BNUMBER:  B-270111
DATE:  February 7, 1996
TITLE:  Saft America Inc.

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REDACTED DECISION
A protected decision was issued on the date below and was subject to a 
GAO Protective Order.  This version has been redacted or approved by 
the parties involved for public release..
Matter of:Saft America Inc.

File:     B-270111

Date:February 7, 1996

Richard J. Bednar, Esq., Crowell & Moring, for the protester.
Alan Grayson, Esq., and Victor Kubli, Esq., for BlueStar Battery 
Systems; Norman Steiger, Esq., for Power Conversion, Inc., 
intervenors. 
Richard A. Couch, Esq., Vera Meza, Esq., and John J. Reynolds, Esq., 
Department of the Army, for the agency.
Peter A. Iannicelli, Esq., and Michael R. Golden, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Contracting officer reasonably determined that the protester was 
nonresponsible to supply large quantities of urgently needed batteries 
for communications-electronics equipment used by soldiers where the 
determination was based on the protester's delinquent deliveries under 
two recent contracts for similar items, the agency has received a 
number of reports from soldiers in the field that batteries previously 
supplied by the protester may vent toxic materials, and the Army has 
frozen its supply of the protester's batteries until the problem is 
corrected so as to prevent injuries to soldiers.

DECISION

Saft America Inc. (Saft) protests the Department of the Army's 
determination that it was nonresponsible to perform a contract under 
invitation for bids (IFB) No. DAAB07-95-B-G346, for supplying 
batteries for military applications.  

We deny the protest.

On September 20, 1996, the Army's Communications-Electronics Command 
(CECOM) issued the IFB for 408,000 urgently needed BA-5590/U 
nonrechargeable lithium sulfur dioxide batteries.  The BA-5590/U 
battery is a small, lightweight battery that is the primary power 
source for approximately 50 different types of portable 
communications-electronics equipment used by soldiers.  As the 
procurement was conducted using accelerated procedures, CECOM orally 
solicited bids from the only two firms that had produced the battery 
for the Army previously, Saft and Power Conversion Inc. (PCI).[1]  
Both firms submitted bids by the September 25 closing date.  Saft's 
total bid price was $16,870,800 and PCI's was $21,750,480.

CECOM requested that the Defense Contract Management Area Office 
(DCMAO) conduct pre-award surveys of both firms.  In PCI's case, the 
pre-award survey team's findings were positive and the firm was 
recommended for award.  In Saft's case, the pre-award survey team made 
negative findings regarding Saft's financial, technical, and 
production capabilities.  The pre-award survey report stated that Saft 
had not demonstrated adequate financial strength to perform the 
proposed contract and complete its current backlog of sales.  The 
report noted that Saft had been asked to provide current financial 
information and had responded with financial data for 1993 and 1994, 
but had provided no data for 1995.  Even though Saft had supplied the 
same batteries to the Army in the past, the pre-award survey team 
rated Saft as unsatisfactory on technical and production capability.  
The team noted Saft's technical/design problems and its unsatisfactory 
(i.e., delinquent) delivery of similar batteries under two existing 
contracts with the Army.  Overall, the pre-award survey team 
recommended that Saft not be considered for award of the present 
contract. 

The contracting officer also was aware of and discussed with other 
cognizant CECOM officials the fact that there had been a number of 
incidents involving "venting" of BA-5590/U batteries manufactured by 
Saft.  A venting is defined as the operating of the cell's vent 
mechanism; it occurs when the cell's internal pressure increases above 
normal operating parameters.  As a safety feature, each battery cell 
has a venting mechanism (i.e., a weak spot built into the cell 
container) that allows the controlled release of toxic materials when 
the cell's internal pressure gets too high.[2]  Ventings are 
undesirable events and are considered a serious problem due to the 
release of toxic materials that endanger any person in the immediate 
area.[3]  On September 21, 1995, five additional ventings of Saft 
batteries were reported at Fort Irwin.  The Army was not able to 
immediately determine what caused the Saft ventings and no 
manufacturing defect that would cause the problem was identified.  The 
agency suspects that [DELETED] causes the problem, which is more 
likely to occur at the end of a battery's life.  Because the Army 
knows of no method to screen its inventory for [DELETED] batteries, it 
has frozen its Saft inventory and will not release the batteries to 
the field.[4]  Saft and the Army are currently working to determine 
the cause and to resolve the venting problem.  

Based upon the recommendations of the pre-award survey team, as well 
as discussion of the venting problem with other knowledgeable CECOM 
personnel, the contracting officer determined that PCI was responsible 
but Saft was not.  Therefore, on September 30, the contract was 
awarded to PCI.  Saft was provided a copy of the negative pre-award 
survey report and was debriefed on October 4.  Saft filed its protest 
in our Office shortly thereafter. 

