B-148124, APR. 13, 1962

B-148124, APR. 13, 1962

TO THE SECRETARY OF THE ARMY:

REFERENCE IS MADE TO A LETTER DATED MARCH 10, 1962, WITH ENCLOSURES, FROM THE ASSISTANT SECRETARY OF THE ARMY (INSTALLATIONS AND LOGISTICS) FURNISHING A REPORT REQUESTED BY OUR OFFICE BY LETTER DATED FEBRUARY 9, 1962, IN CONNECTION WITH THE PROTEST OF THE CAMILLUS CUTLERY COMPANY, CAMILLUS, NEW YORK, AGAINST THE PROPOSED AWARD OF A CONTRACT TO THE COLUMBUS MILPAR AND MANUFACTURING CO., INC., COLUMBUS, OHIO, UNDER INVITATION NO. ORD-11-199-62-61, ISSUED BY THE ORDNANCE WEAPONS COMMAND, ROCK ISLAND, ILLINOIS.

THE INVITATION REQUESTED BIDS FOR FURNISHING 190,000 BAYONET KNIVES, M5A1, AND FOUR ITEMS OF VARIOUS QUANTITIES OF REPAIR PARTS. UPON THE OPENING OF BIDS ON DECEMBER 7, 1961, THE LOWEST APPARENT BID IN THE TOTAL AMOUNT OF $369,507.50 WAS SUBMITTED BY THE COLUMBUS MILPAR AND MANUFACTURING CO., INC. THE CAMILLUS CUTLERY COMPANY SUBMITTED THE NEXT LOWEST BID IN THE AMOUNT OF $375,685. SINCE THE COLUMBUS MILPAR AND MANUFACTURING CO., INC., HAD SUBMITTED THE LOWEST APPARENT BID, THE CLEVELAND ORDNANCE DISTRICT WAS REQUESTED TO PERFORM A PREAWARD SURVEY FOR THE PURPOSE OF ASCERTAINING THE RESPONSIBILITY OF THE COLUMBUS MILPAR AND MFG. CO., INC., AS A PROSPECTIVE GOVERNMENT CONTRACTOR. THE REPORT WAS RECEIVED AT THE PROCUREMENT AGENCY ON DECEMBER 26, 1961, AND IT RECOMMENDED THAT AN AWARD BE MADE TO THE CORPORATION. OF THE SUMMARY OF CAPABILITY FACTORS APPEARING ON THE PREAWARD SURVEY REPORT, ONLY ONE,"PERFORMANCE RECORD" WAS MARKED AS UNSATISFACTORY.

IN HIS REPORT THE CONTRACTING OFFICER STATES:

"THE UNDERSIGNED WAS AWARE OF THE EXISTENCE OF A CURRENT CONTRACT HELD BY COLUMBUS MILPAR AND MANUFACTURING COMPANY, INC., AWARDED BY THIS HEADQUARTERS ON 15 FEBRUARY 1961. THE CONTRACT (NO DA-11-199-ORD 601) CALLS FOR THE DELIVERY OF 342,000 BAYONET-KNIVES, M6 AND FINAL INSPECTION GAGES, FOR A TOTAL AMOUNT OF $706,296.00. ON 31 MARCH 1961, THE GOVERNMENT EXERCISED ITS RIGHTS UNDER THE OPTION CLAUSE OF THE CONTRACT AND INCREASED THE NUMBER OF BAYONETS BY 65,000 EACH FORA NEW TOTAL OF 407,000 AND AN INCREASE IN CONTRACT AMOUNT TO $833,536.00.

"THE CONTRACT REQUIRED DELIVERY OF 4,900 UNITS WITHIN 150 CALENDAR DAYS AFTER DATE OF CONTRACT AND AT A RATE OF 31,000 UNITS PER MONTH THEREAFTER UNTIL COMPLETION. THE CONTRACT DATE BEING 15 FEBRUARY 1961 THE INITIAL DELIVERY WAS REQUIRED BY 15 JULY 1961 WITH DELIVERIES OF 31,000 ON THE 15TH OF EACH SUCCESSIVE MONTH UNTIL COMPLETION IN SEPTEMBER 1962.

