GAO Bid Protest Annual Report to the Congress for Fiscal Year 2009
Gao ID: GAO-10-264R January 8, 2010This letter responds to the requirement of the Competition in Contracting Act of 1984, 31 U.S.C. 3554(e)(2) (2006), that the Comptroller General report to Congress each instance in which a federal agency did not fully implement a recommendation made by our Office in connection with a bid protest decided the prior fiscal year. There was one such occurrence in fiscal year 2009, regarding our recommendation in Mission Critical Solutions, B-401057, May 4, 2009, 2009 CPD 93, recon. denied, Small Business Administration-Recon., B-401057.2, July 6, 2009, 2009 CPD 148. We reported the matter to Congress on October 23,2009, pursuant to 31 U.S.C. 3554(e)(1).
GAO-10-264R, GAO Bid Protest Annual Report to the Congress for Fiscal Year
2009
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GAO-10-264R:
United States Government Accountability Office:
Washington, DC 20548:
B-158766:
January 8, 2010:
The Honorable Nancy Pelosi:
Speaker of the House of Representatives:
Dear Madam Speaker:
This letter responds to the requirement of the Competition in
Contracting Act of 1984, 31 U.S.C. § 3554(e)(2) (2006), that the
Comptroller General report to Congress each instance in which a
federal agency did not fully implement a recommendation made by our
Office in connection with a bid protest decided the prior fiscal year.
There was one such occurrence in fiscal year 2009, regarding our
recommendation in Mission Critical Solutions, B-401057, May 4, 2009,
2009 CPD ¶ 93, recon. denied, Small Business Administration”Recon., B-
401057.2, July 6, 2009, 2009 CPD ¶ 148. We reported the matter to
Congress on October 23, 2009, pursuant to 31 U.S.C. § 3554(e)(1).
Enclosed is a copy of that report, as well as copies of our decisions
in the case explaining in greater detail the particulars surrounding
the procurement.
During the fiscal year, we received 1,898 protests (including 64 cost
claims) and 91 requests for reconsideration, for a total of 1,989
cases. We closed 1,920 cases: 1,822 protests (including 60 cost
claims), 96 requests for reconsideration, and 2 non-statutory
decisions. Enclosed for your information is a chart comparing the bid
protest activity for fiscal years 2005-2009.
A copy of this report, with the enclosures, is being furnished to the
Chairman and Ranking Minority Member of the House Committee on
Government Reform. A similar report is being furnished to the
President of the Senate.
Sincerely yours,
Signed by:
Lynn H. Gibson:
Acting General Counsel:
Enclosures:
[End of letter]
Bid Protest Statistics for Fiscal Years 2005-2009:
Cases Filed:
FY 2009: 1,989[2] (up 20%)[3];
FY 2008: 1,652 (up 17%);
FY 2007: 1,411 (up 6%);
FY 2006: 1,327 (down 2%);
FY 2005: 1,356 (down 9%).
Cases Closed:
FY 2009: 1,920;
FY 2008: 1,582;
FY 2007: 1,393;
FY 2006: 1,274;
FY 2005: 1,341.
Merit (Sustain + Deny) Decisions:
FY 2009: 315;
FY 2008: 291;
FY 2007: 335;
FY 2006: 249;
FY 2005: 306.
Number of Sustains:
FY 2009: 57;
FY 2008: 60;
FY 2007: 91;
FY 2006: 72;
FY 2005: 71.
Sustain Rate:
FY 2009: 18%;
FY 2008: 21%;
FY 2007: 27%;
FY 2006: 29%;
FY 2005: 23%.
Effectiveness Rate (reported)[4]:
FY 2009: 45%;
FY 2008: 42%;
FY 2007: 38%;
FY 2006: 39%;
FY 2005: 37%.
ADR[5] (cases used):
FY 2009: 149;
FY 2008: 78;
FY 2007: 62;
FY 2006: 91;
FY 2005: 103.
ADR Success Rate[6]:
FY 2009: 93%;
FY 2008: 78%;
FY 2007: 85%;
FY 2006: 96%;
FY 2005: 91%.
Hearings[7]:
FY 2009: 12% (65 cases);
FY 2008: 6% (32 cases);
FY 2007: 8% (41 cases);
FY 2006: 11% (51 cases);
FY 2005: 8% (41 cases).
[1] All entries in this chart are counted in terms of the docket
numbers ("B" numbers) assigned by our Office, not the number of
procurements challenged. Where a protester files a supplemental
protest or multiple parties protest the same procurement action,
multiple iterations of the same "B" number are assigned (Le„ .2, .3).
Each of these numbers is deemed a separate protest for purposes of
this chart.
[2] Of the 1,989 cases filed in FY 2009, 168 are attributable to GAO's
recently expanded bid protest jurisdiction over task orders (139
filings), A-76 protests (16 filings), and Transportation Security
Administration protests (13 filings). These 168 filings represent 50%
of the total increase in filings from FY 2008 to FY 2009 (337 filings).
[3] From the prior fiscal year.
[4] Based on a protester obtaining some form of relief from the
agency, as reported to GAO.
[5] Alternative Dispute Resolution.
[6] Percentage resolved without a formal GAO decision.
[7] Percentage of fully developed decisions in which GAO conducted a
hearing.
[End of table]
United States Government Accountability Office:
Washington, DC 20548:
B-401057:
October 23, 2009:
Congressional Committees:
Subject: Mission Critical Solutions, B-401057, May 4, 2009, 2009 CPD ¶
93, recon. denied, Small Business Administration”Recon., B-401057.2,
July 6, 2009, 2009 CPD ¶ 148.
