Matter of: Traffic Moving Systems, Inc. File: B-248572 Date: September 3, 1992
B-248572: Sep 3, 1992
Acted arbitrarily in proposing firm for debarment is denied where the record is devoid of any evidence of improper motives and is replete with evidence. To show that the agency's actions were reasonable. Contends that the rejection of its proposal based on the agency's determination that it is nonresponsible. Are the result of discriminatory conduct on the part of the agency in order to deprive the firm of a contract because it is wholly owned by United States citizens of Cuban descent. The agency determined that Traffic was capable of performing the relocation services based on a financial survey of the company and an investigation of its plant facilities. The contracting officer was advised by a Drug Enforcement Agency (DEA) representative that Traffic's president.
Matter of: Traffic Moving Systems, Inc. File: B-248572 Date: September 3, 1992
PROCUREMENT Contractor Qualification De facto debarment Non-responsible contractors Protester's allegation that agency, to avoid award to a minority-owned firm, acted arbitrarily in proposing firm for debarment is denied where the record is devoid of any evidence of improper motives and is replete with evidence, namely, the prior criminal convictions of the protester's president, to show that the agency's actions were reasonable.
Traffic Moving Systems, Inc. protests the rejection of its offer under solicitation No. 2FYG-JI-92-0001-N, issued by the General Services Administration (GSA) as a total small business set-aside for moving services in connection with the relocation of two offices of the Internal Revenue Service. Traffic, the low offeror, contends that the rejection of its proposal based on the agency's determination that it is nonresponsible, and the resulting proposed debarment of the firm, are the result of discriminatory conduct on the part of the agency in order to deprive the firm of a contract because it is wholly owned by United States citizens of Cuban descent.
We deny the protest.
Traffic submitted the lowest priced offer of the nine initial offers received and the lowest priced best and final offer (BAFO). The agency determined that Traffic was capable of performing the relocation services based on a financial survey of the company and an investigation of its plant facilities. However, during the agency's review of Traffic's responsibility, the contracting officer was advised by a Drug Enforcement Agency (DEA) representative that Traffic's president, Robert Sardina, had been convicted for several crimes involving stolen vehicles. The contracting officer determined that Mr. Sardina's criminal history indicated a lack of business integrity, which would render Traffic unsuitable to perform the work contemplated under the contract, namely, transporting confidential tax records. As a result, the contracting officer found Traffic nonresponsible, referred that determination to the Small Business Administration (SBA), and reported the matter--pursuant to GSA Acquisition Regulation Sec. 509.406-3(a)(1)  --to the GSA Office of the Inspector General for investigation of possible grounds for debarment.
On March 23, SBA notified GSA of its intention to issue a certificate of competency to Traffic. While GSA's appeal of this decision was pending at SBA, a notice of proposed debarment was issued to Traffic on April 15;  Traffic's offer was rejected on the same date.  The agency made award to G&A Moving and Storage, the second low offeror, on April 16. On May 4, Traffic filed its protest with our Office. The work called for under the contract was completed on or about May 16.
Traffic alleges bad faith on the part of GSA, arguing that the nonresponsibility finding and subsequent proposed debarment demonstrates a continuing course of discriminatory conduct on the part of the agency in order to deprive the firm of the contract at issue. To show bad faith, the protester must establish that the agency officials acted intentionally to injure the protester. See Oliver Prods. Co., B-245762.2, Apr. 28, 1992, 92-1 CPD Para. 501. We have reviewed the record here and we find no evidence to suggest that the agency's actions were other than proper. 
According to the protester, the contracting officer's determination that the protester lacked business integrity was motivated by prejudice toward the protester. The protester argues that the prior criminal record of its president has no bearing on the firm's business integrity since the president is merely a minority shareholder and the protester has performed more than 100 government contracts to transport confidential and sensitive materials with various federal, state, and local government agencies without complaint or "claim that the company has not acted honestly."
Our Office will consider protests of allegedly improper suspensions and debarments occurring during the pendency of an award decision to ensure that the contracting agency is not acting arbitrarily to avoid making award to a firm which is otherwise entitled to award and also to ensure that minimal due process standards have been met.  Far West Meats, 68 Comp.Gen. 488 (1989), 89-1 CPD Para. 547. Our review is limited to a consideration of whether the agency has put forth sufficient evidence to show the reasonableness of its decision not to make award to the firm and whether it has followed proper procedures in proposing the firm for debarment; our Office is not the appropriate forum to consider the weight or sufficiency of evidence for purpose of the ultimate debarment decision. Id.
Applying these standards, we conclude that the record does not show that the agency's decision to propose Traffic for debarment was made either arbitrarily or in bad faith in order to avoid making award to the protester. To the contrary, we conclude that there is sufficient evidence to support GSA's decision to propose the firm for debarment.
FAR Sec. 9.406-2, entitled "Causes for debarment," provides that a debarring official may debar a contractor for a conviction for commission of theft or any other offense indicating a lack of business integrity or business honesty that seriously and directly affects its present responsibility. Based on the record before us, the agency had ample evidence to question Traffic's business integrity. Mr. Sardina's criminal record shows that he was convicted on February 11, 1986, on 12 criminal counts, including conspiracy to transport stolen vehicles, possession of a stolen vehicle, knowingly altering a motor vehicle identification number on a stolen vehicle, and knowingly transporting a stolen vehicle. The record also shows, and the protester does not refute, that Mr. Sardina allowed the warehouse and equipment of his moving company (formerly known as A and B Sardina Moving and Storage) to be used for this criminal activity.
