B-173371, DEC 17, 1971

B-173371, DEC 17, 1971

BID PROTEST - SMALL BUSINESS SET-ASIDE - EXPECTATION OF COMPETITION DECISION DENYING PROTEST OF CENTRAL STATES DIVERSIFIED, INC. AGAINST AWARD OF A REQUIREMENTS CONTRACT TO CADILLAC PRODUCTS, INC. UNDER AN IFB ISSUED BY GSA FOR 24 PACKING LIST ENVELOPES AND BEDSIDE PAPER BAGS. PROTESTANT CONTENDS, FIRST, THAT THE DETERMINATION THAT IT IS NOT A SMALL BUSINESS CONCERN WAS AN ERROR AND, SECOND, THAT IN ANY CASE THE SOLICITATION SHOULD NOT HAVE BEEN A SMALL BUSINESS SET-ASIDE AS THE CONTRACTING OFFICER KNEW THAT OVER THE PAST FIVE YEARS ONLY THE TWO FIRMS HERE INVOLVED HAD BID ON THIS REQUIREMENTS CONTRACT. (1) THE COMP. GEN. HAS NO AUTHORITY TO UPSET A DETERMINATION OF SIZE MADE BY THE SBA, AS THAT AGENCY IS THE FINAL AUTHORITY ON THAT QUESTION, 15 U.S.C. 637(B)(6). (2) WHETHER A REASONABLE EXPECTATION OF SMALL BUSINESS COMPETITION EXISTS IS A MATTER WITHIN THE DISCRETION OF THE CONTRACTING AGENCY AND WILL NOT BE UPSET ABSENT A CLEAR SHOWING OF ABUSE. THE MERE ALLEGATION OF KNOWLEDGE OF PAST BIDDING WHERE THE SOLICITATIONS WERE NOT SMALL BUSINESS SET-ASIDES DOES NOT DEMONSTRATE ABUSE SUFFICIENT TO UPSET OF THIS CONTRACT.

TO CENTRAL STATES DIVERSIFIED, INC.:

FURTHER REFERENCE IS MADE TO YOUR LETTER OF JUNE 17, 1971, AND SUBSEQUENT CORRESPONDENCE, CONCERNING YOUR PROTEST UNDER INVITATION FOR BIDS (IFB) FPNSP-FV-10915-A, ISSUED BY THE GENERAL SERVICES ADMINISTRATION (GSA) ON MARCH 24, 1971. THE IFB WAS FOR A REQUIREMENTS CONTRACT FOR 24 ITEMS OF PACKING LIST ENVELOPES AND BEDSIDE PAPER BAGS FOR THE PERIOD SEPTEMBER 1, 1971, OR DATE OF AWARD, WHICHEVER IS LATER, THROUGH AUGUST 31, 1972. NOTICE OF TOTAL SMALL BUSINESS SET-ASIDE APPLIED TO ITEMS 13 THROUGH 24 OF THE SOLICITATION.

IN THIS CONNECTION, GSA STATES THAT IT HAS ISSUED A SOLICITATION FOR ANNUAL REQUIREMENTS CONTRACTS FOR THESE ITEMS FOR AT LEAST THE LAST FIVE YEARS; THAT YOUR CONCERN AND CADILLAC PRODUCTS, INC. (CADILLAC) HAVE BEEN THE ONLY FIRMS THAT SUBMITTED BIDS ON THESE PROCUREMENTS; THAT THE SUBJECT PROCUREMENT IS THE SECOND ON WHICH THE TOTAL SMALL BUSINESS SET-ASIDE PROCEDURES HAVE BEEN APPLIED; THAT THE FIRST TOTAL SMALL BUSINESS SET- ASIDE CONTRACT FOR THESE ITEMS WAS AWARDED TO YOUR CONCERN FOR THE CONTRACT PERIOD WHICH EXPIRED AUGUST 31, 1971; THAT YOUR CONCERN AND CADILLAC BID AS SMALL BUSINESS CONCERNS ON THE PRIOR CONTRACT; AND THAT THE CONTRACTING OFFICER BELIEVED THAT YOUR CONCERN AND CADILLAC WERE STILL SMALL BUSINESS CONCERNS PRIOR TO ISSUING THE SET-ASIDE HERE.

