B-165915, B-166340, B-166751, JUN. 5, 1969, 48 COMP. GEN. 769

B-165915, B-166340, B-166751, JUN. 5, 1969, 48 COMP. GEN. 769

BIDDERS--QUALIFICATIONS--INTEGRITY,ETC.--OFFICIALS LACK OF INTEGRITY IMPUTED TO BIDDER ALTHOUGH AS A GENERAL PROPOSITION THE LACK OF INTEGRITY ON THE PART OF INDIVIDUALS OF A BUSINESS CONCERN WHO AS OFFICERS, DIRECTORS, OR STOCKHOLDERS CONTROL THE ACTIVITIES, POLICIES, AND MANAGEMENT OF THE CONCERN MUST NOT ALWAYS BE IMPUTED TO THE CONCERN, WHERE THE PRESIDENT OF THE LOW BIDDER CORPORATION HAD BEEN FOUND GUILTY OF WILFUL FAILURE TO PAY INCOME TAXES AND A KEY EMPLOYEE WAS CONVICTED OF FRAUD AGAINST THE GOVERNMENT AND SENTENCED, AND ALSO PLACED ON A DEBARRED BIDDERS' LIST, IMPUTING THE LACK OF INTEGRITY TO THE CORPORATION WAS A PROPER DETERMINATION BY THE PROCURING AGENCY, ABSENT A SHOWING THE DETERMINATION WAS NOT BASED ON SUBSTANTIAL EVIDENCE, 10 U.S.C. 2305 (C) REQUIRING AWARD TO A "RESPONSIBLE BIDDER," A TERM EMBRACING THE PERSONAL ATTRIBUTES OF CHARACTER OR INTEGRITY AS WELL AS PECUNIARY ABILITY AND PHYSICAL CAPABILITY TO PERFORM A CONTRACT. BIDDERS- QUALIFICATIONS--INTEGRITY,ETC. --GENERALLY THE DEFINITION OF THE TERM "INTEGRITY" IN CONNECTION WITH GOVERNMENT CONTRACTS DOES NOT DIFFER FROM THE GENERALLY ACCEPTED CONNOTATION OF UPRIGHTNESS OF CHARACTER, MORAL SOUNDNESS, HONESTY, PROBITY, AND FREEDOM FROM CORRUPTING INFLUENCE OR PRACTICE. AS USED IN PRESCRIBING QUALIFICATIONS FOR PUBLIC OFFICERS, TRUSTEES, ETC; THE TERM "INTEGRITY" MEANS SOUNDNESS OF MORAL PRINCIPLE AND CHARACTER IN THE MAKING AND PERFORMANCE OF CONTRACTS AND FIDELITY AND HONESTY IN THE DISCHARGE OF TRUSTS, AND THE TERM SYNONYMOUS WITH PROBITY, HONESTY, AND UPRIGHTNESS, THE LACK OF INTEGRITY ON THE PART OF THE OFFICIALS OF A BIDDER MAY BE IMPUTED TO THE BIDDER BY THE PROCURING AGENCY, UNLESS THE ADMINISTRATIVE DETERMINATION IS NOT BASED ON SUBSTANTIAL EVIDENCE DEMONSTRATING THE BIDDER'S LACK OF RESPONSIBILITY.

TO THE DOMCO CHEMICAL CORPORATION, JUNE 5, 1969:

REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF JANUARY 3, 1969, PROTESTING AGAINST AWARD UNDER INVITATION FOR BIDS (IFB) NOS. DSA-400 69-B -0592, DSA-400-69-B-1720 AND DSA-400-69-B-2137, ISSUED BY THE DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA. REFERENCE IS ALSO MADE TO YOUR SUBSEQUENT TELEGRAMS AND LETTERS OF FEBRUARY 6, MARCH 5 AND APRIL 23, 1969, PROTESTING AGAINST AWARD UNDER IFB 400-69-B-2005, DSA-400-69-B-2871, AND DSA-400-69-B-4405, RESPECTIVELY, ALSO ISSUED BY THE ABOVE COMMAND.

