B-149333, AUGUST 10, 1962, 42 COMP. GEN. 108

B-149333: Aug 10, 1962

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CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - CERTIFICATES - REVOCATION A TOTAL SMALL BUSINESS SET-ASIDE WHICH WAS WITHDRAWN AFTER BID OPENING WHEN THE LOW BIDDER WAS RECLASSIFIED AS A LARGE BUSINESS CONCERN AND IT WAS LEARNED THAT SUCH BIDDER HAD BECOME ELIGIBLE AS A LARGE BUSINESS PLANNED EMERGENCY PRODUCER IN THE INTERIM BETWEEN ISSUANCE OF THE INVITATION AND BID OPENING NEED NOT HAVE BEEN WITHDRAWN AFTER THE RECLASSIFICATION OF THE LOW BIDDER SINCE THE PROVISIONS IN PARAGRAPH 1- 706.2 (B) (II) OF THE ARMED SERVICES PROCUREMENT REGULATION. WHICH PRECLUDE CONTRACTING OFFICERS FROM APPROVING TOTAL SET-ASIDES WHEN A LARGE BUSINESS PLANNED EMERGENCY PRODUCER DESIRES TO PARTICIPATE IN THE PROCUREMENT ARE NOT FOR APPLICATION AFTER A SET ASIDE HAS BEEN PROPERLY ESTABLISHED.

B-149333, AUGUST 10, 1962, 42 COMP. GEN. 108

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SET-ASIDES - WITHDRAWAL. CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - CERTIFICATES - REVOCATION A TOTAL SMALL BUSINESS SET-ASIDE WHICH WAS WITHDRAWN AFTER BID OPENING WHEN THE LOW BIDDER WAS RECLASSIFIED AS A LARGE BUSINESS CONCERN AND IT WAS LEARNED THAT SUCH BIDDER HAD BECOME ELIGIBLE AS A LARGE BUSINESS PLANNED EMERGENCY PRODUCER IN THE INTERIM BETWEEN ISSUANCE OF THE INVITATION AND BID OPENING NEED NOT HAVE BEEN WITHDRAWN AFTER THE RECLASSIFICATION OF THE LOW BIDDER SINCE THE PROVISIONS IN PARAGRAPH 1- 706.2 (B) (II) OF THE ARMED SERVICES PROCUREMENT REGULATION, WHICH PRECLUDE CONTRACTING OFFICERS FROM APPROVING TOTAL SET-ASIDES WHEN A LARGE BUSINESS PLANNED EMERGENCY PRODUCER DESIRES TO PARTICIPATE IN THE PROCUREMENT ARE NOT FOR APPLICATION AFTER A SET ASIDE HAS BEEN PROPERLY ESTABLISHED; THEREFORE, IF THE SMALL BUSINESS ADMINISTRATION AND THE PROCURING AGENCY DETERMINE THAT THE SET-ASIDE SHOULD BE REINSTATED, AN AWARD MAY BE MADE TO THE LOWEST RESPONSIBLE SMALL BUSINESS BIDDER, BUT IF THE SET-ASIDE IS NOT REINSTATED AN AWARD UNDER THE ORIGINAL INVITATION WOULD NOT BE PROPER. THE REVOCATION OF A SMALL BUSINESS CERTIFICATE ON ACCOUNT OF A BIDDER'S SIZE AFTER BID OPENING BUT PRIOR TO AWARD UNDER A TOTAL SMALL BUSINESS SET -ASIDE PROCUREMENT THAT WAS SUBSEQUENTLY WITHDRAWN DOES NOT PRECLUDE THE BIDDER FROM RECEIVING AN AWARD UNDER THE REINSTATED SET ASIDE, IF PRIOR TO AWARD A SMALL BUSINESS CERTIFICATE LIMITED TO THE PARTICULAR PROCUREMENT IS ISSUED SINCE HE WOULD THEN QUALIFY AS A SMALL BUSINESS AT THE TIME OF SUBMISSION OF THE BID AND AT THE TIME OF AWARD, THE TWO CONDITIONS FOR ELIGIBILITY FOR AWARD UNDER AN INVITATION RESTRICTED TO SMALL BUSINESS.

