B-221236, JAN 31, 1986

B-221236, JAN 31, 1986

LEGISLATION - PRIVATE - RELIEF - RECOMMENDATION NEGATIVE DIGEST: GAO DOES NOT FAVOR ENACTMENT OF PRIVATE RELIEF LEGISLATION WHICH WOULD REIMBURSE A CONTRACTOR FOR LOST PROFITS ARISING OUT OF THE DENIAL OF CERTAIN GOVERNMENT CONTRACTS, EVEN THOUGH GAO FOUND IN ONE PROTEST THAT THE CONTRACTOR, IN FACT, WAS ENTITLED TO THE CONTRACT AWARD BUT THAT, DUE TO THE EXTENT OF PERFORMANCE, CORRECTIVE ACTION WAS NOT IN THE BEST INTEREST OF THE GOVERNMENT. PASSAGE OF SUCH LEGISLATION WOULD EXTEND TO THE CONTRACTOR PREFERENTIAL TREATMENT OVER PROTESTERS IN SIMILAR CIRCUMSTANCES WHOSE RECOVERY IS LIMITED TO BID OR PROPOSAL PREPARATION COSTS AND, UNDER THE COMPETITION IN CONTRACTING ACT OF 1984, TO THE COSTS OF PURSUING THE PROTEST.

THE HONORABLE PETER W. RODINO, JR.: CHAIRMAN, COMMITTEE ON THE JUDICIARY HOUSE OF REPRESENTATIVES

WE REFER TO YOUR LETTER OF NOVEMBER 6, 1985, ENCLOSING COPIES OF H.R. 3094, 99TH CONGRESS, 1ST SESSION, REGARDING COMPENSATION FOR DAMAGES CLAIMED BY SPACE SYSTEMS LABORATORIES, INC. (SPACE SYSTEMS). THE CLAIM ARISES OUT OF THE LOSS OF PROFITS FROM THE "WRONGFUL DENIAL OF CERTAIN ARMY CONTRACTS." THE PROPOSED LEGISLATION SPECIFICALLY LISTS REQUEST FOR QUOTATIONS (RFQ) NO. DAAAA25-68-R-0294 AND INVITATION FOR BIDS (IFBS) NOS. DAAA-25-70-0681, DAA2570-B-0697, DAAA25-70-B0735, AND DAAB07-70-B-0-468.

AT THE OUTSET, THERE APPEAR TO BE SOME ERRORS IN THE SOLICITATION NUMBERS LISTED IN H.R. 3094. THEREFORE, WHEN WE REFER TO THE SOLICITATIONS, WE USE THE NUMBERS INDICATED BY OUR RECORDS TO BE CORRECT.

SPACE SYSTEMS FILED A PROTEST WITH OUR OFFICE ON MARCH 21, 1968, CONCERNING REQUEST FOR PROPOSALS (RFP) NO. DAAA25-68-R-0294, ISSUED BY THE FRANKFORD ARSENAL, PHILADELPHIA, PENNSYLVANIA. THE CONTRACTING OFFICER HAD FOUND THAT THE COMPANY LACKED THE NECESSARY TENACITY AND PERSEVERANCE TO PERFORM THE CONTRACT, SINCE IT HAD FAILED TO MAKE OR MAINTAIN ADEQUATE ARRANGEMENTS TO ENSURE TIMELY DELIVERIES OF MATERIALS AND COMPONENTS FROM ITS SUPPLIERS, MOSTLY GERMAN, AND SUBCONTRACTORS. IN OUR DECISION ON THE PROTEST, B-163860, AUG. 14, 1968, WE FOUND THIS DETERMINATION REASONABLE AND DENIED THE PROTEST. (NOTE THAT THIS OCCURRED BEFORE ENACTMENT OF LEGISLATION VESTING FINAL AUTHORITY FOR DETERMINING ALL ELEMENTS OF RESPONSIBILITY FOR SMALL BUSINESS CONCERNS, SUCH AS SPACE SYSTEMS, IN THE SMALL BUSINESS ADMINISTRATION (SBA). SEE 15 U.S.C. SEC. 637(B)(7)(A) (1982).)

