B-140732, DEC. 23, 1959

B-140732, DEC. 23, 1959

TO VACUDYNE CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR PROTEST AGAINST AN AWARD TO ANOTHER BIDDER UNDER INVITATION FOR BIDS NO. 42-600-59-354 ISSUED BY HEADQUARTERS, OGDEN AIR MATERIEL AREA, HILL AIR FORCE BASE, UTAH, ON JUNE 26, 1959. YOUR ATTORNEY'S LETTER OF SEPTEMBER 21, 1959, IT IS CONTENDED THAT THE LOW BIDDER, AERO-TEST EQUIPMENT COMPANY, INC., (HEREINAFTER REFERRED TO AS AERO-TEST) IS NOT A QUALIFIED AND RESPONSIBLE BIDDER, MENTION BEING MADE OF CERTAIN APPLICABLE REGULATIONS, THE RECENT BANKRUPTCY OF AERO-TEST AND THE ALLEGED LACK OF TECHNICAL SKILLS AND EXPERIENCE IN ITS PRESENT MANAGEMENT. THERE HAVE BEEN RECEIVED AND CONSIDERED, ALSO, YOUR ATTORNEY'S LETTER OF DECEMBER 14, 1959, AND HIS MEMORANDUM ENCLOSED THEREWITH.

THE INVITATION REQUESTED BIDS FOR FURNISHING FOUR ALTITUDE CHAMBERS TO BE INSTALLED BY THE CONTRACTOR (TWO AT ANDREWS AIR FORCE BASE, WASHINGTON, D.C., AND TWO AT THE UNITED STATES AIR FORCE ACADEMY, COLORADO SPRINGS, COLORADO). IT IS REPORTED THAT BIDS WERE OPENED AUGUST 13, 1959.

IN RESPONSE TO THE INVITATION, AERO-TEST SUBMITTED THE LOW BID OF $229,430.50. THE FIVE OTHER BIDS RECEIVED RANGED FROM $250,856 (YOUR BID) TO $373,664. THE DEPARTMENT OF THE AIR FORCE STATES THAT NO AWARD HAS BEEN MADE PENDING THE RESOLUTION OF YOUR PROTEST.

THE DEPARTMENT REPORTS THAT A FAVORABLE FACILITY CAPABILITY REPORT ON AERO-TEST WAS RECEIVED FROM THE DALLAS AIR PROCUREMENT DISTRICT OF THE SAN ANTONIO AIR MATERIEL AREA. FULFILLMENT OF THE REQUIREMENTS OF ARMED SERVICES PROCUREMENT REGULATION 1-903.1 FOR GENERAL STANDARDS FOR RESPONSIBLE PROSPECTIVE CONTRACTORS AS TO TECHNICAL AND FINANCIAL COMPETENCY IS REPORTED TO BE FURTHER SHOWN BY THE SUCCESSFUL PERFORMANCE OF A MUCH LARGER CONTRACT (NO. AF 42-/600/-18635) FOR CHAMBERS SIMILAR TO THOSE COVERED BY INVITATION NO. 42-600-59-354; ALSO, BY THE PRESENT EMPLOYMENT OF FIVE SKILLED ENGINEERING PERSONNEL BY AERO-TEST. THE FILE INCLUDES, ALSO, A PHOTOSTATIC COPY OF A LETTER DATED AUGUST 19, 1959, FROM THE FIRST NATIONAL BANK INDALLAS TO AERO TEST AFFIRMING AN UNSECURED LINE OF CREDIT IN THE AMOUNT OF $1,000,000.

