BNUMBER:  B-281414 
DATE:  February 5, 1999
TITLE: BMAR & Associates, Inc., B-281414, February 5, 1999
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Matter of:BMAR & Associates, Inc.

File:     B-281414

Date:February 5, 1999

Donald E. Barnhill, Esq., Joan K. Fiorino, Esq., and Valinda J. 
Astoria, Esq., Douglas & Barnhill, for the protester.
Maj. David Newsome, Department of the Army; and Denise Benjamin, Esq., 
Small Business Administration, for the agencies.
Christina Sklarew, Esq., and Paul Lieberman, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Allegation by small business contractor performing under an interim 
contract that the Small Business Administration (SBA) failed to 
properly determine the adverse impact on the protester of accepting a 
contract requirement for the same services into the 8(a) program is 
denied where the protester merely disagrees with SBA's conclusion and 
does not show any violation of applicable regulations.

DECISION

BMAR & Associates, Inc. protests the decision by the Department of the 
Army and the Small Business Administration (SBA) to place request for 
proposals (RFP) No. DAKF19-98-R-0001 for maintenance and operations 
services in SBA's 8(a) business development program.  BMAR, a small 
business contractor that has been performing these services on an 
interim basis since October 1997 through task orders placed under a 
previously awarded contract, contends that SBA did not properly 
analyze all relevant factors, as required by SBA regulations, in 
determining the adverse impact on BMAR from setting the requirement 
aside for the 8(a) program.

We deny the protest.

Previously, by letter dated July 29, 1996, the Directorate of 
Contracting at Fort Riley, Kansas offered a requirement for 
maintenance and operations services for all non-medical electrical and 
mechanical equipment at the Fort Riley MEDDAC/ DENTAC facilities and 
related energy plant to SBA for award under the 8(a) business 
development program.  The SBA Wichita District Office determined that, 
because the requirement involved a new procurement, it would not be 
necessary to perform an adverse impact analysis, and concluded that 
the offering was suitable for acceptance under the program.  
Accordingly, SBA's Central Office accepted the offering as a 
competitive 8(a) procurement on August 15, 1996.  On August 26, 1997, 
SBA Wichita requested that the solicitation be modified in a manner 
that would increase the number of 8(a) firms that would be eligible 
under the solicitation's experience requirements and thereby maximize 
competition.  The Army requested release of the procurement from the 
8(a) program based on the agency's concerns about whether the 8(a) 
firms that had attended a site visit had sufficient experience to 
perform the work successfully.  However, after consulting further with 
SBA Wichita, the Army withdrew its request for release and agreed that 
the solicitation should be amended in the manner proposed by SBA.  

Citing significant delays encountered in the process of this 
procurement, the Army then decided to cancel the solicitation and 
instead to satisfy the requirement on an interim basis by issuing task 
orders under an existing Medical Command (MEDCOM) preventive 
maintenance contract with BMAR that was being administered through the 
Army Corps of Engineers in Mobile, Alabama.  The MEDCOM contract is an 
indefinite-quantity contract under which task orders are negotiated 
and issued as fixed-price task orders for preventive maintenance 
services at various locations.  It had been awarded to BMAR in May 
1996 for a base year with 4 option years.  The initial interim task 
order for the requirement at issue was placed with BMAR for a period 
of 6 months, from October 1, 1997 to March 31, 1998.   

On March 3, 1998, the Army cancelled the solicitation for this 
requirement, and so advised SBA on March 13.[1]  On March 27, the Army 
issued another 6-month task order for BMAR to continue providing the 
services.  Subsequently, the contracting officer reassessed the 
requirement and again determined that it should be filled through the 
8(a) program.

By letter of April 1, 1998, the Army informed SBA Wichita that it 
intended to resolicit the requirement.  Since there was now an 
incumbent small business contractor, SBA Wichita analyzed whether 
conditions were present which would require the presumption of an 
adverse impact on that contractor.  SBA regulations provide that SBA 
will not accept into the 8(a) program a requirement previously met by 
a small business if doing so would have an adverse impact on other 
small business programs or on an individual small business.  13 C.F.R.  sec.  
124.309(c) (1998).  In this regard, the regulations state that SBA 
will consider "all relevant factors" in determining the impact of an 
8(a) award.  13 C.F.R.  sec.  124.309(c)(1).  The regulations further 
provide that SBA will presume an adverse impact on small business 
concerns and not accept a procurement into the program where (1) a 
small business which has performed the requirement for at least 24 
months is currently performing the requirement or has finished 
performance within 30 days of the procuring agency's offer of the 
requirement for the 8(a) program; and (2) the estimated dollar value 
of the offered 8(a) award is 25 percent or more of that firm's most 
recent annual gross sales.  13 C.F.R.  sec.  124.309(c)(2). 

