TITLE:  Intermark, Inc., B-290925, October 23, 2002
BNUMBER:  B-290925
DATE:  October 23, 2002
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Intermark, Inc., B-290925, October 23, 2002

   Decision
    
    
Matter of:    Intermark, Inc.
    
File:             B-290925
    
Date:              October 23, 2002
    
John N. Ford, Esq., and John M. Manfredonia, Esq., McAleese & Associates,
for the protester.
Col. Michael R. Neds and Capt. Ronald D. Sullivan, Department of the Army,
for the contracting agency.
Jeffrey B. Rosen, Esq., for the Department of Education.
John W. Klein, Esq., and Kenneth Dodds, Esq., for the Small Business
Administration.
Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Agency improperly withdrew small business set-aside in favor of full and
open competition on basis that Randolph-Sheppard Act (RSA) State Licensing
Agency (SLA), which is not a small business concern, expressed interest in
requirement, and agency is required to consult with Secretary of Education
with a view to making award to SLA under the RSA if its proposal is in
competitive range; there is no basis for eliminating the set-aside
altogether, since agency can serve the purpose of the RSA by issuing a
solicitation that is generally restricted to small businesses but also
provides for participation by the SLA in the procurement.
DECISION
    
Intermark, Inc. protests the terms of request for proposals (RFP) No.
DABT01-02-R-0003, issued by the Department of the Army to acquire full
food services at Fort Rucker, Alabama.  Intermark maintains that the
agency has improperly issued the solicitation on an unrestricted basis
rather than as a small business set-aside.
    
We sustain the protest.
    
The agency has in the past procured this requirement using small business
set-aside procedures and Intermark, a small business, is the incumbent
contractor.  On February 21, 2002, the Army issued a presolicitation
notice indicating that the requirement would again be satisfied using
small business set-aside procedures.  Subsequent to this initial notice,
however, the Randolph-Sheppard Act (RSA) State Licensing Agency (SLA)[1]
for the State of Alabama received notice of the requirement, and expressed
interest in competing for the contract.  Since the SLA was, by definition,
not a small business because it is not an entity operated for profit, see
13 C.F.R. S: 121.105(a) (2002), the agency concluded that it was required
to withdraw the small business set-aside, and issue the solicitation using
full and open competitive procedures, in order to permit the SLA to
compete.  On June 4, the agency issued the RFP on an unrestricted basis. 
This protest followed.
    
Intermark maintains that the agency improperly issued the solicitation on
an unrestricted basis because the requirement had previously been
successfully fulfilled using a small business set‑aside, and because
the requirements for a small business set-aside were met--the agency
reasonably could anticipate receiving proposals at fair market prices from
at least two responsible small businesses.  Intermark notes that Federal
Acquisition Regulation (FAR) S: 19.502-2 states that an agency *shall* set
aside an acquisition under these circumstances. 
    
The agency does not dispute that the conditions under which a small
business set‑aside normally is required are present; rather, it
argues only that, because the RSA requires that it afford the SLA an
opportunity to compete, and because the SLA is not a small business, it
cannot set the acquisition aside. 
    
We agree with the protester that there was no proper basis for withdrawing
the small business set-aside here.  Although the preference embodied in
the RSA takes precedence over small business preferences, see Department
of the Air Force--Recon., B‑250465.6 et al., June 4, 1993,
93‑1 CPD P: 431 at 13; see also Automated Communication Sys., Inc.
v. United States, 49  Fed. Cl. 570, 578 (2001), the small business
set-aside here need not be eliminated altogether in order to give effect
to the RSA.  Rather, we see no reason why the solicitation cannot be
fashioned to accommodate both preferences.  This approach is consistent
with the Court of Federal Claims' (COFC) recent decision in Automated
Communication. Sys., Inc. v. United States, supra, in which the court
considered the interrelationship between the preferences afforded by the
RSA and the Historically Underutilized Business Zone (HUBZone) Act, 15
U.S.C. S:657a (2000); FAR subpart 19.13. 
The court stated:
    
