Limitations on Subcontracting: Compliance Presumed Unless Proposal Clearly Shows Otherwise

America’s criminal justice system is founded on the principle that a defendant is innocent until proven guilty. And when it comes to compliance with the limitations on subcontracting, a similar principle applies.

In a recent bid protest decision, the GAO confirmed that a small business’s proposal does not need to affirmatively demonstrate compliance with the “LoS.” Instead, compliance is presumed, unless the proposal “on its face” should lead the procuring agency to conclude that the small business will not comply.

GAO’s decision in D&G Support Services, LLC, B-419245, B-419245.3 (Jan. 6, 2021) involved a DHS RFQ seeking advisory and assistance services. The solicitation was issued under the GSA’s Professional Services Schedule as a small business set-aside. The solicitation contemplated award of a single task order on a best value basis considering technical merit, management approach, past performance and price.

D&G Support Services, LLC submitted a quotation, as did the incumbent, Mayvin, Inc. In its evaluation, DHS assigned Mayvin “High Confidence” scores on all three non-price factors. D&G, in contrast, earned a “High Confidence” for technical merit, but only “Some Confidence” for the other two non-price factors. DHS elected to award the order to Mayvin.

D&G filed a bid protest with GAO, challenging numerous aspects of the agency’s award decision.

Among its bases of protest, D&G alleged that DHS “failed to consider that Mayvin’s quotation would not comply with the solicitation’s stated limitation on subcontracting provision.” D&G argued that Mayvin’s large subcontractor, SAIC would “likely” perform more than 50 percent of the requirement.

The GAO wrote that a vendor “need not affirmatively demonstrate compliance with the subcontracting limitations in its proposal.” GAO continued:

Rather, such compliance is presumed, unless specifically negated by other language in the quotation. Accordingly, when a vendor submits a quotation in response to an RFQ that incorporates FAR clause 52.219-14, the vendor agrees to comply with the limitation, and in the absence of any contradictory language, the agency may presume that the vendor agrees to comply with the subcontracting limitations. Instead, it is the protester who bears the burden of demonstrating that the quotation should have led the agency to conclude that the vendor did not comply with this limitation.

In this case, the GAO determined, “there is nothing on the face of Mayvin’s quotation affirmatively taking exception to the subcontracting limitations or demonstrating that the firm has no intention to comply with the limitations.” The GAO rejected D&G’s argument, and ultimately denied the entire protest.

Compliance with the limitations on subcontracting is a critical piece component of most small business set-aside contracts. And occasionally, my colleagues and I have seen solicitations requiring offerors to affirmatively state how they will comply. In such a case, of course, offerors must respond to the agency’s requirement.

But as the D&G Support Services case demonstrates, in the absence of such a solicitation requirement, an offeror’s intent to comply is presumed. Unless the proposal, on its face, takes exception to the LoS, a protester is likely out of luck.

One final note: the “innocent until guilty” rule applies at the bid stage. But once a contractor has won an award and begun performance, the presumption of compliance no longer applies. During performance, the Contracting Officer and, to some extent, SBA each have authority to audit or review compliance with the limitations on subcontracting. If that happens, the contractor should be prepared to provide hard evidence of actual compliance.

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