B-154030, DEC. 31, 1964

B-154030: Dec 31, 1964

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SHOULD BE CANCELED BECAUSE (1) ALLIED WAS NOT A SMALL BUSINESS CONCERN. (2) THE BALANCE SHEET SUBMITTED BY ALLIED WAS IMPROPERLY MANIPULATED FOR THE PURPOSE OF GIVING AN ERRONEOUS IMPRESSION AS TO ITS FINANCIAL RESPONSIBILITY AND (3) CERTAIN IRREGULARITIES WERE ENCOUNTERED IN THE PERFORMANCE OF THE CONTRACT. THE CONTRACTING OFFICER SHALL ACCEPT AS CONCLUSIVE FOR THE PURPOSE OF A SPECIFIC PROCUREMENT A REPRESENTATION BY THE BIDDER OR OFFEROR THAT IT IS A SMALL BUSINESS CONCERN AS DEFINED BY SBA. SHALL FORWARD SUCH PROTEST RECORD (OR SUBMIT HIS PROTEST) TO THE SBA REGIONAL OFFICE SERVING THE AREA IN WHICH THE PROTESTED CONCERN IS LOCATED. "/B) AS USED IN THIS SECTION. "PROTEST" MEANS A STATEMENT IN WRITING WHICH CONTAINS THE BASIS FOR THE PROTEST TOGETHER WITH SPECIFIC DETAILED EVIDENCE SUPPORTING THE PROTESTANT'S CLAIM THAT SUCH BIDDER IS NOT A SMALL BUSINESS CONCERN.

B-154030, DEC. 31, 1964

TO ALEXANDER BASKOFF, ESQUIRE:

THIS REFERS TO YOUR PROTEST ON BEHALF OF UNITED DISPOSAL CORPORATION CONCERNING GENERAL SERVICES ADMINISTRATION CONTRACT NO. GS-03B-12150, WITH ALLIED PAPER STOCK COMPANY, INCORPORATED (ALLIED), FOR TRASH REMOVAL, SOUTH AREA.

YOU URGE ON BEHALF OF UNITED DISPOSAL CORPORATION, ONE OF THE ORIGINAL BIDDERS INVOLVED, THAT THE CONTRACT AWARDED TO ALLIED PAPER STOCK COMPANY, INCORPORATED, AS THE LOW BIDDER, SHOULD BE CANCELED BECAUSE (1) ALLIED WAS NOT A SMALL BUSINESS CONCERN; (2) THE BALANCE SHEET SUBMITTED BY ALLIED WAS IMPROPERLY MANIPULATED FOR THE PURPOSE OF GIVING AN ERRONEOUS IMPRESSION AS TO ITS FINANCIAL RESPONSIBILITY AND (3) CERTAIN IRREGULARITIES WERE ENCOUNTERED IN THE PERFORMANCE OF THE CONTRACT.

ON FEBRUARY 11, 1964, THE GENERAL SERVICES ADMINISTRATION REQUESTED BIDS TO BE OPENED ON MARCH 2, 1964, FOR TRASH REMOVAL SERVICES, SOUTH AREA, WASHINGTON, D.C. THE INVITATION FOR BIDS PROVIDED THAT AWARD WOULD BE RESTRICTED TO SMALL BUSINESS CONCERNS. IN THIS CONNECTION SECTIONS 1- 1.703-1 AND -2 OF THE FEDERAL PROCUREMENT REGULATIONS IN EFFECT AT THE TIME OF THE ISSUANCE OF THE INVITATION FOR BIDS AND THE AWARD PROVIDED AS FOLLOWS:

"SEC. 1-1.703-1 REPRESENTATION BY BIDDER OR OFFEROR.

IN THE ABSENCE OF A WRITTEN PROTEST OR QUESTION, THE CONTRACTING OFFICER SHALL ACCEPT AS CONCLUSIVE FOR THE PURPOSE OF A SPECIFIC PROCUREMENT A REPRESENTATION BY THE BIDDER OR OFFEROR THAT IT IS A SMALL BUSINESS CONCERN AS DEFINED BY SBA.

SEC. 1-1.703-2 PROTEST REGARDING SMALL BUSINESS STATUS.

