B-145974, NOV. 16, 1961

B-145974, NOV. 16, 1961

BASIC-WITZ FURNITURE INDUSTRIES, INC.:

WE REFER TO YOUR LETTER OF AUGUST 11, 1961, AND OTHER CORRESPONDENCE, INCLUDING A MEMORANDUM SUBMITTED ON YOUR BEHALF BY ARNDT AND DAY, PROTESTING AGAINST THE 100 PERCENT SET-ASIDE FOR SMALL BUSINESS OF CERTAIN INVITATIONS ISSUED BY GENERAL SERVICES ADMINISTRATION FOR WOODEN HOUSEHOLD FURNITURE.

THE BASIS OF YOUR PROTEST MAY BE SUMMARIZED AS FOLLOWS: (1) THE PRESENT SIZE STANDARD OF 500 EMPLOYEES FOR SMALL BUSINESS IS ERRONEOUS AS APPLIED TO THE WOODEN FURNITURE INDUSTRY; (2) THE SMALL BUSINESS ACT OF 195 STATES AS ONE OF ITS PURPOSES THE PRESERVATION OF THE FREE COMPETITION WHICH IS THE ESSENCE OF THE AMERICAN ECONOMIC SYSTEM OF PRIVATE ENTERPRISE, A PURPOSE WHICH IS TO BE ACCOMPLISHED BY PLACING A "FAIR PROPORTION" OF GOVERNMENT CONTRACTS WITH SMALL BUSINESS; (3) SUCH "FAIR PROPORTION" OF GOVERNMENT BUSINESS MUST BE DETERMINED ON AN INDUSTRY BY INDUSTRY BASIS, RATHER THAN ON THE TOTALITY OF GOVERNMENT PROCUREMENT; (4) THE ACTIONS OF THE GENERAL SERVICES ADMINISTRATION IN RESERVING OVER 90 PERCENT OF RECENT FURNITURE PROCUREMENTS FOR SMALL BUSINESS PARTICIPATION ONLY IS VIOLATIVE OF THE REQUIREMENTS OF THE SMALL BUSINESS ACT; AND (5) THE GSA PRACTICE OF MAKING AWARD OF FURNITURE ITEMS ON A GROUP RATHER THAN ITEM BASIS IS MORE COSTLY TO THE GOVERNMENT.

WITH RESPECT TO YOUR FIRST POINT, IT IS NOTED THAT THE SMALL BUSINESS ADMINISTRATOR ANNOUNCED IN THE FEDERAL REGISTER UNDER DATE OF OCTOBER 21, 1961 (26 FED.REG. 9917), THAT AS A RESULT OF HEARINGS ON FEBRUARY 28, 1961, THE SMALL BUSINESS ADMINISTRATION PROPOSES TO AMEND THE DEFINITION OF SMALL BUSINESS FOR THE FURNITURE AND FIXTURES INDUSTRY (EXCLUDING METAL OFFICE FURNITURE AND WINDOW SHADES) TO REDUCE THE SIZE STANDARD FOR THAT INDUSTRY TO 250 EMPLOYEES. YOU REALIZE, OF COURSE, THAT THE DETERMINATION OF SIZE STANDARDS FOR DIFFERENT SMALL BUSINESS INDUSTRIES IS SPECIFICALLY PLACED IN THE HANDS OF THE SMALL BUSINESS ADMINISTRATOR BY SECTION 3 OF THE SMALL BUSINESS ACT, AND IS NOT A MATTER AS TO WHICH THE GENERAL ACCOUNTING OFFICE HAS ANY JURISDICTION. YOU REQUEST, HOWEVER, IN VIEW OF THE PENDING PROPOSED CHANGE IN SIZE STANDARDS, THAT WE ASK THE GENERAL SERVICES ADMINISTRATION TO HOLD UP AWARDS UNDER OUTSTANDING INVITATIONS, PRESUMABLY TO THE END THAT NEW INVITATIONS MAY BE ISSUED INCORPORATING THE NEW SIZE STANDARDS IF ADOPTED. WE DO NOT FEEL THAT WE MAY PROPERLY MAKE SUCH A REQUEST. THE GENERAL SERVICES ADMINISTRATION MUST CONTINUE TO SERVICE THE GOVERNMENT'S NEEDS FOR WOODEN FURNITURE DESPITE THE PROPOSED CHANGE IN SIZE STANDARDS. AWARDS ON SOME OF THE INVITATIONS INVOLVED HAVE ALREADY BEEN HELD UP FOR A CONSIDERABLE PERIOD OF TIME. WHILE WE ARE SURE THAT THE GENERAL SERVICES ADMINISTRATION WILL GIVE APPROPRIATE CONSIDERATION TO THE PROPOSED REDUCTION IN SIZE STANDARDS, IT IS OUR VIEW THAT THE DECISION WHETHER FURTHER DELAY IN THE PROCUREMENT OF SUCH FURNITURE IS JUSTIFIED RESTS WITHIN ITS DISCRETION.

