B-145974, DEC. 21, 1965

B-145974, DEC. 21, 1965

TO MR. JULIUS PETROFSKY, PRESIDENT, PETROF TRADING COMPANY, INCORPORATED:

WE REFER TO YOUR LETTER OF NOVEMBER 17, 1965, REQUESTING THAT ACTION BE TAKEN TO PREVENT ANY FURTHER DESTRUCTION OF SURPLUS EXPLOSIVES IN CASES WHERE A BID HAS BEEN RECEIVED FOR THEM BY THE GOVERNMENT AND ALSO, THAT OUR DECISION IN THE BASIC-WITZ FURNITURE INDUSTRIES, INCORPORATED, CASE, 41 COMP. GEN. 649, BE EXTENDED TO REQUIRE THE DEFENSE SUPPLY AGENCY TO SET ASIDE A PORTION OF EACH INVITATION TO BID INVOLVING THE SALE OF SURPLUS EXPLOSIVES FOR SMALL BUSINESS.

THE DESTRUCTION OF SURPLUS EXPLOSIVES AND OTHER GOVERNMENT PROPERTY IS REQUIRED IN SOME INSTANCES FOR A VARIETY OF LEGITIMATE REASONS. IN ORDER TO PROTECT THE PUBLIC SAFETY AND TO INSURE THIS NATION'S MILITARY SECURITY IT IS IMPERATIVE THAT CERTAIN SURPLUS GOODS NOT BE PUT INTO THE MAINSTREAM OF COMMERCE. MANY FACTORS ARE CONSIDERED IN ARRIVING AT THIS DETERMINATION FOR EXAMPLE, CERTAIN EXPLOSIVES ARE TOO DANGEROUS OR TOO UNSTABLE TO PERMIT MOVING THEM GREAT DISTANCES. ALSO, POTENTIAL PURCHASERS OF SURPLUS EXPLOSIVES MUST DEMONSTRATE TO THE AGENCY'S SATISFACTION THAT THE ADVERTISED ITEMS THEY SEEK TO PURCHASE WILL BE PUT TO LEGITIMATE USE.

IN THE ABSENCE OF SHOWING THAT IN A SPECIFIC INSTANCE SURPLUS GOODS HAVE BEEN OR ARE ABOUT TO BE DESTROYED AND THAT SUCH ACTION IS CLEARLY ILLEGAL, WE MUST PRESUME THAT SURPLUS EXPLOSIVES ARE DESTROYED IN ACCORDANCE WITH THE ABOVE-MENTIONED OR OTHER REASONS SUFFICIENT TO JUSTIFY THESE ACTS EVEN WHERE A BID HAS ALREADY BEEN RECEIVED BY THE GOVERNMENT.

WITH REGARD TO YOUR REQUEST THAT THE DEFENSE SUPPLY AGENCY BE REQUIRED TO PROVIDE SET-ASIDES FOR SMALL BUSINESS ON EACH INVITATION TO BID INVOLVING EXPLOSIVES IT IS NOTED THAT, TO OUR KNOWLEDGE, NO LEGISLATION EXISTS TO COMPEL SUCH RESTRICTIONS.

THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING AGENCY ARE EMPOWERED BY STATUTE TO DETERMINE WHETHER A SPECIFIC CONTRACT OR SALE OR PORTION THEREOF SHOULD BE SET ASIDE FOR SMALL BUSINESS. 15 U.S.C. 644. THIS STATUTE CLEARLY IMPLIES A DISCRETIONARY POWER TO GRANT OR DENY ALTOGETHER A PARTICULAR SET-ASIDE AND THIS OFFICE MAY NOT REQUIRE A CHANGE OF THE ADMINISTRATION'S DETERMINATION UNLESS THERE IS A CLEAR ABUSE OF DISCRETION WHICH RESULTS IN A VIOLATION OF LAW.

YOUR LETTER SUGGESTS THAT IN LIGHT OF OUR DECISION IN THE BASIC WITZCASE, 41 COMP. GEN. 649, CONSIDERATION SHOULD BE GIVEN TO THE UNIQUE CIRCUMSTANCES EXISTING IN THE EXPLOSIVES INDUSTRY WHICH, IT IS CLAIMED, WOULD JUSTIFY A REQUIREMENT THAT PART OF EACH INVITATION TO BID INVOLVING SURPLUS EXPLOSIVES BE SET ASIDE FOR SMALL BUSINESSES. IN THE ABOVE-CITED DECISION OUR OFFICE TOOK THE POSITION, BY IMPLICATION, THAT IF AN AGENCY WENT BEYOND THE STATUTORY REQUIREMENT AND PROVIDED MORE THAN A "FAIR PROPORTION" OF CONTRACTS OR SALES BY SET-ASIDES FOR SMALL BUSINESS WITHIN A PARTICULAR INDUSTRY, SUCH ACTION WOULD BE ILLEGAL. THIS DECISION CAN NOT BE SO BROADLY CONSTRUED AS TO REQUIRE THAT SET-ASIDES BE MADE ON A PORTION OF EACH INVITATION TO BID ON CONTRACTS OR SALES IN A PARTICULAR INDUSTRY. SUCH A RESTRICTION IS NEITHER NECESSARY NOR REQUIRED BY THE STATED POLICY OF THE SMALL BUSINESS ACT WHICH WAS ENACTED TO ASSURE SMALL BUSINESSES A FAIR PROPORTION OF GOVERNMENT CONTRACTS OR SALES. 15 U.S.C. 631. IN ADDITION, UNLIKE THE SITUATION IN 41 COMP. GEN. 649, YOUR LETTER DOES NOT PRESENT SPECIFIC AGENCY ACTION AMOUNTING TO A DENIAL OF THE DISTRIBUTION TO SMALL BUSINESSES AS A WHOLE OF A "FAIR PROPORTION" OF GOVERNMENT CONTRACTS IN THE EXPLOSIVES INDUSTRY. THEREFORE, IN THE ABSENCE OF ADDITIONAL INFORMATION THIS OFFICE CAN NEITHER ARRIVE AT NOR RESOLVE THE QUESTION WHETHER SMALL BUSINESSES IN THE EXPLOSIVES INDUSTRY ARE BEING DENIED THEIR FAIR SHARE OF GOVERNMENT CONTRACTS AS REQUIRED TO BE GIVEN THEM BY THE SMALL BUSINESS ACT.