As noted, HealthRev is a joint venture comprised of a verified SDVOSB called e-Revs Supply Chain LLC and DLH, a large business. The joint venture applied for recognition as a qualifying mentor-protégé joint venture under the SBA’s Mentor-Protégé program on June 6, and received the SBA’s approval of the joint venture on July 13. HealthRev Protest at 9. At the time it submitted its protest to our Office, the agency reports that HealthRev had not yet applied for verification of its joint venture by the VA.

HealthRev argues that the agency unreasonably has declined to extend the deadline for submitting proposals. In this connection, the RFP requires prospective offerors to be verified SDVOSBs in the agency’s Vendor Information Pages (VIP) database as of the time proposals are due. RFP at 89-90, RFP amend. No. 1 at 1. HealthRev maintains that the RFP was issued on May 25, 2018, and this was the first time the firm knew that the agency was going to solicit its requirements as a total SDVOSB set-aside. HealthRev also points out that the agency’s website for obtaining verification of a firm’s status as an eligible SDVOSB was not available for a period of time from May 21 to June 22, and again from June 29 to July 3. According to the protester, because there was no way to become verified in the agency’s VIP database during those periods of time, it is unreasonable for the agency not to extend the deadline for submitting proposals in order to allow it to become verified in the agency’s VIP database before the deadline for proposal submission.

We find no merit to HealthRev’s protest. The VA is required by statute, 38 U.S.C. § 8127(d), to set aside all acquisitions for SDVOSBs in the following circumstances:

. . . a contracting officer of [the VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.]

See also Kingdomware Technologies v. United States, 136 S. Ct. 1969, 195 L. Ed. 2d 334 (2016); Aldevra, B-405271, B-405271.2, Oct. 11, 2011, 2011 CPD ¶ 183. Accordingly, the starting point for our analysis is the overarching statutory dictate that the VA is required to set aside all acquisitions for SDVOSBs where there is a reasonable expectation on the part of the contracting officer that the agency will receive at least two proposals from SDVOSBs, and that award can be made at a fair and reasonable price.

As noted, the agency began its market research for the current requirement in October, 2016. Of significance for our purposes is the fact that the agency conducted its virtual industry day in June, 2017, and both E-Revs Supply Chain LLC and DLH participated in that event. The entire purpose of the industry day event was to present information from the VA about the agency’s anticipated acquisition of its CMOP requirements as a single SDVOSB contract award, and to present detailed information from the SBA about establishing teaming and other types of relationships, and obtaining approval of mentor-protégé relationships. DLH AR, exh. 15, Virtual Industry Day Presentation at 12, 28, 31-46. The record therefore establishes that--realistically--both firms knew no later than June, 2017 of the agency’s intent to pursue an SDVOSB set aside acquisition, provided the agency could identify at least two SDVOSB firms capable of meeting the agency’s requirements, and that award could be made at a fair and reasonable price.

Against this background, the record shows that the VA published a pre-solicitation notice on April 30 announcing its intended acquisition of the CMOP requirement using a single indefinite-delivery, indefinite-quantity contract award, and that the agency’s acquisition would be set aside for SDVOSBs. Notwithstanding all of the agency’s clear information relating to the fact that it intended to set aside the requirement for SDVOSB participation, the protester took no action to establish its joint venture or seek SBA’s approval of that joint venture until June 6, well after the agency announced its intention to acquire the CMOP requirement using an SDVOSB set-aside, and also after the agency issued its RFP. The protester has offered no explanation for why it waited more than a month after the agency announced its solicitation to establish its joint venture and seek the SBA’s approval of the arrangement. Further, the unavailability of the agency’s website for applying for certification of the joint venture’s status as an SDVOSB concern during portions May and June could not have been the cause of HealthRev being unable to apply for verification of its joint venture by VA, since the joint venture was not even approved by the SBA until July 13, well after the website was again available.

In the final analysis, the record shows that the paramount cause of HealthRev being unqualified to offer on the agency’s requirement was the firm’s failure to diligently pursue the SBA’s approval, and the VA’s verification, of the joint venture. Given the VA’s overarching statutory mandate to use SDVOSB set-asides to meet its requirements where the necessary conditions are present, and given the agency’s consistent expression of its intent to set this acquisition aside for SDVOSB participation, there was no reasonable basis for HealthRev to have delayed establishing its joint venture. Moreover, given the amount of time the agency has spent effectively publicizing its intentions, we have no basis to find that the agency is acting unreasonably in refusing to extend the deadline for submitting proposals in order to accommodate HealthRev’s interest in establishing the qualification of its joint venture for purposes of submitting a proposal. We therefore deny HealthRev’s protest.  (HealthRev, LLC; DLH Solutions, Inc. B-416595, B-416595.2: Oct 25, 2018)

Crosstown argues that the VA had a reasonable basis to expect quotations from two or more SDVOSBs, and therefore the agency should have set aside the current RFQ for SDVOSBs, rather than for small businesses.

Under a provision of the Veterans Benefits, Health Care, and Information Technology Act of 2006, a contracting officer in an acquisition conducted by the VA is required to set aside the procurement for either SDVOSBs or VOSBs where there is "a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States." 38 U.S.C. § 8127(d). The VA does not dispute that it expected to receive quotations from multiple SDVOSBs, but argues that the contracting officer reasonably expected that none of those quotations would be at a fair and reasonable price. Therefore, the VA argues, the contracting officer's decision to issue the RFQ as a small business set-aside, rather than an SDVOSB or VOSB set-aside, was reasonable and consistent with law and regulation.

In its comments on the agency report, Crosstown disputes the validity of the IGCE, and argues that the contracting officer's reliance on the IGCE was therefore unreasonable. In particular, Crosstown argues that the cost of paying employees and subcontractors the minimum required under the Service Contract Act (SCA) exceeds the IGCE, which the contracting officer used to determine that SDVOSB prices were not fair and reasonable. As a result, Crosstown argues that the contracting officer lacked a valid basis to conclude that prices quoted by SDVOSBs would not be fair and reasonable because that determination was based on the defective IGCE.

The VA argues that the IGCE was based on the price of the incumbent contract, which was awarded in June 2017 and which required payment of SCA wages. The VA contends that the incumbent contract thus provided a reasonable basis for establishing an IGCE, and that Crosstown has not shown that the incumbent contractor is failing to pay its employees as required by the SCA.

Notwithstanding the protester's arguments, we see no basis to sustain the protest. With respect to Crosstown's argument that the incumbent contract is priced below the cost of performance (which of course required Crosstown to make assumptions about the manner in which the incumbent is performing), an agency is not prohibited from entering into a contract that is below the cost of performance. Brewer-Taylor Assocs., B-277845, Oct. 30, 1997, 97-2 CPD ¶ 124 at 4. Additionally, Crosstown has not shown that the incumbent is violating the SCA (or more precisely, that the contracting officer was unreasonable in relying on the incumbent's price as reflecting compliance with that term of the contract in developing the IGCE). Accordingly, Crosstown has not provided a basis for our Office to conclude that the IGCE was defective, or that the contracting officer acted unreasonably in using the IGCE to assess whether an SDVOSB (or VOSB) set-aside would reasonably result in fair and reasonable prices.  (Crosstown Courier Service, Inc. B-415818: Mar 27, 2018)

Generally, the decision whether to set aside a procurement for SDVOSB concerns is a business judgment within the contracting officer’s discretion, which we will not disturb absent a showing that it was unreasonable. Aero Sage LLC, B-414314, B‑414314.2, May 5, 2017, 2017 CPD ¶ __ at 6; Starlight Corp., Inc., B-410471.2, Dec. 30, 2014, 2014 CPD ¶ 383 at 5. No particular method of assessing the availability of capable small businesses is required; rather, the assessment must be based on sufficient facts so as to establish its reasonableness. Starlight Corp., Inc., supra; Mountain West Helicopters, LLC; Trans Aero, Ltd., B‑408150, B‑408150.2, July 1, 2013, 2013 CPD ¶ 152 at 3. We will not question an agency's set aside determination where the record shows that the evidence before the contracting officer was adequate to support the reasonableness of the conclusion that small business competition reasonably could be expected. Starlight Corp., Inc., supra.

Further, in making set-aside decisions, agencies need not make actual determinations of responsibility or decisions tantamount to determinations of responsibility; rather, they need only make an informed business judgment that there is a reasonable expectation of receiving acceptably priced offers from small business concerns that are capable of performing the contract. InfoReliance Corp., B-413298, Sept. 19, 2016, 2016 CPD ¶ 263 at 4. Here, as explained below, Walker does not show that the VA unreasonably determined that it would receive offers from two or more SDVOSB firms at fair and reasonable prices.

The agency’s market research included a review of the prior acquisition history and searches of the VA Western States Consortium blanket purchase agreement website, the National Acquisition Center contract catalog, and the General Services Administration’s website. AR, Tab 3, Market Research Report, at 1-3. In addition, the agency posted a sources sought notice, conducted a search on Vetbiz.gov, and emailed ninety-one vendors found on Vetbiz.gov with information about the procurement. Id. at 2.

Some of the firms identified in those searches were found to be unable to provide the required equipment. Id. at 2. The VA, however, received responses from two interested SDVOSB concerns that provided capability statements and price estimates, which the agency deemed to be fair and reasonable. Id. During this protest, the agency provided the protester with the names of the two firms identified in the agency’s market research. Walker has not provided a reasonable basis on which to question the agency’s assertion that competition between these two SDVOSB firms will not result in award being made at a reasonable price.

Walker asserts that the agency’s market research failed to consider whether an SDVOSB concern would meet the limitation on subcontracting rule and whether an SDVOSB nonmanufacturer would be providing the product of an SDVOSB concern. Protest at 4. Here, the agency incorporated by reference FAR clause 52.219-27, Notice of Service Disabled Veteran-Owned Small Business Set Aside, and assigned NAICS code 334510, Electromedical and Electrotherapeutic Apparatus Manufacturing, to the RFQ. FAR clause 52.219-27, Notice of Service Disabled Veteran-Owned Small Business Set Aside, states that SDVOSB concerns providing products as manufacturers agree that at least 50 percent of the costs of manufacturing will be performed by the concern or other SDVOSB concerns.

Ordinarily, in order to qualify as a small business concern to provide manufactured products or other supply items, an offeror must either be the manufacturer or producer of the end item being procured, or if it does not manufacture the item being purchased, the offeror must comply with what is known as the nonmanufacturer rule. 13 C.F.R. § 121.406(a). The nonmanufacturer rule provides that the offer of a nonmanufacturer small business concern can be considered, provided, among other things, that the small business concern represents that it will supply the product of a domestic small business manufacturer or processor, or that a waiver of this requirement is granted by the SBA. 15 U.S.C. § 637(a)(17); see also 13 C.F.R. § 121.406.

Where the nonmanufacturing rule applies to a procurement and the agency’s market research fails to consider whether the firms identified in the market research can comply with the rule, the market research is unreasonable. Triad Isotopes, Inc., B-411360, July 16, 2015, 2015 CPD ¶ 220 at 7. The SBA is permitted to waive the nonmanufacturer rule where the SBA has determined that no small business manufacturer or processor can reasonably be expected to offer a product meeting the specifications or where no small business manufacturer or processor is available to participate in the procurement. 15 U.S.C. § 657s(a)(4). When SBA issues a waiver of the nonmanufacturer rule, a firm can supply the product of any size business without regard to the place of manufacture. 13 C.F.R. § 121.406(b)(7).

Here, as noted above, the agency notified offerors that the SBA had issued a class waiver of the nonmanufacturer rule for the assigned NAICS code. Consequently, we see no merit to the protester’s contention that the agency’s market research failed to consider whether the firms identified had the capability to perform and could comply with the rule.

Walker also argues that the agency failed to adequately assess whether the two identified firms could comply with the terms of the solicitation. See Comments on AR at 5-6. As noted above, the agency’s market research considered the capability of the vendors to meet the requirements. The agency was not required to make a determination of responsibility in the course of conducting market research. InfoReliance Corp., supra. (Walker Development & Trading Group, Inc. B-414365: May 18, 2017)

AeroSage’s allegations concern requirements under the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the VA Act). 38 U.S.C. § 8127. Specifically, the VA Act, together with VA’s implementing regulations, require VA to set aside acquisitions for SDVOSBs whenever it is determined that there is a reasonable expectation that offers will be received from at least two SDVOSBs and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d); Veterans Administration Acquisition Regulation (VAAR) § 819.7005(a). We refer to this requirement as the VA Act’s Rule of Two. The VA Act also requires that agencies procuring goods or services on behalf of VA--such as DLA here--must comply with the VA Act Rule of Two “to the maximum extent feasible.” 38 U.S.C. § 8127(j)(1).

AeroSage challenges DLA’s decision not to conduct this procurement as an SDVOSB set‑aside on two principal grounds. First, the firm alleges that DLA’s market research was “incomplete and improper” and that DLA “artificially restricted” its research to “Wisconsin-capable companies.” Protest at 3; Comments at 4-5; Supp. Comments at 4. Second, AeroSage alleges that it was improper for the contracting officer to decide that AeroSage and SageCare did not satisfy the VA Act’s Rule of Two because they are owned by the same individual. Comments at 1-2; Supp. Comments at 3.

In response to the allegation regarding the market research, DLA asserts that its market research was sufficient under the circumstances. In this regard, DLA describes the different types of market research the contracting officer performed, including her search in VA’s VIP database for SDVOSBs registered in Wisconsin under the applicable NAICS code. AR at 7-8. With regard to the decision to limit the VIP database research to firms registered in Wisconsin, DLA points out that the procurement involved a “small dollar value” and a near-immediate delivery schedule. AR, at 6; Supp. AR at 6‑7. Finally, in response to AeroSage’s allegation regarding the contracting officer’s decision that the VA Act’s Rule of Two had not been met, DLA states that because of the firms’ common ownership, the contracting officer did not view them to be independent. AR at 5; Supp. AR at 4. Thus, she was concerned that since the only two SDVOSBs that were identified as being reasonably likely to submit quotations were under common ownership, there was not adequate price competition, and, therefore, there was not a reasonable expectation that award could be made at a fair and reasonable price. See AR, Tab 12 Mem. for Rec., at 1.

After considering DLA’s response to the protest, our Office solicited the views of VA and SBA. In response, VA commented that DLA adhered to the market research requirements of the VAAR by reviewing the VIP database to identify whether there were two SDVOSBs or VOSBs capable of meeting the requirement that were likely to submit a quotation at a fair and reasonable price.[3] VA Comments at 1. On this basis, VA requested that our Office deny the protest. Id.

SBA commented on DLA’s market research as follows:

[T]he agency limited its search to verified SDVOSBs that had Wisconsin included in their service area list. We believe it was reasonable for the contracting officer to posit that a firm whose service area did not include Wisconsin would not be expected to submit an offer for a purchase at this dollar level of approximately $10,000.

SBA Comments at 1. With regard to the contracting officer’s conclusion that due to common ownership, AeroSage and SageCare did not meet the VA Act’s Rule of Two requirements, the SBA commented as follows:

[D]uring a typical Rule of Two determination, an agency determines whether there is a reasonable expectation that the contract will be awarded at a fair market price. Agencies can rely on the expectation of price competition to satisfy the fair-market-price requirement. Expecting only co-owned firms to submit offers, however, would not reasonably support an expectation of price competition. . . . Given these facts, we do not find it unreasonable for the agency to determine that it lacked a reasonable expectation of receiving offers from two or more SDVOSBs and award would be made a fair and reasonable price.

Id. at 2 (internal citations omitted). For the reasons that follow, we agree with DLA, VA, and SBA that AeroSage’s protest should be denied.

We first address the allegation regarding the sufficiency of DLA’s market research. Our Office has established that the determination of whether there is a reasonable expectation of receiving offers from two or more SDVOSBs that are capable of performing the required work is a matter of informed business judgment within the contracting officer’s discretion that we will not disturb absent a showing that it was unreasonable. See In and Out Valet Co., B-411019, Apr. 15, 2015, 2015 CPD ¶ 128 at 3; Crosstown Courier Serv., Inc., B-410936, March 12, 2015, 2015 CPD ¶ 107 at 4. The requirements of the VA Act do not dictate the use of any particular methodology in assessing the availability of SDVOSBs to perform a requirement; measures such as prior procurement history, market surveys, advice from the agency’s small business specialist, and information concerning prospective offerors’ business history and capability or capacity may all provide a reasonable basis for a decision to set aside, or not set aside, a requirement for SDVOSBs. See In and Out Valet Co., supra; Crosstown Courier Serv., Inc., B-410936, supra. Further, we have found that the circumstances of a procurement may support an agency’s decision to reasonably focus its market research on the geographic area in which performance is to occur. See In and Out Valet Co., supra; Crosstown Courier Serv., Inc., B-410936, supra; Crosstown Courier Serv., Inc., B-407404, Nov. 30, 2012, 2012 CPD ¶ 333 at 3.

Here, the record reflects that DLA was faced with an urgent, but low-dollar requirement for fuel. See AR, Tab 12, Mem. for Rec., at 1. The record further reflects that VA needed to take delivery of the fuel at a site in Milwaukee, Wisconsin. Id. Given these circumstances, we find it reasonable that DLA decided to focus its market research on fuel vendors that had indicated they serviced the geographic area of Wisconsin. See In and Out Valet Co., supra; Crosstown Courier Serv., Inc., B-410936, supra. Given the discretion afforded to contracting officers with regard to market research, AeroSage’s arguments to the contrary provide no basis to question DLA’s actions.

We similarly see no basis to question the contracting officer’s conclusion that due to AeroSage’s and SageCare’s common ownership, the VA Act’s Rule of Two had not been met. As shown above, the VA Act’s Rule of Two has two prongs. First, there must be a reasonable expectation that at least two SDVOSBs will submit an offer (or, in the case here, a quotation). Second, there must be a reasonable expectation that award will be made at a fair and reasonable price. Here, the record shows that through reasonable market research, the contracting officer identified only two SDVOSBs that she reasonably expected to submit a quotation in response to the solicitation. See AR, Tab 12, Mem. for Rec., at 1. The record further shows that she documented concern that due to their common ownership (and the fact that the principal and negotiator for both firms is the same individual), these two firms essentially would be competing against each other. See id. Thus, she decided that adequate price competition would not occur and, therefore, there was not a reasonable expectation that award could be made at a fair and reasonable price. See AR, Tab 12 Mem. for Rec., at 1. The record supports the contracting officer’s finding regarding the common ownership of AeroSage and SageCare. See AR, Tab 10, SBA Size Determination No. 3-2017-010; Comments at 2. Under these circumstances, we will not question her judgment that the dual requirements of the VA Act’s Rule of Two were not met.  (AeroSage LLC B-414314, B-414314.2: May 5, 2017)
 

The protester argues that the sole-source award to ARG Tactical, an SDVOSB, is “unlawful…[because] the requirement could be satisfied through an order under the [FSS].” Protest at 1. The agency states that the Veterans Benefit Act of 2003 and implementing regulations provide a contracting officer with the discretion to issue an SDVOSB sole-source award. AR at 2-4.

Section 36 of the Small Business Act, 15 U.S.C. § 657f, sets forth the provisions of the Veterans Benefits Act of 2003, Pub. L. No. 108-183, 117 Stat. 2651, 2662 (2003), and provides the contracting officer with the discretion to issue an SDVOSB sole-source award if certain conditions are met. 15 U.S.C. § 657f(a) (“a contracting officer may award a sole source contract” to an SDVOSB). However, an agency may not issue an SDVOSB sole-source (or set-aside) award if the procurement would otherwise be made using Federal Prison Industries (18 U.S.C. §§ 4124 and 4125) or the Javits-Wagner-O'Day (JWOD) Act (41 U.S.C. § 46 et seq.). Id. § 657f(c). Both SBA and the Federal Acquisition Regulatory Council have implemented these statutory provisions in regulations, which state that an agency may not issue an SDVOSB sole-source award if the requirement can be satisfied using Federal Prison Industries, the JWOD Act, or is currently being performed under the authority of the SBA’s 8(a) Business Development program. 13 C.F.R. § 125.20(a); FAR §§ 19.1404(a),(d); see also 69 Fed. Reg. 25274 (May 5, 2004) (“The law limits use of SDVOSB procurement authority to procurements that would not otherwise be made from Federal Prison Industries (section 4124 or 4125 of title 18, United States Code) or the [JWOD] Act (41 U.S.C. 46 et seq)”).[6] Therefore, there is nothing in the Small Business Act or implementing regulations that preclude an SDVOSB sole-source award if the requirement can be satisfied using the GSA’s FSS.

In addition, the FAR addresses the priorities for use of certain mandatory sources and the use of “other sources,” such as the GSA’s FSS. See FAR § 8.002, Priorities for Use of Mandatory Sources; FAR § 8.003, Use of Other Mandatory Sources; FAR § 8.004, Use of Other Sources. Specifically, the FAR states that if agencies cannot satisfy their requirements using mandatory sources, then:

[A]gencies are encouraged to consider satisfying requirements from or through the non-mandatory sources listed in paragraph (a) of this section (not listed in any order of priority) before considering the non-mandatory source listed in paragraph (b) of this section. 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.

(a)(1) Supplies. Federal Supply Schedules, Governmentwide acquisition contracts, multi-agency contracts, and any other procurement instruments intended for use by multiple agencies, including blanket purchase agreements (BPAs) under Federal Supply Schedule contracts (e.g., Federal Strategic Sourcing Initiative (FSSI) agreements accessible at http://www.gsa.gov/fssi (see also 5.601)).

* * * * *

(b) Commercial sources (including educational and non-profit institutions) in the open market.

FAR § 8.004. The preamble of the Federal Register notice announcing this final FAR regulation responded to various comments on the proposed rule and discussed whether the rule was treating FSS and other similar contracts as mandatory sources. 78 Fed. Reg. 80376, 80377 (Dec. 31, 2013). In response, the FAR Council stated that “[t]he use of FSS is not required” and the “use of FSS is not mandatory”; however, agencies are encouraged to consider “using certain existing non-mandatory sources” before considering sources in the open market. Id.

Thus, there is nothing in statute or regulation stating that it is unlawful for an agency to issue an SDVOSB sole-source award when the requirement could be satisfied through an order under the FSS, as long as all conditions for a sole-source award are met. This protest allegation is denied.

Market Research

The Small Business Act states that an agency may issue a sole-source SDVOSB award if “the contracting officer does not have a reasonable expectation that 2 or more small business concerns owned and controlled by service-disabled veterans will submit offers for the contracting opportunity.” 15 U.S.C. § 657f(a). The implementing regulations state the same. See 13 C.F.R. § 125.20(a); FAR § 19.1406(a)(1) (SDVOSB sole-source is permitted when the “contracting officer does not have a reasonable expectation that offers would be received from two or more service-disabled veteran-owned small business concerns”).

The protester argues that the agency’s own market research shows that there are at least two resellers of the Benchmade Knife combat knives on GSA’s FSS and, therefore, the sole-source award to ARG Tactical violates statute and regulations because 2 or more SDVOSB companies are capable of supplying the knife. Supplemental Protest at 3-5, citing to AR, Tab 5, Market Research, at 28-29. The agency responds that only one SDVOSB expressed an interest in a long term contract for the combat knives. Supplemental AR at 4-5.

