B-154207, NOV. 20, 1964

B-154207, NOV. 20, 1964

TO MERMELSTEIN, BURNS AND LESSER:

FURTHER REFERENCE IS MADE TO YOUR LETTER DATED JUNE 1, 1964, CONCERNING THE PROTEST OF DAGE TELEVISION COMPANY, A DIVISION OF HARVEY-WELLS CORPORATION, OF AN AWARD OF A CONTRACT UNDER UNITED STATES NAVY INVITATION FOR BIDS NO. 604-101-64, ISSUED BY THE NAVY PURCHASING OFFICE.

INVITATION NO. 604-101-64, FOR A CLOSED CIRCUIT EDUCATIONAL TELEVISION SYSTEM, WHICH INCLUDES INSTALLATION AT FORD ISLAND, PEARL HARBOR, WAS MAILED TO 55 PROSPECTIVE BIDDERS. THE PROCUREMENT WAS RESTRICTED TO SMALL BUSINESS CONCERNS ON THE BASIS OF A TOTAL JOINT SET-ASIDE DETERMINATION OF THE CONTRACTING OFFICER AND THE SMALL BUSINESS ADMINISTRATION (SBA), HAWAII, WITH THE CONCURRENCE OF THE BUREAU OF SUPPLIES AND ACCOUNTS, DEPARTMENT OF THE NAVY. THE INVITATION MADE PROVISIONS FOR BIDS TO BE SUBMITTED ON THREE (3) LOTS; LOT I FOR A SYSTEM WHICH PROVIDED THE BARE ESSENTIALS NEEDED FOR THE SYSTEM TO BE FUNCTIONAL; LOT II AND LOT III FOR ADDITIVE ITEMS SUCCESSIVELY TO LOT I SO AS TO PROVIDE A SYSTEM CONDUCIVE TO OPERATIONAL FLEXIBILITY. THE RIGHT TO AWARD ANY OR ALL OF THE LOTS ADVERTISED WAS VESTED IN THE GOVERNMENT, THE LIMITATION OF $240,000 COMMITTED FOR THE PROCUREMENT CONTROLLING. THREE BIDS WERE RECEIVED: VIDEO SYSTEMS, INC., WAS LOW ON EACH LOT AND ITS CUMULATIVE LOW BID PRICE OF $132,409.12 FOR THE THREE LOTS WAS REVIEWED FOR TECHNICAL COMPLIANCE WITH THE SPECIFICATION BY U. S. FLEET SUBMARINE TRAINING FACILITY WHICH RECOMMENDED AWARD THEREOF ON MARCH 30, 1964, SUBJECT TO CLARIFICATION OF THE INTENT OF THE BID IN TWO MINOR AREAS. THIS MATTER IS STATED TO HAVE BEEN RESOLVED PURSUANT TO ASPR 2-405.

THE RECORD SHOWS THAT YOUR PROTEST IS BASED UPON THE GROUND THAT VIDEO SYSTEM, INC., OBTAINS FROM GENERAL PRECISION LABORATORIES, INC., FINISHED END PRODUCTS AND NOT MATERIALS, COMPONENTS AND OTHER SUPPLIES. THUS, WHILE YOUR LETTER OF MAY 14, 1964, TO THE CONTRACTING OFFICER REQUESTED THAT A SIZE DETERMINATION OF VIDEO SYSTEMS BE MADE BY THE SMALL BUSINESS ADMINISTRATION THE GROUND STATED THEREFOR REVEALED THAT YOU WERE NOT QUESTIONING THE SIZE OF VIDEO SYSTEMS, INC., BUT RATHER ITS CONTRACTUAL AFFILIATIONS WITH BIG BUSINESS. THE STATUS OF VIDEO SYSTEMS, INC., AS A SMALL BUSINESS STATUS WAS NOT QUESTIONED IN THE PROTEST, THERE WAS NO REFERRAL BY THE PROCUREMENT ACTIVITY TO THE SMALL BUSINESS ADMINISTRATION, WHICH OFFICE, IT IS REPORTED, ALSO HAD RECEIVED SIMILAR PROTESTS.

PAGE 59 OF THE INVITATION PROVIDED THAT THE PROCUREMENT WAS A TOTAL SET- ASIDE FOR SMALL BUSINESS FIRMS ONLY AND PROVIDED IN PERTINENT PART AS FOLLOWS:

"/A) RESTRICTION. BIDS OR PROPOSALS UNDER THIS PROCUREMENT ARE SOLICITED FROM SMALL BUSINESS CONCERNS ONLY AND THIS PROCUREMENT IS TO BE AWARDED ONLY TO ONE OR MORE SMALL BUSINESS CONCERNS. THIS ACTION IS BASED ON A DETERMINATION BY THE CONTRACTING OFFICER, ALONE OR IN CONJUNCTION WITH A REPRESENTATIVE OF THE SMALL BUSINESS ADMINISTRATION, THAT IT IS IN THE INTEREST OF MAINTAINING OR MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY, IN THE INTEREST OF WAR OR NATIONAL DEFENSE PROGRAMS, OR IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF GOVERNMENT PROCUREMENT IS PLACED WITH SMALL BUSINESS CONCERNS. BIDS OR PROPOSALS RECEIVED FROM FIRMS WHICH ARE NOT SMALL BUSINESS CONCERNS SHALL BE CONSIDERED NONRESPONSIVE AND SHALL BE REJECTED.

