B-161818, APRIL 3, 1968, 47 COMP. GEN. 518

B-161818: Apr 3, 1968

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EVIDENCE OF PREVIOUS PRODUCTION OF A SIMILAR SYSTEM THAT HAD BEEN ACCEPTED BY THE GOVERNMENT WITHIN THE PAST 5 YEARS WERE MISSTATED AS THE WALSH-HEALEY PUBLIC CONTRACTS ACT DOES NOT REQUIRE A CONTRACTOR TO BE A "REGULAR" MANUFACTURER. IN ADDITION THE PREAWARD PROTEST OF A REJECTED PROPONENT SHOULD HAVE BEEN SUBMITTED BY THE CONTRACTING OFFICER TO THE SECRETARY OF LABOR OR THE CONTRACTOR ADVISED OF HIS RIGHT TO REVIEW BY HIM. THE CONTRACTING OFFICER'S DETERMINATION OF MANUFACTURER INELIGIBILITY WAS NOT SUBJECT TO REVIEW BY THE SMALL BUSINESS ADMINISTRATION. ALTHOUGH IT IS NOT IN THE BEST INTEREST OF THE GOVERNMENT TO CANCEL THE CONTRACT AWARDED. CORRECTION ACTION IS RECOMMENDED. 1968: REFERENCE IS MADE TO LETTER OF AUGUST 11.

B-161818, APRIL 3, 1968, 47 COMP. GEN. 518

BIDDERS - QUALIFICATIONS - MANUFACTURER OR DEALER - EXPERIENCE QUALIFICATION THE REQUIREMENTS IN A REQUEST FOR PROPOSALS (RFP) THAT PROSPECTIVE CONTRACTORS SHOW EVIDENCE OF BEING IN THE "REGULAR" BUSINESS OF DESIGNING AND MANUFACTURING CENTRIFUGE SYSTEMS, AND EVIDENCE OF PREVIOUS PRODUCTION OF A SIMILAR SYSTEM THAT HAD BEEN ACCEPTED BY THE GOVERNMENT WITHIN THE PAST 5 YEARS WERE MISSTATED AS THE WALSH-HEALEY PUBLIC CONTRACTS ACT DOES NOT REQUIRE A CONTRACTOR TO BE A "REGULAR" MANUFACTURER. IN ADDITION THE PREAWARD PROTEST OF A REJECTED PROPONENT SHOULD HAVE BEEN SUBMITTED BY THE CONTRACTING OFFICER TO THE SECRETARY OF LABOR OR THE CONTRACTOR ADVISED OF HIS RIGHT TO REVIEW BY HIM, AND NOTWITHSTANDING THE EXPERIENCE QUALIFICATION IN THE RFP INVOLVED CAPACITY WITHIN THE MEANING OF THE SMALL BUSINESS ACT, THE CONTRACTING OFFICER'S DETERMINATION OF MANUFACTURER INELIGIBILITY WAS NOT SUBJECT TO REVIEW BY THE SMALL BUSINESS ADMINISTRATION. ALTHOUGH IT IS NOT IN THE BEST INTEREST OF THE GOVERNMENT TO CANCEL THE CONTRACT AWARDED, TO AVOID SIMILAR ERRORS IN THE FUTURE, CORRECTION ACTION IS RECOMMENDED.

TO THE SECRETARY OF THE NAVY, APRIL 3, 1968:

REFERENCE IS MADE TO LETTER OF AUGUST 11, 1967, WITH ENCLOSURES (SUP 0232A) FROM THE DEPUTY COMMANDER, PURCHASING, NAVAL SUPPLY SYSTEMS COMMAND, REPORTING ON THE PROTEST OF COMPONENT EVALUATION LABORATORIES (CEL) AGAINST AWARD TO ANOTHER OFFEROR UNDER REQUEST FOR PROPOSALS (RFP) NO. N00251-67-R-0359, ISSUED AT PUGET SOUND NAVAL SHIPYARD.

