TITLE: B-297172; B-297172.2, FN Manufacturing, Inc., December 1, 2005
BNUMBER: B-297172; B-297172.2
DATE: December 1, 2005
**************************************************************
B-297172; B-297172.2, FN Manufacturing, Inc., December 1, 2005
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order. This redacted version has been approved for public release.
Decision
Matter of: FN Manufacturing, Inc.
File: B-297172; B-297172.2
Date: December 1, 2005
John S. Pachter, Esq., Jonathan D. Shaffer, Esq., Erin R. Karsman, Esq.,
Richard C. Johnson, Esq., and David S. Stern, Esq., Smith Pachter
McWhorter & Allen, for the protester.
Jeffrey I. Kessler, Esq., and Maria B. Bribriesco, Esq., Department of the
Army, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest challenging an agency's affirmative determination of the awardee's
responsibility on the ground that there is evidence raising serious
concerns that the contracting officer (CO) unreasonably failed to consider
available relevant information suggesting that the awardee does not have a
satisfactory record of integrity and business ethics is denied where the
record shows that: (1) while the awardee was investigated for possible
fraud, it was neither indicted nor proposed for debarment; (2) the CO was
aware of the information that led to the questions about the awardee's
activities under certain previous contracts and did not ignore the matter;
and (3) the CO's more recent dealings with the company provided a rational
basis for her conclusion that the awardee is a responsible contractor.
DECISION
FN Manufacturing, Inc. protests the award of a contract to
Tri-Technologies, Inc. under solicitation No. W52H09-05-R-0190, issued by
the Department of the Army for 12,500 bipod assemblies for M249 machine
guns. FN challenges the Army's affirmative determination of Tri-Tech's
responsibility.
We deny the protest.
BACKGROUND
This protest raises only one contention--i.e., that the Army's contracting
officer (CO) improperly concluded that Tri-Tech has a satisfactory record
of integrity and business ethics, which is a prerequisite to being
considered a responsible contractor eligible for award of a contract from
the federal government under Federal Acquisition Regulation (FAR)
sect. 9.104-1(d). As discussed in greater detail below, Tri-Tech's
performance of previous contracts for bipods--two of them with the Army,
and one as a supplier to FN--raised questions, resulting in an
investigation, about whether the company had committed fraud, and engaged
in on-going efforts to conceal that fraud, or whether it acted
unintentionally when it provided bipods made out of a different type of
steel than specified in its contracts. In FN's view, the CO failed to
conduct a sufficient review of Tri-Tech's actions under those earlier
contracts to properly conclude that the company was responsible here.
The Army's Consideration of Tri-Tech for This Award
This procurement began as an intended sole-source award to FN, due to the
Army's urgent need for M249 bipod assemblies, and the fact that FN
appeared to be the only company able to produce these items without being
subjected to first article testing procedures. Contracting Officer's (CO)
Statement at 13. The agency estimated that first article testing
procedures could add at least 120 days to the delivery time. Agency Report
(AR), Tab C, at 3. As a result, a Justification and Approval (J&A) for
Other Than Full and Open Competition was approved on February 10, 2005,
and a synopsis of the intended sole-source award was publicized. CO's
Statement at 13.
In response to the published synopsis, the Army received an expression of
interest from Tri-Tech; the Army answered, by letter dated March 1, that
issuance of the solicitation was imminent, and that the solicitation would
include a requirement for first article testing and an aggressive delivery
schedule. On April 8, the agency issued the solicitation; both FN and
Tri-Tech submitted proposals by the solicitation's May 10 closing date.
Id.
Upon receipt of the two proposals, the CO noticed that Tri-Tech's offered
price was significantly lower than FN's price, which led the CO to
consider whether Tri-Tech should be allowed to compete for the award. The
CO explains, in response to this protest, that her considerations included
whether Tri-Tech could meet the Government's minimum delivery
requirements, whether the proposed prices were reasonable, and whether
Tri-Tech was responsible in light of the open fraud investigation.
Id. at 14. The contemporaneous record shows that the CO both requested and
received the following information as part of her review: (1) a
"Contractor Performance/Responsibility Review" from an Industrial
Specialist at the Army's Tank and Automotive Command (TACOM), dated June
13; (2) additional information from the TACOM Industrial Specialist about
current contracts and delivery obligations, via e-mails dated June 21 and
August 1; (3) input from the CO's legal advisor regarding what the CO
describes as "the responsibility question"; and (4) input from the Quality
Assurance Representative (QAR) advising that Tri-Tech's bipods could be
exempted from the more extensive first article test procedures if the
agency required the inspection of sample units selected from the initial
production lot. Id. at 14-15. In addition, the CO advises that she called
a meeting with representatives from various TACOM offices to help her
understand the issues involved in allowing Tri-Tech to compete. Id. at 15.
