B-157055, MAY 4, 1967

B-157055, MAY 4, 1967

TO FREQUENCY ENGINEERING LABORATORIES:

REFERENCE IS MADE TO YOUR LETTER OF MARCH 28, 1967, REQUESTING CLARIFICATION OF OUR DECISIONS B-157055, DATED JUNE 21, 1966, AND FEBRUARY 17, 1967, WHICH DENIED YOUR PROTEST AGAINST AWARD BY THE DEPARTMENT OF THE ARMY TO ANY BIDDER UNDER INVITATION FOR BIDS (IFB) NO. AMC/A/-36-038-65- 1033/WEI), ISSUED MAY 3, 1965, BY FRANKFORD ARSENAL, PHILADELPHIA, PENNSYLVANIA. YOU WERE THE LOWEST OF FIVE SMALL BUSINESS CONCERNS WHICH RESPONDED TO THE SMALL BUSINESS RESTRICTED PROCUREMENT SOLICITATION, BUT BY REASON OF AN INCREASE IN THE NUMBER OF YOUR EMPLOYEES SUBSEQUENT TO BID OPENING, WHEREBY YOU BECAME A LARGE BUSINESS CONCERN FOR THE PURPOSE OF THE PROCUREMENT, YOU WERE RENDERED INELIGIBLE FOR AWARD.

AMONG THE ISSUES WHICH WERE CONSIDERED IN OUR DECISIONS WERE THE ADMINISTRATIVE DETERMINATION THAT YOU WERE NOT RESPONSIBLE BY REASON OF AN UNSATISFACTORY PERFORMANCE RECORD ON AN EXISTING CONTRACT FOR THE SAME PROCUREMENT ITEM, AND THE ACCEPTABILITY OF AN OFFER OF A VOLUNTARY BID PRICE REDUCTION FROM THE FOURTH AND ONLY RESPONSIBLE BIDDER EVEN THOUGH ACCEPTANCE OF ITS ORIGINAL BID MIGHT NOT HAVE BEEN CONSIDERED TO BE IN THE INTEREST OF THE GOVERNMENT. IT IS THESE TWO ISSUES WITH WHICH YOU ARE CURRENTLY CONCERNED.

WITH RESPECT TO THE ISSUE OF YOUR RESPONSIBILITY, YOUR LETTER READS, IN PART, AS FOLLOWS:

"THE REQUESTED CLARIFICATION IS DIRECTED TO THE FOLLOWING QUESTIONS:

"1. DID YOU INTEND THE STATEMENT APPEARING IN THE FINAL PARAGRAPH OF PAGE 7 OF THE DECISION DATED JUNE 21, 1966, TO THE EFFECT THAT "THERE APPEARS TO BE NO LIKELIHOOD THAT YOU ("FREQUENCY") WOULD BE CONSIDERED A RESPONSIBLE BIDDER," IN THE EVENT THAT SUBJECT PROCUREMENT WERE TO BE READVERTISED, TO OPERATE PROSPECTIVELY AND TO CONSTITUTE YOUR ADMINISTRATIVE DETERMINATION OF THE NONRESPONSIBILITY OF FREQUENCY TO RECEIVE ANY FUTURE AWARD OF CONTRACTS TO MANUFACTURE FALT UNITS OR RELATED FADC EQUIPMENT?

"2. DID YOU INTEND THE STATEMENT APPEARING IN THE FINAL PARAGRAPH OF PAGE 6 AND THE TOP TWO PARAGRAPHS OF PAGE 7 OF THE DECISION DATED FEBRUARY 17, 1967, IN WHICH YOU DISCUSS THE DETERMINATION OF THE CONTRACTING OFFICER AS TO FREQUENCY'S RESPONSIBILITY AS A BIDDER WITH RESPECT TO THE SUBJECT PROCUREMENT.

