Ecological Planning and Toxicology, Inc., No. 3919 (May 16, 1994)
Docket No. SIZ-94-2-14-8

                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.

SIZE APPEAL OF:                    )
                                   )
Ecological Planning and            )
Toxicology, Inc.                   )
                                   )
     Appellant                     )    Docket No. SIZ-94-2-14-8
                                   )
Re: Technology Applications,       )
  Inc.                             )
Solicitation No. C300378Tl         )
U.S. Environmental                 )
  Protection Agency                )
Contracts Management Division      )
Norwood, Ohio                      )

                             DIGEST
                                
The Regional Office correctly determined the challenged concern's
size status as of the date of its written self-certification,
pursuant to 13 CFR 121.904(a).

The Office of Hearings and Appeals has not been granted jurisdic
tion to challenge the propriety of the regulations of the Small
Business Administration.

An Appellant has the burden of proof in all size appeals,
pursuant to 13 CFR 121.1707.

                            DECISION
                                
                          May 16, 1994

WRIGHT, Administrative Judge, Presiding:

Jurisdiction

This appeal is resolved in accordance with 15 U.S.C. 632 et seq.,
and the regulations codified at 13 CFR Part 121.

Issues

Whether the Regional Office erred in concluding the challenged
concern met the assigned size standard.

Whether the Office of Hearings and Appeal is empowered to
determine the appropriateness of enacted regulations.

Whether the challenged concern acted in good faith at the time of
self-certification.

Facts

On May 28, 1993, the Environmental Protection Agency (EPA),
Contracts Management Division, Norwood, Ohio issued the captioned
Request For Proposals (RFP) for physical, chemical and biological
scientific services to be performed at the EPA's Newport, Oregon
laboratory.  The RFP was set-aside for small business and was
classified under Standard Industrial Classification (SIC) code
8731, which bears a size standard not to exceed 500 employees.
On July 8, 1993, TAI had self-certified as small.  On that date
James I. Chatman was Chief Executive Officer and President of the
concern and owner of 90% of its stock.

On December 7, 1993, the Contracting Officer informed Ecological
Planning and Technology, Inc. (Appellant or EP&T) that it
intended to award the contract to Technology Applications, Inc.
(TAI).  On December 14, 1993, Appellant timely 1/ protested the
size status of TAI and alleged, inter alia, that TAI had been
purchased by DynCorp, a large business with approximately 18,000
employees.

Pursuant to this protest, the Small Business Administration's
(SBA or Agency) Philadelphia Regional Office issued a size
determination on January 25, 1994, concluding that, at the time
of TAI's written certification, it was a small business concern.

The Protestant had alleged during the course of the size
investigation that "[b]etween the time of submission of proposals
and submission of the Best and Final Offers (BAFO), TAI was
acquired by DynCorp...." It further claimed that the officers of
TAI, being aware of the "conditions of the sale prior to the date
of the initial proposal submission," were in violation of FAR
19.301(a) because the concern's representations were not in good
faith." However, after examining 13 CFR 121.401(f), the Regional
Office concluded that the earliest possible date at which
affiliation could arguably have occurred was September 1, 1993;
and that, because this date was subsequent to the controlling
date for determining TAI's size eligibility for the captioned
procurement according to the pertinent regulation, affiliation
between TAI and DynCorp had not been demonstrated.

Moreover, the Regional Office concluded that the evidence did not
demonstrate "bad faith." Finally, regarding Protestant's claim
that TAI's employees exceeded 500 employees during the 12-month
period preceding its self-certification, the Regional Office
concluded that "so long as its average does not exceed the size
standard, it [TAI] would be eligible to certify as a small
business in good faith."

The Appellant received a copy of this determination on February
5, 1994, and timely filed the present appeal on February 10,
1994, within the meaning of 13 CFR 121.1705(a)(2).  In its
appeal, EP&T renews its claim that TAI's must have been
"substantially greater than the 500 employee limit," in order to
average below 500 for a twelve month period." We note, however,
that Appellant does not posit any statistical basis for this
allegation.  Appellant also claims that the controlling date
mandated by 13 CFR 121.904(a), regarding determination of size
status, is inappropriate.  Finally, Appellant continues to
champion the principle of good faith and argues that

     it was patently clear to the TAI officers well before they
     submitted their BAFO, that their qualification as a small
     business would end imminently.  Any reasonable
     interpretation of the "good faith" principle would persuade
     an officer to divulge the fact that the acquisition was for
     all intent and purpose [sic] a "done deal" by the end of
     October 1993.  The very concept of good faith embodied and
     specified in the regulation should compel an officer of a
     firm to express the reality of the situation rather than
     hide behind a potential technical loop hole [sic] such as
     may be provided in the "initial submission controlling date"
     interpretation.

