B-162095, OCT. 30, 1967

B-162095, OCT. 30, 1967

BIDDERS - RESPONSIBILITY - SMALL BUSINESS DECISION TO S.F. BURST AND CO., INC. CONCERNING PROTEST AGAINST REJECTION OF BID IN RESPONSE TO SOLICITATION BY DEFENSE SUPPLY AGENCY. A LOW BIDDER WHO HAD BID REJECTED AFTER PRE AWARD SAMPLES OF MEDICINAL DID NOT COMPLY WITH UNIFORM STANDARDS REQUIRED AND WHO DID NOT HAVE MATTER OF RESPONSIBILITY REFERRED TO SBA BECAUSE OF URGENCY DUE TO CRITICAL STOCK SUPPLY MUST HAVE DETERMINATION OF NONRESPONSIBILITY UPHELD IN ABSENCE OF SHOWING THAT DETERMINATION WAS NOT SUPPORTED OR THAT IT WAS ARBITRARY. THE DETERMINATION OF URGENCY IS ALSO SUPPORTED BY THE HISTORY OF PRIOR PROCUREMENTS AND PROPERLY DOCUMENTED.

TO S.F. DURST AND COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTERS DATED JULY 20 AND 28, 1967, AND ENCLOSURES, IN WHICH YOU PROTEST THE AWARD OF A CONTRACT TO MEAD JOHNSON AND COMPANY UNDER REQUEST FOR PROPOSALS (RFP) NO. DSA 120-67-R 3767, ISSUED BY THE DEFENSE SUPPLY AGENCY (DSA).

YOUR PROTEST IS MADE ESSENTIALLY ON THE GROUNDS THAT THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY IS ERRONEOUS; THAT CONTRARY TO GOVERNMENT TEST REPORTS YOUR PRE-AWARD SAMPLES DID COMPLY WITH PH REQUIREMENTS OF THE SPECIFICATIONS; AND THAT THE CONTRACTING OFFICER'S FAILURE TO SUBMIT THE QUESTION OF YOUR COMPETENCY TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR DETERMINATION WAS IMPROPER.

THE SOLICITATION WAS ISSUED ON APRIL 25, 1967, AND REQUESTED PROPOSALS FOR SUPPLYING SIX GOVERNMENT INSTALLATIONS WITH A TOTAL OF 56,160 PACKAGES OF ACETAMINOPHEN SOLUTION, 10 PERCENT, 15CC STOCK NO. 6505-754-0381 (A LIQUID ANALGESIC AND ANTIPYRETIC FOR USE IN INFANTS AND CHILDREN). DELIVERY AT FIVE DESTINATIONS WAS TO BE COMPLETED IN TWO EQUAL INSTALLMENTS, NO LATER THAN OCTOBER 30, 1967, AND NOVEMBER 30, 1967, RESPECTIVELY. AS TO THE SIXTH DESTINATION, COMPLETE DELIVERY WAS REQUIRED BY OCTOBER 30, 1967. THE RFP ALSO PROVIDED THAT OFFERORS WHO HAD NOT PREVIOUSLY FURNISHED SUCH SUPPLIES TO THE GOVERNMENT COULD REASONABLY ANTICIPATE A REQUEST FOR FURNISHING PREAWARD SAMPLES, AND THAT THE GOVERNMENT RESERVED THE RIGHT TO REJECT THE OFFER OF ANY FIRM FAILING TO FURNISH THE SAMPLES OR WHOSE SAMPLES DID NOT CONFORM TO THE CONTRACT SPECIFICATIONS.

THE CONTRACTING OFFICER HAS REPORTED THAT YOUR FIRM SUBMITTED THE LOWEST PROPOSAL AT A UNIT PRICE OF $ .36, AND DESIGNATED REINE PHARMACEUTICAL CORPORATION AS THE PRINCIPAL MANUFACTURER OF THE SUPPLIES TO BE FURNISHED. BASED ON THE FINDINGS OF A PRE-AWARD SURVEY TEAM THAT YOUR SUPPLIER DID NOT MEASURE UP TO ADEQUATE STANDARDS OF HOUSEKEEPING AND QUALITY CONTROL, AND ON THE FAILURE OF THE PRE-AWARD SAMPLES SUBMITTED BY REINE AND TESTED IN A GOVERNMENT LABORATORY TO CONFORM TO APPLICABLE SPECIFICATIONS, THE CONTRACTING OFFICER DETERMINED ON JULY 3, 1967, THAT YOU WERE NOT RESPONSIBLE FOR PURPOSES OF THIS PROCUREMENT. AWARD WAS MADE TO THE SECOND LOW OFFEROR ON JULY 3 WITHOUT REFERRING THE QUESTION OF YOUR RESPONSIBILITY TO THE SMALL BUSINESS ADMINISTRATION FOR POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY UPON A DETERMINATION BY THE CONTRACTING OFFICER THAT A FURTHER DELAY WOULD JEOPARDIZE THE REQUIRED DELIVERY SCHEDULE AND THEREFORE WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT.

