B-163418, AUG. 1, 1968

B-163418: Aug 1, 1968

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CAPPELLO: REFERENCE IS MADE TO TWO LETTERS DATED FEBRUARY 1 AND APRIL 18. BIDS WERE RECEIVED AND OPENED FROM THREE SELF-CERTIFIED SMALL BUSINESS CONCERNS ON NOVEMBER 2. HARRIS PROTESTED AN AWARD TO AFFOLTER ON THE BASIS THAT SUCH BIDDER DID NOT QUALIFY AS A SMALL BUSINESS CONCERN SINCE IT WAS FINANCIALLY AND SUBSTANTIALLY AFFILIATED WITH BAUER DREDGING CO. AFFOLTER WAS NOT AFFILIATED WITH BAUER AND WAS. WERE DUE TO EXPIRE ON JANUARY 26. THE SECRETARY OF THE SIZE APPEALS BOARD ADVISED THE PROCURING ACTIVITY BY TELEPHONE THAT THERE WAS INSUFFICIENT INFORMATION BEFORE THE BOARD TO MAKE A DETERMINATION BY THAT DATE AS TO AFFOLTER'S SIZE. THEREFORE THE REGIONAL DIRECTOR'S DECISION WAS FINAL.

B-163418, AUG. 1, 1968

TO MR. HENRY J. CAPPELLO:

REFERENCE IS MADE TO TWO LETTERS DATED FEBRUARY 1 AND APRIL 18, 1968, WITH ATTACHMENTS, FROM JAMES R. HARRIS, ESQUIRE, CORPUS CHRISTI, TEXAS, PROTESTING, ON BEHALF OF THE GARRETT CONSTRUCTION COMPANY, THE AWARD OF A CONTRACT TO THE AFFOLTER CONTRACTING COMPANY UNDER INVITATION FOR BIDS NO. DACW64-68-B-0030, ISSUED BY THE UNITED STATES ARMY CORPS OF ENGINEERS, GALVESTON DISTRICT, TEXAS.

THE INVITATION, DATED OCTOBER 5, 1967, SOLICITED BIDS UNDER A 100 PERCENT SMALL-BUSINESS SET ASIDE FOR DREDGING THE GULF INTRACOASTAL WATERWAY, HIGH ISLAND TO PORT BOLIVAR AND TEXAS CITY CHANNEL TO GALVESTON CAUSEWAY IN CHAMBERS AND GALVESTON COUNTIES, TEXAS. PARAGRAPH 3 OF THE INVITATION CONSTRUCTION SPECIAL PROVISIONS, PART I, ENTITLED, "PERFORMANCE OF WORK BY CONTRACTOR" ADVISED PROSPECTIVE BIDDERS, IN PART, THAT,"THE CONTRACTOR SHALL PERFORM ON THE SITE AND WITH HIS OWN ORGANIZATION, WORK EQUIVALENT TO AT LEAST TWENTY PERCENT (20 PERCENT) OF THE TOTAL AMOUNT OF WORK TO BE PERFORMED UNDER THE CONTRACT.'

BIDS WERE RECEIVED AND OPENED FROM THREE SELF-CERTIFIED SMALL BUSINESS CONCERNS ON NOVEMBER 2, 1967. IT APPEARED THAT AFFOLTER SUBMITTED THE LOWEST BID IN THE AMOUNT OF $196,320, AND THAT GARRETT SUBMITTED THE NEXT LOWEST BID IN THE AMOUNT OF $268,976.50. BY TELEGRAM OF THE SAME DATE, AND SUBSEQUENT CORRESPONDENCE, MR. HARRIS PROTESTED AN AWARD TO AFFOLTER ON THE BASIS THAT SUCH BIDDER DID NOT QUALIFY AS A SMALL BUSINESS CONCERN SINCE IT WAS FINANCIALLY AND SUBSTANTIALLY AFFILIATED WITH BAUER DREDGING CO., INC., A LARGE BUSINESS CONCERN.

THEREAFTER, ON DECEMBER 5, 1967, THE CONTRACTING OFFICER TRANSMITTED THE PROTEST FILE TO THE SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICE, SAN ANTONIO, FOR A SIZE DETERMINATION OF AFFOLTER PURSUANT TO ASPR 1-703 (B) (1) (I).

