Comptroller General

of the United States

United States Government Accountability Office

Washington, DC 20548 

DOCUMENT FOR PUBLIC RELEASE

The decision issued on the date below was subject to a

GAO Protective Order. This redacted version has been

approved for public release.

Decision 

Matter of: Ashland Sales and Service Company/Macon Garment Inc., a Joint

Venture 

File: B-400466 

Date: October 23, 2008 

Ruth E. Ganister, Esq., Rosenthal and Ganister, for the protester. 

Jared P. Weissberger, Esq., Defense Supply Center Philadelphia, for the agency. 

Eric M. Ransom, Esq., and Christine S. Melody, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision. 

DIGEST 

Protest that set-aside for Historically Underutilized Business Zone concerns should 

have been withdrawn because prices received were unreasonably high is denied

where the contracting officer properly relied on multiple relevant factors to 

determine that the awardee’s price was reasonable. 

DECISION 

Ashland Sales and Service Company/Macon Garment Inc., a Joint Venture, (AM-JV) 

protests the decision of the Defense Logistics Agency, Defense Supply Center 

Philadelphia (DSCP), to award a contract to Zacbac Apparel, LLC under solicitation 

No. SPM1C1-07-R-0209, a Historically Underutilized Business Zone (HUBZone) 

set-aside for men’s long-sleeved Air Force shirts. 

We deny the protest. 

In coordination with the Small Business Administration, DSCP determined that this

requirement should be set aside for competition among small business concerns. 

Rather than fulfill the requirement through a single procurement, DSCP set aside 

75 percent of the requirement for small businesses under solicitation No. SPM1C1-

07-R-0190, and set aside 25 percent of the requirement for HUBZone small businesses 

under the solicitation challenged here.1

 Under the first solicitation, AM-JV submitted 

 1

 Both solicitations provided for a best value source selection procedure under which 

all evaluation factors other than price, when combined, were significantly more 

important than price. HUBZone Solicitation at 65. 
an offer to supply the required shirts for $13.08 per unit. After evaluation, DSCP 

determined that AM-JV’s offer represented the best value under the small business

set-aside and made the award to AM-JV. 

Under the HUBZone set-aside solicitation, DSCP received submissions from five 

offerors. (AM-JV is not a HUBZone small business and did not submit an offer under 

the solicitation.) DSCP then established a competitive range of three offers, 

including Zacbac’s, and conducted discussions concerning both technical and price 

issues. After discussions, Zacbac submitted a revised offer to supply the required 

shirts for $17.09 per unit. DSCP determined that Zacbac’s offer represented the best 

value under the HUBZone solicitation, and awarded Zacbac the contract. AM-JV 

then filed a protest with our Office, challenging the award to Zacbac as unreasonably 

priced in violation of Federal Acquisition Regulation (FAR) § 19.1305.2

 AM-JV 

requests that our Office recommend that the award to Zacbac be cancelled and the 

HUBZone set-aside be withdrawn. 

FAR § 19.1305 states that in order to set aside an acquisition for HUBZone small 

businesses the contracting officer must have a reasonable expectation that offers 

will be received from two or more HUBZone small businesses and that award will be 

made at a fair market price. If the contracting officer sets the acquisition aside but 

receives no acceptable offers, the HUBZone set-aside must be withdrawn. FAR 

§ 19.1305(d). The determination of price reasonableness in a set-aside is a matter 

within the discretion of the contracting offer and will not be disturbed unless it is

unreasonable. A. Hirsh, Inc., B-271829, July 26, 1996, 96-2 CPD ¶ 55 at 2. 

In view of the congressional policy favoring small businesses, our Office has stated

that contracts may be awarded under small business set-aside procedures to small 

business firms at premium prices, so long as those prices are not unreasonable. 

Vitronics, Inc., B-237249, Jan. 16, 1990, 90-1 CPD ¶ 57 at 2. In this regard, we have 

noted that a small business concern’s price is not unreasonable merely because it is 

higher than the price of an ineligible large business, since there is a range over and 

above the price submitted by the large business that may be considered reasonable 

in a set-aside situation. Hardcore DuPont Composites, L.L.C., B-278371, Jan. 20, 

1998, 98-1 CPD ¶ 28 at 3. The determination of whether a particular small business 

price premium is unreasonable depends upon the circumstances of each case. Id. 

