B-201727.OM, MAR 26, 1981

B-201727.OM, MAR 26, 1981

SUBJECT: SMALL BUSINESS ADMINISTRATION'S CAPITAL OWNERSHIP DEVELOPMENT (7(J)(10)) PROGRAM - ABSENCE OF GEOGRAPHICAL RESTRICTIONS FROM SOLICITATIONS - PROPRIETY OF PROCURING ON A SOLE SOURCE BASIS (FILE B-201727; CODE 077000)

TEAM LEADER, SAN FRANCISCO RO - DAVID MCDANIEL:

DURING THE COURSE OF MEETINGS WITH YOU AND YOUR STAFF, TWO QUESTIONS CONCERNING THE SMALL BUSINESS ADMINISTRATION'S (SBA) PROCUREMENT PROCEDURES IN CONNECTION WITH THE 7(J)(10) PROGRAM (TECHNICAL AND MANAGEMENT ASSISTANCE TO SMALL BUSINESSES) EMERGED. THESE QUESTIONS, WITH BRIEF ANSWERS, FOLLOW.

QUESTION 1: DOES THE GAO DECISION IN BURTON K. MYERS AND COMPANY, B-187960, SEPTEMBER 14, 1977, 77-2 CPD 187, PROHIBIT THE SBA FROM INCLUDING GEOGRAPHIC RESTRICTIONS IN REQUESTS FOR PROPOSALS TO PROVIDE SERVICES UNDER THE 7(J)(10) PROGRAM?

ANSWER: NO. THIS DECISION, AND A SUBSEQUENT DECISION CONCERNING THE SAME RFP RESTRICTION, MERELY RECOMMENDS THAT THE SBA BASE ITS GEOGRAPHIC RESTRICTION UPON A SPECIFIED NUMBER OF MILES FROM A CENTRAL POINT RATHER THAN UPON REGIONAL AREA BOUNDARIES.

QUESTION 2: ARE THE SOLE SOURCE PROCUREMENTS WHICH YOU DESCRIBE IN YOUR SUBMISSIONS PROPER?

ANSWER: WE CANNOT DEFINITIVELY DETERMINE THE PROPRIETY OF THESE PROCUREMENTS UNTIL WE EXAMINE ALL PERTINENT PROCUREMENT DOCUMENTS AND ANALYZE ANY JUSTIFICATION FOR THE ABSENCE OF COMPETITION WHICH THE SBA MAY OFFER.

ATTACHED IS A DISCUSSION OF THESE QUESTIONS.

ATTACHMENT

SMALL BUSINESS ADMINISTRATION'S CAPITAL OWNERSHIP DEVELOPMENT (7(J)(10)) PROGRAM - ABSENCE OF GEOGRAPHICAL RESTRICTIONS FROM SOLICITATIONS - PROPRIETY OF PROCURING ON A SOLE SOURCE BASIS

DIGESTS:

1. BURTON K. MYERS AND COMPANY, B-187960, SEPTEMBER 14, 1977, DOES NOT PROHIBIT SMALL BUSINESS ADMINISTRATION FROM INCLUDING GEOGRAPHICAL RESTRICTIONS IN REQUESTS FOR PROPOSALS TO PROVIDE SERVICES UNDER 7(J)(10) PROGRAM. DECISION MERELY RECOMMENDS THAT ADMINISTRATION BASE ITS GEOGRAPHIC RESTRICTION UPON MILEAGE FROM CENTRAL POINT RATHER THAN UPON AREA BOUNDARIES.

2. PROPRIETY OF PROCURING ON SOLE SOURCE BASIS IS DETERMINED BY EXAMINING ALL CIRCUMSTANCES WHICH EXISTED AT TIME ACTION WAS TAKEN AND BY CONSIDERING ALL REASONS WHICH AGENCY COULD HAVE ADVANCED IN SUPPORT OF ITS SOLE SOURCE DETERMINATION. THEREFORE, WE CANNOT DETERMINE PROPRIETY OF PARTICULAR PROCUREMENTS IN QUESTION UNTIL WE RECEIVE ADDITIONAL INFORMATION.

DISCUSSION

QUESTION 1: DOES THE GAO DECISION IN BURTON K. MYERS AND COMPANY, B-187960, SEPTEMBER 14, 1977, 77-2 CPD 187, PROHIBIT THE SBA FROM INCLUDING GEOGRAPHIC RESTRICTIONS IN REQUESTS FOR PROPOSALS (RFP'S) TO PROVIDE SERVICES UNDER THE 7(J)(10) PROGRAM?

