B-165884, MAY 28, 1969

B-165884: May 28, 1969

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ESQUIRE: FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 27. THE PROCUREMENT COVERED BY THE IFB WAS A REPURCHASE OF THREE STATIC FREQUENCY CONVERTERS. N00600-67-C-1465 WITH ESSEX FOR THE SAME ITEMS BECAUSE OF ESSEX'S FAILURE TO MEET THE DELIVERY SCHEDULE FOR REASONS WHICH WERE FOUND NOT EXCUSABLE WITHIN THE MEANING OF THE DEFAULT PROVISIONS OF THAT CONTRACT. ELEVEN BIDS WERE RECEIVED AND OPENED AS SCHEDULED ON SEPTEMBER 13. ALL 11 BIDS WERE DETERMINED TO BE RESPONSIVE. WAS DISQUALIFIED AND THE THIRD LOW BIDDER. WAS ALSO FOUND NONRESPONSIBLE. WAS DECLARED NONRESPONSIBLE BY THE CONTRACTING OFFICER WITHIN THE MEANING OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-902 FOR DEMONSTRATED LACK OF ZEAL AND PERSERVERANCE IN FULFILLING CONTRACTUAL OBLIGATIONS BASED ON ITS RECORD OF UNSATISFACTORY PERFORMANCE UNDER THE ORIGINAL CONTRACT TERMINATED FOR DEFAULT.

B-165884, MAY 28, 1969

TO FRED ISRAEL, ESQUIRE:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF DECEMBER 27, 1968, AND SUBSEQUENT CORRESPONDENCE, PROTESTING ON BEHALF OF ESSEX ELECTRO ENGINEERS, INC. (ESSEX), AGAINST THE AWARD OF A CONTRACT TO AVTEL CORPORATION, DIVISION OF AIRTRONICS, INC. (AVTEL), UNDER INVITATION FOR BIDS (IFB) NO. N00600-69-B-0073, ISSUED ON AUGUST 23, 1968, BY THE U.S. NAVY PURCHASING OFFICE, WASHINGTON, D.C.

THE PROCUREMENT COVERED BY THE IFB WAS A REPURCHASE OF THREE STATIC FREQUENCY CONVERTERS, 400 CYCLE, FOLLOWING A DEFAULT TERMINATION ON JULY 25, 1968, OF CONTRACT NO. N00600-67-C-1465 WITH ESSEX FOR THE SAME ITEMS BECAUSE OF ESSEX'S FAILURE TO MEET THE DELIVERY SCHEDULE FOR REASONS WHICH WERE FOUND NOT EXCUSABLE WITHIN THE MEANING OF THE DEFAULT PROVISIONS OF THAT CONTRACT.

ELEVEN BIDS WERE RECEIVED AND OPENED AS SCHEDULED ON SEPTEMBER 13, 1968, AND ALL 11 BIDS WERE DETERMINED TO BE RESPONSIVE. AFTER PREAWARD SURVEY, THE FIRST LOW BIDDER, APPLIED ELECTRONICS CORPORATION OF NEW JERSEY, WAS DISQUALIFIED AND THE THIRD LOW BIDDER, THE LOUIS ALLIS COMPANY, WAS ALSO FOUND NONRESPONSIBLE. ESSEX, THE SECOND LOW BIDDER, WAS DECLARED NONRESPONSIBLE BY THE CONTRACTING OFFICER WITHIN THE MEANING OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-902 FOR DEMONSTRATED LACK OF ZEAL AND PERSERVERANCE IN FULFILLING CONTRACTUAL OBLIGATIONS BASED ON ITS RECORD OF UNSATISFACTORY PERFORMANCE UNDER THE ORIGINAL CONTRACT TERMINATED FOR DEFAULT. ACCORDINGLY, REPLACEMENT CONTRACT NO. N00600-69-C -0427 WAS AWARDED ON DECEMBER 11, 1968, TO AVTEL, THE LOWEST RESPONSIVE, RESPONSIBLE BIDDER IN THE AMOUNT OF $67,455, WHICH WAS $45 LESS THAN THE TOTAL AMOUNT OF THE DEFAULTED CONTRACT HELD BY ESSEX.

