B-153175, JUNE 10, 1964, 43 COMP. GEN. 780

B-153175, JUNE 10, 1964, 43 COMP. GEN. 780

CONTRACTS - SPECIFICATIONS - SAMPLES - PREPRODUCTION SAMPLE REQUIREMENT WAIVER UNDER AN INVITATION REQUIRING THE SUBMISSION OF PREPRODUCTION SAMPLES AND RESERVING TO THE GOVERNMENT THE RIGHT TO WAIVE THE REQUIREMENT, PURSUANT TO THE ARMED SERVICES PROCUREMENT REGULATION 2 201 (B) (XIV) AS TO BIDDERS OFFERING A PRODUCT PREVIOUSLY PROCURED OR TESTED BY THE GOVERNMENT, WHERE THE TWO LOWEST BIDDERS HAD PREVIOUSLY SUPPLIED THE PRODUCT AND WAIVER OF THE PREPRODUCTION SAMPLES WOULD MAKE THE SECOND LOW BIDDER ON THE TOTAL PRICE, WHICH INCLUDED THE SAMPLE COSTS, THE LOW BIDDER ON THE PROCUREMENT, THE DETERMINATION OF THE CONTRACTING OFFICER NOT TO WAIVE THE SAMPLE REQUIREMENT WAS NOT SUCH AN IMPROPER EXERCISE OF DISCRETION AS TO JUSTIFY CANCELLATION OF THE CONTRACT AWARDED TO THE LOW BIDDER ON THE TOTAL BID PRICE, THE DETERMINATION THAT THE SAMPLES WERE NECESSARY TO GUARANTEE REQUIRED PERFORMANCE OF THE PRODUCT IN OPERATION AND THAT THE WAIVER OF THE REQUIREMENT WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT HAVING BEEN BASED ON THE TECHNICAL EVALUATION OF THE PRODUCT.

TO GADSBY, HANNAH, COLSON AND MORIN, JUNE 10, 1964:

REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 10, FEBRUARY 28, AND APRIL 10, 1964, PROTESTING ON BEHALF OF SPECIALTY ELECTRONICS DEVELOPMENT CORPORATION, THE AWARD OF A CONTRACT TO BARKER AND WILLIAMSON, INC., BY THE UNITED STATES ARMY MATERIEL AGENCY UNDER INVITATION FOR BIDS NO. AMC (E/-36-039-64-19-A1.

THE INVITATION FOR BIDS WAS ISSUED ON NOVEMBER 1, 1963, AND OPENED ON DECEMBER 2, 1963. FIFTY-ONE FIRMS WERE SOLICITED AND 8 BIDS WERE RECEIVED. THE INVITATION COVERED REQUIREMENTS FOR 21 RADIO SETS, AN/GLQ- 2, AND 8 RECEIVER-TRANSMITTERS, RADIO RT-260 ( ( GLQ-2, UNDER A 100 PERCENT SMALL BUSINESS SET-ASIDE. THE SOLICITATION DOCUMENT CONTAINED A PROVISION FOR SUBMISSION OF PREPRODUCTION SAMPLES WITH A RESERVATION OF THE GOVERNMENT'S RIGHT TO WAIVE THIS REQUIREMENT, AS REQUIRED BY ARMED SERVICES PROCUREMENT REGULATION 2-201 (B) (XIV).

SPECIALTY ELECTRONICS DEVELOPMENT CORPORATION AND BARKER AND WILLIAMSON, INC., BOTH PREVIOUS SUPPLIERS OF RADIO SET AN-GLQ-2, SUBMITTED THE LOW BIDS IN THE TOTAL AMOUNTS OF $399,662.94 AND $368,637.99, RESPECTIVELY, INCLUDING PREPRODUCTION SAMPLES, AND TOTAL PRICES OF $359,503.14 AND $366,537.99, RESPECTIVELY, IF THE SUBMISSION OF PREPRODUCTION SAMPLES SHOULD BE WAIVED.

THE REQUIREMENT FOR PREPRODUCTION SAMPLES WAS ESTABLISHED TO ASSURE THE CONTRACTOR'S ADHERENCE TO BASIC DESIGN REQUIREMENTS AND TO REQUIRE THE DELIVERY OF ITEMS WHICH COULD BE SUBJECTED TO EXTENSIVE AND RIGOROUS SERVICE AND ENVIRONMENTAL TESTS WHICH ARE NOT PERFORMED ON PRODUCTION QUANTITIES. PROVISION AH OF THE INVITATION ENTITLED "PREPRODUCTION SAMPLE EVALUATION AND PPROVAL" REQUIRES THAT THE PREPRODUCTION SAMPLES WILL BE FABRICATED BY THE CONTRACTOR, AND SHALL BE ASSEMBLED USING PARTS, MATERIALS AND PROCESSES THAT WILL BE EMPLOYED IN PRODUCTION AND SHALL BE FABRICATED AND ASSEMBLED IN A MANNER SIMILAR TO THAT USED IN PRODUCTION. ADDITIONALLY, THE WAIVER PORTION OF PROVISION AI STATED: "THE GOVERNMENT RESERVES THE RIGHT TO WAIVE THE REQUIREMENT HEREIN FOR PREPRODUCTION SAMPLES OR TESTS AS TO THOSE BIDDERS/OFFERORS OFFERING A PRODUCT WHICH HAS BEEN PREVIOUSLY PROCURED OR TESTED BY THE GOVERNMENT.'

