B-151517, JUN. 28, 1963

B-151517, JUN. 28, 1963

TO ICES, INCORPORATED:

WE REFER TO YOUR TELEGRAM OF MAY 13, 1963, AND OTHER CORRESPONDENCE PROTESTING AGAINST THE AWARD MADE UNDER INVITATION FOR BIDS NO. 3AC-6 202.

THE INVITATION WAS ISSUED ON APRIL 12, 1963, BY THE FEDERAL AVIATION AGENCY, INSTALLATION AND MATERIEL DEPOT, AIRCRAFT PURCHASING SECTION, OKLAHOMA CITY, OKLAHOMA, COVERING REQUIREMENTS FOR OVERHAUL AND REPAIR OF GOVERNMENT-OWNED R-1830-94 PRATT AND WHITNEY AIRCRAFT ENGINES DURING A ONE -YEAR PERIOD ENDING APRIL 30, 1964. AWARD WAS SET ASIDE EXCLUSIVELY FOR SMALL BUSINESS CONCERNS.

THE INVITATION GUARANTEED A MINIMUM QUANTITY OF 50 ENGINES FOR OVERHAUL WORK, AND THE GOVERNMENT AGREED NOT TO ORDER MORE THAN 15 ENGINES PER MONTH, NOR TO REQUIRE FROM THE CONTRACTOR, EXCEPT BY MUTUAL AGREEMENT, MORE THAN 100 ENGINES FOR OVERHAUL DURING THE CONTRACT PERIOD. BIDDERS WERE ADVISED--- PAGE NO. 15 OF THE INVITATION--- THAT THEY MUST SHOW ADEQUATE "CAPITAL, PLANT, FACILITIES, ABILITY AND EXPERIENCE ON THE PRATT AND WHITNEY R-1830-94 ENGINES * * * AND THE BIDDER'S EXPERIENCE IN THE OVERHAUL OF THE ENGINE SPECIFIED WILL BE CONSIDERED IN MAKING AWARD.' THE INVITATION THEN DETAILED THE FACTORS WHICH WERE REQUIRED TO ESTABLISH QUALIFICATION FOR AWARD.

BIDS WERE OPENED ON APRIL 23, 1963, AND FOUR BIDS WERE RECEIVED. THE TWO LOW BIDS WERE EVALUATED, INCLUDING TRANSPORTATION AND DISCOUNT, AT THE FOLLOWING AMOUNTS:

TABLE

TOTAL ESTIMATED AMOUNT BIDDER WITHOUT GF (GOVT.FURN.) KITS WITH GF KITS ICES $507,768.38 $432,645.88 DALLAS AIR MOTIVE 521,744.00 450,494.00

ON APRIL 30, 1963, A SURVEY TEAM OF TECHNICAL PERSONNEL FROM THE QUALITY CONTROL DIVISION AND OVERHAUL AND MODIFICATION DIVISION OF THE FAA AIRCRAFT SERVICES BASE INSPECTED YOUR PLANT AT BROWNSVILLE, TEXAS, FOR THE PURPOSE OF DETERMINING YOUR CAPABILITY TO PERFORM THE REQUIRED WORK. THEIR REPORT DATED MAY 3, 1963, COVERED VARIOUS FEATURES OF YOUR PRODUCTION CAPABILITY, INCLUDING PERSONNEL, EQUIPMENT, SPACE AND PRIOR EXPERIENCE, AND CONCLUDED AND RECOMMENDED AS FOLLOWS:

"CONCLUSIONS

"THE FACILITY HOLDS AN FAA APPROVED REPAIR STATION RATING NUMBER 4353 AND DOES HAVE THE MINIMUM EQUIPMENT IN ITS SHOPS AND HAS SERVICES AVAILABLE FROM CONTRACTORS TO PERFORM THE OVERHAUL OF R-1830-94 ENGINES. THEIR PERSONNEL ARE ADEQUATE IN SKILL AND TALENT BUT ARE EXTREMELY SMALL IN NUMBER. NUMEROUS ADDITIONAL PERSONNEL WOULD HAVE TO BE HIRED. IT WAS THE COMPANY'S PLAN TO HIRE MECHANICS LOCALLY TO MEET THE WORKLOAD AND THEY STATED THAT THERE WERE ADEQUATELY-TRAINED EX-PAN AMERICAN AIRWAYS MECHANICS AVAILABLE AND SOME HOLD A AND P LICENSES. HOWEVER, IT HAS BEEN A NUMBER OF YEARS SINCE PAN AMERICAN LEFT BROWNSVILLE AND THESE PERSONNEL WOULD NEED REINDOCTRINATION.

