B-161364, B-161407, AUG. 18, 1967

B-161364, B-161407, AUG. 18, 1967

BIDDERS - RESPONSIBILITY - SMALL BUSINESS DECISION TO ORTRONIX, INC., RE PROTEST AGAINST DISQUALIFICATION AND FAILURE OF ARMY ELECTRONICS COMMAND TO SUBMIT BIDDER'S RESPONSIBILITY TO SBA INCIDENT TO SEVERAL NEGOTIATED PROCUREMENTS. OFFEROR WHO WAS DETERMINED TO BE NONRESPONSIBLE PURSUANT TO A PREAWARD SURVEY AND WHO DID NOT HAVE MATTER REFERRED TO SBA BECAUSE OF URGENCY OF REQUIREMENT FOR PROCUREMENTS THAT WERE NEGOTIATED UNDER PUBLIC EXIGENCY AUTHORITY IN 10 U.S.C. 2304 (A) (2) MUST HAVE PROTEST DENIED SINCE RECORD SHOWS THAT PROCUREMENTS INVOLVED PRIORITY REQUIREMENTS WITH URGENT DELIVERY DATES AND SUPPORTS DISQUALIFICATION OF OFFEROR. WHILE OFFEROR SHOULD HAVE BEEN INFORMED OF BASIS FOR REJECTION AS CONTEMPLATED BY ASPR 3-805, SUCH FAILURE DID NOT PREJUDICE OFFEROR'S POSITION.

TO ORTRONIX INCORPORATED:

THIS IS IN REPLY TO YOUR LETTERS OF APRIL 20, APRIL 27 AND MAY 8, 1967, AND ENCLOSURES, PROTESTING AWARDS OF CONTRACTS UNDER REQUESTS FOR PROPOSALS NOS. DAAB05-67-R-1307 (RFP 1307), DAAB05-67-R-0866 (RFP 866), AND DAAB05-67-R-1308 (RFP 1308), ISSUED BY THE ARMY ELECTRONICS COMMAND (AEC), PHILADELPHIA, PENNSYLVANIA.

ALL THREE OF THE RFP'S REFERRED TO WERE ISSUED PURSUANT TO 10 U.S.C. 2304 (A) (2), PERMITTING THE USE OF NEGOTIATION PROCEDURES ON THE BASIS OF PUBLIC EXIGENCY. RFP 1307 SOUGHT PROPOSALS FOR ELECTRICAL EQUIPMENT SHELTERS; RFP 866 WAS FOR SEMITRAILER VANS FOR HOUSING AND TRANSPORTING TELETYPERWRITER RELAY CENTRALS; AND RFP 1308 CALLED FOR S 371 AND S-372 TYPE SHELTERS.

YOUR PROTEST CONCERNING RFPS 1307 AND 866 IS MADE ON SEVERAL GROUNDS WHICH RELATE PRINCIPALLY TO THE GOVERNMENT'S ACTIONS IN EVALUATING YOUR FIRM'S RESPONSIBILITY; TO ITS FAILURE TO SUBMIT THE QUESTION OF YOUR COMPETENCY TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR REVIEW; AND TO THE CONTRACTING OFFICER'S FAILURE TO PROVIDE MEANINGFUL EXPLANATIONS FOR REJECTING YOUR PROPOSALS. ADDITIONALLY, YOU PROTEST THE GOVERNMENT'S FAILURE TO CONDUCT NEGOTIATIONS WITH YOUR FIRM IN VIEW OF THE COMPETITIVE PROPOSALS SUBMITTED BY IT UNDER ALL THREE OF THE ABOVE REFERENCED REQUESTS.

IN REGARD TO YOUR PROTEST CONCERNING THE CONTRACTING OFFICER'S FAILURE TO NEGOTIATE WITH YOUR FIRM UNDER RFP 1308, IT IS REPORTED THAT AWARD WAS MADE TO THE LOWEST OFFEROR WITHOUT DISCUSSION ON THE BASIS OF THE CONTRACTING OFFICER'S "PRICE ANALYSIS.' NEGOTIATIONS WERE NOT CONSIDERED BY HIM TO BE NECESSARY.