THE INSTANT PROTEST PRESENTS A PRELIMINARY QUESTION AS TO WHETHER A DEFAULTED CONTRACTOR HAS A RIGHT TO BID ON, AND BE AWARDED, A COMPLETION CONTRACT. THE TWO MAIN PURPOSES OF A REPURCHASE CONTRACT ARE TO OBTAIN THE NEEDED SUPPLIES OR SERVICES SOUGHT BY THE GOVERNMENT,AND TO SERVE AS A METHOD OF COMPUTING THE GOVERNMENT'S DAMAGES, IF ANY. CONSIDERABLE LATITUDE IS GIVEN THE CONTRACTING OFFICER OR OTHER OFFICIALS ACTING ON BEHALF OF THE GOVERNMENT, SUBJECT ONLY TO THE RULE THAT THEIR ACTIONS MUST BE REASONABLE IN DECIDING WHAT FORM THE RELET CONTRACT SHOULD TAKE AND CONSISTENT WITH HIS DUTY TO MITIGATE DAMAGES. IN SUCH A SITUATION, THE PURCHASE MADE IS FOR THE ACCOUNT OF THE DEFAULTED CONTRACTOR AND THE STATUTORY REQUIREMENT THAT CONTRACTS BE LET AFTER COMPETITIVE BIDDING DOES NOT APPLY. WHEN COMPETITIVE BIDDING IS NOT REQUIRED BY STATUTE AND THE PUBLIC AUTHORITY VOLUNTARILY ADVERTISES FOR BIDS, IT CAN REJECT ALL BIDS AND ENTER INTO PRIVATE NEGOTIATIONS WITH ONE OF THE BIDDERS IN ORDER TO SECURE A LOWER BID. 42 COMP. GEN. 493; B-154650, AUGUST 12, 1964; B 159575, AUGUST 31, 1966; CF. B-158248, MARCH 22, 1966.

THUS THE COURT OF CLAIMS HAS HELD THAT OBTAINING BIDS FROM THE ORIGINAL BIDDERS RATHER THAN COMPETITIVELY ADVERTISING THE REPROCUREMENT IS NEITHER UNREASONABLE OR ILLEGAL AND IT WAS PROPER FOR THE GOVERNMENT TO EXCLUDE ONE OF THE ORIGINAL BIDDERS WHICH HAD BEEN HAVING TECHNICAL DIFFICULTY IN PRODUCTION UNDER ANOTHER CONTRACT WITH THE GOVERNMENT. ZODA V UNITED STATES, 180 F.SUPP. 419; 148 CT. CL. 49 (1960). SEE ALSO UNITED STATES V WARSAW ELEVATOR CO., 213 F.2D 517 (2D CIR. 1954); UNITED STATES V ELLIOTT TRUCK PARTS, INC., 149 F.SUPP. 52.

LIKEWISE, THE ARMED SERVICES BOARD OF CONTRACT APPEALS (ASBCA) APPARENTLY HAS NO DIFFICULTY IN ACCEPTING THE THEORY THAT A DEFAULTED CONTRACTOR MAY NOT BE CONSIDERED TO BE A RESPONSIBLE BIDDER ON THERE LET CONTRACT. SEE APPEAL OF SOUTHERN SUPPLY CO., ASBCA 1413 (1953). THE ASBCA ALSO HAS HELD THAT NOT ONLY MAY THE DEFAULTED CONTRACTOR BE DISREGARDED AS A SOURCE OF SUPPLY UNDER THE REPURCHASE CONTRACT, BUT THE GOVERNMENT MAY ALSO CONFINE ITS REPURCHASE TO A NEGOTIATION WITH THOSE CONCERNS ORIGINALLY SOLICITED, AND IT NEED NOT BROADEN THE BASE OF SOLICITATION. APPEAL OF TAVCO, INC., ASBCA 10025, 65-1 BCA 4537 (1965).

