B-175961(2), NOV 3, 1972

B-175961(2), NOV 3, 1972

BID PROTEST - SMALL BUSINESS SIZE DETERMINATION - CONCLUSIVENESS - SUBCONTRACTOR/CONTRACTOR DENIAL OF PROTEST BY WILLIAMS INSTRUMENTS, INC., AGAINST THE AWARD TO THE G. S. MARSHALL COMPANY OF A SMALL BUSINESS SET-ASIDE CONTRACT FOR ENVIRONMENTAL CONNECTOR MODIFICATION KITS UNDER AN RFP ISSUED AT HILL AFB, UTAH. UNDER 15 U.S.C. 637(B)(6), A DECISION OF THE SMALL BUSINESS ADMINISTRATION REGARDING THE SIZE STATUS OF A PARTICULAR CONCERN IS CONCLUSIVE, 46 COMP. GEN. 898, AND GAO MAY NOT IGNORE THAT DETERMINATION. FURTHER, GAO HAS RECOGNIZED IT TO BE A LEGITIMATE BUSINESS INTEREST FOR A SUBCONTRACTOR TO CONSIDER THE PROSPECTS OF DEALING WITH ONE BIDDER OVER ANOTHER. B-164767, OCTOBER 2, 1968. ACCORDINGLY, THE PROTEST IS DENIED.

TO WILLIAMS INSTRUMENTS, INC.:

WE REFER TO YOUR LETTERS OF JUNE 7, 1972, AND PRIOR CORRESPONDENCE, PROTESTING AGAINST THE AWARD TO THE G. S. MARSHALL COMPANY OF A SMALL BUSINESS SET-ASIDE CONTRACT FOR ENVIRONMENTAL CONNECTOR MODIFICATION KITS UNDER REQUEST FOR PROPOSALS (RFP) NO. F42600-72-R-4501, ISSUED AT HILL AIR FORCE BASE, UTAH.

WHILE THE PROTEST WAS PENDING, AWARD OF THE CONTRACT WAS MADE PURSUANT TO ASPR 1-703(B)(3)(IV) BECAUSE OF THE URGENCY OF THE PROCUREMENT.

IT IS YOUR INITIAL CONTENTION THAT THE SIZE CLASSIFICATION STANDARD GIVEN THIS PROCUREMENT BY THE PURCHASING ACTIVITY WAS INCORRECT. INSTEAD OF A CLASSIFICATION STANDARD THAT ALLOWS A FIRM TO QUALIFY AS A SMALL BUSINESS IF ITS NUMBER OF EMPLOYEES DOES NOT EXCEED 1,000, YOU MAINTAIN THAT, BECAUSE THE OFFEROR RECEIVING THE CONTRACT WILL BE PERFORMING A NON- MANUFACTURING FUNCTION ONLY, THE PROPER CLASSIFICATION STANDARD SHOULD HAVE PERMITTED SMALL BUSINESS QUALIFICATION ONLY FOR THOSE FIRMS WITH AN EMPLOYMENT NOT EXCEEDING 500 PERSONS. IT IS YOUR FURTHER CONTENTION, EVEN ASSUMING THE CLASSIFICATION ASSIGNED BY THE PROCUREMENT ACTIVITY TO BE CORRECT, THAT MARSHALL IN NO EVENT MAY BE CONSIDERED A SMALL BUSINESS BECAUSE OF ITS RELATIONSHIP WITH THE DEUTSCH COMPANY, THE MANUFACTURING SOURCE OF THE KITS TO BE DELIVERED UNDER THE CONTRACT. MARSHALL IS, YOU ALLEGE, THE SOLE NATIONWIDE DISTRIBUTOR OF THE DEUTSCH CONNECTOR MODIFICATION KITS. YOU ALSO BELIEVE THE POSSIBILITY MAY EXIST THAT MARSHALL, BECAUSE OF ITS RELATIONSHIP WITH DEUTSCH, WAS ABLE TO PURCHASE THE ITEMS FOR THIS PROCUREMENT FROM DEUTSCH FOR LESS THAN THOSE PRICES QUOTED BY DEUTSCH TO THE OTHER OFFERORS ON THE RFP.

