ASPR 1-307 Responsible Prospective Contractor.`

Prior to the award of any contract for supplies or services the Contracting Officer shall determine that the prospective contractor is responsible. *** Ă responsible contractor is one which meets all of the requirements set forth below:

(a) is a manufacturer, construction contractor, or regular dealer, if the contract or order calls for supplies;

(b) has adequate financial resources, or ability to secure such resources; (c) has the necessary experience, organization, and technical qualifications to perform the proposed contract;

(d) is able to comply with the required delivery or performance schedule (taking into consideration all existing business commitments);

(e) has a satisfactory record of performance, integrity, judgment, and skills.

The criteria for determining the eligibility of a proposed contractor with the General Services Administration are set forth in section 209.23, Manual GS 5, Volume GS 5-1, Purchase Operations, as follows:

Determining the Responsibility of Bidders. The contracting officer shall determine, prior to award of contract, whether the bidder qualifies as a responsible bidder with respect to the contract being considered.

a. Criteria for Determining if a Bidder is Responsible.

1. In determining whether the bidder is a "responsible bidder," the contracting officer must consider whether the bidder satisfies all of the following requirements:

(a) Has adequate financial resources to complete the proposed contract; (b) Has the necessary experience, organization, technical qualifications, and facilities to perform the contemplated contract; and

(c) Is otherwise qualified and eligible under applicable law and regulations.

2. The contracting officer also shall consider other pertinent factors such as reputation, indicated lack of integrity, or failure to fulfill previous contractual obligations of a similar or comparable nature

In that connection, we consistently have held that the question of the qualifications of a proposed contractor primarily is for determination by the administrative officers concerned, and such determination will not be questioned by us in the absence of a clear showing of bad faith or lack of a reasonable basis therefor. 37 Comp. Gen. 430; 36 id. 42. Also, we have held-as have the courts-that the word "responsible" imports something more than pecuniary ability, and in the selection of the lowest responsible bidder public officers are required to consider not only the financial resources of the bidder but also his integrity, fitness, capacity and ability to perform. See 34 Comp. Gen. 86; 30 id. 235; 28 id. 662; 26 id. 676.

The Walsh-Healey Public Contracts Act of June 30, 1936, 49 Stat. 2036, 41 U. S. C. 35, requires that there be incorporated into Government contracts exceeding $10,000 in amount a stipulation that the contractor either is the "manufacturer" of or a "regular dealer" in the articles of sale. In his "Rulings and Interpretations No. 3 (Walsh-Healey Public Contracts Act)," issued April 30, 1953, the Secretary of Labor caused to be promulgated the following rule:

SEC. 29 (a). The responsibility of determining whether or not a bidder is qualified as a manufacturer or as a regular dealer under the Public Contracts Act rests in the first instance with the contracting agency. However, any decision which the contracting officer might make is subject to review by the

Department of Labor which is charged with the administration of the Act. [Italics supplied.]

Also, the Walsh-Healey Act provides in section 3 (41 U. S. C. 37) for the debarment from Government contracts of persons or firms found by the Secretary of Labor to have breached any of the agreements or representations required by the act. Moreover, under section 3 of the Davis-Bacon Act (40 U. S. C. 276a-2 (a)), persons or firms found by the Comptroller General of the United States to have disregarded their obligations to employees and subcontractors likewise are debarred from Government contracts.

Since by its terms section 213 of the Small Business Act, 15 U. S. C. 642, makes conclusive the Administration's certification of a small business concern as competent with respect to "capacity and credit,” we think such provision must be construed as controlling only insofar as it conflicts with a determination by a procurement officer as to the "capacity or credit" of a bidder. However, if a bidder is found not to be qualified for other reasons, as for example lack of integrity or a consistent record of default under prior contracts; or if he is found not to be a "manufacturer" or "regular dealer," or is debarred from Government contracts under the statutes above cited, in our view the certificate of competency, being limited by statute to "capacity and credit," would not be determinative of the award to be made.

