B-170388, OCT 15, 1970, 50 COMP GEN 281

B-170388: Oct 15, 1970

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BIDDERS - QUALIFICATIONS - FINANCIAL RESPONSIBILITY - EVALUATION UNDER A REQUEST FOR PROPOSALS THAT CONTAINED A "SUBMISSION OF FINANCIAL DATA" CLAUSE AND WAS ISSUED PURSUANT TO THE PUBLIC EXIGENCY AUTHORITY IN 10 U.S.C. 2304(A)(2). IN ACCEPTING THE RECOMMENDATION OF A CONTRACTOR EVALUATION BOARD BASED ON INADEQUATE FINANCIAL DATA THAT THE LOW OFFEROR WAS FINANCIALLY NONRESPONSIBLE. FURTHER NEGOTIATIONS SHOULD HAVE BEEN CONDUCTED BEFORE AWARDING A CONTRACT TO THE HIGH OFFEROR WHO INITIALLY HAD NOT COMPLIED WITH THE CLAUSE. ALTHOUGH THE NEARLY COMPLETED CONTRACT WILL NOT BE DISTURBED. CONTRACTS - DISPUTES - CONFLICT BETWEEN ADMINISTRATIVE REPORT AND CONTRACTOR'S ALLEGATIONS WHERE THERE IS A DISPUTE BETWEEN A CONTRACTING OFFICER AND A PROPOSED CONTRACTOR RELATIVE TO MATTERS THAT ARE NOT PART OF THE WRITTEN RECORD.

B-170388, OCT 15, 1970, 50 COMP GEN 281

BIDDERS - QUALIFICATIONS - FINANCIAL RESPONSIBILITY - EVALUATION UNDER A REQUEST FOR PROPOSALS THAT CONTAINED A "SUBMISSION OF FINANCIAL DATA" CLAUSE AND WAS ISSUED PURSUANT TO THE PUBLIC EXIGENCY AUTHORITY IN 10 U.S.C. 2304(A)(2), THE CONTRACTING OFFICER, IN ACCEPTING THE RECOMMENDATION OF A CONTRACTOR EVALUATION BOARD BASED ON INADEQUATE FINANCIAL DATA THAT THE LOW OFFEROR WAS FINANCIALLY NONRESPONSIBLE, AVOIDED THE INFORMATION-GATHERING DUTY PRESCRIBED BY THE DEFENSE CONTRACT FINANCING REGULATION, PART 2, APPENDIX "E" OF THE ARMED SERVICES PROCUREMENT REGULATION, NOTWITHSTANDING THE URGENCY OF THE PROCUREMENT. BECAUSE OF THE DOUBTFUL FINDINGS AND THE WIDE DISPARITY BETWEEN THE TWO OFFERS RECEIVED, FURTHER NEGOTIATIONS SHOULD HAVE BEEN CONDUCTED BEFORE AWARDING A CONTRACT TO THE HIGH OFFEROR WHO INITIALLY HAD NOT COMPLIED WITH THE CLAUSE. ALTHOUGH THE NEARLY COMPLETED CONTRACT WILL NOT BE DISTURBED, FUTURE RESPONSIBILITY DETERMINATIONS SHOULD BE ADEQUATELY SUPPORTED. CONTRACTS - DISPUTES - CONFLICT BETWEEN ADMINISTRATIVE REPORT AND CONTRACTOR'S ALLEGATIONS WHERE THERE IS A DISPUTE BETWEEN A CONTRACTING OFFICER AND A PROPOSED CONTRACTOR RELATIVE TO MATTERS THAT ARE NOT PART OF THE WRITTEN RECORD, IN ACCORDANCE WITH THE POLICY OF THE UNITED STATES GENERAL ACCOUNTING OFFICE (GAO), THE DISPUTE MUST BE RESOLVED IN FAVOR OF THE CONTRACTING OFFICER, AS GAO IS UNABLE TO RESOLVE QUESTIONS OF CREDIBILITY APART FROM THE WRITTEN RECORD AND MUST THEREFORE DEFER TO THE ADMINISTRATIVE AGENCY.

TO THE SECRETARY OF THE ARMY, OCTOBER 15, 1970:

BY LETTERS DATED AUGUST 6 AND SEPTEMBER 9, 1970, THE ASSISTANT GENERAL COUNSEL, HEADQUARTERS UNITED STATES ARMY MATERIAL COMMAND, WASHINGTON, D.C., FURNISHED OUR OFFICE WITH ADMINISTRATIVE REPORTS ON THE PROTEST OF FILTRON COMPANY, INC., AGAINST THE DETERMINATION OF THE WASHINGTON PROCUREMENT DIVISION (WPD), UNITED STATES ARMY ELECTRONICS COMMAND (USAECOM), THAT THE FIRM WAS NONRESPONSIBLE FOR FINANCIAL REASONS AND COULD NOT BE AWARDED A CONTRACT UNDER REQUEST FOR PROPOSALS NO. DAABO9-70- R-0068. AWARD UNDER THE SOLICITATION WAS MADE ON JUNE 26, 1970, TO RAY PROOF CORPORATION.

THE FOLLOWING FACTS ARE PERTINENT TO OUR CONSIDERATION OF THE PROTEST. THE REQUEST FOR PROPOSALS WAS ISSUED ON JUNE 10, 1970, PURSUANT TO THE AUTHORITY IN 10 U.S.C. 2304(A)(2) TO NEGOTIATE WHEN THE PUBLIC EXIGENCY WILL NOT PERMIT THE DELAY INCIDENT TO FORMAL ADVERTISING. A DETERMINATION AND FINDING CITING ON "03" UMMIPS PRIORITY DESIGNATED SUPPORTS THE DECISION TO NEGOTIATE; WE ALSO NOTE THAT AWARD BY JUNE 30 WAS CONSIDERED TO BE NECESSARY BECAUSE OF FUNDING CONSIDERATIONS.

OFFERS WERE REQUESTED FOR FURNISHING AND INSTALLING ELECTROMAGNETICALLY SHIELDED DOORS AND FRAMES FOR THE PENTAGON TELECOMMUNICATIONS CENTER ON OR BEFORE 120 DAYS AFTER DATE OF THE AWARD DOCUMENT. THE SOLICITATION CONTAINED THE FOLLOWING PROVISION RELATIVE TO THE SUBMISSION OF FINANCIAL DATA:

SUBMISSION OF FINANCIAL DATA: IF THE BIDDER/OFFEROR HAS NOT PREVIOUSLY FURNISHED THIS DIVISION WITH A COPY OF A *CERTIFIED BALANCE SHEET AND PROFIT AND LOSS STATEMENT, CURRENT WITHIN SIX MONTHS FROM THE DATE OF SUBMISSION OF HIS BID/PROPOSAL, SUCH FINANCIAL DATA MUST BE FURNISHED WITH THE BID/PROPOSAL, IN ORDER TO ESTABLISH PROOF OF FINANCIAL RESPONSIBILITY. WHERE DATA AS INDICATED ABOVE HAVE BEEN FURNISHED, THE BIDDER/OFFEROR WILL INDICATE BY CHECKING BELOW THAT DATA PREVIOUSLY FURNISHED REFLECTS CURRENT POSITION OF COMPANY. THE FAILURE OF ANY BIDDER/OFFEROR TO FURNISH SUCH EVIDENCE MAY BE DEEMED BY THE CONTRACTING OFFICER TO BE SUFFICIENT GROUNDS TO DETERMINE THAT BIDDER/OFFEROR IS NOT A RESPONSIBLE BIDDER/OFFEROR, DUE TO NONCOMPLIANCE WITH THIS PROVISION.

