Small Business Wins Contract Despite “Unacceptable” Key Personnel Score

A small business received an “unacceptable” score for its key personnel, but nevertheless was awarded the contract after the matter was referred to the SBA under the Certificate of Competency procedures.

A recent decision by the U.S. Court of Federal Claims demonstrates the breadth and power of the so-called “COC” process, which can allow an otherwise “unacceptable” business to wind up in the winner’s circle.

The decision of the U.S. Court of Federal Claims in Lawson Environmental Services, LLC, No. 15-1550C (2016) involved an EPA procurement for environmental remediation services.  The EPA issued the solicitation as a competitive HUBZone set-aside.

The solicitation contemplated award to the lowest-priced, technically acceptable offeror.  In order to be deemed technically acceptable, an offeror had to satisfy four technical evaluation criteria on a pass/fail basis: Corporate Experience, Key Personnel, Past Performance, and Project Management Plan.

With respect to the Key Personnel factor, the solicitation specified that each offeror propose a Site Superintendent, who was to be responsible for overseeing all project work.  The Site Superintendent was required to have at least three years’ relevant experience.

After a series of protests and re-evaluations (which are not relevant here), the EPA determined that the proposal submitted by Coastal-Enviroworks Joint Venture was unacceptable under the “Key Personnel” factor because Coastal’s proposed Site Superintendent did not satisfy the solicitation’s minimum requirements.  Although the EPA deemed Coastal’s proposal ineligible for award, the EPA referred the matter to the SBA for a Certificate of Competency determination.

Under the Small Business Act, the SBA has conclusive authority to determine whether a small business is “responsible” for purposes of a federal government contract.  A procuring agency cannot preclude a small business from award based on a finding of nonresponsibility without referring the matter to the SBA under the SBA’s COC procedures.  If the SBA issues a Certificate of Competency, it essentially overturns the procuring agency’s nonresponsibility determination (although there is a process by which the contracting agency can appeal the SBA’s decision).

In this case, the SBA issued a Certificate of Competency to Coastal.  The EPA then awarded the contract to Coastal.  Following the award, Lawson Environmental Services, LLC filed a protest in the Court.  Lawson alleged, among other things, that it had been erroneous for the EPA to refer the Key Personnel question to the SBA.

The Court disagreed.  It write that “[t]he Key Personnel technical requirement that Coastal-Enviroworks failed was clearly a traditional responsibility factor that entailed the capacity and competency to perform the contract.  The Court noted that FAR 9.104-1(e) “expressly identifies ‘necessary organization, experience’ and ‘technical skills’ of a prospective contractor as elements of responsibility.”  “As such, the Court wrote, “this technical evaluation factor encompassed a traditional responsibility factor–the offeror’s ability to meet staffing and management requirements.”

Citing the Small Business Act and FAR, the Court wrote “[b]ecause Coastal-Enviroworks’ failure on a ‘responsibility-type’ technical factor would have excluded Coastal-Enviroworks from the competition, both statute and regulation required EPA to refer Coastal-Enviroworks’ proposal to SBA for a Certificate of Competency determination.”  The Court concluded, “[t]his is not a gray area.  In this lowest-priced, technically acceptable procurement, EPA’s determination that Coastal-Enviroworks failed a responsibility-type factor outright–Key Personnel–eliminated Coastal-Enviroworks from the competition and triggered EPA’s obligation to refer the matter to SBA under its Certificate of Competency procedure.”  The Court denied Lawson’s protest.

The Certificate of Competency process is not well-understood by many small businesses, but the Lawson Environmental Services case shows how powerful it can be in the right circumstances.  Here, there was no dispute that the ultimate winner–Coastal–failed to meet the solicitation’s minimum Key Personnel requirements.  But because Coastal failed a traditional responsibility factor, the SBA had the last word–and Coastal got the contract.