B-166445, AUG. 25, 1969

B-166445: Aug 25, 1969

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ENTERED INTO NEGOTIATIONS FOR MERGER WITH A LARGE BUSINESS FIRM DOES NOT HAVE TO HAVE AWARD CANCELED ON BASIS OF INELIGIBILITY AS SMALL BUSINESS SINCE THERE IS NO SHOWING OF BAD FAITH. HOWEVER IT IS RECOGNIZED THAT THE EXISTENCE OF THE MERGER SHOULD HAVE BEEN MADE KNOWN TO SMALL BUSINESS SIZE APPEALS BOARD. TO BUILDING MAINTENANCE CORPORATION: REFERENCE IS MADE TO YOUR LETTER DATED MARCH 14. THE CONTRACT WAS AWARDED PURSUANT TO INVITATION FOR BIDS NO. STATING IN PART THAT A SMALL BUSINESS CONCERN IS A CONCERN THAT (A) IS INDEPENDENTLY OWNED AND OPERATED. (B) IS NOT DOMINANT IN ITS FIELD AND WITH ITS AFFILIATES EMPLOYS FEWER THAN 500 EMPLOYEES. (C) IS CERTIFIED AS A SMALL BUSINESS CONCERN BY THE SMALL BUSINESS ADMINISTRATION.

B-166445, AUG. 25, 1969

BID PROTEST - SMALL BUSINESS SIZE CHANGE DECISION DENYING PROTEST OF BUILDING MAINTENANCE CORP. AGAINST AWARD BY NORFOLK NAVAL SHIPYARD TO AMERICAN WINDOW CORP. FOR ELECTRICAL REPAIR WORK. A LOW BIDDER WHO, 5 DAYS AFTER OPENING OF BID CONTAINING SMALL BUSINESS CERTIFICATION, ENTERED INTO NEGOTIATIONS FOR MERGER WITH A LARGE BUSINESS FIRM DOES NOT HAVE TO HAVE AWARD CANCELED ON BASIS OF INELIGIBILITY AS SMALL BUSINESS SINCE THERE IS NO SHOWING OF BAD FAITH. HOWEVER IT IS RECOGNIZED THAT THE EXISTENCE OF THE MERGER SHOULD HAVE BEEN MADE KNOWN TO SMALL BUSINESS SIZE APPEALS BOARD.

TO BUILDING MAINTENANCE CORPORATION:

REFERENCE IS MADE TO YOUR LETTER DATED MARCH 14, 1969, AND TO SUBSEQUENT CORRESPONDENCE, RELATIVE TO YOUR PROTEST AGAINST THE AWARD OF CONTRACT NO. N62470-69-C-0359, DATED FEBRUARY 17, 1969, TO THE AMERICAN WINDOW CLEANING CORPORATION, NORFOLK, VIRGINIA, FOR CLEANING, RELAMPING AND CERTAIN ELECTRICAL REPAIR SERVICES TO BE PERFORMED AT THE NORFOLK NAVAL SHIPYARD, PORTSMOUTH, VIRGINIA, DURING A PERIOD COMMENCING ON OR ABOUT THE DATE OF CONTRACT AWARD AND CONTINUING THROUGHT THE MONTH OF JANUARY 1970. THE CONTRACT WAS AWARDED PURSUANT TO INVITATION FOR BIDS NO. N62470-69-B-0359, ISSUED DECEMBER 17, 1968, BY THE OFFICER IN CHARGE OF CONSTRUCTION, NORFOLK NAVAL SHIPYARD.

