B-179922, OCT 16, 1974, 54 COMP GEN 276

B-179922: Oct 16, 1974

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BANKRUPTCY - CONTRACTORS - PROSPECTIVE THE FILING OF A PETITION UNDER CHAPTER XI OF THE BANKRUPTCY ACT DOES NOT IN ITSELF REQUIRE A FINDING THAT PETITIONER IS NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR. ALTHOUGH IT WAS UNDERGOING CHAPTER XI ARRANGEMENT. ETC OFFEROR'S PURPORTED POST-CLOSING DATE CONSENT TO CERTAIN CONTRACT CLAUSES WHICH WERE INCORPORATED INTO REQUEST FOR PROPOSALS BY REFERENCE. CONTRACTS - PROTESTS - TIMELINESS - NEGOTIATED CONTRACT ALLEGATION THAT AGENCY IMPROPERLY FAILED TO CONDUCT DISCUSSIONS WAS DISMISSED AS UNTIMELY SINCE IT WAS FILED ALMOST 2 MONTHS AFTER AWARD WAS MADE. 1974: THE PROTESTER'S PRINCIPAL CONTENTION IS THAT THE CONTRACTING OFFICER ARBITRARILY AND CAPRICIOUSLY DETERMINED THE LOW OFFEROR TO BE A RESPONSIBLE PROSPECTIVE CONTRACTOR.

B-179922, OCT 16, 1974, 54 COMP GEN 276

BANKRUPTCY - CONTRACTORS - PROSPECTIVE THE FILING OF A PETITION UNDER CHAPTER XI OF THE BANKRUPTCY ACT DOES NOT IN ITSELF REQUIRE A FINDING THAT PETITIONER IS NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR. BIDDERS - QUALIFICATIONS - BANKRUPTCY EFFECT CONTRACTING OFFICER DID NOT ARBITRARILY DETERMINE FIRM TO BE RESPONSIBLE, ALTHOUGH IT WAS UNDERGOING CHAPTER XI ARRANGEMENT, IN VIEW OF FAVORABLE PREAWARD SURVEYS CONCLUDING THAT FIRM HAD FINANCIAL AND OTHER RESOURCES ADEQUATE FOR PERFORMANCE OF THE CONTRACT. CONTRACTS - NEGOTIATION - DURATION, ETC OFFEROR'S PURPORTED POST-CLOSING DATE CONSENT TO CERTAIN CONTRACT CLAUSES WHICH WERE INCORPORATED INTO REQUEST FOR PROPOSALS BY REFERENCE, AND TO WHICH OFFEROR HAD NOT OBJECTED IN ITS INITIAL PROPOSAL, DID NOT CONSTITUTE THE CONDUCT OF DISCUSSIONS. CONTRACTS - PROTESTS - TIMELINESS - NEGOTIATED CONTRACT ALLEGATION THAT AGENCY IMPROPERLY FAILED TO CONDUCT DISCUSSIONS WAS DISMISSED AS UNTIMELY SINCE IT WAS FILED ALMOST 2 MONTHS AFTER AWARD WAS MADE.

IN THE MATTER OF HUNTER OUTDOOR PRODUCTS, INC., OCTOBER 16, 1974:

THE PROTESTER'S PRINCIPAL CONTENTION IS THAT THE CONTRACTING OFFICER ARBITRARILY AND CAPRICIOUSLY DETERMINED THE LOW OFFEROR TO BE A RESPONSIBLE PROSPECTIVE CONTRACTOR. OUR OFFICE HAS DISCONTINUED THE PRACTICE OF REVIEWING BID PROTESTS OF CONTRACTING OFFICER'S AFFIRMATIVE RESPONSIBILITY DETERMINATIONS, EXCEPT FOR ACTIONS BY PROCURING OFFICIALS WHICH ARE TANTAMOUNT TO FRAUD. MATTER OF UNITED HATTERS, CAP AND MILLINERY WORKERS INTERNATIONAL UNION, 53 COMP. GEN. 931 (1974). HOWEVER, WE SHALL CONSIDER THE INSTANT PROTEST ON THE MERITS BECAUSE IT WAS FILED PRIOR TO OUR CHANGE IN POLICY.

