B-172126, JUN 23, 1971

B-172126: Jun 23, 1971

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PROCURING ACTIVITY'S FINDING THAT PROTESTANT'S FINANCIAL CAPABILITIES WERE UNSATISFACTORY (I.E. AIRCRAFT THAT WERE MORTGAGED AND COULD BE REPOSSESSED AT ANY TIME) IS A VALID EXERCISE OF DISCRETION FOR WHICH THE COMP. WILL NOT SUBSTITUTE HIS JUDGMENT. TO ENTERPRISE FLYING SERVICE: REFERENCE IS MADE TO YOUR TELEGRAM OF MARCH 9. SEVEN PROPOSALS WERE RECEIVED IN RESPONSE TO THE RFP. THE THREE LOWEST PROPOSALS WERE AS FOLLOWS: ENTERPRISE FLYING SERVICE $160. 600 A PREAWARD SURVEY OF YOUR FIRM WAS CONDUCTED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES DIVISION (DCASD). THE CONTRACTING OFFICER WAS INFORMALLY NOTIFIED ON MARCH 5. ENTERPRISE FLYING SERVICE WAS DISQUALIFIED FOR FINANCIAL INCAPABILITY AND YET ENTERPRISE FLYING SERVICE HAD A LETTER OF CREDIT TO COVER ENTIRE AMOUNT OF CONTRACT COST.

B-172126, JUN 23, 1971

BID PROTEST - BIDDER RESPONSIBILITY - FINANCIAL CAPABILITY DENYING PROTEST OF ENTERPRISE FLYING SERVICE, LOW OFFEROR, AGAINST THE AWARD OF A CONTRACT TO INTERNATIONAL AEROSPACE SERVICES, THIRD LOW OFFEROR UNDER A RFP ISSUED BY THE AIR TRAINING COMMAND, RANDOLPH AFB, TEXAS, FOR FURNISHING PRIMARY FLIGHT TRAINING. PROCURING ACTIVITY'S FINDING THAT PROTESTANT'S FINANCIAL CAPABILITIES WERE UNSATISFACTORY (I.E., LIQUID ASSESTS LESS THAN 1/6 OF VALUE OF ALL CONTRACTUAL COMMITMENTS, A DEFICIT WORKING CAPITAL, AND AIRCRAFT THAT WERE MORTGAGED AND COULD BE REPOSSESSED AT ANY TIME) IS A VALID EXERCISE OF DISCRETION FOR WHICH THE COMP. GEN. WILL NOT SUBSTITUTE HIS JUDGMENT.

TO ENTERPRISE FLYING SERVICE:

REFERENCE IS MADE TO YOUR TELEGRAM OF MARCH 9, 1971, AND SUPPLEMENTARY CORRESPONDENCE DATED MAY 5, 1971, PROTESTING THE AWARD OF A CONTRACT TO ANOTHER FIRM UNDER REQUEST FOR PROPOSALS (RFP) F41689-71 R-0104 (HEREAFTER 0104), ISSUED BY HEADQUARTERS, AIR TRAINING COMMAND, RANDOLPH AIR FORCE BASE, TEXAS.

RFP-0104, ISSUED ON JANUARY 8, 1971, SOLICITED PROPOSALS FOR FURNISHING PRIMARY FLIGHT TRAINING (T-41 LIGHT PLANE TRAINING). SEVEN PROPOSALS WERE RECEIVED IN RESPONSE TO THE RFP. THE THREE LOWEST PROPOSALS WERE AS FOLLOWS:

ENTERPRISE FLYING SERVICE $160,658

FLIGHT TRAINING $165,204

INTERNATIONAL AEROSPACE SERVICES $170,600

A PREAWARD SURVEY OF YOUR FIRM WAS CONDUCTED BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES DIVISION (DCASD), BIRMINGHAM, ALABAMA, WHICH RESULTED IN THE RECOMMENDATION THAT NO AWARD BE MADE TO YOUR FIRM. THE CONTRACTING OFFICER WAS INFORMALLY NOTIFIED ON MARCH 5, OF THE RECOMMENDATION. AS A RESULT OF A REVIEW OF ALL THE AVAILABLE FACTS, INCLUDING THE PREAWARD SURVEY RECOMMENDATION, THE CONTRACTING OFFICER MADE A DETERMINATION THAT YOUR FIRM COULD NOT BE CONSIDERED A RESPONSIBLE BIDDER.

