B-182783, JAN 24, 1975

B-182783, JAN 24, 1975

AGENCY'S AWARD OF CONTRACT IMMEDIATELY UPON AGENCY BEING NOTIFIED OF SBA DISTRICT DIRECTOR'S SIZE DETERMINATION THAT QUESTIONED BIDDER QUALIFIED AS SMALL BUSINESS CONCERN WAS PROPER UNDER APPLICABLE REGULATION, EVEN THOUGH REGULATION PROVIDES FOR APPEAL OF SUCH DETERMINATION, AS CONTRACTING OFFICER IS NOT REQUIRED TO DELAY AWARD PENDING PROSECUTION OF POTENTIAL APPEAL. HOWEVER, SBA IS ADVISED OF GAO VIEW THAT NOTIFICATION OF SUCH DETERMINATION SHOULD BE MADE SIMULTANEOUSLY TO INTERESTED PARTIES.

COTTRELL ENGINEERING CORPORATION:

COTTRELL ENGINEERING CORPORATION (COTTRELL) PROTESTED THE ACTION OF THE DISTRICT ENGINEER IN AWARDING A CONTRACT TO K.P. & B. COMPANY (K.P. & B.), UNDER INVITATION FOR BIDS (IFB) NO. DACW31-75-B-0013, A SMALL BUSINESS SET -ASIDE, ISSUED BY THE U.S. ARMY ENGINEER DISTRICT, BALTIMORE, MARYLAND. COTTRELL CONTENDS THAT THE DISTRICT ENGINEER, IN AWARDING THE CONTRACT IMMEDIATELY UPON BEING NOTIFIED BY THE SMALL BUSINESS ADMINISTRATION (SBA) THAT K.P. & B. QUALIFIED AS A SMALL BUSINESS CONCERN, PRECLUDED COTTRELL FROM EXERCISING ITS STATUTORY RIGHT TO APPEAL THE SIZE DETERMINATION.

A REVIEW OF THE RECORD BEFORE OUR OFFICE SHOWS THAT ON OCTOBER 31, 1974, THE DAY AFTER BID OPENING, COTTRELL PROTESTED TO THE DISTRICT ENGINEER THE SIZE STATUS OF K.P. & B., THE LOW BIDDER. THIS PROTEST WAS FORWARDED TO THE NEW YORK REGIONAL OFFICE OF THE SMALL BUSINESS ADMINISTRATION FOR DETERMINATION ON NOVEMBER 5, 1974. ON NOVEMBER 26, 1974, THE SBA TELEPHONED THE DISTRICT ENGINEER TO INFORM HIM OF ITS DETERMINATION THAT K.P. & B. QUALIFIED AS A SMALL BUSINESS CONCERN FOR PURPOSES OF THE INSTANT PROCUREMENT AND ON THE BASIS OF THIS DETERMINATION, AND THE FURTHER DETERMINATION THAT COMMENCEMENT OF PERFORMANCE WAS URGENT, THE CONTRACT WAS AWARDED TO K.P. & B. THE SAME DAY. HOWEVER, THE PROTESTER WAS NOT INFORMED OF THE SBA'S DETERMINATION UNTIL ITS RECEIPT OF THE SBA'S LETTER OF NOVEMBER 26 ON NOVEMBER 29, 1974. THIS DETERMINATION WAS TIMELY APPEALED BY COTTRELL TO THE SBA SIZE APPEALS BOARD ON DECEMBER 3, 1974. THAT SAME DAY COTTRELL PROTESTED TO OUR OFFICE THE ACTION OF THE DISTRICT ENGINEER IN AWARDING THE CONTRACT PRIOR TO ITS RECEIVING NOTIFICATION OF THE SBA'S DETERMINATION AND THUS NOT AFFORDING COTTRELL THE OPPORTUNITY TO PROTEST THE DETERMINATION PRIOR TO AWARD.

PURSUANT TO 15 U.S.C. SEC. 637(B)(6) (1970) THE SBA IS EMPOWERED TO DETERMINE A BUSINESS CONCERN'S SIZE STATUS FOR PROCUREMENT PURPOSES. OFFICES OF THE GOVERNMENT HAVING PROCUREMENT POWERS MUST ACCEPT AS CONCLUSIVE ANY DETERMINATION REACHED BY SBA AS TO WHICH CONCERNS ARE TO BE DESIGNATED AS SMALL BUSINESS. IN DISCHARGE OF THIS RESPONSIBILITY, SBA HAS PROMULGATED REGULATIONS WHICH HAVE THE FORCE AND EFFECT OF LAW (OTIS STEEL PRODUCTS CORPORATION V. UNITED STATES, 161 CT. CL. 694 (1963)), FOUND AT PART 121 OF CHAPTER I OF THE CODE OF FEDERAL REGULATIONS (C.F.R.), TITLE 13 (1974). SECTION 121.3-4 (1974), "SIZE DETERMINATIONS," PROVIDES THAT:

"ORIGINAL SIZE DETERMINATIONS SHALL BE MADE BY THE REGIONAL DIRECTOR, OR HIS DELEGATEE, SERVING THE REGION IN WHICH THE PRINCIPAL OFFICE OF THE CONCERN (NOT INCLUDING ITS AFFILIATES) WHOSE SIZE IS IN QUESTION IS LOCATED ***."

SUCH DETERMINATIONS ARE FINAL UNLESS APPEALED IN ACCORDANCE WITH SEC 121.3-6 (1974). SECTION 121.3-6(A) (1974) PROVIDES THAT THE SIZE APPEALS BOARD SHALL REVIEW APPEALS FROM SIZE DETERMINATIONS MADE PURSUANT TO SEC. 121.3-4 (1974) AND SHALL MAKE FINAL DECISIONS AS TO WHETHER DETERMINATIONS SHOULD BE AFFIRMED, REVERSED, OR MODIFIED.

