B-157581, NOV. 22, 1965

B-157581, NOV. 22, 1965

TO MR. MAX ISSACSON, PRESIDENT:

FURTHER REFERENCE IS MADE TO YOUR LETTERS OF AUGUST 26, SEPTEMBER 9 AND OCTOBER 29, 1965, PROTESTING AN AWARD TO ANY OTHER BIDDER UNDER INVITATION FOR BIDS NO. AMC/T/23-204-65-319 UNTIL NEGOTIATIONS WITH SMALL BUSINESS BIDDERS ARE CONCLUDED OR IN THE ALTERNATIVE THAT THE INVITATION BE CANCELED AND REISSUED WITH RECOGNITION OF SMALL BUSINESS.

THE INVITATION AS ISSUED JULY 6, 1965, REQUESTED BIDS FOR A DEFINITE QUANTITY OF 2,685 AND A REQUIREMENTS QUANTITY ESTIMATED AT 3,312 OF TACHOMETER GENERATORS, GEU-7/A MINIATURE. BY AMENDMENT NO. 1 DATED JULY 30, 1965, THE DEFINITE QUANTITY WAS INCREASED TO 5,432 AND THE ESTIMATED REQUIREMENTS QUANTITY TO 4,830.

THE ITEM IS A QUALIFIED PRODUCTS LIST (QPL) ITEM AND THE SOLICITATION REQUIRED QUALIFICATION APPROVAL PRIOR TO BID OPENING DATE. THE QUALIFIED SUPPLIERS FOR THIS ITEM WERE GENERAL ELECTRIC COMPANY, LEAR SIEGLER, INCORPORATED (POWER EQUIPMENT DIVISION), BILL JACK INDUSTRIES AND YOUR COMPANY. BY LETTERS DATED AUGUST 10 AND 12, 1965, THE ACTIVITY RESPONSIBLE FOR THE LIST, THE UNITED STATES AIR FORCE, APPROVED THE TRANSFER OF QUALIFICATION APPROVAL OF LEAR SIEGLER, INCORPORATED (POWER EQUIPMENT DIVISION), TO AIRCRAFT APPLIANCES AND EQUIPMENT, LTD., A CANADIAN FIRM, AND THE TRANSFER OF APPROVAL OF BILL JACK INDUSTRIES TO TASK CORPORATION, A CALIFORNIA FIRM. FOR ALL PRACTICAL PURPOSES THE LATTER FIRMS ARE DEEMED TO SATISFY THE QPL REQUIREMENTS FOR THE ITEM.

BY BID OPENING DATE OF AUGUST 12, 1965, FOUR BIDS WERE RECEIVED, WITH ALL BIDDERS OFFERING ONE PRICE FOR THE FIXED AND REQUIREMENTS QUANTITIES, AS FOLLOWS:

TABLE

CANADIAN COMMERCIAL CORPORATION

(AIRCRAFT APPLIANCES AND EQUIPMENT, LTD.) $22.90

GENERAL ELECTRIC COMPANY 23.23

GLOBE INDUSTRIES, INCORPORATED 23.75

TASK CORPORATION 38.80

THE FIRMS SUBMITTING THE HIGHEST BIDS ARE SMALL BUSINESS CONCERNS WHILE THE TWO LOWEST BIDS WERE RECEIVED FROM LARGE BUSINESS CONCERNS.

