B-149695, OCTOBER 26, 1962, 42 COMP. GEN. 219

B-149695: Oct 26, 1962

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WAS DETERMINED BY THE SMALL BUSINESS ADMINISTRATION TO BE QUALIFIED AS A SMALL CONCERN ON THE BASIS OF NEW SIZE STANDARDS WHICH HAD BEEN CHANGED AFTER BID OPENING BUT BEFORE AWARD WAS PROPERLY AWARDED THE CONTRACT SINCE THE BIDDER'S CERTIFICATION WAS MADE IN GOOD FAITH AND HIS QUALIFICATION UNDER THE NEW SIZE STANDARDS IN EFFECT ON THE DATE OF AWARD WAS NOT THE RESULT OF ANY ACTION BY THE BIDDER AFTER BID OPENING. 1962: REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 9. ON THE BASIS THAT THIS COMPANY WAS NOT A SMALL BUSINESS CONCERN ON THE DATE OF BID OPENING (JUNE 28. EIGHT BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE LOW BID WAS SUBMITTED BY JOS. YOUR COMPANY WAS THE NEXT LOW BIDDER IN THE AMOUNT OF $834.

B-149695, OCTOBER 26, 1962, 42 COMP. GEN. 219

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SIZE - CHANGES IN STANDARDS A LOW BIDDER WHO, AS A RESULT OF A PROTEST TO HIS SELF-CERTIFICATION AS A SMALL BUSINESS CONCERN FOR A 100 PERCENT SET-ASIDE PROCUREMENT, WAS DETERMINED BY THE SMALL BUSINESS ADMINISTRATION TO BE QUALIFIED AS A SMALL CONCERN ON THE BASIS OF NEW SIZE STANDARDS WHICH HAD BEEN CHANGED AFTER BID OPENING BUT BEFORE AWARD WAS PROPERLY AWARDED THE CONTRACT SINCE THE BIDDER'S CERTIFICATION WAS MADE IN GOOD FAITH AND HIS QUALIFICATION UNDER THE NEW SIZE STANDARDS IN EFFECT ON THE DATE OF AWARD WAS NOT THE RESULT OF ANY ACTION BY THE BIDDER AFTER BID OPENING.

TO THE DRUML COMPANY, INC., OCTOBER 26, 1962:

REFERENCE IS MADE TO YOUR LETTER DATED AUGUST 9, 1962, PROTESTING THE AWARD OF A CONTRACT BY THE DEPARTMENT OF THE NAVY TO JOS. D. BONNESS, INC., WAUWATOSA, WISCONSIN, UNDER INVITATION FOR BIDS NO. 44190/62 FOR PROCUREMENT OF AIR NATIONAL GUARD FACILITIES, AIRCRAFT APRON, TAXIWAY, RAMP, AND WASHRACK AT GENERAL MITCHELL FIELD, MILWAUKEE, WISCONSIN. YOU PROTEST AWARD OF THE CONTRACT TO JOS. D. BONNESS, INC., ON THE BASIS THAT THIS COMPANY WAS NOT A SMALL BUSINESS CONCERN ON THE DATE OF BID OPENING (JUNE 28, 1962), BUT BECAME SO ONLY BY VIRTUE OF AN AMENDMENT TO THE APPLICABLE SMALL BUSINESS SIZE STANDARD WHICH BECAME EFFECTIVE ON AUGUST 1, 1962.

THE RECORD SHOWS THAT THE SUBJECT INVITATION FOR BIDS WHICH ISSUED ON JUNE 8, 1962, PROVIDED FOR A 100 PERCENT SET-ASIDE FOR SMALL BUSINESS. EIGHT BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE LOW BID WAS SUBMITTED BY JOS. D. BONNESS, INC., IN THE AMOUNT OF $797,960.80. IN ITS BID, JOS. D. BONNESS, INC., CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN. YOUR COMPANY WAS THE NEXT LOW BIDDER IN THE AMOUNT OF $834,800. THE REMAINING SIX BIDS RANGED FROM A LOW OF $864,485.93 TO A HIGH OF $1,165,550.

