B-129878, DEC. 4, 1956

B-129878, DEC. 4, 1956

TO THE SECRETARY OF THE NAVY:

REFERENCE IS MADE TO A LETTER OF NOVEMBER 26, 1956, FROM THE ASSISTANT SECRETARY OF THE NAVY (MATERIAL), REQUESTING OUR DECISION AS TO WHETHER THE FACT THAT RESPONSIVE BIDS TO THE SAME INVITATION WERE SUBMITTED BY THE RELIANCE MANUFACTURING COMPANY, INC., AND THE PIONEER PARACHUTE COMPANY, INC., ALL OF WHOSE STOCK IS OWNED BY RELIANCE, NECESSITATES REJECTION OF BOTH BIDS.

YOU STATE THAT THERE IS NO APPARENT INTENDED DECEPTION CONCERNING THE RELATIONSHIP OF THE TWO CORPORATE BIDDERS SINCE THE GOVERNMENT WAS FULLY AND PROPERLY ADVISED OF THE CIRCUMSTANCES. FURTHER, THE PARENT CORPORATION, RELIANCE, HAS STATED THAT FOR THE TIME BEING PIONEER AS A WHOLLY-OWNED SUBSIDIARY "SHALL CONTINUE TO OPERATE AS AN INDEPENDENT ENTITY AND IN COMPETITION WITH THE INDUSTRIAL PRODUCTS AND PARACHUTE DIVISION OF THIS CORPORATION.'

THE GENERAL RULE IS THAT A CORPORATION WILL BE CONSIDERED A LEGAL ENTITY, SEPARATE AND DISTINCT FROM ITS STOCKHOLDERS, UNLESS IT CAN BE SHOWN BY APPROPRIATE EVIDENCE THAT RECOGNITION OF THE SEPARATE CORPORATE ENTITY WILL PROMOTE FRAUD, INJUSTICE, OR WILL CONTRAVENE PUBLIC POLICY. 105841, OCTOBER 17, 1951. NO SUCH SHOWING HAS BEEN MADE IN THIS CASE. STATED IN YOUR LETTER, THERE IS THE INHERENT POSSIBILITY OF CONCERT, PERHAPS COLLUSIVE, IN ANY CASE OF COMMON OWNERSHIP AND CONTROL, AND SPECIAL ATTENTION SHOULD THEREFORE BE GIVEN TO SUCH CASES BY CONTRACTING OFFICERS. IN THE ABSENCE OF A FINDING BY THE CONTRACTING OFFICER THAT SUCH A CONDITION EXISTS IN THIS CASE, HOWEVER, WE PERCEIVE NO REASON WHY BOTH BIDS SHOULD NOT BE CONSIDERED.