THE PROPOSED SERVICE CONTRACT INVOLVED A PROCUREMENT WHICH HAD BEEN SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS IN ACCORDANCE WITH THE PROVISIONS OF 10 U.S.C. 2304 (A) (10) AND SECTION 15 OF THE SMALL BUSINESS ACT, 72 STAT. 395, 15 U.S.C. 644. THE INVITATION FOR BIDS CONTAINED A NOTICE OF SMALL BUSINESS SET-ASIDE, STATING IN PART THAT A SMALL BUSINESS CONCERN IS A CONCERN THAT (A) IS INDEPENDENTLY OWNED AND OPERATED; (B) IS NOT DOMINANT IN ITS FIELD AND WITH ITS AFFILIATES EMPLOYS FEWER THAN 500 EMPLOYEES; (C) IS CERTIFIED AS A SMALL BUSINESS CONCERN BY THE SMALL BUSINESS ADMINISTRATION. ALTHOUGH THE 500-EMPLOYEE SIZE STANDARD IS ERRONEOUS FOR A SERVICE CONTRACT, IT WAS CONSIDERED APPLICABLE IN THIS CASE SINCE NO BIDDER APPEALED IT PURSUANT TO SECTION 121.3-6 (B) (3) (II) OF THE SMALL BUSINESS SIZE STANDARD REGULATION. THE PROVISIONS OF THE NAVY SPECIFICATION WHICH WAS ATTACHED TO THE INVITATION FOR BIDS WERE MODIFIED IN CERTAIN RESPECTS BY ADDENDUM NO. 1, DATED DECEMBER 17, 1968, AND THE ORIGINAL SPECIFICATION, AS WELL AS THE ADDENDUM, CONTAINED A NOTICE THAT EACH BIDDER SHOULD REFER IN HIS BID TO ALL SPECIFICATION ADDENDA. THOSE DOCUMENTS ALSO STATED THAT "FAILURE TO DO SO MAY CONSTITUTE AN INFORMALITY IN BID.'

SIX BIDS WERE RECEIVED AND OPENED, AS SCHEDULED, ON JANUARY 16, 1969. THE THREE LOWEST BIDS WERE EVALUATED IN THE AMOUNTS OF $75,744.80, $102,985.25 AND $120,857.62. THE LOWEST BID WAS SUBMITTED BY THE AMERICAN WINDOW CLEANING CORPORATION, THE SECOND LOWEST WAS SUBMITTED BY THE FRUGAL COMPANY AND THE THIRD LOWEST WAS SUBMITTED BY THE BUILDING MAINTENANCE CORPORATION. THE LOW BID OF THE AMERICAN WINDOW CLEANING CORPORATION WAS CONSIDERED TO BE PROPERLY FOR AWARD AFTER A DETERMINATION HAD BEEN MADE THAT THE COMPANY QUALIFIED AS A RESPONSIBLE PROSPECTIVE CONTRACTOR FOR THE PERFORMANCE OF THE REQUIRED SERVICES. HOWEVER, AWARD ACTION WAS WITHHELD PENDING THE OUTCOME OF A PROTEST SUBMITTED BY YOUR COMPANY. YOU QUESTIONED THE SMALL BUSINESS ELIGIBILITY OF THE AMERICAN WINDOW CLEANING CORPORATION AND CONTENDED THAT THE SECOND LOWEST BID WAS NONRESPONSIVE BECAUSE THE FRUGAL COMPANY'S BID DID NOT CONTAIN A REFERENCE TO ADDENDUM NO. 1 TO THE NAVY SPECIFICATION.

THE QUESTION RAISED IN REGARD TO THE SMALL BUSINESS STATUS OF THE AMERICAN WINDOW CLEANING CORPORATION WAS REFERRED TO THE SMALL BUSINESS ADMINISTRATION REGIONAL OFFICE AT RICHMOND, VIRGINIA, FOR CONSIDERATION, AND IN A DECISION DATED FEBRUARY 7, 1969, THE REGIONAL DIRECTOR DETERMINED THAT THE AMERICAN WINDOW CLEANING CORPORATION WAS AN ELIGIBLE SMALL BUSINESS CONCERN FOR AWARD UNDER INVITATION FOR BIDS NO. N62470-69-B- 0359. THE DECISION OF THE REGIONAL DIRECTOR INCLUDED FINDINGS THAT THE AMERICAN WINDOW CLEANING CORPORATION HAD NO AFFILIATES AND THAT ITS AVERAGE NUMBER OF EMPLOYEES ON THE LAST DAY OF THE THIRD MONTH IN EACH CALENDAR QUARTER FOR THE FOUR PRECEDING YEARS WAS LESS THAN 500. SINCE NO APPEAL FROM THE DECISION OF FEBRUARY 7, 1969, HAD BEEN FILED WITH THE SMALL BUSINESS ADMINISTRATION SIZE APPEALS BOARD WITHIN THE TIME ALLOWED FOR THE FILING OF SUCH APPEALS, THE CONTRACT WAS AWARDED TO THE AMERICAN WINDOW CLEANING CORPORATION ON FEBRUARY 17, 1969. YOUR COMPANY SUBMITTED AN APPEAL TO THE SIZE APPEALS BOARD ON MARCH 11, 1969, AND A PROTEST IN THE MATTER WAS SUBMITTED TO OUR OFFICE BY LETTER DATED MARCH 14, 1969.

