B-173166(1), B-173166(2), B-173166(3), NOV 29, 1971

B-173166(1),B-173166(2),B-173166(3): Nov 29, 1971

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PROTESTANT CONTENDS PROCUREMENTS SHOULD HAVE BEEN 100% SMALL BUSINESS SET ASIDES. THE DETERMINATION OF WHETHER A PROCUREMENT SHOULD BE SET ASIDE IS A MATTER OF ADMINISTRATIVE DISCRETION. UNDER THE CIRCUMSTANCES - THREE PREVIOUS SMALL BUSINESS SET ASIDES WITH ONLY ONE OR TWO RESPONSES - IT CANNOT BE SAID THAT THIS DISCRETION WAS APPLIED IN AN IMPROPER MANNER IN MAKING THE FUTURE SOLICITATION UNRESTRICTED. TO LINCOLN & STEWART: REFERENCE IS MADE TO YOUR LETTER OF JUNE 2. WHICH YOU STATED IS A WHOLLY OWNED SUBSIDIARY OF GENERAL MILLS. THEREFORE IS NOT QUALIFIED FOR CONSIDERATION IN A PROCUREMENT WHICH IS SET ASIDE FOR SMALL BUSINESS CONCERNS. YOU ALLEGE THAT THIS PROCUREMENT SHOULD HAVE BEEN SET ASIDE 100 PERCENT FOR SMALL BUSINESS.

B-173166(1), B-173166(2), B-173166(3), NOV 29, 1971

BID PROTEST - SMALL BUSINESS SET ASIDE - FAILURE TO RESPOND DECISION DENYING PROTESTS OF OSWALD SCHICKER MANUFACTURING COMPANY, INC. AGAINST AWARD OF CONTRACTS UNDER RFP'S ISSUED BY THE DEFENSE PERSONNEL SUPPORT CENTER, PHILADELPHIA, PA., TO ART EMBROIDERY COMPANY. PROTESTANT CONTENDS PROCUREMENTS SHOULD HAVE BEEN 100% SMALL BUSINESS SET ASIDES. THE DETERMINATION OF WHETHER A PROCUREMENT SHOULD BE SET ASIDE IS A MATTER OF ADMINISTRATIVE DISCRETION. UNDER THE CIRCUMSTANCES - THREE PREVIOUS SMALL BUSINESS SET ASIDES WITH ONLY ONE OR TWO RESPONSES - IT CANNOT BE SAID THAT THIS DISCRETION WAS APPLIED IN AN IMPROPER MANNER IN MAKING THE FUTURE SOLICITATION UNRESTRICTED.

TO LINCOLN & STEWART:

REFERENCE IS MADE TO YOUR LETTER OF JUNE 2, 1971, PROTESTING ON BEHALF OF THE OSWALD SCHICKER MANUFACTURING CO., INC., PARAMUS, NEW JERSEY (SCHICKER) THE AWARD OF A CONTRACT UNDER REQUEST FOR PROPOSAL (RFP) DSA 100-71-R-1300 ISSUED BY THE DEFENSE PERSONNEL SUPPORT CENTER, PHILADELPHIA, PENNSYLVANIA (CENTER). YOU SPECIFICALLY PROTESTED ANY AWARD TO THE ART EMBROIDERY CO. (ART) OF WEST NEW YORK, NEW JERSEY, WHICH YOU STATED IS A WHOLLY OWNED SUBSIDIARY OF GENERAL MILLS, INC., AND THEREFORE IS NOT QUALIFIED FOR CONSIDERATION IN A PROCUREMENT WHICH IS SET ASIDE FOR SMALL BUSINESS CONCERNS.

