BNUMBER:  B-272001
DATE:  August 14, 1996
TITLE:  Deval Corporation

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Matter of:Deval Corporation

File:     B-272001

Date:August 14, 1996

Robert G. Fryling, Esq., and Edward J. Hoffman, Esq., Blank, Rome, 
Comisky & McCauley, for the protester.
Eric A. Lile, Esq., Gerald M. Dougherty, Esq., and Harry D. Boonin, 
Esq., Department of the Navy, for the agency.
Linda C. Glass, Esq., and Paul I. Lieberman, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Agency reasonably declined to reverse nonresponsibility determination 
based on new information presented to agency after Small Business 
Administration had twice declined to issue a certificate of competency 
where the new information concerning  personal lines of credit 
available to the protester's offerors did not establish that the 
offeror had the financial capacity to perform the contract.

DECISION

Deval Corporation protests the rejection of its offer under request 
for proposals (RFP) No. N00383-95-R-0274, issued by the Naval 
Inventory Control Point (NAVICP) for the repair and/or modification of 
16 line items of Armament Handling Equipment (AHE).  The protester 
argues that the contracting officer unreasonably declined to find the 
offeror responsible on the basis of new information submitted to the 
agency after the Small Business Administration (SBA) had twice 
declined to issue Deval a certificate of competency (COC).  

We deny the protest.

The RFP, issued on June 26, 1995, contemplated the award of a firm, 
fixed-price, 
3-year requirements contract, with two 1-year option periods.  Award 
was to be made to the low-priced responsible offeror.  Two offers were 
received by the October 13 amended closing date for receipt of 
proposals.  Deval submitted the apparent low offer.

A pre-award survey of Deval was requested by the contracting officer.  
As part of the survey, the Defense Contract Management Area 
Operations, Philadelphia (DCMAO) reviewed Deval's accounting system 
and financial capability.  DCMAO recommended "No Award" based on 
Deval's lack of sufficient financial resources to absorb the work 
under this RFP into Deval's current backlog of work and also meet its 
current obligations.  During the pre-award survey, DCMAO had requested 
Deval to provide a bank commitment letter or some other evidence of 
outside financial support to augment Deval's financial resources, but 
Deval failed to provide any additional information.  Based upon the 
negative pre-award survey, on January 30, 1996, the contracting 
officer found Deval nonresponsible.

By letter dated February 1, the matter was referred to the SBA for COC 
consideration.  On February 29, the SBA notified the contracting 
officer and Deval that it declined to issue a COC.  The SBA's letter 
to the protester stated that "[w]e are unable to overcome the 
procuring agency's determination that your firm is not responsible 
from a financial perspective," and referred to Deval's $600,000 
working capital deficit and negative net worth of $700,000, as well as 
Deval's failure to provide evidence of available outside financing as 
its reasons for declining to issue a COC.  

The same day that the contracting officer received SBA's decision, he 
received additional financial information concerning Deval.  The 
contracting officer reviewed this additional information, consisting 
of a preliminary, nonbinding real estate and financing proposal to 
Deval from the Philadelphia Industrial Development Corporation (PIDC), 
and determined on March 4 that it was not sufficient to warrant 
changing his nonresponsibility determination.  Nonetheless, on March 
5, the contracting officer referred the nonresponsibility 
determination to SBA a second time for review based on this additional 
information.  After the contracting officer sent his second referral 
to the SBA, Deval telefaxed to the contracting officer additional 
financial information, consisting of a "letter of intent" from PGI 
Global Marketing "pledging" $5,600,000 to Deval and a letter from 
Commerce Bank indicating that it was "prepared to review and support a 
line of credit request to Deval for working capital" if award was made 
to Deval under the RFP.  This information was also provided to the 
SBA.

By letter dated March 19, the SBA again declined to issue a COC.  The 
SBA stated that Deval had "submitted no evidence of committed, 
verifiable financing necessary to function the contract."  As the 
basis for not issuing a COC, the SBA cited the following:  (1) no 
evidence that the private financing company (PGI) had resources 
available from which it could provide funds; (2) Deval's bank provided 
no firm financing commitment; and (3) Deval's arrangements and/or 
negotiations with PIDC and Information Network Systems, Inc. (INS) 
were indefinite and incomplete, notwithstanding that Deval's financial 
position may not have been substantially enhanced by them even if such 
arrangements were finalized.   

On April 18, after SBA's second COC denial, the agency made the 
determination to reject Deval's low offer and make award to the other 
offeror, Marvin Engineering Company, Inc.  By letter dated April 17, 
Deval advised the contracting officer that three of its officers had 
obtained personal home equity lines of credit from Core States Bank 
totaling $215,000.  The contracting officer concluded that this 
additional information was not sufficient to change his 
nonresponsibility determination and thereafter made award to Marvin.  
This protest followed.

Deval maintains that the Core States Bank commitment received by the 
principals of Deval should have changed the nonresponsibility 
determination.

Under the Small Business Act, 15 U.S.C.  sec.  637 (b)(7) (1994), SBA has 
conclusive authority to review a contracting officer's negative 
determination of responsibility and to determine a small business 
firm's responsibility by issuing or refusing to issue a COC.  15 
U.S.C.  sec.  637(b)(7)(A); R.T. Nelson Painting Serv., Inc., 69 Comp. Gen. 
279 (1990), 90-1 CPD  para.  202.  Where new information probative of a 
small business concern's responsibility comes to light for the first 
time prior to contract award, as here, the contracting officer may 
reconsider a nonresponsibility determination even though SBA may have 
already declined to issue a COC.  Id.  In cases where new information 
is submitted, it should be evaluated for its effect on the procuring 
agency's initial nonresponsibility determination; our review is 
limited to determining whether the reassessment was reasonable.  Id.  
The contracting officer is not required to speculate as to what impact 
the new information might have on SBA officials, id., and need not 
refer his determination back to SBA for further consideration.  Marlow 
Servs., Inc., 68 Comp. Gen. 390 (1989), 89-1 CPD  para.  388.

Here, we think the agency's reassessment of Deval's responsibility was 
reasonable.  The contracting officer's initial determination of 
Deval's responsibility was based on Deval's financial condition.  
DCMAO's evaluation of Deval's financial condition concluded that, 
among other things, Deval's lack of sufficient financial resources to 
fund the estimated $810,575 in working capital needed to absorb the 
work required by this RFP into its backlog and meet its current 
obligations of $12,880,474.  The additional financial information 
Deval submitted to the contracting officer reflected personal lines of 
credit obtained by Deval's officers.  The contracting officer affirmed 
his initial nonresponsibility determination because the lines of 
credit amounted to only one quarter of the working capital needed and 
because the lines of credit were not committed exclusively to the 
funding of Deval.  Since the contracting officer's conclusions 
regarding the lines of credit are factually correct, we see nothing 
unreasonable with his ultimate decision that the additional 
information did not establish that Deval had the financial wherewithal 
to perform the contract and did not warrant reversal of the 
nonresponsibility determination.

The protest is denied.

Comptroller General
of the United States