Premier Security, B-275908.2, July 14, 1997

B-275908.2 Jul 14, 1997 Jump To VIEW DECISION RELATED PAGES GAO CONTACTS Highlights The bidder was sold in its entirety. The assets transferred pursuant to the sale were of more than negligible value. Since the sale of the business thus was tantamount to the improper sale of the bid. Lyons's assets were negligible. The sale of the business was tantamount to the improper sale of the bid. UIIS is the incumbent large business firm and was ineligible to compete under the IFB. If all of a bidder's assets or that part related to the bid are transferred during the period between the bid opening and the award. The contracting officer shall reject the bid unless the transfer is effected by merger. Since the IFB was set aside for small businesses. Aware that Lyons's new owner is the wife of the owner of UIIS. View Decision Matter of: Premier Security File: B-275908.2 Date: July 14, 1997 DIGEST Attorneys DECISION Premier Security protests the award of a contract to Lyons Security Service, Inc. (LSSI) as the successor in interest to Lyons Security Service, the low bidder under invitation for bids (IFB) No. ACL-6-B-0003, issued by the Immigration and Naturalization Service (INS) for unarmed guard services at the San Pedro Service Processing Center, California. Premier contends that INS improperly awarded the contract to LSSI, because, apart from its low bid, Lyons's assets were negligible, and thus, the sale of the business was tantamount to the improper sale of the bid. We sustain the protest. BACKGROUND The IFB, issued May 13, 1996 as a total small business set-aside, contemplated the award of a fixed-price requirements contract, for a base year and four 1-year option periods. Sixty firms, including Lyons and Premier, responded to the IFB by the time set on July 3 for bid opening; bids, including all option periods, ranged from $25,598,235 to $50,500,923. After rejecting several lower-priced bids as nonresponsive, the contracting officer informed Lyons that it had submitted the apparent low bid ($29,769,313) and requested that the Defense Contract Management Command (DCMC) conduct a pre-award survey on Lyons. On October 31, DCMC recommended that Lyons not be awarded the contract based primarily on Lyons's weak financial condition. DCMC's report further noted that effective October 1, after bid opening, Lyons had been sold to Kathleen E. Guidice, the wife of the owner of United International Investigative Services (UIIS). UIIS is the incumbent large business firm and was ineligible to compete under the IFB. After learning of the sale of Lyons, in a letter dated November 4, INS rejected Lyons's bid, citing Federal Acquisition Regulation (FAR) Sec. 14.404-2(l), which states as follows: "After submitting a bid, if all of a bidder's assets or that part related to the bid are transferred during the period between the bid opening and the award, the transferee may not be able to take over the bid. Accordingly, the contracting officer shall reject the bid unless the transfer is effected by merger, operation of law, or other means not barred by 41 U.S.C. Sec. 15 or 31 U.S.C. Sec. 3727." [1] On November 25, in response to an agency-level protest challenging the rejection, the contracting officer reinstated Lyons as the low bidder. By this time, however, Lyons had been incorporated, thus becoming LSSI, and had moved its offices to a new location at the same street address as UIIS. As a result of these events, and since the IFB was set aside for small businesses, the contracting officer questioned whether LSSI remained eligible for award. In addition, aware that Lyons's new owner is the wife of the owner of UIIS, the contracting officer questioned whether Mrs. Guidice's relationship to UIIS had any impact on LSSI's eligibility for award. Accordingly, by letter dated December 19, INS requested that the Small Business Administration (SBA) determine the awardee's business size status and eligibility for award. On January 24, 1997, the SBA determined that Lyons had properly self- certified that it was a small business as of bid opening. [2] The SBA also found that negotiations regarding the sale of Lyons had not been entered into prior to bid opening and that Mrs. Guidice was not the owner of Lyons as of bid opening. As such, the SBA concluded that any issues arising from Mrs. Guidice's relationship with Mr. Guidice or her affiliation with UIIS were not germane to its analysis. [3] Accordingly, the SBA found that LSSI was a small business eligible for award. DCMC then conducted a pre-award survey on LSSI at the firm's new address. The Defense Contract Audit Agency (DCAA) also audited LSSI's accounting system. Based primarily on LSSI's financial condition, DCMC concluded that the firm did not have the capital required to finance the start-up costs of the contract and recommended no award to LSSI.