At the conclusion of this process, the CO decided to permit Tri-Tech to
compete for this award, and prepared a memorandum for the record, dated
August 3, documenting her decision. This memorandum briefly, but
expressly, recaps her considerations about delivery issues and about first
article testing; the memorandum is silent about any concern regarding
Tri-Tech's integrity. In summary, the memorandum states, "After careful
review of the past performance information on both contractors,
discussions with Quality Assurance, engineering, and the legal office, the
undersigned [CO] has determined that Tri-Tech should be considered as a
second source." AR, Tab Y.
By letter dated August 4, the CO advised both companies that Tri-Tech
would be allowed to compete with FN for the award, and set August 12 as a
second closing date for the receipt of any revised proposals. Upon receipt
of a revised proposal from FN, and notice from Tri-Tech that it would
proceed with its proposal as originally submitted, the agency began its
review. The review showed that Tri-Tech's proposed price of $1.2 million
remained significantly lower than FN's price of $2.3 million. In addition,
Tri-Tech proposed a more favorable delivery schedule than FN. As a result,
the CO selected Tri-Tech for award on August 29.
Concurrent with her award decision, the CO memorialized her determination
of Tri-Tech's responsibility, by document also dated August 29. The
document, in essence, lists each of the general standards of
responsibility found at FAR sect. 9.104-1, and states, summarily, that
Tri-Tech is a responsible contractor because it meets each standard. The
document expressly includes a finding that the "Contractor has a
satisfactory record of integrity and business ethics," but provides no
explanation of the basis for this finding. AR, Tab AM.
The Basis for Agency Concerns about Tri-Tech's Integrity
There is no dispute in this record that Army representatives have
expressed significant concerns about whether Tri-Tech acted with integrity
in its past dealings with the agency. During the course of this protest,
both FN and the Army provided detailed accounts of the events that led to
these concerns. The brief account that follows is intended to outline only
as much of the situation as necessary to provide a context for this
dispute, and is limited to matters for which there is documentary evidence
in the record.[1]
On May 3, 2001, the Army awarded a contract for 3,796 M249 bipods to
Tri-Tech, pursuant to contract No. DAAE20-01-C-0054 (the "-0054
contract"). This contract required both a first article test for the
items, and that the bipods be manufactured using 16MnCr5 steel. CO's
Statement at 1. After apparent delays in getting underway, the Army sent a
letter to Tri-Tech, dated September 18, 2001, which stated:
The Government has reason to believe that you don't have the material
DIN[[2]] 16MnCr5, as identified in the technical data package, for the
production quantity for subject contract. The partial production
delivery of 1,117 each was extended to 19 Jan 2002, and another
extension does not appear to be feasible . . . if our belief is
incorrect, please provide a copy of the purchase order with the vendor
in which the material is being procured.
AR, Tab AS. In reply to the Army, by letter dated September 25, Tri-Tech
answered,
We have secured the material with a supplier in England. Although an
order has not been placed for the production as we are waiting until
First Article Approval. We have no question that they will be able to
receive delivery of the 16MnCr5 material in production quantity as
needed within 5-6 weeks as quoted.
AR, Tab AT. Appended to the letter is a handwritten quotation that is also
dated September 25.
On October 10, 2001, the government's QAR forwarded Tri-Tech's first
article test report to the TACOM contracting office for review and
approval, which was granted on November 14. The first article test report
included a document showing that the steel samples tested were 16MnCr5,
and two statements signed by Tri-Tech's vice-president indicating that
items tested passed the acceptability requirements, that the testing was
performed in accordance with the contract's testing plans, and that the
results are true and accurate. AR, Tab AU; CO's Statement at 3.
