Convention Marketing Services, Inc., No. 3882 (February 3, 1994)
Docket No. SIZ-93-12-30-143

                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.
                                
SIZE APPEAL OF:               )
                              )
Convention Marketing          )
Services, Inc.                )
                              )
     Appellant                )
                              )  Docket No. SIZ-93-12-30-143
Re: Jet Investments, Inc.     )
                              )
Solicitation No.              )
DAKF57-93-B-0046              )
Department of the Army        )
Fort Lewis, Washington        )

                             DIGEST

A firm that leases two lodging facilities owned by its owner's
former business associate at the time of its self certification,
one of which is maintained by the former associate and in which
the former associate also houses guests, will nevertheless not be
found affiliated with firms owned by the former associate, where
there is evidence that these principals have severed their
business connections and that their present relationship is
acrimonious.

                            DECISION
                                
                        February 3, 1994

PHILLIPS, Administrative Judge, Presiding:

Jurisdiction

This appeal is resolved pursuant to the Small Business Act of
1958, 15 U.S.C. 631 et seq., and the regulations published at 13
CFR Part 121.

Issue

Whether Appellant is affiliated with firms owned and controlled
by Ron Pitamber.

Facts

The captioned solicitation for meals and lodging for Armed Forces
applicants of the Military Entrance Processing Station (MEPS) in
Oakland, California was issued on August 12, 1993, as an
unrestricted procurement subject to a Notice of Evaluation
Preference for Small Disadvantaged Businesses (SDB) under
Standard Industrial Classification code 7011 to which a $3.5
million average annual receipts size standard applies. Bids were
opened on September 14, 1993. Timely protests of the SDB status
of the low bidder, Jet Investments, Inc., a Nevada corporation,
(Jet or Jet-Nevada), were filed on September 17, 1993, and
September 21, 1993, by Convention Marketing Services, Inc. (CMS)
and Specialized Contract Services, Inc. (SCS), respectively. SCS
alleged that Jet is affiliated as a joint venturer with Point
Marina Inn (PMI), which is owned by the Bay Area Hotel Company,
Inc., and whose facilities it will lease for performance of the
contract. CMS alleged that Jet is affiliated with Heritage Inn,
Hayward, California (HIH), which Jet lists as its present
address, and with other facilities owned by Ron Pitamber, a
business associate of Jet's owner, Juliana Breece, including
Heritage Inn, Concord, California (HIC), which they are alleged
to have operated as co-owners of Jet Investments, Inc., a
California corporation (Jet-California).

The San Francisco Regional Office issued a size determination on
December 20, 1993, finding Jet to be affiliated with neither HIH,
HIC or any other facility owned by Pitamber nor with PMI. Its
analysis of the affiliation with PMI states as follows:

        Jet entered into a Lease Agreement with the Bay Area Hotel
        Company, Inc. for the PMI on August 13, 1993 for the period of
        October 1, 1993 to September 30, 1996. The lease is contingent on
        Jet securing the MEPS contract. Under that agreement, Jet
        operates the PMI and agrees to hire all existing PMI staff,
        thereby running the PMI with Jet employees. Jet states that it
        has hired 43 of the previous PMI employees, with 5 individuals
        not accepting employment with Jet. According to the Lease
        Agreement, Jet leased the entire PMI premises and will be
        responsible for all aspects of the business operation of PMI. Jet
        will be paying a stated monthly rent and is also responsible for
        paying the taxes.

        In the review of the Lease Agreement, there is no indication that
        the Bay Area Company, Inc. and Jet have entered into a joint
        venture for the performance of the contract.

The Regional Office analyzed Jet's relationship with HIH and HIC
as follows:

        In response to the allegations, Jet states that in May 1990,
        Ron Pitamber and Juliana Breece agreed to form Jet
        Investments, Inc, a California corporation. Mrs. Breece held
        51% of the stock and managed the corporation and Mr.
        Pitamber held 49% and provided technical assistance. Mrs.
        Breece filed the Articles of Incorporation for Jet
        Investments, Inc. a Nevada corporation on January 8, 1992.
        As of April 1993, the corporate license of Jet Investments,
        a California corporation, was suspended for failure to file
        tax returns and failure to pay income taxes. During Mrs.
        Breece's business relationship with Mr. Pitamber, she worked
        at HIH from April 1987 to October 1990 as a manager. From
        October 1990 to June 1993, she worked as manager of HIH and
        also conducted Jet business. Jet states that Mrs. Breece has
        never booked business for Mr. Pitamber.
     
