B-152791, JAN. 9, 1964

B-152791: Jan 9, 1964

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BID OPENING WAS HELD ON AUGUST 6. TRU -RITE WAS THE LOW BIDDER ON ITEM NO. 5 OF THE INVITATION. IT WAS REPORTED UNDER DATE OF SEPTEMBER 9. THAT THE BIDDER WAS INCAPABLE OF PRODUCING THE REQUIRED ITEM. IT IS REPORTED THAT THE FINANCIAL REPORT ON TRU-RITE INDICATED THAT THE BIDDER HAD A SPOTTY OPERATING RECORD. WHILE TRU-RITE'S PROTEST WAS PENDING IN THIS OFFICE. YOU STATE THAT WHILE THE SBA WAS INVESTIGATING TRU-RITE'S COC APPLICATION. IT BECAME CLEAR THAT THE SBA WAS ONLY CONCERNED WITH TRU RITE'S FINANCIAL POSITION. 1963 WHICH SUM IS PRESENTLY IN THE TRU-RITE ACCOUNT AT MERCHANTS BANK OF NEW YORK SHALL BE USED TO REPAY ANY OR ALL OF THE SAID DEBT THAT TRU-RITE INC. WARRANTS TO THE SMALL BUSINESS ADMINISTRATION AND GENERAL SERVICES ADMINISTRATION THAT IN THE EVENT IT RECEIVES A CONTRACT UNDER THE INVITATION FPNSP-6F-3397 FROM GENERAL SERVICES ADMINISTRATION IT WILL SEGREGATE AND ALLOCATE THE AFORESAID $15.

B-152791, JAN. 9, 1964

TO JACOB H. FISCHMAN:

THIS REFERS TO YOUR LETTER OF OCTOBER 28, 1963, AND THE OTHER CORRESPONDENCE PROTESTING IN BEHALF OF TRU-RITE, INCORPORATED, AGAINST THE REJECTION OF ITS BID UNDER INVITATION FOR BIDS NO. FPNSP-6P-3397.

IN BRIEF, THE INVITATION REQUESTED BIDS ON GSA'S REQUIREMENTS OF PROCESSED BACK CARBON PAPER FOR THE CONTRACT PERIOD NOVEMBER 1, 1963 THROUGH OCTOBER 31, 1964. BID OPENING WAS HELD ON AUGUST 6, 1963, AND TRU -RITE WAS THE LOW BIDDER ON ITEM NO. 5 OF THE INVITATION. THE GSA CONDUCTED A PLANT FACILITIES INVESTIGATION OF TRU-RITE'S PLANT, AND IT WAS REPORTED UNDER DATE OF SEPTEMBER 9, 1963, THAT THE BIDDER WAS INCAPABLE OF PRODUCING THE REQUIRED ITEM. FURTHER, IT IS REPORTED THAT THE FINANCIAL REPORT ON TRU-RITE INDICATED THAT THE BIDDER HAD A SPOTTY OPERATING RECORD.

THE CONTRACTING OFFICER THEN REFERRED THE MATTER TO SBA FOR POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY. ON OCTOBER 23, 1963, THE NEW YORK REGIONAL OFFICE OF SBA ADVISED THE CONTRACTING OFFICER AND THE BIDDER THAT IT DECLINED TO ISSUE A COC. THEREAFTER, ON NOVEMBER 22, 1963, WHILE TRU-RITE'S PROTEST WAS PENDING IN THIS OFFICE, GSA MADE THE AWARD TO ANOTHER BIDDER, BASED ON A DETERMINATION UNDER FPR 1-2.407-8/B) (3) I AND II THAT FURTHER DELAY OF THE AWARD WOULD JEOPARDIZE THE MISSION OF GSA IN ITS SUPPLY SUPPORT PROGRAM.

YOU STATE THAT WHILE THE SBA WAS INVESTIGATING TRU-RITE'S COC APPLICATION, IT BECAME CLEAR THAT THE SBA WAS ONLY CONCERNED WITH TRU RITE'S FINANCIAL POSITION; AND BY LETTER DATED OCTOBER 15, 1963, TRU RITE STATED TO SBA (NEW YORK CITY OFFICE) AS FOLLOWS:

"IN ORDER TO CLARIFY THE DEMANDS OF THE SMALL BUSINESS ADMINISTRATION, WE WOULD LIKE TO STATE THAT WE BORROWED $15,000.00 FROM OUR BANK FOR THE SOLE PURPOSE OF FINANCING THE CARBON CONTRACT IFB-FPNSP-6P-3397.

