TITLE: B-299237, Hawkeye Glove Manufacturing, Inc., March 6, 2007
BNUMBER: B-299237
DATE: March 6, 2007
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B-299237, Hawkeye Glove Manufacturing, Inc., March 6, 2007

   DOCUMENT FOR PUBLIC RELEASE
   The decision issued on the date below was subject to a GAO Protective
   Order. This redacted version has been approved for public release.

   Decision

   Matter of: Hawkeye Glove Manufacturing, Inc.

   File: B-299237

   Date: March 6, 2007

   Marc Lamer, Esq., Kostos and Lamer, PC, for the protester.

   Vera Meza, Esq., and Srikanti Dixit, Esq., U.S. Army Materiel Command, for
   the agency.

   Peter D. Verchinski, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest by small business that agency improperly awarded small business
   set-aside contract to unreasonably high-priced offeror is denied where
   set-aside price was lower than government estimate and within range of
   small business prices received.

   DECISION

   Hawkeye Glove Manufacturing, Inc., a small business, protests the
   Department of the Army's award of a contract to Hatch Worldwide Imports
   under request for proposals (RFP) No. W911QY-06-R-0004, for combat gloves.
   Hawkeye alleges that the award was improper because the awardee's price
   was unreasonably high.

   We deny the protest.

   The RFP, issued on February 22, 2006, contemplated the award of two
   contracts: 50 percent of the requirement would be set aside for award to a
   small business, while the other 50 percent would be awarded on an
   unrestricted basis. Each awardee would receive an
   indefinite-delivery/indefinite-quantity contract with a guaranteed minimum
   of 60,000 pairs of gloves, and a maximum of 250,000 pairs. The awards were
   made on a "best value" basis using five evaluation criteria: technical,
   management, past performance, price, and subcontracting plan. The
   technical criteria combined were significantly more important than price.

   Under the small business set-aside portion of the requirement, the agency
   received eight proposals, including Hawkeye's and Hatch's. The agency
   subsequently decided not to include Hawkeye's proposal in the competitive
   range because the firm's product demonstration sample was found to contain
   numerous weaknesses and deficiencies. Two proposals were included in the
   competitive range, and the agency ultimately made award to Hatch based on
   its lower price--$8,832,500 ($35.33 each for 250,000 pairs). Under the
   unrestricted portion of the requirement, the agency received four
   proposals, including one from Hawkeye, offering different gloves from
   those it proposed under the set-aside. The agency determined that
   Hawkeye's proposal provided the best value to the government, and thus
   made award to Hawkeye for the unrestricted portion of the requirement at a
   price of $5,975,000 ($23.90 each).

   After learning of the award to Hatch, Hawkeye filed an agency-level
   protest, asserting that the award for the small business set-aside portion
   was improper because Hatch's price, which was approximately 48 percent
   higher than Hawkeye's contract price, was unreasonably high. The agency
   dismissed Hawkeye's protest on the grounds that it was untimely and that
   Hawkeye was not an interested party to challenge the small business
   set-aside award. Hawkeye then filed this protest with our Office. Hawkeye
   essentially contends that the contract awarded to Hatch was not awarded at
   a fair market price, that the set-aside thus should be withdrawn, and that
   the agency should purchase the full requirement under Hawkeye's contract.

   As a preliminary matter, the agency asserts--as the contracting officer
   found in dismissing Hawkeye's agency-level protest--that Hawkeye is not an
   interested party to protest the award to Hatch because Hawkeye's proposal
   was properly eliminated from the small business competition, and there was
   another firm in the competitive range; that firm, not Hawkeye, would be in
   line for award if Hawkeye's protest were sustained. In this regard, a
   party will not be deemed to have the necessary economic interest to
   maintain a protest if it would not be in line for award if its protest
   were sustained. See 4 C.F.R. sect. 21.0(a) (2006); Eagle Mktg. Group,
   B-242527, May 13, 1991, 91-1 CPD para. 459 at 2.

   This argument is without merit. While the agency found Hawkeye's set-aside
   proposal unacceptable, Hawkeye has challenged the reasonableness of
   Hatch's price, not the rejection of its own proposal. Since the only other
   offeror in the competitive range proposed a price higher than Hatch's, a
   finding by our Office that Hatch's price was unreasonable would also
   necessarily mean that this offeror's price was unreasonable. Since both
   proposals in the competitive range thus would be unacceptable due to
   unreasonable pricing if we sustained the protest, there is no intervening
   small business offeror that would be in line for award. Reopening the
   small business set-aside competition or recompeting the requirement would
   be appropriate remedies under these circumstances. Since Hawkeye thus
   could be in a position to submit a revised proposal or participate in the
   recompetition, it has a sufficient economic interest to qualify as an
   interested party eligible to maintain a protest challenging the award to
   Hatch. See Wilcox Indus. Corp., B-281437 et al., June 30, 1999, 99-2 CPD
   para. 3 at 5.