YOU FURTHER ADVISE THAT PAST PROCUREMENT OF INSIGNIA HAS BEEN UNIFORMLY SET ASIDE FOR SMALL BUSINESS CONCERNS, AND THAT THE SMALL BUSINESS REPRESENTATIVE AT THE CENTER HAS KNOWLEDGE OF SUFFICIENT CAPACITY IN THE SMALL BUSINESS COMMUNITY TO MEET THE REQUIRED DELIVERY SCHEDULES. IN VIEW THEREOF, YOU ALLEGE THAT THIS PROCUREMENT SHOULD HAVE BEEN SET ASIDE 100 PERCENT FOR SMALL BUSINESS, AND THAT FAILURE TO DO SO WITHOUT NOTIFYING THE SMALL BUSINESS ADMINISTRATION AND GIVING IT AN OPPORTUNITY TO PROTECT THE INTERESTS OF SMALL BUSINESS SUPPLIERS, CONSTITUTES AN ARBITRARY VIOLATION OF THE LETTER AND INTENT OF GOVERNMENT PROCUREMENT REGULATIONS.

WE HAVE RECEIVED FROM THE DEFENSE SUPPLY AGENCY, WHICH EXERCISES SUPERVISION OVER THE CENTER FOR THE DEPARTMENT OF DEFENSE, A REPORT OF THE CIRCUMSTANCES INVOLVED IN THIS RFP. THIS REPORT SHOWS THAT FOUR PREVIOUS SOLICITATIONS FOR SIMILAR KINDS OF INSIGNIA WERE ISSUED BY THE CENTER FROM AUGUST 1970 THROUGH MAY 1971. TWO OF THESE SOLICITATIONS HAD TO BE CANCELLED WITHOUT AWARD. IN THE ONE INSTANCE ART, ONE OF ONLY TWO BIDDERS SUBMITTING PRICES, HAD CEASED TO BE SMALL BUSINESS AND, SINCE THE SOLICITATIONS WERE 100 PERCENT SET-ASIDES FOR SMALL BUSINESS, AN AWARD COULD NOT BE MADE BECAUSE THE OTHER BIDDER, WHO WAS THE ONLY SMALL BUSINESS BIDDER, DECLINED TO EXTEND HIS BID ACCEPTANCE PERIOD. IN THE SECOND INSTANCE ART WAS THE ONLY BIDDER, AND AN AWARD COULD NOT BE MADE BECAUSE ART WAS NO LONGER SMALL BUSINESS.

IN THE FIRST OF THE TWO SOLICITATIONS WHICH RESULTED IN AWARD, ART WAS STILL SMALL BUSINESS AND RECEIVED THE AWARD BASED ON A LOWER PRICE THAN THAT OF THE OTHER TWO BIDDERS. THE SECOND SOLICITATION WAS ON AN UNRESTRICTED BASIS, WITH FOUR FIRMS SOLICITED AND ONLY TWO RESPONDING. AWARD AGAIN WAS MADE TO ART AS THE LOW BIDDER.

OF THE FOUR ABOVE-CITED PROCUREMENT EFFORTS, THE FIRST THREE WERE SET ASIDE 100 PERCENT FOR SMALL BUSINESS, AND THE ENSUING COMPETITION BROUGHT RESPONSES FROM ONLY THREE SOURCES ON THE FIRST SOLICITATION, TWO SOURCES ON THE SECOND AND ONLY A SINGLE SOURCE ON THE THIRD. THE SECOND AND THIRD RESULTED IN CANCELLATION AS DESCRIBED ABOVE, AND BECAME THE CAUSE OF FURTHER REVIEW BY THE CONTRACTING OFFICER AND HIS ADVISORS, INCLUDING THE SMALL BUSINESS SPECIALIST. THEREAFTER IT WAS JOINTLY DECIDED BY THE CONTRACTING OFFICER AND THE SMALL BUSINESS SPECIALIST THAT, TO MEET THE URGENT SUPPLY REQUIREMENT AND TO OBTAIN COMPETITION, AN UNRESTRICTED PROCUREMENT ACTION WAS APPROPRIATE. RFP DSA 100-71-R-1300 WAS THEN ISSUED ON MAY 17, 1971.

