B-139037, MAY 7, 1959, 38 COMP. GEN. 744

B-139037: May 7, 1959

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

ON THE BASIS THAT ALL THE NEEDS UNDER SUCH ITEM ARE INDEPENDENT OF AND UNRELATED TO THE NEEDS DESCRIBED UNDER THE REMAINING ITEMS. DOES NOT MAKE THE SET-ASIDE ACTION ON THE ONE ITEM A PARTIAL SET-ASIDE BUT IS PROPERLY CLASSIFIED AS A TOTAL SET-ASIDE UNDER SECTION 1-706.5. WHERE A PRICE COMPARISON ON A TOTAL SMALL BUSINESS SET-ASIDE PROCUREMENT INDICATES THAT THE PRICE OF THE LOWEST OFFER COMPARES FAVORABLY WITH THE REJECTED OFFER OF A LARGE BUSINESS CONCERN AND THAT THE SMALL BID OFFERS ARE SUBSTANTIALLY LOWER THAN THE PRICES FOR PREVIOUS PROCUREMENTS OF SIMILAR REQUIREMENTS. A PROTEST BY A LARGE BUSINESS FIRM THAT THE BID PRICES SUBMITTED BY SMALL BUSINESS CONCERNS WERE NOT FAIR AND REASONABLE TO THE GOVERNMENT.

B-139037, MAY 7, 1959, 38 COMP. GEN. 744

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - PARTIAL V. TOTAL SET ASIDES THE TOTAL SET-ASIDE FOR SMALL BUSINESS OF THE ENTIRE REQUIREMENTS ON ONLY ONE ITEM OF A MULTIPLE ITEM PROCUREMENT, ON THE BASIS THAT ALL THE NEEDS UNDER SUCH ITEM ARE INDEPENDENT OF AND UNRELATED TO THE NEEDS DESCRIBED UNDER THE REMAINING ITEMS, DOES NOT MAKE THE SET-ASIDE ACTION ON THE ONE ITEM A PARTIAL SET-ASIDE BUT IS PROPERLY CLASSIFIED AS A TOTAL SET-ASIDE UNDER SECTION 1-706.5, OF THE ARMED SERVICES PROCUREMENT REGULATION. WHERE A PRICE COMPARISON ON A TOTAL SMALL BUSINESS SET-ASIDE PROCUREMENT INDICATES THAT THE PRICE OF THE LOWEST OFFER COMPARES FAVORABLY WITH THE REJECTED OFFER OF A LARGE BUSINESS CONCERN AND THAT THE SMALL BID OFFERS ARE SUBSTANTIALLY LOWER THAN THE PRICES FOR PREVIOUS PROCUREMENTS OF SIMILAR REQUIREMENTS, A PROTEST BY A LARGE BUSINESS FIRM THAT THE BID PRICES SUBMITTED BY SMALL BUSINESS CONCERNS WERE NOT FAIR AND REASONABLE TO THE GOVERNMENT, AS REQUIRED BY SECTION 1-706.5 OF THE ARMED SERVICES PROCUREMENT REGULATION, MUST BE DENIED.

TO THE FLYING TIGER LINE, INC., MAY 7, 1959:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM DATED MARCH 19, 1959, PROTESTING AGAINST THE ACTION OF THE DEPARTMENT OF THE AIR FORCE IN RESTRICTING BIDDING ON ITEM 15, INVITATION FOR BIDS MAMPC-10-C-2, TO SMALL BUSINESS CONCERNS.

