B-156663, OCT. 11, 1965

B-156663: Oct 11, 1965

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INCORPORATED: REFERENCE IS MADE TO YOUR LETTER DATED APRIL 27. IN YOUR LETTER YOU STATE THAT YOUR LOW BID WAS APPARENTLY REJECTED WITHOUT CAUSE. THE CONTRACT WAS AWARDED TO BRISTOL DYNAMICS AT THEIR SUBSTANTIALLY HIGHER BID. YOU ALSO STATE THAT YOU CONTACTED THE SMALL BUSINESS ADMINISTRATION FOR AN OPPORTUNITY TO OBTAIN A CERTIFICATE OF COMPETENCY BUT WERE ADVISED THAT THEY HAD RECEIVED NO REFERRAL OF THE MATTER. THE INVITATION WAS A 100 PERCENT SET-ASIDE FOR SMALL BUSINESS CONCERNS. YOUR FIRM WAS LOW BIDDER ON ITEM C AND D. A RESPONSIBLE PROSPECTIVE CONTRACTOR IS ONE WHICH MEETS THE MINIMUM STANDARDS SET FORTH IN 1-903. THE AWARD OF A CONTRACT TO A MARGINAL SUPPLIER BASED ON LOWEST COST ALONE CAN BE FALSE ECONOMY IF THERE IS SUBSEQUENT DEFAULT.

B-156663, OCT. 11, 1965

TO ALTON IRON WORKS, INCORPORATED:

REFERENCE IS MADE TO YOUR LETTER DATED APRIL 27, 1965, WITH ENCLOSURE, PROTESTING THE AWARD OF A CONTRACT TO BRISTOL DYNAMICS, INCORPORATED, UNDER INVITATION FOR BIDS NO. AMC/A/-28-017-65-106 ISSUED BY THE PROCUREMENT AND PRODUCTION DIRECTORATE, PICATINNY ARSENAL, ON NOVEMBER 4, 1964.

IN YOUR LETTER YOU STATE THAT YOUR LOW BID WAS APPARENTLY REJECTED WITHOUT CAUSE, OR NOTIFICATION, AND THE CONTRACT WAS AWARDED TO BRISTOL DYNAMICS AT THEIR SUBSTANTIALLY HIGHER BID. YOU ALSO STATE THAT YOU CONTACTED THE SMALL BUSINESS ADMINISTRATION FOR AN OPPORTUNITY TO OBTAIN A CERTIFICATE OF COMPETENCY BUT WERE ADVISED THAT THEY HAD RECEIVED NO REFERRAL OF THE MATTER. UNDER THIS CIRCUMSTANCES YOU CANNOT UNDERSTAND THE REJECTION OF YOUR BID.

THE INVITATION WAS A 100 PERCENT SET-ASIDE FOR SMALL BUSINESS CONCERNS. YOUR FIRM WAS LOW BIDDER ON ITEM C AND D, AND THE CONTRACTING OFFICER INITIATED A PRE-AWARD SURVEY OF YOUR PLANT AND FACILITIES IN COMPLIANCE WITH PARAGRAPH 1-905.4 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) TO DETERMINE YOUR RESPONSIBILITY WITHIN THE MEANING OF PARAGRAPHS 1-902 AND 1-903 OF ASPR, AS AMENDED BY DEFENSE PROCUREMENT CIRCULAR NUMBER 9, JUNE 18, 1964, WHICH READ, IN PERTINENT PARTS, AS FOLLOWS:

"1-902 GENERAL POLICY. PURCHASES SHALL BE MADE FROM, AND CONTRACTS SHALL BE AWARDED ONLY TO, RESPONSIBLE PROSPECTIVE CONTRACTORS. A RESPONSIBLE PROSPECTIVE CONTRACTOR IS ONE WHICH MEETS THE MINIMUM STANDARDS SET FORTH IN 1-903, AND SUCH ADDITIONAL STANDARDS AS MAY BE PRESCRIBED IN ACCORDANCE WITH 1-903.5 AND BY OVERSEA COMMANDERS. THE AWARD OF A CONTRACT TO A MARGINAL SUPPLIER BASED ON LOWEST COST ALONE CAN BE FALSE ECONOMY IF THERE IS SUBSEQUENT DEFAULT, LATE DELIVERIES, OR OTHER UNSATISFACTORY PERFORMANCE RESULTING IN ADDITIONAL PROCUREMENT OR ADMINISTRATIVE COSTS. WHILE IT IS IMPORTANT THAT GOVERNMENT PURCHASES BE MADE AT THE LOWEST COST, THIS DOES NOT REQUIRE AN AWARD TO A MARGINAL SUPPLIER SOLELY BECAUSE HE SUBMITS THE LOWEST OFFER. PROSPECTIVE CONTRACTORS MUST DEMONSTRATE AFFIRMATIVELY THEIR CAPABILITY TO FULFILL SUCCESSFULLY THE CONTEMPLATED CONTRACT. WHEN THE CONTRACTING OFFICER IS UNABLE TO OBTAIN INFORMATION SUFFICIENT TO PERMIT AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY, A DETERMINATION OF NONRESPONSIBILITY WILL BE MADE. RECENT UNSATISFACTORY PRIOR PERFORMANCE, IN EITHER QUALITY OR TIMELINESS OF DELIVERY, WHETHER OR NOT DEFAULT PROCEEDINGS WERE INSTITUTED, ARE EXAMPLES OF PROBLEMS WHICH THE CONTRACTING OFFICER MUST RESOLVE PRIOR TO MAKING AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY. DOUBT AS TO PRODUCTIVE CAPACITY OR FINANCIAL STRENGTH WHICH CANNOT BE RESOLVED WILL REQUIRE A DETERMINATION OF NONRESPONSIBILITY.

