B-161290, SEP. 14, 1967

B-161290, SEP. 14, 1967

BIDDERS - RESPONSIBILITY - REGULAR DEALER, MANUFACTURER DETERMINATION DECISION TO BERTSCH INTERNATIONAL CONCERNING PROTEST AGAINST REJECTION ON BASIS OF NONRESPONSIBILITY FOR PROCUREMENT OF HOT WATER HEATERS BY MARINE CORPS SUPPLY CENTER, BARSTOW, CALIF. LOW OFFEROR WHO WAS DETERMINED TO BE NONRESPONSIBLE ON BASIS THAT HE WAS NOT REGULAR DEALER FOR HOT WATER HEATERS PROCURED UNDER NEGOTIATED PROCEDURES HAD THE WALSH-HEALEY PUBLIC CONTRACTS ACT ,MANUFACTURER OR REGULAR DEALER" LIST ERRONEOUSLY APPLIED BECAUSE SUCH REQUIREMENT DOES NOT APPLY TO PURCHASE OF GENERALLY AVAILABLE COMMERCIAL ITEMS NEGOTIATED UNDER 10 U.S.C. 2304 (A) (2). HOWEVER, EVEN THOUGH THE "REGULAR DEALER" DETERMINATION WAS ERRONEOUSLY APPLIED, IN THE ABSENCE THAT THE CONTRACTING OFFICER ACTED IN OTHER THAN GOOD FAITH, ANY AMOUNT REPRESENTING COSTS OF SUBMISSION OF PROPOSAL OR ANTICIPATED PROFITS MAY NOT BE ALLOWED.

TO BERTSCH INTERNATIONAL:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF APRIL 14, 1967, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE AWARD OF A CONTRACT BY THE MARINE CORPS SUPPLY CENTER, BARSTOW, CALIFORNIA, UNDER REQUEST FOR PROPOSALS (RFP) NO. M62204-67-R-0230.

THE SUBJECT RFP, FOR A QUANTITY OF HOT WATER HEATERS, WAS ISSUED ON JANUARY 16, 1967, PURSUANT TO A PURCHASE REQUEST CITING ISSUE PRIORITY DESIGNATOR NUMBER 02 UNDER THE UNIFORM MATERIAL MOVEMENT AND ISSUE PRIORITY SYSTEM. FOUR PROPOSALS WERE RECEIVED AND OPENED ON FEBRUARY 17, 1967, AND YOUR OFFER OF $1,210 PER HEATER WAS THE LOWEST. YOUR PROPOSAL INDICATED THAT YOU WERE A REGULAR DEALER IN HOT WATER HEATERS AND WERE OFFERING A 175 GALLON HEATER MANUFACTURED BY ABCO INDUSTRIES, INCORPORATED.

IN ORDER TO DETERMINE YOUR ELIGIBILITY FOR AWARD AS A RESPONSIBLE PROSPECTIVE CONTRACTOR AS REQUIRED BY ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-904.1, THE CONTRACTING OFFICER REQUESTED A PRE AWARD SURVEY OF YOUR FIRM PURSUANT TO ASPR 1-905.4. IN ITS REPORT OF MARCH 14, 1967, TO THE CONTRACTING OFFICER THE SURVEY TEAM RECOMMENDED NO AWARD BE MADE TO YOUR FIRM BASED UPON ITS FINDINGS AS SUMMARIZED IN THE FOLLOWING LANGUAGE FROM THE REPORT:

"BERTSCH INTERNATIONAL, LOCATED AT 420 D STREET, TUSTIN, CALIFORNIA, IS A SALES OFFICE. THERE ARE NO EMPLOYEES OTHER THAN THE TWO PARTNERS, MESSRS. ADOLPH AND CARL BERTSCH. THERE ARE NO WAREHOUSES, BINS, OR STORAGE AREAS, WHICH WOULD BE CONSIDERED A REQUIREMENT TO ACT AS A DEALER. THERE ARE NO MANUFACTURING FACILITIES WHEREIN BIDDER COULD PRODUCE OR FABRICATE ANY PRODUCTS. BIDDER HAS INDICATED TO THE PRE-AWARD SURVEY TEAM THAT HE IS NOT A PAID EMPLOYEE OR AGENT OF ANY MANUFACTURER OF THE BID ITEM.

