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THE PROCUREMENT IN QUESTION IS ALSO THE SUBJECT OF A SEPARATE PROTEST BY CORBIN MANUFACTURING CO. THE PROCUREMENT WAS INITIATED BY THE AVIATION SUPPLY OFFICE. THE RFQ WAS SENT TO CORBIN ON THE BASIS OF HIS HAVING MANUFACTURED A NICKEL-LINED RECEIVER WHICH WAS APPROVED BY THE NAVY IN AUGUST 1966 AFTER SUCCESSFUL TESTING. WHO HAD PREVIOUSLY MANUFACTURED A COLD STEEL RECEIVER UNDER PRIOR CONTRACTS FOR THE LAUNCHERS AND WAS ATTEMPTING TO QUALIFY A STAINLESS STEEL-LINED RECEIVER. TO YOU AS THE DEVELOPER FOR THE NAVY OF A RUBBER -LINED RECEIVER WHICH YOU LIKEWISE WERE ENDEAVORING TO QUALIFY AND FOR WHICH YOU HELD AN EXISTING PRODUCTION CONTRACT. A SPECIFIC REQUIREMENT THAT THE PREPRODUCTION GUNFIRE TEST BE PERFORMED WHILE THE RECEIVER WAS ENCASED IN A HOUSING SIMILAR TO THAT USED IN THE LAUNCHER.

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B-162196, AUG. 15, 1968

TO BRUNSWICK CORPORATION:

WE REFER TO YOUR LETTER OF MARCH 11, 1968, PROTESTING AGAINST THE AWARD BY THE DEPARTMENT OF THE NAVY OF CONTRACT NO. N00383-67-C-2962 TO VARO, INC. (VARO), FOR THE FURNISHING OF NITROGEN RECEIVERS FOR THE LAU-7/A LAUNCHER SYSTEM. THE PROCUREMENT IN QUESTION IS ALSO THE SUBJECT OF A SEPARATE PROTEST BY CORBIN MANUFACTURING CO., INC. (CORBIN), AND YOUR PROTEST HAS FOLLOWED THE ISSUANCE BY OUR OFFICE OF A PRELIMINARY DRAFT REPORT ON THE PROCUREMENT, A COPY OF WHICH HAS BEEN MADE AVAILABLE TO YOU.

THE PROCUREMENT WAS INITIATED BY THE AVIATION SUPPLY OFFICE, PHILADELPHIA, PENNSYLVANIA, WITH THE ISSUANCE ON OCTOBER 7, 1966, OF REQUEST FOR QUOTATIONS (RFQ) NO. N00383-67-709073. THE RFQ WAS SENT TO CORBIN ON THE BASIS OF HIS HAVING MANUFACTURED A NICKEL-LINED RECEIVER WHICH WAS APPROVED BY THE NAVY IN AUGUST 1966 AFTER SUCCESSFUL TESTING; TO VARO, WHO HAD PREVIOUSLY MANUFACTURED A COLD STEEL RECEIVER UNDER PRIOR CONTRACTS FOR THE LAUNCHERS AND WAS ATTEMPTING TO QUALIFY A STAINLESS STEEL-LINED RECEIVER; AND TO YOU AS THE DEVELOPER FOR THE NAVY OF A RUBBER -LINED RECEIVER WHICH YOU LIKEWISE WERE ENDEAVORING TO QUALIFY AND FOR WHICH YOU HELD AN EXISTING PRODUCTION CONTRACT.

THE RFQ, WHICH CALLED FOR A QUANTITY OF 1,800 UNITS, INCLUDED SUPPLEMENTAL PROVISIONS TO THE APPLICABLE MILITARY SPECIFICATION PERMITTING THE USE OF ANY SUITABLE LINER MATERIAL, A CHANGE IN ALLOWABLE WEIGHT FROM 8.75 TO 11.0 POUNDS, A CHANGE IN DIAMETER DIMENSION FROM 3.47 TO 3.50 INCHES, AND A SPECIFIC REQUIREMENT THAT THE PREPRODUCTION GUNFIRE TEST BE PERFORMED WHILE THE RECEIVER WAS ENCASED IN A HOUSING SIMILAR TO THAT USED IN THE LAUNCHER. IN ADDITION, THE RFQ INCLUDED A CLAUSE NOTIFYING OFFERORS OF THE POSSIBILITY OF AWARD WITHOUT DISCUSSION OF OFFERS AND THEREFORE REQUESTING THE SUBMISSION OF OFFERS INITIALLY ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT.

