B-154750, NOV. 17, 1964

B-154750: Nov 17, 1964

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INC.: REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF JULY 17. THE SUBJECT INVITATION WAS ISSUED ON MARCH 31. SIXTY-SIX FIRMS WERE SOLICITED AND TWELVE BIDS WERE RECEIVED. REPRESENTED THAT ITS FIRM WAS A SMALL BUSINESS CONCERN AND IT SUBMITTED A BID UNIT PRICE OF $4. THE SECOND LOW BIDDER IN THE PREFERRED DELIVERY SCHEDULE WAS YOUR FIRM. SINCE CSC'S BID WAS SUBSTANTIALLY LOWER THAN THE OTHER PRICES SUBMITTED ON THE SUBJECT INVITATION. IT WAS REQUESTED ON APRIL 30. CSC WAS REQUESTED TO REVIEW ITS DIRECT MATERIAL AND LABOR COSTS. CSC AGAIN CONFIRMED THAT ITS BID PRICE WAS VALID. IT IS REPORTED THAT ON MAY 6. THE SMALL BUSINESS ADMINISTRATION (SBA) REPRESENTATIVE WAS REQUESTED BY THE CONTRACTING OFFICER TO VERIFY THE SMALL BUSINESS STATUS OF CSC.

B-154750, NOV. 17, 1964

TO DIETZ DESIGN, INC.:

REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF JULY 17, 1964, PROTESTING AWARD OF CONTRACT MADE TO COMMUNICATIONS SYSTEMS CORPORATION, MORTON GROVE, ILLINOIS, BY THE UNITED STATES ARMY ELECTRONICS MATERIEL AGENCY, PHILADELPHIA, PENNSYLVANIA, UNDER INVITATION NO. AMC/E/-36-039-64- 593-Q.

THE SUBJECT INVITATION WAS ISSUED ON MARCH 31, 1964, AND COVERED THE REQUIREMENTS FOR 101 EACH TERMINAL, TELEGRAPH AN/FCC-19) ( AND ANCILLARY ITEMS. THE SOLICITATION CONTAINED A PROVISION FOR A 100 PERCENT SMALL BUSINESS SET-ASIDE AS AUTHORIZED BY SECTION 15 OF THE SMALL BUSINESS ACT, 10 U.S.C. 2304 (A) (17). SIXTY-SIX FIRMS WERE SOLICITED AND TWELVE BIDS WERE RECEIVED. THE LOW BIDDER, COMMUNICATIONS SYSTEMS CORPORATION (CSC), REPRESENTED THAT ITS FIRM WAS A SMALL BUSINESS CONCERN AND IT SUBMITTED A BID UNIT PRICE OF $4,244.71 EACH ON THE PREFERRED DELIVERY SCHEDULE. THE SECOND LOW BIDDER IN THE PREFERRED DELIVERY SCHEDULE WAS YOUR FIRM, DIETZ DESIGN, INC., WITH A UNIT PRICE OF $5,981.90. SINCE CSC'S BID WAS SUBSTANTIALLY LOWER THAN THE OTHER PRICES SUBMITTED ON THE SUBJECT INVITATION, IT WAS REQUESTED ON APRIL 30, 1964, TO CONFIRM ITS LOW UNIT PRICE AND IT DID CONFIRM ITS BID PRICE BY TELEGRAM ON MAY 4, 1964. ON MAY 6, 1964, MR. DIETZ OF YOUR FIRM QUESTIONED THE PRICE SUBMITTED BY CSC, AND BY TELEGRAM DATED MAY 7, 1964, CSC WAS REQUESTED TO REVIEW ITS DIRECT MATERIAL AND LABOR COSTS. ON MAY 11, 1964, CSC AGAIN CONFIRMED THAT ITS BID PRICE WAS VALID. WITH REGARD TO THE SMALL BUSINESS ASPECT OF THE PROCUREMENT, IT IS REPORTED THAT ON MAY 6, 1964, THE SMALL BUSINESS ADMINISTRATION (SBA) REPRESENTATIVE WAS REQUESTED BY THE CONTRACTING OFFICER TO VERIFY THE SMALL BUSINESS STATUS OF CSC, AND ON MAY 7, 1964, THE SBA REPRESENTATIVE ADVISED THAT THE COMBINED NUMBER OF EMPLOYEES FOR CSC AND THE H. M. HARPER COMPANY WAS 800 PEOPLE. HE FURTHER ADVISED THAT THE STANDARD INDUSTRIAL CLASSIFICATION FOR THE SUBJECT EQUIPMENT IS 3,661 FOR WHICH THE APPLICABLE SIZE STANDARD WAS 1,000 EMPLOYEES, AND THEREFORE CSD WAS SMALL BUSINESS. AFTER FURTHER PROTEST BY YOUR CORPORATION, ALLEGING THAT CSC WAS A SUBSIDIARY OF THE H. M. HARPER COMPANY AND THAT HARPER TOGETHER WITH ALL AFFILIATES EMPLOYED IN EXCESS OF 1,000 PERSONS, THE CHICAGO REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION ADVISED THE CONTRACTING OFFICER THAT IT HAD REVIEWED THE FILE AND DID NOT FIND ANY DETAILED EVIDENCE SUPPORTING YOUR PROTEST, AND THAT THE SELF CERTIFICATION AS TO CSC'S SIZE STATUS SHOULD BE ACCEPTED, PURSUANT TO SECTION 121.3-8 OF THE SMALL BUSINESS SIZE STANDARDS REGULATION, REVISION 4, AMENDMENT 1.

