B-152066, FEB. 11, 1964

B-152066: Feb 11, 1964

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TO DOYLE SHIRT MANUFACTURING CORPORATION: FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF JULY 18. THE PROCUREMENT WAS RESTRICTED TO SMALL BUSINESS CONCERNS ONLY. FOUR BIDS WERE RECEIVED AND OPENED ON JULY 2. ON THE BASIS THAT IT WAS NOT A SMALL BUSINESS FIRM QUALIFIED FOR AWARD BECAUSE ITS VICE PRESIDENT. WAS ALSO VICE PRESIDENT OF M. IS A SMALL BUSINESS CONCERN FOR PURPOSES OF THIS PROCUREMENT. THE SBA NOTIFIED YOU THAT IT HAD REVIEWED THE INFORMATION SUBMITTED BY YOU IN REGARD TO MARTIN AND THAT IT WAS UNABLE TO FIND AN AFFILIATION BETWEEN MARTIN AND THE COMPANIES MENTIONED BY YOUR FIRM IN YOUR LETTER OF JULY 3. IT ALSO WAS STATED THAT THE VOTING TRUST AGREEMENT UNDER WHICH MR. THE REGIONAL OFFICE DETERMINED THAT MARTIN MANUFACTURING IS A SMALL BUSINESS CONCERN FOR THE PURPOSE OF GOVERNMENT PROCUREMENTS.

B-152066, FEB. 11, 1964

TO DOYLE SHIRT MANUFACTURING CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM OF JULY 18, 1963, PROTESTING AGAINST THE ACTION OF THE DEFENSE CLOTHING AND TEXTILE SUPPLY CENTER, PHILADELPHIA, PENNSYLVANIA, IN AWARDING A CONTRACT TO THE MARTIN MANUFACTURING COMPANY, INC., UNDER INVITATION NO. DSA-1-63 1235, ISSUED ON JUNE 11, 1963.

THE INVITATION REQUESTED BIDS FOR FURNISHING 600,000 MEN'S COTTON SHIRTS TO BE DELIVERED TO THE VARIOUS DESTINATIONS LISTED UNDER ITEMS 1A, 1B, 1C AND 1D. THE PROCUREMENT WAS RESTRICTED TO SMALL BUSINESS CONCERNS ONLY. FOUR BIDS WERE RECEIVED AND OPENED ON JULY 2, 1963. THE J. B. MANUFACTURING COMPANY SUBMITTED THE LOWEST BID PRICES FOR DELIVERY TO ALL FOUR DESTINATIONS. HOWEVER, IN ITS BID, THE COMPANY STATED THAT IT WOULD ONLY ACCEPT AN AWARD FOR 300,000 SHIRTS. SINCE THE J. B. MANUFACTURING COMPANY WOULD ACCEPT AN AWARD FOR ONLY 300,000 SHIRTS, THE MARTIN MANUFACTURING COMPANY, INC., BECAME ELIGIBLE FOR AN AWARD FOR THE REMAINING 300,000 SHIRTS UNDER ITEM 1C OF ITS BID.

BY LETTER DATED JULY 3, 1963, YOU PROTESTED AGAINST AN AWARD TO THE MARTIN MANUFACTURING COMPANY, INC., ON THE BASIS THAT IT WAS NOT A SMALL BUSINESS FIRM QUALIFIED FOR AWARD BECAUSE ITS VICE PRESIDENT, MR. BERNARD S. NEEDLE, WAS ALSO VICE PRESIDENT OF M. C. SCHRANK COMPANY AND PRESIDENT OF M. C. SCHRANK MANUFACTURING COMPANY. IN VIEW OF YOUR PROTEST THE CONTRACTING OFFICER REQUESTED A SIZE DETERMINATION OF THE MARTIN MANUFACTURING COMPANY, INC., OF THE SMALL BUSINESS ADMINISTRATION (SBA). ON JULY 16, 1963, THE SBA NOTIFIED THE CONTRACTING OFFICER THAT ITS PHILADELPHIA BRANCH HAD DETERMINED THAT MARTIN MANUFACTURING COMPANY, INC., IS A SMALL BUSINESS CONCERN FOR PURPOSES OF THIS PROCUREMENT. THE RECORD INDICATES THAT BY LETTER OF JULY 15, 1963, THE SBA NOTIFIED YOU THAT IT HAD INVESTIGATED YOUR ALLEGATIONS AS TO THE AFFILIATION OF THE MARTIN MANUFACTURING COMPANY, INC., WITH THE COMPANIES MENTIONED IN YOUR LETTER OF JULY 3, 1963, TO THE CONTRACTING OFFICER AND THAT IT HAD DETERMINED THAT MARTIN MANUFACTURING COMPANY, INC., MEETS THE NECESSARY STANDARDS REQUIRED TO QUALIFY AS SMALL BUSINESS FOR PURPOSES OF GOVERNMENT PROCUREMENT.