WHILE WE HAVE NOT HAD OCCASION TO HOLD SQUARELY THAT A DEFAULTED CONTRACTOR MAY NOT IN ANY CIRCUMSTANCES BE CONSIDERED AS A PROPER SOURCE FOR COMPLETION OF THE CONTRACT, WE HAVE HELD THAT WHERE THE DEFAULTED CONTRACTOR HAS SUBMITTED A BID ON THE COMPLETION CONTRACT AT A HIGHER PRICE THAN THAT FOR WHICH HE WAS BOUND UNDER THE ORIGINAL CONTRACT HIS BID CANNOT BE ACCEPTED, SINCE TO ACCEPT SUCH A BID WOULD BE TANTAMOUNT TO A MODIFICATION OF THE ORIGINAL CONTRACT TO PROVIDE FOR AN INCREASE IN THE PRICE SPECIFIED THEREIN, AND THEREFORE WOULD BE UNAUTHORIZED FOR LACK OF ANY CONSIDERATION MOVING TO THE GOVERNMENT. 27 COMP. GEN. 343.

SINCE ESSEX'S BID ON THE COMPLETION CONTRACT DID NOT EXCEED THE PRICES OF THE ORIGINAL CONTRACT, WE BELIEVE THE PROPRIETY OF CONSIDERING ESSEX'S BID WOULD AT BEST BE DEPENDENT UPON THE APPLICATION OF BASIC PRINCIPLES RELATING TO BIDDER RESPONSIBILITY. IN YOUR BRIEF OF FEBRUARY 14, 1969, YOU REQUEST A DECISION WHICH HOLDS THAT "WHERE THE CONTRACTING OFFICE HAS NOTICE THAT A SMALL BUSINESS CONCERN MAY HAVE THE PRESENT CAPABILITY OF PERFORMING ON A CONTRACT AND THE CONTRACTING OFFICER HAS DOUBTS AS TO SUCH ABILITY, BROUGHT ON BY, BUT NOT LIMITED TO A BIDDER'S PAST PERFORMANCE, THE CONTRACTING OFFICER MUST REFER THE QUESTION OF A PRESENT ABILITY TO PERFORM TO THE SMALL BUSINESS ADMINISTRATION FOR ACTION ON A CERTIFICATE OF COMPETENCY.' YOU ALSO SUGGEST IN THE SAME BRIEF THAT THE NAVY'S ACTION IN NOT MAKING A DETERMINATION OF ESSEX'S CAPACITY AND RESPONSIBILITY, AFTER BEING ADVISED THAT IT WAS FULLY CAPABLE OF MAKING CURRENT DELIVERIES OF THE SUPPLIES AWARDED AVTEL, AND AFTER NAVY WAS ADVISED OF THE ALLEGATIONS CONTAINED IN ESSEX'S APPEAL TO THE ASBCA FROM THE DEFAULT DETERMINATION, WAS AN IMPROPER CONSTRUCTIVE SUSPENSION DEBARMENT AT LEAST FOR THE PURPOSES OF THE INSTANT PROCUREMENT.

WHILE WE CAN EXPRESS NO OPINION AS TO THE MERITS OF YOUR APPEAL BEFORE ASBCA AT THIS STAGE OF THE PROCEEDINGS, WE THINK IT SHOULD BE NOTED THAT WE HAVE HELD THAT WHEN A CONTRACTOR HAS BEEN DECLARED IN DEFAULT AND THE CONTRACTOR HAS APPEALED FROM THE FINDINGS OF THE CONTRACTING OFFICER IN THE MATTER, IT IS NOT ORDINARILY PRACTICAL OR NECESSARY FOR THE CONTRACTING AGENCY TO SUSPEND ACTIONS ON A PROPOSED PROCUREMENT OF THE NECESSARY SUPPLIES OR SERVICES FROM ANOTHER SOURCE UNTIL SUCH TIME AS A DECISION ON THE APPEAL HAS BEEN RENDERED. 36 COMP. GEN. 72, 73. ADDITIONALLY, WE HAVE HELD THAT PREVIOUS DEFAULTS DO NOT NECESSARILY BAR A BIDDER, BUT THAT SUCH A DEFAULT IS ONLY ONE FACTOR TO BE CONSIDERED IN THE DETERMINATION OF RESPONSIBILITY. 27 COMP. GEN. 621; 15 ID. 149; 14 ID. 313; B-164090, JUNE 21, 1968. WE HAVE HELD, HOWEVER, THAT THE CIRCUMSTANCES OF A CONTRACTOR'S FAILURE TO PERFORM PROPERLY AND IN A TIMELY MANNER UNDER AN EARLIER CONTRACT MAY IN SOME CASES JUSTIFY THE ACTUAL DEBARMENT OF A DEFAULTING BIDDER AS IRRESPONSIBLE. CF. 39 COMP. GEN. 705.

