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B-155122, NOVEMBER 6, 1964, 44 COMP. GEN. 271

B-155122 Nov 06, 1964
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QUALIFIES AS A SMALL BUSINESS CONCERN UNDER PARAGRAPH 121.3-8 (C) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION IS A CONCLUSIVE DETERMINATION PURSUANT TO 15 U.S.C. 637 (B) (6) AS TO THE SMALL BUSINESS STATUS OF THE ORGANIZATION ON THE BASIS OF SUBSTANTIAL EVIDENCE THAT THE SERVICES TO BE PURCHASED FROM THE DAIRY. TO PROCESS THE RAW MILK INTO THE FINISHED PRODUCTS TO BE FURNISHED THE GOVERNMENT WILL NOT BE SO EXTENSIVE AS TO CONVERT THE PRODUCTS OF THE MILK PRODUCERS ORGANIZATION INTO THOSE OF THE DAIRY. WHETHER THE LOW BIDDER IS A MANUFACTURER OR DEALER UNDER THE WALSH HEALEY PUBLIC CONTRACTS ACT IS FOR DETERMINATION BY THE CONTRACTING OFFICER. BIDS WERE OPENED ON JULY 10. WITH THE SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICE ALLEGING THAT CAMPA IS NOT A SMALL BUSINESS FIRM.

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B-155122, NOVEMBER 6, 1964, 44 COMP. GEN. 271

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SIZE - PARTIAL PERFORMANCE BY OTHER THAN SMALL BUSINESS THE DETERMINATION OF THE SMALL BUSINESS ADMINISTRATION SIZE APPEALS BOARD THAT THE LOW BIDDER UNDER A TOTAL SMALL BUSINESS SET-ASIDE FOR FURNISHING DAIRY PRODUCTS, A MILK PRODUCERS ASSOCIATION ORGANIZED TO SELL THE RAW MILK PRODUCTS OF ITS MEMBERS, QUALIFIES AS A SMALL BUSINESS CONCERN UNDER PARAGRAPH 121.3-8 (C) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION IS A CONCLUSIVE DETERMINATION PURSUANT TO 15 U.S.C. 637 (B) (6) AS TO THE SMALL BUSINESS STATUS OF THE ORGANIZATION ON THE BASIS OF SUBSTANTIAL EVIDENCE THAT THE SERVICES TO BE PURCHASED FROM THE DAIRY, HELD BY THE SIZE STANDARD DIVISION NOT TO BE A SMALL BUSINESS CONCERN, TO PROCESS THE RAW MILK INTO THE FINISHED PRODUCTS TO BE FURNISHED THE GOVERNMENT WILL NOT BE SO EXTENSIVE AS TO CONVERT THE PRODUCTS OF THE MILK PRODUCERS ORGANIZATION INTO THOSE OF THE DAIRY, AND WHETHER THE LOW BIDDER IS A MANUFACTURER OR DEALER UNDER THE WALSH HEALEY PUBLIC CONTRACTS ACT IS FOR DETERMINATION BY THE CONTRACTING OFFICER, SUBJECT TO REVIEW BY THE DEPARTMENT OF LABOR.

TO RIDDLE, O-HERIN AND NEWBERRY, NOVEMBER 6, 1964:

BY TELEGRAM DATED SEPTEMBER 7, 1964, AND SUBSEQUENT CORRESPONDENCE, YOU PROTESTED, ON BEHALF OF SUNNY HILL FARMS DAIRY CO., INC., AGAINST THE AWARD OF A CONTRACT TO THE CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION (CAMPA) BY THE DEPARTMENT OF THE AIR FORCE UNDER INVITATION FOR BIDS NO. 03-601-64-53, COVERING THE PROCUREMENT OF DAIRY PRODUCTS BY BLYTHEVILLE AIR FORCE BASE.