"/A) TO CONSTITUTE YOUR ADMINISTRATIVE DETERMINATION, DIRECTLY OR INDIRECTLY, AFFIRMING OR ADOPTING THE CONTRACTING OFFICER'S DETERMINATION HAS NEVER BEEN SUBMITTED TO FREQUENCY AND WAS NOT PROTESTED TO YOUR OFFICE:

"/B) TO CONSTITUTE YOUR ADMINISTRATIVE DETERMINATION, DIRECTLY OR INDIRECTLY, ACCEPTING THE POSITION OF THE CONTRACTING OFFICER, AS SET FORTH IN THE REPORTS TO YOUR OFFICE, WITH RESPECT TO THE SCOPE, MEANING OR INTERPRETATION OF MODIFICATION NO. 5 (ENGINEERING ORDER F143025) TO THE 1964 FALT CONTRACT OR AS TO THE CAUSE OR RESPONSIBILITY FOR FREQUENCY'S FAILURE TO ADHERE TO THE ORIGINAL DELIVERY SCHEDULE; AND

"/C) TO CONSTITUTE, IN ANY MANNER, THE EXPRESSION OF AN OPINION BY YOUR OFFICE AS TO THE MERITS OF ANY CONTROVERSY NOW EXISTING OR CLAIMED TO EXIST BETWEEN FREQUENCY AND THE CONTRACTING OFFICER WITH RESPECT TO THE RIGHT TO, OR AMOUNT OF, ANY EQUITABLE ADJUSTMENT ARISING OUT OF THE ISSUANCE OF MODIFICATION NO. 5?

IN OUR DECISION OF JUNE 21, 1966, THE FINAL PARAGRAPH READS AS FOLLOWS:

"EVEN IF SUCH ACTION WERE TAKEN, AND THE PROCUREMENT READVERTISED ON AN UNRESTRICTED BASIS, OR IF ALL BIDS WERE REJECTED ON THE BASIS OF UNREASONABLENESS OF THE PRICE OF THE ONLY RESPONSIBLE BIDDER AND THE PROCUREMENT NEGOTIATED UNDER 10 U.S.C. 2304 (A) (15), THERE APPEARS TO BE NO LIKELIHOOD THAT YOU WOULD BE CONSIDERED A RESPONSIBLE BIDDER. IN THE CIRCUMSTANCES, AND SINCE WE ARE ADVISED THAT THE PROCUREMENT HAS BECOME CRITICALLY URGENT BY REASON OF YOUR FAILURE TO DELIVER UNDERYOUR PRIOR CONTRACT WE WOULD BE RELUCTANT TO REQUIRE ON THE BASIS OF YOUR PROTEST ANY ACTION WHICH WOULD INVOLVE FURTHER DELAY AND WE ARE THEREFORE ADVISING THE SECRETARY OF THE ARMY THAT WE WILL INTERPOSE NO OBJECTION TO AWARD OF A CONTRACT TO CALIFORNIA COMPUTER PRODUCTS, INC., ON THE BASIS OF ITS REDUCED PRICE OFFER, IF IT BE DETERMINED BY HIS DEPARTMENT THAT SUCH ACTION IS IN THE BEST INTEREST OF THE GOVERNMENT.'

THAT STATEMENT WAS NOT INTENDED TO OPERATE PROSPECTIVELY OR TO CONSTITUTE AN "ADMINISTRATIVE DETERMINATION" OF YOUR NONRESPONSIBILITY TO RECEIVE ANY FUTURE AWARD FOR FALT UNITS OR RELATED FADAC EQUIPMENT. WE THINK IT IS SUFFICIENTLY CLEAR THAT THE STATEMENT WAS INTENDED TO EXPRESS OUR THOUGHT THAT READVERTISING OR NEGOTIATION OF THE PROCUREMENT, EVEN IF WE COULD OTHERWISE HAVE JUSTIFIED INSISTING UPON THE REJECTION OF ALL BIDS, WOULD BE UNLIKELY TO BE OF ANY PRACTICAL BENEFIT TO YOU, BECAUSE WE SAW NO BASIS TO ANTICIPATE ANY CHANGE IN THE VIEWS OF THE CONTRACTING OFFICER, OR IN THE FACTUAL SITUATION INVOLVED, WITHIN THE SHORT TIME WHICH WOULD BE INVOLVED IN SUCH RESOLICITATION.

