B-148633, JUN. 12, 1962

B-148633, JUN. 12, 1962

TO MILITRONICS, INC.:

REFERENCE IS MADE TO YOUR TELEGRAM DATED APRIL 10, 1962, AND YOUR LETTER OF APRIL 16, 1962, WITH ENCLOSURE, PROTESTING AWARD TO REPCO INC., UNDER INVITATION FOR BIDS NO. ORD-11-173-62-37, CONTRACT NO. DA 11-173-ORD-690.

PURSUANT TO A REQUEST BY THE DEPARTMENT OF THE NAVY, THE U.S. ARMY ORDINANCE AMMUNITION COMMAND, JOLIET, ILLINOIS, ISSUED THE ABOVE INVITATION ON JANUARY 9, 1962, REQUESTING BIDS TO BE OPENED FEBRUARY 8, 1962, FOR FURNISHING THREE ITEMS OF SPECIAL PURPOSE CABLE ASSEMBLIES. BIDDERS WERE ADVISED THAT THE DELIVERY SCHEDULE SHOWN IN THE INVITATION, CALLING FOR DELIVERIES TO START IN JUNE 1962, WAS BASED ON THE ASSUMPTION THAT THE AWARD WOULD BE MADE BY FEBRUARY 28, 1962.

YOURS WAS THE SECOND LOWEST BID, THE LOW BID BEING SUBMITTED BY COMPUTRON CORPORATION AND THE THIRD LOWEST BY REPCO INC. AFTER BID OPENING COMPUTRON ALLEGED THAT A MISTAKE HAD BEEN MADE IN ITS BID AND SINCE THIS RAISED THE POSSIBILITY THAT YOUR BID WOULD BECOME LOW THE ORDINANCE AMMUNITION COMMAND REQUESTED THE PHILADELPHIA ORDNANCE DISTRICT TO MAKE A PREAWARD SURVEY OF YOUR FIRM'S ABILITY TO PERFORM. THE REPORT OF SURVEY DATED FEBRUARY 28, 1962, GIVES A SATISFACTORY RATING TO ALL CAPABILITY FACTORS WITH THE EXCEPTION OF YOUR FINANCIAL ABILITY, WHICH WAS DETERMINED TO BE UNSATISFACTORY DUE TO A LACK OF BASICALLY ADEQUATE RESOURCES, AND AWARD TO YOUR COMPANY WAS THEREFORE NOT RECOMMENDED.

EVIDENCE SUPPORTING COMPUTRON'S ALLEGED MISTAKE IN BID WAS RECEIVED BY THE ORDINANCE AMMUNITION COMMAND ON MARCH 5, 1962, AND, AFTER REVIEW AND ANALYSIS, WAS SUBMITTED TO THE OFFICE OF THE CHIEF OF ORDINANCE ON MARCH 15, 1962. COMPUTRON WAS SUBSEQUENTLY AUTHORIZED TO WITHDRAW ITS BID, NOTICE OF WHICH WAS RECEIVED BY THE CONTRACTING OFFICER VERBALLY ON MARCH 20, 1962, AND BY LETTER OF CONFIRMATION ON MARCH 26, 1962. ON MARCH 30, 1962, IT WAS DETERMINED, PURSUANT TO PARAGRAPH 1-705.6 (B) (I) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), THAT THE URGENT REQUIREMENTS FOR DELIVERY INDICATED BY THE NAVY WOULD NOT ADMIT OF THE DELAY IN AWARD INCIDENT TO CONSIDERATION BY THE SMALL BUSINESS ADMINISTRATION (SBA) OF A REQUEST FOR A CERTIFICATE OF COMPETENCY. HOWEVER, IN VIEW OF STATEMENTS MADE BY MR. BROOKS OF YOUR COMPANY THAT A REVIEW BY SBA WOULD ASSURE ISSUANCE OF A CERTIFICATE OF COMPETENCY, IT WAS DECIDED TO DELAY THE AWARD A FEW DAYS IN ORDER TO GIVE YOU ANOTHER OPPORTUNITY TO SUBMIT EVIDENCE TO ARMY ORDNANCE TO PROVE YOUR FINANCIAL ABILITY. ACCORDINGLY, MR. KINGSLEY SHAW, FINANCIAL ANALYST, PHILADELPHIA ORDNANCE DISTRICT, WHO CONDUCTED THE ORIGINAL PREAWARD SURVEY, AND MR. WILLIAM J. HENNESSY OF THE ORDNANCE AMMUNITION COMMAND COMPTROLLER'S OFFICE, CONDUCTED A REINVESTIGATION OF YOUR FINANCIAL CONDITION ON APRIL 4 AND 5, 1962. BASED ON THIS INVESTIGATION, MESSARS. HENNESSY AND SHAW, AS DOCUMENTED BY SEPARATE REPORTS DATED APRIL 6, 1962, CONCURRED IN THE CONCLUSION OF THE ORIGINAL PREAWARD SURVEY THAT AWARD COULD NOT BE RECOMMENDED, DUE TO UNSATISFACTORY FINANCIAL ABILITY. AWARD THEREFORE MADE TO REFCO INC. ON APRIL 7, 1962.

