B-167540, AUG. 27, 1969

B-167540, AUG. 27, 1969

BID PROTEST - SMALL BUSINESS SET-ASIDE DECISION DENYING REQUEST OF AURORA CORD AND CABLE COMPANY, SECOND LOW BIDDER, FOR CANCELLATION OF CONTRACT FOR DELIVERY OF MARKER LIGHTS BETWEEN AWA CORP. AND DEFENSE SUPPLY AGENCY. LOW BIDDER FOR SMALL BUSINESS SET-ASIDE PROCUREMENT WHO CERTIFIED HIMSELF AS SMALL BUSINESS ON THE BASIS EXCLUDING THE EMPLOYEES OF AN AFFILIATED COMPANY AND WHO HAD DELIVERED MOST OF THE CONTRACT REQUIREMENTS WHEN IT WAS DETERMINED THAT SIZE APPEAL OF THE SECOND LOW BIDDER HAD BEEN SUSTAINED BY SMALL BUSINESS ADMINISTRATION DOES NOT JUSTIFY CANCELLATION AT THIS TIME.

TO AURORA CORD AND CABLE COMPANY:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JULY 18, 1969, WITH ENCLOSURES, REQUESTING CANCELLATION OF CONTRACT NO. DSA-400-69-C-5669, DATED APRIL 24, 1969, WITH THE AWA CORPORATION, AURORA, ILLINOIS, FOR THE PRODUCTION AND DELIVERY OF 16,800 CLEARANCE MARKER LIGHTS AND CONTRACT MODIFICATION NO. P-001, DATED MAY 22, 1969, WHEREIN THE GOVERNMENT EXERCISED ITS OPTION TO REQUIRE THE DELIVERY OF AN ADDITIONAL QUANTITY OF 8,400 UNITS AT THE CONTRACT PRICE OF $4.44 PER UNIT.

THE CONTRACT WAS AWARDED TO THE AWA CORPORATION PURSUANT TO INVITATION FOR BIDS NO. DSA-400-69-B-3692, ISSUED FEBRUARY 17, 1969, BY THE DEFENSE GENERAL SUPPLY CENTER, DEFENSE SUPPLY AGENCY, RICHMOND, VIRGINIA. THE INVITATION CONTAINED A NOTICE THAT THE PROPOSED PROCUREMENT HAD BEEN SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS AND THAT THE SMALL BUSINESS STANDARD FOR DETERMINING A BIDDER'S ELIGIBILITY FOR AWARD "IS 500 EMPLOYEES.' THE ORIGINALLY SCHEDULED TIME FOR OPENING OF BIDS WAS CHANGED BY AN AMENDMENT TO THE INVITATION AND, ON THE RESCHEDULED BID OPENING DATE, MARCH 19, 1969, SIX BIDS HAD BEEN RECEIVED. ALL OF THE BIDDERS REPRESENTED THEMSELVES TO BE SMALL BUSINESS CONCERNS AND THE LOW BID WAS SUBMITTED BY THE AWA CORPORATION. YOU SUBMITTED THE NEXT LOWEST BID AND, TWO DAYS AFTER THE BID OPENING DATE, YOU QUESTIONED THE SMALL BUSINESS SIZE STATUS OF THE LOW BIDDER.

BASED UPON A PREAWARD SURVEY REPORT, THE AWA CORPORATION WAS CONSIDERED TO BE A RESPONSIBLE PROSPECTIVE CONTRACTOR BUT AWARD ACTION WAS SUSPENDED IN VIEW OF YOUR PROTEST REGARDING THE SMALL BUSINESS STATUS OF THE AWA CORPORATION WHICH HAD BECOME AFFILIATED WITH ANIXTER BROTHERS, INCORPORATED, SKOKIE, ILLINOIS, DURING THE MONTH OF JULY 1968. ON APRIL 18, 1969, THE CHICAGO, ILLINOIS, REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION DETERMINED THAT THE LOW BIDDER WAS A SMALL BUSINESS CONCERN FOR THE PURPOSE OF AWARD UNDER INVITATION FOR BIDS NO. DSA-400-69-B-3692. SINCE THE CONTRACTING OFFICER WAS NOT AWARE OF THE FACT THAT YOU HAD MADE A TIMELY APPEAL IN THE MATTER TO THE SIZE APPEALS BOARD, SMALL BUSINESS ADMINISTRATION, HE CONSIDERED THE DETERMINATION OF THE CHICAGO REGIONAL OFFICE TO BE CONCLUSIVE ON THE QUESTION OF THE AWA CORPORATION'S ELIGIBILITY AS A SMALL BUSINESS CONCERN TO RECEIVE A CONTRACT AWARD. THAT CONNECTION, IT HAS BEEN REPORTED THAT, ALTHOUGH YOU FURNISHED THE PROCUREMENT OFFICE A NOTICE BY TELEGRAM DATED APRIL 21, 1969, OF YOUR INTENTION TO FILE AN APPEAL, RECEIPT OF THE TELEGRAM WAS NOT BROUGHT TO THE ATTENTION OF THE CONTRACTING OFFICER AND IT WAS MERELY FILED WITH THE OFFICIAL CONTRACT FOLDER. IT IS ALSO REPORTED THAT THE PROCUREMENT OFFICE DID NOT REALIZE THAT AN APPEAL HAD BEEN FILED WITH THE SIZE APPEALS BOARD BEFORE RECEIPT OF A COPY OF YOUR LETTER DATED JULY 18, 1969, TO OUR OFFICE, REQUESTING THAT THE CONTRACT WHICH WAS AWARDED TO THE AWA CORPORATION ON APRIL 24, 1969, BE CANCELED.

