B-172688, JUL 14, 1971

B-172688, JUL 14, 1971

BID PROTEST - BIDDER RESPONSIBILITY - FINANCIAL DECISION DENYING PROTEST AGAINST AWARD OF CONTRACT FOR RENTAL OF DATA PROCESSING PERIPHERAL EQUIPMENT TO AMPEX CORPORATION UNDER RFP ISSUED BY GSA. ALTHOUGH AN ERROR WAS MADE EVALUATING PROTESTANT'S PROPOSAL WHICH RESULTED IN ERRONEOUS DETERMINATION THAT IT WAS SECOND LOW BIDDER, THE DETERMINATION THAT PROTESTANT WAS FINANCIALLY NON RESPONSIBLE BY PROCURING AGENCY (MADE AFTER MISTAKE WAS DISCOVERED) MAY NOT BE UPSET AS NO ABUSE OF ADMINISTRATIVE DISCRETION HAS BEEN SHOWN.

TO MAI EQUIPMENT CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST THE AWARD OF A CONTRACT TO AMPEX CORPORATION BY THE GENERAL SERVICES ADMINISTRATION PURSUANT TO REQUEST FOR PROPOSALS (RFP) NO. FTPH-L-18808-70.

THE SUBJECT RFP WAS ISSUED ON OCTOBER 2, 1970, SOLICITING PROPOSALS ON LEASING AUTOMATIC DATA PROCESSING PERIPHERAL EQUIPMENT FOR THE PERIOD FROM DATE OF AWARD THROUGH JUNE 30, 1971, WITH AN OPTION TO RENEW THE LEASE THROUGH JUNE 30, 1972. AMPEX, AS THE EVALUATED LOW RESPONSIVE AND RESPONSIBLE OFFEROR RECEIVED THE AWARD ON MARCH 26, 1971.

BY LETTER DATED APRIL 21, 1971, YOU PROTESTED TO OUR OFFICE CONTENDING THAT YOU HAD SUBMITTED THE LOW OFFER AND, EXCEPT FOR GSA'S IMPROPER ADDITION OF TRANSPORTATION COSTS THERETO, SHOULD HAVE RECEIVED THE AWARD. FURTHERMORE, YOU STATED THAT EVEN THOUGH NO TRANSPORTATION COSTS SHOULD HAVE BEEN ADDED, IF GSA HAD APPLIED THE CORRECT RATES YOU STILL WOULD HAVE BEEN THE LOW OFFEROR.

IN ITS REPORT TO OUR OFFICE ON THE PROTEST, GSA CONCEDES THAT THE METHOD OF EVALUATION OF YOUR PROPOSAL WAS INCORRECT AND RESULTED IN AN ERRONEOUS DETERMINATION THAT YOU WERE SECOND LOW OFFEROR. HOWEVER, IT IS GSA'S POSITION THAT YOU WOULD NOT HAVE RECEIVED THE AWARD IN ANY EVENT BECAUSE AT THE TIME OF AWARD YOU WERE NOT FINANCIALLY RESPONSIBLE. (IT SHOULD BE NOTED THAT YOU ARE CLASSIFIED AS A LARGE BUSINESS CONCERN.) SINCE YOU HAD NOT BEEN EVALUATED LOW OFFEROR UNDER THE SUBJECT RFP, THE MATTER OF YOUR RESPONSIBILITY AS A PROSPECTIVE CONTRACTOR HAD NOT BEEN CONSIDERED PRIOR TO THE AWARD TO AMPEX. HOWEVER, IN VIEW OF THE DETERMINATION THAT BY APPLICATION OF THE PROPER METHOD OF EVALUATION YOU WERE THE APPARENT LOW OFFEROR, ON APRIL 16, 1971, THE CONTRACTING OFFICER REQUESTED A REPORT CONCERNING YOUR FINANCIAL RESPONSIBILITY TO "RECTIFY A POSSIBLE ERROR IN AWARD." IN A REPORT DATED APRIL 21, 1971, SIGNED BY THE DIRECTOR, CREDIT AND FINANCE DIVISION, THE CONTRACTING OFFICER WAS ADVISED OF THE DIVISION'S NEGATIVE DETERMINATION BASED UPON ITS FINDING OF APRIL 19, 1971, IN CONNECTION WITH INVITATION NO. FTPC-27886-H. IT WAS STATED IN THE REPORT THAT ALTHOUGH INVITATION NO. FTPC-27886-H INVOLVED AN ESTIMATED $6 MILLION VOLUME WHILE THE INSTANT PROCUREMENT ONLY INVOLVED AN ESTIMATED $600,000, THE NEGATIVE DETERMINATION FOR THE $6 MILLION CONTRACT WAS APPLICABLE FOR THE $600,000 CONTRACT.