THE FIRST IFB, DSA-400-69-B-0592, WAS ISSUED ON SEPTEMBER 23, 1968, SOLICITATING OFFERS FOR FURNISHING OF PHOTOGRAPHIC CHEMICALS, AND DOMCO SUBMITTED THE LOW RESPONSIVE BID FOR ITEMS 1 AND 2. HOWEVER, PREAWARD SURVEY NO. DCRN 68-10-95 RECOMMENDED THAT NO AWARD BE MADE TO DOMCO. IFB DSA-400-69-B-1720 WAS ISSUED ON SEPTEMBER 16, 1968, ALSO SOLICITING OFFERS FOR THE FURNISHING OF PHOTOGRAPHIC CHEMICALS. DOMCO WAS THE LOW RESPONSIVE BIDDER FOR ITEMS 1 THROUGH 4. PREAWARD SURVEY NO. DCRN 68-10- 122 RECOMMENDED THAT NO AWARD BE MADE TO DOMCO. IFB DSA-400-69-B-2137 WAS ISSUED ON OCTOBER 9, 1968, ONCE AGAIN SOLICITING OFFERS FOR THE FURNISHING OF PHOTOGRAPHIC CHEMICALS. DOMCO WAS THE LOW BIDDER FOR ITEMS 1, 2, 6 AND 7. PREAWARD SURVEY NO. DCRN 68-11-115 RECOMMENDED THAT NO AWARD BE MADE TO DOMCO.

ON DECEMBER 12, 1968, SEPARATE DETERMINATIONS WERE MADE FOR ALL THREE OF THE ABOVE SOLICITATIONS THAT DOMCO WAS NONRESPONSIBLE DUE TO LACK OF BUSINESS INTEGRITY. EACH OF THE DETERMINATIONS WAS BASED ON INFORMATION CONTAINED IN THE ABOVE-MENTIONED PREAWARD SURVEYS AS SUPPLEMENTED BY FURTHER INQUIRIES. IFB DSA-400-69-B-2005 WAS ISSUED ON OCTOBER 10, 1968, AND SOLICITED OFFERS FOR THE FURNISHING OF THE DEFENSE GENERAL SUPPLY CENTER'S REQUIREMENT FOR BOILER COMPOUND. DOMCO WAS THE LOW RESPONSIVE BIDDER FOR ITEMS 1 AND 2. PREAWARD SURVEY NO. DCRN 68-12-50 RECOMMENDED THAT NO AWARD BE MADE TO DOMCO. ON JANUARY 7, 1969, DOMCO WAS ONCE AGAIN DETERMINED TO BE NONRESPONSIBLE DUE TO LACK OF BUSINESS INTEGRITY. THIS DETERMINATION WAS BASED UPON THE FOUR PREAWARD SURVEYS AS VERIFIED BY FURTHER INQUIRIES. IFB DSA-400 69-B-2871 WAS ISSUED ON NOVEMBER 8, 1968, SOLICITING BIDS ON CORROSION INHIBITOR IN ALTERNATE QUANTITIES. DOMCO WAS THE LOW RESPONSIVE BIDDER FOR ITEMS 11-15, THE ALTERNATE QUANTITY FOR WHICH AWARD WAS MADE. PREAWARD SURVEY NO. DCRN 68-12-65 RECOMMENDED THAT NO AWARD BE MADE TO DOMCO. ON FEBRUARY 6, 1969, DOMCO WAS ONCE AGAIN DETERMINED TO BE NONRESPONSIBLE DUE TO LACK OF BUSINESS INTEGRITY. THIS DETERMINATION WAS ALSO BASED ON THE MOST CURRENT PREAWARD SURVEY PLUS THE PREVIOUS SURVEYS AS VERIFIED BY FURTHER INQUIRIES. FINALLY, IFB DSA-400- 69-B 4405 WAS ISSUED ON JANUARY 27, 1969, AND SOLICITED BIDS ON 26,920 SIX (6) OUNCE JARS OF CALCIUM HYPOCHLORITE. BIDS WERE OPENED ON FEBRUARY 18, 1969, AND DOMCO WAS THE LOW RESPONSIVE BIDDER FOR ALL QUANTITIES. HOWEVER, PREAWARD SURVEY NO. 09193013A, DATED MARCH 20, 1969, CONDUCTED IN CONNECTION WITH THE LATTER PROCUREMENT, UNLIKE THE PREVIOUS PREAWARD SURVEYS RECOMMENDED AWARD. NEVERTHELESS, ON APRIL 11, 1969, DOMCO WAS ONCE AGAIN DETERMINED TO BE NONRESPONSIBLE DUE TO LACK OF BUSINESS INTEGRITY. APPARENTLY DOMCO'S CAPACITY AND CREDIT WERE NOT IN QUESTION AT THIS POINT AND THE PROCURING AGENCY REPORTS THAT THE PREAWARD SURVEY SHOULD HAVE BEEN CONFINED TO ASCERTAINING THE STATUS OF CERTAIN PROCEEDINGS AGAINST MR. WERTHEIMER AND DR. MATTHEW, WHICH WILL BE DISCUSSED LATER, AND THEIR CURRENT ASSOCIATION WITH THE FIRM.

