TITLE: C. Martin Company, Inc., B-292662, November 6, 2003
BNUMBER: B-292662
DATE: November 6, 2003
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C. Martin Company, Inc., B-292662, November 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: C. Martin Company, Inc.
File: B-292662
Date: November 6, 2003
Alan Dickson, Esq., and Paul C. Burkholder, Esq., Epstein Becker & Green,
for the protester.
Richard G. Welsh, Esq., and Leonard L. Anthony, Esq., Department of the
Navy; Kevin R. Harber, Esq, and John W. Klein, Esq., Small Business
Administration, for the agencies.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest contentions that (1) the contracting agency transferred its
requirement for housing maintenance services to the Small Business
Administration*s (SBA) 8(a) contracting program in a bad faith attempt to
avoid continued performance under a small business set-aside contract
previously awarded to the protester, or to avoid giving the protester an
opportunity to compete for the work, and (2) SBA violated its regulations
in accepting the work for the 8(a) program, are denied where the record
shows that despite inadequacies in the contracting agency*s initial
offering letter to SBA, SBA ultimately obtained all of the information
required by its regulations, and followed its regulatory guidelines in
deciding that the offered work was a *new* requirement under the terms of
the regulations.
DECISION
C. Martin Company, Inc. (CMC) protests a decision by the Department of the
Navy and the Small Business Administration (SBA) to place work currently
performed by CMC under SBA*s 8(a) Business Development (BD) program, for
award on a sole-source basis to another contractor. CMC argues that both
agencies violated applicable regulations in shifting this work to SBA*s
8(a) BD program, and in selecting Field Support Services, Inc. (FSSI), an
Alaska Native Corporation participating in that program, for award of the
contract. CMC also argues that the Navy was motivated by bad faith when it
offered CMC*s previous contract to SBA*s 8(a) program.
We deny the protest.
BACKGROUND
In June 2000, CMC was awarded contract No. N68711-99-D-3135, for
maintenance and repair of military housing at the Marine Corps Air Ground
Combat Center, in Twentynine Palms, California, pursuant to a competitive
small business set-aside procurement conducted by the Naval Facilities
Engineering Command. The contract included a mixture of fixed-price and
indefinite-quantity work, and was awarded for a base year with up to four
1-year options.
The fixed-price portion of the effort required CMC to provide change of
occupancy maintenance services, various types of family housing service
calls, preventative maintenance inspection and repair, grounds
maintenance, and street sweeping. The indefinite-quantity work included
unscheduled maintenance and repair services, painting, installation and
removal of flooring, carpet, and appliances, as well as certain general
labor services.
Upon completion of the base period and first option year, CMC was awarded
two additional options to continue performance, but both options were for
periods less than the full year anticipated in the contract. In the first
instance, CMC was awarded an option for 6 months of continued performance
in July 2002; in the second, an option for an additional 9 months was
awarded in January 2003.
These limited extensions of CMC*s contract were apparently related to Navy
concerns about the adequacy of CMC*s performance. In a letter dated May
21, 2002, the contracting officer (CO) advised CMC of several areas of
ongoing concern about the company*s performance; on April 7, 2003, the CO
made a written determination not to exercise CMC*s fourth option; by
letter dated May 28, this decision was communicated to CMC.
Unbeknownst to CMC, the Navy was approached by another business seeking to
perform these services in March 2003. Specifically, the other business,
FSSI, advised the agency that: it had the capability to perform housing
maintenance; it was a participant in SBA*s 8(a) BD program; and, as an
Alaska Native Corporation, it could be awarded the contract directly,
without competition.[1] Concurrently, by letter dated March 5, SBA*s
Anchorage, Alaska regional office marketed FSSI*s capabilities to the Navy
as a possible source for the Twentynine Palms housing maintenance
contract.
By letter dated May 28--the same date as the CO*s letter to CMC advising
the company there would be no exercise of its fourth contract option--the
CO offered to place the Twentynine Palms housing maintenance contract
under SBA*s 8(a) BD program. The Navy*s offering letter was provided to
SBA*s Anchorage, Alaska regional office, and identified FSSI as its
preferred recipient of the contract. By e‑mail also dated May 28,
an SBA representative in Fresno, California, contacted the Anchorage
regional office to advise that one of its constituent small businesses,
CMC, had just learned it would not be receiving an option for continued
performance of its existing contract. In addition, the e-mail advised
that the Navy had instead selected an 8(a) contractor sponsored by the
Anchorage regional office for performance of this effort. In essence,
SBA*s Fresno office asked the Anchorage office why a small business
contractor was losing its contract to provide an award to an 8(a) BD
contractor, despite SBA rules designed to avoid such actions.
