B-171028, MAR 31, 1971

B-171028, MAR 31, 1971

BID PROTEST - BIDDER RESPONSIBILITY - SMALL BUSINESS SET ASIDE DENIAL OF PROTEST OF MARINE SERVICE AND MANUFACTURING COMPANY, LOW BIDDER, AGAINST THE AWARD OF AN ADVERTISED CONTRACT FOR BOMB FIN ASSEMBLIES ISSUED BY OGDEN AIR MATERIAL AREA, HILL AFB, UTAH, TO ANY OTHER BIDDER. THE FINDINGS OF THE DCASR AS TO LACK OF FINANCIAL CAPACITY OF PROTESTANT AND ITS GUARANTOR AERO-FLITE OF OHIO, INC., WILL NOT BE UPSET SINCE SUCH A DETERMINATION INVOLVES A CONSIDERABLE DEGREE OF DISCRETION. ALTHOUGH THE SBA RECEIVED DOCUMENTS RELATING TO THE COMPETENCY OF AERO- FLITE, IT COULD NOT ISSUE A CERTIFICATE OF COMPETENCY TO PROTESTANT BECAUSE SBA NATIONAL DIRECTIVE 615-1A REQUIRES THAT A FIRM TO BE ELIGIBLE FOR A COC MUST PERFORM A SIGNIFICANT PORTION OF THE CONTRACT.

TO MARINE SERVICE AND MANUFACTURING COMPANY:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF CONTRACTS TO OTHER FIRMS PURSUANT TO INVITATION FOR BIDS NO. F42600-70 B-3218, ISSUED BY OGDEN AIR MATERIEL AREA, HILL AIR FORCE BASE, UTAH.

THE INVITATION WAS ISSUED ON JUNE 24, 1970, FOR PROCUREMENT OF 347,820 BOMB FIN ASSEMBLIES, AND INCLUDED A 50 PERCENT SET-ASIDE FOR LABOR SURPLUS AREA CONCERNS. TWELVE BIDS WERE RECEIVED BY THE CLOSING DATE OF JULY 23, 1970. MARINE SERVICE AND MANUFACTURING COMPANY WAS DETERMINED THE LOW RESPONSIVE BIDDER.

ON AUGUST 13, 1970, THE CONTRACTING OFFICER REQUESTED A PREAWARD SURVEY OF MARINE PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1- 905.4. THE SURVEY WAS CONDUCTED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICE REGION (DCASR), CLEVELAND, OHIO, WHICH SUBMITTED ITS REPORT ON SEPTEMBER 15, 1970, RECOMMENDING NO AWARD. THE SURVEY TEAM INVESTIGATED THE CAPABILITY OF BOTH YOUR FIRM AND AERO-FLITE OF OHIO, INC., WHICH WAS NAMED "GUARANTOR" ON DSA FORM 621. IT IS REPORTED THAT THE GUARANTY AGREEMENT COMMITS ALL THE FINANCIAL RESOURCES OF AERO-FLITE TO PERFORMANCE OF THE CONTRACT TO BE AWARDED, AND THAT AERO-FLITE WOULD BE RESPONSIBLE FOR THE BULK OF THE PERFORMANCE. THE NEGATIVE RECOMMENDATION WAS BASED PRIMARILY UPON THE SURVEY TEAM'S CONCLUSION THAT BOTH MARINE AND AERO- FLITE LACKED THE NECESSARY FINANCIAL CAPACITY AND NEITHER HAD AN ACCOUNTING SYSTEM ADEQUATE TO ADMINISTER A CONTRACT WITH PROGRESS PAYMENTS WHICH HAD BEEN REQUESTED.

ON SEPTEMBER 25, 1970, THE CONTRACTING OFFICER ISSUED A DETERMINATION OF NONRESPONSIBILITY PURSUANT TO ASPR 1-904.1. SINCE BOTH MARINE AND AERO- FLITE ARE SMALL BUSINESS CONCERNS AND BECAUSE THE DETERMINATION OF NONRESPONSIBILITY WAS BASED ON A LACK OF CREDIT, THE CONTRACTING OFFICER REFERRED THE MATTER TO THE SMALL BUSINESS ADMINISTRATION PURSUANT TO ASPR 1-705.4(C)(II) FOR CERTIFICATE OF COMPETENCY (COC) CONSIDERATION. OCTOBER 12, 1970, THE CONTRACTING OFFICER WAS ADVISED BY SBA THAT ITS CASE WAS CLOSED AS MARINE HAD FAILED TO FILE FOR A COC. ON OCTOBER 16, 1970, DCASR ADVISED THE CONTRACTING OFFICER THAT ADDITIONAL INFORMATION RELATING TO CREDIT SUBMITTED BY AERO-FLITE WAS NOT SUFFICIENT TO JUSTIFY REVERSAL OF ITS NEGATIVE DETERMINATION WITH RESPECT TO THIS FACTOR.

