Comptroller General

United States Government Accountability Office

Washington, DC 20548 

of the United States

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: Ceradyne, Inc. 

File: B-402281 

Date: February 17, 2010 

Michael A. Hordell, Esq., Stanley R. Soya, Esq., and Heather Kilgore Weiner, Esq., 

Pepper Hamilton LLP, for the protester. 

Maj. Walter Dukes, U.S. Army Materiel Command, for the agency. 

Edward Goldstein, Esq., and Christine S. Melody, Esq., Office of the General 

Counsel, GAO, participated in the preparation of the decision. 

DIGEST 

Agency’s decision to set aside delivery order under a multiple award 

indefinite-delivery/indefinite-quantity (ID/IQ) contract for the small business ID/IQ 

contract holders was reasonable where both small business contract holders 

represented to the agency that they could meet the delivery order requirements. 

DECISION 

Ceradyne, Inc., of Costa Mesa, California, protests a decision by the U.S. Army 

Materiel Command to set aside for small business concerns, delivery order No. 9 for 

body armor, Small Arms Protective Inserts (SAPI). Ceradyne argues that the Army’s 

set-aside decision was unreasonable. 

We deny the protest. 

BACKGROUND 

SAPIs are ceramic plates designed to withstand and absorb ballistic impact. These 

plates are inserted into vests and other protective gear and used by military 

personnel and security forces as body armor. In March 2008, the Army issued a 

solicitation for the award of multiple indefinite-delivery/indefinite-quantity contracts 

to provide SAPIs in support of the government’s foreign military sales program. On 

September 11, 2008, the Army made four awards under the solicitation to the 

following firms: (1) Armacel Armor Corp. (contract No. W91CRB-08-D-0060) (a 

small business concern); (2) ArmorWorks Enterprises, LLC (contract No. W91CRB08-D-0061) (a small business concern); (3) Ceradyne, Inc. (contract No. W91CRB-08-

D-0062) (a large business); and (4) Composix Co. (contract No. W91CRB-08-D-0063) 
(a large business). Under the contracts, delivery orders are to be competed among 

the various contract holders. 

On June 4, 2009, the Army received five purchase requests for 78,502 plates covering 

requirements for the countries of Lebanon, Tunisia, Senegal, and Afghanistan. All of 

the countries needed delivery 6 months after placement of the delivery order. The 

Army decided to set aside the Lebanon, Tunisia, and Senegal plate requirements, 

which had a combined requirement for 13,722 plates, for the two small business 

contract holders (Armacel and ArmorWorks) and solicited quotes for the plates from 

these firms on June 8. The Army ultimately awarded the requirement to Armacel in 

the amount of $4,235,438.00. 

The Army also issued a delivery order request on June 8 for the Afghanistan 

requirement (approximately 64,000 plates with an estimated value of $17,704,631) 

and on July 14, the Army issued the delivery order to Ceradyne in the amount of 

$18,681,710.00. While intending the requirement to be issued on an unrestricted 

basis, the Army mistakenly only solicited quotations from the two large businesses, 

Ceradyne and Composix (Composix did not submit a quotation because, as it 

explained to the Army, it did not have the necessary production capacity at that 

time). ArmorWorks filed a protest with our Office on July 24 arguing that it was 

improperly denied an opportunity to compete for the requirement.1 The Army took 

corrective action, which included reopening the competition for all contract holders 

and modifying the selection criteria. Due to funding issues, the recompetition was 

based on a revised requirement for 61,000 plates. Prior to the closing date for the 

recompetition, ArmorWorks filed another protest, this time challenging the agency’s 

decision not to set aside the Afghanistan requirement (order No. 9) for small 

business concerns, and arguing that even if a total set-aside was not appropriate, the 

Army failed to properly consider a small business partial set-aside as contemplated 

by Federal Acquisition Regulation § 19.502-3.2

 

On November 2, the Army contacted both Armacel and ArmorWorks to obtain 

information regarding their production capacity for the next 6 months and both 

confirmed that they could meet the 61,000 plate and 6-month delivery requirements 

 

1

 On July 7, the Army sent ArmorWorks an e-mail message, which mistakenly asked 

ArmorWorks if it could meet the requirements of delivery order No. 9, but identified 

a 60-day delivery schedule as opposed to the 6-month delivery order actually 

required. ArmorWorks indicated that it could not meet the requirement for delivery 

order No. 9 as requested. E-mail Army to ArmorWorks, July 7, 2009 and 

ArmorWorks E-mail response, July 8, 2009. 

