B-174529, MAY 18, 1972, 51 COMP GEN 749

B-174529, MAY 18, 1972, 51 COMP GEN 749

CONTRACTS - NEGOTIATION - NATIONAL EMERGENCY - "ONE OR MORE" AWARDS - MAINTENANCE OF SUPPLY SOURCES NOTWITHSTANDING A REQUEST FOR PROPOSALS (RFP) FOR FUZE GRENADES PROVIDED FOR TWO CONTRACT AWARDS IN ORDER TO RETAIN TWO SOURCES OF SUPPLY IN THE EVENT OF UNFORESEEABLE CONTINGENCIES, A SINGLE AWARD, PURSUANT TO AN AMENDMENT TO THE RFP, IN VIEW OF CHANGED CIRCUMSTANCES TO THE OFFEROR WHO SUBMITTED BOTH THE PROPOSAL SOLICITED AND AN UNSOLICITED PROPOSAL ON THE BASIS OF A SAVINGS TO THE GOVERNMENT IS NOT PROHIBITED, EVEN THOUGH 10 U.S.C. 2304(A)(16), UNDER WHICH THE PROCUREMENT WAS NEGOTIATED, INDICATES PRICE NEED NOT CONTROL WHEN THE NATIONAL DEFENSE IS INVOLVED, SINCE NEITHER THE DETERMINATION AND FINDINGS NOR THE RFP STATE THE MAINTENANCE OF PRODUCTION CAPACITY REQUIRES CURRENT PRODUCTION BY MORE THAN ONE CONTRACTOR WHERE THE GOVERNMENT IS ASSURED OF SUPPORT FOR THE IMMEDIATE AND LONG RANGE LOGISTICS ASSOCIATED WITH THE REQUIRED ITEM. FURTHERMORE, IN DETERMINING THE LOW OFFER, THE USE OF GOVERNMENT FACILITIES WAS EVALUATED. CONTRACTS - AWARDS - LABOR SURPLUS AREAS - SET-ASIDE - ONE CONCERN ONLY QUALIFIED IN VIEW OF PARAGRAPH 1-804.1(A)(1)(II) OF THE ARMED SERVICES PROCUREMENT REGULATION, WHICH PROVIDES THAT A PARTIAL LABOR SURPLUS AREA SET-ASIDE SHALL NOT BE MADE IF THERE IS A REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE RECEIVED FROM NO MORE THAN TWO CONCERNS WITH TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY AND ONLY ONE OF THE CONCERNS WILL QUALIFY AS A LABOR SURPLUS AREA CONCERN, A LABOR SURPLUS AREA SET-ASIDE WAS PROPERLY NOT PROVIDED FOR THE PROCUREMENT OF FUZE GRENADES UNDER THE AUTHORITY OF 10 U.S.C. 2304(A)(16) SINCE ONLY ONE OF TWO QUALIFIED CONCERNS WAS A LABOR SURPLUS AREA CONCERN. FURTHERMORE, WHETHER THE CRITERIA TO SET ASIDE A PORTION OF A PROCUREMENT FOR LABOR SURPLUS AREA CONCERNS HAS BEEN SATISFIED IN A GIVEN CASE IS LARGELY WITHIN THE DISCRETION OF THE CONTRACTING AUTHORITY.

TO SCOVILL LOCAL 1604, MAY 18, 1972:

REFERENCE IS MADE TO YOUR TELEFAX DATED NOVEMBER 11 AND YOUR LETTER DATED NOVEMBER 19, 1971, PROTESTING THE AWARD OF A CONTRACT TO HONEYWELL, INC., UNDER REQUEST FOR PROPOSALS (RFP) DAAA09-71-R-0156, ISSUED BY THE U.S. ARMY MUNITIONS COMMAND (MUCOM), JOLIET, ILL.

