B-149139, JUL. 30, 1962

B-149139, JUL. 30, 1962

TO J. H. EMERSON COMPANY:

BY LETTER DATED JUNE 8, 1962, YOU PROTESTED AGAINST ANY AWARD THAT MIGHT BE MADE BY THE BUREAU OF SHIPS, DEPARTMENT OF THE NAVY, UNDER INVITATION FOR BIDS NO. 600-1238-62'S FOR UNDERWATER BREATHING APPARATUS.

INITIALLY, INVITATION NO. 600-743-62'S WAS ISSUED ON FEBRUARY 20, 1962, TO COVER THIS PROCUREMENT UNDER A JOINT DETERMINATION TO SET ASIDE THE PROCUREMENT FOR SMALL BUSINESS ONLY. MODIFICATION NO. 2 TO THE INVITATION CHANGED THE QUANTITY AND DELIVERY REQUIREMENTS OF THE INVITATION. SINCE IT WAS DETERMINED BY THE BUREAU THAT THE NEW DELIVERY SCHEDULE WAS IMPOSSIBLE OF FULFILLMENT BY ANY RESPONDING BIDDER, THIS INVITATION WAS CANCELED AFTER IT HAD BEEN OPENED ON MARCH 19, 1962. THEREAFTER, ON MAY 10, 1962, INVITATION NO. 600-1238-62'S WAS ISSUED UNDER A JOINT DETERMINATION TO SET ASIDE THE PROCUREMENT FOR SMALL BUSINESS. THE SAME SUPPLIES WERE REQUESTED BY THE INVITATION UNDER A REVISED DELIVERY SCHEDULE WHICH WAS ADMINISTRATIVELY DETERMINED TO BE MORE ADAPTABLE TO PERFORMANCE. AWARD WAS MADE TO THE SCOTT AVIATION CORPORATION ON JUNE 8, 1962, AS THE LOWEST RESPONSIVE BIDDER UNDER THE READVERTISEMENT. YOU WERE FULLY ADVISED AS TO THE ADMINISTRATIVE BASES FOR THE CANCELLATION AND READVERTISEMENT BY LETTER DATED JUNE 15, 1962, FROM THE DIRECTOR OF CONTRACTS, BUREAU OF SHIPS. SINCE WE FIND NO SUBSTANTIAL BASIS TO DISAGREE WITH THE ACTIONS TAKEN, WE SEE NO NECESSITY FOR DISCUSSING THIS PHASE OF THE PROTEST IN DETAIL. UNDER 10 U.S.C. 2305 (C), AS IMPLEMENTED BY ASPR 2-404.1, THE CONTRACTING AGENCY HAD AMPLE AUTHORITY TO REJECT ALL BIDS AND READVERTISE IN THE PUBLIC INTEREST. SINCE THE FIRST INVITATION WAS CLEARLY DEFECTIVE IN THAT THE DELIVERY SCHEDULES WERE NOT SUSCEPTIBLE OF TIMELY PERFORMANCE, WE CANNOT SAY THAT THE ACTIONS TAKEN WERE NOT IN THE PUBLIC INTEREST. FURTHER, IT HAS CONSISTENTLY BEEN HELD THAT AN INVITATION DOES NOT IMPORT ANY OBLIGATION TO ACCEPT ANY OF THE OFFERS RECEIVED AND ALL BIDS MAY BE REJECTED WHERE THAT ACTION IS DETERMINED TO BE IN THE PUBLIC 44 CT.CL. 524; COLORADO PAVING COMPANY V. MURPHY, 78 F. 28; 37 COMP. GEN. 760.

BY LETTER DATED JUNE 15, 1962--- OR SUBSEQUENT TO THE DATE OF AWARD TO SCOTT--- YOU RAISED THE QUESTION WHETHER SCOTT WAS A SMALL BUSINESS CONCERN ELIGIBLE TO RECEIVE AN AWARD UNDER THE INVITATION. YOUR LETTER IN THIS REGARD READS AS FOLLOWS:

"INFORMATION OBTAINED FROM OUR LOCAL BANK, DUNN AND BRADSTREET, AND PERSONS IN THE BUREAU OF SHIPS INDICATES THAT SCOTT AVIATION CORPORATION EMPLOYS 495 EMPLOYEES AND ITS SUBSIDIARY, WARD HYDRONICS, EMPLOYS 145, TO MAKE A TOTAL OF 640. THIS IS SUBSTANTIALLY OVER THE LIMIT FOR A ,SMALL BUSINESS" EVEN IN A DEPRESSED AREA. MOREOVER, THE SCOTT COMPANY IS REPORTED TO HAVE HAD GROSS SALES IN 1961 OF OVER $11,000,000 WITH APPROXIMATELY $6,000,000 IN BACK ORDERS.'

