B-164173, AUG. 27, 1968

B-164173: Aug 27, 1968

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TO OGDEN CORPORATION: REFERENCE IS MADE TO YOUR LETTER DATED JUNE 21. BID OPENING DATE WAS SET FOR MARCH 8. WE ARE ADVISED THAT THE INGOTS ARE USED BY THE SHIPYARD FOUNDRY SOLELY IN THE REPAIR AND MANUFACTURE OF SHIPS' PROPELLERS. FIVE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. SUBMITTED THE LOWEST BID AND THE SECOND LOWEST BID WAS SUBMITTED BY NORTH AMERICAN SMELTING CO. THIS BIDDER PROTESTED ANY AWARD TO BARTH ON THE BASIS IT WAS NO LONGER A SMALL BUSINESS CONCERN AND. WAS INELIGIBLE TO RECEIVE ANY AWARD UNDER THE INVITATION. WHILE THE BID SUBMITTED BY BARTH SHOWED THAT IT WAS OWNED OR CONTROLLED BY THE OGDEN CORPORATION. THIS DETERMINATION WAS FINAL AND BINDING ON THE CONTRACTING OFFICER UNDER ASPR 1-703 (B) (3).

B-164173, AUG. 27, 1968

TO OGDEN CORPORATION:

REFERENCE IS MADE TO YOUR LETTER DATED JUNE 21, 1968, WITH ENCLOSURES, AND EARLIER CORRESPONDENCE, PROTESTING THE AWARD OF A SMALL BUSINESS SET- ASIDE CONTRACT TO NORTH AMERICAN SMELTING CO. UNDER INVITATION FOR BIDS (IFB) N00151-68-B-2190, ISSUED BY THE PHILADELPHIA NAVAL SHIPYARD. YOU REQUEST THAT SUCH CONTRACT BE CANCELED, AND THAT A NEW INVITATION BE ISSUED WITHOUT SMALL BUSINESS RESTRICTIONS.

THE IFB, ISSUED ON FEBRUARY 28, 1968, REQUESTED BIDS FOR 100,000 POUNDS OF NICKEL ALUMINUM BRONZE, SMALL INGOTS, AND FOR 200,000 POUNDS OF NICKEL ALUMINUM BRONZE, LARGE INGOTS. BID OPENING DATE WAS SET FOR MARCH 8, 1968. WE ARE ADVISED THAT THE INGOTS ARE USED BY THE SHIPYARD FOUNDRY SOLELY IN THE REPAIR AND MANUFACTURE OF SHIPS' PROPELLERS. THE INVITATION INCORPORATED BY REFERENCE A NOTICE OF TOTAL SMALL BUSINESS SET-ASIDE CLAUSE AS REQUIRED BY PARAGRAPH 1-706.5 (C) OF THE ARMED SERVICES PROCUREMENT REGULATION.

FIVE BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. THE BARTH SMELTING CORPORATION, A SUBSIDIARY OF THE OGDEN CORPORATION, SUBMITTED THE LOWEST BID AND THE SECOND LOWEST BID WAS SUBMITTED BY NORTH AMERICAN SMELTING CO. THIS BIDDER PROTESTED ANY AWARD TO BARTH ON THE BASIS IT WAS NO LONGER A SMALL BUSINESS CONCERN AND, THEREFORE, WAS INELIGIBLE TO RECEIVE ANY AWARD UNDER THE INVITATION. WHILE THE BID SUBMITTED BY BARTH SHOWED THAT IT WAS OWNED OR CONTROLLED BY THE OGDEN CORPORATION, BARTH CERTIFIED ITSELF AS A SMALL BUSINESS CONCERN. ACCORDINGLY, THE CONTRACTING OFFICER REQUESTED AN OFFICIAL RULING FROM THE SMALL BUSINESS ADMINISTRATION (SBA) AS TO THE SIZE STATUS OF BARTH IN CONNECTION WITH THE SUBJECT INVITATION. BY LETTER DATED MARCH 29, 1968, SBA INFORMED THE CONTRACTING OFFICER AND BARTH THAT THE BARTH SMELTING CORPORATION DID NOT QUALIFY AS A SMALL BUSINESS CONCERN FOR PURPOSES OF THIS PROCUREMENT. THIS DETERMINATION WAS FINAL AND BINDING ON THE CONTRACTING OFFICER UNDER ASPR 1-703 (B) (3).

BEFORE AN AWARD COULD BE MADE TO NORTH AMERICAN SMELTING, MR. OTTO BARTH CLAIMED THAT, AS A RESULT OF THE SETTLEMENT OF THE COPPER STRIKE, THE BID PRICES WERE UNREASONABLE AND THAT APPROXIMATELY $30,000 COULD BE SAVED IN THE PROCUREMENT OF THESE INGOTS. MR. BARTH THEREAFTER ADVISED THE CONTRACTING AGENCY THAT DURING THE COPPER STRIKE THE PRICE OF COPPER WAS HIGH, BUT SINCE THE END OF THE COPPER STRIKE THE PRICE OF COPPER HAD FALLEN, AND THAT BARTH SMELTING COULD DELIVER THE REQUIRED INGOTS WITHIN A MATTER OF A FEW DAYS AT A REDUCTION IN ITS BID PRICE OF $36,000.

