BNUMBER: B-271071.6; B-271071.7; B-271071.8; B-271071.9
DATE: May 20, 1996
TITLE: McSwain & Associates, Inc.; Shel-Ken Properties, Inc.;
and Elaine Dunn Realty
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Matter of:McSwain & Associates, Inc.; Shel-Ken Properties, Inc.;
and Elaine Dunn Realty
File: B-271071; B-271071.2; B-271071.3; B-271071.4; B-271071.5;
B-271071.6; B-271071.7; B-271071.8; B-271071.9
Date: May 20, 1996
Michael J. McSwain for McSwain & Associates, Inc.; Charlotte C.
Jenkins for
Shel-Ken Properties, Inc.; and Elaine Dunn for Elaine Dunn Realty, the
protesters.
W. Graham Moses, Esq., Department of Housing and Urban Development,
for the agency.
Wm. David Hasfurther, Esq., Susan K. McAuliffe, Esq., and Michael R.
Golden, Esq., Office of the General Counsel, GAO, participated in the
preparation of the decision.
DIGEST
Protests are sustained where agency decision not to set aside real
estate asset manager services procurement for small business concerns
was based on insufficient efforts to ascertain small business
capability to perform the contract.
DECISION
McSwain & Associates, Inc., Shel-Ken Properties, Inc., and Elaine Dunn
Realty protest the decision of the Department of Housing and Urban
Development (HUD), Georgia State Office, to procure real estate asset
manager (REAM) services on an unrestricted basis under request for
proposals (RFP) No. DU204-R-95-0021. The protesters contend that the
procurement of these services, which has in the past been limited to
small business concerns, should be set aside solely for small
businesses. They also contend that the agency has improperly failed
to clarify certain RFP requirements.
We sustain the protests.
The agency advances three reasons for its decision to issue the RFP on
an unrestricted basis. First, it states that the greatly increased
size of each service area under the RFP and the increased managerial
and financial resources needed to service each area make it impossible
for small businesses to perform successfully without entering into
joint ventures. Second, it contends that since the dollar amount of
any contract under the RFP will exceed the maximum dollar level
($1.5 million) permitted by the applicable Standard Industrial
Classification (SIC) code (SIC code 6531) for a small business, no
firm obtaining an award under the RFP can be considered a small
business for purposes of this procurement. Third, it argues that a
Greensboro (North Carolina) Field Office's attempted set-aside, which
had to be canceled when acceptable small business offers were not
received, proves the inappropriateness of setting the current
procurement aside. The agency also notes that the objective of HUD
Notice 91-12, which established the REAM procurement procedures, is
not to limit these procurements to small businesses, but rather to
obtain high-quality property management services.
The protesters maintain that there are several small business firms,
including the protesters, that are capable of fulfilling the contract
requirements and are interested in competing.
An acquisition of services is required to be set aside for exclusive
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 award
will be made at fair market prices. Federal Acquisition Regulation sec.
19.502-2(b). Generally, we regard such a determination as a matter of
business judgment within the contracting officer's discretion which we
will not disturb absent a showing that it was unreasonable. Neal R.
Gross & Co., Inc.,
B-240924.2, Jan. 17, 1991, 91-1 CPD para. 53. However, an agency must
undertake reasonable efforts to ascertain whether it is likely that it
will receive offers from at least two small businesses with the
capability to perform the work and we will review a protest to
determine whether an agency has done so. Library Sys. &
Servs./Internet Sys., Inc., B-244432, Oct. 16, 1991, 91-2 CPD para. 337;
The Taylor Group, Inc., B-235205, Aug. 11, 1989, 89-2 CPD para. 129. In
this regard, we have found unreasonable the determination to issue a
solicitation on an unrestricted basis where that determination is
based upon outdated or incomplete information. Library Sys. &
Servs./Internet Sys., Inc., supra.
The record does not show that the contracting officer met her duty to
reasonably investigate whether the procurement could be set aside for
exclusive small business participation. Based upon the facts
underlying the determination as they were provided to us, the agency's
determination not to set aside the procurement was based on incomplete
information and unsupported assertions. While the use of any
particular method of assessing the availability of small businesses is
not required, and measures such as prior procurement history, market
surveys and/or advice from the agency's small business specialist and
technical personnel may all constitute adequate grounds for a
contracting officer's decision not to set aside a procurement,
American Imaging Servs., Inc., 71 Comp. Gen. 249 (1991), 92-1 CPD para.