ARMED SERVICES PROCUREMENT REGULATION (ASPR) SEC. 1-703(B)(3) (1974) ED.) PROVIDES THAT THE SBA DISTRICT DIRECTOR WILL DETERMINE THE SMALL BUSINESS STATUS OF A QUESTIONED BIDDER AND AWARD MAY BE MADE ON THE BASIS OF THAT DETERMINATION. THIS DETERMINATION IS ACCORDED FINALITY UNLESS APPEALED. IF AN AWARD IS MADE PRIOR TO THE TIME THE CONTRACTING OFFICER RECEIVES NOTICE OF AN APPEAL, THE CONTRACT IS PRESUMED TO BE VALID. ASPR 1-703(B)(3) (1974 ED.). FURTHERMORE, WHERE A CONTRACTING OFFICER RECEIVES NOTIFICATION OF AN APPEAL PRIOR TO AWARD, HE IS NOT REQUIRED TO SUSPEND PROCUREMENT ACTION WHERE HE DETERMINES IN WRITING, AS HERE, THAT THE PROCUREMENT IS URGENT. ASPR SEC. 1-703(B)(3)(IV) (1974 ED.). IN OUR VIEW, THESE PROVISIONS, AS WELL AS THE REGULATORY SCHEME AS A WHOLE, IS DESIGNED TO FACILITATE ORDERLY CONDUCT OF GOVERNMENT PROCUREMENT WHERE SIZE QUESTIONS ARE INVOLVED. CONSIDERING THAT SBA ALONE CAN DETERMINE SMALL BUSINESS STATUS, THERE IS A NEED FOR GOVERNMENT AGENCIES TO BE ABLE TO RELY UPON SBA ACTION AT EACH STAGE OF THE PROCUREMENT PROCESS. CLEARLY, THE RIGHT OF APPEAL FROM A DISTRICT DIRECTOR'S DETERMINATION EXISTS AS TO ALL INTERESTED CONCERNS. HOWEVER, THE EXISTENCE OF THAT RIGHT, OR EVEN THE EXERCISE OF AN APPEAL, DOES NOT NEGATE THE VALIDITY OF A SIZE DETERMINATION BY AN SBA DISTRICT DIRECTOR. THE APPEAL IS SIMPLY NOTICE THAT THE INTERESTED CONCERN DOES NOT AGREE WITH THE SIZE DETERMINATION. UNTIL THE DISTRICT DIRECTOR'S DETERMINATION IS REVERSED OR MODIFIED AS PROVIDED FOR IN THE REGULATIONS, IT REMAINS IN FULL FORCE AND EFFECT INSOFAR AS THE SIZE OF A BIDDER IS CONCERNED, AND THE CONTRACTING OFFICER IS AUTHORIZED TO PROCEED WITH THE PROCUREMENT AS OUTLINED ABOVE.

THE ABOVE REGULATIONS CLEARLY ESTABLISH THE AUTHORITY OF THE CONTRACTING OFFICER TO AWARD A CONTRACT TO A BIDDER IMMEDIATELY UPON BEING NOTIFIED BY THE SBA THAT THE BIDDER IN QUESTION HAS BEEN DETERMINED TO BE A SMALL BUSINESS CONCERN. WHILE THE REGULATIONS REQUIRE THE PROTESTER BE NOTIFIED OF THE SBA DETERMINATION, THERE IS NO PROHIBITION AGAINST A CONTRACTING OFFICER AWARDING A VALID CONTRACT IMMEDIATELY UPON BEING NOTIFIED OF THE SIZE STATUS OF A QUESTIONED BIDDER. FURTHERMORE, ALTHOUGH THE REGULATIONS PROVIDE FOR AN APPEAL OF AN SBA SIZE DETERMINATION, ASPR DOES NOT REQUIRE A CONTRACTING OFFICER TO DELAY AWARDING A CONTRACT PENDING THE POSSIBILITY OF AN APPEAL, AND THE REGULATION SPECIFICALLY STATES THAT AWARD MAY BE MADE ON THE BASIS OF AN URGENCY DETERMINATION EVEN THOUGH THE CONTRACTING OFFICER HAS RECEIVED NOTICE OF AN APPEAL. SINCE AWARD WAS MADE IMMEDIATELY UPON THE CONTRACTING OFFICER RECEIVING NOTIFICATION OF SBA'S DECISION AND PRIOR TO ANY APPEAL, IT WAS CLEARLY VALID. THEREFORE, WE DO NOT BELIEVE THE QUESTION COTTRELL HAS RAISED AS TO THE VALIDITY OF THE URGENCY DETERMINATION IS RELEVANT.

ACCORDINGLY, THE PROTEST IS DENIED.

ALTHOUGH WE HAVE CONCLUDED THAT THE AWARD WAS VALID, WE BELIEVE THAT THE FACTS OF THIS CASE REVEAL AN INEQUITY IN THE SBA NOTIFICATION PROCEDURES. WE NOTE THAT THE SBA FAILED TO SIMULTANEOUSLY NOTIFY THE AGENCY AND THE PROTESTER OF ITS SIZE DETERMINATION. THEREFORE, WE ARE RECOMMENDING TO THE SBA ADMINISTRATOR THAT IN THE FUTURE SIMULTANEOUS NOTIFICATION BE GIVEN TO THE INTERESTED PARTIES.