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AS THEY THEN COULD HAVE CURED THE CONTRACT DELINQUENCIES EVEN WITHOUT A NOVATION OF THE DELINQUENT CONTRACTS. WHICH WAS BASED ON ITS PREDECESSOR'S LACK OF TENACITY AND PERSEVERANCE SHOULD BE REEVALUATED UNDER PARAGRAPH 1-903.1(III) OF THE ARMED SERVICES PROCUREMENT REGULATION. THE JOINT PREAWARD SURVEY WAS CONDUCTED ON JULY 15. A RECOMMENDATION OF "NO AWARD" WAS RECEIVED. THE BASIS STATED BY THE SURVEY TEAM FOR THIS RECOMMENDATION IS SET FORTH AS FOLLOWS: 1. THE FOLLOWING COMMENTS ARE MADE REGARDING THE ON-SITE PREAWARD SURVEY PERFORMED ON THOMPSON MANUFACTURING COMPANY ON 15 JULY 1970. THOMPSON OFFERED VERY LITTLE DOCUMENTATION IN SUPPORT OF THIS PAS: THEREFORE THE COMMENTS BELOW ARE BASED ON CONVERSATION WITH THE CONTRACTOR'S MANAGEMENT PERSONNEL.

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B-170527, NOV 13, 1970, 50 COMP GEN 360

BIDDERS - QUALIFICATIONS - TENACITY AND PERSEVERANCE - IMPUTED TO SUCCESSOR CONCERN THE LACK OF TENACITY AND PERSEVERANCE KNOWN TO TWO PRINCIPALS OF A DELINQUENT CONCERN IN SEPTEMBER 1969, WHEN THEY FIRST UNDERTOOK TO REORGANIZE THE CONCERN, ALTHOUGH THEY DID NOT ACQUIRE FORMAL CONTROL UNTIL APRIL 1970, AT WHICH TIME THEY ASSUMED THE ADMINISTRATION AND MANAGEMENT OF THE REORGANIZED CORPORATE ENTITY AND CHANGED ITS OPERATING PERSONNEL, MAY BE IMPUTED TO THE NEW OWNERS FROM SEPTEMBER 1969, AS THEY THEN COULD HAVE CURED THE CONTRACT DELINQUENCIES EVEN WITHOUT A NOVATION OF THE DELINQUENT CONTRACTS. THEREFORE, A NEGATIVE PREAWARD SURVEY OF THE NEW CONCERN, LOW UNDER A REQUEST FOR PROPOSALS TO FURNISH BOMB RELEASE UNITS, WHICH WAS BASED ON ITS PREDECESSOR'S LACK OF TENACITY AND PERSEVERANCE SHOULD BE REEVALUATED UNDER PARAGRAPH 1-903.1(III) OF THE ARMED SERVICES PROCUREMENT REGULATION; AND IF ADVERSE, REFERRED TO THE SMALL BUSINESS ADMINISTRATION.

TO THE SECRETARY OF THE AIR FORCE, NOVEMBER 13, 1970:

WE REFER TO A LETTER DATED AUGUST 26, 1970, AND ENCLOSURES, FROM THE CHIEF, CONTRACT PLACEMENT DIVISION, DIRECTORATE PROCUREMENT POLICY, DCS/S&L, SUBMITTING FOR OUR CONSIDERATION A REPORT ON THE PROTEST OF THOMPSON MANUFACTURING COMPANY, INCORPORATED, UNDER REQUEST FOR PROPOSALS NO. F08635-70-R-0213, ISSUED BY THE ARMAMENT DEVELOPMENT AND TEST CENTER, EGLIN AIR FORCE BASE, FLORIDA.

THOMPSON SUBMITTED THE LOWEST PRICE OF THE 17 PROPOSALS RECEIVED; AND THE CONTRACTING OFFICER REQUESTED A PREAWARD SURVEY OF THE COMPANY BY THE DEFENSE CONTRACT ADMINISTRATION SERVICES REGION (DCARS), PHOENIX, WITH JOINT PARTICIPATION BY COGNIZANT REPRESENTATIVES FROM THE ARMAMENT DEVELOPMENT AND TEST CENTER (ADTC), AND THE DIRECTORATE FOR PROCUREMENT AND PRODUCTION (WRAMA). THE JOINT PREAWARD SURVEY WAS CONDUCTED ON JULY 15, 1970, AND A RECOMMENDATION OF "NO AWARD" WAS RECEIVED. THE BASIS STATED BY THE SURVEY TEAM FOR THIS RECOMMENDATION IS SET FORTH AS FOLLOWS:

1. THE FOLLOWING COMMENTS ARE MADE REGARDING THE ON-SITE PREAWARD SURVEY PERFORMED ON THOMPSON MANUFACTURING COMPANY ON 15 JULY 1970. THOMPSON OFFERED VERY LITTLE DOCUMENTATION IN SUPPORT OF THIS PAS: THEREFORE THE COMMENTS BELOW ARE BASED ON CONVERSATION WITH THE CONTRACTOR'S MANAGEMENT PERSONNEL.

