B-150791, APR. 25, 1963

B-150791, APR. 25, 1963

TO LAWRENCE GOCHBERG, ESQUIRE:

REFERENCE IS MADE TO YOUR LETTER DATED FEBRUARY 21, 1963, AND SUBSEQUENT CORRESPONDENCE WRITTEN IN BEHALF OF A JOINT VENTURE COMPOSED OF PAUL HARDEMAN, INCORPORATED, F. D. RICH COMPANY, INCORPORATED, AND TERMINAL CONSTRUCTION CORPORATION, AND PROTESTING AGAINST THE ACTION OF THE GENERAL SERVICES ADMINISTRATION IN REJECTING THE JOINT VENTURE'S BID ON CONSTRUCTION OF A FEDERAL OFFICE BUILDING IN NEW YORK CITY.

AS INDICATED BY THE REPORT BY THE GENERAL SERVICES ADMINISTRATION TO THIS OFFICE ON YOUR PROTEST, THE BID OF THE JOINT VENTURE WAS REJECTED FOLLOWING A DETERMINATION BY THE ADMINISTRATION THAT THE JOINT VENTURE COULD NOT BE CONSIDERED A RESPONSIBLE BIDDER. THIS DETERMINATION WAS BASED UPON FINDINGS THAT THE JOINT VENTURE LACKED THE INTEGRITY, JUDGMENT AND EXPERIENCE OF A RESPONSIBLE BIDDER. WITH RESPECT TO INTEGRITY, THE ADMINISTRATION'S REPORT ADVISES AS FOLLOWS:

"THE BID OF THE JOINT VENTURE, THE SECOND LOWEST BIDDER, WAS ALSO PASSED OVER UPON OUR DETERMINATION THAT IT WAS NOT A RESPONSIBLE BIDDER. THIS DETERMINATION, WHICH WAS MADE PURSUANT TO SECTION 303 (B) OF THE FEDERAL PROPERTY AND ADMINISTRATIVE SERVICES ACT OF 1949, AS AMENDED, 41 U.S.C. 253 (B), AND FPR SECTIONS 1-1.310-4 AND 1 1.310.5, WAS BASED ON THE FACTS OF RECORD AT THE TIME OF THE DETERMINATION.

"THE INVESTIGATION UPON WHICH THE DETERMINATION WAS MADE DISCLOSED THE FOLLOWING FACTS:

"RICHARD N. DINALLO, PRESIDENT OF TERMINAL, TOGETHER WITH REPRESENTATIVES OF OTHER COMPANIES, WAS CONVICTED ON DECEMBER 14, 1961, OF CONSPIRACY IN VIOLATION OF NEW JERSEY STATUTE 2A:98-1 BY AGREEING IN ADVANCE OF BIDDING ON BIDS TO BE SUBMITTED AND BY SUBMITTING THE BIDS SO AGREED UPON TO THE PASSAIC VALLEY SEWERAGE COMMISSION IN CONNECTION WITH A CONTRACT TO BE AWARDED UNDER NEW JERSEY STATUTE 58:14-22. ON FEBRUARY 1, 1962, RICHARD N. DINALLO WAS SENTENCED TO SIX MONTHS IN THE ESSEX COUNTY PENITENTIARY (SENTENCE SUSPENDED), FINED $1,000 PLUS 1/5 OF THE COSTS OF THE TRIAL AND PROSECUTION, AND PLACED ON PROBATION FOR TWO YEARS. PRIOR TO SENTENCING, THE TRIAL JUDGE STATED:

"THE DEFENDANTS HAVE UNDERMINED PUBLIC CONFIDENCE IN THE INTEGRITY OF PUBLIC BIDDING. THEY DO AN INJUSTICE TO THE HONEST BIDDER ON EVERY PUBLIC JOB. I HAVE NO DOUBT THAT THEY HAVE AWAKENED A WIDESPREAD SUSPICION AS TO THE LEGITIMACY OF THE BIDS ON OTHER CONTRACTS IN WHICH THEY HAVE BEEN INVOLVED.,

"IT IS SIGNIFICANT THAT THE ACTIONS OF DINALLO UPON WHICH THE CONVICTION WAS BASED INVOLVED, AMONG OTHER THINGS, THE SUBMISSION OF A BID AND THE EXECUTION OF A WRITTEN MANAGEMENT AGREEMENT BY TERMINAL CONSTRUCTION CORPORATION RATHER THAN BY DINALLO IN HIS INDIVIDUAL CAPACITY. MR. DINALLO WAS AND IS PRESIDENT OF THE TERMINAL CONSTRUCTION CORPORATION AND A DIRECTOR OF THE CORPORATION, AND AS SUCH WAS AND IS IN A DOMINANT AND CONTROLLING POSITION IN THE CORPORATION. IN ADDITION TO BEING THE CHIEF OFFICER OF THE CORPORATION, HE IS THE HOLDER OF 45 PERCENT OF THE STOCK, THE REMAINING STOCK BEING OWNED 45 PERCENT BY V. P. CARNECCHIA, SECRETARY- TREASURER, AND 10 PERCENT BY ANTHONY M. DINALLO, VICE PRESIDENT. CORPORATION CAN ONLY OPERATE THROUGH INDIVIDUALS WHO, AS OFFICERS, DIRECTORS, OR STOCKHOLDERS, CONTROL THE ACTIVITIES, POLICIES, AND MANAGEMENT OF THE CORPORATION. THE INTEGRITY OF A CORPORATION CAN BE NO GREATER THAN THE INTEGRITY OF THE INDIVIDUALS WHO CONTROL ITS OPERATION.

