The protester argued that the awardee was unusually reliant on a large subcontractor. The agency defended the award by establishing compliance through the safe harbor provisions. Ultimately, the tribunal affirmed the agency's size determination.
Size Appeal of Veteran Elevated Solutions, LLC, SBA No. SIZ-6356
- Background - The U.S. Department of Veterans Affairs issued a Request for Quotations for elevator maintenance services, entirely set aside for Service-Disabled Veteran-Owned Small Businesses. After evaluating proposals, the agency awarded the contract to the awardee, GD Resources LLC. The protester, Veteran Elevated Solutions LLC, contested the award on grounds that GD Resources was not a small business, alleging they were unduly reliant on a large subcontractor, TK Elevator, in violation of the ostensible subcontractor rule.
- Ostensible Subcontractor Rule - The rule states that if a prime contractor is unusually reliant on a non-similarly situated subcontractor, they are considered affiliated. OHA noted that while the awardee intended to subcontract essential work, the agency found GD Resources would not violate the rule due to a safe harbor provision, 13 C.F.R. § 121.103(h)(3)(iii), allowing them to subcontract within permissible limits. Compliance with the provision was properly evaluated by tangible evidence such as “invoices, copies of subcontracts, or a list of the value of tasks performed.” 13 C.F.R. § 125.6(f)(4).
- Size Determination Date - The protester contended the agency misapplied the size determination date. The key date for assessing compliance was claimed to be the revision date of GD Resources' proposal, when TK Elevator was designated as the subcontractor. The tribunal concurred that the date for size evaluation should have been September 30, 2024, when the agency approved changes. However, it determined that this error was harmless, as GD Resources demonstrated adherence to regulations allowing up to 75% subcontracting without constituting undue reliance.
- Subcontracting Compliance - A significant issue in the case was whether GD Resources met limitations on subcontracting fluctuations due to subcontractor reliance. The awardee provided sufficient documentation, including a "Tasks & Services Breakdown," showing they would not breach the limits. The tribunal highlighted that even when accounting for costs, GD Resources would comply with the statutory requirement, indicating a solid defense against the protester's claims of noncompliance.
The protester is represented by Matthew T. Schoonover, John M. Mattox II, Timothy J. Laughlin, and Haley M. Sirokman of Schoonover & Moriarty LLC. The intervenor, GD Resources LLC, is represented by Richard W. Arnholt and Sylvia Yi of Bass, Berry & Sims PLC. The government is represented by the U.S. Small Business Administration. GAO attorneys Kenneth M. Hyde participated in the decision.