B-181265, NOV 27, 1974

B-181265: Nov 27, 1974

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WHEN DETERMINATION THAT FIRM WAS NONRESPONSIBLE BASED ON PAST UNSATISFACTORY PERFORMANCE DUE TO LACK OF TENACITY AND PERSEVERANCE TO DO ACCEPTABLE JOB IS SUPPORTED BY SUBSTANTIAL EVIDENCE IN ACCORDANCE WITH ASPR PROCEDURES. GAO WILL NOT SUBSTITUTE ITS JUDGMENT ABSENT SHOWING OF UNREASONABLE ABUSE OF AUTHORITY. AFL-CIO: THIS PROTEST IS SUBMITTED BY DISTRICT 2. WAS NONRESPONSIBLE FOR AWARD PURPOSES UNDER REQUEST FOR PROPOSALS (RFP) N00033-74-R-0020. AWARD WAS MADE TO MARINE TRANSPORT LINES. THE CONTRACTOR WAS OBLIGATED UNDER THE TERMS OF THE PRO FORMA CONTRACT THAT ACCOMPANIED THE RFP TO "*** OPERATE THE TANKERS IN SUCH SERVICE AS THE GOVERNMENT ... THE RFP REQUIRED THAT OFFERORS HAVE HAD RECENT SATISFACTORY EXPERIENCE IN THE OPERATION OF EITHER GOVERNMENT-OWNED TANKERS UNDER CONTRACT WITH THE NAVY OR A FLEET OF PRIVATELY-OWNED TANKERS OF T-2 SIZE OR LARGER OF WHICH AT LEAST TWO MUST HAVE BEEN UNITED STATES FLAG.

B-181265, NOV 27, 1974

WHEN DETERMINATION THAT FIRM WAS NONRESPONSIBLE BASED ON PAST UNSATISFACTORY PERFORMANCE DUE TO LACK OF TENACITY AND PERSEVERANCE TO DO ACCEPTABLE JOB IS SUPPORTED BY SUBSTANTIAL EVIDENCE IN ACCORDANCE WITH ASPR PROCEDURES, WITH CUMULATIVE EFFECT THAT DEFICIENCIES UNDULY INCREASED ADMINISTRATIVE BURDEN ON GOVERNMENT, GAO WILL NOT SUBSTITUTE ITS JUDGMENT ABSENT SHOWING OF UNREASONABLE ABUSE OF AUTHORITY.

DISTRICT 2, MARINE ENGINEERS BENEFICIAL ASSOCIATION - ASSOCIATED MARITIME OFFICERS, AFL-CIO:

THIS PROTEST IS SUBMITTED BY DISTRICT 2, MARINE ENGINEERS BENEFICIAL ASSOCIATION - ASSOCIATED MARITIME OFFICERS, AFL-CIO (MEBA), AGAINST THE DETERMINATION OF THE MILITARY SEALIFT COMMAND (MSC), THAT IRAN DESTINY CARRIERS, INC. (IRAN), WAS NONRESPONSIBLE FOR AWARD PURPOSES UNDER REQUEST FOR PROPOSALS (RFP) N00033-74-R-0020. AS A RESULT OF THE DETERMINATION, AWARD WAS MADE TO MARINE TRANSPORT LINES, INC., THE NEXT LOW RESPONSIBLE OFFEROR.

THE RFP, ISSUED DECEMBER 19, 1973, CONTEMPLATED A FIXED-PRICE CONTRACT TO OPERATE MSC'S FLEET OF 9 TANKERS FOR A FIRM 5-YEAR PERIOD WITH CONSECUTIVE 2-YEAR OPTIONS TOTALING 23 YEARS. THE CONTRACTOR WAS OBLIGATED UNDER THE TERMS OF THE PRO FORMA CONTRACT THAT ACCOMPANIED THE RFP TO "*** OPERATE THE TANKERS IN SUCH SERVICE AS THE GOVERNMENT ... MAY DIRECT, INCLUDING ALL MATTERS RELATING TO VOYAGES AND CARGOES." THE RFP LISTED THE FOLLOWING EVALUATION FACTORS IN DECREASING ORDER OF IMPORTANCE:

A. TOTAL FIXED PRICE PER DIEM

B. MANAGEMENT STAFF

(1) OPERATIONS

(2) MAINTENANCE AND REPAIR

(3) PURCHASING AND PROPERTY CONTROL

(4) ACCOUNTING

(5) INSURANCE CLAIMS

C. EXPERIENCE OF OPERATORS

IN ADDITION, THE RFP REQUIRED THAT OFFERORS HAVE HAD RECENT SATISFACTORY EXPERIENCE IN THE OPERATION OF EITHER GOVERNMENT-OWNED TANKERS UNDER CONTRACT WITH THE NAVY OR A FLEET OF PRIVATELY-OWNED TANKERS OF T-2 SIZE OR LARGER OF WHICH AT LEAST TWO MUST HAVE BEEN UNITED STATES FLAG.