THE DEFENSE SUPPLY AGENCY (DSA), DEFENSE PERSONNEL SUPPORT CENTER (DPSC), PHILADELPHIA, PENNSYLVANIA, ISSUED REQUEST FOR PROPOSALS (RFP) DSA100-74-R -0001 FOR THE FURNISHING OF 90,000 SLEEPING BAGS. LA CROSSE GARMENT MANUFACTURING COMPANY (LA CROSSE) SUBMITTED THE LOW OFFER FOR A SUBSTANTIAL PORTION OF THE PROCUREMENT AND THEREFORE WAS THE SUBJECT OF A PREAWARD SURVEY, DESCRIBED MORE FULLY BELOW. IN THE MEANTIME, A REQUIREMENT FOR 113,732 ADDITIONAL SLEEPING BAGS WAS RECEIVED. THE NEW REQUIREMENT WAS ADDED TO THE CURRENT SOLICITATION BY AMENDMENT, AND A SUBSEQUENT AMENDMENT CLARIFYING THE SPECIFICATIONS SET THE DUE DATE FOR RECEIPT OF PROPOSALS AS NOVEMBER 2, 1973.

OF THE FIVE OFFERS RECEIVED, LA CROSSE SUBMITTED THE LOWEST FOR THE ENTIRE QUANTITY SOLICITED. SINCE THE QUANTITY OF SLEEPING BAGS TO BE SUPPLIED HAD INCREASED SUBSTANTIALLY, A SUPPLEMENTAL PREAWARD SURVEY WAS CONDUCTED AT LA CROSSE. ADDITIONALLY, DPSC AND LA CROSSE REPRESENTATIVES MET TO DISCUSS THE AVAILABILITY OF FUEL, EQUIPMENT, LABOR RESOURCES, FINANCES, AND THE PROPOSED PRODUCTION RATE. ON THE BASIS OF THE INFORMATION DERIVED FROM THIS DISCUSSION AND THE TWO PREAWARD SURVEYS, THE CONTRACTING OFFICER DETERMINED LA CROSSE TO BE A RESPONSIBLE PROSPECTIVE CONTRACTOR.

LA CROSSE'S PRICE WAS DETERMINED TO BE FAIR AND REASONABLE, IN VIEW OF THE COMPETITION OBTAINED AND AN INDEPENDENT PRICE ANALYSIS, AND THEREFORE IT WAS CONSIDERED UNNECESSARY TO CONDUCT WRITTEN OR ORAL NEGOTIATIONS.

ON NOVEMBER 29, 1973, HUNTER OUTDOOR PRODUCTS, INCORPORATED (HUNTER) PROTESTED TO OUR OFFICE AGAINST ANY AWARD BEING MADE UNDER THE SOLICITATION ON THE BASIS THAT THE RFP "IS DEFECTIVE IN A NUMBER OF RESPECTS INCLUDING THE FACT THAT THE GOVERNMENT FURNISHED MATERIALS CALLED FOR ARE NOT AVAILABLE." HUNTER NEVER DEVELOPED THIS BASIS FOR PROTEST AND WE ASSUME IT HAS BEEN ABANDONED. THE PROCURING AGENCY PROCEEDED WITH AN AWARD TO LA CROSSE UNDER THE AUTHORITY OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) SEC. 2-407.8(B)(3) (1973 ED.) SINCE SUPPLIES OF THE SLEEPING BAGS WERE EXHAUSTED AND 85,000 UNITS WERE ON BACKORDER.

HUNTER FIRST ALLEGES THAT THE CONTRACTING OFFICER ABUSED HIS DISCRETION BY "PRECIPITOUSLY" MAKING AWARD TO LA CROSSE AFTER THE PROTEST WAS FILED. IN VIEW OF OUR CONCLUSIONS ON THE MERITS OF THIS PROTEST, WE DO NOT BELIEVE THAT THE PROTESTER HAS BEEN PREJUDICED BY THE DECISION TO PROCEED WITH THE AWARD, AND THEREFORE WE SEE NO NECESSITY TO DISCUSS ITS PROPRIETY.

