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CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SET-ASIDE WITHDRAWAL THE READVERTISEMENT OF A PROCUREMENT AND WITHDRAWAL OF A SMALL BUSINESS SET-ASIDE AFTER A PLANNED PRODUCER NO LONGER QUALIFIED AS A SMALL BUSINESS AND AN EVALUATION OF BIDS REVEALED A PRICE DIFFERENTIAL OF APPROXIMATELY 10 PERCENT BETWEEN THE LOW SMALL BUSINESS BID AND THE PRICE PAID FOR THE MATERIAL IN PRIOR PROCUREMENTS PLUS ADJUSTMENT FOR CHANGES IN THE MARKET WERE PROPER ACTIONS AND THE FACT THAT THE PRICES IN THE COURTESY BID OF THE FORMER SMALL BUSINESS FIRM WERE NOT REVEALED TO THE BIDDERS UNDER THE FIRST INVITATION DOES NOT AFFORD A BASIS TO VOID AN AWARD UNDER THE READVERTISEMENT. 1957: REFERENCE IS MADE TO YOUR TWO LETTERS OF JUNE 26.

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B-132202, AUGUST 30, 1957, 37 COMP. GEN. 147

CONTRACTS - AWARDS - SMALL BUSINESS CONCERNS - SET-ASIDE WITHDRAWAL THE READVERTISEMENT OF A PROCUREMENT AND WITHDRAWAL OF A SMALL BUSINESS SET-ASIDE AFTER A PLANNED PRODUCER NO LONGER QUALIFIED AS A SMALL BUSINESS AND AN EVALUATION OF BIDS REVEALED A PRICE DIFFERENTIAL OF APPROXIMATELY 10 PERCENT BETWEEN THE LOW SMALL BUSINESS BID AND THE PRICE PAID FOR THE MATERIAL IN PRIOR PROCUREMENTS PLUS ADJUSTMENT FOR CHANGES IN THE MARKET WERE PROPER ACTIONS AND THE FACT THAT THE PRICES IN THE COURTESY BID OF THE FORMER SMALL BUSINESS FIRM WERE NOT REVEALED TO THE BIDDERS UNDER THE FIRST INVITATION DOES NOT AFFORD A BASIS TO VOID AN AWARD UNDER THE READVERTISEMENT.

TO GEIGER AND HARMEL, AUGUST 30, 1957:

REFERENCE IS MADE TO YOUR TWO LETTERS OF JUNE 26, 1957, AND YOUR ADDITIONAL LETTER OF JULY 2, 1957, PROTESTING THE WITHDRAWAL OF THE ABOVE- CAPTIONED INVITATION, REPRESENTING A TOTAL SMALL BUSINESS SET ASIDE, AND THE READVERTISEMENT OF THE SAME PROCUREMENT UNDER INVITATION FOR BIDS NO. DA-ENG-11-184-57-D-761 WHICH PERMITTED BIDS BY EITHER SMALL OR LARGE BUSINESS.

THE INITIAL INVITATION WAS ISSUED UPON A JOINT DETERMINATION BY THE CONTRACTING OFFICER AND THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE PURSUANT TO PARAGRAPH IVD1 OF DEPARTMENT OF DEFENSE INSTRUCTION NO. 4100.9 DATED NOVEMBER 14, 1955, WHICH PROVIDES:

TOTAL SMALL BUSINESS SET-ASIDES

THE ENTIRE AMOUNT OF A PROCUREMENT SHALL BE SET ASIDE FOR THE EXCLUSIVE PARTICIPATION OF SMALL BUSINESS CONCERNS WHEN SUCH ACTION IS DETERMINED BY A REPRESENTATIVE OF THE SMALL BUSINESS ADMINISTRATION AND THE CONTRACTING PROCUREMENT AGENCY, OR, IN THE EVENT OF THE NONAVAILABILITY OF A SMALL BUSINESS ADMINISTRATION REPRESENTATIVE IT IS DETERMINED BY THE CONTRACTING PROCUREMENT AGENCY TO BE

(A) IN THE INTEREST OF MAINTAINING OR MOBILIZING THE NATION'S FULL PRODUCTIVE CAPACITY, OR

(B) IN THE INTEREST OF WAR OR NATIONAL DEFENSE PROGRAMS.

