B-153760, JUN. 3, 1964

B-153760, JUN. 3, 1964

TO AMERICAN MACHINE AND FOUNDRY COMPANY:

WE REFER TO YOUR LETTERS OF MAY 19, MARCH 19 AND 25, 1964, RELATIVE TO AN AWARD UNDER INVITATION FOR BIDS NO. AMC/W/-11-199-64-8 (STEP II), ISSUED BY THE UNITED STATES ARMY WEAPONS COMMAND, ROCK ISLAND, ILLINOIS, ON FEBRUARY 7 AND OPENED ON MARCH 9, 1964.

THE INVITATION COVERS THE PROCUREMENT OF 234 EACH M6 HELICOPTER ARMAMENT SUBSYSTEMS (ITEM NO. 1), ONE LOT OF FINAL INSPECTION EQUIPMENT FOR THE SUBSYSTEM (ITEM NO. 2) AND ONE LOT OF SPECIAL TOOLING (ITEM NO. 3). THE CONTRACTING OFFICER REPORTS THAT THIS IS THE FIRST COMPETITIVE PROCUREMENT OF THE M6 SUBSYSTEM, UNDER A DATA PACKAGE DELIVERED BY THE DEVELOPING CONTRACTOR, EMERSON ELECTRIC COMPANY. THE AWARD HAS NOT YET BEEN MADE.

STEP I OF THE INVITATION (REQUEST FOR TECHNICAL PROPOSALS) WAS DISTRIBUTED TO PROSPECTIVE BIDDERS AT A CONFERENCE HELD ON DECEMBER 11, 1963. THE REQUEST STATED IN PART AS FOLLOWS:

"8. OFFERORS PLANNING TO USE GOVERNMENT-OWNED INDUSTRIAL FACILITIES OR GOVERNMENT-OWNED SPECIAL TOOLING (INCLUDING FINAL INSPECTION EQUIPMENT). * * * EITHER OF WHICH MAY BE IN THE POSSESSION OF THE OFFEROR OR A PROPOSED SUBCONTRACTOR SHALL NOTIFY THE GOVERNMENT IN THE OFFEROR'S TECHNICAL PROPOSAL (STEP ONE) OF ITS DESIRE TO USE SUCH INDUSTRIAL FACILITIES OR SPECIAL TOOLING. * * *.

"9. THE EVALUATION OF INDUSTRIAL FACILITIES AND/OR SPECIAL TOOLING UNDER STEP TWO OF THIS PROCUREMENT WILL BE SET FORTH IN SECTION VII OF THE PROPOSED INVITATION FOR BIDS, INCLOSED HEREWITH AS EXHIBIT C. EXHIBIT D, ATTACHED HERETO, IS A LISTING OF THE SUBCONTRACTORS TO THE CURRENT SUBSYSTEM PRODUCER, TOGETHER WITH THE NOMENCLATURE AND DRAWING NUMBER OF THE PART (S) BEING MANUFACTURED. ALL OFFERORS ARE CAUTIONED THAT ANY GOVERNMENT-OWNED SPECIAL TOOLING LOCATED IN THE PLANTS OF THESE SUBCONTRACTORS CANNOT BE ASSUMED TO BE AVAILABLE FOR UTILIZATION ON THIS PROCUREMENT, EXCEPT ON THE BASIS OF NONINTERFERENCE WITH THE SUBCONTRACTORS' PRESENT COMMITMENTS TO THE PRIME CONTRACTOR AND WHEN SPECIFICALLY AUTHORIZED IN WRITING BY THE CONTRACTING OFFICER AT THE ST. LOUIS PROCUREMENT DISTRICT. OFFERORS WHO DESIRE FREE USE OF ANY GOVERNMENT-OWNED TOOLING LOCATED IN THE SUBCONTRACTORS' PLANTS SHOULD CONTACT THE ST. LOUIS PROCUREMENT DISTRICT. * * *.' SECTION VII OF THE INVITATION PROVIDES THAT:

"SECTION VII - MISCELLANEOUS

"1. GOVERNMENT-OWNED INDUSTRIAL FACILITIES, AND/OR SPECIAL TOOLING IN POSSESSION OF BIDDERS OR SUBCONTRACTORS AND COVERED BY VALID USE OR LEASE AGREEMENTS, FACILITIES CONTRACTS OR OTHER WRITTEN AUTHORIZATION WHICH PERMIT FREE USE OF THE EQUIPMENT FOR THIS PROCUREMENT, AND THE "LOT" PRICES FOR ITEMS 2 AND 3 WILL BE EVALUATED AS FOLLOWS:

"A. FOR THE PURPOSE OF EVALUATING INDUSTRIAL FACILITIES, SPECIAL TOOLING, AND FINAL INSPECTION EQUIPMENT REQUESTED BY THE BIDDER FOR USE IN PERFORMING ON ANY RESULTING CONTRACT, AND THE "LOT" PRICES BID ON ITEMS 2 AND 3 HEREIN, THE PRODUCTION PERIOD SHALL BE TWELVE (12) MONTHS. FURTHER, THE "LOT" PRICES BID ON ITEMS 2 AND 3 OF THIS INVITATION FOR BIDS, INCLUDING ANY EXISTING GOVERNMENT-OWNED PROPERTY AUTHORIZED FOR FREE-USE IN ANY RESULTING CONTRACT, SHALL BE EVALUATED USING THE FACTORS SET FORTH UNDER PARAGRAPHS 1.B. AND 1.C. BELOW AND THE TOTAL EVALUATION FACTOR ADDED TO THE BID PRICE FOR ITEM 1.

"B. SPECIAL TOOLING--- AN EVALUATION FACTOR OF 1 2/3 PERCENT OF ACQUISITION COST PER MONTH FOR THE PRODUCTION PERIOD WILL BE ADDED TO THE BID PRICE FOR ITEM 1.

"C. FINAL INSPECTION EQUIPMENT IS CONSIDERED TO BE SPECIAL TOOLING FOR THE PURPOSE OF EVALUATING BIDS AND AN EVALUATION FACTOR OF 1 2/3 PERCENT OF ACQUISITION COST PER MONTH FOR THE PRODUCTION PERIOD WILL BE ADDED TO THE BID PRICE FOR ITEM 1.

"G. THE GOVERNMENT RESERVES THE RIGHT TO OVER-RIDE EVALUATION FACTORS SET FORTH ABOVE IF THE ,OUT-OF-POCKET" COSTS WOULD BE SUBSTANTIALLY HIGHER BY REASON THEREOF WITHOUT COMMENSURATE ADVANTAGE TO THE GOVERNMENT.

"2. EACH BIDDER SHALL INDICATE BELOW WHETHER OR NOT HE INTENDS TO USE ANY GOVERNMENT-OWNED PROPERTY FOR PERFORMANCE OF THE CONTRACT RESULTING FROM THIS INVITATION FOR BIDS.

"A. DO YOU PLAN TO USE GOVERNMENT-OWNED INDUSTRIAL FACILITIES AND/OR SPECIAL TOOLING (INCLUDING FINAL INSPECTION EQUIPMENT) ALREADY IN YOUR POSSESSION OR IN THE POSSESSION OF SUBCONTRACTORS?

YES NO

"B. IF ANSWER TO 2.A. IS YES, INDICATE WHETHER USE OF THE INDUSTRIAL FACILITIES AND/OR SPECIAL TOOLING (INCLUDING FINAL INSPECTION EQUIPMENT) IN YOUR POSSESSION OR IN POSSESSION OF THE SUBCONTRACTORS IS COVERED BY A WRITTEN LEASE, USE AGREEMENT, FACILITIES CONTRACT OR OTHER WRITTEN AUTHORIZATION FROM THE COGNIZANT CONTRACTING OFFICER.

YES NO

"C. IF ANSWER TO 2.B. IS YES, STATE WHETHER THE WRITTEN CONTRACT OR AGREEMENT PROVIDES FOR FREE-USE OR REQUIRES PAYMENT OF RENTAL. A COPY OF THE CONTRACT OR OTHER AGREEMENT, INCLUDING A DETAILED LIST OF THE GOVERNMENT-OWNED PROPERTY, SHALL BE FURNISHED TO THE CONTRACTING OFFICER UPON REQUEST.