"GSA DETERMINED THAT, BASED UPON THE CONVICTION, RICHARD N. DINALLO LACKED THE INTEGRITY OF A RESPONSIBLE BIDDER AND THAT HIS POSITION IN AND ASSOCIATION WITH TERMINAL CONSTRUCTION CORPORATION WAS SUCH AS TO IMPUTE A CORRESPONDING LACK OF INTEGRITY TO THE CORPORATION.

"NO QUESTION HAS BEEN RAISED CONCERNING THE INTEGRITY OF EITHER OF THE OTHER TWO JOINT VENTURERS. LACK OF INTEGRITY IN ONE PARTY TO A JOINT VENTURE, HOWEVER, MAY NOT BE CURED BY ASSOCIATION WITH ONE OR MORE OTHER VENTURERS. IT IS SIGNIFICANT AT THIS POINT TO NOTE THAT THE BID HEREIN DATED JANUARY 24, 1963, SUBMITTED BY THE JOINT VENTURE WAS EXECUTED ON BEHALF OF THE JOINT VENTURE BY RICHARD N. DINALLO AS AUTHORIZED REPRESENTATIVE.

"ALTHOUGH RESPONSIBILITY INVOLVES FINANCIAL ABILITY, TECHNICAL SKILLS, NECESSARY EXPERIENCE AND FACILITIES TO PERFORM THE WORK, IT ALSO INVOLVES THE INTEGRITY OF THE BIDDER. ARTHUR VENNERI CO. V. PATERSON HOUSING AUTHORITY (SUP.CT. N.J. 1959), 149 A.2D 228, 234. FURTHERMORE, GOVERNMENT CONTRACTING OFFICERS HAVE THE DUTY TO SELECT THE CONTRACT MOST ADVANTAGEOUS TO THE GOVERNMENT AND HERE TOO ADVANTAGE IS NOT MEASURED EXCLUSIVELY IN TERMS OF PRICE--- IT IS MEASURED ALSO, AMONG OTHER THINGS, BY INTEGRITY. O-BRIEN V. CARNEY (D.C.MASS. 1934). 6 FED.SUPP. 761, 762; 30 COMP. GEN. 235; 26 ID. 676.

"AS INDICATED IN 39 C.G. 468 AT PAGE 470, THE DETERMINATION OF RESPONSIBILITY IS MADE MANDATORY ON GSA BY REASON OF THE FEDERAL PROCUREMENT REGULATIONS. SECTION 1-1.310-5 (A) (5) PROVIDES THAT PROSPECTIVE CONTRACTOR MUST, IN THE OPINION OF THE CONTRACTING OFFICER, HAVE A SATISFACTORY RECORD OF INTEGRITY IN ORDER TO QUALIFY AS A RESPONSIBLE BIDDER.

"WE ARE NOW INFORMED THAT ON FEBRUARY 28, 1963, THE SUPERIOR COURT FOR ESSEX COUNTY, NEW JERSEY, SET ASIDE THE VERDICT AND GRANTED A NEW TRIAL ON THE GROUND OF MISCONDUCT ON THE PART OF ONE OF THE JURORS. A COPY OF A STATEMENT OF THE COURT ON THIS MATTER IS ENCLOSED. IN MAKING ITS DETERMINATION AS TO THE INTEGRITY OF MR. DINALLO, AND CONSEQUENTLY OF TERMINAL CONSTRUCTION CORPORATION AND THE JOINT VENTURE, GSA ACTED ON THE BASIS OF THE FACTS AS THEY EXISTED WHEN THAT DETERMINATION WAS MADE. PATENTLY, WE COULD NOT HAVE TAKEN INTO ACCOUNT CIRCUMSTANCES WHICH DID NOT THEN EXIST. THE ACTION OF THE COURT, COMING AFTER THE DETERMINATION BY GSA TO REJECT THE BID OF THE JOINT VENTURE, AND ALSO AFTER THE TIME FOR ACCEPTANCE OF ALL BIDS HAD EXPIRED, CAN HAVE NO EFFECT ON THE PROPRIETY OR VALIDITY OF ACTION TAKEN BY GSA TO AWARD THE CONTRACT TO THE THIRD LOW BIDDER ON FEBRUARY 15, 1963. WE DO NOT BELIEVE THAT THE SETTING ASIDE OF THE VERDICT AND THE GRANTING OF A NEW TRIAL CAN BE CONSIDERED AS ANY BASIS FOR CONCLUDING THAT GSA'S PRIOR ACTION MUST NOW BE CONSIDERED IN THE LIGHT OF WHAT HAS SUBSEQUENTLY OCCURRED.'

YOUR PROTEST AGAINST THE ADMINISTRATION'S DETERMINATION THAT TERMINAL LACKED THE INTEGRITY OF A RESPONSIBLE BIDDER IS BASED UPON THE FOLLOWING GROUNDS:

1. THAT THE GENERAL SERVICES ADMINISTRATION IS REQUIRED UNDER THE PROVISIONS OF THE FEDERAL PROCUREMENT REGULATIONS TO INSTITUTE DEBARMENT PROCEEDINGS WHERE CONTRACT AWARDS ARE TO BE DENIED BECAUSE OF CONVICTION OF A CRIME.

2. THAT THE OFFENSE FOR WHICH RICHARD N. DINALLO WAS INDICTED AND CONVICTED IS NOT OF A NATURE TO REFLECT UPON THE INTEGRITY OF TERMINAL CONSTRUCTION CORPORATION AS A RESPONSIBLE BIDDER.

