B-132740, OCTOBER 22, 1958, 38 COMP. GEN. 326

B-132740, OCTOBER 22, 1958, 38 COMP. GEN. 326

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - HOUSING CONTRACTS THE SPECIFIC INCLUSION OF CONSTRUCTION CONTRACTS IN THE NEW SMALL BUSINESS ACT, 15 U.S.C. 631, PERMITS THE SET-ASIDE FOR EXCLUSIVE AWARD TO SMALL BUSINESS CONCERNS OF A PORTION OF THE CONSTRUCTION CONTRACTS AUTHORIZED IN SECTION 403 OF THE HOUSING AMENDMENTS ( ACT) OF 1955 AFTER ADVERTISEMENT IN THE USUAL MANNER.

TO THE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION OCTOBER 22, 1958:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 18, 1958, REQUESTING RECONSIDERATION OF OUR DECISION TO YOU OF OCTOBER 23, 1957, B-132740, 37 COMP. GEN. 271, ON THE QUESTION AS TO WHETHER IT WOULD BE PROPER FOR CONTRACTING AGENCIES TO SET ASIDE ANY PORTION OF THE CONTRACTS TO BE MADE PURSUANT TO SECTION 403 OF THE HOUSING AMENDMENTS OF 1955, AS AMENDED ( CAPEHART HOUSING), 42 U.S.C. 1954, FOR EXCLUSIVE AWARDS TO SMALL BUSINESS CONCERNS.

THE VIEW WAS EXPRESSED IN OUR DECISION THAT THERE EXISTED SERIOUS DOUBT AS TO WHETHER THE FORMER SECTION 214 OF THE SMALL BUSINESS ACT OF 1953, AS AMENDED, 15 U.S.C. 643, WAS INTENDED TO BE APPLICABLE TO CONSTRUCTION CONTRACTS. YOU NOW REFER TO PUBLIC LAW 85-536, H.R. 7963, APPROVED JULY 18, 1958, 72 STAT. 384, 15 U.S.C. 631, WHICH REPRESENTS A COMPLETE REVISION OF THE SMALL BUSINESS ACT OF 1953, AS AMENDED. SECTION 15 OF THE NEW ACT, 15 U.S.C. 645, ENLARGES THE AUTHORITY CONTAINED IN THE FORMER SECTION 214 TO MAKE EXCLUSIVE AWARDS TO SMALL BUSINESS CONCERNS UNDER CERTAIN CONDITIONS, IN THAT THE EXERCISE OF SUCH AUTHORITY IS NO LONGER RESTRICTED TO SITUATIONS WHERE IT IS DETERMINED BY THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING AGENCY THAT AN AWARD TO A SMALL BUSINESS CONCERN WOULD BE IN THE INTEREST OF MAINTAINING THE NATION'S FULL PRODUCTIVE CAPACITY OR BE IN THE INTEREST OF WAR OR NATIONAL DEFENSE PROGRAMS. ALSO, SECTION 2 (A) OF THE NEW ACT, 15 U.S.C. 632 (A), STATES, IN PERTINENT PART, AS FOLLOWS:

IT IS THE DECLARED POLICY OF THE CONGRESS THAT THE GOVERNMENT SHOULD AID, COUNSEL, ASSIST, AND PROTECT, INSOFAR AS POSSIBLE, THE INTERESTS OF SMALL- BUSINESS CONCERNS IN ORDER * * * TO INSURE THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT (INCLUDING BUT NOT LIMITED TO CONTRACTS FOR MAINTENANCE, REPAIR, AND CONSTRUCTION) BE PLACED WITH SMALL BUSINESS ENTERPRISES * * *.

THE CONGRESSIONAL DECLARATION OF POLICY IN THE FORMER SECTION 202 OF THE SMALL BUSINESS ACT OF 1953, AS AMENDED, 15 U.S.C. 631, DID NOT CONTAIN ANY SPECIFIC REFERENCE TO CONSTRUCTION CONTRACTS. AS STATED IN OUR DECISION OF OCTOBER 23, 1957, THE ACT PRIMARILY DEALT WITH THE PRODUCTIVE CAPACITY OF PLANTS OPERATED BY SMALL BUSINESS CONCERNS AND SPECIFICALLY REFERRED ONLY TO "CONTRACTS FOR SUPPLIES AND SERVICES," "CONTRACTS FOR RESEARCH AND DEVELOPMENT," AND TO THE FURNISHING OF ,MATERIALS," "SUPPLIES" AND "EQUIPMENT.'

