BNUMBER:  B-280186             
DATE:  August 28, 1998
TITLE: Adams Industrial Services, Inc., B-280186, August 28, 1998
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Matter of:Adams Industrial Services, Inc.

File:B-280186            
        
Date:August 28, 1998

Thomas D. Adams for the protester. 
Linda M. Harding, Saint Lawrence Seaway Development Corporation, for 
the agency. 
Aldo A. Benejam, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Where a timely size protest was filed after small business set-aside 
award, and the awardee was found by the Small Business Administration 
to be other than a small business, the agency, in the absence of 
legitimate countervailing reasons, should have terminated the contract 
and made award to the protester.                  

DECISION

Adams Industrial Services, Inc. (AIS) protests the decision of the 
Saint Lawrence Seaway Development Corporation (SLSDC) to cancel a 
purchase order issued to AIS and the subsequent issuance of a purchase 
order to Atlantic Testing Laboratories (ATL) under request for 
quotations (RFQ) No. DTSL55-98-Q-PO414, issued as a small business 
set-aside by the SLSDC for nondestructive testing of fracture-critical 
welds on 34 stoplogs[1] and inspection of repair work at the 
Eisenhower and Snell Locks near Massena, New York.  The protester 
argues that, after receipt of quotations, the SLSDC improperly 
permitted ATL to correct an alleged error in its certification 
concerning its small business status, and maintains that ATL is 
ineligible for award because it is not a small business.

We sustain the protest.

Background

The RFQ was issued on April 16, 1998, as a total small business 
set-aside, and contained Standard Industrial Classification (SIC) code 
8734, with a size standard of $5 million.  RFQ at 1.  Section K of the 
RFQ contained the clause found at Federal Acquisition Regulation (FAR)  sec.  
52.212-3, which, among other things, required offerors to certify 
whether they are small business concerns and to certify their average 
annual gross revenues for the last 3 fiscal years.

Eight firms, including AIS and ATL, responded to the RFQ by the time 
set on May 19 for receipt of quotations; ATL's quotation was low and 
AIS's quotation was second low.  ATL certified itself as a small 
business, but also certified that it had average annual gross revenues 
for the last 3 fiscal years ranging between $5 and $10 million, which 
exceeded the $5 million size standard stated in the RFQ.  On May 21, 
the contracting officer contacted ATL regarding its size status.  In 
response to the contracting officer's inquiry, ATL stated that it was 
a small business under SIC code 8734, and that the firm's average 
annual gross revenues attributable to that SIC code for the last 3 
fiscal years were below $5 million.  ATL further explained, however, 
that it did not qualify as a small business concern if all its 
affiliates were included in the calculation of gross revenues.  Based 
on ATL's explanation, the contracting officer determined that ATL was 
not eligible to receive award under the RFQ and issued the purchase 
order to AIS.  Subsequently, by letter dated May 26, ATL informed the 
contracting officer that its quotation should have reflected average 
annual gross revenues attributable to SIC code 8734 of between $3.5 
and $5 million, thus making ATL an eligible small business under the 
RFQ.

The contracting officer then contacted the Department of 
Transportation (DOT), Acquisition and Grant Management Office, and the 
DOT Office of Small and Disadvantaged Business Utilization for a 
clarification of the term "affiliates" as used in FAR  sec.  52.219-6, 
Notice of Total Small Business Set-Aside,[2] which was incorporated by 
reference in the RFQ.  According to the SLSDC, on May 27, both offices 
responded that only a firm's average receipts attributable to the 
activities covered by the SIC code applicable to the procurement 
should be counted, and that the receipts of affiliates in a different 
line of business should not be included.  On May 27, the contracting 
officer canceled AIS's purchase order and issued the purchase order to 
ATL.  On May 29, AIS filed this protest in our Office.[3]

By letter dated May 30, AIS protested ATL's size status to the 
contracting officer, who forwarded the matter to the Small Business 
Administration (SBA).  On June 19, the SBA determined that ATL is 
other than small; the SLSDC received SBA's determination on June 23.  
In its size determination, SBA stated that in computing a firm's 
average annual receipts, all revenues should be counted, not merely 
those attributable to the activities covered by the SIC code 
applicable to the procurement.  The SBA further stated that the 
receipts of the affiliates must be included even if they are in a 
different line of business.

The SLSDC, however, did not disturb the award to ATL because the size 
protest was filed after the award had been made.  According to the 
agency, under FAR  sec.  19.302(j), SBA's size determination has 
prospective application but does not affect the award.

Discussion

The protester argues that because of ATL's apparently inconsistent 
certifications, the contracting officer should have referred the 
question of ATL's size status to the SBA prior to award.  The 
protester also argues that, after receipt of quotations, the SLSDC 
improperly permitted ATL to correct the certification in its quotation 
indicating that it had average annual gross revenues greater than the 
size standard specified in the RFQ.  AIS also maintains that ATL 
should not be permitted to perform the work because it is not a small 
business.

A contracting officer may properly rely on an offeror's 
self-certification that it is a small business unless he has 
information prior to award that would reasonably impeach the 
certification.  13 C.F.R.  sec.  121.405(b) (1998); Fiber-Lam, Inc., 
B-237716.2, Apr. 3, 1990, 90-1 CPD  para.  351 at 4.  In the absence of a 
size status protest from an offeror, there is no absolute requirement 
that the contracting officer refer size status questions to the SBA.  
Rather, this is a matter of discretion, the exercise of which must be 
measured against a standard of reasonableness in the particular case.  
The H.J. Osterfeld Co., B-257630, Oct. 24, 1994, 94-2 CPD  para.  150 at 4.

