-sO COMPTROLLER GENERALCECISION t'z'.I OF-THE UNITED STATUE

WA*HINOTON, O. . C.04m

FILF: 3-191432 DATE: Jule 30, 1978

MATTER OF: Vega Precision Laboratories, Inc.

DIGEST:

Protester contends that proposed sole-sourceprocurement of transponder sets should be openedto competition because it is capable of manufacturiniitem from existing production drawings and'Government-furnished model and in willing to assume risk ofconcurrent first article testing and production todeliver timely Contracting officer, with concurrenceof agency's Sole-Source Review Board, believer thatinherent risk of changing from most recent supplieris too great becaUse critical item is urgently needed.In circumstances, GAO concludes that protester has notmet its heavy burden of clearly showing that agency'sdetermination is unreasonable.

Vega Precision Laboratories, Inc. (V fga) pro-te2ts the\Marine Corps' proposed procugrementof106 transponder sets (AN/PPN-18) from Motorola, In-corporat-od,,,Government Electronics Division (Motorola),on a so.: -source basin under request for proposals(RFP) No. M00027-78-R-0011. No award has been madepending our resolution of the-protest.

BACKGROUND

The AN/PPMl18 is a crucial element in close airsupport missions; it provides a signal to an attack-ing aircraft thus enabling the aircrafl: to home inon ground targets ,in all weather conditions. TheMarine Corps, as the designated Department of DefensePrimary Inventory Control Activity for this item, isresponsible for procuring all the military departments'requirements. Currently, the Army (Special Forces) andNavy (Seals) have an urgent need for the requestedquantities as soon aE they can be delivered; however,the fastest realistic delivery sched6le would begin withsix units in January 1979 and 20 units per month thereafteruntil completion. This schedule contemplates waiver of

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first article testing for Motarola, the most recentsupplier, and Motorola's use of "unaudited" drawingsm theschedule also includes adequate time for Motorolato procure certain long lead-time items required forthe transponder sets.

Chronology

The following brief history of this procurementwill be helpful in our consideration of this matter.

The Syracuse Research Corporation initiallydeveloped what is now called the AN/PPN-1.. The Vega326K and Motorola SST-22 models were forerunners ofthe current configuration.

Vega supplied 112 units wuider a contract datedAugust 1, 1969, which was awarded as a result of com-petitive negotiations. Although the initial unitsproduced by Vega under the contract met basic per-formance requirements the design was not entirelysuccessful. The antenna had to be replaced on allthe units.

Following completion of the Vega 1969 contractand actual field usage of the transponder in Vietnama npw requirement of 113 units surfaced. Underthe 1969 contract Vega had supplied the requireddrawings which were totbe suitable for reprocurementof this unit. It was believed by the procuringactivity that an adAvertised procurement would be suit-able for the new requirement based on availabilityof complete design specifications.

While repairing and rebuilding the units, itwas discovered that diicrepancies existed between thethen correct performance npecifications and the draw-ings whidh Vega had supplied. Specifically, therewas reason to believe that.the drawings and designdata would not meet the eystem time delay requirementsof the performance specifications which had been up-graded since the initial Vega procurement. The timedelay requirement is a crucial factor in the actualfield performance of the transponder unit. In order

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to insure the time delay perforLanc' capability a newdesign and engineering effort was ruquired.

Consequently, the procurement plan was revisedto allow for competitive negotiations This was tobe tht first reprocurement of the item since the Vegap;rodiiction was completed on April 30, 1971. An RFPwas issued to forty-six (46) contractors on December 22,1975. A list of all performance specificationchanges was included with the RFP In addition toVega's original reprocurement package. It was alsoindicated that the Vega equipment did not meet theperformance requirements with respect to the timedelay factor. Eight proposals were received and fivefirms were requested to submit best and final offers.The Source Selection Board made the following findingswith regard to the best and final offers am submittedby Vega and Motoxola:

TECHNICAL POINTS FRICEMotorola 278.70 $579,490.00Vega 269.10 601,054.00

The, syutem time delay eQ.emnt was usid as a basisfor a significant portion of tho technical evaluationof each proposal. This was considered to be one ofthe highest technical risk areas as it was directlyrelated to the accuracy of the offset bombing perfor-mance. The contract wds awarded to Motorola in June 1976,

After award of that contract, 13 PCO modifica-tiohs, 12 field modifications, 3 ACO modifications,53 approved master ch'ange orders, and 1 variationchange have been issued. These changes and m6difi-cations to the existing contract are the result ofupgrading the Vega dataipackage and incorporatingsubsequent desired changes. Many are minor, and someare clarifications of the drawings not affecting theperformance specificatidrns; however, other chauigesdo have a significant impact on performarine. Forexample, Motorola developed an electronic sw tchwhich performed the function of the Silicon ControlledR.ctifier (SCR), in the Vega model. This switchto part of the cur ent configuration.