ALTHOUGH YOU HAVE INFORMALLY ADVISED US THAT FOR THE PURPOSE OF THIS DECISION WE MAY PRESUME THAT THE CONTRACTING OFFICER'S ACTIONS IN TERMINATING CONTRACT NO. N00600-67-C-1465, FOR DEFAULT WAS PROPER, WE FEEL IT NECESSARY TO REVIEW THE CHRONOLOGY OF EVENTS LEADING UP TO THE DEFAULT DETERMINATION OF JULY 25, 1968, INASMUCH AS THE CONTRACTING OFFICER'S FINDING OF NONRESPONSIBILITY IN THE INSTANT PROCUREMENT WAS BASED ON ESSEX'S RECORD OF PERFORMANCE UNDER THE EARLIER CONTRACT. IN THIS REGARD THE ADMINISTRATIVE REPORT TO US, A COPY OF WHICH WAS FURNISHED YOUR OFFICE ON APRIL 11, 1969, AND THE FACTUAL STATEMENTS OF WHICH DO NOT APPEAR TO BE SERIOUSLY CONTESTED, CONTAINS THE FOLLOWING ACCOUNT:

"A. THE CONTRACT WAS ISSUED TO ESSEX ON 22 JUNE 1967 REQUIRING DELIVERY OF THREE STATIC FREQUENCY CONVERTERS 270 DAYS AFTER DATE OF CONTRACT (18 MARCH 1968) AT A TOTAL PRICE OF $67,500.00;

"B. ESSEX FAILED TO MEET THE 18 MARCH DELIVERY DATE AND, ON 11 APRIL 1968 NOTIFIED THE CONTRACTING OFFICER THAT DESIGN PROBLEMS HAD BEEN ENCOUNTERED AND REQUESTED THAT THE DELIVERY SCHEDULE BE EXTENDED TO 28 JUNE 1968;

"C. BY LETTER OF 10 MAY 1968 THE CONTRACTING OFFICER INDICATED THAT LATE DELIVERY WOULD BE ACCEPTED ON 28 JUNE BUT THAT SINCE NO EXCUSABLE DELAY HAD BEEN ESTABLISHED, NO EXTENSION IN DELIVERY WOULD BE GRANTED UNLESS CONSIDERATION WAS FORTHCOMING FROM THE CONTRACTOR;

"D. ON 25 MAY 1968 THE CONTRACTOR TELEPHONED THE CONTRACT ADMINISTRATOR AT NAVY PURCHASING OFFICE, WASHINGTON, AND OFFERED CONSIDERATION IN THE AMOUNT OF $325.00 FOR EXTENSION OF THE DELIVERY TO 28 JUNE. THE CONTRACT ADMINISTRATOR INFORMED THE CONTRACTOR THAT $325.00 WAS NOT CONSIDERED SUFFICIENT CONSIDERATION FOR A THREE MONTH EXTENSION. DURING THIS CONVERSATION THE CONTRACTOR INDICATED THAT HE WOULD NOT BE ABLE TO DELIVER BY 28 JUNE AND, UPON QUESTIONING, SAID THAT THE REASON FOR DELAY WAS - ENGINEERING PROBLEMS;-

