B-132231, OCT. 16, 1957

B-132231: Oct 16, 1957

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NO AWARD HAS BEEN MADE ON ITEM NO. 2 PENDING THE AVAILABILITY OF FUNDS AND ITEMS 3 AND 4 HAVE BEEN WITHDRAWN. WAS SUBMITTED BY YOUR FIRM. 900 WAS SUBMITTED BY NORDAN-KETAY. YOUR BID WAS REJECTED AND AWARD MADE TO NORDEN-KETAY AS THE LOWEST RESPONSIBLE BIDDER. IS BASED ON THE FOLLOWING GROUNDS: 1. YOU ARE A SMALL BUSINESS 2. YOU HAVE SUCCESSFULLY PRODUCED THE KIND OF ITEMS CALLED FOR FOR MANY YEARS. 3. YOU HAVE IN STOCK A LARGE QUANTITY OF COMPONENTS FOR THE CONTRACT ITEMS. 4. AWARDS AFTER FORMAL ADVERTISING ARE REQUIRED UNDER 10 U.S.C. 2305 (B) TO BE MADE "TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES. A RESPONSIBLE BIDDER IS ONE WHO POSSESSES.

B-132231, OCT. 16, 1957

TO PARK CITY ELECTRONIC LABORATORY, INC.:

YOUR TELEGRAM OF JUNE 20, 1957, PROTESTED THE AWARD OF A CONTRACT TO THE NORDEN-KETAY CORPORATION FOR RESISTOR ASSEMBLIES PURSUANT TO ITEM NO. 1 OF INVITATION FOR BIDS NO. SC-36-039-57-2374-58 ISSUED MAY 16, 1957, BY THE UNITED STATES ARMY SIGNAL SUPPLY AGENCY.

THE INVITATION, AS AMENDED, REQUESTED BIDS ON FOUR ITEMS. NO AWARD HAS BEEN MADE ON ITEM NO. 2 PENDING THE AVAILABILITY OF FUNDS AND ITEMS 3 AND 4 HAVE BEEN WITHDRAWN. THE LOW BID ON ITEM NO. 1 OF $52,910, LESS PROMPT PAYMENT DISCOUNT, WAS SUBMITTED BY YOUR FIRM. THE SECOND LOW BID AT $53,900 WAS SUBMITTED BY NORDAN-KETAY. UPON A DETERMINATION THAT YOUR FIRM DID NOT POSSESS THE REQUISITE FINANCIAL CAPABILITIES TO PERFORM A CONTRACT OF THE DOLLAR MAGNITUDE INVOLVED, YOUR BID WAS REJECTED AND AWARD MADE TO NORDEN-KETAY AS THE LOWEST RESPONSIBLE BIDDER.

YOUR PROTEST, AS STATED IN YOUR TELEGRAM, IS BASED ON THE FOLLOWING GROUNDS:

1. YOU ARE A SMALL BUSINESS

2. YOU HAVE SUCCESSFULLY PRODUCED THE KIND OF ITEMS CALLED FOR FOR MANY YEARS.

3. YOU HAVE IN STOCK A LARGE QUANTITY OF COMPONENTS FOR THE CONTRACT ITEMS.

4. YOU PROVIDED THE SIGNAL SUPPLY AGENCY WITH A LETTER OF CREDIT INDICATING YOUR FINANCIAL ABILITY TO PERFORM.

AWARDS AFTER FORMAL ADVERTISING ARE REQUIRED UNDER 10 U.S.C. 2305 (B) TO 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.' A RESPONSIBLE BIDDER IS ONE WHO POSSESSES, AMONG OTHER ATTRIBUTES, THE FINANCIAL CAPABILITY TO PERFORM. SEE OSBORN V. MITTEN, 6 P.2D 902; WILLIS V. HATHAWAY, 117 SO. 89, 94; INGE V. BOARD OF PUBLIC WORKS, 33 SO. 678, 681; 30 COMP. GEN. 235; 26 ID. 676. YOUR CAPABILITY TO PERFORM IN ANY OTHER RESPECT HAS NOT BEEN QUESTIONED. THEREFORE, WHETHER AWARD IN THIS INSTANCE COULD PROPERLY HAVE BEEN MADE TO A HIGHER BIDDER DEPENDS UPON WHETHER THE DETERMINATION THAT YOU LACK THE FINANCIAL CAPABILITY TO PERFORM WAS PROPERLY MADE.

