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TO NATIONAL PUBLICATIONS COMPANY: FURTHER REFERENCE IS MADE TO YOUR LETTERS DATED JULY 20 AND AUGUST 9. IT WAS REPORTED THAT THERE WERE NUMEROUS INSTANCES OF UNFILLED ORDERS OR LONG DELAYS IN THE DELIVERY OF MATERIALS. WERE DEVOTED TO A DISCUSSION OF YOUR CONTRACTUAL RELATIONSHIP WITH THE UNITED STATES INFORMATION AGENCY DURING THE YEARS 1951-1959. WHAT MAY HAVE OCCURRED DURING THOSE YEARS HAS NO DIRECT BEARING UPON YOUR PERFORMANCE UNDER YOUR 1960 CONTRACT. WHICH IS THE ONLY ONE HERE INVOLVED. BEGINNING ON PAGE 4 OF YOUR LETTER THERE ARE SET FORTH AT LENGTH CERTAIN MATTERS CONSIDERED BY YOU AS BEING RELEVANT TO YOUR PROTEST. BEGINNING ON PAGE 11 THERE IS SET FORTH THE FOLLOWING PARAGRAPH: "I URGE GAO TO CAREFULLY AND THOROUGHLY CONSIDER THE NECESSITY OF DISCONTINUING THE USE OF THE NEGOTIATED FIXED PRICE CONTRACT FORM AS USED BY THE USIA THIS YEAR.

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B-145678, DEC. 27, 1961

TO NATIONAL PUBLICATIONS COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTERS DATED JULY 20 AND AUGUST 9, 1961, WITH ENCLOSURES, CONCERNING YOUR PROTEST OF THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER REQUEST FOR PROPOSAL NO. C-940, ISSUED BY THE UNITED STATES INFORMATION AGENCY. ALSO, THERE HAS BEEN RECEIVED YOUR LETTER OF NOVEMBER 21, 1961, WITH ENCLOSURE, RELATIVE FURTHER TO THE MATTER OF YOUR PROTEST.

BY OUR DECISION DATED JULY 12, 1961, B-145678, WE DENIED YOUR PROTEST GENERALLY ON THE GROUNDS THAT THE UNITED STATES INFORMATION AGENCY HAD DETERMINED THAT THE BASIC OFFER OF THE AMERICAN NEWS COMPANY WOULD ULTIMATELY RESULT IN THE MOST ECONOMICAL ARRANGEMENT FOR THE REQUIRED SERVICES, AND ALSO BECAUSE OF THE UNSATISFACTORY PERFORMANCE BY YOUR COMPANY UNDER YOUR 1960 CONTRACT WITH THE AGENCY. IT WAS REPORTED THAT THERE WERE NUMEROUS INSTANCES OF UNFILLED ORDERS OR LONG DELAYS IN THE DELIVERY OF MATERIALS, AS WELL AS UNAUTHORIZED CHARGES FOR PRICE INCREASES, ALL OF WHICH RESULTED IN EXCESSIVE COSTS AND INORDINATE SUPERVISORY TIME EXPENDED BY THE ADMINISTRATIVE OFFICE.

APPROXIMATELY THE FIRST FOUR PAGES OF YOUR LETTER OF AUGUST 9, 1961, WERE DEVOTED TO A DISCUSSION OF YOUR CONTRACTUAL RELATIONSHIP WITH THE UNITED STATES INFORMATION AGENCY DURING THE YEARS 1951-1959. OBVIOUSLY, WHAT MAY HAVE OCCURRED DURING THOSE YEARS HAS NO DIRECT BEARING UPON YOUR PERFORMANCE UNDER YOUR 1960 CONTRACT, WHICH IS THE ONLY ONE HERE INVOLVED. BEGINNING ON PAGE 4 OF YOUR LETTER THERE ARE SET FORTH AT LENGTH CERTAIN MATTERS CONSIDERED BY YOU AS BEING RELEVANT TO YOUR PROTEST, AND BEGINNING ON PAGE 11 THERE IS SET FORTH THE FOLLOWING PARAGRAPH:

"I URGE GAO TO CAREFULLY AND THOROUGHLY CONSIDER THE NECESSITY OF DISCONTINUING THE USE OF THE NEGOTIATED FIXED PRICE CONTRACT FORM AS USED BY THE USIA THIS YEAR. IN OUR OPINION THIS FORM WAS USED FOR THE ONE PURPOSE OF ELIMINATING THE NATIONAL PUBLICATIONS COMPANY OR ANY OTHER CONTRACTOR WITH WHOM THE NEW YORK OFFICE DID NOT WISH TO DEAL. WE DON-T FEEL THAT THIS IS A VALID REASON FOR AWARDING CONTACTS UNDER GOVERNMENT PROCUREMENT AND SHOULD BE DISCOURAGED IN EVERY POSSIBLE MANNER AVAILABLE.'

UPON THE BASIS OF THE STATEMENTS CONTAINED IN YOUR LETTER YOU CONCLUDED BY REQUESTING OUR OFFICE TO ADVISE YOU AS TO WHAT ACTION, IF ANY, MAY BE TAKEN IN "CHANGING THE PROCEDURE FOR BID INVITATIONS FOR NEXT YEAR.'