ANSWER: NO. THIS DECISION, AND A SUBSEQUENT DECISION CONCERNING THE SAME RFP RESTRICTION, MERELY RECOMMENDS THAT THE SBA BASE ITS GEOGRAPHIC RESTRICTION UPON A SPECIFIED NUMBER OF MILES FROM A CENTRAL POINT RATHER THAN UPON REGIONAL AREA BOUNDARIES.

OFFICIALS AT SEVERAL SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICES HAVE REPORTED THAT BURTON K. MYERS AND COMPANY, B-187960, SEPTEMBER 14, 1977, 77-2 CPD 187, PROHIBITS THE SBA FROM INCLUDING GEOGRAPHIC RESTRICTIONS IN RFP'S TO PROVIDE SERVICES UNDER THE 7(J)(10) PROGRAM. THE 7(J)(10) PROGROGRAM AUTHORIZES THE SBA TO PROVIDE, AMONG OTHER THINGS, MANAGERIAL AND TECHNICAL ASSISTANCE TO ELIGIBLE SMALL BUSINESSES. U.S.C. 636(J)(10). AS A RESULT OF BURTON K. MYERS AND COMPANY, CLAIM THE OFFICIALS, SBA IN RECENT YEARS HAS SOLICITED PROPOSALS ON A NATIONWIDE BASIS. CONSEQUENTLY, SBA HAS AWARDED SEVERAL CONTRACTS TO FIRMS WHICH ARE GEOGRAPHICALLY REMOTE FROM THE SMALL BUSINESSES THEY ARE TO ASSIST. SERVICES UNDER SUCH CONTRACTS ARE FREQUENTLY RENDERED IN AN UNTIMELY MANNER AND CONTRACT COSTS ARE OFTEN INFLATED BY TRAVEL EXPENSES.

AT THE TIME WE ISSUED OUR DECISION IN BURTON K. MYERS AND COMPANY, THE SBA'S SOLICITATIONS FOR MANAGERIAL ASSISTANCE CONTAINED RESTRICTIONS WHICH LIMITED OFFERORS TO GEOGRAPHIC AREAS COTERMINAL WITH THE RESPECTIVE GEOGRAPHIC AREAS OF RESPONSIBILITY OF THE VARIOUS SBA REGIONAL AND DISTRICT OFFICES. PROTESTER BURTON K. MYERS AND COMPANY CONTENDED THAT THESE RESTRICTIONS UNDULY RESTRICTED COMPETITION. IN OUR DECISION WE EXPLICITLY RECOGNIZED THAT SBA'S MINIMUM NEEDS COULD BE SATISFIED ONLY BY A CONTRACTOR LOCATED IN THE VICINITY OF CONTRACT PERFORMANCE. WE DID, HOWEVER, OBJECT TO THE MEANS WHICH SBA EMPLOYED TO SATISFY THIS NEED. NOTED THAT UNDER THE GEOGRAPHIC BOUNDARY RESTRICTION, FIRMS WITHIN THE AREA BUT RELATIVELY DISTANT FROM THE PLACE OF PERFORMANCE ARE ELIGIBLE, WHILE FIRMS OUTSIDE AREA BOUNDARIES BUT RELATIVELY NEAR THE PLACE OF PERFORMANCE ARE INELIGIBLE. IN OUR VIEW, THE MORE REASONABLE APPROACH WOULD HAVE BEEN TO STATE THE GEOGRAPHIC RESTRICTION IN TERMS OF MILEAGE FROM A CENTRAL POINT. SBA ATTEMPTED TO JUSTIFY ITS AREA RESTRICTION ON THE BASIS OF ADMINISTRATIVE CONVENIENCE, A GROUND WHICH WE WERE UNWILLING TO ACCEPT AS A JUSTIFICATION FOR RESTRICTIONS ON COMPETITION. THEREFORE RECOMMENDED THAT THE ADMINISTRATOR REEXAMINE THE RESTRICTION VIS -A-VIS FUTURE SOLICITATIONS.

