Large Business Tossed Out For Low Subcontracting Goal

A large business was tossed out of a government competition because the company’s small business subcontracting goal was substantially below the agency’s stated goal.

In a recent bid protest decision, the GAO held that the agency acted reasonably when it rated the large business as “unacceptable” for failing to propose a sufficiently high small business subcontracting goal.

The GAO’s decision in Mission Essential Personnel, LLC, B-410431.9, B-410431.10 (March 18, 2015) involved an Army procurement for global intelligence support services.  The solicitation contemplated the award of multiple IDIQ contracts in two pools: an unrestricted pool and a small business pool.

With respect to the unrestricted pool, proposals were to be evaluated on the basis of four factors: technical approach, small business participation, past performance, and cost/price.  Under the small business participation factor, offerors were asked to complete a table identifying the extent to which they would use small businesses as first-tier subcontractors.  The table was to identify overall goals for small businesses, as well as goals for various subcategories of small businesses, such as SDVOSBs and HUBZones.

The solicitation stated that the table should reflect goals based upon the total value of all task orders awarded over the life of the contract “with the focus of meeting or exceeding . . . the Government goal of 15%” subcontracting to small businesses.

Small business participation was to be evaluated using an adjectival rating system.  The solicitation defined a rating of “unacceptable” to mean that “the offeror’s proposed Small Business Participation levels failed to remotely approach the RFP’s small business participation Objectives/goals.”

Mission Essential Personnel, LLC submitted a proposal for the unrestricted pool.  MEP proposed a subcontracting goal beneath the 15% specified in the solicitation.  (How far below is unclear because MEP’s actual proposed subcontracting goal was redacted from the GAO’s published decision).

The Army determined that any offeror that proposed less than 13% small business subcontracting would receive a deficiency under the small business participation factor.  MEP, which apparently proposed below 13%, was assigned a deficiency.  The deficiency resulted in an “unacceptable” rating under the small business participation factor.  MEP was not awarded one of the unrestricted IDIQ contracts.

MEP filed a GAO bid protest challenging the Army’s evaluation of its proposal under the small business participation factor.  MEP argued, in part, that it was improper for the Army to use a 13% subcontracting factor as the dividing line between an “unacceptable” and “marginal” proposal, given that the 13% figure was not specified in the solicitation.

The GAO disagreed.  It held that an agency may use an unstated evaluation methodology in an evaluation, so long as the methodology is reasonable and consistent with the solicitation’s evaluation scheme.  The GAO continued, “[m]oreover, the scale was consistent with the evaluation scheme disclosed in the RFP, which placed offerors on notice that a proposal would be deemed deficient and rated as unacceptable if the proposed small business participation rate was significantly beneath the agency’s small business participation goal of 15%.”

The GAO denied MEP’s protest.

For small businesses, the Mission Essential Personnel case is a heartening example of an agency taking small business participation very seriously in the course of a major procurement.  And this case isn’t the only one; other recent GAO decisions have also involved agencies using small business subcontracting as an important evaluation factor or subfactor.  Perhaps we are seeing the start of a positive trend.

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