B-154087, MAY 26, 1964

B-154087, MAY 26, 1964

TO CHAMPION SPARK PLUG COMPANY:

REFERENCE IS MADE TO YOUR LETTERS DATED FEBRUARY 11 AND MARCH 10, 1964, TO THE ROCK ISLAND ARSENAL, ROCK ISLAND, ILLINOIS, PROTESTING THE EXCLUSION OF YOUR COMPANY FROM THE MAILING LIST USED IN THE SOLICITATION OF BIDS FROM SMALL BUSINESS CONCERNS UNDER INVITATION FOR BIDS, NO. AMC/W/ -11-070-64-381, ISSUED ON JANUARY 23, 1964, BASED UPON A REQUIREMENT FOR 649 SPARK PLUG CLEANING AND TESTING MACHINES. THIS PROPOSED PROCUREMENT WAS SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION IN ACCORDANCE WITH A JOINT DETERMINATION MADE BY THE CONTRACTING OFFICER AND A REPRESENTATIVE OF THE SMALL BUSINESS ADMINISTRATION PURSUANT TO THE PROVISIONS OF SECTION 15 OF THE SMALL BUSINESS ACT, 72 STAT. 395, 15 U.S.C. 644, AND SECTIONS 1-706 OF THE ARMED SERVICES PROCUREMENT REGULATION.

OILJACK MANUFACTURING COMPANY, INC., STROUDSBURG, PENNSYLVANIA ALSO PROTESTED THE LIMITING OF BIDS OR PROPOSALS IN THIS CASE TO SMALL BUSINESS CONCERNS, ALTHOUGH IT APPEARS TO BE A SMALL BUSINESS FIRM AND IT REPORTEDLY WAS AMONG THE NINE SMALL BUSINESS FIRMS WHICH WERE SENT COPIES OF THE INVITATION FOR BIDS. AWARD ACTION UNDER THE INVITATION FOR BIDS HAS BEEN SUSPENDED BY THE DEPARTMENT OF THE ARMY PENDING OUR CONSIDERATION OF THESE PROTESTS.

OILJACK MANUFACTURING COMPANY, INC., HAS INDICATED THAT FOR THE PAST 29 YEARS IT HAS BEEN THE EXCLUSIVE MANUFACTURER OF THE CHAMPION SPARK PLUG CLEANER AND TESTER; THAT YOUR COMPANY CONTROLS ITS MARKETING AND DISTRIBUTION; AND THAT, WHILE OILJACK MANUFACTURING COMPANY, INC., IS SMALL BUSINESS AND HAS BEEN CERTIFIED AS SUCH BY THE SMALL BUSINESS ADMINISTRATION, IT HAS LOST THE OPPORTUNITY OF PRODUCING OVER $200,000 WORTH OF SERVICE UNITS FOR THE GOVERNMENT "BECAUSE THE CHAMPION BIDS WERE REJECTED ON THE SMALL BUSINESS CLAUSE" OF THE PARTICULAR ADVERTISEMENT FOR BIDS.

IN YOUR INITIAL PROTEST LETTER OF FEBRUARY 11, 1964, THE OPINION WAS EXPRESSED THAT, IN VIEW OF YOUR SUPPLIER'S QUALIFICATIONS AS A SMALL BUSINESS CONCERN, THE OBJECTIVES OF THE SMALL BUSINESS SET-ASIDE PROGRAM IN RELATION TO GOVERNMENT PROCUREMENTS WOULD BE ACCOMPLISHED IF YOUR COMPANY, WHICH IS LARGE BUSINESS, WERE PERMITTED TO BID COMPETITIVELY ON THE MACHINE REQUIRED BY THE DEPARTMENT OF THE ARMY.

