B-175665, JUL 10, 1972

B-175665, JUL 10, 1972

BID PROTEST - SMALL BUSINESS SET-ASIDE - SMALL BUSINESS ACT DECISION DENYING THE PROTEST OF DANA LABORATORIES, INC., AGAINST THE AWARDING OF A SMALL BUSINESS SET-ASIDE BY THE SAN ANTONIO AIR MATERIEL AREA, KELLY AFB, TEX., UNDER AN IFB FOR A PROCUREMENT OF DIGITAL MULTIMETERS. THE COMP. GEN. HAS PREVIOUSLY HELD THAT THERE IS NO PROPER BASIS FOR OBJECTION TO A SET-ASIDE FOR SMALL BUSINESS CONCERNS SO LONG AS THE CONTRACTING AGENCY'S DISCRETION IS EXERCISED WITHIN THE FRAMEWORK OF THE AUTHORITY EXPRESSED IN THE SMALL BUSINESS ACT, 15 U.S.C. 631 ET SEQ. 45 COMP. GEN. 613, 616 (1966). IN THE INSTANT CASE, IT APPEARS THAT ADEQUATE COMPETITION WAS OBTAINED FROM AMONG SMALL BUSINESS CONCERNS AND THE LABOR SURPLUS AREA SET-ASIDE COULD NOT BE IMPLEMENTED BECAUSE THE PROCUREMENT WAS NOT SEVERABLE INTO TWO ECONOMIC PRODUCTION RUNS. ACCORDINGLY, THE PROTEST IS DENIED.

TO DANA LABORATORIES, INCORPORATED:

REFERENCE IS MADE TO YOUR TELEGRAM DATED APRIL 10, 1972, AND TO SUBSEQUENT CORRESPONDENCE CONCERNING YOUR PROTEST AGAINST AWARD OF A CONTRACT UNDER INVITATION FOR BIDS NO. F41608-72-B-1014, ISSUED MARCH 21, 1972, BY THE DEPARTMENT OF THE AIR FORCE, DIRECTORATE OF PROCUREMENT AND PRODUCTION, SAN ANTONIO AIR MATERIEL AREA, KELLY AIR FORCE BASE, TEXAS, AS THE SECOND STEP OF A TWO-STEP FORMALLY ADVERTISED PROCUREMENT OF DIGITAL MULTIMETERS WHICH HAD BEEN SET ASIDE FOR COMPETITION AMONG SMALL BUSINESS CONCERNS PURSUANT TO THE PROVISIONS OF SECTION 1-706.5 OF THE ARMED SERVICES PROCUREMENT REGULATION (ASPR).

THE RECORD SHOWS THAT A REQUEST FOR TECHNICAL PROPOSAL WAS ISSUED ON MAY 19, 1971, AS STEP ONE OF A PROPOSED PROCUREMENT OF 88 DIGITAL MULTIMETERS, WITH NOTICE THAT THE PROPOSED PROCUREMENT WAS A 100 PERCENT SET-ASIDE FOR SMALL BUSINESS CONCERNS. TECHNICAL PROPOSALS WERE TO BE SUBMITTED UNDER STEP ONE AND IT WAS CONTEMPLATED THAT AN INVITATION FOR BIDS UNDER STEP TWO WOULD BE SENT ONLY TO THOSE FIRMS WHICH SUBMITTED ACCEPTABLE PROPOSALS UNDER STEP ONE. THREE APPARENTLY ELIGIBLE SMALL BUSINESS CONCERNS SUBMITTED TECHNICAL PROPOSALS AND, DURING EVALUATION OF THE PROPOSALS, THE QUANTITY OF THE PROPOSED PURCHASE WAS INCREASED FROM 88 TO 372 UNITS.

YOU CONTEND THAT THE DETERMINATION MAKING THE PROCUREMENT A TOTAL SMALL BUSINESS SET-ASIDE VIOLATES THE REQUIREMENTS OF ASPR 2-502(B)(IV) AND ASPR 1-706.5, AND THAT THE DETERMINATION ALSO VIOLATES THE REQUIREMENTS OF ASPR 1-706.5 AND ASPR 1-803, SO FAR AS CONCERNS THE MATTER OF GIVING PREFERENCE TO LABOR SURPLUS AREA CONCERNS UNDER LABOR SURPLUS AREA SET-ASIDE PROCEDURES.

