B-154161, JUN. 23, 1964

B-154161, JUN. 23, 1964

TO TROY LAUNDRY MACHINERY:

REFERENCE IS MADE TO YOUR LETTER OF MAY 6, 1964, PROTESTING AGAINST THE 100 PERCENT SET-ASIDE FOR SMALL BUSINESS OF INVITATION FOR BIDS NO. M3-1- 65, ISSUED BY THE VETERANS ADMINISTRATION SUPPLY DEPOT, HINES, ILLINOIS, FOR LAUNDRY EQUIPMENT INTENDED FOR THE VETERANS ADMINISTRATION HOSPITALS AT AUGUSTA, GEORGIA, AND RUTLAND HEIGHTS, MASSACHUSETTS.

YOUR CONCERN IN THE MATTER APPEARS TO BE SUBSTANTIALLY SET FORTH IN THE THIRD PARAGRAPH OF YOUR LETTER AS FOLLOWS:

"NOW, WE FIND THAT THE SMALL BUSINESS LAW COMBINED WITH CERTAIN FEDERAL PROCUREMENT REGULATIONS ARE BEING INTERPRETED AND EXERCISED IN A MANNER THAT EXCLUDES THE LARGER, MORE EXPERIENCED LAUNDRY MACHINERY MANUFACTURERS FROM BIDDING. I BELIEVE WE FIRST CALLED YOUR ATTENTION TO THIS PROBLEM WHERE IT APPLIED TO CERTAIN NAVY PROCUREMENT, AT MECHANICSBURG, PA., SEVERAL YEARS AGO. NOW IT APPEARS THAT SUCH LIMITATION IS BEING INTRODUCED IN VETERANS ADMINISTRATION INVITATIONS, -- ONE OF THE LARGEST PURCHASERS OF LAUNDRY EQUIPMENT,--- FOR GOVERNMENT HOSPITAL APPLICATIONS. THIS EFFECTIVELY CLOSES THE DOOR TO BIDDING, BY LARGER MANUFACTURERS, WHILE ENCOURAGING SMALL, LESS EXPERIENCED, MANUFACTURERS TO BID ON PROJECTS WHICH ARE NORMALLY BEYOND THEIR SCOPE, AND AT THE SAME TIME, ESSENTIALLY GUARANTEEING SMALL MANUFACTURERS THIS BUSINESS, AS THEIR "FAIR OPORTION.'"

IN ADDITION THERETO YOU STATE THAT THE TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS OF THE INSTANT PROCUREMENT, AS WELL AS OTHER VETERANS ADMINISTRATION PROCUREMENTS, OPERATES TO THE DETRIMENT OF YOUR FIRM. REQUESTING THAT SUCH LIMITED INVITATIONS BE DISALLOWED YOU INQUIRE AS TO WHETHER THE VETERANS ADMINISTRATION HAS BEEN EXERCISING ITS JOINT DETERMINATION RESPONSIBILITIES IN MAKING THE SET-ASIDES.

SECTION 15 OF THE SMALL BUSINESS ACT OF 1958 (15 U.S.C. 644) STATES THE CONGRESSIONAL POLICY THAT SMALL BUSINESS CONCERNS SHALL RECEIVE ANY CONTRACT AWARD AS TO WHICH IT IS DETERMINED BY THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING AGENCY THAT SUCH ACTION WOULD 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. THE SECTION ALSO PROVIDES THAT WHENEVER THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING PROCUREMENT AGENCY FAIL TO AGREE, THE MATTER SHALL BE SUBMITTED FOR DETERMINATION TO THE SECRETARY OR THE HEAD OF THE APPROPRIATE DEPARTMENT OR AGENCY. SECTION 1-1.706-2 (A) (1), FEDERAL PROCUREMENT REGULATIONS, SUPPLEMENTING SUCH STATUTORY PROVISIONS, PROVIDES IN PERTINENT PART THAT WHEN A SMALL BUSINESS ADMINISTRATION REPRESENTATIVE HAS RECOMMENDED THAT ALL, OR A PORTION, OF AN INDIVIDUAL PROCUREMENT OR CLASS OF PROCUREMENTS BE SET ASIDE FOR SMALL BUSINESS, THE CONTRACTING OFFICER (OR OTHER DESIGNATED REPRESENTATIVE OF THE PROCUREMENT AGENCY) SHALL PROMPTLY EITHER CONCUR IN THE RECOMMENDATION, OR DISAPPROVE THE RECOMMENDATION, STATING IN WRITING HIS REASONS FOR DISAPPROVAL. THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE SHALL BE ALLOWED TWO WORKING DAYS TO APPEAL ANY SUCH DISAPPROVAL TO THE HEAD OF THE PROCURING ACTIVITY OR HIS DESIGNEE FOR DECISION AND SUCH DECISION MAY THEREAFTER BE APPEALED TO THE HEAD OF THE AGENCY.

