August 6, 2006

Ms. Susan Warshaw Ebner, Esq. Buchanan Ingersoll, PC
1700 K Street, NW
Suite 300
Washington, DC 20006

Certified Mail Number: 7002 3150 0000 3928 5067

Dear Ms. Ebner:

I read your letter of June 21, 2006, on behalf of Militec, Inc. to Patrick Finegan, Deputy Chief, Aviation Supply Chain Commodities Division in response to the Defense Supply Center Richmond's (DSCR's) May 31, 2006, notice that the U.S. Army Research, Development, and Engineering Command asked DSCR to remove the Army as an identified user of National Stock Numbers (NSNs) 9150-01-378-3058, 9150-01-378-3118, 9150-01-415-9112, 9150-01-415-9114, and 9150-01-415-9111. I understand the purpose of your letter was to lay out the history of Militec's attempts to gain acceptance of its product, MILITEC-1, and request a review of what Militec believes are inappropriate actions taken by DSCR personnel. Having considered the entire matter, as you presented it, I believe DSCR's actions were appropriate. The key to understanding DSCR.'s actions in this instance is to understand each of the parties' roles in the procurement and supply process. The military services' roles are to identify their requirements and to provide the requisite engineering expertise to support their requirements. DSCR's role is to procure and supply products to the military services that meet their requirements. As a vendor, Militec's role is to provide a product for which the military services have a defined requirement. Militec, the Army, and the Defense Logistics Agency (DLA), through its field activity, DSCR, have been engaged in an ongoing dispute over whether DoD should purchase MILITEC-1 through DLA as a central purchasing agent.' The central issue in the dispute is that DoD, with the Army as the preparing activity, maintains a military specification for weapons lubricants, MIL-PRF-63460, and identifies approved products by inclusion on a Qualified Products List (QPL). As you set out in your letter and attachments, and as related a number of times on other occasions, Militec has continually tried to persuade the Army that its product should be officially approved as a weapons lubricant. The Army has consistently concluded that MILITEC-1 does not meet the performance requirements of MIL-PR.F-63460. As indicated in your letter, Militec agrees that MILITEC-1 does not meet this standard but believes that its product should nonetheless be approved by the Army as a small arms lubricant. Militec's real disagreement, as you articulate in your letter, is its contention that MILITEC-1 performs better than the approved QPL products as a weapons lubricant in a desert environment. As a purchasing activity, DLA and DSCR must purchase the military's requirements as defined by the military services. As a weapons lubricant, MILITEC-1 is not an approved product. To the extent Militec continues to disagree with that assessment, that can only be resolved tluough discussions with the military services, most notably the Army as the source approval authority. A further complication is the conflict between the NSN identification of MILITEC-1 as a general purpose lubricant and Militec's marketing of its product as a dry lubricant for small arms weapons and other equipment. The NSN number and nomenclature, however, are simply part of a cataloging function that facilitates the Government's purchase, storage, and ordering of supplies. The aforementioned NSNs identified describe the item as "Lubricating Oil, General Purpose" and list the Militec product by manufacturer name and part number. The item description for the NSN does not include a reference to a particular specification or drawing, nor does it describe the intended use for the item. However, Militec markets MILITEC-1 under these NSNs to military personnel in the field as a small arms weapons lubricant. Because MILITEC-1 does not meet the performance requirements of MIL-PRF-63460, the Army, in January 2006, informed DSCR. that it no longer wished to use the DLA Supply System to requisition MILITEC-1 as a weapons lubricant. However, because the NSN identified the product as a general purpose lubricant, the Army decided to take the extra step of testing the product for compliance with its general purpose lubricant standard, MIL-PRF-32033. When the Army determined that MILITEC-1 did not meet MIL-PRF-32033, it informed DSCR that it had no approved uses for the product and no longer wished to remain an identified user of the NSN. DSCR subsequently contacted the other Military Services and informed them of the Army's decision in an effort to identify whether there are any other users of the product. If our customers no longer have an identified use for the product, DSCR will discontinue procuring these NSNs. With respect to your assertion that DSCR's actions effectively prevent Militec from selling its product to the Army and other government entities, I disagree. The military services have a military specification for small arms weapons lubricants. The military services also have a military specification for general purpose lubricants. Those specifications serve a purpose, namely to ensure the products it procures meet established performance standards for the intended application of the product. Militec is free to manufacture and submit a product that meets MIL-PRF-63460, MIL-PRF-32033 or any of the other various military specifications. I trust this explains the actions DSCR has taken and appreciate your continued interest in our mission.

