BNUMBER:  B-272223
DATE:  August 28, 1996
TITLE:  Schwegman Constructors and Engineers, Inc.

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Matter of:Schwegman Constructors and Engineers, Inc.

File:     B-272223

Date:August 28, 1996

Christopher Solop, Esq., and Lynn Hawkins Patton, Esq., Ott & Purdy, 
for the protester.
Richard P. Castiglia, Jr., Esq., Department of the Air Force, for the 
agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest challenging solicitation's inclusion of evaluation 
preference for small disadvantaged business concerns in construction 
acquisitions pursuant to Department of Defense test program on ground 
that the preference contravenes the Small Business Competitiveness 
Demonstration Program (SBCDP) Act's mandate for full and open 
competition is denied; since the evaluation preference does not limit 
the sources that are permitted to compete, the competition remains 
"full and open" and does not violate the SBCDP Act.

2.  General Accounting Office will not consider allegation that 
evaluation preference for small disadvantaged business concerns in 
construction acquisitions pursuant to Department of Defense test 
program is unconstitutional in light of Adarand Constructors, Inc. v. 
Pena and City of Richmond v. Croson Co. because neither decision 
constitutes clear judicial precedent on the constitutionality or 
legality of this test program and its evaluation preference. 

DECISION

Schwegman Constructors and Engineers, Inc. protests the terms of 
invitation for bids (IFB) No. F22600-96-B-0031, issued by the 
Department of the Air Force to replace chillers at Keesler Air Force 
Base, Mississippi.  Schwegman contends that the solicitation's 
inclusion of an evaluation preference for small and disadvantaged 
business (SDB) concerns is improper.

We deny the protest.

In Adarand Constructors, Inc. v. Pena, 115 S.Ct. 2097 (1995), the 
Supreme Court held that racial classifications must be subject to 
strict scrutiny and must serve a compelling governmental interest and 
be narrowly tailored to further that interest.  The Department of 
Defense (DOD) subsequently suspended those sections of the Defense 
Federal Acquisition Regulation Supplement (DFARS) which prescribed the 
set-aside of acquisitions for SDB concerns in order to take account of 
the Adarand decision while an interagency government-wide review of 
affirmative action programs was conducted.  60 Fed. Reg. 54,954 (Oct. 
27, 1995).  On April 29, 1996, DOD issued its final rule amending the 
DFARS to implement initiatives designed to facilitate awards to SDB 
concerns in consideration of the Adarand decision.  61 Fed. Reg. 
18,686 (Apr. 29, 1996).  Relevant to this protest, DOD established a 
test program to ensure that offers from SDB concerns would be given an 
evaluation preference in most construction acquisitions whose value 
exceeds the simplified acquisition threshold.  Id. at 18,688.  

Under the test program, set forth at DFARS Subpart 219.72, offerors 
are required to separately state their bond costs where a solicitation 
requires bonding.  Offers will first be evaluated on the basis of 
total price.  If the apparently successful offeror is an SDB concern, 
no preference will be applied.  If the apparently successful offeror 
is not an SDB concern, offers will be evaluated based upon total price 
minus bond costs.  If, after the exclusion of bond costs, the 
apparently successful offeror is an SDB concern, bond costs will be 
added back to all offers, and SDB concerns will be given an evaluation 
preference by adding a factor of 10 percent to the total price of all 
other offers.  The clause at DFARS  sec.  252.219-7008, which explains this 
procedure, is to be included in all solicitations to which the test 
program applies.

On May 6, the Air Force issued this solicitation as an unrestricted 
procurement.  The work to be performed is classified as construction 
work with a value in excess of $25,000.  After amendment No. 0001 was 
issued to incorporate the clause at DFARS  sec.  252.219-7008 into the 
solicitation, Schwegman filed this protest.  Schwegman principally 
argues that the solicitation's inclusion of the clause violates the 
Small Business Competitiveness Demonstration Program (SBCDP) Act of 
1988,  15 U.S.C.  sec.  644 note (1994).  

The SBCDP Act establishes a demonstration program under which 
solicitations for the procurement of services in designated industry 
groups are to be issued on an unrestricted basis, provided the agency 
has attained its small business participation goals.  Construction is 
one of these designated industry groups.  Section 717(b).  Relevant to 
this protest, section 713 of the SBCDP Act states:

     "(a) Full and Open Competition. . . .  [E]ach contract 
     opportunity with an anticipated value of more than $25,000 for 
     the procurement of services from firms in the designated industry 
     groups (unless set aside pursuant to section 8(a) of the Small 
     Business Act (15 U.S.C. 637(a)) or section 2323 of Title 10, 
     United States Code) shall be solicited on an unrestricted basis . 
     . . .  Any regulatory requirements which are inconsistent with 
     this provision shall be waived."

Schwegman contends that the solicitation's inclusion of the evaluation 
preference renders this a restricted competition, in contravention of 
the SBCDP Act. 

