Technically Unacceptable Offeror Cannot Protest Awardee’s Size, Says OHA

In a recent size determination appeal, OHA confirmed that an offeror found technically unacceptable does not have standing to protest an awardee’s size under SBA’s regulations. As such, OHA denied the appeal and affirmed the Area Office’s size determination dismissing the size protest on such grounds.

Ekagra Partners, LLC, SBA No. SIZ-6189, 2023 (Feb. 3, 2023), involved a Department of Commerce, Enterprise Services, solicitation for Commerce Acquisition for Transformational Technology Services (CATTS), 100% set aside for small business under North American Industry Classification System (NAICS) code 541519, Other Computer Related Services, with a corresponding size standard of $30 million. The solicitation anticipated multiple-award indefinite delivery, indefinite quantity (IDIQ) contracts with a 10-year period of performance.

Upon receipt of the agency’s pre-award notice that Halvik (or Awardee) was the apparent successful offeror under the solicitation here, Ekagra filed a timely size protest with the contracting officer, alleging that the Awardee was other than small with annual revenues exceeding the $30 million size standard. As required by regulation, the contracting officer forwarded the size protest to the SBA’s Area Office. But the contracting officer also provided the Area Office with a “reference sheet” stating that “the protestor does not have an opportunity to be awarded as their proposal was Unsatisfactory.” Based on this information, the Area Office issued a size determination dismissing the protest based on lack of standing. In its dismissal, the Area Office cited the relevant SBA regulation, which states:

For SBA’s Small Business Set-Aside Program, including the Property Sales Program, or any instance in which a procurement or order has been restricted to or reserved for small businesses or a particular group of small businesses (including a partial set-aside), the following entities may file a size protest in connection with a particular procurement, sale or order:

(i) Any offeror that the contracting officer has not eliminated from consideration for any procurement-related reason, such as non-responsiveness, technical unacceptability or outside of the competitive range;

The Appeal

Ekagra (or Appellant) appealed the Area Office’s dismissal to SBA’s OHA, alleging that the Area Office had committed errors of fact and law in its determination that the Appellant lacked standing to protest the Awardee’s size. Specifically, the Appellant said the Area Office was required to suspend the size determination when five Government Accountability Office (GAO) and two Court of Federal Claims (COFC) bid protests challenging the same award were filed. The Appellant also claimed it was allowed to file its size protest because it was not notified that its proposal was found Unsatisfactory and that it was eliminated from competition until after the GAO and COFC protests were filed.

According to the Appellant, SBA has a longstanding practice of requiring an Area Office to postpone any size protests once a bid protest challenging the solicitation is filed. The Appellant said, “SBA practice and OHA precedent is to stay size protest proceedings, when there is a pending GAO protest and when corrective action has the potential to alter the outcome of the source selection.” In support of its position, the Appellant cited to one of SBA’s proposed rules, which it felt demonstrated SBA’s intent to suspend a size protest once a bid protest is filed. The Appellant also cited OHA precedent for looking to a proposed SBA rule for clarity where the regulations were “ambiguous or silent” and where “the preamble and proposed regulation clarified known, pre-existing SBA policy.” So, the Appellant’s position was “based on OHA caselaw, SBA policy, and the proposed rule, the Area Office should have postponed the size protest the same day the bid protests were filed[]” because a decision in either the COFC or GAO protests could trigger a corrective action that could alter the pre-award list of apparent successful offerors.

Additionally, the Appellant argued that the Area Office erred as a matter of law when it based its size determination on a mere assertion by the contracting officer rather than the entire record–citing the requirement that the Area Office’s decision must be based “upon the record, including reasonable inferences from the record” and must “state in writing the basis for its findings and conclusions.” As support, the Appellant relied on OHA precedent vacating an Area Office decision where OHA found the “area office based its decision solely on the CO’s vague statement.” The Appellant argued that the contracting officer’s statement in the instant case was “even more vague” than the cited precedent, and here, there was “no evidence to suggest the Area Office considered supporting documents[.]”

