TITLE:  AMI Construction, B-286351, December 27, 2000
BNUMBER:  B-286351
DATE:  December 27, 2000
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AMI Construction, B-286351, December 27, 2000

Decision

Matter of: AMI Construction

File: B-286351

Date: December 27, 2000

Craig W. Kidwell, Esq., Marvel & Kump, Ltd., for the protester.

Annejanette Kloeb Heckman, Esq., Department of Agriculture, and Laura J.
Mann, Esq., Small Business Administration, for the agencies.

Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Contracting agency's reliance on information in the Small Business
Administration's (SBA) PRO-Net database to determine that the protester,
which certified itself in its bid as an eligible HUBZone small business
concern, was not small and thus was not eligible for a HUBZone evaluation
preference was improper because such questions must be referred to the SBA
under applicable regulations where the agency does not believe it can or
should accept the bidder's self-certification.

DECISION

AMI Construction protests the award of a contract to N.A. Degerstrom, Inc.
under invitation for bids (IFB) No. R4-17-00-10, issued by the United States
Department of Agriculture, Forest Service, for mine reclamation work.

We sustain the protest.

The IFB, issued on August 16, 2000, was for mine reclamation work at the
Aurora Partnership Mine, an abandoned cyanide heap leach facility, in the
Humboldt-Toiyabe National Forest, Mineral County, Nevada. The IFB schedule
requested prices for 12 line items of work (totaled into a base bid) and for
an additive item.

Section I.2(b) of the IFB stated that "offers will be evaluated by adding a
factor of 10 percent to the price of all offers except . . . offers from
HUBZone small business concerns that have not waived the evaluation
preference." [1] A HUBZone small business concern was defined in the IFB as
one that appears on the list maintained by the Small Business Administration
(SBA). [2] IFB sect. I.2(a). The IFB incorporated standard industrial
classification (SIC) code 1629, which stated the applicable small business
size status standard as not more than an average of $17 million in annual
receipts for the preceding 3 fiscal years. IFB sect. K.6.

On August 25, the SBA certified AMI as a qualified HUBZone small business
concern under SIC code 1629 and advised AMI that it was "eligible to receive
HUBZone contracting opportunities, and [would] be included in the listing of
qualified HUBZone small business concerns found on the Internet at
http://www.sba.gov/hubzone." The SBA also advised AMI:

We note that your firm has registered in SBA's PRO-Net system. [3] In order
to receive maximum benefit from the HUBZone Empowerment Contracting Program
it is strongly suggested that you update your firm's profile in PRO-Net.
PRO-Net is a premier marketing tool for small businesses seeking to do
business with the Federal government. It is also a source that Federal
agencies will check to determine if your firm has been certified by SBA and
eligible to receive contracts under the HUBZone program.

Forest Service Report, Tab F, Letter from SBA to AMI, Aug. 25, 2000.

Nine bids in response to the IFB were opened on September 11. Degerstrom's
base bid price was the lowest at $686,564.80 and AMI's base bid price was
next lowest at $744,418.16. [4] The government base bid estimate was
$609,808. In its bid, AMI certified that it met the HUBZone small business
concern classification. If the 10 percent preference was applied, AMI's base
bid price was the lowest.

To determine whether AMI was entitled to the HUBZone evaluation preference,
the Forest Service researched the SBA's PRO-Net database, which identified
AMI's status as a HUBZone small business concern but did not identify that
it was qualified under SIC code 1629. According to the Forest Service, the
local SBA office advised the contracting officer that HUBZone small business
concerns must meet the applicable SIC code to qualify for a HUBZone
preference. Based on the foregoing, the Forest Service determined that AMI
did not meet the IFB's small business size standard and thus was not
eligible for the HUBZone preference. Forest Service Report at 2. After
determining that Degerstrom's base bid price was fair and reasonable, the
Forest Service made award to that firm on September 15. This protest
followed.

AMI protests that it is a certified HUBZone small business concern eligible
under SIC code 1629 and that the agency improperly failed to accept AMI's
certification and did not apply the HUBZone preference which would have made
AMI the low bidder.

