B-155825, APR. 2, 1965

B-155825: Apr 2, 1965

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TO ECCO ELECTRONIC COMPONENTS CORPORATION: REFERENCE IS MADE TO YOUR TELEGRAM DATED DECEMBER 22. IT IS REPORTED BY THE DEPARTMENT OF THE AIR FORCE THAT THE SUBJECT INVITATION FOR BIDS. THAT A FACILITY CAPABILITY REPORT WAS PERFORMED ON ECCO BY THE NEW YORK CONTRACT MANAGEMENT DISTRICT WHICH REPORTED THAT ITS DECISION WAS NEGATIVE BECAUSE ECCO LACKED THE NECESSARY TECHNICAL KNOWLEDGE. DID NOT HAVE ADEQUATE ENGINEERING. IT IS FURTHER REPORTED THAT ON DECEMBER 2. THE SMALL BUSINESS ADMINISTRATION STATED THAT THE ECCO APPLICATION FOR A COC WAS DENIED BECAUSE THAT AGENCY WAS UNABLE TO CERTIFY THAT THE APPLICANT POSSESSED THE NECESSARY CREDIT TO PERFORM THE PROPOSED CONTRACT. IT IS FURTHER STATED THAT THIS ACTION WAS TAKEN BY THE SMALL BUSINESS ADMINISTRATION REGIONAL DIRECTOR PURSUANT TO DELEGATED AUTHORITY.

B-155825, APR. 2, 1965

TO ECCO ELECTRONIC COMPONENTS CORPORATION:

REFERENCE IS MADE TO YOUR TELEGRAM DATED DECEMBER 22, 1964, AND LETTER DATED DECEMBER 30, 1964, PROTESTING THE AWARD OF A CONTRACT TO ANOTHER BIDDER UNDER INVITATION FOR BIDS NO. 33-657-65-36 ISSUED BY THE AERONAUTICAL SYSTEMS DIVISION, WRIGHT-PATTERSON AIR FORCE BASE, OHIO.

IT IS REPORTED BY THE DEPARTMENT OF THE AIR FORCE THAT THE SUBJECT INVITATION FOR BIDS, ISSUED ON SEPTEMBER 14, 1964, AND OPENED ON OCTOBER 14, 1964, CALLED FOR BIDS ON 190 RECEIVER-TRANSMITTERS, PLUS SPARE PARTS; THAT ECCO ELECTRONIC COMPONENTS CORPORATION SUBMITTED THE LOWEST OF THREE BIDS RECEIVED; THAT A FACILITY CAPABILITY REPORT WAS PERFORMED ON ECCO BY THE NEW YORK CONTRACT MANAGEMENT DISTRICT WHICH REPORTED THAT ITS DECISION WAS NEGATIVE BECAUSE ECCO LACKED THE NECESSARY TECHNICAL KNOWLEDGE, DID NOT HAVE ADEQUATE ENGINEERING,TESTING AND PRODUCTION PLANNING TO ASSURE TIMELY PERFORMANCE ON THE SUBJECT PROCUREMENT; THAT THE FACILITY ADVISORY BOARD REVIEWED THE FINDINGS AND NEGATIVE RECOMMENDATIONS DETAILED IN THE REPORTS FROM THE PRODUCTION AND QUALITY CONTROL DIVISION TOGETHER WITH COMMENTS FROM THE TACAN ENGINEERING GROUP, WRIGHT-PATTERSON AIR FORCE BASE AND VOTED UNANIMOUSLY TO DENY AN AWARD TO ECCO UNDER THIS PROCUREMENT.

IT IS FURTHER REPORTED THAT ON DECEMBER 2, 1964, THE NEW YORK CONTRACT MANAGEMENT DISTRICT REFERRED THE NEGATIVE FACILITY CAPABILITY REPORT TO THE NEW YORK CITY SMALL BUSINESS ADMINISTRATION OFFICE FOR THE POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY (COC). BY LETTER DATED DECEMBER 28, 1964, THE NEW YORK CITY SMALL BUSINESS ADMINISTRATION OFFICE NOTIFIED THE NEW YORK CONTRACT MANAGEMENT DISTRICT THAT IT HAD DECLINED TO ISSUE A COC IN BEHALF OF ECCO.