IN ACCORDANCE WITH CURRENT INSTRUCTIONS WITH REFERENCE TO PREPRODUCTION SAMPLES, THE CONTRACTING OFFICER QUERIED THE U.S. ARMY ELECTRONICS MATERIEL SUPPORT AGENCY (USEMSA) AS TO THE WAIVER OF THE SAMPLE REQUIREMENT, POINTING OUT THAT BOTH OF THE TWO LOWEST BIDDERS HAD PREVIOUSLY SUPPLIED THE ARTICLE. USEMSA RECOMMENDED THAT PREPRODUCTION SAMPLES BE REQUIRED TO ASSURE THE GOVERNMENT'S OBTAINING SATISFACTORY EQUIPMENT FROM EITHER BIDDER.

IN SUPPORT OF ITS OBJECTION TO WAIVER OF PREPRODUCTION SAMPLES, USEMSA CONTENDS THAT, WHILE SPECIALTY ELECTRONICS DEVELOPMENT CORPORATION WAS THE PRIME CONTRACTOR ON THE PRECEDING ORDER FOR THE AN/GLQ-2 AND SUCCESSFULLY PRODUCED THE REQUIRED PREPRODUCTION SAMPLES IN MARCH 1962, THE COMPANY ENCOUNTERED FINANCIAL DIFFICULTIES WHICH NECESSITATED SUBCONTRACTING A MAJOR PART OF THE ACTUAL FABRICATION OF THE PRODUCTION UNITS TO BAY STATE ELECTRONICS; THAT THE TECHNIQUES AND PROCESSES USED BY THAT COMPANY IN FABRICATING THE PRODUCTION UNITS WERE NOT IDENTICAL WITH THOSE EMPLOYED BY SPECIALTY IN THE FABRICATION OF THE PREVIOUSLY TESTED SAMPLES; AND THAT NO UNIT FABRICATED BY BAY STATE UNDER THE SUBCONTRACT HAD EVER BEEN SUBJECTED TO THE PREPRODUCTION TEST PROCEDURE. IT IS ALSO POINTED OUT THAT CHANGES IN THE SPECIFICATIONS HAVE BEEN MADE SINCE THE SPECIALTY SAMPLES WERE PRODUCED.

BASED ON THE TECHNICAL RECOMMENDATION OF USEMSA, THE CONTRACTING OFFICER DETERMINED THAT PREPRODUCTION SAMPLES WERE REQUIRED TO GUARANTEE THAT THE EQUIPMENT PURCHASED WOULD PERFORM AS REQUIRED IN ACTUAL OPERATION. THIS CONNECTION, THE CONTRACTING OFFICER POINTS OUT THAT THE DECISION TO WAIVE PREPRODUCTION SAMPLES IS A RIGHT VESTED SOLELY IN THE GOVERNMENT, AND THAT PROVISION AI OF THE INVITATION STATES THAT "WHEN THE GOVERNMENT DECIDES TO EXERCISE ITS RIGHT TO WAIVE PREPRODUCTION SAMPLES, BIDS/OFFERS WILL BE EVALUATED ON THE BASIS OF DECREASED UNIT PRICE AND EARLIER DELIVERY SO OFFERED.' INASMUCH AS THE CONTRACTING OFFICER DETERMINED THAT SUBMISSION OF PREPRODUCTION SAMPLES WOULD NOT BE WAIVED, AWARD WAS MADE ON DECEMBER 21, 1963, TO BARKER AND WILLIAMSON, INC., AS LOW BIDDER.

IN YOUR LETTER OF JANUARY 10, 1964, YOU REFER TO OUR DECISION OF JUNE 20, 1963, B-151436, 42 COMP. GEN. 717, WHICH STATES THAT "THE DISPARITY BETWEEN PROSPECTIVE BIDDERS SHOULD NOT BE INCREASED BY THE IMPOSITION OF UNNECESSARY REQUIREMENTS SUCH AS PRELIMINARY SAMPLES OR TESTING NOT CLEARLY NECESSARY.' IN THE PRESENT CASE, HOWEVER, THE CONTRACTING OFFICER, ON THE ADVICE OF TECHNICAL PERSONNEL, HAD DETERMINED THAT IN VIEW OF THE HIGHLY COMPLEX AND TECHNICAL NATURE OF THE EQUIPMENT INVOLVED, AND THE FACTS CONCERNING THE PRIOR PRODUCTION, WAIVER OF THE SAMPLES WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT IN THE CASE OF EITHER OF THE LOW BIDDERS.

