TITLE:  American Artisan Productions, Inc., B-292380, July 30, 2003
BNUMBER:  B-292380
DATE:  July 30, 2003
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American Artisan Productions, Inc., B-292380, July 30, 2003

   Decision
    
    
Matter of:   American Artisan Productions, Inc.
    
File:            B-292380
    
Date:              July 30, 2003
    
Arthur L. Friedman for the protester.
Alton E. Woods, Esq., and Jeanne A. Anderson, Esq., Department of the
Interior, and John W. Klein, Esq., and Gene Marie M. Pade, Esq., Small
Business Administration, for the agencies.
Sharon L. Larkin, Esq., and Jerold D. Cohen, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
1.  Agency properly imposed bond requirement in solicitation for the
design, fabrication, and installation of exhibits, despite the fact that
it may restrict competition, where agency reasonably determined that bonds
were necessary to ensure timely completion of project and to protect the
government from losses that would result from contractor default.
    
2.  Agency's determination not to set aside procurement for small
businesses was proper where agency reasonably concluded--based on market
surveys and concurrence of the Small Business Administration--that it
could not expect to receive proposals from at least two responsible small
business offerors at fair market prices.
DECISION
    
American Artisan Productions, Inc. (AAP), protests the terms of request
for proposals (RFP) No. NDR030034, issued by the Department of the
Interior, Bureau of Land Management (BLM), for the design, fabrication,
and installation of exhibits for two *Interpretive Centers* in Montana. 
AAP contends that the RFP, issued as an unrestricted solicitation, should
have been set aside for small businesses, and that the bid and performance
bond requirement restricts small business competition and is unnecessary.
    

   We deny the protest.
    
The RFP, issued May 19, 2003, as an unrestricted solicitation, sought
fixed-price proposals for the design, fabrication, shipment, and
installation of interior and exterior exhibits for two new Interpretative
Centers depicting the Lewis and Clark expedition.  The centers were
intended to, among other things, increase recognition of the areas'
history, including the areas' connection with the Lewis and Clark
expedition, and were to be constructed and opened between 2003 and 2006 to
coincide with the national bicentennial celebration of that expedition. 
RFP at 2-3; S: C, Statement of Work (SOW), at 1, 3-4.  
    
According to the BLM, the *project has great historical significance* and
completion of the exhibit work before the bicentennial celebration ends is
*critical.*  Contracting Officer's Statement at 1, 5.  In this regard, the
RFP established performance periods for building construction, exhibit
installation, and opening dates for each center, and provided an estimated
budget for the total project that was *not to exceed* $1.4 million.  RFP,
S: C, SOW, at 2-3, 5.  The RFP also required an offeror to provide a bid
guarantee and performance bond, and expressly included Federal Acquisition
Regulation (FAR) S: 52.228-1 (*Bid Guarantee*), S: 52.228-2 (*Additional
Bond Security*), and S: 52.228-16 (*Performance and Payment Bonds--Other
Than Construction*).  RFP, amend. 0001, at 1, 3-4. 
    
Prior to issuing the RFP, the BLM conducted several nationwide market
searches on the Small Business Administration's (SBA) Procurement
Marketing Access Network (Pro‑Net) to ascertain whether the
requirement should be set aside for small businesses.[1]  The BLM searched
North American Industry Classification System (NAICS) 541420, Industrial
Exhibit Design, and found two Historically Underutilized Business Zone
(HUBZone) firms with bonding capacity; however, neither firm was found to
have experience in designing, fabricating, and installing exhibits.  The
BLM also searched Pro-Net utilizing the keyword *exhibits.*  This search
returned 124 firms, but the listing did not identify the business status
of the firms or their bonding capacity. 
    
Based upon its market research, the BLM concluded that two or more small
business with bonding capacity were not likely to submit proposals and
that the RFP should not be set aside for small businesses.  On April 11,
the BLM submitted a Department of the Interior Acquisition Screening and
Review Form to the SBA, indicating that the work would be advertised as an
unrestricted procurement.  Agency Report, Tab 2. 
    
After reviewing the form, the SBA suggested that the BLM perform a Pro-Net
search of NAISC 541850, Display Advertising; however, upon further
discussions between the agencies, it was agreed that NAISC 541890, Other
Specialized Design Services, was a more appropriate classification.  The
BLM searched Pro-Net for NAISC 541890, which revealed three HUBZone firms
with adequate bonding capacity, but the BLM found that these firms had no
experience in the design, fabrication, and installation of exhibits.  The
SBA procurement center representative signed the Acquisition and Review
Form on April 29, authorizing the issuance of an unrestricted
solicitation.  On May 19, the BLM issued the RFP, open to both large and
small businesses.
    
