B-158618, APR. 15, 1966

B-158618, APR. 15, 1966

TO ELECTRONIC INDUSTRIES, INCORPORATED:

REFERENCE IS MADE TO YOUR TWO TELEGRAMS OF FEBRUARY 28, 1966, AND LETTER DATED MARCH 12, 1966, PROTESTING AWARD OF CONTRACT NO. N104 12921A TO A FIRM OTHER THAN YOURS BY THE UNITED STATES NAVY, SHIPS PARTS CONTROL CENTER (SPCC), UNDER INVITATION FOR BIDS NO. 104-918-66 ISSUED JANUARY 10, 1966. THE INVITATION CALLED FOR BIDS ON A MULTI YEAR PROCUREMENT OF 4,950,000 LEADS, ELECTRICAL, LIVE, FOR USE IN THE 2.75 INCH ROCKET, WITH SCHEDULED DELIVERY OF 1,023,000; 1,035,000; AND 2,882,500 UNITS IN EACH OF THE THREE PROGRAM YEARS.

AN ABSTRACT OF THE TEN BIDS RECEIVED IN RESPONSE TO THE INVITATION SHOWS THAT THE ELECTRONIC INDUSTRIES, INCORPORATED (EII) BID OF $0.14 PER UNIT WAS LOWEST, AND ITT-TERRYPHONE CORPORATION'S (ITT) BID OF $0.158 WAS SECOND LOWEST.

ON FEBRUARY 24, 1966, YOU WERE INFORMED THAT THE CONTRACT HAD BEEN AWARDED TO ITT, BASED ON THE CONTRACTING OFFICER'S DETERMINATION THAT EII WAS NOT A RESPONSIBLE BIDDER UNDER STANDARDS OF EVALUATION PRESCRIBED BY ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-903 (II) AND (III), DUE TO EII'S REPORTED LACK OF TENACITY AND PERSEVERANCE IN THE PERFORMANCE OF ITS CONTRACTS WITH THE GOVERNMENT.

APPLICABLE PORTIONS OF THE ASPR READ AS FOLLOWS:

"1-902 GENERAL POLICY

" * * * THE AWARD OF A CONTRACT TO A SUPPLIER BASED ON LOWEST EVALUATED PRICE ALONE CAN BE FALSE ECONOMY IF THERE IS SUBSEQUENT DEFAULT, LATE DELIVERIES, OR OTHER UNSATISFACTORY PERFORMANCE RESULTING IN ADDITIONAL PROCUREMENT OR ADMINISTRATIVE COSTS. WHILE IT IS IMPORTANT THAT GOVERNMENT PURCHASES BE MADE AT THE LOWEST PRICE, THIS DOES NOT REQUIRE AN AWARD TO A MARGINAL SUPPLIER SOLELY BECAUSE HE SUBMITS THE LOWEST BID OR OFFER. A PROSPECTIVE CONTRACTOR MUST DEMONSTRATE AFFIRMATIVELY HIS RESPONSIBILITY, * * *.

"1-903.1 GENERAL STANDARDS. EXCEPT AS OTHERWISE PROVIDED IN THIS PARAGRAPH 1-903, A PROSPECTIVE CONTRACTOR MUST:

"/II) BE ABLE TO COMPLY WITH THE REQUIRED OR PROPOSED DELIVERY OR PERFORMANCE SCHEDULE, TAKING INTO CONSIDERATION ALL EXISTING BUSINESS COMMITMENTS, COMMERCIAL AS WELL AS GOVERNMENTAL.

