B-159247, AUG. 26, 1966

B-159247, AUG. 26, 1966

TO ELECTRO NEUTRONICS, INC.:

REFERENCE IS MADE TO YOUR LETTER OF JULY 11, 1966, PROTESTING AGAINST THE MAKING OF ANY AWARD OTHER THAN TO ELECTRO NEUTRONICS, INC. (ENI), UNDER INVITATION FOR BIDS (IFB) 600-690-66, ISSUED BY THE U.S. NAVY PURCHASING OFFICE, WASHINGTON, D.C.

THE INVITATION REQUESTED BIDS FOR A MULTIYEAR PROCUREMENT OF REACTOR MONITORING EQUIPMENT FOR INSTALLATION ABOARD NUCLEAR POWERED SUBMARINES AND SURFACE SHIPS. SIX BIDS WERE RECEIVED AND OPENED ON MARCH 2, 1966, OF WHICH THE ONE SUBMITTED BY YOUR FIRM (A SMALL BUSINESS CONCERN) IN THE AMOUNT OF $365,200, WAS THE LOWEST. ALTHOUGH AWARD OF THE CONTRACT HAS NOT BEEN MADE AS YET, THE CONTRACTING OFFICER PROPOSES TO MAKE THE AWARD TO THE SECOND LOWEST BIDDER, NUCLEAR CORPORATION OF AMERICA, IN THE AMOUNT OF $383,626, BASING HIS DECISION UPON A REVISED PREAWARD SURVEY REPORT THAT ENI IS A NONRESPONSIBLE BIDDER FOR PURPOSES OF THIS CONTRACT, AND THE REQUIREMENT OF 10 U.S.C. 2305 (C), AS IMPLEMENTED BY ARMED SERVICES PROCUREMENT REGULATIONS (ASPR) 1-902, AND 1-904, THAT CONTRACTS BE AWARDED ONLY TO RESPONSIBLE PROSPECTIVE CONTRACTORS.

YOUR PROTEST IS MADE ON SEVERAL GROUNDS WHICH RELATE PRINCIPALLY TO THE PROPRIETY OF NAVY'S ACTIONS IN FINDING YOUR FIRM TO BE NONRESPONSIBLE, AND THAT NAVY IMPROPERLY INCLUDED MATERIAL FROM ITS RECORDS WHEN THE MATTER WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION FOR ISSUANCE OF A CERTIFICATE OF COMPETENCY.

CONCERNING YOUR CONTENTION THAT AWARD WAS DELAYED TO A TIME LEAST ADVANTAGEOUS TO ENI, THE RECORD INDICATES THAT INFORMATION SOLICITED AND ACQUIRED FROM ENI AT THE TIME OF THE INITIAL PREAWARD SURVEY WAS FOUND SUFFICIENT TO PERMIT A FAVORABLE RECOMMENDATION TO THE CONTRACTING OFFICER. A SECOND SURVEY REPORT--- RESULTING IN A NEGATIVE RECOMMENDATION --- WAS THEREAFTER REQUESTED BECAUSE OF ADDITIONAL INFORMATION PRESENTED TO THE CONTRACTING OFFICER BY THE NAVAL ELECTRONICS SYSTEMS COMMAND. THIS NEW DATA HAD NOT PREVIOUSLY BEEN CONSIDERED BY THE SURVEY BOARD. ADDITIONAL DATA WAS NOT REQUESTED OF YOUR FIRM FOR THIS LATTER SURVEY. THE FACTS PRESENTED ABOVE CLEARLY CONTRADICT THE CLAIM THAT NAVY ALLOWED YOUR FIRM INSUFFICIENT TIME TO PRESENT ALL THE REQUIRED DATA. FURTHERMORE, THE DELAY OF AWARD WAS OCCASIONED BY THE NAVY'S EFFORTS TO RECONCILE DIVERGENT TECHNICAL OPINIONS RELATED TO YOUR FIRM'S RESPONSIBILITY. THE FACT THAT THE PROCUREMENT AGENCY FOUND IT NECESSARY TO PURSUE THE MATTER OF YOUR RESPONSIBILITY FURTHER TO THE END THAT IT WAS FINALLY DETERMINED THAT YOU WERE NOT RESPONSIBLE, CASTS NO DOUBTS, IN OUR OPINION, ON THE LEGALITY OF THE PROPOSED AWARD TO THE SECOND LOWEST BIDDER.