FREE-USE RENTAL CHARGE

"D. IF ANSWER TO 2.C. IS FREE-USE, A COMPLETE LIST OF THE GOVERNMENT INDUSTRIAL FACILITIES AND TOOLING (INCLUDING FINAL INSPECTION EQUIPMENT) YOU INTEND TO USE MUST BE SUBMITTED WITH YOUR BID IDENTIFYING EACH ITEM AND SHOWING DATE OF ACQUISITION AND ACQUISITION COST OF EACH ITEM. BIDDERS WHO FAIL TO FURNISH THIS LIST WILL BE REJECTED AS NONRESPONSIVE. FORMATS A, B, C, AND D ARE ATTACHED HERETO FOR PROVIDING THE INFORMATION REQUIRED ABOVE.'

(UNDER THE ITEM 2 AND 3 DESCRIPTIONS, BIDDERS WERE ADVISED THAT THE AVAILABLE GOVERNMENT-OWNED EQUIPMENT COULD BE UTILIZED ON ALL OR PART OF THE LOT.)

ARMY EXPLAINS THAT THE AFOREMENTIONED "EQUALIZATION" EVALUATION PROCEDURE WAS ADOPTED TO PERMIT A BIDDER TO UTILIZE TO THE EXTENT AVAILABLE THE GOVERNMENT-OWNED EQUIPMENT IN EXISTENCE AT THE PLANTS OF THE SUBCONTRACTORS TO THE PRESENT PRIME CONTRACTOR (EMERSON ELECTRIC COMPANY) WITHOUT PLACING A NON-USING BIDDER AT A COMPETITIVE DISADVANTAGE IN THE BIDDING.

YOUR PROPOSAL WAS ONE OF FIFTEEN APPROVED UNDER STEP I. (IN YOUR PROPOSAL YOU STATED (PAGE 39) THAT USE OF ANY GOVERNMENT-OWNED EQUIPMENT WOULD NOT BE NECESSARY.) FOURTEEN BIDS WERE RECEIVED ON STEP II. UNDER SECTION VII OF YOUR STEP II BID YOU INDICATED THAT YOU DID NOT PLAN TO USE ANY GOVERNMENT-OWNED PROPERTY ON THE CONTRACT. YOUR BID PRICES ON THE ITEMS WERE AS FOLLOWS:

TABLE

ITEM NO. 1 $9,830 EACH $2,300,220

ITEM NO. 2 LOT 525,091

ITEM NO. 3 LOT 137,272

TOTAL $2,962,583

IT APPEARS THAT YOUR BID IS SECOND LOW IN TERMS OF "OUT-OF POCKET"COSTS (SEE SECTION VII, PARA. 1 G, QUOTED ABOVE). THE LOW "OUT OF-POCKET" BID IS FROM NORTHROP NORTRONICS AS FOLLOWS:

TABLE

ITEM NO. 1 $10,056 EACH $2,353,104

ITEM NO. 2 LOT 286,270

ITEM NO. 3 LOT 53,475

$2,692,849.00

LESS DISCOUNT 6,732.12

TOTAL $2,686,116.88

NORTHROP NORTRONICS SPECIFIED THAT IT WOULD USE GOVERNMENT-OWNED TOOLING, AND IT FURNISHED WITH ITS BID A LIST OF SPECIAL TOOLING HAVING AN ACQUISITION VALUE OF $39,718.75.

PURSUANT TO THE EVALUATION SET FORTH IN SECTION VII, YOUR BID AND NORTHROP NORTRONICS BID HAVE BEEN EVALUATED AS FOLLOWS:

TABLE

NORTHROP NORTRONICS

ITEM NO. 2 $286,270.00 $2,353,104.00

ITEM NO. 3 53,475.00 75,892.75

FORMAT "B" 39,718.75 $2,428,996.75

---------- LESS 1/4

$379,463.75 PERCENT

.20 20 - 6,072.49

$ 75,892.75 TOTAL $2,422,924.26

YOUR BID

ITEM NO. 2 $525,091.00 $2,300,220.00

ITEM NO. 3 137,272.00 132,472.60

TOTAL $2,432,692.60

NO GOVERNMENT-OWNED EQUIPMENT

$662,363.00

.20

$132,472.60

(THE THIRD LOW BID HAS BEEN EVALUATED AT $2,712,983.15. ARMY REPORTS THAT IT DOES NOT INTEND TO UTILIZE THE "OVERRIDING" EVALUATION CRITERIA SET FORTH IN SECTION VII, PARA. 1/G).)