A REPORT RECEIVED FROM THE DEPARTMENT OF THE ARMY INDICATES THAT THE SET- ASIDE WAS AGREED TO BY THE CONTRACTING OFFICER ON THE ASSUMPTION THAT THE J. S. THORN COMPANY OF PHILADELPHIA, PENNSYLVANIA, A PLANNED SOURCE FOR THE MATERIAL TO BE PROCURED, CONTINUED TO QUALIFY AS A SMALL BUSINESS AS IT HAD IN THE PAST.

RESPONSIVE BIDS WERE RECEIVED FROM THREE SMALL BUSINESS CONCERNS; THE LOWEST FROM THE NATIONAL COOLER CORPORATION. A LATE BID FROM THE J. S. THORN COMPANY WAS NOT CONSIDERED BECAUSE THE BID WAS NOT RECEIVED WITHIN THE TIME PRESCRIBED BY THE INVITATION AND BECAUSE THE BIDDER NO LONGER QUALIFIED AS A SMALL BUSINESS CONCERN. THE THORN BID, HOWEVER, APPEARS TO HAVE BEEN SIGNIFICANTLY LOWER THAN THE LOWEST ACCEPTABLE BID RECEIVED FROM A SMALL BUSINESS. ON JUNE 13, 1957, SUBSEQUENT TO THE OPENING OF THE BIDS, A REPRESENTATIVE OF THE CONTRACTING AGENCY ADDRESSED A MEMORANDUM TO THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE REQUESTING THAT THE SET- ASIDE BE WITHDRAWN ON THE BASIS THAT THE THORN COMPANY, A PLANNED PRODUCER, WAS NO LONGER A SMALL BUSINESS CONCERN; THAT ITS BID, WHICH COULD NOT BE ACCEPTED, WAS IN LINE WITH ITS PREVIOUS BIDS FOR THE SAME MATERIAL; AND THAT IN VIEW OF THE QUANTITY OF THE MATERIAL WHICH HAD BEEN PROCURED IN THE PAST FROM THE THORN COMPANY, THE SET-ASIDE WOULD NOT HAVE BEEN AGREED TO BY THE CONTRACTING AGENCY HAD IT BEEN AWARE THAT THAT COMPANY COULD NO LONGER QUALIFY AS A SMALL BUSINESS. IT WAS FURTHER POINTED OUT THAT AN AWARD TO OTHER THAN THE THORN COMPANY WOULD RESULT IN THE PAYMENT OF A PREMIUM OF APPROXIMATELY $25,000 ON AN AWARD IN A TOTAL SUM OF $282,372. IN RESPONSE TO THAT MEMORANDUM, THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE, BY LETTER OF JUNE 14, 1957, ON THE BASIS OF THE FACTS PRESENTED IN THE MEMORANDUM, AGREED TO THE WITHDRAWAL OF THE SET -ASIDE. SUBSEQUENTLY, THE INVITATION WAS WITHDRAWN AND THE PROCUREMENT READVERTISED WITHOUT SET-ASIDE. AWARD WAS MADE UNDER THE SECOND INVITATION ON JUNE 29 TO A FIRM WHICH COINCIDENTALLY IS ALSO A SMALL BUSINESS.

ON BEHALF OF YOUR CLIENT, THE NATIONAL COOLER CORPORATION, YOU PROTEST THE WITHDRAWAL OF THE SET-ASIDE ON THE GROUND THAT THE J. S. THORN BID, SUBMITTED PURSUANT TO THE FIRST INVITATION, SHOULD NEVER HAVE BEEN OPENED SINCE IT WAS FILED LATE, AND THAT IF IT HAD NOT BEEN OPENED, THE DIFFERENCE BETWEEN THE NATIONAL COOLER BID AND THE THORN BID WOULD NOT HAVE BEEN KNOWN AND PRESUMABLY AWARD WOULD HAVE BEEN MADE TO NATIONAL COOLER. SPECIFICALLY, YOU CONTEND THAT THE DATA IN THE THORN BID COULD ONLY HAVE BEEN USED PURSUANT TO APP 30-714E IN DETERMINING THE PROPRIETY OF EXECUTING FUTURE PROCUREMENTS IN THE SAME MANNER. YOU FURTHER POINT OUT THAT NATIONAL COOLER WAS AT AN UNFAIR DISADVANTAGE IN REGARD TO THE SECOND INVITATION BECAUSE IT DID NOT KNOW THE AMOUNT OF THE THORN BID UNDER THE FIRST INVITATION WHILE ITS BID UNDER THAT INVITATION HAD BEEN MADE PUBLIC.