"E. ON 3 JUNE 1968 THE CONTRACTOR SUBMITTED A PROGRESS REPORT (DD FORM 375) INDICATING THAT HE HAD A HEAVY BACKLOG OF GOVERNMENT CONTRACTS AND THAT HE ANTICIPATED COMPLETING DESIGN WORK ON THE FREQUENCY CONVERTERS DURING JUNE AND ACCOMPLISHING FINAL ASSEMBLY IN JULY. THE DCASR REPRESENTATIVE ANNOTATED THIS REPORT INDICATING THAT, IN HIS OPINION, NO VALID DELIVERY DATE COULD BE FORECAST UNTIL DESIGN WORK WAS COMPLETE;

"F. THE CONTRACTOR FAILED TO MEET THE PROMISED 28 JUNE DELIVERY DATE;

"G. ON 1 JULY 1968 THE CONTRACTING OFFICER SENT A LETTER TO THE CONTRACTOR INDICATING THAT THE CONTRACT WAS IN DEFAULT BECAUSE OF FAILURE TO MAKE DELIVERY AND REQUESTED THAT THE CONTRACTOR SHOW CAUSE IN WRITING AS TO WHY THE CONTRACT SHOULD NOT BE TERMINATED FOR DEFAULT;

"H. ON 2 JULY 1968 THE CONTRACTOR SUBMITTED A PROGRESS REPORT (DD 375) INDICATING THAT DESIGN WAS STILL INCOMPLETE AND THAT HE INTENDED TO COMPLETE DESIGN WORK IN JULY AND TO ACCOMPLISH FINAL ASSEMBLY WORK IN AUGUST. AGAIN, THE DCASR REPRESENTATIVE ANNOTATED THIS REPORT INDICATING THAT NO REALISTIC DELIVERY FORECAST COULD BE MADE UNTIL DESIGN WORK WAS COMPLETE AND PURCHASE ORDERS HAD BEEN PLACED WITH VENDORS;

"I. ON 11 JULY 1968 THE CONTRACTOR REPLIED IN WRITING TO THE CONTRACTING OFFICER'S 1 JULY LETTER. THIS REPLY STATED THAT DELAYS IN PERFORMANCE WERE THE RESULT OF CHANGES ON CONTRACT NOM-73490 AND UNEXPECTED PROBLEMS ON CONTRACTS N00600-67-C-0677 AND DSA 700-67-C D041. THE LETTER ALSO INDICATED THAT THESE CONTRACTS WERE HIGHER ON ESSEX'S -PRIORITY LIST.- IN ADDITION, THE LETTER STATED THAT PROBLEMS ON THE OTHER CONTRACTS HAD BEEN SOLVED AND THAT ESSEX WAS NOW CONFIDENT THAT DELIVERY COULD BE MADE BY 10 OCTOBER 1968;

"J. THE CONTRACTING OFFICER, IN INVESTIGATING THE ALLEGATIONS CONTAINED IN THE CONTRACTOR'S 11 JULY LETTER, DISCOVERED THAT ALL CONTRACTS CITED IN THE LETTER AS WELL AS CONTRACT N00600-67-C-1465 CARRIED THE SAME PRIORITY RATING OF -DO-. IN ADDITION, HE DISCOVERED THAT WHILE CHANGES HAD BEEN ISSUED ON CONTRACT NOM-73490, COMPENSATING ADJUSTMENTS IN PRICE AND DELIVERY SCHEDULE HAD BEEN AGREED TO AND INCORPORATED IN THE CONTRACT. FURTHER, THROUGH COMMUNICATION WITH DCASR CHICAGO, THE CONTRACTING OFFICER WAS UNABLE TO ESTABLISH THAT ANY -PROBLEMS' UNDER CONTRACT N00600-67-C- 0677 OR DSA 700-67-C-D041 WERE ATTRIBUTABLE TO THE GOVERNMENT. FINALLY, IT WAS DETERMINED THAT PRODUCTION HAD BEEN COMPLETED BEHIND SCHEDULE ON CONTRACTS N00600-67-C 0677 AND NOM-73490 IN FEBRUARY AND MARCH RESPECTIVELY OF 1968. PRODUCTION ON CONTRACT DSA 700-67-C-D041 IS INCOMPLETE AS OF THIS DATE.

