B-168933, APR. 3, 1970

B-168933: Apr 3, 1970

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SELF-CERTIFICATION- MISREPRESENTATION WHERE SUCCESSFUL OFFEROR (ONE OF PARENT COMPANY'S SUBSIDIARIES) ERRONEOUSLY REPRESENTED ITSELF AS SMALL BUSINESS FOR PURPOSES OF NEGOTIATED SMALL BUSINESS PROCUREMENT AND CONTRACT IS COMPLETED. SELF-CERTIFICATION PROCEDURE WAS ADOPTED AS PRACTICAL SOLUTION IN KNOWLEDGE THAT MISREPRESENTATIONS ARE INFREQUENT AND THAT CONCERNS IN INDUSTRY KNOW SIZE STATUS OF COMPETITORS. IDENTITY OF SUCCESSFUL OFFEROR WOULD HAVE BEEN DISCLOSED IN TIME TO HAVE PERMITTED SIZE PROTEST. 2 MONTHS AFTER AWARD WAS DETERMINED AS NOT SMALL BUSINESS SINCE IT WAS ONE OF PARENT COMPANY'S SUBSIDIARIES. WE HAVE BEEN FURNISHED A COPY OF THAT LETTER AND A DOCUMENTED ADMINISTRATIVE REPORT FROM THE NAVAL SUPPLY SYSTEMS COMMAND ON THE MATTER.

B-168933, APR. 3, 1970

CONTRACTS--AWARDS--SMALL BUSINESS CONCERNS--SELF-CERTIFICATION- MISREPRESENTATION WHERE SUCCESSFUL OFFEROR (ONE OF PARENT COMPANY'S SUBSIDIARIES) ERRONEOUSLY REPRESENTED ITSELF AS SMALL BUSINESS FOR PURPOSES OF NEGOTIATED SMALL BUSINESS PROCUREMENT AND CONTRACT IS COMPLETED, GAO SEES NO PURPOSE IN LOOKING INTO GOOD FAITH OF SUCCESSFUL OFFEROR'S SIZE STATUS. SELF-CERTIFICATION PROCEDURE WAS ADOPTED AS PRACTICAL SOLUTION IN KNOWLEDGE THAT MISREPRESENTATIONS ARE INFREQUENT AND THAT CONCERNS IN INDUSTRY KNOW SIZE STATUS OF COMPETITORS. HAD CONTRACT BEEN AWARDED SUBSEQUENT TO AUG. 29, 1969 REVISION TO ASPR, IDENTITY OF SUCCESSFUL OFFEROR WOULD HAVE BEEN DISCLOSED IN TIME TO HAVE PERMITTED SIZE PROTEST. CONTRACTS--PROFITS ANTICIPATED UNDER NEGOTIATED TOTAL SMALL-BUSINESS SET-ASIDE, SUCCESSFUL OFFEROR, SELF -CERTIFIED AS SMALL BUSINESS, 2 MONTHS AFTER AWARD WAS DETERMINED AS NOT SMALL BUSINESS SINCE IT WAS ONE OF PARENT COMPANY'S SUBSIDIARIES. INASMUCH AS CONTRACT HAS BEEN COMPLETED, GAO SEES NO PURPOSE IN LOOKING INTO GOOD FAITH OF SUCCESSFUL OFFEROR'S SIZE STATUS. ALSO, GAO FINDS NO BASIS FOR CONSIDERING THAT GOVERNMENT MAY BE LIABLE TO PROTESTANT FOR LOSS OF ANTICIPATED PROFITS AND EXPRESSES NO OPINION AS TO WHETHER DAMAGES WOULD BE RECOVERABLE FROM SUCCESSFUL OFFEROR. SEE CT. CASE CITED.

TO AMERICAN INDUSTRIAL CORPORATION:

BY LETTER OF JANUARY 15, 1970, TO THE NAVAL SUPPLY CENTER, NORFOLK, VIRGINIA, YOU PROTESTED THE AWARD OF A CONTRACT FOR A SUCTION TYPE PNEUMATIC CONVEYING SYSTEM TO YOUNG MACHINERY SALES COMPANY, INCORPORATED, MUNCY, PENNSYLVANIA, PURSUANT TO SOLICITATION NO. N00189 69-R-0267, DATED APRIL 8, 1969, AS AMENDED. WE HAVE BEEN FURNISHED A COPY OF THAT LETTER AND A DOCUMENTED ADMINISTRATIVE REPORT FROM THE NAVAL SUPPLY SYSTEMS COMMAND ON THE MATTER.

