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Release of contract from 8(a) Business Development program?

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I work for an 8(a) certified small business, primarily doing business with DoD, which is quickly growing and will soon exceed the size standards for remaining Small under the applicable NAICS codes in our industry. Many of our current contracts are 8(a) sole-source awards.

The 8(a) sole source route will not be an option for us in the near future, however our existing customers are would still like us to have the opportunity to compete for the work on a full and open basis. I am researching the process for removing a contract from the 8(a) Business Development, and would appreciate any insights on the following:

1. I've reviewed 13 CFR 124.504, which provides a process for releasing a requirement from the 8(a) program; however, it seems to require that the incumbent nevertheless be eligible as a small business, and that the follow-on contract be procured as a small business set-aside, WOSB, HubZone, etc. but not Full and Open.

2. I came across a 2010 Court of Federal Claims case, K-LAK Corporation v. United States, that involved an Air Force contract which was an 8(a) sole-source. The Air Force declined to exercise the option on the 8(a) sole-source award, and subsequently procured the items through a Federal Supply Schedule (FSS). The SBA provided notice to the Air Force that the requirement could not be withdrawn from the 8(a) program, but Air Force did so anyway.

The court held that the small business set-aside requirements under FAR part 19 do not apply to orders made through Federal Supply Schedules, and consequently, the Air Force was not required to comply with "the rule of Two or any of the other regulations applicable to small businesses that the plaintiff relies upon..."

https://interact.gsa.gov/sites/default/files/cofc_-_ok_to_use_fss_when_procurement_is_currently_set_aside.pdf

This case was recently (November 27, 2012) cited and reaffirmed in Kingdomware Technologies, Inc. v. United States, where the court stated that it is "well-settled that when placing an order against the FSS, the agency is exempt from the small business set-aside programs under FAR Part 19."

http://www.uscfc.uscourts.gov/sites/default/files/FIRESTONE.KINGDOMWARE112712.pdf

This is fascinating, as it seems to suggest that a contract may be removed freely from the 8(a) program as long as the Government procures the follow-on contract through an FSS.

I'd like to make sure that I'm interpreting this correctly, and is there anything I'm missing here?

3. If a DOD agency wishes to procure a follow-on contract to an 8(a) sole-source through an FSS using Full and Open competition, is there a process in terms of notifying the SBA, completing a J&A or anything else? Are there any special forms that need to be completed?

I appreciate your assistance very much! Thanks.

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FederalConractor -

No. 1 - Your interpretation is correct by my read.

No. 2 - Your interpretation is correct by my read but I would be cautious in applying the decisions to a different situation where the facts may vary. I would suggest that a request to SBA for release is still the prudent step to follow.

No. 3 - Per my response to No 2, I believe the answer is Yes. See 13 CFR 124.504(d) for the needs. There could also be agency specific supplement to the FAR or other internal policy that requires some of the effort you note as well. Best to check to make sure whether such direction does or does not exist internal to the specific agency.

If you have not read the following Wifcon thread which is close to the same questions you have raised you may want to.

http://www.wifcon.com/discussion/index.php?/topic/716-removal-of-acquisition-from-the-8a-program/

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C Culham, I very much appreciate your response. I agree, it would be ideal to obtain releases from SBA. The tricky issue is, if they deny the release (even if they arguably don't have the authority to do so), the contracting agency may be less likely to move forward with an FSS order, for fear of rocking the boat.

I did see the previous thread, but it was written prior to the court cases and CFR revisions at issue. I am surprised that there has not been more commentary and analysis on the K-LAK decision, as it seems to have huge implications for 8(a) firms and their continued survival as they grow into large companies. Thanks again for your help.

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FedKtr,

if your now other-than-small employer cannot survive without taking candy out of the mouths of babies,

maybe you should update your resume ?

And if your business owner is able to lead their Agency CO around by the nose, this is yet another example of the petty corruption that is rife in Air Force contracting.

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