In a recent decision, Hendry Corp., B-400224.2 (Comp. Gen. Aug. 25, 2008), the Government Accountability Office has concluded that an agency’s failure to consider information regarding the allegedly poor business practices of a contractor’s principal member during their association with a previous company does not constitute a ground to contest an agency’s finding of responsibility.
Hendry Corporation, an unsuccessful offeror, protested the award for a contract for the dry-dock repairs to a Coast Guard cutter issued by the Department of Homeland Security to the eventual awardee, RiverHawk Marine, LLC. More specifically, Hendry challenged the agency’s finding of responsibility because, among other reasons, as Hendy contends, during the course of their previous employment, principals of RiverHawk Marine took actions that resulted in the bankruptcy of that company and the company’s default on two Coast Guard contracts.
Addressing Hendry’s contentions, GAO dismissed the protest because it did not “establish a basis for [GAO’s] review of the agency’s responsibility determination.” As noted in its decision, GAO will review a challenge to an agency’s affirmative determination of responsibility “only where it is alleged that definitive responsibility criteria were not met or where the protest identifies evidence, raising serious concerns that, in reaching the responsibility determination, the contracting officer unreasonably failed to consider available relevant information or otherwise violation statute or regulation” and such information, “that by its nature, would be expected to have a strong bearing on whether the awardee should be found responsible”—i.e. proven criminal conduct but not allegation of poor financial or business performance. GAO has reviewed the protest based upon evidence of contractor fraud, criminal convictions of principals and improper financial practices; however, GAO will not review allegations concerning financial issues confronting contractors, i.e. cash on hand and declining net worth.
Applying its previous position on protest-challenged responsibility, GAO concluded that the allegation submitted by Hendry—mismanagement by principal members of the awardee at their previous company that resulted in bankruptcy and contract default—is “one that concerns poor financial or business performance, and thus is not the type that would meet the threshold showing for review of a challenge to an affirmative responsibility determination.”