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Secondly, the engineering change proposalfor the Built In Test (BIT) capability is under-going final' technical and cost evaluation. It isa requirement for the instant procurement.

On rebruary 6, 1978, the Marine Corps SoleSource Procurement Review Board approved theselection of Motorola as the sole source of 'supplyfor the procurement. The contracting officerexecuted two separate Determination and Findings(D&P) citing 1l1 U.S.c. 55 2304a)(2) and (10) (1970)as authority to negotiate. On February 23, 1978,the RFP was issued to Motorola.

On June 26, 1978, the Marine Corps advised our Officethat it has decided not to procure the BIT capabilityunder the exL;ting Motorola contract and that there isa serious question of whether the BIT will be procuredat all.

Sole-Source'Determinati'on

The contracting officer, with the concurrenceof t£le Marine Corps Sole Source Procurement ReviewBoard, determined that Motorola alone has thetechnical data necessary to timely produce theunits in an acceptable configuration.. the reasonsfor such 'dtermination cited by the Board and thoselater stated by she contracting officer are:'(1)currient configurations are significantly',differentfro 1,Xprior versions; (2) the current versions, whichsatisfy the Government's needs, were manufacturedby Motorola, and delivery of drawings reflectingthe current version was not scheduled until March 31,1978;, (3) after delivery of the drawings, an auditof about 3 months in duration would be required toascertain whether the drawings accurately reflectedthe acceptable unit in order to permit a fully com-petitive procurement; (4) first article testing ofany unit manufactured by a firm other than Motorolawould require up to an additional 150 days; and (5)the additional 8 months required to issue a fullycompetitive solicitation would necessitate anunacceptable delivery delay.

The procurement was synopsized in the CommerceBusiness Daily an February 14, 1978. Upon noticeof the Marine Corps' intent to procure the AN/PPN-18's

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on a mole-source basis, Vega requested a conferennewith the Marine Corps, which was held on March 3,1978. Vega presented arguments to the contractingofficer on why the procurement should not be solesource to Motorola. Later Vega was informed ofthe reasons for the Marine Corps decision and thatthe decision was, administratively final. Thereafter,Vega filed a timely protest here.

VEGA'S BASIS OP PROTEST

Vega and the Marine Corps agree thatyVegapossesses the technical capability to successfullymanufacture the transponder sets. In support ofthim contention is a report--completed after thecontracting officer's and Board's determinations--dated March 17, 1978, containing the results of asurvey'of Vega's capability conducted by theoDefenseContract Administration Services (DCASj, which concludesthat Vega has the technical capability. However,the Marine Corps believes that Vega cannot meetthe required delivery schedule based an the recitedcircumstances. In contrast, Vega believes that (1)adequate information now exists to permit Vega tocompete, and (2) if first article testing for Vegawas waived or performed concurrently with productionthen Vega could meet the delivery schedule establishedby the Marine Corps.

Changed Specifications

,, Vega has reviewed the various specificationchanges and believes that it is capable of producingthe AN/PPN-l8 to current configuration and thespecifications of the instant solicitation withoutadvance access to the final datd package under theMotorola contract, although that package will beavailable in ample time for use by Vega in the finalphases of negotiation and, of course, in performance.As to the BIT, the DCAS report states:

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'The requiremeunt c' 1 Fa7 *pabilitycan be addressed fromu ,. (2; aspmctsof designg modification of an existingdesign or generation of an originaldesign. During the meeting, VEGAsuggested several approaches to theimplementation of a BIT capability.The company has produced a hand-heldir ependent unit from which a WITcould be adapted for use in theAN/PPN-18 * * * [Since] the companyhas considered and developed externaltest capabilities, it is well withinthe range of competency to determinethat the compa'Ay can develop a BITcapability unique to the AN/PPNtransponder."