THE REPORT RECEIVED FROM THE DEPARTMENT OF THE ARMY STATES THAT THE DETERMINATION AS TO YOUR FINANCIAL INCAPACITY WAS BASED ON THE LATEST AVAILABLE FINANCIAL STATEMENT OF YOUR FIRM DATED AUGUST 23, 1956, WHICH DISCLOSED A NET WORKING CAPITAL OF $3,970, TOTAL CASH ON HAND AMOUNTING TO APPROXIMATELY $43 AND A TANGIBLE NET WORTH OF $1,239. IT IS ALSO STATED THAT A VISIT BY A REPRESENTATIVE OF THE CONTRACTING AGENCY TO OBTAIN A MORE RECENT FINANCIAL STATEMENT FROM THE FIRM WAS MADE WITHOUT SUCCESS AND AN ATTEMPT TO CONTACT YOU BY TELEPHONE ON JUNE OF 1957, DISCLOSED THAT THE TELEPHONE HAD BEEN DISCONNECTED. IT IS STATED FURTHER THAT A LETTER OF JUNE 7, 1957, FROM THE UNITED STATES FINANCE CO., INC., INDICATING THEIR WILLINGNESS TO MAKE AVAILABLE TO YOUR FIRM ON A FACTORING BASIS SUCH SUMS AS MAY BE REQUIRED TO CARRY OUT THE CONTRACT WAS CONSIDERED BUT THE SUPPORT TO BE AFFORDED BY THE FACTOR WAS NOT CONSIDERED ADEQUATE IN VIEW OF THE POOR FINANCIAL CONDITION OF YOUR FIRM AS INDICATED BY THE FINANCIAL STATEMENT REFERRED TO ABOVE. THE ADMINISTRATIVE REPORT FURTHER STATES THAT THE PROPOSED REJECTION OF YOUR LOW BID WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION ON JUNE 7, 1957, FOR A CERTIFICATE OF COMPETENCY BUT THE CASE WAS RETURNED BY SBA ON THE SAME DATE WITHOUT ACTION BECAUSE THERE WAS INSUFFICIENT TIME FOR PROCESSING.

THE SALIENT BASES FOR THE DETERMINATION CONCERNING YOUR LACK OF FINANCIAL RESPONSIBILITY MADE BY THE CONTRACTING AGENCY WERE COMMUNICATED TO YOU BY TELEPHONE. YOUR LETTER OF AUGUST 1, 1957, IN REFUTATION, POINTS OUT THAT YOU HAVE SUCCESSFULLY MANUFACTURED APPROXIMATELY $1,000,000 WORTH OF THE ITEMS UNDER PROCUREMENT AND THAT YOU HAVE SUCCESSFULLY COMPLETED 46 CONTRACTS WITH THE GOVERNMENT FOR SUCH ITEMS, REPRESENTING A DOLLAR VALUE OF APPROXIMATELY $92,000. THE LARGEST OF THESE CONTRACTS WITH THE GOVERNMENT FROM A DOLLAR STANDPOINT WAS APPROXIMATELY $17,000. YOU ALSO POINT OUT THAT THE SPECIFICATIONS FOR THE ITEM IN QUESTION WERE BASED ON DRAWINGS AND COMPLETE MANUFACTURING INFORMATION ORIGINALLY FURNISHED BY YOUR FIRM. FURTHER, YOU STATE THAT YOU MADE AVAILABLE TO A REPRESENTATIVE OF THE CONTRACTING AGENCY THE LETTER OF JUNE 7, 1957, FROM THE FACTOR REFERRED TO ABOVE AND THAT ON JUNE 12, 1957, YOU WERE GIVEN UNTIL JUNE 17 TO FURNISH A RECENT FINANCIAL STATEMENT BUT THAT SUCH STATEMENT WAS NOT FURNISHED BECAUSE YOU WERE ADVISED ON JUNE 14 THAT THE AWARD TO NORDEN KETAY HAD BEEN MADE ON JUNE 8. YOU FURTHER INDICATE THAT YOU HAD AN INVENTORY OF APPROXIMATELY $10,000 WORTH OF COMPONENT PARTS FOR THE ITEM UNDER PROCUREMENT AND THAT THE CONTRACTING OFFICER, AT THE TIME THE AWARD TO NORDEN-KETAY WAS MADE, COULD NOT HAVE BEEN AWARE EITHER OF SUCH INVENTORY OR THE MANNER IN WHICH YOUR FIRM PROPOSED TO FINANCE THE CONTRACT. FINALLY, YOU STATE THAT ON TWO PREVIOUS OCCASIONS YOUR FIRM HAD BEEN DECLARED FINANCIALLY INCOMPETENT BY THE SIGNAL SUPPLY AGENCY, AND THAT YOU, NEVERTHELESS, WERE ISSUED CERTIFICATES OF COMPETENCY BY THE SMALL BUSINESS ADMINISTRATION AND SUCCESSFULLY COMPLETED BOTH CONTRACTS.

