B-156882, JUL. 28, 1965

B-156882: Jul 28, 1965

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THE INVITATION WAS A SET-ASIDE FOR SMALL BUSINESS CONCERNS. BIDS WERE OPENED ON APRIL 15. SOVEREIGN CONSTRUCTION COMPANY WAS LOW AT $2. YOUR FIRM WAS SECOND LOW AT $2. THE LOW BIDDER REPRESENTED ON ITS BID THAT IT WAS A SMALL BUSINESS CONCERN. PROMPTLY AFTER BID OPENING YOU PROTESTED TO THE CONTRACTING OFFICER THAT SOVEREIGN IN FACT WAS NOT A SMALL BUSINESS CONCERN. THE CONTRACTING OFFICER ALSO RECEIVED A PROTEST THAT YOUR FIRM WAS NOT A SMALL BUSINESS CONCERN. RULES THAT SOVEREIGN (WITH AFFILIATES) WAS AN ELIGIBLE SMALL BUSINESS BIDDER ON THE PROCUREMENT. WERE AFFILIATED WITH SOVEREIGN. IF THE ESTIMATES OF ITS RECEIPTS FURNISHED TO THE BOARD BY JOSEPH SKALLER ARE ADDED TO THE RECEIPTS OF THE FOREGOING CONCERNS.

B-156882, JUL. 28, 1965

TO BONWIT BUILDING CORPORATION:

THIS REFERS TO YOUR LETTER OF JUNE 1, 1965, PROTESTING AGAINST THE AWARD MADE TO SOVEREIGN CONSTRUCTION COMPANY, LTD. (INC.) UNDER INVITATION NO. ENG-19-016-65-23, ISSUED ON MARCH 4, 1965, BY THE U.S. ARMY ENGINEER DIVISION, NEW ENGLAND, FOR CONSTRUCTION OF THE ENVIRONMENTAL MEDICINE BUILDING, U.S. ARMY NATICK LABORATORIES, NATICK,MASSACHUSETTS.

THE INVITATION WAS A SET-ASIDE FOR SMALL BUSINESS CONCERNS. BIDS WERE OPENED ON APRIL 15, 1965, AND SOVEREIGN CONSTRUCTION COMPANY WAS LOW AT $2,384,200, AND YOUR FIRM WAS SECOND LOW AT $2,485,000. THE LOW BIDDER REPRESENTED ON ITS BID THAT IT WAS A SMALL BUSINESS CONCERN. PROMPTLY AFTER BID OPENING YOU PROTESTED TO THE CONTRACTING OFFICER THAT SOVEREIGN IN FACT WAS NOT A SMALL BUSINESS CONCERN. YOU CONTENDED THAT THE LOW BIDDER, WITH ITS AFFILIATES, HAD AVERAGE ANNUAL RECEIPTS FOR THE PRECEDING THREE YEARS EXCEEDING $7 1/2 MILLION. (SECTION 121.3-8 (A) (1), REVISION 5, PART 121--- SMALL BUSINESS SIZE STANDARDS.) THE CONTRACTING OFFICER ALSO RECEIVED A PROTEST THAT YOUR FIRM WAS NOT A SMALL BUSINESS CONCERN. IN VIEW THEREOF, THE CONTRACTING OFFICE REFERRED THE MATTER TO THE SMALL BUSINESS ADMINISTRATION FOR A SIZE DETERMINATION. ON APRIL 30, 1965, THE REGIONAL SBA OFFICE, PHILADELPHIA, PENNSYLVANIA, RULES THAT SOVEREIGN (WITH AFFILIATES) WAS AN ELIGIBLE SMALL BUSINESS BIDDER ON THE PROCUREMENT.

ON MAY 4, 1965, YOU APPEALED TO THE SIZE APPEALS BOARD OF SBA, WASHINGTON, D.C. THE BOARD CONSIDERED WHETHER CERTAIN COMPANIES, AS ALLEGED, WERE AFFILIATED WITH SOVEREIGN. THE BOARD FOUND THAT MR. JOSEPH SKALLER, A STOCKHOLDER AND OFFICER OF SOVEREIGN, HAD OWNED A CONTROLLING INTEREST IN L AND L PAINTING COMPANY, INC. IN THIS CONNECTION, THE BOARD REPORTED AS FOLLOWS:

"* * * THE BOARD HAS NOT RECEIVED INFORMATION AS TO THE EXACT RECEIPTS OF L AND L PAINTING COMPANY, INC. IF THE ESTIMATES OF ITS RECEIPTS FURNISHED TO THE BOARD BY JOSEPH SKALLER ARE ADDED TO THE RECEIPTS OF THE FOREGOING CONCERNS, THE AVERAGE FOR THE PAST THREE FISCAL YEARS WOULD EXCEED $7 1/2 MILLION, AND SOVEREIGN CONSTRUCTION COMPANY, LTD. WOULD NOT QUALIFY AS A SMALL BUSINESS CONCERN FOR GOVERNMENT CONSTRUCTION PROCUREMENT.'

