B-158401, JUL. 7, 1966

B-158401: Jul 7, 1966

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TO HOFFMAN ELECTRONICS CORPORATION: REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 10. THE BASIS FOR YOUR PROTEST UNDER THE SUBJECT PROCUREMENT IS THAT REPUBLIC ELECTRONIC INDUSTRIES CORP. THE RECORD SHOWS THAT THE SUBJECT INVITATION WAS ISSUED ON DECEMBER 22. TWO BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. A PREAWARD SURVEY WAS CONDUCTED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT. THE DISTRICT SUBMITTED A REPORT WHICH WAS FAVORABLE IN ALL RESPECTS. WHEN YOUR FIRM ENTERED ITS PROTEST AGAINST THE AWARD CONTENDING PRIMARILY THAT REPUBLIC WAS NOT FINANCIALLY CAPABLE OF PERFORMING THE CONTRACT. IN YOUR PROTEST YOU HAVE STRESSED THAT A POSITIVE AFFIRMATION OF RESPONSIBILITY UNDER ASPR 1-902 MUST BE MADE BY THE CONTRACTING OFFICER BEFORE AN AWARD CAN BE MADE.

B-158401, JUL. 7, 1966

TO HOFFMAN ELECTRONICS CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF FEBRUARY 10, 1966, PROTESTING AGAINST AWARD OF A CONTRACT TO REPUBLIC ELECTRONIC INDUSTRIES CORP. AND/OR FALROCK CORPORATION UNDER INVITATION FOR BIDS NO. 33-657-66 222,ISSUED BY AIR FORCE SYSTEMS COMMAND, AERONAUTICAL SYSTEMS DIVISION, WRIGHT-PATTERSON AIR FORCE BASE, OHIO.

THE BASIS FOR YOUR PROTEST UNDER THE SUBJECT PROCUREMENT IS THAT REPUBLIC ELECTRONIC INDUSTRIES CORP., HEREINAFTER REFERRED TO AS REPUBLIC, DID NOT MEET THE CRITERIA PRESCRIBED UNDER PARAGRAPH 1-903 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) IN ORDER FOR AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY TO BE MADE BY THE GOVERNMENT. PARTICULARLY YOU CONTEND THAT REPUBLIC, AS A SEPARATE ENTITY, AS AN AFFILIATE OF BE LOCK INSTRUMENTS CORPORATION, OR NOW AS AN AFFILIATE OF FALROCK CORPORATION, HAS NOT AND DOES NOT MEET THE TEST OF RESPONSIBILITY REQUIRED PRIOR TO A CONTRACT AWARD OF THE DOLLAR SIZE, TECHNICAL COMPLEXITY, AND CRITICAL SCHEDULE REQUIREMENTS OF THE SUBJECT PROCUREMENT. IN THIS CONNECTION, YOU POINT OUT PAST INSTANCES OF REPUBLIC'S FINANCIAL DIFFICULTIES WHICH LED TO NEGATIVE FINDINGS OF RESPONSIBILITY BY THE DEPARTMENT OF THE AIR FORCE ON OTHER PROCUREMENTS.

THE RECORD SHOWS THAT THE SUBJECT INVITATION WAS ISSUED ON DECEMBER 22, 1965, WITH A BID OPENING DATE OF JANUARY 4, 1966, AND SOLICITED BIDS FOR FURNISHING CERTAIN INCREMENTAL QUANTITIES OF A RECEIVER TRANSMITTER SET, RT-471/ARN-65 TACAN SYSTEM. TWO BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. REPUBLIC BID THE LOWER UNIT PRICE OF $7,485 EACH FOR THE INCREMENTAL QUANTITY OF 125 UNITS, AND YOUR FIRM BID A UNIT PRICE OF$8,070 FOR THE SAME QUANTITY. THEREAFTER, A PREAWARD SURVEY WAS CONDUCTED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT, GARDEN CITY, NEW JERSEY, TO ESTABLISH THE CAPABILITY OF REPUBLIC TO PERFORM THE CONTRACT. AFTER A THOROUGH INVESTIGATION, WHICH INCLUDED REVIEW AND EVALUATION OF THE HISTORICAL EXPERIENCE OF REPUBLIC'S PERFORMANCE UNDER PRIOR GOVERNMENT CONTRACTS AS WELL AS ITS CURRENT PERFORMANCE CAPABILITIES, THE DISTRICT SUBMITTED A REPORT WHICH WAS FAVORABLE IN ALL RESPECTS, INCLUDING TECHNICAL AND FINANCIAL CAPABILITY, AND WHICH RECOMMENDED THAT REPUBLIC BE FAVORABLY CONSIDERED FOR THIS AWARD. THE CONTRACTING OFFICER ACCEPTED THE FAVORABLE RECOMMENDATION IN THE PREAWARD SURVEY REPORT AND PREPARED TO AWARD THE CONTRACT TO REPUBLIC, AS THE LOW RESPONSIVE AND RESPONSIBLE BIDDER, WHEN YOUR FIRM ENTERED ITS PROTEST AGAINST THE AWARD CONTENDING PRIMARILY THAT REPUBLIC WAS NOT FINANCIALLY CAPABLE OF PERFORMING THE CONTRACT. THE CONTRACTING OFFICER REVIEWED HIS FINDINGS AND REAFFIRMED HIS PRIOR DECISION THAT AWARD SHOULD BE MADE TO REPUBLIC.

