ONS21 protests that the agency acted unlawfully in choosing not to terminate the contract after it received the SBA OHA decision that Trinity was not a small business for the procurement under the RFP's NAICS code 541690.

Since the issue raised, regarding an SBA OHA's reversal of an SBA area office formal size determination after an award has been made, concerns a matter of interpretation involving SBA's regulations, we requested a report on the protest from SBA. SBA explains that the size protest and appeal procedures, at 13 C.F.R. sect. 121.1009, have been set up to allow for quick resolution of size status protests without unduly delaying procurements. SBA Report at 2. In this regard, the regulations state that an SBA area office formal size determination becomes effective immediately, and a contracting officer may award a contract based on that determination, 13 C.F.R. sections 121.1009(g)(1), (2). SBA's regulations further instruct that if an award has been made, and the formal size determination is, as here, reversed upon appeal by the SBA OHA, the OHA decision is not to apply to that procurement, but, instead, is to have prospective effect only, unless the contracting officer chooses to apply the OHA's decision to the procurement. 13 C.F.R. sect. 121.1009(g)(3); see Jensco Marine, Inc., B‑278929.7, Feb. 11, 1999, 99-1 CPD para. 32 at 4. Further, and consistent with the SBA regulations, Federal Acquisition Regulation (FAR) sect. 19.302(g)(2) provides that "[i]f an award was made before the time the contracting officer received notice of the [size determination] appeal, the contract shall be presumed to be valid." Accordingly, we conclude that, under the applicable regulations, since the SBA OHA decision here was received after award, there was no requirement for the agency to terminate the award to Trinity.  (ONS21 Security Services, B-403067, September 16, 2010)  (pdf)
 

In this regard, when issuing its final rule amending the regulations regarding small business size determinations under GWACs, multiple-award schedule contracts, and other long-term contracts, the SBA specifically stated:

Agencies are increasingly conducting complex multi-year, multi-million dollar procurements as competitions for orders under the [multiple- award schedule] program, where offerors submit "quotes" that exceed, in terms of volume and complexity, proposals. Allowing procuring agencies to request size certifications in connection with particular orders is consistent with the purposes of the Small Business Act (procurements meant for small businesses should be awarded to small businesses) . . . . The final rule gives contracting officers the discretion to request size certifications for individual orders, but does not require them to do so. . . .
71 Fed. Reg. 66434, 66438 (2006).

Here, the 8(a) STARS GWAC has a total duration, including options, of 7 years. It therefore meets the definition of a long-term contract to which the provisions of 13 C.F.R. sect. 121.404(g)(3) apply. As a result, we conclude that the Air Force contracting officer has the discretion under the applicable regulations to request a size re-certification in connection with the submission of task order proposals.

Our view is consistent with that of SBA, the agency responsible for administering the Small Business Act (and whose views we solicited in connection with this protest).[6] SBA agrees that the contracting agency has the discretion to request a size re-certification in connection with submission of task order proposals, and if a firm cannot certify that it is a small business concern in response to such a request, the firm is ineligible for award. SBA Letter to GAO, Aug. 23, 2010, at 3.

In challenging the Air Force's decision to require re-certification, EIS argues that the decision is unreasonable because re-certification is not necessary to achieve the Air Force's stated purpose for requiring recertification, namely, claiming 8(a) credit for issuance of the task order. EIS' argument misses the mark. The fact that a contract holder like EIS that is no longer small could continue to receive orders under the ID/IQ contract here, see FAR sect. 19.804-6(c), or that the Air Force could receive 8(a) credit for issuing such an order, does not make it unreasonable or an abuse of discretion for the contracting officer to request a size re-certfication in connection with the submission of task order proposals.[7] As explained above, requesting re-certification under these circumstances is presumptively proper and reasonable, given that doing so furthers the statutory goals of the 8(a) program and is permitted by the applicable regulations.

EIS also argues that the Air Force's decision to request re-certification of firms' size status as of the time they submit their task order proposals is improper as it amounts to retaliation against EIS for the filing of previous protests.

Government officials are presumed to act in good faith; we will not attribute unfair or prejudicial motives to procurement officials on the basis of mere inference or supposition. Saturn Landscape Plus, Inc., B-297450.3, Apr. 18, 2006, 2006 CPD para. 70 at 3. Where a protester alleges bad faith, it must provide credible evidence clearly demonstrating same. TPL, Inc., B-297136.10, B-297136.11, June 29, 2006, 2006 CPD para. 104 at 21.

EIS has furnished no evidence whatsoever to support its allegation of retribution; it merely infers bad faith based on the fact that it filed earlier protests. The record, however, indicates that the Air Force has had a longstanding desire to ensure that the ENSA task order would go to a business concern for which the agency could properly receive 8(a) credit. Further, the record indicates that the Air Force held numerous discussions with various SBA and GSA officials regarding how to ensure that the task order would in fact be one for which the contracting agency would properly receive 8(a) credit. While the protester disagrees with the Air Force's position here--that task orders issued to business concerns such as EIS who have graduated from the 8(a) program and/or are no longer small are not ones for which the contracting agency may receive 8(a) credit--we conclude that EIS has presented no evidence that the agency acted in bad faith.  (Enterprise Information Services, Inc., B-403028, September 10, 2010)  (pdf)

We view it as inconsistent with the integrity of the procurement system and the intent of the Small Business Act, 15 U.S.C. sections 631-657a (2006), for an agency to allow a firm to continue performing a contract where the firm was determined after award to be other than small, unless there are countervailing reasons for allowing the award to remain in place. See, e.g., ALATEC, Inc., B-298730, Dec. 4, 2006, 2006 CPD para. 191 at 5-6. A key consideration is whether there is another offeror in line for award who can step in and perform if the contract is terminated. Compare ALATEC, Inc., supra (sustaining protest where another offeror was eligible for award and there were no countervailing reasons to leave in place award to an other than small business) with Landmark Constr. Corp., B-281957.3, Oct. 22, 1999, 99-2 CPD para. 75 at 3 (where, in order to meet its ongoing needs, and with no other offeror eligible to step in and perform the contract, agency reasonably left in place award to an other than small business until recompetition was completed and new contract awarded).