Because this protest raised issues within the purview of the SBA, our Office
requested that the SBA comment on the protest. In its submission, the SBA
pointed out that the determination of whether a firm is small for purposes
of a particular procurement is separate from the determination of whether
the firm is a qualified HUBZone small business concern (although the latter
does include a determination that the firm is small for purposes of its
primary industry classification). See 13 C.F.R. sect. 126.203 (2000). The
contracting officer here appears to have treated the two determinations as
one. There is no dispute, however, about whether AMI was a HUBZone small
business concern, since the contracting officer was aware that AMI's name
appeared on the SBA's list of qualified HUBZone small business concerns. The
HUBZone issue is thus irrelevant to this case, which turns solely on the
contracting officer's authority to reject a firm's self-certification as to
its size status for purposes of a specific procurement. Here, the
contracting officer was unwilling to accept AMI's self-certification in its
bid because the SIC code that applied to this particular procurement did not
appear on the SBA's PRO-Net listing for AMI. However well intentioned the
contracting officer's action, it was an improper usurpation of the SBA's
authority.

The SBA, not the procuring agency, has conclusive authority to determine
size status matters for federal procurements. [5] 15 U.S.C. sect. 637(b)(6).
According to FAR sect. 19.301, an offeror may self-certify that it is a small
business concern in connection with a specific solicitation if it meets the
definition of a small business concern applicable to the solicitation and
has not been determined by SBA to be other than a small business; the
contracting officer must either accept the firm's self-certification or (if
the self-certification is challenged or the contracting officer has reason
to question the representation) refer the matter to the SBA; the contracting
officer does not have authority to reject the self-certification. [6] See
MTB Invs., Inc., B-275696, Mar. 17, 1997, 97-1 CPD para. 112 at 2-3.

The Forest Service argues that it acted reasonably in denying AMI the
HUBZone evaluation preference because the agency relied upon PRO-Net, which
did not affirmatively indicate that AMI was a small business concern for SIC
code 1629, and upon SBA's advice, and asserts further that AMI is to blame
since it neglected to update its PRO-Net profile as suggested by the SBA.
[7] Forest Service Report at 4-10; Supplemental Forest Service Report at 2.
While an agency may find it helpful to review the PRO-Net site, that review
is not an adequate substitute for referral to the SBA; the procuring agency
does not have the authority to rely upon the PRO-Net site to reject a
bidder's self-certification of its status. [8] Even if we assume, for
purposes of this discussion, that the contracting officer received the
advice from local SBA officials as reported by the Forest Service, that
advice could not waive the statutory and regulatory requirement that size
(and HUBZone) status matters be referred to the SBA for resolution where a
contracting officer is unwilling to accept an offeror's self-certification.

We therefore conclude, and the SBA confirmed in its submission to our
Office, that AMI was entitled to the 10 percent evaluation preference in
this procurement. Under 15 U.S.C. sect. 657a(b)(3), a bid which is low by virtue
of the HUBZone evaluation preference "shall be deemed as being lower than
the price offered by another offeror." Here, AMI's bid is low after applying
the 10 percent evaluation preference to Degerstrom's bid.

The Forest Service nevertheless contends that when it determined that AMI
was not entitled to the evaluation preference, it also determined that AMI's
bid was unreasonably high, so that AMI's bid would have been rejected for
this reason in any case. See Contracting Officer's Statement at 2-3; Forest
Service Report, Tab L, Bid Evaluation Document, at 2.

While an agency can reject a bid pursuant to FAR sect. 14.404-2(f) where it
reasonably determines the total bid price is unreasonably high, where, as
here, that bid is the low bid under the IFB after considering an applicable
evaluation preference, we view it as improper to then award on the basis of
a yet higher evaluated bid, even though the actual price of that bid is
lower than the low evaluated bid. Cf. The Sandtex Corp., B-224527, Jan. 30,
1987, at 1-2, 4 (agency reasonably cancelled solicitation even though
foreign bid price was apparently reasonable, where domestic bid prices were
unreasonably high and, once Buy American Act evaluation factor was added to
foreign bid price, it was higher than domestic bids). As the SBA pointed out
in its submission, if an agency could reject, as unreasonably high, a bid
which was low by virtue of the application of the HUBZone evaluation
preference in order to make award on the basis of a bid that had a higher
evaluated, but lower actual, price, the purpose of the evaluation preference
in 15 U.S.C. sect. 657a(b)(3) would be thwarted. SBA Submission at 8. In other
words, if the agency reasonably determined that AMI's bid price was
unreasonably high, [9] it could not make award under the IFB to Degerstrom
(whose evaluated price was higher), and that award is improper. We therefore
sustain the protest.

