whether the bidder can perform but whether he will perform--are not covered by the COC but are left for determination by the contracting agency. B-148124, April 13, 1962; B-146372, September 8, 1961; B-143145, November 3, 1960. Under the procedures established by both the ASPR (1-705.6) and the FPR (1-1.708) the Small Business Administration, while authorized by statute to make conclusive determinations as to the competency of small bidders as to capacity and credit, is in practice afforded no opportunity to do so until an adverse determination has been made by a contracting officer. The result of these procedures is that every SBA certificate of competency issued amounts in effect to a reversal of a contracting officer's determination. Since there are other elements of responsibility as to which the contracting officer's determinations are not reviewable by SBA, the contracting officer is subject to a normal human tendency to base determinations of nonresponsibility on such elements rather than on lack of capacity or credit.

Perhaps to deal with this tendency, the regulation (ASPR 1-705.6(b)(iv) provides that "if the contracting officer has any doubt as to whether the unsatisfactory record of performance can reasonably be attributed solely to a lack of capacity or credit, the matter shall be discussed with the local SBA representative. If the local SBA representative is of the opinion that the unsatisfactory record of performance is attributable solely to a lack of capacity or credit, and the contracting officer disagrees, the contracting officer shall, in accordance with Departmental procedures, forward the matter to higher authority within his Department for resolution. The decision of such higher authority shall be final."

In its context, this portion of the regulation appears to be directed to determination of the question whether the proposed rejection of the bidder should be referred to the Small Business Administration for consideration, since the regulation does not require notice to SBA unless the contracting officer has found the bidder to be nonresponsible as to capacity or credit and proposes to reject his bid for this reason alone.

In the present case, the contracting officer did not follow the indicated procedure, but referred the matter to the Chicago Office of SBA by letter of November 26, 1962, setting forth "for determining capacity of the low bidder a summary of his reasons for his opinion that the Pathman Company "will not satisfy contract requirements for completion of the work". The reasons stated in this letter, and supplemented by a second letter of December 12, 1962, are in substance those on which the contracting officer now relies to support his conclusion that the bidder is not responsible by reason of past unsatisfactory performance not attributable to lack of capacity or credit.

Notwithstanding the contracting officer's recommendations, and after a meeting held at Washington on January 17, 1963, between officials of SBA and the Department of Defense, SBA issued the certificate of competency on January 25, 1963.

On this record, viewed in the light of the pertinent regulation, we feel that we are justified in concluding that the contracting officer himself had not, at the time he referred the matter to SBA, made any detemination that the bidder's past performance record showed any such elements of lack of responsibility as would not be covered by a certificate of competency.

While we have recognized that such a certificate does not preclude the rejection of a bidder for such a poor performance record as would establish lack of integrity or other essential elements of responsibility not related to capacity or credit, we have stated (39 Comp. Gen. 868, 872); ***We believe, as a general proposition, that a bidder's integrity and business ethics may properly be determined administratively by applying the "Clause for Debarment" enumerated in Section 1-604.1 of the ASPR, or the causes and conditions for the suspension of contractors set out in Section 1-605.1 of the ASPR. However, those regulations, as well ad the decision of our office, contemplate that the administrative determination of lack of integrity or business ethics be based on clear and convincing evidence demonstrating such deficiencies on the part of the bidder. [Italics supplied.)

This statement, particularly with reference to the evidentiary requirement, was merely a statement of the specific requirement of Paragraph 1-604.1 of the regulation dealing with debarment of contractors. (Paragraph 1-605.1 is not here involved.) It was intended as an illustration of what would be appropriate in a given situation rather than a minimum standard to be applied to the evidence as to lack of integrity in each instance. Nevertheless, it demonstrates the standard of proof which may be necessary in a particular case to support a determination of nonresponsibility based on lack of integrity.