THE RFP WAS ISSUED ON JUNE 15, 1971, FOR THE PROCUREMENT OF 17,988,700 FUZE GRENADE, M219E1. PROPOSALS WERE REQUESTED ON SEVERAL ALTERNATE QUANTITIES AND MONTHLY DELIVERY RATES, WHICH WOULD RESULT IN A TOTAL MONTHLY DELIVERY RATE OF 3.4 MILLION UNITS. THE FOLLOWING CLAUSE APPEARED WITH REFERENCE TO THE NUMBER OF AWARDS CONTEMPLATED:

SINCE THIS REQUIREMENT IS CRITICAL TO THE SUPPORT OF SOUTHEAST ASIA, THE GOVERNMENT MUST MAKE TWO AWARDS TO AVOID DISCONTINUITY OF SUPPLY IN THE EVENT OF STRIKES, ACTS OF GOD OR OTHER UNFORSEEABLE CONTINGENCIES. THIS SOLICITATION AND THE RANGE OF QUANTITIES AND DELIVERY RATES PROPOSED ARE FOR THE PURPOSE OF SELECTING TWO AWARDS WHICH WILL SATISFY CURRENT PRODUCTION WITH TWO SUPPLIERS *** .

THIS CLAUSE WAS BASED ON THE DIRECTION INCLUDED IN A TELEGRAM FROM THE PROJECT MANAGER FOR SELECTED AMMUNITION, U.S. ARMY MATERIEL COMMAND, TO MUCOM, DATED JUNE 7, 1971, THAT THE SOLICITATION SPECIFY A MINIMUM OF TWO AWARDS. THE RATIONALE FOR THIS POSITION WAS EXPRESSED AS FOLLOWS:

IT IS CONSIDERED IMPERATIVE AT THIS TIME TO RETAIN TWO SOURCES OF SUPPLY NOT ONLY TO ASSURE SUPPORT OF SEA (SOUTHEAST ASIA) OPERATIONS IN THE FACE OF CONTINGENCIES BUT ALSO TO PERMIT SATISFACTION OF FLUCTUATING REQUIREMENTS WHICH MAY EXCEED THE CAPACITY OF ONLY ONE PRODUCER.

THE COMPANIES RESPONDING TO THE RFP BY THE OPENING DATE OF JULY 30, 1971, WERE HONEYWELL, INCORPORATED (HONEYWELL), SCOVILL MANUFACTURING COMPANY (SCOVILL), AND PACE COMPANY (PACE). A PRICE EVALUATION WAS CONDUCTED ONLY ON THE OFFERS SUBMITTED BY HONEYWELL AND SCOVILL BECAUSE OF THE COMPARATIVELY HIGH PRICE OFFERED BY PACE.

THE TOTAL LOW EVALUATED PRICE FOR TWO SUPPLIERS TO FURNISH 17,988,780 UNITS IN ACCORDANCE WITH THE RFP WAS $4,337,570.11. AWARDS AT THIS TOTAL PRICE WOULD HAVE OBLIGATED HONEYWELL TO FURNISH A QUANTITY OF 13,100,000 UNITS AT A MONTHLY RATE OF 2,500,000 UNITS AND WOULD HAVE OBLIGATED SCOVILL TO FURNISH A QUANTITY OF 4,888,780 UNITS AT A MONTHLY RATE OF 900,000 UNITS. IN ADDITION TO ITS PROPOSAL PURSUANT TO THE RFP, HONEYWELL SUBMITTED AN UNSOLICITED PROPOSAL FOR THE TOTAL PROCUREMENT QUANTITY OF 17,988,780 UNITS AT A TOTAL EVALUATED PRICE OF $3,919,683.21. THE SAVINGS TO THE GOVERNMENT IN AWARDING THE ENTIRE PROCUREMENT TO HONEYWELL WOULD HAVE BEEN $417,886.90. AS A RESULT OF THIS PRICE ANALYSIS, A REQUEST WAS MADE BY MUCOM TO THE PROJECT MANAGER FOR SELECTED AMMUNITION FOR REAFFIRMATION OF THE REQUIREMENT FOR TWO AWARDS.