THE NAVAL FACILITIES ENGINEERING COMMAND, DEPARTMENT OF THE NAVY, SUBMITTED A REPORT ON YOUR PROTEST BY LETTER DATED APRIL 25, 1969. RESPONSE TO OUR REQUEST FOR A REPORT FROM THE SMALL BUSINESS ADMINISTRATION, WE RECEIVED A LETTER DATED MAY 14, 1969, FROM THE CHAIRMAN OF THE SIZE APPEALS BOARD, ENCLOSING A COPY OF THE BOARD'S FINDINGS AND DECISION ON YOUR APPEAL, WHICH HAD BEEN APPROVED ON MAY 7, 1969, BY THE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION.

THE REPORT OF THE NAVAL FACILITIES ENGINEERING COMMAND INDICATED THAT THE CONTRACT HAD BEEN AWARDED TO THE AMERICAN WINDOW CLEANING CORPORATION IN ACCORDANCE WITH REGULATIONS GOVERNING SITUATIONS WHERE, AS HERE, A BIDDER HAS CHALLENGED THE SMALL BUSINESS STATUS OF ANOTHER BIDDER ON THE SAME PROCUREMENT BEFORE CONTRACT AWARD. THE REPORT ALSO SUGGESTED THAT THE FAILURE OF THE SECOND LOWEST BIDDER, FRUGAL COMPANY, TO REFER IN ITS BID TO ADDENDUM NO. 1 TO THE NAVY SPECIFICATION COULD HAVE BEEN WAIVED AS A MINOR INFORMALITY OR IRREGULARITY UNDER THE PROVISIONS OF SECTION 2-405, ARMED SERVICES PROCUREMENT REGULATION (ASPR).

THE MAY 7, 1969, DECISION OF THE SIZE APPEALS BOARD SETS FORTH THAT ON JANUARY 21, 1969, FIVE DAYS AFTER BID OPENING, THE AMERICAN WINDOW CLEANING CORPORATION ENTERED INTO AN AGREEMENT TO MERGE WITH THE SANITAS SERVICE CORPORATION, HARTFORD, CONNECTICUT, AND THAT THE SANITAS SERVICE CORPORATION, TOGETHER WITH ITS AFFILIATES, EMPLOYS IN EXCESS OF 500 PERSONS. IN THE CIRCUMSTANCES, INCLUDING THE FACT THAT THE AMERICAN WINDOW CLEANING CORPORATION DID NOT TAKE ADVANTAGE OF AN OPPORTUNITY TO DISPROVE A PRESUMPTION THAT THE MERGER AGREEMENT HAD A "PRESENT EFFECT," AS OF JANUARY 21, 1969, THE BOARD DETERMINED THAT, BY REASON OF ITS AFFILIATION WITH THE SANITAS SERVICE CORPORATION, THE AMERICAN WINDOW CLEANING CORPORATION WAS NOT AN ELIGIBLE SMALL BUSINESS CONCERN FOR THE PURPOSES OF AN AWARD UNDER INVITATION FOR BIDS NO. N62470-69-B-0359, AS OF FEBRUARY 17, 1969, THE DATE OF THE CONTRACT AWARD. HOWEVER, SINCE YOUR APPEAL WAS NOT TIMELY FILED, THE BOARD'S DECISION STATES THAT "THE EFFECT OF THIS DECISION IS PROSPECTIVE ONLY.' WITH REFERENCE TO THE FACT THAT THE RICHMOND REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION HAD NOT BEEN ADVISED OF THE MERGER AGREEMENT PRIOR TO THE ISSUANCE OF THE REGIONAL DIRECTOR'S DECISION OF FEBRUARY 7, 1969, PARAGRAPH H OF THE DECISION RENDERED BY THE SIZE APPEALS BOARD STATES AS FOLLOWS:

"THE BOARD NOTES ALSO THAT SBA FORM 355, APPLICATION FOR SMALL BUSINESS SIZE DETERMINATION, WAS FORWARDED BY SBA TO AMERICAN WINDOW CLEANING CORPORATION ON JANUARY 24, 1969, AND RETURNED BY ITS COUNSEL UNDER A COVERING LETTER DATED FEBRUARY 3, 1969. ITEM 5B OF THE FORM ASKS THE SPECIFIC QUESTION -HAS APPLICANT AGREED TO MERGE WITH ANOTHER CONCERN IN THE FUTURE?- THE BOX MARKED -NO- WAS CHECKED. HOWEVER, THE ANSWER WAS QUALIFIED BY INSERTION OF THE FOLLOWING EXPLANATION: -NOT AS OF JANUARY 16, 1969.- WHETHER AMERICAN WINDOW CLEANING CORPORATION DELIBERATELY OR UNCONSCIOUSLY WITHHELD INFORMATION OF ITS PENDING MERGER FROM SBA IS A MATTER BEYOND THE JURISDICTION OF THE BOARD. NEVERTHELESS, IT WOULD APPEAR THAT, SINCE THE ANSWER TO THE QUESTION IMPLIED ITS MATERIALITY TO THE APPLICANT'S SIZE STATUS, AND SINCE THE AGREEMENT HAD BEEN EXECUTED PRIOR TO THE RETURN DATE OF SBA FORM 355, THIS INFORMATION SHOULD HAVE BEEN DISCLOSED TO THE SBA REGIONAL ICE.'

AFTER YOU WERE FURNISHED A COPY OF THE NAVY'S ORIGINAL REPORT ON YOUR PROTEST, YOU CONTENDED THAT THERE IS NO REASONABLE BASIS FOR A CONCLUSION THAT THE FAILURE OF THE FRUGAL COMPANY TO REFER IN ITS BID TO NAVY SPECIFICATION ADDENDUM NO. 1 PROPERLY COULD BE WAIVED AS A MINOR IRREGULARITY OR INFORMALITY UNDER THE PROVISIONS OF ASPR 2-405. OUR REPRESENTATIVES DID NOT QUESTION YOUR BELIEF THAT COMPLIANCE WITH THE REQUIREMENTS OF THE ADDENDUM WOULD HAVE INCREASED A CONTRACTOR'S COSTS BY AT LEAST THE SUM OF $250 OVER THE ENTIRE CONTRACT PERIOD AND THAT, IF THIS WAS BASED UPON A REASONABLE ESTIMATE OF INCREASED COSTS AND THERE WERE NO OTHER FACTORS TO BE CONSIDERED, A FAILURE TO ACKNOWLEDGE THE ADDENDUM WHEN SUBMITTING A BID COULD NOT BE REGARDED AS A MINOR IRREGULARITY OR INFORMALITY WHICH COULD BE WAIVED UNDER ASPR 2 405. HOWEVER, YOUR ATTENTION WAS INVITED TO THE FACT THAT THE SPECIFICATION ADDENDUM BEARS THE SAME DATE AS THE INVITATION FOR BIDS AND TO THE CASE OF 40 COMP. GEN. 48, WHEREIN IT WAS HELD THAT A BIDDER'S FAILURE TO ACKNOWLEDGE THE RECEIPT OF AN ADDENDUM ATTACHED TO THE ORIGINAL SPECIFICATIONS WHICH INCORPORATED A PREVAILING WAGE RATE DETERMINATION BY THE SECRETARY OF LABOR DID NOT REQUIRE REJECTION OF THE PARTICULAR BID.