THE PARAGRAPHS ON PAGES 6 AND 7 OF OUR DECISION OF FEBRUARY 17, 1967, TO WHICH YOU REFER, READ AS FOLLOWS:

"IN A 35-PAGE REPORT DATED DECEMBER 2, 1966, THE CONTRACTING OFFICER HAS REPLIED IN EXHAUSTIVE DETAIL TO THE VARIOUS POINTS RAISED IN YOUR REBUTTAL LETTER. A COPY OF THE REPORT IS ENCLOSED HEREWITH FOR YOUR INFORMATION. WITHOUT ATTEMPTING TO SUMMARIZE OR PARAPHRASE THE CONTRACTING OFFICER'S STATEMENTS, WE BELIEVE IT IS SUFFICIENT TO SAY THAT CAREFUL EXAMINATION OF HIS REPORT, AND A POINT-BY-POINT COMPARISON WITH YOUR CONTENTIONS, SATISFIES US THAT THERE IS A REASONABLE BASIS FOR HIS CONCLUSIONS AND NO ADEQUATE BASIS UPON WHICH WE MAY PROPERLY REFUSE TO ACCEPT HIS VERSION OF THE MATERIAL FACTS. IN THIS CONNECTION, THE REALLY DETERMINATIVE QUESTION ON YOUR PROTEST IS WHETHER THE CONTRACTING OFFICER'S DETERMINATION THAT YOU WERE NOT A RESPONSIBLE BIDDER FOR THE PROCUREMENT IN QUESTION COULD OR SHOULD BE DISREGARDED OR OVERRULED BY THIS OFFICE. ON THIS QUESTION WE HAVE UNIFORMLY HELD THAT THE DETERMINATION OF A PROSPECTIVE CONTRACTOR'S ABILITY TO PERFORM IS PRIMARILY THE FUNCTION OF THE ADMINISTRATIVE OFFICERS CONCERNED, AND IN THE ABSENCE OR A SHOWING OF BAD FAITH OR LACK OF ANY REASONABLE BASIS FOR THE ADMINISTRATIVE DETERMINATION THERE IS NO BASIS UPON WHICH WE MAY OBJECT. SEE 39 COMP. GEN. 705.

"WE FIND NO EVIDENCE OF BAD FAITH ON THE PART OF THE CONTRACTING AGENCY, AND THE CONTRACTING OFFICER'S STATEMENTS, IN OUR OPINION, OFFER A REASONABLE BASIS FOR ACCEPTING THE FACTS ON WHICH THE ADMINISTRATIVE DETERMINATION REGARDING YOUR RESPONSIBILITY WAS MADE. ACCORDINGLY, WE ARE UNABLE TO CONCUR WITH YOUR CONTENTION THAT THE ADVERSE ADMINISTRATIVE DETERMINATION WAS WITHOUT A SUBSTANTIAL BASIS.'

IN APPLYING THE GENERAL RULE REGARDING DETERMINATION OF A PROSPECTIVE GOVERNMENTS CONTRACTOR'S RESPONSIBILITY, AS SET FORTH IN THE EXCERPT QUOTED ABOVE FROM OUR DECISION OF FEBRUARY 27, 1967, WE HAVE POINTED OUT THAT THE PROJECTION OF A BIDDER'S ABILITY TO PERFORM IF AWARDED A CONTRACT IS OF NECESSITY A MATTER OF JUDGMENT; WHAT WHILE SUCH JUDGMENT SHOULD BE BASED ON FACT AND SHOULD BE ARRIVED AT IN GOOD FAITH, IT NEVERTHELESS RESTS IN THE SOUND ADMINISTRATIVE DISCRETION OF THE CONTRACTING OFFICIALS INVOLVED, SINCE THEY ARE IN THE BEST POSITION TO ASSESS RESPONSIBILITY, THEY MUST BEAR THE MAJOR BRUNT OF ANY DIFFICULTIES EXPERIENCED BY REASON OF THE CONTRACTOR'S LACK OF ABILITY, AND THEY MUST MAINTAIN THE DAY TO DAY RELATIONS WITH THE CONTRACTOR ON BEHALF OF THE GOVERNMENT; AND FOR SUCH REASONS, IT WOULD BE UNREASONABLE TO SUPERIMPOSE THE JUDGMENT OF OUR OFFICE OR ANY OTHER AGENCY OR GROUP ON THAT OF THE CONTRACTING OFFICIALS. 39 COMP. GEN. 705, 711. FURTHER, WE HAVE ALSO POINTED OUT THAT AN UNFAVORABLE DETERMINATION DOES NOT IN ITSELF CONSTITUTE ANY GROUND FOR SIMILAR DETERMINATIONS IN A FUTURE CASES EVEN BY THE SAME AGENCY, SINCE EACH PROCUREMENT REQUIRES A SEPARATE RESPONSIBILITY DETERMINATION, BASED UPON THE BIDDER'S QUALIFICATIONS AND RECORD OF PERFORMANCE AT THE TIME IT IS MADE. 43 COMP. GEN. 228, 231; B-153478, JANUARY 18, 1965.

