B-161641, OCT. 31, 1967

B-161641, OCT. 31, 1967

BIDDERS - RESPONSIBILITY - SMALL BUSINESS DECISION CONCERNING PROTEST OF SOUTHERN PEANUT CO., INC., AGAINST AWARD TO BRYAN AND HESTER FOR SPRAYING CONTRACT SERVICES BY DEPT. OF AGRICULTURE ON BASIS OF CORRECTION OF BID. TIE BIDDER WHO, HAD INADVERTENTLY CHECKED WRONG BLOCK IN BID FORM INDICATING PARTNERSHIP AS A LARGE BUSINESS FIRM AND WHO WAS PERMITTED AFTER OPENING TO SUBMIT INFORMATION INDICATING THAT IT WAS SMALL BUSINESS PARTNERSHIP MAY HAVE SUCH CORRECTIVE INFORMATION CONSIDERED IN DETERMINING ITS SMALL BUSINESS STATUS SINCE THE MISTAKE IS ONE OF FACT NOT DEPENDING UPON REPRESENTATIONS BY THE BIDDER THAT COULD PREJUDICE OTHER BIDDERS AND INFORMATION DOES NOT AFFECT THE RESPONSIVENESS OF THE BID SINCE THE PROCUREMENT WAS NOT A SMALL BUSINESS SET ASIDE AND INFORMATION WAS USED FOR ESTABLISHING PREFERENCES IN THE BID CASE. FACT THAT PARTNERSHIP DID NOT EXIST BECAUSE IT WAS NOT FORMALLY LEGALIZED DOES NOT BAR CONSIDERATION OF BID BECAUSE PARTNERSHIP MAY BE CREATED BY AGREEMENT OR CONDUCT. IN INSTANT CASE BID WAS SIGNED BY ONE PARTNER AND BID AND PERFORMANCE BONDS SIGNED BY BOTH PARTNERS. ALTHOUGH TIE BIDDERS WERE NOT AFFORDED OPPORTUNITY TO WITNESS DRAWING SUCH FAILURE DOES NOT AFFECT THE VALIDITY OF THE AWARD SINCE RECORD DEMONSTRATES THAT THERE WAS AN HONEST IMPARTIAL DRAWING OF LOTS.

TO MR. HAROLD D. COOLEY:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM DATED JUNE 8, 1967, AND SUBSEQUENT COMMUNICATIONS, PROTESTING ON BEHALF OF THE SOUTHERN PEANUT COMPANY, INCORPORATED, AWARD OF CONTRACT TO THE PARTNERSHIP OF BRYAN AND HESTER FOR UNIT 7 UNDER INVITATION FOR BIDS NO. 177-E-ARS-67 ISSUED BY THE DEPARTMENT OF AGRICULTURE ON MARCH 22, 1967.

THE INVITATION CALLED FOR SPRAYING APPROXIMATELY 529,600 ACRES FOR WITCHWEED CONTROL IN NORTH AND SOUTH CAROLINA. BIDS WERE REQUESTED ON 14 SEPARATE UNITS. ON APRIL 5, 1967, BY TELEGRAPHIC AMENDMENT, THE BID OPENING WAS EXTENDED TO APRIL 10, 1967. ON APRIL 10, 1967, BIDS WERE OPENED PUBLICLY AND READ IN THE PRESENCE OF MOST OF THE BIDDERS. ON UNIT 7 FOR THE SPRAYING OF 88,000 ACRES IN ROBESON COUNTY, NORTH CAROLINA, SOUTHERN PEANUT COMPANY AND THE PARTNERSHIP OF BRYAN AND HESTER SUBMITTED TIE BIDS OF $1.59 PER ACRE.

