B-208312.4, JUN 2, 1983

B-208312.4, JUN 2, 1983

PRECIS-UNAVAILABLE

THE HONORABLE DONALD E. SOWLE ADMINISTRATOR OFFICE OF FEDERAL PROCUREMENT POLICY:

THIS IS IN RESPONSE TO YOUR LETTER OF APRIL 19, 1983, FORWARDING A LETTER OF MARCH 17, 1983, FROM THE DEPARTMENT OF HEALTH AND HUMAN SERVICES (HHS) FOR OUR CONSIDERATION.

THE HHS LETTER OBJECTS TO THE SMALL BUSINESS ADMINISTRATION'S (SBA) ISSUANCE OF A CERTIFICATE OF COMPETENCY (COC) TO A SMALL BUSINESS CONCERN NOTWITHSTANDING THE FACT THAT THE CONCERN HAD FAILED TO OBTAIN A LICENSE WHICH THE SOLICITATION HAD EXPRESSLY REQUIRED BIDDERS TO OBTAIN PRIOR TO BID OPENING. HHS ARGUES THAT SBA MUST APPLY SUCH DEFINITIVE RESPONSIBILITY CRITERIA IN ARRIVING AT COC DETERMINATIONS BECAUSE FAILURE TO APPLY THE CRITERIA IN THE CONTEXT OF AN UNRESTRICTED PROCUREMENT COULD RESULT IN ONE STANDARD FOR SMALL BUSINESSES AND ANOTHER STANDARD FOR ALL OTHER COMPETITORS. THE EXISTENCE OF THIS DOUBLE STANDARD, IN HHS'S VIEW, RENDERS 41 C.F.R. SEC. 1-1.1203-3 A NULLITY BECAUSE THE REGULATION PROVIDES THAT "THE RESULTING STANDARDS I.E., DEFINITIVE RESPONSIBILITY CRITERIA SHALL FORM A PART OF THE SOLICITATION AND SHALL BE APPLICABLE TO ALL BIDDERS OR OFFERORS."

HHS SUGGESTS TWO ALTERNATE SOLUTIONS TO THE CONFLICT BETWEEN SBA'S STATUTORY AUTHORITY TO DETERMINE ALL ASPECTS OF SMALL BUSINESS RESPONSIBILITY AND THE CITED REGULATION: (1) SBA SHOULD APPLY THE DEFINITIVE RESPONSIBILITY CRITERIA UNLESS IT CAN BE SHOWN THAT THE IMPOSITION OF THE CRITERIA LACKS A REASONABLE BASIS, AND (2) WHENEVER THE SITUATION CALLS FOR THE IMPOSITION OF SUCH CRITERIA, THE REGULATIONS SHOULD BE AMENDED TO AUTHORIZE NEGOTIATION, IF FEASIBLE.

WE DO NOT BELIEVE THAT ADOPTION OF EITHER ALTERNATIVE IS NECESSARY. WHERE A PROCURING AGENCY HAS FOUND THAT A BIDDER LACKS RESPONSIBILITY, THAT DETERMINATION IS SUBJECT TO REVIEW BY EITHER SBA, IN THE CASE OF A SMALL BUSINESS, OR OUR OFFICE, IN THE CASE OF ALL OTHER COMPETITORS. BOTH SBA AND GAO CAN DETERMINE THAT A PARTICULAR DEFINITIVE RESPONSIBILITY CRITERIA IS EITHER ARBITRARY OR UNDULY RESTRICTIVE OF COMPETITION AND NOT APPLY SUCH CRITERIA TO THE DETRIMENT OF AN OTHERWISE RESPONSIVE, RESPONSIBLE LOW BIDDER.

IT IS IMPORTANT TO NOTE GAO WOULD HAVE RESOLVED THIS PARTICULAR CASE IN THE SAME WAY THAT SBA RESOLVED IT BECAUSE ALTHOUGH AN AGENCY MAY PROPERLY REQUIRE A SPECIFIC STATE OR LOCAL LICENSE, THE POSSESSION OF SUCH A LICENSE IS A MATTER OF BIDDER RESPONSIBILITY AND NOT OF RESPONSIVENESS. 53 COMP.GEN. 51 (1973). THIS IS TRUE EVEN WHEN THE SOLICITATION CONTAINS LANGUAGE OF "RESPONSIVENESS" REGARDING THE REQUIRED LICENSE. COMP.GEN. 51, 54 (1973). IT THEREFORE FOLLOWS THAT AN AGENCY CAN ONLY REJECT AN OTHERWISE LOW RESPONSIVE BID FOR FAILURE TO PROVIDE EVIDENCE THAT THE BIDDER HAS A SPECIFICALLY REQUIRED LICENSE AS PART OF A NEGATIVE DETERMINATION OF RESPONSIBILITY. WE REITERATED OUR POSITION IN INTERNATIONAL BUSINESS INVESTMENTS - RECONSIDERATION, B-204547.2, MAY 17, 1982, 82-1 CPD 463, WHERE WE SAID:

"IN OUR PRIOR DECISION, WE LIMITED OUR DECISION TO THE PROPRIETY OF HHS REQUIRING A SPECIFIC STATE LICENSE AS A MATTER OF RESPONSIBILITY, WHICH CAN BE DEMONSTRATED AFTER BID OPENING, DESPITE SOLICITATION LANGUAGE TO THE CONTRARY. ***"

FINALLY, YOU REPORT THAT THE SBA HAS ADVISED THAT IT WILL NOT ISSUE A COC FOR FAILURE TO HAVE A LICENSE IF IT BELIEVES THAT A LICENSE REQUIREMENT IN A SOLICITATION IS A CRITERION OF A COMPANY'S COMPETENCY TO PERFORM. FOR THIS REASON, WE DO NOT BELIEVE THAT A DOUBLE STANDARD EXISTS OR THAT ADOPTION OF EITHER OF THE PROPOSED ALTERNATIVE SOLUTIONS IS REQUIRED.