YOU PROTEST THIS AWARD ON THE GROUND THAT YOUR FINANCIAL CONDITION JUSTIFIED MAKING THE AWARD TO YOUR COMPANY AND THAT, IF YOUR BID WAS TO BE REJECTED FOR FINANCIAL NONRESPONSIBILITY, THE CONTRACTING OFFICER SHOULD HAVE REQUESTED A CERTIFICATE OF COMPETENCY FROM THE SBA.

IT IS PRIMARILY THE FUNCTION OF THE CONTRACTING AGENCY TO DETERMINE THE RESPONSIBILITY OF A BIDDER, AS WELL AS THE NEEDS OF THE GOVERNMENT AND THE URGENCY THEREOF, AND IN THE ABSENCE OF BAD FAITH OR LACK OF A REASONABLE BASIS FOR THE DETERMINATION, WE WILL NOT OBJECT TO SUCH A DETERMINATION. 38 COMP. GEN. 248. IN THE PRESENT CASE, THE INVESTIGATION DISCLOSED THAT YOU DID NOT HAVE THE NECESSARY RESOURCES IN CASH OR FIRM CREDIT COMMITMENTS TO FINANCE THE PERFORMANCE OF THE CONTRACT AND THAT THE FEDERAL GOVERNMENT HAD FILED LIENS FOR UNPAID WAGE TAXES IN THE AMOUNT OF $14,419.34 FOR THE LAST THREE QUARTERS OF 1961. WHEN MR. SHAW VISITED MR. ERNEST M. CARTER, VICE PRESIDENT OF THE MOUNT VERNON BANK AND TRUST COMPANY, ON APRIL 5, 1962, MR. CARTER FREELY ADMITTED THAT THE BANK HAD NOT MADE A DEFINITE COMMITMENT TO LEND YOUR COMPANY THE $70,000 CONSIDERED NECESSARY TO FINANCE THE CONTRACT, AND THAT THERE WOULD BE SOME QUESTION AS TO THE BANK'S ABILITY TO FURNISH $70,000 BASED ON THE ASSIGNMENT OF RECEIVABLES, SINCE THE GOVERNMENT WOULD RETAIN APPROXIMATELY 75 PERCENT OF THE RECEIVABLES AS RECOUPMENT OF PROGRESS APPROXIMATELY 75 PERCENT OF THE RECEIVABLES AS RECOUPMENT OF PROGRESS PAYMENTS. ALSO, THE TAX SITUATION WAS CONSIDERED TO BE OF A SERIOUS NATURE, SINCE, WITH THE EXCEPTION OF THE 3 PERCENT EMPLOYER'S TAX PAYABLE UNDER THE FEDERAL INSURANCE CONTRIBUTIONS ACT, THE DELINQUENT TAX REPRESENTED INCOME AND SOCIAL SECURITY TAXES WITHHELD BY YOU FROM YOUR EMPLOYEES' WAGES, WHICH WERE REQUIRED BY LAW TO BE DEPOSITED MONTHLY WITH AN APPROVED GOVERNMENT DEPOSITORY. DISCUSSING YOUR AGREEMENT TO PAY A MINIMUM OF $500 MONTHLY ON THE DELINQUENT TAXES, MR. G. A. BENNARDO OF THE INTERNAL REVENUE SERVICE ADVISED MR. SHAW THAT THE FIRST MONTH YOUR COMPANY FAILED TO MAKE THE REQUIRED PAYMENT THE GOVERNMENT WOULD PADLOCK MILITRONICS IN THE USUAL PROCEDURE TO COLLECT DELINQUENT WAGE TAXES. THERE WOULD APPEAR TO BE NO BASIS, THEREFORE, FOR OBJECTING TO THE ADMINISTRATIVE DETERMINATION OF FINANCIAL NONRESPONSIBILITY.