WHEN BIDS WERE OPENED ON APRIL 20, 1971, FOR THE SUBJECT PROCUREMENT IT WAS NOTED THAT ONLY YOUR CONCERN AND CADILLAC HAD SUBMITTED BIDS AND THAT BOTH BIDDERS HAD AGAIN CERTIFIED THEIR STATUS AS SMALL BUSINESS CONCERNS. IT WAS ALSO NOTED THAT CADILLAC HAD SUBMITTED THE LOWEST BID ON 7 OF THE 12 ITEMS OF THE SET-ASIDE AND, WITH RESPECT TO THE REMAINING FIVE ITEMS FOR THIS SET-ASIDE, THAT ITS BID WAS LESS THAN 3 PERCENT HIGHER THAN YOUR BID FOR THESE ITEMS.

SUBSEQUENTLY, THE CONTRACTING OFFICER REQUESTED A SIZE DETERMINATION OF YOUR CONCERN FROM THE SMALL BUSINESS ADMINISTRATION (SBA), SINCE HE HAD RECEIVED INFORMATION THAT YOUR CONCERN ANNUALLY EMPLOYED 650 EMPLOYEES, WHICH EXCEEDED THE APPLICABLE SMALL BUSINESS SIZE STANDARD FOR THE PROCUREMENT. THEREAFTER, THE SBA INFORMED THE CONTRACTING OFFICER THAT IT HAD DETERMINED THAT YOUR CONCERN WAS NOT A SMALL BUSINESS FOR THIS PROCUREMENT. THIS RULING WAS UPHELD BY THE SIZE APPEALS BOARD OF THE SBA.

IN VIEW OF THIS DETERMINATION, THE CONTRACTING OFFICER ADVISED YOUR CONCERN THAT YOUR BID WAS NONRESPONSIVE TO THE SMALL BUSINESS SET-ASIDE PROVISION OF THE INVITATION, AND THAT IT COULD NOT BE CONSIDERED FOR AWARD.

IN YOUR LETTER DATED JUNE 17, 1971, TO THIS OFFICE YOU STATED THAT THE DECISION OF THE SMALL BUSINESS ADMINISTRATION MUST BE CONSIDERED ERRONEOUS, AND THAT IN ANY EVENT GSA SHOULD WITHDRAW THE SET-ASIDE IF IT WAS DETERMINED THAT ONLY CADILLAC IS ELIGIBLE FOR THE SUBJECT AWARD.

IN THIS REGARD, WE ADVISED YOUR CONCERN BY LETTER DATED JULY 13, 1971, THAT WE COULD NOT QUESTION SBA'S DECISION WITH RESPECT TO THE SIZE STATUS OF YOUR CONCERN, SINCE UNDER 15 U.S.C. 637(B)(6), A DECISION OF THE SBA REGARDING THE SIZE STATUS OF A PARTICULAR CONCERN IS CONCLUSIVE UPON THE PROCUREMENT AGENCY INVOLVED, AND THE COMPTROLLER GENERAL HAS HELD THAT SUCH A DECISION IS ALSO CONCLUSIVE ON THE GENERAL ACCOUNTING OFFICE.

WITH RESPECT TO YOUR CONTENTION THAT THE SUBJECT SET-ASIDE SHOULD BE WITHDRAWN, GSA STATES THAT THE CONTRACTING OFFICER'S DETERMINATION TO SET ASIDE THE ITEMS UNDER THE SUBJECT PROCUREMENTS CANNOT BE CONSIDERED TO BE AN ABUSE OF DISCRETION IN VIEW OF THE PROCUREMENT HISTORY OF THE ITEMS, AS NOTED ABOVE. FURTHERMORE, GSA STATES THAT CADILLAC'S PRICES MUST BE CONSIDERED REASONABLE BECAUSE ITS PRICES FOR THE FIVE ITEMS ON WHICH IT IS NOT THE LOW BIDDER IN THE SUBJECT PROCUREMENT EXCEED THE PRICES PAID FOR SIMILAR ITEMS UNDER YOUR PRIOR CONTRACT BY ONLY 2.2 PERCENT OR A TOTAL OF $3,476.00. ACCORDINGLY, GSA STATES THAT THERE IS NO COMPELLING REQUIREMENT FOR WITHDRAWING THE SUBJECT SET-ASIDE AND READVERTISING THE PROCUREMENT ON AN UNRESTRICTIVE BASIS.

