B-146438, OCTOBER 16, 1961, 41 COMP. GEN. 252

B-146438: Oct 16, 1961

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CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SELF-CERTIFICATION A DETERMINATION BY THE SMALL BUSINESS ADMINISTRATION A MONTH AFTER AN AWARD OF A MILITARY CONSTRUCTION CONTRACT THAT THE CONTRACTOR WAS NOT A SMALL BUSINESS CONCERN ALTHOUGH AT THE TIME OF SUBMISSION OF THE BID THE BIDDER CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN ON THE BASIS OF TWO PREVIOUS DETERMINATIONS BY THE SMALL BUSINESS ADMINISTRATION THAT ITS SIZE QUALIFIED IT AS A SMALL BUSINESS FIRM FOR GOVERNMENT CONSTRUCTION PROCUREMENTS DOES NOT REQUIRE CANCELLATION OF A CONTRACT MADE TO A BIDDER IN GOOD FAITH ON THE BASIS OF A SELF CERTIFICATION THAT WAS IN FULL FORCE ON THE DATE OF AWARD. 1961: REFERENCE IS MADE TO YOUR LETTERS DATED JULY 14.

B-146438, OCTOBER 16, 1961, 41 COMP. GEN. 252

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SELF-CERTIFICATION A DETERMINATION BY THE SMALL BUSINESS ADMINISTRATION A MONTH AFTER AN AWARD OF A MILITARY CONSTRUCTION CONTRACT THAT THE CONTRACTOR WAS NOT A SMALL BUSINESS CONCERN ALTHOUGH AT THE TIME OF SUBMISSION OF THE BID THE BIDDER CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN ON THE BASIS OF TWO PREVIOUS DETERMINATIONS BY THE SMALL BUSINESS ADMINISTRATION THAT ITS SIZE QUALIFIED IT AS A SMALL BUSINESS FIRM FOR GOVERNMENT CONSTRUCTION PROCUREMENTS DOES NOT REQUIRE CANCELLATION OF A CONTRACT MADE TO A BIDDER IN GOOD FAITH ON THE BASIS OF A SELF CERTIFICATION THAT WAS IN FULL FORCE ON THE DATE OF AWARD.

TO THE MISHARA CONSTRUCTION COMPANY, INC., OCTOBER 16, 1961:

REFERENCE IS MADE TO YOUR LETTERS DATED JULY 14, 19 AND AUGUST 15, 1961, PROTESTING THE AWARD OF CONTRACT NO. DA-19-016-ENG-7240 FOR CONSTRUCTION OF AN ADDITION TO A PARACHUTE AND DINGHY SHOP, DOW AIR FORCE BASE, BANGOR, MAINE, TO DAWSON, JOHNSON AND KIBLER, INC., PORTLAND, MAINE, BY THE CORPS OF ENGINEERS, DEPARTMENT OF THE ARMY. YOUR PROTEST IS MADE ON THE BASIS THAT DAWSON, JOHNSON AND KIBLER, INC., IS AN AFFILIATE OF A LARGE BUSINESS CONCERN--- CONSOLIDATED CONSTRUCTORS, INC., OF PORTLAND, MAINE--- AND, AS SUCH, UNQUALIFIED TO BID ON CONTRACTS UNDER THE SMALL BUSINESS SET-ASIDE PROGRAM.

THE RECORD BEFORE THIS OFFICE SHOWS THAT INVITATION FOR BIDS NO. ENG 19- 016-61-65 WAS ISSUED ON JUNE 8, 1961. THIS INVITATION WAS SUBSEQUENTLY MODIFIED IN CERTAIN RESPECTS NOT PERTINENT HERE BY THREE ADDENDA DATED JUNE 14, 20 AND 22, 1961. BIDS WERE OPENED ON JUNE 27, 1961.

