B-158864, MAY 16, 1966

B-158864: May 16, 1966

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000 FOR EACH ADDITIONAL ITEM AWARDED WOULD BE REQUIRED TO COVER THE PURCHASER'S OBLIGATIONS WITH RESPECT TO GOVERNMENT PROPERTY DESIGNATED AS "SAVE LIST ITEMS" WHICH WERE TO BE REMOVED BY THE PURCHASER FOR DELIVERY TO THE GOVERNMENT. A BID DEPOSIT AMOUNTING TO 20 PERCENT OF THE TOTAL AMOUNT OF THE BID WAS REQUIRED AND THE USE OF PERSONAL CHECKS FOR THIS PURPOSE WAS AUTHORIZED BY SPECIAL CONDITION AB OF THE INVITATION ENTITLED "PAYMENT.'. WHICH IS NOT PAID BY THE DRAWEE FOR ANY REASON. WILL BE REQUIRED TO SUBMIT CASH. BIDS SUBMITTED AFTER THE EFFECTIVE DATE OF THE NOTIFICATION REFERRED TO ABOVE WHICH ARE NOT ACCOMPANIED BY THE PROPER BID DEPOSIT IN CASH. CASHIERS CHECKS OR POSTAL TELEGRAPHIC MONEY ORDERS WILL BE SUMMARILY REJECTED.

B-158864, MAY 16, 1966

TO SOUTH BAY LEASING CORPORATION:

BY TELEGRAM DATED APRIL 5, 1966, YOU PROTESTED AGAINST THE AWARD OF A CONTRACT BY THE DEFENSE LOGISTICS SERVICES CENTER UNDER SALES INVITATION NO. 01-6011 DATED DECEMBER 27, 1965, COVERING THE DISPOSITION OF FOUR ITEMS OF PROPERTY CONSISTING OF CERTAIN EQUIPMENT AND MATERIAL LOCATED AT FOUR EX-TITAN I MISSILE SITES.

THE INVITATION PERMITTED THE SUBMISSION OF INDIVIDUAL, TIE-IN OR "ALL OR NONE" BIDS AND ADVISED BIDDERS THAT A PERFORMANCE BOND IN THE AMOUNT OF $75,000 FOR THE FIRST ITEM AWARDED PLUS $50,000 FOR EACH ADDITIONAL ITEM AWARDED WOULD BE REQUIRED TO COVER THE PURCHASER'S OBLIGATIONS WITH RESPECT TO GOVERNMENT PROPERTY DESIGNATED AS "SAVE LIST ITEMS" WHICH WERE TO BE REMOVED BY THE PURCHASER FOR DELIVERY TO THE GOVERNMENT. A BID DEPOSIT AMOUNTING TO 20 PERCENT OF THE TOTAL AMOUNT OF THE BID WAS REQUIRED AND THE USE OF PERSONAL CHECKS FOR THIS PURPOSE WAS AUTHORIZED BY SPECIAL CONDITION AB OF THE INVITATION ENTITLED "PAYMENT.' THIS PROVISION READ AS FOLLOWS:

"NOTWITHSTANDING THE PROVISIONS OF CONDITION NO. 4 OF THE GENERAL SALE TERMS AND CONDITIONS ENTITLED "PAYMENT" OR INSTRUCTIONS TO BIDDERS NO. 1 ENTITLED "BID DEPOSIT" (STANDARD FORM 114-C) BID DEPOSITS AND PAYMENTS MUST BE MADE IN U.S. CURRENCY OR ANY OTHER FORM OF CREDIT INSTRUMENT, MADE PAYABLE, IN U.S. DOLLARS, TO THE TREASURER OF THE UNITED STATES ON DEMAND, INCLUDING PERSONAL CHECKS DRAWN BY THE BIDDERS BUT EXCLUDING PROMISSORY NOTES. PROVIDED, HOWEVER, THAT SHOULD A BIDDER TENDER A CHECK PURSUANT TO THIS INVITATION OR RESULTANT CONTRACT, WHICH IS NOT PAID BY THE DRAWEE FOR ANY REASON, THAT BIDDER, UPON BEING SO NOTIFIED BY THE DEFENSE LOGISTICS SERVICES CENTER, WILL BE REQUIRED TO SUBMIT CASH, CASHIERS CHECKS, OR POSTAL OR TELEGRAPHIC MONEY ORDERS, FOR ALL DEPOSITS ON AND PAYMENTS FOR PERSONAL PROPERTY PURCHASED FROM SALES OFFICES OPERATED BY THE DEFENSE LOGISTICS SERVICES CENTER. BIDS SUBMITTED AFTER THE EFFECTIVE DATE OF THE NOTIFICATION REFERRED TO ABOVE WHICH ARE NOT ACCOMPANIED BY THE PROPER BID DEPOSIT IN CASH, CASHIERS CHECKS OR POSTAL TELEGRAPHIC MONEY ORDERS WILL BE SUMMARILY REJECTED. NO REFUNDS OR DEMANDS WILL BE MADE FOR ANY AMOUNT LESS THAN ONE DOLLAR ($1.00).'

