B-156288, JUL. 29, 1965

B-156288: Jul 29, 1965

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BIDS WERE OPENED ON JANUARY 18. WAS LOW. WAS SECOND LOW. SBA ADVISED THE PROCURING ACTIVITY ON FEBRUARY 4 THAT THE FIRM WAS SMALL BUSINESS. AN APPEAL BY KEYSTONE TO SBA FROM SUCH DECISION WAS DENIED BY SBA ON MARCH 9. SINCE THE RESULTS OF AN AIR FORCE SURVEY OF THE FACILITIES OF PENNSYLVANIA NORTHEAST WERE UNFAVORABLE. SBA CERTIFIED TO THE CONTRACTING OFFICER THAT PENNSYLVANIA NORTHEAST WAS COMPETENT. THE SUBSTANCE OF YOUR PROTEST IS THAT BECAUSE OF THE ALLEGED AFFILIATION OF THE LOW BIDDER THROUGH COMMON OWNERSHIP OR CONTROL BY THE NOW IMPRISONED FORMER OWNER OF SEVERAL OTHER BUSINESS CONCERNS. PENNSYLVANIA NORTHEAST IS NOT SMALL BUSINESS AND LACKS THE INTEGRITY REQUIRED OF A RESPONSIBLE BIDDER.

B-156288, JUL. 29, 1965

TO MR. PAUL L. BLENDEN:

YOUR TELEGRAM OF MARCH 9, 1965, AND SUBSEQUENT COMMUNICATIONS PROTEST, ON BEHALF OF KEYSTONE LAUNDRIES, INCORPORATED, ANY CONTRACT AWARD TO PENNSYLVANIA NORTHEAST LAUNDRIES CORPORATION UNDER INVITATION FOR BIDS NO. 28-609-65-33, ISSUED BY MCGUIRE AIR FORCE BASE, NEW JERSEY.

THE IFB, DATED DECEMBER 7, 1964, SOLICITED BIDS, ON A TOTAL SMALL BUSINESS SET-ASIDE BASIS, FOR THE PERFORMANCE OF LAUNDRY SERVICES AT MCGUIRE AIR FORCE BASE FOR THE PERIOD FEBRUARY 1, 1965, OR DATE OF AWARD IF SUBSEQUENT THERETO, THROUGH JANUARY 31, 1966. BIDS WERE OPENED ON JANUARY 18, 1965, AS SCHEDULED IN THE AMENDED IFB. PENNSYLVANIA NORTHEAST, WITH A BID OF $110,335, WAS LOW, AND KEYSTONE, WITH A BID OF $121,188, WAS SECOND LOW.

PURSUANT TO AN INQUIRY BY THE CONTRACTING OFFICER TO THE SMALL BUSINESS ADMINISTRATION (SBA) REGARDING THE ELIGIBILITY OF PENNSYLVANIA NORTHEAST TO COMPETE AS A SMALL BUSINESS CONCERN, SBA ADVISED THE PROCURING ACTIVITY ON FEBRUARY 4 THAT THE FIRM WAS SMALL BUSINESS. AN APPEAL BY KEYSTONE TO SBA FROM SUCH DECISION WAS DENIED BY SBA ON MARCH 9.

IN ADDITION, SINCE THE RESULTS OF AN AIR FORCE SURVEY OF THE FACILITIES OF PENNSYLVANIA NORTHEAST WERE UNFAVORABLE, THE CONTRACTING OFFICER, IN ACCORDANCE WITH THE REQUIREMENTS OF ARMED SERVICES PROCUREMENT REGULATION 1-705.4 (B), REFERRED TO SBA FOR DETERMINATION THE MATTER OF THE FIRM'S FINANCIAL RESPONSIBILITY. ON MARCH 18, SBA CERTIFIED TO THE CONTRACTING OFFICER THAT PENNSYLVANIA NORTHEAST WAS COMPETENT, AS TO CAPACITY AND CREDIT, TO PERFORM THE PROPOSED CONTRACT.

