BNUMBER: B-274378
DATE: November 8, 1996
TITLE: Grace Industries, Inc.
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Matter of:Grace Industries, Inc.
File: B-274378
Date:November 8, 1996
Herbert V. Kelly, Esq., Jones, Blechman, Woltz & Kelly, for the
protester.
Christopher M. Bellomy, Esq., Department of the Navy, for the agency.
Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest that Small Business Administration (SBA) improperly failed to
perform adverse impact evaluation before accepting janitorial services
requirement into section 8(a) program is denied where record supports
SBA determination that requirement was "new," and that adverse impact
evaluation therefore was not required, because of significant increase
in square footage under the requirement.
DECISION
Grace Industries, Inc. protests the decision by the Department of the
Navy and the Small Business Administration (SBA) to include
solicitation No. N62477-96-D-1044, for janitorial services at Quantico
Marine Corps Base, in the SBA's section 8(a) set-aside program.[1]
We deny the protest.
Grace was awarded a contract for janitorial services at Quantico in
1993; following a series of contract modifications, this contract
ultimately covered a total of 203,868 square feet. In 1996, the
agency decided to consolidate this requirement with additional
requirements and to offer it to the SBA for inclusion in the section
8(a) program; the consolidated requirement covers 368,660 square feet.
The SBA accepted the requirement for the section 8(a) program without
performing an adverse impact evaluation pursuant to 13 C.F.R. sec.
124.309 (1996)[2] based on its determination that, because the offered
requirement covered an area more than 50 percent larger than the
area under Grace's contract, it was a "new" requirement; new
requirements are exempt from the adverse impact evaluation
requirement.
Grace maintains that the requirement should not be considered new
since it covers the same kinds of services provided under its
contract. While the area covered is greater, Grace notes, the agency
previously substantially increased the area under its originally
awarded contract, indicating, Grace argues, that the agency previously
did not consider increases in area to be material. Grace concludes
that the increase in area should not be deemed to make this a new
requirement within the meaning of the regulation, and that an adverse
impact evaluation is required.
Because the Small Business Act affords the SBA and contracting
agencies broad discretion in selecting procurements for the section
8(a) program, our Office reviews challenges to decisions to procure
requirements under section 8(a) only to ensure that agency officials
have not acted in bad faith, and that applicable laws or regulations
have been followed. American Mutual Protective Bureau,73 Comp. Gen.
196 (1994), 94-1 CPD para. 371. Grace does not contend that the Navy and
SBA have acted in bad faith, and we find no violation of law or
regulation.
The applicable regulation, 13 C.F.R. sec. 124.309(c), provides in
relevant part:
"The expansion or alteration of an existing requirement
shall be considered a new requirement where the requirement
is materially expanded or modified so that the ensuing
requirement is not substantially similar to the prior
requirement due to the magnitude of the expansion or
alteration."
The SBA's determination that the requirement is new was based on the
reference in the regulation to a material "expansion," and the fact
that the area covered by the requirement is more than 50 percent
greater than the area under Grace's contract. There is no basis for
objecting to the SBA's interpretation of the regulation language. The
former requirement (the area under Grace's contract) clearly has been
expanded, and the magnitude of the expansion--more than 50 percent--on
its face seems material. In this latter regard, although the SBA's
regulation does not define materiality, we think the possibility that
the expanded requirement could call for a significantly greater,
different, and more costly effort to perform are considerations that
support viewing such a large increase in area as material. See
Coopers Constr., Inc., B-260364; B-260364.2, May 30, 1995, 95-1 CPD para.
268; Federal Acquisition Regulation sec. 14.405 (defect or variation
viewed as material where it has more than a negligible effect on
price, quantity, quality or delivery). The fact that the Navy
previously opted to increase the area under Grace's contract is
irrelevant; the regulation does not preclude the SBA from subsequently
determining that an expansion of a requirement is material, and that
it renders a requirement new such that an adverse impact evaluation is
not required.
The protest is denied
Comptroller General
of the United States
1. Section 8(a) of the Small Business Act, 15 U.S.C. sec. 637(a) (1994),
authorizes the SBA to contract with government agencies and arrange
for performance of those contracts by awarding subcontracts to small
socially and economically disadvantaged businesses.
2. The SBA performs adverse impact evaluations to determine whether
acceptance of a requirement into the section 8(a) program will have an
adverse impact on other small business programs, or on an individual
small business whether or not that small business is in the section
8(a) program; the adverse impact evaluation procedure is designed to
protect other small businesses performing contracts outside the
section 8(a) program. 13 C.F.R. sec. 124.309 (c).