B-167782(1), DEC. 2, 1969

B-167782(1): Dec 2, 1969

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PROGRESS PAYMENTS DENIED WHERE TWO LOW BIDDERS FOR AIRCRAFT MAINTENANCE CONTRACT WERE DETERMINED NONRESPONSIBLE AS RESULT OF PREAWARD SURVEY. AWARD TO THIRD LOW BIDDER (CANADIAN FIRM) IS AFFIRMED. AS AWARD WAS MADE IN ACCORDANCE WITH APPLICABLE REGULATIONS CONSISTENT WITH PROCUREMENT STATUTES OF U.S. PROGRESS PAYMENTS WOULD NOT HAVE PROVIDED LOW BIDDER SUFFICIENT FINANCIAL ASSISTANCE. CONTRACTING AGENCY'S DETERMINATION OF PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS ACCORDED FINALITY ABSENT CLEAR SHOWING OF BAD FAITH OR LACK OF REASONABLE BASIS THEREFOR. IS AFFIRMED. AS IN NEGOTIATION OF SUBCONTRACT IT WAS RECOGNIZED THAT INCREASED LABOR HOURS MIGHT BE EXPECTED BECAUSE OF HARD-CORE LABOR TRAINING PROGRAM.

B-167782(1), DEC. 2, 1969

BIDDERS--QUALIFICATIONS--FINANCIAL RESPONSIBILITY--PROGRESS PAYMENTS DENIED WHERE TWO LOW BIDDERS FOR AIRCRAFT MAINTENANCE CONTRACT WERE DETERMINED NONRESPONSIBLE AS RESULT OF PREAWARD SURVEY, SMALL BUSINESS ADMINISTRATION DECLINED TO ISSUE THEM CERTIFICATES OF COMPETENCY, AND CONTRACTING OFFICER REFUSED TO AMEND REQUEST FOR PROPOSALS TO PROVIDE FOR PROGRESS PAYMENTS, AWARD TO THIRD LOW BIDDER (CANADIAN FIRM) IS AFFIRMED, AS AWARD WAS MADE IN ACCORDANCE WITH APPLICABLE REGULATIONS CONSISTENT WITH PROCUREMENT STATUTES OF U.S.; PROGRESS PAYMENTS WOULD NOT HAVE PROVIDED LOW BIDDER SUFFICIENT FINANCIAL ASSISTANCE; PREAWARD SURVEY OF LOW BIDDER PROVIDED UNSATISFACTORY RATINGS IN SEVERAL AREAS; AND CONTRACTING AGENCY'S DETERMINATION OF PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS ACCORDED FINALITY ABSENT CLEAR SHOWING OF BAD FAITH OR LACK OF REASONABLE BASIS THEREFOR. PRICES--REASONABLENESS--TRAINING DISADVANTAGED SUBCONTRACT AWARD EXCEEDING $400,000 FOR AIRCRAFT MAINTENANCE -- RECEIVED UNDER PRIME CONTRACT AWARDED SMALL BUSINESS ADMINISTRATION PURSUANT TO SECTION 8 (A), SMALL BUSINESS ACT (15 U.S.C. 637 (A)) AND IN ACCORDANCE WITH PRESIDENT'S INDUSTRY/GOVERNMENT PROGRAM TO ASSIST IN RECRUITING, TRAINING, AND UTILIZATION OF HARD-CORE DISADVANTAGED -- IS AFFIRMED, AS IN NEGOTIATION OF SUBCONTRACT IT WAS RECOGNIZED THAT INCREASED LABOR HOURS MIGHT BE EXPECTED BECAUSE OF HARD-CORE LABOR TRAINING PROGRAM, HOWEVER, AGREED-UPON PRICE WAS CONSIDERED FAIR AND REASONABLE SINCE IT WAS BASED ON HISTORICAL COSTS ADJUSTED TO COMPENSATE FOR CHANGED WORK REQUIREMENTS, AND IT INCLUDED REQUESTED PROFIT RATE OF 8 PERCENT, ALTHOUGH RATE OF 10.5 PERCENT WOULD NOT HAVE BEEN EXCESSIVE UNDER CIRCUMSTANCES.