"K. BASED ON THE EVALUATION OF THE FACTORS SET FORTH IN THE CONTRACTOR'S 11 JULY LETTER, THE CONTRACTING OFFICER DETERMINED THAT ESSEX'S FAILURE TO DELIVER WAS NOT EXCUSABLE WITHIN THE MEANING OF THE DEFAULT CLAUSE OF THE CONTRACT;

"L. PRIOR TO DETERMINING WHETHER TO EXERCISE THE GOVERNMENT'S RIGHT TO DEFAULT CONTRACT N00600-67-C-1465, THE CONTRACTING OFFICER CONTACTED THE CONTRACTOR IN AN ATTEMPT TO DETERMINE IF THE 10 OCTOBER DELIVERY DATE PROPOSED IN THE CONTRACTOR'S 11 JULY LETTER WAS REALISTIC. TOWARD THIS END, THE CONTRACTING OFFICER QUERIED THE CONTRACTOR AS TO WHETHER HE WOULD AGREE TO THE 10 OCTOBER DATE WITH A LIQUIDATED DAMAGES RATE OF $150.00 PER DAY UNTIL A MAXIMUM OF $2,750.00 WAS REACHED. THE CONTRACTOR RESPONDED BY SUGGESTING A NEW DELIVERY DATE OF 31 OCTOBER;

"M. THE CONTRACTING OFFICER CONCLUDED FROM THIS CONVERSATION THAT THE CONTRACTOR HIMSELF HAD LITTLE CONFIDENCE IN THE 10 OCTOBER DELIVERY DATE AND THAT THE PROPOSAL MADE IN THE 11 JULY LETTER WAS BUT ONE MORE IN A SERIES OF PROMISES MADE WITHOUT FACTUAL BASIS.

"N. ON 25 JULY 1968 CONTRACT N00600-67-C-1465 WAS TERMINATED FOR DEFAULT.'

ON THIS RECORD THE CONTRACTING OFFICER DETERMINED THAT ESSEX DID NOT MEET THE MINIMUM STANDARDS FOR RESPONSIBLE PROSPECTIVE CONTRACTORS, AS SET FORTH IN ASPR 1-903.1 (III), OR IN HIS OWN WORDS, HE "COULD ONLY CONCLUDE THAT ESSEX LACKED THE NECESSARY TENACITY AND PERSERVERANCE TO PERFORM A CONTRACT OF THIS TYPE, AND THAT IT WOULD BE PURE FOLLY TO AWARD A REPURCHASE CONTRACT FOR THE SAME EQUIPMENT TO ESSEX.' IN YOUR PROTEST YOU HAVE IN ESSENCE URGED THAT REVIEW SHOULD HAVE BEEN MADE OF THE MATTER BY THE SMALL BUSINESS ADMINISTRATION (SBA) WHERE THE CONTRACTING OFFICER HAD NOTICE THAT ESSEX MAY HAVE HAD THE PRESENT CAPABILITY OF PERFORMING ON THE REPROCUREMENT CONTRACT IN SPITE OF HIS DEFAULT UNDER THE ORIGINAL CONTRACT. IN THIS CONNECTION, IT SHOULD BE POINTED OUT THAT UNDER ASPR 1- 903.1 (III), IN THE CASE OF A FINDING OF NONRESPONSIBILITY BASED ON A RECORD OF UNSATISFACTORY PERFORMANCE, REFERRAL TO SBA IS REQUIRED ONLY IF THE DELINQUENT PERFORMANCE WAS DUE SOLELY TO INADEQUATE CAPACITY OR CREDIT. SINCE THE CONTRACTING OFFICER ATTRIBUTED ESSEX'S DELINQUENCY TO OTHER CAUSES ON THE BASIS OF THE RECORD BEFORE HIM, WHICH WE BELIEVE FURNISHES REASONABLE SUPPORT FOR HIS CONCLUSION, REFERRAL TO SBA WAS EXCUSED BY THE REGULATION CITED, EVEN IF THE LETTING OF A REPLACEMENT CONTRACT AFTER DEFAULT BE CONSIDERED TO BE SUBJECT TO ALL THE RULES OF COMPETITIVE BIDDING AND AWARD.

