ARMED FORCES SPORTS OFFICIALS, CORPORATION, APPELLANT
SBA No. 3476SBA No. 3476May 31, 1991
SBA No. 3476 (S.B.A.), SBA No. 3476, 1991 WL 106263
Small Business Administration (S.B.A.)
Office of Hearings and Appeals
[Size Appeal]
*1 ARMED FORCES SPORTS OFFICIALS, CORPORATION, APPELLANT
*1 Docket No. SIZ-91-4-19-59
*1 Solicitation No. DAKF24-90-B-0204
*1 Department of the Army
*1 HQ 5th Infantry Division
*1 Fort Polk, Louisiana
*1 May 31, 1991
DIGEST
In the case of a sealed bid solicitation, where a size determination is made by the Regional Office as part of a Certificate of Competency (COC) proceeding, size status, including eligibility for award under “50 percent rule,” 15 U.S.C. 644(o)(1), is determined as of the time of written self-certification pursuant to 13 CFR 121.908(c)(1).
DECISION
COLE, Administrative Judge, Presiding:
Jurisdiction
*1 This appeal is decided under the Small Business Act of 1958, 15 U.S.C. s 631 et seq., and the regulations codified at 13 CFR Part 121.
Issue
*1 Whether the provisions of 15 U.S.C. 644(o)(1) apply to sealed bid solicitations and, if so, when intended compliance is determined.
Facts
*1 The Department of the Army, Headquarters 5th Infantry Division, Fort Polk, Louisiana, issued the referenced solicitation on September 7, 1990.1 The Invitation For Bids (IFB) was for the supply of resources, management and sports officials for sports events at Fort Polk. The procurement was a 100 percent set-aside for small businesses, and was assigned the Standard Industrial Classification (SIC) code of 7999 (Amusement & Recreation Services) with a designated size standard of $3.5 million or less in average annual receipts.
*1 The Contracting Officer, following bid opening on October 15, 1990, and the disqualification of three other bidders, advised Armed Forces Sports Officials, Corporation (AFSO or Appellant) on February 13, 1991, that AFSO was the apparent low bidder. AFSO was further advised at that time to
*1 Please review FAR clause 52.219-0014, entitled, “Limitations on Subcontracting”, at paragraph I.58 which states, in part, “At least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern”. Request you provide information concerning how contract performance will be accomplished in accordance with the terms and conditions, a list of your employees that will comprise 50% of the contract costs, as well as copies of your employees certification cards.
*1 On March 19, 1991, the Contracting Officer made a “Determination of Nonresponsibility” respecting AFSO, noting that Mr. Steele, the president of AFSO, had refused to provide the identity of any employees, that a telephonic pre-award survey indicated AFSO may lack financial resources, and concluding that AFSO was “nonresponsible due to the lack of an adequate understanding of the contractual requirements, capacity and credit.”
*1 The SBA's Dallas Regional Office was advised of this determination by a letter from the Contracting Officer, received March 21, 1991. The SBA, in turn, advised AFSO of the determination and of the requirements necessary should AFSO wish to apply for a Certificate of Competency (COC). Following the receipt of AFSO's application for a COC, and as a result of the Regional Office's required review of AFSO's size status preliminary to review of AFSO's capacity and credit, the Regional Office issued a determination finding AFSO ineligible for award by reason of noncompliance with the “50 percent rule.”2 The determination stated, inter alia:
*2 This office has requested copies of IRS Forms 940 and 941 which a firm is required to file quarterly to establish the number of employees on its payroll and the number on which it withheld income tax. The company has responded that it has always considered the sports officials to be independent contractors and has issued 1099's rather than reporting their earnings on Forms 940 and 941. It has stated that it has recently become aware of the 50 percent requirement and intends to place linesmen and scorers on its payroll, but will continue to show those officials controlling the sports events as independent contractors. The firm was unable to provide names of any personnel on its payroll who would perform on this contract, nor could it provide letters of commitment from such personnel. Mrs. Steele indicated that the firm had contacted the local sports officials organization/association and that the president of that organization had stated that the members of the association had stated that they would perform the officiating for AFSO if it were awarded the contract.
*2 This office has also reviewed the proposed cash flow statements for this contract and for the other contracts being performed by AFSO. These Statements reflect that the company will subcontract in excess of 50 percent of the cost of labor in all cases. See headings under “Total Cash” labeled “(b) Subcontracts and services” and “(c) Direct Labor”.
*2 For the reasons stated above, this office has determined that the firm does not meet all eligibility requirements of 13 CFR 121, 13 CFR 125, and SOP 60 04 3 for assistance under the Agency's Certificate of Competency (COC) program, specifically that it does not comply with the limitations in subcontracting provision, and is therefore not an eligible small business for the purposes of assistance under the COC program.
