BNUMBER:  B-275043
DATE:  January 16, 1997
TITLE:  Young & Joe Construction

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Matter of:Young & Joe Construction

File:     B-275043

Date:January 16, 1997

Robert O. Dyer, Esq., Jennings & Haug, for the protester.
Sherry Kinland Kaswell, Esq., and Justin P. Patterson, Esq., 
Department of the Interior, for the agency.
Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., 
Office of the General Counsel, GAO, participated in the preparation of 
the decision.

DIGEST

Protest is sustained where agency fails to demonstrate reasonable 
basis for its determination that firm which self-certified as an 
Indian economic enterprise was not in fact such.

DECISION

Young & Joe Construction protests the rejection of its bid and the 
award of a contract to Blaze Construction under invitation for bids 
(IFB) No. SB-96-0016, issued by the Department of the Interior, Bureau 
of Indian Affairs (BIA), for road construction on the Salt River 
Indian Reservation, Arizona.  The procurement was set aside for 
eligible Indian economic enterprises pursuant to the Buy Indian Act, 
25 U.S.C.  sec.  47 (1994).  Young & Joe's bid was rejected based on the 
contracting officer's determination that it was not an eligible Indian 
economic enterprise.  Young & Joe disputes that determination.

We sustain the protest.

BACKGROUND

The IFB was issued on June 20, 1996, as a total Buy Indian set-aside.  
To be considered for award, bidding enterprises were required to 
certify that they were at least 51 percent Indian-owned, that one or 
more of the Indian owners would be involved in daily business 
management of the enterprise, and that the majority of the 
enterprise's earnings would accrue to the Indian owners.  At the July 
31 bid opening, Young & Joe, a partnership comprised of Young & Joe 
Management Company, an Indian-owned firm (holding a majority 
interest), and Agate, Inc., a non-Indian firm (holding a minority 
interest), was the low bidder; Blaze was second low.  As required, 
Young & Joe certified in its bid that it was an eligible Indian 
economic enterprise.

By letter dated August 1, the contracting officer asked Young & Joe to 
submit information required to establish its responsibility, including 
its latest financial statements; a list of its past road construction 
experience; and evidence that it had the necessary production, 
construction, and technical equipment and facilities, or ability to 
obtain them.  In an August 5 telephone conversation, the contracting 
officer also requested a copy of Young & Joe's partnership agreement.  
Young & Joe submitted the requested information the following week.

After reviewing the information submitted, the contracting officer 
determined that Young & Joe was acting as a front for Agate and did 
not qualify as an eligible Indian-owned economic enterprise.  She 
based this determination on her observations that (1) the financial 
resources of both the partnership and its Indian owners were limited, 
meaning that the partnership would be dependent on Agate for the cash 
to finance performance; (2) it was not clear that the Indian owners 
would manage the day to day business of the partnership or be involved 
in management of this particular project;( 3) the construction 
experience of both Young & Joe as a company and of its Indian owners 
was limited; and (4) Agate would provide the principal place of 
business and equipment for the project.  On September 27, the agency 
notified Young & Joe that its bid had been rejected.  A contract was 
awarded to Blaze on the same date.

ANALYSIS

Young & Joe challenges the agency's determination, arguing that the 
contracting officer lacked a reasonable basis for concluding that it 
does not qualify as an eligible Indian economic enterprise. 

The Secretary of the Interior, acting through the BIA Commissioner, 
has broad discretionary authority to implement the Buy Indian Act; 
defining the criteria a firm must meet to qualify as an Indian 
economic enterprise; and determining
the quantum of evidence necessary to establish compliance with the 
required criteria falls within that broad discretion.  Cheyenne, Inc., 
B-260328, June 2, 1995, 95-2 CPD  para.  117; Arrowhead Constr., Inc./FNF 
Constr., Inc., B-251707; B-251708, Apr. 19, 1993, 93-1 CPD  para.  334.  
Consequently, we will defer to the BIA's judgments regarding the 
status of firms as eligible Indian economic enterprises, unless such 
judgments are shown to be unreasonable.  Calvin Corp., B-245768, Jan. 
22, 1992,
92-1 CPD  para.  98.  Here, we think that the protester has made such a 
showing.