IT IS STATED IN YOUR LETTER OF MARCH 10, 1964, THAT YOU CONCUR WITH THE OBJECTIVES OF THE SMALL BUSINESS ADMINISTRATION IN SEEKING TO MAXIMIZE PROCUREMENT FROM SMALL BUSINESS WHERE FEASIBLE, PRACTICABLE AND ECONOMICAL. HOWEVER, IT IS CONTENDED THAT A DESIGNATION OF SPARK PLUG CLEANERS AND TESTERS AS A PRODUCT TO BE PROCURED ONLY THROUGH SMALL BUSINESS COMPLETELY IGNORES THE ROLE THAT MEDIUM INDUSTRY HAS PLAYED IN STRENGTHENING AND DEVELOPING SMALL BUSINESS. IT IS ARGUED THAT A SMALL BUSINESS BENEFITS DIRECTLY WHEN YOU ARE AWARDED A CONTRACT TO SUPPLY AN OILJACK PRODUCT; THAT THE GOVERNMENT BENEFITS DIRECTLY BY RECEIVING A PRODUCT THAT IS TESTED, APPROVED AND CCEPTED; AND THAT IT WOULD SEEM TO BE MORE APPROPRIATE FOR THE SMALL BUSINESS ADMINISTRATION TO CONCENTRATE ITS EFFORTS TOWARD PRODUCTS WHICH ARE OVER-PRICED OR IN SHORT SUPPLY THAN TO, IN EFFECT, ENTER INTO COMPETITION ITSELF, USING THE OFFICES OF THE SMALL BUSINESS ADMINISTRATION TO DEVELOP SOURCES OF SUPPLY WHEN NONE ARE ACTUALLY NEEDED. IT IS FURTHER ARGUED THAT THE SMALL BUSINESS ADMINISTRATION IS, IN EFFECT, INTERJECTING ITSELF BETWEEN CHAMPION AND OILJACK FOR THE PURPOSE OF ACCOMPLISHING FOR OILJACK WHAT YOU ARE NOW DOING; THAT IT HAS BEEN RULED THAT A SMALL BUSINESS FIRM MAY SUBCONTRACT THE MAJOR PORTION OF A CONTRACT TO LARGE BUSINESS; AND THAT IT WOULD SEEM TO BE HIGHLY RIDICULOUS TO ASSUME THAT SUBCONTRACTING BY A LARGE BUSINESS CONCERN OF 95 PERCENT OF A CONTRACT TO A SMALL BUSINESS FIRM WOULD NOT SIMILARLY BE COMPLETELY ACCEPTABLE.

THE RECORD SHOWS THAT THE MOST RECENT PROCUREMENT OF THIS ITEM BY THE ARMY MATERIEL COMMAND UNDER AN UNRESTRICTED ADVERTISEMENT FOR BIDS OCCURRED ABOUT AUGUST 1962 FOLLOWING THE RECEIPT OF BIDS SUBMITTED ON 2,207 UNITS BY YOUR COMPANY AND TWO SMALL BUSINESS CONCERNS. THE CONTRACT WAS AWARDED TO ONE OF THE TWO SMALL BUSINESS FIRMS AS THE LOWEST RESPONSIVE AND RESPONSIBLE BIDDER. FOR THE NEXT PROPOSED PROCUREMENT OF THE SAME QUANTITY OF UNITS BIDS WERE SOLICITED ONLY FROM SMALL BUSINESS CONCERNS, WITH BIDS HAVING BEEN SCHEDULED FOR PUBLIC OPENING ON DECEMBER 28, 1962. FOUR SMALL BUSINESS FIRMS SUBMITTED BIDS AND AN ADDITIONAL BID SUBMITTED BY YOUR COMPANY WAS TREATED AS NONRESPONSIVE ALTHOUGH IT WAS ACCOMPANIED BY A LETTER STATING THAT OILJACK MANUFACTURING COMPANY, INC., IS SMALL BUSINESS AND THAT IT MANUFACTURES THE CHAMPION CLEANERS AND TESTERS TO YOUR DESIGNS AND SPECIFICATIONS EXCLUSIVELY FOR YOUR COMPANY. THE CONTRACT AWARD WAS MADE TO ONE OF THE SMALL BUSINESS BIDDERS AT AN F.O.B. ORIGIN UNIT PRICE OF $54.27. YOUR COMPANY HAD PROPOSED TO SUPPLY 2,207 UNITS AT A PRICE OF $52.21 EACH, F.O.B. ORIGIN, OR AT A PRICE OF $54.76 EACH, F.O.B. DESTINATION. APPARENTLY THE FREIGHT COST DIFFERENTIAL WOULD HAVE BEEN TOO HIGH TO HAVE JUSTIFIED A REJECTION OF YOUR BID IF THE ADVERTISEMENT HAD PERMITTED BIDDING BY LARGE BUSINESS CONCERNS.

