B-166724, AUG. 11, 1969

B-166724: Aug 11, 1969

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BY DEFENSE SUPPLY AGENCY ON BASIS THAT IT SHOULD NOT HAVE BEEN PERMITTED TO SUBSTITUTE A SUBCONTRACTOR. WHEN ADVISED THAT ALTERNATE SUBCONTRACTORS FOR TWO ITEMS WERE NOT SMALL BUSINESS. SUBSTITUTED NAMES OF OTHER SMALL BUSINESS SUBCONTRACTORS MAY HAVE SUCH SUBSTITUTION UNDER TERMS OF INVITATION WHICH PERMITTED SUBSTITUTION WITH CONTRACTING OFFICER'S CONSENT CONSIDERED PROPER. INCORPORATED: REFERENCE IS MADE TO YOUR PROTEST AGAINST AWARD OF A CONTRACT TO DAIRY MAID DAIRY. THE SUBJECT SOLICITATION WAS SET ASIDE EXCLUSIVELY FOR SMALL BUSINESS PARTICIPATION AND WAS ISSUED ON FEBRUARY 19. DAIRY MAID REPRESENTED THAT IT IS A SMALL BUSINESS CONCERN. PROVIDES AS FOLLOWS: "BIDDER REPRESENTS THAT THE PLANTS (OR ESTABLISHMENTS) LISTED BELOW WILL BE UTILIZED IN PROCESSING OR MANUFACTURING THE ITEMS INDICATED.

B-166724, AUG. 11, 1969

BID PROTEST - SMALL BUSINESS SUBCONTRACTORS SUBSTITUTION DECISION TO HARVEY DAIRY, INC. DENYING PROTEST AGAINST AWARD TO DAIRY MAID DAIRY, INC. BY DEFENSE SUPPLY AGENCY ON BASIS THAT IT SHOULD NOT HAVE BEEN PERMITTED TO SUBSTITUTE A SUBCONTRACTOR. LOW BIDDER WHO, WHEN ADVISED THAT ALTERNATE SUBCONTRACTORS FOR TWO ITEMS WERE NOT SMALL BUSINESS, SUBSTITUTED NAMES OF OTHER SMALL BUSINESS SUBCONTRACTORS MAY HAVE SUCH SUBSTITUTION UNDER TERMS OF INVITATION WHICH PERMITTED SUBSTITUTION WITH CONTRACTING OFFICER'S CONSENT CONSIDERED PROPER.

TO HARVEY DAIRY, INCORPORATED:

REFERENCE IS MADE TO YOUR PROTEST AGAINST AWARD OF A CONTRACT TO DAIRY MAID DAIRY, INCORPORATED, BY THE DEFENSE SUPPLY AGENCY UNDER INVITATION FOR BIDS NO. DSA 138-69-B-0080, ISSUED FOR THE MILK AND MILK PRODUCTS REQUIREMENTS AT BOLLING AIR FORCE BASE.

THE SUBJECT SOLICITATION WAS SET ASIDE EXCLUSIVELY FOR SMALL BUSINESS PARTICIPATION AND WAS ISSUED ON FEBRUARY 19, 1969.

ON PAGE 2 OF THE BID FORM, DAIRY MAID REPRESENTED THAT IT IS A SMALL BUSINESS CONCERN. IT ALSO REPRESENTED THAT ALL SUPPLIES TO BE FURNISHED WOULD BE MANUFACTURED OR PRODUCED BY A SMALL BUSINESS CONCERN IN THE UNITED STATES, ITS POSSESSIONS, OR PUERTO RICO.

