B-173194, SEP 22, 1971

B-173194, SEP 22, 1971

BID PROTEST - SMALL BUSINESS SET-ASIDE - DISQUALIFICATION AFTER AWARD DENYING PROTEST OF WESTGATE CORPORATION, LOW BIDDER, AGAINST THE TERMINATION OF A CONTRACT WHICH WAS AWARDED TO WESTGATE UNDER AN IFB ISSUED BY THE OAKLAND ARMY BASE, OAKLAND, CALIF., AS A 100 PERCENT SMALL BUSINESS SET-ASIDE FOR JANITORIAL SERVICES AND AWARD OF THE CONTRACT TO SERVICE TECHNICIANS, INC. WHERE, FOR REASONS OF HEALTH AND WELFARE, IT WAS NECESSARY TO AWARD THE CONTRACT TO WESTGATE WITHOUT DELAY BEFORE A DETERMINATION BY THE SIZE APPEALS BOARD OF THE SBA AS TO ITS QUALIFICATIONS AS A SMALL BUSINESS FIRM COULD BE MADE, THE CONTRACTING AUTHORITY HAD THE OPTION TO VOID THE CONTRACT UPON AN ADVERSE FINDING OF THE BOARD AND TO MAKE AN AWARD TO SERVICE TECHNICIANS, SECOND LOW BIDDER ON THE SOLICITATION.

TO LEE & HERTZER:

FURTHER REFERENCE IS MADE TO YOUR PROTEST ON BEHALF OF WESTGATE CORPORATION, AGAINST THE TERMINATION OF CONTRACT DAHC23-71-D-0070, WHICH WAS AWARDED TO WESTGATE ON FEBRUARY 26, 1971, AND THE SUBSEQUENT AWARD OF THE CONTRACT TO SERVICE TECHNICIANS, INC., WITHOUT RESOLICITATION.

IFB NO. DAHC23-71-B-0024 WAS ISSUED DECEMBER 24, 1970, AS A 100 PERCENT SMALL BUSINESS SET-ASIDE, FOR JANITORIAL SERVICES AT OAKLAND ARMY BASE, OAKLAND, CALIFORNIA, FOR THE PERIOD FEBRUARY 1, 1971, THROUGH JANUARY 31, 1972. EIGHT BIDS WERE RECEIVED AND OPENED AS SCHEDULED ON JANUARY 19, 1971. THE LOWEST BID WAS SUBMITTED BY WESTGATE, THE SECOND LOWEST BY SERVICE TECHNICIANS.

SERVICE TECHNICIANS FILED A PROTEST WITH THE CONTRACTING OFFICER ALLEGING THAT WESTGATE WAS NOT, IN FACT, A SMALL BUSINESS. BY LETTER DATED JANUARY 22, 1971, THE CONTRACTING OFFICER REQUESTED THE SMALL BUSINESS ADMINISTRATION (SBA) REGIONAL OFFICE TO MAKE A SIZE DETERMINATION ON WESTGATE. IN VIEW OF THE PROTEST AND THE FACT THAT THE EXPIRATION DATE ON THE EXISTING CONTRACT WITH THE INCUMBENT CONTRACTOR, SERVICE TECHNICIANS, WOULD EXPIRE JANUARY 31, 1971, THE CONTRACTING OFFICER EXTENDED THE CONTRACT 28 DAYS THROUGH FEBRUARY 28, 1971. BY LETTER DATED FEBRUARY 4, 1971, THE SBA REGIONAL OFFICE ADVISED THE CONTRACTING OFFICER THAT WESTGATE WAS FOUND TO BE A SMALL BUSINESS. ON FEBRUARY 10, 1971, SERVICE TECHNICIANS APPEALED THE FINDING OF THE SBA REGIONAL OFFICE TO THE SIZE APPEALS BOARD, WASHINGTON, D.C. ON FEBRUARY 23, 1971, THE CONTRACTING OFFICER WAS ADVISED THAT THE SIZE APPEALS BOARD WOULD TAKE ABOUT TEN DAYS, TO MARCH 5, 1971, TO RENDER A DECISION. SINCE THIS INFORMATION INDICATED THAT THE APPEAL WOULD BE PENDING BEYOND THE EXTENDED CONTRACT EXPIRATION DATE, THE CONTRACTING OFFICER THEN CONCLUDED THAT FOR REASONS OF SANITATION, HEALTH AND WELFARE, IT WAS NECESSARY TO AWARD THE CONTRACT WITHOUT DELAY. ON FEBRUARY 26, 1971, THE CONTRACT WAS AWARDED TO WESTGATE FOR THE PERIOD MARCH 1, 1971, THROUGH JANUARY 31, 1972.

