TITLE:  Marketing & Management Information, Inc., B-283399.2; B-283399.3, November 30, 1999
BNUMBER:  B-283399.2; B-283399.3
DATE:  November 30, 1999
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Marketing & Management Information, Inc., B-283399.2; B-283399.3, November
30, 1999

Decision

Matter of: Marketing & Management Information, Inc.

File: B-283399.2; B-283399.3

Date: November 30, 1999

Ira E. Hoffman, Esq., and Brian T. Scher, Esq., Grayson and Associates, for
the protester.

Rexford T. Bragaw III, Esq., Defense Commissary Agency, for the agency.

Susan K. McAuliffe, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest challenging agency decision not to set aside procurement for small
business concerns is sustained where decision was based on insufficient
efforts to ascertain small business capability to perform the contract.

DECISION

Marketing & Management Information, Inc. (MMI) protests the decision of the
Defense Commissary Agency (DeCA) to issue request for proposals (RFP)
No. DECA01-99-R-0069, for subscription access to an information retrieval
database, on an unrestricted basis. MMI, a small business, contends that the
requirement should be set aside for small business concerns, and that the
agency failed to undertake sufficient efforts to ascertain small business
interest and capability to perform the contract.

We sustain the protest.

DeCA operates a worldwide system of commissaries for the resale of groceries
and household supplies to military personnel and others. These commissaries
are generally equipped with cash register equipment with front-end scanners,
similar to those used in commercial grocery operations, to collect data on
specific items sold, including information as to the quantity of each item
sold, price, and total revenue from the sale. DeCA's commissary sales data
is currently available to contractors that enter into a "subscription
agreement" with DeCA for the purchase of a 3-year license (at an annual cost
of $700,000) for the use of the raw product movement data collected by the
commissaries' cash register scanner system. Under the subscription
agreement, subscribers may use DeCA's commissary data (which the subscriber
processes and places within its respective databases) to produce reports for
manufacturers and suppliers of resale products which, for example, track
product movement, demand, and prices; the subscriber, however, may not sell
or release the actual data. Subscription Agreement para.para. 5, 6; Contracting
Officer's Statement of Fact at 1.

Having recognized a need to track not only its own product movement, but
also similar product movement and trends in the commercial sector, DeCA
issued the current RFP for agency access to a single database that contains
both DeCA and commercial grocery data which could be manipulated to meet the
agency's information and reporting needs. [1] In this regard, the RFP's
statement of work (SOW) provides for agency access to the contractor's
information retrieval database containing the agency's product movement
sales data for commissaries within the continental United States, as well as
comparable sales/movement data from commercial grocery stores within the
same geographical areas. RFP SOW at 4. The agency's access to the data would
allow agency personnel to generate a variety of reports (for example, for
market research on product movement, vendor presentation validations,
marketing, support initiatives, and other business purposes) based upon
specified parameters, such as geographical regions, products, markets, and
time periods. Id.; Contracting Officer's Statement of Small Business
Set-Aside Determination at 1.

DeCA issued the RFP on July 14, 1999, as an unrestricted acquisition. The
RFP contemplated the award of a fixed-price contract for a base period (of
approximately 1 year) with an 18-month option period. RFP at 1, 3, 20. MMI,
a small business that currently has a contract with the agency for other
DeCA commissary data requirements, filed a protest with our Office prior to
the extended closing date for the receipt of initial proposals challenging
the unrestricted nature of the procurement. [2] MMI, which asserts that the
procurement should be set aside for small business concerns, contends that
the agency failed to make sufficient efforts to solicit small businesses and
to assess small business interest in and capability to perform the contract.

Contracting officers generally are required to set aside for small business
all procurements exceeding $100,000 if there is a reasonable expectation of
receiving fair market price offers from at least two responsible small
business concerns. Federal Acquisition Regulation (FAR) sect. 19.502-2(b).
Generally, we regard such a determination as a matter of business judgment
within the contracting officer's discretion that we will not disturb absent
a showing that it was unreasonable. Neal R. Gross & Co., Inc., B-240924.2,
Jan. 17, 1991, 91-1 CPD para. 53 at 2. However, a contracting officer must make
reasonable efforts to ascertain whether it is likely that offers will be
received from at least two small businesses capable of performing the work.
Safety Storage, Inc., B-280851, Oct. 29, 1998, 98-2 CPD para. 102 at 3. Our
Office will review a protest to determine whether a contracting officer has
made such efforts. Library Sys. & Servs./Internet Sys., Inc., B-244432, Oct.
16, 1991, 91-2 CPD para. 337 at 7. In this regard, we have found unreasonable
the determination to issue a solicitation on an unrestricted basis where
that determination is based upon outdated or incomplete information. McSwain
& Assocs., Inc.; Shel-Ken Properties, Inc.; and Elaine Dunn Realty, B-271071
et al., May 20, 1996, 96-1 CPD para.  255 at 2-4.

