B-165119, OCT. 4, 1968

B-165119: Oct 4, 1968

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PROTESTING THE DELETION OF THE 100-PERCENT SMALL BSINESS SET-ASIDE WHICH WAS ORIGINALLY INCLUDED IN INVITATION FOR BIDS F25600-69-B-0036. BIDS WERE INVITED ON ESTIMATED QUANTITIES OF TWO ITEMS OF AIRCRAFT CARPETING. THE ADMINISTRATIVE REPORT DISCLOSES THAT AT THE TIME OF ISSUANCE OF THE INVITATION THERE WERE TWO KNOWN MANUFACTURERS OF THE CARPETING. BOTH WERE SMALL BUSINESS FIRMS. ONE WAS DURACOTE CORPORATION (DURACOTE) AND THE OTHER WAS JOHN SCHNELLER AND ASSOCIATES (SCHNELLER). OPENING OF BIDS WAS ORIGINALLY SCHEDULED FOR AUGUST 15. THE REASON GIVEN IN SUPPORT OF THE REQUEST WAS THAT THE PROCUREMENT WAS BELIEVED TO HAVE BEEN RESTRICTED TO ONLY ONE SUPPLIER AS A RESULT OF THE MERGER. THIS WAS SUBSTANTIATED BY REFERENCE TO AN AUGUST 8 TELEPHONE CONVERSATION BETWEEN THE CONTRACTING OFFICER AND MR.

B-165119, OCT. 4, 1968

TO DURACOTE CORPORATION:

WE MAKE REFERENCE TO YOUR LETTER OF AUGUST 22, 1968, PROTESTING THE DELETION OF THE 100-PERCENT SMALL BSINESS SET-ASIDE WHICH WAS ORIGINALLY INCLUDED IN INVITATION FOR BIDS F25600-69-B-0036, ISSUED BY THE PROCUREMENT DIVISION, OFFUTT AIR FORCE BASE, NEBRASKA, ON JULY 15, 1968.

BIDS WERE INVITED ON ESTIMATED QUANTITIES OF TWO ITEMS OF AIRCRAFT CARPETING. THE ADMINISTRATIVE REPORT DISCLOSES THAT AT THE TIME OF ISSUANCE OF THE INVITATION THERE WERE TWO KNOWN MANUFACTURERS OF THE CARPETING. BOTH WERE SMALL BUSINESS FIRMS; ONE WAS DURACOTE CORPORATION (DURACOTE) AND THE OTHER WAS JOHN SCHNELLER AND ASSOCIATES (SCHNELLER). OPENING OF BIDS WAS ORIGINALLY SCHEDULED FOR AUGUST 15, 1968, BUT ON AUGUST 7 SCHNELLER TELEPHONED THE CONTRACTING OFFICER TO REPORT A MERGER BETWEEN SCHNELLER AND DECTON DICKINSON COMPANY WHEREBY SCHNELLER HAD CEASED TO BE A SMALL BUSINESS.

THE CONTRACTING OFFICER RECEIVED A WIRE ON THE 8TH FROM SCHNELLER CONFIRMING THE SUBSTANCE OF THE PREVIOUS DAY'S CONVERSATION. ON THE SAME DAY THE OFFICER ADDRESSED TO MR. HARRY HALL, THE SMALL BUSINESS SPECIALIST, A WRITTEN REQUEST FOR APPROVAL TO WITHDRAW THE SMALL BUSINESS SET-ASIDE. THE REASON GIVEN IN SUPPORT OF THE REQUEST WAS THAT THE PROCUREMENT WAS BELIEVED TO HAVE BEEN RESTRICTED TO ONLY ONE SUPPLIER AS A RESULT OF THE MERGER, AND THAT WITHDRAWAL OF THE SET ASIDE WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT. THIS WAS SUBSTANTIATED BY REFERENCE TO AN AUGUST 8 TELEPHONE CONVERSATION BETWEEN THE CONTRACTING OFFICER AND MR. JOHN MURRAY OF DURACOTE DURING WHICH MR. MURRAY INDICATED THAT THE ONLY OTHER SMALL BUSINESS CONCERN IN THIS FIELD WAS EXPANDED RUBBER AND PLASTICS COMPANY (EXPANDED), WHICH WAS A FABRICATOR AND NOT A MANUFACTURER AND THUS HAD TO BUY THE MATERIAL FROM A MANUFACTURER LIKE DURACOTE. THE REQUEST FOR PERMISSION TO WITHDRAW THE SET-ASIDE WAS APPROVED BY MR. HALL ON AUGUST 8. ON AUGUST 9 THE INVITATION WAS AMENDED BY DELETION OF THE SMALL BUSINESS SET-ASIDE AND BY EXTENSION OF THE DATE FOR OPENING OF BIDS TO AUGUST 20.

