B-163128, APR. 24, 1968

B-163128, APR. 24, 1968

TO DYNAMIC ENTERPRISES, INC.:

REFERENCE IS MADE TO YOUR TELEGRAM AND LETTER OF DECEMBER 19, 1967, AND SUBSEQUENT CORRESPONDENCE, PROTESTING AGAINST THE AWARD OF A MESS ATTENDANT SERVICES CONTRACT TO ROBERT H. OVERBAY, TRADING AS ABC FOOD SERVICE OF CORPUS CHRISTI (HEREAFTER ABC) ON DECEMBER 11, 1967, BY THE NAVAL AIR STATION, CORPUS CHRISTI, TEXAS, UNDER RFP N00216-68-R-0058, ISSUED ON NOVEMBER 15, 1967, AS A TOTAL SMALL BUSINESS SET-ASIDE. DECEMBER 15, 1967, SIX WORKING DAYS AFTER PROPOSAL OPENING AND IMMEDIATELY AFTER RECEIPT BY YOU OF NOTICE OF THE AWARD, YOU PROTESTED THE SIZE STATUS OF THE SUCCESSFUL OFFEROR BY A TELEGRAM TO THE CONTRACTING OFFICER. YOU WERE LATER INFORMED THAT YOUR PROTEST WAS RECEIVED AFTER AWARD BUT THAT IT HAD BEEN FORWARDED TO THE APPROPRIATE SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICE FOR ITS CONSIDERATION IN FUTURE ACTIONS. SUBSEQUENTLY, THE SAN ANTONIO REGIONAL OFFICE OF THE SBA DETERMINED THAT THE COMPANY WAS NOT A SMALL BUSINESS CONCERN FOR THE PROCUREMENT BECAUSE IT WAS AFFILIATED WITH ABC FOOD SERVICE, INC., OF EL PASO, TEXAS, THE CONTRACTOR'S FRANCHISOR, WHOSE TOTAL AVERAGE ANNUAL RECEIPTS FOR THE PRECEDING THREE FISCAL YEARS EXCEEDED THE $1 MILLION SIZE STANDARD APPLICABLE FOR PROVIDING FOOD SERVICES (CONTRACT MESSMAN). THIS DETERMINATION WAS AFFIRMED ON APPEAL BY THE SIZE APPEALS BOARD AND APPROVED BY THE ADMINISTRATOR OF THE SBA ON FEBRUARY 15, 1968.

YOU CONTEND THIS CONTRACT SHOULD BE CANCELLED BECAUSE (1) YOU HAD NO EFFECTIVE MEANS OF LODGING A MEANINGFUL PROTEST AGAINST THE COMPANY'S SMALL BUSINESS SELF-CERTIFICATION SINCE THE IDENTITIES OF THE OFFERORS UNDER THE RFP WERE NOT DIVULGED UNTIL AFTER PROPOSALS WERE OPENED AND AWARD WAS MADE; (2) THE CONTRACTING OFFICER ACTED IN BAD FAITH IN ACCEPTING ABC'S SIZE CERTIFICATION; (3) ABC CERTIFIED ITS SMALL BUSINESS SIZE IN BAD FAITH; AND (4) THE CONTRACTING OFFICER ACTED IN BAD FAITH BY ALLOWING THE CONTRACTOR TO PROCEED WITH THE CONTRACT PRIOR TO ANY DETERMINATION BY OUR OFFICE ON THE MERITS OF YOUR PROTEST.

UNDER ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-703 AND SMALL BUSINESS ADMINISTRATION REGULATION (SBAR) 121.3-8 A CONTRACTING OFFICER IS REQUIRED TO ACCEPT AT FACE VALUE FOR THE PARTICULAR PROCUREMENT INVOLVED, A REPRESENTATION BY THE OFFEROR THAT IT IS A SMALL BUSINESS CONCERN UNLESS A WRITTEN PROTEST IS RECEIVED CONCERNING THE SIZE STATUS OF THE APPARENTLY SUCCESSFUL OFFEROR OR THE CONTRACTING OFFICER QUESTIONS THE SMALL BUSINESS STATUS OF THE OFFEROR AND SUBMITS HIS QUESTION TO SBA FOR DETERMINATION. SBAR 121.3-5 (A) STIPULATES THAT A SIZE PROTEST WILL BE CONSIDERED TIMELY IF IT IS SUBMITTED TO THE CONTRACTING OFFICER PRIOR TO THE FIFTH DAY, EXCLUSIVE OF SATURDAYS, SUNDAYS AND LEGAL HOLIDAYS, AFTER PROPOSAL OPENING. AN OFFEROR SUBMITTING A SIZE PROTEST WHICH IS RECEIVED AFTER AWARD IS TO BE INFORMED THAT HIS PROTEST HAS BEEN REFERRED TO THE APPROPRIATE SBA REGIONAL OFFICE FOR ITS CONSIDERATION IN FUTURE ACTIONS, WITH NOTATION THEREON THAT AN AWARD HAS BEEN MADE. SEE ASPR 1-703 (B) (1) (III).