[B-135614]

Contracts-Awards-Small Business Concerns-Limita

tions

The issuance of an administrative regulation which would preclude small business contractors under set-aside procurements from subcontracting with large business firms would be in consonance with the spirit and intent of the statutes affecting small business participation in Government contracts.

To the Chairman, Military Operations Subcommittee, Committee on Government Operations, House of Representatives, April 14, 1958:

Further reference is made to your letter of March 20, 1958, requesting our advice as to whether the Small Business Administration and the Department of the Air Force had authority to limit subcontracting by a small business firm to a big business firm under a set-aside procurement. In that connection, you refer to our decision B-123338, dated May 12, 1955, reported at 34 Comp. Gen. 595, and request to be advised whether said decision would preclude the promulgation of administrative regulations to limit such subcontracting by a small business firm.

The decision in 34 Comp. Gen. 595, addressed to a protesting bidder, held that neither the Walsh-Healey Public Contracts Act, 41 U. S. C.

35, nor the Armed Services Procurement Act, 10 U. S. C. 2305, precluded the award of a contract to a firm which contemplated subcontracting. However, the decision did not imply that the cited statutes precluded reasonable administrative qualifications upon subcontracting. In fact, we have recognized the authority of a procurement agency to impose reasonable limitations upon the right of a contractor to subcontract all or portions of the work. See generally 37 Comp. Gen. 196.

We can find no language either in the Armed Forces Procurement Act, as codified in 10 U. S. C. 2305, or in the Small Business Act, 15 U. S. C. 631 note, which reasonably could be regarded as effectively precluding the promulgation of a regulation such as referred to in your letter. In fact, the issuance of such a limiting regulation would seem to be in furtherance of both the spirit and intent of the statutes affecting small business participation in Government contracting. Such authority is exemplified by regulations contained in ASPR-1-706.5 (c), 1-706.6 (c), 1-707, 7-104.14, and 13 CFR 103.3 (b) (3) which provide generally for subcontracting to small business under set-aside procurements and contracts over $5,000.

Also, your attention is invited to the enclosed copy of our decision B-131078, February 26, 1958, 37 Comp. Gen. 544, to the effect that a procurement agency could require by contract provision that no portion of the work under a contract could be sublet, except subject to the determination and approval by the contracting officer of a proposed subcontractor's qualifications to perform the work in a capable and reasonable manner.

[B-134574]

Contracts-Awards-Small Business Concerns-Certifications-Ineligibility Prior to Revocation

Objection to a small business set-aside contract which was awarded on the basis of a small business certificate, which was not revoked until some time later for the reason that prior to the award the parent corporation of the contractor had acquired an additional subsidiary, would serve no useful purpose after the time for placing orders under the contract has expired. The acceptance by a procurement agency of a small business certificate which is valid at the time a set-aside award is made and is based on information which is correct at the time requested is required by law and regulation (15 U. S. C. 642 (b) and section 1-703 of the Armed Services Procurement Regulation.)

To the Union Oil Company of California, April 15, 1958:

Further reference is made to your letter of December 2, 1957, and accompanying memorandum, relative to your protest against the award of contract No. ASP-18345, dated September 13, 1957, to the Wilshire Oil Company of California, a subsidiary of Malco Refineries, Inc., under invitation for bids No. 57-148, issued by the Military

Petroleum Supply Agency on June 14, 1957, and publicly opened on July 16, 1957.

The invitation provided for a partial set-aside for small business of 4,000,000 barrels of JP-4 jet fuel out of a total requirement of 39,600,000 barrels. Award was made to Wilshire of 20,000,000 gallons under Item 270a, which constituted the entire quantity of that item set aside for small business. While not involved here, Wilshire also was awarded 30,000,000 gallons of the non-set-aside portion of Item 270a and your company received an aggregate award of 22,260,000 gallons under the same item.

The substance of your protest is that Wilshire was not a small business firm at the time it received the award of the set-aside portion of Item 270a, and hence was not eligible to receive that award.

