GAO: Agency Properly Refused SBA COC Time Extension

A contracting agency is not required withhold a contract award so that the SBA has more time to process a Certificate of Competency, even when the SBA itself asks for an extension.

The Government Accountability Office decided recently that it was reasonable for an agency to move ahead with an award while the SBA was still in the process of determining the competency of a small business that lost out on the contract.

N3 Government Solutions, LLC, B-411303.2, (Sept. 9, 2015) involved a Department of Defense, Defense Threat Reduction Agency solicitation seeking proposals to provide administrative support services at several DTRA locations. The solicitation, which was set aside for SDVOSBs, stated that the evaluation would consider “the offeror’s ability to hold a TOP SECRET facility clearance at the time of proposal submission.”

N3 Government Solutions, LLC submitted the lowest bid, but the DTRA disqualified it because it had an interim Top Secret clearance rather than final clearance. The DTRA then made award to a competitor.

N3 protested the award to the GAO on the grounds that a deficiency in security clearance is responsibility factor, i.e., it relates to the businesses ability to perform the contract. As such, N3 argued, the DTRA was required the refer the matter to the SBA under its Certificate of Competency.

Responding to the protest, the DTRA told the GAO that it would take corrective action by referring the issue to the SBA so that it could consider N3 under the COC process.  The SBA received the COC on May 8, 2015.

Under the SBA’s regulations, when an agency refers a question over the responsibility of a small business to the SBA to consider issuing a COC, the contracting officer must withhold the contract award “for a period of 15 working days (or longer if agreed to by SBA and the contracting officer).  If no COC is issued in the 15-day period, and no longer period is agreed to by the SBA and contracting officer, the contracting officer is to proceed with award to the next firm in line.

The DTRA waited the requisite 15 days and on June 3, informed the SBA that it would move ahead with the contract and the original awardee. The SBA asked for nine additional days, until June 12, to consider N3’s competency. The DTRA declined the SBA’s request. The DTRA then called the original awardee and told it to resume performance of the contract. On June 12, the SBA told N3 that the DTRA had refused its request for additional time and thus no further action would be taken.

N3 filed a second GAO bid protest. This time, N3 argued that the DTRA had unreasonably denied the SBA’s request for an extension.

After discussing the “15-day” regulation, the GAO wrote, “[a]lthough the SBA asked the contracting officer to agree to more time to consider issuing a COC, there was no agreement by the contracting officer to do so.” GAO stated that the granting of such extensions is “entirely discretionary” within the contracting agency, and the GAO will not review the contracting officer’s discretion in denying an extension “absent a showing that the decision to deny the request may have been influenced by fraud or bad faith.”

Here, N3 “has not shown, or even alleged, that the failure of the SBA to complete the COC process within 15 days, or the contracting officer’s decision not to extend that time, was cased by fraud or bad faith.” The GAO denied N3’s protest.

The Certificate of Competency process provides an important protection for small businesses deemed non-responsible by a contracting agency. But as the N3 Government Solutions case demonstrates, that protection is limited. Where, as here, the SBA exceeds the 15-day time frame, the agency may proceed with award to the firm next in line–even if the SBA has requested an extension.

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