B-169073, MAR. 25, 1970

B-169073: Mar 25, 1970

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000 CONSTRUCTION PROJECT BY ADDENDUM BEFORE BID OPENING AND AWARD TO LARGE BUSINESS FIRM WERE NOT VIOLATIVE OF INTENT AND PURPOSE OF SMALL BUSINESS ACT SINCE UNDER SEC. 15 OF ACT. DETERMINATION TO SET ASIDE PROCUREMENT FOR SMALL BUSINESS IS ORDINARILY WITHIN JURISDICTION OF PROCURING AGENCY. IT WILL NOT BE DISTURBED. INC.: REFERENCE IS MADE TO YOUR LETTERS OF FEBRUARY 13 AND 28. BID OPENING DATE WAS SCHEDULED FOR FEBRUARY 11. THE SMALL BUSINESS SET-ASIDE WAS WITHDRAWN AND THE PROJECT OPENED TO UNRESTRICTED BIDDING BY BOTH SMALL AND LARGE BUSINESS CONCERNS. SEVEN BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION. TYEE IS NOT A SMALL BUSINESS CONCERN. WAS RECEIVED FROM YOUR FIRM. FOUR OTHER BIDS WERE RECEIVED FROM SMALL BUSINESS CONCERNS AND ONE FROM A LARGE BUSINESS CONCERN.

B-169073, MAR. 25, 1970

CONTRACTS--AWARDS--SMALL BUSINESS CONCERNS--SET-ASIDES--WITHDRAWAL PROPRIETY WITHDRAWAL OF SMALL BUSINESS SET-ASIDE ON $1,500,000 CONSTRUCTION PROJECT BY ADDENDUM BEFORE BID OPENING AND AWARD TO LARGE BUSINESS FIRM WERE NOT VIOLATIVE OF INTENT AND PURPOSE OF SMALL BUSINESS ACT SINCE UNDER SEC. 15 OF ACT, DETERMINATION TO SET ASIDE PROCUREMENT FOR SMALL BUSINESS IS ORDINARILY WITHIN JURISDICTION OF PROCURING AGENCY, AND ABSENT CONVINCING EVIDENCE OF ARBITRARY OR CAPRICIOUS ACTION, IT WILL NOT BE DISTURBED. HERE SET-ASIDE RESULTED FROM INADVERTENT FAILURE TO COMPARE ENGINEERING ESTIMATE WITH AGENCY'S SET-ASIDE CRITERIA. MOREOVER, SUCH DETERMINATION MAY BE ADMINISTRATIVELY WITHDRAWN UNDER FPR 1-1.706-3 (B). SEE COMP. GEN. DECS. CITED.

TO R. C. HUGHES ELECTRIC COMPANY, INC.:

REFERENCE IS MADE TO YOUR LETTERS OF FEBRUARY 13 AND 28, 1970, PROTESTING AGAINST THE AWARD OF A CONTRACT TO THE TYEE CONSTRUCTION COMPANY UNDER INVITATION FOR BIDS (IFB) NO. 0234, ISSUED BY THE BONNEVILLE POWER ADMINISTRATION (BPA), PORTLAND, OREGON.

THE SUBJECT INVITATION, ISSUED ON JANUARY 21, 1970, SOLICITED BIDS FOR THE REMOVAL OF THE COVINGTON-TACOMA 115-KILOVOLT LINES NOS. 1 AND 2, THE CONSTRUCTION OF THE TACOMA-COVINGTON SECTION OF THE TACOMA RAVER 500- KILOVOLT LINE NO. 1, AND THE RELOCATION OF THE TACOMA COVINGTON 287- KILOVOLT LINES NOS. 3 AND 4, ALL IN MILE 6, PIERCE AND KING COUNTIES, WASHINGTON. BID OPENING DATE WAS SCHEDULED FOR FEBRUARY 11, 1970.

THE INVITATION, AS ORIGINALLY ISSUED, CONTAINED A UNILATERAL NOTICE OF A TOTAL SMALL BUSINESS SET-ASIDE. HOWEVER, BY ADDENDUM NO. 1, DATED JANUARY 28, 1970, THE SMALL BUSINESS SET-ASIDE WAS WITHDRAWN AND THE PROJECT OPENED TO UNRESTRICTED BIDDING BY BOTH SMALL AND LARGE BUSINESS CONCERNS.