After SBA received the May 28 offering letter from the Navy, and after
additional information was exchanged between the Navy and SBA*s Anchorage
office, SBA accepted the Navy*s housing maintenance contract into its 8(a)
BD program. In its June 11 acceptance letter, SBA states that *[a]
determination has been made that acceptance of this procurement will cause
no adverse impact on another small business concern.* As of SBA*s June 11
determination, the agency had received from the Navy, and apparently
reviewed, a copy of the RFP that resulted in award to CMC in June 2000;
SBA had not, however, received a copy of the statement of work for the new
contract. Instead, SBA relied on representations from the Navy*s CO about
the differences between the previous and follow-on contracts.
Approximately 6 weeks later, the Navy provided SBA with a copy of the new
statement of work, and a memorandum analyzing the differences between the
old and new contracts.
On July 22, the Navy provided the protester a response to a Freedom of
Information Act request about the status of its contract, and about the
interaction between the Navy and SBA regarding the placement of this work
with the 8(a) BD program. Based on the information it received, CMC
argues that the Navy and SBA violated the regulations governing placement
of work under SBA*s 8(a) program. In addition, CMC alleges that the
Navy*s decision to refer this effort to the 8(a) program was motivated by
bad faith.
DISCUSSION
Section 8(a) of the Small Business Act authorizes SBA to contract with
other government agencies, and to arrange for the performance of those
contracts via subcontracts awarded without competition to socially and
economically disadvantaged small businesses. 15 U.S.C. S: 637(a) (2000).
The Act affords SBA and contracting agencies broad discretion in selecting
procurements for the 8(a) program; we will not consider a protest
challenging a decision to procure under the 8(a) program unless, as here,
the protester alleges possible fraud or bad faith on the part of
government officials, or that specific laws or regulations have been
violated. 4 C.F.R. S: 21.5(c)(2) (2003); Korean Maintenance Co.,
B-243957, Sept. 16, 1991, 91-2 CPD P: 246 at 5.
Under the Act*s implementing regulations, SBA may not accept any
procurement for award as an 8(a) contract if doing so would have an
adverse impact on an individual small business, a group of small
businesses in a specific geographic location, or other small business
programs. 13 C.F.R. S: 124.504(c)(1)-(3) (2003). The purpose of the
adverse impact concept is to protect incumbent small businesses who are
currently performing an offered requirement outside the program. 13
C.F.R. S: 124.504(c); Korean Maintenance Co., supra, at 2. An adverse
impact is presumed to exist where a small business has been performing the
requirement and the requirement represents 25 percent or more of the small
business*s gross sales. 13 C.F.R. S: 124.504(c)(1)(i)(C).
The adverse impact concept, however, does not apply to *new* requirements,
which have not been previously purchased by the procuring agency. 13
C.F.R. S: 124.504(c)(1)(ii). In this regard, the regulations explain that
[w]here a requirement is new, no small business could have previously
performed the requirement and, thus, SBA*s acceptance of the requirement
for the 8(a) BD program will not adversely impact any small business.
13 C.F.R. S: 124.504(c)(1)(ii)(A). In addition, even existing
requirements performed by non-8(a) small businesses may nonetheless be
considered *new* requirements
where the magnitude of change is significant enough to cause a price
adjustment of at least 25 percent (adjusted for inflation) or to require
significant additional or different types of capabilities or work.
13 C.F.R. S: 124.504(c)(1)(ii)(C).
To avoid adverse impacts, and to obtain other information necessary for
SBA to determine that an offered requirement is eligible and appropriate
for award under the 8(a) program, SBA*s regulations require that
contracting agencies furnish detailed information about a procurement when
offering it for inclusion in the program. 13 C.F.R. S: 124.502.
Given the framework of the process explained above, we turn first to CMC*s
complaint that the Navy*s letter offering this procurement to SBA lacked
several pieces of information required by SBA*s own regulations, and thus
could not properly provide the basis for an SBA decision to accept the
procurement into the 8(a) program. We agree--as do the Navy and SBA.