EVEN MORE DISPOSITIVE OF THIS ISSUE IS OUR EARLIER RULING IN B 110520, NOVEMBER 17, 1952, WHERE WE STATED:

"IT IS CLEAR THAT THE GOVERNMENT'S ACTION IN TERMINATING YOUR RIGHT TO PROCEED WAS TAKEN PURSUANT TO THE PROVISION OF CONTRACT * * * AND THAT ACCEPTANCE OF YOUR BID UNDER INVITATION * * * WOULD HAVE HAD THE EFFECT OF REINSTATING THE CONTRACT. YOU WERE AFFORDED MORE THAN A REASONABLE OPPORTUNITY TO PERFORM UNDER THE CONTRACT AND SINCE YOU DID NOT FURNISH PERFORMANCE UNDER THE ORIGINAL CONTRACT * * *, IT WAS NOT REASONABLE TO ASSUME THAT YOU WOULD RENDER TIMELY PERFORMANCE WITH RESPECT TO ANY OTHER AWARD TO YOU FOR THE SHAFTS. AND, WHILE IT MAY BE THAT THE SMALL DEFENSE PLANTS ADMINISTRATIONS' CERTIFICATION OF CAPACITY AND CREDIT PRECEDED THE AWARD OF THE REPLACEMENT CONTRACT BY A FEW DAYS, IT DID NOT PRECEDE YOUR DEFAULT UNDER THE ORIGINAL CONTRACT AT WHICH TIME THE RIGHT TO EXERCISE THE PROCEDURE AND RECEIVE THE BENEFITS PRESCRIBED BY THE DEFAULT CLAUSE OF THAT CONTRACT ACCURED TO THE GOVERNMENT.'

IN A REVIEW OF THAT DECISION, THE UNITED STATES DISTRICT COURT, NORTHERN DISTRICT OF WEST VIRGINIA, STATED IN THE CASE OF UNITED STATES V THOMPSON, 168 F.SUPP. 281, 289 (1958):

"* * * ALTHOUGH THIS CERTIFICATION MIGHT VOUCH FOR THE DEFENDANT'S COMPETENCY AS TO CAPACITY AND CREDIT, IT DID NOT INSURE OR GUARANTEE PERFORMANCE. THE EXISTENCE OF ABILITY TO DO A JOB DOES NOT NECESSARILY IMPORT THE EXISTENCE OF THE TENACITY OR PERSERVERANCE NECESSARY TO DO THE JOB FOR WHICH ONE HAS THE ABILITY. THE FACTS COMPRISING THE HISTORY OF THIS CONTRACT SHOW THE FAILURE OF THE DEFENDANT TO PERFORM THE CONTRACT, WHETHER THROUGH DISINCLINATION OR LACK OF ABILITY AND PERSERVERANCE. VIEW OF THIS, THE COURT CAN FIND NO FAULT WITH THE NAVY'S REFUSAL TO ACCEPT A PAPER CERTIFICATION OF THE DEFENDANT'S COMPETENCY IN THE PARTICULARS MENTIONED. ALTHOUGH IT IS QUITE TRUE THAT THE NAVY MUST ACCEPT SUCH CERTIFICATION AS CONCLUSIVE, THE CERTIFICATION GOES ONLY TO THE PLANT'S COMPETENCY AS TO CAPACITY AND CREDIT. IT DOES NOT PRESUME TO CERTIFY THAT THE PLANT WILL PERFORM, ONLY THAT IT CAN. * * *"