A. CONTRACTOR DOES NOT NOW PRESENTLY HAVE THE PRODUCTION CAPABILITY TO PERFORM THIS CONTRACT. CONTRACTOR GAVE HIS VERBAL ASSURANCE THAT MACHINES AND FACILITIES WERE AVAILABLE; HOWEVER, THE TYPES AND QUANTITIES OF MACHINES, SIZE AND TYPE OF FACILITIES REQUIRED, AND OTHER REQUIREMENTS WERE NOT KNOWN BY THE CONTRACTOR. CONTRACTOR HAS EVIDENTLY DONE LITTLE PLANNING REGARDING PRODUCTION FACILITIES, AS IS NECESSARY FOR A PROGRAM OF THIS TYPE AND MAGNITUDE.

B. CONTRACTOR FAILED TO PRODUCE OR DESCRIBE A PRODUCTION CONTROL PLAN TO DEMONSTRATE THE ABILITY TO CONTROL COMPONENT AND SUBASSEMBLY FLOW TOWARD THE ASSEMBLY AND DELIVERY OF COMPLETED BOMB RACKS ON SCHEDULE. LITTLE, IF ANY, PRODUCTION PLANNING HAS BEEN DONE. THE REQUIREMENT TO DELIVER 219 BOMB RACKS, COMPOSED OF SEVERAL HUNDRED COMPONENTS AND SUBASSEMBLIES PER MONTH REQUIRES PLANNING TO A MUCH GREATER DEPTH THAN DEMONSTRATED BY THE CONTRACTOR.

C. CONTRACTOR DID NOT HAVE ON HAND PRECISION TEST EQUIPMENT OR GAUGES NECESSARY FOR THE QUALITY CONTROL REQUIREMENTS OF THIS PROCUREMENT. DID NOT DEMONSTRATE AN UNDERSTANDING OF THE QUALITY CONTROL REQUIREMENTS. THE ABILITY TO HIRE THE NECESSARY QC PERSONNEL AND BUY THE PRECISION MEASURING EQUIPMENT WAS NOT PROVED.

D. CONTRACTOR DEMONSTRATED LACK OF UNDERSTANDING OF THE TOLERANCE STUDY REQUIREMENT. HIS ESTIMATE OF 200/HRS WAS NOT CONSIDERED ADEQUATE. HIS PROPOSED USE OF THE COMPANY GENERAL MANAGER FOR THIS STUDY MEANT THE LOSS OF MIDDLE MANAGEMENT FOR THE FIRST FIVE WEEKS OF THE CONTRACT. NO RESUME OF THIS MAN WAS PRESENTED TO THE TEAM TO SUBSTANTIATE HIS PREVIOUS EXPERIENCE/BACKGROUND. THIS MAN ALSO BECAME THE HEAD OF ENGINEERING DEPARTMENT DURING THE PAS TEAM VISIT. THUS THE INTEGRITY OF THE PROPOSED PERSONNEL PLAN WAS CONSIDERED QUESTIONABLE.

E. CONTRACTOR DID NOT HAVE CONTRACT ADMINISTRATION PERSONNEL FOR THIS CONTRACT. HIS ABILITY TO HIRE SAME WAS NOT PROVED.

F. CONTRACTOR DID NOT DEMONSTRATE AN EFFECTIVE CONFIGURATION MANAGEMENT PLAN, NOR DID HE PROVE HE HAD CONTROLS TO INSURE TRACEABILITY OF COMPONENTS, ENGINEERING RELEASE, ENGINEERING CHANGE ORDERS, ACCOUNTABILITY OF ENGINEERING DATA OR RETRIEVABILITY OF CONFIGURATION DATA. CONTRACTOR'S LACK OF EXPERIENCE WITH THE ASSEMBLY OF END ITEMS AS COMPLICATED AS THIS BOMB RACK CASTS SERIOUS DOUBTS ON HIS ABILITY TO EFFECT A CONFIGURATION MANAGEMENT PLAN SUFFICIENT FOR THIS PROCUREMENT.

