TITLE: SWR, Inc., B-294266, October 6, 2004
BNUMBER: B-294266
DATE: October 6, 2004
**********************************************************************
Decision
Matter of: SWR, Inc.
File: B-294266
Date: October 6, 2004
Benjamin M. Bowden, Esq., Albrittons, Clifton, Alverson, Moody & Bowden,
for the protester.
Julius Rothlein, Esq., and A. Neil Stroud, Esq., U.S. Marine Corps, and
Laura Mann Eyester, Esq., and John W. Klein, Esq., Small Business
Administration, for the agencies.
Paul E. Jordan, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest challenging agency decision not to set aside procurement for
Historically Underutilized Business Zone (HUBZone) small businesses is
sustained where decision was based on insufficient facts to establish
reasonableness of conclusion that HUBZone business concerns of which the
agency was aware were not interested in, and/or not capable of, performing
the requirement.
DECISION
SWR, Inc. protests the terms of request for proposals (RFP) No.
M00146-04-R-9024, issued by the U.S. Marine Corps (USMC) for the washing
of various aircraft at three Marine Corps Air Stations (MCAS) in North and
South Carolina. SWR asserts that the RFP, issued as a small business
set-aside, instead should have been set aside for Historically
Underutilized Business Zone (HUBZone) small business concerns.
We sustain the protest.
BACKGROUND
The RFP sought proposals for a fixed-price contract to provide authorized
maintenance personnel to clean, wash, lubricate, and inspect aircraft at
three USMC installations--three wash racks at MCAS Cherry Point for EA-6B,
AV-8B, and KC-130 aircraft; two rotary-wing wash racks at MCAS New River
for UH-1N, AH-1W, CH-53, and CH-46 aircraft; and two fixed-wing wash racks
at MCAS Beaufort for F/A18 aircraft. The requirement here resulted from
the combination of the work under two delivery orders that had been issued
to large businesses, representing 95 percent of the work at all three
installations, and a Cherry Point contract awarded to SWR, which
represented the remaining 5A percent. In January 2004, prior to issuing
the RFP, the agency performed market research that included consideration
of current and past aircraft washing procurements. This research
disclosed that the last USMC combined aircraft washing procurement had
been conducted at Camp Pendleton in AugustA 2000 on an unrestricted basis,
and that award had been made to a small business. The contract specialist
also obtained a copy of an RFP for aircraft washing issued by Charleston
Air Force Base (CAFB); the specialist believed that procurement was a
100-percent small business set-aside based on the RFP's cover page but, as
she later discovered, it was a HUBZone set-aside.
The specialist also used the Small Business Administration's (SBA) Pro-Net
weba**based small business database system to search for potential HUBZone
offerors.[1] She ran several searches after determining that the most
relevant North American Industry Classification System (NAICS) code was
488190, which covers "other support activities for air transportation."
Two searches included NAICS code 488190, the HUBZone restriction, and the
keywords "aircraft maintenance" and "aircraft washing." Neither search
identified any HUBZone certified firms. When the specialist ran another
search using the keywords "aircraft maintenance" and NAICS code 488190,
but without the HUBZone restriction, she found 18 small businesses. Based
on her market research, the specialist decided to issue the RFP as a
100-percent small business set-aside, and obtained concurrence in that
decision from the local (Cherry Point MCAS) small business specialist.
Notice of the requirement as a proposed small business set-aside was
posted to FedBizOpps on February 20.
Thereafter, in telephone conversations on March 30 and April 1 with CAFB
contracting personnel, the contracting officer learned that the CAFB
procurement was a HUBZone set-aside. Agency Report (AR) Tab 8. She also
learned that the awardee was U.S. Logistics, Inc. (USL), that SWR had
protested the award, and that there also was a third offeror, a team
comprised of the incumbent and another firm. Id. The contracting officer
asserts that it was from these conversations that she first learned that
"SWR might be a HUBZone firm." Contracting Officer's Statement (COS)
PA 8. Earlier, on March 30, the contract specialist received, and replied
to, an e-mail inquiry from USL regarding the USMC procurement's progress
and the scheduling of a site visit.[2] AR, Tab 16. USL's e-mail did not
mention its HUBZone status or question the small business set-aside.
Based on the absence of any inquiries about the procurement from firms
identifying themselves as HUBZone firms, the agency issued the RFP on May
5, 2004 as a total small business set-aside.