THE PERTINENT PORTIONS OF THE ARMED SERVICES PROCUREMENT REGULATIONS (ASPR) SEC. 3-805.1 WHICH ARE FOR CONSIDERATION HERE ARE AS FOLLOWS:

"3-805.1 GENERAL.

"/A) AFTER RECEIPT OF INITIAL PROPOSALS, WRITTEN OR ORAL DISCUSSIONS SHALL BE CONDUCTED WITH ALL RESPONSIBLE OFFERORS WHO SUBMIT PROPOSALS WITHIN A COMPETITIVE RANGE, PRICE AND OTHER FACTORS CONSIDERED, EXCEPT THAT THIS REQUIREMENT NEED NOT NECESSARILY BE APPLIED TO:

"/V) PROCUREMENTS IN WHICH IT CAN BE CLEARLY DEMONSTRATED FROM THE EXISTENCE OF ADEQUATE COMPETITION OR ACCURATE PRIOR COST EXPERIENCE WITH THE PRODUCT OR SERVICE THAT ACCEPTANCE OF THE MOST FAVORABLE INITIAL PROPOSAL WITHOUT DISCUSSION WOULD RESULT IN A FAIR AND REASONABLE PRICE. (PROVIDED, HOWEVER, THAT IN SUCH PROCUREMENTS, THE REQUEST FOR PROPOSALS SHALL NOTIFY ALL OFFERORS OF THE POSSIBILITY THAT AWARD MAY BE MADE WITHOUT DISCUSSION OF PROPOSALS RECEIVED AND HENCE, THAT PROPOSALS SHOULD BE SUBMITTED INITIALLY ON THE MOST FAVORABLE TERMS FROM A PRICE AND TECHNICAL STANDPOINT WHICH THE OFFEROR CAN SUBMIT TO THE GOVERNMENT. * *

IT IS REPORTED THAT NOTICE WAS INCLUDED IN RFP 1308 THAT AN AWARD MIGHT BE MADE WITHOUT DISCUSSION AND SINCE IT APPEARS THAT THE CONTRACTING OFFICER CONDUCTED A "PRICE ANALYSIS" UNDER THIS PROCUREMENT, WE MUST CONCLUDE THAT HIS ACTION IN MAKING AWARD ON THE LOWEST PROPOSAL RECEIVED WITHOUT FURTHER NEGOTIATION OR DISCUSSION WAS AUTHORIZED BY THE REGULATION.

YOU HAVE FORWARDED TO OUR OFFICE A COPY OF A LETTER DATED MAY 8, 1967, ADDRESSED TO AEC IN CONNECTION WITH YOUR REQUEST PURSUANT TO SECTION XVII OF ASPR FOR A MONETARY ADJUSTMENT TO A PRIOR CONTRACT. RELATIVE TO THE INSTANT PROTEST YOU STATE THEREIN THAT:

"DURING TELEPHONE CONVERSATIONS, WE HAVE BEEN INFORMED THAT AWARD ON THE LAST TWO ITEMS WERE MADE TO THE -LOWEST RESPONSIBLE BIDDER.- IN SPITE OF WRITTEN AND VERBAL REQUESTS, NO FURTHER INFORMATION HAS BEEN RECEIVED.

"FROM THIS INFORMATION, WE CAN ONLY ASSUME THAT THE DECISIONS REACHED ON REFERENCE (1) (RFP 866) AND (2) (RFP 1037) WERE SUBSTANTIATED ON THE BASIS OF -URGENCY- SINCE THE ONLY SUPPORTABLE CAUSE FOR DISQUALIFICATION OF ORTRONIX, INC. WAS FOR CREDIT WHICH WOULD NORMALLY RESULT IN A REFERRAL TO SBA FOR POSSIBLE C.O.C. ACTION.

"AS YOU ARE AWARE, THIS COMPANY HOLDS A NUMBER OF BASIC PATENTS IN THE TELECOMMUNICATIONS FIELD AND HAS DONE, AND IS DOING, SOPHISTICATED ENGINEERING WORK IN THIS FIELD. THIS WORK HAS RESULTED IN A LINE OF STANDARD PRODUCTS ASSOCIATED WITH TELEPRINTER, DATA HANDLING AND SINGLE SIDEBAND DATA TRANSMISSION FIELD.