THIS WAS A NEGOTIATED PROCUREMENT SET ASIDE FOR SMALL BUSINESS CONCERNS ONLY. ALL THREE PROPOSALS RECEIVED AS OF THE CLOSING DATE, MAY 6, 1969, ALTHOUGH ORIGINALLY FOUND TO BE TECHNICALLY UNACCEPTABLE, WERE MADE ACCEPTABLE IN THE COURSE OF NEGOTIATIONS. THE CONTRACT WAS AWARDED TO YOUNG MACHINERY SALES COMPANY, INCORPORATED, ON JULY 29, 1969, AT THE LOWEST OFFERED PRICE OF $24,232. THE CONTRACTING OFFICER IN NOTIFYING THE UNSUCCESSFUL OFFERORS THAT AN AWARD HAD BEEN MADE TO YOUNG MACHINERY SALES COMPANY, INCORPORATED, ERRONEOUSLY STATED THE CONTRACT PRICE AS $18,993, THE COMPANY'S INITIAL QUOTATION. CONTRARY TO YOUR STATED UNDERSTANDING, THE CONTRACTING OFFICER HAS REPORTED THAT NO AFTER-AWARD NEGOTIATIONS WERE CONDUCTED WITH THE CONTRACTOR AND THE CONTRACT PRICE HAS NOT BEEN INCREASED.

YOUR PROTEST IS BASED ON THE CONTENTION THAT YOUNG MACHINERY SALES COMPANY, INCORPORATED, DID NOT QUALIFY AS A SMALL BUSINESS CONCERN AND, THEREFORE, WAS NOT ELIGIBLE FOR AWARD. IN A LETTER OF JULY 14, 1969, YOU ADVISED THE CONTRACTING AGENCY THAT "SINCE THIS PROCUREMENT IS A 'SMALL BUSINESS SET ASIDE,' I TRUST THAT YOU ARE CONSIDERING ONLY SMALL BUSINESSES FOR AWARD." THAT STATEMENT WAS NOT REGARDED AS NOTICE OF ANY SUSPECTED IRREGULARITY IN THE SMALL BUSINESS REPRESENTATIONS OR CERTIFICATIONS OF THE OTHER OFFERORS. IN A LETTER DATED AUGUST 4, 1969, AFTER CONTRACT AWARD, YOU QUESTIONED THE SMALL BUSINESS ELIGIBILITY OF THE CONTRACTOR. YOU WERE ADVISED BY THE CONTRACTING OFFICER, IN A LETTER DATED AUGUST 14, 1969, THAT THE CONTRACTOR HAD REPRESENTED ITSELF TO BE SMALL BUSINESS AND THAT HE WAS REQUIRED TO ACCEPT THE REPRESENTATION "AT FACE VALUE."

YOU SUBMITTED ADDITIONAL INFORMATION ON THE SMALL BUSINESS STATUS OF THE CONTRACTOR WHICH THE CONTRACTING OFFICER FORWARDED TO THE PHILADELPHIA, PENNSYLVANIA, OFFICE OF THE SMALL BUSINESS ADMINISTRATION FOR CONSIDERATION. THE CONTRACTING OFFICER ADVISED YOU BY LETTER DATED AUGUST 25, 1969, THAT THE PROCEDURE ADOPTED CONFORMS TO THE REQUIREMENTS OF THE ARMED SERVICES PROCUREMENT REGULATION, ASPR 1-703 (B) (1) (III), AND THAT FURTHER ACTION ON YOUR PROTEST COULD NOT BE TAKEN BY THE NAVAL SUPPLY CENTER. SUBSEQUENTLY, ON SEPTEMBER 23, 1969, THE NAVAL SUPPLY CENTER RECEIVED FROM THE MIDDLE ATLANTIC AREA OFFICE OF THE SMALL BUSINESS ADMINISTRATION INFORMATION INDICATING THAT THE CONTRACTOR, IN COMBINATION WITH ITS PARENT COMPANY, THE UNITED STATES FILTER CORPORATION, WHITTIER, CALIFORNIA, AND OTHER SUBSIDIARIES OF THAT FIRM, COULD NOT BE CONSIDERED AS A SMALL BUSINESS CONCERN.

