B-139516, JUL. 1, 1959

B-139516, JUL. 1, 1959

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED JUNE 10, 1959, FROM THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS), IN RESPONSE TO OUR REQUEST FOR A REPORT RELATIVE TO THE PROTEST OF VAUGHN CONSTRUCTION CORPORATION, LONG ISLAND CITY, NEW YORK, AGAINST THE AWARD OF A CONTRACT TO A HIGHER BIDDER ON INVITATION NO. ENG-30-347-59-18 FOR CONSTRUCTION WORK AT ERNEST HARMON AIR FORCE BASE, NEWFOUNDLAND, CANADA.

THE RECORD SHOWS THAT THE UNITED STATES ARMY ENGINEER DISTRICT, EASTERN OCEAN, UNDER DATE OF FEBRUARY 5, 1959, REQUESTED BIDS--- TO BE OPENED MARCH 17, 1959 (AS AMENDED/--- FOR THE CONSTRUCTION OF AIRFIELD WORK, BUILDINGS AND UTILITIES AT ERNEST HARMON AIR FORCE BASE, NEWFOUNDLAND, CANADA. INSTRUCTIONS TO BIDDERS (STANDARD FORM 22) ACCOMPANYING THE INVITATION PROVIDED IN PART:

"3. BIDDER'S QUALIFICATIONS. BEFORE A BID IS CONSIDERED FOR AWARD, THE BIDDER MAY BE REQUESTED BY THE GOVERNMENT TO SUBMIT A STATEMENT OF FACTS IN DETAIL AS TO HIS PREVIOUS EXPERIENCE IN PERFORMING SIMILAR OR COMPARABLE WORK, AND OF HIS BUSINESS AND TECHNICAL ORGANIZATION AND FINANCIAL RESOURCES AND PLANT AVAILABLE AND TO BE USED IN PERFORMING THE CONTEMPLATED WORK.

"11. AWARD OF CONTRACT. (A) THE CONTRACT WILL BE AWARDED AS SOON AS PRACTICABLE TO THE LOWEST RESPONSIBLE BIDDER, PRICE AND OTHER FACTORS CONSIDERED, PROVIDED HIS BID IS REASONABLE AND IT IS TO THE INTEREST OF THE GOVERNMENT TO ACCEPT IT.

"12. REJECTION OF BIDS. THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY AND ALL BIDS WHEN SUCH REJECTION IS IN THE INTEREST OF THE GOVERNMENT; TO REJECT THE BID OF A BIDDER WHO HAS PREVIOUSLY FAILED TO PERFORM PROPERLY OR COMPLETE ON TIME CONTRACTS OF A SIMILAR NATURE; AND TO REJECT THE BID OF A BIDDER WHO IS NOT, IN THE OPINION OF THE CONTRACTING OFFICER, IN A POSITION TO PERFORM THE CONTRACT.'

IN RESPONSE TO THE INVITATION, FOUR BIDS WERE RECEIVED AS FOLLOWS:

TABLE

VAUGHN CONSTRUCTION CORPORATION $443,777

ARGO CONSTRUCTION LTD. 464,927

J. A. JONES CONSTRUCTION COMPANY 474,960

AYERS-HAGAN-BOOTH 520,296

AFTER HAVING MADE A PREAWARD SURVEY AND AFTER THE MATTER HAD BEEN CONSIDERED AND REVIEWED AT VARIOUS LEVELS, AWARD WAS MADE ON MAY 5, 1959, TO ARGO CONSTRUCTION LTD., THE SECOND LOW BIDDER, AND NOTICE TO PROCEED WITH THE WORK WAS ISSUED ON MAY 13, 1959.

