B-173634, DEC 29, 1971

B-173634, DEC 29, 1971

BID PROTEST - SMALL BUSINESS SET-ASIDE - MANUFACTURER DECISION DENYING PROTEST OF OCTAGON PROCESSING AGAINST AWARD TO DOMCO CHEMICAL CORPORATION UNDER AN IFB ISSUED BY THE GENERAL SERVICES ADMINISTRATION CONCERNING A SMALL BUSINESS SET-ASIDE FOR LAUNDRY AND CLEANING CHEMICALS. PROTESTANT CONTENDS THAT DOMCO IS NOT A MANUFACTURER OF THE ITEM AND AND THEREFORE IS NOT ENTITLED TO AWARD UNDER A SMALL BUSINESS SET ASIDE. UNDER NEW SBA REGULATIONS A DECISION AS TO MANUFACTURER OR NONMANUFACTURER FOR THE PURPOSE OF A SIZE DETERMINATION SHALL BE MADE BY THE APPROPRIATE SBA REGIONAL DIRECTOR. ACCORDINGLY, THE PROTEST IS DENIED.

TO FRIED, FRANK, HARRIS, SHRIVER & KAMPELMAN:

REFERENCE IS MADE TO YOUR LETTER OF SEPTEMBER 1, 1971, AND PRIOR CORRESPONDENCE, PROTESTING ON BEHALF OF OCTAGON PROCESSING, AGAINST THE AWARD OF A CONTRACT TO DOMCO CHEMICAL CORP. (DOMCO) UNDER INVITATION FOR BIDS (IFB) NO. FPNGG-L-18969-A-4-30-71, ISSUED BY THE FEDERAL SUPPLY SERVICE, GENERAL SERVICES ADMINISTRATION (GSA).

THE SUBJECT INVITATION, ISSUED ON MARCH 31, 1971, WAS FOR A REQUIREMENTS CONTRACT COVERING LAUNDRY AND CLEANING CHEMICALS FOR THE PERIOD SEPTEMBER 1, 1971, OR DATE OF AWARD, THROUGH AUGUST 31, 1972. ITEMS 1 THROUGH 34 AND 59 THROUGH 110 OF THE INVITATION WERE TOTALLY SET ASIDE FOR SMALL BUSINESS PARTICIPATION. BIDS WERE OPENED ON APRIL 30, 1971, AND DOMCO WAS THE LOW BIDDER ON ITEMS 1 THROUGH 11 COVERING THE FURNISHING OF CALCIUM HYPOCHLORITE (CH) IN 3-3/4-POUND PACKAGES IN ACCORDANCE WITH SPECIFICATIONS. DOMCO HAD CERTIFIED ITSELF TO BE A SMALL BUSINESS CONCERN AND A MANUFACTURER OF THE SUPPLIES OFFERED ON PAGE 2 OF ITS BID (STANDARD FORM 33) ENTITLED "REPRESENTATIONS, CERTIFICATIONS, AND ACKNOWLEDGMENTS.

OCTAGON PROTESTED INITIALLY TO THE PROCUREMENT ACTIVITY AGAINST AWARD TO DOMCO ON THE BASIS THAT DOMCO IS NOT A MANUFACTURER AS CERTIFIED IN ITS BID INASMUCH AS IT MERELY PACKAGES THE CH WHICH IT PURCHASES FROM A LARGE BUSINESS CONCERN. IT WAS CONTENDED, THEREFORE, THAT DOMCO WAS NOT ELIGIBLE FOR AWARD UNDER THE TOTAL SMALL BUSINESS SET-ASIDE APPLICABLE TO ITEMS 1 THROUGH 11. IN ADDITION, OCTAGON CONTENDED THAT SINCE CH IS MANUFACTURED ONLY BY LARGE BUSINESS CONCERNS, IT WAS IMPOSSIBLE TO SECURE COMPETITION NECESSARY FOR A SMALL BUSINESS SET ASIDE, AND ITEMS 1 THROUGH 11, THEREFORE, SHOULD NOT HAVE BEEN SET ASIDE FOR TOTAL SMALL BUSINESS PARTICIPATION.

