B-168765, FEB. 26, 1970

B-168765: Feb 26, 1970

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RECEIVED SBA CERTIFICATE OF COMPETENCY MAY NOT HAVE ANY LEGAL OBJECTION TO AWARD INTERPOSED SINCE UNDER SECTION 8 (B) OF SMALL BUSINESS ACT SUCH CERTIFICATIONS ARE CONCLUSIVE. TO ELECTROSPACE CORPORATION: REFERENCE IS MADE TO YOUR LETTERS DATED JANUARY 6. THE REFERENCED IFB WAS ISSUED ON JUNE 21. THIRTY-NINE FIRMS WERE SOLICITED. NINE RESPONSIVE BIDS WERE RECEIVED. BIDS WERE OPENED ON AUGUST 4. 996.94 WAS LOW. THE DEPARTMENT OF THE ARMY IS PRESENTLY HOLDING THE AWARD IN ABEYANCE PENDING A DECISION BY THIS OFFICE ON YOUR PROTEST. IS THAT YOU DO NOT BELIEVE A COC SHOULD HAVE BEEN ISSUED BY THE SBA TO BARRETT. SINCE YOU FEEL THAT FIRM IS FINANCIALLY NONRESPONSIBLE. YOU EMPHASIZE THAT THE FINANCIAL CAPABILITY REQUIRED TO PERFORM THIS CONTRACT IS SUBSTANTIAL.

B-168765, FEB. 26, 1970

BID PROTEST--SMALL BUSINESS--CERTIFICATE OF COMPETENCY DECISION TO ELECTROSPACE CORPORATION DENYING PROTEST AGAINST AWARD TO BARRETT INTERCOMMUNICATIONS PRODUCTS COMPANY, LOW BIDDER, FOR FURNISHING TELEPHONE SETS TO ARMY ELECTRONICS COMMAND. LOW BIDDER WHO, AFTER BEING DETERMINED NONRESPONSIBLE DUE TO DEFICIENCIES IN CREDIT, RECEIVED SBA CERTIFICATE OF COMPETENCY MAY NOT HAVE ANY LEGAL OBJECTION TO AWARD INTERPOSED SINCE UNDER SECTION 8 (B) OF SMALL BUSINESS ACT SUCH CERTIFICATIONS ARE CONCLUSIVE.

TO ELECTROSPACE CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS DATED JANUARY 6, 12, AND 19, AND FEBRUARY 9, 1970, PROTESTING THE AWARD OF A CONTRACT TO BARRETT INTERCOMMUNICATIONS PRODUCTS COMPANY, BROOKLYN, NEW YORK, UNDER INVITATION FOR BIDS (IFB) NO. DAAB05-69-B-0682, ISSUED BY THE PHILADELPHIA PROCUREMENT DIVISION, PROCUREMENT AND PRODUCTION DIRECTORATE, UNITED STATES ARMY ELECTRONICS COMMAND (ECOM).

THE REFERENCED IFB WAS ISSUED ON JUNE 21, 1969, AND CALLED FOR BIDS ON 46,217 TELEPHONE SETS, TA-312 ( )/PT, PLUS 100 PERCENT INCREASE OPTION. THIRTY-NINE FIRMS WERE SOLICITED, AND NINE RESPONSIVE BIDS WERE RECEIVED. BIDS WERE OPENED ON AUGUST 4, 1969, AND SINCE BARRETT INTERCOMMUNICATIONS PRODUCTS COMPANY'S GROSS TOTAL BID OF $2,448,996.94 WAS LOW, THE CONTRACTING OFFICER ON AUGUST 5, 1969, REFERRED THE BID TO THE CONTRACTOR EVALUATION BOARD (CEB) AT PHILADELPHIA FOR A DETERMINATION OF CONTRACTOR RESPONSIBILITY. SUBSEQUENTLY, THE CEB REQUESTED DEFENSE CONTRACT ADMINISTRATION SERVICES REGION (DCASR), NEW YORK TO PERFORM A PRE-AWARD SURVEY OF BARRETT FACILITIES. IN A REPORT DATED SEPTEMBER 10, 1969, AND A SUPPLEMENTAL REPORT DATED OCTOBER 2, 1969, DCASR RATED BARRETT AS SATISFACTORY FOR AWARD. ON OCTOBER 10, 1969, CEB DISAGREED WITH DCASR'S FAVORABLE RECOMMENDATION AND CONCLUDED THAT BARRETT COULD NOT BE CONSIDERED FINANCIALLY RESPONSIBLE, A CONCLUSION WITH WHICH THE CONTRACTING OFFICER AGREED.

