B-173681, FEB 7, 1972, 51 COMP GEN 476

B-173681, FEB 7, 1972, 51 COMP GEN 476

CONTRACTS - PERFORMANCE - INSPECTION THE "ENTRY INTO PLANT" REQUIREMENT IN A REQUEST FOR PROPOSALS THAT WOULD PERMIT GOVERNMENT PERSONNEL TO OBSERVE AND CONSULT WITH THE CONTRACTOR DURING PERFORMANCE OF MANUFACTURING THE FLYERS' HELMETS SOLICITED BY THE DEFENSE SUPPLY AGENCY IS AN ESSENTIAL REQUIREMENT AND THE OFFER OF THE MANUFACTURER WHO DEVELOPED THE HELMET THAT DID NOT EXTEND ACCESS TO ITS PLANT WAS NONRESPONSIVE AND PROPERLY REJECTED, FOR IN ADDITION TO ITS LICENSE AGREEMENT WITH THE MANUFACTURER, THE GOVERNMENT NOT ONLY WANTED TO TEST THE CONTRACTOR'S ABILITY TO MANUFACTURE THE HELMET, BUT ALSO THE ADEQUACY OF THE SPECIFICATION IN MASS PRODUCTION. MOREOVER, THE MERE ALLEGATION OF A POSSIBLE DIVULGENCE OF TRADE SECRETS IN VIOLATION OF A CONFIDENTIAL RELATIONSHIP DOES NOT WARRANT THE INTERVENTION OF THE UNITED STATES GENERAL ACCOUNTING OFFICE IN THE AWARD PROCESS WHERE ADEQUATE SAFEGUARDS EXIST AGAINST THE IMPROPER DISCLOSURE OF PROPRIETARY INFORMATION.

TO THE CONTEX CORPORATION, FEBRUARY 7, 1972:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 21, 1971, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST THE REFUSAL OF THE DEFENSE SUPPLY AGENCY, DEFENSE PERSONNEL SUPPORT CENTER (DPSC), TO CONSIDER YOUR PROPOSAL FOR AWARD UNDER REQUEST FOR PROPOSALS (RFP) NO. DSA100-71-R 0876.

FOR THE REASONS STATED BELOW, THE PROTEST OF GENTEX IS DENIED.

THE RFP, AS AMENDED, SOLICITED OFFERS FOR THE MANUFACTURE AND DELIVERY OF A TOTAL OF 9,000 REGULAR AND EXTRA LARGE SIZE SPH-4 PROTECTIVE FLYERS' HELMETS "IN ACCORDANCE WITH LIMITED PRODUCTION PURCHASE DESCRIPTION LP/P DES 53-70 DATED 25 NOV 1970 *** WITH DEVIATIONS LISTED BELOW." CLAUSE B30.86 OF THE RFP, INTER ALIA, CONTAINS AN ENTRY INTO PLANT CLAUSE, QUOTED BELOW AS COMPLETED BY GENTEX:

3. ENTRY INTO PLANT

THE CONTRACTING OFFICER OR ANY GOVERNMENT PERSONNEL DESIGNATED BY HIM SHALL BE PERMITTED ENTRY INTO CONTRACTOR'S PLANT FOR THE PURPOSE OF OBSERVATION AND CONSULTATION DURING PERFORMANCE OF MANUFACTURING OPERATION.

SEE LETTER FROM GENTEX CORPORATION DATED 7 APRIL 71, ATTACHED HERETO AND MADE A PART OF THIS PROPOSAL/OFFER.

THE APRIL 7 LETTER, WHICH SPECIFICALLY TOOK EXCEPTION TO THE ENTRY INTO PLANT CLAUSE, READS, IN PERTINENT PART, AS FOLLOWS:

THIS PROCUREMENT RELATES TO THE SPH-4 FLIER'S PROTECTIVE HELMET WHICH WAS DEVELOPED BY GENTEX CORPORATION AT ITS OWN COST AND IS THE SUBJECT OF AN AGREEMENT BETWEEN GENTEX CORPORATION AND THE UNITED STATES GOVERNMENT, BEARING DATE JANUARY 28, 1970 AND NUMBER DAAG 17-70-C-0081, RELATING TO A TECHNICAL DATA PACKAGE ("TDP" HEREINAFTER).