BASICALLY, IT IS YOUR CONTENTION THAT MAI WAS AND IS CAPABLE OF PERFORMING THE SUBJECT CONTRACT, AND GSA'S CONTRARY FINDING IS NOT SUPPORTABLE BECAUSE IT WAS NOT BASED ON MAI'S ABILITY TO PERFORM THE SUBJECT CONTRACT, BUT ON THE INSOLVENCY OF MAI'S PARENT CORPORATION, MANAGEMENT ASSISTANCE INCORPORATED. AS PROOF OF MAI'S ABILITY TO PERFORM THE SUBJECT CONTRACT, YOU CITE THE FOLLOWING FACTS:

1. ALL THE EQUIPMENT NECESSARY FOR PERFORMANCE WAS AND IS OWNED BY MAI AND AVAILABLE FOR DELIVERY.

2. MAI'S REPAIR AND RECONDITIONING FACILITIES WERE AND ARE IN OPERATION.

3. CASH IN EXCESS OF $6 MILLION WAS AND IS AVAILABLE.

4. A MORE THAN AMPLE SERVICE FORCE WAS AND IS AVAILABLE.

WITH REGARD TO THE MATTER OF MANAGEMENT'S SOLVENCY, YOU STATE THAT ALTHOUGH MANAGEMENT WAS THEN INSOLVENT IN THE SENSE THAT LIABILITIES EXCEEDED ASSETS, IT HAS SINCE CONSUMMATED AN EXCHANGE OFFER WHICH WAS THEN PENDING AND IS NOW SOLVENT. IN THIS CONNECTION, YOU CONTEND, WITHOUT CONCEDING, THAT IF THE QUESTION OF MANAGEMENT'S SOLVENCY WAS RELEVANT, GSA SHOULD HAVE CONSIDERED THE ALMOST CERTAIN CONSUMMATION OF THE EXCHANGE OFFER AND THE UNLIKELIHOOD THAT, IN THE EVENT THE EXCHANGE OFFER FAILED, MAI'S EQUIPMENT WOULD BE FORECLOSED OR, IN THE EVENT OF BANKRUPTCY, THE TRUSTEE WOULD TERMINATE THE LEASE, BECAUSE THE VALUE OF THE EQUIPMENT LIES IN ITS BEING RENTED.

SINCE AN AWARD HAS ALREADY BEEN MADE TO AMPEX, THE BASIC QUESTION RAISED BY YOUR PROTEST IS THE VALIDITY OF THE CONTRACT. WHETHER THE CONTRACT IS VALID DEPENDS UPON COMPLIANCE WITH THE GOVERNING STATUTE, 41 U.S.C. 252(C), WHICH AS IMPLEMENTED BY REGULATION, REQUIRES THAT AWARD BE MADE TO THAT RESPONSIBLE OFFEROR WHOSE OFFER WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT, PRICE AND OTHER FACTORS CONSIDERED. IT IS CLEAR THAT IF THE CONTRACTING OFFICER'S DETERMINATION THAT MAI WAS NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR IS VALID, THEN THE AWARD TO AMPEX AS THE LOW RESPONSIBLE OFFEROR WAS PROPER.