IN A REPORT TO US DATED AUGUST 27, 1962, THE DEPARTMENT OF THE NAVY STATES THAT DUE TO VARIOUS IMPEDIMENTS INVOLVING FUNDING AND COORDINATION AMONG THE STATE OF WISCONSIN, THE COUNTY OF MILWAUKEE, THE AIRPORT COMMISSION, THE AIR NATIONAL GUARD, AND THE FEDERAL AVIATION AGENCY, AWARD WAS HELD IN ABEYANCE. SUBSEQUENTLY, BY LETTER DATED JULY 25, 1962, TO THE CONTRACT BRANCH, DISTRICT PUBLIC WORKS OFFICE, NINTH NAVAL DISTRICT, YOUR COMPANY PROTESTED AGAINST THE CONSIDERATION OF THE BONNESS BID ON THE GROUNDS THAT THE AVERAGE ANNUAL RECEIPTS FOR THE PRECEDING 3 FISCAL YEARS OF BONNESS AND ITS AFFILIATES EXCEEDED THE $5,000,000 LIMIT THEN CONTAINED IN THE APPLICABLE SMALL BUSINESS SIZE STANDARD. YOUR LETTER ALLEGES THAT JOS. D. BONNESS, INC., IS AFFILIATED WITH KOCH AND BONNESS, INC., CONCRETE CONSTRUCTION, INC., BONNESS COMPANY, AND HIGHWAY PAVERS, INC. YOUR PROTEST WAS FORWARDED TO THE REGIONAL DIRECTOR, SMALL BUSINESS ADMINISTRATION (SBA), CHICAGO, ILLINOIS, BY THE DISTRICT PUBLIC WORKS OFFICER, NINTH NAVAL DISTRICT ON JULY 25, 1962.

PRIOR TO AUGUST 1, 1962, THE SIZE STANDARD FOR THE CONSTRUCTION INDUSTRY WAS AVERAGE ANNUAL RECEIPTS NOT EXCEEDING $5,000,000. HOWEVER, BY AMENDMENT 11 OF THE SMALL BUSINESS SIZE STANDARDS REGULATION (REVISION 2), AS AMENDED, EFFECTIVE AUGUST 1, 1962, THE STANDARD WAS INCREASED TO AVERAGE ANNUAL RECEIPTS NOT EXCEEDING $7,500,000. ON AUGUST 8, 1962, IN CONNECTION WITH YOUR PROTEST, THE SBA CHICAGO REGIONAL OFFICE USING AMENDMENT 11 DETERMINED THAT, AS OF THAT DATE, JOS. D. BONNESS, INC., WAS A SMALL BUSINESS CONCERN. IN A LETTER DATED AUGUST 8, 1962, TO YOU BY THE DEPUTY REGIONAL DIRECTOR OF THE SBA CHICAGO OFFICE IT WAS STATED, IN PERTINENT PART, AS FOLLOWS:

WE HAVE COMPLETED OUR INVESTIGATION AND HEREBY FORMALLY DETERMINE THAT JOS. D. BONNESS, INC., WAUWATOSA, WISCONSIN, QUALIFIES AS A SMALL BUSINESS FOR THE PURPOSE OF CONSTRUCTION CONTRACTS UNDER THE SMALL (BUSINESS) SIZE STANDARDS CURRENTLY IN EFFECT.

THIS DETERMINATION IS BASED ON THE FACT THAT THE AVERAGE ANNUAL RECEIPTS OF THE FOLLOWING AFFILIATED COMPANIES IS LESS THAN $7,500,000.00:

BONNESS CO.

JOS. D. BONNESS, INC.

KOCH AND BONNESS, INC.

CONCRETE CONSTRUCTION, INC.

BONNESS BROS. CO.

WE HAVE DETERMINED FURTHER THAT THE HIGHWAY PAVERS, INC., MENTIONED IN YOUR PROTEST, IS NOT AN AFFILIATED COMPANY UNDER OUR SIZE STANDARDS BECAUSE THE BECHTHOLD FAMILY OWNS A MAJORITY OF THE SHARES, AND ELECTS TWO OF THE THREE DIRECTORS.

THE LETTER FROM THE DEPUTY REGIONAL DIRECTOR ALSO ADVISED YOU THAT IF YOU WISHED TO APPEAL THE DETERMINATION YOU COULD REQUEST RECONSIDERATION IN ACCORDANCE WITH SECTION 121.3-4 (D) OF THE SMALL BUSINESS SIZE STANDARDS, AMENDMENT NO. 4. THE RECORD FAILS TO DISCLOSE THAT YOU REQUESTED RECONSIDERATION OF THE DETERMINATION. AWARD OF THE CONTRACT WAS MADE TO JOS. D. BONNESS, INC., ON AUGUST 9, 1962.

