B-162538, JAN. 13, 1969

B-162538, JAN. 13, 1969

TO MR. SECRETARY:

WE REFER TO OUR DECISION B-162538, AUGUST 15, 1968, TO YOU CONCERNING MULTI-YEAR CONTRACT F41608-67-C-1139, WHICH WAS AWARDED TO ACME INDUSTRIES, INC. (ACME), BY THE SAN ANTONIO AIR MATERIEL AREA ON JULY 6, 1966, UNDER TWO-STEP FORMALLY ADVERTISED PROCEDURES. THE PROCUREMENT ITEM IS AN MA-3 MOBILE AIR CONDITIONER INTO WHICH TWO GOVERNMENT FURNISHED COMPONENTS, A COMPRESSOR AND A PACKETTE ENGINE, ARE REQUIRED TO BE INCORPORATED.

THE DECISION WAS THE RESULT OF A COMPLAINT FILED WITH OUR OFFICE IN SEPTEMBER 1967 BY KECO INDUSTRIES, INC. (KECO), THE ONLY COMPETITOR OF ACME IN THE PROCUREMENT. OF PERTINENCE HERE IS THAT PORTION OF THE COMPLAINT WHICH CHALLENGED THE VALIDITY OF ACTIONS BY THE CONTRACTING OFFICER DURING THE FIRST YEAR OF PERFORMANCE WHEREBY CERTAIN MODIFICATIONS WERE MADE TO THE CONTRACT AUTHORIZING PAYMENT OF INCREASED PRICES TO ACME TO COVER UNANTICIPATED COSTS INCIDENT TO INCORPORATION OF THE GOVERNMENT FURNISHED COMPONENTS IN THE END ITEM AS DESIGNED BY ACME.

AS THE DECISION INDICATES, WE FOUND NO BASIS FOR OBJECTION TO THE GOVERNMENT'S ACTION IN AGREEING TO PAY FOR THE CHANGE WHICH INVOLVED THE PACKETTE ENGINE. HOWEVER, WE ADVISED YOU WITH RESPECT TO THE COMPRESSOR THAT IN THE ABSENCE OF A CLEAR SHOWING THAT THE AIR FORCE KNEW, WHEN THE ACME TECHNICAL PROPOSAL WAS SUBMITTED AND EVALUATED, THAT THE V-BELT DRIVE PROPOSED BY ACME COULD NOT BE ACCOMPLISHED IN THE MANNER INDICATED ON THE ACME DRAWING INCLUDED IN THE PROPOSAL, AND FAILED TO ADVISE ACME TO THAT EFFECT, WE MUST CONSIDER THE ALLOWANCE OF THE INCREASED COSTS RESULTING FROM ADDITIONAL MATERIALS OR DESIGN CHANGES NECESSARY TO SUCCESSFUL APPLICATION OF THE V-BELT DRIVE TO BE UNAUTHORIZED. WE THEREFORE SUGGESTED THAT THE MATTER BE FURTHER CONSIDERED AND APPROPRIATE CORRECTIVE ACTION TAKEN, UNLESS AFFIRMATIVE PROOF BE FOUND TO ESTABLISH ACTUAL KNOWLEDGE BY THE AIR FORCE OF THE PERTINENT FEATURE OF THE GOVERNMENT FURNISHED COMPRESSOR WHICH OCCASIONED THE CONTRACTOR'S DIFFICULTY.

IN A MEMORANDUM DATED OCTOBER 17, 1968, ACME REQUESTED OUR OFFICE TO RECONSIDER THE DECISION WITH RESPECT TO THE COMPRESSOR ISSUE. BRIEFLY, ACME CLAIMED THAT IT HAD BEEN UNABLE TO OBTAIN ANY DATA ON THE COMPRESSOR FROM EITHER THE MANUFACTURER OR THE AIR FORCE, A FACT WHICH WAS NOTED IN ITS TECHNICAL PROPOSAL; THAT THE AIR FORCE HAD USED THE COMPRESSOR FOR SEVERAL YEARS AND HAD KNOWLEDGE THAT THE BELT DRIVE COULD NOT BE ACCOMPLISHED IN THE MANNER INDICATED IN ACME'S DRAWING BUT HAD FAILED TO ADVISE ACME ACCORDINGLY; AND THAT THE FINAL ARRANGEMENT OF THE V-BELT DRIVE WAS NOT ACCOMPLISHED IN THE MANNER SHOWN IN ACME'S ORIGINAL DRAWING. A COPY OF THE ACME MEMORANDUM WAS FORWARDED TO YOU BY OUR LETTER OF OCTOBER 17 FOR REPORT AND COMMENTS.