"AT THE TIME AN AWARD OF A CONTRACT UNDER SUBJECT IFB WAS UNDER CONSIDERATION, I.E., 2 JANUARY 1962, THE RECORDS AT THIS HEADQUARTERS INDICATED THAT THE CONTRACTOR HAD DELIVERED APPROXIMATELY 32,500 BAYONETS AGAINST A SCHEDULED REQUIREMENT OF APPROXIMATELY 175,000. THE PRE-AWARD SURVEY REPORT OF 22 DECEMBER 1961 HAD THIS TO SAY ABOUT THE CONTRACTOR'S PERFORMANCE UNDER THE EXISTING CONTRACT:

" "THE CONTRACTOR'S PERFORMANCE ON BAYONET KNIFE M6 HAS BEEN FAIR.' DURING THE PERIOD 1 DEC 1961 THROUGH 15 DEC 1961 10,400 UNITS WERE DELIVERED. START-UP PROBLEMS, TOOL REFINEMENTS AND POOR DELIVERY BY SEVERAL CONTRACTORS EFFECTED OUTPUT ADVERSELY. PROBLEMS ARE BEING SOLVED AT A SATISFACTORY RATE, AND IT IS EXPECTED THAT THE CONTRACTOR WILL DELIVER 20,000 ADDITIONAL UNITS PER MONTH COMMENCING JAN 1962. IT IS THE WRITER'S OPINION THAT 62,000 UNITS IN JANUARY IS OPTIMISTIC AND THAT DELIVERY OF 45,000 UNITS IS MORE NEARLY REALISTIC. WRITER CONCURS THAT 62,000 PER MONTH THEREAFTER IS A SOUND FORECAST.'

THE REPORT CONCLUDED THAT THE PRODUCTION CAPABILITIES ON THE BAYONET- KNIFE M6 WERE ADEQUATE FOR THE ENTIRE SCHEDULE INCLUDING THE PERIOD OF MAY AND JUNE 1962 WHEN PRODUCTION WOULD OVERLAP WITH THAT OF THE BAYONET-KNIFE M5A1.

"THE BOARD OF AWARDS OF THIS HEADQUARTERS RECOMMENDED THAT THE BID OF COLUMBUS MILPAR AND MANUFACTURING COMPANY, INC., SHOULD BE REJECTED BECAUSE:

"A. THE COMPANY'S DELINQUENCY,

"B. THE ITEM WAS IN OUT-OF-STOCK POSITION,

"C. DOUBT THAT CONCURRENT PRODUCTION OF BOTH BAYONETS COULD BE PERFORMED AT THE SAME TIME, AND

"D. DISCREPANCIES IN THE CLEVELAND ORDNANCE DISTRICT'S REPORT.

THE UNDERSIGNED CONCURRED IN THE FIRST THREE REASONS BUT NOT IN THE LAST. IT WAS ASCERTAINED, HOWEVER, THAT WHAT THE BOARD OF AWARDS MEANT BY THIS FINDING WAS THAT PAST ESTIMATES OF PRODUCTION AS MADE BY THE DISTRICT HAS NOT BEEN REALIZED AND, THEREFORE, THOSE CONTAINED IN THE REPORT WERE NOT VIEWED WITH CONFIDENCE.

