B-180973, JUN 19, 1974

B-180973: Jun 19, 1974

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AGAINST REJECTION OF ITS BID ON GROUNDS THAT FIRM WAS NONRESPONSIBLE BECAUSE IT LACKED TENACITY. IS DENIED. WAS ISSUED BY THE DEPARTMENT OF STATE ON FEBRUARY 28. WAS FOUND TO BE THE LOW BIDDER. AFTER DETERMINING THAT KENNEDY'S PERFORMANCE ON PRIOR CONTRACTS HAD BEEN UNSATISFACTORY AND THAT KENNEDY THEREFORE WAS NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR. ASSERTS THAT MANY OF THE PROBLEMS IT ENCOUNTERED ON THE PRIOR CONTRACTS HAVE BEEN RESOLVED WHILE OTHERS WERE CAUSED BY THE STATE DEPARTMENT'S REQUIRING IT TO PROVIDE SERVICES GREATLY IN EXCESS OF THE ESTIMATES CONTAINED IN THE SOLICITATIONS WHICH LED TO THE CONTRACTS. SUPPORTS KENNEDY'S ASSERTIONS AND STATES THAT THE NONRESPONSIBILITY DETERMINATION "IS A PUNITIVE MEASURE *** NOT *** APPLICABLE ON THIS CASE.".

B-180973, JUN 19, 1974

PROTEST BY BIDDER, A SMALL-BUSINESS CONCERN, AGAINST REJECTION OF ITS BID ON GROUNDS THAT FIRM WAS NONRESPONSIBLE BECAUSE IT LACKED TENACITY, PERSEVERANCE, INTEGRITY AND BUSINESS ETHICS, IS DENIED, SINCE EVEN THOUGH COMPTROLLER GENERAL VIEWS RECORD AS PROVIDING QUESTIONABLE BASIS FOR DETERMINATION REGARDING INTEGRITY AND BUSINESS ETHICS, RECORD DOES PROVIDE BASIS FOR DETERMINATION THAT BIDDER LACKED TENACITY AND PERSEVERANCE.

TO KENNEDY VAN & STORAGE CO., INC.:

INVITATION FOR BIDS 74-28, FOR SERVICES INCIDENT TO INBOUND AND OUTBOUND SHIPMENTS OF UNACCOMPANIED AIR BAGGAGE, WAS ISSUED BY THE DEPARTMENT OF STATE ON FEBRUARY 28, 1974. AT BID OPENING ON MARCH 20, KENNEDY VAN & STORAGE COMPANY, INC. (KENNEDY), A SMALL-BUSINESS CONCERN, WAS FOUND TO BE THE LOW BIDDER. HOWEVER, THE CONTRACTING OFFICER, AFTER DETERMINING THAT KENNEDY'S PERFORMANCE ON PRIOR CONTRACTS HAD BEEN UNSATISFACTORY AND THAT KENNEDY THEREFORE WAS NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR, NOTIFIED THE SMALL BUSINESS ADMINISTRATION (SBA) BY LETTER OF MARCH 25 OF THIS DETERMINATION AND THEN AWARDED A CONTRACT TO THE SECOND LOW BIDDER. KENNEDY'S PROTEST FOLLOWED.

THE STATE DEPARTMENT REPORTS THAT IT HAS HAD TO TERMINATE KENNEDY'S PRIOR CONTRACTS BECAUSE OF DELAYS IN PERFORMANCE, SERIOUS DEVIATIONS FROM CONTRACT SPECIFICATIONS, AND OVERSTATEMENTS OF WEIGHTS RESULTING IN OVERCHARGES TO THE GOVERNMENT. IT THEREFORE VIEWS KENNEDY AS NONRESPONSIBLE "BASED ON A LACK OF CONTRACTOR TENACITY, PERSEVERANCE, AND INTEGRITY BECAUSE OF FLAGRANTLY NONCONFORMING PAST PERFORMANCE." MOREOVER, THE CONTRACTING OFFICER DETERMINED THAT KENNEDY LACKED "A SATISFACTORY RECORD OF INTEGRITY AND BUSINESS ETHICS." KENNEDY, ON THE OTHER HAND, ASSERTS THAT MANY OF THE PROBLEMS IT ENCOUNTERED ON THE PRIOR CONTRACTS HAVE BEEN RESOLVED WHILE OTHERS WERE CAUSED BY THE STATE DEPARTMENT'S REQUIRING IT TO PROVIDE SERVICES GREATLY IN EXCESS OF THE ESTIMATES CONTAINED IN THE SOLICITATIONS WHICH LED TO THE CONTRACTS. THE SBA, DISAGREEING WITH THE CONTRACTING OFFICER'S DETERMINATION, SUPPORTS KENNEDY'S ASSERTIONS AND STATES THAT THE NONRESPONSIBILITY DETERMINATION "IS A PUNITIVE MEASURE *** NOT *** APPLICABLE ON THIS CASE."

