GAO: Agencies Must Consider SDVOSB Set-Asides Before Issuing Small Business Set-Aside RFPs

One day back when I was in fourth grade, my teacher informed our class that Thomas Jefferson had never been a United States president.  I marched to the back of the classroom, pulled out the Encyclopedia Britannica, and quickly proved that Mr. Jefferson had, in fact, served in our nation’s highest office, leading to a chorus of laughter among the fourth graders of Winship Elementary.  After all, it’s rather amusing to find out that the person in charge got it wrong.  (No wonder my teacher never liked me very much after that stunt).

In a recent GAO bid protest decision, both the procuring agency and the SBA initially got it wrong, too, by erroneously relying on outdated regulations to argue that the agency need not consider a SDVOSB set-aside before awarding a small business set-aside contract.  Fortunately for SDVOSBs, the GAO set matters straight.

The GAO’s decision in Split Rock, Inc.–Costs, B-404892.2 (June 25, 2012), involved a SDVOSB protester’s efforts to recover the costs of filing a successful bid protest with the GAO.  That successful GAO bid protest involved a Defense Information Systems Agency solicitation for information manager engineering support services.  DISA originally issued the solicitation as a small business set-aside.  Split Rock, Inc., a SDVOSB, filed a GAO bid protest, arguing that DISA should have considered a SDVOSB set-aside before issuing the contract as a small business set-aside.

DISA responded by arguing that  under the SBA’s regulations, a contracting officer could–but need not–consider a set-aside for SDVOSBs, HUBZone participants, or 8(a) program participants before issuing a small business set-aside contract.  The SBA also weighed in, supporting DISA’s position.

The GAO, however, noticed a flaw in the reasoning of both DISA and the SBA: one month before the solicitation was issued, the SBA had amended its regulations to require that a contracting officer consider a SDVOSB, 8(a) or HUBZone set-aside before setting-aside the requirement for small businesses.  Both DISA and the SBA had been relying on the outdated regulation.

The GAO asked the SBA to re-evaluate the matter in the context of the amended regulation.  The SBA responded that its earlier position had been a mistake, and that under the new regulation, DISA had been required to consider a SDVOSB set-aside before issuing the solicitation as a small business-set-aside.  The next day, DISA voluntarily took corrective action, stating that it would conduct market research to determine whether a SDVOSB, HUBZone, or 8(a) set-aside was appropriate.

The GAO’s decision in Split Rock (and the SBA’s position that its regulations definitely require consideration of SDVOSB, HUBZone, and 8(a) set-asides) is good news for SDVOSBs, as well as companies participating in the 8(a) and HUBZone programs.  Despite initial mistakes about the applicable regulation, everyone eventually got it right–just like my fourth grade teacher, who, I imagine, still recalls the identity of our country’s third president.

2 thoughts on “GAO: Agencies Must Consider SDVOSB Set-Asides Before Issuing Small Business Set-Aside RFPs

  1. As an advocate for small and disadvantaged businesses, I see the latest GAO decision as putting even more pressure on the government contracting community because, frankly, their workforce is very poorly trained, especially when it comes to to set-aside requirements.

    Additionally, the contracting leadership in practically ALL the Federal Agencies (specially those at DoD) have been guilty of a ‘dysfunctional culture,’ which has preferred awarding contracts to established large businesses; have ignored our statutory rights and have allowed ‘abusive procurement practices’ to run rampant for years!

    In short, both the Obama Administration and the brass at all Federal Agencies have done NOTHING to eliminate our ‘barriers,’ focusing instead – since 2009 – on Outreach Activities which have failed to increase the participation of small and disadvantaged businesses in government contracting, http://bit.ly/Lh3kfX.

    This GAO decision, if anything, has even put more pressure on the contracting community to a) obey the the exclusivity of ‘simplified acquisitions (all contracts between $3,000 and $150,000 must be set-aside); b) force contracting officials and their specialists to perform due diligence, in accordance with FAR Part 10, on ALL the solicitations; c) perform ‘small business coordination through the SBA PCR community (which has been avoided when either the GSA Schedules or a reverse auction has been used as a procurement vehicle); d) avoid relying on an endemic practice – traceable to end-users or program staff – that offers preferential treatment in violation of four separate OFPP directives, http://bit.ly/Unfair_Justifications.

    Let me conclude by mentioning the ‘barriers’ involving ‘reverse auctions,’ a very promising procurement vehicle which small businesses believe it is “the future of government contracting as far as commodities are concerned.” GAO has avoided addressing several Protests involving ‘barriers’ involving reverse auctions causing FPA to call for an IG investigation with the Army, the Air Force, DHS and the VA. The issues have all been the same and they are addressed on this link, http://bit.ly/AkjTaq.

    So my final point is, transparency in urgently needed in this arena and the solution the Umbrella Initiative Think Tank has proposed is to create a public database – maintained by the private sector – to permit small businesses to report ALL alleged abusive procurement practices within the government – in a similar fashion to the database the Project on Government Oversight (POGO) created to report unethical contractors, except this database will be focused on reporting blunders, mistakes and plain incompetency. The POGO database eventually became FAPIIS, the government database that reports on contractors’ performance.

    Thank you for the opportunity to make a difference.

    Raul Espinosa
    Founder and CEO – Fairness in Procurement Alliance (FPA)
    Managing Partner – Umbrella Initiative

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