This letter is submitted pursuant to 31 U.S.C. § 3554(e)(1) (2006),
which requires our Office to report any case in which a Federal agency
fails to implement fully a recommendation of the Comptroller General
contained in a bid protest decision. As required by that statute, this
report includes a comprehensive review of the procurement, including
the circumstances surrounding the failure of the contracting agency to
implement the recommendation made in the decision, as well as a
recommendation for further Congressional action.
The decision in question concerned the Department of the Army's
selection of Copper River Information Technology, LLC of Anchorage,
Alaska, an 8(a) Alaska Native Corporation, for the award of a sole-
source contract for information technology support for the Office of
the Judge Advocate General. The protester, Mission Critical Solutions
of Tampa, Florida, which is a qualified Historically Underutilized
Business Zone (HUBZone) small business, argued that rather than
awarding to Copper River on a sole-source basis, the agency should
have set the requirement aside for competition among HUBZone small
businesses.
Our Office found that it was improper for the agency to proceed with a
sole-source award to Copper River without considering whether a set-
aside for HUBZone concerns was required. We based our conclusion on
the plain language of the HUBZone statute, which provides in relevant
part that "notwithstanding any other provision of law," "a contract
opportunity shall be awarded pursuant to this section on the basis of
competition restricted to qualified HUBZone small business concerns if
the contracting officer has a reasonable expectation that not less
than 2 qualified HUBZone small business concerns will submit offers
and that the award can be made at a fair market price." 15 U.S.C. §
657a. We recommended that the agency undertake reasonable efforts to
determine whether two or more qualified HUBZone small business
concerns would submit offers and whether award could be made at a
reasonable price if the contract opportunity were set aside for
competition among HUBZone firms, and that if there were such an
expectation, that the requirement be resolicited on the basis of
competition restricted to HUBZone small business concerns. We also
recommended that the agency reimburse the protester the costs of
filing and pursuing its protest, including reasonable attorneys' fees.
By letter dated June 24, 2009, the Department of the Army notified our
Office that it would be fully implementing the corrective action that
we had recommended. In a subsequent letter dated September 28, 2009,
the agency advised us that it had reversed its decision, and that
rather than implementing our recommendation, it intended to make an
award consistent with its original intent (i.e., as a sole-source
award to an 8(a) firm). The agency explained that it was taking this
action in response to an August 21, 2009 Memorandum Opinion by the
Office of the Deputy Assistant Attorney General, Office of Legal
Counsel, Department of Justice, which in effect directed executive
branch agencies to follow the Small Business Administration's (SBA)
regulations placing the different categories of small businesses on an
equal footing for the competition and award of contracts. (The SBA
regulations in question, 13 C.F.R. §§ 126.605, 126.606, 126.607,
essentially provide that HUBZone set-asides are not required even
where the criteria specified in 15 U.S.C. § 657a(b)(2)(B) are
satisfied if the requirement has previously been performed by an 8(a)
contractor or the contracting officer has chosen to offer the
requirement to the 8(a) program.)
The Department of Justice opinion notwithstanding, we continue to read
the plain language of the HUBZone statute as requiring an agency to
set aside an acquisition for competition restricted to qualified
HUBZone small business concerns where it has a reasonable expectation
that not less than two qualified HUBZone small business concerns will
submit offers and that the award can be made at a fair market price.
As we explained in a September 14, 2009 letter to various
Congressional Committees, this is strictly a legal determination on
the part of our Office and is not intended to express a preference”in
one direction or the other”about whether the HUBZone program should
have priority over other set-aside programs, or whether there should
be parity among the programs; we recognized that the foregoing matter
is a question of policy to be resolved by Congress. In our September
14 letter, we stated our belief that the acquisition community would
benefit from statutory guidance clarifying whether Congress intends
for there to be parity or priority among the various set-aside
programs. We continue to believe that such guidance would be helpful
and recommend that Congress enact legislation clarifying its intent.
Enclosed for your review are copies of our decision on the protest and
our September 14 letter to the Committees, as well as the Department
of the Army's letters dated June 24 and September 28.
Sincerely yours,
Signed by:
Lynn H. Gibson:
Acting General Counsel:
Enclosures:
cc:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Mary L. Landrieu:
Chair:
The Honorable Olympia J. Snowe:
Ranking Member:
Committee on Small Business and Entrepreneurship:
United States Senate:
The Honorable David R Obey:
Chairman:
The Honorable Jerry Lewis:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Ike Skelton:
Chairman:
The Honorable Howard P. "Buck" McKeon:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable Edolphus Towns:
Chairman:
The Honorable Darrell Issa:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Nydia M. Velazquez:
Chairwoman:
The Honorable Sam Graves:
Ranking Member:
Committee on Small Business:
House of Representatives:
[End of letter]
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: Mission Critical Solutions:
File: B-401057:
Date: May 4, 2009:
John R. Tolle, Esq., and Bryan R. King, Esq., Barton Baker Thomas &
Tolle, LLP, for the protester.
Capt. Charles D. Halverson, Department of the Army, and John W. Klein,
Esq., and Laura Mann Eyester, Esq., Small Business Administration, for
the agencies.
Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq.,
Office of the General Counsel, GAO, participated in the preparation of
the decision.
Digest:
Protest is sustained where contracting agency did not consider whether
two or more qualified Historically Underutilized Business Zone
(HUBZone) small businesses could be expected to submit offers and
whether award could be made at a fair market price, as required by the
HUBZone statute, 15 U.S.C. § 657a, prior to deciding to award contract
to an Alaska Native Corporation on a sole-source basis.