"1-903.1 GENERAL STANDARDS. EXCEPT AS OTHERWISE PROVIDED IN THIS PARAGRAPH 1-903, A PROSPECTIVE CONTRACTOR MUST---

(III) HAVE A SATISFACTORY RECORD OF PERFORMANCE (CONTRACTORS WHO ARE SERIOUSLY DELINQUENT IN CURRENT CONTRACT PERFORMANCE, WHEN THE NUMBER OF CONTRACTS AND THE EXTENT OF DELINQUENCIES OF EACH ARE CONSIDERED SHALL, IN THE ABSENCE OF EVIDENCE TO THE CONTRARY OR CIRCUMSTANCES PROPERLY BEYOND THE CONTROL OF THE CONTRACTOR, BE PRESUMED TO BE UNABLE TO FULFILL THIS REQUIREMENT (III) ); SEE 1-905.2 AND 1-905.4 (D);

(IV) HAVE A SATISFACTORY RECORD OF INTEGRITY; "

THE NEW YORK PROCUREMENT DISTRICT MADE A PRE-AWARD SURVEY OF YOUR FIRM AND IN THE REPORT DATED DECEMBER 18, 1964, ADVISED THAT YOUR FIRM HAD AN UNSATISFACTORY RECORD OF PERFORMANCE AND ABILITY TO MEET SPECIFIED DELIVERY SCHEDULES. THE REPORT LISTED NINE CONTRACTS UNDER WHICH YOU WERE DELINQUENT IN DELIVERIES AS OF DECEMBER 1, 1964, AS FOLLOWS:

TABLE

"CONTRACT NO. ITEM DUE DATE N195-16050 SLIDE 8/26/64 N383-88317 HEAD ASSY 10/6/64 AF36/600/17563 FLYWHEEL 3/18/64 DA28-017-AMC-935 3 PREPRO ACCEPT. 8/1/64 DA19-058 AMC-506 COCKING LEVERS 10/14/64 DA20-113-AMC-0329/T) CHUTES 9/20/64 DA30-144-AMC-764 BLOCK HINGE10/13/64 DA20-113-AMC-03766 PINTLE 10/5/64 DA19-058-AMC-672 TACKING 11/1/64"

ALTHOUGH THE REPORT OF SURVEY WAS FAVORABLE AS TO CAPACITY AND CREDIT, IT WAS UNFAVORABLE AS TO THE EXPECTANCY OF TIMELY DELIVERIES IN VIEW OF THE DELINQUENCIES UNDER THE ABOVE EXISTING CONTRACTS, WHICH DELINQUENCIES WERE STATED TO BE ATTRIBUTABLE TO YOUR FIRM AND THEREFORE NOT EXCUSABLE.

IN VIEW OF THE FOREGOING REPORT THE CONTRACTING OFFICER DETERMINED THAT YOUR FIRM DID NOT MEET THE MINIMUM STANDARDS OF A RESPONSIBLE PROSPECTIVE CONTRACTOR AS DEFINED BY ASPR 1-903.1 (III). IT WAS FURTHER DETERMINED THAT SINCE THE CAUSES OF NONRESPONSIBILITY WERE UNRELATED TO CAPACITY AND CREDIT, THERE WAS NOT NEED TO REFER THE MATTER TO THE SMALL BUSINESS ADMINISTRATION PURSUANT TO ASPR 1-705.5 (B) (III). THE AWARD OF ITEMS C AND D WAS MADE TO BRISTOL DYNAMICS, INCORPORATED, AS THE LOW RESPONSIVE AND RESPONSIBLE BIDDER.

THE DETERMINATION OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS PRIMARILY THE FUNCTION OF THE CONTRACTING OFFICER, AND NECESSARILY IS A MATTER OF JUDGMENT INVOLVING A CONSIDERABLE RANGE OF DISCRETION. WHERE SUCH DETERMINATION IS BASED UPON SUBSTANTIAL EVIDENCE THERE IS NO VALID BASIS ON WHICH WE MAY SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER. 39 COMP. GEN. 705, 711. IT IS OUR OPINION THAT THE FOREGOING REPORTED FACTS CONSTITUTE SUBSTANTIAL EVIDENCE OF A PRIOR UNSATISFACTORY RECORD OF PERFORMANCE AND THAT THE CONTRACTING OFFICER'S DETERMINATION MAY NOT THEREFORE BE PROPERLY QUESTIONED BY OUR OFFICE.

