Jump to content
The Wifcon Forums and Blogs

elgueromeromero

Fair Opportunity vs. "Rule of Two"

Recommended Posts

My Qs:

1. As I understand Delex, the Rule of Two applies to task and delivery orders even when an IDIQ contains a “Fair Opportunity” clause. This IQC (awarded post-Delex) allows for small business set aside (see below), but this particular task order was not set aside for small businesses, even though there are two small business IQC holders. Why not? Does the IQC language (below) exempt the CO from the rule of two?

No. Read Delex again. The rule of two comes from FAR. You cannot overrule FAR with contract language unless you get a FAR deviation.

2. If the TO should be set aside under rule of two, but the task order is less than $10 million, where/how can a small business protest? To get to GAO, the TO must be more than $10 million. COFC has no jurisdiction to hear task order protests. IQC permits awardees to complain to the IQC ombudsman, which has little authority.

If the TO is under the $10 million threshold, then there is no protest forum.

3. Here is the posible twist: would it be possible to bring a breach of contract claim similar to DTI, and allege that IQC incorporates the Rule of Two by implication and that US agency breached the IQC by failing to set aside under Rule of Two?

Yes, it would be possible.

Share this post


Link to post
Share on other sites

The relevant rule for orders under multiple award contracts is at FAR 16.505( b )(2)(i)(F):

"In accordance with section 1331 of Public Law 111-240 (15 U.S.C. 644®), contracting officers may, at their discretion, set aside orders for any of the small business concerns identified in 19.000(a)(3). When setting aside orders for small business concerns, the specific small business program eligibility requirements identified in part 19 apply."

Also, see FAR 19.502-4( c ). Maybe the CO did not set aside the task order in question because they exercised their discretion not to.

Share this post


Link to post
Share on other sites

i've re-read Delex and re-read the posts in this thread and still have questions:

if the CO exercised his/her discretion under 16.505( B )(2)(i)(F) and decides to not set aside the task order, even though there are two small businesses under the MAC capable of doing the work at market prices, then (a) must the CO, under the Rule of Two, document his/her decision in order to show that the decision was reasonable and ( B ) if the CO's reasoning for not setting aside the TO is not documented or, even if not documented, is unreasonable, then would one of the small businesses have grounds to protest (assuming the dollar threshhold is met) that the CO abused his/her discretion?

Share this post


Link to post
Share on other sites

i've re-read Delex and re-read the posts in this thread and still have questions:

if the CO exercised his/her discretion under 16.505( B )(2)(i)(F) and decides to not set aside the task order, even though there are two small businesses under the MAC capable of doing the work at market prices, then (a) must the CO, under the Rule of Two, document his/her decision in order to show that the decision was reasonable and ( B ) if the CO's reasoning for not setting aside the TO is not documented or, even if not documented, is unreasonable, then would one of the small businesses have grounds to protest (assuming the dollar threshhold is met) that the CO abused his/her discretion?

The FAR doesn't require such documentation, but contemporaneously documenting such rationale is probably worth the trouble.

Share this post


Link to post
Share on other sites

Vern

In post #26 you wrote

Quote

2. If the TO should be set aside under rule of two, but the task order is less than $10 million, where/how can a small business protest? To get to GAO, the TO must be more than $10 million. COFC has no jurisdiction to hear task order protests. IQC permits awardees to complain to the IQC ombudsman, which has little authority.

If the TO is under the $10 million threshold, then there is no protest forum.