THE "BIDDER REPRESENTS--PLANT LOCATIONS" PORTION OF SECTION H, EVALUATION AND AWARD FACTORS, ON PAGE 12 OF THE BID FORM, PROVIDES AS FOLLOWS: "BIDDER REPRESENTS THAT THE PLANTS (OR ESTABLISHMENTS) LISTED BELOW WILL BE UTILIZED IN PROCESSING OR MANUFACTURING THE ITEMS INDICATED, AND THAT THE BUSINESS SIZE STATUS OF EACH IS AS INDICATED. (BIDDER'S OWN PLANT/S) MUST BE LISTED IF WORK WILL BE PERFORMED THERE.) BIDDER IS ADVISED THAT ELIGIBILITY FOR PREFERENCE AS A SMALL BUSINESS CONCERN IS DEPENDENT UPON HIS REPRESENTATION PRIOR TO BID OPENING THAT THE SUPPLIES TO BE DELIVERED HEREUNDER WILL BE MANUFACTURED OR PRODUCED BY A SMALL BUSINESS CONCERN AND THAT ANY REPRESENTATION BELOW AS TO MANUFACTURING PLANT OR LOCATION MUST BE IN CONFORMANCE WITH THAT MISE.'

IN ACCORD WITH THE ABOVE DAIRY MAID STATED THAT ITEMS 1-12 AND 15 WOULD BE PRODUCED IN ITS OWN PLANT AT FREDERICK, MARYLAND, AND THAT IT WAS A SMALL BUSINESS CONCERN.

FURTHER REPRESENTATIONS UNDER THIS SECTION WERE IN PERTINENT PART AS FOLLOWS: "BIDDER FURTHER REPRESENTS THAT SUCH ITEMS WILL BE STORED, SHIPPED AND/OR DISTRIBUTED FROM THE ABOVE PLANTS EXCEPT AS FOLLOWS: (HERE INSERT ITEM NUMBERS, NAMES AND LOCATIONS OF PLANTS IF DIFFERENT FROM THOSE SET FORTH ABOVE):

BUSINESS SIZE ITEM NO. NAME OF PLANT

ADDRESS STATUS 13, 14, CAPITOL MILK PRODUCERS FREDERICK, AND 16 COOPERATIVE, INC. MARYLAND SMALL

COUNTRY BELLE (DIVISION GRANTSVILLE,

OF GRANTSVILLE) MARYLAND SMALL PLANT LOCATION INFORMATION MAY BE FURNISHED OR CHANGED AFTER BID OPENING, BUT PRIOR TO AWARD: PROVIDED HOWEVER, IF THIS PROCUREMENT IS SET ASIDE FOR SMALL BUSINESS OR IF THE BIDDER SEEKS PREFERENCE AS A SMALL BUSINESS CONCERN HE MUST INDICATE THE MANUFACTURING PLANT, LOCATION AND SIZE STATUS PRIOR TO BID OPENING AND ANY CHANGE THERETO MUST BE IN CONFORMANCE WITH HIS REPRESENTATION THAT THE SUPPLIES TO BE DELIVERED HEREUNDER WILL BE MANUFACTURED OR PRODUCED BY A SMALL BUSINESS CONCERN. ALSO, NO AWARD WILL BE MADE UNLESS THE CONTRACTING OFFICER DETERMINES, FOR EACH OF THE ITEMS BID UPON, THAT SUCH ESTABLISHMENTS ARE EITHER (1) LISTED BY THE ARMY AS APPROVED SOURCES OF SUPPLY IN THE CURRENT -DIRECTORY OF SANITARILY APPROVED FOOD ESTABLISHMENTS FOR ARMED FORCES PROCUREMENT- PUBLISHED BY CONTINENTAL U.S. ARMY COMMANDERS (INCLUDING THE MILITARY DISTRICT OF WASHINGTON) OR (2) HAVE OTHERWISE PASSED A MILITARY VETERINARY SANITARY INSPECTION OR (3) HAS A PASTEURIZATION PLANT COMPLIANCE RATING OF 90 OR MORE AND IS LISTED IN THE PUBLICATION, -SANITARY COMPLIANCE AND ENFORCEMENT RATINGS OF INTERSTATE SHIPPERS.- THE PERFORMING OF ANY WORK CONTRACTED FOR IN ANY PLANT OR ESTABLISHMENT OTHER THAN NAMED ABOVE, OR SUBSEQUENTLY NAMED BY THE BIDDER AND APPROVED AS A SOURCE OF SUPPLY IS PROHIBITED UNLESS THE SAME IS SPECIFICALLY APPROVED IN ADVANCE BY THE CONTRACTING OFFICER.'

