B-136704, SEP 19, 1958

B-136704: Sep 19, 1958

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INCORPORATED: REFERENCE IS MADE TO YOUR LETTER OF JULY 9. IT IS YOUR CONTENTION. THAT THE REFUSAL BY THE PROCUREMENT AGENCY TO AWARD YOU THE CONTRACT WAS CONTRARY TO LAW SINCE YOUR PROPOSAL WAS THE LOWEST OFFER SUBMITTED IN RESPONSE TO THE SUBJECT INVITATION. THAT THE BASIS RELIED UPON BY THE ADMINISTRATIVE OFFICE IN REJECTING YOUR BID WAS NOT SUPPORTED BY THE FACTS. MORE SPECIFICALLY YOU ALLEGE IN SUPPORT OF YOUR POSITION THAT NOT SUFFICIENT TIME WAS DEVOTED TO THE STUDY OF YOUR FACILITIES DURING THE PRE-AWARD SURVEY CONDUCTED BY REPRESENTATIVES OF THE DEPARTMENT OF THE AIR FORCE TO BE REALISTIC. THAT AWARD OF THE INSTANT CONTRACT WAS MADE TO A CONTRACTOR NOW IN DEFAULT UNDER ANOTHER CONTRACT.

B-136704, SEP 19, 1958

PRECIS-UNAVAILABLE

SABRE METAL PRODUCTS, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTER OF JULY 9, 1958, WITH ENCLOSURES, AND TO OTHER COMMUNICATIONS, PROTESTING THE AWARD OF A CONTRACT NO. CONSOLIDATED DIESEL ELECTRIC CORPORATION UNDER INVITATION TO BID NO. AFP-33-600-50-146, AS AMENDED, ISSUED BY THE UNITED STATES AIR FORCE, AIR MATERIAL COMMAND, WRIGHT-PATTERSON AIR FORCE BASE, OHIO. IT IS YOUR CONTENTION, IN SUBSTANCE, THAT THE REFUSAL BY THE PROCUREMENT AGENCY TO AWARD YOU THE CONTRACT WAS CONTRARY TO LAW SINCE YOUR PROPOSAL WAS THE LOWEST OFFER SUBMITTED IN RESPONSE TO THE SUBJECT INVITATION, AND THAT THE BASIS RELIED UPON BY THE ADMINISTRATIVE OFFICE IN REJECTING YOUR BID WAS NOT SUPPORTED BY THE FACTS. MORE SPECIFICALLY YOU ALLEGE IN SUPPORT OF YOUR POSITION THAT NOT SUFFICIENT TIME WAS DEVOTED TO THE STUDY OF YOUR FACILITIES DURING THE PRE-AWARD SURVEY CONDUCTED BY REPRESENTATIVES OF THE DEPARTMENT OF THE AIR FORCE TO BE REALISTIC; THAT YOU HAD SATISFACTORILY PRODUCED THE SAFE EQUIPMENT IN THE PAST FOR THE GOVERNMENT; AND, THAT AWARD OF THE INSTANT CONTRACT WAS MADE TO A CONTRACTOR NOW IN DEFAULT UNDER ANOTHER CONTRACT.

THE APPLICABLE STATUTE (20 U.S.C. 2345(B)) PERTAINING TO THE MATTER PROVIDED THAT AWARD AFTER FORMAL ADVERTISING SHALL BE "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." RESPONSIBLE BIDDER IS ONE WHO POSSESSES, AMONG OTHER ATTRIBUTES, THE FINANCIAL CAPABILITY TO PERFORM. SEE OSBORN V. HITTCH, 6P. 2D 902. IN A REPORT DATED AUGUST 15, 1956, THE ASSISTANT SECRETARY OF THE AIR FORCE STATED THAT IN CONTEMPLATION OF AN AWARD OF A CONTRACT TO YOU A PRE-AWARD FACILITIES CAPABILITY SURVEY OF YOUR CORPORATION WAS MADE BY THE CHICAGO AIR PROCUREMENT DISTRICT WHICH DISCLOSED NEGATIVE FINDINGS IN THE AREAS OF (1) QUALITY CONTROL, (2) FINANCIAL STABILITY, (3) BUSINESS PRACTICES, AND (4) ACCOUNTING PRACTICES. THOSE FINDINGS WERE REVIEWED BY THE FACILITY ADVISORY BOARD OF THE OKLAHOMA CITY AIR MATERIAL AREA, WHICH SUSTAINED THE NEGATIVE FINDINGS WITHOUT EXCEPTION.

