B-152832, MAR. 18, 1964

B-152832, MAR. 18, 1964

TO THE HEIL COMPANY:

WE HAVE RECEIVED YOUR LETTER OF FEBRUARY 18, 1964, OBJECTING TO THE PROPOSED AWARD OF A CONTRACT BY THE DEPARTMENT OF THE ARMY PURSUANT TO INVITATION FOR BIDS NO. AMC-20-113-63-2070-/T) ON SEMI-TRAILER TANKS, FOLLOWING A FAVORABLE REEVALUATION OF THE RESPONSIBILITY OF CITY TANK CORPORATION, A SUBSIDIARY OF HAGAN INDUSTRIES, INC., AND THE LOW BIDDER FOR THE CONTRACT.

IN OUR DECISION, B-152832, DATED JANUARY 20, 1964, WHICH WAS ENCLOSED WITH OUR LETTER TO YOU OF FEBRUARY 11, 1964, WE SUSTAINED AN ACTION TAKEN BY THE DEPARTMENT OF THE ARMY WHICH IT REGARDED AS A CANCELLATION OF A CONTRACT AWARD TO THE BUTLER MANUFACTURING COMPANY, THE SECOND LOW BIDDER FOR THE ABOVE PROCUREMENT. THE BASIS FOR THAT DECISION WAS THAT "THE GOVERNMENT'S "ACCEPTANCE" " (OF BUTLER'S BID) "WAS NOT EFFECTIVE AND DID NOT BECOME A CONTRACT WHICH COULD BE VOIDED.' OF COURSE, IF A VALID CONTRACT WITH BUTLER HAD COME INTO EXISTENCE, NEITHER CITY TANK CORPORATION NOR YOUR FIRM, THE THIRD LOW BIDDER, COULD SUBSEQUENTLY HAVE BEEN CONSIDERED FOR AWARD UNDER THE SAME INVITATION.

THE RECORD SHOWS THAT PRIOR TO THE ATTEMPTED AWARD TO BUTLER ON OCTOBER 29, 1963, THE PROCURING ACTIVITY HAD DETERMINED THAT CITY TANK CORPORATION WAS NOT FINANCIALLY RESPONSIBLE. THIS DETERMINATION WAS BASED IN PART UPON A REQUEST MADE BY THE DEPARTMENT OF THE ARMY TO CITY TANK CORPORATION FOR A BANK LETTER SPECIFICALLY INDICATING THE AVAILABILITY OF CREDIT TO FINANCE PERFORMANCE OF THE PROPOSED CONTRACT. IN A LETTER DATED SEPTEMBER 13, 1963, THE MARINE MIDLAND TRUST COMPANY OF NEW YORK WROTE TO THE PHILADELPHIA PROCUREMENT DISTRICT OF THE DEPARTMENT OF THE ARMY AND ADVISED THAT ITS EXPERIENCE WITH HAGAN INDUSTRIES, INC., AND ITS SUBSIDIARIES (SPECIFICALLY INCLUDING THE CITY TANK CORPORATION) HAD ALWAYS BEEN SATISFACTORY. THIS WAS CONSIDERED BY THE DISTRICT TO BE UNSATISFACTORY IN THAT IT DID NOT CONSTITUTE A FIRM BANK COMMITMENT. SEPTEMBER 16, 1963, THE DISTRICT ADVISED CITY TANK CORPORATION THAT THE MARINE MIDLAND LETTER WAS GENERAL IN NATURE AND THEREFORE DID NOT MEET THE SPECIFIC REQUIREMENT OF INDICATING THE AMOUNT OF CREDIT AVAILABLE TO FINANCE PERFORMANCE OF THE PROPOSED CONTRACT. IT APPEARS FROM THE ABOVE FACTS AND FROM THE ADMINISTRATIVE REPORT THAT THE DISTRICT EQUATED THE ABSENCE OF A FIRM COMMITMENT WITH THE ABSENCE OF A SPECIFICALLY STATED AMOUNT OF AVAILABLE CREDIT. IN A LETTER DATED SEPTEMBER 23, MARINE MIDLAND ACKNOWLEDGED THE DISTRICT'S LETTER OF SEPTEMBER 16, 1963, AND STATED THAT WHILE IT DID NOT THINK THAT $400,000 WOULD BE REQUIRED TO COMPLETE THE CONTRACT, THE TRUST COMPANY "WOULD FEEL FAVORABLY DISPOSED TO A REQUEST BY THE COMPANY'S MANAGEMENT" FOR ANY NEEDED AMOUNT. BOTH LETTERS FROM MARINE MIDLAND WERE STAMPED WITH A STATEMENT TO THE EFFECT THAT ANY INFORMATION ON A FIRM'S RESPONSIBILITY WAS MERELY AN EXPRESSION OF OPINION SUBJECT TO CHANGE WITHOUT NOTICE AND GIVEN WITHOUT LIABILITY ON THE PART OF THE TRUST COMPANY.

