The agency awarded multiple IDIQ contracts. Some of those contracts had been unrestricted while others had been set aside for small businesses. The agency issued a delivery order under one of the unrestricted IDIQs. The delivery order, however, was set aside for small businesses. The protester argued that an agency cannot set aside a delivery order under an unrestricted IDIQ when it has already set aside some of the IDIQs. GAO disagreed, noting that the FAR and Small Business Act give agencies discretion to set aside orders, and the decision to set aside IDIQ contracts for small businesses does not negate that discretion.
Marine Hydraulics International, LLC, GAO B-420562
Background
The Navy issued a solicitation seeking to award multiple IDIQ contracts for ship maintenance. The solicitation divided the Navy’s requirements into four lots. Lots 1 and 2 were for complex repairs. Lots 3 and 4 were for non-complex repairs. Additionally, Lots 1 and 2 were unrestricted while lots 3 and 4 were set aside for small businesses.
The Navy awarded six contracts under lot 1. The Navy planned to award a delivery order under the lot 1 contract for maintenance of the U.S.S. Cole. The Navy issued a sources sought synopsis to determine which of the six contractors had the resources for the delivery order. Based on the responses it received, the Navy determined that two small businesses were capable of performing the requirement. Accordingly, the Navy set the delivery order aside for small businesses. One of the other awardees of the IDIQ contract, Marine Hydraulics International, protested challenging the set-aside decision.
Legal Analysis
Jurisdiction
The Navy requested dismissal of the protest for lack of jurisdiction. GAO only has jurisdiction over delivery orders that (1) increase the scope of the IDIQ contract, or (2) are valued at more than $25 million. The Navy argued that the delivery order did not increase the scope of the IDIQ, and its own government estimate valued the contract at less than $25 million.
GAO agreed that the delivery order did not increase the scope of the IDIQ contract. But GAO found, despite the Navy’s estimate, that the contract value exceeded $25 million. Past orders for ship maintenance had exceeded $25 million. What’s more, the proposals the Navy received for the task order exceeded $25 million. GAO believed the proposals were the most compelling evidence of the delivery order’s value.
Set-Aside Decision
Marine argued that the Navy should not have set the delivery order aside for small business. Marine reasoned that because two lots of the IDIQ contract had been set aside, the Navy was precluded from setting aside the delivery order under lot 1 aside.
GAO rejected Marine’s argument. The FAR and the Small Business Job Act of 2010 specifically state that notwithstanding the fair opportunity provisions of FAR part 16, a contracting officer has discretion to set task and delivery orders aside for small businesses. The discretion to set aside portions of an IDIQ contract does not negate the agency’s discretion to also set aside orders issued under the IDIQ. Indeed, the IDIQ contract itself had put offerors on notice that orders could be set aside. The IDIQ stated orders would be issued on FAR part 16.505. That provision states that agencies have discretion to set aside orders for small businesses.
Rule of Two
Even if the Navy had properly set aside the delivery order, Marine argued that the agency could not expect to receive offers from two responsible small businesses. Marine contended that the two small businesses that submitted offers had relationships with affiliates that could impact their performance.
GAO was not convinced. Marine’s arguments amounted to speculation as to whether the two small business offerors could perform. The Navy was not required to speculate about offerors’ motives in making a rule of two determination.
Marine is represented by Dean W .Baxtresser, Kyle R. Jefcoat, Walter Allan Perry, and W Blake Page of Latham & Watkins LLP. The agency is represented by Candace M. Shields, Bradley S. Garner, and Philip S. Lazarus of the Navy. GAO attorneys Evan D. Wesser and Edward Goldstein participated in the preparation of the decision.