NEGOTIATIONS WERE CONDUCTED WITH THE FIVE OFFERORS THAT SUBMITTED OFFERS BY THE FEBRUARY 4, 1974, DEADLINE. IRAN SUBMITTED THE LOW OFFER. AT THE REQUEST OF THE CONTRACTING OFFICER, A PREAWARD SURVEY WAS CONDUCTED ON IRAN BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGION (DCASR), NEW YORK, TO DETERMINE IRAN'S FINANCIAL CAPABILITY TO PERFORM. THIS PREAWARD SURVEY WAS PARTICIPATED IN BY THE DEFENSE CONTRACT AUDIT AGENCY (DCAA), NEW YORK. THE ONLY ITEMS REQUESTED TO BE REVIEWED WERE THE ADEQUACY OF IRAN'S FINANCIAL CAPABILITY AND ACCOUNTING SYSTEM. THE MARCH 22, 1974, REPORT RECOMMENDED NO AWARD DUE TO THE LACK OF FINANCIAL CAPABILITY AND THE FAILURE TO MAINTAIN A JOB COST ACCOUNTING SYSTEM. HOWEVER, IRAN'S TREASURER STATED TO THE PREAWARD SURVEY TEAM THAT A JOB COST SYSTEM WOULD BE INSTALLED AND MAINTAINED IF AWARDED THE CONTRACT. IT WAS NOTED BY DCAA THAT IRAN DID NOT HAVE A JOB COST SYSTEM BECAUSE IRAN HAD NO GOVERNMENT CONTRACTS. THE CONCLUSION THAT IRAN LACKED THE FINANCIAL CAPABILITY WAS BASED UPON: (1) IRAN'S BALANCE SHEET, SUBMITTED WITH ITS PROPOSAL WHICH INDICATED A DEFICIT WORKING CAPITAL AND DEFICIT NET WORTH AS OF DECEMBER 31, 1973; (2) IRAN'S INABILITY TO ARRANGE A SUFFICIENT LINE OF CREDIT WITH ITS BANK FOR WORKING CAPITAL; AND (3) IRAN'S PROJECTED INABILITY TO MAKE TIMELY PAYMENTS OF CONTRIBUTIONS TO UNION PENSION AND MEDICAL FUNDS.

THE COMPTROLLER, MSC, ON MARCH 21, 1974, ALSO SUBMITTED A FINANCIAL ANALYSIS WHICH INDICATED THAT A MINIMUM WORKING CAPITAL OF $1,000,000 WOULD BE NECESSARY TO SUSTAIN THE CONTEMPLATED OPERATIONS, AND DEPENDING ON THE CREDIT RATING OF THE OPERATOR, MIGHT BE HIGHER. IN THIS LIGHT, AND AFTER A REVIEW OF IRAN'S PROPOSAL, INCLUDING ITS BEST AND FINAL OFFER OF MARCH 18, 1974, THE COMPTROLLER CONCLUDED THAT IRAN DID NOT HAVE, NOR HAD IT DEMONSTRATED AN ABILITY TO OBTAIN, AT LEAST $1,000,000 WORKING CAPITAL. CONSEQUENTLY, HE RECOMMENDED NO AWARD SINCE IRAN HAD NOT AFFIRMATIVELY DEMONSTRATED ITS FINANCIAL CAPABILITY.

REGARDING RECENT PERFORMANCE, IRAN WAS EVALUATED ON THE BASIS OF ITS OPERATION OF THE FALCON TANKERS. IRAN IS THE OPERATING AGENT AND MANAGER OF FOUR 34,000 DEADWEIGHT (D.W.T.) DIESEL PROPELLED TANKERS OWNED BY AN AFFILIATE CORPORATION, FALCON TANKERS, INC. THE VESSELS WERE CONSECUTIVE VOYAGE CHARTERED TO MSC BY ANOTHER AFFILIATE, FALCON CARRIERS, INC. IN ASSESSING IRAN'S PROSPECTIVE ABILITY TO PERFORM, MSC'S EXPERIENCE WITH THE FALCON TANKERS WAS THE STANDARD OF MEASURE. THERE IS NO DISPUTE AS TO THE ACCEPTABILITY OF USING THAT STANDARD TO DETERMINE THE RESPONSIBILITY OF IRAN TO PERFORM THE INSTANT CONTRACT.. THE MSC ENGINEERING SHOP STATED THAT THE PERFORMANCE OF FALCON IN OPERATING THE TANKERS WAS UNSATISFACTORY DUE TO A LACK OF CAPACITY AND CONSISTENT FAILURE TO APPLY THE NECESSARY TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB.

