By section 11(a) of the Armed Services Procurement Act of 1947, 62 Stat. 25, the Congress specifically repealed section 3722, Revised Statutes. And this Office has not adhered to the proposition that all double bidding is prohibited or even undesirable. In a report dated April 2, 1957, to the Chairman, Military Operations Subcommittee, House Committee on Government Operations, we stated in general terms that "It is not unusual for bids to be received from different divisions of the same corporation and sometimes from a parent corporation and one or more of its subsidiaries under the same invitation for bids. In such cases the bidders generally are responding to separate copies of the invitation sent to them and apparently do not have any reason to believe than an affiliated company or division has been requested to submit a bid. We perceive no legal objection to consideration of the bids received under these circumstances. An individual might also have legitimate reasons for submitting bids on behalf of two or more of the companies which he owns or controls. This could be the situation where partial awards are permitted and it is hoped that an award will be made to each of the companies for such amount of the work as it can conveniently perform." That appears to be the situation in the instant case where the two bidding parties hope to be awarded a contract for such an amount of the desired work as they, individually, may be found by the contracting officer to be capable of accomplishing.

Of course, a contracting officer would be justified in rejecting more than one bid submitted by a person, or by two or more affiliated companies, where such bidding was resorted to for the purpose of circumventing the requirements of a statute such as the Davis-Bacon Act of August 30, 1935, 49 Stat. 1011, 40 U.S.C. 276a; where an unfair advantage may be gained in cases of an award through the drawing of lots; or in any other instance where multiple bidding is prejudicial either to the United States or to other bidders.

With respect to the present case, since the two bids of Pergamon International Corporation and its affiliated organization are the lowest offers received, it would be prejudicial to the interests of the United States to reject such offers and, therefore, we concur with the recommendation of your Director of Administration that such proposals be considered. Accordingly, the implication arising by virtue of certain statements contained in decision at 14 Comp. Gen. 168, that all multiple bids are to be rejected, should be disregarded; and to the extent that the said decision is inconsistent with our conclusions stated herein, it no longer will be followed.

[B-143208]

Bidders Qualifications-Financial Responsibility

An administrative determination that a low bidder, who was denied a small business certificate of competency, did not have the necessary financial capability to satisfactorily perform the contract, which determination followed a capability survey committee report and a reevaluation of the financial status of the bidder after a presentation of evidence of a bank credit, is proper in view of the provisions of the invitation which put bidders on notice that they had the burden of providing adequate financing to assure successful completion of the contract and that the bid prices would be evaluated in conjunction with information on the bidder's financial position to provide reasonable assurance that the bidder could complete the contract upon payment of the amount bid.

Under an invitation which imposed upon all bidders the responsibility for providing adequate finances at the time of a capability committee survey, the matter of whether the low bidder, who was determined to lack the necessary financial capability to satisfactorily perform and who was denied a small business certificate, should have been afforded information concerning the additional financial ability required to correct the deficiencies is within the sound discretion of the contracting officer in view of the record which shows that additional consideration was given by the Small Business Administration after the low bidder acquired a bank credit and by the procurement agency after denial of the certificate. To Lear and Scoutt, June 29, 1960:

Reference is made to your telegram dated June 14, 1960, and subsequent correspondence, written in behalf of Airline Transport Carriers, Inc., d/b/a California-Hawaiian Airlines, and protesting against the action of the Air Force in rejecting the bid submitted by that company under IFB 11-626-60-8.

This invitation was issued by the Military Air Transportation Service and requests bids on furnishing and operating cargo configurated aircraft to provide specified air transportation services for the Department of the Navy. The record shows that the bid submitted by California-Hawaiian Airlines in the amount of $4,782,511.37 was second low. However, the Air Force rejected the low bid as nonresponsive and therefore entered into a capability survey of California-Hawaiian as the lowest responsive bidder.

Under the provisions of Paragraph 21 of the Terms and Conditions of the invitation each bidder was required to submit with his bid three copies of the most recent financial statement prepared from his own records and signed by an officer of the firm, together with any additional information relevant to an evaluation of its current financial ability to perform in accordance with its bid. In addition, Paragraph 18 provided as follows:

18. FINANCIAL AND TECHNICAL ABILITY-Bidders are cautioned to submit with their bids full information concerning the financial ability of the bidder to perform and the arrangements made by the bidder to assure that aircraft meeting the Government's requirements will be available to bidder for use on any resulting contract. If, on the basis of this information, the bid or proposal submitted in response to this Invitation is favorably considered, a survey team may contact bidder's facility for the purpose of determining bidder's technical and financial ability to perform. Data pertinent to this pur

pose should be available at the time, if not already on file with Headquarters, Military Air Transport Service. The team will also evaluate bidders system for determining the financial and technical ability of bidder's proposed sub-contract or procurement sources to perform. BIDDER WILL BE REQUIRED TO FURNISH EVIDENCE OF ITS ABILITY TO ASSURE THAT THE TYPES AND QUANTITIES OF AIRCRAFT REQUIRED TO PERFORM IN ACCORDANCE WITH ITS BID WILL BE AVAILABLE TO IT IN AN ACCEPTABLE CONFIGURATION IN SUFFICIENT TIME TO COMMENCE PERFORMANCE. 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. IN ADDITION, BIDDER MUST PROVIDE TO THE SURVEY TEAM SATISFACTORY EVIDENCE THAT IT WILL BE CURRENTLY AUTHORIZED BY THE FEDERAL AERONAUTICS AUTHORITY TO OPERATE IN TRANSPORTATION SERVICES THE TYPE OF AIRCRAFT (e.g. DC-6, L-1049) SPECIFIED IN ITS BID. ONLY BIDDERS SO AUTHORIZED WILL BE CONSIDERED FOR AWARD. Examples of other types of technical, financial and capability matters the survey team visiting bidder's facility will evaluate are given below:

The records of the Air Force show that the MATS Capability Survey Committee surveyed California-Hawaiian on May 26 and 27, 1960, and on May 28 a determination was made that CaliforniaHawaiian was not considered capable of performing the services required under the invitation "due to the carrier's apparent financial instability at the time of survey." This conclusion appears to have been based primarily upon three factors. First, that the net worth of the company was only $66,056, while its total bid price was $4,782,511.37. Second, that the company had sustained a loss of $22,832 on operations through March 1960. And, third, that while the company had advised it was negotiating a loan of $300,000, which should be available by June 3, the company's financial capability to perform the contract would be marginal even with the addition of such amount. The contracting officer furnished this information to the regional Small Business Administration office on May 28 with advice that award would be withheld pending determination by that office as to whether a Certificate of Competency would be issued to California-Hawaiian.

While it appears that the company effected a loan of $300,000 on June 2, the Regional Small Business office denied the company a Certificate of Competency on June 9, and such action was upheld by the Small Business Administrator on June 14.

On the same date, and apparently as a result of the final denial of a Certificate of Competency, you filed a formal protest on behalf of California-Hawaiian with this Office and with the Air Force against an award to any other company. This protest is based upon the understanding and affirmation of Mr. C. C. Sherman, the President of California-Hawaiian, that during his discussions with the survey team on May 27 he was advised by Captain R. E. Hennessey, the team's financial advisor, that his recommendation would be that $250,000 on deposit in the company's bank would be adequate to start performing the contract, and upon the further understanding of Mr. Sherman that he was advised by the survey team to have the company's bank advise Headquarters, MATS on or before June 3 if credit in that amount had been established. Since the company's bank notified MATS of a $300,000 credit on June 2, this portion of your protest would appear to be based upon a contention that such action established the company's financial responsibility and precludes rejection of its bid on that ground.

The available records of the Air Force contain a statement by Lieutenant Colonel Harry A. Wagner, the Survey Team Chief, that the initial evaluation indicated that the carrier would need a minimum of $300,000 for working capital to begin operation and, while this information was made known to the survey team and to observers from SBA and LAAPD and apparently became known to Mr. Sherman, at no time was any statement or indication made to Mr. Sherman or other personnel of California-Hawaiian that it would be awarded the contract if $300,000 was injected into the company. Additionally, the record contains a denial by Captain Hennessey of the statement attributed to him by Mr. Sherman, and such denial appears to be substantiated by a telegraphic report dated May 27 from the survey team to Hq. MATS, a portion of which is signed by Captain Hennessey and states that "even with the additional $300,000 carrier's financial capability would be marginal." In view of the fact that any statements of the nature attributed by Mr. Sherman to Captain Hennessey or similar statements by Colonel Wagner would not operate to bind or estop the Survey Committee or the Air Force, and in view of subsequent developments to be discussed in considering the second portion of your protest, it would appear that any further discussion or investigation of the accuracy of Mr. Sherman's allegations would serve no useful purpose.

Following your protest on June 14, the financial capability of California-Hawaiian was reevaluated by the Air Force with full consideration being given to the $300,000 loan consummated by the company on June 2 and to a subsequent consent by the lender to

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

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