After the initial flurry of concern that Tri-Tech might not have the
specified material, there is nothing in the record to suggest that the
Army's concern continued. On August 6, 2003, however, the CO for the -0054
contract (not the CO for the instant procurement) sent an e-mail to her
colleagues describing a telephone call from FN. The CO's e-mail advised
that FN had a subcontract with Tri-Tech for bipods and had received its
first production quantities; that Tri-Tech would not provide
certifications for the material used; that FN had sent one of the items to
a lab for analysis; and that the lab had advised that the items were not
manufactured with the specified steel. AR, Tab BA, at 3. The CO also
advised that FN rejected the bipods, and that she was concerned about the
bipods the Army had accepted from Tri-Tech. As a result, she asked that
the QAR check the first article report, make sure the certification for
the material was in the file, target the material for inspection, and ask
Tri-Tech for new certifications. Id.
After several inquiries to and exchanges with Tri-Tech, the Army, by
letter dated October 21, 2003, again formally asked about the steel
Tri-Tech was using to produce its bipods. This letter addresses bipod
deliveries to the Army under another contract with Tri-Tech, contract No.
DAAE20-03-P-0217 (hereinafter, the -0217 contract), which the agency also
views as requiring the use of 16MnCr5 steel. CO's Statement at 3. The
letter states:
This is to inform you of a problem with steel that your company is
currently using and to request your assistance and cooperation to
address this matter. The Government has reason to believe that currently
your company is not using the steel or material, DIN 16MnCr5, specified
in the technical data package. We understand that you have a
certification from your vendor that the material is 16MnCr5; however, we
have tested the material at the Rock Island Arsenal metallurgical
department and it is not 16MnCr5.
* * * * *
The undersigned requests that you provide as much information as
possible concerning your purchase and dealings with the vendor. At a
minimum, please provide a copy of the purchase order/contract with your
vendor for this material (16MnCr5), which should clearly show quality
and dates of delivery. Also, we request that you state whether you've
purchased all the material from this company. Essentially, the
Government wants confirmation that the product delivered to the
Government was made from the same material that was tested at Rock
Island Arsenal.
AR, Tab BC.
After several more exchanges, the Army, by e-mail dated January 23, 2004,
again asked a direct question of Tri-Tech, which reads, in relevant part,
"our Metallurgical Lab is having trouble classifying exactly what steel
this is, could you please let me know what the company said that they
delivered?" AR, Tab BL. Tri-Tech's answer, provided via e-mail dated
January 27, was:
After reviewing our records I have been able to determine that there is
no separate P.O. for material for this contract. We must have used
existing stock material. I now believe this stock material was delivered
as Alloy Steel MIL-S-18729.
AR, Tab BM. Two days later, the CO on the -0054 contract organized a team
meeting to discuss Tri-Tech's answer. AR, Tab BN. The CO for the instant
procurement attended that meeting as did representatives of numerous TACOM
offices, including the legal department. CO's Statement at 8. Although the
CO did not take notes of the meeting, she remembers that the conversation
considered whether Tri-Tech's actions regarding the metal it used to
manufacture bipods should be considered a mistake, or fraud. Id.
The documents in the record show further involvement by the CO in the
instant procurement. For example, the CO here was the author of an
additional letter to Tri-Tech, dated February 12, 2004, which states:
As of today the Government still has not received your response [to] our
letter dated 21 Oct 2003 concerning information about your vendor for
the specified 16MnCr5 material including the certification you should
have on file from this vendor.
AR, Tab BT. The second paragraph of the letter is almost identical to the
second paragraph of the October 21, 2003 letter, quoted above, which
requests a copy of the purchase order for the material, and a statement
about whether all of the material was purchased from this company. By
e-mail dated February 24, 2004, Tri-Tech's vice-president sent a response
to the February 12 letter to the CO for the -0054 contract, which
essentially repeats the information provided on January 27. There is no
evidence in the record that Tri-Tech ever provided more detailed answers,
nor is there evidence that Tri-Tech ever produced a purchase order for the
material.
As part of the Army's review of how to proceed, TACOM engineers studied
the composition of the bipods and concluded that the material used by
Tri-Tech, which the CO refers to as "4130 steel," would perform equally as
well as 16MnCr5. Since the steel used was also more widely available than
the specified steel, the agency approved an engineering change
substituting 4130 steel for 16MnCr5. CO's Statement at 11. In addition,
the CO advised that an additional meeting was held with all team members
to decide what, if anything, should be done regarding Tri-Tech's actions.
