B-182170, FEB 3, 1975

B-182170: Feb 3, 1975

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FAILURE OF CONTRACTING AGENCY TO DISPATCH NOTICE OF REJECTION LETTER TO UNSUCCESSFUL LOW BIDDER ON SAME DATE AS AWARD TO ANOTHER BIDDER IS PROCEDURAL ERROR RATHER THAN SUBSTANTIVE ONE AND WOULD NOT AFFECT VALIDITY OF AWARD SINCE INTENT OF GSPR 5A-2.408(B) IS THAT NOTIFICATION BE GIVEN PROMPTLY AFTER AWARD WHICH WAS DONE IN THAT LETTER WAS RECEIVED 1 WEEK AFTER AWARD. 2. NO DECISION WILL BE RENDERED ON PROTEST ISSUE. 3. THERE IS NO BASIS TO OBJECT TO CONTRACTING OFFICER'S DETERMINATION THAT LOW BIDDER IS NONRESPONSIBLE SINCE THE DETERMINATION IS LEFT PRIMARILY TO CONTRACTING OFFICER AND WILL NOT BE QUESTIONED IN ABSENCE OF SHOWING OF LACK OF REASONABLE BASIS AND RECORD OF UNSATISFACTORY FINANCIAL POSITION ALONE SUPPORTS DETERMINATION.

B-182170, FEB 3, 1975

1. FAILURE OF CONTRACTING AGENCY TO DISPATCH NOTICE OF REJECTION LETTER TO UNSUCCESSFUL LOW BIDDER ON SAME DATE AS AWARD TO ANOTHER BIDDER IS PROCEDURAL ERROR RATHER THAN SUBSTANTIVE ONE AND WOULD NOT AFFECT VALIDITY OF AWARD SINCE INTENT OF GSPR 5A-2.408(B) IS THAT NOTIFICATION BE GIVEN PROMPTLY AFTER AWARD WHICH WAS DONE IN THAT LETTER WAS RECEIVED 1 WEEK AFTER AWARD. 2. WHERE UNSUCCESSFUL LOW BIDDER SEEKS A PRELIMINARY INJUNCTION AGAINST CONTRACTING AGENCY RAISING MATTERS DEALING WITH PROTEST ISSUE AND COURT, IN DECLINING TO GRANT PRELIMINARY INJUNCTION, DISPOSED OF THOSE MATTERS, NO DECISION WILL BE RENDERED ON PROTEST ISSUE. 3. THERE IS NO BASIS TO OBJECT TO CONTRACTING OFFICER'S DETERMINATION THAT LOW BIDDER IS NONRESPONSIBLE SINCE THE DETERMINATION IS LEFT PRIMARILY TO CONTRACTING OFFICER AND WILL NOT BE QUESTIONED IN ABSENCE OF SHOWING OF LACK OF REASONABLE BASIS AND RECORD OF UNSATISFACTORY FINANCIAL POSITION ALONE SUPPORTS DETERMINATION.

RAYCOMM INDUSTRIES, INC.:

THIS PROTEST WAS SUBMITTED BY RAYCOMM INDUSTRIES, INC. (RAYCOMM), AGAINST THE AWARD OF A CONTRACT FOR TECHNICAL SERVICES TO POTOMAC RESEARCH, INC. (POTOMAC).

THE PROTEST ESSENTIALLY CONCERNS THREE ISSUES:

1. WHETHER RAYCOMM WAS INFORMED OF NOTICE OF DISQUALIFICATION IN A PROPER MANNER AND WHETHER A LACK OF NOTICE WOULD AFFECT THE VALIDITY OF THE AWARD;

2. WHETHER THE GENERAL SERVICES ADMINISTRATION (GSA) IMPROPERLY CIRCUMVENTED THE CERTIFICATE OF COMPETENCY (COC) PROGRAM OF THE SMALL BUSINESS ADMINISTRATION (SBA) BY ISSUING A CERTIFICATE OF URGENCY; AND

