BNUMBER:  B-276535 
DATE:  June 27, 1997
TITLE: T3 Corporation, B-276535, June 27, 1997
**********************************************************************

Matter of:T3 Corporation

File:     B-276535

Date:June 27, 1997

Edward J. Tolchin, Esq., Fettmann, Tolchin & Majors, for the 
protester.
Alexander J. Brittin, Esq., and Diane E. Flyer, Esq., McKenna & Cuneo, 
for KBM Group, an intervenor.
Anthony N. Torres, Esq., Bureau of Alcohol, Tobacco and Firearms, for 
the agency.
Jacqueline Maeder, Esq., and Paul Lieberman, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest that contracting agency's offering of requirement to Small 
Business Administration for acceptance into 8(a) program on sole 
source basis was improper because agency failed to identify protester 
as interested firm is denied where contracting agency took reasonable 
steps to identify and solicit 8(a) vendors with appropriate expertise 
and was not made aware of protester's alleged interest in the 
procurement, and nothing in the record suggests that protester took 
any affirmative steps to make its interest known to agency.

DECISION

T3 Corporation protests the award of a sole source subcontract to KBM 
Group under request for proposals (RFP) No. BATF-97-1, issued by the 
Department of the Treasury, Bureau of Alcohol, Tobacco and Firearms 
(ATF) under section 8(a) of the Small Business Act, 15 U.S.C.  sec.  637(a) 
(1994).[1]  The protester asserts that ATF did not report T3's 
interest in the procurement to the SBA and did not properly estimate 
the value of the subcontract.  T3 also complains that the agency 
failed to report changed requirements and a revised estimate of the 
subcontract's value to the SBA.

We deny the protest.

The work required under this solicitation was broadly described as 
providing services to convert ATF's documents to microfilm and prepare 
an automated index.  The primary document types were defined in the 
statement of work (SOW) as 
"(1) records of the acquisition and disposition of firearms by dealers 
no longer in business and (2) other documents for which microfilming 
would either save space or make the information more readily available 
for use."  Several examples of "other documents" were listed, 
including firearm transaction records, suspect guns reports, 
interstate theft forms, federally licensed firearms theft forms and 
other ATF firearms or nonfirearms related documents.  

Prior to this procurement, Digicon Corporation, another 8(a) firm, had 
performed the microfilming and information retrieval services on the 
serial numbers of firearms from licensees who had discontinued 
business and on firearms used in violent crimes.  In September 1996, 
ATF determined that only $300,000 remained for the final option period 
under Digicon's subcontract.  Because these funds were insufficient to 
complete the anticipated work and would be depleted by
November 15 and because the agency could not permit disruption of 
performance, it sought to increase the subcontract ceiling by $2.3 
million.[2]  ATF was informed by the SBA that further increases or 
extensions would be outside the scope of the subcontract and that 
Digicon had graduated from the 8(a) program.  To provide it sufficient 
time to develop an updated solicitation for a multi-year 8(a) 
subcontract and to prevent a lapse in performance, ATF decided to 
award an interim 1-year contract and began the process of obtaining 
another subcontractor under the SBA's 8(a) program.  

ATF's Small Business Specialist (SBS) provided contracting personnel 
with the names of three 8(a) vendors with expertise in data retrieval 
services.  The SBS had used her library and SBA's Procurement 
Automated Source System (PASS) to obtain the names of qualified 
vendors.  T3 was not included on the PASS list, however, and its name 
was not one of the three provided to the contracting personnel.  The 
SBS also provided the data retrieval/microfilming requirement 
information to vendors attending monthly Treasury Department outreach 
sessions and suggested they contact ATF if they were interested in the 
procurement; none of those vendors, however, contacted the agency to 
express interest in the procurement.  Contracting officials then 
invited the three firms identified by the SBS to attend a National Gun 
Tracing Center site visit, but KBM Group was the only vendor to accept 
that invitation and attend the site visit.  Because of KBM's favorable 
past performance providing similar services and because of severe time 
constraints, ATF decided to nominate KBM to the SBA for award.  

By letter dated October 7, 1996, ATF nominated KBM to the SBA for a 
1-year subcontract whose value was estimated at $2.8 million.  This 
estimate included the remaining $300,000 in contract funds, the $2.3 
million increase ATF had previously requested and an additional 
$200,000 because KBM, which is not a West Virginia firm, would have to 
maintain an on-site administrator and other on-site personnel.  On 
October 23, ATF received SBA's acceptance letter of KBM.[3]  SBA 
advised ATF that if the SOW were changed, "SBA will have to 
re-determine the appropriateness of the SIC [Standard Industrial 
Classification] Code, and the acceptability of this offer" for KBM.  