THREE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION WITH THE FOLLOWING PRICES:

CHART

DAWSON, JOHNSON AND KIBLER, INC. $51,451

MISHARA CONSTRUCTION CO., INC. 54,346

A. P. WHITAKER AND SONS, RANDOLPH, MASSACHUSETTS 63,969

BASED ON A DETERMINATION BY THE CONTRACTING OFFICE, IN CONJUNCTION WITH A REPRESENTATIVE OF THE SMALL BUSINESS ADMINISTRATION, THAT THE PROJECT SHOULD BE RESTRICTED TO SMALL BUSINESS CONCERNS, THE INVITATION FOR BIDS CONTAINED A NOTICE IN PARAGRAPH 11 OF SUPPLEMENT TO INVITATION FOR BIDS THAT " BIDS UNDER THIS INVITATION ARE SOLICITED FROM SMALL BUSINESS CONCERNS ONLY AND THE CONTRACT WILL BE AWARDED ONLY TO A SMALL BUSINESS CONCERN OR CONCERNS.'

IN A REPORT DATED AUGUST 21, 1961, SUBMITTED BY THE DEPARTMENT OF THE ARMY, IT IS STATED THAT THE LOW BIDDER, DAWSON, JOHNSON AND KIBLER, INC., REPRESENTED ON ITS BID THAT THE FIRM WAS A SMALL BUSINESS CONCERN AND THAT THIS BID WAS RESPONSIVE IN ALL RESPECTS TO THE INVITATION. ACCORDINGLY, ON JUNE 30, 1961, THE CONTRACT WAS AWARDED TO DAWSON, JOHNSON AND KIBLER, INC.

IT IS FURTHER REPORTED THAT ON JULY 6, 1961, YOU PROTESTED THE AWARD TO THE CONTRACTING OFFICER PREDICATED UPON YOUR OPINION THAT DAWSON, JOHNSON AND KIBLER, INC., DID NOT QUALIFY AS A SMALL BUSINESS CONCERN. IT IS STATED YOU WERE ADVISED BY THE CONTRACTING OFFICER THAT THE SMALL BUSINESS STATUS OF DAWSON, JOHNSON AND KIBLER, INC., HAD BEEN RECENTLY REAFFIRMED BY THE SMALL BUSINESS ADMINISTRATION AND THAT THE MATTER COULD BE PURSUED WITH THE SMALL BUSINESS ADMINISTRATION, WHICH AGENCY WOULD ISSUE A DETERMINATION TO HAVE EFFECT ON FUTURE JOBS.

A REPORT FROM THE SMALL BUSINESS ADMINISTRATION DATED SEPTEMBER 1, 1961, OUTLINES THE BACKGROUND EVENTS CONCERNING THE SIZE STATUS DETERMINATIONS MADE BY THAT AGENCY AS FOLLOWS:

THIS IS IN REPLY TO YOUR REQUEST FOR A COMPLETE REPORT ON THE ACTIONS TAKEN BY THIS AGENCY WITH REGARD TO THE SMALL BUSINESS STATUS OF DAWSON, JOHNSON AND KIBLER, TOGETHER WITH COPIES OF SUCH PAPERS OR DOCUMENTS AS MAY BE PERTINENT TO A CERTAIN COMPLAINT BROUGHT BY MISHARA CONSTRUCTION COMPANY, INC. OF EAST NATICK, MASSACHUSETTS.

THIS CASE WAS FIRST BROUGHT TO OUR ATTENTION WHEN LT. COLONEL J. T. MCQUAIDE OF THE U.S. ARMY ENGINEER DIVISION, NEW ENGLAND, REQUESTED A SIZE DETERMINATION ON DAWSON, JOHNSON AND KIBLER ON NOVEMBER 14, 1960 (SEE EXHIBIT A) AT THIS AGENCY'S REQUEST.

BASED UPON THAT REQUEST, THE THEN DEPUTY ADMINISTRATOR FOR PROCUREMENT AND TECHNICAL ASSISTANCE DETERMINED THAT DAWSON, JOHNSON AND KIBLER, INC. WAS NOT A SMALL BUSINESS FOR GOVERNMENT CONSTRUCTION PROCUREMENTS SINCE IT WAS AFFILIATED WITH CONSOLIDATED CONSTRUCTORS, INC. OF PORTLAND, MAINE, AND NEW YORK CITY, NEW YORK. ( SEE EXHIBIT B)

BY LETTER DATED DECEMBER 5, 1960, DAWSON, JOHNSON AND KIBLER, INC. APPEALED THE DEPUTY ADMINISTRATOR'S DETERMINATION. ( SEE EXHIBIT C)

