Protest of Small Business Set-Aside Contract Award

B-205222: Apr 6, 1982

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A firm protested the award of a contract under an invitation for bids (IFB) issued by the Defense Logistics Agency (DLA). The IFB, a total small business labor surplus area (LSA) set-aside, solicited bids for white cotton trousers. The IFB imposed a 5-percent evaluation on non-LSA concerns. The protester was the lowest bidder and claimed to qualify as an LSA concern. However, the awardee, the next lowest bidder, argued that the protester did not qualify as an LSA concern. DLA investigated the eligibility of both the protester and the awardee as LSA concerns. DLA ruled that the awardee qualified and that the protester did not. Accordingly, the 5-percent evaluation factor was added to the protester's bid, which raised the protester's bid above the awardee's. The protester contended that it was denied LSA concern eligibility, because DLA erroneously excluded the administrative costs of one of its first-tier subcontractors. DLA and the protester agreed that the first-tier subcontractor was a converter that had subcontracted to provide the protester with the basic cloth it needed to manufacture trousers. GAO held that, where the first-tier subcontractor was a converter of fabric, the costs of the converter's manufacturers rather than the administrative costs of the converter were required to be used by the IFB to determine whether the bidder was eligible as an LSA concern. Accordingly, the protest was denied.

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