B-141070, OCT. 26, 1959

B-141070: Oct 26, 1959

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THE COMMODITY CREDIT CORPORATION MAKES AVAILABLE PRIME SUPPORT UPON COTTON THROUGH THE MEDIUM OF NON-RECOURSE LOANS TO THE PRODUCERS IN ORDER TO OBTAIN PRICE SUPPORT A PRODUCER IS REQUIRED TO STORE HIS COTTON IN A WAREHOUSE APPROVED BY THE COMMODITY CREDIT CORPORATION. THE WAREHOUSE RECEIPTS BECOME SECURITY FOR THE LOAN OR ARE DELIVERED UPON THE SALE OF THE COTTON. EACH LOAN AND PURCHASE FORM CONTAINS A STORAGE AGREEMENT REQUIRED TO BE SIGNED BY THE WAREHOUSEMAN STIPULATING THE TERMS AND CONDITIONS UNDER WHICH THE COTTON WILL BE STORED THROUGH THE END OF THE MARKETING YEAR. COTTON WHICH REMAINS UNREDEEMED IS TAKEN OVER BY THE COMMODITY CREDIT CORPORATION AND IF NOT RESOLD IS STORED UNDER A UNIFORM STORAGE AGREEMENT FOR COTTON BETWEEN THE COMMODITY CREDIT CORPORATION AND THE WAREHOUSEMAN.

B-141070, OCT. 26, 1959

TO THE SECRETARY OF AGRICULTURE:

WE REFER TO YOUR LETTER OF OCTOBER 22, 1959, REQUESTING OUR DECISION WITH RESPECT TO SPECIFIC QUESTIONS INDIVIDUALLY CONSIDERED BELOW DEALING WITH THE EFFECT OF A CERTIFICATE OF COMPETENCY ISSUED TO A WAREHOUSEMAN BY THE SMALL BUSINESS ADMINISTRATION ON A DETERMINATION AS TO THE ELIGIBILITY OF SUCH WAREHOUSEMAN TO ENTER INTO A STORAGE AGREEMENT.

UNDER THE AGRICULTURAL ACT OF 1959, AS AMENDED, THE COMMODITY CREDIT CORPORATION MAKES AVAILABLE PRIME SUPPORT UPON COTTON THROUGH THE MEDIUM OF NON-RECOURSE LOANS TO THE PRODUCERS IN ORDER TO OBTAIN PRICE SUPPORT A PRODUCER IS REQUIRED TO STORE HIS COTTON IN A WAREHOUSE APPROVED BY THE COMMODITY CREDIT CORPORATION. THE WAREHOUSE RECEIPTS BECOME SECURITY FOR THE LOAN OR ARE DELIVERED UPON THE SALE OF THE COTTON. EACH LOAN AND PURCHASE FORM CONTAINS A STORAGE AGREEMENT REQUIRED TO BE SIGNED BY THE WAREHOUSEMAN STIPULATING THE TERMS AND CONDITIONS UNDER WHICH THE COTTON WILL BE STORED THROUGH THE END OF THE MARKETING YEAR. AT THE CLOSE OF THE MARKETING YEAR, COTTON WHICH REMAINS UNREDEEMED IS TAKEN OVER BY THE COMMODITY CREDIT CORPORATION AND IF NOT RESOLD IS STORED UNDER A UNIFORM STORAGE AGREEMENT FOR COTTON BETWEEN THE COMMODITY CREDIT CORPORATION AND THE WAREHOUSEMAN.

WAREHOUSEMEN DESIRING THE APPROVAL OF THEIR FACILITIES NEEDED TO ESTABLISH ELIGIBILITY FOR PARTICIPATION IN THE PROGRAM ARE REQUIRED BY COMMODITY CREDIT CORPORATION ADMINISTRATIVE REGULATIONS TO MEET CERTAIN ESTABLISHED STANDARDS. AMONG THE REQUIREMENTS ARE THAT THE WAREHOUSEMAN SUBMIT A SURETY BOND EQUAL TO $5 PER BALE BASED ON THE MAXIMUM CAPACITY OF THE WAREHOUSE AND THAT THE WAREHOUSEMAN HAVE A MINIMUM NET WORTH OF $10,000. THE APPARENT PURPOSE OF THE STATED FINANCIAL REQUIREMENTS IS TO PROVIDE ASSURANCE THAT THE WAREHOUSEMAN HAS THE FINANCIAL RESOURCES NECESSARY TO FURNISH THE STORAGE SERVICES REQUIRED BY THE CONTRACT AND ALSO THAT HE HAS THE RESOURCES TO PROTECT THE COMMODITY CREDIT CORPORATION AGAINST LOSSES RESULTING FROM A BREACH OF THE STORAGE AGREEMENT.