THE INVITATION DATED JUNE 4, 1964, REQUESTED BIDS UNDER A TOTAL SMALL BUSINESS SET-ASIDE FOR FURNISHING DAIRY PRODUCTS FOR THE PERIOD AUGUST 1, 1964, OR FROM DATE OF AWARD IF SUBSEQUENT THERETO, TO JULY 31, 1965. BIDS WERE OPENED ON JULY 10, 1964, AND IT APPEARED THAT CAMPA SUBMITTED THE LOWEST AGGREGATE BID IN THE AMOUNT OF $163,519.51, LESS A PROMPT PAYMENT DISCOUNT OF 1 PERCENT, 10 DAYS, AND SUNNY HILL SUBMITTED THE NEXT LOWEST AGGREGATE BID IN THE AMOUNT OF $164,437.58, NET. SUNNY HILL FILED A FORMAL PROTEST ON JULY 11, 1964, WITH THE SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICE ALLEGING THAT CAMPA IS NOT A SMALL BUSINESS FIRM. THE PROCUREMENT OFFICE ON THE SAME DAY REQUESTED THE SBA REGIONAL OFFICER TO MAKE A SIZE DETERMINATION OF CAMPA. THE BASIS OF THE SIZE PROTEST WAS AS FOLLOWS:

5) THAT THE BID MADE BY THE CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION IS NON-RESPONSIVE AND SHOULD BE REJECTED BECAUSE THE SAID CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION IS NOT A SMALL BUSINESS FOR PURPOSES OF GOVERNMENT PROCUREMENT PREFERENCE UNDER THE CATEGORY OF MILK MANUFACTURERS, FOR THE FOLLOWING REASONS:

A) THE CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION HAS SALES IN EXCESS OF $10,000,000.00 FOR THE LAST FISCAL YEAR PRIOR TO THE BID DATE OF JULY 1, 1964.

B) THE CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION IS A COOPERATIVE ORGANIZED FOR THE PURPOSE OF SELLING THE RAW MILK PRODUCED BY ITS MEMBERS.

D) THE CENTRAL ARKANSAS MILK PRODUCERS ASSOCIATION HAS CONTRACTED WITH THE FOREMOST DAIRY COMPANY OF PARAGOULD, ARKANSAS FOR THE MANUFACTURE AND PROCESSING OF RAW MILK TO THE FINISHED MILK PRODUCTS THAT WILL BE USED TO FULFILL THIS SAID GOVERNMENT CONTRACT, AND THAT THE SAID FOREMOST DAIRY COMPANY IS NOT A SMALL BUSINESS AS DEFINED BY THE SMALL BUSINESS ADMINISTRATION FOR PURPOSES OF GOVERNMENT PROCUREMENT PREFERENCE UNDER THE CATEGORY OF MILK MANUFACTURERS.

ON AUGUST 3, 1964, THE DIRECTOR, SIZE STANDARDS DIVISION, SBA, DETERMINED THAT CAMPA WAS NOT A SMALL BUSINESS FOR THE PURPOSE OF GOVERNMENT PROCUREMENT. THAT DETERMINATION READ IN PART:

* * * WE HAVE DETERMINED THAT CAMPA HAS NO AFFILIATES AND THAT ITS TOTAL AVERAGE EMPLOYMENT IS LESS THAN 500 PERSONS. HOWEVER, WE UNDERSTAND THAT IF CAMPA WERE TO RECEIVE THIS AWARD, IT PROPOSES TO DELIVER IN THE PERFORMANCE OF THE CONTRACT DAIRY PRODUCTS PROCESSED, I.E., MANUFACTURED, BY A CONCERN WHICH DOES NOT QUALIFY AS A SMALL BUSINESS. PARAGRAPH 121.3- 8 (C) OF THE SMALL BUSINESS SIZE STANDARDS REGULATION PROVIDES THAT, EXCEPT IN THE CASE OF CONSTRUCTION OR SERVICE CONTRACTS, A CONCERN SUBMITTING A BID IN ITS OWN NAME ON A PROCUREMENT RESERVED FOR SMALL BUSINESS BUT WHICH PROPOSES TO FURNISH A PRODUCT NOT MANUFACTURED BY SAID BIDDER, IS A SMALL BUSINESS ONLY IF (1) ITS EMPLOYMENT DOES NOT EXCEED 500 PERSONS AND (2) IT WILL FURNISH IN THE PERFORMANCE OF THE CONTRACT THE PRODUCTS OF A SMALL BUSINESS MANUFACTURER OR PRODUCER. FOR SIZE DETERMINATION PURPOSES, THE CONCERN THAT PRODUCES THE END ITEM IS CONSIDERED AS BEING THE MANUFACTURER OF THE PRODUCT BEING PURCHASED. VIEW OF THE ABOVE, WE HAVE DETERMINED THAT CAMPA IS NOT, REPEAT NOT A SMALL BUSINESS CONCERN FOR THE PURPOSE OF THE PROCUREMENT IN QUESTION BECAUSE PRODUCTS IT WILL DELIVER ARE TO BE MANUFACTURED BY A CONCERN WHICH DOES NOT QUALIFY AS A SMALL BUSINESS.