SUBSEQUENT TO THE SUBMISSION OF YOUR PROTEST, THERE WAS RECEIVED A COPY OF A LETTER DATED JUNE 21, 1957, FROM THE HEAD OF THE PROCURING ACTIVITY, CHIEF OF ENGINEERS, IN WHICH IT WAS STATED:

UPON OPENING BIDS 7 JUNE IT WAS APPARENT THAT THE PRICES AS SUBMITTED BY THE THREE BIDDERS REGISTERED ON THE ABSTRACT WERE EXCESSIVE WHEN COMPARED WITH THE PRICES PAID FOR THESE TWO ITEMS IN COMPARABLE QUANTITIES IN 1952 PLUS ADJUSTMENT FOR CHANGES IN THE MARKET BETWEEN 1952 AND THE PRESENT TIME. THE APPARENT PRICE DIFFERENTIAL WAS APPROXIMATELY 10 PERCENT. * *

IN A REPORT FROM THE SMALL BUSINESS ADMINISTRATION, IT WAS INDICATED THAT WITHDRAWAL OF THE SET-ASIDE HAD BEEN AGREED TO BY THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE BECAUSE THE LOW RESPONSIVE BID WAS APPROXIMATELY 10 PERCENT OVER THE PRICE PREVIOUSLY PAID FOR THE SAME MATERIAL IN 1952 PLUS AN ADJUSTMENT FOR CHANGES IN THE MARKET DURING THE INTERVENING PERIOD. THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE INDICATED THAT HE WOULD NOT HAVE CONCURRED IN THE WITHDRAWAL OF THE SET- ASIDE HAD HE BEEN AWARE THAT THE THORN BID HAD BEEN OPENED AND THAT THE THORN BID APPEARED TO HAVE BEEN A FACTOR LEADING TO THE REQUEST FOR WITHDRAWAL. THAT THE THORN BID HAD BEEN OPENED AND THAT IT WAS COMPARATIVELY LOW, HOWEVER, WAS BROUGHT TO THE ATTENTION OF THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE PRIOR TO HIS AGREEMENT TO THE WITHDRAWAL BY THE MEMORANDUM OF JUNE 13 PREVIOUSLY REFERRED TO IN WHICH IT WAS STATED:

RECORDS OF THIS OFFICE SHOW J. S. THORN COMPANY TO BE A CONSISTENT LOW BIDDER FOR THE BALK INVOLVED IN THIS PROCUREMENT, WITH PRICES PREVIOUSLY PAID IN LINE WITH THE THORN BID ON THIS PROCUREMENT. ( ITALICS SUPPLIED.)

THIS STATEMENT CLEARLY INDICATES THAT THE THORN BID HAD BEEN OPENED OR AT LEAST THAT THE PRICE CONTAINED THEREIN WAS KNOWN TO THE CONTRACTING OFFICER.

DEPARTMENT OF DEFENSE INSTRUCTION NO. 4100.9 PROVIDES, AT PARAGRAPH IVD4 THAT:

IF, IN THE LIGHT OF THE FACTS AND CIRCUMSTANCES EXISTING AT THE TIME OF THE PLACEMENT OF THE CONTRACT THE CONTRACTING OFFICER CONSIDERS THAT A CONTRACT CANNOT BE MADE WITH A SMALL BUSINESS CONCERN WITHOUT DETRIMENT TO THE GOVERNMENT'S INTEREST, (E.G., BECAUSE OF UNREASONABLE PRICE) THE CONTRACTING OFFICER MAY INITIATE WITHDRAWAL OF THE SET ASIDE. IF THE SET- ASIDE RESULTED FROM A JOINT DECISION OF AN SBA REPRESENTATIVE AND THE PROCURING AGENCY AND IF THE SBA REPRESENTATIVE DOES NOT AGREE TO THE WITHDRAWAL, THE MATTER SHALL BE REFERRED TO THE CHIEF OF THE CONTRACTING OFFICE, OR HIS DESIGNEE, WHOSE DECISION SHALL BE FINAL, UNLESS THE CHIEF OR HIS DESIGNEE DECIDES TO REFER THE MATTER TO HIGHER AUTHORITY, IN WHICH EVENT THE DECISION OF HIGHER AUTHORITY SHALL BE FINAL. A SIGNED MEMORANDUM RECORD OF THE WITHDRAWAL OF ANY SET-ASIDE SHALL BE MADE AND RETAINED IN THE PROCUREMENT FILE.