188, the assessment must be based on sufficient facts so as to
establish its reasonableness. Here, however, the agency's general
assertion that the service areas are too large to be successfully
serviced by a small business simply states a conclusion that is not
established by any facts provided to our Office. The agency offers no
meaningful comparison of the current requirements to those of the
service areas which have been successfully serviced by small
businesses in the past to support its position; additionally, no facts
have been offered to establish the applicability of the Greensboro
experience, where acceptable small business offers were not received,
to the present procurement.
The agency here simply did not conduct an adequate review of the
potential small business market. For instance, the agency did not
contact any of the small businesses that expressed interest in the
contract, or those with known REAM contract experience, to ascertain
whether they were qualified to meet the increased requirements.
Rather, the agency concluded, without evidentiary support, that any
small business would be incapable of meeting the contract
requirements, particularly with regard to financially capacity.
Although the agency states that it reviewed prior small business REAM
contracts and proposals in reaching its conclusion, the agency has not
explained how a review of these prior contracts is relevant to
determining the availability of responsible small businesses to meet
the current requirements.
The agency's conclusion that small business contractors lack the
financial capability to satisfactorily perform the contract was based
upon the agency's experience with incumbent small business
contractors' complaints regarding their need to use their own
financial resources (sometimes exceeding $100,000) between agency
payments. The protesters respond, however, that they are financially
able to perform the current contract requirements and that the
contractor complaints referenced by the agency were the result of the
agency's own violations of the prompt payment terms of those
contracts. The agency has not rebutted the protesters' position and,
in the absence of any further explanation concerning these
circumstances and the causes of the small business incumbents'
complaints, we are not persuaded that this concern justifies an
unrestricted procurement where other small businesses may in fact have
the financial capability. (The record shows that there has been no
review of the interested small businesses' financial capability to
satisfactorily perform the current requirements in accordance with the
RFP's payment terms.)
We do not question the legitimacy of the agency's concerns that the
increased requirements may be excessive for certain small businesses
or reach any conclusion as to whether there actually are two or more
small businesses that can meet the RFP's requirements. We find only
that the agency was required to more actively investigate the current
capabilities of at least a representative number of interested small
business firms before determining, based only upon incomplete
information and unsupported assertions, that no small business concern
would be able to perform the work. Because the agency failed to make
reasonable efforts to ascertain whether small business firms are
capable of performing the contract, we conclude that the decision not
to set aside this procurement for exclusive small business competition
is not adequately supported and, therefore, the protests are
sustained. DCT Inc., B-252479, July 1, 1993, 93-2 CPD para. 1.[1]
Accordingly, we recommend that the contracting officer adequately
investigate the potential small business interest in this procurement
and the responsibility of interested small business firms. If the
contracting officer finds that there is a reasonable expectation that
offers will be obtained from at least two responsible small business
concerns (and that award can be made at a fair market price), the
agency should take the necessary steps to set aside this procurement
for small businesses. We also recommend that the protesters be
reimbursed their costs of filing and pursuing their protests. Bid
Protest Regulations, 4 C.F.R. sec. 21.8(d)(1) (1996). The protesters
should submit their detailed and certified claim for costs directly to
the agency within 90 days after receipt of this decision. 4 C.F.R. sec.
21.8(f)(1).
The protests are sustained.[2]
Comptroller General
of the United States
1. Further, the agency's reliance on the applicable SIC code--for
purposes of arguing that since the current contract will exceed that
code's small business size ceiling (of $1.5 million in annual
receipts), no firm can be considered a small business--is misplaced.
The dollar amount of the current contract would be excluded from the
calculation of a firm's annual receipts for compliance with the
applicable SIC code ceiling for this procurement. In any event, the
SIC code's effect on offeror eligibility as to size status is a matter
for the Small Business Administration (SBA). See StaffAll, B-233205,
Feb. 23, 1989, 89-1 CPD para. 195. We also note, regarding the SBA, that
the agency did not seek the opinion of that agency in making its
determination not to set aside the procurement for small business
concerns.
2. McSwain and Shel-Ken raised numerous other challenges to the
procurement (e.g., alleged bias or criminal activity on the part of
the agency) that have been reviewed by our Office, but which are not
supported by the record or are rendered academic in light of our
decision above sustaining the protests of the agency's determination
not to set aside the procurement for small businesses. To the extent
the protesters challenge certain specifications of the RFP as
restrictive of competition or ambiguous, that insufficient time was
permitted for the preparation of proposals, and that the requirement
should be procured under sealed bidding procedures, we have no basis
to question the contested terms of the procurement. The record shows
that all offerors were given sufficient time and information to
intelligently prepare their proposals on an equal basis, reasonably
allowing for the exercise of their own business judgment.