YOUR COMPANY, BY ITS WIRE DATED AUGUST 23, 1965, TO THE CONTRACTING OFFICER, AND BY LETTER TO THIS OFFICE DATED AUGUST 26, 1965, PROTESTED AWARD TO ANY OTHER BIDDER, UNTIL NEGOTIATIONS WITH THOSE QUALIFIED SMALL BUSINESS BIDDERS WERE CONCLUDED. YOUR PROTEST SHOWED THAT IT WAS BASED UPON TWO PREMISES, THAT THE SOLICITATION SHOULD HAVE BEEN A SMALL BUSINESS SET-ASIDE AND THAT THE SMALL BUSINESS SIZE STANDARD FOR THE ITEM SHOULD HAVE BEEN 1,000 RATHER THAN 500 EMPLOYEES. YOUR CONTENTION WAS THAT, BY INCLUSION OF PARAGRAPH 16 (DEFINITION OF SMALL BUSINESS) AND PARAGRAPH 17 (SMALL BUSINESS SIZE STANDARD) OF THE ADDITIONAL INSTRUCTIONS AND CONDITIONS OF THE SOLICITATION, IT WAS INDICATED THE GOVERNMENT INTENDED TO MAKE THE PROPOSED PROCUREMENT A SMALL BUSINESS SET-ASIDE. YOU FURTHER CONTENDED THAT THE SMALL BUSINESS STANDARD OF 500 ARBITRARILY EXCLUDED YOUR COMPANY FROM CONSIDERATION AS A SMALL BUSINESS AND A COPY OF A LETTER FROM THE SMALL BUSINESS ADMINISTRATION (SBA) WAS ADDED TO YOUR PROTEST FILE STATING THAT THE SMALL BUSINESS STANDARD FOR STANDARD INDUSTRIAL CLASSIFICATION (SIC) 3621 WAS 1,000 EMPLOYEES. A LETTER WAS WRITTEN TO YOU ON SEPTEMBER 2, 1965, BY THE CONTRACTING OFFICER EXPLAINING THAT THE PROCUREMENT WAS NOT A SMALL BUSINESS SET-ASIDE AND THAT THEREFORE NEGOTIATIONS WITH SMALL BUSINESS CONCERNS WERE NOT AUTHORIZED. IT WAS FURTHER EXPLAINED THAT INCLUSION OF PARAGRAPHS 16 AND 17 OF THE ADDITIONAL INSTRUCTIONS AND CONDITIONS OF THE SOLICITATION WAS NOT INDICATIVE OF SMALL BUSINESS RESTRICTED ADVERTISING. RATHER, THE PARAGRAPHS WERE INCLUDED FOR THE PURPOSE OF DETERMINING PRIORITIES IN THE EVENT EQUAL LOW BIDS WERE RECEIVED AND THE PROVISIONS OF ARMED SERVICES PROCUREMENT REGULATION (ASPR) 2-407.6 HAD TO BE FOLLOWED. IT WAS FURTHER STATED THAT ASPR 1-703/B) (5) PROVIDES THAT THE DETERMINATION OF THE SMALL BUSINESS SIZE STANDARD SHALL BE MADE BY THE CONTRACTING OFFICER AND HIS DETERMINATION SHALL BE FINAL UNLESS APPEALED IN ACCORDANCE WITH ASPR 1-703 (B) (6) AND THAT SUCH APPEAL HAD TO BE MADE PRIOR TO BID OPENING.

UPON REQUEST TO HEADQUARTERS, ARMY MATERIEL COMMAND, APPROVAL WAS RECEIVED BY THE CONSTRUCTING OFFICER ON SEPTEMBER 7, 1965, TO AWARD A CONTRACT FOR ITEM 1 OF THE SOLICITATION, OR 4,907 UNITS, BASED ON THE URGENT REQUIREMENT FOR THIS QUANTITY OF THE ITEMS WHICH IS TO BE UTILIZED AS GOVERNMENT-FURNISHED MATERIAL IN THE FISCAL YEAR 1966 PRODUCTION OF UH- 1 AIRCRAFT. AWARD IS SAID TO BE PENDING RECEIPT OF A FAVORABLE PREAWARD SURVEY AND OTHER REQUIRED CLEARANCES, TO THE LOWEST, RESPONSIVE, RESPONSIBLE BIDDER.

THE PROTEST IS SHOWN, REGARDLESS OF THE SEVERAL POINTS RAISED BY YOUR LETTERS, TO HAVE RESOLVED ITSELF INTO A BASIC QUESTION OF THE ARMY'S RIGHT TO HAVE ISSUED AN INVITATION FOR THE PROCUREMENT WHICH WAS NEITHER A TOTAL NOR A PARTIAL SET-ASIDE FOR SMALL BUSINESS. PRELIMINARY TO THIS QUESTION, HOWEVER, THE EFFECT OF THE CONTRACTING OFFICER'S APPARENT ERROR IN DEFINING THE SMALL BUSINESS SIZE STANDARD APPLICABLE TO THE ITEM MUST BE CONSIDERED.

