B-240525, Nov 23, 1990, 70 Comp.Gen. 108

B-240525, Nov 23, 1990, 70 Comp.Gen. 108

PROCUREMENT - Socio-Economic - Policies - Small businesses - Competency certification - Eligibility - Criteria Contracting agency is required to refer its finding that small business bidder is nonresponsible to the Small Business Administration (SBA) for consideration under certificate of competency procedures despite the fact that agency is located outside the United States, since statutory requirement for referral to SBA is unrelated to agency's location.

Attorneys

Discount Machinery & Equipment, Inc.:

Discount Machinery & Equipment, Inc. protests the award of a contract to any other bidder under invitation for bids (IFB) No. P-90 18, issued by the Panama Canal Commission for a brake machine.

We sustain the protest.

The IFB was issued as an unrestricted solicitation on February 12, 1990, with a scheduled bid opening date of April 11. In its bid, Discount certified that it was a small business and that all end items to be furnished under the contract would be manufactured by a small business concern in the United States. At bid opening, Discount was found to be the low responsive bidder; however, in reviewing Discount's responsibility, the Commission noted that the company had been terminated for default on an earlier Commission contract on July 26, 1988. /1/ Because of this prior default, the agency conducted a responsibility survey of the company; based on the survey's results, by notice dated June 11, the Commission rejected Discount as nonresponsible.

On June 21, by facsimile, Discount protested the Commission's nonresponsibility determination; by facsimile on July 5, the Commission denied Discount's protest. By letter dated July 18, Discount protested to our Office; we received the protest on July 23. /2/

We sustain the protest because the failure to award to Discount was based on a finding that Discount was nonresponsible, which should have been, but was not, referred to the Small Business Administration (SBA) for consideration under its certificate of competency (COC) procedures.

Under the Small Business Act, the SBA has conclusive authority to review a contracting officer's negative determination of responsibility and to determine a small business bidder's responsibility by issuing or refusing to issue a COC; no small business may be precluded from award because of nonresponsibility without referral of the matter to the SBA for such a final disposition. See 15 U.S.C. Sec. 637(b)(7)(A) (1988); Lock Corp. of America, B-238886, July 5, 1990, 69 Comp.Gen. ***, 90-2 CPD Para. 12. the event that the SBA does issue a COC to the small business, the procuring agency is required to accept this determination of responsibility as conclusive and if otherwise appropriate, award the contract to the small business concern. See 15 U.S.C. Sec. 637(b)(7)(C).

In this case, the Commission argues that it was not required to refer the nonresponsibility determination to SBA since it is an agency located outside of the continental United States in the Panama Canal Zone. /3/ As support for its position, the Commission relies on Federal Acquisition Regulation (FAR) Sec. 19.000(b), which describes the scope of the Small Business and Small Disadvantaged Business Concerns part of the FAR as follows:

"This part applies only inside the United States, its territories and possessions, Puerto Rico, the Trust Territory of the Pacific Islands, and the District of Columbia."

According to the Commission, this provision prohibits SBA review of any federal procurement if the procuring agency is located outside the United States. Based on our review of the Small Business Act and the applicable regulations, we find that the location of the contracting agency has no bearing on the applicability of SBA's COC program.

Nothing in the Small Business Act imposes any geographical limitation regarding a contracting agency's location which would exempt procurements from the Act's coverage. Rather, the factor which determines whether a small business concern qualifies for SBA's COC proceedings is the nationality of the small business. As defined by the SBA regulations:

"A business concern eligible for assistance as a small business is a business entity organized for profit, with a place of business located in the United States and which makes a significant contribution to the U.S. economy through payment of taxes and/or use of American products, materials and/or labor." 13 C.F.R. Sec. 121.403(a) (1990).

In order to qualify for a COC, all products furnished by a nonmanufacturing small business concern such as Discount must be produced by a small business concern in the United States. 13 C.F.R. Sec. 125.5(c). Requiring a small business concern to maintain a nexus with the United States fosters the underlying policy of the Small Business Act to benefit American rather than foreign small business concerns. Thus, under the regulations implementing the Small Business Act, geographic location is significant only with regard to whether a small business qualifies as an American concern; the location of the procuring agency has no bearing on the applicability of the COC program. /4/

As evidenced by the language of the Small Business Act, Congress intended the SBA to have broad review authority where an American small business concern is involved. In this regard, the Small Business Act, 15 U.S.C. Sec. 637(d)(1), expresses its intended coverage in broad terms, as follows:

"It is the policy of the United States that small business concerns ... shall have the maximum practicable opportunity to participate in the performance of contracts let by any Federal agency. ..."

The Small Business Act also adopts the Administrative Procedure Act's definition of "federal agency"; accordingly, the Act applies to "each authority of the Government of the United States" excluding "the Congress." See 5 U.S.C. Sec. 551(1) (1988); 15 U.S.C. Sec. 632(b). The Act and the COC program it authorizes apply generally to agencies within the executive branch of the government. Fry Communications, Inc., 62 Comp.Gen. 164 (1983), 83-1 CPD Para. 109. The Commission is an executive branch agency. See 22 U.S.C. Sec. 3611 (1988). With regard specifically to the COC procedures, the Small Business Act again defines its application broadly, stating that SBA determinations of a small business concern's responsibility are binding upon "Government procurement officers." See 15 U.S.C. Sec. 637(b)(7)(A).

Since the Small Business Act evidences an intent to implement a government-wide policy fostering American small business interests, and since the Panama Canal Commission is an executive agency within the meaning of the Act, we see no basis to conclude that the Commission's procurements are exempted from the Act's coverage merely because the agency is physically located in the Panama Canal Zone. Eastern Marine, Inc., 63 Comp.Gen. 551 (1984), 84-2 CPD Para. 232 (fact that item is to be delivered in Panama does not affect applicability of SBA COC procedures to small business bidder).

Normally, we would recommend that the Commission's nonresponsibility determination be referred to the SBA for COC consideration since Discount otherwise qualifies for the COC program; however, such corrective action is not practicable in this case since the contract already has been performed. Accordingly, we find that Discount is entitled to recover the reasonable costs of preparing its bid and of pursuing the protest. C.F.R. Sec. 21.6(d). Based on our finding, by letter of today we are recommending to the FAR Council that FAR Sec. 19.000(b) be amended to reflect the requirements of the Small Business Act in this respect.

/1/ Apparently, Discount was terminated because of its failure to comply with the contract's delivery schedule.

/2/While the protest appears to be untimely under our Bid Protest Regulations, 4 C.F.R. Sec. 21.2(a)(1) (1990), we are considering the protest under our significant issue exception because the protest involves an issue that has not been considered on the merits in our previous decisions and which may affect many procurements in the future. 4 C.F.R. Sec. 21.2(b); see Baszile Metals Serv., B-237925; B-238769, Apr. 10, 1990, 90-1 CPD Para. 378.

/3/ The Panama Canal Commission is responsible for carrying out the responsibilities and rights of the United States under the Panama Canal Treaty with respect to the management, operation and maintenance of the Panama Canal.

/4/ We note that the SBA agrees with our position that the COC program applies regardless of the location of the contracting agency. According to the SBA, Discount's nonresponsibility determination should have been referred to the SBA since the brake machine required under the contract is being manufactured by a small business concern located in the United States.