ASPR 1-703, PRESCRIBING THE PROCEDURES TO BE FOLLOWED IN DETERMINING SMALL BUSINESS SIZE STATUS, READS IN PERTINENT PART AS FOLLOWS:

"1-703 DETERMINATION OF STATUS AS SMALL BUSINESS CONCERN.

"/A) EXCEPT AS PROVIDED IN (B) BELOW, THE CONTRACTING OFFICER SHALL ACCEPT AT FACE VALUE (I) A SMALL BUSINESS CERTIFICATE (SEE 1-701.1 (E) ( THAT A BIDDER OR OFFEROR IS A SMALL BUSINESS CONCERN OR (II) A STATEMENT BY THE BIDDER OR OFFEROR THAT IT IS A SMALL BUSINESS CONCERN (SEE 1-701.1 AND 1-701.4).

"/B) SMALL BUSINESS CERTIFICATES AND STATEMENTS THAT A BIDDER OR OFFEROR IS A SMALL BUSINESS CONCERN SHALL BE EFFECTIVE, EVEN THOUGH QUESTIONED IN ACCORDANCE WITH THE TERMS OF THIS SUBPARAGRAPH (B), UNLESS THE SBA, IN RESPONSE TO SUCH QUESTION AND PURSUANT TO THE PROCEDURES IN (3) BELOW, DETERMINES THAT THE BIDDER OR OFFEROR IN QUESTION IS NOT A SMALL BUSINESS CONCERN. THE CONTROLLING POINT IN TIME FOR A DETERMINATION CONCERNING THE SIZE STATUS OF A QUESTIONED BIDDER OR OFFEROR SHALL BE THE DATE OF AWARD, EXCEPT THAT NO BIDDER OR OFFEROR SHALL BE ELIGIBLE FOR AWARD AS A SMALL BUSINESS CONCERN UNLESS HE HAS IN GOOD FAITH REPRESENTED HIMSELF AS SMALL BUSINESS PRIOR TO THE OPENING OF BIDS OR CLOSING DATE FOR SUBMISSION OF OFFERS (SEE 2-405 (II) WITH RESPECT TO MINOR INFORMALITIES AND IRREGULARITIES IN BIDS).

"/1) ANY BIDDER OR OFFEROR MAY, PRIOR TO AWARD, QUESTION THE SMALL BUSINESS STATUS OF THE APPARENTLY SUCCESSFUL BIDDER OR OFFEROR BY SENDING A WRITTEN PROTEST TO THE CONTRACTING OFFICER AND TO THE SBA REGIONAL OFFICE FOR THE REGION IN WHICH THE QUESTIONED BIDDER OR OFFEROR HAS HIS PRINCIPAL PLACE OF BUSINESS. SBA WILL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF THE DATE OF ITS RECEIPT OF ANY SUCH PROTEST AND WILL ADVISE THE QUESTIONED BIDDER OR OFFEROR THAT HIS SMALL BUSINESS STATUS IS UNDER REVIEW.

"/2) A CONTRACTING OFFICER MAY, PRIOR TO AWARD, QUESTION THE SMALL BUSINESS STATUS OF THE APPARENTLY SUCCESSFUL BIDDER OR OFFEROR BY SENDING A WRITTEN NOTICE TO THE SBA REGIONAL OFFICE FOR THE REGION IN WHICH THE BIDDER OR OFFEROR HAS HIS PRINCIPAL PLACE OF BUSINESS. SUCH NOTICE SHALL CONTAIN A STATEMENT OF THE BASIS FOR QUESTIONING AND OF AVAILABLE SUPPORTING FACTS. SBA WILL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF THE DATE SUCH NOTICE WAS RECEIVED AND WILL ADVISE THE BIDDER OR OFFEROR IN QUESTION THAT HIS SMALL BUSINESS STATUS IS UNDER REVIEW.

