B-145974, MAY 16, 1962

B-145974, MAY 16, 1962

TO BASIC-WITZ FURNITURE INDUSTRIES, INC.:

WE REFER TO YOUR LETTER OF JANUARY 19, 1962, AND THE CORRESPONDENCE SUBMITTED IN YOUR BEHALF FROM ARNDT AND DAY, REQUESTING A RECONSIDERATION OF OUR DECISION B-145974 OF NOVEMBER 16, 1961.

IN OUR DECISION OF APRIL 5, 1962 (B-145974) WE CONSIDERED YOUR CONTENTION THAT THE SMALL BUSINESS ACT MERELY PROVIDES FOR THE PLACEMENT WITHIN EACH INDUSTRY OF A FAIR PROPORTION OF GOVERNMENT CONTRACTS WITH SMALL BUSINESS; AND THAT SINCE SMALL BUSINESS IN YOUR INDUSTRY, I.E. THE WOODEN FURNITURE INDUSTRY, HAS BEEN RECEIVING AND STILL IS RECEIVING AN AMPLE SHARE OF GOVERNMENT CONTRACTS, THERE IS NO AUTHORITY UNDER LAW FOR SET-ASIDES IN THAT INDUSTRY. WE CONCLUDE THAT WHILE CONGRESS DID NOT GIVE A SPECIFIC DEFINITION TO THE TERM "FAIR PROPORTION" AS IT APPEARS IN THE SMALL BUSINESS ACT OF 1958, SMALL BUSINESS SET-ASIDES, EVEN IF APPARENTLY UNNECESSARY IN THE LIGHT OF PAST AWARDS MADE TO SMALL BUSINESS ON AN UNRESTRICTED BASIS, CANNOT BE CONSIDERED IMPROPER UNLESS THEIR EFFECT IS TO INCREASE SMALL BUSINESS AWARDS, BOTH ON SET-ASIDES AND OTHERWISE, BEYOND A "FAIR PROPORTION" IN A PARTICULAR INDUSTRY. ON THE FACTS PRESENTED WITH REGARD TO YOUR INDUSTRY, INDICATING THAT, WHILE SOME 90 PERCENT OF FEDERAL WOODEN HOUSEHOLD FURNITURE PROCUREMENTS HAVE BEEN PLACED WITH SMALL BUSINESS CONCERNS, OVER 99 PERCENT OF ALL WOODEN HOUSEHOLD FURNITURE MANUFACTURERS ARE PRESENTLY CLASSIFIED BY THE SMALL BUSINESS ADMINISTRATION AS SMALL BUSINESS, WE WERE UNABLE TO CONCLUDE THAT MORE THAN A "FAIR PROPORTION" OF SUCH CONTRACTS HAVE BEEN PLACED WITH SMALL BUSINESS (B-145974, APRIL 5, 1962).

YOU QUESTION THE PROPRIETY OF CERTAIN INVITATIONS FOR WOODEN 100 PERCENT SET-ASIDES FOR SMALL BUSINESS. YOU CONTEND, AS YOU CONTENDED IN YOUR PROTEST CONSIDERED IN OUR DECISION OF NOVEMBER 16, 1961 (B 145974), THAT THE GSA PRACTICE OF MAKING AWARD OF FURNITURE ITEMS ON A GROUP RATHER THAN ITEM BASIS IS MORE COSTLY TO THE GOVERNMENT. IT WAS OUR CONCLUSION THAT THE DETERMINATION OF WHETHER TO PURCHASE BY GROUP OR BY ITEM IS A MATTER FOR DECISION BY THE PURCHASING ACTIVITY, AND THAT IN THE ABSENCE OF PERSUASIVE EVIDENCE OF IMPROVIDENCE THERE APPEARED TO BE NO BASIS FOR OBJECTING TO THE MANNER IN WHICH SUCH ADMINISTRATIVE DISCRETION IS EXERCISED.