IN VIEW OF YOUR LETTER OF AUGUST 1, 1957, A SECOND REPORT WAS REQUESTED FROM THE DEPARTMENT OF THE ARMY. THIS REPORT INDICATES THAT THE CONTRACTING AGENCY WAS AWARE OF YOUR PREVIOUS SATISFACTORY PERFORMANCE BUT THAT THE PASSAGE OF TIME AND THE WEAK FINANCIAL POSITION OF YOUR FIRM MADE YOUR FINANCIAL COMPETENCY A PRIMARY CONSIDERATION IN AWARDING THE CONTRACT. IN REGARD TO YOUR STATEMENTS CONCERNING THE REQUEST FOR A MORE RECENT FINANCIAL STATEMENT MADE ON JUNE 12 AFTER AWARD ON ITEM 1 HAD ALREADY BEEN MADE, IT IS STATED THAT THIS REQUEST WAS MADE WITH REFERENCE TO ITEM NO. 2 OF THE INVITATION. YOUR FIRM AS LOW BIDDER WAS UNDER CONSIDERATION FOR AWARD OF ITEM 2 SINCE IT WAS POSSIBLE IN THAT CASE THAT YOUR FINANCIAL CONDITION WAS ADEQUATE IN VIEW OF THE RELATIVELY SMALL DOLLAR VALUE ($5,000) INVOLVED. AS TO CONTENTION THAT THE CONTRACTING OFFICER COULD NOT HAVE BEEN AWARE AT THE TIME OF AWARD OF EITHER YOUR INVENTORY OR THE FINANCIAL SUPPORT OFFERED BY THE UNITED STATES FINANCE CO., IT IS STATED THAT BOTH OF THESE FACTS HAD BEEN BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER ON JUNE 7, 1957, PRIOR TO AWARD BY THE REPRESENTATIVES OF THE CONTRACTING AGENCY WHO, AS YOU ACKNOWLEDGE IN YOUR LETTER OF AUGUST 1, HAD SURVEYED YOUR PLANT ON THAT DAY. IT IS FURTHER INDICATED THAT THE AWARD TO NORDEN-KETAY WAS MADE WITH FULL KNOWLEDGE OF YOUR INVENTORY AND PROMISE OF FINANCIAL SUPPORT ON THE BASIS THAT THESE FACTORS WERE INSUFFICIENT TO OVERCOME YOUR QUESTIONABLE FINANCIAL CONDITION.

IT IS SIGNIFICANT TO NOTE THAT THE CONTRACTS WHICH YOU HAVE PREVIOUSLY PERFORMED SUCCESSFULLY FOR THE SUPPLY AGENCY WERE MUCH SMALLER IN DOLLAR VALUE THAN THAT HERE UNDER CONSIDERATION. FURTHER, IT DOES NOT APPEAR THAT YOU, AT ANY TIME, EITHER PRIOR TO THE AWARD TO NORDEN-KETAY OR SINCE, ASSERTED THAT THE FINANCIAL STATEMENT UPON WHICH THE DETERMINATION AS TO YOUR FINANCIAL RESPONSIBILITY WAS MADE WAS INACCURATE OR THAT IT DID NOT PROPERLY REFLECT YOUR PRESENT FINANCIAL CONDITION.

WE HAVE CONSISTENTLY HELD THAT THE RESPONSIBILITY OF A BIDDER IS PRIMARILY A MATTER FOR DETERMINATION BY THE CONTRACTING AGENCY. B 131286, JUNE 14, 1957; B-127823, JUNE 20, 1956; B-120300, MARCH 8, 1955. SUCH DETERMINATION IS NOT SUBJECT TO REVIEW BY OUR OFFICE IN THE ABSENCE OF A SHOWING OF FRAUD, COLLUSION, BAD FAITH OR LACK OF PROPER FACTUAL BASIS. -128237, JULY 31, 1956. UNDER THE CIRCUMSTANCES STATED ABOVE THERE IS APPARENT NO LEGALLY VALID BASIS UPON WHICH WE MAY CONCLUDE THAT THE AWARD TO NORDEN-KETAY WAS IMPROPER.

IN YOUR LETTER OF AUGUST 1, YOU ALSO POINT OUT THAT THE DELIVERY SCHEDULE IN THE INVITATION PURSUANT TO WHICH AWARD WAS MADE WAS STRETCHED OUT AS COMPARED TO A PRIOR INVITATION WHICH WAS SUBSEQUENTLY CANCELLED. YOU QUESTION THE REASONS FOR SUCH STRETCH-OUT, PARTICULARLY SINCE YOU WERE IN A POSITION, AND OFFERED, TO MAKE DELIVERY UNDER A MUCH SHORTER SCHEDULE THAN REQUIRED. THE DRAFTING OF PROCUREMENT SPECIFICATIONS TO REFLECT THE MINIMUM NEEDS OF THE GOVERNMENT IS PRIMARILY THE RESPONSIBILITY OF THE CONTRACTING AGENCY. 36 COMP. GEN. 251; 17 COMP. GEN. 554. SINCE IT APPEARS THAT THE DELIVERY SCHEDULE STIPULATED IN THE LATER INVITATION ADEQUATELY MET THE MINIMUM NEEDS OF THE GOVERNMENT AND SINCE A TIGHTER DELIVERY SCHEDULE MIGHT CONCEIVABLY HAVE RESULTED IN A HIGHER COST TO THE GOVERNMENT, WE SEE NO BASIS FOR QUESTIONING THE STRETCH-OUT.