   The agency also argues--as the contracting officer also concluded--that
   the protest is untimely, since Hawkeye learned that its proposal was
   excluded from the competitive range under the small business set-aside
   portion on August 22, but did not file its protest until it learned of the
   award. See 4 C.F.R. sect. 21.2(a)(2) (2006) (protests must be filed no
   later than 10 days after the basis for protest is known or should have
   been known). This argument is without merit. Hawkeye is not protesting its
   exclusion from the competitive range; rather, as stated above, Hawkeye
   maintains that the award to Hatch was improper because Hatch's price was
   unreasonably high. Hawkeye did not possess the information necessary to
   raise this argument until it learned both that Hatch had received the
   award, and Hatch's price. Since Hawkeye filed its agency-level protest
   within 10 days of learning this information, and then filed its protest
   with our Office within 10 days of learning that its agency-level protest
   was dismissed, the protest is timely.

   Turning to the merits, in view of the congressional policy favoring small
   businesses, contracts may be awarded under small business set-aside
   procedures at premium prices, so long as those prices are not
   unreasonable. Hardcore DuPont Composites, LLC, B-278371, Jan. 20, 1998,
   98-1 CPD 28 at 3.[1] The contracting officer has discretion to determine
   price reasonableness, and we will not disturb such a determination unless
   it is unreasonable. A. Hirsh, Inc., B-271829, July 26, 1996, 96-2 CPD
   para. 55 at 2. In making such a determination, the contracting officer may
   consider such factors as the government estimate, the procurement history
   for the solicited supplies, the current market climate, or the "courtesy
   bid" of an ineligible non-small business. See Federal Acquisition
   Regulation (FAR) sections 19.202-6, 15.404-1(b); Stitziel Co., B-251560,
   Apr. 13, 1993, 93-1 CPD para. 315 at 2. The determination of whether a
   small business price premium is unreasonable depends on the circumstances
   of each case. Olsen Envtl. Servs., Inc., B-241475, Feb. 6, 1991, 91-1 CPD
   para. 126 at 2-3.

   There is no basis for objecting to the agency's finding that Hatch's price
   was reasonable. The record shows that the Army's determination was based
   on the independent government estimate (IGE), which projected a price of
   $60 for a pair ($15,000,000 for 250,000 pairs) of size medium combat
   gloves. AR, Tab 12. The agency also cited the pricing of the 8 small
   business set-aside proposals received, which ranged from $3,290,000 to
   $19,301,750, Agency Report (AR), Tab 13, 21, for an average price of
   $10,115,859. Although all but two of these proposals were eliminated from
   the competitive range, there is no indication--or argument by
   Hawkeye--that the proposals' elimination was somehow related to their
   prices. In any case, given that Hatch's price was well below the IGE, the
   agency reasonably determined that Hatch's proposed price was reasonable.
   See Sletager, Inc., B-240789.6, Oct. 11, 1991, 91-2 CPD para. 328 at 2.

   The protester also argues that the agency improperly failed to consider
   Hawkeye's price under the unrestricted competition in assessing the
   reasonableness of Hatch's price. However, there is no requirement that
   agencies take a price submitted outside of a small business set-aside
   competition--or any other particular factors--into account in its
   reasonableness determination. See FAR sect. 19.202-6. In any case, there
   is a range above the price an agency may receive under an unrestricted
   procurement that may be considered reasonable in a set-aside situation,
   Browning-Ferris Indus., B-209234, Mar. 29, 1983, 83-1 CPD para. 323
   at 2-3; CDI Marine Co., B-188905, Nov. 15, 1977, 77-2 CPD para. 367 at
   2-3, and we have found a price premium of as much as 51 percent to be
   reasonable. See Browning-Ferris Indus., supra. Therefore, the fact that
   Hatch's price was 48 percent higher than the protester's would not mandate
   a finding that the price was unreasonable.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] We note that we have equated the concept of price reasonableness with
   "fair market price" in the context of a small business set-aside. See
   American Imaging Servs., B-238969, B-238971, July 19, 1990, 90-2 CPD
   para. 51 at 2.