FOLLOWING THE OPENING OF BIDS, BY LETTER DATED MARCH 28, 1969, HARVEY DAIRY PROTESTED AN AWARD TO DAIRY MAID STATING THAT DAIRY MAID'S SUPPLIER FOR ITEMS 13, 14 AND 16, CAPITOL MILK PRODUCERS COOPERATIVE, INCORPORATED, WAS NOT A SMALL BUSINESS CONCERN. ADVICE WAS RECEIVED BY THE CONTRACTING OFFICER FROM THE SMALL BUSINESS ADMINISTRATION THAT NEITHER CAPITOL MILK PRODUCERS COOPERATIVE NOR COUNTRY BELLE, NAMED BY DAIRY MAID AS ALTERNATIVE SUPPLIERS FOR ITEMS 13, 14 AND 16, IS A SMALL BUSINESS CONCERN.

UPON BEING ADVISED THAT THE TWO COMPANIES IT HAD CITED AS SUPPLIERS WERE LARGE BUSINESS, DAIRY MAID WITHDREW THE NAMES OF THE COMPANIES AND CITED IN SUBSTITUTION THE NAMES OF FOUR SMALL BUSINESS CONCERNS AS SUPPLIERS OF ITEMS 13, 14 AND 16. IT WAS THEN STATED BY LETTER DATED APRIL 23, 1969, THAT GREEN SPRING DAIRY, OF BALTIMORE, WOULD BE THE SUPPLIER OF THE THREE ITEMS. AWARD WAS MADE TO DAIRY MAID UNDER THE NEW SUBCONTRACT ARRANGEMENT.

YOU PROTEST THE AWARD OF A CONTRACT TO DAIRY MAID ON THE BASIS THAT PERMISSION TO SUBSTITUTE A SUBCONTRACTOR WAS IMPROPER.

IN OUR DECISION OF FEBRUARY 24, 1969, B-165847, TO THE DIRECTOR, DEFENSE SUPPLY AGENCY, WE STATED THAT:

"* * * WE RECOMMEND THAT A CLAUSE BE INCLUDED IN FUTURE INVITATIONS * * * ADVISING THAT ELIGIBILITY FOR A SMALL BUSINESS SET-ASIDE AWARD IS DEPENDENT UPON PROMISING PRIOR TO BID OPENING THAT THE PRODUCT WILL BE MANUFACTURED BY SMALL BUSINESS AND THAT ANY CHANGE MADE THEREIN, MUST BE IN CONFORMANCE WITH THAT PROMISE WHICH TAKES PRECEDENCE OVER ANY REPRESENTATION AS TO PARTICULAR PLANTS PROPOSED TO BE USED. IN SHORT, WHILE A BIDDER MAY CHANGE MANUFACTURERS, HIS PROMISE TO HAVE THE PRODUCT MANUFACTURED BY A SMALL BUSINESS SHOULD REMAIN FIRM AND NOT BE CHANGED AFTER BID OPENING;,

THE RECOMMENDATION WAS ACCEPTED AND INCORPORATED IN THE INVITATION ISSUED IN THE PRESENT MATTER, AS EVIDENCED IN THE HEREINABOVE QUOTED PORTIONS OF THE INVITATION.

IT IS REPORTED THAT CAPITOL MILK AND COUNTRY BELLE HAVE FREQUENTLY BEEN LISTED AS SUBCONTRACTORS BY OTHER BIDDERS IN THE BELIEF THAT THE TWO CONCERNS WERE SMALL BUSINESS. HENCE, THERE WAS NO REASON TO QUESTION THE GOOD FAITH OF DAIRY MAID.