BY TELEGRAM DATED SEPTEMBER 24, 1971, THE PROJECT MANAGER ADVISED THAT:

IN LIGHT OF POTENTIAL SAVINGS, THIS OFFICE HAS EXAMINED CURRENT END ITEM PRODUCTION SCHEDULES AND REVIEWED FUTURE REQUIREMENTS WITH AF HQ. THIS OFFICE CONCURS THAT ONLY ONE AWARD SHOULD BE MADE AT THIS TIME FOR THE TOTAL QUANTITY OF 17,988,780 PROVIDED THE FOLLOWING STEPS ARE TAKEN TO MINIMIZE RISK:

A. EXPEDITE NECESSARY RESOLICITATION AND SUBSEQUENT PROCUREMENT ACTIONS TO REDUCE LOSS OF LEAD TIME.

B. DURING RESOLICITATION, CONDUCT AN ENGINEERING EVALUATION TO ESTABLISH WHETHER CONTRACTOR PROPOSING TO DELIVER 3.4 MILLION FUZES PER MONTH CAN ATTAIN AND MAINTAIN THIS RATE WITHOUT JEOPARDIZING QUALITY.

ON SEPTEMBER 27, 1971, AMENDMENT 0004 TO THE SUBJECT RFP WAS ISSUED. LIGHT OF AN ADDITIONAL FUNDED REQUIREMENT FOR M219E1 FUZES, THE AMENDMENT INCREASED THE TOTAL QUANTITY BY 22,275,000 UNITS TO 40,263,780 UNITS, BUT IT DID NOT CHANGE THE TOTAL MONTHLY DELIVERY RATE OF 3.4 MILLION UNITS. IN ADDITION, IT DELETED THE REQUIREMENT FOR AWARDING A MINIMUM OF TWO CONTRACTS AND ADVISED THAT THE GOVERNMENT RESERVES THE RIGHT TO MAKE ONE OR MORE AWARDS ON THE TOTAL QUANTITY OR ANY PORTION THEREOF, PRICE AND OTHER FACTORS CONSIDERED.

THE THREE ORIGINAL OFFERORS UNDER THE RFP RESUBMITTED PROPOSALS PURSUANT TO AMENDMENT 0004. BECAUSE OF THE PRICE SPREAD BETWEEN THE PROPOSAL OF PACE AND THAT OF HONEYWELL AND SCOVILL, AN EVALUATION WAS AGAIN CONDUCTED ONLY ON THE PROPOSALS OF THE TWO LOW OFFERORS. THE FOLLOWING IS THE RESULT OF THAT EVALUATION AND THE POTENTIAL AWARD COMBINATIONS:

TOTAL

UNIT CONTRACT

CONTRACTOR QUANTITY PRICE AMOUNT

HONEYWELL 29,700,000 $.25498 $7,572,906

SCOVILL 10,563,780 .31980 3,378,297

TOTAL EVALUATED PRICE 10,951,203

HONEYWELL 26,100,000 .26579 6,937,119

SCOVILL 14,163,780 .30057 4,257,207

TOTAL EVALUATED PRICE 11,194,326

HONEYWELL 20,131,890 .27803 5,597,269

SCOVILL 20,131,890 .28037 5,644,378

TOTAL EVALUATED PRICE 11,241,647

HONEYWELL 40,263,780 .245 9,864,626

BASED UPON HONEYWELL'S EVALUATED PROPOSAL FOR THE ENTIRE PROCUREMENT QUANTITY, AND A DETERMINATION THAT HONEYWELL CAN MANUFACTURE 3.4 MILLION UNITS PER MONTH, A SINGLE AWARD WAS MADE TO HONEYWELL. THE AWARD TO HONEYWELL RESULTED IN A SAVINGS TO THE GOVERNMENT OF $1,086,577 OVER THE LOWEST COST OF A COMBINATION OF TWO AWARDS TO HONEYWELL AND SCOVILL FOR THE TOTAL PROCUREMENT QUANTITY.

IN YOUR PROTEST TO THIS OFFICE YOU INQUIRE AS TO THE RATIONALE OF THE GOVERNMENT IN MAKING A SINGLE AWARD TO HONEYWELL WITHOUT A BACK-UP SUPPLIER. WE FEEL THIS INQUIRY IS ESPECIALLY PERTINENT IN LIGHT OF THE POSITION EVIDENCED BY THE GOVERNMENT PRIOR TO ITS ISSUING OF AMENDMENT 0004 TO THE EFFECT THAT "THE GOVERNMENT MUST MAKE TWO AWARDS TO AVOID DISCONTINUITY OF SUPPLY IN THE EVENT OF *** UNFORESEEABLE CONTINGENCIES."

