Matter of: Border Maintenance Service, Inc. File: B-250489 Date: February 3, 1993 72 Comp.Gen. 101

B-250489: Feb 3, 1993

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Small Business Administration (SBA) reasonably determined that there was not a reasonable expectation that at least two 8(a) firms located in the local buy region would submit offers. SBA's decision to expand 8(a) procurement's geographic area to include firms located in region adjacent to the local buy region is unobjectionable since applicable SBA regulation authorizes such an expansion under these circumstances. The RFP was issued as a competitive small disadvantaged business set-aside under section 8(a) of the Small Business Act. BMS contends that PCT is ineligible for the award since PCT is located outside the appropriate geographic region for this competition. Background The Small Business Administration (SBA) is divided into 10 regional offices which supervise many smaller district offices.

Matter of: Border Maintenance Service, Inc. File: B-250489 Date: February 3, 1993 72 Comp.Gen. 101

Procurement Specifications Minimum needs standards Competitive restrictions Performance specifications Geographic restrictions Where competitive 8(a) procurement included an experience requirement which exceeded the reported capabilities of 8(a) firms in the procuring activity's "local buy" region, Small Business Administration (SBA) reasonably determined that there was not a reasonable expectation that at least two 8(a) firms located in the local buy region would submit offers; accordingly, SBA's decision to expand 8(a) procurement's geographic area to include firms located in region adjacent to the local buy region is unobjectionable since applicable SBA regulation authorizes such an expansion under these circumstances.

Attorneys

Border Maintenance Service, Inc. (BMS) challenges the award of a contract to PCT Services, Inc. under request for proposals (RFP) No. DADA11-92- R-0016. The RFP was issued as a competitive small disadvantaged business set-aside under section 8(a) of the Small Business Act, 15 U.S.C. Sec. 637(a) (1988 and Supp. III 1991), by the Department of the Army, for hospital housekeeping services at the Brooke Army Medical Center (BAMC), and the United States Army Institute of Surgical Research. BMS contends that PCT is ineligible for the award since PCT is located outside the appropriate geographic region for this competition.

We deny the protest.

Background

The Small Business Administration (SBA) is divided into 10 regional offices which supervise many smaller district offices; the BAMC-at which these services are required-is located in the SBA's San Antonio District, which is supervised by the SBA's Dallas Region Office.

On February 6, 1992, BAMC contracting personnel met with the San Antonio District SBA officials to discuss the possibility of conducting this procurement under the 8(a) program; by letter dated February 11, the Army formally offered the requirement to the SBA's San Antonio District Office, which referred the procurement request to the Dallas Region Assistant Regional Administrator (ARA) for Minority Small Business concerns and Capital Ownership Development for review, as required by Federal Acquisition Regulation (FAR) Sec. 19.804-2(b). [1]

By letter to the contracting officer dated March 9, the Dallas ARA accepted the requirement into the 8(a) program. The requirement was designated as a competitive 8(a) procurement because the yearly cost of the contract was expected to exceed $3 million, see FAR Sec. 19.805-1(a), and was classified under Standard Industrial Code (SIC) 7349, Building Cleaning and Maintenance Services." [2] Additionally, because the identified services were being purchased to meet the specific needs of one user-BAMC-in one geographic location, the Dallas ARA classified this procurement as a "local buy" competition. See 13 C.F.R. Sec. 124.100 (1992); FAR Sec. 19.801.

With regard to local buy competitions, the appropriate SBA ARA is charged with determining a geographic region of competition based on his knowledge of the 8(a) portfolio; this region would normally be the "geographical boundaries of one or more district offices or the entire region." Only those firms located within the designated geographic area are eligible to submit offers. 13 C.F.R. Sec. 124.311(h)(3). In this regard, if the ARA determines that there is not a reasonable expectation that at least two firms within the region will submit offers, the ARA may authorize the procuring agency to accept offers from 8(a) firms located in one or more adjacent regions. Id.

In its February offer letter, the Army had advised SBA that the agency would only consider proposals from those 8(a) participants who could demonstrate an existing "minimum" company experience of "creditable performance of hospital housekeeping services for 24 months within the previous 36 months from the date established for receipt of proposals." The Army had determined that this company experience requirement would help ensure that the agency would not encounter the "quality performance problems" which it had encountered with another, less-experienced 8(a) contractor who was performing these same services at the Eisenhower medical facility, located at Fort Gordon, Georgia.

