BNUMBER:  B-279724             
DATE:  July 15, 1998
TITLE: CW Construction Services & Materials, Inc., B-279724, July
15, 1998
**********************************************************************

Matter of:CW Construction Services & Materials, Inc.

File:B-279724            
        
Date:July 15, 1998

Kurt Thalwitzer, Esq., Mateer & Harbert, for the protester. 
Denise Benjamin-Bibby, Esq., Small Business Administration, and Thomas 
W. Burt, Esq., Office of the Chief of Engineers, Department of the 
Army, for the agencies.
Aldo A. Benejam, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Small Business Administration (SBA) reasonably determined that 
protester was ineligible for award of 8(a) construction contract where 
protester failed to provide sufficient information during SBA's 
investigation to show that it established and maintained an office 
staffed with at least one full-time employee within the geographic 
area specified in the solicitation.

2.  Protest that solicitation for 8(a) construction contract contained 
a latent ambiguity is denied where protester has not demonstrated a 
reasonable possibility that it was prejudiced by the alleged 
ambiguity.

DECISION

CW Construction Services & Materials, Inc. (CW) protests the 
determination by the Small Business Administration (SBA) that the firm 
is ineligible for award because it does not satisfy the geographic 
restriction contained in invitation for bids (IFB) No. 
DCA01-98-B-0025, issued by the U.S. Army Corps of Engineers, Mobile 
District for construction repairs at MacDill Air Force Base, Florida.  
The protester argues that the SBA's determination was unreasonable 
because CW maintains an office with at least one full-time employee 
within the geographic area specified in the IFB.  The protester also 
argues that the IFB's geographic restriction contained a latent 
ambiguity.

We deny the protest.

BACKGROUND

The IFB was issued on February 17, 1998, as a competitive small 
disadvantaged business set-aside under section 8(a) of the Small 
Business Act, 15 U.S.C.  sec.  637(a) (1994).  The IFB sought bids for 
interior and exterior construction repairs to Dorm 371 in MacDill Air 
Force Base.  In a letter dated January 22, the Army offered the 
requirement to the SBA's Miami District.  The SBA's regulations 
require that a contract opportunity offered to the 8(a) program be 
awarded on the basis of a competition restricted to eligible 
participants where there is a reasonable expectation that at least two 
eligible program participants will submit offers and award can be made 
at a fair market price; and the anticipated award price exceeds $3 
million for non-manufacturing contracts.  13 C.F.R.  sec.  124.311(a) 
(1998).  Since the anticipated award price here was not expected to 
exceed that threshold, the Army requested the SBA's approval in 
competing the requirement.  See 13 C.F.R.  sec.  124.311(c).  The SBA 
approved the Army's request and also determined that the geographical 
area of competition for the requirement should be limited to the SBA 
South Florida District.[1]

As amended, the IFB contained the provision at Federal Acquisition 
Regulation (FAR)  sec.  52.219-18, Notification of Competition Limited to 
Eligible 8(a) Concerns--Alternate I (Nov. 1989), which states in part 
as follows:

     (a) Offers are solicited only from small business concerns 
     expressly certified by the [SBA] for participation in the SBA's 
     8(a) Program and which meet the following criteria at the time of 
     submission of offer--

                    .     .     .     .     .

          (4) The offeror's approved business plan is on the file and 
          serviced by the following SBA district and/or Regional 
          Office(s):

          Miami District:          Regional:
          Small Business AdministrationSmall Business Administration
          1320 S. Dixie Hwy, 5th FloorSuite 318
          Coral Gables, FL 33146   1720 Peachtree Rd., NW
          305-536-5058             Atlanta, GA 30309
                                   404-347-5052

The Army received eight bids by the time set on March 19 for bid 
opening, ranging from $1,386,900 to $2,149,446; CW submitted the low 
bid.  In view of the IFB's geographic limitation, by letter dated 
March 23, the Army requested that the SBA determine whether the firms 
that submitted the lowest four bids were eligible for award.[2]

The address provided for CW in the Army's letter indicated that the 
firm is located in Longwood, Florida.  According to the SBA, Longwood 
is within the jurisdiction of the SBA's North Florida District Office, 
in Jacksonville.  As such, the SBA states that in order to be eligible 
for award under the IFB, CW would need to establish that it maintains 
a branch office within the South Florida District.  See PI Constr. 
Co., B-272174, B-272177, Oct. 2, 1996, 96-2 CPD  para.  128 (SBA regulatory 
implementation of geographic restriction contemplates that 8(a) 
concerns will be eligible for award if they maintain a branch office 
in the designated area).  The record shows that on March 24, Mr. 
Garcilaso Rey-Moran, an SBA official, telephoned CW president, Mr. 
Cecil V. Walker, to inquire whether CW maintained a branch office in 
the South Florida District.  The record contains a declaration in 
which Mr. Rey-Moran states that he requested that Mr. Walker provide 
documentation routinely requested by the SBA to determine eligibility, 
such as a copy of a lease of office space and the name of an employee 
engaged in either marketing or other general business functions.

