A Tool For People That Mean Business!
The FAR Revises Its Coverage of SDVOSB Set-Asides to Be Consistent with SBA Rules
In FAC 2005-43, the FAR Council amended the circumstances in which a sole source award could be made to an SDVOSB concern. FAR 19.1406(a) was amended, effective August 2, 2010, to state that a sole source award can be made to an SDVOSB concern if the “contracting officer does not have a reasonable expectation that offers would be received from two or more service-disabled veteran-owned small business concerns.” This change was made to make the FAR consistent with the SBA regulations concerning sole source SDVOSB awards and followed a successful protest against a contracting officer’s actions that complied with the old FAR coverage.
In MCS Portable Restroom Service, B-299291, March 28, 2007, the GAO sustained a protest challenging an agency’s failure to make a sole source award to a SDVOSB. MCS, a service-disabled veteran-owned small business concern, protested the Air Force’s decision not to make a sole-source award to an SDVOSBC, for portable chemical toilet services at the United States Air Force Academy, and to instead obtain these services as a small business set-aside.
As part of the market research for this acquisition, the contracting officer searched the Central Contractor Registration (CCR) database under the appropriate North American Industry Classification System code, and located 28 SDVOSBCs, 29 section 8(a) concerns, 10 Historically Underutilized Business Zone (HUBZone) concerns, and 28 other small business concerns that potentially could perform the work.
The agency sent e-mails to all of these firms in February 2006, and received responses from two SDVOSBCs (MCS and a Florida company that expressed interest in developing a joint venture to perform this work), one HUBZone concern, and four small businesses. The agency then posted a “sources sought” notice on FedBizOpps and three companies responded: one small business, one women-owned small business, and MCS.
After considering this market research, the contracting officer determined that she did not have a reasonable expectation of receiving two or more bids from HUBZone or SDVOSBC concerns. Based on this determination and after receiving approval from the Air Force small business specialist to set aside the procurement for small businesses, the agency posted a synopsis of the proposed solicitation for these services as a small business set‑aside on FedBizOpps.
MCS then filed an agency-level protest of this determination.
After receiving the protest, the contracting officer searched the CCR for all SDVOSBCs in Colorado and nationwide. This search revealed the existence of 2 SDVOSBCs in Colorado and 20 SDVOSBCs nationwide that could potentially perform the work. The agency determined that a sole‑source SDVOSBC award was prohibited by the FAR. The agency then affirmed its decision to set aside the procurement for small businesses and denied MCS’s agency-level protest.
When the IFB was posted on FedBizOpps as a small business set-aside, MCS then timely protested to the GAO, reasserting the grounds raised in its agency-level protest.
In processing this protest, the GAO sought the views of the SBA on the propriety of the contracting officer’s actions. In commenting on the protest, the SBA disagreed with the contracting officer’s actions.
MCS complained that, even if the agency were correct that there was insufficient interest from two or more SDVOSBCs to set aside the procurement for SDVOSBCs, the agency should have made a sole-source award to MCS.
The agency asserted that FAR 19.1406(a) precluded a sole-source award to an SDVOSBC where more than one SDVOSBC exists that can satisfy the requirement. FAR 19.1406(a) states in pertinent part:
A contracting officer may award contracts to [SDVOSBCs] on a sole source basis . . ., provided–
(1) Only one [SDVOSBC] can satisfy the requirement
The Air Force’s essential argument was that FAR 19.1406(a) precluded making a sole‑source award to an SDVOSBC if, as its later CCR review established, more than one SDVOSBC existed that could potentially perform the work. In other words, although an offer was expected from only one offeror, other firms existed that were capable of performing the work. Therefore, the Air Force believed the FAR provision did not authorize the award of a sole source contract.
MCS and the SBA asserted that the Air Force misinterpreted FAR 19.1406(a). The SBA argued that the FAR should be interpreted “logically and consistently” with the Small Business Act and the implementing SBA regulations, which provide that a contracting officer may consider making a sole-source award to an SDVOSBC unless more than one SDVOSBC is expected to submit a bid under the acquisition. Using this approach, it is irrelevant how many firms can perform the work. What is the determinative factor of whether a procurement should be awarded on a sole source basis is how many SBVOSBCs are expected to submit bids or offers.