"/III) HAVE A SATISFACTORY RECORD OF PERFORMANCE (CONTRACTORS WHO ARE SERIOUSLY DEFICIENT IN CURRENT CONTRACT PERFORMANCE, WHEN THE NUMBER OF CONTRACTS AND THE EXTENT OF DEFICIENCY OF EACH ARE CONSIDERED, SHALL, IN THE ABSENCE OF EVIDENCE TO THE CONTRARY OR CIRCUMSTANCES PROPERLY BEYOND THE CONTROL OF THE CONTRACTOR, BE PRESUMED TO BE UNABLE TO MEET THIS REQUIREMENT). PAST UNSATISFACTORY PERFORMANCE, DUE TO FAILURE TO APPLY NECESSARY TENACITY OR PERSEVERANCE TO DO AN ACCEPTABLE JOB, SHALL BE SUFFICIENT TO JUSTIFY A FINDING OF NONRESPONSIBILITY * * *.'

AT THE TIME IFB NO. 104-918-66 WAS OPENED ON FEBRUARY 1, 1966, THE CONTRACTING OFFICER WAS IN THE PROCESS OF EVALUATING BIDS RECEIVED IN RESPONSE TO A PRIOR INVITATION (OPENED JANUARY 6, 1966) ON WHICH YOU WERE THE LOW BIDDER. DCASR-DALLAS HAD COMPLETED A PRE-AWARD SURVEY (DCRT 66-1- 34, DATED JANUARY 21, 1966) IN REFERENCE TO THAT INVITATION, PURSUANT TO ASPR 1-904.1 FOR THE EXPRESS PURPOSE OF ASCERTAINING EII'S OVERALL PERFORMANCE RECORD AND ABILITY TO MANUFACTURE AND DELIVER THE ARTICLES IN ACCORDANCE WITH THE SPECIFICATIONS AND DELIVERY REQUIREMENTS. THE PRE- AWARD SURVEY CONCLUDED WITH THE RECOMMENDATION THAT EII NOT BE AWARDED THE CONTRACT BECAUSE OF A SUBSTANTIAL HISTORY OF CONTRACT DELINQUENCIES, DUE TO AN INSUFFICIENT PRODUCTION CONTROL SYSTEM WHICH LACKED ELEMENTS FOR THE CONTROL OF TIMELY RECEIPT OF MATERIALS AND COMPONENTS TO SUPPORT PRODUCTION AND DELIVERY SCHEDULES.

A SECOND PRE-AWARD SURVEY (DCRT 66-2-45, DATED FEBRUARY 25, 1966), REQUESTED IN REFERENCE TO YET ANOTHER INVITATION UNDER WHICH EII WAS ALSO THE LOW BIDDER, FURTHER SUBSTANTIATED THE FINDINGS OF THE PRIOR REPORT, AND READS IN PART AS FOLLOWS:

"PERFORMANCE RECORD: BIDDER'S PERFORMANCE RECORD IS UNSATISFACTORY. THIS IS BASED UPON A HIGH DELINQUENCY FACTOR RELATIVE TO CONTRACTS CURRENTLY IN PROCESS IN BIDDER'S PLANT. BIDDER PRESENTLY HOLDS 87 CONTRACTS OF WHICH 34 ARE DELINQUENT, A DELINQUENCY FACTOR OF 39 PERCENT. PRINCIPAL CAUSES OF DELINQUENCIES ARE MATERIAL VENDORS' OR SUBCONTRACTORS' FAILURES TO SUPPORT BIDDER'S EFFORT. AT THIS TIME 16 "SHOW CAUSE" LETTERS HAVE BEEN ISSUED WITH MORE CONTEMPLATED. THIS CONDITION IS FURTHER COMPOUNDED BY BIDDER'S FAILURE TO RECOGNIZE POTENTIAL PROBLEMS AND INITIATE TIMELY, EFFECTIVE CORRECTIVE ACTION.

"ALL OF THE FOREGOING IS PROOF OF A COMPLETE COLLAPSE OF BIDDER'S PRODUCTION CONTROL AND TOTAL LACK OF MANAGERIAL CAPABILITY. IN VIEW OF THIS SITUATION, BIDDER'S BUSINESS PRACTICES ARE DEEMED UNSATISFACTORY SINCE HE HAS DEMONSTRATED A DEFINITE LACK OF TENACITY AND PERSEVERANCE IN THE PURSUIT OF HIS CONTRACTUAL OBLIGATIONS.'

THE SAME PRE-AWARD SURVEY ALSO REPORTED AS FOLLOWS:

"FINANCIAL CAPABILITY: BIDDER'S FINANCIAL POSITION HAS SERIOUSLY DETERIORATED. HE CONTINUES TO INCUR LOSSES FROM OPERATIONS AND FINANCIAL REPORTS INDICATE AN INCREASING DEFICIT POSITION REGARDING WORKING CAPITAL AND NET WORTH. THE TREND IS TOWARD INCREASING INDEBTEDNESS AND IF NOT REVERSED, THERE IS NO ASSURANCE BIDDER CAN REMAIN IN BUSINESS LONG ENOUGH TO COMPLETE THE PROPOSED CONTRACT IF IT WERE AWARDED.'

YOUR REQUEST FOR CANCELLATION OF THE CONTRACT WITH ITT AND SUBSEQUENT AWARD TO EII IS APPARENTLY PREDICATED UPON THE CONTENTION THAT THESE ABOVE -QUOTED REPORTS, SUBMITTED TO SPCC BY DCASO-ALBUQUERQUE AND DCASR DALLAS,"WERE NOT FACTUAL, NOT UP-TO-DATE, AND PRESENTED A DISTORTED PICTURE OF THE CONDITIONS AT THE TIME.' IN SUPPORT OF YOUR POSITION YOU HAVE CITED THE FOLLOWING FACTS IN YOUR LETTER OF MARCH 12, 1966:

" * * * IN THE PERIOD OF SEVEN DAYS, DCASO-ALBUQUERQUE REPORTED TO SHIPS PARTS CONTROL CENTER THAT ELECTRONIC INDUSTRIES, INC. HAD 57 CONTRACTS, THEN LATER REPORTED 71, AND THEN LATER REPORTED 51 TO ITS OWN HEADQUARTERS ORGANIZATION. AGAIN, AS OF THAT DATE, ELECTRONIC INDUSTRIES, INC.'S TOTAL CONTRACTS NUMBERED 61.

"HOWEVER, THERE IS ONE CATEGORY IN WHICH ELECTRONIC INDUSTRIES, INC. WILL AGREE WITH DCASO-ALBUQUERQUE AND THAT IS THE TOTAL NUMBER OF CONTRACTS DELINQUENT, REGARDLESS OF THE REASON BEHIND THE DELINQUENCY. THAT NUMBER IS 22 CONTRACTS. A GENERAL CLASSIFICATION OF THE REASONS AND PERCENTAGES OF THE TOTAL ARE AS FOLLOWS:

TABLE

7 CONTRACTS DELINQUENT BECAUSE OF GOVERNMENT.

7 CONTRACTS DELINQUENT BECAUSE OF COPPER WIRE SHORTAGES AND NOT

CHARGED AGAINST CONTRACTOR---BDSA - 138A FORMS FILED.

5 CONTRACTS DELINQUENT ON BASIS OF PRE-PRODUCTION SAMPLES ONLY---

WILL NOT DELAY PRODUCTION OF CONTRACT QUANTITY.

3 CONTRACTS DELINQUENT--- FAULT OF CONTRACTOR.

22 TOTAL

"IN SUMMARY, BASED ON TOTAL UNITS ON CONTRACT QUANTITIES, ELECTRONIC INDUSTRIES, INC. WAS 1.1 PERCENT LATE AND 4.2 PERCENT LATEON TOTAL DOLLARS IN ALL 61 CONTRACTS. * * * ON THE BASIS OF TRUE CONDITIONS, WHICH DCASO- ALBUQUERQUE DID NOT REPORT, ELECTRONIC INDUSTRIES, INC., BY SHIPS PARTS CONTROL CENTER'S OWN METHOD OF MEASURING CONTRACTOR PERFORMANCE, IS ONLY 4.2 PERCENT DELINQUENT. THE INTENT OF ELECTRONIC INDUSTRIES, INC.'S PROTEST IN THIS AWARD IS NOT TO WHITEWASH ITSELF--- THERE ARE MINOR FAULTS AND DELINQUENCIES, BUT THESE ARE ONLY A FRACTION OF THE REPORTED 40 PERCENT. HAD THERE BEEN A SPECIFIC ON-SITE PRE-AWARD SURVEY CONDUCTED, OR HAD DCASO- ALBUQUERQUE EVEN BEEN CURRENT ON THE TRUE CONDITIONS AS OF THAT TIME, THEN THEIR REPORT WOULD HAVE BEEN SIGNIFICANTLY CHANGED.'