"SINCE THE ENTIRE CONTRACT AMOUNTS TO APPROXIMATELY $132,000.00, THE $15,000.00 SHOULD MORE THAN COVER OUR COMMITMENTS FOR ANY ONE MONTH.'

YOU REPORT THAT SBA REQUESTED FURTHER CLARIFICATION ABOUT THE $15,000 LOAN; AND MR. JACK SHELDON, PRESIDENT OF TRU-RITE, THEN SUBMITTED TO THE SBA, LETTERS DATED OCTOBER 16 AND 17, 1963. THE OCTOBER 16 LETTER STATES AS FOLLOWS:

"WE HEREBY SUBORDINATE OUR RIGHT TO DEMAND REPAYMENT OF A $15,000.00 LOAN MADE BY JACK SHELDON AND ROBERT SHELDON TO TRU-RITE INC. IN THE AMOUNT OF $15,000.00 UPON THE FOLLOWING TERMS.

"NO PART OF A LOAN OF 15,000.00 BORROWED BY TRU-RITE INC. FROM THE MERCHANTS BANK OF NEW YORK ON SEPTEMBER 30, 1963 WHICH SUM IS PRESENTLY IN THE TRU-RITE ACCOUNT AT MERCHANTS BANK OF NEW YORK SHALL BE USED TO REPAY ANY OR ALL OF THE SAID DEBT THAT TRU-RITE INC. OWES TO JACK SHELDON OR ROBERT SHELDON.

"THIS SUBORDINATION DOES NOT MEAN THAT TRU-RITE INC. MAY NOT REPAY JACK SHELDON OR ROBERT SHELDON ANY OR ALL OF THE SAID LOAN MADE BY JACK SHELDON OR ROBERT SHELDON TO TRU-RITE INC. PROVIDED SUCH PAYMENT SHALL BE MADE FROM FUNDS OTHER THAN THOSE ALLOCATED TO THE AFORESAID $15,000.00 BORROWED FROM THE MERCHANTS BANK OF NEW YORK.

"THE UNDERSIGNED AS PRESIDENT OF TRU-RITE INC. WARRANTS TO THE SMALL BUSINESS ADMINISTRATION AND GENERAL SERVICES ADMINISTRATION THAT IN THE EVENT IT RECEIVES A CONTRACT UNDER THE INVITATION FPNSP-6F-3397 FROM GENERAL SERVICES ADMINISTRATION IT WILL SEGREGATE AND ALLOCATE THE AFORESAID $15,000.00 BORROWED FROM THE MERCHANTS BANK OF NEW YORK FOR THE SOLE PURPOSE OF FINANCING THE AFORESAID CONTRACT TO BE LET.'

THE OCTOBER 17 LETTER STATES AS FOLLOWS:

"I HOPE IT IS CLEARLY UNDERSTOOD THAT THE $15,000.00 OWED TO JACK SHELDON AND ROBERT SHELDON IS BEING SUBORDINATED TO THE CONTEMPLATED CONTRACT ON INVITATION FPNSP-6P-3397. IN ADDITION, WE HAVE TAKEN A LOAN OF $15,000.00 FROM THE MERCHANTS BANK OF NEW YORK FOR THE SPECIFIC PURPOSE OF FINANCING THIS CONTRACT.'

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

IN YOUR LETTER OF OCTOBER 28, 1963, YOU ASK THIS OFFICE TO RULE THAT SBA SHOULD ACT TO RECONSIDER THE TRU-RITE COC DENIAL, FOR THE REASON THAT THE DETERMINATION WAS REACHED WITHOUT CONSIDERING TRU RITE'S LETTERS OF OCTOBER 15, 16 AND 17.

