Small Business’s FedBid Suspension Was Improper, Says GAO

The suspension of a small business’s FedBid account was improper because the matter was not referred to the SBA under the SBA’s certificate of competency procedures.

In an important decision for small businesses participating in reverse auctions, the GAO recently held that FedBid could not properly suspend a small business’s user account for a supposed lack of “business integrity,” thereby causing the small business to be ineligible to bid on a federal solicitation, without a referral to the SBA.

The GAO’s decision in Latvian Connection, LLC, B-410947 (Mar. 31, 2015) involved a Department of State solicitation for first aid kits and related medical supplies.  DOS conducted the solicitation as a reverse auction on FedBed.  The solicitation was set aside for small businesses.

Latvian Connection, LLC, wished to compete for the award.  However, in July 2014, FedBid suspended Latvian Connection’s FedBid user account.  The FedBid suspension notice stated, in part: “System and Business Integrity: Latvian Connection has taken actions to repeatedly and purposely interfere with FedBid’s business relationships.”

Since Latvian Connection’s FedBid account was suspended, it was unable to compete for the procurement.  Latvian Connection filed a GAO protest.  It argued, in part, that its exclusion from the competition was a negative responsibility determination, which should have been referred to the SBA.

DOS argued that there had never been a nonresponsibility determination because Latvian Connection never submitted a response to the solicitation.  DOS also pointed out that FedBid had suspended Latvian Connection on its own initiative, “without direction or encouragement from DOS.”

The GAO noted that, under the Small Business Act, the SBA has the authority to determine the responsibility of small businesses to receive and perform government contracts.  The Small Business Act defines “integrity” as a matter of responsibility.  Additionally, the government “may not . . . preclude any small business concern or group of such concerns” from being awarded a contract “without referring the matter for a final disposition by” the SBA.

In this case, Latvian Connection’s FedBid suspension rendered it “ineligible to respond to DOS’s solicitation, and thereby precluded from competing of being awarded a contract.”  Although FedBid is a private company, “when FedBid hosts a reverse auction on its website, it acts as an agent for the agency conducting the procurement.”

The GAO continued:

As a result, we conclude that the DOS, though its agent, FedBid, precluded Latvian Connection, a small business, from competing for, and potentially being awarded, a contract on the basis of the firm’s integrity, without referring the matter to the SBA.  This amounted to a determination of nonresponsibility, which the agency should have referred to the SBA for a COC determination.

The GAO sustained Latvian Connection’s protest.

The SBA’s COC procedures provide important protections to small businesses involved in government procurement.  No private company should have the right to unilaterally exclude a small business from federal contracting without regard to these protections.  For small businesses, the Latvian Connection decision is a resounding win.

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