IN YOUR LETTER TO THIS OFFICE DATED JULY 20 YOU HAVE TAKEN THE POSITION THAT THE CONTRACTING OFFICER'S DETERMINATION MIS-STATED THE PRE-AWARD SURVEY REPORT, ALLEGING THAT THE GOVERNMENT REPRESENTATIVES WHO SURVEYED YOUR SUPPLIER'S FACILITIES ON JUNE 15 AND 16 WERE OF THE OPINION THAT THE COMPANY MET REASONABLY OBJECTIVE STANDARDS OF HOUSEKEEPING AND QUALITY CONTROL EXCEPT THAT SOME MINOR CHANGES HAD BEEN REQUESTED BY THE INSPECTORS. IN ADDITION YOU CONTEST THE UNFAVORABLE RESULTS OF TESTS CONDUCTED BY THE GOVERNMENT ON SAMPLES SUBMITTED BY REINE AFTER BID OPENING. IN THIS REGARD YOU HAVE FORWARDED TO OUR OFFICE A COPY OF A REPORT OF AN INDEPENDENT EVALUATION OF SIMILAR SAMPLES CONDUCTED BY FITELSON LABORATORIES, INC., DATED JULY 24, 1967, INDICATING DIFFERENT RESULTS IN COMPARISON TO THE GOVERNMENT'S TEST REPORT.

BY LETTER OF JUNE 19 YOUR SUPPLIER INFORMED THE GOVERNMENT SURVEYING ACTIVITY OF VARIOUS REMEDIAL EFFORTS INITIATED BY IT AS A RESULT OF THE SURVEY TEAM'S STATEMENTS DURING THE INSPECTION AND, ALSO, THAT ALL OTHER MINOR DISCREPANCIES HAD BEEN CORRECTED. CONTRARY TO YOUR BELIEF, THE RECORD IN THIS CASE INDICATES THAT THE PRE-AWARD SURVEY TEAM DISCOVERED THREE DEFECTS WHICH WERE CONSIDERED TO BE READILY CORRECTABLE AND MANY OTHERS WHICH WOULD REQUIRE YOUR SUPPLIER TO INSTITUTE MAJOR CORRECTIVE MEASURES, ALL OF WHICH HAVE SINCE BEEN BROUGHT TO YOUR ATTENTION. THE SURVEY REPORT CONCLUDED THAT YOUR SUPPLIER WAS NOT QUALIFIED TO PRODUCE THIS ITEM AND THE FOLLOWING SUMMARY OF ITS FINDINGS WAS SUBMITTED TO THE CONTRACTING OFFICER: "1. READILY CORRECTABLE DEFECTS

"A. PRODUCTION PERSONNEL RECEIVE NO PRE-EMPLOYMENT PHYSICAL NOR ARE THEY PERIODICALLY EXAMINED FOR COMMUNICABLE DISEASES.

"B. RAW MATERIALS NOT ADEQUATELY TESTED TO DETERMINE COMPLIANCE WITH SPECIFICATIONS, AND NOT TESTED IN ACCORDANCE WITH COMPANY'S OWN STANDARDS.

"C. NO EXHAUST SYSTEM IN THE PRODUCTION AREAS FOR ELIMINATION OF AIR- BORNE PARTICLES. THUS THERE IS A POTENTIAL FOR CROSS EXAMINATION. "2. DISCREPANCIES REQUIRING THE COMPANY TO INSTITUTE MAJOR CORRECTIVE MEASURES:

"THE DISCREPANCIES NOTED DURING THE SURVEY REVEALED A LACK OF ADEQUATE PERSONNEL TRAINING AND LACK OF DEFINITIVE QUALITY CONTROL AND MANUFACTURING PROCEDURES.

