B-242656, B-242657, B-242659, May 8, 1991, 91-1 CPD 448

B-242656, B-242657, B-242659, May 8, 1991, 91-1 CPD 448

PROCUREMENT - Sealed Bidding - Bids - Responsiveness - Financial capacity - Corporate entities PROCUREMENT - Contractor Qualification - Responsibility - Financial capacity - Corporate entities Agency reasonably found a Panamanian corporation nonresponsible based on a review of submitted information that indicated the firm was experiencing severe financial difficulties that may not allow it to complete the work.

Attorneys

Construcciones Electromecanicas, S.A.:

Construcciones Electromecanicas, S.A. (Conelsa) (a Panamanian corporation) protests the rejection of its bids under the invitations for bids (IFB) Nos. DACA01-90-B-0129 (-0129), DACA01-90-B-0143 (-0143), and DACA01-90-B-0157 (-0157), respectively, for electrical construction work in Panama, issued by the Department of the Army, Corps of Engineers, Mobile, Alabama.

We deny the protests and claim for protest costs.

Conelsa submitted the lowest bid on each of the three IFBs ($94,000, $931,000, and $279,000, respectively). By letter dated September 13, 1990 (received on September 19), Conelsa provided the agency with a financial statement, an independent auditor's report for 1988 and 1989, a record of the company, and a list of present contractual commitments. Relying upon this information, the pre-award survey team found Conelsa financially nonresponsible and recommended the rejection of its bids. The pre-award survey team based its finding upon two factors: that Conelsa's financial statements for both 1988 and 1989 reflected a net loss; and that Conelsa's list of current contractual commitments presented an untenable financial burden on such a financially weak firm.

The contracting officer accepted the recommendation of the pre-award survey team and determined Conelsa financially nonresponsible on September 26, 1990. As a result, the agency awarded IFB Nos. -0157 and -0143 to the next lowest bidder. The agency informs us that it has not awarded IFB No. -0129 because it is resolving a mistake in the next lowest bid.

Conelsa protested these determinations to the agency on October 5 and submitted reference letters from two banks and a corporate sponsor. The agency-level protest was denied on December 14. This protest followed. Conelsa argues that the nonresponsibility determinations were unreasonable because the contracting officer relied upon erroneous information.

A finding of "responsibility" requires, among other things, that the potential contractor affirmatively demonstrate that it has sufficient financial resources to perform the contract or the ability to obtain them. Federal Acquisition Regulations (FAR) Sec. 9.104-1. Absent such an affirmative showing, the FAR requires the contracting officer to make a nonresponsibility determination. FAR Sec. 9.103(b)-(c). In making his determination, the contracting officer is vested with a wide degree of discretion and business judgment. Oertzen Co. GmbH, B-228537, Feb. 17, 1988, 88-1 CPD Para. 158. We therefore will not question a nonresponsibility determination unless the protester shows bad faith on the part of the agency or that the determination lacks any reasonable basis. Id. For example, a negative responsibility determination is unreasonable if it is dependent, in any material way, upon inaccurate information in the pre-award survey. Fairchild Communications Elec. Co., 66 Comp.Gen. 109 (1986), 86-2 CPD Para. 633; Dyneteria, Inc., B-211525, Dec. 7, 1983, 83-2 CPD Para. 654.

Conelsa argues that the contracting officer selected an outdated list in calculating Conelsa's present commitments. Conelsa provided both an abbreviated and an extended list of its contractual commitments for the pre-award survey. The abbreviated list, dated September 14, 1990, shows 11 ongoing construction projects requiring approximately $3,000,000 in funds for completion. The extended list (which apparently includes all the firm's construction contracts since 1976), dated "31 de Mayo, 1990," shows 12 ongoing and 6 anticipated construction projects requiring approximately $5,000,000 in funds for completion.

The protester is correct that the contracting officer did not rely on the September 14 list, but based his nonresponsibility determination entirely on the May 31 list. As both lists were dated, the agency should have given more weight to the more current information in its possession. However, given the magnitude of Conelsa's apparent financial difficulties (as discussed below), we do not think the agency's failure to note that Conelsa's outstanding project obligations totaled only $3 million, rather than $5 million, affects the reasonableness of the agency's nonresponsibility determination in any material way.

The agency has provided an analysis of Conelsa's financial condition that shows the ratio of Conelsa's assets to liabilities, as reflected in its 1988 and 1989 financial statements, was very low and indicates a serious liability problem. The agency notes that the average industry ratio of assets to liabilities /1/ for electrical contractors, like Conelsa, is more than twice Conelsa's ratio. Indeed, Conelsa's ratio is significantly lower than the lowest ratio of any rated electrical contractor. The ratio of Conelsa's cash plus accounts receivable to current liabilities was also calculated to determine whether the firm had sufficient short-term resources to start the three new contracts in question here. Conelsa's ratio in this regard is less than half the average industry ratio for electrical contractors. Here too Conelsa's ratio was much lower than any rated electrical contractor. Conelsa has not rebutted these analyses. conclude that the agency could reasonably find that the firm was experiencing financial difficulty that could preclude it from performing the three contracts, whether it had $3 million or $5 million in outstanding contractual commitments.

The record shows the agency wanted to make these awards prior to September 30 in order to obligate its budgeted funds before they lapsed, and the financial information submitted by Conelsa from Panama to Mobile, Alabama, to support a determination of responsibility was only received by the Corps on September 19, which left little time to review the responsibility of Conelsa and the next low bidder. Under the circumstances, given the poor financial condition indicated by Conelsa's submissions, we do not think the agency was required to solicit further information or allow Conelsa to obtain additional financial backing prior to award. See ICR, Inc.-- Recon., B-223033.2, Nov. 4, 1986, 86-2 CPD Para. 516. After the awards were made on two of the IFBs, Conelsa proffered various statements to the agency from corporate and banking references. One bank stated that it had given Conelsa a seven figure line of credit, while a corporation promised financial and technical backing to complete these contracts. Since Conelsa submitted the banking and corporate references after Conelsa's bids were rejected and awards made, that information is not relevant insofar as it concerns the two IFBs under which awards had already been made.

With regard to IFB No. -0129, although the agency decision in September 1990 was reasonable, and we will not sustain Conelsa's protest, the Corps informs us that no award has been made and over 7 months have passed since that determination. Information concerning a bidder's responsibility may be provided or changed any time prior to award. See Saco Def. Inc., B-240603; B-240891, Dec. 6, 1990, 90-2 CPD Para. 462; Adrian Supply Co., B-239681, Aug. 28, 1990, 90-2 CPD Para. 170. In view of the relatively small dollar value of this IFB ($94,000), and since Conelsa has submitted apparently credible banking references and Conelsa's list of contractual commitments indicated that all were to be completed by March 1991, we think the Corps should again review Conelsa's responsibility to ascertain whether it now has the financial capability to complete this IFB work.

Finally, Conelsa asserts a claim for its costs of bid preparation and pursuing the protests. Since we deny Conelsa's protests because the agency had a reasonable basis to determine Conelsa nonresponsible, there is no legal basis to reimburse Conelsa for these costs. 4 C.F.R. Sec. 21.6(d) (1991); Concord Analysis, Inc., B-239790.3; B-241009, Dec. 4, 1990, 90-2 CPD Para. 452.

The protests and claim are denied.

/1/ The standard industry ratios were taken by the agency from Dun and Bradstreet Inc.'s Industry Norm and Key Business Ratio, 1989.