IN VIEW OF THE QUESTION POSED BY OCTAGON, THE CONTRACTING OFFICER DIRECTED AN INQUIRY TO DOMCO CONCERNING THE NATURE OF ITS SUPPLY OF CH AND DOMCO ASSERTED THAT WHILE THE MATERIAL CONSISTING OF THE CH WAS PURCHASED IN 100-POUND DRUMS, DOMCO CHANGED THE ORIGINAL STATE OF THE ITEM TO MEET THE REQUIREMENTS OF THE PROCUREMENT AND CONSIDERED ITSELF A MANUFACTURER OF THE ITEM FOR PURPOSES OF THIS PROCUREMENT. ALSO, THE CONTRACTING OFFICER REQUESTED THE SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICE IN NEW YORK CITY TO MAKE A DETERMINATION AS TO WHETHER DOMCO QUALIFIED AS A SMALL BUSINESS CONCERN FOR THIS PROCUREMENT. BY LETTER DATED JUNE 30, 1971, THE SBA OFFICE DETERMINED THAT DOMCO QUALIFIED FOR PREFERENCE AS A SMALL BUSINESS CONCERN FOR THE PURPOSES OF THIS PROCUREMENT AND STATED AS FOLLOWS:

"BASED UPON THE INFORMATION FURNISHED TO THIS OFFICE, IT IS DETERMINED THAT DOMCO CHEMICAL CO. QUALIFIES FOR PREFERENCE AS A SMALL BUSINESS CONCERN FOR THE PURPOSE OF THE SOLICITATION CITED ABOVE. THE COMPANY, TOGETHER WITH ALL OF ITS AFFILIATES, EMPLOYS FEWER THAN THE 750 PERSONS THAT IS THE SMALL BUSINESS SIZE STANDARD FOR THIS PROCUREMENT.

"IN ADDITION, DOMCO CHEMICAL CO. IS CONSIDERED TO BE A MANUFACTURER OF THE ITEM. THIS DECISION IS BASED UPON THE FACTS THAT IT IS INCUMBENT UPON DOMCO CHEMICAL CO. TO MEET THE REQUIREMENTS OF FEDERAL SPECIFICATION O-C- 114A, WITH AMENDMENT NUMBER 4; THAT CERTAIN CONTROLS OF TEMPERATURE AND HUMIDITY ARE REQUIRED TO BE EXERCISED BY THAT COMPANY; THAT WITHOUT THE REQUISITE CONTROLS, THE END PRODUCT COULD BE FOUND UNACCEPTABLE TO THE GOVERNMENT."

AFTER RECEIPT OF THE FOREGOING DETERMINATION BY SBA THAT DOMCO QUALIFIED FOR PREFERENCE AS A SMALL BUSINESS CONCERN FOR THE PURPOSES OF THIS PROCUREMENT, THE CONTRACTING OFFICER AWARDED THE CONTRACT FOR FURNISHING ITEMS 1 THROUGH 11 TO DOMCO ON JULY 16, 1971.

YOU CONTEND THAT WHILE DOMCO MAY BE CONSIDERED A SMALL BUSINESS CONCERN, IT CANNOT BE CONSIDERED A MANUFACTURER OF THE PRODUCT INVOLVED. YOU ALSO CONTEND THAT THE SBA DETERMINATION THAT DOMCO QUALIFIED AS A MANUFACTURER IS NOT BINDING ON GSA AS IT IS NOT A DETERMINATION OF SIZE REQUIRED TO BE MADE BY SBA UNDER 15 U.S.C. 637(B)(6).

IN THIS REGARD, THE PERTINENT SBA REGULATION IN EFFECT AT THE TIME OF THIS PROCUREMENT, 13 CFR 121.3-14(H), STATES AS FOLLOWS:

"(H) SECTIONS 121.3-2(Q) AND 121.3-8(C) 'DEFINITION OF NONMANUFACTURER.' FOR SIZE DETERMINATION PURPOSES THERE CAN ONLY BE ONE MANUFACTURER OF THE END ITEM BEING PROCURED. THE MANUFACTURER OF THE END ITEM BEING PROCURED IS THE CONCERN WHICH WITH ITS OWN FORCES TRANSFORMS INORGANIC OR ORGANIC SUBSTANCES INCLUDING RAW MATERIALS AND/OR MISCELLANEOUS PARTS OR COMPONENTS INTO SUCH END ITEM."

INASMUCH AS A BIDDER'S STATUS AS A MANUFACTURER OR A NONMANUFACTURER WITH RESPECT TO A PARTICULAR PROCUREMENT MUST BE CONSIDERED IN DETERMINING THE BIDDER'S ENTITLEMENT TO SMALL BUSINESS STATUS FOR PURPOSES OF THAT PROCUREMENT, IT CANNOT BE SAID THAT SUCH DETERMINATION IS NOT ONE OF "SIZE" BINDING ON GSA WITHIN THE CONTEMPLATION OF THE SMALL BUSINESS STATUTE. SEE 44 COMP. GEN. 271 (1964).

