Link: GAO Opinion
Agency: Small Business Administration
Disposition: Request denied.
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, B-401057, 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.
General Counsel P.C. Highlight:
The Small Business Administration (SBA) asks that GAO reconsider its decision in Mission Critical Solutions, B-401057, May 4, 2009, in which GAO 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’s three arguments are as follows: (1) that the decision overstepped the statutory authority granted to the 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. GAO preliminarily stated that the Bid Protest Regulations require that a party requesting reconsideration must show that GAO’s prior decision contains errors of either fact or law, or must present information not previously considered that warrants reversal or modification of our decision. GAO will not consider a request for reconsideration based on repetition of arguments previously raised.
As for the first arguments, GAO states that the jurisdiction of GAO to hear bid protests is established by the Competition in Contracting Act of 1984 (CICA), 31 U.S.C. sections 3551-3556 (2006). Under CICA, GAO has the authority to determine whether [a] solicitation, proposed award, or award complies with statute and regulation. As the SBA notes, bid protest decisions by GAO–an independent, nonpartisan, legislative branch agency–are not binding on executive branch agencies. Instead, GOA’s authorizing statute requires that if it concludes that an agency action violates a procurement law or regulation, GAO shall recommend that the Federal agency take actions such as terminat[ing] the contract, or award[ing] a contract consistent with the requirements of such statute and regulation. Upon receipt of such a recommendation from GAO, the executive branch agency is required to advise the Comptroller General by letter if the agency does not implement GAO’s recommendation. The Comptroller General is required to report to the cognizant congressional committees each instance in which a federal agency did not implement our recommendation.
GAO’s 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. Both the district court and the appellate court decisions cited by the SBA reached precisely the same conclusion. With respect to the SBA’s concerns about its regulation, GAO acknowledged in its decision that its 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. sections 126.605, 126.606, and 126.607. Nonetheless, as GAO 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.
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. GAO addressed this argument in its decision, noting that the SBA had not provided information to support its position. Further, GAO 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 has non-mandatory set-aside requirements. GAO finds 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, GAO would not see a basis to interpret the notwithstanding language in a way that does not give effect to its plain meaning.
Finally, the SBA contends that GAO’s decision misinterpreted the holdings of the two Contract Management decisions. 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. 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. The SBA argues that GAO’s decision ignored the court’s conclusion that its regulations were reasonable implementations of congressional intent that the two programs be given parity.
In GAO’s 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. As mentioned, 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. Accordingly, GAO finds its decision is consistent with both of the Contract Management decisions. To the extent the SBA continues to argue that GAO’s decision was in error, GAO finds no basis to reconsider its decision.