B-162187, NOV. 29, 1967

B-162187, NOV. 29, 1967

BIDDERS - RESPONSIBILITY - TWO FIRMS DECISION TO RMF, INC., SECOND LOW BIDDER, DENYING PROTEST AGAINST AWARD TO THE BORACA CORP., THIRD LOW BIDDER, UNDER READVERTISED PROCUREMENT FOR 758 AERO 20A-1 EJECTOR BOMB RACKS AND PARTS FOR NAVY UNDER 100 PERCENT SMALL BUSINESS SET ASIDE PROCUREMENT. TWO BIDS WHICH WERE SUBMITTED BY COMPANIES SUBSTANTIALLY CONTROLLED BY THE SAME FAMILY AND SIGNED BY SAME INDIVIDUAL IN HIS CAPACITY AS PRESIDENT OF BOTH FIRMS DO NOT REQUIRE REJECTION AND WHERE ONE OF FIRMS WAS DETERMINED TO BE LOWEST RESPONSIBLE, RESPONSIVE BIDDER AFTER PREAWARD SURVEY, AND RECORD DOES NOT INDICATE ANY VIOLATION OF INTEGRITY OF COMPETITIVE BIDDING SYSTEM OR ANY PREJUDICE TO BIDDERS AWARD WILL NOT BE QUESTIONED. SEE 39 COMP. GEN. 892.

TO RMF, INC.:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 8, 1967, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE AWARD OF A CONTRACT TO THE BORACA CORP. (BORACA) BY THE UNITED STATES NAVY, NAVAL AIR SYSTEMS COMMAND, UNDER REISSUED INVITATION FOR BIDS NO. N00019-67-B-0224. THE FIRST INVITATION WAS ISSUED ON JANUARY 19, 1967, AND ADMINISTRATIVELY CANCELLED, AFTER BID OPENING, ON FEBRUARY 28, 1967, BECAUSE IT HAD NOT BEEN PROPERLY PUBLICIZED IN ACCORDANCE WITH THE APPLICABLE RULES AND REGULATIONS GOVERNING PROCUREMENT BY FORMAL ADVERTISING. OUR OFFICE DID NOT OBJECT TO THE CANCELLATION OF THE FIRST INVITATION AND THE ISSUANCE OF THE PRESENT INVITATION FOR THE REASONS SET FORTH IN OUR DECISION B-160975, MARCH 28, 1967, COPY HEREWITH. THE PRESENT INVITATION ISSUED ON MARCH 6, 1967, REQUESTED BIDS ON A 100-PERCENT SMALL BUSINESS SET-ASIDE BASIS FOR THE PURCHASE OF 758 AERO 20A-1 EJECTOR BOMB RACKS AND SPARE PARTS, WITH A PROVISION FOR THE OPTIONAL PURCHASE OF 233 ADDITIONAL UNITS.

FOUR BIDS WERE SUBMITTED IN RESPONSE TO THE INVITATION FROM FIRMS, AND IN THE AMOUNTS, INDICATED BELOW:

BIDDER BID PER UNIT TOTAL CONTRACT PRICE LINOCHINE PRODUCTS CORP.

$ 998.00 $ 758,480.00 RMF, INC. 1,096.85

831,412.30 THE BORACA CORP. 1,234.00935,372.00 STANDARD ARMAMENT 1,343.00 1,017,994.00

PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-904.1 AND 1- 906, THE CONTRACTING OFFICER AFTER BID OPENING REQUESTED THAT A PREAWARD SURVEY BE CONDUCTED ON THE LOW RESPONSIVE BIDDER, LINOCHINE PRODUCTS (LINOCHINE), AND ITS INDICATED SUBCONTRACTOR, BORACA, IN ORDER TO DETERMINE IF LINOCHINE WAS A RESPONSIBLE BIDDER FOR PURPOSES OF THE SUBJECT PROCUREMENT UNDER THE GUIDELINES SET FORTH AT ASPR 1 902.

