B-157921, NOV. 29, 1965

B-157921, NOV. 29, 1965

TO THE HONORABLE ROSS D. DAVIS, EXECUTIVE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION:

REFERENCE IS MADE TO YOUR LETTER OF OCTOBER 25, 1965, AND ENCLOSURES, REQUESTING OUR ADVICE ON THE ELIGIBILITY OF CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION (CAMPA) FOR AWARD OF A CONTRACT UNDER INVITATION FOR BIDS (IFB) NO. 03-65-61, A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS. YOUR REQUEST IS SUBMITTED AS EXECUTIVE ADMINISTRATOR OF THE SMALL BUSINESS ADMINISTRATION (SBA) IN THE ABSENCE OF AN APPOINTMENT OF A SUCCESSOR TO THE FORMER SBA ADMINISTRATOR.

CAMPA IS THE LOW BIDDER UNDER THE SUBJECT INVITATION FOR SUPPLYING BLYTHEVILLE AIR FORCE BASE, BLYTHEVILLE, ARKANSAS, MILK AND MILK PRODUCTS, AND IS THE PRESENT SUPPLIER OF SUCH PRODUCTS UNDER THE CURRENT CONTRACT WHICH WAS ALSO A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS. CONNECTION WITH AWARD OF THE PRESENT CONTRACT, CAMPA'S SMALL BUSINESS STATUS WAS QUESTIONED, AND BY A DECISION OF THE SMALL BUSINESS SIZE APPEALS BOARD DATED SEPTEMBER 3, 1964, IT WAS DETERMINED TO BE SMALL BUSINESS FOR THAT PROCUREMENT.

IN BIDDING ON THE SUBJECT PROCUREMENT, CAMPA APPARENTLY CERTIFIED ITSELF SMALL BUSINESS ON THE STRENGTH OF THE BOARD'S 1964 DETERMINATION. HOWEVER, THE SECOND LOW BIDDER, SUNNY HILL FARMS DAIRY COMPANY, INC., PROTESTED CAMPA'S ELIGIBILITY AS A SMALL BUSINESS CONCERN BECAUSE IT PROPOSED TO PROCESS THE MILK THROUGH THE FACILITIES OF A LARGE BUSINESS CONCERN. THE SBA'S LITTLE ROCK REGIONAL OFFICE SUSTAINED ITS ELIGIBILITY AS SMALL BUSINESS AND SUNNY HILL APPEALED THIS DETERMINATION TO THE SIZE APPEALS BOARD. ON SEPTEMBER 28, 1965, THE BOARD REVERSED THE FINDING OF THE REGIONAL OFFICE AND DETERMINED THAT CAMPA WAS NOT A SMALL BUSINESS CONCERN FOR THE SUBJECT PROCUREMENT. IN A LETTER DATED OCTOBER 8, 1965, TO THE BOARD, CAMPA APPEALED THE BOARD'S DECISION AND ALSO ASKED THE BOARD'S RULING, IN THE EVENT THE APPEAL SHOULD BE DENIED, ON WHAT EFFECT SEVERAL ALTERNATIVE PROPOSED CHANGES IN ITS ORGANIZATION OR OPERATIONS WOULD HAVE ON ITS SMALL BUSINESS STATUS. SO FAR AS APPEARS FROM THE PRESENT RECORD, THE BOARD HAS NOT RULED ON EITHER FACET OF THE APPEAL.

YOU STATE THAT THE SBA IS NOT CERTAIN WHETHER THE RULES ESTABLISHED BY OUR PAST DECISIONS PERMIT A CONCERN, AFTER BIDS ON A SMALL BUSINESS SET- ASIDE PROCUREMENT HAVE BEEN OPENED, TO VARY ITS ORGANIZATION OR METHOD OF DOING BUSINESS FOR THE PURPOSE OF ELIMINATING AN IMPEDIMENT TO ITS QUALIFYING AS A SMALL BUSINESS CONCERN, AND YOU REQUEST OUR VIEWS AS FOLLOWS:

"YOUR ADVICE IS REQUESTED ON THE EFFECT OF THE QUOTED ALTERNATIVES PROPOSED BY COUNSEL FOR CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION ON HIS CLIENT'S ELIGIBILITY FOR RECEIPT OF AN AWARD ON IFB 03-65-61, ASSUMING THAT THE SMALL BUSINESS ADMINISTRATION DETERMINED THAT THE ADOPTION OF THE PROPOSALS WILL RESULT IN CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION BEING A SMALL BUSINESS CONCERN FOR GOVERNMENT PROCUREMENTS OF MILK AND MILK PRODUCTS.'