In resolving this issue, the GAO began its analysis with the language of the Veterans Benefit Act of 2003, which provides for sole-source contract awards to SDVOSBCs and states in pertinent part:
(a) Sole source contracts — In accordance with this section, a contracting officer may award a sole-source contract to any [SDVOSBC] if –
(1) such concern is determined to be a responsible contractor with respect to performance of such contract opportunity and the contracting officer does not have a reasonable expectation that 2 or more [SDVOSBCs] will submit offers for the contracting opportunity; . . .
15 U.S.C. §657f
The GAO observed that both the Act and the implementing SBA regulations provide contracting officers with the discretion to make sole-source awards to SDVOSBCs where the prerequisites that would allow for an SDVOSBC set‑aside have not been met, i.e., offers will not be received from two SDVOSBs and award will be made at a fair market price. Neither the Act nor the SBA regulations make a sole source award dependent upon the number of firms capable of performing the work, only the number of bids or offers expected.
While the Air Force’s position would seem to be consistent with a literal reading of old FAR 19.1406(a), the GAO reiterated that “a regulation must be interpreted so as to harmonize with and further and not conflict with the objective of the statute it implements.” In this regard, the “plain meaning” and intent of the Veterans Benefit Act of 2003 is that a sole-source award to an SDVOSBC is permitted if the contracting officer does not have a reasonable expectation that two or more SDVOSBCs would submit bids.
Therefore, the GAO held that the FAR should be read consistent with the SBA statutory and regulatory language. In conclusion, the GAO said that it recognized that “the plain wording of FAR 19.1406 is potentially at odds with that of the Act and the SBA regulations. By letter dated today, we are advising the FAR Council of the possible inconsistency in language with the applicable statute so that the Council may review the matter.” Over three years later, action has been taken on this error in the FAR.
As an aside, FAC 2005-45 increased the ceiling for SDVOSB sole source awards to $6M for NAICS manufacturing codes and $3.5M for all other NAICS, effective August 30, 2010.
Share:
Related posts:
GAO Rules that HUBZone Set-Aside Procedures Take Precedence Over 8(a) Set-Asides
Court Holds SDB Price Evaluation Adjustment Factor in FAR Subpart 19.11 Unconstitutional
SBA Promulgates Final Women-Owned Small Business Contracting Rules
Published September 22nd, 2010 at 3:33 pm in SBA Compliance with no comments
Tagged with FAC 2005-43, FAR 19.1406(a), SDVOSB
In MCS Portable Restroom Service, B-299291, March 28, 2007, the GAO sustained a protest challenging an agency’s failure to make a sole source award to a SDVOSB. MCS, a service-disabled veteran-owned small business concern, protested the Air Force’s decision not to make a sole-source award to an SDVOSBC, for portable chemical toilet services at the United States Air Force Academy, and to instead obtain these services as a small business set-aside.
As part of the market research for this acquisition, the contracting officer searched the Central Contractor Registration (CCR) database under the appropriate North American Industry Classification System code, and located 28 SDVOSBCs, 29 section 8(a) concerns, 10 Historically Underutilized Business Zone (HUBZone) concerns, and 28 other small business concerns that potentially could perform the work.
The agency sent e-mails to all of these firms in February 2006, and received responses from two SDVOSBCs (MCS and a Florida company that expressed interest in developing a joint venture to perform this work), one HUBZone concern, and four small businesses. The agency then posted a “sources sought” notice on FedBizOpps and three companies responded: one small business, one women-owned small business, and MCS.
After considering this market research, the contracting officer determined that she did not have a reasonable expectation of receiving two or more bids from HUBZone or SDVOSBC concerns. Based on this determination and after receiving approval from the Air Force small business specialist to set aside the procurement for small businesses, the agency posted a synopsis of the proposed solicitation for these services as a small business set‑aside on FedBizOpps.
MCS then filed an agency-level protest of this determination.
After receiving the protest, the contracting officer searched the CCR for all SDVOSBCs in Colorado and nationwide. This search revealed the existence of 2 SDVOSBCs in Colorado and 20 SDVOSBCs nationwide that could potentially perform the work. The agency determined that a sole‑source SDVOSBC award was prohibited by the FAR. The agency then affirmed its decision to set aside the procurement for small businesses and denied MCS’s agency-level protest.
