B-140116, NOV. 19, 1959

B-140116, NOV. 19, 1959

TO THE SECRETARY OF THE ARMY:

BY LETTER DATED JULY 28, 1959, 21ST CENTURY ELECTRONICS, INC., POST OFFICE BOX 2326, RIVERSIDE, CALIFORNIA, PROTESTED TO OUR OFFICE THE ACTION OF THE SIGNAL CORPS, DEPARTMENT OF THE ARMY, IN REFUSING TO AWARD A CONTRACT TO THAT CONCERN PURSUANT TO PROPOSAL REQUEST NO. SC 36-039-59- 10542-A1, DATED MAY 14, 1949, REQUESTING PROPOSALS FOR FURNISHING 42 RADIO SETS, TYPE AN/GRO-41.

IN CONNECTION WITH ITS PROTEST IN THIS CASE, THE COMPANY STATED THAT ON JUNE 18, 1959, THE DEPARTMENT OF THE ARMY SENT A "SURVEY TEAM" TO INSPECT ITS PLANT AND FACILITIES AND THAT THEREAFTER ON JUNE 30, 1959, A TELEPHONE CALL WAS RECEIVED FROM MAJOR ADAMS TO THE EFFECT THAT THE SIGNAL CORPS DID NOT CONSIDER THE COMPANY'S PLANT LARGE ENOUGH TO HANDLE THE CONTRACT AND THAT THE TRANSMITTERS CALLED FOR BY THE INVITATION WERE "TOO COMPLEX" FOR THAT CONCERN TO HANDLE. THE COMPANY PROTESTED THIS DETERMINATION ON THE GROUNDS THAT THEY WERE CURRENTLY DESIGNING AND BUILDING FAR MORE COMPLEX EQUIPMENT FOR THE GOVERNMENT, INCLUDING X-RAY MACHINES, REFERENCE BEING MADE TO A NUMBER OF THEN CURRENT CONTRACTS BETWEEN THAT CONCERN AND THE DEPARTMENT OF THE NAVY. ALSO, THE COMPANY INSISTED THAT IT HAD AMPLE FACILITIES, FINANCES AND CAPABILITIES TO SUCCESSFULLY CARRY OUT A CONTRACT OF THIS NATURE, IT BEING STATED THAT ITS RIVERSIDE PLANT IS A NEW MODERN ONE BUILT AND OWNED BY THE COMPANY, AND THAT ALL TEST AND SHOP EQUIPMENT IS ALSO COMPANY OWNED.

UNDER DATE OF AUGUST 6, 1959, WE REQUESTED YOUR DEPARTMENT TO FURNISH A COMPLETE REPORT WITH RESPECT TO THE PROTEST AND THE REQUESTED REPORT HAS NOW BEEN RECEIVED. THE RECORD SHOWS THAT UNDER THE CITED SOLICITATION THE U.S. ARMY SIGNAL SUPPLY AGENCY REQUESTED PROPOSALS FOR FURNISHING 42 RADIO SETS, TYPE AN-GRC-41, TO BE RECEIVED BY THE CLOSE OF BUSINESS ON JUNE 11, 1959. TEN PROPOSALS WERE RECEIVED IN RESPONSE TO THE SOLICITATION, AMONG THEM BEING THE PROPOSAL OF 21ST CENTURY ELECTRONICS, INC., IN THE AMOUNT OF $264.432, LESS ONE PERCENT FOR PAYMENT WITHIN TWENTY DAYS. AMONG OTHER THINGS, IT IS REPORTED THAT THE PROTESTANT WAS NOT A PLANNED PRODUCER FOR THE SIGNAL CORPS; THAT THE COMPANY WAS NOT ON THE MAILING LIST FOR THIS PARTICULAR SOLICITATION, AND THAT NO REQUEST WAS EVER RECEIVED FROM THE COMPANY FOR THE SUBJECT PROPOSAL REQUEST FOR BIDDING PURPOSES.

