Protest of VA Contract Award

A firm protested the award of four items under an invitation for bids issued by the Veterans Administration as a total small business set-aside. The protester asserted that the apparent low bidder could not be considered a small business because it does not buy any U.S. raw materials. The protester indicated that the acceptance of such a bid could not help the Nation achieve full productive capacity and would not be in the interest of the national defense program. The solicitation defined a small business concern as one which, among other things, agrees to furnish items manufactured or produced by small business concerns in the United States, its territories and possessions, Puerto Rico, the Trust Territory of the Pacific Islands, and the District of Columbia. GAO has previously considered protests involving surgical instruments in which it was contended that in a small business set-aside, the Government should not consider bids in which foreign material or labor was offered. The holding has been that an indication that a small business will furnish a foreign product does not automatically negate its status as a small business concern. In such cases, a firm may qualify as a small business even though the item it offers is not completely of domestic origin if it makes a significant contribution to the manufacture or production of the contract end item. Therefore, if a bidder indicates that foreign components will be used, the procuring agency should question the extent of foreign involvement and, if appropriate, refer the matter to the Small Business Administration (SBA) for decision. In either case, any challenges to a small business' status must be resolved by SBA, rather than by GAO. As for productive capacity and the national defense, these are policy matters which Congress has considered and sought to protect by requiring that preference be given to domestic end items under the Buy American Act. However, this is a separate and distinct requirement from that for furnishing domestically manufactured end items in a small business set-aside. Accordingly, the protest was dismissed.