HOWEVER, THE AUTHORITY OF A CONTRACTING AGENCY TO MAKE FINAL DETERMINATIONS OF THE RESPONSIBILITY OF SMALL BUSINESS BIDDERS HAS BEEN MODIFIED AND LIMITED TO SOME EXTENT BY SECTION 8 (B) (7) OF THE SMALL BUSINESS ACT, 15 U.S.C. 637 (B) (7), WHICH PROVIDES THAT WHERE A SMALL BUSINESS CONCERN IS CERTIFIED BY THE SMALL BUSINESS ADMINISTRATION TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT, THE PROCURING OFFICERS OF THE GOVERNMENT MUST ACCEPT SUCH CERTIFICATION AS CONCLUSIVE. IMPLEMENTING REGULATIONS REQUIRE THAT A SMALL BUSINESS BIDDER MAY NOT BE REJECTED FOR LACK OF RESPONSIBILITY WITHOUT FIRST REFERRING THE MATTER TO THE SMALL BUSINESS ADMINISTRATION, WHERE SUCH LACK OF RESPONSIBILITY RESULTS FROM THE BIDDER'S CAPACITY OR CREDIT.

SINCE YOU ARE A SMALL BUSINESS CONCERN, A FURTHER QUESTION RAISED BY YOUR PROTEST APPEARS TO BE WHETHER THE CONTRACTING AGENCY ACTED PROPERLY IN CONCLUDING THAT ITS REASONS FOR DETERMINING THAT YOUR COMPANY WAS NOT A RESPONSIBLE OFFER OR WERE NOT RELATED TO YOUR COMPANY'S "COMPETENCY, AS TO CAPACITY AND CREDIT," AS THAT TERM IS USED IN THE SMALL BUSINESS ACT AND IN THE APPLICABLE PROCUREMENT REGULATIONS (ASPR 1-705.4 (B) ).

THIS OFFICE HAS RECOGNIZED THAT IT IS NOT INCUMBENT UPON CONTRACTING OFFICERS TO SUBMIT THE QUESTION OF A BIDDER'S RESPONSIBILITY TO SMALL BUSINESS ADMINISTRATION (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. IN THIS REGARD, THE AUTHORITY OF SBA TO CERTIFY THE COMPETENCY OF A SMALL BUSINESS CONCERN AS TO CAPACITY AND CREDIT IS RECOGNIZED IN PARAGRAPH 1-705.4 (A) OF APPR, AND THEREIN THE TERM "CAPACITY" AS USED IN THE SMALL BUSINESS ACT IS DEFINED AS THE "OVERALL ABILITY OF A PROSPECTIVE SMALL BUSINESS CONTRACTOR TO MEET QUALITY, QUANTITY, AND TIME REQUIREMENTS OF A PROPOSED CONTRACT AND INCLUDES ABILITY TO PERFORM, ORGANIZATION, EXPERIENCE, TECHNICAL KNOWLEDGE, SKILLS,"KNOW-HOW," TECHNICAL EQUIPMENT AND FACILITIES * * *.' HOWEVER, THE CITED REGULATION ALSO PROVIDES THAT REFERENCE TO SBA IS NOT REQUIRED WHERE THE CONTRACTING OFFICER HAS FOUND THE CONCERN NONRESPONSIBLE FOR A REASON OTHER THAN LACK OF CAPACITY OR CREDIT, AS WHERE THE CONCERN DOES NOT MEET THE REQUIREMENTS OF SECTION 1- 903.1 (IV), QUOTED ABOVE, AS TO A SATISFACTORY RECORD OF INTEGRITY, OR WHERE THE CONCERN DOES NOT MEET THE REQUIREMENTS OF SECTION 1-903.1 (III), QUOTED ABOVE, AS TO A SATISFACTORY RECORD OF PERFORMANCE, AND THE UNSATISFACTORY RECORD OF PERFORMANCE WAS NOT DUE SOLELY TO INADEQUATE CAPACITY OR CREDIT.

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 THOSE 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.

WE BELIEVE THAT THERE WAS ADEQUATE EVIDENCE OF RECORD TO SUPPORT THE CONCLUSION OF THE CONTRACTING OFFICER THAT YOUR RECORD OF PERFORMANCE ON CURRENT CONTRACTS DID NOT RESULT SOLELY FROM LACK OF CAPABILITY AS TO CAPACITY OR CREDIT, BUT WAS DUE TO A SUBSTANTIAL DEGREE FROM FACTORS WITHIN THE CONTROL OF COMPANY MANAGEMENT. UNDER THE APPLICABLE LAW AND REGULATIONS WE MUST THEREFORE CONCLUDE THAT THE REJECTION OF YOUR BID, WITHOUT FIRST REFERRING THE QUESTION OF YOUR CAPACITY AND CREDIT TO SBA, WAS AUTHORIZED.

IN VIEW THEREOF, WE SEE NO LEGAL BASIS TO OBJECT TO THE AWARD OF A CONTRACT ON ITEMS C AND D TO BRISTOL DYNAMICS, INC., AND YOUR PROTEST MUST THEREFORE BE DENIED.