B-225012, FEB 13, 1987, 66 COMP.GEN. 257

B-225012, FEB 13, 1987, 66 COMP.GEN. 257

PROCUREMENT - SOCIO-ECONOMIC POLICIES - SMALL BUSINESS SET-ASIDES - USE JUSTIFICATION PROTEST CHALLENGING A CONTRACTING OFFICER'S DECISION TO SET ASIDE A PROCUREMENT FOR COMPETITION EXCLUSIVELY AMONG SMALL BUSINESS CONCERNS IS DENIED WHERE, ALTHOUGH THE CONTRACTING OFFICER'S DECISION WAS BASED ONLY ON ADVICE FROM OTHER AGENCY OFFICIALS THAT THE TECHNICAL DATA WERE ADEQUATE FOR COMPETITION AND THAT A SET-ASIDE WOULD BE APPROPRIATE, THE RECORD SHOWS THAT AFTER THE SOLICITATION WAS ISSUED TWO SPECIFIC SMALL BUSINESS CONCERNS INDICATED THAT THEY EXPECTED TO COMPETE. PROCUREMENT - SOCIO-ECONOMIC POLICIES - SMALL BUSINESS SET/ASIDES - USE - NATIONAL DEFENSE INTERESTS - APPLICABILITY PLANNED EMERGENCY PRODUCER PROVISION IN REGULATION CONCERNING WHEN A SET- ASIDE FOR SMALL BUSINESS IS APPROPRIATE DOES NOT APPLY WHERE THE PROCUREMENT IS FOR A COMPONENT THAT IS NOT ON AN ESTABLISHED PLANNING LIST.

LITTON ELECTRON DEVICES:

LITTON ELECTRON DEVICES PROTESTS THE DETERMINATION BY THE U.S. ARMY MISSILE COMMAND, HUNTSVILLE, ALABAMA, TO SET ASIDE FOR COMPETITION EXCLUSIVELY AMONG SMALL BUSINESS CONCERNS ITS REQUIREMENT FOR 229 ELECTRON TUBES UNDER INVITATION FOR BIDS (IFB) NO. DAAHO1-87-B-A031. WE DENY THE PROTEST.

THE ITEM BEING PROCURED IS A MICROWAVE, TRAVELING WAVE TUBE (TWT) FOR USE IN A RADAR SYSTEM. LITTON, WHICH IS NOT A SMALL BUSINESS, CONTENDS THAT IT DEVELOPED THE TWT AND HAS BEEN SUPPLYING THESE ITEMS TO THE GOVERNMENT'S RADAR SYSTEM PRIME CONTRACTOR. LITTON SAYS THERE IS ONLY ONE OTHER FIRM QUALIFIED TO PRODUCE THE ITEMS, AND THAT THIS FIRM ALSO IS NOT A SMALL BUSINESS. ACCORDING TO LITTON, THERE IS NO SMALL BUSINESS WITH THE CAPABILITY OF PRODUCING THE ITEMS, AND THEREFORE THE CONTRACTING OFFICER COULD NOT PROPERLY HAVE DETERMINED UNDER THE FEDERAL ACQUISITION REGULATION (FAR), 48 C.F.R. 19.502-2 (1986), THAT A REASONABLE EXPECTATION EXISTED OF RECEIVING OFFERS FROM AT LEAST TWO RESPONSIBLE SMALL BUSINESS CONCERNS AND MAKING AWARD AT A REASONABLE PRICE. LITTON ALSO CONTESTS THE SET-ASIDE BASED ON FAR, 48 C.F.R. 19.502-5(B), WHICH PROVIDES THAT A TOTAL SMALL BUSINESS SET ASIDE SHOULD NOT BE MADE WHEN AN ESTABLISHED PLANNING LIST UNDER THE INDUSTRIAL READINESS PLANNING PROGRAM CONTAINS A LARGE BUSINESS PLANNED EMERGENCY PRODUCER THAT HAS CONVEYED A DESIRE TO SUPPLY SOME OR ALL OF THE REQUIRED ITEMS.

