B-153780, JUN. 4, 1963

B-153780, JUN. 4, 1963

TO A.R.F. PRODUCTS, INCORPORATED:

WE REFER TO YOUR LETTER DATED MARCH 16, 1964, WITH ENCLOSURE, IN WHICH YOU PROTEST THE REJECTION OF YOUR BID AND THE ACCEPTANCE OF ANOTHER UNDER INVITATION FOR BIDS NO. 600-346-64, ISSUED BY THE UNITED STATES NAVY PURCHASING OFFICE ON DECEMBER 3, 1963, FOR THE PROCUREMENT OF A QUANTITY OF TRANSPONDERS AND RELATED MATERIALS.

PAGE 3 OF THE INVITATION PROVIDED THAT BIDS WERE SOLICITED FROM SMALL BUSINESS CONCERNS ONLY AND THAT BIDS RECEIVED FROM FIRMS WHICH WERE NOT SMALL BUSINESS WOULD BE CONSIDERED AS NONRESPONSIVE. ON THE COVER PAGE OF THE INVITATION, STANDARD FORM 30, 1957 EDITION, BIDDERS WERE TO REPRESENT WHETHER THEY WERE LARGE OR SMALL BUSINESS.

BIDS WERE OPENED ON DECEMBER 27, 1963, AS PROVIDED IN THE INITIATION.

THE CONTRACTING OFFICER DID NOT RECEIVE YOUR BID UNTIL AFTER BID OPENING, ALTHOUGH A TELEGRAPHIC BID MODIFICATION WAS RECEIVED PRIOR THERETO. THIS CONNECTION THERE IS NO EVIDENCE THAT YOUR BID WAS RECEIVED AT THE INSTALLATION PRIOR TO BID OPENING. BY TELEGRAM TRANSMITTED JANUARY 10, 1964, YOU REQUESTED A REVIEW OF THE CONTRACTING OFFICER'S DECISION TO REJECT YOUR BID. ON FEBRUARY 6, 1964, YOU WERE ADVISED BY THE ACTING ASSISTANT CHIEF FOR PURCHASING, DEPARTMENT OF THE NAVY, THAT THE CONTRACTING OFFICER'S DECISION TO REJECT YOUR BID WAS AFFIRMED ALTHOUGH YOU OBTAINED A CERTIFICATE OF MAILING ON THE GROUNDS THAT YOUR LATE BID DID NOT COMPLY WITH SECTION 48 OF THE "ADDITIONAL GENERAL PROVISIONS," INCORPORATED BY REFERENCE IN THE INVITATION ON PAGE 17, WHICH IN PERTINENT PART PROVIDES:

"BIDS AND MODIFICATIONS OR WITHDRAWALS THEREOF RECEIVED AT THE OFFICE DESIGNATED IN THE INVITATION FOR BIDS AFTER THE EXACT TIME SET FOR OPENING OF BIDS WILL NOT BE CONSIDERED UNLESS: (A) THEY WERE RECEIVED BEFORE AWARD WAS MADE; (B) THEY ARE SENT BY REGISTERED MAIL, OR BY CERTIFIED MAIL FOR WHICH AN OFFICIAL POST OFFICE STAMP (POSTMARK) ON THE ORIGINAL RECEIPT FOR CERTIFIED MAIL HAS BEEN OBTAINED OR BY TELEGRAPH IF AUTHORIZED; AND (C) IT IS DETERMINED BY THE GOVERNMENT THAT LATE RECEIPT WAS DUE SOLELY TO EITHER (I) DELAY IN THE MAILS, * * *.'

YOU WERE ALSO ADVISED BY NAVY THAT THE INVITATION DID NOT PROVIDE FOR TELEGRAPHIC BIDS, THAT CLAUSE 2 (A) OF THE "TERMS AND CONDITIONS" OF THE INVITATION FOR BIDS SPECIFICALLY STATED THAT TELEGRAPHIC BIDS WOULD NOT BE CONSIDERED UNLESS AUTHORIZED, AND THAT YOUR TELEGRAPHIC MODIFICATION, THEREFORE, COULD NOT BE CONSIDERED AS YOUR BID.