TO THE SECRETARY OF THE ARMY, AUGUST 10, 1962:

THIS REFERS TO THE LETTERS OF JULY 11, 1962, AND JULY 30, 1962, FROM THE ASSISTANT SECRETARY OF THE ARMY (INSTALLATIONS AND LOGISTICS), REQUESTING AN ADVANCE DECISION FROM THIS OFFICE WITH RESPECT TO INVITATION FOR BIDS NO. DA-ENG-11-184-62-BE-62-JD, ISSUED ON JANUARY 19, 1962, BY THE UNITED STATES ARMY ENGINEER PROCUREMENT OFFICE, CHICAGO, ILLINOIS.

THE SALIENT FACTS ARE AS FOLLOWS:

THE SUBJECT INVITATION CALLS FOR A QUANTITY OF 2,500 EACH WEAPONSIGHTS, INFRARED, LIGHT SOURCE IN ACCORDANCE WITH REFERENCED SPECIFICATIONS. THE ITEM IN QUESTION IS STATED TO BE A COMPACT, BUT VERY COMPLEX ELECTRONIC INSTRUMENT WHICH IS ATTACHED TO A MILITARY RIFLE AND UTILIZES INFRARED RAYS TO FACILITATE NIGHT FIRING OF BASIC INFANTRY WEAPONS AND ALSO AS AN AID IN THE DETECTION OF ENEMY USE OF INFRARED LIGHT SOURCES. IT IS ALSO USED AS A GENERAL PURPOSE INFRARED SURVEILLANCE TELESCOPE. OF THE TOTAL QUANTITY, 1,200 OF THE UNITS ARE DESTINED FOR THE ARMY AND 1,300 FOR THE MARINE CORPS.

PURSUANT TO A JOINT DETERMINATION BY THE PROCUREMENT OFFICE AND THE SMALL BUSINESS ADMINISTRATION, THE INVITATION WAS ISSUED AS A 100 PERCENT SET- ASIDE FOR SMALL BUSINESS CONCERNS.

THE CONTRACTING OFFICER REPORTS THAT WHILE A SIMILAR DEVICE, KNOWN AS A "SNIPERSCOPE," HAD BEEN PROCURED IN THE PAST BY THE ADMINISTRATIVE OFFICE, THE ONLY PRODUCTION CONTRACT FOR THE WEAPONSIGHT INVOLVED HERE, WHICH CONTAINS SUBSTANTIAL IMPROVEMENTS AND REFINEMENTS OVER THE ,SNIPERSCOPE," WAS ONE AWARDED TO VARO, INCORPORATED, IN MAY 1960, CALLING FOR 4,000 UNITS, ALL OF WHICH HAD BEEN DELIVERED. AT THE TIME THE PRESENT INVITATION WAS ISSUED IT WAS ASCERTAINED THAT VARO WAS A SMALL BUSINESS CONCERN.

BID OPENING WAS HELD ON JUNE 4, 1962, AND 9 BIDS WERE RECEIVED. VARO WAS FOUND TO BE THE LOW BIDDER AS TO PRICE, EVALUATED AT $113,602.73 LOWER THAN THE SECOND LOW BIDDER AT A TOTAL BID, CONSIDERING ALL EVALUATING FACTORS, OF APPROXIMATELY $1,500,000.

IT APPEARS THAT VARO EMPLOYS MORE THAN 500 BUT LESS THAN 1,000 EMPLOYEES, AND THAT IT HAD OBTAINED AN SBA CERTIFICATION THAT IT WAS A SMALL BUSINESS CONCERN FOR THE PURPOSES OF GOVERNMENT PROCUREMENT OF INFRARED VIEWING DEVICES. HOWEVER, ON JUNE 29, 1962, THE PROCURING OFFICE RECEIVED NOTICE FROM SBA WITHDRAWING VARO'S SMALL BUSINESS STATUS. IN EXPLAINING ITS ACTION OF JUNE 29, 1962, SBA STATED THAT:

* * * SBA DOES NOT FIND AT THE PRESENT TIME THERE ARE A LIMITED NUMBER OF SMALL CONCERNS CAPABLE OF PRODUCING INFRARED VIEWING DEVICES. THERE MAY BE CERTAIN INFRARED VIEWING DEVICES, WHICH ARE BEYOND THE PRODUCTION CAPABILITIES OF SMALL CONCERNS. IF A CONCERN REQUESTS CERTIFICATION FOR A PARTICULAR INFRARED VIEWING DEVICE AND IT CAN BE SHOWN THAT SUCH A VIEWING DEVICE IS NOT WITHIN THE CAPABILITIES OF MORE THAN A LIMITED NUMBER OF SMALL BUSINESSES, SBA WILL CONSIDER ISSUING A SMALL BUSINESS CERTIFICATE FOR THE PARTICULAR DEVICE. HOWEVER, IN VIEW OF THE FACTS STATED ABOVE, SBA DOES NOT PLAN TO CONTINUE TO ISSUE SMALL BUSINESS CERTIFICATES FOR THE BROAD CLASSIFICATION OF INFRARED VIEWING DEVICES.