IN ANY EVENT THE INVITATION CLEARLY REQUIRED THE CONTRACTOR AND SUBCONTRACTORS, IF ANY, TO BE SMALL BUSINESS CONCERNS, AND PROVIDED FURTHER, THAT IF THE SUBCONTRACTORS NAMED WERE NOT USED, OTHER SUBCONTRACTORS, IF SMALL BUSINESS CONCERNS, COULD BE SUBSTITUTED WITH THE CONTRACTING OFFICER'S CONSENT. THE SUCCESSFUL CONTRACTOR WAS BOUND BY HIS AGREEMENT AND COULD NOT WITHDRAW HIS BID OR REFUSE TO NAME, IN THIS MATTER, A SMALL BUSINESS SUBCONTRACTOR.

SINCE THE RECORD SHOWS THAT UPON NOTIFICATION THAT ITS NAMED SUBCONTRACTORS WERE NOT SMALL BUSINESS CONCERNS, DAIRY MAID SUBSTITUTED SMALL BUSINESS CONCERNS, WHICH WERE ACCEPTABLE TO THE CONTRACTING OFFICER, THE ACTION TAKEN WAS IN ACCORD WITH THE PROVISIONS OF THE INVITATION.

ACCORDINGLY, YOUR PROTEST MUST BE DENIED.

IN ADDITION TO THE ABOVE PROTEST YOU QUESTIONED THE PROCEDURES FOLLOWED BY THE CONTRACTING OFFICER IN THE ADMINISTRATION OF CURRENT CONTRACTS FOR DAIRY PRODUCTS AT THE NAVAL SUPPORT FACILITY, THURMONT, MARYLAND, AND AT FORT GEORGE G. MEADE, MARYLAND. IN BOTH INSTANCES DAIRY MAID WAS LOW BIDDER AND WAS AWARDED CONTRACTS, AND IN BOTH INSTANCES HARVEY DAIRY WAS THE EFFECTIVE SECOND LOW BIDDER. BEFORE DAIRY MAID COULD BEGIN DELIVERY UNDER ONE CONTRACT AND SHORTLY AFTER BEGINNING DELIVERY UNDER THE OTHER, IT WAS DISAPPROVED AS A SOURCE OF SUPPLY FOR MILK FOR THE ARMED SERVICES BY REASON OF PLANT SANITATION DEFECTS.

YOU ALLEGED THAT THESE CONTRACTS WERE TERMINATED FOR DEFAULT AND THAT THE CONTRACTING OFFICER AWARDED REPLACING CONTRACTS TO THE THIRD LOW BIDDER, COMPLETELY IGNORING YOUR SECOND LOW BIDS.

CONTRARY TO YOUR BELIEF, THE CONTRACTS WERE NOT TERMINATED FOR DEFAULT. IT IS REPORTED THAT THE CONTRACTS WERE NOT AT ANY TIME TERMINATED, BUT THAT THE CONTRACTOR SUBCONTRACTED FOR ALL DAIRY REQUIREMENTS AND SOUGHT THE APPROVAL OF THE CONTRACTING OFFICER FOR THIS ARRANGEMENT. B-166724 THE CONTRACTING OFFICER AGREED TO THE MODIFICATION WHICH CONTINUED DAIRY MAID AS THE PRIME CONTRACTOR WITH PROCESSING AND DELIVERY BY APPROVED SUBCONTRACTORS. THESE SUBCONTRACTORS WERE SELECTED BY THE PRIME CONTRACTOR AND SUBSTITUTION PERMITTED (WITH THE CONTRACTING OFFICER'S APPROVAL) OF THE PLANT LOCATION, AS PERMITTED BY THE INVITATION FOR BIDS AND SUBSEQUENT CONTRACT.

HENCE THERE WAS NO TERMINATION OF CONTRACT, AND THE CONTRACTOR WAS WITHIN HIS RIGHTS TO SUBCONTRACT WITH THE THIRD LOW BIDDER. THE CONTRACTOR WAS STILL BOUND TO THE CONTRACT PRICE AND COULD NOT OBLIGATE THE GOVERNMENT TO AN INCREASED PRICE.