AS SET OUT IN YOUR TELEGRAM, IT IS YOUR CONTENTION THAT THE ITEMS SET ASIDE FOR SMALL BUSINESS IN THE ABOVE INVITATION CONSTITUTED A PARTIAL RESERVATION OF THE DEPARTMENT'S TOTAL REQUIREMENTS AND THE ACTION OF THE DEPARTMENT IN RESTRICTING BIDS TO SMALL BUSINESS CONCERNS WAS THEREFORE CONTRARY TO THE ARMED SERVICES PROCUREMENT REGULATION. YOU ALSO ASSERT THAT THE REQUIREMENTS UNDER ITEM 15 OF THE INVITATION CANNOT BE SERVED ECONOMICALLY BY EQUIPMENT AVAILABLE TO PRESENTLY QUALIFIED SMALL BUSINESS CONCERNS; THAT EFFICIENT MODERN CARGO PLANES POSSESSED BY YOUR COMPANY WOULD BE AVAILABLE TO THE GOVERNMENT AT GREAT SAVINGS; AND THAT A COMPARISON SHOULD BE MADE OF THE BID PRICES SUBMITTED BY SMALL BUSINESS CONCERNS TO DETERMINE WHETHER SUCH PRICES ARE FAIR AND REASONABLE TO THE GOVERNMENT.

THE REPORT FROM THE DEPARTMENT OF THE AIR FORCE IN THIS MATTER STATES THAT THE DESIGNATION ,MAMPC-10-C-2" REFERS TO A TELEGRAPHIC REQUEST FOR PROPOSALS, WHICH WAS FORWARDED ONLY TO HOLDERS OF CURRENT BASIC "CALL TYPE" AGREEMENTS FIXING TERMS AND CONDITIONS (OTHER THAN PRICES, ROUTES, AND QUANTITIES) FOR THE PERFORMANCE OF COMMERCIAL AIR/LIFT SERVICES. THIS TELEGRAM LISTED FIFTEEN ITEMS OF ADDITIONAL COMMERCIAL AIR TRANSPORTATION REQUIREMENTS IN THE ATLANTIC AND PACIFIC AREAS DURING THE MONTHS OF APRIL, MAY, AND JUNE OF 1959. ITEM 15 REQUESTED PRICE PROPOSALS FOR THE TRANSPORTATION OF 233 TONS OF ONE-WAY CARGO FROM TRAVIS FIELD TO TACHIKAWA. PROPOSALS ON THIS ITEM, AS WELL AS ON ITEMS 9 THROUGH 14, WERE RESTRICTED TO SMALL BUSINESS CONCERNS.

THE DEPARTMENT OF THE AIR FORCE ADVISES THAT THE DETERMINATION TO SET ASIDE THESE ITEMS FOR SMALL BUSINESS CONCERNS WAS BASED PRIMARILY ON THAT PORTION OF SECTION 634, PUBLIC LAW 85-724, 72 STAT. 729, WHICH DIRECTS THAT "THE SECRETARY OF DEFENSE SHALL UTILIZE THE SERVICES OF CIVIL AIR CARRIERS WHICH QUALIFY AS SMALL BUSINESSES TO THE FULLEST EXTENT FOUND PRACTICABLE.' WITH RESPECT TO ITEM 15, IT IS STATED THAT THE REQUIREMENTS DESCRIBED THEREIN WERE TOTALLY SET ASIDE IN ACCORDANCE WITH A JOINT DETERMINATION MADE BY THE CONTRACTING OFFICER AND A REPRESENTATIVE OF THE SMALL BUSINESS ADMINISTRATION UNDER THE PROVISIONS OF SECTION 15 OF THE SMALL BUSINESS ACT, 72 STAT. 395, 15 U.S.C. 645, AND OF ASPR 1-706.1 AND 1 -706.5. THE SET-ASIDE OF ITEM 15 WAS CONSIDERED PRACTICABLE SINCE ADEQUATE CAPACITY TO FULFILL SUCH REQUIREMENTS EXISTED AMONG SMALL BUSINESS CONCERNS, VIGOROUS COMPETITION AMONG SUCH CONCERNS WAS VIRTUALLY CERTAIN, AND THERE WAS A REASONABLE EXPECTATION THAT PROPOSALS WOULD BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS TO PERMIT AWARDS AT REASONABLE PRICES, AS REQUIRED BY ASPR 1-706.5. THE FACTS THAT NO CARGO AIRLIFT REQUIREMENTS HAD PREVIOUSLY BEEN SET ASIDE FOR SMALL BUSINESS IN THE FISCAL YEAR 1959, AND THAT SMALL BUSINESS CONCERNS OPERATING ONLY DC-4 AIRCRAFT COULD NOT PARTICIPATE IN PASSENGER SET-ASIDES BECAUSE OF THE REQUIRED USE OF PRESSURIZED AIRCRAFT, ARE ADVANCED AS ADDITIONAL JUSTIFICATION FOR THE DETERMINATION TO SET ASIDE THE CARGO REQUIREMENTS UNDER ITEM 15.

