B-144980, MAR. 3, 1961

B-144980: Mar 3, 1961

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TO SUN ELECTRIC CORPORATION: REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 9 AND FEBRUARY 2. YOUR BID WAS REJECTED BECAUSE YOUR FIRM IS CLASSIFIED AS A LARGE BUSINESS CONCERN. WAS ENCLOSED FOR OUR INFORMATION ONLY. YOU CONTEND THAT THE BEST INTERESTS OF THE GOVERNMENT HAVE BEEN JEOPARDIZED BY THE INCLUSION OF TOTAL SMALL BUSINESS SET-ASIDES AN INVITATION TO BID BECAUSE IT HAS RESULTED IN GREATER COSTS TO THE GOVERNMENT. ONE THAT IS OPEN TO LARGE AND SMALL BUSINESS CONCERNS. AS TO WHICH IT IS DETERMINED BY THE ADMINISTRATION AND THE CONTRACTING PROCUREMENT OR DISPOSAL AGENCY (1) TO BE IN THE INTEREST OF MAINTAINING OR MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY. (3) TO BE IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT ARE PLACED WITH SMALL-BUSINESS CONCERNS.

B-144980, MAR. 3, 1961

TO SUN ELECTRIC CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 9 AND FEBRUARY 2, 1961, WITH ENCLOSURES, PROTESTING THE SMALL BUSINESS SET-ASIDE UNDER INVITATION NO. TC 23-204-61-59, ISSUED BY THE U.S. ARMY TRANSPORTATION MATERIAL COMMAND, ST. LOUIS, MISSOURI. YOUR BID WAS REJECTED BECAUSE YOUR FIRM IS CLASSIFIED AS A LARGE BUSINESS CONCERN.

IN REGARD TO YOUR LETTER OF JANUARY 9, 1961, SINCE YOU STATED THEREIN THAT THE ATTACHED LETTER OF THE SAME DATE TO THE COMMANDING OFFICER, U.S. ARMY TRANSPORTATION MATERIAL COMMAND, ST. LOUIS, MISSOURI, WAS ENCLOSED FOR OUR INFORMATION ONLY, WE DID NOT TAKE ACTION THEREON.

YOU CONTEND THAT THE BEST INTERESTS OF THE GOVERNMENT HAVE BEEN JEOPARDIZED BY THE INCLUSION OF TOTAL SMALL BUSINESS SET-ASIDES AN INVITATION TO BID BECAUSE IT HAS RESULTED IN GREATER COSTS TO THE GOVERNMENT. YOU ALSO CONTEND THAT THE SUBSTANTIAL DIFFERENCE BETWEEN YOUR LOW BID AND THE NEXT LOW BID RECEIVED FROM A SMALL BUSINESS CONCERN WARRANTS THE CANCELLATION OF THE INVITATION IN QUESTION AND THE ISSUANCE OF A NEW NONRESTRICTIVE INVITATION, NAMELY, ONE THAT IS OPEN TO LARGE AND SMALL BUSINESS CONCERNS.

SECTION 15 OF THE SMALL BUSINESS ACT OF 1958, APPROVED JULY 18, 1958, 15 U.S.C. 644, PROVIDES, IN PART, AS FOLLOWS:

"TO EFFECTUATE THE PURPOSES OF THIS CHAPTER, SMALL-BUSINESS CONCERNS WITHIN THE MEANING OF THIS CHAPTER SHALL RECEIVE ANY AWARD OF CONTRACT OR ANY PART THEREOF, AND BE AWARDED ANY CONTRACT FOR THE SALE OF GOVERNMENT PROPERTY, AS TO WHICH IT IS DETERMINED BY THE ADMINISTRATION AND THE CONTRACTING PROCUREMENT OR DISPOSAL AGENCY (1) TO BE IN THE INTEREST OF MAINTAINING OR MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY, (2) TO BE IN THE INTEREST OF WAR OR NATIONAL DEFENSE PROGRAMS, (3) TO BE IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT ARE PLACED WITH SMALL-BUSINESS CONCERNS, * * *.'

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

"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 CONCERNS. * * *"

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 A 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 1-707.6 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 VERTISING.' 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.'

IT APPEARS THAT BASED ON AN EVALUATION OF PROCUREMENT DATA BY THE U.S. ARMY TRANSPORTATION MATERIAL COMMAND FOR IDENTICAL EQUIPMENT IT WAS DETERMINED THAT BIDS COULD BE EXPECTED FROM A SUFFICIENT NUMBER OF SMALL BUSINESS FIRMS AND THAT AN AWARD COULD BE MADE AT A REASONABLE PRICE. THE DETERMINATION WAS BASED ON THE FOLLOWING PROCUREMENT DATA REPORTED IN TELEGRAM OF JANUARY 13, 1961, TO YOU, AS FOLLOWS:

"* * * SUBJECT IFB TC 23-204-61-59 OPENING 28 DECEMBER 1960 FOR 11 EACH AIRCRAFT HYDRAULIC SYSTEM TEST STANDS TYPE D-5A. THE SUPPLIES ON THIS IFB WERE DETERMINED TO BE SUITABLE FOR SMALL BUSINESS SET ASIDE AFTER THOROUGH REVIEW OF THE PROCUREMENT HISTORY OF THE ITEM AS FOLLOWS: IN 1958 CONTRACT PRICE OF AIR FORCE CONTRACT AF 14 (604/8305 AWARDED TO SUN ELECTRIC CORP FOR 42 EACH TEST STANDS AT $3,840.00 EA. IN 1960 IFB TC-23-204-60-196 BID BY SMALL BUSINESS FIRMS AND LARGE BUSINESS FIRMS INDICATED FURTHER THAT THIS ITEM WAS SUITABLE FOR A SET ASIDE. OF 20 FIRMS WHICH BID ON THIS PROCUREMENT 7 WERE LARGE BUSINESS AND 13 WERE SMALL BUSINESS. THE FOUR LOWEST BIDDERS OF THIS PROCUREMENT WERE SMALL BUSINESS FIRMS. THE FIFTH BIDDER, LARGE BUSINESS, SUN ELECTRIC BID PRICE OF $3,994.00 EACH ON THESE 61 UNITS. THE NEXT TWO BIDDERS WERE SMALL BUSINESS FIRMS. THIS INDICATED A GREATER ACTIVITY AMONG SMALL BUSINESS FIRMS. THE AWARDED BID PRICE ON THAT PROCUREMENT WAS $3,368.00 EACH. * * *"

SINCE THE PROCUREMENT WAS RESTRICTED TO SMALL BUSINESS CONCERNS AND YOU ARE A LARGE BUSINESS CONCERN, THE CONTRACTING OFFICER HAD NO ALTERNATIVE BUT TO REJECT YOUR BID.

THE SET-ASIDE OF THIS PROCUREMENT FOR SMALL BUSINESS APPEARS TO HAVE BEEN WITHIN THE FRAMEWORK OF PERTINENT LAWS AND REGULATIONS ON THE BASIS OF A DETERMINATION AUTHORIZED TO BE MADE BY THE CONTRACTING OFFICER AND THE SMALL BUSINESS ADMINISTRATION. WE, THEREFORE, FIND NO LEGAL BASIS ON WHICH TO QUESTION THE DEPARTMENT'S DETERMINATION TO PROCURE THE EQUIPMENT CALLED FOR IN THE INVITATION UNDER A TOTAL SET ASIDE FOR SMALL BUSINESS CONCERNS. YOUR PROTEST MUST THEREFORE BE DENIED.