G. DCAS DD375 PRODUCTION PROGRESS REPORTS FOR THE PAST 24 MONTHS SHOW A CONSISTENT DELINQUENCY OF APPROXIMATELY 40% ON CONTRACTS. WHEN ASKED WHAT ATTEMPTS TO CORRECT THIS SITUATION HAD BEEN DONE, MR. THOMPSON STATED HE AND HIS BROTHER HAD ASSUMED ACTIVE TOP MANAGEMENT RESPONSIBILITIES IN LIEU OF PAST EXISTENCE AS INACTIVE INVESTORS. FACTS INDICATED THAT SINCE THEIR ASSUMPTION OF ABOVE MENTIONED POSITIONS IN SEPTEMBER 1969, NO DECREASE IN DELINQUENCIES HAD OCCURRED. FOR THE PAST SIX MONTHS, DELINQUENCIES AVERAGED 43%. THE THOMPSON BROTHERS FURTHER STATED THAT MANAGEMENT EMPHASIS IN THE CASE OF DELINQUENCIES WAS NOT WASTED ON LOW PROFIT CONTRACTS, BUT RATHER EMPHASIS WAS PLACED ON PROFITABLE ONES.

H. CONTRACTOR FAILED TO DEMONSTRATE AN EFFECTIVE INVENTORY CONTROL PROGRAM. ON-SITE INSPECTION OF HIS MER BREECH PRODUCTION LINE REVEALED BREECHES IN SEVERAL STATES OF COMPLETION STORED TOGETHER WITH NO APPARENT RHYME OR REASON. THERE WAS NO PAPERWORK EVIDENT WHICH DESCRIBED THE MANUFACTURING OPERATIONS PREVIOUSLY PERFORMED OR TO BE PERFORMED. SIMILAR PRACTICES ON THE NUMEROUS PARTS IN THE BRU-3A/A WOULD ALMOST SURELY PRECLUDE ATTAINMENT OF ANY REQUIRED SCHEDULE.

2. THE FOLLOWING FACTORS, REVEALED TO THE PAS TEAM MEMBERS BY DCASD, PHOENIX PERSONNEL, ARE CONSIDERED TO BE PARTICULARLY GRAVE CIRCUMSTANCES IN LIGHT OF THE IMPORTANCE OF THIS PROCUREMENT.

A. CONTRACTOR HAS REPEATEDLY BEEN DELINQUENT ON PREVIOUS CONTRACTS, AVERAGING 43% DELINQUENT IN THE PREVIOUS SIX MONTHS. THIS PROCUREMENT HAS BEEN DELAYED TWELVE MONTHS ALREADY. ANY ADDITIONAL DELAYS IN THE DELIVERY OF BRU-3A/A BOMB RACKS CANNOT BE TOLERATED.

B. CONTRACTOR HAS REPEATEDLY FAILED FIRST ARTICLE ACCEPTANCE TESTS ON PREVIOUS CONTRACTS. FAAT FAILURE ON THE BRU-3A/A WOULD LIKELY RESULT IN DELIVERY SCHEDULE SLIPPAGES WHICH WOULD BE UNACCEPTABLE. CONTRACTOR'S LACK OF EXPERIENCE WITH SIMILAR HARDWARE COULD AGGRAVATE THIS PROBLEM, REQUIRING ADDITIONAL TIME TO TRACE DOWN AND RESOLVE THE CAUSE OF FAILURE.

C. ON MANY OF THOSE CONTRACTS THAT CONTRACTOR COMPLETED "ON SCHEDULE" SCHEDULE EXTENSIONS WERE REQUESTED FOR MONETARY CONSIDERATION. THIS FACT IS NOT REFLECTED IN THE DELINQUENCY FIGURES BUT IS FURTHER EVIDENCE OF CONTRACTOR'S LACK OF PERSEVERANCE AND TENACITY.