TWENTY-THREE BIDS WERE RECEIVED AND OPENED ON FEBRUARY 16, 1966, AND IT APPEARED THAT YOU SUBMITTED THE HIGHEST BID IN THE AMOUNT OF $158,888.88 FOR ITEM 1; THAT MR. WILLIAM R. BROOKMAN, JR., SUBMITTED THE HIGHEST BID FOR ITEM 4 IN THE AMOUNT OF $142,185, AND THAT THE MID-CONTINENT CONSTRUCTION COMPANY SUBMITTED THE HIGHEST BIDS ON ITEMS 2 AND 3 IN THE AMOUNT OF $121,415.50 EACH. THE AGGREGATE OF THESE BIDS AMOUNTED TO $543,904.88. THE CONTRACTORS RIGGING AND ERECTION COMPANY SUBMITTED THE HIGHEST "ALL OR NONE BID" IN THE AMOUNT OF $537,000.

IT IS REPORTED BY THE SALES CONTRACTING OFFICER THAT CREDIT REPORTS WERE OBTAINED ON SOUTH BAY LEASING WHICH DISCLOSED FAILURES TO PAY BONDING COMPANIES, SUBCONTRACTORS AND OTHER DEBTORS. ALSO, THE REPORT SHOWED THAT TWO TAX LIENS HAD BEEN FILED AGAINST SOUTH BAY LEASING. DURING THE PERIOD FEBRUARY 17 THROUGH MARCH 9, 1966, INFORMATION WAS COLLECTED FOR SUBMISSION TO THE ATTORNEY GENERAL FOR ANTITRUST CLEARANCE PURSUANT TO 40 U.S.C. 488. THEREAFTER, ON MARCH 22, THE SALES CONTRACTING OFFICER CONTACTED YOU TO ELICIT INFORMATION RESPECTING YOUR CAPABILITY TO PERFORM THE SALES CONTRACT. YOU ADVISED THE SALES CONTRACTING OFFICER THAT YOU HAD SUFFICIENT FUNDS ON DEPOSIT TO HONOR YOUR PERSONAL BID DEPOSIT CHECK IN THE AMOUNT OF $40,000. ON MARCH 24, 1966, THE SALES CONTRACTING OFFICER TELEPHONED THE SAN DIEGO TRUST AND SAVINGS BANK UPON WHICH YOU HAD DRAWN YOUR PERSONAL BID DEPOSIT CHECK TO INQUIRE AS TO THE AVAILABILITY OF FUNDS TO SUPPORT YOUR CHECK. A MEMORANDUM FOR THE RECORD PREPARED ON THAT DAY BY THE CONTRACTING OFFICER STATED:

"CALLED THE SAN DIEGO TRUST COMPANY TO DETERMINE WHETHER MR. WAYNE HUDSON, OR SOUTH BAY LEASING COMPANY HAD SUFFICIENT FUNDS TO COVER HIS DEPOSIT CHECK OF $40,000.

"MR. STEVENS OF THE SAN DIEGO TRUST COMPANY STATED THAT IF WE PRESENTED THE CHECK NOW IT WOULD BE RETURNED MARKED "INSUFFICIENT FUNDS.'

"I ASKED IF HE WOULD MIND TELLING ME HOW MUCH HE NEEDED TO COVER THE CHECK. MR. STEVENS SAID THAT "IF HUDSON'S CHECK WERE PRESENTED FOR PAYMENT TODAY HE WOULD NEED $40,000 TO MAKE IT GOOD.'"

IN A FURTHER ATTEMPT TO DETERMINE THE VALIDITY OF YOUR BID DEPOSIT CHECK, THE SALES CONTRACTING OFFICER SENT THE FOLLOWING TELEGRAM ON MARCH 30, 1966, TO THE SAN DIEGO TRUST AND SAVINGS BANK:

"THE SALES CONTRACTING OFFICER AT THE DEFENSE LOGISTICS SERVICES CENTER HAS RECEIVED A CHECK DRAWN ON YOUR BANK BY A MR. WAYNE HUDSON OF THE SOUTH BAY LEASING CORP. THE CHECK IS IN THE AMOUNT OF $40,000 AND PURPORTS TO BE A BID DEPOSIT ON THE SALE OF SURPLUS PERSONAL PROPERTY LOCATED IN EX-TITAN "I" MISSILE SITE AT ELLSWORTH AFB RAPID CITY, SOUTH DAKOTA.