SECTION 1-706.1 OF THE ARMED SERVICES PROCUREMENT REGULATION READS, IN PERTINENT PART, AS FOLLOWS:

1-706.1 GENERAL. ANY INDIVIDUAL PROCUREMENT OR CLASS OF PROCUREMENTS OR AN APPROPRIATE PART THEREOF, SHALL BE SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS WHEN SUCH ACTION IS (I) JOINTLY DETERMINED BY AN SBA REPRESENTATIVE AND THE CONTRACTING OFFICER * * * TO BE IN THE INTEREST OF MAINTAINING OR MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY, OR IN THE INTEREST OF WAR OR NATIONAL DEFENSE PROGRAMS, OR IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF GOVERNMENT PROCUREMENT IS PLACED WITH SMALL BUSINESS CONCERN. * * *.

SECTION 1-706.5, ENTITLED " TOTAL SET-ASIDES," OF SUCH REGULATION PROVIDES AS FOLLOWS:

(A) THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR CLASS OF PROCUREMENTS (INCLUDING BUT NOT LIMITED TO CONTRACTS FOR MAINTENANCE, REPAIR, AND CONSTRUCTION) SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION (SEE ASPR 1-706.1) WHERE THERE IS A REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. TOTAL SET-ASIDES SHALL NOT BE MADE UNLESS SUCH A REASONABLE EXPECTATION EXISTS; HOWEVER, SEE ASPR 1-706.6 AS TO PARTIAL SET -ASIDES.

(B) CONTRACTS FOR TOTAL SMALL BUSINESS SET-ASIDES MAY BE ENTERED INTO BY CONVENTIONAL NEGOTIATION OR BY A SPECIAL METHOD OF PROCUREMENT KNOWN AS " SMALL BUSINESS RESTRICTED ERTISING.' THE LATTER METHOD SHALL BE USED WHEREVER POSSIBLE. INVITATIONS FOR BIDS AND REQUESTS FOR PROPOSALS SHALL BE RESTRICTED TO SMALL BUSINESS CONCERNS. SMALL BUSINESS RESTRICTED ADVERTISING, INCLUDING AWARDS THEREUNDER, SHALL BE CONDUCTED IN THE SAME WAY AS PRESCRIBED FOR FORMAL ADVERTISING IN ASPR, SECTION II, EXCEPT THAT BIDS AND AWARDS SHALL BE RESTRICTED TO SMALL BUSINESS CONCERNS.

THE FACT THAT PROPOSALS ON ALL ITEMS TO BE PROCURED UNDER MAMPC-10-C 2 WERE NOT RESTRICTED TO SMALL BUSINESS DOES NOT MAKE THE SET-ASIDE ACTION WITH RESPECT TO ITEM 15 OF A PARTIAL SET-ASIDE. AS INDICATED ABOVE, ITEM 15 INCLUDED ALL OF THE DEPARTMENT'S ADDITIONAL CARGO NEEDS FOR THE PERIODS IN QUESTION ON THE ROUTE SPECIFIED--- IN FACT, IT APPEARS TO BE THE ONLY TRANSPACIFIC CARGO TRANSPORTATION REQUIREMENT LISTED IN THE ENTIRE INVITATION. SUCH NEEDS WERE INDEPENDENT OF, AND QUITE UNRELATED TO, THE NEEDS DESCRIBED UNDER THE REMAINING FOURTEEN ITEMS. UNDER SUCH CIRCUMSTANCES, WE ARE OF THE OPINION THAT ITEM 15 WAS PROPERLY CLASSIFIED AS A TOTAL SET-ASIDE UNDER THE APPLICABLE PROVISIONS OF THE ARMED SERVICES PROCUREMENT REGULATION AND THAT THE PROVISION RESTRICTING OFFERS TO SMALL BUSINESS CONCERNS WAS PROPER.

