Lightcom International, Inc., No. 3829 (September 17, 1993)
Docket No. SIZ-93-7-26-86



                    UNITED STATES OF AMERICA
                                
                  SMALL BUSINESS ADMINISTPATION
                                
                 OFFICE OF HEARINGS AND APPEALS
                                
                        WASHINGTON, D.C.



SIZE APPEAL OF:               )
                              )
Lightcom International, Inc.  )
                              )
     Appellant                )
                              )
Solicitation Nos.             )   Docket No. SIZ-93-7-26-86
TSR WA26OCT920256             )
TSR WA26OCT920262             )
TSR WA26OCT920263             )
Defense Information Systems   )
  Agency                      )
Defense Commercial            )
  Communications Office       )
Scott AFB, Illinois           )




                             DIGEST

The issue of jurisdiction is not subject to waiver under the five
day rule or the new issue rule codified at 13 CFR 121.1705(a)(2)
and 13 CFR 121.1707, respectively, and, if raised on appeal, will
be addressed on the merits by this Office.

The Small Business Administration has jurisdiction to determine
whether an offeror is in compliance with the "Limitations on
Subcontracting" clause, commonly referred to as the 50 percent
rule, prescribed by 15 U.S.C. 644(o)(1) and 48 CFR 52.219-14.

                            DECISION

                       September 17, 1993

WHITE, Administrative Judge, Presiding:

Jurisdiction

This appeal of a size determination is decided pursuant to the
Small Business Act of 1958, 15 U.S.C. 631 et seq., and the
regulations codified at 13 CFR Part 121.

Issues

Was the issue of jurisdiction timely raised by the Appellant?

Does the Small Business Administration have jurisdiction to
d6termine whether an offeror is in compliance with the
"limitations on Subcontracting" clause, commonly referred to as
the 50 percent rule, prescribed by 15 U.S.C. 644(o)(1) and 48 CFR
52.219-14?

Facts

On February 9, 1993, the Defense Information Systems Agency
(DISA), Defense Commercial Communications Office, Scott Air Force
Base, Illinois, issued the above-referenced solicitations for
certain telecommunication services. The three solicitations were
total small business set asides with a size standard of 1,500
employees or less under Standard Industrial Classification (SIC)
code 4813 (Telephone Communications, Except Radiotelephone). The
contracts were awarded to Lightcom International, Inc. (Lightcom
or Appellant) on March 15, 1993.

By letter dated March 15, 1993, Communications Transmission
Group, Inc. (CTGI) filed a protest with the Contracting Officer,
alleging that Lightcom could not meet "the legal requirement to
perform 50 percent of the cost of performance using Lightcom
employees" as required by 48 CPR 52.219-14(b)(1). The Contracting
officer faxed the protest to the Dallas Regional Office of the
Small Business Administration (SBA or Agency) on March 17, 1993.
The Regional Office dismissed the protest as moot on March 22,
1993. Pertinent portions of this Regional office determination
state as follows:

     ... The protest is lodged pursuant to FAR 52.219--14
     ... Limitation on Subcontracting (the 1150 percent
     rule") .... 1/ [Footnote added.]
     
     Since the issue of compliance with the limitation of
     subcontracting regulation is contract specific, and
     since this contract has been awarded, a determination
     by this office would serve no purpose with respect to
     this or future contracts. Therefore, the protest is
     dismissed as moot.

On April 5, 1993, the Contracting Officer filed an untimely
Notice of Appeal with this Office, which was considered to be an
attempt by the Contracting Officer to file both a Contracting
Officer's protest and an appeal of the March 22, 1993 Regional
Office determination. Since the appeal of the Regional Office
determination by the Contracting Officer was untimely, the appeal
portion was dismissed. 2/ However, pursuant to 13 CFR
121.1603(b)(2), the Contracting Officer's protest was deemed to
be timely, and the case was remanded to the Regional Office for a
determination on the merits. 3/ Size Appeal of Defense
Information Systems Agency, No. 3776 (May 5, 1993).

As a result, the Regional Office advised Lightcom, on May 19,
1993, that:

     Your eligibility as a small business regarding
     compliance with the Prime Contractor Performance
     Requirements (Limitations on Subcontracting) has been
     protested. A copy of the letter of protest is enclosed.
     SBA must make a determination of your eligibility as of
     the date of your Best and Final offer.

