The Basics: Socioeconomic Sole Source Awards

Just last week during a Govology webinar on Women-Owned Small Businesses, one of the attendees asked my colleague Haley Claxton and I an insightful question about the different standards for giving sole source awards to participants in various government programs. She wanted to know the difference between how contracting officers go about offering an 8(a) sole source award and a WOSB sole source award.

I had to admit, the practical, ground-level, nitty gritty business of how these awards are doled out doesn’t actually come across my desk that much.

So, let’s take a look, shall we?

WOSB sole source awards

As we’ve written about before, WOSB sole source awards are discretionary, not mandatory. Contracting officers are required to consider sole source awards to WOSBs (or EDWOSBs) before small business set-asides in certain circumstances. They are laid out in FAR 19.1506.

First, the acquisition must be assigned a NAICS code in which WOSBs are substantially underrepresented (as determined by the SBA). Second, the contracting officer needs to not have a reasonable expectation that two or more WOSBs will bid on the work. Third—which includes several factors itself—the price of the contract will not exceed $4 million ($6.5 million for manufacturing), the concern is responsible, and award can be made at a fair and reasonable price.

The same standards go for sole source awards to Economically Disadvantaged WOSBs, except that the assigned NAICS code only has to have been determined to be underrepresented by WOSBs—not substantially underrepresented.

This does not apply, by the way, to work being performed out of the 8(a) program, suitable for award to the federally-owned prison corporation (Federal Prison Industries, Inc.) or the AbilityOne program, or an order under an IDIQ or FSS contract. If any of those circumstances are in place, a sole source WOSB award would be improper.

8(a) sole source awards

We started with WOSBs because that’s what the question was about, but the federal program most associated with sole source awards is probably the 8(a) Business Development Program for businesses owned by socially and economically disadvantaged individuals.

That’s because the standard for giving sole source awards to 8(a) companies is the least restrictive of all the socioeconomic categories. (The flip side of the coin is that the 8(a) program is hard to get in to, especially for individual business owners who are not presumed socially disadvantaged.)

Contracting officers may give 8(a) work to an 8(a) business on a sole source basis if they determine that the 8(a) business is responsible, will do the work at a fair market price, and the estimated cost is $4 million or less ($7 million for manufacturing). If the contract is likely to have a greater value, the contracting officer can still give a sole source award if she has no reasonable expectations that two participants will bid and the award can be made at a fair price, or the contracting officer can give a sole source award to an 8(a) entity owned by an Indian Tribe, Alaska Native Corporation (ANC) or Native Hawaiian Organization (NHO). Contracting officers can go up to $22 million on sole source awards to tribal concerns (using that term broadly) without having to justify the decision.

As you can tell, it’s much easier for contracting officers to give sole source awards to 8(a) contractors. In fact, the 8(a) regulation in question—13 C.F.R. § 124.506—is written as though sole source awards are the rule, not the exception. Competition among 8(a)s is only required when there is a reasonable expectation that two participants will submit offers at fair market prices, the expected contract value will exceed the dollar thresholds described above, and the requirement has not been accepted as a sole source to a tribal-owned, ANC-owned, or NHO-owned concern. In fact, contracting officers have to ask permission to compete 8(a) work that falls below the $4/$7 million thresholds.

SDVOSB sole source awards

Service-Disabled Veteran-Owned Small Business sole source awards are, like WOSB sole source awards, subject to the exclusions described in the WOSB section: that the work is not being performed out of the 8(a) program, is not suitable for award to Federal Prison Industries, Inc. or through the AbilityOne program, and is not an IDIQ or FSS contract order.

SDVOSB sole source awards are also similar to WOSB sole source awards in that the contracting officer should consider a sole source award when she does not have a reasonable expectation that offers will be received from two or more eligible SDVOSBs, the price of the contract does not exceed $4 million ($6.5 for manufacturing), the SDVOSB is responsible, and the award can be made at a fair and reasonable price.

Within the Department of Veteran Affairs, which runs its own SDVOSB program, contracting officers can give SDVOSB sole source awards when the contract will not exceed $5 million, the requirement is publicized, the concern is responsible, and award can be made at a fair and reasonable price.

HUBZone sole source awards

A contracting officer can give a HUBZone sole source award based on the probably now familiar refrain that the exclusions (8(a), AbilityOne, etc.) do not apply, she has no reasonable expectation of receiving two or more competitive offers from HUBZone concerns, the price will not exceed $4/$7 million, the awarded concern is responsible, and award can be made at a fair and reasonable price. The HUBZone sole source regulation also requires that the value be above the simplified acquisition threshold.

The takeaway

So, what is the main difference between 8(a) sole source awards and other socioeconomic set aside sole source awards? It’s the requirement of no “reasonable expectation that offers will be received from two or more” concerns. That’s not a hard barrier to surpass and the presumption thereafter is that the contract will be competed.

The 8(a) program does not have similar language. In fact, that language is only found where a procurement is above the $4 million line that takes sole sourcing off the board for the other socioeconomic set aside programs. In short, the 8(a) program presumes sole sourcing will be used frequently, while the other programs presume that competition will be the rule.