Link: GAO Opinion
Agency: Department of the Army
Disposition: Protest sustained.
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.
General Counsel P.C. Highlight:
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. sect. 657a (2006), requires that the procurement be set aside for competition among HUBZone small businesses. GAO states that 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. Section 602(b)(1)(B) of the Act, 15 U.S.C. sect. 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 two qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price. GAO has interpreted this language to mean that a HUBZone set-aside is mandatory where the enumerated conditions are met. 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.
GAO has concluded 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. 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, GAO concludes 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.
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. sect. 657a(b)(2); that is, it must make reasonable efforts to ascertain whether it will receive offers from at least two HUBZone small business concerns. 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, 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.
GAO disagrees. 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 GAO’s view, a separate contract opportunity arises every time an agency prepares to award a new contract. GAO’s view is supported by SBA’s regulations, which define a contract opportunity as a situation in which a requirement for a procurement exists. 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. Accordingly, given that MCS protested to GAO within 10 days after learning that the contract opportunity at issue here had been awarded to Copper River, GAO finds 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, GAO sustains MCS’s protest. The protest is sustained.