Unrestricted competition and restricted competition are terms that 
define the universe of firms that may compete for award under a given 
solicitation.  Generally, in an unrestricted competition, all 
responsible sources are permitted to compete.  Federal Acquisition 
Regulation (FAR)  sec.  6.003.  In a restricted competition, the sources 
permitted to compete are limited to, for example, small businesses 
under a small business set-aside.  FAR  sec.  6.203.  Indeed, the SBCDP Act 
itself defines restricted competitions as those restricted to small 
business concerns under a small business set-aside, see section 
713(b), and FAR  sec.  19.1003(a) explains that the purpose of the program 
is to test the ability of small businesses to compete successfully in 
certain industry categories "without competition being restricted by 
the use of small business set-asides."  Since the evaluation 
preference here does not limit the sources that are permitted to 
compete, the competition remains unrestricted and does not contravene 
the requirements of the SBCDP Act.

Schwegman claims our Office has held that using an evaluation 
preference in a procurement covered by the SBCDP Act violates the Act, 
citing our decision in Perdomo & Sons, Inc., B-240436, Nov. 19, 1990, 
90-2 CPD  para.  404.  Schwegman has misread this decision.

In Perdomo, the Air Force inadvertently included the SDB evaluation 
preference clause prescribed at DFARS  sec.  252.219-7007 in an 
unrestricted solicitation under the SBCDP Act.  Our conclusion that 
the agency properly refused to apply the preference was not based upon 
any notion that it violated the SBCDP Act, but upon the fact that the 
applicable regulations specifically prohibited the inclusion of the 
evaluation preference.  Presently, DFARS  sec.  219.1006(b)(1)(B) 
specifically prohibits use of the evaluation preference at DFARS  sec.  
219.70, the provision at issue in Perdomo.[1]  However, that same 
section specifically recognizes the exception for the construction 
acquisitions test program.  Hence, unlike in Perdomo, use of the 
evaluation preference at issue here is not prohibited by the 
applicable regulations.

Schwegman's fundamental complaint is that this evaluation preference 
is unduly restrictive of competition.  The protester believes that its 
application could be catastrophic to small businesses competing for 
the same procurement because they cannot reduce their prices by 10 
percent and survive.  However, a solicitation may include restrictive 
provisions to the extent necessary to satisfy the needs of the agency 
or as authorized by law.  10 U.S.C.  sec.  2305(a)(1)(B) (1994).  Since 
DFARS Part 219.72 required the Air Force to include this evaluation 
preference here, its presence is not legally objectionable. 

Schwegman alternatively asks this Office to find that the inclusion of 
the clause is unconstitutional in light of the Adarand decision.  The 
protester contends that DOD's test program regulations are not based 
on specific, direct evidence that past discrimination has limited the 
ability of SDB concerns to obtain contracts with the federal 
government.  

There must be clear judicial precedent before we will consider a 
protest based on the asserted unconstitutionality of the procuring 
agency's actions.  DePaul Hosp. and The Catholic Health Ass'n of the 
United States, B-227160, Aug. 18, 1987, 87-2 CPD  para.  173.  We have 
consistently held that since the Court in Adarand simply announced the 
standard that is to be applied in determining the constitutionality of 
programs involving racial classifications in the federal government, 
and remanded the case to the lower courts for further consideration in 
light of that standard, Adarand did not provide that precedent.  
Advanced Eng'g & Research Assocs., Inc., B-261377.2 et al., Oct. 3, 
1995, 95-2 CPD  para.  156; Elrich Contracting, Inc.; The George Byron Co., 
B-262015; B-265701, Aug. 17, 1995, 95-2 CPD  para.  71.    

Schwegman contends that, following the Court's decision in Adarand, 
racially based set-aside programs imposed by the federal government 
are subjected to the same level of "strict scrutiny" applied to 
racially based set-aside programs at the state or local level 
following the Court's decision in City of Richmond v. Croson Co., 488 
U.S. 469 (1989), which concerned a municipality's minority set-aside 
program.  Schwegman maintains that these two decisions taken together 
provide our Office with the clear judicial precedent it requires to 
review this matter.  We disagree.

There must be clear judicial precedent on the precise issue presented 
to us before we will consider a protest based on the asserted 
unconstitutionality of a procuring agency's action.  Neither the 
Adarand nor the Croson decision constitutes clear judicial precedent 
on the constitutionality or legality of this test program and its SDB 
evaluation preference.  These decisions addressed the particular 
programs that were before the Court and, while they indicate what 
factors need to be considered to determine the constitutionality of 
such programs, we are unaware of, and the protester does not cite to, 
any dispositive federal court decisions applying the standards 
articulated in Adarand and Croson to a program which is sufficiently 
similar to this one so as to warrant regarding those decisions as 
clear judicial precedent here.  G.H. Harlow Co., Inc.--Recon., 
B-266144.3, Feb. 28, 1996, 96-1 CPD  para.  116; see also Seyforth Roofing 
Co., Inc., B-235703, June 19, 1989, 89-1 CPD  para.  574.
 
The protest is denied.

Comptroller General
of the United States

1. At the time the decision in Perdomo was issued, DFARS  sec.  
219.1070-1(c)(3) prohibited application of the evaluation preference 
at issue in that case.