YOU STATE THAT THE CONTRACTING OFFICER FAILED TO INVESTIGATE THE SMALL BUSINESS QUALIFICATIONS OF CENTRAL AND CADILLAC BEFORE ISSUING THE PROCUREMENT; THAT HE DID NOT, THEREFORE, HAVE A REASONABLE EXPECTATION OF ADEQUATE SMALL BUSINESS COMPETITION AS A BASIS FOR ISSUING THE SET-ASIDE, WHICH IS REQUIRED BY FEDERAL PROCUREMENT REGULATIONS (FPR) 1-1.706-5(A); THAT THE ALLEGED FAILURE OF THE PROCURING ACTIVITY TO INVESTIGATE THE SIZE STATUS OF CENTRAL AND CADILLAC CONSTITUTED AN ABUSE OF DISCRETION; AND THAT IN ANY EVENT THE SET-ASIDE SHOULD NOW BE WITHDRAWN SINCE CADILLAC IS THE ONLY BIDDER ELIGIBLE FOR THE AWARD.

CONCERNING YOUR PROTEST AGAINST THE DETERMINATION OF GSA TO MAKE THIS PROCUREMENT A TOTAL SMALL BUSINESS SET-ASIDE, SECTION 15 OF THE SMALL BUSINESS ACT, 15 U.S.C. 644, PROVIDES THAT SMALL BUSINESS CONCERNS SHALL RECEIVE ANY AWARD OR CONTRACT OR ANY PART THEREOF AS TO WHICH IT IS DETERMINED TO BE IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF THE TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT ARE PLACED WITH SMALL BUSINESS CONCERNS. UNDER SECTION 15 OF THE ACT THE DETERMINATION AS TO WHETHER A PARTICULAR PROCUREMENT SHOULD BE SET ASIDE IS WITHIN THE JURISDICTION OF THE PROCURING AGENCY AND THE SMALL BUSINESS ADMINISTRATION. THIS STATUTORY PROVISION IS IMPLEMENTED BY FPR 1-1.706- 5(A) WHICH PROVIDES:

"1-1.706-5 TOTAL SET-ASIDES.

"(A) SUBJECT TO THE CONDITIONS SET FORTH IN SECTIONS 1-1.706-1 AND 1 1.706-2, THE ENTIRE AMOUNT OF AN INDIVIDUAL PROCUREMENT OR CLASS OF PROCUREMENTS SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION WHERE THERE IS A REASONABLE EXPECTATION THAT BIDS OR PROPOSALS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. TOTAL SET-ASIDES SHALL NOT BE MADE UNLESS SUCH A REASONABLE EXPECTATION EXISTS; *** ."

IN THIS CONNECTION, IT HAS BEEN THE CONSISTENT POSITION OF OUR OFFICE THAT THE DETERMINATION OF WHETHER A REASONABLE EXPECTATION OF SMALL BUSINESS COMPETITION EXISTS IS A MATTER WITHIN THE SOUND DISCRETION OF THE CONTRACTING AGENCY AND WE WILL NOT SUBSTITUTE OUR JUDGMENT IN THIS AREA IN THE ABSENCE OF A CLEAR SHOWING OF ABUSE OF DISCRETION. B 172165, SEPTEMBER 3, 1971; B-171693, APRIL 22, 1971; 45 COMP. GEN. 228 (1965).

