B-156971, AUG. 23, 1965

TO MODEL ENGINEERING AND MANUFACTURING CORPORATION:

THIS REFERS TO YOUR LETTER OF AUGUST 3, 1965, PROTESTING AGAINST AN AWARD TO BRISTOL ELECTRONICS CORPORATION ON THE LABOR SURPLUS SET-ASIDE PORTION OF INVITATION FOR BIDS NO. AMC (E) 36-039-65-602-1, ISSUED BY THE DEPARTMENT OF THE ARMY ON MARCH 27, 1965, FOR THE AN-PRC-25 RADIO SET.

YOUR FIRM WAS AWARDED THE NON-SET-ASIDE PORTION OF THE PROCUREMENT. THE SET-ASIDE PORTION THE FIRST AND SECOND BIDDERS (UNDER THE PRESCRIBED ORDER OF PRIORITY) HAVE BEEN REJECTED ON GROUNDS OF RESPONSIBILITY. BRISTOL ELECTRONICS WAS THIRD IN ORDER OF PRIORITY. THE PROCURING OFFICE (UNITED STATES ARMY ELECTRONICS COMMAND) CONDUCTED A PRE-AWARD SURVEY OF BRISTOL AND CONCLUDED THAT THE BIDDER LACKED THE NECESSARY TECHNICAL ABILITY, FACILITIES, FINANCIAL RESOURCES AND RECORD OF PERFORMANCE ON OTHER CONTRACTS TO QUALIFY FOR THE SET-ASIDE AWARD. THE MATTER WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION UNDER THE CERTIFICATE OF COMPETENCY (COC) PROCEDURES. SBA DETERMINED THAT BRISTOL DID HAVE THE REQUISITE CAPACITY AND CREDIT TO PERFORM THE SUBJECT CONTRACT, AND ON JULY 28, 1965, IT ISSUED A COC TO BRISTOL. THE TOTAL DOLLAR VALUE OF THE PROPOSED SET-ASIDE AWARD IS $4,321,809.11. (BRISTOL HAD BID $4,607,011.)

AS THE CURRENT PRODUCER ON THIS ITEM, YOU QUESTION HOW A FIRM WITH BRISTOL'S LIMITED FINANCIAL, TECHNICAL AND PRODUCTION RESOURCES COULD SUCCESSFULLY PRODUCE IN ACCORDANCE WITH THE QUANTITY AND DELIVERY REQUIREMENTS OF THIS PROCUREMENT. FURTHER, YOU QUESTION SBA'S JUDGMENT IN ISSUING A COC TO BRISTOL IN VIEW OF THE POSITIVE FINDINGS BY ARMY THAT BRISTOL IS NOT QUALIFIED. (YOU ADVISE THAT THE PROPOSED AWARD INVOLVES FIVE TO SIX TIMES BRISTOL'S PREVIOUS VOLUME, OVER FORTY TIMES ITS NET WORTH AS OF AUGUST 31, 1964, AND ONE HUNDRED AND FIFTY TIMES ITS NET WORKING CAPITAL AS OF AUGUST 31, 1964.)

THE GENERAL COUNSEL OF THE SBA EXPLAINS THE SBA ACTION AS FOLLOWS:

"IN CERTIFYING THE CAPACITY AND CREDIT OF BRISTOL ELECTRONICS, INC., THE SMALL BUSINESS ADMINISTRATION MADE ITS DETERMINATION ON THE BASIS OF A COMPREHENSIVE REVIEW OF THE CONCERN'S FINANCIAL AND PRODUCTIVE CAPABILITIES, AND WE BELIEVE THE RECORD WILL DEMONSTRATE AMPLE SUPPORT FOR OUR ACTION. AFTER A THOROUGH INVESTIGATION, WE CONCLUDED THAT THE APPLICANT HAS AVAILABLE TO IT THE NECESSARY ORGANIZATION, SKILLS, PERSONNEL, FACILITIES, EQUIPMENT AND SUPPLIES REQUIRED TO MEET THE QUANTITY, QUALITY, AND DELIVERY REQUIREMENTS OF THE PROPOSED CONTRACT. WORKING CAPITAL TO FINANCE PERFORMANCE WILL BE GENERATED FROM OPERATIONS AND PROFIT FROM THE BUSINESS, PROGRESS PAYMENTS, AND A $* * * OPEN LINE OF CREDIT FROM THE * * * BANK, BOSTON, MASSACHUSETTS. THE BANK HAS ALSO INDICATED ITS WILLINGNESS TO EXTEND AN ADDITIONAL $* * * TO THE APPLICANT SHOULD IT BE NEEDED. SOUND FINANCIAL MANAGEMENT ENABLES GOOD CONTROL OF OVERALL OPERATIONS AS WELL AS EFFECTIVE USE OF ITS RESOURCES. IN VIEW OF THESE POSITIVE FACTORS PLUS ADEQUATE SUPPLIER CREDIT, WE WERE OF THE OPINION THAT FINANCIAL RESOURCES WERE SUFFICIENT TO SUPPORT CONTRACT PERFORMANCE.'