IT IS ADMINISTRATIVELY REPORTED THAT FOR PURPOSES OF THIS PROCUREMENT THE CONTRACTING OFFICER DEFINED SMALL BUSINESS AS A CONCERN HAVING 500 EMPLOYEES OR LESS BASED UPON HIS DETERMINATION THAT THE ITEM IN QUESTION CAME UNDER SECTION 3611 OF THE SIC MANUAL (1957 EDITION) FOR WHICH THE APPLICABLE SIZE STANDARD IS 500 EMPLOYEES AND NOT SECTION 3621, FOR WHICH THE APPLICABLE SIZE STANDARD IS 1,000 EMPLOYEES. THIS DETERMINATION WAS MADE BY THE CONTRACTING OFFICER PURSUANT TO THE AUTHORITY CONTAINED IN ASPR 1-703 (B) (5) AND IT IS NOTED THAT NO APPEAL FROM SUCH DETERMINATION WAS MADE WITHIN THE PERIOD PRESCRIBED BY ASPR 1-703 (B) (6). NOTWITHSTANDING THE ABOVE, THE MATTER IS REPORTED TO HAVE BEEN REFERRED TO THE SBA THROUGH ITS ST. LOUIS, MISSOURI, REPRESENTATIVE FOR A FINAL DETERMINATION OF THE SMALL BUSINESS SIZE STANDARD WHICH SHALL BE APPLICABLE TO FUTURE PROCUREMENTS OF THE ITEM, RECOGNIZING THE FINAL AND EXCLUSIVE AUTHORITY OF THAT AGENCY TO DECLARE SIZE STANDARDS TO BE USED IN THE DEFINITION OF SMALL BUSINESS CONCERNS FOR VARIOUS INDUSTRIES. U.S.C. 637 (B) (6). ASSUMING THAT THE APPLICABLE SIZE STANDARD FOR THE ITEM IS 1,000 EMPLOYEES, THIS FACT DOES NOT OFFSET THE GOOD-FAITH DETERMINATION MADE BY THE CONTRACTING OFFICER NOR DOES IT SUPPORT THE PROTEST, NO TIMELY OBJECTION HAVING BEEN MADE ON THIS ISSUE, ON THE VALIDITY OF THE PRIMARY ISSUE TO BE CONSIDERED, THAT IS, WHETHER THE CONTRACTING OFFICER IMPROPERLY FAILED TO MAKE A SMALL BUSINESS SET ASIDE FOR THIS PROCUREMENT.

ASPR 1-706.5 (A) (1) PROVIDES AS FOLLOWS:

"SUBJECT TO ANY APPLICABLE PREFERENCE FOR LABOR SURPLUS AREA SET ASIDES AS PROVIDED IN 1-803 (A) (II), THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR A CLASS OF PROCUREMENTS, INCLUDING BUT NOT LIMITED TO CONTRACTS FOR MAINTENANCE, REPAIR, AND CONSTRUCTION, SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION (SEE 1-701.1) IF THE CONTRACTING OFFICER DETERMINES THAT THERE IS REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. TOTAL SET-ASIDES SHALL BE MADE UNLESS SUCH A REASONABLE EXPECTATION EXISTS. (BUT SEE 1-706.6 AS TO PARTIAL SET ASIDES.) ALTHOUGH PAST PROCUREMENT HISTORY OF THE ITEM OR SIMILAR ITEMS IS ALWAYS IMPORTANT, IT IS NOT THE ONLY FACTOR WHICH SHOULD BE CONSIDERED IN DETERMINING WHETHER A REASONABLE EXPECTATION EXISTS.'