ON DECEMBER 21, 1967, BY LETTER ADDRESSED TO THE SMALL BUSINESS AND LABOR SURPLUS ADVISER AT THE PROCURING ACTIVITY, THE SBA ACTING REGIONAL DIRECTOR CONCLUDED THAT, BASED UPON THE AVAILABLE EVIDENCE, AFFOLTER WAS NOT AFFILIATED WITH BAUER AND WAS, THEREFORE, A SMALL BUSINESS CONCERN. ON DECEMBER 22, 1967, OR WITHIN THE SPECIFIED TIME PERIOD OF FIVE DAYS AFTER RECEIPT OF THE ACTING REGIONAL DIRECTOR'S SIZE DETERMINATION, MR. HARRIS APPEALED THE DECISION TO THE SIZE APPEALS BOARD PURSUANT TO ASPR 1- 703 (B) (4). SHORTLY THEREAFTER, THE CONTRACTING OFFICER ADVISED SBA THAT THE WAGE RATES DETERMINED BY THE DEPARTMENT OF LABOR UNDER THE DAVIS-BACON ACT, 40 U.S.C. 276A, WERE DUE TO EXPIRE ON JANUARY 26, 1968, AND THAT, THEREFORE, THE CONTRACT HAD TO BE AWARDED ON OR BEFORE THAT DATE. INTERIM CONVERSATIONS BETWEEN THE CONTRACTING OFFICIALS AND A REPRESENTATIVE OF THE SIZE APPEALS BOARD INDICATED THAT A DECISION WITH RESPECT TO THE APPEAL WOULD BE FORTHCOMING BY JANUARY 26; HOWEVER, ON JANUARY 25, 1968, THE SECRETARY OF THE SIZE APPEALS BOARD ADVISED THE PROCURING ACTIVITY BY TELEPHONE THAT THERE WAS INSUFFICIENT INFORMATION BEFORE THE BOARD TO MAKE A DETERMINATION BY THAT DATE AS TO AFFOLTER'S SIZE, AND THAT, THEREFORE THE REGIONAL DIRECTOR'S DECISION WAS FINAL. SEE AMERICAN ELECTRIC COMPANY, V UNITED STATES, 270 F.SUPP. 689; SPRINGFIELD WHITE CASTLE COMPANY V FOLEY, 230 F.SUPP. 77.

THE CONTRACTING OFFICER CONCLUDED THAT THE FAILURE OF THE SIZE APPEALS BOARD TO RENDER A DECISION WITHIN THE SPECIFIED TIME PERIOD, IN EFFECT, SUSTAINED THE ACTING REGIONAL DIRECTOR'S SIZE DECISION. THEREFORE, THE CONTRACT WAS AWARDED TO AFFOLTER ON JANUARY 26, 1968.

THERE ARE FOR APPLICATION HERE THE FOLLOWING REGULATIONS APPEARING IN ASPR 1-703 (B) (3) AND 1-703 (B) (4) AS FOLLOWS:

"/3) DETERMINATION BY SBA REGIONAL DIRECTOR. THE SBA REGIONAL DIRECTOR WILL DETERMINE THE SMALL BUSINESS STATUS OF THE QUESTIONED BIDDER OR OFFEROR AND NOTIFY THE CONTRACTING OFFICER AND THE BIDDER OR OFFEROR OF HIS DETERMINATION, AND AWARD MAY BE MADE ON THE BASIS OF THAT DETERMINATION. THIS DETERMINATION IS FINAL UNLESS IT IS APPEALED IN ACCORDANCE WITH (4) BELOW, AND THE CONTRACTING OFFICER IS NOTIFIED OF THE APPEAL PRIOR TO AWARD. * * *

** * * * * * "/II) IF AN APPEAL FROM THE SBA REGIONAL DIRECTOR'S DETERMINATION IS MADE, PURSUANT TO (4) * * *, TO THE CHAIRMAN, SIZE APPEALS BOARD, SMALL BUSINESS ADMINISTRATION, WASHINGTON, D.C. 20416, AND THE CONTRACTING OFFICER IS NOTIFIED PRIOR TO AWARD, AN ADDITIONAL 20 WORKING DAYS (I.E., 30 WORKING DAYS INCLUSIVE FROM THE TIME OF INITIAL RECEIPT OF THE CASE IN THE SBA REGIONAL OFFICE) SHALL BE ALLOWED FOR RECEIPT OF THE SBA SIZE DETERMINATION. "/III) IF THE DETERMINATION OF THE CHAIRMAN, SIZE APPEALS BOARD, SMALL BUSINESS ADMINISTRATION, ON THE APPEAL IS NOT RECEIVED BY THE CONTRACTING OFFICER WITHIN THE 30 WORKING DAY PERIOD, IT SHALL BE PRESUMED THAT THE SBA REGIONAL DIRECTOR'S SIZE DETERMINATION HAS BEEN SUSTAINED.

"/4) APPEAL FROM SIZE DETERMINATION. AN APPEAL FROM A SIZE DETERMINATION MADE BY AN SBA REGIONAL DIRECTOR MAY BE TAKEN BEFORE THE CLOSE OF BUSINESS ON THE FIFTH WORKING DAY AFTER THE RECEIPT OF SUCH DECISION. UNLESS SUCH WRITTEN NOTICE OF APPEAL IS RECEIVED BY THE SBA SIZE APPEALS BOARD, WASHINGTON, D.C., WITHIN THIS TIME AND THE CONTRACTING OFFICER HAS BEEN NOTIFIED OF SUCH APPEAL PRIOR TO AWARD, THE APPELLANT WILL BE DEEMED TO HAVE WAIVED ITS RIGHTS OF APPEAL INSOFAR AS THE PENDING PROCUREMENT IS CONCERNED.'