The determination as to whether an agency expects two or more SDVOSBs to submit an offer is a matter of business judgment within the contracting officer's discretion that we will not disturb absent a showing that it was unreasonable. See DNO Inc., B-406256, B-406256.2, March 22, 2012, 2012 CPD ¶ 136 at 4. Although agencies need not use any particular methodology when conducting market research, measures such as prior procurement history, market surveys, and advice from the agency’s small business specialist may all constitute adequate grounds for a contracting officer’s decision. See id. at 4-5. Further, this Office has stated that an agency may issue an SDVOSB sole-source award even where another SDVOSB exists that could conceivably perform the contract, but has expressed no interest in the work. MCS Portable Restroom Serv., B-299291, Mar. 28, 2007, 2007 CPD ¶ 55 at 7; see also Chicago Dryer Co., B-401888, Dec. 8, 2009, 2009 CPD ¶ 253 at 2 (an agency is not required to contact all potential sources when conducting market research regarding the feasibility of sole-source procurement).

Here, DLA conducted market research, which included a sources sought notice, a review of all responses received expressing an interest in the acquisition, and a review of the prior procurement history. AR, Tab 4, Justification for Other than Full and Open Competition; Tab 5, Market Research. Specifically, the record shows that DLA received responses from only Benchmade Knife, Gerber, and ARG Tactical concerning a long term IDPO, that prior acquisition history since 2010 showed that awards for the combat knives had only been made to these same three companies, and that DLA had contracted with ARG Tactical on the last two acquisitions for the knives. AR, Tab 4, Justification for Other than Full and Open Competition, at 3; Tab 5, Market Research, at 39-40; AR at 5. DLA therefore concluded that ARG Tactical was the sole SDVOSB that expressed an interest in the acquisition for combat knives. Id. Consequently, DLA reasonably exercised its discretion in determining that the acquisition was appropriate for an SDVOSB sole-source award because its market research showed that only one SDVOSB was interested in the long term IDPO. This protest allegation is denied.

SDVOSB Status

Finally, the protester contends that DLA was required to protest ARG Tactical’s SDVOSB status to the SBA before issuing the sole-source award. Protest at 9-14.

The SBA, and not our Office or the procuring agency, is the designated authority for determining whether a firm is an eligible SDVOSB under the SBA’s program, and it has established procedures for interested parties to challenge a firm’s status. See Singleton Enters.-GMT Mech., A Joint Venture, B-310552, Jan. 10, 2008, 2008 CPD ¶ 16 at 3; see also 13 C.F.R. §§ 125.24-27; FAR § 19.307. Therefore, we will generally dismiss a protest challenging a firm’s small business or socio-economic status. Bid Protest Regulations, 4 C.F.R. § 21.5(b)(1). However, a limited exception applies where a protester argues that the awardee’s offer shows, on its face, that it is not eligible for award as a small business, or in this case as an SDVOSB; in those instances, we will review the reasonableness of the contracting officer’s decision not to refer the matter to the SBA. See Al-Razaq Computing Services, B-410491, B-410491.2, Jan. 7, 2015, 2015 CPD ¶ 28 at 4; Hydroid LLC, B-299072, Jan. 31, 2007, 2007 CPD ¶ 20 at 3.

Here, the protester argues that publicly available information, but not anything on the face of ARG Tactical’s proposal, calls into question its SDVOSB status. Protest at 9-14. The record shows that the agency reviewed ARG Tactical’s quotation and SAM profile prior to award, and both showed that ARG Tactical represented that it was an SDVOSB. AR at 4; AR, Tab 7, ARG Tactical Quotation, at 19; Tab 8, ARG Tactical SAM Profile, at 1, 6. Thus, the protester has not shown that anything on the face of ARG Tactical’s proposal would have called into question its SDVOSB status. We therefore deny this protest issue.

The protest is denied.   (Fiskars Brands, Inc., dba Gerber Legendary Blades B-412730, B-412730.2: May 20, 2016)  (pdf)

Spur argues that the VA’s decision not to set the procurement aside for SDVOSB concerns was in contravention of the VA Act’s Rule of Two, which is implemented by the VA Acquisition Regulation (VAAR) §§ 819.7004 and 819.7005.[10] For the reasons set forth below, we agree.

The Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. § 8127 (VA Act), implemented by VAAR §§ 819.7004 and 819.7005, created the Veterans First Contracting Program and provides the VA with independent authority to set aside contracts for SDVOSB and VOSB concerns. Buy Rite Transport, B-403729, B-403768, Oct. 15, 2010, 2010 CPD ¶ 245 at 2-3; Apex Ltd., Inc., B-402163, Jan. 21, 2010, 2010 CPD ¶ 35 at 2. Under the Veterans First Contracting Program, acquisitions must be set aside for SDVOSB concerns if the VA determines that there is a reasonable expectation that offers will be received by at least two SDVOSB concerns and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d). We will refer to this requirement, grounded in Title 38, as the VA Act’s Rule of Two.

Here, there is no dispute in the record that the literal requirement as set forth in the VA Act’s Rule of Two was satisfied. Nonetheless, the agency maintains that because it needs a minimum of 14 contracts, the number of SDVOSB concerns capable of performing the required work was insufficient to meet its needs. As a result, the VA concluded it was not required to set aside the procurement, or any subset of the procurement, for SDVOSB concerns.

During development of this protest, our Office asked the parties to brief the question of whether the VA Act’s Rule of Two applies to multiple-award IDIQ contracts. The agency responded that “38 USC 8127(d) means that a set aside is required when there will be two or more SDVOSB offers per contract.” Agency Brief (Feb. 8, 2016) at 2.

The plain language of the VA Act does not support the agency’s position. Instead, the VA Act simply states that

a contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.

38 U.S.C. § 8127(d) (emphasis added). Nothing in the language of the VA Act supports the agency’s position that in the context of multiple-award contracts, the VA Act’s Rule of Two requires set asides only when there will be two or more SDVOSB or VOSB offers per contract.

In addition, the agency does not argue that its implementing regulations exempt, or even address, whether the VA Act’s Rule of Two applies to multiple-award IDIQ contracts. Rather, the agency contends that “common-sense and sound business judgment” dictate that the VA Act’s Rule of Two should not be applied when the number of qualified SDVOSB concerns is less than the agency’s anticipated minimum number of awards because it is impractical. See Agency Brief (Feb. 8, 2016) at 2-3. In this regard, the agency argues that “blindly apply[ing] the [VA Act’s] Rule of [Two]” to require the agency to set aside a multiple-award IDIQ procurement for SDVOSB concerns would result in “abandon[ing] the benefits of competition and simply award[ing] the 7-9 SDVOSBs with contracts.” This, the agency contends, “fails to consider the real needs of the [agency],” which “was surely not the intent of Congress.” Id. at 1, 3.

Congress’s apparent intent when it passed the VA Act was to broadly foster participation in VA procurements by SDVOSB and VOSB concerns.[14] See Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ¶ 112 at 5. Prior to the enactment of the VA Act, contracting officers were allowed, but not required, to restrict competition to SDVOSB and VOSB concerns under the Small Business Act, as amended by the Veterans Benefits Act of 2003. See 15 U.S.C. § 657f. Under the 2006 VA Act at issue here, the VA “shall” set aside its acquisitions for SDVOSB or VOSB concerns once the Rule of Two is satisfied. Further, in implementing the VA Act, the VA additionally required that “[i]n determining the acquisition strategy applicable to an acquisition, the contracting officer shall consider, in the following order of priority, contracting preferences that ensure contracts will be awarded” first to SDVOSB concerns, then VOSB concerns, to the extent the Rule of Two is met, prior to considering whether to award to any other category of small business contracting preferences, including small business concerns. VAAR §§ 819.7004, 819.7005 (emphasis added).

We cannot find reasonable the agency’s decision not to set aside this acquisition, or any portion of this acquisition, for SDVOSB or VOSB concerns because its market research yielded fewer of these concerns than the anticipated number of contract awards. We recognize it is within the agency’s discretion to determine the number of IDIQ contracts required to satisfy its needs. However, we see no basis to conclude that the agency has the discretion to ignore the requirements of the VA Act and the VA’s own implementing regulations because it anticipates making multiple awards under an IDIQ contract.

In conclusion, the VA Act and its implementing regulations require that the agency set aside its acquisitions for SDVOSB and VOSB concerns when the conditions of the statute are met. There is no dispute that those conditions are satisfied here. Since we conclude that the agency’s decision not to set aside any of these contracts was inconsistent with the requirements set forth in the VA Act and its implementing regulations, we sustain the protest.  (Spur Design, LLC B-412245.3: Feb 24, 2016)  (pdf)

 FRM asserts that it was unreasonable for the agency to limit the market research to the local geographic area because, according to the protester, the “majority of the support requirements for this contract will be performed at the contractor’s own facility.” Comments at 5-6. The agency responds that:

it was necessary to limit . . . market research to the states of Oregon, Washington and Idaho because the solicitation clearly stated under the heading Construction Period Services that site visits would be expected . . . and again under Supplement B of the solicitation . . . that the ‘A/E shall visit proposed project site, as required’ . . .

Supplemental Agency Report at 4.

Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. § 8127, and the VA’s implementing regulations, VA Acquisition Regulation, 48 C.F.R. §§ 819.7004, 819.7005, the VA is required to set aside acquisitions for [service-disabled veteran-owned small business] SDVOSBs whenever it determines that there is a reasonable expectation that offers will be received from at least two SDVOSB firms and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d); 48 C.F.R. § 819.7005. The determination as to whether there is a reasonable expectation of receiving offers from two or more SDVOSB firms that are capable of performing the required work is a matter of informed business judgment within the contracting officer’s discretion that we will not disturb absent a showing that it was unreasonable. Crosstown Courier Serv., Inc., B-410936, Mar. 12, 2015, 2015 CPD ¶ 107 at 4; Buy Rite Transp., B-403729, B-403768, Oct. 15, 2010, 2010 CPD ¶ 245 at 3. The requirements of the 2006 VA Act do not dictate the use of any particular methodology in assessing the availability of SDVOSB firms to perform a requirement; measures such as prior procurement history, market surveys, advice from the agency’s small business specialist, and information concerning prospective offerors’ business history and capability or capacity may all provide a reasonable basis for a decision to set aside, or not set aside, a requirement for SDVOSBs. Crosstown Courier Serv., Inc., B-410936, supra; FlowSense, LLC, B-310904, Mar. 10, 2008, 2008 CPD ¶ 56 at 3. Further, we have held that, even where an RFP does not restrict competition to firms located in a particular geographical area, an agency may focus its market research on the geographical area in which performance will take place and consider the likelihood that firms from outside it would respond to the solicitation. In and Out Valet Co., B-411019, Apr. 15, 2015, 2015 CPD ¶ 128 at 3; Crosstown Courier Serv., Inc., B-407404, Nov. 30, 2012, 2012 CPD ¶ 333 at 3.

Here, we conclude that the agency’s determination here that there was not a reasonable expectation that offers would be received from at least two SDVOSB firms that are capable of performing the required work is not supported by the record. As noted by the agency, our cases have recognized that in appropriate circumstances an agency may focus its market research on the geographical area in which performance will take place after reasonably concluding that there is little likelihood that firms from outside the area would respond to the solicitation. See, e.g., In and Out Valet Co., supra, at 4-5. The cases cited by the agency, however, are readily distinguished from the circumstances here, since they involved requirements that likely would be performed by local firms, such as those requirements necessitating a substantial, regular presence by the contractor at specific sites or a specific work area. See, e.g., Crosstown Courier Serv., B‑407404, supra (courier services in a designated area); In and Out Valet Co., supra (valet parking services).

Here, in contrast, the protester asserts that A/E firms are typically not required to be “on site” for extended periods of time, and the level of effort that would actually need to be performed within the VISN area would be “a small percentage” of the overall required effort. Comments at 3. In this regard, the protester explains that:

Whether in support of an upcoming facility renovation or a part of a ‘‘Statement of Conditions” review, the time spent on site by the engineer(s) is relatively small in comparison to the time needed to develop the design documentation or final report of code compliance or conditions; all of which would be performed at the contractor’s facility, with all submissions of documents, including drafts for Government review, now being performed electronically.

Id.

Further, we note that the protester’s position appears to be consistent with the solicitation, which indicates that the A/E services to be performed under the RFP are “Design Services,” which include studies, schematics/design development, contract drawings, specifications, cost estimates, and/or construction period services, drawing review services, code compliance reviews, and Joint Commission Statement of Conditions support. SOW at 1. Although the RFP makes it clear that site visits will be necessary, see, e.g., SOW at 2 (the required construction period services will include “conducting site visits,” while the required existing facility code review “will include on-site inspection and review”), it is not evident from the solicitation how often the required services will require substantial performance “on site” in addition to design services that can be performed at the A/E firm’s office(s). In this regard, when asked by our Office to respond to the protester’s assertions, the agency did not specifically address the frequency of when the contractor would be required to visit the VA facilities, and instead noted only that the solicitation provides for site visits “as required.” Supplemental AR at 4; see RFP, Supplement B, at 3. Further, when the agency considered whether the solicitation should be restricted to A/E firms located within the VISN 20 region, the agency project engineer rejected setting a “distance limit,” proposing instead only that firms that are located closer should be rated higher. AR, Tab 4, Mar. 24, 2015, at 30. Thus, it appears that the project engineer recognized that firms located outside of the VISN 20 region could perform the contract. In any case, given that the VISN 20 region includes facilities in Washington, Oregon, Idaho, and Alaska, it seems likely that even A/E firms located within VISN 20 will be required to travel significant distances away from their office(s) for necessary site visits.

Thus, the record here does not support the agency’s determination to limit its market research to firms within the VISN 20 region. Further, as indicated above, the contract specialist, in a database search specifically directed by the contracting officer, found more than 127 profiles of SDVOSB concerns nationwide “matching the criteria.” Id., May 4, 2015, at 64. Thus, it appears that had the agency expanded its market research beyond the VISN 20 region it would have discovered numerous SDVOSB A/E concerns doing fire protection work.

Although the agency now argues that the inadequate number of SDVOSB A/E firms in the VISN 20 region warranted not setting aside the procurement for SDVOSB firms, the protest record suggests that agency officials may, in fact, have been concerned with presumed poor performance by an SDVOSB awardee. In this regard, when the contracting officer, in reconsidering the set-aside decision after receiving the contract specialist’s expanded search results, indicated on May 4 that a “100% SDVOSB set aside” may be necessary, id., the agency project engineer responded that he was “definitely opposed to setting this solicitation aside for SDVOSB,” due to the poor performance of the SDVOSB contractor in the VISN 6 and VISN 20 regions. Id. at 63-64. As noted, the engineer concluded that, “[i]n my opinion, if we are going to be forced to set this aside for SDVOSB, then we should cancel the solicitation. It doesn’t make any sense to hire someone who cannot do the job properly.” Id. In our view, however, such anecdotal evidence of poor performance by an SDVOSB contractor, unsupported by any detailed analysis indicating that a small business concern would be unlikely to possess the specific skills and resources needed to perform the specific work required under the contemplated contract, does not represent the reasonable exercise of informed business judgment required under the statute. See Crosstown Courier Serv., Inc., B-410936, Mar. 12, 2015, 2015 CPD ¶ 107 at 4.  (Fire Risk Management, Inc. B-411552: Aug 20, 2015)  (pdf)

IOVC asserts that the VA failed to perform sufficient market research to ascertain the interest and capability of SDVOSBs [service-disabled veteran-owned small business] to perform the requirement. Specifically, the protester notes that there are 46 SDVOSB firms nationwide registered under NAICS code 812930, and that four of those firms are currently performing contracts under that NAICS code. Therefore, IOVC contends that the agency abused its discretion in failing to set the procurement aside for SDVOSBs.

Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. § 8127, and the VA’s implementing regulations, VA Acquisition Regulation (VAAR), 48 C.F.R. §§ 819.7004, 819.7005, the VA is required to set aside acquisitions for SDVOSBs whenever it determines that there is a reasonable expectation that offers will be received from at least two SDVOSB firms and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d); VAAR § 819.7005. The determination as to whether there is a reasonable expectation of receiving offers from two or more SDVOSB firms that are capable of performing the required work is a matter of informed business judgment within the contracting officer’s discretion that we will not disturb absent a showing that it was unreasonable. Crosstown Courier Serv., Inc., B-410936, March 12, 2015, 2015 CPD ¶ 107 at 4; Crosstown Courier Serv., Inc., B-407404, Nov. 30, 2012, 2012 CPD ¶ 333 at 3; Buy Rite Transp., B-403729, B-403768, Oct. 15, 2010, 2010 CPD ¶ 245 at 3. The requirements of the 2006 VA Act do not dictate the use of any particular methodology in assessing the availability of SDVOSB firms to perform a requirement; measures such as prior procurement history, market surveys, advice from the agency’s small business specialist, and information concerning prospective offerors’ business history and capability or capacity may all provide a reasonable basis for a decision to set aside, or not set aside, a requirement for SDVOSBs. Crosstown Courier Serv., Inc., B-410936, supra; FlowSense, LLC, B-310904, Mar. 10, 2008, 2008 CPD ¶ 56 at 3. Further, we have held that, even where an RFP does not restrict competition to firms located in a particular geographical area, an agency may focus its market research on the geographical area in which performance will take place and consider the likelihood that firms from outside it would respond to the solicitation. Crosstown Courier Serv., Inc., B-407404, supra, at 3.

We conclude that the agency’s market research and resulting set-aside decision were reasonable. The statement of work for this procurement requires the successful contractor to provide bonded, fully trained, experienced staff with valid Washington State driver licenses to perform valet parking services for approximately 650 to 750 vehicles daily at VA Puget Sound Health Care System facilities located in Seattle, Washington. RFQ at 7, 9. In addition, the RFQ requires the successful contractor to have the valet parking site ready to provide full service by the February 1, 2015 start date. See RFQ at 1, 5, 8; AR, Tab 2, Market Research Report, at 1; AR, Tab 4, E-mails, at 24. Given these requirements, we find that there was nothing unreasonable in the agency’s decision to focus its market research on the geographic area in which performance was to occur, and to consider the likelihood that firms from outside of the geographic area would be able to effectively and timely perform the contemplated contract.

As noted above, in conducting its market research, the agency used the NAICS code for parking lots and garages to search the VetBiz database to identify potential SDVOSB firms, then researched the firms’ websites to determine whether the company performed valet parking services. The agency initially searched only in Washington state and found that there were no SDVOSB firms under the relevant NAICS code that perform valet parking services. The agency then expanded its search to the nearby states of Oregon, Idaho, and California, and found only one SDVOSB firm (located in California) under the relevant NAICS code that performs valet parking services. Finally, the agency removed all geographic restrictions and identified five other firms nationwide under the relevant NAICS code that perform valet parking services. The agency considered the geographic location of each of these companies--Texas, Virginia, Pennsylvania, North Carolina, and South Carolina--and concluded that given their distance from the site of performance, there was not a reasonable expectation of receiving offers from two or more SDVOSB firms that would be capable of performing the required work at a reasonable price. Although the protester lists other websites and databases that it contends the agency should have searched, Comments at 1-2, the protester has not shown the agency’s research here to be unreasonable in light of the discretion afforded to contracting officers. See Crosstown Courier Serv., Inc., B‑410936, supra.

Finally, the agency also considered the procurement history of this requirement. As set forth above, the agency considered the fact that it had previously made award to an SDVOSB firm, which was unable to perform the contract. After terminating the first contract, the agency awarded to another SDVOSB that was also unable to perform the contract. The agency’s inability to find an SDVOSB firm ultimately led the agency to issue a sole source contract to the incumbent contractor to perform the required services until the agency could conduct a new competition. AR, Tab 4, E-mails, at 36.

Based on this record, we find that the agency reasonably concluded that there was no reasonable expectation that offers would be received from at least two SDVOSB firms capable of performing the required work at a fair and reasonable price. The agency conducted searches of the VetBiz database, reasonably focused its market research on the geographical area in which performance will take place, and considered the likelihood that firms from outside it would respond to the RFQ. The agency did further market research by reviewing the websites of SDVOSB firms with the relevant NAICS code to investigate whether these firms perform valet parking services. In addition, the agency reasonably considered the fact that two SDVOSBs had previously been unable to perform the incumbent contract. In these circumstances, we find no basis to sustain the protest against the agency’s determination not to set aside the procurement for SDVOSBs.  (In and Out Valet Company B-411019: Apr 15, 2015)  (pdf)

 Crosstown challenges the adequacy of the VA’s market research and ultimate determination not to set aside the RFP for SDVOSB concerns. The protester’s primary complaint is that the agency unreasonably limited its market research to Minnesota, instead of considering SDVOSB couriers nationwide. See Protest (Dec. 17, 2014) at 2-3. Crosstown further argues that the VA’s decision to restrict its market research to Minnesota, despite not limiting the competition to Minnesota-based concerns, was unreasonable and an improper attempt to avoid setting aside the RFP exclusively for SDVOSB concerns. See Comments (Jan. 20, 2015) at 1. We find no basis to sustain the protest.

Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. § 8127, and the VA’s implementing regulations, VA Acquisition Regulation Supplement (VAAR), 48 C.F.R. §§ 819.7004, 819.7005, the VA is required to set aside acquisitions for SDVOSBs whenever it determines that there is a reasonable expectation that offers will be received from at least two SDVOSB concerns and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d); VAAR § 819.7005. The determination as to whether there is a reasonable expectation of receiving offers from two or more SDVOSB concerns that are capable of performing the required work is a matter of informed business judgment within the CO’s discretion that we will not disturb absent a showing that it was unreasonable. Crosstown Courier Serv., Inc., B-407404, Nov. 30, 2012, 2012 CPD ¶ 333 at 3; Buy Rite Transport, B-403729, B-403768, Oct. 15, 2010, 2010 CPD ¶ 245 at 3. The requirements of the 2006 Act do not dictate the use of any particular methodology in assessing the availability of SDVOSB concerns to perform a requirement; measures such as prior procurement history, market surveys, advice from the agency’s small business specialist, and information concerning prospective offerors’ business history and capability or capacity may all provide a reasonable basis for a decision to set aside, or not set aside, a requirement for SDVOSBs. Crosstown Courier Serv., Inc., supra, at 3; FlowSense, LLC, B-310904, Mar. 10, 2008, 2008 CPD ¶ 56 at 3.

