TITLE:  National Linen Service, B-285458, August 22, 2000
BNUMBER:  B-285458
DATE:  August 22, 2000
**********************************************************************
National Linen Service, B-285458, August 22, 2000

Decision

Matter of: National Linen Service

File: B-285458

Date: August 22, 2000

James J. McCullough, Esq., and Catherine E. Pollack, Esq., Fried, Frank,
Harris, Shriver & Jacobson, for the protester.

Col. Nicholas P. Retson, and Maj. Howard W. Roth, III, Department of the
Army, and John W. Klein, Esq., and Audrey H. Liebross, Esq., Small Business
Administration, for the agencies.

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

DIGEST

Protest that agency improperly set acquisition aside for exclusive small
business participation is denied where record shows that agency had a
reasonable basis to anticipate that it would receive offers from at least
two responsible small business concerns, and that award would be made at a
fair market price.

DECISION

National Linen Service protests the terms of invitation for bids (IFB) No.
DAKF40-00-B-0006, issued by the Department of the Army for medical linen
laundry services at Womack Army Medical Center (WAMC), Fort Bragg, North
Carolina. National, a large business, contends that the agency improperly
issued the solicitation as a total small business set-aside.

We deny the protest.

The IFB, issued on May 11, 2000, as a 100-percent small business set-aside,
contemplates the award of a requirements contract, for a base year and 4
option years, to the responsible bidder submitting the low conforming bid.
IFB para.para. 52.212-2(a), 52.216-21; Agency Memorandum of Law at 1. The awardee is
to provide the personnel, materials, transportation, supplies, equipment,
and facilities for laundry services for approximately 90,000 to 100,000
pounds per month of WAMC medical linens. IFB Statement of Work para.para.1, 5,
Technical Exh. 1.

The protester contends that the agency failed to perform sufficient market
research

to support a reasonable expectation of receiving at least two bids from
responsible small business concerns at fair market prices. National suggests
that, although the required services are currently being performed by a
small business, neither the incumbent nor any other capable small business
is located in the local geographic area. National contends that the
additional transportation costs for out-of-town small businesses, such as
the incumbent, will result in an award price exceeding the fair market price
for the services. [1] National contends that as a local large business, it
can supply the services at a significantly lower price and that the agency's
market research was inadequate because the contracting officer did not
consider potential large business prices for the work.

Under Federal Acquisition Regulation (FAR) sect. 19.502-2(b), a procurement with
an anticipated dollar value of more than $100,000 must be set aside for
exclusive small business participation when there is a reasonable
expectation of receiving offers from at least two responsible small business
concerns and that award will be made at a fair market price. American Med.
Response of Conn., Inc., B-278457, Jan. 30, 1998, 98-1 CPD para. 44 at 2. The
use of any particular method of assessing the availability of small
businesses is not required so long as the agency undertakes reasonable
efforts to locate responsible small business competitors. The decision
whether to set aside a procurement may be based on an analysis of factors
such as the prior procurement history, the recommendations of appropriate
small business specialists, and market surveys that include responses to
Commerce Business Daily (CBD) announcements. SAB Co., B-283883, Jan. 20,
2000, 2000 CPD para. 58 at 1-2; Litton Electron Devices, B-225012, Feb. 13,
1987, 87-1 CPD para. 164 at 2-3. Because a decision whether to set aside a
procurement is a matter of business judgment within the contracting
officer's discretion, our review generally is limited to ascertaining
whether that official abused his or her discretion. CardioMetrix, B-271012,
May 15, 1996, 96-1 CPD para. 227 at 2. We will not question a small business
set-aside determination where the record shows that the evidence before the
contracting officer was adequate to support the reasonableness of the
conclusion that small business competition reasonably could be expected.
Litton Electron Devices, supra.

