B-174545, JAN 31, 1972

B-174545, JAN 31, 1972

BID PROTEST - IMPROPER SET-ASIDE - EVALUATION FACTOR DECISION DENYING PROTEST OF RONSON HYDRAULIC UNITS CORPORATION AGAINST THE ANTICIPATED AWARD OF A SMALL BUSINESS SET-ASIDE FOR A PROCUREMENT OF ACTUATOR ASSEMBLIES UNDER AN IFB ISSUED BY THE DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VA. PROTESTANT CONTENDS THAT THE SOLICITATION VIOLATES ASPR 1 1903(A)(III) IN THAT IT FAILS TO INCLUDE THE COST OF FIRST ARTICLE TESTING AS AN EVALUATION FACTOR. RONSON FURTHER ALLEGES THAT THE INCLUSION OF THIS FACTOR WOULD HAVE RENDERED A TOTAL SMALL BUSINESS SET ASIDE IMPROPER SINCE THE LOW BIDDER, ELECTROMAGNETIC INDUSTRIES, INC., WAS ENTITLED TO WAIVER OF FIRST ARTICLE TESTING. IN THE INSTANT CASE, THE CONTRACTING OFFICER, AFTER CONSULTING WITH THE ENGINEERING SUPPORT ACTIVITY, DETERMINED THAT THE COST TO THE GOVERNMENT OF FIRST ARTICLE TESTING COULD NOT BE REASONABLY ESTIMATED. SINCE THE INCLUSION OF THE FACTOR WOULD NOT HAVE DISPLACED THE LOW BID, THERE IS NO COGENT REASON FOR CANCELLATION. ACCORDINGLY, THE PROTEST MUST BE DENIED.

TO SURREY, KARASIK AND MORSE:

WE REFER TO YOUR LETTERS OF NOVEMBER 22, 1971, AND JANUARY 11, 1972, ON BEHALF OF RONSON HYDRAULIC UNITS CORPORATION, PROTESTING BEFORE AWARD THAT IFB NO. DSA 400-72-B-2271 IS DEFECTIVE AND SHOULD BE CANCELLED.

THE INVITATION WAS ISSUED ON OCTOBER 26, 1971, BY THE DEFENSE GENERAL SUPPLY CENTER, RICHMOND, VIRGINIA, CALLING FOR BIDS ON 300 ACTUATOR ASSEMBLIES. THE PROCUREMENT WAS A TOTAL SET-ASIDE FOR PARTICIPATION BY SMALL BUSINESS CONCERNS ONLY.

IT IS YOUR CONTENTION THAT THE SOLICITATION IS DEFECTIVE IN THAT IT FAILED TO INCLUDE THE COST TO THE GOVERNMENT FOR FIRST ARTICLE TESTING AS A FACTOR IN EVALUATION OF BIDS, PURSUANT TO ARMED SERVICES PROCUREMENT REGULATION (ASPR) 1-1903(A)(III). YOU ASSERT THAT IF THE COST OF FIRST ARTICLE TESTING HAD BEEN INCLUDED, THERE WOULD HAVE BEEN NO EFFECTIVE COMPETITION FROM OTHER SMALL BUSINESS CONCERNS, SINCE ELECTROMAGNETIC INDUSTRIES, INC., IS THE ONLY SMALL BUSINESS CONCERN WHO WAS ENTITLED TO WAIVER OF FIRST ARTICLE TESTING, AND THAT THE TOTAL SET-ASIDE FOR SMALL BUSINESS THEREFORE WAS IMPROPER.

THE REPORT OF THE CONTRACTING OFFICER STATES THAT THE DECISION TO RESTRICT THE PROCUREMENT TO PARTICIPATION BY SMALL BUSINESS CONCERNS ONLY WAS BASED ON TWO FACTORS; FIRST, THAT SEVEN SMALL BUSINESS CONCERNS BID ON THE PREVIOUS PROCUREMENT AND, SECOND, BECAUSE OF THE DETERMINATION THAT THE COST TO THE GOVERNMENT OF FIRST ARTICLE TESTING WOULD NOT BE USED AS A FACTOR IN THE EVALUATION OF BIDS. THE CONTRACTING OFFICER NOTES THAT FIRMS MANUFACTURING THE ACTUATOR ASSEMBLIES MAY ARRANGE TO HAVE THEIR PRODUCTS TESTED AND APPROVED BY THE ENGINEERING SUPPORT ACTIVITY, THE U.S. ARMY ENGINEERING, RESEARCH AND DEVELOPMENT LABORATORIES, FT. BELVOIR, VIRGINIA, AND THEREAFTER SUCH FIRMS WOULD NOT BE SUBJECT TO FIRST ARTICLE TESTING. RONSON HAD FOLLOWED THIS PROCEDURE IN HAVING SIX UNITS TESTED AND APPROVED, AND THE ESA MADE NO CHARGE FOR THE TESTING. AFTER CONSULTING WITH THE ESA, THE CONTRACTING OFFICER CONCLUDED THAT THE COST TO THE GOVERNMENT OF SUCH TESTING CANNOT BE REALISTICALLY ESTIMATED FOR BID EVALUATION PURPOSES PURSUANT TO ASPR 1-1903(A)(III), AND THEREFORE ELIMINATED THIS FACTOR FROM THE PRESENT SOLICITATION.