3. WHETHER THE CONTRACTING OFFICER'S DETERMINATION THAT RAYCOMM WAS NONRESPONSIBLE WAS SUPPORTED.

ON JUNE 18, 1974, THE FEDERAL SUPPLY SERVICE OF THE GSA ISSUED INVITATION FOR BIDS (IFB) NO. AT/FS 18224 FOR THE PROVISION OF "TECHNICAL SUPPORT SERVICES FOR THE FEDERAL DATA PROCESSING CENTER, HUNTSVILLE, ALABAMA." TERMS OF THE IFB, THE CONTRACT WAS TO COMMENCE 30 DAYS AFTER THE DATE OF AWARD OR NOVEMBER 1, 1974, WHICHEVER WAS LATER.

RAYCOMM AND OTHERS SUBMITTED BIDS WHICH WERE OPENED ON JULY 25, 1974. RAYCOMM WAS THE LOW BIDDER AT $1,158,818.30. POTOMAC WAS THE SECOND LOW BIDDER AT $1,284,515. OTHER BIDS RANGED TO A MAXIMUM OF $6,315,585.

FOLLOWING USUAL PROCEDURES, GSA COMMENCED AN INQUIRY TO DETERMINE THE FINANCIAL ABILITY OF RAYCOMM TO PERFORM THE CONTRACT. ON AUGUST 23, 1974, THE CONTRACTING OFFICER DETERMINED, INTER ALIA, THAT RAYCOMM LACKED SUFFICIENT FINANCIAL CAPACITY TO PERFORM THE CONTRACT BASED UPON AN INVESTIGATION BY THE GSA REGIONAL DIRECTOR OF FINANCE. IT HAD BEEN FOUND, FOR EXAMPLE, THAT RAYCOMM'S CURRENT LIABILITIES EXCEEDED ITS ASSETS; THAT IT LACKED SUFFICIENT CAPITAL; AND THAT ITS PROSPECTS OF OBTAINING LOANS WERE POOR.

THE CONTRACTING OFFICER FURTHER DETERMINED THAT IT WAS ESSENTIAL, IF THE SUCCESSFUL BIDDER WAS TO COMMENCE OPERATIONS ON SCHEDULE, THAT THE CONTRACT BE AWARDED AS SOON AS POSSIBLE, PREFERABLY PRIOR TO SEPTEMBER 1, 1974. IN THE JUDGMENT OF THE CONTRACTING OFFICER, THE SUCCESSFUL BIDDER WOULD NEED AT LEAST 60 DAYS TO HIRE AND TRAIN THE MORE THAN 75 NEEDED EMPLOYEES. ON AUGUST 23, 1974, THE CONTRACTING OFFICER ISSUED A CERTIFICATE OF URGENCY STATING THAT THE AWARD MUST BE MADE WITHOUT DELAY, OR NOT LATER THAN AUGUST 30, 1974.

BY LETTER OF AUGUST 23, 1974, THE CONTRACTING OFFICER NOTIFIED THE APPROPRIATE SBA REGIONAL OFFICE THAT RAYCOMM HAD BEEN DETERMINED TO BE NONRESPONSIBLE AND, IN ACCORDANCE WITH FEDERAL PROCUREMENT REGULATIONS (FPR) SEC. 1-1.708.2(A) (1964 ED., 2D ED., FPR AMEND. 71, FEBRUARY 1970), ATTACHED A COPY OF THE CERTIFICATE OF URGENCY. THEREFORE, THE QUESTION OF THE FINANCIAL RESPONSIBILITY OF RAYCOMM WAS NOT SUBMITTED TO SBA. THE CONTRACT WAS THEN AWARDED TO POTOMAC ON SEPTEMBER 3, 1974.