"WE FEEL THAT THE FACILITY LACKED EQUIPMENT AND THAT THE DELIVERY TIME REQUIRED AND ESTIMATED WORKLOAD OF 100 ENGINES A YEAR COULD NOT BE MET UNDER THEIR EXISTING ARRANGEMENTS. COMPANY PERSONNEL STATED THAT IF THEY WERE AWARDED THIS CONTRACT, THEY WOULD PROCURE ADDITIONAL EQUIPMENT.

"OUR ESTIMATED CONTRACT REQUIREMENTS OF 100 R-1830-94 ENGINES WOULD BE AN APPROXIMATE 20 TIMES INCREASE IN VOLUME OF R-1830-94 ENGINES HANDLED BY THIS COMPANY IN THE PAST TWELVE MONTHS (IT WAS DETERMINED THAT ONLY 4 OR 5 SUCH ENGINES WERE HANDLED BY ICES DURING THE LAST 12 MONTHS) AND WOULD MORE THAN DOUBLE THEIR ENTIRE ENGINE PRODUCTION. ALSO, THEY STATED THAT THERE WAS A POSSIBILITY THAT THEY MIGHT BE AWARDED A CONTRACT TO OVERHAUL ENGINES FOR KELLY FIELD. THIS COULD POSSIBLY INCREASE THEIR BUSINESS NOT LESS THAN 16 ENGINES PER YEAR OR NOT TO EXCEED 12 ENGINES PER MONTH. AGAIN, WE FELT THAT THIS WOULD FURTHER COMPLICATE THEIR CAPABILITY OF PRODUCING OUR VOLUME. OUR PRESENT INVITATION TO BID CALLED FOR A GUARANTEE MINIMUM OF 15 ENGINES TO BE INPUT THIS FISCAL YEAR. IT IS OUR PLAN TO INPUT 15 ENGINES IN THE MONTH OF MAY AND 15 ENGINES IN THE MONTH OF JUNE. WE FEEL THAT THE FACILITY COULD NOT POSSIBLY MEET A 60-DAY DELIVERY ON THE ABOVE INPUT.

"THE COMPANY STATED THAT IF AWARDED THIS CONTRACT, THEY WOULD SUPPLEMENT THEIR PARTS ON HAND BY THE PROCUREMENT OF 53 USED R-1830-94 ENGINES WHICH THEY WOULD DISASSEMBLE AND REWORK THE PARTS TO A SERVICEABLE STATE FOR USE IN OUR CONTRACT. HOWEVER, THIS PROCEDURE FOR SUPPLEMENTING THEIR EXISTING SPARE PARTS WILL TAKE TIME AND, THEREFORE, ONLY SUPPLEMENTS OUR CONCLUSION THAT THEY COULD NOT MEET THE DELIVERY TIME OF OUR FIRST TWO PLANNED INPUTS.

"RECOMMENDATIONS

"THIS ORGANIZATION HAS A SMALL NUCLEUS OF CAPABLE AND RELIABLE PERSONNEL WHO WOULD LIKE VERY MUCH TO INCREASE THE CAPACITY OF THEIR PLANT SO THAT THEY COULD PERFORM IN ACCORDANCE WITH OUR PROPOSED CONTRACT. WE DO NOT BELIEVE THAT THEY CAN DO THIS. THEY DO NOT NOW HAVE A PHYSICAL PLANT INCLUDING PERSONNEL, TOOLING, EQUIPMENT AND SUPPLIES NECESSARY TO CAUSE US TO BELIEVE THAT THEY COULD PERFORM IN ACCORDANCE WITH OUR NEEDS.

