B-213023, MAY 2, 1984

B-213023: May 2, 1984

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WHETHER THE AWARDEE SATISFIED RESPONSIBILITY STANDARDS SET FORTH IN THE REGULATIONS CONCERNS THE CONTRACTING OFFICER'S DETERMINATION THAT THE AWARDEE IS RESPONSIBLE. GAO WILL NOT REVIEW SUCH DETERMINATIONS ABSENT A SHOWING OF POSSIBLE FRAUD OR BAD FAITH BY GOVERNMENT OFFICIALS. OR THAT DEFINITIVE RESPONSIBILITY CRITERIA WERE NOT MET. 2. A PROTESTER'S SPECULATION THAT CERTAIN EVENTS AND AGENCY ACTIONS WERE MOTIVATED BY THE AGENCY'S DESIRE TO AVOID CONTRACTING WITH THE PROTESTER IS NOT SUFFICIENT TO ESTABLISH AGENCY BAD FAITH. WHETHER AN AWARDEE'S OFFERED PRICE IS UNREASONABLY LOW AND WHETHER THE AWARDEE WILL BE ABLE TO PERFORM SATISFACTORILY AT ITS BELOW COST BID PRICE ARE MATTERS OF THE AWARDEE'S RESPONSIBILITY.

B-213023, MAY 2, 1984

DIGEST: 1. WHETHER THE AWARDEE SATISFIED RESPONSIBILITY STANDARDS SET FORTH IN THE REGULATIONS CONCERNS THE CONTRACTING OFFICER'S DETERMINATION THAT THE AWARDEE IS RESPONSIBLE; GAO WILL NOT REVIEW SUCH DETERMINATIONS ABSENT A SHOWING OF POSSIBLE FRAUD OR BAD FAITH BY GOVERNMENT OFFICIALS, OR THAT DEFINITIVE RESPONSIBILITY CRITERIA WERE NOT MET. 2. A PROTESTER'S SPECULATION THAT CERTAIN EVENTS AND AGENCY ACTIONS WERE MOTIVATED BY THE AGENCY'S DESIRE TO AVOID CONTRACTING WITH THE PROTESTER IS NOT SUFFICIENT TO ESTABLISH AGENCY BAD FAITH; TO PROVE BAD FAITH, THE PROTESTER MUST PRESENT VIRTUALLY IRREFUTABLE EVIDENCE THAT AGENCY OFFICIALS ACTED WITH A SPECIFIC AND MALICIOUS INTENT TO INJURE THE PROTESTER. 3. WHETHER AN AWARDEE'S OFFERED PRICE IS UNREASONABLY LOW AND WHETHER THE AWARDEE WILL BE ABLE TO PERFORM SATISFACTORILY AT ITS BELOW COST BID PRICE ARE MATTERS OF THE AWARDEE'S RESPONSIBILITY, WHICH GAO WILL NOT REVIEW UNDER THE CIRCUMSTANCES HERE. 4. PROTESTS BASED ON ALLEGED SOLICITATION IMPROPRIETIES ARE UNTIMELY, AND NOT FOR CONSIDERATION, WHERE FILED SUBSEQUENT TO THE TIME SET FOR RECEIPT OF INITIAL PROPOSALS.

EBONEX, INC.:

EBONEX, INC. PROTESTS THE AWARD OF A CONTRACT TO VULCAN TECHNOLOGIES UNDER REQUEST FOR PROPOSALS (RFP) NO. DAAA09-83-R-3083, ISSUED BY THE DEPARTMENT OF THE ARMY AS A TOTAL SMALL BUSINESS SET-ASIDE FOR 18,060 BOMB FIN ASSEMBLIES AND 602 ADAPTER PALLETS. WE DISMISS THE PROTEST IN PART AND DENY IT IN PART.

THE SOLICITATION PROVIDED THAT OFFERS WOULD BE EVALUATED ON THE BASIS OF TOTAL PRICE AND OTHER FACTORS AND THAT AWARD WOULD BE MADE TO THE RESPONSIBLE OFFEROR PROPOSING THE LOWEST TOTAL PRICE. OF 18 PROPOSALS RECEIVED PRIOR TO THE CLOSING DATE, VULCAN'S WAS LOW WITH OFFERED UNIT PRICES OF $39.80 AND $88.00 FOR THE FIN ASSEMBLIES AND ADAPTER PALLETS, RESPECTIVELY ($742,868 TOTAL EVALUATED PRICE). EBONEX WAS THE SECOND LOW OFFEROR WITH UNIT PRICES OF $66.1404 AND $55.38 ($1,169,312.75 TOTAL EVALUATED PRICE). SINCE BOTH OFFERS WERE SIGNIFICANTLY BELOW THE ARMY'S ESTIMATE OF $192.68 AND $94.93, IT ASKED THE FIRMS TO CONFIRM THEIR PRICES; BOTH CONFIRMED THAT THEIR PRICES WERE NOT MISTAKEN.