"BASED ON THE ABOVE FINDINGS, A NO AWARD IS RECOMMENDED.'

AS A RESULT THEREOF, THE CONTRACTING OFFICER MADE THE FOLLOWING DETERMINATION OF NONRESPONSIBILITY PURSUANT TO ASPR 1-904.1:

"DETERMINATION OF NON-RESPONSIBILITY "UPON THE BASIS OF THE FOLLOWING FINDINGS AND DETERMINATION, THE PROPOSED CONTRACT SHALL NOT BE AWARDED TO THE LOW OFFEROR ON REQUEST FOR PROPOSAL M62204 67-R-0230 UNDER THE AUTHORITY OF ASPR 1-904.1.

"FINDINGS "1. THE LOW OFFEROR, BERTSCH INTERNATIONAL, 420 D STREET, TUSTIN, CALIFORNIA 92680, SUBMITTED SF 129 SHOWING COMPANY CONSISTED OF 2 PERSONS, TOTAL ASSETS $12,000, NO PAST PROCUREMENT HISTORY AVAILABLE AND NO LISTING IN THOMAS REGISTER. IN VIEW OF THESE FACTS A PRE-AWARD SURVEY WAS REQUESTED. "2. THE PRE AWARD SURVEY REVEALED OFFEROR HAD NO PAST HISTORY WITH GOVERNMENT CONTRACTS. HE HAS NO FIRM WRITTEN AUTHORITY TO QUOTE A COMMITMENT OF A SUPPLIER OF WHOM HE HAS NO PAST HISTORY OF DELIVERIES OR PREVIOUS BUSINESS RELATIONS.

"DETERMINATION "IT IS THEREFORE DETERMINED TO DECLARE THE OFFEROR NONRESPONSIBLE BY REASON OF NOT QUALIFYING AS A REGULAR DEALER OR MANUFACTURER AND AWARD MADE TO THE LOWEST RESPONSIBLE, RESPONSIVE BIDDER. DEFENSE CONTRACT ADMINISTRATION SERVICES REGION, LOS ANGELES, SMALL BUSINESS ANALYST, CONCURRED.'

BY LETTER DATED MARCH 27, 1967, THE CONTRACTING OFFICER INFORMED YOU THAT YOU WERE NOT RECEIVING THE AWARD BECAUSE YOU DID NOT HAVE A FIRM AGREEMENT WITH ABCO INDUSTRIES, INCORPORATED. ON THE SAME DATE THE CONTRACT WAS AWARDED TO THE SECOND LOW BIDDER, NATIONAL STEEL CONSTRUCTION CORPORATION, AND IT IS REPORTED THAT THE HEATERS WERE READY FOR SHIPMENT ON JUNE 6, 1967.

IT IS YOUR BASIC CONTENTION THAT THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY WAS BASED ON AN INCOMPETENT SURVEY WHICH HAS RESULTED IN YOUR SUSTAINING EXPENSES INCURRED IN SUBMITTING A PROPOSAL AND LOSS OF ANTICIPATED PROFITS FOR WHICH YOU SEEK REIMBURSEMENT. IN YOUR LETTER OF PROTEST YOU STATE THAT YOU SUBMITTED YOUR PROPOSAL AS A MANUFACTURER'S REPRESENTATIVE FOR ABCO; THAT IT IS USUAL FOR BOILER MANUFACTURERS TO SELL THROUGH REPRESENTATIVES SUCH AS YOUR FIRM; THAT IT IS TRADITIONAL FOR THE MANUFACTURER'S REPRESENTATIVE TO BID IN HIS NAME; THAT THE SURVEY TEAM IGNORED THIS STANDARD OPERATING PROCEDURE AND FAILED TO INQUIRE AS TO YOUR BUSINESS ARRANGEMENTS WITH ABCO; AND THAT THE SURVEY TEAM IMPROPERLY AND IMCOMPETENTLY CONDUCTED ITS SURVEY AT YOUR OFFICE WHEN IT SHOULD HAVE DONE SO AT THE PLANT OF THE "SUBCONTRACTOR NAMED, IN THE CASE, ABCO INDUSTRIES.' YOU HAVE ALSO SUBMITTED COPIES OF CORRESPONDENCE WITH ABCO TO ESTABLISH YOUR RELATIONSHIP WITH IT. YOU ALSO QUESTION THE CONTRACTING OFFICER'S FAILURE TO NOTIFY THE SMALL BUSINESS ADMINISTRATION (SBA) OF HIS DECISION TO REJECT YOUR OFFER BECAUSE OF HIS DETERMINATION OF NONRESPONSIBILITY.

THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY, QUOTED ABOVE, INDICATES THAT THE BASIS FOR HIS FINDING WAS THE FAILURE OF YOUR FIRM TO QUALIFY AS EITHER A MANUFACTURER OR REGULAR DEALER (WHICH LATTER WAS CHECKED ON YOUR PROPOSAL). THE TERM "REGULAR DEALER" IS DEFINED IN ASPR 12-603.3 (A), AS FOLLOWS:

"12-603.2 REGULAR DEALER.

"/A) EXCEPT AS SET FORTH IN (B) BELOW, AS UED IN 12-601 A REGULAR DEALER IS A PERSONS (SIC) WHO OWNS, OPERATES, OR MAINTAIN A STORE, WAREHOUSE, OR OTHER ESTABLISHMENT IN WHICH MATERIALS, SUPPLIES, ARTICLES, OR EQUIPMENT OF THE GENERAL CHARACTER DESCRIBED BY THE SPECIFICATIONS AND REQUIRED UNDER THE CONTRACT ARE BOUGHT, KEPT IN STOCK, AND SOLD TO THE PUBLIC IN THE USUAL COURSE OF BUSINESS. * * *" ASPR 1-903.1 (E) PROVIDES THAT A PROSPECTIVE CONTRACTOR MUST BE QUALIFIED AND ELIGIBLE TO RECEIVE AN AWARD UNDER THE PROVISIONS OF PART 12, SUBPART F, OF ASPR, WHICH INCLUDES THE ABOVE-QUOTED PARAGRAPH. THEREFORE, THE CONTRACTING OFFICER DID NOT CONSIDER YOU ELIGIBLE FOR AWARD AND REJECTED YOUR OFFER. REVIEW OF A CONTRACTING OFFICER'S DETERMINATION AS TO WHETHER AN OFFEROR QUALIFIES AS A MANUFACTURER OR REGULAR DEALER RESTS WITH THE DEPARTMENT OF LABOR RATHER THAN OUR OFFICE. ASPR 12-604. FURTHERMORE, ASPR 1-705.4 (C) (5) PROVIDES THAT REFERRAL NEED NOT BE MADE TO SBA WHERE A CONTRACTING OFFICER DETERMINES A SMALL BUSINESS CONCERN NONRESPONSIBLE BECAUSE IT DOES NOT SATISFY THE CRITERIA OF ASPR 1-903.1 (E). IN THESE CIRCUMSTANCES, BUT FOR THE REASONS HEREINAFTER DISCUSSED, OUR OFFICE WOULD HAVE NO BASIS UPON WHICH WE COULD PROPERLY OBJECT TO THE ADMINISTRATIVE ACTION IN REJECTING YOUR OFFER AND AWARDING THE CONTRACT TO NATIONAL.