In our view, the record here does not show that the contracting officer
reasonably investigated whether the procurement should be set aside for
exclusive small business participation. While the use of any particular
method of assessing the availability of small businesses is not required,
and measures such as prior procurement history, market surveys and/or advice
from the agency's small business specialist and technical personnel may all
constitute adequate grounds for a contracting officer's decision not to set
aside a procurement, American Imaging Servs., Inc., B-246124.2, Feb. 13,
1992, 92-1 CPD para. 188 at 3, the assessment must be based on sufficient facts
so as to establish its reasonableness. Safety Storage, Inc., supra. As
discussed below, the record here shows that the agency's determination not
to set aside the procurement was based upon incomplete information
(regarding small business interest and capability) and unsupported
assertions (regarding the ability of a small business to realize a profit
under the contract in light of the substantial subscription costs for DeCA's
data). Accordingly, we conclude that the agency failed to make sufficient
efforts to ascertain small business capability to perform the contract, and
we sustain the protest on that basis.

In determining whether to set the procurement aside for small businesses,
the contracting officer considered the fact that only three firms--two large
businesses and one small business, MMI--currently hold subscription
agreements for DeCA's commissary data and that only these three firms have
held subscriptions since the DeCA data subscription program started in 1996.
Contracting Officer's Statement of Fact at 2. The contracting officer
reports that DeCA contacted "all three current data providers regarding
their capabilities in the area of database access." Id. During these
conversations, he learned that only the two large business subscribers
"currently secure front-end sales and product movement data from civilian
grocery stores throughout the United States." Memorandum of Law at 2. The
contracting officer also considered that the $700,000 annual fee for access
to the DeCA data would be a substantial "capital outlay" for any new
subscriber, especially in light of the fact that the dollar amount of the
contract to be awarded under the RFP was expected to be considerably less
than the $700,000 annual fee. Contracting Officer's Statement of Fact at 2,
3. In this regard, the contracting officer states the following:

[T]his negative cash flow will require the successful contractor to be able
to offset that cost through other means, e.g., the sale of reports based on
the [data] to interested manufacturers and suppliers of resale products.
Given that the commercial market is currently occupied by at least three
other already established firms, it is difficult to believe that a new entry
to the field, especially a small business concern, would be able to start
anew and survive in such an environment.

Id. at 2.

Considering the above information, the contracting officer decided to issue
the RFP on an unrestricted basis; the small business specialist concurred in
that determination. [3] Id. at 3.

MMI challenges the reasonableness of the contracting officer's determination
that there was no reasonable expectation of receiving offers from at least
two responsible small businesses. In particular, MMI contends that the
market research conducted by the agency was flawed and incomplete, since the
agency's inquiries as to industry capability did not extend beyond the three
known subscribers to the DeCA data; MMI also contends that when it was
contacted by DeCA, the agency's inquiries did not involve the specific
requirements of the current RFP. MMI contends that asking the two large
businesses about potential competitors was an inadequate survey effort,
since their responses that no other firms maintained the necessary
commercial grocery data are incorrect and tainted by their self-interest in
limiting the competition.

We agree with MMI that a survey of the three current subscribers provided
incomplete information to support the contracting officer's determination.
The record shows that an important factor in the agency's determination to
issue the RFP on an unrestricted basis was the contracting officer's belief,
gained through communications with the subscribers, that only the two large
businesses "currently secure . . . front-end sales and movement data from
the civilian grocery chains on a nationwide basis." Contracting Officer's
Statement of Fact at 1-2. As MMI points out, however, the RFP does not
require commercial grocery data on a nationwide basis; rather, the required
database is more limited in scope, since only "comparable sales/movement
data from commercial grocery stores within the same geographical areas" as
the DeCA commissaries is required. RFP SOW at 4. The RFP also did not
require any firm to have the necessary databases in place prior to award.
MMI, in response to the agency report, identifies several firms, including
at least two other small business concerns, which operate in this industry
and have access to, or could obtain, the requisite data; DeCA has not
specifically challenged the capability of the firms identified by MMI. Since
the RFP does not require a potential offeror to have a subscription for the
DeCA commissary data or the comparable commercial data in place at the time
of proposal submission, a market survey limited to the three current
subscribers was insufficient to reasonably assess potential industry
interest and capability to meet the agency's needs, particularly regarding
small businesses.

Our review of the record further shows that, although the RFP identified the
relevant Standard Industrial Classification (SIC) code for information
retrieval services, no effort was made by the agency to research small
business capability in the referenced industry. There is no evidence, for
instance, of any request (by SIC code or otherwise) for potential source
information from the Small Business Administration, and although source
information could reasonably have been obtained through a request for
information published in industry periodicals, or by holding a
presolicitation conference to involve potential offerors in the acquisition,
no such effort was made. Although, as stated above, no particular method of
investigation is required by an agency in assessing small business presence
and capability in an industry, we think the agency here was required to seek
out more complete information than that which was obtained through limited
communications with the current subscribers, and the contracting officer's
own assumptions regarding small business capability or interest in the
requirement.

