TITLE:  Tiger Enterprises, Inc., B-292815.3; B-293439, January 20, 2004
BNUMBER:  B-292815.3; B-293439
DATE:  January 20, 2004
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Tiger Enterprises, Inc., B-292815.3; B-293439, January 20, 2004

   Decision
    
    
Matter of:   Tiger Enterprises, Inc.
    
File:            B-292815.3; B-293439
    
Date:              January 20, 2004
    
Monty Mauldin and Lillian K. Mauldin, for the protester.
Julius Rothlein, Esq., and A. Neil Stroud, Esq., U.S. Marine Corps, and
John W. Klein, Esq., and Kenneth Dodds, Esq., Small Business
Administration, for the agencies.
Katherine I. Riback, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Where the awardee was found by the Small Business Administration to be
other than small based on a timely size protest filed after award on a
small business set-aside, and this determination was not appealed, the
agency, in the absence of legitimate countervailing reasons, should have
terminated the contract and obtained these services from a small business.
DECISION
    
Tiger Enterprises, Inc. protests the decision of the U.S. Marine Corps
(USMC) to continue performance of contracts awarded to Tarheel
Specialties, Inc. under request for quotations (RFQ) No. M67001-04-Q-0001,
issued as a small business set‑aside, for the lease and maintenance
of washers and dryers at Camp Lejeune, North Carolina. Tiger contends that
Tarheel was ineligible for award because it was a large business.
    

   We sustain the protests.
    
In anticipation of the expiration of the USMC*s contract for these
services with Block*s Management Company (a large business) on October 31,
2003, the agency issued a solicitation on July 22 as a small business
set-aside.  Five proposals, including Tiger*s and Tarheel*s, were
submitted by the August 15 closing date in response to the solicitation. 
On August 28, the agency made award to Tarheel.[1]  On September 1, Tiger
filed a timely size protest against Tarheel with the Small Business
Administration (SBA), which was subsequently joined by the contracting
officer.  Tiger*s protest was dismissed by SBA on September 15 because it
was determined not to be an interested party.  The contracting officer
subsequently determined that the solicitation contained the incorrect
North American Industrial Classification System (NAICS) code and
corresponding size standard, and therefore terminated Tarheel*s contract
for convenience and cancelled the solicitation on September 25.
    
The agency then engaged in negotiations with the incumbent contractor,
Block*s, to extend its contract.  According to the USMC, these
negotiations were unsuccessful and Block*s reiterated its intention to
remove the machines provided under its contract by the October 31
expiration date. 
    
On October 8, the contracting officer executed a justification and
approval (J&A) to obtain the services under other than full and open
competition, based on a finding that the agency*s need for the services
was of an unusual and compelling urgency, pursuant to 10 U.S.C. S:
2304(c)(2) (2000).  The J&A stated that *[t]he loss of laundry
capabilities will significantly impact and degrade their overall health,
welfare, and quality of life, thereby, impeding the mission of the Marine
Corps.*  The J&A further stated that this requirement would be synopsized,
and full and open procedures utilized, when the contracting activity was
not operating under *urgent time restraints.*  Agency Report (AR), Tab AA,
J&A.
    
On that same day, the agency issued this RFQ to the three firms that had
submitted proposals under the previous solicitation, including Tarheel and
Tiger.  The RFQ contemplated the award of two fixed-price requirements
contracts (one for each of two locations) for base periods of 11 months
with three 1-year options.  The RFQ was set aside for small business
concerns and included the appropriate NAICS code and corresponding size
standard.  Quotations were originally due on October 10, 2 days after the
RFQ was issued.[2]  Prior to that time, Tiger protested that this
acquisition should not be conducted on an urgency basis and that the
timeframe for submission of quotations was insufficient.  In response to
the protest, the agency extended the due date to October 15.  On October
13, Tiger renewed its protest that this acquisition should not be
conducted on an urgency basis and that this urgency was intended to allow
for award to Tarheel, even though that firm was a large business.
    
