TITLE: B-400224.2, Hendry Corporation, August 25, 2008
BNUMBER: B-400224.2
DATE: August 25, 2008
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B-400224.2, Hendry Corporation, August 25, 2008

   Decision

   Matter of: Hendry Corporation

   <

   File: B-400224.2

   Date: August 25, 2008

   Kent P. Smith, Esq., Smith Currie & Hancock LLP, for the protester.

   Bruce C. Smith, Esq., Robert C. Threlkeld, Esq., and James M. Johnson,
   Esq., Morris, Manning & Martin, LLP, for RiverHawk Marine, LLC, the
   intervenor.
   Wilbert Jones, Esq., U.S. Coast Guard, for the agency.
   Kenneth Kilgour, Esq., and Christine S. Melody, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest challenging contracting officer's affirmative determination of
   responsibility regarding the awardee is dismissed where the assertion on
   which the protest is based--failure to consider allegedly poor business
   performance by principal members of the awardee during their association
   with a previous firm--does not constitute the type of information that, by
   its nature, would be expected to have a strong bearing on whether the
   awardee should be found responsible, as required under Government
   Accountability Office (GAO) Bid Protest Regulations for GAO review of such
   a protest.

   DECISION

   Hendry Corporation protests the award of a contract to RiverHawk Marine,
   LLC by the Department of Homeland Security (DHS), U.S. Coast Guard under
   request for quotations No. HSCG80-08-Q-3FAD73 for dry-dock repairs to a
   Coast Guard cutter. Hendry challenges the agency's determination that
   RiverHawk is a responsible firm on two grounds. Hendry alleges that three
   founding members of RiverHawk "do not have a satisfactory record of
   performance, integrity, and business ethics," Protest at 3, because,
   during their course of employment at a previous firm, they took action
   that resulted in the bankruptcy of that company and default on two Coast
   Guard vessel repair contracts, and because, in violation of a non-compete
   agreement, they made plans to form RiverHawk while affiliated with that
   other firm.[1]

   We dismiss the protest because, as filed with our Office, it does not
   establish a basis for our review of the agency's responsibility
   determination.

   We will consider a protest of an affirmative determination of
   responsibility only where it is alleged that definitive responsibility
   criteria in the solicitation were not met, or where the protest identifies
   evidence raising serious concerns that, in reaching the responsibility
   determination, the contracting officer unreasonably failed to consider
   available relevant information or otherwise violated statute or
   regulation. Bid Protest Regulations, 4 C.F.R. sect. 21.5(c) (2008); T.F.
   Boyle Transp., Inc., B-310708.2, Jan. 29, 2008, 2008 CPD para. 52 at 5.
   The protest allegations here focus on the latter type of case. In that
   context, we will review a challenge to an agency's affirmative
   responsibility determination where the protester presents 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. Verestar Gov't Servs. Group,
   B-291854, B-291854.2, Apr. 3, 2003, 2003 CPD para. 68 at 4-5. We therefore
   have reviewed credible allegations that an agency failed to properly
   consider that a contractor committed fraud, FN Mfg., Inc., B-297172.2,
   Dec. 1, 2005, 2005 CPD para. 212 at 11-12, that principals of a contractor
   had criminal convictions, Southwestern Bell Tel. Co., B-292476, Oct. 1,
   2003, 2003 CPD para. 177 at 5, or that a contractor engaged in improper
   financial practices and improperly reported earnings. Verestar Gov't
   Servs. Group, supra. In contrast, we will not review unsupported
   allegations of illegal action, such as insider trading, MD Helicopters,
   Inc.; AgustaWestland, Inc., B-298502 et al., Oct. 23, 2006, 2006 CPD
   para. 164 at 41 n.40, or allegations concerning financial issues
   confronting a contractor, such as cash on hand and declining net worth.
   Advanced Tech. Sys., Inc., B-296493.6, Oct. 6, 2006, 2006 CPD para. 151 at
   6 n.8.