Here, we find the CO’s market research and resulting set-aside decision were reasonable. The contractor will be required to provide labor, equipment, and transportation services each weekday for pick-up and delivery between the MVAHCS in Minneapolis and 10 CBOCs located throughout Minnesota and western Wisconsin. RFP at 11, 19-28. As detailed above, the CO’s market research here included searches for Minnesota-based SDVOSB courier service vendors in VA, SBA, and GSA databases. Those searches identified only one Minnesota-based SDVOSB courier service vendor. See AR, Tab 4, Market Research Report, at 1-2; Tab 5, Minnesota Market Research. The CO also considered the procurement history for the incumbent, small business set-aside contract. See AR, Tab 4, Market Research, at 2. The agency explains that it did not set aside the solicitation for the incumbent contract, or a similar procurement for courier services in Iowa, for SDVOSB concerns because the pricing received from SDVOSB concerns in response to those solicitations exceeded the independent government estimate by an average of 212% and 163%, respectively. See AR, Tab 9, VA Decision on Agency-Level Protests of RFP Nos. VA-263-09-RP-0292 and VA-263-09-RP-0293 (Sept. 22, 2009), at 1. Additionally, the VA was concerned that awarding the contract to a SDVOSB concern not located in Minnesota could result in excessive subcontracting in violation of the limitation on subcontracting provisions at FAR clause 52.219‑27(d) and VAAR clause 852.219-10(c). See AR at 4. Under these circumstances, we find the VA’s market research and set-aside determination to be reasonable. See Crosstown Courier Serv., Inc., supra, at 3 (denying protest challenging a determination not to set aside a procurement for similar VA courier services for SDVOSB concerns based on market research limited to the states where the majority of work would be performed).  (Crosstown Courier Service, Inc. B-410936: Mar 12, 2015)  (pdf)

Under FAR § 19.502-2(b), a procurement with an anticipated dollar value of more than $150,000, such as the one here, must be set aside for exclusive small business participation when there is a reasonable expectation that offers will be received from at least two responsible small business concerns and that award will be made at fair market prices. No particular method of assessing the availability of capable small businesses is required; rather, the assessment must be based on sufficient facts so as to establish its reasonableness. Mountain West Helicopters, LLC; Trans Aero, Ltd., B-408150, B-408150.2, July 1, 2013, 2013 CPD ¶ 152 at 3. The decision whether to set aside a procurement may be based on an analysis of factors such as the prior procurement history, the recommendations of appropriate small business specialists, and market surveys that include responses to sources sought announcements. Commonwealth Home Health Care, Inc., B‑400163, July 24, 2008, 2008 CPD ¶ 140 at 3. In making set-aside decisions, agencies need not make actual determinations of responsibility or decisions tantamount to determinations of responsibility; rather, they need only make an informed business judgment that there is a reasonable expectation of receiving acceptably priced offers from small business concerns that are capable of performing the contract. Ceradyne, Inc., B-402281, Feb. 17, 2010, 2010 CPD ¶ 70 at 4.

Because a decision whether to set aside a procurement is a matter of business judgment within the contracting officer’s discretion, our review generally is limited to ascertaining whether that official abused his or her discretion. Information Ventures, Inc., B-400604, Dec. 22, 2008, 2008 CPD ¶ 232 at 3; ViroMed Labs., B‑298931, Dec. 20, 2006, 2007 CPD ¶ 4 at 3-4; Information Ventures, Inc., B‑279924, Aug. 7, 1998, 98-2 CPD ¶ 37 at 3. We will not question an agency’s small business determination where the record shows that the evidence before the contracting officer was adequate to support the reasonableness of the conclusion that small business competition reasonably could be expected. Commonwealth Home Health Care, Inc., supra, at 3.

Here, the agency’s set-aside determination is unobjectionable. The record, as described above, shows that the Air Force conducted ample market research in connection with its decision to set aside the acquisition for SDVOSB, including: (1) issuing a sources sought notice and questionnaire; (2) identifying potential small business offerors using available government contractor databases; (3) surveying those businesses regarding their socioeconomic status; and (4) contacting contracting officials at other Air Force bases to discuss recently conducted procurements for similar aircraft services. We agree with the agency that this market research is consistent with the requirements of the FAR, and we find no basis to sustain Starlight’s protest that the agency unreasonably set aside the procurement for SDVOSBs.

Significantly, Starlight concedes that two SDVOSB firms have experience servicing C-5 aircraft. Comments at 3. To the extent that the protester contends that these SDVOSB firms may have limited experience, we find that the protester has not persuasively rebutted the agency’s argument that the services being procured are not complex, do not involve specialized tasks, or otherwise require highly skilled labor, unique qualifications, or certifications. Moreover, we are not persuaded by the protester that it was unreasonable for the Air Force to consider experience providing services to C‑17, C-130, KC-135, and KC‑10 aircraft relevant to providing similar services to C-5 aircraft, and we disagree with the protester that the agency misled offerors in that regard.

The protest is denied.  (Starlight Corporation, Inc., B-410471.2: Dec 30, 2014)  (pdf)

The protesters contend that the RFP should have been set aside for SDVOSBs, citing the Veterans Benefits, Health Care and Information Technology Act of 2006, 38 U.S.C. § 8127, and VA’s implementing regulations. The protesters argue that, had the agency issued a sources-sought notice, it would have discovered that at least two SDVOSBs were interested in competing.

The VA responds that, pursuant to the specific authority accorded the agency in 38 U.S.C. § 8123, it was not required to set aside a procurement of prosthetic appliances for SDVOSBs. AR at 3-4. Section 8123 of Title 38 provides:

The Secretary may procure prosthetic appliances and necessary services required in the fitting, supplying, and training and use of prosthetic appliances by purchase, manufacture, contract, or in such other manner as the Secretary may determine to be proper, without regard to any other provision of law.

38 U.S.C. § 8123. The VA asserts that the statute reflects the intent of Congress to give the VA as much flexibility as possible in procuring prosthetic appliances, which are uniquely sensitive and personal to the needs of the individual veteran.

The VA states that, moreover, while this specific authority exempts this procurement from any set-aside requirements, the VA’s decision not to set-aside the procurement for SDVOSBs was also supported by the agency’s conclusion that it did not have a reasonable expectation of receiving fair market offers from at least two SDVOSBs. AR, Tab 2, Market Research Report, at 1.

We agree with the VA that 38 U.S.C. § 8123 allows the agency to procure prosthetic appliances and services without considering whether to set aside the procurements for SDVOSBs. Although the protesters characterize the VA’s citation to this authority as an “after-the-fact justification of its improper procurement planning,” see Comments at 3, the contemporaneous record contains numerous citations to this authority. See, e.g., RFP Amend. 1, at 5; AR, Tab 2, Market Research Report, at 4; AR, Tab 4, Pre‑solicitation Notice, at 2. For the same reason, we also find no merit to the protester’s contention that the VA violated VA Acquisition Regulation § 806.302-5 (directing the contracting officer to cite 38 U.S.C. § 8123 and 41 U.S.C. § 253(c)(5) as authority when awarding a contract for orthopedic and prosthetic appliances and related services without providing full and open competition).

In any event, the record indicates that the VA considered whether there was a reasonable expectation of receiving offers from at least two SDVOSBs for these requirements and concluded that there was not such a reasonable expectation. As stated above, the VA noted from its experience procuring these goods and services that it did not receive offers from any SDVOSBs over the past 10 years. Although the protesters disagree with the VA’s judgment in this regard, they have not shown it to be unreasonable, or to violate applicable procurement laws or regulations.  (Charlie Mike Prosthetics; Half Milers Rule, LLC, B-409389, B-409389.2: Mar 10, 2014)  (pdf)

Kingdomware Technologies, of Waldorf, Maryland, a service-disabled veteran-owned small business (SDVOSB), requests reconsideration of our decision in Kingdomware Technologies, B-407232, Sept. 17, 2012, in which we dismissed a protest challenging the award of task order No. VA255P657SC1615, and the exercise of an option under that task order, by the Department of Veterans Affairs (VA) to LiveProcess, Inc., of Madison, New Jersey, under that firm’s Federal Supply Schedule (FSS) contract.

We dismiss the request because, as discussed below, our Office will no longer consider protests concerning the contention that the Veterans Benefits, Health Care, and Information Technology Act of 2006 (2006 VA Act), 38 U.S.C. §§ 8127-28 (2006), requires the VA to consider setting aside a procurement for SDVOSBs, or veteran-owned small businesses (VOSB), before procuring its requirements under the FSS.

On August 1, 2011, the VA issued the task order on a sole-source basis under LiveProcess’ FSS contract. The VA posted information concerning the task order on the Federal Procurement Data System (FPDS) website the same day. One year later, on August 1, 2012, the VA exercised an option to extend the task order, and posted the information on FPDS on August 2. The VA did not post the task order award or exercise of the option on the Federal Business Opportunities (FedBizOpps) website. On August 18, Kingdomware became aware of the information on FPDS, and on August 27 protested to our Office both the 2011 award, and the 2012 exercise of the option.

Kingdomware argued that the VA’s award of the initial task order, and its exercise of the task order option one year later, did not comply with the requirements of the 2006 VA Act. Kingdomware cited our Office’s decision in Aldevra, B-405271, B-405524, Oct. 11, 2011, 2011 CPD ¶ 183, where we held that the plain meaning of 38 U.S.C. § 8127(d) requires the VA to conduct market research concerning its requirements and determine whether there are two or more SDVOSBs (or VOSBs) capable of performing the requirements, and if so, to set the requirement aside exclusively for SDVOSB (or VOSB) concerns. Specifically, our Office held in Aldevra that the VA must consider whether to set aside the procurement for SDVOSBs (or VOSBs) prior to conducting a procurement on an unrestricted basis under the FSS.

On September 17, our Office dismissed Kingdomware’s protest. We dismissed the challenge to the underlying task order award and failure to post the award on the FedBizOpps website, concluding that, given passage of more than one year since the award of the order, “no useful purpose is served by our considering a protest of the action.” Kingdomware Techs., supra, at 2. We also dismissed the challenge to the exercise of the option on the task order because our Office will generally not question an agency’s exercise of an option contained in an existing contract, unless the protester shows that the agency failed to follow applicable regulations, or the agency’s determination to exercise the option, rather than conduct a new procurement, was unreasonable. Id. at 2-3.

Kingdomware requests reconsideration of our decision. This request is based, at its core, on a contention that the 2006 VA Act requires the VA to consider a set-aside for SDVOSBs (or VOSBs) prior to conducting an unrestricted procurement under the FSS. Recent actions by the VA and the U.S. Court of Federal Claims lead our Office to conclude that we should not continue hearing protests that rely solely on this contention.

In response to our Office’s decision in Aldevra and other decisions regarding the 2006 VA Act,[2] the VA has advised that it will not follow our recommendations concerning our interpretation of the 2006 VA Act. See GAO Annual Report to Congress for Fiscal Year 2012, at 1, available at: http://www.gao.gov/products/GAO-13-162SP. Additionally, on November 27, the U.S. Court of Federal Claims issued a decision which disagreed with our Office’s interpretation of the 2006 VA Act. Kingdomware Techs., Inc. v. United States, No. 12-173C (Fed. Cl., Nov. 27, 2012). The court held that the VA’s interpretation of the 2006 VA Act and its regulations, which permit the VA to place orders on the FSS without first considering whether to set aside a requirement for SDVOSB (or VOSB) firms, was entitled to deference. Id. at 34, 35.

While this Office has set forth its view of the 2006 VA Act in Aldevra and its progeny, as well as in testimony before the Congress,[3] the VA has elected not to follow our recommendations. In addition, the court has reached a different conclusion about the meaning of the 2006 VA Act. Although our Office is not bound by the court’s decisions, its decision in Kingdomware, together with the VA’s position on the meaning of this statute, effectively means that protesters who continue to pursue these arguments will be unable to obtain meaningful relief. Consequently, under these circumstances, we will no longer consider protests based only on the argument that the VA must consider setting aside procurements for SDVOSBs (or VOSBs) before conducting an unrestricted procurement under the FSS.

The request for reconsideration is dismissed.  (Kingdomware Technologies--Reconsideration, B-407232.2, Dec 13, 2012)  (pdf)
 

CCS raises a number of arguments challenging the VA’s determination to set aside the procurement for small businesses rather than for SDVOSBs. We have considered all of the protester’s arguments and find that none provide a basis to object to the VA's decision to set aside the RFP for small businesses. This decision addresses CCS’s primary arguments.

CCS asserts that the VA failed to perform sufficient market research to ascertain the interest and capability of SDVOSBs to perform the requirement. Specifically, the protester notes that there are at least two capable SDVOSB firms: CCS which is performing a VA courier contract in Montana, administered by the same contracting officer, and another SDVOSB courier firm, Medical Logistics, which is located in Utah. Given these two firms, CCS concludes that the contracting officer abused her discretion in failing to set the procurement aside.

Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. §8127, and the VA's implementing regulations, VA Acquisition Regulation (VAAR) §§ 819.7004, 819.7705, the VA is required to set aside acquisitions for SDVOSBs whenever it determines that there is a reasonable expectation that offers will be received from at least two SDVOSB firms and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d); VAAR § 819.7005. The determination as to whether there is a reasonable expectation of receiving offers from two or more SDVOSB firms that are capable of performing the required work is a matter of informed business judgment within the contracting officer's discretion that we will not disturb absent a showing that it was unreasonable. Buy Rite Transport, B-403729, B-403768, Oct. 15, 2010, 2010 CPD ¶ 245 at 3. The requirements of the 2006 VA Act do not dictate the use of any particular methodology in assessing the availability of SDVOSB firms to perform a requirement; measures such as prior procurement history, market surveys, advice from the agency’s small business specialist, and information concerning prospective offerors’ business history and capability or capacity may all provide a reasonable basis for a decision to set aside, or not set aside, a requirement for SDVOSBs. FlowSense, LLC, B-310904, Mar. 10, 2008, 2008 CPD ¶ 56 at 3.

The contracting officer’s market research and resulting set-aside determination were reasonable. In this regard, the statements of work for the two regions required the successful contractor to provide labor, equipment, and transportation services each week-day for pick-up and delivery between the VASLCHCS in Salt Lake City, Utah and four VA clinics each in the northern and/or southern regions (covering Utah, Idaho, and Nevada). RFP at 7-9. While the RFP did not restrict competition to firms located in this geographical area, there was nothing unreasonable in the contracting officer’s market research focusing on that area and the likelihood of whether firms from outside it would respond to the RFP. See American Connecting Source d/b/a Connections, B-276889, July 1, 1997, 97-2 CPD ¶ 1 at 3 (agencies may properly restrict procurements to offerors within a specified geographical area if the restriction is reasonably necessary for the agency to meet its minimum needs).

Here, using the NAICS code for courier services (No. 492110), the contracting officer searched both the VIP and CCR databases to identify available firms. While the CCR database identified hundreds of VOSB and SDVOSB firms, none of them were located in the states of Utah or Idaho where the majority of the courier work is to be performed. Likewise, of the more than 50 (courier) SDVOSBs found in the VIP database, the contracting officer ultimately found none that were located in Utah or Idaho. Although she initially found one such firm located in Utah, her subsequent search found that the firm was no longer listed, and the firm identified by CCS in its protest is no longer listed in VIP. [2] Neither of these firms would be eligible for award under an SDVOSB set-aside. As for CCS, while it is an SDVOSB, it is currently performing its VA courier contract in Montana, not in the states encompassed by this procurement. In any case, even if the VA had considered CCS’s interest, the firm represents only one SDVOSB and the protester has not identified any other VIP-eligible SDVOSB that would be interested in competing for this requirement. Given the large geographical area and the daily nature of the work covered by the RFP, the contracting officer reasonably concluded that there was no expectation that two or more SDVOSBs from outside this area would respond to the solicitation. Contracting Officer’s Statement at 4.  (Crosstown Courier Service, Inc., B-407404, Nov 30, 2012)  (pdf)
 

Phoenix complains that the agency issued the purchase order to a small business concern, where there are two or more SDVOSB concerns that could provide the fertilizer to the agency, and without soliciting the protester despite the fact that the very purchasing agent involved knew of Phoenix’s interest in fertilizer acquisitions.

As an initial matter, the VA argues that Phoenix is not an interested party, because it did not submit a quotation. We disagree that Phoenix is not an interested party to challenge the agency's actions. Under the Competition in Contracting Act of 1984, 31 U.S.C. §§ 3551- 56 (2006) and our Bid Protest Regulations, 4 C.F.R. § 21.0(a)(1) (2012), only an “interested party” may protest a federal procurement. That is, a protester must be an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or the failure to award a contract. Here, Phoenix is challenging the agency’s failure to solicit Phoenix for the order, and the agency’s improper issuance of the order to a small business concern where there were other SDVOSB concerns, including Phoenix, that could satisfy this requirement. Under these circumstances, Phoenix is a prospective offeror whose direct economic interest is affected by the issuance of the order to Golf Enviro.

VA also argues that it satisfied the competition requirements of Federal Acquisition Regulation (FAR) § 13.104(b) for simplified acquisitions where it solicited quotations from three SDVOSB concerns. In using simplified acquisition procedures, agencies are required to obtain competition to the maximum extent practicable. See FAR § 13.104. Where, as here, such procedures are used and notice is not to be provided through the FedBizOpps website, the FAR states that

maximum practicable competition ordinarily can be obtained by soliciting quotations or offers from sources within the local trade area. Unless the contract action requires synopsis pursuant to 5.101 and an exception under 5.202 is not applicable, consider solicitation of at least three sources to promote competition to the maximum extent practicable. Whenever practicable, request quotations or offers from two sources not included in the previous solicitation.

FAR § 13.104(b).

Although we agree that the purchasing agent’s solicitation of three SDVOSBs generally satisfied the competition requirements of FAR Part 13, the agency fails to recognize Phoenix’s complaint that the acquisition was required to be set aside for SDVOSBs and the fertilizer acquired from an SDVOSB concern. We have previously sustained protests filed with respect to VA procurements, where, as here, the protesters alleged that the VA failed to comply with requirements of the VA Act and its implementing regulations. See, e.g., Aldevra, B-405271, B-405524, Oct. 11, 2011, 2011 CPD ¶ 183. We noted in those decisions that the VA Act in relevant part, 38 U.S.C. § 8127(d), provides as follows:

[A] contracting officer of [the VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.

The VA issued regulations implementing the VA Act which, as relevant here, state as follows:

(a) The contracting officer shall consider SDVOSB set-asides before considering VOSB set-asides. Except as authorized by 813.106, 819.7007 and 819.7008, the contracting officer shall set aside an acquisition for competition restricted to SDVOSB concerns upon a reasonable expectation that:

(1) Offers will be received from two or more eligible SDVOSB concerns; and

(2) Award will be made at a fair and reasonable price.

Veterans Administration Acquisition Regulation, 48 C.F.R. § 819.7005(a) (2012).

Here, it is not disputed that the purchasing agent, in searching for SDVOSB concerns to supply the fertilizer for the Santa Fe National Cemetery, found a number of SDVOSB concerns, including the protester. In addition, the agency does not contend that it had no reasonable expectation of receiving two or more offers from SDVOSB concerns at a fair and reasonable price. There also is no analysis in the record supporting such a conclusion. Moreover, in this regard, Phoenix, which was not solicited, has previously received an order from the same purchasing agent to provide fertilizer for other VA national cemeteries. We see no basis on this record to conclude that the fertilizer for the Santa Fe National Cemetery could not be procured from an SDVOSB concern.

The agency’s only explanation as to why it chose to procure the fertilizer from a non-SDVOSB concern is that it had already complied with the requirement to solicit three sources in accordance with FAR § 13.104(b). This explanation, however, reflects a fundamental misunderstanding of the agency’s obligations under the VA Act. While an agency is only required to obtain competition to the maximum extent practicable in a simplified acquisition under FAR Part 13, this does not relieve the VA of its obligation to comply with the requirements of the VA Act and its own implementing regulations.

Specifically, absent a reasonable determination that the agency could not expect to receive quotations from two or more SDVOSB concerns at a fair and reasonable price, the VA was required to continue to conduct this procurement as a set-aside for SDVOSB concerns. See Kingdomware Techs., B-406507, May 30, 2012, 2012 CPD ¶ 165 at 2 (“the plain language of the VA Act mandates that the VA ‘shall’ conduct its procurements . . . using an SDVOSB set-aside when there is a reasonable expectation that two or more SDVOSB concerns can meet its requirements at a reasonable price.”) The VA decided not to solicit any of the other SDVOSB concerns identified by the purchasing agent, and instead issued this order to a non-veteran-owned small business. Accordingly, we find that the agency violated the VA Act and its own implementing regulations when it issued this order to Golf Enviro.  (Phoenix Environmental Design Inc., B-407104, Oct 26, 2012)  (pdf)

The procurements are being conducted pursuant to General Services Administration Federal Supply Schedule (FSS) procedures and implementing regulations, set forth at Federal Acquisition Regulation (FAR) subpart 8.4. In accordance with those regulations, the solicitations were issued on an unrestricted basis to vendors holding FSS contracts.

Aldevra asserts that the VA acted improperly by using FSS procedures without first conducting market research to determine whether the procurements should be set aside for SDVOSB (or VOSB) concerns. Aldevra maintains that if the agency had conducted market research, it would have found that at least two SDVOSBs could meet the requirements at a reasonable price. The agency concedes that it did not conduct market research to determine whether two or more SDVOSB (or VOSB) concerns could meet the requirements at a reasonable price. Agency E-Mail, Aug. 2, 2012.

Previously, we sustained protests filed by Aldevra against VA procurements being conducted pursuant to FSS procedures in which, like here, the protester asserted that the agency failed to comply with the requirements of the VA Act and its implementing regulations. Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ¶ 112; Aldevra, B-405271, B-405524, Oct. 11, 2011, 2011 CPD ¶ 183. The issue raised and the agency’s arguments in those Aldevra protests are the same as the issue and the arguments presented here.

For the same reasons that we discussed at length in our recent decisions, we reject the VA’s arguments in the current protests. Here, as in the previous Aldevra protests, the VA has not conducted market research to determine if there are two or more eligible SDVOSB (or VOSB) concerns capable of performing the agency’s requirements. Consistent with our recent decisions, we conclude that the 2006 VA Act requires that the agency make a determination whether these acquisitions should be set aside for SDVOSB (or VOSB) concerns prior to conducting the procurements using FSS procedures. We therefore sustain Aldevra’s protests.  (Aldevra, B-406774; B-406857; B-406892; B-406912; B-406913; B-406927; B-406928; B-406942, August 21, 2012)  (pdf)
 

The procurements are being conducted pursuant to General Services Administration Federal Supply Schedule (FSS) procedures and implementing regulations, set forth at Federal Acquisition Regulation (FAR) subpart 8.4. In accordance with those regulations, the solicitations were issued on an unrestricted basis to vendors holding FSS contracts.

Aldevra asserts that the VA acted improperly by using FSS procedures without first conducting market research to determine whether the procurements should be set aside for SDVOSB (or VOSB) concerns. Aldevra maintains that if the agency had conducted market research, it would have found that at least two SDVOSBs could meet the requirements under each solicitation at a reasonable price. The agency concedes that it did not conduct market research to determine whether two or more SDVOSBs (or VOSBs) could meet the requirements under any of the solicitations at a reasonable price. Agency E-Mail, June 12, 2012, at 1.

Previously, we sustained protests filed by Aldevra against VA procurements being conducted pursuant to FSS procedures in which, like here, the protester asserted that the agency failed to comply with the requirements of the VA Act and its implementing regulations. Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ¶ 112; Aldevra, B-405271, B-405524, Oct. 11, 2011, 2011 CPD ¶ 183. The issue raised and the agency’s arguments in the recent Aldevra protests are the same as the issue and arguments presented here.

