GAO: HUBZone Price Preference Applies to GSA Lease Procurements

Is the GAO the new best friend of small businesses?  That might be going a bit too far, but in recent years, the GAO has sided with small businesses in several important bid protests regarding the scope of small business preferences and set-asides.

First, in GAO Protest of Delex Systems, Inc., B-400403 (Oct. 8, 2008), the GAO held that the small business set-aside provisions of FAR 19.502-2(b)—the so-called “rule of two”—apply to competitions for task and delivery orders under multiple-award contracts.  In GAO Protest of Aldevra, B-405271, B-405524 (Oct. 11, 2011) and GAO Protest of Kingdomware Technologies, B-405727 (Dec. 19, 2011), the GAO sided with service-disabled veteran-owned small businesses against the very federal agency created to support veterans, holding that the VA had improperly used the Federal Supply Schedule rather than set-asides for SDVOSBs.  The decision in GAO Protest of The Argos Group, LLC, B-406040 (Jan. 24, 2012), follows in this vein—and this time is a nice win for HUBZone small businesses.

In The Argos Group bid protest, the question was whether the General Services Administration was required to apply the 10 percent HUBZone price preference in an unrestricted competition for the leasing of office space.  When the GSA issued the solicitation, it stated only that the award would be made to the lowest priced responsible offeror—with no mention of the price preference.  After unsuccessfully requesting that the GSA amend the solicitation to include FAR 52.219-4, the HUBZone price preference clause, The Argos Group, LLC, filed a GAO bid protest, arguing that the GSA was required, both by statute and the FAR, to include the HUBZone price preference clause.

The GAO sustained the protest—though at first, the decision looked like it was going the other way.  The GAO agreed with the GSA that the FAR does not apply to the government’s acquisition of real property, but only to the acquisition of supplies or services.  From this, one might assume that the bid protest was over—after all, if FAR 52.219-4 did not apply, the GSA was home free.  Or was it?

The GAO next examined the HUBZone Act, the statute enacted by Congress adopting the HUBZone program, to determine whether the price preference was required even though the FAR did not apply.  In the HUBZone Act, at 15 U.S.C. § 657a(b)(3)(B), it states “in any case in which a contract is to be awarded on the basis of full and open competition,” the 10 percent HUBZone price preference applies.

From this, the GAO stated that “the HUBZone Act, on its face, does not limit the type of ‘contract’ to which it applies.”  The GAO continued, “there is little dispute that a real property lease is a ‘contract.’”  Following the logical bouncing ball, the GAO held that even though the FAR did not apply, the GSA was required under the HUBZone Act to include the HUBZone price preference in its solicitation.

The GAO’s decision in The Argos Group is a nice win for HUBZone small businesses.  Not only does it definitively provide that the HUBZone price preference is required for government leases, it is a good reminder that if a HUBZone small business sees an unrestricted solicitation without the price preference, it may have good legal grounds under the HUBZone Act to insist that the procuring agency include it.

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