        Jet's business address is located at the HIH and the Jet
        business address for the MEPS contract is located at PMI.
        Both offices will be located at PMI when the fictitious
        business name and the business license is approved by Contra
        Costa County....
     
        As stated above, Jet Investments, Inc. a California
        corporation, the company owned by Mrs. Breece and Mr.
        Pitamber, has ceased operations. Mr. Pitamber has no
        interaction with Jet Investments, Inc. a Nevada corporation.
        The fact that Jet has leased housing for the MEPS contracts
        from Mr. Pitamber indicates a cooperative arrangement,
        however, it is not evident that Mr. Pitamber presently has
        or in the past had, the power to control Jet [sic]. It would
        be unreasonable to find affiliation between Mr. Pitamber and
        Mrs. Breece due to the nature of the lease agreement. The
        performance of the subject contract at PMI has no ties with
        Mr. Pitamber and his properties.

CMS filed a timely appeal within the five-day time limit set
forth in Section 121.1705(a)(2) on December 30, 1993. CMS emphasizes
that size must be determined as of bid opening, i.e., September
14, 1993. CMS contends that as of that date "Jet was fully
involved in the arrangement with Pitamber at HIC and HIH" and
that
        [t]he mere fact that Jet indicates that it will be moving
        its offices to some other facility in the near future, if
        the pending procurement is awarded, and that it has or will
        be in the near future likewise ceasing to operate and manage
        the HIC facility jointly with Pitamber does not absolve the
        large business affiliation taint which was present at the
        time of their certification.
     
Jet's owner, Juliana Breece, filed a response on January 19,
1994, stating, in pertinent part, as follows:

        I [Juliana Breece] had worked as manager of Heritage Inn of
        Hayward ("HIH") from April 1987 to October 1990. HIH was
        owned by Pitamber Enterprises and Plaza International (Miss
        Janet Lee). In 1990, I desired to start a business of
        administration of military lodging contracts. Ramesh (Ron)
        Pitamber, the principal of Pitamber Enterprises, was a
        lawyer with experience in hotel management who could provide
        technical and financial support. We thereupon formed Jet
        Investments, Inc., a California corporation [Jet-
        California]...during or about May, 1990, with myself holding
        51% of the shares and Mr. Pitamber 49%. Mr. Pitamber handled
        all financial matters...while I managed the operation of the
        lodging facility [HIH] itself.
     
        In March, 1993, I requested from Mr. Pitamber audited
        financial statements...for submittal to SBA. Said statements
        were never provided, and upon investigating I later learned
        that [Jet-California] had been suspended by the State of
        California, effective April 1, 1993. Mr. Pitamber had not
        informed me of this suspension, and at all times refused to
        provide me with pertinent financial information [concerning
        Jet-California].
      
        I thereupon ceased my relationship with [Jet-California],
        and exclusively used [Jet-Nevada] for military lodging
        contracts. Neither Mr. Pitamber nor Pitamber Enterprises has
        ever had any involvement or connection whatever with [Jet-
        Nevada]. I personally continued working as manager of HIH
        until June, 1993; since then, my sole occupation has been
        with [Jet-Nevada] and the administration of its contracts.
        Thus, when the pending procurement was bidden [sic] in
        September, 1993, I had no affiliation with Pitamber.
     
        Appellant CMS asserts that Jet's office is located at HIH.
        The lease agreement executed by [Jet-California] and
        Pitamber was entered into in 1990. The lease agreement...was
        obviously arms-length and lessor-oriented. [Jet-California]
        thereupon entered into a Military Sealift Command (MSC)
        contract the term of which was 10/1/90 to 10/1/93. After I
        severed relations with [Jet-California] and Pitamber, [Jet-
        Nevada] was awarded a 5-year extension of this MSC contract.
        The MSC contract is entirely administered at [Jet-Nevada's]
        office at Point Marina Inn in Richmond. Only the lodging
        itself takes place at HIH.
     