DOUBT AS TO THE APPLICABILITY OF THE FORMER SMALL BUSINESS ACT TO CONSTRUCTION CONTRACTS WAS RECOGNIZED IN HOUSE REPORT NO. 555, 85TH CONGRESS, ST SESSION, TO ACCOMPANY H.R. 7963. AT PAGE 5 OF THE REPORT, IT WAS STATED:

THE SMALL BUSINESS ACT NOW PROVIDES THAT SMALL BUSINESS SHALL OBTAIN A FAIR SHARE OF PURCHASES AND CONTRACTS FOR "SUPPLIES AND SERVICES" FOR THE GOVERNMENT. SOME QUESTION HAS BEEN RAISED WHETHER THIS LANGUAGE IS BROAD ENOUGH TO COVER ALL TYPES OF GOVERNMENT PROCUREMENT. ACCORDINGLY, THIS LANGUAGE IS REVISED IN SECTION 2 OF THE ACT AS REWRITTEN BY H.R. 7963 TO MAKE ABSOLUTELY CLEAR THAT IT IS THE INTENT OF CONGRESS THAT SMALL- BUSINESS CONCERNS SHALL OBTAIN A FAIR PROPORTION OF ALL TYPES OF GOVERNMENT CONTRACTS. "PROPERTY CONTRACTS" AS USED IN THIS SECTION IS USED IN ITS BROADEST SENSE AND INCLUDES SUPPLY CONTRACTS, MAINTENANCE, REPAIR, AND CONSTRUCTION CONTRACTS, AS WELL AS ANY OTHER KIND OF CONTRACT LET BY GOVERNMENT AGENCIES.

WE AGREE WITH YOUR SUGGESTION THAT THE AMENDMENT OF THE SMALL BUSINESS ACT OF 1953 BY PUBLIC LAW 85-536 SHOULD REMOVE ANY DOUBT AS TO THE APPLICABILITY OF THE NEW SMALL BUSINESS ACT TO GOVERNMENT CONSTRUCTION PROCUREMENTS. HOWEVER, HOUSING PROJECTS AUTHORIZED FOR CONSTRUCTION UNDER SECTION 403 OF THE HOUSING AMENDMENTS OF 1955, AS AMENDED, WOULD APPEAR TO REPRESENT A SPECIAL PROBLEM INASMUCH AS THE CONSTRUCTION WORK IS FINANCED THROUGH FHA INSURED MORTGAGES, AND THE CONGRESS HAS PLACED CERTAIN LIMITATIONS WITH RESPECT TO ELIGIBILITY FOR SUCH INSURANCE, INCLUDING THE REQUIREMENT NOT ONLY THAT THE MORTGAGE SHOULD NOT EXCEED THE BID OF THE ELIGIBLE BIDDER, BUT ALSO THAT THE AVERAGE COST OF THE HOUSING UNITS SHOULD NOT EXCEED A SPECIFIED AMOUNT AND THAT THE INSURED MORTGAGE SHOULD NOT EXCEED THE FHA ESTIMATE OF THE REPLACEMENT COST OF THE PROPERTY WHEN THE PROPOSED IMPROVEMENTS ARE MADE. SEE 12 U.S.C. 1748B AND 24 CFR 292 A.7 AND 292 A.8.

HOWEVER, IN THE LIGHT OF THE CONGRESSIONAL POLICY MAINTAINED IN P.L. 85- 536, YOU ARE ADVISED THAT WE NOW PERCEIVE NO LEGAL OBJECTION TO YOUR ORIGINAL PROPOSAL THAT A FAIR PROPORTION OF THE CONTRACTS TO BE AWARDED PURSUANT TO SECTION 403 OF THE HOUSING AMENDMENTS OF 1955, AS AMENDED, BE SET ASIDE FOR SMALL BUSINESS AWARDS AFTER ADVERTISING IN THE USUAL MANNER EXCEPT THAT ONLY SMALL BUSINESSES WOULD BE ELIGIBLE TO BID. WHETHER OR NOT SUCH A POLICY SHOULD BE ADOPTED IN REGARD TO PROPOSED CONSTRUCTION OF THAT TYPE WOULD, OF COURSE, UNDER SECTION 15 OF THE NEW SMALL BUSINESS ACT, BE A MATTER FOR FINAL DETERMINATION BY "THE SECRETARY OR THE HEAD OF THE APPROPRIATE DEPARTMENT OR AGENCY" CONCERNED. WE BELIEVE THAT SUCH A FINAL DETERMINATION SHOULD BE MADE ONLY AFTER GIVING DUE CONSIDERATION TO THE NUMBER AND EXTENT OF CONTRACTS FOR HOUSING CONSTRUCTION WHICH HAVE BEEN AWARDED TO SMALL BUSINESSES AFTER UNRESTRICTED ADVERTISING AND TO THE QUESTION AS TO WHETHER, IN THE USUAL CASE OF AN ADVERTISEMENT RESTRICTED TO SMALL BUSINESSES FOR CONSTRUCTION OF A MILITARY HOUSING PROJECT, THE GOVERNMENT COULD REASONABLY EXPECT TO OBTAIN AN ACCEPTABLE LOW BID FROM AN "ELIGIBLE BIDDER" AS DEFINED IN THE HOUSING AMENDMENTS, WHICH WOULD MEET THE REQUIREMENTS FOR FHA INSURED MORTGAGE FINANCING OF THE PROJECT INVOLVED.