BEFORE A LOW BID MAY BE ACCEPTED, THE CONTRACTING OFFICER MUST MAKE AN AFFIRMATIVE DETERMINATION AS TO THE RESPONSIBILITY OF THE PROSPECTIVE CONTRACTOR. FPR 1-1.1204-1. IN MAKING THAT DETERMINATION, THE CONTRACTING OFFICER MUST CONSIDER SUCH THINGS AS ADEQUACY OF FINANCIAL RESOURCES, ABILITY TO COMPLY WITH REQUIRED DELIVERY SCHEDULES, RECORD OF PERFORMANCE ON CURRENT OR RECENT CONTRACTS, AND RECORD OF INTEGRITY AND BUSINESS ETHICS. FPR 1-1.1203-1. IF THE INFORMATION AVAILABLE TO THE CONTRACTING OFFICER "DOES NOT INDICATE CLEARLY THAT THE PROSPECTIVE CONTRACTOR IS RESPONSIBLE," A DETERMINATION OF NONRESPONSIBILITY "SHALL BE MADE." FPR 1-1.1202(D). WHEN THE PROSPECTIVE CONTRACTOR IS A SMALL- BUSINESS, HOWEVER, AND A DETERMINATION OF NONRESPONSIBILITY IS BASED ON LACK OF NECESSARY CAPACITY OR CREDIT, THE MATTER MUST BE REFERRED TO THE SBA FOR POSSIBLE ISSUANCE OF A CERTIFICATE OF COMPETENCY. FPR 1-1.708- 2(A). IF A SMALL BUSINESS CONCERN IS FOUND TO BE NOT RESPONSIBLE "FOR REASONS OTHER THAN DEFICIENCIES IN CAPACITY OR CREDIT (E.G., LACK OF INTEGRITY, BUSINESS ETHICS, OR PERSISTENT FAILURE TO APPLY NECESSARY TENACITY OR PERSEVERANCE TO DO AN ACCEPTABLE JOB - NOT WHETHER THE BIDDER CAN PERFORM BUT WHETHER HE WILL PERFORM)," THEN THE CERTIFICATE OF COMPETENCY REFERRAL IS NOT REQUIRED AND THE FINAL DECISION IS TO BE MADE BY THE CONTRACTING OFFICER WITH APPROVAL OF THE HEAD OF THE PROCURING ACTIVITY. FPR 1-1.708-2(A)(5). HOWEVER, THE VIEWS OF SBA ON THE MATTER MUST BE OBTAINED AND CONSIDERED BY THE CONTRACTING OFFICER UNLESS AWARD MUST BE MADE WITHOUT DELAY. FPR 1-1.708-2(A)(5)(I)-(VI). (HERE THE CONTRACTING OFFICER NOTIFIED SBA OF HIS PROPOSED ACTION, BUT AWARDED A CONTRACT PRIOR TO RECEIPT OF SBA'S VIEWS BECAUSE CONTRACT PERFORMANCE HAD TO BEGIN ON APRIL 1, 1974. HE INDICATED TO SBA THAT HE WOULD TERMINATE THE CONTRACT FOR CONVENIENCE OF THE GOVERNMENT IN THE EVENT THAT SBA DISAGREED WITH THE ACTION TAKEN AND EITHER HE OR THE HEAD OF THE PROCURING ACTIVITY AGREED WITH SBA'S VIEWS. SBA SUBSEQUENTLY FILED AN "APPEAL" WITH THE STATE DEPARTMENT IN OPPOSITION TO THE DETERMINATION OF NONRESPONSIBILITY, BUT THE STATE DEPARTMENT DID NOT AGREE WITH SBA'S POSITION.)