THEREAFTER, ON AUGUST 10, 1964, CAMPA APPEALED FROM THIS DETERMINATION TO THE SBA SIZE APPEALS BOARD. ON SEPTEMBER 3, 1964, THE APPEALS BOARD SUSTAINED THE APPEAL OF CAMPA ON THE BASIS THAT THE DAIRY PRODUCTS TO BE FURNISHED ARE PRODUCTS OF CAMPA; THAT CAMPA WILL BE PURCHASING THE SERVICES, AS DISTINGUISHED FROM THE PRODUCTS, OF FOREMOST DAIRIES, INC., AND THAT THE SERVICES SO PURCHASED WILL NOT BE SO EXTENSIVE AS TO CONVERT THE PRODUCTS OF CAMPA INTO THOSE OF FOREMOST DAIRIES, INC.

IT IS CONTENDED BY YOU THAT THE FINDINGS OF FACT AND THE DECISION OF SBA SIZE APPEALS BOARD ARE ERRONEOUS SINCE "THEY ARE NOT BASED UPON ANY EVIDENCE AND ARE ARBITRARY AND CAPRICIOUS AND THE CONCLUSIONS OF LAW CONTAINED IN SAID DECISION ARE CONTRARY TO CONTRACTUAL AND STATUTORY PROVISIONS AND THE LEGAL PRINCIPLES CONCERNING DETERMINATION OF SMALL BUSINESS STATUS.' ALSO, YOU CONTEND THAT SUCH DECISION IS CONTRARY TO ARMED SERVICES PROCUREMENT REGULATION 1-903.1 (VI) AND 12 601, ET SEQ., CONCERNING THE QUALIFICATION OF A RESPONSIBLE PROSPECTIVE CONTRACTOR UNDER THE WALSH-HEALEY PUBLIC CONTRACTS ACT, CITING IN THAT CONNECTION 37 COMP. GEN. 676.

THE QUESTION WHETHER A BIDDER IS A MANUFACTURER OR A REGULAR DEALER UNDER THE WALSH-HEALEY ACT, 41 U.S.C. 35, IS FOR DETERMINATION IN THE FIRST INSTANCE BY THE CONTRACTING AGENCY SUBJECT, HOWEVER, TO REVIEW BY THE DEPARTMENT OF LABOR. SBA HAS NO ORIGINAL OR APPELLATE JURISDICTION WITH RESPECT TO THE STATUS OF A BIDDER, SMALL OR LARGE, UNDER THE WALSH-HEALEY PUBLIC CONTRACTS ACT. 37 COMP. GEN. 676; B 144614, JANUARY 5, 1961; B- 123889, MAY 20, 1955; B-151552, APRIL 30, 1964. THE SIZE APPEALS BOARD DID NOT, AND COULD NOT, CONCLUSIVELY DETERMINE CAMPA'S STATUS AS A REGULAR DEALER OR MANUFACTURE OF DAIRY PRODUCTS. RATHER, IT CONSIDERED WHETHER CAMPA WOULD FURNISH PRODUCTS MANUFACTURED BY A SMALL BUSINESS CONCERN FOR THE SOLE PURPOSE OF DETERMINING ITS STATUS UNDER SECTION 121.3-8 (B) OF THE SBA SIZE REGULATIONS. THIS REGULATION, PROMULGATED PURSUANT TO 15 U.S.C. 634 (B) (6), PROVIDES AS FOLLOWS:

(B) DEFINITION OF SMALL BUSINESS NONMANUFACTURER. ANY CONCERN WHICH SUBMITS A BID OR OFFER IN ITS OWN NAME, OTHER THAN A CONSTRUCTION OR SERVICE CONTRACT, BUT WHICH PROPOSES TO FURNISH A PRODUCT NOT MANUFACTURED BY SAID BIDDER OR OFFERER, IS DEEMED TO BE A SMALL BUSINESS CONCERN HEN:

(1) IT IS A SMALL BUSINESS CONCERN WITHIN THE MEANING OF PARAGRAPH (A) OF THIS SECTION, AND

(2) IN THE CASE OF GOVERNMENT PROCUREMENT RESERVED FOR OR INVOLVING THE PREFERENTIAL TREATMENT OF SMALL BUSINESSES, SUCH NONMANUFACTURER SHALL FURNISH IN THE PERFORMANCE OF THE CONTRACT THE PRODUCTS OF A SMALL BUSINESS MANUFACTURER OR PRODUCER WHICH PRODUCTS ARE MANUFACTURED OR PRODUCED IN THE UNITED STATES: * * *

UNDER 15 U.S.C. 637 (B) (6), SBA IS AUTHORIZED TO DETERMINE WHICH FIRMS WITHIN ANY INDUSTRY ARE TO BE DESIGNATED AS SMALL BUSINESS CONCERNS FOR PURPOSES OF GOVERNMENT PROCUREMENT. THIS PROVISION OF LAW FURTHER STATES THAT "OFFICES OF THE GOVERNMENT HAVING PROCUREMENT OR LENDING POWERS * * * SHALL ACCEPT AS CONCLUSIVE THE ADMINISTRATION'S DETERMINATION AS TO WHICH ENTERPRISES ARE TO BE DESIGNATED "SMALL BUSINESS CONCERNS," AS AUTHORIZED AND DIRECTED UNDER THIS PARAGRAPH.' REGULATIONS OF SBA, DEFINING A SMALL BUSINESS CONCERN, HAVE THE FORCE AND EFFECT OF LAW. OTIS STEEL PRODUCTS CORPORATION V. UNITED STATES, 316 F.2D 937. IN THE CASE OF SPRINGFIELD WHITE CASTLE COMPANY V. FOLEY, UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI, MAY 27, 1964, THE COURT, IN CONSIDERING AN ACTION TO DETERMINE WHETHER A DECISION BY SBA THAT THE PLAINTIFF WAS NOT A SMALL BUSINESS CONCERN WAS ERRONEOUS AND NOT SUPPORTED BY SUBSTANTIAL EVIDENCE, HELD IN PERTINENT PART:

BEFORE EMBARKING ON A DISCUSSION OF THE FACTS IT SHOULD FIRST BE POINTED OUT THAT IF THE DETERMINATION OF THE ADMINISTRATOR IS SUPPORTED BY SUBSTANTIAL EVIDENCE, THEN THAT DECISION IS FINAL UNLESS ERRONEOUS AS A MATTER OF LAW. SEC. 1009, TITLE 5, U.S.C. IN THE PRESENT CASE THE PLAINTIFF DOES NOT QUARREL WITH THE VALIDITY OF THE REGULATIONS UNDER WHICH IT WAS DETERMINED THAT PLAINTIFF IS NOT A SMALL BUSINESS, BUT PLAINTIFF ASSERTS THAT THE FINDING OF THE ADMINISTRATOR IS NOT SUPPORTED BY SUBSTANTIAL EVIDENCE. WHILE THIS COURT MIGHT, IF MAKING THE ORIGINAL DETERMINATION, REACH A RESULT DIFFERENT THAN THAT REACHED BY THE ADMINISTRATOR, IF THE FINDING OF THE ADMINISTRATOR IS SUPPORTED BY SUBSTANTIAL EVIDENCE THEN THE FINDING OF THE ADMINISTRATOR MUST STAND AS FINAL. * * *

THE COURT IN THAT CASE HELD THAT THE SBA DECISION WAS SUPPORTED BY SUBSTANTIAL EVIDENCE.

FOR SUBSTANTIALLY THE SAME REASON AS STATED BY THE COURT IN THE ABOVE CASE AND SINCE THE DECISION OF THE SBA, BY STATUTE, IS "CONCLUSIVE," WE FIND NO LEGAL BASIS TO QUESTION THE DETERMINATION THAT CAMPA IS SMALL BUSINESS FOR THE PURPOSES OF GOVERNMENT PROCUREMENT. ACCORDINGLY, YOUR PROTEST IS DENIED.

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