TO I.C.E.S., INCORPORATED:

REFERENCE IS MADE TO YOUR TELEGRAM DATED AUGUST 22, 1969, AND TO SUBSEQUENT CORRESPONDENCE, RELATIVE TO THE REJECTION OF YOUR PROPOSAL AND THAT OF ALL AMERICAN MAINTENANCE, INCORPORATED, SAN ANTONIO, TEXAS, AND THE AWARD OF A CONTRACT TO THE CANADIAN COMMERCIAL CORPORATION, A CORPORATION OWNED AND CONTROLLED BY THE GOVERNMENT OF CANADA, PURSUANT TO REQUEST FOR PROPOSALS NO. F-04606-69-R-0524, DATED MAY 16, 1969, AS AMENDED.

THE REQUEST FOR PROPOSALS WAS ISSUED BY THE SACRAMENTO AIR MATERIEL AREA, DIRECTORATE OF PROCUREMENT AND PRODUCTION, MCCLELLAN AIR FORCE BASE, CALIFORNIA, AS A MULTI-YEAR SOLICITATION FOR THREE YEARS OF INTER SERVICE DEPOT LEVEL MAINTENANCE OF A QUANTITY OF 180 T-39 AIRCRAFT. BY JULY 8, 1969, THE LIMITING DATE FOR SUBMISSION OF PROPOSALS, SIX PROPOSALS HAD BEEN RECEIVED. THE LOWEST TOTAL PRICE PROPOSAL WAS SUBMITTED BY YOUR COMPANY, THE NEXT LOWEST WAS SUBMITTED BY ALL AMERICAN MAINTENANCE, INCORPORATED, AND THE THIRD LOWEST WAS SUBMITTED BY NORTHWEST INDUSTRIES, LIMITED, EDMONTON, ALBERTA, CANADA. A CONTRACT IN THE AMOUNT OF $4,480,447.31 WAS AWARDED TO THE CANADIAN COMMERCIAL CORPORATION ON OCTOBER 16, 1969, WITH THE UNDERSTANDING THAT THE REQUIRED MAINTENANCE WORK WOULD BE SUBCONTRACTED TO NORTHWEST INDUSTRIES LIMITED, THE THIRD LOWEST OFFEROR.

PREAWARD SURVEYS WERE CONDUCTED AS A MEANS OF ASSISTING THE CONTRACTING OFFICER IN DETERMINING WHETHER EACH OF THE THREE LOWEST OFFERORS COULD BE CONSIDERED A RESPONSIBLE PROSPECTIVE CONTRACTOR FOR THE T-39 AIRCRAFT MAINTENANCE PROGRAM. THE CONTRACTING OFFICER DETERMINED THAT NEITHER YOUR COMPANY NOR ALL AMERICAN MAINTENANCE, INCORPORATED, COULD BE CONSIDERED RESPONSIBLE UNDER THE APPLICABLE STANDARDS IN THE REQUEST FOR PROPOSALS AND IN SECTION 1, PART 9, OF THE ARMED SERVICES PROCUREMENT REGULATIONS (ASPR), BUT THAT NORTHWEST INDUSTRIES LIMITED COULD BE CONSIDERED RESPONSIBLE UNDER SUCH STANDARDS. HOWEVER, BEFORE MAKING AN AWARD TO THE CANADIAN COMMERCIAL CORPORATION IN ACCORDANCE WITH THE CANADIAN PURCHASE PROVISIONS OF PART 5, SECTION 6, ASPR, WHERE IT IS PROPOSED TO ACCEPT A BID OR PROPOSAL SUBMITTED BY A CANADIAN CONCERN, THE SOUTHWEST AREA OFFICE OF THE SMALL BUSINESS ADMINISTRATION AT DALLAS, TEXAS, WAS AFFORDED AN OPPORTUNITY TO EXAMINE PERTINENT RECORDS FOR THE PURPOSE OF DETERMINING WHETHER CERTIFICATES OF COMPETENCY (COC) SHOULD BE ISSUED IN FAVOR OF YOUR COMPANY AND ALL AMERICAN MAINTENANCE, INCORPORATED. A COC IS CONCLUSIVE ON THE CONTRACTING OFFICER WITH RESPECT TO CAPACITY OR CREDIT. IN EACH CASE, THE SMALL BUSINESS ADMINISTRATION DECLINED TO ISSUE A COC.