"/3) SBA WILL DETERMINE THE SMALL BUSINESS STATUS OF THE QUESTION BIDDER OR OFFEROR AND NOTIFY THE CONTRACTING OFFICER AND THE BIDDER OR OFFEROR OF ITS DECISION. IF THE SBA DETERMINATION IS NOT RECEIVED BY THE CONTRACTING OFFICER WITHIN TEN WORKING DAYS AFTER SBA'S RECEIPT OF THE PROTEST OR NOTICE QUESTIONING SMALL BUSINESS STATUS, IT SHALL BE PRESUMED THAT THE QUESTIONED BIDDER OR OFFEROR IS A SMALL BUSINESS CONCERN. THIS PRESUMPTION WILL NOT BE USED AS A BASIS FOR MAKING AN AWARD TO THE QUESTIONED BIDDER OR OFFEROR WITHOUT FIRST ASCERTAINING WHEN A SIZE DETERMINATION CAN BE EXPECTED FROM SBA AND, WHERE PRACTICABLE, WAITING FOR SUCH DETERMINATION, UNLESS FURTHER DELAY IN AWARD WOULD BE DISADVANTAGEOUS TO THE GOVERNMENT. PENDING SBA DETERMINATION OR EXPIRATION OF THE TEN-DAY PERIOD, WHICHEVER IS EARLIER, PROCUREMENT ACTION SHALL BE SUSPENDED; PROVIDED THAT SUCH TEN DAY SUSPENSION PERIOD SHALL NOT APPLY TO ANY URGENT PROCUREMENT ACTION WHICH, AS DETERMINED BY THE CONTRACTING OFFICER, MUST, IN ORDER TO PROTECT THE PUBLIC INTEREST, BE AWARDED WITHOUT DELAY AND AS TO WHICH HE INSERTS IN THE CONTRACT FILE A STATEMENT SIGNED BY HIM JUSTIFYING THIS DETERMINATION.

SMALL BUSINESS ADMINISTRATION (SBA) REGULATIONS DEALING WITH JOINT SET- ASIDES, PROMULGATED PURSUANT TO THE AUTHORITY CONFERRED UPON THE ADMINISTRATOR BY SECTION 5 OF THE SMALL BUSINESS ACT, 15 U.S.C. 634, ARE CONTAINED IN 13 C.F.R. 127.15. SECTION 127.15-2 (3) OF THESE REGULATIONS PROVIDES, IN PART, THAT IN A 100 PERCENT SET-ASIDE,"THE ENTIRE PROCUREMENT IS RESTRICTED TO SMALL BUSINESS CONCERNS AND BIDS OR QUOTATIONS BY LARGE FIRMS WILL BE REJECTED AS NONRESPONSIVE.' WITH REGARD TO SELF- CERTIFICATION, 13 C.F.R. 121.3-8 (D) PROVIDES THAT:

"/D) SELF CERTIFICATION BY A SMALL BUSINESS. IN THE SUBMISSION OF A BID OR PROPOSAL ON A GOVERNMENT PROCUREMENT, A CONCERN WHICH MEETS THE CRITERIA OF PARAGRAPH (A) OR (B) OF THIS SECTION, OR PARAGRAPH (B) (1) OF SEC. 121.3-7, MAY REPRESENT THAT IT IS A SMALL BUSINESS. IN THE ABSENCE OF A WRITTEN PROTEST OR OTHER INFORMATION WHICH WOULD CAUSE HIM TO QUESTION THE VERACITY OF THE SELF-CERTIFICATION, THE CONTRACTING OFFICER SHALL ACCEPT THE SELF-CERTIFICATION AT FACE VALUE FOR THE PARTICULAR PROCUREMENT INVOLVED.'

IN BOTH THE CANCELED AND THE READVERTISED INVITATIONS FOR BIDS, SCOTT REPRESENTED AND STATED THAT IT WAS A SMALL BUSINESS CONCERN BY VIRTUE OF BEING LOCATED IN AN AREA OF SUBSTANTIAL LABOR SURPLUS. SEE 13 C.F.R. 121.3-7 (B) WHICH PROVIDES THAT THE SMALL BUSINESS SIZE STANDARDS FOR A MANUFACTURING CONCERN ARE INCREASED BY 25 PERCENT (THAT IS, FROM 500 EMPLOYEES TO 625 EMPLOYEES) WHEN SUCH CONCERN AGREES TO PERFORM IN AN AREA OF SUBSTANTIAL LABOR SURPLUS. WE UNDERSTAND THAT LANCASTER, NEW YORK, THE LOCATION OF SCOTT, HAS BEEN CLASSIFIED BY THE DEPARTMENT OF LABOR, BUREAU OF EMPLOYMENT SECURITY, AS AN AREA OF SUBSTANTIAL LABOR SURPLUS.