Because this company experience requirement exceeded the reported capabilities of those 8(a) firms located within the immediate San Antonio district-and was more stringent than the cleaning experience requirements used in other procurements conducted under the same SIC code category-the Dallas ARA initially decided to expand the field of competition for this requirement beyond the San Antonio District to include any qualified 8(a) firm located within the Dallas Region.

On March 13, the Dallas ARA notified each district office within the Dallas Region of the BAMC offering, and requested that each district provided the names and addresses of any 8(a) concerns in its district who were qualified to compete under SIC 7349. On April 7, the Dallas ARA forwarded a list of 11 8(a) firms to the BAMC contracting personnel.

By letter dated June 1, the BAMC contracting officer requested that the ARA conduct this procurement as a "nation-wide" competitive 8(a) procurement. In this regard, the BAMC contracting officer advised the Dallas ARA that after reviewing information provided by the San Antonio SBA District Office regarding each of the 11 firms, the Army had concerns that notwithstanding each firm's reported capability to compete in the SIC Code 7349 category, none of these firms appeared to currently have the requisite 2 years of recent hospital housekeeping experience which the Army deemed mandatory for successful performance. The contracting officer further stated that without such qualified offerors, an 8(a) competition for this requirement would not "be in the best interest of the [BAMC]."

Upon receiving the contracting officer's letter, the Dallas ARA further researched the list of 11 firms and their reported qualifications; the Dallas ARA contacted each firm's supervising small business opportunity specialist (BOS)-who is the designated district SBA employee charged with monitoring and assisting each 8(a) participant's progression through the 8(a) program, see generally 13 C.F.R Secs. 124.100, 124.302-and discussed whether the identified firm could currently meet the 2-year experience requirement. Each BOS informed the Dallas ARA that none of the firms was currently capable of meeting the requirement.

Based on this information, the Dallas ARA determined that he could not reasonably expect 2 of the 11 Dallas 8(a) firms, "considering the existing skill and experience of such concerns at that time," to "submit responsive offers." In this regard, the record shows that while several BOSs had advised the Dallas ARA that "the concerns might acquire such experience through subcontracting, teaming, or hiring the experienced personnel," the Dallas ARA determined that the "question of whether the Dallas region concerns could obtain the required experience . . . was a matter of speculation." Accordingly, the Dallas ARA decided to expand the geographic eligibility requirement for this competition beyond the Dallas region, as permitted by 13 C.F.R. Sec. 124.311(h)(3).

Although the Army had requested that this requirement be conducted as a nationwide competitive 8(a) procurement, the ARA determined that such an expansion would be "too great"; instead, the Dallas ARA sought to expand the geographic eligibility boundaries to include only one adjacent geographic region. There are four SBA regions adjacent to the Dallas Region: Atlanta, Kansas City, Denver, and San Francisco. After determining that he could not reasonably expect two Dallas 8(a) firms to submit responsive offers for this requirement, the Dallas ARA contacted the Atlanta ARA and learned that there were five 8(a) firms in the Atlanta region which had 2 years of recent experience in successfully performing these services under the SIC 7349 category. After his discussion with the Atlanta ARA, the Dallas ARA contacted the army contracting officer by telephone and advised her that there were five qualified 8(a) concerns located in the Atlanta Region; during this conversation, the contracting officer responded that based on the existing capabilities of the Atlanta 8(a) firms, the Army would not withdraw the requirement from the 8(a) program if the competition was expanded to include the Atlanta Region.

By letter dated June 12, the Dallas ARA provided the Army contracting officer with a new list of qualified 8(a) firms which -- in addition to the previously identified Dallas Region firms -- included the names and addresses of six Atlanta Region firms; [3] on June 9, the Army issued the RFP to each of the 17 firms. On June 29, the Army held a preproposal conference-which both the protester and the awardee attended; on July 7, the agency issued amendment No. 0001, which responded to questions raised during the conference and provided that experience of individuals could be used to satisfy the 2-year company experience requirement. By the July 21 closing date, six proposals were received, five from firms located in Dallas Region, and one from a firm in the Atlanta Region. On August 24, after completing technical evaluations, the agency issued amendment No. 0002, which contained discussion letters and a request for submission of best and final offers (BAFO) by September 8. On September 24, BMS filed the protest.

