B-174184, MAY 24, 1972

B-174184, MAY 24, 1972

BID PROTEST - BIDDER RESPONSIBILITY - "BUY IN" - PRODUCT ACCEPTABILITY - BUY AMERICAN ACT DENIAL OF PROTEST BY JRB ASSOCIATES, INC., AGAINST THE AWARD OF A CONTRACT TO PHILIPS ELECTRONIC INSTRUMENTS UNDER AN IFB ISSUED BY THE DIRECTORATE OF PROCUREMENT AND PRODUCTION, SAN ANTONIO AIR MATERIEL AREA, KELLY AFB, TEX. EVEN IF THE RECORD DID SUPPORT PROTESTANT'S CONTENTION THAT THE PHILIPS' BID IS A "BUY-IN", THERE STILL WOULD BE NO BASIS FOR REJECTION OF THE BID. ASPR 1-311 DOES NOT INCLUDE REJECTION OF THE BID AS ONE OF THE ACTIONS THE CONTRACTING OFFICER COULD TAKE AGAINST AN ATTEMPTED BUY IN. TECHNICAL ACCEPTABILITY OF A PRODUCT IS TO BE DETERMINED BY THE PROCURING AGENCY AND GAO WILL NOT CHALLENGE THAT DETERMINATION UNLESS IT CONSTITUTED A CLEAR ABUSE OF DISCRETION. ALSO, WHERE A CONTRACTOR DOES NOT EXCLUDE ANY ITEMS FROM A BUY AMERICAN ACT CERTIFICATE, HE IS LEGALLY OBLIGATED TO DELIVER A DOMESTIC SOURCE END ITEM. FURTHER, GAO WILL ACCEPT A CONTRACTING OFFICER'S FINDING OF RESPONSIBILITY UNLESS IT CAN BE SHOWN BY CONVINCING EVIDENCE THAT THE FINDING WAS ARBITRARY, CAPRICIOUS, OR NOT BASED ON SUBSTANTIAL EVIDENCE.

TO JRB ASSOCIATES, INC.:

WE HAVE REVIEWED YOUR PROTEST AGAINST THE AWARD OF A CONTRACT TO PHILIPS ELECTRONIC INSTRUMENTS (PHILIPS) UNDER INVITATION FOR BIDS (IFB) F41608-72 -B-0861, ISSUED BY THE DIRECTORATE OF PROCUREMENT AND PRODUCTION, SAN ANTONIO AIR MATERIEL AREA (SAAMA), KELLY AIR FORCE BASE, TEXAS.

THE IFB WAS ISSUED AUGUST 19, 1971, AS THE SECOND STEP OF A TWO-STEP PROCUREMENT FOR 37 FLUOROSCOPIC INSPECTION UNITS, FEDERAL STOCK NUMBER 6635-NC408794PYB, PLUS SPARES AND TECHNICAL DATA. THE IFB INCLUDED A 100- PERCENT OPTION.

OF THE SEVEN SOURCES DEEMED TECHNICALLY ACCEPTABLE AFTER CONCLUSION OF THE FIRST STEP, SIX SUBMITTED BIDS WHICH WERE OPENED ON SEPTEMBER 8, 1971, AS FOLLOWS:

PHILIPS ELECTRONIC INSTRUMENTS $356,923.75

JRB ASSOCIATES$474,110.25

BALTEAU ELECTRIC CORPORATION $500,737.65

BENDIX CORPORATION $502,781.00

BURDEL, INC. $522,540.00

X-RAY PRODUCTS CORPORATION $913,789.00

ON NOVEMBER 12, 1971, OUR OFFICE WAS NOTIFIED BY THE AIR FORCE THAT AWARD WOULD BE MADE TO PHILIPS AS THE LOW BIDDER, NOTWITHSTANDING THE JRB ASSOCIATES (JRB) PROTEST. THE GROUNDS OF THE PROTEST WERE:

1. PHILIPS' PRICE INDICATES THAT IT IS "BUYING IN";

2. PHILIPS' PROPOSED UNIT WILL NOT CONFORM TO THE SPECIFICATIONS;

3. PHILIPS HAS VIOLATED THE BUY AMERICAN ACT; AND

4. PHILIPS IS NOT A RESPONSIBLE BIDDER BASED ON ITS PAST PERFORMANCE RECORD.

ESSENTIALLY, YOU BASED YOUR FIRST CONTENTION ON THE FACT THAT THE PHILIPS BID WAS APPROXIMATELY 37-PERCENT LOWER THAN YOUR BID AND THE SECOND THROUGH FIFTH LOW BIDS WERE ALL WITHIN A 10-PERCENT RANGE. JRB HYPOTHESIZED THAT PHILIPS EITHER COMMITTED A MISTAKE IN ITS BID OR WAS ATTEMPTING TO "BUY-IN" ON THE INITIAL CONTRACT AND WOULD ATTEMPT TO RECOUP ANY LOSSES THROUGH CHANGE ORDERS OR FOLLOW-ON CONTRACTS.

CONCERNING THE MISTAKE IN BID ALLEGATION, BY LETTER DATED SEPTEMBER 9, 1971, THE CONTRACTING OFFICER REQUESTED PHILIPS TO REVIEW ITS BID. LETTER DATED SEPTEMBER 17, 1971, PHILIPS VERIFIED THE BID WAS CORRECT.

FURTHER, WITH RESPECT TO THE CONTENTION THAT THE PHILIPS BID MAY HAVE BEEN A "BUY-IN" COVERED BY ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1- 311, OUR OFFICE HAS STATED IN B-171609, MAY 12, 1971:

"WITH RESPECT TO THE IMPACT OF THIS REGULATION, (ASPR 1-311), WE HAVE CONSISTENTLY HELD THAT IT DOES NOT AFFORD A BASIS FOR REJECTION OF A BID. IN THIS CONNECTION, IT SHOULD BE NOTED THAT WHILE THE REGULATION SETS OUT SPECIFIC ACTIONS TO BE TAKEN BY THE CONTRACTING OFFICER IN THE EVENT 'BUYING IN' IS THOUGHT TO BE OCCURRING OR HAS OCCURRED, THERE IS NO SPECIFIC PROVISION IN THE REGULATION FOR REJECTION OF THE BID". SEE ALSO 50 COMP. GEN. 788 (1971).

MOREOVER, THE PRICE DIFFERENTIAL IS EXPLAINED IN LARGE PART IN A REPORT DATED OCTOBER 6, 1971, FROM THE DEPUTY CHIEF, SERVICE ENGINEERING DIVISION, WHEREIN IT WAS STATED:

" *** THE PHILIPS' PROPOSAL DOES NOT INCLUDE A PHILIPS' X-RAY UNIT BUT WILL USE A FLUOROSCOPY SYSTEM DESIGNED, PATENTED, AND MANUFACTURED BY TORR LABORATORIES, INC. PHILIPS IS THE EXCLUSIVE DEALER FOR THE TORR FLUOROSCOPIC EQUIPMENT. THE TORR UNIT DOES NOT USE A SEPARATE X-RAY MACHINE BUT INCORPORATES A GENERATING UNIT DESIGNED SPECIFICALLY FOR FLUOROSCOPY. IT ELIMINATES MANY OF THE EXPENSIVE CONTROL CIRCUITS ESSENTIAL TO FILM RADIOGRAPHY, BUT SUPERFLUOUS TO FLUORSCOPY. ANOTHER AREA OF COST SAVINGS IS IN THE GLASS X-RAY TUBE. TORR IS THE ONLY MANUFACTURER WHO PRODUCES HIS OWN TUBES. *** THIS PERMITS TORR TO SIMPLIFY THEIR X-RAY GENERATING SOURCE AND TO REDUCE THE NUMBER OF ELECTRICAL/ELECTRONIC COMPONENTS BY OVER 50-PERCENT."

THE SECOND BASIS OF THE PROTEST WAS THAT THE PHILIPS UNIT WILL NOT MEET THE SPECIFICATIONS. TECHNICAL ACCEPTABILITY WAS DETERMINED DURING THE FIRST STEP OF THIS TWO-STEP PROCUREMENT. THE QUESTION OF WHETHER A BIDDER IS TECHNICALLY CAPABLE OF MEETING THE SPECIFICATIONS AT ITS BID PRICE IS WITHIN THE JURISDICTION OF THE CONTRACTING AGENCY. OUR OFFICE WILL NOT QUESTION THAT DETERMINATION UNLESS IT CONSTITUTED A CLEAR ABUSE OF DISCRETION. SINCE THERE IS NO SUCH INDICATION HERE, WE ACCEPT THE JUDGMENT OF THE CONTRACTING AGENCY. B-174113, APRIL 5, 1972.

