B-149096, AUG. 9, 1962

B-149096, AUG. 9, 1962

TO GREER HYDRAULICS, INC.:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF JUNE 6, 1962, PROTESTING AGAINST THE ACTION OF THE DEPARTMENT OF THE ARMY IN AWARDING A CONTRACT TO HYDRODYNE INDUSTRIES, INC., FARMINGDALE, NEW YORK, PURSUANT TO INVITATION FOR BIDS NO. ORD-20-113-62-1397.

THE ORDNANCE TANK AUTOMOTIVE COMMAND, DETROIT, MICHIGAN, BY THE REFERRED- TO INVITATION REQUESTED BIDS FOR FURNISHING 2,188 ACCUMULATORS, HYDRAULIC PUMP ASSEMBLY. THE INVITATION RESTRICTED THE BIDDING TO SMALL BUSINESS CONCERNS. NINETEEN BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE LOWEST BID WAS SUBMITTED BY THE ROCKY MOUNTAIN TOOL COMPANY AND THAT FIRM WAS PERMITTED TO WITHDRAW ITS BID BECAUSE OF AN ERROR THEREIN. THE NEXT LOWEST BID WAS SUBMITTED BY HYDRODYNE INDUSTRIES, INC., AND THE FIFTH LOWEST BID WAS SUBMITTED BY YOUR FIRM. AFTER THE BID OPENING BUT PRIOR TO AWARD, THE REQUIREMENTS FOR THE ACCUMULATORS WERE REDUCED FROM 2,188 TO 615.

IT APPEARS THAT AS A RESULT OF A PREAWARD SURVEY THE CONTRACTING OFFICER DETERMINED THAT THE BID OF HYDRODYNE INDUSTRIES, INC., SHOULD BE REJECTED BECAUSE THE CORPORATION LACKED ADEQUATE CAPACITY AND CREDIT TO PERFORM THE CONTRACT. IN COMPLIANCE WITH THE PROVISIONS OF SECTION 1-705.6 (B) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), THE MATTER OF HYDRODYNE'S RESPONSIBILITY WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR CONSIDERATION AS TO WHETHER A CERTIFICATE OF COMPETENCY AS TO ITS CAPACITY AND CREDIT SHOULD BE ISSUED. BY LETTER DATED APRIL 16, 1962, THE SBA ADVISED THE PROCUREMENT ACTIVITY THAT ON THIS DATE IT WAS ISSUING A CERTIFICATE OF COMPETENCY IN BEHALF OF HYDRODYNE INDUSTRIES, INC. THEREAFTER, ON JUNE 2, 1962, CONTRACT NO. DA-20-113-ORD-29399 WAS AWARDED TO HYDRODYNE INDUSTRIES, INC.

IN YOUR TELEGRAM OF JUNE 6, 1962, YOU STATE---

"* * * STRONGLY PROTEST AWARD SUBJECT BID TO HYDRODYNE INC., FARMINGDALE, NEW YORK. REQUEST INVESTIGATION UNUSUAL PROCUREMENT PRACTICES INVOLVED OBVIOUSLY AGAINST THE BEST INTEREST OF THE GOVT ON THE FOLLOWING BASIS: HYDRODYNE DOES NOT QUALIFY AS (1) DO NOT OWN OR OPERATE MINIMUM MANUFACTURING FACILITIES AS REQUIRED ON THE BID REQUEST. (2) DOES NOT HAVE TEST EQUIP, QUALITY CONTROL ORGANIZATION, OR MINIMUM PERSONNEL TO ASSEMBLE OR TEST. (3) HYDRODYNE HAS STATED THEIR INTENTION TO SUBCONTRACT 100 PERCENT. (4) HAVE BEEN REJECTED FORMALLY BY NEW YORK ORDNANCE FACILITY INSPECTION TEAM AS NOT HAVING CAPABILITY OF COMPLIANCE WITH ENGINEERING EVALUATION REPORT NUMBER 10905300. A PART OF BID REQUEST AND CALLS FOR REQUIREMENTS WHICH HYDRODYNE DOES NOT HAVE IN EXISTENCE OR ABILITY TO ACQUIRE. AFTER REJECTION BY ARMY ORDNANCE TEAM HYDRODYNE ISSUED CERTIFICATE OF COMPETENCY BY SMALL BUSINESS ADMINISTRATION. ACTION TAKEN BY U.S. O.T.A.C. BASED ON SBA ALLOWANCE WAS TO PROCEED WITH PROCESSING OF AWARD. THIS ACTION COMPLETELY UNFAIR TO COMPETITORS WHO HAVE THE CAPABILITY AND MUST MAINTAIN OVERHEAD IN THE ORGANIZATION TO COMPLY WITH THE MINIMUM GOVT REQUIREMENTS. GREER HYDRAULICS INC IS SMALL BUSINESS BUT IS CAPABLE ALONG WITH MANY OTHERS. FURTHER HYDRODYNE IS IN LITIGATION INVOLVING PRACTICALLY ALL OF HYDRODYNE IS IN LITIGATION INVOLVING PRACTICALLY ALL OF THEIR ASSETS IN A STRICTLY ONE MAN SHOW. REQUEST ADVICE WHETHER ASPR REGULATIONS APPLY TO THEM AS WELL AS US"