THE CONTRACTING OFFICER UPON SUBSEQUENT EXAMINATION OF THE BID OF BRYAN AND HESTER DISCOVERED THAT THE SPACE IN THE BID WAS CHECKED TO REPRESENT THAT THEIR PARTNERSHIP WAS NOT A SMALL BUSINESS. UNDER THE PREFERENCE SET FORTH IN FEDERAL PROCUREMENT REGULATION 1-2.407-6 AWARD IS MADE TO THE SMALL BUSINESS WHEN THERE IS A TIE BETWEEN BIDS OF A LARGE BUSINESS AND A SMALL BUSINESS. THEREFORE, ON THE FACT OF THE BIDS IT APPEARED THAT AWARD SHOULD BE MADE TO SOUTHERN PEANUT COMPANY UNDER THE PREFERENCE. FPR 1- 1.701-1 READS IN PART AS FOLLOWS: "/F) SERVICES, ANY CONCERN BIDDING ON A CONTRACT FOR SERVICES IS CLASSIFIED: (1) AS SMALL IF IT IS BIDDING ON A CONTRACT FOR SERVICES NOT OTHERWISE DEFINED IN THIS (SECTION) 1-1.701-1 AND ITS AVERAGE ANNUAL SALES OR RECEIPTS FOR ITS PRECEDING THREE FISCAL YEARS DO NOT EXCEED $1,000,000 * * *.' THE CONTRACTING OFFICER STATED THAT THERE WAS A REASONABLE DOUBT IN HIS MIND THAT THE ANNUAL GROSS INCOME OF BRYAN AND HESTER HAD EXCEEDED $1,000,000 PER YEAR AND HE THOUGH THAT EITHER THEY HAD MISUNDERSTOOD THIS PART OF THE BID FORM OR HAD INADVERTENTLY CHECKED THE WRONG BLOCK. THE CONTRACTING OFFICER, TO RESOLVE THIS DOUBT, TELEGRAPHED BRYAN AND HESTER ON APRIL 11, 1967, REQUESTING THEIR AVERAGE ANNUAL RECEIPTS DURING THE PAST THREE YEARS FOR PURPOSES OF BID EVALUATION. BRYAN AND HESTER RESPONDED BY TELEGRAM ON APRIL 12, 1967, THAT THEIR ANNUAL RECEIPTS FOR THE PRECEDING THREE YEARS WERE $150,000. THE CONTRACTING OFFICER THEN DETERMINED THAT THE PARTNERSHIP OF BRYAN AND HESTER WAS IN FACT A SMALL BUSINESS CONCERN AS DEFINED IN FPR 1-1.701-1 AND THAT THE TIE BIDS COULD NOT BE RESOLVED BY THE PREFERENCES ESTABLISHED IN FPR 1 2.407-6.

ON APRIL 12, 1967, THE CONTRACTING OFFICER HELD A DRAWING OF LOTS TO RESOLVE THE TIE BETWEEN SOUTHERN PEANUT AND BRYAN AND HESTER. ALTHOUGH NEITHER BIDDER WAS NOTIFIED OF THE DRAWING, IT WAS WITNESSED BY FIVE EMPLOYEES OF THE DEPARTMENT OF AGRICULTURE AND THERE IS NOTHING TO INDICATE, NOR IS IT CONTENDED, THAT THE SELECTION REPRESENTED ANYTHING OTHER THAN A BONA FIDE SELECTION BY LOT. THE INVESTIGATORS OF THE INSPECTOR GENERAL INTERVIEWED SEPARATELY THE FIVE PEOPLE PRESENT, AND THE SUBSTANCE OF THEIR STATEMENTS IS AS FOLLOWS: THEY WERE IN MR. YOUNG'S OFFICE ON APRIL 12, 1967. MR. BACHMAN WROTE THE INITIALS "B AND H" ON ONE SLIP OF PAPER AND "S.P.' ON ANOTHER. BOTH SLIPS OF PAPER, OF ABOUT THE SAME SIZE, WERE THEN FOLDED THE SAME AND PLACED IN A HAT. THE HAT WAS HELD HIGH AND SHAKEN. MR. GUCWA, WHO DID NOT KNOW THE NAMES OF THE FIRMS INVOLVED, WAS TOLD BY MR. YOUNG TO DRAW ONE OF THE SLIPS. MR. GUCWA DID SO, READ THE INITIALS "B AND H" FROM THE SLIP AND HELD IT UP IN FULL VIEW OF ALL PRESENT. HE THEN DREW THE OTHER SLIP, READING THE INITIALS "S.P.' , AND LAID BOTH SLIPS ON THE TABLE FOR ALL TO SEE. AS YOU HAVE BEEN ADVISED BY THE DEPARTMENT OF AGRICULTURE, ITS REGULATIONS PRECLUDE FURNISHING YOU A COPY OF THE ABOVE REPORT. WE RECEIVED IT FOR OFFICIAL USE ONLY AND MUST THEREFORE DECLINE TO MAKE IT AVAILABLE TO YOU. TELEGRAPHIC NOTICES OF AWARD WERE SENT TO THE FIVE SUCCESSFUL BIDDERS ON APRIL 13, 1967, WITH AWARD FOR UNIT 7 BEING MADE TO BRYAN AND HESTER AT THE BID PRICE OF $1.59 PER ACRE. C. D. BRISSON, PRESIDENT, SOUTHERN PEANUT COMPANY, ON APRIL 14, 1967, TELEGRAPHED THE CONTRACTING OFFICER PROTESTING THE AWARD OF UNIT 7 TO BRYAN AND HESTER.

