Link: GAO Opinion
Agency: Department of the Air Force
Disposition: Protest denied.
Small Business Administration (SBA) properly accepted requirement for operations, maintenance and support of an Air Force range into the 8(a) program without determining whether acceptance would have an adverse impact on an existing small business that had been performing similar services at the range where based on the record there is no reason to object to the SBA and the Air Force decision that the services to be obtained under the 8(a) program constituted a new requirement.
General Counsel P.C. Highlight:
AHNTECH argues that AFSOC’s use of the 8(a) program was improper and that an adverse impact determination was required but not done. Section 8(a) of the Small Business Act authorizes the SBA to contract with other government agencies and to arrange for the performance of those contracts via subcontracts awarded to socially and economically disadvantaged small businesses. The Act affords the SBA and contracting agencies broad discretion in selecting procurements for the 8(a) program; GAO will not consider a protest challenging a decision to procure under the 8(a) program absent a showing of possible bad faith on the part of government officials or that regulations may have been violated. Under the Small Business Act’s implementing regulations, the SBA is precluded from accepting into the 8(a) program a procurement for which the contracting agency had previously “issued a solicitation for or otherwise expressed publicly a clear intent to reserve the procurement as a small business or small disadvantaged business set-aside prior to offering the requirement to SBA for award as an 8(a) contract . . . [except] under extraordinary circumstances.” Moreover, these regulations preclude the SBA from accepting any procurement for award as an 8(a) contract if doing so would have an adverse impact on an individual small business, a group of small businesses in a specific geographical location, or other small business programs.
AHNTECH first argues that the SBA’s acceptance of the Melrose Range requirement under the 8(a) program was contrary to its regulations because the Air Force previously expressed a clear intent to reserve the requirement for small businesses by virtue of its obtaining these services from a small business for the last 8 years. In this regard, AHNTECH asserts that this history should be enough evidence for GAO to interpret the SBA’s regulations to include circumstances where a requirement has been, as it alleges the Melrose Range requirement was, historically set aside for small businesses. The SBA states that it determined that AFSOC did not intend to reserve this requirement for small businesses since it did not issue a solicitation for the pending Melrose Range requirement as a small business set-aside, nor did it issue a pre-solicitation notice or synopsis expressing its intent to solicit offers for the pending requirement. In addition, the SBA does not support AHNTECH’s argument that 13 C.F.R. sect. 124.504(a), by its language, applies merely because a requirement has been historically set aside for small businesses. Further, GAO will not interpret the regulation’s language to preclude the removal of a requirement for the 8(a) program that was allegedly historically set-aside for small businesses. As the agency responsible for promulgating the applicable regulations, the SBA’s interpretation of the regulations, that is, what constitutes “express[ing] a clear intent to reserve the requirement for small businesses,” deserves great weight, and GAO defers to the SBA’s interpretation so long as that interpretation is reasonable. AHNTECH has provided no basis for us to disagree with the SBA’s interpretation of 13 C.F.R. sect. 124.504(a) as not including requirements that were allegedly historically set-aside for small businesses.
Additionally, AHNTECH claims that the SBA was required, but failed, to perform an analysis as to whether the 8(a) award would have an adverse impact on individual small business, a group of small businesses in a specific geographical location, or other small business programs as was required by 13 C.F.R. sect. 124.504(c). The adverse impact concept is designed to protect small business concerns that are performing government contracts awarded outside the 8(a) program. The SBA presumes adverse impact to exist where the small business concern has performed the specific requirement for at least 24 months; the small business is performing the requirement at the time it is offered to the 8(a) program, or its performance of the requirement ended within 30 days of the procuring activity’s offer of the requirement to the 8(a) program; and the dollar value of the requirement that the small business is or was performing is 25 percent or more of its most recent annual gross sales.
The Air Force and the SBA assert that an adverse impact analysis was not required because AFSOC’s Melrose Range requirement was considered to be a new requirement. In this regard, the SBA’s regulations provide that the “SBA need not perform an impact determination where a new requirement is offered to the 8(a) [business development] program.” The SBA’s regulations define a “new requirement” as a requirement that has not previously been procured by the relevant procuring activity. The rationale for exempting new requirements from adverse impact analysis under the SBA’s regulations is that “[w]here a requirement is new, no small business could have previously performed the requirement and, thus, SBA’s acceptance of the requirement for the 8(a) [business development] program will not adversely impact any small business.” The regulations further provide that “[t]he expansion or modification of an existing requirement will be considered a new requirement where the magnitude of change is significant enough to cause a price adjustment of at least 25 percent (adjusted for inflation) or to require significant additional or different types of capabilities or work.”
The Air Force and the SBA disagree with AHNTECH’s assertion that its work under the ACC contracts was substantially similar to the AFSOC Melrose Range requirements to be obtained under the 8(a) program. The SBA’s analysis established that AHNTECH’s contracts were awarded by ACC and the pending requirement will be awarded by AFSOC; that ACC and AFSOC have different missions; and that as a result AFSOC will use the Melrose Range in a different manner, which will require different operations, maintenance and support services. The Air Force has explained the significant difference in the missions of ACC and AFSOC and how this relates to the range and support services required. Moreover, the SBA has confirmed the Air Force’s analysis finding a difference in value between the AFSOC requirement and the ACC requirement as much greater than the 25 percent required to meet the regulation’s new requirement definition for the expansion or modification of existing requirements. AHNTECH has not rebutted the Air Force’s and the SBA’s explanation regarding the differences between those previously performed by AHNTECH and those contemplated under this 8(a) contract. For example, AFSOC requires support for new aircraft not currently operated on the Melrose Range, use by special operations ground troops, and live fire support for AC-130 gunships. COS at 3-4; AR Tab 2.1, AFSOC/A3 Statement of Work Analysis. Under these circumstances, GAO has no basis to object to the SBA’s and Air Force’s analyses and interpretation as to why the Melrose Range requirement to be obtained under the 8(a) program was new. Thus, GAO finds that the SBA properly accepted AFSOC’s Melrose Range requirement into the 8(a) program without an adverse impact analysis. The protest is denied.