EIGHT BIDS WERE RECEIVED AND OPENED AT 11:00 A.M. ON NOVEMBER 16, 1971, AS FOLLOWS:

BIDDER UNIT PRICE

ELECTROMAGNETIC INDUSTRIES, INC. $121.80

RONSON HYDRAULIC UNITS, INC. 123.50

FEDERAL MANUFACTURING & SUPPLY CO. 134.95

A.S.P.R. 140.33

HYDRAULIC SYSTEMS CO. 239.00

BOGUE ELECTRIC MFG. CO. 248.00

A. C. BALL CO. 325.00

COMMUNICOLOGY, INC. 350.00

ALL OF THE BIDS RECEIVED WERE FROM SMALL BUSINESS CONCERNS EXCEPT THAT OF RONSON, WHICH IS A LARGE BUSINESS. THE BID OF ELECTROMAGNETIC WAS ORIGINALLY FOR A UNIT PRICE OF $136.55 AND WAS REDUCED TO $121.80 BY A TELEGRAPHIC MODIFICATION RECEIVED AT THE PROCURING ACTIVITY PRIOR TO BID OPENING.

YOUR LETTER OF JANUARY 11, 1972, TAKES ISSUE WITH THE CONTRACTING OFFICER'S DETERMINATION THAT THE COST TO THE GOVERNMENT FOR FIRST ARTICLE TESTING CANNOT BE REALISTICALLY ESTIMATED, POINTING OUT THAT THIS COST WAS ESTIMATED AT $5,000 IN THE PREVIOUS PROCUREMENT. YOU REPEAT YOUR CONTENTIONS THAT THE GOVERNMENT'S COST OF TESTING SHOULD HAVE BEEN ESTIMATED AND INCLUDED IN THE PRESENT SOLICITATION AND IF THIS HAD BEEN DONE, THERE WOULD HAVE BEEN NO REALISTIC COMPETITION FROM OTHER SMALL BUSINESS CONCERNS AND THE SET ASIDE WAS THEREFORE IMPROPER.

ASPR 1-1903(A)(III) PROVIDES AS FOLLOWS:

"(III) IF THE GOVERNMENT IS TO BE RESPONSIBLE FOR FIRST ARTICLE TESTING, THE COST TO THE GOVERNMENT OF SUCH TESTING SHALL BE A FACTOR IN THE EVALUATION OF BIDS AND PROPOSALS TO THE EXTENT THAT SUCH COST CAN BE REALISTICALLY ESTIMATED. THIS ESTIMATE SHALL BE DOCUMENTED IN THE CONTRACT FILE AND CLEARLY SET FORTH IN THE SOLICITATION AS A FACTOR WHICH WILL BE CONSIDERED IN EVALUATING THE BIDS OR PROPOSALS."

WE HAVE PREVIOUSLY HAD OCCASION TO EXAMINE THE DUTIES OF A CONTRACTING OFFICER UNDER THE PROVISIONS OF THIS SECTION. IN B-164648, DECEMBER 16, 1968, THE CONTRACTING OFFICER WAS ADVISED ON ONE OCCASION THAT TESTING COSTS WOULD EXCEED $68,000 WHILE LATER HE WAS TOLD THE COST WOULD BE APPROXIMATELY $13,000, BUT NEITHER FIGURE COULD BE VERIFIED. IN VIEW OF THE UNCERTAINTY AS TO COSTS AND THE FACT THAT INCLUSION OF EITHER FIGURE WOULD NOT HAVE RESULTED IN DISPLACEMENT OF THE OTHERWISE SUCCESSFUL LOW BIDDER, WE FOUND NO BASIS FOR OBJECTION TO AN AWARD WITHOUT CONSIDERATION OF TESTING COSTS. IN B-173129, DECEMBER 6, 1971, 51 COMP. GEN. , A PROTESTOR OBJECTED TO THE FAILURE TO INCLUDE AN EVALUATION FACTOR OF $5,800 FOR THE COST OF GOVERNMENT TESTING WHICH HAD BEEN INCLUDED IN A PRIOR PROCUREMENT. THE CONTRACTING OFFICER FOUND THAT SEA TESTS WOULD BE CONDUCTED DURING NORMAL FLEET OPERATIONS AND THE COSTS OF SUCH TESTS COULD NOT BE REALISTICALLY ESTIMATED. WE HELD THAT SUCH TESTING COSTS WERE PROPERLY ELIMINATED AS AN EVALUATION FACTOR, AND WE STATED FURTHER THAT EVEN ASSUMING A $5,800 EVALUATION FACTOR SHOULD HAVE BEEN INCLUDED, ITS OMISSION WOULD NOT CONSTITUTE A COGENT OR COMPELLING REASON TO CANCEL THE INVITATION, SINCE INCLUSION OF THAT AMOUNT WOULD NOT HAVE RESULTED IN DISPLACEMENT OF THE LOW BID.