3. THAT THE COURT'S ACTION IN SETTING ASIDE THE CONVICTION AND GRANTING A NEW TRIAL, NOTWITHSTANDING SUCH ACTION OCCURRED AFTER A CONTRACT WAS AWARDED TO TURNER CONSTRUCTION COMPANY, REQUIRES THAT THE CONVICTION BE DISREGARDED AND THAT GSA EITHER RECONSIDER THE QUESTION OF RICHARD N. DINALLO'S INTEGRITY ON THE BASIS OF THE OUTSTANDING INDICTMENT ALONE, OR THAT THIS OFFICE DISREGARD THE CONVICTION IN CONSIDERING THE MERITS OF YOUR PROTEST.

4. THAT IN THE EVENT EITHER THE INDICTMENT OR THE CONVICTION OF RICHARD N. DINALLO IS CONSIDERED SUFFICIENT TO REFLECT UPON HIS INTEGRITY, A CORRESPONDING LACK OF INTEGRITY CANNOT BE IMPUTED TO TERMINAL CONSTRUCTION COMPANY, SINCE RICHARD N. DINALLO OWNS ONLY 50 PERCENT OF ITS VOTING STOCK, AND THUS CANNOT BE SAID TO BE IN CONTROL OF THE COMPANY.

5. THAT IF A LACK OF INTEGRITY CAN BE IMPUTED TO TERMINAL CONSTRUCTION COMPANY, THE SAME LACK OF INTEGRITY CANNOT BE IMPUTED TO THE JOINT VENTURE SINCE THE COMPANY HAS ONLY A ONE-THIRD INTEREST IN THE VENTURE AND, UNDER THE TERMS OF THE DEFINITIVE JOINT VENTURE AGREEMENT WHICH WAS TO BE EXECUTED IN THE EVENT OF AN AWARD TO THE JOINT VENTURE, F. D. RICH COMPANY WAS TO BE DESIGNATED AS THE SPONSOR, WITH FULL AUTHORITY TO DIRECT AND CONTROL THE CONTRACT WORK.

WE WILL DISCUSS THE MERITS OF THESE CONTENTIONS IN THE ORDER IN WHICH THEY ARE LISTED.

CONCERNING YOUR CONTENTION THAT THE GENERAL SERVICES ADMINISTRATION IS WITHOUT AUTHORITY TO BASE A FINDING OF LACK OF INTEGRITY IN A BIDDER UPON THE CONVICTION OF A CRIME BY ONE OF ITS OFFICERS UNLESS THE PROCEDURES PRESCRIBED BY SUBPART 1-1.6 OF THE FEDERAL PROCUREMENT REGULATIONS FOR DEBARMENT OF BIDDERS HAVE BEEN COMPLIED WITH, IT SHOULD BE NOTED THAT THE DUTY TO PASS UPON THE RESPONSIBILITY OF LOW BIDDERS IN EACH INDIVIDUAL ADVERTISED PROCUREMENT IS IMPOSED BY LAW (41 U.S.C. 253 (B) (, WHILE THE INSTITUTION OF DEBARMENT PROCEEDINGS BASED UPON CONVICTION OF THE COMMISSION OF A CRIME IS DISCRETIONARY WITH THE CONTRACTING AGENCY. THE PROCEDURES FOR DEBARMENT, INCLUDING THE REQUIREMENTS FOR NOTICE AND HEARING PRIOR TO DEBARMENT, WHICH ARE SET OUT IN SUBPART 1-1.6 OF THE REGULATIONS, THEREFORE HAVE NO APPLICATION TO THE DETERMINATION OF A BIDDER'S RESPONSIBILITY UNDER 41 U.S.C. 253 (B) AND SECTION 1-1.310-6 OF THE REGULATIONS.

WITH RESPECT TO WHETHER THE SUBMISSION OF COLLUSIVE BIDS ON A PUBLIC CONTRACT IS AN OFFENSE WHICH MAY PROPERLY BE CONSIDERED IN DETERMINING THE INTEGRITY OF SUCH BIDDERS, SECTION 1-1.605 (A) (1) OF THE FEDERAL PROCUREMENT REGULATIONS PROVIDES AS FOLLOWS:

"EACH EXECUTIVE AGENCY IS AUTHORIZED TO DEBAR IN THE PUBLIC INTEREST A FIRM OR INDIVIDUAL FOR ANY OF THE CAUSES AND UNDER ALL APPROPRIATE CONDITIONS LISTED:

(A) CAUSES

(1) CONVICTION FOR COMMISSION OF A CRIMINAL OFFENSE AS AN INCIDENT IN OBTAINING A CONTRACT OR IN AN ATTEMPT TO OBTAIN A CONTRACT OR IN THE PERFORMANCE THEREOF.'

IN OUR DECISION REPORTED AT 39 COMP. GEN. 868 WE HELD THAT, IN DETERMINING WHETHER A BIDDER SHOULD BE CONSIDERED A RESPONSIBLE BIDDER, HIS INTEGRITY AND BUSINESS ETHICS MAY PROPERLY BE DETERMINED BY APPLYING THE "CAUSES FOR DEBARMENT" SET OUT IN THE ARMED SERVICES PROCUREMENT REGULATION. THE PERTINENT DEBARMENT PROVISIONS OF THAT REGULATION ARE, FOR ALL PRACTICAL PURPOSES, IDENTICAL WITH THE PROVISIONS OF THE FEDERAL PROCUREMENT REGULATIONS QUOTED ABOVE, AND THE SAME CONCLUSION THEREFORE WOULD APPEAR TO BE FOR APPLICATION IN THE INSTANT CASE.