IN THE CONTRACTING OFFICER'S STATEMENT OF FACTS AND FINDINGS CONCERNING YOUR PROTEST, IT IS STATED THAT THE PROCUREMENT WAS SET ASIDE FOR COMPETITION AMONG SMALL BUSINESS CONCERNS ONLY, PURSUANT TO ASPR 1-706.5, ON A REASONABLE EXPECTATION THAT PROPOSALS WOULD BE RECEIVED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS TO INSURE ADEQUATE COMPETITION; THAT THIS EXPECTATION WAS REALIZED WHEN THREE ACCEPTABLE PROPOSALS WERE RECEIVED; AND THAT THE PROCUREMENT WAS NOT CHANGED FROM A 100 PERCENT SMALL BUSINESS SET-ASIDE TO A PARTIAL LABOR SURPLUS AREA SET-ASIDE BECAUSE IT FAILED TO QUALIFY UNDER THE CRITERIA AS SET FORTH IN ASPR 1-804.1(A)(2), SINCE THE PROCUREMENT IS NOT SEVERABLE INTO TWO ECONOMIC PRODUCTION RUNS.

WITH RESPECT TO YOUR CONTENTIONS IN THE MATTER, THE CONTRACTING OFFICER'S STATEMENT OF FACTS AND FINDINGS IS IN PART AS FOLLOWS:

"5. DANA LABORATORIES INC., PROTESTS THE 100% SMALL BUSINESS SET ASIDE AND CONTENDS THAT LABOR SURPLUS AREA SET-ASIDE PROCEDURES SHOULD BE USED.

"A. NOTWITHSTANDING DANA'S ALLEGATION TO THE CONTRARY UTILIZATION OF 100% SMALL BUSINESS SET-ASIDE PROCEDURES IN THIS PROCUREMENT DO NOT VIOLATE ASPR 2-502(B)(IV) OR ASPR 1-706.5. WE HAD REASONABLE EXPECTATION THAT PROPOSALS WOULD BE RECEIVED FROM A SUFFICIENT NUMBER OF RESPONSIBLE SMALL BUSINESS CONCERNS SO THAT AWARD WOULD BE MADE AT A REASONABLE PRICE. DURING OUR COORDINATION, THIS DECISION WAS FURTHER STRENGTHENED BY THE SBA REPRESENTATIVES FURNISHING FOURTEEN (14) POTENTIAL SMALL BUSINESS CONCERNS. ADEQUATE COMPETITION WAS A FACT WHEN THREE TECHNICAL PROPOSALS FROM SMALL BUSINESS CONCERNS WERE ACCEPTED.

"(1) DANA'S CONCLUSION IN PARAGRAPH 3, PAGE 5, 'THAT THE DECISION FOR MAKING THE PROCUREMENT A TOTAL SMALL BUSINESS SET-ASIDE WAS PLACED SOLELY IN THE HANDS OF THE SMALL BUSINESS REPRESENTATIVE' IS ERRONEOUS. *** THE DISAGREEMENT BETWEEN THE PROCUREMENT CONTRACTING OFFICER AND THE SBA REPRESENTATIVE CONCERNING A 100% SMALL BUSINESS SET ASIDE WAS REFERRED TO THE OFFICE OF THE DIRECTOR OF PROCUREMENT AND PRODUCTION PURSUANT TO HQ USAF ASPR SUPPLEMENT 1-706.3(E) FOR A DECISION. THE DECISION WAS TO PROCEED WITH THE 100% SET-ASIDE. ***