THE ARMY EXPLAINS THAT THE CONTRACTING OFFICER INITIALLY DETERMINED THAT VULCAN WAS NOT A RESPONSIBLE OFFEROR BASED ON A RECENT PREAWARD SURVEY FOR ANOTHER ITEM FINDING VULCAN UNSATISFACTORY IN SIX AREAS AFFECTING CAPACITY AND CREDIT, INCLUDING PRODUCTION AND FINANCIAL CAPABILITY AND ABILITY TO MEET THE REQUIRED SCHEDULE. SINCE VULCAN WAS A SMALL BUSINESS, THE CONTRACTING OFFICER REFERRED HIS DETERMINATION TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR A CERTIFICATE OF COMPETENCY (COC) REVIEW. WHILE THE MATTER WAS PENDING AT SBA, THE ARMY LEARNED VULCAN HAD BEEN ISSUED A COC FOR THE ITEM ON WHICH THE PREAWARD SURVEY HAD BEEN BASED, AND DECIDED TO CONDUCT A NEW ON-SITE SURVEY TO REEXAMINE VULCAN'S CAPABILITY. BECAUSE THIS NEW SURVEY FOUND SIGNIFICANT IMPROVEMENT IN THE PREVIOUSLY UNSATISFACTORY AREAS AND THE REQUIREMENT WAS DEEMED URGENT, THE CONTRACTING OFFICER MADE A NEW DETERMINATION THAT VULCAN WAS RESPONSIBLE, AND MADE AWARD TO VULCAN ON AUGUST 19, 1983 AT ITS EVALUATED PRICE OF $742,868. THREE DAYS LATER, THE ARMY WITHDREW THE COC REFERRAL.

EBONEX FIRST CONTENDS THAT THE AWARD WAS IMPROPER BECAUSE VULCAN IS UNABLE TO MEET THE RESPONSIBILITY STANDARDS UNDER APPLICABLE REGULATIONS, AND THUS IS NOT A RESPONSIBLE OFFEROR. IT NOTES THAT DEFENSE ACQUISITION REGULATION (DAR) SEC. 1-902 PROHIBITS CONTRACTING WITH OTHER THAN RESPONSIBLE OFFERORS.

EBONEX, IN ESSENCE, IS CHALLENGING THE CONTRACTING OFFICER'S DETERMINATION THAT VULCAN IS RESPONSIBLE TO PERFORM THIS CONTRACT. OUR OFFICE DOES NOT REVIEW SUCH AFFIRMATIVE DETERMINATIONS OF RESPONSIBILITY - WHICH CONSIST LARGELY OF SUBJECTIVE BUSINESS JUDGMENTS - UNLESS THERE IS A SHOWING OF POSSIBLE FRAUD ON THE PART OF THE PROCURING OFFICIALS, OR THE SOLICITATION CONTAINS DEFINITIVE RESPONSIBILITY CRITERIA WHICH ALLEGEDLY HAVE NOT BEEN APPLIED. SEE HARNISCHFEGER CORPORATION, B-211313, JULY 8, 1983, 83-2 CPD 68.

EBONEX ATTEMPTS TO INVOKE THE "BAD FAITH" EXCEPTION, ARGUING THAT THE ARMY REVERSED ITS INITIAL DETERMINATION THAT VULCAN WAS NOT RESPONSIBLE SOLELY TO AVOID MAKING THE AWARD TO A FIRM SUCH AS EBONEX, WHICH IS OWNED AND OPERATED BY A SOCIALLY AND ECONOMICALLY DISADVANTAGED INDIVIDUAL. FN1 EBONEX HAS SUBMITTED NO PROOF THAT THE ARMY FOUND VULCAN RESPONSIBLE FOR IMPROPER REASONS. IT INSTEAD CITES NUMEROUS ACTIONS BY THE ARMY WHICH IT BELIEVES CLEARLY SHOW THE ARMY DID NOT WANT TO MAKE THE AWARD TO EBONEX, AND THEN POINTS TO ALLEGED IRREGULARITIES IN THE PROCUREMENT PROCESS WHICH IT BELIEVES SHOW THAT IT WAS THIS AVERSION TO CONTRACTING WITH EBONEX THAT LED THE ARMY TO FIND VULCAN RESPONSIBLE. IN THIS LATTER REGARD, FOR EXAMPLE, EBONEX CITES THE FACT THAT IT WAS SUBJECTED TO A PREAWARD SURVEY BEFORE VULCAN, THE LOW OFFEROR, AS EVIDENCE THAT THE ARMY WAS LOOKING FOR SOMETHING WRONG WITH EBONEX IN THE EVENT IT FOUND VULCAN NONRESPONSIBLE.