THE FIRST ISSUE CONCERNING WHETHER RAYCOMM WAS INFORMED OF NOTICE OF DISQUALIFICATION IS A TECHNICAL ONE. RAYCOMM CONTENDS THAT IT DID NOT RECEIVE NOTICE OF REJECTION, A CERTIFIED AIRMAIL LETTER DATED SEPTEMBER 4, 1974, AND POSTMARKED SEPTEMBER 7, 1974, UNTIL SEPTEMBER 10, 1974, OR 1 WEEK AFTER AWARD, IN VIOLATION OF GENERAL SERVICES PROCUREMENT REGULATIONS (GSPR) 5A-2.408(B), WHICH PROVIDES, AS FOLLOWS:

"NOTIFICATION TO UNSUCCESSFUL LOWER BIDDERS OF THE REJECTION OF THEIR BIDS SHALL BE IN WRITING AND SHALL BE PREPARED AND SUBMITTED FOR SIGNATURE AND DISPATCH AT THE SAME TIME THAT THE RELATED AWARDS ARE SUBMITTED FOR THE CONTRACTING OFFICER'S SIGNATURE AND RELEASE."

HOWEVER, GSA'S FAILURE TO DISPATCH THE NOTIFICATION TO RAYCOMM ON THE AWARD DATE IS A PROCEDURAL ERROR RATHER THAN A SUBSTANTIVE ONE, B 175555, AUGUST 25, 1972, AND WOULD NOT AFFECT THE VALIDITY OF THE AWARD. FURTHERMORE, IT WOULD APPEAR THAT THE INTENT OF THE REGULATION IS THAT NOTIFICATION OF REJECTION IS TO BE GIVEN PROMPTLY AFTER AWARD, WHICH WAS DONE IN THE PRESENT CASE. SEE B-175955, JULY 25, 1972; AND B 159537, SEPTEMBER 7, 1966.

THE SECOND ISSUE REGARDING WHETHER GSA IMPROPERLY CIRCUMVENTED THE COC PROGRAM BY ISSUING A CERTIFICATE OF URGENCY IS THE SUBSTANTIVE ISSUE OF THE PROTEST. COROLLARY THERETO IS THE RAYCOMM CONTENTION THAT THE 10-DAY PERIOD BETWEEN THE DETERMINATION OF NONRESPONSIBILITY AND THE DATE OF AWARD PROVIDED AMPLE TIME FOR A REFERRAL TO AND A CONSIDERATION BY SBA UNDER THE COC PROCEDURES OF RAYCOMM'S FINANCIAL RESPONSIBILITY.

RAYCOMM SOUGHT A PRELIMINARY INJUNCTION AGAINST GSA IN THE UNITED STATES DISTRICT COURT, DISTRICT OF NEW JERSEY, CIVIL ACTION NO. 74 1423, FILED SEPTEMBER 13, 1974. RAYCOMM REQUESTED THAT THE COURT (1) DIRECT GSA TO SUBMIT THE QUESTION OF ITS FINANCIAL RESPONSIBILITY TO SBA AND (2) DECLARE THE CERTIFICATE OF URGENCY INVALID. IN AN OPINION DATED SEPTEMBER 18, 1974, THE COURT DECLINED TO GRANT THE PRELIMINARY INJUNCTION CONCLUDING, IN PERTINENT PART, AS FOLLOWS:

"*** I FIND THE CONTRACTING OFFICER HERE DID HAVE A RATIONAL BASIS IN REACHING HIS DECISION TO ISSUE A CERTIFICATE OF URGENCY.

"*** INDEED, I AM SATISFIED ON THE BASIS OF THE TESTIMONY THAT THE CONTRACTING OFFICER ACTED IN A FASHION FULLY CONSISTENT WITH THE REQUIREMENTS AND RESPONSIBILITIES OF HIS OFFICE."

