B-157208, OCT. 7, 1965

B-157208: Oct 7, 1965

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TO PALMER BITUMINOUS CORPORATION: REFERENCE IS MADE TO YOUR LETTER OF JULY 8. THE PROCUREMENT WAS SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS PURSUANT TO THE PROVISIONS OF PARAGRAPH 1 706.5 OF THE ARMED SERVICES PROCUREMENT REGULATION. UNDER PARAGRAPH 9 OF THE INVITATION SCHEDULE (NOTICE OF TOTAL SMALL BUSINESS SET ASIDE) A SMALL BUSINESS IN THE CONSTRUCTION INDUSTRY FOR REPAIR OF ROADS IS DESCRIBED GENERALLY AS A CONCERN NOT DOMINANT IN SUCH FIELD AND HAVING AVERAGE ANNUAL RECEIPTS OF NOT MORE THAN $7. THE THREE BIDS RECEIVED WERE OPENED AS SCHEDULED ON JUNE 25. 288 WAS SUBMITTED BY MAY CONSTRUCTION COMPANY OF CANAAN. YOUR BID AND THAT OF ASPHALT PAVEMENT CORPORATION WERE IN THE AMOUNTS OF $124.

B-157208, OCT. 7, 1965

TO PALMER BITUMINOUS CORPORATION:

REFERENCE IS MADE TO YOUR LETTER OF JULY 8, 1965, PROTESTING THE AWARD OF A CONSTRUCTION CONTRACT TO MAY CONSTRUCTION COMPANY FOR MAINTENANCE WORK ON THE BASE ROADS AT WESTOVER AIR FORCE BASE, MASSACHUSETTS, UNDER INVITATION FOR BIDS NO. 19-617-65-100 ISSUED BY THE BASE PROCUREMENT OFFICE.

THE PROCUREMENT WAS SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS PURSUANT TO THE PROVISIONS OF PARAGRAPH 1 706.5 OF THE ARMED SERVICES PROCUREMENT REGULATION. UNDER PARAGRAPH 9 OF THE INVITATION SCHEDULE (NOTICE OF TOTAL SMALL BUSINESS SET ASIDE) A SMALL BUSINESS IN THE CONSTRUCTION INDUSTRY FOR REPAIR OF ROADS IS DESCRIBED GENERALLY AS A CONCERN NOT DOMINANT IN SUCH FIELD AND HAVING AVERAGE ANNUAL RECEIPTS OF NOT MORE THAN $7,500,000. UNDER PARAGRAPH 22 OF THE GENERAL PROVISIONS, AND IN ACCORDANCE WITH ASPR 1-707.3, THE CONTRACTOR AGREES TO ACCOMPLISH THE MAXIMUM AMOUNT OF SUBCONTRACTING TO SMALL BUSINESS CONCERNS THAT HE ,FINDS TO BE CONSISTENT WITH THE EFFICIENT PERFORMANCE OF THIS CONTRACT.' THE THREE BIDS RECEIVED WERE OPENED AS SCHEDULED ON JUNE 25, 1965, AND THE LOW BID OF $98,288 WAS SUBMITTED BY MAY CONSTRUCTION COMPANY OF CANAAN, CONNECTICUT. YOUR BID AND THAT OF ASPHALT PAVEMENT CORPORATION WERE IN THE AMOUNTS OF $124,797 AND $131,302, RESPECTIVELY. THE RECORD INDICATES THAT ALL BIDDERS FELL IN THE CATEGORY OF SMALL BUSINESS CONCERNS AND AWARD OF THE CONTRACT WAS MADE TO MAY CONSTRUCTION COMPANY ON JUNE 28, 1965.

YOU STATE THAT YOU PROTESTED TO THE BASE PROCUREMENT OFFICER AGAINST AWARD OF A CONTRACT TO MAY CONSTRUCTION ON THE BASIS THAT SUCH FIRM WAS NOT QUALIFIED; DID NOT HAVE THE EQUIPMENT TO PERFORM THE WORK AS SPECIFIED IN THE CONTRACT; AND THAT AN INVESTIGATION BY THE PROCUREMENT OFFICER SHOWED THAT MAY PLANNED TO SUBCONTRACT APPROXIMATELY 59 PERCENT OF THE WORK TO A LARGE BUSINESS CONCERN (LAND CONSTRUCTION CORPORATION). YOU CONTEND THAT THE AWARD TO MAY UNDER SUCH CIRCUMSTANCES IS CONTRARY TO THE INTENT OF THE PROVISION OF THE INVITATION WHICH RESTRICTED THE AWARD FOR THE ENTIRE PROJECT TO ONLY SMALL BUSINESS CONCERNS.

