B-149063, JUL. 16, 1962

B-149063, JUL. 16, 1962

TO DIMOND AND THORMAN:

ON BEHALF OF OCTAGON PROCESS, INC., EDGEWATER, NEW JERSEY, YOU HAVE BY LETTER DATED JUNE 1, 1962, PROTESTED THE REJECTION OF THAT FIRM'S BID SUBMITTED IN RESPONSE TO INVITATION NO. 160-1170-62, ISSUED BY THE YARDS AND DOCKS SUPPLY OFFICE, DEPARTMENT OF THE NAVY, PORT HUENEME, CALIFORNIA.

THE REFERRED-TO INVITATION REQUESTED BIDS FOR FURNISHING FOUR NUMBERED ITEMS OF CARBON-REMOVING COMPOUND. YOUR CLIENT SUBMITTED THE LOWEST BID ON ITEMS 1, 2, AND 4 AND THE TOTAL AMOUNT OF ITS BID ON THESE THREE ITEMS WAS $2,658.89. HOWEVER, ON THE BASIS OF A THOROUGH REVIEW OF YOUR CLIENT'S RESPONSIBILITY AS A POTENTIAL CONTRACTOR, IT WAS CONCLUDED THAT AN AFFIRMATIVE DETERMINATION THAT OCTAGON PROCESS, INC., WAS A RESPONSIBLE BIDDER COULD NOT BE MADE SINCE IT DID NOT HAVE A SATISFACTORY RECORD OF PERFORMANCE UNDER 17 PRIOR CONTRACTS. ACCORDINGLY, THE BID OF YOUR CLIENT ON ITEMS 1, 2, AND 4 WAS REJECTED AND THESE ITEMS WERE AWARDED TO THE NEXT LOWEST RESPONSIBLE BIDDERS THEREON.

IN YOUR LETTER OF JUNE 1, 1962, YOU STATE:

"BY TELEGRAM DATED MAY 31, 1962, TO THE CONTRACTING OFFICER, OUR CLIENT, OCTAGON PROCESS INC. PROTESTED THE AWARD OF A CONTRACT BASED UPON THE FOLLOWING STATEMENT BY THE CONTRACTING OFFICER:

" "REFERENCE INVITATION FOR BIDS IFB 160-1170-62 WHICH OPENED 18 MAY 1962.

" "YOUR BID ON THIS INVITATION WAS REJECTED AS YOU WERE FOUND TO BE A NON -RESPONSIBLE SUPPLIER DUE TO YOUR CURRENTLY DELINQUENT STATUS ON CONTRACT N160-30175.'

"OCTAGON HAS ONLY ONE OUTSTANDING CONTRACT WITH THIS PROCUREMENT ACTIVITY. OCTAGON HAS BEEN UNABLE TO COMPLETE DELIVERY SOLELY BECAUSE OF AN ISSUE AS TO MARKINGS ON CADMIUM BALLS. SINCE THE MATERIAL IS ON HAND WITHOUT THE MARKING, OCTAGON HAS OFFERED TO REDUCE ITS PRICE IN CONSIDERATION FOR THE DEVIATION.

"IFB-160-1170-62 INVOLVED AN AWARD IN EXCESS OF $10,000. IT IS OUR UNDERSTANDING THAT THE REGULATIONS REQUIRE THAT IF THERE IS ANY QUESTION OF COMPETENCY, THE MATTER SHOULD BE SUBMITTED TO THE SMALL BUSINESS ADMINISTRATION FOR A DETERMINATION AS TO WHETHER IT WOULD ISSUE A CERTIFICATE OF COMPETENCY.'