THE QUESTION AS TO WHETHER MARSHALL QUALIFIED AS A SMALL BUSINESS FOR THE PROCUREMENT WAS APPEALED TO THE SMALL BUSINESS ADMINISTRATION (SBA) DISTRICT OFFICE IN LOS ANGELES. THAT OFFICE ADVISED BY LETTER OF MAY 16, 1972, THAT FOR THE PURPOSES OF THE PROCUREMENT IN QUESTION G. S. MARSHALL WAS SMALL BUSINESS. NO WRITTEN TRADE AGREEMENT WAS FOUND TO EXIST BETWEEN THAT FIRM AND THE DEUTSCH COMPANY. THIS DECISION WAS APPEALED BY YOU AND OTHERS TO THE SBA SIZE APPEALS BOARD. THE CORRECTNESS OF THE CONTRACTING OFFICER'S SIZE CLASSIFICATION STANDARD WAS ALSO QUESTIONED IN THE APPEAL. THE SIZE APPEALS BOARD BY ITS DECISION OF JULY 19, 1972, DENIED THE APPEAL. IT WAS FOUND THAT THE RELATIONSHIP BETWEEN MARSHALL AND DEUTSCH WAS THAT OF A PURCHASER SUPPLIER IN WHICH MARSHALL PURCHASES VARIOUS PARTS FROM DEUTSCH AND THEN ASSEMBLES AND SELLS THEM. MARSHALL DOES NOT HAVE AN EXPRESS OR EXCLUSIVE TRADE AGREEMENT WITH DEUTSCH, BUT RATHER MARSHALL HAS EVOLVED OVER A PERIOD OF YEARS AS THE SOLE AUTHORIZED ASSEMBLY POINT FOR DEUTSCH KITS. IT FOUND THAT OTHER PURCHASERS COULD BUY RAW MATERIAL FROM DEUTSCH IN THE SAME MANNER AND AT THE SAME PRICE AS MARSHALL. SINCE THESE FACTS INDICATED NO FORMAL CONTRACTUAL RELATIONSHIP BETWEEN THE TWO FIRMS, SUCH AS TO CONFER ON DEUTSCH THE POWER TO CONTROL MARSHALL, NO AFFILIATION WAS FOUND TO EXIST BETWEEN THE TWO. APPEAL OF THE SIZE CLASSIFICATION STANDARD DESIGNATED BY THE CONTRACTING OFFICER WAS DEEMED UNTIMELY BECAUSE THIS MATTER HAD NOT BEEN APPEALED WITHIN THE PROPER TIME PERIOD PRIOR TO THE DEADLINE FOR RECEIPT OF PROPOSALS. SEE 13 CODE OF FEDERAL REGULATIONS 121.3-6(B)(3)(II).

UNDER 15 U.S.C. 637(B)(6), A DECISION OF SBA REGARDING THE SIZE STATUS OF A PARTICULAR CONCERN IS "CONCLUSIVE." 46 COMP. GEN. 898, 900 (1967) AND 44 ID. 271, 273 (1964). MOREOVER, OUR OFFICE MAY NOT IGNORE A DETERMINATION BY SBA OF THE SIZE STATUS OF A PARTICULAR CONCERN. 173301, JUNE 28, 1972.

WE NOTE THAT IN THE SBA DECISION, IT IS STATED THAT "OTHER PURCHASERS CAN BUY RAW MATERIALS FROM DEUTSCH IN THE SAME MANNER AND AT THE SAME PRICE AS MARSHALL DOES." THUS, WHILE YOU AND OTHERS MAY HAVE RECEIVED QUOTATIONS FROM DEUTSCH ON AN ASSEMBLED KIT BASIS, IT IS NOT APPARENT THAT QUOTATIONS WERE REQUESTED ON A RAW MATERIAL BASIS OR THAT THEY WOULD NOT HAVE BEEN PROVIDED ON SUCH BASIS IF REQUESTED. THE FAILURE TO OBTAIN PRICES ON A RAW MATERIAL BASIS COULD HAVE RESULTED FROM AN ABSENCE OF A REQUEST ON SUCH A BASIS. IN ANY EVENT, OUR OFFICE HAS RECOGNIZED IT TO BE A LEGITIMATE BUSINESS INTEREST FOR A SUBCONTRACTOR TO CONSIDER THE PROSPECTS OF DEALING WITH ONE BIDDER OVER ANOTHER. B 164767, OCTOBER 2, 1968.

ACCORDINGLY, THE PROTEST IS DENIED.