B-160011, NOV. 21, 1966

B-160011: Nov 21, 1966

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO ARNDT AND DAY: REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 2. THE CONTRACT WAS BASED UPON THE PROVISIONS OF INVITATION FOR BIDS (IFB) NO. IT WAS PROVIDED ON PAGE 1 (STANDARD FORM 33) OF THE INVITATION THAT "THIS IS A 100 PERCENT SET ASIDE FOR SMALL BUSINESS CONCERNS.'. BIDDERS WERE TO MAKE REPRESENTATIONS BY CHECKING APPROPRIATE BLOCKS THAT THEY WERE OR WERE NOT SMALL BUSINESS CONCERNS. THAT THEY WERE REGULAR DEALERS OR MANUFACTURERS OF THE SUPPLIES BID UPON. THAT THEY WERE OPERATING AS INDIVIDUALS. THAT THEY WERE OR WERE NOT OWNED OR CONTROLLED BY A PARENT COMPANY. THAT BIDS RECEIVED FROM FIRMS WHICH WERE NOT SMALL BUSINESS CONCERNS WOULD BE CONSIDERED NONRESPONSIVE AND BE REJECTED.

B-160011, NOV. 21, 1966

TO ARNDT AND DAY:

REFERENCE IS MADE TO YOUR LETTER DATED SEPTEMBER 2, 1966, WITH ATTACHMENTS, PROTESTING ON BEHALF OF DERRETH OFFICE MACHINE SERVICE, INC., BALTIMORE, MARYLAND, THE AWARD OF CONTRACT DAAD05-67-C-0006 TO MR. LINDY LEROY DELL. THE CONTRACT WAS BASED UPON THE PROVISIONS OF INVITATION FOR BIDS (IFB) NO. AMC (R) 18-001-66-403 ISSUED JUNE 1, 1966, BY THE ABERDEEN PROVING GROUND, MARYLAND, TO PROVIDE MAINTENANCE SERVICES FOR GOVERNMENT- OWNED MONROE CALCULATORS AND ADDING AND SUBTRACTING MACHINES FOR THE CONTRACT PERIOD OF JULY 1, 1966, TO JUNE 30, 1967, AT THE ABERDEEN PROVING GROUND.

IT WAS PROVIDED ON PAGE 1 (STANDARD FORM 33) OF THE INVITATION THAT "THIS IS A 100 PERCENT SET ASIDE FOR SMALL BUSINESS CONCERNS.' IN ADDITION, ON PAGE 2, BIDDERS WERE TO MAKE REPRESENTATIONS BY CHECKING APPROPRIATE BLOCKS THAT THEY WERE OR WERE NOT SMALL BUSINESS CONCERNS; THAT THEY WERE REGULAR DEALERS OR MANUFACTURERS OF THE SUPPLIES BID UPON; THAT THEY WERE OPERATING AS INDIVIDUALS, PARTNERSHIPS, OR CORPORATIONS; AND THAT THEY WERE OR WERE NOT OWNED OR CONTROLLED BY A PARENT COMPANY. PAGE 9, PROVIDED, INTER ALIA, THAT BIDS RECEIVED FROM FIRMS WHICH WERE NOT SMALL BUSINESS CONCERNS WOULD BE CONSIDERED NONRESPONSIVE AND BE REJECTED. ALSO, IN A NUMBERED PARAGRAPH 17 (B), SET FORTH THE DEFINITION OF A SMALL BUSINESS CONCERN AS:

"/B) DEFINITION. A "SMALL BUSINESS CONCERN" IS A CONCERN, INCLUDING ITS AFFILIATES, WHICH IS INDEPENDENTLY OWNED AND OPERATED, IS NOT DOMINANT IN THE FIELD OF OPERATION IN WHICH IT IS BIDDING ON GOVERNMENT CONTRACTS, AND CAN FURTHER QUALIFY UNDER THE CRITERIA SET FORTH IN REGULATIONS OF THE SMALL BUSINESS ADMINISTRATION (CODE OF FEDERAL REGULATIONS, TITLE 13, SECTION 121.3-8). IN ADDITION TO MEETING THESE CRITERIA, A MANUFACTURER OR A REGULAR DEALER SUBMITTING BIDS OF PROPOSALS IN HIS OWN NAME MUST AGREE TO FURNISH IN THE PERFORMANCE OF THE CONTRACT END ITEMS MANUFACTURED OR PRODUCED IN THE UNITED STATES, ITS POSSESSIONS, OR PUERTO RICO, BY SMALL BUSINESS CONCERNS: PROVIDED, THAT THIS ADDITIONAL REQUIREMENT DOES NOT APPLY IN CONNECTION WITH CONSTRUCTION OR SERVICE CONTRACTS.'

WHEN BIDS WERE OPENED AS SCHEDULED ON JUNE 20, 1966, THE TWO BIDS RECEIVED WERE THAT OF MR. LINDY LEROY DELL AT A TOTAL PRICE OF $14,885, AND THAT OF DERRETH OFFICE MACHINE SERVICE, INC., AT A TOTAL BID PRICE OF $15,069. BOTH OFFERED 5 PERCENT DISCOUNTS FOR PROMPT PAYMENT.

THE BID OF MR. DELL INDICATED BY APPROPRIATE CHECKS ON STANDARD FORM 33, PAGE 2, THAT HE WAS A SMALL BUSINESS CONCERN, A REGULAR DEALER IN THE SUPPLIES BID UPON, OPERATING AS AN INDIVIDUAL, AND NOT OWNED OR CONTROLLED BY A PARENT COMPANY.

YOU HAVE RAISED SEVERAL QUESTIONS REGARDING THE ENTITLEMENT OF MR. DELL TO RECEIVE AWARD AND HIS QUALIFICATIONS TO PERFORM THE CONTRACT. YOU ALLEGE THAT MR. DELL, BEING AN EMPLOYEE OF MONROE INTERNATIONAL, INC., A DIVISION OF LITTON INDUSTRIES, AT THE TIME OF SUBMISSION OF HIS BID, COULD NOT IN GOOD FAITH CERTIFY HIMSELF AS A SMALL BUSINESS CONCERN IN VIEW OF HIS AFFILIATION WITH THAT LARGE BUSINESS CONCERN WHICH HAD THE POWER TO CONTROL HIM, AND FURTHER, THAT THE CONTRACTING OFFICER SHOULD HAVE QUESTIONED MR. DELL'S SMALL BUSINESS STATUS PRIOR TO AWARD BY NOTICE TO THE SMALL BUSINESS ADMINISTRATION REGIONAL OFFICE PURSUANT TO PARAGRAPH 1- 703 (B) 2 OF THE ARMED SERVICES PROCUREMENT REGULATION.

THE RECORD INDICATES, AS YOU CONTEND, THAT AT THE TIME MR. DELL SUBMITTED HIS BID HE WAS AN EMPLOYEE OF MONROE, FROM WHICH EMPLOYMENT, YOU ADVISE, HE RESIGNED ON JULY 7, 1966. ALTHOUGH YOU WERE NOTIFIED BY LETTER DATED JULY 5, 1966 (WHEN THE CONTRACTING OFFICER RECEIVED A FAVORABLE PREAWARD SURVEY REPORT ON MR. DELL), THAT YOU WERE NOT THE SUCCESSFUL BIDDER, THE DATE OF ACTUAL AWARD WAS JULY 8, 1966, AND IT APPEARS THAT MR. DELL WAS NOT THEN AN EMPLOYEE OF MONROE. IN HIS BID MR. DELL DID NOT REFER TO MONROE IN ANY WAY OR OTHERWISE INDICATE THAT HE WAS NOT BIDDING SOLELY IN HIS INDIVIDUAL CAPACITY. ALSO, THE CONTRACTING OFFICER REPORTS, CONTRARY TO YOUR CONTENTION, THAT MR. DELL DID NOT SUBMIT A LETTER WITH HIS BID STATING THAT HE WAS AN EMPLOYEE OF MONROE, ALTHOUGH A LETTER CONCERNING HIS EMPLOYMENT WITH THAT FIRM WAS INCLUDED IN THE PREAWARD SURVEY MATERIAL.