YOUR PROTEST ON BEHALF OF SOUTHERN PEANUT COMPANY IS BASED UPON FOUR CONTENTIONS: (1) AWARD TO BRYAN AND HESTER AS A PARTNERSHIP WAS IN ERROR IN THAT A PARTNERSHIP DID NOT EXIST; (2) AWARD SHOULD NOT HAVE BEEN MADE TO BRYAN AND HESTER AS THEY WERE NOT RESPONSIBLE BIDDERS AND FURTHER THAT SOUTHERN PEANUT COMPANY WAS THE MORE RESPONSIBLE BIDDER; (3) AWARD TO BRYAN AND HESTER AS A SMALL BUSINESS CONCERN WAS IMPROPER BECAUSE THE CONTRACTING OFFICER SHOULD NOT HAVE CORRECTED THE MISTAKE BY BRYAN AND HESTER IN REPRESENTING THE SIZE OF THEIR COMPANY; AND (4) THE DRAWING OF LOTS TO RESOLVE THE TIE WITHOUT PRIOR NOTIFICATION TO ENABLE THE BIDDERS CONCERNED TO BE PRESENT WAS IMPROPER.

IN SUPPORT OF YOUR CONTENTION THAT A PARTNERSHIP BETWEEN CARL BRYAN AND WINTON HESTER DID NOT EXIST, YOU POINT OUT THAT A DILIGENT SEARCH ON YOUR PART REVEALED THAT NO PARTNERSHIP DOCUMENTS HAD EVER BEEN FILED WITH THE SECRETARY OF THE STATE OF NORTH CAROLINA AND THAT THERE WAS NO RECORD OF ANY INCOME TAX RETURN FILED BY THE PARTNERSHIP WITH EITHER THE INTERNAL REVENUE SERVICE OR THE COMMISSIONER OF REVENUE FOR THE STATE OF NORTH CAROLINA. THE RECORD INDICATES THAT BRYAN AND HESTER STATED THAT THEY HAD BEEN PARTNERS IN MANY BUSINESS TRANSACTIONS, BUT HAD NEVER FORMALLY LEGALIZED THEIR PARTNERSHIP. IN THIS CONNECTION THE SUPREME COURT OF NORTH CAROLINA STATED: "NOT ONLY MAY A PARTNERSHIP BE FORMED ORALLY, BUT - /IT) MAY BE CREATED BY THE AGREEMENT OR CONDUCT OF THE PARTIES, EITHER EXPRESS OR IMPLIED.-" EGGLESTON V. EGGLESTON, 47 S.E. 2D 243, 228 N.C. 668. THEREFORE, THE ABSENCE OF PARTNERSHIP DOCUMENTS DOES NOT ESTABLISH THAT A PARTNERSHIP DID NOT EXIST. FURTHER, THE BID BY BRYAN AND HESTER WAS SIGNED BY CARL BRYAN AS PARTNER, AND THE BID BOND AND PERFORMANCE BOND WERE SIGNED BY BOTH PARTNERS.

