B-174041, DEC 22, 1971

B-174041, DEC 22, 1971

BID PROTEST - LABOR SURPLUS SET-ASIDE - ELIGIBILITY DECISION DENYING PROTEST OF STEELCOT CORPORATION AGAINST AWARD OF A CONTRACT FOR A QUANTITY OF PRACTICE BOMBS, ONE-HALF OF WHICH WAS A LABOR SURPLUS SET-ASIDE, TO ENGINEERING RESEARCH, INC., (ERI), LOW BIDDER, UNDER AN IFB ISSUED BY HILL AFB, UTAH. PROTESTANT CONTENDS THAT IT WAS AN ERROR IN JUDGEMENT TO AWARD BOTH PORTIONS OF THE IFB TO ERI, AS IT DOES NOT HAVE THE CAPACITY TO PERFORM AND AS ERI IS INELIGIBLE FOR THE LABOR SURPLUS SET-ASIDE PORTION OF THE CONTRACT. FIRST, A DETERMINATION OF CAPACITY IS AN ADMINISTRATIVE MATTER AND WILL NOT BE UPSET BY GAO ABSENT A SHOWING OF ERROR, FRAUD, FAVORITISM, ETC. NO SUCH SHOWING HAVING BEEN MADE HERE, THIS GROUND MAY NOT BE USED TO INVALIDATE THIS AWARD. SECOND, AS PROTESTANT HAS BROUGHT FORTH NO EVIDENCE TO SUPPORT ITS ALLEGATION THAT LESS THAN 25% OF THE WORK WILL BE DONE IN INDIANAPOLIS (THE AREA OF LABOR SURPLUS), THE ADMINISTRATIVE DETERMINATION THAT 26.6% OF THE WORK WILL BE DONE IN THAT CITY, THEREBY MAKING ERI ELIGIBLE FOR THE LABOR SURPLUS SET-ASIDE, MUST ALSO STAND. VIEW OF THE FOREGOING, THE PROTEST MUST BE DENIED.

TO STEELCOT CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR TELEFAX AND LETTER OF SEPTEMBER 7, 1971, AND SUBSEQUENT CORRESPONDENCE, PROTESTING THE AWARD OF A CONTRACT TO ENGINEERING RESEARCH, INC. (ERI) UNDER INVITATION FOR BIDS F42600-71 B- 3319, ISSUED AT HILL AIR FORCE BASE, UTAH.

THE ABOVE-REFERENCED SOLICITATION WAS ISSUED ON MAY 10, 1971, FOR A SUPPLY OF PRACTICE BOMBS IN VARIOUS QUANTITY RANGES FROM 300,000 TO 800,000. AN EQUAL QUANTITY WAS SET ASIDE FOR AWARD TO LABOR SURPLUS AREA CONCERNS IN ACCORDANCE WITH THE CLAUSE "NOTICE OF LABOR SURPLUS AREA SET- ASIDE (70 JUN)" (ASPR 1-804.2(B)(1)), WHICH COMPRISED SECTION C-30 OF THE SOLICITATION. AT THE TIME OF BID OPENING, JUNE 15, 1971, A FIRM REQUIREMENT EXISTED FOR 1,500,000 UNITS. ERI, THE LOW BIDDER AT A UNIT PRICE OF $3.99 CERTIFIED ITSELF TO BE A SMALL BUSINESS CONCERN AND SUBMITTED WITH ITS BID A CERTIFICATE OF ELIGIBILITY FOR THE FIRST PREFERENCE GROUP. YOUR FIRM, WHICH SUBMITTED THE SECOND LOW BID OF $4.10 PER UNIT, WAS ALSO A SMALL BUSINESS CONCERN WHOSE PRINCIPAL FIRST TIER SUBCONTRACTOR HELD A CERTIFICATE OF ELIGIBILITY FOR THE FIRST PREFERENCE GROUP. FOLLOWING RECEIPT OF AN AFFIRMATIVE PREAWARD SURVEY ON ERI, THE NON-SET-ASIDE AWARD OF 750,000 UNITS WAS MADE TO IT ON AUGUST 16, 1971. UNDER THE TERMS OF THE INVITATION, ERI HAD FIRST PRIORITY FOR THE NEGOTIATION OF THE SET-ASIDE PORTION OF THE PROCUREMENT, WHICH WAS AWARDED IT ON AUGUST 27, 1971.