On May 21, AAP notified the SBA's local office that it believed the
*contracting officer has ignored the 'Rule of Two'* set forth in FAR S:
19.502-2 in issuing an unrestricted solicitation, and that the bond
requirement constitutes an *additional restraint* upon small businesses
which *ties up the small business capital and places us out of the
competitive market.*  Protest, attach. 1, E-mail from AAP to the SBA.   
    
On May 22, the SBA responded that, according to the BLM, the bond was
required to *keep the artists on the job* based upon past experiences of
the BLM.   The SBA informed AAP that the SBA has a Surety Bond Division to
assist small businesses to qualify for these bonds, and that AAP would not
*be out this expense* because it could invoice the BLM and receive payment
at the beginning of the contract.  Protest, attach. 2, E-mail from the SBA
to AAP. 
    
With regard to the BLM's decision not to set aside the procurement for
small businesses, the SBA stated that the BLM had two past experiences
with large exhibit work, and it had tried to set aside one of those
experiences for small businesses without success.  The SBA stated that,
according to the BLM, the RFP requires both design and fabrication, and
most small businesses perform design work, but not fabrication.  The SBA
informed AAP that *[i]f you still think that there are four small
businesses who can perform this work, please . . . get back to me . . .
with a description of your firms' capabilities and the others' as they
relate to the statement of work.*  Id.
    
Later that day, AAP provided the names of three *design build* firms,
including itself, that AAP asserted have *untarnished reputations.*[2]  It
described its own experience as including *design and production* work,
but did not describe the experience or capabilities of the other firms. 
It also did not state whether any of the firms, or AAP, had the requisite
bonding capacity.  AAP suggested that the BLM consult the *bidders mailing
list* and contact the *Exhibit Designers and Producers Association* for a
listing of *additional eligible small businesses.*  Protest, attach. 3,
E-mail from AAP to the SBA.
    
On May 23, AAP again contacted the SBA and repeated its concerns regarding
small business participation and the bond requirement.  Protest, attach.
4, E-mail from AAP to SBA.  However, on May 28, the SBA informed AAP that
the *Contracting Officer stands by her decision* concerning both issues. 
Protest, attach. 5, E-mail from the SBA to AAP.  Later that day, AAP filed
its protest with this Office. 
    
AAP protests that the bid guarantee and performance bond requirement is
unreasonable.  It generally contends that the BLM did not reasonably
investigate whether the bond requirement is necessary, or whether other
alternatives are available, and argues that the requirement is *used as a
ploy to eliminate small business[es] from participating.*  Protest at 2. 
    
A bid guarantee refers to a form of security ensuring that the bidder will
not withdraw its bid within the period specified for acceptance, and that
the bidder will execute a written contract and furnish required bonds
within the time specified in the bid.  A performance bond secures
performance and fulfillment of the contractor's obligations under the
contract, and may be required for contracts exceeding the simplified
acquisition threshold when necessary to protect the government's
interest.  FAR S: 28.001; S: 28.103-2.  An agency has the discretion to
impose bond requirements in appropriate circumstances as a necessary and
proper means to secure fulfillment of the contractor's obligations.  In
reviewing the bond requirements contained in a particular solicitation, we
look only to see if they are reasonable and imposed in good faith. 
Iowa-Illinois Cleaning Co.; Patco Indus., B‑254805 et al., Jan. 18,
1994, 94‑1 CPD P: 22 at 2 (hereinafter *Iowa-Illinois*). 
    
Specifically, AAP contends that the BLM failed to research other agencies'
solicitations as to the need for a bond requirement.  Protester's Comments
at 2-3.  In support of this argument, the firm provides examples of
solicitations that other agencies issued without the requirement to show
that the requirement imposed by the BLM is unreasonable.  However, we are
unaware of any authority that requires the BLM to search, or adopt,
another agency's needs or solicitation requirements.  In any event, the
BLM explains that it has imposed bond requirements in two similar
contracts for exhibit and design fabrication in the past year and, as
noted above, BLM's experience demonstrated that a bond requirement was
necessary to *keep the artists on the job.*  Protest, attach. 2, E-mail
from the SBA to AAP.
    
AAP also argues that the inclusion of progress payments or issuance of a
Certificate of Competency by the SBA would adequately protect the BLM
without the need for a bid guarantee and performance bond.  However,
neither option protects the BLM from losses incurred as the result of a
defaulting contractor, or precludes the contracting officer from
exercising her discretion to include bond requirements in the RFP to
protect the government's interest.  Moreover, the making of progress
payments before delivery of the exhibits is one of the bases set forth in
the FAR that justify the imposition of a bond requirement. [3] 
FAR S: 28.103-2(a)(3). 
    