When the IFB was posted on FedBizOpps as a small business set-aside, MCS then timely protested to the GAO, reasserting the grounds raised in its agency-level protest.
In processing this protest, the GAO sought the views of the SBA on the propriety of the contracting officer’s actions. In commenting on the protest, the SBA disagreed with the contracting officer’s actions.
MCS complained that, even if the agency were correct that there was insufficient interest from two or more SDVOSBCs to set aside the procurement for SDVOSBCs, the agency should have made a sole-source award to MCS.
The agency asserted that FAR 19.1406(a) precluded a sole-source award to an SDVOSBC where more than one SDVOSBC exists that can satisfy the requirement. FAR 19.1406(a) states in pertinent part:
A contracting officer may award contracts to [SDVOSBCs] on a sole source basis . . ., provided–
(1) Only one [SDVOSBC] can satisfy the requirement
The Air Force’s essential argument was that FAR 19.1406(a) precluded making a sole‑source award to an SDVOSBC if, as its later CCR review established, more than one SDVOSBC existed that could potentially perform the work. In other words, although an offer was expected from only one offeror, other firms existed that were capable of performing the work. Therefore, the Air Force believed the FAR provision did not authorize the award of a sole source contract.
MCS and the SBA asserted that the Air Force misinterpreted FAR 19.1406(a). The SBA argued that the FAR should be interpreted “logically and consistently” with the Small Business Act and the implementing SBA regulations, which provide that a contracting officer may consider making a sole-source award to an SDVOSBC unless more than one SDVOSBC is expected to submit a bid under the acquisition. Using this approach, it is irrelevant how many firms can perform the work. What is the determinative factor of whether a procurement should be awarded on a sole source basis is how many SBVOSBCs are expected to submit bids or offers.
In resolving this issue, the GAO began its analysis with the language of the Veterans Benefit Act of 2003, which provides for sole-source contract awards to SDVOSBCs and states in pertinent part:
(a) Sole source contracts — In accordance with this section, a contracting officer may award a sole-source contract to any [SDVOSBC] if –
(1) such concern is determined to be a responsible contractor with respect to performance of such contract opportunity and the contracting officer does not have a reasonable expectation that 2 or more [SDVOSBCs] will submit offers for the contracting opportunity; . . .
15 U.S.C. §657f
The GAO observed that both the Act and the implementing SBA regulations provide contracting officers with the discretion to make sole-source awards to SDVOSBCs where the prerequisites that would allow for an SDVOSBC set‑aside have not been met, i.e., offers will not be received from two SDVOSBs and award will be made at a fair market price. Neither the Act nor the SBA regulations make a sole source award dependent upon the number of firms capable of performing the work, only the number of bids or offers expected.
While the Air Force’s position would seem to be consistent with a literal reading of old FAR 19.1406(a), the GAO reiterated that “a regulation must be interpreted so as to harmonize with and further and not conflict with the objective of the statute it implements.” In this regard, the “plain meaning” and intent of the Veterans Benefit Act of 2003 is that a sole-source award to an SDVOSBC is permitted if the contracting officer does not have a reasonable expectation that two or more SDVOSBCs would submit bids.
Therefore, the GAO held that the FAR should be read consistent with the SBA statutory and regulatory language. In conclusion, the GAO said that it recognized that “the plain wording of FAR 19.1406 is potentially at odds with that of the Act and the SBA regulations. By letter dated today, we are advising the FAR Council of the possible inconsistency in language with the applicable statute so that the Council may review the matter.” Over three years later, action has been taken on this error in the FAR.
As an aside, FAC 2005-45 increased the ceiling for SDVOSB sole source awards to $6M for NAICS manufacturing codes and $3.5M for all other NAICS, effective August 30, 2010.
Share:
Related posts:
GAO Rules that HUBZone Set-Aside Procedures Take Precedence Over 8(a) Set-Asides
Court Holds SDB Price Evaluation Adjustment Factor in FAR Subpart 19.11 Unconstitutional
SBA Promulgates Final Women-Owned Small Business Contracting Rules
Published September 22nd, 2010 at 3:33 pm in SBA Compliance with no comments
Tagged with FAC 2005-43, FAR 19.1406(a), SDVOSB
Views: 2
Comment
Photos
© 2012 Created by Walter Cotton III.
You need to be a member of The M_P_U Network to add comments!
Join The M_P_U Network