According to Mr. Rey-Moran's declaration, Mr. Walker responded that CW 
did not have a lease because the space CW used in South Florida was 
provided by a third party and that CW did not conduct any marketing 
from that office.  Mr. Rey-Moran then requested that Mr. Walker 
provide at least a copy of a telephone bill in CW's name, to which Mr. 
Walker replied that he would transmit "something" to the SBA.  On 
March 25, Mr. Walker transmitted a brief, 1-page letter to the SBA's 
Miami District office stating that CW had maintained an office in the 
Fort Lauderdale, Florida area since 1995, and that in 1997 CW moved 
its operation to "1400 Lee Waganer Blvd. Fort Lauderdale, Florida."  
Mr. Walker further stated in his letter that:

     The Broward County Aviation Department provides our current 
     office in Fort Lauderdale.  We will be providing Construction 
     Management Services to the Fort Lauderdale-Hollywood 
     International Airport through the year of 2003.

     We will continue to run our South Florida operations from the Lee 
     Waganer office.

Contrary to Mr. Rey-Moran's request, Mr. Walker did not provide a copy 
of a telephone bill in CW's name; did not provide a copy of a lease or 
any other document showing that CW had established and maintained an 
office in South Florida; and did not explain CW's office-sharing 
arrangement with the Broward County Aviation Department.  

On March 26, relying upon the information in Mr. Walker's responses to
Mr. Rey-Moran's telephone inquiry and based on the information in Mr. 
Walker's March 25 letter, the SBA's Assistant District Director for 
Minority Enterprise Development for the Miami District determined that 
CW was ineligible for award under the IFB.  Specifically, the SBA 
concluded that CW did not satisfy the IFB's geographic limitation 
requirement because CW does not maintain an office within the South 
Florida area, but instead uses space provided to it by a local 
government for the performance of specific contracts for a branch of 
that government.  The SBA also concluded that CW did not employ a 
full-time individual engaged in various business functions; rather, CW 
has several employees engaged in the performance of one specific 
contract.  Accordingly, the SBA found CW ineligible and recommended 
that award be made to the next low, eligible bidder, Nicon, Inc.  
Award was made to Nicon on March 30, and this protest followed.

The protester's main contention is that the SBA's determination was 
unreasonable because, since 1991, CW has maintained an office in the 
South Florida area staffed with at least one full-time employee.  The 
protester further argues that the IFB's geographic restriction 
contained a latent ambiguity.[3]

DISCUSSION

Section 8(a) of the Small Business Act, 15 U.S.C.  sec.  637(a), authorizes 
the SBA to enter into contracts with government agencies and to 
arrange for performance through subcontracts with socially and 
economically disadvantaged small business concerns; FAR  sec.  19.805 and 
13 C.F.R.  sec.  124.311 provide for and govern competitively awarded 
contracts set aside for 8(a) qualified concerns.  Because of the broad 
discretion afforded to the SBA and the contracting agencies under the 
applicable statute and regulations, our review of actions under the 
8(a) program is generally limited to determining whether government 
officials have violated applicable regulations or engaged in bad 
faith.  See Border Maintenance Serv., Inc., B-250489, Feb. 3, 1993, 
93-1 CPD  para.  97 at 5, recon. denied, B-250489.4, June 21, 1993, 93-1 CPD  para.  
473.  Here, we conclude that the SBA's determination that CW did not 
maintain a branch office within the IFB's geographic restriction, 
rendering the firm ineligible for award, was reasonable.