VARO APPEALED THIS DETERMINATION TO THE SBA SIZE APPEAL BOARD, AND WE ARE ADVISED BY SBA THAT THIS APPEAL WAS DENIED ON AUGUST 1, 1962.

MEANWHILE, BY LETTER OF JULY 2, 1962, TO THE SBA REPRESENTATIVE, THE CONTRACTING OFFICER REQUESTED THAT THE SET-ASIDE UNDER THE INVITATION BE WITHDRAWN. THE LETTER STATES AS FOLLOWS:

AT THE TIME OF THE JOINT SET-ASIDE FOR SMALL BUSINESS (4 JANUARY 1962) WE WERE INFORMED THAT VARO QUALIFIED AS A SMALL BUSINESS CONCERN. THE SET- ASIDE WOULD NOT HAVE BEEN MADE IF VARO HAD BEEN CONSIDERED LARGE BUSINESS BECAUSE THIS WOULD HAVE EXCLUDED FROM COMPETITION THE ONLY PROVEN AND PLANNED EMERGENCY PRODUCER OF THE WEAPONSIGHT. ALSO SEE ASPR 1-706.2 (B) (II).

BY LETTER OF JULY 3, 1962, THE SBA REPRESENTATIVE, MR. FRANK HNATEK, JR., AGREED TO THE WITHDRAWAL, AS FOLLOWS:

THIS CONFIRMS THIS WRITER'S WITHDRAWAL OF JOINT SET-ASIDE CASE NO. EPOC- 62-191. THIS IS IN CONNECTION WITH YOUR IFB-BE-62JD FOR THE INFRA-RED WEAPON SIGHT.

YOUR LETTER OF JULY 2, 1962 CONVERTING THE ORAL REQUEST TO A FORMAL REQUEST, WAS RECEIVED AND IS BEING USED AS THE BASIS FOR THE WITHDRAWAL.

ARMED SERVICES PROCUREMENT REGULATION 1-302.5 STATES THAT:

A "PLANNED EMERGENCY PRODUCER" IS A CONCERN WITH WHICH ONE OR MORE GOVERNMENT PROCURING ACTIVITIES HAVE NEGOTIATED AN EMERGENCY PRODUCTION ASSIGNMENT AND WHICH HOLDS A VALID PLANNED EMERGENCY PRODUCTION SCHEDULE SIGNED BY THE RESPONSIBLE ARMED SERVICES PROCUREMENT PLANNING OFFICER (ASPRO). IN PROCUREMENTS OF ITEMS FOR WHICH THERE ARE PLANNED EMERGENCY PRODUCERS, SUCH PRODUCERS SHALL BE SOLICITED.

ASPR 1-706.2 PROVIDES IN PART AS FOLLOWS:

(B) NONE OF THE FOLLOWING IS, IN ITSELF SUFFICIENT CAUSE FOR NOT MAKING A SET-ASIDE.

( (I) THE ITEM TO BE PURCHASED IS ON AN ESTABLISHED PLANNING LIST UNDER THE INDUSTRIAL READINESS PLANNING PROGRAM; EXCEPT THAT A TOTAL SET-ASIDE SHALL NOT BE AUTHORIZED WHEN ONE OR MORE LARGE BUSINESS PLANNED EMERGENCY PRODUCERS OF THE ITEM DESIRE TO PARTICIPATE IN THE PROCUREMENT;