OBJECTION IS ALSO RAISED AGAINST ABRIDGMENT OF YOUR "RIGHTS TO AN IMPARTIAL HEARING" IN THAT ENI WAS NOT AFFORDED AN OPPORTUNITY TO MEET ITS "DETRACTORS" AND WAS INSTEAD JUDGED IN ABSENTIA. HOWEVER, TO OUR KNOWLEDGE THERE IS NO STATUTORY OR REGULATORY REQUIREMENT FOR A HEARING IN SUCH A MATTER AND SINCE THERE IS NO EVIDENCE THAT THE UNFAVORABLE FINDINGS EITHER WERE ARRIVED AT IN BAD FAITH OR WERE NOT BASED ON SUBSTANTIAL EVIDENCE, THIS OBJECTION FURNISHES NO LEGAL BASIS FOR OUR OFFICE TO QUESTION THE ADMINISTRATIVE FAILURE TO AFFORD YOU AN OPPORTUNITY TO BE HEARD.

OUR OFFICE HAS CONSISTENTLY HELD THAT A DETERMINATION OF 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 REASONABLE BASIS FOR THE DETERMINATION AS MADE, WE ARE NOT REQUIRED TO OBJECT TO THE DETERMINATION. 37 COMP. GEN. 798.

IT IS APPARENT FROM THE RECORD THAT THE PREAWARD SURVEY BOARD SOLICITED AND ACQUIRED FROM YOUR FIRM INFORMATION RELATING TO ITS MANAGEMENT, PERSONNEL, PLANT FACILITIES, PRODUCTION EQUIPMENT, MATERIALS AND PURCHASED PARTS, SUBCONTRACTING, PRODUCTION CONTROL, RELATED PREVIOUS PRODUCTION, CURRENT PRODUCTION, AND QUALITY ASSURANCE (SEE ASPR 1-905.3 (II) (, AND THAT THE INFORMATION SOLICITED WAS DULY CONSIDERED BY BOTH THE SURVEY BOARD AND THE CONTRACTING OFFICER IN THE ORIGINAL AND REVISED ACTIONS. THE REJECTION BY THE CONTRACTING OFFICER OF ENI'S BID WAS BASED MAINLY ON THAT FIRM'S RECORD OF POOR PERFORMANCE ON CURRENT DELINQUENT CONTRACTS AND THE DETERMINATION THAT THE DELIVERY DELAYS WERE NOT EXCUSABLE. ADDITION, THE LACK OF ADEQUATE IMPLEMENTATION OF QUALITY CONTROL PROCEDURES CONTRIBUTED TO THE CONTRACTING OFFICER'S DETERMINATION TO REJECT ENI'S BID. THE FOLLOWING REVIEW WAS MADE BY THE SURVEY BOARD OF ENI'S CURRENT CONTRACTS WITH REGARD TO PLANT LOAD AND DELIVERY AND WAS CONSIDERED BY THE CONTRACTING OFFICER IN DETERMINING THAT SUCH FIRM WAS NONRESPONSIBLE:

"/1) AN/PDR-56 (NOBSR-89209, 91015 AND 93268). THE 15 APRIL 1966 SURVEY INDICATED THAT THESE CONTRACTS WOULD BE COMPLETED IN AUGUST 1966 AND WAS PREDICATED ON THE FACT THAT THE MAJOR PRODUCTION EFFORT HAD BEEN COMPLETED WITH THE INSTALLATION OF A FEW COMPONENTS, ASSEMBLY, INSPECTION, FINAL TEST AND PACKAGING REMAINING. IT WAS POINTED OUT THAT ENI'S PAST PRODUCTION RECORD NEVER APPROACHED THIS RATE OF DELIVERY. A DELIVERY SCHEDULE OF PHOTO-TUBES FROM RCA TO ENI WAS PRESENTED. THE INFORMATION IS AS FOLLOWS AND WAS OBTAINED ON 6-1-66.

