One day back when I was in fourth grade, my teacher informed our class that Thomas Jefferson had never been a United States president.  I marched to the back of the classroom, pulled out the Encyclopedia Britannica, and quickly proved that Mr. Jefferson had, in fact, served in our nation’s highest office, leading to a chorus of laughter among the fourth graders of Winship Elementary.  After all, it’s rather amusing to find out that the person in charge got it wrong.  (No wonder my teacher never liked me very much after that stunt).

In a recent GAO bid protest decision, both the procuring agency and the SBA initially got it wrong, too, by erroneously relying on outdated regulations to argue that the agency need not consider a SDVOSB set-aside before awarding a small business set-aside contract.  Fortunately for SDVOSBs, the GAO set matters straight.

The GAO’s decision in Split Rock, Inc.–Costs, B-404892.2 (June 25, 2012), involved a SDVOSB protester’s efforts to recover the costs of filing a successful bid protest with the GAO.  That successful GAO bid protest involved a Defense Information Systems Agency solicitation for information manager engineering support services.  DISA originally issued the solicitation as a small business set-aside.  Split Rock, Inc., a SDVOSB, filed a GAO bid protest, arguing that DISA should have considered a SDVOSB set-aside before issuing the contract as a small business set-aside.

DISA responded by arguing that  under the SBA’s regulations, a contracting officer could–but need not–consider a set-aside for SDVOSBs, HUBZone participants, or 8(a) program participants before issuing a small business set-aside contract.  The SBA also weighed in, supporting DISA’s position.

The GAO, however, noticed a flaw in the reasoning of both DISA and the SBA: one month before the solicitation was issued, the SBA had amended its regulations to require that a contracting officer consider a SDVOSB, 8(a) or HUBZone set-aside before setting-aside the requirement for small businesses.  Both DISA and the SBA had been relying on the outdated regulation.

The GAO asked the SBA to re-evaluate the matter in the context of the amended regulation.  The SBA responded that its earlier position had been a mistake, and that under the new regulation, DISA had been required to consider a SDVOSB set-aside before issuing the solicitation as a small business-set-aside.  The next day, DISA voluntarily took corrective action, stating that it would conduct market research to determine whether a SDVOSB, HUBZone, or 8(a) set-aside was appropriate.

The GAO’s decision in Split Rock (and the SBA’s position that its regulations definitely require consideration of SDVOSB, HUBZone, and 8(a) set-asides) is good news for SDVOSBs, as well as companies participating in the 8(a) and HUBZone programs.  Despite initial mistakes about the applicable regulation, everyone eventually got it right–just like my fourth grade teacher, who, I imagine, still recalls the identity of our country’s third president.