YOU CONTENDED IN A LETTER DATED JUNE 12, 1969, THAT THE CASES ARE DISTINGUISHABLE BECAUSE THE WAGE RATE DETERMINATION WAS REQUIRED BY LAW TO BE INCORPORATED IN ANY CONTRACT TO BE AWARDED IN THE CASE OF 40 COMP. GEN. 48. HOWEVER, THE DECISION IN THAT CASE WAS BASED UPON GENERAL PRINCIPLES RELATING TO THE MATTER OF RESPONSIVENESS OF BIDS, NOT WHAT A CONTRACT SHOULD REQUIRE, AND IT WOULD APPEAR THAT THE RULING IN THAT CASE WOULD BE APPLICABLE TO THE FACTS OF THIS CASE IF SPECIFICATION ADDENDUM NO. 1 WAS INCLUDED AMONG THE DOCUMENTS OF THE ORIGINAL BID PACKAGE SENT TO THE FRUGAL COMPANY.

IN THAT CONNECTION, YOU CONTENDED THAT NEITHER YOUR COMPANY NOR THE FRUGAL COMPANY WAS FURNISHED A COPY OF THE SPECIFICATION ADDENDUM WITH THE BID PACKAGE WHICH EACH COMPANY RECEIVED, THAT YOU OBTAINED A COPY OF THE ADDENDUM ON THE MORNING OF THE BID OPENING DATE AND THAT YOU WERE ADVISED BY THE FRUGAL COMPANY'S REPRESENTATIVE AT THE BID OPENING THAT HIS COMPANY HAD NO KNOWLEDGE OF THE ADDENDUM.

IN A SUPPLEMENTAL REPORT DATED JULY 9, 1969, FROM THE NAVAL FACILITIES ENGINEERING COMMAND, IT WAS STATED WITH REFERENCE TO SPECIFICATION ADDENDUM NO. 1 THAT "OUR ATLANTIC DIVISION ADVISED US THAT THE ADDENDUM WAS ISSUED WITH THE ORIGINAL BIDDING PACKAGE TO ALL PROSPECTIVE BIDDERS ON THE MAILING LIST AND, IN THE SAME FASHION, TO ALL WHO SUBSEQUENTLY REQUESTED THE PACKAGE.' ALSO, IN REPLY TO OUR REQUEST FOR THE COMMENTS OF THE FRUGAL COMPANY CONCERNING YOUR LETTER OF JUNE 12, 1969, MR. FRANK L. FORD, OWNER, ADVISED US THAT, ALTHOUGH THE COMPANY'S REPRESENTATIVE AT THE BID OPENING ADMITS THAT HE MADE THE STATEMENT AT THE BID OPENING THAT THE FRUGAL COMPANY HAD NO KNOWLEDGE OF THE ADDENDUM, THE REPRESENTATIVE WAS NOT IN A POSITION TO STATE WHETHER OR NOT THE ADDENDUM HAD BEEN RECEIVED WITH THE ORIGINAL BID PACKAGE SINCE HE HAD NOT SEEN THE ORIGINAL PACKAGE AND HIS ONLY DUTY AT THE BID OPENING WAS TO OBTAIN THE BID PRICES. WERE FURTHER ADVISED BY MR. FORD THAT HE RECEIVED A COMPLETE BID PACKAGE, INCLUDING SPECIFICATION ADDENDUM NO. 1, THAT HE APPARENTLY DID NOT ACKNOWLEDGE THE ADDENDUM WHEN SUBMITTING A BID, BUT THAT THE ADDENDUM WAS TAKEN INTO CONSIDERATION IN CONNECTION WITH THE PRICES WHICH HE QUOTED.

WE THEREFORE DO NOT AGREE THAT, IN THE EVENT OF A CANCELLATION OF THE CONTRACT WITH THE AMERICAN WINDOW CLEANING CORPORATION, YOUR COMPANY CLEARLY WOULD BE ENTITLED TO AN AWARD COVERING THE PERFORMANCE OF RELAMPING AND ELECTRICAL REPAIR SERVICES AT THE NORFOLK NAVAL SHIPYARD DURING THE REMAINING MONTHS OF THE YEAR 1969 AND THE MONTH OF JANUARY 1970.