IN HIS LETTER OF FEBRUARY 1, 1968, MR. HARRIS PROTESTED THE AWARD MADE TO AFFOLTER, AND BY LETTER OF APRIL 18, 1968, HE SUBMITTED ADDITIONAL ARGUMENTS AND EVIDENCE FOR OUR CONSIDERATION AND FOR USE BY THE SBA SIZE APPEALS BOARD. HE CONTENDED THAT THE ACTING REGIONAL DIRECTOR'S DETERMINATION WAS BASED ON FALSE, FRAUDULENT AND INSUFFICIENT INFORMATION. OUR OFFICE, HOWEVER, FINDS NO BASIS TO QUESTION THAT DETERMINATION. SEE THE COURT CASES CITED ABOVE.

QUESTIONS CONCERNING THE ELIGIBILITY OF A PARTICULAR BIDDER FOR THE AWARD OF A SMALL BUSINESS SET-ASIDE CONTRACT HAVE BEEN CONSIDERED BY OUR OFFICE ON SEVERAL OCCASIONS. GENERALLY, WE HAVE HELD THAT THE DETERMINATION OF THE ELIGIBILITY OF A BIDDER AS A SMALL BUSINESS CONCERN UNDER A SMALL BUSINESS PROCUREMENT IS TO BE MADE AT THE TIME OF AWARD. 42 COMP. GEN. 219; 44 ID. 271.

UNDER 15 U.S.C. 637 (B) (6), SBA IS AUTHORIZED TO DETERMINE WHICH FIRMS WITHIN ANY INDUSTRY ARE TO BE DESIGNATED AS SMALL BUSINESS CONCERNS FOR PURPOSES OF GOVERNMENT PROCUREMENT. THIS PROVISION OF LAW FURTHER STATES THAT "OFFICES OF THE GOVERNMENT HAVING PROCUREMENT OR LENDING POWERS * * * SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S DETERMINATION AS TO WHICH ENTERPRISES ARE TO BE DESIGNATED SMALL BUSINESS CONCERNS, AS AUTHORIZED AND DIRECTED UNDER THIS PARAGRAPH.' NEITHER OUR OFFICE NOR ANY EXECUTIVE AGENCY OF THE GOVERNMENT MAY IGNORE A DETERMINATION BY SBA AS TO THE SIZE STATUS OF A PARTICULAR CONCERN. 46 COMP. GEN. 898. AT THE TIME OF AWARD, THE CONTRACTING OFFICER WAS OBLIGATED TO GIVE CONCLUSIVE EFFECT TO THE SBA DETERMINATION THAT AFFOLTER WAS A SMALL BUSINESS CONCERN FOR PURPOSES OF THE PROCUREMENT. BECAUSE OF THE CIRCUMSTANCE THAT AROSE WHICH REQUIRED AN IMMEDIATE AWARD EVEN THOUGH A SIZE APPEAL WAS PENDING, WE BELIEVE THAT THE RATIONALE OF ASPR 1-703 (B) (3) (III), ABOVE, REQUIRES THE CONCLUSION THAT THE SBA REGIONAL DIRECTOR'S DETERMINATION OF AFFOLTER'S SIZE WAS SUSTAINED. SINCE THE ELIGIBILITY OF AFFOLTER FOR AWARD WAS CONFIRMED BY SBA BEFORE AWARD, WE FIND NO LEGAL BASIS TO QUESTION THE ACTION TAKEN.

WE NOTE THE SIZE APPEALS BOARD ON JUNE 28, 1968, REVERSED THE ACTING REGIONAL DIRECTOR'S SIZE DETERMINATION OF DECEMBER 21, 1967 -- THAT AFFOLTER IS A SMALL BUSINESS CONCERN -- ON THE BASIS THAT BAUER, THE LARGE BUSINESS CONCERN: "* * * INDIRECTLY THROUGH HIS (BAUER-S) EMPLOYEES, CONTROLS OR HAS THE POWER TO CONTROL AFFOLTER IN THE PERFORMANCE OF THE WORK. THEREFORE, THESE CONCERNS ARE AFFILIATED WITHIN THE MEANING OF THE APPLICABLE SIZE REGULATION, AND AFFOLTER IS NOT A SMALL BUSINESS CONCERN FOR AWARD UNDER IFB DACW64-68-B-0030.'

HOWEVER, SUCH CIRCUMSTANCE DOES NOT REQUIRE THE CONCLUSION THAT THE CONTRACT AWARDED TO AFFOLTER SHOULD BE CANCELLED SINCE, AT THE TIME OF AWARD, AFFOLTER WAS DETERMINED TO BE A SMALL BUSINESS CONCERN. ADDITIONALLY, WE ARE ADVISED THAT THE CONTRACT WAS SUBSTANTIALLY COMPLETED AS OF JUNE 30, 1968.