ALL OF THE DETERMINATIONS OF NONRESPONSIBILITY ARE SUBSTANTIALLY THE SAME (EXCEPT FOR THE DETERMINATION OF APRIL 11, 1969) BASING DOMCO'S LACK OF BUSINESS INTEGRITY ON THE FACT THAT, ON MARCH 20, 1968, A CRIMINAL INFORMATION WAS FILED IN THE FEDERAL DISTRICT COURT, SOUTHERN DISTRICT OF NEW YORK, CHARGING DR. THOMAS MATTHEW, PRESIDENT OF DOMCO CHEMICAL CORPORATION WITH WILFUL FAILURE TO PAY INCOME TAXES ON $106,003, ALLEGEDLY EARNED OVER A 3-YEAR PERIOD; 1961, 1962 AND 1963. ADDITIONALLY ONE OF DOMCO'S KEY EMPLOYEES, MR. JULES WERTHEIMER, WAS RECENTLY CONVICTED IN THE SAME COURT OF OFFENSES CONSTITUTING CRIMINAL FRAUD AGAINST THE U.S. GOVERNMENT AS A RESULT OF HIS ACTIONS UNDER CONTRACTS DSA-4-08054 AND DSA- 4-08631 AWARDED BY THE DEFENSE GENERAL SUPPLY CENTER, AND WAS SENTENCED TO A TOTAL OF 10 YEARS IMPRISONMENT. MR. WERTHEIMER WAS ALSO PLACED ON THE DEPARTMENT OF DEFENSE (DOD) DEBARRED BIDDERS' LIST. THE DETERMINATION OF APRIL 11 DIFFERED FROM THE OTHER DETERMINATIONS IN THAT PRIOR TO THE TIME IS WAS MADE DR. MATTHEW WAS TRIED AND FOUND GUILTY ON TWO COUNTS AND IS NOW AWAITING SENTENCING, AND THE DETERMINATION INCLUDED A REFERENCE THERETO.

CONTRACTS PURSUANT TO FORMAL ADVERTISING ARE REQUIRED TO BE AWARDED, UNDER 10 U.S.C. 2305 (C), "TO THE RESPONSIBLE BIDDER WHOSE BID CONFORMS TO THE INVITATION AND WILL BE THE MOST ADVANTAGEOUS TO THE UNITED STATES." THE RULE IS SETTLED THAT THE PHRASE "RESPONSIBLE BIDDER" IN THIS AND SIMILAR STATUTES DENOTES SOMETHING MORE THAN THE ABILITY OR CAPACITY OF A BIDDER TO PERFORM THE CONTRACT, AND A CONTRACTING AGENCY, THEREFORE, MAY ALSO CONSIDER A BIDDER'S RECORD OF INTEGRITY IN DECIDING WHETHER HE IS, IN FACT, A RESPONSIBLE BIDDER. B 159242, JULY 26, 1966. ALSO SEE 39 COMP. GEN. 468, 470, AND COURT CASES AND DECISIONS OF OUR OFFICE THEREIN CITED. IT WAS STATED IN BEST V CITY OF OMAHA (NEB.), 293 N.W. 116, "THAT RESPONSIBILITY AS USED IN STATUTORY ENACTMENTS REQUIRING AWARD OF PUBLIC CONTRACTS TO THE LOWEST RESPONSIBLE BIDDER, EMBRACES NOT MERELY PECUNIARY ABILITY AND PHYSICAL CAPABILITY TO PERFORM, BUT ALSO MORE PERSONAL ATTRIBUTES OF CHARACTER OR INTEGRITY." ALSO SEE ARTHUR VENNERI COMPANY V PATERSON HOUSING AUTHORITY, 149 A.2D228, 234.

