BNUMBER:  B-272163
DATE:  September 5, 1996
TITLE:  South Texas Turbine Supply

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Matter of:South Texas Turbine Supply

File:     B-272163

Date:September 5, 1996

Cynthia S. Emerson, Esq., for the protester.
Jean V. Zurface, Esq., Defense Logistics Agency, for the agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Since the requirement to reject the bid of a contractor proposed for 
debarment at the time of bid opening--notwithstanding the fact that 
the proposed debarment is lifted prior to award--extends to any of 
that contractor's affiliates, a contracting agency may not award a 
contract to a firm alleged to be an affiliate of such a contractor 
unless it has determined that the firms are not affiliated.

DECISION

South Texas Turbine Supply protests the proposed award of a contract 
to Sierra Sales Corporation under the invitation for bids covering 
Sale No. 31-6317, issued by the Defense Logistics Agency's Defense 
Reutilization and Marketing Service (DRMS).[1]  South Texas 
principally argues that Sierra is affiliated with a firm that was 
proposed for debarment at the time of bid opening, and consequently is 
ineligible for award.

We sustain the protest.

The solicitation sought bids to purchase more than 300 line items of 
assorted electrical, electronic, and aircraft parts that are no longer 
needed by the government.  The solicitation incorporated the agency's 
"Sale by Reference" pamphlet, which states that award will be made to 
the responsible bidder whose conforming bid is most advantageous to 
the government, price and other factors considered.  The only factor 
to be considered under this solicitation, however, is price--award of 
each line item will be made to the responsible bidder submitting the 
highest price.  

The bid closing date was January 11, 1996.  The contracting officer's 
review of bids disclosed that Sierra's bid of $6,858 was the highest 
received for line item number 295, a quantity of turbine engine 
nozzles; South Texas submitted the second-highest bid.  South Texas 
subsequently contacted the agency and alleged that Sierra was 
affiliated with Garlick Helicopter, Inc., a firm which was proposed 
for debarment at the time of bid opening and, thus, ineligible to 
participate in this sales program.  

On January 17, the contracting officer asked Sierra to establish its 
nonaffiliation with Garlick.  Sierra responded by stating that it was 
a minority investment stockholder in Garlick, and that the same person 
served as both a director and president of Sierra, and a director and 
chief financial officer of Garlick.  The contracting officer 
determined that she did not have adequate information to make an 
affiliation determination, and asked Sierra to explain whether it 
shared offices with Garlick and to provide evidence of separate bank 
accounts.  She also asked the firm to extend its bid acceptance period 
to allow the agency more time to resolve the matter.  Sierra informed 
the agency that the two firms did not share offices and provided a 
copy of a deposit slip in its name as evidence that it had its own 
bank account.  Sierra also extended its bid acceptance period.  The 
contracting officer subsequently received a report from Dunn & 
Bradstreet indicating that no record of a business telephone listing 
under Sierra's name existed; no record of Sierra being granted a 
business or occupational license existed; and the address given for 
Sierra was a plot of land.  In the face of this report, Sierra sent 
the contracting officer copies of its certificate of incorporation and 
its Internal Revenue Service new employer identification number form, 
and stated that no business license was required by its local 
government.

While the contracting officer was considering this information, the 
proposed debarment of Garlick was lifted based upon the firm's 
entering into a settlement and compliance agreement with the 
Environmental Protection Agency and DRMS.  The contracting officer 
informed South Texas that, in light of the fact that the proposed 
debarment had been lifted, she was proceeding to make award to Sierra.  
South Texas' agency-level protest of this intended action was denied, 
and the firm filed the same protest in our Office.  The agency has 
withheld award pending the resolution of this protest.

South Texas principally contends that award to Sierra under the 
circumstances here would be contrary to the applicable regulations.  
We agree. 

The Federal Acquisition Regulation (FAR) mandates the rejection of a 
bid from a firm which is debarred, suspended, or proposed for 
debarment at the time of bid opening, and does not provide the 
contracting agency with discretion to do otherwise unless the agency 
head or a designee determines that there is a compelling reason for 
such action.[2]  FAR  sec.  9.405(a), 9.405(d)(2), 14.404-2(h); see 
Southern Dredging Co., Inc., 66 Comp. Gen. 300 (1987), 87-1 CPD  para.  245; 
Instruments by Precision Ltd., Inc., B-235339, Aug. 14, 1989, 89-2 CPD  para.  
138.  Hence, the agency would have been required to reject a bid 
submitted by Garlick because the firm was proposed for debarment as of 
January 11, 1996, the bid closing date.  Since the prohibition against 
award to firms which are debarred, suspended, or proposed for 
debarment at the time of bid opening extends to their affiliates,[3] 
FAR  sec.  9.403 (definition of "contractor"); Detek, Inc., B-261678, Oct. 
16, 1995, 95-2 CPD  para.  177, the agency here cannot make award to Sierra 
if that firm was affiliated with Garlick at the time of bid opening. 