CLEARLY, UNDER BOTH THE BASIC LAW AND THE IMPLEMENTING REGULATION THE FINAL DETERMINATION AS TO WHETHER OR NOT BIDS UNDER A PROCUREMENT WILL BE SOLICITED FROM SMALL BUSINESS CONCERNS ONLY IS PLACED WITHIN THE ADMINISTRATIVE DISCRETION OF THE PROCURING AGENCY CONCERNED.

THE VETERANS ADMINISTRATION REPORTS THAT THERE IS NO QUESTION AS TO ADEQUACY OF COMPETITION BETWEEN SMALL FIRMS TO INSURE REASONABLE PRICES ON THE REQUIRED LAUNDRY EQUIPMENT, WHICH IS ORDINARILY CENTRALLY PROCURED BY THEIR MARKETING DIVISION AT HINES, AND THAT CONSIDERATION IS REGULARLY GIVEN TO PROPOSED PROCUREMENTS FOR THE PURPOSE OF DETERMINING WHETHER SOME, OR ALL, SHOULD BE SET ASIDE FOR SMALL FIRMS. THE REPORT CONCLUDES THAT THE VETERANS ADMINISTRATION SET ASIDE ACTIONS IN CONNECTION WITH ITS PROCUREMENTS OF LAUNDRY EQUIPMENT ARE NOT ADMINISTRATIVELY REGARDED AS HAVING BEEN UNDULY RESTRICTIVE UPON LARGE BUSINESS AND AS SUPPORT FOR SUCH VIEW THE FOLLOWING INFORMATION IS FURNISHED:

"DURING FISCAL YEAR 1963, NONE OF OUR LAUNDRY EQUIPMENT PROCUREMENTS WERE SET ASIDE FOR SMALL FIRMS AND THE BREAKDOWN OF AWARDS WAS:

LARGE BUSINESS--- 124 LINE ITEMS VALUED AT $335,506

SMALL BUSINESS--- 43 LINE ITEMS VALUED AT $183,405

"FOR FISCAL YEAR 1964, TO DATE, ONLY OUR LAST TWO LAUNDRY EQUIPMENT PROCUREMENTS WERE SET ASIDE--- THE FIRST OF WHICH IS THE SUBJECT OF TROY'S PROTEST. NO AWARD HAS YET BEEN MADE ON THESE INVITATIONS. THE BREAKDOWN OF ACTUAL AWARDS FOR THE PERIOD IS:

LARGE BUSINESS--- 143 LINE ITEMS VALUED AT $649,870

SMALL BUSINESS--- 95 LINE ITEMS VALUED AT $287,358"

WHILE A SPECIFIC DEFINITION WAS NOT GIVEN IN THE 1958 SMALL BUSINESS LEGISLATION AS TO WHAT CONSTITUTES A "FAIR PROPORTION" OF THE GOVERNMENT'S TOTAL PURCHASE TO BE PLACED WITH SMALL BUSINESS CONCERNS, THE INTENT OF THE ACT WAS TO BROADEN THE BASE AND INCREASE THE SHARE OF SMALL BUSINESS PARTICIPATION IN THE TOTAL GOVERNMENT PROCUREMENT PROGRAM. IN VIEW OF SUCH INTENT AND THE ABOVE DATA FURNISHED BY VETERANS ADMINISTRATION, WHICH SHOWS A DROP IN THE PROPORTION OF LAUNDRY EQUIPMENT PROCUREMENTS BY THAT AGENCY FROM SMALL BUSINESS IN 1964 AS AGAINST 1963, AND REFLECTS FOR THE PERIOD COVERED ONLY TWO PROCUREMENTS OF LAUNDRY EQUIPMENT SET-ASIDE FOR SMALL BUSINESS, WE CAN NOT CONCLUDE THAT MORE THAN A FAIR PROPORTION OF THE VETERANS ADMINISTRATION PROCUREMENTS OF LAUNDRY MACHINERY IS BEING PLACED WITH SMALL BUSINESS FIRMS.

ACCORDINGLY, YOU ARE ADVISED THAT WE DO NOT FIND A LEGAL BASIS FOR OBJECTING TO THE SET-ASIDE ACTION TAKEN IN CONNECTION WITH THE VETERANS ADMINISTRATION INVITATION FOR BIDS TO WHICH YOU HAVE OBJECTED. REGARDLESS OF YOUR CONTENTIONS AS TO THE PUBLIC POLICY OR ECONOMICS OF THE SET-ASIDE PROCEDURE, SUCH ACTION APPEARS TO HAVE BEEN CLEARLY WITHIN THE AUTHORITY CONFERRED BY THE SMALL BUSINESS ACT, AND OUR OFFICE MUST NECESSARILY RECOGNIZE AND ABIDE BY THE POLICY OF THE CONGRESS AS ENACTED INTO LAW.

CONCERNING THE GENERAL IMPLICATIONS OF THE TERM "FAIR PROPORTION,"AS USED IN THE SMALL BUSINESS ACT, THERE IS ENCLOSED A COPY OF OUR DECISION, 41 COMP. GEN. 649, WHICH YOU MAY FIND OF INTEREST.