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GAO-11-211SP:
United States Government Accountability Office:
Washington, DC 20548:
B-158766:
November 23, 2010:
The Honorable Nancy Pelosi:
Speaker of the House of Representatives:
Dear Madam Speaker:
This letter responds to the requirements 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 were three such occurrences in fiscal year 2010, DGR Assocs.,
Inc., B-402494, May 14, 2010, 2010 CPD 111 115, Rice Servs., Inc., B-
402966.2, Sept. 16, 2010, 2010 CPD If 217, and Rice Servs., Inc., B-
403746, Sept. 16, 2010, 2010 CPD If 220. Enclosed is a copy of our
report on these matters created pursuant to 31 U.S.C. § 3554(e)(1), as
well as copies of our decisions in the protests explaining in greater
detail the particulars surrounding the procurements.
During the fiscal year, we received 2,220 protests (including 52 cost
claims) and 79 requests for reconsideration, for a total of 2,299
cases. Of the 2,299 cases filed, 189 are attributable to GAO's
recently expanded bid protest jurisdiction over task orders. We closed
2,226 cases during the fiscal year: 2,131 protests (including 64 cost
claims), 94 requests for reconsideration, and 1 non-statutory
decision. Enclosed for your information is a chart comparing the bid
protest activity for fiscal years 2006-2010.
A copy of this report, with the enclosure, 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:
Enclosure:
[End of letter]
Table: Bid Protest Statistics for Fiscal Years 2006-2010:
Cases Filed[1]:
FY 2010: 2,229 (up 16%);
FY 2009: 1,989[2] (up 20%)[3];
FY 2008: 1,652 (up 17%);
FY 2007: 1,411 (up 6%);
FY 2006: 1,326 (down 2%).
Cases Closed:
FY 2010: 2,226;
FY 2009: 1,920;
FY 2008: 1,582;
FY 2007: 1,394;
FY 2006: 1,275.
Merit (Sustain + Deny) Decisions:
FY 2010: 441;
FY 2009: 315;
FY 2008: 291;
FY 2007: 335;
FY 2006: 251.
Number of Sustains:
FY 2010: 82;
FY 2009: 57;
FY 2008: 60;
FY 2007: 91;
FY 2006: 72.
Sustain Rate:
FY 2010: 19%;
FY 2009: 18%;
FY 2008: 21%;
FY 2007: 27%;
FY 2006: 29%.
Effectiveness Rate (reported)[4]:
FY 2010: 42%;
FY 2009: 45%;
FY 2008: 42%;
FY 2007: 38%;
FY 2006: 39%.
ADR[5] (cases used):
FY 2010: 159;
FY 2009: 149;
FY 2008: 78;
FY 2007: 62;
FY 2006: 91.
ADR Success Rate[6]:
FY 2010: 80%;
FY 2009: 93%;
FY 2008: 78%;
FY 2007: 85%;
FY 2006: 96%.
Hearings[7]:
FY 2010: 10% (61 cases);
FY 2009: 12% (65 cases);
FY 2008: 6% (32 cases);
FY 2007: 8% (41 cases);
FY 2006: 11% (51 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 (i.e., .2, .3).
Each of these numbers is deemed a separate protest for purposes of
this chart.
[2] Of the 2,299 cases filed in FY 2010, 189 are attributable to GAO's
recently expanded bid protest jurisdiction over task orders. These 189
filings represent 61% of the total increase in filings from FY 2009 to
FY 2010 (310 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-402494, B-402966.2, B-403746:
November 23, 2010:
Congressional Committees:
Subject: DGR Assocs., Inc., B-402494, May 14, 2010, 2010 CPD ¶ 115,
Rice Servs., Inc., B-402966.2, Sept. 16, 2010, 2010 CPD ¶ 217, and
Rice Servs., Inc., B-403746, Sept. 16, 2010, 2010 CPD ¶ 220.
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 procurements, including
the circumstances surrounding the failure of the contracting agency to
implement the recommendation made in the decision.