THE FILE DISCLOSES THAT APPROXIMATELY 36 MAN-HOURS WERE DEVOTED TO THE SURVEY AND THE ASSISTANT SECRETARY OF THE AIR FORCE STATES THAT A SUFFICIENT PERIOD OF TIME WAS DEVOTED TO THE SURVEY TO DEVELOP THE SALIENT FACTS RELIED UPON BY THE DEPARTMENT OF THE AIR FORCE IN ITS ACTION TO WHICH YOU NOW TAKE EXCEPTION. IN A MORE DETAILED STATEMENT OF FACTS DATED JULY 15, 1956, BY THE CONTRACTING OFFICER, ELEVEN ELEMENTS WERE ITEMIZED SUPPORTING THE CONCLUSION THAT YOUR CORPORATION DID NOT HAVE ADEQUATE SYSTEMS ESTABLISHED FOR THE QUALITY CONTROL REQUIRED UNDER GENERAL SPECIFICATIONS DATED MARCH 15, 1956 (MIL-Q 59236), IN THE PRODUCTION OF THE SUBJECT EQUIPMENT.

IN CONNECTION WITH THE QUESTION OF YOUR FINANCIAL CAPABILITY TO PRODUCE THE ARTICLES WHICH EXCEED A TOTAL COST OF OVER ONE MILLION DOLLARS, THE RECORD SHOWS THAT A BALANCE SHEET DATED MAY 31, 1956, REVEALED A NET WORTH OF ONLY $45,873.20, WITH CASH ON HAND OF $3,669.98, WHICH HAS DEEMED INADEQUATE BY THE DEPARTMENT OF THE AIR FORCE TO FINANCE THE CONTRACT. WHILE SUCH REPORTS ARE PREDICATED UPON A CONTRACTOR'S CURRENT CAPITAL RESOURCES, THERE WAS NO ASSURANCE OFFERED THAT ADEQUATE FINANCING WAS OBTAINABLE FROM WITHIN YOUR ORGANIZATION OR FROM OTHER SOURCES. AS TO YOUR OFFER TO FURNISH A PERFORMANCE BOND IN THE AMOUNT OF $100,000, WHICH THE PROCUREMENT OFFICIALS CONSIDERED INADEQUATE, SEE PIBES V. ARNESBERRY, 119 A. 727, WHICH HELD THAT THE GIVING OF A PERFORMANCE BOND UNDER A PUBLIC CONTRACT "DOES NOT MAKE UP FOR RESPONSIBILITY."

WITH RESPECT TO YOUR REFERENCE TO THE PRODUCTION OF THESE UNITS UNDER PRIOR GOVERNMENT CONTRACTS, THE FILE SUBMITTED TO US FOR CONSIDERATION CONTAINS A LETTER DATED JULY 12, 1958, FROM THE DEPARTMENT OF THE NAVY, BUREAU OF AERONAUTICS, WHICH STATES IN PART AS FOLLOWS - "BASED UPON THE POOR MANUFACTURING PRACTICES PERFORMED BY THE SABRE METAL PRODUCTS, INC., AND THEIR INABILITY OR UNWILLINGNESS TO TAKE ADEQUATE CORRECTIVE ACTION, WHICH HAS RESULTED IN WITHHOLDING OF SOME PAYMENT UNDER CONTRACT M160-249A -17592, THIS BUREAU IS OF THE FIRM OPINION THAT THEY CANNOT MANUFACTURE OR PROPERLY SERVICE A HIGH COST, COMPLEX UNIT LIKE THE TYPE MC-1 AIRFIELD VACUUM SWEEPER." IN SUPPORT OF THAT CONCLUSION THERE HAS BEEN FURNISHED COPIES OF NUMEROUS FIELD COMPLAINTS RELATIVE TO MECHANICAL FAILURE OF SUCH UNITS AND THE APPARENT UNREASONABLE DELAY IN CORRECTING THE DEFECTS. ALSO, IN LETTER DATED JULY 10, 1958, FROM THE DIRECTOR, MAINTENANCE, ENGINEERING, MEMPHIS AIR FORCE DEPOT, TO THE AIR MATERIEL COMMAND, WRIGHT- PATTERSON AIR FORCE BASE, IT WAS STATED THAT "DUE TO THE DIFFICULTIES ENCOUNTERED ON THE SABRE SWEEPER, THE AF UTILIZATION OF THIS EQUIPMENT HAS BEEN LIMITED. IN VIEW OF THE UNSATISFACTORY SERVICES RENDERED BY THE CONTRACTOR AND DEFICIENCIES IN HIS EQUIPMENT, WE DO NOT RECOMMEND PROCUREMENT OF ADDITIONAL SABRE SWEEPERS." SINCE REJECTION OF YOUR BID WAS PREDICATED ON GROUNDS OTHER THAN THE LACK OF PRODUCTION AND ENGINEERING FACILITIES, MENTION IS MADE OF THE FOREGOING NOT ONLY BECAUSE OF THE EMPHASIS WHICH YOU PLACE UPON THE FACT THAT HERETOFORE YOU HAVE PRODUCED SOME 275 UNITS, BUT THE EFFECT OF SUCH REPORTS WHEN CONSIDERED BY THE ADMINISTRATIVE OFFICE IN EVALUATING YOUR BUSINESS PRACTICES.