RAYCOMM STATES THAT THE CONTRACTING OFFICER CONVENIENTLY CHANGED GSA'S REQUIREMENTS OF 30 DAYS' ADVANCE NOTICE AFTER DATE OF AWARD TO A MINIMUM TIME OF 60 DAYS TO JUSTIFY ITS POSITION OF ISSUING THE CERTIFICATE OF URGENCY. RAYCOMM CONTENDS THAT THIS ISSUE HAS STILL NOT BEEN ANSWERED BY THE GSA OR THE COURTS. NEVERTHELESS, IN GSA'S MEMORANDUM IN OPPOSITION TO MOTION FOR PRELIMINARY INJUNCTION, CONSIDERED BY THE COURT IN ITS OPINION, IT STATES THAT:

"*** BY TERMS OF THE INVITATION TO BID THE CONTRACT WAS TO COMMENCE 30 DAYS AFTER THE DATE OF AWARD OR NOVEMBER 1, 1974, WHICHEVER WAS LATER. THUS, A PROSPECTIVE CONTRACTOR WAS GUARANTEED A MINIMUM STARTUP PERIOD OF 30 DAYS. THERE WAS NO REPRESENTATION IN THE INVITATION, HOWEVER, AS TO MAXIMUM STARTUP PERIOD THAT WOULD BE DESIRABLE."

FURTHERMORE, OUR READING OF THE DOCUMENTS FILED WITH THE COURT BY THE RESPECTIVE PARTIES LEADS TO THE CONCLUSION THAT THE COURT DISPOSED OF ALL OF THE MATTERS RAISED BY RAYCOMM WITH RESPECT TO THIS ISSUE. SINCE THE POLICY OF OUR OFFICE IS NOT TO RENDER DECISIONS ON PROTEST ISSUES WHICH HAVE BEEN DECIDED ON THE MERITS BY A COURT OF COMPETENT JURISDICTION, WE WILL NOT RENDER A DECISION ON THIS ISSUE. SEE 4 C.F.R. SEC. 20.11 (1974).

THE LAST ISSUE IS WHETHER THE CONTRACTING OFFICER'S DETERMINATION THAT RAYCOMM WAS NONRESPONSIBLE WAS SUPPORTED. NEITHER THIS ISSUE NOR THE FIRST ISSUE DISCUSSED ABOVE WAS RAISED BY RAYCOMM BEFORE THE COURT.

AS MENTIONED ABOVE, A RESPONSIBILITY EVALUATION WAS CONDUCTED SHORTLY AFTER BID OPENING. TO THE CONTRACTING OFFICER, RAYCOMM'S LOW BID OF $1,158,818.30 APPEARED TO BE OUT OF LINE COMPARED TO THE 30 OTHER BIDS, RANGING FROM $1,284,515 TO $6,315,585, THE CURRENT CONTRACT RATE OF APPROXIMATELY $1,565,638, AND THE GOVERNMENT ESTIMATE OF $1,286,286 AS MINIMUM COST TO THE CONTRACTOR. THE CONTRACTING OFFICER NOTIFIED RAYCOMM OF THE SUSPECTED MISTAKE IN BID AND RECEIVED VERIFICATION OF THE BID BY RAYCOMM AS ORIGINALLY SUBMITTED. RAYCOMM'S BID INCLUDED "NO CHARGE" FOR CERTAIN SIGNIFICANT SERVICES OF, E.G., SENIOR PROGRAMMERS. RAYCOMM ADVISED CONTRACTING OFFICIALS AFTER OPENING THAT IT HOPED TO CONVINCE GSA TO PERMIT PERFORMANCE OF THE "NO CHARGE" SERVICES BY PROGRAMMERS WITH LESSER QUALIFICATIONS AT LOWER RATES. RAYCOMM WAS TOLD THAT THE GOVERNMENT WOULD NOT ALTER ITS REQUIREMENTS FOR THE FINANCIAL GAIN OF THE CONTRACTOR AND ALTHOUGH RAYCOMM FIGURED IT COULD "BREAK EVEN" UNDER THE SUPPLIED ESTIMATES, THE CONTRACTING OFFICER DETERMINED IT WOULD LOSE SUBSTANTIAL SUMS IF REQUIREMENTS ON THE "NO CHARGE" ITEMS WERE REASONABLY ACCURATE.