AS TO THE BASES USED BY THE CONTRACTING OFFICER AND THE CONTRACT REVIEW BOARD FOR DECLARING THAT YOUR CLIENT WAS A NONRESPONSIBLE BIDDER FOR PURPOSES OF AWARD UNDER THE SUBJECT INVITATION, THE RECORD INDICATES THAT YOUR CLIENT'S PERFORMANCE UNDER CONTRACT NO. N160 30175, THE CONTRACT WHICH YOU MENTION IN YOUR LETTER, WAS NOT THE SOLE BASIS USED BY THAT OFFICER AND THE BOARD IN MAKING SUCH DECLARATION, BUT THAT ITS PERFORMANCE UNDER 16 OTHER CONTRACTS WAS ALSO CONSIDERED. IT IS REPORTED THAT DURING THE PERIOD BETWEEN SEPTEMBER 1961 AND THE DATE OF THE DECLARATION OF NONRESPONSIBILITY, YOUR CLIENT WAS AWARDED 23 CONTRACTS; THAT IN 17 OF THESE INSTANCES YOUR CLIENT HAD FAILED TO DELIVER IN ACCORDANCE WITH THE DELIVERY REQUIREMENTS OF THE CONTRACTS; AND THAT THIS HABITUAL DELINQUENCY RATE TRANSLATED ITSELF INTO A 74 PERCENT DELINQUENCY FACTOR WHICH WAS CONSIDERED UNTENABLE.

IN YOUR LETTER YOU STATE THAT SINCE THE INVITATION INVOLVES AN AWARD IN EXCESS OF $10,000 IT IS YOUR UNDERSTANDING THAT REGULATIONS REQUIRE THAT ANY QUESTION OF COMPETENCY SHOULD BE SUBMITTED TO THE SMALL BUSINESS ADMINISTRATION (SBA) FOR A DETERMINATION AS TO WHETHER IT WOULD ISSUE A CERTIFICATE OF COMPETENCY. WHILE IT IS TRUE THAT THE TOTAL AMOUNT OF THE AWARDS MADE UNDER THE INVITATION IN QUESTION DID EXCEED $10,000 THE TOTAL AMOUNT OF THE PROPOSED AWARD OF ITEMS 1, 2, AND 4 TO YOUR CLIENT WAS ONLY $2,658.89. PARAGRAPH 1-705.6 (B) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR) REQUIRES CONTRACTING OFFICERS TO NOTIFY SBA WHEN THE BID OF A SMALL-BUSINESS CONCERN IS REJECTED FOR REASONS OF CAPACITY OR CREDIT AND TO WITHIN THE AWARD FOR A DESIGNATED PERIOD OF TIME DURING WHICH SBA MAY ISSUE A CERTIFICATE OF COMPETENCY. HOWEVER, ASPR 1-705.6 (B) (III) PROVIDES THAT A REFERRAL IS NOT MANDATORY FOR CONTRACTS INVOLVING LESS THAN $10,000. SINCE THE AMOUNT OF THE PROPOSED AWARD TO YOUR CLIENT WAS LESS THAN $10,000 IT WAS WITHIN THE CONTRACTING OFFICER'S DISCRETION AS TO WHETHER HE SHOULD FOLLOW THE PRESCRIBED PROCEDURE.

WE HAVE CONSISTENTLY HELD THAT THE QUESTION AS TO THE QUALIFICATIONS OF A PROPOSED CONTRACTOR IS PRIMARILY THE FUNCTION OF THE PROCUREMENT AGENCY AND, UNLESS THERE IS A SHOWING OF BAD FAITH OR LACK OF A REASONABLE BASIS FOR THE DETERMINATION AS MADE, WE ARE NOT REQUIRED TO OBJECT TO THE DETERMINATION. 37 COMP. GEN. 798. OUR REVIEW OF THE ADMINISTRATIVE ACTION TAKEN HERE DOES NOT SHOW THAT THE REJECTION WAS ARBITRARY OR CAPRICIOUS OR NOT SUPPORTED BY FACTUAL EVIDENCE.

IN VIEW OF THE FOREGOING, WE MUST CONCLUDE THAT THE AWARD ACTION TAKEN BY THE DEPARTMENT OF THE NAVY IN THE MATTER IS NOT SUBJECT TO LEGAL OBJECTION.