"IN OUR OPINION THE IMPORTANCE OF KEEPING OUR DC-3 FLEET OPERATING IS SUCH THAT WE CANNOT TAKE A CHANCE OF PUTTING THIS COMPANY IN BUSINESS ON THE SCALE NECESSARY TO PERFORM IN ACCORDANCE WITH OUR NEEDS.'

A SURVEY REPORT WAS ALSO MADE BY OTHER FAA REPRESENTATIVES COVERING YOUR ADMINISTRATION AND FINANCIAL ABILITY. IT WAS FOUND THAT YOUR FIRM WAS QUALIFIED FOR THE CONTRACT AS TO THESE ELEMENTS. HOWEVER, THE AGENCY AUDIT DIVISION REPORTED THAT IN THE FINANCIAL AREA YOUR FIRM MIGHT EXPERIENCE DIFFICULTIES IN PERFORMING THIS CONTRACT. SPECIFICALLY, IT WAS OBSERVED THAT YOU MIGHT HAVE TROUBLE WITH THE WORKING CAPITAL REQUIRED TO SUSTAIN A JOB OF THE MAGNITUDE REQUIRED ON THIS PROCUREMENT.

THE CHIEF, AIRCRAFT SERVICES BASE, AT THE AERONAUTICAL CENTER THEN PREPARED A REPORT DATED MAY 8, 1963, TO THE PROCUREMENT BRANCH, BASED ON ITS SURVEY TEAM FINDINGS, RECOMMENDING THAT YOUR FIRM WAS NOT QUALIFIED FOR THE SUBJECT AWARD FOR THE FOLLOWING REASONS:

"A. THE BIDDER IS NOT QUALIFIED TO EFFECT DELIVERY OF THE OVERHAULED ENGINES IN ACCORDANCE WITH THE REQUIREMENTS OF THE INVITATION.

"B. THE BIDDER IS NOT CAPABLE OF PROVIDING WORK OF THE QUALITY REQUIRED BY THIS AGENCY WHEN ACCOMPLISHED IN THE QUANTITY ANTICIPATED UNDER THE CONTRACT.

"C. THERE IS A CONSIDERABLE DEGREE OF NECESSARY SUBCONTRACTING TO BE ACCOMPLISHED BY THE BIDDER WHICH WILL HAVE THE EFFECT OF DILUTING RESPONSIBILITY FOR TIMELY PERFORMANCE AND IMPERIL PROMPT DELIVERY TO US.

"WITH REGARD TO TIMELY DELIVERY, THE BIDDER DOES NOT HAVE AN ADEQUATE PRODUCTION LINE FOR THE PROPOSED OVERHAUL SERVICE; THE NUMBER OF MECHANICS AND SERVICE PERSONNEL PRESENTLY STAFFED WOULD NOT BE ADEQUATE FOR THE VOLUME ANTICIPATED UNDER OUR CONTRACT; THE RECRUITMENT OF ADDITIONAL PERSONNEL WOULD CLEARLY REQUIRE DELAYS FOR THE ACQUISITION OF OPERATING EXPERIENCE; AND THE BIDDER'S PRESENT STOCK OF SUPPLIES AND PARTS IS NOT ADEQUATE. MANY ENGINE PARTS AND COMPONENTS ARE TO BE OBTAINED BY THE BIDDER THROUGH THE CANNIBALIZATION OF A REPORTED 53 ENGINES YET TO BE PURCHASED. FURTHER, THE BIDDER REQUIRES MANY SPECIAL TOOLS AND EQUIPMENT AND HAS INDICATED THAT THESE ITEMS WILL NOT BE AVAILABLE, IN SOME CASES, UNTIL THE END OF MAY.