In this case, since all three remaining proposals (including the protester's) were found unacceptable, there is no offeror to which award could be made if CWU's contract were terminated at this juncture. In this regard, as noted above, Greystones does not challenge the agency's finding that its proposal was unacceptable, and concurs that the agency has a legitimate need for uninterrupted roleplayer services, such that continued performance by CWU is required to meet the agency's needs. Under these circumstances, we see no basis to object to the agency's decision not to terminate CWU's contract. Landmark Constr. Corp., supra.

The protester's challenge focuses on the method by which the agency proposes to select a new contractor in place of CWU. As noted above, the agency plans to not exercise the option year of the contract and to resolicit with due diligence in order to make a new contract award. The protester asserts that the agency instead should reopen the competition, conduct discussions with the three offerors whose proposals were evaluated as unacceptable, and make award to one of those firms. Such a course, the protester asserts, would lead more quickly to replacing CWU with a small business eligible under the current solicitation.

The agency states that it will take approximately 6 months to conduct a recompetition; we see no basis to conclude that this reprocurement timetable is unreasonable given the nature of the procurement here. See id. Moreover, reopening the original solicitation, instead of conducting a new competition, would exclude new offerors as well as CWU. There is no basis for restricting the competition in this manner, especially given that three of the four proposals received were found to be technically unacceptable. Further, we see no basis to conclude that, in lieu of its plan to conduct a reasonably prompt recompetition, the agency is required to open discussions in the hope that one or more of the remaining offerors can remedy the deficiencies in their proposals such that they would be eligible for award under the RFP.

In sum, we see no basis to challenge the reasonableness of the agency's decision to leave in place the award to CWU, given the FLETC's need for continuing roleplayer services and its plan to award a new contract after holding a reasonably prompt recompetition.  (Greystones Consulting Group, Inc., B-402835, June 28, 2010)  (pdf)
 

Five firms submitted bids in response to the IFB by the September 25 bid opening date. The contracting officer determined that the two lowest bids were both nonresponsive for reasons not germane to the protest. Singleton-GMT JV’s bid was third low. The VA rejected this bid as nonresponsive based on its review of a copy of a Singleton-GMT JV agreement, dated August 13, which was not included in the firm’s bid, but was on file with the agency.[1] Agency Report (AR), Tab 4, Singleton-GMT JV Agreement (Aug. 13, 2007). The VA claimed that the Singleton-GMT JV agreement did not comply with the Small Business Administration’s (SBA) SDVOSBC regulatory requirement incorporated into this IFB that every JV agreement to perform a contract set aside for SDVOSBCs must contain a provision “[d]esignating an SDVOSBC as the managing venturer of the joint venture, and an employee of the managing venturer as the project manager responsible for performance of the SDVO contract.” 13 C.F.R. sect. 125.15(b)(2)(ii) (2007); FAR sect. 52.219-27(d). The VA, therefore, rejected Singleton-GMT JV’s bid as nonresponsive, and made award to the fourth low bidder, Affiliated Western, Inc. This protest followed. At the outset, the agency’s determination that the bid of Singleton-GMT JV was nonresponsive was clearly in error. Responsiveness involves whether a bid as submitted represents an offer to perform, without exception, the exact thing called for in the solicitation so that, upon acceptance, the contractor will be bound to perform in accordance with the IFB’s material terms and conditions. B-G Mech. Serv., Inc., B-265782, Dec. 27, 1995, 96-1 CPD para. 6 at 2. Responsiveness, thus, is determined at the time of bid opening from the face of the bid documents. Id. For such purpose, bid documents include information submitted with a bid or incorporated into the bid by reference. Hewlett-Packard Co., B-184515, Jan. 12, 1976, 76-1 CPD para. 18 at 5-6. Here, Singleton-GMT JV’s bid took no exception to the IFB requirements, and the August 13 agreement the agency relied on was neither included, nor incorporated by reference, in the bid. Moreover, we view the issue of Singleton-GMT JV’s eligibility as an SDVOSBC to be a matter of status and, where an agency has a question regarding a bidder’s status as an SDVOSBC, the SBA, not the procuring agency, is responsible for determining whether a firm is an eligible SDVOSBC. In 2003, Congress created, by amending the Small Business Act, a procurement program for small business concerns owned and controlled by service-disabled veterans, that is, SDVOSBCs. Veterans Benefits Act of 2003, Pub. L. No. 108-183, 117 Stat. 2651, 2662 (2003), 15 U.S.C. sect. 657f (Supp. V 2005). The Small Business Act basically defines an SDVOSBC as a small business concern that is (1) at least 51 percent owned by one or more service-disabled veterans, and (2) managed and controlled by one or more service-disabled veterans, or spouse or permanent caregiver of a service-disabled veteran with a permanent and severe disability. 15 U.S.C. sect. 632(q)(2) (2000). The SBA has issued regulations implementing the SDVOSBC program, including one establishing criteria whereby a joint venture that includes a partner that is not an SDVOSBC, but is otherwise a small business concern, could qualify as an SDVOSBC. 13 C.F.R. sect. 125.15(b); see also FAR sect. 19.1403(c). As required by the Small Business Act, as amended by the Veterans Benefits Act, 15 U.S.C. sections 637(m)(5), 657f(d), the SBA also has established procedures for interested parties to challenge a firm’s size or status as a qualified SDVOSBC. 13 C.F.R. sections 125.24-125.28. Accordingly, we requested the views of the SBA in this matter. The SBA asserts that questions concerning SDVOSBC status, including whether an SDVOSBC joint venture meets the minimum SBA requirements for such arrangements, are not for resolution by the procuring agency, but by the SBA. We are required to give deference to an agency’s reasonable interpretation of its regulations, and because the SBA is the agency responsible for promulgating the regulations regarding the SDVOSBC program, we give its interpretation of its regulations great weight. Catapult Tech., Ltd., B‑294936, B‑294936.2, Jan. 13, 2005, 2005 CPD para. 14 at 6. For competitive set-asides, “[a]ny interested party [to include contracting officers] may protest the apparent successful offeror’s SDVOSBC status.”  13 C.F.R. sect. 125.24(b). While the SBA notes that its regulations do not explicitly address protests concerning the eligibility of SDVOSBC joint ventures, we agree with the SBA that such challenges essentially concern the “status” of an SDVOSBC and that such status challenges are for consideration by the SBA and not the procuring agency. See PPG-CMS-PSI JV, B‑298239, B-298239.2, July 19, 2006, 2006 CPD para. 111 at 5.