IT IS REPORTED THAT THE PREAWARD SURVEY DATED MAY 19, 1967, CONCLUDED THAT LINOCHINE DID NOT POSSESS ADEQUATE FINANCIAL RESOURCES TO SUPPORT THE CONTRACT, AND THAT ITS FACILITY LOCATED IN BROOKLYN, NEW YORK,"WAS NOT ADEQUATELY STAFFED OR EQUIPPED FOR THE MANUFACTURE OR ASSEMBLY OF THE BOMB RACKS CONTEMPLATED BY THIS PROCUREMENT.' IT WAS THEREFORE RECOMMENDED THAT AWARD NOT BE MADE TO LINOCHINE. IT SHOULD BE NOTED, HOWEVER, THAT THE SAME PREAWARD SURVEY APPROVED THE BORACA FACILITIES, LOCATED AT TO A ALTA, PUERTO RICO, AS QUALIFIED TO PERFORM AS A SUBCONTRACTOR UNDER THE SUBJECT PROCUREMENT.

PURSUANT TO THE FOREGOING RECOMMENDATION, THE CONTRACTING OFFICER PROPOSED TO REJECT THE LINOCHINE BID ON THE BASIS THAT THE BIDDER DID NOT POSSESS THE REQUISITE CAPACITY OR CREDIT TO PERFORM THE SUBJECT CONTRACT. ON MAY 29, 1967, IN ACCORDANCE WITH ASPR 1-705.4, THE MATTER WAS SUBMITTED TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR CONSIDERATION WHETHER A CERTIFICATE OF COMPETENCY SHOULD BE ISSUED ON BEHALF OF LINOCHINE. JUNE 26, 1967, SBA ADVISED THE CONTRACTING OFFICER THAT LINOCHINE HAD FAILED TO TIMELY APPLY FOR A CERTIFICATE OF COMPETENCY AND THAT THEREFORE THE CASE WAS CLOSED.

RMF, INC., ALSO WAS RULED INELIGIBLE FOR AWARD BECAUSE, AS INDICATED ABOVE, THE PROCUREMENT INVOLVED A 100-PERCENT SMALL BUSINESS SET ASIDE, AND SBA HAD DETERMINED ON JUNE 8, 1967, THAT FOR THE PURPOSE OF THE PRESENT PROCUREMENT RMF, INC., WAS OTHER THAN A SMALL BUSINESS CONCERN. THE SBA RULING RELATIVE TO THE SIZE OF RMF, INC., HAD BEEN REQUESTED ON MAY 23, 1967, UNDER THE AUTHORITY OF ASPR 1-703 (B) (2), WHICH PROVIDES THAT A CONTRACTING OFFICER MAY QUESTION THE SMALL BUSINESS STATUS OF AN APPARENTLY SUCCESSFUL BIDDER ANY TIME PRIOR TO AWARD. EVEN THOUGH RMF, NC., WAS NOT THE APPARENTLY SUCCESSFUL BIDDER AT THE TIME THE CONTRACTING OFFICER QUESTIONED ITS SMALL BUSINESS STATUS, WE ARE NOT AWARE OF ANY PREJUDICE OR BIAS WHICH RESULTED FROM THE EARLY DETERMINATION.

BECAUSE THE BIDS OF THE TWO LOWEST BIDDERS HAD BEEN ADMINISTRATIVELY REJECTED, THE THIRD LOW BIDDER, BORACA, ON JUNE 29, 1967, PROTESTED THE ANTICIPATED AWARD OF THE CONTRACT TO THE FOURTH LOW BIDDER ON THE GROUNDS THAT THE BORACA FACILITIES HAD NOT BEEN SURVEYED OR OTHERWISE EVALUATED BY THE CONTRACTING OFFICER TO DETERMINE IF IT WAS A RESPONSIBLE BIDDER WITHIN THE TERMS OF THE SUBJECT PROCUREMENT. IN VIEW THEREOF, AND BECAUSE IT APPEARED THAT BORACA WAS THE LOW RESPONSIVE BIDDER, THE CONTRACTING OFFICER REQUESTED A SECOND PREAWARD SURVEY ON BORACA TO DETERMINE IF IT POSSESSED THE REQUISITE CAPACITY AND CREDIT TO PERFORM THE PRIME CONTRACT. THE SECOND PREAWARD SURVEY, DATED JULY 19, 1967, CONCLUDED THAT BORACA WAS A RESPONSIBLE BIDDER AND RECOMMENDED THAT A COMPLETE AWARD BE MADE TO IT. PREDICATED UPON THE FOREGOING, THE CONTRACT WAS AWARDED TO BORACA ON JULY 24, 1967.