IN YOUR LETTER OF APRIL 18, 1969, YOU STATE THAT YOU ARE UNABLE TO RESPOND TO THE ALLEGATION THAT YOUR FIRM LACKS "INTEGRITY," SINCE YOU HAVE NO KNOWLEDGE OF HOW THIS OFFICE DEFINES THE TERM IN CONNECTION WITH GOVERNMENT CONTRACTS. WE ARE UNAWARE OF ANY DEFINITION FOR THE TERM IN CONNECTION WITH GOVERNMENT CONTRACTS WHICH DIFFERS FROM ITS GENERALLY ACCEPTED CONNOTATION, AND WE HAVE ACCEPTED THE USUAL DEFINITIONS GIVEN BY THE COURTS. "INTEGRITY" HAS BEEN DEFINED AS "UPRIGHTNESS OF CHARACTER AND SOUNDNESS OF MORAL PRINCIPLE, HONESTY, PROBITY" (IN RE GORDON'S ESTATE, 75 P. 672, 674, 142 CAL. 125) AND "MORAL SOUNDNESS, FREEDOM FROM CORRUPTING INFLUENCE OR PRACTICE" (MANASCO V WALLEY, 63 SO. 2D 91, 95, 216 MISS. 614). BLACK'S LAW DICTIONARY, FOURTH EDITION, STATES "AS OCCASIONALLY USED IN STATUTES PRESCRIBING THE QUALIFICATION OF PUBLIC OFFICERS, TRUSTEES, ETC; THIS TERM MEANS SOUNDNESS OF MORAL PRINCIPLE AND CHARACTER, AS SHOWN BY ONE PERSON DEALING WITH OTHERS IN THE MAKING AND PERFORMANCE OF CONTRACTS, AND FIDELITY AND HONESTY IN THE DISCHARGE OF TRUSTS. IT IS SYNONYMOUS WITH 'PROBITY,' 'HONESTY' AND 'UPRIGHTNESS.'"

WHILE THE FACT THAT A CRIMINAL INFORMATION WAS FILED AGAINST DR. MATTHEW CHARGING HIM WITH WILFUL FAILURE TO PAY INCOME TAXES, IN AND OF ITSELF, MIGHT NOT BE SUFFICIENT TO WARRANT AN ADVERSE RESPONSIBILITY DETERMINATION, SEE 39 COMP. GEN. 468; B-105082, SEPTEMBER 18, 1951, WE ARE OF THE OPINION THAT THE CRIMINAL INFORMATION, COUPLED WITH MR. WERTHEIMER'S CONVICTION FOR CRIMINAL FRAUD AND HIS SUBSEQUENT PLACEMENT ON THE DOD DEBARRED LIST, IS SUFFICIENT TO SUPPORT A DETERMINATION OF NONRESPONSIBILITY. OF COURSE DR. MATTHEW'S SUBSEQUENT CONVICTION WOULD ADD EVEN GREATER WEIGHT TO THE DETERMINATION.

THE NEXT QUESTION TO BE RESOLVED IS WHETHER THE LACK OF INTEGRITY OF DR. MATTHEW AND MR. WERTHEIMER AS INDICATED BY THEIR CONVICTIONS, CAN BE IMPUTED TO THE CORPORATION. WE HAVE HELD THAT WHILE A CORPORATION IS GENERALLY VIEWED AS SEPARATE AND DISTINCT FROM THE STOCKHOLDERS, IT CAN OPERATE ONLY THROUGH THE INDIVIDUALS WHO, AS OFFICERS, DIRECTORS, OR STOCKHOLDERS, CONTROL THE ACTIVITIES, POLICIES, AND MANAGEMENT OF THE CORPORATION. IT FOLLOWS THAT THE INTEGRITY OF A CORPORATION CAN BE NO GREATER THAN THE INTEGRITY OF THE INDIVIDUALS WHO CONTROL ITS OPERATION. 39 COMP. GEN. 468, 471. CERTAINLY ANY LACK OF INTEGRITY ON THE PART OF DR. MATTHEW COULD BE IMPUTED TO THE CORPORATION, SINCE AS PRESIDENT OF THE CORPORATION HE COULD BE EXPECTED TO HAVE A MAJOR VOICE IN ITS MANAGEMENT AND OPERATION.