With regard to the set-aside challenged here, we think our statements concerning the 

 2

 The protester also asserts that the agency failed to properly publicize the award 

notice, which prevented AM-JV from filing a protest within 10 days of award. AM-JV 

argues that this action in effect violated the statutory stay provisions of the 

Competition in Contracting Act of 1984 (CICA). Issues regarding whether an agency 

is complying with the CICA stay requirements are not subject to review by our 

Office. Systalex Corp., B-400109, July 17, 2008, 2008 CPD ¶ 148 at 6; Grot Inc., 

B-276979, Aug. 14, 1997, 97-2 CPD ¶ 50 at 3 n.1. 

Page 2 B-400466 
congressional policy favoring small businesses apply equally in the context of a 

HUBZone small business set-aside. 

AM-JV asserts that under the circumstances presented in this case, Zacbac’s price 

was unreasonable. AM-JV specifically emphasizes that Zacbac’s price was over 

30 percent higher than that offered by AM-JV (itself a small business), that the item 

being produced is a mass production item that does not require research or 

development, and that there are no special reasons why production in a HUBZone 

should be any more expensive than production in AM-JV’s facilities. AM-JV also

points to previous decisions by our Office in which we have upheld a contracting 

officer’s decision to cancel a set-aside when the small business’ price was less than

30 percent higher than that of an ineligible business. American Imaging Servs., 

B-238969, B-238971, July 19, 1990, 90-2 CPD ¶ 51 at 2 (26 percent higher); Flagg 

Integrated Sys. Tech., B-214153, Aug. 24, 1984, 84-1 CPD ¶ 221 at 1 (24 percent 

higher). 

We note, however, that our Office also has upheld a contracting officer’s decision to 

proceed with a set-aside where the small business’ price has been as much as 

51 percent higher than that of an ineligible large business. Browning-Ferris Indus., 

B-209234, Mar. 29, 1983, 83-1 CPD ¶ 323 at 2 (51 percent higher); Canadian 

Commercial Corp., B-196111, May 29, 1980, 80-1 CPD ¶ 369 at 3 (31 percent higher). 

When taken together, we believe that our decisions reflect the broad discretion 

granted the contracting officer in this area and in fact counter the notion that there is

any set price differential at which that discretion ends, as long as the contracting 

officer’s conclusion is supported by other relevant factors. See A. Hirsh, Inc., Supra, 

at 2 (in making a determination of price reasonableness, the contracting officer may 

consider pricing history, government estimates, current market conditions, or other 

relevant factors revealed by the bidding). 

Here, the record indicates that the contracting officer conducted a thorough price 

analysis of Zacbac’s offer. This price analysis explicitly made a comparison between 

Zacbac’s price and the price offered by AM-JV on the small business set-aside, and 

noted the 30.7 percent price differential. Agency Report, Tab 5, at 6. The price 

analysis also considered that there was adequate price competition in the HUBZone 

set-aside solicitation in the form of offers from five different HUBZone firms, three 

of which were included in the competitive range; during discussions, all three firms 

were advised to review their proposed prices. Id. at 4, 6-7. Ultimately, the 

contracting officer determined that Zacbac’s price was fair and reasonable based on

adequate price competition, and discounted the price differential between Zacbac 

and AM-JV as a product of the three times greater quantity under the small business

set-aside solicitation. Id. at 7. 

Based on our review of the record, we cannot conclude that the contracting officer’s

conclusion was unreasonable. That all offers received in response to the HUBZone 

set-aside solicitation were higher in price than the offer submitted by the protester 

Page 3 B-400466 
on the prior solicitation can reasonably be interpreted (as the contracting officer 

did) to indicate that the difference in volume between the two solicitations had a 

material impact on price. In light of that factor, we find the contracting officer’s 

decision to discount the differential between solicitations in determining reasonable 

price, relying on the price competition achieved on the particular solicitation at

issue, to be unobjectionable. 

The protest is denied. 

Gary L. Kepplinger 

General Counsel 

Page 4 B-400466