*BIDDER/OFFEROR CHECK ONE:

THE BIDDER/OFFEROR REPRESENTS THAT THE FINANCIAL DATA PREVIOUSLY FURNISHED REFLECTS THE CURRENT FINANCIAL CONDITION OF THE COMPANY.

CERTIFIED BALANCE SHEET AND PROFIT AND LOSS STATEMENT IS ATTACHED.

OF THE 12 SOURCES SOLICITED, ONLY FILTRON, WITH A PROPOSED PRICE OF $42,950 AND RAY PROOF, WITH A PROPOSED PRICE OF $75,905, RESPONDED BY THE JUNE 19, 1970, OPENING DATE. THE GOVERNMENT'S ESTIMATE FOR THE WORK WAS $113,000. FILTRON IS A SECOND-TIER SUBSIDIARY OF LIQUIDONICS INDUSTRIES, INC.; THE INTERVENING PARENT, H. O. BOEHME COMPANY, INC., IS NOT CONNECTED ADMINISTRATIVELY OR OPERATIONALLY WITH FILTRON. WITH RESPECT TO THE SUBMISSION OF FINANCIAL DATA, FILTRON CHECKED THE BLOCK, ABOVE, INDICATING THAT IT HAD PREVIOUSLY FURNISHED FINANCIAL DATA WHICH WAS CURRENT AND ALSO IDENTIFIED LIQUIDONICS AS ITS PARENT. RAY PROOF, ON THE OTHER HAND, MADE NO RESPONSE TO THE CLAUSE AND DID NOT FURNISH CURRENT DATA COMPLYING WITH THE CLAUSE. UPON INVESTIGATION, IT WAS DETERMINED THAT THE ONLY FINANCIAL DATA ON FILE AT WPD FOR FILTRON WAS FOR ITS FISCAL YEAR ENDING JUNE 30, 1968. THIS DATA WAS CONSIDERED OBSOLETE BY THE CONTRACTING OFFICER. ACCORDANCE WITH ITS ESTABLISHED PROCEDURES, WPD REQUESTED ON JUNE 23 THAT THE CONTRACTOR EVALUATION BOARD (CEB), UNITED STATES ARMY ELECTRONICS COMMAND, PHILADELPHIA, EVALUATE FILTRON'S FINANCIAL RESPONSIBILITY. DATA WAS SENT WITH THE REQUEST SINCE IT WAS HOPED THAT CEB WOULD HAVE MORE CURRENT FINANCIAL INFORMATION ON FILE. IN ANY EVENT, THE CONTRACTING OFFICER STATES THAT WPD ANTICIPATED FORWARDING ANY ADDITIONAL INFORMATION IT RECEIVED TO CEB.

ON JUNE 24 TECHNICAL NEGOTIATIONS WERE CONDUCTED WITH BOTH OFFERORS AND, IN THIS REGARD, FILTRON'S INITIAL PROPOSAL WAS CONSIDERED TECHNICALLY UNACCEPTABLE. THE CONTRACTING OFFICER ADVISES THAT BECAUSE OF FILTRON'S LOW PRICE HE PLANNED TO CONDUCT PRICE NEGOTIATIONS WITH THE FIRM TO INSURE THAT IT WAS NOT "BUYING IN." NEGOTIATIONS WERE NEVER HELD IN VIEW OF SUBSEQUENT EVENTS. BOTH FILTRON AND RAY PROOF WERE REQUESTED TO SUBMIT CURRENT FINANCIAL DATA AND WERE ADVISED THAT PROMPT RESPONSES WOULD BE REQUIRED. LATER, ON JUNE 24, EACH FIRM WAS ADVISED BY TELEGRAM THAT 12 NOON OF JUNE 26 WAS THE CLOSING DATE FOR THE RECEIPT OF PROPOSAL REVISIONS.

ON JUNE 25, A CONTRACT SPECIALIST AT WPD TELEPHONED CEB TO DETERMINE THE STATUS OF ITS REVIEW OF FILTRON'S FINANCIAL RESPONSIBILITY. HIS SIGNED MEMORANDUM OF THAT CONVERSATION IS AS FOLLOWS:

1. ON 25 JUNE 1970 *** (THE CONTRACT SPECIALIST) AND *** (THE QUALITY ASSURANCE MEMBER) AND *** (THE FINANCIAL MEMBER) OF THE CONTRACT EVALUATION BOARD, PHILADELPHIA DISCUSSED THE WRITTEN REQUEST SENT TO THE CEB ON 23 JUNE 1970. THE DISCUSSION WAS CONDUCTED TELEPHONICALLY. THE SUBJECT OF THE DISCUSSION WAS THE FINANCIAL RESPONSIBILITY OF THE FILTRON COMPANY, A SUBSIDIARY OF LIQUIDONICS INDUSTRIES INC. PRIOR TO THIS DISCUSSION CEB HAD BEEN FURNISHED FINANCIAL DATA ON LIQUIDONICS INDUSTRIES AND ALSO RAY PROOF INC., THE OTHER OFFER IN THIS PROCUREMENT.

2. DURING THE DISCUSSION *** (THE FINANCIAL MEMBER) OF THE CEB STATED THAT THE FINANCIAL POSITION OF LIQUIDONICS INDUSTRIES WAS VERY BAD. *** (THE FINANCIAL MEMBER) REQUESTED THAT HE BE PROVIDED WITH FINANCIAL DATA ON THE SUBSIDIARY, FILTRON COMPANY. *** (THE FINANCIAL MEMBER) WENT ON TO SAY THAT HE WANTED THIS DATA FOR RECORD ONLY. *** (THE FINANCIAL MEMBER) STATED THAT THE FILTRON COMPANY COULD NOT BE APPROVED AS FINANCIALLY RESPONSIBLE WITH A PARENT FIRM (LIQUIDONICS INDUSTRIES) BEING IN SUCH BAD FINANCIAL CONDITION. IN SHORT *** (THE FINANCIAL MEMBER) SAID THAT HE WOULD NOT APPROVE FILTRON ANYWAY BUT HE WOULD LIKE TO HAVE THEIR FINANCIAL DATA FOR THE RECORD.