In addition, FAR sect. 19.307(a) provides, “[f]or service-disabled veteran-owned small business set-asides, any interested party [to include contracting officers] may protest the apparently successful offeror’s [SDVOSBC] status” and FAR sect. 19.307(h) provides, “[a]ll questions about service-disabled veteran-owned small business size or status must be referred to the SBA for resolution.” The VA focuses on the word “may” in FAR sect. 19.307(a) and argues that this leaves it to the procuring agency’s discretion whether to consult the SBA before rejecting the bid of a JV under an SDVOSBC set‑aside on the basis that the JV is not compliant with applicable SBA regulations. This argument is unavailing for two reasons. First, the “may” language in FAR sect. 19.307(a) is clearly intended to convey that interested parties (including contracting officers) have the right, but are obviously not required, to challenge the apparent winner’s SDVOSBC status. Second, the VA ignores the mandatory “must” language in FAR sect. 19.307(h), which states that all questions concerning SDVOSBC status must be referred to the SBA for resolution. We sustain the protest. Since the VA questions whether Singleton-GMT JV is an eligible SDVOSBC, we recommend that the agency forward this matter to the SBA for its consideration. If the SBA concludes that the protester is eligible for award as an SDVOSBC, we further recommend that the VA award the contract to the protester, if otherwise eligible. We also recommend that the agency reimburse the protester for the costs of filing and pursuing its protest. Singleton-GMT JV’s certified claim for costs, detailing the time expended and costs incurred, must be submitted to the agency within 60 days of receiving this decision. 4 C.F.R. sect. 21.8(f)(1) (2007). (Singleton Enterprises-GMT Mechanical, A Joint Venture, B-310552,  January 10, 2008) (pdf)

Synergetics asserts that the agency improperly gave Vistronix evaluation credit for being a small disadvantaged business (SDB). In the protester’s view, because Vistronix is no longer an SDB, it was not entitled to represent itself as one and the agency should have discovered the awardee’s misrepresented status in its evaluation. The evaluation in this area was unobjectionable. The RFQ provided that, in making the best value determination, preference would be given to small business vendors, with “additional preference” given to small businesses that were also under additional socioeconomic preference programs. RFQ sect. 24.4. The RFQ included a form that requested information from vendors, including their business size status under their GSA FSS contracts and other socioeconomic programs. RFQ sect. 24.6. No other representations or certifications were required. RFQ Question Responses No. 9. Even though Vistronix is not currently certified as an SDB, it was in the SDB program at the time its FSS contract was awarded, and its completed quotation form identified itself as a “small disadvantaged business, minority owned.” Vistronix Quotation at 00324. In conducting the evaluation, the agency relied on this information after verifying the awardee’s SDB status in its FSS contract. Contracting Officer’s Supplemental Statement para. 7. Since the RFQ did not require any new or additional recertification or representation apart from that contained in the vendors’ underlying FSS contracts, and Vistronix accurately reported its SDB status from its FSS contract, there is no basis to conclude that the awardee misrepresented its SDB status. Likewise, in view of the RFQ’s limited SDB representation requirements, the agency reasonably relied upon Vistronix’s representation and gave the firm the additional preference in the evaluation. (We note that the agency’s approach here is consistent with Federal Acquisition Regulation (FAR) sect. 19.301-1(b), which requires agencies to accept a vendor’s small business representation absent a challenge by another vendor, or where the contracting officer has a reason to question the representation, and FAR sect. 8.405-5, which provides that ordering activities should rely on small business representations made by schedule contractors at the contract level).  (Synergetics, Inc., B-299904, September 14, 2007) (pdf)

Termination of even an otherwise properly awarded contract is appropriate, where a timely size protest was filed, the SBA ruled that the awardee was not a small business and that ruling was not appealed, and there were no countervailing circumstances that weighed in favor of allowing a business concern that is not small to continue performance. ALATEC Inc., B‑298730, Dec. 4, 2006, 2006 CPD para. 191 at 5. In the absence of countervailing reasons, we view it as inconsistent with the integrity of the Small Business Act, 15 U.S.C. sections 631-657a (2000), for an agency to permit a large business, which was ineligible under the terms of the solicitation, to continue contract performance. Id. In this case, the contract awards were not proper when they were made.

