SDVOSB Set-Asides: VA Properly Limited Market Research By Region, Says GAO

The U.S. Department of Veterans Affairs properly limited its SDVOSB market research to firms located in the geographic area where the contract would be performed, according to a recent GAO bid protest decision.

In an era in which many contractors bid on procurements nationally, the GAO’s rationale is debatable–but should serve as a reminder that SDVOSBs cannot take VA set-asides for granted, even when the VA does not use the Federal Supply Schedule.

The GAO’s bid protest decision in Crosstown Courier Service, Inc., B-407404 (Nov. 30, 2012), involved a VA procurement for medical courier and dry ice delivery services for the VA Salt Lake City Health Care system.  The solicitation called for the successful offeror to service VA clinics in Utah and Idaho.

Before issuing the solicitation, the contracting officer conducted market research of firms listing NAICS code 492110 (Courier Services) in CCR and the VA’s VIP database.  The contracting officer found 52 SDVOSBs in the VIP database.  However, the initial search identified only one SDVOSB in Utah, and none in Idaho.  A later search found no SDVOSBs in either state listing the applicable NAICS code.

Based on this research, the contracting officer determined that there was not a reasonable likelihood that two or more SDVOSBs would submit offers.  The VA set-aside the procurement for small businesses, not SDVOSBs.

Crosstown Courier Service, Inc., a SDVOSB located in Massachusetts, filed a GAO bid protest.  CCS pointed out that it was currently performing a similar contract in Montana, administered by the same contracting officer, and argued that the contracting officer should have recognized that CCS was likely to submit an offer.  CCS identified a SDVOSB based in Utah that CCS believed was also likely to submit an offer.

The GAO found that the VA’s market research was reasonable.  It wrote, “[w]hile the RFP did not restrict competition to firms located in this geographical area, there was nothing unreasonable in the contracting officer’s market research focusing on that area and the likelihood of whether firms from outside it would respond to the RFP.”

The GAO stated that although CCS was performing a similar contract in Montana, the contract was “not in the states encompassesd by this procurement.”  Moreover, the GAO held, because the Utah-based firm was no longer listed as a SDVOSB, even if the VA had considered CCS’s interest, there was no second SDVOSB likely to submit an offer.  The GAO denied CCS’s protest.

In my view, the VA’s geography-based market research, and the GAO’s decision affirming it as reasonable, are certainly debatable.  After all, many contractors pursue government contracts nationally or in wide swaths of the country.

CCS, a New England company, is a good example: it was performing a similar contract in Montana, and interested in work in Utah and Idaho.  Perhaps no other non-local companies would have been interested in this particular procurement, but with more than 50 SDVOSBs nationwide performing these services, it seems reasonable to question whether the VA should have done more (such as issued a RFI) to determine whether it could expect offers from two or more SDVOSBs.

Unfortunately for SDVOSBs, my commentary is just part of the blogosphere, whereas the GAO’s opinions carry legal weight.  In Crosstown Courier Service, the GAO made it clear that, at least in the context of this procurement, it was perfectly reasonable for the VA to restrict its SDVOSB market research to the geographic region where the contract would be performed.  SDVOSBs should take notice, and consider notifying the VA of their interest in upcoming procurements outside their home states, to improve the odds of SDVOSB set-asides.

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