVISED. WHILE ANY MISUNDERSTANDING THAT MAY HAVE ENSUED FROM THAT INCIDENT IS REGRETTABLE, THE RECORD IS DEVOID OF ANY EVIDENCE THAT INDICATES THE PROCURING ACTIVITY ACTED IN BAD FAITH OR KNOWINGLY MISLED YOU ON THIS MATTER.

FINALLY, WITH RESPECT TO YOUR ALLEGATION THAT DORSETT'S FIRST ARTICLES, AS SUBMITTED, VIOLATE THE SPECIFICATIONS, WE NOTE THAT THE SUPPLEMENTAL ADMINISTRATIVE REPORT OF SEPTEMBER 23, 1971, RELATES THAT PURSUANT TO THE REQUIREMENT OF MIL-T-23369BAS) THE DRAWINGS REFERENCED IN THAT SPECIFICATION ARE TO BE OF THE ISSUE IN EFFECT ON THE DATE OF THE REQUEST FOR PROPOSAL. DL 1012252B, DATED OCTOBER 15, 1967, WAS THE DRAWING APPLICABLE TO THE TRANSMITTER, AND THAT DRAWING DOES NOT RESTRICT THE TRANSMITTER TO EITHER TUBE OR SOLID STATE COMPONENTS. IN VIEW THEREOF, AND IN THE ABSENCE OF ANY TANGIBLE EVIDENCE TO THE CONTRARY, WE ARE NOT IN A POSITION TO REFUTE NAVAL AIR'S INTERPRETATION THAT PARAGRAPH 3.2.2, SPECIFYING THAT TUBES UTILIZED IN THE EQUIPMENT SHALL BE CHOSEN FROM REQUIREMENT 29 OF MIL-STD-454, IS OPERATIVE ONLY IF THE CONTRACTOR ELECTS TO UTILIZE TUBES INSTEAD OF SOLID STATE COMPONENTS FOR THE TRANSMITTER.

ACCORDINGLY, WE ARE OF THE OPINION THAT A PROPER AND VALID CONTRACT WAS CONSUMMATED WITH DORSETT, AND YOUR PROTEST MUST THEREFORE BE DENIED.