B-245762.2, Apr 28, 1992

B-245762.2: Apr 28, 1992

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Protest that contracting agency disregarded results of prior negative post-award audit in bad faith is denied. 2. Although contracting officials should not have relied on awardee's Buy American Act certification without inquiring into results of agency audits indicating noncompliance with domestic content requirements under prior contracts. Protester was not prejudiced as a result of agency's action where post-award audit indicates that awardee's product qualifies as a domestic end item. Oliver contends that DLA contracting personnel acted in bad faith in determining that NJCT was a responsible contractor. BACKGROUND This protest is the second challenge filed by Oliver against the NJCT award. /1/ In its initial protest.

B-245762.2, Apr 28, 1992

DIGEST: 1. Where record contains no evidence of an intent to harm the protester or any other offeror, and where contract specialist based her affirmative determination of awardee's responsibility on current evidence of the contractor's responsibility and successful performance, protest that contracting agency disregarded results of prior negative post-award audit in bad faith is denied. 2. Although contracting officials should not have relied on awardee's Buy American Act certification without inquiring into results of agency audits indicating noncompliance with domestic content requirements under prior contracts, protester was not prejudiced as a result of agency's action where post-award audit indicates that awardee's product qualifies as a domestic end item.

Oliver Products Company:

Oliver Products Company protests the award of a contract to NJCT Corporation under request for proposals (RFP) No. DLA400-91-R-4292, issued by the Defense General Supply Center (DGSC), Defense Logistics Agency (DLA), as a small business set-aside for 21 bread slicing machines. its protest, Oliver contends that DLA contracting personnel acted in bad faith in determining that NJCT was a responsible contractor.

We deny the protest.

BACKGROUND

This protest is the second challenge filed by Oliver against the NJCT award. /1/ In its initial protest, filed with our Office on September 19, 1991, Oliver argued that the awardee intended to supply a foreign end item in contravention of its offer, which indicated that NJCT would provide a domestic end item as defined by Department of Defense Federal Acquisition Regulation Supplement (DFARS) Sec. 252.225 7000, which implements the Buy American Act, 41 U.S.C. Secs. 10a et seq. (1988). /2/ Whether a contractor intends to comply with its Buy American Act certification is a matter of contract administration not for resolution under our Bid Protest Regulations, 4 C.F.R. Sec. 21.3(m)(1) (1992); accordingly, by decision dated January 7, 1992, we dismissed Oliver's initial protest. See Oliver Prods. Co., B-245762, Jan. 7, 1992, 92-1 CPD Para. 33.

Although we ultimately dismissed Oliver's first protest, we did so only after developing the written record. In its comments on the first agency report, Oliver alleged that NJCT was the subject of an internal DLA investigation for "wrong-doing"; Oliver also contended that the agency had received congressional inquiries in response to two prior agency-level protests filed by Oliver which alleged that NJCT's bread slicing machine did not constitute a domestic end item. On December 10, we asked DLA to comment on these allegations.

On December 16, DLA provided this Office with a written response to our December 10 inquiry. First, DLA stated that although NJCT was not the subject of any internal investigation for wrong-doing, the agency had received telephone inquiries from two Members of Congress regarding the domestic component composition of the bread slicing machine NJCT had furnished under two prior contracts awarded in 1990. As a result of these inquiries, DLA informed us that it had conducted two post award component cost audits which were completed on June 19, 1990] the audits revealed that the cost of the NJCT bread slicing machine's domestic components did not constitute 51 percent of the cost of all its components. DLA further informed this Office that with respect to the current award, no pre-award survey had been conducted.

After receiving this information, Oliver filed this second protest with our Office on December 23, alleging that the contracting officer's determination that NJCT was a responsible small business concern was made in bad faith. /3/

DISCUSSION

Whether an offeror can or will supply domestic products which meet the domestic product definition set forth in the Buy American Act concerns a matter of responsibility which this Office generally will not review absent a showing of possible fraud or bad faith, or that definitive responsibility criteria were not followed. See Bryant Org., B-228204.2, Jan. 7, 1988, 88-1 CPD Para. 10. Where, as here, a protester asserts that procurement officials acted in bad faith, the protester must submit evidence that the contracting officials had an intent to harm the protester, since contracting officials are presumed to act in good faith. Binghamton Simulator Co., Inc., B-244839, Nov. 5, 1991, 91-2 CPD Para. 429.