(A) QTY. 450 DELIVERED

(B) QTY. 600 AVAILABLE NOW IF PAYMENT CAN BE ARRANGED.

(C) QTY. 600 BY END OF AUGUST 1966.

"THIS INFORMATION PLUS THE FACT THAT ENI HAS DELIVERED ONLY 325 OF 1423 EQUIPMENTS CAN ONLY LEAD TO THE CONCLUSION THAT DELIVERY CANNOT BE COMPLETED PRIOR TO OCTOBER-NOVEMBER.

"/2) AN/PDR-27Q (NOBSR-89550). ONLY 211 OF 677 EQUIPMENTS DELIVERED TO DATE. THE TOTAL QUANTITY SHOULD HAVE BEEN DELIVERED IN MARCH 1966.

"/3) AN/PDR-43 (NOBSR-91202). A QUANTITY OF 419 OF 690 DUE HAVE BEEN DELIVERED TO DATE. THEY HAVE PRODUCED THIS EQUIPMENT PREVIOUSLY UNDER NOBSR-87624 AND 89199 AND STILL CANNOT DELIVER IN A TIMELY MANNER.

"/4) AN/PDR-59 (N600 (24-126) 64603). ITEM 4 OF THIS CONTRACT (PRELIMINARY PLANS) DUE 17 JANUARY 1966 HAD NOT BEEN SUBMITTED AS OF 28 APRIL 1966. THERE IS NO EVIDENCE IN DCASD FILES TO INDICATE SUBMISSION.

"/5) ENI IS A SUBCONTRACTOR TO T.D. ASSOCIATES NOBSR-93155). ENI IS TO PRODUCE QTY. 304 ND-251/UD. DELIVERY WAS DUE IN MAY 1966. NO DELIVERY IS EXPECTED FOR SEVERAL MONTHS. THIS IS NOT A CONTRACTUAL DELIVERY SURVEILLANCE PROBLEM FOR DCASD, OAKLAND BUT IS A PLANT (AVAILABLE CAPITAL) LOADING FACTOR TO BE CONSIDERED.

"AFTER THIS REVIEW IT WAS POINTED OUT THAT EVEN WHEN ENI IS GRANTED EVERY EXCUSABLE DELAY UNDER THESE CONTRACTS THEY ARE STILL LATE IN DELIVERY. ALSO IT WAS GENERALLY AGREED THAT ENI HAS DEVELOPED AN ART FOR CREATING EXCUSABLE DELAYS IN AN EFFORT TO EXTEND CONTRACTUAL DATES AND AVOID TERMINATION FOR NON-PERFORMANCE.'

WITH REGARD TO THE ADMINISTRATIVE FINDING THAT YOUR FIRM HAS FAILED TO ADEQUATELY IMPLEMENT QUALITY CONTROL PROCEDURES, THE NAVAL SHIP ENGINEERING CENTER HAS STATED THAT EVALUATION REPORTS FROM THE U.S. NAVAL RADIOLOGICAL DEFENSE LABORATORY OF MARCH 31, 1966, ON AN/PDR-56 ALPHA RADIACMETERS; OF FEBRUARY 15, 1966, ON HD-251/UD AIR PARTICLE SAMPLERS; AND OF SEPTEMBER 1, 1964, ON AN/PDR-27Q RADIACSETS INDICATE THAT ENI'S QUALITY CONTROL SYSTEM IS NOT ADEQUATELY EFFECTIVE TO INSURE COMPLIANCE WITH THE SPECIFICATIONS OF THE SUBJECT IFB. FURTHER, THE SURVEY BOARD CONCLUDED THAT THE PRESENT PROCUREMENT WAS GREATLY MORE COMPLEX THAN RELATED EQUIPMENT PREVIOUSLY PRODUCED BY ENI.