UNDER 15 U.S.C. 637(B)(6), A DECISION OF THE SBA REGARDING THE SIZE STATUS OF A PARTICULAR CONCERN IS CONCLUSIVE UPON THE PROCUREMENT AGENCY INVOLVED. 46 COMP. GEN. 898, 900 (1967); 44 ID. 271, 273 (1964). MOREOVER, AS WE STATED IN B-150757, APRIL 8, 1963: "NEITHER OUR OFFICE NOR ANY EXECUTIVE AGENCY OF THE GOVERNMENT MAY IGNORE A DETERMINATION BY SBA AS TO THE SIZE STATUS OF A PARTICULAR CONCERN." AMERICAN ELECTRIC COMPANY, LTD. V UNITED STATES, 270 F. SUPP. 689 (1967); SPRINGFIELD WHITE CASTLE COMPANY V FOLEY, 230 F. SUPP. 77 (1964). SEE, ALSO, MID-WEST CONSTRUCTION, LTD. V UNITED STATES, 387 F. 2D 957 (1967).

YOU HAVE ALSO CONTENDED THAT THE ISSUANCE OF THE SUBJECT INVITATION COVERING ITEMS 1 THROUGH 11 AS A SMALL BUSINESS SET-ASIDE WAS IMPROPER SINCE IN YOUR VIEW CH IS MANUFACTURED ONLY BY LARGE BUSINESS CONCERNS IN THE UNITED STATES AND IT IS IMPOSSIBLE TO SECURE THE COMPETITION PREREQUISITE TO A TOTAL SMALL BUSINESS SET-ASIDE. IN THIS RESPECT, IT IS REPORTED THAT THE DETERMINATION TO SET ASIDE PART OF THE PROCUREMENT FOR SMALL BUSINESS WAS BASED UPON THE FACT THAT IN 1969 NINE OF 11 FIRMS WHICH SUBMITTED BIDS UNDER A SIMILAR SOLICITATION WERE CONSIDERED TO BE SMALL BUSINESS FIRMS AND THREE OF THOSE RECEIVED AWARDS. THE DETERMINATION TO SET ASIDE A PROCUREMENT FOR SMALL BUSINESS IS WITHIN THE AMBIT OF SOUND ADMINISTRATIVE DISCRETION. THIS AUTHORITY IS VERY BROAD AND AN ADMINISTRATIVE DETERMINATION MADE PURSUANT TO SUCH AUTHORITY IS NOT ORDINARILY REVIEWED BY OUR OFFICE. 45 COMP. GEN. 613, 617 (1966).

FOR YOUR INFORMATION, THE SBA HAS ISSUED NEW REGULATIONS DEALING WITH THE CATEGORIES OF MANUFACTURER AND NONMANUFACTURER. THE NEW REGULATION IS CONTAINED IN 36 F.R. 20671, OCTOBER 28, 1971, AND PROVIDES AS FOLLOWS:

"SEC 121.3-14 INTERPRETATIONS.

"(H) SECTIONS 121.3-2(4) AND 121.3-8(C) 'DEFINITION OF NONMANUFACTURER.' FOR SIZE DETERMINATION PURPOSES THERE CAN ONLY BE ONE MANUFACTURER OF THE END ITEM BEING PROCURED. THE MANUFACTURER OF THE END ITEM BEING PROCURED IS THE CONCERN WHICH WITH ITS OWN FORCES TRANSFORMS INORGANIC OR ORGANIC SUBSTANCES INCLUDING RAW MATERIALS AND/OR MISCELLANEOUS PARTS OR COMPONENTS INTO SUCH END ITEM. WHETHER A BIDDER ON A PARTICULAR PROCUREMENT IS THE MANUFACTURER OR A NONMANUFACTURER FOR THE PURPOSE OF A SIZE DETERMINATION IS NOT FOR DETERMINATION BY THE CONTRACTING OFFICER. THE DECISION SHALL BE MADE BY THE APPROPRIATE SBA REGIONAL DIRECTOR OR HIS DELEGATES, AND NEED NOT BE CONSISTENT WITH THE CONTRACTING OFFICER'S DECISION AS TO WHETHER SUCH CONCERN IS OR IS NOT A MANUFACTURER FOR THE PURPOSE OF THE WALSH HEALEY ACT, ETC.

"THIS AMENDMENT SHALL BECOME EFFECTIVE ON PUBLICATION IN THE FEDERAL REGISTER (10-28-71).

"DATED: OCTOBER 19, 1971."

FOR THE REASONS STATED, WE FIND NO LEGAL OBJECTION TO THE AWARD OF THE CONTRACT MADE TO DOMCO, AND YOUR PROTEST IS DENIED.