FAR sect. 19.302(h)(1) provides:

After receiving a [size] protest involving an offeror being considered for award, the contracting officer shall not award the contract until (i) the SBA has made a size determination or (ii) 10 business days have expired since SBA’s receipt of a protest, whichever comes first; however, award shall not be withheld when the contracting officer determines in writing that an award must be made to protect the public interest.

DHS awarded these contracts before it referred the pre-award Alliance and American Sentry size protests to the SBA for its determination, without a written determination from the contracting officer that the award was made to protect the public interest. While the SBA and OHA ultimately determined that these protests were procedurally defective, the disposition of the protests does not excuse DHS’s failure to follow FAR sect. 19.302(h)(1). In this regard, the record shows that DHS never raised any questions concerning the procedural validity of these size status protests when referring the protests to the SBA. Even though DHS stayed performance under these contracts, this was only done after the initial adverse SBA size determination in order to allow C&D to appeal this determination. Moreover, the record shows that C&D has been conclusively determined by the SBA to be other than small for these procurements and has not contested this determination.  In light of DHS’s failure to comply with the applicable FAR provision with regard to delaying award of the contracts, the issue to be considered here is whether there were countervailing circumstances that weighed in favor of allowing a business concern that is not small to continue performance. We first note that when DHS lifted the stay of performance on November 27 in response to the OHA decision, actual contract performance was not scheduled to begin for more than 3 months, on March 1, 2007. The SBA almost immediately (on November 28) apprised DHS of its protest of C&D’s size status. As stated above, under the applicable regulations, the SBA size determination based on the SBA protest is applicable to this procurement. C&D never challenged in its appeal to the OHA the merits of the SBA’s well-documented determination on October 13 that C&D was other than small because of certain affiliations, the OHA only vacated the size determination on technical grounds, and there was no evidence in the record that indicated that C&D’s small business self-certification was otherwise proper. Under these circumstances, we think the facts weigh against allowing a large business to perform these contracts. On the other hand, because of the transition period under these contracts, C&D has incurred substantial performance costs. While we have considered, but do not always accept, termination costs as an adequate countervailing reason to allow an award to a large business to stand, see, e.g., Hydroid LLC, supra, at 4; Tiger Enters, Inc., B-292815.3, B-293439, Jan. 20, 2004, 2004 CPD para. 19 at 4-5, we find that the substantial costs incurred here, together with the protracted SBA size protest process, provide sufficient countervailing reasons not to disturb the base period award to C&D, even though it is a large business for purposes of these procurements. However, there are no countervailing reasons that justify allowing the potential exercise of the four yearly options available under these contracts. While C&D asserts that it now qualifies as a small business under the revised NAICS code size standard, to allow this contract to continue for the full 5-year term under these circumstances would, in our view, be inconsistent with the integrity of the procurement system and the Small Business Act, inasmuch as C&D was not eligible for award under the terms of these RFPs. See ALATEC Inc., supra, at 6. (Alliance Detective & Security Service, Inc., B-299342, April 13, 2007) (pdf)

