B-155350, DEC. 18, 1964

B-155350, DEC. 18, 1964

TO UNITED ELECTRONICS COMPANY:

WE REFER TO YOUR TELEGRAM OF OCTOBER 8, 1964, AND YOUR ATTORNEY'S LETTER DATED OCTOBER 26, 1964, RELATIVE TO THE REJECTION OF YOUR BID UNDER INVITATION FOR BIDS NO. DSA-9-64-1219, ISSUED BY THE DEFENSE ELECTRONICS SUPPLY CENTER, DAYTON, OHIO, ON JUNE 22, 1964. YOU PROTEST THIS ACTION ON THE GROUND THAT THE MATTER SHOULD HAVE BEEN COORDINATED WITH THE SMALL BUSINESS ADMINISTRATION (SBA) OR THAT YOU SHOULD HAVE BEEN GIVEN AN OPPORTUNITY TO APPLY TO THAT AGENCY FOR A CERTIFICATE OF COMPETENCY.

THE INVITATION FOR BIDS CALLED FOR 10 SEPARATE ITEMS OF ELECTRON TUBES IN ACCORDANCE WITH THE SPECIFICATIONS CITED THEREIN. YOUR COMPANY BID ON ITEMS 1 AND 3 AND WAS THE LOW RESPONSIVE BIDDER ON ITEM 1.

IN ACCORDANCE WITH EXISTING PROCEDURES THE CONTRACTING OFFICER REQUESTED A FACILITY CAPABILITY REPORT (FOR) ON UNITED FROM THE AIR FORCE'S NEWARK CONTRACT MANAGEMENT DISTRICT (NECMD). THE FACILITY ADVISORY BOARD ISSUED A NEGATIVE REPORT REGARDING UNITED'S ENGINEERING AND PRODUCTION CAPABILITIES, ITS FINANCIAL STABILITY, ITS BUSINESS PRACTICES AND ITS ABILITY TO MEET THE DELIVERY SCHEDULE CONTAINED IN THE INVITATION FOR BIDS, AND RECOMMENDED THAT UNITED NOT BE CONSIDERED FOR AWARD. THE FOLLOWING QUOTATIONS ARE TAKEN FROM THE FCR:

"BACKGROUND: PAST EXPERIENCE WITH THIS CONTRACTOR REVEALS THAT HE HAS ALWAYS BEEN A MARGINAL PERFORMER. RECORDS INDICATE THAT FROM MARCH 1961 THROUGH JUNE 1964, THE CONTRACTOR HAD A TOTAL OF 49 DELINQUENT CONTRACTS, MANY OF WHICH WERE REPETITIVE DELINQUENCIES. AS OF THE END OF JULY, THE CONTRACTOR HAD 8 DELINQUENCIES AGAINST 10 CONTRACTS DUE OR OVERDUE IN JULY.

"PRODUCTION AND ENGINEERING: THERE WILL BE NO ENGINEERING REQUIRED. ATTACHED IS A COPY OF THE CONTRACTOR'S PRESENT DESC WORKLOAD. ALSO ATTACHED ARE LETTERS FROM THE CONTRACTOR REQUESTING RESCHEDULING OF CONTRACTS DSA 9-5073-C4 AND C5, DSA 9-6486-C1, C2 AND C3 AND DSA 9-12088. THE DELINQUENCIES THAT THE CONTRACTOR HAS INCURRED IN THE PAST ARE DUE MAINLY TO POOR PRODUCTION SCHEDULING, VENDOR FAILURES AND LOW YIELD. AFTER REPEATED REQUESTS BY THE INDUSTRIAL SPECIALIST FOR A COPY OF THE CONTRACTOR'S PRODUCTION FLOW CHART BY OPERATIONS, IT BECAME APPARENT THAT THE CONTRACTOR'S PRODUCTION CONTROL IS MAINLY AN AFTER-THE-FACT REPORTING SYSTEM, RATHER THAN SCHEDULED EVENTS.

"BUSINESS PRACTICES: AS INDICATED AND EXPLAINED UNDER BACKGROUND AND PRODUCTION REMARKS, THE CONTRACTOR HAS BEEN A MARGINAL PERFORMER SINCE AT LEAST MARCH 1961 TO THE PRESENT; THAT IS, FAILING TO MEET COMMITMENTS. THE CONTRACTOR HAS BEEN UNREALISTIC IN HIS RESPONSES TO IFBS/RFPS IN FEAR THAT HE WOULD BE CONSIDERED UNRESPONSIVE IF THEIR QUOTATION DID NOT MEET THE SCHEDULE CONTAINED IN THE IFB-RFP. THE POOR PERFORMANCE OF THE CONTRACTOR NECESSITATED A VISIT BY CHIEF, PRODUCTION DIVISION, MR. P. MILANESE AND INDUSTRIAL SPECIALIST, T. E. GREEN ON 10 JULY 1964 TO DISCUSS THE CONTRACTOR'S POOR PERFORMANCE AND TO ASSURE THAT CORRECTIVE ACTION WOULD BE TAKEN. DUE TO CONTINUED POOR PERFORMANCE, ADDITIONAL VISITS WERE MADE BY MR. J. S. CORCORAN, SUPERVISORY INDUSTRIAL SPECIALIST AND MR. T. E. GREEN, INDUSTRIAL SPECIALIST TO EFFECT EARLY DELIVERIES. IMPROVEMENT IN CONTRACTOR'S PERFORMANCE WAS NOTED. IN ADDITION, THE ACO, DURING JULY, ISSUED FIVE (5) "SHOW-CAUSE" LETTERS TO THE CONTRACTOR.'