2

 During the pendency of Armorwork’s protest, the Army proceeded with the receipt 

and evaluation of quotations and, based on the results of the recompetition, 

Composix was identified as the apparent successful vendor. 

Page 2 B-402281 
for SAPI delivery order No. 9.3

 Also on November 2, the Army informed our Office 

that it would take corrective action in response to the protest filed by ArmorWorks 

and sought dismissal of the protest as academic. E-mail from Army, Nov. 2, 2009. 

We dismissed the protest as academic on November 6. The Army then notified the 

contract holders on November 10 that requirement No. 9 would be set aside for the 

small business contract holders. Thereafter, Ceradyne filed this protest. 

DISCUSSION 

In its protest, Ceradyne principally argues that the agency’s decision to set aside 

delivery order No. 9 for the small business ID/IQ contract holders (Armacel and 

ArmorWorks) was unreasonable because the Army failed to consider the capability 

of the small business concerns in making its set-aside decision.4

 According to 

Ceradyne, neither firm has performed contracts of the magnitude required under 

delivery order No. 9. Specifically, Ceradyne alleges that both Armacel’s and 

ArmorWorks’ largest delivery orders under their SAPI ID/IQ contracts are, 

respectively, approximately 1/3 and less than 10 percent of the value for delivery 

order No. 9. In addition, Ceradyne suggests that both firms have had performance 

problems under their current ID/IQ contracts as reflected by the fact that the Army 

has, in some instances, extended delivery schedules for orders issued under these 

contracts. 

Pursuant to FAR § 19.502--2(b), a procurement with an anticipated dollar value of 

more than $100,000 must be set aside for exclusive small business participation 

when there is a reasonable expectation that offers will be received from at least two 

responsible small business concerns and that award will be made at a fair market 

 

3

 In response to an earlier inquiry, Armacel informed the Army on August 6 that it 

would not be able to meet requirement No. 9 at that time. On November 2, when 

asked to provide its production capacity for the next six months, Armacel confirmed 

that it “is currently in position to produce 10,000 units per month” and could “ramp 

up as necessary.” Agency Report (AR) Tab B, E-mail from Armacel to Army, Nov. 2, 

2009. 

4

 Ceradyne also argues that the Army has “breached its implied covenant of good 

faith and fair dealing.” Protest at 11. As a general matter, a breach of contract claim 

is a matter of contract administration and therefore outside the scope of our bid 

protest jurisdiction. 4 C.F.R. § 21.5(a) (2009). To the extent Ceradyne’s allegations 

are premised on the unreasonable nature of the agency’s decision to set aside 

delivery order No. 9 for small business concerns, thereby denying Ceradyne the 

opportunity to perform order No. 9 as originally awarded under its ID/IQ contract, 

that argument does fall within our protest jurisdiction because it concerns the 

proposed issuance of a delivery order in excess of $10 million, see 41 U.S.C. § 253j(e) 

(West 2009), and is subsumed within our decision below. 

Page 3 B-402281 
price. Often referred to as the “rule of two,” these set-aside provisions apply to 

competitions for task and delivery orders issued under multiple-award contracts, 

such as the ID/IQ contracts at issue in this protest. See Delex Sys., Inc., B-400403, 

Oct. 8, 2008, 2008 CPD ¶ 181 at 5-10. Agencies are not required to use a particular 

method to assess the availability of small businesses; rather, an agency need only 

undertake reasonable efforts to locate responsible small business competitors. 

