TITLE: B-299037, Margni, Inc., January 26, 2007
BNUMBER: B-299037
DATE: January 26, 2007
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B-299037, Margni, Inc., January 26, 2007

   Decision

   Matter of: Margni, Inc.

   File: B-299037

   Date: January 26, 2007

   Thomas J. Kelleher, Jr., Esq., Smith, Currie & Hancock, for the protester.

   Phillipa L. Anderson, Esq., and Dennis J. Foley, Esq., Department of
   Veterans Affairs, and John W. Klein, Esq., and Laura Mann Eyester, Esq.,
   U.S. Small Business Administration, for the agencies.

   Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the
   General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Small Business Administration's (SBA) determination that placing a
   cemetery maintenance requirement into SBA's section 8(a) program would not
   have an adverse impact on an individual small business, a group of small
   businesses located in a specific geographical location, or other small
   business programs was reasonable, where the record shows that the SBA made
   requisite findings concerning the lack of adverse impact.

   DECISION

   Margni, Inc. protests the award of a sole-source contract to Native
   Contractors, Inc. under request for proposals (RFP) No. VA-786-06-RP-0148
   under the Small Business Administration's (SBA) section 8(a) program, for
   cemetery maintenance services for the Department of Veterans Affairs (VA)
   at the Georgian National Cemetery, Canton, Georgia.

   We deny the protest.

   On March 29, 2006, under request for proposals (RFP) No.
   VA-786-06-RP-0050, the VA solicited the predecessor to this requirement as
   a service disabled veteran owned (SDVO) small business set-aside. Five
   SDVO small businesses, including Margni, submitted acceptable proposals by
   the April 28 closing date. On May 25, the VA awarded the contract to
   Benchmark Headstones LLC based on its low $2,437,704.57 price. The
   requirements contract awarded was for a base period from date of contract
   award through September 30, 2006, with four 1-year option periods.

   During performance of the base period, the VA encountered several problems
   with Benchmark's performance, which caused the VA not to exercise the
   first option year under the contract. The VA then decided to obtain these
   cemetery maintenance services under a sole-source contract under the SBA's
   8(a) program from Native Contractors, an 8(a) SDVO small business, which
   was successfully performing similar services at a nearby cemetery. The VA
   determined that because of the non-exercise of the option, this course of
   action was in the agency's best interests due to "the urgent nature of the
   Government's needs." See VA Report, Tab G.1, Justification for Use of
   SDVOSB 8(a) Contractor.

   On September 14, the VA notified the SBA of its desire to negotiate an
   8(a) contract with Native Contractors. Included in the letter was the
   estimated cost of the contract ($2,400,000), the period of performance,
   which was for 1 year longer than the prior contract, the acquisition
   history, and other pertinent information. The only acquisition history
   provided the SBA by the VA was information relating to the Benchmark
   contract. See VA Report, Tab G.3, at 1-2. On September 19, the SBA,
   accepted the offering on behalf of Native Landscaping and stated that "[a]
   determination has been made that acceptance of this procurement will cause
   no adverse impact on another small business concern." VA Report, Tab G.3,
   at 1. A sole-source contract was awarded to Native Contractors under the
   8(a) program on September 29.

   Under section 8(a) of the Small Business Act, the SBA is authorized to
   enter into contracts with government agencies and to arrange for
   performance of such contracts by awarding subcontracts to socially and
   economically disadvantaged small businesses. 15 U.S.C. sect. 637(a)
   (2000). The Act affords the 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 absent a
   showing of possible bad faith on the part of government officials or that
   regulations may have been violated. 4 C.F.R. sect. 21.5(b)(3) (2006);
   Designer Assocs., Inc., B-293226, Feb. 12, 2004, 2004 CPD para. 114 at 4.

   Under the Act's implementing regulations, the 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 located within a specific geographical location, or other small
   business programs. 13 C.F.R. sect. 124.504(c) (2006). The purpose of the
   adverse impact concept is to protect incumbent small businesses which are
   currently performing an offered requirement outside the 8(a) program. Id.;
   Korean Maint. Co., B-243957, Sept. 16, 1991, 91-2 CPD para. 246 at 2. As
   part of the process, the agency has the obligation to submit all relevant
   information, including the acquisition history of the offered requirement,
   which the SBA may rely upon in making its decision. 13 C.F.R. sections
   124.502, 124.504(c); Korean Maint. Co., Inc., supra, at 5.