The agency reports that its set-aside determination was based on several
factors. First, in considering the procurement history, the agency found
that the current, predecessor, and earlier contracts for the same services
had been performed by small businesses at reasonable prices. Contracting
Officer's Statement at 1; Agency Comments at 2. Next, the agency conducted
market research as to small business capability and interest, which
included: conducting a search on the Small Business Administration's (SBA)
PRO-Net computerized database to identify small business laundry sources;
contacting businesses identified by that search for expressions of interest
in the current procurement; reviewing the local telephone directory for
additional small business sources; communicating with previous small
business suppliers of these services at WAMC; and obtaining statements of
interest from the other small businesses that requested copies of the
solicitation in response to the agency's CBD announcement of the
procurement. Agency Memorandum of Law at 2. Additionally, the agency sought
and obtained the concurrence of the cognizant SBA Procurement Center
Representative and the Small and Disadvantaged Business Utilization
Specialist as to the propriety of the contracting officer's determination to
set the procurement aside for 100-percent small business participation. Id.

As a result of its market research efforts, the agency identified at least
three small business concerns that confirmed an intention to compete for the
requirement--two of the small businesses previously performed the same
services at WAMC (at prices determined to be reasonable), and the third
small business confirmed having similar contracts and an interest in
competing under the IFB. The agency explains that the contracting officer's
anticipation of adequate price competition among, at least, the identified
experienced firms led to the expectation that award would be made at a fair
market price. Id. at 3; Agency Comments at 2, citing FAR sect. 15.404-1(b)(2)(i)
(stating that adequate price competition normally establishes price
reasonableness).

National does not challenge the agency's position that at least three small
businesses confirmed an intention to compete under the IFB. The protester
also does not challenge those small businesses' capabilities to perform the
contract. Rather, National challenges as unreasonable the agency's asserted
expectation that award will be made at a fair market price since the agency
did not consider large businesses' prices for the services. The protester
argues that the set-aside determination is improper because it was made
without "assurance" that award will be made at a fair market price.
Protester's Comments at 5.

As a preliminary matter, to the extent that National asserts that the
contracting officer must obtain "assurance" of fair market pricing before
setting a procurement aside, National is incorrect. Although a contract may
not be awarded as a result of a small business set-aside if the cost to the
awarding agency exceeds the fair market price, FAR sect. 19.501(h), prior to
making a set-aside determination, the agency need only have a reasonable
expectation of award at a fair market price. See FAR sect. 19.502-2(b). We
conclude that the agency had such a reasonable expectation here.

As stated above, prior to setting the current requirement aside, the agency
considered procurement history showing that the requirement had been
performed successfully by small businesses at prices considered reasonable.
Moreover, as a result of its market research, the agency learned that at
least the two incumbent small businesses and a third firm intend to compete
for the requirement, and the agency received expressions of interest from
several additional small businesses. Under these circumstances, we conclude
that it was reasonable for the agency to anticipate adequate price
competition, and that, as result of that price competition, award would be
made at a fair market price under the set-aside procurement. Contrary to
National's argument, where, as here, the evidence before the contracting
officer otherwise supports a reasonable expectation that award to a small
business will be at a fair market price, we see no basis to conclude that
the agency must ascertain the prices that large businesses might bid before
it decides to set aside a procurement. [2] Accordingly, we see no reason to
question the agency's determination to set the procurement aside for
exclusive small business participation. [3]

The protest is denied.

Robert P. Murphy

General Counsel

Notes

1. In its protest, National initially asserted that the incumbent was
currently providing the required services at an unreasonably high price
under a contract awarded in 1997. Protest at 5. The agency has explained,
however, that the current medical linen requirements were only recently
added by modification to the incumbent's 1997 contract (which contract had
provided for other laundry services at Fort Bragg). The agency reports that
under the recent contract modification, it is paying substantially less for
the medical linen services than the amount alleged by the protester. Agency
Comments at 1-2.

2. In this regard, a small business bidder's price is not unreasonable
merely because it is higher than the price of an ineligible large business,
since there is a range over and above the large business's price that may be
considered reasonable in a set-aside situation. See Hardcore DuPont
Composites, L.L.C., B-278371, Jan. 20, 1998, 98-1 CPD para. 28 at 3. Moreover,
while the protester states that it "believes" that, as a large business
located closer to the medical center than the identified small businesses,
its bid for the services would be significantly lower than any small
business bid, this contention is purely speculative and unsupported by any
evidence in the record.

3. For the record, we note that, in a July 10, 2000 report on the protest
prepared at our request, SBA concluded that the set-aside was proper in view
of the prior procurement history and the expressions of interest received
from other small businesses.