AT THE TIME OF MAKING THE JOINT DETERMINATION TO SET THIS PROCUREMENT WHOLLY ASIDE FOR SMALL BUSINESS, THE RECORDS IN THE BUREAU OF SHIPS SHOWED THAT BOTH YOU AND SCOTT QUALIFIED AS SMALL BUSINESS CONCERNS. IT WAS ON THIS BASIS THAT THE REPRESENTATIVE OF THE SMALL BUSINESS ADMINISTRATION ASKED FOR, AND THE CONTRACTING OFFICER AGREED TO, THE SET-ASIDE. HAD YOU ALONE BEEN SMALL BUSINESS THERE WOULD HAVE BEEN NO BASIS FOR THE SET-ASIDE BECAUSE, APART FROM SCOTT, YOU ARE THE ONLY KNOWN SMALL BUSINESS SOURCE FOR THE SUPPLIES INVOLVED. ASPR 1 706.5 PROVIDES, IN SUBSTANCE, THAT TOTAL SET-ASIDES SHALL NOT BE MADE UNLESS A REASONABLE EXPECTATION EXISTS THAT BIDS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS TO THAT AWARD WILL BE MADE AT A REASONABLE PRICE. SUCH EXPECTATION EXISTED ONLY ON THE BASIS THAT BOTH YOU AND SCOTT WERE SMALL; OTHERWISE, THE SET-ASIDE WOULD HAVE BEEN CLEARLY IMPROPER. SEE 40 COMP. GEN. 489.

YOU DID NOT QUESTION THE SMALL BUSINESS SIZE STATUS OF SCOTT UNTIL AFTER AWARD HAD BEEN MADE TO THAT COMPANY. WHEN YOU DID RAISE THE QUESTION, THE BUREAU OF SHIPS REQUESTED AND OBTAINED THE FOLLOWING ADVICE ON JUNE 21, 1962, FROM SBA ON THE SIZE DETERMINATION OF SCOTT.

"SCOTT AVIATION CORP LANCASTER NY WITH AFFILIATE WARD HYDRONICS INC ALDEN NY AVERAGED 662 EMPLOYEES FOR THE PRECEDING FOUR QUARTERS HENCE DOES NOT REPEAT NOT QUALIFY AS SMALL BUSINESS FOR UNDERWATER EQUIPMENT PROCUREMENTS E J FINN DIRECTOR CONTRACTS ADMINISTRATION OF THIS COMPANY WAS SO ADVISED BY LETTER JUNE 1 1962 * * *"

SINCE AWARD OF THE CONTRACT TO SCOTT WAS MADE ON THE BASIS OF ITS CERTIFICATION THAT IT WAS A SMALL BUSINESS CONCERN BY VIRTUE OF ITS LOCATION IN AN AREA OF SUBSTANTIAL LABOR SURPLUS, THE PRIMARY QUESTION FOR CONSIDERATION IS WHETHER THE DETERMINATION MADE AFTER AWARD THAT SCOTT DID NOT "QUALIFY AS SMALL BUSINESS FOR UNDERWATER EQUIPMENT PROCUREMENTS" PRIOR TO AWARD RENDERED THE RESULTING CONTRACT ILLEGAL.