THERE CAN BE NO DOUBT THAT THE OFFENSE FOR WHICH RICHARD N. DINALLO WAS CONVICTED WAS COMMITTED "AS AN INCIDENT TO OBTAINING A CONTRACT OR IN AN ATTEMPT TO OBTAIN A CONTRACT.' THE FACT THAT THE CONTRACT IN QUESTION WAS NOT TO BE PERFORMED FOR THE FEDERAL GOVERNMENT DOES NOT, IN OUR OPINION, PLACE THE OFFENSE OUTSIDE OF THE SCOPE OF SECTION 1 1.605 (A) (1) OF THE FEDERAL PROCUREMENT REGULATIONS. NEITHER DOES THE FACT THAT THE OFFENSE IS CLASSIFIED AS A MISDEMEANOR UNDER THE LAWS OF NEW JERSEY RULE OUT ITS CONSIDERATION AS A "CRIMINAL OFFENSE" UNDER SUCH REGULATION, SINCE IT IS OUR OPINION THAT THE NATURE OF THE OFFENSE, RATHER THAN ITS DESIGNATION UNDER THE VARIOUS STATE STATUTES SHOULD CONTROL. HOWEVER, WITH SPECIFIC REFERENCE TO THE NEW JERSEY STATUTE UNDER WHICH RICHARD N. DINALLO WAS SENTENCED, SEE 2A:85-7 OF THE NEW JERSEY STATUTES, PROVIDING FOR PUNISHMENT OF CRIMES WHICH ARE DECLARED BY STATUTE TO BE MISDEMEANORS.

IT IS THEREFORE OUR OPINION THAT THE OFFENSE ON WHICH RICHARD N. DINALLO'S CONVICTION WAS BASED FALLS SQUARELY WITHIN THE PROVISIONS OF SECTION 1-1.605 (A) (1) OF THE FEDERAL PROCUREMENT REGULATIONS QUOTED ABOVE, AND THAT SUCH CONVICTION CONSTITUTED CLEAR AND CONVINCING EVIDENCE OF LACK OF INTEGRITY WHICH WAS PROPERLY FOR CONSIDERATION BY THE GENERAL SERVICES ADMINISTRATION IN DETERMINING WHETHER HE, IN HIS INDIVIDUAL CAPACITY, COULD BE CONSIDERED A RESPONSIBLE BIDDER. WHERE A DETERMINATION OF LACK OF INTEGRITY IS BASED UPON SUCH EVIDENCE, THIS OFFICE WILL NOT SUBSTITUTE ITS JUDGMENT FOR THAT OF THE CONTRACTING AGENCY IN DETERMINING WHETHER ONE SO CONVICTED MAY BE CONSIDERED A RESPONSIBLE BIDDER. SEE 39 COMP. GEN. 468; CF. 39 ID. 868.

YOU ALSO POINT OUT THAT THE CONVICTION OF RICHARD N. DINALLO INVOLVED A CONSPIRACY TO RIG BIDS WHICH IS TANTAMOUNT TO A VIOLATION OF THE FEDERAL ANTITRUST STATUTE, 15 U.S.C. 1; THAT CORPORATIONS CONVICTED OF COLLUSIVE BIDDING UNDER THAT STATUTE (WITH SPECIFIC REFERENCE TO THE RECENT CONVICTION OF CERTAIN ELECTRICAL EQUIPMENT MANUFACTURERS) CONTINUE TO BE CLASSIFIED AS RESPONSIBLE BIDDERS AND AWARDED CONTRACTS; AND THAT THE CORPS OF ENGINEERS HAS DETERMINED TERMINAL CONSTRUCTION CORPORATION WAS A RESPONSIBLE BIDDER AND AWARDED A CONTRACT TO IT SINCE THE CONVICTION OF RICHARD N. DINALLO. YOU THEREFORE CONTEND THAT THE ADMINISTRATION'S ACTION DISCRIMINATES UNFAIRLY AGAINST TERMINAL CONSTRUCTION CORPORATION.

WE HAVE NO INFORMATION AS TO WHETHER ANY, OR HOW MANY, OF THE CORPORATIONS WHICH HAVE BEEN CONVICTED UNDER THE FEDERAL ANTITRUST STATUTES FOR COLLUSIVE BIDDING MAY HAVE SUBSEQUENTLY BEEN DETERMINED TO LACK THE INTEGRITY OF A RESPONSIBLE BIDDER. ASSUMING, HOWEVER, THAT SUCH ACTION HAS NOT BEEN TAKEN WITH RESPECT TO CERTAIN ELECTRICAL EQUIPMENT MANUFACTURERS RECENTLY CONVICTED, WE SEE NO VALID BASIS UPON WHICH IT MAY BE CONTENDED THAT SUCH FAILURE SHOULD ENTER INTO, OR BE DETERMINATIVE OF, THE PROPRIETY OF THE ACTION TAKEN BY THE GENERAL SERVICES ADMINISTRATION IN THE INSTANT CASE. WHILE IT IS, OF COURSE, DESIRABLE THAT EQUAL TREATMENT BE GIVEN BY ALL FEDERAL AGENCIES TO ALL BIDDERS UNDER IDENTICAL FACTS AND CIRCUMSTANCES, SUCH INFORMATION AS IS PRESENTLY AVAILABLE TO THIS OFFICE INDICATES THAT CONSIDERABLE VARIATION MAY EXIST BETWEEN THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE AND THOSE CONSTITUTING VIOLATIONS OF THE FEDERAL ANTITRUST STATUTES BY THE MANUFACTURERS OF ELECTRICAL EQUIPMENT. IN ANY EVENT, THE AUTHORITY TO DETERMINE IN THE FIRST INSTANCE WHETHER BIDDERS ON SPECIFIC PROCUREMENTS ARE RESPONSIBLE BIDDERS IS VESTED IN THE CONTRACTING AGENCIES AND, UNTIL THE QUESTION WHETHER AN ELECTRICAL EQUIPMENT SUPPLIER WHO HAS BEEN CONVICTED FOR ANTITRUST VIOLATION CAN BE CONSIDERED A RESPONSIBLE BIDDER IS PROPERLY PRESENTED TO THIS OFFICE FOR DETERMINATION ON THE BASIS OF SPECIFIED FACTS AND CIRCUMSTANCES SURROUNDING A PARTICULAR PROCUREMENT, WE ARE NOT IN A POSITION TO DETERMINE THAT IDENTICAL CONCLUSIONS ON RESPONSIBILITY, OR LACK OF RESPONSIBILITY, SHOULD BE REACHED WITH RESPECT TO SUCH COMPANIES AND TERMINAL CONSTRUCTION CORPORATION. THE MERITS OF YOUR PROTEST MUST THEREFORE BE DECIDED WITHOUT REFERENCE TO THE ACTION WHICH MAY, OR SHOULD, BE TAKEN WITH RESPECT TO OTHER BIDDERS WHO MAY BE SIMILARLY SITUATED.