YOUR LETTER OF FEBRUARY 28, 1964, DISPUTES CERTAIN OTHER CONTENTIONS MADE BY THE ARMY IN SUPPORT OF ITS ACTION. WHILE WE ARE INCLINED TO AGREE THAT SOME OF THOSE CONTENTIONS ARE OF DUBIOUS VALIDITY, WE DO NOT REGARD THEM AS DECISIVE OF THE ESSENTIAL ISSUE, WHICH IS WHETHER THE REFUSAL TO WAIVE THE PREPRODUCTION SAMPLES WAS ARBITRARY OR CAPRICIOUS OR WITHOUT ANY SUBSTANTIAL BASIS IN FACT.

AS INDICATED ABOVE IT IS THE POSITION OF THE CONTRACTING AGENCY THAT THE PRIOR PRODUCTION UNDER SPECIALTY'S PREVIOUS CONTRACT WAS NOT AN ADEQUATE GROUND FOR WAIVER BECAUSE A MATERIAL AND CRITICAL PART OF THAT PRODUCTION HAD BEEN PERFORMED BY A SUBCONTRACTOR WHICH HAD NOT PRODUCED THE PREPRODUCTION SAMPLES PREVIOUSLY TESTED AND APPROVED, WHILE SPECIALTY, WHICH HAD PRODUCED THE APPROVED SAMPLES, HAD NOT PERFORMED ANY OF THESE CRITICAL PRODUCTION OPERATIONS DURING THE PERIOD OF APPROXIMATELY TWO YEARS WHICH HAD ELAPSED SINCE APPROVAL OF ITS PREPRODUCTION SAMPLES. SINCE SPECIALTY DID NOT GIVE ANY INDICATION IN ITS BID THAT IT INTENDED TO SUBCONTRACT THE SAME PART OF THE WORK TO BAY STATE, DESPITE THE PROVISIONS OF THE INVITATION CALLING FOR"EVIDENCE WITH THE BID/OFFER THAT PRIOR GOVERNMENT APPROVAL IS PRESENTLY APPROPRIATE," THE ARMY ASSERTS THAT THE BID HAD TO BE INTERPRETED AS MEANING THAT SPECIALTY PROPOSED TO PERFORM THE ENTIRE CONTRACT IN ITS OWN PLANT. ON THE ALTERNATIVE SUGGESTED BY YOU, THAT SPECIALTY IN FACT INTENDED TO SUBCONTRACT TO BAY STATE AND THAT THE ARMY SHOULD HAVE INQUIRED AS TO SPECIALTY'S INTENTIONS, THE AGENCY CONTENDS, AS INDICATED ABOVE, THAT NO UNIT PRODUCED BY BAY STATE HAD EVER BEEN SUBJECTED TO THE RIGOROUS TESTING PROVIDED FOR IN THE PREPRODUCTION SAMPLE PROCEDURE AND THAT THERE COULD BE NO ADEQUATE ASSURANCE, WITHOUT SUBMITTING ITEMS FABRICATED BY BAY STATE TO A SERIES OF RIGOROUS PREPRODUCTION TYPE TESTS, THAT SUCH ITEMS COULD BE RELIED UPON AS FULLY AS WOULD HAVE BEEN THE CASE IF THE FABRICATION HAD BEEN DONE BY SPECIALTY. IN EFFECT, THE CONTRACTING AGENCY RELIES UPON THIS SAME REASONING IN ANSWER TO YOUR LETTER OF APRIL 10, 1964, WHEREIN YOU POINTED OUT THAT BAY STATE HAD BEEN SUPPLIED BY SPECIALTY WITH THE APPROVED SAMPLES AND ALL COMPONENTS, TOOLING, TEST PROCEDURES, WORKSHEETS AND OTHER PRODUCTION DATA, AS WELL AS SUPERVISORY PERSONNEL DURING THE EARLY PERIOD OF PRODUCTION, AND THAT THE APPROVED PREPRODUCTION SAMPLES MADE BY SPECIALTY HAD BEEN EMPLOYED BY THE GOVERNMENT INSPECTORS, AS WELL AS BY BAY STATE'S OWN INSPECTORS AS A BASIS FOR INSPECTION OF THE ITEMS FABRICATED BY BAY STATE.

WHILE IT MAY WELL BE, AS YOU CONTEND THAT THE FACTS WERE SUCH AS WOULD HAVE SUPPORTED A WAIVER OF THE PREPRODUCTION SAMPLE REQUIREMENT IN EVALUATING SPECIALTY'S BID ON THE INSTANT PROCUREMENT, THE QUESTION BEFORE US IS WHETHER THE DETERMINATION NOT TO WAIVE WAS SUCH AN IMPROPER EXERCISE OF DISCRETION AS WOULD JUSTIFY US IN DIRECTING CANCELLATION OF THE CONTRACT AWARDED TO BARKER AND WILLIAMSON, INC. AFTER CONSIDERING THE HISTORY OF THE PREVIOUS PROCUREMENT OF THE EQUIPMENT INVOLVED, ITS HIGHLY TECHNICAL NATURE, AND THE DISCRETION RESERVED TO THE PROCURING OFFICIALS BY THE TERMS OF THE INVITATION, WE MUST CONCLUDE THAT THERE IS INSUFFICIENT BASIS TO QUESTION THE VALIDITY OF THE AWARD MADE, AND THAT YOUR PROTEST MUST THEREFORE BE DENIED.