ALTHOUGH THE PROTEST WAS LODGED WITH OUR OFFICE PRIOR TO ANY AWARD BEING MADE, IT WAS DETERMINED PURSUANT TO ASPR 2-407.8(B)(3)(I) THAT THE ITEMS TO BE PROCURED WERE URGENTLY REQUIRED AND, THEREFORE, AWARD OF THE NON-SET -ASIDE PORTION WAS MADE ON NOVEMBER 17, 1970, TO THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER. ON NOVEMBER 30, 1970, WE WERE ADVISED THAT THE SET- ASIDE PORTION WAS BEING AWARDED TO ATLAS FABRICATORS INCORPORATED, WHICH WAS ENTITLED TO FIRST PRIORITY UNDER ASPR 1-804.2(B), AS A GROUP 1, CERTIFIED-ELIGIBLE FIRM AND SMALL BUSINESS CONCERN.

IT IS YOUR CONTENTION THAT SINCE YOU HAD ACCESS TO ADEQUATE FINANCIAL SUPPORT, THE CONTRACTING OFFICER'S DETERMINATION OF NON-RESPONSIBILITY BASED UPON FINANCIAL CONSIDERATIONS WAS ERRONEOUS. THE BASIS FOR THIS CONTENTION IS THE OFFER OF GEORGE M. STEINBRENNER, III, IN HIS LETTER OF OCTOBER 2, 1970, TO PROVIDE UP TO $200,000 FOR PERFORMANCE OF THE CONTRACT. ALSO, YOU CONTEND THAT YOU ARE CAPABLE OF DEVELOPING AN ACCOUNTING SYSTEM ADEQUATE TO JUSTIFY PROGRESS PAYMENTS. FINALLY, YOU CONTEND THAT SBA'S ADVICE TO THE CONTRACTING OFFICER THAT YOU HAD FAILED TO FILE FOR A COC WAS ERRONEOUS. IN THIS CONNECTION YOU ASSERT THAT YOU MADE A TIMELY OFFER OF THE REQUIRED INFORMATION TO SBA WHICH ARBITRARILY REFUSED TO ACCEPT IT.

IT IS WELL SETTLED THAT THE QUESTION OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS A MATTER FOR DETERMINATION BY THE CONTRACTING OFFICER. 43 COMP. GEN. 257 (1963). SINCE SUCH DETERMINATION INVOLVES A CONSIDERABLE RANGE OF DISCRETION, WE WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER UNLESS IT IS SHOWN BY CLEAR AND CONVINCING EVIDENCE THAT THE FINDING OF NONRESPONSIBILITY WAS ARBITRARY, CAPRICIOUS, OR NOT BASED UPON SUBSTANTIAL EVIDENCE. 45 COMP. GEN. 4 (1965).

AS NOTED ABOVE, THE CONTRACTING OFFICER'S DETERMINATION OF NON RESPONSIBILITY WAS BASED PRIMARILY UPON THE PREAWARD SURVEY TEAM'S CONCLUSION THAT YOU LACK SUFFICIENT FINANCIAL SUPPORT TO PERFORM THE CONTRACT. AN EXAMINATION OF THE SURVEY TEAM'S FINANCIAL CAPABILITY REPORT SHOWS THAT THEY MADE A COMPREHENSIVE ANALYSIS OF YOUR FINANCIAL POSITION AND CONCLUDED THAT YOU WERE UNABLE TO PROVIDE THE CASH REQUIREMENTS ESTIMATED BY YOU TO BE FROM $150,000 TO $200,000. ALTHOUGH YOU INDICATED THAT THIS COULD BE OBTAINED FROM OUTSIDE SOURCES, YOU HAD NOT PROVIDED PROOF OF ANY SUCH COMMITMENTS AT THE TIME OF THE NEGATIVE REPORT AND DETERMINATION OF NONRESPONSIBILITY. WITH REGARD TO THE COMMITMENT OF OCTOBER 2, 1970, FROM MR. STEINBRENNER, THE CONTRACTING OFFICER STATES THE FOLLOWING:

" *** IF PROGRESS PAYMENT COULD BE APPROVED AND BASED ON THE SUBCONTRACTING INFORMATION SPECIFIED IN THE PRE-AWARD SURVEY, IT WILL BE NECESSARY FOR THE COMPANY TO HAVE SUBSTANTIALLY IN ADVANCE OF ANY AUTHORIZATION OF PROGRESS PAYMENTS, CREDIT CAPABILITY OR CASH ON HAND SUFFICIENT TO (I) ORDER APPROXIMATLEY 60 DAYS OF REQUIRED MATERIALS WHICH WOULD COST IN EXCESS OF $750,000.; (II) ESTABLISH AN ASSEMBLY PRODUCTION LINE INCLUDING ACQUIRING WASHING, DEGREASING AND PAINTING EQUIPMENT; AND (III) MEET SUBSTANTIAL PAYROLL COSTS PRIOR TO RECEIVING PAYMENTS FOR PRODUCTION DELIVERIES. THE COMPANY AND THE GUARANTOR HAVE STATED THAT $150,000 - $200,000, COULD BE OBTAINED AS FINANCIAL SUPPORT. IN A LETTER DATED 2 OCT 1970, THE GUARANTOR WAS INFORMED THAT THE NECESSARY FINANCIAL SUPPORT, A MAXIMUM OF $200,000, WOULD BE PROVIDED BY MR GEORGE M. STEINBRENNER, III, CONTINGENT UPON A FAIR AND EQUITABLE ARRANGEMENT REGARDING FORMATION OF A NEW CORPORATION, ITS CORPORATE STRUCTURE AND STOCK OWNERSHIP. THIS ARRANGEMENT IS CONSIDERED UNACCEPTABLE BY OOAMA. *** " IN THESE CIRCUMSTANCES, WE FIND NO BASIS FOR OUR OFFICE TO SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER.

HOWEVER, SINCE YOU ARE A SMALL BUSINESS CONCERN THE CONTRACTING OFFICER WAS REQUIRED BY ASPR 1-705.4(C) TO REFER THE MATTER TO SBA, WHICH IS EMPOWERED UNDER THE SMALL BUSINESS ACT, 15 U.S.C. 637(B)(7), TO CERTIFY THE CAPACITY AND CREDIT OF A SMALL BUSINESS CONCERN TO PERFORM A SPECIFIC GOVERNMENT CONTRACT. THIS WAS DONE ON THE DATE OF THE DETERMINATION OF NONRESPONSIBILITY. ON OCTOBER 12, 1970, SBA ADVISED THE CONTRACTING OFFICER THAT MARINE HAD FAILED TO APPLY FOR THE COC. IN THE ABSENCE OF THE ISSUANCE OF A COC THE CONTRACTING OFFICER PROPERLY REJECTED YOUR BID.

WE HAVE RECEIVED A REPORT FROM THE SBA WITH REGARD TO YOUR CONTENTION THAT THE INFORMATION REQUIRED FOR ISSUANCE OF A COC WAS ARBITRARILY REFUSED BY ITS REGIONAL OFFICE IN CHICAGO. IT IS REPORTED THAT MR. KOKINDA OF AERO-FLITE TENDERED CERTAIN DOCUMENTS TO THAT OFFICE ON OCTOBER 6, 1970. THESE DOCUMENTS RELATED TO THE COMPETENCY OF AERO FLITE. SBA EMPLOYEES ADVISED MR. KOKINDA THAT SINCE MARINE SERVICE AND MANUFACTURING COMPANY WAS THE BIDDER ITS COMPETENCY WAS AT ISSUE AND THEREFORE THE DOCUMENTS RELATING TO AERO-FLITE WERE NOT RELEVANT. ACCORDING TO SBA THESE DOCUMENTS WERE NOT REFUSED, BUT APPARENTLY MR. KOKINDA FELT IT USELESS TO SUBMIT THEM. IN THIS CONNECTION, IT IS REPORTED THAT EVEN IF THE DOCUMENTS HAD ESTABLISHED AERO-FLITE'S COMPETENCY, A COC WOULD NOT HAVE BEEN ISSUED AS MARINE WAS THE BIDDER AND NOT ELIGIBLE FOR A COC UNDER PARAGRAPH 4(B) OF SBA NATIONAL DIRECTIVE 615-1A, WHICH PROVIDES:

"A MANUFACTURING, CONSTRUCTION, OR SERVICE CONCERN SHALL NOT BE ELIGIBLE FOR A COC UNLESS IT PERFORMS A SIGNIFICANT PORTION OF THE CONTRACT, MEASURED IN DOLLAR VALUE, WITH ITS OWN FACILITIES AND PERSONNEL ON ITS OWN PAYROLL."

ACCORDINGLY, THERE IS NO BASIS UPON WHICH OUR OFFICE MAY PROPERLY DISTURB THE AWARDS.