IT APPEARS THAT THE SUCCESSFUL BIDDER AND THE CHICAGO REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION BELIEVED THAT, NOTWITHSTANDING THE BIDDER'S AFFILIATION WITH ANIXTER BROTHERS, INCORPORATED, THE AVERAGE NUMBER OF EMPLOYEES OF THE TWO COMPANIES DURING THE PRECEDING YEAR DID NOT EXCEED THE 500-EMPLOYEE SMALL BUSINESS SIZE STANDARD, AND THAT, IN ARRIVING AT THIS CONCLUSION, THEY CONSIDERED THAT IT WAS NOT NECESSARY TO COUNT THE EMPLOYEES OF ANIXTER BROTHERS, INCORPORATED, DURING THE FIRST TWO CALENDAR QUARTERS OF THE YEAR 1968 BECAUSE THE TWO COMPANIES DID NOT BECOME AFFILIATED UNTIL THE MONTH OF JULY 1968. HOWEVER, IN A DECISION RENDERED ON JULY 9, 1969, BY THE SIZE APPEALS BOARD WITH THE APPROVAL OF THE ADMINISTRATOR, SMALL BUSINESS ADMINISTRATION, THE BOARD SUSTAINED YOUR APPEAL ON THE BASIS OF A DIRECTIVE OF MARCH 20, 1967, REQUIRING THE CONSIDERATION IN SUCH CASES OF THE APPLICANT'S ENTIRE ACCOUNTING PERIOD, EVEN THOUGH AN AFFILIATE WAS ACQUIRED DURING SUCH ACCOUNTING PERIOD. THE CALCULATIONS MADE BY THE BOARD SHOW THE TOTAL NUMBER OF THE EMPLOYEES OF THE AFFILIATED CONCERNS TO HAVE BEEN MORE THAN 500 DURING EACH CALENDAR QUARTER OF THE YEAR PRECEDING THE DATE ON WHICH THE CONTRACT WAS AWARDED TO THE AWA CORPORATION.

THE DEFENSE SUPPLY AGENCY CONSIDERS THAT THERE IS NO BASIS FOR TAKING THE POSITION THAT THE AWA CORPORATION DID NOT ACT IN GOOD FAITH WHEN IT CERTIFIED ITSELF TO BE A SMALL BUSINESS CONCERN WITH KNOWLEDGE OF THE FACT THAT THE NUMBER OF EMPLOYEES OF ANY AFFILIATED CONCERN MUST BE CONSIDERED WHEN DETERMINING WHETHER A BIDDER MEETS THE 500-EMPLOYEE SMALL BUSINESS STANDARD MADE APPLICABLE IN THIS CASE. NEVERTHELESS, THE DEFENSE SUPPLY AGENCY CONSIDERED THE POSSIBILITY OF CONTRACT CANCELLATION AND IT MADE A REVIEW OF ITS SUPPLY SITUATION FOR THE PURPOSE OF DETERMINING WHETHER CANCELLATION WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT. THAT INVESTIGATION DISCLOSED THAT AS OF AUGUST 11, 1969, THE CONTRACTOR HAD SHIPPED 14,794 CLEARANCE MARKER LIGHTS, THAT 6,051 ADDITIONAL UNITS WERE BEING PACKED FOR SHIPMENT AND THAT 4,355 UNITS HAD NOT BEEN COMPLETELY MANUFACTURED. BASED UPON SUCH FIGURES, WHICH MAKE UP THE TOTAL OF 25,200 CLEARANCE MARKER LIGHTS REQUIRED TO BE DELIVERED UNDER THE CONTRACT, AS AMENDED, IT APPEARS THAT THE CONTRACT HAS BY THIS TIME BEEN COMPLETED OR THAT IT IS NEAR COMPLETION.

THE REPORT OF THE DEFENSE SUPPLY AGENCY ALSO REFERS TO A CONTRACT ENTERED INTO WITH YOUR COMPANY IN MARCH 1968, REQUIRING DELIVERIES OF SIMILAR CLEARANCE MARKER LIGHTS TO BE COMPLETED IN JANUARY 1969. THE REPORT STATES THAT YOU HAD NOT YET RECEIVED FIRST ARTICLE APPROVALS UNDER THAT CONTRACT AS OF AUGUST 12, 1969, AND THAT, IN VIEW OF THIS SITUATION, AN AWARD MOST PROBABLY WOULD NOT HAVE BEEN MADE TO YOUR COMPANY IN APRIL 1969 EVEN IF IT HAD THEN BEEN DETERMINED THAT THE AWA CORPORATION WAS NOT AN ELIGIBLE SMALL BUSINESS CONTRACTOR.

IN THE CIRCUMSTANCES, IT DOES NOT APPEAR THAT FURTHER ACTION BY OUR OFFICE IS REQUIRED IN REGARD TO YOUR REQUEST THAT THE CONTRACT WITH THE AWA CORPORATION AND THE AMENDMENT THERETO BE CANCELED.