Under the SBA’s regulations, “[a] timely filed protest applies to the procurement in question, even though a contracting officer awarded the contract prior to receipt of the protest.” 13 C.F.R. sect. 121.1004(c). Nevertheless, we generally have not questioned the propriety of an award made by an agency before a decision by the SBA on a size protest had been issued, where the 10 business day period for issuing such decisions had expired, even where the awardee was determined by the SBA to be other than a small business concern. See, e.g., Planned Sys. Int’l, Inc., B‑282319.7, Feb. 24, 2004, 2004 CPD para. 43 at 2-3; Systems Research and Applications Corp.; Infotec Dev., Inc., B-270708 et al., Apr. 15, 1996, 96‑1 CPD para. 186, at 6-8. However, we have recognized that in certain circumstances, even where the requirements of FAR sect. 19.302 have been satisfied by the agency in making an award, termination of the awardee’s contract is appropriate, where a timely size protest was filed, there was no appeal of the SBA size ruling that the awardee was not a small business, and there were no countervailing circumstances that weighed in favor of allowing a business concern that is not small to continue performance. See, e.g., Tiger Enters., Inc., B-292815.3, B-293439, Jan. 20, 2004, 2004 CPD para. 19 at 4; Adams Indus. Servs., Inc., B-280186, Aug. 28, 1998, 98-2 CPD para. 56 at 4; Diagnostic Imaging Technical Educ. Ctr., Inc., B-257590, Oct. 21, 1994, 94-2 CPD para. 148 at 2-3; American Mobilephone Paging, Inc., B-238027, Apr. 5, 1990, 90‑1 CPD para. 366 at 3. We found that under such circumstances, when there are no countervailing reasons for preserving an award to a business that is not small, it would be inconsistent with the integrity of the procurement system and the intent of the Small Business Act, 15 U.S.C. sections 631‑657a (2000), for an agency to permit a business that is ineligible under the terms of the solicitation to continue contract performance.  In this case, a timely size protest was filed. In addition, during the course of this protest, the OHA has affirmed the SBA size determination, which, therefore, “remains in full force and effect” with respect to this procurement. See 13 C.F.R. sect. 121.1009(g)(1). Thus, there is no possibility that the SBA’s ruling on this matter will change. On this record, we also find no plausible countervailing circumstances that weigh in favor of allowing a business concern that is not small to begin performance under this suspended contract, and certainly none for allowing that firm to perform for what could be 5 years, which could occur if all options are exercised under the small business set‑aside. In this regard, contract performance remains stayed and the SBA OHA has conclusively resolved the size determination with respect to this procurement. Moreover, the SBA determination that TAG was not an eligible small business was issued on August 18--the date that the SBA indicated it planned to issue its decision--which was only 2 days after the Army made award to TAG, and the agency received the SBA determination at least a month prior to the commencement of scheduled performance of the awarded contract. Finally, despite having been afforded the opportunity to comment on the SBA’s comments and the SBA OHA size determination, which indicated that its ruling was applicable to this award and that the contract should be terminated, the Army has not advanced any countervailing reasons for why preserving the award with TAG at this juncture would be appropriate, save that the Army complied with FAR sect. 19.302(h)(1). We, therefore, conclude that the Army should have terminated TAG’s contract when it received the SBA OHA decision affirming that TAG was not a small business concern. Not to terminate the contract under these circumstances was inconsistent with the integrity of the procurement system and the Small Business Act, inasmuch as TAG was not eligible for award under the terms of the RFP that required award to a small business. See Diagnostic Imaging Technical Educ. Ctr., Inc., supra, at 2-3.  (ALATEC Inc., B-298730, December 4, 2006) (pdf)

Here, the protests challenging TSS’s size status were forwarded to SBA on December 21, and TSS acknowledges that SBA contacted it for information regarding its size status on December 22. Protester Response to Dismissal Request at 3. This being the case, the Navy was permitted to make an award to Quantell after January 9, that is, 10 business days later. Since the agency made award to Quantell on March 16, which is more than 50 business days after the size protests were received by SBA, the award was permissible under the applicable regulations. FAR sect. 19.302(h)(1); Planned Sys. Int’l, Inc., B-292319.7, Feb. 24, 2004, 2004 CPD para. 43 at 2. In accordance with FAR sect. 19.302(i), the OHA ruling received by the agency after award did not apply to the protested acquisition. See also 13 C.F.R. sect. 121.1009(g)(3) (OHA decision received after award does not apply to the current procurement). Since the award was made in accordance with the FAR and SBA regulations, and since OHA’s decision on appeal did not apply to the procurement, the agency was not required to terminate Quantell’s contract in favor of an award to TSS.

In comments filed in response to a request by our Office, SBA posits that OHA’s remanding of the first regional office determination (finding TSS other than small) in effect vacated that decision; it goes on to reason that, since the agency made award to Quantell on March 16, prior to SBA’s March 20 final determination that TSS was other than small, the award was improper. SBA concludes that, since there was no proper award in place at the time TSS filed its appeal, OHA’s appeal decision applied to this procurement, and the agency, therefore, is required to terminate Quantell’s contract and make award to TSS. See FAR sect. 19.302(i). We do not agree with SBA’s position. The SBA’s regulations state that an OHA decision received after award does not apply to the procurement and will have future effect. 13 C.F.R. sect. 121.1009(g)(3). Furthermore, the regulations do not in any way suggest that OHA’s decision to remand the regional office determination, made subsequent to the award to Quantell, has any bearing on the propriety of the award. SBA’s position ignores the fact that, as discussed above, the award to Quantell was made more than 10 days after the size protests were received and, therefore, was permitted under the explicit terms of the FAR, whether or not a final size determination had been issued at the time of award.

TSS similarly maintains that there was no valid award to Quantell, citing FAR sect. 19.302(g)(2), which provides that an award to another offeror will only be “presumed to be valid” if it is made before the contracting officer receives notice that the originally intended awardee had appealed a negative size status decision. According to TSS, since the Navy made award to Quantell after it received notice of TSS’s appeal of the first negative size status determination (the one that thereafter was remanded by OHA), the award to Quantell is not presumed valid. Again, however, this argument ignores the fact that the agency was permitted to proceed with the award to Quantrell because more than 10 days had passed since the size protests were received by SBA. While the intended effect of the “presumed to be valid” language in FAR sect. 19.302(g)(2) is not clear, there is no indication that it should be read as negating the clear language in FAR sect. 19.302(h)(1). TSS argues that, under FAR sect. 19.302(h)(3), the procuring agency is obligated to notify SBA if it is making award before a size determination is received; TSS maintains that the Navy failed to do so and that the award to Quantell, therefore, was invalid. While the record does not indicate that the Navy specifically advised SBA that it planned to make award to Quantell before it received the size status determination, the Navy reports that it in fact contacted SBA before making the award and, on March 14, was told by SBA that it was finalizing its second determination that TSS was not small and that the Navy should proceed with the award. Agency Comments on SBA Response at 5-6. (Technical Support Services, B-298527, October 12, 2006) (pdf)