SINCE ASPR 3-508.3 (A) PROVIDES THAT THE IDENTITY OF OFFERORS IN NEGOTIATED PROCUREMENTS SHALL NOT BE DIVULGED UNTIL AFTER AN AWARD HAS BEEN MADE, EFFECTIVE PROTEST BY ANY OFFEROR AGAINST THE SMALL BUSINESS STATUS OF ANOTHER IS VIRTUALLY PRECLUDED, AND THE PROTECTION INTENDED TO BE PROVIDED BY THE PROTEST PROCEDURE AGAINST IMPROPER AWARD TO AN OFFEROR NOT PROPERLY QUALIFIED AS A SMALL BUSINESS IS LOST. THIS OBVIOUSLY TENDS TO THWART THE STATUTORY POLICY ESTABLISHED BY THE SMALL BUSINESS ACT OF 1953, 15 U.S.C. 631-647, THAT A "FAIR PROPORTION" OF THE GOVERNMENT'S TOTAL PURCHASES BE PLACED WITH SMALL BUSINESS CONCERNS. ACCORDINGLY, WE ARE RECOMMENDING TO THE SBA AND THE ASPR COMMITTEE THAT CORRECTIVE ACTION SHOULD BE TAKEN TO PROVIDE A PRACTICAL PROCEDURE FOR CONTESTING SMALL BUSINESS SIZE CERTIFICATIONS IN NEGOTIATED PROCUREMENTS PRIOR TO AWARD. WE ARE UNABLE, HOWEVER, TO CONSIDER THE SUBJECT CONTRACT ILLEGALLY AWARDED BECAUSE OF THIS CONSIDERATION, SINCE NEITHER THE STATUTE NOR THE IMPLEMENTING REGULATIONS PRESENTLY CONTAIN ANY SPECIFIC REQUIREMENT FOR SUCH PROCEDURE.

IT IS OUR POSITION THAT A CONTRACT AWARDED TO A CONTRACTOR WHO IS SUBSEQUENTLY DETERMINED NOT TO BE SMALL BUSINESS IS VOIDABLE AND MAY BE REQUIRED TO BE CANCELLED IF THE AWARD WAS MADE ON THE BASIS OF AN AWARDEE'S SELF-CERTIFICATION WHICH WAS EITHER MADE IN BAD FAITH OR ACCEPTED BY THE CONTRACTING OFFICER IN BAD FAITH. 41 COMP. GEN. 252; B 147973, APRIL 9, 1962. YOU CONTEND THAT THE CONTRACTING OFFICER IN THIS CASE ACTED IN BAD FAITH BECAUSE HE DID NOT HAVE ANY PRIOR DECISIONS OF THE SBA BEFORE HIM WHICH CONFIRMED ABC'S STATUS AS A SMALL BUSINESS WHEN HE MADE THE AWARD. WE CANNOT CONSIDER THIS AS EVIDENCE OF BAD FAITH IN THE LIGHT OF THE SPECIFIC PROVISION IN ASPR 1-703 THAT CONTRACTING OFFICERS MAY ACCEPT ANY BIDDER'S SIZE CERTIFICATION AT FACE VALUE WITHOUT DEMANDING FURTHER EVIDENCE OF SMALL BUSINESS SIZE. CLEARLY, IF THE CONTRACTING OFFICER KNEW OF PRIOR SBA RULINGS DENYING SMALL BUSINESS STATUS TO ABC, OR IF HE POSSESSED OTHER INFORMATION INDICATING THAT THE CONCERN COULD NOT QUALIFY AS A SMALL BUSINESS, HE WOULD HAVE SHOWN BAD FAITH HAD HE MADE AN AWARD TO THE COMPANY WITHOUT REQUESTING SBA TO REVIEW THE SIZE STATUS SO CERTIFIED. HOWEVER, IN THE ABSENCE OF ANY INDICATION OF SUCH KNOWLEDGE WE CANNOT CONCLUDE THAT THE CONTRACTING OFFICER ACTED IN BAD FAITH IN MAKING THE SUBJECT AWARD. SIMILARLY, TO ESTABLISH THAT ABC CERTIFIED ITS SMALL BUSINESS STATUS IN BAD FAITH WOULD REQUIRE A SHOWING THAT ABC POSSESSED KNOWLEDGE OF PRIOR, ADVERSE, SBA DECISIONS ON ITS SMALL BUSINESS STATUS, OR THAT IT HAD INFORMATION WHICH WOULD PLACE A REASONABLY PRUDENT BIDDER ON NOTICE THAT IT SHOULD FORMALLY APPLY FOR A SMALL BUSINESS CERTIFICATE PRIOR TO SELF-CERTIFICATION. SEE 41 COMP. GEN. 47, 55.