The contracting officer never made an affiliation determination with 
respect to Sierra and Garlick, but, citing FAR  sec.  9.405(d)(3), asserts 
that she was relieved of the obligation to do so when the proposed 
debarment of Garlick was lifted prior to award.  

Section 9.405(d)(3) of the FAR provides instructions for those 
situations where the agency receives proposals, quotations, or offers 
in a negotiated procurement.  In such situations, contracting agencies 
have the discretion to accept the proposal, quotation, or offer of a 
contractor proposed for debarment where the proposed debarment is 
lifted by the time of award.  However, the instant solicitation is an 
invitation for bids which required interested firms to submit sealed 
bids and, as the protester correctly points out, FAR  sec.  
9.405(d)(2)--not FAR  sec.  9.405(d)(3)--governs.  See Auto-X, Inc., 
B-238046.2; B-238046.3, June 6, 1990, 90-1 CPD  para.  532. As noted above, 
that section requires the rejection of such bids and does not afford 
contracting agencies discretion absent circumstances not present here.  
See Instruments by Precision Ltd., Inc., supra.  As a result, the 
agency must determine whether Sierra was affiliated with Garlick at 
the time of bid opening before it may properly award a contract to 
Sierra.       

South Texas also contends that the agency improperly asked Sierra to 
extend its bid acceptance period.  The protester alleges that the 
agency's failure to make an affiliation determination within Sierra's 
original bid acceptance period is evidence of bad faith.

Sierra offered a 60-day bid acceptance period, which was to expire on 
March 11.  By letter dated March 5, the contracting officer asked 
Sierra to extend its bid acceptance period pending resolution of the 
affiliation issue.  On March 11, Sierra agreed to a 30-day extension.  
On March 27, the debarment of Garlick was lifted, and by letter dated 
April 3, the contracting officer advised the protester that the agency 
planned to proceed with award to Sierra.

We see no basis to conclude that the agency's actions were improper.  
On the contrary, where award may be delayed beyond the bid acceptance 
period, FAR  sec.  14.404-1(d) plainly contemplates that the contracting 
officer ask for extensions before expiration of the bids--precisely 
the action taken by the contracting officer here.  See Right Away 
Foods Corp., B-216199, Jan. 3, 1985, 85-1 CPD  para.  15. Moreover, to 
establish bad faith, a protester must present virtually irrefutable 
proof that government officials had a specific and malicious intent to 
injure the protester.  Midwest Security Agency, Inc., B-222424, Apr. 
7, 1986, 86-1 CPD  para.  345.  There is no evidence here that the agency 
asked Sierra to extend its bid acceptance period for any reason other 
than to ensure that it had sufficient information from Sierra to make 
an informed affiliation determination.

We recommend that the agency make an affiliation determination with 
respect to Sierra and Garlick.  If the agency determines that Sierra 
was not affiliated with Garlick at the time of bid opening, the agency 
may proceed with award to Sierra if otherwise appropriate.  If the 
agency determines that Sierra was affiliated with Garlick at the time 
of bid opening, Sierra is ineligible for award, and the agency may 
make award to the next eligible bidder or take other appropriate 
action.

The protest is sustained.

Comptroller General
of the United States

1. We consider this nonstatutory protest under 4 C.F.R.  sec.  21.13 
(1996).  By letter dated January 13, 1987, the agency agreed to our 
considering bid protests involving its surplus property sales.  
Resource Recovery Int'l Group, Inc., B-265880, Dec. 19, 1995, 95-2 CPD  para.  
277.

2. The policies, procedures, and requirements of FAR subpart 9.4 are 
incorporated by reference and made applicable to contracts for, and to 
contractors who engage in, the purchase of federal personal property.  
41 C.F.R.  sec.  101-45.601(b) (1995).  Pursuant to 41 C.F.R.  sec.  
109-45.304-50, the procedures in FAR subpart 14.4 are applicable to 
the evaluation of bids and award of contracts for the sale of personal 
property.

3. Business concerns, organizations, or individuals are affiliates of 
each other if, directly or indirectly, (a) either one controls or has 
the power to control the other, or (b) a third party controls or has 
the power to control both.  Indicia of control include interlocking 
management or ownership, identity of interests among family members, 
shared facilities and equipment, common use of employees, or a 
business entity organized following the debarment, suspension, or 
proposed debarment of a contractor which has the same or similar 
management, ownership, or principal employees as the contractor that 
was debarred, suspended, or proposed for debarment.  FAR  sec.  9.403.