THE BOARD FOUND, HOWEVER, THAT JOSEPH SKALLER HAD DISPOSED OF HIS INTEREST IN L AND L PAINTING COMPANY, INCORPORATED, ON APRIL 26, 1965, WHILE THE SIZE STATUS OF SOVEREIGN WAS UNDER CONSIDERATION BY SBA, AND THAT THE SALE WAS BONA FIDE, THAT IS, A SALE TO A DISINTERESTED PARTY, WITHOUT REGARD TO WHETHER THE SALE WAS MADE FOR THE SPECIFIC PURPOSE OF MAINTAINING A CONCERN'S SMALL BUSINESS STATUS. THE BOARD CONCLUDED THAT SOVEREIGN WAS, ON MAY 25, 1965, A SMALL BUSINESS CONCERN. ON MAY 26, 1965, AWARD WAS MADE TO SOVEREIGN.

YOU PROTEST, FIRST, THAT SOVEREIGN WAS NOT A SMALL BUSINESS CONCERN AT THE TIME OF AWARD, AND SECOND THAT, IN ANY EVENT, THE BIDDER SHOULD NOT HAVE BEEN ALLOWED TO QUALIFY FOR A SMALL BUSINESS AWARD BY SELLING ITS AFFILIATE AFTER THE BID OPENING, WHEN ITS ELIGIBILITY FOR THE AWARD WAS UNDER CHALLENGE.

ASPR 1-703 (B) PROVIDES THAT:

"* * * THE CONTROLLING POINT IN TIME FOR A DETERMINATION CONCERNING THE SIZE STATUS OF A QUESTIONED BIDDER OR OFFEROR SHALL BE THE DATE OF AWARD, EXCEPT THAT NO BIDDER OR OFFEROR SHALL BE ELIGIBLE FOR AWARD AS A SMALL BUSINESS CONCERN UNLESS HE HAS IN GOOD FAITH REPRESENTED HIMSELF AS A SMALL BUSINESS PRIOR TO THE OPENING OF BIDS OR CLOSING DATE FOR SUBMISSION OF OFFERS * * *.'

BY STATUTE SBA DECISIONS REGARDING SIZE STATUS ARE CONCLUSIVE FOR PURPOSE OF GOVERNMENT PROCUREMENT. 15 U.S.C. 637 (B) (6). ACCORDINGLY, WE FIND NO LEGAL BASIS TO QUESTION SBA'S DETERMINATION THAT SOVEREIGN WAS A QUALIFIED SMALL BUSINESS CONCERN AT THE DATE OF AWARD. SEE B-155122, NOVEMBER 6, 1964, (44 COMP. GEN. - ).

YOUR SECOND CONTENTION CONCERNS THE GOOD FAITH OF SOVEREIGN'S SELF CERTIFICATION. APPARENTLY SBA WOULD HAVE FOUND SOVEREIGN TO BE A LARGE BUSINESS CONCERN BUT FOR MR. SKALLER'S SALE ON APRIL 26, 1965, (AFTER BID OPENING) OF HIS INTEREST IN THE L AND L PAINTING COMPANY, INCORPORATED. IN 41 COMP. GEN. 47, 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, AND ALSO THAT THE STOCK REALIGNMENT AFTER BID OPENING GAVE IT A SECOND CHANCE AND AN UNDUE ADVANTAGE OVER THE OTHER BIDDERS. THUS WE CONCLUDED THAT THE AWARD TO THE LOW BIDDER WAS IMPROPER. ON THE OTHER HAND, WE HAVE SUSTAINED AWARD TO A SELF-CERTIFIED SMALL BUSINESS BIDDER ALTHOUGH THE BIDDER WAS IN FACT A LARGE BUSINESS CONCERN AT THE TIME OF CERTIFICATION, WHERE THE FACTS SHOWED THAT THE BIDDER HAD CERTIFIED ITSELF IN GOOD FAITH AND WAS A QUALIFIED SMALL BUSINESS ON THE DATE OF AWARD DUE TO A CHANGE IN THE SBA REGULATIONS AFTER THE SUBMISSION OF BIDS, A FACTOR OVER WHICH THE BIDDER HAD NO CONTROL. 42 COMP. GEN. 219; SEE B-153267, AUGUST 10, 1964.