Decision:
Mission Critical Solutions (MCS) of Tampa, Florida, a firm that is
both an 8(a) program participant and a qualified Historically
Underutilized Business Zone (HUBZone) small business, protests the
Department of the Army's award of a sole-source contract for
information technology (IT) support for the Office of the Judge
Advocate General to Copper River Information Technology, LLC, of
Anchorage, Alaska, an Alaska Native Corporation. The protester argues
that rather than awarding to Copper River on a sole-source basis, the
agency should have competed the requirement among HUBZone small
businesses.
We sustain the protest.
Background:
The agency reports that prior to January 2008, the IT support services
at issue here were provided by a large business. In December 2007, the
Army notified the Small Business Administration (SBA) that the effort
was appropriate for set-aside under SBA's 8(a) program and that it
intended to award a sole-source contract to MCS (the protester). SBA
accepted the requirement into the 8(a) program and authorized the Army
to negotiate directly with MCS. On January 31, 2008, the Army awarded
MCS a 1-year contract for approximately $3.45 million.
Near the conclusion of the 1-year period of performance, the Army
determined that it would structure the follow-on contract for the
services to include a base and 2 option years. Because this raised the
anticipated value of the contract to an amount in excess of $3.5
million, a sole-source award to the incumbent contractor was precluded
by Federal Acquisition Regulation (FAR) § 19.805-1; as relevant here,
that provision states that, unless SBA accepts the requirement on
behalf of a concern owned by an Indian tribe or an Alaska Native
Corporation, an acquisition offered to SBA under the 8(a) program must
be awarded on the basis of competition limited to eligible 8(a) firms
if (1) there is a reasonable expectation that at least two eligible
and responsible 8(a) firms will submit offers and that award can be
made at a fair market price, and (2) the anticipated total value of
the contract, including options, will exceed $3.5 million (for non-
manufacturing acquisitions). The Army then determined that an 8(a)
Alaska Native Corporation firm, Copper River Information Technology,
LLC, was capable of performing the requirement. On December 17, 2008,
the Army notified SBA that, if SBA concurred, it intended to award a
contract to Copper River. On December 23, SBA accepted the requirement
on behalf of Copper River. The Army awarded a contract to Copper River
on January 13, 2009. The protester learned of the award on January 22
and protested to our Office on January 29.
Discussion:
The protester challenges the agency's decision to make award on a sole-
source basis to Copper River, arguing that the HUBZone statute, 15
U.S.C. § 657a (2006), requires that the procurement be set aside for
competition among HUBZone small businesses.[Footnote 1] As explained
below, we conclude that it was improper for the agency to proceed with
a sole-source award to Copper River without considering whether a set-
aside for HUBZone concerns was required.
The HUBZone Program was established by Title VI of the Small Business
Reauthorization Act of 1997, Pub. L. No. 105-135, to provide federal
contracting assistance to qualified small business concerns located in
historically underutilized business zones in an effort to increase
employment opportunities, investment, and economic development in
those areas. See FAR § 19.1301(b). Section 602(b)(1)(B) of the Act, 15
U.S.C. § 657a, provides that, "notwithstanding any other provision of
law," "a contract opportunity shall be awarded pursuant to this
section on the basis of competition restricted to qualified HUBZone
small business concerns if the contracting officer has a reasonable
expectation that not less than 2 qualified HUBZone small business
concerns will submit offers and that the award can be made at a fair
market price."[Footnote 2] (Emphasis added.) We have interpreted this
language to mean that a HUBZone set-aside is mandatory where the
enumerated conditions are met. International Program Group. Inc., B-
400278, B-400308, Sept. 19, 2008, 2008 CPD (11 172 at_____.
The statutory language authorizing the 8(a) program differs from the
language authorizing the HUBZone program in that it gives the
contracting agency the discretion to decide whether to offer a
contracting opportunity to SBA for the 8(a) program. In this
connection, the statute provides in relevant part as follows:
In any, case in which [SBA] certifies to any officer of the Government
having procurement powers that [SBA] is competent and responsible to
perform any specific Government procurement contract to be let by any
such officer, such officer shall be authorized in his discretion to
let such procurement contract to [SBA] upon such terms and conditions
as may be agreed upon between [SBA] and the procurement officer.
15 U.S.C. § 637(a)(1)(A) (2006):
In a case regarding the HUBZone program, the Ninth Circuit
distinguished the mandatory language of the HUBZone statute from the
discretionary language of the 8(a) statute as follows:
[A]s the district court noted, "Congress has used the term 'shall' to
mandate that certain contracting opportunities be set aside for
competition restricted to HUBZone small businesses. With regard to the
8(a) program ... Congress has ... left to agency discretion the
initial offer and acceptance of contracts into the 8(a) Program."
[Citation omitted.] The text of the Section 8(a) Program is materially
different from that of the HUBZone Program. Accordingly, the
discretionary nature of the Section 8(a) Program cannot be imported
into the HUBZone Program thereby eliminating the mandatory aspect of
the HUBZone Program.
Contract Mgmt. Indus. Inc. v. Rumsfeld, 434 F.3d 1145, 1149 (9th Cir.