THE ENGINEERING STAFF RECOMMENDATION WAS BASED UPON ITS ANALYSIS OF FALCON'S PERFORMANCE. THE FIRST CONCERN WAS UNSCHEDULED DOWNTIME DUE TO MECHANICAL FAILURES. IT WAS THE ENGINEERING STAFF'S OPINION THAT SATISFACTORY OPERATION WOULD RESULT IN 15 DAYS OR LESS PER SHIP PER YEAR IN A FLEET OF 4 SHIPS. THE ENGINEERING OFFICER SUBMITTED COMPUTATIONS SHOWING UNSCHEDULED DOWNTIME LOSSES DURING A ONE-YEAR PERIOD FOR THE 4 FALCON TANKERS OF 30, 46, 74 AND 37 DAYS. NOTING THE CORRELATION BETWEEN DOWNTIME AND REVENUE GENERATING ABILITY, IT WAS OPINED THAT SUCH AN OPERATIONAL SCHEME WOULD RESULT IN A SIGNIFICANT LOSS OF REVENUE.

THE DEPUTY ENGINEERING OFFICER SUBMITTED HIS ASSESSMENT OF IRAN'S MANAGEMENT PERFORMANCE WITH THE FALCON TANKERS BY MEMORANDUM OF MARCH 25, 1974, RECOMMENDING THAT IRAN BE DETERMINED TO BE UNQUALIFIED TO OPERATE OR MAINTAIN THE MSC TANKERS. THIS ASSESSMENT WAS ALSO BASED UPON A REVIEW OF THE OPERATING PERFORMANCE OF THE FALCON TANKERS TO DETERMINE THE EFFECTIVENESS AND CAPABILITY OF FALCON'S MANAGEMENT AND ENGINEERING STAFF. IN THE DEPUTY ENGINEERING OFFICER'S OPINION, FALCON'S ACCEPTANCE OF THE TANKERS FROM THE SHIPBUILDER EVIDENCED A "*** SERIOUS LACK OF APPRECIATION FOR THE RELIABILITY AND PROVEN EQUIPMENTS AND SYSTEMS SO VITAL IN A TANKER OPERATION *** TYPICAL OF THEIR (FALCON'S) FAILURE TO CONSIDER OR BECOME AWARE OF THE IMPORTANCE OF MACHINERY RELIABILITY AND MAINTAINABILITY WAS THE ACCEPTANCE OF THE PUMPING SYSTEM INSTALLED IN THESE SHIPS." A CONTINUING PROBLEM OF FOUR YEARS' DURATION, PORTRAYED AS TYPICAL OF FALCON'S FAILURE TO RECOGNIZE AND CORRECT THEIR OWN MISTAKES, CONCERNED THE CARGO TANK STRIPPING SYSTEM. IT IS STATED THAT IT WAS NECESSARY FOR MSC ENGINEERS TO ANALYZE AND RECOMMEND CORRECTIVE MEASURES SO THAT THE SHIPS COULD OPERATE WITH A CLEAN PRODUCT. HOWEVER, THIS DEFICIENCY STILL EXISTS AND WOULD SOON NEED CORRECTION.

THE DEPUTY ENGINEERING OFFICER NEXT CRITICIZED FALCON'S RECORD OF EXCESSIVE DOWNTIME BECAUSE OF MAIN PROPULSION AND AUXILIARY MACHINERY FAILURES. THE FIGURE CITED WAS 57.5 AVERAGE DAYS FOR REPAIR OVER THE PRECEDING TWO-YEAR PERIOD. MSC EXPERIENCE AND OTHER TANK OPERATORS WITH VESSELS "QUITE SIMILAR IN DESIGN AND MACHINERY," INDICATES OUT-OF SERVICE FOR REPAIRS OF 23 DAYS PER YEAR. IN NOTING THAT FALCON FAILED TO CORRECT DEFICIENCIES, THE DEPUTY ENGINEERING OFFICER ATTRIBUTED THIS FAILURE TO NEGLECT APPARENTLY ATTRIBUTABLE TO LACK OF MAINTENANCE OF PROPER TECHNICAL PLANS, RECORDS OF MACHINERY PERFORMANCE AND ACCOUNTS OF SPARE PARTS, ONBOARD AND SHORE BASED BACKUPS VITAL FOR SHIP MAINTENANCE, OVERHEAD AND REPAIR.

FURTHER, DISCUSSIONS WITH MANUFACTURERS OF "MAJOR MACHINERY," SUCH AS THE MAIN PROPULSION SUPPLIER, LED MSC TO CONCLUDE THAT "ADEQUATE AND PROPER MAINTENANCE AND PLANNING PHILOSOPHY WAS NEVER APPRECIATED NOR DEMANDED IN ACCORDANCE WITH GOOD MARINE PRACTICES." THE DEPUTY ENGINEERING OFFICER STATED THAT CRUCIAL DECISIONS REGARDING OVERHAUL, MAINTENANCE AND REPAIR WERE OFTEN DELAYED TO COINCIDE WITH OTHER EVENTS AGAINST WHICH THEY COULD BE CHARGED IN ORDER TO MAINTAIN A PROFITABLE PICTURE.