SEVEN BIDS WERE RECEIVED IN RESPONSE TO THE INVITATION, WITH THE LOW BID BEING SUBMITTED BY THE TYEE CONSTRUCTION COMPANY IN THE AMOUNT OF $1,375,603. TYEE IS NOT A SMALL BUSINESS CONCERN. THE SECOND LOW BID, FOR $1,394,475, WAS RECEIVED FROM YOUR FIRM, R. C. HUGHES ELECTRIC COMPANY, INC; A SMALL BUSINESS CONCERN. FOUR OTHER BIDS WERE RECEIVED FROM SMALL BUSINESS CONCERNS AND ONE FROM A LARGE BUSINESS CONCERN. YOUR BID ACKNOWLEDGED RECEIPT OF ADDENDUM NO. 1 WHICH WITHDREW THE SMALL BUSINESS SET-ASIDE.

YOUR PROTEST AGAINST THE AWARD OF CONTRACT TO TYEE (A LARGE BUSINESS CONCERN) IS BASED ON YOUR CONTENTION THAT THE WITHDRAWAL OF THE SMALL BUSINESS SET-ASIDE BY ADDENDUM NO. 1 VIOLATES THE INTENT AND PURPOSE OF THE SMALL BUSINESS ACT. THE ISSUE THUS PRESENTED IS WHETHER A PROCURING ACTIVITY MAY PROPERLY AND LEGALLY WITHDRAW A NOTICE OF A SMALL BUSINESS SET-ASIDE PRIOR TO THE TIME OF RECEIVING AND OPENING BIDS AFTER PUBLIC ADVERTISING IN THE CIRCUMSTANCES OF THIS CASE.

IT IS ADMINISTRATIVELY REPORTED THAT THE INITIAL DECISION TO SET ASIDE THIS PROCUREMENT FOR SMALL BUSINESS PARTICIPATION WAS IN CONFORMITY WITH THE DEPARTMENT OF THE INTERIOR AND BPA POLICY TO TREAT AS AUTOMATICALLY SET ASIDE FOR SMALL BUSINESS ALL CONSTRUCTION PROJECTS NOT EXPECTED TO EXCEED $500,000 IN COST. BEFORE THE ISSUANCE OF THE INVITATION, THE ENGINEERING ESTIMATE OF WORK INCLUDED WAS NOT COMPARED WITH THE SET-ASIDE CRITERIA. HOWEVER, WHEN THE ENGINEERING ESTIMATE FOR THIS JOB WAS IDENTIFIED IN THE RANGE OF $1,500,000, THE ADDENDUM TO THE INVITATION WAS ISSUED ON JANUARY 28 REMOVING THE SMALL BUSINESS SET-ASIDE NOTICE FROM THE INVITATION.

IT IS FURTHER STATED THAT DEPARTMENT OF THE INTERIOR AND BPA POLICY IS TO ASSIST SMALL BUSINESS BY UNILATERALLY RESTRICTING BIDS ON ALL PROPOSED CONSTRUCTION PROJECTS FROM $2,500 TO $500,000 TO SMALL BUSINESS FIRMS. BECAUSE OF THE MANNER IN WHICH SEVERAL SEPARATE PROJECTS WERE COMBINED INTO IFB NO. 0234, AND UPON REEXAMINATION OF THE ENGINEER'S ESTIMATES, THE CONTRACTING OFFICER DETERMINED THAT THE IFB DID NOT COME UNDER THE CLASS SET ASIDE TO SMALL BUSINESS DETERMINATION CONTAINED IN SECTION 14-1.706-1 OF THE INTERIOR PROCUREMENT REGULATIONS. THESE REGULATIONS REFLECT THE POLICIES OF THE SMALL BUSINESS ADMINISTRATION, AS SET OUT IN GSA BULLETIN 11, FEDERAL PROCUREMENT, MARCH 14, 1969, WHICH ARE STATED AS FOLLOWS:

"4. POLICIES.

"A. A TOTAL SET-ASIDE PREFERENCE FOR THE PARTICIPATION OF SMALL BUSINESS SHOULD BE INITIATED IN EVERY ACTION TO PROCURE CONSTRUCTION SERVICES BETWEEN $2,500 AND $500,000 IN AMOUNT, SUBJECT ONLY TO A FINDING BY THE CONTRACTING AGENCY THAT SUCH PREFERENCE WOULD NOT SERVE THE BEST INTERESTS OF THE GOVERNMENT.

