B-137679, DECEMBER 16, 1958, 38 COMP. GEN. 434

B-137679: Dec 16, 1958

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CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - LICENSEE OF LARGE CONCERN THE AWARD OF A SET-ASIDE PORTION OF A PROCUREMENT REQUIRED TO BE PERFORMED BY A SMALL BUSINESS CONCERN IN A LABOR SURPLUS AREA TO A BIDDER WHO MET THESE REQUIREMENTS BUT WHO WAS ALSO THE LICENSEE OF A LARGE CONCERN WHICH RECEIVED THE AWARD FOR THE NON-SET-ASIDE PORTION OF THE PROCUREMENT IS NOT INVALID. 1958: FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 14. WE HAVE RECEIVED A REPORT FROM THE DEPARTMENT OF THE ARMY AND THE RECORD NOW SHOWS THAT BIDS WERE INVITED. BIDDERS WERE ADVISED THAT NEGOTIATION FOR AWARD OF THE SET-ASIDE PORTION OF THE PROCUREMENT WOULD PROCEED IN THE FOLLOWING ORDER: A. SMALL BUSINESS CONCERNS WHICH WILL PERFORM A SUBSTANTIAL PORTION OF THE CONTRACT IN LABOR SURPLUS AREAS.

B-137679, DECEMBER 16, 1958, 38 COMP. GEN. 434

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - LICENSEE OF LARGE CONCERN THE AWARD OF A SET-ASIDE PORTION OF A PROCUREMENT REQUIRED TO BE PERFORMED BY A SMALL BUSINESS CONCERN IN A LABOR SURPLUS AREA TO A BIDDER WHO MET THESE REQUIREMENTS BUT WHO WAS ALSO THE LICENSEE OF A LARGE CONCERN WHICH RECEIVED THE AWARD FOR THE NON-SET-ASIDE PORTION OF THE PROCUREMENT IS NOT INVALID.

TO THE STANDARD MATTRESS COMPANY, DECEMBER 16, 1958:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 14, 1958, PROTESTING AN AWARD OF A CONTRACT TO THE TOYAD CORPORATION, LATROBE, PENNSYLVANIA, FOR DELIVERY OF 1,715 FOAM RUBBER MATTRESSES, REPRESENTING THE QUANTITY SET ASIDE FOR POSSIBLE PURCHASE FROM FIRMS IN LABOR SURPLUS AREAS UNDER MILITARY CLOTHING AND TEXTILE SUPPLY AGENCY, PHILADELPHIA QUARTERMASTER DEPOT, INVITATION FOR BIDS NO. QM) CTM/-36 243-59-77, ISSUED JULY 29, 1958.

WE HAVE RECEIVED A REPORT FROM THE DEPARTMENT OF THE ARMY AND THE RECORD NOW SHOWS THAT BIDS WERE INVITED, ON AN F.O.B. DESTINATION BASIS, FOR THE FURNISHING OF 1,715 FOAM RUBBER MATTRESSES, 76 INCHES LONG, 28 INCHES WIDE, 6 INCHES THICK, AND A WEIGHT OF 44 POUNDS, WITH THE PLACEMENT OF AN ORDER OR ORDERS FOR AN ADDITIONAL QUANTITY OF 1,715 MATTRESSES OF SIMILAR SPECIFICATIONS BEING RESERVED FOR NEGOTIATION WITH A FIRM OR FIRMS WHICH WOULD PERFORM A SUBSTANTIAL PORTION OF THE NECESSARY WORK IN LABOR SURPLUS AREAS. BIDDERS WERE ADVISED THAT NEGOTIATION FOR AWARD OF THE SET-ASIDE PORTION OF THE PROCUREMENT WOULD PROCEED IN THE FOLLOWING ORDER:

A. SMALL BUSINESS CONCERNS WHICH WILL PERFORM A SUBSTANTIAL PORTION OF THE CONTRACT IN LABOR SURPLUS AREAS, STARTING WITH THE LOWEST SUCH BIDDER OR OFFEROR.

B. OTHER CONCERNS WHICH WILL PERFORM A SUBSTANTIAL PORTION OF THE CONTRACT IN LABOR SURPLUS AREAS, STARTING WITH THE LOWEST SUCH BIDDER OR OFFEROR.

C. SMALL BUSINESS CONCERNS NOT IN LABOR SURPLUS AREAS, STARTING WITH THE LOWEST SUCH BIDDER OR OFFEROR (TO BE UTILIZED ONLY IN THE EVENT FULL COVERAGE IS NOT OBTAINED IN LABOR SURPLUS AREAS).

THIRTY BIDDERS WERE SOLICITED AND FOUR BIDS WERE RECEIVED. THE FIRESTONE TIRE AND RUBBER COMPANY, AKRON, OHIO, WAS THE LOW BIDDER FOR THE UNRESTRICTED PORTION OF 1,715 MATTRESSES, AND WAS AWARDED THE CONTRACT THEREFOR AT A TOTAL CONTRACT PRICE OF $106,749.39. THE THREE OTHER BIDDERS WERE THE TOYAD CORPORATION, THE DENISON MATTRESS FACTORY, DENISON, TEXAS, AND YOUR COMPANY. ON THE BASIS OF UNIT PRICES QUOTED FOR DELIVERY TO THE THREE DESTINATIONS INVOLVED, THEIR RESPECTIVE TOTAL BID PRICES WERE $118,660, $115,911.53 AND $111,294.14.