"/B) DEFINITION. A "SMALL BUSINESS CONCERN" 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 CAN FURTHER QUALIFY UNDER THE CRITERIA SET FORTH IN REGULATIONS OF THE SMALL BUSINESS ADMINISTRATION (CODE OF FEDERAL REGULATIONS, TITLE 13, SECTION 121.3-8). IN ADDITION TO MEETING THESE CRITERIA, A MANUFACTURER OR A REGULAR DEALER SUBMITTING BIDS OR PROPOSALS IN HIS OWN NAME MUST AGREE TO FURNISH IN THE PERFORMANCE OF THE CONTRACT END ITEMS MANUFACTURED OR PRODUCED IN THE UNITED STATES,ITS POSSESSIONS, OR PUERTO RICO, BY SMALL BUSINESS CONCERNS: PROVIDED, THAT THIS ADDITIONAL REQUIREMENT DOES NOT APPLY IN CONNECTION WITH CONSTRUCTION OR SERVICE CONTRACTS.'

IN YOUR LETTER DATED APRIL 15, 1964, TO THE CONTRACTING OFFICER, YOU REFER SPECIFICALLY TO THE STATEMENT IN PARAGRAPH (B), PAGE 59 OF THE INVITATION AND IT IS YOUR CONTENTION THAT "IN VIEW OF THE ABOVE AND THE CONDITIONS OF THE SMALL BUSINESS SET-ASIDE, ANY DEALER MUST AGREE TO FURNISH END ITEMS MANUFACTURED BY THE SMALL BUSINESS CONCERNS.' YOU STATE FURTHER THAT VIDEO SYSTEMS IS A DEALER FOR GENERAL PRECISION LABORATORIES, A DIVISION OF GENERAL PRECISION INSTRUMENTS, INC.

VIDEO SYSTEMS, INC., HAS CERTIFIED THAT IT IS A SMALL BUSINESS CONCERN AND THAT IT IS A MANUFACTURER. THE ADMINISTRATIVE OFFICE REPORTS THAT IT WAS AWARE OF THE CONTRACTUAL CONNECTION OF VIDEO SYSTEMS IN RELATION TO ITS SOURCE OF SUPPLIES FOR THE PROCUREMENT AND THAT IT CONSIDERS THE MANUFACTURED OR END PRODUCT TO BE THE INSTALLATION, CHECKOUT AND ADJUSTMENT AT THE SITE OF THE CLOSED CIRCUIT TELEVISION SYSTEM REQUESTED. FURTHER, IT IS REPORTED THAT A REVIEW OF YOUR BID REVEALED THAT YOUR COMPANY CONTEMPLATED USING COMPONENTS MANUFACTURED BY CONCERNS IDENTIFIED AS BIG BUSINESS, NAMELY, BELL AND HOWELL, CO., TEKTRONIX, INC., THOMPSON RAMO WOOLRIDGE, INC., AND RCA; ALSO THE SERVICES OF KENTRON HAWAII, LTD., A SUBSIDIARY OF LING-TEMCO-VOUGHT, INC., WERE TO BE UTILIZED BY YOUR COMPANY TO INSTALL, CHECKOUT AND ADJUST THE SYSTEM OFFERED. THUS, IT IS DEVELOPED BY THE RECORD THAT IT WAS WITHIN YOUR CONTEMPLATION THAT THE END PRODUCT IN THIS PROCUREMENT IF AWARDED TO YOU WAS TO BE SUPPLIED BY YOUR COMPANY'S AUTHORIZED SALES AND SERVICE REPRESENTATIVE, KENTRON HAWAII, LTD., A BIG BUSINESS SUBSIDIARY.

WHETHER A FIRM QUALIFIES AS A MANUFACTURER IS A QUESTION FOR DETERMINATION IN THE FIRST INSTANCE BY THE CONTRACTING OFFICER. WE HAVE HELD THAT A FIRM WHICH PERFORMS WORK ON, AND ADDS MATERIAL TO, A PRODUCT WHICH IS SMALL IN COMPARISON TO THE VALUE OF THE FINISHED PRODUCT MAY NEVERTHELESS QUALIFY AS A MANUFACTURER OF THE END ITEM. 39 COMP. GEN. 435.

WE HAVE PREVIOUSLY CONSIDERED AN INVITATION PROVISION SUCH AS THAT CITED ABOVE AND WHICH FORMS THE BASIS OF YOUR PROTEST. WE HELD IN THAT DECISION THAT THE CLAUSE WAS BASED UPON SECTION 1-706.5 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR 1-706.5/C), 1963 EDITION) BUT THAT THERE WAS NOTHING IN THE REGULATION OR THE INVITATION DEFINING "END ITEMS.' SINCE THERE WAS NO PROVISION IN THE INVITATION PROVIDING SPECIFICALLY WHAT CONSTITUTED END ITEMS OR THE FUNCTIONS THAT WERE TO BE PERFORMED BY SMALL BUSINESS, AND SINCE THE FACTS INVOLVED WERE KNOWN BY THE CONTRACTING OFFICER AND THE SMALL BUSINESS ADMINISTRATION PRIOR TO AWARD, WE SAW NO LEGAL BASIS TO QUESTION THE AWARD MADE IN THAT CASE. SEE B-148260, DATED MAY 8, 1962 (COPY HEREWITH). WE THINK THAT THE INSTANT CASE CONTAINS A SIMILAR FACTUAL BACKGROUND AND IS BASED UPON THE SAME CONSIDERATIONS AS THE CASE IN THE CITED DECISION. IN THESE CIRCUMSTANCES WE MUST HOLD LIKEWISE.