IN REGARD TO YOUR STATEMENT THAT HYDRODYNE INDUSTRIES, INC., HAS INDICATED THAT IT WAS ITS INTENTION TO SUBCONTRACT 100 PERCENT OF THE WORK INVOLVED, THE PREAWARD SURVEY REPORT INDICATES THAT THE CORPORATION CONTEMPLATED SUBCONTRACTING 40 PERCENT OF THE CONTRACT WORK TO NASSAU MACHINE AND WELDING COMPANY, INC., FARMINGDALE, NEW YORK, WHICH APPEARS TO BE A SMALL BUSINESS FIRM. HOWEVER, THERE IS GENERALLY NO LEGAL INTERDICTION TO THE AWARD OF A CONTRACT TO A FIRM WHICH CONTEMPLATES SUBCONTRACTING. SEE 34 COMP. GEN. 595. WHILE WE HAVE RECOGNIZED THE AUTHORITY OF A PROCUREMENT AGENCY TO IMPOSE REASONABLE LIMITATIONS UPON THE RIGHT OF A CONTRACTOR TO SUBCONTRACT ALL OR PORTIONS OF THE WORK--- SEE GENERALLY 37 COMP. GEN. 196--- THE CONTRACT IN QUESTION HERE DOES NOT CONTAIN ANY PROVISION LIMITING THE AMOUNT OF WORK WHICH MAY BE SUBCONTRACTED.

IT APPEARS THAT THE OTHER CONTENTIONS ADVANCED BY YOU IN YOUR TELEGRAM RELATE TO THE CAPACITY AND CREDIT OF HYDRODYNE INDUSTRIES, INC. IN THAT REGARD, SECTION 8 (B) (7) OF PUBLIC LAW 85-536, APPROVED JULY 18, 1958, 15 U.S.C. 637 (B) (7), EMPOWERS THE SMALL BUSINESS ADMINISTRATION:

"/7) TO CERTIFY TO GOVERNMENT PROCUREMENT OFFICERS * * * WITH RESPECT TO THE COMPETENCY, AS TO CAPACITY AND CREDIT, OF ANY SMALL BUSINESS CONCERN * * * TO PERFORM A SPECIFIC GOVERNMENT CONTRACT. IN ANY CASE IN WHICH A SMALL-BUSINESS CONCERN * * * HAS BEEN CERTIFIED BY OR UNDER THE AUTHORITY OF THE ADMINISTRATION TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT AS TO A SPECIFIC GOVERNMENT CONTRACT, THE OFFICERS OF THE GOVERNMENT HAVING PROCUREMENT * * * POWERS ARE DIRECTED TO ACCEPT SUCH CERTIFICATION AS CONCLUSIVE, AND ARE AUTHORIZED TO LET SUCH GOVERNMENT CONTRACT TO SUCH CONCERN * * * WITHOUT REQUIRING IT TO MEET ANY OTHER REQUIREMENT WITH RESPECT TO CAPACITY AND CREDIT; "

WE HAVE HELD THAT THE CERTIFICATION OF THE SMALL BUSINESS ADMINISTRATION IS CONCLUSIVE UPON THE PROCURING AGENCY AS TO THE PROSPECTIVE SMALL BUSINESS CONTRACTOR'S OVER-ALL ABILITY TO MEET QUALITY, QUANTITY AND TIME REQUIREMENTS OF THE PROCUREMENT, AS WELL AS THE NECESSARY CREDIT TO PERMIT ADEQUATE PERFORMANCE. SEE 38 COMP. GEN. 864.

IN CONSONANCE WITH THE ABOVE DECISION, SECTION 1-705.6 (A), ASPR, PROVIDES:

"SBA HAS STATUTORY AUTHORITY TO CERTIFY THE COMPETENCY OF ANY SMALL BUSINESS CONCERN AS TO CAPACITY AND CREDIT. "CAPACITY" MEANS THE OVERALL ABILITY OF A PROSPECTIVE SMALL BUSINESS CONTRACTOR TO MEET QUALITY, QUANTITY, AND TIME REQUIREMENTS OF A PROPOSED CONTRACT AND INCLUDES ABILITY TO PERFORM, ORGANIZATION, EXPERIENCE, TECHNICAL KNOWLEDGE, SKILLS,"KNOW-HOW," TECHNICAL EQUIPMENT, AND FACILITIES. CONTRACTING OFFICERS SHALL ACCEPT SBA CERTIFICATES OF COMPETENCY AS CONCLUSIVE OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY AS TO CAPACITY * * *.'

IN VIEW OF THE CONCLUSIVE CHARACTER OF THE CERTIFICATE OF COMPETENCY AND SINCE WE HAVE NO AUTHORITY TO REVIEW DETERMINATIONS OF THE SMALL BUSINESS ADMINISTRATION, WE FIND NO BASIS FOR QUESTIONING THE AWARD MADE TO HYDRODYNE INDUSTRIES, INC. ..END :