ALTHOUGH YOU STATE IT CONSTITUTED AN ABUSE OF DISCRETION FOR THE CONTRACTING OFFICER TO ISSUE A SET-ASIDE HERE WHEN HE EXPECTED ONLY TWO SMALL BUSINESSES TO BID, WE DO NOT BELIEVE THE CIRCUMSTANCES INVOLVED REQUIRES SUCH A CONCLUSION. YOUR CONCERN AND CADILLAC HAD EACH CERTIFIED ITSELF TO BE A SMALL BUSINESS CONCERN ON THE PRIOR PROCUREMENT, AND THOSE FIRMS SUBMITTED THE ONLY BIDS RECEIVED ON RECENT PROCUREMENTS OF THE ITEMS, EVEN WHEN THE PROCUREMENTS WERE NOT RESTRICTED TO SMALL BUSINESS CONCERNS. IT SEEMS CLEAR THEREFORE THAT THE RECORD DOES NOT ESTABLISH A BASIS ON WHICH THE CONTRACTING OFFICER SHOULD HAVE REASONABLY EXPECTED THAT RESTRICTING BIDDING ON THE SUBJECT ITEMS TO SMALL BUSINESS CONCERNS WOULD HAVE AFFECTED EITHER THE OVERALL AMOUNT OF COMPETITION OR THE NUMBER OF BIDS WHICH WOULD BE SUBMITTED BY SMALL BUSINESSES. WHILE FPR 1-1.706- 5(A) PROVIDES THAT PAST PROCUREMENT HISTORY OF AN ITEM IS NOT THE ONLY "CONTROLLING" FACTOR FOR DETERMINING WHETHER A REASONABLE EXPECTATION OF COMPETITION EXISTS FOR A SET-ASIDE, THE REGULATION STATES THAT PAST HISTORY OF AN ITEM IS "IMPORTANT" FOR DETERMINING WHETHER SUCH EXPECTATION EXIST. ACCORDINGLY, WHILE WE CANNOT CONCLUDE THAT THE CONTRACTING OFFICER ABUSED HIS DISCRETION IN DETERMINING THAT A SET-ASIDE SHOULD ISSUE HERE, SUCH POSITION SHOULD NOT BE CONSTRUED AS INDICATING THAT THE WIDE RANGE OF DISCRETION AFFORDED THE ADMINISTRATIVE OFFICERS IN SUCH MATTERS WOULD NOT HAVE ALSO PERMITTED A DECISION NOT TO SET THE ITEMS ASIDE FOR SMALL BUSINESSES.

FURTHERMORE, WE BELIEVE THE FACTS, AS SHOWN ABOVE, ARE DISTINGUISHABLE FROM THOSE CONSIDERED IN B-170698, MAY 4, 1971, WHICH YOU CITE, WHEREIN WE UPHELD THE REFUSAL OF AN AGENCY TO ISSUE A SET ASIDE FOR A PROCUREMENT. IN THAT CASE THE CONTRACTING OFFICER WAS AWARE, AT THE TIME OF THE SET- ASIDE, THAT ONE OF THE TWO PROSPECTIVE SMALL BUSINESS BIDDERS FOR THE PROCUREMENT HAD SUBMITTED AN UNREASONABLE PRICE UNDER A PRIOR PROCUREMENT FOR THE SAME ITEMS. B 157581, NOVEMBER 22, 1965, WHICH YOU ALSO CITE, IS LIKEWISE DISTINGUISHABLE FROM THE SUBJECT CASE SINCE THE DETERMINATION NOT TO ISSUE A SET-ASIDE IN THAT CASE WAS BASED ON THE CONTRACTING OFFICER'S KNOWLEDGE THAT ONLY ONE PROSPECTIVE SMALL BUSINESS CONCERN WOULD COMPETE FOR THE PROCUREMENT.

WITH RESPECT TO YOUR CONTENTION THAT THE CONTRACTING OFFICER SHOULD HAVE INVESTIGATED YOUR FIRM AND CADILLAC PRIOR TO ISSUING THE SET-ASIDE IN ORDER TO ASCERTAIN WHETHER SUCH CONCERNS WERE STILL SMALL BUSINESSES, WHILE SUCH AN INQUIRY MAY HAVE BEEN A PRUDENT COURSE OF ACTION IN VIEW OF THE LIMITED NUMBER OF PROSPECTIVE SMALL BUSINESS BIDDERS, NO REGULATION HAS BEEN CALLED TO OUR ATTENTION REQUIRING SUCH ACTION BY THE CONTRACTING OFFICER. IN ADDITION, WE DO NOT BELIEVE THAT YOUR FIRM CAN COMPLETELY ABSOLVE ITSELF FROM ANY SHORTCOMINGS IN THIS CONNECTION. CLEARLY, THE PRIMARY RESPONSIBILITY RESTED WITH YOUR FIRM TO RESOLVE ANY DOUBT AND TO ACCURATELY DETERMINE ITS SMALL BUSINESS STATUS BEFORE REPRESENTING AND CERTIFYING IN ITS BID THAT IT WAS A SMALL BUSINESS CONCERN. HAD YOU PROPERLY DETERMINED, PRIOR TO BIDDING, THAT YOU WERE NOT A SMALL BUSINESS CONCERN UNDER THE APPLICABLE STANDARD, IT APPEARS THAT FAVORABLE CONSIDERATION MAY HAVE BEEN GIVEN AT THAT TIME TO A REQUEST BY YOUR FIRM THAT THE SET-ASIDE BE RESCINDED. IN THIS REGARD, THERE IS NO EVIDENCE IN THE RECORD THAT THE CONTRACTING OFFICER HAD RECEIVED ANY INFORMATION PRIOR TO BID OPENING INDICATING THAT YOUR FIRM, WHICH WAS THEN PERFORMING UNDER THE PRIOR CONTRACT AWARDED TO IT AS A SMALL BUSINESS CONCERN, WAS NOT STILL A SMALL BUSINESS.

