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CFC Again Rejects DOJ Interpretation of Set-Aside Scheme

The Court of Federal Claims enjoined performance of a contract that was set aside for participants in the Small Business Administration's 8(a) Business Development Program because the government did not give priority to historically underutilized business zone small business concerns. The government conducted market research and determined it could set aside the solicitation for housing maintenance services for either HUBZone small businesses or 8(a) small businesses. It chose to set aside the acquisition for 8(a) small businesses because it met its HUBZone goals, but not its 8(a) goals, in the prior fiscal year. Although the protester prevailed in its protest before the Government Accountability Office (see 25 CGEN 113,118), the government declined to follow the GAO's decision. According to the government, memoranda from the Office of Management and Budget and the Department of Justice constituted binding and mandatory guidance on the prioritization of HUBZone small businesses, and these memoranda direct executive agencies to follow SBA 126.605 and SBA 126.607 and to place qualified HUBZone small businesses and 8(a) small businesses on an equal footing.

Award Enjoined

The protest before the court hinged "on a single question of statutory interpretation: whether the language of the Small Business Act grants priority to a HUBZone competition over a section 8(a) competition." The Act provides "[n]otwithstanding any other provision of law ... a contract opportunity shall be awarded ... on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price" (15 USC 657a(b)(2)(B)). The issue had been decided earlier in 2010 in Mission Critical Solutions v. U.S. (54 CCF 79,272), where the CFC found the Act unequivocally requires the prioritization of the HUBZone program over other small business programs, including the section 8(a) program. The Act's HUBZone provision makes clear that a CO must first determine if the procurement can be set aside for a HUBZone small business before a procurement can be set aside under the 8(a) program. There was "no need to modify the detailed, analytical, and persuasive reasoning" of Mission Critical Solutions. Had the government followed the statutory scheme, it would have found the requisite conditions were present and set aside the procurement for HUBZone small businesses. Its failure to do so violated the Small Business Act and provided grounds to grant the protester's request to permanently enjoin the awardee's performance of the contract. (DGR Associates, Inc. v. U.S., et al., FedCl, 54 CCF 79,397)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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