GAO: Small Businesses’ Capabilities Not Part Of Set-Aside Decision

A procuring agency is not required to evaluate whether potential small business offerors possess the capabilities to meet all of the requirements of a solicitation before issuing the solicitation as a small business set-aside, according to a recent GAO bid protest decision.

In Swank Healthcare, B-407367 (Dec. 12, 2012), the GAO denied a large business’s bid protest, holding that the procuring agency had properly issued a small business set-aside without first considering whether the small businesses it had identified as likely offerors possessed the capabilities to meet all of the requirements of the solicitation.

The Swank Healthcare GAO bid protest decision involved a VA solicitation for commercial off-the-shelf online courses.  The VA issued the solicitation using the GSA Schedule, under the procedures prescribed in FAR 8.4.

Before issuing the solicitation, the VA conducted market research and discovered five small businesses holding GSA Schedule contracts that could perform the work.  The VA then exercised its discretion under FAR 8.405-5(a) and set-aside the solicitation for small businesses.  Two small businesses ultimately submitted offers.

Swank Healthcare, a large business, filed a GAO bid protest challenging the VA’s decision to issue the solicitation as a small business set-aside.  Swank contended, in part, that the solicitation was too large and complex for a small business to perform and that the VA did not verify each small business’s ability to meet all of the requirements of the solicitation prior to making its set-aside determination.

In a brief opinion, the GAO rejected Swank’s argument, writing, “[t]here is no merit to this complaint.”  The GAO explained, “[a]gencies are not required to make actual determinations of responsibility or decisions tantamount to determinations of responsibility in determining whether to set aside a procurement.”  The GAO denied Swank’s protest.

The GAO reached the right result in Swank Healthcare.  If procuring agencies were required to investigate the responsibility of potential small business offerors before issuing a set-aside, the administrative burdens on agencies and small businesses alike would be formidable.  Especially in the wake of last year’s decrease in small business contracting, a new barrier to small business set-asides is the last thing we need.

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