For the same reasons that we discussed at length in our recent decisions, we reject the VA’s arguments in the current protests. Here, as in the previous Aldevra protests, the VA has not conducted market research to determine if there are two or more eligible SDVOSB (or VOSB) concerns capable of performing the agency’s requirements. Consistent with our recent decisions, we conclude that the 2006 VA Act requires that the agency make a determination whether these acquisitions should be set aside for SDVOSB (or VOSB) concerns prior to conducting the procurements using FSS procedures. We therefore sustain Aldevra’s protests.  (Aldevra, B-406608, B-406654, B-406655, B-406656, Jul 13, 2012)  (pdf)

This procurement was conducted pursuant to General Services Administration Federal Supply Schedule (FSS) procedures, set forth at Federal Acquisition Regulation (FAR) subpart 8.4. Kingdomware asserts that the VA acted improperly by using non-mandatory FSS procedures and awarding a contract to a non-SDVOSB company, rather than setting aside the procurement for SDVOSB concerns. Kingdomware further asserts that the agency’s own market research established that there were “at least 20 SDVOSB [concerns]” (including Kingdomware) that hold FSS contracts for the acquired services; yet, the agency awarded the contract to a non-SDVOSB concern.

The VA has responded to Kingdomware’s protest by repeating arguments it has previously made in connection with a prior protest regarding SDVOSB concerns. See Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ¶ 112. In that decision we sustained a protest challenging the VA’s actions with regard to an FSS procurement in which, as here, the protester asserted that the agency failed to comply with the requirements of the VA Act and its implementing regulations.

Specifically, in Aldevra, we noted that the VA Act provides that:

. . . a contracting officer of [the VA] shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.

38 U.S.C. § 8127(d) (2006).

There, as here, the VA argued that, notwithstanding the VA Act, the agency need not consider SDVOSB and VOSB set-asides prior to determining whether to purchase goods or services through the FSS program. We disagreed on the basis that the plain language of the VA Act mandates that the VA “shall” conduct its procurements, including FSS acquisitions, using an SDVOSB set-aside when there is a reasonable expectation that two or more SDVOSB concerns can meet its requirements at a reasonable price. Aldevra, supra, at 5.

Here, the VA asserts that it “finds no legal question at issue in this protest other than [Kingdomware’s] contention that VA is required to perform market research and conduct SDVOSB set-asides . . . prior to considering use of the FSS.” Agency Report, Apr. 12, 2012, at 2. As it has previously, the VA maintains that FSS acquisitions “[are not] impacted by VA’s SDVOSB/VOSB authority.” Id. Further, the VA does not dispute Kingdomware’s assertion that the VA, in fact, conducted market research in connection with this procurement and found that there were at least 20 SDVOSBs that could perform the requirements at issue. Rather, the VA asserts that

“it is irrelevant whether VA conducted market research to determine whether two or more small businesses of any type were capable of bidding on the requirement” maintaining that SDVOSB set-asides are discretionary under any FSS acquisition. Id.

For the same reasons we discussed at length in Aldevra, we reject the VA’s arguments. In addition, it appears that, here, the agency conducted market research prior to the acquisition and found that at least 20 SDVOSB concerns were capable of meeting the requirements at issue. Specifically, in an email to Kingdomware dated March 12, 2012, the agency stated the FSS schedule under which this procurement was conducted “includes 541 vendors,” and acknowledged that “20 of those are SDVOSBs.” Protest, Tab 4, Email from Contract Specialist to Kingdomware, Mar. 12, 2012.

Consistent with our decision in Aldevra, supra, we conclude that the VA Act required the agency to consider whether this acquisition should have been set aside for SDVOSB (or VOSB) concerns. Further, on the record presented, it appears that such set-aside should have occurred. Accordingly, we sustain Kingdomware’s protest.  (Kingdomware Technologies, B-406507, May 30, 2012)  (pdf)

Crosstown argues that the agency improperly issued the solicitation under the FSS (and intends to award a task order to an FSS vendor) rather than as an open market acquisition reserved for SDVOSBs. Crosstown maintains that the agency erred in not first conducting market research to determine whether there were two or more SDVOSB (or veteran owned small business (VSOB)) concerns that could meet the agency’s requirement at a fair and reasonable price that offers best value to the government. Crosstown contends that, had the agency conducted adequate market research, it would have found at least two SDVOSB concerns that could meet the agency’s requirements. In support of its position, Crosstown directs our attention to 38 U.S.C. § 8127(d), which embodies the market research and “rule of two” set-aside requirements relied upon by Crosstown. Crosstown further asserts that, inasmuch as the VA received only one quote under its FSS solicitation, its proposed issuance of a task order to MLS amounts to an improper sole source contract award, and the agency has no assurance that it will make the award at a fair and reasonable price, or that the award will represent the best value to the agency, as required by 38 U.S.C. § 8127(d).

The VA responds by repeating arguments it has made to our Office in answer to prior protests filed by another SDVOSB concern, Aldevra. Aldevra, B-405271, B-405524, Oct. 11, 2011, 2011 CPD ¶ 183; Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ¶ 112. In essence, the VA argues that the VA Act presents no bar to the agency’s ability to proceed directly to the FSS to purchase goods or services listed on that schedule without regard to the SDVOSB status of the vendor. We have addressed these arguments and found them to be without merit. Id. Nonetheless, we conclude that Crosstown cannot claim a prejudicial violation of statute or regulation, as it appears that VA has statutory authority for its actions here, despite the agency’s failure to claim during the protest that it acted using this authority.

As an initial matter, we point out that nothing in the statutory authority relied on by Crosstown, 38 U.S.C. § 8127(d), requires the VA to conduct its market research exclusively on the open market, as opposed to among FSS vendors. The statute provides:

Except as provided in subsections (b) and (c), for purposes of meeting the goals under subsection (a), and in accordance with this section, a contracting officer of the [VA] shall award contracts on the basis of competition restricted to . . . [VOSBs or SDVOSBs] if the contracting officer has a reasonable expectation that two or more . . . [VOSBs or SDVOSBs] will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.

38 U.S.C. § 8127(d). Thus, the agency’s initial decision to conduct market research confined to FSS vendors was not, in and of itself, objectionable, to the extent that the VA sought to determine whether there were two or more SDVOSB (or VOSB) FSS vendors capable of meeting its requirement.

As noted, however, the agency received an expression of interest from only one concern. Accordingly, the agency had no reasonable expectation of receiving proposals or quotes from at least two FSS SDVOSB (or VOSB) vendors, nor was there a basis for the agency to conclude from its market research that it would be able to make award at a fair and reasonable price. It follows that the agency could not properly set aside this acquisition under the FSS pursuant to the authority provided by 38 U.S.C. § 8127(d).

Even though we conclude that the agency could not have set aside the acquisition under the FSS using the authority under 38 U.S.C. § 8127(d), the VA Act permits the agency properly to have confined its acquisition to MLS. Rather than the provision at 38 U.S.C. § 8127(d), the provision at 38 U.S.C. § 8127(b) is pertinent here and it provides:

(b) Use of noncompetitive procedures for certain small contracts.--For purposes of meeting the goals under subsection (a), and in accordance with this section, in entering into a contract with a . . . [SDVOSB or VOSB] for an amount less than the simplified acquisition threshold (as defined in section 134 of title 41), a contracting officer of the Department may use procedures other than competitive procedures.

As noted above, the value of the requirement at issue here is $9,990, which is well below the simplified acquisition threshold. The VA therefore has authority to use “other than competitive procedures” to award to SDVOSB (or VOSB) vendors, which is what it has done here.

We conclude that the agency’s acquisition here amounted to the solicitation and award of a requirement using “other than competitive procedures” as authorized by 38 U.S.C. § 8127(b). Moreover, under 38 U.S.C. §8127(b), there is no requirement for the VA to conduct market research of any sort, so long as the value of the procurement is below the simplified acquisition threshold and award is made to an SDVOSB (or VOSB).  (Crosstown Courier Service, Inc., B-406336, Apr 23, 2012)  (pdf)

The procurements are being conducted pursuant to General Services Administration Federal Supply Schedule (FSS) procedures and implementing regulations, set forth at Federal Acquisition Regulation (FAR) subpart 8.4. In accordance with those regulations, the solicitations were issued on an unrestricted basis to vendors holding FSS contracts.

Aldevra asserts that the VA acted improperly by using FSS procedures without first conducting market research to determine whether the procurements should be set aside for SDVOSB (or VOSB) concerns. Aldevra maintains that if the agency had conducted market research, it would have found that at least two SDVOSBs could meet the requirements at a reasonable price. The agency concedes that it did not conduct market research to determine whether two or more SDVOSB (or VOSB) concerns could meet the requirements at a reasonable price.

In March, we sustained a protest filed by Aldevra against a VA procurement being conducted pursuant to FSS procedures in which, like here, the protester asserted that the agency failed to comply with the requirements of the [Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. §§ 8127-8128 (2006)] VA Act and its implementing regulations. Aldevra, B-406205, Mar. 14, 2012, CPD ¶ 112. The issue raised and the agency’s arguments in the recent Aldevra protest are the same as the issue and arguments presented here.

For the same reasons that we discussed at length in our recent decision, we reject the VA’s arguments in the current protests. Here, as in Aldevra, supra, the VA has not conducted market research to determine if there are two or more eligible SDVOSB (or VOSB) concerns capable of performing the agency’s requirements. Consistent with our recent decision, we conclude that the 2006 VA Act requires that the agency make a determination whether these acquisitions should be set aside for SDVOSB (or VOSB) concerns prior to conducting the procurements using FSS procedures. We therefore sustain Aldevra’s protest.  (Aldevra, B-406331, B-406391, Apr 23, 2012)  (pdf)

The protester maintains that there are no SDVOSBs that can meet the terms of the solicitation which requires, among other things, for the successful contractor to maintain documentation that it meets all requirements of federal, state, county or city codes regarding the operation of wheelchair/stretcher transportation service vehicles. RFP at 10. More specifically, the RFP requires that the successful contractor must be licensed to perform the contemplated services in Hillsborough County, Florida, by the Hillsborough County Public Transportation Commission (HCPTC). Id. According to the protester, none of the prospective SDVOSB offerors is licensed to perform the services by the HCPTC.

We find no merit to the protest. The VA Act, by its terms, requires that the contracting activity set aside acquisitions for SDVOSBs where it has a reasonable expectation that there are at least two such concerns that will submit offers, and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d).

Here, the record shows that the agency conducted market research in connection with its decision to set aside this acquisition. Specifically, the agency issued a sources sought request for information. The agency received 12 responses to its request for information. Of the 12 responses, three were from verified SDVOSBs, three were from registered, but as yet not verified SDVOSBs, one was from a verified veteran owned small business and the remainder were from small or large businesses not owned by veterans. Agency Report (AR), exh. 4. On the basis of this market research, the contracting officer concluded that there was a reasonable expectation that the agency would receive proposals from at least two SDVOSBs, and that prices submitted likely would be competitive. Id. The record thus shows that the contracting officer here acted in accordance with the requirements of the VA Act and, based on his market research, determined to set aside the acquisition for SDVOSBs. 38 U.S.C. § 8127(d).

The record further shows that, in response to the RFP, the agency received 5 proposals, two from verified SDVOSBs, one from a registered, but as yet not verified, SDVOSB, one from a verified veteran owned small business and one from a large business (the protester). AR, exh. 4. The results of the competition thus effectively validated the contracting officer’s initial expectation that the agency would receive at least two proposals from SDVOSBs.

As a final matter, we point out that general solicitation provisions of the type included here that require the “contractor” to obtain all necessary licenses or permits needed to perform the work do not require that a bidder or offeror demonstrate compliance prior to award. Chem-Spray-South, Inc., B-400928.2, June 25, 2009, 2009 CPD ¶ 144 at 5-6. Instead, the securing of licenses or permits is a performance requirement that may be satisfied during contract performance. Id. The issue of whether the successful contractor here ultimately obtains the licenses and permits is a matter of contract administration, which our Office does not review. See id.; 4 C.F.R. §21.5(a) (2011).  (American Medical Response, B-406274, Mar 16, 2012)  (pdf)
 

Kevcon makes numerous arguments challenging the VA’s determination that the agency did not have a reasonable expectation that it would receive offers from two or more SDVOSBs capable of performing the stated requirements. We have considered all of the protester’s arguments, although we only address the primary ones, and find that none provide a basis to object to the VA’s decision to set aside the RFP for small businesses.

Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. § 8127, and the VA’s implementing regulations, VA Acquisition Regulation (VAAR) §§ 819.7004, 819.7705, the VA is required to set aside acquisitions for SDVOSBs whenever it determines that there is a reasonable expectation that offers will be received from at least two SDVOSB firms and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d); VAAR § 819.7005. The determination as to whether there is a reasonable expectation of receiving offers from two or more SDVOSB firms that are capable of performing the required work is a matter of informed business judgment within the contracting officer’s discretion that we will not disturb absent a showing that it was unreasonable. Buy Rite Transport, B-403729, B-403768, Oct. 15, 2010, 2010 CPD ¶ 245 at 3. While the use of a particular method of assessing the availability of capable SDVOSB firms is not required, an analysis of factors such as the recommendations of appropriate small business specialists, market surveys that include responses to sources sought announcements, and prior procurement history, may all constitute adequate grounds for a contracting officer’s decision not to set aside a procurement. FlowSense, LLC, B-310904, Mar. 10, 2008, 2008 CPD ¶ 56 at 3. The assessment must be based on sufficient evidence to establish its reasonableness. See Rochester Optical Mfg. Co., B-292247, B-292247.2, Aug. 6, 2003, 2003 CPD ¶ 138 at 5.

Kevcon complains that the VA’s market research was flawed, because the agency’s emails to SDVOSBs to determine whether any were interested in performing this work was limited to firms conducting business in Washington, Oregon and/or Idaho. Kevcon contends, given the size of this procurement, that SDVOSBs outside this geographic area would be interested in this procurement. Comments at 4. There is no merit to this complaint. Although it is true that the VA emailed approximately 250 SDVOSBs within this tri-state area, this additional research followed the agency’s earlier posting of the requirement, without any geographic limitations, on FedBizOpps. As noted above, the agency only received expressions of interest from three SDVOSBs, only one of which (Kevcon) was capable of performing the work.

Although Kevcon has identified numerous SDVOSBs that it believes may be interested in performing this work, it has not demonstrated that the VA’s posting of a sources sought notice on FedBizOpps and other market research was inadequate. Also, apart from the two other SDVOSBs that Kevcon earlier identified to the agency (and which the VA found incapable of performing the work), Kevcon has not identified any SDVOSBs interested in performing this work.

With respect to the two SDVOSBs that responded to the sources sought notice and the other two SDVOSBs identified by Kevcon as interested in the procurement, Kevcon does not specifically argue that the agency unreasonably found that these firms could not perform this work. Rather, Kevcon complains that the agency’s judgment as to the capability of these firms to perform this work was essentially a responsibility determination. See Comments at 5-6. Although Kevcon suggests that the VA used an overly stringent standard in finding that these firms could not perform this work, it does not identify any specific part of the agency’s analysis that was unreasonable. Contrary to Kevcon’s arguments, the record shows that the VA’s judgment as to the capability of these firms was part of an informed business judgment that there was not a reasonable expectation of receiving offers from two or more SDVOSBs capable of performing the contract.  (Kevcon, Inc., B-406101, B-406101.2, B-406101.3, Feb 6, 2012)  (pdf)

Interpretation of the VA Act and the JWOD Act

ACE and PFM argue that the plain language of the [Veterans Benefits, Health Care, and Information Technology Act of 2006] VA Act requires the VA to consider setting aside these requirements for SDVOSB or VOSB concerns before considering any other mandatory preferences, such as that provided for AbilityOne organizations. ACE Protest (B-406291.2) at 3; PFM Protest (B-406291.1) at 2. The VA disagrees with the protesters’ assertion that the VA Act reaches the AbilityOne program. Rather, the VA contends that the VA Act is silent as to how the statute should operate with respect to the mandatory statutory preference created by the JWOD Act. See Hearing Transcript at 15-16.

Where, as here, the relationship between two statutes is at issue, the rule is to give effect to both if possible. United States v. Borden Co., 308 U.S. 188, 198 (1939). When two statutes are capable of co-existence, absent a clearly expressed congressional intention to the contrary, each must be regarded as effective. Morton v. Mancari, 417 U.S. 535, 551 (1974). Repeal by implication is strongly disfavored. Id., at 549; B-307720, Sept. 27, 2007.

The statutes at issue in this case unambiguously provide for mandatory contracting preferences. The JWOD Act provides that federal agencies shall procure items on the procurement list from an AbilityOne organization, absent certain circumstances not relevant here. See 41 U.S.C. § 8504. The VA Act provides that the VA must set aside procurements for SDVOSB or VOSB concerns if the contracting officer can expect at least two such concerns could meet the requirement at a reasonable price. 38 U.S.C. § 8127(d).

We find that the two statutes can be read so as not to conflict. In this regard, we agree with the VA that the VA Act does not expressly address the preference required by the JWOD Act. That is, the VA Act neither expressly overrides the JWOD preference nor provides that the preference for SDVOSB or VOSB concerns is subordinate to that of the AbilityOne program. Moreover, although the legislative history stresses the importance of the VA providing contracting opportunities for SDVOSB and VOSB concerns, the legislative history does not address the role of SDVOSB or VOSB contracting priorities in relation to the AbilityOne program.

Where Congress has explicitly left a gap to fill, there is an express delegation of authority to the agency to elucidate a specific provision of the statute by regulation. Such regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to the statute. Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984). Because the VA Act is silent with respect to the AbilityOne program, we look to the agency’s interpretation of the statute through its regulations.

The VA, however, did not explicitly address the relationship between the two statutes in its regulations. Rather, the agency addressed the AbilityOne preference in the preamble to the agency’s regulations implementing the VA Act and in its internal guidelines. As noted above, the VA stated in its preamble that the priority status of the AbilityOne program would not be impacted. See 74 Fed. Reg. 64,622. In its internal guidelines, the VA instructed contracting officers to give priority to SDVOSB or VOSB concerns for items not on the AbilityOne procurement list and before seeking to place an item on the list, but to give priority to AbilityOne organizations when seeking to purchase items that were already on the procurement list. See ACE Post-Hearing Comments, exhib. 8, VA Guidelines, Apr. 28, 2010, at 2.

We agree with the protesters that the VA’s preamble and internal guidance are not entitled to Chevron deference, given that neither construction reflects formal rulemaking or is a regulation. Nevertheless, this does not mean, as the protesters presume, that the agency’s construction of its statute, which the VA was entrusted to administer, is entitled to no deference. While the preamble of a regulation does not control the meaning of the regulation and is not entitled to the same level of deference, the preamble is evidence of an agency’s contemporaneous understanding of its rules. Wyoming Outdoor Council v. U.S. Forest Serv., 165 F.3d 43, 53 (D.C. Cir. 1999). Likewise, an agency’s internal guidelines, although not entitled to the same level of deference as regulations, nonetheless are “entitled to respect” to the extent that they are persuasive. Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944).

We find that the VA’s construction of the two statutes in its preamble and guidelines is entitled to Skidmore deference, which the protesters have not shown to be inconsistent with the statutes or unreasonable. In this regard, we disagree with the protesters’ contention that the VA’s construction of the statutes is unreasonable because it failed to give weight to the more recent and specific VA Act. ACE Comments (B-406291.2) at 2-3; PFM Comments (B-406291.1) at 4-5. However, a later, more specific statute only trumps an earlier general one where the two statutes are in conflict. See Morton v. Mancari, supra, at 550-51; NISH; RCI, Inc. v. Rumsfeld, 348 F.3d 1263, 1272 (10th Cir. 2003) (to the extent a conflict exists between two statutes, the more specific statute must control); Coalition for a Sustainable Delta v. McCamman, 725 F.Supp. 2d 1162, 1199 (2010).

This is consistent with the recent decision of the United States Court of Federal Claims in Angelica Textile Servs., Inc. v. U.S., 95 Fed. Cl. 208 (2010).[11] There, the court addressed the application of the VA Act to requirements that VA sought to fulfill by procuring from the AbilityOne program, without consideration of SDVOSB or VOSB concerns. The court found no real conflict between the VA Act and the JWOD Act and gave deference to the VA’s interpretation that the VA Act did not impact items already on the AbilityOne procurement list. See id. at 221-222. In this regard, the court gave a limited form of deference to the VA’s guidelines, concluding that:

The Department is responsible for implementing the Veterans Benefits Act; indeed, it is the only federal department or agency to which the Act’s requirements apply. The Department’s New Guidelines provide detailed instructions to “fill[] a space” between the Veterans Benefits Act and Javits-Wagner-O’Day Act and their accompanying regulations. . . . The New Guidelines reflect agency-wide policy and do not conflict with the Veterans Benefits Act, the Javits-Wagner-O’Day Act, or the VA Acquisition Regulations.

Id. at 222.

In short, we conclude, as did the court in Angelica, that the VA’s decision to give the AbilityOne program contracting priority for items already on the procurement list was not unreasonable in light of the statute’s silence regarding this issue. In reaching our conclusion, we give due deference, as did the Court of Federal Claims, to the agency’s guidelines. See id., citing U.S. v. Mead Corp., 533 U.S. 218, 229 (2001).  (Alternative Contracting Enterprises, LLC; Pierce First Medical, B-406265, B-406266, B-406291, B-406291.2, B-406318.1, B-406318.2, B-406343, B-406356, B-406357, B-406369, B-406371, B-406374, B-406400, B-406404, B-406428, Mar 26, 2012)  (pdf)

Encompass, which is not a SDVOSB concern, complains that the RFPs should not have been set aside for SDVOSB concerns. The protester contends that there are no SDVOSB concerns that can actually manufacture or assemble textiles in accordance with the solicitation requirements. Encompass also complains that the agency’s market survey did not adequately consider the application of the Buy American Act.

The Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. §§ 8127-8128 (2006), provides the VA with independent authority to set aside contracts for SDVOSB and Veteran-Owned Small Business (VOSB) concerns. The Act provides that SDVOSB firms receive first priority for VA contract awards, and that VOSB firms receive second priority. 38 U.S.C. § 8127(i). Further, under the Act, acquisitions must be set aside for SDVOSB firms if the VA determines that there is a reasonable expectation that offers will be received by at least two SDVOSB firms and that award can be made at a fair and reasonable price. 38 U.S.C. § 8127(d). Generally, a procurement set-aside determination is a business judgment within the contracting officer’s discretion, which we will not disturb absent a showing that it was unreasonable. Eagle Home Med. Corp.-Costs, B-299821.3, Feb. 4, 2008, 2008 CPD ¶ 41 at 2.

Here, Encompass does not show that the VA’s set-aside determination was unreasonable. As noted above, the agency conducted market research from which it determined that there were a number of SDVOSBs that appeared capable and interested in performing these requirements. The agency also determined that there were small business manufacturers from which the VA had obtained the solicited items in the past, and from which non-manufacturing SDVOSBs could obtain the items for sale to the VA. Although Encompass generally contends that the SDVOSBs will not be able to satisfy all of the solicitation requirements, we find that these general and speculative arguments do not show that the VA’s business judgment was unreasonable. Moreover, in this regard, we do not agree with the protester’s apparent belief that the VA was required to determine prospective offerors’ technical acceptability or responsibility in order to determine whether it was likely that it would receive offers from two or more SDVOSBs that appeared capable of performing and that award could be made at a fair and reasonable price.  (Encompass Group, LLC, B-406346, Mar 23, 2012)  (pdf)

This procurement is being conducted pursuant to General Services Administration Federal Supply Schedule (FSS) procedures and implementing regulations, set forth at Federal Acquisition Regulation (FAR) subpart 8.4. In accordance with those regulations, the solicitation was conducted as a discretionary small business set aside confined to small business vendors holding FSS contracts. FAR § 805-5.

