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B-126327, I-19337, JUN. 12, 1956

B-126327 Jun 12, 1956
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TO THE SECRETARY OF THE ARMY: REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 13 AND FEBRUARY 9. THE INVITATION WHICH WAS ISSUED ON SEPTEMBER 13. THREE AMENDMENTS TO THE INVITATION WERE ISSUED. THE CONTRACTING OFFICER REPORTED THAT BIDS WERE RECEIVED FROM 27 BIDDERS AND THAT WHEN THE BIDS WERE OPENED ON OCTOBER 13. IT WAS FOUND THAT THE BID SUBMITTED BY ATLANTIC SEABOARD INDUSTRIES. WAS THE LOWEST RECEIVED. HE NOTED AND ANNOUNCED PUBLICLY THAT THIS BID HAD BEEN RECEIVED WITHOUT ANY OF THE THREE AMENDMENTS TO THE INVITATION AND THAT A NOTATION TO THAT EFFECT WAS MADE ON THE ABSTRACT OF BIDS. HE REPORTS THAT FOLLOWING THE BID OPENING HE PROCEEDED SIMULTANEOUSLY WITH THE EVALUATION OF THE THREE LOW BIDS AND WITH A SURVEY OF THE FACILITIES AND FINANCIAL CONDITION OF THE LOW BIDDERS AND THAT HE WAS AT FIRST NOT SATISFIED WITH THE EVIDENCE FURNISHED BY THE LOW BIDDER AS TO ITS FINANCIAL CONDITION.

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B-126327, I-19337, JUN. 12, 1956

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 13 AND FEBRUARY 9, 1956, FURNISHING THE REPORT REQUESTED BY OUR OFFICE IN LETTER OF DECEMBER 15, 1955, RELATIVE TO THE PROTEST OF ATLANTIC SEABOARD INDUSTRIES, INC., AGAINST THE ACTION OF THE SIGNAL CORPS SUPPLY AGENCY AT PHILADELPHIA, PENNSYLVANIA, IN REFUSING TO AWARD A CONTRACT TO THAT CONCERN PURSUANT TO INVITATION NO. SC-36-039-56-374-55 WHICH REQUESTED BIDS FOR FURNISHING REMOTE CONTROL EQUIPMENT.

THE INVITATION WHICH WAS ISSUED ON SEPTEMBER 13, 1955, REQUESTED BIDS TO BE OPENED ON OCTOBER 13, 1955. THREE AMENDMENTS TO THE INVITATION WERE ISSUED, ONE ON SEPTEMBER 13, ONE ON SEPTEMBER 23, AND ONE ON OCTOBER 3, 1955, ALL OF WHICH CONTAINED THE NOTATION THAT "FAILURE TO SIGN AND RETURN ANY AMENDMENT TO THIS INVITATION FOR BID MAY INVALIDATE BID.'

THE CONTRACTING OFFICER REPORTED THAT BIDS WERE RECEIVED FROM 27 BIDDERS AND THAT WHEN THE BIDS WERE OPENED ON OCTOBER 13, 1955, IT WAS FOUND THAT THE BID SUBMITTED BY ATLANTIC SEABOARD INDUSTRIES, INC., WAS THE LOWEST RECEIVED. HE REPORTS ALSO THAT ON OCTOBER 13, 1955, HE NOTED AND ANNOUNCED PUBLICLY THAT THIS BID HAD BEEN RECEIVED WITHOUT ANY OF THE THREE AMENDMENTS TO THE INVITATION AND THAT A NOTATION TO THAT EFFECT WAS MADE ON THE ABSTRACT OF BIDS. IN ADDITION, HE REPORTS THAT FOLLOWING THE BID OPENING HE PROCEEDED SIMULTANEOUSLY WITH THE EVALUATION OF THE THREE LOW BIDS AND WITH A SURVEY OF THE FACILITIES AND FINANCIAL CONDITION OF THE LOW BIDDERS AND THAT HE WAS AT FIRST NOT SATISFIED WITH THE EVIDENCE FURNISHED BY THE LOW BIDDER AS TO ITS FINANCIAL CONDITION, AS A RESULT OF WHICH HE TOOK THE MATTER UP WITH THE SMALL BUSINESS ADMINISTRATION WITH A VIEW TO OBTAINING A CERTIFICATE OF COMPETENCY FOR THE BIDDER. SUBSEQUENT TO THIS ACTION THE BIDDER PRESENTED FURTHER EVIDENCE OF ITS FINANCIAL CAPABILITY WHICH SATISFIED THE CONTRACTING OFFICER THAT THE BIDDER WAS IN A POSITION TO ASSUME THE CONTRACT.