HE CONCLUDED THAT IRAN DID NOT HAVE SUFFICIENT STAFF OF ADEQUATE SIZE OR TECHNICAL COMPETENCE TO HANDLE THE COMPLEX PROBLEMS ASSOCIATED WITH THE BREAK-IN OF THE MSC TANKERS.

THE TANKER DIVISION, MSC, ALSO OFFERED ITS EVALUATION OF ITS PREVIOUS EXPERIENCE WITH FALCON. IT STATED THAT IRAN DOES NOT HAVE EITHER THE COMPETENCE OR EXPERIENCE IN SHORE MANAGEMENT, MARINE ENGINEERING OR SHIP OPERATIONS TO RUN THE FLEET. THIS CONCLUSION WAS BUTTRESSED BY THE NEED FOR MSC TO HAVE TAKEN OVER THE FOUR FALCON TANKERS FOR MECHANICAL FAILURES. POOR IN-PORT TURN-AROUND TIME WITH LONG DEBALLASTING AND DISCHARGE TIME, AND FAILURE TO MAKE WARRANTED SPEED WERE CITED AS EVIDENCE OF MARGINAL PERFORMANCE. THE MAIN BLAME WAS PLACED ON LACK OF MANAGEMENT STAFF COMPETENCE IN ACCEPTING LESS THAN SATISFACTORY EQUIPMENT FROM THE SHIPBUILDER.

BASED UPON THE FOREGOING, THE CONTRACTING OFFICER, ON MARCH 29, 1974, DETERMINED IRAN TO BE NONRESPONSIBLE DUE TO A LACK OF: (1) ADEQUATE FINANCIAL RESOURCES ABILITY TO OBTAIN SAME (CITING ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-903.1(I) (173 ED.)); (2) AN ABILITY TO COMPLY WITH DELIVERY OR PERFORMANCE SCHEDULE, CONSIDERING ALL EXISTING BUSINESS COMMITMENTS (ASPR 1-903.1(II)); AND (3) A SATISFACTORY PERFORMANCE RECORD DUE TO A FAILURE TO APPLY THE NECESSARY TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB. (ASPR 1-903.1(III)).

SINCE IRAN CERTIFIED ITSELF SMALL BUSINESS, THE CONTRACTING OFFICER NOTIFIED THE SMALL BUSINESS ADMINISTRATION (SBA) BY LETTER OF MARCH 29, 1974, THAT HE HAD DETERMINED IRAN NONRESPONSIBLE PURSUANT TO ASPR 1 903.1(I)(II) AND (III). SBA'S EARLY ACTION, IF ANY, WAS REQUESTED.

ON APRIL 1, 1974, IRAN WROTE THE CONTRACTING OFFICER THAT IT HAD OBTAINED A COMMITMENT FROM THE STERLING NATIONAL BANK AND TRUST COMPANY TO EXTEND A $1,000,000 LINE OF CREDIT FOR A 5-YEAR PERIOD. BASED UPON THIS COMMITMENT, IRAN REQUESTED THE CONTRACTING OFFICER TO REDETERMINE ITS RESPONSIBILITY BASED UPON FINANCIAL CAPABILITY. THIS OFFER WAS CONTINGENT UPON IRAN'S ASSIGNMENT OF ITS ACCOUNTS RECEIVABLE, MSC'S WAIVER OF ALL RIGHT OF SETOFF, APPROPRIATE PAYMENT BY MSC, AND APPROVAL OF IRAN'S COUNSEL.

ON APRIL 2, 1974, SBA NOTIFIED THE CONTRACTING OFFICER THAT IRAN HAD ELECTED TO FILE AN APPLICATION FOR A CERTIFICATE OF COMPETENCY (COC) AS TO CAPACITY AND CREDIT TO PERFORM THE CONTRACT. THE CLOSING DATE FOR PROCESSING THE APPLICATION WAS SET FOR APRIL 22, 1974. ALSO, ON APRIL 2, 1974, THE CONTRACTING OFFICER NOTIFIED IRAN THAT THE ASSUMPTION IN ITS APRIL 1 LETTER THAT IT HAD BEEN DETERMINED NONRESPONSIBLE FOR ITS DELAY IN SUBMITTING EVIDENCE OF ITS WORKING CAPITAL WAS ERRONEOUS. THE CONTRACTING OFFICER INFORMED IRAN THAT THE DETERMINATION WAS ALSO BASED ON ITS LACK OF ABILITY TO PERFORM IN ACCORDANCE WITH THE TERMS OF THE CONTRACT AND ITS PAST UNSATISFACTORY PERFORMANCE AS OPERATOR AND MANAGER OF THE FALCON TANKERS. THE NOTIFICATION FURTHER POINTED OUT THAT THE LINE OF CREDIT OFFERED BY STERLING WOULD HAVE BEEN INADEQUATE, IN ANY EVENT, SINCE IT WAS NOT A TRUE LINE OF CREDIT, BUT RATHER AN OFFER TO ADVANCE MONIES AGAINST IRAN'S ACCOUNTS RECEIVABLE. SUCH AN ARRANGEMENT WOULD NOT PERMIT IRAN TO MEET ITS COMMITMENT UNDER THE PRO FORMA CONTRACT FOR BUNKERS OR SHIPYARD REPAIRS SINCE THOSE ITEMS DID NOT BECOME RECEIVABLE UNTIL PAID BY IRAN AND INVOICED TO MSC. CONSEQUENTLY, MSC WOULD NOT AGREE TO WAIVE ITS RIGHT TO SETOFF, AS REQUIRED BY STERLING. HE DETERMINATION OF NONRESPONSIBILITY WAS AFFIRMED.

