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B-164836, JAN. 16, 1969

B-164836 Jan 16, 1969
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BROWNSTEIN: REFERENCE IS MADE TO YOUR LETTER OF AUGUST 27. WHILE A NUMBER OF FINANCIAL INSTITUTIONS ACCEPT CREDIT REPORTS FROM BUREAUS THAT DO NOT HAVE ACCESS TO THE TRADE EXPERIENCE OF THE PRINCIPAL DEPARTMENT AND GENERAL STORES IN AN AREA FOR PURPOSES OF CONVENTIONAL MORTGAGE LOANS WITH SUBSTANTIAL DOWN PAYMENTS. SUCH REPORTS ARE NOT CONSIDERED BY YOUR AGENCY TO BE ADEQUATE FOR THE PURPOSE OF EVALUATING CREDIT RISKS IN THE CASE OF FHA MORTGAGE INSURANCE WHERE THE LOAN MAY REPRESENT 97 PERCENT OF THE VALUE OF THE PROPERTY. YOU HAVE CONCLUDED. THAT THE CURRENT FHA STANDARDS ARE NECESSARY TO OBTAIN INFORMATION NEEDED TO EXERCISE CREDIT JUDGMENT ON MORTGAGE INSURANCE APPLICATIONS. THIS OFFICE HAS CONSISTENTLY HELD THAT THE DETERMINATION OF THE NEEDS OF THE GOVERNMENT AND THE METHOD OF ACCOMMODATING SUCH NEEDS ARE THE PRIMARY RESPONSIBILITIES OF THE CONTRACTING AGENCY.

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B-164836, JAN. 16, 1969

TO MR. BROWNSTEIN:

REFERENCE IS MADE TO YOUR LETTER OF AUGUST 27, 1968, AND SUBSEQUENT CORRESPONDENCE, REPORTING ON THE PROTEST OF CREDIT SERVICE OF MIAMI, FLORIDA, AGAINST THE AWARD OF A TERM CONTRACT FOR CREDIT REPORTS TO A HIGHER BIDDER UNDER INVITATION FOR BIDS NO. 68-500, ISSUED BY THE FEDERAL HOUSING ADMINISTRATION (FHA).

AN ANALYSIS OF ALL THE CORRESPONDENCE SUBMITTED INDICATES THE PROTEST REQUIRES CONSIDERATION OF ESSENTIALLY TWO CONTENTIONS. FIRST, THE PROTESTOR CONSIDERS IT UNNECESSARY AND ARBITRARY FOR FHA TO REQUIRE A CONTRACTOR TO REPORT ON A SUBJECT'S CREDIT RECORD IN THE PAYMENT OF BILLS AND OTHER OBLIGATIONS THROUGH CREDIT ACCOUNTS OR ACCUMULATED RECORDS OF THE PRINCIPAL DEPARTMENT AND GENERAL STORES OF THE COMMUNITY IN WHICH THE SUBJECT RESIDES.

IN THIS REGARD, YOUR LETTER OF AUGUST 27 ADVISES THAT, WHILE A NUMBER OF FINANCIAL INSTITUTIONS ACCEPT CREDIT REPORTS FROM BUREAUS THAT DO NOT HAVE ACCESS TO THE TRADE EXPERIENCE OF THE PRINCIPAL DEPARTMENT AND GENERAL STORES IN AN AREA FOR PURPOSES OF CONVENTIONAL MORTGAGE LOANS WITH SUBSTANTIAL DOWN PAYMENTS, SUCH REPORTS ARE NOT CONSIDERED BY YOUR AGENCY TO BE ADEQUATE FOR THE PURPOSE OF EVALUATING CREDIT RISKS IN THE CASE OF FHA MORTGAGE INSURANCE WHERE THE LOAN MAY REPRESENT 97 PERCENT OF THE VALUE OF THE PROPERTY. YOU HAVE CONCLUDED, THEREFORE, THAT THE CURRENT FHA STANDARDS ARE NECESSARY TO OBTAIN INFORMATION NEEDED TO EXERCISE CREDIT JUDGMENT ON MORTGAGE INSURANCE APPLICATIONS.

