B-169357, APR. 30, 1970

B-169357, APR. 30, 1970

CONTRACTS--AWARDS--SMALL BUSINESS CONCERNS--CERTIFICATIONS--FAILURE TO REQUEST PROTEST OF BIDDER WHICH HAD REPRESENTED ITSELF TO BE SMALL BUSINESS CONCERN AGAINST AWARD TO ANY OTHER BIDDER OF PORTION OF IFB NOT SET ASIDE FOR LABOR SURPLUS AREA CONCERNS IS DENIED, AS CONTRACTING OFFICER'S DETERMINATION OF PROTESTANT'S NONRESPONSIBILITY, BASED ON FACTORS RELATING TO ITS CAPACITY AND CREDIT, IS SUPPORTED BY SUBSTANTIAL EVIDENCE. PROTESTANT WAIVED RIGHT TO HAVE QUESTION DETERMINED BY SBA BY REFUSING TO APPLY FOR CERTIFICATE OF COMPETENCY, AND UNDER CIRCUMSTANCES GAO WOULD NOT BE WARRANTED IN EXCEPTING TO CONTRACTING OFFICER'S DETERMINATION. SEE COMP. GEN. DECS. CITED.

TO CODITRON CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF MARCH 19, 1970, PROTESTING ANY AWARD OTHER THAN TO YOUR COMPANY FOR THE NON-SET-ASIDE PORTION OF INVITATION FOR BIDS NO. DAAB05-70-B-0428, ISSUED OCTOBER 24, 1969, BY THE UNITED STATES ARMY ELECTRONICS COMMAND, PHILADELPHIA OFFICES, PHILADELPHIA, PENNSYLVANIA, FOR THE PROCUREMENT OF 5,000 GROUPS OF EQUIPMENT DESCRIBED AS "ANTENNA GROUP AN/GRA-50."

THE INVITATION FOR BIDS CONTAINED A NOTICE THAT 50 PERCENT OF THE 5,000 GROUPS OF EQUIPMENT HAD BEEN SET ASIDE FOR LABOR SURPLUS AREA CONCERNS. FIFTEEN BIDS WERE RECEIVED AS OF THE SCHEDULED BID OPENING DATE, NOVEMBER 24, 1969. THE TWO LOWEST BIDS WERE SUBMITTED BY YOUR COMPANY AND THE F&H MANUFACTURING CORPORATION, HAUPPAUGE, NEW YORK. YOU QUOTED A UNIT PRICE OF $53.90, OR A TOTAL PRICE OF $134,750, ON THE NON-SET-ASIDE PORTION OF 2,500 UNITS. F&H MANUFACTURING QUOTED A UNIT PRICE OF $58.69, OR A TOTAL PRICE OF $146,725. THE TWO BIDS WERE EVALUATED, HOWEVER, IN THE RESPECTIVE TOTAL AMOUNTS OF $134,076.25 AND $145,991.37, AFTER CONSIDERATION OF THE PROMPT PAYMENT DISCOUNTS OFFERED IN THE BIDS. YOU ALSO QUOTED A UNIT PRICE OF $53.90 ON THE SET ASIDE PORTION OF 2,500 UNITS, BUT IT HAS BEEN REPORTED BY THE CONTRACTING OFFICER THAT YOU DID NOT FURNISH EVIDENCE OF CERTIFICATION BY THE SECRETARY OF LABOR WHICH IS REQUIRED FOR INITIAL CONSIDERATION ON THE LABOR SURPLUS SET-ASIDE PORTION OF THE INVITATION.

PREAWARD SURVEYS WERE CONDUCTED AT THE PLANTS OF THE TWO LOWEST BIDDERS AS A MEANS OF ASSISTING THE CONTRACTING OFFICER IN DETERMINING WHETHER EACH COMPANY QUALIFIED AS A RESPONSIBLE PROSPECTIVE CONTRACTOR FOR THE PERFORMANCE OF THE PROPOSED CONTRACT FOR THE NON-SET-ASIDE PORTION OF THE INVITATION. ON THE BASIS OF THE PREAWARD SURVEY REPORTS, THE CONTRACTING OFFICER DETERMINED THAT THE F&H MANUFACTURING CORPORATION IS A RESPONSIBLE BIDDER AND IS CAPABLE OF ASSURING SATISFACTORY PERFORMANCE ON THE PROPOSED CONTRACT. HOWEVER, HE DETERMINED THAT YOUR COMPANY DID NOT QUALIFY AS A RESPONSIBLE PROSPECTIVE CONTRACTOR UNDER THE STANDARDS FOR DETERMINING RESPONSIBILITY AS SET FORTH IN SECTION 1, PART 9, ARMED SERVICES PROCUREMENT REGULATION (ASPR). HIS DETERMINATION OF NONRESPONSIBILITY ON THE PART OF YOUR COMPANY WAS BASED ON INDICATED DEFICIENCIES IN THE FOLLOWING AREAS: PRODUCTION CAPABILITY, LABOR RESOURCES, QUALITY ASSURANCE CAPABILITY, FINANCIAL RESPONSIBILITY, ACCOUNTING SYSTEM, PURCHASING AND SUBCONTRACTING, AND ABILITY TO MEET THE REQUIRED DELIVERY SCHEDULE. THE REFERENCED CATEGORIES OF DEFICIENCIES CORRESPOND WITH THE VARIOUS STANDARDS OF ASPR 1-903.1 AND 1-903.2 FOR RESPONSIBLE PROSPECTIVE CONTRACTORS, WHICH INCLUDE REQUIREMENTS THAT THE PROSPECTIVE CONTRACTOR HAVE ADEQUATE FINANCIAL RESOURCES, THAT IT BE ABLE TO COMPLY WITH THE REQUIRED OR PROPOSED DELIVERY OR PERFORMANCE SCHEDULE, TAKING INTO CONSIDERATION ALL EXISTING BUSINESS COMMITMENTS, AND THAT IT HAVE THE NECESSARY ORGANIZATION, EXPERIENCE, OPERATIONAL CONTROLS AND TECHNICAL SKILLS, OR THE ABILITY TO OBTAIN THEM WITHIN SUFFICIENT TIME TO COMPLY WITH THE REQUIREMENTS OF THE PROPOSED CONTRACT.