APP 30-714A IS SUBSTANTIALLY TO THE SAME EFFECT. THUS, THE SMALL BUSINESS SET-ASIDE MAY BE WITHDRAWN UPON AGREEMENT BETWEEN THE CONTRACTING OFFICER AND THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE. AGREEMENT WAS ACCOMPLISHED IN THIS CASE BY THE MEMORANDUM OF JUNE 13 AND THE LETTER OF JUNE 14 REFERRED TO ABOVE UPON WHAT WE CONSIDER, AS PREVIOUSLY STATED, TO HAVE BEEN A FULL DISCLOSURE OF THE FACTS.

ONE OF THE FACTORS TO BE CONSIDERED UNDER APP 30-702N (3) IN DETERMINING INITIALLY THAT A SMALL BUSINESS SET-ASIDE SHOULD BE EFFECTED IS WHETHER A SMALL BUSINESS CAN PRODUCE OR FURNISH THE MATERIAL AT COMPETITIVE PRICES. IT IS APPARENT THAT ONE OF THE FACTORS LEADING TO THE CONCLUSION THAT COMPETITIVE PRICES COULD BE OBTAINED WAS THE ASSUMPTION THAT J. S. THORN CONTINUED TO BE A SMALL BUSINESS. SINCE IT WAS SUBSEQUENTLY FOUND THAT THORN WAS NO LONGER A SMALL BUSINESS, THE INITIAL DETERMINATION THAT COMPETITIVE PRICES COULD BE PROCURED CLEARLY APPEARS TO HAVE BEEN BASED ON AN ERRONEOUS ASSUMPTION. WE DEEM THIS TO BE SUFFICIENT TO WARRANT A DETERMINATION, UPON AGREEMENT BETWEEN THE CONTRACTING OFFICER AND THE SMALL BUSINESS ADMINISTRATION REPRESENTATIVE, THAT THE SET-ASIDE SHOULD BE WITHDRAWN.

YOU CONTEND THAT THE APP PROVIDES THAT INFORMATION OBTAINED FROM BIDS RECEIVED FROM FIRMS NOT QUALIFIED AS SMALL BUSINESS SHOULD BE USED ONLY IN REGARD TO FUTURE PROCUREMENTS. APP 30-714B PROVIDES IN PART:

WHERE BIDS ARE RECEIVED FROM LARGE BUSINESS AT PRICES LOWER THAN THOSE QUOTED BY SMALL BUSINESS, IT MAY BE AN INDICATION THAT SCREENING FOR SUSCEPTIBILITY OF THE PROCUREMENT FROM SMALL BUSINESS WAS NOT AS COMPLETE AS IT SHOULD HAVE BEEN. SUCH BIDS BY LARGE FIRMS WILL BE REGARDED AS COURTESY BIDS AND WILL BE CONSIDERED NONRESPONSIVE. RECORDS OF SUCH LOWER BIDS FROM LARGE BUSINESS SHOULD BE MAINTAINED AT THE PURCHASING OFFICE FOR USE IN DETERMINING THE PROPRIETY OF EXECUTING DETERMINATIONS IN CONNECTION WITH FUTURE PROCUREMENTS OF THE SAME OR SIMILAR ITEMS. ALTHOUGH APP 30- 714A PERMITS WITHDRAWAL OF A DETERMINATION DUE TO UNREASONABLE PRICE, ALL PURCHASING OFFICES SHOULD ONLY ENTER INTO 100-PERCENT DETERMINATION AFTER CAREFUL CONSIDERATION OF ALL THE FACTORS INVOLVED, INCLUDING THE POSSIBILITY OF A BID OR PROPOSAL FROM A LARGE FIRM SUBSTANTIALLY LOWER THAN ANY WHICH COULD BE RECEIVED FROM A SMALL BUSINESS.