IN RESPONSE TO OUR REQUEST IN THE MATTER, THE DEPARTMENT OF THE ARMY SUBMITTED A REPORT ANSWERING THE ISSUES RAISED BY YOUR PROTEST ON A POINT BY POINT BASIS AS FOLLOWS:

"A. PROTEST NUMBER 1

"/1) DIETZ PROTESTS THAT CSC'S BID WAS EXCEEDINGLY LOW: CSC WAS REQUESTED TO CONFIRM THEIR LOW UNIT PRICE WHICH THEY DID ON 4 MAY 1964 AND RECONFIRMED ON 11 MAY (SEE PARA 4 AND 6 ABOVE).

"/2) DIETZ QUESTIONS THE PRE-AWARD SURVEY MADE OF CSD: A COMPLETE PRE- AWARD SURVEY WAS MADE AND CSC WAS DETERMINED TO BE TECHNICALLY AND FINANCIALLY CAPABLE OF PERFORMING ON THE PROPOSED AWARD. THE FILED ENGINEER'S REPORT ADVISES THAT CSC HAS THE TECHNICAL ABILITY TO PRODUCE IN THE EVENT OF AWARD (INCL 10A).

"/3) DIETZ STATES THAT PRE-AWARD SURVEY OF SECOND LOW BIDDER (DIETZ) PROVES CONTRACTING OFFICER'S DOUBT AS TO CSC'S RESPONSIVENESS: THE REASON THAT A PRE-AWARD SURVEY WAS MADE OF DIETZ DESIGN IS THAT IT IS STANDARD OPERATING PROCEDURE TO SUBMIT THE FIRST AND SECOND LOW BIDDERS. (AND IN SOME INSTANCES THE THIRD LOW BIDDER) TO CEB FOR A PRE-AWARD SURVEY IN ORDER TO EXPEDITE THE MAKING OF AN AWARD, SHOULD IT BE DETERMINED FOR ANY REASON THAT THE LOWEST BIDDER IS NOT ACCEPTABLE FOR AWARD.

"/4) DIETZ BELIEVES IT IS "PECULIAR" THAT THE C. O. REQUESTED AN EXTENSION OF ACCEPTANCE DATE: THE FIVE (5) LOW BIDDERS ON THE SUBJECT WHO WERE CONSIDERED TO BE WITHIN THE ZONE OF CONSIDERATION WERE ALL REQUESTED TO EXTEND THEIR ACCEPTANCE DATE TO 17 AUGUST 1964 BY TELEGRAM DATED 17 JUNE 64. SINCE THE BIDS WOULD HAVE EXPIRED ON 29 JUNE, IT IS REQUIRED THAT THE BIDDERS WHO ARE BEING CONSIDERED FOR AWARD BE GIVEN AN OPPORTUNITY TO CONTACT THEIR SUPPLIERS, AT LEAST TEN (10) DAYS PRIOR TO EXPIRATION DATES OF THEIR BIDS IN ORDER TO GRANT THE REQUESTED EXTENSION OF ACCEPTANCE. THIS IS NORMAL PRACTICE IN THIS AGENCY.

"B. PROTEST NO. NUMBER 2

"/1) DIETZ PROTESTS INVESTIGATION MADE AS TO CSC'S SIZE DETERMINATION: IT IS TO BE NOTED THAT THE CONTRACTING OFFICER REQUESTED SMALL BUSINESS ADMINISTRATION TO VERIFY THE SMALL BUSINESS STATUS OF CSC PRIOR TO THE PROTEST BY DIETZ THAT CSC WAS LARGE BUSINESS (INCL 11). PURSUANT TO ASPR 1-703B/3), SBA IS REQUIRED TO DETERMINE THE SMALL BUSINESS STATUS OF A QUESTIONED BIDDER AND NOTIFY THE CONTRACTING OFFICER OF ITS DECISION. SBA HAS DETERMINED THAT THE SELF-CERTIFICATION OF CSC THAT IT WAS A SMALL BUSINESS FIRM BE ACCEPTED AT FACE VALUE (SEE INCL 20 AND 20A) AND THE CONTRACTING OFFICER'S ACTIONS WERE BASED ON THAT DECISION.