THREE BIDS WERE RECEIVED, THE LOW BID OF $91,944.32 BEING SUBMITTED BY SCHNELLER. YOUR BID WAS IN THE AMOUNT OF $115,014.76, AND THE HIGH BID OF $171,683.98 WAS SUBMITTED BY EXPANDED.

YOU ALLEGE THAT THE CONTRACTING OFFICER IN REMOVING THE 100-PERCENT SET- ASIDE FAILED TO FOLLOW THE PROCEDURE PRESCRIBED IN ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-706.3; YOU THEREFORE CONTEND THAT NO AWARD SHOULD BE MADE UNDER THE AMENDED INVITATION BUT THAT A NEW INVITATION WHICH INCLUDES A SMALL BUSINESS SET-ASIDE SHOULD BE ISSUED. YOU DO NOT SPECIFY IN WHAT WAY THE ASPR 1-706.3 WAS NOT COMPLIED WITH. THE CITED REGULATION, TO THE EXTENT HERE APPLICABLE, PROVIDES:

"/A) * * * IF, PRIOR TO AWARD OF A CONTRACT INVOLVING AN INDIVIDUAL OR CLASS SET-ASIDE, THE CONTRACTING OFFICER CONSIDERS THAT PROCUREMENT OF THE SET-ASIDE FROM A SMALL BUSINESS CONCERN WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST (E.G., BECAUSE OF UNREASONABLE PRICE), HE MAY WITHDRAW A UNILATERAL OR JOINT SET-ASIDE DETERMINATION BY GIVING WRITTEN NOTICE TO THE SMALL BUSINESS SPECIALIST OR THE SBA REPRESENTATIVE, AS APPROPRIATE, STATING THE REASONS FOR THE WITHDRAWAL.

"/G) A SIGNED MEMORANDUM OF NONCONCURRENCE IN A RECOMMENDED SET ASIDE ACTION OR OF ANY WITHDRAWAL OR MODIFICATION SHALL BE MADE AND RETAINED IN THE CONTRACT FILE.'

THE AUGUST 8, 1968, WRITTEN NOTICE STATES THE REASONS FOR THE WITHDRAWAL AND IS SIGNED BY THE CONTRACTING OFFICER. ALTHOUGH THE ASPR REGULATION DOES NOT APPEAR TO REQUIRE ANY ACTION BY THE SMALL BUSINESS SPECIALIST OR THE SMALL BUSINESS ADMINISTRATION (SBA) REPRESENTATIVE WHEN A CONTRACTING OFFICER INITIATES WITHDRAWAL OF A SET-ASIDE PROVISION, THE SMALL BUSINESS SPECIALIST APPROVED AND SIGNED THE NOTICE. THE DOCUMENT WAS RETAINED AS PART OF THE CONTRACT FILE. THEREFORE, YOUR ASSERTION THAT THE WITHDRAWAL OF THE 100-PERCENT SET ASIDE WAS PROCEDURALLY INVALID IS WITHOUT SUPPORT IN THE RECORD.

