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Is not an abuse of discretion where the contracting officer's knowledge of the market and past small business performance did not support an expectation that offers from two or more responsible small business concerns would be received. Where the level of service will be greatly increased. The solicitation is for nationwide verbatim reporting services for DOT's Office of Hearings. BACKGROUND DOT's Office of Hearings is responsible for conducting formal proceedings pursuant to the Administrative Procedure Act. 5 U.S.C. Court reporting services are needed to record and transcribe a verbatim account of each proceeding. DOT did not exercise its option under the 8(a) contract because of what DOT believed were serious performance problems in 1989.

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B-240924.2, Jan 17, 1991, 90-2 CPD 53

PROCUREMENT - Socio-Economic Policies - Small business set-asides - Use - Administrative discretion DIGEST: Contracting officer's decision to procure services on an unrestricted basis, and not through a small business set-aside, is not an abuse of discretion where the contracting officer's knowledge of the market and past small business performance did not support an expectation that offers from two or more responsible small business concerns would be received; where the level of service will be greatly increased; and where the agency small business representative concurs with the decision not to set aside the procurement.

Attorneys

Neal R. Gross Company, Inc.:

Neal R. Gross Company, Inc. protests the decision of the Department of Transportation (DOT) to issue request for proposals No. DTOS59-90-R-00158 on an unrestricted basis. The protester argues that the solicitation should be issued as a small business set-aside. The solicitation is for nationwide verbatim reporting services for DOT's Office of Hearings.

We deny the protest.

BACKGROUND

DOT's Office of Hearings is responsible for conducting formal proceedings pursuant to the Administrative Procedure Act. 5 U.S.C. Sec. 551, et seq. (1988). Since the Act requires that these proceedings be conducted on a formal evidentiary record, court reporting services are needed to record and transcribe a verbatim account of each proceeding. The reporting service must prepare an official transcript from the record. Prior to 1987, the Office of Hearings obtained its court reporting services pursuant to a General Services Administration Federal Supply Schedule (FSS) contract. Because of the unsatisfactory performance of the small business FSS contractor, DOT obtained an exemption from the FSS contract and entered into a contract with a minority small business enterprise pursuant to section 8(a) of the Small Business Act, 15 U.S.C. Sec. 637(a) (1988). In 1990, DOT did not exercise its option under the 8(a) contract because of what DOT believed were serious performance problems in 1989. During 1990, DOT obtained the needed services through the use of the small purchase procedures set forth at Federal Acquisition Regulation (FAR) Part 13 on an as-needed-basis. Since this process proved to be time-consuming and inefficient and because DOT expected a significant increase in its workload due to the resumption of the Federal Aviation Administration's (FAA) civil penalty program, DOT decided to issue the subject solicitation for a single contract with one firm capable of handling all of the Office of Hearing's proceedings nationwide. /1/

PROTEST

The regulations require that an acquisition be set aside exclusively for small business participation if the contracting officer determines that there is a reasonable expectation that offers will be obtained from at least two responsible small business concerns and that awards will be made at reasonable prices. FAR Sec. 19.502-2. Gross argues that the requisite number of capable small business firms does exist and maintains that the contracting officer should have been aware of this and should have set the solicitation aside. In the alternative, Gross argues for the first time after the receipt of the agency protest report that if there are not sufficient small businesses to justify setting aside the entire nationwide requirement, DOT should at least have split off the Washington, D.C. portion and set it aside.

DOT did not set the requirement aside because the contracting officer determined that she did not have a reasonable expectation of receiving two offers from responsible small business. Generally, we regard such a determination as a matter of business judgment within the contracting officer's discretion which we will not disturb unless we find that the decision is without a rational basis. Universal Hydraulics, Inc., B-232144, Oct. 31, 1988, 88-2 CPD Para. 417.

The record shows that in making the determination the contracting officer considered several factors. First, the number of hearings to be held during the period covered by the RFP will be significantly higher than in the past due to the resumption of the FAA's civil penalty program. According to DOT, between August 16 and September 10, 1990, 33 civil penalty cases have been docketed compared to 22 other types of cases docketed from January to October 1990. Next, the contracting officer considered that while most of DOT's past hearings were held in Washington, D.C., the majority of the new proceedings will be scheduled outside Washington. Therefore, according to the agency, there would be problems resulting from a small business contractor having to obtain subcontractors for out-of-town hearings. Finally, the contracting officer considered the performance problems which the Office of Hearings has had over the recent years with the quality of the transcripts generated by small business firms. These problems included the loss of exhibits, errors and deficiencies in the transcripts, untimely delivery of transcripts and problems with recording equipment and reporters.

Gross disagrees maintaining that there are several small firms, including itself, capable of fulfilling the contract requirement and interested in competing. Further, the protester states there should be no subcontracting problem because while more hearings will be held outside Washington, the bulk of the transcript pages are to be generated by the Washington hearings. Since recorders and transcribers are paid by the page, more than 50 percent of a small business' personnel costs will be incurred by the small business' own staff located in Washington, and the requirement that a small business perform at least 50 percent of the work can easily be met. See FAR Sec. 52.219-14.

We find the contracting officer acted within her discretion in issuing the solicitation on an unrestricted basis. It is undisputed that the number of hearings will rise substantially during the contract term because of the resumption of the civil penalty program and that more hearings will be held outside Washington. Gross attempts to discredit DOT's performance concerns by disputing the seriousness of the cited performance deficiencies and pointing out that at least two of the offending firms are no longer in business. Nevertheless, the agency has furnished numerous memoranda from its administrative law judges complaining that the transcripts obtained from small business firms are not meeting their needs. Their concerns do not appear to us unreasonable. Further, we note that while it is true that two of the firms cited are not in business several of the firms cited, including the protester, are. In any event, we do not think it was improper for the contracting officer to have reviewed past performance problems with small business firms even if some of the involved firms are no longer in existence. Under the circumstances here, where the agency has experienced significant performance problems in the past with small business and where its requirements are to be greatly expanded both in terms of quantity and distance, which may significantly increase the likelihood of performance problems, we find that the contracting officer's judgment that the particular requirement will not attract two small business firms capable of meeting DOT's needs to be rationally based. See MVM, Inc., Cook Int'l, Inc; Special Investigations, Inc.; and Varicon, Inc., B-237620, Mar. 13, 1990, 90-1 CPD Para. 270.

We have reached the above result also based on the fact that the DOT's Small Business Administration representative, who was aware of the procurement history for these services, concurred in the contracting officer's decision. RBC, Inc., B-233589; B-233589.2, Mar. 28, 1989, 89-1 CPD Para. 316.

We also find that DOT is not required to issue the solicitation as a partial set-aside for the Washington, D.C. area because of the above mentioned performance problems and the difficulties it previously had in not having one contractor perform or be responsible for all of its transcription needs. We think that the determination that under the circumstances here the acquisition does not meet the criterion set forth in FAR Sec. 19-502-3(a)(3), that one or more small businesses have the technical competence and production capability to satisfy a portion of the requirement at a fair price, was a reasonable one.

The protest is denied.

/1/ FAA is a component agency of DOT.

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