HOWEVER, IN THE CASE OF MR. WERTHEIMER WE CANNOT BE AS CERTAIN. DR. MATTHEW STATES THAT MR. WERTHEIMER HAS A TECHNICAL PROFICIENCY IN CONNECTION WITH PACKAGING TRICHLOROMELAMINE FOOD DISINFECTANT PRODUCTS WHICH THE CORPORATION PRODUCES OR WILL PRODUCE; ABOUT 15 YEARS MANUFACTURING EXPERIENCE; A MASTER'S DEGREE IN BUSINESS ADMINISTRATION; AND A BACHELOR OF SCIENCE DEGREE IN CHEMICAL ENGINEERING. DR. MATTHEW FURTHER STATES THAT MR. WERTHEIMER WAS OFFICIALLY EMPLOYED AS A CONSULTING PRODUCT DEVELOPER AND HIS DUTIES ARE LIMITED TO MAKING RECOMMENDATIONS AND ASSISTING IN THE INSTRUCTION OF EMPLOYEES IN THE IMPLEMENTATION OF APPROVED RECOMMENDATIONS. HOWEVER, THE RECORD INDICATES THAT MR. WERTHEIMER HAS BEEN REPEATEDLY NAMED BY DR. MATTHEW DURING VARIOUS PREAWARD PLANT SURVEYS AS "CHIEF CONSULTANT" FOR DOMCO CHEMICAL CORPORATION AND DOMCO PROPERTIES AND ALSO AS "PLANT OR PRODUCTION MANAGER" FOR DOMCO CHEMICAL CORPORATION. IN THE LATTER POSITION IT IS STATED THAT HE HAS BEEN VERY ACTIVE IN THE PREPARATION OF BIDS AND PROPOSALS IN RESPONSE TO SOLICITATIONS ISSUED BY THE DEFENSE GENERAL SUPPLY CENTER. DR. MATTHEW HAS STATED THAT MR. WERTHEIMER'S EMPLOYMENT IS VITAL TO THE OPERATION OF DOMCO CHEMICAL CORPORATION, AND WE MUST ASSUME HE IS STILL ASSOCIATED WITH THE COMPANY SINCE THE PREAWARD SURVEY REPORT OF MARCH 20, 1969, SHOWS THAT MR. WERTHEIMER WAS ONE OF THE PERSONS WHO SERVED AS A CONTACT FOR DOMCO DURING THE SURVEY. WHILE THIS OFFICE WOULD BE EXTREMELY RELUCTANT TO SUBSCRIBE TO THE GENERAL PROPOSITION THAT LACK OF INTEGRITY ON THE PART OF AN EMPLOYEE MUST ALWAYS BE IMPUTED TO THE CORPORATION, WE CANNOT CONCLUDE THAT IN THE PRESENT INSTANCE SUCH AN IMPUTATION IS NOT JUSTIFIED.

WHETHER EVIDENCE OF A BIDDER'S LACK OF INTEGRITY IS SUFFICIENT TO WARRANT A FINDING IN ANY PARTICULAR CASE THAT THE BIDDER IS NOT RESPONSIBLE IS A MATTER PRIMARILY FOR EVALUATION BY THE PROCURING AGENCY, AND BECAUSE REASONABLE MEN MAY WELL DISAGREE IN SUCH EVALUATION, THIS OFFICE HAS ADOPTED THE RULE THAT WE WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING AGENCY UNLESS IT IS SHOWN THAT THE AGENCY'S DETERMINATION WAS NOT BASED ON SUBSTANTIAL EVIDENCE DEMONSTRATING THE BIDDER'S LACK OF RESPONSIBILITY. 39 COMP. GEN. 468, 472; 36 ID. 42; 37 ID. 798; 38 ID. 131; ID. 778.

SINCE ON THE BASIS OF THE RECORD WE ARE UNABLE TO SAY THAT THE EVIDENCE WAS INSUFFICIENT TO SUPPORT THE CONTRACTING AGENCY'S DETERMINATIONS THAT DOMCO WAS NONRESPONSIBLE, YOUR PROTESTS MUST BE DENIED.