3. AT THIS POINT THE DISCUSSION TURNED TO THE FINANCIAL RESPONSIBILITY OF RAY PROOF INC. *** (THE QUALITY ASSURANCE MEMBER) STATED THAT RAY PROOF INC. WAS FINANCIALLY RESPONSIBLE, HOWEVER, HE NEEDED A WRITTEN REQUEST TO APPROVE THEM IN WRITING. *** (THE CONTRACT SPECIALIST) STATED THAT HE WOULD SEND THE WRITTEN REQUEST THAT DAY.

THE FOLLOWING ENTRIES WERE INDORSED ON THIS MEMORANDUM BY THE CONTRACTING OFFICER AND CHIEF, WPD, RESPECTIVELY:

ON THE BASIS OF THE FINDINGS OF THE CEB CITED ABOVE, THE UNDERSIGNED CONTRACTING OFFICER WILL DETERMINE THE FILTRON COMPANY TO BE A NON RESPONSIBLE OFFEROR. STEPS WILL NOW BE TAKEN TO PERFORM THE NECESSARY PREAWARD APPROVALS IN ORDER TO AWARD THE RESULTING CONTRACT TO THE ONLY OTHER OFFER RECEIVED.

I CONCUR WITH THE ACTION TO BE TAKEN AS STATED ABOVE BY CONTRACTING OFFICER. AS A RESULT OF OUR REQUEST FOR INFORMATION CONCERNING THE SUBSTANCE OF THE CONVERSATION, CEB MEMBERS PREPARED A MEMORANDUM DATED AUGUST 24, 1970, WHICH STATES, IN PART, THAT:

ON 25 JUNE 1970 *** (THE CONTRACT SPECIALIST), WASHINGTON PROCUREMENT DIVISION, TELEPHONED CEB AT USAECOM/PHILA. AND TALKED WITH *** (THE QUALITY ASSURANCE MEMBER) AND *** (THE FINANCIAL MEMBER), MEMBERS OF CEB. *** (THE CONTRACT SPECIALIST) ASKED IF THE BOARD HAD RECEIVED A REQUEST FOR EVALUATION OF FINANCIAL RESPONSIBILITY OF SUBJECT COMPANY. *** (THE FINANCIAL MEMBER) TOLD *** (THE CONTRACT SPECIALIST) THAT THE WRITTEN EVALUATION REQUEST, FOR AN EVALUATION IN THE FINANCIAL AREA ONLY, WAS RECEIVED AT CEB ON 24 JUNE 1970 BUT THAT THIS REQUEST DID NOT INCLUDE A FINANCIAL STATEMENT ON FILTRON. WHEN *** (THE CONTRACT SPECIALIST) ASKED *** (THE FINANCIAL MEMBER) WHETHER OR NOT HE *** COULD PROVIDE VERBAL APPROVAL, *** (THE FINANCIAL MEMBER) REPLIED THAT BASED UPON AVAILABLE DATA IN-HOUSE THE CASE LOOKED LIKE A FINANCIAL TURN DOWN BUT THAT A WRITTEN EVALUATION COULD NOT BE MADE UNTIL A LATER FINANCIAL STATEMENT ON FILTRON WAS RECEIVED.

BOTH FIRMS SUBMITTED TIMELY RESPONSES BY THE JUNE 26 CLOSING DATE AND AWARD WAS MADE LATER THAT DAY TO RAY PROOF. FILTRON'S REVISED PROPOSAL WAS HAND-CARRIED TO THE CONTRACT SPECIALIST BY ITS REGIONAL MANAGER ON THE MORNING OF THE 26TH. INCLUDED IN ITS SUBMISSION WAS A TWO-PAGE "STATEMENT OF INCOME AND DEFICIT" FOR ITS FISCAL YEAR ENDING JUNE 30, 1969.

NOTICE OF AWARD TO RAY PROOF, IN ACCORDANCE WITH PARAGRAPH 3-508.3 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), WAS MAILED TO FILTRON ON JUNE 29, BUT WAS NOT RECEIVED UNTIL JULY 2, 1970. ON JUNE 30, FILTRON'S REGIONAL MANAGER CALLED THE CONTRACTING OFFICER TO DETERMINE THE STATUS OF THE PROCUREMENT. HE WAS ADVISED OF THE AWARD OF THE CONTRACT AND THAT FILTRON WAS DETERMINED TO BE NONRESPONSIBLE FOR FINANCIAL REASONS. THIS INFORMATION WAS COMMUNICATED TO FILTRON'S PRESIDENT, WHO ALSO SPOKE WITH THE CONTRACTING OFFICER. BOTH REPRESENTATIVES DISPUTED THE DETERMINATION AND THE CONTRACTING OFFICER WAS ADVISED THAT FILTRON INTENDED TO PROTEST THE MATTER. SUCH ACTION WAS TAKEN BY TELEGRAM DATED JULY 2. (THIS TELEGRAM WAS NOT RECEIVED BY THE CONTRACTING OFFICER UNTIL JULY 7.)

ON JULY 6, 1970, FILTRON'S REGIONAL MANAGER INQUIRED WHETHER WPD HAD RECEIVED ITS PROTEST. THE SUBSTANCE OF THE ENSUING CONVERSATION IS A MATTER OF DISPUTE WHICH, IN ACCORDANCE WITH OUR POLICY, WE RESOLVE IN FAVOR OF THE CONTRACTING OFFICER'S VERSION OF THE CONVERSATION. THE CONTRACTING OFFICER STATES THAT:

*** (THE REGIONAL MANAGER) NOTIFIED ME THAT A TELEGRAM HAD BEEN TRANSMITTED TO ME BY THE FILTRON HOME OFFICE REQUESTING THE AWARD TO RAY PROOF BE STOPPED. HE ALSO INFORMED ME ADDITIONAL FINANCIAL DATA FURTHER SUPPORTING THEIR FINANCIAL POSITION COULD BE FURNISHED. I ADVISED *** (THE REGIONAL MANAGER) ANY SUCH ADDITIONAL FINANCIAL DATA WOULD BE REVIEWED AND ANY RECONSIDERATIONS THAT COULD LEGALLY BE MADE AS TO "SUSPENDING" THE CONTRACT WITH RAY PROOF WOULD BE MADE, IF SUCH RECONSIDERATIONS WERE VALID. HOWEVER, AT NO TIME DID I PROMISE *** (THAT) I WOULD HOLD UP THE PROCUREMENT WITH RAY PROOF, AS ALLEGED *** . IN VIEW OF THE NEW FINANCIAL INFORMATION *** (THE REGIONAL MANAGER) SAID WOULD BE FORTHCOMING, I TOLD HIM THAT IN MY OPINION, HE DID NOT HAVE A BASIS FOR A PROTEST UNTIL ALL "NEW" DOCUMENTS WERE SUBMITTED. IF HE RECEIVED ANY ENCOURAGEMENT THAT ANY REVIEW OF ADDITIONAL FINANCIAL DATA WOULD RESULT IN SUSPENSION OF THE RAY PROOF AWARD, IT WAS NOT INTENDED. IN A LATER CONVERSATION ON THIS SAME DATE *** (THE REGIONAL MANAGER) INDICATED THE FILTRON HOME OFFICE WAS WITHDRAWING THEIR TELEGRAPHIC PROTEST PENDING ANY RECONSIDERATIONS OF ADDITIONAL FINANCIAL DATA.

