GAO: HUBZone Price Preference Not Optional

When a contract contains FAR 52.219-4, the so-called “HUBZone price preference” clause, a procuring agency must apply the HUBZone price preference by adding a factor of 10 percent to the price of all other offerors, except HUBZone firms and otherwise successful small businesses.

For procuring agencies, applying the HUBZone price preference is not optional.  In GAO Protest of Explo Systems, Inc., B-404952 (July 8, 2011), the GAO sustained a bid protest because the procuring agency failed to apply the HUBZone price preference.

The Explo Systems GAO protest involved an Army solicitation for the demilitarization and disposal of ammunition.  The solicitation was unrestricted, but contained the HUBZone price preference clause.  Award was to be made on a best value basis, considering technical, past performance, price, and small business utilization.

The Army awarded the contract to General Dynamics Ordance and Tactical Systems, Inc., a large business.  Explo Systems, Inc., a HUBZone small business, was the lowest priced offeror, unadjusted for the HUBZone price preference.

Explo filed a bid protest with the GAO, arguing that the Army had improperly failed to apply the HUBZone price preference.  Explo contended that if the Army had done so, Explo’s price advantage would have been much greater, which might have altered the best value result.

The GAO agreed with Explo.  Although Explo was already the lowest-priced offeror, the GAO wrote that there is “nothing in the plain language of the statute, or the legislative history of the statute,” that limits the HUBZone price preference to cases in which a HUBZone firm is not the lowest priced offeror.  The GAO held that “the HUBZone price evaluation preference must be applied to all large business offers, not just those that are lower in price than the HUBZone offer.”  The GAO sustained Explo’s bid protest.

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