AS WE INDICATED ABOVE, THE PROTESTER'S PRINCIPAL CONTENTION IS THAT THAT CONTRACTING OFFICER ARBITRARILY AND CAPRICIOUSLY DETERMINED LA CROSSE TO BE A RESPONSIBLE PROSPECTIVE CONTRACTOR. THIS CONTENTION IS BASED UPON THE OBSERVATION THAT LA CROSSE IS "IN BANKRUPTCY," A REFERENCE TO THE FACT THAT LA CROSSE IS UNDERGOING AN ARRANGEMENT IN ACCORDANCE WITH CHAPTER XI OF THE BANKRUPTCY ACT. IN THIS REGARD OUR OFFICE HAS STATED THAT:

*** 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.

SEE B-172149, JUNE 25, 1971, AND THE CASES CITED THEREIN; B-160374, JANUARY 4, 1967; B-156288, JULY 29, 1965.

THE INITIAL PREAWARD SURVEY OF LA CROSSE INCLUDED THAT FIRM'S TECHNICAL AND PRODUCTION CAPABILITY; PLANT FACILITIES AND EQUIPMENT; FINANCIAL CAPABILITY; PURCHASING AND SUBCONTRACTING; QUALITY ASSURANCE CAPABILITY; LABOR RESOURCES; PERFORMANCE RECORD; AND ABILITY TO MEET THE REQUIRED SCHEDULE. ALL OF THESE FACTORS WERE RATED "SATISFACTORY" EXCEPT "PLANT FACILITIES AND EQUIPMENT." THE UNSATISFACTORY RATING IN THAT CATEGORY RESULTED FROM UNCERTAINTY AS TO WHETHER A CERTAIN BUILDING WOULD BE AVAILABLE FOR THE MANUFACTURING OPERATIONS. AS RELATED IN THE ADMINISTRATIVE REPORT, THIS UNCERTAINTY WAS RESOLVED IN LA CROSSE'S FAVOR, AND THE EVALUATORS SUBSEQUENTLY CHANGED THEIR RATING OF "PLANT FACILITIES AND EQUIPMENT" TO "SATISFACTORY." IN ADDITION TO THE TWO PREAWARD SURVEYS, THE PROCURING AGENCY INDEPENDENTLY INVESTIGATED LA CROSSE'S FUEL SUPPLY; ITS EQUIPMENT SET-UP PLANS; ITS LABOR RESOURCES AND FINANCES AND THE REALISM OF ITS PROPOSED PRODUCTION RATE.

WE HAVE REVIEWED THE INFORMATION OBTAINED FROM THESE SURVEYS AND CONCLUDE THAT IT PROVIDES A RATIONAL BASIS FOR THE DETERMINATION THAT LA CROSSE WAS A RESPONSIBLE FIRM.

BASICALLY, THE SURVEY TEAM CONCLUDED THAT LA CROSSE WAS CAPABLE OF ESTABLISHING A PRODUCTION LINE FROM MACHINERY IN STORAGE IN ITS BUILDING. THE TEAM WAS ADVISED THAT THE MACHINERY WAS NOT INCLUDED AMONG SURPLUS EQUIPMENT TO BE PLACED AT AUCTION. IT WAS ALSO CONCLUDED THAT THE PROPOSED BUILDING TO BE USED IN THE PRODUCTION OF THE ITEM WAS ADEQUATE. IT APPEARS FROM INFORMATION SUBMITTED BY LA CROSSE, THE LOCAL UNION REPRESENTATIVE, AND THE WISCONSIN STATE EMPLOYMENT SERVICE THAT PRODUCTION PERSONNEL WERE AVAILABLE IN THE LA CROSSE AREA. LA CROSSE'S PERFORMANCE RECORD WAS RATED AS SATISFACTORY IN VIEW OF ITS ON SCHEDULE PRODUCTION OF 72,000 SLEEPING BAGS UNDER ITS MOST RECENT CONTRACT FOR THAT ITEM. CROSSE ALSO DEMONSTRATED TO THE PREAWARD SURVEY TEAM THAT IT HAD OBTAINED FIRM WRITTEN QUOTES FROM SUBCONTRACTORS AND ADEQUATE FINANCING TO PERFORM THE CONTRACT.

