TITLE: B-299452, Rothe Computer Solutions, LLC d/b/a Rohmann Joint Venture, May 9, 2007
BNUMBER: B-299452
DATE: May 9, 2007
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B-299452, Rothe Computer Solutions, LLC d/b/a Rohmann Joint Venture, May 9, 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: Rothe Computer Solutions, LLC d/b/a Rohmann Joint Venture

   File: B-299452

   Date: May 9, 2007

   David F. Barton, Esq., The Gardner Law Firm, for the protester.

   Christopher S. Cole, Esq., Department of the Air Force, and John W. Klein,
   Esq., and Kenneth Dodds, Esq., Small Business Administration, for the
   agencies.

   Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office
   of the General Counsel, GAO, participated in the preparation of the
   decision.

   DIGEST

   Small Business Administration properly accepted requirement for visual
   information services for the Air Force Academy into the 8(a) business
   development program for award on a competitive basis without determining
   whether acceptance of the requirement into the 8(a) program would have an
   adverse impact on an existing small business after reasonably determining
   that the services qualified as a new requirement.

   DECISION

   Rothe Computer Solutions, LLC d/b/a Rohmann Joint Venture (RJV) protests
   the decision by the Department of the Air Force and the Small Business
   Administration (SBA) to place a requirement for visual information
   services for the Air Force Academy under the SBA's section 8(a) business
   development program for award on a competitive basis.

   We deny the protest.

   BACKGROUND

   RJV has been performing a contract for various information management and
   communications services, including the visual information services at
   issue in this protest, for the Air Force Academy since 2002. Because this
   contract is due to expire in July 2007, the Air Force has initiated the
   process of reprocuring the services. In June 2006, the Air Force shifted
   responsibility for the visual information services from the Communications
   Squadron, which had awarded the contract to RJV, to the Air Force Public
   Affairs Office; as a consequence of this reorganization, the Air Force
   determined that the visual information services should be procured
   separately from the other services.

   After determining that the visual information services should be procured
   separately, the Air Force conducted market research to determine the size
   status and assess the capabilities of potential sources. Based on the
   results of its research, the agency concluded that there were multiple
   8(a) firms capable of performing the requirement and that the services
   should be offered to the 8(a) program for award on a competitive basis.

   By letter of November 16, 2006, the Air Force offered the requirement to
   the SBA. Of significance to this protest, the letter furnished the
   following summary of the acquisition history of the requirement:

     These services were outsourced as part of an A-76 study and are
     currently included in a larger scale contract that was awarded to a
     small business, Rohmann Joint Venture, San Antonio, TX. Mandated
     reorganization of Media Services under Public Affairs requires a new
     contract action to be put into place for those services. . . . To be
     noted is the fact that the value for the Media Services piece is
     approximately [deleted] of the current contract value for Communication
     Support, which includes the Media Services.[1] This is considered to be
     a new requirement.

   Letter from AF Director of Small Business to SBA at 1.[2] By letter of the
   following day, SBA accepted the requirement for competition in the 8(a)
   program.

   The Air Force posted a presolicitation notice describing the requirement
   on the Federal Business Opportunities website on November 28. The notice
   informed prospective sources that the requirement would be set aside as a
   competitive 8(a) acquisition. RJV contacted the contracting officer later
   the same day to object to the setting aside of the requirement for 8(a)
   competition, arguing that such a course of action would have an adverse
   impact on it "in that the proposed set-aside is more than 25% of [its]
   only contract and therefore its annual gross sales." E-mail from RJV to
   the Contracting Officer, Nov. 28, 2006, Agency Report, Tab 23. The Air
   Force sought guidance from the SBA regarding the protester's complaint. By
   letter dated December 15, the SBA advised the Air Force that an adverse
   impact determination had not been required because the procurement in
   question was considered a new requirement. The Air Force notified the
   protester of the SBA's response. On December 22, RJV filed an agency-level
   protest objecting to placement of the requirement in the 8(a) program. The
   agency denied the protest, whereupon RJV protested to our Office.

   The protester argues that the SBA erred in finding that the requirement
   for visual information services was a new requirement and that an adverse
   impact determination thus was not required.

   DISCUSSION

   Section 8(a) of the Small Business Act authorizes the SBA to contract with
   other government agencies and to arrange for the performance of those
   contracts via subcontracts awarded 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 in a specific geographical location, or other small business
   programs. 13 C.F.R. sect. 124.504(c) (2006). The adverse impact concept is
   designed to protect small business concerns that are performing government
   contracts awarded outside the 8(a) program. Id. The SBA presumes adverse
   impact to exist where the small business concern 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.
   13 C.F.R. sect. 124.504(c)(1)(i).