THE RFP CALLED FOR A CENTRIFUGE SYSTEM, INCLUDING PLANS AND DRAWINGS FOR THE CENTRIFUGE AND ENCLOSURE THEREFOR. UNDER THE HEADING "BID EVALUATION FACTORS" IT PROVIDED THAT BIDDERS SHOULD SHOW EVIDENCE OF "BEING IN THE REGULAR BUSINESS OF DESIGNING AND MANUFACTURING CENTRIFUGE SYSTEMS AND EVIDENCE OF PREVIOUS PRODUCTION OF A COMPLETE CENTRIFUGE SYSTEM ENCOMPASSING DESIGN REQUIREMENTS SIMILAR TO THOSE SPECIFIED HEREIN. THE COMPLETE SYSTEM MUST HAVE BEEN APPROVED AND ACCEPTED BY A U.S. GOVERNMENT AGENCY WITHIN THE PAST FIVE YEARS.'

CEL PROTESTS THE REJECTION OF ITS PROPOSAL FOR NONCONFORMITY WITH THE ABOVE PROVISIONS.

THE FILE FORWARDED WITH YOUR DEPARTMENT'S REPORT CONTAINS AN UNSIGNED STATEMENT, PRESUMABLY PREPARED BY THE CONTRACTING OFFICER, CONSISTING OF (1) CHRONOLOGICAL STATEMENT OF FACTS; (2) DISCUSSION OF FACTS; AND (3) CONCLUSIONS AND RECOMMENDATIONS. PARAGRAPH 1 OF THE CONCLUSIONS READS AS FOLLOWS: THE STATEMENT AND DISCUSSION OF FACTS SHOW THAT (1) CEL DID NOT QUALIFY IN ACCORDANCE WITH OUR BID EVALUATION FACTORS, (2) THEY ARE NOT A REGULAR MANUFACTURER WITHIN THE MEANING OF THE WALSH-HEALEY ACT, AND (3) HAD CEL QUALIFIED UNDER THE RFP, THEIR CAPABILITY TO PERFORM THE CONTRACT SATISFACTORILY WAS DOUBTFUL IN VIEW OF PAST PERFORMANCE OF THEIR TESTING FACILITY AS WELL AS THE INTRINSIC WORTH OF THEIR PROPOSAL.

PARAGRAPH 6 OF THE "CHRONOLOGICAL STATEMENT OF FACTS" STATES THAT AFTER REVIEW OF THE PROPOSALS RECEIVED, THE PROCURING AGENCY NOTIFIED CEL BY TELEPHONE CALL OF MAY 22, 1967, THAT IT WAS DISQUALIFIED UNDER THE BID EVALUATION FACTOR AND THE WALSH-HEALEY PUBLIC CONTRACTS ACT, 41 U.S.C. 34- 45. PARAGRAPH 8 OF THE STATEMENT REFERS TO DISCUSSIONS WITH CEL "* * * CENTERED AROUND CEL'S QUALIFICATIONS AS A REGULAR MANUFACTURER WITHIN THE MEANING OF THE WALSH-HEALEY ACT * * *; " AND THE FORMAL RULING OF THE CONTRACTING OFFICER IN THE LETTER OF JUNE 6STATED HIS DETERMINATION THAT CEL DID NOT QUALIFY "* * * AS A REGULAR MANUFACTURER OF CENTRIFUGES WITHIN THE MEANING OF THE WALSH-HEALEY ACT * * *.'

NOWHERE IN THE CITED ACT IS THERE ANY REQUIREMENT THAT A CONTRACTOR BE A "REGULAR" MANUFACTURER, NOR DO THE REGULATIONS ISSUED BY THE SECRETARY OF LABOR THEREUNDER IMPOSE SUCH A REQUIREMENT. THE LANGUAGE OF THE STATUTE REQUIRES THAT THE CONTRACTOR STIPULATE THAT HE IS "* * * THE MANUFACTURER OF OR A REGULAR DEALER IN THE MATERIALS, SUPPLIES, ARTICLES, OR EQUIPMENT TO BE MANUFACTURED * * *.' CIRCULAR LETTER NO. 1-58 ISSUED BY THE DEPARTMENT OF LABOR ON JANUARY 24, 1958, STATES THAT A BIDDER, TO QUALIFY AS A MANUFACTURER, MUST SHOW BEFORE AWARD THAT HE IS (1) AN ESTABLISHED MANUFACTURER OF THE PARTICULAR GOODS OR GOODS OF THE GENERAL CHARACTER SOUGHT BY THE GOVERNMENT OR (2) IF HE IS NEWLY ENTERING INTO SUCH MANUFACTURING ACTIVITY THAT HE HAS MADE ALL NECESSARY PRIOR ARRANGEMENTS FOR SPACE, EQUIPMENT AND PERSONNEL TO PERFORM THE CONTRACT OPERATIONS. SEE ALSO THE LAST SENTENCE OF ARMED SERVICES PROCUREMENT REGULATION 12- 603. IN 39 COMP. GEN. 254 WE CONSIDERED THESE PROVISIONS AND STATED THAT THE ACT DOES NOT REQUIRE A BIDDER TO STIPULATE THAT HE HAS PREVIOUSLY MANUFACTURED THE ITEM BID UPON, BUT ONLY THAT HE WILL BE THE MANUFACTURER OF THE ITEM.