CONCERNING YOUR CONTENTION THAT LACK OF EFFICIENT MODERN CARGO PLANES PRECLUDES SMALL BUSINESS CONCERNS FROM ECONOMICALLY FULFILLING THE ITEM 15 REQUIREMENTS, AND YOUR REQUEST THAT A COMPARISON BE MADE OF THE PROPOSALS SUBMITTED TO DETERMINE WHETHER SUCH PRICES ARE FAIR AND REASONABLE, YOU ARE ADVISED THAT OFFERS WERE RECEIVED FROM SEVEN SMALL BUSINESS CONCERNS ON THIS ITEM, THREE OF WHICH OFFERED DC-6 AIRCRAFT, AND FOUR DC-4-S. AWARDS WERE MADE TO THE THREE LOWEST RESPONSIBLE OFFERORS FOR THE MAXIMUM AMOUNT OF THEIR SERVICE CAPABILITIES AT PRICES AS FOLLOWS:

CHART

CARRIER TONNAGE PRICE PER TON OVERSEAS NATIONAL----------------------- 525 $1,510.00 AMERICAN INTERNATIONAL------------------ 56 1,862.00 ALASKA AIRLINES------------------------- 96.25 1,878.26

WHILE NOT SPECIFICALLY STATED IN YOUR TELEGRAM, WE UNDERSTAND THAT YOUR COMPANY SUBMITTED A LOW BID OF $1,500 PER TON ON ITEM 15 AND THAT SUCH BID WAS REJECTED BY THE DEPARTMENT OF THE AIR FORCE BECAUSE YOUR COMPANY WAS NOT A SMALL BUSINESS CONCERN.

YOU WILL NOTE THAT THE PRICE OFFERED BY OVERSEAS NATIONAL, AT WHICH PRICE THE BULK OF THE CARGO IS TO BE TRANSPORTED, COMPARES FAVORABLY WITH YOUR OWN REJECTED OFFER; THAT ALL PRICES ARE SUBSTANTIALLY LOWER THAN THE PRICE OF $1,920 PER TON AT WHICH YOUR COMPANY WAS AWARDED ITEM 12 COVERING SIMILAR SERVICES UNDER IFB 11-626-59-3-CAB DATED AUGUST 13, 1958, OR THE AVERAGE COST OF $1,959.89 AT WHICH YOUR COMPANY PERFORMED VARIOUS CALL- TYPE CONTRACTS ON THE SAME ROUTE PATTERN DURING JULY, SEPTEMBER, OCTOBER, AND NOVEMBER OF 1958. BASED UPON THIS INFORMATION, AND SIMILAR INFORMATION WITH RESPECT TO OTHER OPERATIONS, IT WAS CONCLUDED BY THE CONTRACTING OFFICER THAT THE PRICES OFFERED ON ITEM 15 WERE FAIR AND REASONABLE.

WHILE THERE IS NO REQUIREMENT THAT PRICES OFFERED UNDER A TOTAL SET ASIDE PROCUREMENT BE EQUAL TO, OR BETTER THAN, PRICES WHICH MIGHT REASONABLY HAVE BEEN ANTICIPATED AS A RESULT OF UNRESTRICTED COMPETITION, WE ARE UNABLE TO CONCLUDE, IN VIEW OF THE PRICE RECORD ON PREVIOUS PROCUREMENTS OF SIMILAR REQUIREMENTS AS SET OUT ABOVE, THAT THE PRICES AT WHICH AWARDS WERE MADE UNDER ITEM 15 WERE UNFAIR OR UNREASONABLE.

WE FIND NO BASIS ON WHICH TO QUESTION EITHER THE PROPRIETY OF THE DEPARTMENT'S DETERMINATION TO CLASSIFY THE ITEM 15 REQUIREMENTS AS A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS OR THE PROPRIETY OF THE AWARDS MADE UNDER THAT ITEM. YOUR PROTEST MUST THEREFORE BE DENIED.