B-160533, MAR. 20, 1967

B-160533: Mar 20, 1967

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TO KRAUSE-AIRCO: REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 9. WAS LOW AS COMPARED TO DOUGLAS' OFFER OF $552.70 EACH. INASMUCH AS THE CONTRACTING OFFICER DID NOT HAVE AVAILABLE SUFFICIENT INFORMATION UPON WHICH TO BASE A DETERMINATION THAT KRAUSE AIRCO COULD MEET THE MINIMUM STANDARDS FOR PROSPECTIVE CONTRACTORS AS SET FORTH IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-904.1. A PREAWARD SURVEY OF YOUR FACILITIES WAS REQUESTED. RECOMMENDED THAT "NO AWARD" BE MADE TO KRAUSE-AIRCO SINCE THE CONTRACT WAS TO BE 100 PERCENT SUBCONTRACTED AND BECAUSE . THE PROPOSED CONTRACTOR DOES NOT HAVE THE CAPABILITIES OF SURVEYING THE SUBCONTRACTOR'S QUALITY CONTROL SYSTEM.'. WE ARE ADVISED THAT THE NEGATIVE PREAWARD SURVEY WAS BASED ON KRAUSE-AIRCO'S INABILITY TO EXERCISE CONTROL OVER THE QUALITY OF THE ITEM BEING MANUFACTURED IN ACCORDANCE WITH THE TECHNICAL SPECIFICATIONS CONTAINED IN THE RFP.

B-160533, MAR. 20, 1967

TO KRAUSE-AIRCO:

REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 9, 1966, AND SUBSEQUENT CORRESPONDENCE, PROTESTING THE REJECTION OF YOUR PROPOSAL SUBMITTED IN RESPONSE TO REQUEST FOR PROPOSALS (RFP) NO. F42600-67-R-0113, ISSUED BY THE UNITED STATES AIR FORCE, OGDEN AIR MATERIEL AREA, UTAH.

THE SUBJECT RFP, ISSUED ON JULY 13, 1966, TO KRAUSE-AIRCO --- A SMALL BUSINESS CONCERN--- AND TO THE DOUGLAS AIRCRAFT COMPANY, REQUESTED PROPOSALS FOR FURNISHING 136 CYLINDER DEBOOSTERS, APPLICABLE TO THE C-118 AIRCRAFT. YOUR PROPOSAL OF $461.50 EACH, TOTALLING $62,764.00, WAS LOW AS COMPARED TO DOUGLAS' OFFER OF $552.70 EACH, TOTALLING $75,167.20.

INASMUCH AS THE CONTRACTING OFFICER DID NOT HAVE AVAILABLE SUFFICIENT INFORMATION UPON WHICH TO BASE A DETERMINATION THAT KRAUSE AIRCO COULD MEET THE MINIMUM STANDARDS FOR PROSPECTIVE CONTRACTORS AS SET FORTH IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-904.1, A PREAWARD SURVEY OF YOUR FACILITIES WAS REQUESTED. THE SURVEY, CONDUCTED BY TECHNICAL PERSONNEL OF THE DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT, VAN NUYS, CALIFORNIA, RECOMMENDED THAT "NO AWARD" BE MADE TO KRAUSE-AIRCO SINCE THE CONTRACT WAS TO BE 100 PERCENT SUBCONTRACTED AND BECAUSE ,THE PROPOSED CONTRACTOR DOES NOT HAVE THE CAPABILITIES OF SURVEYING THE SUBCONTRACTOR'S QUALITY CONTROL SYSTEM.' SPECIFICALLY, WE ARE ADVISED THAT THE NEGATIVE PREAWARD SURVEY WAS BASED ON KRAUSE-AIRCO'S INABILITY TO EXERCISE CONTROL OVER THE QUALITY OF THE ITEM BEING MANUFACTURED IN ACCORDANCE WITH THE TECHNICAL SPECIFICATIONS CONTAINED IN THE RFP.