ON APRIL 22, PURSUANT TO ASPR 1-705.4(C)(VI), SBA FORMALLY APPEALED THE MSC DETERMINATION OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB TO THE COMMANDER, MSC. IN VIEW OF THIS, SBA CEASED CONSIDERATION OF IRAN'S COC APPLICATION, SINCE THE COC PROCEDURE DOES NOT COVER DETERMINATIONS OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE. SBA ALSO FORWARDED INFORMATION TO MSC WHICH FORMED THE BASIS FOR SBA'S APPEAL OF THE DETERMINATION OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE. ON THE BASIS OF INFORMATION FURNISHED TO SBA BY IRAN, SBA APPEALED MSC'S FINDINGS CONCERNING THE OPERATION OF THE FOUR FALCON TANKERS, AMOUNT OF TIME AND REASONS FOR THEIR BEING OUT OF SERVICE.

IN RESPONSE, COUNSEL, MSC, PREPARED A MEMORANDUM DATED MAY 6, 1974, TO THE COMMANDER, MSC, OUTLINING HIS RESPONSIBILITY TO APPROVE OR DISAPPROVE THE CONTRACTING OFFICER'S DETERMINATION. THE EVIDENCE WAS SUMMARIZED, AS WERE THE PERTINENT REGULATIONS AND COMPTROLLER GENERAL DECISIONS. INTERPRETING THE ABOVE, COUNSEL RECOMMENDED THAT THE EVIDENCE WAS SUFFICIENT TO AFFIRM THE CONTRACTING OFFICER'S DETERMINATION. RELIANCE FOR THIS POSITION WAS FOUND IN 49 COMP. GEN. 139 (1969); 43 ID. 298 (1963); B-164606, AUGUST 6, 1968; AND 43 ID. 257 (1963). THESE CASES ALL CONCERN VARIOUS FACTUAL SITUATIONS TENDING TO DEFINE WHAT AMOUNTS TO NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB. IRAN'S OPERATIONAL DIFFICULTIES EXPERIENCED WITH THE FALCON TANKERS WERE CATEGORIZED INTO FOUR AREAS: (1) EXCESSIVE DOWNTIME IN RELATION TO INDUSTRY TANKERS; (2) INADEQUATE MAINTENANCE OF MACHINERY PERFORMANCE OR REPAIR, SPARE PARTS INVENTORY AND TECHNICAL PLANS; (3) LACK OF PREVENTIVE MAINTENANCE AND SAFETY PROGRAM; AND (4) LACK OF EFFORT TO ESTABLISH SAFETY PROGRAMS AND CORRECTION OF UNSAFE CONDITIONS.

ON MAY 7, 1974, THE COMMANDER, MSC, INFORMED SBA THAT ITS APPEAL HAD BEEN DENIED AND THE DECISION OF THE CONTRACTING OFFICER WAS AFFIRMED BASED UPON HIS REVIEW OF THE RELEVANT INFORMATION. AWARD WAS THEN MADE TO THE NEXT LOW OFFEROR, MARINE TRANSPORT LINES, INC. ON MAY 13, 1974, THE PRESIDENT OF MEBA PROTESTED THE NONRESPONSIBILITY DETERMINATION ON IRAN. AT MEBA'S REQUEST, MAY 22, 1974, A MEETING WAS HELD WITH MEBA AND MSC. AT THE CLOSE OF THE MEETING, MEBA WAS INFORMED THAT THE DECISION WAS SUSTAINED. MEBA PROTESTED TO GAO ON MAY 24, 1974. MEBA, IN ITS CORRESPONDENCE WITH GAO, HAS RESPONDED TO MSC'S REASONS FOR DETERMINING IRAN TO BE NONRESPONSIBLE.

IRAN'S FINANCIAL CAPABILITY AND CAPACITY TO PERFORM NEED NOT BE CONSIDERED HERE SINCE, AS STATED ABOVE, IRAN WAS DETERMINED TO BE NONRESPONSIBLE FOR LACK OF TENACITY AND PERSEVERANCE, A CIRCUMSTANCE BEYOND THE SCOPE OF SBA'S COC PROCEDURE. THEREFORE, WE WILL CONSIDER MEBA'S ARGUMENTS ONLY AS THEY RELATE TO THE DETERMINATION OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB.