"IT WAS THE DETERMINATION OF THE UNDERSIGNED THAT THE REASONS FOR THE REJECTION OF THE BID (ASIDE FROM REASON NUMBER TWO) ARE MATTERS OF "CAPACITY" AS DEFINED IN ASPR 1-705.6 (A). THE PRE-AWARD SURVEY REPORT ATTRIBUTED THE PAST POOR PERFORMANCE TO "START-UP PROBLEMS, TOOL REFINEMENTS AND POOR DELIVERY BY SEVERAL CONTRACTORS.' VARIOUS COMMUNICATIONS FROM THE CLEVELAND ORDNANCE DISTRICT DURING THE PERIOD FROM 1 AUGUST 1961 TO 4 DECEMBER 1961 REPORTED PRODUCTION DIFFICULTIES DUE TO PROBLEMS WITH PRODUCTION PROCESSES, DIE AND EQUIPMENT BREAKAGE, AND SUBCONTRACTOR DELINQUENCIES. THESE ALSO WERE DETERMINED TO BE MATTERS OF "CAPACITY".'

SINCE THE CONTRACTING OFFICER DETERMINED THAT THE PAST UNSATISFACTORY PERFORMANCE WAS DUE TO LACK OF "CAPACITY," AS DEFINED IN SECTION 1- 705.6/A) OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR), THE MATTER WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION (SBA), FOR ITS CONSIDERATION PURSUANT TO ASPR 1-705.6 (B) (IV). AFTER REVIEW OF THE CORPORATION'S TECHNICAL, PRODUCTION AND FINANCIAL CAPABILITIES, THE SBA ISSUED A CERTIFICATE OF COMPETENCY ON JANUARY 25, 1962, TO THE COLUMBUS MILPAR AND MFG. CO., INC., CERTIFYING THAT SUCH CORPORATION WAS COMPETENT AS TO CAPACITY AND CREDIT, TO PERFORM THE PROPOSED PROCUREMENT COVERED BY THE INVITATION.

THE RECORD INDICATES THAT BY TELEGRAM DATED JANUARY 31, 1962, THE LAW FIRM OF WEIL, GOTSHAL AND MANGES, ATTORNEYS FOR THE CAMILLUS CUTLERY COMPANY, PROTESTED AGAINST THE PROPOSED AWARD OF A CONTRACT TO THE COLUMBUS MILPAR AND MANUFACTURING CO., INC., UNDER THE SUBJECT INVITATION. IN ITS TELEGRAM THE ATTORNEYS CONTENDED THAT NO AWARD SHOULD BE MADE TO COLUMBUS MILPAR FOR THE REASON THAT THE GOVERNMENT ITSELF PROPOSED TO REJECT THE CORPORATION'S BID ON SEVERAL GROUNDS, AMONG WHICH WAS THE FACT THAT THE CORPORATION WAS PRESENTLY DELINQUENT IN DELIVERY OF AN IDENTICAL ITEM UNDER A CURRENT CONTRACT. THE ATTORNEYS ALSO CONTENDED THAT WHILE THE SBA HAD ISSUED A CERTIFICATE OF COMPETENCY FOR THE CORPORATION, THAT AGENCY IN SO DOING DID NOT CONSIDER THE CORPORATION'S SERIOUS DELINQUENCY UNDER THE CURRENT CONTRACT. BY LETTER DATED FEBRUARY 5, 1962, THE ORDNANCE WEAPONS COMMAND, ROCK ISLAND, ILLINOIS, ADVISED THE ATTORNEYS FOR THE CAMILLUS CUTLERY COMPANY THAT THE CERTIFICATE OF COMPETENCY ISSUED TO COLUMBUS MILPAR AND MFG. CO., INC., WAS BINDING UPON THE CONTRACTING OFFICER IN VIEW OF HIS OPINION THAT THE COMPANY'S LACK OF ,CAPACITY," THAT IS, ITS DIFFICULTIES WITH MANUFACTURING PROCESSES CAUSED THE UNSATISFACTORY PERFORMANCE UNDER ITS PRIOR CONTRACT. SUBSTANTIATION OF THIS POSITION THERE WAS CITED 37 COMP. GEN. 676, ID. 798, AND 38 COMP. GEN. 289.