YOU ALSO CONTEND THAT THE PARTNERSHIP HAS NEITHER THE FINANCIAL RESOURCES NOR EXPERIENCE TO BE CONSIDERED RESPONSIBLE. FEDERAL PROCUREMENT REGULATION 1-2.407-2 PROVIDES THAT THE CONTRACTING OFFICER MUST DETERMINE A BIDDER TO BE RESPONSIBLE BEFORE MAKING AWARD. FPR 1 1.310 PROVIDES AMONG OTHER THINGS THAT THE BIDDER MUST HAVE AN ABILITY TO OBTAIN THE NECESSARY FINANCIAL RESOURCES, ORGANIZATION AND FACILITIES IN TIME FOR PERFORMANCE. THAT REGULATION FURTHER PROVIDES THAT THE SIGNING OF THE CONTRACT BY THE CONTRACTING OFFICER IS CERTIFICATION THAT HE HAS DETERMINED THE CONTRACTOR TO BE RESPONSIBLE. THIS OFFICE HAS HELD THAT THE DETERMINATION OF RESPONSIBILITY IS PRIMARILY A FUNCTION OF THE CONTRACTING OFFICER AND, IN THE ABSENCE OF EVIDENCE THAT SUCH DETERMINATION WAS ARBITRARY OR CAPRICIOUS IT IS ACCEPTED BY OUR OFFICE. SEE 33 COMP. GEN. 549; 38 COMP. GEN. 131. WE FIND NO SUCH EVIDENCE IN THE CASE. THERE IS, OF COURSE, NO QUESTION THAT SOUTHERN PEANUT COMPANY IS VERY WELL QUALIFIED AND HAS AN EXCELLENT RECORD IN PERFORMING SIMILAR CONTRACTS. YOU ALSO POINTED OUT THAT BRYAN AND HESTER FAILED TO FURNISH AN ,EMPLOYERS IDENTIFICATION NUMBER" AS REQUIRED BY SECTION 14 OF STANDARD FORM 33 A. FPR 1-1.1605-2 (B) STATES THAT FAILURE TO PROVIDE SUCH IDENTIFICATION NUMBER SHALL NOT BE CAUSE FOR REJECTION OF BIDS. FOR THESE REASONS WE CANNOT AGREE THAT THE PARTNERSHIP OF BRYAN AND HESTER SHOULD BE HELD NONRESPONSIBLE.

YOU ALLEGE THAT INVESTIGATION BY THE CONTRACTING OFFICER OF THE SIZE OF BRYAN AND HESTER, AND CONSIDERATION FOR PURPOSES OF THE TIE BID OF THAT PARTNERSHIP AS A SMALL BUSINESS CONCERN WAS IMPROPER IN VIEW OF THE LARGE BUSINESS REPRESENTATION ON THE FACE OF THEIR BID. THE CONTRACTING OFFICER, AS PREVIOUSLY NOTED, FELT THIS TO BE A MISTAKE DUE EITHER TO A MISUNDERSTANDING OR A CLERICAL ERROR. THIS PROCUREMENT DOES NOT INVOLVE A SMALL BUSINESS SET-ASIDE AND THE REPRESENTATION BY THE BIDDER DOES NOT AFFECT THE RESPONSIVENESS OF HIS BID. THE MISTAKE INVOLVED IS ONE OF EXISTING FACT WHICH DOES NOT DEPEND FOR ITS RESOLUTION UPON REPRESENTATIONS BY A BIDDER THAT COULD PREJUDICE OTHER BIDDERS. THE CORRECTION BY THE CONTRACTING OFFICER DOES NOT IN ANY WAY ALTER THE BID BY BRYAN AND HESTER. TO REQUIRE THE CONTRACTING OFFICER TO IGNORE THE STATUS OF A SMALL BUSINESS CONCERN, WHEN THAT CONCERN HAS MISTAKENLY MISREPRESENTED ITSELF WOULD BE TO FRUSTRATE THE PURPOSE OF FPR 1-2.407-6 IN ESTABLISHING PREFERENCES TO BE USED IN CASES OF TIE BIDS. IN THIS CONNECTION, IT SEEMS TO BE YOUR CONTENTION THAT THE BRYAN AND HESTER BID SHOULD BE DISREGARDED BECAUSE OF THEIR TELEGRAPHIC STATEMENT TO THE CONTRACTING OFFICER THAT THEIR "ANNUAL AVERAGE RECEIPTS OF PRECEDING THREE YEARS FROM BUSINESS" WAS $150,000. THIS INFORMATION WAS NOT REQUESTED OR USED FOR THE PURPOSE OF DETERMINING THE RESPONSIBILITY OF BRYAN AND HESTER, BUT IN CONNECTION WITH THEIR STATUS AS LARGE OR SMALL BUSINESS, AND THE FACT THAT THE PARTNERSHIP AS SUCH MAY NOT HAVE HAD THIS MUCH INCOME WOULD NOT AFFECT THIS DETERMINATION. ACCORDINGLY, WE FIND NO OBJECTION TO ACTION TAKEN BY THE CONTRACTING OFFICER PURSUANT TO THE AUTHORITY IN FEDERAL PROCUREMENT REGULATION 1-2.406.