THE TOYAD CORPORATION CONTENDED THAT AN AWARD OF THE SET-ASIDE PORTION OF THE PROCUREMENT TO EITHER YOUR COMPANY OR THE DENISON MATTRESS FACTORY WOULD DEFEAT THE PURPOSE OF THE SET-ASIDE POLICY OF CONTRACTING WITH FIRMS IN LABOR SURPLUS AREAS, SINCE BOTH COMPANIES WOULD PERFORM ONLY A SMALL AMOUNT OF SEWING WORK AND ALL OTHER LABOR AND MATERIAL WOULD BE SUPPLIED TO THEM BY THE LOW BIDDER, FIRESTONE TIRE AND RUBBER COMPANY.

THE CONTRACTING OFFICER DETERMINED THAT THE DENISON MATTRESS COMPANY WAS NOT IN A LABOR SURPLUS AREA AS CLASSIFIED BY THE DEPARTMENT OF LABOR IN " AREA LABOR MARKET TRENDS" AND REQUESTED A SIZE DETERMINATION OF YOUR COMPANY BY THE SMALL BUSINESS ADMINISTRATION. BY MEMORANDUM DATED SEPTEMBER 18, 1958, THE SMALL BUSINESS REPRESENTATIVE, MILITARY CLOTHING AND TEXTILE SUPPLY AGENCY, NOTIFIED THE CONTRACTING OFFICER THAT THE SMALL BUSINESS ADMINISTRATION'S FIELD OFFICE IN NEW YORK CITY HAD DETERMINED THAT FOR THIS PROCUREMENT YOUR COMPANY DID NOT QUALIFY AS A SMALL BUSINESS CONCERN SINCE IT WOULD BE ACTING AS A DEALER FURNISHING A PRODUCT PRIMARILY MANUFACTURED BY A LARGE BUSINESS CONCERN. NO QUESTION WAS RAISED AS TO THE SMALL BUSINESS STATUS OF THE TOYAD CORPORATION BEFORE MAKING AN AWARD TO THAT COMPANY ON SEPTEMBER 26, 1958, ON THE BASIS OF NEGOTIATIONS UNDER WHICH ITS TOTAL BID PRICE WAS REDUCED TO $106,747.81.

SUBSEQUENT TO THE AWARD, BY LETTER DATED SEPTEMBER 29, 1958, YOU ALLEGED THAT ONLY TWO FIRMS, FIRESTONE TIRE AND RUBBER COMPANY AND ITS LICENSEE, TOYAD CORPORATION, WERE ABLE TO MANUFACTURE THE SIX-INCH MATTRESSES. INVESTIGATION BY THE MILITARY CLOTHING AND TEXTILE SUPPLY AGENCY INDICATED THAT OTHER COMPANIES, SUCH AS THE B. F. GOODRICH COMPANY AND THE UNITED STATES RUBBER COMPANY, ARE UNABLE AT PRESENT TO PRODUCE THE SIX-INCH MATTRESSES. THEREFORE, THE DEPARTMENT OF THE ARMY HAS CONCLUDED THAT YOUR ALLEGATION IN THE MATTER IS CORRECT. IT IS STATED IN THE DEPARTMENTAL REPORT THAT THIS FACT WILL BE TAKEN INTO CONSIDERATION ON FUTURE PROCUREMENTS OF THIS ITEM.

THE TOYAD CORPORATION CERTIFIED IN ITS BID THAT IT IS A SMALL BUSINESS CONCERN AND THE FACT THAT IT IS A LICENSEE OF THE FIRESTONE TIRE AND RUBBER COMPANY FOR THE MANUFACTURE OF THE PARTICULAR TYPE OF MATTRESS WOULD NOT, IN OUR OPINION, AFFECT THE VALIDITY OF THE CONTRACT AWARDED TO THE TOYAD CORPORATION. THE DEPARTMENTAL REPORT STATES THAT THE TOYAD CORPORATION MET THE REQUIREMENTS OF THE FIRST PRIORITY SET OUT IN THE INVITATION AND IT IS APPARENT THAT THE CONTRACTING AGENCY MUST BE CONSIDERED TO HAVE BEEN BOUND BY THE DETERMINATION OF THE SMALL BUSINESS ADMINISTRATION THAT YOUR COMPANY DID NOT QUALIFY AS A SMALL BUSINESS CONCERN FOR THE PROCUREMENT HERE INVOLVED.

ACCORDINGLY, YOU ARE ADVISED THAT THERE APPEARS TO BE NO PROPER BASIS UPON WHICH WE WOULD BE WARRANTED IN TAKING EXCEPTION TO THE CONTRACT AWARDED TO THE TOYAD CORPORATION FOR THE SET-ASIDE PORTION OF INVITATION FOR BIDS NO. QM) CTM/-36-243-59-77.