TITLE:  United Enterprise & Associates, B-295742, April 4, 2005
BNUMBER:  B-295742
DATE:  April 4, 2005
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   Decision

   Matter of:   United Enterprise & Associates

   File:            B-295742

   Date:           April 4, 2005

   W. Michael Duncan, Esq., Austin, Lewis & Rogers, for the protester.

   Andrea S. Grill, Esq., Corporation for National & Community Service, and
John W. Klein, Esq., and Kenneth Dodds, Esq., Small Business
Administration, for the agencies.

   John L. Formica, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   In a noncompetitive acquisition under the Small Business Administration's
(SBA) section 8(a) program, although SBA, in considering the
responsibility of an 8(a) vendor under the certificate of competency
procedures, was not following applicable regulations, the protester was
not prejudiced because SBA agreed with the procuring agency that the 8(a)
vendor was not responsible for this requirement, and it is thus apparent
that SBA would not have exercised its right to appeal the agency's
determination not to contract with that vendor, which was the only action
under applicable regulations that SBA could take to contest the procuring
agency's determination here, and the protester has not shown that either
agency acted in bad faith.

   DECISION

   United Enterprise & Associates (UEA) protests its failure to receive a
noncompetitive contract under the Small Business Administration's (SBA)
section 8(a) program for the Corporation for National & Community Service
(CNCS), for facilities support services needed at the AmeriCorp facility
in Charleston, South Carolina. [1]

   We deny the protest.

   The required facilities support services were previously performed by a
section 8(a) contractor that had received a noncompetitive award.  As the
incumbent 8(a) contractor would be graduating from the 8(a) program, and
the contract was due to expire in November 2004, CNCS, at the suggestion
of the incumbent 8(a) contractor, identified UEA as an eligible 8(a) firm
that could perform the services.  CNCS explains that "[t]aking into
consideration [the incumbent contractor's] recommendations, as well as
other independent, appropriate procurement and business considerations,
[CNCS] was interested in seeing whether UEA would be an appropriate vendor
to be awarded the 8(a) contract and continue the work."  Contracting
Officer's Statement at 2.  CNCS thus contacted SBA, seeking authorization
to enter into negotiations with UEA.  Agency Report (AR), Tab 30,
Contracting Officer's Letter to SBA (Apr. 22, 2004).  SBA subsequently
"authorized [CNCS] to conduct negotiations with [UEA] and sign the
contract documents on behalf of the Federal Government."  AR, Tab 29, SBA
Letter to CNCS (Apr. 28, 2004).

   CNCS issued a request for proposals (RFP) to UEA on May 10 requesting UEA
to respond by June 11.  On June 4, UEA submitted a number of written and
oral questions regarding the RFP to CNCS, and requested "an extension in
submitting [its] proposal" to July 2.  The agency responded to UEA's
questions, and granted the extension.  AR, Tab 7, UEA Letter to
Contracting Officer (June 4, 2004); Contracting Officer's Statement at 2. 
The agency did not receive a proposal from UEA by the JulyA 2 due date. 
The agency subsequently revised the RFP, and invited UEA to submit a
proposal in response to the revised RFP by August 6.  Contracting
Officer's Statement at 2; AR, Tab 10, Revised RFP.  UEA submitted its
proposal to CNCS on August 9.  AR, Tab 11, UEA Proposal.

   The agency reviewed UEA's proposal, and "noted several serious
deficiencies with it, raising substantial concern as to whether UEA would
be able to satisfactorily perform the required services."  Contracting
Officer's Statement at 2-3.  After being informally advised by SBA that it
was permissible for CNCS to request that SBA replace UEA with another
eligible section 8(a) vendor for the possible performance of the services,
CNCS, by letter dated November 9, formally advised SBA that CNCS did "not
believe that [UEA] would be able to properly fulfill the requirements or
terms of the new maintenance contract."  AR, Tab 21, Contracting Officer's
Letter to SBA, at 1.  CNCS also stated in this letter that it "would
consider . . . another 8(a) firm" for the performance of the services, and
identified a specific 8(a) vendor as a possibility.  Id. at 3.

   SBA responded by informing CNCS that SBA had been "mistaken," and it could
not "just replace" UEA, but rather, that CNCS was required to refer the
matter of UEA's "ability to perform" to the cognizant SBA office for
"Certificate of Competency consideration."  AR, Tab 20, SBA E-Mail to the
Contracting Specialist.  Shortly thereafter, the CNCS contracting officer
performed a "pre-award survey" of UEA, as instructed by SBA, found UEA to
be nonresponsible, and referred the matter to SBA for consideration under
SBA's COC procedures.  Contracting Officer's Statement atA 4; Tab 17,
Contracting Officer's Referral of Non-Responsibility Determination to SBA;
Tab 18, Contracting Officer's Letter to SBA (Nov. 23, 2004); Tab 19,
Pre-Award Survey Results.  On January 6, 2005, SBA issued its
determination not to issue a COC to UEA.  AR, Tab 14, SBA's COC letter to
UEA.  This protest followed.