THE CONTRACTING OFFICER REPORTS THAT THE DETERMINATION TO SET ASIDE THIS PROCUREMENT WAS BASED ON ESSENTIALLY TWO FACTORS. FIRST, THE AGENCY'S TECHNICAL DATA REPORT SHOWED THAT THE GOVERNMENT WAS IN POSSESSION OF TECHNICAL DATA FOR THE TWT AND THAT MOST OF THE DRAWINGS WERE SUFFICIENT TO PERMIT UNLIMITED COMPETITION. SECOND, ENGINEERS IN THE AGENCY'S PROCUREMENT OFFICE HAD REVIEWED THE TECHNICAL DATA PACKAGE AND HAD CHECKED A BOX IN A REPORT TO THE CONTRACTING OFFICER INDICATING THAT THIS PROCUREMENT WOULD BE A GOOD CANDIDATE FOR A SMALL BUSINESS SET-ASIDE UNDER FAR, 48 C.F.R. 19.502-2. THE AGENCY ALSO REPORTS THAT SUBSEQUENT TO THE ISSUANCE OF THE IFB, THE PROCUREMENT OFFICE HAD CONTACT WITH A FIRM THAT HAD RECEIVED THE IFB. THE FIRM, STAR MICROWAVE SAID THAT IT WAS A SMALL BUSINESS AND THAT IT WAS INTERESTED IN BIDDING, HAVING HIRED THE INDIVIDUAL WHO HAD DESIGNED THE TWT. SUBSEQUENTLY, IN AN AGENCY PROTEST REPORT FILED BY THE ARMY IN A RELATED PROTEST BY VARIAN ASSOCIATES, INC. (B-225012.2) ALSO QUESTIONING THE SETTING ASIDE OF THIS SOLICITATION, THE AGENCY STATES THAT ANOTHER SMALL BUSINESS FIRM, AXION CORPORATION, HAS EXPRESSED INTEREST IN SUBMITTING AN OFFER. BIDS ARE NOT RESCHEDULED TO BE OPENED UNTIL FEBRUARY 26, 1987.

FAR, 48 C.F.R. 15.502-2, THE SO-CALLED "RULE OF TWO," PROVIDES THAT THE ENTIRE AMOUNT OF AN ACQUISITION SHALL BE SET ASIDE FOR EXCLUSIVE SMALL BUSINESS PARTICIPATION IF THE CONTRACTING OFFICER DETERMINES THAT THERE IS A REASONABLE EXPECTATION THAT OFFERS WILL BE RECEIVED FROM AT LEAST TWO RESPONSIBLE SMALL BUSINESS CONCERNS AND THAT AWARD WILL BE MADE AT A REASONABLE PRICE. ABSENT THIS DETERMINATION, A TOTAL SMALL BUSINESS SET- ASIDE SHOULD NOT BE MADE. ID.

A DETERMINATION UNDER FAR, 48 C.F.R. 19.502-2, THAT COMPETITIVE OFFERS FROM TWO OR MORE SMALL BUSINESS CONCERNS REASONABLY MAY BE EXPECTED IS BASICALLY A BUSINESS JUDGMENT WITHIN THE DISCRETION OF THE CONTRACTING OFFICER. THEREFORE, THIS OFFICE WILL NOT DISTURB A CONTRACTING OFFICER'S SET-ASIDE DETERMINATION UNLESS THERE HAS BEEN A CLEAR SHOWING OF AN ABUSE OF THAT DISCRETION. ADVANCE MACHINE CO., B-217399, SEPT. 20, 1985, 85-2 CPD 311. UNDER THIS STANDARD, WE HAVE HELD THAT PROCUREMENTS PROPERLY HAVE BEEN RESERVED FOR SMALL BUSINESS CONCERNS WHERE THE SET-ASIDE DETERMINATIONS WERE BASED ON SUCH FACTORS AS PRIOR PROCUREMENT HISTORY, ANCHOR CONTINENTAL, INC., 65 COMP.GEN. 270 (1986), 86-1 CPD 137, MARKET SURVEYS, CONSOLIDATED MICROGRAPHICS, INC., B-222229, APR. 29, 1986, 86-1 CPD 415, OR ADVICE FROM THE AGENCY'S SMALL BUSINESS SPECIALISTS AND TECHNICAL PERSONNEL, MANTECH INTERNATIONAL CORP., B-216505, FEB. 11, 1985, 85-1 CPD 176. IN SHORT, WE WILL SUSTAIN A SMALL BUSINESS SET-ASIDE DETERMINATION WHERE THE RECORD SHOWS THAT THE EVIDENCE BEFORE THE CONTRACTING OFFICER WAS ADEQUATE TO SUPPORT THE CONCLUSION THAT SMALL BUSINESS COMPETITION REASONABLY COULD BE EXPECTED.

