Educational Planning and Advice, Inc., No. 4201 (July 25, 1996) Docket No. SIZ-96-6-19-50 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. _______________________________ ) SIZE APPEAL OF: ) ) Educational Planning and ) Advice, Inc. ) ) Appellant ) Docket No. SIZ-96-6-19-50 ) Solicitation No. ) DAKF06-96-B-0010 ) Department of the Army ) Directorate of Contracting ) Fort Carson, Colorado ) _______________________________) DIGEST A non profit corporation is not a small business concern eligible for award of a small business set aside procurement. DECISION July 25, 1996 HOLLEMAN, Administrative Judge: Jurisdiction This appeal is decided under the Small Business Act, 15 U.S.C. Sections 631 et seq., and 13 C.F.R. Part 121 (1996).[1] Issue Whether a non profit corporation is a small business concern eligible for award of a small business set aside procurement. Background On March 29, 1996, the Contracting Officer of the Department of the Army, Directorate of Contracting, Fort Carson, Colorado, issued the subject sealed bid solicitation for Foreign Language Educational Services. The requirement was totally set aside for small business. The Contracting Officer (CO) assigned to the procurement Standard Industrial Classification (SIC) code 8299, (Schools and Educational Services, Not Elsewhere Classified), with a corresponding average annual receipts size standard of $5 million. The bid opening date was May 17, 1996. The apparent low bidder was Educational Planning and Advice, Inc. (Appellant), a non profit corporation. The CO filed a protest with the Small Business Administration (SBA) Area VI Office of Government Contracting in San Francisco, California (Area Office) on May 21, 1996. He questioned whether Appellant was a qualified small business for purposes of the award, because of its non profit status. On May 21, the Area Office notified Appellant of the protest and requested that it provide the Area Office with a completed SBA Form 355 and other documentation. Among the documents Appellant provided were an Internal Revenue Service letter informing Appellant it qualified as a non profit entity under Section 501(c)(3) of the Internal Revenue Code; and its ByLaws, identifying it as a California Nonprofit Public Educational Corporation. Appellant admitted, both in its offer and in response to the CO's protest, that it is a non profit corporation. However, Appellant denied its non profit status rendered it ineligible for contract award under a small business set aside. Appellant, on its own behalf and through counsel, in effect asserted that the regulatory definition of small business (13 C.F.R. Section 121.105) is not applicable here, because Appellant is not applying for Agency procurement assistance. Rather, Appellant asserted, the only question is whether it met the applicable size standard, which establishes no exception for non profit entities. Because Appellant met the applicable size standard and was the low bidder for this procurement, Appellant asserted it should receive the contract award. Appellant asserted further that other, unnamed, non profit firms had received similar contract awards. Finally, Appellant asserted that nonprofit concerns realize a profit and incur tax liabilities, like other businesses. In its May 31, 1996 determination, the Area Office found that only a for profit concern can be an eligible small business. Because Appellant was non profit, it was not an eligible small business. Arguments on Appeal Appellant received the size determination on June 4, 1996, and filed the instant appeal on June 19, 1996. Appellant's appeal reiterates its protest arguments. Specifically, it asserts it is a non profit small business, because it has less than $5 million in average annual receipts and fewer than 500 employees. Thus, it is an eligible small business under the applicable SIC code. Appellant further asserts the solicitation does not specifically define a small business as a for profit entity. Therefore, the small business set aside includes all small businesses, both for profit and non profit. Finally, Appellant asserts the "for profit limitations" do not apply to procurements, but only to procurement assistance, which it does not seek. Discussion Since the instant appeal was filed within 15 days of the service of the size determination, the appeal is timely. 13 C.F.R. Section 134.304(a)(1)(1996).[2] The sole issue in this case is whether Appellant is an eligible small business for a total small business set aside procurement. It is not, as urged by Appellant, whether it satisfies the applicable size standard; whether it seeks procurement assistance; or whether the SIC code applies both to for profit and non profit entities. The government-wide small business set aside program is intended to award certain contracts exclusively to small business concerns. Federal Acquisition Regulation (FAR) Section 19.501(a). The Small Business Act defines a small business as an independently owned and operated business, not dominant in its field of operation. Small Business Act (SBAct) Section 3(a)(1), 15 U.S.C. Section 632(a)(1) (1995). The Act explicitly delegates to SBA's Administrator the authority to define a small business in more detail, and to establish size standards. SBAct Section 3(a)(2)(A), 15 U.S.C. Section 632(a)(2)(A). The SBA regulations implementing the above SBAct provisions state generally that the size standards define whether a business entity is small and, thus, is eligible for government small business set aside programs. 