According to the CO, the consensus of the TACOM team was that nothing
should be done because:
(1) the material used by Tri-Tech was equal to or better [than] 16MnCr5;
(2) the Engineers had already approved Tri-Tech's RFD [Request for
Deviation] and were planning to issue an ECP [Engineering Change
Proposal] to change the Technical Data Package to specify the material
that Tri-Tech had used (4130 steel); (3) there were no reports of
problems with Tri-Tech's bipods; (4) there was no solid evidence of
false certifications; (5) there was no actual damage or harm to the
Government; (6) with the new specified material, 4130, there would be
better competition for any new procurements and (7) the Government
urgently needed bipods.
Id.
Finally, the record shows that in September or October of 2004, shortly
before this procurement began in early 2005, the CO here attended a
meeting with FN held at TACOM. Id. at 13. The CO, who attended the meeting
with her supervisor (who was the CO on the -0054 contract), states that FN
gave a "presentation concerning Tri-Tech's misconduct and irregularities
under the Government bipod contracts and the subcontract with [FN]." Id.
at 13. In addition, the CO states that FN provided her supervisor with a
volume that contained a report on Tri-Tech's actions, and documentary
attachments which FN viewed as supporting its views of those actions. This
volume was provided to our Office by the Army as part of the agency report
in this protest. It is entitled, "Report of Apparent Procurement
Irregularities by Tri-Technologies in Connection with Government Prime and
Subcontracts," and is dated September 3, 2004.
ANALYSIS
In its challenge to the CO's conclusion that Tri-Tech is a responsible
contractor for purposes of this procurement, FN argues that the CO ignored
information regarding Tri-Tech's past conduct, or, in the alternative, did
not sufficiently investigate whether Tri-Tech committed fraud in its
earlier dealings with the Army. In FN's view, unless and until the CO
reaches a conclusion about whether Tri-Tech committed fraud, the CO cannot
properly find that Tri-Tech has a satisfactory record of business
integrity and ethics, as required by FAR sect. 9.104-1(d). FN also argues
that the CO misapplied the regulatory standard for affirmative
responsibility determinations. In this regard, FN contends that if the CO
had any doubts about whether Tri-Tech committed fraud under its earlier
contracts, she was required to make a negative determination of
responsibility.
The underlying premise of every federal contract award is that contracts
are only awarded to "responsible prospective contractors." FAR
sect. 9.103(a). There is no requirement, however, that COs explain the
basis for an affirmative responsibility determination, Southwestern Bell
Tel. Co., B-292476, Oct. 1, 2003, 2003 CPD para. 177 at 8; a written
explanation is only required when a CO makes a determination of
nonresponsibility. FAR sect. 9.105-2(a)(1). Thus, even though the FAR
expressly requires that "[n]o purchase or award shall be made unless the
[CO] makes an affirmative determination of responsibility," FAR
sect. 9.103(b), a CO's signature on a contract constitutes the requisite
determination. FAR sect. 9.105-2(a)(1).
Even though an affirmative responsibility determination is construed from
the award of every contract, Id., the FAR identifies several standards
that must be met before a prospective contractor may be properly deemed
responsible; one of these is that the contractor must "[h]ave a
satisfactory record of integrity and business ethics." FAR
sect. 9.104-1(d). In addition, COs are advised that "[i]n the absence of
information clearly indicating that the prospective contractor is
responsible, the [CO] shall make a determination of nonresponsibility."
FAR sect. 9.103(b).
The regulatory scheme above reveals the unusual nature of affirmative
responsibility determinations--even though no documentation is required,
and the vast majority of such determinations arise when a CO signs the
contract, the FAR nonetheless identifies seven specific requirements that
must be met as a condition precedent to a finding of responsibility. See
FAR sect. 9.104-1(a)-(g). Since the determination of whether a particular
contractor meets these conditions is largely a matter within a CO's
discretion, our Office, as a general matter, will not consider a protest
challenging an affirmative determination of responsibility, except under
limited exceptions. 4 C.F.R. sect. 21.5 (2005).
On December 31, 2002, our Bid Protest Regulations were revised to add as a
specified exception protests "that identify evidence raising serious
concerns that, in reaching a particular responsibility determination, the
contracting officer unreasonably failed to consider available relevant
information or otherwise violated statute or regulation." 67 Fed. Reg.
79,833, 79,836 (2002). This change was made in light of a seminal decision
from the United States Court of Appeals for the Federal Circuit, Impresa
Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1323
(Fed.Cir. 2001) ("Garufi I"), which held that affirmative determinations
of responsibility by contracting officers are reviewable by the Court of
Federal Claims under the "arbitrary and capricious" standard[3] applicable
under the Administrative Procedure Act.[4] We explained in the preamble to
the revision that it was "intended to encompass protests where, for
example, the protest includes specific evidence that the contracting
officer may have ignored information that by its nature, would be expected
to have a strong bearing on whether the awardee should be found
responsible." 67 Fed. Reg. 79,833, 79,844; see also Verestar Gov't Servs.