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

YOU CONTEND THAT THE EFFECT OF THIS PRACTICE WITH REGARD TO SMALL BUSINESS SET-ASIDES IN THE GOVERNMENT-WIDE PROCUREMENT OF WOODEN HOUSEHOLD FURNITURE IS THAT THE SET-ASIDES EXCEED A FAIR PROPORTION OF THE AVAILABLE PROCUREMENTS IN YOUR INDUSTRY AND, THEREFORE, ARE CONTRARY TO LAW. YOU BASE THIS CONCLUSION ON THE CONTENTION THAT THE "FAIR PROPORTION" OF GOVERNMENT CONTRACTS TO BE PLACED WITH SMALL BUSINESS IN ACCORDANCE WITH THE SMALL BUSINESS ACT MUST BE COMPUTED SEPARATELY ON AN INDUSTRY BY INDUSTRY BASIS, AND THAT NO MORE THAN A "FAIR PROPORTION" OF THE TOTAL PROCUREMENTS FOR EACH SEPARATE INDUSTRY MAY BE SET ASIDE FOR SMALL BUSINESS.

IT IS THE VIEW OF THE SMALL BUSINESS ADMINISTRATOR, AS EXPRESSED IN HIS LETTER TO US OF OCTOBER 17, 1961, THAT SINCE THE SMALL BUSINESS ACT REFERS TO A FAIR PROPORTION OF THE "TOTAL" PURCHASES OF THE GOVERNMENT, THE TERM "FAIR PROPORTION" DOES NOT REFER TO ANY SINGLE PROCUREMENT OR SINGLE INDUSTRY BUT RATHER TO THE TOTALITY OF GOVERNMENT PROCUREMENT. WE HAVE SO FAR FOUND NO CONCLUSIVE EVIDENCE ON THIS POINT IN THE LEGISLATIVE HISTORY AND THE MATTER IS RECEIVING FURTHER STUDY. HOWEVER, WE DO NOT BELIEVE IT IS NECESSARY TO RULE ON THIS PARTICULAR POINT IN ORDER TO DECIDE THE INSTANT CASE.

EVEN IF WE ASSUME FOR THE PURPOSE OF ARGUMENT THAT THE TERM "FAIR PROPORTION" APPLIES ON AN INDUSTRY BY INDUSTRY BASIS, WE DO NOT BELIEVE THE EVIDENCE BEFORE US SUPPORTS THE CONCLUSION THAT MORE THAN A FAIR PROPORTION OF PROCUREMENTS OF WOODEN FURNITURE HAS BEEN SET ASIDE BY GSA FOR SMALL BUSINESS. YOUR OWN TABULATION OF INVITATIONS FOR WOODEN CASE GOODS AND UPHOLSTERED FURNITURE ISSUED BY THE WASHINGTON OFFICE OF GSA SINCE APRIL 28, 1961, HAS BEEN ANALYZED BY GSA IN TERMS OF THE PERCENTAGE OF TOTAL DOLLAR VOLUME THEREOF WHICH HAS BEEN SET ASIDE FOR SMALL BUSINESS. THE TWO CANCELLED INVITATIONS HAVE BEEN EXCLUDED, FOR OBVIOUS REASONS, AND THERE HAVE ALSO BEEN EXCLUDED THE INVITATION FOR TABLE AND FLOOR LAMPS (WHICH ARE NOT WOODEN CASE GOODS OR UPHOLSTERED FURNITURE) AND THE ONE FEDERAL SUPPLY SCHEDULE INVITATION (SINCE THERE HAVE BEEN A NUMBER OF FEDERAL SUPPLY SCHEDULE INVITATIONS). THIS LEAVES A TOTAL OF 25 CASE GOODS INVITATIONS AND 9 UPHOLSTERED FURNITURE INVITATIONS. IT IS TRUE, AS YOU STATE, THAT 27 OF THESE 34 INVITATIONS WERE RESTRICTED ENTIRELY TO SMALL BUSINESS, AND THAT TWO OTHERS HAD PARTIAL SMALL BUSINESS RESTRICTIONS. HOWEVER, YOUR TABULATION FAILS TO STATE THE DOLLAR AMOUNT OF THESE INVITATIONS, WHICH IS, WE BELIEVE, THE ONLY VALID BASIS UPON WHICH A "FAIR PROPORTION" CAN BE DETERMINED.