IN CONTRACTS AWARDED BY UNRESTRICTED COMPETITION, THERE IS GENERALLY NO LEGAL PROHIBITION TO SUBCONTRACTS MADE BY THE PRIME GOVERNMENT CONTRACTOR. SEE 34 COMP. GEN. 595. THE RESTRICTION ON COMPETITION IN THE INSTANT CASE, WHEREBY THE ONLY PRIME CONTRACTORS ELIGIBLE FOR AWARD WERE SMALL BUSINESS CONTRACTORS, IS SPECIFICALLY REQUIRED UNDER THESE CIRCUMSTANCES BY STATUTORY LAWS AND REGULATIONS ISSUED PURSUANT TO THOSE LAWS. SEE SECTION 15 OF THE SMALL BUSINESS ACT OF 1958, 72 STAT. 395, 15 U.S.C. 644, AND 10 U.S.C. 2301. ALTHOUGH WE HELD IN 37 COMP. GEN. 678 THAT NEITHER OF THESE ACTS PRECLUDES THE PROMULGATION OF A REGULATION WHICH WOULD PRESERVE FOR SMALL BUSINESS ALL SUBCONTRACT WORK LET UNDER A SET-ASIDE AWARD, OUR OFFICE WOULD NOT BE AUTHORIZED, WITHOUT SUCH A REGULATION, TO REQUIRE THE REJECTION OF MAY'S BID OR THE CANCELLATION OF ITS CONTRACT. IN THE INSTANT CASE, WE FIND NO LAW, REGULATION, OR CONTRACT PROVISION, WHICH WOULD PRECLUDE MAY FROM SUBCONTRACTING A PART OF ITS CONTRACT TO A LARGE BUSINESS. IT SHOULD BE NOTED THAT THE ONLY PERTINENT PROVISION IN THE INVITATION AND THE ARMED SERVICES PROCUREMENT REGULATION WITH REGARD TO THE AMOUNT OF SUBCONTRACTING TO EITHER LARGE OR SMALL BUSINESS CONCERNS IN REGARD TO RELATIVELY SMALL CONSTRUCTION CONTRACTS AS HERE INVOLVED IS THAT CONTAINED IN PARAGRAPH 22 OF THE INVITATION'S GENERAL PROVISIONS, WHEREIN THE CONTRACTOR AGREES TO SUBCONTRACT TO SMALL BUSINESS THE MAXIMUM AMOUNT THAT THE CONTRACTOR FINDS TO BE CONSISTENT WITH THE EFFICIENT PERFORMANCE OF THE CONTRACT.

CONCERNING YOUR CONTENTION THAT THE MAY CONSTRUCTION COMPANY IS NOT QUALIFIED TO PERFORM THE WORK, OUR OFFICE HAS CONSISTENTLY HELD THAT THE DETERMINATION OF A BIDDER'S QUALIFICATIONS TO COMPLY WITH CONTRACT REQUIREMENTS IS PRIMARILY A FUNCTION OF THE DEPARTMENT OR AGENCY CHARGED WITH ADMINISTRATION OF THE CONTRACT AND IN THE ABSENCE OF A SHOWING OF BAD FAITH OR THE LACK OF A REASONABLE FACTUAL BASIS FOR THE DETERMINATION, WE WILL NOT OBJECT TO THE CONCLUSION REACHED. IN THIS CASE, PARAGRAPH 16 OF THE INVITATION SCHEDULE SPECIFICALLY PROVIDED THAT A SURVEY TEAM MAY CONTRACT A BIDDER'S FACILITY TO DETERMINE THE BIDDER'S ABILITY TO PERFORM AND THAT THE TEAM MAY ALSO EVALUATE THE BIDDER'S SYSTEM FOR DETERMINING THE ABILITY OF HIS PROPOSED SUBCONTRACT OR PROCUREMENT SOURCES TO PERFORM. THE CONTRACTING OFFICER'S DETERMINATION AND FINDINGS IN SUCH RESPECT ARE REPORTED AS FOLLOWS:

"3. IN ORDER TO DETERMINE THE RESPONSIBILITY OF THE MAY CONSTRUCTION COMPANY TO PERFORM THE WORK OUTLINED IN THIS INVITATION AND IN COMPLIANCE WITH THE PROVISIONS OF ASPR AND AFPI, SECTION 1, PART 9, INQUIRIES WERE MADE BY THIS OFFICE REGARDING THE MAY CONSTRUCTION COMPANY. AMONG OTHER PARTIES CONTACTED BY THIS OFFICE WAS MR. ROBERT D. MAY, A PARTNER IN THE MAY CONSTRUCTION COMPANY. HE WAS ASKED THE APPROXIMATE EXTENT AND WITH WHOM HIS SUB-CONTRACTING WOULD BE DONE. WE WERE ADVISED THAT IT WAS HIS INTENTION TO SUBCONTRACT APPROXIMATELY 50 TO 60 PERCENT OF THE ENTIRE JOB TO LANE CONSTRUCTION COMPANY, A LARGE BUSINESS CONCERN. MR. MAY WAS ADVISED THAT SUB CONTRACTING TO THE LANE CONSTRUCTION COMPANY WOULD APPEAR TO BE DENYING THE LETTER AND SPIRIT OF GENERAL PROVISION 22, ENTITLED "UTILIZATION OF SMALL BUSINESS CONCERN.' HE RESPONDED SUBSTANTIALLY AS OUTLINED IN HIS CONFIRMING LETTER OF 10 JULY 1965, A COPY OF WHICH IS INCLOSED IN OUR FILE. IT WAS AT THAT POINT THAT I DETERMINED THAT HE WAS A RESPONSIBLE CONTRACTOR, AND THAT HE COULD PERFORM THIS AGREEMENT, AND THAT THERE WAS NO VIOLATION OF ANY OF THE PROVISIONS OF THE CONTRACT FOR THE FOLLOWING REASONS:

"A. THE CONTRACTOR HAD PREVIOUSLY PERFORMED WORK AT THIS BASE AND THE WORK WAS PERFORMED IN AN ACCEPTABLE MANNER.

"B. THROUGH THE COMBINATION OF THE CAPABILITIES, EQUIPMENT AND MANPOWER POSSESSED BY THE MAY CONSTRUCTION COMPANY AND THEIR SUB CONTRACTOR, THE WORK COVERED BY THIS PROJECT COULD BE COMPLETED IN A SATISFACTORY MANNER.

"C. THE MAY CONSTRUCTION COMPANY INDICATED, AND INQUIRY HAS REVEALED THEIR STATEMENT TO BE ACCURATE, THAT THE ONLY COMPANIES IN THIS AREA IN CLOSE PROXIMITY TO WESTOVER AFB THAT COULD HAVE PROVIDED THE MATERIAL REQUIRED IN PLACE, WERE THE ASPHALT PAVEMENT CORPORATION, 1000 PAGE BOULEVARD, SPRINGFIELD, MASSACHUSETTS; PALMER BITUMINOUS CORPORATION, 25 BLANCHARD STREET, PALMER, MASSACHUSETTS; AND LANE CONSTRUCTION CORPORATION, BERKSHIRE AVENUE, HOLYOKE, MASSACHUSETTS.

"D. THE MAY CONSTRUCTION COMPANY KNEW FROM PREVIOUS KNOWLEDGE OF THE HISTORY OF BIDDING ON SIMILAR JOBS AT WESTOVER AFB AND FROM TELEPHONE CALLS RECEIVED FROM BOTH THE PALMER BITUMINOUS CORPORATION AND THE ASPHALT PAVEMENT CORPORATION REQUESTING SUB-BIDS FROM HIM ON THIS SAME JOB THAT THEY INTENDED BIDDING. THE MAY CONSTRUCTION COMPANY, IN ORDER TO PRECLUDE ANY POSSIBLE VIOLATION OF PARAGRAPH 7 OF THE SCHEDULE ENTITLED "CERTIFICATE OF INDEPENDENT PRICE DETERMINATION" WHEREIN BIDDERS CERTIFY THEY WILL REFRAIN FROM CONSULTING WITH ANY COMPETITOR ON ANY MATTER RELATED TO PRICES ON THIS PROJECT AND TO PRECLUDE FROM PROVIDING HIS CHIEF COMPETITORS ANY COMPETITIVE ADVANTAGE OF KNOWING BEFOREHAND HIS PRICE ON A PRINCIPAL PORTION OF THE PROJECT, REFRAINED FROM SOLICITING THEIR BID AND RESORTED TO THE ONLY OTHER KNOWN AVAILABLE SOURCE IN THIS AREA.

"4. IT IS MY CONCLUSION THAT THE LOW BIDDER, THE MAY CONSTRUCTION COMPANY, ACTED IN A REASONABLE MANNER IN LIGHT OF THE CIRCUMSTANCES ABOVE AND THE CONDITIONS OUTLINED IN THE INVITATION FOR BIDS. UNDER THE CIRCUMSTANCES IT APPEARS THERE WAS NO VIOLATION OF EITHER THE LETTER OR SPIRIT OF CLAUSE 22, UTILIZATION OF SMALL BUSINESS CONCERNS.'

IN VIEW OF THE ABOVE CONSIDERATIONS WE CANNOT CONCLUDE THAT THERE WAS A LACK OF ANY REASONABLE FACTUAL BASIS FOR THE CONTRACTING OFFICER'S DETERMINATION AS TO MAY'S RESPONSIBILITY, OR AS TO THAT FIRM'S COMPLIANCE WITH ITS AGREEMENT UNDER PARAGRAPH 22 OF THE GENERAL PROVISIONS TO THE INVITATION.