2006).[Footnote 3] Similarly, our Office concluded in International
Program Group, Inc., supra, that the discretion granted a contracting
officer under a program that permits, but does not require, the
setting aside of an acquisition for a particular subgroup of small
businesses (in that case, the service-disabled veteran-owned (SDVO)
small business program) does not supersede the mandatory nature of the
HUBZone set-aside program.[Footnote 4] In view of the mandatory nature
of the language in the HUBZone statute, and the discretionary nature
of the statutory language authorizing the 8(a) program, we conclude
that it was improper for the agency to proceed with a sole-source
award to Copper River without considering whether a set-aside for
HUBZone concerns was required.[Footnote 5]
We recognize that our conclusion that an agency must make reasonable
efforts to determine whether it will receive offers from two or more
HUBZone small businesses, and if so, set the acquisition aside for
HUBZone firms, even where a prior contract for the requirement has
previously been performed by an 8(a) contractor, is inconsistent with
the views of SBA, as argued in connection with this protest and as
implemented through its regulations. Those regulations essentially
provide that HUBZone set-asides are not required even where the
criteria specified in 15 U.S.C. § 657a(b)(2)(B) are satisfied if the
requirement has previously been performed by an 8(a) contractor or the
contracting officer has chosen to offer the requirement to the 8(a)
program. See 13 C.F.R. §§ 126.605, 126.606, and 126.607. While an
agency's interpretation of a statute that it is responsible for
implementing is entitled to substantial deference, and, if reasonable,
should be upheld, Blue Rock Structures, Inc., B-293134, Feb. 6, 2004,
2004 CPD ¶ 63 at 8, an interpretation that is unreasonable is not
entitled to deference. We do not think that SBA's regulatory
implementation of the HUBZone and 8(a) statutes is reasonable since it
fails to give effect to the mandatory language of the HUBZone statute.
[Footnote 6] We note in this connection that we have reviewed the
legislative history pertaining to the HUBZone program and are aware
that there has been considerable discussion (expressing differing
viewpoints) as to the intended relationship between the 8(a) and
HUBZone programs. As we pointed out in International Program Group,
Inc., supra, however, the starting point of any analysis of the
meaning of a statutory provision is the statutory language, and where
the language is clear on its face, as the language of the HUBZone
statute is here, its plain meaning will be given effect.[Footnote 7]
Contrary to the position taken by SBA in its comments on the protest,
the contracting agency concedes that "before it recommends a
requirement for SBA consideration as a candidate eligible for the 8(a)
Program, it must first follow the HUBZone set-aside prescriptive set
out in 15 U.S.C. § 657a(b)(2)," Agency Report at 7; that is, it must
make reasonable efforts to ascertain whether it will receive offers
from at least two HUBZone small business concerns. See International
Program Group, Inc., supra, at 7; Global Solutions Network, Inc., B-
292568, Oct. 3, 2003, 2003 CPD ¶ 174 at 3. The Army asserts, however,
that the point at which it was required to investigate whether HUBZone
firms could be expected to compete was when the requirement was
originally offered to SBA under the 8(a) program (i.e., December
2007), and that any objection by the protester to the agency's failure
to investigate therefore should have been raised at that time and is
now untimely.
We disagree. The HUBZone statute requires that a "contract
opportunity" be awarded on the basis of competition restricted to
HUBZone small business concerns when the enumerated conditions are
met, and, in our view, a separate "contract opportunity" arises every
time an agency prepares to award a new contract. Our view is supported
by SBA's regulations, which define a "contract opportunity" as a
situation in which "a requirement for a procurement exists." 13 C.F.R.
§ 126.103. Moreover, the SBA regulations governing the award of 8(a)
contracts clearly anticipate a reevaluation of the potential for
competition, and a decision whether the requirement should continue
under the 8(a) program, every time the award of a follow-on contract
is contemplated. See 13 C.F.R. § 124.503(f).[Footnote 8] Accordingly,
given that MCS protested to our Office within 10 days after learning
that the contract opportunity at issue here had been awarded to Copper
River, we think that its protest is timely.
In sum, because the Army-did-not consider whether two or more
qualified HUBZone small businesses could be expected to submit offers
and whether award could be made at a fair market price, as required by
the HUBZone statute, prior to deciding to award to Copper River on a
sole-source basis, we sustain MCS's protest. We recommend that the
agency undertake reasonable efforts to determine whether two or more
qualified HUBZone small business concerns will submit offers and
whether award can be made at a reasonable price if the contract
opportunity is set aside for competition among HUBZone firms. If there
is such an expectation, we recommend that the Army terminate the
contract awarded to Copper River and resolicit the requirement on the
basis of competition restricted to HUBZone small business concerns. We
also recommend that the agency reimburse the protester the costs of
filing and pursuing its protest, including reasonable attorneys' fees.
4 C.F.R. § 21.8(d)(1) (2008). The protester's certified claim for
costs, detailing the time spent and cost incurred, must be submitted
to the agency within 60 days after receiving this decision.
The protest is sustained.
Daniel I. Gordon:
Acting General Counsel:
Footnotes:
[1] In its initial protest, MCS also asserted that there are firms
capable of performing the IT services that are both 8(a) program
participants and qualified HUBZone small businesses and that the
agency was required to compete the requirement among 8(a) firms that
are also HUBZone-certified, rather than award a contract to Copper
River on a sole-source basis. In support of its position, MCS cited
FAR § 19.800(e), which provides in relevant part that "[W. [an]
acquisition is offered to the SBA, SBA regulations (13 C.F.R. §
126.607(b)) give first priority to HUBZone 8(a) concerns." SBA (which
we invited to comment on the protest) pointed out that the SBA
regulation cited in FAR § 19.800(e) as requiring that first priority
be given to HUBZone 8(a) concerns is no longer in effect. That is, 13
C.F.R. § 126.607(b) was revised in 2005 to eliminate the language
providing for first priority to HUBZone 8(a) concerns. The Civilian
Agency Acquisition Council and the Defense Acquisition Regulations
Council have twice issued proposed rules providing for the amendment
of FAR § 19.800(e) to delete the reference to 13 C.F.R. § 126.607(b).