CONCERNING YOUR ADVICE THAT THE CORPS OF ENGINEERS HAS AWARDED A CONTRACT TO TERMINAL CONSTRUCTION CORPORATION SINCE THE CONVICTION OF RICHARD N. DINALLO, YOUR ATTENTION IS INVITED TO 39 COMP. GEN. 468 WHERE, WHILE RECOGNIZING THE UNDESIRABILITY OF SUCH LACK OF UNIFORMITY IN DETERMINATIONS BY THE VARIOUS CONTRACTING AGENCIES, WE CONCLUDED THAT A DETERMINATION BY ONE AGENCY THAT A BIDDER WAS RESPONSIBLE WAS PERTINENT ONLY TO THE VALIDITY OF THE CONTRACT AWARDED PURSUANT TO SUCH DETERMINATION, AND COULD NOT BE INVOKED IN REFUTATION OF A NEGATIVE DETERMINATION BY ANOTHER AGENCY. THE SAME CONCLUSION WOULD APPEAR TO BE PROPER IN THE INSTANT CASE.

YOUR BELIEF THAT, IN VIEW OF THE NEW TRIAL GRANTED TO RICHARD N. DINALLO ON FEBRUARY 28, 1963, HIS PREVIOUS CONVICTION SHOULD BE DISREGARDED IN CONSIDERING THE MERITS OF YOUR PROTEST APPEARS TO BE BASED UPON THE FACT THAT, WHILE TURNER CONSTRUCTION COMPANY WAS NOTIFIED ON FEBRUARY 15, 1963, THAT ITS BID WAS ACCEPTED, A NOTICE TO PROCEED HAS NOT YET BEEN ISSUED; UPON YOUR BELIEF THAT A BINDING CONTRACT HAS THEREFORE NOT BEEN AWARDED; AND UPON YOUR BELIEF THAT BOTH THE GENERAL SERVICES ADMINISTRATION AND THIS OFFICE, IN DETERMINING WHETHER TERMINAL CONSTRUCTION CORPORATION IS A RESPONSIBLE BIDDER, THEREFORE MAY PROPERLY CONSIDER AND APPLY ANY CHANGE IN CIRCUMSTANCES WHICH OCCURRED AFTER THE DATE ON WHICH TURNER CONSTRUCTION COMPANY WAS NOTIFIED THAT ITS BID WAS ACCEPTED.

BY TELEGRAM OF FEBRUARY 15, 1963, THE ADMINISTRATION ADVISED THE TURNER CONSTRUCTION COMPANY, IN PERTINENT PART, AS FOLLOWS:

"YOUR BID * * * IS HEREBY ACCEPTED EXCLUSIVE OF ALTERNATES. FORMAL CONTRACT AWARD WILL LLOW.'

IT IS OUR OPINION THAT THIS NOTICE BOUND BOTH THE BIDDER AND THE GOVERNMENT TO EXECUTION OF A WRITTEN CONTRACT IN ACCORDANCE WITH THE TERMS OF THE INVITATION FOR BIDS, UNLESS IT CAN BE ESTABLISHED THAT THE CONTRACTING OFFICER WAS ACTING IN VIOLATION OF LAW, OR OTHERWISE OUTSIDE OF THE SCOPE OF HIS AUTHORITY, IN ACCEPTING THE BID. WHETHER THE CONTRACTING OFFICER WAS ACTING WITHIN, OR OUTSIDE OF, THE SCOPE OF HIS AUTHORITY MUST NECESSARILY BE DETERMINED AS OF THE TIME HE ACTED. THE COURT'S ACTION IN GRANTING RICHARD N. DINALLO A NEW TRIAL SUBSEQUENT TO THE DATE OF BID ACCEPTANCE CAN THEREFORE HAVE NO EFFECT UPON THE PROPRIETY OF THE CONTRACTING OFFICER'S ACTION IN ACCEPTING THE BID OF TURNER CONSTRUCTION COMPANY, AND IT NECESSARILY FOLLOWS THAT THIS OFFICE MUST, IN THE FIRST INSTANCE, DECIDE THE PROPRIETY OF THE AWARD TO TURNER CONSTRUCTION COMPANY BY APPLYING THE FACTS AND CIRCUMSTANCES AS THEY EXISTED AT THE TIME OF BID ACCEPTANCE. THE NATURE OF THE ACTION WHICH THE GENERAL SERVICES ADMINISTRATION MIGHT HAVE TAKEN UNDER DIFFERENT CIRCUMSTANCES THEREFORE BECOMES IMMATERIAL, ALTHOUGH IT SHOULD BE NOTED THAT WE HAVE BEEN ADVISED BY THE ADMINISTRATION UNDER DATE OF APRIL 3, 1963, THAT THE ADMINISTRATION'S ACTION WOULD NOT HAVE BEEN DIFFERENT EVEN IF THE PRESENT CIRCUMSTANCES HAD EXISTED AT THE TIME ITS ACTION WAS TAKEN.