THE SUBSTANCE OF YOUR PROTEST IS THAT BECAUSE OF THE ALLEGED AFFILIATION OF THE LOW BIDDER THROUGH COMMON OWNERSHIP OR CONTROL BY THE NOW IMPRISONED FORMER OWNER OF SEVERAL OTHER BUSINESS CONCERNS, PENNSYLVANIA NORTHEAST IS NOT SMALL BUSINESS AND LACKS THE INTEGRITY REQUIRED OF A RESPONSIBLE BIDDER, AND THAT THE CONCERN IS NOT FINANCIALLY RESPONSIBLE SINCE ITS AFFAIRS ARE NOW BEING CONDUCTED BY A RECEIVER IN BANKRUPTCY.

UNDER SECTION 8 (B) (6) OF THE SMALL BUSINESS ACT, 15 U.S.C. 637 (B) (6), SBA IS AUTHORIZED TO DETERMINE WHETHER A PARTICULAR FIRM IS A SMALL BUSINESS CONCERN FOR PURPOSES OF GOVERNMENT PROCUREMENT, AND SUCH DETERMINATION IS CONCLUSIVE ON OTHER GOVERNMENT AGENCIES. 38 COMP. GEN. 328, 331. UNDER SECTION 8 (B) (7) OF THE ACT, 15 U.S.C. 637 (B) (7), SBA HAS AUTHORITY TO CERTIFY THE COMPETENCY OF ANY SMALL BUSINESS CONCERN AS TO CAPACITY AND CREDIT, AND GOVERNMENT CONTRACTING OFFICERS ARE REQUIRED TO ACCEPT SUCH SBA CERTIFICATE OF COMPETENCY AS CONCLUSIVE OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY AS TO CAPACITY AND CREDIT. COMP. GEN. 868, 871.

AT THE REQUEST OF OUR OFFICE, SBA HAS AGAIN REVIEWED THE ORIGINAL RECORD ON WHICH ITS SIZE DETERMINATION REGARDING PENNSYLVANIA NORTHEAST WAS BASED, AS WELL AS THE MATTER OF THE FIRM'S CAPACITY AND CREDIT IN RELATION TO THE PROCUREMENT IN QUESTION, AND HAS ALSO CONSIDERED THE SUPPLEMENTAL INFORMATION RECEIVED SUBSEQUENT TO SUCH DETERMINATIONS. WHILE SBA REPORTS THAT THE RECORD EVIDENCES THAT THE INDIVIDUAL NAMED BY YOU EXERCISED CONSIDERABLE INFLUENCE ON THE AFFAIRS OF PENNSYLVANIA NORTHEAST PRIOR TO BOTH HIS IMPRISONMENT AND THE PLACING OF THE CONCERN IN RECEIVERSHIP, NO AFFILIATION WAS FOUND TO EXIST WITHIN THE PURVIEW OF SECTION 121.3-2 (A) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION, 13 CFR 121.3-2 (A), WHICH READS, IN PART, AS FOLLOWS:

"CONCERNS ARE AFFILIATES OF EACH OTHER WHEN EITHER DIRECTLY OR INDIRECTLY (1) ONE CONCERN * * * CONTROLS OR HAS THE POWER TO CONTROL THE OTHER, OR (2) A THIRD PARTY OR PARTIES * * * CONTROLS OR HAS THE POWER TO CONTROL BOTH. IN DETERMINING WHETHER CONCERNS ARE INDEPENDENTLY OWNED AND OPERATED AND WHETHER OR NOT AFFILIATION EXISTS, CONSIDERATION SHALL BE GIVEN TO ALL APPROPRIATE FACTORS, INCLUDING COMMON OWNERSHIP, COMMON MANAGEMENT, AND CONTRACTUAL RELATIONSHIPS.'

