B-151643, SEP. 4, 1963, 43 COMP. GEN. 223

B-151643, SEP. 4, 1963, 43 COMP. GEN. 223

CONTRACTS - SPECIFICATIONS - QUALIFIED PRODUCTS - CORRECTION OF SAMPLE DEFECTS THE SUBSTITUTION BY THE GOVERNMENT OF A NONDEFECTIVE TUBE IN AN OSCILLOSCOPE SAMPLE BEING TESTED FOR THE QUALIFIED PRODUCTS LIST DOES NOT RESULT IN INEQUITABLE TREATMENT OF COMPETING BIDDERS AND IS PERMISSIBLE, THE MERE LISTING OF A PRODUCT ON THE QUALIFIED PRODUCTS LIST NOT RELIEVING THE CONTRACTOR FROM THE OBLIGATION TO MEET THE SPECIFICATIONS; THEREFORE, THE GOVERNMENT TO AVOID ELIMINATING COMPETITION MAY INFORM A MANUFACTURER OF A DEFECT IN A PRODUCT SUBMITTED FOR QUALIFICATION, AND A REMEDY WHEN KNOWN, AND IN VIEW OF THE RESTRICTIVE ASPECTS OF THE QUALIFIED PRODUCTS SYSTEM, A REASONABLE EFFORT, AVOIDING DISCRIMINATORY PRACTICES SUCH AS DISCLOSING CONFIDENTIAL OR PROPRIETARY INFORMATION TO COMPETITORS, OR OFFERING ACTIVE ENGINEERING OR OTHER ASSISTANCE IN THE MANUFACTURE OR CONSTRUCTION OF THE PRODUCT TO BE TESTED, SHOULD BE MADE TO QUALIFY AS MANY AVAILABLE SOURCES OF SUPPLY AS POSSIBLE.

TO ELECTRONIC TUBE AND INSTRUMENT DIVISION OF GENERAL ATRONICS CORPORATION, SEPTEMBER 4, 1963:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 8, 1963, REQUESTING RECONSIDERATION OF OUR DECISION OF AUGUST 7, 1963 (B-151643), IN WHICH WE HELD, FOR THE REASONS STATED THEREIN, THAT WE COULD FIND NO BASIS FOR HOLDING THAT A BID SUBMITTED BY CHEMICAL ELECTRONICS, INC. (CEI), WAS NONRESPONSIVE OR OTHERWISE NOT FOR CONSIDERATION IN MAKING AN AWARD UNDER INVITATION FOR BIDS NO. 600-481-63'S FOR A QUANTITY OF AN/USM 117 OSCILLOSCOPES AND RELATED DATA.

IN YOUR LETTER OF AUGUST 8 YOU CONTEND THAT OUR DECISION APPEARS TO BE BASED ON THE PREMISE THAT IT IS NOT PERTINENT WHETHER IT WAS THE GOVERNMENT WHICH PROVIDED THE CATHODE RAY TUBE NEEDED BY CEI TO PASS THE QUALIFICATION TESTS. YOUR LETTER CONTINUES, IN PART, AS FOLLOWS:

TO REGARD THE GOVERNMENT'S INTERVENTION AS NOT PERTINENT WOULD HAVE THE DUAL EFFECT OF JEOPARDIZING THE QUALIFIED PRODUCTS PROGRAM AND OPENING THE DOOR TO FLAGRANT VIOLATIONS OF THE PRINCIPAL THAT ALL PROSPECTIVE CONTRACTORS SHOULD RECEIVE EQUAL TREATMENT BY THE GOVERNMENT.