FURTHER, WE NOTE THAT THIS PROCUREMENT WAS NEGOTIATED UNDER THE AUTHORITY OF 10 U.S.C. 2304(A)(16) AS IMPLEMENTED BY THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) 3-216. PURSUANT TO 10 U.S.C. 2304(A)(16), CONTRACTS MAY BE NEGOTIATED AS AN EXCEPTION TO THE RULES OF FORMAL ADVERTISING IN THOSE INSTANCES WHERE THE SECRETARY (OR HIS DESIGNEE) DETERMINES THE FOLLOWING:

*** (A) IT IS IN THE INTEREST OF NATIONAL DEFENSE TO HAVE A PLANT, MINE, OR OTHER FACILITY, OR A PRODUCER, MANUFACTURER, OR OTHER SUPPLIER, AVAILABLE FOR FURNISHING PROPERTY OR SERVICES IN CASE OF A NATIONAL EMERGENCY; OR (B) THE INTEREST OF INDUSTRIAL MOBILIZATION IN CASE OF SUCH AN EMERGENCY, OR THE INTEREST OF NATIONL DEFENSE IN MAINTAINING ACTIVE ENGINEERING, RESEARCH, AND DEVELOPMENT, WOULD OTHERWISE BE SUBSERVED.

THE LEGISLATIVE HISTORY OF THIS AUTHORITY CLEARLY INDICATES THAT THE PRICE TO THE GOVERNMENT NEED NOT BE CONTROLLING, SINCE IT WAS EXPECTED THAT THE GOVERNMENT WOULD BE REQUIRED TO PAY MORE FOR CONTRACTS AWARDED IN FURTHERANCE OF THOSE INTERESTS.

HOWEVER, WE HAVE HELD THAT WHERE NEITHER THE DETERMINATION AND FINDINGS JUSTIFYING NEGOTIATION UNDER 10 U.S.C. 2304(A)(16) NOR THE RFP ITSELF STATES THAT THE MAINTENANCE OF NEEDED PRODUCTION CAPACITY NECESSARILY REQUIRES CURRENT PRODUCTION BY MORE THAN ONE CONTRACTOR, AND WHERE THE GOVERNMENT IS ASSURED THAT AWARDS MADE TO ONE OR MORE OFFERORS WOULD SUPPORT THE IMMEDIATE AND LONG RANGE LOGISTICS ASSOCIATED WITH THE REQUIRED ITEM, WE ARE AWARE OF NO JUSTIFIABLE BASIS FOR PROHIBITING A SINGLE AWARD AT A LOWER COST TO THE GOVERNMENT. SEE 49 COMP. GEN. 772 (1970).

IN THE INSTANT CASE, WE HAVE BEEN ADVISED BY HEADQUARTERS, U.S. ARMY MATERIEL COMMAND THAT BECAUSE OF THE UNSOLICITED PROPOSAL OF HONEYWELL, THE PROJECT MANAGER FOR SELECTED AMMUNITION REASSESSED THE REQUIREMENTS FOR THE SUBJECT FUZE, AND CONCLUDED THAT AS A RESULT OF THE CHANGED CIRCUMSTANCES EXISTING AT THE TIME OF THE REASSESSMENT, THE NEED FOR TWO AWARDS HAD BEEN VITIATED. IN PARTICULAR, THE PROJECT MANAGER INDICATED THAT THE REQUIREMENT FOR TWO SUPPLIERS HAD BEEN BASED UPON AN AIR FORCE FORECAST IN JUNE 1971 THAT CERTAIN PROGRAMS REQUIRING THE M 219E1 FUZE WOULD BE ACCELERATED AND THAT A REQUIREMENT FOR AN INCREASE IN THE RATE OF PRODUCTION OF THESE FUZES WAS A LIKELY POSSIBILITY. HOWEVER, IN SEPTEMBER 1971, THE AIR FORCE DETERMINED THAT EXPANSION OF SUCH PROGRAMS WAS UNLIKELY DUE TO THE WINDING DOWN OF OPERATIONS IN SOUTHEAST ASIA AND BECAUSE OF FUNDING LIMITATIONS. FURTHER, THERE WAS A DELETION OF ANOTHER AIR FORCE PROGRAM USING PRODUCTION EQUIPMENT WHICH COULD BE EMPLOYED IN MANUFACTURING M-219E1 FUZES, AND PROVIDE ADDITIONAL CAPACITY TO SUPPORT A SINGLE AWARD IF REQUIRED. IN ADDITION, THE PROJECT MANAGER'S STUDY IN SEPTEMBER 1971 OF PRODUCTION DELIVERIES FROM M-219E1 FUZE CONTRACTS CURRENT AT THAT TIME, AND OF END ITEM LOADING SCHEDULES, PROJECTED AN INVENTORY BUILD UP WHICH WAS CONSIDERED ADEQUATE PROTECTION FOR UNFORESEEN CONTINGENCIES. THE PROJECT MANAGER ALSO ADVISED THAT THE ARMY'S MOBILIZATION BASE REQUIREMENTS WERE NOT DIRECTLY RELATED TO THE DECISION AS TO WHETHER ONE OR MORE AWARDS OF THE SUBJECT PROCUREMENT SHOULD BE MADE, SINCE THE TOOLING OF BOTH HONEYWELL AND SCOVILL ARE GOVERNMENT-OWNED AND UPON MAKING ONE AWARD THE TOOLING OF THE UNSUCCESSFUL OFFEROR WOULD BE RETAINED IN LAYAWAY FOR FUTURE USE.