Implementing 10 U.S.C.  sec.  637(a)(11), the applicable SBA regulation, 13 
C.F.R.  sec.  124.311(g)(3), provides that only 8(a) program participants 
"located within the appropriate geographical boundaries" are eligible 
to compete for 8(a) construction contracts.  The regulations do not 
define this phrase or otherwise describe the circumstances under which 
the SBA would consider a participant "located within the appropriate 
geographical boundaries."  However, the preamble to the regulations 
explains that the "SBA believes that a Program Participant may be 
considered as being located within a geographical boundary if it 
regularly maintains an office which employs at least one full-time 
individual within that geographical boundary."  60 Fed. Reg. 29,969, 
29,971 (June 7, 1995).[4]  On August 7, 1997, the SBA issued an 
internal agency procedural notice stating that for purposes of 8(a) 
competitive award of construction contracts, a firm with a "branch 
office" located within the geographic boundaries of the relevant 
competitive area where the work is to be performed is eligible for 
award of the contract.  That notice further stated that a "branch 
office" means an office with at least one full-time employee that:

     (1) is other than a firm's principal place of business for 
     determining 8(a) eligibility; (2) is established and maintained 
     by the firm for conduct of one or more business activity(ies) as 
     an on-going business concern (space provided by the government 
     shall not be used to market other procurements and shall not be 
     considered an office); (3) was established and operational on or 
     before the date the instant requirement was accepted into the 
     8(a) program; and (4) is staffed by one or more full time 
     employee(s) on the date that the instant requirement was accepted 
     into the 8(a) program.

In its protest, CW concedes that its principal place of business is in 
Longwood, Florida (within the SBA's North Florida District), but 
asserts that it maintains an office in South Florida.  In support of 
its position, CW explains that it uses space located at 1400 Lee 
Waganer Boulevard, in Fort Lauderdale, Florida, provided to CW by its 
"mentoring partner," O'Brien-Kreitzberg.  The protester adds that, 
while this space is located on property owned by the local government 
(the Fort Lauderdale-Hollywood International Airport), CW does not 
have a lease in its name with the local government.  In addition, 
contrary to its March 25 letter to the SBA's Miami District office, CW 
states that the firm does not provide any services directly to the 
airport authority.  Specifically, CW states in its comments that its 
employees provide construction management services as a 
"sub-consultant" to its mentor, O'Brien-Kreitzberg, for a specific 
project O'Brien-Kreitzberg has with the Fort Lauderdale-Hollywood 
Airport.

While in its protest and comments on the agency report CW explains its 
relationship with O'Brien-Kreitzberg and provides a copy of a document 
entitled "Mentoring and Commitment Agreement," executed on January 30, 
1998, between CW and O'Brien-Kreitzberg, CW failed to explain this 
relationship in response to Mr. Rey-Moran's inquiry on March 24, and 
did not provide a copy of this agreement until it filed this protest.  
In fact, Mr. Walker's March 25 letter made no mention of this 
arrangement and specifically stated that "[t]he Broward County 
Aviation Department provides [CW its] current office in Fort 
Lauderdale," without further explanation.  In any case, nothing in the 
mentoring agreement between the firms makes reference to 
O'Brien-Kreitzberg providing CW office space at the Fort Lauderdale 
location, or suggests that O'Brien-Kreitzberg has space in Fort 
Lauderdale that it can make available to CW.  The only document in the 
record that refers to the office sharing arrangement is an undated 
1-page memorandum on O'Brien-Kreitzberg's letterhead, signed by a 
contracts administration manager, which simply states in relevant part 
that "[a]s part of the O'Brien Kreitzberg Program team, [CW] has 
offices provided by us."  However, the memorandum does not state where 
those "offices" are located or whether CW established and maintains 
the office to conduct one or more business activities as an on-going 
business concern.  Nor does that document explain whether CW office 
was established and operational on or before the date the instant 
requirement was accepted into the 8(a) program.

With regard to staffing at its Fort Lauderdale office, in its protest 
CW states that it satisfies the SBA eligibility requirement because it 
has a full-time employee engaged in general business activities, 
including marketing, in that office.  There is no indication in the 
record, however, that any evidence to support CW assertion was 
provided to the SBA before the eligibility determination was made.