   Except where a new requirement--which SBA's regulations define as a
   requirement that has not previously been procured by the relevant
   procuring activity--is created through a consolidation of existing
   requirements, the concept of adverse impact does not apply to new
   requirements.[3] 13 C.F.R. sect. 124.504(c)(1)(ii) and (2). In this
   connection, the regulations explicitly provide that the "SBA need not
   perform an impact determination where a new requirement is offered to the
   8(a) BD [business development] program." 13 C.F.R. sect.
   124.504(c)(1)(ii)(D). The rationale for exempting new requirements from
   adverse impact analysis, the regulations explain, is that "[w]here a
   requirement is new, no small business could have previously performed the
   requirement and, thus, SBA's acceptance of the requirement for the 8(a) BD
   program will not adversely impact any small business." 13 C.F.R.
   sect. 124.504(c)(1)(ii)(A). The regulations further explain that "[t]he
   expansion or modification of an existing requirement will be considered a
   new requirement where the magnitude of change is significant enough to
   cause a price adjustment of at least 25 percent (adjusted for inflation)
   or to require significant additional or different types of capabilities or
   work." 13 C.F.R. sect. 124.504(c)(1)(ii)(C).

   To avoid adverse impacts, and to obtain other information necessary for
   SBA to determine that an offered requirement is eligible and appropriate
   for award under the 8(a) program, SBA's regulations require that
   contracting agencies furnish detailed information about a procurement when
   offering it for inclusion in the program. 13 C.F.R. sect. 124.502; see
   also Federal Acquisition Regulation (FAR) sect. 19.804-2. Among the items
   of information required to be included in the offering letter are the
   acquisition history, if any, of the requirement; the names and addresses
   of any small business contractors that have performed on the requirement
   within the previous 24 months; and the identities of all 8(a) program
   participants that have expressed an interest in being considered for the
   acquisition. 13 C.F.R. sect. 124.502(c)(9), (10), and (14); FAR sect.
   19.804-2(a)(8) and (12).

   In its report to our Office, the Air Force explained that the visual
   information services offered to the 8(a) program qualified as a new
   requirement because the services represented "approximately [deleted] of
   the current contract value, or, a [deleted] reduction in total services
   from the current contract," a change "that satisfie[d] the 25% requirement
   established by the SBA." Agency Memorandum of Law at 4. In commenting on
   the agency report, the SBA agreed with the Air Force that the requirement
   should be considered new, although basing its analysis on the Air Force's
   representation in its offering letter that the visual information services
   represented approximately [deleted] of the current contract value, rather
   than the above figure.[4] The SBA explained as follows:

     In its offering letter, the Air Force informed SBA that the value of the
     visual information services requirement being offered to the 8(a) BD
     program was approximately [deleted] lower than the total value of the
     acquisition currently being performed by RJV. If that is correct, the
     change in value between the two procurements is greater than 25 percent,
     and the visual services acquisition is a new requirement under SBA's
     regulations and no adverse impact determination is required. 13 C.F.R.
     sect. 124.504(c)(1)(ii)(D). A change in value alone is enough to render
     a procurement new for adverse impact determination purposes, even if the
     goods or services are exactly the same as a prior procurement. See NANA
     Services, LLC, B-297177.3, B-297177.4, Jan. 3, 2006, 2006 CPD para. 4. .
     . . Under the adverse impact regulation, SBA compares the total
     estimated value of RJV's contract, including all options, to the total
     estimated value of the offered requirement, including all options, to
     determine whether it is new.

   SBA Comments, Mar. 23, 2007, at 3.

   RJV argues that the SBA's interpretation of its own regulation is
   unreasonable. According to the protester, it is not the change in overall
   procurement value, but rather the change in the value of the visual
   information services component that the agency should consider. RJV
   maintains that the value of the visual information services under the
   contract that it is performing and the value of the visual information
   services under the new solicitation are virtually the same; thus, the
   protester argues, the requirement for a price adjustment of 25 percent is
   not met.

   As the agency responsible for promulgating the applicable regulations, the
   SBA's interpretation of the regulations, that is, what constitutes a "new"
   requirement, deserves great weight, and we defer to the SBA's
   interpretation so long as that interpretation is reasonable. NANA Servs.,
   LLC, supra, at 10; The Urban Group, Inc.; McSwain and Assocs., Inc.,
   B-281352, B-281353, Jan. 28, 1999, 99-1 CPD para. 25 at 6.