IN THIS CASE, WHILE WE THINK THE EVIDENCE BEFORE THE CONTRACTING OFFICER WAS NOT ADEQUATE TO SUPPORT THE SET-ASIDE DETERMINATION, WE UPHOLD THE DETERMINATION BECAUSE SUBSEQUENT EVENTS SHOW THAT SUFFICIENT SMALL BUSINESS INTEREST IN THE PROCUREMENT DOES IN FACT EXIST. FROM THE RECORD IT APPEARS THAT THIS IS THE AGENCY'S FIRST DIRECT PROCUREMENT OF THE TWT. THERE WAS THEREFORE NO PRIOR PROCUREMENT HISTORY TO ESTABLISH THAT ANY SMALL BUSINESS CONCERN WAS INTERESTED IN COMPETING FOR AWARD OF A TWT CONTRACT. THERE IS NO INDICATION THAT PRIOR TO ISSUING THE SOLICITATION THE AGENCY CONDUCTED ANY SORT OF MARKET SURVEY, EITHER INFORMALLY OR THROUGH THE MORE FORMAL PROCESS OF SOLICITING EXPRESSIONS OF INTEREST BY WAY OF A COMMERCE BUSINESS DAILY ANNOUNCEMENT. CF. MANTECH INTERNATIONAL CORP., SUPRA. ALTHOUGH THE CONTRACTING OFFICER MAY HAVE BEEN ADVISED THAT THE TECHNICAL DATA AVAILABLE WERE ADEQUATE TO PERMIT COMPETITION, IT DOES NOT FOLLOW NECESSARILY THAT SMALL BUSINESS CONCERNS COULD BE EXPECTED TO COMPETE. WHILE THE AGENCY'S ENGINEERS MAY HAVE THOUGHT THAT THIS PROCUREMENT WAS A GOOD CANDIDATE FOR A SET-ASIDE, THEY DID NOT IDENTIFY ANY SPECIFIC FIRMS THEY BELIEVED CAPABLE OF FURNISHING THE ITEM; IN FACT, THERE IS NOTHING AT ALL IN THE RECORD SHOWING ANY BASIS FOR THE ENGINEERS' BELIEF. NONETHELESS, THE FACT THAT AFTER THE SOLICITATION WAS ISSUED TWO SMALL BUSINESSES EXPRESSED INTEREST IN THE PROCUREMENT SUPPORTS THE CONTRACTING OFFICER'S DETERMINATION. IT WOULD BE POINTLESS TO OBJECT TO THE SET-ASIDE ON THE BASIS THAT NO SPECIFIC FIRMS WERE IDENTIFIED AT THE TIME THE DETERMINATION WAS MADE SINCE AT THIS TIME THE RECORD SHOWS THAT THE REQUISITE NUMBER OF INTERESTED SMALL BUSINESSES EXIST.

WITH RESPECT TO LITTON'S ARGUMENT THAT THE AGENCY SHOULD NOT HAVE SET ASIDE THIS PROCUREMENT FOR SMALL BUSINESS BECAUSE A LARGE BUSINESS PLANNED EMERGENCY PRODUCER DESIRES TO SUPPLY THE REQUIRED ITEMS, THE AGENCY'S RESPONSE IS THAT THE TUBES BEING PROCURED, WHICH ARE COMPONENTS OF A RADAR SYSTEM, ARE NOT THEMSELVES ON AN ESTABLISHED PLANNING LIST. (APPARENTLY, THE RADAR SYSTEM IS ON SUCH A LIST.) IN CONDIESEL MOBILE EQUIPMENT, 64 COMP.GEN. 559 (1985), 85-1 CPD 610, WE SAID THAT AN AGENCY IS NOT PROHIBITED FROM SETTING ASIDE ITS REQUIREMENT FOR A COMPONENT OF A MILITARY ITEM UNLESS THE COMPONENT ITSELF IS ON AN ESTABLISHED PLANNING LIST. HERE, THE ITEM IN QUESTION IS NOT ON A PLANNING LIST, SO THERE IS NO SUCH RESTRICTION ON ITS BEING SET ASIDE.

THE PROTEST IS DENIED.