13 C.F.R. Section 121.101. The regulatory definition of a "small business concern" in Subpart A, "Size Eligibility Provisions and Standards", requires that an eligible small business satisfy three criteria. It must be a business entity -- (1) organized for profit; (2) located in the U.S.; and (3) which operates primarily within the U.S. or makes a significant contribution to the U.S. economy. 13 C.F.R. Section 121.105(a). This definition applies to all the various types of assistance covered by Part 121: among others, SBA financial assistance, government procurement, and minority small business contract assistance. The only element of the test at issue under these facts, that an eligible small business must be a for profit concern, is a long-standing requirement; it has been part of the regulations since 1980. This Office and its predecessor, the Size Appeals Board, consistently have construed the regulations as providing that non profit concerns do not satisfy the definition of a small business. The cases have reasoned that the Small Business Act generally is intended to afford small business concerns preferential treatment to offset any competitive disadvantage caused by their size. By contrast, the cases have reasoned that a non profit concern, which is sheltered by its tax exempt status, has an unfair competitive advantage over a for profit firm. Size Appeal of Silver State Industries, No. 3846 (1993); Size Appeal of Southern Tier Alcoholism Programming, Inc., No. 2114 (1985); and Size Appeal of Center for Research and Education, No. 594 (1972).[3] Thus, a non profit corporation does not meet the first element of the threshold definition for an eligible small business concern. For that reason alone, Appellant is ineligible for contract award under a total small business set aside. See Size Appeal of Mexican Intermodal Equipment, No. 4182 (1996); and Size Appeal of Com-Tech Services, Inc., No. 4119 (1995). Appellant has shown no reason why these cases are not apposite, nor any reason to change this Office's long-standing precedent. In fact, Appellant has failed to cite any cases for its position. Therefore, where a firm fails to satisfy any element of the above three-part regulatory definition of a small business, it is irrelevant whether the firm meets the appropriate size standard; the inquiry does not proceed that far. Appellant's additional arguments to the contrary also are without merit. They consist largely of bare assertions, unsupported by any probative evidence. Specifically, as discussed previously, the text of Part 121 makes clear that the for profit requirement applies to many types of government assistance, including the type at issue here, small business set asides. Similarly, Appellant makes the bare assertion, without evidentiary support, that non profits may realize a profit. Appellant fails to identify such firms or submit documentation that any non profit firms previously received contract awards. In any event, as stated by the Area Office, if other agencies improperly or mistakenly awarded such contracts, this Agency should not perpetuate the error.[4] Conclusion Appellant is a non profit corporation and, thus, is not an eligible small business concern for this procurement. For the above reasons, the Area Office's determination is AFFIRMED, and the appeal is DENIED. This is the final decision of the Small Business Administration. See 13 C.F.R. Section 121.316(b). ___________________________ Christopher Holleman Administrative Judge ____________________ [1] The Small Business Administration has revised its substantive size and SIC regulations and its procedural regulations, including those for this Office, effective March 1, 1996. See 13 C.F.R. Parts 121 and 134 (1996). Since the instant solicita-tion was issued, and the instant appeal filed, after March 1st, the new regulations, both procedural and substantive, apply here. [2] Appellant made further filings on July 10 and 11, 1996, after the close of the record. Because Appellant did not show good cause or seek leave for the late filings, the Presiding Judge will not consider them. [3] This Office has adopted as valid precedent, pursuant to the rule of stare decisis, the cases decided by its predecessor body, the Size Appeals Board. See Size Appeal of Mota Construction Co., Inc., No. 2061 (1984). [4] Appellant's remaining arguments, that the solicitation does not actually set the procurement aside for eligible small businesses and the solicitation is defective, are wholly without merit because they are based upon strained readings of the document and are contrary to its plain language. The solicitation clearly states, both on pages one and K-8, that it is set aside for small business. Similarly, Appellant provides no statutory or regulatory support for its bare assertion that "enterprises" are different from "concerns".