IN A REPORT DATED MARCH 3, 1965, THE SMALL BUSINESS ADMINISTRATION STATED THAT THE ECCO APPLICATION FOR A COC WAS DENIED BECAUSE THAT AGENCY WAS UNABLE TO CERTIFY THAT THE APPLICANT POSSESSED THE NECESSARY CREDIT TO PERFORM THE PROPOSED CONTRACT. IT IS FURTHER STATED THAT THIS ACTION WAS TAKEN BY THE SMALL BUSINESS ADMINISTRATION REGIONAL DIRECTOR PURSUANT TO DELEGATED AUTHORITY, AND THE DENIAL OF A COC WAS BASED, IN PART, ON THE FOLLOWING:

(1) TANGIBLE NET WORTH DISPROPORTIONATE TO TOTAL DEBT;

(2) INADEQUATE WORKING CAPITAL;

(3) UNSATISFACTORY ARRANGEMENTS TO IMPROVE WORKING CAPITAL STATUS;

(4) UNREALISTIC CASH FLOW PROJECTION WITH UNDUE DEPENDENCE ON PROGRESS PAYMENTS; AND

(5) UNSATISFACTORY SUPPLIER CREDIT ARRANGEMENTS.

IN YOUR LETTER OF DECEMBER 30, 1964, COMMENT IS MADE THAT "IT IS INTERESTING TO NOTE THAT ONE AGENCY OF THE GOVERNMENT NAMELY THE AIR FORCE FINDS US FINANCIALLY COMPETENT BUT TECHNICALLY INCOMPETENT WHEREAS ANOTHER AGENCY OF THE GOVERNMENT FINDS US TECHNICALLY COMPETENT BUT FINANCIALLY INCOMPETENT.' YOU ALSO EXPRESS THE OPINION THAT BIAS, PREJUDICE, AND CAPRICIOUSNESS WERE EXHIBITED BY BOTH AGENCIES IN THEIR DENIAL OF A CONTRACT TO YOUR COMPANY, AND REQUEST THAT OUR OFFICE INVESTIGATE THE MATTER.

IN OUR DECISION OF SEPTEMBER 25, 1963, 43 COMP. GEN. 298, WE STATED:

"IT IS WELL SETTLED THAT THE DETERMINATION OF A BIDDER'S RESPONSIBILITY INVOLVES THE EXERCISE OF A CONSIDERABLE RANGE OF DISCRETION, AND OUR OFFICE HAS CONSISTENTLY ADHERED TO THE RULE THAT THE ADMINISTRATIVE DETERMINATION WILL NOT BE QUESTIONED UNLESS ARBITRARY, CAPRICIOUS OR NOT BASED ON SUBSTANTIAL EVIDENCE. 38 COMP. GEN. 131; 37 COMP. GEN. 430, 435. HOWEVER, WHERE, AS HERE, THE BIDDER IS A SMALL BUSINESS CONCERN, THE CONTRACTING OFFICER'S DETERMINATION OF RESPONSIBILITY IS SUBJECT, SO FAR AS CONCERNS CAPACITY AND CREDIT TO THE AUTHORITY OF THE SMALL BUSINESS ADMINISTRATION UNDER SECTION 8 (B) (7) OF THE SMALL BUSINESS ACT, PUBLIC LAW 85-536, 15 U.S.C. 637 (B) (7) TO CERTIFY TO GOVERNMENT PROCUREMENT OFFICERS WITH RESPECT TO THE CAPACITY AND CREDIT OF A SMALL BUSINESS TO PERFORM A SPECIFIC GOVERNMENT PROCUREMENT CONTRACT. UNDER THE TERMS OF THE STATUTORY PROVISION THE PROCUREMENT OFFICERS OF THE GOVERNMENT ARE REQUIRED TO ACCEPT THE SBA CERTIFICATION AS CONCLUSIVE. THE TERM "CAPACITY AND CREDIT" HAS BEEN DEFINED AS THE OVER-ALL ABILITY OF THE BIDDER TO MEET QUALITY, QUANTITY, AND TIME REQUIREMENTS OF THE PROCUREMENT, INCLUDING ABILITY TO PERFORM, ORGANIZATION, TECHNICAL EXPERIENCE, KNOWLEDGE, SKILLS,"KNOW-HOW," TECHNICAL EQUIPMENT, AND FACILITIES. SEE ASPR 1 705.6 (A); 38 COMP. GEN. 864. IN SHORT, THE CERTIFICATE IS CONCLUSIVE AS TO WHETHER THE BIDDER CAN PERFORM.