IT WOULD APPEAR THAT THE PRESENT CASE FALLS SQUARELY WITHIN THE RULINGS IN THESE TWO CASES. IN THE PRESENT CASE THE CONTRACTING OFFICER DETERMINED, AFTER CONSULTATION WITH THE ENGINEERING SUPPORT ACTIVITY, THAT THE COST TO THE GOVERNMENT OF FIRST ARTICLE TESTING COULD NOT BE REALISTICALLY ESTIMATED FOR BID EVALUATION PURPOSES, AND IT IS OUR OPINION THAT ELIMINATION OF SUCH COSTS WAS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION. IT ALSO APPEARS THAT INCLUSION OF AN EVALUATION FACTOR OF $5,000, AS IN THE PRIOR PROCUREMENT, WOULD NOT HAVE RESULTED IN DISPLACEMENT OF THE LOW BID, AND THEREFORE NO COGENT OR COMPELLING REASON FOR CANCELLING THE INVITATION WOULD EXIST EVEN IF THE EXCLUSION WERE IMPROPER.

THE SECOND PORTION OF YOUR ARGUMENT, THAT A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS IS IMPROPER, RESTS ON YOUR ASSERTION THAT THERE WILL BE NO EFFECTIVE COMPETITION FROM SMALL BUSINESS CONCERNS IF THE COST OF TESTING IS USED AS AN EVALUATION FACTOR. ASPR 1-706.5(A)(1) PERMITS TOTAL BUSINESS SET-ASIDES WHERE THERE IS A REASONABLE EXPECTATION THAT BIDS WILL BE OBTAINED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARDS WILL BE MADE AT REASONABLE PRICES. OUR OFFICE HAS REPEATEDLY HELD THAT THE DETERMINATION AS TO WHETHER SUCH REASONABLE EXPECTATION EXISTS IS A MATTER WITHIN THE DISCRETION OF THE CONTRACTING OFFICIALS AND OUR OFFICE WILL NOT QUESTION SUCH DETERMINATION IN THE ABSENCE OF A CLEAR SHOWING OF ABUSE OF DISCRETION. B-164800, OCTOBER 4, 1968; B-168184, JANUARY 21, 1970.

IN THE PRESENT CASE, WE HAVE INDICATED ABOVE THAT ELIMINATION OF THE COST OF TESTING AS AN EVALUATION FACTOR WAS A PROPER EXERCISE OF ADMINISTRATIVE DISCRETION. SUCH DECISION PLACED ALL SMALL BUSINESS CONCERNS ON AN EQUAL COMPETITIVE BASIS WHETHER OR NOT THEY HAD PREVIOUSLY PRODUCED THE ACTUATOR ASSEMBLIES. THE FACT THAT SEVEN SMALL BUSINESS CONCERNS BID ON THE PREVIOUS PROCUREMENT GAVE THE CONTRACTING OFFICER A SOUND BASIS FOR HIS CONCLUSION THAT THERE WAS A REASONABLE EXPECTATION OF RECEIVING BIDS FROM A SUFFICIENT NUMBER OF SMALL BUSINESS CONCERNS TO INSURE AWARD AT A REASONABLE PRICE. THE VALIDITY OF SUCH CONCLUSION IS SUPPORTED BY THE FACT THAT BIDS WERE RECEIVED FROM SEVEN SMALL BUSINESS CONCERNS IN THE PRESENT PROCUREMENT, AND THE LOW BIDDER'S PRICE WAS EVEN LOWER THAN THAT OF RONSON, AN INELIGIBLE LARGE BUSINESS. IN VIEW THEREOF, WE FIND NO BASIS ON WHICH TO QUESTION THE CONTRACTING OFFICER'S DECISION TO MAKE A TOTAL SET-ASIDE FOR SMALL BUSINESS CONCERNS IN THIS PROCUREMENT.

FOR THE REASONS STATED, YOUR PROTEST IS DENIED.