THE PROTESTER BEARS A HEAVY BURDEN OF PROOF WHEN ALLEGING BAD FAITH ON THE PART OF GOVERNMENT OFFICIALS; IT MUST SHOW BY VIRTUALLY IRREFUTABLE PROOF THAT THESE OFFICIALS HAD A SPECIFIC AND MALICIOUS INTENT TO INJURE THE PROTESTER. KALVAR CORPORATION, INC. V. UNITED STATES, 543 F.2D 1295, 1301 (CT.CL. 1976). EBONEX HAS NOT MET THIS STANDARD.

WHILE EBONEX MAY BELIEVE THAT THE ARMY WAS ACTING SOLELY TO DEPRIVE EBONEX OF THE AWARD, IT HAS SUBMITTED NO EVIDENCE THAT THIS WAS IN FACT THE CASE. RATHER, IT ESSENTIALLY ASKS THAT WE INFER BAD FAITH FROM WHAT IT CONSIDERS TO BE SEVERAL IRREGULARITIES, INCLUDING THE ARMY'S INITIAL PREAWARD SURVEY OF EBONEX. IRREGULAR OR NOT THESE ACTIONS AND EVENTS DO NOT ESTABLISH ANY SPECIFIC INTENT BY THE ARMY AND THUS, BY THEMSELVES, DO NOT CONSTITUTE EVIDENCE OF BAD FAITH. THE MERE FACT THAT THE ARMY MAY HAVE CONDUCTED AN UNNECESSARY PREAWARD SURVEY OF EBONEX DOES NOT CONSTITUTE EVIDENCE THAT IT DID SO IN BAD FAITH FOR THE PURPOSE OF DENYING EBONEX THE AWARD. THE ARMY STATES THAT IN FACT IT SURVEYED EBONEX INITIALLY BECAUSE AN ERROR IN THE TRANSPORTATION COST EVALUATION MADE IT APPEAR THAT EBONEX WAS THE LOW OFFEROR. A PREMATURE PREAWARD SURVEY ALSO IS JUSTIFIABLE AS A MEANS OF REDUCING THE AMOUNT OF TIME REQUIRED TO ULTIMATELY AWARD THE CONTRACT. SEE SECURITY AND ASSISTANCE FORCES & EQUIPMENT INTERNATIONAL, INC., B-194876, MAY 5, 1980, 80-1 CPD 320. FIND BOTH OF THESE EXPLANATIONS AT LEAST AS PLAUSIBLE AS EBONEX'S SPECULATION THAT THE SURVEY WAS PART OF A BAD FAITH SCHEME TO DENY EBONEX THE CONTRACT.

INFERENCE AND SUPPOSITION WILL NOT SUPPORT A FINDING OF BAD FAITH, SEE ARCTIC CORNER, INCORPORATED, B-209765, APRIL 15, 1983, 83-1 CPD 414, AND SINCE WE FIND THAT EBONEX'S ARGUMENT IS BASED EXCLUSIVELY ON ITS INADEQUATELY SUBSTANTIATED SUSPICIONS, IT HAS NOT MET ITS BURDEN OF PROOF. CONSEQUENTLY, WE WILL NOT REVIEW THE ARMY'S AFFIRMATIVE DETERMINATION OF VULCAN'S RESPONSIBILITY.

EBONEX ALSO ALLEGES THAT THE ARMY IS IMPROPERLY ALLOWING VULCAN TO ASSUME "A POTENTIALLY DISASTROUS AMOUNT OF RISK," CONTRARY TO REGULATORY POLICY. THIS ALLEGATION IS FOUNDED ON EBONEX'S BELIEF THAT VULCAN'S BOMB FIN UNIT PRICE IS UNREASONABLY LOW AND THAT THERE THUS IS A GREAT RISK THAT VULCAN WILL BE UNABLE TO PERFORM. AN OFFEROR'S ABILITY TO SATISFACTORILY PERFORM AT ITS PROPOSED PRICE, HOWEVER, IS, AGAIN, A MATTER OF RESPONSIBILITY. THE ARMY FOUND VULCAN RESPONSIBLE AT THE TIME OF THE AWARD AND, AS STATED ABOVE, WE WILL NOT REVIEW THIS DETERMINATION UNDER THE CIRCUMSTANCES HERE. SEE PROFICIENCY ASSOCIATES, INC., B-198844.3, JANUARY 19, 1981, 81-1 CPD 29.

THE FACT THAT VULCAN'S BID MAY NOT INCLUDE ANY PROFIT OR MAY BE AN ATTEMPTED BUY-IN WOULD NOT RENDER VULCAN INELIGIBLE FOR AWARD. IT IS WELL -ESTABLISHED THAT BELOW-COST PRICING IS NOT ILLEGAL AND THAT THE GOVERNMENT CANNOT WITHHOLD AN AWARD FROM A RESPONSIBLE OFFEROR MERELY BECAUSE ITS LOW OFFER IS BELOW COST. SEE GENERALLY ZIMMERMAN PLUMBING AND HEATING COMPANY, B-211879, JUNE 24, 1983, 83-2 CPD 16.

