DIVERSIFIED ASSEMBLY, INC., APPELLANT RE: PAN D.A. PACIFIC, INC.
SBA No. 3584SBA No. 3584February 25, 1992
SBA No. 3584 (S.B.A.), SBA No. 3584, 1992 WL 48455
Small Business Administration (S.B.A.)
Office of Hearings and Appeals
[Size Appeal]
*1 DIVERSIFIED ASSEMBLY, INC., APPELLANT
*1 RE: PAN D.A. PACIFIC, INC.
*1 Docket No. SIZ-92-1-17-8
*1 Solicitation No. 2FYP-DM-91-0002S
*1 General Services Administration
*1 Federal Supply Services
*1 New York, New York
*1 February 25, 1992
DIGEST
When a size determination by the Regional Office fails to address properly issues of decisional significance, the proceeding will be remanded to the Regional Office for further investigation and proper disposition.
DECISION
WHITE, Administrative Judge, Presiding:
Jurisdiction
*1 This appeal of a size determination is decided pursuant to the Small Business Act of 1958, 15 U.S.C. 631 et seq., and the regulations codified at 13 CFR Part 121.
Issue
*1 Is Pan D.A. Pacific affiliated with Barkley Filing Supplies, Inc?
Facts
*1 On August 21, 1991, the General Services Administration, Federal Supply Services, New York, New York, issued the above-referenced solicitation (IFB) for “Envelope, Wallet; and Wallet, Jacket Filing.” Certain of the items to be acquired were set aside for small business concerns, with the remainder being unrestricted. The Standard Industrial Classification (SIC) code assigned to the set-aside portion was 2679 (Converted Paper and Paperboard Products, Not Elsewhere Classified), with a size standard of 500 employees or less. Bids were due on September 24, 1991.
*1 By letter dated December 5, 1991, the Contracting Officer advised the San Francisco Regional Office of the Small Business Administration (SBA) that Pan D.A. Pacific, Inc. (Panda) was the apparent low bidder for Item Nos. 14, 15, 19, 20 and 22, of which Item Nos. 15, 19 and 22 had been set aside for small business concerns. The Contracting Officer also enclosed a copy of a letter from Diversified Assembly, Inc (Diversified or Appellant), dated December 2, 1991, protesting Panda's small business size status, and requested a formal size determination. In its protest, Diversified stated that:
*1 This letter is to protest Pan. D.A. Pacific's bid on small business set-aside on the above referenced solicitation. We have obtained evidence showing that Pan. D.A. Pacific is an alter ego for Barkley Filing Supplies, Inc. By calling the following phone number to Pan D.A. Pacific, ..., you will hear the following message: (not verbatim)
*1 This is John Biber of Pan. D.A. Pacific.... You can also locate me at Barkley Filing Supplies at....
*1 Pan. D.A. Pacific shares 15,000 sq. ft. in Barkley's facilities in California and will receive manufacturing help in the performance of the above referenced solicitation....
*1 Diversified also alleged that Barkley Filing Supplies, Inc. (Barkley) was a large business concern, and that three of Barkley's officers, L.E. Rhian (Rhian), John Wellons (Wellons), and Gary Carmichael (Carmichael), were also stockholders in Panda.
*1 The Regional Office advised Panda of Diversified's protest on December 10, 1991, and Panda subsequently submitted its application for a size determination. By memorandum issued on January 7, 1992, the Regional Office determined that Panda was not affiliated with Barkley and that Panda's number of employees did not exceed the size standard for this solicitation. Pertinent portions of this Regional Office determination state as follows:
*2 A timely protest was filed by Diversified Assembly, Inc.....
*2 The SBA Form 355 submitted by Panda reveals that Suthin and Suraphi Tewasart, who are husband and wife, own 60% of the voting stock of Panda. The remaining stock is held by John Wellons, 5%; L.E. Rhian, 25%; Gary Carmichael, 5%; and Bradley Dean, 5%.
*2 As 60% of the voting stock of Panda is held by the Tewasarts, they have the power to control Panda through an identity of interest. [13 CFR 121.401(d) ]
*2 Mr. Rhian is a stockholder in Murray Envelope Corporation which wholly owns Barkley. Mr. Wellons and Mr. Carmichael are officers of Barkley, but own no stock. As the Tewasarts hold the majority of stock and therefore have the power to control Panda, Mr. Rhian, Mr. Wellons and Mr. Carmichael, as minority stockholders, do not have the power to control Panda.
*2 Listed as an affiliate of Panda's is Paper Production Services, Inc., which the Tewasarts wholly own....
*2 Panda is located in a 15,000 square foot facility in Montebello owned by the Tewasarts. Barkley does not share facilities with Panda. Mr. and Mrs. Tewasart have never been employees of Barkley's.
*2 Historically, Barkley has been a customer of Panda's. Barkley manufactures the paper products, Panda assembles and laminates paper products and returns the finished product to Barkley as well as other customers. Barkley will not be involved in the performance of subject solicitation.1
*2 In their response, Panda states that John Biber represents Panda in a sales marketing capacity and also does marketing work for Barkley. As John Biber holds no stock and is not an officer or director in either Panda or Barkley, he does not have the power to control either concern.