YOUR LETTER OF AUGUST 8, 1967, CONTENDED THAT THE AWARD TO BORACA WAS IMPROPER, AND NOT IN THE BEST INTERESTS OF THE GOVERNMENT, ON THE GROUNDS THAT LINOCHINE AND BORACA HAD CONTRIVED TO "RIG" THEIR BIDS SUBMITTED IN RESPONSE TO THE SUBJECT INVITATION.

IN SUPPORT THEREOF YOU ALLEGED THAT BOTH COMPANIES ARE DOMINANTLY CONTROLLED AND MANAGED BY THE SAME FAMILY, AND THE CONCEPT OF ONE PERSON SUBMITTING TWO SEPARATE BIDS IN THE NAME OF DIFFERENT COMPANIES IS IN VIOLATION OF THE REGULATIONS AND LAWS GOVERNING PROCUREMENT BY FORMAL ADVERTISING. YOU POINTED OUT, FURTHER, THAT THE TWO COMPANIES IN QUESTION HAD ENJOYED A CLOSE CONTRACTUAL RELATIONSHIP FOR SEVERAL YEARS BY EITHER SUBCONTRACTING PORTIONS OF PRIME GOVERNMENT CONTRACTS TO EACH OTHER--AS LINOCHINE HAD CONTEMPLATED IN THE PRESENT CASE--OR BY ONE COMPANY ACTING AS A SALES AGENT FOR THE OTHER. SEE, IN THIS REGARD, B-160975, SUPRA.

YOUR LETTER DOES NOT STATE WHICH ASPR PROVISION OR LAW WAS VIOLATED BY THE SUBMISSION OF BIDS BY LINOCHINE AND BORACA AND OUR OFFICE IS UNAWARE OF ANY ASPR PROVISION WHICH WOULD MAKE BIDS SUBMITTED BY TWO COMPANIES WHICH ARE FAMILY-OWNED NONRESPONSIVE BY REASON OF THAT CIRCUMSTANCE ALONE. IT IS ASSUMED, HOWEVER, THAT YOUR PROTEST HAS REFERENCE TO ASPR 1- 111.2 RELATING TO NONCOMPETITIVE PRACTICES. UNDER THAT PROVISION, CONTRACTING OFFICERS ARE REQUIRED TO REPORT PRACTICES, IN ACCORDANCE WITH DEPARTMENTAL PROCEDURES, WHICH ARE DESIGNED TO ELIMINATE COMPETITION OR RESTRAIN TRADE WHICH MAY EVIDENCE POSSIBLE VIOLATIONS OF SUCH LAWS. EXAMPLES OF SUCH PRACTICES SET FORTH IN THE CITED SECTION OF ASPR ARE COLLUSIVE BIDDING, FOLLOW-THE- LEADER PRICING, ROTATED LOW BIDS, UNIFORM ESTIMATING SYSTEMS, SHARING OF THE BUSINESS, IDENTICAL BIDS, ETC.

THE PROCUREMENT AGENCY HAS CONFIRMED YOUR STATEMENT THAT MR. S. J. FEUER IS PRESIDENT OF BOTH LINOCHINE AND BORACA, AND THAT MR. AND MRS. S. J. FEUER ARE DIRECTORS AND DOMINANT STOCKHOLDERS OF BOTH COMPANIES. FURTHER, THE ADMINISTRATIVE FILE MADE AVAILABLE TO OUR OFFICE BY THE PROCUREMENT AGENCY INDICATED THAT MR. S. J. FEUER SIGNED THE BIDS OF BOTH LINOCHINE AND BORACA IN HIS CAPACITY OF PRESIDENT.