PRIOR TO THE APPEAL BEING HEARD, DAWSON, JOHNSON AND KIBLER, INC. REQUESTED A PERSONAL INTERVIEW WITH SBA EMPLOYEES AND WAS GRANTED SUCH INTERVIEW. A MEETING WAS HELD WITH SAMUEL S. SOLOMON, DIRECTOR OF THE OFFICE OF SMALL BUSINESS SIZE STANDARDS ON DECEMBER 16, 1960. DURING THE MEETING A REPRESENTATIVE OF DAWSON, JOHNSON AND KIBLER, INC. PRESENTED PROPOSALS TO REORGANIZE THE COMPANY SO THAT IT WOULD NOT BE CONSIDERED AFFILIATED WITH CONSOLIDATED CONSTRUCTORS, INC. ( SEE EXHIBIT D--- LETTER FROM JOHN A. KIBLER TO SAMUEL S. SOLOMON DATED DECEMBER 29, 1960.)

ON JANUARY 13, DAWSON, JOHNSON AND KIBLER, INC. WAS SENT A LETTER REVIEWING ITS PROPOSAL AND WAS ADVISED THAT UPON RECEIPT OF DOCUMENTATION OF CERTAIN CHANGES A SIZE DETERMINATION WOULD BE MADE. ( SEE EXHIBIT E)

BY LETTER DATED JANUARY 23, 1961, DAWSON, JOHNSON AND KIBLER, INC. SUBMITTED CERTAIN DOCUMENTS AND REQUESTED APPROVAL OF THE REORGANIZATION SO THAT IT MAY BID AS A SMALL BUSINESS FOR GOVERNMENT CONSTRUCTION PROCUREMENTS. ( SEE EXHIBIT F)

ON FEBRUARY 13, 1961, THE THEN ACTING DEPUTY ADMINISTRATOR DETERMINED THAT DAWSON, JOHNSON AND KIBLER, INC. AND CONSOLIDATED CONSTRUCTORS, INC. WERE NO LONGER AFFILIATED WITHIN THE MEANING OF THE SMALL BUSINESS SIZE STANDARDS REGULATION, AND THAT DAWSON, JOHNSON AND KIBLER, INC. COULD SELF -CERTIFY THAT IT WAS A SMALL BUSINESS FOR THE PURPOSE OF GOVERNMENT CONSTRUCTION PROCUREMENTS. ( SEE EXHIBIT G)

BY LETTER DATED MAY 23, 1961, COUNSEL FOR THE FRANCHI CONSTRUCTION COMPANY, INC. OF NEWTON, MASSACHUSETTS, PROTESTED THE SIZE STATUS OF DAWSON, JOHNSON AND KIBLER, INC. IN CONNECTION WITH CONTRACT NBY 3349. THIS PROTEST WAS SENT TO THE SBA BOSTON REGIONAL OFFICE. ( SEE EXHIBIT H)

AT THE REQUEST OF THIS AGENCY, DAWSON, JOHNSON AND KIBLER, INC. SUBMITTED A NEW APPLICATION FOR DETERMINATION OF SIZE STATUS TOGETHER WITH A LETTER DATED MAY 26, 1961. ( SEE EXHIBIT I)

ON JUNE 6, 1961, THE DIRECTOR, OFFICE OF SMALL BUSINESS SIZE STANDARDS, DETERMINED THAT DAWSON, JOHNSON AND KIBLER, INC. WAS A SMALL BUSINESS CONCERN FOR THE PURPOSE OF GOVERNMENT CONSTRUCTION PROCUREMENTS. ( SEE EXHIBIT J)

ON JUNE 14, 1961, COUNSEL FOR FRANCHI CONSTRUCTION COMPANY, INC. PROTESTED THE DETERMINATION OF JUNE 6, 1961 TO THE SIZE APPEALS BOARD. SEE EXHIBIT K)

ON AUGUST 8, 1961, THE SIZE APPEALS BOARD DETERMINED THAT DAWSON, JOHNSON AND KIBLER IS NOT A SMALL BUSINESS CONCERN FOR PROCUREMENT PURPOSES AND NOTIFIED DAWSON, JOHNSON AND KIBLER AND COUNSEL FOR THE FRANCHI CONSTRUCTION COMPANY, INC. OF ITS FINDINGS. ( SEE EXHIBIT L)

