Original Contract, Not Bridge, Correct Comparison for “New Requirement” for SBA’s 8(a) Program; COFC No. 17-1982C, SKC LLC v. United States

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Protest that the agency improperly awarded a sole-source contract through the Small Business Administration’s 8(a) program after publicly announcing its intent to award it as a small business set-aside is denied, where agency forecasts provided at an industry day did not make any final public announcement of the agency’s intentions; and protest that the agency failed to determine whether meeting its requirements through the 8(a) program would have an adverse impact on the protester is denied, where the agency reasonably compared the new requirement to the protester’s original contract, not to the bridge contract, and properly concluded it did not need to conduct an impact assessment.

SKC LLC protested the Defense Intelligence Agency’s award of a sole-source 8(a) set-aside contract for logistical services to Ikun LLC, arguing that the procurement process violated SBA’s implementing regulations for the 8(a) program. SKC previously challenged the award with the Government Accountability Office, and refiled with COFC when its protest was unsuccessful.

SKC argued that SBA never performed an adverse impact analysis when determining to accept DIA’s proposed procurement into the 8(a) program and that the proposed procurement did not qualify for an exemption from that process.

Second, SKC alleged that DIA publicly stated an intention to award the logistics contract following competition as a small business set-aside, and thus the procurement could not be accepted into the program. According to SKC, DIA designated the procurement as a small business set-aside during an industry day, after its acceptance into the 8(a) program, and noted that SKC was the incumbent.

SKC argued that DIA’s statements regarding the logistics requirement at the industry days constituted public expressions of “clear intent” to award the contract as a small business set-aside. SKC argued that DIA’s forecast documents reflected DIA’s intent at the time they were distributed, including a significant level of detail regarding the procurement timeline and point of contact.

In response, the government argued that the forecasts were not a public expression of clear intent. According to the government, SKC’s arguments were foreclosed by disclaimers contained on a presentation at one industry day and provided orally at a second. The government further noted that the forecast documents contained information on a multitude of potential procurements rather than a series of acquisition-specific activities that were targeted at a select list of vendors.

COFC agreed with the government, finding that DIA’s disclaimers conveyed a lack of explicit intent to be bound by the specifics of the communication, which SBA is required to consider when deciding whether to accept a contract into the 8(a) program. The regulation bars a procurement for  which a statement of intent to reserve as a small business set-aside was sufficiently definite as to rise to the level of a recitation in an actual solicitation or some comparable statement of intent. In this case, DIA’s statements did not meet that standard.

Alternatively, SKC challenged DIA’s and SBA’s determination that the logistics requirement was a “new” requirement and thus no analysis of the potential adverse impact on SKC of the acceptance of the requirement into the 8(a) program was required. SBA’s regulations state that a requirement is new if expansion or modification of an existing requirement results in a magnitude of change significant enough to cause a price adjustment of at least 25 percent (adjusted for inflation) or to require significant additional or different types of capabilities of work. SKC argued that the plain meaning of the word “existing” in the regulations requires that SBA compare, for purposes of determining if a planned procurement is a new requirement, the procurement “in existence or operation at the current time.”

According to SKC, DIA improperly compared the 8(a) contract to the original 2011-2016 contract when it concluded that the new contract varied by greater than 25 percent and was thus a new requirement. Further, because that contract was not “existing” at the time the 8(a) procurement was planned, SKC asserted that a proper comparison would show a less than 25 percent variance and thus the agency unreasonably failEd to perform an adverse impact analysis.

In response, the government disputed SKC’s interpretation of the term “existing requirement,” arguing that the regulation does not specify precisely when that requirement had to exist. In short, the government argued that the 2011-2016 contract, not the later bridge contract—was the existing requirement. The government argued that this position was consistent with SBA’s approach for how the new requirement test works in other contexts.

COFC acknowledged that SCK reasonably interpreted the term “existing requirement” as meaning its original bridge contract, the actual contract in place at the time the follow-on award was accepted into the 8(a) program. However, the court explained that agencies are granted considerable deference in interpreting their own regulations. COFC found that SKC failed to show any reason to suspect SBA or DIA unreasonably interpreted the regulations to preclude the consideration of the bridge contract when determining whether the subject procurement was a new requirement for purposes of acceptance into the 8(a) program. Accordingly, COFC denied the protest.

SKC LLC is represented by Devon E. Hewitt, Protorae Law, PLLC and by of counsel Kandis M. Koustenis, Ben M. Kacher, and Bret C. Marfut, Protorae Law, PLLC. The government is represented by Devin A. Wolak, Trial Attorney, Commercial Litigation Branch, Civil Division, Department of Justice. With him on the briefs were Chad A. Readler, Acting Assistant Attorney General, Civil Division, Robert E. Kirschman, Jr., Director, and Douglas K. Mickle, Assistant Director, Commercial Litigation Branch, Civil Division, Department of Justice.

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