IN ADDITION TO MISSTATING THE REQUIREMENTS OF THE ACT, THE CONTRACTING OFFICER APPARENTLY IGNORED THE MANDATE OF ASPR 12-604 (A), WHICH PROVIDES THAT "WHEN THE ELIGIBILITY OF A BIDDER OR OFFEROR IS CHALLENGED BEFORE AWARD, IT SHOULD BE TREATED IN A MANNER SIMILAR TO A PROTEST BEFORE AWARD * * *. THE PROCURING CONTRACTING OFFICER SHOULD MAKE AN INITIAL DETERMINATION AND SHOULD PROCESS THE PROTEST IN ACCORDANCE WITH APPLICABLE PROCEDURES FOR SUBMISSION TO THE DEPARTMENT OF LABOR FOR A FINAL DETERMINATION.' ALTHOUGH IT MIGHT BE ARGUED THAT THE QUOTED LANGUAGE IS APPLICABLE ONLY WHERE ELIGIBILITY IS CHALLENGED BY ANOTHER BIDDER, IT APPEARS FROM THE SECOND PARAGRAPH OF THE REPORT FROM THE DEPUTY COMMANDER, PURCHASING, NAVAL SUPPLY SYSTEMS COMMAND, THAT THE COMMAND CONSIDERS THE PROVISIONS APPLICABLE TO THE SITUATION IN THIS CASE. THAT PARAGRAPH STATES:

BECAUSE THE PROTEST WAS NOT LODGED UNTIL AFTER AWARD, NO REFERRAL WAS MADE TO THE DEPARTMENT OF LABOR FOR A FINAL DETERMINATION OF ELIGIBILITY UNDER THE WALSH-HEALEY PUBLIC CONTRACTS ACT (ASPR 12-604).

WHILE WE AGREE WITH THIS INTERPRETATION OF THE ASPR WE ARE UNABLE TO FIND A BASIS FOR THE FACTUAL STATEMENT THAT THE PROTEST WAS NOT LODGED UNTIL AFTER AWARD, SINCE THE RECORD INDICATES THAT IMMEDIATELY UPON RECEIPT OF TELEPHONE ADVICE OF THE PROPOSED REJECTION OF ITS PROPOSAL, ON MAY 22, 1967, CEL WIRED THE PROCUREMENT AGENT AS FOLLOWS:* * * IN RESPONSE TO YOUR TELECON THIS DATE, WE WOULD LIKE TO ENTER AN OBJECTION TO BEING DISQUALIFIED ON SUBJECT RFP, BECAUSE WE ARE NOT "REGULAR BUSINESS" OF CENTRIFUGE MANUFACTURING. WOULD APPRECIATE YOUR ADVICE AS TO PROPER METHOD OF REGISTERING AN OBJECTION. IF THIS TELEGRAM IS NOT SUFFICIENT. WE WOULD ALSO APPRECIATE FACING AN AUDIENCE WITH APPROPRIATE PERSONS AT KEYPORT AT YOUR CONVENIENCE. PLEASE ADVISE IF THIS SHOULD BE HANDLED THROUGH YOU, OF IF SOMEONE ELSE WOULD BE APPOINTED TO REFEREE IN THIS MATTER. * * *