THE RECORD BEFORE THIS OFFICE EVIDENCES THAT A CLASS DETERMINATION AND FINDINGS, DATED APRIL 13, 1971, AND SIGNED BY THE ASSISTANT SECRETARY OF THE ARMY (INSTALLATIONS AND LOGISTICS), AUTHORIZES THE PROCUREMENT OF GOODS AND SERVICES PURSUANT TO 10 U.S.C. 2304(A)(16). THIS AUTHORIZATION WAS CITED BY THE CONTRACTING OFFICER AS HIS AUTHORITY TO NEGOTIATE THE SUBJECT PROCUREMENT. THE CLASS DETERMINATION AND FINDINGS STATES THAT:

4. A PROCUREMENT ACTION FOR ITEMS OF AMMUNITION CRITICAL TO THE SUPPORT OF OPERATIONS IN SOUTHEAST ASIA MAY BE FOR MORE THAN ONE AWARD ***

THUS, THE PERTINENT CLASS DETERMINATION AND FINDINGS WAS PERMISSIVE WITH RESPECT TO THE NUMBER OF AWARDS THAT COULD BE MADE AND DID NOT REQUIRE MORE THAN ONE AWARD.

IN VIEW OF THE CHANGED CIRCUMSTANCES CONCERNING THE REQUIREMENTS TO BE SATISFIED BY THE INSTANT PROCUREMENT, AS WELL AS THE PERMISSIVE WORDING OF THE CLASS DETERMINATION AND FINDING CONCERNING THE NUMBER OF AWARDS THAT MAY BE MADE THEREUNDER, WE ARE OF THE OPINION THAT THE ELIMINATION OF THE PROVISION FOR A MINIMUM OF TWO AWARDS BY AMENDMENT 0004 TO THE RFP, WAS PROPER.

YOU CONTEND THAT THE FACT THAT SCOVILL WAS NOT AWARDED A PORTION OF THE SUBJECT PROCUREMENT INDICATES THAT THE PROCUREMENT AGENCY DID NOT GIVE SUFFICIENT CONSIDERATION TO THE LABOR SURPLUS SITUATION IN THE WATERBURY, CONN., AREA. FURTHER, YOU NOTE THAT THE GOVERNMENT HAS MADE PARTIAL LABOR SURPLUS AREA SET-ASIDE AWARDS TO SCOVILL IN THE PAST, NOTWITHSTANDING THE FACT THAT ITS PRICE WAS HIGHER THAN THE NON-SET ASIDE CONTRACTOR, AND THAT A LABOR SURPLUS AREA SET-ASIDE AWARD TO SCOVILL WOULD HAVE BEEN APPROPRIATE UNDER THIS PROCUREMENT.

