B-158420, AUG. 1, 1966

B-158420, AUG. 1, 1966

TO AEROSPACE ELECTRONICS, INC.:

REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 26, 1966, FEBRUARY 4, 1966, APRIL 29, 1966, AND MAY 26, 1966, WRITTEN IN BEHALF OF AEROSPACE ELECTRONICS, INC. (AEROSPACE), MIAMI, FLORIDA, AND PROTESTING AGAINST THE AWARD OF A CONTRACT TO ANYONE OTHER THAN YOUR CLIENT BASED ON INVITATION FOR BIDS (IFB) AMC/Z/-01-021-66-1669 (1669), AMC/Z/-01-021 66-1757 (1757) AND AMC/Z/-01-021-66-1791 (1791).

ALL THREE OF THE IFBS WERE ISSUED BY THE U.S. ARMY MISSILE COMMAND, REDSTONE ARSENAL, ALABAMA, FOR DIFFERENT ITEMS AND TYPES OF CABLE ASSEMBLIES, AND AWARDS WERE MADE IN AMOUNTS UNDER $2,500. IN EACH CASE THE RESPONSIBILITY OF AEROSPACE WAS DETERMINED FOLLOWING A PREAWARD SURVEY REQUESTED OF AND CONDUCTED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT (DCASD), ORLANDO, FLORIDA. EACH SURVEY RESULTED IN THE RECOMMENDATION THAT NO AWARD BE MADE TO AEROSPACE.

AS YOU POINT OUT IN YOUR LETTER OF FEBRUARY 4, 1966, THE SOLE ISSUE INVOLVED IS ONE OF RESPONSIBILITY SINCE THE RESPONSIVENESS OF AEROSPACE'S BIDS HAS NOT BEEN QUESTIONED.

IFB 1669 FOR ONE ITEM OF CABLE ASSEMBLY, OPN 11028317-9, WAS ISSUED ON NOVEMBER 3, 1965. THE NINE BIDS SUBMITTED IN RESPONSE THERETO WERE OPENED AS SCHEDULED ON DECEMBER 3, 1965. EVANS ELECTRONICS, MERIDIANVILLE, ALABAMA, HAD THE LOWEST BID AT A UNIT PRICE OF $36.34 FOR ITEM 1A. HOWEVER, IT WAS REJECTED AS NONRESPONSIBLE DUE TO THE LACK OF PLANT FACILITIES, FINANCIAL CAPABILITY AND QUALITY ASSURANCE CAPABILITY. THE SECOND LOWEST BID WAS THAT OF AEROSPACE AT A UNIT PRICE OF $41.61 OR A TOTAL PRICE FOR THE 35 UNITS OF ITEM 1A OF $1,456.35. BASED ON THE RECOMMENDATION OF THE DCASD PREAWARD SURVEY WHICH FOUND AEROSPACE'S FINANCIAL CONDITION TO BE SUBMARGINAL, NO AWARD WAS MADE TO THAT FIRM, INSTEAD AWARD WAS MADE ON JANUARY 10, 1966, TO THE THIRD LOW BIDDER, ELECTRONIC INDUSTRIES, INC., ROSWELL, NEW MEXICO, FOR $47.20 PER UNIT OR FOR $1,652 AS THE TOTAL CONTRACT PRICE.

ON IFB 1757 BIDS WERE TO BE SUBMITTED ON CABLE ASSEMBLIES, OPN 11025753- 19. IN RESPONSE THERETO YOUR CLIENT AND FOUR OTHER BIDDERS SUBMITTED BIDS WHICH WERE OPENED ON DECEMBER 8, 1965. SINCE THE BID OF AEROSPACE WAS LOWEST AT $83.74 PER UNIT OR $1,591.06 TOTAL CONTRACT PRICE FOR ITEM 1A, A PREAWARD SURVEY, AS BEFORE, WAS CONDUCTED BY DCASD, ORLANDO. THE SURVEY RECOMMENDED NO AWARD BE MADE TO AEROSPACE DUE TO ITS SUBMARGINAL FINANCIAL CONDITION, PAST PERFORMANCE RECORD AND INABILITY TO MEET THE REQUIRED DELIVERY SCHEDULE. ON JANUARY 21, 1966, A CONTRACT BASED ON IFB 1757 WAS AWARDED TO OCTOBER ELECTRO SYSTEMS CORPORATION, DAYTON, OHIO, AT A UNIT PRICE OF $95.97 OR TOTAL CONTRACT PRICE OF $1,823.43.