HOWEVER, THE PROVISIONS OF PART 12, SUBPART F, OF ASPR, WHICH IMPLEMENT THE WALSH-HEALEY PUBLIC CONTRACTS ACT, 41 U.S.C. 35-45, AND WHICH THE CONTRACTING OFFICER RELIED UPON IN REJECTING YOUR OFFER, DO NOT APPLY TO PURCHASES OF GENERALLY AVAILABLE COMMERCIAL ITEMS NEGOTIATED PURSUANT TO THE AUTHORITY OF 10 U.S.C. 2304 (A) (2), WHICH IS THE AUTHORITY FOR THIS PROCUREMENT. ASPR 12-602.2 (A). THEREFORE, ASSUMING THE ITEMS BEING PROCURED ARE "GENERALLY AVAILABLE COMMERCIAL ITEMS," THE CONTRACTING OFFICER ERRONEOUSLY APPLIED THE "MANUFACTURER" OR "REGULAR DEALER" TEST IN DETERMINING YOUR ELIGIBILITY AS A RESPONSIBLE PROSPECTIVE CONTRACTOR. THE QUESTION, THEN, IS WHETHER THIS FACT MAY BE RELIED UPON BY YOU TO SUPPORT YOUR CLAIM FOR REIMBURSEMENT OF EXPENSES INCURRED IN SUBMITTING YOUR PROPOSAL AND FOR ANTICIPATED PROFITS. WE BELIEVE THIS QUESTION MUST BE ANSWERED IN THE NEGATIVE.

WHILE THE CONTRACTING OFFICER ERRONEOUSLY APPLIED THE TESTS PRESCRIBED IN PART 12 OF ASPR RATHER THAN THOSE PRESCRIBED IN PART 9IN DETERMINING YOUR RESPONSIBILITY, THERE IS NOTHING IN THE RECORD BEFORE US TO INDICATE THAT HE ACTED OTHER THAN IN GOOD FAITH. IN HEYER PRODUCTS COMPANY INC. V. UNITED STATES, 135 CT. CL. 63, WHERE AN UNSUCCESSFUL BIDDER CLAIMED BOTH LOSS OF PROFIT AND COSTS INCURRED IN PREPARING A BID THE COURT HELD:

"IT GOES WITHOUT SAYING THAT NOT EVERY UNSUCCESSFUL BIDDER IS ENTITLED TO RECOVER THE COST OF PUTTING IN HIS BID. RECOVERY CAN BE HAD IN ONLY THOSE CASES WHERE IT CAN BE SHOWN BY CLEAR AND CONVINCING PROOF THAT THERE HAS BEEN A FRAUDULENT INDUCEMENT FOR BIDS, WITH THE INTENTION, BEFORE THE BIDS WERE INVITED OR LATER CONCEIVED, TO DISREGARD THEM ALL EXCEPT THE ONES FROM BIDDERS TO ONE OF WHOM IT WAS INTENDED TO LET THE CONTRACT, WHETHER HE WAS THE LOWEST RESPONSIBLE BIDDER OR NOT. IN OTHER WORDS, IT MUST BE SHOWN THAT BIDS WERE NOT INVITED IN GOOD FAITH, BUT AS A PRETENCE TO CONCEAL THE PURPOSE TO LET THE CONTRACT TO SOME FAVORED BIDDER, OR TO ONE OF A GROUP OF PREFERRED BIDDERS, AND WITH THE INTENT TO WILLFULLY, CAPRICIOUSLY, AND ARBITRARILY DISREGARD THE OBLIGATION TO LET THE CONTRACT TO HIM WHOSE BID WAS MOST ADVANTAGEOUS TO THE GOVERNMENT.' THE COURT HELD FURTHER THAT THE UNSUCCESSFUL BIDDER WAS NOT ENTITLED TO RECOVER ANTICIPATED PROFITS BECAUSE IT HAD NO CONTRACT. ALSO SEE PERKINS V. LUKENS STEEL COMPANY, 310 U.S. 113.

IN VIEW OF THE LACK OF PROOF SUCH AS IS REQUIRED BY THE HEYER CASE, AND BECAUSE WE ARE AWARE OF NO DECISION, EITHER BY THIS OFFICE OR THE COURTS TO THE CONTRARY, WE MUST CONCLUDE THAT YOU ARE NOT ENTITLED TO BE PAID ANY AMOUNT REPRESENTING THE COSTS OF SUBMITTING YOUR PROPOSAL OR FOR ANTICIPATED PROFITS.