Since the Forest Service reports that the contract is more than 95 percent
complete, we do not recommend disturbing the award. Instead, we recommend
that AMI be reimbursed its bid preparation costs as well as the costs of
filing and pursuing its protest, including reasonable attorneys' fees. 4
C.F.R. sect.sect. 21.8(d)(1), (2) (2000). The protester should submit its certified
claim for such costs, detailing the time expended and the costs incurred,
directly to the contracting agency within 60 days of receiving this
decision.

Anthony H. Gamboa

Acting General Counsel

Notes

1. This implements the 10 percent HUBZone small business concern evaluation
preference provided by 15 U.S.C. sect. 657a(b)(3) (Supp. IV 1998).

2. Under the Small Business Act, 15 U.S.C. sect. 632(p)(1), a HUBZone
(a historically underutilized business zone) "means any area located within
1 or more-- (A) qualified census tracts; (B) qualified nonmetropolitan
counties; or (C) lands within the external boundaries of an Indian
reservation." This section defines HUBZone small business concern as "a
small business concern-- (A) that is owned and controlled by 1 or more
persons, each of whom is a United States citizen; and (B) the principal
office of which is located in a HubZone." The SBA is required to establish
and maintain a list of qualified HUBZone small business concerns. 15 U.S.C.
sect. 632(p)(5)(D).

3. As explained on its website, , "PRO-Net is an
electronic gateway of procurement information--for and about small
businesses. It is a search engine for contracting officers, a marketing tool
for small firms and a ‘link' to procurement opportunities and
important information. It is designed to be a ‘virtual'
one-stop-procurement-shop."

4. There were insufficient funds to award the additive item.

5. Similarly, the SBA is the designated authority for determining whether a
firm is an eligible HUBZone small business concern, and it has established
procedures for interested parties, including procuring agencies, for
challenging a bidder's self-certification. 15 U.S.C. sect.sect. 632 (p)(5)(A), 657a
(c)(1); 13 C.F.R. sect.sect. 126.503, 126.801; Federal Acquisition Regulation (FAR)
sect.sect. 19.306, 19.1303.

6. Similarly, under FAR sect. 19.306, the only way for a contracting officer to
call into question an offeror's HUBZone status is to protest to the SBA.

7. The Forest Service also argues that the protest should be dismissed
because our Office should not be the forum to review the proper operation of
PRO-Net. We view the protest, however, as questioning the agency's decision
to unilaterally reject AMI's self-certification as to its size, not the
operation of PRO-Net.

8. Citing a number of our decisions, e.g., Adams Indus. Servs., Inc., B-
280186, Aug. 28, 1998, 98-2 CPD para. 56, the Forest Service argues that the
agency has the discretion not to refer questions concerning a bidder's size
to the SBA. The cases cited, however, concern an agency's decision to accept
an offeror's self-certification and therefore not to refer a small business
size question to the SBA; the cases cannot be read to permit an agency to
unilaterally reject a firm's self-certification without referring the matter
to the SBA.

9. In supporting its claim that AMI's bid was unreasonably high, the agency
specifically claimed that AMI's bid for three line items greatly exceeded
the government's estimate for these line items and were thus unreasonably
high. However, given that AMI's total price for these three items is
actually less than Degerstrom's assertedly reasonable price for these items,
this agency claim cannot form a basis for determining AMI's bid unreasonably
high, particularly given AMI's unrebutted assertions that some necessary
costs elements were not included in the government's estimate. See Amendment
to Protest (Oct. 19, 2000).