D. CONTRACTOR'S BEING ON THE NAVCEL SINCE 1 JULY 1969 SHOWS FURTHER IRRESPONSIBILITY.

3. BASED ON THE ABOVE, A NEGATIVE PRE-AWARD SURVEY IS RECOMMENDED.

THEREAFTER, ON JULY 27, 1970, THE CONTRACTING OFFICER MADE THE FOLLOWING WRITTEN FINDINGS AND DETERMINATION OF NONRESPONSIBILITY CONCERNING THOMPSON:

1. THOMPSON MANUFACTURING CO, INC SUBMITTED A PROPOSAL IN RESPONSE TO REQUEST FOR PROPOSAL F08635-70-R-0213 CALLING FOR 3,128 BRU-3A/A BOMB RELEASE UNITS FOR THE F111 AIRCRAFT AND SERVICES TO PERFORM A COMPLETE EVALUATION OF THE TECHNICAL DATA PACKAGE FURNISHED WITH THE RFP. THOMPSON'S PROPOSAL WAS THE LOWEST IN PRICE OF A TOTAL OF 17 PROPOSALS RECEIVED.

2. SUBSEQUENT TO THE RECEIPT OF THE PROPOSALS, AN EVALUATION REVEALED THAT THOMPSON'S PROPOSAL WAS OTHERWISE ELIGIBLE TO BE CONSIDERED FOR AN AWARD PROVIDED A DETERMINATION OF RESPONSIBILITY COULD BE MADE BY THE CONTRACTING OFFICER DCASD PHOENIX, ARIZONA WAS REQUESTED TO PERFORM A PRE- AWARD SURVEY (PAS) OF THOMPSON MANUFACTURING CO, INC. THE PURPOSE OF THE PAS WAS TO DETERMINE THOMPSON'S CAPABILITY TO PERFORM UNDER THE TERMS OF THE PROPOSED CONTRACT. PARTICIPATING IN THE PAS WERE REPRESENTATIVES FROM DCASD PHOENIX, ADTC/ADAFG (BUYING OFFICE) AND ADTC/ADLEZ/ADLEC (ENGINEERING OFFICES), AND A REPRESENTATIVE FROM THE DIRECTORATE FOR PROCUREMENT AND PRODUCTION, WRAMA.

3. BY MESSAGE 222019Z JUL 70, DCASD PHOENIX ADVISED THAT THOMPSON MANUFACTURING CO., INC. HAS BEEN GIVEN AN UNSATISFACTORY RATING FOR FACTORS 5 AND 12 (PURCHASING AND SUBCONTRACTING AND PERFORMANCE RECORD) OF THE PAS AND RECOMMENDED THAT NO AWARD BE MADE TO THOMPSON.

4. IT HAS BEEN ASCERTAINED BY THE UNDERSIGNED CONTRACTING OFFICER THAT THOMPSON MANUFACTURING CO, INC HAS A HISTORY OF POOR PERFORMANCE AS EVIDENCED BY PREVIOUS NEGATIVE PRE-AWARD SURVEYS. THOMPSON CURRENTLY APPEARS ON THE NAVY CONTRACTOR EXPERIENCE LIST UNDER CATEGORY D INDICATING "THAT SUPPLIER IS NOW DELINQUENT IN CURRENT CONTRACT PERFORMANCE OR HAS A HISTORY OF DELINQUENCY IN PAST CONTRACT PERFORMANCE."

IN VIEW OF THE ABOVE FINDINGS, THE UNDERSIGNED CONTRACTING OFFICER DETERMINES THAT THOMPSON MANUFACTURING CO. INC IS NONRESPONSIBLE INASMUCH AS THOMPSON HAS FAILED TO MEET THE MINIMUM STANDARDS FOR A RESPONSIBLE CONTRACTOR AS SET FORTH IN ASPR 1-903.1(III) AND IS THEREFORE INELIGIBLE FOR AN AWARD.

THE RECORD INDICATES THAT THE SBA ERRONEOUSLY INTERPRETED THE CONTRACTING OFFICER'S FILING OF THE FINDINGS AND DETERMINATION IN ACCORDANCE WITH ASPR 1-705.4(C)(VI), AS REVISED BY DEFENSE PROCUREMENT CIRCULAR (DPC) #75 DATED DECEMBER 10, 1969, AS A REQUEST FOR A CERTIFICATE OF COMPETENCY. LETTER DATED JULY 31, 1970, SBA ADVISED AFSC, EGLIN AIR FORCE BASE, THAT THE FINAL DATE FOR PROCESSING THE COC WOULD BE THE CLOSE OF BUSINESS ON AUGUST 20, 1970. HOWEVER, ON AUGUST 5, 1970, THE SBA REGIONAL OFFICE, SAN FRANCISCO, ADVISED AFSC OF THE FOLLOWING:

THIS IS IN CONFIRMATION OF TELEPHONE CONVERSATIONS WHICH TOOK PLACE ON AUGUST 4 AND 5, 1970, BETWEEN MR. DYSTER, MYSELF, AND MR. CUMISKEY OF MY OFFICE. THE CONTRACT OFFICER'S DETERMINATION OF NONRESPONSIBILITY FOR LACK OF TENACITY AND PERSEVERANCE AS IT RELATES TO THE PROPOSAL OF THOMPSON MANUFACTURING COMPANY, INC., PHOENIX, ARIZONA, UNDER RFP F08635- 70-R-0313 WILL NOT BE APPEALED BY SBA.