IN AN AFFIDAVIT SUBMITTED TO OUR OFFICE, THE REGIONAL MANAGER STATES THAT DURING THE CONVERSATION THE CONTRACTING OFFICER REQUESTED THAT FILTRON RETURN THE CONTRACTING OFFICER'S LETTER OF JUNE 29; SUBMIT ADDITIONAL UNAUDITED FINANCIAL DATA NOT MORE THAN 6 MONTHS OLD; AND THAT FILTRON SHOULD WITHDRAW ITS PROTEST. THE REGIONAL MANAGER FURTHER STATES THAT THE CONTRACTING OFFICER INDICATED THAT HE WOULD "HOLD UP THE CONTRACT" IF THIS WAS DONE.

IN HIS SUPPLEMENTAL ADMINISTRATIVE REPORT OF AUGUST 28, THE CONTRACTING OFFICER REAFFIRMS HIS POSITION AND OBSERVES THAT: "I CANNOT CONCEIVE OF ANY COMPANY OFFICIAL ACCEPTING ANY CONTRACTING OFFICER'S TELEPHONIC STATEMENT THAT 'FILTRON SHOULD WITHDRAW THEIR TELEGRAPHIC PROTEST OF AWARD TO RAY PROOF.'"

ON JULY 7, RAY PROOF WAS TELEPHONICALLY NOTIFIED OF THE POSSIBILITY OF A PROTEST AND ASKED IF IT WOULD INCUR ANY COSTS UNDER THE CONTRACT DURING THE NEXT 10 DAYS. RAY PROOF INDICATED THAT IT WAS UNLIKELY THAT IT WOULD INCUR COSTS DURING THE PERIOD, BUT THAT IT WOULD NOTIFY THE CONTRACTING OFFICER IF CIRCUMSTANCES CHANGED.

ON THE SAME DAY BOTH THE TELEGRAM OF PROTEST AND THE TELEGRAM OF JULY 6 WERE RECEIVED BY THE CONTRACTING OFFICER. ON THE MORNING OF JULY 7, FILTRON'S REGIONAL MANAGER HAND-CARRIED TO THE CONTRACTING OFFICER AN UNAUDITED BALANCE SHEET AND STATEMENT OF OPERATIONS FOR THE PERIOD ENDING DECEMBER 31, 1969. THE CONTRACTING OFFICER STATES THAT AT THIS TIME HE TOLD THE REGIONAL MANAGER THAT SINCE THIS INFORMATION WAS RECEIVED AFTER AWARD, HE COULD ONLY ACCEPT THE ADDITIONAL FINANCIAL DATA AND FORWARD IT TO THE APPROPRIATE AGENCY FOR ANY CONSIDERATION THAT MIGHT LEGALLY BE MADE. (COPIES OF THE FINANCIAL INFORMATION WERE MAILED TO CEB THAT DAY.) THE CONTRACTING OFFICER ALSO DETERMINED THAT NO STOP ORDER WOULD BE ISSUED BECAUSE OF THE ASSERTED URGENCY OF THE PROJECT AND THE FACT THAT NO FORMAL PROTEST WAS PENDING.

CEB'S FORMAL RECOMMENDATION OF NONRESPONSIBILITY DATED JULY 8, 1970, ALSO TOOK INTO CONSIDERATION THE DATA FURNISHED ON JULY 7. ITS DETERMINATION WAS FORMALLY ADOPTED BY THE CONTRACTING OFFICER ON JULY 13, AND BY LETTER OF JULY 14 FILTRON WAS ADVISED OF THE RESULTS.

ON JULY 15 THE CONTRACTING OFFICER RECEIVED A LETTER DATED JULY 9 FROM LIQUIDONICS INDUSTRIES, INC., FILTRON'S PARENT, ENCLOSING ITS FINANCIAL STATEMENT AS OF MARCH 31, 1970. BY LETTER OF JULY 16, TO LIQUIDONICS, THE CONTRACTING OFFICER ENCLOSED A COPY OF THE JULY 14 LETTER AND ADVISED THAT THE STATEMENT WOULD BE RETAINED FOR WPD USE AND WOULD ALSO BE DISTRIBUTED TO APPROPRIATE AGENCIES FOR USE IN ANY FUTURE PROCUREMENTS. GADSBY & HANNAH, COUNSEL FOR FILTRON, PROTESTED THE MATTER TO OUR OFFICE ON JULY 20, 1970. WE HAVE ACKNOWLEDGED THAT THE DETERMINATION OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS A MATTER RESERVED INITIALLY TO THE SOUND DISCRETION OF THE CONTRACTING OFFICER, AND OUR OFFICE WILL NOT DISTURB THE ADMINISTRATIVE JUDGMENT UNLESS IT IS SHOWN - BY CLEAR AND CONVINCING EVIDENCE - TO BE FRAUDULENT, ARBITRARY, CAPRICIOUS, SO GROSSLY ERRONEOUS AS TO IMPLY BAD FAITH, OR NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. WE ARE CONCERNED HERE WITH THE QUESTION WHETHER THE CONTRACTING OFFICER FAILED TO ESTABLISH A SUBSTANTIAL FACTUAL BASIS FOR HIS DETERMINATION. AT THE CORE OF OUR INQUIRY ARE TWO EVIDENTIARY OBSTACLES THAT A PROSPECTIVE CONTRACTOR MUST OVERCOME WHEN ITS RESPONSIBILITY IS IN ISSUE: FIRST, IT MUST "DEMONSTRATE AFFIRMATIVELY" ITS RESPONSIBILITY; SECOND, DOUBT AS TO PRODUCTIVE CAPACITY OR FINANCIAL STRENGTH WHICH CANNOT BE RESOLVED "AFFIRMATIVELY" REQUIRES A DETERMINATION OF NONRESPONSIBILITY. SEE ASPR 1 -903. WE ARE ASKED TO SUSTAIN THE CONTRACTING OFFICER'S DECISION IN THIS CASE ON EITHER OR BOTH OF THESE GROUNDS.