YOUR LETTER OF JUNE 1 TO THE CONTRACTING OFFICER CONCERNING PAST PRACTICES WITH REGARD TO SMALL BUSINESS SET-ASIDES WAS ANSWERED ON JUNE 9 AND RECITED THE GOVERNMENT'S DIFFICULTY IN SATISFYING ITS REQUIREMENTS THROUGH SMALL BUSINESS SOURCES. ALSO DISCUSSED WAS THE DECISION THAT A LABOR SURPLUS AREA SET-ASIDE OF 50 PERCENT OF THE REQUIREMENT WAS APPROPRIATE, AND THAT SUCH ACTION TAKES PRECEDENCE OVER SMALL BUSINESS SET -ASIDES. THEREAFTER AN AMENDMENT SUBSTITUTING THE 50 PERCENT LABOR SURPLUS AREA SET-ASIDE FOR THE UNRESTRICTED PROCUREMENT WAS ISSUED ON JUNE 10, 1971.

THE CIRCUMSTANCES UNDER WHICH A PROCUREMENT IS TO BE SET ASIDE FOR SMALL BUSINESS ARE SET OUT IN ASPR 1-706.5 AS FOLLOWS:

"1-706.5 TOTAL SET-ASIDES.

(A)(1) SUBJECT TO ANY APPLICABLE PREFERENCE FOR LABOR SURPLUS AREA SET- ASIDES AS PROVIDED IN 1-803(A)(II), THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR A CLASS OF PROCUREMENTS, INCLUDING BUT NOT LIMITED TO CONTRACTS FOR MAINTENANCE, REPAIR, AND CONSTRUCTION, SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION (SEE 1-701.1) IF THE CONTRACTING OFFICER DETERMINES THAT THERE IS 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. TOTAL SET-ASIDES SHALL NOT BE MADE UNLESS SUCH A REASONABLE EXPECTATION EXISTS. (BUT SEE 1-706.6 AS TO PARTIAL SET-ASIDES.) ALTHOUGH PAST PROCUREMENT HISTORY OF THE ITEM OR SIMILAR ITEMS IS ALWAYS IMPORTANT, IT IS NOT THE ONLY FACTOR WHICH SHOULD BE CONSIDERED IN DETERMINING WHETHER A REASONABLE EXPECTATION EXISTS."

SIMILAR INTRODUCTORY LANGUAGE OCCURS IN ASPR 1-706.6, WHICH READS IN PERTINENT PART AS FOLLOWS:

"1-706.6 PARTIAL SET-ASIDES.

(A) SUBJECT TO ANY APPLICABLE PREFERENCE FOR LABOR SURPLUS AREA SET ASIDES AS PROVIDED IN 1-803(A)(II), A PORTION OF A PROCUREMENT, *** SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION (SEE 1 706.1) WHERE:

(III) ONE OR MORE SMALL BUSINESS CONCERNS ARE EXPECTED TO HAVE THE TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY TO FURNISH A SEVERABLE PORTION OF THE PROCUREMENT AT A REASONABLE PRICE, EXCEPT THAT A PARTIAL SET-ASIDE SHALL NOT BE MADE IF THERE IS A REASONABLE EXPECTATION THAT ONLY TWO CONCERNS (ONE LARGE AND ONE SMALL) WITH TECHNICAL COMPETENCY AND PRODUCTIVE CAPACITY WILL RESPOND WITH BIDS OR PROPOSALS. BEFORE REACHING THIS CONCLUSION THE CONTRACTING OFFICER SHALL CONSULT WITH THE SMALL BUSINESS SPECIALIST AND MAY MAKE ADVANCED INQUIRIES TO DETERMINE THE NUMBER OF INTERESTED CONCERNS. ANY DEVIATION FROM THIS PARTIAL SET ASIDE PROCEDURE MUST BE APPROVED BY THE HEAD OF THE PROCURING ACTIVITY ON A CASE -BY-CASE BASIS."

IN VIEW OF THE PAST HISTORY OF PROCUREMENT OF THESE ITEMS, AS SET OUT ABOVE, AND THE FAILURE OF THE SMALL BUSINESS COMMUNITY TO RESPOND TO THE EXTENT OF DEMONSTRATING AN ADEQUATE NUMBER OF INTERESTED SOURCES TO PROVIDE A REASONABLE DEGREE OF COMPETITION, IT IS OUR OPINION THERE WAS AMPLE JUSTIFICATION FOR THE CONTRACTING OFFICER'S DECISION NOT TO SET ASIDE THE INSTANT PROCUREMENT FOR SMALL BUSINESS.