A FURTHER BASIS FOR THE ADMINISTRATIVE ACTION TAKEN INVOLVED AN EXAMINATION OF YOUR ACCOUNTING SYSTEMS BECAUSE OF YOUR REQUEST FOR PROGRESS PAYMENTS IN THE EVENT OF AN AWARD OF A CONTRACT TO YOU. THE ARMY AUDIT AGENCY DETERMINED THAT IN ADDITION TO YOUR DIFFICULT FINANCIAL STRUCTURE YOUR COST ACCOUNTING SYSTEM WAS NOT ADEQUATE TO WARRANT APPROVAL OF PROGRESS PAYMENTS OTHERWISE REQUIRED IN THE PROTECTION OF THE GOVERNMENT'S INTEREST.

CERTAIN ADDITIONAL CHARGES HAVE BEEN MADE TO THE EFFECT THAT ADMINISTRATIVE PERSONNEL FAILED TO COMPLY WITH APPLICABLE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION AND AIR FORCE PROCUREMENT INSTRUCTION, PARTICULARLY THOSE RELATING TO SMALL BUSINESS CONCERNS. SPECIFICALLY, BOTH THE REFERRED-TO REGULATIONS AND INSTRUCTIONS REQUIRE THE SUBMISSION TO THE SMALL BUSINESS ADMINISTRATION OF A NEGATIVE FACILITY CAPABILITY REPORT COMPLIED ON THE BASIS OF A PRE-AWARD SURVEY, BEFORE AN OTHERWISE ACCEPTABLE BID MAY BE REJECTED FOR LACK OF CAPACITY OR CREDIT. IT IS FURTHER PROVIDED THAT A CONTRACTING OFFICER SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S CERTIFICATE OF COMPETENCY AS TO THESE TWO ELEMENTS UNLESS THERE IS GRAVE DOUBT AS TO THE FIRM'S ABILITY TO PERFORM. A CERTIFICATE OF COMPETENCY WAS NOT REQUESTED FROM THE SMALL BUSINESS ADMINISTRATION BY THE PROCUREMENT OFFICIALS IN THIS CASE ALTHOUGH IT WAS KNOWN THAT SABRE METAL PRODUCTS, INCORPORATED, QUALIFIED AS A SMALL BUSINESS CONCERN. HOWEVER, THE MATTER WAS BROUGHT TO THE ATTENTION OF THAT AGENCY (SBA) PRIOR TO AWARD, AND BY LETTER DATED JULY 15, 1958, THE SMALL BUSINESS ADMINISTRATION ADVISED YOU THAT A REQUEST FOR SUCH CERTIFICATE HAD NOT BEEN MADE BECAUSE YOUR BID WAS REJECTED FOR REASONS OTHER THAN CAPACITY OR CREDIT.

WITH RESPECT TO YOUR CONTENTION THAT THE DEPARTMENT OF THE AIR FORCE ERRED IN AWARDING CONTRACT NO. AF 33(600)-3778 COVERING THE SUBJECT PROCUREMENT TO CONSOLIDATED DIESEL ELECTRIC CORPORATION BECAUSE THAT COMPANY PRESENTLY IS IN DEFAULT UNDER ANOTHER CONTRACT (AFP 33-600- 37 5162), THE ADMINISTRATIVE REPORT DISCLOSES THAT A DELAY OF APPROXIMATELY 45 DAYS IN THE DELIVERY SCHEDULE OF THE LAST MENTIONED CONTRACT WAS DUE TO THE TRANSITORY FAILURE OF THE GOVERNMENT TO PROVIDE, AS REQUIRED BY THE CONTRACT, ALL THE NECESSARY ENGINEERING DRAWINGS TO THE CONTRACTOR. THE DELIVERY SCHEDULE WAS AMENDED ACCORDINGLY AND PERFORMANCE THEREUNDER IS BEING ACCOMPLISHED AS REQUIRED.

THE DETERMINATION OF MATTERS PERTAINING TO THE RESPONSIBILITY OF BIDDERS IS PRIMARILY THE FUNCTION OF THE ADMINISTRATIVE OFFICE IN THE EXERCISE OF SOUND DISCRETION, AND IN THE ABSENCE OF FRAUD, OR BAD FAITH, NEITHER OF WHICH HAS BEEN ALLEGED OR PROVED HERE, IS NOT SUBJECT TO REVIEW BY THE ACCOUNTING OFFICERS OF THE GOVERNMENT.

HERE THE ADMINISTRATIVE ACTION DOES NOT APPEAR TO HAVE BEEN ARBITRARY, OR IN VIOLATION OF ANY LAW OR REGULATION, OUR OFFICE WOULD NOT BE WARRANTED IN RAISING AN OBJECTION TO THE AWARD OF THE CONTRACT INVOLVED.