AS YOU ARE AWARE, ON OCTOBER 21, 1966, THE CLOSING DATE FOR SUBMISSION OF QUOTATIONS, CORBIN'S NICKEL-LINED RECEIVER WAS THE ONLY RECEIVER WHICH THE NAVY HAD APPROVED FOR THE LAUNCHERS. YOUR RUBBER LINED RECEIVER WAS NOT APPROVED UNTIL OCTOBER 26, 1966, AND VARO'S STAINLESS STEEL-LINED RECEIVER, THE ITEM COVERED BY ITS CONTRACT, WAS NOT APPROVED UNTIL DECEMBER 20, 1966.

VARO, WHO WAS LOWEST WHEN THE OFFERS WERE OPENED, SUBSEQUENTLY OFFERED THE GOVERNMENT A REDUCTION IN PRICE TO $242 PER UNIT, THE PRICE WHICH IS REFLECTED IN THE CONTRACT WHICH WAS AWARDED TO VARO FOR 1,500 UNITS ON FEBRUARY 23, 1967. FURTHER, CORBIN ALSO MADE A SUBSEQUENT REDUCTION IN ITS PRICE TO $270.90, AND THIS WAS THE PRICE WHICH WAS INCLUDED IN A CONTRACT WHICH WAS AWARDED TO CORBIN FOR AN URGENT NEED FOR 300 UNITS ON JANUARY 26, 1967. A SUBSEQUENT MODIFICATION TO CORBIN'S CONTRACT INCREASED THE UNIT PRICE TO $279.50.

YOU CONTEND THAT YOU SHOULD HAVE RECEIVED THE CONTRACT WHICH WAS AWARDED TO VARO SINCE AN ALTERNATE PROPOSAL WHICH YOU HAD SUBMITTED QUOTED A UNIT PRICE OF $241.68, BASED UPON DELIVERY COMMENCING IMMEDIATELY AFTER COMPLETION OF YOUR EXISTING PRODUCTION CONTRACT, OR ABOUT JULY 1967, WITH FINAL DELIVERY ABOUT OCTOBER 1967. SUCH DELIVERY SCHEDULE, YOU CLAIM, WAS MORE FAVORABLE THAN THE SCHEDULE STIPULATED IN VARO'S CONTRACT CALLING FOR COMMENCEMENT OF DELIVERIES IN AUGUST 1967 AND COMPLETION ABOUT NOVEMBER 1968. FURTHER, YOU STATE THAT SUBSEQUENT DELAYS WHICH AROSE UNDER YOUR EXISTING PRODUCTION CONTRACT COULD NOT HAVE BEEN ANTICIPATED AT THE TIME OF THE AWARD TO VARO IN FEBRUARY 1967.

YOU ALSO CONTEND THAT VARO'S OFFER WAS NOT RESPONSIVE TO THE SPECIFICATIONS; THAT A CHANGE PERMITTING VARO TO INCREASE THE WEIGHT OF ITS RECEIVER TO 13.5 POUNDS DEFEATS ONE OF THE PURPOSES FOR WHICH YOUR 8.75-POUND RECEIVER WAS DEVELOPED, I.E., A SUBSTANTIAL SAVINGS IN WEIGHT; AND THAT VARO WAS PERMITTED TO OFFER A STAINLESS STEEL-LINED RECEIVER AFTER ORIGINALLY PROPOSING TO SUPPLY A NICKEL-LINED RECEIVER.

YOU ALSO CONTEND THAT YOU WERE NOT AFFORDED THE OPPORTUNITY WHICH YOU CLAIM WAS GIVEN TO CORBIN AND TO VARO TO NEGOTIATE PRICES. FINALLY, WHILE IT IS NOT RELATED TO THE PROCUREMENT TO WHICH YOUR PROTEST IS DIRECTED, YOU CLAIM THAT AS A RESULT OF RECENT CHANGES WHICH HAVE BEEN MADE IN THE DRAWINGS FOR THE RECEIVER, YOUR RUBBER LINED, FIBERGLASS PRESSURE RECEIVER HAS BEEN WRITTEN OUT OF THE SPECIFICATION ALTHOUGH YOU CONSIDER YOUR RECEIVER TO BE THE BEST ITEM FOR THE NAVY'S PURPOSE.