YOU PROTESTED THE POSSIBLE REJECTION OF YOUR PROPOSAL ON THE GROUND THAT THE REQUEST FOR PROPOSALS WAS NOT AMENDED, FOLLOWING A CONFERENCE AT THE PROCUREMENT OFFICE ON JUNE 16, 1969, TO PROVIDE FOR PROGRESS PAYMENTS UNDER THE CONTRACT. ALL AMERICAN MAINTENANCE, INCORPORATED, PROTESTED ON THE SAME BASIS. BOTH COMPANIES CONTENDED THAT THEY WERE BEING CONSIDERED NONRESPONSIBLE SOLELY BECAUSE OF A BELIEF THAT THEIR FINANCIAL RESOURCES WERE INADEQUATE TO FINANCE OPERATIONS PENDING PAYMENT FOR SERVICES RENDERED. THEY FURTHER CONTENDED THAT THE CONTRACTING OFFICER'S REFUSAL TO REMEDY THIS SITUATION BY PROVIDING FOR PROGRESS PAYMENTS WAS CONTRARY TO REGULATIONS APPLICABLE TO NEGOTIATED CONTRACTS AS DISTINGUISHED FROM CONTRACTS AWARDED PURSUANT TO FORMAL ADVERTISING, AND THAT THE FAILURE OF THE REQUEST FOR PROPOSALS TO PROVIDE FOR PROGRESS PAYMENTS DISCRIMINATED AGAINST SMALL BUSINESS CONCERNS.

IN A LETTER DATED OCTOBER 27, 1969, AFTER YOU HAD BEEN NOTIFIED OF THE AWARD TO THE CANADIAN COMMERCIAL CORPORATION, YOU STATED THAT YOUR COMPANY WAS DETERMINED NOT RESPONSIBLE DUE TO LACK OF FINANCES; THAT SUCH LACK OF FINANCES WAS DUE TO THE CONTRACTING OFFICER'S UNWILLINGNESS TO ALLOW PROGRESS PAYMENTS; THAT THIS REFUSAL WAS CONTRARY TO THE ARMED SERVICES PROCUREMENT REGULATION AND IN VIOLATION OF SMALL BUSINESS ADMINISTRATION POLICIES; THAT THE COMPETENCY SURVEY MADE BY THE SMALL BUSINESS ADMINISTRATION HAD RESULTED IN A DETERMINATION THAT YOUR COMPANY HAD ALL THE CAPABILITIES TO PERFORM THE PROPOSED CONTRACT WITH THE EXCEPTION OF FINANCES; AND THAT A LACK OF FINANCING WAS THE MAIN FACTOR IN DETERMINING ALL AMERICAN MAINTENANCE, INCORPORATED, TO BE NONRESPONSIBLE. YOU STATED, FURTHER, THAT YOU WERE PROTESTING THE AWARD TO THE CANADIAN COMMERCIAL CORPORATION "AT AN EXHORBITANT PRICE UNDER PREVAILING CIRCUMSTANCES" AS INIMICAL TO VARIOUS PROGRAMS OF THE UNITED STATES SUCH AS THE WAR ON POVERTY, THE PROGRAMS DESIGNED TO CREATE FULL EMPLOYMENT OPPORTUNITIES AND THE DECLARED POLICY OF THE CONGRESS THAT A FAIR PROPORTION OF ALL TYPES OF GOVERNMENT CONTRACTS SHOULD BE AWARDED TO SMALL BUSINESS CONCERNS.

WITH RESPECT TO THE CONTRACT PRICE, IT APPEARS THAT ADEQUATE COMPETITION WAS OBTAINED IN THIS CASE. IT DOES NOT NECESSARILY FOLLOW THAT AN AWARD HAS BEEN MADE AT AN EXHORBITANT PRICE BECAUSE THE PRICES QUOTED BY FIRMS DETERMINED TO BE NONRESPONSIBLE WERE CONSIDERABLY LOWER THAN THE PRICE QUOTED BY THE SUCCESSFUL OFFEROR. IN ANY EVENT, WE HAVE NO INFORMATION OR EVIDENCE WHICH WOULD TEND REASONABLY TO SUPPORT A CONCLUSION THAT THE PRICE OF THE SUCCESSFUL OFFEROR, NORTHWEST INDUSTRIES LIMITED, WAS EXHORBITANT IN RELATION TO THE SERVICES TO BE PERFORMED. IN SHORT, THE AWARD APPEARS TO HAVE BEEN MADE IN ACCORDANCE WITH APPLICABLE REGULATIONS WHICH ARE CONSISTENT WITH THE PROCUREMENT STATUTES OF THE UNITED STATES.