"B. SMALL BUSINESS SET-ASIDE PREFERENCES SHOULD BE CONSIDERED FOR CONSTRUCTION PROCUREMENTS IN EXCESS OF $500,000 ON A CASE-BY-CASE BASIS, FAVORING THE PREFERENTIAL PARTICIPATION OF SMALL BUSINESS WHENEVER APPROPRIATE." ACCORDINGLY, THE CONTRACTING OFFICER NOTIFIED ALL PROSPECTIVE BIDDERS OF HIS DECISION BY ADDENDUM NO. 1 WHICH REMOVED THE SMALL BUSINESS SET-ASIDE WELL IN ADVANCE OF BID OPENING. YOUR CONTENTION IS THAT SUCH ACTION WAS CONTRARY TO THE INTENT AND PURPOSE OF THE SMALL BUSINESS ACT.

SECTION 15 OF THE SMALL BUSINESS ACT, 15 U.S.C. 644, PROVIDES THAT SMALL BUSINESS CONCERNS SHALL RECEIVE ANY AWARD OR CONTRACT OR ANY PART THEREOF AS TO WHICH IT IS DETERMINED TO BE IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT ARE PLACED WITH SMALL BUSINESS CONCERNS. UNDER SECTION 15 OF THE ACT, THE DETERMINATION AS TO WHETHER A PARTICULAR PROCUREMENT SHOULD BE SET ASIDE FOR SMALL BUSINESS IS ORDINARILY WITHIN THE JURISDICTION OF THE PROCURING AGENCY. SEE B-167131, JULY 23, 1969.

IN THIS REGARD, SECTION 1-1.706-5 OF THE FEDERAL PROCUREMENT REGULATIONS (FPR) PROVIDES IN PART AS FOLLOWS:

"(A) * * * THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR CLASS OF PROCUREMENTS SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION WHERE THERE IS A REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. * * *"

WITH REFERENCE TO WITHDRAWAL OR MODIFICATION OF SET-ASIDES, FPR SEC. 1- 1.706-3 (B) PROVIDES IN PART AS FOLLOWS:

"(B) IF, PRIOR TO THE AWARD OF A CONTRACT INVOLVING AN INDIVIDUAL OR CLASS SET-ASIDE FOR SMALL BUSINESS, THE CONTRACTING OFFICER CONSIDERS THAT PROCUREMENT OF THE SET-ASIDE PORTION FROM A SMALL BUSINESS CONCERN WOULD BE DETRIMENTAL TO THE PUBLIC INTEREST (E.G; BECAUSE OF UNREASONABLE PRICE), THE CONTRACTING OFFICER SHALL WITHDRAW A UNILATERAL SET-ASIDE DETERMINATION. * * *"

THE FOREGOING REGULATION EXPRESSLY RECOGNIZES THE AUTHORITY OF A CONTRACTING OFFICER TO WITHDRAW A SET-ASIDE NOTICE. COMPARE 42 COMP. GEN. 108, 111 (1962). IN RESPECT TO SUCH EXERCISE OF DISCRETION BY CONTRACTING OFFICERS, 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; B-165119, OCTOBER 4, 1968. SEE, ALSO, 45 COMP. GEN. 613, 617 (1966). 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 (1965). SEE B-153264, APRIL 13, 1964, WHERE WE STATED THE STANDARD FOR UPSETTING A DECISION RELATIVE TO THE INCLUSION OF A SMALL BUSINESS SET-ASIDE AS BEING WHETHER OR NOT THERE IS "CONVINCING EVIDENCE OF ARBITRARY OR CAPRICIOUS ACTION." SEE, ALSO, B-165119, SUPRA, AND B-167131, SUPRA.

SINCE THE SMALL BUSINESS SET-ASIDE IN THIS CASE WAS INADVERTENT, WE DO NOT CONSIDER ITS WITHDRAWAL AS BEING "ARBITRARY OR CAPRICIOUS." ALSO, AS IT APPEARS THAT THE PROCUREMENT PROCEDURE FOLLOWED BY THE BPA CONTRACTING OFFICER WAS IN CONSONANCE WITH THE FEDERAL PROCUREMENT REGULATIONS, WE FIND NO LEGAL BASIS TO OBJECT TO THE AWARD OF THE CONTRACT TO TYEE.