B-156428, FEB. 8, 1966

B-156428, FEB. 8, 1966

TO ROBERT B. DIEM AND ASSOCIATES:

REFERENCE IS MADE TO YOUR RADIOGRAM OF MARCH 29, 1965, YOUR LETTERS OF APRIL 26 AND AUGUST 3, 1965, THE ENCLOSURES WITH YOUR LETTERS, YOUR MEMORANDUM OF JULY 19, 1965, OTHER SUBSEQUENT CORRESPONDENCE, AND YOUR RADIOGRAM OF OCTOBER 19, 1965, PROTESTING THE AWARD OF A CONTRACT BY THE PROCUREMENT DIRECTORATE, AIR PROCUREMENT REGION-EUROPE, CHATEAUROUX (INDRE), FRANCE, TO DE MONTIS, S.A. UNDER REQUEST FOR PROPOSAL NO. SGAP-65 -17. IN YOUR RADIOGRAM, RECEIVED HERE AUGUST 10, 1965, YOU ASK THAT WE HOLD OUR DECISION IN SUSPENSE, PENDING ARRIVAL IN WASHINGTON FOR PERSONAL CONFERENCE WITH MEMBERS OF OUR OFFICE. YOUR RADIOGRAM OF OCTOBER 19, 1965, ADVISED THAT YOUR VISIT WAS BEING POSTPONED. SINCE MORE THAN THREE MONTHS HAVE ELAPSED SINCE THE DATE OF YOUR LAST RADIOGRAM, WE MUST CONCLUDE THAT YOU HAVE ABANDONED YOUR INTENT TO TRAVEL HERE. IN THIS CIRCUMSTANCE WE HEREIN CONSIDER YOUR PROTEST ON THE BASIS OF YOUR LETTERS, BRIEF AND EXHIBITS, AND THE REPORT OF THE ADMINISTRATIVE DEPARTMENT.

IT APPEARS THAT REQUEST FOR PROPOSAL NO. SGAP-65-17, ISSUED BY THE PROCUREMENT DIRECTORATE, AIR PROCUREMENT REGION-EUROPE, USAF, CHATEAUROUX, FRANCE, ON DECEMBER 14, 1964, REQUESTED PROPOSALS FOR FURNISHING CERTAIN SPECIFIED SERVICES IN CONNECTION WITH THE ARRIVAL AND DEPARTURE OF MILITARY AIR TRANSPORT SERVICE AIRCRAFT AT TORREJON AIR BASE, SPAIN, FOR A PERIOD OF 12 MONTHS FROM DATE OF CONTRACT. FOUR PROPOSALS WERE RECEIVED. THE TWO LOWEST RESPONSIVE PROPOSALS, AS FINALLY REVISED THROUGH NEGOTIATIONS, WERE SUBMITTED BY THE FIRM OF DE MONTIS, S.A., A SPANISH CORPORATION, WHICH QUOTED A PRICE OF $41,666.67, AND BY YOUR ORGANIZATION, WHICH QUOTED A PRICE OF $45,000.00.

IT IS REPORTED THAT ON RECEIPT OF A FAVORABLE REPORT AS TO THE CAPABILITY OF THE LOW OFFEROR, DE MONTIS, TO PERFORM THE CONTRACT, THE CONTRACTING OFFICER DECIDED TO AWARD THE CONTRACT TO DE MONTIS. IT IS FURTHER REPORTED THAT DE MONTIS WAS SELECTED OVER THE OTHER PROPOSERS FOR THE FOLLOWING REASONS:

A. LOWEST PROBABLE COST TO THE GOVERNMENT

B. DETERMINATION THAT DE MONTIS IS A RESPONSIBLE COMPANY, AND

C. CURRENT EXPERIENCE ON IDENTICAL WORK AT BARAJOS INTERNATIONAL AIRPORT, MADRID, SPAIN, AND FIVE OTHER LOCATIONS IN SOUTHERN EUROPE.

THE CONTRACTING OFFICER STATES THAT YOUR FIRM WAS NOT SELECTED BECAUSE OF HIGHER PROBABLE COST TO THE GOVERNMENT AND A NEGATIVE FACILITY CAPABILITY REPORT.