BY LETTER DATED JULY 16, 1963, YOU ADVISED THE SBA THAT YOU DID NOT AGREE WITH ITS FINDINGS IN REGARD TO MARTIN MANUFACTURING COMPANY, INC., AND YOU REQUESTED THAT THE AGENCY REVIEW THE INFORMATION SUBMITTED BY YOUR FIRM IN REGARD TO THE ALLEGED AFFILIATIONS OF MARTIN. BY LETTER DATED JULY 18, 1963, THE SBA NOTIFIED YOU THAT IT HAD REVIEWED THE INFORMATION SUBMITTED BY YOU IN REGARD TO MARTIN AND THAT IT WAS UNABLE TO FIND AN AFFILIATION BETWEEN MARTIN AND THE COMPANIES MENTIONED BY YOUR FIRM IN YOUR LETTER OF JULY 3, 1963, TO THE CONTRACTING OFFICER. ON JULY 19, 1963, THE CONTRACTING OFFICER AWARDED CONTRACT NO. DSA-1-2915-64-C TO THE J. B. MANUFACTURING COMPANY FOR 300,000 SHIRTS AND CONTRACT NO. DSA-1-2916-64-C TO THE MARTIN MANUFACTURING COMPANY, INC., FOR 300,000 SHIRTS. IN HIS REPORT THE CONTRACTING OFFICER STATES THAT ON THE DATE OF THESE AWARDS HE DID NOT KNOW THAT YOUR COMPANY HAD, ON A PREVIOUS DATE, JULY 18, 1963, MADE A SIMILAR PROTEST TO OUR OFFICE.

BY TELEGRAM OF JULY 18, 1963, ADDRESSED TO OUR OFFICE, YOU PROTESTED THE AWARD OF A CONTRACT TO THE MARTIN MANUFACTURING COMPANY, INC., ON THE BASIS THAT THE COMPANY DID NOT QUALIFY AS A SMALL BUSINESS CONCERN BECAUSE OF ITS AFFILIATION WITH CERTAIN FIRMS. IN VIEW OF THE ABOVE CONTENTION OUR OFFICE REQUESTED THE SBA TO FURNISH US WITH A REPORT OF THE ACTION TAKEN BY THAT AGENCY WITH RESPECT TO THE SMALL BUSINESS SIZE STATUS OF THE MARTIN MANUFACTURING COMPANY, INC. BY LETTER DATED OCTOBER 18, 1963, THE SBA FURNISHED OUR OFFICE WITH AN INTERIM REPORT IN WHICH IT STATED THAT MR. BERNARD S. NEEDLE, VICE PRESIDENT OF MARTIN MANUFACTURING COMPANY, INC., OWNS 24 PERCENT OF THE STOCK OF THAT CORPORATION AND THAT MR. DAVID B. CHASE, SECRETARY OF THE CORPORATION, HOLDS 59 PERCENT OF THE STOCK OF THE CORPORATION, 3 PERCENT OF WHICH HE HOLDS AS CUSTODIAN FOR HIS DAUGHTER AND 56 PERCENT AS TRUSTEE FOR M. C. SCHRANK, RELATIVES OF M. C. SCHRANK, AND EMPLOYEES OF THE M. C. SCHRANK COMPANY. IT ALSO WAS STATED THAT THE VOTING TRUST AGREEMENT UNDER WHICH MR. CHASE HOLDS 59 PERCENT OF THE STOCK OF THE CORPORATION GIVES HIM THE POWER TO VOTE THIS STOCK DURING THE 5- YEAR TERM OF THE TRUST. THE SBA ALSO STATED AS FOLLOWS:

"ON JULY 15, 1963, THE REGIONAL OFFICE DETERMINED THAT MARTIN MANUFACTURING IS A SMALL BUSINESS CONCERN FOR THE PURPOSE OF GOVERNMENT PROCUREMENTS. IT APPROPRIATELY NOTIFIED THE DEFENSE CLOTHING AND TEXTILE SUPPLY CENTER, MARTIN MANUFACTURING AND DOYLE SHIRT (SEE EXHIBIT C, D, AND E).

"THE BASIS FOR THE DETERMINATION WAS THAT:

(A) DAVID B. CHASE HAS THE POWER TO CONTROL MARTIN MANUFACTURING BY VIRTUE OF THE 56 PERCENT OF VOTING STOCK HELD BY HIM UNDER THE VOTING TRUST.

(B) DAVID B. CHASE DOES NOT HAVE THE POWER TO CONTROL J. K. LASSER AND COMPANY, THE M. C. SCHRANK COMPANY (BRIDGETON, NEW JERSEY), AND/OR THE M. C. SCHRANK MANUFACTURING COMPANY (ATLANTIC CITY, NEW JERSEY).

(C) THE ABOVE CONCERNS ARE NOT, THEREFORE, CONTROLLED BY THE SAME THIRD PARTIES SO THEY ARE NOT AFFILIATED.

(D) THE TOTAL EMPLOYMENT OF MARTIN MANUFACTURING ITSELF DOES NOT EXCEED 500 EMPLOYEES, THE APPLICABLE SIZE STANDARD.

"IN VIEW OF YOUR INQUIRY, WE NOW ARE OBTAINING ADDITIONAL INFORMATION CONCERNING THE OWNERSHIP AND MANAGEMENT OF THE ABOVE COMPANIES AND THE CONTRACTUAL RELATIONS BETWEEN THEM AND, ON RECEIPT THEREOF, WILL DETERMINE WHETHER MARTIN MANUFACTURING IS A SMALL BUSINESS CONCERN FOR THE PURPOSE OF GOVERNMENT PROCUREMENTS.'

BY LETTER DATED JANUARY 20, 1964, THE SBA ADVISED OUR OFFICE THAT IT HAD CONCLUDED ITS INVESTIGATION OF THE MARTIN MANUFACTURING COMPANY, INC., AND THAT FOR THE REASONS STATED THEREIN IT HAD DETERMINED THAT THE MARTIN MANUFACTURING COMPANY, INC., WAS NOT ELIGIBLE AS A SMALL BUSINESS CONCERN FOR PURPOSE OF AWARD UNDER INVITATIONS NO. DSA-1-63 1235 AND THAT THE CORPORATION IS NOT PRESENTLY A SMALL BUSINESS CONCERN FOR THE PURPOSE OF SET-ASIDE PROCUREMENTS. SOME OF THE REASONS GIVEN BY THE SBA FOR ITS DETERMINATION ARE AS FOLLOWS:

"WE CONSIDER THAT M. C. SCHRANK AND HIS FAMILY HAVE AN IDENTITY OF INTEREST. FURTHER, WE FIND THAT THE PURPOSE OF THE VOTING TRUST AGREEMENTS UNDER WHICH DAVID B. CHASE HOLDS 56.7 PERCENT OF MARTIN MANUFACTURING'S VOTING STOCK BENEFICIALLY OWNED BY THE SCHRANK INTERESTS (M. C. SCHRANK, MEMBERS OF HIS FAMILY AND HIS EMPLOYEES), WAS TO SEPARATE VOTING POWER FROM BENEFICIAL OWNERSHIP FOR THE PURPOSE OF SHIFTING CONTROL OF, OR THE POWER TO CONTROL MARTIN MANUFACTURING, IN ORDER THAT IT WOULD CONTINUE TO QUALIFY AS A SMALL BUSINESS CONCERN. WE DO NOT REGARD A TRUST VALID FOR SUCH PURPOSE, REGARDLESS OF WHETHER IT IS, OR IS NOT, A VALID VOTING TRUST WITHIN THE APPROPRIATE JURISDICTION.

