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GAO Sustains Protest to Solicitation’s Implementation of Randolph-Sheppard Act


Koprince Law LLC

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GAO recently sustained a protest to the terms of a solicitation incorporating the Randolph-Sheppard Act (RSA). The RSA is a statutorily-prescribed preference for blind individuals in the operation of vending facilities (which include cafeterias, snack bars, and automatic vending machines) on Federal property.

The protester here, the incumbent contractor and a non-RSA HUBZone concern, challenged the agency’s decision to include the RSA preference in its HUBZone set-aside solicitation for food service attendant services, arguing the work the solicitation contemplated was not for the operation of a cafeteria. And GAO agreed. This GAO decision could have a significant impact, given the broad range of food service solicitations that agencies have been (seemingly increasingly) applying the RSA to lately. Let’s take a deeper dive.

GAO’s decision in JW Mills Management, LLC, B-420416 (Mar. 24, 2022), involved a FAR part 12 and 15 solicitation issued by the Department of the Navy as a full HUBZone set-aside. The solicitation sought food service attendant (FSA) services for the dining facilities at the Naval Base Ventura County, California. Specifically, it sought the necessary personnel, supervision of those personnel, and any items and services necessary to perform the services outlined in the PWS, which was to include cashier, food service attendant, scullery, and housekeeping services. It said the two dining facilities, called galleys, that would be staffed through the contract were to remain under the operational control of a food service officer (FSO), a military service member. And the FSO would be responsible for inventory, maintaining the facilities’ equipment, ordering and supplying the food, establishing menus, and food preparation and storage. The solicitation said, “[i]n form and fact [the] FSO operate[s] the galleys.”

The solicitation anticipated an award on a best-value tradeoff basis, under three evaluation factors: (1) technical; (2) past performance; and (3) price. But it also included a provision giving priority to state licensing agencies (SLAs) pursuant to the RSA. It said:

The Government will award a contract resulting from this solicitation to the responsible offeror whose offer conforming to the solicitation will be most advantageous to the Government, price and other factors considered, unless preempted by application of the State Licensing Authority (SLA) priority under the Randolph–Sheppard Act. If the SLA is within the competitive range, is found to be technically acceptable, has a neutral or better past performance rating, offers a price determined to be fair and reasonable, and is deemed a responsible contractor, the SLA priority will pre-empt award to the Best Value Offeror.

The solicitation allowed the contracting officer to initiate discussions with only the SLA in the competitive range to facilitate an SLA award without further consideration of other offerors. And it said the SLA could be included in the competitive range even if it was not the lowest priced.

By way of brief background, the RSA is a Federal statute that authorizes licensed blind persons to operate vending facilities on any Federal property for the purpose of “providing blind persons with remunerative employment, enlarging the economic opportunities of the blind, and stimulating the blind to greater efforts in striving to make themselves self-supporting[.]” It requires: “[In authorizing the operation of vending facilities on Federal property, priority shall be given to blind persons licensed by a State agency[.]” Under the RSA, it is actually the State Licensing Agency (SLA) that serves as the prime contractor, and the SLA recruits, trains, licenses, and places blind individuals in positions to operate certain Federal facilities.

The Department of Education’s implementing regulations for the RSA state:

In order to establish the ability of blind vendors to operate a cafeteria in such a manner as to provide food service at comparable cost and of comparable high quality as that available from other providers of cafeteria services, the appropriate State licensing agency shall be invited to respond to solicitations for offers when a cafeteria contract is contemplated by the appropriate property managing department, agency, or instrumentality.

The regulation requires RSA solicitations to “establish criteria under which all responses will be judged[,]” which “may include sanitation practices, personnel, staffing, menu pricing and portion sizes, menu variety, budget and accounting practices.” It ultimately requires, if the SLAs proposal is found to be within the competitive range and “ranked among those proposals which have a reasonable chance of being selected for final award,” the agency will award to the SLA (so long as the agency and Secretary of the Rehabilitation Services Administration agree that the “operation can be provided at a reasonable cost, with food of a high quality comparable to that currently provided employees, whether by contract or otherwise.”).

