B-175834, DEC 19, 1972

B-175834: Dec 19, 1972

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ANY COMPETITIVE ADVANTAGE EXISTING BECAUSE THE SOLICITATION REQUIRES THE USE OF A PRODUCT MANUFACTURED BY ONE OF THE BIDDERS CANNOT BE MITIGATED BY TAKING INTO ACCOUNT THOSE PARTICULAR CIRCUMSTANCES IF THIS ADVANTAGE IS NOT DUE TO A PREFERENCE OR UNFAIR ACTION BY THE GOVERNMENT. THE DETERMINATION OF WHETHER THERE IS A REASONABLE EXPECTATION OF RECEIVING A SUFFICIENT NUMBER OF BIDS OR OFFERS UNDER A TOTAL SMALL BUSINESS SET-ASIDE TO ASSURE REASONABLE PRICES IS WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION AND WILL NOT BE QUESTIONED IN THE ABSENCE OF IMPROPER ACTION BY THE CONTRACTING OFFICER. 45 COMP. CHURCH & BURNS: THIS IS IN REPLY TO YOUR LETTERS DATED JUNE 6. IN THE PERFORMANCE OF WHICH THE USE OF REPLACEMENT AND REPAIR PARTS MANUFACTURED BY THE CARRIER CORPORATION (CARRIER) IS REQUIRED.

B-175834, DEC 19, 1972

BID PROTEST - BIDDER COMPETITIVE ADVANTAGE - SMALL BUSINESS SET-ASIDE DECISION DENYING THE PROTEST OF DALTON SERVICE AGENCY, INC., AGAINST ANY AWARD UNDER AN RFP ISSUED AT KELLY AFB, TEX., FOR MAINTENANCE AND SERVICING OF AIR CONDITIONERS. ANY COMPETITIVE ADVANTAGE EXISTING BECAUSE THE SOLICITATION REQUIRES THE USE OF A PRODUCT MANUFACTURED BY ONE OF THE BIDDERS CANNOT BE MITIGATED BY TAKING INTO ACCOUNT THOSE PARTICULAR CIRCUMSTANCES IF THIS ADVANTAGE IS NOT DUE TO A PREFERENCE OR UNFAIR ACTION BY THE GOVERNMENT. FURTHERMORE, THE DETERMINATION OF WHETHER THERE IS A REASONABLE EXPECTATION OF RECEIVING A SUFFICIENT NUMBER OF BIDS OR OFFERS UNDER A TOTAL SMALL BUSINESS SET-ASIDE TO ASSURE REASONABLE PRICES IS WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION AND WILL NOT BE QUESTIONED IN THE ABSENCE OF IMPROPER ACTION BY THE CONTRACTING OFFICER. 45 COMP. GEN. 228, 230 (1965).

TO KAMPMANN, CHURCH & BURNS:

THIS IS IN REPLY TO YOUR LETTERS DATED JUNE 6, JULY 14, AUGUST 16 AND OCTOBER 10, 1972, ON BEHALF OF DALTON SERVICE AGENCY, INC. (DALTON), PROTESTING ANY AWARD UNDER REQUEST FOR PROPOSALS (RFP) F-41699-72-R 0248, ISSUED BY THE AIR FORCE AT KELLY AIR FORCE BASE, TEXAS.

THE RFP CONTEMPLATES A CONTRACT FOR THE MAINTENANCE AND SERVICING OF SIX CARRIER BRAND AIR CONDITIONERS, IN THE PERFORMANCE OF WHICH THE USE OF REPLACEMENT AND REPAIR PARTS MANUFACTURED BY THE CARRIER CORPORATION (CARRIER) IS REQUIRED. OFFERS ARE TO BE EVALUATED ON THE BASIS OF THE REQUIRED MAINTENANCE SERVICES, AND THE CONTRACTOR IS TO BE SEPARATELY REIMBURSED FOR PARTS AND MATERIALS WITH A UNIT COST IN EXCESS OF $2 PURSUANT TO NEGOTIATIONS AFTER AWARD OF THE SERVICES CONTRACT.