   Here, the allegation that the three RiverHawk principals took action that
   resulted in the bankruptcy of their former firm and its default on two
   Coast Guard vessel repair contracts is not a protest ground that we will
   review. As our cases noted above illustrate, the circumstances under which
   we will consider a challenge like Hendry's involve information that, by
   its nature, would be expected to have a bearing on whether the awardee
   should be found responsible--proven criminal conduct, for example, but not
   allegations of poor financial or business performance. Here, the protester
   alleges that, while the three founders of RiverHawk were affiliated with
   their previous employer, their performance was sufficiently poor to cause
   the bankruptcy of the firm and the contract default. Even if the
   principals of RiverHawk were responsible for their prior firm's bankruptcy
   or default, the nature of the allegation is one that concerns poor
   financial or business performance, and thus is not the type that would
   meet the threshold showing for review of a challenge to an affirmative
   responsibility determination.[2]

   The second prong of the protester's challenge to the agency's
   responsibility determination is the allegation that the principals of
   RiverHawk, in contravention of a non-compete agreement, made plans to form
   that company while affiliated with their prior firm, and then
   misrepresented the existence of that agreement to the agency. This protest
   ground likewise does not meet the threshold for our review. As a
   preliminary matter, the existence and potential enforceability of the
   non-compete agreement is a private dispute and not for our consideration.
   See DSG Corp.--Recon., B-213070.2, Dec. 19, 1983, 83-2 CPD para. 705
   at 1-2. In support of its allegation that the RiverHawk principals misled
   the agency as to the existence of a non-compete agreement, the protester
   produced a certificate from the relevant state department of corporations
   in an attempt to show that the bankrupt firm is a viable concern and that
   the non-compete clause is still enforceable against one of RiverHawk's
   principals. That certificate, standing alone, is not sufficient to
   establish the applicability of the non-compete agreement. Because the
   non-compete agreement precluded competition by the signers with the
   products, services, or activities of the prior firm, that firm would have
   to have remained in the business of ship repair for the RiverHawk
   principal to be in violation of the agreement; the protester has offered
   no evidence that the principal's prior firm is still actively engaged in
   its former line of work. More important, the non-compete agreement was for
   the benefit of the lender, not the firm, and by its terms expired on or
   about January 2, 2008, when the assets securing the loan were sold. See
   Intervenor's Response to Motion to Dismiss, Aug. 15, 2008, Exh. D. The
   record establishes that the three former principals of the bankrupt firm
   founded RiverHawk after the previous firm had ceased operations and the
   loan giving rise to the non-compete agreement was no longer in effect;
   thus this protest ground--that the RiverHawk principals misrepresented the
   existence of a viable non-compete agreement--lacks a valid legal and
   factual basis. See Bid Protest Regulations, 4 C.F.R. sect. 21.5(f).

   In summary, the challenge to the agency's responsibility determination
   does not meet our threshold showing for review. Nor has the protester
   adequately supported its allegation that the awardee misrepresented to the
   agency the existence of an enforceable non-compete agreement. Moreover,
   the record indicates that the agency did, in fact, consider the issues
   raised by the protester in reaching its responsibility determination.

   The protest is dismissed.

   Gary L. Kepplinger
   General Counsel

   ------------------------

   [1] While the protest alleges that all three of those individuals signed
   non-compete agreements, the record shows that, in fact, only one signed
   the agreement at issue.

   [2] In any event, the allegation is unsupported by the record. While the
   protester states that these individuals "took action which resulted in the
   bankruptcy of [the prior firm] and performance default on two ongoing
   Coast Guard vessel repair contracts," Protest at 2, the protester provides
   no evidence in support of its allegation. In fact, the allegation is
   contradicted by the memorandum and order of the judge who presided over
   the bankruptcy proceedings. See Intervenor's Comments, Aug. 6, 2006, Encl.
   Memorandum and Order of the U.S. Bankruptcy Court. Moreover, the record
   demonstrates that, when making his responsibility determination of
   RiverHawk, the contracting officer in fact did consider this allegation,
   as well as the allegation regarding the non-compete agreement. Agency
   Request for Dismissal, Encls. 1 & 2, completed DHS Form 700-12,
   Determination of Prospective Contractor Responsibility, and Memo to File
   from Contracting Officer, both dated July 16, 2008, prior to the contract
   award.