subordinate the loan for the duration of the contract. This reevaluation included a review of the working capital position of the company, which showed a deficit of $62,879 as of March 31, 1960, and of the "start-up" and operating costs used in computing the company's bid price. As a result the cash flow schedule submitted by the contractor was adjusted to reflect increases of $90,000 for a total of $273,000 in initial cash outlay, and of $456,105 in operating expenses. It was, therefore, concluded by the Air Force that only $27,000 of the $300,000 loan would remain to begin operation as of July 1 and that the cash flow indicated there would be a cash deficit of $162,696 at the end of the contract which, when added to the initial $27,000 cash depletion, would indicate a total loss to the company of $189,696 if the contract were to be completed.
The Air Force records further show that consideration, in determining the financial capability of the company to perform the contract, was given to advice from responsible personnel of the Navy Department relative to the importance of uninterrupted performance of the contract and the necessity for obtaining a contractor whose ability to perform was beyond question.
Based upon the above, on June 24 the Procurement Policy Division of the Air Force concluded that the company could not be considered capable of performing the contract and that, in view of the extremely marginal financial condition of California-Hawaiian as a company, the estimated financial loss if awarded the contract at its bid price, the definite uncertainty of certain cost arrangement statements made by the company, and its prior financial history, an award to the company would place the operational requirements of the Navy in jeopardy.
The second portion of your protest, which was submitted under date of June 23, is directed to this reevaluation. From the information in this letter and from discussions with representatives of this Office, we understand it to be your position that the portion of the reevaluation which was directed to determining whether CaliforniaHawaiian could be expected to make, or lose, money in performing the contract was improper, or, in the event such procedure was proper, it was incumbent upon the Air Force to advise the company of the amount of additional working capital which would be required before the company would be considered financially capable of performing the contract and to afford the company an opportunity to raise such additional capital before final rejection of its bid.
We are unable to agree with these contentions. As indicated above, Paragraph 21 of the Terms and Conditions of the invitation for bids
required bidders to submit with their bids all information relevant to evaluation of their current financial ability to perform in accordance with their bids. Additionally, Paragraph 18 cautioned bidders to have any data pertinent to financial ability to perform, which was not already on file at MATS Headquarters, available at the time the bidder's facility was visited by a capability survey team. The same paragraph gave notice that "the adequacy of bidder's arrangements to assure that it will be able to perform any resulting contract will be considered by the contracting officer in determining the responsibility of the bidder for purposes of award."
It is our opinion that these provisions of the invitation provided adequate notice to all bidders that the burden of providing adequate financing to assure successful completion of the contract was placed upon the bidder, and that bid prices would be evaluated in conjunction with information on available finances for the purpose of determining that a bidder's financial position would provide reasonable assurance that the bidder could complete the contract upon payment of the amount bid. Both the initial evaluation by the Air Force prior to the submission by California-Hawaiian of evidence of a $300,000 credit and the reevaluation subsequent to such submission appear to have been directed to such determination.
Decisions with respect to the financial capacity of a bidder to perform a contract in procurements of this nature are primarily within the province of the contracting agency and the Small Business Administration. However, from our review of the record in this case we see no valid reason for disagreeing with the conclusions of the Air Force on the financial capability of California-Hawaiian to perform the contract. Since the validity of such conclusions would appear to be further substantiated by the denial of a Certificate of Competency by the Small Business Administration, that portion of your protest which questions the propriety of the evaluation procedures followed by the Air Force must be denied.
