The Urban Group, Inc.; McSwain and Associates, Inc., B-

The Urban Group, Inc.; McSwain and Associates, Inc., B- BNUMBER: B-281352; B-281353 DATE: January 28, 1999 TITLE: The Urban Group, Inc.; McSwain and Associates, Inc., B- 281352; B-281353, January 28, 1999 ********************************************************************** Matter of:The Urban Group, Inc.; McSwain and Associates, Inc. File: B-281352; B-281353 Date:January 28, 1999 Sam Z. Gdanski, Esq., and Jeffrey I. Gdanski, Esq., for the protesters. David R. Kohler, Esq., and Audrey H. Liebross, Esq., for the Small Business Administration. Michael J. Farley, Esq., Department of Housing and Urban Development, for the agency. Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of the General Counsel, GAO, participated in the preparation of this decision. DIGEST 1. Issuance of a section 8(a) set-aside solicitation, which includes work previously performed by small businesses as well as new work, without assessing the adverse impact of the set-aside on small business concerns, is unobjectionable where no adverse impact assessment is required under applicable Small Business Administration (SBA) regulations because the SBA, in interpreting its regulations, reasonably determined that the overall solicitation is radically different from the previously performed work and thus represents new work. 2. A solicitation provision stating that a section 8(a) set-aside will become a small business set-aside if fewer than two acceptable offers from 8(a) firms are received is not contrary to statute or regulation, or unfair to small businesses. 3. Absent clear judicial precedent, General Accounting Office will not consider protest alleging that agency did not have constitutionally sufficient basis for creating a section 8(a) set-aside. 4. Agency's decision to consolidate marketing requirements (previously performed largely in-house) with existing property management contract requirements into larger contracts for both management and marketing services in multiple states is not objectionable under the Small Business Act, 15 U.S.C.A. sec. 631(j)(3), 644(e)(2) (West Supp. 1998), where the resulting benefits are "measurably substantial" and support a determination that the bundling is necessary and justified, and the protester has not identified a reasonable alternative that would provide similar benefits. DECISION The Urban Group, Inc. and McSwain and Associates, Inc. protest request for proposals (RFP) No. R-OPC-21230, issued by the Department of Housing and Urban Development (HUD) contemplating up to 16 separate contracts for management and marketing (M&M) services for single family properties in 16 designated areas of the United States. Urban challenges the set-aside for section 8(a) concerns in the area of Florida and Puerto Rico. McSwain challenges the bundling of Alabama, Georgia, Mississippi, North Carolina, and South Carolina into one area. We deny the protests. HUD insures hundreds of thousands of Federal Housing Administration (FHA) mortgages. Where defaulted mortgages result in foreclosure by the lender and payment of insurance claims by HUD to the lender, HUD gains title to thousands of properties throughout the country. HUD manages these properties by providing maintenance and repairs, and ultimately sells the properties in order to recoup funds paid on insurance claims. The Real Estate Owned Branch (REO) of HUD's Office of Housing is responsible for managing and marketing these properties. Agency Report on Urban Protest (ARU) at 2; Agency Report on McSwain Protest (ARM) at 2. Prior to the issuance of this RFP for M&M services, HUD generally contracted for the property management services separately, and the REO staff performed the marketing services in-house with some assistance from advertising contractors. The most recent management contracts were the Real Estate Asset Management (REAM) services contracts, which were usually performed by small business concerns covering small geographic areas and administered by REO staff in 81 HUD field offices. REAM contractors received a fixed-fee for managing the properties, and subcontracted for maintenance and repairs, the cost of which was directly paid by HUD. ARU at 2-3; ARM at 2-3. Administration of the REAM contracts and marketing properties has been burdensome for HUD. Also, an audit of the REAM contract program, conducted by the General Accounting Office in response to congressional inquiries regarding reports or poor contract administration, found that HUD's oversight of these contracts was inadequate. Single-Family Housing: Improvements Needed in HUD's Oversight of Property Management Contractors (GAO/RCED-98-65, Mar. 1998).