BY TELEGRAM OF MARCH 9, 1971, YOU PROTESTED THE CONTRACTING OFFICER'S DETERMINATION, STATING:

"ENTERPRISE FLYING SERVICE PROTESTS THE AWARD OF A CONTRACT RESULTING FROM REQUEST FOR PROPOSAL F41689 71 R 0104 MADE ON THIS DATE BY CAPT PAUL D. POTTER, USAF CONTRACTING OFFICER HDQ., AIR TRAINING COMMAND (DMPTM), RANDOLPH AIR FORCE BASE, TEXAS 78148. ENTERPRISE FLYING SERVICE WAS DISQUALIFIED FOR FINANCIAL INCAPABILITY AND YET ENTERPRISE FLYING SERVICE HAD A LETTER OF CREDIT TO COVER ENTIRE AMOUNT OF CONTRACT COST. CONTRACTING OFFICER HAS MADE AN AWARD THIS DATE TO INTERNATIONAL AIRCRAFT SERVICES CORP. WITHOUT BENEFIT OF CERTIFICATE OF COMPETENCY UNDER PROVISION OF URGENCY YET IFB STATES THE CURRENT CONTRACT MAY BE EXTENDED FOR 90 DAYS WHICH WOULD RELIEVE THE URGENCY OF THE SITUATION."

WE ARE ADVISED THAT THE PROCURING ACTIVITY DID CONSIDER REFERRING THE MATTER TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR CERTIFICATE OF COMPETENCY (COC) PROCESSING. HOWEVER, AT THAT POINT IN TIME, MARCH 5, A CONDITION OF EXTREME URGENCY WAS DEEMED TO EXIST. WE ARE INFORMED THAT IT WAS NECESSARY TO FINALIZE THE CONTRACT IN ORDER TO HAVE THE SUCCESSFUL CONTRACTOR IN A POSITION TO ASSUME HIS DUTIES UNDER THE CONTRACT PRIOR TO MARCH 17, 1971, OR FACE THE POSSIBILITY OF A DISRUPTION OF THE ENTIRE PILOT TRAINING PROGRAM AT CRAIG AIR FORCE BASE, ALABAMA. THE POSSIBILITY OF EXTENDING THE CURRENT CONTRACT WITH MILITARY AVIATION CONTRACTOR'S INC., (MACI) WAS CONSIDERED. HOWEVER, AT THAT POINT IN TIME, MARCH 5, THE GOVERNMENT HAD NO CONTRACTUAL RIGHT TO EXTEND THE CONTRACT WHICH WAS TO EXPIRE ON MARCH 16, SINCE THE OPTION TO EXTEND HAD TO BE EXERCISED 14 DAYS PRIOR TO THE EXPIRATION OF THE CONTRACT.

SUBSEQUENT TO THE DECISION NOT TO REFER THE MATTER TO SBA THE SECOND LOW OFFEROR, FLIGHT TRAINING INC., AND THE THIRD LOW OFFEROR, INTERNATIONAL AEROSPACE SERVICES, INC., WERE CONTACTED. FLIGHT TRAINING, INC., SUBSEQUENTLY WITHDREW ITS OFFER AND AWARD WAS MADE TO INTERNATIONAL AEROSPACE SERVICES, INC., ON MARCH 9, 1971.

IN YOUR LETTER OF MAY 5, 1971, YOU TAKE ISSUE WITH THE PREAWARD SURVEY DETERMINATION THAT YOUR TECHNICAL CAPABILITY, PLANT FACILITIES AND EQUIPMENT, PURCHASING AND SUBCONTRACTING, LABOR RESOURCES, ABILITY TO MEET REQUIRED SCHEDULES, AND FINANCIAL CAPABILITIES WERE UNSATISFACTORY.

YOU STATE THAT YOUR FIRM RECENTLY BID ON TWO CONTRACTS TO PERFORM BOTH FIXED AND ROTARY WING TRAINING AT FORT RUCKER, ALABAMA, AND THAT YOUR TECHNICAL CAPABILITY TO PERFORM THESE CONTRACTS WAS NEVER QUESTIONED, NOR WAS IT QUESTIONED PRIOR TO THE PREAWARD SURVEY UNDER THE PRESENT PROCUREMENT.

IN REGARD TO YOUR PLANT FACILITIES AND EQUIPMENT, YOU STATE THAT YOUR PLANT FACILITIES IN ENTERPRISE, ALABAMA, HAVE BEEN APPROVED BY THE FEDERAL AVIATION ADMINISTRATION. AS RESPECTS THE PLANT AND FACILITIES AT SELMA, ALABAMA, YOU STATE THAT YOU HAVE MADE CONTRACTUAL ARRANGEMENTS WITH THE INCUMBENT CONTRACTOR, MACI, TO PURCHASE THEIR EXISTING PLANT FACILITIES AS WELL AS CERTAIN TOOLS AND EQUIPMENT. ALSO, YOU POINT OUT THAT THE CITY OF SELMA HAS AGREED TO LEASE THE FIXED BASE FACILITIES, LOCATED AT SELMA, TO YOUR FIRM WHICH YOU STATE IS BASICALLY THE SAME ARRANGEMENT THE CITY HAD WITH MACI.