Unless I am reading MORI wrong, I think the COFC determined that a protest based on failure to follow the rule-of-two is not considered a protest in conjunction with the issuance of a task order, and therefore COFC can hear these protests. The following passage is from the COFC Decision in Mori (10-289C under seal Dec 15, 2011, reissued Dec 21, 2011) Passage starts on page 31 of the Decision:

When an agency skips past the step of conducting Rule of Two analysis and proceeds with the plan of obtaining services through task order contracts, this does not, however, mean that a protest in response by an interested small business is one “in connection with the issuance or proposed issuance of a task or delivery order.” 41 U.S.C.A. § 4106(f)(1). Merely because this failure to follow 48 C.F.R. § 19.502-2( B), if left unchecked, would ultimately result in the issuance of a task order does not necessarily connect a protest of that failure with that hypothetical order --- which might never be proposed if the protest succeeds. There is no reason to believe that the phrase “in connection with,” when used in FASA, has the same sweeping meaning as when used in the ADRA. See Global Computer Enters., Inc. v. United States, 88 Fed. Cl. 350, 407-10 (2009). To be sure, the protest is in connection with a procurement, but the Federal Circuit has held that for purposes of the ADRA “‘procurement’ includes all stages of the process of acquiring property or services, beginning with the process for determining a need for property or services and ending with contract completion and closeout.” Distributed Solutions, Inc. v. United States, 539 F.3d 1340, 1345 (Fed. Cir. 2008) (adopting and quoting 41 U.S.C. § 403(2)). The actual acquisition begins when an agency’s needs are established, 48 C.F.R. § 2.101, and the set-aside decision, to be meaningful, must occur prior to the selection of the vehicle to be used to satisfy these needs, since certain vehicles may exclude small businesses. As explained above, contracting officers cannot reasonably expect small businesses to submit offers if they do not allow them to do so.

The “procurement,” then, which this Rule of Two protest concerns, is a “stage of the process of acquiring property or services” that falls after the establishment of the particular agency needs, but before the choice of the vehicle to satisfy these needs. See 48 C.F.R. § 7.105( B)(1)& ( B)(4)(ii)( B)(2) (2010) (describing the consideration of prospective sources, including small businesses, in written acquisition plans). This is a logically distinct step from the issuance or proposed issuance of task orders, which presupposes the selection of a multiple award task order contract vehicle to begin with.33 Since at this stage an agency could just as well choose not to go down the task order road as to follow it, this choice is not “in connection with the issuance or proposed issuance of a task or delivery order” any more than it is in connection with an order using the GSA FSS, or with a negotiated procurement under FAR Part 15, or any other option at the agency’s disposal. Thus, the 41 U.S.C.A. § 4106(f)(1) limit on protests does not preclude our jurisdiction over MORI’s Help Desk Solicitation claims

I take this to mean that protests based on a rule-of-two violation can be filed with the COFC for any proposed task order of any dollar value under multiple award IDIQ contracts. And that makes your earlier advice that discretion does not mean you can do whatever you want to do even more apropos, since every IDIQ task order could become subject to a rule-of-two protest if a CO does not properly act on the rule-of-two market information. Do you read this the same way?

Share this post


Link to post
Share on other sites
Vern... Unless I am reading MORI wrong, I think the COFC determined that a protest based on failure to follow the rule-of-two is not considered a protest in conjunction with the issuance of a task order, and therefore COFC can hear these protests...

I take this to mean that protests based on a rule-of-two violation can be filed with the COFC for any proposed task order of any dollar value under multiple award IDIQ contracts. And that makes your earlier advice that discretion does not mean you can do whatever you want to do even more apropos, since every IDIQ task order could become subject to a rule-of-two protest if a CO does not properly act on the rule-of-two market information. Do you read this the same way?

I do not read it the same way, and I suggest that you read MORI again. MORI Associates, Inc. v. U.S., 102 Fed.Cl. 503 (December 2011).

Judge Wolski, after reviewing the GAO's decision in Delex, asked a rhetorical question on page 530 (in the Federal Claims Reporter) of the decision:

Since, in the GAO's view, task orders could be set aside for small businesses, the Rule of Two analysis is required by an agency before it competes a task order among the general pool of ID/IQ contract holders—as a reasonable expectation that at least two responsible small businesses will submit offers allowing an award at a fair market price requires the award to be set aside for small businesses... But is this the only stage in the acquisition process at which the Rule of Two analysis should be performed?