As noted above, under FAR sect. 15.503(a)(2), in procurements that have been set aside for small businesses, the contracting agency is required to inform each unsuccessful offeror, in writing, of the identity of the apparent successful offeror prior to making award. The purpose for this pre-award notice is to allow unsuccessful offerors the opportunity to have SBA review the prospective awardee’s size status before award. Science Sys. and Applications, Inc., B-236477, Dec. 15, 1989, 89-2 CPD para. 558 at 3. The FAR provides that a contracting officer may not make an award after receiving a size protest until (1) SBA has made a size determination, (2) 10 business days have expired since SBA’s receipt of the size protest, or (3) where the contracting officer determines in writing that an award must be made to protect the “public interest.” See FAR sect. 19.302(h)(1). Here, ICE violated the pre-award notice regulation, thus precluding Spectrum from being able to file a size status protest until after award and denying SBA the opportunity to issue its size determination before award. Under similar circumstances where the agency failed to give the required pre-award notice, we have sustained protests and recommended the termination of contracts awarded to the concerns that were determined to be large businesses. See, e.g., Tiger Enters., Inc., B-292815.3, B-293439, Jan. 20, 2004, 2004 CPD para. 19 at 4-5; Science Sys. & Applications, Inc., supra, at 6. ICE nevertheless argues that termination of Ahuska’s contract is not appropriate despite SBA’s determination that Ahuska is not a small business concern for this procurement. ICE first points out that the FAR allows the contracting officer to make award pending SBA’s size determination after 10 business days have expired since SBA’s receipt of the size protest, see FAR sect. 19.302(h)(1), and that, here, SBA took 14 business days to issue its size determination. ICE suggests that SBA’s failure to issue its size determination within 10 business days excuses the agency’s failure to provide the pre-award notice. We disagree. As we have noted in prior decisions, we are unwilling to speculate whether SBA would not have provided its formal determination within 10 business days of receipt had ICE complied with the pre-award notice requirement. See Science Sys. & Applications, Inc., supra, at 4. Rather, we think it is more reasonable to assume--given that the 10-day period for SBA’s size decisions is premised upon agency compliance with the pre-award notice requirement--that SBA would have issued its size determination within the 10-day period had the agency been delaying award pending SBA’s determination. Id.; see also Eagle Marketing Group, B-242527, May 13, 1991, 91-1 CPD para. 459 at 3. Accordingly, we do not find that SBA’s failure to issue its size determination within 10 business days excuses ICE’s failure to provide pre-award notice and to stay award pending SBA’s decision. (Spectrum Security Services, Inc., B-297320.2; B-297320.3, December 29, 2005) (pdf)

PSI’s timely protest of AMTI’s size status was received in the appropriate office at SBA on August 28. Thus, according to its own regulations, if possible, SBA was to render a decision on the size protest within 10 business days thereafter, that is, by September 12; SBA’s subsequent request to NSF that this time be extended 10 days moved the due date for SBA’s decision to September 24. SBA did not issue the size determination by the September 24 due date. Indeed, SBA did not issue its decision until November 6. This was inconsistent with SBA’s regulations; there is no indication--and SBA does not assert--that it was not possible to issue the determination by September 24. NSF did not make award until more than 1 month after the size determination due date, on October 31, the day after our decision on PSI’s protest was issued and the stay of award was lifted. Under these circumstances, since NSF delayed the award as required by the FAR, and SBA had not issued the size status determination as of the award date, the award to AMTI was proper and the delivery order need not be canceled. See Systems Research and Applications Corp.; Infotec Dev., Inc., B-270708 et al., Apr. 15, 1996, 96-1 CPD ¶ 186 at 6; Priscidon Enters., Inc., B-230035, Mar. 18, 1988, 88-1 CPD ¶ 290 at 2.  (Planned Systems International, Inc., B-292319.7, February 24, 2004) (pdf)

We previously have found, in circumstances such as these, where a timely size protest has been filed, there is no appeal of the SBA’s size ruling, and there are no countervailing circumstances that would weigh in favor of allowing the large business concern to continue performance, that termination of the awardee’s contract is appropriate. Adams Indus. Servs., Inc., B-280186, Aug, 28, 1998, 98‑2 CPD ¶ 56; Diagnostic Imaging Tech. Educ. Ctr., Inc., B-257590, Oct. 21, 1994, 94-2 CPD ¶ 148 at 2-3. In the absence of countervailing reasons, we view it as inconsistent with the integrity of the Small Business Act, 15 U.S.C. §§ 631-657a, for an agency to permit a large business, which was ineligible under the terms of the solicitation, to continue performance. Adams Indus. Servs., Inc., supra. The record shows that in the present circumstances, all of these conditions are met. First, although Tiger filed its size status protest after award, it could not have done otherwise because simplified acquisition procedure acquisitions do not require the agency to issue a pre-award notice to unsuccessful vendors, and none was issued here. See Federal Acquisition Regulation (FAR) § 13.106-3(c). Because the size protest was filed within 5 days of Tiger receiving notice from the USMC of the awards to Tarheel, Tiger’s protest was timely under SBA’s size status regulations. 13 C.F.R. § 121.1004(a)(2). Moreover, a contracting officer’s size protest is always timely. 13 C.F.R. § 121.1004(b). Second, according to SBA, Tarheel has not appealed the SBA’s size determination. Third, there are no countervailing reasons that would justify allowing Tarheel to perform these contracts until September 30, 2004. The J&A, prepared by the agency based on urgency, does not discuss why an 11-month base period of the award was required. As noted by Tiger and SBA, an urgency justification cannot support the procurement of more than a minimum quantity or time period needed to satisfy the immediate urgent requirement.[4] See Signals & Sys., Inc., B-288107, Sept. 21, 2001, 2001 CPD ¶ 168 at 12; Tri-Ex Tower Corp., B-239628, Sept. 17, 1990, 90-2 CPD ¶ 221 at 5. While the USMC states that termination of the contracts is impractical due to the substantial performance of the contracts, it has not explained why that should be the case, given the apparent availability of other sources for these relatively mundane services, such as the two other vendors (including Tiger), who responded to the RFQ. We also note that, pending a competition conducted under full and open competition, the interim requirement for the services can be quickly satisfied from small businesses, as is evidenced by the expeditious matter in which the competition under this RFQ was conducted.  (Tiger Enterprises, Inc., B-292815.3; B-293439, January 20, 2004) (pdf)

