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Has Congress Sanctioned Parity?




When I read Senator Landrieu's comments in the Senate on S. 3190, The Small Business Programs Parity Act of 2010, I couldn't wait to write an unkind comment. Below is an excerpt from her statement.

Two recent decisions by the Government Accountability Office misinterpreted Congress's long-standing intent with regard to the operation of the current laws governing these programs. The decisions stated that the HUBZone program had preference over all other small business contracting programs. The decisions were also relied upon in a recent opinion issued by a judge of the Court of Federal Claims, in a case called Mission Critical Solutions v. United States.

I was disappointed by these decisions because they misinterpret the intent of Congress in passing the Small Business Reauthorization Act of 1997.

The Government Accountability Office (GAO) and the Court of Federal Claims (COFC) said the language of the Small Business Act, in regard to the HUBZone and 8(a) program was clear but the Senator appeared to claim that congressional intent trumped clear law. I was ready to say something unkind. Now, with more research under my belt, I'm not sure about my thoughts for an unkind comment. The Senator may be correct.

If you haven't kept up with the parity thing, here is a brief refresher. It deals with the HUBZone and 8(a) programs and the words "notwithstanding," "shall," and "may." You can get the full story by going here and looking for the Mission Critical Solutions decisions of GAO and the COFC. Add in the International Program Group, the Small Business Administration (SBA) Reconsideration, and the DGR Associates, Inc. GAO decisions.

In GAO's version of Mission Critical Solutions, this paragraph sums things up. GAO said

We recognize that our conclusion that an agency must make reasonable efforts to determine whether it will receive offers from two or more HUBZone small businesses, and if so, set the acquisition aside for HUBZone firms, even where a prior contract for the requirement has previously been performed by an 8(a) contractor, is inconsistent with the views of SBA, as argued in connection with this protest and as implemented through its regulations. Those regulations essentially provide that HUBZone set-asides are not required even where the criteria specified in 15 U.S.C. sect. 657a
are satisfied if the requirement has previously been performed by an 8(a) contractor or the contracting officer has chosen to offer the requirement to the 8(a) program. See 13 C.F.R. sections 126.605, 126.606, and 126.607. While an agency's interpretation of a statute that it is responsible for implementing is entitled to substantial deference, and, if reasonable, should be upheld, Blue Rock Structures, Inc., B‑293134, Feb. 6, 2004, 2004 CPD para. 63 at 8, an interpretation that is unreasonable is not entitled to deference. We do not think that SBA's regulatory implementation of the HUBZone and 8(a) statutes is reasonable since it fails to give effect to the mandatory language of the HUBZone statute. We note in this connection that we have reviewed the legislative history pertaining to the HUBZone program and are aware that there has been considerable discussion (expressing differing viewpoints) as to the intended relationship between the 8(a) and HUBZone programs. As we pointed out in International Program Group, Inc., supra, however, the starting point of any analysis of the meaning of a statutory provision is the statutory language, and where the language is clear on its face, as the language of the HUBZone statute is here, its plain meaning will be given effect. (
, B-401057, May 4, 2009)

When it comes to reading the law, I agree with GAO and the COFC. I also agree that the SBA regulations are inconsistent with the clear language of the law. However, in doing some research, I found Contract Management Inc. v. Rumsfeld 291 F. Supp 2d 1166 (District Court of Hawaii 2003). Below, is the section that caught my eye.

Although the SBA's resolution of the conflict between the Congressional objective of parity between the 8(a) and HUBZone programs, on the one hand, and the mandatory status of HUBZone set-asides, on the other, appears to be one that Congress would have sanctioned, this Court need not speculate. As Defendants point out, the Small Business Act is re-authorized every three years, the most recent re-authorization having occurred in 2000. Pub.L. 106-554, 114 Stat. 2763 (2000). The final HUBZone regulations were published in June 1998. Congress, therefore, has been placed on notice that the SBA regulations establish parity between the 8(a) and HUBZone programs, and has not acted to modify the language of the statute. "[A]
consistent administrative interpretation of a statute, shown clearly to have been brought to the attention of Congress and not changed by it, is almost conclusive evidence that the interpretation has congressional approval
." [Footnote deleted, italics added]

Another Court in Kay v. Federal Communications Commission, 443 F. 2d 638, 646-47 (D.C.Cir.1970) further explains the principle of--let's call it, "constructive congressional approval" as