After receiving Lightcom's response thereto, the Regional Office,
on June 21, 1993, determined that Lightcom was "not in compliance
with the Limitations on Subcontracting provision as set forth in
FAR Clause 52.219-1411 and, therefore, "other than a small
business for this procurement." on July 26, 1993, Lightcom filed
a Notice of Appeal with this Office 4/ which stated, in part,
that:

     ... SBA determined that Lightcom did not qualify as a
     small business for the applicable procurements because
     it did not satisfy the 50% rule. SBA's Size
     Determination did not address the 1500 employee Size
     Standard. Lightcom appeals SBA's decision because of -
     SBA's failure to address the applicable Size Standard
     and that SBA does not have jurisdiction to decide
     protests based on FAR 52.219-14 .... the "Limitations
     on Subcontracting 11 or "50%-" rule.

                    *     *     *     *     *
     ... SBA should be directed to cease and desist from
     making any further decisions in this regard and this
     matter should be remanded to the procuring agency for
     resolution.

The procuring agency filed "Appellee's Motion To Dismiss Appeal
Of Lightcom International, Inc." and "Appellee's Response To
Appeal of Lightcom International, Inc." on August 12, 1993. In
its dismissal motion, DISA argues that Lightcom's appeal was
untimely in that it was filed more than five work days after
Lightcom received the Regional Office determination and, as a
result, should be dismissed. In support of this argument, the
procuring agency cited 13 CFR 121.1705(a)(1) and (a)(2) and its
own prior appeal pertaining to this same solicitation, Size
Appeal of Defense Information Systems Agency, supra.

As for the merits of Lightcom's appeal, DISA argued that:

     SBA derives its jurisdiction to issue size
     determinations regarding the subcontracting limitation
     for small business set-aside procurements such as the
     ones at issue directly from federal statute. The Small
     Business Act requires the SBA to determine what firms
     are to be considered "small business concerns" for the
     purpose of the Act within any industry. 15 U.S.C.
     637(b)(6). An amendment to the Act expressly provides
     that no concern may be awarded a contract in a small
     business set-aside unless it complies with subcontract-
     ing limitations set by Congress and implemented by the
     SBA. 15 U.S.C. 644(o)(1).

Accordingly, DISA contends that the jurisdictional challenge by
Lightcom has no merit.

Discussion

In this case, Lightcom received the June 21, 1993 Regional Office
determination on June 25, 1993. Thirty one days later, on Monday,
July 26, 1993, Lightcom filed this Notice of Appeal. Therefore,
this appeal is clearly untimely under the five day rule, and
would also have been untimely under the 30 day rule were it not
for the fact that the 30th day for filing, which was on Sunday,
extended the filing date to the next business day.
13 CFR 121.1705(a)(1) and (a)(2).

However, the only issue before the Regional office, and the only
one addressed in its determination, was the Appellant's
compliance with the 50 percent rule. On appeal, the Appellant
does not question the Regional office determination that it is
not in compliance with this percentage of work requirement, but
raises two new issues instead; one is SBA's jurisdiction to
decide protests relative to the 50 percent rule, and the other is
the Regional Offices's alleged failure to address its size status
under the 1,500 employee size standard for this procurement.

As a general rule, the Office of Hearings and Appeals (OHA) will
not consider new issues raised for the first time on appeal. 13
CFR 121.1707 and Size Appeal of Caldwell Consulting Associates,
No. 3665 (August 27, 1992). In addition, the issue of size may be
foreclosed respecting a pending procurement by exceeding the five
day time limit proscribed by 13 CFR 121.1705(a)(2). However, the
issue of Jurisdiction is not subject to waiver under either of
these two regulatory restrictions and, if raised on appeal, will
be addressed on the merits by this office. 5/ See Size Appeal of
Department of the Navy, No. 3560 (December 23, 1991).

Appellant alleges in this appeal that SBA does not have
jurisdiction to decide protests alleging noncompliance with the
50 percent rule. Section 921 of Public Law 99-661 amended the
Small Business Act 6/ by adding to 15 U.S.C. 644 the following:

      (o) Expansion of annual participation goals. (1) a
     concern may not be awarded a contract under subsection
     (a) as a small business concern unless the concern
     agrees that- [Emphasis added.]
     
     (A) in the case of a contract for services (except
     construction), at least 50 percent of the cost of
     contract performance incurred for personnel shall be
     expended for employees of the concern ....