HAVING DETERMINED BARRETT, A SMALL BUSINESS, TO BE NONRESPONSIBLE DUE TO DEFICIENCIES IN CREDIT, THE CONTRACTING OFFICER, IN ACCORDANCE WITH ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-705.4, REFERRED THE CASE TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR CERTIFICATE OF COMPETENCY (COC) CONSIDERATION. ON FEBRUARY 12, 1970, THE SBA, BY ISSUANCE OF A COC, CERTIFIED BARRETT TO BE COMPETENT AS TO CAPACITY AND CREDIT TO PERFORM THE PROPOSED CONTRACT. THE DEPARTMENT OF THE ARMY IS PRESENTLY HOLDING THE AWARD IN ABEYANCE PENDING A DECISION BY THIS OFFICE ON YOUR PROTEST.

YOUR COMPLAINT AGAINST THE AWARD TO BARRETT, IN SUMMARY, IS THAT YOU DO NOT BELIEVE A COC SHOULD HAVE BEEN ISSUED BY THE SBA TO BARRETT, SINCE YOU FEEL THAT FIRM IS FINANCIALLY NONRESPONSIBLE. YOU EMPHASIZE THAT THE FINANCIAL CAPABILITY REQUIRED TO PERFORM THIS CONTRACT IS SUBSTANTIAL, WITH THE TOOLS ALONE FOR MANUFACTURE OF THE EQUIPMENT COSTING IN THE VICINITY OF SEVERAL HUNDRED THOUSAND DOLLARS, WHICH WILL NOT BE RECOVERABLE BY PROGRESS PAYMENTS. YOU STATE THAT A CREDIT CHECK OF THE COMPANY REVEALS THAT BARRETT IS A NEW YORK STATE CORPORATION WHICH WAS FORMED IN 1968 ON A TOTAL CAPITAL OF $32,000, WHICH INCLUDES A $25,000 LOAN FROM THE SMALL BUSINESS ADMINISTRATION. YOU ARGUE THAT AN AWARD TO BARRETT WOULD BE ILLEGAL, CONTRARY TO ASPR 1-903.1, AND WOULD DEFEAT THE PURPOSE AND INTENT OF FORMALLY ADVERTISED COMPETITIVE BIDDING SINCE BARRETT IS TO BE IN PARTNERSHIP WITH THE FOURTH LOWEST BIDDER, SPEDCOR ELECTRONICS CORPORATION.

THE AGENCY REPORT INDICATES THAT SPEDCOR IS TO FURNISH SOME OF THE FINANCING AND A PERCENTAGE OF THE PURCHASED MATERIAL AND LABOR NECESSARY FOR BARRETT TO PERFORM THE PROCUREMENT. SPEDCOR WAS REQUIRED BY THE CONTRACTING OFFICER TO SUBMIT AN AGREEMENT SIMILAR TO THAT SET FORTH IN DSA FORM 621, WHEREBY SPEDCOR AS SUBCONTRACTOR WOULD GUARANTEE THE PERFORMANCE OF BARRETT. ALTHOUGH THE CEB CONSIDERED THE GUARANTEE AGREEMENT INSUFFICIENT TO CHANGE ITS RECOMMENDATION THAT BARRETT WAS NOT FINANCIALLY RESPONSIBLE, AND THE ECOM PHILADELPHIA OFFICE OF GENERAL COUNSEL ADVISED THAT THE AGREEMENT WAS INSUFFICIENT ADEQUATELY TO PROTECT GOVERNMENT RIGHTS IN THE EVENT THAT BARRETT FOR ANY REASON FAILED TO PERFORM THE PROPOSED CONTRACT, THE SMALL BUSINESS ADMINISTRATION INDICATED THAT THESE FINANCIAL ARRANGEMENTS CONSTITUTED A GUARANTEE ADEQUATE TO PROTECT THE GOVERNMENT'S INTEREST AND SUFFICIENT TO MAKE A POSITIVE DETERMINATION AS TO CAPACITY AND CREDIT. ALTHOUGH THE CONTRACTING OFFICER FELT THESE FINANCIAL ARRANGEMENTS WERE INSUFFICIENT TO SUPPORT A FAVORABLE DETERMINATION OF FINANCIAL RESPONSIBILITY, HE AT THE SAME TIME FELT THAT IT WOULD NOT BE PRACTICAL TO APPEAL THE CASE TO THE WASHINGTON SMALL BUSINESS ADMINISTRATION NOR WOULD IT BE APPROPRIATE TO WITHDRAW THE REQUEST FOR COC ACTION. IN ACCORDANCE WITH ASPR 1-705.4 (F) (III) HE INFORMED SBA THAT IT MUST ISSUE A COC AS A PREREQUISITE TO HIS AWARDING THE CONTRACT TO BARRETT. ACCORDINGLY, SBA ISSUED THE COC UNDER DATE OF FEBRUARY 12, 1970.