"REQUEST THIS CENTER, ATTN: DLSC-MSS BE ADVISED BY RETURN COLLECT WIRE AS TO WHETHER MR. HUDSON HAS AN ACCOUNT IN HIS NAME OR ANY SPECIAL ACCOUNT SET UP FOR PAYMENT OF THE CHECK AND FURTHER WHETHER SUCH ACCOUNT HAS AMPLE FUNDS FOR PAYMENT SHOULD THE CHECK BE PRESENTED FOR PAYMENT THIS DATE.'

ON MARCH 31, 1966, THE BANK ADVISED THAT YOUR CHECK WAS "NOT GOOD THIS DATE ADVICE RECEIVED FROM BANK OF AMERICA THIS DATE THEY ARE FORWARDING TO US $40,000 CASHIER'S CHECK AIRMAIL/SPECIAL DELIVERY TO COVER YOURS.' ALSO, ON THAT DAY THE SALES CONTRACTING OFFICER TELEPHONED THE BANK AND REPORTED ON THE NAME IN A MEMORANDUM FOR THE RECORD AS FOLLOWS:

"CALLED THE SAN DIEGO TRUST AND SAVINGS BANK IN SAN DIEGO, CALIFORNIA REGARDING OUR WIRE CONCERNING MR. HUDSON'S ACCOUNT TO DETERMINE WHAT ACTION WOULD BE TAKEN BY THE BANK. MR. EDER, VICE PRESIDENT OF THE BANK, ADVISED ME THAT AT THE PRESENT TIME THERE ARE NOT SUFFICIENT FUNDS TO COVER MR. HUDSON'S CHECK. HOWEVER, UP UNTIL LAST WEEK THE BANK HAD BEEN HOLDING A CHECK FROM THE JEROME COMPANY WITH INSTRUCTIONS TO PAY HUDSON'S CHECK WHEN PRESENTED FOR PAYMENT. ABOUT 2 WEEKS AGO THIS CHECK WAS RECALLED BY THE JEROME COMPANY.

"MR. EDER STATED THAT HE WAS PRESENTLY TRYING TO GET HOLD OF THE HUDSON COMPANY SINCE HE BELIEVES THAT THEY WILL PROBABLY BE MAKING THE CHECK GOOD. HE WILL WIRE US A REPLY TO OUR TELEGRAM AFTER TALKING TO MR. WAYNE HUDSON.'

THE SALES CONTRACTING OFFICER THEREUPON DETERMINED, ON THE BASIS OF ALL AVAILABLE INFORMATION, THAT YOU WERE NOT A RESPONSIBLE BIDDER ON THE BASIS OF A DEMONSTRATED LACK OF BUSINESS INTEGRITY. HE THEREFORE REJECTED YOUR BID AND MADE AWARD TO CONTRACTORS RIGGING AND ERECTION AS THE HIGHEST ,ALL OR NONE" BIDDER ON APRIL 1, 1966. IN SUPPORT OF THE REJECTION ACTION TAKEN, THE COUNSEL FOR THE DEFENSE LOGISTICS SERVICES CENTER REPORTED TO OUR OFFICE THAT:

"10. INTEGRITY HAS BEEN DEFINED AS SOUNDNESS OF MORAL PRINCIPAL AND CHARACTER AS SHOWN BY ONE PERSON DEALING WITH OTHERS IN THE MAKING AND PERFORMANCE OF CONTRACTS. IT IS ALSO USED AS A SYNONYM FOR PROBITY, HONESTY AND UP-RIGHTNESS IN BUSINESS RELATIONS WITH OTHERS. SEE WORDS AND PHRASES VOLUME 21A. THE COMPTROLLER GENERAL HAS SUPPORTED A CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY OF A BIDDER FOR LACK OF INTEGRITY IN THE FACE OF A CERTIFICATE OF COMPETENCY ISSUED BY THE SMALL BUSINESS ADMINISTRATION IN A PROCUREMENT ACTION. 43 C.G. 387. IN THAT DECISION THE COMPTROLLER GENERAL ESTABLISHED CLEAR LINES OF DEMARCATION BETWEEN DEBARMENT AND SUSPENSION PROCEDURES ON THE ONE HAND AND THE COC PROCEDURES ON THE OTHER. THAT DECISION STATES THAT "THE BASIS TO JUSTIFY A DETERMINATION OF NONRESPONSIBILITY, EVEN EXCLUDING, THE FACTORS UPON WHICH A COC WOULD BE CONCLUSIVE, ARE MUCH MORE EXTENSIVE IN SCOPE . . . THAN THOSE THAT WOULD SUPPORT A DEBARMENT . . . OR A SUSPENSION . . . FOR EXAMPLE, A RESPONSIBLE BIDDER IS REQUIRED . . . TO HAVE A SATISFACTORY RECORD OF INTEGRITY WHILE THE COMPARABLE GROUNDS FOR DEBARMENT OR SUSPENSION ARE MUCH MORE LIMITED.'