Crosstown asserts that the VA acted improperly by using FSS procedures without first conducting market research to determine whether the procurement should be set aside for SDVOSB (or VOSB) concerns. Crosstown maintains that if the agency had conducted market research, it would have found that at least two SDVOSBs could meet the requirement at a reasonable price. The agency concedes that it did not conduct market research to determine whether two or more SDVOSB (or VOSB) concerns could meet the requirement at a reasonable price.

By decision dated March 14, 2012, Aldevra, B-406205, Mar. 14, 2012, 2012CPD ¶ __ , we sustained a protest filed by another SDVOSB concern against a VA procurement being conducted pursuant to FSS procedures in which, like here, the protester asserted that the agency had failed to comply with the requirements of the VA Act and its implementing regulations. The issue raised and the agency’s arguments in the recent Aldevra protest are the same as the issue and arguments presented here; in fact, the arguments presented in the agency’s briefs in both cases are identical.

For the same reasons that we discussed at length in our recent decision, we reject the VA’s arguments in the current protest. Here, as in Aldevra, supra, the VA has not conducted market research to determine if there are two or more eligible SDVOSB (or VOSB) concerns capable of performing the agency’s requirements. Consistent with our recent decision, we conclude that the 2006 VA Act requires that the agency make a determination whether an acquisition should be set aside for SDVOSB (or VOSB) concerns prior to conducting a procurement using FSS procedures. We therefore sustain Crosstown’s protest.  (Crosstown Courier Service, Inc., B-406262, Mar 21, 2012)  (pdf)

Aldevra filed this protest prior to the closing time for the solicitation, arguing that the agency acted improperly by using FSS procedures without first conducting market research to determine whether the procurement should be set aside for [service-disabled veteran-owned small business]  SDVOSB concerns. Protest at 1-2. Aldevra asserts that if the agency had conducted market research, it would have found that at least two SDVOSBs could meet the requirement at a reasonable price. Id. at 2. The agency concedes that it did not conduct market research to determine whether two or more SDVOSB concerns could meet the requirement at a reasonable price. Agency E-mail to GAO (Jan. 14, 2012).

The issue raised in this protest is identical to the issue presented in a prior protest filed by Aldevra. See Aldevra, B-405271, B-405524, Oct. 11, 2011, 2011 CPD ¶ 183. Specifically, this protest concerns the Veterans Benefits, Health Care, and Information Technology Act of 2006 (the VA Act), which provides in part:

(d) Use of restricted competition.--Except as provided in subsections (b) and (c), for purposes of meeting the goals under subsection (a), and in accordance with this section, a contracting officer of the Department shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans if the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States.

38 U.S.C. § 8127(d) (2006). The statute also establishes an order of priority for awarding contracts to small business concerns, providing that the first priority shall be given to SDVOSB concerns, followed by veteran-owned small business (VOSB) concerns. Id. § 8127(i). Following enactment of the statute, the VA issued implementing regulations which, as relevant here, state as follows:

(a) Except as authorized by 813.106, 819.7007 and 819.7008, the contracting officer shall set aside an acquisition for competition restricted to SDVOSB concerns upon a reasonable expectation that:

(1) Offers will be received from two or more eligible SDVOSB concerns; and

(2) Award will be made at a reasonable price.

Veterans Administration Acquisition Regulation (VAAR), 48 C.F.R. § 819.7005(a) (2011).

Our Office sustained Aldevra’s prior protest, finding that nothing in the VA Act or the VAAR provides the agency with discretion to conduct a procurement under FSS procedures without first determining whether the acquisition should be set aside for SDVOSB concerns.

(section deleted)

The Plain Meaning of 38 U.S.C. § 8127

With respect to the merits of Aldevra’s protest, the agency maintains that it need not have considered whether two or more SDVOSB concerns could meet the requirement at a reasonable price before conducting the procurement through the FSS program because our decision in the prior protest was incorrect. AR at 1, 8-10. In this regard, the agency argues that in resolving the prior protest, our Office failed to recognize that 38 U.S.C. § 8127(d) includes the phrase “for purposes of meeting the goals under subsection (a),” which, according to the agency, qualifies the requirement for the agency to preliminarily determine whether a procurement should be set aside for SDVOSB concerns. See id. at 8-9. Subsection (a), as referenced in subsection (d), states in relevant part:

(1) In order to increase contracting opportunities for [SDVOSB and VOSB concerns], the Secretary [of the VA] shall--

(A) establish a goal for each fiscal year for participation in Department contracts (including subcontracts) by [VOSB concerns]; and

(B) establish a goal for each fiscal year for participation in Department contracts (including subcontracts) by [SDVOSB concerns].

38 U.S.C § 8127(a).

The agency argues that the phrase “for purpose of meeting the goals under subsection (a)” signals that “Congress did not . . . require that this authority [referenced in subsection (d)] be used in conducting all VA procurements, including FSS purchases.” AR at 2. Thus, according to the agency, the statute should be interpreted to mean that the “VA may consider its current achievements vis-à-vis attaining the Secretary’s SDVOSB/VOSB contracting goals in deciding to do restricted competitions.” Id. at 9.

As an initial matter, although the agency has defended numerous protests before our Office involving precisely this issue, this is the first time that the agency has raised these arguments. Thus, until this protest, the agency had not suggested that the phrase “for purposes of meeting the goals under subsection (a)” as it appears in 38 U.S.C. § 8127(d) grants the agency discretion to decide that in some procurements the mandate in the statute will apply, and in other procurements it will not.

In matters concerning the interpretation of a statute, the purpose is clear: to determine and give effect to the intent of the enacting legislature. Philbrook v. Glodgett, 421 U.S. 707, 713 (1975). In furtherance thereof, the first question is whether the statutory language provides an unambiguous expression of the intent of Congress. If it does, the matter ends there, for the unambiguous intent of Congress must be given effect. Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984).

We find that the plain language of 38 U.S.C. § 8127(d) mandates that the VA “shall” conduct its procurements using an SDVOSB (or VOSB) set-aside when there is a reasonable expectation that two or more SDVOSB (or VOSB) concerns can meet the requirement at a reasonable price. The phrase “for purposes of meeting the goals” is part of an introductory clause that establishes exceptions to the mandate (those exceptions being when subsections (b) and (c) apply). The phrase explains the purpose for the mandate, which is to meet the goals established under subsection (a); however, the phrase does not create an exception to the mandate.

In addition, the exceptions set out in subsections (b) and (c) of section 8127 use the discretionary term “may,” in contrast to subsection (d)’s use of the mandatory term “shall.” This distinction provides further evidence of a congressional intent to require--rather than permit--SDVOSB or VOSB set-asides under subsection (d), when conditions of the statute are met.

Finally, we note that the legislative history of the VA Act underscores that 38 U.S.C. § 8127 was intended to broadly foster participation in VA procurements by SDVOSB and VOSB concerns. For example, the House Committee on Veterans’ Affairs report accompanying the bill that ultimately was enacted stated, among other things, that the bill would “[p]rovide veteran and service-disabled, veteran-owned small businesses priority in VA contracting . . . .” H.R. Rep. No. 109-592 (2006) at 12. The committee report also included the statement that “the Committee believes that small businesses owned and controlled by veterans and service-disabled veterans should routinely be granted the primary opportunity to enter into VA procurement contracts.” Id. at 14-15. We read these statements to reflect a congressional expectation that the VA generally will conduct procurements with the purpose of meeting the SDVOSB and VOSB participation goals.

VA’s Remaining Contentions

For the record, the VA argues that our Office should abandon our previous conclusions about the plain meaning of this statute, and should instead conclude that the statute is ambiguous, and show deference to one of the VA’s interpretations of the statute. In our view, the VA has not yet proffered an interpretation to which we can properly defer.

With respect to the VA’s newly-raised argument that our Office should defer to its view that the phrase in section 8127(d) that states “for purposes of meeting the goals under subsection (a)” permits the agency to, in some circumstances, disregard the statute, we note first that this interpretation is nowhere to be found in the VA’s 2009 notice and comment rulemaking. In essence, the VA seeks Chevron deference for a rulemaking it has never performed. Despite this lack of rulemaking, the VA now claims blanket discretion to define the scope of procurements to which the statutory mandate applies. We see no basis for this broad discretion.

With respect to the VA’s previously-raised argument that our Office should defer to its 2009 rulemaking that stated that the FAR language in Part 19 applies to the SDVOSB set-aside program created by the VA Act, the VA’s conclusions in that rulemaking were refuted by the express language of the FAR section upon which the VA relies. See Aldevra, supra, at 5 (explaining that FAR subpart 19.14--the only subpart within FAR Part 19 that addresses set-asides for SDVOSBs--implements the requirements of the Veterans Benefit Act of 2003, which applies government-wide, and not the 2006 VA Act, which applies only to VA procurements).

Finally, we turn to the VA’s additional argument that our decision in the prior protest did not give meaning to 38 U.S.C. § 8128(a)--a separate subsection of the VA Act, which provides, in its entirely, as follows:

(a) Contracting priority.--In procuring goods and services pursuant to a contracting preference under this title or any other provision of law, the Secretary [of the VA] shall give priority to a small business concern owned and controlled by veterans, if such business concern also meets the requirements of that contracting preference.

38 U.S.C. § 8128(a). Based on this subsection, the agency argues that “if a SDVOSB/VOSB is not a FSS contract holder, it cannot be viewed as meeting the same requirements of that contracting preference, the FSS program, and, therefore, is not entitled to any priority preference.” AR at 9-10.

We disagree with the VA’s characterization of the FSS program as a “contracting preference.” Instead, we read 38 U.S.C. § 8127(d) to require a preliminary determination about whether there was a reasonable expectation that two or more SDVOSB (or VOSB) concerns can meet the requirement at a reasonable price. Once the agency makes this determination, the agency then can determine whether to apply another contracting preference or to proceed using FSS procedures.

In sum, we find unreasonable, and inconsistent with the statute, the agency’s failure to determine whether two or more SDVOSB concerns can meet the requirement at a reasonable price before using FSS procedures.  (Aldevra, B-406205, Mar 14, 2012) (pdf)

The VA contends that Kingdomware has not been prejudiced by the agency's corrective action because the protester had the opportunity to submit a quotation in response to the revised FSS solicitation and chose not to do so.Agency Report at 2.The VA also argues that, because the protester did not submit a quotation, it is not an interested party to further challenge the procurement. Id. at 3.

As an initial matter, we disagree that Kingdomware is not an interested party to challenge the agency's actions.Under the Competition in Contracting Act of 1984, 31 U.S.C. sections 3551-3556 (2006) and our Bid Protest Regulations, 4 C.F.R. sect. 21.0(a)(1) (2011), only an "interested party" may protest a federal procurement.That is, a protester must be an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or the failure to award a contract.Here, Kingdomware protested the terms of the RFQ, arguing among other things that the VA had not reasonably determined whether the procurement should be set aside for SDVOSBs.Kingdomware also timely objected to the VA's proposed corrective action, arguing that in accordance with the 2006 VA Act the VA was required to perform market research to determine whether an SDVOSB set-aside was appropriate.Where, as here, the protester is challenging the terms of the solicitation, and the remedy sought is the opportunity to compete under a revised solicitation, the protester is an interested party, even if it did not submit a quotation or offer.See Courtney Contracting Corp., B-242945, June 24, 1991, 91-1 CPD para. 593 at 4-5.

We also do not agree with the VA that Kingdomware has not been prejudiced by the agency's actions.As noted above, in Aldevra, supra, we found that the VA's decision to procure items from the FSS without determining whether the procurement should be set aside for SDVOSBs violated the 2006 VA Act.We also noted that the VA's regulations implementing the 2006 VA Act provide in relevant part:

(a) . . . .the contracting officer shall set aside an acquisition for competition restricted to SDVOSB concerns upon a reasonable expectation that:

(1) Offers will be received from two or more eligible SDVOSB concerns and;

(2) Award will be made at a reasonable price.

VA Acquisition Regulation, 48 C.F.R. sect. 819.7005(a) (2010).Here, as in Aldevra, the VA has not conducted market research to determine if there are two or more eligible SDVOSBs capable of performing the agency's requirements.

In sum, consistent with our decision in Aldvera, we conclude that the 2006 VA Act requires that the agency make a determination whether an acquisition should be set aside for SDVOSB concerns prior to conducting a procurement using FSS procedures.  (Kingdomware Technologies, B-405727, December 19, 2011)  (pdf)

MICCI argues that because it offered a lower price than Seawolf, the [Department of Veterans Affairs] VA was required under the class deviation to VAAR sect. 804.1102 to notify MICCI of its status as the apparently successful offeror and expedite the [VA's Center for Veterans Enterprise] CVE's review of MICCI's application to be verified and listed in the VIP database as an [service-disabled, veteran-owned small business] SDVOSB concern.

The VA argues that MICCI is not an interested party to pursue this protest because on September 28, 2011, the CVE denied MICCI's application for inclusion in the [Vendor Information Pages] VIP database. Agency Report, Tab 4, CVE Letter to MICCI, Sept. 28, 2011, at 1.

Under the bid protest provisions of the Competition in Contracting Act of 1984, 31 U.S.C. sections 3551-3556 (2006), only an "interested party" may protest a federal procurement. That is, a protester must be an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or the failure to award a contract. Bid Protest Regulations, 4 C.F.R. sect. 21.0(a)(1) (2011). Determining whether a party is interested involves consideration of a variety of factors, including the nature of issues raised, the benefit or relief sought by the protester, and the party's status in relation to the procurement. Four Winds Servs., Inc., B-280714, Aug. 28, 1998, 98-2 CPD para. 57. A protester is not an interested party where it would not be in line for contract award were its protest to be sustained. Id. Here, MICCI would not be in line for award even if we were to sustain the protest because the CVE has denied its application for inclusion in the VIP database as an SDVOSB concern.

MICCI contends that the CVE erred in rejecting MICCI's application, and that the protester remains an interested party because it has filed a request for reconsideration with the CVE and is awaiting the CVE's decision. Comments at 4. Although MICCI has filed a request for reconsideration, the determination that MICCI is not an eligible SDVOSB concern remains in effect, and thus provides no basis for us to consider the agency's actions. See A1 Procurement, LLC, B-405535, Nov. 18, 2011; see also S.A. Saber, B-249874, Dec. 10, 1992, 92-2 CPD para. 403 (holding that small business concern, which had been determined to be other than small by the Small Business Administration (SBA), was not an interested party to challenge award of a small business set-aside contract, notwithstanding a pending appeal with SBA).

The protest is dismissed.  (MICCI Imaging Construction Company, Inc., B-405654, November 28, 2011)  (pdf)

Kingdomware contends that the agency failed to determine whether this acquisition was suitable for an SDVOSB set-aside and, as a result, the agency improperly competed the requirement on an "unrestricted" basis. Protest at 1, 6; Comments at 4-5. In this regard, Kingdomware argues that the agency failed to comply with FAR sect. 19.502-2(b), which generally requires than an agency set aside acquisitions with an anticipated dollar value of more than $150,000 for small businesses where there is a reasonable expectation of receiving fair market prices from at least two small business concerns. In support of its position that the solicitation should have been set aside for SDVOSBs, Kingdomware also relies on FAR sect. 19.1405, which generally provides that an agency may set aside acquisitions for SDVOSBs when there is a reasonable expectation that offers will be received from at least two SDVOSBs and award will be made at a fair market price. Protest at 1, 6; Comments at 4-5. Kingdomware asserts that it provided the agency with information indicating that numerous SDVOSBs could provide the required emergency notification service. Protest at 5; Comments at 8, 10, 12.

The regulations that implement small business programs and the GSA FSS program expressly anticipate and exclude FSS purchases from the set-aside requirements in FAR part 19. In particular, FAR sect. 8.404(a) and FAR sect. 38.101(e)--both of which pertain to FSS purchasing--provide that FAR part 19 does not apply to orders placed against FSS contracts. Similarly, FAR sect. 19.502-1(b), which pertains to small business set-aside requirements, also provides that FAR part 19 set-aside requirements do not apply to FSS purchases. In sum, the FAR part 19 regulations on which Kingdomware's protest is predicated do not impose a requirement on agencies to first evaluate whether a solicitation should be set-aside for small businesses--or SDVOSBs--before purchasing the goods or services through the FSS program. Edmond Computer Co.; Edmond Sci. Co., B-402863, B-402864, Aug. 25, 2010, 2010 CPD para. 200 at 2-3; Future Solutions, Inc., B-293194, Feb. 11, 2004, 2004 CPD para. 39 at 3. Accordingly, it was not improper for the agency here not to set this requirement aside for SDVOSBs, and Kingdomware's arguments to the contrary provide no basis on which to sustain the protest.

Kingdomware asserts that the solicitation is defective in two other respects. First, Kingdomware objects to the solicitation's reference to the MOBIS schedule. Protest at 6. Second, Kingdomware objects to the requirement that the emergency notification service include a capability to notify and receive responses through social media, such as Instant Messenger, Facebook, and Twitter. Protest at 7. Kingdomware contends that this requirement amounts to a government endorsement of the use of social media by federal employees during work, and that such a requirement is unnecessary because emergency notifications and responses "could [occur] directly through the emergency notification solution." Id.


With respect to the solicitation's reference to MOBIS, the agency responds that the reference was an error. Contracting Officer's Statement para. 17. The agency, however, maintains that the error did not prejudice Kingdomware because the solicitation was sent only to vendors that hold GSA Schedule 70 contracts--including Kingdomware-- and because the agency received no vendor questions regarding the reference. Id.; Memorandum of Law at 4-5. With respect to the solicitation's social media notification capability requirement, the agency responds that the requirement reflects the agency's need to quickly alert staff as to a potential emergency in a broad range of formats. Contracting Officer's Statement para.15. The social media format is necessary, the agency explains, in the event that problems arise with other communication formats, such as when cellular telephone service is disrupted or overloaded. Id. paras. 15, 16. The agency further explains that the social media notification capability is useful for reaching employees when they are not in the workplace. Id. para. 16.

Kingdomware in its comments on the agency report did not rebut the agency's responses regarding the MOBIS reference or the social media notification capability requirement. Consequently, we consider these protest grounds to be abandoned. Washington-Harris Group, B-401794, B-401794.2, Nov. 16, 2009, 2009 CPD para. 230 at 5 n.3; Strategic Res., Inc., B-287398, B-287398.2, June 18, 2001, 2001 CPD para. 131 at 10-11.  (Kingdomware Technologies, Inc., B-405533.2, November 10, 2011)  (pdf)

The protester contends that the sole-source awards are improper because the VA failed to consider other qualified SDVOSBs for award. Protest (B-405492) at 1; Protest (B-405493) at 1. The protester argues that the VA should have set aside these procurements for SDVOSBs--and not have awarded sole-source contracts--because two or more SDVOSBs would have submitted offers for the work. Protest (B‑405492) at 1; Protest (B-405493) at 1; Comments at 1.

Under the Veterans First Contracting Program, the VA has authority to award contracts using other than full and open competition (including set-aside procurements and sole-source awards) in certain circumstances. See 38 U.S.C. sect. 8127. With regard to setting aside procurements exclusively for veteran-owned small businesses (VOSBs) or SDVOSBs, 38 U.S.C. sect. 8127(d) states:

Except as provided in subsections (b) and (c), . . . a contracting officer of the [VA] shall award contracts on the basis of competition restricted to [VOSBs or SDVOSBs] if the contracting officer has a reasonable expectation that two or more [VOSBs or SDVOSBs] will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States."

38 U.S.C. sect. 8127(d) (emphasis added); see Buy Rite Transport, B-403729, B-403768, Oct. 15, 2010, 2010 CPD para. 245 at 3.

Subsection (c), referred to in the above provision, provides the VA with authority to award sole-source contracts to SDVOSBs when:

(1) such concern is determined to be a responsible source with respect to performance of such contract opportunity;

(2) the anticipated award price of the contract (including options) will exceed the simplified acquisition threshold . . . but will not exceed $5,000,000; and

(3) in the estimation of the contracting officer, the contract award can be made at a fair and reasonable price that offers best value to the United States. 38 U.S.C. sect. 8127(c); see Apex Ltd., Inc., B-402163, Jan. 21, 2010, 2010 CPD para. 35 at 2; In & Out Valet Co., B-311141, April 3, 2008, 2008 CPD para. 71 at 3.

Subsection (b) provides that, for contracts with SDVOSBs for amounts less than the simplified acquisition threshold, the VA is also authorized to use noncompetitive procedures. 38 U.S.C. sect. 8127(b).

Here, the VA awarded the sole-source contracts to FCX pursuant to its authority under the Veterans First Contracting Program. The protester's assertion that the VA should have set aside the procurements for SDVOSBs is without merit because the requirement to set aside certain procurements only applies when the VA does not use its sole-source authority under the Veterans First Contracting Program. As emphasized above, the VA is required to set aside certain procurements "[e]xcept as provided in subsections (b) and (c) . . . ." 38 U.S.C. sect. 8127(d). Subsections (b) and (c) are the VA's authority under the Veterans First Contracting Program to award sole-source contracts to SDVOSBs. See 38 U.S.C. sections 8127(b) and (c). Therefore, because the VA used the authority provided in 8127(b) and 8127(c) to award sole‑source contracts to FCX, the VA was not required to set aside for SDVOSBs these procurements.

The record here shows that the agency's decision to award these sole-source contracts to FCX was in accord with the statute authorizing the award of sole-source contracts to SDVOSBs. See Apex Ltd., Inc., supra. Accordingly, we find no basis to sustain the protests.  (Crosstown Courier Service, Inc., B-405492, B-405493, November 8, 2011)  (pdf)

VA argues that neither the VA Act, nor the VA's implementing regulations, require the agency to consider SDVOSB and VOSB set-asides prior to determining whether to purchase goods or services through the [Federal Supply Schedule] FSS program. AR, July 20, 2011, at 3; AR, Sept. 27, 2011, at 2. The agency contends that it has the discretion to determine whether to meet its requirements through the FSS before procuring from other sources—such as SDVOSBs or VOSBs. Id.

We see nothing in the [Veterans Benefits, Health Care, and Information Technology Act of 2006] VA Act or the VAAR that provides the agency with discretion to conduct a procurement under FSS procedures without first determining whether the acquisition should be set aside for SDVOSBs. The provisions of both the VA Act and the VAAR are unequivocal; the VA "shall" award contracts on the basis of competition restricted to SDVOSBs where there is a reasonable expectation that two or more SDVOSBs will submit offers and award can be made at a fair and reasonable price. Thus, contrary to the agency's position, the VA Act requires, without limitation, that the agency conduct its acquisitions using SDVOSB set asides where the necessary conditions are present. 38 U.S.C. sect. 8127-8128.

Moreover, since the agency concedes that there are at least two SDVOSBs capable of meeting its requirements under solicitation RQ-1170, it must set this requirement aside exclusively for SDVOSBs. Because the agency did not conduct market research to determine if there are two or more SDVOSB concerns capable of performing the requirements under solicitation 179-0306, it must conduct market research and, if it determines that there are two or more firms capable of performing the requirements, it must set this requirement aside exclusively for SDVOSB concerns.

In our view, the discussion above disposes of the question raised by this protest. The VA has argued, however—in pleadings filed in response to this protest, and in pleadings filed in several other protests currently pending before our Office—that it addressed and resolved the applicability of the VA Act to the FSS when it promulgated the above-quoted provisions of the VAAR. AR, July 20, 2011, at 6-7; AR, Sept. 27, 2011, at 3.

The comments on the agency's proposed regulations, and the agency's responses in answer to those comments, were published in the Federal Register, which included the following exchange addressing the applicability of the VA Act to FSS acquisitions:

Comment: VA received a comment stating that the proposed rule was unclear whether it was intended to be applicable to task and delivery orders under the Federal Supply Schedule (FSS). The commenter indicated that although GSA [General Services Administration] has delegated to VA the authority to administer certain schedules, the delegation does not extend to policy implementation. The commenter recommended a revision stating that SDVOSB and VOSB set-asides and sole source provisions do not apply at the FSS order level.

Response: We disagree with the commenter and reject the suggestion because this rule does not apply to FSS task or delivery orders. VA does not believe a change to the regulation is needed, and 48 CFR part 8 procedures in the FAR [Federal Acquisition Regulation] will continue to apply to VA FSS task/delivery orders. Further, VA will continue to follow GSA guidance regarding applicability of 48 CFR part 19 of the FAR, Small Business Programs, which states that set-asides do not apply to FAR part 8 FSS acquisitions.

74 Fed. Reg. 64619 (Dec. 8, 2009).  As stated above, the VA contends that this commentary addressed and resolved the applicability of the VA Act to FSS acquisitions. The VA also contends that it reasonably relied on the FAR in concluding that the VA Act does not apply to FSS acquisitions.

As the VA correctly points out, FAR sect. 8.404 (a) expressly provides that the requirements related to small businesses in FAR part 19 are inapplicable to FSS acquisitions with the exception of FAR sect. 19.202-1 (e)(1)(iii) (not relevant here). FAR part 19 includes requirements relating to various small business programs.

Of relevance here, FAR subpart 19.14 includes provisions relating to one program for the award of contracts to SDVOSBs; this is the only subpart of FAR part 19 that addresses set-asides for SDVOSBs. Subpart 19.14, however, implements the requirements of the Veterans Benefit Act of 2003, which was codified at 15 U.S.C. sect. 657f (2006), and applies government-wide. See FAR sect. 19.1402. The 2006 VA Act, which is codified at 38 U.S.C. sections 8127, 8128, applies only to VA procurements. See Angelica Textile Servs., Inc. v. U.S., 95 Fed. Cl. 208, 222 (2010) (noting that the VA is the only agency to which the requirements of the Veterans Benefits Act of 2006 apply).

In addition—and in contrast to the 2006 VA Act at issue here—the Veterans Benefit Act of 2003 provides, in relevant part, that:

In accordance with this section, a contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by service-disabled veterans if the contracting officer has a reasonable expectation that not less than 2 small business concerns owned and controlled by service-disabled veterans will submit offers and that award can be made at a fair market price.

15 U.S.C. sect. 657f (b) (emphasis added).

Simply stated, the 2003 government-wide program is separate and distinct from the VA-specific program created by the VA Act of 2006. As a result, the FAR language implementing the 2003 Act—and exempting the FSS program (among other programs) from its requirements—has no application to the statute at issue here. In addition, the program created by the 2003 statute is permissive in nature, insofar as it provides that contracting officers "may" restrict competition to SDVOSBs in appropriate circumstances. See, e.g., Mission Critical Solutions, B-401057, May 4, 2009, 2009 CPD para. 93 at 3.

In light of these considerations, we conclude that the exception in the FAR that permits agencies to award task and delivery orders under the FSS without regard to government-wide small business programs—including the SDVOSB set-aside program created by the 2003 statute (and implemented by FAR subpart 19.14)—does not govern, or apply to, the SDVOSB set-aside program created by the Veterans Benefits, Health Care, and Information Technology Act of 2006.

RECOMMENDATION

We recommend that the agency cancel solicitation RQ-1170 and re-solicit its requirements using a SDVOSB set-aside. We recommend that the agency conduct a reasonable market research regarding its requirements under solicitation 179-0306, and, that it cancel solicitation 179-0306 and re-solicit its requirements using a SDVOSB set-aside if it determines that there are two or more SDVOSB concerns capable of performing the requirements. We also recommend that the agency reimburse the protester the costs of filing and pursuing the protests. 4 C.F.R. sect. 21.8(d)(1) (2011).  (Aldevra, B-405271; B-405524, October 11, 2011) (pdf)

The protester argues that the VA improperly rejected its bid because the contracting officer incorrectly determined that FedCon was not listed in the VIP database, and because the firm qualifies for an expedited verification review of its VIP application under the class deviation. Protest at 2; Comments at 2. The VA contends that FedCon was not listed in the VIP database at the time of award, and therefore FedCon does not qualify for an expedited verification decision under the class deviation and is ineligible for award. AR at 4-5.

As noted above, an SDVOSB firm must be listed in the VIP database in order to receive a contract award in an SDVOSB set-aside procurement. 38 U.S.C. sect. 8127(e). A firm cannot be listed in the VIP database without the VA first verifying the firm's SDVOSB status. 38 U.S.C. sect. 8127(f)(4). In connection with solicitations issued on or after October 1, 2010 (such as the one here), the class deviation permits an expedited review of firms that are listed but not verified in the VIP database if those firms are selected for award. Protest, encl. 1, VA Memorandum, at 1-5; IFB at 10. Otherwise, the review of a firm's SDVOSB status will be completed, "when practicable," within 60 days after receipt of a completed application for verification. 38 C.F.R. sect. 74.11.

Here, FedCon does not assert that it was listed but not verified in the database prior to enactment of the pre-listing verification requirement in October 2010, such that the firm would qualify for an expedited review of its status if selected for award. Rather, FedCon asserts only that it commenced the application process for verification and listing on June 9, 2011.[7] FedCon did not complete the verification application until August 15 (two months after bid opening), and CVE is currently reviewing the firm's status on a non-expedited basis. Agency Response to GAO Questions, Sept. 1, 2011, at 3; Comments at 3. Given that FedCon was not listed in the VIP database when it submitted its application, the firm is not entitled to an expedited review of its status. Instead, the firm is statutorily precluded from being listed in the VIP database until its SDVOSB status is verified. See 38 U.S.C. sect. 8127(f)(4). Because the firm was not listed in the database at the time of award, and is not entitled to an expedited review of its SDVOSB status, the firm is ineligible for award of the contract here. See 38 U.S.C. sect. 8127(e).

The protest is denied.  (FedCon RKR JV LLC, B-405257, October 4, 2011)  (pdf)

Further, the agency notes (and Pro South-Emcom does not dispute) that, although one member of the Pro South-Emcom joint venture (Pro South Construction LLC) was registered as an SDVOSB on the VetBiz database, the joint venture itself was not. Accordingly, the agency maintains that the joint venture was not eligible for award. We agree.

The Veterans Benefits, Health Care, and Information Technology Act of 2006, Pub. Law No. 109-461, provides the VA with independent authority to restrict competition to SDVOSB concerns under certain circumstances. 38 U.S.C. sect. 8127(d). In this regard, 38 U.S.C. sect. 8127(e) states that a small business concern may be awarded a contract only if the small business concern and the veteran owner of the small business concern are listed in a database of veteran-owned small business (VOSB) concerns, which the Act requires the Secretary of Veterans Affairs to maintain. The Secretary is required to verify that each small business concern listed in the database is owned and controlled by veterans, and where a service-connected disability is indicated, to verify the service-disabled status of the veteran. 38 U.S.C. sect. 8127(f).

We have specifically held, with regard to facts virtually identical to those presented here, that the requirements for registration on the VetBiz database are applicable to a joint venture offeror, and the fact that one member of the joint venture is registered does not meet those requirements. A-1 Procurement, JVG, B-404618.3, July 26, 2011, 2011 CPD para. __.

Here, while Pro South Construction Services, LLC, one of the joint venturers, is an SDVOSB concern listed in the VetBiz database, the record shows that the joint venture offeror itself--Pro South-Emcon--is not. Accordingly, Pro South-Emcom was not eligible for award under the terms of the solicitations. Id.  (Pro South-Emcon, a Joint Venture, B-405267; B-405268, August 18, 2011)  (pdf)

Al JVG protests that the VA's rejection of its proposal was unreasonable because the contracting officer erroneously concluded that the joint venture was not listed in the VetBiz database. A1 JVG argues that, under VAAR sect. 819.7003(b) and (c), the joint venture could rely on the VetBiz listing of the SDVOSB managing partner in the joint venture.

As an initial matter, the VA contends, citing our decision in TEC/WEST-TEC JV, B‑402573.3, July 30, 2010, 2010 CPD para. 174, that GAO does not have jurisdiction to review the contracting officer's determination that A1 JVG is ineligible for award in this procurement. We agree that a firm's status as an SDVOSB concern and the VA's determination as to whether a firm should be included in the VetBiz database are not within our bid protest jurisdiction, as these have been given to VA to determine. TEC/WEST-TEC JV, supra, at 2-3.

In TEC/WEST-TEC JV, the protester challenged the SDVOSB status of the awardee. We concluded that GAO did not have jurisdiction to resolve protests of a firm's SDVOSB status under VA's Veterans First program because the Veterans Benefits, Health Care, and Information Technology Act of 2006 requires that SDVOSB eligibility be determined on the basis of a list maintained in a VA-controlled database (i.e., known alternatively as the VetBiz or VIP database), and that a firm's inclusion on the list is to be determined and verified by the VA. See 38 U.S.C. sect. 8127(e) and (f).

The protest here, however, does not concern the agency's determination regarding the inclusion of a firm in the VetBiz database. Rather, A1 JVG protests the contracting officer's decision that the joint venture was not listed in the VetBiz database and is thus ineligible for award. As with other contracting officer procurement decisions, we will review whether that decision is reasonable and consistent with applicable procurement laws and regulations. See e.g., Eagle Home Med. Corp., B‑402387, Mar. 29, 2010, 2010 CPD para. 82 at 4 n.4; see generally, SPM Mfg. Corp., B‑228078.2, Apr. 18, 1988, 88-1 CPD para. 370 at 2-3 (GAO will review an agency's determination of a small business's nonresponsibility where the Small Business Administration concludes that the issue is not subject to its review); Gutierrez-Palmenberg, Inc., B-255797.3, et al., Aug. 11, 1994, 94-2 CPD para. 158 at 8 (GAO will review competitive 8(a) procurements for compliance with applicable procurement laws and regulations). Moreover, as the regulations at issue here represent the VA's implementation of a VA-specific procurement statute, we are required to give deference to an agency's reasonable interpretation of its regulations. Singleton Enters.-GMT Mech., A Joint Venture, B-310552, Jan. 10, 2008, 2008 CPD para. 16 at 3.

Here, we agree with the VA's conclusion that A1 JVG was not eligible to receive award under the VA's regulations implementing the Veterans Benefits, Health Care, and Information Technology Act of 2006. Contrary to the protester's arguments, VAAR sect. 819.7003(c)(1) does not exempt a joint venture from the requirement that it must be listed in the VetBiz database to be eligible for award. Subsection (b) of VAAR sect. 819.7003 plainly provides that, to be eligible for award under a VA veteran-owned small business program set‑aside, an offeror must represent that it is an SDVOSB or VOSB concern and is listed in the VetBiz database. The offeror here is A1 JVG, and A1 JVG--as opposed to A1 LLC--is not listed.

Subsection (c) of the regulation does not propose an alternate method for offerors to be viewed as eligible for award under this program. Instead, the subsection states that a joint venture may be considered to be an SDVOSB or VOSB concern for a procurement if one member of the joint venture is an SDVOSB or VOSB and, as relevant here, the SDVOSB or VOSB member of the joint venture is listed as verified in the VetBiz database. See VAAR sect. 819.7003(c)(1). Satisfying the requirements in subsection (c) allows a joint venture to be considered to be an SDVOSB or VOSB offeror under subsection (b)(1). The joint venture offeror must still satisfy the remaining requirements of subsection (b), that is, as relevant here, to be listed in the VetBiz database.

In sum, given that the joint venture is not listed in the VetBiz database, which the VA has required in its implementation of this program, the contracting officer reasonably rejected A1 JVG's proposal as ineligible for award. This is the extent of our limited review in this matter. The question of whether A1 JVG will ultimately be included on the list of contractors eligible for award is a matter for the VA, not our Office. TEC/WEST-TEC JV, supra.

The protest is denied.  (A1 Procurement, JVG, B-404618.3, July 26, 2011)  (pdf)

The Veterans First Contracting Program, created by the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. sect. 8127, and implemented by Veterans Affairs Acquisition Regulation (VAAR) sections 819.7004, 819.7005, provides the VA with independent authority to set aside contracts for SDVOSB and VOSB firms. See Apex Ltd., Inc., B-402163, Jan. 21, 2010, 2010 CPD para. 35 at 2. The Program provides that SDVOSB firms receive first priority for VA contract awards, and that VOSB firms receive second priority. 38 U.S.C. sect. 8127(i); VAAR sect. 819.7004. Further, under the Program, acquisitions must be set aside for SDVOSB firms if the VA determines that there is a reasonable expectation that offers will be received by at least two SDVOSB firms and that award can be made at a fair and reasonable price. 38 U.S.C. sect. 8127(d); VAAR sect. 819.7005. Generally, a procurement set-aside determination is a business judgment within the contracting officer's discretion, which we will not disturb absent a showing that it was unreasonable. Eagle Home Med. Corp.--Costs, B-299821.3, Feb. 4, 2008, 2008 CPD para. 41 at 2. Here, Buy Rite does not show that the VA unreasonably determined that it would receive offers from two or more SDVOSB firms at fair and reasonable prices.

The VA explains that, in preparation for the initial solicitation, it conducted its initial search for SDVOSB firms using the wrong search term, and found no SDVOSB firms listed. AR at 2. The VA states that after Crosstown Courier protested to our Office, the agency recognized its error and conducted another search in its Vetbiz database under the appropriate NAICS code, 492110, couriers and express delivery services, and found over 100 SDVOSB firms listed. Id. The VA reissued the requirements as SDVOSB set-asides. Id. at 3. In addition, the contracting officer points out that it had received four offers from SDVOSB firms under the initial procurement. Id., Tab 14, Memorandum to File, Aug. 9, 2010.

Buy Rite disputes many of the factual details of the VA's statement of explanation about why it reissued the requirements as SDVOSB set-asides. For example, Buy Rite points out that the VA stated that their initial search term was "taxi services" but the documentation it provided concerning its searches does not include the term. Comments at 2. Buy Rite is correct; the documentation provided by the VA shows that the VA used the NAICS code for taxi services in its search, not the actual words "taxi services." Buy Rite also contends that the timing of the various searches that the VA states that it performed do not correspond with the documentation the VA provided to support its explanation. Id. Again, Buy Rite is correct. Nonetheless, even though the agency's after-the-fact explanation contains factual inaccuracies, we will not disturb a set-aside decision when subsequent events justify the decision. See York Int'l Corp., B-244748, Sept. 30, 1991, 91-2 CPD para. 282 at 7. Regardless of the precise date when the VA conducted its search, the search results provided a reasonable basis for the VA to conclude that it would receive at least two offers from SDVOSB firms. In addition, we performed our own search to confirm the accuracy of the VA's results. Moreover, the receipt of four offers from SDVOSB firms in response to the original RFP further confirms the VA's decision to set aside the requirements.

Buy Rite also argues that the VA's determination is unreasonable because no California-based SDVOSB firms meet the RFP requirements. In this regard, Buy Rite appears to argue that the VA should have limited its search to SDVOSB firms located in California, as the VA did in its original search. Comments at 3. However, Buy Rite has not identified any provision in the solicitation or in any statute or regulation--nor are we aware of any--that would require such a limitation. Nor has Buy Rite explained why a firm with an address outside of California would be unable to perform these requirements. Moreover, the question of whether a company--wherever located--is capable of performing the contract is a matter of responsibility, which we generally will not consider. 4 C.F.R. sect. 21.5(c) (2010); see Marinette Marine Corp., B‑400697, et al., Jan. 12, 2009, 2009 CPD para. 16 at 23.

In sum, we conclude that the VA's decision to set aside these procurements for SDVOSB firms was reasonable, considering its search of the Vetbiz database, and its receipt of four offers from SDVOSB firms in response to the prior solicitation, which was set aside for VOSB firms.  (Buy Rite Transport, B-403729; B-403768, October 15, 2010) (pdf)

The [Department of Veterans Affairs] VA issued regulations implementing the Act which, as relevant here, state as follows:

(a) . . . Except as authorized by 813.106, 819.7007 and 819.7008, the contracting officer shall set aside an acquisition for competition restricted to [service-disabled veteran-owned small business] SDVOSB concerns upon a reasonable expectation that

(1) Offers will be received from two or more eligible SDVOSB concerns and;

(2) Award will be made at a reasonable price.

[Veterans Affairs Acquisition Regulation] VAAR, 48 C.F.R. sect. 819.7005(a) (emphasis added).

We see nothing in the VA Act or the VA regulations that exempts A/E procurements from the set-aside requirement. The VAAR does specify three exceptions to the requirement that contracting officers set aside acquisitions for SDVOSB concerns, but the fact that a procurement is for A/E services is not one of them. In fact, as discussed below, the VA itself offers no defense of its position based on the plain language of the Act or its regulations. Further, the Brooks Act, which prescribes procedures for conducting A/E procurements with a particular focus on how price is to be considered, is silent with respect to set-asides; nothing contained in it or its implementing regulations (FAR subpart 36.6) suggests a reasonable basis for asserting that A/E procurements are exempt from the Act or the VA regulations.

The agency offers several defenses of its decision not to set aside these requirements. We consider each of them in turn.

The agency argues that its implementing regulation--the VAAR provision quoted above--"did not otherwise modify or supplement FAR Part 36.6 [on the conduct of A/E procurements]," AR at 3, and that "set-asides are not generally applicable to A-E services contracting." Id. We see no relevance to the agency's accurate observation that its regulations did not modify the FAR provisions regarding A/E services procurements. The agency has offered no rationale, and we are aware of none, for why the fact that the VAAR did not modify FAR Part 36.6 would render the VAAR inapplicable to A/E services procurements. Moreover, while the agency asserts that set-asides are not "generally applicable" to A/E services contracting, it offers no legal foundation for this claim and, again, no rationale for why--even if true--it necessarily follows that the VA Act and the VAAR are inapplicable to A/E services procurements.

In the course of promulgating its regulations, the agency requested comments on them. Selected comments and agency responses were published in the Federal Register, including the following exchange that addresses the applicability of the then-proposed regulations to A/E services contracts. Because this exchange is the principal basis for the VA's argument that the statutory set-aside requirement does not apply to A/E procurements, we set it out in full, as follows:

3. Applicability to Architect-Engineering (A/E) Services

Comment: Several commenters asked whether proposed subpart 819.70 applies to the award of sole source VOSB and SDVOSB contracts for A/E contracts.

Response: This rule does not apply to the procedures to procure A/E services. Pursuant to the Brooks Act (Pub. L. 92-582), A/E services cannot be awarded on a sole source basis. The Brooks Act requires Federal agencies to publicly announce all requirements for A/E services, and to negotiate contracts for A/E services on the basis of demonstrated competence and qualifications for the type of professional services required at fair and reasonable prices. The sole source authority in 38 U.S.C. [sect.] 8127 does not override the Brooks Act because under general principles of statutory interpretation the specific governs over general language. In this instance, A/E contracting statutes govern versus contracting in general. However, since the Small Business Competitiveness Demonstration Program in [FAR subpart 19.10] includes A/E services as a designated industry group (DIG), VA contracting officers may use the provisions of 38 U.S.C. [sect.] 8127 and this rule when procuring [designated industry group] requirements [which include A/E services]. Section 19.1007(b)(2) of the FAR, 48 C.F.R. [sect.] 19.1007(b)(2), establishes that Section 8(a), Historically Underutilized Business (HUB) Zone and SDVOSB set-asides, must be considered in DIG acquisitions. However, using the provisions of 38 U.S.C. [sect.] 8127 and this rule, VA personnel may change the order of priority to consider SDVOSB and VOSB set-asides before Section 8(a) and HUB Zone set-asides when procuring A/E services under the Small Business Competitiveness Demonstration Program.

VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned Small Businesses, 74 Fed. Reg. 64620 (Dec. 8, 2009).

The agency argues that this comment and response interpreted A/E services procurements to be exempt from the regulation's set-aside requirement and that the agency's interpretation is due deference as the VA's "specific interpretation included in the rulemaking process." AR at 3.

We disagree with the agency that this comment and response reasonably can be read to mean that the VA interpreted its regulation to include an across-the-board exemption from the statutory set-aside requirement for A/E services procurements. The comment to which the VA was responding concerned only the issue of sole-source awards of A/E services contracts. Likewise, the agency's response repeatedly addressed the issue of whether the proposed regulation applied to the issuance of sole‑source A/E services contracts. Far from indicating that the VA regarded all A/E services procurements as exempt from the regulation, the VA's response noted that "VA contracting officers may use the provisions of 38 U.S.C. [sect.] 8127 and this rule when procuring [A/E services] requirements," referring to the very statute that imposes the set-aside requirement. We see no reasonable basis on which to conclude that this exchange in the Federal Register was intended to, or in fact did, indicate that the VA interpreted its proposed regulation to exempt A/E services procurements from the SDVOSB set-aside requirement.

More important, even if the Federal Register comment and response said what the agency claims, it would not, as the agency asserts, warrant deference as an agency interpretation of a statute arrived at through rule-making or adjudication. In matters concerning the interpretation of a statute, the first question is whether the statutory language provides an unambiguous expression of the intent of Congress. If it does, our analysis ends there, for the unambiguous intent of Congress must be given effect. Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43 (1984); Mission Critical Solutions, B-401057, May 4, 2009, 2009 CPD para. 93 at 6. Here, the statutory requirement that certain VA acquisitions be set aside for SDVOSB concerns is clear, and the agency has offered no sufficient explanation of the need to consult the Federal Register.

In any event, deference to the interpretation of an administering agency is dependent on the circumstances. Chevron, 467 U.S. at 843‑45; United States v. Mead Corp., 533 U.S. 218, 227-37 (2001). Where an agency interprets an ambiguous provision of the statute through a process of rule-making or adjudication, unless the resulting regulation or ruling is procedurally defective, arbitrary, or capricious in substance, or manifestly contrary to the statute, deference will be given to the agency's interpretation. Mead, 533 U.S. at 227-31; Chevron, 467 U.S. at 843-44. However, where the agency's position reflects an informal interpretation, Chevron deference is not warranted; in these cases, the agency's interpretation is "entitled to respect" only to the extent it has the "power to persuade." Gonzales v. Oregon, 546 U.S. 243, 255‑56 (2006).