THE TOTAL DOLLAR VALUE OF THESE 34 INVITATIONS, BASED ON AWARDS MADE AND ESTIMATES FOR THOSE NOT YET AWARDED, IS $4,734,912. OF THIS TOTAL SMALL BUSINESS SET-ASIDES WERE APPLICABLE TO $3,097,312, LEAVING $1,637,600 OR 36 PERCENT OPEN TO BID BY OTHER THAN SMALL BUSINESS. THERE MUST ALSO BE CONSIDERED THE FACT THAT NO SET-ASIDES ARE APPLICABLE TO FEDERAL SUPPLY SCHEDULE CONTRACTS, THE TOTAL VALUE OF WHICH FOR THE FISCAL YEAR 1961 FOR WOODEN CASE GOODS AND UPHOLSTERED FURNITURE AMOUNTED TO $2,321,209. ALSO, SINCE WE FIND NO BASIS FOR REFUSING TO CONSIDER THE MANUFACTURE OF SOLID WOODEN FURNITURE AS A PART OF THE WOODEN FURNITURE INDUSTRY, THERE MUST BE CONSIDERED ANOTHER SEGMENT OF WOODEN FURNITURE PROCUREMENT BY THE WEST COAST OFFICES OF GSA DURING THE EARLY PART OF 1961 WHICH WAS NOT RESTRICTED TO SMALL BUSINESS, AND WHICH HAD A VALUE OF OVER $4,000,000. WHILE WE RECOGNIZE THAT THE PERIODS COVERED ARE NOT IDENTICAL, THE ADDITION OF THE FOREGOING FIGURES SHOWS A TOTAL VALUE OF OVER $11,000,000, OF WHICH SMALL BUSINESS SET-ASIDES APPLIED TO ONLY $3,097,312, OR LESS THAN 29 PERCENT.

WE ARE UNABLE TO CONCLUDE, IN THE LIGHT OF THIS INFORMATION, THAT MORE THAN A FAIR PROPORTION OF WOODEN FURNITURE PROCUREMENTS HAS BEEN SET ASIDE BY GSA FOR SMALL BUSINESS, REGARDLESS OF THE INTERPRETATION GIVEN THE TERM "FAIR PROPORTION.'

YOUR REMAINING CONTENTION PERTAINS TO THE RELATIVE ECONOMY OF PURCHASING FURNITURE ON AN ITEM BY ITEM BASIS AS OPPOSED TO ITS PURCHASE IN A GROUP OR RELATED SET. WE ARE ADVISED BY GENERAL SERVICES ADMINISTRATION THAT IN THE COMMERCIAL MARKET FURNITURE IS NORMALLY PURCHASED IN SUITES, AND THAT MANUFACTURERS SHOULD THEREFORE BE IN A POSITION TO QUOTE LOWER PRICES ON AGGREGATE QUANTITIES OF RELATED ITEMS. IT IS THE OPINION OF GSA THAT PRICES QUOTED ON AN AGGREGATE BASIS WILL BE GENERALLY LOWER THAN PRICES ON AN INDIVIDUAL ITEM BASIS. OBVIOUSLY, PRICES QUOTED FOR PARTICULAR ITEMS WITHIN A GROUP WHICH IS TO BE AWARDED ON AN AGGREGATE BASIS CANNOT BE ASSUMED TO BE THE PRICES AT WHICH SUCH PIECES WOULD BE PRICED ON AN INDIVIDUAL BASIS. IN ANY EVENT, WHETHER TO PURCHASE BY GROUP OR BY ITEM IS A MATTER FOR DECISION BY THE PURCHASING ACTIVITY, AND IN THE ABSENCE OF PERSUASIVE EVIDENCE OF IMPROVIDENCE WE PERCEIVE NO BASIS FOR OBJECTING TO THE MANNER IN WHICH SUCH ADMINISTRATIVE DISCRETION IS EXERCISED.

FOR THE FOREGOING REASONS, WE MUST CONCLUDE THAT YOU HAVE PRESENTED NO VALID LEGAL BASIS UPON WHICH WE COULD OBJECT TO THE MAKING OF AWARDS BY GENERAL SERVICES ADMINISTRATION UNDER THE SEVERAL INVITATIONS CONCERNED. ACCORDINGLY, YOUR PROTEST IS DENIED.