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When Large Is Small--Or Maybe Not

by Robert Antonio

  In reading a sustained protest from August 1998, some language in the decision caught my eye. The protest was Adams Industrial Services, Inc., B-280186, August 28, 1998. Among other things, the protester maintained that a large business receiving an award under a small business set-aside should not be permitted to perform the work because it is not a small business. However, in small business contracting, things are never that simple. At times, large businesses may be allowed to perform contracts awarded under small business set-asides.

The Regulations

Under the Federal Acquisition Regulation (FAR) at Part 19.301, businesses provide representations of their status as a small business. During a procurement, a size representation can be protested by either an offeror, the SBA Government Contracting Area Director having responsibility for the area in which the headquarters of the protested offeror is located, the SBA Associate Administrator for Government Contracting, or an other interested party.

In order to affect a specific solicitation under the FAR, a protest must be timely. To be timely, a protest must be received by the contracting officer by the close of business of the 5th business day after bid opening (sealed bid acquisitions) or receipt of the special notification from the contracting officer that identifies the apparently successful offeror (negotiated acquisitions). FAR Part 19.302 (d). However, simplified acquisition procedures do not require a contracting officer to issue a pre-award notice to unsuccessful vendors.

Upon receipt of a protest from or forwarded by a contracting officer, the SBA Government Contracting Area Director is to determine the size status of the challenged concern and notify the contracting officer, the protester, and the challenged offeror of its decision within 10 business days after receiving a protest, the challenged offeror's response, and other pertinent information. This determination is final unless it is appealed to SBA's Office of Hearings and Appeals and the contracting officer is notified of the appeal before award. The contracting officer is not to award a contract until the SBA Government Contracting Area Director has made a size determination or until 10 business days have expired since SBA's receipt of a protest, whichever occurs first. However, the contracting officer should make an award when an award must be made to protect the public interest. After the 10-day period has expired, the contracting officer may, when practical, continue to withhold award until the SBA's determination is received, unless further delay would be disadvantageous to the Government.

If a decision by the SBA Government Contracting Area Director is appealed and an award was made before the time the contracting officer received notice of the appeal, the contract shall be presumed to be valid. The SBA appeal decision, if received before award, is to apply to the pending acquisition. A ruling received after award is not to apply to that acquisition.

Under SBA's regulations at 13 CFR 121.1004, protests by entities other than a contracting officer or SBA, must be received by a contracting officer prior to the close of business on the 5th day, exclusive of Saturdays, Sundays, and legal holidays, after bid or proposal opening on a non-negotiated procurement or sale. For a negotiated procurement, a protest must be received by the contracting officer prior to the close of business on the 5th day, exclusive of Saturdays, Sundays, and legal holidays, after the contracting officer has notified the protestor of the identity of the prospective awardee. Additionally, a timely filed protest applies to the procurement in question even though a contracting officer awarded the contract prior to receipt of the protest.

The Protest

On April 16, 1998, the Saint Lawrence Seaway Development Corporation (SLSDC) issued an RFQ under the simplified acquisition procedure as a total small business set-aside. On May 27, the contracting officer awarded the purchase order to Atlantic Testing Laboratories (ATL) and on May 29, Adams Industrial Services, Inc. (AIS) protested the award to the Comptroller General. By letter dated May 30, AIS protested ATL's size status to the contracting officer, who forwarded the matter to SBA.

On June 19, SBA determined that ATL was other than small and SLSDC received SBA's determination on June 23. The SLSDC did not disturb the award to ATL because the size protest was filed after the award had been made. According to the agency, under FAR 19.302(j), SBA's size determination has prospective application but does not affect the award.

The Comptroller General's Decision

In its decision, the Comptroller General concluded that SLSDC's decision to allow ATL's selection to stand notwithstanding SBA's determination that ATL is other than small was improper, and the protest was sustained on this basis. Accordingly, the Comptroller General recommend that the purchase order issued to ATL be terminated and a purchase order for the remainder of the requirement be issued to AIS, if that firm is otherwise eligible.

The Comptroller General stated that although AIS filed its size status protest after award, it could not have done otherwise because simplified acquisition procedures do not require the agency to issue a pre-award notice to unsuccessful vendors, and none was issued here. Because the size protest was filed within 5 days of AIS receiving notice from the SLSDC of the issuance of a purchase order to ATL, the Comptroller General concluded that it was timely under SBA's size status regulations. Additionally, ATL did not defend its size certification by appealing SBA's determination.

The Comptroller General further added that while FAR 19.302(j) treats size status protests received after award of a contract as having no applicability to that contract, SBA's regulations at 13 CFR 121.1004 (c), which the Comptroller General views as controlling in this area, provide that "[a] timely filed protest applies to the procurement in question even though a contracting officer awarded the contract prior to receipt of the protest." Moreover, in the absence of countervailing reasons, the Comptroller General views it as inconsistent with the integrity of the competitive procurement system and the intent of the Small Business Act for an agency to permit a large business, which was ineligible under the terms of the RFQ, to continue to perform.

Comments

The Comptroller General's decision points out an apparent conflict between two federal procurement regulations. Specifically, FAR 19.302 (j) states that "A protest received by a contracting officer after award of a contract shall be forwarded to the SBA Government Contracting Area Office with a notation that award has been made. The protester shall be notified that the award has been made and that the protest has been forwarded to SBA for its consideration in future actions." Additionally, for appeal decisions by SBA's Office of Hearings and Appeals, FAR 19.302 (i) states that "The SBA decision, if received before award, will apply to the pending acquisition. SBA rulings received after award shall not apply to that acquisition." However, the SBA regulations at 13 C.F.R. 121.1004(c) conflict with the FAR by stating that "A timely filed protest applies to the procurement in question even though a contracting officer awarded the contract prior to receipt of the protest."

The Comptroller General further emphasized its opinion by stating that "in the absence of countervailing reasons, the Comptroller General views it as inconsistent with the integrity of the competitive procurement system and the intent of the Small Business Act for an agency to permit a large business, which was ineligible under the terms of the RFQ, to continue to perform."

Additionally, the simplified acquisition procedures are unclear with regard to notification of other offerors. Finally, although not a part of the protest, one needs to wonder why two separate SBA organizations can render decisions on the same case. It would seem that one or the other could suffice.

Copyright 1999 by Robert Antonio

 

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