We recognize that there is a discrepancy between Mr. Walker's and Mr. 
Rey-Moran's statements regarding their discussion of this issue during 
their telephone conversation on March 24.  Mr. Rey-Moran states that 
Mr. Walker said that no marketing was conducted from CW Fort 
Lauderdale office.  Mr. Walker, in contrast, states that he advised 
Mr. Rey-Moran that CW employees in its Fort Lauderdale office 
regularly market CW services in the South Florida area, but that Mr. 
Rey-Moran did not ask for their names.  Even accepting Mr. Walker's 
version, however, CW did not provide any documentation or otherwise 
mention any employees in its March 25 letter sent in response to Mr. 
Rey-Moran's inquiry.  In this regard,
Mr. Walker states that had he been aware of the "branch office" rule 
and the significance of the SBA's inquiry, he would have been more 
precise in the wording of his March 25 letter.  Mr. Walker also 
suggests that Mr. Rey-Moran's telephone inquiry did not provide 
sufficient notice that without a branch office in South Florida, CW 
would be deemed ineligible for award.  In our view, it should have 
been apparent to Mr. Walker that Mr. Rey-Moran's inquiry related to 
the geographic restriction on eligibility for award set out in the 
IFB,[5] and thus that CW should have submitted information fully 
responding to that issue.  

Based on the limited information CW provided in response to Mr. 
Rey-Moran's inquiry, we have no basis to question SBA's determination 
that CW did not establish that it had a "branch office" within the 
IFB's geographical limitation.  By Mr. Walker's own admission, CW 
could not provide a copy of a telephone bill or lease in its name 
showing that it maintained an office in South Florida, and did not 
provide any written evidence upon which the SBA's Miami District 
office could have determined that CW office was staffed with at least 
one full-time employee.[6]  Further, even the documents CW has 
submitted during these protest proceedings fail to show that the firm 
established and maintains an office within the IFB's geographic 
restriction.  Based on our review of the record, we conclude that, in 
making its determination, the SBA reasonably relied on Mr. Walker's 
March 25 letter and the information he submitted to the Miami District 
Office on behalf of CW during that office's investigation, and 
reasonably concluded that CW was ineligible for award.

The protester also argues that the IFB's geographical restriction 
contained a latent ambiguity, subject to more than one reasonable 
interpretation.  In this connection, CW states that the IFB required 
that bidders' approved business plans be on file and serviced by the 
SBA's Miami District "and/or" the Atlanta Regional Office.  CW asserts 
that, since it has a business plan on file with, and is serviced by, 
the SBA's Jacksonville District, and since the SBA's Jacksonville 
District is located within, and is part of, the Atlanta Regional 
Office, it reasonably believed that CW business plan is on file and 
serviced by the Atlanta Regional Office, making the firm eligible for 
award.

The SBA concedes that the IFB's geographic restriction, by referring 
to the regional office, was incorrectly worded.  The SBA explains that 
its regional offices exercise limited authority over the district 
offices in their region, see 13 C.F.R.  sec.  101.104, and do not provide 
direct services or support to 8(a) firms in the portfolio of 
individual district offices.  Under the applicable regulations, 
program participants, such as CW, are serviced in the field office 
serving the territory where the concern's principal place of business 
is located.  13 C.F.R.  sec.  124.203.  As such, the Atlanta Regional 
Office does not maintain on file or service approved business plans of 
any program participant.  In this case, as the protester recognizes, 
CW principal place of business is in Longwood, Florida, which is 
serviced by the SBA's Jacksonville District Office in North 
Florida.[7]

Despite the incorrect wording of the geographic restriction, SBA 
asserts that the error did not prejudice CW.  We agree.  Competitive 
prejudice is an essential element of every viable protest.  Diverco, 
Inc., B-259734, Apr. 21, 1995, 95-1 CPD  para.  209 at 3.  Our Office will 
not sustain a protest unless the protester demonstrates a reasonable 
possibility that it was prejudiced by the agency's actions, that is, 
unless the protester demonstrates that, but for the agency's actions, 
it would have had a substantial chance of receiving the award.  
McDonald Bradley, B-270126, Feb. 8, 1996, 96-1 CPD  para.  54 at 3; see 
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed.  Cir. 
1996).  Contrary to CW position, the fact that CW would receive award 
under the IFB if the incorrect and unintended meaning of the 
geographic restriction were applied does not constitute prejudice.  
Rather, in considering the issue of prejudice in circumstances such as 
these, we look to see if the bidder would have altered its bid to its 
competitive advantage if it had had the opportunity to respond to the 
correct and intended provision.  See Colt Indus., B-218834.2, Sept. 
11, 1985, 85-2 CPD  para.  284 at 5-6 (protester was not prejudiced by an 
ambiguous experience requirement in a solicitation where it could not 
comply with the intended meaning of the requirement).  Here, the 
protester does not argue and there is no evidence in the record to 
show that CW could have prepared its bid differently or otherwise done 
anything to become eligible for award had it known of the error in the 
IFB.  Thus, there is no evidence that CW was competitively prejudiced 
by the incorrect wording of the IFB's geographic restriction.[8]

The protest is denied.