Emphasis added.

He then found that there are two points in time at which a Rule of Two determination must be made in connection with a multiple award IDOQ contract. The first is before issuing a solicitation for the underlying contract and the second is before issuing a solicitation for a task order when the awardees include small businesses. He found that the first fell within the court's jurisdiction and then held that MORI's protest was an instance of the first and was not a protest of the issuance of a task order, and so was within the COFC's jurisdiction:

The “procurement,” then, which this Rule of Two protest concerns, is a “stage of the process of acquiring property or services” that falls after the establishment of the particular agency needs, but before the choice of the vehicle to satisfy these needs. See 48 C.F.R. Secs. 7.105(B)(1) & (B)(4)(ii)(B)(2) (2010) (describing the consideration of prospective sources, including small businesses, in written acquisition plans). This is a logically distinct step from the issuance or proposed issuance of task orders, which presupposes the selection of a multiple award task order contract vehicle to begin with.

Emphasis added. See page 533. Delex involved the second of the Rule of Two determinations.

The court's findings and holdings about the expiration of the limitation on protests have been overcome by events. Congress has renewed it.

I stand by my comments in Post #26.

Share this post


Link to post
Share on other sites

Take a look at this decision issued today by the GAO: B-404892.2, Split Rock, Inc.-Costs.

It says that COs are bound to follow SBA regs mandating documentation of the market research done to determine if a procurement can be set aside for 8(a)s, HUBZones, SDVOSBs, or WOSBs prior to using a standard SBSA.

Share this post


Link to post
Share on other sites

Hello, I'm a new member to wifcon but have been reading it on and off for several years. I couldn't decide whether to post my question as a new topic or tack it on to this thread as it is along the same subject matter. I hope I made the correct decision, if not please accept my apologies.

My question relates to the Rule of 2 and the new exception to fair opportunity under FAR 16.505( b )(2)(i)(F), specifically as to whether you need a minimum of two small business multiple award IDIQ contract holders in order to set aside the task order for small business. It appears most people believe that the rule of two requires a minimum of two small business in order to set aside the order. I'm not necessarily convinced this is an accurate application of the rule of two. For example If you only have one small business IDIQ contract holder, can you exercise the discretion provided in 16.505( b )(2)(i)(F) and set aside the order? I think you might be able to, but would love some feedback. Based on my research I'm leaning towards the position that the "rule of two" applies to mandatory set asides, but not discretionary set asides, am I wrong?

By definition FAR 19.502-2(a) or (B) (aka the "rule of two"), is mandatory, not discretionary. If you have a reasonable expectation that two or more responsible small business concerns will respond, you must set aside the procurement. I don't see how this can be read to also mean that because FAR 16.505( b )(2)(i)(F) states "when setting aside orders for small business concerns, the specific small business program eligibility requirements identified in part 19 apply" that you must have at least two small businesses to set aside the order. This interpretation, I think, directly conflicts with FAR 19.502-2(a)&(B) as it would have to be read to be mandatory and yet discretionary at the same time. Any thoughts?

Share this post


Link to post
Share on other sites

Neither the statute nor the regulation define "set-aside", but in every other context the term is used in the FAR it implies competition. For example, see FAR subpart 6.2. If you noncompetitively awarded a task order to a small business, that would be a sole source--not a set-aside.

Share this post


Link to post
Share on other sites

My question relates to the Rule of 2 and the new exception to fair opportunity under FAR 16.505( b )(2)(i)(F), specifically as to whether you need a minimum of two small business multiple award IDIQ contract holders in order to set aside the task order for small business...

Any thoughts?

Yes, I have a thought. Here is 16.505( B)(2)(i)(F):

(F) In accordance with section 1331 of Public Law 111-240 (15 U.S.C. 644( r), contracting officers may, at their discretion, set aside orders for any of the small business concerns identified in 19.000(a)(3). When setting aside orders for small business concerns, the specific small business program eligibility requirements identified in part 19 apply.