CONCERNING YOUR CONTENTION THAT, EVEN ASSUMING THAT THE ORIGINAL DETERMINATION TO ISSUE A SMALL BUSINESS SET-ASIDE WAS PROPER, THE SET ASIDE SHOULD NOW BE CLEARLY RECOGNIZED AS INVALID SINCE ONLY ONE CONCERN IS ELIGIBLE FOR THE AWARD, OUR OFFICE HAS HELD THAT THE RECEIPT OF ONLY ONE RESPONSIVE BID UNDER A TOTAL SMALL BUSINESS SET-ASIDE DOES NOT PRECLUDE AWARD WHERE THE ORIGINAL SET-ASIDE APPEARS TO HAVE BEEN MADE WITHIN THE FRAMEWORK OF PERTINENT LAWS AND REGULATIONS ON THE BASIS OF A DETERMINATION AUTHORIZED TO BE MADE BY THE CONTRACTING OFFICER. B-166879, MAY 27, 1969; B-164635, DECEMBER 24, 1968.

AS WE STATED IN B-156718, JUNE 16, 1965, WHERE ONLY ONE RESPONSIVE BID WAS RECEIVED UNDER A TOTAL SMALL BUSINESS SET-ASIDE, THE PURPOSE OF SECURING A REASONABLE NUMBER OF BIDS FROM SMALL BUSINESS CONCERNS IS TO ENSURE THAT AWARD WILL BE MADE AT A FAIR PRICE TO THE GOVERNMENT. BELIEVE THE CONTRACTING OFFICER'S ANALYSIS, AS NOTED ABOVE, OF THE PRICES SUBMITTED ABOVE BY CADILLAC ADEQUATELY DEMONSTRATES THAT THE GOVERNMENT WILL RECEIVE A FAIR AND REASONABLE PRICE FOR THE ITEMS IF THEY ARE ALL AWARDED TO CADILLAC.

WHERE BIDS HAVE BEEN OPENED AND COMPETITIVE PRICES REVEALED, AS IN THIS SITUATION, FPR 1-2.404-1 PROVIDES, IN SUBSTANCE, THAT AWARD SHOULD BE MADE TO THE ELIGIBLE BIDDER UNLESS THERE IS A COMPELLING REASON TO REJECT ALL BIDS. CONSIDERING ALL THE CIRCUMSTANCES OF THIS CASE, WE DO NOT BELIEVE THAT WE SHOULD OBJECT TO GSA'S POSITION THAT A SUFFICIENTLY COMPELLING REASON HAS NOT BEEN ESTABLISHED WHICH REQUIRES REJECTION OF CADILLAC'S BID ON THE SET-ASIDE ITEMS AND READVERTISEMENT.

WHILE, FOR THE REASONS STATED ABOVE, WE CANNOT CONCLUDE THAT A CONTRACT MAY NOT BE LEGALLY AWARDED TO CADILLAC FOR ALL ITEMS OF THE SUBJECT IFB, WE AGREE WITH THE STATED POSITION OF GSA IN ITS REPORT OF AUGUST 13, 1971, THAT THE FACT THAT YOUR FIRM IS A LARGE BUSINESS CONCERN INDICATES THAT FUTURE SOLICITATIONS FOR THESE SUPPLIES MAY HAVE TO BE ON AN UNRESTRICTED BASIS. GSA FURTHER REPORTS THAT A COMPREHENSIVE ANALYSIS OF THE SITUATION WILL BE MADE PRIOR TO ANY DETERMINATION AS TO WHETHER THE SET-ASIDE FOR THESE ITEMS SHOULD BE CONTINUED.

WE HAVE CONSIDERED THE REMAINING DECISIONS OF THIS OFFICE CITED IN SUPPORT OF YOUR PROTEST AND FIND THEM FACTUALLY DISTINGUISHABLE FROM THE INSTANT CASE.

FOR THE REASONS SET FORTH ABOVE, YOUR PROTEST MUST BE DENIED.