FPR 1-1.708-2(A)(5) REQUIRES THAT A DETERMINATION THAT A SMALL BUSINESS CONCERN IS NOT RESPONSIBLE FOR REASONS OTHER THAN CAPACITY OR CREDIT "MUST BE SUPPORTED BY SUBSTANTIAL EVIDENCE DOCUMENTED IN THE CONTRACT FILE." RECOGNIZING THAT QUESTIONS OF RESPONSIBILITY ARE MATTERS PRIMARILY FOR DETERMINATION BY THE PROCUREMENT AGENCIES, WE HAVE UPHELD NONRESPONSIBILITY DETERMINATIONS FOR REASONS OTHER THAN CAPACITY OR CREDIT WHEN THE EVIDENCE OF RECORD REASONABLY PROVIDED A BASIS FOR SUCH DETERMINATIONS. 51 COMP. GEN. 288 (1971); 49 ID. 139 (1969); B-179098, JANUARY 24, 1974. HOWEVER, DETERMINATIONS BASED ON AN ALLEGED LACK OF TENACITY, PERSEVERANCE, ETHICS OR INTEGRITY HAVE NOT BEEN UPHELD WHEN THE EVIDENCE DID NOT RELATE TO THOSE FACTORS OR DID NOT ADEQUATELY ESTABLISH A BASIS FOR A DETERMINATION OF NONRESPONSIBILITY. 49 COMP. GEN. 600 (1970); 39 ID. 868 (1960); SEE ALSO 43 ID. 298 (1963).

THE EVIDENCE OF RECORD INDICATES THAT CONTRACT NUMBER 0000-245015 WAS AWARDED TO KENNEDY ON JANUARY 2, 1972, BUT THAT KENNEDY'S PERFORMANCE RESULTED IN THE ISSUANCE OF A CURE LETTER ON OCTOBER 16, 1972. SPECIFICALLY, THE STATE DEPARTMENT FOUND THAT KENNEDY WAS NOT MAKING REQUIRED WRITTEN REPORTS AND TELEPHONIC NOTICES TIMELY, WAS NOT COMPLYING WITH INNER-PACKING SPECIFICATION REQUIREMENTS, AND WAS USING DOUBLE-WALL BOXES INSTEAD OF THE TRIPLE-WALL BOXES REQUIRED BY THE SPECIFICATIONS. ADDITION, IT WAS FOUND THAT KENNEDY WAS REPORTING AND BILLING FOR INFLATED SHIPMENT WEIGHTS AND WAS ALSO SUBMITTING VOUCHERS FOR CONTRACTOR-PACKED BAGGAGE WHEN IN FACT THE BAGGAGE HAD BEEN PACKED BY THE OWNERS. THE RECORD FURTHER SHOWS THAT THE CONTRACT NUMBER 0000-300416, AWARDED TO KENNEDY ON MARCH 30, 1973, WAS PARTIALLY TERMINATED FOR DEFAULT BECAUSE OF VARIOUS SPECIFICATION VIOLATIONS PERTAINING TO PACKING MATERIALS, SHIPPING CONTAINERS, AND STORAGE FACILITIES AND BECAUSE OF FAILURE TO MEET TIME REQUIREMENTS FOR PACKING AND PICK-UP SERVICES, FILING REPORTS, AND MAKING REQUIRED TELEPHONE NOTIFICATIONS. ON AUGUST 15, 1973, LIQUIDATED DAMAGES WERE ASSESSED BECAUSE OF UNEXCUSED DELAYS IN CONTRACT PERFORMANCE. AUGUST 27, 1973, THE INBOUND PORTION OF THE CONTRACT WAS TERMINATED FOR THE CONVENIENCE OF THE GOVERNMENT BECAUSE OF KENNEDY'S "CONTINUOUS INABILITY OR RELUCTANCE TO COMPLY WITH THE TERMS AND CONDITIONS OF THE CONTRACT, THE DISSATISFACTION OF MANY TRAVELERS WITH THE SERVICES PROVIDED, AND THE INORDINATE DEGREE OF MONITORING THAT HAS BEEN FOUND NECESSARY TO INSURE EVEN PARTIAL COMPLIANCE WITH CONTRACT PROVISIONS." (IT IS REPORTED THAT THE CONTRACT WAS TERMINATED FOR CONVENIENCE RATHER THAN DEFAULT BECAUSE OF POSSIBLE GOVERNMENT LIABILITY FOR INACCURATE ESTIMATES IN THE SOLICITATION.)