WHILE VARO'S ORIGINAL OFFER UNDER RFQ NO. N00383-67-709073 MADE REFERENCE TO A DOCUMENT WHICH DESCRIBED A NICKEL-LINED RECEIVER, THE ONLY TYPE OF RECEIVER WHICH THE NAVY HAD APPROVED AT THE TIME THE RFQ WAS ISSUED, VARO DID NOT SPECIFY THE TYPE OF LINER WHICH IT WOULD USE IN ITS RECEIVER BUT MERELY DESCRIBED THE RECEIVER AS "SIMILAR TO" THE UNITS ALREADY APPROVED. ACCORDINGLY, WE ARE UNABLE TO CONCUR WITH YOUR VIEW THAT VARO WAS PROPOSING UNDER SUCH OFFER TO SUPPLY ONLY NICKEL LINED RECEIVERS. FURTHER, SINCE THE SPECIFICATIONS AS SUPPLEMENTED IN THE RFQ PERMITTED THE USE OF ANY SUITABLE LINER MATERIAL, THE USE BY VARO OF A STAINLESS STEEL LINER, LIKE THE USE BY CORBIN OF A NICKEL LINER, MUST BE REGARDED AS A PERMISSIBLE SUBSTITUTION FOR THE RUBBER LINER, THE ONLY ACCEPTABLE LINER UNDER THE MILITARY SPECIFICATION IN ITS ORIGINAL FORM.

REGARDING THE DELIVERIES OFFERED UNDER YOUR ALTERNATE OFFER AS COMPARED WITH THE DELIVERIES OFFERED BY VARO, THE PROCURING ACTIVITY REPORTS THAT AT THE TIME THE OFFERS WERE BEING EVALUATED THE CONTRACTING OFFICER WAS IN RECEIPT OF A REQUEST FROM YOU FOR A CHANGE IN THE DELIVERY SCHEDULE UNDER YOUR EXISTING NITROGEN RECEIVER PRODUCTION CONTRACT WHEREBY COMMENCEMENT OF DELIVERIES WOULD HAVE BEEN POSTPONED TO JANUARY 31, 1967, AND COMPLETION TO JULY 31, 1967. ON THE BASIS OF SUCH FORECASTED DELIVERY, IT WAS APPARENT THAT THE INITIAL DELIVERY BY YOU UNDER A NEW CONTRACT COULD NOT BE EXPECTED UNTIL AUGUST 1967, WHICH WOULD NOT MEET THE GOVERNMENT'S NEED. IN THIS CONNECTION, WE DIRECT YOUR ATTENTION TO THE FACT THAT THE DELIVERY SCHEDULE INCLUDED IN THE CONTRACT AS AWARDED TO VARO IN FEBRUARY 1967 CALLED FOR DELIVERIES IN INCREMENTS OF 250 UNITS PER MONTH COMMENCING ABOUT JUNE 23, 1967, WITH COMPLETION IN NOVEMBER 1967. THE REVISED SCHEDULE, WHICH POSTPONED THE INITIAL SHIPMENT TO AUGUST 1967, DECREASED THE MONTHLY QUANTITIES, AND EXTENDED THE DELIVERY PERIOD TO NOVEMBER 1968, WAS EFFECTED BY AN AMENDMENT TO THE CONTRACT APPROVED IN JUNE 1967, WHICH WAS FOUR MONTHS AFTER THE AWARD TO VARO AND WAS THEREFORE NOT A CONSIDERED FACTOR AT THE TIME THE OFFERS WERE EVALUATED. ACCORDINGLY, THE REJECTION OF YOUR ALTERNATE OFFER AT A UNIT PRICE OF $241.68, CONDITIONED ON DELIVERY FOLLOWING COMPLETION OF YOUR EXISTING PRODUCTION CONTRACT, DOES NOT APPEAR TO HAVE BEEN WITHOUT A PROPER BASIS.

AS A MATTER OF INFORMATION, OUR RECORDS INDICATE THAT VARO COMPLETED DELIVERIES OF ALL UNITS UNDER ITS CONTRACT IN JANUARY 1968, OR TWO MONTHS BEHIND THE COMPLETION DATE CONTEMPLATED BY THE ORIGINAL SCHEDULE SET FORTH IN ITS CONTRACT. ACCORDINGLY, AND SINCE THE PROCURING ACTIVITY HAS REPORTED THAT YOU DID NOT COMPLETE DELIVERIES UNDER YOUR PRODUCTION CONTRACT UNTIL DECEMBER 1967, IT IS APPARENT THAT YOU WOULD NOT HAVE BEEN IN A POSITION EITHER TO MEET THE ORIGINAL DELIVERY SCHEDULE IN THE VARO CONTRACT OR TO BETTER THE DELIVERIES MADE BY VARO UNDER ITS REVISED SCHEDULE.

