TITLE:  Admiral Towing and Barge Company, B-291849; B-291849.2, March 6, 2003
BNUMBER:  B-291849; B-291849.2
DATE:  March 6, 2003
**********************************************************************
Admiral Towing and Barge Company, B-291849; B-291849.2, March 6, 2003

   DOCUMENT FOR PUBLIC RELEASE                                                
The decision issued on the date below was subject to a GAO Protective      
Order.  This redacted version has been approved for public release.        

   Decision
    
Matter of:   Admiral Towing and Barge Company
    
File:            B-291849; B-291849.2
    
Date:              March 6, 2003
    
Michael A. Hopkins, Esq., and David M. Glynn, Esq., McKenna Long &
Aldridge, for the protester.
George N. Brezna, Esq., and David Ranowsky, Esq., the Department of the
Navy, the agency.
John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Agency properly amended solicitation to become a 100-percent set-aside for
small businesses where the agency reasonably determined, based upon the
proposals it received from small businesses, that it could reasonably
expect after discussions to receive proposals from at least two small
business concerns capable of performing the contract and that award would
be at a fair market price.
DECISION
    

   Admiral Towing and Barge Company protests the terms of request for
proposals (RFP) No. N00033-03-R-1003, issued by the Department of the
Navy, for tug boat services to assist vessels in Pearl Harbor, Hawaii and
surrounding waters. Admiral challenges certain terms of the solicitation,
as well as the Navy*s determination to make this solicitation a small
business set-aside.
    

   We deny the protest.
    
The RFP, issued November 21, 2002, provides for the award of a fixed-price
contract for the charter of four tug boats with crews to assist vessels in
docking, undocking, and emergency situations.  The RFP provides for a
*time charter arrangement,* whereby the contractor makes the tug boats
available 24 hours per day, 365 days per year, and is paid a daily rate
for each tug boat regardless of whether the tugs are used on any given
day. 
    
The RFP provides that the award will be made to the offeror with
acceptable past performance submitting the lowest priced, technically
acceptable proposal. 
With regard to technical acceptability, the RFP sets forth certain vessel
specifications and characteristics, and states that the agency will
evaluate proposals to determine whether the proposed vessels meet the
RFP*s minimum requirements.  The RFP also includes past performance
worksheets to be completed by the offerors* references and returned by the
references directly to the agency.  Finally, the RFP provides a *rate
table* to be completed by offerors, and explains that prices will be
evaluated based upon the offerors* rates as set forth in their completed
rate tables, and fuel costs to the government, based upon the fuel
consumption figures provided by the offerors, the government*s estimated
work requirements, and cost of fuel as calculated by the agency.[1] 
    
The RFP was amended on December 3, 2002 to include a notice providing that
*[i]f two or more offers from qualified small business concerns are
received this solicitation shall be converted to a 100 percent set-aside
for small business concerns.*  The RFP added here that *[n]otwithstanding
the possibility of a small business set-aside, the procurement remains
unrestricted and large businesses may offer.*  RFP amend. 1, at 2.
    
Admiral, one of the two incumbent contractors, protested to our Office
that the above clause *unfairly discriminates against large, qualified
bidders, including Admiral.*  Initial Protest at 3.  The protester also
challenged certain other terms of the solicitation. 
    
On January 24, prior to the date for the agency*s submission of its report
in response to the protest, the agency amended the solicitation to inform
offerors that it had *received two or more qualified small business
offers,* and that because of this, *the solicitation is converted to a
100% set-aside for small business concerns.*  RFP amend. 6, at 2. 
    
In response, Admiral filed a second protest, challenging the agency*s
conversion of the solicitation to a 100-percent set-aside for small
businesses.[2]  Admiral contends that, based upon its review of the small
business offerors* proposals, the agency*s determination to amend the
solicitation to make it a 100-percent set-aside for small businesses was
unreasonable.  In this regard, the protester argues that of the [DELETED]
proposals submitted by small businesses, [DELETED] were either technically
unacceptable or so high in price that the agency could not reasonably
believe that at least [DELETED] small business offerors were capable of
performing the contract at an acceptable price.[3]  In support of this
assertion, Admiral points to the deficiencies in the [DELETED] proposals
identified by the agency during its evaluation of initial proposals, and
argues that because of these deficiencies, the agency*s determination to
set aside the procurement for small businesses lacked a rational basis. 
The protester adds here that neither of these [DELETED] offerors submitted
certain required information in their initial proposals, and that,
according to the record, the agency has not received any past performance
information from the offerors* references.  Admiral finally asserts that
the total price of each of these proposals exceeds, by the protester*s
calculation, the agency*s *price negotiation objective* by [DELETED]
percent.
    
The record reflects that the contracting officer verified that each of the
[DELETED] small business offerors self-certified itself as a small
business.  The contracting officer then determined through a check of the
agency*s *internal records and Dunn & Bradstreet reports* that there was
no reason for the agency to question the self-certifications.  Contracting
Officer*s Statement at 2.  With regard to the results of the technical
evaluation of initial proposals, as well as the lack of past performance
information, the contracting officer found that *[n]othing in any of the
offers indicated a problem that was not susceptible of resolution during
discussions.*  Id. at 3.  With regard to price, the agency found that the
total price of one of the small business offerors was [DELETED] percent
less than the independent government estimate (IGE), while the total
prices of the other [DELETED] small business offerors were [DELETED] and
[DELETED] percent higher.  AR, Tab O, Business Clearance Memorandum, at
10.  The contracting officer concluded that although the offered price
that exceeded the IGE by [DELETED] percent *was higher than expected,* the
other [DELETED] offers received were *within . . . the normal range of
offers under [the agency*s] tug procurements.*  Contracting Officer*s
Statement at 3.
    