IT IS REPORTED THAT VAUGHN CONSTRUCTION CORPORATION WAS UNKNOWN TO THE CONTRACTING OFFICER AND WAS NOT LISTED IN ANY CONTRACTORS' REGISTER OR THE DUN AND BRADSTREET REFERENCE IN THE CONTRACTING OFFICE. INFORMATION OBTAINED FROM MR. JOSEPH HALPERN AND OTHER SOURCES SHOWED THAT MR. HAPERN WAS SOLE OWNER OF VAUGHN CONSTRUCTION CORPORATION, JOSEPH HALPERN CONSTRUCTION, INC., AND JAD CONSTRUCTION CORPORATION; THAT NEITHER VAUGHN CONSTRUCTION CORPORATION NOR JOSEPH HALPERN CONSTRUCTION COMPANY, INC., HAD PERFORMED CONSTRUCTION; AND THAT JAD CONSTRUCTION CORPORATION HAD ALL OF THE CONSTRUCTION EQUIPMENT AND HAD PERFORMED CONSTRUCTION AS A SUBCONTRACTOR TO JOSEPH HALPERN AND OTHER CONTRACTORS. IT IS REPORTED FURTHER THAT NONE OF THE NAMED CORPORATIONS HAD PERFORMED CONSTRUCTION WORK OVERSEAS, ALTHOUGH MR. HALPERN WAS A PRINCIPAL IN WALTERS CONSTRUCTION COMPANY WHEN THAT COMPANY PERFORMED SOME CONSTRUCTION WORK IN THE VIRGIN ISLANDS OVER 20 YEARS AGO, AT WHICH TIME HE ADMINISTERED THE CONTRACT FROM THE HOME OFFICE. THE FILE SHOWS THAT VAUGHN CONSTRUCTION CORPORATION WAS INCORPORATED IN NEW YORK IN 1957 AND HAD BEEN DORMANT FROM ITS INCEPTION.

IN AN ADMINISTRATIVE FINDINGS OF FACT SIGNED BY FOUR REPRESENTATIVES OF THE GOVERNMENT IT IS STATED:

"7. IT IS APPARENT THAT JOSEPH HALPERN IS THE PARTY IN INTEREST. THE MAJOR PORTION OF HIS RECENT WORK HAS BEEN PERFORMED IN HIS OWN NAME UNDER CONTRACTS WITH THE NEW YORK DISTRICT. PERTINENT DETAILS OF FIVE SUCH CONTRACTS AS FURNISHED BY NEW YORK DISTRICT ARE ATTACHED HERETO, WHICH INDICATE THAT THIS CONTRACTOR WAS UNABLE TO COMPLETE CONSTRUCTION ON SCHEDULE. FURTHER, ON TWO OF THESE PROJECTS, FAMILY HOUSING AND NIKE SITES, PERFORMANCE WAS SUCH AS TO WARRANT AN ,UNSATISFACTORY" PERFORMANCE RATING. THE NEW YORK DISTRICT HAS STATED ITS INTENT TO RATE ,UNSATISFACTORY" THE FOLLOWING FACTORS ON ENG FORM 2456 FOR THESE TWO CONTRACTS: SUCCESS IN MEETING SCHEDULED COMPLETION DATES, QUALITY OF WORK PERFORMED, COOPERATIVE ATTITUDE OF PRINCIPALS AND OTHER PERSONNEL, AND EFFECTIVENESS OF SUPERVISION. THE "UNSATISFACTORY" RATING HAS BEEN ORALLY CONCURRED IN PERSONALLY BY COLONEL T. D. RODGERS, NEW YORK DISTRICT ENGINEER.

"8. ALTHOUGH MR. HALPERN IS THE PARTY IN INTEREST IN THIS BID, HE DID NOT SUBMIT THE BID IN HIS OWN NAME, NOR DID HE SIGN THE BIDDING DOCUMENT AS AN OFFICIAL OF THE VAUGHN CONSTRUCTION CORPORATION. HIS SON SIGNED THE BID, AS VICE PRESIDENT, ALTHOUGH THE DUN AND BRADSTREET REPORT INDICATES THE SON IS SECRETARY. THEREFORE, WHETHER INTENTIONAL OR NOT, MR. HALPERN PLACED HIMSELF IN THE POSITION OF BEING ABLE TO DECIDE, AFTER BID OPENING, WHETHER TO ACCEPT THIS WORK OR NOT, BY BEING ABLE TO OFFER OR WITHDRAW HIS SUPPORT FROM VAUGHN CONSTRUCTION CORPORATION. TO PERMIT SUCH A BIDDER TO HAVE A CHOICE, AFTER BID OPENING, TO QUALIFY OR NOT QUALIFY FOR AN AWARD, AT HIS DISCRETION, IS UNFAIR TO THE OTHER COMPETING BIDDERS AND DETRIMENTAL TO THE COMPETITIVE BIDDING SYSTEM.