Due to congressional concern that some ATF records may be inaccurate, 
on November 4, ATF determined to redo the optical imaging and 
microfilming of its records for machine guns and other nonfirearm 
destructive devices and to include the redoing of the microfilming in 
KBM's proposed subcontract.  The redoing of the microfilming was not 
specifically included in the agency's original requirements or in its 
original estimate of the value of the contract.  Contracting personnel 
requested a revised estimate to include this work.  Although it 
initially appeared that the additional work would cause the estimated 
contract value to rise to $3.2 million, that figure was revised 
downward to $2.76 million after it was determined that the agency 
would be prepared to award a multi-year contract for these services 
within 10 months (rather than the 12 months which has formed the basis 
of the $3.2 million estimate).  ATF issued its sole source 
solicitation to KBM on January 17, 1997, on an indefinite 
delivery/indefinite quantity basis with a not-to-exceed price of $2.9 
million (for reasons not clear from the record, the subcontract 
awarded identified the period of performance as 1 year).  On that 
basis, an 8(a) subcontract was awarded to KBM on March 6.  Upon 
learning of the award, T3 protested to our Office.
 
The protester argues that ATF failed to notify SBA of T3's interest in 
the procurement and violated the requirements of Federal Acquisition 
Regulation (FAR)  sec.  19.805-1 and 13 C.F.R.  sec.  124.311(a) (1997) by 
awarding the contract to KBM on a sole source basis.  T3 also argues 
that the estimated value of the 1-year subcontract that was awarded 
exceeds the $3 million competitive threshold for a sole source 8(a) 
acquisition and that ATF's use of a 10-month estimate for a 1-year 
award indicates that the agency was trying to circumvent the 
competitive threshold.  Finally, T3 argues that ATF changed the 
requirements under the SOW without reporting the change to the SBA.  

When planning to place an 8(a) contract with the SBA, FAR  sec.  
19.804-2(a)(12) requires the agency to identify all known 8(a) 
concerns that have expressed an interest in this specific requirement 
as a result of self-marketing, response to sources sought, or 
publication of advanced acquisition requirements.  Additionally, FAR  sec.  
19.805-1(a) and 13 C.F.R.  sec.  124.311(a) provide that an acquisition 
offered to the SBA under the 8(a) program shall be awarded on the 
basis of competition limited to eligible 8(a) firms where the agency 
expects offers from at least two eligible and responsible 8(a) firms 
and the anticipated award price of the contract including options will 
exceed $3 million.[4]

The agency reports that it was not aware of T3's existence or of the 
firm's interest in the procurement at the time it nominated KBM to SBA 
for award.  ATF states that it first became aware of T3's interest on 
or about December 18 (after SBA had approved award to KBM), upon 
receipt of a letter from a U.S. Senator from West Virginia.  That 
letter was sent to ATF in response to a letter from Digicon in which 
Digicon indicated that it was mentoring T3 and supported T3 for 
contract consideration.  Subsequently, in late February 1997, ATF was 
contacted by SBA representatives on behalf of T3.  The contracting 
officer informed the SBA representatives that the agency had been 
unaware of T3 at the time it requested SBA approval to award to KBM on 
a sole source basis.  The contracting officer indicated that SBA had 
approved ATF's request and that a sole source award was pending with 
KBM.  The contracting officer also explained that ATF was preparing a 
solicitation for a multi-year follow-on contract and that T3 could 
participate in the competition for that contract.   

Based on this record, there is no basis to object to the sole source 
award.  Although the letter from Digicon to the Senator on behalf of 
T3 suggests that Digicon and T3 were following contracting 
opportunities at ATF, the record shows that T3 took no steps to make 
its interest known to the agency.  Moreover, T3 does not rebut the 
agency's explanation or timeline and did not submit to our Office any 
documentation suggesting that T3 had contacted ATF earlier and that 
ATF therefore should have been aware of the firm's status as an 8(a) 
contractor and its interest in the procurement.  In fact, upon receipt 
of T3's protest, ATF's SBS again searched SBA's PASS database by SIC 
code, state, and company name and found that T3 is not listed in the 
database.[5]  Thus, the record provides no basis to conclude that ATF 
should have been aware of T3's interest in the procurement or that ATF 
failed to inform SBA of T3's interest.

We also find without merit T3's allegations that ATF improperly 
modified the solicitation requirements without notifying SBA of the 
changes and that the estimate is improper.  As noted above, in 
November, ATF determined to include the microfilming of certain 
machine gun and other nonfirearm records in its proposed contract to 
KBM.  T3 argues that this additional work constitutes a change in the 
solicitation's SOW and, under the terms of SBA's acceptance of KBM, 
should have been resubmitted to SBA.[6]  The protester argues that to 
include this additional work, the agency's estimate increased from 
$2.3 million to $3.2 million, an increase of 40 percent.  T3 argues 
that such an increase is clearly substantial and material.

To determine if there has been a meaningful change or modification in 
the SOW, we look to whether there is a material difference between the 
modified SOW and the original SOW and consider such factors as the 
extent of any changes in the type of work to be performed or changes 
in the performance period and the costs anticipated.  See Data 
Transformation Corp., B-274629, Dec. 19, 1996, 97-1 CPD  para.  10 at 6; 
Neil R. Gross & Co., Inc., 69 Comp. Gen. 292, 294 (1990), 90-1 CPD  para.  
212  at
2-3.  We also consider whether the original SOW adequately advised 
offerors of the potential for the type of modifications that in fact 
occurred and whether the modification is of a nature which offerors 
would reasonably have anticipated under the SOW.  See Neil R. Gross & 
Co., Inc., supra, at 2-3.