A REVIEW OF THE INFORMATION SUBMITTED BY YOUR OFFICE DISCLOSES THAT THE DETERMINATION WAS BASED ON THE DELINQUENCY RECORD ON CONTRACTS HELD BY THE THOMPSON INTERNATIONAL COMPANY WHICH IS REFERRED AS A PREDECESSOR OF THOMPSON MANUFACTURING COMPANY, INC. THE PRE-AWARD SURVEY STATES ON PAGE 3 OF PART II - FINANCIAL CAPABILITY - THAT THOMPSON INTERNATIONAL CORPORATION, A PUBLIC CORPORATION, SOLD ITS AEROSPACE DIVISION TO THE NEW COMPANY KNOWN AS THOMPSON MANUFACTURING COMPANY, INC. IT FURTHER STATES THAT THE PRINCIPALS OF THOMPSON INTERNATIONAL CORPORATION, DARROW AND STANLEY THOMPSON, ARE ALSO PRINCIPALS OF THE NEW COMPANY WHICH IS NOT PUBLIC. ON THE BASIS OF THE RESPONSIBILITY OF CONTINUING MANAGEMENT FROM ONE COMPANY TO THE OTHER, SBA DECIDED AS NOTED ABOVE. ***

THOMPSON, IN ITS LETTER OF PROTEST AGAINST THE CONTRACTING OFFICER'S DETERMINATION THAT THE COMPANY IS NONRESPONSIBLE FOR LACK OF TENACITY AND PERSEVERANCE, CONTENDS THAT THE PRIOR UNSATISFACTORY PERFORMANCE BY ITS PREDECESSOR COMPANY, AEROSPACE DIVISION OF THOMPSON INTERNATIONAL CORPORATION, SHOULD NOT NOW BE IMPUTED TO THEM PERSONALLY OR TO THE NEWLY ORGANIZED CORPORATE ENTITY BECAUSE OF THE LIMITED EXTENT TO WHICH THE THOMPSON BROTHERS PARTICIPATED IN THE ACTUAL MANAGEMENT AND OPERATION OF SUCH DIVISION. IT IS FURTHER ALLEGED THAT THOMPSON INTERNATIONAL CORPORATION IS A CORPORATE CONGLOMERATE ENGAGED IN SUCH DIVERSE INTERESTS AS LOANS, CONSTRUCTION, INSURANCE REAL ESTATE, AND FINANCING, THROUGH FIVE CORPORATE SUBSIDIARIES. IN ADDITION TO THE CORPORATE SUBSIDIARIES, THOMPSON INTERNATIONAL HAD THREE OPERATING DIVISIONS, ONE OF WHICH (AEROSPACE DIVISION) BID ON, WAS AWARDED, AND PERFORMED NUMEROUS GOVERNMENT CONTRACTS. IT IS EXPLAINED THAT A DECISION WAS MADE AS EARLY AS SEPTEMBER 1969, THAT THOMPSON INTERNATIONAL SHOULD DISPOSE OF THIS DIVISION; HOWEVER, SINCE SEVERAL THOUSANDS OF DOLLARS OF ASSETS WERE INVOLVED, AND SINCE THOMPSON INTERNATIONAL WAS A "REPORTING COMPANY" UNDER APPROPRIATE S.E.C. REGULATIONS, IT TOOK UNTIL APRIL 1970 TO AUDIT THE CONSOLIDATED COMPANY AND MAKE THE ACTUAL TRANSFER OF ASSETS AND ASSUMPTIONS OF LIABILITIES. SINCE APRIL 1, 1970, THE THOMPSON BROTHERS, AS SOLE OWNERS OF THOMPSON MANUFACTURING COMPANY, INCORPORATED, HAVE BEEN THE ADMINISTRATORS AND DIRECT MANAGERS OF THE NEW COMPANY AND HAVE CHANGED THE OPERATING PERSONNEL, STATING THAT "ONLY ONE PERSON EMPLOYED IN SEPTEMBER 1969, WAS RETAINED IN THE NEW COMPANY AND HE WAS GIVEN IN THE NEW COMPANY, NO AUTONOMY AND NO AUTHORITY TO COMMIT THE COMPANY IN ANY SIGNIFICANT AREA WITHOUT DIRECT AUTHORITY FROM ONE OF THE THOMPSONS". IS ALSO ALLEGED THAT ON APRIL 1, 1970, WHEN THOMPSON MANUFACTURING COMPANY TOOK OVER THE DELINQUENT CONTRACTS FOR AEROSPACE DIVISION, THE OVER-ALL CONTRACTS WERE 64 PERCENT DELINQUENT. ON MAY 1, 1970, THE PERCENTAGE WAS 55; ON JUNE 1, 41 PERCENT; ON JULY 1, 26 PERCENT; ON AUGUST 1, 42 PERCENT AND ON SEPTEMBER 1, 20 PERCENT. ON SEPTEMBER 10, 1970, 3 OF 15 PERCENT CONTRACTS WERE TECHNICALLY DELINQUENT. ONE OF THOSE WAS IN DISPUTE AND HAD BEEN FOR ALMOST A YEAR AND A HALF, AND REPRESENTS ONE HALF OF THE DOLLAR AMOUNT OF WORK IN THE DELINQUENT CATEGORY.