The protester contends that the contracting officer's negative 
determination of Saft's responsibility was unreasonable because it was 
based solely upon inaccurate factual information and conclusions in 
the pre-award survey report.  According to the protester, the 
pre-award survey team incorrectly determined that it did not have the 
financial capability to do the job because the survey team did not 
give Saft enough time to submit 1995 financial data.  Saft states that 
it was impossible for it to gather and submit audited/certified 
financial statements in the 2 days allowed by the survey team.  Saft 
also contends that the survey team incorrectly concluded that it did 
not have the technical and production capability to produce sufficient 
quantities of batteries within the accelerated delivery schedule based 
upon technical problems and delayed delivery under two existing 
contracts for batteries that are materially different from the BA559/U 
batteries.  Saft states that the batteries with which it had technical 
difficulties have different electrical requirements from the BA-5590/U 
battery or were developmental in nature, or were produced under tight 
specifications.  In any event, Saft points out that it did eventually 
solve the technical difficulties encountered in those contracts.  Saft 
asserts that the survey team and the contracting officer should have 
given greater weight to Saft's successful production of more than 2 
million BA-5590/U batteries from 1989 through 1993, and to its 
production of approximately 5,500 batteries a day during the first 
6 months of operation Desert Shield.       

The protester also contends that the contracting officer's negative 
determination of responsibility was based upon inaccurate information 
regarding the venting problem.  Saft acknowledges that a real problem 
exists in that its batteries are venting in the field at the end of 
their lives.  However, Saft contends that the venting problem is not 
caused by defects in its batteries or in its manufacturing processes; 
Saft states that its batteries exceed CECOM's performance 
specifications in many cases.  The protester asserts that the soldiers 
in the field, who are the end users of the batteries, may have 
reported ventings that did not occur or exaggerated the severity of 
ventings that really did occur (e.g., report mild ventings as violent 
ventings).  The protester also asserts that soldiers may be abusing 
the batteries or otherwise using them improperly.  In this connection, 
Saft contends that the performance specifications in the contracts do 
not accurately reflect the way in which the batteries are used in the 
field, and, therefore, CECOM should change the performance 
specifications.  For example, Saft states that BA-5590/U batteries are 
often discharged at lower rates than those set out in the performance 
specifications and that discharge at lower rates may make the battery 
less stable and prone to vent.

The determination of a prospective contractor's responsibility rests 
principally within the broad discretion of the contracting officer, 
including the issue of whether a pre-award survey should be conducted 
and the degree of reliance that should be placed on the results of the 
survey.  Aydin Vector Div., B-244838, Nov. 13, 1991, 91-2 CPD  para.  455.  
As a general matter, our Office will not question a nonresponsibility 
determination absent a showing of bad faith by the contracting agency 
or the lack of any reasonable basis for the determination, since the 
determination is essentially a matter of business judgment and 
encompasses a wide degree of discretion.  MCI Constructors, Inc., 
B-240655, Nov. 27, 1990, 90-2 CPD  para.  431.  In reviewing a 
nonresponsibility determination based on prior performance, we will 
consider only whether the determination was reasonably based on the 
available information.  Becker and Schwindenhammer, GmbH, B-225396, 
Mar. 2, 1987, 87-1 CPD  para.  235.  

The Federal Acquisition Regulation (FAR) provides that in order to be 
found responsible, a prospective contractor must have adequate 
financial resources to perform the contract, or the ability to obtain 
them, FAR  sec.  9.104-1(a), and a satisfactory performance record, FAR 
Sec. 9.104-1(c), and that a prospective contractor that is or recently 
has been seriously deficient in contract performance shall be presumed 
to be nonresponsible unless the contracting officer determines that 
the circumstances were properly beyond the contractor's control or 
that the contractor has taken appropriate corrective action, FAR Sec. 
9.104-3(c).  A nonresponsibility determination may be based upon the 
contracting agency's reasonable perception of inadequate prior 
performance, even where the agency did not terminate the prior 
contract for default and the contractor disputes the agency's 
interpretation of the facts or has appealed a contracting officer's 
adverse determination.  MCI Constructors, Inc., supra.  

We find that the contracting officer's negative determination of 
Saft's responsibility was reasonable.  