UPON RECONSIDERATION, HOWEVER, AND AFTER OBTAINING ADDITIONAL INFORMATION FROM THE ARMY, WE CONCLUDED IN B-163860.2, JULY 22, 1969, THAT THE ARMY'S RECORDS DID NOT SUPPORT THE NONRESPONSIBILITY DETERMINATION AND THAT THE SBA WOULD HAVE FOUND THAT SPACE SYSTEMS HAD SUFFICIENT CAPACITY AND CREDIT TO PERFORM THE CONTRACT AND, THEREFORE, WOULD HAVE BEEN ENTITLED TO A CERTIFICATE OF COMPETENCY. IN SHORT, WE FOUND THAT SPACE SYSTEMS SHOULD HAVE BEEN AWARDED THE CONTRACT. DUE TO THE EXTENT TO WHICH THE CONTRACT HAD ALREADY BEEN PERFORMED, HOWEVER, WE HELD THAT IT WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT TO TERMINATE THE CONTRACT AND AWARD THE BALANCE TO SPACE SYSTEMS.

WE DID, HOWEVER, WRITE THE SECRETARY OF DEFENSE STATING THAT WE HAD BEEN UNABLE TO RECOMMEND CORRECTIVE ACTION SOLELY BECAUSE THE PROCURING AGENCY HAD NOT BEEN PROMPT IN FURNISHING US WITH SUCH COMPLETE AND ACCURATE INFORMATION AS WAS NEEDED TO RESOLVE THIS MATTER WHILE IT WAS STILL PRACTICAL TO GRANT THE RELIEF REQUESTED.

WITH REGARD TO THE OTHER SOLICITATIONS LISTED IN H.R. 3094, BY A TELEGRAM TO OUR OFFICE DATED AUGUST 30, 1970, SPACE SYSTEMS PROTESTED ANY AWARDS UNDER IFBS NOS. DAAA25-70-B-0681, DAAA25-70-B-0697, DAAA25 70-B-0735 AND DAAB07-70-B-0468, ISSUED BY THE FRANKFORD ARSENAL AND THE FORT MONMOUTH, NEW JERSEY, PROCUREMENT DIVISION. THE PROTESTER MAINTAINED THAT UNDER THE FIRST THREE SOLICITATIONS, THE ARMY HAD UNJUSTIFIABLY FOUND IT TO BE NONRESPONSIBLE, AND THAT THE ARMY HAD UNJUSTIFIABLY CANCELED THE FOURTH SOLICITATION AFTER SPACE SYSTEMS HAD BEEN DETERMINED TO BE THE LOW BIDDER. HOWEVER, BY A SECOND TELEGRAM DATED SEPTEMBER 22, 1970, THE FIRM WITHDREW ALL FOUR PROTESTS, STATING THAT IT WAS GOING OUT OF BUSINESS. THEREFORE CLOSED OUR FILES WITHOUT FURTHER ACTION. SINCE WE DID NOT ISSUE A DECISION AN ANY OF THESE PROTESTS, WE ARE UNABLE TO COMMENT ON THEIR MERITS.

WE RECOGNIZE THAT THE PASSAGE OF ANY PRIVATE RELIEF LEGISLATION IS A MATTER OF POLICY FOR DETERMINATION BY THE CONGRESS. IN PRIOR DECISIONS ON CLAIMS BY PROTESTERS FOR LOST PROFITS, HOWEVER, OUR OFFICE HAS CONSISTENTLY HELD THAT THERE IS NO LEGAL BASIS FOR SUCH RECOVERY, EVEN IF, AS HERE, THE CLAIMANT HAS BEEN WRONGFULLY DENIED A CONTRACT. RATHER, IN CASES SUCH AS SPACE SYSTEMS' PROTEST UNDER RFP NO. DAAA25-68 R-0294, WHERE WE HAVE SUSTAINED A PROTEST BUT ALSO FOUND IT IMPRACTICAL TO RECOMMEND CORRECTIVE ACTION DUE TO THE EXTENT OF PERFORMANCE, WE HAVE LIMITED THE PROTESTER'S RECOVERY TO BID OR PROPOSAL PREPARATION COSTS. SEE, FOR EXAMPLE, CONNECTICUT TELEPHONE & ELECTRIC CORP., B-217101, FEB. 25, 1985, 85-1 CPD PARA. 233; POWER SYSTEMS-- CLAIM FOR COSTS, B-210032.2, MAR. 26, 1984, 84-1 CPD PARA. 344.

WE DO NOT BELIEVE THAT THE FACTUAL CIRCUMSTANCES PRESENTED IN THIS CASE WARRANT EXTENDING TO SPACE SYSTEMS' PREFERENTIAL TREATMENT THAT HAS NOT BEEN AVAILABLE TO OTHER SIMILARLY SITUATED BIDDERS. CONSEQUENTLY, WE DO NOT FAVOR PERMITTING SPACE SYSTEMS TO RECOVER LOST PROFITS UNDER H.R. 3094.