IN DETERMINING WHETHER A PROSPECTIVE CONTRACTOR IS CAPABLE OF PERFORMING A PROPOSED CONTRACT, CONTRACTING OFFICERS OF GSA ARE GUIDED BY THE POLICY AND REQUIREMENTS SET FORTH IN SECTION 1-1.301-1 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR). GENERALLY, THE REGULATIONS PROVIDE THAT THE CONTRACTING OFFICER MUST MAKE AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY AND THAT UNLESS THE INFORMATION CONCERNING THIS MATTER CLEARLY INDICATES THE PROSPECTIVE CONTRACTOR IS RESPONSIBLE, THE CONTRACTING OFFICER MUST MAKE A DETERMINATION OF NONRESPONSIBILITY. FURTHER PROVIDES THAT DOUBT IN THIS REGARD WHICH CANNOT BE RESOLVED AFFIRMATIVELY REQUIRES A NEGATIVE DETERMINATION. FPR 1-1.310-5 PRESCRIBES THE MINIMUM STANDARDS OF RESPONSIBILITY WHICH INCLUDES, AMONG OTHER THINGS, ADEQUATE FINANCIAL RESOURCES. THE REGULATION ALSO PROVIDES THAT SUCH INFORMATION SHALL BE OBTAINED ON AS CURRENT A BASIS AS FEASIBLE FROM THE FILES OF THE AGENCY, WHERE AVAILABLE, OR THROUGH PRE-AWARD SURVEY, AND THAT SUCH INFORMATION SHALL BE SUFFICIENT TO SATISFY THE CONTRACTING OFFICER THAT THE PROSPECTIVE CONTRACTOR MEETS THE MINIMUM STANDARDS OF RESPONSIBILITY. FPR 1-1.310 7.

IT HAS LONG BEEN OUR POSITION THAT IT IS NEITHER THE PROVINCE NOR THE INTENTION OF OUR OFFICE TO DETERMINE THE RESPONSIBILITY OF PROSPECTIVE CONTRACTORS, SUCH DETERMINATION BEING A QUESTION OF FACT PRIMARILY FOR RESOLUTION BY THE CONTRACTING OFFICER CONCERNED. 45 COMP. GEN. 4 (1965); 43 COMP. GEN. 257 (1963); 38 COMP. GEN. 131 (1958). IN THESE AND OTHER DECISIONS WE HAVE TAKEN THE POSITION THAT A DETERMINATION OF RESPONSIBILITY NECESSARILY INVOLVES THE EXERCISE OF A CONSIDERABLE RANGE OF DISCRETION AND JUDGMENT, WHICH SHOULD NOT BE DISTURBED BY OUR OFFICE IN THE ABSENCE OF CONVINCING EVIDENCE THAT THE DETERMINATION WAS ARBITRARY, CAPRICIOUS, OR NOT BASED UPON SUBSTANTIAL EVIDENCE.

AS NOTED ABOVE, THE NEGATIVE DETERMINATION OF RESPONSIBILITY IN THIS CASE WAS BASED ON THE CONCLUSION OF THE CREDIT AND FINANCE DIVISION THAT ITS ANALYSIS OF AVAILABLE FINANCIAL DATA AND UNSATISFACTORY FINDING IN CONNECTION WITH ANOTHER CURRENT SOLICITATION WAS APPLICABLE TO THE SUBJECT PROCUREMENT. THE FINANCIAL DATA REFERRED TO WAS MAI'S BALANCE SHEET AS OF DECEMBER 31, 1970, MAI STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, 1970, GSA FORM 534, STATE OF FINANCIAL INFORMATION, SUBMITTED UPON GSA'S REQUEST BY LETTER DATED APRIL 15, 1971, FROM MR. JOSEPH S. BARSA, VICE PRESIDENT AND TREASURER, MAI EQUIPMENT CORPORATION. FROM THEIR ANALYSIS OF THE INFORMATION, CREDIT AND FINANCIAL DIVISION PERSONNEL CONCLUDED THAT THE "ABILITY OF THE BIDDER AND ITS PARENT MANAGEMENT ASSISTANCE INCORPORATED TO CONTINUE AS A GOING CONCERN IS MOST UNCERTAIN. OPERATIONS OVER THE PAST SEVERAL YEARS HAVE RESULTED IN SUBSTANTIAL LOSSES, COVENANTS REQUIRED UNDER AGREEMENTS WITH SECURED CREDITORS HAVE NOT BEEN COMPLIED WITH AND FORECLOSING IS A REAL THREAT."

WE HAVE REVIEWED AND CONSIDERED THE INFORMATION RELIED UPON IN DETERMINING THAT MAI WAS NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR WITHIN THE STANDARDS PRESCRIBED BY APPLICABLE REGULATIONS, AND FIND NO BASIS FOR CONCLUDING THAT THE DETERMINATION WAS OUTSIDE THE REASONABLE RANGE, OR AN ABUSE, OF THE ADMINISTRATIVE DISCRETION.

ACCORDINGLY, THERE IS NO BASIS UPON WHICH OUR OFFICE MAY LEGALLY DISTURB THE AWARD AS MADE.