WITH RESPECT TO THE BANKRUPTCY OF AERO-TEST, THE FILE SHOWS THAT ON AUGUST 6, 1959, THE REFEREE IN BANKRUPTCY IN THE DISTRICT COURT OF THE UNITED STATES FOR THE NORTHERN DISTRICT OF TEXAS ISSUED AN ORDER OF CONFIRMATION OF MODIFIED PLAN OF ARRANGEMENT UNDER CHAPTER XI OF THE BANKRUPTCY ACT, APPROVING AND CONFIRMING THE MODIFIED PLAN, TERMINATING THE RECEIVERSHIP, DISCHARGING THE RECEIVER AND DISMISSING THE PROCEEDING. IT APPEARS THAT A DIVIDEND OF 10 PERCENT HAD BEEN PAID TO UNSECURED CREDITORS AND THE APPROVED PLAN PROVIDED FOR GIVING UNSECURED NON-INTEREST -BEARING NOTES TO UNSECURED CREDITORS IN THE PRINCIPAL AMOUNTS DUE, PAYABLE WITHIN FIVE YEARS.

THE FILE SHOWS A MATERIAL CHANGE IN THE FINANCIAL CONDITION OF AERO TEST SINCE RECEIPT OF THE NEGATIVE FACILITY CAPABILITY REPORT IN JULY 1958 IN CONNECTION WITH A PRIOR PROCUREMENT, SUCH CHANGE RESULTING FROM THE RELEASE FROM BANKRUPTCY AND THE ACQUISITION OF SUBSTANTIAL FINANCIAL BACKING.

CONTRACT NO. AF 42/600/-18635 HEREINBEFORE MENTIONED (APPARENTLY ERRONEOUSLY REFERRED TO IN YOUR ATTORNEY'S LETTER AS NO. 42/600/57-292), IN THE AMOUNT OF $1,369,650, COVERED CHAMBERS SIMILAR TO THOSE INVOLVED IN THE INSTANT PROCUREMENT. IT IS REPORTED THAT AS A RESULT OF CHANGES IN THE SPECIFICATIONS WHICH INCREASED THE SCOPE OF THE WORK AND THE COST OF FURNISHING CERTAIN EQUIPMENT ORIGINALLY SPECIFIED TO BE FURNISHED BY THE GOVERNMENT, THE CONTRACT PRICE WAS INCREASED TO $1,694,002. THE COMPLETION DATE WAS EXTENDED FROM AUGUST 1, 1959, TO NOVEMBER 1, 1959, BECAUSE OF DELAYS ON THE PART OF THE BUILDING CONTRACTOR UNDER THE JURISDICTION OF THE CORPS OF ENGINEERS. THE DEPARTMENT OF THE AIR FORCE STATES:

"AERO-TEST EQUIPMENT CO. HAS BEEN READY TO DELIVER ON TIME THROUGHOUT THE LIFE OF THE CONTRACT AND ANY DELAYS HAVE BEEN OCCASIONED BY THE GOVERNMENT. AS PREVIOUSLY STATED, AERO-TEST EQUIPMENT CO. HAS FURNISHED SATISFACTORY PERFORMANCE IN ALL RESPECTS UNDER CONTRACT NO. AF 42/600/- 18365.'

ARMED SERVICES PROCUREMENT REGULATION 1-903.2/1) REQUIRES A CONTRACTOR EITHER TO POSSESS OR TO HAVE THE ABILITY TO OBTAIN THE NECESSARY TECHNICAL EQUIPMENT AND FACILITIES TO PERFORM THE CONTRACT. IT IS REPORTED THAT UNDER THE REFERRED-TO CONTRACT NO. AF 42/600/ 18635, AERO-TEST MADE EXTENSIVE USE OF VECTOR ENGINEERING COMPANY, DALLAS, TEXAS, AS ENGINEERING CONSULTANTS, AND THAT ITS SERVICES ARE AVAILABLE IF REQUIRED. THERE IS TO BE NOTED ALSO THE FACT, AS ABOVE STATED, THAT AERO-TEST NOW EMPLOYS FIVE SKILLED ENGINEERING PERSONNEL.