In its response to these claims, TAI makes three arguments: that
"TAI has properly demonstrated...that TAI qualified as a small
business in accordance with the standard for SIC code 8731 at the
date of self-certification"; that the date of determination of
its size status was correctly determined to be the submission
date of its initial offer; and, as "[n]o agreement, written or
verbal, existed prior to submission of initial offers," that,
consequently, its certification was made in good faith.

Discussion

We conclude that none of the claims of the Appellant is
meritorious.  Regarding the date which controls size status
determinations, the pertinent regulation, 13 CFR 121.904(a)
provides that

     ...the size status of a concern (including its affiliates)
     is determined as of the date of its written self-
     certification as a small business.  The concern shall
     certify that it is a small business for the purpose of
     performing a particular contract at the time it submits its
     initial offer which includes price to the procuring agency
     for that contract.

Although Appellant challenges the propriety and fairness of this
regulation and urges the Office of Hearings and Appeals to
overrule its application to this case, we decline to do so as it
is beyond our jurisdictional grant of power, as found in 13 CFR
121.1701.  See, for example, Size Appeal of Triad America Service
Corporation, No. 3770 (1993).

In the present case it has been amply demonstrated that as of
July 8, 1993, the date of TAI's written self-certification, James
I. Chatman was President and Chief Executive Officer of TAI and
the owner of 90t of its outstanding stock.  Although preliminary
acquisition discussions with DynCorp had taken place early in
1993, these had been subsequently abandoned and further
discussions were expressly terminated as of two months prior to
July 8, 1993.

Regarding DynCorp's later acquisition of the majority of TAIs
stock, SBA's regulation, 13 CFR 121.401(f) provides that

     [s]tock options, convertible debentures, and agreements to
     merge (including agreements in principle) are generally
     considered to have a present effect on the power to control
     the concern.  Therefore, in making a size determination,
     such options, debentures, and agreements are generally
     treated as though the rights held thereunder had been
     exercised.
     
The evidence of record demonstrates that no agreement in
principle to acquire TAI was reached until after the date of self-
certification.  The facts, as presented, also support the
Regional Office's conclusion that the actions of the two concerns
which led, subsequent to the self-certification of TAI, to
affiliation did not demonstrate bad faith.  2/

Accordingly, we conclude that the resolution of the Philadelphia
Regional Office was correct in this respect.

Finally, Appellant has failed to carry its burden of proof,
pursuant to 13 CFR 121.1707, in its renewed allegations with
respect to the average number of employees of TAI.

Conclusion

For all of these reasons, the size determination of the
Philadelphia Regional Office was correct.

The relief sought by this appeal is DENIED; and the decision of
the Philadelphia Regional Office is AFFIRMED.

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

                         _______________________________
                         G. Stephen Wright (Presiding)
                         Administrative Judge
                         
                         
                         
                         ________________________________
                         Gloria E. Blazsik (Concurring)
                         Administrative Judge
                         
                         
                         
                         _________________________________
                         Elwin H. White (Concurring)
                         Administrative Judge

__________________
1/   The protest was timely within the meaning of 13 CFR
     121.1603(a)(2).

2/   Although DynCorp proposed to acquire all of the outstanding
     stock of TAI in its letter of August 31, 1993 and TAI
     executed a non-binding letter of intent with DynCorp on
     September 1, 1993 to begin a "due-diligence" process that
     could "culminate in a definitive acquisition agreement," the
     letter also provided that "no legal obligations are created
     with respect to the proposed transaction...until a
     definitive acquisition agreement is signed by DynCorp and
     the Stockholders [of TAI]." We need not more closely
     evaluate these matters, all of which occurred subsequent to
     self-certification.