THE CONTRACTING OFFICER DENIES THAT HIS REFUSAL TO MODIFY THE REQUEST FOR PROPOSALS WAS DESIGNED TO DISCRIMINATE AGAINST SMALL BUSINESS CONCERNS, AND HE STATES THAT THE ORIGINAL DETERMINATION NOT TO INCLUDE PROGRESS PAYMENTS WAS REAFFIRMED AFTER REVIEWING APPROPRIATE ASPR DIRECTIVES AND CONSULTATIONS WITH THE STAFF JUDGE ADVOCATE ADVISER. HE REFERS TO APPENDIX E, ASPR SECTION E-209 (I), LISTING PRIVATE CAPITAL TO BE THE PREFERRED METHOD OF FINANCING GOVERNMENT CONTRACTS, AND TO THE GUIDELINES OF ASPR E-503, ENTITLED "CUSTOMARY PROGRESS PAYMENTS," AS THE BASIS FOR HIS DETERMINATION THAT THE REQUEST FOR PROPOSALS SHOULD NOT INCLUDE AN OFFER TO ALLOW PROGRESS PAYMENTS. IN THAT CONNECTION, IT WAS HIS DETERMINATION THAT THE LEAD TIME AND FLOW TIME INVOLVED IN THE T-39 AIRCRAFT MAINTENANCE PROGRAM DID NOT MEET THE GENERAL GUIDELINES OF ASPR E -503, WHEREIN CONSIDERATION IS GIVEN TO THE POSSIBILITY OF ALLOWING CUSTOMARY PROGRESS PAYMENTS TO BE MADE UNDER PRODUCTION CONTRACTS WHICH INVOLVE A LONG "LEAD TIME" OR PREPARATORY PERIOD,"NORMALLY INVOLVING SIX MONTHS OR MORE BETWEEN THE BEGINNING OF WORK AND THE FIRST PRODUCTION DELIVERY.' ALSO, THE CONTRACTING OFFICER REPORTED THAT, DURING THE CITED CONFERENCE OF JUNE 16, 1969, YOU WERE ADVISED TO THE EFFECT THAT WORK ON EACH AIRCRAFT WOULD BE BILLABLE ON ITS DELIVERY AT THE UNIT PRICE AWARDED AND, IF THE DELIVERIES WERE ON SCHEDULE, THIS TIME WOULD BE ONLY 63 CALENDAR DAYS ON 171 OF THE TOTAL NUMBER OF 180 AIRCRAFT.

ALTHOUGH THE REQUEST FOR PROPOSALS CONTAINED A PROGRESS PAYMENT PROVISION "APPLICABLE ONLY TO FORMALLY ADVERTISED SOLICITATIONS," THE DEPARTMENT OF THE AIR FORCE REPORTS THAT SUCH PROVISION WAS INCLUDED INADVERTENTLY AND THERE WAS NO INTENTION TO DISREGARD THE PROVISIONS OF ASPR E-502.1 THAT REQUESTS FOR PROPOSALS SHOULD STATE THAT PROVISION FOR PROGRESS PAYMENTS "WILL BE MADE IN CONFORMITY WITH REGULATIONS," AND THAT THE NEED FOR PROGRESS PAYMENTS CONFORMING TO REGULATIONS ,WILL NOT BE CONSIDERED AS A HANDICAP OR ADVERSE FACTOR IN THE AWARD OF CONTRACTS.' THE DEPARTMENT OF THE AIR FORCE HAS STATED, AND WE AGREE, THAT THE PROVISIONS OF ASPR E- 502.1 DO NOT NECESSARILY REQUIRE PROGRESS PAYMENTS SINCE THERE ARE SEVERAL LIMITATIONS AND RESTRAINTS IN "CONFORMING TO REGULATIONS.'

THE CONTRACTING OFFICER FURTHER DETERMINED THAT, EVEN IF AVAILABLE, PROGRESS PAYMENTS WOULD NOT HAVE PROVIDED SUFFICIENT FINANCIAL ASSISTANCE TO YOUR COMPANY, AND THAT YOUR COMPANY WAS NOT OTHERWISE QUALIFIED IN VIEW OF OTHER NEGATIVE FINDINGS MADE IN THE PREAWARD SURVEY REPORT ON YOUR COMPANY, AND IN VIEW OF HIS OWN DETERMINATION THAT YOUR COMPANY HAD AN UNSATISFACTORY RECORD OF PERFORMANCE UNDER GOVERNMENT CONTRACTS, INCLUDING A CONTRACT AWARDED IN APRIL 1969 FOR "IRAN OF TWENTY U-3 AIRCRAFT.'