Vega states that it can, as DCAS found, pro-vide a competent design for a 13IT--the design andmanufacture of a BIT is, in fact, a relativelysimple matter--and Vega states that-it can accom-plish the necessary design within .2 weeks of arequest by the Marine Corps, thus having no adverseimpact on required delivery schedule. We believethat the effect of this specification change hasbecome moot since the Marine Corps' intended procure-of the BIT under the Motorola contract was eliminatedand may be eliminated from the instant procurement.

With regard to the other specification changes,including the switch used in the Motorola unit, Veganotes that it is currently in production.on 13different models of transponders and producesbetween 700 and 1,000 units each year, many of muchhigher complexity than the AN/PPN-18. While it istrue that none are of the exact confijuration andperformance characteristics of the AN/PPN-18, Vegastates that many ate very similar in electrical andmechanical design, particularly with respect to theplug-in modules which are the basic building blocks ofthe AN/PPN-18. In this regard, DCAS concludes that Vegacan build the unit tr the required configuration.

Finally, Vega ig willing contractually toassume the obligation to duplicate the last Motorolatransponder delivered, provided the Marine Corpswill furnish one unit, and Vega is willing to assist

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in auditing and revising Motorola drawings to theend product desired.

Delivery Schedule

The DCAS report concludes as follows;

'CONCLUSIONs BDased on positiveevaluations of all areas of consid-eration, VEGA has the capability tobuild and supply AN/PPN-18 transpondersto the configuration available(i.e. Basic drawings supplied byVEGA and the MASTER CHANGE ORDERSfrom MOTOROLA) within the timeframe of deliverables of the solic-itation.'

Vega states the Marine Corps argument that Vegashould be saddled with a 3-morth, final data packageaudit in the context of this "urgent" procurement iswrong because Vega can meet the requirements of themolicitation without this package. Vega contends thatthis argument is made poscible principally by the failureof the Marine Corps to enforce the Motorola contractprovision requiring delivery 6f all drawings showingall changes to the current configurationp such drawingsmust certainly exist in Motorola's plant in orderto permit Motorola's manufacture of the equipment.

Vega also states that the Marine Corps hasknown of the current requirement for the AN/PPN-18since at least early. October 1977, and the inter-vening 4 months to announce the instant ,solicitationin February 1978 could well have been spent indeveloping a data package the Marine Corps couldfeel comfortable in presenting to a highly competentand experienced producer of the AN/PPN-18, such asVe'a, for a competitive proposal; instead, thepassage of time was permitted to aggravate theurgency which, in turn, is being advanced in supportof the sole-source determination. Vega argues that,citing 46 Comp. Gen. 651 (1967), the Marine Corps'conduct is inconsistent with the principles of soundprocurement practice.

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Vega argues that there is no reasonable basimfor the Marine Corp. (1) to waive first articletesting for Motorola and not for Vega, and (2)1to not permit first article teisting to be conductedconcurrently with production activities. Vega'noteethat in the 1969 procurement, Vega accomplishedrigorous first article and acceptance tests, includ-ing shock testing and endurance testing which MarineCorps representatives at the protest conferenceadmitted ran for over t oice the hours of any per-'formed by Motorola (1,000 to 2,000 hours for Vegevs. 500 hours for Motorola). In contrast, Vegastates that although the Motorole contract providedthat it was mandatory to meet specifications, Motorolasought and received extensive waiver and relaxationsof first article performance and/or testing, shocktest, including electromagnetic compatibility test,and others, without any corresponding reductionin contract price.

Vega also'contends that in the 1969 situation,fraught with uigency, Vega was required to deliverproduction quantities prior to first article testingand approval and in the 1976 solicitation only 45days were scheduled between first:;article approvaland first production delivery. Thus, Vega concludesthat while the AN/PPN-18 procurement has been refinedanu made routine over the past decade with the suc-cessful purchase of over 270 copies, the MarineCorps--which in 1976 fdund Vega qualified to deliverproduction quantities 45 days after first articleacceptance--now concludes that 240 (150 for testingand 90 for audit) days would be required.