ON MARCH 16, 1964, YOU DIRECTED A COPY OF YOUR REPLY TO NAVY'S LETTER OF FEBRUARY 6, 1964, TO OUR OFFICE, STATING THAT THE INTENT OF ARMED SERVICES PROCUREMENT REGULATION SECTION 2-303.1, WHICH LIMITS CONSIDERATION OF LATE BIDS IN MUCH THE SAME MANNER AS CLAUSE 48, QUOTED ABOVE, IS TO WAIVE THE LIMITATIONS IF IT CAN BE SHOWN THAT THE BID WAS IN THE HANDS OF THE POST OFFICE IN SUFFICIENT TIME TO BE DELIVERED PRIOR TO BID OPENING. IN THIS CONNECTION YOU OFFER YOUR CERTIFICATE OF MAILING, WHICH YOU ALLEGE SPECIFICALLY IDENTIFIES YOUR BID, AS EVIDENCE THAT YOUR BID WAS TIMELY MAILED AND YOU ALSO OFFER YOUR TELEGRAPHIC MODIFICATION AS A FURTHER INDICATION OF THE TIMELY MAILING OF YOUR BID.

WE HAVE HELD THAT A CERTIFICATE OF MAILING, EVEN WHERE IT IDENTIFIES THE ITEM MAILED BY THE INVITATION NUMBER, DOES NOT SATISFY THE RULE IN CLAUSE 48 NOT ONLY BECAUSE IT IS NOT INCLUDED IN THE LITERAL REQUIREMENTS THEREOF, BUT ALSO BECAUSE IT DOES NOT OFFER THE SAME DEGREE OF IDENTIFICATION OF THE MATERIAL MAILED AS DO THE METHODS OF MAILING NAMED IN THE CLAUSE. B-152527, DECEMBER 4, 1963; B-150124, NOVEMBER 21, 1962. WHILE YOUR TELEGRAPHIC MODIFICATION WAS RECEIVED PRIOR TO BID OPENING, SUCH RECEIPT DOES NOT ESTABLISH THE TIME YOUR BID WAS MAILED. IN THESE CIRCUMSTANCES WE FIND THAT YOUR LATE MAILED BID WAS PROPERLY REJECTED.

YOUR LETTER TO OUR OFFICE DATED MARCH 16, 1964, ALSO QUESTIONS THE PROPRIETY OF THE AWARD OF A CONTRACT UNDER THIS INVITATION TO WESTERN ELECTRO-DYNAMICS ON THE GROUNDS THAT AT THE TIME OF AWARD WESTERN ELECTRO- DYNAMICS WAS A SUBSIDIARY OF MIDWEST OIL COMPANY, DENVER, COLORADO, AND WAS NOT A SMALL BUSINESS CONCERN. SUBSEQUENT TO YOUR PROTEST WE REQUESTED THAT THE SMALL BUSINESS ADMINISTRATION DETERMINE THE SIZE STATUS OF WESTERN ELECTRO-DYNAMICS. WE HAVE BEEN ADVISED BY SBA AS FOLLOWS:

" NO CONCERN CAN QUALIFY AS A SMALL BUSINESS FOR THE PURPOSE OF A GOVERNMENT PROCUREMENT OF A PRODUCT IT MANUFACTURES, IF TOGETHER WITH ITS AFFILIATES, ITS NUMBER OF EMPLOYEES EXCEEDS 1000 PERSONS. SEE SEC. 121.3- 8 OF THE SMALL BUSINESS SIZE STANDARDS REGULATION (REVISION 4), AS AMENDED.'