"9.IT IS EVIDENT THAT THE VAUGHN CONSTRUCTION CORPORATION COULD NOT PERFORM SATISFACTORILY PER SE, IN VIEW OF LACK OF EXPERIENCE, DORMANT STATUS SINCE INCEPTION, LOW FINANCIAL POSITION AND EXTREMELY LIMITED ASSETS. EVEN IF COMPLETELY SUPPORTED BY JOSEPH HALPERN AND HIS ORGANIZATION AND ASSETS, IT IS CONCLUDED THAT THE COMBINATION WOULD BE AT BEST MARGINAL FOR OVERSEAS CONSTRUCTION, DUE TO LACK OF EXPERIENCE IN OVERSEAS WORK AND THE RECENT UNSATISFACTORY PERFORMANCE OF JOSEPH HALPERN IN RELATIVELY LOCAL STATESIDE WORK FOR THE CORPS OF ENGINEERS. THE FACT THAT JOSEPH HALPERN ORALLY OFFERED TO ACCEPT THE AWARD PERSONALLY AND JOINTLY WITH VAUGHN CONSTRUCTION CORPORATION DOES NOT CHANGE THE ABOVE CONCLUSION.

"10. BASED ON THE ABOVE IT IS CONCLUDED THAT THE VAUGHN CONSTRUCTION CORPORATION CANNOT BE CONSIDERED A RESPONSIBLE BIDDER WITHIN THE INTENT OF PARAGRAPH 1-307 OF APP, AND ACCORDINGLY, AWARD TO THIS CONCERN WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT. THE VAUGHN CONSTRUCTION CORPORATION BID SHOULD BE REJECTED AND AWARD MADE TO ARGO CONSTRUCTION LTD., THE SECOND LOW BIDDER.'

WE HAVE CONSISTENTLY FOLLOWED THE RULE THAT THE MATTER OF A BIDDER'S QUALIFICATIONS AND RESPONSIBILITY IS SOLELY FOR DETERMINATION BY THE CONTRACTING AGENCY WITH WHICH THIS OFFICE WILL NOT INTERFERE IN THE ABSENCE OF A SHOWING OF BAD FAITH OR LACK OF A REASONABLE BASIS THEREFOR. 37 COMP. GEN. 430. IN THE INSTANT CASE WE WILL NOT DISTURB THE AWARD TO ARGO CONSTRUCTION LTD., SINCE WE ARE INFORMALLY ADVISED THAT THE CONTRACTOR HAS MADE SUBSTANTIAL COMMITMENTS, THE WORK IS NOW PROCEEDING, AND AN URGENT NEED EXISTS FOR EARLY COMPLETION. WE THINK, HOWEVER, THAT THERE IS A SERIOUS QUESTION AS TO THE PROPRIETY OF THE REJECTION OF VAUGHN'S BID.