The Awardee’s Response

The Awardee maintained that the Area Office was correct in dismissing the size protest based on the evaluation conclusion that the Appellant’s proposal was technically unacceptable. The Awardee cited the same SBA regulation as the Area Office and OHA precedent for the assertion that “OHA’s interpretation of § 121.1001(a)(1)(i) has previously upheld area office determinations to dismiss protests for lack of standing when the concern was eliminated for technical unacceptability.” The Awardee said the Area Office was not required to postpone the size protest due to the pending bid protests, as OHA precedent on lack of standing did not require a stay pending resolution of the procurement related protest(s). Rather, the Awardee believed that the Appellant’s reliance on OHA precedent was misplaced, as OHA only requires a stay of the size protest where the agency initiates a corrective action–which was not the case here.

The Awardee noted that, here, GAO had already dismissed all pending protests “leaving no possibility for corrective action before the GAO,” and the DOJ was currently defending the bid protests at COFC, with no indication of corrective action before the COFC either. According to the Awardee, the Appellant was merely overlooking the primary issue of whether it had standing to initiate its size protest. The Awardee said, “SBA regulations and OHA precedent do not provide for tolling of a size protest pending resolution of a procurement-related protest filed by a technically unacceptable protester based on a chance the agency may take corrective action.” Additionally, the Awardee argued that the Appellant was misguided when it relied on SBA’s rules for timing–rather than the rules for standing. According to the Awardee, the proposed rule the Appellant cited was meant to clarify the timelines of size protests, leaving SBA regulations on standing unaltered.

Finally, the Awardee contested the Appellant’s assertion that the Area Office had made its size determination without evidence. According to the Awardee, the Area Office acted in good faith and properly relied upon the contracting officer’s representation of the underlying record–which was made “unequivocally” and without ” doubt or inconsistency.” The Awardee also raised OHA precedent arguing that an Area Office is allowed to dismiss a size protest based on lack of standing regardless of whether the protester was informed of its technical unacceptability.

SBA’s Agency Comment

During the appeal process, SBA filed an agency comment confirming that the proposed rule the Appellant cited was “an attempt to clarify when and how size protests are stayed in the SBA size protest process.” SBA’s explanation for the policy supported the Appellant’s stance, as SBA said, “if there is a pending parallel bid protest [,] the size protest should be stayed.” But because the GAO protests here had all been dismissed, SBA had to clarify whether the proposed rule extended to pending COFC bid protests. Again favoring the Appellant’s stance, SBA confirmed that “a COFC parallel bid protest is the functional equivalent [of] a GAO bid protest given the stated policy reasons by SBA for this type of stay.” Indeed, according to SBA, “a stay in a COFC protest and a GAO protest serve the same policy objective.” SBA did add that, to qualify for the mandated stay, “the parallel proceedings must be initiated prior to SBA issuing the size determination.” SBA added, “[f]or similar issues, SBA confirms that if the parallel litigation results in correcting the standing issue, then SBA will consider a future size protest and will start the clock for filing a new protest at the time the concern was notified of its standing.”

OHA’s Decision

OHA explained the rules at issue here, reiterating, “any offeror may initiate a size protest if the contracting officer has not eliminated [the offeror] from consideration for any procurement related reason, such as non-responsiveness, technical unacceptability or outside of the competitive range.” OHA also explained that it had “repeatedly held that offerors lack standing to initiate a size protest when it is eliminated from consideration for reasons unrelated to size (e.g., nonresponsiveness; technical unacceptability; outside the competitive range).” OHA said:

Here, when asked whether Appellant was in the competitive range and considered technically acceptable, the CO informed the Area Office that Appellant did not have an opportunity to receive an award because Appellant’s proposal was unsatisfactory. Therefore, Appellant was eliminated from competition for reasons unrelated to size. The Area Office’s dismissal was supported by clear OHA precedent, which requires the dismissal for lack of standing for a protest filed by an offeror where the procuring agency has found the proposal to be technically unacceptable.