YOUR MAJOR CONTENTION CONCERNS THE FAILURE OF THE CONTRACTING OFFICER TO AFFORD THE TIE BIDDERS AN OPPORTUNITY TO WITNESS THE DRAWING OF LOTS, AS PRESCRIBED IN FPR 1-2.407-6 (B) WHICH PROVIDES IN PERTINENT PART:

"/B) * * * IF TWO OR MORE BIDDERS STILL REMAIN EQUALLY ELIGIBLE FOR AWARD, AWARD SHALL BE MADE BY A DRAWING BY LOT LIMITED TO SUCH BIDDERS. IF TIME PERMITS, THE BIDDERS SHALL BE GIVEN AN OPPORTUNITY TO BE PRESENT AT THE DRAWING BY LOT. SUCH DRAWING SHALL BE WITNESSED BY AT LEAST THREE PERSONS, AND THE CONTRACT FILE SHALL CONTAIN THE NAMES AND ADDRESSES OF THESE WITNESSES.' THE EVIDENCE PRESENTED BY YOU ON BEHALF OF SOUTHERN PEANUT COMPANY SUFFICIENTLY ESTABLISHED THAT TIME DID PERMIT THE BIDDERS TO BE GIVEN AN OPPORTUNITY TO BE PRESENT AT THE DRAWING. THEREFORE, YOU CONTEND THAT THE FAILURE TO FOLLOW THE ABOVE REGULATION INVALIDATED THE AWARD TO BRYAN AND HESTER. IN SUPPORT OF THIS CONTENTION YOU REFERRED TO OUR DECISION 44 COMP. GEN. 661 WHEREIN WE STATED: "HOWEVER, TO AVOID ANY RECURRENCE OF THIS SITUATION, WE RECOMMEND THAT THE REGULATION AS PROMULGATED BE STRICTLY FOLLOWED IN THE FUTURE.' IN THAT CASE THE TIE BIDDERS WERE NOT INVITED TO WITNESS THE DRAWING ALTHOUGH TIME PERMITTED AND ON THE BASIS OF THE ABOVE STATEMENT YOU CONCLUDE ANY FAILURE TO FOLLOW THE REGULATION IN THE FUTURE WOULD INVALIDATE THE AWARD SO MADE. THE PROTESTANT IN THAT CASE CONTENDED, AS YOU NOW DO, THAT PRESENCE OF THE BIDDERS WAS MANDATORY AND REQUESTED RECONSIDERATION OF OUR DECISION IN 44 COMP. GEN. 661.

UPON RECONSIDERATION, WE CONCLUDED IN A DECISION OF JUNE 10, 1965, B- 156427, COPY ENCLOSED, THAT THE FAILURE TO FOLLOW STRICTLY THE PROCEDURAL REQUIREMENTS OF THE REGULATION DID NOT AFFECT THE LEGALITY OF THE CONTRACT SINCE AWARD WAS MADE PURSUANT TO A DRAWING OF LOTS. THE SAME SITUATION EXISTS IN THE PRESENT CASE. THE EVIDENCE PRESENTED TO US DEMONSTRATES CONCLUSIVELY, WE BELIEVE, THAT THERE WAS IN FACT AN HONEST AND IMPARTIAL DRAWING OF LOTS. WE AGREE THAT THE TIE BIDDERS SHOULD HAVE BEEN INVITED TO WITNESS THE DRAWING, BUT WE MUST CONCLUDE, AS WE DID IN OUR DECISION OF JUNE 10, 1965, THAT A VALID AWARD RESULTED EVEN THOUGH THIS WAS NOT DONE.

WE HAVE ADVISED THE SECRETARY OF AGRICULTURE OF OUR VIEWS IN THE MATTER, AND WE ENCLOSE A COPY OF OUR LETTER TO HIM.