IN ACCORDANCE WITH SUCH PRINCIPLES, WE HELD IN OUR DECISIONS ON THIS PROCUREMENT THAT IN THE LIGHT OF THE ADMINISTRATIVELY REPORTED FACTS, WHICH WE WERE REQUIRED TO ACCEPT AS CORRECT ABSENT EVIDENCE SUFFICIENT TO OVERCOME THE PRESUMPTION OF THEIR CORRECTNESS, WE COULD NOT CONCUR WITH YOUR POSITION THAT THE DETERMINATION REGARDING YOUR RESPONSIBILITY WAS WITHOUT A SUBSTANTIAL BASIS. BY REFUSING TO SUBSTITUTE OUR JUDGMENT FOR THE JUDGMENT OF THE CONTRACTING OFFICER WE DID NOT "AFFIRM" OR "ADOPT" HIS DETERMINATION, OR MAKE ANY ADMINISTRATIVE DETERMINATION OF OUR OWN WITH RESPECT TO THE MATTER; RATHER, WE CONCLUDED THAT THE RECORD SHOWED THAT THERE WERE SUBSTANTIAL GROUNDS FOR THE ADMINISTRATIVE ACTION, AND THAT WE THEREFORE WOULD NOT BE JUSTIFIED IN QUESTIONING IT. FURTHER, OUR DECISIONS COULD APPLY ONLY TO THIS PROCUREMENT, IT BEING INCUMBENT UPON THE CONTRACTING AGENCY, IN LINE WITH 43 COMP. GEN. 228, 231 AND B-153478, SUPRA, TO REASSESS YOUR RESPONSIBILITY FOR ANY FUTURE PROCUREMENT IN THE LIGHT OF YOUR QUALIFICATION AND THE FACTS AND CIRCUMSTANCES EXISTING AT THE TIME OF EACH SUCH PROCUREMENT.

NOR WERE OUR DECISIONS INTENDED TO DENOTE CONCURRENCE WITH THE CONTRACTING OFFICER'S POSITION ON THE CONTROVERSY BETWEEN YOU AND THE CONTRACTING AGENCY UNDER YOUR 1964 FALT CONTRACT. ALTHOUGH THE MERITS OF THE DISPUTE HAD NOT AND STILL HAVE NOT BEEN FINALLY DETERMINED, THE DEFECTS WHICH THE ADMINISTRATIVE OFFICIALS CHARGE IN YOUR PERFORMANCE UNDER THAT CONTRACT WERE PROPERLY FOR CONSIDERATION, PURSUANT TO ASPR 1 902, IN DETERMINING WHETHER YOU WERE RESPONSIBLE FOR THE PURPOSES OF THE PROCUREMENT IN QUESTION. SEE 43 COMP. GEN. 323; B-155903, APRIL 9, 1965. THE RESOLUTION OF THOSE MATTERS IS GOVERNED BY THE PROVISIONS OF THE CONTRACT DISPUTE CLAUSE WHICH ARE BINDING ON THE GOVERNMENT AS WELL AS ON YOU, AND UNTIL THE ADMINISTRATIVE REMEDIES PROVIDED BY THE DISPUTES CLAUSE HAVE BEEN EXHAUSTED, OUR OFFICE IS WITHOUT AUTHORITY TO ISSUE A DECISION AFFECTING YOUR RIGHTS UNDER SUCH CONTRACT. B-157813, DECEMBER 8, 1965, AND COURT CASES THEREIN CITED. IN THE MEANTIME THE GOVERNMENT COULD NOT BE EXPECTED TO HOLD UP ANY PROCUREMENT IN WHICH YOU MIGHT BE INTERESTED UNTIL A FINAL DECISION HAD BEEN REACHED CONCERNING THE REASONS FOR OR EXCUSABILITY OF YOUR DELAYS IN PERFORMING THE PRIOR CONTRACT; HOWEVER, DETERMINATIONS OF YOUR RESPONSIBILITY FOR PURPOSES OF AWARD OF ANOTHER CONTRACT CANNOT PROPERLY BE CONSIDERED AS AFFECTING YOUR RIGHTS UNDER THE PRIOR CONTRACT.