SINCE AWARD OF THE CONTRACT TO DAWSON, JOHNSON AND KIBLER, INC., WAS MADE ON THE BASIS OF ITS CERTIFICATION THAT IT WAS A SMALL BUSINESS CONCERN, THE PRIMARY QUESTION FOR CONSIDERATION IS WHETHER THE DETERMINATION MADE AFTER AWARD THAT DAWSON, JOHNSON AND KIBLER, INC., WAS NOT A SMALL BUSINESS CONCERN PRIOR TO AWARD RENDERED THE RESULTING CONTRACT A NULLITY.

PARAGRAPH 1-703 OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES AS FOLLOWS:

1-703 DETERMINATION OF STATUS AS SMALL BUSINESS CONCERN.

(A) EXCEPT AS PROVIDED IN (B) BELOW, THE CONTRACTING OFFICER SHALL ACCEPT AT FACE VALUE (I) A SMALL BUSINESS CERTIFICATE (SEE 1-701.1 (E) ( THAT A BIDDER OR OFFEROR IS A SMALL BUSINESS CONCERN OR (II) A STATEMENT BY THE BIDDER OR OFFEROR THAT IT IS A SMALL BUSINESS CONCERN (SEE 1-701.1 AND 1- 701.4) AND THAT IT HAS NOT PREVIOUSLY BEEN DENIED SMALL BUSINESS STATUS BY SBA.

(B) SMALL BUSINESS CERTIFICATES AND STATEMENTS THAT A BIDDER OR OFFEROR IS A SMALL BUSINESS CONCERN SHALL BE EFFECTIVE, EVEN THOUGH QUESTIONED IN ACCORDANCE WITH THE TERMS OF THIS SUBPARAGRAPH (B), UNLESS THE SBA, IN RESPONSE TO SUCH QUESTION AND WITHIN THE PERIOD SPECIFIED IN (3) BELOW, DETERMINES THAT THE BIDDER OR OFFEROR IN QUESTION IS NOT A SMALL BUSINESS CONCERN.

(1) ANY BIDDER OR OFFEROR MAY, PRIOR TO AWARD, QUESTION THE SMALL BUSINESS STATUS OF THE APPARENTLY SUCCESSFUL BIDDER OR OFFEROR BY SENDING A WRITTEN PROTEST TO THE CONTRACTING OFFICER AND TO THE SBA REGIONAL OFFICE FOR THE REGION IN WHICH THE QUESTIONED BIDDER OR OFFEROR HAS HIS PRINCIPAL PLACE OF BUSINESS. SBA WILL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF THE DATE OF ITS RECEIPT OF ANY SUCH PROTEST AND WILL ADVISE THE QUESTIONED BIDDER OR OFFEROR THAT HIS SMALL BUSINESS STATUS IS UNDER REVIEW.

(2) A CONTRACTING OFFICER MAY, PRIOR TO AWARD, QUESTION THE SMALL BUSINESS STATUS OF THE APPARENTLY SUCCESSFUL BIDDER OR OFFEROR BY SENDING A WRITTEN NOTICE TO THE SBA REGIONAL OFFICE FOR THE REGION IN WHICH THE BIDDER OR OFFEROR HAS HIS PRINCIPAL PLACE OF BUSINESS. SUCH NOTICE SHALL CONTAIN A STATEMENT OF THE BASIS FOR QUESTIONING AND OF AVAILABLE SUPPORTING FACTS. SBA WILL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF THE DATE SUCH NOTICE WAS RECEIVED AND WILL ADVISE THE BIDDER OR OFFEROR IN QUESTION THAT HIS SMALL BUSINESS STATUS IS UNDER REVIEW.