WITH THE REPORT OF YOUR DEPARTMENT THERE WAS ENCLOSED A COPY OF THE SUMMARY OF EVALUATION DATED JUNE 24, 1959, MADE BY THE EVALUATION BOARD, IN WHICH IT WAS REPORTED THAT THE COMPANY'S UNSIGNED AND UNAUDITED BALANCE SHEET DATED MARCH 31, 1959, DISCLOSED A NOMINAL WORKING CAPITAL OF $22,408 WITH 54 PERCENT OF THE TOTAL CURRENT ASSETS CENTERED IN RECEIVABLES. THE COMPANY'S NET WORTH OF $115,570 WAS REPORTED AS CONSISTING OF FIXED ASSETS IN THE AMOUNT OF $93,162--- 81 PERCENT OF THE TOTAL--- AND NET WORKING CAPITAL OF $22,408--- 19 PERCENT OF THE TOTAL. IT WAS REPORTED FURTHER THAT AS OF THE DATE OF THE REPORT THE CURRENT REPORTED BACKLOG OF $350,000 WOULD REQUIRE, FOR FINANCIAL PERFORMANCE, THE REPORTED RESOURCES EVEN BEFORE THE ADDITION OF THE PROPOSED AWARD; ALSO, THAT THE COMPANY'S ANTICIPATED TEN MONTHS FOR COMPLETION DID NOT APPEAR REALISTIC WHEN RELATED TO CURRENT SALES OF $73,822 DURING A THREE MONTH PERIOD. THE RECORD INDICATES THAT ON JUNE 19, 1959, THE COMPANY WAS VISITED BY A QUALIFIED ENGINEER OF THE SIGNAL EQUIPMENT SUPPORT (SUPPLY) AGENCY, WHO FOUND THAT THE COMPANY HAD ONE GRADUATE ELECTRONIC ENGINEER WHOSE FIELD WAS RADIO EQUIPMENT. HOWEVER, THE COMPANY DID HAVE SEVERAL ENGINEERS OF VARIED BACKGROUNDS, BUT HAD NO PRIOR EXPERIENCE IN THE PRODUCTION OF TRANSMITTERS.

RESPECTING THE PROTEST IT IS REPORTED FURTHER THAT THE SPECIFICATIONS AND DRAWINGS WERE NOT REQUESTED BY THE COMPANY AND NEITHER DID A REPRESENTATIVE OF THE COMPANY VIEW THE MODEL WHICH WAS ON DISPLAY AT FORT MONMOUTH, NEW JERSEY. SINCE THE SOLICITATION SPECIFIED RADIO SET AN/GRC- 41, IN ACCORDANCE WITH MILITARY SPECIFICATIONS MIL-R-11769B WITH AMENDMENT NO. 2, APPROXIMATELY 350 SIGNAL CORPS DRAWINGS, AND THE MODEL WITH THE MANY EXCEPTIONS LISTED IN NOTE NO. 3 OF THE SOLICITATION, COLONEL J. G. BENT, JR., DEPUTY FOR PROCUREMENT, EXPRESSED THE VIEW THAT IT IS DIFFICULT TO SEE HOW A REALISTIC BID COULD HAVE BEEN SUBMITTED UNDER THE CIRCUMSTANCES. THE REPORT OF THE EVALUATION BOARD CONCLUDED WITH THE FOLLOWING PARAGRAPHS:

"5. THE COMPANY HAS HAD NO EXPERIENCE IN ELECTRONIC EQUIPMENT SIMILAR IN SIZE AND COMPLEXITY TO THE AN/GRC-41. THE COMPLEXITY OF THIS EQUIPMENT IS MUCH GREATER THAN THE TYPE OF EQUIPMENT PREVIOUSLY OR CURRENTLY BEING MADE BY THIS COMPANY AND THE BIDDER LACKS THE ADMINISTRATIVE PURCHASING AND MECHANICAL FACILITIES FOR HANDLING THIS EQUIPMENT.

"6. IN SUMMATION, THE CONTRACTOR DOES NOT MEET THE CRITERIA OF RESPONSIBILITY AS CITED IN ASPR 1-903.1 (II) AND 1.903.2 (I), THAT HE IS TECHNICALLY AND FINANCIALLY INCAPABLE OF ASSURING SATISFACTORY PERFORMANCE. REFERRAL TO THE SMALL BUSINESS ADMINISTRATION IS NOT REQUIRED UNDER THE DEFINITION OF "CAPACITY" AS CITED IN ASPR 1-705.6 (A) AND 1-903.1 (III).'

IN A SUPPLEMENTARY STATEMENT DATED AUGUST 28, 1959, THE CHIEF OF THE LEGAL DIVISION, OFFICE OF THE CHIEF SIGNAL OFFICER, STATED THAT THE PROPOSAL OF 21ST CENTURY ELECTRONICS, INC., WAS NOT REFERRED TO THE SMALL BUSINESS ADMINISTRATION BY THE CONTRACTING OFFICER FOR A CERTIFICATE OF COMPETENCY BECAUSE, AT THE TIME OF THE ACTION, ASPR 1 705.6 (A) AND 1- 903.1 (III) WERE NOT INTERPRETED BY THE PROCURING ACTIVITY AS REQUIRING SUCH ACTION IN THOSE CASES WHERE THE PROSPECTIVE CONTRACTOR WAS DETERMINED TO BE LACKING IN TECHNICAL ABILITY TO PERFORM THE CONTRACT. IT WAS STATED ALSO THAT THE ACTION TAKEN IN THIS CASE WAS PRIOR TO THE RECEIPT OF INFORMATION CONCERNING THE HOLDING IN OUR DECISION OF JUNE 24, 1959, B- 139366. A SIMILAR VIEW WAS EXPRESSED BY COLONEL BENT IN HIS REPORT OF AUGUST 21, 1959.