First, with regard to the issue of financial resources, it is not 
apparent from the record that Young & Joe will be totally dependent on 
Agate for funding, as the contracting officer surmises.  The record 
reflects that the partnership has qualified for its own line of credit 
at a local bank and that it obtained its own bond for this project.[1]  
Further, pursuant to the terms of the partnership agreement, Young & 
Joe Management Company will maintain majority ownership of the 
partnership and receive a majority of the profits even in the event 
that Agate contributes a majority of the cash  for performance.  In 
this regard, the partnership agreement clearly states that Agate will 
own a 33-1/3 percent, and Young & Joe Management Company a 66 
2/3-percent, interest in the partnership, and that profits, losses, 
gain, and distributions will be borne in the same percentages.  
Although, as the contracting officer points out, the partnership 
agreement also provides for loans by either partner to the 
partnership, which must be repaid with interest prior to a 
distribution of profits to the partners, we fail to see how this leads 
to the conclusion reached by the contracting officer that a majority 
of any profits will accrue to Agate:  Agate will not increase its 
percentage of ownership in the partnership by loaning it money.

Second, we see no reasonable basis for the contracting officer's 
conclusion that Young & Joe's Indian owners will not be involved in 
daily business management of the enterprise.  The partnership 
agreement designates Young & Joe Management Company as the 
partnership's initial managing partner, and there is no evidence in 
the record that this designation has ever been changed.[2]  Further, 
contrary to the contention of the contracting officer, the partnership 
agreement does not require unanimous approval of the partners for 
certain business decisions--an initial requirement for unanimous 
approval of the partners was changed to a requirement for the managing 
partner's approval by the Second Amendment to the Partnership 
Agreement, dated April 22, 1996.[3] 
Third, we see no reasonable basis for the contracting officer's 
conclusion that neither of the Indian owners of Young & Joe Management 
Company will be involved in management of the road project here.  In 
response to the agency's inquiry, Young & Joe identified one of the 
Indian owners, Charles Young, as the project's manager.  The 
contracting officer refused to accept this representation based on her 
judgment that Mr. Young did not have sufficient construction-related 
experience to be capable of performing that function.  The record does 
not support the contracting officer's conclusion that Mr. Young is not 
qualified, and therefore could not be intending to serve as project 
manager, given that his resume indicates that he has a range of 
construction-related experience, including involvement in highway 
construction projects.  In addition, Mr. Young is the qualifying party 
for the partnership's Class A General Engineering license, the license 
necessary for the subject project.  In order to qualify for this 
license, Mr. Young was required to demonstrate, by written 
examination, qualification in the kind of work for which his company 
proposes to contract; general knowledge of the building, safety, 
health, and lien laws of the state of Arizona, administrative 
principles of the contracting business, and the rules adopted by the 
Registrar of Contractors; and knowledge and understanding of the 
construction plans and specifications applicable to the particular 
industry in which his company proposes to engage.  Given Mr. Young's 
demonstrated qualifications, we do not think that the contracting 
officer had a reasonable basis for discounting Young & Joe's 
representation that he would manage the subject road construction 
project.[4]  We also do not think that the fact that Mr. Young has a 
part-time (i.e., 20 hours per week) job at a feed store furnished the 
contracting officer with a reasonable basis to doubt that he would be 
available to perform his responsibilities as project manager.  Based 
on the information available in the record, we see no reason why he 
could not perform both functions.

Further, the record does not support the contracting officer's 
conclusion that Young & Joe Construction, as a company, has no 
construction experience.  Although Young & Joe did state on its 
Experience Questionnaire that it had been in existence only 1 year and 
had not yet completed any projects, it also reported that it was 
engaged in an ongoing project for a pipeline for the White Mountain 
Apache Tribe.