Congress, of course, is not required to act each time a statute is interpreted erroneously and legislative silence in the face of such interpretation is not necessarily equivalent to legislative approval. However, a consistent administrative interpretation of a statute, shown clearly to have been brought to the attention of Congress and not changed by it, is almost conclusive evidence that the interpretation has congressional approval. [Footnote deleted]

And finally, the U. S. Supreme Court in United States v. Rutherford, 442 U.S. 544, 553-554, 99 S.Ct. 2470, 61 L.Ed.2d 68 (1979) weighs in

In implementing the statutory scheme, the FDA has never made exception for drugs used by the terminally ill. As this Court has often recognized, the construction of a statute by those charged with its administration is entitled to substantial deference.
. Such deference is particularly appropriate where, as here, an agency's interpretation involves issues of considerable public controversy, and Congress has not acted to correct any misperception of its statutory objectives. [Footnote deleted]

As can be seen, if Congress knows about implementing regulations that do not perfectly follow the language of the law, and it doesn't change the law, Congress can end up approving the implementing regulations by inaction. In Contract Management Inc., the court explained that Congress knew about the Small Business Administration (SBA) regulations that established parity between the 8(a) and HUBZone programs and Congress appears to have approved of them. From personal experience with Congress, I know of instances where regulation did not perfectly implement a law but Congress "sanctioned" it by not changing the law until a later date. Instead, there was a gentleman's agreement that the implementing regulations would be written around the law. Now, that isn't right but it happens.

Let's go back to Senator Landrieu's statement and note where she says "Congress's long-standing intent with regard to the operation of the current laws governing these programs." Is she stating that Congress sanctioned the SBA regulations by not changing the law? Who would know better than the Chairman of the Senate Small Business Committee?

In the current controversy, GAO in its opinions, has worked its way out on a tree limb and a COFC judge followed GAO. What else could they have done? Would either have said that Congress sanctioned regulations that run counter to law by Congress's lack of action? Certainly not a congressional agency such as the GAO.

In its latest decision, DGR Associates, Inc., B-402494, May 14, 2010, GAO summed up where we stand on this subject

In making our recommendation, we recognize, as the Air Force has noted and the DOJ memorandum indicates, that the recommendations in our bid protest decisions are not binding on Executive Branch agencies. Small Business Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478 U.S. 714, 727-32 (1986)). This fact, however, does not affect our statutory obligation to decide protests concerning alleged violations of procurement statutes and regulations. See 31 U.S.C. ? 3552 (2006). We have clearly stated our view on the proper interpretation of the HUBZone statute, and we recognize that the Executive Branch has resolved to apply its own, contrary interpretation of the HUBZone statute. Accordingly, absent some change in the statutory scheme, Executive Branch policy, or a contrary decision by the United States Court of Appeals for the Federal Circuit in connection with the Justice Department's appeal of the decision in Mission Critical Solutions v. United States, supra, we will decide future protests raising the issue here in an expedited and summary manner, in the interest of reducing the costs associated with filing and pursuing such protests.

With Congress unable to do its job and fix its law, we wait for another court to issue its decision. If it follows the law, it will uphold GAO and the COFC. If it follows reality, it will end up with an even more controversial and bizarre decision.

Our nation deserves better than this!



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So, I am reading this fairly late in the evening. Then I notice the date, Jul 19, 2010 it was posted....I get a bit startled. Today is 15th and the 16th of July arrives a second after midnight.

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Guest Vern Edwards


Consider all the things on the legislative agenda. The parity policy was promulgated in accordance with the notice and comment process of the Administrative Procedures Act. Congress has long known about it and has not intervened to put an end to it. The lawyers have adhered to their simplistic, but long-standing and well-established, approach to statutory interpretation. Under that approach, their conclusion is unassailable.

GAO should not have taken it upon itself to challenge an administrative agency's long-standing and properly promulgated policy. It should instead have denied the protest and referred the matter to the cognizant congressional committees.

I respect the protest process and GAO, and think that they are necessary elements of the acquisition system. However, Executive Branch acquiescence to GAO rule-making by protest decision has resulted in a costly mess. Consider the confusion about the proper conduct of "discussions" in source selection. Hundreds of costly and inconsistent ad hoc GAO decisions that have left COs understandably confused about the rules and have made a joke of competitive 'negotiation," all arising out of a single obscure phrase in a 1962 statute: "the contracting officer shall conduct discussions with all offerors within a competitive range."

If the parity matter reaches the Federal Circuit, that court should side with the SBA. My fear is that they will take the easy way out.

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