YOU FIRST CONTEND THAT IT WAS AN ERROR IN JUDGMENT TO HAVE AWARDED BOTH THE NON-SET-ASIDE AND SET-ASIDE PORTIONS OF THE PROCUREMENT TO ERI, SINCE YOU CLAIM ERI IS AN UNTRIED PRODUCER INCAPABLE OF MEETING THE REQUIRED DELIVERY SCHEDULE OF 125,000 UNITS PER MONTH. IT IS ADMINISTRATIVELY REPORTED THAT ERI HOLDS ANOTHER CONTRACT WITH THE AIR FORCE FOR THE SAME ITEMS, UNDER WHICH FIRST ARTICLE APPROVAL HAS BEEN GIVEN AND PRODUCTION HAS COMMENCED. MOREOVER, THE PROCURING ACTIVITY SPECIFICALLY REQUESTED DEFENSE CONTRACT ADMINISTRATION SERVICES DISTRICT (DCASD), INDIANAPOLIS, TO DETERMINE DURING ITS PREAWARD SURVEY WHETHER ERI COULD PRODUCE 125,000 UNITS PER MONTH. THE PREAWARD SURVEY REPORT FOUND ERI'S "ABILITY TO MEET REQUIRED SCHEDULE" SATISFACTORY, AND RECOMMENDED COMPLETE AWARD TO ERI.

A BIDDER'S PRIOR PERFORMANCE RECORD, CAPACITY TO PERFORM A CONTRACT, AND ABILITY TO MAKE TIMELY DELIVERIES ALL ARE COMPONENTS OF A FIRM'S RESPONSIBILITY. IN REGARD TO THE CONTRACTING OFFICER'S DUTY TO DETERMINE A BIDDER'S RESPONSIBILITY, IN OUR DECISION B-163859, APRIL 17, 1968, WE STATED:

"OUR OFFICE HAS CONSISTENTLY HELD THAT THE DETERMINATION OF A BIDDER'S OVERALL RESPONSIBILITY IS PRIMARILY THE FUNCTION OF THE CONTRACTING AGENCY AND NOT OF THE GENERAL ACCOUNTING OFFICE. 38 COMP. GEN. 131; 33 ID. 549. WHETHER A BIDDER IS, OR IS NOT, CAPABLE OF PRODUCING IN ACCORDANCE WITH CONTRACT REQUIREMENTS IS A QUESTION OF FACT, AND ABSENT EVIDENCE THAT THE DETERMINATION OF A BIDDER'S CAPABILITIES WAS BASED ON ERROR, FRAUD OR FAVORITISM, OUR OFFICE WILL ACCEPT THE FINDINGS OF THE CONTRACTING AGENCY. 40 COMP. GEN. 294. WE HAVE ALSO STATED THAT THE PROJECTION OF A BIDDER'S ABILITY TO PERFORM IF AWARDED A CONTRACT IS OF NECESSITY A MATTER OF JUDGMENT, WHICH, WHILE IT SHOULD BE BASED ON FACT AND ARRIVED AT IN GOOD FAITH, MUST PROPERLY BE LEFT LARGELY TO THE SOUND ADMINISTRATIVE DISCRETION OF THE OFFICERS INVOLVED, SINCE THEY ARE IN THE BEST POSITION TO ASSESS RESPONSIBILITY, THEY MUST BEAR THE MAJOR BRUNT OF ANY DIFFICULTIES EXPERIENCED BY REASON OF THE CONTRACTOR'S LACK OF ABILITY, AND THEY MUST MAINTAIN THE DAY-TO-DAY RELATIONS WITH THE CONTRACTOR ON BEHALF OF THE GOVERNMENT. FOR THESE REASONS, WE HAVE HELD THAT IT WOULD BE UNREASONABLE TO SUPERIMPOSE THE JUDGMENT OF OUR OFFICE OR ANY OTHER AGENCY OR GROUP ON THAT OF THE CONTRACTING OFFICIALS. 39 COMP. GEN. 705, 711."

SINCE OUR REVIEW REVEALS NO REASON TO CONCLUDE THAT THERE WAS NOT AN ADEQUATE FACTUAL BASIS FOR THE ADMINISTRATIVE DETERMINATION THAT ERI WAS A RESPONSIBLE PROSPECTIVE CONTRACTOR, THIS DETERMINATION WILL NOT BE QUESTIONED BY OUR OFFICE.