Group, B-291854, B-291854.2, Apr. 3, 2003, 2003 CPD para. 68 at 4.
We begin by noting that FN does not argue that the CO was unaware of
Tri-Tech's actions; rather, it argues that the CO's Statement provided
with the agency's report reveals that the CO knew about Tri-Tech's
actions, but improperly ignored them. Protester's Comments, Oct. 24, 2005,
at 31. As set forth above, the record here shows that neither the CO's
written determination that Tri-Tech is responsible, AR, Tab AM, nor her
memorialization of the decision to allow Tri-Tech to compete, AR, Tab Y,
expressly addresses Tri-Tech's actions under its prior contracts to
produce bipods. Given that there is no requirement to even document an
affirmative determination of responsibility, Southwestern Bell Tel. Co.,
supra, see FAR sect. 9.105-2(a)(1), we are aware of no requirement that
either of these contemporaneous documents address this matter.[5]
The first explanation in this record of the CO's thoughts about Tri-Tech's
actions under its prior bipod contracts is set forth in the CO's
Statement, provided with the agency report. In this document, the CO
explains that she was thinking about responsibility issues, in particular,
as part of her consideration of whether to allow Tri-Tech to compete.
Specifically, she states:
In order to determine whether I should even consider Tri-Tech's
proposal, I wanted to review whether Tri-Tech could be a viable source
in all respects. I had to determine whether Tri-Tech could meet the
Government's minimum delivery requirements, whether the proposed prices
were reasonable, and whether Tri-Tech was responsible in light of the
open fraud investigation.
CO's Statement at 14. In addition, the CO explains that she convened a
meeting to obtain input from legal and quality assurance representatives
at TACOM while considering whether to delay the on-going sole-source
procurement to let Tri-Tech compete. In her view, it did not make sense to
consider allowing Tri-Tech to compete if the company could not meet the
Army's delivery requirements, or was otherwise nonresponsible. Id. at 15.
The CO made the determination to allow Tri-Tech to compete on August 3.
AR, Tab Y.
On August 29, some 26 days after the decision to allow Tri-Tech to
compete, the CO awarded the contract to Tri-Tech. Although she was not
required to do so, her responsibility determination is memorialized in the
record; however, as noted above, the determination contains only the
conclusion that Tri-Tech has "a satisfactory record of integrity and
business ethics," without further explanation. AR, Tab AM. In her
statement submitted in response to the protest, she explains that she had
knowledge about Tri-Tech's recent and current performance, was aware of
the open fraud investigation, but was also aware that Tri-Tech had not
been suspended or debarred. CO's Statement at 16. She explains her
conclusion as follows:
In my opinion and business judgment, Tri-Tech's more current and recent
performance on government contracts does not show a pattern of
dishonesty or lack of business integrity or ethics. In my opinion,
Tri-Tech is a responsible contractor. Prior to this protest, I possessed
knowledge and information about Tri-Tech's performance under its
government contracts for the M249 bipods as well as its performance in
other government contract[s], and I found Tri-Tech responsible and
personally awarded 18 contracts to Tri-Tech for various items.
Id. at 16-17.
In addition to the CO's Statement submitted with the agency report, our
Office convened a hearing in this protest to take testimony from the CO
about her considerations. During the course of the hearing, the CO
testified that Tri-Tech is producing numerous items for the Army, has been
delivering quality products, and is, in the view of the CO, one of TACOM's
best contractors. Hearing Transcript (Tr.) at 27. She also testified that
she strongly believes Tri-Tech has business integrity and ethics and that
"they are a very good producer of quality parts for our soldiers." Id. at
27-28.
In our view, the CO was a credible witness and there was no testimony
produced during cross-examination by the protester that leads us to
conclude that she did not consider the things she claims to have
considered in her statement or in her testimony. We also note for the
record, in answer to the protester's contentions, that we see nothing in
the CO's statement or testimony that contradicts any of the
contemporaneous documents in the record; rather, her statement and her
testimony "provide a detailed rationale for contemporaneous conclusions .