13 C.F.R. S: 124.502(c) sets forth 12 enumerated items which must be
identified in any agency*s letter offering work for inclusion in SBA*s
8(a) program. Here, there is no dispute that the Navy*s May 28 offering
letter did not include required information about the requirement*s
acquisition history, the name and address of the small business contractor
currently performing the requirement, the identities of other 8(a) firms
that expressed an interest in the requirement, or the justification for
nominating FSSI as a sole-source contractor. Nonetheless, in a filing to
our Office, SBA explains--and documents--that it had actual notice of each
of these missing pieces of information before it decided to accept the
offered requirement into the 8(a) program.
For example, on the day the Navy offered this requirement to SBA,
representatives in SBA*s Fresno office contacted SBA*s Anchorage regional
office to advise that another small business, CMC, had been performing the
Twentynine Palms housing maintenance contract, and was interested in
continuing performance--or at a minimum, in competing for any new contract
for these services. On the next day, SBA*s Fresno office provided the
Anchorage office with a copy of the RFP that resulted in award to CMC in
June 2000. This information led to additional exchanges between SBA and
the Navy about the nature of the requirement and whether it could properly
be accepted into the 8(a) program.
In addition, SBA learned that the Navy*s justification for nominating FSSI
was that the company had marketed itself to the Navy as a housing
maintenance contractor, and was eligible for a sole-source award as a
concern owned by an Alaska Native Corporation. Thus, while we agree that
the Navy*s offering letter was deficient in several respects, the record
shows that SBA ultimately obtained all of the information that should have
been provided in the Navy*s offering letter. Under these circumstances,
we have no basis to conclude that the initially deficient offering letter,
by itself, supports a finding that SBA violated its regulations by
ultimately accepting this requirement into the 8(a) program.
We turn next to CMC*s contention that SBA improperly concluded that
accepting the offered procurement into the 8(a) BD program would have no
adverse impact on another small business concern. On this front, CMC
argues that there is no evidence SBA ever made an adverse impact
determination here; that SBA did not have sufficient information to make
its determination at the time it claims to have made it; and that SBA did
not receive the information it would have needed to make this
determination until several weeks after accepting the new requirement into
the program.
With respect to CMC*s argument that there is no evidence in the record
that SBA ever made an adverse impact determination in this case, CMC
focuses on one sentence in SBA*s letter accepting this procurement into
the 8(a) program. As indicated above, the acceptance letter stated that
*[a] determination has been made that acceptance of this procurement will
cause no adverse impact on another small business concern.* CMC*s claim
that an adverse impact determination was required, but never made, is
apparently based on the mistaken premise that a full-blown analysis and
determination must be generated each time SBA accepts work for the 8(a)
program. This premise is not supported by the regulatory framework, or by
the express guidance in the regulations.
The SBA regulation for determining adverse impact, at 13 C.F.R. S:
124.504(c), is broken into three logical areas--determining adverse impact
on individual small businesses (S: 124.504(c)(1)), determining adverse
impact on groups of small businesses (S: 124.504(c)(2)), and determining
adverse impact on other small business programs (S: 124.504(c)(3)). Only
the guidance found in S:124.504(c)(1) is applicable here.
Within S: 124.504(c)(1), there are two subsections--one prescribes a
presumption of adverse impact in certain situations where a small business
is currently performing a requirement (S: 124.504(c)(1)(i)); the other
explains that adverse impact concerns do not apply to *new* requirements,
and provides guidance about when requirements may properly be considered
*new* (S: 124.504(c)(1)(ii)). In the first case, if the requirements for
a presumption of adverse impact are not met, additional analysis could be
needed before a determination is made that there is no adverse impact.
McNeil Techs., Inc., B-254909, Jan. 25, 1994, 94-1 CPD P: 40 at 10. In
the second case, no further analysis need be made because a requirement
that can properly be termed *new,* by definition, has no adverse impact on
any individual small business. The Urban Group; McSwain and Assocs.,
Inc., B-281352, B-281353, Jan. 28, 1999, 99-1 CPD P: 25 at 6-7.
The situation here falls within the second of the two subsections
discussed above--i.e., since the offered work is a *new* requirement,
there is no adverse impact on another small business by definition. In
the words of the regulatory guidance quoted earlier, *[w]here a
requirement is new, no small business could have previously performed the
requirement and, thus, SBA*s acceptance of the requirement for the 8(a) BD
program will not adversely impact any small business.* 13 C.F.R.