YOU CONTEND THAT THE AWARDING OF THE CONTRACT IN THIS CASE HAS BEEN HANDLED IN A MOST UNPROFESSIONAL MANNER AND THAT APPROPRIATE REGULATIONS AND DIRECTIVES HAVE BEEN IGNORED. SPECIFICALLY, YOU STATE THAT DE MONTIS' WRITTEN PROPOSAL CONSISTED SOLELY OF A PRICE QUOTATION, WITH NO COST OR PRICING DATA AS REQUIRED BY THE REQUEST FOR PROPOSALS; THAT DURING NEGOTIATIONS BETWEEN THE CONTRACTING OFFICER AND THE COMPETING BIDDERS, YOU WERE INVITED ON TWO SEPARATE OCCASIONS TO LOWER YOUR BID; THAT YOUR ORGANIZATION WAS INVITED TO LOWER ITS BID TO $45,000.00 WITH NO CHANGE IN THE PROPOSAL, WHICH IT ACCEPTED, ASSUMING IT WAS AWARDED THE CONTRACT; AND THAT DIEM AND ASSOCIATES ARE, IN FACT, A "RESPONSIBLE BIDDER.'

IT APPEARS FROM THE RECORD BEFORE US THAT AFTER INITIAL PROPOSALS WERE RECEIVED AND EXAMINED, IT BECAME OBVIOUS TO THE PROCURING AUTHORITIES THAT THERE WAS NOT A GENERAL UNDERSTANDING OF THE WORK REQUIREMENTS OF THE REQUEST FOR PROPOSALS BY ALL THE PROSPECTIVE CONTRACTORS. THE CONTRACTING OFFICER DECIDED TO CONTACT EACH PROPOSER TO DISCUSS THE NEEDS OF THE GOVERNMENT, AND OFFER THE PROPOSERS AN OPPORTUNITY TO REVISE THEIR OFFERS EITHER UPWARD OR DOWNWARD IN THE LIGHT OF THE ADDITIONAL INFORMATION. ALL FOUR PROPOSERS WERE REQUESTED TO REVIEW THEIR PROPOSALS AND SUBMIT REVISIONS IF THEY SO DESIRED, BUT NOT LATER THAN MARCH 5, 1965. IN THIS CONNECTION, THE NARRATIVE REPORT OF THE CONTRACTING OFFICER ON THIS PROCUREMENT STATES:

"9. * * * ON 2 MARCH 1965, I HAD RECEIVED ONLY TWO REVISED PROPOSALS. (SEE ATCH 1 FOR SUMMARY). SINCE THE DIEM FIRM HAD WHAT APPEARED TO BE THE BEST OVERALL PLAN AND HAD ACCOMPLISHED THE MOST SEARCHING ANALYSIS OF THE WORKLOAD, I ELECTED TO NEGOTIATE WITH THEM RATHER THAN THE LOWER PROPOSER, TUMCO. IN ADDITION, THERE WAS THE POSSIBILITY OF NEGOTIATING A FIRM FIXED PRICE WITH DIEM SINCE THEY HAD NOT REQUESTED WAGE ESCALATION SAFEGUARDS IN THE CONTRACT AS HAD THE OTHER PROPOSER. AS A BASIS FOR ESTABLISHING A GOVERNMENT FIXED-PRICE POSITION, I DEVELOPED AN ESTIMATE OF LABOR COSTS WHICH THE SUCCESSFUL CONTRACTOR WOULD EXPERIENCE FOR THE SKILLS NECESSARY TO PERFORM THIS CONTRACT. THESE COSTS WERE BASED ON JUSMAG LABOR RATES FOR SPANISH PERSONNEL IN GRADES SM-5, 6, 8 AND SA-4. THE BASIC COST FOR LABOR FOR 20 PERSONS WILL BE APPROXIMATELY $35,100. THIS ESTIMATE INCLUDES A FACTOR OF 15 PERCENT INCREASE APPLIED TO CURRENT WAGES OVER THE PERIOD OF PERFORMANCE CONTEMPLATED IN THIS CONTRACT TIMES THE NUMBER OF TOTAL PERSONNEL REQUIRED TO PERFORM THE SERVICES (20) PLUS 22 PERCENT REQUESTED BY DIEM FOR OVERHEAD, G. AND A. AND PROFIT. THE TOTAL ESTIMATE IS $45,000. (TAB 43). I CONSIDERED A GOVERNMENT FIXED PRICE POSITION AT $45,000 TO BE FAIR AND REASONABLE. I WIRED DIEM ON 2 MARCH 1965 INVITING THEM TO REDUCE THEIR PROPOSAL TO $45,000. DIEM AND ASSOCIATES ACCEPTED THIS PROPOSITION AND I THEN REQUESTED A FACILITY CAPABILITY REPORT TO BE PERFORMED ON DIEM BY AFPO, MADRID. THE FCR ON DIEM AND ASSOCIATES PROVED NEGATIVE (TAB 25).

