B-162570, FEB. 8, 1968

B-162570, FEB. 8, 1968

BIDDERS - RESPONSIBILITY - SMALL BUSINESS DECISION TO MECHTRON CORPORATION DENYING PROTEST AGAINST CANCELLATION OF NEGOTIATED CONTRACT WITH ARMY FOR KITS FOR M-14 RIFLE AND REAFFIRMING DECISION OF DEC. 18, 1967, THAT REJECTION OF PROPOSAL OF METAL CRAFT CORP. ON BASIS OF UNSATISFACTORY RECORD WITHOUT REFERRAL TO SBA FOR CERTIFICATE OF COMPETENCY WAS IMPROPER.

TO MECHTRON CORPORATION:

REFERENCE IS MADE TO YOUR LETTER DATED JANUARY 5, 1968, RE: 725, PROTESTING THE CANCELLATION OF DEPARTMENT OF THE ARMY CONTRACT NO. DAAE07- 68-C-0540, DATED SEPTEMBER 14, 1967, AWARDED TO YOUR COMPANY PURSUANT TO REQUEST FOR PROPOSALS NO. DAAE07-67-R-2756, ISSUED JUNE 15, 1967, BY THE ARMY TANK-AUTOMOTIVE COMMAND, PROCUREMENT AND PRODUCTION DIRECTORATE, WARREN, MICHIGAN, FOR THE PRODUCTION OF 6,936KITS, MOUNTING-M14 RIFLE, FEDERAL STOCK NO. 2590-045-9611.

PROPOSALS WERE SOLICITED FROM SMALL BUSINESS CONCERNS ONLY AND THE REQUEST FOR PROPOSALS CONTAINED A PROVISION RELATING TO COMPONENT PARTS WHICH INCLUDED A REQUIREMENT THAT THE CATCH ASSEMBLY PART MANUFACTURED BY THE STEWART-WARNER CORPORATION BE FURNISHED. THE REQUEST FOR PROPOSALS ALSO CONTAINED A DESIRED 180-DAY DELIVERY SCHEDULE. THE LOWEST PROPOSAL WAS SUBMITTED BY THE METAL CRAFT COMPANY, MARLETTE, MICHIGAN, AND IT APPEARS THAT THE CONTRACT AWARDED TO YOUR COMPANY WAS CANCELED IN ACCORDANCE WITH DECISION B-162570, DECEMBER 18, 1967, TO THE SECRETARY OF THE ARMY, WHEREIN WE AGREED WITH THE PROPOSED ADMINISTRATIVE ACTION TO CANCEL THE CONTRACT AND AWARD THE PROCUREMENT TO THE METAL CRAFT COMPANY AS THE LOW RESPONSIVE AND RESPONSIBLE OFFEROR. WE CONSIDERED THAT THE REJECTION OF THE PROPOSAL SUBMITTED BY THE METAL CRAFT COMPANY ON THE BASIS THAT IT DID NOT HAVE A SATISFACTORY RECORD OF PERFORMANCE WAS IMPROPER FOR THE REASON THAT THE CONTRACTING OFFICER DID NOT REFER THE CASE TO THE SMALL BUSINESS ADMINISTRATION FOR CONSIDERATION OF THE QUESTION WHETHER A SMALL BUSINESS CERTIFICATE OF COMPETENCY SHOULD HAVE BEEN ISSUED IN FAVOR OF THE METAL CRAFT COMPANY BEFORE ITS PROPOSAL WAS REJECTED.

A COPY OF THE DECISION DATED DECEMBER 18, 1967, WAS ENCLOSED WITH A LETTER TO YOU OF THE SAME DATE WHICH CITED AND INCLUDED A COPY OF DECISION B-142716, FEBRUARY 6, 1961, 40 COMP. GEN. 447, AS TO THE PROPRIETY OF CANCELING THE AWARD TO YOU WITHOUT REIMBURSEMENT FOR COSTS INCURRED PRIOR TO CANCELLATION.