"/2)DIETZ REFERS TO PRICE OF PREVIOUS SUPPLIER WHO BID ON THE SUBJECT IFB: DIETZ PROTESTED THAT "THE ONLY OTHER BIDDER THAT HAD PREVIOUSLY MANUFACTURED THIS EQUIPMENT (TELE-SIGNAL CORP) BID ALMOST TWICE AS MUCH PER UNIT (AS CSC) AND ARE CERTAINLY IN A GOOD POSITION TO KNOW THE MANUFACTURING COSTS INVOLVED.' IT SHOULD BE NOTED THAT DIETZ'S BID PER UNIT PRICE OF $5,981.90 EACH IS $2,327.04 PER UNIT LESS THAN TELE-SIGNAL'S UNIT PRICE OF $8,308.94 AND CONSIDERABLY LOWER BY $235,031.04 THAN TELE- SIGNAL'S TOTAL PRICE. OBVIOUSLY, PURCHASING AND MANUFACTURING EFFICIENCIES VARY GREATLY AMONG SUPPLIERS.

"C. PROTEST NO. NUMBER 3

"/1) DIETZ CONSIDERS CSC TO BE AN IRRESPONSIBLE BIDDER. DIETZ CHARGES THAT CSC IS AN IRRESPONSIBLE BIDDER WHO DESIRES AND VIGOROUSLY FIGHTS FOR A CONTRACT THAT WILL LOSE MONEY. BASED ON THE PRE-AWARD SURVEY WHICH SHOWS CSC'S STRONG FINANCIAL POSITION AND EXCELLENT PERFORMANCE RECORD, DIETZ'S ALLEGATION IS CONVINCINGLY REFUTED AND INSTEAD INDICATES A HIGHLY RESPONSIBLE BIDDER WHO MEETS AND OFTEN EXCEEDS THE MINIMUM STANDARDS FOR RESPONSIBLE PROSPECTIVE CONTRACTORS SET FORTH IN ASPR 1-903.1.'

IN CONNECTION WITH THE FOREGOING REPORT, AND WITH REGARD TO YOUR APPARENT CONTENTION THAT THE PROCUREMENT LAWS DO NOT REQUIRE AWARD ON THE BASIS OF A LOW BID SUBMITTED IN BAD FAITH, IT IS OUR VIEW THAT SUCH LAWS DO NOT PROHIBIT SUBMISSION OF BIDS BELOW COST. WE ARE AWARE OF NO LEGAL PRINCIPLE ON THE BASIS OF WHICH AN AWARD MAY BE PRECLUDED OR DISTURBED MERELY BECAUSE THE LOW BIDDER SUBMITTED AN UNPROFITABLE PRICE. SEE B- 149551, DATED AUGUST 16, 1962.

WITH REGARD TO YOUR CONTENTION CONCERNING THE PROPRIETY OF THE SMALL BUSINESS STATUS OF CSC, SECTION 8 (B) (6) OF THE SMALL BUSINESS ACT, AS AMENDED BY PUBLIC LAW 85-536, 72 STAT. 384, 390, 15 U.S.C. 637 (B) (6), AUTHORIZES THE SMALL BUSINESS ADMINISTRATION TO DETERMINE WHICH BUSINESS ENTERPRISES ARE TO BE DESIGNATED AS SMALL BUSINESS CONCERNS AND MAKES ITS DETERMINATIONS IN THESE MATTERS CONCLUSIVE. SPECIFICALLY, THAT SECTION PROVIDES THAT "OFFICES OF THE GOVERNMENT * * * SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S DETERMINATION AS TO WHICH ENTERPRISES ARE TO BE DESIGNATED "SMALL-BUSINESS CONCERNS.'" AS NOTED ABOVE, COMMUNICATIONS SYSTEMS CORPORATION WAS DETERMINED TO BE A SMALL BUSINESS CONCERN AS OF DATE OF AWARD OF CONTRACT, AND IN VIEW OF THE PROVISIONS OF 15 U.S.C. 637 (B) (6) SUCH DETERMINATION IS CONCLUSIVE ON THIS OFFICE. IT FOLLOWS THAT THE AWARD OF A CONTRACT TO CSC UNDER THE SUBJECT INVITATION WAS PROPER AND IN ACCORDANCE WITH APPLICABLE LAW. ACCORDINGLY, WE MUST ADVISE THAT OUR OFFICE HAS NO LEGAL BASIS UPON WHICH TO QUESTION THE AWARD AND YOUR PROTEST IS DENIED.