IT IS A POLICY OF THE DEPARTMENT OF DEFENSE TO ENDEAVOR TO REACH AGREEMENT WITH SBA REGARDING THE LACK OF CAPACITY OR CREDIT OF A SMALL BUSINESS CONCERN. ASPR 1-705.4 (D). WHERE THE SBA REGIONAL OFFICE IS PLANNING TO ISSUE A COC OR TO REFER THE APPLICATION TO SBA HEADQUARTERS, THE PURCHASING ACTIVITY SHOULD ATTEMPT TO FIND OUT IF NEW OR ADDITIONAL FACTS IN THE CASE EXIST SUCH AS TO WARRANT A REVISAL IN ITS NEGATIVE FINDING. IF THE COC IS ISSUED AND THE CONTRACTING OFFICER HAS SUBSTANTIAL DOUBT REGARDING THE ABILITY OF THE CONTRACTOR TO PERFORM, HE IS AUTHORIZED TO FORWARD THE CASE ON AN EXPEDITED BASIS TO, IN THE CASE OF ARMY, THE DIRECTORATE OF PROCUREMENT FOR REVIEW, AND AWAIT FURTHER INSTRUCTIONS FROM DEPARTMENTAL HEADQUARTERS. ASPR 1 705.4 (C). THE DIRECTOR OF PROCUREMENT ADVISES US THAT IT CONSIDERED PROTESTING TO SBA THE ISSUANCE OF A COC IN THIS CASE, BUT SUBSEQUENTLY DETERMINED THAT DUE TO FINDINGS REPORTED BY SBA, THE REMAINING OBJECTIONS TO THE CAPACITY AND CREDIT OF BRISTOL WERE INTANGIBLE AND COULD NOT BE PROTESTED.

WE HAVE REVIEWED SBA'S FILE ON THE MATTER. THE POSITIVE FINDING AS TO CREDIT WAS BASED ON THE FACTORS AS CITED BY THE GENERAL COUNSEL. SBA CONSIDERED BRISTOL'S PROPOSED PLAN OF OPERATION, INCLUDING THE COMPONENTS TO BE SUBCONTRACTED AND TO BE PRODUCED IN-HOUSE. APPARENTLY THE MAJOR IN- HOUSE COMPONENT WILL BE MODULES, WHICH THE SBA SPECIALIST FOUND TO BE SIMILAR TO THOSE PRODUCED BY BRISTOL UNDER A RECENT CONTRACT. HE FOUND THAT THE CONTRACTOR HAS ON HAND TEST AND INSPECTION EQUIPMENT WHICH WILL BE USED ON THE SUBJECT PROCUREMENT, AND THAT CERTAIN DIES AND ASSEMBLY FIXTURES CAN BE, AND WILL BE, DESIGNED AND BUILT IN-HOUSE.

UNDER THE APPLICABLE PROVISIONS OF THE LAW AND REGULATIONS THE ISSUANCE OF A COC BY THE SMALL BUSINESS ADMINISTRATION IS CONCLUSIVE ON THE CONTRACTING OFFICER WITH RESPECT TO A SMALL BUSINESS BIDDER'S CAPACITY AND CREDIT TO PERFORM THE SPECIFIC GOVERNMENT CONTRACT. 15 U.S.C. 637 (B) (7); ASPR 1-705.4. IN THE CIRCUMSTANCES, WE CANNOT OBJECT IF THE SET- ASIDE IS AWARDED TO BRISTOL.