IN OUR DECISION AT 39 COMP. GEN. 892, WE TOOK COGNIZANCE OF THE FACT THAT IT IS NOT UNUSUAL FOR BIDS TO BE RECEIVED FROM A PARENT CORPORATION AND ONE OF ITS SUBSIDIARIES UNDER THE SAME INVITATION, AND THAT AN INDIVIDUAL MIGHT HAVE LEGITIMATE REASONS FOR SUBMITTING BIDS OF TWO OR MORE COMPANIES WHICH HE OWNS OR CONTROLS. WE HELD IN THAT CASE, QUOTING FROM THE SYLLABUS, IN PERTINENT PART AS FOLLOWS: "MULTIPLE BIDS SUBMITTED BY ONE INDIVIDUAL ON BEHALF OF TWO OR MORE COMPANIES OR BY TWO OR MORE AFFILIATED COMPANIES DO NOT HAVE TO BE REJECTED WHEN SUCH BIDS ARE NOT SUBMITTED FOR THE PURPOSE OF CIRCUMVENTING A LAW * * * FOR GAINING AN UNFAIR ADVANTAGE IN CASE OF AWARDS BY DRAWING LOTS, OR FOR ANY OTHER PURPOSE WHICH WOULD BE PREJUDICIAL TO THE UNITED STATES OR TO OTHER BIDDERS. 14 COMP. GEN. 168, MODIFIED.'

IT IS ADMINISTRATIVELY REPORTED THAT THERE IS NO EVIDENCE THAT EITHER THE GOVERNMENT OR THE OTHER BIDDERS WERE PREJUDICED BECAUSE BOTH BORACA AND LINOCHINE SUBMITTED COMPETING BIDS ON THE SUBJECT PROCUREMENT OR BECAUSE THE TWO BIDS WERE SUBMITTED IN AN ATTEMPT TO CIRCUMVENT STATUTORY OR REGULATORY REQUIREMENTS. THUS, WHILE WE RECOGNIZE IN PRINCIPLE THAT THE PRACTICE OF MULTIPLE BIDDING HAS INHERENTLY OBJECTIONABLE FEATURES WHICH REQUIRE CLOSE SCRUTINY OF ALL THE SURROUNDING CIRCUMSTANCES, IT IS OUR FURTHER VIEW THAT ANY UNDESIRABLE ASPECTS CAN BE CONTROLLED, AS APPEARS FROM THE RECORD TO HAVE BEEN DONE IN THE PRESENT CASE, BY CONDUCTING EFFICIENT PREAWARD SURVEYS AND BY MAKING AN AWARD TO THE LOWEST RESPONSIBLE BIDDER.

IN ANY EVENT, THE PROCURING AGENCY IS GENERALLY REQUIRED TO ACCEPT THE LOWEST RESPONSIVE BID SUBMITTED BY A RESPONSIBLE BIDDER. 10 U.S.C. 2305. THEREFORE, WE MAY CONCLUDE THAT WHERE THE CONSIDERATION OF BIDS SUBMITTED FOR LEGITIMATE BUSINESS REASONS BY AN INDIVIDUAL THROUGH TWO OWNED OR CONTROLLED COMPANIES WILL NOT PREJUDICE THE GOVERNMENT OR AFFORD EITHER COMPANY AN ADVANTAGE NOT ENJOYED BY OTHER BIDDERS, WE WILL TAKE NO EXCEPTION TO THE AWARD OF A CONTRACT TO EITHER COMPANY, PROVIDED THAT THE COMPANY HAS BEEN AFFIRMATIVELY DETERMINED TO BE THE RESPONSIBLE BIDDER WHICH SUBMITTED THE LOW RESPONSIVE BID, AS IN THE PRESENT CASE.

SINCE THE RECORD BEFORE US REVEALS NO EVIDENCE TO INDICATE THAT THE BIDS SUBMITTED BY LINOCHINE AND BORACA VIOLATED THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM, OR THAT THE AWARD TO BORACA WAS PREJUDICIAL TO ANY OTHER BIDDER, YOUR PROTEST IS DENIED.