In its protest, Oliver asserts that based on the results of the two prior 1990 audits referenced above, the contract personnel involved in this procurement /4/ should have determined that despite the company's domestic end item certification, NJCT is not capable of furnishing a domestic end product. Since the record indicates that NJCT was nonetheless found to be responsible, Oliver asserts that contracting officials must have "intentionally disregarded" the 1990 audit report results in making the NJCT responsibility determination and therefore acted in bad faith. discussed below, we find no evidence of bad faith.

Price Negotiation Memorandum

On August 26, 1991, the contract specialist prepared a "Price Negotiation Memorandum" in which she stated:

"Contract DLA400-90-C-0877 -0877 was determined fair and reasonable based on competition between two manufacturers NJCT Corp. at $1,500 and Oliver Products at $1,524."

Contract No. -0877 was one of the NJCT contract awards which was audited for Buy American Act compliance in June 1990. Oliver contends that the price negotiation memorandum demonstrates the contract specialist's intentional disregard of the 1990 determination that NJCT was not offering a qualifying domestic end product, since-- according to Oliver-- it was "impossible" for the contract specialist to conclude that the competition was "fair and reasonable" in light of the 1990 audit results.

A price negotiation memorandum is an internal document prepared by contracting officials to demonstrate that a proposed awardee's offered price is fair and reasonable. See DFARS Sec. 215.808. Such price evaluation is a separate determination from an offeror's responsibility. Accordingly, in preparing this documentation, contracting personnel are only required to review an award's pricing history; here, the contract specialist asserts that she researched this award's pricing history by reviewing the item's national stock number (NSN) file which contains all prices submitted by all offerors on previous awards for this item. The NSN file does not contain responsibility documentation or any other performance-related findings by the agency. Since preparation of a price negotiation memorandum does not entail review of a contractor's responsibility, we fail to see how this document demonstrates that the contract specialist's ultimate affirmative determination of NJCT's responsibility was in bad faith.

Affirmative Determination of Responsibility

In making the determination that NJCT was a responsible contractor, the contract specialist took the following steps. First, she reviewed NJCT's Contractor General File (CGF). DLA maintains CGF files on every government contractor that the agency deals with; as a general rule, these files include pre-award surveys, delinquency reports, and other correspondence and records which document the contractor's capabilities, past performance, and financial resources. /5/ Upon reviewing the CGF file, the contract specialist then questioned the section's contract administrator about several delinquency notices contained in the file; in this regard, the contract specialist asserts that she was aware that at one time NJCT had been listed on the agency's internal list of "Top 100 Delinquent Contractors." The contract administrator informed the contract specialist that NJCT had corrected nearly all of these delinquencies; the contract administrator further advised the contract specialist that there was no reason not to make this award to NJCT.

Next, the contract specialist reviewed the General Services Administration's directory of debarred and suspended contractors and found that NJCT was not listed. The contract specialist also verified NJCT's financial capability by reviewing a Dun & Bradstreet financial report.

As a result of her investigation, the contract specialist prepared an affirmative "Determination of Responsibility" form for the contracting officer's signature. This form was signed by the contracting officer on September 5.

In its protest, Oliver asserts that the contract specialist's failure to conduct a pre-award survey prior to making her affirmative determination of responsibility constitutes evidence of a deliberate intent to disregard the 1990 audit results.

A pre-award survey involves an evaluation of a prospective contractor's capability to perform the proposed contract-- that is, the contractor's responsibility. See Federal Acquisition Regulation (FAR) Sec. 9.101. a matter pertaining to contractor responsibility, the contracting official has broad discretion as to whether a pre-award survey should be conducted; although a contracting official may request such a survey to help determine whether the proposed awardee is responsible, a pre-award survey is not a prerequisite to an affirmative determination of responsibility. Saratoga Indus., B-219341, Aug. 29, 1985, 85-2 CPD Para. 247. In this regard, an agency is not required to conduct such a survey if the information on hand or readily available is sufficient to allow the contracting officer to make a determination of responsibility. FAR Sec. 9.106-1(a).

Here, the record shows that the contract specialist's decision to waive a pre-award survey was based primarily on positive 1991 pre-award surveys for similar food machine items contained in the CGF file and the contract administrator's recommendation to select NJCT for award-- a reliable recommendation derived from active, current information that NJCT had cured most of its contract delinquencies and was otherwise considered to be a successfully performing contractor. Under these circumstances, we find that the contract specialist's decision to forgo a pre-award survey does not establish any impropriety on the agency's part. Automated Data Mgmt., B-234549, Mar. 2, 1989, 89-1 CPD Para. 229.

1990 Audit Results

In their affidavits, 501 both the contract specialist and the chief contracting officer admit that they were aware that some sort of investigation had taken place with regard to the 1990 NJCT awards. The record shows, however, that neither official ever inquired about the outcome of this investigation. /6/ Oliver contends that this failure to investigate the audit results constitutes bad faith.