YOU NEXT SUGGEST THAT AWARD TO ERI SHOULD HAVE BEEN WITHHELD PENDING THE EVALUATION OF A VALUE ENGINEERING CHANGE PROPOSAL (VECP) WHICH YOU HAVE SUBMITTED. WE ARE ADVISED BY THE AIR FORCE THAT THE CHANGE WHICH YOU HAVE PROPOSED IS A MAJOR ONE, WHICH IF FOUND FEASIBLE UPON INITIAL EVALUATION, WILL REQUIRE STATIC, FLIGHT AND BALLISTIC TESTING. THE EVALUATION OF YOUR VECP COULD NOT BE ACCOMPLISHED BEFORE SEPTEMBER 18, 1971, AND THE DELIVERY SCHEDULE UNDER THE INSTANT SOLICITATION COULD NOT HAVE BEEN MET HAD AWARD BEEN DELAYED BEYOND THAT TIME. UNDER THESE CIRCUMSTANCES, WE DO NOT BELIEVE THE REFUSAL TO DELAY AWARD WAS IMPROPER.

YOUR THIRD ARGUMENT IS THAT ERI COULD NOT SATISFY ONE CRITERION OF A "CERTIFIED-ELIGIBLE CONCERN WITH A FIRST PREFERENCE", AND THEREFORE WAS IMPROPERLY AWARDED THE SET-ASIDE PORTION OF THE PROCUREMENT. PARAGRAPH (B)(2)(I) OF THE "NOTICE OF LABOR SURPLUS AREA SET-ASIDE" CLAUSE INCLUDES WITHIN THE DEFINITION OF "CERTIFIED-ELIGIBLE CONCERNS WITH A FIRST PREFERENCE" THE REQUIREMENT THAT ONE "AGREE TO PERFORM OR CAUSE TO BE PERFORMED BY CERTIFIED CONCERNS WITH A FIRST PREFERENCE A SUBSTANTIAL PROPORTION OF A CONTRACT IN OR NEAR SUCH SECTIONS (OF CONCENTRATED UNEMPLOYMENT OR UNDEREMPLOYMENT) OR IN SUCH AREAS (OF PERSISTENT OR SUBSTANTIAL LABOR SURPLUS) *** ." THIS PARAGRAPH FURTHER PROVIDES THAT:

"A CONCERN SHALL BE DEEMED TO PERFORM A SUBSTANTIAL PROPORTION OF THE CONTRACT (IN SUCH SECTIONS OR AREAS) IF THE COSTS THAT THE CONCERN WILL INCUR ON ACCOUNT OF MANUFACTURING OR PRODUCTION IN OR NEAR SUCH SECTIONS OR IN SUCH AREAS (BY ITSELF IF A CERTIFIED CONCERN, OR BY CERTIFIED CONCERNS WITH A FIRST PREFERENCE ACTING AS FIRST TIER SUBCONTRACTORS) AMOUNT TO MORE THAN 25% OF THE CONTRACT PRICE."

IT IS YOUR CONTENTION THAT SUCH COSTS INCURRED BY ERI WILL BE LESS THAN 25 PERCENT OF THE CONTRACT PRICE.

YOUR ALLEGATIONS IN THIS REGARD WERE INVESTIGATED BY DCASD, INDIANAPOLIS, WHICH DETERMINED, ON THE BASIS OF PLANT VISITS AND EXAMINATION OF ERI'S PURCHASE ORDERS, THAT DIRECT LABOR, BURDEN, AND GENERAL AND ADMINISTRATIVE EXPENSE AMOUNTED TO 26.3 PERCENT OF THE CONTRACT UNIT PRICE. FOR COMPARISON PURPOSES, DCASD, INDIANAPOLIS, DEVELOPED AN INDEPENDENT ESTIMATE, IN WHICH SUCH EXPENSES AMOUNTED TO 26.6 PERCENT OF THE CONTRACT UNIT PRICE. THEREFORE, DCASD, INDIANAPOLIS, CONCLUDED THAT ERI WOULD COMPLY WITH THE ABOVE-QUOTED REQUIREMENT OF THE SOLICITATION. IN THE ABSENCE OF EVIDENCE TO THE CONTRARY, WHICH YOU HAVE NOT SUBMITTED, WE MUST ACCEPT THE DCASD FINDINGS AS CORRECT.

IN VIEW OF THE FOREGOING, YOUR PROTEST IS DENIED.