B-150607, MAY 14, 1963

B-150607: May 14, 1963

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TO LAVELLE AIRCRAFT CORPORATION: REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 7 AND MARCH 14. AWARD WAS MADE TO LAWRENCE AVIATION INDUSTRIES. A CONTRACT WAS NEGOTIATED WITH THE SAME FIRM. YOU PROTEST THE AWARD OF THE SET-ASIDE PORTION AND CONTEND THAT NEGOTIATION FOR SAME SHOULD HAVE BEEN WITH YOUR FIRM AS THE SECOND LOW BIDDER AND THAT A TOTAL AWARD TO ONE BIDDER SHOULD RESULT IN A LOWER PRICE UNDER CUSTOMARY PRODUCTION CURVE PROCEDURE. YOU FURTHER QUESTION THE FACT THAT PART OF THE WORK WILL BE SUBCONTRACTED TO BIG BUSINESS. NEGOTIATIONS FOR AWARD OF THIS SET-ASIDE PORTION WILL BE CONDUCTED ONLY WITH RESPONSIBLE SMALL BUSINESS CONCERNS WHO HAVE SUBMITTED RESPONSIVE BIDS ON THE NON-SET-ASIDE PORTION AT A UNIT PRICE WITHIN 120 PERCENT OF THE HIGHEST AWARD MADE ON THE NON-SET ASIDE PORTION.

B-150607, MAY 14, 1963

TO LAVELLE AIRCRAFT CORPORATION:

REFERENCE IS MADE TO YOUR LETTERS OF JANUARY 7 AND MARCH 14, 1963, CONCERNING YOUR PROTEST OF AN AWARD TO LAWRENCE AVIATION INDUSTRIES, INC., UNDER NAVY INVITATION FOR BIDS NO. 383-421-63.

THE ABOVE INVITATION REQUESTED BIDS FOR FURNISHING 249 AIRCRAFT TAILPIPE ASSEMBLIES, WITH A LIKE AMOUNT SET ASIDE FOR AWARD TO SMALL BUSINESS. AWARD WAS MADE TO LAWRENCE AVIATION INDUSTRIES, INC., A SMALL BUSINESS CONCERN, AS THE LOW BIDDER ON THE NON-SET-ASIDE PORTION, AND A CONTRACT WAS NEGOTIATED WITH THE SAME FIRM, AT THE SAME PRICE, ON THE SET-ASIDE PORTION.

YOU PROTEST THE AWARD OF THE SET-ASIDE PORTION AND CONTEND THAT NEGOTIATION FOR SAME SHOULD HAVE BEEN WITH YOUR FIRM AS THE SECOND LOW BIDDER AND THAT A TOTAL AWARD TO ONE BIDDER SHOULD RESULT IN A LOWER PRICE UNDER CUSTOMARY PRODUCTION CURVE PROCEDURE, WITH A CORRESPONDING SAVING TO THE GOVERNMENT. YOU FURTHER QUESTION THE FACT THAT PART OF THE WORK WILL BE SUBCONTRACTED TO BIG BUSINESS.

IN ACCORDANCE WITH PARAGRAPH 1-706.6 OF THE ARMED SERVICES PROCUREMENT REGULATION, THE INVITATION PROVIDES, WITH RESPECT TO THE SMALL BUSINESS SET-ASIDE, AS FOLLOWS:

"A PORTION OF THIS PROCUREMENT, AS IDENTIFIED ELSEWHERE IN THE SCHEDULE, HAS BEEN SET ASIDE FOR AWARD ONLY TO ONE OR MORE SMALL BUSINESS CONCERNS. NEGOTIATIONS FOR AWARD OF THIS SET-ASIDE PORTION WILL BE CONDUCTED ONLY WITH RESPONSIBLE SMALL BUSINESS CONCERNS WHO HAVE SUBMITTED RESPONSIVE BIDS ON THE NON-SET-ASIDE PORTION AT A UNIT PRICE WITHIN 120 PERCENT OF THE HIGHEST AWARD MADE ON THE NON-SET ASIDE PORTION. NEGOTIATIONS SHALL BE CONDUCTED WITH SUCH SMALL BUSINESS CONCERNS IN THE FOLLOWING ORDER OF PRIORITY:

TABLE

"GROUP 1. SMALL BUSINESS CONCERNS WHICH ARE ALSO PERSISTENT

LABOR SURPLUS AREA CONCERNS.

"GROUP 2. SMALL BUSINESS CONCERNS WHICH ARE ALSO SUBSTANTIAL

LABOR SURPLUS AREA CONCERNS.