THE RECORD ALSO SHOWS THAT CONTRACT NUMBER 1026-450003, AN ELECTRONIC EQUIPMENT PACKING CONTRACT, WAS TERMINATED FOR DEFAULT ON MARCH 19, 1974, BECAUSE OF CONTINUED SPECIFICATION VIOLATIONS FOLLOWING A PARTIAL DEFAULT AND CURE PERIOD. THESE VIOLATIONS INCLUDED FAILURE TO USE A WATER- VAPORPROOF BARRIER OR DESICCANT, FAILURE TO HEAT SEAL THE BARRIERS, FAILURE TO DOUBLE PACK USING THE REQUISITE CARTONS, IMPROPERLY NAILING OUTER PLYWOOD BOXES, AND USING A LARGER BOX THAN NECESSARY, THEREBY INCREASING THE COST TO THE GOVERNMENT. IN ADDITION, KENNEDY WAS REQUIRED TO PAY A CLAIM UNDER CONTRACT NUMBER 8670-412123 AWARDED NOVEMBER 29, 1973, FOR DAMAGE SUSTAINED TO SUPPLIES BECAUSE THE PACKING CRATE USED WAS "FAR LARGER THAN NECESSARY AND *** NOTHING WAS USED TO FILL THE EMPTY SPACE" SO AS TO PREVENT THE SUPPLIES FROM BEING "TOSSED AND SCATTERED WITHIN THE BOX."

KENNEDY'S UNSATISFACTORY PERFORMANCE ON CONTRACT NUMBER 0000-300416 SEEMS TO HAVE BEEN DUE IN LARGE MEASURE TO THE FIRM'S LACK OF CAPACITY TO HANDLE THE UNEXPECTED VOLUME OF BUSINESS GENERATED PURSUANT TO THE CONTRACT. KENNEDY AND SBA CLAIM THAT KENNEDY WAS PREPARED TO ADEQUATELY SERVICE THE NEEDS OF STATE DEPARTMENT PERSONNEL IN ACCORDANCE WITH THE ESTIMATES LISTED IN THE SOLICITATION, BUT THAT IT WAS COMPLETELY OVERBURDENED BY REQUIREMENTS WHICH WERE GROSSLY IN EXCESS OF THE STATED ESTIMATES. KENNEDY HAS APPEALED THE ASSESSMENT OF LIQUIDATED DAMAGES ON THIS BASIS, AND THE STATE DEPARTMENT HAS RECOGNIZED THE POSSIBLE VALIDITY OF KENNEDY'S ASSERTION BY TERMINATING THE CONTRACT FOR CONVENIENCE RATHER THAN DEFAULT. WITH RESPECT TO THE CLAIM FILED AGAINST KENNEDY UNDER CONTRACT NUMBER 8670-412123, SBA REPORTS THAT THIS WAS THE ONLY CLAIM (IN THE AMOUNT OF $69) RESULTING FROM KENNEDY'S HANDLING OF APPROXIMATELY $10 MILLION WORTH OF MATERIAL AND THAT KENNEDY WILLINGLY SETTLED THE MATTER. FINALLY, WITH RESPECT TO CONTRACT NUMBER 1026-450003, WE NOTE THAT KENNEDY CLAIMS ITS DEFAULT WAS DUE TO MISLEADING AND IMPROPER INSTRUCTIONS RECEIVED, ALTHOUGH THE RECORD IS NOT CONCLUSIVE AS TO PRECISELY WHY KENNEDY DID NOT ADHERE TO SPECIFICATION REQUIREMENTS.

WE HAVE RECOGNIZED THAT "THE FORMULATION OF PRECISE RULES FOR *** DETERMINING A BIDDER'S LACK OF INTEGRITY IS NOT FEASIBLE" AND THAT EACH CASE "MUST BE EVALUATED IN THE LIGHT OF THE PARTICULAR CIRCUMSTANCES INVOLVED." 39 COMP. GEN. 868, 872, SUPRA. IT HAS ALSO BEEN HELD THAT A DETERMINATION REGARDING INTEGRITY OR BUSINESS ETHICS NEED NOT BE BASED ON STANDARDS AS "RIGID" AS THOSE LISTED AS CAUSE FOR DEBARMENT IN ASPR 1- 604.1 AND FPR 1-1.604. WARREN BROTHERS ROADS CO. V. UNITED STATES, 173 CT. CL. 714, 355 F.2D 612 (1965). NEVERTHELESS, WHILE WE AGREE WITH THE CONTRACTING OFFICER THAT KENNEDY'S RECORD IS NOT ONE OF SATISFACTORY PERFORMANCE, WE HAVE SERIOUS DOUBTS THAT THIS RECORD PERMITS THE CONCLUSION THAT KENNEDY LACKS INTEGRITY OR BUSINESS ETHICS. FOR EXAMPLE, THE STATE DEPARTMENT FOUND IN EFFECT THAT KENNEDY HAD FALSIFIED RECORDS PERTAINING TO SHIPMENT WEIGHTS AND SERVICES PERFORMED UNDER CONTRACT NUMBER 0000-245015. HOWEVER, THERE IS SOME INDICATION IN THE FILE THAT KENNEDY'S ACTIONS MIGHT HAVE BEEN DUE TO CARELESSNESS RATHER THAN TO A WILLFUL ATTEMPT TO DEFRAUD THE GOVERNMENT. FURTHERMORE, WE NOTE THAT THE MATTER WAS REFERRED TO THE JUSTICE DEPARTMENT, BUT THAT PROSECUTION WAS DECLINED FOLLOWING AN INVESTIGATION BY THE FBI. WE ALSO NOTE THAT KENNEDY WAS AWARDED AT LEAST THREE MORE CONTRACTS, EVEN THOUGH THE STATE DEPARTMENT WAS AWARE OF THE PROBLEMS ENCOUNTERED WITH KENNEDY ON THIS CONTRACT, AND THAT THERE IS NOTHING IN THE RECORD INDICATING FALSIFICATION OF RECORDS OR RELATED OFFENSES ON THE PART OF KENNEDY UNDER ANY OF THESE SUBSEQUENT CONTRACTS.