ASPR 1-706.6 PROVIDES IN PERTINENT PART AS FOLLOWS:

"/A) SUBJECT TO ANY APPLICABLE PREFERENCE FOR LABOR SURPLUS AREA SET- ASIDES AS PROVIDED IN 1-803 (A) (II), A PORTION OF A PROCUREMENT, NOT INCLUDING CONSTRUCTION, SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION (SEE 1-706.1) WHERE:

"/II) THE PROCUREMENT IS SEVERABLE INTO TWO OR MORE ECONOMIC PRODUCTION RUNS OR REASONABLE LOTS (SEE 1-804.1 (A) (2) (I/-/V); * * *"

IT IS A LONG-RECOGNIZED POLICY OF THE DEPARTMENT OF DEFENSE THAT A FAIR PROPORTION OF THE DEPARTMENT'S TOTAL PURCHASES OF SUPPLIES AND SERVICES BE PLACED WITH SMALL BUSINESS CONCERNS, WHICH IS IN KEEPING WITH THE NATIONAL POLICY AND THE SMALL BUSINESS ACT (15 U.S.C. 631 ET SEQ.) AS IMPLEMENTED BY ASPR 1-706.5 (A) (1), ABOVE. THE DECISION AS TO WHETHER A PROCUREMENT SHOULD BE SET ASIDE IN WHOLE OR IN PART FOR SMALL BUSINESS CONCERNS IS WITHIN THE PROVINCE OF THE ADMINISTRATIVE AGENCY. SEE ASPR 1-706.1 (A), REVISION, 12, AUGUST 1, 1965. NEITHER THE PROVISIONS CONTAINED IN PART 7 OF SECTION 1 OF ASPR NOR THE PROVISIONS OF THE SMALL BUSINESS ACT MAKE IT MANDATORY THAT THERE BE SET ASIDE FOR SMALL BUSINESS ANY PARTICULAR PROCUREMENT. MOREOVER, WE FEEL THAT YOUR COMPANY WAS NOT PREJUDICED BECAUSE THERE WAS NOT SET ASIDE FOR SMALL BUSINESS SINCE YOUR COMPANY WAS ON THE QPL AND HAD AMPLE OPPORTUNITY TO OBTAIN AN AWARD HAD YOU BID SUFFICIENTLY LOW AND OTHERWISE MET THE REQUIREMENTS. REGARDING THE ADMINISTRATIVE ACTION TAKEN IN THE CIRCUMSTANCES, THE ITEM FOR WHICH BIDS WERE SOLICITED IS A QUALIFIED PRODUCT AND, CONSEQUENTLY, SOURCES OF SUPPLY WERE NECESSARILY RESTRICTED. IT APPEARS THAT AT THE TIME OF ISSUANCE OF THE SOLICITATION, THE CONTRACTING OFFICER CONCLUDED IN GOOD FAITH THAT THERE WERE THREE LARGE BUSINESS CONCERNS AND ONE SMALL BUSINESS CONCERN ON THE QPL. IN VIEW OF THESE CIRCUMSTANCES THE CONTRACTING OFFICER HAD VALID AND SUFFICIENT GROUNDS TO SUPPORT HIS DETERMINATION THAT THERE WAS NO REASONABLE EXPECTATION THAT BIDS COULD BE OBTAINED FROM A SUFFICIENT NUMBER OF SMALL BUSINESS CONCERNS SO THAT AWARD COULD BE MADE AT REASONABLE PRICES. THIS DETERMINATION CONSEQUENTLY ELIMINATED THE POSSIBILITY OF A TOTAL SMALL BUSINESS SET-ASIDE IN ACCORDANCE WITH INSTRUCTIONS CONTAINED IN ASPR 1-706.5 (A) (1).

