HUBZone Price Preference: GAO Confirms Application to GSA Leases

The HUBZone price preference applies to GSA leasehold acquisitions, according to a GAO decision confirming a prior bid protest ruling.

In General Services Administration–Reconsideration, B-406040.2 (Oct. 24, 2012), the GSA asked the GAO to reconsider its decision in The Argos Group, LLC, B-406040 (Jan. 24, 2012), in which the GAO initially held that the HUBZone price evaluation preference applies to GSA lease acquisitions.  The GAO–with the SBA’s support–confirmed its prior ruling, holding that the GSA cannot evade the HUBZone price preference when it issues a competitive procurement to acquire a lease.

The GAO’s decision in General Services Administration–Reconsideration addressed a single question: did the GAO commit a legal error when it held, in The Argos Group, that the 10 percent HUBZone price evaluation preference applies to GSA lease acquisitions?  The GSA argued that this was the case, contending that the GAO failed to afford the GSA appropriate deference in its interpretation of the HUBZone Act, and pointing out that the HUBZone Act does not specifically reference leases.

The GAO rejected the GSA’s arguments.  With respect to deference, the GAO wrote, “while GSA is correct . . . that general deference should be afforded to an agency’s interpretation of a statute, that deference is to be afforded to the agency that is charged with administering the statute in question.”

The GAO continued: “here, the statute under consideration, the HUBZone price preference statute, creates a program to be administered by the Small Business Administration (SBA), not GSA.”  As such, the GAO held, “it is the views of SBA, rather than those of GSA, to which our Office will afford deference.”

The GAO wrote that it had carefully considered the SBA’s views, and the SBA “took the position that the HUBZone price preference is applicable to leasehold acquisitions.”  The GAO agreed, stating, “SBA’s interpretation of of the HUBZone statute is reasonable and should be upheld.”  The GAO also rejected the GSA’s other arguments, finding that nothing in the HUBZone Act precludes its application to leasehold acquisitions.

Finally, the GAO suggested that public policy supported applying the preference to leases, writing, “GSA has not explained why the interests of the federal government do not include affording qualified HUBZone small businesses enhanced contracting opportunities through application of the HUBZone price evaluation preference.”  The GAO denied the request for reconsideration, and upheld its prior ruling in The Argos Group bid protest.

The GAO’s decision in General Services Administration–Reconsideration is a good result for HUBZone small businesses.  Although the decision most immediately affects HUBZone companies competing in GSA lease procurements, the GAO’s broad view of the proper scope of the HUBZone price preference may benefit HUBZone companies in other industries.

Last but not least, kudos to the SBA for standing up for HUBZone small businesses in this case.  There is no telling what sort of inter-agency pressure the SBA may have faced, but it stood with HUBZone small businesses and refused to agree with the GSA’s narrow reading of the HUBZone price evaluation preference.  And for that, the SBA deserves credit.

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