THIS OFFICE HAS CONSISTENTLY HELD THAT THE DETERMINATION OF THE NEEDS OF THE GOVERNMENT AND THE METHOD OF ACCOMMODATING SUCH NEEDS ARE THE PRIMARY RESPONSIBILITIES OF THE CONTRACTING AGENCY. SINCE THERE APPEAR TO BE SUFFICIENT REASONS FOR THE REQUIREMENTS SPECIFIED IN THE INVITATION WE ARE NOT REQUIRED TO OBJECT THERETO.

THE SECOND BASIS FOR THE COMPANY'S PROTEST RELATES TO THE REJECTION OF ITS LOW BID FOR FAILURE TO MEET CERTAIN REQUIREMENTS OF THE INVITATION.

UNDER THE INVITATION SUCCESSFUL BIDDERS ARE REQUIRED TO FURNISH CREDIT REPORTS ON MORTGAGORS IN THE AREA COVERED BY THE CONTRACT IN ACCORDANCE WITH THE FHA STANDARD REPORT FORM ATTACHED THERETO. THE PARTICULAR ASPECT OF THE FORMS FOR CONSIDERATION IN THIS CASE PROVIDES FOR CERTIFICATION, AND THE REPORTING THEREON, OF THE SUBJECT'S CREDIT RECORD IN THE PAYMENT OF BILLS AND OTHER OBLIGATIONS OWED TO THE PRINCIPAL DEPARTMENT AND GENERAL STORES OF THE COMMUNITY IN WHICH THE SUBJECT RESIDES. ADDITION, THE INVITATION LISTS REQUIREMENTS FOR BIDDERS' QUALIFICATIONS, IN PERTINENT PART, AS FOLLOWS:

"SPECIAL CONDITIONS

"2. QUALIFICATIONS

"/A) THE BIDDER MUST BE FOUND TO BE RESPONSIBLE, COMPETENT, CAPABLE, ADEQUATELY EQUIPPED AND PREPARED TO FURNISH FACTUAL DATA (CREDIT) REPORTS, INCLUDING ABILITY TO SATISFACTORILY PROVIDE ALL INFORMATION AND CREDIT EXPERIENCE REQUIRED BY THE ATTACHED -FHA STANDARD FACTUAL DATA REPORT- FORM (EXHIBIT B) TO THE FEDERAL HOUSING ADMINISTRATION, FHA-APPROVED MORTGAGEES, AND FHA-CONTRACT BROKERS THROUGHOUT THE AREA COVERED BY THE BID. ACCORDINGLY, BIDDERS MUST MEET THE FOLLOWING ESSENTIAL REQUIREMENTS IN ORDER TO QUALIFY FOR AN AWARD RESULTING FROM THIS INVITATION FOR BIDS:

"/3) THE BIDDER MUST: (A) BE THE REPOSITORY OF ACCUMULATED CREDIT RECORDS OF THE PRINCIPAL DEPARTMENT STORES, IF ANY, AND THE PRINCIPAL GNERAL STORES OF THE COMMUNITY OR COMMUNITIES IN THE AREA COVERED BY THE BID; OR (B) INTEND TO PURCHASE OR OTHERWISE OBTAIN THE INFORMATION FROM THE REPOSITORY OF ACCUMULATED CREDIT RECORDS BROUGHT UP TO DATE BY SUCH REPOSITORY (ACQUISITION OF THE -IN FILE- INFORMATION WILL NOT COMPLY WITH THE SPECIFICATIONS UNLESS IT HAS BEEN BROUGHT UP TO DATE BY THE REPOSITORY) AND SUBMIT WITH HIS BID A FULL EXPLANATION OF THE ARRANGEMENTS TO OBTAIN THE INFORMATION FROM THE REPOSITORY OF ACCUMULATED CREDIT RECORDS WITH THE NAME OF THE FIRM/S) FROM WHICH HE WILL PROCURE SUCH INFORMATION, THE PRICE TO BE PAID IF HE INTENDS TO PURCHASE, AND EVIDENCE OF THE AGREEMENT/S); OR (C) EXPRESSLY STATE THAT THE PRINCIPAL DEPARTMENT STORES, IF ANY, AND THE PRINCIPAL GENERAL STORES OF THE COMMUNITY OR COMMUNITIES IN THE AREA COVERED BY THE BID HAVE AGREED TO AND WILL MAKE AVAILABLE TO HIM FREELY THEIR FULL CREDIT INFORMATION ON ANY SUBJECT ON WHOM THE BIDDER WOULD PREPARE A FACTUAL DATA REPORT AND THAT THE BIDDER WILL DIRECTLY CONTACT EACH SUCH STORE IN THE COMMUNITY IN WHICH THE SUBJECT RESIDES IN EVERY SUCH CASE AND OBTAIN AND REPORT FAITHFULLY ALL SUCH INFORMATION.