THE THIRD INVITATION WHICH YOUR CLIENT PROTESTS AN AWARD AGAINST IS IFB 1791 FOR CABLE ASSEMBLY, OPN 11026165-9, ISSUED ON NOVEMBER 12, 1965, WITH A BID OPENING DATE OF DECEMBER 14, 1965. AT THE LATTER TIME THE SEVEN BIDS RECEIVED WERE OPENED AND AEROSPACE WAS THE LOWEST BIDDER AT A UNIT PRICE OF $139.68. AS BEFORE A PREAWARD SURVEY WAS CONDUCTED BY DCASD, ORLANDO. THE SURVEY CONCLUDED WITH THE RECOMMENDATION THAT NO AWARD BE MADE TO AEROSPACE DUE TO SUBMARGINAL FINANCIAL CONDITION. ON JANUARY 27, 1966, AWARD WAS MADE TO THE NEXT LOWEST RESPONSIVE BIDDER, BESCAST, INC., OF WICKLIFFE, OHIO, AT A UNIT PRICE OF $141.56 AND A TOTAL CONTRACT PRICE OF $2,123.40.

IN THE CORRESPONDENCE FROM YOUR OFFICE AND THE INFORMAL DISCUSSION RELATING TO THIS MATTER YOU REQUEST THAT THE SURVEY TEAMS' PROCEDURES AND FINDINGS BE LOOKED INTO BY THIS OFFICE. WITH RESPECT TO THE CONTRACTING OFFICER'S FINDING OF NONRESPONSIBILITY BASED ON THE SURVEY REPORTS THAT THE FINANCIAL CONDITION OF AEROSPACE WAS SUBMARGINAL, YOU POINT OUT THAT NONE OF THE AWARDS EXCEEDED $2,200 AND THAT AEROSPACE HAS IN THE PAST SUCCESSFULLY COMPLETED GOVERNMENT PRIME CONTRACTS EXCEEDING $50,000. FURTHERMORE, YOU HAVE PRESENTED TWO LETTERS FROM AERO/SPACE DEVICES, INC., SIGNED BY HELENE VAN DER BUSCH, CORPORATE SECRETARY, DATED JANUARY 18, 1966, AND SENT TO REDSTONE ARSENAL WHICH YOU SAY GUARANTEED PERFORMANCE AND FINANCIAL SUPPORT TO AEROSPACE FOR IFBS 1757 AND 1791.

IN ADDITION TO THE MENTIONED DATA CONCERNING THE FINANCIAL CAPABILITY OF AEROSPACE, YOU HAVE PRESENTED CERTAIN RECORDS WHICH TEND TO REBUT THE CONCLUSIONS OF THE PREAWARD SURVEY CONDUCTED FOR IFB 1757 THAT AEROSPACE HAD AN UNSATISFACTORY PERFORMANCE RECORD AND WAS NOT ABLE TO MEET THE REQUIRED DELIVERY SCHEDULE.

THE DETERMINATION OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS A QUESTION OF FACT AND, AS STATED IN YOUR LETTERS, IS PRIMARILY THE FUNCTION OF THE CONTRACTING OFFICER. IT IS ALSO A MATTER OF JUDGMENT INVOLVING A CONSIDERABLE RANGE OF DISCRETION. IN THIS REGARD, IT IS OUR DUTY TO DETERMINE FROM THE RECORD BEFORE US WHETHER THE INFORMATION AND DATA RELIED UPON BY THE CONTRACTING OFFICER IN FINDING AEROSPACE NONRESPONSIBLE AS A PROSPECTIVE CONTRACTOR FOR THE PROCUREMENTS IN QUESTION REASONABLY SUPPORTED THAT CONCLUSION. WE WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER UNLESS IT IS SHOWN BY CONVINCING EVIDENCE THAT THE FINDING OF NONRESPONSIBILITY WAS ARBITRARY, CAPRICIOUS OR NOT BASED ON SUBSTANTIAL EVIDENCE. 45 COMP. GEN. 4, 43 COMP. GEN. 257.

THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-903.1 (I) REQUIRES A BIDDER, IN ORDER TO BE CONSIDERED RESPONSIBLE, TO HAVE ADEQUATE FINANCIAL RESOURCES OR THE ABILITY TO OBTAIN SUCH RESOURCES AS MAY BE REQUIRED DURING THE PERFORMANCE OF THE CONTRACT. A BIDDER, WHO IS OTHERWISE RESPONSIBLE, BUT LACKS FINANCIAL RESPONSIBILITY MAY PROPERLY BE HELD NONRESPONSIBLE. 37 COMP. GEN. 703. THE PREAWARD SURVEYS CONDUCTED ON ALL THREE OF THE INVITATIONS IN QUESTION CONCLUDED THAT AEROSPACE HAD A SUBMARGINAL FINANCIAL CONDITION. ALTHOUGH YOU CONTEND THAT AEROSPACE HAD A PROFITABLE PRECEDING YEAR AND IS ENJOYING THE BEST FISCAL POSITION IN ITS HISTORY A REVIEW OF THE SURVEYS SHOWS THAT, BASED ON FINANCIAL INFORMATION SUPPLIED BY THE FIRM'S CONTROLLER, AEROSPACE STILL HAD A SUBSTANTIAL DEFICIT WORKING CAPITAL AND A NEGATIVE NET WORTH POSITION REFLECTING A .35 RATIO OF ASSETS TO LIABILITIES. SUCH FACTORS APPEAR TO HAVE WEIGHED HEAVILY IN THE DCASD FINANCIAL ANALYST'S DETERMINATION THAT THE FINANCIAL CONDITION OF AEROSPACE WAS SUBMARGINAL. ON THE BASIS OF THE RECORD BEFORE US WE CANNOT CONCLUDE THAT SUCH VIEW WAS ENTIRELY UNJUSTIFIED.

YOU FURTHER ALLEGE THAT AEROSPACE COULD HAVE OBTAINED ADEQUATE FINANCIAL BACKING AND THE CONTRACTING OFFICER WOULD HAVE SO ASCERTAINED IF THE REQUIRED PROCEDURES OF APPENDIX K OF ASPR HAD BEEN FOLLOWED. ASPR 1-905.4 STATES, IN PART, THAT PREAWARD SURVEYS SHALL BE CONDUCTED IN ACCORDANCE WITH APPENDIX K, PRE-AWARD SURVEY PROCEDURES. A REVIEW OF ASPR K-303.4, WHICH IS CONCERNED WITH A PROSPECTIVE CONTRACTOR'S FINANCIAL CAPACITY TO PERFORM, DOES NOT INDICATE A REQUIREMENT FOR THE SURVEYING TEAM TO ASCERTAIN WHAT TYPES OF OUTSIDE FINANCING ARE AVAILABLE. OUR DECISION AT 39 COMP. GEN. 895 SUPPORTS THIS CONCLUSION. FURTHERMORE, ASPR 1-902, PROVIDES IN PART THAT A PROSPECTIVE CONTRACTOR MUST DEMONSTRATE AFFIRMATIVELY HIS RESPONSIBILITY. IN VIEW THEREOF, WE MUST CONCLUDE THAT THE DUTY OF INFORMING THE SURVEY TEAM AND/OR CONTRACTING OFFICER OF ANY OUTSIDE SOURCES OF FINANCIAL AID WAS PROPERLY UPON THE PROSPECTIVE CONTRACTOR, AEROSPACE, RATHER THAN IT BEING A TASK OF THE SURVEY TEAM TO DISCOVER SUCH THERETOFORE UNREVEALED SOURCES.

IN YOUR LETTER OF APRIL 29, 1966, IT WAS INDICATED THE CONTROLLER OF AEROSPACE TENDERED TO THE FINANCIAL ANALYST FROM DCASD, ORLANDO, FINANCIAL STATEMENTS OF BOTH NASCO INTERNATIONAL, INC., AND AERO/SPACE DEVICES, INC., BOTH OF WHICH ARE LOCATED AT THE SAME ADDRESS AS AEROSPACE. WE ARE ADVISED BOTH WERE REFUSED SINCE THE SURVEY TEAM CONSIDERED THEM IRRELEVANT AS THE SURVEY WAS BEING CONDUCTED ONLY ON AEROSPACE. IN SUCH CONNECTION, ASPR 1-904.3 (A) PROVIDES THAT AFFILIATED CONCERNS SHALL BE CONSIDERED AS SEPARATE ENTITIES IN DETERMINING WHETHER THE ONE OF THEM WHICH IS TO PERFORM THE CONTRACT MEETS THE APPLICABLE STANDARDS FOR A RESPONSIBLE PROSPECTIVE CONTRACTOR.