AS TO THE FAILURE OF THE CONTRACTING OFFICER TO REQUEST A CERTIFICATE OF COMPETENCY, SECTION 8 (B) (7) OF THE SMALL BUSINESS ACT, 72 STAT. 384, PROVIDES THAT IT SHALL BE THE DUTY OF THE ADMINISTRATION TO CERTIFY TO GOVERNMENT PROCUREMENT OFFICERS WITH RESPECT TO THE COMPETENCY, AS TO CAPACITY AND CREDIT, OF ANY SMALL BUSINESS CONCERN TO PERFORM A SPECIFIC GOVERNMENT CONTRACT. PARAGRAPH 1-705.6 (B) (I) OF ASPR FURTHER PROVIDES AS FOLLOWS:

"/B) IF A SMALL BUSINESS CONCERN HAS SUBMITTED AN OTHERWISE ACCEPTABLE BID OR PROPOSAL BUT HAS BEEN FOUND BY THE CONTRACTING OFFICER TO BE NONRESPONSIBLE AS TO CAPACITY OR CREDIT, AND IF THE BID OR PROPOSAL IS TO BE REJECTED FOR THIS REASON ALONE, (I) SBA SHALL BE NOTIFIED OF THE CIRCUMSTANCES SO AS TO PERMIT IT TO ISSUE A CERTIFICATE OF COMPETENCY,AND (II) AWARD SHALL BE WITHHELD PENDING EITHER SBA ACTION CONCERNING ISSUANCE OF A CERTIFICATE OF COMPETENCY OR THE EXPIRATION OF FIFTEEN WORKING DAYS AFTER SBA IS SO NOTIFIED, WHICHEVER IS EARLIER, SUBJECT TO THE FOLLOWING:

"/I) THIS PROCEDURE IS NOT MANDATORY WHERE THE CONTRACTING OFFICER CERTIFIES IN WRITING THAT AWARD MUST BE MADE WITHOUT DELAY, AND PROMPTLY ADVISES THE SBA REPRESENTATIVE THEREOF, AND INCLUDES IN THE CONTRACT FILE A STATEMENT SIGNED BY HIM WHICH JUSTIFIES THE CERTIFICATE. A COPY OF THE STATEMENT SHALL BE FURNISHED THE SBA REPRESENTATIVE.'

THE ARMY HAS REPORTED THAT DURING THE PERIOD AFTER BID OPENING PRESSURE FROM THE NAVY CONCERNING DELIVERY OF THE CABLE ASSEMBLIES MOUNTED STEADILY. IN A MESSAGE DATED MARCH 19, 1962, FROM THE U.S. NAVAL ORDNANCE SUPPLY DEPOT, MECHANICSBURG, PENNSYLVANIA, THE ARMY WAS REQUESTED TO EXPEDITE THIS PROCUREMENT AS MUCH AS POSSIBLE, AS THE CABLES WERE "URGENTLY REQUIRED FOR BOMB CONVERSION TO MEET CURRENT FLEET REQUIREMENTS.' ANOTHER MESSAGE FROM MECHANICSBURG DATED APRIL 3, 1962, STATES THAT THE CABLES ARE REQUIRED FOR USE IN BOMBS WHICH FURNISH DIRECT SUPPORT TO COMBATANT UNITS THAT COMPRISE THE PRIMARY NAVAL OFFENSIVE AND DEFENSIVE FORCES WHOSE MISSION IS OF VITAL IMPORTANCE TO NATIONAL SECURITY AND THAT THE DELIVERY OF THESE ITEMS MUST BE EXPEDITED TO THE GREATEST POSSIBLE DEGREE. IN VIEW OF THIS ESTABLISHMENT URGENT NEED, THE CONTRACTING OFFICER ISSUED THE CERTIFICATE OF NECESSITY FOR MAKING THE AWARD WITHOUT DELAY, AS REQUIRED BY THE REGULATION QUOTED ABOVE, AND FURNISHED A COPY OF SAME TO THE SBA.

YOU HAVE EMPHASIZED THE FACT THAT YOU WERE IN CONSTANT TOUCH WITH THE SBA AND THE PROCURING AGENCY AND THAT YOU DID ALL IN YOUR POWER TO EXPEDITE ACTION ON A REQUEST FOR A CERTIFICATE OF COMPETENCY, IF MADE. ALSO, THE ADVERSE FINANCIAL REPORT DATED FEBRUARY 28, 1962, MADE IT OBVIOUS THAT A CERTIFICATE OF COMPETENCY WOULD BE REQUIRED IF THE LOW BID WAS ELIMINATED. ACCORDINGLY, WHILE THERE IS NO ASSURANCE THAT ACTION WOULD HAVE BEEN FAVORABLE, IT APPEARS THAT A CERTIFICATE SHOULD HAVE BEEN REQUESTED UPON RECEIPT OF THE NEGATIVE REPORT. HOWEVER, SINCE THE CONTRACTING OFFICER, IN THE EXERCISE OF HIS INDEPENDENT JUDGMENT, DETERMINED TO WAIT UNTIL THE LOW BIDDER'S ALLEGATION OF MISTAKE HAD BEEN DISPOSED OF, AND SINCE IT APPEARS THAT HE PROCEEDED WITH REASONABLE DISPATCH THEREAFTER AND THAT THE URGENT NEED FOR THE ITEMS WAS REAL, WE ARE UNABLE TO CONCLUDE THAT THE AWARD AS MADE WAS ILLEGAL. YOUR PROTEST MUST THEREFORE BE DENIED.