BY LETTER DATED NOVEMBER 13, 1968, HEADQUARTERS, UNITED STATES AIR FORCE ADVISED OUR OFFICE TO THE EFFECT THAT AFTER EXAMINATION OF ACME'S MEMORANDUM AND EXTENSIVE INQUIRY INTO THE FACTUAL ISSUES RAISED THEREIN, THE CONCLUSION HAD BEEN REACHED THAT WHILE THE AIR FORCE DID NOT HAVE ACTUAL KNOWLEDGE THAT V-BELT DRIVE WOULD BE A PROBLEM (IN ACME'S ORIGINAL DESIGN), THE AIR FORCE DID HAVE INFORMATION AVAILABLE AND ACCESS TO ADDITIONAL INFORMATION THAT COULD HAVE RAISED THE QUESTION OF THE UNSUITABILITY OF THE V-BELT DRIVE FOR THE GOVERNMENT FURNISHED COMPRESSOR. FURTHER, AGREEMENT IS EXPRESSED WITH ACME'S STATEMENT THAT THE ULTIMATE DESIGN IS AN ENTIRELY NEW INDIRECT DESIGN FOR USING THE COMPRESSOR IN THE END ITEM AS MANUFACTURED BY ACME.

IN VIEW OF SUCH STATEMENTS BY THE AIR FORCE, WE CONCLUDE THAT, IN THE PECULIAR CIRCUMSTANCES OF THIS CASE, THE ACTUAL INFORMATION IN THE HANDS OF THE AIR FORCE PERSONNEL RESPONSIBLE FOR THE PROCUREMENT WITH RESPECT TO THE GOVERNMENT FURNISHED COMPRESSOR WAS SUFFICIENT TO REQUIRE SUCH PERSONNEL TO QUESTION THE FEASIBILITY OF THE ACME DESIGN SHOWN IN ITS TECHNICAL PROPOSAL, AND SINCE THE ANSWER TO THE PROBLEM WAS READILY AVAILABLE TO THE AIR FORCE BUT NOT TO ACME, SUCH INFORMATION MAY BE CONSIDERED AS TANTAMOUNT TO ACTUAL KNOWLEDGE. OUR CONCLUSIONS IN THIS RESPECT ARE GREATLY STRENGTHENED BY THE FACT REFLECTED IN THE RECORD (SEE PAGE 4 OF OUR DECISION OF AUGUST 15, 1968) THAT WHEN ACME WAS QUESTIONED ABOUT THE POSSIBILITY OF A MISTAKE IN ITS BID DUE TO THE WIDE VARIANCE BETWEEN ACME'S UNIT PRICE OF $7,500 AND KECO'S UNIT PRICE OF $12,200, AN ISSUE WHICH WAS RAISED BY KECO SHORTLY AFTER BID OPENING, ACME'S REPLY STATED THAT ITS BID HAD BEEN PREPARED TO COMPLY WITH ITS TECHNICAL PROPOSAL, WITH THE MILITARY SPECIFICATION, WITH THE IFB PROVISIONS AND WITH ACME'S DRAWING, WHICH MUST BE CONSIDERED PART OF ITS BID, AND THAT IF THE DRAWING WAS ACCEPTED, THE BID WAS CONFIRMED AS CORRECT AND AWARD WAS REQUESTED ON SUCH BASIS. SUCH REPLY, IN OUR OPINION, BY EMPHASIZING THE CRUCIAL IMPORTANCE OF THE DESIGN DRAWING,WAS SUFFICIENT TO PLACE THE AIR FORCE ON NOTICE OF ACME'S APPARENT INTENTION TO RESTRICT ITS RESPONSIBILITY FOR ANY MODIFICATION OF THE DESIGN SHOWN.

IN THESE CIRCUMSTANCES, WE NO LONGER WILL OBJECT TO THE ACTION OF THE CONTRACTING OFFICER, IF OTHERWISE CORRECT, IN AGREEING TO PAY FOR THE MODIFICATIONS INCIDENT TO THE SUCCESSFUL APPLICATION OF THE COMPRESSOR IN THE ACME AIR CONDITIONER.