        Appellant asserts that during the relevant time, including
        the time of self-certification, Jet was doing business with
        Pitamber in a joint venture at Heritage Inn of Concord
        ("HIC"). There was no joint venture or similar "arrangement"
        at HIC. In fact, [Jet-Nevada] moved from HIC to Point Marina
        Inn in November 1993 after termination of the lease; the SBA
        received notification thereof. The former HIC lease between
        [Jet-Nevada] and Pitamber...was comprehensive and arms-
        length. The obligation of [Jet-Nevada] was to administer the
        Military Entrance Processing (MEPS) contract, and the lease
        covered only that portion of the HIC facility which was
        necessary for that purpose. Pitamber had its own guests in
        the balance of the hotel. Its obligation was to maintain the
        MEPS portion of the hotel, along with its own portion.
        Pitamber had nothing to do with MEPS administration, and
        [Jet-Nevada] had nothing to do with hotel maintenance....

After alleging that Pitamber plans to enter a joint venture with
CMS should the latter receive the present MEPS contract, Breece
concludes by stating that "the relationship between myself and
Pitamber not only does not constitute an affiliation, but is
entirely acrimonious." 1/

Discussion

CMS is correct in asserting that Jet's size status must be
determined as of September 14, 1993, its date of self
certification, and in noting that Jet was leasing facilities at
HIH as well as HIC on that date. Did the record not indicate an
estrangement between Breece and Pitamber as of that date, this
lessee/lessor relationship, coupled with their former ownership
of Jet-California, would have indicated affiliation under either
the common facilities or the newly organized concern rule at 13
CFR 121.401(i) and (j). 2/

However, evidence of record establishes that the cooperation
ordinarily ascribed to firms in such circumstances is lacking
here. Breece states, under oath, that she had disassociated
herself from her former business associate and characterizes
their relationship as "acrimonious." She has explained why. Her
actions, also documented in the record, bear her out. She is no
longer involved with Jet-California and is the sole owner of Jet-
Nevada. She has elected to lease premises for provision of
services under the instant solicitation from PMI, rather than
from HIC.

Both the newly organized concern and the common facilities rules
are articulated as presumptions; i.e., "affiliation generally
arises" when the elements enumerated therein are in evidence.

However, it would be unreasonable, given the record evidence of
the estrangement that exists between Breece and Pitamber, to find
their respective firms affiliated With each other based on an
implied cooperation which clearly does not exist. Therefore, the
Regional Office determination Will be affirmed.

Conclusion

The Regional Office determination is AFFIRMED; the appeal is
DENIED.

This constitutes the final decision of the Small Business
Administration. See 13 CFR 121.1720.

                         __________________________________
                         Jane E. Phillips (Presiding)
                         Administrative Judge
                         
                         
                         ___________________________________
                         Gloria E. Blazsik (Concurring)
                         Administrative Judge
                         
                         
                         ___________________________________
                         G. Stephen Wright (Concurring)
                         Administrative Judge

_______________

     1/   Pitamber filed a response to the appeal on January 19,
1994, disavowing any loans or commission payments to Breece
alleged in the protest. Breece, too, attests to these facts.

     2/ The text of these rules states as follows:

        (i)  Affiliation throuqh common facilities.
        Affiliation generally arises where one concern
        shares office space and/or employees and/or other
        facilities with another concern, particularly where
        such concerns are in the same or related industry or
        field of operations, or where such concerns were
        formerly affiliates.

        (j)  Affiliation with a newly orqanized concern. Affiliation
        generally arises where former officers, directors,
        principal stockholders, and/or key employees of one concern
        organize a new concern in the same or a related industry or
        field of operation, and serve as its officers, directors,
        principal stockholders, and/or key employees, and the one
        concern is furnishing or will furnish the other concern with
        subcontracts, financial or technical assistance, bid or
        performance bond indemnification, and/or other facilities,
        whether for a fee or otherwise.