CONCERNING LABOR RESOURCES, YOU MAINTAIN THAT EXCEPT FOR ONE FLIGHT INSTRUCTOR ALL OF MACI'S EMPLOYEES, BOTH SUPERVISORY PERSONNEL AND FLIGHT INSTRUCTORS, AGREED TO ACCEPT EMPLOYMENT WITH YOUR FIRM IN THE EVENT THAT YOU WERE AWARDED THE T-41 CONTRACT. WITH YOUR LETTER OF MAY 5, 1971, YOU ENCLOSED A LIST OF WHAT YOU STATE ARE QUALIFIED INSTRUCTOR PILOTS AND AIRCRAFT MECHANICS AVAILABLE TO YOUR FIRM SHOULD YOU BE AWARDED THE CONTRACT. IN LIGHT OF THE FACT THAT YOUR FIRM WOULD BE HIRING MACI EMPLOYEES, IT IS YOUR VIEW THAT YOUR FIRM WOULD HAVE NO DIFFICULTY MEETING THE REQUIRED SCHEDULE PRESUMABLY BECAUSE OF THE RELATIVELY EASY TRANSITION OF THE TRAINING FUNCTIONS FROM MACI TO YOUR FIRM.

THE RECORD INDICATES THAT YOUR FIRM'S MOST SERIOUS DEFICIENCY WAS ITS SUBMARGINAL FINANCIAL POSITION. IT APPEARS THAT THE UNSATISFACTORY RATINGS IN THE OTHER CATEGORIES COVERED BY THE PREAWARD SURVEY WERE, FOR THE MOST PART, THE RESULT OF YOUR VERY WEAK FINANCIAL POSITION. WE ARE ADVISED THAT THE PROCURING ACTIVITY HAD, IN 1967, EXPERIENCED A COMPLETE BREAKDOWN IN THE T-41 LIGHT PLANE TRAINING PROGRAM DUE TO CONTRACT FAILURE AND ABANDONMENT OF SEVEN T-41 CONTRACTS, AND THAT ALL REASONABLE STEPS HAD TO BE TAKEN TO MAKE SURE THAT YOUR FIRM WAS RESPONSIBLE. APPARENTLY ONE OF THESE STEPS WAS MAKING SURE THAT YOUR FIRM HAD A SOUND CASH FLOW POSITION. TO INSURE THAT YOUR FIRM HAD A SOUND CASH FLOW POSITION IT WAS FELT THAT YOUR LIQUID ASSETS SHOULD EQUAL AT LEAST 1/6 OF THE VALUE OF ALL CONTRACTUAL COMMITMENTS. ACCORDING TO THE PREAWARD SURVEY YOUR FIRM HAD FORECASTED COMMERCIAL SALES OF $527,000. THIS AMOUNT PLUS THE APPROXIMATELY $160,000 FOR THE CONTRACT IN QUESTION TOTALS $687,000. ONE- SIXTH OF THIS AMOUNT WOULD BE $114,500. ACCORDING TO YOUR DECEMBER 31, 1970, BALANCE SHEET YOUR FIRM HAS A DEFICIT WORKING CAPITAL OF $83,068.68 AND ONLY $43,088 IN LIQUID ASSETS. ALSO, YOU STATE, IN BOTH YOUR TELEGRAM OF MARCH 9, AND YOUR LETTER OF MAY 5, 1971, THAT YOUR FIRM HAD A LETTER OF CREDIT COVERING THE ENTIRE CONTRACT COST. COGNIZANT PERSONNEL OF THE PROCURING ACTIVITY AND THE PREAWARD SURVEY TEAM WERE OF THE VIEW THAT YOUR OVERALL FINANCIAL POSITION WAS SUCH THAT THE FINANCIAL SUPPORT OFFERED BY THE LETTER OF CREDIT, WHICH WAS LIMITED TO THE AMOUNT OF YOUR BID AND CONDITIONED UPON ADEQUATE REIMBURSEMENT FROM THE GOVERNMENT TO PAY THE FIRST PHASE OF THE INDEBTEDNESS DURING APRIL 1971 WAS NOT SUFFICIENT TO ASSURE THE OVERALL STABILITY OF YOUR FIRM SHOULD YOU SUFFER FINANCIAL REVERSES IN CONNECTION WITH YOUR COMMERCIAL OR OTHER BUSINESS.