QUESTIONS CONCERNING THE ELIGIBILITY OF PARTICULAR BIDDERS FOR AWARD OF SMALL BUSINESS SET-ASIDES HAVE BEEN BEFORE THIS OFFICE A NUMBER OF TIMES. THE GENERAL RULE WITH REGARD TO THE PARTICULAR POINT IN TIME AT WHICH A BIDDER'S STATUS AS TO SIZE IS HELD TO BE DETERMINATIVE IS THE TIME OF AWARD. THAT IS, THE FINAL DETERMINATION OF THE ELIGIBILITY OF A BIDDER AS A SMALL BUSINESS CONCERN UNDER A SMALL BUSINESS RESTRICTED INVITATION IS MADE AS OF THE DATE OF AWARD. B-143630, OCTOBER 13, 1960. ALTHOUGH WE HAVE RECOGNIZED TWO EXCEPTIONS TO THIS RULE, WHICH WILL BE DISCUSSED BELOW, WE PERCEIVE NO COGENT REASONS FOR DEPARTING FROM THE GENERAL RULE IN THE INSTANT CASE.

THE FIRST EXCEPTION TO THE GENERAL RULE IS THAT FOUND IN 40 COMP. GEN. 550 WHERE IT WAS HELD THAT A BIDDER WHICH CERTIFIED ITSELF AS A LARGE BUSINESS CONCERN AT THE TIME OF BID SUBMISSION AND WHICH, PRIOR TO AWARD, AS A RESULT OF A SUBSEQUENT EVENT, BECAME A SMALL BUSINESS CONCERN MAY NOT HAVE ITS BID CONSIDERED RESPONSIVE. THE HOLDING IN THE CASE WAS PREDICATED PRIMARILY UPON THE DISTINCT PROBABILITY THAT SERIOUS HARM WOULD RESULT TO SMALL BUSINESS SET-ASIDE PROCEDURES IF PROCUREMENT AGENCIES WERE PERMITTED TO CONSIDER BIDS FOR AWARD SUBMITTED BY FIRMS THAT DID NOT, WHEN SUBMITTING THEIR BIDS, SELF CERTIFY THEMSELVES AS SMALL BUSINESS CONCERNS. IT WAS NOTED THAT THE SELF-CERTIFICATION PROCEDURE WAS DESIGNED TO SIMPLIFY AND EXPEDITE SIZE DETERMINATIONS AND THE SBA HOPED THAT 95 TO 99 PERCENT OF THE CASES WOULD BE HANDLED UNDER THE SELF-CERTIFICATION PROCEDURE. IN VIEW OF THIS, IT WAS STATED THAT UNLESS THE SUBMISSION OF BIDS UNDER A 100 PERCENT SMALL BUSINESS SET-ASIDE COULD BE RESTRICTED SOLELY TO THOSE WHO, IN GOOD FAITH, COULD CERTIFY IN THEIR BIDS THAT THEY WERE SMALL BUSINESS, NO USEFUL PURPOSE WOULD BE SERVED BY REQUIRING, IN EVERY INSTANCE, SELF-CERTIFICATION ON SIZE STATUS. TO HAVE PERMITTED DELAY OF CONTRACT AWARDS IN ORDER TO ALLOW TIME TO LARGE BUSINESS BIDDERS TO MAKE APPLICATIONS TO THE SBA FOR A SMALL BUSINESS CERTIFICATE ON THE BASIS THAT THEIR STATUS MAY HAVE CHANGED SUFFICIENTLY IN THE INTERIM--- BETWEEN BID OPENING AND AWARD--- SO AS TO QUALIFY AS SMALL BUSINESS, WOULD HAVE IMPAIRED THE EFFECTIVENESS OF THE SMALL BUSINESS SET-ASIDE PROCEDURE.

THE SECOND CASE WHERE WE HAVE RECOGNIZED AN EXCEPTION TO THE GENERAL RULE IS FOUND IN 41 COMP. GEN. 47. THERE, A LOW BIDDER CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN ALTHOUGH IT WAS ON NOTICE BY THE SBA PRIOR TO THE SUBMISSION OF ITS BID THAT ITS SIZE STATUS WAS SUBJECT TO QUESTION. AFTER BID OPENING THE LOW BIDDER TOOK AFFIRMATIVE ACTION (REALIGNMENT OF ITS STOCK) FOR THE SOLE PURPOSE OF MEETING THE SMALL BUSINESS SIZE CRITERIA THEREBY QUALIFYING FOR AWARD. WE HELD THAT THE LOW BIDDER HAD NOT UTILIZED THE SELF-CERTIFICATION PROCEDURE PRUDENTLY AS REQUIRED BY THE SMALL BUSINESS ACT, 15 U.S.C. 631, AND ALSO THAT THE STOCK REALIGNMENT AFTER BID OPENING GAVE IT A SECOND CHANCE AND AN UNDUE ADVANTAGE OVER OTHER BIDDERS. THE AWARD MADE TO THE LOW BIDDER WAS DESTRUCTIVE OF THE COMPETITIVE BIDDING PROCESS AND CIRCUMVENTED THE SMALL BUSINESS PROGRAM. WE, THEREFORE, DIRECTED CANCELLATION OF THE CONTRACT.