YOU OBJECT TO THE "CONFUSING" PROCEDURES FOLLOWED BY ARMY ON THIS PROCUREMENT. SPECIFICALLY, YOU SAY THAT YOUR FIRM WAS NEVER FULLY INFORMED OF THE EXTENT OF THE GOVERNMENT-OWNED PROPERTY THAT WAS AVAILABLE TO BIDDERS, NOR OF THE ACQUISITION COSTS OF SUCH PROPERTY. YOU SAY THAT THE GOVERNMENT-FURNISHED LIST OF SUBCONTRACTORS ONLY PROVIDED A CLUE AS TO WHAT EQUIPMENT WAS AVAILABLE. HOWEVER, YOU SUGGEST THAT SOME OF THE BIDDERS ALREADY HAD DETAILED KNOWLEDGE CONCERNING THE AVAILABILITY OF THE GOVERNMENT-OWNED EQUIPMENT. FURTHER, YOU CRITICIZE THE ARMY FOR PROVIDING ALTERNATE METHODS OF EVALUATION UNDER THE INVITATION.

YOU CITE OUR DECISION AT 42 COMP. GEN. 383, 385 FOR THE RULE THAT ALL BIDDERS SHOULD BE REQUIRED TO BID ON THE SAME THING AND SECTION 13, PARTS 1, 2 AND 3 OF THE ARMED SERVICES PROCUREMENT REGULATION FOR THE REQUIREMENT THAT GOVERNMENT-FURNISHED PROPERTY UTILIZED UNDER ADVERTISED BIDDING MUST BE DESCRIBED IN SUFFICIENT DETAIL SO AS TO ENABLE THE SUBMISSION OF BIDS AND EVALUATION THEREON ON A COMMON AND EQUAL BASIS. YOU CONCLUDE THAT THIS SOLICITATION DID NOT MEET THE STANDARDS REQUIRED UNDER ADVERTISED BIDDING.

IN 42 COMP. GEN. 383, WE OBJECTED TO THE USE OF AN INVITATION PROVISION ALLOWING BIDDERS TO SUBSTITUTE "ALTERNATE ITEMS" IN LIEU OF ITEMS EXACTLY AS SPECIFIED. BUT WE HAVE NOT OBJECTED TO INVITATION PROVISIONS WHICH PERMIT BIDDERS TO EXCLUDE ITEMS THAT HAVE ALREADY BEEN FURNISHED AND, HENCE, ARE NOT NEEDED BY THE GOVERNMENT. SEE B 151436, JUNE 20, 1963. (42 COMP. GEN. - ). IN THIS CASE ARMY HAS AVAILABLE FOR USE SOME OF THE SPECIAL TOOLING (INCLUDING FINAL INSPECTION EQUIPMENT) NEEDED TO PRODUCE THE M6 SUBSYSTEM. HOWEVER, ARMY IS WILLING TO ACCEPT A NEW SET OF TOOLING ON THE M6 IF OFFERED AT AN ADVANTAGEOUS PRICE. USE OF THE GOVERNMENT'S EQUIPMENT WAS MADE OPTIONAL. BUT IT APPEARS THAT ARMY DID NOT HAVE A DETAILED KNOWLEDGE OF THE EXTENT OF THE GOVERNMENT'S EQUIPMENT THAT WAS AVAILABLE IN THE HANDS OF SUBCONTRACTORS. BIDDERS WERE GIVEN THE INFORMATION THAT WAS AVAILABLE TO ARMY, AND THE INTERESTED BIDDERS WERE ADVISED TO SEEK FURTHER INFORMATION FROM THE SUBCONTRACTORS. (BID OPENING WAS HELD ROUGHLY THREE MONTHS AFTER DISTRIBUTION OF THE REQUEST FOR PROPOSALS ON DECEMBER 11, 1963.) BY SUBSTITUTING THE ACQUISITION COST OF THE AVAILABLE GOVERNMENT EQUIPMENT FOR A BID PRICE, ARMY SOUGHT TO PROVIDE FOR AN EQUALITY IN BIDDING EVALUATION BETWEEN BIDDERS PLANNING TO USE GOVERNMENT-OWNED TOOLING AND BIDDERS PLANNING TO SUPPLY ALL OF ITEM 2 AND 3 THEMSELVES.