YOU PROTEST THE CANCELLATION OF YOUR CONTRACT FOR THE REASONS THAT THE CONTRACT WAS AWARDED PURSUANT TO A VALID RESPONSE TO A REQUEST FOR PROPOSALS ISSUED PURSUANT TO THE AUTHORITY AT 10 U.S.C. 2304 (A) TO NEGOTIATE; THAT IN A NEGOTIATED PROCUREMENT THERE IS NO RESTRICTION THAT THE CONTRACT AWARD BE MADE TO THE LOWEST RESPONSIVE AND RESPONSIBLE OFFEROR, NOTWITHSTANDING THE PROVISION IN 10 U.S.C. 2305 (C) WHICH REQUIRES THAT AWARDS UNDER FORMAL ADVERTISING PROCEDURES BE MADE "TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES, PRICE AND OTHER FACTORS CONSIDERED"; THAT THE CONTRACT AWARDED TO YOUR COMPANY WAS FULLY ENFORCEABLE ON THE PART OF THE GOVERNMENT; AND THAT, IN ALL FAIRNESS, THE CONTRACT AWARD SHOULD NOT HAVE BEEN DISTURBED BECAUSE THE LOW BIDDER HAD A HISTORY OF POOR PERFORMANCE, REQUESTED A 35-DAY EXTENSION IN DELIVERY AND WAS DELINQUENT IN DELIVERIES OF THE SAME ITEM.

YOUR LETTER ALSO POINTS OUT THAT THE SPECIFIC LANGUAGE OF B-142716, SUPRA, DISTINGUISHES BETWEEN FORMALLY ADVERTISED PROCUREMENTS AND NEGOTIATED PROCUREMENTS SO FAR AS CONCERNS THE APPLICATION OF 10 U.S.C. 2305 (C).

CLEARLY, 10 U.S.C. 2305 (C) IS APPLICABLE ONLY TO AWARDS PURSUANT TO FORMAL ADVERTISING. HOWEVER, 10 U.S.C. 2304 (G) REQUIRES, GENERALLY, THAT COMPETITION BE SECURED IN NEGOTIATED PROCUREMENTS WITH CERTAIN EXCEPTIONS NOT APPLICABLE HERE; AND PARAGRAPH 3-101 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), WHICH HAS THE FORCE OF LAW, PROVIDES THAT:

"WHENEVER SUPPLIES OR SERVICES ARE TO BE PROCURED BY NEGOTIATION * * * PRICE QUOTATIONS * * * SHALL BE SOLICITED FROM THE MAXIMUM NUMBER OF QUALIFIED SOURCES OF SUPPLIES OR SERVICES CONSISTENT WITH THE NATURE OF AND REQUIREMENTS FOR THE SUPPLIES OR SERVICES TO BE PROCURED * * * TO THE END THAT THE PROCUREMENT WILL BE MADE TO THE BEST ADVANTAGE OF THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. * * *"

WE AGREE THAT IN THE AWARD OF CONTRACTS PURSUANT TO NEGOTIATION THE CONTRACTING OFFICER HAS CONSIDERABLY GREATER DISCRETION THAN UNDER FORMAL ADVERTISING AND MAY TAKE INTO CONSIDERATION FACTORS OTHER THAN PRICE. THIS INSTANCE, OF COURSE, HE COULD HAVE DETERMINED THAT ACCEPTANCE OF THE LOW PRICE WAS NOT IN THE BEST INTERESTS OF THE GOVERNMENT. HOWEVER, HE MADE NO SUCH DETERMINATION. INSTEAD, HE FOUND THE LOW PROPOSER NOT RESPONSIBLE FOR WHAT WERE LATER DETERMINED TO BE INVALID REASONS AND, MORE SIGNIFICANTLY, HE FAILED TO SUBMIT THE MATTER OF THE LOW PROPOSER'S COMPETENCY TO THE SMALL BUSINESS ADMINISTRATION AS CONTEMPLATED UNDER 15 U.S.C. 637 (B) (7) FOR POSSIBLE ISSUANCE OF A CERTIFICATE AS TO THE CAPACITY AND CREDIT OF THE SMALL BUSINESS CONCERN TO PERFORM THE SPECIFIC CONTRACT. SMALL BUSINESS CONCERNS HAVE THE RIGHT TO COMPETE FOR ALL CONTRACTS WHICH THEY CAN PERFORM AND THE SMALL BUSINESS CERTIFICATE OF COMPETENCY PROGRAM WAS ESTABLISHED AS A MEANS OF PROTECTING THAT RIGHT BY LIMITING THE AUTHORITY OF THE PROCUREMENT AGENCIES OF THE GOVERNMENT TO REJECT SMALL BUSINESS BIDDERS OR OFFERORS AS NOT RESPONSIBLE WITHOUT FIRST REFERRING THE MATTER TO THE SMALL BUSINESS ADMINISTRATION.

