Protest challenging the agency’s decision not to set aside a solicitation for women-owned small business concerns is denied, where this decision is within the agency’s discretion and where the agency’s market research reasonably concluded only one WOSB was able to meet the requirements. GAO also denied the protester’s argument the agency should have awarded it a sole-source contract, where the agency reasonably considered, but rejected, this option.
EDWOSB Transformer Services LLC protested the terms of invitation for bids issued by the Department of Energy for electrical substation construction, arguing that the agency failed to reasonably consider either a set-aside for WOSB concerns or a sole-source award to the protester.
EDWOSB Transformer primarily argued that DOE’s market research was not reasonable, and that the agency therefore unreasonably concluded that it could not set aside the procurement for WOSB concerns, either on a competitive or sole-source basis.
GAO noted that agencies are required to apply the Rule of Two on acquisitions valued over $150,000. However, prior to setting aside a procurement for small business concerns, the agency is required to first consider a set-aside or sole source award under the 8(a) BD, HUBZone, SDVOSB, or WOSB programs, in any order. In determining which socioeconomic program to use, the contracting officer is required to consider the results of market research and the agency’s progress toward its small business participation goals.
EDWOSB Transformer argued that the requirement for an agency to “consider” a set-aside for WOSB concerns requires that the agency conduct the same type of market research that would be required to justify a small business set-aside. In effect, the protester argued that the requirement to “consider” a set-aside obligates the agency to affirmatively demonstrate through market research that the requirements for a set-aside for WOSB concerns are not satisfied.
However, GAO found no requirement that the market research required to satisfy the small business rule of two must also be conducted to satisfy the requirement to consider a set-aside for WOSB concerns. Although agencies “shall” consider set-asides for WOSB concerns prior to setting aside a procurement for small business concerns, neither the FAR nor SBA’s regulations ultimately require agencies to set aside the procurement—even if agencies find that the requirements for a set-aside are met. Instead, agencies “may” set procurements aside for WOSB concerns.
In contrast, the small business rule of two requires the agency to conduct market research to support one of two mandatory outcomes: (1) setting aside a procurement valued over $150,000, or (2) using full and open competition (or an authorized exception to full and open competition). Additionally, an agency must set aside any procurement valued above $150,000 where it finds that the small business rule of two has been met, regardless of whether the agency has met or exceeded its small business participation goals for the year. No such requirement exists for WOSB participation. Further, the FAR does not define any minimum requirements for the consideration of whether to set aside a solicitation for WOSBs.
Having concluded there were no special requirements for the agency regarding its consideration of a WOSB set-aside, GAO next considered whether DOE’s market research was reasonable. DOE relied on two primary sources of information: (1) the SBA’s Dynamic Small Business Research database, and (2) a review of prior procurements for the region. DOE searched the DSBS database to identify all WOSB concerns who self-certified under NAICS code 237130, Power and Communication Line and Related Structures Construction. The agency then narrowed and refined the search based on the specific requirement, and identified 21 WOSBs. However, of those 21 firms, DOE identified only one that provided a relevant capabilities narrative. DOE noted that several firms, including the protester, did not provide such a narrative.
The agency next found that none of the 21 WOSBs had previously bid on work in the region and therefore DOE concluded it could not determine whether any of the companies were capable of performing, likely to bid, or likely to have reasonable prices. Overall, the agency’s market research concluded that there was not an expectation of receiving two or more bids from WOSB concerns at a fair and reasonable price. Further, DOE had already exceeded its WOSB participation goal for the year, prior to the issuance of the IFB.
EDWOSB Transformer argued that DOE’s review of information from the DSBS database was unreasonable because it ignored numerous WOSB concerns that the protester alleged were capable of performing the work. The protester identified 4 firms, including itself, who could perform the work, in addition to the single firm identified by the agency. However, GAO noted the protester did not explain why the capabilities narratives for these firms should have led the agency to conclude that they could meet the requirements. As noted, the protester’s DSBS entry did not contain a capabilities narrative, and therefore did not provide a basis for the agency to assess its capabilities.
Next, the protester argued that the agency unreasonably considered information regarding whether WOSB concerns identified in the DSBS database had previously bid on relevant projects. However, GAO noted an agency may reasonably rely on this type of procurement history to help it determine if small businesses are likely to compete. In this case, the agency reasonably conducted a broad search for capable WOSBs, then narrowed its search to identify those who had previously expressed interest in competing for this kind of work in the region. GAO found the agency’s market research reasonable overall.
Finally, EDWOSB Transformer argued the agency unreasonably failed to use its discretion to award the contract on a sole-source basis, again generally challenging the adequacy of the agency’s market research. GAO noted that while agencies “may” consider a sole-source award to a WOSB, where the acquisition is assigned a NAICS code in which SBA has determined that WOSB concerns are substantially underrepresented in federal procurement, (2) the contracting officer does not have a reasonable expectation that offers would be received from two or more WOSB concerns, (3) the award is anticipated not to exceed $6.5 million for a construction NAICS code or $4 million for any other NAICS code, (4) the WOSB concern has been found responsible; and award can be made at a fair and reasonable price. However, there is no requirement for an agency to do so. Accordingly, GAO denied the protest.
EDWOSB Transformer Services LLC is represented by David S. Black and Mitchell A. Bashur of Holland & Knight LLP. The government is represented by Stephanie B. Young, , Nicholas M. Bidwell, David C. Gorlin, and Thomas C. Cordova, Department of Energy. GAO attorneys Jonathan L. Kang and Laura Eyester participated in the preparation of the decision.