Fourth, we do not think that the partnership's proposed use of Agate's 
home office, which is located less than 2 miles from the project site, 
as opposed to Young & Joe's home office, which is located 160 miles 
away, establishes that Young & Joe is acting as a front for 
Agate--this just as easily can be viewed as a logical business 
decision.  Similarly, we fail to see why the fact that a newly 
organized enterprise such as Young & Joe does not own its own 
equipment should be interpreted as evidence that it is acting as a 
front.  The record reflects that Young & Joe will rely on several 
sources to obtain the equipment required for performance, including 
Salt River Sand and Rock, a company wholly owned by the Salt River 
Indian Community.

In sum, the record here does not support the contracting officer's 
finding that a majority of the partnership's earnings will accrue to 
its non-Indian owner or her finding that neither of the Indian owners 
will be involved in daily management of partnership business.  The 
partnership agreement clearly provided for the accrual of a majority 
of the profits to the Indian owners and clearly vested authority for 
the management of the partnership's day-to-day business in the Indian 
owners.[5]

Given our conclusion that the agency did not have a reasonable basis 
for determining that Young & Joe did not qualify as an eligible Indian 
economic enterprise, and absent any evidence that the protester would 
otherwise have been ineligible for award, we recommend that the agency 
terminate the award to Blaze Construction and make award to Young & 
Joe Construction.  We also recommend that the agency pay the protester 
the costs of filing and pursuing its protest.  See Bid Protest 
Regulations, section 21.8(d)(1), 61 Fed Reg. 39039, 39046 (1996)(to be 
codified at 4 C.F.R.  sec.  21.8(d)(1).  In accordance with section 
21.8(f)(1) of our Regulations, Young & Joe's certified claim for such 
costs, detailing the time expended and the costs incurred, must be 
submitted directly to the agency within 60 days after receipt of the 
decision.

The protest is sustained.

Comptroller General
of the United States

1. There is also no evidence in the record to substantiate the 
contracting officer's conjecture that Agate obtained either bonding or 
insurance on behalf of the partnership.

2. The agency argues that the fact that the designation is identified 
as "initial" means that it is subject to change.  We agree that the 
designation is subject to change, but absent any evidence that it has 
in fact been changed, we see no basis to conclude that Young & Joe 
Management Company is no longer the managing partner of the 
partnership.  Also, since the partnership, like any partnership, would 
be free to change the designation of managing partner through 
amendment of the partnership agreement, we fail to see how the 
inclusion of the word "initial" makes the arrangement any more subject 
to change than it would otherwise be.

3. The agency argues that the contracting officer did not have a copy 
of the Second Amendment at the time she made her eligibility 
determination and therefore could not consider it.  The contracting 
officer admits in her affidavit that she was informed of the existence 
of the amendment prior to making her eligibility determination, 
however; it is unclear why, once on notice, she took no steps to 
obtain a copy.

4. We recognize that the contracting officer may not have been aware 
that Mr. Young had replaced Agate as the qualifying party on the 
partnership's engineering license since there is no evidence in the 
record that this information was submitted to the agency.  We do not 
think that the protester can be faulted for failing to submit all 
documentation bearing on its status as an eligible Indian economic 
enterprise, however, since the contracting officer failed to inform it 
(until immediately prior to issuance of her notice rejecting its bid) 
that she questioned the validity of its self-certification.

5. We note that if it turns out that Mr. Young's involvement in 
management of the road project is in fact minimal and that BIA was 
correct in suspecting that Young & Joe Construction is only a front 
for Agate, the agency will be able to rely on this information to 
disqualify Young & Joe under future Buy Indian solicitations.  Since 
Young & Joe is an ongoing business concern that presumably would like 
to compete for future BIA awards, we think that this is a significant 
enforcement mechanism.