THE VIEWS OF THE COURT IN THOMPSON WERE SUBSTANTIALLY ADOPTED IN OUR DECISION B-148124, APRIL 13, 1962. IN 43 COMP. GEN. 298, WE AGAIN EXPRESSED THE VIEW THAT A CERTIFICATE OF COMPETENCY IS CONCLUSIVE ONLY AS TO WHETHER A BIDDER CAN PERFORM, AND IF THE CONTRACTING OFFICER DETERMINES SUCH LOW BIDDER TO BE NONRESPONSIBLE FOR REASONS NOT GOING TO THE CERTIFICATION, FACTORS GOING TO WHETHER THE BIDDER WILL RATHER THAN CAN PERFORM, THE MATTER NEED NOT BE SUBMITTED TO SBA.

IN DECISIONS OF OUR OFFICE AT 43 COMP. GEN. 257 AND 387, WE EXTENDED THIS PRINCIPLE OF EXCLUSION FROM THE CONCLUSIVE CHARACTER OF A CERTIFICATE OF COMPETENCY TO SITUATIONS WHEREIN A BIDDER HAS BEEN DETERMINED TO BE NONRESPONSIBLE BY A CONTRACTING OFFICER BECAUSE OF HAVING DEMONSTRATED A LACK OF PERSERVERANCE, TENACITY, OR WILLINGNESS TO PERFORM UNDER PRIOR GOVERNMENT CONTRACTS. THE RATIONALE OF THESE DECISIONS HAS BEEN CONSISTENTLY FOLLOWED BY OUR OFFICE AND HAS BEEN INCORPORATED IN THE PROCUREMENT REGULATIONS. SEE ASPR 1-705.4 (C) (V). ALSO SEE WARREN BROTHERS ROADS COMPANY V UNITED STATES, 355 F.2D 612 (1965).

WE THINK IT IS ESSENTIAL UNDER LAW AND REGULATION, AND IN THE INTEREST OF SOUND CONTRACTING PROCEDURES, THAT GOVERNMENT AGENCIES AWARD THEIR CONTRACTS TO QUALIFIED CONCERNS WHO ARE CAPABLE OF RENDERING, AND REASONABLY MAY BE EXPECTED TO RENDER, SATISFACTORY PERFORMANCE. THEREFORE, WE FEEL THAT THE CONTRACTING AGENCIES SHOULD BE PERMITTED TO EXERCISE THE FINAL AUTHORITY TO PASS ON THOSE ELEMENTS OF RESPONSIBILITY WHICH PRESENTLY ARE EXCLUDED FROM THE CERTIFICATE OF COMPETENCY JURISDICTION OF THE SBA.

FROM THE FACTS SET FORTH, WE CANNOT FIND THAT ESSEX'S RECORD OF PERFORMANCE UNDER THE DEFAULTED CONTRACT DOES NOT FURNISH A REASONABLE BASIS FOR THE ADMINISTRATIVE DETERMINATION OF LACK OF RESPONSIBILITY, DUE TO REASONS OTHER THAN THOSE SOLELY RELATED TO ESSEX'S FINANCIAL STATUS AND PHYSICAL CAPABILITY TO PERFORM, SUCH AS LACK OF PERSERVERANCE, TENACITY AND PROPER PLANNING.

FOR THE REASONS STATED, WE FIND NO LEGAL BASIS FOR OBJECTING TO THE ACTION OF THE CONTRACTING OFFICER IN REJECTING ESSEX'S BID AND MAKING AWARD TO THE NEXT LOW RESPONSIVE, RESPONSIBLE BIDDER. SUCH DETERMINATION, HOWEVER, DOES NOT CONSTITUTE A PERMANENT EVALUATION OF YOUR CLIENT'S CAPABILITIES, AND SHOULD NOT BE REGARDED AS CONCLUSIVE OF ITS ELIGIBILITY TO RECEIVE A FUTURE CONTRACT AWARD FOR SIMILAR ITEMS.

THE PROTEST FILED BY YOU ON BEHALF OF ESSEX AGAINST THE ACTION TAKEN IN THE INSTANT PROCUREMENT IS THEREFORE DENIED.