Sincerely,

RICHARD J. LEY
Acting Commander

A chronology of the dispute is included as an enclosure.

Enclosure

FACT SHEET

SUBJECT: Chronology of Militec-1 Status in DLA Stock System

- In the late 1980s and early 1990s, Militec began marketing its products to the Military Services as an oil additive and metal conditioner.

- In 1994, DSCR. assigned several NSNs to the Militec product, MILITEC-1, which made it directly available to the military services through DLA's supply system.' MILITEC-1 was assigned NSNs in Federal Supply Class 6850, which identifies chemicals, additives, and conditioners, and FSC 9150, which identifies formulated oils, greases, and fluids. The NSNs corresponded to different container sizes for Militec product.

- Shortly after DSCR assigned the NSNs to MILITEC-1, the Navy requested that DSCR rescind the NSNs because the Militec product was not approved to military specifications as an oil additive. This action resulted in a congressional inquiry. The NSNs were blocked from DoD activities instead of being cancelled.

- In 1995, Militec marketed the same product as a weapons lubricant. After a meeting between DLA, NAVSEA and Militec, DLA establish additional NSNs in FSC 9150 for the product in various container sizes. At or around this time DLA was informed that the Department of Treasury, Secret Service, had requested Militec product as a weapons lubricant. Consequently, DLA identified the Department of Treasury as a user of the product in the DLA supply system.

- DSCR also procures a cleaner, lubricant, and preservative (CLP) for weapons and weapon systems in accordance with MIL-PRF-63460, the military specification for small arms lubricants. This specification has a qualified products list (QPL). The Army qualifies products for inclusion on the QPL. Militec's product has never been qualified to MIL-PRF-63460.

- In March 2003, DSCR noticed an increase in Army requisitions for the NSNs that corresponded to Militec product. As the Militec product was not approved as a weapons lubricant by the Army, DSCR recommended cancelling open requisitions and solicitations for these NSNs. The Army was advised of the DSCR action and concurred.

- Because of the wartime status, on April 16, 2003, DSCR. was advised by the Army to resume issuing Militec product for a period of 60 days. DSCR consolidated all Militec NSNs in FSC 9150, deleted any NSNs for quantities greater than 1 gallon, attempted to reinstate all cancelled requisitions and continued to issue the Militec product. The 60-day window remained open until August 21, 2003, when DSCR was advised by the Army to stop filling requisitions for the Militec lubricant.

--On October 14, 2003, DSCR was advised by the Army to resume issuing the Militec lubricant.

- On July 29, 2005, the Army provided an official memorandum to DSCR requesting that all MILITEC-1 NSNs be labeled "Not approved for small arms use".

--On January 31, 2006, the Army advised DSCR personnel that MILITEC-1 was not an approved weapons lubricant and that it no longer wished to use the DLA supply system to procure MILITEC-1 as a weapons lube. However, the Army informed DSCR it would test MILITEC-1 against the general purpose lubricant specification.

--On April 14, 2006, the Army informed DSCR by letter that MILITEC-1 failed to meet the general purpose lubricant specification and requested that the Army be removed as a user.

' NSNs are catalog numbers used to facilitate the Government's purchase, storage, and ordering of supplies. Each NSN describes a product (or products) that will perform one or more functions for the end user. In order to foster competition, it is preferable to describe acceptable products for a particular use by reference to a specification or drawing. When it is not feasible to develop a competitive specification or drawing, an NSN will describe a product by reference to a manufacturer's name and part number.