ALSO, SBA REPORTS THAT THE CONCERN IS CURRENTLY BEING OPERATED BY THE RECEIVER INDEPENDENTLY OF THE FIRMS ASSOCIATED WITH THE PRISONER, AND TO DATE THERE HAS BEEN NO ADJUDICATION BY THE COURT AS TO THE INTEREST, IF ANY, OF SUCH INDIVIDUAL IN PENNSYLVANIA NORTHEAST. ACCORDINGLY, SBA HAS FOUND THAT WHILE THERE ARE SOME CONFLICTS OF RECORD, THE SUPPLEMENTAL INFORMATION DOES NOT CONSTITUTE NEW AND MATERIAL EVIDENCE AS TO THE MAJOR ISSUES INVOLVED, AND, THEREFORE, NO REASONABLE BASIS EXISTS FOR DISTURBING ITS ORIGINAL DECISION. SINCE SBA'S DECISION IN SUCH MATTERS ARE CONCLUSIVE ON OTHER GOVERNMENT AGENCIES, AS STATED ABOVE, THERE IS NO FURTHER ACTION WHICH OUR OFFICE MAY TAKE ON THESE ISSUES.

IN CONNECTION WITH THE FACT THAT PENNSYLVANIA NORTHEAST IS PRESENTLY IN RECEIVERSHIP, HOWEVER, YOU ARE ADVISED THAT WE HAVE HELD THAT SUCH FACT DOES NOT PER SE RENDER A BIDDER FINANCIALLY NONRESPONSIBLE AND, THEREFORE, AN AWARD TO SUCH A BIDDER WHO WAS ADMINISTRATIVELY DETERMINED TO BE FINANCIALLY RESPONSIBLE, AS CONTEMPLATED BY ARMED SERVICES PROCUREMENT REGULATION 1-905, ON THE BASIS OF ADEQUATE EVIDENCE, WAS LEGALLY PROPER. B-153478, JANUARY 18, 1965.

CONCERNING THE MATTER OF THE INTEGRITY OF PENNSYLVANIA NORTHEAST, THE DEPARTMENT OF THE AIR FORCE, IN A REPORT DATED APRIL 29, MAKES THE FOLLOWING STATEMENTS:

"6. WE ALSO NOTE THAT THE COMPLAINANT IN HIS LETTER OF 12 APRIL 1965 TO YOUR OFFICE ALLEGES THAT PENNSYLVANIA NORTHEAST LACKS THE INTEGRITY CONTEMPLATED BY THE ASPR FOR THE PERFORMANCE OF THE PROPOSED CONTRACT. THIS REGARD WE HAVE ALSO CAREFULLY REVIEWED THE FILE, INCLUDING PROTEST LETTERS, THE CONTRACTING OFFICER'S STATEMENT, THE FACILITY CAPABILITY REPORT, THE STATEMENTS OF THE SBA OF 4 FEBRUARY AND 9 MARCH 1965 AND FIND INSUFFICIENT INFORMATION TO ADEQUATELY SUPPORT A DETERMINATION THAT PENNSYLVANIA NORTHEAST IS NOT A RESPONSIBLE FIRM BECAUSE IT LACKS INTEGRITY OVER AND ABOVE THE NECESSARY CAPACITY AND CREDIT. * * *"

IN THIS REGARD, IT IS TO BE NOTED THAT SBA'S FINDING AS TO THE ABSENCE OF ANY EVIDENCE OF A CURRENT AFFILIATION BETWEEN PENNSYLVANIA NORTHEAST AND THE INDIVIDUAL NAMED BY YOU WOULD APPEAR TO SUBSTANTIATE THE ACTION OF THE AIR FORCE AND TO PRECLUDE IMPUTING ANY LACK OF INTEGRITY ON THE PART OF SUCH INDIVIDUAL TO PENNSYLVANIA NORTHEAST. ACCORDINGLY, WE SEE NO BASIS TO QUESTION THE AIR FORCE DETERMINATION OF RESPONSIBILITY.

FOR THE REASONS STATED, WE FIND NO LEGAL BASIS TO OBJECT TO AWARD OF A CONTRACT TO PENNSYLVANIA NORTHEAST FOR THE PROCUREMENT IN QUESTION AND YOUR PROTEST IS ACCORDINGLY DENIED.