ARTICLE II, PARAGRAPH A, EXPRESSLY PROVIDES THAT THE TDP

"WILL NOT INCLUDE ANY DATA INVOLVING THE COMPOSITION OF OR THE FORMING OF THE SHELL WHICH CONTRACTOR CONSIDERS TO BE ITS TRADE SECRETS."

ARTICLE I, PARAGRAPH B1, PROVIDES:

"THE LICENSE HEREIN GRANTED EXTENDS ONLY INSOFAR AS THE INVENTIONS COVERED BY SAID PATENTS AND APPLICATIONS FORM AN INTEGRAL PART OF SAID SPH -4 HELMET AND AS SUCH INVENTIONS ARE INCORPORATED IN SAID TDP."

SINCE THE SALE OF THE TDP UNDER SAID CONTRACT, GENTEX CORPORATION HAS MADE IMPROVEMENTS IN THE METHOD OF FORMING THE VISOR, WHICH IMPROVEMENTS AND METHODS ARE NOT PART OF THE TDP.

AS YOU KNOW, THE MAINTENANCE OF TRADE SECRETS REQUIRES THAT THE PROCESSES WHICH ARE THE SUBJECT OF THE TRADE SECRETS MUST BE MAINTAINED AS SECRETS BY THE OWNER OF THE TRADE SECRETS. IN ORDER TO DO THIS, NO PUBLIC INSPECTION OF THE MANUFACTURING AREAS IN WHICH THE PROCESSES ARE BEING PRACTICED CAN BE PERMITTED. THE PROVISION IN THE PROPOSED CONTRACT REFERRED TO ABOVE WOULD, IF ACCEPTED, CAUSE GENTEX CORPORATION TO LOSE ITS TRADE SECRETS. THIS, GENTEX CANNOT CONSENT TO DO.

DURING THE PERIOD BETWEEN THE SUBMISSION OF YOUR QUALIFIED OFFER AND THE FORMAL REJECTION THEREOF, DPSC REQUESTED, BUT FAILED TO OBTAIN, A CONCESSION AS TO THOSE PORTIONS OF THE GENTEX PLANT WHICH WOULD BE ACCESSIBLE TO GOVERNMENT INSPECTORS OTHER THAN THOSE PORTIONS WHEREIN A FINISHED ARTICLE INSPECTION AND QUALITY CONTRACT TESTING PROCEDURE WOULD BE PERFORMED. ALTHOUGH WE NOTE THAT AN INTERCHANGE OF CORRESPONDENCE BETWEEN GENTEX AND DPSC, MONITORED BY OUR OFFICE, RESULTED IN SOME FURTHER ACCESS CONCESSIONS BY GENTEX, DPSC DOES NOT CONSIDER SUCH EXTENT OF ACCESS TO THE GENTEX PLANT TO BE AN ACCEPTABLE ALTERNATIVE TO THAT CONTEMPLATED BY THE CLAUSE. IN ANY EVENT, DPSC FORMALLY REJECTED GENTEX'S PROPOSAL "IN VIEW OF YOUR REFUSAL TO PERMIT FREE ACCESS TO THE AREAS OF MANUFACTURE OF THIS HELMET AS CALLED FOR BY THE CLAUSE ENTITLED 'ENTRY INTO PLANT'" THEREBY "NOT MEETING AN ESSENTIAL REQUIREMENT OF OUR *** (RFP)."

