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
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[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.