BNUMBER:  B-270881
DATE:  May 10, 1996
TITLE:  BFI Medical Waste Systems of Arizona, Inc.

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Matter of:BFI Medical Waste Systems of Arizona, Inc.

File:     B-270881

Date:May 10, 1996

Allen Samelson, Esq., Rogers, Joseph, O'Donnell & Quinn, for the 
protester.
Terrence J. Tychan, Department of Health and Human Services, for the 
agency.
Jerold D. Cohen, Esq., Office of the General Counsel, GAO, 
participated in the preparation of the decision.

DIGEST

Protest of decision to set a procurement aside for small businesses is 
sustained where the record does not support the agency's determination 
that there was a reasonable expectation of bids from at least two 
responsible small businesses. 

DECISION

BFI Medical Waste Systems of Arizona, Inc., protests the decision by 
the Phoenix Area Office of the Indian Health Service (IHS), Department 
of Health & Human Services (HHS), to set aside for small businesses 
invitation for bids (IFB) No. 5015 for the collection and disposal of 
medical waste.  

We sustain the protest. 

Federal Acquisition Regulation (FAR)  sec.  19.502 requires that a 
solicitation be set aside for small business participation when there 
is a reasonable expectation that offers will be obtained from at least 
two responsible small business concerns, and that award will be made 
at a fair market price.  IHS set the procurement aside after the IHS 
small and disadvantaged business utilization specialist (SADBUS) and 
the contracting officer agreed that a set-aside was warranted under 
the FAR criteria.  IHS mailed out 11 copies of the solicitation and 
received two bids in response, one from a small business, Arizona 
Medical Waste Management, Inc. ($152,496 total for a base year and 4 
option years), and one from an ineligible large business ($230,828 
total).

BFI, which timely protested before bids were opened, argues that IHS 
made virtually no initial effort to determine whether the criteria in 
the FAR for a set-aside were met, and did not investigate the matter 
even after BFI raised the issue with the contracting officer.[1]  BFI 
argues that a proper investigation in fact would have shown that a 
set-aside was not appropriate.  BFI also maintains that Arizona  
Medical--the only small business to have responded to the IFB--cannot 
be found a responsible concern because some of the medical waste will 
have to be disposed of by incineration, which the firm is not equipped 
to do.

As a general rule, the decision whether to set aside a particular 
procurement is within the discretion of the contracting agency.  York 
Int'l Corp., B-244748, Sept. 30, 1991, 91-2 CPD  para.  282.  However, an 
agency must undertake reasonable efforts to ascertain whether it is 
likely that the agency will receive offers from at least two small 
businesses capable of performing the work.  Library Sys. & 
Servs./Internet Sys., Inc., B-244432, Oct. 16, 1991, 91-2 CPD  para.  337.  
There is no particular method prescribed for assessing the 
availability of small businesses, although we have recognized it 
appropriate to refer to factors such as prior procurement history, 
nature of the contract, type of contract, market surveys, and/or 
advice from the agency's technical specialists.  See FKW Inc., 
B-249189, Oct. 22, 1992, 92-2 CPD  para.  270.  Our Office will object to a 
set-aside decision that does not have a reasonable basis.  York Int'l 
Corp., supra.

We agree with BFI that the record in this case does not support the 
set-aside.  The record includes only three agency comments concerning 
the determination to restrict the procurement.  In the protest report, 
HHS states:

     "[T]he contracting officer conferred with the IHS small and 
     disadvantaged business utilization specialist, who had personal 
     knowledge of other medical waste disposal contracts in the state 
     being performed by small businesses.  They both agreed that there 
     was a reasonable expectation of receiving bids from at least two 
     responsible small businesses at reasonable prices."  

In a memorandum prepared for the report, the contracting officer 
states that a 
set-aside "was recommended by the SADBUS Coordinator and concurred by 
the Contracting Officer."  In another memorandum prepared for the 
report, the IHS Supervisory Contract Specialist repeats the 
contracting officer's statement, adding that the determination "was 
based upon a previous and similar requirement initiated by this office 
for the Whiteriver Indian Hospital."

IHS has provided no information about the "other" Arizona medical 
waste disposal contracts of which SADBUS had knowledge, e.g., whether 
they were at all similar to the one in issue here, and why they 
supported an expectation of small business competition.  There also is 
nothing in the record about the "similar requirement initiated" by IHS 
for the Whiteriver Indian Hospital, e.g., what is meant by 
"initiated," which on its face suggests an ultimately unsuccessful 
set-aside attempt, or whether the result was a successful set-aside 
procurement that would serve as a procurement history to support the 
current set-aside.[2]  There is nothing else in the record to explain 
why the contracting officer agreed with the SADBUS's recommendation.  
Finally, the record does not indicate that any market survey was 
conducted, that any small businesses expressed interest in the 
contemplated procurement, or any other rationale that would establish 
the propriety of the set-aside.  

In sum, the record is devoid of any substantive support for the 
contracting officer's decision that IHS reasonably could expect at 
least two offers from responsible small business concerns, the first 
of the two FAR criteria.  We therefore have no basis to find the 
decision to set this procurement aside reasonable.  See York Int'l 
Corp., supra ("the bare assertion that the determination was based on 
a reasonable expectation of small business participation, provides no 
basis on which to conclude that the decision, when made, was 
reasonable.").  Additionally, we note that, unlike in York Int'l 
Corp., "subsequent events"--sufficient small business 
participation--did not justify the set-aside; only one small business 
responded to IHS's solicitation. 

BFI's protest is sustained.  We recommend that IHS cancel the IFB 
under protest and conduct an unrestricted procurement.  We also 
recommend that BFI be reimbursed the costs of filing and pursuing its 
protest, including reasonable attorneys' fees.  Bid Protest 
Regulations, 4 C.F.R.  sec.  21.8(d)(1) (1996).  The protester should 
submit its detailed and certified claim for costs directly to the 
agency within 90 days after receipt of this decision.  Bid Protest 
Regulations, 4 C.F.R.  sec.  21.8(f)(1). 

Comptroller General
of the United States

1. BFI initially protested that IHS could not reasonably expect bids 
from two small businesses capable of incinerating all waste--IHS had 
advised BFI that incineration was the required disposal method.  IHS 
subsequently reported that the advice to BFI had been incorrect, but 
maintained that BFI had not been prejudiced in the competition because 
the set-aside otherwise was proper, so that the protester was not 
eligible for award.  In response, BFI argues that the set-aside is not 
supportable in any event.

2. In fact, in the previous, unrestricted procurement of the services 
involved here, the solicitation had been mailed to 30 potential 
bidders and the only two bids received were from BFI (the awardee) and 
another large business.