YOU STATE THAT THE RESEARCH AND ENGINEERING COMMAND, ARMY QUARTERMASTER CORPS, NATICK, MASSACHUSETTS, DID NOT CONCUR WITH GSA'S POSITION THAT IT WAS NECESSARY FOR PURPOSES OF COMPATIBILITY TO BUY ENTIRE FURNITURE SUITES RATHER THAN ON ITEM-BY-ITEM BASIS; AND THAT THE FOREGOING COMMAND POINTED OUT THAT FOR A PERIOD OF 15 YEARS THE ARMY QUARTERMASTER CORPS HAD BOUGHT SUCCESSFULLY AND WITHOUT COMPLAINTS ITS HOUSEHOLD FURNITURE ON AN ITEM-BY- ITEM BASIS, WHICH RESULTED IN CONSIDERABLE SAVINGS. YOU POINT TO INVITATION NO. FN-9T-26559 (OPENED FEBRUARY 2, 1962) AND NO. FN-9T-26560 (OPENED FEBRUARY 6, 1962) COVERING ARMY QUARTERMASTER REQUIREMENTS FOR DINING ROOM AND BEDROOM FURNITURE, ISSUED ON A GROUP BASIS, AND YOU ESTIMATE THAT A SAVING OF 15 TO 20 PERCENT, OR APPROXIMATELY $200,000 TO $250,000, WOULD ACCRUE TO THE GOVERNMENT IF THE DINING AND BEDROOM FURNITURE ITEMS WERE ADVERTISED WITHOUT RESTRICTION ON AN ITEM-BY-ITEM BASIS. TO ILLUSTRATE, UNDER INVITATION NO. FN-9T-26559, THE LOW BIDDER BID AS FOLLOWS:

"BUFFET: $80.00. (F.O.B. PLANT, LEVEL "C" PACKAGING), BASED ON AN ESTIMATED QUANTITY OF 1030 BUFFETS.'

FOR COMPARISON, YOU STATE THAT UNDER A RECENT CONTRACT WITH THE COLUMBUS QUARTERMASTER DEPOT, YOU FURNISHED THE SAME IDENTICAL BUFFET AT A PRICE OF $72.42 (F.O.B. ORIGIN, LEVEL "C" PACKAGING), BASED ON A QUANTITY OF 250 AND MORE. ALSO, UNDER INVITATION NO. FN-9T-26560, THE LOW BID ON A DRESSER (F.O.B. ORIGIN, LEVEL "C" PACKAGING) IS $65, BASED ON A QUANTITY OF 2651 DRESSERS. UNDER YOUR CONTRACT WITH THE ARMY QUARTERMASTER CORPS, THE UNIT PRICE FOR THE SAME IDENTICAL REQUIREMENT WAS $57.73 BASED ON A QUANTITY OF 250 OR MORE. YOU ALSO PRESENT OTHER SUCH EXAMPLES.

YOU HAVE PRESENTED COMPARATIVE PRICES TO SHOW THAT A UNIT BASIS OF AWARD ON WOODEN HOUSEHOLD FURNITURE PROCUREMENTS WOULD RESULT IN LOWER PRICES THAN AN AGGREGATE BASIS OF AWARD. THE GSA OBSERVES THAT A REALISTIC DETERMINATION OF THE MATTER MUST TAKE INTO ACCOUNT MANY FACTORS NOT NECESSARILY CONSIDERED IN YOUR ANALYSIS. FOR EXAMPLE, FN 9T-26559 AND 26560 WERE INDEFINITE QUANTITY INVITATIONS FOR A PERIOD OF ONE YEAR WHICH OPENED IN FEBRUARY, 1962, WHEREAS IT IS LIKELY THAT THE QUARTERMASTER INVITATIONS RESULTING IN CONTRACTS TO BASIC-WITZ WERE OF THE DEFINITE QUANTITY TYPE AND AT AN EARLIER DATE. PRICES WOULD ALSO BE AFFECTED BY MARKET CONDITIONS IN EXISTENCE AT THE TIME OF BIDDING. IN ADDITION, ASSUMING IDENTICAL SPECIFICATIONS, THE TERMS AND CONDITIONS OF THE INVITATION MAY HAVE DIFFERED. THE GSA CONCLUDES THAT WHILE IT IS STILL OF THE OPINION THAT AGGREGATE AWARDS ARE JUSTIFIED, IT WILL REVIEW THIS MATTER CAREFULLY IN CONNECTION WITH FUTURE PROCUREMENTS. UNDER THESE CIRCUMSTANCES WE FIND NO BASIS FOR OBJECTING TO THE EXERCISE OF ADMINISTRATIVE DISCRETION FOLLOWED BY GSA WITH REGARD TO ITS METHOD OF AWARD IN WOODEN HOUSEHOLD FURNITURE PROCUREMENTS.