S: 124.504(c)(1)(ii)(A). In this instance, despite CMC*s contentions to
the contrary, SBA can properly say--as it did here in its June 11
acceptance letter--that *[a] determination has been made that acceptance
of this procurement will cause no adverse impact on another small business
concern.* The absence of a stand-alone adverse impact determination does
not mean that SBA failed to determine that no small business was
impacted. It did, and it did so when it concluded that the requirement
was *new.*
We turn next to CMC*s contentions that SBA did not have sufficient
information to support its decision to accept the offered work into the
8(a) program at the time it made its decision, and that it did not receive
the needed information until several weeks later. Since we have concluded
that SBA was not required to make an adverse impact determination once it
concluded that the offered work was *new,* these contentions, in effect,
raise the issue of whether SBA followed its regulations in concluding that
the offered work was a *new* requirement. For the reasons below, we find
that SBA acted in accordance with its regulations.
With respect to CMC*s claims that SBA lacked sufficient information to
properly decide whether the requirement here was *new,* CMC argues that
SBA had only the RFP that was used to award the previous contract to CMC
in June 2000, and explanations from the CO about the ways in which the
work was materially different from the previous work. In this regard, we
note that the CO*s explanations fell squarely within the regulatory
guidance for deciding whether existing work can properly be termed
*new*--i.e., he explained that the offered procurement would require
*significant additional or different types of capabilities or work,* and
he indicated that *the magnitude of change is significant enough to cause
a price adjustment of at least 25 percent (adjusted for inflation).* 13
C.F.R. S: 124.504(c)(1)(ii)(C).
As a general matter, SBA is entitled to rely on a CO*s representations
regarding offered requirements for the 8(a) program. Comint Sys. Corp.,
B-274853, B-274853.2, Jan. 8, 1997, 97-1 CPD P: 14 at 3. In addition, SBA
regulations do not specify that contracting agencies must provide SBA with
the new statement of work for offered requirements. Instead, the
regulations require that agency offering letters include *[a] description
of the work to be performed.* 13 C.F.R. S: 124.502(c)(1). Thus, we are
aware of no requirement that an SBA finding that work can be considered
*new* must be based on a detailed comparison of the previous and new
statements of work.
As an overlay to the analysis above, however, we must also consider the
impact of CMC*s allegations of bad faith. First, we note that CMC alleges
that the Navy offered this requirement to the 8(a) program in a bad faith
effort to avoid continued dealings with CMC. Given these allegations
against the Navy, we generally would look behind the Navy CO*s
representations to SBA with an eye towards making an independent judgment
about whether the CO accurately represented the scope of the new work to
SBA. See, e.g., DGS Contracting Servs., Inc., B-276300, June 3, 1997,
97-1 CPD P: 223 at 9 (where protester alleged that a contracting agency,
in bad faith, manipulated numbers in its offering letter and during the
adverse impact process to convince SBA that an offered requirement was
*new,* our Office reviewed the record to determine whether the agency
provided erroneous or inadequate information to SBA). In this case,
though, subsequent actions by SBA make this additional review unnecessary.
As indicated in the facts above (and reiterated by CMC in its arguments),
although SBA accepted this requirement into the 8(a) program on June 11,
it received a copy of the statement of work for the offered effort, and a
memorandum analyzing the differences between the old and new efforts,
approximately 6 weeks later. In its filing during the course of this
protest, SBA advised our Office that
[w]hen the prior contract used by the Navy for the procurement of military
family housing maintenance services at the Base is compared to the
protested solicitation it becomes evident that the two requirements differ
significantly. The prior contract was solely for maintenance services at
the Base*s military family housing units. The current solicitation, while
still providing for the performance of maintenance services, also covers
the overall management of the housing units and thus requires an
additional range of dues and responsibilities on the part of the
prospective contractor.
SBA Report, Sept. 2, 2003, at 5.
Thus, while SBA initially concluded that the offered work was *new* based,
in part, on the CO*s representations about the new effort, SBA has since
revisited that initial determination. In fact, SBA now reiterates and
expands on its initial determination based on a comparison of both
statements of work. Since SBA appears to have received all of the
information its regulations required it to receive, and then some; and
appears to have considered all of the issues its regulations anticipated;
and considering SBA*s determinative role as to whether a requirement
offered to the 8(a) program is *new,* we have no basis to object to SBA*s
interpretation. The Urban Group; McSwain and Assocs., Inc., supra, at 6.
The protest is denied.
Anthony H. Gamboa
General Counsel
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[1]Federal Acquisition Regulation (FAR) S: 19.805-1(b)(2) permits the
award of sole-source contracts to Indian tribes or Alaska Native
Corporations, without regard to the dollar thresholds that would otherwise
require a competitive 8(a) procurement. See FAR S: 19.805-1(a)(2).