(A) ANY RESPONSIVE BIDDER OR OFFEROR MAY, BEFORE AWARD, QUESTION THE SMALL BUSINESS STATUS OF ANY APPARENTLY LOW BIDDER OR OFFEROR BY SENDING A WRITTEN PROTEST, AS DEFINED IN (B) OF THIS SEC. 1-1.703-2, TO THE CONTRACTING OFFICER RESPONSIBLE FOR THE PARTICULAR PROCUREMENT. ANY CONTRACTING OFFICER WHO RECEIVES SUCH PROTEST, OR WHO WISHES TO QUESTION THE SMALL BUSINESS STATUS OF A BIDDER OR OFFEROR, SHALL FORWARD SUCH PROTEST RECORD (OR SUBMIT HIS PROTEST) TO THE SBA REGIONAL OFFICE SERVING THE AREA IN WHICH THE PROTESTED CONCERN IS LOCATED.

"/B) AS USED IN THIS SECTION,"PROTEST" MEANS A STATEMENT IN WRITING WHICH CONTAINS THE BASIS FOR THE PROTEST TOGETHER WITH SPECIFIC DETAILED EVIDENCE SUPPORTING THE PROTESTANT'S CLAIM THAT SUCH BIDDER IS NOT A SMALL BUSINESS CONCERN. A COMPLAINT RECEIVED AFTER AWARD OF A CONTRACT OR A COMPLAINT RECEIVED THAT A CONCERN IS NOT A SMALL BUSINESS CONCERN, BUT WHICH DOES NOT MEET THE REQUIREMENTS OF THIS PARAGRAPH, WILL NOT BE CONSIDERED A "PROTEST" AND WILL NOT BE ACTED UPON.

"/C) UPON RECEIPT OF A PROTEST, THE SBA REGIONAL DIRECTOR OR HIS DELEGATE WILL PROMPTLY NOTIFY THE CONTRACTING OFFICER OF THE DATE IT WAS RECEIVED, AND WILL INFORM THE AFFECTED BIDDER OR OFFEROR THAT ITS SIZE STATUS IS UNDER REVIEW.

"/D) SBA WILL, WITHIN 10 WORKING DAYS, IF POSSIBLE, AFTER RECEIPT OF A PROTEST, INVESTIGATE AND DETERMINE THE SMALL BUSINESS STATUS OF THE PROTESTED BIDDER OR OFFEROR AND NOTIFY THE CONTRACTING OFFICER, THE PROTESTANT, AND THE PROTESTED BIDDER OR OFFEROR OF ITS DECISION.'

ALLIED CERTIFIED IN ITS BID THAT IT WAS A SMALL BUSINESS CONCERN. BIDDER QUESTIONED ALLIED'S STATUS AS A SMALL BUSINESS CONCERN AND AWARD WAS MADE TO ALLIED AS THE LOW RESPONSIVE AND QUALIFIED BIDDER ON MARCH 25, 1964.