73 Fed. Reg. 12,700, Mar. 10, 2008; 74 Fed. Reg. 16,826, Apr. 13,
2009. The protester has not rebutted the SBA position or made any
further argument regarding the applicability of FAR § 19.800(e);
accordingly, we consider it to have abandoned its argument that the
agency was required to set aside the procurement for HUBZone 8(a)
firms.
[2] The statute also provides that a contracting officer "may" award a
sole-source contract to a qualified HUBZone small business concern if
the qualified HUBZone firm is determined to be a responsible
contractor with respect to performance of the contract, and the
contracting officer does not have a reasonable expectation that two or
more qualified HUBZone firms will submit offers; the anticipated award
price of the contract (including options) will not exceed $5 million
(in the case of a contract opportunity assigned a standard industrial
classification code for manufacturing) or $3 million (in the case of
all other contract opportunities); and, in the estimation of the
contracting officer, the contract award can be made at a fair and
reasonable price. 15 U.S.C. § 657a(b)(2)(A).
[3] This decision (and the underlying District Court decision
discussed in footnote 6, infra) concerned a challenge to an agency's
decision to set aside a procurement for HUBZone small business
concerns rather than small businesses.
[4] In its comments on the protest here, SBA argued that "the
contracting officer has discretion not necessarily in using the 8(a)
program, since that is an initial determination made by the SBA, but
in deciding whether the 8(a) participant to be utilized by the SBA is
capable of performing," and that "[t]he ultimate discretion as to
whether a requirement should be placed in the 8(a) program rests with
the Administrator of the SBA[;] [t]he Administrator will place a
requirement into the 8(a) program when he or she decides it is
necessary or appropriate." SBA Comments, Mar. 3, 2009, at 10. We
understand SBA to be arguing that the cited excerpt from 15 U.S.C. §
637(a)(1)(A) does not give the contracting officer the discretion to
decline to place in the 8(a) program a contract that SBA has
determined appropriate for performance under the program, and that the
only discretion conferred upon the contracting agency by the 8(a)
statute is the discretion to reject SBA's nomination of a specific
contractor for performance. We do not agree with SBA that the only
discretion conferred upon the contracting agency by the 8(a) statute
is the discretion to reject SBA's nomination of a particular
contractor for performance. In fact, this construction of the statute
is at odds with SBA's own regulations, which give SBA the right to
appeal to the head of the procuring agency”implying that the ultimate
authority rests with the latter official”"[a] contracting officer's
decision not to make a particular procurement available for award as
an 8(a) contract." 13 C.F.R. § 124.505(a)(1). Moreover, even assuming
that the ultimate discretion as to whether a requirement should be
placed in the 8(a) program rests with the Administrator of SBA, that
does not mean that the SBA's discretionary authority under the 8(a)
statute supersedes the mandatory aspect of the HUBZone program.
[5] In further support of this conclusion, 15 U.S.C. § 657a(b)(4)
provides that "[a] procurement may not be made from a source on the
basis of a preference provided in paragraph (2) or (3), if the
procurement would otherwise be made from a different source under
section 4124 or 4125 of title 18 [acquisitions from Federal Prison
Industries] or the Javits-Wagner-O'Day Act (41 U.S.C. 46 et seq.)." We
view the omission of acquisitions in or offered to the 8(a) program
from the contracting preferences explicitly exempt from application of
the HUBZone statute as further evidence that Congress did not intend
to exempt these acquisitions from the language making HUBZone set-
asides mandatory when the specified conditions are met.
[6] SBA argues that the district court in Contract Mgmt. Indus., Inc.
v. Rumsfeld, supra, "sanctioned" its regulations exempting contract
opportunities for requirements that have previously been accepted into
the 8(a) program from application of the HUBZone statute. While the
court there observed that the SBA regulations were consistent with a
goal of preventing a conflict between the HUBZone and 8(a) programs,
the court did not address the issue before us”whether it was
consistent with the mandatory nature of the HUBZone statute for the
regulations to exempt certain 8(a) acquisitions from the statute's
application.
[7] SBA also argued that the phrase "notwithstanding any other
provision of law" in the HUBZone statute is best interpreted as
requiring the disregard only of provisions outside the Small Business
Act and not provisions of law contained in the Act, such as those
regarding the 8(a) program. SBA maintains that this interpretation is
consistent with other provisions of the Act, including the section
setting goals for small business contracting with various categories
of small businesses, 15 U.S.C. § 644(g)(1). SBA argues that in order
for any agency to assist in meeting goals for small business
contracting, "the agency must be afforded some discretion in
determining which small business program to utilize." SBA Comments at
10.
SBA appears to be arguing that achievement of the goals set forth in
15 U.S.C. § 644(g)(1) takes precedence over the requirement for
HUBZone set-asides. As a preliminary matter, SBA has furnished no
evidence to support its position that the setting aside of
acquisitions for HUBZone small business concerns where the specified
criteria are met will prevent the government from meeting its goals
for contracting with other categories of small businesses. Moreover,
as pointed out by the district court in Contract Mgmt. Indus., Inc. v.
Rumsfeld, 291 F. Supp. 2d 1166 (D. Haw. 2003), "[i]f the HUBZone
Program becomes so successful that it threatens the ability of other
small businesses to meet their goals, Congress is free to amend the
statute." Id. at 1176. In any event, while this argument likely
reflects SBA's view of the better policy in this area, it does not
take into account the plain language of the HUBZone statute.
[8] In relevant part, this provision, entitled "Repetitive
Acquisitions," states as follows:
A procuring activity contracting officer must submit a new offering
letter to SBA where he or she intends to award a follow-on or
repetitive contract as an 8(a) award. This enables SBA to determine:
(1) Whether the requirement should be a competitive 8(a) award;...