"WE UNDERSTAND THAT ON JANUARY 31, 1964, AND ON DECEMBER 27, 1963:

"1. APPROXIMATELY 80 PERCENT OF THE VOTING STOCK OF WESTERN ELECTRO- DYNAMICS WAS HELD BY MIDWEST OIL CORPORATION WHICH ALSO HELD 100 PERCENT OF THE VOTING STOCK OF MORCO OIL CORPORATION, DENVER, COLORADO, WHICH IN TURN OWNED 66 2/3 PERCENT OF THE VOTING STOCK OF THE KEETER CHARCOAL CORPORATION, BRANSON, MISSOURI.

"2. APPROXIMATELY 30 PERCENT OF MIDWEST OIL CORPORATION'S VOTING STOCK WAS HELD BY STANDARD OIL OF INDIANA AND 20.15 PERCENT OF ITS VOTING STOCK WAS HELD BY THE STANDARD OIL FOUNDATION.

"3. MR. JOHN E. SWEARINGEN IS PRESIDENT OF BOTH STANDARD OIL OF INDIANA AND THE STANDARD OIL FOUNDATION. FURTHER, MESSRS. R. C. CUNNESS, L. A. KIMPTON, AND G. MYERS ARE VICE-PRESIDENT'S OF BOTH CONCERNS.

"4. THE TOTAL EMPLOYMENT OF WESTERN ELECTRO-DYNAMICS CORPORATION, MIDWEST OIL CORPORATION, MORCO CORPORATION, AND KEETER CHARCOAL CORPORATION IS 227 PERSONS. THE EMPLOYMENT OF STANDARD OIL OF INDIANA EXCEED 1000 PERSONS.

"IN VIEW OF THE ABOVE, WE HAVE DETERMINED (A) THAT STANDARD OIL OF INDIANA AND THE STANDARD OIL FOUNDATION ARE AFFILIATES BY REASON OF COMMON MANAGEMENT, (B) THAT THOSE TWO AFFILIATED CONCERNS CONTROL OR HAVE THE POWER TO CONTROL THE MIDWEST OIL CORPORATION THROUGH OWNERSHIP OF 50.31 PERCENT OF ITS STOCK, (C) THAT THE MIDWEST OIL CORPORATION CONTROLS OR HAS THE POWER TO CONTROL MORCO OIL CORPORATION AND KEETER CHARCOAL CORPORATION THROUGH OWNERSHIP OF 100 PERCENT OF THE FORMER WHICH OWNS 66 2/3 PERCENT OF THE LATTER, AND (D) THAT MIDWEST OIL CORPORATION ALSO CONTROLS OR HAS THE POWER TO CONTROL WESTERN ELECTRO-DYNAMICS THROUGH OWNERSHIP OF 77.9 PERCENT OF ITS VOTING STOCK. THEREFORE, WE HAVE DETERMINED THAT ALL OF THE ABOVE CONCERNS ARE AFFILIATED WITHIN THE MEANING OF SEC. 121.3-2 (A) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION.

"SINCE THE TOTAL EMPLOYMENT OF WESTERN ELECTRO-DYNAMICS, INC., AND ITS AFFILIATES EXCEEDED 1000 PERSONS, IT WAS NOT A SMALL BUSINESS CONCERN ON EITHER JANUARY 31, 1964, OR ON DECEMBER 27, 1963, AND IS NOT A SMALL BUSINESS CONCERN AT THIS TIME.'

WESTERN ELECTRO-DYNAMICS BY LETTER DATED APRIL 22, 1964, ADVISED SBA AS FOLLOWS:

"AT THE TIME WE RESPONDED TO THE IFB AND UNDER THE DEFINITION OF SMALL BUSINESS CONCERNS THEREIN STATED, WE FIRMLY BELIEVE AND STILL DO BELIEVE AND MAINTAIN THAT WE ARE A SMALL BUSINESS AS WAS INTENDED BY THE STATUTE AND THE REGULATIONS. OUR PARENT COMPANY, MIDWEST OIL CORPORATION, AND OUR OTHER AFFILIATES, MORCO AND KEETER, COMBINED WITH OURSELVES, ARE NOT DOMINANT IN OUR FIELD, NAMELY, ELECTRONICS INSTRUMENTATION, AND COMBINED, WE HAVE A TOTAL PAYROLL OF APPROXIMATELY 226 EMPLOYEES. WE DO NOT CONSTRUE STANDARD OIL OF INDIANA, TWO CORPORATIONS REMOVED, TO BE AN AFFILIATE. * * *.'