IN YOUR PROTEST YOU HAVE STRESSED THAT A POSITIVE AFFIRMATION OF RESPONSIBILITY UNDER ASPR 1-902 MUST BE MADE BY THE CONTRACTING OFFICER BEFORE AN AWARD CAN BE MADE, AND THAT DOUBT AS TO PRODUCTIVE STRENGTH OR FINANCIAL STRENGTH WHICH CANNOT BE RESOLVED AFFIRMATIVELY SHALL REQUIRE A DETERMINATION OF NONRESPONSIBILITY. MOREOVER, YOU POINT OUT THAT ASPR 1- 903.1 REQUIRES THAT A COMPANY'S CAPABILITIES BE EVALUATED NOT ONLY IN THE INSTANT FOR WHICH A CONTEMPLATED AWARD IS TO BE MADE, BUT ALSO TO EVALUATE THE COMPANY'S RECORD OF PAST PERFORMANCE. YOUR CONTENTIONS ARE WELL TAKEN AND YOU HAVE CITED SEVERAL CASES TO SUPPORT YOUR VIEW. AS YOU KNOW, IN OUR DECISION B-156555, DATED JULY 21, 1965, INVOLVING YOUR FIRM AND REPUBLIC, FULL CREDENCE WAS GIVEN YOUR CONTENTIONS BY THE DEPARTMENT OF THE AIR FORCE.

HOWEVER, IN THE INSTANT PROCUREMENT, HEADQUARTERS AIR FORCE SYSTEMS COMMAND RAISED SOME FURTHER QUESTIONS CONCERNING THE FINANCIAL CONDITION OF REPUBLIC. AS A RESULT, ADDITIONAL FINANCIAL DOCUMENTATION AND INVESTIGATION WERE REQUESTED. SUCH INVESTIGATION DISCLOSED THE FOLLOWING:

"7. THE DEFENSE CONTRACT ADMINISTRATION REGION (DCASR) REQUESTED THE DEFENSE CONTRACT AUDIT AGENCY (DCAA) TO EVALUATE REPUBLIC'S FINANCIAL DATA, INCLUDING CASH FLOW SHEETS, AND ADVISE WHETHER THEY CONSIDERED REPUBLIC TO POSSESS ADEQUATE FINANCIAL RESOURCES TO PERFORM THIS CONTRACT. DCAA ADVISED THAT REPUBLIC'S PRESENT CASH ASSETS INDICATED LACK OF FINANCIAL STABILITY, BUT THAT REPUBLIC HAD APPLIED TO THE SECURITY EXCHANGE COMMISSION FOR AUTHORITY TO SELL DEBENTURES WHICH WOULD NET APPROXIMATELY $270,000 IN ADDITIONAL WORKING CAPITAL. DCAA FURTHER ADVISED THAT REPUBLIC WOULD BE FINANCIALLY CAPABLE OF PERFORMING THE CONTRACT, PROVIDED THE DEBENTURE SALE WAS SUCCESSFUL.

"8. THE AIR FORCE THEN LEARNED THAT A TECHNICALITY IN THE SALES OF THE SECURITY EXCHANGE COMMISSION PREVENTED THE IMMEDIATE APPROVAL OF THE DEBENTURE OFFERING. THEREFORE, HEADQUARTERS, AFSC AND HEADQUARTERS, USAF, DECIDED NOT TO APPROVE AN AWARD TO REPUBLIC. TO OVERCOME THIS DIFFICULTY, REPUBLIC SUBMITTED A LETTER FROM THE FALROCK CORPORATION, WHICH HAS ACQUIRED A CONTROLLING INTEREST IN REPUBLIC, INDICATING AN AGREEMENT BY FALROCK TO FURNISH REPUBLIC IMMEDIATELY AN ADDITIONAL LOAN OF $270,000 IN THE EVENT THE DEBENTURES WERE NOT SOLD BY THE TIME REPUBLIC NEEDED THIS ADDITIONAL WORKING CAPITAL.