Three vendors, including Tarheel and Tiger, submitted five quotations in
response to the RFQ.  Tarheel*s lowest-priced, technically acceptable
quotation was selected for award.  On October 15, the head of the
contracting activity made a determination to make award, notwithstanding
the protest, based on urgent and compelling circumstances, and award was
made to Tarheel on October 16, 2003.  Tarheel is currently performing the
contract work.
    
On October 20, Tiger filed a timely protest with the SBA challenging
Tarheel*s size status.  The contracting officer joined this protest on
October 29.  On December 2, the SBA issued its formal size determination
finding Tarheel to be other than small.  On December 5, Tiger protested to
our Office, challenging the award and the continued performance under this
small business set-aside by Tarheel, because the SBA had found Tarheel to
be other than small. 
    
Upon receipt of the size determination, on December 3, the contracting
officer suspended performance of Tarheel*s contracts, and on December 8
the USMC issued a notice to Tarheel to show cause why the contracts should
not be terminated for cause due to its false size certification.  On
December 12, Tarheel responded to the show cause notice arguing that its
certification had been made in good faith.  Based on the contracting
officer*s review of Tarheel*s submission, she determined that there was
insufficient evidence to terminate Tarheel*s contracts for cause or to
further suspend contract performance.  Tarheel was informed by the agency
on December 18 that the stop work order was rescinded, that it was
expected to proceed with performance for the base period of the contracts,
and that *[p]erformance under the option periods [would] be determined at
a later date.*  USMC Letter to Tarheel (Dec. 18, 2003). 
    
On December 22, the USMC notified our Office that it did not intend to
disturb the award to Tarheel because *the evidence [did] not support a
finding of bad faith* on Tarheel*s part in making its size status
certification (citing Kleen-Rite Corp., B‑184313, Apr. 26, 1976,
76-1 CPD P: 279).  The USMC advised our Office that it would allow Tarheel
to perform the base period of the contracts, but that it would not
exercise any options. 
    
We requested and received an SBA report on Tiger*s protests.  SBA
recommended that we sustain Tiger*s protests and recommend termination of
Tarheel*s contracts because, according to SBA regulations, *[a] formal
size determination becomes effective immediately and remains in full force
unless and until reversed by OHA [Office of Hearings and Appeals].*[3]  13
C.F.R. S: 121.1009(g) (2003).  SBA*s regulations also provide that *[a]
timely filed protest applies to the procurement in question even though a
contracting officer awarded the contract prior to receipt of the
protest.*  13 C.F.R. S: 121.1004(c).  Both Tiger and SBA argue that there
are no reasons that would justify allowing Tarheel to continue performing
these contracts until September 30, 2004.  We agree.
    
We previously have found, in circumstances such as these, where a timely
size protest has been filed, there is no appeal of the SBA*s size ruling,
and there are no countervailing circumstances that would weigh in favor of
allowing the large business concern to continue performance, that
termination of the awardee*s contract is appropriate.  Adams Indus.
Servs., Inc., B-280186, Aug, 28, 1998, 98‑2 CPD P: 56; Diagnostic
Imaging Tech. Educ. Ctr., Inc., B-257590, Oct. 21, 1994, 94-2 CPD P: 148
at 2-3.  In the absence of countervailing reasons, we view it as
inconsistent with the integrity of the Small Business Act, 15 U.S.C. S:S:
631-657a, for an agency to permit a large business, which was ineligible
under the terms of the solicitation, to continue performance.  Adams
Indus. Servs., Inc., supra.
    
The record shows that in the present circumstances, all of these
conditions are met.  First, although Tiger filed its size status protest
after award, it could not have done otherwise because simplified
acquisition procedure acquisitions do not require the agency to issue a
pre-award notice to unsuccessful vendors, and none was issued here.  See
Federal Acquisition Regulation (FAR) S: 13.106-3(c).  Because the size
protest was filed within 5 days of Tiger receiving notice from the USMC of
the awards to Tarheel, Tiger*s protest was timely under SBA*s size status
regulations.  13 C.F.R. S: 121.1004(a)(2).  Moreover, a contracting
officer*s size protest is always timely.  13 C.F.R. S: 121.1004(b). 
Second, according to SBA, Tarheel has not appealed the SBA*s size
determination.
    