ALTHOUGH WE VIEW THE RECORD AS PROVIDING A QUESTIONABLE BASIS FOR CONCLUDING THAT KENNEDY LACKS INTEGRITY OR BUSINESS ETHICS, WE BELIEVE THAT THE RECORD DOES ADEQUATELY PROVIDE A SUFFICIENT BASIS FOR A DETERMINATION OF NONRESPONSIBILITY BASED ON KENNEDY'S LACK OF TENACITY AND PERSEVERANCE. IT APPEARS THAT KENNEDY HAS CONSISTENTLY FAILED TO PROVIDE THE STATE DEPARTMENT AND ITS EMPLOYEES WITH ADEQUATE SERVICE IN ACCORDANCE WITH CONTRACT SPECIFICATIONS AND THAT AS A RESULT THE STATE DEPARTMENT HAS HAD TO MONITOR KENNEDY MUCH MORE CLOSELY THAN IT WOULD ORDINARILY MONITOR A CONTRACTOR. WHILE, AS NOTED ABOVE, SOME OF KENNEDY'S PROBLEMS CAN BE ATTRIBUTED TO LACK OF CAPACITY, THE RECORD DOES NOT INDICATE ANY APPARENT REASON FOR KENNEDY'S NON-ADHERENCE TO CERTAIN SPECIFICATION REQUIREMENTS UNDER CONTRACTS 0000-245015 AND 1026 450003. WE HAVE REGARDED A CONTRACTOR'S FAILURE TO CORRECT PERFORMANCE DEFICIENCIES OVER A PERIOD OF TIME AS POOR BUSINESS PRACTICES WHICH GO TO TENACITY AND PERSEVERANCE. 179098, SUPRA. WE HAVE ALSO RECOGNIZED THAT THE "CUMULATIVE EFFECT" OF VARIOUS DEFICIENCIES WHICH, WHEN TAKEN TOGETHER, ARE RELATIVELY MINOR "IS UNDULY TO INCREASE THE BURDEN OF ADMINISTRATION FROM THE GOVERNMENT'S STANDPOINT," AND THAT A RECORD OF SUCH DEFICIENCIES CAN SUPPORT A FINDING OF NONRESPONSIBILITY BASED, IN APPROPRIATE CIRCUMSTANCES, ON LACK OF TENACITY AND PERSEVERANCE. 43 COMP. GEN. 257, 263 (1963); 49 ID. 139, SUPRA. HERE THE STATE DEPARTMENT REPORTS THAT IT HAS FOUND EXCESSIVE MONITORING OF KENNEDY TO BE NECESSARY AND THAT IT DOES NOT HAVE THE PERSONNEL AVAILABLE TO INSPECT KENNEDY "TO THE EXTENT BELIEVED REQUIRED TO ENSURE COMPLIANCE" WITH CONTRACT REQUIREMENTS.

ACCORDINGLY, WE BELIEVE THAT THE REPEATED SPECIFICATION DEVIATIONS AFTER VARIOUS WARNINGS, CURE NOTICES AND CONTRACT TERMINATIONS COULD LEAD THE CONTRACTING OFFICER TO VIEW KENNEDY AS HAVING FAILED TO APPLY THE NECESSARY TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB. THEREFORE, SINCE THE DETERMINATION THAT KENNEDY WAS NONRESPONSIBLE FOR REASONS OTHER THAN CAPACITY AND CREDIT IS REASONABLY SUPPORTED BY THE PRESENT RECORD, WE CANNOT OBJECT TO THE REJECTION OF KENNEDY'S BID.

FOR THE FOREGOING REASONS, THE PROTEST IS DENIED.