Where in that do you see any mention of the "rule of two" or FAR 19.502-2( B)? Nowhere. Moreover, 16.505( B)(2)(i)(F) says that you can set an order aside "for any of the small business concerns identified in 19.000(a)(3)." "Any" would include one, would it not? It does not say any two or more.

So why are you asking about the rule of two?

Share this post


Link to post
Share on other sites

the BC,,,

you posted:

My question relates to the Rule of 2 and the new exception to fair opportunity under FAR 16.505( b )(2)(i)(F), specifically as to whether you need a minimum of two small business multiple award IDIQ contract holders in order to set aside the task order for small business.

You may want to read the Mori Decision mentioned in an earlier post. The Rule-of-Two analysis is done before you select a contract vehicle. So that means you do market research on the capability of all of the members in the SB community, not just those that hold your IDIQ contract. You may find there are two or more capable of peforming your requirement who you reasonably expect would submit an offer which you could negotiatie for a fair and reasonable market price. - and none of them may hold your IDIQ contract. In that event you would be using another exisitng vehicle whose scope covered your requirement and where at least two of the capable sources you found were contract holders, or you would be awarding a stand alone contract. You don't pick a vehicle and then see if you have two SB contractors holding that IDIQ contract who are capable and would submit offers.

Share this post


Link to post
Share on other sites

16.505 ( b )(2)(i)(F) allows this discretion for “small business concerns identified in 19.000( a )(3). FAR 19.000( a )(3) states “Setting acquisitions aside for exclusive competitive participation by [small businesses]…”

I don’t think you could justify that you are in accordance with the FAR 19.300 “competitive” threshold without soliciting at least two SBs.

Share this post


Link to post
Share on other sites

FAR 16.505(b((2)(i)(F) says:

(F) In accordance with section 1331 of Public Law 111-240 (15 U.S.C. 644

( r), contracting officers may, at their discretion, set aside orders for any of the small business concerns identified in 19.000(a)(3). When setting aside orders for small business concerns, the specific small business program eligibility requirements identified in part 19 apply.

That passage does not say: set aside orders... in accordance with 19.000(a)(3). The only purpose of the reference to 19.003(a)(3) is to identify the kinds of concerns for which an order may be set aside:

small business, 8(a) business development participants, HUBZone small business concerns, service-disabled veteran-owned small business concerns, and economically disadvantaged women-owned small business concerns and women-owned small business concerns eligible under the Women-Owned Small Business Program.

The words "competitive participation" in 19.003(a)(3) have no bearing on 16.505(

B)(2)(i)(F).

Share this post


Link to post
Share on other sites

Recent decision, Oct 16, 2015, regarding Protest that an agency was required by statute to set aside a Federal Supply Schedule order valued at approximately $4,300 is denied where statute and implementing regulations specifically provide that decision whether to set aside such an order is within the discretion of the contracting agency.

http://www.gao.gov/products/B-411752

Share this post


Link to post
Share on other sites
I'd hate to be paying Aldevra's legal fees.

Read the decision, people. Aldevra was not represented by an attorney. It was represented by Rodney Marshall, the company president and CEO, a service-disabled veteran and former Marine. http://aldevra.com/our-team/ The man just wanted a shot at the business.

Government contracting is a cruel world for the uninformed, which includes all of us with respect to something or other.

Share this post


Link to post
Share on other sites

Ah so! I didn't notice the missing "esq." behind Mr. Marshall's name. I will withdraw my earlier comment. Thanks to him for his service to our country.

Share this post


Link to post
Share on other sites

How many protests have Mr. Marshall and Aldevra filed?

See. http://www.gao.gov/search?q=Aldevra&Submit=Search. Most have been sustained - similar issues concerning agencies not setting aside acquisitions.

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.

×