YOU CITE SEVERAL DECISIONS OF OUR OFFICE WHICH ARE CONSIDERED RELEVANT TO THE QUESTION UNDER CONSIDERATION. AS WAS STATED IN ONE OF THE CITED DECISIONS, 41 COMP. GEN. 47,55,"ORDINARILY * * * THE FINAL DETERMINATION OF THE ELIGIBILITY OF A BIDDER AS A SMALL BUSINESS CONCERN UNDER A SMALL- BUSINESS RESTRICTED INVITATION IS MADE AS OF THE DATE OF AWARD.' HOWEVER, AS WAS POINTED OUT IN THAT DECISION, WE DO NOT BELIEVE THIS GENERAL RULE IS FOR APPLICATION UNDER CERTAIN CIRCUMSTANCES. THE ABOVE-CITED DECISION INVOLVED ONE OF THE RECOGNIZED EXCEPTIONS TO THE GENERAL RULE. INVOLVED WAS A SITUATION WHERE THE 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 THE BIDS WERE OPENED, THE 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 AWARD TO THAT BIDDER WAS NOT PROPER BECAUSE THE BIDDER HAD NOT UTILIZED THE SELF CERTIFICATION PROCEDURE PRUDENTLY AS REQUIRED BY THE SMALL BUSINESS ACT AND ALSO BECAUSE THE STOCK REALIGNMENT AFTER BID OPENING GAVE IT A SECOND CHANGE AND AN UNDUE ADVANTAGE OVER OTHER BIDDERS.

IN A SITUATION WHERE THE SELF-CERTIFICATION WAS IN GOOD FAITH ALTHOUGH ERRONEOUS AND THE BIDDER TOOK NO AFFIRMATIVE ACTION AFTER BID OPENING TO QUALIFY ITSELF AS A SMALL BUSINESS CONCERN, BUT THERE WAS A CHANGE IN THE BIDDER'S STATUS FROM A LARGE TO SMALL BUSINESS CONCERN BY REASON OF FACTORS BEYOND ITS CONTROL, WE HELD THAT THE GENERAL RULE WAS FOR APPLICATION AND UPHELD THE AWARD TO THAT BIDDER. SEE 42 COMP. GEN. 219; B -153267, AUGUST 10, 1964.

IN ANOTHER DECISION CITED BY YOU, B-156882, JULY 28, 1965, WHERE THE EVIDENCE INDICATED THE SELF-CERTIFICATION WAS IN GOOD FAITH, WE APPROVED THE AWARD ALTHOUGH THE BIDDER'S CHANGE IN STATUS FROM A LARGE TO A SMALL BUSINESS CONCERN WAS BROUGHT ABOUT BY THE BIDDER AFTER BID OPENING. HOWEVER, IT IS SIGNIFICANT TO NOTE THAT ALTHOUGH THE AFFIRMATIVE ACTION OF THE BIDDER AFTER BID OPENING RESULTED IN ITS QUALIFYING AS A SMALL BUSINESS CONCERN, SUCH ACTION WAS NOT FOR THE SOLE PURPOSE OF MEETING THE SMALL BUSINESS SIZE CRITERIA, BUT A BONA FIDE TRANSACTION NOT RELATED TO ITS SIZE STATUS.

IN THE INSTANT CASE, WE CANNOT CONCLUDE FROM THE RECORD PRESENTED THAT CAMPA'S SELF-CERTIFICATION AT THE TIME OF BID SUBMISSION WAS IN BAD FAITH. HOWEVER, IT IS CLEAR THAT ANY OF THE PROPOSED CHANGES IN ITS ORGANIZATION OR OPERATIONS AT THIS LATE DATE WOULD BE FOR THE SOLE PURPOSE OF QUALIFYING IT AS A SMALL BUSINESS CONCERN AND MAKING IT ELIGIBLE FOR AWARD. TO PERMIT CONSIDERATION OF THE CAMPA BID IN THESE CIRCUMSTANCES WOULD BE TANTAMOUNT TO THE GRANTING OF A SECOND CHANCE TO BID. SUCH PROCEDURE WOULD BE PREJUDICIAL TO OTHER RESPONSIVE BIDDERS, WOULD BE DESTRUCTIVE OF THE COMPETITIVE BIDDING PROCESS, AND WOULD CIRCUMVENT THE SMALL BUSINESS SET-ASIDE PROGRAM.

IN VIEW OF THE FOREGOING, IT IS OUR OPINION THAT IT WOULD BE IMPROPER TO CONSIDER THE ALTERNATIVES PROPOSED BY CAMPA IN DETERMINING ITS ELIGIBILITY FOR AN AWARD UNDER IFB 03-65-61.