IN VIEW OF THE NEGATIVE RESULTS OF THE PREAWARD SURVEY AND SINCE KRAUSE- AIRCO DECLINED TO REQUEST THE SMALL BUSINESS ADMINISTRATION (SBA) TO CONSIDER ITS COMPETENCY, THE CONTRACTING OFFICER DETERMINED, PURSUANT TO ASPR 1-904.1, THAT KRAUSE-AIRCO WAS NONRESPONSIBLE FOR THE PURPOSES OF THIS PROCUREMENT.

THE INFORMATION CONTAINED IN THE PREAWARD SURVEY WAS NOT FURNISHED TO YOU BEFORE THE DETERMINATION OF NONRESPONSIBILITY WAS MADE BECAUSE IT WAS NECESSARY TO SUBMIT THE MATTER OF YOUR COMPETENCY TO SBA, AS EXPLAINED BELOW. ASPR 1-907 MAKES THE DISCLOSURE OF SUCH INFORMATION, PRIOR TO A DETERMINATION INVOLVING THE RESPONSIBILITY FACTOR, DISCRETIONARY UPON THE PURCHASING AGENCY.

ASPR 1-705.4 (C) PROVIDES THAT IF A SMALL BUSINESS CONCERN IS TO BE REJECTED SOLELY FOR LACK OF CAPACITY OR CREDIT, THE MATTER MUST BE REFERRED TO SBA TO PERMIT TO TO EVALUATE THE RESPONSIBILITY FACTOR IN ACCORDANCE WITH ITS OWN PROCEDURES. ASPR 1-705.4 (A) FURTHER PROVIDES THAT THE RESULTS OF THE SBA INVESTIGATION ARE CONCLUSIVE UPON THE CONTRACTING OFFICER AS TO A PROSPECTIVE CONTRACTOR'S CAPACITY OR CREDIT. SINCE KRAUSE-AIRCO IS A SMALL BUSINESS AND THE NEGATIVE PREAWARD SURVEY CONCERNED CAPACITY, THE MATTER WAS ACCORDINGLY SUBMITTED TO SBA. LETTER DATED NOVEMBER 29, 1966, SBA INFORMED THE PROCURING AGENCY THAT KRAUSE-AIRCO HAD DECLINED TO FILE FOR A CERTIFICATE OF COMPETENCY. THE LETTER FROM SBA CONCLUDED WITH THE ADVICE THAT IT WOULD TAKE NO FURTHER ACTION AND WOULD CONSIDER THE CASE CLOSED. SINCE KRAUSE-AIRCO DECLINED TO FILE FOR THE CERTIFICATE, THE ADMINISTRATIVE OFFICIALS HAD NO ALTERNATIVE BUT TO REJECT YOUR PROPOSAL BECAUSE OF YOUR NONRESPONSIBILITY.

ON DECEMBER 9, 1966, AWARD WAS MADE TO DOUGLAS AIRCRAFT COMPANY FOR A DECREASED QUANTITY IN THE AMOUNT OF $62,455.10.

YOU STATE THAT INASMUCH AS KRAUSE-AIRCO SATISFACTORILY COMPLIED WITH THE CRITERIA OF PART D OF THE RFP, ENTITLED "SOURCES FOR REPLENISHMENT SPARE PARTS," THERE IS NO BASIS FOR THE NEGATIVE DETERMINATION OF RESPONSIBILITY IN THIS INSTANCE SINCE SUCH COMPLIANCE SATISFIED YOUR RESPONSIBILITY. THIS PROVISION IS A PROMULGATION OF ASPR 1-313 (A) AND (C) WHEREIN IT IS PROVIDED THAT REPLENISHMENT SPARE PARTS SHOULD BE SO PROCURED AS TO ASSURE SAFE AND DEPENDABLE OPERATION OF THE EQUIPMENT AND THAT WHERE THIS ASSURANCE CAN BE HAD ONLY IF THE PARTS ARE PROCURED FROM THE EQUIPMENT MANUFACTURER, THE PROCUREMENT SHOULD BE RESTRICTED. SCHEDULE PROVISION "D" WAS A CONDITION PRECEDENT TO THE MAKING OF AN OFFER AND WAS NOT RELATED TO THE PREAWARD SURVEY WHICH EVALUATED YOUR ABILITY TO PERFORM THE CONTRACT SOLICITED. IN THIS REGARD, YOUR ATTENTION IS INVITED TO THE RFP COVER PAGE, NOTE 1, WHERE IN THERE WERE LISTED 21 SEPARATE AREAS FOR EVALUATION BY A PREAWARD SURVEY TEAM SUBSEQUENT TO THE SUBMISSION OF PROPOSAL.