Comptroller General
of the United States

1. 15 U.S.C.  sec.  637(a)(11) requires "to the maximum extent practicable" 
that 8(a) construction contracts "be awarded within the county or 
State where the work is to be performed."  Under 13 C.F.R.  sec.  
124.311(g)(3), the SBA determines, based on its knowledge of the 8(a) 
portfolio, whether the competition should be limited only to those 
firms within the geographical boundaries of one or more SBA district 
offices, an entire SBA regional office, or adjacent SBA regional 
offices.  Only those concerns located within the appropriate 
geographical boundaries are eligible to compete.

2. Under the procedures set out in FAR  sec.  19.805-2(c)(1) and 13 C.F.R.  sec.  
124.311(e)(6), the SBA determines the eligibility of the firms for 
award of the contract.  In sealed bid acquisitions, the SBA is to 
first consider the eligibility of the low bidder.  If that firm is 
ineligible for award, the SBA is to consider the eligibility of the 
next low bidder, and so on, until an eligible firm is identified or 
the list of bidders provided by the contracting agency is exhausted.  
Within 5 working days after receipt of the request for an eligibility 
determination, the SBA is to determine whether any firm identified by 
the contracting agency is eligible for award of the contract, 
including whether the firm is located within the required geographic 
location.  13 C.F.R.  sec.  124.311(e)(5)(iii).  

3. The protester also argues that the IFB should not have contained a 
geographic restriction because the anticipated award price of this 
requirement would not exceed the $3 million threshold and the Army's 
letter offering the contracting opportunity to the SBA imposed no 
geographic restrictions on the requirement.  The fact that the Army's 
offering letter placed no geographic limitations on the requirement is 
immaterial since the SBA approved the agency's request to compete the 
requirement below the $3 million threshold, and the SBA, not the 
procuring activity, has the discretion to determine whether to limit 
the competition to program participants based on geographic location.  
See 13 C.F.R.  sec.  124.311(g)(3).

4. The legal effect of that regulatory preamble and SBA's 
implementation of its regulations pertaining to geographic limitations 
for construction contracts were addressed in our decision in PI 
Constr. Co., supra.

5. In fact, in its comments on the agency report, CW acknowledges that 
it "recognized that it was important to have a South Florida branch 
office," (page 5) and "believed that a branch office would be an 
important factor considered by the SBA" (page 9) in making award.

6. We note that on March 27, Mr. Walker faxed another letter to SBA's 
North District Office explaining in greater detail CW presence in 
South Florida.  In that letter,
Mr. Walker provided a brief chronological history of the firm's 
business activities in Dade County (in South Florida) and provided 
greater details about its relationship with O'Brien, referred to its 
offices at various locations in South Florida, and stated its future 
business plans in the region.  The protester does not explain, 
however, and it is not clear from the record, in view of Mr. 
Rey-Moran's specific request only 3 days earlier, why Mr. Walker 
transmitted this letter to the SBA's North District Office in 
Jacksonville on March 27, after its eligibility determination on March 
26, rather than to the SBA's Miami District office for that office's 
consideration when it had initially requested the information.

7. While the protester maintains that it was unaware of what it calls 
the "inner workings" of the SBA, SBA's regulations are published in 
the Federal Register and the Code of Federal Regulations.  CW was 
therefore on constructive notice that program participants are 
serviced in the field office serving the territory where the concern's 
principal place of business is located, not the regional office.  See, 
e.g., Aircraft Components Inc., B-235204, Aug. 2, 1989, 89-2 CPD  para.  98 
at 2.

8. In its comments on the SBA report to our Office, CW points out 
that, prior to bid opening, the awardee, Nicon wrote a letter to the 
SBA inquiring whether a firm could have a business plan serviced by a 
regional office, thereby qualifying for all districts covered by that 
regional office.  The SBA responded by providing Nicon with a copy of 
SBA's internal procedural notice clarifying the eligibility 
requirements for 8(a) construction contracts.  CW argues that Nicon's 
inquiry should have placed the agency on notice that the IFB's 
geographic restriction was confusing, and asserts that the agency 
should have amended the IFB to provide all other potential bidders 
with a copy the SBA's procedural notice.  As already explained, 
however, the error in the IFB was not prejudicial to CW.  Even if the 
agency had provided CW with the procedural notice, CW could not have 
prepared its bid differently so as to become eligible for award.