(4) Whether the requirement should continue under the 8(a) [business
development] program.
[End of Decision]
Comptroller General of the United States:
United States Government Accountability Office:
Washington, DC 20548:
Decision:
Matter of: Small Business Administration”Reconsideration:
File: B-401057.2:
Date: July 6, 2009:
John R. Tolle, Esq., and Bryan R. King, Esq., Barton Baker Thomas &
Tolle, LLP, for the protester.
John W. Klein, Esq., and Laura Mann Eyester, Esq., Small Business
Administration, for the agency/requester.
Jonathan L. Kang, Esq., and Ralph O. White, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
Digest:
1. Request for reconsideration from the Small Business Administration
(SBA), arguing that our Office exceeded its statutory grant of
authority to decide bid protests when we concluded in Mission Critical
Solutions, B401057, May 4, 2009, 2009 CPD ¶ 93, that set-asides under
the Historically Underutilized Business Zone (HUBZone) program are
mandatory where the enumerated conditions of the HUBZone statute are
met, is denied where, despite the SBA's contentions to the contrary,
our decision did not "invalidate" the SBA's conflicting regulation,
and the decision, and the recommendation within it, were consistent
with our statutory jurisdiction.
2. Request for reconsideration of prior decision sustaining protest is
denied where newly raised information fails to show that our prior
decision contains any errors of fact or law.
Decision:
The Small Business Administration (SBA) asks that we reconsider our
decision in Mission Critical Solutions, B-401057, May 4, 2009, 2009
CPD ¶ 93, in which we concluded that, prior to the award of a contract
to an Alaska Native Corporation on a sole-source basis, the statute
authorizing a preference for Historically Underutilized Business Zone
(HUBZone) small businesses requires a contracting agency to first
consider whether two or more qualified HUBZone small businesses could
be expected to submit offers and whether award could be made at a fair
price. The SBA argues that our decision erred in concluding that the
HUBZone statute creates a mandatory preference for HUBZone small
businesses over the preference for 8(a) businesses.
We deny the request for reconsideration.
Background:
Our decision in Mission Critical Solutions, supra, addressed the
statutory requirements for the HUBZone and 8(a) programs, and the SBA
regulations that implement these programs. The HUBZone Program was
established by Title VI of the Small Business Reauthorization Act of
1997, Pub. L. No. 105-135, to provide federal contracting assistance
to qualified small business concerns located in historically
underutilized business zones in an effort to increase employment
opportunities, investment, and economic development in those areas.
See Federal Acquisition Regulation (FAR) § 19.1301(b). Section
602(b)(1)(B) of the Act provides as follows:
Notwithstanding any other provision of law...a contract opportunity
shall be awarded pursuant to this section on the basis of competition
restricted to qualified HUBZone small business concerns if the
contracting officer has a reasonable expectation that not less than
2 qualified HUBZone small business concerns will submit offers and
that the award can be made at a fair market price.
15 U.S.C. § 657a (emphasis added).
Based on the statute's use of the phrase "shall be awarded," we have
interpreted this language to mean that a HUBZone set-aside is
mandatory where the enumerated conditions are met. International
Program Group. Inc., B-400278, B-400308, Sept. 19, 2008, 2008 CPD ¶
172 at 5.
The statutory language authorizing the 8(a) program differs from the
language authorizing the HUBZone program in that it gives the
contracting agency the discretion to decide whether to offer a
contracting opportunity to the SBA for the 8(a) program. In this
connection, the statute provides:
In any case in which [SBA] certifies to any officer of the Government
having procurement powers that [SBA] is competent and responsible
to perform any specific Government procurement contract to be let by
any such officer, such officer shall be authorized in his discretion
to let such procurement contract to [SBA] upon such terms and
conditions as may be agreed upon between [SBA] and the procurement
officer.
15 U.S.C. § 637(a)(1)(A) (2006).
MCS”a participant in the SBA's 8(a) program and a qualified HUBZone
small business”challenged the award of a sole-source contract by the
Department of the Army for information technology (IT) support for the
Office of the Judge Advocate General to Copper River Information
Technology, LLC, an Alaska Native Corporation. The requirements had
been previously performed by MCS under an 8(a) set-aside.[Footnote 1]
In our decision, dated May 4, 2009, we agreed with the protester's
contention that the Army should have competed the requirement among
HUBZone small businesses, rather than awarding to Copper River on a
sole-source basis. Specifically, we concluded that, in view of the
mandatory nature of the language in the HUBZone statute, and the
discretionary nature of the statutory language authorizing the 8(a)
program, an agency must first consider whether a set-aside for HUBZone
small business concerns is required, before making a sole-source award
to an 8(a) or Alaska Native Corporation. Mission Critical Solutions,
supra, at 4-5. Our decision recognized that our conclusion regarding
the HUBZone statute was inconsistent with the SBA's regulations, which
state that a contracting activity may not make a requirement available
for a HUBZone contract if:...[a]n 8(a) participant currently is
performing the requirement through the 8(a)BD [business development]
program or the SBA has accepted the requirement for award through the
8(a)BD program, unless the SBA has consented to release the
requirement from the 8(a)BD program.
13 C.F.R. § 126.605.
On May 14, the SBA requested that we reconsider our decision.
Discussion:
Our Bid Protest Regulations require that a party requesting
reconsideration "must show that our prior decision contains errors of
either fact or law, or must present information not previously
considered that warrants reversal or modification of our decision." 4
C.F.R. § 21.14(a) (2009). Our Office will not consider "a request for
reconsideration based on repetition of arguments previously raised."
Id.