"/B) THE BIDDERS ABILITY TO COMPLY WITH THE REQUIREMENTS LISTED ABOVE MUST BE ESTABLISHED TO THE SATISFACTION OF THE FEDERAL HOUSING ADMINISTRATION. ACCORDINGLY, BEFORE AN AWARD IS MADE THE FEDERAL HOUSING ADMINISTRATION MAY MAKE AN INVESTIGATION TO ASCERTAIN THE BIDDER'S ABILITY TO COMPLY WITH THE ABOVE REQUIREMENTS, OR VERIFY ANY FACTUAL STATEMENTS MADE BY THE BIDDER.

"/C) FAILURE TO INCLUDE ALL OF THE INFORMATION REQUESTED WITH THE BID MAY BE CAUSE FOR REJECTION OF THE BID. THE FOLLOWING INFORMATION MUST BE FURNISHED BY EACH BIDDER AT THE TIME OF SUBMISSION OF BID:

"/1) THE ATTACHED FHA FORM, -BIDDERS QUALIFICATIONS FOR FHA'S FACTUAL DATA REPORTS CONTRACT-.

"/2) LATEST FINANCIAL STATEMENT OF BIDDER.

"/3) AREA COVERED BY THE BID.

"/4) BID PRICE PER REPORT.'

THE FHA FORM ENTITLED "BIDDERS QUALIFICATIONS FOR FHA'S FACTUAL DATA REPORTS CONTRACT" REQUIRES THE BIDDER TO INDICATE WHETHER IT IS THE REPOSITORY OF ACCUMULATED CREDIT RECORDS OF THE PRINCIPAL DEPARTMENT AND GENERAL STORES, WHETHER THE BIDDER INTENDS TO PURCHASE THE INFORMATION FROM THE REPOSITORY, OR TO REPRESENT THAT SUCH STORES HAVE AGREED TO AND WILL FREELY MAKE AVAILABLE TO IT THEIR FULL CREDIT INFORMATION ON ANY SUBJECT, AND THAT THE BIDDER WILL DIRECTLY CONTACT EACH SUCH STORE IN EVERY CASE AND REPORT FAITHFULLY ALL SUCH INFORMATION. IN THE LATTER SITUATION, THE FORM REQUIRES BIDDERS TO ATTACH A LIST OF ALL STORES THAT HAVE AGREED TO MAKE THE INFORMATION AVAILABLE. IT IS ALSO NOTED THAT THE FORM INSTRUCTS ANY BIDDER WHO IS THE REPOSITORY OF CREDIT RECORDS TO WRITE IN THE LETTERS "N.A.' (NOT APPLICABLE) IN THE SPACES PROVIDED FOR INDICATING OTHER METHODS OF ACQUIRING CREDIT INFORMATION.