Last fiscal year, on October 23, 2009, we reported to the Committee
that the Department of the Army had failed to implement the
recommendation for corrective action in our Office's decision
sustaining the protest of Mission Critical Solutions, B-401057, May 4,
2009, 2009 CPD ¶ 148. In that decision, we concluded that the
Historically Underutilized Business Zone (HUBZone) statute mandated a
HUBZone set-aside or award where certain enumerated conditions were
met, and that the Army had failed to reasonably consider whether those
conditions were met prior to proceeding with a non-HUBZone small
business award. We recommended that the agency reconsider whether the
conditions enumerated in the HUBZone statute were met, and if so,
terminate the award and make a new award to a HUBZone small business.
The Army initially indicated that it would comply with our
recommendation, however, the Army subsequently advised our Office that
it would not follow our recommendation in reliance on an August 21,
2009 Memorandum Opinion by the Office of the Deputy Assistant Attorney
General, Office of Legal Counsel, Department of Justice (DOJ),
disagreeing with our interpretation of the HUBZone statute. For
further details on the circumstances of the Mission Critical Solutions
protest and DOJ Memorandum Opinion, please see our Office's October 23
report to the Committee.
During fiscal year 2010, there were three further occurrences in which
an agency declined to consider whether to set aside procurements for
HUBZone small business firms. contrary to our Office's decisions, in
reliance or the DOJ Memorandum Opinion: DGR Assocs., Inc.; B-402494,
May 14, 2010 CDP ¶ 115, Rice Servs., Inc., B-402966.2, Sept. 16, 2010
CPD ¶ 217, and Rice Servs., Inc., B-403746, Sept. 16, 2010, 2010 CPD ¶
220. Our Office sustained each protest, and in each case recommended
that the agency consider whether the conditions in the HUBZone statute
were met, and if so, set aside the procurement for competition
restricted to HUBZone small businesses. In each case, the agency
declined to follow our recommendation, again citing the DOJ Memorandum
Opinion.
As stated in our October 23 report to the Committee, in a September
14, 2009 letter to various Congressional Committees our Office
explained that our conclusion regarding the HUBZone statute was
strictly a legal determination and was 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.
We also 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.
On September 27, 2010, the enactment of the Small Business Jobs Act of
2010 provided statutory guidance clarifying this matter, providing for
parity between the various small business programs by striking
mandatory language in the HUBZone statute and inserting discretionary
language. See Pub. L. No. 111-240, § 1347(c).
Enclosed for your review are copies of our decisions in the protests
and our Office's October 23, 2009 report to the Committee.
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:
Decision:
Matter of: DGR Associates, Inc.
File: B-402494:
Date: May 14, 2010:
Darcy Hennessy, Esq., Hennessy and Boe, PA, for the protester.
S. Lane Tucker, Esq., Stoel Rives LLP; Wayne A. Keup, Esq.; and
William K. Walker, Esq., Walker Reausaw for the intervenors.
Christopher S. Cole, Esq., Department of the Air Force, for the agency.
Cherie J. Owen, Esq., and Edward T. Goldstein, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
Digest:
Given the unambiguous language of the applicable statutes regarding
the Historically Underutilized Business Zone (HUBZone) and 8(a)
programs, contracting agency, before proceeding with an 8(a) set-
aside, must first reasonably consider whether the conditions for a
HUBZone set-aside exist, and, if they do, the agency must proceed with
a HUBZone set-aside.
Decision:
DGR Associates, Inc. of Dallas, Texas, a Historically Underutilized
Business Zone (HUBZone) small business concern, protests the terms of
request for proposals (RFP) No. FA5004-10-D-0001, issued by the
Department of the Air Force for military family housing maintenance.
DGR argues that the Air Force should have issued the
solicitation as a HUBZone set-aside rather than setting it aside under
the 8(a) program.
We sustain the protest.
Background:
The Air Force, on December 22, 2009, issued the RFP as a set-aside for
8(a) small business concerns. The RFP contemplates the award of a
fixed-price requirements contract for maintenance, inspection, and
repair services for military family housing (MFH) at Eielson Air Force
Base, Alaska.[Footnote 1] Specifically, the successful offeror will be
required to provide all management, supervision, personnel, labor,
equipment, vehicles, service calls, materials, tools, and other items
and services necessary for maintenance of the 1,184 MFH units located
on the base.
On January 22, 2010, DGR filed art agency-level protest challenging,
among other things, the agency's decision not to set aside the
procurement for HUBZone small businesses. The agency decided to
proceed with the solicitation's closing date without amending the
solicitation, and this protest followed.