FIRST, MEBA DISPUTES THE ACCURACY OF MSC'S FIGURES FOR UNSCHEDULED DOWNTIME. MEBA ATTRIBUTES 70 PERCENT OF THE DOWNTIME AS THE SHIPBUILDER'S RESPONSIBILITY, PRIMARILY AS A RESULT OF DESIGN DEFICIENCIES, WHILE ONLY 8 PERCENT WAS FALCON'S RESPONSIBILITY. MEBA CONCEDES THAT THE IN-PORT TIME EXCEEDS MSC'S OTHER FLEET VESSELS. HOWEVER, IT STATES THAT THIS EXTRA TIME IS DUE TO THE FACT THAT THE FALCON VESSELS WERE 34,000 D.W.T. WHILE MSC'S FLEET AVERAGED 25,000 D.W.T. MEBA CONTENDS ITS BALLAST TIME AND DRYING TIME, AS WELL AS LOADING AND DISCHARGING TIME, MUST NECESSARILY BE LONGER THAN THE SMALLER VESSELS TO WHICH IT WAS COMPARED BY MSC. IN THIS REGARD, MEBA POINTS TO DETAILED INSTRUCTIONS ISSUED BY FALCON FOR ITS VESSELS IN JULY 1973 THAT OUTLINED PROCEDURES FOR QUICKER DEBALLASTING AND DRYING OUT TIMES.

MEBA MAINTAINS THAT IT COULD NOT MAKE WARRANTED SPEED BECAUSE THE MAIN ENGINE COULD NOT BE RUN AT FULL POWER. IT STATES THAT, WHILE THE ENGINES WERE DESIGNED TO RUN AT 115 REVOLUTIONS PER MINUTE (RPM), THEY CAN ONLY BE RUN AT 105 RPM WITHOUT EXTENSIVE VIBRATION AND NOISE. UNDER THESE CIRCUMSTANCES, MEBA CONTENDS THAT THE WARRANTED SPEED WAS TOO AMBITIOUS. THE PROBLEM OF EXCESSIVE VIBRATION AND NOISE IS ALSO A DESIGN DEFICIENCY WHICH, IN TURN, CAUSED OTHER MALFUNCTIONS.

WITH RESPECT TO THE FAILURE OF FALCON TO ISSUE STANDARD OPERATING PROCEDURES, MEBA HAS SUBMITTED A COPY OF THE ENGINEER'S OPERATING MANUAL FOR THE FALCON VESSELS PREPARED BY INGALLS NUCLEAR SHIPBUILDING, PASCAGOULA, MISSISSIPPI. IN ADDITION, FALCON IS STATED TO HAVE DISSEMINATED MANUFACTURER'S INSTRUCTION BOOKS FOR EVERY PIECE OF MACHINERY ABOARD. THE NEXT CONCERN IS MSC'S FINDING THAT FALCON MAINTAINED INADEQUATE RECORDS OF SPARES AND DID NOT MAINTAIN A PROPER PREVENTIVE MAINTENANCE PROGRAM. MEBA CONTENDS THAT FALCON KEPT COMPLETE SPARE PARTS INVENTORY AND INSPECTION RECORDS, BUT MSC DID NOT INSPECT THEM. LASTLY, MEBA CONTENDS THAT A PREVENTIVE MAINTENANCE PROGRAM OF THE SORT ENVISIONED BY MSC WAS IMPOSSIBLE UNDER THE CIRCUMSTANCES.

IT NOTES THAT THE FALCON VESSELS WERE PROTOTYPE DIESEL-POWERED. THE INITIAL VOYAGES WERE A LEARNING EXPERIENCE FOR BOTH CREW AND MSC. CONTINUOUS BREAKDOWN OF EQUIPMENT FROM THE MAIDEN VOYAGE ON REQUIRED TOTAL ATTENTION TO KEEP THE VESSELS OPERATIONAL. THE BREAKDOWNS OCCURRED BEFORE ANY PREVENTIVE MAINTENANCE PROGRAMS COULD BE INITIATED. EXAMPLES OF SOME OF THE BREAKDOWNS WERE CASINGS ON THE BOILER, MONITOR PANEL TRANSMITTER, EXPANSION JOINTS, CARGO PUMP, COOLING WATER HOSES. MEBA CONTENDS THAT ITS EFFORTS IN KEEPING THE VESSELS OPERATIONAL FAR EXCEEDED ANY EFFORT THAT WOULD HAVE BEEN REQUIRED IN A PREVENTIVE MAINTENANCE PROGRAM. THEREFORE, THE DOWNTIME SHOULD NOT HAVE BEEN ATTRIBUTED TO ANY LACK OF TENACITY AND PERSEVERANCE. FINALLY, MEBA CONTENDS THAT COMPARISON OF THE PROTOTYPE DIESEL-POWERED VESSELS TO CONVENTIONAL STEAM-POWERED VESSELS IS UNWARRANTED.