SINCE THE ABOVE CONSIDERATIONS RELATED TO YOUR FIRM'S CAPACITY AND THE CONTRACTING OFFICER WAS UNABLE TO MAKE AN AFFIRMATIVE FINDING OF RESPONSIBILITY AS REQUIRED BY ASPR 1-902 AND 1-904, THE MATTER WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION, IN COMPLIANCE WITH ASPR 1- 705.4 (C), FOR CONSIDERATION AS TO THE ISSUANCE OF A CERTIFICATE OF COMPETENCY. UNDER DATE OF JULY 8, 1966, THE SMALL BUSINESS ADMINISTRATION ADVISED THE PROCURING ACTIVITY, IN PART, AS FOLLOWS:

"AFTER CAREFUL CONSIDERATION THIS OFFICE HAS DECLINED TO ISSUE A CCC IN FAVOR OF ELECTRO-NEUTRONICS, INC., AND THEY ARE BEING SO NOTIFIED BY LETTER THIS DATE. THE DECLINATION WAS FOR LACK OF CAPACITY BASED PRIMARILY ON THE PROPOSED APPLICANT'S POOR PERFORMANCE RECORD ON PRESENT AND PAST CONTRACTS, PLUS EVIDENCE THAT THE QUALITY CONTROL IMPLEMENTATION WAS WEAK.'

WE HAVE HELD THAT THE REFUSAL OF THE SMALL BUSINESS ADMINISTRATION TO ISSUE A CERTIFICATE OF COMPETENCY AS TO A SMALL-BUSINESS BIDDER MUST BE REGARDED AS PERSUASIVE WITH RESPECT TO THE COMPETENCY OR CREDIT OF THE BIDDER CONCERNED. 39 COMP. GEN. 705. WHEN THE ISSUANCE OF A CERTIFICATE OF COMPETENCY IS DENIED, THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY MUST BE REGARDED AS HAVING BEEN AFFIRMED. WE HAVE NO AUTHORITY TO REVIEW DETERMINATIONS OF THE SMALL BUSINESS ADMINISTRATION,OR TO REQUIRE IT TO ISSUE A CERTIFICATE OF COMPETENCY. NOR DO WE DISTURB THE DETERMINATIONS OF A CONTRACTING OFFICER WHERE, AS HERE, THEY APPEAR TO BE SUPPORTED BY THE EVIDENCE OF RECORD AND ARE NEITHER ARBITRARY NOR CAPRICIOUS.

CONCERNING YOUR OBJECTION TO NAVY'S PROVIDING THE SMALL BUSINESS ADMINISTRATION WITH ITS FILE OF FACTS TOGETHER WITH ITS CONCLUSIONS, WE BELIEVE THE ACTION TAKEN BY NAVY WAS IN FULL ACCORDANCE WITH THE REQUIREMENT IN ASPR 1-705.4 (D), WHICH READS AS FOLLOWS:

"/D) IT IS THE POLICY OF THE DEPARTMENT OF DEFENSE TO ENDEAVOR TO REACH AGREEMENT WITH THE SBA REGARDING THE LACK OF CAPACITY OR CREDIT OF A SMALL BUSINESS CONCERN. TO ASSIST THE SBA AND TO ASSURE THAT IT HAS THE BENEFIT OF THE VIEWS OF THE MILITARY DEPARTMENT, THE SBA SHALL BE FURNISHED THREE COPIES OF THE SOLICITATION, ONE COPY OF THE PERTINENT DRAWINGS AND SPECIFICATIONS, THE PRE-AWARD SURVEY FINDINGS, PERTINENT TECHNICAL AND FINANCIAL INFORMATION, AND, IF AVAILABLE, THE ABSTRACT OF BIDS.'

FOR THE FOREGOING REASONS WE SEE NO LEGAL BASIS FOR OBJECTING TO THE REJECTION OF YOUR BID, AND YOUR PROTEST IS THEREFORE DENIED.