CONCERNING YOUR CONTENTION THAT ANY LACK OF INTEGRITY ON THE PART OF RICHARD N. DINALLO WHICH IS BASED UPON HIS CONVICTION CANNOT BE IMPUTED TO TERMINAL CONSTRUCTION CORPORATION SINCE HE OWNS ONLY 50 PERCENT OF ITS VOTING STOCK AND THEREFORE CANNOT BE SAID TO BE IN CONTROL OF THE CORPORATION, IT SHOULD FIRST BE NOTED THAT THE STOCK HELD BY ANTHONY M. DINALLO HAS NO VOTING RIGHTS. YOUR ADVICE THAT THE VOTING STOCK IS OWNED IN EQUAL AMOUNTS BY RICHARD N. DINALLO AND V. P. CARNECCHIA, THE SECRETARY -TREASURER OF THE CORPORATION, IS THEREFORE ACCEPTED BY BOTH THE ADMINISTRATION AND THIS OFFICE AS A CORRECT STATEMENT OF THE EXISTING FACTS AT THE TIME IT WAS DETERMINED THAT TERMINAL WAS NOT A RESPONSIBLE BIDDER. HOWEVER, WE UNDERSTAND IT TO BE THE POSITION OF THE ADMINISTRATION THAT KNOWLEDGE, AT THE TIME IT DETERMINED TERMINAL COULD NOT BE CONSIDERED A RESPONSIBLE BIDDER, OF THE FACT THAT RICHARD N. DINALLO OWNED 50 PERCENT RATHER THAN 45 PERCENT OF THE CORPORATION'S VOTING STOCK WOULD NOT HAVE RESULTED IN THE DIFFERENT CONCLUSION BY THE ADMINISTRATION BUT WOULD HAVE BEEN CONSIDERED EVEN STRONGER EVIDENCE INDICATING THAT RICHARD N. DINALLO WAS IN A DOMINANT AND CONTROLLING POSITION IN THE CORPORATION. WE SEE NO VALID BASIS FOR A DIFFERENT CONCLUSION, AND THE QUESTION WHETHER A LACK OF INTEGRITY ON THE PART OF RICHARD N. DINALLO CAN PROPERLY BE IMPUTED TO TERMINAL CONSTRUCTION CORPORATION WILL THEREFORE BE CONSIDERED ON THE BASIS OF ACTUAL VOTING STOCK OWNERSHIP AS ESTABLISHED BY THE EVIDENCE YOU HAVE SUBMITTED.

IN OUR DECISION REPORTED AT 39 COMP. GEN. 468, WE RECOGNIZED THAT A CORPORATION GENERALLY IS TO BE VIEWED AS SEPARATE AND DISTINCT FROM ITS STOCKHOLDERS. HOWEVER, WE POINTED OUT THAT A CORPORATION CAN OPERATE ONLY THROUGH THE INDIVIDUALS WHO, AS OFFICERS, DIRECTORS, OR STOCKHOLDERS, CONTROL THE ACTIVITIES, POLICIES, AND MANAGEMENT OF THE CORPORATION, AND THAT THE INTEGRITY OF A CORPORATE BIDDER CAN THEREFORE BE NO GREATER THAN THE INDIVIDUALS WHO CONTROL ITS OPERATIONS. APPLYING THESE PRINCIPLES TO THE INSTANT CASE, THERE WOULD APPEAR TO BE NO DOUBT THAT RICHARD N. DINALLO, WITH OWNERSHIP OF 50 PERCENT OF THE CORPORATION'S VOTING STOCK AND OCCUPYING BOTH THE POSITIONS OF PRESIDENT DOMINANT AND CONTROLLING POSITION IN THE CONDUCT OF THE CORPORATION'S AFFAIRS. IN THE ABSENCE OF CONCLUSIVE EVIDENCE THAT THE CORPORATION IS, IN FACT, DOMINATED AND CONTROLLED BY OTHER THAN RICHARD N. DINALLO, WE MUST CONCLUDE THAT THE ADMINISTRATION WAS JUSTIFIED IN IMPUTING ANY LACK OF INTEGRITY ON HIS PART TO THE CORPORATION ITSELF.