   The protester argues that SBA's denial of a COC for UEA was affected by
bad faith on the part of the agencies, and that the agencies failed to
follow applicable regulations in considering UEA for a COC.

   The section 8(a) program has both competitive and noncompetitive
components, depending on the dollar value of the requirement.  See 13
C.F.R. S 124.506(a) (2004); New Tech. Mgmt., Inc., B-287714.2 et al., Dec.
4, 2001, 2001 CPD P 196 at 3.  Generally, where the acquisition value
exceeds $3 million, a section 8(a) contract must be competed among section
8(a) firms; section 8(a) acquisitions with values less than $3 million,
such as the one here, generally are awarded on a noncompetitive basis. 
New Tech. Mgmt., Inc., supra.  Because of the broad discretion afforded a
contracting officer to let a noncompetitive contract under section 8(a) of
the Small Business Act upon such terms and conditions as may be agreed
upon by the procuring agency and SBA, our review of actions related to
noncompetitive acquisitions under the section 8(a) program is generally
limited to determining whether government officials have violated
regulations or engaged in fraud or bad faith.  DLS Servs., Inc., B-276960,
May 20, 1997, 97-1 CPD P 191 at 2.  As explained below, although we agree
with SBA that CNCS and SBA failed to follow applicable regulations upon
CNCS's determination that UEA was nonresponsible, we fail to see, and the
protester has not explained, how it was harmed by the agencies' errors.

   As set forth in the regulations and explained by SBA, until 1998, SBA's
regulations specifically provided that the COC procedures did not apply to
contracts awarded under SBA's section 8(a) program.[2]  13 C.F.R. S
124.313 (1998).  SBA's regulations were amended on June 30, 1998, to
provide (as they do now) that if, in the conduct of "competitive 8(a)
procurements," the "procuring activity contracting officer believes that
the apparent successful offeror is not responsible to perform the
contract, he or she must refer the concern to the SBA for a possible
Certificate of Competency."  63A Fed. Reg. 35726, 35758 (1998); 13A C.F.R.
S 124.507(b)(5) (2004).  In making this regulatory change, SBA explained
that it wanted "to make competitive 8(a)A procurements as similar as
possible to nona**8(a) Government contracting procedures."  62 Fed. Reg.
43583, 43592 (1997); SBA Supplemental Report at 1.  SBA emphasizes,
however, that as provided in the regulatory history of 13 C.F.R.
SA 124.507(b)(5), and as indicated by SBA's current regulations, the
availability of the COC process to an 8(a) participant is limited to
nonresponsibility determinations made during competitive 8(a)
acquisitions. 

   With regard to noncompetitive acquisitions, such as the one here, SBA, in
amending its regulations to provide for the applicability of the COC
process to nonresponsibility determinations made in the context of
competitive 8(a) acquisitions, stated as follows:

   COC procedures would not, however, be available for sole source 8(a)
procurements.  In most cases, the procuring agency would have selected the
Participant for the sole source contract by assessing the firm's
capabilities prior to offering the procurement to SBA.  It is unlikely
that the procuring agency would select a Participant, go through
negotiations with the firm, and then find the firm not to be responsible. 
If that does happen, or if the procuring agency determines that a firm
nominated by SBA for an open requirement cannot perform the contract, SBA
would review the situation to determine whether it agrees with the
procuring agency.  If SBA agrees, it can nominate another Participant to
perform the contract, if one exists that is found to be eligible and
responsible for the requirement, or it can permit the agency to withdraw
the requirement from the 8(a) program if an eligible and responsible
Participant is not found.  If SBA does not agree, it can appeal the
procuring agency's decision to the head of the procuring agency pursuant
to S 124.505.

   62 Fed. Reg. 43583, 43592 (1997).  The procedures referenced above are
implemented through 13 C.F.R. S 124.505(a)(2), which provides that the
"Administrator of SBA may appeal . . . to the head of the procuring
agency" the procuring agency's "decision to reject a specific [8(a)]
Participant for award of an 8(a) contract."

   As such, here, once CNCS determined that UEA was nonresponsible, and
informed SBA of that determination, SBA, if it agreed with CNCS, should
have allowed for the replacement of UEA with another 8(a) vendor, such as
the vendor identified by CNCS, or should have permitted CNCS to withdraw
the requirement from the 8(a) program if no qualified 8(a) vendor was
available.  See DLS Servs., Inc., supra, at 3.  If SBA disagreed with CNCS
regarding its determination that UEA was nonresponsible, the Administrator
of SBA could have appealed the CNCS contracting officer's responsibility
determination to the head of the procuring agency.  13 C.F.R. S
124.505(a)(2).  In short, we agree with SBA that it erred in considering
UEA for a COC because the COC process is not applicable to noncompetitive
8(a) acquisitions.  SBA Report at 2; SBA Supplemental Report at 1-2.