THE CONTRACTING OFFICER REPORTS THAT ONLY THREE FIRMS WERE KNOWN TO HAVE THE TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY TO SUBMIT A PROPOSAL IN RESPONSE TO THE SUBJECT RFP. THE THREE FIRMS WERE SCOVILL, HONEYWELL AND BELL AND HOWELL CO. HOWEVER, SCOVILL WAS THE ONLY FIRM CONSIDERED A LABOR SURPLUS AREA CONCERN. FURTHER, IN RESPONSE TO A PRESOLICITATION NOTICE RELATIVE TO THIS PROCUREMENT BELL AND HOWELL INDICATED THAT THEY WOULD NOT SUBMIT A PROPOSAL. BASED ON THIS INFORMATION, THE CONTRACTING OFFICER EXPECTED TO RECEIVE OFFERS FROM ONLY SCOVILL AND HONEYWELL, ALTHOUGH A THIRD PROPOSAL WAS RECEIVED FROM PACE.

ASPR 1-804.1(A)(1)(II) PROVIDES THAT A PARTIAL SET-ASIDE SHALL NOT BE MADE IF THERE IS A REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE RECEIVED FROM NO MORE THAN TWO CONCERNS WITH TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY AND ONLY ONE OF THE CONCERNS WILL QUALIFY AS A LABOR SURPLUS AREA CONCERN. THEREFORE, IN VIEW OF THE FACT THAT IT WAS REASONABLE TO EXPECT THAT ONLY ONE LABOR SURPLUS AREA CONCERN WOULD SUBMIT A PROPOSAL, A LABOR SURPLUS AREA SET-ASIDE WAS NOT CONSIDERED TO BE AUTHORIZED FOR THIS PROCUREMENT. WHETHER THE CRITERIA TO SET ASIDE A PORTION OF A PROCUREMENT FOR LABOR SURPLUS AREA CONCERNS HAS BEEN SATISFIED IN A GIVEN CASE IS LARGELY WITHIN THE DISCRETION OF THE CONTRACTING ACTIVITY, AND WE SEE NO BASIS FOR OBJECTING TO THE DECISION REACHED IN THIS CASE. SEE B-174443, FEBRUARY 8, 1972.

WITH REGARD TO WHETHER THE GOVERNMENT-OWNED FACILITIES USED BY HONEYWELL WERE EVALUATED BY THE PROCUREMENT AGENCY PRIOR TO MAKING THE AWARD TO HONEYWELL, THE CONTRACTING OFFICER REPORTS THE FOLLOWING:

SECTION C OF THE SOLICITATION PROVIDED FOR USE OF GOVERNMENT OWNED FACILITIES IN THE OFFEROR'S POSSESSION IN ACCORDANCE WITH ASPR 13-308. SECTION D OF THE RFP INCLUDED THE CLAUSE ENTITLED EVALUATION PROCEDURE TO ELIMINATE COMPETITIVE ADVANTAGE FROM RENT-FREE USE OF GOVERNMENT PRODUCTION AND RESEARCH PROPERTY WHICH INCLUDES A FORMULA FOR COMPUTATION OF EVALUATION FACTORS TO BE APPLIED AGAINST THE OFFEROR TO ELIMINATE COMPETITIVE ADVANTAGE AS REQUIRED BY ASPR 13-503 AND 13-506. THESE CLAUSES WERE APPLICABLE TO THE ORIGINAL PROPOSALS AND PROPOSALS SUBMITTED UNDER AMENDMENT 0004. FACILITY EVALUATIONS WERE CONDUCTED ON ALL PROPOSALS IN CONJUNCTION WITH OTHER EVALUATION FACTORS INCLUDED IN THE PROPOSAL, TO COMPUTE THE TOTAL EVALUATED PRICES WHICH WERE USED AS A BASIS FOR AWARD. PURSUANT TO OUR REVIEW OF THE RECORD AS SET FORTH ABOVE, WE FIND NO EVIDENCE OF IMPROPRIETY ON THE PART OF THE PROCUREMENT AGENCY IN MAKING A SINGLE AWARD OF THIS PROCUREMENT TO HONEYWELL.

THEREFORE, YOUR PROTEST MUST BE DENIED.