B-135614, APRIL 14, 1958, 37 COMP. GEN. 678

B-135614: Apr 14, 1958

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1958: FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 20. WE HAVE RECOGNIZED THE AUTHORITY OF A PROCUREMENT AGENCY TO IMPOSE REASONABLE LIMITATIONS UPON THE RIGHT OF A CONTRACTOR TO SUBCONTRACT ALL OR PORTIONS OF THE WORK. SUCH AUTHORITY IS EXEMPLIFIED BY REGULATIONS CONTAINED IN ASPR-1-706.5 (C). YOUR ATTENTION IS INVITED TO THE ENCLOSED COPY OF OUR DECISION B- 131078.

B-135614, APRIL 14, 1958, 37 COMP. GEN. 678

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - LIMITATIONS THE ISSUANCE OF AN ADMINISTRATIVE REGULATION WHICH WOULD PRECLUDE SMALL BUSINESS CONTRACTORS UNCER SET-ASIDE PROCUREMENTS FROM SUBCONTRACT WITH LARGE BUSINESS FIRMS WOULD BE IN CONSONANCE WITH THE SPIRIT AND INTENT OF THE STATUTES AFFECTING SMALL BUSINESS PARTICIPATION IN GOVERNMENT CONTRACTS.

TO THE CHAIRMAN, MILITARY OPERATIONS SUBCOMMITTEE, COMMITTEE ON GOVERNMENT OPERATIONS, HOUSE OF REPRESENTATIVES, APRIL 14, 1958:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF MARCH 20, 1958, REQUESTING OUR ADVICE AS TO WHETHER THE SMALL BUSINESS ADMINISTRATION AND THE DEPARTMENT OF THE AIR FORCE HAD AUTHORITY TO LIMIT SUBCONTRACTING BY A SMALL BUSINESS FIRM TO A BIG BUSINESS FIRM UNDER A SET-ASIDE PROCUREMENT. IN THAT CONNECTION, YOU REFER TO OUR DECISION B 123338, DATED MAY 12, 1955, REPORTED AT 34 COMP. GEN. 595, AND REQUEST TO BE ADVISED WHETHER SAID DECISION WOULD PRECLUDE THE PROMULGATION OF ADMINISTRATIVE REGULATIONS TO LIMIT SUCH SUBCONTRACTING BY A SMALL BUSINESS FIRM.

THE DECISION IN 34 COMP. GEN. 595, ADDRESSED TO A PROTESTING BIDDER, HELD THAT NEITHER THE WALSH-HEALEY PUBLIC CONTRACTS ACT, 41 U.S.C. 35, NOR THE ARMED SERVICES PROCUREMENT ACT, 10 U.S.C. 2305, PRECLUDED THE AWARD OF A CONTRACT TO A FIRM WHICH CONTEMPLATED SUBCONTRACTING. HOWEVER, THE DECISION DID NOT IMPLY THAT THE CITED STATUTES PRECLUDED REASONABLE ADMINISTRATIVE QUALIFICATIONS UPON SUBCONTRACTING. IN FACT, WE HAVE RECOGNIZED THE AUTHORITY OF A PROCUREMENT AGENCY TO IMPOSE REASONABLE LIMITATIONS UPON THE RIGHT OF A CONTRACTOR TO SUBCONTRACT ALL OR PORTIONS OF THE WORK. SEE GENERALLY 37 COMP. GEN. 196.

WE CAN FIND NO LANGUAGE EITHER IN THE ARMED FORCES PROCUREMENT ACT, AS CODIFIED IN 10 U.S.C. 2305, OR IN THE SMALL BUSINESS ACT, 15 U.S.C. 631 NOTE, WHICH REASONABLY COULD BE REGARDED AS EFFECTIVELY PRECLUDING THE PROMULGATION OF A REGULATION SUCH AS REFERRED TO IN YOUR LETTER. IN FACT, THE ISSUANCE OF SUCH A LIMITING REGULATION WOULD SEEM TO BE IN FURTHERANCE OF BOTH THE SPIRIT AND INTENT OF THE STATUTES AFFECTING SMALL BUSINESS PARTICIPATION IN GOVERNMENT CONTRACTING. SUCH AUTHORITY IS EXEMPLIFIED BY REGULATIONS CONTAINED IN ASPR-1-706.5 (C), 1-706.6 (C), 1-707, 7-104.14, AND 13 CFR 103.3 (B) (3) WHICH PROVIDE GENERALLY FOR SUBCONTRACTING TO SMALL BUSINESS UNDER SET-ASIDE PROCUREMENTS AND CONTRACTS OVER $5,000.

ALSO, YOUR ATTENTION IS INVITED TO THE ENCLOSED COPY OF OUR DECISION B- 131078, FEBRUARY 26, 1958, 37 COMP. GEN. 544, TO THE EFFECT THAT A PROCUREMENT AGENCY COULD REQUIRE BY CONTRACT PROVISION THAT NO PORTION OF THE WORK UNDER A CONTRACT COULD BE SUBLET, EXCEPT SUBJECT TO THE DETERMINATION AND APPROVAL BY THE CONTRACTING OFFICER OF A PROPOSED SUBCONTRACTOR'S QUALIFICATIONS TO PERFORM THE WORK IN A CAPABLE AND REASONABLE MANNER.