. . [and] simply fill in previously unrecorded details." NWT, Inc.;
PharmChem Labs, Inc., B-280988, B-280988.2, Dec. 17, 1998, 98-2 CPD
para. 158 at 16; see also ITT Fed. Servs. Int'l Corp., B-283307,
B-283307.2, Nov. 3, 1999, 99-2 CPD para. 76 at 5-7. Accordingly, we find
that the CO did not ignore Tri-Tech's actions under its prior contracts,
but in fact considered them.
We also disagree with the protester's alternative contention that even if
we conclude that the CO was generally aware of Tri-Tech's actions and
considered them, we should find that the CO did not sufficiently
investigate the situation to reach her own independent conclusion about
whether Tri-Tech committed fraud. Moreover, we disagree with the
protester's contention that the situation here is indistinguishable from
the situation we reviewed in Southwestern Bell.
In Southwestern Bell, the CO was generally aware of allegations of
misconduct against Adelphia Communications Corporation (and against the
Rigas family members that controlled that entity), but had taken no steps
to determine the extent to which those entities controlled Adelphia
Business Solutions, Inc., the awardee in that case. Southwestern Bell Tel.
Co., supra, at 9-10. We concluded that in the absence of any consideration
of these control issues, the CO's general knowledge of the situation was
not sufficient to show that the affirmative determination of the awardee's
responsibility was reasonable. Id. at 10-11. Thus, the issue was whether
the CO had taken sufficient steps to know whether the awardee was
essentially the same entity, or was controlled by an entity against whom
serious allegations of misconduct were lodged.[6]
Here, there is no doubt about the awardee's identity. The awardee is
clearly the same firm that produced bipods using non-specified steel, and
the CO was part of the team that reviewed the situation to conclude
whether those actions were intentional or accidental. In FN's view, our
decision in Southwestern Bell imposed a requirement on the CO here to
personally review all of the exchanges on multiple contracts (for none of
which she was the CO), from the beginning of contract performance to the
end, in order to determine for herself whether Tri-Tech did, or did not,
commit fraud while performing those contracts. See Protester's Comments,
supra, at 31-32. We do not agree that the situation is the same as existed
in Southwestern Bell, and, more importantly, we do not agree that the CO
here was under any such obligation.
Instead, the record here shows that a team of TACOM personnel, including
attorneys, contracting officers, quality personnel, engineers, and others,
reviewed this matter, and in the end, decided not to pursue it. CO's
Statement at 11. The CO testified that she accepts the team's conclusion
and agrees with it. Tr. at 68, 73-74. While FN clearly disagrees with this
decision, and has, in fact, met with the TACOM representatives, including
the CO here, to attempt to convince them otherwise, FN's disagreement with
their conclusion does not translate to additional review responsibilities
for the CO here. While we recognize that FN is able to point to certain
evidence that the CO has not reviewed herself--such as the compilation of
documents it presented to the agency in the fall of 2004--we think the
CO's reliance on the judgment of the TACOM team about whether these
matters do, or do not, constitute fraud, together with her own involvement
in certain of these discussions, gave her a sufficient understanding of
the situation to provide a reasonable basis for the determination she
made.[7]
Finally, we turn to FN's contention that the CO misapplied the regulatory
standard for affirmative responsibility determinations. In this regard, FN
argues that because the CO admitted during the hearing to having doubts
about whether Tri-Tech did, or did not, commit fraud against the Army (see
Tr. at 83), the CO was required to make a determination that Tri-Tech was
nonresponsible. FN's argument is based on FAR sect. 9.103, which requires
that "[i]n the absence of information clearly indicating that the
prospective contractor is responsible, the contracting officer shall make
a determination of nonresponsiblity."
While we agree with the protester that, at first blush, portions of the
CO's testimony during the hearing suggested that she may have misapplied
the FAR standard quoted above, our consideration of the record as a whole
leads us to conclude otherwise. The exchange most favorable to the
protester's position is set forth below:
Q: Was it your understanding that--let me put it a different way--that a
company such as Tri-Tech has business integrity or ethics unless you
make an affirmative finding to the contrary?
A: Unless I have proof.
Q: Okay.
A: That they did not.
Q: And you had no proof at this time, correct?
A: No proof.
Q: So it's sort of innocent until proven guilty?
A: No comment.
Q: Is that what was going through your head?
A. No. I had no proof that led me to believe they did not have business
ethics--integrity and ethics based on their performance under the most
recent and current contracts.
Tr. at 104-05.