AS TO THE PRICE REDUCTIONS BY VARO AND CORBIN, THE PROCURING ACTIVITY CALLS ATTENTION TO THE RFQ PROVISION CONCERNING THE POSSIBILITY OF AWARD WITHOUT DISCUSSION OF OFFERS AND STATES THAT NO PRICE NEGOTIATIONS WERE CONDUCTED WITH VARO SINCE IT BELIEVED THAT ADEQUATE COMPETITION HAD BEEN OBTAINED AND VARO'S PRICE WAS DEEMED TO BE FAIR AND REASONABLE. IT IS STATED FURTHER THAT THE PRICE REDUCTION BY VARO, WHICH WAS VOLUNTARY, WAS NOT A DETERMINATE IN MAKING THE AWARD TO VARO. AS TO THE PRICE REDUCTION WHICH WAS RECEIVED FROM CORBIN, INFORMATION IN OUR FILES IS TO THE EFFECT THAT SUCH REDUCTION WAS OCCASIONED BY A MISTAKE IN THE CORBIN OFFER AND NOT BY ANY NEGOTIATIONS WITH CORBIN. IN THIS CONNECTION, WE DIRECT YOUR ATTENTION TO THE STATEMENTS IN OUR DRAFT REPORT INDICATING THAT CORBIN WAS NOT THE LOW OVERALL OFFEROR AND THAT THE AWARD OF 300 UNITS TO CORBIN WAS JUSTIFIED ON THE BASIS OF THE GOVERNMENT'S URGENT NEED AND ON CORBIN'S ABILITY TO PROVIDE THE EARLIEST INITIAL DELIVERY. ACCORDINGLY, WHILE THE PROCURING ACTIVITY MIGHT HAVE ELECTED, AFTER RECEIPT OF THE PRICE REDUCTION FROM VARO AND CORRECTION OF CORBIN'S ERROR, TO CONDUCT PRICE NEGOTIATIONS WITH ALL OFFERORS AS IS AUTHORIZED UNDER ARMED SERVICES PROCUREMENT REGULATIONS (ASPR) 3-805.1 (B), SUCH ACTION WAS WITHIN THE DISCRETION OF THE ACTIVITY. ON THE RECORD, WHICH EVIDENCES THAT NEITHER PRICE REDUCTION WAS A FACTOR IN THE MAKING OF THE AWARDS TO CORBIN AND TO VARO, WE ARE UNABLE TO SAY THAT THE ACTIVITY'S FAILURE TO CONDUCT SUCH PRICE NEGOTIATIONS WAS AN IMPROPER EXERCISE OF ITS DISCRETION.

WITH REGARD TO THE WEIGHT OF THE VARO RECEIVER, THE PROCURING ACTIVITY STATES THAT THE CHANGE IN WEIGHT IS NOT CONSIDERED TO BE A MAJOR CHANGE OR TO BE PREJUDICIAL TO THE OTHER OFFERORS. IT IS FURTHER STATED THAT THERE WERE NO OTHER DEVIATIONS BY VARO FROM THE SPECIFICATIONS. WHILE THE NAVY ORIGINALLY APPEARS TO HAVE SOUGHT TO OBTAIN A LIGHTWEIGHT RECEIVER, A CHANGE IN THE WEIGHT LIMITATION OF THE ITEM, AS WITH OTHER CHANGES IN DESIGN, MUST BE REGARDED AS A MATTER PRIMARILY WITHIN THE PROVINCE OF THE NAVY AS THE CONTRACTING AGENCY CHARGED WITH THE RESPONSIBILITY FOR DRAFTING THE SPECIFICATIONS TO MEET THE GOVERNMENT'S MINIMUM NEEDS. ACCORDINGLY, AND SINCE OUR OFFICE WILL NOT SUBSTITUTE ITS JUDGMENT FOR THAT OF THE PROCURING ACTIVITY INSOFAR AS TECHNICAL REQUIREMENTS IN THE SPECIFICATIONS ARE CONCERNED, WE MUST CONCLUDE THAT THE RECORD DOES NOT SUPPORT THE PROPOSITION THAT THE VARO OFFER WAS NOT IN SUBSTANTIAL COMPLIANCE WITH THE RFQ.

AS TO THE RECENT CHANGES IN THE RECEIVER SPECIFICATIONS REQUIRING AN ALL METAL RECEIVER, WHICH HAVE ELIMINATED THE USE OF THE RUBBER LINER WHICH YOU DEVELOPED FOR THE GOVERNMENT, YOU ARE ADVISED THAT WE ARE CURRENTLY CONSIDERING A PROTEST BY CORBIN AGAINST THE SAME CHANGES, SINCE THEY AFFECT THE USE OF NONMETALLIC MATERIALS IN THE SEAL ON CORBIN'S NICKEL- LINED RECEIVER. SINCE OUR DECISION IN THE CORBIN CASE SHOULD ALSO ANSWER THE QUESTION WHICH YOU HAVE RAISED, WE SHALL FORWARD YOU A COPY THEREOF WHEN WE HAVE COMPLETED OUR CONSIDERATION OF THE MATTER.

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