Federal Acquisition Regulation (FAR) S: 19.502-2(b) generally requires
that an acquisition over $100,000 be set aside for exclusive small
business participation where there is a reasonable expectation that offers
will be obtained from at least two responsible small business concerns and
that an award will be made at a fair market price.  A determination that a
particular procurement is to be set aside for small business participation
is basically a business judgment within the broad discretion of the
contracting officer.  In making this determination, the contracting
officer need not make determinations tantamount to affirmative
determinations of responsibility, but rather need only make an informed
business judgment that there is a reasonable expectation of receiving
acceptably priced offers from small business concerns that are capable of
performing the contract.  We will not question the set-aside determination
of the contracting officer in the absence of a clear showing of abuse of
discretion.  American Med. Response of Connecticut, Inc., B-278457, Jan.
30, 1998, 98-1 CPD P: 44 at 2-3.
    
This case involves the unusual situation where, consistent with the terms
of the RFP, the agency*s decision to make this solicitation a 100-percent
set-aside for small businesses was made after receipt of proposals that
included several from small businesses.  Under such circumstances, we do
not think that the agency, in determining to set aside this procurement,
was required to determine whether the initial proposals as submitted were
technically compliant or acceptably priced.  See id.; cf. York Int*l
Corp., B-244748, Sept. 30, 1991, 91‑2 CPD P: 282 at 7 (although
agency*s determination to issue a solicitation as a small business
set-aside lacked a reasonable basis, its receipt of offers from small
businesses justified the set-aside).  Rather, we think that the agency
need only determine, based upon the initial proposals received, that there
is a reasonable expectation that it will ultimately receive offers from at
least two small business concerns that are capable of performing the
contract and that award will be made at a fair market price.  See FAR S:
19.502-2; American Med. Response of Connecticut, Inc., supra. 
    
As noted above, Admiral does not specifically contest the agency*s
consideration of one of the small business proposals in making its
set-aside determination.  Thus, in this case, the question becomes whether
the contracting officer reasonably determined, with regard to at least
[DELETED] of the [DELETED] other small business proposals received, that
the technical deficiencies, lack of past performance information, and
relatively high prices were *susceptible of resolution during
discussions.*  See Contracting Officer*s Statement at 3.  Despite the
protester*s arguments to the contrary, we cannot find the contracting
officer*s determination in this respect to be unreasonable.
    
Specifically, the protester points out that the agency *found material
omissions regarding bollard pull capacity, fendering, and the type of
lines proposed* in one of the small business proposals, and argues that
*[a]s a result of these and other omissions and overall lack of detail,
the [agency] could not make an affirmative determination regarding
technical acceptability.*  Protester*s Comments at 6.  Although the
protester may be correct that a finding of technical acceptability at this
juncture would be unreasonable, the protester has not shown that the
contracting officer*s determination that the technical deficiencies
identified during its evaluation of initial proposals were susceptible to
resolution through discussions constituted an abuse of discretion. 
Similarly, while pointing out that the agency has not received past
performance information from the offeror*s references, the protester has
failed to explain why the agency*s belief that this deficiency can be
resolved through discussions is unreasonable.  Nor has the protester
explained why the agency*s view that the price set forth in this small
business offeror*s proposal (which exceeds the IGE by [DELETED] percent
(and the agency*s price negotiation objective by [DELETED] percent)), was
not so high that a reduction in the offeror*s final revised proposal to a
point where the price could be considered reasonable, is objectionable. 
Thus, the agency could reasonably rely upon this small business offeror*s
proposal in making its small business set-aside determination.
    
Accordingly, the agency has two proposals from small businesses on which
to base its small business set-aside determination.[4]  Under the
circumstances, despite the protester*s arguments to the contrary, we
cannot conclude that the agency*s determination that the procurement
should be set aside for small businesses, based upon the proposals
received, was an abuse of discretion.[5]
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    
    

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

   [1] The RFP states that the government will provide fuel to the successful
contractor. 
[2] The amendment*s deletion of the RFP notice that it may be converted to
a set-aside for small business concerns renders Admiral*s protest of the
notice academic.
[3] Admiral does not challenge the propriety of the agency*s determination
with regard to the [DELETED] small business offer received from the other
incumbent contractor. 
[4] We need not consider the propriety of the agency*s determinations with
regard to the [DELETED] small business offeror, whose price exceeded the
IGE by [DELETED] percent.
[5] Because we find that the agency*s decision to set aside the
procurement for small businesses is unobjectionable, we will not consider
Admiral*s protest challenging certain other terms of the RFP, given that
as a large business it is ineligible for award and is thus not an
interested party that would be affected by the resolution of these
issues.  Four Winds Servs., Inc., B-280714, Aug. 28, 1998, 98‑2 CPD
P: 57 at 2.  Also, to the extent that the protester is arguing that an
award to any of the small business offerors is inappropriate, and that the
set-aside should be withdrawn, its protest is premature.  As indicated,
the agency has not completed its evaluation of proposals, and accordingly,
has made no determination as to whether any of the offerors should be
awarded a contract.  Should the agency award a contract to one of the
small business offerors, Admiral may file its protest concerning such an
award and its belief that the set-aside must be withdrawn at that time
(presuming that it can establish its interested party status).  See
Ace-Federal Reporters, Inc., B-241309, Dec. 14, 1990, 91-2 CPD P: 438 at 3
n.2; Black Hills Refuse Serv., B-228470, Feb. 16, 1988, 88-1 CPD P: 151 at
3.