THE AUTHORITY TO DETERMINE WHETHER A BIDDER WHO REPRESENTS HIMSELF AS A SMALL BUSINESS CONCERN, AS HERE, IS IN FACT A SMALL BUSINESS CONCERN, IS VESTED BY LAW IN THE SMALL BUSINESS ADMINISTRATION. 15 U.S.C. 637 (B) (6). UNDER THE APPLICABLE REGULATIONS, PROTESTS CONCERNING A SELF- CERTIFICATION OF THE SMALL BUSINESS STATUS OF A BIDDER MUST BE MADE WITHIN FIVE DAYS AFTER BID OPENING, EXCLUSIVE OF SATURDAYS, SUNDAYS AND LEGAL HOLIDAYS. SEE SBA RULES AND REGULATIONS 121.3-5 (A). SEE ALSO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1 703.

THE FACTS CLEARLY SHOW YOUR PROTEST CONCERNING MR. DELL'S SMALL BUSINESS STATUS WAS FILED DIRECTLY WITH THE SBA ON JULY 27, 1966, MORE THAN A MONTH AFTER THE BID OPENING DATE, JUNE 20, 1966, AND AFTER THE DATE OF CONTRACT AWARD, JULY 8, 1966. WHILE REPRESENTATIVES OF DERRETH MAY HAVE ORALLY QUESTIONED MR. DELL'S STATUS WITHIN THE FIVE DAY PERIOD, THE RECORD FAILS TO SHOW A FORMAL WRITTEN PROTEST TO THE CONTRACTING OFFICER IN ACCORDANCE WITH ASPR 1-703 (B) (1). WE MUST CONCLUDE, THEREFORE, THAT YOUR PROTEST AS TO THE SMALL BUSINESS STATUS OF MR. DELL WAS UNTIMELY SUBMITTED, AND THE QUESTION OF WHETHER, PURSUANT TO A TIMELY PROTEST, SBA WOULD HAVE DETERMINED MR. DELL NOT TO BE A SMALL BUSINESS CONCERN BY REASON OF HIS EMPLOYMENT WITH MONROE, IS NOW ACADEMIC. IT IS OUR VIEW, HOWEVER, THAT THE LIKELIHOOD OF SUCH A DETERMINATION CONTAINS SUCH ELEMENTS OF DOUBT THAT WE DO NOT FEEL COMPELLED TO DISAGREE WITH THE DECISION OF THE CONTRACTING OFFICER NOT TO QUESTION MR. DELL'S SMALL BUSINESS REPRESENTATION UNDER THE PROCEDURE PERMITTED BY ASPR 1-703 (B) (2).

WITH REFERENCE TO 40 COMP. GEN. 550, WHICH YOU CITE, IT WAS HELD THEREIN THAT THE BID OF A FIRM, WHICH HAD REPRESENTED ITSELF NOT TO BE A SMALL BUSINESS CONCERN, WAS NONRESPONSIVE ON ITS FACE TO AN INVITATION RESTRICTED TO SMALL BUSINESS CONCERNS. HERE, MR. DELL REPRESENTED HIMSELF AS BEING A SMALL BUSINESS CONCERN, RATHER THAN NOT BEING SUCH A CONCERN, AND WE FIND NOTHING IN THE RECORD WHICH INDICATES THAT SUCH REPRESENTATION WAS NOT MADE IN GOOD FAITH, NOR HAS IT BEEN ESTABLISHED IN ACCORDANCE WITH APPLICABLE PROCEDURES THAT MR. DELL'S STATUS WAS NOT, IN FACT, AS REPRESENTED AT THE TIME OF HIS BID SUBMISSION. IN SUCH CONNECTION, IT IS NOTED THAT YOU STATED IN YOUR PROTEST TO SBA THAT "DERRETH IS NOT INFERRING LACK OF GOOD FAITH ON THAT PART OF MR. DELL.'