THE ADMINISTRATIVE REPORT, WITH RESPECT TO GUARANTEED PERFORMANCE OR FINANCIAL SUPPORT FOR AEROSPACE, REVEALS THAT NO GUARANTEES WERE MADE AT THE TIME SUCH FIRM SUBMITTED ITS FINANCIAL DATA FOR THE PREAWARD SURVEY AND THAT THE CONTRACTING OFFICER HAD NO KNOWLEDGE PRIOR TO RECEIPT OF THE LETTER OF PROTEST THAT ANY AFFILIATED CORPORATION HAD MADE AN OFFER TO GUARANTEE AEROSPACE'S FINANCIAL OR PERFORMANCE CAPABILITY. FURTHERMORE, IT IS NOTED THAT THE LETTERS OF JANUARY 18 FROM AERO/SPACE DEVICES FAIL TO MAKE REFERENCE TO AEROSPACE ELECTRONICS OR INDICATE THAT PROPER AUTHORIZATION EXISTED ON THE PART OF THE SIGNER TO BIND AERO/SPACE DEVICES TO THE GUARANTEE. WHILE THE LETTERS, PURPORTEDLY GUARANTEEING FINANCIAL SUPPORT TO AEROSPACE, SHOULD NORMALLY HAVE BEEN CONSIDERED BY THE CONTRACTING OFFICER IF RECEIVED PRIOR TO AWARD, THEIR FAILURE TO DESIGNATE THE RECIPIENT OF THE GUARANTEE AND TO SHOW A PROPER CORPORATE GRANT OF AUTHORITY TO MAKE THE GUARANTEE IS, WE BELIEVE, SUFFICIENT TO RENDER THEM INEFFECTIVE FOR THE PURPOSE ADVOCATED.

YOUR ASSERTION THAT CONTRACTS IN EXCESS OF $50,000 HAVE BEEN SUCCESSFULLY PERFORMED BY AEROSPACE IS OFFERED TO REBUT THE ADMINISTRATIVE DETERMINATION OF NONRESPONSIBILITY. HOWEVER, IT MUST BE OBSERVED THAT SUCCESSFUL PAST PERFORMANCE, IN ITSELF, IS NOT A GUARANTEE OF FUTURE SUCCESSFUL PERFORMANCE. THE MAIN DETERMINING FACTOR WAS NOT WHAT AEROSPACE HAD DONE IN THE PAST BUT WHAT ALL AVAILABLE SOURCES INDICATED ITS CURRENT CAPABILITIES WERE FOR PERFORMING THE CONTRACTS INVOLVED. THE RECORD BEFORE US SHOWS AN OBSERVANCE BY THE SURVEY TEAM OF THE APPLICABLE PROVISIONS OF ASPR IN ITS CONDUCT OF THE SURVEY, AND WE CANNOT CONCLUDE THAT THE ACTION TAKEN BY THE CONTRACTING OFFICER IN FINDING AEROSPACE NONRESPONSIBLE ON THE BASIS OF A SUBMARGINAL FINANCIAL STATUS AS DETERMINED BY THE SURVEY TEAM WAS CAPRICIOUS, ARBITRARY OR CLEARLY UNSUPPORTED BY THE FACTS.

IN VIEW OF THE FOREGOING, WE BELIEVE IT ACADEMIC TO CONSIDER YOUR OBJECTIONS TO THE OTHER GROUNDS ADVANCED BY THE ARMY IN THEIR FINDING OF NONRESPONSIBILITY ON IFB 1757, SINCE, AN INADEQUATE FINANCIAL CONDITION, BY ITSELF, IS SUFFICIENT TO HOLD A PROSPECTIVE CONTRACTOR NONRESPONSIBLE. 37 COMP. GEN. 703.

CONCERNING YOUR CONTENTION THAT HAD THE THREE IFB'S BEEN COMBINED INTO ONE PROCUREMENT THE AMOUNT INVOLVED WOULD HAVE NECESSITATED REFERRAL OF THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY TO THE SMALL BUSINESS ADMINISTRATION FOR CONSIDERATION, THE PROCURING ACTIVITY REPORTS THAT THERE WAS NO INTENTION TO CIRCUMVENT ASPR PROVISIONS RELATING TO THE ISSUANCE OF SPA CERTIFICATES OF COMPETENCY. IT IS STATED THAT ALTHOUGH THE THREE IFB'S INVOLVED CABLE ASSEMBLIES REQUIRING THE SAME SPECIAL QUALITY ASSURANCE PROVISIONS FOR TESTS, THE ASSEMBLIES ARE ENTIRELY DIFFERENT, HAVE NO COMMON PARTS, ARE MADE FROM A DIFFERENT TYPE OF WIRE OR CABLE, HAVE DIFFERENT TYPES OF CONNECTORS, AND THAT PAST EXPERIENCE HAS SHOWN THAT ITEMS SO DISSIMILAR IN NATURE DO NOT GENERALLY RESULT IN AN AWARD TO AN AGGREGATE LOW BIDDER.