B-218669, MAY 13, 1985, OFFICE OF GENERAL COUNSEL

B-218669: May 13, 1985

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GAO WILL NOT CONSIDER A COMPLAINT AGAINST THE CANCELLATION OF A SMALL BUSINESS SET-ASIDE REFERRED TO IT BY A MEMBER OF CONGRESS SINCE THE REFERRAL WAS RECEIVED AT THE GAO MORE THAN 10 WORKING DAYS AFTER CONSTITUENT KNEW OF A BASIS FOR PROTEST. RECEIPT OF A LARGE BUSINESS "COURTESY" BID THAT IS SIGNIFICANTLY LOWER THAN THE LOW SMALL BUSINESS BID. THE MATTER IS ESSENTIALLY ONE OF THE CONTRACTING OFFICER'S JUDGMENT. WHICH THE PROTESTER HAS THE BURDEN OF PROVING IS UNREASONABLE. FALCON WAS THE LOW BIDDER FOR 18- AND 24 -INCH WOOD OFFICE RULERS UNDER INVITATION FOR BIDS (IFB) NO. 2FC EAI-A- A3350-S. BECAUSE ACME SUBMITTED A BID IN RESPONSE TO THE SOLICITATION THAT HAD BEEN SET ASIDE FOR SMALL BUSINESS THAT WAS CONSIDERABLY LOWER THAN THE BIDS SUBMITTED BY THE SMALL BUSINESS PARTICIPANTS AND WAS IN FACT 60 PERCENT BELOW ACME'S OWN CATALOG PRICES FOR THE ITEMS IN QUESTION.

B-218669, MAY 13, 1985, OFFICE OF GENERAL COUNSEL

CONTRACTS - PROTESTS - GENERAL ACCOUNTING OFFICE PROCEDURES - TIMELINESS OF PROTEST - CONGRESSIONAL TRANSMITTAL OF PROTEST DIGEST: 1. GAO WILL NOT CONSIDER A COMPLAINT AGAINST THE CANCELLATION OF A SMALL BUSINESS SET-ASIDE REFERRED TO IT BY A MEMBER OF CONGRESS SINCE THE REFERRAL WAS RECEIVED AT THE GAO MORE THAN 10 WORKING DAYS AFTER CONSTITUENT KNEW OF A BASIS FOR PROTEST, BUT DID NOT FILE A TIMELY PROTEST WITH EITHER THE CONTRACTING AGENCY OR GAO. CONTRACTS - SMALL BUSINESS CONCERNS - AWARDS - SET-ASIDES - PRICE REASONABLENESS - COMPARISON CRITERIA 2. A CONTRACTING OFFICER MAY CONSIDER THE PRICE SUBMITTED BY AN OTHERWISE INELIGIBLE BUSINESS IN DECIDING WHETHER TO CANCEL A SMALL BUSINESS SET- ASIDE ON GROUNDS OF PRICE UNREASONABLENESS AND RESOLICIT THE REQUIREMENT ON AN UNRESTRICTED BASIS. RECEIPT OF A LARGE BUSINESS "COURTESY" BID THAT IS SIGNIFICANTLY LOWER THAN THE LOW SMALL BUSINESS BID, HOWEVER, DOES NOT AUTOMATICALLY INDICATE THE UNREASONABLENESS OF THE SMALL BUSINESS BID. THE MATTER IS ESSENTIALLY ONE OF THE CONTRACTING OFFICER'S JUDGMENT, WHICH THE PROTESTER HAS THE BURDEN OF PROVING IS UNREASONABLE.

THE HONORABLE GEORGE J. MITCHELL: UNITED STATES SENATOR 11 LISBON STREET LEWISTON, MAINE 04240

DEAR SENATOR MITCHELL:

WE REFER TO YOUR LETTER OF MARCH 29, 1985, CONCERNING YOUR CONSTITUENT, THE FALCON RULE COMPANY.