There is no *conflict* requiring the [contracting officer] to reconcile
competing provisions.  [The protester] will receive the [10 percent] price
preference to which it is entitled [as a qualified HUBZone concern], and
should [the SLA] submit a bid and the [contracting officer] decide to
conduct negotiations, the [SLA] will be given its priority should it
qualify for the competitive range.  Contrary to [the protester's]
contentions, the preferences are not incompatible.  Each preference can be
given its due.  The fact that the RSA preference or priority, if
triggered, is superior to the others, does not mean that the various
preferences conflict.  The fact that one preference is of greater value
than the others does not mean that each cannot be fully applied before the
contract award is made.  The court finds that such is the case here, and
there is no inherent conflict between the competing preferences.
Id. at 578.  We recognize that the current case is in one sense
distinguishable from the case before the court.  In Automated
Communication Systems, the Court was reconciling the 10 percent price
evaluation preference afforded HUBZone concerns with the priority afforded
SLAs under the RSA within the context of a full and open competitive
acquisition.  Here, the Army was faced with the challenge of reconciling
the priority afforded SLAs with the limitation of potential competitors
afforded in a small business set-aside that would generally exclude SLAs. 
Nonetheless, we think the court's broad conclusion is applicable to the
facts here; simply stated, there is no inherent conflict in applying the
two preferences or priorities.  The solicitation can include a *cascading*
set of priorities or preferences whereby competition is limited to small
business concerns and the SLA, with the SLA receiving award if its
proposal is found to be within the competitive range and consultation with
the Secretary of Education results in agreement that award should be made
to the SLA; otherwise, award will be made to an eligible small business in
accordance with the RFP's evaluation scheme.  Such an approach would
preserve the SLA's superior preference, while according small businesses a
preference vis-`a-vis large businesses (other than the SLA), to which they
are entitled under the Small Business Act and applicable regulations. [2]
The agency cites in support of its position our decision in Department of
the
Air Force--Recon., supra, in which we found that the agency properly
withdrew a section 8(a) (small disadvantaged business) set-aside for a
dining facility requirement where it determined that the acquisition was
subject to the RSA, and that the preference in favor of the SLA applied. 
However, there is no requirement that agencies set aside any particular
acquisition for inclusion in the section 8(a) program.  See FAR
S: 19.800(b) (*Contracts may be awarded to the [Small Business
Administration] for performance by eligible 8(a) firms . . . .*  (emphasis
supplied)).  Since the agency in that case therefore was not required to
set the procurement aside for section 8(a) firms in the first place, there
was no basis for objecting to the elimination of the set-aside once the
agency became aware of the applicability of the RSA.   In contrast, small
business set-asides (and the HUBZone price evaluation preference--the
subject of the COFC's Automated Communication Systems decision) are
mandatory where, as here, the specified conditions are present.  FAR
S:S: 19.502-2(b), 19.1307.  Where this is the case, and it is possible to
accommodate the RSA requirement in the context of a small business
set-aside, we believe that agencies must do so. 
    
We solicited the views of both the Small Business Administration (SBA) and
the Department of Education (DOE) (the agency responsible for
administering the RSA) in connection with this case.  SBA shares our view
that the two statutes are not incompatible, and that both preferences can
be given effect by structuring the solicitation as discussed above.  (SBA
also agrees with our view, discussed above, that small business
set-asides, because they are mandatory where the necessary conditions are
present, warrant a different approach than where a non-mandatory section
8(a) set aside is involved.)  In its submission, DOE understandably
focuses on the RSA and states that, in its view, if the only way to
satisfy the requirements of that statute is through opening the
procurement to unrestricted competition, then the Army acted properly
here.  Because we believe, as explained above, that the RSA requirements
can be satisfied in the context of a solicitation limited to small
businesses and the SLA, we believe our conclusion is consistent with the
logic of DOE's analysis.
    
