B-135444, B-135504, OCTOBER 9, 1958, 38 COMP. GEN. 289

B-135444,B-135504: Oct 9, 1958

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CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - CERTIFICATION CONCLUSIVENESS A CERTIFICATE OF COMPETENCY ISSUED BY THE SMALL BUSINESS ADMINISTRATION CONCLUSIVELY ESTABLISHES A BIDDER'S PRESENT CAPACITY AND CREDIT AND REJECTION OF A BID SUBMITTED BY A BIDDER WHO HOLDS A CERTIFICATE OF COMPETENCY SOLELY ON THE BASIS OF AN ADMINISTRATIVE DETERMINATION BY THE PROCUREMENT AGENCY THAT THE BIDDER'S LACK OF CAPACITY OR CREDIT RESULTED IN UNSATISFACTORY PERFORMANCE OF PRIOR CONTRACTS IS NOT AUTHORIZED. 1958: REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 12. ADVISING THAT CERTAIN PROCURING AGENCIES ARE CONSTRUING SUCH LANGUAGE TO MEAN THAT IT WOULD BE ILLEGAL TO HONOR A CERTIFICATE OF COMPETENCY ISSUED BY YOUR ADMINISTRATION PURSUANT TO SECTION 8 (B) (7) OF PUBLIC LAW 85-536.

B-135444, B-135504, OCTOBER 9, 1958, 38 COMP. GEN. 289

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - CERTIFICATION CONCLUSIVENESS A CERTIFICATE OF COMPETENCY ISSUED BY THE SMALL BUSINESS ADMINISTRATION CONCLUSIVELY ESTABLISHES A BIDDER'S PRESENT CAPACITY AND CREDIT AND REJECTION OF A BID SUBMITTED BY A BIDDER WHO HOLDS A CERTIFICATE OF COMPETENCY SOLELY ON THE BASIS OF AN ADMINISTRATIVE DETERMINATION BY THE PROCUREMENT AGENCY THAT THE BIDDER'S LACK OF CAPACITY OR CREDIT RESULTED IN UNSATISFACTORY PERFORMANCE OF PRIOR CONTRACTS IS NOT AUTHORIZED.

TO THE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION, OCTOBER 9, 1958:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 12, 1958, INVITING ATTENTION TO CERTAIN LANGUAGE CONTAINED IN OUR DECISION OF APRIL 14, 1958 (37 COMP. GEN. 676), AND ADVISING THAT CERTAIN PROCURING AGENCIES ARE CONSTRUING SUCH LANGUAGE TO MEAN THAT IT WOULD BE ILLEGAL TO HONOR A CERTIFICATE OF COMPETENCY ISSUED BY YOUR ADMINISTRATION PURSUANT TO SECTION 8 (B) (7) OF PUBLIC LAW 85-536, 72 STAT. 384, 15 U.S.C. 637 (FORMERLY SECTIONS 212 (D) AND 213 (A) OF THE SMALL BUSINESS ACT OF 1953) IF THE LOW BID OF A SMALL BUSINESS CONCERN IS REJECTED BECAUSE OF PRIOR DELINQUENCIES OR DEFAULTS, EVEN THOUGH SUCH DELINQUENCIES ARE VIEWED ONLY AS INDICATING THAT THE BIDDER DOES NOT HAVE THE PRESENT CAPABILITY IN TERMS OF CAPACITY OR CREDIT TO PERFORM THE WORK.

YOUR LETTER QUOTES OUR DECISION OF APRIL 14, 1958, IN PERTINENT PART, AS FOLLOWS:

* * * WE THINK SUCH PROVISION (SECTION 213) MUST BE CONSTRUED AS CONTROLLING ONLY INSOFAR AS IT CONFLICTS WITH A DETERMINATION BY A PROCUREMENT OFFICER AS TO THE CAPACITY OR CREDIT OF A BIDDER. HOWEVER, IF A BIDDER IS FOUND NOT TO BE QUALIFIED FOR OTHER REASONS, AS FOR EXAMPLE * * * A CONSISTENT RECORD OF DEFAULT * * * IN OUR VIEW THE CERTIFICATE * * * WOULD NOT BE DETERMINATIVE * * * ( ITALICS SUPPLIED.)

YOU ADVISE THAT YOU DO NOT INTERPRET THIS LANGUAGE AS IMPLYING OR JUSTIFYING THE CONCLUSION THAT THE QUESTION OF CAPACITY AND CREDIT OF A SMALL BUSINESS CONCERN AND THE PAST PERFORMANCE OF SUCH CONCERN ARE NECESSARILY UNRELATED, AND YOU THEREFORE ASK TO BE ADVISED AS TO WHETHER YOU ARE CORRECT IN YOUR BELIEF THAT THE REFERENCE IS OUR DECISION TO PRIOR DEFAULTS WAS NOT INTENDED TO, AND SHOULD NOT BE INTERPRETED AS, AUTHORIZING PROCUREMENT OFFICIALS TO REFUSE TO MAKE AN AWARD TO A SMALL BUSINESS CONCERN BECAUSE OF THE CONCERN'S PRIOR DEFAULTS OR DELINQUENCIES IF THE CONCERN HOLDS A CERTIFICATE OF COMPETENCY ISSUED BY YOUR ADMINISTRATION AND THE DEFAULTS OR DELINQUENCIES ARE VIEWED ONLY AS REFLECTING ON THE CONCERN'S PRESENT CAPACITY, FOR CAPACITY OR CREDIT REASONS, TO PERFORM THE CONTRACT.