THE QUALIFIED PRODUCTS PROGRAM IS DESIGNED TO ASSURE THE GOVERNMENT, IN ITS PURCHASE OF COMPLEX TECHNICAL EQUIPMENT SUCH AS IS INVOLVED HERE, THAT ONLY BIDDERS WHO HAVE DEMONSTRATED THEIR ABILITY TO PRODUCE A SAMPLE OF SUCH EQUIPMENT WILL RECEIVE AN AWARD FOR ITS QUANTITY MANUFACTURE. IN THE PRESENT INSTANCE, THE INTERVENTION OF THE GOVERNMENT IN CURING THE DEFECT IN CEI'S PRODUCT IS CLEARLY PERTINENT TO SHOW THAT CEI HAS NOT DEMONSTRATED THE REQUISITE ABILITY. TO PERMIT AN AWARD WITHOUT DEMONSTRATION OF SUCH ABILITY WOULD NULLIFY THE WHOLE PURPOSE OF THE QUALIFIED PRODUCTS PROGRAM SINCE THE IMPOSITION OF A QUALIFIED PRODUCTS REQUIREMENT WOULD THEN NO LONGER INSURE THAT SUCH DEMONSTRATION IS OBTAINED.

THE PRINCIPLE THAT NO ONE PROSPECTIVE CONTRACTOR SHOULD BE FAVORED OVER OTHERS IS ONE OF THE MOST FUNDAMENTAL TENETS OF THE GOVERNMENT'S PROCUREMENT PROGRAM AND HAS BEEN REPEATEDLY UPHELD AND ENFORCED BY THE COMPTROLLER GENERAL. THE INTERVENTION OF THE GOVERNMENT IN CURING THE DEFECT IN CEI'S PRODUCT IS CLEARLY PERTINENT TO SHOW THAT CEI RECEIVED PREFERENTIAL TREATMENT. TO SANCTION THE AWARD OF A CONTRACT ON THE BASIS OF SUCH PREFERENTIAL TREATMENT CAN LEAD ONLY TO SERIOUS IMPAIRMENT OF THE UNDERLYING PRINCIPLE OF FAIR AND EQUAL TREATMENT OF ALL PROSPECTIVE CONTRACTORS.

ON THIS ASPECT OF THE CASE, A REPORT DATED JUNE 21, 1963, FROM THE BUREAU OF SHIPS, DEPARTMENT OF THE NAVY, STATES:

AT THE OUTSET, THE ADMINISTRATIVE AND TECHNICAL JUDGMENT OF THE BUREAU OF SHIPS WAS AND IS THAT THE SAMPLE PRODUCT SUBMITTED FOR QUALIFICATION BY CEI PASSED THE SPECIFIED TESTS IN ALL RESPECTS AND QUALIFIED FOR INCLUSION IN QPL 23124. IT WAS TESTED AT THE MATERIAL LABORATORY, NEW YORK NAVAL SHIPYARD, THE TEST REPORT REVIEWED BY COGNIZANT ENGINEERING PERSONNEL IN THE BUREAU AND QUALIFICATION APPROVAL GRANTED. AS A RESULT THEREOF THE COGNIZANT TECHNICAL PERSONNEL THEREFORE WERE NECESSARILY SATISFIED THAT THE PRODUCT OFFERED BY CEI IN ITS BID WAS A PRODUCT MEETING THE REQUISITE QUALIFICATION CALLED FOR BY THE INVITATION.

THIRD. THE LETTER TO CEI GRANTS QUALIFICATION APPROVAL SUBJECT TO CERTAIN GENERAL CONDITIONS AND "CONDITIONED UPON USE OF A CATHODE RAY TUBE WHICH MEETS THE EQUIPMENT SPECIFICATION.' GENERAL ATRONICS ASSERTS THAT HIS ALLEGED "CONDITIONAL QUALIFICATION" DOES NOT MEET THE INVITATION'S REQUIREMENTS BECAUSE THE INVITATION DOESN-T PROVIDE FOR "CONDITIONAL" QUALIFICATION. THE INVITATION, AS SHOWN IN THE QUOTATION ABOVE, SAYS "TESTED AND QUALIFY.' ALL QUALIFICATION APPROVALS GRANTED ARE SUBJECT TO CERTAIN CONDITIONS. FURTHER, ALL SUCH APPROVALS ARE ,CONDITIONAL" IN THAT, UNDER QPL REGULATIONS, A QUALIFICATION APPROVAL MAY BE WITHDRAWN IF PRODUCTION UNITS FAIL TO MEET SPECIFICATION REQUIREMENTS. AS SHOWN BELOW, THE "CONDITION" CONCERNING THE CRT TUBE DOES NOT AFFECT THE QUALIFICATION OF CEI'S SAMPLE OSCILLOSCOPE.