SECTION 8 (B) (6) OF THE SMALL BUSINESS ACT, AS AMENDED BY PUBLIC LAW 85- 536, 72 STAT. 390, AUTHORIZES SBA TO DETERMINE WHICH BUSINESS ENTERPRISES ARE TO BE DESIGNATED AS SMALL BUSINESS CONCERNS AND MAKES ITS DETERMINATIONS IN SUCH MATTERS CONCLUSIVE; CONSEQUENTLY, WE WILL NOT QUESTION SBA'S DETERMINATION THAT WESTERN ELECTRO-DYNAMICS IS NOT A SMALL BUSINESS CONCERN. ARMED SERVICES PROCUREMENT REGULATION SEC. 1-703 (A) PROVIDES THAT THE CONTRACTING OFFICER SHALL ACCEPT AT FACE VALUE FOR THE PARTICULAR PROCUREMENT INVOLVED, A REPRESENTATION BY THE BIDDER OR OFFEROR THAT IT IS A SMALL BUSINESS CONCERN. BASICALLY, THE SAME PROVISION IS CONTAINED IN THE SBA RULES AND REGULATIONS, REVISION 4, DATED DECEMBER 26, 1963, PART 121.3-9 AND 13 CODE OF FEDERAL REGULATIONS SEC. 121.3-8. ARMED SERVICES PROCUREMENT REGULATION SEC. 1-703 (B) (1) PROVIDES:

"/1) ANY BIDDER OR OFFEROR MAY, PRIOR TO AWARD, QUESTION THE SMALL BUSINESS STATUS OF ANY APPARENTLY LOW BIDDER OR OFFEROR BY SENDING A WRITTEN PROTEST TO THE CONTRACTING OFFICER RESPONSIBLE FOR THE PARTICULAR PROCUREMENT. ANY CONTRACTING OFFICER WHO RECEIVES SUCH A PROTEST OR WHO WISHES TO QUESTION THE SMALL BUSINESS STATUS OF A BIDDER OR OFFER HIMSELF SHALL FORWARD SUCH PROTEST RECORD (OR SUBMIT A WRITTEN PROTEST) TO THE SMALL BUSINESS ADMINISTRATION REGIONAL OFFICE SERVING THE AREA IN WHICH THE PROTESTED CONCERN IS LOCATED. THE SMALL BUSINESS ADMINISTRATION REGIONAL OFFICE SERVING THE AREA IN WHICH THE PROTESTED CONCERN IS LOCATED. THE SMALL BUSINESS ADMINISTRATION WILL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF THE DATE OF ITS RECEIPT OF ANY SUCH PROTEST AND WILL ADVISE THE QUESTIONABLE BIDDER OR OFFEROR THAT HIS SMALL BUSINESS STATUS IS UNDER REVIEW. THE PROTEST SHALL CONTAIN THE BASIS FOR THE PROTEST TOGETHER WITH SPECIFIC DETAILED EVIDENCE SUPPORTING THE PROTESTANT'S CLAIM THAT SUCH BIDDER IS NOT A SMALL BUSINESS. A PROTEST RECEIVED AFTER AWARD OF A CONTRACT WILL NOT BE CONSIDERED A "PROTEST" AND WILL BE RETURNED TO THE SENDER WITH AN EXPLANATION OF WHY IT COULD NOT BE ACTED UPON.'