"WITH REGARD TO QUALITY CONTROL, IT IS IMPERATIVE THAT YOU UNDERSTAND THE IMPORTANCE THAT AGENCY-OPERATED AIRCRAFT BE MAINTAINED IN THE HIGHEST DEGREE OF AIRWORTHINESS. OUR TEAM INVESTIGATION DISCLOSES THAT THE BIDDER NOW HAS BUT A SINGLE INSPECTOR ON DUTY IN ITS ENGINE OVERHAUL SHOP. FURTHER, THE COMPANY'S PRIOR EXPERIENCE IN OVERHAULING THE R-1830-94 PRATT AND WHITNEY MODEL ENGINE APPEARS TO BE LIMITED TO FOUR OR FIVE ENGINES IN A 12 MONTH PERIOD.'

THE REPORT CONTINUED AS FOLLOWS:

"REGARDLESS OF THE POSSIBLE CAPABILITY OF SUCH A RELATIVELY SMALL BUSINESS IN OVERHAULING A SMALL NUMBER OF ENGINES, I AM SATISFIED THAT SUCH RESTRICTED PAST EXPERIENCE IS LIKELY TO PROVE INADEQUATE WHERE THE COMPANY MUST ENTER, AS WOULD HERE BE THE CASE, INTO A PROGRAM OF RAPID EXPANSION.

"AS TO THE BIDDER'S NEED FOR SUBCONTRACTING, I UNDERSTAND THAT THE BID REPRESENTED ONLY THAT SUBCONTRACTING WAS NEEDED FOR MAGNETO AND CARBURETOR WORK. ON THE CONTRARY, OUR TEAM FOUND THAT DEFICIENCIES IN THE BIDDER'S FACILITIES WILL REQUIRE SUBCONTRACTING FOR CYLINDER GRINDING, ALL PLATING, MACHINE SHOP WORK, IMPELLER BALANCING, AND CAM REWORK. FURTHER, THE MAJORITY OF THIS OFF-PLANT PROCESSING MUST BE ACCOMPLISHED OUTSIDE OF BROWNSVILLE, WHICH DOES NOT AFFORD ALL OF THE NECESSARY SUBCONTRACTING FACILITIES. CONSEQUENTLY, THE BIDDER'S QUALIFICATIONS ARE THUS IMPERILED BY UNNECESSARY TRANSPORTATION PROBLEMS AND DELAYS NECESSARILY AND CUSTOMARILY INHERENT IN WIDESPREAD SUBCONTRACTING PROGRAMS.'

THE CONTRACTING OFFICER (MR. D. J. ODVODY) ISSUED A "STATEMENT AND CERTIFICATE OF AWARD," DATED MAY 8, 1963, WHEREIN AWARD WAS MADE TO DALLAS AUTOMOTIVE, INC., AS THE LOWEST RESPONSIBLE BIDDER. THE STATEMENT RECITED THAT YOUR LOW BID WAS REJECTED ON THE BASIS THAT YOU WERE NOT A RESPONSIBLE PROSPECTIVE CONTRACTOR ON THIS PROCUREMENT. THE DEFICIENCIES NOTED IN THE SURVEY REPORTS WERE CITED, AND IT WAS STATED THAT:

"THE BIDDER, BECAUSE OF AFOREMENTIONED DEFICIENCIES, COULD NOT MEET THE MAXIMUM 60-DAY DELIVERY SCHEDULE WERE THE GOVERNMENT TO DELIVER IMMEDIATELY (AS WILL BE THE CASE HERE) ITS MINIMUM OF 15 ENGINES FOR OVERHAUL. DUE TO THE LOW STOCK OF ZERO-TIME OVERHAULED ENGINES, THE GOVERNMENT MUST HAVE THE INITIAL INPUT RETURNED WITHIN 60 DAYS TO PREVENT THE GROUNDING OF FEDERAL AVIATION AGENCY AIRCRAFT FOR AN UNDETERMINABLE LENGTH OF TIME. DELAYS IN DELIVERY WOULD SERIOUSLY IMPAIR THE FLIGHT INSPECTION AND NAVIGATION MISSION REQUIRED FOR FLIGHT SAFETY OF BOTH CIVIL AND MILITARY AIRCRAFT OPERATIONS.