In view of the foregoing, we sustain this aspect of the protest.
    
Intermark also asserts that, in order for the competition to be conducted
on an equal basis, the SLA should be required to perform the contract
using a small business blind licensee.  Intermark further contends that
the small business licensee should be required to meet the limitation on
subcontracting requirements applicable to small business concerns, FAR
S: 52.219-14, namely, that it should be required to expend at least 50
percent of the contract labor cost for its own employees.  Intermark
maintains that these requirements apply because the regulations
implementing the RSA require that the SLA's proposal be evaluated using
the same established criteria under which all proposals will be judged. 
34 C.F.R. S: 395.33(b). 
    
This argument is without merit.  The RSA is designed to enlarge economic
opportunities for the blind, and includes no limitation on the size of the
entity that will perform a contract awarded pursuant to the RSA. 
20 U.S.C. S: 107 et seq.  This being the case, subjecting SLAs to
requirements designed to ensure contract performance by small business
concerns would be inconsistent with the underlying purpose of the RSA, and
would tend to negate the RSA preference's precedence over small business
preferences.  See Department of the Air Force--Recon., supra.
    
Additionally, the regulation to which Intermark refers, 34 C.F.R. S:
395.33(b), does not require that the SLA be bound by small business
requirements such as the limitation on subcontracting, but states only
that:
    
[s]uch solicitations for offers shall establish criteria under which all
responses will be judged.  Such criteria may include sanitation practices,
personnel, staffing, menu pricing and portion sizes, menu variety, budget
and accounting practices.
This regulation relates to the substantive, comparative bases under which
proposals will be evaluated; it does not provide that the SLA's
eligibility for award is subject to requirements of the Small Business
Act. 
    
We recommend that the Army amend the solicitation so that the acquisition
is generally set aside for small businesses, but also permits the SLA to
compete and be afforded the priority in consideration for award required
by RSA and its implementing regulations.  We also recommend that Intermark
be reimbursed the costs of filing and pursuing its protest, including
reasonable attorneys' fees.  4 C.F.R. S: 21.8(d)(1) (2002).  Intermark's
certified claim, detailing the time spent and the costs incurred, should
be submitted to the agency within 60 days of receiving this decision.  4
C.F.R. S: 21.8(f)(1).
    
The protest is sustained.
    
Anthony H. Gamboa
General Counsel
    
    
    

   ------------------------

   [1] Pursuant to the terms of the RSA, 20 U.S.C. S: 107 et seq., (2000),
each state has a state licensing agency (SLA), designated by the Secretary
of Education, which licenses blind business concerns within the state.  20
U.S.C. S: 107a.  Where an acquiring activity has a requirement for
cafeteria services (including full food services such as those required
here), the agency is required to invite the SLA to compete for the
requirement.  20 U.S.C. S: 107d-3 (e); 34 C.F.R. S: 395.33 (b)(2001). 
If the SLA's proposal is found to be within the competitive range, the
regulations contemplate that the acquiring agency will consult with the
Secretary of Education with a view to making award to the SLA.  34 C.F.R.
S: 395.33.  
[2] In the solicitation at issue in Automated Communication Systems,
giving the HUBZone concerns' proposals the benefit of the 10 percent price
evaluation preference could be viewed as potentially affecting the ability
of the SLA proposal to be included in the competitive range.  In contrast,
under the *cascading* approach recommended here, the preference afforded
the SLA is undiluted because there will be no price evaluation preference,
and there is no risk that its chances for being within the competitive
range will be hurt by limiting the competition to the SLA and small
business concerns (on the contrary:  eliminating the participation of
large businesses may improve the SLA's proposal's chances in this
regard).  The approach we are recommending thus preserves the priority of
the RSA preference vis-`a-vis the Small Business Act preference.