ASPR 1-902 REQUIRES THAT PURCHASES BE MADE FROM RESPONSIBLE PROSPECTIVE CONTRACTORS ONLY UPON AN AFFIRMATIVE DEMONSTRATION BY THE PROSPECTIVE CONTRACTOR OF ITS RESPONSIBILITY, AS WEIGHED AGAINST THE STANDARDS OF ASPR 1-903.1. ASPR 1-903.1(I) THROUGH (V) REQUIRES THAT A CONTRACTOR MUST HAVE A SATISFACTORY RECORD OF PERFORMANCE. PAST UNSATISFACTORY PERFORMANCE DUE TO FAILURE TO APPLY THE NECESSARY TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB IS SUFFICIENT TO JUSTIFY A FINDING OF NONRESPONSIBILITY. ASPR 1-903.1(III). IN THE CASE OF SMALL BUSINESS CONCERNS, THE PROVISIONS OF ASPR 1-705.4(C)(VI) AND 1-905.2 ARE APPLICABLE. THE LATTER PROVISION CONCERNS THE NEED FOR A PREAWARD SURVEY AND THE FORMER CONCERNS THE PROCEDURE TO BE FOLLOWED IN INFORMING SBA OF THE DETERMINATION OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE, WHICH MUST BE SUPPORTED BY SUBSTANTIAL EVIDENCE IN THE RECORD.

GENERALLY, SINCE A DETERMINATION OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS SUBJECT TO THE CONSIDERABLE DISCRETION OF THE CONTRACTING OFFICER, GAO WILL NOT OBJECT TO THAT DETERMINATION OF LACK OF TENACITY AND PERSEVERANCE WHERE THE SUBSTANTIAL EVIDENCE OF RECORD REASONABLY PROVIDES A BASIS FOR SUCH DETERMINATIONS. MATTER OF KENNEDY VAN & STORAGE COMPANY, INC., B-180973, JUNE 19, 1974; 51 COMP. GEN. 288 (1971); 49 ID. 139 (1969). HOWEVER, WHERE A DETERMINATION IS MADE BASED UPON AN ALLEGED LACK OF TENACITY AND PERSEVERANCE AND THE EVIDENCE DID NOT EITHER RELATE TO THESE FACTORS, OR DID NOT ADEQUATELY ESTABLISH A REASONABLE BASIS FOR THE DETERMINATION, OUR OFFICE WILL NOT UPHOLD SUCH DETERMINATIONS. 49 COMP. GEN. 600 (1970); 39 ID. 868 (1960).

THE EVIDENCE IN SUPPORT OF THE DETERMINATION MUST BE GERMANE TO THE INQUIRY AND A MERE ASSERTION THAT POOR PERFORMANCE RESULTED FROM A LACK OF TENACITY AND PERSEVERANCE WILL NOT SUFFICE WITHOUT INQUIRY INTO THE NATURE OF THE POOR PERFORMANCE. 49 COMP. GEN. 600, SUPRA. WHILE POOR PERFORMANCE MAY NOT HAVE RESULTED FROM A SINGLE DEFICIENCY, THE CONTINUED PRACTICE OF COUNTENANCING MINOR DEFICIENCIES MAY CUMULATIVELY ADD UNDULY TO THE ADMINISTRATIVE BURDEN OF THE GOVERNMENT AND ADVERSELY IMPACT UPON A FIRM'S TENACITY AND PERSEVERANCE. 49 COMP. GEN. 139 (1969); AND 43 ID. 257 (1963). WE HAVE RECOGNIZED THAT POOR BUSINESS PRACTICES AFFECT ONE'S TENACITY AND PERSEVERANCE. MATTER OF THE TRANSPORT TIRE COMPANY, INC., B- 179098, JANUARY 24, 1974; B-161806, FEBRUARY 26, 1968. WHAT IS REQUIRED TO SUSTAIN A DETERMINATION OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE TO DO AN ACCEPTABLE JOB IS A CLEAR SHOWING THAT A PROSPECTIVE CONTRACTOR DID NOT DILIGENTLY OR AGGRESSIVELY TAKE WHATEVER ACTION WAS REASONABLY NECESSARY TO RESOLVE ITS PROBLEMS. B-170224(2), OCTOBER 8 1970. WE ARE CONCERNED NOT WITH WHETHER A FIRM IS OR WILL BECOME CAPABLE TO PERFORM, BUT WITH WHETHER A FIRM THAT IS DEEMED TO POSSESS ADEQUATE CAPABILITY APPLIES IT IN SUFFICIENT MEASURE TO INSURE SATISFACTORY COMPLETION OF THE CONTRACT. 51 COMP. GEN. 288 (1971).

UNDER THE ABOVE PRINCIPLES, FROM OUR REVIEW, WE MUST CONCLUDE THAT THE RECORD IS SUFFICIENT TO SUBSTANTIATE THE MSC DETERMINATION. WE TAKE THIS POSITION NOTWITHSTANDING THE INCLUSION OF CAPACITY AND CREDIT MATTERS IN THE DETERMINATION OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE THAT WERE PROPERLY FOR CONSIDERATION UNDER THE COC PROCEDURES OF SBA. AS SUCH, THEY DO NOT INFLUENCE OUR CONCLUSION.