"9. SUBSEQUENTLY, FALROCK CORPORATION ACTUALLY DEPOSITED THE SUM OF $270,000 TO THE ACCOUNT OF REPUBLIC AND SUBORDINATED THIS AMOUNT FOR THE DURATION AND COMPLETION OF THE PROPOSED AIR FORCE CONTRACT. ON THE BASIS OF THIS SITUATION, THE AIR FORCE FINDS THAT REPUBLIC NOW POSSESSES ADEQUATE FINANCIAL CAPACITY AND IS FINANCIALLY RESPONSIBLE FOR THE PURPOSE OF THIS CONTRACT AWARD. THE FACT THAT REPUBLIC IN THE PAST WAS FOUND NON- RESPONSIVE FINANCIALLY FOR TWO OTHER CONTRACTS FOR SIMILAR EQUIPMENT, DOES NOT, IN OUR OPINION, PRECLUDE A FINDING OF RESPONSIBILITY AT THIS TIME, SINCE THE DETERMINATION OF RESPONSIBILITY HAS TO BE MADE AS OF THE DATE OF AWARD OF THE CONTRACT. ACCORDINGLY, ON 17 MAY 1966, HEADQUARTERS USAF AUTHORIZED THE PROCURING ACTIVITY TO PROCEED WITH AN IMMEDIATE AWARD TO REPUBLIC. THIS ACTION WAS TAKEN BECAUSE THE DELAY IN THIS AWARD DUE TO THE PROTEST HAD CREATED A SITUATION OF URGENCY TO SATISFY CRITICAL AIR FORCE REQUIREMENTS. NOTICE OF OUR INTENT TO MAKE THE AWARD WAS GIVEN TO YOUR OFFICE AT THAT TIME.'

THUS, ANY DOUBT THAT THE PROCURING AGENCY MAY HAVE HAD CONCERNING REPUBLIC'S FINANCIAL CAPACITY WAS DISPELLED BY FALROCK'S ACTUAL DEPOSIT OF $270,000 TO THE ACCOUNT OF REPUBLIC AND SUBORDINATION OF THIS AMOUNT FOR THE DURATION AND COMPLETION OF THE SUBJECT CONTRACT.

IN CONNECTION WITH THE FOREGOING, IT IS NOTED THAT ASPR 1-905.2 PROVIDES IN RELEVANT PART AS FOLLOWS:

"WHEN INFORMATION WILL BE OBTAINED. GENERALLY INFORMATION REGARDING THE RESPONSIBILITY OF A PROSPECTIVE CONTRACTOR (INCLUDING PRE-AWARD SURVEYS (SEE 1-905.4) WHEN DEEMED NECESSARY) SHALL BE OBTAINED PROMPTLY AFTER BID OPENING OR RECEIPT OF PROPOSALS. * * * NOTWITHSTANDING THE FOREGOING, INFORMATION REGARDING FINANCIAL RESOURCES (SEE 1-903.1 (I) ( AND PERFORMANCE CAPABILITY (SEE 1-903.1 (II) ( SHALL BE OBTAINED ON AS CURRENT A BASIS AS FEASIBLE WITH RELATION TO THE DATE OF CONTRACT AWARD.'

AS WAS POINTED OUT TO MR. DAVID ROWLAND OF YOUR CORPORATION AT A CONFERENCE AT OUR OFFICE TO REVIEW THE ADMINISTRATIVE REPORT, THE PROCEDURE FOLLOWED BY THE AIR FORCE TO SATISFY ITSELF AS TO THE FINANCIAL CAPABILITIES OF REPUBLIC WAS IN ACCORD WITH THE FOREGOING REGULATIONS. IS OUR VIEW THAT IN ACCORDANCE WITH ASPR 1-905.2, THE PROCURING AGENCY EMPLOYED THE MOST CURRENT INFORMATION ON FINANCIAL RESOURCES WHICH COULD BE AND WAS OBTAINED BEFORE AWARD OF A VALID CONTRACT. THE FACT THAT IN THE PAST REPUBLIC HAS HAD FINANCIAL DIFFICULTIES SHOULD NOT, IN AND OF ITSELF, OPERATE TO BAR REPUBLIC FROM BEING AWARDED CONTRACTS WHEN THESE DIFFICULTIES ARE OVERCOME. THE ADMINISTRATIVE EVALUATION AS TO BIDDER'S RESPONSIBILITY WHICH WAS MADE AFTER BID OPENING DATE, BUT PRIOR TO AWARD, IS NOT OBJECTIONABLE, SINCE THE ULTIMATE OBJECTIVE IS THE DETERMINATION OF RESPONSIBILITY AS OF THE TIME OF AWARD OF A CONTRACT. SEE 39 COMP. GEN. 895; AND B 131286, DATED JUNE 14, 1957, IN WHICH WE SAID:

"IN REGARD TO THE FINANCIAL CLEARANCE GRANTED ON THE SECOND FACILITIES CAPABILITY REPORT, IT IS STATED THAT THE EVIDENCE OF FINANCIAL ASSISTANCE TO BE FURNISHED BY THE HUDSON COUNTY NATIONAL BANK, THE RELDAN TRADING COMPANY AND CRUCIBLE STEEL CORPORATION, AS SUBMITTED BY RANDY WIRE WORKS, WAS CONSIDERED SUFFICIENT TO RELY UPON AS GIVING REASONABLE ASSURANCE OF SUCCESSFUL PERFORMANCE OF THE PROPOSED CONTRACT FROM A FINANCIAL STANDPOINT.

"WE HAVE CONSISTENTLY HELD THAT THE QUESTION OF RESPONSIBILITY OF BIDDERS IS PRIMARILY A MATTER FOR CONSIDERATION BY THE CONTRACTING AGENCY. SEE IN THIS CONNECTION, O-BRIEN V. CARNEY, 6 F.SUPP. 761. THE BID OF RANDY WIRE WORKS WAS A FIRM BID AND THE ACCEPTANCE THEREOF, WITHOUT ANY INVESTIGATION WHATEVER BY THE GOVERNMENT AS TO ITS RESPONSIBILITY, WOULD HAVE CREATED A VALID AND BINDING CONTRACT. THE INVESTIGATION OF THE CORPORATION'S RESPONSIBILITY WAS SOLELY FOR THE PROTECTION AND BENEFIT OF THE GOVERNMENT. ORDINARILY, A LOW BIDDER IS ENTITLED TO AN AWARD UNLESS IT IS DETERMINED THAT THE BIDDER IS NOT QUALIFIED TO PERFORM OR FOR SOME OTHER SUBSTANTIAL REASON IT IS NOT TO THE ADVANTAGE OF THE GOVERNMENT TO MAKE THE AWARD TO THE LOW BIDDER, AND OUR OFFICE HAS CONSISTENTLY HELD THAT REJECTION OF A LOW BID MUST BE JUSTIFIED BY SUBSTANTIAL GROUNDS.

"IN THE INSTANT CASE, WHILE IT WAS ORIGINALLY DETERMINED THAT RANDYWIRE WORKS WAS NOT QUALIFIED, THE CORPORATION PROTESTED SUCH DETERMINATION AND APPARENTLY WAS ABLE TO RAISE SUFFICIENT DOUBT AS TO THE ACCURACY OR COMPLETENESS OF THE FIRST PRE-AWARD SURVEY TO WARRANT FURTHER INVESTIGATION. IN SUCH CIRCUMSTANCES, THE ACTION OF THE DEPARTMENT OF THE AIR FORCE IN CONDUCTING THE SECOND PRE-AWARD SURVEY CANNOT PROPERLY BE CONSIDERED AS NOT IN THE BEST INTEREST OF THE GOVERNMENT.'

QUESTIONS CONCERNING THE QUALIFICATIONS OF A PROPOSED CONTRACTOR ARE FOR RESOLUTION PRIMARILY BY THE ADMINISTRATIVE OFFICERS CONCERNED. IN THE ABSENCE OF ANY SHOWING OF BAD FAITH OR LACK OF A REASONABLE BASIS FOR THE DETERMINATION, WE ARE NOT JUSTIFIED IN OBJECTING TO A DETERMINATION MADE ON THIS QUESTION BY THE ADMINISTRATIVE AGENCY. 37 COMP. GEN. 430; 36 ID. 42. MOREOVER, AN UNFAVORABLE DETERMINATION DOES NOT IN ITSELF CONSTITUTE ANY GROUND FOR SIMILAR DETERMINATIONS IN FUTURE CASES SINCE EACH DETERMINATION OF RESPONSIBILITY MUST BE BASED ON THE SITUATION EXISTING AS OF THE TIME WHEN SUCH DETERMINATION IS MADE. HERE, THE AIR FORCE HAS DETERMINED THAT REPUBLIC IS A RESPONSIBLE CONTRACTOR AND THE RECORD SHOWS NO SHOWING OF BAD FAITH OR LACK OF A REASONABLE BASIS FOR SUCH DETERMINATION.

IN VIEW OF THE RECORD BEFORE US, WE SEE NO VALID BASIS FOR OBJECTING TO THE ACTIONS TAKEN BY THE DEPARTMENT OF THE AIR FORCE IN DETERMINING THAT REPUBLIC, AS THE RESPONSIBLE BIDDER, WAS ENTITLED TO AWARD OF THE INSTANT PROCUREMENT.