Prior to the July 2 closing time for receipt of proposals, SWR filed an
agencya**level protest challenging the failure to set the procurement
aside for HUBZone small businesses. As part of her review of the protest,
the contracting officer conducted additional Pro-Net searches using the
key words "aircraft wash" and "aircraft washing," but excluding the NAICS
code. These searches identified SWR and a second firm as being HUBZone
certified. Also as part of this review, the contracting officer reviewed
those firms that had expressed interest in the current procurement,
including USL and another firm. Based on the Pro-Net profile and past
performance information, the contracting officer concluded that SWR and
the other firms--except USL--were not capable of performing the
requirement. As for USL, the contracting officer made two telephone calls
to USL's president, and determined that the firm was not interested in
competing because the calls were not returned. The contracting officer
also reviewed information on the six firms--in addition to SWR and
USL--that had competed under the CAFB HUBZone set-aside. Of those firms,
the agency found that two were not HUBZone certified and that four were
not capable of performing the requirement. Taking this information into
account, the agency denied SWR's agency-level protest, and the firm then
filed this protest in our Office.
After the protest was filed, the contracting officer conducted an
additional review of two HUBZone-related procurements. The first was a
HUBZone seta**aside for aircraft washing conducted by the Department of
Homeland Security (DHS) that resulted in the receipt of four proposals.
The DHS solicitation was canceled, however, because all offers were much
higher than the government estimate, and DHS had insufficient funding.
AR, Tab 19. The second was a HUBZone "sources sought" notice for aircraft
washing at Fairchild AFB, Washington. The Air Force received capability
statements from at least seven firms, but decided to issue a delivery
order instead of conducting a HUBZone set-aside. AR, Tab 21. The
contracting officer did not obtain the names or capability information of
any of the HUBZone firms in either procurement.
DISCUSSION
SWR asserts that the agency unreasonably determined not to set the
procurement aside for HUBZone small business concerns. Specifically, SWR
asserts that the agency failed to conduct sufficient market research prior
to issuing the RFP, as evidenced by the agency's subsequent awareness of
the CAFB HUBZone set-aside and the existence of more than two HUBZone
certified firms--including SWR--that were interested in competing for this
requirement. The agency asserts that its market research prior to issuing
the RFP was reasonable and that its additional, post-protest research
validated its conclusion that a HUBZone set-aside was not appropriate.[3]
Acquisitions must be set aside for HUBZone small business concerns if the
agency determines that there is a reasonable expectation that offers will
be received from two or more HUBZone small business concerns, and that
award will be made at a fair market price. Federal Acquisition Regulation
(FAR) S 19.1305(a), (b). An agency must make reasonable efforts to
ascertain whether it will receive offers from at least two HUBZone small
business concerns with the capability to perform the work, and we will
review a protest to determine whether the agency has done so. Global
Solutions Network, Inc., Ba**292568, Oct. 3, 2003, 2003 CPD PA 174 at 3.
While the use of any particular method of assessing the availability of
HUBZone small businesses is not required, and measures such as prior
procurement history, market surveys, and advice from the agency's small
business specialist 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 PA 188 at 3, the
assessment must be based on sufficient facts so as to establish its
reasonableness. Rochester Optical Mfg. Co., Ba**292247, Ba**292247.2,
Aug. 6, 2003, 2003 CPD PA 138 at 5.
While, as noted above, the agency here undertook efforts to determine
whether two capable HUBZone firms would submit offers, we find that its
efforts were insufficient under the circumstances.
The agency relies on the contracting officer's Pro-Net research--which did
not identify any HUBZone concerns--and the lack of expressed interest from
firms that identified themselves as HUBZone concerns in support of its
position that its review was adequate. However, even though its original
Pro-Net research did not identify any HUBZone concerns, as of AprilA 1,
more than 1 month before the RFP was issued, the agency knew that CAFB had
conducted a HUBZone set-aside for aircraft washing services, and that SWR
and USL had competed for that award. At that same time, the agency
received, and responded to, an e-mail from USL expressing a specific
interest in participating in this procurement, and the agency knew of
SWR's 10-year performance of aircraft washing services at Cherry Point.