"B. THE DETERMINATION TO CONTINUE WITH THE 100% SMALL BUSINESS SET ASIDE AND NOT TO CHANGE TO A PARTIAL SET-ASIDE FOR LABOR SURPLUS AREA CONCERNS WAS MADE IN ACCORDANCE WITH ASPR 1-804.1(A)(2). BASED ON PAST EXPERIENCE WITH SIMILAR ITEMS, THE START UP COSTS FOR THIS PROCUREMENT ARE ESTIMATED TO EXCEED $30,000. THESE COSTS WOULD BE DUPLICATED IF TWO CONTRACTORS RECEIVED A CONTRACT FOR THIS REQUIREMENT. ALSO, ADDITIONAL LOGISTIC COSTS ESTIMATED TO BE IN EXCESS OF $13,000 WOULD BE INCURRED, SUCH AS BUT NOT LIMITED TO, TECHNICAL PUBLICATIONS, CATALOGING, STORAGE, DISTRIBUTION, AND ITEM MANAGEMENT OF ADDITIONAL HARDWARE AND SPARES, IN THE EVENT OF AN AWARD TO MORE THAN ONE CONTRACTOR. THIS PRECLUDES A DETERMINATION THAT THE REQUIREMENT IS SEVERABLE INTO TWO ECONOMIC PRODUCTION RUNS AS REQUIRED BY REFERENCED ASPR. IN THE ABSENCE OF THIS DETERMINATION OF SEVERABILITY, THE LABOR SURPLUS AREA SET-ASIDE COULD NOT BE IMPLEMENTED."

ASPR 2-502(B) PROVIDES WITH RESPECT TO LISTED ITEMS THEREUNDER THAT "NONE OF THE FOLLOWING IN ITSELF PRECLUDES THE USE OF TWO-STEP FORMAL ADVERTISING." ITEM (IV) REFERS TO PROCUREMENTS IN WHICH TOTAL SMALL BUSINESS SET-ASIDES ARE INVOLVED. IT STATES IN PART THAT A TOTAL SMALL BUSINESS SET-ASIDE WOULD NOT BE APPROPRIATE IN A PROCUREMENT OF A HIGHLY TECHNICAL AND COMPLEX ITEM WHERE IT IS ANTICIPATED THAT, IN ORDER TO OBTAIN ADEQUATE COMPETITION, A SIGNIFICANT NUMBER OF ACCEPTABLE TECHNICAL PROPOSALS MUST BE RECEIVED FROM FIRMS WITH PRIOR TESTING, DEVELOPMENTAL AND PRODUCTION EXPERIENCE OF THE ITEM. HOWEVER, THAT STATEMENT DOES NOT PRECLUDE A SMALL BUSINESS TOTAL SET-ASIDE ON A TWO-STEP FORMALLY ADVERTISED PROCUREMENT OF AN ITEM NOT PREVIOUSLY MANUFACTURED.

SECTION 15 OF THE SMALL BUSINESS ACT, 15 U.S.C. 644, PROVIDES IN PART THAT SMALL BUSINESS CONCERNS SHALL RECEIVE ANY AWARD OF CONTRACT OR CONTRACT FOR ANY PART THEREOF AS TO WHICH IT IS DETERMINED BY THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING PROCUREMENT AGENCY "(3) TO BE IN THE INTEREST OF ASSURING THAT A FAIR PROPORTION OF TOTAL PURCHASES AND CONTRACTS FOR PROPERTY AND SERVICES FOR THE GOVERNMENT ARE PLACED WITH SMALL-BUSINESS CONCERNS." IN 45 COMP. GEN. 613, 616 (1966), WE CONCLUDED WITH RESPECT TO A TWO-STEP FORMALLY ADVERTISED PROCUREMENT SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS THAT, AS LONG AS THE EXERCISE OF THE RESPONSIBILITY AND DISCRETION BY A CONTRACTING AGENCY WAS WITHIN THE FRAMEWORK OF THE AUTHORITY EXPRESSED IN THE SMALL BUSINESS ACT, 15 U.S.C. 631, ET SEQ., AND APPLICABLE REGULATIONS, THERE WOULD BE NO BASIS UPON WHICH OUR OFFICE COULD PROPERLY OBJECT TO A DETERMINATION TO SET ASIDE A PROCUREMENT FOR SMALL BUSINESS CONCERNS, ADVERTISE AS PROVIDED THEREIN, AND AWARD ANY CONTRACT IN ACCORDANCE THEREWITH.

OUR REVIEW OF THE PROCUREMENT MAKES CLEAR THAT ALL DETERMINATIONS WITH RESPECT TO SMALL BUSINESS AND LABOR SURPLUS AREA SET-ASIDES WERE MADE ON REASONABLE BASES AND IN ACCORDANCE WITH THE PROCEDURES PRESCRIBED BY LAW AND REGULATION. WE FIND NO LEGAL OBJECTION TO THE PROCUREMENT AND, THEREFORE, YOUR PROTEST MUST BE DENIED.