IN 50 COMP. GEN. 383 (1970) WE SAID "THE DETERMINATION WHETHER A PROCUREMENT SHOULD BE SET ASIDE IS A MATTER WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION." (SEE ALSO 45 COMP. GEN. 228 (1965) CITED THEREIN.) IN THE INSTANT CASE, IN VIEW OF THE HISTORY OF PRIOR PROCUREMENTS AND THE CONCURRENCE BY THE SMALL BUSINESS SPECIALIST IN THE DECISION TO PROCURE ON AN UNRESTRICTED BASIS, WE CANNOT CONCLUDE THAT THE DISCRETION OF THE AGENCY HAS EITHER BEEN ABUSED OR APPLIED IN AN IMPROPER OR UNREASONABLE MANNER. IT IS THEREFORE OUR OPINION THAT YOUR PROTEST UNDER RFP DSA 100-71-R-1300 IS WITHOUT MERIT AND MUST BE DENIED.

REFERENCE IS ALSO MADE TO YOUR LETTER OF JUNE 16, 1971, BY WHICH YOU PROTESTED, IN BEHALF OF SCHICKER, THE PROCUREMENT BEING UNDERTAKEN UNDER IFB DSA 100-71-B-1301. THE FACTS IN THIS CASE (B-173166(2)) VARY SLIGHTLY IN THAT THE ORIGINAL IFB CONTEMPLATED A 100 PERCENT SMALL BUSINESS SET- ASIDE WHICH ON FURTHER REVIEW WAS REVISED TO ELIMINATE THE SMALL BUSINESS SET-ASIDE AND TO PROVIDE FOR A LABOR SURPLUS AREA SET ASIDE OF ABOUT 34 PERCENT. THE BALANCE OF THE PROCUREMENT WAS UNRESTRICTED IN CONFORMANCE WITH ASPR 1-804.2, WHICH SPECIFIES THAT "THE PROCUREMENT SHALL BE DIVIDED INTO A NON-SET-ASIDE PORTION AND A SET-ASIDE PORTION, EACH OF WHICH SHALL BE NOT LESS THAN AN ECONOMIC PRODUCTION RUN OR REASONABLE LOT."

YOU PROTEST SUCH ACTION ON THE GROUND THAT THERE IS AMPLE COMPETITION BETWEEN THE SMALL BUSINESS CONCERNS MANUFACTURING THE ITEMS IN QUESTION, AND THAT THERE IS OPEN CAPACITY WITH SUCH CONCERNS TO MEET DELIVERY REQUIREMENTS AT COMPETITIVE PRICES.

DSA HAS ADVISED THAT THE 100 PERCENT SMALL BUSINESS SET-ASIDE DETERMINATION EXECUTED BY THE SPECIAL ASSISTANT FOR SMALL BUSINESS AND ECONOMICAL UTILIZATION ON MAY 7, 1971, INDICATED A DETERMINATION THAT THE PROCUREMENT WAS TOO SMALL FOR SEVERANCE INTO TWO ECONOMIC PRODUCTION RUNS. HAD THIS NOT BEEN THE CASE, A PARTIAL SET-ASIDE FOR SURPLUS LABOR AREA CONCERNS WOULD HAVE BEEN APPROPRIATE UNDER THE PROVISIONS OF ASPR 1- 803(A)(II), WHICH READS AS FOLLOWS:

"(II) WHERE APPROPRIATE, PROCUREMENT SHALL BE MADE FROM LABOR SURPLUS AREA CONCERNS BY PARTIAL SET-ASIDE PROCEDURES, IN ACCORDANCE WITH 1-804, AND SUCH SET-ASIDES SHALL BE GIVEN PREFERENCE OVER ANY SMALL BUSINESS SET- ASIDE (BUT NO TOTAL SET-ASIDE SHALL BE MADE FOR LABOR SURPLUS AREA CONCERNS);"

UPON FURTHER CONSIDERATION, HOWEVER, IT WAS DETERMINED THAT THE QUANTITIES AND DESTINATIONS MADE THE PROCUREMENT SUSCEPTIBLE TO A LABOR SURPLUS AREA DETERMINATION. IN VIEW THEREOF, AND OF THE PREFERENCE FOR LABOR SURPLUS AREA SET-ASIDES EXPRESSED IN ASPR 1-803(A)(II), THE SMALL BUSINESS SET-ASIDE WAS DISSOLVED AND THE IFB WAS AMENDED TO PROVIDE FOR A PARTIAL LABOR SURPLUS AREA SET-ASIDE OF APPROXIMATELY 34 PERCENT.