The record establishes that prior to the date of Wilshire's bid, the Small Business Administration had certified, on June 24, 1957, the status of Malco Refineries, Inc., Wilshire's parent corporation, as a small business concern for the purpose of making bids and proposals for various petroleum products, including those involved in the subject procurement. This certificate was made effective until December 31, 1957, unless sooner revoked by the Small Business Administration, and was in force and effect at the time the set-aside portion of Item 270a was awarded to Wilshire. Thereafter, on October 21, 1957, the Small Business Administration notified Malco that because of its acquisition of an additional subsidiary in April 1957, neither Malco nor its subsidiaries could be classified as small business, and that its certificate of June 24, 1957, was revoked as of October 21, 1957.

While the record indicates that the Malco group was not in fact small business at the time the set-aside award was made to Wilshire, we are of the view that since the time for placing orders under the contract has now expired, no useful purpose would be served by any action which could now be taken.

Furthermore, the procurement agency was required by law and regulation (see 15 U. S. C. 642 (b) and section 1-703 of the Armed Services Procurement Regulation) to accept the small business certificate issued to Malco and in force at the time of award, and the certificate was based upon information received from Malco which was correct at the time it was requested.

However, since the issuance of such certificates for fixed periods of time, without an affirmative requirement of prompt disclosure of any change in the status of the business involved, may result in abuses of the intent of the law, we are suggesting to the Small Business Administration that consideration be given to modification of its procedures to avoid or minimize the possibility of such undesirable results.

[B-135620]

Military Personnel-Savings Deposits-Interest—Discharge and Reenlistment-Redeposit

Savings deposits which are not withdrawn at the expiration of each three-year enlistment period by enlisted members of the uniformed services whose enlistments are for periods longer than three years may continue to accrue interest to the extent authorized by regulation.

The long established rule that interest does not accrue on the savings deposits of an enlisted member of the uniformed services after the date of discharge is for application under 10 U. S. C. 1035 (c), even though the member reenlists immediately; accordingly, if the member wishes to have the deposit continue to draw interest after discharge and immediate reenlistment or after retirement and immediate recall to active duty, the principal and interest must be redeposited in which event both principal and accrued interest will draw interest. Under 10 U. S. C. 1035, which permits the deposit of savings by an enlisted member of the uniformed services and authorizes payment of the deposits and interest upon discharge, a regulation to permit the compounding of interest as of the date of the expiration of each three-year period in the case of enlistments for longer periods would not be proper.

To the Secretary of Defense, April 15, 1958:

Reference is made to letter of March 24, 1958, from the Assistant Secretary of Defense (Comptroller), requesting decision on certain questions set forth and discussed in Committee Action No. 205 of the Military Pay and Allowance Committee, Department of Defense. The questions are as follows:

1. May interest continue to accrue on savings, that were deposited by enlisted members, in accordance with Title 10, United States Code, section 1035, which are not withdrawn and redeposited upon occurrence of the following:

a. Expiration of each 3-year period of an enlistment greater than 3 years? b. Discharge and immediate reenlistment (without a break in service)? c. Retirement and immediate recall to active duty (without a break in service)? 2. If the answer to question 1, or any part thereof, is in the affirmative, may the service regulations be changed to provide that such interest be compounded as of the date following the date of expiration of each 3-year period of an enlistment greater than 3 years; discharge and immediate reenlistment; or retirement and immediate recall to active duty, as the case may be?

Section 1035, 10 U. S. C. (codified from the act of July 15, 1954, 68 Stat. 485), permits the deposit of savings by an enlisted member of the Army, Navy, Air Force or Marine Corps, with any branch, office or officer of his armed force designated by the Secretary concerned; authorizes the payment of interest at the rate of 4 percent a year on the amounts deposited for six months or more, and provides that:

(c) Payments of deposits from the respective funds named in subsection (a), and interest thereon, may be made only to the member upon discharge, or at such time before his discharge as may be prescribed by the Secretary concerned, or to the member's heirs or legal representative.

Under the foregoing provisions of law, interest on amounts deposited for 6 months or more prior to discharge may be paid upon discharge or at such time before discharge as may be specified in regu