SBA SUBSEQUENTLY REEXAMINED ITS AREA BOUNDARY RESTRICTION AND CONCLUDED THAT IT DID NOT UNDULY RESTRICT COMPETITION. IT THEREFORE CONTINUED TO INCLUDE THIS RESTRICTION IN ITS RFP'S. WHEN BURTON MYERS AGAIN PROTESTED THE USE OF THE RESTRICTION, SEE 57 COMP.GEN. 454 (1978), SBA SOUGHT TO JUSTIFY ITS INCLUSION BY EMPHASIZING THE NEED FOR A CLOSE LIAISON BETWEEN THE CONTRACTOR AND THE SBA PERSONNEL WHO ADMINISTER THE CONTRACT. REJECTED THIS JUSTIFICATION. WE RECOMMENDED THAT THE ADMINISTRATOR ADOPT "A MORE REALISTIC RESTRICTION TO MAKE CERTAIN THAT POTENTIAL AWARDEES HAVE GAINED ENOUGH EXPERIENCE WITH 'LOCAL' SMALL BUSINESSES TO PROVIDE EFFECTIVE SERVICE" AND ADVISED THAT "CONSIDERATION SHOULD BE GIVEN TO EXTENDING GEOGRAPHICAL LIMITS FOR MANY METROPOLITAN AREAS IN THE UNITED STATES TO THE BROADEST SCOPE THAT IS CONSISTENT WITH *** THE NEEDS OF THE SBA." 57 COMP.GEN. AT 458.

IT IS CLEAR THAT THESE TWO DECISIONS MERELY RECOMMEND THAT THE SBA ELIMINATE AREA BOUNDARY RESTRICTIONS IN FAVOR OF SOME OTHER MORE REASONABLE RESTRICTION. A CONCLUSION THAT THESE DECISIONS REQUIRE NATIONWIDE SOLICITATIONS IS WHOLLY UNWARRANTED.

QUESTION 2: ARE THE SOLE SOURCE PROCUREMENTS WHICH YOU DESCRIBE IN YOUR SUBMISSIONS PROPER?

ANSWER: WE CANNOT DETERMINE THE PROPRIETY OF THESE PROCUREMENTS ON THE LIMITED INFORMATION CURRENTLY AT OUR DISPOSAL.

AGENCY DECISIONS TO PROCURE WITHOUT THE BENEFIT OF COMPETITION ARE SUBJECT TO CLOSE SCRUTINY. PRECISION DYNAMICS CORPORATION, 54 COMP.GEN. 1114 (1975). THEY WILL BE UPHELD, HOWEVER, WHERE THE AGENCY IS ABLE TO OFFER A REASONABLE BASIS FOR THEM. WINSLOW ASSOCIATES, 53 COMP.GEN. 478 (1974).

IN REVIEWING THE PROPRIETY OF A SOLE SOURCE PROCUREMENT, THE PRIMARY CONCERN IS WHETHER OR NOT THE ACTION IS SUPPORTABLE IN LIGHT OF ALL CIRCUMSTANCES THAT EXISTED AT THE TIME THE ACTION WAS TAKEN. TOSCO CORPORATION, B-187776, MAY 10, 1977, 77-1 CPD 329. THEREFORE, WE MAY CONSIDER ALL THE REASONS WHICH THE AGENCY COULD HAVE ADVANCED IN SUPPORT OF ITS SOLE SOURCE DETERMINATION, EVEN IF THEY ARE NOT APPARENT FROM THE AGENCY'S DETERMINATION AND FINDINGS. EMI MEDICAL, INC.; PICKER CORPORATION, B-195487, FEBRUARY 6, 1980, 80-1 CPD 96. CONSEQUENTLY, WE CANNOT DETERMINE THE PROPRIETY OF THE CONTRACTS WHICH YOU BRIEFLY DESCRIBE PRIOR TO AN INSPECTION OF ALL PERTINENT PROCUREMENT DOCUMENTS AND AN ANALYSIS OF ANY JUSTIFICATION WHICH THE SBA MAY OFFER. PLEASE LET ME KNOW IF YOU WISH TO PURSUE THE ISSUE OF SOLE SOURCE JUSTIFICATIONS WITH RESPECT TO SPECIFIC CONTRACTS.

FINALLY, IT SHOULD BE MENTIONED THAT ONE 1980 CONTRACT YOU SUMMARIZE, INVOLVING THE CITY OF BUFFALO, IS APPARENTLY A GRANT. GRANTS ARE NOT SUBJECT TO COMPETITION REQUIREMENTS AND WILL NOT BE INVALIDATED ABSENT EVIDENCE THAT THE AGENCY USED THE GRANT PROCESS TO CIRCUMVENT FEDERAL PROCUREMENT REQUIREMENTS OR THAT THE SELECTION OF THE GRANTEE WAS INFLUENCED BY A CONFLICT OF INTEREST. BURGESS & ASSOCIATES, B-195839, FEBRUARY 25, 1980, 80-1 CPD 155.

SPECIAL STUDIES AND ANALYSIS

BY: CHARLES KRATZER