"THE QUESTION OF -URGENCY- IS WORTH FURTHER CONSIDERATION IN VIEW OF THE FOURTEEN MONTH PRODUCTION LEAD TIME ON REFERENCE (1) AND FOURTEEN MONTH PRODUCTION LEAD TIME ON REFERENCE (2). THIS CONTRACTOR HAS FABRICATED OVER SIX-HUNDRED (600) UNITS OF VERY SIMILAR END ITEMS UNDER THE PREVIOUS CONTRACTS COVERED BY THE SUBJECT LETTER. IN VIEW OF THIS EXPERIENCE, IT WOULD BE RIDICULOUS TO EVEN QUESTION TECHNICAL ABILITY.

"THE PREVIOUS EXPERIENCE OF THIS CONTRACTOR, PLUS THE AREA OF CAPABILITY DESCRIBED ABOVE, PLACES ORTRONIX, INC. IN A TECHNICAL POSITION AT LEAST EQUAL TO THE APPARENT SUCCESSFUL BIDDERS.

"RETURNING TO THE QUESTION OF CREDIT, IT WOULD APPEAR OBVIOUS THAT HAD EXPEDITIOUS HANDLING BEEN GRANTED TO OUR LETTER OF 6 OCTOBER 1966, A DECISION BY THIS TIME WOULD HAVE RESULTED IN OUR EITHER BEING CONSIDERED - RESPONSIBLE- OR THE COMPANY WOULD NOT HAVE UNDERTAKEN THE EFFORT AND INCURRED THE COST OF BIDDING TO USAECOM.'

THE RECORD ESTABLISHES THAT SEVEN OFFERS WERE RECEIVED UNDER RFP1307, OF WHICH YOURS WAS THE LOWEST, AND THAT A PREAWARD SURVEY OF YOUR CAPABILITIES WAS REQUESTED BY AEC ON MARCH 8, 1967, CULMINATING IN A NEGATIVE REPORT AND RECOMMENDATION DATED MARCH 24, 1967. UPON REVIEW OF THE SURVEY REPORT ON YOUR FIRM THE CONTRACT EVALUATION BOARD DETERMINED ON APRIL 5, 1967, WITH THE CONCURRENCE OF THE CONTRACTING OFFICER, THAT ORTRONIX WAS NOT RESPONSIBLE FOR THE PROPOSED CONTRACT. REFERRAL TO SBA FOR CONSIDERATION OF THE ISSUANCE OF A CERTIFICATE OF COMPETENCY WAS DISPENSED WITH ON THE BASIS OF URGENCY, PURSUANT TO THE CONTRACTING OFFICER'S CERTIFICATION TO SBA ON APRIL 10, 1967, IN ACCORDANCE WITH ASPR SEC. 1-705.4 (C) (IV) THAT IT WAS NECESSARY TO MAKE AN AWARD UNDER RFP 1307 WITHOUT REFERRAL BECAUSE OF AN URGENT REQUIREMENT FOR DELIVERY OF THE ITEMS BY APRIL 1968, AS ESTABLISHED UNDER THE UNIFORM MATERIEL ISSUE PRIORITY SYSTEM (UMIPS). ON APRIL 11, 1967, AN AWARD WAS MADE WITHOUT FURTHER NEGOTIATION OR DISCUSSION TO THE NEXT LOW OFFEROR ON A "PRICE ANALYSIS" BASIS.