YOU CLAIM THAT THE COMPANY SHOULD HAVE KNOWN THAT IT WOULD BE CONSIDERED A LARGE BUSINESS BECAUSE THE NOTE FINANCING THE SUBJECT CONTRACT WAS APPROVED BY A LENDING INSTITUTION ONLY AFTER IT WAS CO SIGNED BY A PARTNER IN THE ACCOUNTING FIRM OF THE SECRETARY-TREASURER OF ABC OF EL ASO; HOWEVER, NO OFFICER OR DIRECTOR OF ABC OF EL PASO SIGNED THE NOTE, AND ALTHOUGH YOU MAINTAIN THAT THIS ARRANGEMENT WAS A SUBTERFUGE "TO HIDE THE FACT THAT ABC OF CORPUS CHRISTI AND ABC OF EL PASO WERE ONE AND THE SAME COMPANIES," WE BELIEVE IT IS EQUALLY REASONABLE TO CONCLUDE THAT THE COMPANIES IN GOOD FAITH SOUGHT TO AVOID FINANCING ARRANGEMENTS WHICH WOULD LINK THE CONCERNS IN THEIR CORPORATE CAPACITIES. IN THE ABSENCE OF PROOF SHOWING THAT THE CO SIGNING OF THE NOTE WAS ACCOMPLISHED PURSUANT TO AN AGREEMENT WHEREBY ABC OF EL PASO WOULD COMPENSATE THE CO-SIGNER FOR ANY LOSSES HE INCURRED ON THE INSTRUMENT, OR REFRAIN FROM HOLDING HIM FOR ANY EXPENSE RESULTING TO IT THEREON, WE ARE UNABLE TO CONCLUDE THAT THE ARRANGEMENTS EVIDENCE BAD FAITH IN THE SMALL BUSINESS CERTIFICATION BY ABC OF CORPUS CHRISTI.

UNDER THE PRINCIPLES STATED BY THE COURT OF CLAIMS IN MID-WEST CONSTRUCTION, LTD. V UNITED STATES (CT. CL. NO. 123-66, DECEMBER 15, 1967) THE AWARD WAS AUTHORIZED BY THE PERTINENT REGULATIONS AND IS BINDING UPON THE UNITED STATES WITHOUT REGARD TO THE SUBSEQUENT DETERMINATION OF THE SBA THAT THE CONTRACTOR WAS NOT IN FACT A SMALL BUSINESS. EVEN IF WE WERE TO REGARD THE CONTRACT IN THIS CASE AS VOIDABLE, WE DO NOT FIND ANY COMPELLING REASON TO CONSIDER ITS CANCELLATION TO BE IN THE BEST INTEREST OF THE GOVERNMENT, PARTICULARLY SINCE WE HAVE BEEN ADVISED THAT THE FRANCHISE AGREEMENT WHICH WAS THE BASIS OF THE SBA FINDING HAS BEEN SUPERSEDED BY A NEW AND DIFFERENT AGREEMENT, RETROACTIVE IN EFFECT, UNDER WHICH A DIFFERENT SIZE DETERMINATION MIGHT BE REACHED.

FOR THE REASONS SET OUT ABOVE YOUR PROTEST MUST BE DENIED.

NOTHING IN THIS DECISION SHOULD BE VIEWED AS INDICATING ANY OPINION AS TO THE VALIDITY OF THIS CONTRACT UNDER THE CIVIL SERVICE LAWS.