Here, there are no significant differences in the nature or character 
of the services to be performed, in the performance time frame, or in 
the costs.[7]  While the microfilming of nonfirearm related documents 
was not originally specifically anticipated by the agency, but is now 
required, it is not a modification of the type of work that was always 
to be performed.  KBM will still be required to microfilm and index 
ATF documents.  Indeed, as noted above, the SOW identifies two 
categories of documents to be microfilmed and indexed.  While T3 
argues that the SOW's "other documents" category is impermissibly 
broad, the SOW provides numerous examples of the additional types of 
documents that an offeror could be required to microfilm and index 
and, specifically cites "non-firearms related documents" as an 
example.  Thus, an offeror could reasonably expect that additional 
microfilming of other documents could be requested which could 
include, as here, nonfirearms related documents.

Moreover, the estimate of the value of the contract increased only 
slightly from the original $2.8 million estimate to the $2.9 million 
not-to-exceed price.  T3's assertion that costs increased 40 percent, 
from $2.3 million to $3.2 million, is simply incorrect.  ATF 
originally submitted an estimate of $2.8 million to SBA.  This 
estimate was revised to $2.76 million based on the combined effect of 
the additional microfilming requirement (which caused the estimate to 
increase) and the 10-month performance period (which caused it to 
decrease).  The difference of $100,000 between the original estimate 
and the not-to-exceed price of the subcontract actually awarded does 
not evidence a significant modification.  Thus, there is no basis to 
conclude that the SOW was expanded or modified in a manner resulting 
in the ensuing requirement being other than substantially similar to 
the original one, and there was thus no reason for resubmission to 
SBA.

Finally, the protester alleges that the actual estimated value of the 
subcontract exceeds the $3 million competitive threshold but was 
revised downward only to avoid competition.  T3 complains that ATF has 
violated FAR  sec.  19.805-1(c), which prohibits an agency from dividing a 
requirement into lesser amounts in order to use 8(a) sole source 
procedures for award to a single firm. 

As noted above, ATF contacted three interested firms concerning this 
procurement and discussed the acquisition in its vendor outreach 
sessions.  These actions do not suggest that ATF was attempting to 
avoid a competitive procurement.  Moreover, by the time the estimate 
was being finalized, ATF had concluded that it could issue that 
solicitation for a multi-year contract, which was to be competed, in 
10 months.  As a result, the $3.2 million estimate, which assumed that 
awarding the multi-year contract would require a full year, was 
inappropriate and ATF reasonably based its final estimate on the 
10-month period.  In making the change, the actual work to be 
performed was neither divided into lesser amounts nor into shorter 
periods; hence, there is no basis for objection.  

The protest is denied.

Comptroller General 
of the United States

1. Section 8(a) of the Small Business Act authorizes the Small 
Business Administration (SBA) to contract with government agencies and 
to arrange for performance of such contracts by awarding subcontracts 
to socially and economically disadvantaged small business.  15 U.S.C.  sec.  
637(a).

2. Disruption needed to be avoided because the work performed under 
this subcontract enables the agency to provide tracing information to 
federal, state, local and foreign law enforcement agencies on firearms 
used in criminal activity. 

3. To ensure a smooth, gradual transition and continued service, ATF 
entered into an interagency agreement with the General Services 
Administration and the Federal Systems Integration and Management 
Center to award a 5-month contract to Digicon on November 5 for 
$1,238,937.  The contract period ran from October 29, 1996, through 
April 15, 1997.

4. The competitive threshold is $5 million for acquisitions assigned 
manufacturing SIC codes and $3 million for all other acquisitions, 
such as the one at issue here. 

5. In response to our request that T3 provide evidence of its status, 
the only confirmation it submitted relevant to SBA certification under 
the relevant SIC code was dated May 30, 1997.

6. Although we address the materiality of modifications to the SOW in 
our discussion, we note that the terms of SBA's acceptance letter 
suggested that ATF was required to resubmit its offer letter only if 
it changed the SOW so that SBA would have to redetermine if the SIC 
code remained appropriate and if KBM was still qualified to perform 
the required work.  Thus, SBA requested resubmittal only where the 
work requirements of the SOW were revised in a way that could affect 
the assigned SIC code or KBM's eligibility.  Clearly, no such revision 
occurred here, and the protester does not assert that one did.

7. The agency reports that it added a transition clause and a 
requirement for an on-site administrator to the SOW.  ATF also revised 
the language in the SOW related to document control procedures to 
allow the offeror to propose these procedures anytime before 
implementation.  However, these changes do not relate to the type of 
work to be performed, and thus to the SIC code, or to KBM's ability to 
do the work.  Thus, there is no basis to conclude that these changes 
should have been resubmitted to SBA.