IN YOUR LETTER, YOU ALSO STATE THAT THE AGENCY CONTACTED YOUR SUBCONTRACTOR DIRECTLY,"ASKING THEM IF THEY WOULD SUPPLY THE ITEM DIRECTLY TO THEM, THEREBY SUGGESTING THAT WE COULD BE ELIMINATED.' WE UNDERSTAND THAT THIS STATEMENT IS TRUE WITH RESPECT TO FUTURE PROCUREMENTS. HOWEVER, WE ARE ADVISED AND ASSURED BY THE AGENCY THAT THE REQUEST WAS IN NO WAY CONNECTED WITH THE SUBJECT PROCUREMENT. RATHER, IT WAS FOR THE EXPRESS PURPOSE OF ESTABLISHING NEW DIRECT SOURCES FOR FUTURE PROCUREMENT ACTION AS CONTEMPLATED BY ASPR 1-313, SUPRA.

CONCERNING YOUR STATEMENT THAT THE AWARD TO DOUGLAS WAS NOT IN THE BEST INTEREST OF THE GOVERNMENT IN THAT AT NO TIME CAN THE RESULTING HIGHER COSTS BE CONDONED, ATTENTION IS INVITED TO ASPR 1-902, WHICH PROVIDES, IN PART, AS FOLLOWS:

"THE AWARD OF A CONTRACT TO A SUPPLIER BASED ON LOWEST EVALUATED PRICE ALONE CAN BE FALSE ECONOMY IF THERE IS SUBSEQUENT DEFAULT, LATE DELIVERIES, OR OTHER UNSATISFACTORY PERFORMANCE RESULTING IN ADDITIONAL PROCUREMENT OF ADMINISTRATIVE COSTS. WHILE IT IS IMPORTANT THAT GOVERNMENT PURCHASES BE MADE AT THE LOWEST PRICE, THIS DOES NOT REQUIRE AN AWARD TO THE MARGINAL SUPPLIER SOLELY BECAUSE HE SUBMITS THE LOWEST BID OR OFFER.'

IN OUR VIEW, YOUR FAILURE TO FILE FOR A CERTIFICATE OF COMPETENCY RENDERED CONCLUSIVE THE ADMINISTRATIVE DETERMINATION OF NONRESPONSIBILITY. A DETERMINATION OF RESPONSIBILITY IS PRIMARILY THE FUNCTION OF THE CONTRACTING OFFICER, AND IS NECESSARILY A MATTER OF JUDGMENT INVOLVING A CONSIDERABLE RANGE OF DISCRETION. WHERE SUCH DETERMINATION IS BASED UPON SUBSTANTIAL EVIDENCE AS IN THIS INSTANCE, THERE IS NO VALID BASIS UPON WHICH WE MAY SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER. 37 COMP. GEN. 705; ZEPHYR AIRCRAFT CORP. V. UNITED STATES, 122 CT.CL. 523. UNDER THESE CIRCUMSTANCES, NO LEGAL BASIS EXISTS FOR DISTURBING THE ADMINISTRATIVE ACTIONS TAKEN UNDER THE RFP.