IN REGARD TO RFP 866 THE RECORD ESTABLISHES THAT SIX OFFERS WERE RECEIVED, OF WHICH YOURS WAS THE SECOND LOWEST. THE LOWEST BIDDER WAS FOUND TO BE NONRESPONSIBLE, AND A PREAWARD SURVEY ON YOUR FIRM WAS REQUESTED BY AEC ON FEBRUARY 6, 1967, RESULTING IN A NEGATIVE REPORT AND RECOMMENDATION DATED FEBRUARY 28, 1967. THIS REPORT WAS REVIEWED BY THE CONTRACT EVALUATION BOARD AND ON MARCH 31, 1967, IT DETERMINED WITH THE CONCURRENCE OF THE CONTRACTING OFFICER THAT YOUR FIRM WAS NOT RESPONSIBLE FOR THE PROPOSED CONTRACT. REFERRAL TO SBA WAS AGAIN DISPENSED WITH BECAUSE OF URGENCY OF DELIVERY, AND ON APRIL 18, 1967, AWARD WAS MADE WITHOUT FURTHER NEGOTIATION OR DISCUSSION TO THE LOWEST RESPONSIBLE OFFEROR ON A "PRICE ANALYSIS" BASIS.

ASPR SEC. 1-902 TREATS THE QUESTION OF CONTRACTOR RESPONSIBILITY AS FOLLOWS:

"1-902 GENERAL POLICY. PURCHASES SHALL BE MADE FROM, AND CONTRACTS SHALL BE AWARDED TO, RESPONSIBLE PROSPECTIVE CONTRACTORS ONLY. A RESPONSIBLE PROSPECTIVE CONTRACTOR IS ONE WHICH MEETS THE STANDARDS SET FORTH IN 1- 903.1 AND 1-903.2, AND SUCH SPECIAL STANDARDS AS MAY BE PRESCRIBED IN ACCORDANCE WITH 1-903.3 AND BY OVERSEAS COMMANDERS. 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 OR ADMINISTRATIVE COSTS. WHILE IT IS IMPORTANT THAT GOVERNMENT PURCHASES BE MADE AT THE LOWEST PRICE, THIS DOES NOT REQUIRE AN AWARD TO A MARGINAL SUPPLIER SOLELY BECAUSE HE SUBMITS THE LOWEST BID OR OFFER. A PROSPECTIVE CONTRACTOR MUST DEMONSTRATE AFFIRMATIVELY HIS RESPONSIBILITY, INCLUDING, WHEN NECESSARY, THAT OF HIS PROPOSED SUBCONTRACTORS. THE CONTRACTING OFFICER SHALL MAKE A DETERMINATION OF NONRESPONSIBILITY IF, AFTER COMPLIANCE WITH 1-905 AND 1-906, THE INFORMATION THUS OBTAINED DOES NOT INDICATE CLEARLY THAT THE PROSPECTIVE CONTRACTOR IS RESPONSIBLE. RECENT UNSATISFACTORY PERFORMANCE, IN EITHER QUALITY OR TIMELINESS OF DELIVERY, WHETHER OR NOT DEFAULT PROCEEDINGS WERE INSTITUTED, IS AN EXAMPLE OF A PROBLEM WHICH THE CONTRACTING OFFICER MUST CONSIDER AND RESOLVE AS TO ITS IMPACT ON THE CURRENT PROCUREMENT PRIOR TO MAKING AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY. DOUBT AS TO PRODUCTIVE CAPACITY OR FINANCIAL STRENGTH WHICH CANNOT BE RESOLVED AFFIRMATIVELY SHALL REQUIRE A DETERMINATION OF NONRESPONSIBILITY.'

THE DETERMINATION OF A CONTRACTOR'S QUALIFICATIONS IS PRIMARILY THE FUNCTION OF THE CONTRACTING AGENCY, INVOLVING THE EXERCISE OF A CONSIDERABLE RANGE OF DISCRETION, AND, IN THE ABSENCE OF BAD FAITH, OR LACK OF SUBSTANTIAL GROUNDS FOR THE ADMINISTRATIVE DETERMINATION, THERE IS NO BASIS FOR LEGAL OBJECTION BY OUR OFFICE. SEE 37 COMP. GEN. 430 AND 43 COMP. GEN. 298.