IN OUR DECISION TO YOU 49 COMP. GEN. 600, MARCH 18, 1970, WE STATED IN PART THE FOLLOWING:

WHILE WE RECOGNIZE THAT A CONTRACTING OFFICER'S DETERMINATION OF A BIDDER'S RESPONSIBILITY INVOLVES THE EXERCISE OF A CONSIDERABLE RANGE OF DISCRETION, WHERE THE BIDDER IS A SMALL BUSINESS CONCERN THE CONTRACTING OFFICER'S DETERMINATION OF RESPONSIBILITY IS SUBJECT, SO FAR AS CONCERNS CAPACITY AND CREDIT, TO THE AUTHORITY OF SBA UNDER SECTION 8(B)(7) OF THE SMALL BUSINESS ACT, PUBLIC LAW 85-536, 15 U.S.C. 637(B)(7), TO CERTIFY TO GOVERNMENT PROCUREMENT OFFICERS WITH RESPECT TO THE CAPACITY AND CREDIT OF A SMALL BUSINESS TO PERFORM A SPECIFIC GOVERNMENT CONTRACT. WE HAVE HELD THAT A DETERMINATION OF NONRESPONSIBILITY OF A SMALL BUSINESS CONCERN ON THE BASIS OF A RECORD OF SUBSTANTIAL DELIVERY DELINQUENCIES WITHOUT REFERRAL TO SBA FOR CERTIFICATION OF THE CONCERN'S CAPACITY AND CREDIT IS UNJUSTIFIED ABSENT A FINDING, BASED ON SUBSTANTIAL EVIDENCE, THAT THE DELINQUENCIES AROSE OUT OF SOMETHING OTHER THAN CAPACITY AND CREDIT AND ARE THEREFORE NOT WITHIN THE SCOPE OF A SBA CERTIFICATION. 43 COMP. GEN. 298 (1963). WE STATED THAT A LIMITATION ON THE AUTHORITY OF THE CONTRACTING OFFICER IN DETERMINING THE RESPONSIBILITY OF A SMALL BUSINESS BIDDER RESULTED FROM THE CERTIFICATION AUTHORITY VESTED IN SBA AND THAT SUCH LIMITATION COULD NOT BE OVERCOME BY SIMPLY CONCLUDING THAT THE REASONS FOR THE CONTRACTING OFFICER'S NEGATIVE DETERMINATION BELONG IN THE CATEGORY OF FACTORS WHICH COULD NOT BE COVERED BY THE SBA CERTIFICATION.