Third, there are no countervailing reasons that would justify allowing
Tarheel to perform these contracts until September 30, 2004.  The J&A,
prepared by the agency based on urgency, does not discuss why an 11-month
base period of the award was required.  As noted by Tiger and SBA, an
urgency justification cannot support the procurement of more than a
minimum quantity or time period needed to satisfy the immediate urgent
requirement.[4]  See Signals & Sys., Inc., B-288107, Sept. 21, 2001, 2001
CPD P: 168 at 12; Tri-Ex Tower Corp., B-239628, Sept. 17, 1990, 90-2 CPD
P: 221 at 5.  While the USMC states that termination of the contracts is
impractical due to the substantial performance of the contracts,[5] it has
not explained why that should be the case, given the apparent availability
of other sources for these relatively mundane services, such as the two
other vendors (including Tiger), who responded to the RFQ.[6]  We also
note that, pending a competition conducted under full and open
competition, the interim requirement for the services can be quickly
satisfied from small businesses, as is evidenced by the expeditious matter
in which the competition under this RFQ was conducted.[7]  
    
The protests are sustained.     
    
We recommend that the contracts awarded to Tarheel be terminated as soon
as feasible, and that the agency obtain the services under a small
business set-aside. 
We also recommend that the protester be reimbursed the reasonable costs of
filing and pursuing the protests.  4 C.F.R. S: 21.8(d)(1) (2003).  The
protester*s certified claim for costs, detailing the time spent and costs
incurred, must be submitted to the agency within 60 days of receiving this
decision.  4 C.F.R. S: 21.8(f)(1).  
    
Anthony H. Gamboa
General Counsel
    
    
    
    
    
    

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

   [1] It has been alleged by Tiger that Tarheel and Block*s are essentially
the same entity.   
[2] On October 10, an SBA Procurement Center Representative (PCR) objected
to the *piecemeal actions* taken by the USMC to *rush* the contract award,
and instead advocated extending the contract with Block*s, and issuing a
*well-thought out* solicitation that was set aside for small businesses. 
AR, Tab AF, SBA*s PCR E-mail (Oct. 10, 2003).
[3] SBA has conclusive authority to determine the size status of
businesses for all government procurements.  See 15 U.S.C.S: 632(a)(2)
(2000).
[4] For this reason, and as apparently recognized by the USMC, the options
for the subsequent years should not have been included in this
solicitation.
[5] On the other hand, the agency*s show-cause notice indicates that the
agency believes that these services could be obtained from another firm,
even if Tarheel*s contracts were terminated.
[6] In contrast, in Resource Applications, Inc., B-271079.6, Aug. 12,
1996, 96-2 CPD P: 61 at 4-5, we did not recommend termination of an award
under a small business set‑aside, notwithstanding SBA*s adverse
determination in response to a timely size protest, because there was no
other offeror eligible for award, and the agency demonstrated that it had
a continuing, urgent need for the services.
[7] As noted above, the agency cites Kleen-Rite Corp., supra, for the
proposition that termination for convenience is not required where the
agency is satisfied that the firm, which is ultimately found to be large,
did not certify its size status in bad faith. This decision is not
applicable here.  The SBA regulations have significantly changed since the
Kleen-Rite decision was issued in 1976.  Moreover, unlike the present
situation, which involves an initial SBA area office size determination,
Kleen-Rite involved a situation where the area office had found the firm
small and it was only on appeal that it was determined to be other than
small; under the currently applicable regulations, an appellate size
determination does not apply to the procurement in question unless it is
received before award.  FAR S: 19.302(i); Jensco Marine, Inc., B-278929.7,
Feb. 11. 1999, 99‑1 CPD P: 32 at 4.