   As explained above, 13 C.F.R. sect. 124.504(c)(1)(ii)(C) provides that a
   "modification" of an existing requirement will be considered "new" (and
   therefore exempt from the requirement to do an adverse impact analysis)
   where the "magnitude of change" between the original and modified
   requirements is at least 25 percent. The protester argues that the
   magnitude of change here must be based on the change in value of the work
   that is the subject of the new procurement relative to the value of only
   that component of the work under the existing contract, rather than the
   contract value as a whole. We think that, in determining whether there has
   been a price change of at least 25 percent, the SBA has reasonably
   interpreted its own regulation as providing for comparison of the value of
   the requirement to be solicited with the overall value of the existing
   contract encompassing that requirement. NANA Servs., LLC, supra, at 10;
   see also OMNI Gov't Servs., LP, B-297240.2 et al., Mar. 22, 2006, 2006 CPD
   para. 56 at 2 n.2. Although RJV disagrees and offers an alternate
   approach, we see no basis to conclude that the interpretation by the
   SBA--the agency that is charged by statute with administering the 8(a)
   program and that wrote and issued the regulation at issue--is
   unreasonable. Since it is undisputed that, applying this interpretation of
   the regulation, the value of the work called for under the new requirement
   represents a reduction of more than 25 percent from the value of the
   existing contract held by RJV, the agencies properly concluded that no
   adverse impact analysis was required.[5]

   Finally, the protester argues that in deciding to make the requirement an
   8(a) set-aside, SBA violated 13 C.F.R. sect. 124.504(c)(3) by failing to
   consider the number and value of contracts in the subject industry
   reserved for the 8(a) program as compared with other small business
   programs. 13 C.F.R. sect. 124.504(c)(3) provides as follows:

     In determining whether the acceptance of a requirement would have an
     adverse impact on other small business programs, SBA will consider all
     relevant factors, including but not limited to, the number and value of
     contracts in the subject industry reserved for the 8(a) BD program as
     compared with other small business programs.

   By its terms, this provision calls on the SBA to perform the review set
   forth therein only where an adverse impact determination is required.
   Since, as explained above, an adverse impact determination was not
   required here, 13 C.F.R. sect. 125.504(c)(3) does not apply.

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The Air Force previously referred to the services that it now calls
   "visual information services" as "media services." Agency Request for
   Summary Dismissal at 2.

   [2] The letter also furnished the following information regarding
   interested 8(a) firms:

     Of the [deleted] companies that provided capability information, there
     were [deleted] 8(a) companies from across the United States and Alaska
     that submitted capability information. After reviewing the information
     provided, and following up with telephone calls for clarification, it
     was determined that [deleted] of the 8(a) companies that responded have
     the background, capability and skills to provide the required services .
     . . .

   Id. at 1-2.

   [3] With regard to a requirement that is created through a consolidation
   of existing requirements, the regulations provide as follows:

     In determining whether the acceptance of a requirement would have an
     adverse impact on a group of small businesses, the 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.

   13 C.F.R. sect. 124.504(c)(2).

   [4] While we are perplexed by the unexplained discrepancy between the
   information furnished to the SBA and the information furnished to our
   Office regarding the percentage of existing contract value that the visual
   services represent--and by the fact that attachment 1 to the Contracting
   Officer's Statement of Facts furnishes yet a third percentage
   [deleted]--we nonetheless do not regard the inconsistency as significant
   for purposes of our decision given that the percentage change in value now
   reported by the Air Force (i.e., approximately [deleted]) is greater than
   the percentage change in value (i.e., approximately [deleted]) on which
   the SBA based its determination.

   [5] RJV further argues that since 13 C.F.R. sect. 124.504(c)(2) provides
   for the performance of an adverse impact determination where a new
   requirement is formed by combining requirements currently being performed
   by two or more small businesses into a single contract, an adverse impact
   determination logically should be required in the converse situation,
   i.e., where a new requirement is formed by extracting work from an
   existing requirement. Whether or not it would be logically consistent with
   13 C.F.R. sect. 124.504(c)(2) for the SBA to require the performance of an
   adverse impact determination where a new requirement arises through the
   division of an existing requirement, the fact is that the provision does
   not provide for performance of an adverse impact determination under those
   circumstances.