CDE Enterprises, Inc., No. 4156 (March 6, 1996)
Docket No. SIZ-96-1-16-6


                    UNITED STATES OF AMERICA

                  SMALL BUSINESS ADMINISTRATION

                 OFFICE OF HEARINGS AND APPEALS

                        WASHINGTON, D.C.



_______________________________
                               )
SIZE APPEAL OF:                )
                               )
CDE Enterprises, Inc.          )
                               )
     Appellant                 )  Docket No. SIZ-96-1-16-6
                               )
Solicitation No.               )
IFB DAAD07-95-B-001            )
Department of the Army         )
White Sands Missile Range      )
New Mexico                     )
_______________________________)



                             DIGEST

Where the challenged firm asserts that the official issuing the
size determination lacked legal authority to do so because of a
Federal furlough of non-essential employees, but fails to show
that the official was, in fact, non-essential, the challenged
firm failed to carry its burden of proving by a preponderance of
the evidence that the size determination was issued without
authority.

Where an Area Office's file shows that the challenged firm
submitted all the information the Area Office requested, which
should have enabled the Area Office to issue a size determina-
tion, but that the Area Office neglected to do so based upon an
alleged failure of the challenged firm to make full disclosures
of its relationships with alleged affiliates, the proceeding will
be remanded to the Area Office for a new size determination.

                       DECISION ON REMAND

                          March 6, 1996

BLAZSIK, Administrative Judge:

                          Jurisdiction

     This appeal is decided under the Small Business Act of 1958,
15 U.S.C. Sections 631 et seq., and 13 C.F.R. Part 121.


                             Issues

     Whether the challenged firm has shown, by a preponderance of
the evidence, that the Area Office's size determination was
issued without authority.

     Whether this proceeding should be remanded to the Area
Office for a new size determination.

                              Facts

     On June 15, 1995, the Contracting Officer for the Department
of the Army, White Sands Missile Range, New Mexico, issued this
small business set-aside for repair/replacement of roofs, and
classified it under Standard Industrial Classification code 1761
(Roofing, Siding, and Sheet Metal Work), having a $7 million
average annual receipts size standard.  The solicitation was
reserved entirely for small businesses.  Bid opening day was on
October 27, 1995.

     In a letter dated November 22, 1995, Architectural Systems
Corporation (ASC) filed a protest against the apparent low
bidder, CDE Enterprises, Inc.'s (CDE or Appellant), small
business size status.  In its protest, ASC asserted that CDE was
ineligible for the award because it is affiliated with two other
firms, Vanguard Storage and CDE Construction Leasing.  Although
ASC did not know the three firms' total revenues, ASC asserted
that various Federal agencies have awarded CDE numerous contracts
in the past two years which exceeded the applicable size
standard.  In support, ASC attached copies of the Commerce
Business Daily announcing government awards and a Dun &
Bradstreet report.  

     On December 1, 1995, the Contracting Officer forwarded the
protest to the Small Business Administration (SBA), Dallas Area V
Office of Government Contracting (Area Office) for a size
determination on CDE.  The Contracting Officer stated in
pertinent part:

     Due to information provided in the ASC protest...this
     Office has concerns regarding CDE Enterprises, Inc.
     meeting the size standard of the subject solicitation. 
     If the information provided by ASC is correct, it
     appears CDE Enterprises may have improperly represented
     themselves as a small business....  Based on this
     concern and our attempt to maintain the integrity of
     our procurement system, it is hereby requested that
     your Office verify CDE Enterprises representation as a
     small business for this procurement action....

     The Area Office file contains CDE's SBA Form 355, Articles
of Incorporation, Bylaws, Federal income tax returns, and other
submissions, including an explanation of CDE's accounting
methods.  

     In its January 5, 1996 determination, the Area Office
stated:

     In the text of CDE's...explanation letter, there was
     mention of income from "Joint Venture Contracts",
     however no further explanation regarding the joint
     ventures was provided or response to the allegations of
     the protest.

     Moreover, there was no correlation between the tax
     returns, the financial statements or the financial
     information contained in the SBA Form 355 and CDE's
     accountant was contacted....  During the conversation
     it was confirmed that there were two joint venture
     contracts ongoing with JT Construction...a large firm. 
     At that time CDE provided limited information regarding
     the contract numbers...but still failed to make a full
     disclosure of the contractual arraignment with JTC.
     
[Wording and punctuation as in the original.]