BOTH THE ASSISTANT GENERAL COUNSEL, AMC, IN HIS LETTER OF AUGUST 6, 1970, AND THE CONTRACTING OFFICER'S LEGAL ADVISOR, IN A MEMORANDUM SUBMITTED WITH THE INITIAL ADMINISTRATIVE REPORT, EMPHASIZE THAT FILTRON DID NOT FURNISH CURRENT FINANCIAL DATA PRIOR TO AWARD, AND THAT IT HAD THE BURDEN OF PROVIDING SUCH DATA. THE LEGAL ADVISOR SPECIFICALLY DRAWS ATTENTION TO THE "SUBMISSION OF FINANCIAL DATA" CLAUSE AND THE CAVEAT THEREIN THAT THE FAILURE TO FURNISH A CERTIFIED BALANCE SHEET AND PROFIT AND LOSS STATEMENT CURRENT WITHIN 6 MONTHS MAY BE DEEMED SUFFICIENT GROUNDS FOR A DETERMINATION OF NONRESPONSIBILITY. OUR DECISION, 39 COMP. GEN. 895 (1960), IS CITED BY THE LEGAL ADVISOR WITH REFERENCE TO FILTRON'S OBLIGATION TO AFFIRMATIVELY ESTABLISH ITS RESPONSIBILITY AND WHETHER OPPORTUNITY SHOULD HAVE BEEN AFFORDED FILTRON TO CORRECT INFORMATIONAL DEFICIENCIES.

THE CITED CASE INVOLVED A MULTIMILLION DOLLAR ADVERTISED PROCUREMENT FOR AIR TRANSPORTATION SERVICES. INCLUDED IN THE INVITATION WAS A REQUIREMENT THAT BIDDERS SUBMIT WITH THEIR BIDS ALL INFORMATION RELEVANT TO AN EVALUATION OF THEIR CURRENT FINANCIAL ABILITY. ALSO, BIDDERS WERE CAUTIONED TO HAVE ANY DATA PERTINENT TO THEIR FINANCIAL ABILITY, NOT ALREADY ON FILE AT THE ADMINISTRATIVE AGENCY, AVAILABLE AT THE TIME THE BIDDER'S FACILITY WAS VISITED BY A CAPABILITY SURVEY TEAM. NOTICE WAS GIVEN THAT "THE ADEQUACY OF BIDDER'S ARRANGEMENTS TO ASSURE THAT IT WILL BE ABLE TO PERFORM ANY RESULTING CONTRACT WILL BE CONSIDERED BY THE CONTRACTING OFFICER IN DETERMINING THE RESPONSIBILITY OF THE BIDDER FOR PURPOSES OF AWARD."

AFTER A THOROUGH PREAWARD SURVEY OF THE PROTESTANT'S FACILITY, NO AWARD WAS RECOMMENDED DUE TO FINANCIAL INSTABILITY; THEREAFTER, THE MATTER WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION WHICH DECLINED TO ISSUE A CERTIFICATE OF COMPETENCY. SUBSEQUENT TO FILING ITS PROTEST WITH OUR OFFICE, THE FIRM'S FINANCIAL POSITION WAS REEVALUATED BY THE AIR FORCE, AND THE PRIOR JUDGMENT AFFIRMED. THE REEVALUATION DEMONSTRATED THAT THERE WOULD BE INSUFFICIENT WORKING CAPITAL TO SATISFACTORILY INSURE PERFORMANCE OF THE CONTRACT. THE PROTESTANT CONTENDED BEFORE OUR OFFICE THAT IT WAS INCUMBENT ON THE ADMINISTRATIVE AGENCY TO ADVISE IT OF THE AMOUNT OF ADDITIONAL WORKING CAPITAL WHICH WOULD BE REQUIRED BEFORE THE COMPANY COULD BE CONSIDERED FINANCIALLY CAPABLE AND URGED THAT IT BE AFFORDED A FURTHER OPPORTUNITY TO CURE THE DEFICIENCIES. IN THIS CONTEXT, WE MADE THE FOLLOWING RESPONSES:

IT IS OUR OPINION THAT THESE PROVISIONS OF THE INVITATION PROVIDED ADEQUATE NOTICE TO ALL BIDDERS THAT THE BURDEN OF PROVIDING ADEQUATE FINANCING TO ASSURE SUCCESSFUL COMPLETION OF THE CONTRACT WAS PLACED UPON THE BIDDER, AND THAT BID PRICES WOULD BE EVALUATED IN CONJUNCTION WITH INFORMATION ON AVAILABLE FINANCES FOR THE PURPOSE OF DETERMINING THAT A BIDDER'S FINANCIAL POSITION WOULD PROVIDE REASONABLE ASSURANCE THAT THE BIDDER COULD COMPLETE THE CONTRACT UPON PAYMENT OF THE AMOUNT BID. BOTH THE INITIAL EVALUATION *** AND THE REEVALUATION SUBSEQUENT TO SUCH SUBMISSION APPEAR TO HAVE BEEN DIRECTED TO SUCH DETERMINATION.

*** WHETHER ANY FURTHER OPPORTUNITY SHOULD BE AFFORDED THE LOW BIDDER AT THIS TIME TO CORRECT FINANCIAL DEFICIENCIES MUST, IN THE ABSENCE OF CLEAR AND CONVINCING EVIDENCE OF ERROR, BE LEFT TO THE SOUND DISCRETION OF THE CONTRACTING AGENCY. UNDER THE CIRCUMSTANCES IN THIS CASE WE ARE UNABLE TO SAY THAT THE FAILURE OR REFUSAL BY THE AIR FORCE TO ADVISE THE COMPANY OF THE EXTENT TO WHICH ITS FINANCES ARE DEFICIENT OR TO PERMIT THE COMPANY ADDITIONAL TIME AND OPPORTUNITY TO CORRECT SUCH DEFICIENCY WOULD CONSTITUTE AN ABUSE OF DISCRETION. IN THE ABSENCE OF SUCH ABUSE, THERE WOULD APPEAR TO BE NO SOUND BASIS UPON WHICH THIS OFFICE COULD JUSTIFY THE IMPOSITION OF FURTHER REQUIREMENTS IN THIS AREA *** .