YOU QUESTION THE REPRESENTATION MADE BY MR. DELL IN HIS BID THAT HE WAS A "REGULAR DEALER" IN THE SUPPLIES BID UPON. YOU FURTHER STATE THAT THE WALSH-HEALEY PUBLIC CONTRACTS ACT APPLIES ONLY TO "SUPPLIES" AND NOT TO "SERVICES" AND THAT THE DEFINITION OF A "REGULAR DEALER" AND ,MANUFACTURER" HAS BEEN THE SUBJECT OF DECISIONS OF THE DEPARTMENT OF LABOR IN ADMINISTERING THE ACT. BASED ON THE DEFINITIONS SO ESTABLISHED, YOU MAINTAIN, A REGULAR DEALER MUST BE ENGAGED PRIOR TO ANY AWARD IN AN ESTABLISHED REGULAR BUSINESS AND THAT SINCE MR. DELL HAD NO ESTABLISHED BUSINESS HE WAS NOT QUALIFIED AS A "REGULAR DEALER.' FURTHER, YOU STATE THAT IT HAS BEEN THE PAST POLICY OF ABERDEEN PROVING GROUND TO REQUIRE PROSPECTIVE CONTRACTORS TO SHOW THEY HAVE BEEN ENGAGED IN A RECOGNIZED TRADE RENDERING THE SERVICES REQUIRED.

WE AGREE THAT CONTRACTS WHICH ARE ESSENTIALLY FOR SERVICES, AS HERE, ARE NOT COVERED BY THE WALSH-HEALEY PUBLIC CONTRACTS ACT (41 U.S.C. 35-45). WE FAIL TO SEE, THEREFORE, HOW STANDARDS AND DEFINITIONS FOR "REGULAR DEALERS" AND "MANUFACTURERS" ESTABLISHED BY THE DEPARTMENT OF LABOR BASED ON THE ACT CAN BE APPLIED TO THIS CASE. FURTHERMORE, IT IS NOTED ASPR 1- 702 (B) REQUIRES THAT SMALL BUSINESS CONCERNS, BOTH ESTABLISHED AND POTENTIAL SUPPLIERS, BE AFFORDED AN EQUITABLE OPPORTUNITY TO COMPETE FOR ALL CONTRACTS THAT THEY CAN PERFORM. THE PROCURING AGENCY ADVISES THAT A PREAWARD SURVEY CONDUCTED ON MR. DELL RESULTED IN A SATISFACTORY RATING AND THAT AN AFFIRMATIVE DETERMINATION OF RESPONSIBILITY WAS MADE ON JULY 8, 1966, BY THE CONTRACTING OFFICER. ALSO, THE AGENCY HAS ADVISED IT IS NOT ITS ESTABLISHED POLICY TO REQUIRE PROSPECTIVE BIDDERS TO SHOW THEY ARE ENGAGED IN AN ESTABLISHED REGULAR SERVICE BUSINESS PRIOR TO AWARD. VIEW THEREOF, WE FAIL TO SEE ANY MERIT TO YOUR CONTENTION THAT MR. DELL WAS UNQUALIFIED FOR THE SERVICE CONTRACT BY REASON OF NOT FITTING THE PRESCRIBED DESCRIPTION OF A REGULAR DEALER FOR SUPPLY CONTRACTS. IT IS NOTED THAT DERRETH DID NOT CHECK EITHER OF THE BLOCKS DESIGNATED FOR REGULAR DEALER OR MANUFACTURER, BUT INSERTED, INSTEAD, A REPRESENTATION THAT IT WAS A SERVICE COMPANY.