EBONEX RAISES A NUMBER OF ALLEGATIONS CONCERNING THE ARMY'S FAILURE TO PERFORM A PRICE OR COST ANALYSIS ON VULCAN'S PROPOSAL DESPITE AN RFP REQUIREMENT THAT COST OR PRICING DATA BE SUBMITTED. IT SEEMS TO BE EBONEX'S VIEW THAT SUCH AN ANALYSIS WOULD HAVE ESTABLISHED THAT VULCAN'S PRICE WAS UNREASONABLY LOW. EBONEX MISUNDERSTANDS THE PURPOSE OF CONDUCTING COST AND PRICE ANALYSES. SUCH EVALUATIONS ARE CONCERNED PRIMARILY WITH WHETHER THE OFFERED PRICES ARE HIGHER THAN WARRANTED BASED ON THE OFFEROR'S COSTS, AND ARE USED IN NEGOTIATING REASONABLE PRICES. ALREADY DISCUSSED, CONSIDERATION OF WHETHER OFFERED PRICES ARE TOO LOW IS STRICTLY A MATTER OF THE OFFEROR'S RESPONSIBILITY.

EBONEX NEXT ARGUES THAT THIS PROCUREMENT SHOULD HAVE BEEN CONDUCTED ON AN ADVERTISED, RATHER THAN A NEGOTIATED BASIS, AND THAT THE SOLICITATION AS ISSUED FAILED TO CLEARLY SET FORTH THE EVALUATION FACTORS. THESE ARGUMENTS ARE UNTIMELY. THE CLOSING DATE FOR RECEIPT OF PROPOSALS WAS MAY 4, 1983. EBONEX'S PROTEST WAS RECEIVED IN OUR OFFICE ON SEPTEMBER 13, MORE THAN 4 MONTHS LATER. PROTESTS BASED ON ALLEGED SOLICITATION IMPROPRIETIES MUST BE FILED PRIOR TO THE CLOSING DATE. SEE 4 C.F.R. SEC. 21.2(B)(1). THIS INCLUDES ALLEGATIONS CHALLENGING THE METHOD OF SOLICITATION AS WELL AS THE EXPRESSLY STATED SOLICITATION TERMS AND CONDITIONS SUCH AS EVALUATION FACTORS. SEE SCOTT AVIATION, B-212063, JUNE 24, 1983, 83-2 CPD 18. WE THUS WILL NOT CONSIDER THESE ALLEGATIONS.

EBONEX FINALLY MAINTAINS THAT IT WAS PREJUDICED BY THE ARMY'S FAILURE TO ADHERE TO THE STATED EVALUATION CRITERIA IN EVALUATING THE PROPOSALS. DOES NOT SPECIFY HOWEVER THE MANNER IN WHICH IT BELIEVES THE ARMY DEVIATED FROM THE EVALUATION CRITERIA. WE FIND NO EVIDENCE TO SUPPORT THIS ALLEGATION.

THE PROTEST IS DISMISSED IN PART AND DENIED IN PART.

FN1 THE ARMY ARGUES THAT THIS BAD FAITH ALLEGATION IS UNTIMELY, AND SHOULD NOT BE CONSIDERED, SINCE IT IS BASED ON FREEDOM OF INFORMATION ACT (FOIA) MATERIALS MAILED ON OCTOBER 24, 1983, BUT WAS NOT ASSERTED BY EBONEX UNTIL NOVEMBER 17 WHEN ITS COMMENTS ON THE ARMY'S REPORT WERE RECEIVED IN OUR OFFICE. OUR BID PROTEST PROCEDURES REQUIRE THAT SUCH ALLEGATIONS BE RAISED NO LATER THAN 10 DAYS AFTER THE INFORMATION ON WHICH THEY ARE BASED WAS OR SHOULD HAVE BEEN KNOWN. 4 C.F.R. SEC. 21.2(B)(2) (1983). WHILE IT APPEARS EBONEX MAY HAVE RECEIVED THE FOIA INFORMATION MORE THAN 10 DAYS BEFORE IT FILED ITS COMMENTS, IT IS JUST AS POSSIBLE, BASED ON THIS RECORD, THAT THE MATERIALS WERE RECEIVED WITHIN THE 10-DAY PERIOD. WE RESOLVE SUCH DOUBT IN FAVOR OF THE PROTESTER. SEE WEARDCO CONSTRUCTION CORP., B-210259, SEPTEMBER 2, 1983, 83-2 CPD 296.