Subsection (a) referred to in 15 U.S.C. 644(o)(1) pertains
to small business set aside contracts issued pursuant to 15
U.S.C. 644(a).

The Federal Acquisition Regulation (FAR) implementing
Section 921 of Public Law 99-661 is Subsection (a) referred
to in 15 U.S.C. 644(o)(1) pertains to small business set
aside contracts issued pursuant to 15 U.S.C. 644(a). 48 CFR
52.219-14. This regulation provides, in pertinent part,
that:

     As prescribed in 19.508(e), insert the following
clause:

     LIMITATIONS ON SUBCONTRACTING (JAN 1991

                    *     *     *     *     *

      (b) By submission of an offer and execution of a
     contract, the Offeror/Contractor agrees that in
     performance of the contract in the case of a contract
     for-
     
     (1) Services (except construction). At least 50 percent
     of the cost of contract performance incurred for
     personnel shall be expended for employees of the
     concern.

The referenced 48 CFR 19.508 requires the use of this Clause in
the following solicitations and contracts:

     The contracting officer shall insert the clause in
     52.219-14, Limitations on Subcontracting, in
     solicitations and contracts for supplies, services, and
     construction, if any portion of the requirement is to
     be set aside for small business ....

The preamble to 48 CFR 52.219-14, published in 52 Federal
Register 38188, et seq., on October 14, 1987, states that this
regulation was added to provide a contract clause for set-aside
contracts, and that SBA requested the FAR Councils to adopt the
percentage limitations contained in the Clause until a final rule
was promulgated by the Agency. In addition, 13 CFR 121.904, a
size regulation promulgated pursuant to SBA's authority under the
Small Business Act, supra, incorporates the statutory
requirements of 15 U.S.C. 644(o)(1) therein. Pertinent portions
of this SBA regulation are as follows: 7/

     Time at which size is determined. [Emphasis added].
     
                    *     *     *     *     *
     
      (d) For purposes of determining compliance with the
     prime contractor performance of work requirements set
     forth in 15 U.S.C. 644(o)(1), the size of a concern
     shall be determined as of the following dates-
     
     (1) In a sealed bid procurement, compliance shall be
     determined as of the date the bid was submitted.
     
     (2) In a negotiated procurement, compliance shall be
     determined as of the date the concern submits its best
     and final offer. If a concern is determined not to be
     in compliance at the time it submits its best and final
     offer, it may not thereafter come into compliance by
     revising its subcontracting plan.

Therefore, it is clear from the cited statutory and regulatory
authority that SBA does have jurisdiction to determine an
offeror's compliance with the percentage of work requirements of
15 U.S.C. 644(o)(1) and 48 CFR 52.219-14. Since the Regional
Office determined that the Appellant was not in compliance with
the subcontracting limitations contained therein and, was
therefore, other than a small business for this procurement,
resolution of the issue raised by the Appellant concerning the
Regional Office's failure to address its qualifications under the
1,500 employee size standard is unnecessary, and the issue will
not be discussed further.

Conclusion

For the reasons stated herein, the Regional Office determination
that the Appellant is other than small for this procurement is
AFFIRMED.

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


                         _______________________________
                         Elwin H. White (Presiding)
                         Administrative Judge

                         _______________________________
                         Gloria E. Blazsik (Concurring)
                         Administrative Judge

                         _______________________________
                         Jane E. Phillips (Concurring)
                         Administrative Judge

_______________

1/   15 U.S.C. 644(o)(1).

2/   The Appeal was contract-specific, and the Contracting
     Officer's appeal was not filed within the requisite five-day
     time period necessary for it to apply to the present
     solicitation. 13 CFR 121.1705(a)(2).

3/   The Contracting Officer indicated that the contract awarded
     to Lightcom would be cancelled if Lightcom did not meet the
     50 percent rule requirements. It also appears from the
     record that a stop work order was issued to Lightcom by the
     procuring agency, effective March 17, 1993.

4/   Lightcom stated that it received the June 21, 1993 Regional
     Office determination on June 25, 1993.

5/   We hasten to note that our decision on this point does not
     contravene the rule that the time limit for initiating
     appeals set forth in 13 CFR 121.1705(a) may not be extended
     by OHA.

6/   SBA derives its statutory jurisdiction from the Small
     Business Act, 15 U.S.C. 631 et seq.

7/   See also, Size Appeal of Vilaret Construction Services,
     Inc., No. 3474 (May 28, 1991).