   Although SBA failed to follow applicable regulations once CNCS determined
that UEA was not responsible and referred the matter to SBA, we fail to
see, and UEA has not explained, how it was prejudiced by this error.  That
is, the matter of UEA's responsibility was considered by SBA as part of
its COC process, with SBA determining not to issue a COC to UEA.  As such,
it is clear from the record that SBA ultimately agreed with CNCS's
determination regarding UEA's responsibility, with the end result
remaining the same--CNCS does not contract with SBA for performance of the
services by UEA.  In short, whether the matter of UEA's responsibility was
considered by SBA through the process provided for by the regulations that
contemplates a determination as to whether SBA agrees with the procuring
agency's nonresponsibility determination, or whether the matter of UEA's
responsibility was considered by SBA through the COC process, nothing in
the record indicates that the process or result would have differed in a
manner that would have favored UEA--SBA considered the matter, and
concluded that it did not disagree with CNCS's nonresponsibility
determination.  Thus, it is apparent that SBA would not have appealed the
CNCS determination not to contract with UEA under the 8(a) program, which
was the only appropriate action under applicable regulations that could be
taken to contest the procuring agency's determination here.

   With regard to the protester's contention that the process evidenced "bad
faith," we have reviewed the record and find no credible evidence of bad
faith on the part of the CNCS or SBA officials.  In this regard, we note
that the protester argues in a number of instances that certain of the
agencies' actions, such as the asserted "lack of any meaningful
communications with UEA about the *problems' with its proposal shows bad
faith or incompetence to the extent that it equates to bad faith." 
Protester's Supplemental Comments at 3.

   To establish bad faith, a protester must present convincing evidence that
the officials had a specific and malicious intent to harm the firm.  E.F.
Felt Co., Inc., Ba**289295, Feb. 6, 2002, 2002 CPD P 37 at 3.  The burden
of establishing bad faith is a heavy one.  Id.  Evidence establishing a
possible defect in an agency's actions generally is not sufficient in
itself to establish that an agency acted in bad faith.  For instance, and
contrary to the protester's apparent belief, neither negligence,
incompetence, nor a lack of diligence on the part of agency officials
establishes that such individuals acted in bad faith.  D.H. Kim Enters.,
Inc., B-261103, July 7, 1995, 95-2 CPD P 5 at 2.  Rather, a protester must
also present facts reasonably indicating, beyond mere inference and
suspicion, that the actions complained of were motivated by a specific and
malicious intent to harm the protester.  E.F. Felt Co., Inc., supra, at
3-4.

   Although UEA alleges bad faith, we do not agree with the protester that
instances where "SBA failed to handle th[e] situation properly," where the
protester believes that SBA and CNCS did not effectively communicate with
each other, or the apparent suggestion by CNCS that it be able to
"replace" UAE with another 8(a) vendor, equate to bad faith.  See
Protester's Supplemental Comments (Mar. 14, 2005), at 3-4.  Additionally,
because UEA has not established, and the record does not reflect, that in
reviewing UEA's responsibility, either CNCS or SBA failed to consider
information bearing on UEA's responsibility with the intention of harming
UEA, the protester fails to show that CNCS or SBA acted in bad faith.  See
E.F. Felt Co., Inc., supra, at 4.

   To the contrary, the procuring agency's lack of bad faith in this regard
is evidenced by the fact that the agency extended proposal due dates at
UEA's request, and ultimately considered UEA's proposal for performance of
the services, even though UEA submitted its proposal after the extended
due dates had passed.  With regard to the only instance alleged by UEA
that could have been construed as suggesting bad faith, involving a
statement allegedly made by an SBA representative to a UEA representative,
we note that SBA has submitted the statement of that SBA representative
that directly addresses and denies this allegation, while the protester,
even though provided the opportunity to do so, did not submit any further
statement in support of its allegation.  In our view, CNCS's and SBA's
actions here reflect the agencies' concerns and judgment that UEA was not
capable of adequately performing the required services, as well as a lack
of familiarity as to how to proceed in the context of a noncompetitive
section 8(a) acquisition, rather than bad faith.

   The protest is denied.

   Anthony H. Gamboa

   General Counsel

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

   [1] Section 8(a) of the Small Business Act authorizes SBA to contract with
government agencies and arrange for the performance of such contracts by
awarding subcontracts to socially and economically disadvantaged small
businesses.  15 U.S.C. S 637(a) (2000).

   [2] Specifically, 13 C.F.R. S 124.313(a) (1998) provided that SBA would
"certify" that a firm "is competent to perform the requirement . . . based
on [SBA's] determination that the 8(a) concern with which it intends to
subcontract is responsible to perform the requirement," with 13 C.F.R. S
124.313(c) stating that "[a] Participant that is determined by SBA not to
be responsible to perform a sole source or competitive 8(a) contract may
not seek the issuance of a Certificate of Competency."