IN OUR DECISION OF NOVEMBER 16, 1961, WE REVIEWED YOUR TABULATION OF INVITATIONS FOR WOODEN CASE GOODS AND UPHOLSTERED FURNITURE ISSUED BY THE WASHINGTON OFFICE OF GSA FOR A 6-MONTH PERIOD COMMENCING APRIL 28, 1961. BASED ON INFORMATION FURNISHED BY THE GSA, WE STATED AS FOLLOWS:

"THE TOTAL DOLLAR VALUE OF THESE 34 INVITATIONS, BASED ON AWARDS MADE AND ESTIMATES FOR THOSE NOT YET AWARDED, IS $4,734,912. OF THIS TOTAL SMALL BUSINESS SET-ASIDES WERE APPLICABLE TO $3,097,312, LEAVING $1,637,600 OR 36 PERCENT OPEN TO BID BY OTHER THAN SMALL BUSINESS. THERE MUST ALSO BE CONSIDERED THE FACT THAT NO SET-ASIDES ARE APPLICABLE TO FEDERAL SUPPLY SCHEDULE CONTRACTS, THE TOTAL VALUE OF WHICH FOR THE FISCAL YEAR 1961 FOR WOODEN CASE GOODS AND UPHOLSTERED FURNITURE AMOUNTED TO $2,321,209. ALSO, SINCE WE FIND NO BASIS FOR REFUSAL TO CONSIDER THE MANUFACTURE OF SOLID WOODEN FURNITURE AS A PART OF THE WOODEN FURNITURE INDUSTRY, THERE MUST BE CONSIDERED ANOTHER SEGMENT OF WOODEN FURNITURE PROCUREMENT BY THE WEST COAST OFFICES OF GSA DURING THE EARLY PART OF 1961 WHICH WAS NOT RESTRICTED TO SMALL BUSINESS, AND WHICH HAD A VALUE OF OVER $4,000,000. WHILE WE RECOGNIZE THAT THE PERIODS COVERED ARE NOT IDENTICAL, THE ADDITION OF THE FOREGOING FIGURES SHOWS A TOTAL VALUE OF OVER $11,000,000, OF WHICH SMALL BUSINESS SET-ASIDES APPLIED TO ONLY $3,097,312, OR LESS THAN 29 PERCENT.'

YOU TAKE EXCEPTION TO THE VALUES ON THE 34 INVITATIONS IN QUESTION. THE GSA WAS ASKED TO REVIEW THESE FIGURES, AND IT REPORTS THAT THE FIGURES INCLUDED ACTUAL AWARDS IN SOME CASES AND ESTIMATES OF PROBABLE COST IN OTHER CASES. A REVIEW OF THE FIGURES NOW INDICATE THAT OF THE TOTAL AMOUNT OF $4,734,912 AWARDED ON THE 34 INVITATIONS, ACTUALLY $1,454,367, OR 31 PERCENT OF THE TOTAL (AS COMPARED WITH THE 36 PERCENT ORIGINALLY REPORTED) WERE OPEN TO BID BY OTHER THAN SMALL BUSINESS.

YOU FURTHER STATE THAT THE $2,321,209 AMOUNT REPORTED AS THE VALUE OF FEDERAL SUPPLY SCHEDULE CONTRACTS FOR WOODEN CASE GOODS AND UPHOLSTERED FURNITURE INCLUDE $448,363 FOR METAL FURNITURE, WHICH WAS NOT PROPERLY INCLUDED. THE GSA NOW AGREES THAT THE CORRECT AMOUNT WAS $1,872,846 ($2,321,209 LESS $448,363). YOU MENTION ALSO, THAT THE FIGURE OF $4,000,000 FOR SOLID WOODEN FURNITURE AWARDS RESULTING FROM INVITATIONS ISSUED BY WEST COAST GSA OFFICERS FOR OPENING IN EARLY 1961 CONTAINED MORE THAN 50 PERCENT SET-ASIDES FOR LABOR SURPLUS AREAS WHICH INCLUDES SMALL BUSINESS CONCERN PREFERENCE. SINCE ALL OF THESE INVITATIONS WERE OPENED PRIOR TO MAY 1, 1961, E., PRIOR TO THE ADVENT OF THE SMALL BUSINESS SET- ASIDE PROGRAM ADOPTED BY GSA, IT IS NOT FAIR, YOU SAY, TO USE THE FIGURE FOR PURPOSES OF COMPARISON. YOU CONCLUDE THAT OUR FINDING THAT "LESS THAN 29 PERCENT" OF ALL GSA WOODEN HOUSEHOLD FURNITURE PROCUREMENTS WERE SMALL BUSINESS SET-ASIDES SHOULD BE REVISED IF RELIED ON FURTHER. WE AGREE WITH YOUR CONCLUSION THAT THE FIGURES FOR SET-ASIDES PRESENTED IN THE NOVEMBER 16, 1961, DECISION WERE NOT ENTIRELY CORRECT IN THE LIGHT OF THE CORRECTED FIGURES. IT IS STILL THE FACT, HOWEVER, THAT A SIGNIFICANT PORTION OF THE TOTAL WOODEN FURNITURE PROCUREMENTS WERE OPEN FOR BIDDING BY OTHER THAN SMALL BUSINESS.