Because the incumbent, BMAR, had not been performing the contract for 
the minimum time period specified as necessary to give rise to the 
presumption, SBA concluded that no adverse impact existed and no 
additional impact analysis was necessary.  It therefore accepted the 
requirement into the 8(a) program on April 8, 1998.  BMAR protested 
this decision to the agency on May 4, and, after the agency had denied 
the protest, filed a protest in our Office on June 12, which we 
dismissed as premature.

Apparently as a result of the protest, SBA Wichita decided to perform 
a full adverse impact analysis, and, on August 17, it requested 
financial and organizational information from BMAR for that purpose; 
BMAR delivered the requested information on August 31.  SBA analyzed 
the data and concluded that there was no likelihood that BMAR would be 
forced into bankruptcy if it could not continue to provide the 
services under the contract, since the percentage of BMAR's business 
that is dedicated to this particular contract is relatively small; 
that the employees dedicated to this contract represent only about 8 
percent of BMAR's workforce; and that although BMAR had made capital 
expenditures for this project, BMAR had not shown that the value of 
the assets acquired would be significantly impaired by the loss of the 
contract or that the firm's future business capability would be 
significantly impaired.  SBA determined on this basis on September 10 
that acceptance of the requirement into the 8(a) program would not 
have a significant adverse impact on BMAR, and that the offering was 
therefore suitable for acceptance under the 8(a) program.[2]  SBA 
Wichita Impact Analysis at 1-2.

On October 21, SBA published a notice in the Commerce Business Daily 
of its intent to solicit the requirement as a competitive 8(a) 
set-aside.  BMAR's protest was filed in our Office on October 29, 
alleging that SBA had failed to perform a proper adverse impact 
analysis, in violation of SBA regulations.  

Because the Small Business Act affords SBA and contracting agencies 
broad discretion in selecting procurements for the 8(a) program, our 
Office will not question the decision to procure under the 8(a) 
program absent a showing of bad faith on the part of government 
officials or that specific regulations have been violated.  Korean 
Maintenance Co., B-243957, Sept. 16, 1991, 91-2 CPD  para.  246 at 5.    

BMAR primarily contends that SBA violated 13 C.F.R.  sec.  124.309(c)(1) by 
failing to properly analyze "all relevant factors" prior to 
determining that accepting this requirement into the 8(a) program 
would not have an adverse impact on BMAR as the incumbent small 
business contractor.  BMAR complains that SBA's adverse impact 
analysis utilized a "mechanical approach . . . which has resulted in a 
violation of 13 C.F.R.  sec.  124.309(c)(1)," because SBA focused primarily 
on the following three factors:

     1.  Whether the small business incumbent would be forced into 
     bankruptcy if it could not continue to provide the product or 
     service called for under the procurement;

     2.  Whether the performance of the procurement requires a very 
     large percentage of the incumbents' current employees and the 
     loss of this contract would cause these dedicated employees to be 
     terminated; and

     3.  Whether the incumbent has invested substantial amounts of 
     capital and equipment solely dedicated to the procurement, and 
     failure to continue performance on the procurement would 
     significantly impair the value of such assets.

Protester's Comments at 5.  

BMAR refers to our decision in Microform Inc., B-244881.2, July 10, 
1992, 92-2 CPD  para.  13, where SBA considered these same factors when it 
performed an adverse impact analysis, as a result of which we 
concluded that SBA's analysis and conclusions were unobjectionable.  
Because SBA considered the same factors here, BMAR contends that the 
analysis was "mechanical" and failed to consider "all relevant 
factors" specific to the situation at hand.  Protester's Comments at 
4, 5.  This argument is without merit.  The responsibility for 
determining what is and what is not a "relevant factor" under 13 
C.F.R.  sec.  124.309(c)(1) rests with SBA, not the protester.  The 
analysis contemplated by this regulation involves an exercise of 
discretion on the part of SBA, which must balance various program 
requirements for different segments of the small business community.  
American Mut. Protective Bureau, B-243329.2, June 16, 1994, 94-1 CPD  para.  
371 at 6.  As in Microform, here SBA examined the factors that it 
considered most relevant to the issue of adverse impact, as evidenced 
by the extent to which the loss of the contract could be expected to 
have an impact on BMAR's viability, based on all of the information 
provided by BMAR.  The protester has not provided any reason why SBA's 
analysis was inadequate, beyond labeling the approach "mechanical" and 
disagreeing with SBA's conclusions.  In our view, the fact that SBA's 
approach here was consistent 
with an approach which our Office previously recognized to be 
unobjectionable supports, rather than calls into question, the 
propriety of the resulting analysis. 