IN VIEW OF THE DETAILED STATEMENTS AND SUPPORTING DATA FURNISHED IN YOUR LETTER OF AUGUST 9, 1961, IN OPPOSITION TO THE FACTUAL STATEMENTS CONTAINED IN THE REPORTS SUBMITTED HERE BY THE UNITED STATES INFORMATION AGENCY, WE REQUESTED FROM THAT AGENCY A FURTHER REPORT IN THE MATTER, TOGETHER WITH THE SPECIFIC COMMENTS OF THE ADMINISTRATIVE OFFICE ON YOUR SEVERAL CONTENTIONS.

WE HAVE BEEN ADVISED THAT A TOTAL OF 502 PRICE CHANGES WERE REQUESTED PURSUANT TO ARTICLE V OF YOUR 1960 CONTRACT AND THAT A TOTAL OF 120 PRICE CHANGE REQUESTS SUBMITTED BY YOUR COMPANY FOR INCLUSION IN AMENDMENTS TO THE CONTRACT (ALMOST ALL PRICE INCREASES) WERE REJECTED BY THE AGENCY AS UNWARRANTED. AN AGENCY SPOT CHECKING OF YOUR COMPANY'S COSTS ON ONLY THREE TITLES WHEREIN REQUESTED PRICE INCREASES WERE NOT AUTHORIZED (AFRICA SPECIAL REPORT, AMERICAN HERITAGE, U.S. CAMERA) RESULTED IN A SAVING OF $1,208.50 TO THE GOVERNMENT. IT WAS REPORTED THAT AS A RESULT OF THE AGENCY'S EXPERIENCE WITH YOUR FISCAL AND ACCOUNTING PRACTICES, IT WAS NECESSARY FOR THE AGENCY TO MAINTAIN CONSTANT SURVEILLANCE ON ALL ASPECTS OF THE CONTRACT IN ORDER TO ASSURE THAT GOVERNMENT'S INTERESTS WERE PROTECTED.

AS AN INSTANCE OF POOR FISCAL PROCEDURE, IT WAS REPORTED THAT YOUR COMPANY CREDITED THE AGENCY FOR UNFILLED ORDERS ON THE BASIS OF YOUR OWN COSTS OF SUBSCRIPTIONS, RATHER THAN ON THE BASIS OF ACTUAL AGENCY PAYMENTS THEREFOR, CAUSING ADDITIONAL TIME AND TROUBLE TO THE GOVERNMENT IN ADJUSTING THE SAME. ALSO, CONTRARY TO AN EXPRESS PROVISION IN THE CONTRACT, YOUR COMPANY IN A NUMBER OF INSTANCES BILLED THE AGENCY PRIOR TO THE PLACING OF AGENCY ORDERS WITH THE PUBLISHERS.

WITH RESPECT TO YOUR SERVICES UNDER THE 1960 CONTRACT, THE AGENCY REPORTS THAT A SPOT CHECK OF YOUR RECORDS INDICATED THAT A MAJORITY OR ORDERS TOOK FROM ONE TO TWO MONTHS TO FILL AND THAT YOUR SYSTEM OF FOLLOW-UP WITH PUBLISHERS ON UNDELIVERED ITEMS WAS INADEQUATE; ALSO, THAT THE FILES REFLECTED IN MANY CASES THAT AFTER THE FIRST INQUIRY ON MISSING ITEMS WERE MADE, THERE WAS NO FURTHER CORRESPONDENCE BY YOUR COMPANY ON THE MATTER. THE FOREGOING COMMENTS ON YOUR COMPANY'S PERFORMANCE AND FISCAL PRACTICES ARE THE CONSIDERED CONCLUSIONS REACHED BY AGENCY AUDITORS AS SET FORTH IN AN AGENCY AUDIT REPORT DATED FEBRUARY 13, 1961.

THE AGENCY FURTHER STATED THAT PERFORMANCE UNDER YOUR 1960 CONTRACT HAS RESULTED IN THE FAILURE OF JOURNALS AND PERIODICALS TO BE AVAILABLE TO FOREIGN READERS THROUGHOUT THE WORLD. IT WAS STATED THAT THE AGENCY CANNOT PROPERLY OPERATE ITS LIBRARIES AND CENTERS UNLESS ITS SHELVES ARE FILLED WITH COMPLETE SETS OF UP-TO-DATE MATERIALS, AND THAT SUCH WAS NOT THE CASE WHERE PERIODICAL SUBSCRIPTIONS WERE BEING SERVICED EXCLUSIVELY BY YOUR COMPANY.

WE HAVE EXAMINED A NUMBER OF LETTERS AND MEMORANDUMS FROM THE VOLUMINOUS CORRESPONDENCE CONCERNING YOUR PERFORMANCE UNDER THE 1960 CONTRACT, WHICH APPEAR TO CONSTITUTE SUBSTANTIAL EVIDENCE OF THE NON DELIVERY OR EXCESSIVELY DELAYED DELIVERY OF PERIODICALS TO LIBRARIES AND CENTERS ABROAD. THE AGENCY POINTED OUT THAT DELAYS IN PLACING SUBSCRIPTIONS RESULT IN VARIED TERMINATION DATES FOR A PARTICULAR PUBLICATION AT DIFFERENT POSTS, CREATING AN ALMOST IMPOSSIBLE PROBLEM FOR THE AGENCY IN SCHEDULING WORLD-WIDE SUBSCRIPTION RENEWALS IN FUTURE YEARS.