ACCORDING TO THE CORRESPONDENCE, FALCON WAS THE LOW BIDDER FOR 18- AND 24 -INCH WOOD OFFICE RULERS UNDER INVITATION FOR BIDS (IFB) NO. 2FC EAI-A- A3350-S, A SMALL BUSINESS SET-ASIDE ISSUED BY THE GENERAL SERVICES ADMINISTRATION (GSA). GSA APPARENTLY NOW PLANS TO CANCEL THE IFB AND RESOLICIT THE REQUIREMENT SO THAT A LARGE BUSINESS, ACME UNITED CORPORATION, CAN ALSO COMPETE. THIS CAME ABOUT, ACCORDING TO FALCON, BECAUSE ACME SUBMITTED A BID IN RESPONSE TO THE SOLICITATION THAT HAD BEEN SET ASIDE FOR SMALL BUSINESS THAT WAS CONSIDERABLY LOWER THAN THE BIDS SUBMITTED BY THE SMALL BUSINESS PARTICIPANTS AND WAS IN FACT 60 PERCENT BELOW ACME'S OWN CATALOG PRICES FOR THE ITEMS IN QUESTION. FALCON INTERPRETS ACME'S BID AS A "PUNITIVE ACTION BY A GIANT COMPANY HUNGRY TO FURTHER CONTROL A BUSINESS IT ALREADY DOMINATES." IN FALCON'S OPINION, ACME WAS LEGALLY BANNED FROM BIDDING ON THIS SOLICITATION AND DID SO ONLY TO SUBVERT THE SMALL BUSINESS SET-ASIDE PROCESS. FALCON SOUGHT YOUR AID IN CONVINCING GSA TO REINSTATE THE IFB AND THEN TO MAKE THE AWARDS TO THE LOW SMALL BUSINESS BIDDERS AS ORIGINALLY INTENDED.

AS YOU KNOW, OUR OFFICE CONSIDERS COMPLAINTS SUCH AS FALCON'S UNDER OUR BID PROTEST REGULATIONS, 4 C.F.R. PART 21 (1985) (COPY ENCLOSED). FALCON HAD FILED A PROTEST NO LATER THAN 10 WORKING DAYS AFTER IT KNEW THE BASIS FOR PROTEST, AS REQUIRED BY THE TIMELINESS PROVISIONS OF THE REGULATIONS, WE WOULD HAVE CONSIDERED THE PROTEST ON THE MERITS. FALCON DID NOT FILE A TIMELY PROTEST, HOWEVER. FROM THE FALCON CORRESPONDENCE YOU FURNISHED, IT APPEARS THAT FALCON KNEW OF ITS BASIS FOR PROTEST WHEN IT WROTE ITS JANUARY 22, 1985 LETTER TO YOU; IT CERTAINLY KNEW BY MARCH 19, THE DATE OF THE SECOND LETTER TO YOU. OUR FIRST NOTICE OF THIS MATTER WAS PROVIDED BY YOUR MARCH 29 LETTER WHICH WE RECEIVED ON APRIL 9. SINCE THIS WAS MORE THAN 10 WORKING DAYS AFTER FALCON KNEW OF ITS BASIS FOR PROTEST, WE CANNOT CONSIDER YOUR LETTER TO BE A TIMELY PROTEST FILED ON FALCON'S BEHALF.

FOR YOUR INFORMATION, WE POINT OUT THAT A CONTRACTING OFFICER MAY CANCEL A SMALL BUSINESS SET-ASIDE AND RESOLICIT THE REQUIREMENT ON AN UNRESTRICTED BASIS WHEN HE DETERMINES THAT THE PRICES OFFERED UNDER THE SET-ASIDE ARE UNREASONABLE. OUR OFFICE WILL NOT DISTURB A DETERMINATION OF PRICE UNREASONABLENESS UNLESS IT IS CLEARLY UNREASONABLE OR THERE IS A SHOWING OF FRAUD OR BAD FAITH ON THE PART OF THE CONTRACTING OFFICIALS. IN MAKING A DETERMINATION OF PRICE REASONABLENESS, A CONTRACTING OFFICER MAY CONSIDER SUCH FACTORS AS GOVERNMENT ESTIMATES, THE PROCUREMENT HISTORY FOR THE SUPPLIES OR SERVICES IN QUESTION, CURRENT MARKET CONDITIONS, AND EVEN THE PRICE SUBMITTED BY AN OTHERWISE INELIGIBLE LARGE BUSINESS SUCH AS ACME. SEE FLAG INTEGRATED SYSTEMS TECHNOLOGY, B-214153, AUG. 24, 1984, 84-2 CPD PARA. 221 AND CASES CITED. HOWEVER, THE RECEIPT OF A LARGE BUSINESS "COURTESY" BID THAT IS SIGNIFICANTLY LOWER THAN THE LOW SMALL BUSINESS BID DOES NOT AUTOMATICALLY INDICATE THE UNREASONABLENESS OF THE SMALL BUSINESS BID. SEE OSMOSE WOOD PRESERVING COMPANY OF AMERICA, INC., B-192191, OCT. 23, 1978, 78-2 CPD PARA. 294. THE MATTER IS ESSENTIALLY ONE OF THE CONTRACTING OFFICER'S JUDGMENT, AND TO PREVAIL WHEN COMPLAINING OF THAT JUDGMENT, A PROTESTER HAS TO MEET THE STANDARD SET FORTH ABOVE CONCERNING UNREASONABLENESS OR FRAUD/BAD FAITH.

WE TRUST THAT THIS INFORMATION WILL BE USEFUL TO YOU.