WITH RESPECT TO THE ACCEPTANCE BY THE GOVERNMENT OF THE REDUCED BID OF THE ONLY RESPONSIBLE BIDDER, YOU MAKE THE FOLLOWING STATEMENTS:

"A COMPLETE RESTUDY OF THE PROCEEDINGS INCIDENT TO THE SUBJECT PROTESTS FAILS TO DISCLOSE A FULLY SATISFACTORY ANSWER AS TO THE COMPLIANCE WITH THE APPLICABLE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATIONS BY CALIFORNIA COMPUTER PRODUCTS, INC. AND THE CONTRACTING OFFICER. ACCORDINGLY, IT MUST BE URGED AGAIN THAT, NOTWITHSTANDING THE PASSAGE OF TIME NOR THE NEED FOR THE EQUIPMENT, THE SUBJECT AWARD SHOULD BE SET ASIDE ON LEGAL GROUNDS AND THAT THE POLICY SHOULD BE ANNOUNCED BY YOUR OFFICE THAT NO BIDDER, REGARDLESS OF CIRCUMSTANCES, CAN BE PERMITTED TO MODIFY OR CHANGE HIS BID AFTER THE BID OPENING UNLESS, AT THE TIME OF SUCH MODIFICATION, SUCH BIDDER IS ALREADY THE LOW BIDDER AND IS OTHERWISE ENTITLED TO RECEIVE THE AWARD. IT IS RESPECTFULLY SUBMITTED THAT ONLY IN THIS MANNER CAN THE FULL INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM, AS SPELLED OUT IN THE ASPR, BE RETAINED INTACT.' ASPR 2-305 READS AS FOLLOWS:

"LATE MODIFICATIONS AND WITHDRAWALS. MODIFICATIONS OF BIDS AND REQUESTS FOR WITHDRAWAL OF BIDS WHICH ARE RECEIVED IN THE OFFICE DESIGNATED IN THE INVITATION FOR BIDS AFTER THE EXACT TIME SET FOR OPENING ARE "LATE MODIFICATIONS" AND "LATE WITHDRAWALS," RESPECTIVELY. A LATE MODIFICATION OR LATE WITHDRAWAL SHALL BE SUBJECT TO THE RULES AND PROCEDURES APPLICABLE TO LATE BIDS SET FORTH IN 2 303. HOWEVER, A LATE MODIFICATION OF THE OTHERWISE SUCCESSFUL BID SHALL BE OPENED AT ANY TIME IT IS RECEIVED; AND IF IN THE JUDGMENT OF THE CONTRACTING OFFICER IT MAKES THE TERMS OF THE BID MORE FAVORABLE TO THE GOVERNMENT, IT SHALL BE CONSIDERED.'