The SBA's request for reconsideration primarily states its
disagreement with our legal analysis regarding the statutory
requirements for HUBZone set-asides.[Footnote 2] Much of the agency's
request addresses matters that were raised during the protest and
discussed in our decision; those issues need not be addressed again.
We discuss below, however, the following three arguments raised by the
SBA: (1) that the decision overstepped the statutory authority granted
to the Government Accountability Office (GAO) to decide bid protests
by "invalidating," in the SBA's view, a regulation properly
promulgated by the executive branch agency charged with administering
and interpreting the Small Business Act; (2) that the decision erred,
as a matter of law, in its interpretation of the phrase
"notwithstanding any other provision of law" found in the HUBZone
statute; and (3) that the decision incorrectly stated the trial and
appellate court holdings in Contract Management Inc. v. Rumsfeld, (291
F. Supp. 2d 1166 (D. Hawaii 2003), and 434 F.3d 1145 (9th Cir. 2006),
respectively), which discussed the statutory provisions for the
HUBZone and 8(a) programs. As set forth more fully below, we think
none of these contentions provides a basis to grant this request for
reconsideration.
GAO's Statutory Authority to Decide Bid Protests:
First, the SBA argues that our decision improperly concluded that its
regulations concerning HUBZone set-asides are inconsistent with the
HUBZone statute because lilt is not within GAO's authority to decide
whether an agency's regulation is reasonable and void an agency's
regulations." Request for Reconsideration at 5. We think that the SBA
mischaracterizes the holding of our decision, and that the decision
was consistent with our statutory authority.
The jurisdiction of our Office to hear bid protests is established by
the Competition in Contracting Act of 1984 (CICA), 31 U.S.C. §§ 3551-
3556 (2006). Under CICA, our Office has the authority to "determine
whether [a] solicitation, proposed award, or award complies with
statute and regulation." 31 U.S.C. § 3554(b)(1). As the SBA notes, bid
protest decisions by our Office”an independent, nonpartisan,
legislative branch agency”are not binding on executive branch
agencies. See Bowsher v. Synar, 478 U.S. 714, 727-32.
Instead, our authorizing statute requires that if we conclude that an
agency action violates a procurement law or regulation, we "shall
recommend that the Federal agency" take actions such as "terminating
the contract," or "awarding a contract consistent with the
requirements of such statute and regulation." 31 U.S.C. § 3554(c).
Upon receipt of such a recommendation from our Office, the executive
branch agency is required to advise the Comptroller General by letter
if the agency does not implement our recommendation. Id. The
Comptroller General is required to report to the cognizant
congressional committees each instance in which a federal agency did
not implement our recommendation. 31 U.S.C. § 3554(e).
Our decision held that the plain meaning of the HUBZone statute
creates a mandatory preference for HUBZone small business concerns
when the enumerated conditions of the statute are met. Mission
Critical Solutions, supra, at 7. Both the district court and the
appellate court decisions cited by the SBA, and discussed in detail
below, reached precisely the same conclusion. 291 F. Supp. 2d at 1166;
434 F.3d at 1149.
With respect to the SBA's concerns about its regulation, we
acknowledged in our decision that our conclusions regarding the
HUBZone statute were "inconsistent with the views of the SBA, as
argued in connection with this protest and as implemented through its
regulations," specifically, 13 C.F.R. §§ 126.605, 126.606, and
126.607. Id. at 5. Nonetheless, as we also explained, while an
agency's interpretation of a statute it is responsible for
implementing is entitled to substantial deference”and, if reasonable,
should be upheld”an agency interpretation that is unreasonable is not
entitled to deference. Id. (citing Blue Rock Structures, Inc., B-
293134, Feb. 6, 2004, 2004 CPD 5 63 at 8). In sum, we conclude that
our decision, and the recommendation within it, were consistent with
our statutory jurisdiction.
Effect of "Notwithstanding" Language on Other Small Business Programs:
Next, the SBA provides new information regarding its argument that the
phrase in the HUBZone statute, "notwithstanding any other provision of
law," should not be interpreted literally. During the course of the
underlying protest, the SBA argued that this phrase should not be
given its literal meaning because to do so would conflict with”and by
implication repeal, in the SBA's view”the goals set under the Small
Business Act for contracting with various categories of small
businesses. See 15 U.S.C. § 644(g)(1). Specifically, the SBA contends
that our decision would require contracting agencies to give priority
to HUBZone small business concerns for all small business set-asides,
and would hinder contracting agencies' ability to meet their goals for
contracting with other types of small businesses, such as 8(a) firms.
We addressed this argument in our decision, noting that the SBA had
not provided information to support its position. Mission Critical
Support, supra, at 6 n.7. Further, we noted that the SBA's argument
ignores the plain language of the HUBZone statute, which distinguishes
that program from others, such as the 8(a) program, which have non-
mandatory set-aside requirements. Id.
In its request for reconsideration, the SBA provided data which show
that there are more registered HUBZone small business concerns than
8(a) participants for the construction and computer services
industries.[Footnote 3] Request for Reconsideration at 14. The agency
again contends that our decision will prevent executive branch
agencies from meeting their contracting goals, because all
requirements will be awarded to HUBZone small business concerns,
instead of the other contractors.
We think the SBA's data about the numbers of different types of
HUBZone and 8(a) businesses do not establish that respecting the plain
language of the HUBZone statute will effectively "repeal" the Small
Business Act's contracting goals. In any event, even if that impact
were established, we would not see a basis to interpret the
"notwithstanding" language in a way that does not give effect to its
plain meaning.[Footnote 4]
The Contract Management Decisions:
Finally, the SBA contends that our decision misinterpreted the
holdings of the two Contract Management decisions. Specifically, the
SBA argues that the district court agreed with the agency's view "that
HUBZone set-asides are not mandatory in every case and the court did
not rule that HUBZone set asides take priority over the 8(a) [business
development] or [the service-disabled veteran-owned small business
concern] programs." Request for Reconsideration at 15. We stand by our
view that these decisions support our conclusion that a HUBZone set
aside is mandatory where the statute's enumerated conditions are met.