BASED ON THE FOREGOING, THE CONTRACTING OFFICER MADE A DETERMINATION THAT "THE REASONS FOR THE PAST AND PRESENT DELINQUENCIES OF UNITED ELECTRONICS, INC., ARE NOT THOSE WHICH GO TO THE CAPACITY AND CREDIT OF THAT CONCERN, BUT THAT ITS FAILURE TO APPLY THE NECESSARY TENACITY AND PERSEVERANCE IS RESPONSIBLE FOR ITS FAILURE TO DELIVER SUPPLIES IN A TIMELY MANNER.' WAS THEREFORE CONCLUDED THAT REFERENCE OF THE MATTER TO THE SBA WAS NOT REQUIRED.

THIS ACTION IS IN ACCORDANCE WITH SECTION 1-705.4 (B) (III) OF THE ARMED SERVICES PROCUREMENT REGULATION WHICH READS IN PART AS FOLLOWS:

"/B) IF A BID OR PROPOSAL OF A SMALL BUSINESS CONCERN IS TO BE REJECTED SOLELY BECAUSE THE CONTRACTING OFFICER HAS FOUND THE CONCERN TO BE NONRESPONSIBLE AS TO CAPACITY OR CREDIT, SBA SHALL BE NOTIFIED OF TIE CIRCUMSTANCES, AND AWARD SHALL BE WITHHELD UNTIL SBA ACTION CONCERNING ISSUANCE OF A CERTIFICATE OF COMPETENCY OR UNTIL 15 WORKING DAYS AFTER SBA IS SO NOTIFIED, WHICHEVER IS EARLIER, SUBJECT TO THE FOLLOWING:

"/III) THIS PROCEDURE DOES NOT APPLY WHERE THE CONTRACTING OFFICER HAS FOUND A SMALL BUSINESS CONCERN NONRESPONSIBLE FOR A REASON OTHER THAN LACK OF CAPACITY OR CREDIT. THUS, IT DOES NOT APPLY WHERE A CONCERN DOES NOT SATISFY THE CRITERIA OF RESPONSIBILITY IN 1-913.1 (IV), (V), AND (VI). WHERE THE CONTRACTING OFFICER DETERMINES THAT A CONCERN DOES NOT MEET THE REQUIREMENTS OF 1-903.1 (III) AS TO A SATISFACTORY RECORD OF PERFORMANCE, THE PROCEDURE IS MANDATORY ONLY IF THE UNSATISFACTORY RECORD OF PERFORMANCE WAS DUE SOLELY TO INADEQUATE CAPACITY OR CREDIT.'

THIS OFFICE HAS RECOGNIZED THAT IT IS NOT INCUMBENT UPON CONTRACTING OFFICERS TO SUBMIT THE QUESTION OF A BIDDER'S RESPONSIBILITY TO THE SBA WHERE HIS DETERMINATION OF NONRESPONSIBILITY BECAUSE OF PRIOR UNSATISFACTORY CONTRACT PERFORMANCE IS NOT ATTRIBUTABLE TO LACK OF CAPACITY OR CREDIT. 38 COMP. GEN. 289; 37 ID. 798; 37 ID. 676. IT IS ESTABLISHED BY NUMEROUS DECISIONS OF OUR OFFICE THAT A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY INVOLVES MORE THAN PECUNIARY STABILITY AND PHYSICAL CAPABILITY TO PERFORM; THAT THESE OTHER FACTORS ARE VARIOUSLY TERMED AS PERSEVERANCE, TENACITY, OR INTEGRITY, AND ARE LEFT FOR DETERMINATION BY THE CONTRACTING ACTIVITY WITHOUT REFERENCE TO THE SMALL BUSINESS ACT. SEE 43 COMP. GEN. 257, AND CASES CITED THEREIN. AS WAS STATED IN THE ABOVE DECISION: "ON THE OTHER HAND THOSE ELEMENTS MAKING UP THE FACTOR OF INTEGRITY--- I.E., NOT WHETHER THE BIDDER CAN PERFORM BUT WHETHER HE WILL PERFORM--- ARE NOT COVERED BY THE COC BUT ARE LEFT FOR DETERMINATION BY THE CONTRACTING AGENCY.' WHERE SUCH FACTORS AS THESE ARE RELIED UPON TO JUSTIFY A DETERMINATION OF NONRESPONSIBILITY, SUCH DETERMINATION MUST BE SUPPORTED BY SUBSTANTIAL EVIDENCE. 43 COMP. GEN. 257, 262; 39 COMP. GEN. 868, 872. IN OUR OPINION THE FACTS OF RECORD REPRESENT SUBSTANTIAL EVIDENCE TO SUPPORT THE DETERMINATION MADE IN THIS CASE.

ACCORDINGLY, WE PERCEIVE NO BASIS FOR HOLDING THAT THE AWARD AS MADE ON ITEM 1 WAS ILLEGAL.