IT IS READILY APPARENT FROM THE ABOVE BRIEF ANALYSIS OF THE TWO EXCEPTIONAL CASES THAT THE INSTANT CASE DIFFERS MATERIALLY FROM THEM. HERE, JOS. D. BONNESS, INC., CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN. THERE IS NOTHING IN THE RECORD BEFORE US TO INDICATE A LACK OF GOOD FAITH, OR IMPRUDENCE, ON THE PART OF BONNESS IN MAKING ITS CERTIFICATION. FURTHERMORE, BONNESS TOOK NO AFFIRMATIVE ACTION AFTER BID OPENING SO AS TO QUALIFY ITSELF AS A SMALL BUSINESS CONCERN. BONNESS WAS CERTIFIED AS A SMALL BUSINESS CONCERN BY THE SBA UNDER THE NEW SIZE STANDARDS EFFECTIVE AUGUST 1, 1962, WHICH, ALTHOUGH AMENDED AFTER BID OPENING, WERE IN FULL FORCE AND EFFECT ON THE DATE OF AWARD. IN THAT CONNECTION SEE THE PROVISIONS OF 15 U.S.C. 637 (B) (6) WHICH AUTHORIZE THE SBA TO DETERMINE WHICH BUSINESS ENTERPRISES ARE TO BE DESIGNATED AS SMALL BUSINESS CONCERNS AND MAKE ITS DETERMINATIONS IN THESE MATTERS CONCLUSIVE. FURTHERMORE, IT IS NOTED THAT THE CHANGE IN THE APPLICABLE SIZE STANDARD WAS SOMETHING OVER WHICH BONNESS HAD NO CONTROL.

ONE FURTHER CASE SHOULD BE MENTIONED SINCE ITS RATIONALE APPEARS TO BE FOR APPLICATION HERE. IN B-148023, MARCH 19, 1962, A SMALL BUSINESS RESTRICTED INVITATION WAS ISSUED AND BIDS WERE OPENED ON OCTOBER 13, 1961. THE LOW BIDDER'S ELIGIBILITY AS A SMALL BUSINESS FIRM WAS DEPENDENT UPON THE ADDITIONAL 25 PERCENT FACTOR IN EMPLOYMENT NUMBER WHICH WAS AVAILABLE TO FIRMS LOCATED IN LABOR SURPLUS AREAS. ON BID OPENING DATE THE LOW BIDDER WAS IN FACT A SMALL BUSINESS FIRM. HOWEVER, ON OCTOBER 31, 1961, SPRINGFIELD, OHIO, WHERE THE LOW BIDDER WAS LOCATED, WAS REMOVED FROM THE LISTING OF PERSISTENT AND SUBSTANTIAL LABOR SURPLUS AREAS. THE LOW BIDDER THUS BECAME A LARGE BUSINESS CONCERN FOR PURPOSES OF THE PROCUREMENT. IT WAS HELD THAT SINCE THE DATE OF AWARD GOVERNED THE FINAL DETERMINATION OF THE ELIGIBILITY OF A BIDDER AS A SMALL BUSINESS CONCERN THE LOW BIDDER WAS NO LONGER ELIGIBLE FOR AWARD UNDER THE INVITATION AND THE AWARD, WHICH WAS SUBSEQUENTLY MADE TO THE NEXT LOWEST BIDDER AT A SUBSTANTIALLY HIGHER PRICE, WAS UPHELD.

WE CAN SEE NO REASON WHY THE GENERAL RULE SHOULD BE APPLIED IN ONE INSTANCE TO ELIMINATE A BIDDER FROM CONSIDERATION BUT SHOULD NOT BE APPLIED IN ANOTHER INSTANCE TO SUSTAIN A BIDDER'S ELIGIBILITY FOR AWARD. IN VIEW OF THE FOREGOING, WE FIND NO LEGAL BASIS FOR OBJECTING TO THE AWARD MADE TO JOS. D. BONNESS, INC. ..END :