IN A SUBSEQUENT SIMILAR PROCUREMENT YOU QUESTIONED, ON BEHALF OF ANOTHER BIDDER, WHETHER ALLIED WAS A SMALL BUSINESS CONCERN DUE TO ITS AFFILIATION WITH KLINE PAPER STOCK COMPANY. THE MATTER WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION AND THE SIZE STANDARDS DIVISION, IN DECISION OF JUNE 11, 1964, HELD THAT ALLIED WAS NOT THEN A SMALL BUSINESS CONCERN FOR THE PURPOSE OF GOVERNMENT WASTE PAPER AND TRASH COLLECTION CONTRACTS, BECAUSE KLINE PAPER STOCK COMPANY OWNED AND/OR CONTROLLED 50 PERCENT OF ALLIED'S VOTING STOCK. IT WAS FURTHER HELD THAT IF THE KLINE VOTING STOCK WAS EXCHANGED FOR NONVOTING STOCK, IT WOULD THEN BE CONSIDERED THAT KLINE PAPER STOCK COMPANY WOULD NO LONGER HAVE THE POWER TO CONTROL ALLIED AND THEREAFTER ALLIED COULD QUALIFY AS A SMALL BUSINESS CONCERN. THE KLINE- CONTROLLED VOTING STOCK WAS CONVERTED TO NONVOTING STOCK. HOWEVER, THE DECISION OF THE SIZE STANDARDS DIVISION WAS APPEALED TO THE SIZE APPEALS BOARD AND IN DECISION OF AUGUST 7, 1964, IT WAS DETERMINED THAT ALLIED HAS BEEN AND STILL IS FINANCIALLY DEPENDENT UPON KLINE, AND THEREFORE, HELD THAT ALLIED WAS NOT A SMALL BUSINESS CONCERN BECAUSE THE CHANGE IN THE VOTING STOCK DID NOT CHANGE THE CONTROL OR POWER TO CONTROL THAT KLINE HAD OVER ALLIED AND THAT WERE AFFILIATED WITH EACH OTHER FOR THE PURPOSES OF GOVERNMENT PROCUREMENT OF SERVICES. ACCORDINGLY, IN THAT PROCUREMENT, THE GENERAL SERVICES ADMINISTRATION REJECTED ALLIED'S BID AS NOT BEING RESPONSIVE TO THE REQUIREMENTS OF THE INVITATION AND AWARD WAS MADE TO YOUR CLIENT, THE CAPITAL TRASH REMOVING COMPANY, INCORPORATED.

WHILE IT MAY BE THAT ALLIED WAS NOT IN FACT A SMALL BUSINESS CONCERN AT THE TIME OF THE AWARD OF CONTRACT NO. GS-03B-12150, UNDER THE ABOVE-QUOTED 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 INDICATES THAT THERE WAS SOME BASIS AT THE TIME FOR ALLIED'S CERTIFICATION THAT IT WAS A SMALL BUSINESS CONCERN. FURTHERMORE, IT HAS BEEN HELD THAT IN THE ABSENCE OF A WRITTEN PROTEST PRIOR TO AWARD, A CONTRACT AWARDED IN GOOD FAITH ON THE BASIS OF A BIDDER'S STATEMENT THAT IT IS A SMALL BUSINESS CONCERN NEED NOT BE CANCELED UPON A SUBSEQUENT DETERMINATION THAT THE CONCERN WAS NOT A SMALL BUSINESS AT THE TIME OF AWARD. 41 COMP. GEN. 252.

WITH RESPECT TO THE ALLEGED SUBMISSION BY ALLIED OF AN IMPROPERLY MANIPULATED BALANCE SHEET FOR THE PURPOSE OF ESTABLISHING FINANCIAL RESPONSIBILITY TO PERFORM THE PROPOSED CONTRACT, THE RECORD DOES NOT INDICATE, NOR IS IT NECESSARY TO DETERMINE AT THIS TIME, WHAT ACTION WOULD HAVE BEEN TAKEN IF THE COMPLETE FACTS WERE KNOWN. NEVERTHELESS, ALLIED IS PERFORMING THE CONTRACT WORK AND WHATEVER INDUCEMENT WAS MADE TO AWARD IT THE CONTRACT IN NO WAY RELIEVES IT FROM ITS RESPONSIBILITY TO PERFORM OR TO RESPOND TO ANY DAMAGES THE GOVERNMENT MIGHT SUFFER FOR ITS FAILURE TO PERFORM.

THE GENERAL SERVICES ADMINISTRATION REPORTS THAT ITS COMPLIANCE DIVISION INVESTIGATED THE PERFORMANCE OF THE CONTRACT BY ALLIED; THAT CERTAIN IRREGULARITIES WERE FOUND; THAT STEPS HAVE BEEN TAKEN TO CORRECT THE POSSIBILITY OF A REOCCURRENCE OF SUCH IRREGULARITIES; AND THAT EVIDENCE CONCERNING THE IRREGULARITIES WAS INSUFFICIENT TO WARRANT PROSECUTION.

IN VIEW OF THE FOREGOING, AND SINCE ALLIED IS NOW PERFORMING THE CONTRACT SATISFACTORILY, WE ARE UNABLE TO CONCLUDE THAT THE ADMINISTRATIVE AGENCY SHOULD BE REQUIRED TO TERMINATE ALLIED'S CONTRACT.