B-169549, JUL. 8, 1970

B-169549: Jul 8, 1970

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PARTICULARLY WHEN THE RECORD INDICATES THAT DELAYS UNDER PRIOR CONTRACTS WERE BEYOND HIS CONTROL AND WITHOUT FAULT OR NEGLIGENCE. SCHAUB & FENSTERMAKER: REFERENCE IS MADE TO YOUR LETTERS OF APRIL 29 AND MAY 6. THE REFERENCED INVITATION WAS ISSUED ON AN UNRESTRICTED BASIS. POTENTIAL BIDDERS WERE ADVISED THAT PROGRESS PAYMENTS WOULD BE AVAILABLE TO SMALL BUSINESS CONCERNS ONLY AND THAT THE NEED FOR PROGRESS PAYMENTS WOULD NOT BE AN ADVERSE FACTOR IN AWARD. POTENTIAL BIDDERS WERE ADVISED OF THE AVAILABILITY OF ONE SET OF TOOLING AT A STATED RENTAL FEE AND EACH BIDDER WAS REQUIRED TO INDICATE WHETHER THE BID WAS BASED ON THE USE OF GOVERNMENT-OWNED TOOLING. NINE BIDS WERE RECEIVED AND OPENED ON FEBRUARY 17.

B-169549, JUL. 8, 1970

CONTRACT -- BID PROTEST -- BIDDER RESPONSIBILITY DECISION DENYING PROTEST OF ARMSTRONG PRODUCTS CO. AGAINST PROPOSED AWARD TO BOOTZ MANUFACTURING CO. UNDER ADVERTISED PROCUREMENT FOR BURNER UNIT COMPONENTS BY DEFENSE SUPPLY AGENCY. A LOW BIDDER WHO HAS FILED PETITION IN BANKRUPTCY BUT WHO HAS A SATISFACTORY FINANCIAL STATUS AT PRESENT AS WELL AS AN AFFIRMATIVE PRE AWARD SURVEY RATING SHOULD NOT ON THE BASIS OF THE EVIDENCE BE REJECTED AS A PROPOSED CONTRACTOR, PARTICULARLY WHEN THE RECORD INDICATES THAT DELAYS UNDER PRIOR CONTRACTS WERE BEYOND HIS CONTROL AND WITHOUT FAULT OR NEGLIGENCE.

TO JENKINS, SCHAUB & FENSTERMAKER:

REFERENCE IS MADE TO YOUR LETTERS OF APRIL 29 AND MAY 6, 1970, CONCERNING THE PROTEST OF YOUR CLIENT, ARMSTRONG PRODUCTS COMPANY, AGAINST THE AWARD OF A CONTRACT TO BOOTZ MANUFACTURING COMPANY, UNDER IFB NO. DSA 400-70-B- 4128, ISSUED ON JANUARY 16, 1970, BY THE DEFENSE SUPPLY AGENCY, DIRECTORATE OF PROCUREMENT AND PRODUCTION, DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA.

THE REFERENCED INVITATION WAS ISSUED ON AN UNRESTRICTED BASIS, SOLICITING BIDS ON 30 ITEMS OF VARIOUS BURNER UNIT COMPONENTS. POTENTIAL BIDDERS WERE ADVISED THAT PROGRESS PAYMENTS WOULD BE AVAILABLE TO SMALL BUSINESS CONCERNS ONLY AND THAT THE NEED FOR PROGRESS PAYMENTS WOULD NOT BE AN ADVERSE FACTOR IN AWARD. POTENTIAL BIDDERS WERE ADVISED OF THE AVAILABILITY OF ONE SET OF TOOLING AT A STATED RENTAL FEE AND EACH BIDDER WAS REQUIRED TO INDICATE WHETHER THE BID WAS BASED ON THE USE OF GOVERNMENT-OWNED TOOLING. THE SOLICITATION CONTAINED AN OPTION FOR AN INCREASED QUANTITY NOT TO EXCEED 50 PERCENT OF THE BASIC QUANTITY OF EACH ITEM SET FORTH IN THE CONTRACT SCHEDULE.

NINE BIDS WERE RECEIVED AND OPENED ON FEBRUARY 17, 1970. AWARD WAS TO BE MADE ON AN INDIVIDUAL ITEM BASIS EXCEPT THAT ITEM NOS. 2-6 WERE TO BE AWARDED AS ONE ITEM DUE TO THE AVAILABILITY OF ONLY ONE SET OF GOVERNMENT TOOLING. CONTRACTS HAVE BEEN AWARDED TO THREE FIRMS (INCLUDING ARMSTRONG) FOR ALL ITEMS EXCEPT ITEMS 2-6,15, 16 AND 21, WHICH THE AGENCY PROPOSES TO AWARD TO BOOTZ.