UNDER THE REGULATIONS QUOTED ABOVE, A CONTRACTING OFFICER IS REQUIRED TO ACCEPT A SMALL BUSINESS SELF-CERTIFICATION AT FACE VALUE IN THE ABSENCE OF A TIMELY WRITTEN PROTEST BY OTHER INTERESTED BIDDERS. IT IS CLEAR FROM THE RECORD BEFORE US THAT THE SELF-CERTIFICATION OF SCOTT WAS IN FULL FORCE ON THE DATE OF AWARD. WHILE THE JUNE 21 TELEGRAM FROM SBA TO THE BUREAU OF SHIPS STATED THAT SCOTT WAS ADVISED BY LETTER OF JUNE 1 THAT IT DID NOT QUALIFY AS SMALL BUSINESS, THE BUREAU WAS NOT SIMILARLY ADVISED UNTIL AFTER THE DATE OF AWARD. WE HAVE NO INFORMATION AS TO WHETHER THE JUNE 1 LETTER WAS RECEIVED BY SCOTT IN SUFFICIENT TIME FOR IT TO GRATUITOUSLY ADVISE THE CONTRACTING OFFICER-- PRIOR TO JUNE 8--- OF THE SBA SIZE DETERMINATION. UNDER ASPR 1-703 (B), THE CONTROLLING POINT IN TIME FOR A DETERMINATION OF SIZE STATUS IS THE DATE OF ARD,"EXCEPT THAT NO BIDDER * * * SHALL BE ELIGIBLE FOR AWARD AS A SMALL BUSINESS CONCERN UNLESS HE HAS IN GOOD FAITH REPRESENTED HIMSELF AS SMALL BUSINESS PRIOR TO THE OPENING OF BIDS.' CLEARLY, ON THE DATE INVITATION NO. 600-1238-62'S WAS OPENED (MAY 22, 1962) SCOTT'S SELF-CERTIFICATION MUST BE CONSIDERED AS HAVING BEEN MADE IN GOOD FAITH, AND IT IS ENTIRELY PROBABLE THAT SUCH GOOD FAITH CARRIED OVER TO THE DATE OF AWARD IN THE ABSENCE OF ANY EVIDENCE THAT SCOTT COULD HAVE TAKEN SOME TIMELY, POSITIVE STEPS TO CORRECT ITS SIZE STATUS CERTIFICATION. WE KNOW OF NO AFFIRMATIVE REQUIREMENT IN THE ASPR OR IN THE SBA REGULATIONS RESPECTING SIZE STATUS DETERMINATIONS THAT A SELF-CERTIFIED BIDDER MUST UNILATERALLY APPRISE THE CONTRACTING OFFICER OF A CHANGE IN HIS SIZE STATUS DETERMINED AFTER BID OPENING. IN THE CASE HERE, SCOTT WAS ENTITLED TO HAVE THE JUNE 1 SIZE STATUS DETERMINATION RECONSIDERED BY THE DIRECTOR, OFFICE OF SMALL BUSINESS SIZE STANDARDS, SBA, UNDER 13 C.F.R. 121.3-4 (D), OR BY THE SIZE APPEALS BOARD, SBA, UNDER 13 C.F.R. 121.3-6. WE THUS BELIEVE THAT THE JUNE 1 SIZE STATUS DETERMINATION WAS NOT OF SUCH FINALITY AS WOULD AFFECT THE BONA FIDES OF SCOTT'S SELF-CERTIFICATION AT THE DATE OF AWARD.

IN VIEW THEREOF, WE CANNOT CONCLUDE THAT SCOTT WAS LACKING IN GOOD FAITH WHEN IT CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN BASED UPON ITS BEING LOCATED IN A SUBSTANTIAL LABOR SURPLUS AREA, THAT IS, A FIRM EMPLOYING NOT OVER 625 EMPLOYEES. IN THIS CONNECTION, WE NOTE THAT SCOTT REPRESENTED THAT IT WAS NOT A SMALL BUSINESS CONCERN IN SUBMITTING A PROPOSAL UNDER P.R. 622A-21640 (S) WHICH HAD A CLOSING DATE OF JULY 2, 1962, AND UNDER WHICH YOU RECEIVED AN AWARD ON JULY 11, 1962. IN THE ABSENCE OF A PROTEST PRIOR TO AWARD FROM OTHER BIDDERS WHO WERE INTERESTED IN THE PROCUREMENT, A CONTRACT AWARDED IN GOOD FAITH ON THE BASIS OF A BIDDER'S STATEMENT THAT IT IS A SMALL BUSINESS CONCERN IS NOT VOID AB INITIO BUT IS VOIDABLE ONLY AT THE OPTION OF THE GOVERNMENT. B-137689, JANUARY 21, 1959. ACCORDINGLY, WE MUST CONCLUDE THAT NO LEGAL BASIS EXISTS FOR OBJECTING TO THE AWARD AS MADE, AND YOUR PROTEST IS DENIED.