THE RECORD ESTABLISHES THAT, IF GOVERNMENT INSPECTORS UTILIZE THE ENTRY INTO PLANT CLAUSE, TRADE SECRETS OF GENTEX NOT COVERED BY ITS LICENSE AGREEMENT WITH THE GOVERNMENT WOULD BE SUBJECT TO SCRUTINY. GENTEX CLAIMS THAT THE EXPECTED RESULT OF SUCH A DETAILED INSPECTION OF ITS PRODUCTION TECHNIQUES AND PROCESSES WOULD BE THE COMPROMISE OF ITS TRADE SECRETS. WHILE NOT ATTRIBUTING POTENTIAL WILLFUL DISCLOSURE OF TRADE SECRETS TO OTHERS, GENTEX FEARS DISSEMINATION BY GOVERNMENT PERSONNEL, APPARENTLY BASED ON PRIOR EXPERIENCE.

ON THE OTHER HAND, DESPITE THESE CLAIMS, DPSC HAS CONSISTENTLY MAINTAINED ITS POSITION THAT, IN A PRODUCTION TEST CONTRACT OF THIS TYPE, THE RIGHT TO VIEW AND INSPECT THE MANUFACTURING PROCESS AND TECHNIQUE IS ESSENTIAL TO THE NEEDS OF THE GOVERNMENT EVEN THOUGH GENTEX HAS THE ABILITY TO MANUFACTURE THE HELMET AND NOTWITHSTANDING THE AVAILABILITY OF ITS TRADE SECRETS. IN THIS CONNECTION, THE CONTRACTING AGENCY HAS ADVISED THAT:

*** THE APPLICABLE SPECIFICATION IS UNTRIED, AND THE PRODUCTION TEST CONTRACTS ARE ENTERED INTO IN ORDER TO OBSERVE THAT THE ITEM IS BEING MANUFACTURED IN ACCORDANCE WITH THE SPECIFICATION REQUIREMENTS AND THAT SOME OTHER METHOD IS NOT BEING USED. FURTHER, NOT ONLY THAT THE SPECIFICATION IS BEING FOLLOWED, BUT THAT THE SPECIFICATION REQUIREMENTS ARE PROPER AND ATTAINABLE UTILIZING CURRENTLY ACCEPTED INDUSTRY PRACTICES. IN OTHER WORDS, THAT THE REQUIREMENTS OF THE SPECIFICATION CAN BE MET UNDER MASS PRODUCTION CONDITIONS. TO INSURE THAT THESE OBJECTIVES ARE MET, IT IS CONSIDERED ESSENTIAL THAT GOVERNMENT PERSONNEL HAVE ACCESS TO THOSE AREAS OF A CONTRACTOR'S PLANT WHERE THE ITEM IS BEING MANUFACTURED IN ORDER THAT ALL FACETS OF PRODUCTION MAY BE OBSERVED. LIMITING THE GOVERNMENT TO EXAMINATION AND TESTING OF THE END PRODUCT WOULD DEFEAT THE PURPOSE OF THE *** (PRODUCTION TEST CONTRACT) WHICH IS CONSIDERED TO BE OF PRIME IMPORTANCE. ***

OBSERVING THE ACTUAL PRODUCTION WILL ENABLE TECHNICIANS TO SEE PROBLEMS AS THEY ARISE; DETERMINE DESIRABILITY OF CHANGING TO A DETAILED SPECIFICATION OR VICE VERSA CHANGING TO A PERFORMANCE SPECIFICATION; DETERMINE THAT THE REQUIREMENTS ARE TOO RESTRICTIVE OR NOT SUFFICIENTLY RESTRICTIVE AND MANY OTHER SPECIFICATION REVISIONS. WE ARE TESTING NOT ONLY A CONTRACTOR'S ABILITY TO MANUFACTURE THE HELMET, BUT THE ADEQUACY OF THE SPECIFICATION IN MASS PRODUCTION, WHEN PRODUCED IN ACCORDANCE WITH SPECIFICATION REQUIREMENTS. ***

FURTHERMORE, IN OUR DECISION B-164389, JULY 18, 1968, TO GENTEX, WE APPROVED THE USE OF A RIGHT OF ENTRY INTO PLANT CLAUSE FOR SIMILAR PURPOSES.