WE TURN, THEN, TO THE QUESTION WHETHER LACK OF INTEGRITY ON THE PART OF TERMINAL CONSTRUCTION CORPORATION MAY BE IMPUTED TO THE JOINT VENTURE COMPOSED OF TERMINAL CONSTRUCTION CORPORATION, PAUL HARDEMAN, INCORPORATED, AND F. D. RICH COMPANY, INCORPORATED. AS PREVIOUSLY STATED, NO QUESTION WAS RAISED BY THE GENERAL SERVICES ADMINISTRATION CONCERNING THE INTEGRITY OF EITHER PAUL HARDEMAN, INCORPORATED, OR F. D. RICH COMPANY, INCORPORATED. THE PRIMARY QUESTION THEREFORE APPEARS TO BE WHETHER A LACK OF INTEGRITY IN ONE CORPORATION, WHICH THE CONTRACTING AGENCY CONSIDERS SUFFICIENTLY SERIOUS TO PRECLUDE A DETERMINATION THAT SUCH CORPORATION IS A RESPONSIBLE BIDDER, IS OVERCOME BY ASSOCIATION IN A JOINT VENTURE WITH TWO OTHER CORPORATIONS OF UNQUESTIONED INTEGRITY. THIS CONNECTION, YOUR BRIEF REFERS TO OUR DECISION REPORTED AT 39 COMP. GEN. 468 WHERE, IN CONSIDERING THE INTEGRITY OF A TWO PARTY JOINT VENTURE, WE HELD THAT LACK OF INTEGRITY IN ONE BIDDER IS NOT A CIRCUMSTANCE WHICH, LIKE LACK OF CAPACITY OR ABILITY TO PERFORM A CONTRACT, MAY BE CURED BY ASSOCIATION WITH ANOTHER BIDDER IN A JOINT VENTURE. WE THEREFORE CONCLUDED THAT AN AGENCY'S CONSIDERATION OF THE INTEGRITY OF A JOINT VENTURE SHOULD PROPERLY INCLUDE CONSIDERATION OF THE INTEGRITY OF EACH VENTURER, AND WHERE THE OBLIGATIONS OF ALL VENTURERS ARE EQUAL A FINDING OF LACK OF INTEGRITY IN ONE MAY BE CONSIDERED A SUFFICIENT BASIS TO SUPPORT A DETERMINATION THAT THE JOINT VENTURE IS NOT A RESPONSIBLE BIDDER. WHILE YOU EXPRESS NO DISAGREEMENT WITH THIS HOLDING, YOU CONTEND THAT THE INSTANT CASE MUST BE DISTINGUISHED ON THE FOLLOWING GROUNDS:

1. THE JOINT VENTURE CONSISTS OF THREE PARTIES, AND TERMINAL THEREFORE HAS ONLY A MINORITY INTEREST THEREIN.

2. UNDER THE SPECIFIC TERMS OF THE JOINT VENTURE AGREEMENT WHICH WAS TO BE EXECUTED BY THE THREE CORPORATIONS, F. D. RICH COMPANY, INCORPORATED, WAS TO BE DESIGNATED AS SPONSOR WITH AUTHORITY TO DIRECT AND CONTROL WORK UNDER THE CONTRACT.

3. THAT THE FAILURE OF THE GENERAL SERVICES ADMINISTRATION TO INQUIRE INTO THE SPECIFIC TERMS OF THE JOINT VENTURE AGREEMENT BEFORE PASSING UPON THE INTEGRITY OF THE JOINT VENTURE AS A WHOLE IS A VIOLATION OF SECTION 1- 1.310-7 OF THE FEDERAL PROCUREMENT REGULATIONS, WHICH REQUIRES CONTRACTING OFFICERS TO HAVE SUFFICIENT CURRENT INFORMATION TO SATISFY HIMSELF THAT THE PROSPECTIVE CONTRACTOR HAS A SATISFACTORY RECORD OF INTEGRITY BEFORE MAKING A DETERMINATION OF RESPONSIBILITY.

AS A GENERAL RULE, THE RIGHTS, DUTIES, AND OBLIGATIONS OF ALL MEMBERS OF A JOINT VENTURE ARE EQUAL, AS WELL AS JOINT AND SEVERAL. IN THE ABSENCE OF ADVICE TO THE CONTRARY IT WOULD THEREFORE APPEAR THAT CONTRACTING AGENCIES, IN CONSIDERING A BID SUBMITTED BY A JOINT VENTURE, MAY ASSUME THAT THE BID IS SUBMITTED ON THAT BASIS, AND THAT ACCEPTANCE OF THE BID WILL RESULT IN A CONTRACT UNDER WHICH THE GOVERNMENT MAY RELY UPON NOT ONLY THE JOINT VENTURE AS AN ENTITY, BUT ALSO EACH INDIVIDUAL MEMBER OF THE JOINT VENTURE, FOR FULL AND FAITHFUL PERFORMANCE OF THE CONTRACT WORK. WE THEREFORE SEE NO SOUND BASIS FOR CONCLUDING THAT A THREE-PART JOINT VENTURE, WHOSE MEMBERSHIP INCLUDES ONE WHO LACKS THE INTEGRITY OF A RESPONSIBLE BIDDER, MUST BE CONSIDERED A RESPONSIBLE BIDDER, WHILE A TWO- PARTY JOINT VENTURE, ONE OF WHOSE MEMBERS LACKS THE INTEGRITY OF A RESPONSIBLE BIDDER, MAY NOT BE CONSIDERED A RESPONSIBLE BIDDER. THE REFERENCE TO JOINT VENTURES "WHERE THE OBLIGATIONS OF ALL VENTURERS ARE EQUAL," IN OUR DECISION REPORTED AT 39 COMP. GEN. 468, WAS NOT INTENDED TO SO IMPLY.