"THE BIDDER WILL NOT BE ABLE TO CORRECT ITS DEFICIENCIES REGARDING FACILITIES, ORGANIZATION, SUPPLIES AND PARTS IN A SUFFICIENT TIME TO COMPLY WITH THE REQUIRED DELIVERY SCHEDULE UPON THE GOVERNMENT'S IMMEDIATE PRESENTATION FOR THE OVERHAUL OF THE MINIMUM OF THE 15 ENGINES WHICH THE GOVERNMENT IS OBLIGATED TO DELIVER.'

IN SUPPORT OF THE AWARD, THE ADMINISTRATIVE FILE CONTAINS A STATEMENT DATED MAY 8, 1963, SIGNED BY THE CONTRACTING OFFICER, HEADED "JUSTIFICATION FOR IMMEDIATE AWARD OF IFB 3AC-6-202," WHICH STATES IN PART, AS FOLLOWS:

"/2) THAT AN EMERGENCY EXISTS WHEREIN R-1830-94 AIRCRAFT ENGINES MUST BE SUPPLIED IN A SUFFICIENT QUANTITY IN TIME TO INSURE A CONTINUOUS AGENCY PROGRAM OF "FLIGHT INSPECTION" AND ,NAVIGATIONAL AIDS" REQUIRED FOR BOTH CIVIL AND MILITARY AIRCRAFT OPERATIONS.

"/3) THAT THE AGENCY HAS 21 EACH SCHEDULES R-1830-94 ENGINE CHANGES AND AN ESTIMATED QUANTITY OF 4 EACH UNSCHEDULED CHANGES WHICH WILL BE REQUIRED ON OR BEFORE JULY 9, 1963; AND THAT THE PRESENT SUPPLY OF 18 EACH ENGINES WILL NOT MEET THE REQUIRED QUANTITY.

"/4) THAT AWARD OF THE CONTRACT TO THE LOW BIDDER WOULD RESULT IN GROUNDING OF FEDERAL AVIATION AGENCY AIRCRAFT FOR AN UNDETERMINABLE LENGTH OF TIME AND AS A RESULT THEREOF, WOULD IMPAIR EXISTING FLIGHT INSPECTIONS, NAVIGATION PROGRAMS AND WOULD PREVENT THE CARRYING OUT OF THE FEDERAL AVIATION AGENCY MISSION.

"/5) THAT THIS FINDING IS BASED ON SUBSTANTIVE FACTS CONTAINED IN THE AFOREMENTIONED STATEMENT OF AWARD.

"THEREFORE, AS PROVIDED IN FEDERAL PROCUREMENT REGULATION 1-1.708.2 (A) (1), I HEREBY DETERMINE THAT AWARD OF SUBJECT INVITATION FOR BID MUST BE MADE WITHOUT DELAY.'

IN LINE WITH THIS STATEMENT, IT IS REPORTED THAT THE SMALL BUSINESS ADMINISTRATION WAS NOTIFIED BY TELEPHONE ON MAY 8, 1963, THAT THE CONTRACTING OFFICER WAS REJECTING YOUR BID WITHOUT REFERRING THE MATTER TO SBA, BECAUSE OF "AN EMERGENCY SITUATION" REQUIRING IMMEDIATE AWARD.

A LETTER DATED MAY 17, 1963, FROM MR. W. A. CRAIG, PRESIDENT OF THE CITY NATIONAL BANK, FORT WORTH, TEXAS, HAS BEEN SUBMITTED HERE IN YOUR BEHALF. MR. CRAIG STATES THAT HE IS IN A POSITION TO SEE THAT YOUR FIRM IS ADEQUATELY FINANCED IF IT RECEIVES THIS CONTRACT. WE HAVE ALSO BEEN FURNISHED WITH COPIES OF YOUR WORK ORDER AUTHORIZATIONS FOR THE PERIOD MAY 25, 1960, TO APRIL 3, 1963, INDICATING THAT YOUR FIRM HAD PERFORMED OVERHAUL ON CONSIDERABLY MORE THAN FIVE EACH R-1830-94 ENGINES DURING THAT PERIOD. YOU LIST A TOTAL OF 30 JOB AUTHORIZATIONS COVERING R-1830-94 ENGINES DURING THE PERIOD. FOUR OF THE TOTAL 30 ARE LISTED FOR 1963, TO DATE, AND 7 ARE LISTED FOR 1962.