BY LETTER DATED MARCH 23, 1962, THE ATTORNEYS FOR CAMILLUS CUTLERY COMPANY CONTEND THAT THE CERTIFICATE OF COMPETENCY AND CREDIT ISSUED TO COLUMBUS MILPAR IS NOT DISPOSITIVE OF THE CASE IN VIEW OF THE HOLDING IN UNITED STATES V. THOMPSON, 168 F.SUPP. 281, AFFIRMED 268 F.2D 426. SPECIFICALLY, IT IS CONTENDED THAT THE THOMPSON CASE REQUIRES THE CONCLUSION THAT:

"* * * WHILE THE S.B.A.'S CERTIFICATE IS CONCLUSIVE AS TO A SMALL BUSINESS FIRM'S CAPACITY AND CREDIT, THE CONTRACTING OFFICER, IN CIRCUMSTANCES OF CLEAR, PRESENT, CONTINUING DEFAULT BY THE LOW BIDDER UNDER A CONTRACT WITH THE SAME CONTRACTING OFFICER FOR ESSENTIALLY THE SAME ITEM, IS NEVERTHELESS "AUTHORIZED" NOT TO AWARD A NEW CONTRACT FOR FURTHER ESSENTIAL DEFENSE PROCUREMENT TO THIS SAME FIRM IN DEFAULT.'

THE ATTORNEYS FOR CAMILLUS POINT TO THE FOLLOWING LANGUAGE FROM THE THOMPSON CASE (PAGES 289, 290) IN SUPPORT OF THEIR CONTENTION:

"/5) WITH RESPECT TO COUNT I, THE DEFENDANT CONTENDS ALSO THAT HIS BID ON THE REPLACEMENT CONTRACTS WAS WRONGFULLY AND ILLEGALLY REJECTED, SINCE HIS BID WAS THE LOWEST AND SINCE IT RECEIVED THE SMALL DEFENSE PLANTS ADMINISTRATION CERTIFICATION. AS TO THIS CERTIFICATION, THE COURT CONCURS WITH THE DECISION OF THE COMPTROLLER GENERAL OF THE UNITED STATES, HANDED DOWN IN THE CASE ON NOVEMBER 17, 1952, TO THE EFFECT THAT SUCH CERTIFICATION, UNDER THE CIRCUMSTANCES, SHOULD NOT BE BINDING ON THE NAVY. ALTHOUGH THIS CERTIFICATION MIGHT VOUCH FOR THE DEFENDANT'S COMPETENCY AS TO CAPACITY AND CREDIT, IT DID NOT INSURE OR GUARANTEE PERFORMANCE. THE EXISTENCE OF ABILITY TO DO A JOB DOES NOT NECESSARILY IMPORT THE EXISTENCE OF THE TENACITY OR PERSEVERANCE NECESSARY TO DO THE JOB FOR WHICH ONE HAS THE ABILITY. THE FACTS COMPRISING THE HISTORY OF THIS CONTRACT SHOW THE FAILURE OF THE DEFENDANT TO PERFORM THE CONTRACT, WHETHER THROUGH DISINCLINATION OR LACK OF ABILITY AND PERSEVERANCE. VIEW OF THIS, THE COURT CAN FIND NO FAULT WITH THE NAVY'S REFUSAL TO ACCEPT A PAPER CERTIFICATION OF THE DEFENDANT'S COMPETENCY IN THE PARTICULARS MENTIONED. ALTHOUGH IT IS QUITE TRUE THAT THE NAVY MUST ACCEPT SUCH CERTIFICATION AS CONCLUSIVE, THE CERTIFICATION GOES ONLY TO THE PLANT'S COMPETENCY AS TO CAPACITY AND CREDIT. IT DOES NOT PRESUME TO CERTIFY THAT THE PLANT WILL PERFORM, ONLY THAT IT CAN. MOREOVER, THE LANGUAGE OF THE PERTINENT SECTION, 714 (F) (1), OF THE DEFENSE PRODUCTION ACT OF 1950, 64 STAT. 798, AS AMENDED BY PUBLIC LAW 96, 65 STAT. 131 (1951), 50 U.S.C.A. APPENDIX SECS. 2163A (F) (1), DOES NOT PURPORT TO REQUIRE THE GOVERNMENT AGENCY TO GIVE THE CERTIFIED PLANT THE CONTRACT. RATHER, IT USES THE WORD "AUTHORIZED," AS IS SHOWN IN THE FOLLOWING REPRODUCTION OF THAT SECTION:

" "/F) (1) IN ANY CASE IN WHICH A SMALL-BUSINESS CONCERN OR GROUP OF SUCH CONCERNS HAS BEEN CERTIFIED BY OR UNDER THE AUTHORITY OF THE ADMINISTRATION TO BE A COMPETENT GOVERNMENT CONTRACTOR WITH RESPECT TO CAPACITY AND CREDIT AS TO A SPECIFIC GOVERNMENT PROCUREMENT CONTRACT, THE OFFICERS OF THE GOVERNMENT HAVING PROCUREMENT POWERS ARE DIRECTED TO ACCEPT SUCH CERTIFICATION AS CONCLUSIVE, AND ARE AUTHORIZED TO LET SUCH GOVERNMENT PROCUREMENT CONTRACT TO SUCH CONCERN OR GROUP OF CONCERNS WITHOUT REQUIRING IT TO MEET ANY OTHER REQUIREMENT WITH RESPECT TO CAPACITY AND CREDIT.'

"IT IS, THEREFORE, THE CONCLUSION OF THE COURT THAT THE S.D.P.A. CERTIFICATION OF JUNE 9, 1952, HAD NO LEGAL EFFECT ON THE ISSUE HERE INVOLVED.'

THE ATTORNEYS FOR CAMILLUS NOTE THAT THE LANGUAGE OF 50 U.S.C. APPENDIX SEC. 2163A (F) (1) REFERRED TO IN THE THOMPSON CASE, QUOTED ABOVE, IS IDENTICAL TO THE PERTINENT LANGUAGE OF 15 U.S.C. SEC. 637 (B) (7) HERE INVOLVED.

