B-175609, JUN 27, 1972

B-175609, JUN 27, 1972

BID PROTEST - SBA SECTION 8(A) PROGRAM - SUBCONTRACTOR RESPONSIBILITY DECISION DENYING THE PROTEST OF FORTEC CONSTRUCTORS AGAINST THE PROPOSED AWARD OF A CONTRACT TO THE SMALL BUSINESS ADMINISTRATION, PURSUANT TO ITS SECTION 8(A) PROGRAM, 15 U.S.C. 637(A), UNDER AN IFB ISSUED BY THE FEDERAL AVIATION ADMINISTRATION. IN VIEW OF CONFLICTING COURT DECISIONS, GAO MUST DECLINE TO RULE ON PROTESTS QUESTIONING THE LEGALITY OF THE 8(A) PROGRAM UNTIL THE CASES UNDER APPEAL HAVE BEEN FINALLY LITIGATED. WITH REGARD TO THE RESPONSIBILITY OF SBA'S PROPOSED SUBCONTRACTOR, GAO WILL NOT DISTURB THE AGENCY'S DETERMINATION ABSENT A SHOWING OF ARBITRARY OR CAPRICIOUS ACTION. IN VIEW OF THE FOREGOING, AND SINCE BOTH SBA AND FAA HAVE FOUND THE CAPITAL CITY CONSTRUCTION COMPANY TO BE A RESPONSIBLE CONTRACTOR, THE PROTEST IS DENIED.

TO SADUR, PELLAND & BRAUDE:

REFERENCE IS MADE TO YOUR LETTER OF MAY 3, 1972, IN SUPPORT OF FORTEC CONSTRUCTORS' PROTEST AGAINST THE PROPOSED AWARD OF A CONTRACT TO THE SMALL BUSINESS ADMINISTRATION (SBA) UNDER IFB NO. WE00-2-0607, ISSUED BY THE FEDERAL AVIATION ADMINISTRATION, UNITED STATES DEPARTMENT OF TRANSPORTATION, FOR THE EXPANSION AND MODERNIZATION OF THE AIR ROUTE TRAFFIC CONTROL CENTER, LONGMONT, COLORADO. THE PROPOSED AWARD IS UNDER THE SBA'S SECTION 8(A) PROGRAM, 15 U.S.C. 637(A), AND IMPLEMENTING REGULATIONS ADOPTED BY THE SBA, 13 CFR 124.8-1, ET. SEQ.

FORTEC CONTENDS THAT THE INSTANT METHOD OF PROCUREMENT IS CONTRARY TO ESTABLISHED LAW, CITING RAY BAILLIE TRASH HAULING V. KLEPPE, 334 F. SUPP. 194 (D.C. FLA; 1971).

WHILE THE CITED DISTRICT COURT CASE DID FIND THAT THE 8(A) PROGRAM WAS ILLEGAL THAT DECISION HAS BEEN APPEALED TO THE FIFTH CIRCUIT COURT OF APPEALS. THIS LEGAL QUESTION HAS BEEN THE SUBJECT OF CONFLICTING DISTRICT COURT OPINIONS. IN PACIFIC COAST UTILITIES SERVICE V. LAIRD, CIVIL NO. 71 -1035LHB (D.C.N.D. CALIF; JUNE 15, 1971) A PRELIMINARY INJUNCTION WAS ISSUED AGAINST THE GOVERNMENT, WHICH DECISION HAS BEEN APPEALED TO THE TENTH CIRCUIT COURT OF APPEALS. ON THE OTHER HAND, IN KLEEN-RITE JANITORIAL SERVICES, INC. V. LAIRD, CIVIL NO. 71-1968W (D.C. MASS; SEPT. 21, 1971) THE COURT SUPPORTED THE SECTION 8(A) PROCUREMENT AND UPHELD THE VALIDITY OF THE STATUTE. THIS DECISION WAS NOT APPEALED.