IN THE DECISION OF JUNE 24, 1959, WE HAD UNDER CONSIDERATION A PROTEST BY THE AMECO ELECTRONIC CORPORATION AGAINST THE AWARD OF A CONTRACT TO ANY BIDDER OTHER THAN ITSELF UNDER INVITATION FOR BIDS NO. SC-36-039-59-1651- A3, ISSUED ON JANUARY 14, 1959, BY THE SIGNAL SUPPLY AGENCY. IN THAT CASE THE INVITATION REQUESTED BIDS, UNDER A SMALL BUSINESS SET ASIDE, FOR FURNISHING A QUANTITY OF FREQUENCY METERS. UPON OPENING OF BIDS ON FEBRUARY 10, 1959, IT WAS FOUND THAT THE LOWEST BID IN THE NET AMOUNT OF $509,812 WAS SUBMITTED BY AMECO. A CERTIFICATE OF COMPETENCY WAS ISSUED TO AMECO ON MARCH 27, 1959, HOWEVER, IT WAS THE OPINION OF YOUR DEPARTMENT THAT THE CERTIFICATE OF COMPETENCY ISSUED BY SBA TO AMECO WAS NOT CONCLUSIVE UPON THE CONTRACTING OFFICER SINCE SUCH ELEMENTS OF RESPONSIBILITY AS EXPERIENCE, SKILL,"KNOW-HOW," TECHNICAL KNOWLEDGE, QUALITY OF PRODUCTION, QUALITY OF PERSONNEL, JUDGMENT AND SOUND BUSINESS MANAGEMENT OF A PROSPECTIVE CONTRACTOR ARE NOT WITHIN THE PURVIEW OF THE CERTIFICATE OF COMPETENCY, THAT IS TO SAY, YOUR DEPARTMENT VIEWED THE CERTIFICATE AS GOING ONLY TO THE CREDIT AND THE PHYSICAL ABILITY OF A PROSPECTIVE CONTRACTOR TO PERFORM.

THE MATTER WAS CONSIDERED AT LENGTH IN THE DECISION OF JUNE 24, 1959, AND WE EXPRESSED THE OPINION THAT THE TERM "CAPACITY" AS USED IN SECTION 8 (B) (7) OF PUBLIC LAW 85-536, APPROVED JULY 18, 1958, HAS REFERENCE TO THE OVER-ALL ABILITY OF A PROSPECTIVE SMALL BUSINESS CONTRACTOR TO MEET QUALITY, QUANTITY, AND TIME REQUIREMENTS OF A PROCUREMENT AS TO WHICH A CERTIFICATE OF COMPETENCY HAS BEEN ISSUED. ACCORDINGLY, IT WAS HELD THAT ELEMENTS OF RESPONSIBILITY RELATING TO A CONTRACTOR'S ABILITY TO PERFORM, EXPERIENCE, SKILL,"KNOW-HOW," TECHNICAL KNOWLEDGE, ETC., ARE INCLUDED IN THE CERTIFICATE OF COMPETENCY ISSUED TO A CONTRACTOR. FOR READY REFERENCE A COPY OF THE DECISION OF JUNE 24, 1959, IS ENCLOSED.

IN VIEW OF THE AUTHORITY VESTED IN THE SMALL BUSINESS ADMINISTRATION BY THE CITED ACT OF JULY 18, 1958, TO DETERMINE THE "CAPACITY" OF A PROSPECTIVE SMALL-BUSINESS CONTRACTOR TO PERFORM A PARTICULAR CONTRACT, IT APPEARS THAT ACTION IN THIS CASE SHOULD HAVE BEEN TAKEN BY YOUR DEPARTMENT TO REFER THE MATTER TO SBA FOR SUCH DETERMINATION. THE RECORD INDICATES THAT THE DECISION OF JUNE 24, 1959, WAS NOT BROUGHT TO THE CONTRACTING OFFICER'S ATTENTION PRIOR TO THE AWARD ON JUNE 30, 1959, OF A CONTRACT IN THIS CASE. THEREFORE AND SINCE THE CONTRACT HAS NOW BEEN IN EFFECT FOR MORE THAN FOUR MONTHS, IT IS OUR VIEW THAT THE INTERESTS OF THE UNITED STATES WILL BEST BE SERVED BY ALLOWING THE CONTRACT TO STAND.