In summary, Vega proposes to eliminate therisk of inadequate drawings by tying the contractto an actual acceptable uinit and Vega proposes toeliminate the risk of lack of first article testingby conducting the testing while production activitiesare ongoing. In the event of failure of first articletesting, the Government would not be liable forproduction costs incurred.

It should be noted here that-we find itunnecessary for purposes of this decision to consider

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whather first article testing should be waived inVega'. case because of Vega's offer tj conduct thetesting concurrently with production.

MARINE CORPS' RESPONSE

The Marine Corps, in timely and thoroughlydocumented reports to this Office, explains thatthe contracting officer recognizes that Vega, givensufficient time and a complete current data package,could produce the item in question; however, theitem is not the same item that Vega produced underprior contract. The Marine Corps states that thenumerous changes reinforce tke contracting officer'sjudgment that a drawing audit is absolutely necessarybefore a competitive award caa be made,

The Marine Corps explains that Vega's offerto assist in the audit of the Motorola drawingscannot be accdpted because the responsibility toperform the audit belongs to the Government anda competent Government agency (NAVWESA) will betasked to perform this function; the Governmentcannot abrogate its basic responsibility anddelegate a Government administrative function to acontractor.

Secondly, the Marine Corps contends that theVega model did not meet all the performancespecifidatibns accordifig to test re'iults compiledat the Marine Corps request by Syra'cuse, thusindicating poor design and/or pcor quality control.The Marine Corps reports that some of the morecritical areas'where the AN/MPP-18 did not meetspecifications in the test results are time delayand anteinna polarization, among others. The MarineCorps also reports that data (made a part of therecord) proves conclusively that the origInal Vegaantenna did not meet-:specifications in free spaceor mounted on the transponder and, further, tfe "holes"in the antenna pattern were as a result of matingthe antenna to the top of the beacon (its normaloperating position), not as a result of the battlefield

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environment as inferred by Vega. The Marine Corp.explains that while Vega contends it was "entrusted"with a contract to produce a substitute antennawhich would solve the difficulty, in fact, it wasbecause of the Vietnam emergency that Vega wasgiven the contract since it would have taken longerto go to anyone else at that point in the program.Consequently, the Marine Corps concludes that thecontracting officer has a rational basis to doubtVega's capacity even though the Marine Corps concededthat Vega could ultimately produce the item.

Finally, the Marine Corps submits that thestandard of review which this Office consis'entlyapplies to matters of administrative judgment demandsthat the Marine Corps' position be upheldg the GAOwill not overturn an agency decision unless it isclearly unreasonable. The Marine Corps concludesthat the record demonstrates that the contractingofficer's determination is founded on fact and thathe has a reasonable basis to believe that Vegacannot meet the requirement in the time available.

It should be noted here that for purposes of rthis decision it is unnecessary for our Office toconsider;(1) whether the Vega model was changedsignificantly as compared to the current Motorolamodel because all parties agree that Vega couldbuild the model to meet the agency's requirements,and (2) whether the Vega model substantially deviatedfrom the performance or delivery requirementsbecause those events transpired over 7 years ago.(See United Office Machines, 56 Comp. Gen. 411(1977), 77-1 CPD 195.)

ANALYSIS

We recognize that in situations involving"exigency" the contracting officer has considerablediscretion to determine the extent of competitionthat is consistent with the urgent needs of theGovernment and unless it is shown that the contract-ing officer, in authorizing a solo-source procure-ment, acted without a reasonable basis, our Office

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will not question the award. See e.g., Aydinporgoation ,'Vector fltvision, 3-189729, September 6,

l977,X77-2cPD 175I

Past decisions of this Office have foundthat expected delivery delays and their potentialadverse impact on an agency's misnions areparticularly compelling reasona to justify sole-source procurements based on urgency. rf'r example,in BioMarine Industries, B-180211, August 5, 1974,74-2 CPD 78, the urgency related to the Navy'sneed for life support breathing devices to outfitsubm&rine rescue ships which had already joined the.fleet.