Discussion

Section 8(a) of the Small Business Act, 15 U.S.C. Sec. 637(a), authorized the SBA to enter into contracts with government agencies and to arrange for performance through subcontracts with socially and economically disadvantaged small business concerns; FAR Sec. 19.805 and 13 C.F.R. Sec. 124.311 provide for and govern competitively awarded contracts set aside for section 8(a) qualified concerns. Because of the broad discretion afforded to SBA and the contracting agencies under the applicable statute and regulations, our review of actions under the section 8(a) program is generally limited to determining whether government officials have violated applicable regulations or engaged in bad faith. See 4 C.F.R. Sec. 21.3(m)(4) (1992); Morrison Constr. Servs., Inc., 70 Comp.Gen. 139 (1990) 90-2 CPD Para. 499; Industrial Data Link Corp., B-246682, Mar. 19, 1992, 92-1 CPD Para. 296; Southwest Resource Dev., B-244147, Sept. 26, 1991, 91-2 CPD Para. 295.

In its protest, BMS challenges the award to PCT on the grounds that the SBA improperly expanded competition for this requirement to include the Atlanta Region firms. [4] Specifically, BMS contends that the SBA violated 13 C.F.R. Sec. 124.311(h)(3) since-according to the protester-the Dallas ARA could not have reasonably expected that fewer than two 8(a) firms located in the Dallas Region would submit offers for this requirement. In support of its position, BMS in its comments points to amendment No. 0001, which permitted offerors to use their executive personnel's individual experience to satisfy the 2-year company experience requirement, as well as to the fact that five of the six proposals submitted under this solicitation were from Dallas Region 8(a) firms. BMS asserts that the record shows that the Dallas ARA expanded competition for this requirement only to satisfy the Army's demands.

We find that the Dallas ARA had a reasonable basis to believe that the Army would not receive offers from two Dallas Region firms. As discussed above, the record clearly shows that the Dallas ARA carefully reviewed the list of Dallas 8(a) firms and verified with each firm's supervising BOS that none of these concerns held the requisite 2 years of hospital housekeeping experience. Although BMS suggests that the Dallas ARA should have taken his investigation further and specifically contacted each of the identified 8(a) concerns to ascertain whether any of them was interested in competing for this requirement, we think the Dallas ARA's reliance on the expertise of the appropriate BOS was sufficient, since each BOS-as a result of ongoing interaction with each program participant -- is thoroughly familiar with the experience, resources, and capabilities or the firms he assists. [5]

The Dallas ARA reasonably took into consideration the nature of the services to be procured. The hospital housekeeping services required under this procurement are performed in all hospital "vital patient care" areas -- including surgery, intensive care, and the emergency room-and are critical to maintaining a sterile, antiseptic environment. Any lapse in quality performance of these cleaning services -- such as that encountered by the Army at the Eisenhower medical facility-presents life-threatening consequences. See Tidewater Protective Servs., Inc. et al. Recon., 56 Comp.Gen. 649 (1977), 77-1 CPD Para. 361. Given the critical nature of these services, the decreased performance risk reflected in requiring any eligible 8(a) firm to hold 2 years of recent experience in this area, and the fact that this requirement was more stringent than the experience required for most SIC 7349 category procurements, we think the Dallas ARA reasonably concluded that, because none of the Dallas 8(a) firms currently had the required experience, they could not successfully compete for this requirement.

The amendment does not negate the reasonableness of the ARA's decision. In reviewing a contracting officer's decision to set aside a procurement for small businesses -- a decision which involves an analogous "rule of two" determination [6] -- we have consistently recognized that information that first becomes available after issuance of a solicitation does not demonstrate the unreasonableness of a contracting officer's decision not to set aside a requirement. Fayetteville Group Practice, Inc., 66 Comp. Gen. 489 (1987), 87-1 CPD Para. 541. We think the same rule applies in this situation since, as in the case of a small business set-aside determination, a local buy eligibility expansion determination requires the appropriate procurement official -- the SBA ARA -- to ascertain whether there are two concerns capable of competing for a particular requirement.

