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Protest challenging decision to set aside procurement for small businesses is denied. The protester argued that the agency had failed determine whether a “fair proportion” of contracts had been set aside for small businesses as required by the FAR and statute. But the court reasoned that the fair proportion determination is really a public policy determination made by the agency in consultation with the President with regard to classes of contracts. Agencies are not required to make a fair proportion determination on a contract-specific basis. The protester also contended that the agency failed to determine whether potential small businesses were responsible as required by the Rule of Two. The court found that the protester was conflating the set aside decision with a responsibility determination. A contracting officer need only have a reasonable expectation of receiving offers from responsible small business when making a set aside decision. They need not actually determine whether the businesses are responsible.

The Federal Emergency Management Agency issued a solicitation seeking protective service officers to guard federal employees, visitors, and property at disaster sites in Puerto Rico. The solicitation was unrestricted, open to businesses of all sizes.

Several offerors, including AGMA Security Service, Inc. and the incumbent, Ranger American of Puerto Rico, submitted proposals.

FEMA initially awarded the contract to AGMA. Ranger protested the award with GAO. In response to the protest, FEMA took corrective action, so GAO dismissed the protest.

A few months later, FEMA issued a revised decision, awarding the contract to Ranger. AGMA filed a protest with the Court of Federal Claims challenging the decision. The court ruled in favor of AGMA, finding FEMA’s corrective action arbitrary and capricious. The court reasoned that the corrective action had not actually corrected any errors in the procurement.

Following the court’s decision, FEMA awarded sole-source bridge contract to Ranger, reasoning that it urgently needed the guard services and did not have enough time to conduct a full competition. AGMA protested the award of the sole-source contract. The court once again sided with AGMA, finding that FEMA had not sufficiently explained the sole-source decision.

While the protest on the sole-source decision was pending, FEMA issued a new, long-term solicitation for the guard services. This time the solicitation was set aside for small businesses. While the various protests were pending, the government closed multiple facilities in Puerto Rico. Consequently, fewer guards were needed for the solicitation. Given the reduced requirement, FEMA expected that it would receive offers from at least two small responsible business.

Before proposals were due, Ranger filed a protest with the COFC, challenging FEMA’s set aside decision. AGMA intervened. All the parties moved for judgment on the administrative record.

Ranger alleged that under statute and FAR 19.502-1(a), an agency can only set aside a procurement for small businesses after it determines that a “fair proportion” of government contracts in each industry is placed with small businesses. Ranger alleged that FEMA never conducted a “fair proportion” analysis before setting aside the contract.

The court rejected this argument. Citing Federal Circuit precedent, the court reasoned that the fair proportion determination is made by the administration and the contract procuring agency, and it may be made for individual contracts but also for classes of awards and contracts. The fair proportion determination concerns a public policy decision about small business goals that an agency makes after consultation with the President. Moreover, the fair proportion is inextricably linked to the process by which the Office of Management and Budget creates NAICS industry codes. There is nothing in the Small Business Act indicating that a fair proportion determination must be made on a contract-specific basis. What’s more, the court reasoned, Ranger had not even articulated what the agency was supposed to do in conducting a fair proportion determination on a contract-specific basis.

Ranger argued that FEMA was apparently relying on the Small Business Review Form 700-22 that it completed for the set aside decision as supporting its fair proportion determination. But reliance on that form was not valid because it erroneously stated that the solicitation was seeking a new requirement. Yet this requirement, Ranger contended, was the same requirement for security guards that FEMA had  previously solicited.

The court, however, found that this was a new requirement. The previous requirement was for 600 security guards. Due to the closure of facilities in Puerto Rico, the current requirement was significantly smaller, i.e., about 200 guards. While the new solicitation contemplated the same type of work, the scope of that work was much smaller.

In addition to the fair proportion argument, Ranger contended that FEMA unreasonably implement the Rule of Two. FAR 19.502-2(b), which codifies the Rule of Two, states that an agency shall only set aside a procurement when it has determined that offers will be obtained from at least two responsible small businesses at a reasonable price. Ranger alleged that FEMA had failed to consider whether the potential small businesses interested in this procurement were responsible.

But the court found that Ranger was conflating the set aside decision with the a responsibility determination made under FAR 9.104.1. The set aside determination only requires that the contracting officer have a reasonable expectation that likely small business offerors will survive a responsibility determination. Agencies are not required to impose a responsibility determination on the set aside determination.

Moreover, the court reasoned, in this case, the contracting officer had a reasonable expectation that small business offerors would be responsible. In response to the previous solicitation, FEMA had received offers from three small businesses. Two of the offerors had received acceptable technical ratings while the third had received a marginal rating. These ratings indicated that at least two small business could meet the responsibility criteria at a fair price.

Ranger is represented by Jonathan D. Shaffer and Todd M. Garland of Smith Pachter McWhorter PLC. The intervenor, AGMA, is represented by Alan M Grayson. The government is represented by Bryan M. Byrd, Kara M. Westercamp, Elizabeth M. Hosford, and Brian Boynton of the Department of Justice as well as Matthew Lane of FEMA.