Hatco Corporation

B-270545 Mar 21, 1996 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Protest challenging awardee's eligibility for preferential consideration as a small disadvantaged business on the ground that the supplier proposed by the awardee is not a manufacturer is dismissed because the Small Business Administration is vested with conclusive authority to decide that issue. It was offering a product on the qualified products list manufactured by Technolube. It is Hatco's contention that Lubricating Specialties is not a "manufacturer" of the products to be provided under the contract and thus that Naughton does not qualify for the SDB preference. [1] Hatco contends that Lubricating Specialties merely mixes an additive defoamant obtained from Mobil with ester also provided by Mobil and that this effort is too insubstantial to qualify as manufacturing for the purpose of obtaining preferential consideration for award. View Decision Matter of: Hatco Corporation File: B-270545 Date: March 21, 1996 Protest challenging awardee's eligibility for preferential consideration as a small disadvantaged business on the ground that the supplier proposed by the awardee is not a manufacturer is dismissed because the Small Business Administration is vested with conclusive authority to decide that issue. Attorneys DECISION Hatco Corporation protests the award of a contract to Naughton Energy under request for proposals (RFP) No. SPO451-95-R-2181, issued by the Defense Logistics Agency, Defense General Supply Center (DGSC) for the manufacture and supply of synthetic lubricating oil. The protester contends that the agency improperly gave Naughton preferential consideration for award available under the RFP to small disadvantaged business (SDB) concerns. We dismiss the protest. On March 21, 1995, DGSC issued the RFP for award of a fixed-price requirements contract for a base year, with two 1-year option periods, to supply synthetic lubricating oil for use in aircraft turboshaft engines. The RFP provided for a partial small business set-aside, with preferential consideration for SDBs. The RFP required regular dealers claiming the preference as SDBs to agree to furnish only items manufactured or produced by small business concerns in the United States. After awarding the non-set-aside portion to Mobil Oil Corporation, the agency conducted discussions with Naughton. Naughton agreed to accept an award at Mobil's price plus a 10-percent premium allowed for SDBs. The agency awarded a contract to Naughton on November 8, and this protest followed. On November 28, Hatco filed a challenge of Naughton's status as a disadvantaged firm, which the agency forwarded to the Small Business Administration (SBA) for decision. Naughton's offer indicated that in accordance with the RFP's qualification requirements, it was offering a product on the qualified products list manufactured by Technolube, a division of Lubricating Specialties Company. Naughton also identified Lubricating Specialties' plant in Vernon, California, as the place of performance. It is Hatco's contention that Lubricating Specialties is not a "manufacturer" of the products to be provided under the contract and thus that Naughton does not qualify for the SDB preference. [1] Hatco contends that Lubricating Specialties merely mixes an additive defoamant obtained from Mobil with ester also provided by Mobil and that this effort is too insubstantial to qualify as manufacturing for the purpose of obtaining preferential consideration for award. Hatco describes the agreement between Mobil and Lubricating Specialties as a "thinly veiled" scheme to take advantage of the SDB program. Hatco argues that Naughton's proposal clearly disclosed its intention to purchase the lubricant from Lubricating Specialties; that Naughton therefore was not offering a product manufactured by a small business; and thus that Naughton was not entitled to preferential consideration for award. With regard to Naughton, SBA has denied Hatco's protest that the awardee is not socially and economically disadvantaged. There is no allegation that either Naughton or Lubricating Specialties fails to meet the applicable size standard. Naughton itself is a regular dealer and not a manufacturer, and as noted above, is entitled to the preference so long as it supplies a product manufactured by another small business. The only issue for resolution is whether Lubricating Specialties, a small business, is the manufacturer of the lubricant. We conclude that this constitutes a matter that, by statute, SBA--which advises that it routinely addresses the issue in precisely this context--is exclusively empowered to determine. Congress has established for the Department of Defense (DOD) a goal of 5 percent of the contract funds obligated each fiscal year for the award of contracts and subcontracts to small business concerns owned and controlled by socially and economically disadvantaged individuals. 10 U.S.C. Sec.