THE CONTRACTING OFFICER DETERMINED IN THIS CASE THAT THE METAL CRAFT COMPANY DID NOT QUALIFY AS A RESPONSIBLE PROSPECTIVE CONTRACTOR SOLELY ON THE BASIS OF A FINDING WHICH INVOLVED THE COMPANY'S CAPACITY TO PERFORM. IT REMAINS OUR OPINION THAT THE CONTRACT AWARDED TO YOUR COMPANY WAS INVALID BECAUSE THE CONTRACTING OFFICER DID NOT REFER THE CASE TO THE SMALL BUSINESS ADMINISTRATION BEFORE REJECTING THE PROPOSAL OF THE METAL CRAFT COMPANY, AS WAS REQUIRED UNDER ASPR 1-705.4 (C), WHICH WAS DESIGNED TO FACILITATE THE OPERATION OF THE SMALL BUSINESS CERTIFICATE OF COMPETENCY PROGRAM.

OUR REVIEW OF THE MATTER FAILED TO DISCLOSE ANY INDICATION THAT THE METAL CRAFT COMPANY'S PAST RECORD OF PERFORMANCE WAS SUCH AS TO HAVE JUSTIFIED A CONCLUSION THAT IT WAS NOT CAPABLE OF PRODUCING THE REQUIRED ITEMS OF EQUIPMENT AND MAKING DELIVERY WITHIN THE DESIRED 180 DAY DELIVERY SCHEDULE. WITH RESPECT TO YOUR STATEMENT THAT THE METAL CRAFT COMPANY REQUESTED A 35-DAY EXTENSION IN THE DELIVERY SCHEDULE, THE EVIDENCE OF RECORD SHOWS THAT THE DELIVERY TIME EXTENSION WAS ACTUALLY REQUESTED BY THE GOVERNMENT REPRESENTATIVE WHO PERFORMED A PREAWARD SURVEY OF THE METAL CRAFT COMPANY, AND THAT SUCH REQUEST WAS BASED UPON AN ERRONEOUS BELIEF THAT THE STEWART-WARNER CORPORATION HAD PROMISED TO MAKE DELIVERY OF CATCH ASSEMBLY PARTS TO THE METAL CRAFT COMPANY WITHIN 180 DAYS AFTER RECEIPT OF ORDER. THE PROMISED TIME FOR MAKING DELIVERY WAS 120 DAYS AFTER RECEIPT OF ORDER AND IT APPEARS THAT THE METAL CRAFT COMPANY DID NOT HAVE KNOWLEDGE OF THE REQUESTED 35-DAY EXTENSION IN THE DELIVERY SCHEDULE OF THE REQUEST FOR PROPOSALS BEFORE SUBMITTING A PROTEST AGAINST THE AWARD TO YOUR COMPANY.

NOTWITHSTANDING YOUR CONTENTION THAT THE CONTRACT WOULD HAVE BEEN FULLY ENFORCEABLE BY THE GOVERNMENT, IT IS OUR OPINION THAT THE CONTRACT WAS PROPERLY CANCELED FOR THE REASONS AFORESAID. ACCORDINGLY, OUR DECISION OF DECEMBER 18, 1967, IS AFFIRMED.