ASPR 1-903.1, WHICH YOU HAVE CITED, CONTAINS THE GENERAL MINIMUM STANDARDS FOR RESPONSIBLE PROSPECTIVE CONTRACTORS. THE FIRST SUBPARAGRAPH OF THAT PROVISION DEALS WITH FINANCIAL RESPONSIBILITY AS FOLLOWS:

"1-903 MINIMUM STANDARDS FOR RESPONSIBLE PROSPECTIVE CONTRACTORS.

"1-903.1 GENERAL STANDARDS. EXCEPT AS OTHERWISE PROVIDED IN THIS PARAGRAPH 1-903, A PROSPECTIVE CONTRACTOR MUST:

"(I) HAVE ADEQUATE FINANCIAL RESOURCES, OR THE ABILITY TO OBTAIN SUCH RESOURCES AS REQUIRED DURING PERFORMANCE OF THE CONTRACT (SEE DEFENSE CONTRACT FINANCING REGULATIONS, PART 2, APPENDIX E, AND ANY AMENDMENTS THERETO; SEE ALSO 1-904.3 AND 1-905.2; FOR SBA CERTIFICATES OF COMPETENCY, SEE 1-705.4)."

SINCE THIS PARAGRAPH IS QUALIFIED BY REFERENCE TO SBA CERTIFICATES OF COMPETENCY, THE VALIDITY OF YOUR PROTEST MUST OF NECESSITY TURN ON THE EFFECT OF THE ISSUANCE OF A COC. INSOFAR AS IS HERE PERTINENT, SECTION 8 (B) OF THE SMALL BUSINESS ACT OF 1958, AS AMENDED, 15 U.S.C. 637 (B), PROVIDES AS FOLLOWS:

"IT SHALL ALSO BE THE DUTY OF THE (SMALL BUSINESS) ADMINISTRATION AND IT IS EMPOWERED, WHENEVER IT DETERMINES SUCH ACTION IS NECESSARY -

"(7) TO CERTIFY TO GOVERNMENT PROCUREMENT OFFICERS, AND OFFICERS ENGAGED IN THE SALE AND DISPOSAL OF FEDERAL PROPERTY, WITH RESPECT TO THE COMPETENCY, AS TO CAPACITY AND CREDIT, OF ANY SMALL-BUSINESS CONCERN OR GROUP OF SUCH CONCERNS TO PERFORM A SPECIFIC GOVERNMENT CONTRACT. IN ANY CASE IN WHICH A SMALL-BUSINESS CONCERN OR GROUP OF SUCH CONCERNS HAS BEEN CERTIFIED BY OR UNDER THE AUTHORITY OF THE ADMINISTRATION TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT AS TO A SPECIFIC GOVERNMENT CONTRACT, THE OFFICERS OF THE GOVERNMENT HAVING PROCUREMENT OR PROPERTY DISPOSAL POWERS ARE DIRECTED TO ACCEPT SUCH CERTIFICATION AS CONCLUSIVE, AND ARE AUTHORIZED TO LET SUCH GOVERNMENT CONTRACT TO SUCH CONCERN OR GROUP OF CONCERNS WITHOUT REQUIRING IT TO MEET ANY OTHER REQUIREMENT WITH RESPECT TO CAPACITY AND CREDIT"

IN VIEW OF THE ABOVE STATUTORY MANDATE THAT PROCUREMENT OFFICERS OF THE GOVERNMENT MUST ACCEPT SBA DETERMINATIONS AS TO THE CAPACITY AND CREDIT OF PROSPECTIVE CONTRACTORS, WE HAVE HERETOFORE REACHED THE CONCLUSION THAT IT WOULD BE IMPROPER FOR THIS OFFICE TO REVIEW SUCH DETERMINATIONS. 47 COMP. GEN. 360 (1968); B-167608, SEPTEMBER 22, 1969.

ACCORDINGLY, WE ARE UNABLE TO INTERPOSE ANY LEGAL OBJECTION TO AN AWARD BASED UPON SBA'S ISSUANCE OF A COC TO BARRETT IN THIS CASE. YOUR PROTEST MUST THEREFORE BE DENIED.