Although the protester asserts that these contracting officials acted in bad faith, the facts simply do not establish that this is the case. discussed above, a finding of bad faith requires evidence that contracting officials had an intent to injure the protester. Inefficiency or negligence do not suffice to meet this standard. The Taylor Group, Inc., 70 Comp.Gen. 343 (1991), 91-1 CPD Para. 306; Harris Corp., RF Coms. Div., B-220387, Nov. 14, 1985, 85-2 CPD Para. 556.

The record here shows that the contract specialist's affirmative determination of responsibility was based on current performance assessments; specifically, the contract administrator's award recommendation and recent pre-award surveys. With regard to the 1990 audits of NJCT's prior contracts, the contracting officials' failure to ascertain the results of the audits does not rise to the level of bad faith since there is no evidence that they acted with an intent to harm Oliver or any other offeror. The Taylor Group, Inc., supra.

The contracting officials' failure to ascertain the results of the 1990 audits is relevant, however, to their obligation to investigate the awardee's Buy American Act certification. As a general rule, an agency should go beyond a firm's self-certification for Buy American Act purposes where the agency has reason to believe, prior to award, that a foreign end product will be furnished. Cryptek, Inc., B-241354, Feb. 4, 1991, 91-1 CPD Para. 111. In this case, because of their knowledge of the NJCT investigation, the contracting officials should not have relied on NJCT's Buy American Act certification as evidence that NJCT would furnish a domestic end item without inquiring into the 1990 audit results prior to award.

The record shows, however, that the agency conducted an interim pre delivery cost component audit of NJCT's bread slicing machine which confirmed that the item's domestic component costs exceeded 50 percent of its total component cost. /7/ Since the awardee's offered product constitutes a domestic end item, we find that Oliver was not prejudiced by the agency's failure to inquire into the 1990 audit results before making award to NJCT.

The protest is denied.

Thomas T. Kivell, Esq., Siebers & Kivell, P.C., for the protester.

Alan R. Yuspeh, Esq., Howrey & Simon, for NJCT Corporation, an interested party.

Philip F. Eckert, Jr., Esq., and Niketa L. Wharton, Esq., Defense Logistics Agency, for the agency.

Behn Miller, Esq., and Christine S. Melody, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision.

/1/ The solicitation was issued on June 12, 1991; based on initial proposals, Oliver and NJCT were the two low offerors with the same total overall price of $31,605. To break the tie, a request for best and final offers (BAFO) was issued on August 21; based on the BAFOs, NJCT was the low offeror with a revised price of $30,849. Award was made to NJCT on September 11.

/2/ Under DFARS Sec. 252.225-7001(a)(5), a domestic end product is defined as an "end product manufactured in the United States if the cost of its ... components ... which are mined, produced or manufactured in the United States exceeds 50 percent of the cost of all its components."

/3/ We considered this protest to be timely filed since the agency's December 16 response was the first time Oliver learned the basis for its bad faith claim.

/4/ In this case, the three procurement officials who were directly involved in the decision to award this contract to NJCT were the contract specialist, the contracting officer, and the chief contracting officer. The contract specialist prepared the solicitation documents, conducted the evaluation of proposals, and made the initial award and responsibility determinations. The contracting officer supervised the contract specialist and was responsible for signing all award documents. Because the contracting officer was absent on the day of award, the chief contracting officer-- who supervises the Refrigeration and Food Services Equipment Contracting Section-- signed the actual award document.

/5/ According to the agency, each contractor's CGF file is intended to serve as a source of information on a contractor's current and future capability or responsibility. In this regard, DLA informed us that each contractor's CGF file is reviewed annually during the first quarter of each fiscal year to remove obsolete and superseded documents. DLA provided NJCT's CGF file for our in camera review.

/6/ A second agency report addressing Oliver's bad faith protest was provided to this Office on January 29, 1992; on March 24, we requested and received-- by submission dated March 30-- affidavits from the contract specialist, the contracting officer, and the chief contracting officer.

/7/ According to the contract specialist, while she was aware of the 1990 protests and congressional inquiry, she "did not have any information regarding the response to those matters." The chief contracting officer asserts that although she knew that the audit was being conducted, she did not learn of the results until after Oliver had filed its September 19 protest. The record shows that the chief contracting officer was also the contracting officer for the 1990 procurements.

Additionally, DLA has informed this Office that prior to acceptance of NJCT's delivery of these items, the agency is going to inspect NJCT's manufacturing site and perform an audit of the actual bread slicing machine.