Although the information regarding the CAFB HUBZone procurement and SWR
and USL cast serious doubt on the validity of her research and resulting
decision, the contracting officer continued to rely on that research and
the lack of expressed interest in affirming the decision. This was
unreasonable. Since the contracting officer should have known that the
research on which her decision had been based--showing no HUBZone
concerns--was flawed, at a minimum she should have conducted additional
research.[4] In particular, since the contracting officer now was aware
that SWR and USL were HUBZone concerns, she should have contacted the
firms to ascertain their interest and capability. In the event that
additional information about SWR and USL did not result in a decision to
set the requirement aside, additional research--similar to the research
later conducted following SWR's agency-level protest--would have been
warranted to determine whether other HUBZone firms competed for the CAFB
set-aside and, if so, whether they were capable and available to perform
the current requirement. Such additional research would have shown that
four of the six other firms that competed were HUBZone certified
concerns.[5]
The agency relies on the findings from its post-protest market research
and reassessment of the seta**aside decision to show, essentially, that
its decision would have been the same even if it had conducted further
research before issuing the RFP. Specifically, the agency performed
additional market research on Pro-Net, reviewed the CAFB procurement and
its HUBZone contractors, and considered the interest and capability of
USL, SWR, and a third firm.[6] With regard to USL--which had sent the
agency an unequivocal written expression of interest following publication
of the original small business set-aside notice--the agency sought to
"verify" that USL was interested in competing by twice telephoning the
firm's president after SWR's protest was filed. When that individual was
unavailable, the contracting officer left messages to call back. COS
PA 17(c). The calls were never returned, and the agency concluded from
this, and from USL's failure to otherwise express interest in the
procurement (such as by attending the site visits), that there was no
reasonable expectation that USL would submit an offer. Id. As for SWR,
the contracting officer explains that she had serious doubts that the firm
was capable of handling the larger requirement, based primarily on the
firm's experience and past performance at Cherry Point. Specifically, she
notes that the current contract under which SWR experienced performance
problems represents only 5 percent of the new requirement and is
restricted to one wash station, while the RFP requirement encompasses
staffing and managing performance at multiple wash stations at three
geographically separate locations handling more and different types of
aircraft. COS PA 17(b). Because it concluded from this additional
research that there still were no capable and/or interested HUBZone
concerns, the agency asserts that there is no basis to change its original
determination that a HUBZone set-aside was not appropriate.
We find that the agency's post-protest conclusions--that SWR was not
capable of performing and that USL was not interested in competing--were
unreasonable. First, ignoring the fact that the agency's further review
took place only after SWR's protest was filed, and that it affirmed its
conclusion in the heat of litigation,[7] we do not think that two
telephone calls constituted a reasonable effort to ascertain USL's
interest under the circumstances. Had the attempts to contact USL come in
April, prior to issuance of the RFP, and shortly after USL expressed
interest, the agency might have been justified in reaching this
conclusion, but it is just as possible that USL would have expressed
interest if the agency had attempted contact at that time. As it is,
since the inquiries were made only after the RFP was issued as a
nona**HUBZone set-aside, there is no way of knowing whether USL's assumed
lack of interest was due to changed business circumstances (since the time
of its expression of interest), the failure to make this a HUBZone
set-aside (in which case, USL might not have been interested in
competing), or some other reason. We note in this regard that the agency
does not indicate exactly what information was included in the messages
left for USL. The content of the messages--for example, whether the
agency specifically stated that it was soliciting USL's interest in
performing this requirement under a HUBZone set-aside, or merely asked the
company to return the calls, with no HUBZone set-aside
reference--obviously could have affected whether USL would respond, as
well as one's interpretation of its failure to respond.
Regarding SWR, while the scope and complexity of a requirement is an
appropriate consideration in determining a potential HUBZone offeror's
capability, Global Solutions Network, Inc., supra, at 2, here, the
agency's determination that SWR lacked the capability to perform was
unreasonable. In this regard, the mere fact that SWR currently is
performing only a small portion of the requirement does not necessarily
equate with an inability to perform the larger requirement. There is no
evidence that the agency actually considered whether SWR had the resources
to perform the larger requirement. This is relevant given that SWR has 10
years of experience performing the type of work under the RFP, and that
during part of its Cherry Point contract SWR performed washing services at
a USMC base in Hawaii, for which it received exceptional past performance
ratings. In addition, despite the fact that large businesses performed 95
percent of the requirement in the past, in setting the requirement aside
for small businesses, the agency determined that small businesses
generally could handle the substantially larger scope of work; it is not
apparent why the agency considered SWR to be differently situated in this
regard than other small businesses.