IT IS REPORTED THAT UNDER YOUR 1960 CONTRACT THE AGENCY TO DATE HAS HAD FORTY REPORTS FROM THE FIELD ON THE NON-ARRIVAL OF 367 SUBSCRIPTIONS. RESPECTING SUCH NON-DELIVERIES THE AGENCY MADE THE FOLLOWING STATEMENT:

"* * * IT IS CLEAR FROM THE LARGE VOLUME OF NON-DELIVERIES AND FROM AGENCY CORRESPONDENCE WITH PUBLISHERS THAT IN MANY INSTANCES NATIONAL PUBLICATIONS ORDERS WERE EITHER NEVER RECEIVED BY THE PUBLISHERS OR GREATLY DELAYED.'

ON THE BASIS OF THE RECORD BEFORE OUR OFFICE WE FIND NO BASIS FOR LEGAL OBJECTION TO THE ACTION OF THE UNITED STATES INFORMATION AGENCY IN CONTRACTING WITH ANOTHER CONCERN FOR THE YEAR 1961. AS STATED IN OUR DECISION OF JULY 12, 1961, QUESTIONS PERTAINING TO THE QUALIFICATIONS OF A PROPOSED CONTRACTOR ARE FOR DETERMINATION BY THE PROCURING AGENCY INVOLVED AND, IN THE ABSENCE OF CONVINCING EVIDENCE OF BAD FAITH ON THE LACK OF ANY REASONABLE BASIS FOR A PARTICULAR FINDING, THEIR DETERMINATIONS ARE REGARDED AS BINDING. ACCORDINGLY, YOUR PROTEST MUST AGAIN BE DENIED.

THERE REMAIN FOR CONSIDERATION THE STATEMENTS CONTAINED IN YOUR LETTER OF AUGUST 9, 1961, REGARDING THE NECESSITY OF DISCONTINUING THE USE OF A "NEGOTIATED FIXED PRICE CONTRACT FORM" IN PROCURING THE REQUIRED PUBLICATIONS, AND YOUR INQUIRY AS TO THE ACTION, IF ANY, OUR OFFICE MAY TAKE IN CHANGING THE PROCEDURE FOR BID INVITATIONS FOR NEXT YEAR. IN THIS CONNECTION, THERE HAS BEEN NOTED THE STATEMENT IN THE CONCLUDING PARAGRAPH OF YOUR LETTER OF NOVEMBER 21, 1961, TO THE EFFECT THAT IT IS YOUR INTENTION TO USE ALL STEPS LEGALLY POSSIBLE TO PREVENT A REPETITION ON THE TYPE OF AWARD MADE LAST YEAR.

IT IS REPORTED BY THE AGENCY THAT THE CONTRACT WITH THE AMERICAN NEWS COMPANY WAS NEGOTIATED PURSUANT TO THE AUTHORITY CONTAINED IN SECTION 302 (C) (10) OF PUBLIC LAW 152, 81ST CONGRESS, 63 STAT. 377, AS AMENDED, AND THAT THE DECISION OF THE CONTRACTING OFFICER IN THIS CASE WAS BASED ON THE FOLLOWING CONSIDERATIONS:

THE AGENCY REPORTS THAT FOR MANY YEARS IT FORMALLY ADVERTISED FOR SEALED BIDS, FROM TWELVE OR MORE SOURCES, TO FURNISH THE SUBSCRIPTIONS, AND THAT CONSISTENTLY THE AGENCY RECEIVED ONLY TWO RESPONSIVE BIDS--- ONE FROM THE AMERICAN NEWS COMPANY AND THE OTHER FROM YOUR COMPANY. IN THE LIGHT OF THE AGENCY'S DETERMINATION THAT YOUR SERVICES WERE SO UNSATISFACTORY AS TO PRECLUDE AWARD TO YOU OF ANOTHER CONTRACT, WE CONCLUDE THAT NEGOTIATION UNDER THE STATUTORY AUTHORITY CITED WAS JUSTIFIED. HOWEVER, SINCE THE RESULTS OF THE MODIFICATIONS OF THE TERMS AND CONDITIONS OF SERVICE ADOPTED FOR THE 1961 PROCUREMENT APPEAR TO HAVE BEEN TO CREATE OR INCREASE COMPETITION FOR THE CONTRACT, WE ARE OF THE OPINION THAT NEGOTIATION FOR SERVICES OF THE SAME KIND FOR THE NEXT YEAR, IF SUCH SERVICES ARE AGAIN REQUIRED, COULD NOT BE JUSTIFIED ON THE BASIS OF IMPRACTICABILITY OF OBTAINING COMPETITION. THE AGENCY IS BEING ADVISED TO THAT EFFECT.

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