IN ADDITION, THE EVALUATION OF RAYCOMM'S FINANCIAL CONDITION REVEALED TO GSA THAT THE FIRM DID NOT HAVE ADEQUATE FINANCIAL RESOURCES OR ABILITY TO OBTAIN SUCH AS REQUIRED TO BE CONSIDERED RESPONSIBLE UNDER FPR SEC. 1- 1.1203-1(A) (1964 ED., 2D ED., FPR AMEND. 95, AUGUST 1971). AT THE END OF THE AUDITED PERIOD, APRIL 30, 1974, RAYCOMM'S BALANCE SHEET REVEALED A WORKING CAPITAL DEFICIT (TOTAL CURRENT LIABILITIES EXCEEDING TOTAL CURRENT ASSETS) AND A VERY LOW CASH BALANCE. ALSO, RAYCOMM'S CHECKING ACCOUNT FLUCTUATED AND, AT TIMES, WAS REDUCED TO ZERO; AS OF APRIL 30, 1974, A CERTAIN AMOUNT OF ACCOUNTS RECEIVABLE WERE ASSIGNED, WITH PERMISSION OF SBA, AS COLLATERAL AGAINST THE COMPANY'S NOTES PAYABLE TO VARIOUS BANKS; AND ALL OTHER ACCOUNTS RECEIVABLE HAD BEEN ASSIGNED AS COLLATERAL FOR A BANK LOAN GUARANTEED 90 PERCENT BY SBA.

ONE EXAMPLE OF PERFORMANCE, ACCORDING TO GSA, WHICH RAYCOMM WOULD HAVE BEEN UNABLE TO MEET IS REQUIRED BY THE FOLLOWING CONTRACT PROVISION:

"IN PERFORMING ITS RESPONSIBILITIES UNDER THE CONTRACT, THE CONTRACTOR SHALL USE ONLY FULLY TRAINED, EXPERIENCED, AND TECHNICALLY PROFICIENT PERSONNEL. TRAINING WILL BE PERFORMED BY THE CONTRACTOR AT HIS OWN EXPENSE ***."

RAYCOMM WOULD HAVE BEEN EXPECTED TO EXPEND IN EXCESS OF $58,000 IN ORDER TO TRAIN ITS EMPLOYEES AND PREPARE FOR PERFORMANCE FOR THE CONTRACT PERIOD BEGINNING NOVEMBER 1, 1974. SINCE THE CONTRACT DID NOT PROVIDE FOR OVERLAP SERVICE WITH THE CURRENT CONTRACTOR, RAYCOMM WOULD HAVE BEEN REQUIRED TO MAKE THIS NONREIMBURSABLE IMMEDIATE OUTLAY IN ORDER TO BE READY FOR PERFORMANCE. RAYCOMM ATTEMPTS TO EXPLAIN AWAY THIS POINT BY STATING THAT THE MAJOR PORTION OF PERSONNEL RECRUITED WAS INCUMBENT AND NO STARTUP EXPENSE AS ESTIMATED BY GSA WOULD BE INCURRED. HOWEVER, RAYCOMM HAD NOT RECRUITED ALL NECESSARY PERSONNEL SO SOME STARTUP EXPENSE MIGHT VERY WELL HAVE BEEN ANTICIPATED.

ON THE BASIS OF THE FOREGOING INFORMATION, THE CONTRACTING OFFICER CONCLUDED THAT RAYCOMM WAS NONRESPONSIBLE.

THE DETERMINATION OF RESPONSIBILITY IS LEFT PRIMARILY TO THE CONTRACTING OFFICER AND WILL NOT BE QUESTIONED BY OUR OFFICE IN THE ABSENCE OF A SHOWING OF LACK OF A REASONABLE BASIS. 51 COMP. GEN. 233 (1971). OUR OFFICE HAS FOUND NO BASIS UPON WHICH TO OBJECT TO THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY HERE FOR RAYCOMM'S UNSATISFACTORY FINANCIAL POSITION ALONE WOULD SUPPORT THE DETERMINATION.

ACCORDINGLY, THE PROTEST IS DENIED.