"11. IT IS THE OPINION OF THIS OFFICE THAT IT HAS BEEN CONCLUSIVELY ESTABLISHED THAT BOTH THE SOUTH BAY LEASING COMPANY AND MR. WILLIAM R. BROOKMAN, JR., UTTERED AND DELIVERED CHECKS IN RESPONSE TO INVITATION FOR BIDS NO. 01-6011 FOR WHICH THERE WERE INSUFFICIENT FUNDS OR NO FUNDS ON DEPOSIT. IN ADDITION TO REFLECTING ON THEIR BUSINESS INTEGRITY, IT FURTHER CASTS SERIOUS DOUBT ON THEIR ABILITY TO SATISFACTORILY PERFORM THE OBLIGATIONS REQUIRED UNDER THIS INVITATION FOR BIDS. SEE B-158534, 4 APRIL 1966.'

40 U.S.C. 484 DEALING WITH ADVERTISED DISPOSALS OF SURPLUS GOVERNMENT PROPERTY PROVIDES IN ART:

"/1) ALL DISPOSALS OR CONTRACTS FOR DISPOSAL OF SURPLUS PROPERTY (OTHER THAN BY ABANDONMENT, DESTRUCTION, DONATION, OR THROUGH CONTRACT BROKERS) MADE OR AUTHORIZED BY THE ADMINISTRATOR SHALL BE MADE AFTER PUBLICLY ADVERTISING FOR BIDS, * * *.

"/2) WHENEVER PUBLIC ADVERTISING FOR BIDS IS REQUIRED UNDER PARAGRAPH (1) OF THIS SUBSECTION---

"/A) THE ADVERTISEMENT FOR BIDS SHALL BE MADE AT SUCH TIME PREVIOUS TO THE DISPOSAL OR CONTRACT, THROUGH SUCH METHODS, AND ON SUCH TERMS AND CONDITIONS AS SHALL PERMIT THAT FULL AND FREE COMPETITION WHICH IS CONSISTENT WITH THE VALUE AND NATURE OF THE PROPERTY INVOLVED;

"/B) ALL BIDS SHALL BE PUBLICLY DISCLOSED AT THE TIME AND PLACE STATED IN THE ADVERTISEMENT;

"/C) AWARD SHALL BE MADE WITH REASONABLE PROMPTNESS BY NOTICE TO THE RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION FOR BIDS, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED: PROVIDED, THAT ALL BIDS MAY BE REJECTED WHEN IT IS IN THE PUBLIC INTEREST TO DO SO.'

IN B-158534 DATED APRIL 4, 1966, WE OBSERVED THAT THE REQUIRED RESPONSIBILITY OF A BIDDER IN A SURPLUS SALE IS SOMEWHAT LESS THAN IS EXPECTED IN AN ADVERTISED PROCUREMENT, AND HELD:

"THE TERM "RESPONSIBILITY," AS USED IN STATUTES REQUIRING AWARD OF PUBLIC CONTRACTS TO THE LOWEST RESPONSIBLE BIDDER, HAS BEEN HELD TO EMBRACE, IN ADDITION TO FACTORS RELATING TO PECUNIARY ABILITY AND PHYSICAL CAPABILITY TO PERFORM, MORE PERSONAL ATTRIBUTES OF CHARACTER OR INTEGRITY. SEE 43 COMP. GEN. 257, AND COURT CASES THEREIN CITED. FURTHER, OUR OFFICE HAS HELD THAT THE CAUSES FOR DEBARMENT OF BIDDERS OR THE CAUSES FOR SUSPENSION OF BIDDERS ENUMERATED IN ARMED SERVICES PROCUREMENT REGULATION 1-604.1 AND 1-605.1, RESPECTIVELY, MAY BE APPLIED IN DETERMINING A BIDDER'S INTEGRITY AND BUSINESS ETHICS. WE HAVE FURTHER HELD, HOWEVER, THAT THOSE REGULATIONS AND THE DECISIONS OF OUR OFFICE CONTEMPLATE THAT AN ADMINISTRATIVE DETERMINATION OF LACK OF INTEGRITY OR BUSINESS ETHICS SHALL BE BASED ON CLEAR AND CONVINCING EVIDENCE OF SUCH DEFICIENCIES ON THE PART OF THE BIDDER. 39 COMP. GEN. 868, 872.