THE REPORT OF THE PREAWARD SURVEY BOARD UNDER RFP 1307, INCLUDING INFORMATION SOLICITED AND ACQUIRED FROM YOUR FIRM, WAS REVIEWED BY THE CONTRACT EVALUATION BOARD WHICH AGREED WITH THE SURVEY BOARD'S CONCLUSIONS THAT YOU WERE UNSATISFACTORY IN THE FOLLOWING AREAS:

A. TECHNICAL CAPABILITY: INADEQUATE SKILLED TECHNICAL WORK FORCE.

B. FINANCIAL CAPABILITY: MARGINAL.

C. PURCHASING AND SUBCONTRACTING: INABILITY TO LOCATE OR CONFIRM SOURCES OF SUPPLY FOR CRITICAL COMPONENTS.

D. PAST PERFORMANCE RECORD: UNSATISFACTORY, WITH CONSISTENT DELINQUENCIES.

E. ABILITY TO MEET REQUIRED SCHEDULE: SUBJECT TO SERIOUS DOUBT BECAUSE OF ABOVE FACTORS AND LACK OF AGGRESSIVE MANAGEMENT.

SIMILARILY, IN THE CASE OF RFP 866, THE CONTRACT EVALUATION BOARD DULY CONSIDERED AND AGREED WITH THE SURVEY BOARD'S FINDINGS, WHICH WERE SUBSTANTIALLY THE SAME AS IN RFP 1307 EXCEPT AS TO PURCHASING AND SUBCONTRACTING.

IN VIEW OF THE ABOVE FINDINGS IT IS CLEAR THAT YOUR CONTENTION THAT THE ONLY SUPPORTABLE CAUSE FOR DISQUALIFICATION WAS FOR CREDIT IS ERRONEOUS, AND SINCE THE DETERMINATIONS OF NONRESPONSIBILITY UNDER BOTH RFPS APPEAR TO BE BASED UPON SUBSTANTIAL GROUNDS WE HAVE NO AUTHORITY TO DISTURB THEM. SINCE THE PROCUREMENT REGULATIONS REQUIRE NEGOTIATIONS ONLY WITH RESPONSIBLE OFFERORS (ASPR SEC. 3-805.1) THE CONTRACTING OFFICER WAS NOT REQUIRED TO CONDUCT NEGOTIATIONS WITH YOUR FIRM.

IN REGARD TO THE CONTRACTING OFFICER'S DETERMINATIONS NOT TO SUBMIT THE QUESTIONS OF YOUR RESPONSIBILITY TO SBA, WE DO NOT CONSIDER THE FACT THAT BOTH RFPS PROVIDED FOR A MULTI-MONTH PRODUCTION LEAD TIME TO BE A VALID BASIS FOR OBJECTION, BECAUSE THE URGENT NEED UNDER BOTH PROCUREMENTS HAD BEEN ESTABLISHED PRIOR TO ISSUING THE RFPS AND THE ALLOWANCE OF EXTENSIVE PRODUCTION LEAD TIME (WHICH IS NOT SHOWN TO BE GREATER THAN REASONABLY NECESSARY) CAN REASONABLY BE INTERPRETED AS FURNISHING ADDITIONAL SUPPORT FOR THE DETERMINATION OF URGENCY. INASMUCH AS THE RECORD SHOWS THAT THESE PROCUREMENTS INVOLVED PRIORITY REQUIREMENTS WITH URGENT DELIVERY DATES ESTABLISHED UNDER UMIPS WE CANNOT SAY THAT THE CONTRACTING OFFICER'S DECISION TO MAKE AWARDS WITHOUT INCURRING THE DELAY INCIDENT TO SBA'S REFERRAL WAS NOT JUSTIFIED OR REASONABLE. SEE B-160624, MAY 24, 1967.

WHILE IT IS REGRETTABLE THAT YOU WERE NOT INFORMED BY AEC OF THE REASONS FOR REJECTING YOUR PROPOSALS, AS CONTEMPLATED BY THE NOTICE PROVISIONS OF THE PROCUREMENT REGULATIONS (ASPR SEC. 3-805), WE DO NOT FIND THAT THIS FAILURE SERIOUSLY PREJUDICED YOUR POSITION WITH RESPECT TO THE PROCUREMENTS IN QUESTION. SINCE OUR REVIEW OF THE REASONS FOR REJECTING YOUR PROPOSALS LEADS US TO THE CONCLUSION THAT THEY ARE LEGALLY SUFFICIENT TO SUPPORT THE ACTIONS OF THE PROCURING ACTIVITY, YOUR PROTEST IS DENIED.