IN THE FIRST PLACE WE HAVE HELD THAT IN EVALUATING THE EXPERIENCE AND FINANCIAL RESPONSIBILITY OF A NEWLY FORMED COMPANY THERE MAY BE CONSIDERED THE EXPERIENCE, RESOURCES, AND RESPONSIBILITY OF THE PRINCIPAL OFFICERS OF THE COMPANY. 36 COMP. GEN. 673; 38 COMP. GEN. 572. SINCE MR. HALPERN IS THE SOLE OWNER OF VAUGHN, WE THINK THAT HIS RESOURCES AND EXPERIENCE PROPERLY WERE FOR CONSIDERATION IN DETERMINING THE RESPONSIBILITY OF VAUGHN. THE RECORD CONTAINS A STATEMENT SHOWING PERTINENT DETAILS OF FIVE CONTRACTS INDICATING THAT MR. HALPERN WAS UNABLE TO COMPLETE CONSTRUCTION ON SCHEDULE AND HIS PERFORMANCE RATING ON TWO OF THE CONTRACTS WAS UNSATISFACTORY. IT IS NOTED THAT THE CONTRACTS CITED WERE COMPLETED DURING THE YEARS 1954 THROUGH 1958, THE LATEST ONE BEING CONTRACT ENG- 7944, WHICH STARTED ON JULY 30, 1957, AND WAS COMPLETED ON NOVEMBER 21, 1958, FOURTEEN DAYS LATER THAN THE REQUIRED COMPLETION DATE, AS AMENDED. WE DO NOT BELIEVE THAT THE NATURE OF THE PERFORMANCE UNDER THE FOUR PRIOR CONTRACTS CITED WAS FOR CONSIDERATION IN DETERMINING THE RESPONSIBILITY OF MR. HALPERN SINCE, NOTWITHSTANDING THE ALLEGED UNSATISFACTORY PERFORMANCE OF THOSE CONTRACTS, CONTRACT ENG-7944 WAS THEREAFTER AWARDED TO MR. HALPERN. IT IS ONLY REASONABLE TO ASSUME THAT AT THAT TIME YOUR DEPARTMENT DID NOT CONSIDER THAT THE ALLEGED POOR PERFORMANCE AND LATE COMPLETION UNDER THOSE CONTRACTS AFFECTED HIS RESPONSIBILITY TO PERFORM CONTRACT ENG-7944.

A FURTHER BASIS FOR REJECTING VAUGHN'S BID WAS THAT MR. HALPERN LACKED EXPERIENCE IN PERFORMING CONTRACTS IN A FOREIGN COUNTRY. APART FROM THE FACT THAT THE INVITATION DID NOT CONTAIN ANY REQUIREMENT THAT A BIDDER HAVE PREVIOUS OVERSEAS EXPERIENCE, WE ARE OF THE VIEW THAT IN CASES WHERE A FINANCIALLY RESPONSIBLE BIDDER HAS HAD ADEQUATE EXPERIENCE AND BACKGROUND IN THE PERFORMANCE OF CONTRACTS OF SIMILAR MAGNITUDE AND COMPLEXITIES IN THE UNITED STATES THERE IS NO SUFFICIENT JUSTIFICATION FOR CONCLUDING THAT HE IS NOT CAPABLE OF PERFORMING SUCH A CONTRACT IN A FOREIGN COUNTRY.

ANOTHER FACTOR GIVEN FOR REJECTING VAUGHN WAS THAT IT HAD A LOW FINANCIAL POSITION AND EXTREMELY LIMITED ASSETS. AS PREVIOUSLY STATED, WE BELIEVE THAT THE FINANCIAL POSITION OF MR. HALPERN, THE SOLE OWNER OF VAUGHN, PROPERLY WAS FOR CONSIDERATION IN DETERMINING THE FINANCIAL CAPACITY OF VAUGHN. THERE APPEARS LITTLE DOUBT THAT MR. HALPERN HAS SUFFICIENT FUNDS TO FINANCE THE CONTRACT WORK. WHAT APPEARS TO BE EVEN MORE SIGNIFICANT IS THE FACT THAT PARAGRAPH GC-16 OF THE GENERAL CONDITIONS OF THE SPECIFICATIONS REQUIRED THE SUCCESSFUL CONTRACTOR TO FURNISH A PERFORMANCE BOND ACCEPTABLE TO THE GOVERNMENT IN THE PENAL SUM OF 100 PERCENT OF THE CONTRACT PRICE. THIS REQUIREMENT WOULD APPEAR TO PROTECT THE INTERESTS OF THE GOVERNMENT SO FAR AS THE CONTRACTOR'S FINANCIAL RESPONSIBILITY IS CONCERNED.

WHILE WE FEEL THAT THE ADMINISTRATIVE ACTION TAKEN IN THIS CASE WAS BASED ON RATHER TENUOUS EVIDENCE, IN VIEW OF THE REASONS STATED ABOVE WE WILL NOT REQUIRE ANY FURTHER ACTION IN THE MATTER.