B-172149, JUN 25, 1971

B-172149: Jun 25, 1971

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THE PROTEST IS GROUNDED IN THE CONTENTION THAT ELECTRO-TEC IS NONRESPONSIBLE BECAUSE OF A CONTINUING LABOR DISPUTE AND THE FACT THAT ITS PARENT CORPORATION HAS FILED A PETITION IN BANKRUPTCY UNDER CHAPTER IX OF THE BANKRUPTCY ACT. EVEN IF ELECTRO-TEC WERE PETITIONING UNDER CHAPTER IX. THIS WOULD NOT IN ITSELF REQUIRE A FINDING OF NONRESPONSIBILITY SINCE SUCH A DETERMINATION IS IN THE REASONABLE DISCRETION OF THE CONTRACTING OFFICER. TO POLY-SCIENTIFIC: REFERENCE IS MADE TO YOUR LETTER DATED MARCH 9. THE RFP WAS ISSUED ON OCTOBER 19. FOUR PROPOSALS WERE RECEIVED. THE DETERMINATION WAS MADE TO AMEND THE TESTING REQUIREMENTS. ALL OFFERORS WERE GIVEN UNTIL JANUARY 15. ET'S FINAL PRICE WAS LOW.

B-172149, JUN 25, 1971

BID PROTEST - RESPONSIBILITY - BANKRUPTCY DECISION DENYING PROTEST OF POLY-SCIENTIFIC, DIVISION OF LITTON INDUSTRIES, SECOND LOW OFFEROR, AGAINST AWARD OF CONTRACT UNDER RFP ISSUED BY DEPARTMENT OF AIR FORCE, DIRECTOR OF PROCUREMENT AND PRODUCTION, OGDEN AIR MATERIAL AREA TO KDI ELECTRO-TEC CORPORATION LOW OFFEROR, FOR THE PURCHASE OF SHIP RINGS. THE PROTEST IS GROUNDED IN THE CONTENTION THAT ELECTRO-TEC IS NONRESPONSIBLE BECAUSE OF A CONTINUING LABOR DISPUTE AND THE FACT THAT ITS PARENT CORPORATION HAS FILED A PETITION IN BANKRUPTCY UNDER CHAPTER IX OF THE BANKRUPTCY ACT. THE ADMINISTRATIVE RECORD INDICATES THAT ELECTRO-TEC HAS SUFFICIENT PERSONNEL AVAILABLE TO PERFORM AND THAT THEY SHALL CONTINUE IN OPERATION ON AN AUTONOMOUS BASIS DESPITE THE BANKRUPTCY OF THE PARENT CONCERN. HOWEVER, EVEN IF ELECTRO-TEC WERE PETITIONING UNDER CHAPTER IX, THIS WOULD NOT IN ITSELF REQUIRE A FINDING OF NONRESPONSIBILITY SINCE SUCH A DETERMINATION IS IN THE REASONABLE DISCRETION OF THE CONTRACTING OFFICER.

TO POLY-SCIENTIFIC:

REFERENCE IS MADE TO YOUR LETTER DATED MARCH 9, 1971, WITH ENCLOSURES, AND A COPY OF YOUR LETTER TO THE AIR FORCE DATED MAY 21, 1971, IN WHICH YOU QUESTION THE PROPRIETY OF MAKING AN AWARD TO KDI ELECTRO-TEC CORPORATION (ET) UNDER REQUEST FOR PROPOSALS NO. F42600-71 R-0534, ISSUED BY THE DEPARTMENT OF THE AIR FORCE, DIRECTORATE OF PROCUREMENT AND PRODUCTION, OGDEN AIR MATERIAL AREA, HILL AIR FORCE BASE, UTAH.

THE RFP WAS ISSUED ON OCTOBER 19, 1970, FOR THE PURCHASE OF SLIP RINGS. FOUR PROPOSALS WERE RECEIVED. SUBSEQUENT TO THE INITIAL RECEIPT OF OFFERS, THE DETERMINATION WAS MADE TO AMEND THE TESTING REQUIREMENTS, ADD A SUPPLY WARRANTY PROVISION AND, AT THE SAME TIME, TO CLARIFY AND FORMALIZE OTHER POINTS.

FOLLOWING DISCUSSIONS, ALL OFFERORS WERE GIVEN UNTIL JANUARY 15, 1971, TO MODIFY THEIR PROPOSALS. YOUR FIRM AND ET REVISED THEIR PRICES DOWNWARD. ET'S FINAL PRICE WAS LOW. AFTER A FAVORABLE PREAWARD SURVEY, ET WAS DETERMINED TO BE RESPONSIBLE AND RECEIVED THE AWARD ON MARCH 2, 1971.

APPROXIMATELY ONE WEEK PRIOR TO THE AWARD OF THE CONTRACT, YOU SENT A TELEFAX TO THE CONTRACTING OFFICER ALLEGING THAT ET WAS NOT RESPONSIBLE AND INFORMED HIM OF YOUR INTENTION TO PROTEST "AGAINST THE PENDING AWARD TO KDI ELECTRO-TEC." THE CONTRACTING OFFICER CONSIDERED THIS TELEFAX AS A PROTEST TO HIM AND DENIED IT ON MARCH 2, 1971.