ON MAY 13, 1971, THE SIZE APPEALS BOARD DETERMINED THAT WESTGATE WAS NOT A SMALL BUSINESS. IT WAS ADMINISTRATIVELY DECIDED THAT, AS A RESULT OF THE SIZE APPEALS BOARD'S FINDINGS, IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO CANCEL THE CONTRACT WITH WESTGATE AND AWARD IT TO THE SECOND LOWEST RESPONSIBLE BIDDER, SERVICE TECHNICIANS. WESTGATE WAS ADVISED BY LETTER DATED JUNE 2, 1971, THAT THE CONTRACT WOULD BE CANCELLED EFFECTIVE MIDNIGHT ON JUNE 6, 1971. MEANWHILE ON JUNE 1, 1971, SERVICE TECHNICIANS WAS AWARDED A CONTRACT, BASED ON ITS BID ON THE ORIGINAL IFB, TO COVER THE PERIOD JUNE 7, 1971, THROUGH JANUARY 31, 1972.

IT IS YOUR CONTENTION THAT WESTGATE HAD A VALID CONTRACT ENTERED INTO IN GOOD FAITH AND UNDER WHICH IT HAD PERFORMED IN AN ENTIRELY SATISFACTORY MANNER. IN ADDITION, YOU QUESTION THE VALIDITY OF THE CONTRACTING OFFICER'S DECISION TO AWARD TO SERVICE TECHNICIANS, RATHER THAN RESOLICIT. IN THIS REGARD, YOU CONTEND THAT ALL INTERESTED BIDDERS INCLUDING WESTGATE SHOULD BE GIVEN AN OPPORTUNITY TO BID ON SUCH CONTRACT.

YOU CITE MID-WEST CONSTRUCTION, LTD. V UNITED STATES, 387 F. 2D 957, 183 CT. CL. 1968, AS THE BASIS FOR YOUR CONTENTION THAT WESTGATE HAD A VALID CONTRACT. IN THAT CASE, THE CONTRACTING OFFICER AWARDED A CONTRACT TO MID -WEST ON A SMALL BUSINESS SET-ASIDE AFTER THE SBA REGIONAL OFFICE HAD FOUND THE FIRM SMALL AND THAT FINDING HAD BEEN AFFIRMED BY THE SBA SIZE STANDARDS DIVISION. SUBSEQUENT TO AWARD THE SBA FOUND THAT MID-WEST DID NOT QUALIFY AS A SMALL BUSINESS, AND IN 44 COMP. GEN. 253 (1964) WE THEREFORE EXPRESSED OUR FEELING THAT THE AWARD SHOULD BE CANCELLED. WHEN THE CONTRACT WAS CANCELLED BY THE CONTRACTING AGENCY, MID-WEST SUED IN THE COURT OF CLAIMS FOR BREACH OF CONTRACT. THE COURT HELD THAT MID-WEST HAD A VALID CONTRACT WHICH IT HAD NOT BEEN PERMITTED TO PERFORM.