IT IS STATED FURTHER BY THE CONTRACTING OFFICER THAT IT WAS DETERMINED THAT AMENDMENTS 2 AND 3 MATERIALLY AFFECTED THE REQUIREMENTS UNDER THE INVITATION SO AS TO AFFECT THE PRICE OF THE WORK REQUIRED TO BE PERFORMED. HE STATES ALSO THAT HE WAS ADVISED BY THE STAFF ENGINEER THAT IT WOULD BE PREJUDICIAL TO THE RIGHTS OF OTHER BIDDERS TO PERMIT ATLANTIC SEABOARD INDUSTRIES, INC., TO EXECUTE THE TWO AMENDMENTS AFTER THE BID OPENING. HENCE, THE BID WAS REJECTED ON THE GROUND THAT IT WAS NOT RESPONSIVE TO THE INVITATION.

IN YOUR LETTER OF FEBRUARY 9, 1956, IT WAS STATED THAT DURING THE PERIOD FROM OCTOBER 13 TO DECEMBER 1, 1955, A DAILY CHECK OF THE MAIL RECORD SECTION OF THE SIGNAL CORPS SUPPLY AGENCY WAS MADE BUT NO EVIDENCE WAS FOUND OF RECEIPT OF THE AMENDMENTS. IF, AS STATED BY THE CONTRACTING OFFICER, AMENDMENTS 2 AND 3 WERE REGARDED AS BEING OF SUCH MATERIALITY AS TO AFFECT THE PRICE OF THE WORK, WE DO NOT UNDERSTAND WHY THIS WAS DONE, NOR WHY IT WAS NECESSARY TO ASCERTAIN THE BIDDER'S FINANCIAL CAPABILITY AFTER IT WAS FOUND THAT THE AMENDMENTS WERE NOT RECEIVED BY THE OPENING DATE. IT WAS ANNOUNCED AT THE BID OPENING THAT THE AMENDMENTS WERE NOT RECEIVED WITH THE BID AND IT WOULD THEREFORE APPEAR THAT, IF THE AMENDMENTS WERE MATERIAL, THE LOW BID COULD HAVE BEEN REJECTED AT THAT TIME ON THE BASIS THAT THEY HAD NOT BEEN RECEIVED.

IN VIEW OF THE CONTENTIONS REPEATEDLY MADE BY THE LOW BIDDER AND THE EVIDENCE PRESENTED INDICATING THAT THE AMENDMENTS MAY HAVE BEEN RETURNED AS REQUIRED, AN INVESTIGATION WAS MADE BY REPRESENTATIVES OF OUR OFFICE. THEY REPORT THAT, ALTHOUGH THE CONTRACTING OFFICER TESTIFIED BEFORE THE AWARDS COMMITTEE THAT THE PROTESTING BIDDER WAS NOT SOLICITED AND THAT THE RECORDS SHOWED THAT THE SAID BIDDER DID NOT REQUEST A SOLICITATION, WILLIAM M. GAYNOR, BUSINESS ANALYST, SIGNAL CORPS, LONG ISLAND CITY, STATED THAT AT THE TIME OF THE AWARD IN QUESTION HE MAINTAINED A DAILY LOG LISTING THE NAMES OF THE FIRMS TO WHOM INVITATIONS FOR BIDS HAD BEEN DISTRIBUTED. HE STATED THAT HE ALSO MAINTAINED A 3 BY 5 CARD FILE FOR EACH INVITATION, LISTING THE NAMES OF THE FIRMS WHO WERE ISSUED INVITATIONS, THE DATE OF ISSUANCE, THE MANNER OF DELIVERY AND THE NAMES OF FIRMS WHOSE REQUESTS WERE REFERRED TO THE PHILADELPHIA OFFICE. OUR REPRESENTATIVES REPORT FURTHER THAT THE SEVENTH ENTRY ON THE DAILY LOG KEPT IN GAYNOR'S OFFICE FOR SEPTEMBER 16, 1955, INDICATES THAT MR. MILLER PERSONALLY PICKED UP AND SIGNED FOR RECEIPT OF INVITATION NO. SC-36-039- 374-55 WITH AMENDMENT NO. 1. THIS ENTRY WAS MADE BY MRS. CELIA HABER, A FORMER EMPLOYEE OF THE SIGNAL CORPS. THE REPORT OF OUR REPRESENTATIVES CONTINUES AS FOLLOWS:

"THE EIGHTH ENTRY IN THE LOG WAS MADE BY NORMAN CROUSE, ALSO A FORMER EMPLOYEE WHO WORKED IN GAYNOR'S OFFICE FROM AUGUST 15 TO ABOUT NOVEMBER 28, 1955. CROUSE WAS UNABLE TO EXPLAIN OR CLARIFY HIS ENTRY FOR SEPTEMBER 16. HE SAID, HOWEVER, THAT BOTH "JANZER" AND MR. MILLER MAY HAVE PICKED UP THE IFB. HE ACKNOWLEDGED HAVING PREPARED THE 3 BY 5 CARD FOR THIS IFB (EXHIBIT 7). HE SAID ITEM 9 ON THIS CARD SHOWED THAT IFB 374-55 HAD BEEN MAILED TO ASI ON SEPTEMBER 16, 1955, AS INDICATED BY THE NOTATION "9/16M.'

"MRS. HABER SAID THAT MR. CROUSE WAS HER SUBORDINATE AND WHEN SHE REVIEWED THE CARD PREPARED BY HIM IT WAS APPARENT THAT HE HAD MADE SEVERAL ERRORS. SHE SAID THAT AFTER REVIEWING THE DAILY LOG SHEET AND DISCUSSING THE MATTER WITH HIM, SHE DETERMINED THAT THE IFB WAS NOT MAILED TO ASI BUT THAT IT WAS ISSUED DIRECTLY TO MR. MILLER ON THE 16TH. SHE SAID THAT SHE CROSSED OUT THE "M" ON THE CARD PREPARED BY MR. CROUSE AND PLACED THE LETTERS "ISS" THEREON TO INDICATE THAT THE IFB WAS ISSUED.

"MR. GAYNOR PRODUCED FOR EXAMINATION HIS COPY OF A MEMORANDUM DATED SEPTEMBER 16, 1955, IN WHICH HE REQUESTED TASSA TO SEND THREE IFBS, INCLUDING 374-55 TO ASI (EXHIBIT 8). THE ORIGINAL OF THE MEMORANDUM FROM WHICH THIS EXHIBIT WAS REPRODUCED HAD BEEN PREVIOUSLY LOCATED IN THE FILES OF THE BIDDERS INFORMATION SECTION AT TASSA.

"TASSA ACKNOWLEDGED RECEIPT OF MR. GAYNOR'S REQUEST OF SEPTEMBER 16 ADVISING ASI BY LETTER DATED SEPTEMBER 21, 1955 (EXHIBIT 9), THAT ACTION ON THE REQUEST FOR COPIES OF THE THREE IFBS WAS BEING WITHHELD BECAUSE ASI HAD FAILED TO REPLY TO TASSA'S LETTER OF AUGUST 17, 1955 (EXHIBIT 10), REQUESTING INFORMATION CONCERNING (1) ASI'S REPORTED AFFILIATION WITH PRODUCTION FACILITIES COMPANY, INC., ALSO A MANUFACTURER OF ELECTRONIC EQUIPMENT, AND (2) ASI'S KEY ENGINEERING AND TECHNICAL PERSONNEL.

"THE RECORDS IN GAYNOR'S OFFICE DISCLOSED A DAILY LOG SHEET FOR OCTOBER 21, 1955 (EXHIBIT 11), SHOWING THAT ALBERT MACKINTOSH SIGNED FOR THE RECEIPT OF "AMEND 3 AND DWG ONLY ON 374-55" FOR ASI (SEE ITEM 1). EXAMINATION OF ASI'S PAYROLL RECORDS SHOWED THAT ON THIS DATE AN ALBERT MACKINTOSH WAS AN EMPLOYEE. MRS. HABER ACKNOWLEDGED MAKING THE ENTRY ON THIS DAILY LOG FOR OCTOBER 21.'

WITH RESPECT TO THE EVALUATION OF THE BIDDER'S QUALIFICATION THE REPORT STATES AS FOLLOWS:

"MR. CAPONE SAID THAT ON OCTOBER 14, 1955, UNDER STANDARD PROCEDURES, HE REQUESTED THE CONTRACTOR EVALUATION BOARD (CEB) TO MAKE A PREAWARD QUALIFICATION DETERMINATION ON THE SECOND AND THIRD LOWEST BIDDERS (EXHIBITS 15 AND 16, RESPECTIVELY). HE SAID THAT IT IS CUSTOMARY TO REQUEST SUCH AN EVALUATION OF THE THREE LOWEST BIDDERS AT THE SAME TIME. HE SAID HE DID NOT KNOW WHY HE FAILED TO REQUEST AN EVALUATION OF ASI ON OCTOBER 14, BUT THAT HE MUST HAVE HAD ORDERS NOT TO DO SO (EITHER FROM THE CONTRACTING OFFICER OR HIS REPRESENTATIVE, STUART R. HYANS), SINCE OTHERWISE HE WOULD HAVE FOLLOWED THE NORMAL PROCEDURE.

