Small Business Set-Asides Not Required Under NETCENTS-2, Says GAO

The Air Force’s large NETCENTS-2 IDIQ vehicle did not require orders to be set-aside under the small business pool, except for orders valued between the micro-purchase threshold and simplified acquisition threshold.

In a recent decision, the GAO held that although the NETCENTS-2 contract in question says that Contracting Officers “should” perform a “rule of two” small business set-aside analysis for orders valued over the simplified acquisition threshold, it does not require that such an analysis be performed–meaning that Contracting Officers can validly award such orders to large businesses, even if two or more small business NETCENTS-2 holders exist.

Like many large IDIQs, the NETCENTS-2 IDIQ has dedicated small business pools.  The NETCENTS-2 contract for NetOps and Infrastructure gives the following instructions to Contracting Officers regarding use of the small business pool:

a.  Each acquisition of services that has an anticipated dollar value exceeding the micro-purchase threshold, but not over the simplified acquisition threshold shall be competed in the NetOps Small Business Companion Contracts pool of awardees . . . .

b.  For orders exceeding the simplified acquisition threshold the task order Contracting Officer should conduct market research to determine whether or not there is a reasonable expectation of receiving offers from at least two small business companion contractors.  If market research reveals that at least two small businesses in the Small Business Companion contract are capable of performing the work, the task order should be competed in the NetOps Small Business Companion contract pool of awardees.  If a task order is competed in the NetOps Small Business Companion contract pool of awardees and the task order contracting officer receives no offers, or no acceptable offers from a small business companion contract ID/IQ awardee, the RFP shall be withdrawn and the requirement, if still valid, shall be resolicited in the NetOps full and open pool of ID/IQ contracts awardees.

That brings us to the GAO’s decision in Technica Corporation, B-416542, B-416542.2 (Oct. 5, 2018).  The case involved a NETCENTS-2 task order issued on a sole source basis to Leidos Innovations Corporation, a large business.  Under the task order, Leidos was to provide various IT network services under a program known as the Air Force National Capital Region Information Technology requirement.

Technica Corporation, a small business, was the incumbent contractor and a NETCENTS-2 contract holder.  Technica filed a GAO bid protest challenging the sole source award to Leidos.  Among its allegations, Technica contended that the Air Force was required to set aside the order for small businesses.

The GAO wrote that FAR 16.5, which generally governs the award of task orders, says that agencies “may, at their discretion,” set aside orders for small businesses.  According to the GAO, this provision, as well as the underlying statutory authority, “make clear that agencies are not required to set aside an order for small businesses, absent specific contractual language obligating the agency to do so.”

Turning to the NETCENTS-2 contact itself, the GAO noted that “the contract states that for orders exceeding the simplified acquisition threshold, agencies ‘should’ conduct market research regarding small business vendors, and ‘should’ set aside task orders for small business vendors if there is a reasonable expectation of receiving proposals from two or more such firms.”  The GAO contrasted the use of the term “should” in this sentence with the use of the word “shall” in the paragraph discussing orders between the micro-purchase threshold and simplified acquisition threshold.  The GAO wrote:

We conclude that for orders valued above the simplified acquisition threshold, the use of the term “should” in the NETCENTS-2 contract does not require the agency to assess whether to conduct market research for the purpose of determining whether to set aside an order for small businesses, nor does the contract require the agency to set aside an order if market research shows that two or more small businesses are capable of performing the work.  Instead, these set-aside actions for orders above the simplified acquisition threshold are discretionary on the part of the agency.

The GAO denied the protest.

For small business NETCENTS-2 contract holders, the GAO’s decision in Technica Corporation is disappointing.  Even though the Air Force “should” prioritize small businesses, “should” is not the same as “shall,” and the Air Force need not conduct a rule of two analysis for orders valued over the simplified acquisition threshold.