Turning to SWR's allegedly marginal performance record at Cherry Point,
the contracting officer noted a number of instances regarding labor issues
and performance problems, and the contracting officer's representative's
view that he would not award the firm another contract. COS PA 17(b).
SWR asserts that the agency has mischaracterized its performance and
provides explanations for the alleged performance issues. SWR Comments at
7. Regardless of whether SWR or the agency is correct, we believe that it
was unreasonable for the contracting officer to conclude in advance,
without at least more meaningfully reviewing SWR's performance record,
that perceived performance problems at Cherry Point would preclude SWR
from receiving award. In this regard, as noted above, SWR's performance
was rated exceptional under at least one other contract--at the USMC base
in Hawaii. See Rochester Optical Mfg. Co., supra, at 6 (offeror's receipt
of cure notice, without termination of contract, did not establish offeror
was nonresponsible, and thus was not a reasonable basis for making a
negative set-aside determination). We conclude that the agency
unreasonably determined that SWR was not a viable potential HUBZone
offeror.
We recommend that the contracting officer reasonably consider whether
fair market price offers will be obtained from at least two capable
HUBZone small business concerns. This should include, at a minimum, a
more thorough review of the capability and interest of the HUBZone
concerns of which the agency already is aware, the HUBZone concerns that
responded to the DHS and Fairchild AFB procurements, and the other HUBZone
offerors involved in the CAFB set-aside. If, after conducting a proper
market survey, the agency determines that there is a reasonable
expectation of receiving offers from at least two capable HUBZone concerns
at fair market prices, the contracting officer should cancel the RFP and
rea**issue it as a HUBZone set-aside. We also recommend that SWR be
reimbursed the reasonable costs of filing and pursuing the protest,
including reasonable attorneys' fees. 4 C.F.R. SA 21.8(d)(1) (2004).
SWR's certified claim for costs, detailing the time expended and costs
incurred, must be submitted to the agency within 60 days of receiving this
decision. 4 C.F.R. SA 21.8(f)(1).
The protest is sustained.
Anthony H. Gamboa
General Counsel
------------------------
[1] Pro-Net, now integrated with the central contractor registration
databases under the heading "Dynamic Small Business Search," is an on-line
database of information on thousands of small, disadvantaged, Section
8(a), HUBZone, and women-owned businesses. See www.ccr.gov.
[2] The contracting officer states that she was unaware of this e-mail
until after SWR filed its agency-level protest. COS P17(c).
[3] We also requested that SBA respond to the issues raised in SWR's
protest. SBA agrees with the protester that the agency's market research
was flawed and that its decision not to issue a HUBZone set-aside was not
reasonable. SBA Comments (Aug. 10, 2004) at 9.
[4] SBA agrees that the contracting officer should have further reviewed
the CAFB HUBZone procurement and reassessed her procurement strategy. SBA
Comments (Aug. 10, 2004) atA 7. We accord substantial weight to the SBA's
view after its review of an agency's handling of set-aside determinations.
See Global Solutions Network, Inc., supra, at 4.
[5] The agency asserts that, approximately 1 year ago, SWR stated its
intention not to contract with Cherry Point again, and that this provided
a reasonable basis for concluding that SWR would not compete under a
HUBZone set-aside. However, SWR disputes the agency's understanding,
stating that it repeatedly expressed an interest in this follow-on
procurement, Comments at 7, and the agency concedes that SWR expressed
interest in competing for future government contracts, in general, during
discussions about its past performance. Supplemental AR at 12. Given
these facts, we find that the contracting officer should have verified
SWR's intent.
[6] This third firm, [deleted], had expressed interest prior to the
issuance of the RFP, but did not identify its HUBZone status at that
time. It attended the site visits, and the agency subsequently learned of
its HUBZone status. The agency's review revealed that, while [deleted]
had performed washing services at Cherry Point 10 years earlier, its SBA
profile indicated that it only had 10A employees and did primarily
construction work (its profile listed only construction NAICS codes), and
[deleted] had only submitted past performance information on construction
contracts. COS PA 17(a). Based on these considerations, it appears the
agency reasonably concluded that [deleted] was not capable.
[7] While, in reviewing protests, we consider the entire record, including
parties' later-developed explanations and arguments, we accord less weight
to arguments and documentation--such as the agency's post-protest
conclusions based on its further review--prepared in response to protest
contentions. Boeing Sikorsky Aircraft Support, B-277263.2, B-277263.3,
Sept. 29, 1997, 97-2 CPD P 91 atA 15.