WITH RESPECT TO CERTAIN OF YOUR CONTENTIONS REGARDING THE POSSIBILITY OF CONTRACT CANCELLATION ON THE BASIS OF THE "PROSPECTIVE ONLY" DECISION OF THE SIZE APPEALS BOARD, SMALL BUSINESS ADMINISTRATION, IT HAS BEEN AND REMAINS OUR POSITION THAT, IF A CONTRACT HAS BEEN AWARDED ON A SMALL BUSINESS SET-ASIDE PROCUREMENT TO A CONCERN WHICH, SUBSEQUENT TO AWARD, HAS BEEN DETERMINED BY THE SMALL BUSINESS ADMINISTRATION AS ONE NOT QUALIFYING AS AN ELIGIBLE SMALL BUSINESS CONTRACTOR ON THE CONTRACT AWARD DATE, THE CONTRACT IS NOT VOID AB INITIO BUT IS VOIDABLE, DEPENDING UPON THE PARTICULAR CIRCUMSTANCES OF THE CASE, ONLY AT THE OPTION OF THE GOVERNMENT. SEE 41 COMP. GEN. 252 AND OUR DECISION B-164100, JULY 8, 1968. SEE, ALSO, OTIS STEEL PRODUCTS CORPORATION V UNITED STATES, 316 F.2D 937, WHEREIN THE COURT OF CLAIMS HELD THAT THE PLAINTIFF COULD NOT BE RELIEVED FROM ITS OBLIGATIONS UNDER THE CONTRACT INVOLVED BY PLEADING THAT IT WAS NOT A SMALL BUSINESS CONCERN AT THE TIME THE CONTRACT WAS AWARDED.

THE CONTRACT WITH THE AMERICAN WINDOW CLEANING CORPORATION IS NOT REQUIRED TO BE CANCELED BECAUSE IT WAS AWARDED OTHER THAN TO AN ELIGIBLE SMALL BUSINESS CONCERN UNLESS ADDITIONALLY DETERMINED THAT CANCELLATION WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT AND THAT THE CONTRACTOR DID NOT ACT IN GOOD FAITH WHEN IT CERTIFIED ITSELF TO BE A SMALL BUSINESS CONCERN OR WHEN IT WAS REQUESTED BY THE RICHMOND REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION TO COMPLETE AND RETURN SBA FORM 355.

IN CONTENDING THAT THE AMERICAN WINDOW CLEANING CORPORATION DID NOT ACT IN GOOD FAITH WHEN IT CERTIFIED IN ITS BID SUBMITTED ON THE BID OPENING DATE, JANUARY 16, 1969, THAT IT WAS A SMALL BUSINESS CONCERN, YOU REFERRED TO THE FACT THAT THE AGREEMENT TO MERGE WITH THE SANITAS SERVICE CORPORATION WAS ENTERED INTO ON JANUARY 21, 1969, OR ONLY FIVE CALENDAR DAYS AND THREE WORKING DAYS AFTER THE BID OPENING DATE, AND YOU CITED THE CASE OF 34 COMP. GEN. 115, WHEREIN IT WAS CONSIDERED THAT A SMALL BUSINESS AWARD SHOULD BE CANCELED BECAUSE THE CONTRACTOR HAD FURNISHED ERRONEOUS INFORMATION IN REGARD TO ITS SIZE TO THE CONTRACTING AGENCY BEFORE IT WAS INITIALLY DETERMINED BY THE SMALL BUSINESS ADMINISTRATION, PRIOR TO AWARD, THAT THE CONTRACTOR WAS AN ELIGIBLE SMALL BUSINESS BIDDER. WE DO NOT AGREE THAT THE PENDENCY OF NEGOTIATIONS FOR MERGER WITH THE SANITAS SERVICE CORPORATION IS SUFFICIENT TO JUSTIFY A CONCLUSION THAT THE AMERICAN WINDOW CLEANING CORPORATION, WHICH WAS A SMALL BUSINESS CONCERN BEFORE MERGING WITH THE SANITAS SERVICE CORPORATION, COULD NOT HAVE CERTIFIED IN GOOD FAITH, AS OF JANUARY 16, 1969, THAT IT WAS A SMALL BUSINESS CONCERN. HOWEVER, WE AGREE WITH THE SIZE APPEALS BOARD THAT THE EXISTENCE OF THE MERGER AGREEMENT ENTERED INTO ON JANUARY 21, 1969, SHOULD HAVE BEEN DISCLOSED TO THE RICHMOND REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION AT THE TIME IT WAS CONSIDERING THE QUESTION WHETHER THE AMERICAN WINDOW CLEANING CORPORATION QUALIFIED FOR AN AWARD AS A SMALL BUSINESS CONCERN UNDER THE INVITATION OF DECEMBER 17, 1968.