IT APPEARS THAT THE ACTION TAKEN BY THE CONTRACTING OFFICER IN MAKING THE CONTRACT AWARD AND IN CONSIDERING YOUR QUESTION REGARDING THE CONTRACTOR'S SMALL BUSINESS STATUS WAS FULLY IN ACCORDANCE WITH THE PROVISIONS OF ASPR 1-703 (A) (2) AND 1-703 (B) (1) (III), WHICH PROVIDE GENERALLY FOR ACCEPTANCE OF A SMALL BUSINESS REPRESENTATION AT FACE VALUE, AND FOR CERTAIN REFERRAL ACTION WITH RESPECT TO PROTESTS RECEIVED AFTER CONTRACT AWARD WHICH CONCERN THE SMALL BUSINESS STATUS OF CONTRACTORS. ASPR 1-703 (B) (1) (III) STATES THAT THE PROTESTANT SHALL BE NOTIFIED THAT AWARD HAS BEEN MADE AND THAT HIS PROTEST HAS BEEN FORWARDED TO THE SMALL BUSINESS ADMINISTRATION FOR CONSIDERATION IN FUTURE ACTIONS. THE LETTER OF AUGUST 25, 1969, COMPLIED WITH THAT REQUIREMENT.

THE SELF-CERTIFICATION PROCEDURE WAS DESIGNED TO SIMPLIFY AND EXPEDITE SIZE DETERMINATIONS AND THE PROCUREMENT PROCESSES IN SUCH CASES. THERE IS NO ABSOLUTE ASSURANCE THAT IN EVERY CASE THE AWARD WILL BE MADE TO AN ELIGIBLE SMALL BUSINESS CONCERN. HOWEVER, AS WE STATED IN B-166065, APRIL 14, 1969, THE SELF-CERTIFICATION PROCEDURE HAS BEEN ADOPTED AS A PRACTICAL SOLUTION TO AN OTHERWISE MORE DIFFICULT PROBLEM IN THE KNOWLEDGE THAT MISREPRESENTATIONS BY BUSINESS CONCERNS ARE INFREQUENT AND THAT SMALL BUSINESS CONCERNS IN AN INDUSTRY ARE IN THE BEST POSITION TO KNOW THE SIZE STATUS OF THEIR COMPETITORS; AND A CASE-BY-CASE INVESTIGATION OF THE STATUS OF BIDDERS AND OFFERORS ON EVERY GOVERNMENT PROCUREMENT WOULD BE EXTREMELY EXPENSIVE AND TIME CONSUMING.

THE ORIGINAL SECTION 1-703 (B) OF THE 1969 EDITION OF THE ARMED SERVICES PROCUREMENT REGULATION PROVIDES IN PART AS FOLLOWS:

"* * * THE CONTROLLING POINT IN TIME FOR A DETERMINATION CONCERNING THE SIZE STATUS OF A QUESTIONED BIDDER SHALL BE THE DATE OF AWARD, EXCEPT THAT NO BIDDER OR OFFEROR SHALL BE ELIGIBLE FOR AWARD AS A SMALL BUSINESS CONCERN UNLESS HE HAS IN GOOD FAITH REPRESENTED HIMSELF AS SMALL BUSINESS PRIOR TO THE OPENING OF BIDS OR CLOSING DATE FOR SUBMISSION OF OFFERS * *

"(1) PROTEST OF SMALL BUSINESS STATUS. ANY BIDDER OR OFFEROR MAY, IN CONNECTION WITH A CONTRACT INVOLVING SMALL BUSINESS SET ASIDE OR OTHERWISE INVOLVING SMALL BUSINESS PREFERENTIAL CONSIDERATION, QUESTION THE SMALL BUSINESS STATUS OF ANY APPARENTLY SUCCESSFUL BIDDER OR OFFEROR BY SENDING A WRITTEN PROTEST TO THE CONTRACTING OFFICER RESPONSIBLE FOR THE PARTICULAR PROCUREMENT. * * * SUCH PROTEST MUST BE RECEIVED BY THE CONTRACTING OFFICER PRIOR TO THE CLOSE OF BUSINESS ON THE FIFTH WORKING DAY * * * AFTER BID OPENING DATE OR CLOSING DATE FOR THE RECEIPT OF PROPOSALS. * * *"

