TITLE: B-310904, FlowSense, LLC, March 10, 2008
BNUMBER: B-310904
DATE: March 10, 2008
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B-310904, FlowSense, LLC, March 10, 2008

   Decision

   Matter of: FlowSense, LLC

   File: B-310904

   Date: March 10, 2008

   Patrick C. Summers, Mackall Crounse & Moore, PLC, for the protester.

   Phillipa L. Anderson, Esq., Department of Veterans Affairs, 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

   1. Protest that agency improperly passed over protester, a
   service-disabled veteran-owned small business (SDVOSB), in order to award
   contract to 8(a) firm is denied where agency reasonably determined that
   neither protester nor other SDVOSBs were viable potential offerors.

   2. Protest that awardee and protester were similarly situated firms, and
   that agency thus unreasonably determined that awardee could perform the
   work while protester could not, is denied where agency determined that
   awardee had capability to perform based on its prior performance of
   contracts for agency.

   DECISION

   FlowSense, LLC, a service-disabled veteran-owned small business (SDVOSB),
   protests the proposed sole-source award of a contract to Tarraf
   Construction, Inc. under solicitation No. VA-263-08-RP-0025, a section
   8(a) set-aside issued by the Department of Veterans Affairs (VA) for
   boiler replacement at the VA Medical Center (VAMC) in St. Cloud,
   Minnesota. FlowSense asserts that VA improperly set the contract aside for
   an 8(a) sole-source award rather than make award to FlowSense as an
   SDVOSB.

   We deny the protest.

   In September 2007, VA conducted market research to determine whether two
   or more SDVOSB concerns were available to perform the work at issue here.
   In this regard, the Veterans Benefits, Health Care, and Information
   Technology Act of 2006 (the Act) establishes priorities for contracting
   preferences for VA requirements; first priority goes to SDVOSBs, so the
   agency must consider those concerns' ability to satisfy a requirement
   before considering other preferences, such as for section 8(a) concerns.
   38 U.S.C. sect. 8127(i). Based upon a search of VA's Vendor Information
   Pages (VIP) database, the contracting officer (CO) identified four SDVOSBs
   (including the protester) that possessed the applicable North American
   Industry Classification System (NAICS) code and were located in Minnesota;
   the agency determined that none of these firms was a viable potential
   competitor. Regarding FlowSense, VA discovered through searches of various
   databases that the firm had average annual revenue of $1-2 million and a
   staff of only 8 employees, and that its largest prior contract was for
   only $475,000. The CO concluded that it was doubtful that FlowSense would
   be able to obtain the necessary bonding for the boiler replacement
   contract here, since the estimated cost was $2-3.5 million. Agency Report,
   exh. 9, at 1. The CO also suspected that, since the protester had 20 NAICS
   codes listed in the Central Contractor Registration database, the firm may
   be primarily a broker of services. Given that VA had no other knowledge of
   FlowSense's capabilities, it concluded that the firm was not a viable
   potential SDVOSB offeror for purposes of either an SDVOSB set-aside or
   sole-source award. Id.

   The agency subsequently decided to conduct the procurement under the Small
   Business Administration's (SBA) section 8(a) program. By letter dated
   September 19, the CO offered the requirement to SBA, recommending a
   non-competitive award to Tarraf. Noting that Tarraf had successfully
   completed other projects for the agency, the agency stated that it
   believed that Tarraf had the capabilities and financial resources to
   handle a project of this size, and would be able to meet or exceed the
   timelines set forth in the project specifications. CO's Statement at 3. In
   this regard, the record shows that Tarraf received at least four other
   building maintenance contracts from VAMC in the first half of 2007.
   Protester's Comments, exh. 14, at 7, 11, 19, 21. Approximately 1 month
   later, SBA accepted the requirement under the 8(a) program. On October 29,
   the CO issued the RFP with the intent to negotiate with Tarraf on a
   sole-source basis. Thereafter, FlowSense filed this protest.