THE STATEMENT "NOT AS OF JANUARY 16, 1969," MADE IN RESPONSE TO THE QUESTION ON SBA FORM 355 WHETHER THE COMPANY HAD AGREED TO MERGE WITH ANY OTHER COMPANY, IS SOMEWHAT MISLEADING, BUT IT IS NOT ERRONEOUS, AND THE COMPANY HAS CONTENDED, IN EFFECT, THAT IT WAS NOT AWARE OF THE RULE THAT, IN ORDER TO QUALIFY FOR AN AWARD UNDER AN INVITATION FOR BIDS INVOLVING A SMALL BUSINESS SET-ASIDE PROCUREMENT, A BIDDER MUST BE A SMALL BUSINESS CONCERN ON THE DATE OF THE CONTRACT AWARD AS WELL AS PRIOR TO THE BID OPENING DATE. FURTHERMORE, SINCE THE "NOT AS OF JANUARY 16, 1969" STATEMENT HAD REFERENCE TO THE BID OPENING DATE, THERE APPEARS TO BE A REASONABLE BASIS FOR CONSIDERING THAT THE RICHMOND REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION MIGHT WELL HAVE REALIZED THAT THE COMPANY PROBABLY HAD MADE AN ERRONEOUS ASSUMPTION REGARDING THE PARTICULAR POINT IN TIME AT WHICH A BIDDER'S STATUS AS TO SIZE IS HELD TO BE DETERMINATIVE FOR AWARD PURPOSES, AND THAT IT SHOULD HAVE MADE FURTHER INQUIRY IN THE MATTER.

IN ITS SUPPLEMENTAL REPORT OF JULY 9, 1969, THE NAVAL FACILITIES ENGINEERING COMMAND STATED THAT ANY ACTION TO DISTURB OR INVALIDATE THE CONTRACT WITH THE AMERICAN WINDOW CLEANING CORPORATION WOULD RESULT IN INCONVENIENCE TO THE ACTIVITY, TOGETHER WITH SUBSTANTIAL ADDITIONAL COSTS IN EXCESS OF $15,000 (IN ADDITION TO CONTRACT TERMINATION CHARGES) TO AWARD TO THE NEXT LOWEST BIDDER. THE OPINION IS EXPRESSED IN THE REPORT THAT CANCELLATION OF THE CONTRACT WOULD NOT BE IN THE BEST INTEREST OF THE GOVERNMENT AND SHOULD NOT BE ATTEMPTED.

ON AUGUST 15, 1969, YOU SUBMITTED A COPY OF "CERTIFICATE OF INCORPORATION OF AMERICAN WINDOW CLEANING CORPORATION," FILED ON JANUARY 17, 1969, WITH THE OFFICE OF THE SECRETARY OF STATE, STATE OF CONNECTICUT. ALSO, ON AUGUST 18, 1969, YOU SUBMITTED AN AFFIDAVIT CONCERNING A STATEMENT MADE BY MR. FRANK L. FORD, OWNER OF THE FRUGAL COMPANY, REGARDING THE QUESTION WHETHER HIS COMPANY RECEIVED A COPY OF SPECIFICATION ADDENDUM NO. 1 WITH THE BID PACKAGE SENT TO THAT COMPANY, AND YOU SUBMITTED A STATEMENT CONCERNING THE QUESTION WHETHER THE VIRGINIA CORPORATION KNOWN AS THE AMERICAN WINDOW CLEANING CORPORATION WAS STILL IN EXISTENCE AS OF FEBRUARY 17, 1969, WHEN IT WAS AWARDED THE CONTRACT FOR THE PERFORMANCE OF MAINTENANCE SERVICES AT THE NORFOLK NAVAL SHIPYARD.