PARAGRAPHS 7 THROUGH 10 OF THE "CHRONOLOGICAL STATEMENT" STATE THE SUBSEQUENT EVENTS AS OLLOWS: ON MAY 25 THE SMALL BUSINESS ADMINISTRATION WAS ADVISED THAT CEL WAS NOT CONSIDERED A MANUFACTURER, AND THAT EVIDENCE WAS NOT SUBMITTED THEY HAD MANUFACTURED AN ITEM FOR THE GOVERNMENT WITHIN 5 YEARS (AS REQUIRED BY THE RFP); ON MAY 31 A CONFERENCE WAS HELD, FOLLOWING NUMEROUS TELEPHONE CONVERSATIONS WITH CEL, DISCUSSION CENTERING AROUND CEL'S QUALIFICATIONS AS A ,* * * REGULAR MANUFACTURER WITHIN THE MEANING OF THE WALSH-HEALEY ACT * * *," AND ADDITIONALLY WHETHER IT MET THE STATED REQUIREMENT OF MANUFACTURE OF A PRODUCTION UNIT FOR THE GOVERNMENT WITHIN 5 YEARS; ON JUNE 3 CEL BY TELEGRAM REQUESTED A WRITTEN DECISION BY THE CONTRACTING OFFICER ON THE CONTROVERTED QUESTION; ON JUNE 6 THE CONTRACTING OFFICER CONFIRMED BY LETTER HIS PREVIOUS CONCLUSIONS, AND ON JUNE 7 AWARD WAS MADE TO ANOTHER OFFEROR, AT A PRICE STATED BY CEL TO HAVE BEEN 50 PERCENT HIGHER THAN THE PRICE PROPOSED BY IT.

AS WE READ IT, CEL'S TELEGRAM OF MAY 22 SPECIFICALLY CHALLENGED THE CONTRACTING OFFICER'S POSITION AND PUT SQUARELY IN ISSUE THE QUESTION OF ITS ELIGIBILITY UNDER THE WALSH-HEALEY ACT. THE CONTRACTING OFFICER'S SUBSEQUENT DECISION ON THAT ISSUE SHOULD THEN, UNDER ASPR 12 604, HAVE BEEN TREATED AS HIS "INITIAL DETERMINATION" FOR PROCESSING TO THE SECRETARY OF LABOR IN ACCORDANCE WITH THE ASPR. EVEN IF IT WERE CONSIDERED THAT THIS REGULATION DID NOT APPLY, THE TELEGRAM CLEARLY REQUESTED ADVICE AS TO HOW AND TO WHOM THE OBJECTION TO THE CONTRACTING OFFICER'S POSITION SHOULD BE MADE, AND WE BELIEVE IT WAS INCUMBENT UPON THE CONTRACTING OFFICER TO ADVISE CEL OF ITS RIGHT TO REQUEST REVIEW BY THE SECRETARY OF LABOR, IF THE CONTRACTING OFFICER DID NOT INTEND TO SUBMIT THE QUESTION TO THAT OFFICIAL.

THE REFERENCE TO THE ADVICE GIVEN TO THE SMALL BUSINESS ADMINISTRATION INDICATES THAT THE CONTRACTING OFFICER RECOGNIZED THE AUTHORITY OF THAT AGENCY UNDER SECTION 2 (8) OF THE SMALL BUSINESS ACT OF 1958, PUBLIC LAW 85-536, 15 U.S.C. 631, TO CONSIDER THE CAPABILITIES OF THE OFFEROR IN THE EVENT IT WAS DETERMINED THAT ITS PROPOSAL SHOULD BE REJECTED FOR REASONS INVOLVING CAPACITY OR CREDIT. IT ALSO APPEARS TO INDICATE THAT THE CONTRACTING OFFICER DID NOT CONSIDER THE PROCUREMENT TO BE WITHIN ANY OF THE EXCEPTIONS ENUMERATED IN ASPR 1-705.4 TO THE CERTIFICATE OF COMPETENCY PROCEDURE THEREIN PRESCRIBED. TO THE EXTENT THAT THE QUALIFICATIONS STATED IN THE RFP EXCEEDED THE MANUFACTURER OR REGULAR DEALER REQUIREMENTS OF THE WALSH HEALEY ACT, AS THEY DID IN REQUIRING EVIDENCE OF PREVIOUS PRODUCTION OF A COMPLETE CENTRIFUGE SYSTEM, AND APPROVAL AND ACCEPTANCE OF SUCH A SYSTEM BY A GOVERNMENT AGENCY WITHIN 5 YEARS, THEY CLEARLY IMPOSED REQUIREMENTS INVOLVING "CAPACITY" WITHIN THE MEANING OF THE SMALL BUSINESS ACT. SEE 40 COMP. GEN. 106, THE SYLLABUS OF WHICH IS AS FOLLOWS: EXPERIENCE QUALIFICATIONS SPECIFICALLY STATED IN AN INVITATION FOR THE PROCUREMENT OF WATER PURIFICATION EQUIPMENT BY A MILITARY DEPARTMENT ARE MATTERS OF RESPONSIBILITY INCLUDED IN THE DEFINITION OF "CAPACITY" IN SECTION 1-705.6 (A) OF THE ARMED SERVICES PROCUREMENT REGULATION, WHICH REFERS TO THE STATUTORY AUTHORITY OF THE SMALL BUSINESS ADMINISTRATION TO CERTIFY THE COMPETENCY OF SMALL BUSINESS CONCERNS, AND THE INCLUSION IN THE INVITATION OF SPECIFIC EXPERIENCE REQUIREMENTS CANNOT DEFEAT THE STATUTORY AUTHORITY VESTED IN THE SMALL BUSINESS ADMINISTRATION TO MAKE DETERMINATIONS OF THE CAPACITY AND CREDIT OF IDDERS; THEREFORE, THE DETERMINATION OF THE EXPERIENCE QUALIFICATIONS OF SEVERAL SMALL BUSINESS CONCERNS SUBMITTING BIDS FOR THE WATER PURIFICATION EQUIPMENT MUST BE REFERRED TO THE SMALL BUSINESS ADMINISTRATION.