INITIALLY, YOU PROTESTED TO OUR OFFICE THAT CARRIER HAD REFUSED TO SELL SPARE PARTS TO DALTON WHICH PRECLUDED DALTON FROM SUBMITTING A PROPOSAL UNDER THE RFP. IN THIS CONNECTION, WE ADVISED YOU THAT YOUR PROTEST WAS INAPPROPRIATE FOR CONSIDERATION BY OUR OFFICE AND THAT THE MATTER WAS REFERRED TO THE SECRETARY OF THE AIR FORCE FOR APPROPRIATE DISPOSITION PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION 1 111.2(A). TO THE EXTENT THAT YOU AGAIN OBJECT TO THE DIFFICULTIES BEING ENCOUNTERED BY DALTON BECAUSE OF CARRIER'S ALLEGED REFUSAL TO SELL YOU ITS REPAIR PARTS, WE MUST AGAIN ADVISE YOU THAT SUCH ASPECT OF YOUR PROTEST IS INAPPROPRIATE FOR OUR CONSIDERATION.

IN YOUR ABOVE-REFERENCED LETTERS YOU FURTHER PROTEST THAT THE SOLICITATION IS DEFECTIVE IN THAT THE MANUFACTURER OF THE REQUIRED REPLACEMENT PARTS IS BEING PERMITTED TO COMPETE ON A BASIS DIFFERENT FROM ALL OTHER OFFERORS. SPECIFICALLY, YOU ARGUE THAT CARRIER ENJOYS AN UNFAIR ADVANTAGE SINCE IT WILL MAKE A PROFIT ON THE MAINTENANCE SERVICES AS WELL AS ON THE REPAIR PARTS, WHILE OTHER OFFERORS WOULD NOT SIMILARLY PROFIT FROM THE FURNISHING OF CARRIER REPAIR PARTS. YOU NOTE THAT CARRIER COULD LOWER ITS OFFER FOR THE MAINTENANCE SERVICES AND STILL PROFIT FROM FURNISHING THE PARTS AND MATERIALS. MOREOVER, YOU BELIEVE THE SOLICITATION, AS WRITTEN, WOULD ALLOW THE MANUFACTURER TO ESTABLISH EXCESSIVE PRICES FOR ITS REPAIR PARTS SHOULD A CONTRACTOR OTHER THAN CARRIER BE AWARDED THE SERVICE CONTRACT. YOU REQUEST THAT THE SOLICITATION BE AMENDED TO PRECLUDE CARRIER FROM PROFITING FROM THE MANUFACTURE AND SUPPLYING OF ITS OWN MATERIALS AND PARTS.

INASMUCH AS THE AIR FORCE PROPOSES TO AWARD A CONTRACT TO THE LOW RESPONSIBLE OFFEROR BASED SUBSTANTIALLY ON LABOR ONLY, AND SINCE THE PRICE OF PARTS AND MATERIALS WITH A UNIT COST IN EXCESS OF $2 WILL NOT BE AN ELEMENT FOR INCLUSION IN THE OFFERS OR FOR EVALUATION, WE MUST CONCLUDE THAT ANY COMPETITIVE ADVANTAGE FAVORING CARRIER BY REASONS OF THAT FIRM DESIRING A PROFIT FROM ITS PARTS, WOULD NOT BE AS A RESULT OF PREFERENCE OR UNFAIR ACTION BY THE GOVERNMENT. FOR THE GOVERNMENT TO REQUIRE THAT CARRIER FORGO ANY PROFIT ON MATERIALS MANUFACTURED BY THAT COMPANY, AND USED IN THE PERFORMANCE OF THE SERVICE CONTRACT, IN ORDER FOR CARRIER TO BE ELIGIBLE FOR THE AWARD WOULD, IN OUR VIEW, BE PREJUDICIAL TO CARRIER. IN THIS CONNECTION, IT IS THE GOVERNMENT'S ESTABLISHED POLICY IN ITS PROCUREMENTS TO ALLOW MANUFACTURERS A FAIR AND REASONABLE PROFIT ON THEIR PRODUCTS. SEE PARAGRAPH 3-808 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR). ALSO, WE HAVE HELD THAT THERE IS NO REQUIREMENT FOR EQUALIZING COMPETITION (EVEN IF IT COULD BE EFFECTED) BY TAKING INTO CONSIDERATION THOSE TYPES OF COMPETITIVE ADVANTAGES WHICH MAY ACCRUE TO A GIVEN FIRM BY REASON OF ITS OWN PARTICULAR CIRCUMSTANCES, AND WHICH ARE NOT DIRECTLY PROVIDED BY THE GOVERNMENT. B-175496, NOVEMBER 10, 1972.

