B-121145, SEPTEMBER 3, 1954, 34 COMP. GEN. 115

B-121145: Sep 3, 1954

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CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS UNDER AN INVITATION TO BID WHICH PROVIDED THAT BIDS WERE RESTRICTED TO SMALL BUSINESS CONCERNS AN AWARD TO A BIDDER WHICH ACTUALLY DID NOT QUALIFY AS A SMALL BUSINESS CONCERN. DUE TO AN ERRONEOUS SMALL BUSINESS ADMINISTRATION DETERMINATION WHICH WAS BASED ON INCORRECT INFORMATION FURNISHED BY THE BIDDER. IS ILLEGAL AND SHOULD BE CANCELED. 1954: REFERENCE IS MADE TO LETTER DATED AUGUST 23. IN VIEW OF THE FACT THAT THE AWARD WAS MADE UPON AN ERRONEOUS DETERMINATION BY THE SMALL BUSINESS ADMINISTRATION THAT THE FIRM WAS A SMALL BUSINESS WITHIN THE MEANING OF THAT TERM AS DEFINED IN SECTION 203 OF THE SMALL BUSINESS ACT OF 1953. THE INVITATION FOR BIDS ON WHICH THE CONTRACT WAS BASED CONTAINED PROVISIONS TO THE EFFECT THAT THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING OFFICE HAD JOINTLY DETERMINED.

B-121145, SEPTEMBER 3, 1954, 34 COMP. GEN. 115

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS UNDER AN INVITATION TO BID WHICH PROVIDED THAT BIDS WERE RESTRICTED TO SMALL BUSINESS CONCERNS AN AWARD TO A BIDDER WHICH ACTUALLY DID NOT QUALIFY AS A SMALL BUSINESS CONCERN, DUE TO AN ERRONEOUS SMALL BUSINESS ADMINISTRATION DETERMINATION WHICH WAS BASED ON INCORRECT INFORMATION FURNISHED BY THE BIDDER, IS ILLEGAL AND SHOULD BE CANCELED.

ACTING COMPTROLLER GENERAL KELLER TO THE SECRETARY OF THE ARMY, SEPTEMBER 3, 1954:

REFERENCE IS MADE TO LETTER DATED AUGUST 23, 1954, WITH ENCLOSURES, FROM THE DEPUTY UNDER SECRETARY OF THE ARMY, REQUESTING DECISION AS TO THE ACTION WHICH THE DEPARTMENT OF THE ARMY SHOULD TAKE WITH RESPECT TO CONTRACT NO. DA-11-070-ORD-9658 AWARDED ON JUNE 30, 1954, TO EXCELLO PAPER PRODUCTS CO., CINCINNATI, OHIO, IN VIEW OF THE FACT THAT THE AWARD WAS MADE UPON AN ERRONEOUS DETERMINATION BY THE SMALL BUSINESS ADMINISTRATION THAT THE FIRM WAS A SMALL BUSINESS WITHIN THE MEANING OF THAT TERM AS DEFINED IN SECTION 203 OF THE SMALL BUSINESS ACT OF 1953, 67 STAT. 233, AND REGULATIONS ISSUED PURSUANT THERETO.

THE INVITATION FOR BIDS ON WHICH THE CONTRACT WAS BASED CONTAINED PROVISIONS TO THE EFFECT THAT THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING OFFICE HAD JOINTLY DETERMINED, IN ACCORDANCE WITH THE CRITERIA SET FORTH IN SECTION 214 OF THE SMALL BUSINESS ACT OF 1953, 67 STAT. 238, TO AWARD THE PROCUREMENT TO A SMALL BUSINESS CONCERN; THAT BIDS WERE RESTRICTED TO SMALL BUSINESS CONCERNS; THAT AWARD WOULD BE MADE TO SUCH A CONCERN SUBMITTING THE LOWEST RESPONSIBLE BID CONFORMING TO THE INVITATION, PRICE AND OTHER FACTORS CONSIDERED; THAT THE DEPARTMENT OF DEFENSE DEFINED SMALL BUSINESS AS ANY CONCERN WHICH, INCLUDING ITS AFFILIATES, EMPLOYS IN THE AGGREGATE, FEWER THAN 500 EMPLOYEES; AND THAT BIDS RECEIVED FROM FIRMS NOT CONSIDERED AS SMALL BUSINESS WOULD BE CONSIDERED AS NONRESPONSIVE. PRIOR TO AWARD OF THE CONTRACT TO EXCELLO PAPER PRODUCTS COMPANY AS THE LOW BIDDER FOR DELIVERY OF THE SUPPLIES CALLED FOR UNDER ITEM ONE OF INVITATION, THE CONTRACTING OFFICER AT ROCK ISLAND ARSENAL, ROCK ISLAND, ILLINOIS, SUBMITTED TO THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE THERE THE QUESTION OF WHETHER EXCELLO WAS A SMALL BUSINESS. THE SBA REPRESENTATIVE CERTIFIED TO THE CONTRACTING OFFICER ON JUNE 30, 1954, THAT EXCELLO WAS A SMALL BUSINESS, WHICH CERTIFICATION WAS BASED, AMONG OTHER THINGS, UPON A TELEGRAM SENT ON JUNE 28, 1954, BY EXCELLO TO THE ROCK ISLAND ARSENAL TO THE EFFECT THAT IT WAS AN INDEPENDENT CORPORATION WITH 130 EMPLOYEES AND WAS NOT A SUBSIDIARY OR AFFILIATE OF ANY CORPORATION.