   Here, the SBA's adverse impact analysis at the time the requirement was
   accepted into the 8(a) program was admittedly not "detailed," but only
   determined "that as result of Benchmark's poor performance, it would have
   no chance of being awarded another contract." See SBA Report at 3;
   Declaration Business Development Specialist (Jan. 11, 2007) at 1. This
   analysis only addressed the issue of whether this 8(a) award would have an
   adverse impact on an individual small business, that is, Benchmark. See
   13 C.F.R. sect. 124.504(c)(1).[1]

   As a result of this protest and because it had not been apprised by the VA
   that five SDVO small business concerns had submitted proposals for the
   predecessor requirement, the SBA performed a documented detailed impact
   analysis that determined that accepting the requirement into the 8(a)
   program has no adverse impact to a group of small businesses located
   within a specific geographical location.[2] See 13 C.F.R. sect.
   124.504(c)(2), which provides:

     In determining whether the acceptance of a requirement would have an
     adverse impact on a group of small businesses, SBA will consider the
     effects of combining or consolidating various requirements being
     performed by two or more small business concerns into a single contract
     which would be considered a "new" requirement as compared to any of the
     previous smaller requirements. SBA may find adverse impact to exist if
     one of the existing small business contractors meets the presumption set
     forth in paragraph (c)(1)(i) of this section.[3]

   The SBA advises that it found that "there was no combining or
   consolidating of various requirements being performed by two or more small
   businesses into a single contract," and that the acquisition history,
   including the five SDVO small business concerns that competed under the
   prior procurement, was not a basis to find an adverse impact to a group of
   small businesses located within a specific geographical location because
   this circumstance only reflected the level of interest of small businesses
   from various locations in the requirement.[4] See SBA Supplemental Report
   (Jan. 4, 2007) at 5, n.2.

   Margni nevertheless argues that the SBA's analyses should not be accepted
   because it relied solely upon the dated information involving the prior
   solicitation, instead of performing its own broad based independent
   research of databases, such as the Central Contractor Registration (CCR),
   to determine this question.[5] The kind of research suggested by Margni
   with regard to whether accepting a requirement into the 8(a) program will
   have an adverse impact on a group of small businesses located in a
   specific geographical location is not required by the SBA regulations. As
   previously noted, the purpose of the adverse impact concept is to protect
   incumbent small businesses currently performing an offered requirement
   outside the program, and 13 C.F.R. sect. 124.504(c)(2) addresses the
   potential adverse impact of the loss of business by two or more small
   businesses when the agency is combining or consolidating requirements
   currently being performed by them.[6]  As pointed out by the SBA, the
   agency was not combining or consolidating this requirement. Based on our
   review, Margni has not shown that the SBA's determination in this regard
   was improper, or that small businesses were having work taken from them
   that they currently were performing prior to the VA's and SBA's action.[7]

   In sum, Margni has not shown that the SBA's determination that there was
   no adverse impact in placing this requirement under the 8(a) program was
   not reasonably based. See Catapult Tech., Ltd., supra, at 5.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

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

   [1] Under 13 C.F.R. sect. 124.504(c)(1)(i), the SBA is required to presume
   that adverse impact exists where the individual small business has
   performed the specific requirement for at least 24 months, the small
   business is performing the requirement at the time it is offered to the
   8(a) program, or its performance of the requirement ended within 30 days
   of the procuring activity's offer of the requirement to the 8(a) program;
   and the dollar value of the requirement that the small business is or was
   performing is 25 percent or more of its most recent annual gross sales. In
   its report, the SBA stated that this contract did not represent 25 percent
   of Benchmark's most recent annual revenue, so that no adverse impact on
   Benchmark could be presumed. SBA Report at 4; see 13 C.F.R. sect.
   124.504(c)(1)(i)(C). Margni does not argue that this aspect of the
   determination was improper.

   [2] The SBA also determined that accepting this procurement into the 8(a)
   program would not have an adverse impact on other small business programs
   because this requirement is only a very small percentage of VA's SDVO
   small business set-aside program and that the VA has significantly
   exceeded its SDVO small business goals. SBA Report at 4-5. The protester
   does not dispute this aspect of the determination.

   [3] Paragraph (c)(1)(i) is summarized in note 1, infra.

   [4] While the SBA's more detailed documented impact analysis was not
   undertaken until after the protest, we have given weight to SBA's
   post-protest statements and analyses concerning the adverse impact of
   accepting an agency requirement into the SBA's 8(a) program. See Catapult
   Tech., Ltd., B-294936, B-294936.2, Jan. 13, 2005, 2005 CPD para. 14 at
   5-7; Designer Assocs., Inc., supra, at 5; C. Martin Co., Inc., B-292662,
   Nov. 6, 2003, 2003 CPD para. 207 at 5-8.

   [5] CCR is the common source of vendor data for the government. Federal
   Acquisition Regulation (FAR) sect. 4.1100(b).

   [6] This regulation was added to the SBA adverse impact regulations to
   broaden the adverse impact concept to allow for such impact to be found
   where several requirements currently being performed by different small
   business concerns are consolidated into one large requirement, which could
   be considered "new" under SBA's regulations due to the magnitude of the
   consolidated requirement. This rule permits SBA to find adverse impact
   whenever at least one of the small business concerns losing work that is
   to be consolidated meets the presumption of adverse impact. 62 Fed. Reg.
   43584, 43591 (Aug. 14, 1997).

   [7] The SBA has previously taken, and we have given deference to, the
   position that in the context of a consolidated requirement, 13 C.F.R.
   sect. 124.504(c)(2) only provides that the SBA "may," rather than "shall,"
   find adverse impact if the circumstances under this regulation exist, so
   that it has the discretion to accept a requirement into the 8(a) program
   in appropriate circumstances, even where one or more contractors met the
   presumption of adverse impact. Catapult Tech., Ltd., supra, at 6.