CONTRACTORS ARE REQUIRED TO FURNISH THE CREDIT INFORMATION ON EACH MORTGAGOR WHICH IS SPECIFIED ON THE FHA STANDARD FACTUAL DATA REPORT, PARAGRAPH 3 OF THE REMARKS OF WHICH PROVIDES AS FOLLOWS:

"3. THE REPORTING BUREAU CERTIFIES THAT THE SUBJECT'S CREDIT RECORD IN THE PAYMENT OF BILLS AND OTHER OBLIGATIONS HAS BEEN CHECKED: (A) ( ( THROUGH THE CREDIT ACCOUNTS EXTENDED BY THE PRINCIPAL DEPARTMENT STORES, IF ANY, AND THE PRINCIPAL GENERAL STORES OF THE COMMUNITY IN WHICH THE SUBJECT RESIDES WITH THE RESULTS INDICATED BELOW; OR, (B) ( ( THROUGH ACCUMULATED CREDIT RECORDS OF SUCH STORES OF THE COMMUNITY IN WHICH THE SUBJECT RESIDES, WITH THE RESULTS INDICATED BELOW. KIND OF SELLING HIGH OWING PAST MONTHLY PAYING BUSINESS SINCE

CREDIT DUE INSTALLMENTS RECORD"

YOUR LETTER OF NOVEMBER 13, 1968, DEFINES A REPOSITORY OF ACCUMULATED CREDIT RECORDS AS A FIRM TO WHICH THE PRINCIPAL DEPARTMENT AND GENERAL STORES IN THE AREA BEING SERVED REGULARLY AND ROUTINELY SUPPLY THEIR TRADE EXPERIENCES IN THE EXTENSION OF CREDIT.

IN THE INSTANT CASE, CREDIT SERVICE INDICATED IT WAS THE REPOSITORY OF CREDIT INFORMATION OF PRINCIPAL DEPARTMENT AND GENERAL STORES IN THE AREA ENCOMPASSED BY ITS BID AND IN ACCORDANCE WITH THE INSTRUCTIONS ON THE ABOVE MENTIONED FORM INSERTED "N/A" IN THE SPACES PROVIDED FOR OTHER METHODS OF ACQUIRING INFORMATION. YOUR LETTER OF AUGUST 27 STATES THAT A LOCAL SURVEY OF TWELVE LOCAL STORES WAS CONDUCTED ON JUNE 11, 1968, TO DETERMINE THE CREDIT EXPERIENCE AVAILABLE TO CREDIT SERVICE. THIS SURVEY INDICATED THAT FOUR STORES REGULARLY SUPPLIED CREDIT SERVICE WITH CREDIT EXPERIENCE, FIVE STORES WOULD FURNISH THE INFORMATION UPON REQUEST, TWO STORES INDICATED THEY DID NOT CONTROL THEIR CREDIT OPERATIONS, AND ONE STORE INDICATED IT WOULD NOT FURNISH THE COMPANY WITH ITS CREDIT EXPERIENCE. BASED UPON THIS SURVEY, CREDIT SERVICE WAS DISQUALIFIED FOR THE REASON THAT IT WAS NOT THE PRINCIPAL REPOSITORY OF SUCH CREDIT EXPERIENCE. WHILE THE SURVEY INDICATES THAT IT MAY HAVE BEEN POSSIBLE FOR CREDIT SERVICE TO OTHERWISE ACQUIRE THE NECESSARY CREDIT INFORMATION FROM EVERY STORE EXCEPT ONE, IT DOES NOT APPEAR FROM THE RECORD BEFORE US THAT A DETERMINATION WAS MADE AS TO ITS QUALIFICATIONS FOR OTHERWISE ACQUIRING THE NECESSARY CREDIT INFORMATION.