As discussed above, the contracting officer also based his decision not to
set the procurement aside for small business on the assumptions that a small
business would not be able to realize a profit under the contract, since the
annual subscription agreement fee of $700,000 exceeds the expected dollar
amount of the contract under the RFP, and that small business concerns would
not be able to compete in this allegedly limited grocery data market, since
three firms already provide this type of data. Our review of the record does
not support the reasonableness of the contracting officer's speculation in
this regard. In fact, MMI has provided evidence of the commercial demand for
this type of grocery sales data. As MMI explains, the $700,000 annual fee
for a DeCA data subscription may be a viable investment for a firm desiring
further participation in a potentially lucrative retail grocery sales data
market. MMI asserts that the potential value of the databases could be
substantial, since manufacturers and suppliers rely on such data comparisons
for their marketing and other business decisions, the value of which, in
MMI's experience, could easily "dwarf" the subscription cost. MMI Comments,
Oct. 12, 1999, at 6. In fact, MMI states that its earnings from sales of its
data reports to grocery industry concerns have vastly exceeded its
subscription fees. MMI Supplemental Comments, Oct. 21, 1999, at 3-4 n.5. The
contracting officer has provided no evidence to support his position that
there are no business opportunities for another competitor in this market or
to rebut MMI's contentions to the contrary.

In support of its actions, the agency also relies upon the fact that the
agency's small business specialist concurred with the determination to
solicit proposals under the RFP on an unrestricted basis. The small business
specialist's concurrence, however, was based upon the contracting officer's
representations regarding the potential for receiving adequate competition.
Those representations included the contracting officer's assertion that,
based upon his understanding that MMI did not currently maintain comparable
commercial grocery data, "the only sources which are expected to be able to
provide what DeCA needs under this requirement are both Large Business
concerns." Small Business Coordination Record, July 12, 1999, at 2. The
contracting officer's representations to the small business specialist, as
discussed above, were not based upon reasonable efforts on the part of DeCA
to assess small business interest and capability. Consequently, the small
business specialist's concurrence does not indicate that the agency acted
reasonably in assessing whether there was a reasonable expectation of
receiving sufficient small business participation to support a set-aside
determination. [4]

We recommend that the contracting officer adequately investigate the
potential small business capability and interest in the procurement and
determine whether there is a reasonable expectation that offers will be
obtained from two responsible small business concerns at fair market prices.
If the contracting officer determines that there is, he should cancel the
RFP and reissue it as a set-aside for small businesses. We also recommend
that MMI be reimbursed the reasonable costs of filing and pursuing its
protest, including attorneys' fees. 4 C.F.R. sect. 21.8(d)(1). The protester
should submit its claim for costs, detailing and certifying the time
expended and costs incurred, with the contracting agency within 60 days
after receipt of this decision. 4 C.F.R. sect. 21.8(f)(1).

The protest is sustained.

Comptroller General
of the United States

Notes

1. DeCA does not presently possess the capability to review and manipulate
the raw product data currently provided under the subscription agreements.
Contracting Officer's Statement of Fact at 1.

2. MicroNEX, another small business interested in participating in the
procurement, had earlier filed a protest with our Office based upon the
agency's failure to provide sufficient time for proposal preparation. Upon
receiving notification from the agency that DeCA had extended the closing
date for receipt of proposals, we dismissed the protest as academic.
MicroNEX, B-283399, Aug. 26, 1999, at 1. In that decision, we noted that,
although MicroNEX had generally "questioned" the agency's decision not to
set aside the procurement for small business concerns, the firm failed to
provide sufficient support for its general challenge to consider it a valid
basis of protest for review. Id. at 1-2.

3. The requirement initially was to be synopsized in the Commerce Business
Daily on July 14, but the announcement was inadvertently eliminated from
publication. In response to MicroNEX's protest, DeCA readvertised the
requirement on August 11. The agency reports that eight firms did express
interest in the procurement as a result of the August announcement; the
agency, however, does not report whether any of those firms are small
business concerns, and, if so, whether the agency investigated their
capability or included them in any subsequent market research efforts.

4. MMI raises several other issues that we dismiss without review on the
merits. For instance, the protester challenges the agency's failure to
submit its agency-level protest to the Assistant Secretary of Defense; the
protest instead was reviewed by the contracting officer. This protest
contention is academic, however, in light of the protester's filing of the
same matters with our Office for review. Next, although MMI raises various
challenges for the first time in its report comments regarding the agency's
sale of its commissary data, the requirements concerning DeCA's subscription
agreement, and the propriety of the initial auction held for those
agreements, these contentions are untimely, since they could have been, but
were not, raised at the time of its initial protest to our Office. 4 C.F.R.
sect. 21.2(a)(2) (1999). Finally, in its protest, MMI also contends that the RFP
is ambiguous as to the number of awards to be made by the agency; however,
since MMI failed to pursue the matter in its comments to the agency's report
on the protest, we consider the issue abandoned. See The Big Picture Co.,
Inc., B-220859.2, Mar. 4, 1986, 86-1 CPD para. 218 at 5.