Strange But True: Small Business Protests Small Business Set-Aside

Recently, I brought you the story of a contractor protesting its own award.

Now, in the same “strange but true” category comes a GAO bid protest decision in which a small business argued that the procuring agency should not have set aside the procurement for small businesses.

The GAO’s decision in Emax Financial & Real Estate Advisory Services, LLC, B-408260 (July 25, 2013) involved a Navy solicitation for professional services.  Before the due date for proposals, Emax Financial & Real Estate Advisory Services, LLC filed a GAO bid protest challenging the terms of the solicitation.

Emax argued, in part, that the solicitation should not have been set aside for small businesses.  Although Emax itself was a small business, it argued that “setting aside the procurement for small businesses interferes with its ability to structure a team that would maximize its evaluation scores” under the solicitation’s evaluation factors.  Emax stated that had it known how the solicitation would be structured and weighted, it would not have responded to a sources sought notice seeking information about prospective offerors.

The GAO found that the Navy had appropriately issued the solicitation as a small business set-aside.  After reviewing responses to the sources sought and accompanying capability statements, the Navy had concluded that two small businesses–Emax and the incumbent–were clearly capable of performing the work.  The Navy had also determined that two other small businesses were likely capable of performing the work.  Accordingly, the “rule of two” was satisfied.  The GAO denied Emax’s protest, writing “the Navy reasonably based its set-aside decision on the capability statements it received in response to its sources sought notice.”

Unfortunately, the GAO’s written decision does not provide any more detail about why Emax challenged the set-aside designation.  However, based on Emax’s complaint about its inability to structure a more competitive team, my guess is that Emax’s concern was with the limitation on subcontracting.  Had the solicitation been issued as unrestricted, Emax would have been free to subcontract as much of the work as it liked, perhaps allowing it to bring on teammates who could bolster its scores in certain areas.  But as a small business set-aside, the solicitation limited Emax’s ability to do so.

Of course, had the solicitation been issued as unrestricted, Emax likely would face stiff competition from much larger businesses.  In such a case, Emax might have found itself thinking of the old saying “be careful what you wish for, because it might come true.”

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