ALSO, IN CONNECTION WITH YOUR GENERAL OVERALL FINANCIAL POSITION, IT WAS POINTED OUT THAT WHILE YOU INTEND TO HIRE MANY FLIGHT INSTRUCTORS THEN EMPLOYED BY MACI, YOU PROPOSED TO PAY THEM ONLY ABOUT $450.00 PER MONTH WHILE MACI WAS PAYING THEM IN EXCESS OF $700 PER MONTH. IT IS FELT THAT THIS COULD ONLY LEAD TO A RAPID PERSONNEL TURNOVER WITH THE RESULTING DIFFICULTY OF HIRING COMPETENT REPLACEMENT PERSONNEL.

WE DO NOT BELIEVE THAT IT IS NECESSARY TO DISCUSS, IN DETAIL, THE RELATION BETWEEN YOUR WEAK FINANCIAL POSITION AND THE OTHER FACTORS COVERED BY THE PREAWARD SURVEY. WE BELIEVE IT IS SUFFICIENT TO SAY THAT THE PROCURING ACTIVITY WAS OF THE VIEW THAT, IN THE ABSENCE OF A SOUND FINANCIAL POSITION, YOUR FIRM COULD NOT BE RATED SATISFACTORY IN THE OTHER CATEGORIES.

ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-903.1(I) REQUIRES A BIDDER, IN ORDER TO BE CONSIDERED RESPONSIBLE, TO HAVE ADEQUATE FINANCIAL RESOURCES OR THE ABILITY TO OBTAIN SUCH RESOURCES AS MAY BE REQUIRED DURING THE PERFORMANCE OF THE CONTRACT. A BIDDER, WHO IS OTHERWISE RESPONSIBLE, BUT LACKS FINANCIAL RESPONSIBILITY MAY PROPERLY BE HELD NONRESPONSIBLE. 37 COMP. GEN. 703 (1958). THE PREAWARD SURVEY CONCLUDED THAT YOUR FIRM'S FINANCIAL CONDITION WAS SUBMARGINAL. AS PREVIOUSLY MENTIONED, YOUR DECEMBER 31, 1970, BALANCE SHEET REVEALED A DEFICIT WORKING CAPITAL OF $83,068. ALSO, THE BALANCE SHEET REVEALED THAT YOUR CURRENT ASSETS WERE ONLY $43,088 WHILE YOUR CURRENT LIABILITIES WERE $126,157. ADDITIONALLY, AN AMOUNT OF $103,860 IN CURRENT NOTES PAYABLE WERE PAYABLE AT A RATE OF $9,857 PER MONTH. IT ALSO APPEARS THAT YOUR FIRM'S NET WORTH CONSISTS OF AIRCRAFT AND THAT OF THE 37 AIRCRAFT OWNED BY YOUR FIRM, 29 ARE BEING PAID OFF ON AN INSTALLMENT BASIS WHICH MEANS THAT THEY ARE MORTGAGED AND CAN BE REPOSSESSED AT ANY TIME. SUCH FACTORS APPEAR TO HAVE HAD SUBSTANTIAL WEIGHT IN THE DCASD FINANCIAL ANALYST'S DETERMINATION THAT THE FINANCIAL CONDITION OF YOUR FIRM WAS SUBMARGINAL.

THE DETERMINATION OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS A QUESTION OF FACT AND IS PRIMARILY THE FUNCTION OF THE CONTRACTING OFFICER. IT IS ALSO A MATTER OF JUDGMENT INVOLVING A CONSIDERABLE RANGE OF DISCRETION. IN THIS REGARD IT IS OUR DUTY TO DETERMINE FROM THE RECORD BEFORE US WHETHER THE INFORMATION AND DATA RELIED UPON BY THE CONTRACTING OFFICER IN FINDING YOUR FIRM NONRESPONSIBLE AS A PROSPECTIVE CONTRACTOR FOR THE PROCUREMENT IN QUESTION REASONABLY SUPPORTED THAT CONCLUSION. WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER UNLESS IT IS SHOWN BY CONVINCING EVIDENCE THAT THE FINDING OF NONRESPONSIBILITY WAS ARBITRARY, CAPRICIOUS OR NOT BASED ON SUBSTANTIAL EVIDENCE. 45 COMP. GEN. 4 (1965), 43 COMP. GEN. 257 (1963). ON THE RECORD BEFORE US WE FIND NO BASIS TO DISTURB THIS FINDING.

IN VIEW OF THE FOREGOING, YOUR PROTEST IS DENIED.