In addition, the "other factors that may result in an impact on an 
incumbent contractor" to which BMAR refers do not appear relevant to 
the requirements under the regulation.  For example, BMAR argues that 
because "the issuance of the subject solicitation will cause an abrupt 
termination to this portion of BMAR's MEDCOM Contract" (i.e., the task 
orders covering the Fort Riley requirement), SBA was somehow required 
to analyze the effect of accepting the requirement into the 8(a) 
program differently.  Protester's Comments at 5-6.  We find this 
argument unconvincing.  Each of the task orders that was issued for 
this requirement referred to the temporary nature of the agreement and 
defined the period of performance.  No task order was written for a 
period of longer than 12 months.[3]   Each task order was complete in 
itself, and none of them contained any promise or guarantee of a 
continuation of the services after the expiration of the task order.  
Letter from the Contracting Officer to the Protester's Attorney at 1 
(June 1, 1998).  There is nothing in the record to suggest that the 
underlying contract under which BMAR is currently performing will be 
terminated.[4]

BMAR also cites, as other "relevant factors," an alleged "adverse 
impact on the taxpayers and the inordinate cost for procuring 
services."  Protest at 15.   These are clearly not relevant to the 
concern with "protect[ing] small business concerns which are 
performing Government contracts awarded outside the 8(a) program," 
which the regulation sets forth as the purpose for which the "adverse 
impact concept is designed."  13 C.F.R.  sec.  124.309(c). 

BMAR has raised various other issues in its protest which we find 
without merit.  For example, BMAR alleges that the Army failed to 
conduct a proper evaluation to determine the extent to which the 
requirement should be offered in support of the 8(a) program, as 
provided for under FAR  sec.  19.804-1, or to satisfy the requirement under 
FAR  sec.  19.805-1 that, in order for an agency to offer the acquisition 
to the SBA under the competitive 8(a) program, it must have a 
reasonable expectation that at least two eligible and responsible 
firms will submit offers and that award can be made at a fair market 
price.  The contracting officer who evaluated the acquisition each 
time it was offered to SBA explains that in her analysis she took into 
account:  that numerous 8(a) contractors were seeking to perform these 
services at Fort Riley; that Fort Riley had a goal of maximizing its 
involvement in the 8(a) program; that Fort Riley had success in the 
past with 8(a) contractors, including two firms that had expressed 
interest in this requirement and had made technical presentations; 
that there was no reason to expect that an 8(a) firm would cause any 
delay in delivery; and that market research and other sources 
identified 29 prospective 8(a) firms.  Contracting Officer's 
Statement, Nov. 24, 1998, at 1-2.  In our view, this analysis 
reasonably satisfied the regulatory requirements and BMAR's 
disagreement with and objection to the assessment does not show that 
the Army acted either in bad faith or in violation of the regulations. 

The protest is denied.

Comptroller General
of the United States

1. On March 23, another vendor, Contract Services Inc., filed a 
protest in our Office against the cancellation, which was dismissed 
for failure to state a valid basis. 

2. BMAR argues that SBA's failure to perform a full adverse impact 
analysis before it accepted the procurement into the 8(a) program 
violated 13 C.F.R.  sec.  124.309.  While we agree that SBA's initial 
conclusion that it did not need to perform a full analysis once it 
determined that no presumption of adverse impact existed was 
incorrect, we see no merit to this argument in these circumstances.  
The agency completed its full analysis on September 10, before the 
solicitation was reissued.

3. BMAR's apparent argument that the agency's intention not to place 
additional task orders under options that may or may not be exercised 
under the MEDCOM contract in the future should be viewed as a 
"termination" of a "contract" with BMAR is misplaced.  In addition to 
the fact that a contractor has no rights in connection with a task 
order that has not been issued, options are generally exercisable at 
the sole discretion of the government, and a contractor thus has no 
legal right to compel the government to exercise an option.  Wayne D. 
Josephson, B-256243, May 12, 1994, 94-1 CPD  para.  307 at 5.  

4. To the extent BMAR is anticipating the agency's failure to exercise 
an option under its MEDCOM contract, or to place additional task 
orders, this issue is not for our review since a contracting agency's 
decision whether to exercise an option is a matter of contract 
administration outside the scope of our bid protest function.  
American Consulting Servs., Inc., B-276149.2, B-276537.2, July 31, 
1997, 97-2 CPD  para.  37 at 9.