An additional reason for requiring this standard of proof that a bidder lacks perseverance, tenacity, or integrity is that such factors are ethical in nature and have no bearing on the question of a contractor's purely physical ability to perform. B-148124, April 13, 1962. Ethical considerations, of course, relate closely to motives. As stated by the Supreme Court of the United States in Adler v. Fenton, 65 U.S. 407,410 (1860) -

*** An act legal in itself, and violating no right, cannot be made actionable on account of the motive which superinduced it. It is the province of ethics to consider of actions in their relation to motives, but jurisprudence deals with actions in their relation to law, and for the most part independently of the motive. ***

Since considerations of motives are largely alien to the civil law, a quasi-judicial tribunal should be circumspect in its judgment as to a bidder's motives, unless admitted by him, where such judgment will determine the bidder's opportunity to participate in the competition for a Government contract. We recognize that no party has a right to a Government contract. See Friend v. Lee, (App. D.C. 1955) 221 F. 2d 96. However, the rejection of otherwise acceptable bidders must inevitably have a serious adverse effect on the integrity of the competitive system unless sufficient bases for rejection exist.

Under the traditional test, a detemination of nonresponsibility may be questioned by our Office only if arbitrary, capricious or not supported by substantial evidence. Where a COC has been issued, a determination of

nonresponsibility because of factors not included in the COC must be supported by substantial evidence to establish not only that a situation exists to justify the determination but that the situation results from such factors as lack of integrity, tenacity or perseverance.

The contracting officer's determination that the Pathman Company was not responsible for reasons not included in the COC, which have already been described, was based on a detailed review of the history of 11 construction contracts awarded to Pathman by the Chicago District. Of these 11 contracts, it appears that the work under 9 was accepted within the time required for performance subject to subsequent correction of deficiencies. Liquidated damages were, or will be, assessed on two contracts for delayed completion. Performance ratings on the contracts, given after performance of the work on each, were average or satisfactory on seven and unsatisfactory on the other four. However, it is explained that one rating of satisfactory was given in error. It is further noted that under five of the contracts deficiencies to be made up after completion took from 12 to 15 months to complete, and in one instance of the five, the Government claimed a $365 credit because of failure to correct deficiencies. In addition to failure to correct deficiencies promptly, defects noted in performance which might be regarded as due to factors not covered by the COC were delinquencies in submitting progress charts, schedules and reports, shop drawings, safety programs, copies of purchase orders and payroll records. Also, safety programs and regular administrative procedures were said to be deficient.

The Pathman firm contends that the basis for the contracting officer's conclusions as to its lack of perseverance, tenacity, etc., are based upon routine correspondence assigned undue weight and often taken out of context; that its contracts were in general accomplished in a timely, acceptable fashion with the exception of some minor errors; that the quality of the workmanship on the contracts has exceeded minimum standards as evidenced by the fact that there has not been a single callback under the guarantee provisions of any of the contracts; that payroll reports were submitted regularly and promptly and delays that did occur were on the payrolls of subcontractors performing Corps of Engineers work for the first time; that safety requirements and recommendations were carried out to the fullest extent; and that performance by the firm in spite of the alleged harassment and lack of cooperation by Corps of Engineers personnel attests to its tenacity and perseverance. Finally, the firm has presented a number of affidavits from public and private sources attesting to its responsibility as a contractor.

The factual points at issue could be resolved by our Office only if we were to hold a full-scale adversary proceeding with sworn testimony, cross examination of witnesses, etc. We have not the facilities for, nor are we otherwise disposed in favor of, such an undertaking. In any case, the matter of responsibility remains for determination by the contracting officer to the extent that his authority has not been circumscribed by the COC procedure. However, we feel that certain factors merit comment.

The contracting officer has based his findings on the history of 11 contracts with a total price in excess of $6,500,000. We believe the record of the Pathman firm on the 11 contracts, taken as a whole, establishes that the work to be done by the contractor was substantially performed within the time and in the manner required. The record also demonstrates, however, that the firm has been dilatory in meeting those relatively minor requirements of the contract which would not generally be deemed sufficiently significant to warrant a temination for default. Thus the deficiencies remaining after the work was accepted were corrected only after much delay and constant prodding. Also, reports required under the terms of the contract were furnished by the contractor in part only and then after repeated requests. Deficiencies noted by agency officials in maintaining the work site at an acceptable standard of orderliness were often ignored. Debris was not promptly removed from the work site, not only creating a work hazard but interfering with the orderly flow of traffic around the work site. This last appears particularly significant in relation to the contract at issue since it involves the major rehabilitation of an existing building which will continue to be used during the course of the work.