Further, the record shows that the United States Attorney for the District of New Jersey requested that Mr. Sardina receive a substantial period of incarceration because he believed that Mr. Sardina had committed other crimes for which he was not prosecuted that were relevant in determining an appropriate sentence. For example, Mr. Sardina was accused of attempting to obstruct justice on the basis that Mr. Sardina had inquired on three separate occasions from three different individuals how much it would cost to eliminate one of the government's key witnesses. Mr. Sardina was also accused of other crimes that took place at his place of business, namely, drug distribution and credit card fraud.
In light of the fact that Mr. Sardina's convictions clearly suggest that he at one time lacked integrity (which includes probity, honesty, and uprightness, 48 Comp.Gen. 769 (1969)) and the fact that Mr. Sardina used his place of business to further his criminal enterprise, we conclude that there is sufficient evidence in the record to support the proposed debarment action. Traffic's allegation that it successfully performed several government contracts in the past does not detract from the sufficiency of the evidence for the proposed debarment; rather, it is a mitigating factor and, as such, goes to the sufficiency and the weight of evidence for purposes of the ultimate debarment decision, which is outside the scope of our protest jurisdiction.
We also find unpersuasive Traffic's argument that Mr. Sardina's purported lack of integrity should not be imputed to the corporation because, according to Traffic, Mr. Sardina is merely a minority shareholder in the corporation. While a corporation is generally viewed as separate and distinct from the stockholders, it can operate only through the individuals who, as officers, directors, or stockholders, control the activities, policies, and management of the corporation; the integrity of a corporation can be no greater than the integrity of the individuals who control its operation. Id. As discussed above, Mr. Sardina is the president of Traffic and it reasonably follows that any lack of integrity on the part of Mr. Sardina could be imputed to the corporation, since as president of the corporation he could be expected to have a major voice in its management and operation. Id. Moreover, despite Traffic's argument that his role as a minority shareholder shows a limited capacity to control the corporation, the record demonstrates that Mr. Sardina has substantial control over the corporation. In this regard, Mr. Sardina was listed as the chief executive officer of the corporation in a Dun and Bradstreet report; he is listed as the individual transacting business under the name of Traffic in a business certificate filed with the state of New York; and he also signed the proposal that Traffic submitted in response to this procurement. With regard to the fact that Mr. Sardina was authorized to sign bids, it is reasonable to believe that a person who is entrusted with the power to bind a contractor to perform under a contract is substantially involved with the corporation. See TS Generalbau GmbH; Thomas Stadlbauer, B-246034 et al., Feb. 14, 1992, 92-1 CPD Para. 189, citing Caiola v. Carroll, 851 F.2d 395 (D.C. Cir. 1988). Further, his role as one shareholder of the two the corporation has also shows--contrary to the protester's suggestion--that he has influence over the company's activities. As a result, the agency properly imputed Mr. Sardina's alleged lack of integrity to the corporation.
As for the procedural aspects of the proposed debarment, Traffic has not alleged that it was not afforded due process and there is no evidence in the record that the agency failed to follow proper procedures.
Consequently, since the record is devoid of any evidence to suggest that Traffic's proposed debarment resulted from GSA's discrimination against it based on its minority-owned status, and the record is replete with evidence that the president of Traffic actively used the business to further a criminal enterprise, we cannot conclude that GSA acted unreasonably in finding Traffic nonresponsible and proposing the firm for debarment.
The protest is denied.
1. The regulation requires that any element of GSA, acting as a contracting activity, that becomes aware of circumstances which may serve as the basis for a debarment shall refer the matter to the debarring official for consideration; circumstances that involve possible criminal or fraudulent activities must first be reported to the Office of the Inspector General. If appropriate, the Inspector General is to refer the matter to the debarring official.
2. The debarring official has not yet decided whether or not to debar Traffic.
3. As a result of Traffic's proposed debarment, the SBA discontinued its review of GSA's appeal.
4. In addition to the nonresponsibility finding and proposed debarment, the protester, in support of its bad faith claim, asserts that the only reason the contracting officer requested BAFOs from the offerors was to avoid making award to the protester, a minority-owned firm, and to "engineer" the award to a non-minority owned company. We see nothing in the record to suggest that the agency's request for BAFOs was improperly motivated. To the contrary, the agency was required to request BAFOs because the solicitation did not contain the provision at FAR Sec. 52.215-16, which states that the government may award a contract on the basis of initial offers received, without discussions.
5. Although GSA initially found Traffic nonresponsible, the ultimate rejection of Traffic's proposal was based on the fact that the firm had been proposed for debarment. See FAR Sec. 9.405(a). Since the proposed debarment thus superseded the contracting officer's nonresponsibility determination as the basis for rejection of Traffic's proposal, our review focuses on GSA's decision to propose the firm for debarment. We have, however, considered the protester's objection to GSA's nonresponsibility determination as part of the protester's argument that GSA engaged in a pattern of bad faith conduct culminating in the rejection of its proposal.