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Good Morning,

Here is the scenario, a sources sought we sent out, a total of 7 responses were received: 2 SDVOSB's, 1 SMALL BIZ, and 4 Large Business.

Under the VHA the "Rule of 2 Applies"  therefore we did have two SDVOSB's respond with capabilities statements etc.  However, the 2 SDVOSB's were then asked if they could comply with the "limitations on subcontracting as they apply to a set-aside" (i.e. SDVOSB must be able to perform 50% of the work and maintain 50% of the revenue".  SDVOSB  "A" states that they could meet the limitations on sub-contracting (i.e. they seemed the less capable of the 2 SDVOSB's however based on the info they provided to the sources sought, past contracts they have performed on etc.)  SDVOSB "B" originally responded stating that they could comply, however they then replied afterword and stated after a more thorough review of the requirement they would be unable to comply with the limitations on sub-contracting due to the large IT component which is involved which would require them to further subcontract this portion out (i.e. SDVOSB "B" based on the past contracts they have been awarded and performed on appeared to be the more capable of the 2 SDVOSB's).

We were originally going to solicit SDVOSB's as a set aside and meet the rule of 2, however due to one of the SDVOSB's stating they could not meet the limitations on subcontracting this just left us with one SDVOSB, and one Small.  Currently, the program office SME is evaluating these two for strengths and weaknesses.  However, regardless, all of these small businesses state they will have to partner with a large business in order to meet this requirement.  Currently, the incumbent is a large biz. This is a fairly large contract greater than 15 million value, therefore FAR part 15 will be utilized, IPT etc.  However, currently it appears based on our market research which is showing it is very unlikely SDVOSB "A" who states they can meet the limitation of sub-contracting actually can.  This is based on the stronger SDVOSB who has performed multiple contracts of this type and magnitude stating they would not be able to.  Also, the weaker of the SDVOSB's "A" has not performed on any contracts of this large scope, the largest they performed on was a $1.5 million contract.  We are waiting for the strengths and weaknesses from the SME as well.

Based on the current situation and info, I believe it is best we move forward with an unrestricted solicitation and solicit full and open, as I believe our market research will support the conclusion that although SDVOSB "A" states they can meet the limitations on sub contracting, in all actual reality they cannot based on all of the reasons I have stated above. Therefore, this would only leave us with a SMall, and we would not be able to meet the Rule of 2, thus solicit unrestricted "Full and open"

 

Please provide your thoughts and strategies you would take regarding this situation.

 

Kind Regards,

J

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SDVOSB "B" admits it is not capable.  

Your current market research SUGGESTS SDVOSB "A" is not capable, considering Limitations on Subcontracting:

51 minutes ago, jdetton said:

However, currently it appears based on our market research which is showing it is very unlikely SDVOSB "A" who states they can meet the limitation of sub-contracting actually can.  This is based on the stronger SDVOSB who has performed multiple contracts of this type and magnitude stating they would not be able to.

So it all seems to hinge on the strength of your analysis.  You haven't described your rationale on WHY you can conclude one vendor's lack of capability from another's.  

I don't know how much stock to put in your statement, "[A]ll these small businesses state they will have to partner with a large business in order to meet this requirement."  This obviously isn't the same thing as not complying with the Limitations on Subcontracting clause.

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1 hour ago, jdetton said:

However, the 2 SDVOSB's were then asked if they could comply with the "limitations on subcontracting as they apply to a set-aside" (i.e. SDVOSB must be able to perform 50% of the work and maintain 50% of the revenue".

Sorry if you have already answered this, but is this a contract for supplies or services?  I can't find your reference to "maintain 50% of the revenue" so I couldn't it figure out from that.  The limitations on subcontracting are slightly different under FAR 52.219-14 than under FAR 52.219-27, so I'm not sure whether SDVOSB "A" was answering for -27 or for -14.  Conversely, I'm not sure SDBOSB "B" was answering for -27 or for -14.  Presumably, if this were a set-aside under FAR Subpart 19.5, the clause at FAR 52.219-14 would be the one in the contract.  If the VHA is the Veterans Health Administration, it wouldn't surprise me if you have agency clauses that are used in lieu of clauses like FAR 52.219-27, so sorry if this isn't helpful.