YOU CONTEND THAT BOOTZ SHOULD NOT RECEIVE THE AWARD SINCE IT IS NOT A RESPONSIBLE CONTRACTOR DUE TO ITS FINANCIAL CONDITION. YOU EMPHASIZE THAT ON NOVEMBER 10, 1969, BOOTZ FILED A PETITION FOR CORPORATE REORGANIZATION UNDER CHAPTER X OF THE BANKRUPTCY ACT WITH THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF INDIANA, BUT THAT NO PLAN FOR REORGANIZATION HAS BEEN FILED, MUCH LESS APPROVED BY THE COURT. YOU EMPHASIZE THAT WHEN BOOTZ SUBMITS A PLAN FOR REORGANIZATION, THE PLAN MUST BE APPROVED BY THE CREDITORS AND IT MUST ALSO BE APPROVED BY THE COURT. YOU STATE THAT "IF THE CREDITORS DO NOT APPROVE OF THE PLAN, AND THE COURT DOES NOT APPROVE OF THE PLAN, THE COURT, AFTER HEARING AND UPON NOTICE TO THE DEBTOR, CREDITORS AND OTHER PARTIES AS DIRECTED BY THE COURT, MAY EITHER ADJUDGE THE DEBTOR (BOOTZ) A BANKRUPT, OR DISMISS THE ARRANGEMENT PROCEEDINGS, WHICHEVER APPEARS TO BE IN THE INTEREST OF THE CREDITORS, AS DETERMINED BY THE COURT." SINCE THERE IS NO ASSURANCE THE REORGANIZATION PROCEDURE WILL BE APPROVED, YOU FEEL THAT THE GOVERNMENT COULD NOT CONTRACT WITH OR DO BUSINESS WITH BOOTZ WITH REASONABLE ASSURANCE THAT THE COMPANY WILL REMAIN IN BUSINESS.

YOU HAVE ALSO DISCUSSED BOOTZ' PERFORMANCE UNDER A PRIOR CONTRACT (CONTRACT NO. DSA 400-68-C-1416) WITH THIS SAME COMMAND AND EMPHASIZE THE COMPANY WAS LATE IN DELIVERING BOTH THE BURNER UNITS AND THE TOOLING UNDER THIS CONTRACT.

THE CONTRACTING OFFICER STATES THAT HE RECOMMENDED AWARD AFTER CAREFUL CONSIDERATION OF BOOTZ' PRESENT FINANCIAL STATUS AND PREVIOUS PERFORMANCE UNDER GOVERNMENT CONTRACTS, INCLUDING THE CONTRACT ON WHICH YOU CLAIM BOOTZ' DELIVERY WAS LATE.

WE HAVE CAREFULLY EXAMINED THE FILE CONCERNING BOOTZ' PRESENT FINANCIAL ABILITY TO PERFORM THE PROPOSED CONTRACT. A STATEMENT FROM THE TRUSTEE IN REORGANIZATION FOR THE COMPANY, DATED JUNE 5, 1970, STATES THAT THE WORKING CAPITAL (CURRENT ASSETS INCLUDING CASH, ACCOUNTS RECEIVABLE AND INVENTORY) OF THE COMPANY AFTER THE SALE OF THE WHOLLY OWNED SUBSIDIARY, PIONEER METAL SPECIALTIES, INC., WHICH WAS CONSUMMATED ON MAY 25, 1970, EXCEEDS CURRENT LIABILITIES BY APPROXIMATELY $400,000. IN ADDITION, WORKING CAPITAL EXCEEDS ALL LIABILITIES, INCLUDING LONG TERM DEBT, BY $280,000. THIS STATEMENT OF EXCESS OF ASSETS OVER LIABILITIES DOES NOT TAKE INTO ACCOUNT FIXED ASSETS WHICH INCLUDE A BUILDING WHICH WOULD, AFTER PAYMENT OF THE LONG TERM DEBT, BE FREE AND UNENCUMBERED, AND WHICH WAS RECENTLY APPRAISED AT $100,000 ON A SHORT TERM LIQUIDATION BASIS.