IN VIEW OF THE CONFLICTING COURT DECISIONS, OUR CURRENT POSITION IS THAT WE WILL NOT RULE ON PROTESTS QUESTIONING THE LEGALITY OF THE 8(A) PROGRAM UNTIL THE CASES UNDER APPEAL HAVE BEEN FINALLY LITIGATED. ACCORDINGLY, WE MUST DECLINE TO CONSIDER THIS ASPECT OF THE PROTEST AT THIS TIME.

CONCERNING YOUR REQUEST THAT SBA BE REQUIRED TO EXPLAIN IN DETAIL HOW ITS PROPOSED SUBCONTRACTOR, CAPITAL CITY CONSTRUCTION CO. (CCC), HAS THE NECESSARY QUALIFICATIONS AND RESPONSIBILITY TO PERFORM A CONSTRUCTION CONTRACT OF SUCH MAGNITUDE ($2,621,000) AND COMPLEXITY AND AT THE SAME TIME ALSO MEET THE CRITERIA OF BEING "ECONOMICALLY DISADVANTAGED," THERE IS NOTHING IN THE RECORD WHICH WOULD INDICATE THAT CCC HAS BEEN DESIGNATED "ECONOMICALLY DISADVANTAGED," AS OPPOSED TO "SOCIALLY DISADVANTAGED."

REGARDLESS OF WHICH DESIGNATION IS MADE WE DO NOT THINK THAT THE MERE FACT AN INDIVIDUAL IS DISADVANTAGED, FROM EITHER A SOCIAL OR ECONOMIC VIEW POINT, NECESSARILY PRECLUDES HIM FROM BEING ABLE TO MEET THE REQUIREMENTS OF A PROSPECTIVE RESPONSIBLE CONTRACTOR. ESPECIALLY IS THIS THE CASE UNDER A CONSTRUCTION CONTRACT WHERE A SUBSTANTIAL PORTION OF THE WORK TO BE PERFORMED WILL BE SUBCONTRACTED TO SPECIALTY FIRMS. IN ANY EVENT, THE SBA REGULATIONS MAKE NO DISTINCTION BETWEEN THE TWO CATEGORIES AND, PURSUANT TO 15 U.S.C. 637(A)(1), SBA IS AUTHORIZED TO ENTER INTO CONTRACTS WITH ANY GOVERNMENT AGENCY WITH PROCUREMENT POWERS AND THE PROCURING OFFICER IS AUTHORIZED TO LET THE CONTRACT TO SBA UNDER SUCH TERMS AND CONDITIONS AS MAY BE AGREED UPON BETWEEN SBA AND THE PROCURING ACTIVITY.

13 CFR 124.8-2 SETS FORTH THE PROCEDURE FOR SBA'S DETERMINATION OF THE COMPETENCY OF A POTENTIAL SUBCONTRACTOR, BE HE SOCIALLY OR ECONOMICALLY DISADVANTAGED. UPON THE REQUEST OF THE PROCURING ACTIVITY SBA WILL CERTIFY THAT THE ADMINISTRATION, THROUGH ITS PROPOSED SUBCONTRACTOR, IS COMPETENT TO PERFORM THE CONTRACT. THIS CERTIFICATION IS MUCH BROADER IN SCOPE THAN THE CERTIFICATE OF COMPETENCY PROCEDURES WHICH GO ONLY TO THE QUESTION OF THE POTENTIAL CONTRACTOR'S CAPACITY OR CREDIT. IN THIS REGARD, IT IS NOTED THAT FAA AS WELL AS SBA HAVE FOUND CCC TO BE A RESPONSIBLE CONTRACTOR, AND HAVE RECOMMENDED AWARD TO THAT FIRM.

YOUR QUESTION RELATES TO THE RESPONSIBILITY OF CCC, THE DETERMINATION OF WHICH MUST REST WITH THE AGENCIES INVOLVED AND NOT WITH OUR OFFICE IN THE FIRST INSTANCE. ABSENT A SHOWING OF ARBITRARY OR CAPRICIOUS ACTION BY THE DECIDING OFFICIALS), OUR OFFICE WILL NOT OVERTURN SUCH A DETERMINATION. THERE HAS BEEN NO SUCH SHOWING IN THE PRESENT RECORD.