Here, after she received ATL's May 26, 1998 letter, in an effort to 
investigate the question of ATL's size, the contracting officer 
contacted the DOT's Acquisition and Grant Management Office and the 
Office of Small and Disadvantaged Business Utilization for 
clarification of the term "affiliates" as used in FAR  sec.  52.219-6.  The 
agency states that both offices explained that only a firm's average 
receipts attributable to the activities covered by the SIC code 
applicable to the procurement should be counted.  Even though this 
advice proved to be incorrect, we think that the contracting officer, 
in light of the source of the advice and in view of the information 
ATL provided in its letter, had no reason to question ATL's size 
status prior to issuance of the purchase order to that firm.

Moreover, the contracting officer properly permitted ATL to correct 
its certification after the firm submitted its quotation, since the 
issue of whether a firm is a small business under the applicable size 
standard relates solely to the firm's status and eligibility for award 
and may be resolved after the submission of a quotation on the basis 
of information outside the quotation.  Nortex Corp., B-224930, Jan. 6, 
1987, 87-1 CPD  para.  12 at 4-5.  Failure to properly complete the small 
business size status certification is a minor informality that can be 
corrected even under the strict rules governing sealed bidding, and is 
thus certainly correctable in the context of quotations.   See, e.g., 
Lioncrest Ltd., Inc., B-221026, Feb. 6, 1986, 86-1 CPD  para.  139 at 5.

Nonetheless, we do not think the award made to ATL should be allowed 
to stand.  In Diagnostic Imaging Tech. Educ. Ctr., Inc., B-257590, 
Oct. 21, 1994, 94-2 CPD  para.  148 and American Mobilphone Paging, Inc., 
B-238027, April 5, 1990, 90-1 CPD  para.  366, we addressed facts very 
similar to those here and concluded that two circumstances--the size 
protest was timely filed and the awardee did not appeal the SBA's 
determination--militated in favor of termination of the awardee's 
contract and award to the small business protester.  Both 
circumstances are present here.  

First, although AIS filed its size status protest after award, it 
could not have done otherwise because, under the circumstances of this 
procurement, simplified acquisition procedures did not require the 
agency to issue a pre-award notice to unsuccessful vendors, and none 
was issued here.  See FAR  sec.  13.106-3(c).  Because the size protest was 
filed within 5 days of AIS receiving notice from the SLSDC of the 
issuance of a purchase order to ATL, it was timely under SBA's size 
status regulations.  13 C.F.R.  sec.  121.1004(a)(2).[4]  Second, ATL did 
not defend its size certification by appealing SBA's determination.[5]

While FAR  sec.  19.302(j) treats size status protests received after award 
of a contract as having no applicability to that contract, SBA's 
regulations, which we view as controlling in this area, provide that 
"[a] timely filed protest applies to the procurement in question even 
though a contracting officer awarded the contract prior to receipt of 
the protest."  13 C.F.R.  sec.  121.1004(c).  Moreover, in the absence of 
countervailing reasons, we view it as inconsistent with the integrity 
of the competitive procurement system and the intent of the Small 
Business Act, 15 U.S.C.  sec.  631-657a (1994), for an agency to permit a 
large business, which was ineligible under the terms of the RFQ, to 
continue to perform.  Diagnostic Imaging Tech. Educ. Ctr., Inc., 
supra.

Conclusion and Recommendation

We conclude that SLSDC's decision to allow ATL's selection to stand 
notwithstanding SBA's determination that ATL is other than small was 
improper, and we sustain the protest on this basis.  Although our 
Office asked the agency to address whether it would be appropriate to 
terminate the purchase order issued to ATL, the agency failed to 
respond.  In the absence of countervailing reasons and in view of the 
nature of the work involved here, we conclude that it would be 
feasible to terminate the purchase order issued to a business that has 
been determined to be other than small and have a small business 
complete the work.

Accordingly, we recommend that the purchase order issued to ATL be 
terminated in accordance with FAR  sec.  13.302-4, and a purchase order for 
the remainder of the requirement be issued to AIS, if that firm is 
otherwise eligible.  AIS is also entitled to its costs of filing and 
pursuing the protest.  Bid Protest Regulations, 4 C.F.R.  sec.  21.8(d)(1) 
(1998).  The protester should submit its certified claim for such 
costs, detailing the time expended and costs incurred, directly to the 
contracting agency within 60 days of receiving this decision. 4 C.F.R.  sec.  
21.8(f)(1).

The protest is sustained.

Comptroller General
of the United States

1. Stoplogs are steel structures which form temporary dams used when 
water is being removed from a lock.

2. Under FAR  sec.  52.219-6(a), a small business concern "means a concern, 
including its affiliates, that is independently owned and operated, 
not dominant in the field of operation in which it is bidding on 
Government contracts, and qualified as a small business under the size 
standards in the solicitation."

3. On June 3, the SLSDC determined, pursuant to FAR  sec.  33.104(c)(2), 
that urgent and compelling circumstances that significantly affect the 
interests of the government would not permit waiting for our decision 
on this protest and authorized ATL to continue performance of the 
contract.

 4. While the SLSDC argues that AIS should have filed its protest by 
May 24 (within 5 days after receipt of quotations), AIS had no reason 
to challenge ATL's size until it learned that its purchase order had 
been canceled and an order issued to ATL on May 27.  

5. In its agency report to our Office, the SLSDC states that 
subsequent to award, when informed of SBA's adverse size determination 
ATL stated that it would be appealing SBA's decision.  SBA has 
informed our Office, however, that ATL has not appealed the size 
determination.