Concerning your contention that it is incumbent upon the Air Force to advise California-Hawaiian of the additional amount of working capital which would be necessary to support a determination of financial capability to perform the contract, the invitation imposed upon all bidders the responsibility for proving adequate finances at the time of initial survey. While we are in agreement with the propriety in this case of the additional consideration given by the Small Business Administration to the after-acquired credit of $300,000, and to the additional consideration given by the Air Force following denial of a Certificate of Competency by the Small Business Admin
istration, whether any further opportunity should be afforded the low bidder at this time to correct financial deficiencies must, in the absence of clear and convincing evidence of error, be left to the sound discretion of the contracting agency. Under the circumstances in this case we are unable to say that the failure or refusal by the Air Force to advise the company of the extent to which its finances are deficient or to permit the company additional time and opportunity to correct such deficiency would constitute an abuse of discretion. In the absence of such abuse, there would appear to be no sound basis upon which this Office could justify the imposition of further requirements in this area on the Air Force.
Accordingly, your protest is denied.
July 1, 1959-June 30, 1960
ABSENCES
(See Leaves of Absence)
ACCOUNTABLE OFFICERS
(See, also, Certifying Officers and Disbursing
Officers)
Debt liquidation. (See Set-off, compensation,
etc., due civilian employees, accountable
officers, etc., debts)
ACCOUNTING SYSTEMS
Accounting form prescription-General
Accounting Office authority-since au-
thority vested in Comptroller General to
prescribe forms, systems and procedures
under sec. 309, Budget and Accounting
Act, 1921, 31 U.S.C. 49, is specifically
made applicable to municipal government
of Dist. of Col., 31 U.S.C. 2, and that
authority is required to be exercised con-
sistent with provisions of sec. 112 of the
Accounting and Auditing Act of 1950, the
omission of Dist. of Col. from specific terms
of the 1950 act is immaterial insofar as
application of principles, standards, and
related accounting and auditing require-
ments are concerned; therefore, establish-
ment of accounting system for Dist. of Col.
is required to conform to standards pre-
scribed by Comptroller General and to be
submitted for approval pursuant to sec.
112(b) of the 1950 act, 31 U.S.C. 66(b)................
ADMINISTRATIVE DETERMINA-
TIONS
Conclusiveness
Bidder's qualifications—although
detailed descriptive data might be re-
quired from bidders who have not had
prior production experience than from
established manufacturers, nature and
extent of proof of bidder's ability to per-
form pursuant to contract requirements
are matters primarily for determination
of contracting agency and, when in-
terests of Govt. are adequately pro-
tected, determination of contracting
agency will not be questioned...--------
Contract disputes-fact questions-al-
though, under Capehart housing con-
struction contract which requires Fed-
eral Housing Commissioner to determine
amount for price adjustment purposes
based on difference between replacement
cost computed according to bidder's
wage schedule and wage schedule actu-
Page ADMINISTRATIVE DETERMINA- Page
TIONS Continued
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A certificate by commanding officer of
nonavailability of quarters which
accompanied a claim for quarters
allowance for officer, who prior to
vacating bachelor quarters and mov-
ing off base was advised of determina-
tion that adequate quarters were avail-
able in new officer quarters, is not
conclusive upon accounting officers
under quarters allowance provisions
in sec. 302, Career Compensation Act
of 1949, in view of facts which clearly
establish availability and adequacy of
Govt. quarters, so that the mainte-
nance of quarters off base must be
regarded as for officer's convenience
and precludes payment of quarters
allowance...
Quarters allowance claims under sec.
302(b), Career Compensation Act of
1949, 37 U.S. C. 252(b), which precludes
payment of quarters allowance to
members of uniformed services as-
signed to Govt. quarters or housing
appropriate to grade or rank and ade-
quate for themselves and dependents,
are for determination on basis of facts
in each case rather than on basis of
specific administrative authorization
or certification that is contrary to
actual facts, and although contempo-
raneous authorization or certification
by proper authority of quarters avail-
ability or adequacy usually is con-
sidered to be the best evidence of
facts, it is not conclusive where facts
are otherwise established............. 561
ADMINISTRATIVE EXPENSES Page ADVERTISING-Continued.