APART FROM LA CROSSE'S FINANCIAL STATUS, HUNTER ALLEGES THAT THE PREAWARD SURVEYS WERE DEFECTIVE IN THAT DPSC DID NOT ADVISE THE SURVEY TEAM THAT SPECIAL AND MODIFIED EQUIPMENT (WHICH LA CROSSE LACKED) WAS REQUIRED FOR THE PERFORMANCE OF THIS CONTRACT. HUNTER ALSO CONTENDS THAT LA CROSSE HAD AN UNSATISFACTORY RECORD OF PERFORMANCE WHICH SHOULD HAVE PRECLUDED AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY.

THERE IS NO DISCUSSION IN THE RECORD OF ANY NEED FOR "SPECIAL AND MODIFIED EQUIPMENT." HOWEVER, WE NOTE THAT THE PREAWARD SURVEY TEAM WAS IN POSSESSION OF THE SOLICITATION AND ACCOMPANYING SPECIFICATIONS WHEN IT VISITED LA CROSSE'S PLANT. MOREOVER, DURING THEIR VISIT TO LA CROSSE'S FACILITY AFTER THE PREAWARD SURVEYS, DPSC REPRESENTATIVES SPECIFICALLY INQUIRED AS TO THE AVAILABILITY AND CONDITION OF PRODUCTION EQUIPMENT AND THE PLANS FOR SETTING IT UP IN A PRODUCTION LINE. THE CONCLUSION OF BOTH THE PREAWARD SURVEY AND DPSC TEAMS WAS THAT LA CROSSE WAS EQUIPPED TO PERFORM THE CONTRACT. WE DO NOT BELIEVE THAT THE PROTESTER'S GENERAL ALLEGATION HAS SHOWN THIS DETERMINATION TO HAVE BEEN ARBITRARY.

WITH RESPECT TO LA CROSSE'S PRIOR PERFORMANCE RECORD, THE PROCURING AGENCY HAS PROVIDED A STATEMENT OF LA CROSSE'S PERFORMANCE UNDER DPSC CONTRACTS FOR THE PAST FIVE YEARS. ALL 17 OF THESE CONTRACTS WERE TIMELY COMPLETED BY LA CROSSE. HOWEVER, UNDER THREE OF THESE CONTRACTS, LA CROSSE DELIVERED ITEMS WHICH IN THE AGENCY'S JUDGMENT CONTAINED MINOR DEVIATIONS FROM SPECIFICATION REQUIREMENTS. UNDER FOUR OTHER CONTRACTS, WE ARE ADVISED, LA CROSSE DEVIATED "SUBSTANTIALLY" FROM SPECIFICATION REQUIREMENTS.

INDIVIDUALS' JUDGMENTS MAY DIFFER AS TO WHETHER THIS PERFORMANCE RECORD IS ONE OF A RESPONSIBLE FIRM. HOWEVER, IN VIEW OF THE FACT THAT THE MAJORITY OF LA CROSSE'S PERFORMANCE HAS BEEN SATISFACTORY, WE ARE NOT PREPARED TO CHARACTERIZE AS ARBITRARY OR UNREASONABLE THE PROCURING AGENCY'S DETERMINATION THAT LA CROSSE WAS A RESPONSIBLE PROSPECTIVE CONTRACTOR.

THE RECORD IN THE INSTANT CASE WAS HELD OPEN FOR A LONG PERIOD LARGELY IN DEFERENCE TO THE PROTESTER'S REQUESTS TO SUBMIT ADDITIONAL INFORMATION REGARDING LA CROSSE'S RESPONSIBILITY. THIS INFORMATION, HOWEVER, CONCERNED LA CROSSE'S PERFORMANCE UNDER THE INSTANT CONTRACT, WHICH WE DO NOT CONSIDER RELEVANT TO THE ISSUE BEFORE US. WE ARE OF THE OPINION THAT THE PROPRIETY OF THE CONTRACTING OFFICER'S AFFIRMATIVE DETERMINATION OF RESPONSIBILITY MUST BE MADE ON THE BASIS OF INFORMATION AVAILABLE TO HIM AT THE TIME THE DETERMINATION WAS MADE.