The record shows that the contracting officer was aware of Saft's 
successfully having produced large quantities of BA-5590/U batteries 
in the past.  However, the pre-award survey report and the contracting 
officer's statement in response to Saft's protest show that Saft had 
experienced technical problems and was delinquent in delivering the 
batteries under two recent contracts for similar batteries.  The 
contracting officer states that he considered the pre-award survey 
team's negative findings concerning Saft's poor performance on these 
two contracts, because Saft's performance is "absolutely relevant to a 
consideration of their technical and production capability and ability 
to meet the terms of an urgency-based delivery schedule."  The 
contracting officer specifically refutes Saft's assertion that any 
technical problems it encountered under those two contracts should be 
excused because the contracts are developmental in nature, stating 
that the contracts are production contracts.  The contracting officer 
also points out that the original delivery schedule was extended more 
than once for both contracts and this allowed Saft to avoid the 
embarrassment of a termination for default on one of the contracts.  
While the contracting officer recognizes that the batteries 
manufactured under those contracts have different configurations from 
the BA-5590/U battery, the contracting officer reports that the basic 
design and manufacture of the batteries are similar.  The contracting 
officer concluded that technical and production problems Saft 
encountered in the two recent battery contracts were clear evidence of 
Saft's overall competence in producing lithium batteries and were of 
much greater significance than Saft's performance record in 
manufacturing BA-5590/U batteries in contracts that were awarded 5 or 
more years ago.

Regarding Saft's venting problems, the record shows that a large 
number of incidents were reported and that incidents were reported 
with greater frequency in recent months.  The record also shows that 
CECOM and Saft have not yet determined what causes Saft's batteries to 
vent, and to vent violently on occasion, and that, as a result, in the 
interest of safety the Army will not use Saft's BA-5590/U batteries 
until the cause is discovered and the problem corrected.  On the other 
hand, CECOM points out that very few incidents have been reported with 
PCI batteries, that the agency believes it has discovered the cause of 
the PCI failures, and that the Army will use current supplies of PCI 
BA-5590/U batteries after they have been inspected and found to be 
acceptable.  

On this record of Saft's recent performance history, delinquencies in 
delivery and the technical problem related to venting, we think the 
contracting officer reasonably concluded that Saft might have 
difficulty producing sufficient quantities of usable batteries in 
accord with the urgent delivery schedule and, therefore, reasonably 
found the firm nonresponsible.  See Aydin Vector Div., supra; Equa 
Indus., Inc., 
B-257197, Sept. 6, 1994, 94-2 CPD  para.  96.  Although Saft attributes its 
performance problems in part to defective specifications and in part 
to misuse and misreporting by soldiers, it is the contracting 
officer's reasonable judgment of events that must govern the agency's 
determination, even where the agency's interpretation is disputed by 
the protester.  Id.  We see nothing unreasonable in the Army's 
decision not to award Saft this contract because the cause of the 
venting has not yet been determined nor has a remedy been devised.   
See Hercules Aerospace Co., B-254677, Jan. 10, 1994, 94-1 CPD  para. 7.   
This result is consistent with our general view that, where a 
solicitation requirement relates to human safety or national defense, 
an agency has broad discretion to set its minimum needs so as to 
achieve the highest possible reliability and effectiveness.  See Dash 
Eng'g., Inc; Engineered Fabrics Corp., B-246304.8; 246304.9, May 4, 
1993, 93-1 CPD  para.  363.[5]

The protest is denied.

Comptroller General
of the United States

1. An agency may use noncompetitive procedures to procure goods or 
services where the agency's needs are of such an unusual and 
compelling urgency that the government would be seriously injured if 
the agency is not permitted to limit the number of sources from which 
it solicits bids or proposals.  10 U.S.C.  sec.  2304(c)(2) (1994).

2. Since 1992, there have been 46 reported ventings involving 
BA-5590/U batteries manufactured by Saft; 36 of those were reported as 
violent ventings.  A violent venting occurs under extreme conditions 
in which the cell's internal pressure increases so fast that the vent 
mechanism is overwhelmed and the cell itself explodes.  Twenty-five of 
the reported ventings occurred in 1995.

3. The materials vented include sulfur dioxide gas and liquid 
acetonitrile.  Inhalation of sulfur dioxide gas causes severe 
respiratory irritation, and exposure to acetonitrile electrolyte can 
cause severe irritation to eyes and skin.

4. In contrast, the Army reports that only five incidents involving 
PCI's batteries were reported during the same time period; most of 
those incidents involved dead or leaking cells.  The Army deduced that 
PCI's problem was a manufacturing defect and that the existing 
inventory could be screened to locate defective batteries.  Thus, 
after examination reveals no defects, PCI's BA-5590/U batteries are 
being released to the field.

5. As noted above, Saft also complains that the nonresponsibility 
determination considered DCMAO's finding that Saft failed to provided 
current financial data.  As Saft's performance record was a sufficient 
basis for the contracting officer's nonresponsibility determination, 
we need not discuss this aspect of the pre-award survey.  We note that 
the contracting officer reports that Saft had been asked for this same 
information in connection with another pre-award survey more than 
1 month earlier.