"INASMUCH AS THE LANGUAGE IN THE DISPOSAL STATUTE REQUIRING THAT A BIDDER BE "RESPONSIBLE" TO QUALIFY FOR AWARD OF SURPLUS PROPERTY CONTRACTS IS SIMILAR TO THE LANGUAGE USED IN THE ADVERTISED PROCUREMENT STATUTES, IT MAY BE ARGUED THAT THE PRINCIPLES SET FORTH IN OUR DECISIONS CONCERNING DETERMINATIONS OF A BIDDER'S LACK OF INTEGRITY IN ADVERTISED PROCUREMENTS ARE EQUALLY FOR APPLICATION TO ADVERTISED SALES OF SURPLUS GOVERNMENT PROPERTY. ON THE OTHER HAND, THE GOVERNMENT AS A SELLER OF SURPLUS PROPERTY IS ORDINARILY INTERESTED ONLY IN OBTAINING THE BEST PRICE AVAILABLE, AND IT MAY BE QUESTIONED WHETHER THE REQUIRED "RESPONSIBILITY" OF A BIDDER IN SUCH A CASE INCLUDES ANYTHING OTHER THAN ABILITY TO PAY THE BID PRICE.'

HOWEVER, THIS WAS NOT A SALE WHEREUNDER THE GOVERNMENT WAS INTERESTED MERELY IN OBTAINING THE HIGHEST OR BEST PRICE AVAILABLE. HERE, SUBSTANTIAL WORK WAS REQUIRED TO BE PERFORMED BY THE PURCHASER WITH RESPECT TO THE RETURN OF VALUABLE GOVERNMENT PROPERTY ("SAVE LIST ITEMS"). THE IMPORTANCE AND URGENCY OF THIS REMOVAL WORK FOR THE GOVERNMENT WAS EVIDENCED BY THE REQUIREMENTS FOR A PERFORMANCE BOND AND PRESCRIBED INSURANCE COVERAGE. THUS, THE SALES CONTRACTING OFFICER HAD BEFORE HIM FOR CONSIDERATION AND ULTIMATE DETERMINATION NOT ONLY YOUR ABILITY TO MEET THE FINANCIAL COMMITMENTS OF YOUR BID, BUT MORE IMPORTANTLY, WHETHER YOU POSSESSED THE NECESSARY BUSINESS INTEGRITY TO PERFORM THE DEMOLITION AND REMOVAL WORK CONTEMPLATED BY THE INVITATION.

THE RESPONSIBILITY OF A PROSPECTIVE BIDDER UNDER A SALE WHICH CONTEMPLATES NOT ONLY THE PAYMENT OF THE HIGHEST PRICE BUT ALSO THE REMOVAL OF EQUIPMENT HAVING NATIONAL-DEFENSE APPLICATIONS NECESSARILY INCLUDES THE FACTOR OF BUSINESS INTEGRITY. WE FEEL THAT THIS RESPONSIBILITY FACTOR RELATES TO A BIDDER'S REPUTATION IN HIS DEALINGS WITH OTHERS, THAT IS, WHETHER HE HAS DEMONSTRATED UPRIGHTNESS AND FAIR DEALING IN BUSINESS RELATIONSHIPS. THE FILES BEFORE US REASONABLY SUPPORT THE SALES CONTRACTING OFFICER'S DETERMINATION THAT YOU WERE A NONRESPONSIBLE BIDDER AND, AS SUCH, NOT ENTITLED TO AN AWARD. THE FILES DISCLOSE A PATTERN OF QUESTIONABLE BUSINESS DEALINGS ON YOUR PART WITH RESPECT TO THE SALE AND ACQUISITION OF GOVERNMENT SURPLUS PROPERTY. INCLUDED IN THE FILE IS A STATEMENT OF THE ASSISTANT COUNSEL, DEFENSE LOGISTICS SERVICES CENTER, WHICH REPORTS AS FOLLOWS: "DURING FEBRUARY 1966 THE WRITER HAD SEVERAL TELEPHONE CONVERSATIONS WITH MR. EMERY ZIDELL, ZIDELL EXPLORATIONS, INC., 3121 SOUTHWEST MOODY STREET, PORTLAND, OREGON, WITH RESPECT TO THE POSSIBLE ASSUMPTION OF THE CONTRACTUAL RESPONSIBILITIES OF THE HUDSON COMPANY UNDER CONTRACT NO. 01-6007-013. DURING THE COURSE OF THESE CONVERSATIONS THE WRITER ADVISED MR. ZIDELL THAT THE ASSIGNMENT OF GOVERNMENT CONTRACTS GENERALLY WAS NOT PERMITTED BUT THAT A "NOVATION" PROCEDURE DID EXIST WHICH MIGHT BE CONSIDERED. THROUGHOUT THESE CONVERSATIONS, REPRESENTATIVES OF THE ABOVE CORPORATION CONSISTENTLY TOOK THE POSITION THAT THEY COULD NOT AGREE TO WORK WITH THE HUDSON INTERESTS UNDER A SUBCONTRACT OR DIRECT FINANCING IN LIEU OF DIRECT RELATIONS WITH THE GOVERNMENT BECAUSE OF THE BUSINESS REPUTATIONS OF THOMAS A. AND WAYNE HUDSON.