THE RECORD SHOWS THAT YOUR BID WAS REJECTED BECAUSE IT WAS DETERMINED THAT YOUR FIRM CURRENTLY LACKED THE OVERALL CAPACITY TO PERFORM THE SUBJECT CONTRACT, PARTICULARLY WITH RESPECT TO THE IMMEDIATE AND URGENT REQUIREMENTS OF THE AGENCY DURING THE FIRST TWO MONTHS. THE FEDERAL PROCUREMENT REGULATIONS REQUIRE THAT BEFORE AN OTHERWISE ACCEPTABLE BID MAY BE REJECTED BECAUSE OF A LACK OF CAPACITY OR CREDIT, THE CONTRACTING OFFICER MUST ORDINARILY SUBMIT THE MATTER TO THE SBA TO PERMIT IT TO CONSIDER THE ISSUANCE OF A CERTIFICATE OF COMPETENCY. HOWEVER, THIS PROCEDURE IS NOT MANDATORY WHERE THE AWARD MUST BE MADE WITHOUT DELAY AND THE CONTRACTING OFFICER INCLUDES IN THE CONTRACT FILE A STATEMENT SIGNED BY HIM WHICH JUSTIFIES IMMEDIATE AWARD ACTION. FPR 1-1.708-2 (A) (1). UNDER THE INVITATION DELIVERY TERMS, THE CONTRACTOR MUST OVERHAUL THE ENGINES AND RETURN THEM TO THE GOVERNMENT WITHIN 60 DAYS AFTER RECEIPT. THE CONTRACTING OFFICER "JUSTIFIED" HIS IMMEDIATE AWARD ON MAY 8, ON THE BASIS THAT THE ON HAND SUPPLY OF R-1830-94 ENGINES WAS NOT ADEQUATE TO MEET THE NEEDS OF THE AGENCY OVER THE NEXT 60 DAYS, HENCE IT WAS NECESSARY TO CHOOSE A CONTRACTOR IMMEDIATELY. ON THE RECORD BEFORE US WE CANNOT PROPERLY QUESTION THIS FINDING. SEE B-148975, JULY 16, 1962, COPY ENCLOSED.

APART FROM THE AUTHORITY OF THE SMALL BUSINESS ADMINISTRATION TO ISSUE A CERTIFICATE OF COMPETENCY, THE DETERMINATION OF THE CAPABILITIES OF A BIDDER IS PRIMARILY THE FUNCTION OF THE PROCUREMENT AGENCY, AND IN THE ABSENCE OF BAD FAITH OR LACK OF A REASONABLE FACTUAL BASIS FOR THE DETERMINATION WE WILL NOT OBJECT TO THE DETERMINATION AS MADE. 38 COMP. GEN. 248.

YOUR FIRM APPEARS TO HAVE REASONABLE ASSURANCE OF FINANCIAL BACKING IF IT OBTAINS THIS JOB, AND YOU HAVE SUBMITTED INFORMATION TO THE EFFECT THAT YOU WORKED ON MORE THAN 4 OR 5 R-1830-94 ENGINE OVERHAUL JOBS WITHIN THE LAST 12 MONTHS. BUT THE REJECTION OF YOUR BID WAS NOT BASED PRIMARILY UPON EITHER OF THESE FACTORS. ESSENTIALLY, THE ADMINISTRATIVE AGENCY FOUND THAT YOU LACKED THE IMMEDIATE PHYSICAL CAPACITY, IN TERMS OF PERSONNEL, INVENTORY, PLANT APPARATUS, AND THE LIKE, TO SATISFACTORILY MEET THE QUANTITY AND DELIVERY DEMANDS OF THIS CONTRACT DURING THE FIRST FEW MONTHS. ON THE RECORD BEFORE US, WE CANNOT SAY THAT THE ADMINISTRATIVE DETERMINATION WAS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE.