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Hypothetical Rule of Two Questions


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18 minutes ago, ji20874 said:

I disagree.  Words have meaning.  The statute did not say that the agency shall use a set-aside used when certain conditions for a set-aside exist; rather, the statute gives agencies discretion to do set-asides in ordering situations.  To me, the Tolliver decision erases any meaning for the word discretion and makes set-asides mandatory if certain conditions exist.

So to be clear, you feel as though the shall(s) in 19.502-1 and -2 are overwritten by the may in -4? 

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17 minutes ago, Vern Edwards said:

I'm relying on your precious GAO, of which you think so well.

Precious?  What does that mean?

Yes, in this matter I agree with the GAO.  Apparently, the Justice Department does, too, inasmuch as you reported that the government is appealing the Tolliver decision.  I think the GAO got it right.  Please don't mock me for thinking that way.

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15 hours ago, Vern Edwards said:

So what? Even if that is true—though it may not be—why would that make the court's decision about the application of the rule of two wrong?

Because such an interpretation would violate an "elementary canon of construction that a statute should be interpreted so as not to render one part inoperative." (quoting from Colautti v. Franklin, 439 U.S. 379, 392 (1979)).

 

15 hours ago, Vern Edwards said:

Maybe it means what it says: "[N]otwithstanding the fair opportunity requirements under section 2304c(b) of title 10 and section 4106(c) of title 41, [agencies may] set aside orders placed against multiple award contracts for small business concerns, including the subcategories of small business concerns identified in subsection (g)(2)..." 

Which implies there is such a thing as a nonmandatory set-aside. However, there would be no such thing under the COFC's interpretation.

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4 hours ago, ji20874 said:

Deciding whether there are two small businesses for the rule-of-two might be a matter of professional judgment, but is not a matter of discretion.  We might have differing understandings of the word "discretion."

@ji20874I think we may indeed have different understandings of the word discretion. Mine is based on law. See the entry for discretion in Black's Law Dictionary:

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discretion (di-skresh-ən) (14c) 1. Wise conduct and management exercised without constraint; the ability coupled with the tendency to act with prudence and propriety. 2. Freedom in the exercise of judgment; the power of free decision-making. 3... 4. A public official's power or right to act in certain circumstances according to personal judgment and conscience, often in an official or representative capacity. — Also termed discretionary power.

Agency and CO decisions that require judgments require exercises of discretion. There are more than 2,000 GAO decisions which stand for that proposition. Now, I will rely again on the GAO. See Owens & Minor Distribution, Inc. GAO B-218223.5, Feb. 3, 2021:

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An agency's judgment that the features identified in the proposal did not significantly exceed the requirements of the RFP, and thus did not warrant the assessment of unique strengths, is a matter within the agency's discretion and one that we will not disturb where the protester has failed to demonstrate that the evaluation was unreasonable.

When determining whether the rule of two has been satisfied, a CO must decide whether there are at least two responsible small businesses. Determinations of responsibility are judgments that are within the CO's discretion. See HomeSafe Alliance LLC, GAO B-418266.5, Oct. 21, 2020:

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In most cases, responsibility determinations involve subjective business judgments that are within the broad discretion of the contracting activity. Mountaineers Fire Crew, Inc., et al., B–413520.5 et al., Feb. 27, 2017, 2017 CPD ¶77 at 10. 

Again, my research has found more than 2,000 GAO decisions in which it is stated that judgments are matters of discretion. Determinations of responsibility are matters of judgment. And that is why I said, "By the way, agencies do have discretion with respect to the rule of two."

So that is my understanding of discretion. What is yours?

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2 hours ago, Don Mansfield said:

Because such an interpretation would violate an "elementary canon of construction that a statute should be interpreted so as not to render one part inoperative." (quoting from Colautti v. Franklin, 439 U.S. 379, 392 (1979)).

@Don MansfieldFrom Reading Law: The Interpretation of Legal Texts (2012) by Antonin Scalia and Bryan Garner, from the section, Fundamental Principles:

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3. Principle of Interrelating Canons: No canon of interpretation is absolute. Each may be overcome by the strength of differing principles that point in other directions.

In any case, I'm not yet ready to accept GAO's assertion that applying the rule of two to MATOCs would render 15 USC 644(r)(2) meaningless. I think it would depend on how it is applied. 

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2 hours ago, Vern Edwards said:

So that is my understanding of discretion. What is yours?

When FAR 16.505(b)(2)(i)(F) says "contracting officers may, at their discretion, set aside orders for . . . small businesses," I understand that to mean a contracting officer may, at his or her discretion, set aside an order for small businesses.  There's a quote from somewhere, "My soul delights in plainness" -- that's me.  My understanding jives well with Black's Law Dictionary.  I don't agree with a reading of discretion that means that a contracting officer must apply the rule-of-two in an ordering situation and then must set aside an order for small businesses if application of the rule-of-two points in that direction; or that use of the MATOC is prohibited if the rule-of-two points to small businesses outside the MATOC -- to me, that is not discretion. 

I will withdraw from this thread and let you have the last word.  I am content with my understanding, and I will be interested in the Federal Circuit's decision.

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@ji20874Why withdraw? What's up with you? We're talking about stuff, that's all. There's nothing at stake here. We're working it out. Thinking.

On second thought, go ahead and withdraw. I think you mostly enjoy quick-answer in-and-out, which I don't really care for. But I understand.

When I got started in this business as an intern I used to watch and listen to the GS-12 contract specialists, real pros, argue off and on for days about various contracting issues. I learned a lot that way. I miss that. I don't enjoy answering poorly-worded elementary questions that people could answer for themselves through a little research and thought.

Yes, ji20874, withdraw. It's for the best. People who don't like to argue shouldn't do it.

"I am content with my understanding." Wow. A virtual repudiation of Western civilization. It's a good thing not everybody thinks that way. Nobody should ever be content with their understanding. I'm not content with mine about much of anything. I'm not content with mine about this topic.

I found this on Headspace.com, in an article by Jeremy Deaton entitled, "The case for owning your self-doubt":

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Einstein once described his method by saying, “I think and think for months and years. Ninety-nine times, the conclusion is false. The hundredth time I am right.” You may read this as a lesson in persistence, but it is just as much a lesson in self-doubt. Assume that you are never right, that your work is never good enough, and maybe you will produce something worthwhile.

I argue because I'm not sure of myself and want to test my beliefs.

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1 hour ago, Vern Edwards said:

@Don MansfieldFrom Reading Law: The Interpretation of Legal Texts (2012) by Antonin Scalia and Bryan Garner, from the section, Fundamental Principles:

I understand that and am open to "strength of differing principles that point in other directions".

Another canon of interpretation that points in favor of the GAO is lex specialis over lex generalis. That is, the specific rule for discretionary set-asides under multiple-award contracts takes precedence over the general Rule of Two.

BTW, I think you were too hard on @ji20874 in your last post. And that's coming from me.😀

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@Don Mansfield You expressing concern for ji20874's feelings. Talk about strange bedfellows.

How about the whole-text canon, the presumption against effectiveness canon, and the harmonius-reading canons? 15 USC 644 is long. Read 15 USC 644(a) and 15 USC 644(r)(2) and ask yourself if GAO's interpretation of the latter and its logical consequence make sense in terms of the former. Did the Congress really want to undermine the effectiveness of the rule of two by making it inapplicable to MATOCs?

ITility argued that application of the rule of two prior to the selection of an acquisition method and satisfaction of the two set-aside criterion should block proceeding under a MATOC, and I have thought that way, too. But what if it meant only that when the rule of two is satisfied an agency cannot proceed under a MATOC that does not include at least two small businesses. What if it meant that the agency could proceed under the MATOC if it could set the order aside?

Some of you have argued that 15 USC 644(r)(2) makes setting an order aside a matter of unfettered discretion. Read the statute again. What if the discretion is to restrict the fair opportunity process to small businesses as necessary?

And consider this quote from Tolliver:

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Moreover, where the FAR intends to make the Rule of Two entirely inapplicable to the selection of a particular procurement vehicle, the FAR knows how to do so. See FAR 8.404(a) (“Use of Federal Supply Schedules”) (providing that FAR “Parts 13 (except 13.303-2(c)(3)), 14, 15, and 19 (except for the requirements at 19.102(b)(3) and 19.202-1(e)(1)(iii)) do not apply to BPAs or orders placed against Federal Supply Schedules contracts (but see 8.405-5)”). Accordingly, there is no requirement for an agency to apply the Rule of Two prior to an agency’s electing to use a FAR Part 8 FSS procurement, although the agency has the discretion to set-aside such procurements after deciding to utilize FAR Part 8, just as the Army did here with respect to the 13F and JFOC Solicitations. See FAR 8.405-5(a) (“Although the preference programs of part 19 are not mandatory in this subpart, in accordance with section 1331 of Public Law 111-240 (15 U.S.C. 644(r)) - (1) Ordering activity contracting officers may, at their discretion - (i) Set aside orders for any of the small business concerns identified in 19.000(a)(3)”).

In contrast, no provision similar to FAR 8.404(a) – exempting the selection of an FSS procurement from FAR Part 19 – exists in FAR part 16, generally, or FAR 16.5, in particular.

 

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17 minutes ago, Vern Edwards said:

ITility argued that application of the rule of two prior to the selection of an acquisition method and satisfaction of the two set-aside criterion should block proceeding under a MATOC, and I have thought that way, too. But what if it meant only that when the rule of two is satisfied an agency cannot proceed under a MATOC that does not include at least two small businesses. What if it meant that the agency could proceed under the MATOC if it could set the order aside?

So you're asking if the discretion at 15 U.S.C. 644(r) means the discretion to either conduct a set-aside under the MATOC or a set-aside for a new contract? So the choice is how to set aside, not whether to set aside?

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I think that if the rule of two is satisfied, then an agency must either set aside an acquisition for award of a new contract or set an order aside under a MATOC.

I think that a reasonable interpretation of 15 USC 644(r)(2) is that it lets COs depart from the requirements of the two statutes it mentions, which means that they do not have to not give "all" contractors a fair opportunity. It specifically mentions discretion with respect to those two statutes. It makes no mention of FAR, of which FAR 19.502-2(b) is a part.

I don't think 15 USC 644(r)(2) was written to relieve COs from the requirement to set-aside an acquisition when there are two or more responsible small businesses simply by choosing to proceed under a MATOC. If that were the case, why didn't the FAR councils write something for MATOCs like they did in FAR 8.404 for GSA FSS? All they had to say was:

When deciding whether to conduct an acquisition by placing an order under a multiple-award contract, or when issuing an order under a multiple-award contract, agencies need not comply with FAR 19.502-2(b). However, they may set an order aside for small businesses in general, or for any subcategory of small businesses, without providing a fair opportunity to other businesses.

I cannot believe that Congress has intentionally allowed agencies to disregard the rule of two simply by choosing to issue an order against a MATOC.

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On 4/1/2021 at 11:33 AM, Constricting Officer said:

I agree with you in practice. The question was posed this way b/c if an acquisition, as defined by FAR 2.101, is bring planned and there are two small business concerns what right down we have not to set it aside.

It seems like a procedural step in the contract formation process. For now, let’s agree that’s the contract formation process is as follows:

1. Initiation of want or need

2. Market research (FAR Part 8 and 19 considerations)

3. Describe agency needs

4. Acquisition planning

Market research includes determining if sources capable of satisfying the government’s requirement exists and whether the acquisition should utilize any of the small business programs in accordance with FAR Part 19. Presumably this includes checking required sources of supply and services. FAR Parts 10 and 8 logically occur before considering FAR Part 19. (You can’t consider a small business program until you identify capable sources)

Skip to FAR 8.004, which reads, in part:

When satisfying requirements from non-mandatory sources, see 7.105(b) and part  19 regarding consideration of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including 8(a) participants), and women-owned small business concerns.”

I’m willing to argue that when using a non-mandatory source such as a MATOC, that consideration of FAR Part 19 small business programs is required. However, when the MATOC is also a MAC (multi-agency contract) I think the Rule of Two is applied to the MAC. Agencies are encouraged, by FAR, to consider satisfying requirements from or through MACs before going to commercial sources in the open marketplace.

That being said, its long-standing practice to apply a similar response (apply the Rule of Two) to MATOCs and not the open marketplace. Doesn’t seem SBA has an issue with it unless I missed something. If the FAR is silent (at least not expressly requiring) and there is long-standing practice, it might be okay until SBA or the FAR Councils, or legislative branch decide otherwise.

This discussion reminds me of the Kingdomware and Latvian decisions and resultant legislation - Things change, stay awake!

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To add some fuel - from the original federal notice where the FAR was amended in 2016:

 

https://www.federalregister.gov/documents/2016/12/06/2016-28432/federal-acquisition-regulation-set-asides-under-multiple-award-contracts

Comment: One respondent stated that a written justification should be required for order set-asides under multiple-award contracts.

Response: The interim rule did not change FAR subpart 6.2, which provides that a written justification is not required for small business set-asides or set-asides to any small business concern participating in the socioeconomic programs identified at FAR 19.000(a). In addition, section 1331 (15 U.S.C. 644(r)) established an exception to the fair opportunity requirements for set-asides of orders under multiple-award contracts, which was incorporated into FAR subparts 8.4 and 16.5 under the interim rule. However, contracting officers are required to adhere to the criteria at FAR 19.502-2 to determine whether or not a small business set-aside is feasible before proceeding with this acquisition strategy.

The intent was never to get around 19.502-2. It was to allow for the exception in fair opportunity.

 

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1 hour ago, sdvr said:

The intent was never to get around 19.502-2. It was to allow for the exception in fair opportunity.

 

On 4/2/2021 at 6:27 PM, Vern Edwards said:

I cannot believe that Congress has intentionally allowed agencies to disregard the rule of two simply by choosing to issue an order against a MATOC.

I also doubt that Congress intentionally allowed agencies to get around the rule of two by moving work to an unrestricted MATOC that would otherwise be set aside. However, I don't think Congress foresaw that happening.

Assuming the purpose of the Small Business Jobs Act was to create more opportunities for small business concerns, I don't see how permitting set-asides "inside" a MATOC that would otherwise have to be set aside "outside" of a MATOC creates more opportunities for small business concerns. All that does is, perhaps, make the contracting process easier. I think the intent was to permit set-asides under MATOCs to create more opportunities for small business. What we're seeing are the unintended consequences.

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On 4/3/2021 at 12:21 PM, Jamaal Valentine said:

1. Initiation of want or need

2. Market research (FAR Part 8 and 19 considerations)

3. Describe agency needs

4. Acquisition planning

I would make it 1, 3, and then 2/4. 

 

On 4/3/2021 at 12:21 PM, Jamaal Valentine said:

Agencies are encouraged, by FAR, to consider satisfying requirements from or through MACs before going to commercial sources in the open marketplace.

"Encouraged."

2 hours ago, Don Mansfield said:

However, I don't think Congress foresaw that happening.

They didn't, but if they were better at writing legislation it would have said the intent. 

Once a rule has been applied and a contract results at the local level, not only legally but also conceptually, it makes no sense to apply it again.  

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What’s noticeable is the express exclusions found at FAR 19.304 (HUBZone), 19.404 (Service Disabled Veteran Owned Small Business), and 19.504 (Woman Owned Small Business).

”Orders under indefinite-delivery contracts (see subpart 16.5). (But see 16.505(b)(2)(i)(F) for discretionary set-asides of orders)”

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On 4/5/2021 at 3:43 PM, Constricting Officer said:

I would make it 1, 3, and then 2/4. 

I’m not against reordering the events; keep in mind FAR 11.002 policy, which states “...agencies shall [s]pecify needs using market research...”

It makes sense that we start with an identified capability gap or innovative opportunity that triggers market research. Market research helps determine how we should describe the agency need(s) for synopsis and solicitation purposes.

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