"A. THE FIRM PERMITTED USE OF MATERIAL BEFORE QUALITY CONTROL RELEASE. THE COMPANY SHOULD REVIEW THEIR PROCEDURES AND METHODS TO ASCERTAIN HOW MATERIAL WAS RELEASED WITHOUT APPROVAL AND THE DETAILS OF THE PROCEDURES ESTABLISHED TO ASSURE AN ACCEPTABLE SYSTEM.

"B. MATERIAL WAS LABELED AS RELEASED PRIOR TO THE DATE OF RELEASE BY THE COMPANY'S LABORATORY:

"C. ANALYTICAL LABORATORY RECORD SHOWED THAT ASCORBIC ACID, USP,LOT 17, WAS RELEASED 6/15/67 ASSAYED AT 100.9 PERCENT. THE USP XVII, PAGE 2 STATES -WHERE A MAXIMUM TOLERANCE IS NOT SPECIFIED, THE ASSAY SHALL SHOW THE EQUIVALENT OF NOT MORE THAN 100.5 PERCENT....- THIS ITEM WAS IN NONCOMPLIANCE WITH THE USP, ACCORDING TO THE RESULTS. YET IT WAS APPROVED FOR USE.

"D. WHEN INCOMING RAW MATERIAL IS SAMPLED FOR TESTING, THERE IS NO INDICATION ON THE CONTAINER TO DENOTE THE SOURCE CONTAINER FROM WHICH THE SAMPLE WAS WITHDRAWN.

"E. RAW MATERIAL LOG IS INCOMPLETE AND INACCURATE.

"F. MANUFACTURING INSTRUCTIONS ON BATCH PRODUCTION SHEETS ARE NOT INITIALED OR DATED.

"G. CONTAINER OF PROPYLENE GLYCOL, RUGER CO., WAS LOCATED IN THE QUARANTINE AREA WITHOUT AN ASSIGNED LOT NUMBER -9-. OTHER ITEMS WITHOUT THE ASSIGNED LOT NUMBERS ANNOTATED ON THE CONTAINERS WERE SODIUM CYCLAMATE AND SUGAR.

"H. INADEQUATE LABELING OF CONTAINERS.

"I. THE FIRM HAS NO DOCUMENTED PROCEDURE FOR RECEIVING AND INSPECTING INCOMING MATERIAL.

"J. QUARANTINE AREA COULD BE ENTERED THROUGH TWO SEPARATE LOCATIONS...NEITHER HAD BEEN LOCKED FOR CONTROL PURPOSES.

"K. IMPROPER STORAGE OF UNTESTED RAW MATERIAL.' THE RECORD IN THIS CASE INDICATES THAT AFTER RECEIPT OF REINE'S LETTER OF JUNE 19 WHICH INDICATED THAT THE CORRECTIVE MEASURES INSTITUTED AT THAT TIME WERE LIMITED TO THOSE DEFECTS CONSIDERED TO BE READILY CORRECTABLE, THE CONTRACTING OFFICER WAS ADVISED BY GOVERNMENT TECHNICAL PERSONNEL THAT THE CORRECTIVE ACTION TAKEN WAS LESS THAN WHAT WAS CONSIDERED NECESSARY.

WITH REGARD TO THE ACCEPTABILITY OF YOUR SAMPLES THE CONTRACTING OFFICER HAS REPORTED THAT PRIOR TO AWARD HE HAD RECEIVED ORAL ADVICE FROM GOVERNMENT PERSONNEL THAT YOUR SAMPLES DID NOT MEET THE CRITICAL PH REQUIREMENT OF THE SPECIFICATIONS. HOWEVER, THE CONTRACTING OFFICER ALSO WAS IN POSSESSION OF A REPORT BY FITELSON LABORATORIES STATING THAT ITS TESTS SHOWED COMPLIANCE WITH THE SPECIFICATION PH REQUIREMENTS. IN THIS REGARD THE CONTRACTING OFFICER HAS TAKEN THE POSITION THAT EACH LABORATORY UTILIZED TEST METHODS WHICH PRODUCED ACCURATE RESULTS AND THEREFORE THE DIFFERENCES CREATED A REASONABLE DOUBT AS TO THE CAPABILITY OF REINE TO PRODUCE A STABLE, CONSISTENTLY UNIFORM PRODUCT.