IN DENYING A PROTEST MADE BY OILJACK MANUFACTURING COMPANY, INC., CONCERNING THAT INVITATION FOR BIDS, IT WAS SUGGESTED TO THAT COMPANY THAT IT SHOULD BID DIRECTLY ON ANY SUBSEQUENT PROCUREMENT BY THE GOVERNMENT OF SPARK PLUG CLEANING AND TESTING MACHINES UNDER A CONTRACT TO BE AWARDED UNDER THE "SMALL BUSINESS RESTRICTED ADVERTISING" PROCEDURE.

THE CONTRACTING OFFICER HAS CITED THE PROVISION OF SUBSECTION 1 706.5 (A) OF THE ARMED SERVICES PROCUREMENT REGULATION THAT, SUBJECT TO ANY APPLICABLE PREFERENCE FOR LABOR SURPLUS AREA SET-ASIDES, THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR CLASS OF PROCUREMENTS SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION WHERE THERE IS A REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. ALSO, THE SMALL BUSINESS SET-ASIDE PROGRAM DESCRIBED IN PART 7 OF THE ARMED SERVICES PROCUREMENT REGULATION DOES NOT CONTEMPLATE IN ANY MANNER THE RECOGNITION OF A LARGE BUSINESS CONCERN FOR THE PURPOSES OF BIDDING UNDER THE SMALL BUSINESS RESTRICTED ADVERTISING PROCEDURE. AS INDICATED AT PAGE A4 OF INVITATION FOR BIDS NO. AMC/W/-11- 070-64-381, BIDS ARE TO BE SOLICITED FROM SMALL BUSINESS CONCERNS ONLY AND BIDS OR PROPOSALS SUBMITTED BY FIRMS WHICH ARE NOT SMALL BUSINESS ARE REQUIRED TO BE REJECTED AS NONRESPONSIVE.

WE DO NOT AGREE THAT A LARGE BUSINESS CONCERN COULD QUALIFY UNDER EXISTING REGULATIONS AS AN ELIGIBLE SMALL BUSINESS BIDDER MERELY BECAUSE IT PROPOSES TO FURNISH A PRODUCT TO BE MANUFACTURED TO ITS SPECIFICATIONS BY A SMALL BUSINESS CONCERN. WE HAVE BEEN ADVISED BY THE SMALL BUSINESS ADMINISTRATION THAT IT HAD BEEN REQUESTED SOME TIME AGO TO CHANGE ITS REGULATIONS (SEC. 121.3-8 (C) (, SMALL BUSINESS SIZE STANDARDS REGULATION (REVISION 4), COPY ENCLOSED, TO PERMIT LARGE DISTRIBUTORS TO QUALIFY AS SMALL BUSINESS WHENEVER THEY WOULD DELIVER IN THE PERFORMANCE OF A SET- ASIDE PROCUREMENT, PRODUCTS WHICH HAD BEEN MANUFACTURED BY A SMALL BUSINESS. SBA WAS AND IS OF THE VIEW THAT THE SMALL BUSINESS ACT DOES NOT AUTHORIZE AWARD OF SET-ASIDE PROCUREMENTS TO CONCERNS THAT THEMSELVES DO NOT QUALIFY AS SMALL BUSINESS CONCERNS, EVEN THOUGH THEY WOULD FURNISH PRODUCTS MANUFACTURED BY SMALL BUSINESS CONCERNS. NEVERTHELESS, SBA STATED IT TO BE ITS POLICY TO CONSIDER THE VIEWS OF ANY PARTY SUGGESTING A CHANGE IN ITS REGULATIONS, AND SAID IT WOULD BE PLEASED TO DISCUSS THE MATTER WITH YOUR REPRESENTATIVES. THE SMALL BUSINESS ACT (15 U.S.C. 637 (B) (6) ( MAKES THE DETERMINATION OF SBA FINAL AND CONCLUSIVE AS TO WHAT FIRMS SHALL BE CONSIDERED SMALL BUSINESS. WE MUST, THEREFORE, RULE THAT YOU WERE NOT ELIGIBLE TO BID ON THIS PROCUREMENT.

ACCORDINGLY, AS RECOMMENDED BY HEADQUARTERS, UNITED STATES ARMY MATERIEL COMMAND, YOUR PROTEST IN THE MANNER IS HEREBY DENIED. SIMILAR ACTION IS BEING TAKEN IN REGARD TO THE SEPARATE PROTEST OF YOUR SUPPLIER.