*2 Although not addressed in this Regional Office determination, it is noted for the record that Panda's SBA Form 355, Application For Small Business Size Determination, section 4, states that Suthin Tewasart and Suraphi Tewasart, owners of 60 percent of the stock, serve as its President and Secretary, respectively. No other officers, directors or principal stockholders were listed. However, the attached Minutes Of Annual Meeting of Stockholders, dated April 30, 1991, shows that Suthin Tewasart, Suraphi Tewasart, Rhian, Wellons, Carmichael, and Bradley Dean, were all elected to serve as directors of Panda during the ensuing year. In addition, a Dun and Bradstreet report obtained by the Regional Office indicates that Rhian is not just a stockholder in Murray Envelope Corporation (Murray), but is the owner of 100 percent of its stock and serves as its Chairman of the Board and Chief Executive Officer as well. It further appears from this same report that Carmichael and Wellons may, in addition to being directors, also serve as officers of Panda.
*2 On January 16, 1992, Diversified filed a timely Notice of Appeal with this Office.2 In its appeal letter, the Appellant stated that:
*2 This letter is to appeal the decision of size determination, large company involvement and cited company not meeting the subcontracting limitation clause in the performance of awards made under the above cited solicitation to Pan D.A. Pacific.
*3 A proper inspection of records will show that Murray Envelope Corp. (Barkley Filing Supplies, Inc.) is directly involved in the purchase and all conversion of material (paper) prior to assembly of the finished product, therefore making Pan D.A. Pacific not able to perform any contract awarded under the cited solicitation on its own and is also, therefore, in violation of small-business set-aside rules. SBA records will show a letter of commitment from Murray to Pan D.A. Pacific to furnish paper for this contract. (Murray is not a paper mill, nor a paper distributor but a large manufacturer of filing supplies.) The same records will show that Murray does all the converting to the assembly point. The part that Murray (Barkley) plays in the performance of this contract is substantial and critical to Pan D.A. Pacific's existence.
*3 The ownership of stock in Pan D.A. Pacific by Murray's officers and principals, compounded by the manufacturing that it performs, is further evidence of the control that Murray has over the ability of Pan D.A. Pacific's performance and makes their interest one and the same.
*3 A supplemental filing was received from the Appellant on February 5, 1992, which questioned Panda's compliance with certain Quality Assurance Standards (QAS) as well.
Discussion
*3 The regulation codified at 13 CFR 121.1707, which governs the scope of this appeal and the burden of proof requirements of this proceeding, provides that:
*3 The Office of Hearings and Appeals will not consider issues not previously presented to the Small Business Administration official whose size determination is being appealed unless such consideration is determined to be necessary to prevent manifest injustice to a party and such omission was not due to the fault of such party. The appellant shall have the burden of proof, by a preponderance of the evidence, in both size and SIC code appeals.
*3 In this case, the “subcontracting limitation clause” issue was raised by the Appellant for the first time on appeal and, pursuant to this regulation, will not be considered on the merits by this Office. However, assuming arguendo that the Appellant's protest allegation that Panda would receive “manufacturing help” from Barkley did somehow relate to this issue, the Regional Office determined that Barkley would not be involved in the performance of this procurement. Further, the Appellant, on appeal, has submitted no evidence to support its continuing and unsubstantiated allegation of Barkley's involvement in the performance of this contract, nor is the Appellant's allegation that there is a letter of commitment from Murray to Panda to furnish paper for this contract supported by the record in this proceeding. In addition, Panda submitted a statement to the Regional Office, under threat of criminal penalty for making false statements or misrepresentations, that it would be providing its own product to the procuring agency. Therefore, the Appellant submission to this Office would not meet the burden of proof requirements on this issue if it were subject to review.
*4 The question of Panda's compliance with certain QAS will also not be considered as it, too, was raised by the Appellant for the first time on appeal. This is also an issue that is outside of our jurisdiction. See 13 CFR 121.1701.
*4 The Regional Office determination pertaining to John Biber's employment by both Panda and Barkley, and Panda's sharing of facilities with Barkley, which was favorable to Panda, was not challenged by the Appellant on appeal. Accordingly, these issues will also not be considered further.
*4 We also agree with the Regional Office that, standing alone, the 60 percent stock ownership in Panda by Mr. and Mrs. Tewasart would generally constitute control. However, it appears from the record, although not addressed by the Regional Office in its determination, that minority stockholders Rhian, Wellons and Carmichael, are not only officers and/or directors of either Barkley or its parent Murray, but also serve as officers and/or directors of Panda as well. If this is the case, it would further appear that these firms may be affiliated pursuant to the “common management” regulation codified at 13 CFR 121.401(h).
*4 Therefore, to resolve this affiliation through common management issue, we are remanding this case to the Regional Office for additional review. As we previously held in Size Appeal of Blocksom & Company, No. 3567 (January 17, 1992), when a size determination fails to address properly issues of decisional significance, the proceeding will be remanded for further investigation and proper disposition.
Conclusion
*4 The question of Panda's affiliation with Barkley and/or Murray is REMANDED to the Regional Office for a new size determination in accordance with the findings and directions contained herein.
*4 This constitutes the final decision of the Small Business Administration. See 13 CFR 121.1720(a), (b), and (c).
Footnotes
As part of its response to Diversified's protest, Panda also submitted a statement to the Regional Office, under threat of criminal penalty for making false statements or misrepresentations, that it would be providing its own product in the performance of this contract.
The record reflects that the Regional Office determination, dated January 7, 1992, was sent by Express Mail to Diversified on January 8, 1992 and was received by Diversified on January 10, 1992. Therefore, Diversified's appeal was timely pursuant to the 5 day rule codified at 13 CFR 121.1705(a)(2).
SBA No. 3584 (S.B.A.), SBA No. 3584, 1992 WL 48455
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