IN OUR OPINION, THE HOLDING IN THE THOMPSON CASE, AND THE LANGUAGE USED BY THE COURT IN SUPPORT OF ITS HOLDING, IS NOT INCONSISTENT WITH THE DECISIONS OF THIS OFFICE ON THE QUESTION OF WHAT CONSTITUTES "CAPACITY AND CREDIT" OR ON THE EFFECT THAT A CERTIFICATE OF COMPETENCY AS TO CAPACITY AND CREDIT HAS UPON THE FUNCTION OF THE CONTRACTING OFFICER IN DETERMINING, FOR THE PURPOSE OF AWARD, THE RESPONSIBILITY OF A PARTICULAR BUSINESS CONCERN TO PERFORM A GOVERNMENT CONTRACT. WE HELD IN 37 COMP. GEN. 676 THAT A CERTIFICATE OF COMPETENCY IS FINAL WITH RESPECT TO THE CAPACITY OR CREDIT OF THE BIDDER AND IS NOT CONTROLLING WHERE A BIDDER IS DETERMINED NOT BE QUALIFIED FOR OTHER REASONS, SUCH AS LACK OF INTEGRITY; CONSISTENT RECORD OF DEFAULT UNDER PRIOR CONTRACTS; NOT A MANUFACTURER OR DEALER; OR DEBARMENT UNDER THE WALSH-HEARLEY OR DAVIS-BACON ACTS. IN 37 COMP. GEN. 798 WE STATED THAT THE CERTIFICATION OF A FIRM AS TO THE CAPACITY AND CREDIT BY THE SMALL BUSINESS ADMINISTRATION IS CONCLUSIVE ONLY INSOFAR AS IT CONFLICTS WITH A DETERMINATION BY A PROCUREMENT OFFICER AS TO THE "CAPACITY OR CREDIT" OF A BIDDER. BUT WHERE A BIDDER IS FOUND NOT TO BE QUALIFIED BECAUSE OF PRIOR UNSATISFACTORY CONTRACT PERFORMANCE, THE CERTIFICATE OF COMPETENCY, BEING LIMITED TO "CAPACITY AND CREDIT," COULD NOT BE DETERMINATIVE OF THE AWARD TO BE MADE. SEE, ALSO, 38 COMP. GEN. 289, AND ID. 864. IN THE LATTER DECISION WE STATED THAT THE TERM ,CAPACITY" IN SECTION 8 (B) (7) OF THE SMALL BUSINESS ACT OF 1958 REFERS TO THE OVER-ALL ABILITY OF A PROSPECTIVE SMALL BUSINESS CONTRACTOR TO MEET QUALITY, QUANTITY, AND TIME REQUIREMENTS OF A PROCUREMENT; AND THAT A CERTIFICATE OF COMPETENCY IS CONCLUSIVE UPON A PROCUREMENT AGENCY AS TO ELEMENTS OF RESPONSIBILITY RELATING TO THE CONTRACTOR'S ABILITY TO PERFORM, EXPERIENCE, ILL,"KNOW-HOW," TECHNICAL KNOWLEDGE, ET CETERA. SHOULD BE NOTED THAT THE PROVISIONS OF PARAGRAPH 1-705.6 (A), ASPR, ARE IN ACCORD WITH THE ABOVE DECISION AS TO WHAT IS COVERED BY THE TERM "CAPACITY.' THAT PARAGRAPH READS, IN PERTINENT PART, AS FOLLOWS: "/A) SBA HAS STATUTORY AUTHORITY TO CERTIFY THE COMPETENCY OF ANY SMALL BUSINESS CONCERN AS TO CAPACITY AND CREDIT. "CAPACITY" MEANS THE OVERALL ABILITY OF A PROSPECTIVE SMALL BUSINESS CONTRACTOR TO MEET QUALITY, QUANTITY, AND TIME REQUIREMENTS OF A PROPOSED CONTRACT AND INCLUDES ABILITY TO PERFORM, ORGANIZATION, EXPERIENCE, TECHNICAL KNOWLEDGE, SKILLS,"KNOW-HOW," TECHNICAL EQUIPMENT AND FACILITIES. * * *"

THE FACTS PRESENT IN THE THOMPSON CASE INDICATE THAT THE COURT'S HOLDING WAS BASED ON A PREVIOUS RECORD OF SERIOUS DELINQUENCIES IN CONTRACT PERFORMANCE BY THE CONTRACTOR WHO HELD THE CERTIFICATE OF COMPETENCY FROM THE SMALL DEFENSE PLANTS ADMINISTRATION. THE COURT INDICATES THAT THE DELINQUENCIES WERE NOT CAUSED BY THE CONTRACTOR'S LACK OF "CAPACITY" AS DEFINED BY THIS OFFICE AND PARAGRAPH 1-705.6 (A), ASPR, BUT BY A LACK OF PERSEVERANCE AND TENACITY. SEE, FOR EXAMPLE, THE COURT'S LANGUAGE APPEARING ON PAGES 282, 283:

"AT THE TIME THE DEFENDANT BID FOR AND ENTERED INTO THE CONTRACT, HE KNEW THAT HE WOULD NOT BE ABLE TO MANUFACTURE THE SHAFT ASSEMBLIES AND COMPLETE THEM FOR DELIVERY IN HIS SHOP IN PARKERSBURG, AND THAT HE WOULD REQUIRE THE SERVICES OF A SUBCONTRACTOR TO MACHINE AND BORE THE SHAFT FORGINGS. NOTWITHSTANDING THIS, THE DEFENDANT DID NOT UNDERTAKE TO EVEN ORDER THIS WORK FROM A SUBCONTRACTOR UNTIL AUGUST 12, 1949, MORE THAN FIVE MONTHS AFTER THE DATE OF THE CONTRACT AND ONLY SLIGHTLY MORE THAN ONE MONTH BEFORE THE FINISHED ARTICLE WAS TO BE DELIVERED UNDER THE TERMS OF THE CONTRACT. * * *