THE ASSISTANT SECRETARY REPORTS THAT AS OF THE DATE THE INVITATION WAS ISSUED (JANUARY 19, 1962), THERE WERE NO PLANNED EMERGENCY PRODUCERS FOR THE ITEM IN QUESTION. ACTION TO ESTABLISH PLANNED EMERGENCY PRODUCERS OF THE ITEM WAS UNDERTAKEN ON JANUARY 22 AND ON MARCH 1, 1962, VARO BECAME THE FIRST TO QUALIFY. ON JUNE 29, 1962, WHEN VARO'S SMALL BUSINESS STATUS WAS REVOKED, A REPRESENTATIVE IN THE SECRETARY'S OFFICE INSTRUCTED THE CONTRACTING OFFICER "TO DO NOTHING" WITH RESPECT TO THE STATUS OF THIS PROCUREMENT WITHOUT FURTHER INSTRUCTIONS. HOWEVER, WITHDRAWAL ACTION WAS INITIATED BY THE CONTRACTING OFFICER ON JULY 2, 1962. THE ASSISTANT SECRETARY IS OF THE VIEW THAT ALL ACTIONS IN THE MATTER SHOULD BE TREATED AS IF THE SET ASIDE HAD NOT BEEN WITHDRAWN. THE CONTRACTING OFFICER HAS BEEN INSTRUCTED TO EXPLAIN THE SITUATION TO THE SMALL BUSINESS REPRESENTATIVE AND TO JOIN WITH HIM TO REINSTATE THE JOINT SET-ASIDE AS IT APPLIES TO THIS PENDING PROCUREMENT.

NO AWARD HAS BEEN MADE, BUT IT IS REPORTED THAT THE REQUISITIONING AGENCIES, PARTICULARLY THE MARINE CORPS, HAVE REQUESTED EXPEDITIOUS PROCUREMENT OF THE URGENTLY NEEDED WEAPONSIGHT.

OUR DECISION IS REQUESTED AS TO WHETHER ANY AWARD MAY NOW BE MADE UNDER THE INVITATION.

THE INVITATION WAS ISSUED WITH A TOTAL SMALL BUSINESS SET-ASIDE IN JANUARY, 1962, AND IT WAS OPENED ON JUNE 4, 1962. THE LOW BIDDER (VARO) WAS ESTABLISHED AS A PLANNED EMERGENCY PRODUCER OF THE ITEM IN MARCH, 1962, AND, IT WAS NOT UNTIL JUNE 29, 1962, WHEN VARO WAS RECLASSIFIED AS A LARGE BUSINESS CONCERN, THAT IT FIRST BECAME EVIDENT THAT A LARGE BUSINESS PLANNED EMERGENCY PRODUCER OF THE ITEM DESIRED TO PARTICIPATE IN THE PROCUREMENT. UNDER THE PROVISIONS OF ASPR 1 706.2 (B) (II) A CONTRACTING OFFICER IS NOT AUTHORIZED TO APPROVE A TOTAL SET-ASIDE RECOMMENDATION ON A PROCUREMENT, IF A LARGE BUSINESS PLANNED EMERGENCY PRODUCER OF THE ITEM DESIRES TO PARTICIPATE IN THE PROCUREMENT. WE DO NOT BELIEVE THIS REGULATION APPLIES AFTER THE SET ASIDE HAS BEEN PROPERLY ESTABLISHED.

ASPR 1-706.3 PROVIDES THAT THE CONTRACTING OFFICER MAY INITIATE WITHDRAWAL OF A JOINT SET-ASIDE DETERMINATION WHEN HE CONSIDERS THAT PROCUREMENT OF THE SET-ASIDE FROM A SMALL BUSINESS CONCERN WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST (E.G., BECAUSE OF UNREASONABLE PRICE). WE HAVE RECOGNIZED THAT THE WITHDRAWAL OF A SET-ASIDE WAS PROPER AFTER A PLANNED PRODUCER NO LONGER QUALIFIED AS A SMALL BUSINESS AND THE BID PRICES RECEIVED UNDER THE INVITATION WERE NOT CONSIDERED REASONABLE. SEE 37 COMP. GEN. 147. WE HAVE ALSO SUSTAINED WITHDRAWAL ACTION IN SITUATIONS WHERE A FIRM, WHOSE PRODUCT HAD BEEN PLACED ON A QUALIFIED PRODUCTS LIST, WAS PREVENTED FROM BIDDING BECAUSE IT DID NOT QUALIFY AS SMALL BUSINESS. B-144080, OCTOBER 26, 1960; B 1143426, OCTOBER 6, 1960; SEE ASPR 1-706.2 (B) (III). HOWEVER, WE AGREE WITH THE CONCLUSIONS OF YOUR ASSISTANT SECRETARY THAT THE SET ASIDE WAS NOT REQUIRED TO BE WITHDRAWN AFTER VARO WAS RECLASSIFIED AS LARGE BUSINESS ON JUNE 29.