THE CATHODE RAY TUBE (CRT) SUPPLIED BY CEI WITH ITS SAMPLE PRODUCT PROVED TO BE DEFECTIVE FOR THIS APPLICATION AND IN THE COURSE OF TESTING A NON- DEFECTIVE TUBE WAS SUBSTITUTED AND CEI'S SAMPLE PASSED "WITH FLYING COLORS.' WHILE THE CRT IS AN ESSENTIAL PART OF THE OSCILLOSCOPE, WE DO NOT AGREE WITH GENERAL ATRONICS THAT THE CRT IS THE "HEART" OF IT. IT IS A REPLACEABLE PART OF THE OSCILLOSCOPE WHICH PLUGS IN AND OUT OF A SOCKET EXACTLY LIKE THE PICTURE TUBE IN A TELEVISION SET. THE SPECIFICATION FOR THE AN/USM-117 DOES NOT SPECIFY ANY PARTICULAR CRT; THE CHOICE OF THE CRT IS LEFT UP TO THE SUPPLIER WHO MAY MAKE IT HIMSELF OR BUY IT FROM A TUBE SUPPLIER. FURTHER, ALTHOUGH AN OSCILLOSCOPE MAY BE QUALIFIED WITH A PARTICULAR TUBE THERE IS NOTHING IN THE APPLICABLE SPECIFICATIONS, INCLUDING THE QUALIFIED PRODUCT REQUIREMENT, WHICH REQUIRES PRODUCTION OSCILLOSCOPES TO USE THE SAME CRT, OR FOR THAT MATTER OTHER INTERNAL PARTS, THAT ARE THE SAME AS THE ONE IN THE SAMPLE. OF COURSE, THE PRODUCTION EQUIPMENTS HAVE TO MEET SPECIFICATIONS, AND THERE ARE SOME RESTRICTIONS ON HOW FAR A MANUFACTURER CAN GO IN SUBSTITUTING PARTS.

MORE IMPORTANT, THE QPL REGULATIONS PROVIDE IN SUBSTANCE THAT QUALIFICATION ONLY ESTABLISHES THAT THE MANUFACTURER HAS DEMONSTRATED THE CAPABILITY OF PRODUCING A SAMPLE WHICH MEETS SPECIFICATIONS. CEI HAS DONE SO. THERE WAS NOTHING WRONG WITH THE DESIGN AND CONSTRUCTION OF ITS OSCILLOSCOPE. GIVEN A SUITABLE CRT IT WOULD WORK. IN THE BUREAU'S OPINION SUITABLE CRT'S ARE OR CAN BE MADE AVAILABLE TO MEET THE DELIVERY REQUIREMENTS UNDER THE SUBJECT INVITATION OR ANY OTHER PROCUREMENT OF THESE OSCILLOSCOPES. IT IS OUR TECHNICAL JUDGMENT THAT CEI'S PRODUCT WAS AND IS QUALIFIED. THE "CONDITION" WAS SIMPLY A CAUTION TO CEI OF WHAT IS REQUIRED IN ANY CASE AND WHICH THE CIRCUMSTANCES WARRANTED MAKING EXPLICIT, NAMELY THAT HIS PRODUCTION EQUIPMENTS HAVE TO HAVE A SUITABLE CRT SO THAT PRODUCTION OSCILLOSCOPES WOULD MEET THE SPECIFICATION.