In our view, the contracting officer reasonably imposed the bid and
performance bond requirement here.  As the BLM explains, the requirement
is necessary to ensure completion before the bicentennial celebration of
the Lewis and Clark expedition ends and protect against losses resulting
from a defaulting contractor's failure to meet this deadline.  As noted
above, the timely completion of this project was *critical* to the agency,
given the project's *great historical significance.*  Contracting
Officer's Statement at 1, 5.  While AAP contends that the bond requirement
*does not guarantee* timely performance and was not needed, Protester's
Comments at 4, this disagreement with the BLM's judgment does not render
it unreasonable.  D.J. Findley, Inc., B-221096, Feb. 3, 1986, 86-1 CPD P:
121 at 4.  Although a bond requirement may restrict competition, and may
even exclude some small businesses, that possibility alone, absent a
finding of unreasonableness or bad faith, does not render a bond
requirement improper.  Maintrac Corp., B‑251500, Mar. 22, 1993, 93-1
CPD P: 257 at 3.  AAP has presented no evidence of bad faith and, as
discussed above, we find that the BLM's determination was reasonable. 
    
AAP next protests that the BLM *made an unreasonable determination not to
set aside the procurement for small business* because it failed to perform
adequate market research.  Protester's Comments at 8. 
    
An acquisition is required to be set aside for small businesses if the
contracting officer determines that there is a reasonable expectation that
offers will be obtained from at least two responsible small businesses at
fair market prices.  FAR S: 19.502‑2(b).  Generally, we regard such
a determination to be a matter of business judgment within the contracting
officer's discretion, which we will not disturb unless unreasonable. 
Quality Hotel Westshore; Quality Inn Busch Gardens, B-290046, May 31,
2002, 2002 CPD P: 91 at 3. (hereinafter *Quality Hotel*).  However, a
contracting officer must make reasonable efforts to ascertain whether it
is likely that offers will be received from at least two responsible small
businesses at fair market prices, and we will review a protest of a
contracting officer's decision in that regard to determine whether the
contracting officer made such efforts.  Id.  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 advice
from the SBA 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 P: 188 at 3. 
    
As noted above, the contracting officer performed three Pro-Net searches,
at least one of which was performed in consultation with the SBA, and from
these searches could not identify two or more small businesses with
bonding capacity that could perform design, fabrication, and installation
work.  Based on these results, and with the concurrence of the SBA, the
contracting officer determined that there was no reasonable expectation
that the BLM would receive two or more offers from small businesses in
response to the RFP.  We find this determination to be reasonable.  We
accord substantial weight to the fact that the contracting officer's
determination was made in concurrence with the SBA, was subsequently
reviewed by the SBA's local office, and was again reviewed by the SBA
during this protest and found not to be unreasonable.  Quality Hotel,
supra, at 4; CardioMetrix, B-260747, July 18, 1995, 95-2 CPD P: 28 at 3.
    
AAP contends that the contracting officer should have consulted the
bidders list and contacted the firms and trade associations identified by
AAP during its post‑solicitation communications with the SBA and in
its post-protest submissions.  However, AAP did not apprise the BLM of
this information prior to the issuance of the RFP, [4] and information
that first becomes available after issuance of a solicitation does not
necessarily demonstrate the unreasonableness of a contracting officer's
determination not to set aside a procurement.  Fayetteville Group
Practice, Inc., B‑226422, May 26, 1987, 87-1 CPD P: 541 at 4.  In
this case, we think the contracting officer undertook sufficient and
reasonable efforts through the Pro-Net searches and consultation with the
SBA to reasonably conclude that two or more small businesses with bonding
capacity would not be available to perform the work.
    
The protest is denied.
    
Anthony H. Gamboa
General Counsel
    
    
    
    
    
    
    
    

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   [1] Pro-Net is an on-line database of information on more than 195,000
small, disadvantaged, Section 8(a), Historically Underutilized Business
Zone, and women-owned businesses.  See .
[2] AAP did not provide any identifying or contact information for the
firms, such as address or telephone number.
[3] AAP also suggests that bid and performance bonds should not be
required because this is not a construction contract.  Protester's
Comments at 3.  Although it is true that an agency generally should not
impose performance bond requirements in non-construction contracts, the
FAR permits their use when, as here, they are found necessary to protect
the government's interest; and a bid guarantee may be required whenever
there is requirement for a performance bond.  FAR S: 28.101-1(a);
Iowa-Illinois, supra, at 2.
    
[4] Moreover, the BLM no longer maintains a bidders list.  Contracting
Officer's Statement at 2.