IN ANY EVENT, IT IS REPORTED BY DSA THAT LA CROSSE'S FIRST ARTICLES WERE CONDITIONALLY APPROVED SUBJECT TO THE CORRECTION OF NUMEROUS BUT MINOR DEVIATIONS; THAT LA CROSSE HAS SINCE BEEN MEETING THE DELIVERY SCHEDULE; AND THAT "*** QUALITY AUDITS CONDUCTED ON FOUR SEPARATE SHIPMENTS FROM LA CROSSE TOTALING 18,400 ITEMS INDICATE THAT LA CROSSE IS PERFORMING IN ACCORDANCE WITH THE SPECIFICATIONS." LA CROSSE HAS BEEN PERMITTED TO DEVIATE FROM THE SPECIFICATIONS ONLY FOR THE THREAD TREATMENT FOR 9,000 ITEMS, FOR THE BACKSTITCHING FOR 1,000 ITEMS AND FOR THE INCLUSION OF DIFFERENT COLORED LININGS WITHIN THE SAME ITEM.

AS A SECONDARY ARGUMENT, HUNTER ALLEGES THAT THE PROCURING AGENCY CONDUCTED NEGOTIATIONS SOLELY WITH LA CROSSE, IN VIOLATION OF 10 U.S.C. SEC. 2304(G) (1970) AND ASPR SEC. 3-805.1(B) (1973 ED.). THIS ARGUMENT IS BASED UPON THE FACT THAT 10 DAYS AFTER OFFERS WERE RECEIVED FOR THE INCREASED QUANTITY OF SLEEPING BAGS, LA CROSSE ADVISED DPSC BY TELEGRAM THAT LA CROSSE "AGREED TO INCLUSION" IN ITS OFFER OF SEVERAL CLAUSES WHICH THE SOLICITATION HAD INCORPORATED BY REFERENCE. HUNTER CONTENDS THAT LA CROSSE THEREBY REMEDIED THE OMISSION OF SEVERAL PROVISIONS FROM ITS OFFER, IN THE ABSENCE OF WHICH LA CROSSE WOULD NOT HAVE BEEN ELIGIBLE FOR AWARD.

IF LA CROSSE DID NOT ASSENT TO CERTAIN TERMS OF THE RFP, THAT WAS NOT APPARENT FROM ITS OFFER. WE HAVE CAREFULLY EXAMINED LA CROSSE'S OFFER AND THE CORRESPONDENCE WHICH ACCOMPANIED IT AND FIND THEREIN NO INDICATION THAT LA CROSS TOOK EXCEPTION TO ANY OF THE SOLICITATION TERMS. IT APPEARS TO US THAT HAD AN AWARD BEEN MADE TO LA CROSS BEFORE IT DISPATCHED ITS TELEGRAM IT WOULD HAVE BEEN BOUND TO THE SAME TERMS WHICH IT LATER PURPORTED TO ACCEPT. UNDER THESE CIRCUMSTANCES, WE DO NOT BELIEVE THAT LA CROSSE'S TELEGRAM AFFORDS A BASIS FOR DISTURBING THE AWARD.

FINALLY, HUNTER ALLEGES THAT THE INITIAL PRICES RECEIVED WERE NOT FAIR AND REASONABLE, AND THEREFORE THE AGENCY SHOULD HAVE CONDUCTED NEGOTIATIONS WITH ALL OFFERORS PURSUANT TO 10 U.S.C. SEC. 2304(G) (1970). SINCE THIS ALLEGATION WAS FIRST MADE APPROXIMATELY 2 MONTHS AFTER THE CONTRACT WAS AWARDED TO LA CROSSE, WE REGARD IT AS UNTIMELY FILED AND DECLINE TO CONSIDER IT UPON THE MERITS. 4 C.F.R. SEC. 20.2(A) (1974).