THE PROVISION DOES NOT SPECIFICALLY LIMIT UTILIZATION OF COURTESY BIDS TO FUTURE PROCUREMENTS ONLY, ALTHOUGH IT AFFIRMATIVELY PROVIDES FOR SUCH USE. IN THIS CASE, WHETHER THE THORN BID WAS PROPERLY FOR CONSIDERATION IN DETERMINING TO WITHDRAW THE SET-ASIDE IS MOOT SINCE THERE WERE SUFFICIENT OTHER FACTORS (THE FACT, CONTRARY TO WHAT HAD BEEN SUPPOSED, THAT THORN WAS NOT A SMALL BUSINESS, AND THE DIFFERENCE BETWEEN THE LOW RESPONSIVE BID AND THE PRICE FOR THE MATERIAL IN PRIOR PROCUREMENT PLUS ADJUSTMENT FOR CHANGES IN THE MARKET) TO REASONABLY SUPPORT THE WITHDRAWAL.

YOU ALSO CONTEND THAT THE THORN BID SHOULD NOT HAVE BEEN OPENED BECAUSE IT WAS RECEIVED LATE. THE APP CLEARLY ESTABLISHES THAT BIDS RECEIVED FROM LARGE BUSINESS SHOULD BE OPENED AND THE INFORMATION CONTAINED IN THE BID RETAINED FOR DETERMINING THE PROPRIETY OF FUTURE SET-ASIDES. THEY ARE ALSO TO BE REGARDED AS COURTESY BIDS AND NONRESPONSIVE. SINCE BIDS FROM LARGE BUSINESS CANNOT BE CONSIDERED FOR AWARD, WE SEE NO BASIS FOR HANDLING THEM DIFFERENTLY WHEN RECEIVED LATE RATHER THAN WITHIN THE TIME REQUIRED FOR BIDS TO BE CONSIDERED FOR AWARD.

FINALLY, YOU CONTEND THAT THE THORN COMPANY HAD AN UNFAIR ADVANTAGE IN SUBMITTING ITS BID PURSUANT TO THE SECOND INVITATION IN THAT THE NATIONAL COOLER BID HAD BEEN MADE PUBLIC WHILE THE THORN BID HAD NOT. THE NATIONAL COOLER BID WAS MADE PUBLIC PURSUANT TO 10 U.S.C. 2305 (B) REQUIRING THE PUBLIC OPENING OF BIDS. SINCE THE THORN BID COULD NOT BE CONSIDERED FOR AWARD, THERE WAS NOT THE SAME REQUIREMENT IN THAT CASE. WHILE IT MAY BE THAT THE PRICES QUOTED BY THORN IN ITS COURTESY BID SHOULD HAVE BEEN MADE AVAILABLE TO YOU, THE FACT THAT IT WAS NOT WOULD BE INSUFFICIENT TO VOID THE AWARD MADE PURSUANT TO THE SECOND INVITATION. YOUR POSITION UNDER THE SECOND INVITATION WITH RESPECT TO THE THORN BID WAS NO DIFFERENT THAN IT WOULD HAVE BEEN IN RELATION TO BIDDERS WHO HAD BID ONLY UPON THE LATTER INVITATION, YET IT IS NOT S*GGESTED, NOR DO WE SEE ANY BASIS FOR CONTENDING, THAT IN CIRCUMSTANCES SUCH AS THIS A SECOND INVITATION SHOULD BE OPEN ONLY TO THOSE BIDDERS WHO HAD BID OR WHOSE BIDS HAD BEEN MADE PUBLIC UNDER THE FIRST.

THEREFORE, WE PERCEIVE NO VALID LEGAL BASIS UPON WHICH WE COULD OBJECT TO THE WITHDRAWAL OF THE FIRST INVITATION AND OF THE SMALL BUSINESS SET-ASIDE AND THE AWARD OF A CONTRACT UNDER THE SECOND INVITATION.

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