Here, the comment and response appear in the Federal Register as part of the rule-making process, but the response is merely that, a response to a comment. The agency "interpretation" of the statute in question, 38 U.S.C. sect. 8127(d), is found in the regulation itself, VAAR sect. 819.7005, which unambiguously requires VA contracting officers to set aside an acquisition for competition restricted to SDVOSB concerns upon a reasonable expectation that competitive offers will be received from two or more eligible SDVOSB concerns. VAAR sect. 819.7005(a).

The agency argues that its Federal Register response was intended to address an ambiguity between the Brooks Act and the set-aside requirement in the VA Act, pointing to the fact that the Brooks Act selection procedures require discussions with at least three firms while the VA Act contemplates set-asides when there is the expectation that two or more firms are expected to submit competitive offers. According to the VA, "an ambiguity existed as to whether the set-aside and priority [under 38 U.S.C. sect. 8127] would apply to A&E contracting or the 'rule of three' associated with the Brooks Act would apply." Agency Comments, Sept. 21, 2010, at 8. As a result, the agency argues, the VA Act and the VAAR cannot be read as requiring the set-aside of A/E services procurements, and its Federal Register response was intended to so indicate. Contrary to the agency's position, the difference in the statutes does not establish the incompatibility of the Brooks Act with the VA Act or the VAAR, such that the VA is precluded from setting aside A/E services procurements for small businesses. While the award of a contract for A/E services must be governed by the policy expressed in the Brooks Act, the "zone of competition eligible for award" may properly be limited by set-asides for particular types of firms. Vector Eng'g, Inc., B‑193874, Oct. 11, 1979, 79-2 CPD para. 247 at 7-8.

In sum, we conclude that the VA Act and the VAAR do not exempt A/E services procurements from the statutory requirement that VA set aside procurements for SDVOSB concerns where the prerequisites set out in the Act are met. Accordingly, we recommend that for each of the eight requirements at issue here, the agency determine whether there is a reasonable expectation that it would receive offers from two or more eligible SDVOSB concerns and award would be made at a reasonable price. For each requirement where there is such an expectation, we recommend that the VA solicit the requirement on the basis of a competition restricted to SDVOSB concerns. We also recommend that Powerhouse be reimbursed the costs of filing and pursuing the protest, including reasonable attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (2010). Powerhouse should submit its certified claim for costs, detailing the time expended and costs incurred, directly to the contracting agency within 60 days after receipt of this decision. Id. sect. 21.8(f)(1). 

The protests are sustained.  (Powerhouse Design Architects & Engineers, Ltd., B-403174; B-403175; B-403176; B-403177; B-403633; B-403647; B-403648; B-403649, October 7, 2010) (pdf)

In the instant protest, the VA and the intervenor argue that the agency's actions here were fully in accord with the SBA's February 1 decision decertifying CEI, and our Office's decisions in Singleton I and Singleton II, which required the VA to reject CEI's offer once the VA learned of the SBA's February 1 decision decertifying CEI. They argue that, unlike in Singleton I, the contracting officer in this procurement did not make a determination on CEI's SDVOSBC status, but rather, as in Singleton II, merely followed an existing SBA determination of CEI's SDVOSBC status that was in effect at the time the agency intended to make award. Thus, the VA and the intervenor conclude that the VA did not reject CEI's offer on the basis of any VA determination, but on the basis of a standing SBA decision that CEI was "ineligible to bid on or receive any future SDVOSBC contracts." SBA Decision, Feb. 1, 2010, at 1.

In our view, this interpretation of the facts and relevant regulations and decisions is consistent with the SBA's position in the Singleton II protest. Specifically, we think the result in Singleton II supports the VA's conclusion that once the SBA determines that an offeror does not qualify as an SDVOSBC, the applicable regulations (13 C.F.R. sections 125.27 and 125.28) bar that offeror from being considered on any other SDVOSBC procurement until the determination is overturned on appeal to OHA, or the SBA grants prospective recertification pursuant to 13 C.F.R sect. 125.27.

We solicited the views of the SBA in reference to CEI's protest. In contrast to the SBA's previous advice on this issue, the SBA now contends that the VA should have considered CEI's offer and, if CEI were the apparently successful offeror, referred the matter of CEI's SDVOSBC status to the SBA for decision as an SDVOSBC status protest. Regarding the Singleton II decision, the SBA stated that although in that case it "acquiesced to a procuring agency's rejection of an offer based on a negative SDVO eligibility determination rendered in connection with an SDVO representation made on a prior procurement," in Singleton II "there was no reason to believe that the protester might have been eligible in connection with the procurement in question despite having been found to be ineligible in connection with the prior procurement." SBA Opinion, Apr. 23, 2010, at 3. In addition the SBA now maintains that the contracting officer in Singleton II should have referred the question of Singleton's status to the SBA. The SBA also explains that, because there was no reason to believe that Singleton was an eligible SDVOSBC in that case, the failure to refer to SBA was a "harmless error." SBA Submission, May 7, 2010, at 3.

As required by the Small Business Act, as amended by the Veterans Benefits Act, 15 U.S.C. sections 637(m)(5), 657f(d), the SBA has established procedures for interested parties to challenge a firm's size or status as a qualified SDVOSBC. 13 C.F.R. sections 125.24-125.28. The SBA has long interpreted these regulations to mean that questions concerning SDVOSBC status are not for resolution by the procuring agency, but by the SBA. Singleton Enters.--GMT Mech., A Joint Venture, B-310552, supra, at 3. The SBA now asserts that a standing SBA decision that an offeror is "ineligible to bid on or receive any future SDVOSBC contracts" in connection with a prior procurement is not conclusive in a subsequent procurement, but merely raises a question concerning the offeror's status that the contracting officer must refer to the SBA for conclusive resolution. We see nothing in the SBA's regulations (or the FAR) which conflicts with, or would prevent the SBA from taking, the position that notification of a decertification decision does not make a firm automatically ineligible for award, but instead requires the contracting officer to file a status protest in connection with a subsequent procurement.

We do not think that the facts in Singleton II can be meaningfully distinguished from the present protest and, as set forth below, we conclude that the SBA, in effect, has changed its position on this issue. In its April 11, 2008, submission in Singleton II, the SBA concluded that a standing decision of the SBA related to a prior procurement was to be followed by the contracting agency in a subsequent procurement. The SBA now takes the position that even where there is an SBA decision in effect on an offeror's lack of SDVOSBC status, the contracting officer cannot reject a proposal from that offeror in a subsequent procurement without again referring the matter to the SBA.

Our Office gives deference to an agency's reasonable interpretation of its regulations, and because the SBA is the agency responsible for promulgating the regulations regarding the SDVOSBC program, we give its interpretations of its regulations great weight. Id. at 3. Thus, while the SBA's position in the current protest runs contrary to its interpretation of these regulations at the time of the Singleton II protest, we cannot find unreasonable the current interpretation of the regulations now asserted by the SBA.

That said, we cannot conclude that the VA acted improperly in connection with the procurement at issue here, given that the agency acted in accordance with the SBA's interpretation of its regulations in effect at the time it made its decision to reject CEI's proposal. In this regard, our decision in Singleton II, which reflected the SBA's April 11, 2008 views on that protest, clearly supports the agency's and intervenor's arguments here that the SBA's February 1 decision decertifying CEI, still in effect on February 23, represented a bar to CEI's eligibility for award. In addition, we think the agency reasonably rejected CEI's offer, without referring the matter to the SBA. Accordingly, because CEI was not an eligible offeror on February 23, the date the agency intended to make award, CEI's protest of the rejection of its offer is denied.

The protest is denied.  (Combined Effort, Inc., B-402573, June 4, 2010) (pdf)

The IFB was issued on November 25, 2009. Bids were opened on December 30, and Corners was the apparent low bidder. However, on January 25, 2010, when VA accessed its database of SDVOSBs to determine whether Corners was an eligible SDVOSB, it found that Corners was not listed. Agency Report (AR) at 2. In this regard, VA maintains a database of SDVOSBs that are eligible to receive contracts under solicitations issued by VA as SDVOSB set-asides. 38 C.F.R. part 74 (2009). Eligible businesses are placed on the list for 1 year, after which they must re-apply to be included on the list again. 38 C.F.R. sect. 74.15. The record shows that Corners was listed in the database on January 16, 2009 for a period of 1 year. Corners was removed from the database before January 25, 2010, when the agency checked the database in anticipation of making award under the IFB. AR at 2. Because Corners was not listed, VA determined that Corners was not eligible for award, and made award to the next low bidder.

Corners maintains that it should be considered an eligible SDVOSB, and that it therefore should have received the award, because it was listed in the database on both the date the IFB was issued and the date of bid opening.

The statute granting VA authority to set aside procurements for SDVOSB concerns provides that "[a] small business concern may be awarded a [SDVOSB set-aside] contract . . . only if the small business concern . . . [is] listed in the database of veteran‑owned businesses. . . ." 38 U.S.C. sect. 8127(e) (2006). The VA regulation implementing this statute similarly provides that, "all . . . SDVOSBs must be listed in the . . . database . . . to receive contract awards under VA's Veteran-owned Small Business. . . [set-aside] program." VA Acquisition Regulation (VAAR) sect. 804.1102. VA asserts that, based on this language, a small business concern is eligible for award under a VA SDVOSB set-aside only if it is listed in the database on the date of award; thus, even though Corners was listed in the database at the time of bid opening, it was ineligible for award because it was no longer listed at the time of award.

We will uphold an agency's reasonable interpretation of a statute that it is responsible for implementing. Blue Rock Structures, Inc., B-293134, Feb. 6, 2004, 2004 CPD para. 63 at 8. VA's interpretation here is reasonable. While the statute and regulation do not expressly provide that small businesses must be "listed in the database" at the time of award, neither do they provide that listing is to be at the time of solicitation issuance or bid opening. We think the relevant language supports VA's interpretation, since it relates to a concern's status for purposes of receiving an award, suggesting that status at the time of award is contemplated. Moreover, this interpretation is consistent with the underlying purpose of SDVOSB set-asides--i.e., providing contracting opportunities to eligible SDVOSBs, see 38 U.S.C. sect. 8127(a)‑-and we think VA reasonably could determine that this purpose is best served, and that an eligible SDVOSB concern will actually perform the contract, if it satisfies the prerequisite to receiving award (listing) at the time award is made. Accordingly, there is no basis for us to question VA's determination that Corners, which was not listed in the database on the date of award, was ineligible for award. Compare CMS Info. Servs., Inc., B-290541, Aug. 7, 2002, 2002 CPD para. 132 at 2 (where request for quotations under Federal Supply Schedule was limited to small business concerns, agency reasonably required recertification of small business status to ensure that order would be issued to concern that currently qualifies as small business).  (See VA Regulation.)  (Corners Construction, B-402465, April 23, 2010)  (pdf)
 

The FAR provisions cited by the protester are inapplicable to the award challenged here. FAR Subpart 19.14 applies to the Service-Disabled Veteran-Owned Small Business Procurement Program, created by the Veterans Benefit Act of 2003, 15 U.S.C. sect. 657f (2006), and administered by the Small Business Administration. The award here was made pursuant to the Veterans First Contracting Program, created by the Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. sect. 8127, and administered by the VA. The Veterans First Contracting Program provides the VA with independent authority to make sole-source contract awards to SDVOSBs and veteran-owned small business firms. See In and Out Valet Co., B-311141, Apr. 3, 2008, 2008 CPD para. 71 at 3. Specifically, 38 U.S.C. sect. 8127(c) states:

(c) Sole Source Contracts for Contracts Above Simplified Acquisition Threshold.—

For purposes of meeting the goals under subsection (a), and in accordance with this section, a contracting officer of the Department [of Veterans Affairs] may award a contract to a small business concern owned and controlled by veterans using procedures other than competitive procedures if—
(1) such concern is determined to be a responsible source with respect to performance of such contract opportunity;

(2) the anticipated award price of the contract (including options) will exceed the simplified acquisition threshold (as defined in section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 403)) but will not exceed $5,000,000; and

(3) in the estimation of the contracting officer, the contract award can be made at a fair and reasonable price that offers best value to the United States.[2]
The Veterans First Contracting Program also includes a statement of priority for VA contract awards, which grants first priority to sole-source or set-aside contracts for SDVOSB firms, second priority to sole-source or set-aside contracts for veteran-owned small business firms, and lower priority for all other categories of small business firms. 38 U.S.C. sect. 8127(i).

In connection with its assertion that FAR Subpart 19.14 applies to the award here, Apex Limited argues that VA Information Letter 049-07-08, June 19, 2007, which provides guidance to VA contracting officers concerning the award of contracts to SDVOSBs and veteran-owned small business firms, states that "FAR Subpart 19.14 is still an existing authority." Protest at 2. However, in this argument Apex Limited selectively quotes from a portion of the Information Letter applicable to SDVOSB set-asides, and not to SDVOSB sole-source awards. In full, the quoted passage states, "While FAR Subpart 19.14 is still an existing authority, . . . [VA] contracting officers performing SDVOSB set asides must exclusively use the authority of 38 U.S.C. 8127." VA Information Letter 049-07-08, June 19, 2007, Attachment 1, at 2. Further, the Information Letter makes clear that VA contracting officers are authorized to make sole-source contract awards to SDVOSB firms under 38 U.S.C. 8127(c). Id.

In sum, the provisions of FAR Subpart 19.14 do not apply to the acquisition here and thus provide no basis for our Office to object to the award, which, the record shows, was properly made pursuant to the VA's statutory authority under the Veterans First Contracting Program.  (Apex Limited, Inc., B-402163,January 21, 2010)  (pdf)

WHG raises two primary arguments: (1) that the Army unreasonably interpreted the RFP as not requiring SDVOSB prime contractors to perform more than 50 percent of the contract requirements, and therefore improperly credited Skyline as being an SDVOSB offeror; and (2) that even under the agency’s own interpretation of the solicitation, Skyline should not have received credit as an SDVOSB offeror. For the reasons discussed below, we disagree.

First, WHG argues that the agency’s interpretation of the SDVOSB evaluation factor was unreasonable. As discussed above, the RFP stated that the agency would give favorable evaluation consideration to an SDVOSB offeror, and that an offeror’s status was one of the two most important evaluation factors. The protester does not dispute that Skyline, on its own, is an SDVOSB concern, as defined under Small Business Administration regulations. Instead, WHG argues that Skyline should not be eligible to receive credit as an SDVOSB under this procurement because, in the protester’s view, the solicitation and applicable FAR provisions state that SDVOSB contractors must perform more than 50 percent of the contract requirements in order to receive credit as an SDVOSB.

As a preliminary matter, WHG does not specifically state what statutory or regulatory provision it believes was violated in giving the SDVOSB evaluation credit to Skyline. However, the protester presumably refers to FAR part 19.14, which governs awards under the SDVOSB program. The FAR states that when an agency makes an SDVOSB sole-source award, or restricts a competition to SDVOSB offerors, the solicitation must include the clause at FAR sect. 52.219-27, Notice of Total Service-Disabled Veteran-Owned Small Business Set-Aside. FAR sections 19.1405, 19.1406. This clause requires an SDVOSB offeror--in a set-aside or sole-source procurement--to agree to perform, for service contracts, “at least 50 percent of the cost of personnel for contract performance.” FAR sect. 52.219-27(c)(1).

There is no dispute in this record that Skyline will perform less than 50 percent of the contract requirements. Instead, the Army contends, and we agree, that the SDVOSB set-aside clause at FAR sect. 52.219-27 was not included in this solicitation, was not required to be included here, and has no application to this procurement. This RFP expressly states that this procurement was neither an SDVOSB set-aside nor an SDVOSB sole-source award. RFP, Evaluation Criteria, sect. 4.1. We conclude, therefore, that the requirement for an SDVOSB contractor to perform at least 50 percent of the personnel costs in a service contract does not apply to this procurement.

WHG also argues that the Army’s interpretation of the solicitation was unreasonable because the RFP stated that an SDVOSB joint venture partner, but not an SDVOSB prime contractor, must perform more than 50 percent of the contract requirements in order to receive SDVOSB evaluation credit. The protester contends that there was no reasonable basis to distinguish between these two types of offerors and that the agency should have read the solicitation “as a whole” and applied the restriction to both offerors. As discussed above, however, the solicitation explicitly stated that these two categories of business arrangements would be treated differently in the evaluation. See RFP amend. 3, at 6. To the extent that the protester believes these solicitation provisions were improper or inconsistent with the FAR requirements for SDVOSBs, it cannot now timely challenge them, as such a challenge must be raised prior to the time for submission of proposals. Bid Protest Regulations, 4 C.F.R. sect. 21.2(a)(1); Continental Staffing, Inc., B-299054, Jan. 29, 2007, 2007 CPD para. 18 at 4-5.

Second, WHG argues that, even if the Army’s interpretation of the solicitation is reasonable, Skyline should not have received the SDVOSB credit because Skyline should not have been considered the prime contractor under its proposal. In this regard, the protester argues that a teaming agreement between Skyline and Sterling indicates that Sterling, rather than Skyline, is the prime contractor. We disagree.

Skyline’s proposal stated that the company was an SDVOSB, and included a February 26, 2009, letter from the Department of Veterans Affairs (VA) stating that the company had been certified as an SDVOSB. AR, Tab 9, Skyline Proposal, at 1. Skyline’s proposal also stated the following in the executive summary of its proposal regarding the relationship between the two entities:

As a [SDVOSB] providing excellent program management, logistics, and IT services support to the government for nearly a decade, Skyline will serve as the prime contractor. As the subcontractor partner, Sterling Medical furnishes well over 2,000 ([full-time equivalent]) qualified contract healthcare providers on behalf of federal agencies at more than 100 government facilities in the United States and 12 overseas nations.

AR, Tab 9, Skyline Proposal, at iv.

The CO explains that she found that Skyline was an SDVOSB by reviewing the offeror’s self-certification and letter from the VA in its proposal. Supp. CO Statement at 1. In addition the CO reviewed the following information to verify Skyline’s SDVOSB status: the GSA schedule contract listed in Skyline’s proposal; Skyline’s Central Contractor Registration entry; and Skyline’s representations and certifications in the Online Representations and Certifications Application website. Id. at 1-2; AR, Tab 14, SSD, at 7. With regard to the relationship between Skyline and Sterling, the CO reviewed the executive summary information quoted above, and concluded that the proposal clearly identified Skyline as the prime contractor, and Sterling as the subcontractor. Id. at 2. Based on these analyses, the CO concluded that Skyline merited evaluation credit as an SDVOSB.

With regard to WHG’s argument, the Army provided in its report on the protest a copy of a “Master Teaming Agreement” between Sterling and Skyline. The teaming agreement sets forth an arrangement whereby Skyline may perform work under Sterling’s FSS contract 621-I. The “Objective” for the agreement is as follows: “This Agreement is for the purpose of establishing the cooperative relationship of the Parties and for facilitating the utilization of Skyline under Sterling Medical’s [GSA] Schedule, in order to further the interests of both Team Members.” AR, Tab 9A, Teaming Agreement, at 1. WHG argues that the teaming agreement shows that Skyline will be Sterling’s subcontractor on the contract, based on the following statements:

(D) Sterling Medical desires to appoint Skyline as a dealer under its [GSA] schedule.

(E) In order to facilitate Skyline’s participation as a small business and as [an] SDVOSB Sterling Medical desires to also utilize Skyline as mutually agreeable as a subcontractor under its schedule.

Id.

In reviewing a protest of an agency’s evaluation of proposals, our Office will examine the record to determine whether the agency’s judgment was reasonable and consistent with the stated evaluation criteria and applicable procurement statutes and regulations. See Shumaker Trucking & Excavating Contractors, Inc., B-290732, Sept. 25, 2002, 2002 CPD para. 169 at 3. A protester’s mere disagreement with the agency’s judgment in its evaluation of offerors’ proposals does not establish that the evaluation was unreasonable. C. Lawrence Constr. Co., Inc., B-287066, Mar. 30, 2001, 2001 CPD para. 70 at 4.

Here, the protester does not dispute that the agency did not have the teaming agreement during the course of the procurement, nor does the protester argue that the teaming agreement was required to be provided as part of Skyline’s proposal. The agreement simply was not part of the agency’s evaluation and selection decisions.

In any event, we also disagree with WHG’s view that the teaming agreement shows that Skyline will act as Sterling’s subcontractor for this procurement. The stated purpose of the teaming agreement is to allow Skyline to utilize Sterling’s GSA schedule contract. To the extent that the teaming agreement states that Skyline will be a subcontractor to Sterling, we think it is only within the context of Sterling’s FSS contract. In this regard, the teaming agreement does not mention any specific solicitations or contracts, but instead provides for a general arrangement wherein Skyline may perform work under Sterling’s schedule contract. Moreover, this approach was sanctioned by the RFP, which stated that a prime contractor could utilize a subcontractor’s FSS contract in performing the contract, provided that “all services provided must be within the scope of the team’s respective schedules.” RFP amend. 3, at 6.

In sum, we think that the Army reasonably concluded that, under the terms of its proposal, Skyline was the prime contractor for this procurement, and was therefore entitled under the terms of the RFP to receive credit as an SDVOSB offeror.  (Washington-Harris Group, B-401794; B-401794.2, November 16, 2009)  (pdf)

On June 5, MCS submitted a protest to the contracting officer alleging that DAV Prime JV was not a SDVOSBC and was thus ineligible for award. The agency forwarded MCS’s status protest to the SBA. MCS’s protest was accepted by the SBA on June 19. The SBA notified MCS and the agency on June 26 that it had received the timely filed protest. Upon receiving the SBA’s notice, the agency chose to allow DAV Prime JV to continue performance under the protested contract.

The SBA Director of Government Contracting sustained MCS’s protest on July 15, finding that DAV Prime did not meet the eligibility requirements of a SDVOSBC, and therefore, the joint venture of DAV Prime and Vantex Service failed to qualify as a SDVOSBC. The SBA decision stated that both DAV Prime and DAV Prime JV were ineligible to receive an award under the current RFQ and both were prohibited from submitting offers on future SDVOSBC procurements. After receiving notice of the decision, MCS contacted the contracting officer to determine the status of the award given the SBA’s findings. The contract officer informed MCS on July 21 that he would not make any decision until DAV Prime JV “forego(s) appeal or an appeal decision is made.” AR, Tab 13, Email Correspondence.

On July 25, DAV Prime JV appealed the decision of the SBA to the SBA’s OHA. The OHA denied DAV Prime JV’s appeal on August 15. MCS again contacted the contracting officer on September 8 to determine the status of award and was informed on September 15 that the award was not and would not be vacated. MCS filed the current protest with our Office on September 19 seeking termination of DAV Prime JV’s contract because the SBA found, and the OHA affirmed, that DAV Prime JV was not an eligible SDVOSBC.

In 2003, Congress created, by amending the Small Business Act, a procurement program for small business concerns owned and controlled by service-disabled veterans. Veterans Benefits Act of 2003, Pub. L. No. 108-183, 117 Stat. 2651, 2662 (2003), 15 U.S.C. sect. 657f (2006). Under this authority, the SBA, and not our Office or the procuring agency, is the designated authority for determining whether a firm is an eligible SDVOSBC, and it has established procedures for interested parties to challenge a firm’s status as a qualified SDVOSBC. Singleton Enters.--GMT Mech., A Joint Venture, B-310552, Jan. 10, 2008, 2008 CPD para. 16 at 3; see 15 U.S.C. sections 632(q), 657b; 13 C.F.R. sections 125.25, 125.27 (2008); FAR sections 19.307, 19.1403.