"ON 24 FEBRUARY 1966 MR. EMERY ZIDELL TELEPHONED THE WRITER TO ADVISE THAT HE FELT HE COULD NO LONGER DEAL WITH THE HUDSON BROTHERS IN VIEW OF THE STATEMENTS MADE TO HIM BY THOMAS AND WAYNE DURING THE NEGOTIATIONS. MR. ZIDELL STATED SUBSTANTIALLY AS FOLLOWS:

"THE HUDSON BROTHERS HAD CONTRACTED HIM BY TELEPHONE CONCERNING THE POSSIBLE PURCHASE OF THEIR INTEREST IN CONTRACT NO. 01-6007-013. DURING THE COURSE OF THOSE CONVERSATIONS THE HUDSON BROTHERS INFORMED ZIDELL THAT THE BID DEPOSIT CHECK SUBMITTED IN RESPONSE TO INVITATION NO. 01-6007 WOULD NOT BE HONORED BY THE BANK WHEN PRESENTED IN THAT THERE WERE NOT SUFFICIENT FUNDS ON DEPOSIT AT THAT TIME OR AT THE TIME OF ISSUANCE OF THE CHECK. THE HUDSON BROTHERS REQUESTED ZIDELL TO IMMEDIATELY ADVANCE FUNDS TO HONOR THE BID DEPOSIT CHECK AS THE INITIAL PART OF THE BARGAIN.

"WAYNE AND THOMAS HUDSON TRAVELLED TO PORTLAND, OREGON, AT ZIDELL'S EXPENSE, TO DISCUSS THE POSSIBLE ASSUMPTION OF THE ABOVE REFERENCED CONTRACT. DURING THE COURSE OF THOSE NEGOTIATIONS, THOMAS AND WAYNE HUDSON REPEATED TO MR. ZIDELL THAT THEY HAD ISSUED BID DEPOSIT CHECKS IN RESPONSE TO MISSILE INVITATIONS FOR BID WITHOUT SUFFICIENT FUNDS ON DEPOSIT FOR ANY OF THE CHECKS AND THAT THEY INTENDED TO CONTINUE TO ISSUE "BAD CHECKS" WITH RESPECT TO FUTURE INVITATIONS. (SPECIFIC REFERENCE WAS MADE TO SITES IN COLORADO AND AT MT. HOME AIR FORCE BASE.)