SOVEREIGN CONTENDS THAT THE OFFICERS AND EXECUTIVE PERSONNEL OF THE COMPANY AT THE TIME OF BIDDING "ABSOLUTELY BELIEVED" THAT THE COMPANY WAS SMALL BUSINESS WITHIN THE MEANING OF THE REGULATIONS. IN SUPPORT, THE BIDDER HAS SUBMITTED A COPY OF A LETTER DATED JUNE 26, 1964, FROM THE SBA, PHILADELPHIA, PENNSYLVANIA, TO ESSENTIAL CONSTRUCTION COMPANY, INCORPORATED AND HIMOUNT CONSTRUCTORS, LTD., WITH REFERENCE TO THE DEPARTMENT OF THE ARMY CONSTRUCTION PROJECT FOR REHABILITATION OF BARTLETT MALL, WEST POINT, NEW YORK. THE LETTER STATES THAT BASED ON THE INFORMATION SUPPLIED BY ESSENTIAL AND HIMOUNT REGARDING ITS ANNUAL RECEIPTS, AS WELL AS THE RECEIPTS OF SOVEREIGN AND ALL OTHER AFFILIATES, SBA HAS DETERMINED THAT THESE FIRMS WERE ELIGIBLE SMALL BUSINESS BIDDERS ON THE AFOREMENTIONED PROJECT. FURTHER, ALTHOUGH WE HAVE NOT BEEN ADVISED AS TO THE ANNUAL RECEIPTS OF L AND L PAINTING FOR THE PERTINENT YEARS, IT HAS BEEN INDICATED THAT THE RECEIPTS WERE NOT OF A VERY LARGE MAGNITUDE, BUT MERELY LARGE ENOUGH, WHEN ADDED TO THE SOVEREIGN RECEIPTS SHOWN BY SBA, TO HAVE BROUGHT THE TOTAL AMOUNT TO A LITTLE IN EXCESS OF THE $7 1/2 MILLION YEARLY AVERAGE.

IT WAS SOVEREIGN'S VIEW THAT MR. SKALLER'S ASSOCIATION WITH BOTH SOVEREIGN AND L AND L PAINTING DID NOT RESULT IN MAKING THESE FIRMS AFFILIATES OF EACH OTHER. APPARENTLY THIS VIEW WAS NOT CHALLENGED UNTIL AFTER THE BID OPENING. SOVEREIGN MAY HAVE THEN RECONSIDERED ITS POSITION AND DECIDED TO SELL THE L AND L PAINTING INTEREST, ALTHOUGH MR. JOSEPH SKALLER CONTENDS THAT HIS SALE OF L AND L PAINTING STOCK WAS UNRELATED TO THE SOVEREIGN SIZE DETERMINATION. ALSO, SOVEREIGN COULD HAVE RECOGNIZED ITS AFFILIATION WITH L AND L PAINTING AND YET CERTIFIED ITSELF AS SMALL BUSINESS IN THE BELIEF THAT THE COMBINED RECEIPTS DID NOT EXCEED THE MAXIMUM LIMIT SET BY SBA. BE THAT AS IT MAY, WE CANNOT SAY THAT SOVEREIGN'S SELF-CERTIFICATION AT THE TIME OF BID SUBMISSION WAS MADE IN BAD FAITH. WHILE WE RECOGNIZE THAT THE CHANGE IN STATUS WAS BROUGHT ABOUT BY THE BIDDER AFTER BID OPENING, THIS FACTOR ALONE DOES NOT JUSTIFY CANCELLATION OF THE AWARD IN THE ABSENCE OF CLEAR AND CONVINCING EVIDENCE THAT SOVEREIGN WAS AWARE THAT IT WAS NOT SMALL BUSINESS AT THE TIME OF BID SUBMISSION. WE MUST CONCLUDE THAT THE AWARD TO SOVEREIGN WAS LEGALLY MADE.