AGREEMENT WAS REACHED ON JULY 3, 1962, BETWEEN THE CONTRACTING OFFICER AND THE SBA REPRESENTATIVE TO WITHDRAW THE 100 PERCENT SMALL BUSINESS SET- ASIDE. THE QUESTION WHETHER THE SET-ASIDE SHOULD NOW BE REINSTATED OR NOT IS, IN OUR OPINION, A MATTER FOR DETERMINATION BY THE DEPARTMENT OF THE ARMY AND THE SMALL BUSINESS ADMINISTRATION. IF THE SET-ASIDE IS REINSTATED, WE SEE NO REASON WHY AWARD CANNOT BE MADE UNDER THE INVITATION TO THE LOWEST RESPONSIBLE SMALL BUSINESS BIDDER. IF THE SET-ASIDE IS NOT REINSTATED, IT IS OUR OPINION THAT AWARD MAY NOT BE MADE UNDER THE PRESENT INVITATION. IN SUCH CASE, THE PROCUREMENT MAY BE READVERTISED OR, IF YOU FIND THAT THE URGENCY OF THE NEED FOR THE WEAPONSIGHTS DOES NOT PERMIT THE DELAY INCIDENT TO READVERTISING, THE PROCUREMENT MAY BE MADE BY NEGOTIATION UNDER SECTION 2304 (A) (2) OF TITLE 10, U.S.C.

THE SECOND QUESTION SUBMITTED IS WHETHER, ASSUMING REINSTATEMENT OF THE SET-ASIDE, AWARD MAY BE MADE TO THE LOWEST BIDDER WITHOUT REGARD TO THE CHANGE EFFECTED IN ITS STATUS BY THE SBA LETTER OF JUNE 29, 1962. THE LOW BIDDER OF COURSE IS VARO. AT THE TIME OF BID OPENING, JUNE 4, VARO HELD AN SBA CERTIFICATION THAT IT WAS A SMALL BUSINESS CONCERN. ON JUNE 29, 1962, SBA REVOKED VARO'S SMALL BUSINESS CERTIFICATE. WE HAVE HELD, GENERALLY, THAT THE FINAL DETERMINATION OF THE ELIGIBILITY OF A BIDDER AS A SMALL BUSINESS CONCERN IS MADE AS OF THE DATE OF AWARD. SEE B-143630, OCTOBER 13, 1960; ASPR 1-703 (B). A BIDDER MUST QUALIFY AS A SMALL BUSINESS AS A CONDITION FOR BIDDING UNDER AN INVITATION CONTAINING A TOTAL SMALL BUSINESS SET-ASIDE, AND HE MUST ALSO QUALIFY AS SMALL BUSINESS AT THE TIME OF RECEIVING THE AWARD. SEE 41 COMP. GEN. 252; ID. 47; 40 COMP. GEN. 550. ACCORDINGLY, IN ORDER TO BE ELIGIBLE FOR AWARD UNDER AN INVITATION RESTRICTED TO SMALL BUSINESS, VARO MUST QUALIFY AS A SMALL BUSINESS CONCERN AT THE TIME OF THE AWARD.

THE SECOND PART OF THE QUESTION IS WHETHER, AGAIN ASSUMING REINSTATEMENT OF THE SET-ASIDE, AN AWARD MAY BE MADE TO VARO IF THAT BIDDER NOW OBTAINS A FURTHER SMALL BUSINESS CERTIFICATE LIMITED TO THE PARTICULAR INFRA-RED WEAPONSIGHT BEING PROCURED. IN THIS CONNECTION OUR ATTENTION IS CALLED TO THE SBA LETTER OF JUNE 29, 1962, QUOTED ABOVE, WHICH APPEARS TO INVITE REQUESTS FOR CERTIFICATION FOR PARTICULAR INFRA-REDDEVICES AS DISTINGUISHED FROM INFRA-RED DEVICES IN GENERAL.

IF THE SET-ASIDE IS REINSTATED, AND IF VARO SHOULD OBTAIN A SMALL BUSINESS CERTIFICATE BEFORE AN AWARD IS MADE COVERING THE ITEMS UNDER THIS INVITATION, IT WOULD THEN QUALIFY AS A SMALL BUSINESS CONCERN, BOTH AT THE TIME OF BID OPENING AND AT THE TIME OF AWARD. THE FACT THAT THE CERTIFICATE VARO HELD PRIOR TO JUNE 29 WAS REVOKED WOULD NOT, IN OUR OPINION, PRECLUDE AWARD TO IT UNDER THE INVITATION.