ON THE BASIS OF THE ABOVE FACTS AND PURSUANT TO THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-902, THE CONTRACTING OFFICER DETERMINED ON JULY 3, 1967, THAT YOUR FIRM WAS NOT A RESPONSIBLE OFFEROR FOR PURPOSES OF THIS PROCUREMENT.

OUR OFFICE HAS CONSISTENTLY HELD THAT THE DETERMINATION OF A CONTRACTOR'S QUALIFICATIONS IS PRIMARILY THE FUNCTION OF THE CONTRACTING AGENCY, INVOLVING THE EXERCISE OF A CONSIDERABLE AMOUNT 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. IN THE PRESENT CASE WE FIND NO BASIS FOR HOLDING THAT THE DETERMINATION OF NONRESPONSIBILITY BY THE CONTRACTING OFFICER WAS NOT SUPPORTED BY THE EVIDENCE OF RECORD EXISTING AT THAT TIME, OR THAT IT WAS ARBITRARY OR CAPRICIOUS.

CONCERNING YOUR OBJECTION TO THE CONTRACTING OFFICER'S DETERMINATION OF URGENCY AND REFUSAL TO SUBMIT THE QUESTION OF REINE'S COMPETENCY TO THE SBA FOR DETERMINATION THE CONTRACTING OFFICER HAS REPORTED TO THIS OFFICE THAT HE:

"* * * REQUESTED THE COGNIZANT COMMODITY MANAGERS, ON THE SAME DATE (JUNE 29, 1967), TO REVIEW THE DELIVERY SCHEDULE REQUIREMENTS STATED IN THE SOLICITATION. HE WAS ADVISED THAT THE 30 OCTOBER AND 30 NOVEMBER REQUIRED DELIVERY DATES WERE FIRM AND COULD NOT BE EXTENDED. A DISCUSSION TOOK PLACE AS TO THE PRODUCTION LEAD TIME REQUIRED TO ASSURE DELIVERY IN ACCORDANCE WITH THE SOLICITATION REQUIREMENTS. IT WAS GENERALLY ACKNOWLEDGED THAT THE DELIVERY SCHEDULE COULD BE MET ONLY IF AWARD COULD BE MADE WITHOUT DELAY. THE COMMODITY MANAGERS ADVISED THAT AN UPGRADING IN PRIORITY OF THE PURCHASE REQUEST WOULD BE REQUIRED IN THE EVENT OF A DELAY, SINCE THEIR RECORDS INDICATED THAT THE STOCK POSITION OF THE ITEM IN QUESTION WOULD BECOME CRITICAL BY THE END OF OCTOBER IF DELIVERIES WERE NOT MADE AS SCHEDULED AND STOCK ISSUES CONTINUED AT THE THEN CURRENT RATE.