YOU CONTEND THAT ET SHOULD NOT BE CONSIDERED RESPONSIBLE BECAUSE THE FIRM IS PRESENTLY INVOLVED IN A CONTINUING LABOR DISPUTE AND EMPLOYEE STRIKE AND ITS PARENT CORPORATION HAS FILED A PETITION IN BANKRUPTCY UNDER CHAPTER XI OF THE BANKRUPTCY ACT.

WITH REGARD TO THE EMPLOYEE STRIKE AT ET, THE ADMINISTRATIVE RECORD INDICATES THAT ET'S LABOR SITUATION HAS BEEN EXAMINED AND THE CONCLUSION REACHED THAT IT HAS THE NUMBER AND TYPE OF PERSONNEL AVAILABLE TO PERFORM THE CONTRACT PROPERLY.

ALTHOUGH A BANKRUPTCY PETITION HAS BEEN FILED BY ET'S PARENT CORPORATION, THE INFORMATION AVAILABLE INDICATES THAT THE SUBSIDIARIES WILL CONTINUE TO OPERATE ON AN AUTONOMOUS BASIS AND WILL NOT BE INCLUDED IN THE BANKRUPTCY PROCEEDINGS. IN ANY CASE, THE MERE FACT THAT A CONTRACTOR FILES A PETITION IN BANKRUPTCY UNDER CHAPTER XI DOES NOT IN ITSELF REQUIRE A FINDING OF NONRESPONSIBILITY REGARDLESS OF OTHER FACTS. IN B-153478, JANUARY 18, 1965, THIS OFFICE FOUND NO BASIS TO OVERTURN AN AFFIRMATIVE ADMINISTRATIVE DETERMINATION OF THE RESPONSIBILITY OF A CONTRACTOR WHO HAD FILED A PETITION UNDER CHAPTER XI OF THE BANKRUPTCY ACT.

THIS DETERMINATION WAS UPHELD IN B-169549, DATED JULY 8, 1970, WHEREIN WE STATED IN PART AS FOLLOWS:

"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 *** 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 THE INSTANT CASE, THE CONTRACTING OFFICER MADE THE REQUIRED AFFIRMATIVE DETERMINATION OF RESPONSIBILITY KNOWING THAT A PETITION IN BANKRUPTCY HAD BEEN FILED. SUCH A DETERMINATION IS LARGELY WITHIN THE REASONABLE DISCRETION OF THE CONTRACTING OFFICER. WE FIND NO BASIS FOR OVERTURNING THE CONCLUSION HERE.

YOU ALSO CONTEND THAT AFTER THE INITIAL SOLICITATION YOU WERE ADVISED THAT YOU WERE THE APPARENT LOW BIDDER. SUBSEQUENTLY, THE SOLICITATION WAS AMENDED FOUR TIMES WITHOUT CHANGE IN THE HARDWARE OR DELIVERY REQUIREMENTS. SINCE, IN YOUR OPINION, THE AMENDMENTS DID NOT AFFECT COST, YOU QUESTION WHETHER THE AMENDMENTS SERVED ANY PURPOSE EXCEPT TO PERMIT YOUR COMPETITOR TO REDUCE HIS PRICE BELOW YOURS.

WHETHER THESE AMENDMENTS ACTUALLY RESULTED IN ANY ADDITIONAL COST DOES NOT NECESSARILY AFFECT THE PROPRIETY OF THEIR ISSUANCE. SINCE THEY COULD HAVE HAD A MATERIAL EFFECT, WE BELIEVE THE CONTRACTING OFFICER WOULD HAVE BEEN REMISS IN NOT MAKING THE OFFERORS AWARE OF THE CHANGES. WHILE WE CANNOT CONDONE ANY DISCLOSURE OF AN OFFEROR'S RELATIVE STANDING DURING THE NEGOTIATING PROCESS, WE NOTE THAT BOTH YOU AND ET TOOK ADVANTAGE OF THE OPPORTUNITY AFFORDED BY THE ISSUANCE OF AMENDMENTS TO REDUCE PRICES.

FINALLY, YOU CONTEND THAT THE AWARD WAS MADE WITH IMPROPER HASTE BETWEEN THE TIME OF YOUR TELEFAX DATED FEBRUARY 26 WHICH SET FORTH YOUR INTENTION TO PROTEST FORMALLY AND YOUR ACTUAL LETTER OF PROTEST DATED MARCH 9, 1971. IN VIEW OF OUR CONCLUSIONS ON THE MERITS OF YOUR PROTEST, WE DO NOT FIND THAT YOUR FIRM WAS PREJUDICED BY THE ADMINISTRATIVE TREATMENT OF YOUR PROTEST.

THEREFORE, IN ACCORDANCE WITH THE FACTS SET FORTH ABOVE AND THE APPLICABLE LAW AND REGULATIONS DISCUSSED WITH RESPECT THERETO, YOUR PROTEST IS HEREBY DENIED.