Discussion:
DGR argues that the agency's decision to set aside the procurement for
8(a) small businesses was improper, and that the agency instead was
required to set aside the procurement for HUBZone small businesses. In
this regard, DGR cites several decisions issued by our Office
interpreting the applicable statutes as requiring an agency to set
aside a solicitation for HUBZone small business concerns where the
standards of that program are satisfied. As explained in our
decisions, the plain language of the statute authorizing the HUBZone
program is mandatory and requires that an agency set aside a
procurement when certain criteria are met (specifically, where the
agency has a reasonable expectation of receiving offers from at least
two qualified HUBZone small business concerns and where the award can
be made at a fair market price), whereas the plain language of the
authorizing statute for the 8(a) program leaves the agency with
discretion to set aside the procurement. See Mission Critical
Solutions, B-401057, May 4, 2009, 2009 CPD 93 at 3-8, recon. denied,
Small Business Admin.--Recon., B-401057.2, July 6, 2009, 2009 CPD I
148 at 5.
The Air Force acknowledges our decisions, but contends that its
actions are consistent with a Memorandum Opinion by the Office of the
Deputy Assistant Attorney General, Office of Legal Counsel, Department
of Justice (D0J), stating its disagreement with our decisions and
concluding that the Small Business Act "does not compel SBA [the Small
Business Administration] to prioritize the HUBZone Program in the
manner GAO determined to be required." DOJ Memorandum Opinion, Aug.
21, 2009, at 2. This memorandum directs Executive Branch agencies to
follow SBA's regulations placing the different categories of small
businesses on an equal footing for the competition and award of
contracts.[Footnote 2] In this regard, the DOJ
Memorandum expressly instructs that "the SBA's regulations ... are
reasonable [and are] binding on all Executive Branch agencies,
notwithstanding any GAO decisions to the contrary," and reminds
agencies that GAO decisions are not binding on the Executive Branch.
Id. at 13.
The DOJ 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. See also
Mission Critical Solutions v. United States, No. 09-864C (Fed. Cl.
Mar. 2, 2010), appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010)
(rejecting DOJ's interpretation of the HUBZone statute and concluding,
consistent with our decisions in Mission Critical Solutions, B-401057,
supra, that the language of the HUBZone statute is mandatory, such
that a contract opportunity must be set aside for competition among
qualified HUBZone small business concerns whenever the criteria set
out in 15 U.S.C. § 657a are met). Thus, we conclude that the Air Force
was required to first consider whether the conditions for setting
aside a procurement for HUBZone businesses were met, and if so, to set
aside the procurement for HUBZone small businesses. Because the agency
did not perform this mandatory step, we conclude that it was improper
for the agency to proceed with this procurement as an 8(a) set-aside,
and we sustain the protest.
Recommendation:
We recommend that the agency undertake reasonable efforts to ascertain
whether it will receive offers from at least two HUBZone concerns and
award will be made at a fair market price. If the agency's research
indicates that these conditions are met, the agency should cancel the
current solicitation and reissue it as a HUBZone set-aside. We also
recommend that the agency reimburse the protester its costs of filing
and pursuing the protest, including reasonable attorneys' fees.
[Footnote 3] 4 C.F.R. § 21.8(d)(1) (2009).
In making our recommendation, we recognize, as the Air Force has noted
and the DOJ memorandum indicates, that the recommendations in our bid
protest decisions are not binding on Executive Branch agencies. Small
Business Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478
U.S. 714, 727-32 (1986)). This fact, however, does not affect our
statutory obligation to decide protests concerning alleged violations
of procurement statutes and regulations. See 31 U.S.C. § 3552 (2006).
We have clearly stated our view on the proper interpretation of the
HUBZone statute, and we recognize that the Executive Branch has
resolved to apply its own, contrary interpretation of the HUBZone
statute. Accordingly, absent some change in the statutory scheme,
Executive Branch policy, or a contrary decision by the United States
Court of Appeals for the Federal Circuit in connection with the
Justice Department's appeal of the decision in Mission Critical
Solutions v. United States, supra, we will decide future protests
raising the issue here in an expedited and summary manner, in the
interest of reducing the costs associated with filing and pursuing
such protests.