"IN VIEW OF THE ABOVE, WE CONSIDER THAT M. C. SCHRANK AND HIS FAMILY AND EMPLOYEES, AS OWNERS OF MORE THAN 50 PERCENT OF THE VOTING STOCK OF MARTIN MANUFACTURING, DIRECTLY OR INDIRECTLY CONTROL OR HAVE THE POWER TO CONTROL THAT CONCERN AND ALSO THE M. C. SCHRANK COMPANIES. THEREFORE, ALL OF THE COMPANIES ARE CONSIDERED AS BEING AFFILIATED WITHIN THE MEANING OF SEC. 121.3-2 (A) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION, AND MARTIN MANUFACTURING WAS NOT ON JULY 15, 1963, AND IS NOT NOW A SMALL BUSINESS CONCERN SINCE ITS TOTAL EMPLOYMENT, INCLUDING ITS AFFILIATES, EXCEEDS 500 PERSONS.'

SECTION 8 (B) (6) OF THE SMALL BUSINESS ACT AS AMENDED BY PUBLIC LAW 85- 536, 72 STAT. 384, 390, 15 U.S.C. 637 (B) (6), AUTHORIZES THE SMALL BUSINESS ADMINISTRATION TO DETERMINE WHICH BUSINESS ENTERPRISES ARE TO BE DESIGNATED AS SMALL BUSINESS CONCERNS AND MAKES ITS DETERMINATIONS IN THESE MATTERS CONCLUSIVE. SPECIFICALLY, THAT SECTION PROVIDES THAT "OFFICES OF THE GOVERNMENT * * * SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S DETERMINATION AS TO WHICH ENTERPRISES ARE TO BE DESIGNATED "SMALL-BUSINESS CONCERNS.'"

AS ABOVE INDICATED, THE MARTIN MANUFACTURING COMPANY, INC., CERTIFIED IN ITS BID THAT IT WAS SMALL BUSINESS AND WAS NOT OWNED OR CONTROLLED BY A PARENT COMPANY; FURTHER, IN RESPONSE TO THE REQUEST OF THE DEFENSE CLOTHING AND TEXTILE SUPPLY CENTER FOR A SIZE DETERMINATION OF MARTIN MANUFACTURING COMPANY, INC., THE PHILADELPHIA BRANCH OFFICE OF SBA ADVISED THE PROCUREMENT OFFICE THAT THE CORPORATION WAS SMALL BUSINESS FOR THE PURPOSE OF THIS PROCUREMENT AND, BASED ON THIS DETERMINATION, THE SUBJECT CONTRACT WAS AWARDED. THEREFORE, AT THE TIME OF AWARD, THE ONLY SBA SIZE DETERMINATION OF WHICH THE CONTRACTING OFFICER WAS AWARE WAS THAT THE MARTIN MANUFACTURING COMPANY, INC., WAS A SMALL BUSINESS CONCERN.

WHILE THE SBA HAS NOW DETERMINED THAT THE MARTIN MANUFACTURING COMPANY, INC., WAS NOT ELIGIBLE AS A SMALL BUSINESS CONCERN FOR PURPOSES OF AWARD UNDER THE SUBJECT INVITATION, AND IN SOME CASES WE MIGHT DIRECT CANCELLATION OF AN AWARD MADE UNDER SIMILAR CIRCUMSTANCES, NO SUCH ACTION MAY BE TAKEN HERE SINCE WE ARE INFORMALLY ADVISED THAT THE MARTIN MANUFACTURING COMPANY, INC., COMPLETED DELIVERIES OF THE SHIRTS ON JANUARY 9, 1964.