AFTER RECEIPT OF SUCH INFORMATION, THE CONTRACTING OFFICER INDEPENDENTLY CHECKED THE PRICES OF COPPER FROM THE DATE OF THE ISSUANCE OF THE INVITATION. CONTRARY TO MR. BARTH'S STATEMENTS, IT WAS DETERMINED THAT THE PRICE OF DOMESTIC COPPER HAD RISEN SINCE THE END OF THE COPPER STRIKE.

THE AWARD OF CONTRACT N00151-68-C-2342 (X) WAS MADE TO NORTH AMERICAN SMELTING ON MAY 3, 1968. YOU CONTEND THAT THE PROCUREMENT WAS NOT A VALID SMALL BUSINESS SET-ASIDE BECAUSE OF (A) LACK OF EFFECTIVE COMPETITION, AND (B) THE LACK OF EFFECTIVE COMPETITION IN THE CONTEXT OF THE EXTRAORDINARY ECONOMIC EMERGENCY CONDITIONS PREVAILING IN THE COPPER INDUSTRY AS A CONSEQUENCE OF AN UNPRECEDENTED 8 MONTHS' COPPER STRIKE. IN YOUR LETTER OF MAY 2, 1968, YOU PROTEST THE ,ENTIRELY TOO RESTRICTED COMPETENCE OF SMALL BUSINESS ONLY FOR THE EXACTING METAL REQUIRED" AND SUGGEST READVERTISEMENT WITHOUT THE SMALL BUSINESS RESTRICTION.

CONCERNING YOUR PROTEST AGAINST THE TOTAL SMALL BUSINESS SET-ASIDE, SECTION 15 OF THE SMALL BUSINESS ACT, 15 U.S.C. 644, PROVIDES THAT SMALL BUSINESS CONCERNS SHALL RECEIVE ANY AWARD OR CONTRACT OR ANY PART THEREOF AS TO WHICH IT IS DETERMINED TO BE IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT ARE PLACED WITH SMALL BUSINESS CONCERNS. WITH RESPECT TO TOTAL SET-ASIDES, ASPR 1-706.5 (A) (1) PROVIDES AS FOLLOWS:

"SUBJECT TO ANY APPLICABLE PREFERENCE FOR LABOR SURPLUS AREA SET ASIDES AS PROVIDED IN 1-803 (A) (II), THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR A CLASS OF PROCUREMENTS, INCLUDING BUT NOT LIMITED TO CONTRACTS FOR MAINTENANCE, REPAIR, AND CONSTRUCTION, SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION (SEE 1-701.1) IF THE CONTRACTING OFFICER DETERMINES THAT THERE IS REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. TOTAL SET-ASIDES SHALL NOT BE MADE UNLESS SUCH A REASONABLE EXPECTATION EXISTS. * * *"

OUR OFFICE HAS HELD THAT THE DETERMINATION OF WHETHER THERE EXISTS A REASONABLE EXPECTATION OF RECEIVING A SUFFICIENT NUMBER OF BIDS UNDER A TOTAL SMALL BUSINESS SET-ASIDE TO ASSURE REASONABLE PRICES IS WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION; AND WE WILL NOT SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER IN THE ABSENCE OF A CLEAR SHOWING THAT SUCH DISCRETION WAS ABUSED. SEE 45 COMP. GEN. 228. ALSO, WE HAVE STATED THAT THE FACT THAT LOWER BIDS MAY BE EXPECTED FROM LARGE BUSINESS CONCERNS IS NOT A SIGNIFICANT FACTOR IN DETERMINING WHETHER A PROCUREMENT SHOULD BE SET ASIDE FOR SMALL BUSINESS PARTICIPATION ONLY. SEE 43 COMP. GEN. 497.

CONTRARY TO YOUR CONTENTIONS, THE BID SUBMITTED BY NORTH AMERICAN SMELTING WAS NOT SUBSTANTIALLY HIGHER THAN THE BID SUBMITTED BY YOUR COMPANY. THE BID SUBMITTED BY YOUR COMPANY AMOUNTED TO $212,550, WHEREAS THE BID SUBMITTED BY NORTH AMERICAN SMELTING, UPON WHICH THE CONTRACT WAS AWARDED, WAS $214,890. THE TOTAL DIFFERENCE BETWEEN THE TWO BIDS WAS ONLY $2,340, OR SLIGHTLY MORE THAN 1 PERCENT OF THE CONTRACT PRICE.

CONCERNING THE VALIDITY OF THE SET-ASIDE IN THIS OR SIMILAR PROCUREMENTS, WE ARE ADVISED THAT THE CONTRACTING OFFICER HAS DISCUSSED THIS MATTER WITH REPRESENTATIVES OF THE SMALL BUSINESS ADMINISTRATION (SBA) AND IT IS THE OPINION OF BOTH SBA AND THE CONTRACTING OFFICER THAT PROCUREMENTS FOR INGOTS MAY BE PROPERLY SET ASIDE FOR SMALL BUSINESS AND SHOULD CONTINUE TO BE SO SET ASIDE.