*2 AFSO received this determination on April 16, 1991, and timely filed an appeal with the Office of Hearings and Appeals (OHA) on April 19, 1991. The Appellant states, in pertinent part:
*2 6. Please note that the referenced application is an IFB (Invitation For Bid) not an RFP (Request For Proposal). It is also a REQUIREMENTS - type contract when awarded. There is no guarantee that the Department of Defense installation will issue either Purchase or Delivery Orders.
*2 All of the Sports Officials used by our Company in the past were employed after the contract has been awarded. To our knowledge, there is no FAR requirement under which an IFB procurement obliges the contractor to have employees for the procurement prior to the contract award.
*2 On the spread sheet provided to the SBA Case Officer, the sub-contracted (sic) dollars and the employees' wages and taxes were divided equally to comply with the new FAR requirement. As in previous contracts, our Company had verbal agreement from the individuals representing the local sports officials associations that indeed certified officials would be made available immediately upon award to our Company.
*3 It is the stated purpose of our Company (to the SBA Case Officer) that 50% of the payroll dollars would conform to the new FAR requirement.
Discussion
*3 The regulation applicable here is set forth at 13 CFR 121.908, and provides, in pertinent part:
*3 (a) Upon receipt of a referral for a Certificate of Competency (COC) from a procuring agency contracting officer, SBA shall review the size of the concern to determine whether the concern is eligible to receive COC. SBA will review the concern's completed SBA “Application for Small Business Size Determination” (Size Determination Application) to make such a program size eligibility determination.... If the Size Determination Application indicates that the firm is other than small or raises issues concerning the firm's size status, SBA will initiate a formal size determination.
*3 (b) ...Such formal size determination must be made prior to the issuance of a COC.
*3 (c)(1) Pursuant to s 121.904(a), the size of such concern, except for those concerns bidding on unrestricted procurements, is determined as of the date of its written self-certification that it is a small business for the purpose of performing a particular contract.
*3 (d) A firm will be deemed ineligible for a COC if the SBA determines it to be other than small.
*3 Case precedent of this Office has established that a “formal size determination” encompasses consideration of a bidder's compliance with the “50 percent rule.” See Size Appeal of Alaska Cargo Transport, Inc., No. 3437 (March 20, 1991); Size Appeal of Department of Health and Human Services, et al., No. 3353 (1990) (and cases cited therein); Size Appeal of Pacific Information Management, Inc., No. 2520 (1986). Obviously, in the case of a COC application, ineligibility for award by reason of noncompliance with the “50 percent rule” has the substantive effect of rendering the application moot. Thus, the Regional Office was correct to evaluate the Appellant's size status, including its compliance with the “50 percent rule,” as of the date of the Appellant's self- certification, and to find the Appellant ineligible for a COC where noncompliance was evidenced.
*3 Here, the record clearly demonstrates that the Appellant neither employed personnel necessary for performance of the procurement, nor had written commitments for such employment in the event of award.3 Thus, we find that the Regional Office was not unreasonable in its conclusion respecting the Appellant's apparent noncompliance with the “50 percent rule.”
*3 In light of the foregoing, the Appellant's assertion that it knows of “...no FAR requirement under which an IFB procurement obliges the contractor to have employees for the procurement prior to the contract award” is without merit. Such an observation does not alter the rule, cited above, respecting the time at which compliance with the “50 percent rule” is evaluated; nor does the fact that the procurement involves a “requirements” type contract. In the case of a sealed bid solicitation, size status, including eligibility for award under “50 percent rule,” is determined as of the time of written self- certification.
Conclusion
*4 For the reasons stated above, the size determination of the Regional Office is AFFIRMED; the appeal is DENIED.
*4 This is a final decision of the Small Business Administration. See 13 CFR 121.1720(a), (b), and (c).
Footnotes
Solicitations issued on or after January 1, 1990 are regulated by 13 CFR Part 121 published in 54 Federal Register 52634, et seq., on December 21, 1989, effective January 1, 1990, and any amendments in effect on or before the solicitation date.
15 U.S.C. 644(o)(1)(A) provides that a concern may not be awarded a contract for services unless the concern agrees that at least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern. Federal Acquisition Regulation (FAR) clause 52.219-14 implements this statutory provision.
The practice of using “prospective” employees to evidence a bidder's intent and ability to comply with the “50 percent rule” has been accepted by OHA where there is the written commitment of such persons to become employed by the bidding concern. See Size Appeal of Department of Health and Human Services, et al., No. 3353 (1990); Unpublished Opinion, B- 237208, February 9, 1990.
SBA No. 3476 (S.B.A.), SBA No. 3476, 1991 WL 106263
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