We conclude that, in light of the purpose of the Act and the absence of any specific statutory or regulatory prohibition, there is nothing objectionable in an agency's requiring that FSS vendors responding to a task order RFQ be small as of the date quotations are due, instead of relying on the original FSS self-certification, which may not reflect a vendor's current small business status.  (CMS Information Services, Inc., B-290541, August 7, 2002)  (pdf)

Contracting agency's reliance on information in the Small Business Administration's (SBA) PRO-Net database to determine that the protester, which certified itself in its bid as an eligible HUBZone small business concern, was not small and thus was not eligible for a HUBZone evaluation preference was improper because such questions must be referred to the SBA under applicable regulations where the agency does not believe it can or should accept the bidder's self-certification.  (AMI Construction, B-286351, December 27, 2000)

While FAR sec. 19.302(j) treats size status protests received after award of a contract as having no applicability to that contract, SBA's regulations, which we view as controlling in this area, provide that "[a] timely filed protest applies to the procurement in question even though a contracting officer awarded the contract prior to receipt of the protest." 13 C.F.R. sec. 121.1004(c). Moreover, in the absence of countervailing reasons, we view it as inconsistent with the integrity of the competitive procurement system and the intent of the Small Business Act, 15 U.S.C. sec. 631-657a (1994), for an agency to permit a large business, which was ineligible under the terms of the RFQ, to continue to perform. Diagnostic Imaging Tech. Educ. Ctr., Inc., supra.  (Adams Industrial Services, Inc., B-280186, August 28, 1998)

Plaintiff asserts that the SBA incorrectly held that the LOI between the Holding Company and Compass is an agreement in principle because paragraph 8 of the LOI is titled “Non-binding Agreement.” On the other hand, Defendant states that this is simply incorrect and that the agency properly concluded that the LOI should be given present effect under 13 C.F.R. 103 §121.103(d). This case, therefore, turns on whether the agency’s decision that the LOI is an agreement in principle was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. The Court must, therefore, examine the LOI together with the SBA’s own regulations.

SBA regulations are clear when determining size. Specifically, “[i]n determining size, SBA considers agreements to merge (including agreements in principle) to have present effect on the power to control a concern.” 13 C.F.R. 103 §121.103(d)(1). Where there is supporting evidence to show that serious negotiations between the parties have occurred, letters of intent and similar documents will be given present effect; while where such negotiations have not occurred, present effect will not be given by OHA. Size Appeal of PCCI, Inc., SBA 4531(2003). In reviewing the LOI in this case, it is clear to the Court that on its face the LOI indicates that substantial negotiations had already been held, that partial due diligence had already been performed between buyer and seller, and that WRS intended to purchase Compass. The Court agrees that the LOI is an agreement in principle as it was reached after negotiations and due diligence, and represented an agreement to merge as well as providing specific price terms and conditions that were to be included in the closing documents.

At the time WRS submitted its bid, on October 29, 2007, it certified that it was a small business as a formal merger had not yet occurred between WRS and Compass. It was not until November 19, 2008 that WRS and Compass formally merged. WRS argues that because the merger had not yet been executed, the LOI could not be considered an agreement in principle nor could it be considered “affiliated with Compass” because there was still the possibility that the merger might not go through. Therefore, it is WRS’s contention that at the time it submitted the bid, it was still a small business. However, even though the actual merger had not been executed as of the date of the LOI, this will not automatically preclude the agency from concluding that an LOI is an agreement in principle and be given its present effect. Instead “a firm becomes affiliated with another when it reaches an agreement in principle to acquire the other by the date of self certification, even if the merger or acquisition has yet to be executed.” See Size Appeal of Geosyntec Consultant, SBA No. 4277 (1997). In addition, “a firm is not considered affiliated with another firm merely by virtue of negotiations toward one possibly acquiring the other. Rather, a firm becomes affiliated with another when it reaches an agreement in principle to acquire the other by the date of self certification, even if the merger or acquisition has yet to be executed.” Id. Thus, if an agreement is looking to negotiate a possible future merger or acquisition, this agreement would not rise to the level of an agreement in principle. Id., See also Size Appeal of Technology Systems Association, Inc., SBA No. 3963 (1994).