WE DO NOT BELIEVE THAT IT CAN FAIRLY BE SAID THAT OUR COMMENTS CONCERNING THE EFFECT OF THE INVITATION PROVISION IN 39 COMP. GEN. 895, SUPRA, HAVE ANY PERTINENCY TO THE "SUBMISSION OF FINANCIAL DATA" CLAUSE INVOLVED HERE. THE CONTRASTS ARE STRIKING. IN ITS SUBMISSION OF AUGUST 20, 1970, COUNSEL FOR FILTRON HAS, WE BELIEVE, PLACED IN PROPER PERSPECTIVE THE NET EFFECT OF ADMINISTRATIVE RELIANCE ON THIS PROVISION:

FILTRON EMPLOYS A FISCAL YEAR ENDING JUNE 30. LIKE OTHER FIRMS ITS SIZE, IT DOES NOT HAVE ITS QUARTERLY OR SIX-MONTHS' STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS. AT THE TIME OFFERS WERE DUE (19 JUNE 1970), ITS CURRENT FISCAL YEAR WAS NOT YET COMPLETE. ITS MOST RECENT CERTIFIED FINANCIAL STATEMENT WAS DATED 30 JUNE 1969, RAY PROOF WAS MORE FORTUNATE: ITS FISCAL YEAR ENDS 31 MARCH AND CURRENT AUDITED FINANCIAL DATA COULD BE SUPPLIED.

AS *** (WPD) MUST SEE IT, NEITHER FILTRON OR RAY PROOF CAN BE TECHNICALLY RESPONSIBLE BUT FOR SIX MONTHS IN THE YEAR, ASSUMING THAT RAY PROOF ALSO PREPARES BUT ONE AUDITED STATEMENT AT THE END OF ITS FISCAL YEAR. *** (WPD) WILL ENJOY THE BENEFITS OF COMPETITIVE BIDDING ON ELECTROMAGNETICALLY SHIELDED ENCLOSURES ONLY DURING THE MONTHS OF JULY, AUGUST AND SEPTEMBER. FOR TWO ADDITIONAL QUARTERS THERE EXISTS THE POSSIBILITY OF SOLE SOURCE PROCUREMENT. IN THE FIRST QUARTER OF THE YEAR, ALL REQUESTS FOR OFFERS OR BIDS MUST OF NECESSITY FALL UPON FINANCIALLY NON-RESPONSIBLE EARS. UNHAPPILY FOR FILTRON, OFFERS WERE DUE IN THE SECOND QUARTER, ONE OF ITS BLACK-OUT PERIODS.

IT MIGHT ALSO BE ASKED WHY FILTRON DID NOT OBJECT TO THE CLAUSE, OR INDICATE ITS INABILITY TO COMPLY AND OFFER ALTERNATIVE DATA. THE FOLLOWING ANSWER FROM FILTRON'S COUNSEL IN ITS LETTER TO US OF AUGUST 20 SEEMS TO REPRESENT AN ADEQUATE JUSTIFICATION FOR ITS ACTION:

*** FILTRON IS NOW SUCCESSFULLY PERFORMING A $444,000 CONTRACT WITH *** (WPD) FOR THE CONSTRUCTION OF SHIELDED ENCLOSURES IN THE PENTAGON (DAAB09- 69-C-0015). THAT LARGE AND IMPORTANT CONTRACT WAS AWARDED TO FILTRON ON 8 AUGUST 1968, EVEN THOUGH THAT SOLICITATION ALSO REQUIRED CERTIFIED FINANCIAL DATA CURRENT WITHIN SIX MONTHS OF THE PROPOSAL DATE (19 JULY 1968) AND FILTRON HAD ON FILE WITH *** (WPD) ONLY ITS CERTIFIED FISCAL 1967 FINANCIAL STATEMENT, WHICH WAS 12-1/2 MONTHS OUT OF DATE. *** (WPD) BEHAVIOR, THEREFORE, IS STRANGELY INCONSISTENT. ONE SHOULD NOTE THAT THE FISCAL 1967 "STALE" FINANCIAL DATA SHOWED A NET LOSS OF $166,094, WHILE MORE CURRENT DATA FOR FISCAL 1968 WOULD HAVE SHOWN NET INCOME OF $156,875. IF CERTIFIED DATA WITHIN SIX MONTHS WERE REALLY IMPORTANT TO *** (WPD), ONE WOULD THINK *** (WPD) WOULD INSIST UPON IT FOR LARGE CONTRACTS RATHER THAN SMALL CONTRACTS AND WHEN "STALE" DATA ON HAND AT *** (WPD) SHOWED A LOSS RATHER THAN A PROFIT.

FILTRON'S LACK OF CONCERN WITH THE CLAUSE IS PLAUSIBLE, AND PRIOR TO JUNE 26 THERE IS NO INDICATION IN THE RECORD THAT ITS ATTENTION WAS DIRECTED BY WPD TO ANYTHING OTHER THAN THE CLAUSE. A DETERMINATION OF A PROSPECTIVE CONTRACTOR'S FINANCIAL NONRESPONSIBILITY BASED SOLELY ON THIS CLAUSE IS INCONSISTENT WITH THE DEFENSE CONTRACT FINANCING REGULATIONS, PART 2, APPENDIX "E," WHICH ASPR 1-903.1(I) CLEARLY INDICATES ARE CONTROLLING WHEN QUESTIONS OF "ADEQUATE FINANCIAL RESOURCES" ARE IN ISSUE. IN RESPONSE TO OUR INFORMAL INQUIRY, THE CONTRACTING OFFICER ADVISES THAT USE OF THE CLAUSE WAS REQUIRED BY USAECOM PROCUREMENT INSTRUCTIONS, BUT THAT THE CLAUSE HAS BEEN ELIMINATED BY A NEW MANDATORY PROCEDURE FOR THE PREPARATION OF SOLICITATIONS, EFFECTIVE JULY 1, 1970. UNFORTUNATELY, THE ELIMINATION OF THE CLAUSE CAME TOO LATE FOR FILTRON, BUT IT DID HAVE A MEASUREABLE IMPACT ON WPD'S WILLINGNESS TO INVESTIGATE FILTRON'S RESPONSIBILITY.

THERE IS, HOWEVER, A DISPUTE AS TO WHAT INFORMATION WAS GIVEN TO FILTRON'S REGIONAL MANAGER ON JUNE 26 BY WPD'S CONTRACT SPECIALIST RELATIVE TO THE ADEQUACY OF THE FINANCIAL DATA SUBMITTED. THE CONTRACTING OFFICER STATES THAT:

*** THEY WERE ADVISED AT THIS TIME THAT THE 30 JUNE 69 STATEMENT WAS STILL NOT ADEQUATE FOR A DETERMINATION OF FINANCIAL RESPONSIBILITY AND WERE REQUESTED TO SUBMIT A MORE UP-TO-DATE STATEMENT, IF SUCH WERE AVAILABLE. AT THIS TIME FILTRON WAS TOLD THAT ANY NEW DATA SUBMITTED MAY OR MAY NOT HAVE A BEARING IN THE CONSIDERATION OF AN AWARD TO THEIR FIRM, SINCE, THEY HAD UP TO THIS POINT, BEEN GIVEN EVERY OPPORTUNITY TO PRESENT THEIR MOST CURRENT FINANCIAL DATA. THEY WERE AWARE OF THE EXTREMELY SHORT TIME IN WHICH AN AWARD WAS TO BE MADE. THEY HAD BEEN MADE COGNIZANT OF THIS FACT DURING NEGOTIATIONS HELD ON 24 JUNE.

