Agency: Defense Logistics Agency
Disposition: Protest Sustained in Part, Dismissed in Part, and Denied in Part
Decided: August 23, 2018
Keywords: Small Business Set-Asides, Rule of Two
General Counsel P.C. Highlight: When seeking requests for proposals in a by-CLIN basis, agencies must consider the value of each CLIN when assessing whether it qualifies for a small business set aside.
Summary of Facts
The Defense Logistics Agency (DLA) issued a request for proposals (RFP) on May 1, 2018, pursuant to Federal Acquisition Regulation (FAR) part 12, the commercial item acquisition procedures, and the simplified acquisition procedures of FAR part 13. The solicitation covered the delivery of fuel to locations in Connecticut, Maine, Massachusetts, Rhode Island, and Vermont. Included in the solicitation were 10 contract line item numbers (CLINs), each calling for the delivery of fuel to specific locations. Proposals could be submitted on a by-CLIN basis. The award called for fixed price indefinite delivery contracts with economic price adjustments. The contracts would be awarded on a CLIN basis to the lowest price technically acceptable offer.
Prior to the time the proposals were due, AeroSage filed a protest.
Basis of Protest
AeroSage protested the solicitation on several grounds. As to the successful portion of the protest, AeroSage argued the DLA improperly failed to set aside the solicitation for small business concerns. AeroSage pointed to the Small Business Act, which requires acquisitions under $150,000 be reserved for small businesses. AeroSage noted that due to the size of the tanks, and tank storage capacities at certain sites identified in the RFP, any individual purchase order would necessarily be less than $150,000. As such, AeroSage argued those CLINS, 0004 and 0009, should have been subject to the rules for Small Business set asides.
The Agency argued that although individually 2 of the 10 CLINs were valued at less than $150,000, the aggregate amount of the CLINs exceeded the $150,000 simplified acquisition threshold.
DLA argued it properly concluded there was no reasonable expectation at least two small business concerns would make offers at a fair and reasonable price. Therefore, it argued it was not bound to set aside CLINs under the solicitation. The agency pointed out that the Small Business Administration’s (SBA) procurement center representative (PCR) agreed with its conclusion not to set aside the procurement. Additionally, the DLA provided the GAO with a copy of the small business coordination record. This record detailed the market research performed by the agency. It was signed by the SBA PCR.
The GAO’s decision noted that contracting officers are bound to make “every reasonable effort” to locate small businesses to maximize small business participation. In reviewing the record, the GAO concluded the agency’s determination regarding CLINs 0004 and 0009 was not based on complete information. The record documenting the agency’s market research made clear the agency failed to consider the value of CLINs 0004 and 0009 individually. Instead, the agency relied on the aggregated value of all 10 CLINs. The aggregated value of the CLINs triggered the non-manufacturer rule. The non-manufacturer rule requires an offeror proposing to provide a product that it did not personally manufacture, it must provide the product of a small business manufacturer. It was on this basis the agency relied when determining there was no reasonable expectation at least two small business concerns would make offers at a fair and reasonable price. As such, the agency’s evaluation led to the conclusion the set aside was not required. However, the non-manufacturer rule does not apply to small business set aside line items where the value is between the micro-purchase threshold of $3,500 and the simplified acquisition threshold of $150,000. Thus, the GAO decided the agency’s decision not to set aside CLINs 0004 and 0009 was based on incomplete information and sustained the protest on that basis.
¹This case review focuses on the successful portion of the protest.