The protest is sustained.
Lynn H. Gibson:
Acting General Counsel:
[End of section]
Comptroller General of the United States:
United States Government Accountability Office:
Washington, DC 20548:
Decision:
Matter of: Rice Services, Inc.
File: B-402966.2:
Date: September 16, 2010:
William R. Purdy, Esq., Bradley Arant Boult Cummings LLP, for the
protester. Helen J.S. White, Esq., Defense Commissary Agency, 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:
In accordance with DGR Assocs., Inc., B-402494, May 14, 2010, 2010 CPD
11 115, protest is summarily sustained where contracting agency
declined to consider whether to set aside solicitation for competition
limited to Historically Underutilized Business Zone small business
concerns in reliance on the August 21, 2009 Memorandum Opinion by the
Office of the Deputy Assistant Attorney General, Office of Legal
Counsel, Department of Justice.
Decision:
Rice Services, Inc., of Smithville, Tennessee, a Historically
Underutilized Business Zone (HUBZone) small business concern, protests
the terms of solicitation No. HDEC08-10-R-0018, issued as a set-aside
for service-disabled veteran-owned small business concerns (SDVOSBC)
by the Defense Commissary Agency (DeCA) for shelf stocking and
custodial services at the Davis-Monthan Air Force Base Commissary.
We sustain the protest.
DeCA issued the solicitation on July 30, 2010, as a total set-aside
for SDVOSBCs. Rice Services filed this protest on August 16, arguing
that the procurement should instead be set aside for competition
limited to HUBZone small business concerns. In this regard, Rice
Services asserts that the conditions for a mandatory HUBZone set-aside
exist, citing the HUBZone statute, 15 U.S.C. § 657a, Federal
Acquisition Regulation (FAR) § 19.1305(a), and our decision in DGR
Assocs., Inc., B-402494, May 14, 2010, 2010 CPD 1f 115.
Our Office has considered this issue in several prior protests,
including DGR Assocs., Inc., supra; Mission Critical Solutions, B-
401057, May 4, 2009, 2009 CPD 93, recon. denied, Small Business
Admin.--Recon., B-401057.2, July 6, 2009, 2009 CPD 11 148; and
International Program Group, Inc., B-400278, B-400308, Sept. 19, 2008,
2008 CPD ¶ 172. In each decision, our Office has concluded that the
HUBZone statute requires procuring agencies to set aside procurements
for HUBZone small business concerns when the conditions set forth in
the statute are met.
In our most recent decision on this issue, DGR Assocs., Inc., the
agency explained that it had decided not to set aside the procurement
for HUBZone small business concerns in reliance on a Memorandum
Opinion by the Office of the Deputy Assistant Attorney General, Office
of Legal Counsel, Department of Justice (D0J), stating disagreement
with our decisions and concluding that the Small Business Act does not
require the prioritization of the HUBZone program in the manner that
our Office has determined. See DOJ Memorandum Opinion, Aug. 21, 2009,
at 2. The DOJ Memorandum states that "the SBA's regulations [creating
parity between the HUBZone program and other small business set-aside
programs] ... are reasonable [and are] binding on all Executive Branch
agencies, notwithstanding any GAO decisions to the contrary." Id. at
13.
The DOJ Memorandum notwithstanding, our Office concluded in DGR
Assocs., Inc., as in prior decisions, that the plain language of the
HUBZone statute requires an agency to set aside an acquisition for
competition restricted to qualified HUBZone small business concerns
where the conditions set forth in the HUBZone statute are met. We also
advised that, going forward, protests raising the sole issue of
HUBZone set-aside priority would be addressed in an "expedited and
summary manner" where the agency acted contrary to our decisions in
reliance on the DOJ Memorandum Opinion. DGR Assocs., Inc., supra, at
4.
Accordingly, after Rice Services filed its current protest, we
requested that DeCA inform our Office whether it had acted in reliance
on the DOJ Memorandum Opinion. DeCA responded that "in issuing the
solicitation for SDVOSBC, the Agency [acted] in reliance on the
Memorandum Opinion issued by the Office of the Deputy Assistant
Attorney General, Office of Legal Counsel, Department of Justice,
which concluded that there is no statutory requirement to prioritize
the HUBZone program." DeCA Response, Aug. 18, 2010, at 1.