IT WOULD, OF COURSE, APPEAR TO BE WITHIN THE DISCRETION OF THE CONTRACTING AGENCY TO INQUIRE INTO THE TERMS OF A JOINT VENTURE AGREEMENT BEFORE ACCEPTING OR REJECTING ITS BID, AND SOUND PROCUREMENT PRACTICE WOULD APPEAR TO SUGGEST SUCH PROCEDURE UNDER CERTAIN CIRCUMSTANCES, SUCH AS DOUBT AS TO ABILITY TO PERFORM, PRIOR TO REJECTION OF A JOINT VENTURE BID. HOWEVER, WE ARE NOT AWARE OF ANY REQUIREMENT OF LAW OR REGULATION WHICH IMPOSES A DUTY UPON CONTRACTING AGENCIES TO FOLLOW SUCH PROCEDURE. IN THIS CONNECTION, IT SHOULD BE NOTED THAT SECTION 1-1.310-7 OF THE FEDERAL PROCUREMENT REGULATIONS IMPOSES AN OBLIGATION UPON THE CONTRACTING OFFICER ONLY TO HAVE SUFFICIENT INFORMATION TO SUPPORT AN AFFIRMATIVE DETERMINATION THAT A BIDDER IS RESPONSIBLE. IT IMPOSES NO OBLIGATION TO GATHER INFORMATION TO SUPPORT THE NEGATIVE DETERMINATION THAT A BIDDER IS NOT RESPONSIBLE. IN THE ABSENCE OF A DUTY SO IMPOSED, THE FAILURE OF A CONTRACTING AGENCY TO VOLUNTARILY INQUIRE INTO THE SPECIFIC TERMS OF A JOINT VENTURE AGREEMENT FOR THE PURPOSE OF ASCERTAINING WHETHER A MEMBER OF THE JOINT VENTURE WHO LACKED THE INTEGRITY OF A RESPONSIBLE BIDDER WOULD, IN FACT, BE ASSUMING DUTIES AND OBLIGATIONS EQUAL TO THE OTHER VENTURERS IN PERFORMANCE OF A CONTRACT AWARDED TO THE JOINT VENTURE, WOULD NOT AFFECT THE VALIDITY OR LEGALITY OF A CONTRACT AWARDED TO ANOTHER BIDDER. IN VIEW OF THE FOREGOING, THE PROVISONS OF THE TERMINAL-HARDEMAN- RICH JOINT VENTURE AGREEMENT ARE IMMATERIAL TO OUR DECISION IN THIS MATTER. HOWEVER, IT SHOULD BE NOTED THAT THE PREBIDDING AGREEMENT EXECUTED BY THE PARTIES ON JANUARY 18, 1963, PROVIDES THAT THE INTERESTS OF EACH PARTY SHALL BE 33 1/3 PERCENT; THAT ALL PARTIES SHALL JOINTLY AND SEVERALLY EXECUTE ANY CONTRACT AWARDED BY THE GENERAL SERVICES ADMINISTRATION; THAT A JOINT VENTURE AGREEMENT SHALL BE EXECUTED UPON AWARD OF SUCH CONTRACT; AND THAT THE PREBIDDING AGREEMENT AND ALL OF ITS PROVISIONS SHALL BE DEEMED TO HAVE MERGED IN SUCH JOINT VENTURE AGREEMENT. THE PROPOSED JOINT VENTURE AGREEMENT, AS YET UNEXECUTED, WOULD DESIGNATE F. D. RICH COMPANY AS SPONSOR WHO, SUBJECT TO THE CONTROL OF AN OPERATING COMMITTEE, WOULD HAVE GENERAL CHARGE AND SUPERVISION OF THE PROJECT, WITH AUTHORITY TO APPOINT PROJECT MANAGERS, AGENTS, AND EMPLOYEES, TO EXECUTE SUBCONTRACTS AND AGREEMENTS, AND TO OTHERWISE OBLIGATE THE JOINT VENTURE. THE OPERATING COMMITTEE WOULD CONSIST OF ONE MEMBER NAMED BY EACH OF THE JOINT VENTURERS, AND WOULD BE EMPOWERED, BY MAJORITY VOTE, TO REVOKE THE DESIGNATION OF SPONSOR AND NAME A NEW SPONSOR, AND TO REVOKE, CHANGE OR AMEND ANY DECISION OR ACTION TAKEN BY THE SPONSOR EXCEPT SUCH ACTIONS AS MAY HAVE LEGALLY BOUND THE JOINT VENTURE. IT WOULD THEREFORE APPEAR TO HAVE BEEN INTENDED THAT TERMINAL CONSTRUCTION CORPORATION WOULD ASSUME AN ACTIVE, EVEN IF NOT CONTROLLING, POSITION IN THE AFFAIRS OF THE JOINT VENTURE.

IN VIEW OF THE FOREGOING IT IS OUR OPINION THAT THE GENERAL SERVICES ADMINISTRATION WAS ACTING WITHIN THE LIMITS OF ITS DISCRETIONARY AUTHORITY IN IMPUTING A LACK OF INTEGRITY IN TERMINAL CONSTRUCTION CORPORATION TO THE JOINT VENTURE. SINCE SECTION 1-1.310-5 (A) (5) OF THE FEDERAL PROCUREMENT REGULATIONS REQUIRES A DETERMINATION THAT A BIDDER HAVE A SATISFACTORY RECORD OF INTEGRITY AS A PREREQUISITE TO A DETERMINATION THAT HE IS A RESPONSIBLE BIDDER IT WOULD APPEAR TO BE UNNECESSARY TO CONSIDER THE BASES FOR THE ADMINISTRATION'S CONCLUSIONS ON THE EXPERIENCE AND JUDGMENT RECORD OF THE JOINT VENTURE. WE MUST THEREFORE CONCLUDE THAT THE AWARD TO TURNER CONSTRUCTION COMPANY CONSTITUTES A VALID AND BINDING OBLIGATION OF THE GOVERNMENT WHICH THIS OFFICE IS WITHOUT AUTHORITY TO DISTURB. YOUR PROTEST AGAINST SUCH AWARD IS THEREFORE DENIED. A COPY OF OUR LETTER OF TODAY TO THE ADMINISTRATOR OF GENERAL SERVICES, MAKING CERTAIN RECOMMENDATIONS WITH RESPECT TO FUTURE PROCUREMENTS, IS ENCLOSED.