SAMJO, INC., OF BAKERSFIELD, CALIFORNIA, HAS SUBMITTED A REQUEST FOR APPROVAL OF THE SMISER WAREHOUSE FOR STORAGE OF COMMODITY CREDIT CORPORATION COTTON. YOU STATE THAT AN AUDIT HAS BEEN MADE OF THE FIRM'S FINANCIAL POSITION IN CONNECTION WITH ITS APPLICATION TOGETHER WITH THAT OF ANOTHER CORPORATION UNDER THE SAME OWNERSHIP. IT IS STATED THAT THE FUNDS OF THE TWO CORPORATIONS ARE SO INTERMINGLED AS TO MAKE THEM FOR ALL PRACTICAL PURPOSES A SINGLE ENTITY. BASED ON THE AUDIT, YOU CONCLUDE THAT THE APPLICANT FIRM HAS A NEGATIVE NET WORTH AND, THEREFORE, DOES NOT MEET THE CRITERIA ESTABLISHED FOR APPROVAL BY THE COMMODITY CREDIT CORPORATION. HOWEVER, IT APPEARS THAT ON OCTOBER 15, 1959, THE SMALL BUSINESS ADMINISTRATION CERTIFIED SAMJO, INC., COMPETENT AS TO CAPACITY AND CREDIT TO PERFORM A CONTRACT FOR WAREHOUSING COTTON THROUGH JULY 31, 1960, UNDER A COMMODITY CREDIT CORPORATION STORAGE AGREEMENT.

YOU NOTE THAT THE COTTON IS NORMALLY STORED INITIALLY PURSUANT TO AN AGREEMENT BETWEEN THE WAREHOUSEMAN AND THE PRODUCER TO WHICH THE GOVERNMENT IS NOT A PARTY ALTHOUGH THE WAREHOUSEMAN IS, AS INDICATED PREVIOUSLY, REQUIRED TO MEET COMMODITY CREDIT CORPORATION ESTABLISHED STANDARDS IF THE PRODUCER IS TO BE ELIGIBLE FOR PARTICIPATION IN THE PROGRAM. HOWEVER, COTTON REMAINING IN STORAGE AT THE END OF THE MARKETING YEAR AND TO WHICH THE COMMODITY CREDIT CORPORATION HOLDS TITLE COMES WITHIN THE COVERAGE OF THE STORAGE AGREEMENT FOR COTTON TO WHICH THE COMMODITY CREDIT CORPORATION IS UNQUESTIONABLY A PARTY.

SECTION 8 (B) (7) OF PUBLIC LAW 85-536, APPROVED JULY 18, 1958, EMPOWERS THE SMALL BUSINESS ADMINISTRATION:

"/7) TO CERTIFY TO GOVERNMENT PROCUREMENT OFFICERS, * * *, WITH RESPECT TO THE COMPETENCY, AS TO CAPACITY AND CREDIT, OF ANY SMALL BUSINESS CONCERN * * * TO PERFORM A SPECIFIC GOVERNMENT CONTRACT. IN ANY CASE IN WHICH A SMALL-BUSINESS CONCERN * * * HAS BEEN CERTIFIED BY OR UNDER THE AUTHORITY OF THE ADMINISTRATION TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT AS TO A SPECIFIC GOVERNMENT CONTRACT, THE OFFICERS OF THE GOVERNMENT HAVING PROCUREMENT * * * POWERS ARE DIRECTED TO ACCEPT SUCH CERTIFICATION AS CONCLUSIVE, AND ARE AUTHORIZED TO LET SUCH GOVERNMENT CONTRACT TO SUCH CONCERN * * * WITHOUT REQUIRING IT TO MEET ANY OTHER REQUIREMENT WITH RESPECT TO CAPACITY AND CREDIT; * * *"

WE HAVE HELD WITH RESPECT TO THAT AUTHORITY THAT THE TERM "CAPACITY AND CREDIT" AS USED IN THE QUOTED SECTION CONSTITUTES A CERTIFICATION CONCLUSIVE UPON THE PROCURING AGENCY THAT THE PROSPECTIVE SMALL BUSINESS CONTRACTOR HAS THE OVERALL ABILITY TO MEET QUALITY, QUANTITY AND TIME REQUIREMENTS OF THE PROCUREMENT AS WELL AS HAVING THE NECESSARY CREDIT TO PERMIT ADEQUATE PERFORMANCE. B-139366, JUNE 24, 1959 (38 COMP. GEN. - ).