In our view, this exchange appears to confuse the proof required to find
someone guilty of a crime, such as fraud, with the standard set forth in
the FAR for finding a contractor to be responsible. Nonetheless, when
given an opportunity to express herself at greater length, as in the last
answer quoted above, she explained that she had no proof that Tri-Tech
lacked business ethics, given their recent performance.
We note that the CO stated an appropriate basis for her responsibility
determination on numerous occasions elsewhere in this record. In the CO's
statement she explained that, in her experience and view, "Tri-Tech's more
current and recent performance on government contracts does not show a
pattern of dishonesty or lack of business integrity or ethics." CO's
Statement at 16-17. In addition, she explains that she has awarded 18
contracts to Tri-Tech since early 2004, and thus has gained more recent,
first-hand experience with Tri-Tech that affects her view of the company's
responsibility. Id. Finally, we note that even during cross-examination by
the protester, the CO explained that she viewed her own knowledge as
clearly indicating that Tri-Tech is currently a responsible offeror,
despite the open fraud investigation. Tr. at 107. We think these
explanations, despite the answer given during cross-examination, establish
that the CO's determination was made consistent with the standard set
forth in FAR sect. 9.103.
The protest is denied.
Anthony H. Gamboa
General Counsel
------------------------
[1] Tri-Tech has elected not to intervene in this proceeding. We reach no
conclusion, and intend no inference, about the considerations that may
have influenced Tri-Tech's decision not to intervene.
[2] DIN is an acronym for "Deutsches Institut fuer Normung" or the "German
Institute for Standardization," which sets uniform requirements for
materials and products, such as the steel at issue here.
[3] As explained in the Federal Register notice announcing the proposed
change, while our Office does not apply the Administrative Procedure Act
in our bid protest reviews, we concluded it was appropriate to act
consistently with the rationale underlying the Garufi I decision. 67 Fed.
Reg. 61,542, 61,543 (2002).
[4] The Court of Appeals remanded the case to the Court of Federal Claims
for further proceedings. On remand, the Court of Federal Claims held that
the CO failed to "independently investigate or verify the information
provided to him" about whether the awardee was controlled by individuals
who had been convicted of bid rigging and other crimes. Impresa
Construzioni Geom. Domenico Garufi v. United States, 52 Fed. Cl. 421,
427-428 (2002) ("Garufi II"). As a result, the CO's affirmative
determination of the awardee's responsibility was found to be
unreasonable. Id. at 428.
[5] Nonetheless, the record confirms the protester's recognition that the
CO was aware of these events. For example, the CO here attended several of
the meetings where TACOM officials considered Tri-Tech's actions, and in
fact signed the Army's letter of February 12, 2004, seeking from Tri-Tech
the certification for the steel from its vendor, which, she noted, should
have been retained in Tri-Tech's files. AR, Tab BT. In addition, she
attended the meeting with FN in the fall of 2004, wherein FN provided its
own views and arguments about the meaning of Tri-Tech's actions. CO's
Statement at 13.
[6] We also note that the Garufi cases turned ultimately on whether the CO
had sufficiently reviewed the identity of the awardee to know whether the
awardee was, or was not, controlled by entities whose integrity was
considered suspect. Specifically, on remand, the Court of Federal Claims
concluded that the CO had taken no steps to determine (nor had he relied
on advice from anyone else who had determined) whether the terms of the
awardee's receivership would leave the company in the control of an
individual whose integrity was suspect. Garufi II, supra, at 427-28.
[7] We also note for the record that FN's contention that the CO could not
reasonably find that Tri-Tech was a responsible offeror without
investigating and independently determining whether Tri-Tech committed
fraud in its prior dealings with the Army appears to be based on an
incorrect assumption. Specifically, FN argues that if the CO had
concluded--as FN claims she must--that Tri-Tech acted fraudulently, then
the CO must also conclude that Tri-Tech is not a responsible offeror.
Protester's Comments, supra, at 29-30. As the Court of Appeals pointed out
in Garufi I, "past criminal activities by a corporate officer do not
automatically establish that the bidder fails the responsibility
requirement." Garufi I, supra, at 1335 (citing and discussing both Trilon
Educational Corp. v. United States, 578 F.2d 1356, 1358 (Ct.Cl. 1978) and
the FAR's debarment regulations found at subpart 9.4). Thus, we think the
CO could both conclude that the awardee committed fraud in the past, and
conclude that its more recent actions provide clear evidence of
responsibility.