SINCE OUR DECISION OF APRIL 14, WE HAVE HAD OCCASION IN A DECISION DATED MAY 28, 1958 (37 COMP. GEN. 798), TO CONSIDER ONE ASPECT OF THE QUESTION YOU PRESENT. IN THAT CASE A SMALL BUSINESS CONCERN PROTESTED A DECISION OF THE CONTRACTING OFFICER THAT THE CONCERN COULD NOT BE REGARDED AS A RESPONSIBLE BIDDER BECAUSE OF UNSATISFACTORY PERFORMANCE ON CURRENT CONTRACTS AT ANOTHER GOVERNMENT INSTALLATION. THE CONCERN PROTESTED SUCH DETERMINATION, BASING ITS PROTEST IN PART UPON A CONTENTION THAT IT WAS INCUMBENT UPON THE CONTRACTING OFFICER TO SUBMIT THE QUESTION OF COMPETENCY TO YOUR ADMINISTRATION AND TO BE GUIDED IN DETERMINING THE CONCERN'S ELIGIBILITY FOR AWARD BY YOUR DETERMINATION AS TO WHETHER A CERTIFICATE OF COMPETENCY SHOULD BE ISSUED. IN RESPONSE TO SUCH CONTENTION WE POINTED OUT THAT, WHILE DETERMINATIONS BY YOUR ADMINISTRATION WITH RESPECT TO A SMALL BUSINESS CONCERN'S CAPACITY AND CREDIT WERE CONCLUSIVE UPON CONTRACTING OFFICERS, NO QUESTION AS TO THE CONCERN'S COMPETENCY IN THAT RESPECT HAD BEEN RAISED IN EVALUATING THE BID, AND IT WAS OUR OPINION THAT WHERE A BIDDER IS FOUND NOT TO BE RESPONSIBLE BECAUSE OF PRIOR UNSATISFACTORY CONTRACT PERFORMANCE WHICH THE CONTRACTING OFFICER DOES NOT ATTRIBUTE TO LACK OR CAPACITY OR CREDIT, THE QUESTION OF COMPETENCY NEED NOT BE SUBMITTED TO YOUR ADMINISTRATION. BELIEVE THIS DECISION CORRECTLY INTERPRETS THE APPLICABLE STATUTES WHERE IT IS THE CONSIDERED OPINION OF PROCUREMENT OFFICIALS THAT A SMALL BUSINESS CONCERN'S UNSATISFACTORY PRIOR PERFORMANCE WAS ATTRIBUTABLE TO CAUSES OTHER THAN INADEQUATE CAPACITY OR CREDIT.

HOWEVER, WE MUST AGREE WITH YOUR STATEMENT THAT OUR DECISION OF APRIL 14 (OR OUR DECISION OF MAY 28), SHOULD NOT BE INTERPRETED AS JUSTIFYING A CONCLUSION THAT QUESTIONS OF CAPACITY AND CREDIT AND QUESTIONS OF PAST PERFORMANCE ARE NECESSARILY UNRELATED. CONCEIVABLY, A CONTRACTING OFFICER IN EVALUATING PAST PERFORMANCE OF A SMALL BUSINESS CONCERN COULD CONCLUDE THAT UNSATISFACTORY PERFORMANCE WAS ATTRIBUTABLE SOLELY TO INADEQUATE CAPACITY OR CREDIT. THIS APPEARS TO BE THE SITUATION WHICH HAS GIVEN RISE TO YOUR QUESTION, AND UNDER SUCH CIRCUMSTANCES IT IS OUR OPINION THAT A CERTIFICATE OF COMPETENCY ISSUED BY YOUR ADMINISTRATION WOULD BE CONCLUSIVE ON THE QUESTION OF PRESENT CAPACITY AND CREDIT, AND THAT REJECTION OF THE CONCERN'S BID AND REFUSAL TO MAKE AN AWARD SOLELY BECAUSE PROCUREMENT OFFICIALS WERE OF THE OPINION THAT THE CONCERN'S LACK OF CAPACITY OR CREDIT RESULTED IN UNSATISFACTORY PERFORMANCE OF PRIOR CONTRACTS WOULD, IN THE ABSENCE OF CIRCUMSTANCES SUCH AS ARE CONTEMPLATED BY ASPR 1-705.6 (B) (A), BE UNAUTHORIZED WITHOUT FIRST REFERRING THE QUESTION TO YOUR ADMINISTRATION. IN THIS CONNECTION, SEE PARAGRAPH 1- 705.6 (B) OF THE ARMED SERVICES PROCUREMENT REGULATION AND SECTION 209.23B1 (D) (3), GENERAL SERVICES ADMINISTRATION MANUAL GS 5, VOLUME GS 5 -1.