"UPON QUESTIONING BY THE COURT, THE DEFENDANT FRANKLY STATED THAT WHEN HE TOOK THE CONTRACT WITH THE BUREAU OF SHIPS HE KNEW THAT HE WOULD NOT BE ABLE TO PERFORM WITHIN THE ORIGINAL TIME LIMITS SPECIFIED IN THE CONTRACT, BUT WAS COUNTING ON EXTENSIONS, THE GRANTING OF WHICH THE DEFENDANT SEEMED TO REGARD AS A CUSTOMARY PRACTICE WITH THE GOVERNMENT OR, AT LEAST, WITH THE Y.'

WITH REGARD TO THE CONTENTIONS MADE BY THE ATTORNEYS FOR CAMILLUS AS TO THE SIGNIFICANCE OF THE WORD "AUTHORIZED" AS USED IN 15 U.S.C. SEC. 637 (B) (7), WE DO NOT BELIEVE THAT USE OF THIS WORD IN THE STATUTE DETRACTS FROM THE CONCLUSIVENESS OF THE CERTIFICATE OF COMPETENCY ON MATTERS OF CAPACITY AND CREDIT. WHILE THE LEGISLATIVE HISTORY OF THE SMALL BUSINESS ACT DOES NOT REVEAL THE SPECIFIC REASON FOR THE EMPLOYMENT OF THE WORD, IT IS CLEAR THAT ITS USE WAS NOT INTENDED TO QUALIFY OR LIMIT THE DUTY OF CONTRACTING OFFICERS TO ACCEPT THE CERTIFICATION OF COMPETENCY AS CONCLUSIVE ON MATTERS OF CAPACITY AND CREDIT. SEE THE TESTIMONY OF SENATOR JAMES E. MURRAY IN THE SENATE HEARINGS BEFORE THE COMMITTEE ON BANKING AND CURRENCY ON S.2250, 77TH CONGRESS, SECOND SESSION, WHICH IS SET FORTH IN 38 COMP. GEN. 864, 867. IT IS NOT UNREASONABLE TO ASSUME THAT THE DRAFTERS OF THE LEGISLATION RECOGNIZED THAT WERE THEY TO REQUIRE, RATHER THAN AUTHORIZE, AN AWARD OF A CONTRACT TO A CONCERN HOLDING A CERTIFICATE OF COMPETENCY, THE CONTRACTING OFFICER'S FREEDOM OF ACTION WOULD BE SERIOUSLY HAMPERED. SUPPOSE, FOR EXAMPLE, THAT AFTER A PROCUREMENT HAS BEEN ADVERTISED AND THE LOW BIDDER ACQUIRES A CERTIFICATE, THE PROCUREMENT AGENCY DECIDED TO CANCEL THE PROCUREMENT EITHER BECAUSE THE SUPPLIES WERE NO LONGER NEEDED OR BECAUSE OF SOME OTHER COGENT REASON NOT RELATED TO THE CAPACITY OR CREDIT OF THE LOW BIDDER. IF THE STATUTE REQUIRED AWARD TO BE MADE TO THE LOW BIDDER HOLDING THE CERTIFICATE, THERE MIGHT BE SOME QUESTION AS TO THE CONTRACTING OFFICER'S POWER TO CANCEL THE PROCUREMENT.