SECTION 1-703 (B) WAS, HOWEVER, REVISED UNDER ASPR REVISIONS NOS. 4 AND 6, DATED AUGUST 29 AND DECEMBER 31, 1969, RESPECTIVELY. THESE CHANGES ARE NOT MATERIAL HERE EXCEPT FOR EMPHASIS OF THE FACT THAT, WHEREAS THE SUBMISSION OF PROPOSALS RELATES TO CONTRACT NEGOTIATION PROCEDURES UNDER WHICH, DURING NEGOTIATIONS, NO INFORMATION CONTAINED IN ANY PROPOSAL OR QUOTATION OR INFORMATION REGARDING THE NUMBER OR IDENTITY OF THE OFFERORS COULD UNDER THE THEN CURRENT REGULATIONS BE MADE AVAILABLE TO THE PUBLIC, THE ORIGINAL SUBPARAGRAPH (1) OF ASPR 1 703 (B), 1969 EDITION, REQUIRED THE RECEIPT OF ANY PROTEST PRIOR TO THE CLOSE OF BUSINESS ON THE FIFTH WORKING DAY AFTER THE CLOSING DATE FOR THE RECEIPT OF PROPOSALS. RECOGNITION OF THE FACT THAT AN OFFEROR COULD NOT SUBMIT A TIMELY SMALL BUSINESS STATUS PROTEST IF THE IDENTITY OF OTHER OFFERORS WAS UNKNOWN, THAT SUBPARAGRAPH, AS REVISED ON AUGUST 29, 1969, CONTAINS THE FOLLOWING PROVISION:

"* * * IN PROCUREMENTS REQUIRING THE SUBMISSION OF PROPOSALS, THE CONTRACTING OFFICER SHALL, EXCEPT UNDER THE CIRCUMSTANCES SPECIFIED IN 3- 508.2 (B), NOTIFY THE APPARENTLY UNSUCCESSFUL OFFERORS) AND ESTABLISH A DEADLINE DATE (AT LEAST FIVE WORKING DAYS PLUS A REASONABLE TIME FOR NOTICE TO REACH THE UNSUCCESSFUL OFFERORS) BY WHICH ANY SIZE PROTEST ON THE INSTANT PROCUREMENT MUST BE RECEIVED. * * *"

THE CONTRACT HERE INVOLVED WAS AWARDED PRIOR TO THE ISSUANCE OF THE AUGUST 29, 1969, REVISION TO ASPR 1-703 (B) (1) AND THE CONTRACTING OFFICER WOULD NOT HAVE BEEN AUTHORIZED TO DISCLOSE THE IDENTITY OF THE APPARENTLY SUCCESSFUL OFFEROR, YOUNG MACHINERY SALES COMPANY, INCORPORATED, BEFORE MAKING THE AWARD. HAD THE PROCUREMENT BEEN AWARDED SUBSEQUENT TO THE REVISION, THE IDENTITY OF THE APPARENTLY SUCCESSFUL OFFEROR WOULD HAVE BEEN DISCLOSED IN TIME TO HAVE PERMITTED A SIZE PROTEST ON THE PROCUREMENT.

WHILE THE GOOD FAITH OF THE SUCCESSFUL OFFEROR'S SIZE STATUS WOULD BE CONSIDERED BY OUR OFFICE EVEN WHERE NO PROTEST WAS RECEIVED UNTIL AFTER AWARD, WE SEE NO PURPOSE IN LOOKING INTO THE MATTER IN THE PRESENT CASE SINCE, ACCORDING TO INFORMATION INFORMALLY PROVIDED BY THE NAVAL SUPPLY SYSTEMS COMMAND, THE CONTRACT HAS BEEN COMPLETED.

WITH RESPECT TO THE STATEMENT MADE IN YOUR LETTER OF JANUARY 15, 1970, THAT YOU FEEL THAT YOU HAVE A JUSTIFIABLE CLAIM TO THE PROFITS WHICH YOU COULD HAVE ENJOYED HAD THE CONTRACT BEEN AWARDED TO YOUR COMPANY, WE FIND NO BASIS FOR CONSIDERING THAT THE GOVERNMENT MAY BE LIABLE TO YOUR COMPANY IN THE MATTER. WE EXPRESS NO OPINION IN REGARD TO THE QUESTION WHETHER DAMAGES REPRESENTING LOSS OF ANTICIPATED PROFITS WOULD BE RECOVERABLE FROM THE SUCCESSFUL OFFEROR. HOWEVER, YOUR ATTENTION IS INVITED TO THE CASE OF ROYAL SERVICES, INC; V. MAINTENANCE, INC; 361 F.2D 86 (1966). IN THAT CASE, THE UNITED STATES COURT OF APPEALS, FIFTH CIRCUIT, AFFIRMED THE DISMISSAL OF AN ACTION FILED AGAINST A GOVERNMENT CONTRACTOR ON THE BASIS OF A CONTENTION THAT THE CONTRACTOR HAD MADE AN ERRONEOUS CERTIFICATION RESPECTING ITS STATUS AS A SMALL BUSINESS CONCERN.

ACCORDINGLY, WE FIND NO PROPER BASIS FOR TAKING FURTHER ACTION IN REGARD TO YOUR PROTEST.