"TO GIVE EFFECT TO THE STATUTE, PROCEDURES HAVE BEEN ESTABLISHED BY ASPR 1-705.6 REQUIRING THE CONTRACTING OFFICER, WHERE HE HAS FOUND A SMALL BUSINESS WHICH HAS SUBMITTED AN OTHERWISE ACCEPTABLE LOW BID TO BE NONRESPONSIBLE BY REASON OF FACTORS INCLUDED IN THE SBA CERTIFICATION, TO SUBMIT THE MATTER TO THE SMALL BUSINESS ADMINISTRATION UNLESS THE AWARD MUST BE MADE WITHOUT DELAY. IF, HOWEVER, THE CONTRACTING OFFICER DETERMINES SUCH LOW BIDDER TO BE NONRESPONSIBLE FOR REASONS NOT GOING TO THE CERTIFICATION--- FACTORS GOING TO WHETHER THE BIDDER WILL RATHER THAN CAN PERFORM--- THE MATTER NEED NOT BE SUBMITTED TO THE SMALL BUSINESS ADMINISTRATION.'

WE ALSO HAVE HELD THAT THE REFUSAL OF SBA TO ISSUE A CERTIFICATE OF COMPETENCY AS TO A SMALL BUSINESS BIDDER MUST BE REGARDED AS PERSUASIVE WITH RESPECT TO THE COMPETENCY OR CREDIT OF THE BIDDER CONCERNED. COMP. GEN. 705. WHEN THE ISSUANCE OF A CERTIFICATE OF COMPETENCY IS DENIED, THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY MUST BE REGARDED AS HAVING BEEN AFFIRMED, ALBEIT FOR DIFFERENT REASONS OR ON A DIFFERENT BASIS. WE HAVE NO AUTHORITY TO REVIEW DETERMINATIONS OF THE SMALL BUSINESS ADMINISTRATION OR REQUIRE IT TO ISSUE A CERTIFICATE OF COMPETENCY. NOR DO WE DISTURB THE DETERMINATIONS OF A CONTRACTING OFFICER, WHERE, AS HERE, THEY DO NOT APPEAR TO BE EITHER ARBITRARY OR CAPRICIOUS. IN THIS LATTER CONNECTION IT MAY BE OBSERVED THAT BOTH THE AIR FORCE AND SMALL BUSINESS ADMINISTRATION CONSIDERED THE MATTER OF YOUR CAPACITY AND CREDIT IN GREAT DETAIL AND AT LENGTH BEFORE ARRIVING AT THEIR RESPECTIVE CONCLUSIONS. REGARDING THE APPARENT INCONSISTENT FINDINGS AS TO FINANCIAL CAPABILITY, THE CONTRACTING OFFICER WAS OF THE OPINION---

"* * * THAT AN AFFIRMATIVE FCR DECISION CONCERNING THE COMPANY'S FINANCIAL CAPABILITIES IS MARGINAL AND SUBJECT TO ADDITIONAL SCRUTINY. THE CONTRACTING OFFICER'S RESERVATIONS APPLY MAINLY TO COMPANY'S CASH BALANCE, CURRENT RATIO IS 1.3 TO 1 AND IS INADEQUATE. WORKING CAPITAL OF $68,198 IS NOT ADEQUATE. ECCO WOULD BE REQUIRED TO PERFORM SUCCESSFULLY FIRST ARTICLE TESTING AND AGREE III DEMONSTRATION RELIABILITY TESTING PRIOR TO DELIVERY OF PRODUCTION ITEMS. THIS INITIAL EXPENSE IS CONSIDERABLE AND IT IS DOUBTFUL IF PROGRESS PAYMENTS COULD ABSORB THE TOTAL IMPACT WHICH WOULD BE NECESSARY BECAUSE OF THE COMPANY'S CASH BALANCE, CURRENT RATIO AND WORKING PITAL.'

IN VIEW OF THE SMALL BUSINESS ADMINISTRATION'S REFUSAL TO ISSUE A CERTIFICATE OF COMPETENCY AND THE CONTRACTING OFFICER'S DETERMINATION IN ACCORDANCE WITH THE PROVISIONS OF ASPR 1-904.1 THAT YOUR COMPANY WAS NOT A RESPONSIBLE BIDDER, YOUR PROTEST IS DENIED.