IN CONDEC CORPORATION V UNITED STATES, CT.CL. NO. 304-62, DECIDED DECEMBER 16, 1966, WHICH WE CITED IN OUR DECISION OF FEBRUARY 17, 1967, TO YOU, THE COURT OF CLAIMS REFERRED TO LEITMAN V UNITED STATES, 104 CT.CL. 324 (1945), AND AGAIN POINTED OUT THAT THE PURPOSE OF THE RESTRICTION AGAINST CONSIDERATION OF BID MODIFICATIONS RECEIVED AFTER BID OPENING IS TO PREVENT ANY BIDDER FROM GAINING AN UNFAIR ADVANTAGE, AND THAT WHEN SUCH A MODIFICATION COMES FROM A BIDDER WHO IS ALREADY LOW, NO BIDDER CAN COMPLAIN IF THE GOVERNMENT ELECTS TO CONSIDER IT. THERE IS NOTHING IN THE CONDEC DECISION, OR IN THE LEITMAN DECISION, HOWEVER, WHICH WOULD SUPPORT THE VIEW ESPOUSED BY YOU THAT THE TERM "LOW BIDDER" SHOULD BE CONSTRUED TO MEAN ONLY THE BIDDER WHOSE BID ON ITS FACE OFFERS THE LOWEST PRICE, WITHOUT REGARD TO ITS RESPONSIVENESS OR TO THE RESPONSIBILITY OF THE BIDDER. TO SO INTERPRET THE COURT'S RULING WOULD BE CONTRARY TO THE MEANING LONG ASCRIBED BY OUR OFFICE AND THE COURTS TO THE TERM "LOW BIDDER" AS INCLUDING BY IMPLICATION THE WORDS "RESPONSIBLE" AND "RESPONSIVE.' B-11642, APRIL 11, 1941; A 96336, JULY 15, 1938, AND COURT CASES CITED THEREIN. IN ADDITION, SUCH INTERPRETATION WOULD BE IN CONFLICT WITH THE PROVISIONS OF THE PROCUREMENT STATUTE, 10 U.S.C. 2305, AND ASPR 2-407.1, WHICH REQUIRE, UNLESS ALL BIDS ARE DISCARDED, THAT AWARD BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE TERMS OF THE ADVERTISED INVITATION AND WILL BE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED.

CONSISTENT WITH THE FOREGOING, OUR OFFICE, IN APPLYING THE VOLUNTARY BID REDUCTION OR FAVORABLE LATE MODIFICATION RULE ENUNCIATED IN THE LEITMAN CASE, HAS STATED THAT SUCH AN OFFER MAY BE ACCEPTED FROM A BIDDER WHO, THOUGH NOT THE LOWEST (DOLLAR) BIDDER, HAS BECOME THE LOWEST RESPONSIBLE, RESPONSIVE BIDDER UPON DISQUALIFICATION OF A LOWER BIDDER OR BIDDERS. NOR DOES THE TIME AT WHICH THE OFFER IS TENDERED AFFECT ITS ACCEPTABILITY, AS YOU CONTEND, IN VIEW OF THE REQUIREMENT IN ASPR 2-305 THAT SUCH OFFER SHALL BE OPENED AT ANY TIME IT IS RECEIVED AND CONSIDERED AT THE DISCRETION OF THE CONTRACTING OFFICER. IN SUCH CIRCUMSTANCES, THERE CAN BE NO PREJUDICE TO OTHER BIDDERS SINCE THE LOWER BIDDERS ARE NOT ELIGIBLE FOR AWARD IN ANY EVENT AND THE OFFEROR IS LOWER THAN THE REMAINING BIDDERS, AND THEREFORE HIS BID MUST BE REGARDED AS THE ,OTHERWISE SUCCESSFUL BID" CONTEMPLATED BY THE REGULATION. 39 COMP. GEN. 779, 781, B -159412, JULY 26, 1966; B 153624, APRIL 27, 1964; B-146229, SEPTEMBER 1, 1961.

FINALLY, YOUR CONTENTION THAT AN OFFER OF A LOWER PRICE CANNOT BE CONSIDERED UNLESS THE PRICE ORIGINALLY QUOTED BY THE SAME BIDDER WOULD HAVE BEEN ACCEPTED WITHOUT THE REDUCTION WAS FULLY CONSIDERED IN OUR DECISION OF FEBRUARY 17, 1967, AND REJECTED ON WHAT WE CONSIDER TO BE SOUND AND VALID GROUNDS. FOR THE REASONS STATED, WE FIND NO LEGAL BASIS TO QUESTION THE LEGALITY OF ASPR 2-305 OR ITS APPLICATION TO THE PROCUREMENT IN QUESTION.

ACCORDINGLY, YOUR REQUEST THAT THE AWARD TO CALIFORNIA COMPUTER PRODUCTS, INC., BE SET ASIDE AND THAT WE ISSUE A DECISION WHICH WOULD REQUIRE THE LIMITED APPLICATION OF ASPR 2-305 WHICH YOU DESIRE IS DENIED, AND OUR DECISIONS OF JUNE 21, 1966, AND FEBRUARY 17, 1967, ARE AFFIRMED.