ARMED SERVICES PROCUREMENT REGULATION SEC. 1-703 (B) (2) PROVIDES THAT A CONTRACTING OFFICER MAY, PRIOR TO AWARD, QUESTION THE SMALL BUSINESS STATUS OF THE APPARENTLY SUCCESSFUL BIDDER BY SENDING A WRITTEN NOTICE TO THE SBA REGIONAL OFFICE OF THE REGION WHERE THE BIDDER OR OFFEROR HAS HIS PRINCIPAL PLACE OF BUSINESS. THE RECORD INDICATES THAT PRIOR TO AWARD NAVY REQUESTED A PRE-AWARD SURVEY OF WESTERN ELECTRO-DYNAMICS, AND THAT THE REPORT OF THIS SURVEY DATED JANUARY 23, 1964, CONFIRMED THAT MIDWEST OIL CORPORATION OF DENVER HAD PURCHASED A MAJORITY INTEREST IN WESTERN ELECTRO-DYNAMICS. IT WAS DETERMINED BY NAVY THAT DESPITE THIS ACQUISITION THE NUMBER OF EMPLOYEES OF THIS AFFILIATION DID NOT CHANGE THE SMALL BUSINESS SIZE STATUS OF WESTERN ELECTRO-DYNAMICS FOR THIS PROCUREMENT SINCE THE SIZE STANDARD SPECIFIED IN THE INVITATION FOR BIDS WAS 500 EMPLOYEES. IN THIS CONNECTION SBA'S REPORT CONFORMS THAT MIDWEST AS AFFILIATED WITH WESTERN ELECTRO-DYNAMICS EMPLOYS 227 PERSONS. THERE IS NO EVIDENCE OR ALLEGATION THAT ANY BIDDER PROTESTED THE SMALL BUSINESS STATUS OF WESTERN ELECTRO-DYNAMICS PRIOR TO AWARD.

IN VIEW OF THE RECORD WE CONCLUDE THAT WESTERN ELECTRO-DYNAMICS IS NOT A SMALL BUSINESS CONCERN FOR PURPOSES OF GOVERNMENT PROCUREMENTS AT THE PRESENT TIME. HOWEVER, WE CANNOT SAY THAT EITHER THE SELF CERTIFICATION OF SMALL BUSINESS STATUS FOR THIS PROCUREMENT OR NAVY'S DETERMINATION OF WESTERN ELECTRO-DYNAMICS' SMALL BUSINESS STATUS WAS NOT IN GOOD FAITH. THIS REGARD IT IS CLEAR THAT BOTH NAVY AND WESTERN ELECTRO-DYNAMICS DID NOT CONSIDER MIDWEST'S AFFILIATION WITH STANDARD OIL OF INDIANA AND THE STANDARD OIL FOUNDATION IN DETERMINING THAT WESTERN ELECTRO-DYNAMICS WAS SMALL BUSINESS AND IT IS CLEAR THAT IF SUCH AFFILIATION IS NOT CONSIDERED WESTERN ELECTRO-DYNAMICS WOULD NOT BE CONSIDERED AS LARGE BUSINESS ON THE BASIS OF THE NUMBER OF ITS EMPLOYEES. WE DO NOT FEEL THAT IN THIS CASE SUCH AN OMISSION WOULD BE SUFFICIENT TO IMPUTE BAD FAITH TO EITHER WESTERN ELECTRO-DYNAMICS OR THE DEPARTMENT OF THE NAVY. IN THESE CIRCUMSTANCES, WE FIND THAT THERE HAS BEEN NO DEVIATION FROM THE REGULATIONS QUOTED ABOVE AND THAT THE AWARD TO WESTERN ELECTRO-DYNAMICS RESULTED IN A VALID AND BINDING CONTRACT; CONSEQUENTLY, CANCELLATION OF THE CONTRACT AWARDED TO WESTERN ELECTRO-DYNAMICS AT THIS TIME WOULD NOT BE IN THE BEST INTEREST OF THE UNITED STATES. SEE B-148475, JUNE 13, 1962.