"GROUP 3. SMALL BUSINESS CONCERNS WHICH ARE NOT LABOR SURPLUS

AREA CONCERNS.

"WITHIN EACH OF THE ABOVE GROUPS, NEGOTIATIONS WITH SUCH CONCERNS WILL BE IN THE ORDER OF THEIR BIDS ON THE NON-SET-ASIDE PORTION, BEGINNING WITH THE LOWEST RESPONSIVE BID. THE SET-ASIDE SHALL BE AWARDED AT THE HIGHEST UNIT PRICE AWARDED ON THE NON-SET-ASIDE PORTION, ADJUSTED TO REFLECT TRANSPORTATION AND OTHER COST FACTORS WHICH WERE CONSIDERED IN EVALUATING BIDS ON THE NON-SET-ASIDE PORTION * * *.'

THE INVITATION DEFINES A LABOR SURPLUS AREA CONCERN AS ONE WHICH AGREES TO PERFORM A CONTRACT OR CAUSE IT TO BE PERFORMED SUBSTANTIALLY IN AREAS OF LABOR SURPLUS, AND PROVIDES FURTHER THAT A CONCERN SHALL BE DEEMED TO PERFORM A CONTRACT SUBSTANTIALLY IN AREAS OF LABOR SURPLUS IF THE COSTS THAT IT INCURS ON ACCOUNT OF MANUFACTURING OR PRODUCTION (BY ITSELF OR ITS FIRST-TIER SUBCONTRACTORS) IN SUCH AREAS AMOUNT TO MORE THAN 50 PERCENT OF THE CONTRACT PRICE.

IN SUBMITTING ITS BID, LAWRENCE AVIATION ADVISED THAT 59 PERCENT OF THE COST OF MANUFACTURING OR PRODUCING THE SUPPLIES WOULD BE INCURRED IN LABOR SURPLUS AREAS, 34 PERCENT BY INDUSTRIAL STAINLESS STEEL, INC., AT BUFFALO, NEW YORK, AND 25 PERCENT BY SOLAR AIRCRAFT COMPANY AT SAN DIEGO, CALIFORNIA. SUBCONTRACTING WITH BIG BUSINESS IS NOT PROHIBITED AND THE AGREEMENT TO SUBCONTRACT WORK REPRESENTING 59 PERCENT OF THE COST OF MANUFACTURE OR PRODUCTION IN LABOR SURPLUS AREAS MEETS THE ABOVE REQUIREMENT FOR SUBSTANTIAL PERFORMANCE IN SUCH AREAS.

WITH REFERENCE TO THE NEGOTIATION OF THE SET-ASIDE PORTION, IT IS REPORTED THAT YOUR FIRM AND THE SUCCESSFUL BIDDER BOTH FALL WITHIN GROUP 2 OF THE ABOVE LABOR SURPLUS PRIORITY CLASSIFICATIONS, AND SINCE THE INVITATION SPECIFICALLY PROVIDES THAT NEGOTIATIONS FOR THE SET ASIDE PORTION WILL BE IN THE ORDER OF BIDS ON THE NON-SET-ASIDE PORTION, BEGINNING WITH THE LOWEST RESPONSIVE BID, NEGOTIATION FOR THE SET-ASIDE WAS PROPERLY CONDUCTED FIRST WITH LAWRENCE AVIATION INDUSTRIES, INC.

AS TO THE POSSIBILITY OF SECURING A LOWER PRICE ON A TOTAL AWARD, THE INVITATION PROVIDES, AS QUOTED ABOVE, THAT THE SET-ASIDE "SHALL BE" AWARDED THAT THE HIGHEST UNIT PRICE AWARDED ON THE NON-SET-ASIDE PORTION. THE ONLY PURPOSE OF THE NEGOTIATION, THEREFORE, WAS TO SECURE THE CONSENT OF LAWRENCE AVIATION INDUSTRIES, INC., TO DELIVER UNDER THE SET-ASIDE AT THE SAME PRICE AS ON THE NON-SET-ASIDE, THERE BEING NO LEGAL REQUIREMENT THAT THE CONTRACTING OFFICER ATTEMPT TO NEGOTIATE A BETTER PRICE THAN THAT AT WHICH AWARD WAS MADE ON THE NON SET-ASIDE.

FROM THE FOREGOING, IT SEEMS CLEAR THAT AWARD WAS MADE IN ACCORDANCE WITH THE APPLICABLE REGULATION AND THE TERMS OF THE INVITATION. YOUR PROTEST MUST THEREFORE BE DENIED.