UPON PROTESTS BEING FILED BY OTHER BIDDERS, THE MATTER WAS FURTHER INVESTIGATED BY SBA AND BY LETTER OF JULY 20, 1954, THE GENERAL COUNSEL FOR THE ADMINISTRATION INFORMED THE OFFICE OF THE CHIEF OF ORDNANCE, DEPARTMENT OF THE ARMY, THAT THE SBA REPRESENTATIVE AT ROCK ISLAND ARSENAL "WAS IN ERROR WHEN HE STATED THAT EXCELLO WAS A SMALL BUSINESS, AND THEREFORE, ELIGIBLE TO PARTICIPATE IN A JOINT DETERMINATION PROCUREMENT; " THAT IN THE OPINION OF THE ADMINISTRATION, EXCELLO IS NOT AN INDEPENDENT SMALL BUSINESS WITH LESS THAN 500 EMPLOYEES BUT RATHER IS AFFILIATED WITH MEAD BOARD SALES AND THROUGH THEM WITH MEAD CORPORATION; AND THAT MEAD CORPORATION AND ITS AFFILIATES EMPLOY APPROXIMATELY 7000 PERSONS.

SECTION 212 (C) OF THE ABOVE-MENTIONED ACT, 67 STAT. 238, DIRECTS THE SMALL BUSINESS ADMINISTRATION TO DETERMINE, WITHIN ANY INDUSTRY, THE CONCERNS OF BUSINESS ENTERPRISES WHICH ARE TO BE DESIGNATED "SMALL BUSINESS CONCERNS" FOR THE PURPOSES OF THE ACT, AND SECTION 214 OF THE ACT DIRECTS THAT SMALL-BUSINESS CONCERNS "SHALL" RECEIVE ANY AWARD OR CONTRACT OR ANY PART THEREOF AS TO WHICH IT IS DETERMINED BY THE ADMINISTRATION AND THE CONTRACTING PROCUREMENT AGENCY "/A) TO BE IN THE INTEREST OF MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY, OR (B) TO BE IN THE INTEREST OF WAR OR NATIONAL DEFENSE PROGRAMS.'

SINCE AN APPARENTLY VALID DETERMINATION WAS MADE, PURSUANT TO SECTION 214 OF THE AFORESAID ACT, LIMITING PROCUREMENT IN THIS CASE TO SMALL BUSINESS, A LEGAL AND BINDING CONTRACT COULD NOT BE MADE WITH A FIRM NOT IN THAT CATEGORY. THE ORIGINAL FINDING WAS INDUCED, AT LEAST IN PART, BY THE ERRONEOUS INFORMATION RECEIVED FROM EXCELLO. IT CERTAINLY WOULD TEND TO DEFEAT THE PURPOSE OF THE ACT IF, UNDER SUCH CIRCUMSTANCES, THE ERROR COULD NOT BE CORRECTED. ACCORDINGLY, IT MUST BE CONCLUDED THAT SINCE EXCELLO IS NOT, IN FACT, A SMALL BUSINESS CONCERN, THE AWARD OF THE CONTRACT TO THAT FIRM WAS UNAUTHORIZED AND APPROPRIATE STEPS SHOULD BE TAKEN TO CANCEL IT. ..END :