WE HELD IN 36 COMP. GEN. 809 THAT WE WOULD NOT QUESTION THE QUALIFIED PRODUCTS SYSTEM AS A PROPER PROCUREMENT METHOD IN VIEW OF THE AUTHORITY CONTAINED IN THE ARMED SERVICES PROCUREMENT ACT OF 1947, 10 U.S.C. 2305, AND THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, 41 U.S.C. 253, WHICH VEST INDIVIDUAL AGENCIES WITH A REASONABLE DEGREE OF DISCRETION TO DETERMINE THE EXTENT OF COMPETITION THAT MAY BE REQUIRED CONSISTENT WITH THE NEEDS OF THE AGENCY. SUBSEQUENT TO THAT DECISION, HOWEVER, THE ADMINISTRATION OF THE QPL SYSTEM RESULTED IN INSTANCES WHERE COMPETITION WAS UNDULY RESTRICTED AND SEVERAL BID PROTESTS WERE FILED WITH OUR OFFICE BY BIDDERS WHO WERE DEPRIVED OF AN EQUAL OPPORTUNITY TO COMPETE FOR THE GOVERNMENT'S BUSINESS. IN RESOLVING THESE PROTESTS OUR DECISIONS HAVE SET FORTH CERTAIN GUIDELINES TO INSURE THAT THE QPL SYSTEM WILL NOT RESULT IN RESTRICTING COMPETITION BEYOND THE BARE MINIMUM NECESSARY TO ACCOMPLISH THE OBJECTIVES CONTEMPLATED BY THAT SYSTEM.

MANY OF THE PROBLEM AREAS TO WHICH OUR DECISIONS HAVE BEEN DIRECTED HAVE CONCERNED PROCUREMENT ACTIONS WHICH RESULTED IN IMPROPERLY PRECLUDING AVAILABLE SOURCES FROM QUALIFYING THEIR PRODUCTS FOR INCLUSION ON THE APPLICABLE LISTS. FOR EXAMPLE, IN 38 COMP. GEN. 357 WE WERE CRITICAL OF A PROCUREMENT WHERE THE INVITATION FOR BIDS ALLOWED BIDDERS ONLY 13 BUSINESS DAYS FROM THE ISSUANCE OF THE INVITATION UNTIL BID OPENING TO QUALIFY THEIR PRODUCTS. WE ALSO TOOK THE POSITION IN THAT DECISION THAT A PROCUREMENT RESTRICTED TO QUALIFIED PRODUCTS ITEMS AFTER PREVIOUS PROCUREMENTS OF THE SAME, OR SIMILAR, ITEMS WERE ACCOMPLISHED THROUGH ORDINARY ADVERTISING PROCEDURES MAKES SUCH A RESTRICTED PROCUREMENT OF DOUBTFUL LEGALITY. IN 40 COMP. GEN. 348 THE PROCURING AGENCY FAILED TO GIVE A LOW BIDDER, WHO WAS THE THEN CURRENT CONTRACTOR, PROPER NOTIFICATION THAT QUALIFICATION OF ITS PRODUCT UNDER THE NEW PROCUREMENT WOULD BE REQUIRED SO THAT THE LOW BIDDER WOULD HAVE THE SAME TIME AS OTHER PROSPECTIVE BIDDERS TO QUALIFY HIS PRODUCT. WE HELD THAT SUCH FAILURE TO NOTIFY THE LOW BIDDER DEPRIVED THE UNITED STATES OF THE FULL AND FREE COMPETITION CONTEMPLATED BY THE LAW AND, THEREFORE, NO AWARD COULD BE MADE UNDER THE INVITATION. SEE, ALSO, 40 COMP. GEN. 352 AND 41 ID. 93.

IT IS REPORTED THAT CEI AND YOUR COMPANY WERE THE ONLY TWO BIDDERS AND THE ONLY FIRMS HAVING PRODUCTS APPROVED FOR INCLUSION IN QPL 23124. VIEW OF THE RESTRICTIVE NATURE OF THE QUALIFIED PRODUCTS SYSTEM OF PROCUREMENT, AND IN VIEW OF THE PAST HISTORY IN THE USE OF THAT SYSTEM, WE BELIEVE THAT INVITATION PROVISIONS REQUIRING PRODUCT QUALIFICATION SHOULD NOT BE NARROWLY CONSTRUED SO AS TO ELIMINATE AN ACCEPTABLE PRODUCT WHICH, AS IN THE INSTANT CASE, HAS BEEN DETERMINED BY THE PROCUREMENT AGENCY TO MEET THE ESSENTIAL REQUIREMENTS OF THE SPECIFICATIONS. A NARROW CONSTRUCTION OF SUCH INVITATION PROVISIONS IS EVEN LESS JUSTIFIED WHEN IT IS REMEMBERED THAT THE MERE LISTING OF A PRODUCT ON A QUALIFIED PRODUCTS LIST DOES NOT RELIEVE A CONTRACT FROM HIS OBLIGATION TO DELIVER AN ITEM WHICH MEETS THE SPECIFICATIONS. 41 COMP. GEN. 124; 40 ID. 352.