ON OCTOBER 30, 1963, THE DAY AFTER THE ATTEMPT TO AWARD A CONTRACT TO BUTLER, CITY TANK CORPORATION PROTESTED TO THE DEPARTMENT OF THE ARMY AND DISPUTED THE REASONABLENESS OF THE DETERMINATION CONCERNING ITS RESPONSIBILITY. ON NOVEMBER 4, 1963, MARINE MIDLAND WROTE A LETTER TO THE PROCURING ACTIVITY ASSURING IT THAT IF $400,000 TO $500,000 WAS NEEDED FOR COMPLETION OF THE CONTRACT, IT WOULD BE MADE READILY AVAILABLE. A COPY OF THE LETTER FORWARDED WITH THE ADMINISTRATIVE REPORT INDICATES THAT IT DID NOT CONTAIN A DISCLAIMER STATEMENT, AS DID THE TWO EARLIER LETTERS. WHEN THIS OFFICE DETERMINED THAT NO CONTRACT HAD BEEN MADE WITH BUTLER, THE CONTRACTING OFFICER CONSIDERED HIMSELF FREE TO RECONSIDER THE FINANCIAL RESPONSIBILITY OF CITY TANK CORPORATION AND, ON THE BASIS OF MARINE MIDLAND'S LETTER OF NOVEMBER 4, REVERSED HIS EARLIER OPINION AND MADE A FINDING THAT CITY TANK CORPORATION HAS THE FINANCIAL RESOURCES TO PERFORM A CONTRACT AWARDED UNDER IFB NO. AMC-20-113-63-2070/T). SEE ASPR 1-905.2, WHICH PROVIDES IN RELEVANT PART:

"WHEN INFORMATION WILL BE OBTAINED. GENERALLY INFORMATION REGARDING THE RESPONSIBILITY OF A PROSPECTIVE CONTRACTOR (INCLUDING PRE-AWARD SURVEYS (SEE 1-905.4) WHEN DEEMED NECESSARY) SHALL BE OBTAINED PROMPTLY AFTER BID OPENING OR RECEIPT OF PROPOSALS. * * *. NOTWITHSTANDING THE FOREGOING, INFORMATION REGARDING FINANCIAL RESOURCES (SEE 1-903.1 (I) ( AND PERFORMANCE CAPABILITY (SEE 1-903.1 (II) ( SHALL BE OBTAINED ON AS CURRENT A BASIS AS FEASIBLE WITH RELATION TO THE DATE OF CONTRACT AWARD.'

FROM THE FOREGOING, WE CONCLUDE THAT IN ACCORDANCE WITH ASPR 1-905.2, THE CONTRACTING OFFICER HAS EMPLOYED THE MOST CURRENT INFORMATION ON FINANCIAL RESOURCES WHICH COULD BE AND WERE OBTAINED BEFORE AWARD OF A VALID CONTRACT. REEVALUATION OF A BIDDER'S RESPONSIBILITY ON THE BASIS OF INFORMATION INVOLVING SATISFACTORY CREDIT ARRANGEMENTS SECURED BY A BIDDER AFTER IT HAD INITIALLY BEEN DECLARED NONRESPONSIBLE IS NOT OBJECTIONABLE, SINCE THE ULTIMATE OBJECTIVE IS THE DETERMINATION OF RESPONSIBILITY AS OF THE TIME OF AWARD OF A CONTRACT. SEE 39 COMP. GEN. 895; AND B-131826, DATED JUNE 14, 1957, IN WHICH WE SAID:

"IN REGARD TO THE FINANCIAL CLEARANCE GRANTED ON THE SECOND FACILITIES CAPABILITY REPORT, IT IS STATED THAT THE EVIDENCE OF FINANCIAL ASSISTANCE TO BE FURNISHED BY THE HUDSON COUNTY NATIONAL BANK, THE RELDAN TRADING COMPANY AND CRUCIBLE STEEL CORPORATION, AS SUBMITTED BY RANDY WIRE WORKS, WAS CONSIDERED SUFFICIENT TO RELY UPON AS GIVING REASONABLE ASSURANCE OF SUCCESSFUL PERFORMANCE OF THE PROPOSED CONTRACT FROM A FINANCIAL STANDPOINT.

"WE HAVE CONSISTENTLY HELD THAT THE QUESTION OF RESPONSIBILITY OF BIDDERS IS PRIMARILY A MATTER FOR CONSIDERATION BY THE CONTRACTING AGENCY. SEE IN THIS CONNECTION, O-BRIEN V. CARNEY, 6 F.SUPP. 761. THE BID OF RANDY WIRE WORKS WAS A FIRM BID AND THE ACCEPTANCE THEREOF, WITHOUT ANY INVESTIGATION WHATEVER BY THE GOVERNMENT AS TO ITS RESPONSIBILITY, WOULD HAVE CREATED A VALID AND BINDING CONTRACT. THE INVESTIGATION OF THE CORPORATION'S RESPONSIBILITY WAS SOLELY FOR THE PROTECTION AND BENEFIT OF THE GOVERNMENT. ORDINARILY, A LOW BIDDER IS ENTITLED TO AN AWARD UNLESS IT IS DETERMINED THAT THE BIDDER IS NOT QUALIFIED TO PERFORM OR FOR SOME OTHER SUBSTANTIAL REASON IT IS NOT TO THE ADVANTAGE OF THE GOVERNMENT TO MAKE THE AWARD TO THE LOW BIDDER, AND OUR OFFICE HAS CONSISTENTLY HELD THAT REJECTION OF A LOW BID MUST BE JUSTIFIED BY SUBSTANTIAL GROUNDS.

"IN THE INSTANT CASE, WHILE IT WAS ORIGINALLY DETERMINED THAT RANDY WIRE WORKS WAS NOT QUALIFIED, THE CORPORATION PROTESTED SUCH DETERMINATION AND APPARENTLY WAS ABLE TO RAISE SUFFICIENT DOUBT AS TO THE ACCURACY OR COMPLETENESS OF THE FIRST PRE-AWARD SURVEY TO WARRANT FURTHER INVESTIGATION. IN SUCH CIRCUMSTANCES, THE ACTION OF THE DEPARTMENT OF THE AIR FORCE IN CONDUCTING THE SECOND PRE-AWARD SURVEY CANNOT PROPERLY BE CONSIDERED AS NOT IN THE BEST INTEREST OF THE GOVERNMENT.'

CITY TANK CORPORATION WAS THE LOW BIDDER FOR THIS PROCUREMENT. THE FINAL DETERMINATION ON ITS RESPONSIBILITY APPEARS TO HAVE BEEN REACHED AFTER THOROUGH CONSIDERATION, AND ALSO APPEARS TO HAVE BEEN BASED ON THE BEST JUDGMENT OF THE ADMINISTRATIVE OFFICIALS CHARGED WITH THE DUTY OF MAKING THIS DETERMINATION. ACCORDINGLY, WE MUST HOLD THAT THE CONTRACTING OFFICER'S INITIAL ADVERSE DETERMINATION REGARDING THE FINANCIAL RESOURCES OF CITY TANK CORPORATION, WHICH DECISION HE LATER REVERSED DOES NOT PRECLUDE A VALID AWARD OF THE CONTRACT TO THAT CORPORATION.