"THE HUDSONS FURTHER STATED THEIR INTENTION TO HAVE ONE BROTHER SUBMIT A HIGH PRICE AND THE OTHER BROTHER A CONSIDERABLE LOWER PRICE HOPING THAT THERE WOULD BE NO INTERVENING BIDS. IN SUCH EVENT THE HIGH BIDDING BROTHER WOULD "WITHDRAW HIS BID" EXPECTING THE GOVERNMENT TO THEN AWARD THE CONTRACT TO THE OTHER LOWER BIDDING BROTHER. SPECIFICALLY WAYNE HUDSON TOLD ZIDELL IN THE PRESENCE OF OTHERS, THAT HE WAS BIDDING ON MISSILE SITES LOCATED AT MT. HOME, IDAHO, AND IN COLORADO. HE BRAGGED THAT HE HAD NO PORTION OF THE FUNDS REQUIRED TO COVER CHECKS WHICH HE HAD ISSUED OR WOULD ISSUE IN CONNECTION WITH BIDS ON THOSE OR OTHER FUTURE MISSILE SITES AND THAT THE GOVERNMENT COULD DO NOTHING ABOUT IT. DURING THE SAME CONVERSATION, WAYNE HUDSON STATED THAT ADDITIONAL BIDS WOULD BE PLACED IN THE NAME OF A "TRUCK DRIVER" IN BEHALF OF THE HUDSON INTERESTS, THAT THE TRUCK DRIVER WAS PARTICIPATING IN THE ADVENTURE BUT WAS A "FIGURE HEAD" ONLY. MR. ZIDELL STATED THAT THE TRUCK DRIVER WAS A MAN WITH THE NAME OF BROOKMAN. AT THE CONCLUSION OF THE CONVERSATION, MR. ZIDELL IDENTIFIED AN ASSOCIATE IN THE PROPOSED ASSUMPTION OF THE BEALE CONTRACT AS A MR. TED KRIEGER OF SAN FRANCISCO, MR. ZIDELL FURTHER ADVISED THAT HIS BROTHER ARNOLD, AND HIS ATTORNEYS JACK DUNN AND NATHAN COHN HAD BEEN PRESENT DURING THE NEGOTIATIONS AND WERE WITNESSES TO WAYNE AND THOMAS HUDSON'S STATEMENTS WITH RESPECT TO THEIR INTENTION CONCERNING THE SUBMISSION OF "BAD CHECKS" AS BID DEPOSITS.

"SHORTLY AFTER THE CONCLUSION OF THE ABOVE CONVERSATION, THE WRITER RECEIVED A TELEPHONE CALL FROM MR. CHESTER KRIEGER, OWNER OF H. KRIEGER MACHINERY COMPANY, 724 BRANNON STREET, SAN FRANCISCO, CALIFORNIA. DURING THE COURSE OF THAT TELEPHONE CONVERSATION MR. KRIEGER REPEATED SUBSTANTIALLY ALL OF THE ALLEGATIONS MADE BY MR. ZIDELL WITH RESPECT TO WAYNE AND THOMAS HUDSON'S STATEMENTS CONCERNING THE ISSUANCE OF CHECKS WITH NO FUNDS ON DEPOSIT IN THE BANKS ON WHICH THE CHECKS WERE ISSUED AND THAT SUCH INFORMATION HAD BEEN CONVEYED TO HIM BY THOMAS AND WAYNE HUDSON IN MR. KRIEGER'S OFFICE DURING EARLY FEBRUARY 1966. * * *"

THE SALES CONTRACTING OFFICER ADVISED WITH REFERENCE TO THE FOREGOING THAT:

"THE ALLEGATIONS IN THESE STATEMENTS WERE SUPPORTED IN PART BY THE FACT THAT WAYNE HUDSON WAS APPOINTED AS AGENT FOR THOMAS HUDSON ON CONTRACT 01- 6007-013, AS EVIDENCED BY THE ATTACHED POWER OF ATTORNEY, AND THAT WAYNE HUDSON SUBMITTED A BID IN RESPONSE TO INVITATION FOR BID 01-6007 SUBSTANTIALLY LOWER THAN THAT OF THOMAS HUDSON.

"IN MY CONSIDERATION AS TO WHETHER TO MAKE AN AWARD TO THE SOUTH BAY LEASING COMPANY AND W. R. BROOKMAN, JR., SUBSTANTIAL WEIGHT WAS GIVEN TO THE INFORMATION CONVEYED TO ME BY MR. DARROW REGARDING THE HUDSON BROTHERS STATED INTENTIONS IN ADDITION TO BROOKMAN'S APPARENT ASSOCIATION WITH THE HUDSON INTEREST WITH RESPECT TO THE INVITATION FOR BIDS (INVITATION FOR BID 01-6011) AT THE MT. HOME AND ELLSWORTH COMPLEXES. THIS, IN ADDITION TO OTHER FACTORS, CAUSED ME TO CONCLUDE THAT NEITHER WAYNE HUDSON NOR W. R. BROOKMAN, JR. EVIDENCED A SATISFACTORY RECORD OF INTEGRITY. THESE CONCLUSIONS WERE OF PRIMARY IMPORTANCE IN MY ULTIMATE DECISION TO REJECT THE BIDS OF SOUTH BAY LEASING AND W. R. BROOKMAN ON THE BASIS OF NON- RESPONSIBILITY.'

