TITLE:  E. F. Felt Company, Inc., B-289295, February 6, 2002
BNUMBER:  B-289295
DATE:  February 6, 2002
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Decision

Matter of: E. F. Felt Company, Inc.

File: B-289295

Date: February 6, 2002

Walter J. Malyszek, Esq., Malyszek & Malyszek, for the protester.

Warren D. Leishman, Esq., and Kenneth C. Kitzmiller, Esq., Department of the
Air Force, and John W. Klein, Esq., and Kenneth Dodds, Esq., Small Business
Administration, for the agencies.

Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

General Accounting Office will not review challenges to the Small Business
Administration's (SBA) decision not to issue a certificate of competency
unless there is a showing that the certificate of competency denial resulted
from possible bad faith on the part of a government official, or from a
failure to consider vital information because of how information was
presented to, or withheld from, the SBA by the procuring agency.

DECISION

E. F. Felt Company, Inc. protests the refusal of the Small Business
Administration (SBA) to issue a certificate of competency (COC) to Felt with
regard to its offer under request for proposals (RFP) No. F34601-01-R-40213,
issued by the
Department of the Air Force for the overhaul of 840 aircraft components.
The protest also alleges an organizational conflict of interest exists for a
competing offeror.

We dismiss the protest.

The Air Force issued the emergency RFP on July 17, 2001, with award to be
made to the acceptable, responsible offeror who proposed the lowest price.
The contracting officer requested a preaward survey on Felt from the Defense
Contract Management Agency-San Francisco (DCMA). DCMA found the firm's
financial resources to be satisfactory, although it otherwise recommended
that award not be made to Felt based on the following deficiencies: lack of
sufficient personnel or subcontracts to perform the contract work, lack of
evidence that material quotes had been received, lack of adequate testing
facilities, non-compliance with the RFP's safety requirements, and no
certified quality program in place. On October 1, based on the DCMA's
preaward survey, the contracting officer determined that Felt was not a
responsible prospective contractor for the solicited requirement and
referred the matter to the SBA pursuant to the COC procedures. The
contracting officer also informed Felt of the reasons for the
non-responsibility determination and the referral to the SBA.

Felt timely applied for a COC with the SBA. By letters of October 24 to Felt
and the Air Force, the SBA Area Director for Government Contracting declined
to issue a COC, finding that Felt would not have adequate working capital
available throughout the proposed term of the contract to successfully
perform. The area director based his decision on a letter from a potential
creditor to Felt that, though indicating an intent to enter into an
agreement to provide the firm a significant line of credit, explicitly
stated that the letter did not commit the creditor to do so; the creditor
would not approve the credit line prior to a review and documentation
process. See SBA Report, exh. E, Creditor's Letter of Intent to Felt. The
area director stated in his letter to Felt that assets pledged as collateral
for the proposed line of credit were already committed by the firm as
security for two other loans, one of which was an SBA loan. The area
director stated that he thus was not confident that the proposed line of
credit would be approved and, consequently, the SBA could not be assured
that Felt would satisfy the Air Force's contract requirements in a timely
manner. The letter stated that the decision was final and offered the firm
an opportunity to discuss with the SBA the reasons for the decision.

On October 25, Felt met with the area director, at which time it asserted
that the area director's finding was based on incorrect facts. Felt states
that it advised the area director that other, uncommitted assets had been
pledged for the credit line in question, and that Felt had provided
information to DCMA and other SBA officials demonstrating this fact, which
the area director had not considered. Protest at 8. Felt and the SBA's Area
Director disagree as to the substance and result of that meeting. Felt
states the following:

The SBA did not realize it had utilized incorrect information in making a
negative determination denying E. F. Felt a COC. However, when they did
learn such, an attempt was made the next day to request that the Contracting
Officer re-open the COC.

Protest at 10. SBA's Area Director states the following:

At no time either before or after my decision to deny a COC did I advise
[the contracting officer] or any representative from E. F. Felt Company that
we had made a "mistake" and that it needed to be corrected. In fact, I
clearly explained to the representatives from E. F. Felt Company during a 3
hour meeting on October 25, 2001 that even if the contracting officer would
reopen the COC case to allow E. F. Felt Company to submit new additional
information, there was no guarantee that SBA would issue a COC.

SBA Report, exh. B, Declaration of the Area Director, at 1. On October 26,
the area director contacted the contracting officer, stated that he was firm
in his belief that his decision to deny the COC was correct, and requested
that the contracting officer consider allowing Felt to provide her with new
information that could possibly demonstrate the necessary financial
resources to perform. Id. Soon thereafter, the contracting officer notified
Felt that the Air Force intended to award the contract to another offeror.
This protest followed.

The protester challenges the SBA's decision denying a COC for the firm,
alleging that the SBA acted in bad faith by willfully disregarding
significant facts, failed to follow the SBA's standard operating procedures,
and failed to consider vital information bearing on Felt's responsibility.
[1] The protester also alleges that the only other offeror in the
competitive range has an organizational conflict of interest that should
preclude that offeror from performing the contract requirements.