AS INDICATED ABOVE, THE INITIAL CONTRACT OF STORAGE IS BETWEEN THE PRODUCER AND THE WAREHOUSEMAN SO THAT THE CONTRACT CANNOT BE SAID TO DIRECTLY AFFECT THE GOVERNMENT PROCUREMENT. HOWEVER, UNLESS THE PROSPECTIVE WAREHOUSEMAN IS DETERMINED TO BE ELIGIBLE FOR PARTICIPATION IN THE PROGRAM PRIOR TO OR AT THE TIME SUCH AGREEMENTS WITH THE PRODUCERS ARE ENTERED INTO HE IS, AS A PRACTICAL MATTER, PRECLUDED FROM PARTICIPATING IN THE LATER STORAGE AGREEMENT FOR COTTON TO WHICH THE COMMODITY CREDIT CORPORATION IS A PARTY TO THE EXTENT THAT NO COTTON TO WHICH TITLE MAY BE TAKEN BY THE COMMODITY CREDIT CORPORATION IN THE END OF THE MARKETING YEAR WILL BE IN HIS WAREHOUSE. SHOULD THE STANDARDS FOR ELIGIBILITY UNDER THE PROGRAM BE REGARDED AS DISTINCT FROM ELIGIBILITY FOR CONTRACTING WITH THE COMMODITY CREDIT CORPORATION THE EFFECT WOULD BE TO RENDER THE CERTIFICATE OF COMPETENCY A PRACTICAL NULLITY. SINCE THE CLEAR PURPOSE OF THE QUOTED STATUTORY PROVISION IS TO ENABLE SMALL BUSINESSES TO PARTICIPATE IN GOVERNMENT PROCUREMENT EVEN THOUGH THEY MAY NOT BE ELIGIBLE FOR SUCH PARTICIPATION UNDER THE NORMAL CRITERIA RELATING TO CAPACITY AND CREDIT ESTABLISHED BY THE PROCURING AGENCY, PROVIDED THE SMALL BUSINESS ADMINISTRATION HAS DETERMINED THAT IN FACT THEY HAVE SUCH COMPETENCY AS HAVING APPLICATION TO THE PRELIMINARY APPROVAL LEADING TO THE CONTRACT WITH THE GOVERNMENT AGENCY INSOFAR AS IT RELATES TO CAPACITY AND CREDIT.

THE OBJECTIONS CITED ABOVE TO THE CERTIFICATION OF A WAREHOUSEMAN NOT MEETING THE MINIMUM NET WORTH REQUIREMENT RELATE PRIMARILY TO THE POSSIBILITY OF RECOVERY BY EITHER THE PRODUCER OR THE GOVERNMENT IN THE EVENT OF A BREACH OF THE WAREHOUSEMAN'S OBLIGATIONS UNDER ONE OF THE WAREHOUSING AGREEMENTS. IT APPEARS, HOWEVER, THAT ADEQUATE PROTECTION CAN BE OBTAINED AGAINST SUCH POSSIBLE BREACHES BY APPROPRIATE BONDS.

IN ACCORDANCE WITH THE FOREGOING YOUR SPECIFIC QUESTIONS ARE ANSWERED AS FOLLOWS:

1. THE CERTIFICATE OF COMPETENCY MUST BE REGARDED AS A CONCLUSIVE DETERMINATION AS TO THE FACTORS ENUMERATED ABOVE SO THAT THE RESPONSIBILITY OF THE PROSPECTIVE CONTRACTOR WITH RESPECT TO ITS ELIGIBILITY FOR THE CONTRACT MAY NOT BE QUESTIONED ON THE BASIS OF ITS INABILITY TO MEET THE NET WORTH REQUIREMENT.

2. THE ISSUANCE OF THE CERTIFICATE OF COMPETENCY REQUIRES ALSO THAT THE WAREHOUSEMAN MAY NOT BE KEPT OFF THE LIST OF APPROVED WAREHOUSES ON THE BASIS OF ITS FAILURE TO MEET THE NET WORTH REQUIREMENT.

3. THE ISSUANCE OF THE CERTIFICATE DOES NOT PRECLUDE THE DEPARTMENT FROM REQUIRING THE WAREHOUSEMAN TO FURNISH BONDS GUARANTEEING PERFORMANCE ON THE BASIS OF THE SAME STANDARDS APPLIED TO ALL OTHER PROSPECTIVE CONTRACTORS UNDER THE PROGRAM.

4. AS STATED PREVIOUSLY, THE ISSUANCE OF THE CERTIFICATE CONSTITUTES A CONCLUSIVE DETERMINATION THAT THE PROSPECTIVE CONTRACTOR NOT ONLY HAS THE NECESSARY CREDIT BUT ALSO THE OVERALL ABILITY TO MEET THE PERFORMANCE REQUIREMENTS OF THE CONTRACT. HOWEVER, WE THINK YOUR DEPARTMENT HAS A RIGHT TO MAKE ITS CUSTOMARY INSPECTION TO DETERMINE WHETHER THE FACILITY IS ACCEPTABLE IN ORDER TO MAKE SUCH REPRESENTATIONS AS MAY BE CONSIDERED WARRANTED TO THE SMALL BUSINESS ADMINISTRATION. OF COURSE, THE FINAL DETERMINATION BY SMALL BUSINESS ADMINISTRATION WOULD BE CONCLUSIVE.

5. THE CERTIFICATE UNDER ITS TERMS COVERS A CONTRACT EXTENDING THROUGH JULY 31, 1960. WE SEE NO BASIS FOR CONCLUDING THAT THE CERTIFICATE SHOULD BE VALID FOR ANY PERIOD BEYOND THAT SPECIFIED BY ITS TERMS.

Oct 29, 2020

Oct 28, 2020

Oct 27, 2020

  • Silver Investments, Inc.
    We dismiss the protest as untimely because it was filed more than 10 days after the protester knew, or should have known, the basis for its protest.
    B-419028

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