THE CONTRACTING OFFICER'S UNDERSTANDING OF WHAT INFORMATION WAS COMMUNICATED TO FILTRON BY THE CONTRACT SPECIALIST IS CONTESTED IN THE REGIONAL MANAGER'S AFFIDAVIT OF AUGUST 20. SPECIFICALLY, HE AVERS THAT "AT NO TIME WAS I INFORMED THAT THE MOST RECENT CERTIFIED ANNUAL REPORT OF FILTRON WOULD NOT ADEQUATELY FULFILL THE REQUIREMENT THAT DATA SHOWING THE CURRENT FINANCIAL STATUS OF THE COMPANY BE SUBMITTED."

RESOLUTION OF THIS DISPUTE IS NOT MATERIAL TO THE ISSUE RAISED AND, AS WE HAVE INDICATED, WE ARE NOT ABLE TO RESOLVE QUESTIONS OF CREDIBILITY APART FROM THE WRITTEN RECORD, AND WE MUST DEFER TO THE ADMINISTRATIVE AGENCY. WE MUST OBSERVE, HOWEVER, FOLLOWING THE RATIONALE SUGGESTED BY THE CONTRACTING OFFICER WITH RESPECT TO THE DISPUTE CONCERNING WITHDRAWAL OF FILTRON'S INITIAL PROTEST, THAT IF THE CONTRACT SPECIALIST RELAYED THE INFORMATION SUGGESTED, THE ABSENCE OF AN IMMEDIATE PROTEST BY FILTRON TO THE CONTRACTING OFFICER IS WHOLLY INCONSISTENT WITH ITS SUBSEQUENT ACTIONS.

ADMITTEDLY, 39 COMP. GEN. 895, SUPRA, AND OTHER DECISIONS RECOGNIZE, AS DO THE REGULATIONS, THAT A BIDDER HAS THE DUTY TO PROVIDE INFORMATION; HOWEVER, THE DECISION QUITE PLAINLY SUGGESTS THAT A PROSPECTIVE CONTRACTOR MUST BE AFFORDED A REASONABLE OPPORTUNITY TO PROVIDE SUCH INFORMATION. MOREOVER, TO ASSERT ON THE BASIS OF THE CITED CASE THAT A CONTRACTING OFFICER HAS NO DUTY TO INDICATE WHAT INFORMATION IS NECESSARY, ONE MUST IGNORE COMPLETELY THE THOROUGHNESS OF THE ADMINISTRATIVE AGENCY'S INVESTIGATION. INDEED, WE BELIEVE THAT IT IS CLEAR FROM ASPR THAT THE ADMINISTRATIVE AGENCY, THAT IS, THE CONTRACTING OFFICER, HAS A CORRELATIVE INFORMATION-GATHERING DUTY THAT CANNOT BE AVOIDED, AND THAT THIS DUTY HAS A DIRECT RELATIONSHIP TO THE EXISTENCE OF REASONABLE DOUBTS AS TO FINANCIAL CAPACITY. SEE ASPR 1 902 AND 1-905.

INCIDENT TO THIS INFORMATION-GATHERING DUTY, IT SEEMS CLEAR THAT IN THE AREA OF FINANCIAL ABILITY THE TYPE OF INFORMATION NECESSARY AND THE SCOPE OF THE CONTRACTING OFFICER'S DUTY WILL VARY WITH THE CIRCUMSTANCES OF EACH CASE. THE DEFENSE CONTRACT FINANCING REGULATION, PART 2, APPENDIX "E," OF ASPR IS QUITE SPECIFIC IN THIS CONNECTION. SEE ASPR APPENDIX E-213 AND E- 214.

A READING OF APPENDIX "E" LEADS US TO THE CONCLUSION THAT THE FINANCIAL STRENGTH OF A PROSPECTIVE CONTRACTOR BEARS A DIRECT CORRELATION TO THE AMOUNT OF FINANCIAL INFORMATION AND DEGREE OF ANALYSIS NECESSARY IN A PARTICULAR CASE AND THAT IF UPON INITIAL EXAMINATION THE PROSPECTIVE CONTRACTOR'S FINANCIAL ABILITY IS DOUBTFUL, THERE IS A GREATER NEED FOR INFORMATION AND ANALYSIS.

NEVERTHELESS, IT MUST BE CONCEDED THAT THE URGENCY OF A PARTICULAR PROCUREMENT AND THE NEED TO REACH A PROMPT DECISION MUST ALSO BE CONSIDERED. WE RECOGNIZE THAT IN LIGHT OF AN ASSERTED URGENCY, THE PROSPECTIVE CONTRACTOR MAY BE REQUIRED TO SUSTAIN A GREATER INFORMATIONAL BURDEN, WITH A CORRESPONDING DIMINUTION OF THE CONTRACTING OFFICER'S DUTY. SEE, E.G., B-159960, DECEMBER 8, 1966. FROM OUR REVIEW OF THIS RECORD, WE ARE NOT PERSUADED, HOWEVER, THAT THE CONTRACTING OFFICER ATTEMPTED TO COMPLY WITH THE APPLICABLE REGULATIONS.

THE CONTRACTING OFFICER HAS EMPHASIZED THAT UNDER USAECOM STANDARD PROCUREMENT OPERATING PROCEDURES HE WAS REQUIRED TO SECURE CEB'S RECOMMENDATION, AND THAT HIS "DETERMINATION OF NONRESPONSIBILITY WAS MADE PRINCIPALLY ON THE BASIS OF THE REPORT FROM THE USAECOM CONTRACTOR EVALUATION BOARD *** ; HOWEVER, ALL INFORMATION AVAILABLE TO ME AT THE TIME OF AWARD WAS UTILIZED IN REACHING THAT DETERMINATION." CONCEDING THAT THE CONTRACTING OFFICER WAS REQUIRED TO REFER THE MATTER TO CEB, WE CANNOT AGREE THAT SUCH REFERRAL DISPENSED WITH THE NECESSITY FOR FURTHER ACTION ON HIS PART. WE AGREE, AS THE CONTRACTING OFFICER'S LEGAL ADVISOR POINTS OUT, THAT A CONTRACTING OFFICER MAY OBTAIN INFORMATION AND ADVICE FROM EXPERTS IN AREAS WHERE HE MAY HAVE LITTLE OR NO SPECIALIZED KNOWLEDGE; HOWEVER, HE MAY NOT AVOID HIS RESPONSIBILITY IN THE DECISION- MAKING PROCESS. IN OUR OPINION, HIS PARTICIPATION IS EVEN MORE ESSENTIAL IN CASES OF ASSERTED URGENCY. THE USAECOM STANDARD OPERATING PROCEDURES EMPHASIZE THIS VIEW. NO ADMINISTRATIVE ATTEMPT WAS MADE TO RELATE FILTRON'S FINANCIAL POSITION TO THE CIRCUMSTANCES OF THE PROCUREMENT AND TO AFFORD IT AN OPPORTUNITY TO RESOLVE THE ASSERTED "DOUBTS" ABOUT ITS FINANCIAL ABILITY TO PERFORM. THIS, IN OUR VIEW, WAS ERRONEOUS AND PREJUDICIAL TO FILTRON'S POSTURE AS BOTH A CONTRACTOR AND AS A PROSPECTIVE CONTRACTOR.