In North Electric Company, E-182248, March 12,1975, 75-1 CPO 150, the Army decided to negotiatesole-source with a vendor for a modified :AN/TTC-38switch to be supplied to another contractor as aGovsrnment-furnished component of a P.ED k alocTelephone System--a state-of-the-art automaticelectronic telephone central office. Although theprotester had experience manufacturing similarswitches, significant design changes were subsequentlydeveloped but no performance specification existed.In order for a competitive procurement to be feasible,the Army showed that a proper performance specifica-tion and statement of work would have to be developedwhich would require about 7 months. While othervendors may have been able to roiply with therequired time of delivery, the additional 7 monthswould have presented an unacceptable impact on thedelivery of the end product. There, we found nobasis to object to the Army'R determination.

The situation in BioMarinei ndustries, supra,is substantially similar to the instant one. There,the Navy uigently required a number of underwaterbreathing apparatus systems for use in g5ive depthsup to l,00C feet. The Navy's contracting officerdetermined that a General Electric Company (GE)system--an integral portion of which was proprietaryto GE--would satisfy the Government's needs and that

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the Government did not have data available to giveothers to assure that any other firm could4 providethe required equipment. The Navy's Sole Source Boardapproved the contracting officer's det6rminationand also noted that the Navy did rot own the modelbeing procured'and suitable data would be availablefor future competitive procurements. BioMarine contendedthat the sole-source procurement was improper becausefor about 5 years it produced a system similar toGE's and test results showed that the BioMarinesystem rould meet the Ncvy's requirements. The Navycontended that the test data was insufficient soBioMarine offered to perform all tests requestedby the Navy at its-own expense or accomplish thesame result by means' of first article testing tobe performed concurrent with production of the unitsunder an awarded c6ntract. The Navy rejectedBioMarine's offer because: (1) a high degree ofwcon-fidence in the capability of the unit is manadatoryto assure maximum diver safety--a minimum need ofthe Navy--and this confidence can only be achievedby a series of tests culminating in a completedsystem, such as GE's; (2) the ultimate availabilitydate of the BioMarine system cannot be establishedwith confidence. We concluded that BioMarine didnot meet the heavy burden of showing that the Navy'ssole-source was arbitrary or an abuse of procurementdiscretion because the BioMarine proposal wouldhave exposed the Navy to technical risks and thepossibility of delivery delays of the urgentlyneeded equipment.

While as noted earlier the instant situationcontains many of the above cdnsiderations, we havepresent here the following significant factors:(1) Vega produced a substantially similar itemto the one being procured; (2) through its workon other projects Vega has kept pace with technologicaldevelopments since it completed the prior contracts(3) Vega has reviewed information made availableto it by the Marine Corps and concludes that itcan produce the transponder required and the MarineCorps agrees; (4) the DCAS report concludes that

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Vega can do the work in the time required under theinstant solicitation; (5) Vega's delivery scheduleunder the prior contract was shorter than under theone in the instant RFP; and'(6) unlike the situationin BioMarine, the Matine Corps owns the latest acceptablemodel of the transponder, which can be made availableto Vega. Unquestionably, the instant situation is morecompelling than that in either the BioMarine orNorth Electric decisions.

Because of the statutory requirement for niaximumpractical competition, agency decisiins to procuresole-source are subjr'ctato close scrutiny by ourOffice. Capital RecordIng Comoanv.Inc., B-189319,February 15 197e, 78-1 .CPD 126; Precision Dynamic2Corv'oation, 54 Comp. Gen. 1114 (1975), 75-1 CPD402 (there we recommended termination of a contract,which was'awarded sole-source based on the preferenceof agency personnel rather than on a determination thatonly that supplirr'e item could satisfy the Government'sminimum needs).

After carefully reviewing the entire record, we mustconclude that in the circumstances, we have no basis todisturb the Marine Corps proposed procurement for thereasons stated below. First, the urgency of the require-ment and its critical nature make it imperative that timelydelivery be made. A delay-incident to a misunderstandingof the specifications (contained in production drawingsor Government-furnished equipment) may notibe known untilrevealed by the first article testing. Design changes orproduction modifications, necessitating prolonged firstarticle testing, or unanticipated production delays con-stitute inherent risks incident to a procuring agency'schanging contractors; in the contracting officer's judg-ment, with concurrence from the Marine Corps Sole SourceProcurement Review Board, those risks are unacceptable.Second, the record indicates that for future procure-ments, adequate data will be available to permit competitiveprocurement.

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Protest denied.

tephty Comp91hreneralof the United States

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