The Small Business Act, 15 U.S.C. sect. 637(b)(7) (2000), gives the SBA, not our
Office, the conclusive authority to review a contracting officer's
determination that a small business is not responsible. We therefore do not
review challenges to the SBA's decision not to issue a COC unless there is a
showing that the COC denial resulted from possible bad faith on the part of
a government official, or from a failure to consider vital information
because of how information was presented to, or withheld from, the SBA by
the procuring agency. 4 C.F.R. sect. 21.5(b)(2) (2001); Joanell Labs., Inc.,
B-242415.16, Mar. 5, 1993, 93-1 CPD para. 207 at 4-6.

To establish bad faith, a protester must present convincing evidence that
the officials involved had a specific and malicious intent to harm the firm.
Joa Quin Mfg. Corp., B-255298, Feb. 23, 1994, 94-1 CPD para. 140 at 6. The
burden of establishing bad faith is a heavy one. Evidence establishing a
possible defect in an agency's actions generally is not sufficient in itself
to establish that the agency acted in bad faith; the protester must also
present facts reasonably indicating, beyond mere inference and suspicion,
that the actions complained of were motivated by a specific and malicious
intent to harm the protester. See Vangard Indus., Inc., B-233490.2, Dec. 21,
1988, 88-2 CPD para. 615 at 2; David Boland, Inc., B-221845, May 23, 1986, 86-1
CPD para. 484 at 3.

Although it generally alleges "bad faith," Felt has not alleged or otherwise
presented facts showing that the SBA acted with intent to harm the firm.
Even assuming for the sake of argument that the area director did not
consider all the information presented to the SBA, or incorrectly
interpreted that information, Felt states that the area director was not
aware of this problem at the time he denied the protester's application for
a COC. The protester thus essentially concedes that the SBA acted without
intent to harm the firm. Also, since the protest does not provide a basis
for concluding that the SBA failed to consider vital information with the
intention of harming the firm, it fails to show that the SBA acted in bad
faith. See Marine Instrument Co., B-241287.2, May 6, 1991, 91-1 CPD para. 436 at
3. Thus, Felt has not made the requisite showing of possible bad faith on
the part of the SBA that would allow us to consider its protest.

Absent bad faith, Felt's allegation that the SBA did not consider vital
information does not otherwise provide a basis for reviewing a protest of
the SBA's decision not to issue a COC. To do so, the protester must show
that the SBA's failure to consider vital information is due to the
contracting agency's failure to adequately inform the SBA of the
information, not the SBA's alleged failure to consider vital information
presented to it. Joanell Labs., Inc., supra at 5. Here, since the protester
states that the Air Force properly provided all vital information to the
SBA, Protester's Comments at 5, the "vital information" exception does not
apply.

Felt also contends that the SBA did not follow applicable regulations in
considering and declining the COC. See Skillens Enters., B-202508.2, Dec.
15, 1981, 81-2 CPD para. 472 at 3. This contention is based on the alleged
failure of the SBA to follow its standard operating procedures (SOP)
regarding the processing of COCs. These procedures represent internal SBA
policies and guidelines that do not have the force and effect of law, and we
generally do not review the SBA's compliance with them. A.R.E. Mfg. Co.,
Inc., B-218116, May 17, 1985, 85-1 CPD para. 564 at 3. Moreover, evidence that
the SBA failed to follow its standard procedures does not establish that the
SBA acted with intent to harm a firm. Prospect Assocs., Ltd., B-218602,
June 17, 1985, 85-1 CPD para. 693 at 2.

In sum, the protester has not established the elements necessary for our
Office to consider a protest of SBA's decision not to issue a COC. We thus
have no basis to disturb the finding of nonresponsibility.

Since the protester was determined to be nonresponsible and not eligible for
award here, it is not an interested party eligible to maintain a protest of
an organizational conflict of interest of another offeror. 4 C.F.R.
sect. 21.0(a); see WesternWorld Servs., Inc., d/b/a The Video Tape Co.,
B-243808.3, Aug. 12, 1991, 91-2 CPD para. 182 at 3; Stemaco Prods., Inc.,
B-243206, Mar. 27, 1991, 91-1 CPD para. 333 at 3.

The protest is dismissed.

Anthony H. Gamboa
General Counsel

Notes

1. The protester initially alleged that the Air Force improperly failed to
re-open the COC process. The Air Force submitted a report responding fully
to this protest issue, stating that the protester has not identified any new
information for the agency to consider concerning the agency's
responsibility determination or the SBA's denial of the firm's COC
application, and thus there was nothing improper about the
Air Force's decision not to reconsider the matter. The protester did not
substantively reply to the Air Force's explanation and we consider this
protest allegation to be abandoned.