"* * * FACED WITH A POSSIBLE DELAY OF AWARD TO 25 JULY 1967 (15 WORKING DAYS) IF THE MATTER WERE REFERRED TO SBA, THE CONTRACTING OFFICER CONSIDERED THE POSSIBILITY OF A CERTIFICATE OF URGENCY AND AN IMMEDIATE AWARD TO MEAD JOHNSON. AS SHOWN ON THE FACE PAGE OF ITS OFFER, MEAD JOHNSON HAD ALLOWED 60 CALENDAR DAYS AFTER OPENING FOR THE ACCEPTANCE OF ITS OFFER TO BIND DELIVERIES AT THE TIMES SPECIFIED IN THE SCHEDULE. IS THIS OFFER LIMITATION, REQUIRING ACCEPTANCE BY 9 JULY 1967, WHICH WAS REFERRED TO IN THE JULY 19, 1967 LETTER TO DURST AS A -....STATEMENT FROM MEAD JOHNSON, THE SECOND LOW BIDDER, THAT THE AWARD MUST BE MADE BY 9 JULY TO INSURE THE REQUESTED DELIVERIES IN OCTOBER AND NOVEMBER.- THE CONTRACTING OFFICER DID NOT REQUEST AN EXTENSION OF THE MEAD JOHNSON ACCEPTANCE TIME. A REVIEW OF THE PRIOR PROCUREMENT HISTORY FOR THE ITEM SHOWED THAT THE ACTUAL LEAD TIMES (DIFFERENCE BETWEEN AWARD DATE AND DELIVERY DATE) IN PRIOR AWARDS TO MCNEIL LABORATORIES, THE ONLY PREVIOUS SUPPIER, RANGED FROM 2 TO 9 MONTHS. THE CONTRACTING OFFICER DETERMINED THAT AN ACTUAL PRODUCTION LEAD TIME OF 5 MONTHS FOR DELIVERY OF THE ENTIRE QUANTITY WAS REASONABLE BOTH FROM THE STANDPOINT OF THE PROCUREMENT HISTORY AS WELL AS FROM THE FACT THAT MEAD JOHNSON WAS A NEW SUPPLIER AND WOULD REQUIRE ALL THE LEAD TIME POSSIBLE. FOLLOWING THIS DETERMINATION AND IN VIEW OF THE CRITICAL STOCK POSITION WHICH WOULD RESULT IF OCTOBER DELIVERIES WERE NOT MET, THE CONTRACTING OFFICER CONCLUDED THAT THE GOVERNMENT COULD NOT AFFORD THE DELAY INCIDENT TO A REFERRAL OF THE MATTER TO THE SMALL BUSINESS ADMINISTRATION AND PREPARED THE CERTIFICATE OF URGENCY. AWARD WAS MADE TO MEAD JOHNSON ON 3 JULY 1967 (NOT 7 JULY 1967, AS ERRONEOUSLY STATED IN ENCL 12) AND A COPY OF THE CERTIFICATE OF URGENCY WAS PROMPTLY FORWARDED TO THE SBA.'

ASPR 1-705.4 PROVIDES THAT WHEN A BID OR PROPOSAL OF A SMALL BUSINESS CONCERN IS TO BE REJECTED SOLELY BECAUSE THE CONTRACTING OFFICER HAS DETERMINED THAT THE CONCERN IS NONRESPONSIBLE AS TO CAPACITY OR CREDIT, THE MATTER SHALL BE REFERRED TO SBA AND AWARD SHALL NOT BE MADE UNTIL SBA RENDERS ITS DECISION OR UNTIL 15 WORKING DAYS HAVE ELAPSED, WHICHEVER IS EARLIER. HOWEVER, ASPR 1-705.4 (C) (IV) PROVIDES THAT A REFERRAL NEED NOT BE MADE TO SBA IF THE CONTRACTING OFFICER CERTIFIES IN WRITING THAT THE AWARD MUST BE MADE WITHOUT DELAY, INCLUDES SUCH CERTIFICATE AND SUPPORTING DOCUMENTATION IN THE CONTRACT FILE, AND PROMPTLY FURNISHES A COPY TO THE SBA REPRESENTATIVE.

ALTHOUGH IT IS YOUR CONTENTION THAT OFFERORS COULD MEET THE REQUIRED DELIVERY DATES EVEN IF AN AWARD HAD BEEN POSTPONED UNTIL SEPTEMBER 1, WE ARE REQUIRED TO ACCEPT THE GOVERNMENT'S POSITION IN THIS MATTER SINCE IT APPEARS TO BE REASONABLY SUPPORTED BY THE HISTORY OF PRIOR PROCUREMENTS, AND YOUR STATEMENT DOES NOT APPEAR TO BE BASED UPON ANY INQUIRY OR INFORMATION CONCERNING THE CAPABILITIES OF ANY OTHER BIDDERS. INDICATED ABOVE, IT APPEARS THAT A CRITICAL LACK OF THE PROCUREMENT ITEM COULD HAVE RESULTED FROM A FURTHER DELAY OF THE AWARD AND, THEREFORE, WE CANNOT SAY THAT THE CONTRACTING OFFICER'S DECISION TO MAKE AN AWARD WITHOUT INCURRING THE DELAY INCIDENT TO AN SBA REFERRAL WAS NOT JUSTIFIED OR REASONABLE. SEE B-161364, AUGUST 18, 1967.

IN THE CIRCUMSTANCES, WE FIND NO ADEQUATE LEGAL BASIS FOR OBJECTING TO THE ACTION TAKEN BY THE CONTRACTING OFFICER IN REJECTING YOUR LOW OFFER AND IN MAKING THE AWARD TO THE NEXT LOW RESPONSIVE, RESPONSIBLE OFFEROR.