WHERE A SMALL BUSINESS SET-ASIDE CONTRACT IS AWARDED IN GOOD FAITH ON THE BASIS THAT THE CONTRACTOR IS A SMALL BUSINESS AND IT IS SUBSEQUENTLY DETERMINED THAT THE CONTRACTOR WAS IN FACT NOT SMALL AT THE TIME OF AWARD, IT IS OUR POSITION THAT THE CONTRACT IS VOIDABLE AT THE OPTION OF THE GOVERNMENT. 49 COMP. GEN. 369, 375 (1969). IN THE VAST MAJORITY OF CASES THE RULE HAS BEEN APPLIED IN SUPPORT OF AN ADMINISTRATIVE DETERMINATION NOT TO VOID THE CONTRACT, AND WE HAVE SOME QUESTION AS TO WHETHER THE OPTION SHOULD HAVE BEEN EXERCISED IN THIS CASE. NEVERTHELESS, THE RULE HAS BEEN CLEARLY SET OUT A NUMBER OF TIMES. THEREFORE, WHILE WE MAY NOT NECESSARILY AGREE WITH THE EXERCISE OF THE ADMINISTRATIVE DISCRETION IN THIS CASE, WE CANNOT DENY THE EXISTENCE OF THAT DISCRETION.

WE ARE NOT UNMINDFUL THAT THE COURT OF CLAIMS FOUND THAT A VALID CONTRACT HAD BEEN AWARDED IN MID-WEST. HOWEVER, THE COURT THERE WAS CONCERNED WITH AN ACTION FOR DAMAGES. THE SAME COURT HAS RECOGNIZED THAT GOVERNMENT CONTRACTS MAY, AS A MATTER OF PROCUREMENT POLICY, BE CANCELLED EVEN THOUGH THEY WOULD NOT BE HELD INVALID BY THE COURT. JOHN REINER & CO. V UNITED STATES, 325 F. 2D 438, 440 (CT. CL. 1963). THE WESTGATE CONTRACT, UNLIKE THE MID-WEST CONTRACT, CONTAINED A TERMINATION FOR CONVENIENCE CLAUSE. IS WELL ESTABLISHED THAT SUCH A PROVISION GIVES THE GOVERNMENT THE RIGHT TO TERMINATE THE CONTRACT WHENEVER THE CONTRACTING OFFICER DETERMINES SUCH ACTION TO BE IN THE BEST INTERESTS OF THE GOVERNMENT. THE COURT IN REINER CONCLUDED THAT IN THE CIRCUMSTANCES THE CANCELLATION SHOULD BE TREATED AS A TERMINATION FOR CONVENIENCE. IN THIS CONNECTION, SEE OUR LETTER OF TODAY TO THE SECRETARY OF THE ARMY, COPY ATTACHED.

IN SUMMARY, WE CONCLUDE FOR THE REASONS STATED, THAT THE CONTRACTING ACTIVITY HAD A RIGHT TO TERMINATE THE WESTGATE CONTRACT IN THE CIRCUMSTANCES EVEN THOUGH SUCH ACTION DOES NOT NECESSARILY LEAVE WESTGATE WITHOUT A CLAIM UNDER THE TERMINATION FOR CONVENIENCE CLAUSE OF THE CONTRACT.

SO FAR AS CONCERNS YOUR CONTENTION THAT THE PROCUREMENT SHOULD HAVE BEEN RESOLICITED RATHER THAN AWARDED TO THE NEXT LOW ELIGIBLE BIDDER ON THE INITIAL SOLICITATION, THE ISSUE IN OUR JUDGMENT, IS WHETHER THE COMPETITION OBTAINED UNDER THE SOLICITATION CAN REASONABLY BE REGARDED AS REPRESENTATIVE OF THE COMPETITION WHICH WOULD BE AVAILABLE AT THE TIME OF THE AWARD TO SERVICE TECHNICIANS. WE FIND NOTHING IN THE RECORD TO SHOW THAT THE SITUATION HAD SO CHANGED AS TO INVALIDATE THE RESULTS OF THE EARLIER SOLICITATION AS A MEASURE OF THE COMPETITION AVAILABLE AT THE TIME OF THE SECOND AWARD.

ACCORDINGLY, YOUR PROTEST IS DENIED.