YOUR LETTER OF PROTEST RELATES THAT YOU ASKED FOR RETURN OF YOUR SCALED BID WHEN YOU LEARNED OF THE ELIMINATION OF THE SET-ASIDE. IT IS FURTHER STATED THAT THE BID WAS RETURNED UNOPENED. HOWEVER, YOU ASSERT THAT A REPRESENTATIVE OF SBA INFORMED YOU THAT A 50-PERCENT SET ASIDE HAD BEEN GRANTED AND THAT IT WAS ONLY WITH THIS ASSURANCE OF AN OPPORTUNITY TO QUALIFY FOR 50 PERCENT OF THE CONTRACT THAT YOU RESUBMITTED YOUR BID. YOU ARGUE THAT SINCE THIS INFORMATION WAS INCORRECT YOUR BID SHOULD HAVE BEEN CANCELLED. IT IS ALSO CONTENDED THAT THE GOVERNMENT'S INTERESTS WOULD NOT HAVE BEEN JEOPARDIZED BY INCLUSION OF A PARTIAL SET-ASIDE; THAT FROM YOUR EXPERIENCE AS A MANUFACTURER OF THIS PRODUCT THE SCHNELLER BID CAN ONLY BE CONSTRUED AS "BUYING " A DEVICE FOR APPLYING UNDUE ECONOMIC PRESSURE; AND THAT THERE HAS BEEN THEREBY CREATED A SITUATION OF RUTHLESS COMPETITION WHICH CAN ONLY END IN THE ELIMINATION OF COMPETITION, TO WHICH THE GOVERNMENT SHOULD NOT MAKE ITSELF A PARTY.

WITH RESPECT TO YOUR ALLEGATION THAT AN SBA OFFICIAL REPRESENTED TO YOU THAT A 50-PERCENT SET-ASIDE WOULD BE INCLUDED IN THE INVITATION, THE CONTRACT FILE CONTAINS A DOCUMENT DATED AUGUST 14, 1968, AND ENTITLED "MEMO FOR RECORD," READING AS FOLLOWS:

"SUBJECT: TELEPHONE CONVERSATION - IFB F25600-69-B-0036

"PARTICIPANTS: MR. YELICK OF SBA AND LT. COL. SMITH AND MR. HARTNETT OF THIS OFFICE.

"MR. YELICK CALLED AND ASKED US TO CONSIDER A PARTIAL SET-ASIDE OF 50 PERCENT OF THE PROCUREMENT. COL. SMITH ADVISED MR. YELICK THAT IF IT WAS POSSIBLE HE WOULD DO IT, BUT ONLY IF THE ASPR ALLOWED IT. MR. YELICK SAID I WILL ADVISE THE SBA IN DENVER OF YOUR DECISION. COL. SMITH THEN SAID "I HAVE NOT MADE ANY DECISION I AM GOING TO FOLLOW THE PROCEDURES OUTLINED IN THE ASPR COVERING THIS MATTER" . COL. SMITH THEN AGREED TO NOTIFY MR. YELICK OF HIS FINDINGS.

"AFTER THE PHONE CALL COL. SMITH USED THE FOLLOWING REASONS FOR MAKING HIS DECISION:

"1. ASPR 1-706.6 (A) (III) STATES THAT A PARTIAL SET ASIDE SHALL NOT BE MADE IF THERE IS REASONABLE EXPECTATION THAT ONLY TWO CONCERNS (ONE LARGE AND ONE SMALL) WITH TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY WILL RESPOND WITH BIDS OR PROPOSALS.

"MR. YELICK COULD NOT BE REACHED UNTIL A LATER DATE TO BE APPRISED OF COL. SMITH'S DECISION.' THIS MEMORANDUM WOULD COUNTER ANY POSSIBLE INFERENCE THAT THE CONTRACTING AGENCY SHARES RESPONSIBILITY FOR THE ASSERTED REPRESENTATION. THE SUGGESTION THAT A PARTIAL SET ASIDE BE INCLUDED WAS ACTIVELY RESISTED BY THE AIR FORCE OFFICIALS. THE FAILURE PROMPTLY TO COMMUNICATE THE AIR FORCE DECISION MAY HAVE RESULTED IN THE SBA'S APPARENT ASSUMPTION THAT THERE WOULD BE A PARTIAL SET-ASIDE. BUT THE FAILURE MAY NOT BE CHARGED TO THE CONTRACTING OFFICER SINCE HE ATTEMPTED TO INFORM SBA OF THE DECISION.