THE DOCUMENTED REPORT OF THE DEPARTMENT OF THE ARMY CONCERNING YOUR PROTEST SHOWS THAT, BECAUSE YOUR COMPANY HAD REPRESENTED ITSELF TO BE A SMALL BUSINESS CONCERN, AND THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY ON THE PART OF YOUR COMPANY WAS BASED ON FACTORS RELATING TO YOUR CAPACITY AND CREDIT, THE PROPOSED REJECTION OF YOUR BID WAS MADE THE SUBJECT OF A REFERRAL TO THE SMALL BUSINESS ADMINISTRATION (SBA) UNDER THE SMALL BUSINESS CERTIFICATE OF COMPETENCY PROGRAM. IN THAT CONNECTION, THE SBA HAS THE AUTHORITY TO ISSUE A CERTIFICATE OF COMPETENCY (COC) AS TO THE CAPACITY AND CREDIT OF A SMALL BUSINESS CONCERN AND THE PROCURING OFFICERS OF THE GOVERNMENT MUST ACCEPT A SMALL BUSINESS COC AS CONCLUSIVE. SEE ASPR 1-705.4 (A) AND 15 U.S.C. 637 (B) (7).

THE SBA WAS REQUESTED ON MARCH 5, 1970, TO CONSIDER THE PROPOSED REJECTION OF YOUR BID. ON MARCH 20, 1970, THE CONTRACTING OFFICER WAS NOTIFIED THAT YOU HAD ELECTED NOT TO APPLY FOR A COC AND, THEREFORE, THE SBA FILE ON THE MATTER HAD BEEN CLOSED. IN A TELEPHONE CONVERSATION OF MARCH 24, 1970, THE CONTRACTING OFFICER REQUESTED THAT YOU WITHDRAW YOUR PROTEST SINCE YOUR COMPANY HAD NOT APPLIED FOR A COC AND IT HAD BEEN FOUND TO BE NONRESPONSIBLE DUE TO SEVERAL UNSATISFACTORY AREAS FOUND DURING THE PREAWARD SURVEY. HOWEVER, THE CONTRACTING OFFICER WAS ADVISED THAT YOU WOULD NOT WITHDRAW THE PROTEST.

IN REGARD TO THE QUESTIONS AS TO YOUR PRODUCTION CAPABILITY, LABOR RESOURCES AND ABILITY TO MEET THE REQUIRED DELIVERY SCHEDULE, THE CONTRACTING OFFICER HAS NOT QUESTIONED THE QUALIFICATIONS OF ANY OF YOUR EMPLOYEES BUT IT IS HIS POSITION, BASED UPON AN ANALYSIS OF YOUR PERFORMANCE UNDER THREE CURRENT GOVERNMENT CONTRACTS AND YOUR PROPOSED INCREASES IN PERSONNEL, THAT YOUR PRODUCTION AND ENGINEERING STAFFS ARE AND WOULD BE INSUFFICIENT TO WARRANT A REASONABLE BELIEF THAT YOU WOULD HAVE THE PRODUCTION CAPABILITY TO MEET THE REQUIREMENTS OF THE PROPOSED CONTRACT AND AT THE SAME TIME TO PERFORM SATISFACTORILY THE PREVIOUSLY AWARDED GOVERNMENT CONTRACTS.

WITH RESPECT TO THE CATEGORY OF QUALITY ASSURANCE CAPABILITY, THE CONTRACTING OFFICER INDICATED THAT YOU DID NOT HAVE AN ESTABLISHED QUALITY ASSURANCE SYSTEM, THAT CERTAIN OF YOUR TESTING EQUIPMENT HAD NOT BEEN CALIBRATED AS REQUIRED TO MEET THE QUALITY SPECIFICATIONS OF THE THREE CURRENT CONTRACTS OF YOUR COMPANY WITH THE GOVERNMENT, THAT YOU HAD REPEATEDLY STATED THAT YOU WOULD CONFORM IMMEDIATELY WITH THE REQUIREMENTS AND SPECIFICATIONS, AND THAT THE GOVERNMENT HAS NO SATISFACTORY BASIS FOR ASSUMING THAT YOU WILL PREPARE AND IMPLEMENT AN ACCEPTABLE QUALITY ASSURANCE SYSTEM.