Because a decision whether to set aside a procurement is a matter of business 

judgment within the contracting officer’s discretion, our review generally is limited 

to ascertaining whether that official abused his or her discretion. ViroMed 

Laboratories, B-298931, Dec. 20, 2006, 2007 CPD ¶ 4 at 3-4. We will not question a 

small business set-aside determination where the record shows that the evidence 

before the contracting officer was adequate to support the reasonableness of the 

conclusion that small business competition reasonably could be expected. Id. 

Here, Ceradyne’s arguments essentially challenge the responsibility of Armacel and 

ArmorWorks. As noted above, Ceradyne questions the capability of the small 

business ID/IQ contract holders to successfully perform requirement No. 9. 

According to Ceradyne, given the size of requirement No. 9, as well as concerns 

regarding the ability of Armacel and ArmorWorks to timely perform other delivery 

orders, the Army should not have set aside requirement No. 9 based solely on the 

representations of these firms regarding their respective production capacity. 

Ceradyne’s arguments, however, are misplaced under the circumstances here. 

Generally, responsibility is a contract formation term that refers to the ability of a 

prospective contractor to perform the contract for which it has submitted an offer, 

and, by law, a contracting officer must determine that an offeror is responsible 

before awarding it a contract. See 41 U.S.C. § 253b(c), (d); FAR § 9.103(a), (b), 

Advanced Tech. Sys., Inc., B-296493.6, Oct. 6, 2006, 2006 CPD ¶ 151 at 5. Once an 

offeror has been determined to be responsible and is awarded a contract, as is the 

case with Armacel and ArmorWorks, both of which were found responsible when 

they were awarded their underlying ID/IQ contracts, there is no requirement that an 

agency make additional responsibility determinations during contract performance, 

i.e., when placing individual delivery orders under an existing ID/IQ contract. See

FAR § 16.505; ESCO Marine, Inc., B-401438, Sept. 4, 2009, 2009 CPD ¶ 234 at ___; 

Advanced Tech. Sys., Inc., supra. 

 

Moreover, in making set-aside decisions, agencies need not make actual 

determinations of responsibility or decisions tantamount to determinations of 

responsibility; rather, they need only make an informed business judgment that there 

is a reasonable expectation of receiving acceptably priced offers from small business 

concerns that are capable of performing the contract. ViroMed Laboratories, supra. 

In the context of a multiple-award ID/IQ contract, where there are at least two small 

business contract holders, as in this case, the agency’s inquiry properly may be of 

limited scope, since the agency has already identified responsible small business 

concerns for award of task or delivery orders under the umbrella ID/IQ contract. 

Page 4 B-402281 
Page 5 B-402281 

Thus, where an agency receives expressions of interest from the small business 

contract holders and they represent their ability to perform requirements that the 

agency intends to order, the agency has a reasonable basis upon which to conclude 

that the “rule of two” has been met. While Ceradyne maintains that the Army should 

not have relied on the production capacities claimed by Armacel and ArmorWorks, 

in the absence of evidence of misrepresentation by these firms, we do not think the 

Army had a duty to subject these representations to a greater level of scrutiny.5

 

ViroMed Laboratories, supra. 

The protest is denied. 

 

Lynn H. Gibson 

Acting General Counsel 

 

5

 Ceradyne asserts that the capability statements made by the small business 

contract holders were unreliable because they were inconsistent with prior 

indications by these firms that they could not meet the production requirements 

associated with delivery order No. 9. The most relevant benchmark for ascertaining 

the performance capability of ArmorWorks and Armacel, however, would be the 

Army’s recent inquiries of these firms as opposed to the performance capability 

statements referenced by Ceradyne. In this regard, Armacel’s initial indication that it 

would not be able to meet delivery order No. 9 was made several months ago and 

prefaced with the statement “at this time.” ArmorWorks’ initial representation 

regarding delivery order No. 9 was similarly made several months ago and is 

unreliable since the representation was based on the mistaken 60-day delivery 

period, rather than the longer 6 month period actually required for delivery order 

No. 9. Moreover, ArmorWorks’ prior response identified a future delivery capacity of 

10,000 plates per month by October 2009, which is consistent with the most recent 

projections ArmorWorks has provided to the Army. E-mail from ArmorWorks to 

Army, July 8, 2009.