As explained in our prior decision, we 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. See also Mission Critical
Solutions v. United States, No. 09-864C (Fed. Cl. Mar. 2, 2010),
appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010) (rejecting
D0J's interpretation of the HUBZone statute and concluding, consistent
with our decision in Mission Critical Solutions, B-401057, supra, that
the language of the HUBZone statute is mandatory, such that a contract
opportunity must be set aside for competition among qualified HUBZone
small business concerns whenever the criteria set out in 15 U.S.C. §
657a are met). Thus, we conclude that DeCA was required to consider
whether the conditions for setting aside a procurement for HUBZone
small business concerns were met, and if so, to set aside the
procurement for HUBZone small businesses. Because the agency did not
perform this mandatory step, we conclude that it was improper for the
agency to proceed with this procurement as an SDVOSBC set-aside.
Recommendation:
In making our recommendation, we recognize, as the DOJ Memorandum
Opinion indicates, that the recommendations in our bid protest
decisions are not binding on Executive Branch agencies. Small Business
Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478 U.S. 714,
727-32 (1986)). This fact, however, does not affect our statutory
obligation to decide protests concerning alleged violations of
procurement statutes and regulations. See 31 U.S.C. § 3552 (2006).
Accordingly, we recommend that the agency undertake reasonable efforts
to ascertain whether it will receive offers from at least two HUBZone
concerns and award will be made at a fair market price. If the
agency's research indicates that these conditions are met, the agency
should cancel the current solicitation and reissue it as a HUBZone set-
aside. We also recommend that the agency reimburse the protester its
costs of filing and pursuing the protest, including reasonable
attorneys' fees. 4 C.F.R. § 21.8(d)(1) (2010). Rice Services should
submit its claim for protest costs directly to DeCA within 60 days of
receipt of this decision.
The protest is sustained.
Lynn H. Gibson:
Acting General Counsel:
[End of section]
Comptroller General of the United States:
United States Government Accountability Office:
Washington, DC 20548:
Decision:
Matter of: Rice Services, Inc.
File: B-403746:
Date: September 16, 2010:
William R. Purdy, Esq., Bradley Arant Boult Cummings LLP, for the
protester. LTC Won K. Lee and Christopher S. Cole, Esq., Department of
the Air Force, 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:
In accordance with DGR Assocs., Inc., B-402494, May 14, 2010, 2010 CPD
¶ 115, protest is summarily sustained where contracting agency
declined to consider whether to set aside solicitation for competition
limited to Historically Underutilized Business Zone small business
concerns in reliance on the August 21, 2009 Memorandum Opinion by the
Office of the Deputy Assistant Attorney General, Office of Legal
Counsel, Department of Justice.
Decision:
Rice Services, Inc., of Smithville, Tennessee, a Historically
Underutilized Business Zone (HUBZone) small business concern, protests
the terms of solicitation No. FA4800-10-R-0003, issued by the
Department of the Air Force for mess attendant services at Langley Air
Force Base, Virginia.
We sustain the protest.
The Air Force issued the solicitation on August 16, 2010, as a set-
aside for competition among section 8(a) small business concerns. Rice
Services filed this protest on August 31, arguing that the procurement
should instead be set aside for competition limited to HUBZone small
business concerns. In this regard, Rice Services asserts that the
conditions for a mandatory HUBZone set-aside exist, citing the HUBZone
statute, 15 U.S.C. § 657a, Federal Acquisition Regulation (FAR)
§ 19.1305(a), and our decision in DGR Assocs., Inc., B-402494, May 14,
2010, 2010 CPD if 115.
Our Office has considered this issue in several prior protests,
including DGR Assocs., Inc., supra (which also involved a procurement
by the Air Force); Mission Critical Solutions, B-401057, May 4, 2009,
2009 CPD ¶ 93, recon. denied, Small Business Admin.--Recon., B-
401057.2, July 6, 2009, 2009 CPD 148; and International Program Group,
Inc., B-400278, B-400308, Sept. 19, 2008, 2008 CPD ¶ 172. In each
decision, our Office has concluded that the HUBZone statute requires
procuring agencies to set aside procurements for HUBZone small
business concerns when the conditions set forth in the statute are
met.
