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Alandraj

Dissolving Small business set-aside

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Situation: Solicitation was set aside for a small business (offers came in from small businesses) and an offer comes in from a large business (the large business offer is lower than the small business). Since it was set aside for a small business can you ignore the large business offer that came in and award to the small business, or do you have to dissolve the small business set aside and make the award to the large business.

Is there a regulation somewhere that states this?

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Have you read FAR 19.506?

"19.506 Withdrawing or modifying small business set-asides.

(a) If, before award of a contract involving a small business set-aside, the contracting officer considers that award would be detrimental to the public interest (e.g., payment of more than a fair market price), the contracting officer may withdraw the small business set-aside determination whether it was unilateral or joint. The contracting officer shall initiate a withdrawal of an individual small business set-aside by giving written notice to the agency small business specialist and the SBA procurement center representative (or, if a procurement center representative is not assigned, see 19.402(a)) stating the reasons. In a similar manner, the contracting officer may modify a unilateral or joint class small business set-aside to withdraw one or more individual acquisitions.

(b ) If the agency small business specialist does not agree to a withdrawal or modification, the case shall be promptly referred to the SBA representative (or, if a procurement center representative is not assigned, see 19.402(a)) for review.

(c ) The contracting officer shall prepare a written statement supporting any withdrawal or modification of a small business set-aside and include it in the contract file."

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So does that mean that we can withdraw the large business from the acquisition? We want to go with making the award to the small business but we need to figure out how to do that with us having a large business offer that is lower.

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Is 52.219-6 Notice of Total Small Business Set-Aside in your solicitation?

See © (1):

Offers are solicited only from small business concerns. Offers received from concerns that are not small business concerns shall be considered nonresponsive and will be rejected.

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Prior to setting the procurement aside for small business, you determined that there was a reasonable expectation that award would be made at fair market prices. Now, you need to make a judgement about whether the proposed award price is fair and reasonable. If it is, then you may proceed and make the award.

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See Hardcore DuPont Composites, LLC, GAO Decision B-278371, 96-1 CPD para. 28:

Under Federal Acquisition Regulation (FAR) § 19.506(a), a contracting officer may withdraw a set-aside before award if he or she determines that award to a small business concern would be detrimental to the public interest because, for example, the award would be at more than fair market price. The contracting officer has discretion to determine price reasonableness in a small business or other set-aside, and we will not disturb such a determination unless it is unreasonable. A. Hirsh, Inc., B-271829, July 26, 1996, 96-2 CPD ¶ 55 at 2. In making a determination of price reasonableness in this context, the contracting officer may, among other things, perform a comparison of proposed prices received in response to the solicitation, including prices submitted by an otherwise ineligible large business. Id.; FAR §§ 19.202-6(a), 15.805-2 (June 1997).

However, in view of the congressional policy favoring small businesses, contracts may be awarded under small business set-aside procedures to small business firms at premium prices, so long as those prices are not unreasonable. Vitronics, Inc., 69 Comp. Gen. 170, 171 (1990), 90-1 CPD ¶ 57 at 2, aff'd, B-237249.2, 90-1 CPD ¶ 391. In this regard, we have noted that a small business bidder's price is not unreasonable merely because it is greater than the price of an ineligible large bidder, since there is a range over and above the price submitted by the large business that may be considered reasonable in a set-aside situation. The determination of whether a particular small business price premium is unreasonable depends upon the circumstances of each case. See, e.g., Advanced Constr., Inc., B-218554, May 22, 1985, 85-1 CPD ¶ 587 at 2 (contracting officer in a set-aside procurement properly found reasonable a small business bid which was more than 11 percent higher than large business courtesy bid); Browning-Ferris Indus., B-209234, Mar. 29, 1983, 83-1 CPD ¶ 323 at 2-3 (small business bid which was 51 percent higher than large business bid was properly found reasonable); CDI Marine Co., B-188905, Nov. 15, 1977, 77-2 CPD ¶ 367 at 2-3 (small business offer which was 17 percent higher than that of other qualified firms, large and small business alike, was properly found reasonable).

Moreover, as was pointed out by someone else, above, under a set-aside you must ignore the proposal submitted by the large bidder.

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Moreover, as was pointed out by someone else, above, under a set-aside you must ignore the proposal submitted by the large bidder

I am confused by the above statement since the referenced decision also stated the following:

In making a determination of price reasonableness in this context, the contracting officer may, among other things, perform a comparison of proposed prices received in response to the solicitation, including prices submitted by an otherwise ineligible large business.

I would think instead of "must" ignore it would be "can" ignore but perhaps I'm missing something.

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The contracting officer MUST ignore the price from the large business offer.

If the price from the small business offer is not reasonable, then the contracting officer MAY withdraw the set-aside and re-solicit on an unrestricted basis.

In any case, the contracting officer cannot award based to the large business offeror. The solicitation said offers from large businesses will be rejected.

-----

STEP ONE: Reject the offer from the large business.

STEP TWO: Determine if the price from the small business offer is reasonable.

YES: Award to the small business.

NO: Withdraw (dIssolve) the set-aside and re-solicit on an unrestricted basis.

There are other possibilities, such as opening discussions with the small business offeror(s), but the above is simplified for teaching points.

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A CO must "ignore" a proposal from an ineligible offeror in the sense that he or she must not consider it for award. However, in order to determine the reasonableness of a price proposed by an eligible offeror, a CO may consider any pricing information at his or her disposal, including the price in an offer submitted by an ineligible offeror.

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