WHILE WE RECOGNIZE THAT MUCH OF THE INFORMATION RELATING TO YOUR RESPONSIBILITY AS A PROSPECTIVE CONTRACTOR PERHAPS MIGHT BE CONSIDERED AS HEARSAY, THE SALES CONTRACTING OFFICER, IN THE DISCHARGE OF HIS STATUTORY RESPONSIBILITY TO ASSURE THAT AWARD IS MADE TO A "RESPONSIBLE" BIDDER, IS REQUIRED TO CONSIDER INFORMATION FROM EVERY AND ANY SOURCE THAT HE REGARDS PROPER AND NECESSARY IN THE CIRCUMSTANCES. COUPLED WITH HIS OWN KNOWLEDGE THAT THE BID DEPOSIT CHECK TENDERED TO SECURE THE GOVERNMENT AGAINST DEFAULT IN THE EVENT OF AN AWARD WAS DRAWN AGAINST INSUFFICIENT FUNDS, THE SALES CONTRACTING OFFICER WOULD HAVE BEEN DERELICT IN HIS DUTY HAD HE IGNORED THE FURTHER INFORMATION COMMUNICATED TO HIM AND MADE AWARD TO YOU IN RELIANCE UPON SPECIAL CONDITION AB.

PURSUANT TO PART 3, SECTION A1 OF THE DEFENSE SUPPLY AGENCY MANUAL 4160.1, THE SALES CONTRACTING OFFICER IS PERMITTED TO UTILIZE PERTINENT PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) AS GUIDELINES IN ADMINISTERING SURPLUS PROPERTY SALES. UNDER ASPR 1 903.1, A PROSPECTIVE CONTRACTOR MUST HAVE, AMONG OTHERS, A SATISFACTORY RECORD OF INTEGRITY. AN AWARD TO A BIDDER WHO DOES NOT MEET THIS GENERAL STANDARD OF RESPONSIBILITY WOULD BE IMPROPER AND IS PRECLUDED BOTH BY LAW AND REGULATION. SEE 40 U.S.C. 484 (E) (2) (C) AND ASPR 1-902. FACED WITH THIS MANDATE AND THE FACT THAT HE COULD NOT MAKE AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY IN YOUR CASE--- CONSIDERING THE ACCUMULATION OF INFORMATION ADVERSELY REFLECTING UPON YOU--- THE SALES CONTRACTING OFFICER HAD NO COURSE OF ACTION OTHER THAN THE ONE HE FOLLOWED.

ONCE THE SALES CONTRACTING OFFICER MAKES HIS DETERMINATION OF NONRESPONSIBILITY, WE MUST GIVE IT GREAT WEIGHT SINCE THERE IS INVOLVED A DISCRETION THAT IS NOT ORDINARILY SUBJECT TO REVIEW BY OUR OFFICE. JUDICIAL AND ADMINISTRATIVE PRECEDENTS ON THE "RESPONSIBILITY" OF BIDDERS INVARIABLY HOLD THAT DETERMINATIONS ADVERSE TO BIDDERS WILL NOT BE OVERTURNED IN THE ABSENCE OF CONVINCING EVIDENCE THAT THE OFFICER'S CONDUCT WAS TANTAMOUNT TO FRAUD OR THAT THE DETERMINATION WAS THE RESULT OF PERSONAL WHIM OR CAPRICE. SUCH EVIDENCE HAS NOT BEEN FURNISHED IN THIS CASE.

WE RECOGNIZE THAT INFORMATION RELIED UPON BY THE SALES CONTRACTING OFFICER IN MAKING HIS DETERMINATION MAY BE SOMETHING LESS THAN CONCLUSIVE. BUT THE FACTUAL ACCURACY OF THIS INFORMATION COULD BE RESOLVED BY OUR OFFICE ONLY IF WE WERE TO CONDUCT A FULL-SCALE ADVERSARY PROCEEDING WITH SWORN TESTIMONY, CROSS-EXAMINATION OF WITNESSES, ETC. WE HAVE NOT THE FACILITIES FOR, NOR ARE WE OTHERWISE DISPOSED IN FAVOR OF, SUCH AN UNDERTAKING. IN THIS POSTURE OF THE CASE, WE KNOW OF NO SUBSTANTIAL OR OVERRIDING CONSIDERATIONS WHICH WOULD REQUIRE US TO QUESTION THE BONA FIDES OF THE SALES CONTRACTING OFFICER'S DECISION.

UPON CAREFUL CONSIDERATION AND REVIEW OF ALL THE RECORD BEFORE US, WE MUST CONCLUDE THAT THE REJECTION OF YOUR BID WAS PROPER IN THE LIGHT OF ALL THE CIRCUMSTANCES. YOUR PROTEST IS THEREFORE DENIED.