WITH RESPECT TO THE AUTHORITY OF THE PERSON WHO SIGNED THE AERO TEST BID, THE FILE INCLUDES A PHOTOSTATIC COPY OF A LETTER DATED OCTOBER 6, 1959, FROM THE REFEREE IN BANKRUPTCY, AS FOLLOWS:

"MR. BILL W. SOLLEY SIGNED ALL BIDS AND CONTRACTS WHILE AERO-TEST EQUIPMENT COMPANY, INC., WAS UNDER THE JURISDICTION OF THE BANKRUPTCY COURT. AS PRESIDENT OF THE COMPANY AND GENERAL MANAGER, MR. SOLLEY SIGNED SUCH BIDS AND CONTRACTS WITH AUTHORITY EXTENDED HIM BY THE RECEIVER, MR. G. E. LAWRENCE.'

A LETTER DATED OCTOBER 26, 1959, FROM THE REFEREE IN BANKRUPTCY TO THE DALLAS AIR PROCUREMENT DISTRICT STATES IN PERTINENT PART:

"THE UNITED STATES BANKRUPTCY COURT APPOINTED MR. GEORGE E. LAWRENCE TO ACT AS THE RECEIVER FOR AERO-TEST EQUIPMENT COMPANY, INC. MR. LAWRENCE, THE RECEIVER, IN TURN APPOINTED MR. BILL W. SOLLEY TO ACT AS PRESIDENT AND GENERAL MANAGER OF THIS CORPORATION, WITH FULL AUTHORITY TO SIGN ALL BIDS AND CONTRACTS AND TO FUNCTION AS ADMINISTRATIVE HEAD OF THE CORPORATION. THIS AUTHORITY WAS WITH THE FULL KNOWLEDGE AND APPROVAL OF THE REFEREE IN BANKRUPTCY.

"MANY CONTRACTS WERE OBTAINED AND SUCCESSFULLY COMPLETED TO THE SATISFACTION OF THE COURT AS WELL AS THE AIR FORCE WHILE OPERATING WITH THIS ARRANGEMENT.'

SINCE THE ACTIONS OF THE RECEIVER IN THIS MATTER, INCLUDING THE APPOINTMENT OF MR. BILL W. SOLLEY "TO ACT AS PRESIDENT AND GENERAL MANAGER OF THIS CORPORATION, WITH FULL AUTHORITY TO SIGN ALL BIDS AND CONTRACTS AND TO FUNCTION AS ADMINISTRATIVE HEAD OF THE CORPORATION," ARE SHOWN TO HAVE BEEN TAKEN WITH THE FULL KNOWLEDGE AND APPROVAL OF THE COURT, THERE APPEARS NO PROPER BASIS FOR OUR OFFICE TO QUESTION THE LEGALITY OF THOSE ACTIONS OR THE PROPRIETY OF THE COURT'S APPROVAL, INSOFAR AS THE DETERMINATION OF THE AUTHORITY AND QUALIFICATIONS OF A BIDDER ARE CONCERNED. THIS CONCLUSION APPEARS ESPECIALLY JUSTIFIED IN VIEW OF THE LANGUAGE OF THE REFEREE'S ORDER DATED MARCH 28, 1958, QUOTED IN PART IN YOUR ATTORNEY'S REFERRED-TO MEMORANDUM, AS FOLLOWS:

"THAT GEORGE E. LAWRENCE OF DALLAS, TEXAS, BE, AND HE HEREBY IS, APPOINTED RECEIVER OF ALL PROPERTY OF WHATSOEVER NATURE AND WHERESOEVER LOCATED, NOW OWNED BY OR IN POSSESSION OF SAID DEBTOR, AND ALL OR ANY PROPERTY WHERESOEVER LOCATED AND OF WHATSOEVER NATURE, BEING PROPERTY OF SAID DEBTOR, AND IN POSSESSION OF ANY AGENT, SERVANT, OFFICER, OR REPRESENTATIVE OF SAID DEBTOR, WITH AUTHORITY TO TAKE POSSESSION OF,PRESERVE, CARE FOR, INVENTORY, INSURE, SEGREGATE, AND MOVE ALL ASSETS OF SAID DEBTOR UNTIL THE APPOINTMENT AND QUALIFICATION OF A TRUSTEE HEREIN, AND WITH FURTHER AUTHORITY TO COLLECT SUCH ACCOUNTS RECEIVABLE THAT ARE DUE TO SAID ESTATE, AND WITH FURTHER AUTHORITY TO CONDUCT THE BUSINESS, AND SAID RECEIVER IS AUTHORIZED TO DO ALL AND ANY SUCH ACTS AND TAKE ALL AND ANY SUCH PROCEEDING AS MAY ENABLE HIM FORTHWITH TO OBTAIN POSSESSION OF ALL AND ANY SUCH PROPERTY AND TO PROSECUTE OR DEFEND ANY PENDING SUIT OR PROCEEDING BY OR AGAINST THE DEBTOR AND TO COMMENCE AND PROSECUTE ANY SUIT OR PROCEEDING IN BEHALF OF THE ESTATE WHICH MAY SEEM NECESSARY TO PRESERVE THE SAME OR TO PREVENT LOSS THERETO.

"THAT THE DUTIES AND COMPENSATION OF SAID RECEIVER ARE HEREBY SPECIFICALLY EXTENDED BEYOND THOSE OF A MERE CUSTODIAN WITHIN THE MEANING OF SECTION 48 OF THE BANKRUPTCY ACT TO EMBRACE THE CONDUCT OF THE BUSINESS AND MARSHALLING OF ASSETS, PREPARATION OF INVENTORIES, COLLECTION, SALE, AND DISPOSITION OF ACCOUNTS AND NOTES RECEIVABLE, AND CONDUCT OF THE BUSINESS OF SAID DEBTOR AS HEREINABOVE SPECIFICALLY AUTHORIZED.'

THE QUOTED LANGUAGE OF THE ORDER APPARENTLY WAS INTENDED AND REGARDED BY THE COURT AS AUTHORIZING ACTIONS BY THE REFEREE "BEYOND THOSE OF A MERE CUSTODIAN," INCLUDING THE SIGNING OF BIDS AND CONTRACTS WITHOUT THE NECESSITY OF OBTAINING SPECIFIC APPROVAL OF THE COURT FOR EACH BID OR CONTRACT. THE PROCEDURE FOLLOWED IN THIS MATTER WELL MIGHT BE REGARDED AS CONSISTENT WITH THE APPARENT PURPOSE OF THE BANKRUPTCY ACT AS AMENDED TO BENEFIT CREDITORS BY PROVIDING, UNDER CERTAIN CONDITIONS, FOR THE CONTINUED OPERATION OF A DEBTOR'S BUSINESS.

IT HAS BEEN HELD CONSISTENTLY THAT THE QUESTION OF THE QUALIFICATIONS OF A PROPOSED CONTRACTOR PRIMARILY IS FOR DETERMINATION BY THE ADMINISTRATIVE OFFICERS CONCERNED AND SUCH DETERMINATION WILL NOT BE QUESTIONED BY US IN THE ABSENCE OF A CLEAR SHOWING OF BAD FAITH OR LACK OF A REASONABLE FACTUAL BASIS THEREFOR. 37 COMP. GEN. 430; ID. 676; ID. 798; 36 ID. 42. IN THE INSTANT MATTER, THE FILE INDICATES THAT THERE IS A REASONABLE BASIS FOR REGARDING AERO-TEST EQUIPMENT COMPANY, INC., AS A QUALIFIED AND RESPONSIBLE BIDDER. THEREFORE, WE OFFER NO OBJECTION TO CONSIDERATION OF ITS BID AND AWARD TO IT IF DEEMED BY THE ADMINISTRATIVE OFFICE TO BE IN THE INTEREST OF THE UNITED STATES. THE SECRETARY OF THE AIR FORCE IS BEING ADVISED ACCORDINGLY.