WITH REFERENCE TO THE CATEGORY OF PURCHASING AND SUBCONTRACTING, YOUR PROPOSED ARRANGEMENTS WERE NOT CONSIDERED TO BE UNSATISFACTORY. HOWEVER, THE CONTRACTING OFFICER INDICATED THAT YOU HAD EXPERIENCED CERTAIN SUBCONTRACTING DIFFICULTIES IN THE PAST WHICH WERE OF SUCH A NATURE AS TO CREATE A REASONABLE DOUBT WHETHER YOU HAD THE ABILITY "TO PROPERLY MANAGE GOVERNMENT CONTRACTS."

RELATIVE TO THE ACCOUNTING SYSTEM AND FINANCIAL CAPABILITY CATEGORIES, THE CONTRACTING OFFICER INDICATED THAT CERTAIN ITEMS IN YOUR ACCOUNTS HAD NOT BEEN EXPLAINED SATISFACTORILY, PARTICULARLY IN CONNECTION WITH AN INVESTIGATION MADE REGARDING YOUR FINANCIAL CONDITION. ON THE BASIS OF THE AVAILABLE INFORMATION, THE CONTRACTING OFFICER QUESTIONED YOUR ABILITY TO FINANCE AN AWARD WITH YOUR OWN RESOURCES OR TO OBTAIN THE NECESSARY CREDIT TO DO SO. ALTHOUGH HE RECOGNIZED THAT YOU HAD REQUESTED PROGRESS PAYMENTS, THE CONTRACTING OFFICER STATED THAT HE WAS ADVISED BY THE ECONOMICS BRANCH, USAECOM, THAT YOUR ACCOUNTING SYSTEM IS NOT ADEQUATE TO SUPPORT THE REQUEST FOR PROGRESS PAYMENTS.

UNDER THE SMALL BUSINESS CERTIFICATE OF COMPETENCY PROGRAM, THE SBA MAY SUBSTITUTE ITS JUDGMENT FOR THAT OF THE CONTRACTING AGENCY WITH RESPECT TO THE QUESTION WHETHER A SMALL BUSINESS BIDDER OR OFFEROR HAS THE NECESSARY FINANCIAL RESOURCES, PRODUCTION FACILITIES, EXPERIENCE, OPERATIONAL CONTROLS AND TECHNICAL SKILLS, AND THE ABILITY TO MEET A REQUIRED OR PROPOSED DELIVERY SCHEDULE. BY REFUSING TO FILE AN APPLICATION WITH THE SBA FOR A COC, YOU WAIVED YOUR RIGHT TO HAVE THE QUESTION AS TO YOUR CAPACITY AND CREDIT DETERMINED BY THE SBA. IF A COC HAS NOT BEEN ISSUED IN A CASE OF THIS NATURE, WE WOULD NOT BE WARRANTED IN TAKING EXCEPTION TO THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY UNLESS IT IS CLEAR THAT THE DETERMINATION IS NOT BASED ON SUBSTANTIAL EVIDENCE. THE REASONS FOR THIS CONCLUSION ARE SET FORTH IN 47 COMP. GEN. 291 (1967), AT PAGE 304, AND YOU ARE ADVISED THAT IT HAS CONSISTENTLY BEEN OUR POSITION THAT THE ABILITY OF A BIDDER TO PERFORM IN ACCORDANCE WITH THE REQUIREMENTS OF AN INVITATION FOR BIDS IS FOR DETERMINATION PRIMARILY BY THE CONTRACTING AGENCY "AND ABSENT A SHOWING OF BAD FAITH OR LACK OF A REASONABLE BASIS THEREFOR, WE WILL NOT QUESTION THE VALIDITY OF THE DETERMINATION." SEE 43 COMP. GEN. 228, 230 (1963).

THE CONTRACTING OFFICER'S DETERMINATION OF NONRESPONSIBILITY IN THIS CASE IS SUPPORTED BY SUBSTANTIAL EVIDENCE AND IT APPEARS TO HAVE BEEN BASED UPON A REASONABLE BELIEF THAT HE COULD NOT MAKE AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY, AS REQUIRED UNDER ASPR 1-904.1 AND 1 904.2 FOR THE PURPOSE OF MAKING AN AWARD TO YOUR COMPANY FOR THE NON SET- ASIDE PORTION OF THE INVITATION FOR BIDS. WE THEREFORE FIND NO BASIS FOR CONSIDERING THAT WE ARE REQUIRED TO TAKE EXCEPTION TO THE ADMINISTRATIVELY PROPOSED REJECTION OF YOUR BID.