JRB NEXT CONTENDED THAT PHILIPS HAD VIOLATED THE BUY AMERICAN ACT BECAUSE JRB REASONED THAT PHILIPS MUST BE UTILIZING FOREIGN PARTS TO BE ABLE TO OFFER THE UNITS AT SUCH LOW PRICES.

WE NOTE THAT PHILIPS DID NOT EXCLUDE ANY END PRODUCTS FROM THE BUY AMERICAN CERTIFICATE IN THE IFB WHICH PHILIPS COMPLETED. IN REGARD TO THE ACCEPTANCE OF THE BUY AMERICAN CERTIFICATE, WE STATED IN 50 COMP. GEN. 697, 702 (1971):

"AS TO THE GENERAL ACCEPTANCE OF THE BUY AMERICAN CERTIFICATE BY CONTRACTING OFFICIALS, WE HAVE HELD THAT WHERE AN OFFER IS ACCEPTED FROM AN OFFEROR WHO EXCLUDES NO PRODUCTS FROM THE CERTIFICATE OR OTHERWISE INDICATES THAT HE IS NOT OFFERING A DOMESTIC SOURCE END ITEM, THE OFFEROR IS LEGALLY OBLIGATED UNDER ITS CONTRACT TO FURNISH THE GOVERNMENT A DOMESTIC SOURCE END PRODUCT, AND COMPLIANCE WITH THAT OBLIGATION IS A MATTER OF CONTRACT ADMINISTRATION WHICH HAS NO EFFECT ON THE VALIDITY OF THE CONTRACT AWARD."

FURTHER, CONCERNING THE DOMESTICITY OF THE PHILIPS COMPONENTS, IT IS REPORTED BY THE CHIEF, SERVICE ENGINEERING DIVISION, DIRECTORATE OF MATERIEL MANAGEMENT, IN A MEMORANDUM DATED SEPTEMBER 22, 1971:

"THE PHILIPS ELECTRONIC X-RAY UNITS, TRADE NAMES OF NORELCO AND SCAN RAY, HAVE MANY COMPONENTS THAT ARE MANUFACTURED IN FOREIGN COUNTRIES. HOWEVER, THE PROPOSAL SPECIFIES THAT THE TORR RADIFLUOR UNIT WILL BE USED. REVIEW OF THE PARTS LIST FROM THE RADIFLUOR UNIT PURCHASED LAST YEAR DOES NOT SHOW ANY FOREIGN SUPPLIERS OF COMPONENTS." ***

FINALLY, YOU QUESTIONED PHILIPS' RESPONSIBILITY BASED ON ITS PAST PERFORMANCE. SPECIFICALLY, JRB ALLEGED THAT THE PAST PHILIPS' UNIT HAS NOT PERFORMED IN ACCORDANCE WITH THE STATED SPECIFICATIONS. THE AIR FORCE INVESTIGATED THE ALLEGATIONS AND RESPONSES REGARDING THE PERFORMANCE OF THE PHILIPS' UNIT INDICATE THAT DISSATISFACTION WITH THE PRODUCT HAS STEMMED FROM THE LIMITED APPLICATION OF THE UNIT, RATHER THAN AN INABILITY TO PERFORM ITS FUNCTION AS INDICATED BY ITS SPECIFICATIONS. IT HAS LONG BEEN THE RULE OF OUR OFFICE TO ACCEPT THE CONTRACTING OFFICER'S DETERMINATION OF RESPONSIBILITY, UNLESS IT IS SHOWN BY CONVINCING EVIDENCE THAT THE FINDING WAS ARBITRARY, CAPRICIOUS, OR NOT BASED ON SUBSTANTIAL EVIDENCE. B-173157, OCTOBER 26, 1971. WE DO NOT FIND ANY SUCH EVIDENCE IN THIS CASE.

IN VIEW OF THE FOREGOING, THE PROTEST IS DENIED.