TITLE: B-299407, International Filter Manufacturing, Inc., April 10, 2007
BNUMBER: B-299407
DATE: April 10, 2007
******************************************************************
B-299407, International Filter Manufacturing, Inc., April 10, 2007
Decision
Matter of: International Filter Manufacturing, Inc.
File: B-299407
Date: April 10, 2007
William Blakely, Esq., and Lauren P. DeSantis-Then, Esq., Polsinelli
Shalton Welte Suelthaus PC, for the protester.
Michael Walters, Esq., and Matthew Geary, Esq., Defense Logistics Agency,
and John W. Klein, Esq., and Kenneth Dodds, Esq., Small Business
Administration, for the agencies.
Sharon L. Larkin, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest that agency should have issued a solicitation for part kits as a
set-aside for historically underutilized business zone (HUBZone) small
business concerns is denied, where the acquisition was below the
simplified acquisition threshold and thus was not required to be set aside
for HUBZone small business concerns; in any case, the agency's market
research did not reveal that the agency could reasonably anticipate
receiving offers from two or more HUBZone small business concerns.
DECISION
International Filter Manufacturing Corp. (IFM) protests the decision of
the Defense Logistics Agency, Defense Supply Center Columbus (DSCC) to
issue request for quotations (RFQ) No. SPM7M0-07-Q-0194 for part kits on
an unrestricted basis rather than as a historically underutilized business
zone (HUBZone) set-aside.
We deny the protest.
IFM is a small disadvantaged, woman-owned, minority-owned, HUBZone
business concern that manufactures filters and assembles part kits. In the
past, IFM has provided fluid pressure filter part kits to the agency that
included its manufactured filters under a HUBZone set-aside contract. The
contract was set aside for HUBZone contractors because the filter, which
constituted a large portion of the kit, was manufactured by HUBZone small
business concerns, including IFM.
The RFP sought 2,970 fluid pressure filter part kits, National Stock
Number (NSN) 4330-01-495-6900. The kit was comprised of the same group of
20 NSNs as under the previous HUBZone set-aside contract, except that the
filter was now going to be provided by the agency as "government furnished
material."
The acquisition was issued on the basis of urgency, pursuant to the
special emergency procurement authority (SEPA) granted in 41 U.S.C. sect.
428a (Supp. IV 2004). This statute provides emergency authority to procure
property or services "in support of a contingency operation," which is
defined elsewhere as a "military operation . . . in which members of the
armed forces are or may become involved in military actions, operations,
or hostilities against an enemy of the United States." 41 U.S.C. sect.
428a(a)(1); see 10 U.S.C. sect. 101(a)(13) (2000). The SEPA statute also
increased the simplified acquisition threshold for any awarded contract to
$250,000. 41 U.S.C. sect. 428a(b)(2)(A). The agency invoked SEPA here
because the kit is the "number one backordered item in the DSCC Maritime
Supply Chain" and, of these pending backorders, 52 percent are needed to
support urgent requirements in Southwest Asia (Iraq, Kuwait, and
Afghanistan), and because the estimated value of this proposed acquisition
was $249,925.50. Contracting Officer's Statement at 1.
Before issuing the RFQ on an unrestricted basis, the agency considered
whether this acquisition should have been set aside for small business or
HUBZone concerns. The agency requested that the small business programs
office at the Defense Supply Center Philadelphia (DSCP) examine the
procurement history of the NSNs listed on a drawing of the kit to
determine whether any of the NSNs had been manufactured by small
businesses or HUBZone small business concerns. Of the 19 NSNs listed
(excluding the filter), DSCP determined that 3 had been previously
provided by small businesses, 1 had been previously provided by HUBZone
small businesses, and the remaining 15 had been provided by large
businesses. Id. at 2; Agency Report, Tab 3, DSCP Analysis. The contracting
officer's supervisor analyzed DSCP's results using the standard unit price
list for the NSNs that make up the kit and determined that only 5 percent
of the cost of the NSNs in the kit were procured from HUBZone small
business concerns, and 15 percent of the costs were procured from small
businesses. Contracting Officer's Statement at 3. The contracting officer
considered DSCP's and his supervisor's analyses, and determined that there
was not a reasonable expectation of receiving offers from two or more
small business or HUBZone small business concerns. Based on this
determination, the contracting officer decided to issue the RFQ on an
unrestricted basis.
The contracting officer coordinated with the DSCC office of small business
programs and the Small Business Administration (SBA) Procurement Center
Representative (PCR). Both concurred with the contracting officer's
decision.