IN REGARD TO BOOTZ' PERFORMANCE UNDER CONTRACT NO. DSA 400-68-C-1416, THE ADMINISTRATIVE FILE INDICATES BOOTZ' TROUBLE IN PERFORMING ON TIME WAS DUE TO ILLEGIBLE GOVERNMENT-FURNISHED DRAWINGS, AN ELEVEN WEEK PLANT STRIKE, AN EARTHQUAKE AND A FLU EPIDEMIC. THE FILE DOES SHOW THAT BOOTZ WAS LATE IN PERFORMING UNDER THE CONTRACT, BUT MUCH OF THE DELAY ENCOUNTERED BY BOOTZ APPEARS TO HAVE ARISEN FROM CAUSES BEYOND THE CONTROL AND WITHOUT THE FAULT OR NEGLIGENCE OF THE FIRM AND WHICH MAY NOT HAVE BEEN FULLY REFLECTED IN THE ADJUSTMENT WHICH WAS MADE IN THE CONTRACT DELIVERY SCHEDULE. THE CONTRACTING OFFICER CONCLUDED THAT A RECURRENCE OF THE DELAYS EXPERIENCED ON THIS CONTRACT, SEVERAL OF WHICH WERE UNIQUE, SHOULD NOT BE ANTICIPATED IN PERFORMANCE OF THE CONTRACT PROPOSED TO BE AWARDED TO BOOTZ, A CONCLUSION WITH WHICH WE FIND NO BASIS TO DISAGREE.

PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION 1-905.4, THE CONTRACTING OFFICER INITIATED A PREAWARD SURVEY TO DETERMINE BOOTZ' RESPONSIBILITY FOR THE PROPOSED CONTRACT. THE PREAWARD SURVEY TEAM, WITH KNOWLEDGE OF THE PETITION FOR CORPORATE REORGANIZATION, FOUND THAT BOOTZ DID HAVE THE PRODUCTION CAPACITY, PLANT FACILITIES AND EQUIPMENT, FINANCIAL CAPABILITY, PURCHASING AND SUBCONTRACTING SYSTEM, ACCOUNTING SYSTEM, QUALITY ASSURANCE CAPABILITY, LABOR RESOURCES, PERFORMANCE RECORD AND ABILITY TO MEET THE REQUIRED SCHEDULE TO SUCCESSFULLY PERFORM THE PROSPECTIVE CONTRACT. A SATISFACTORY RATING WAS GIVEN FOR ALL FACTORS OF RESPONSIBILITY CONSIDERED. THE SURVEY TEAM RECOMMENDED COMPLETE AWARD, AND THIS RECOMMENDATION WAS CONCURRED IN BY THE PRE AWARD MONITOR AND APPROVED BY THE CHAIRMAN OF THE PRE-AWARD SURVEY BOARD.

IN B-153478, JANUARY 18, 1965, THIS OFFICE CONSIDERED THE QUESTION OF A PROPOSED AWARD TO A FIRM WHICH WAS OPERATING UNDER CHAPTER XI OF THE BANKRUPTCY ACT (WHICH IS SUBSTANTIALLY SIMILAR TO CHAPTER X OF THE BANKRUPTCY ACT FOR THE PURPOSES OF THIS DECISION) AND HELD THAT WE WERE NOT JUSTIFIED IN OBJECTING TO A DETERMINATION CONCERNING THE FINANCIAL ABILITY OF THE PROPOSED CONTRACTOR IN THE ABSENCE OF ANY SHOWING OF BAD FAITH OR A LACK OF A REASONABLE BASIS FOR THE DETERMINATION BY THE PROCURING ACTIVITY. IN VIEW THEREOF, AND IN LIGHT OF THE PRESENT FINANCIAL STATUS OF BOOTZ, EVIDENCE OF THE CAUSES OF THE DELAYS UNDER CONTRACT NO. DSA 400-68-C-1416, AND THE OBTAINING OF AN AFFIRMATIVE PREAWARD SURVEY, WE CANNOT CONCLUDE THAT THE PROCURING ACTIVITY'S FAVORABLE DETERMINATION OF BOOTZ' ABILITY TO PERFORM THIS CONTRACT IS NOT SUPPORTABLE BY THE RECORD. SINCE THE QUESTION OF THE QUALIFICATIONS OF A PROPOSED CONTRACTOR IS PRIMARILY THE FUNCTION OF THE ADMINISTRATIVE OFFICERS CONCERNED, AND THIS DETERMINATION HAS A REASONABLE BASIS, WE FIND NO REASON TO OBJECT TO AN AWARD TO BOOTZ. SEE 37 COMP. GEN. 430 (1957).

FOR THE ABOVE REASONS, YOUR PROTEST IS DENIED.