YOU ALSO ALLEGE THAT THE CONTRACTING OFFICER, IN SETTING FORTH THE QUALIFICATION REQUIREMENTS, STATED THAT BIDS WOULD NOT BE ACCEPTED FROM ANY INDIVIDUAL OPERATING OUT OF HIS OWN HOME AND THAT SUCCESSFUL BIDDER WOULD HAVE TO SHOW A "PLACE OF BUSINESS.' MR. DELL'S BID, YOU NOTE, SHOWED HIS HOME ADDRESS AS APPARENTLY HE DID NOT HAVE A BONA FIDE PLACE OF BUSINESS. THE CONTRACTING OFFICER HAS REPORTED THAT HE MADE NO STATEMENTS INDICATING A BID WOULD NOT BE ACCEPTED FROM AN INDIVIDUAL OPERATING OUT OF HIS HOME OR THAT THE SUCCESSFUL BIDDER WOULD BE REQUIRED TO SHOW A "PLACE OF BUSINESS.' HOWEVER, IRRESPECTIVE OF WHETHER SUCH STATEMENTS WERE, OR WERE NOT, MADE WE PERCEIVE NOTHING IN THE INVITATION WHICH PROHIBITS THE SUCCESSFUL BIDDER FROM OPERATING OUT OF, OR USING, HIS RESIDENCE AS HIS PLACE OF BUSINESS. AS A POINT OF INFORMATION, THE PREAWARD SURVEY FILE INDICATES MR. DELL IS TO SHARE THE OFFICE AND SHOP OF THE HUETER OFFICE MACHINES CO., 334 ST. PAUL PLACE, BALTIMORE, MARYLAND, WHICH COMPANY HAS BEEN IN BUSINESS AT THAT LOCATION SINCE 1935.

FINALLY, YOU QUESTION MR. DELL'S ABILITY TO PERFORM THE IFB REQUIREMENTS IN SECURITY AREAS, TO FURNISH EQUIPMENT FOR USE WHEN GOVERNMENT MACHINES ARE REMOVED FOR REPAIRS, AND TO FURNISH NEW STANDARD PARTS MANUFACTURED BY THE MONROE COMPANY. THE PREAWARD SURVEY REPORT INDICATES MR. DELL HAS SATISFACTORY LABOR RESOURCES, FACILITIES AND EQUIPMENT AND THE ABILITY TO MEET THE REQUIRED SCHEDULE. FURTHER, THE PROCURING AGENCY HAS AFFIRMATIVELY DETERMINED MR. DELL TO BE RESPONSIBLE. THE DETERMINATION OF A PROSPECTIVE CONTRACTOR'S RESPONSIBILITY IS A QUESTION OF FACT PRIMARILY FOR THE CONTRACTING OFFICER. IT ALSO INVOLVES MATTERS OF JUDGMENT AND A CONSIDERABLE RANGE OF DISCRETION. IN CASES INVOLVING SUCH DETERMINATIONS WE THEREFORE WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER UNLESS IT IS SHOWN BY CONVINCING EVIDENCE THAT THE FINDING WAS ARBITRARY, CAPRICIOUS OR NOT BASED ON SUBSTANTIAL EVIDENCE. SEE B-158420, AUGUST 1, 1966, AND CASES CITED THEREIN. FROM THE RECORD BEFORE US IT CANNOT BE SAID THE CONTRACTING OFFICER'S DECISION AS TO THE RESPONSIBILITY OF MR. DELL WAS ARBITRARY, CAPRICIOUS OR NOT BASED ON SUBSTANTIAL EVIDENCE. IN SUCH CONNECTION, WE HAVE BEEN ADVISED THAT, IN ADDITION TO THE SUBJECT CONTRACT, MR. DELL WAS AWARDED CONTRACTS FOR THE MAINTENANCE OF MONROE MACHINES AT EDGEWOOD ARSENAL, MARYLAND, AND AT FORT GEORGE G. MEADE, MARYLAND, AND THAT PERFORMANCE AT ALL THREE INSTALLATIONS HAS BEEN SATISFACTORY.

BASED UPON THE FOREGOING, WE CANNOT CONCLUDE THAT AWARD WAS MADE TO OTHER THAN THE LOW RESPONSIVE, RESPONSIBLE, BIDDER AND YOUR PROTEST MUST THEREFORE BE DENIED.