"10. THE FCR REVEALED THAT DIEM AND ASSOCIATES APPARENTLY CONSISTS OF AN INDIVIDUAL, R. B. DIEM, WITH SOME FINANCIAL SUPPORT FROM "PARTNERS" WHOSE CHARTER TO OPERATE CONSISTS PRIMARILY OF VERBAL AGREEMENTS AMONG THE INDIVIDUALS. AS STATED IN THE FCR THEY WERE NOT ABLE TO PRODUCE FINANCIAL RECORDS NOR RECORDS OF ANY KIND ATTESTING TO THE FACT THAT A BUSINESS ENTITY ACTUALLY EXISTED IN THE NAME OF ROBERT B. DIEM AND ASSOCIATES. MR. DIEM STATED THAT HE IS A CITIZEN OF THE UNITED STATES * * *. BECAUSE OF THE FACTS BROUGHT OUT BY THE FCR, IN MY OPINION, IT WOULD HAVE BEEN EXTREMELY RISKY FOR THE U.S. GOVERNMENT TO AWARD A CONTRACT TO DIEM AND ASSOCIATES. THIS INFORMATION DID NOT BECOME AVAILABLE UNTIL THE FCR WAS PERFORMED. MR. DIEM HAD STATED IN OUR VARIOUS MEETINGS 19-23 FEBRUARY 1965 THAT DIEM AND ASSOCIATES IS A BONAFIDE GOING CONCERN OPERATING IN OTHER BUSINESS ENDEAVORS IN SPAIN. ALSO, HE HAD FURNISHED A CERTIFICATE WITH HIS PROPOSAL DATED 28 DECEMBER 1964 STATING THAT DIEM AND ASSOCIATES IS A CORPORATION AUTHORIZED TO OPERATE IN SPAIN FOR THE PURPOSES OF THIS PROCUREMENT. AWARD OF THE CONTRACT TO DIEM COULD HAVE RESULTED IN EMBARRASSMENT TO THE U.S. GOVERNMENT IN THEIR RELATIONS WITH SPAIN.

"11. MEANWHILE, ON 3 MARCH 1965, I RECEIVED BY MAIL A REVISED DE MONTIS PROPOSAL. ALTHOUGH THEIR PRICE WAS INCREASED OVER THEIR ORIGINAL ESTIMATE TO COVER THE ITEMS MENTIONED IN PARAGRAPH 6 ABOVE, IT WAS STILL A LOWER PRICE THAN TUMCO OR DIEM PROPOSED. BECAUSE OF THE NEGATIVE FCR ON DIEM AND THE LOWER PRICE OF THE DE MONTIS PROPOSAL, I ELECTED TO AWARD THE CONTRACT TO DE MONTIS WITHOUT FURTHER NEGOTIATION.'

IT IS OUR OPINION, AND THE SAME OPINION IS HELD BY THE ADMINISTRATIVE OFFICE, THAT THE NEGOTIATING PROCEDURE EMPLOYED BY THE CONTRACTING OFFICER WHEN HE INVITED YOUR ORGANIZATION TO CONSIDER REDUCING ITS OFFER TO $45,000.00 WAS ERRONEOUS. WE AGREE THAT THIS ACTION WOULD NATURALLY LEAD YOU TO BELIEVE THAT YOUR BID IN THAT AMOUNT WOULD BE THE LOW BID, BUT SUCH AN ,AUCTION" TECHNIQUE OF NEGOTIATING IS SPECIFICALLY PROHIBITED BY ASPR 3 -805.1 (B). HOWEVER, THE RECORD SHOWS THAT YOU WERE NOT PRECLUDED BECAUSE OF THE IRREGULARITY, BUT BECAUSE YOU WERE UNDERBID BY DE MONTIS, AND ALSO BECAUSE THE FACILITY CAPABILITY REPORT (FCR) WAS NEGATIVE. IN THIS RESPECT IT IS ADMINISTRATIVELY REPORTED AS FOLLOWS:

"* * * A FACILITY CAPABILITY REPORT (FCR) OBTAINED ON PROTESTANT DETERMINED THAT HE WAS NOT CAPABLE OF PERFORMING THE CONTRACT (BY REASON OF INADEQUATE FACILITIES) AND DID NOT DEMONSTRATE SUFFICIENT FINANCIAL STABILITY TO PERFORM THE CONTRACT. ALTHOUGH LATER, ON MARCH 5, HE PRODUCED A FINANCIAL STATEMENT, THIS WAS NEITHER TIMELY NOR WAS IT A SATISFACTORY RECORD UPON WHICH TO BASE AN OPINION AS TO FINANCIAL STABILITY, AND SINCE PROTESTANT OPERATES ON A CASH BASIS AND KEEPS NO BOOKS, HIS ACCOUNTING SYSTEM IS INADEQUATE TO ENABLE A JUDGMENT OF FINANCIAL STABILITY TO BE MADE. * * * FURTHERMORE, A PROTESTANT WAS NOT YET INCORPORATED UNDER SPANISH LAW. * * * SINCE THE FCR WAS NEGATIVE, PROTESTANT WAS NOT A RESPONSIBLE BIDDER, AND SO AWARD COULD NOT HAVE BEEN MADE TO PROTESTANT EVEN IF HE HAD BEEN LOW BIDDER. * * *.'

OUR OFFICE HAS CONSISTENTLY HELD THAT THE QUESTION OF A BIDDER'S RESPONSIBILITY IS PRIMARILY FOR DETERMINATION BY THE CONTRACTING OFFICER. 38 COMP. GEN. 131; 33 ID. 549. THE RECORD PRESENTED IN THIS CASE ESTABLISHES THAT THE DETERMINATION AS TO THE RESPONSIBILITY OF THE LOW OFFEROR AND THE NEGATIVE DETERMINATION OF YOUR FIRM WAS MADE AFTER DUE CONSIDERATION OF THE INFORMATION DISCLOSED BY PRE-AWARD SURVEYS. IN THE ABSENCE OF EVIDENCE OF ARBITRARY OR CAPRICIOUS ACTION, WE FIND NO BASIS TO OBJECT TO THE ADMINISTRATIVE NEGATIVE DETERMINATION OF RESPONSIBILITY.

IN YOUR MEMORANDUM OF JULY 19, 1965, AND YOUR LETTER OF AUGUST 3, 1965, YOU ALLEGE THAT THE FIRST QUARTER PERFORMANCE REPORT ON DE MONTIS AT TORREJON AIR BASE HAS BEEN UNSATISFACTORY AND THAT YOU ARE ADVISED THAT DE MONTIS "IS GOING TO APPLY FOR AN INCREASE IN THE COST OF THE CONTRACT TO HIRE AMERICAN SUPERVISION.'

WE HAVE NOT BEEN SO ADVISED BY THE ADMINISTRATIVE OFFICE AND ARE OTHERWISE WITHOUT INFORMATION IN THAT REGARD. HOWEVER, THERE WOULD APPEAR TO BE NO BASIS FOR PAYING AN INCREASED AMOUNT TO THE CONTRACTOR WITHOUT ADDITIONAL CONSIDERATION FLOWING TO THE GOVERNMENT NOT ALREADY INCLUDED IN THE CONTRACT TERMS. AS TO UNSATISFACTORY PERFORMANCE OF THE CONTRACT, THAT MATTER IS PRIMARILY FOR DETERMINATION BY THE CONTRACTING OFFICER AND IT IS FOR HIM TO DETERMINE WHETHER THE CONTRACT SHOULD BE TERMINATED FOR THAT REASON.

IN VIEW OF THE FOREGOING, WE FIND NO LEGAL REASON TO QUESTION THE VALIDITY OF THE AWARD TO DE MONTIS, S.A., AND YOUR PROTEST IS THEREFORE DENIED.