YOUR ARGUMENT THAT A PARTIAL SET-ASIDE SHOULD HAVE BEEN INCLUDED IS DIRECTED AT A DISCRETIONARY DECISION BY THE CONTRACTING OFFICER. WE HAVE HELD THAT:

"THE DETERMINATION TO SET ASIDE A PROCUREMENT FOR SMALL BUSINESS IS WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION. THIS AUTHORITY IS VERY BROAD AND AN ADMINISTRATIVE DETERMINATION MADE PURSUANT TO SUCH AUTHORITY IS NOT ORDINARILY REVIEWED BY OUR OFFICE.' B 150048,DECEMBER 12, 1962. WE HAVE ALSO STATED THAT EVEN WHERE WE MAY NOT AGREE WITH SUCH A DETERMINATION "WE ARE RELUCTANT TO SUBSTITUTE OUR JUDGMENT FOR THAT OF THE CONTRACTING OFFICER IN THE ABSENCE OF A CLEAR SHOWING OF ABUSE OF THE DISCRETION PERMITTED HIM.' 45 COMP. GEN. 228, 231. SEE B-153264, APRIL 13, 1964, WHERE WE STATED THE STANDARD FOR UPSETTING A DECISION RELATIVE TO INCLUSION OF A SMALL BUSINESS SET-ASIDE AS BEING WHETHER OR NOT THERE IS "CONVINCING EVIDENCE OF ARBITRARY OR CAPRICIOUS ACTION.'

IN ASPR 1-706.6 IT IS PROVIDED THAT THERE SHALL BE A PARTIAL SET ASIDE UNDER CERTAIN LISTED CIRCUMSTANCES,"EXCEPT THAT A PARTIAL SET ASIDE SHALL NOT BE MADE IF THERE IS A REASONABLE EXPECTATION THAT ONLY TWO CONCERNS (ONE LARGE AND ONE SMALL) WITH TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY WILL RESPOND WITH BIDS OR PROPOSALS.' THE CONTRACTING OFFICER KNEW THAT THERE WERE ONLY THREE POTENTIAL BIDDERS: SCHNELLER, DURACOTE AND EXPANDED. SINCE EXPANDED WOULD HAVE TO BUY ITS MATERIALS FROM A MANUFACTURER, THUS INCURRING HIGHER COSTS THAN EITHER SCHNELLER OR DURACOTE, IT WOULD BE AT A COMPETITIVE DISADVANTAGE AGAINST DURACOTE AND SCHNELLER. THIS WOULD RENDER IT REASONABLY UNLIKELY THAT EXPANDED WOULD MAKE THE EFFORT OF SUBMITTING A BID; CONVERSELY, IT WOULD BE REASONABLY LIKELY THAT ONLY SCHNELLER AND DURACOTE (ONE A LARGE FIRM, THE OTHER SMALL) WOULD ENTER BIDS. THE MERE FACT THAT EXPANDED DID ENTER THE COMPETITION DOES NOT PERMIT US TO SAY, WITH THE BENEFIT OF HINDSIGHT, THAT THE CONTRACTING OFFICER'S EXPECTATION WAS UNREASONABLE. IN SHORT, WE CONSIDER THAT THE CONTRACTING OFFICER ACTED FAIRLY AND REASONABLY UNDER THE DUTY IMPOSED ON HIM BY ASPR 1-706.6.

LASTLY, YOUR BID WAS MORE THAN 120 PERCENT OF WHAT WOULD HAVE BEEN THE NON-SET-ASIDE PORTION OF THE CONTRACT IF THERE HAD BEEN A 50 PERCENT SET- ASIDE. UNDER ASPR 1-706.6 (D) (1), THEREFORE, YOU WOULD NOT HAVE BEEN ELIGIBLE FOR THE 50-PERCENT SET-ASIDE PORTION OF THE CONTRACT. FOR THIS ADDITIONAL REASON WE CONCLUDE THAT THERE ARE NO COMPELLING REASONS TO REJECT ALL THE BIDS AND CANCEL THE INVITATION. ASPR 2-404.1 (A).

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