In JW Mills Management, the protester timely submitted its pre-award protest to the terms of the solicitation (prior to the date and time proposals were due), challenging the inclusion of the RSA. Specifically, the protester argued that the RSA and its implementing regulations only apply when a blind vendor actually operates the dining facility, and this requires “control or management over the facility as a whole.” According to the protester, this solicitation required the contractor to perform ancillary tasks to support the dining facilities’ overall functions and did not involve control or management of the cafeterias.

The Navy argued that the solicitation’s scope of work required “more than the performance of discrete tasks, but instead, tasks necessary for the proper functioning of the cafeterias[,]” and as such, the contracting officer’s decision to apply the RSA here was reasonable. The Navy cited a long line of court and arbitration decisions on the issue broadly applying the RSA to various food service solicitations. And both parties’ arguments asserted that the statutory and regulatory history of the RSA supported their positions.

In the end, GAO sustained the protest based on its finding that the Navy’s inclusion of the RSA preference here was improper because the solicitation’s requirements were not for the operation of a cafeteria.

First, GAO prefaced its analysis here with a history lesson on the RSA, explaining that the RSA was enacted “in 1936 for the purpose of training and employing qualified blind individuals to operate vending facilities in federal buildings[,]” and amended in 1974 to establish “a clear federal-state relationship[]” and to broaden “the applicability of the RSA to vending machines, snack bars, and cafeterias.” GAO then gave a brief history lesson on another statutory preference, the Javits–Wagner–O’Day Act (JWOD Act), which provides employment for individuals with disabilities (including those visually impaired) and is implemented by the AbilityOne Program.

GAO discussed (at length) the potential overlap of these programs and the legislative history regarding the manner in which Congress and the various implementing agencies/programs have viewed their applications, including: the 2006, 2007, and 2015 NDAAs; various joint policy and joint explanatory statements of the implementing agencies; DoD’s proposed (but subsequently withdrawn) final rule; the Secretary of Education’s letter to Congress; and the DOE’s implementing regulations. But in the end, GAO looked directly at the statute and DOE’s regulations in making its decision.

GAO began its own analysis by applying the “plain meaning” rule of statutory construction. GAO said, according to the Supreme Court, “[t]he first step is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in this case[,]” and this “begin[s] with the language employed by Congress and the assumption that the ordinary meaning of that language accurately expresses the legislative purpose.” GAO again quoted SCOTUS, stating, “[i]f the statutory language is clear and unambiguous, the inquiry ends with the plain meaning.” Applying this rule, GAO explained:

[T]he RSA’s statutory preference applies to the “operation of vending facilities on Federal property.” While the statute does not specifically define “operation,” the plain meaning of such a term connotes some degree of control, management, or administration of the vending facility.

Then, turning to the factual analysis here, GAO said:

In this solicitation, the tasks to be performed are in support of the cafeterias, but do not, in and of themselves, involve operating the cafeterias. Indeed, reasoning by analogy, if a contractor was performing janitorial services at a government facility, it could hardly be construed that the firm was “operating” the facility. Similarly, here, the PWS only asks the contractor to perform cashier, FSA, scullery, and housekeeping services, whereas the solicitation expressly provides that the Navy (through the FSOs) will operate the cafeterias (by retaining control of the overall management and day-to-day operations of the cafeterias).

So, GAO found that that the solicitation here did “not involve the ‘operation’ of a vending facility.”

GAO went on to confirm its statutory interpretation with the RSA’s implementing regulations. It reiterated the relevant regulatory language in section (a) of the regulation, stating, “[p]riority in the operation of cafeterias by blind vendors on Federal property shall be afforded” when DOE determines “that such [an] operation can be provided at a reasonable cost, with food of a high quality comparable to that currently provided[.]” It also cited section (b)’s language, stating, “[i]n order to establish the ability of blind vendors to operate a cafeteria in such a manner as to provide food service at comparable cost and of comparable high quality as that available from other providers of cafeteria services.”

Based on this language, GAO determined: “Implicit in this phrasing is not only that the contractor will have some degree of management or control over the cafeteria, but also that it will do so in relation to providing food.”