QUESTIONS OF CAPACITY AND CREDIT, AS DEFINED BY OUR DECISIONS AND PARAGRAPH 1-705.6 (A), ASPR, MAY, OR MAY NOT, BE RELATED TO QUESTIONS CONCERNING PAST UNSATISFACTORY PERFORMANCE. SEE 38 COMP. GEN. 289. CONTRACTING OFFICER IN EVALUATING PAST PERFORMANCE OF A SMALL BUSINESS FIRM PROPERLY COULD CONCLUDE THAT UNSATISFACTORY PERFORMANCE WAS ATTRIBUTABLE SOLELY TO LACK OF ABILITY, ORGANIZATION, EXPERIENCE, TECHNICAL KNOWLEDGE, SKILLS,"KNOW-HOW," TECHNICAL EQUIPMENT, AND FACILITIES--- IN SHORT A LACK OF "CAPACITY.' ON THE OTHER HAND, HE MIGHT CONCLUDE THAT UNSATISFACTORY PERFORMANCE WAS DUE SOLELY TO LACK OF PERSEVERANCE, TENACITY OR INTEGRITY. THESE LATTER THREE ELEMENTS ARE ETHICAL IN NATURE AND HAVE NO BEARING ON THE QUESTION OF THE CONTRACTOR'S PURELY PHYSICAL ABILITY TO PERFORM. AS POINTED OUT BY THE COURT IN THE THOMPSON CASE, THEY GO TO THE QUESTION OF WHETHER THE THE CONTRACTOR WILL PERFORM NOT TO THE QUESTION OF WHETHER HE CAN PERFORM. IF THE CONTRACTING OFFICER FINDS THAT PAST UNSATISFACTORY PERFORMANCE WAS DUE SOLELY TO LACK OF PERSEVERANCE, TENACITY OR INTEGRITY, A CERTIFICATE OF COMPETENCY ISSUED BY THE SMALL BUSINESS ADMINISTRATION HAS NO BEARING ON THESE MATTERS AND IS NOT CONCLUSIVE UPON THE CONTRACTING OFFICER. CONVERSELY, IF IT IS FOUND THAT PRIOR UNSATISFACTORY PERFORMANCE IS DUE TO A LACK OF CAPACITY AND CREDIT AS DEFINED BY OUR DECISIONS AND PARAGRAPH 1-705.6 (A), ASPR, A CERTIFICATE OF COMPETENCY ISSUED BY SBA WOULD BE CONCLUSIVE AND A CONTRACTING OFFICER WOULD NOT BE AUTHORIZED TO REJECT THE LOW BID OF A CERTIFIED CONCERN SOLELY BECAUSE HE MAY DISAGREE WITH SBA'S DETERMINATION ON THIS QUESTION.

IN THE PRESENT CASE THE CONTRACTING OFFICER DID NOT FIND THAT THE PAST UNSATISFACTORY PERFORMANCE OF COLUMBUS MILPAR WAS CAUSED BY A LACK OF TENACITY, PERSEVERANCE OR INTEGRITY. ON THE CONTRARY, HE STATES AFFIRMATIVELY THAT PAST UNSATISFACTORY PERFORMANCE WAS DUE TO LACK OF CAPACITY AS DEFINED IN PARAGRAPH 1-705.6 (A), ASPR.

WE HAVE BEEN ADVISED BY LETTER DATED MARCH 30, 1962, FROM THE GENERAL COUNSEL OF THE SMALL BUSINESS ADMINISTRATION THAT THE CERTIFICATE OF COMPETENCY ISSUED TO COLUMBUS MILPAR ON JANUARY 25, 1962, WAS REAFFIRMED BY THE ADMINISTRATION IN A TELEGRAM DATED MARCH 2, 1962. IT IS FURTHER STATED THAT THE ADMINISTRATION CONSIDERS THE CERTIFICATE TO BE CURRENT AND EFFECTIVE. IN VIEW OF THE CONCLUSIVE CHARACTER OF THE CERTIFICATE OF COMPETENCY UNDER SECTION 637 (B) (7), TITLE 15, U.S.C. WE CONCLUDE THAT THE PROPOSED AWARD TO COLUMBUS MILPAR AND MANUFACTURING COMPANY, INC., MAY NOT BE QUESTIONED ON THE GROUND THAT THE CORPORATION LACKS THE CAPACITY TO PERFORM THE CONTRACT.