The record shows that the LOI dated September 21, 2007 is an agreement in principle and not an agreement to continue negotiations. First, the LOI is signed by both the president of WRS Holding Company, and the representative of Compass and The Edgewater Funds. The joint signatures show the intent of the parties to fulfill the terms of the LOI. Second, the letter specifically states that “based on the review we have completed over the past several weeks and our discussions to date, WRS Holding Company is pleased to confirm its intent to purchase . . . all of the capital stock of Compass.” AR 472. It is clear that the negotiations took place prior to the LOI and that, therefore, the LOI is not an agreement to conduct further discussions or an agreement to open negotiations. See 13 C.F.R. 103 §121.103(d)(2). Even though the Plaintiffs argue that some negotiations took place after this letter, the LOI set forth the essential terms of an agreement. The additional negotiations related to the “confirmatory due diligence” which is normal; as it is addressed in paragraph 4(a) which states “Buyer shall be entitled to complete its due diligence investigation of Compass.” AR 474. Thus, some due diligence had already been performed and affirms the Holding Company’s intent to purchase Compass prior to the certification that WRS was a small business. Third, the LOI set forth the exact purchase price and its intent to purchase all of the outstanding shares of stock. Lastly, the LOI set forth several other specific transactional dates and amounts, clearly indicating an intent by WRS to purchase Compass.

Plaintiff argues that paragraph 8 of the LOI states that it is a “non-binding agreement” and, therefore, the LOI cannot possibly be considered an agreement in principle. Plaintiff further argues that the agreement must create legal rights. However, if this were true, it would always be possible for large companies to evade the rule by inserting language that the agreement created no rights. This interpretation would make this rule almost meaningless. The regulations do not specify that the agreement be binding, the regulations only provide what to consider in making the size determination. Therefore, the agency’s interpretation of the agreement in principle is a reasonable approach, otherwise it would create a rule that is so vague it is useless or so easy to evade that it would serve no purpose. Here, at the time the LOI was signed, it is clear to the Court that the Holding Company had every intention of merging with Compass. Further, in balancing all of the other enumerated provisions in the LOI against the non-binding paragraph, it is clear to the Court that the LOI is an agreement in principle to purchase Compass and should, therefore be given the effect attributed to it by the agency.  (WRS Infrastructure & Environment. Inc., v. U. S. and Environmental Restoration, LLC, 08-613C, Filed December 18, 2008; Refiled January 30, 2009.)  (pdf)

The procurement process for this HUD contract involved an award to HMBI based on a size determination by SBA’s Area Office. The contracting officer’s reliance on SBA’s size determination and the subsequent award of contract are presumed to be valid under the FAR. FAR § 19.302(g)(2). The FAR specifically directs that, because Chapman did not file its appeal with OHA until ten days after the contract award, any decision reached by SBA’s OHA would not affect the award of the contract. See FAR § 19.302(g)(2); see also Mid-West Constr., Ltd. v. United States, 387 F.2d 957, 963 (1967) (“It is true that further SBA proceedings, once the contracting officer makes an award pursuant to authority granted by this provision of the regulations, would have no effect on that particular contract. But the size determination can influence further contracts with the concern whose status is questioned.”). The FAR also provides that, based on the timing of Chapman’s appeal, a ruling by OHA received after the contract award date would affect prospective procurements only. FAR § 19.302(g)(2). By failing to appeal promptly the decision of SBA Area Office, plaintiff has forfeited its opportunity to affect the current contract award under the applicable regulations. Because plaintiff did not file its appeal prior to the contract award and OHA did not issue a decision before HUD awarded HMBI the contract, the award of this contract is unchallengeable on SBA size determination grounds. See FAR § 19.302(g)(2). Because the court is unable to supply the relief plaintiff seeks in its motion for preliminary injunction, the court finds that plaintiff’s claim is not justiciable. See Mercer, 52 Fed. Cl. at 723. (Chapman Law Firm v. U. S. and Harington, Moran, Barksdale, Inc., No. 04-1553C, November 23, 2004) (pdf)

Plaintiff attempts to impute the contracting officer with constructive knowledge of Guilltone's size, i.e., over the small-business threshold, due to the availability of such information on SBA's PRO-Net. Because of 'the ease of use of PRO-Net and of the quality of information it contains, throughout the small-business contracting world PRO-Net has universally become the first place agency or contractor personnel consult for information about a small-business contractor,' plaintiff intones, . . . .  Although a search on PRO-Net may be in wide practice, it is not a requirement of this procurement. 

Significantly, the contracting officer pursued additional avenues of information about the bidders via Dun & Bradstreet, a reputable financial service. The merits of one information resource versus another are not appropriate for debate in this forum. '[C]ontracting officers are 'entitled to exercise discretion upon a broad range of issues confronting them' in the procurement process.' Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324, 1332 (Fed. Cir. 2001) (quoting Latecoere Int'l, Inc. v. United States Dep't of Navy, 19 F.3d 1342, 1356 (11th Cir. 1994)). The contracting officer's conduct in this regard was neither arbitrary nor capricious, and it was not irrational.  (Tech Systems, Inc. v. U.S., No. 01-186C, August 23, 2001)

The court finds that defendant’s erroneous requirement in the RFP did not cause unfair consideration of plaintiff’s bid. There was, nevertheless, technically an “error” in the RFP that concealed the standard for eligibility from the bidders.  Yet, even if the court were prepared to find that defendant’s failure to enforce the SIC Code certification requirement arbitrarily and capriciously prejudiced its consideration of plaintiff’s bid, this alone does not meet the test for the grant of injunctive relief.  (Hawpe Construction, Inc. v. U.S., No. 00-69C, May 5, 2000)