REGARDING THE POSSIBILITY OF AT LEAST A PARTIAL SMALL BUSINESS SET ASIDE IN THE CIRCUMSTANCES, AS CONTENDED IN YOUR PROTEST, THE RECORDS SHOW THAT THE FACTS AVAILABLE TO THE CONTRACTING OFFICER AT THE TIME HE MADE HIS DETERMINATION AGAINST A PARTIAL SMALL BUSINESS SET-ASIDE INDICATED THAT THIS PROCEDURE ALSO WAS NOT FEASIBLE. THE PROCUREMENT HISTORY OF THE ITEM DISCLOSED THAT NO PARTIAL SET-ASIDES HAD EVER BEEN MADE BY THE ARMY OR THE AIR FORCE, BASICALLY BECAUSE IT WAS BELIEVED THAT SUCH PROCUREMENTS WERE NOT SEVERABLE INTO TWO OR MORE ECONOMIC PRODUCTION RUNS. ASPR 1.706.6 (A) (II). FURTHER, THE CONTRACTING OFFICER FELT THAT INASMUCH AS THERE WAS ONLY ONE SMALL BUSINESS CONCERN ON THE QPL THE PRACTICAL EFFECT OF A PARTIAL SET-ASIDE WOULD RESULT IN THE AWARD OF A CONTRACT ON THE SET-ASIDE PORTION WITHOUT EFFECTIVE COMPETITION, SUBJECT ONLY TO THE 120-PERCENT LIMITATION OF THE PARTIAL SET-ASIDE CLAUSE AS SET FORTH IN ASPR 1.706.6 (C). BASED ON THESE FACTS THE CONTRACTING OFFICER MADE AN HONEST JUDGMENT WHICH LED TO HIS GOOD-FAITH DETERMINATION THAT A PARTIAL SMALL BUSINESS SET ASIDE WAS NOT INDICATED FOR THIS PROCUREMENT.

THE RESULTS OF THE BIDDING AND THE APPARENT FACTUAL SITUATION WHICH HAS DEVELOPED IN CONNECTION WITH THE INVITATION ARE NOT DETERMINATIVE OF THE QUESTION AS TO WHETHER THERE WAS AT THE TIME OF ISSUING THAT INVITATION A REASONABLE EXPECTATION OF SUFFICIENT COMPETITION FROM SMALL BUSINESS CONCERNS. THE SITUATION HEREIN IS ACCENTUATED BY THE FACT THAT YOUR PROTEST ON THESE POINTS WAS NOT FORTHCOMING UNTIL AFTER BIDS WERE OPENED AND THE AMOUNTS BID WERE MATTERS OF PUBLIC KNOWLEDGE. IN FACT, 13 DAYS HAD ELAPSED AFTER BID OPENING DATE BEFORE YOUR PROTEST WAS MADE. IN THE CIRCUMSTANCES IT MUST BE CONCLUDED THAT YOUR PROTEST AMOUNTS TO MERELY A SECOND REQUEST TO BID ON THE PROCUREMENT, WHICH IS CONTRARY TO THE BASIC POLICIES OF THE COMPETITIVE BIDDING SYSTEM.

ON THE BASIS OF THE FACTUAL SITUATION PRESENT IN THIS CASE THE DEPARTMENT OF THE ARMY HAS CONCLUDED, AND WE AGREE, THAT IT WOULD NOT BE IN THE BEST INTERESTS OF THE GOVERNMENT FROM THE STANDPOINT OF MAINTAINING THE INTEGRITY OF BOTH THE COMPETITIVE BIDDING SYSTEM AND THE SMALL BUSINESS SET-ASIDE PROGRAM TO REJECT ALL BIDS AND CANCEL THE INVITATION WITH A VIEW TOWARD NEGOTIATING A CONTRACT WITH ONE OF THE SMALL BUSINESS BIDDERS. IS OUR OPINION THAT, IN THE CIRCUMSTANCES OF THIS PARTICULAR CASE, AS SET OUT ABOVE, SUCH ACTION CLEARLY WOULD BE CONTRARY TO ASPR 2-404.1, WHICH PROVIDES, IN PERTINENT PART, THAT "THE PRESERVATION OF THE INTEGRITY OF THE COMPETITIVE BID SYSTEM DICTATES THAT AFTER BIDS HAVE BEEN OPENED, AWARD MUST BE MADE TO THAT RESPONSIBLE BIDDER WHO SUBMITTED THE LOWEST RESPONSIVE BID, UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS AND CANCEL THE INVITATION.' WE SEE NO SUCH COMPELLING REASON INVOLVED HERE. 28 COMP. GEN. 662.

ACCORDINGLY, THE PROTEST MADE TO OUR OFFICE IN THE MATTER MUST BE, AND IS, DENIED.