A REVIEW OF THE ABOVE-QUOTED DETERMINATION BY THE CONTRACTING OFFICER IN THIS CASE, AND THE SUPPORTING DOCUMENTATION IN THE ACCOMPANYING FILE, SHOWS THAT THE FINDING IN PARAGRAPH 3 COVERING THE UNSATISFACTORY RATING FOR FACTORS 5 AND 12 (PURCHASING AND SUBCONTRACTING AND PERFORMANCE RECORD), IS BASED UPON LANGUAGE CONTAINED IN THE PREAWARD SURVEY WHICH STATES:

2. A FORMAL REVIEW OF THE CONTRACTOR'S PURCHASING AND SUBCONTRACTING SYSTEM HAS NOT BEEN PERFORMED. IT IS EVIDENT FROM AN EXAMINATION OF CURRENT AND PAST PERFORMANCE RECORDS ON PRIME GOVERNMENT CONTRACTS THAT DEFICIENCIES AND INADEQUACIES EXIST IN HIS SYSTEM. HIS HIGH RATE OF DELINQUENCIES WERE PRIMARILY CAUSED BY LATE ISSUANCE OF PURCHASE ORDERS AND LACK OF AGGRESSIVE FOLLOW UP. THIS FACTOR IS CONSIDERED TO BE UNSATISFACTORY.

IT IS APPARENT THAT THE DETERMINATION OF THE CONTRACTING OFFICER IS BASED UPON DELINQUENCIES UNDER CONTRACTS ENTERED INTO BY THOMPSON INTERNATIONAL AND IT DOES NOT APPEAR TO BE DETERMINABLE FROM THE PREAWARD SURVEY WHAT CONSIDERATION WAS GIVEN TO CONTRACTS ENTERED INTO BY THE NEW COMPANY AS A BASIS FOR SUCH DETERMINATION.

FROM THE FACTS SET FORTH BY THE RECORD, AS CITED HEREIN, THERE IS NO QUESTION BUT THAT THE PERFORMANCE RECORD OF THOMPSON INTERNATIONAL WAS POOR; AND SUCH EVIDENCE, IN OUR OPINION, WOULD HAVE BEEN SUFFICIENT TO SUPPORT THE CONTRACTING OFFICER'S FINDINGS AND DETERMINATION THAT THOMPSON INTERNATIONAL WAS NOT A RESPONSIBLE BIDDER WITHIN THE MEANING OF THE PROCUREMENT REGULATIONS.

THE QUESTION FOR OUR DETERMINATION, THEREFORE, IS WHETHER THE SALE OF THE AEROSPACE DIVISION TO TWO OFFICERS OF THE PARENT FIRM, SUBSEQUENT TO THE AWARD OF THE CONTRACTS ON WHICH THE PARENT FIRM WAS DELINQUENT, WITHOUT A NOVATION OF SUCH DELINQUENT CONTRACTS, HAS SO CHANGED THE STRUCTURE OF THE BUSINESS THAT THE NEW CORPORATION SHOULD NOT BE CHARGED WITH THE DELINQUENCIES ATTRIBUTABLE TO THE PARENT FIRM.

OFFICE OF COUNSEL CITES SEVERAL OF OUR DECISIONS WHEREIN OUR OFFICE HAS HELD THAT IN EVALUATING THE RESPONSIBILITY OF A BIDDER, IN INSTANCES WHERE A FIRM ESTABLISHES A POOR RECORD OF PERFORMANCE AND IS THEN INCORPORATED WITH LITTLE OR NO CHANGE IN MANAGEMENT, THE NEW CORPORATION MAY PROPERLY BE HELD NONRESPONSIBLE BASED UPON THE PRIOR FIRM'S POOR RECORD. B-156897, JULY 21, 1965. SIMILARLY, A CONTRACTING OFFICER MAY PROPERLY CONSIDER THE DEFICIENT PERFORMANCE OF A CORPORATION WHICH SUBSEQUENTLY CONTINUES PERFORMANCE UNDER A TRUSTEE IN BANKRUPTCY, THE FACT THAT THE TWO "ARE LEGALLY SEPARATE ENTITIES DOES NOT NECESSARILY MEAN THAT IN DETERMINING THE RESPONSIBILITY OF ONE IT IS NOT PROPER TO CONSIDER THE PERFORMANCE OF THE OTHER." B-168209, FEBRUARY 2, 1970. THERE CAN BE NO DOUBT THAT POOR MANAGEMENT MAY BE THE PROPER BASIS FOR A FINDING OF NONRESPONSIBILITY. 157203, DECEMBER 29, 1965. THE LACK OF PERSEVERANCE AND TENACITY OF A CORPORATE OFFICIAL CAN BE IMPUTED TO A CORPORATION. B-163485, AUGUST 6, 1968.