"LEON BUDDINE, CHAIRMAN, CEB, SAID THAT THERE ARE FIVE FACTORS TO BE CONSIDERED IN MAKING A PREAWARD QUALIFICATION DETERMINATION, THAT IS, A CONTRACTOR'S ABILITY TO PERFORM ON A PROPOSED AWARD. THEY ARE: TECHNICAL ABILITY, FACILITIES, FINANCIAL STABILITY, PERFORMANCE AND QUALITY. THE SECOND LOWEST BIDDER, THE SILTRONIC COMPANY, WAS DETERMINED TO BE COMPLETELY ACCEPTABLE BY CEB ON NOVEMBER 3, 1955 (SEE EXHIBIT 15), AND THE THIRD LOWEST BIDDER, THE SUPERIOR MAGNETO CORPORATION, WAS APPROVED ON OCTOBER 24, 1955 (SEE EXHIBIT 16). CAPTAIN BAUMGARTNER SAID THAT AFTER A CONTRACTOR HAS BEEN APPROVED BY CEB, HE CAN MAKE THE AWARD ANY TIME THEREAFTER, WHICH IN THE CASE OF THE SILTRONIC COMPANY COULD HAVE BEEN NOVEMBER 3.

"MR. CAPONE SAID THAT ON OCTOBER 19, 1955, THE SAME DAY HE RECEIVED THE ENGINEER'S FIRST REPORT PERTAINING TO TECHNICAL RESPONSIVENESS OF THE FOUR LOWEST BIDS, HE REQUESTED CEB TO MAKE A PREAWARD QUALIFICATION DETERMINATION OF ASI (EXHIBIT 17). HE SAID HE BELIEVES HE WAS TOLD TO MAKE THE REQUEST AT THAT TIME EITHER BY THE CONTRACTING OFFICER OR HIS REPRESENTATIVE, STUART R. HYANS. ON NOVEMBER 4, 1955, CEB STATED THAT THEIR FINDINGS DETERMINED ASI TO BE "NOT CAPABLE OF PERFORMING THE PROPOSED AWARD" ON THE BASIS OF A "NEGATIVE SUMMARY OF EVALUATION.'

"THE CEB SUMMARY OF EVALUATION REPORT, NO. 7908 DATED NOVEMBER 4, 1955 (EXHIBIT 18), SHOWS THAT ASI WAS DETERMINED TO BE SATISFACTORY AS TO TECHNICAL ABILITY, FACILITIES, PERFORMANCE AND QUALITY BUT UNSATISFACTORY BECAUSE OF FINANCIAL INSTABILITY. THE DISQUALIFICATION IS SHOWN AS HAVING BEEN BASED ON A FINANCIAL EVALUATION OF ASI BY THE CHIEF, ECONOMICS DIVISION, DATED NOVEMBER 1, 1955 (EXHIBIT 19). TWO MEMORANDUMS FOR THE FILE, DATED NOVEMBER 1 AND NOVEMBER 3, 1955 (EXHIBITS 20 AND 21 RESPECTIVELY), FURTHER CLARIFY SOME OF THE CONSIDERATIONS INVOLVED IN DETERMINING THE ABILITY OF ASI TO PERFORM ON THE PROPOSED AWARD.

"IN A SECOND REPORT ON THE EVALUATION OF ASI'S FINANCIAL ABILITY, DATED NOVEMBER 10, 1955 (EXHIBIT 22), THE ECONOMICS DIVISION OF TASSA REVERSED THE FINANCIAL EVALUATION OF NOVEMBER 1, 1955, AND DETERMINED THAT ASI WAS FINANCIALLY CAPABLE OF CARRYING OUT THE PROPOSED AWARD.

"MR. BUDDINE SAID THAT AS A RESULT OF THIS REVISED REPORT, TASSA WOULD NORMALLY HAVE HAD TO FIND ASI CAPABLE OF PERFORMING THE PROPOSED AWARD. HE SAID THIS WAS NOT DONE, HOWEVER, FOR REASONS WHICH WERE CLASSIFIED AS "CONFIDENTIAL" BY THE AGENCY. THE BASIS FOR NOT ACCEPTING ASI ON ACCOUNT OF THESE CLASSIFIED REASONS WAS REJECTED AS INVALID ON NOVEMBER 25, 1955.'