CONCERNING YOUR SUGGESTION THAT CARRIER COULD ESTABLISH EXCESSIVE PRICES FOR ANY REPAIR PARTS NEEDED IN PERFORMANCE OF THE CONTRACT BY ANOTHER FIRM, WE BELIEVE ADEQUATE SAFEGUARDS AGAINST SUCH A POSSIBILITY ARE PROVIDED BY 15 U.S.C. 13(A) WHICH MAKES IT UNLAWFUL FOR A FIRM TO DISCRIMINATE IN THE PRICES OF ITS COMMODITIES BETWEEN DIFFERENT PURCHASERS.

YOU ALSO OBJECT TO THE GOVERNMENT'S FAILURE TO RESTRICT THIS PROCUREMENT FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESSES AS YOU ALLEGE, HAS BEEN DONE FOR MAINTENANCE SERVICES ON EQUIPMENT MANUFACTURED BY OTHER CORPORATIONS.

IN THIS CONNECTION THE CONTRACTING OFFICER REPORTS THAT HE HAD NEVER BEFORE RECEIVED A RESPONSIBLE OFFER ON THIS REQUIREMENT FROM ANY FIRM OTHER THAN CARRIER. THUS, IT WAS DECIDED TO CONTINUE ON AN UNRESTRICTED BASIS UNTIL OFFERS WERE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS AT REASONABLE PRICES TO JUSTIFY SETTING THE PROCUREMENTS ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION.

WHETHER A PARTICULAR PROCUREMENT SHOULD BE SET ASIDE FOR SMALL BUSINESS CONCERNS IS A MATTER WITHIN THE JURISDICTION OF THE PROCURING AGENCY AND THE SMALL BUSINESS ADMINISTRATION (SBA). 15 U.S.C. 644. WITH RESPECT TO TOTAL SET-ASIDES, ASPR 1-706.5(A)(1) PROVIDES AS FOLLOWS:

"1-706.5 TOTAL SET-ASIDES.

(A)(1) SUBJECT TO THE ORDER OF PROCEDURE ESTABLISHED IN 1-706.1(A), 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 OFFERS 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."

WE HAVE HELD THAT THE DETERMINATION OF WHETHER THERE IS A REASONABLE EXPECTATION OF RECEIVING A SUFFICIENT NUMBER OF BIDS OR OFFERS UNDER A TOTAL SET-ASIDE TO ASSURE REASONABLE PRICES IS WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION AND WILL NOT ORDINARILY BE QUESTIONED BY OUR OFFICE. 45 COMP. GEN. 228, 230 (1965). IN THE CIRCUMSTANCES, WE ARE UNABLE TO CONCLUDE THAT THE CONTRACTING OFFICER'S ACTION WAS IMPROPER, NOR ARE WE AWARE OF ANY LEGAL BASIS FOR REQUIRING THE CONTRACTING OFFICER TO RECONSIDER AFTER RECEIPT OF OFFERS HIS DETERMINATION NOT TO RESTRICT THE PROCUREMENT TO SMALL BUSINESS CONCERNS.

FOR THE FOREGOING REASONS, YOUR PROTEST IS DENIED.