In our most recent decision on this issue, DGR Assocs., Inc., the Air
Force explained that it had decided not to set aside the procurement
for HUBZone small business concerns in reliance on a Memorandum
Opinion by the Office of the Deputy Assistant Attorney General, Office
of Legal Counsel, Department of Justice (D0J), stating disagreement
with our decisions and concluding that the Small Business Act does not
require the prioritization of the HUBZone program in the manner that
our Office has determined. See DOJ Memorandum Opinion, Aug. 21, 2009,
at 2. The DOJ Memorandum states that "the SBA's regulations [creating
parity between the HUBZone program and other small business set-aside
programs] ... are reasonable [and are] binding on all Executive Branch
agencies, notwithstanding any GAO decisions to the contrary." Id. at
13.
The DOJ Memorandum notwithstanding, our Office concluded in DGR
Assocs., Inc., as in prior decisions, that the plain language of the
HUBZone statute requires an agency to set aside an acquisition for
competition restricted to qualified HUBZone small business concerns
where the conditions set forth in the HUBZone statute are met. We also
advised that, going forward, protests raising the sole issue of
HUBZone set-aside priority would be addressed in an "expedited and
summary manner" where the agency acted contrary to our decisions in
reliance on the DOJ Memorandum Opinion. DGR Assocs., Inc., supra, at
4.
Accordingly, after Rice Services filed its current protest, we
requested that the Air Force inform our Office whether it had acted in
reliance on the DOJ Memorandum Opinion. The Air Force responded that
"[consistent] with our prior position, the Air Force intends to follow
the Memorandum Opinion issued by the Office of the Deputy Assistant
Attorney General, Office of Legal Counsel, Department of Justice,
concluding that there is no statutory requirement to prioritize the
HUBZone small business program." Air Force Letter to GAO, Sept. 10,
2010, at 1.
As explained in our prior decisions, we 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. See also Mission Critical
Solutions v. United States, No. 09-864C (Fed. Cl. Mar. 2, 2010),
appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010) (rejecting
DOJ's interpretation of the HUBZone statute and concluding, consistent
with our decision in Mission Critical Solutions, B-401057, supra, that
the language of the HUBZone statute is mandatory, such that a contract
opportunity must be set aside for competition among qualified HUBZone
small business concerns whenever the criteria set out in 15 U.S.C. §
657a are met). Thus, we conclude that the Air Force was required to
consider whether the conditions for setting aside a procurement for
HUBZone small business concerns were met, and if so, to set aside the
procurement for HUBZone small businesses. Because the agency did not
perform this mandatory step, we conclude that it was improper for the
agency to proceed with this procurement as an 8(a) set-aside.
Recommendation:
In making our recommendation, we recognize, as the DOJ Memorandum
Opinion indicates, that the recommendations in our bid protest
decisions are not binding on Executive Branch agencies. Small Business
Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478 U.S. 714,
727-32 (1986)). This fact, however, does not affect our statutory
obligation to decide protests concerning alleged violations of
procurement statutes and regulations. See 31 U.S.C. § 3552 (2006).
Accordingly, we recommend that the agency undertake reasonable efforts
to ascertain whether it will receive offers from at least two HUBZone
concerns and award will be made at a fair market price. If the
agency's research indicates that these conditions are met, the agency
should cancel the current solicitation and reissue it as a HUBZone set-
aside. We also recommend that the agency reimburse the protester its
costs of filing and pursuing the protest, including reasonable
attorneys' fees. 4 C.F.R. § 21.8(d)(1) (2010). Rice Services should
submit its claim for protest costs directly to the Air Force within 60
days of receipt of this decision.
The protest is sustained.
Lynn H. Gibson:
Acting General Counsel:
[End of section]
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 5
93, recon. denied, Small Business Administration—Recon., B401057.2,
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, TALC 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 Zone 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 M.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 section]
Footnotes:
[1] Although services and labor were to be proposed on a fixed-price
basis, the solicitation provided a cost-reimbursement formula for
materials. RFP at 2-15.
[2] 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.
[3] DGR challenged other aspects of the RFP which it subsequently
withdrew. DGR may not recover protest costs associated with the
withdrawn issues.
[End of section]
[End of document]