IN PARAGRAPH 7 OF THE CHRONOLOGICAL STATEMENT IT IS STATED "NO FURTHER JUSTIFICATION FROM SBA WAS RECEIVED.' IN THE CIRCUMSTANCES WE FIND NO BASIS FOR ATTACHING ANY SIGNIFICANCE TO THIS FACT. SINCE THE ADVICE FURNISHED TO SBA INCLUDED THE CONTRACTING OFFICER'S DETERMINATION THAT CEL WAS NOT A MANUFACTURER, A MATTER WITHIN THE FINAL AUTHORITY OF THE SECRETARY OF LABOR AND NOT SUBJECT TO REVIEW OR DETERMINATION BY THE SMALL BUSINESS ADMINISTRATION (SEE 37 COMP. GEN. 676), THERE WAS NO BASIS FOR INSTITUTION BY THAT AGENCY OF THE COC PROCEDURE AND ITS FAILURE TO DO SO OR TO ISSUE A COC CANNOT BE CONSTRUED AS AGREEMENT WITH OR ACQUIESCENCE IN THE CONTRACTING OFFICER'S CONCLUSIONS AS TO CEL'S CAPACITY.

ON THE BASIS OF THE ABOVE, WE CONCLUDE THAT OF THE THREE NUMBERED CONCLUSIONS STATED IN PARAGRAPH 1 OF THE "CONCLUSIONS AND RECOMMENDATIONS" FURNISHED WITH THE REPORT OF THE SUPPLY SYSTEMS COMMAND, (1) AND (3) WERE BOTH BEYOND THE AUTHORITY OF THE CONTRACTING OFFICER TO ACT ON WITHOUT REFERRAL TO THE SMALL BUSINESS ADMINISTRATION, AND (2) WAS BASED UPON A MISSTATEMENT OF THE TERMS OF THE WALSH-HEALEY ACT AND SHOULD NOT HAVE BEEN ACTED ON WITHOUT EITHER A REFERRAL TO THE SECRETARY OF LABOR OR ADVICE TO CEL OF ITS RIGHT TO REQUEST REVIEW BY HIM.

INASMUCH AS WE WERE NOT FURNISHED THE ADMINISTRATIVE REPORT UNTIL MORE THAN 2 MONTHS AFTER THE CONTRACT AWARD, AND THE CONTRACTOR APPARENTLY WAS PERMITTED TO PROCEED WITH PERFORMANCE, WHICH WAS TO BE COMPLETED IN 8 MONTHS, ACTION BY EITHER LABOR OR SBA TO DETERMINE THE MERITS OF THE PROTEST WOULD NOT THEN HAVE BEEN, AND CERTAINLY WOULD NOT NOW BE, IN THE INTEREST OF THE GOVERNMENT. WE THEREFORE ARE OBLIGED TO DENY THE CEL PROTEST WITHOUT REFERENCE TO ITS MERITS. WE HOPE, HOWEVER, THAT THIS DECISION WILL SERVE TO POINT UP THE DESIRABILITY OF CORRECTIVE ACTION TO AVOID SIMILAR ERRORS BY YOUR PROCUREMENT OFFICIALS IN THE FUTURE.