THE PREAWARD SURVEY REPORT ON YOUR COMPANY PROVIDED UNSATISFACTORY RATINGS WITH RESPECT TO FINANCIAL RESOURCES, TECHNICAL ABILITY, PRODUCTION CAPABILITY, FACILITIES AND EQUIPMENT, PLANT SAFETY, LABOR RESOURCES AND ABILITY TO MEET THE REQUIRED DELIVERY SCHEDULE. THESE FACTORS, TOGETHER WITH THE PRIOR UNSATISFACTORY RECORD OF PERFORMANCE, APPEAR REASONABLY TO SUPPORT THE DETERMINATION OF NONRESPONSIBILITY.

WE HAVE CONSISTENTLY HELD THAT THE CONTRACTING AGENCIES OF THE GOVERNMENT HAVE THE PRIMARY RESPONSIBILITY FOR DETERMINING WHETHER A PROSPECTIVE CONTRACTOR IS RESPONSIBLE AND THAT THE ADMINISTRATIVE DETERMINATION SHOULD BE ACCORDED FINALITY IN THE ABSENCE OF A CLEAR SHOWING OF BAD FAITH OR LACK OF A REASONABLE BASIS THEREFOR. WE FIND NO BASIS FOR CONSIDERING THAT THE DETERMINATIONS IN THIS CASE WERE ARBITRARY IN ANY RESPECT AND THE REASONABLENESS OF SUCH DETERMINATIONS APPEAR TO BE FURTHER SUPPORTED BY THE FACT THAT THE SMALL BUSINESS ADMINISTRATION, AN AGENCY OF THE GOVERNMENT WHICH IS CHARGED WITH THE RESPONSIBILITY FOR PROTECTING THE INTERESTS OF SMALL BUSINESS CONCERNS, DECLINED TO ISSUE A COC IN FAVOR OF EITHER OF THE TWO LOWEST OFFERORS. ALTHOUGH YOU CONTEND THAT THE SMALL BUSINESS ADMINISTRATION DETERMINED THAT YOU HAD ALL THE CAPABILITIES TO PERFORM WITH EXCEPTION OF FINANCES, WE DO NOT SO INTERPRET THE ADVICE GIVEN TO THE CONTRACTING OFFICER BY THE SOUTHWEST AREA OFFICE OF THE SMALL BUSINESS ADMINISTRATION.

ACCORDINGLY, YOUR PROTEST CONCERNING THE AWARD MADE UNDER REQUEST FOR PROPOSALS NO. F04606-69-R-0524 IS DENIED.

WITH REFERENCE TO YOUR REQUEST THAT WE INVESTIGATE AN AWARD IN EXCESS OF $400,000 TO AEROSPACE SERVICES, INCORPORATED, OAKLAND, CALIFORNIA, FOR MAINTENANCE OF T-33 AIRCRAFT, THE DEPARTMENT OF THE AIR FORCE ADVISES THAT AEROSPACE HAD BEEN OPERATING UNDER A PREVIOUS CONTRACT FOR MAINTENANCE OF T-33 AIRCRAFT AND THE FIRM RECEIVED A SUBCONTRACT UNDER A PRIME CONTRACT AWARDED TO THE SMALL BUSINESS ADMINISTRATION PURSUANT TO SECTION 8 (A) OF THE SMALL BUSINESS ACT, AS AMENDED, AND IN ACCORDANCE WITH THE PRESIDENT'S INDUSTRY/GOVERNMENT PROGRAM TO ASSIST IN RECRUITING, TRAINING AND UTILIZATION OF THE HARD CORE DISADVANTAGED. IN THE NEGOTIATION OF THE SUBCONTRACT, IT WAS RECOGNIZED THAT INCREASED LABOR HOURS MIGHT BE EXPECTED BECAUSE OF THE HARD-CORE LABOR TRAINING PROGRAM. HOWEVER, THE RECORD SHOWS THAT THE GOVERNMENT'S NEGOTIATORS CONSIDERED THE AGREED-UPON PRICE TO BE FAIR AND REASONABLE SINCE IT WAS BASED ON HISTORICAL COSTS ADJUSTED TO COMPENSATE FOR CHANGED WORK REQUIREMENTS, AND IT INCLUDED A REQUESTED PROFIT RATE OF 8 PERCENT, ALTHOUGH A RATE OF APPROXIMATELY 10.5 PERCENT WOULD NOT HAVE BEEN CONSIDERED EXCESSIVE IN THE PARTICULAR CASE. IN SUCH CIRCUMSTANCES, IT DOES NOT APPEAR THAT ANY FURTHER ACTION NEED BE TAKEN BY OUR OFFICE WITH RESPECT TO THE AWARD INVOLVED.