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This is for a Pharmacy Benefit Manager Service large scope > $15 million.  Yes, as I stated we are in the process of gathering all of our supporting facts which includes the SME's eval of the strengths and weaknesses.  However, as I stated SDVOSB "B" was the stronger of the two based on the info we have, as they have been awarded contracts of very similar scope and magnitude, however they are stating they cannot meet the limitations due to the large IT component that is involved. The weaker SDVOSB "A" has not been awarded nor performed contracts similar to this scope or magnitude.  And yes, the fact that due to the type and nature of service required, small businesses do not have the capability unless they can sub-contract to large business, this is why it is important to know whether they can comply with the limitations on sub-contracting.

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3 hours ago, jdetton said:

...however they are stating they cannot meet the limitations...

Forgive me as I pretend I am your small business specialist and play devil's advocate:

When SDVOSB "B" stated the quote above, which clause did the vendor have in mind?

Is it possible that SDVOSB "A" has different subcontractors in mind for providing the "large IT component," where SDVOSB "A" intends to use more small businesses?  (This may be relevant if your agency uses 13 CFR 125.6 in lieu of 52.219-14.)

Is the "large IT component" supplies, services, or both?  If supplies, could you reasonably characterize the overall effort as one primarily for supplies?  If so, and if there is an exception to the nonmanufacturer rule, then it may potentially be appropriate for set-aside under FAR Subpart 19.5.

How is the non-SDVOSB small business vendor meeting the limitations on subcontracting?

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You do not do a set-aside of any sort unless you have a reasonable expectation of two offers from responsible small businesses and award at a reasonable price.  Do you have this expectation?

YES or NO.

Do not agonize over this — just answer the question.  It is simple.

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I agree with Jacques — flawed or sloppy logic won’t provide a reasonable expectation.  But just answer the question, YES or NO, based on a reasonable survey of the marketplace.  If your logic is sloppy, the GAO will tell you in the bid protest decision — if your logic is reasonable, you will win.

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FAR 52.219-14 Applies as does FAR 52.219-27 if the vendor is an SDVSOB.  However, to meet the rule of 2 you just need 2 smalls, they don't both have to be SDVOSB's.

I agree with you Jacques and you bring up some interesting ideas, this is a service contract the IT component is just a piece of a larger pie.  

For the other response, YES we are award of the Rule of 2, we are delving into more complex issues related to this.  If you have ever worked on a large project and had OSDBU as a voting member of the IPT what contracting finds and what OSDBU believes are two different sides.  This is why evidence has to be added to the MArket research etc. in order to move past set asides, not as easy as just saying oh, do I have 2 or not.  That is just the first step.

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7 hours ago, jdetton said:

Based on the current situation and info, I believe it is best we move forward with an unrestricted solicitation and solicit full and open, as I believe our market research will support the conclusion that although SDVOSB "A" states they can meet the limitations on sub contracting, in all actual reality they cannot based on all of the reasons I have stated above. Therefore, this would only leave us with a SMall, and we would not be able to meet the Rule of 2, thus solicit unrestricted "Full and open"

My recommendation:  full speed ahead!

Who makes the decision in your organization?  Contracting officer?  SADBUS?  Someone else?

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12 hours ago, jdetton said:

 

FAR 52.219-14 Applies as does FAR 52.219-27 if the vendor is an SDVSOB

 

Just to be clear, generally the clause at 52.219-27 only applies if the acquisition is set aside for competition among SDVOSBs.  If the solicitation is set aside for “regular” (FAR Subpart 19.5) small businesses and a SDVOSB happens to win, that contractor would only have to comply with the clause at FAR 52.219-14. 

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