ON THE BASIS OF THE RECORD BEFORE US WE FAIL TO SEE HOW IT CAN BE CONCLUDED THAT THE GOVERNMENT'S ACTION IN THIS CASE RESULTED IN INEQUITABLE TREATMENT TO YOUR COMPANY. CEI'S PRODUCT WAS MEASURED AGAINST THE SAME SPECIFICATIONS THAT YOUR PRODUCT WAS REQUIRED TO MEET. WE DO NOT THINK THAT THE SO-CALLED CONDITION QUALIFICATION OF CEI'S OSCILLOSCOPE PRECLUDES AN AWARD TO CEI SINCE, AS THE NAVY DEPARTMENT REPORTS, THERE IS NOTHING IN THE APPLICABLE SPECIFICATIONS WHICH REQUIRE PRODUCTION OSCILLOSCOPES TO USE THE SAME CATHODE RAY TUBE AS THE ONE USED IN THE SAMPLE TESTED AND, IN THE NAVY'S OPINION, SUITABLE CATHODE RAY TUBES ARE, OR CAN BE MADE, AVAILABLE TO MEET THE DELIVERY REQUIREMENTS UNDER THE SUBJECT INVITATION OR ANY OTHER PROCUREMENT OF THESE OSCILLOSCOPES. MOREOVER, THE PRODUCTION UNITS MUST STILL MEET THE SPECIFICATIONS UPON DELIVERY.

IF IT IS YOUR POSITION THAT IN TESTING A PRODUCT FOR QUALIFICATION THE GOVERNMENT MUST REMAIN SILENT AND DECLINE TO INFORM THE PRODUCT MANUFACTURER OF A DEFECT IN HIS PRODUCT AND, IF KNOWN, WHAT IS NEEDED TO REMEDY SUCH DEFECT, ESPECIALLY WHEN THE DEFECT, AS THE NAVY REPORTS, DOES NOT GO TO THE HEART OF THE PRODUCT, WE CANNOT AGREE. WE DO NOT THINK, THAT SUCH SILENCE WOULD BE IN THE GOVERNMENT'S BEST INTERESTS SINCE IT COULD RESULT IN NEEDLESSLY ELIMINATING COMPETITION WHICH THE GOVERNMENT IS ENTITLED TO RECEIVE IN BUYING THE GOODS THAT IT REQUIRES. NOR DO WE THINK THAT THE BUREAU OF SHIPS ACTION IN SUBSTITUTING A NON-DEFECTIVE TUBE IN TESTING CEI'S OSCILLOSCOPE IS CONTRARY TO PERMISSIBLE TESTING PROCEDURE. WE ARE NOT AWARE OF ANY LAW OR REGULATION WHICH PROHIBITS SUCH ACTION. THE CONTRARY, IN VIEW OF THE RESTRICTIVE ASPECTS INVOLVED IN QUALIFIED PRODUCTS SYSTEM PROCUREMENTS WE THINK THAT A REASONABLE EFFORT SHOULD BE MADE BY PROCURING ACTIVITIES TO QUALIFY AS MANY AVAILABLE SOURCES OF SUPPLY AS POSSIBLE. THIS EFFORT, OF COURSE, SHOULD NOT EMBRACE DISCRIMINATORY PRACTICES SUCH AS DISCLOSING CONFIDENTIAL OR PROPRIETARY INFORMATION TO COMPETITORS. NOR SHOULD SUCH EFFORT RESULT IN ACTIVE ENGINEERING, OR OTHER, ASSISTANCE IN THE MANUFACTURE OR CONSTRUCTION OF PRODUCTS TO BE TESTED. HOWEVER, SUCH DISCRIMINATORY PRACTICES ARE NOT INVOLVED HERE.

ACCORDINGLY, WE MUST CONCLUDE THAT OUR DECISION OF AUGUST 7, 1963, IS CORRECT AND IT IS SUSTAINED.