     The Area Office concluded from these factual findings that
CDE failed to "adequately" address the protest's allegations "or
disclose pertinent information concerning the joint ventures with
JT Construction...because it would be contrary to the [sic] their
interest."  Thus, the Area Office found CDE to be other than
small.[1]

     CDE received the Area Office's determination on January 8,
1996, and filed an appeal that was postmarked January 16, 1996.

                       Arguments on Appeal

     CDE asserts that the official who issued the size
determination had no legal authority to do so and that,
therefore, the size determination is illegal and has no effect. 
CDE asserts that on the determination's issuance date, there was
a general Federal furlough due to the budget crisis, and that
only "essential" employees conducted Federal business.  CDE
implies, but does not expressly assert, that the official
rendering the size determination was not declared an "essential"
employee by the SBA's Administrator for the furlough period.

     CDE also asserts that, assuming the determination was
legally issued, it submitted all the information requested by the
Area Office, but the Area Office failed to analyze CDE's
evidence.  Instead, the Area Office concluded that CDE is other
than small based upon CDE's apparent "failure" to divulge that it
is engaged in two joint ventures with JT Constructions Co.  CDE
asserts that Schedules 4-6 (pages 11-13) of CDE's June 1995
financial statement discussed these joint venture contracts and
the revenues derived from them.  Similarly, the Schedules
attached to CDE's Federal income tax return for that year
identify the joint ventures and the income accounted by these
endeavors.

     CDE further asserts that the Area Office considered contract
awards to CDE in measuring CDE's size.  CDE asserts that, under
SBA size regulations, a firm's size status is evaluated by the
firm's own revenues and those of its affiliates, which do not
include other contract awards.  Finally, CDE asserts that "to
have acknowledged JT Construction Co., Inc., as an affiliate
would have been improper given that the sole relationship between
the two firms was the performance of two contracts under joint
ventures."

     In view of the above assertions, CDE requests that this
Office remand the proceeding to the Area Office for a full and
complete size determination.

                           Discussion

     Because the appeal was postmarked within five days from 
the date Appellant received the size determination, the appeal 
is timely and applies to this solicitation.  13 C.F.R. Section
121.1705(a)(2).  Additionally, although the protest was late-
filed, the Contracting Officer adopted the protest's allegations. 
Thus, this was a Contracting Officer's protest and, as such, it
is timely for this solicitation.  13 C.F.R. Section
121.1603(b)(2).

     Regarding Appellant's assertions that the official issuing
the size determination lacked legal authority to do so, Appellant
which has the burden of proof by a preponderance of the evidence
in an appeal (13 C.F.R. Section 121.1707), has failed to meet its
burden.  Aside from the bare assertion that the deciding official
acted without authority, Appellant has not actually shown that
the deciding official was a non-essential Federal employee and
that in issuing the determination, the official was not acting
under the SBA Administrator's authorization to conduct
"essential" Federal business.  Thus, Appellant's ultimate
conclusion that the size determination had no legal effect has
not been supported by any probative evidence and, therefore,
lacks merit.

     The Presiding Judge's review of the Area Office file shows
that Appellant submitted a fully completed SBA Form 355, Federal
income tax returns for the relevant period, financial statements,
and other information in which, among other matters, Appellant
accounted for the joint ventures with JT Construction Co., Inc. 
Thus, the Area Office's statement that Appellant failed to make a
full disclosure of its financial relationship is contradicted by
the record.  The Presiding Judge believes that the Area Office
had a complete record before it.  However, the Presiding Judge
notes that the Area Office could have asked for additional
information or clarification in writing, if it believed the
record was incomplete.  13 C.F.R. Section 121.1606(c).  Instead,
the Area Office elected not to conduct a size investigation but
to declare Appellant other than a small business based upon an
adverse inference.  In doing so, the Area Office failed to
fulfill its obligation enunciated in the SBA's size regulations. 
13 C.F.R. Section 121.1602; and Size Appeal of Data Monitor
Systems, Inc., No. 4150 (1996).

     Under the circumstances, the proceeding is REMANDED to the
Area Office for a new size determination on Appellant.


                              _______________________________
                              Gloria E. Blazsik 
                              Administrative Judge

____________________
 [1] The Area Office applied the regulation at 13 C.F.R. Section
121.1605(c), without citing it.  That regulation states that if
an offeror does not submit complete answers to the protest's
allegations (or a fully complete SBA Form 355) within a certain
time period, the Area Office may assume that disclosure would be
contrary to the interests of the firm and may determine the firm
to be other than small.