Big opportunityIn a GAO bid protest that challenges the agency’s small business set aside decision, contractors would have to focus on facts pertaining to the prior procurement history, the recommendations of appropriate small business specialists, and market surveys that include responses to sources sought announcements. This one reason why government contracting agencies issue sources sought.

What if the agency received for four responses to a sources sought notice? Can the contracting officer then decide that the responding companies are not capable of performing and use that to then solicit under full and open competition?

These are all issues that can arise when a contractor decides to file a GAO protest that challenges the set-aside decision. Generally, the contracting officer should not make the set-aside decision based upon a responsibility determination. Instead, the decision should be made on whether there is a reasonable expectation  of receiving acceptably priced offers from small business concerns that are capable of performing the contract. See Ceradyne, Inc., B-402281, Feb. 17, 2010, 2010 CPD ¶ 70 at 4.

Tip for Challenging the Set-Aside Decision – what is a sources sought notice?

To prevail, bid protest lawyers would have to prove that the contracting officer abused his or her discretion. Government contracting agencies have wide business judgment discretion and is sometimes hard to overcome. As a contractor, you should not preface your protest on whether the decision was a bad business decision. Instead, you would have to that the contracting officer had enough information and simply ignored it. See also KNAPP Logistics Automation, Inc., B-406303, Mar. 23, 2012, 2012 CPD ¶ 137 at 2.

It is always advisable to respond to sources sought notices. Many contractors skip this process and then hope for the solicitation to be posted as a small business set-aside. This can be a grave mistake.

The “Rule of Two”

The Rule of Two and the Federal Acquisition Regulation (FAR) requires that acquisitions with an anticipated dollar value of more than $150,000 be set aside for small business concerns if the agency determines there is a reasonable expectation that offers will be received from two or more responsible small business concerns, and that award will be made at a fair market price. FAR 19.502-2(b) Simply put, GAO will not sustain a protest challenging the determination absent a showing that it was unreasonable.

The escape for the agency would be that the prices received from the sources sought notices were not at fair market price. Therefore, you must submit realistic pricing for these types of notices.

Contractors challenging the agency’s small business set-aside decision should not base a bid protest argument on the negative performance of a small business incumbent.

Past acquisition history may be relevant to the Rule of Two analysis, but “it is not the only factor to be considered in determining whether a reasonable expectation exists.” 48 CFR 19.502-2(b)(2). “The contracting officer may consider and base its decision on such factors as prior procurement history, the nature of the contract, market surveys, and/or advice of the agency’s small business specialist.” MCS Mgmt., Inc. v. United States, 48 Fed. Cl. 506, 512, 514 (2000).

When you challenge the set-aside decision in a GAO protest, you should also understand that it is not required or practical at this stage of the procurement process for the contracting officer to conduct a full responsibility evaluation. GAO decisions – Fermont Div., Dynamics Corp., B-195431, 1980 WL 18035, 59 Comp. Gen. 533, 538-40 (1988). Rather, the contracting officer need only reasonably expect that likely offerors will “be capable of surviving a future responsibility determination.” Greenleaf Const. Co., Inc. v. United States, 67 Fed. Cl. 350, 358 (2005).

When deciding whether to challenge an agency’s small business set-aside decision in a GAO protest, always keep in mind that the legal analysis should be based upon the abuse of discretion standard.

Contact a government contracts attorney.

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