Next, OHA addressed the Area Office’s reliance on the contracting officer’s statement. OHA distinguished the case the Appellant cited as one holding “that it was unclear whether that appellant’s proposal was technically unacceptable based on the CO’s statement.” But here, OHA found the contracting officer’s statement (that the Appellant’s proposal was technically unacceptable) was definitive, clear, and unequivocal. OHA added:

Further, neither the Area Office nor OHA have jurisdiction over the conduct of the procurement and cannot entertain Appellant’s arguments over the finding that its proposal was technically unacceptable. I cannot say it was a clear error for the Area Office to accept and act upon that information, rather than to conduct its own investigation into the CO’s finding, an investigation the Area Office has no authority to conduct. Appellant’s argument the Area Office relied upon a conclusory statement is meritless. SBA does not evaluate proposals and make determinations as to whether a proposal is satisfactory. It is the CO’s job to draw those conclusions.

As such, OHA found the Area Office did not err in relying upon the contracting officer’s statement here.

OHA then considered the Appellant’s argument that OHA precedent and SBA policy required it to postpone the size determination until the resolution of all pending bid protests. OHA said, “SBA provided the Agency Comment and agreed that under the proposed rule, the Area Office may stay a size determination if the protestor provides proof of pending and concurrent COFC or GAO bid protest.” But OHA added:

It is worth noting however, that SBA did not confess error on the part of the Area Office, and request a remand of the case, as it could, in order to conduct a new size determination. Further, SBA did not have the Area Director or any of the other SBA officials authorized to initiate a size protest do so. SBA thus does not appear to consider the Area Office in error in this case.

OHA next addressed the Appellant’s reliance upon a proposed rule for the assertion that SBA was required to stay the size protest pending the outcome of any simultaneously filed GAO protests. OHA acknowledged SBA’s stance that “GAO protests are analogous to COFC protests because they both may require corrective action which could affect the apparent successful offeror.” But OHA said, “a proposed rule is not governing authority.” And OHA distinguished the case the Appellant cited as one that actually relied on the regulatory history of a final rule (rather than a proposed rule).

OHA explained:

Here, the Area Office is not mandated under any current authority to postpone size determinations pending GAO or COFC bid protests. It is the discretion of the Area Office to make that decision, and OHA lacks the jurisdiction to mandate a postponement. Appellant argues that SBA policy requires the stay it requests. But the Agency has not taken the opportunity afforded by this case to either request a remand or initiate a new size determination, in order to carry out such a policy. The Area Office, under the existing regulation, has the discretion to determine whether to stay the proceeding, and I cannot say that it was clear error for it to decline to do so. Thus, I cannot say it was a clear error for the Area Office to dismiss Appellant’s protest, rather than stay proceedings pending decisions in COFC and GAO.

OHA also found the Appellant’s remaining arguments unavailing. Though the Appellant had maintained that the pending bid protests in COFC and GAO could lead to corrective action that could result in a new source selection decision–OHA explained that “a mere filing is no indication that these tribunals intend to order corrective action.” Finally, OHA said it did not matter whether an offeror was notified of its unacceptability, as “it is longstanding precedent that OHA does not confer standing upon those offerors who were found to be technically unacceptable, even if they had not received notice of that finding.”

OHA concluded that the Appellant did not have standing to protest the Awardee’s size. OHA said the Appellant had not established that the size determination was “based upon any clear error of fact or law[,]” and therefore, OHA denied the appeal and affirmed the size determination.

* * *

OHA’s decision here exemplifies the deference OHA gives to the Area Offices and their size determinations. Even if the Area Office could have stayed the size determination pending the resolution of all bid protests (whether GAO or COFC), OHA was not about to require the Area Office to do so absent a final rule mandating it. Additionally, even where SBA issues an agency comment in a size appeal that seems to support the appellant’s position, OHA may still find ways around that. Here, for right or for wrong, OHA essentially said that SBA could have confessed error on behalf of the Area Office and requested a new size determination–but it didn’t. So SBA must not have believed the Area Office’s dismissal was improper.

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