THE FACTS IN THE PRESENT CASE ARE NOT THE SAME AS THOSE IN ANY OF THE DECISIONS CITED. HERE, THERE IS ALLEGED TO HAVE BEEN A NEARLY COMPLETE CHANGE IN OPERATING MANAGEMENT OF THE BUSINESS ENTITY CONCERNED. WE THINK THE BASIC QUESTION INVOLVED IN SUCH A SITUATION, SO FAR AS THE IMPUTATION OF PAST DELINQUENCIES TO THE NEW MANAGEMENT IS CONCERNED, IS WHETHER OR NOT THE NEW OPERATING MANAGERS HAVE DEMONSTRATED SUFFICIENT TENACITY AND PERSEVERANCE SINCE THEIR ASSUMPTION OF MANAGEMENT RESPONSIBILITIES TO CREATE CONFIDENCE IN THEIR PRESENT ABILITY TO PERFORM THE PROPOSED CONTRACT IN A SATISFACTORY MANNER.

IT SEEMS CLEAR THAT PRIOR DELINQUENCIES OF ANY BUSINESS ENTITY SHOULD NOT BE IMPUTED TO IT AFTER IT IS ACQUIRED BY PERSONS WHO HAD NO PRIOR CONNECTION WITH ITS MANAGEMENT. THIS IS NOT TO SAY THAT THE NEW MANAGEMENT SHOULD NOT BE HELD RESPONSIBLE FOR ITS ACTIONS IN ATTEMPTING TO CURE EXISTING DELINQUENCIES FOR WHICH IT ASSUMES RESPONSIBILITY, BUT THIS MUST BE MEASURED IN TERMS OF ACTION OR INACTION BY THE NEW MANAGEMENT.

WHERE THERE HAS BEEN NO CHANGE IN HIGHER CORPORATE CONTROL, OR WHERE THE SAME HIGHER MANAGEMENT CONTROLS BOTH THE OLD AND THE REVAMPED BUSINESS ENTITY, WE BELIEVE IT IS PROPER TO REQUIRE DEMONSTRATION OF ADEQUATE TENACITY AND PERSEVERANCE BY THE NEW OPERATING MANAGEMENT TO SHOW THAT PRIOR DEFICIENCIES IN THESE AREAS HAVE BEEN CURED.

IN THE INSTANT CASE, THE RECORD INDICATES THAT THE PRESENT OWNERS AND MANAGERS OF THOMPSON MANUFACTURING COMPANY, INCORPORATED, ACTUALLY BECAME AWARE OF THE DELINQUENCIES OF THE AEROSPACE DIVISION OF THOMPSON INTERNATIONAL CORPORATION IN AUGUST OR SEPTEMBER 1969. THERE IS NOTHING IN THE RECORD BEFORE US TO INDICATE THAT THEY WERE NOT THEN GIVEN AUTHORITY TO TAKE WHATEVER STEPS WERE NECESSARY TO CURE THOSE DELINQUENCIES, DESPITE THE FACT THAT THEY DID NOT FORMALLY ACQUIRE OWNERSHIP OF THE AEROSPACE DIVISION UNTIL APRIL 1, 1970. CONSEQUENTLY, WE BELIEVE IT IS PROPER TO IMPUTE TO THE THOMPSON MANUFACTURING COMPANY ANY LACK OF TENACITY AND PERSEVERANCE SINCE SEPTEMBER 1969. SO FAR AS CONCERNS ANY DEFICIENCY IN THIS REGARD PRIOR TO THAT TIME, WE BELIEVE IT SHOULD NOT BE IMPUTED TO THE THOMPSON MANUFACTURING COMPANY UNLESS IT CAN BE SHOWN THAT THE PRESENT OWNERS HAD CONTROL OVER THE AEROSPACE DIVISION DURING THE PERIOD INVOLVED.

IN VIEW OF OUR CONCLUSIONS, WE BELIEVE A NEW EVALUATION SHOULD BE MADE AS TO THE RESPONSIBILITY OF THE THOMPSON MANUFACTURING COMPANY UNDER PARAGRAPH 1-903.1(III) OF ASPR. IF THE NEW EVALUATION IS ADVERSE, WE BELIEVE IT SHOULD AGAIN BE REFERRED TO THE SBA FOR POSSIBLE APPEAL UNDER THE REGULATIONS.

WE ARE FORWARDING FOR YOUR CONSIDERATION A COPY OF ADDITIONAL MATERIAL RECEIVED BY US SINCE YOUR REPORT OF AUGUST 26, 1970.

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