GAO Sustains Protest Over VA's Failure To Issue SDVOSB Set-Aside

On August 20, 2015, the GAO sustained a protest in: The Matter of Fire Risk Management, Inc. (August 20, 2015). The protest was sustained where the Department of Veterans Affairs' (VA) determination that there was not a reasonable expectation of receiving offers from 2 or more SDVOSBs was not supported by the record.  In particular, the protester, Fire Risk Management, Inc. (FRM) asserted that the VA's decision not to set aside a particular acquisition for SDVOSBs was based on unreasonable market research.  

Summary of Relevant Facts:

• The RFP at issue was for fire protection and life safety architect/engineer (A/E) services.  The SOW described the A/E services as:  "Design services which includes Studies, Schematics,/Design Development, Contract Drawings, Specifications, Cost Estimates and/or Construction Period Services, Drawing Review Services, Code Compliance Reviews, and Joint Commission Statement of Conditions Support.
• Prior to issuing the RFP, the contract specialist did market research by searching the Dynamic Small Business Search (DSBS) database and the VA Vendor Information Pages website using NAICS Code 541330 and the keyword "fire."  The specialist's research found 2 SDVOSB/VOSB concerns registered under this NAICS code in the SBA database in the WA, OR, ID regions, but only one of them was an A/E firm.  The research also found 2 SDVOSB/VOSB firms registered under this NAICS code on the VA website in the WA, OR, ID region, but only one of them was an A/E firm.
• Based on the contract specialist's research, the RFP was issued as a total small business set-aside.
• In response to the RFP, FRM, an SDVOSB inquired as to why the procurement had not been issued as an SDVOSB/VOSB set-aside.  Although the contracting officer was leaning toward issuing it as an SDVOSB/VOSB set-aside, the Agency Engineer objected on the basis that in his opinion, any SDOVSB/VOSB that received the award likely would not be able to do the job properly. 
• The Agency ultimately decided not to reverse its decision to issue the RFP as a total small business set-aside (as opposed to an SDVOSB/VOSB set-aside) and FRM protested.

GAO Analysis and Decision:

In sustaining FRM's protest, the GAO considered the following:

• GAO confirmed the position that under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. 8127, the VA is required to set aside acquisitions for SDVOSBs whenever it determines there is a reasonable expectation that offers will be received from at least 2 SDVOSB firms and that award can be made at a fair and reasonable price.  
• GAO agreed with FRM that because the majority of the support requirements for the contract would be performed at the contractor's own facility, it was unreasonable for the Agency to limit their search to a particular geographic region (i.e., Washington, Oregon, Idaho - which was what the contracting specialist limited his/her search in this case to).
• GAO held that "anecdotal evidence of poor performance by an SDVOSB contractor, unsupported by any detailed analysis indicating that a small business concern would be unlikely to possess the specific skills and resources needed to perform the specific work required under the contemplated contract, does not represent the reasonable exercised of informed business judgment required under the statute."

Impact of the Decision:


This decision was certainly a win for SDVOSB/VOSBs registered as such with the VA.  Although the VA has in the past disputed the application of the "rule of two" (see Kingdomware case), there was a noticeable absence of such dispute in this case.  GAO recommended that the contracting officer go back and conduct a proper market survey in accordance with the agency's requirements for the procurement at issue.  Whether the RFP is ultimately cancelled or re-issued as a SDVOSB set-aside remains to be seen.  Nonetheless, it should serve as encouragement to small businesses not to accept things at face value and that sometimes it might be worth pursuing.

If you have any questions about this decision or about getting certified as an SDVOSB, please feel free to contact us at: info@holomuaconsulting.com or (808) 369-9710.