While the deficiencies noted in Pathman's record of performance are, taken individually, relatively minor, the cumulative effect is unduly to increase the burden of administration from the Government's standpoint. Such record is, we think, adequate to support a determination of nonresponsibility by the contracting officer. As noted earlier where, as in this case, a COC has been issued it must be established that the situation results from factors not covered by the COC. Here the low bidder has regularly demonstrated his ability to perform major construction work. We think it would be illogical to conclude that a firm which has proven its overall ability to erect or rehabilitate a large building fails in the performance of the minor and comparatively routine work of deficiency corrections, report filing and debris clean-ups because of lack of capacity. We cannot, therefore, disagree with the contracting officer's conclusion that the deficiencies result not from lack of capacity but a consistent failure to apply the necessary tenacity and perseverance to do an acceptable job. Accordingly, we conclude that the low bid may be rejected in this instance. With respect to future procurements the Pathman firm's responsibility will have to be based on the nature of the work to be done and its capacity credit, integrity, tenacity, and perseverance--as well as all the other elements of responsibility--as of that time.

In the findings of fact dated February 21, 1963, the contracting officer takes the position that his recommendation is supported by United States v. Thompson, 168 F. Supp. 281, affirmed 268 F. 2d 426. We think it appropriate to comment on that decision. A Government contractor had been terminated for default and the uncompleted portion of the procurements readver tised. The defaulted contractor was low bidder under the readvertisement and after his bid had expired by its own terms obtained a COC from the predecessor agency to the Small Business Administration. Notwithstanding the COC, said defaulted contractor was passed over and award made to a higher bidder. The action was brought by the United States aginst the original contractor to recover excess costs incurred in reprocurement. One basis for the defense was that the low bid on readvertisement was improperly rejected in view of the COC. We had occasion to consider the matter prior to litigation. In our decision B-110520, November 17, 1952,

we rejected the defaulted bidder's protest on one part of the reprocurement pointing out that under the very terms of the applicable contract terminated for default the Government had the right, upon the contractor's failure to perform, to terminate and procure the articles on the open market and that if award were to be made to the defaulted contractor the Government would be in the same position as prior to termination (except that the delivery dates would probably have been extended upon reprocurement). The court in the cited case approved the conclusion in our decision, then pointed out that the language of the law, substantially similar to the provision of Small Business Act quoted above, did not require but authorized award to the small business which had obtained a COC. We think this latter statement may properly be regarded as dicta. It is our position that while a bidder who has obtained a COC must be rejected, such rejection must be on the basis of nonresponsiveness, or if for nonresponsibility, on the basis only of some aspect not covered by the COC. See 38 Comp. Gen. 778, 782. We think that ASPR 1-705.6 (a) is consistent with our position.

The salient facts are as follows: On June 1, 1964, the Architect of the Capitol issued an Invitation for Bids for the construction of an underground garage for the Additional House Office Building in process of erection near the Capitol in Washington, D.C. One of the requirements was that every proposal should be accompanied by a bond for at least ten per cent of the amount bid. The offers were to be opened at 3:00 P.M. on July 15, 1964.. The two plaintiffs, in a joint venture, submitted a proposal of $11,735,000. It was accompanied by a bond for only $1,000,000, instead of $1,173,500, as was required by the invitation. This deficiency was due to an inadvertent error on the part of the surety company which wrote the bond. Unfortunately, the plaintiffs did not discover the mistake until the last minute. They immediately communicated with the surety company, and at 3:24 P.M. on 15 July, which was shortly after the bids were opened, the surety telegraphed to the Architect of the Capitol increasing the bond to a proper amount. The plaintiffs' proposal turned out to be the lowest, the next bid being $35,000 higher.

On August 10, 1964 plaintiffs received a notice from the Architect of the Capitol rejecting their bid. This action was taken because of the inadequacy of the bond submitted when the proposals were opened. The conclusion was reached that the insufficiency should not be waived and that the correction made subsequently to the opening of the bids should not be considered. Accordingly, the contract was awarded to the next lowest bidder.