WITH REGARD TO INVITATIONS FOR BIDS NO. FB-9T-26559, AND 26560, PREVIOUSLY MENTIONED, CONTAINING 100 PERCENT SET-ASIDES FOR SMALL BUSINESS MENTIONED, CONTAINING 100 PERCENT SET-ASIDES FOR SMALL BUSINESS CONCERNS, YOU CHALLENGE THE SMALL BUSINESS STATUS OF THE LOW BIDDER, C. B. ATKIN COMPANY. YOU ALLEGE THAT THE FIRM HAS AFFILIATIONS WITH OTHER FIRMS WHICH EXCLUDE IT AS A SMALL BUSINESS. THE SMALL BUSINESS ADMINISTRATION, ATLANTA OFFICE, IS RESPONSE TO A REQUEST FROM THE CONTRACTING OFFICER ADVISED THE ADMINISTRATIVE OFFICE ON MARCH 12, 1962, THAT C. B. ATKIN CO., HAS BEEN DETERMINED TO HAVE 314 EMPLOYEES, INCLUDING THOSE OF ALL AFFILIATES, AND THEREFORE IS SMALL BUSINESS FOR PURPOSES OF THE SUBJECT PROCUREMENTS. WE MUST REGARD THIS DETERMINATION AS CONCLUSIVE. SEE SECTIONS 3 AND 8 (B) (6) OF THE SMALL BUSINESS ACT OF 1958, 15 U.S.C. 632, 637 (B) (6).

YOU ALSO CHALLENGE THE PROPRIETY OF THE SMALL BUSINESS ADMINISTRATION REGULATION TO THE EFFECT THAT A CONCERN EMPLOYING UP TO 625 PERSONS MAY QUALIFY AS A SMALL BUSINESS CONCERN FOR PURPOSES OF PROCUREMENT, IF SUCH FIRM AGREES TO PERFORM OR CAUSE A CONTRACT TO BE PERFORMED SUBSTANTIALLY IN AREAS OF SUBSTANTIAL LABOR SURPLUS. YOU CLAIM THAT THE SMALL BUSINESS ACT GIVES NO AUTHORITY TO VARY THE SIZE STANDARD OF A BUSINESS WITHIN AN INDUSTRY BECAUSE OF CONDITIONS AFFECTING THE AREA IN WHICH A GOVERNMENT CONTRACT WILL BE PERFORMED.

THE PERTINENT SBA REGULATIONS PROVIDE THAT A SMALL BUSINESS MANUFACTURER FOR THE PURPOSE OF GOVERNMENT PROCUREMENT IS A CONCERN, INCLUDING ITS AFFILIATES, WHICH IS INDEPENDENTLY OWNED AND OPERATED, IS NOT DOMINANT IN THE FIELD OF OPERATION IN WHICH IT IS BIDDING ON GOVERNMENT CONTRACTS AND WHICH (1) DOES NOT HAVE A TOTAL AVERAGE EMPLOYMENT EXCEEDING 500 PERSONS (OR 625 PERSONS IF IT AGREES TO PERFORM LABOR SURPLUS, OR (2) IT IS CERTIFIED AS A SMALL BUSINESS CONCERN BY THE SMALL BUSINESS ADMINISTRATION (SEE SECTIONS 121.3-8 (A) AND 121.3-7 (B) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION (REVISION 2) AS AMENDED.

YOU HAVE NOT SHOWN THAT THE PARTICULAR REGULATION COMPLAINED OF HAS AFFECTED THE BIDDING OR AWARD IN ANY OF THE PROCUREMENTS REFERRED TO, NOR HAVE YOU POINTED OUT HOW THE REGULATION HAS ADVERSELY AFFECTED YOUR FIRM. FOR THIS REASON THE QUESTION OF THE VALIDITY OF THE REGULATION DOES NOT APPEAR TO BE PROPERLY BEFORE US. HOWEVER, WE HAVE INDICATED RECOGNITION OF THE PROPRIETY OF THE PROVISION IN QUESTION B 147833, MAY 4, 1962.

FOR THE REASONS STATED ABOVE AND IN OUR PRIOR DECISIONS TO YOU, WE DO NOT FIND THAT WE CAN LEGALLY OBJECT TO THE MAKING OF AWARDS ON THE SEVERAL INVITATIONS HERE CONCERNED, FOR ANY OF THE REASONS YOU HAVE PRESENTED.