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.