GAO turned back to the solicitation here, finding that “the contractor does not exercise management or control over providing food, but, at best, performs ancillary tasks in relation to providing food[,]” and pointing to the sections of the solicitation “requiring the contractor to pack/prepare box lunches and picnic rations, distribute and replenish food on the serving line, etc.” And GAO concluded the priority described in the RSA’s implementing regulations should not apply to such circumstances.

GAO then reviewed other materials advanced by the parties’, finding that those did “not advance a binding (or otherwise dispositive) interpretation of the RSA’s application,” and provided “no basis to deviate from a plain reading of the statute and implementing regulations.”

Specifically, it found that the 2006 and 2007 NDAAs did not clarify the scope of the RSA or “provide a clear interpretive lens” to analyze FSA service contracts, as there was no clear congressional intent to limit or broaden the RSA’s application. Now, in the 2015 joint explanatory statement, GAO did see a clear position regarding the application of the two statutory preferences, “with the JWOD Act, not the RSA, applying to contracts for dining support services and dining facility attendant (DFA) services at a military dining facility.” But GAO said that statement, as well as the Secretary of Education’s letter (seemingly calling for a broader reading of the statute), was “not a product of formal rulemaking[.]”

GAO acknowledged the discrepancies among Congress, the agencies, and courts regarding RSA application, stating:

We acknowledge that federal courts have grappled with the applicability of the RSA to military cafeteria contracts, in a variety of different factual contexts, and have reached mixed results. Likewise, arbitration panels convened under DOE’s RSA regulations have addressed similar issues, tending to favor a broader application of the RSA to FSA service contracts.

But nonetheless, GAO returned to its own “plain meaning” analysis, explaining that, here, “the agency’s own solicitation provides that the Navy will (through the FSO) retain ‘operational control’ of the cafeterias and will, in ‘form and fact’ operate the galleys.” It said:

Even without the solicitation expressly providing that the Navy will operate the cafeterias, given the responsibilities of the FSO in managing and directing the workings of the cafeteria, we conclude the discrete tasks to be performed by the contractor do not rise to the level of operating the cafeteria.

And thus, GAO concluded the following:

[I]n our view, based on a plain reading of the RSA statute and implementing regulations, the work required in the instant solicitation for FSA services does not constitute the “operation” of a cafeteria per the meaning of the RSA. As such, we conclude the Navy’s inclusion of the RSA preference in the solicitation was improper and we therefore sustain the protest.

GAO sustained the protest and recommended that the agency amend the solicitation to remove the RSA preference and reimburse the protester the reasonable costs of filing and pursuing the protest, including attorneys’ fees.

So what is the big deal here? Sure, this one was a big win for the protester; but the holding specifically applied only to the Navy solicitation here. So, why is this potentially a huge decision? Well, as you can gather from a full reading of GAO’s decision in In JW Mills Management, there has been a ton of discussion regarding the applicability of the RSA at the legislative level, federal agency level, and among various representatives and offices. But we don’t have much at all from GAO on this front, as GAO is extremely limited in its substantive RSA-related decisions. GAO won’t even consider an SLA’s protest that the procuring agency violated the RSA by eliminating its proposal from the competitive range. And when it comes to protests that the agency should not have made an award to an SLA, the priority established by the RSA is a huge hurdle for unsuccessful contractors to overcome–and frankly, one that GAO hasn’t really discussed.

Thus, whether or not the RSA should apply to certain solicitations is GAO’s primary focus in RSA-based litigation matters. And GAO has provided very little, if any, real guidance on the matter before this decision. While the RSA is an incredible tool, serving a valuable purpose–to promote employment of the blind in federal contracting–it is safe to say that it was not intended to “take” all FSA work from other small and disadvantaged contractors performing such services. This decision, while it may not create bright line rules for when all solicitations should or should not be subject to the RSA, does demonstrate GAO’s intent to limit RSA’s applicability to the areas GAO believes Congress and DOE intended. And thus, it has to potential to support future litigation of this type.

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The post GAO Sustains Protest to Solicitation’s Implementation of Randolph-Sheppard Act first appeared on SmallGovCon - Government Contracts Law Blog.

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