(3) SBA WILL DETERMINE THE SMALL BUSINESS STATUS OF THE QUESTIONED BIDDER OR OFFEROR AND NOTIFY THE CONTRACTING OFFICER AND THE BIDDER OR OFFEROR OF ITS DECISION. IF THE SBA DETERMINATION IS NOT RECEIVED BY THE CONTRACTING OFFICER WITHIN TEN WORKING DAYS AFTER SBA'S RECEIPT OF THE PROTEST OR NOTICE QUESTIONING SMALL BUSINESS STATUS, IT SHALL BE PRESUMED THAT THE QUESTIONED BIDDER OR OFFEROR IS A SMALL BUSINESS CONCERN. PENDING SBA DETERMINATION OR EXPIRATION OF THE TEN-DAY PERIOD, WHICHEVER IS EARLIER, PROCUREMENT ACTION SHALL BE SUSPENDED.

UNDER THESE REGULATIONS A CONTRACTING OFFICER IS REQUIRED TO ACCEPT A SMALL BUSINESS SELF-CERTIFICATION AT FACE VALUE IN THE ABSENCE OF A TIMELY WRITTEN PROTEST BY OTHER INTERESTED BIDDERS. THE RECORD SHOWS THAT PRIOR TO THE TIME WHEN THE SUBJECT INVITATION FOR BIDS WAS ISSUED ( JUNE 8, 1961), A TOTAL OF THREE SIZE DETERMINATIONS HAD BEEN MADE BY THE SMALL BUSINESS ADMINISTRATION WITH REGARD TO DAWSON, JOHNSON AND KIBLER, INC.--- THE LAST TWO DETERMINATIONS FINDING THAT THE FIRM WAS A SMALL BUSINESS CONCERN FOR THE PURPOSE OF GOVERNMENT PROCUREMENT. THE FOURTH, AND FINAL, DETERMINATION TO THE EFFECT THAT DAWSON, JOHNSON AND KIBLER, INC., WAS NOT A SMALL BUSINESS CONCERN WAS MADE MORE THAN A MONTH AFTER THE CONTRACT HAD BEEN AWARDED. IT IS CLEAR FROM THE RECORD BEFORE US THAT THE SELF- CERTIFICATION BY DAWSON, JOHNSON AND KIBLER WAS IN FULL FORCE ON THE DATE OF AWARD. FURTHERMORE, THERE IS NO EVIDENCE TO INDICATE THAT DAWSON, JOHNSON AND KIBLER WAS IMPRUDENT OR LACKING IN GOOD FAITH WHEN IT CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN SINCE PRIOR TO THAT SELF- CERTIFICATION THE SMALL BUSINESS ADMINISTRATION HAD IN ITS TWO MOST RECENT DETERMINATIONS ON THE SIZE STATUS OF THE FIRM DECLARED THAT THE FIRM WAS A SMALL BUSINESS CONCERN. THUS, THE AWARD WAS MADE STRICTLY IN ACCORDANCE WITH THE APPLICABLE REGULATIONS.

FURTHERMORE, IN THE ABSENCE OF A PROTEST PRIOR TO AWARD FROM OTHER BIDDERS WHO WERE INTERESTED IN THE PROCUREMENT, A CONTRACT AWARDED IN GOOD FAITH ON THE BASIS OF A BIDDER'S STATEMENT THAT IT IS A SMALL BUSINESS CONCERN IS NOT VOID AB INITIO BUT IS VOIDABLE ONLY AT THE OPTION OF THE GOVERNMENT. B-137689, JANUARY 21, 1959. UNDER THE CIRCUMSTANCES OF THIS CASE, WE FEEL THAT IT WOULD BE INEQUITABLE AND WOULD SERVE NO USEFUL PURPOSE TO REQUIRE CANCELLATION OF A CONTRACT AWARDED TO A BIDDER WHO NOT ONLY CERTIFIED ITSELF AS A SMALL BUSINESS IN GOOD FAITH BUT WHO, ON THE BASIS OF TWO PRIOR DETERMINATIONS BY THE SMALL BUSINESS ADMINISTRATION, HAD EVERY REASON TO BELIEVE THAT ITS SELF-CERTIFICATION WAS BASED ON FIRM GROUND.

ACCORDINGLY, WE MUST CONCLUDE THAT NO LEGAL BASIS EXISTS FOR OBJECTING TO THE AWARD OF THE CONTRACT TO DAWSON, JOHNSON AND KIBLER, INC., AND YOUR PROTEST IS DENIED.