THERE IS NO QUESTION THAT MSC CONTRACTING OFFICIALS DETERMINED THAT IRAN WAS A NONRESPONSIBLE BIDDER DUE TO LACK OF TENACITY AND PERSEVERANCE IN COMPLETE CONFORMITY WITH THE PROCEDURES GOVERNING RESPONSIBILITY DETERMINATIONS, INCLUDING REFERRAL TO AND CONSIDERATION OF THE POSITION OF SBA. WE NOTE HERE THAT ASPR 1-705.4(C)(VI) ATTACHES FINALITY TO THE COMMANDER, MSC'S DECISION ON THE SBA APPEAL FROM THE DETERMINATION THAT IRAN LACKED THE REQUISITE TENACITY AND PERSEVERANCE. MSC SUMMARIZED ITS POSITION AS FOLLOWS:

"THE PRINCIPAL AREAS OF FALCON'S DEFICIENCIES WERE: EXCESSIVE UNSCHEDULED DOWNTIME, EXCESSIVE IN-PORT TIME, FAILURE TO MAKE WARRANTED SPEED, LACK OF STANDARD OPERATING PROCEDURES, RELIANCE UPON THE MSC ENGINEERING STAFF FOR ASSISTANCE IN SOLVING ENGINEERING PROBLEMS, LACK OF ADEQUATE RECORDS NECESSARY FOR A PREVENTIVE MAINTENANCE PROGRAM, AND INADEQUATE SPARE PARTS INVENTORY AND SAFE HOUSEKEEPING PROGRAM.

"ESSENTIALLY THE CONCLUSION REACHED WAS THAT ALTHOUGH THE SHIP HAD MORE THAN NORMAL DESIGN DEFICIENCIES, MANAGEMENT DID LITTLE TO OVERCOME THE PROBLEMS THEREBY GENERATED. A FUNDAMENTAL AND INEXCUSABLE MANAGEMENT DEFICIENCY WAS IRAN'S FAILURE TO INITIATE OR PROMULGATE AN ACCEPTABLE PREVENTIVE MAINTENANCE PROGRAM OR AN ADEQUATE RECORDING SYSTEM IN REGARD TO MAINTENANCE, REPAIRS, SPARE PARTS AND STORES. ESSENTIALLY IT APPEARS THAT THE SHIPS WERE LEFT TO RUN THEMSELVES. IT IS NOTED THAT THE OPERATOR'S ABILITY AND WILLINGNESS TO PERFORM EXTENSIVE PREVENTIVE MAINTENANCE IS CONSIDERED TO BE THE MOST IMPORTANT SINGLE FACTOR IN THE CONTRACT FOR THE OPERATION OF THE NINE SEALIFT TANKERS."

BECAUSE, AS IS EVIDENT FROM THE POSITION TAKEN BY MEBA, REASONABLE PERSONS MIGHT VERY WELL DISAGREE BY INTERPRETING IDENTICAL FACTUAL MATTERS RELATIVE TO TENACITY AND PERSEVERANCE DIFFERENTLY, OUR OFFICE WILL NOT SUBSTITUTE ITS JUDGMENT FOR THREAT OF CONTRACTING OFFICIALS ABSENT FLAGRANT OR UNREASONABLE ABUSE OF DISCRETION. WE BELIEVE THE RECORD SUPPORTS THE ANALYSIS OF MSC OF IRAN'S LACK OF TENACITY AND PERSEVERANCE IN DISCLOSING CONDUCT WHICH UNDULY INCREASED THE ADMINISTRATIVE BURDEN ON THE GOVERNMENT. THERE IS EVIDENCE ON THE RECORD THAT, WITH RESPECT TO KEEPING FALCON TANKERS OPERATIONAL, THE DIRECTION FOR SUCCESSFUL FLEET OPERATION FROM IRAN APPEARS TO HAVE BEEN VIRTUALLY NONEXISTENT. THE MERE DISSEMINATION OF MANUFACTURER'S HANDBOOKS ALONE DOES NOT CONSTITUTE AFFIRMATIVE STEPS TO INSURE SUCCESSFUL PERFORMANCE. WHILE IN-PORT TIME MAY ULTIMATELY HAVE BEEN REDUCED, IT WAS ONLY AFTER CONTINUED PRODDING BY MSC; ALSO, ENGINEERING PROBLEMS WERE NOT CORRECTED EVEN AFTER MSC REQUESTED SAME ON SEVERAL OCCASIONS.

IN CONCLUSION, WE CONCUR WITH THE MSC EMPHASIS TO MEBA DURING A CONFERENCE ON THE PROTEST THAT THE NONRESPONSIBILITY DETERMINATION REFLECTED UPON IRAN, NOT THE UNION.

CONSEQUENTLY, THE PROTEST IS DENIED.