IT THUS APPEARS FROM THE RECORD BEFORE US THAT THERE WAS A DELIBERATE PURPOSE ON THE PART OF THE SIGNAL CORPS TO REJECT THE LOW BID SUBMITTED BY ATLANTIC SEABOARD INDUSTRIES, INC. AT FIRST AN ATTEMPT WAS MADE TO DISQUALIFY THE BIDDER ON THE GROUND THAT IT WAS NOT FINANCIALLY QUALIFIED TO ASSUME THE CONTRACT AND THIS AT A TIME WHEN IT SHOULD HAVE BEEN KNOWN THAT THE AMENDMENTS TO THE INVITATION HAD NOT BEEN RECEIVED. WHEN IT WAS FOUND, HOWEVER, THAT THE BIDDER WAS QUALIFIED, THE ALLEGED FAILURE TO RETURN THE AMENDMENTS WAS THEN RESORTED TO FOR THE PURPOSE OF DENYING THE CONTRACT TO THE BIDDER. IN THIS CONNECTION, THIRTEEN UNSUCCESSFUL BIDDERS IN THE NEW YORK CITY AREA WHO SUBMITTED BIDS IN RESPONSE TO THE INVITATION WERE INTERVIEWED AND SEVEN OF THE NINE WHO RECEIVED ALL OF THE AMENDMENTS STATED THAT THE AMENDMENTS WOULD HAVE MADE NO DIFFERENCE IN THE PRICES QUOTED OR IF THEY HAD THE DIFFERENCE COULD HAVE BEEN MEASURED IN PENNIES PER UNIT. IT IS STATED THAT NONE OF THE SEVEN WOULD HAVE CHANGED THEIR BIDS AS A RESULT OF THE AMENDMENTS. THE OTHER TWO OF THE NINE BIDDERS DID NOT COMMENT ON THE MATERIALITY OF THE AMENDMENTS, ONE BECAUSE HIS ESTIMATOR WAS ABSENT AND THE OTHER BECAUSE HE NO LONGER HAD THE FILE PERTAINING TO THE INVITATION. ALSO, BY TELEGRAM OF NOVEMBER 17, 1955, THE LOW BIDDER WAS REQUESTED TO EXTEND THE TIME FOR ACCEPTANCE OF ITS BID UNTIL DECEMBER 4, 1955. IT WOULD THUS APPEAR THAT THE ACTION OF THE SIGNAL CORPS IN EVALUATING THE BIDS OVER THE LONG PERIOD BELIES THE REPORT THAT THE AMENDMENTS WERE CONSIDERED MATERIAL AS TO PRICE SO AS TO REQUIRE REJECTION OF THE BID.

SECTION 3/B) OF THE ARMED SERVICES PROCUREMENT ACT OF 1947 EXPRESSLY REQUIRES THAT AWARD BE MADE TO THAT RESPONSIBLE BIDDER WHOSE BID, CONFORMING TO THE INVITATION, WILL BE MOST ADVANTAGEOUS TO THE GOVERNMENT AND, OF COURSE, IT WAS AN IMPLIED CONDITION OF THE INVITATION THAT EACH BID RECEIVED WOULD BE HONESTLY AND FAIRLY CONSIDERED. THE RECORD SHOWS THAT, CONTRARY TO THE STATEMENTS OF THE CONTRACTING OFFICER, THE LOW BIDDER WAS GIVEN COPIES OF THE INVITATION AND COPIES OF THE AMENDMENTS AND, ALTHOUGH ITS BID WAS FOUND TO BE THE LOWEST RECEIVED, IT WAS DEPRIVED OF THE CONTRACT. AS THE BIDDER WAS FOUND TO BE QUALIFIED TO ASSUME THE CONTRACT AND AS THE BIDDER OFFERED TO PERFORM THE CONTRACT, INCLUDING THE WORK AS CHANGED BY THE AMENDMENTS, WITHOUT ANY CHANGE IN THE PRICE QUOTED, THE FAILURE TO FURNISH THE AMENDMENTS SHOULD HAVE BEEN WAIVED AS AN INFORMALITY. THE CONTRACTOR WHO RECEIVED THE AWARD, NOT BEING THE LOWEST RESPONSIBLE BIDDER, WAS ON NOTICE THAT THE AWARD TO IT WAS ILLEGALLY MADE. IN VIEW OF SUCH FACTS, THE CONTRACT SHOULD BE CANCELED.

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