Protest challenging agency’s decision to not set aside procurement for service-disable veteran owned small business is denied. The protester argued that the Rule of Two had been satisfied because two SDVSOBs were available to perform the contract. GAO, however, found that the two companies were affiliated. They had, among other things, the same owner, officers, and address. The agency reasonably concluded that there would not be adequate price competition between two affiliated companies.
The Army conducted market research to determine whether service-disabled veteran owned small businesses were available to perform blood donor testing at Ft. Hood in Texas. As part of its market research, the Army issued sources sought notice. The Army received responses from two small businesses, MCI Diagnostic and NEO Services, LLC. The contracting officer noted that MCI and NEO had the same owner/CEO. The Army determined there could not be adequate price competition among affiliated business and thus issued an unrestricted solicitation. MCI protested, alleging the Army erred by not setting aside the procurement for SDVOSBs.
Under the Rule of Two, an agency can only set aside a procurement when there is a reasonable expectation that offers will be received from to two responsible small business, and award can be made at a reasonable price. Here, MCI argued that the Rule of Two was satisfied because there were more than 81 SDVOSBs in the VA’s VETBIZ database that utilized the solicitations designated NAICS code.
GAO, however, note that the Army was not required to use the VETBIZ database as part of its market research. No particular method of assessing the availability of small business is required. Here, the agency issued a sources sought notice and used SBA’s online market search tool, and it did not find more than two SDVOSBs to perform the contract.
MCI also argued that despite its affiliation with NEO, the Rule of Two had been satisfied because there could still be adequate price competition. GAO disagreed finding that two firms shared personnel and resources. For instance, the same individual updated both companies’ SAM registrations. Both companies appeared to share the same COO. The companies had the same address in Oklahoma’s corporate registry. MCI admitted that it shared key employees with NEO. Both companies’ operating agreements indicated they had only the same two members. The record supported the Army’s conclusions that these two co-owned with close ties could not provide adequate price competition.
MCI is represented by Kathleen Henderson. The agency is represented by Scott N. Flesch, Major Wayne T. Branom, Lieutenant Colonel Stephen M. Hernandez, and Robert B Neill of the Army. GAO attorneys Heather Self and Edward Goldstein participated in the preparation of the decision.