See Mission Critical Solutions, supra, at 6 n.6, 7.
As a preliminary matter, the SBA seems to overlook the fact that the
two Contract Management decisions addressed a challenge to an agency's
decision to set aside a procurement for HUBZone small business
concerns, rather than small business concerns, and the fact that, in
both cases the courts rejected the argument that the HUBZone program
should be viewed as providing for discretionary set-asides for small
businesses, similar to the 8(a) program. In addition, both courts
expressly concluded that the statutory language concerning the HUBZone
program was mandatory, and therefore took precedence over a small
business set-aside. In so doing, both courts distinguished between the
HUBZone program's mandatory language, and the 8(a) program's
discretionary language. 291 F. Supp. 2d at 1176; 434 F.3d at 1149.
Despite the underlying holdings of these decisions, the SBA correctly
observes that the district court also stated that the SBA's
regulations "sufficiently promote the congressional objective of
parity between the HUBZone and 8(a) programs." 291 F. Supp. 2d at 1176-
77. The SBA argues that our decision ignored the court's conclusion
that its regulations were reasonable implementations of congressional
intent that the two programs be given parity.
In our view, the district court's discussion of the SBA's regulations
concerning the 8(a) program”as distinct from the statutes governing
the HUBZone and 8(a) programs”was ancillary to the court's primary
holding concerning the mandatory requirements of the HUBZone statute.
[Footnote 5] As mentioned above, however, both the appellate court and
district court ultimately concluded, in no uncertain terms, that the
HUBZone statute mandates a set-aside, while the statutory language
authorizing the 8(a) program is discretionary. 434 F.3d at 1148-49;
291 F. Supp. 2d at 1176. Accordingly, we think our decision is
consistent with both of the Contract Management decisions. To the
extent the SBA continues to argue that our decision was in error, we
find no basis to reconsider our decision.
The request for reconsideration is denied.
Daniel I. Gordon:
Acting General Counsel:
Footnotes:
[1] As discussed in our prior decision, the SBA had accepted the IT
support services at issue here into the SBA's 8(a) program and
authorized the Army to negotiate directly with MCS. These negotiations
led to the award of a 1-year contract to MCS on a sole-source basis.
When the agency began its planning for a follow-on contract, the
anticipated value of the contract was greater than $3.5 million; thus,
the agency decided that a sole-source award to MCS was precluded under
FAR § 19.805-1. As relevant here, FAR § 19.805-1 states that”unless
the SBA accepts the requirement on behalf of a concern owned by an
Indian tribe or an Alaska Native Corporation”an acquisition under the
8(a) program must be awarded on the basis of competition limited to
eligible 8(a) firms if: (1) there is a reasonable expectation that at
least two eligible and responsible 8(a) firms will submit offers, and
that award can be made at a fair market price; and (2) the anticipated
total value of the contract, including options, will exceed $3.5
million (for non-manufacturing acquisitions). The Army then determined
that Copper River, an 8(a) Alaska Native Corporation firm, was capable
of performing the requirement, and, with the SBA's approval, awarded a
sole-source contract to that company.
[2] At our Office's invitation, SBA provided its views regarding these
matters during the protest.
[3] We note that the SBA could have, but did not, provide these data
in its comments during the protest.
[4] The SBA's request for reconsideration also reiterates its view
that three cases cited by the agency during the protest support its
view that the phrase "notwithstanding other provisions of law" should
not be applied literally because it would place the mandatory HUBZone
requirements in conflict with the contracting goals, with the effect
of repealing the latter. The SBA cites both Oregon Natural Resources
Council v. Thomas, 92 F.3d 792, 796-97 (9th Cir. 1996) and In re
Glacier Bay Kee Leasing Co., 944 F.2d 577, 582 (9th Cir. 1991), which
hold generally that repeals of one statutory provision by another must
be expressly stated, in support of its argument that applying the
plain meaning of the "notwithstanding" provision would result in an
improper repeal of the small business contracting goals. We do not
find these cases apposite, because, as discussed above, we do not
agree that the data cited by the SBA show that-the HUBZone statute has
the effect of repealing these goals, and because, in any event, the
plain language of the statute would give explicit priority to the
HUBZone program even in the event a conflict between the programs were
to arise. The SBA's third case is E.P. Paup Co. v. Director, Office of
Workers Compensation Programs, 999 F.2d 1341, 1348-49 (9th Cir. 1993),
where the court concluded that the phrase "notwithstanding any other
provision of law" in a federal statute did not mean that the statute
impliedly preempted state law, as such preemptions must be explicitly
set forth. Here, however, there is no issue of federal preemption of
state law.
[5] For the record, we note that when the district court references a
"congressional objective" that there be parity between the HUBZone and
8(a) programs, the court cites the report of the Senate Small Business
Committee concerning the Small Business Reauthorization Act of 2000
(S. Rep. 106-422 (Sept. 27, 2000)). 291 F. Supp. 2d at 1176. We have
found no evidence of this "objective" in the statute, which is plain
on its face. In contrast, the court of appeals decision did not
address this issue. Rather, the court of appeals noted that although
this issue had been discussed in the district court decision, it was
not raised on appeal. Contract Management, Inc., 434 F.3d at 1147 n.3.
[End of Decision]
[End of document]