   FlowSense challenges the agency's decision to set the procurement aside
   for award under the section 8(a) program. The protester asserts that it is
   a capable SDVOSB that is qualified to perform the work and that, since the
   Act gives first priority to SDVOSBs, the agency should have made award to
   FlowSense rather than to an 8(a) concern. [1]

   Although agencies need not use any particular methodology in assessing the
   availability of firms for a set-aside, measures such as prior procurement
   history, market surveys, and advice from the agency's small business
   specialist may all constitute adequate grounds for a contracting officer's
   decision to set aside, or not set aside, a procurement. See American
   Imaging Servs., Inc., B-246124.2, Feb. 13, 1992, 92-1 CPD para. 188 at 3.
   The assessment must be based on sufficient evidence to establish its
   reasonableness. See Rochester Optical Mfg. Co., B-292247, B-292247.2, Aug.
   6, 2003, 2003 CPD para. 138 at 5.

   As stated above, the agency based its decision here on the information
   contained largely in the VIP database--the accuracy of which the protester
   does not challenge--showing that the firm's total annual
   revenue--$1-2 million--was substantially below the estimated value of this
   contract, and that the value of its largest prior contract was only
   $475,000; this brought into question the firm's capacity to perform, since
   the contract here was valued at $2-3.5 million.[2] Information such as
   this, concerning firms' business history, properly may be considered by
   agencies when making a determination as to whether there are viable
   potential competitors so as to warrant setting a requirement aside under a
   small business preference program. See, e.g., MCS Mgmt., Inc., B-285813,
   B-285882, Oct. 11, 2000, 2000 CPD para. 187 (agency reasonably considered
   annual revenues and size of past contracts when examining whether small
   businesses were capable of performing contract for a set-aside
   solicitation). This information led the agency to conclude that "there
   were no SDVOSB firms, which included FlowSense, with the capabilities and
   capital to procure the necessary bonding and to perform the work
   associated with the project." CO's Statement at 2. We find nothing
   unreasonable in this conclusion.

   FlowSense asserts that it was unreasonable for the agency to determine
   that it was not capable of performing the work while finding that Taraff
   was capable of performing, since the two firms are similarly situated. In
   this regard, the protester alleges--and the agency does not dispute--that
   the two firms had similar staffing, similar annual revenues, and similar
   potential bonding problems.

   This argument is without merit. While FlowSense and Tarraf had similar
   staffing and annual revenue, they were different in that the agency had
   worked with Tarraf on several occasions and had direct knowledge of
   Tarraf's capabilities through this past performance. This direct knowledge
   provided the agency with a reasonable basis for predicting that Tarraf
   could successfully perform the contract. In contrast, the agency had no
   such direct knowledge of FlowSense's capabilities; rather, the firm was an
   unknown entity, so the agency was left to determine the firm's capability
   from available information. As discussed above, in making this
   determination, the agency reasonably relied on information indicating that
   the firm lacked the capacity necessary to perform the contract here. We
   conclude that the agency reasonably viewed the two firms' capability
   differently; the agency's decision to proceed with an award to Tarraf did
   not undermine its prior conclusion that FlowSense was not capable of
   performing such that an SDVOSB award was required under the Act.[3]

   The protest is denied.

   Gary L. Kepplinger
   General Counsel

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

   [1] The protester does not challenge the agency's decision not to set this
   procurement aside for veteran-owned small business concerns, which
   category is second in priority after SDVOSBs. 38 U.S.C. sect. 8127(i).
   Section 8(a) concerns and Historically Underutilized Business Zone
   (HUBZone) concerns are third in line. Id.

   [2] The protester asserts that the CO should also have been aware of its
   capability to perform from information it provided to the CO via e-mail
   prior to issuance of the solicitation. However, that e-mail was consistent
   with the information contained in the database. For example, it noted that
   "[i]n 2006-2007, [FlowSense] completed and [is] currently involved in
   multiple mechanical & general renovation projects exceeding $3.75 million
   up to date." Protester's Comments, Jan. 9, 2008, exh. 3. This information
   seems to support the database information showing that the firm's annual
   revenue was $1-2 million. In any case, there was no requirement that the
   agency discount the information in the VIP databases in favor of
   FlowSense's unsolicited self-serving information.

   [3] We solicited the Small Business Administration's (SBA) comments on
   this protest, and SBA shares our view that the agency did nothing
   improper. Specifically, SBA asserts that the agency reasonably determined
   that FlowSense did not have the capability to perform the contract, and
   that the agency could rely on its "first-hand experience" of Tarraf in
   determining that it was capable of performing. SBA Letter to GAO, Jan. 11,
   2008.