WE HAVE CAREFULLY REVIEWED THE POSITIONS OF GENTEX AND DPSC AND WE MUST CONCLUDE THAT THERE IS NO LEGAL BASIS UPON WHICH WE CAN INTERPOSE ANY OBJECTION TO THE REJECTION OF THE GENTEX OFFER.

INITIALLY, WE REALIZE THAT IT IS THE PREROGATIVE OF GENTEX NOT TO SUBJECT ITS PROPRIETARY PROCESSES AND TECHNIQUES TO SCRUTINY BY GOVERNMENT INSPECTORS. FURTHERMORE, WE ARE NOT UNMINDFUL OF THE RISKS A MANUFACTURER ENCOUNTERS IN ATTEMPTING TO PROTECT ITS PROPRIETARY INFORMATION. CLEARLY, GENTEX'S LICENSE AGREEMENT WITH THE GOVERNMENT SPECIFICALLY EXCLUDES CERTAIN PROPRIETARY INFORMATION WHICH MIGHT BE ASCERTAINABLE FROM THE TYPE OF INSPECTION CONTEMPLATED BY THE RFP. HOWEVER, DPSC HAS DETERMINED THAT THE IN-PROCESS INSPECTION CLAUSE IS IMPORTANT TO THE GOVERNMENT. IN THAT CONNECTION, IT SHOULD BE RECOGNIZED THAT THE PROVISIONS OF THE RFP AND PROCUREMENT REGULATIONS AND IMPLEMENTATIONS THEREOF PERMIT THE GOVERNMENT TO PERFORM SUCH AN INSPECTION AS IS CONSIDERED NECESSARY TO EFFECT THE STATED OBJECTIVES UNDER A PARTICULAR CONTRACT. THE MERE ALLEGATION OF A POSSIBLE DIVULGENCE OF TRADE SECRETS IN VIOLATION OF A CONFIDENTIAL RELATIONSHIP DOES NOT WARRANT THE INTERVENTION OF OUR OFFICE IN THE AWARD PROCESS. MOREOVER, WE BELIEVE THAT ADEQUATE SAFEGUARDS EXIST AGAINST THE IMPROPER DISCLOSURE OF PROPRIETARY INFORMATION. SEE 18 U.S.C. 1905; CF. 50 COMP. GEN. 271 (1970).

TAKING THE ABOVE INTO ACCOUNT, WE BELIEVE THAT GENTEX MISSTATES THE ISSUE WHEN, CITING ITS LICENSE AGREEMENT AND POSSIBLE DIVULGENCE OF TRADE SECRETS, IT STATES THAT IT IS IMPROPER FOR THE GOVERNMENT TO REQUIRE IT TO EXPOSE ITS TRADE SECRETS UNDER THE PENALTY OF THE LOSS OF A CONTRACT AWARD.

IF, AS A MATTER OF BUSINESS PRUDENCE, GENTEX DOES NOT WISH TO SUBMIT TO THE INSPECTION PROCESS, IT HAS EVERY RIGHT TO REFUSE TO SUBMIT AN OFFER ON A CONTRACT PROVIDING FOR THE INSPECTION PROCESS. CONCOMMITANTLY, IF THE GOVERNMENT CONSIDERS THE INSPECTION PROCESS TO BE ESSENTIAL TO A CONTRACT, IT MUST BE PERMITTED TO EFFECT THE TYPE OF INSPECTION DEEMED APPROPRIATE IN CONSIDERATION OF THE PECULIAR NATURE OF THE PROCUREMENT AND TO REFUSE TO ACCEPT AN OFFER THAT DOES NOT CONFORM TO ITS REQUIREMENTS.

SINCE DPSC CONSIDERS THE USE OF THE ENTRY INTO PLANT CLAUSE ESSENTIAL, THE REJECTION OF THE GENTEX PROPOSAL WHICH TAKES EXCEPTION TO THE CLAUSE IS PROPER.