IN VIEW OF THE REGULATORY PROVISIONS CITED ABOVE, AND THE FOREGOING EXPLANATION OF THE CHANGE IN THE IFB, WE CANNOT CONCLUDE THAT SUCH CHANGE WAS IMPROPER, AND YOUR PROTEST UNDER IFB DSA 100-71-B-1301 MUST ALSO BE DENIED.

YOUR THIRD BID PROTEST (B-173166(3)) IN BEHALF OF SCHICKER WAS FILED ON JULY 21, 1971, AND CONCERNS IFB DSA 100-71-B-1518. THE FACTS AND CIRCUMSTANCES HERE INVOLVED WERE SUBSTANTIALLY THE SAME AS DISCUSSED IN THE PRECEDING PARAGRAPHS RELATING TO RFP DSA 100-71-R-1300. HOWEVER, YOUR PROTEST SEEKS TO ESTABLISH ALTERNATE GROUNDS AS FOLLOWS:

"(A) IN FAILING TO MAKE A 100% SMALL BUSINESS SET-ASIDE FOR THE SUBJECT PROCUREMENT AND (B) ALTERNATIVELY IN FAILING TO MAKE A 50% SMALL BUSINESS SET-ASIDE CONGRUENT WITH THE 50% LABOR SURPLUS AREA SET ASIDE."

WITH REGARD TO ALTERNATIVE (A) QUOTED ABOVE, THE HIGHER PRIORITY LABOR SURPLUS AREA SET-ASIDE MUST PREVAIL, AS DISCUSSED EARLIER. WITH REGARD TO ALTERNATIVE (B), THAT PART OF ASPR 1-803(A)(II), QUOTED ABOVE, WHICH ADVISES THAT NO TOTAL SET-ASIDE SHALL BE MADE FOR LABOR SURPLUS AREA CONCERNS IS BASED UPON, AND INTENDED TO IMPLEMENT, THAT PORTION OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT WHICH PROHIBITS PAYMENT OF A PRICE DIFFERENTIAL ON CONTRACTS MADE FOR THE PURPOSE OF RELIEVING ECONOMIC DISLOCATIONS. SEE SECTION 824 OF THE DEPARTMENT OF DEFENSE APPROPRIATION ACT FOR FISCAL YEAR 1971, 84 STAT. 2034. THIS PROVISION HAS BEEN INTERPRETED TO REQUIRE UNRESTRICTED COMPETITION ON ONE PORTION OF A PROCUREMENT IN ORDER TO ASSURE THAT A PRICE DIFFERENTIAL IS NOT INCLUDED IN THE PRICE AT WHICH THE SET-ASIDE PORTION IS AWARDED TO A LABOR SURPLUS AREA CONCERN. SEE 40 COMP. GEN. 489; 41 COMP. GEN. 121. IN VIEW THEREOF, IT IS APPARENT THAT YOUR SUGGESTED PROCEDURE, UNDER WHICH A PORTION OF THE PROCUREMENT WOULD BE AWARDED AT A PRICE RESULTING FROM THE RESTRICTED COMPETITION OBTAINED UNDER A SMALL BUSINESS SET-ASIDE, WOULD OFFER NO ASSURANCE THAT A DIFFERENTIAL WAS NOT BEING PAID TO AWARD THE SURPLUS LABOR AREA SET ASIDE PORTION TO A SURPLUS LABOR AREA CONCERN.

ACCORDINGLY, YOUR PROTEST UNDER IFB DSA 100-71-B-1518 MUST ALSO BE DENIED.