Here, the record shows that the Army -- which was in the best position to define its minimum needs -- specifically advised the Dallas ARA prior to issuing the solicitation that "prospective experience at the time of receipt of initial proposals was not adequate." Given the Army's refusal to proceed with this requirement under the 8(a) program until firms with 2 years of current company experience were located, the Dallas ARA reasonably concluded that any firm which did not currently have this company experience would be unable to submit a technically acceptable offer for this procurement. The fact that the solicitation was subsequently amended - thereby permitting five Dallas 8(a) firms to submit offers for this requirement - does not demonstrate that the Dallas ARA's preliminary eligibility determination was unreasonable.

To the extent BMS contends that the Army "impermissibly pressured" the Dallas ARA to expand the area of geographic eligibility for this requirement, the record simply does not support this assertion. While the BAMC contracting officer advised the Dallas ARA that the Army was contemplating withdrawing the requirement from the 8(a) program unless the geographic field of competition was expanded to include properly qualified firms, the record clearly establishes that the paramount reason for the competition expansion was the Dallas ARA's determination that none of the identified Dallas Region firms held the mandatory 2 years of experience necessary to perform this procurement. In our view, the effect of BAMC's communications was simply to reinforce the Dallas ARA's interpretation that any firm with less than 2 years of company experience in performing these services would be unable to successfully submit an offer for this procurement.

While BMS suggests that the Army's conversations with the Dallas ARA regarding the withdrawal of this requirement were improper, the applicable statute and regulations clearly contemplate substantial interaction between the contracting officer and SBA with respect to 8(a) procurements. [7] The procuring agency - and thus the contracting officer - has broad discretion in deciding whether to let contracts under the 8(a) program; this discretion necessarily encompasses negotiating an 8(a) procurement which best meets the procuring agency's contract needs. In this case, based on the record before us, we see no evidence of bad faith or misconduct on the part of either BAMC or the SBA; in our view, BAMC's communications with the Dallas ARA simply reflect a legitimate exercise of the agency's broad discretion under the 8(a) program and its critical interest in seeing that this requirement was awarded to a technically qualified 8(a) firm.

Since we find that the record reasonably supports the Dallas ARA's determination that fewer than two Dallas Region 8(a) firms could submit offers for this requirement, and since 13 C.F.R. Sec. 124.311(h)(3) expressly permits SBA to expand the geographic region of competition for a local buy under these circumstances, we see no basis to question SBA's decision to expand the geographic region of competition to include the Atlanta Region 8(a) firms.

The protest is denied.

1. FAR Sec 19.804-2(b) provides that "[a]n agency offering a local buy requirement should submit it to the SBA Regional Office for the geographic area where the user is located."

2. For 8(a) procurements the government uses a SIC code system which defines activities by industry categories and indicates either a maximum number of employees or annual receipts allowed for a business concern to be considered small within that particular industry. This system is published in the SIC Manual, which is also set out in FAR Sec. 19.102(g). SIC Code 7349, "Building Maintenance Services" sets forth an annual receipt size standard of $8 million.

3. Apparently, after discussing the requirement with the Dallas ARA, the Atlanta ARA located a sixth 8(a) firm which held the requisite 2 years of creditable performance experience.

4. The solicitation did not identify the region of competition for this requirement; thus, because it was not apparent from the face of the solicitation - and not otherwise divulged to the offerors - we consider BMS' protest against the geographic boundaries of competition for this requirement to be timely filed.

5. In order to develop a complete record, we asked SBA to amplify the explanation of the decision to expand the geographic area of competition provided in its initial report on the protest. In response, SBA submitted a narrative and supporting affidavit from the Dallas ARA. The protester challenges the veracity of the Dallas ARA, arguing that he should have furnished "documents which reflect that these conversations with the various BOSs occurred." The protester's unsupported speculation provides no basis to question the veracity of the SBA official's explanation of the efforts undertaken in connection with his decision to expand the area of competition.

6. An acquisition is required to be set aside for exclusive small business participation if the contracting officer determines that: (1) there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns; and (2) award will be made at fair marked prices. FAR Sec. 19.501-2(a).

7. Under 15 U.S.C. Sec. 637(a)(1)(A), the contracting officer is authorized "in his discretion to let" contracts to the SBA "upon such terms and conditions as may be agreed upon between the [SBA] and the procurement officer"; the statute also vests the procuring agency with final authority to resolve any disagreements - such as withdrawal of a requirement - which arise between the contracting officer and the SBA. Id. See also FAR Secs. 19.800, 19.803, 19.804-1.