Limitations. (See Appropriations, limita-
tions, administrative expenses)
ADVERTISING
Necessity or nonnecessity
Amended contracts-to amend existing
military family housing contracts, under
which construction is virtually com-
pleted, to include construction of health
center or other community facilities,
which additional facilities may not be
regarded as an inseparable part of
original contract work and would en-
large scope of contract, would be con-
trary to advertising requirement in
sec. 403, Housing Amendments Act of
1955, 42 U.S.C. 1594 (a), notwithstanding
such amendment would not Increase
cost limitation for housing units........
Exemptions
Common carrier services-contracts for
transportation of mail by motor car-
riers (star route contracts), which have
long been subject of special legislation,
which required such contracts to be
awarded after advertising may not
now be corsidered contracts for trans-
portation services under sec. 321(a),
Transportation Act of 1940, 49 U.S.O.
65(a), which permits the award of con-
tracts for transportation of household
effects and Govt. property and sup-
plies without advertising, and coverage
of mail transportation contracts under
general advertising statutes in 41
U.S.O. 5 and the liberalization of
advertising procedures, particularly
with respect to 60-day advertising re-
quirement by act of May 1, 1958, may
not be construed to permit negotiation
of mail transportation contracts with-
out advertising.....
Railway mail service
A change in transportation of mail
under metropolitan area plan, which
would involve discontinuance of star
route contract and include new
extended service outside present rail
operations of railroads through oper-
ation of motor vehicle freight service
over highways, may not be regarded
as substitution by railroads of bus
transportation service for abandoned
or curtailed train service so that such
new service may be contracted for
by negotiation under authority in
39 U.S.O. 541a...
In connection with establishment of
metropolitan plan for transportation
and distribution of mail within a
particular geographical area, the
discontinuance of transportation of
mail by rall carriers between certain
points and substitution of motor
vehicle freight service to meet new
delivery schedules may not be
Necessity or non necessity-Continued.
Exemptions-Continued.
Railway mail service-Continued.
regarded as changeover from train
to highway bus service due to dis-
continued or curtailed train service
to come within negotiation authority
granted to Postmaster General under
39 U.S.O. 541a.......
AGRICULTURE DEPARTMENT
Appropriations. (See Appropriations. Agri-
culture Department)
Foreign trade and assistance programs
Interest-in computing interest on agri-
cultural commodities sold to friendly
nations under sec. 403, Agricultural
Trade Development and Assistance
Act of 1954, which provides for payment
over periods not to exceed 20 years from
date of last delivery in each calendar
year and interest from date of such last
delivery, where more than one delivery
is made during a calendar year, no
interest would accrue until date of last
delivery in each year...
Payment basis-to construe sec. 403, Agri-
cultural Trade Development and As-
sistance Act of 1954, 7 U.8.C. 1731, which
provides with respect to sales of surplus
agricultural commodities to friendly
nations "that payments may be made
in approximately equal annual amounts
over periods not to exceed 20 years," as
authorizing payments on a bi-annual or
deferred 10- or 20-year payment basis
would be to construe the word "may" in
its permissive sense without considera-
tion for entire context of sentence and
without regard to qualifying words "in
approximately equal annual amounts";
therefore, while the section does permit
slight flexibility or variation in annual
amounts, it may not be construed as
authorizing payment in other than equal
annual amounts or in approximately
equal annual amounts........
AIRCRAFT
Carriers liability for overtime payments for
Inspection services-establishment of uni-
form flat rate for inspection of private
aircraft by Bur. of Customs during over-
time periods and on Sundays or holidays at
ports of entry from Canada, Mexico, Cuba,
and other nearby countries in lieu of
present system of charging actual com-
pensation earned by employees rendering
service, which is administratively burden-
some, would substitute system of charges
that would require overpayments from
some operators to offset underpayments
by others, is not permissible under 19
U.S.O. 267 and 1451 which require that
each person requesting inspectional serv-
ices be charged amount sufficient to reim-
burse Govt. for cost of overtime or extra
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