COMMENTING ON THE CONTRACT SPECIALIST'S MEMORANDUM OF THE CONVERSATION WITH CEB ON JUNE 25, THE CONTRACTING OFFICER STATES IN HIS SUPPLEMENTAL REPORT THAT:

*** WHILE THE MEMORANDUM FOR RECORD OF 25 JUNE 1970, SIGNED BY *** (THE CONTRACT SPECIALIST) AND ACCEPTED BY THE CONTRACTING OFFICER, DOES NOT FULLY ADDRESS EVERY WORD THAT WAS PASSED DURING THE TELEPHONE CONVERSATION REFERRED TO *** THE OVERALL FINANCIAL POSITION OF FILTRON WAS CAREFULLY CONSIDERED AND THAT CONSIDERATION, IN CONJUNCTION WITH THE FINANCIAL POSITION OF ITS PARENT ORGANIZATION, LIQUIDONICS, WAS CONDENSED INTO THE INFORMATION CONTAINED IN THE SIGNED MEMORANDUM FOR RECORD. IF TIME HAD BEEN ALLOWED FOR A COMPLETE DEFENSE CONTRACT ADMINISTRATION SERVICES REGION PREAWARD SURVEY AND ANALYSIS OF FILTRON'S AND LIQUIDONICS' FINANCIAL POSITION, THEN THE ADOPTION OF THE TELEPHONE TURN DOWN BY THE CONTRACTOR EVALUATION BOARD WOULD NOT HAVE BEEN A PART OF THIS PROCUREMENT. ***

AGAIN, WE DO NOT BELIEVE THAT THE ASSERTED URGENCY OF THE PROCUREMENT ELIMINATED THE NEED FOR SETTING FORTH ALL THE BASES FOR THE NONRESPONSIBILITY DETERMINATION. SEE ASPR 1-904.1. WITH RESPECT TO THE OVERALL FINANCIAL CONDITION OF FILTRON, AND THE RESULTANT "DOUBT," THE CEB MEMBERS' AUGUST 24 MEMORANDUM INDICATES THAT BASED ON COMMERCIAL CREDIT REPORTS FILTRON'S PAYMENT RECORD WITH VENDORS WAS CONSIDERED TO BE UNSATISFACTORY AND, FURTHER, THAT ITS FINANCIAL CONDITION WAS BEING AGGRAVATED BY ITS INTERVENING PARENT, H. O. BOEHME, INC., AND BY LIQUIDONICS INDUSTRIES, INC. THE ULTIMATE CONCLUSION DRAWN FROM CEB'S EXAMINATION IS PERHAPS BEST STATED IN ITS INTERNAL WORKING PAPERS:

FINDING

COMPANY'S ABILITY TO OBTAIN MATERIALS IN A TIMELY MANNER IS DOUBTFUL.

IN OUR VIEW, THIS "FINDING" CANNOT BE SUSTAINED ON THE RECORD BEFORE OUR OFFICE. WE RECOGNIZE THAT THE CONTRACTING OFFICER DID NOT HAVE ACCESS TO MUCH OF THIS INFORMATION; NEVERTHELESS, HE HAD A DUTY TO ATTEMPT TO RESOLVE THIS DOUBT, AND WE CAN THINK OF NO MORE APPROPRIATE WAY THAN BY CONDUCTING NEGOTIATIONS WITH BOTH OFFERORS. IN THIS REGARD, THE LEGAL ADVISOR'S RELIANCE ON 37 COMP. GEN. 703 (1958) FOR THE PROPOSITION THAT SUCH ACTION WAS UNNECESSARY IS WITHOUT MERIT. EMPHASIZING THE DISPARITY BETWEEN FILTRON'S LOW OFFER OF $42,950 AND RAY PROOF'S OFFER OF $75,905, THE FOLLOWING EXCERPTS FROM THAT DECISION IS ADVANCED:

*** IN VIEW OF THE WIDE DISPARITY OF BID PRICES BETWEEN THOSE SUBMITTED BY YOUR FIRM AND THOSE OF THE OTHER BIDDERS, THE MATTER OF THE FINANCIAL RESPONSIBILITY OF YOUR FIRM WAS PARTICULARLY IMPORTANT. *** 37 COMP. GEN. 703, AT 704.

WE AGREE. THE CASE DOES NOT, HOWEVER, SUGGEST THAT AFTER DISCOVERING THE DISPARITY, THERE IS NO NEED TO EXPLORE ITS SIGNIFICANCE. WE ALSO NOTE THAT IN THAT CASE THE PROSPECTIVE CONTRACTOR WAS DETERMINED TO BE NONRESPONSIBLE ONLY AFTER HE "REFUSED OR FAILED TO FURNISH INFORMATION" NECESSARY FOR A SMALL BUSINESS ADMINISTRATION CERTIFICATE OF COMPETENCY DETERMINATION.

THEREFORE, ON THE RECORD NOW BEFORE US, WE CONCLUDE THAT THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY WAS NOT SUPPORTED BY SUFFICIENT EVIDENCE AND A FINDING THAT FILTRON WAS, IN FACT, A RESPONSIBLE PROSPECTIVE CONTRACTOR FOR THIS PROCUREMENT WOULD HAVE BEEN PROPER. BELIEVE THAT THE RECORDS OF YOUR DEPARTMENT SHOULD BE APPROPRIATELY NOTED IN THIS REGARD.

SINCE WE ARE INFORMALLY ADVISED THAT RAY PROOF WILL COMPLETE PERFORMANCE UNDER THE CONTRACT WITHIN THE NEXT 3 WEEKS, REMEDIAL ACTION IS THUS PRECLUDED IN THIS CASE. HOWEVER, WE RECOMMEND THAT APPROPRIATE STEPS BE TAKEN TO ASSURE THAT FUTURE RESPONSIBILITY DETERMINATIONS BE ADEQUATELY SUPPORTED BY A FACTUALLY COMPLETE RECORD.