The RFQ was issued on January 17, 2006, and IFM protested. IFM asserts
that the agency should have set aside the RFQ for HUBZone small business
concerns. Contracting officers are generally required to set aside
procurements in excess of the simplified acquisition threshold for HUBZone
small business concerns, if the agency determines that offers will be
received from two or more HUBZone small businesses and that award will be
made at a fair market price. Federal Acquisition Regulation (FAR) sect.
19.1305(a), (b). For procurements less than the simplified acquisition
threshold but more than the micro-purchase threshold, the HUBZone
set-aside requirements are not mandatory, but such acquisitions may be set
aside for HUBZone small businesses "at the sole discretion of the
contracting officer." FAR sect. 19.1305(c). With regard to a HUBZone
supply contract, such as the one here, the concern seeking award must also
be the manufacturer or supply the product of a HUBZone small business
concern. FAR sect. 19.1303(d); 13 C.F.R. sections 125.6(c)(4), 126.601(e)
(2006). To satisfy this requirement, a qualified HUBZone small business
concern may subcontract part of the HUBZone contract so long as:
the qualified HUBZone [small business concern] spends at least
50 [percent] of the manufacturing costs (excluding the cost of
materials) on performing the contract in a HUBZone. One or more
qualified HUBZone [small business concerns] may combine to meet this
subcontracting percentage requirement.
13 C.F.R. sect. 125.6(c)(4).
Here, the simplified acquisition threshold is above the estimated value of
the contract, so the agency was not required to set aside the requirement
for HUBZone small business concerns.[1] In any event, the contracting
officer reasonably determined that it did not have a reasonable
expectation of receiving offers from two or more HUBZone small businesses,
given that only 5 percent of the cost of the NSNs in the kit had been
provided by HUBZone small businesses in the past.[2] Although IFM
challenges the sufficiency of the analysis, it has not shown the analysis
to be unreasonable.
For example, IFM complains that the agency improperly focused on past
procurement history and did not search various available databases that
would have shown (according to IFM) that HUBZone small businesses could
manufacture the NSNs.[3] However, a contacting officer may rely on prior
procurement history in the conduct of market research; the use of any
particular method of assessing the availability of firms for a HUBZone
set-aside is not required. See American Imaging Servs., Inc., B-246124.2,
Feb. 13, 1992, 92-1 CPD para. 188 at 3. Here, the agency reviewed the
procurement history for the NSNs, and also consulted the DSCC office of
small business programs and the SBA PCR. As noted above, both of these
offices concurred with the contracting officer's determination. Our Office
also sought the views of the SBA during this protest, and the SBA found
that the agency's determination not to set aside the procurement for
HUBZone small business concerns does not violate any procurement law or
regulation. Based on this record, we find reasonable the agency's
determination not to set aside the RFQ for HUBZone small business
concerns.[4]
The protest is denied.
Gary L. Kepplinger
General Counsel
------------------------
[1] IFM questions the agency's calculation of estimated contract value
arguing that this calculation is unsupported. However, not only has IFM
provided no evidence that the estimated value exceeds $250,000, but the
amount of the actual order awarded under this RFQ is $157,261.50.
[2] Although IFM questions the use of standard unit pricing and the
determination that HUBZone manufacturers produced only 5 percent of the
cost of the kit, the only evidence that it has produced indicates that
HUBZone small businesses may be able to provide a small number of the NSNs
that are contained in the kit. The record confirms that the overall total
cost of the kits attributable to these NSNs is far less than the required
50 percent.
[3] IFM also complains that the agency's market research and set-aside
determination failed to take into account that at least two HUBZone small
businesses can manufacture the filter. We find that the agency was not
required to consider whether HUBZone small businesses could provide the
filter, given that the filter will be provided as government furnished
material under this RFQ.
[4] IFM contends for this first time in its comments on the agency report
that the agency's analysis is flawed because it failed to recognize that,
as a "kit assembler, [IFM] need only ensure that `50 percent of the total
value of the components of the kit must be manufactured by business
concerns in the United States which are small under the NAICS codes for
the components being assembled.'" Protester's Comments at 3. For the
reasons discussed in International Filter Mfg, Inc., B-299368, April ___,
2007, this protest basis, not raised in IFM's initial protest, is untimely
and is in any case based upon a misinterpretation of the regulations. IFM
also raises other untimely arguments for the first time in its
comments--e.g,, that the RFQ was "unduly restrictive." Because these
protest grounds were also not raised in its initial protest, they too
constitute piecemeal presentation of protest grounds that our Bid Protest
Regulations do not permit. L-3 Sys. Co. Wescam Sonoma, Inc., B-297323,
Dec. 3, 2005, 2005 CPD para. 219 at 5.