IT SEEMS CLEAR THAT THE REASON FOR REQUIRING A BIDDER TO INDICATE THE METHOD BY WHICH IT WOULD ACQUIRE THE NECESSARY CREDIT INFORMATION IS TO ENABLE THE CONTRACTING AGENCY TO DETERMINE THE RESPONSIBILITY OF THE BIDDER, THAT IS, ITS ABILITY TO SUPPLY FHA WITH THE TYPE OF CREDIT REPORT SPECIFIED. SUCH INFORMATION IS CLEARLY UNNECESSARY TO DETERMINE THE RESPONSIVENESS OF BIDS, THAT IS, THE BIDDER'S OBLIGATION UPON ACCEPTANCE OF ITS BID TO PERFORM THE WORK SPECIFIED BY USING ONE OR BOTH OF THE METHODS DESCRIBED IN PARAGRAPH 3 OF THE "REMARKS" PORTION OF THE FHA STANDARD FACTUAL DATA REPORT. SINCE THE STATUTES GOVERNING PUBLIC PROCUREMENT BY FORMAL ADVERTISING PERMIT AWARD ONLY TO THE RESPONSIBLE BIDDER SUBMITTING THE LOWEST RESPONSIVE BID, WE HAVE CONSISTENTLY TAKEN THE POSITION THAT OFFERS OF PROSPECTIVE CONTRACTORS MAY NOT BE REJECTED MERELY FOR FAILURE TO FURNISH WITH ITS OFFER INFORMATION REQUIRED TO ESTABLISH ITS QUALIFICATIONS, NOR CAN SUCH A REQUIREMENT IN THE INVITATION BE CONSIDERED AS HAVING THE EFFECT OF TRANSFORMING THE PURELY FACTUAL QUESTION OF RESPONSIBILITY INTO A LEGAL QUESTION OF CONFORMITY TO THE INVITATION. SEE 39 COMP. GEN. 655, 658; 39 COMP. GEN. 173, 178; 42 COMP. GEN. 728; AND 45 COMP. GEN. 4.

ACCORDINGLY, IN THE ABSENCE OF ADEQUATE EVIDENCE OF A FULL EVALUATION OF THE ABILITY OF CREDIT SERVICE TO ACQUIRE THE NECESSARY CREDIT INFORMATION AND TO FURNISH THE GOVERNMENT WITH THE CREDIT REPORTS SPECIFIED IN THE INVITATION, WE ARE UNABLE TO CONCLUDE THAT THE REJECTION OF THE COMPANY'S BID WAS JUSTIFIED. FOR THIS REASON WE ARE UNABLE AT THE PRESENT TIME TO ACCEPT THE VALIDITY OF THE CONTRACTS AWARDED IN THIS CASE COVERING THE AREA OF THE PROTESTOR'S BID, AND WE THEREFORE REQUEST THAT THE RESPONSIBILITY OF CREDIT SERVICE BE EVALUATED ON THE BASIS OF ITS ABILITY TO ACQUIRE THE CREDIT EXPERIENCE OF THE PRINCIPAL DEPARTMENT AND GENERAL STORES IN THOSE AREAS WITHIN THE JURISDICTIONAL TERRITORY OF THE MIAMI OFFICE ON WHICH CREDIT SERVICE OF MIAMI WAS LOW BIDDER AND THAT WE BE ADVISED OF YOUR DECISION. SHOULD YOUR DECISION BE FAVORABLE TO CREDIT SERVICE IT MAY THEN BECOME NECESSARY TO CANCEL EXISTING CONTRACTS, IN WHICH CASE OUR PROCEDURES ALLOW THE CONTRACTOR AN OPPORTUNITY TO PRESENT ITS VIEWS IN THE MATTER FOR OUR CONSIDERATION BEFORE A FINAL DETERMINATION IS MADE AS TO WHETHER CANCELLATION SHOULD BE EFFECTED. SHOULD YOUR DECISION BE UNFAVORABLE TO CREDIT SERVICE, WE REQUEST THAT THIS OFFICE BE PROVIDED WITH A FULLY DOCUMENTED REPORT OUTLINING THE REASONS THEREFOR.

FOR CONSIDERATION IN CONNECTION WITH THE REQUESTED EVALUATION THERE IS ENCLOSED A COPY OF A LETTER DATED SEPTEMBER 13, 1968, FROM THE PROTESTING BIDDER COMMENTING UPON THE REPORT FURNISHED BY YOUR AGENCY WITH RESPECT TO ITS QUALIFICATIONS.

YOU ARE ADVISED THAT A COPY OF THIS LETTER HAS BEEN TRANSMITTED TO THE PROTESTOR. IN VIEW OF CONGRESSIONAL INTEREST IN THIS MATTER IT IS REQUESTED THAT YOUR ACTION BE EXPEDITED.

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