YOU REFERRED IN YOUR AFFIDAVIT TO A CONVERSATION WHICH TOOK PLACE IN YOUR OFFICE "DURING MAY OR JUNE 1969" WITH MR. FORD. PURPORTEDLY, YOU ASKED HIM WHETHER HE HAD RECEIVED A COPY OF THE ADDENDUM TO THE NAVY SPECIFICATION AND HIS ANSWER WAS "NO, I DID NOT RECEIVE THAT AMENDMENT.'

IT WOULD BE IMPOSSIBLE FOR US TO DETERMINE WHETHER, AS A MATTER OF FACT, THE FRUGAL COMPANY RECEIVED A COMPLETE BID PACKAGE, INCLUDING SPECIFICATION ADDENDUM NO. 1. HOWEVER, IT DOES NOT APPEAR THAT WE WOULD BE WARRANTED IN TAKING EXCEPTION TO THE ADVICE FURNISHED BY MR. FORD IN HIS LETTER OF AUGUST 1, 1969, TO OUR OFFICE, THAT HE DID RECEIVE THE ADDENDUM AND THAT THE ADDENDUM WAS TAKEN INTO CONSIDERATION IN CONNECTION WITH THE QUOTED BID PRICES OF THE FRUGAL COMPANY.

THE INCORPORATORS WHO SIGNED THE CERTIFICATE OF INCORPORATION FILED WITH THE OFFICE OF THE SECRETARY OF STATE, STATE OF CONNECTICUT, APPEAR TO BE OFFICERS AND MAJOR STOCKHOLDERS OF THE SANITAS SERVICE CORPORATION AND IT ALSO APPEARS THAT THEY WERE ACTING ON BEHALF OF THAT CORPORATION IN ANTICIPATION OF THE CONSUMMATION OF A MERGER AGREEMENT WITH THE VIRGINIA FIRM KNOWN AS THE AMERICAN WINDOW CLEANING CORPORATION. THE FACT THAT THE NEW CORPORATION WAS AUTHORIZED TO DO BUSINESS IN THE STATE OF VIRGINIA ON JANUARY 24, 1969, WOULD NOT APPEAR, AS YOU SEEM TO BELIEVE, TO HAVE RESULTED IN AN AUTOMATIC DISSOLUTION OF THE VIRGINIA CORPORATION. IN THAT CONNECTION, WE HAVE NO REASON OTHER THAN TO ASSUME THAT THE VIRGINIA CORPORATION CONTINUED IN EXISTENCE UNTIL THE EFFECTIVE DATE OF THE JANUARY 21, 1969, MERGER AGREEMENT, UNDER WHICH THE SANITAS SERVICE CORPORATION WAS TO BECOME THE SURVIVING CORPORATION, AND THAT THE CONTRACT OF FEBRUARY 17, 1969, WAS ENTERED INTO PRIOR TO THE AFFECTIVE DATE OF THE MERGER AGREEMENT. SO FAR AS CONCERNS YOUR REFERENCE TO THE PERFORMANCE AND PAYMENT BONDS OF THAT DATE, IT IS APPARENT THAT THEY AFFORDED THE GOVERNMENT AND ANY LABORERS, SUPPLIERS OR SUBCONTRACTORS ADEQUATE PROTECTION, IN VIEW OF THE PROVISIONS OF SECTION 13.1-245, CODE OF VIRGINIA, WHICH MAKES THE SURVIVING OR NEW CORPORATION INVOLVED IN A MERGER AGREEMENT LIABLE FOR ALL LIABILITIES AND OBLIGATIONS OF EACH OF THE CORPORATIONS MERGED OR CONSOLIDATED, AND PROVIDES THAT ANY CLAIM EXISTING OR ACTION OR PROCEEDING PENDING BY OR AGAINST ANY SUCH CORPORATION MAY BE PROSECUTED AS IF SUCH MERGER OR CONSOLIDATION HAD NOT TAKEN PLACE, OR SUCH SURVIVING OR NEW CORPORATION MAY BE SUBSTITUTED IN ITS PLACE.

IN THE CIRCUMSTANCES, WE DO NOT FEEL REQUIRED TO REQUEST THE DEPARTMENT OF THE NAVY TO CANCEL THE CONTRACT AND, ACCORDINGLY, YOUR PROTEST TO OUR OFFICE IN THE MATTER IS DENIED.