THE CONTRACTING OFFICER ADVISED THAT WHEN SPCC RECEIVED YOUR PROTEST ALLEGING THE ABOVE-STATED FACTS DCASO-ALBUQUERQUE AND DCASR DALLAS REVIEWED AND UPDATED THE STATUS REPORT OF CONTRACTS ADMINISTERED BY THEIR OFFICES. THEY REPORTED THAT 51 CONTRACTS WERE OUTSTANDING, OF WHICH 22 WERE DELINQUENT. DELINQUENCY ON FIVE OF THE CONTRACTS WAS ATTRIBUTED, IN PART, TO THE GOVERNMENT'S FAILURE TO PROVIDE, IN A TIMELY MANNER, REQUESTED DATA, LEGIBLE DRAWINGS, AND/OR GOVERNMENT FURNISHED PROPERTY. DELINQUENCY ON THE 17 OTHER CONTRACTS IS ATTRIBUTABLE SOLELY TO EII (33 1/3 PERCENT OF THE TOTAL), AND IS PRIMARILY DUE TO NONDELIVERY BY VENDORS OF EQUIPMENT, MATERIALS OR COMPONENTS.

YOUR CONTENTION THAT THE CONTRACTING OFFICER'S DECISION MUST HAVE BEEN BASED ON SECOND-HAND AND NOT CURRENTLY VALID INFORMATION BECAUSE A PRE- AWARD SURVEY WAS NOT CONDUCTED IN REFERENCE TO THE SUBJECT INVITATION IS DIRECTLY CONTRADICTED BY THE CONTRACTING OFFICER'S REPORT WHEREIN HE TATED:

"IN VIEW OF THE RELATIVELY RECENT PRE-AWARD SURVEY AND THE ADVERSE NATURE OF IT, (I) DID NOT CONSIDER THAT ANOTHER PRE-AWARD SURVEY ON THE SPECIFIC ITEM, COVERED BY IFB 104-918-66, WAS WARRANTED.'

IT IS CLEAR FROM THIS THAT THE CONTRACTING OFFICER CONSIDERED THE INFORMATION AVAILABLE TO HIM TO BE CURRENT, AND AN ADEQUATE REFLECTION OF TRUE CONDITIONS AT THE TIME.

A DETERMINATION OF RESPONSIBILITY IS PRIMARILY THE FUNCTION OF THE CONTRACTING OFFICER, AND IS NECESSARILY A MATTER OF JUDGMENT INVOLVING A CONSIDERABLE RANGE OF DISCRETION. WHERE SUCH DETERMINATION IS BASED UPON SUBSTANTIAL EVIDENCE, THERE IS NO VALID BASIS UPON WHICH WE MAY SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER. 39 COMP. GEN. 705; ZEPHYR AIRCRAFT CORPORATION V. UNITED STATES, 122 CT.CL. 523. IN OUR VIEW, THE INFORMATION THE CONTRACTION OFFICER HAD BEFORE HIM WAS SUFFICIENT TO SUPPORT HIS DETERMINATION THAT EII WAS NOT A RESPONSIBLE BIDDER UNDER THE STANDARDS SET FORTH IN ASPR.

IN THE CIRCUMSTANCES NO LEGAL BASIS EXISTS FOR DISTURBING THE ADMINISTRATIVE ACTION TAKEN UNDER THE INVITATION. 37 COMP. GEN. 430.