WE ASKED THE SBA FOR A REPORT ON THE MATTER, AND BY LETTER OF DECEMBER 9, 1963, THE GENERAL COUNSEL OF SBA REPORTED TO US THAT: "THE LETTERS OF TRU- RITE, INC., DATED OCTOBER 15, 16 AND 17, 1963, WERE TAKEN INTO CONSIDERATION IN CONNECTION WITH THIS CERTIFICATE OF COMPETENCY PPLICATION" AND THAT THE SBA OFFICIALS INVOLVED (MESSRS. SHERIDAN, DILLON AND MANNIX) DISAGREE WITH YOU AS TO WHAT OCCURRED AT THE OCTOBER 25 MEETING. THE SBA GENERAL COUNSEL CONCLUDED THAT ,THERE IS NO MERIT IN THE CONTENTIONS OF TRU-RITE, INC. IN ITS PROTEST.'

WHATEVER MAY HAVE OCCURRED AT THE OCTOBER 25 MEETING, THE RECORD CONCLUSIVELY SHOWS THAT THE LETTERS OF OCTOBER 15, 16 AND 17, 1963 WERE CONSIDERED BY THE SBA IN THE TRU-RITE COC APPLICATION. OBVIOUSLY, IT IS POINTLESS TO ASK THE SBA TO RECONSIDER THE TRU-RITE COC DENIAL ON THE BASIS THAT IT FAILED TO CONSIDER CERTAIN INFORMATION, WHEN THE RECORD SHOWS THAT THE INFORMATION IN QUESTION WAS CONSIDERED. WHILE YOU MAY QUESTION WHETHER THE COC DENIAL WAS CORRECT IN LIGHT OF THE LETTERS OF OCTOBER 15, 16 AND 17, THIS OFFICE HAS NO AUTHORITY TO REVIEW THE CORRECTNESS OF EITHER THE ISSUANCE OR THE DENIAL OF A CERTIFICATE OF COMPETENCY. B-147107, OCTOBER 12, 1961.

THE DETERMINATION OF A BIDDER'S ABILITY TO PERFORM THE CONTRACT IS PRIMARILY THE FUNCTION OF THE ADMINISTRATIVE OFFICERS CONCERNED--- APART FROM THE AUTHORITY OF THE SBA TO MAKE A FINAL DETERMINATION THAT A BIDDER HAS THE CAPACITY OR CREDIT TO PERFORM THE CONTRACT--- AND UNLESS THE RECORD SHOWS THAT THE ADMINISTRATIVE DETERMINATION WAS CLEARLY ERRONEOUS, WE WILL NOT QUESTION THAT DETERMINATION. SEE 39 COMP. GEN. 705; 37 COMP. GEN. 430. WE ARE PARTICULARLY PERSUADED THAT AN ADMINISTRATIVE DETERMINATION WAS CORRECT IN SUCH CASE WHERE THE SBA DENIES THE BIDDERS' APPLICATION FOR A CERTIFICATE OF COMPETENCY. SEE B-146257, AUGUST 8, 1961. WE RECOGNIZE THAT IN THIS CASE TRU-RITE BASES ITS CONTENTION OF RESPONSIBILITY LARGELY ON ITS PROMISE TO SET ASIDE THE SUM OF $15,000 EXCLUSIVELY FOR THE PURPOSE OF THIS CONTRACT; AND THAT THIS INFORMATION, WHICH WAS CONTAINED IN THE AFOREMENTIONED LETTERS OF OCTOBER 15, 16 AND 17, APPARENTLY WAS NOT KNOWN BY THE CONTRACTING OFFICER PRIOR TO THE COC REFERRAL.

BE THAT AS IT MAY, UNDER ITS BID TRU-RITE HAS OFFERED TO FURNISH A MAXIMUM OF 25,000 BOXES OF PAPER PER MONTH, OR A TOTAL OF 300,000 BOXES FOR THE YEAR, AT A BID PRICE OF ?45 PER BOX. WE DO NOT THINK THAT THE ADDITIONAL AMOUNT OF $15,000 (WHICH TRU-RITE BORROWED) CLEARLY TIPS THE SCALE IN FAVOR OF THE BIDDERS' RESPONSIBILITY ON THIS PROCUREMENT. LEAST THE SBA DID NOT ISSUE A CERTIFICATE OF COMPETENCY TO TRU-RITE DESPITE THE $15,000.

TRU-RITE ALSO ALLEGES THAT GSA SHOULD NOT HAVE MADE THE AWARD TO ANOTHER BIDDER WHILE ITS PROTEST WAS PENDING. AS STATED ABOVE, THIS ACTION WAS TAKEN PURSUANT TO REGULATION (FPR 1-2.407-8 (B) (3) ).