WE FAIL TO SEE HOW THE ALTERNATE BASIS OF EVALUATION PROVIDED UNDER SECTION VII, PARAGRAPH 1 (G), PREJUDICED THE BIDDING. THE EFFECT OF THIS PROVISION, IF ANY, ON THE BIDDING WAS TO ENCOURAGE THE USE OF GOVERNMENT- OWNED EQUIPMENT. THE CONTRACTING OFFICER REPORTS THAT IN FACT THE BIDS WILL NOT BE EVALUATED ON AN "OUT-OF-POCKET" BASIS. NORTHROP NORTRONICS IS THE LOW BIDDER ON EITHER BASIS. IN THE CIRCUMSTANCES, WE THINK THAT THE PROCEDURE FOLLOWED WAS SUITABLE AND NOT CONTRARY TO THE REQUIREMENTS OF ADVERTISED BIDDING. B-153201, MARCH 17, 1964. ACCORDINGLY, WE DO NOT OBJECT TO AN AWARD UNDER THIS INVITATION.

NEXT YOU CONTEND THAT YOUR BID WAS IN ERROR AND SHOULD BE AMENDED. AS TO ITEM NO. 3 OF YOUR BID, YOU SAY THAT IF YOU HAD KNOWN FROM THE GOVERNMENT OF THE EXTENT OF THE AVAILABLE SPECIAL TOOLING HELD BY ONE PARTICULAR SUBCONTRACTOR, YOU WOULD HAVE PLANNED TO USE AT LEAST $39,718.75 OF THE GOVERNMENT'S SPECIAL TOOLING. BE THAT AS IT MAY, IT DOES NOT APPEAR THAT SUCH A CHANGE IN YOUR BID WOULD HAVE ANY EFFECT ON THE BID EVALUATION. FOR YOU WOULD BE SUBJECT TO A 20 PERCENT EVALUATION ON THE ACQUISITION COST OF ANY GOVERNMENT-OWNED EQUIPMENT. WE CANNOT ASSUME, AS YOU SUGGEST, THAT YOUR BID PRICE ON ITEM NO. 3 WOULD HAVE BEEN REDUCED CONSIDERABLY BELOW THE ACQUISITION VALUE OF ANY GOVERNMENT TOOLING WHICH YOU MIGHT HAVE PLANNED TO USE. ON ITEM NO. 2 YOU SAY THAT A TOTAL OF $219,000 OF THE $525,000 QUOTED WAS ERRONEOUSLY INCLUDED AS DUPLICATED COSTS. YOU OFFER TO PROVE THIS ERROR BY MEANS OF YOUR WORKING PAPERS AND COST DATA. HOWEVER, THE EFFECT OF CORRECTING YOUR ERROR WOULD BE TO DISPLACE THE LOW BID OF NORTHROP NORTRONICS BY YOUR BID. CORRECTION IN SUCH CASE IS NOT PERMITTED UNLESS THE ERROR IS OBVIOUS ON THE FACE OF THE BID. 37 COMP. GEN. 210. BUT YOUR BID ON ITEM NO. 2 SHOWS NO SIGN OF ERROR. EVEN YOUR BID PRICE OF $525,000 IS LOWER THAN SOME OF THE OTHER BIDS OFFERED ON THAT ITEM. YOU CONTEND THAT THE "BID DISPLACEMENT" RULE IS NOT APPLICABLE HERE BECAUSE EVEN IF YOU HAD NOT ALLEGED ERROR UNDER ITEM NO. 2, THE GOVERNMENT WOULD STILL BE ENTITLED TO RECOVER YOUR ERRONEOUS OVERCHARGE UNDER A RESULTING CONTRACT. HENCE, YOU CONCLUDE THAT YOUR BID SHOULD BE CONSIDERED FOR AWARD WITHOUT THE OVERCHARGE INCLUDED. HOWEVER, THE FACT REMAINS THAT YOU WERE IN A POSITION TO DISREGARD YOUR ERROR IN ORDER TO AVOID AN AWARD. IN LINE WITH THE RULE STATED IN 37 COMP. GEN. 210, YOU MAY NOT BE PERMITTED TO DISPLACE OTHER BIDDERS MERELY BY CHOOSING TO ALLEGE, OR NOT TO ALLEGE, ERROR. SEE 39 COMP. GEN. 531.