Many of MCS’s arguments concern the issue of whether DAV Prime JV qualified as an SDVOSBC, which issue has been resolved by the SBA. Based on these arguments, MCS argues that the contracting officer should have investigated and questioned the joint venture’s representation that it was an SDVOSBC. However, we find nothing that would have required the contracting officer to investigate or question DAV Prime JV’s representation before making award.

MCS has also asserted that the Army should have terminated the contract upon receiving the SBA’s and the OHA’s decisions finding DAV Prime JV ineligible as an SDVOSBC joint venture. The Army, on the other hand, argues that in accordance with the SBA’s regulations it was not required to terminate the contract. The SBA, whose views we solicited, agrees with the Army.

The SBA’s regulations regarding SDVOSBC protests describes the effect of an SBA determination on SDVOSBC status as follows:

Effect of determination. SBA’s determination is effective immediately and is final unless overturned by OHA on appeal. If SBA sustains the protest, and the contract has not yet been awarded, then the protested concern is ineligible for an SDVO SBC contract award. If a contract has already been awarded, and SBA sustains the protest, then the contracting officer cannot count the award as an award to an SDVO SBC and the concern cannot submit another offer as an SDVO SBC on a future SDVO SBC procurement unless it overcomes the reasons for the protest.

13 C.F.R. sect. 125.27(g). The regulation thus explicitly differentiates between a determination’s effect when issued before versus after award and, as we have previously found, we think a fair reading of this regulation is that there is no requirement that a contract be terminated if an awardee is found to be other than an SDVOSBC after award was made. Veteran Enter. Tech. Servs., LLC, B‑298201.2, July 13, 2006, 2006 CPD para. 108 at 3. Indeed, the SBA states that its regulations “do not, under any circumstances, require a procuring activity to terminate or even suspend an award made to an entity that is subsequently determined to not be SDVO SBC eligible,” although the Army “may certainly be subject to moral suasion” to do so. SBA Report at 3.  (Major Contracting Services, Inc., B-400616, November 20, 2008)  (pdf)

DAV Prime, Inc., a service-disabled veteran-owned small business concern (SDVOSBC) protests the terms of solicitation No. AG-024B-S-07-0005, issued by the Department of Agriculture, U.S. Forest Service, for portable latrines. DAV argues that this work should have been reserved for SDVOSB companies. It contends a set-aside is required because the agency has violated the Small Business Act, as amended by sect. 36 of the Veterans Benefits Act of 2003, Pub. L. No. 108-183, 117 Stat. 2651, 2662 (2003), 15 U.S.C. sect. 657f (Supp. IV 2004), by failing to meet its stated goal of awarding 3 percent of its annual contracts to SDVOSBCs, and by failing to conduct a market survey to determine whether an SDVOSBC set-aside is appropriate. Protest at 2; Response to Motion to Dismiss at 1.  We dismiss the protest because it does not establish a valid basis for challenging the agency’s action.

Section 36 of the Veterans Benefits Act of 2003 provides:

In accordance with this section, a contracting officer may award contracts on the basis of competition restricted to [SDVOSBCs] if the contracting officer has a reasonable expectation that not less than 2 [SDVOSBCs] will submit offers and that the award can be made at a fair market price. 15 U.S.C. sect. 657f(b).

In our view, the language of the Act is clearly discretionary. As such, it permits, but does not require, a contracting officer to restrict competition to SDVOSBCs if certain conditions are satisfied. (DAV Prime, Inc., B-311420, May 1, 2008) (pdf)

As discussed in Singleton Enters. -- GMT Mech., A Joint Venture, supra, at 4, Federal Acquisition Regulation sect. 19.307(h) and 13 C.F.R. sect. 125.24(b) provide for the SBA’s resolution of questions of SDVOSBC status and for an agency procedure to protest a firm’s SDVOSBC status to the SBA. Consistent with the SBA’s regulations, 13 C.F.R. sect. 125.27(g) and 125.28 (2007), the SBA’s February 20 determination that Singleton-GMT JV is not an SDVOSBC expressly stated that the determination was effective “immediately” and was “final” unless overturned on appeal or unless relief was granted under 13 C.F.R. sect. 125.27(g) (e.g., a change in ownership to satisfy the SDVOSBC definition), and that because of this determination the joint venture was ineligible to bid on or receive any SDVOSBC contract awards. VA Dismissal Request, exh. 4, SBA’s SDVOSBC Determination. According to the SBA, given that the OHA has affirmed the SBA’s determination, before Singleton-GMT JV can bid on or receive SDVOSBC contracts, the joint venture must request that SBA grant it relief under 13 C.F.R. sect. 125.27(g), and prove that it merits such relief by documenting the actions it has taken to address those problems with its eligibility that were identified by SBA. If the SBA agrees that the firm qualifies as an SDVOSBC, then the agency will grant relief under 13 C.F.R. sect. 125.25(g) and issue a new determination letter to the firm stating that it qualifies as an SDVOSBC and that it is eligible to bid on and receive SDVOSBC contracts. To date Singleton-GMT JV has not requested, and SBA has not granted, relief from that decision under 13 C.F.R. sect. 125.27(g).  Singleton-GMT JV also contends that the OHA decision affirming the SBA’s determination that the joint venture is not an SDVOSBC was not yet final but, under 13 C.F.R. sect. 227(a), was only the OHA’s initial decision and could not be final for 30 days. Thus, the protester contends, the VA cannot rely upon the SBA’s and OHA’s determinations to reject Singleton-GMT JV’s bid. However, as noted by the SBA, OHA’s rulings on appeal are effective immediately, and are final, unless or until the judge chooses to reconsider the ruling; in fact the OHA’s decision states that “[t]his is the final decision of the Small Business Administration.” VA Submission (Mar. 27, 2007), attach., SBA OHA Decision (Mar. 27, 2007) at 8.  Because the SBA’s February 20 determination that Singleton-GMT JV was not an SDVOSBC has remained in force and effect, the VA properly rejected Singleton-GMT JV’s bid.  (Singleton Enterprises- GMT Mechanical, A Joint Venture, B-311343, April 23, 2008) (pdf)

The protester essentially objects to the sole-source award to VPM primarily because VPM had been previously determined by the SBA to be other than a small business concern. The protester argues that the agency erred in contracting with VPM on a sole-source basis without taking into consideration the favorable performance it provided on the incumbent contract. The protester also points to the VA’s hiring of VPM’s former project manager to assist with the performance transition from VPM to In and Out, and maintains that this employee contributed to the protester’s performance problems and influenced the agency’s decision to contract with VPM on a sole-source basis.  The agency asserts that it was within its authority to award the contract to VPM on a sole-source basis. We agree. The VA’s statutory authority to make sole-source awards to SDVOSBs is set forth at 38 U.S.C. sect. 8127, Pub. L. No. 109-461, 120 Stat. 3431, 3432 (2006). This authority allows the VA to award to an SDVOSB on a sole-source basis when:

(1) such concern is determined to be a responsible source with respect to performance of such contract opportunity;

(2) the anticipated award price of the contract (including options) will exceed the simplified acquisition threshold (as defined in section 4 of the Office of Federal Procurement Policy Act (41 U.S.C. 403) but will not exceed $5,000,000; and

(3) in the estimation of the contracting officer, the contract award can be made at a fair and reasonable price that offers best value to the United States.

As explained above, VPM was re-certified as a small business concern by the SBA on October 4, 2007. Agency Report (AR) Tab 4, SBA Size Determination. In addition, the agency reports that VPM is currently registered as an SDVOSB. AR, Tab 8, Sole Source Justification, at 3. In accordance with the statute, the CO determined that VPM was a responsible source, that the anticipated award price plus options was more than the simplified acquisition threshold but less than $5,000,000, and that award would be made at a fair and reasonable price. AR, Tab 1, CO’s Statement at 2 and 3. Moreover, the agency disagrees with In and Out’s favorable assessment of its past performance; in fact, the CO’s decision to use this authority was also based expressly on the fact that the agency was not satisfied with the protester’s performance. Id.  Based on our review, we think the record shows that in making her decision to award a sole-source contract to VPM, the CO’s decision was in accord with the statute authorizing the award of sole-source contracts to SDVOSBs. Despite In and Out’s desire to compete for this contract--given its similar status as an SDVOSB--we see no requirement, under this statute and under these circumstances, for even a limited competition. (In and Out Valet Co., B-311141, April 3, 2008) (pdf)

Under the SDVOSBC procurement program, a contracting officer may restrict competition to SDVOSBCs if he or she has a reasonable expectation that not fewer than two such firms will submit offers and that the award can be made at a fair market price. 15 U.S.C. sect. 657f(b) (Supp. IV 2004); Federal Acquisition Regulation (FAR) sect. 19.1405(a), (b). Prior to proceeding with a small business set-aside, a procuring agency is required to make reasonable efforts to ascertain whether an SDVOSBC set-aside is appropriate. MCS Portable Restroom Serv., B‑299291, Mar. 28, 2007, 2007 CPD para. 55 at 5. Although the use of any particular method of assessing the availability of firms for a set-aside is not required, measures such as prior procurement history, market surveys, and advice from the agency’s small business specialist may all constitute adequate grounds for a contracting officer’s decision to set aside, or not to set aside, a procurement. National Linen Serv., B-285458, Aug. 22, 2000, 2000 CPD para. 138 at 2. Generally, our Office regards such a determination as a matter of business judgment that we will not disturb absent a clear showing that it has been abused. Id.

IBV asserts that the contracting officer did not make a reasonable effort to ascertain whether an SDVOSBC set-aside was suitable. This argument is without merit. While the record shows that at least two SDVOSBC firms were available and interested in competing on this requirement, this is only the first of two considerations that go into a set-aside decision. In addition, the contracting officer must have a reasonable expectation that award will be made at a fair market price. 15 U.S.C. sect. 657f(b); FAR sect. 19.1405(a), (b). Here, as noted above, the contracting officer did not set the requirement aside because she did not expect to receive fair market prices from SDVOSBCs, and there is nothing in the record to demonstrate that her expectations were unreasonable. In this regard, while IBV disagrees with her decision, it has not provided any evidence that it and at least one other SDVOSBC would or could have provided fair market prices. IBV’s mere disagreement with the agency’s assessment does not demonstrate that the agency’s judgment was unreasonable. Bahan Dennis Inc., B-249496.3, Mar. 3, 1994, 94-1 CPD para. 184 at 5. Moreover, even if we agreed with IBV that the set-aside determination was not adequately supported at the time it was made, we would not object to the determination under the circumstances here. In this regard, while the agency received multiple proposals from SDVOSBCs, the contracting officer’s concern that they would not propose fair market pricing was confirmed by the pricing of those proposals; all of the SDVOSBC proposals received were priced at more than double the independent government estimate, and all exceeded the RFP’s estimated price range. Further, IBV’s price was the highest of all proposals received, including those of the other SDVOSBCs, and was more than double the prices of the three lowest‑priced non-SDVOSBC small business proposals. Agency Report at 30. Under these circumstances, the agency’s set-aside decision was reasonable. See The Atlantic Co. of Am., Inc., B‑293974, July 1, 2004, 2004 CPD para. 182 at 2 (GAO will consider proposals actually received in determining whether set-aside decision was reasonable (HUBZone set-aside)); York Int’l Corp., B‑244748, Sept. 30, 1991, 91‑2 CPD para. 282 at 7 (small business set-aside); Litton Electron Devices, B‑225012, Feb. 13, 1987, 87-1 CPD para. 164 at 2-3 (small business set-aside).  We reach the same conclusion with regard to IBV’s assertion that the agency should have considered awarding it a contract on a sole-source basis. While an agency may make a sole-source award to an SDVOSBC, four conditions must be met: only one SDVOSBC can satisfy the requirement; where, as here, the requirement falls under a nonmanufacturing NAICS code, the anticipated award price will not exceed $3 million; the SDVOSBC has been determined responsible with respect to performance; and award can be made at a fair and reasonable price. FAR sect. 19.406. Three of the four provisions are not met here. The record shows that there are multiple SDVOSBCs available to compete; the anticipated award exceeds the $3 million limit; and, as discussed above, award could not be made to an SDVOSBC at a fair market price. Accordingly, the contracting officer reasonably did not consider IBV for a sole-source award.  (IBV, Ltd., B-311244, February 21, 2008) (pdf)

New C. The VA is Required to Use the Rule of Two Even When Goods and Services Are on the List

Now that we have determined that the Claims Court properly exercised jurisdiction over PDS Consultants’ complaint, we next examine whether the Claims Court erred in its substantive legal analysis. We conclude that it did not.

“As in any case of statutory construction, our analysis begins with the language of the statute.” Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999) (internal quotation marks omitted). “The first step ‘is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case.’” Barnhart v. Sigmon Coal Co., 534 U.S. 438, 450 (2002) (quoting Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997)). We “must read the words ‘in their context and with a view to their place in the overall statutory scheme.’” King v. Burwell, 135 S. Ct. 2480, 2489 (2015) (quoting FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 133 (2000)). This is because statutory “[a]mbiguity is a creature not of definitional possibilities but of statutory context.” Brown v. Gardner, 513 U.S. 115, 118 (1994).

The two statutory provisions at the heart of this case are the [Veterans Benefits, Health Care, and Information Technology Act of 2006, Pub. L. No. 109-461, 120 Stat. 3403, 3431–35 (2006)] VBA, 38 U.S.C. § 8127(d), and the [Javits-WagnerO’Day Act] JWOD, 41 U.S.C. § 8504(a). Section 8127(d) of the VBA provides that, subject to two exceptions not relevant here, VA contracting officers “shall award contracts on the basis of competition restricted to small business concerns owned and controlled by veterans,” provided they have a “reasonable expectation” (1) “that two or more small business concerns owned and controlled by veterans will submit offers” and (2) “that the award can be made at a fair and reasonable price that offers best value to the United States.” 38 U.S.C. § 8127(d). The Supreme Court in Kingdomware held that, because it contains the word “shall,” § 8127(d) “unambiguously requires the [VA] to use the Rule of Two before contracting under the competitive procedures.” 136 S. Ct. at 1976.

Section 8504(a) of the JWOD also contains the word “shall.” It provides that “[a]n entity of the Federal Government intending to procure a product or service on the [List] . . . shall procure the product or service from a qualified nonprofit agency for the blind or a qualified nonprofit agency for other severely disabled” in accordance with regulations promulgated by and prices set by AbilityOne, “if the product or service is available within the period required by the entity.” 41 U.S.C. § 8504(a) (emphasis added). Because § 8504(a) includes the word “shall” and because it specifies the terms by and conditions under which federal agencies, which would include the VA, shall procure products or services that are on the List, § 8504(a) on its face seems to also obligate the VA to procure products and services on the List from qualified nonprofit agencies for the blind or other severely disabled individuals where such products and services are “available within the period required by the entity.” See Kingdomware, 136 S. Ct. at 1977 (“Unlike the word ‘may,’ which implies discretion, the word ‘shall’ usually connotes a requirement.”). As both statutes contain mandatory language, we must determine whether and to what extent they conflict with one another. If it is possible to give effect to both statutes, we must do so. Watt v. Alaska, 451 U.S. 259, 267 (1981) (court must read statutes to give effect to each if it can do so while preserving their sense and purpose). If any interpretation of the statutory provisions at issue allows both statutes to remain operative, the court must adopt that interpretation absent a clear congressional directive to the contrary. Miccosukee Tribe of Indians of Fla. v. United States Army Corps of Eng’rs, 619 F.3d 1289, 1299 (11th Cir. 2010) (interpretation that allows both statutes to stand must be employed). The government argues that any statutory conflict can be avoided by interpreting § 8127(d) “as applying only to non-mandatory, competitive awards.” Gov’t Br. 19. It argues that the mandatory procurements under the JWOD are not governed by § 8127(d), despite the absence of an express exception to that effect. We do not read § 8127(d) so narrowly.

Rather than limit its application to competitive contracts, § 8127(d) requires the VA to “award contracts on the basis of competition.” That is, by its express language, the statute applies to all contracts—not only competitive contracts. The statute requires that, when the Rule of Two is triggered—i.e., when “the contracting officer has a reasonable expectation that two or more small business concerns owned and controlled by veterans will submit offers and that the award can be made at a fair and reasonable price that offers best value to the United States”—the VA must apply competitive mechanisms to determine to whom the contract should be awarded. See Kingdomware, 136 S. Ct. at 1976 (finding that the text of § 8127 “requires the [VA] to apply the Rule of Two to all contracting determinations.” (emphasis added)). And, while § 8127(d) applies only when the Rule of Two is satisfied, § 8127(i) is broader and requires the VA to prioritize veterans (with and without serviceconnected disabilities) under subsections (b) and (c), even when the Rule of Two is not satisfied.

So, we must turn to the question of whether an alternative means for reconciling these provisions can be found in standard principles of statutory interpretation. We find that it can.

“A basic tenet of statutory construction is that a specific statute takes precedence over a more general one.” Arzio v. Shinseki, 602 F.3d 1343, 1347 (Fed. Cir. 2010) (citing Morales v. Trans World Airlines, Inc., 504 U.S. 374, 384 (1992) (“[I]t is a commonplace of statutory construction that the specific governs the general.”)); RadLAX Gateway Hotel, LLC v. Amalgamated Bank, 566 U.S. 639, 645 (2012) (“The general/specific canon is perhaps most frequently applied to statutes in which a general permission or prohibition is contradicted by a specific prohibition or permission. To eliminate the contradiction, the specific provision is construed as an exception to the general one.”). While the JWOD applies to all agencies of the federal government, the VBA applies only to VA procurements and only when the Rule of Two is satisfied. The express, specific directives in § 8127(d), thus, override the more general contracting requirements of the JWOD.

A comparison of the provisions and stated goals of the VBA with those of its predecessor, the Veterans Benefit Act of 2003, reinforces this conclusion. The 2003 Act, unlike the VBA, authorized but did not require all contracting officers within the federal government to apply the Rule of Two when contracting with service-disabled veteran-owned small businesses (as opposed to all veteran-owned small businesses) under title 15 of the United States Code. Specifically, it amended 15 U.S.C. § 657(f) to add the following provision:

a contracting officer may award contracts on the basis of competition restricted to small business concerns owned and controlled by service-disabled veterans if the contracting officer has a reasonable expectation that not less than 2 small business concerns owned and controlled by service-disabled veterans will submit offers and that the award can be made at a fair market price.

The VBA, moreover, was expressly enacted to “increase contracting opportunities for small business concerns owned and controlled by veterans and . . . by veterans with service-connected disabilities.” 38 U.S.C. § 8127(a)(1). Consistent with the VA’s duty to support and champion the veteran community, the VBA created the Veterans First Contracting Program (“Veterans First”), which requires the VA to give “contracting priori-ty” to qualified service-disabled veteran-owned small businesses and veteran-owned small businesses. See 38 U.S.C. §§ 8127–8128. And it specifies that the Secretary, “[i]n procuring goods and services pursuant to a contracting preference under this title or any other provision of law . . . shall give priority to a small business concern owned and controlled by veterans, if such business concern also meets the requirements of that contracting preference.” Id. § 8128(a) (emphasis added).

The VBA also lacks any exception for procurements that would otherwise be governed by the JWOD. We assume that Congress was aware that it wrote an exception into the agency-wide Veterans Benefits Act in 2003 when it left that very same exception out of the VBA only three years later.

Additionally, “when two statutes conflict, the laterenacted statute controls.” Miccosukee Tribe, 619 F.3d at 1299; see also United States v. Estate of Romani, 523 U.S. 517, 532 (1998) (finding later-enacted, more specific statute controlling). As the VBA was enacted over 30 years after the JWOD was last amended, we can infer that Congress intended the VBA to control in its narrower arena, and the JWOD to dictate broader procurements outside of the VA. Because we can give meaning to both statutes under this interpretation, we avoid any repeal of the JWOD by implication. See Morton v. Mancari, 417 U.S. 535, 549 (1974) (“[R]epeals by implication are not favored.”). That is, agencies outside of the VA must still comply with the JWOD, as does the VA when the Rule of Two is not implicated. We, therefore, conclude that the requirements of the more specific, later-enacted VBA take precedence over those of the JWOD when the two statutes are in apparent conflict.

Our conclusion finds support in the Supreme Court’s decision in Kingdomware. There, the Court considered whether the VA must use the Rule of Two every time it awards contracts, or whether it instead must use the rule only to the extent necessary to meet annual minimum goals for contracting with veteran-owned small businesses. Kingdomware, 136 S. Ct. at 1973. The Court stated that the VBA’s requirement to set aside contracts for veteran-owned small businesses “is mandatory, not discretionary,” and held that the text of § 8127(d) “unambiguously” requires that the VA “apply the Rule of Two to all contracting determinations and to award contracts to veteran-owned small businesses.” Id. at 1976 (emphasis added). It reasoned that § 8127(d) expressly provides that the VA “shall award contracts” to veteran-owned small businesses and service-disabled veteran-owned small businesses except in two statutorily defined circumstances, and that the provision “requires” the VA to “use the Rule of Two before awarding a contract to another supplier.” Id. at 1977 (emphasis added). The Court held that these mandatory requirements in the VBA override the purchase requirements set forth in the Federal Supply Schedules included in FAR Part 8. Id. at 1978–79. While the precise question we consider today was not presented in Kingdomware, we may not ignore the Court’s finding that the VBA “is mandatory, not discretionary” and that § 8127(d) “requires the Department to apply the Rule of Two to all contracting determinations and to award contracts to veteran-owned small businesses.” 136 S. Ct. at 1975–76 (emphasis added). Competitive or not, placing an item on the List, or choosing an item therefrom under the JWOD, is a form of awarding a contract. And under § 8127(d) and Kingdomware, the VA, in such a situation, is required to first conduct a Rule of Two analysis.

Our conclusion is not, as the government and the Industries for the Blind contend, inconsistent with the FAR. They argue that, even if § 8127(d) applies to all VA contracts, it is superseded by Part 8 of the FAR, which “expressly recognizes the AbilityOne Program as . . . a mandatory Government source requirement.” Indus. for the Blind Br. 38; see also Gov’t. Br. 30. According to the Appellants, the FAR requires use of mandatory sources like AbilityOne prior to competitive sources. We disagree. Even if a regulation could ever overrule a clear statutory mandate, the FAR does not purport to do so with respect to § 8127(d). FAR Part 8 begins by stating, “[e]xcept . . . as otherwise provided by law,” therefore expressly acknowledging that the use of “mandatory . . . sources,” like AbilityOne, can be superseded. 48 C.F.R. § 8.002.

Indeed, under § 8128(a), the Secretary of Veterans Affairs, when “procuring goods and services pursuant to a contracting preference under [title 38] or any other provision of law . . . shall give priority to a small business concern owned and controlled by veterans, if such business concern also meets the requirements of that contracting preference.” 38 U.S.C. § 8128(a) (emphases added). The phrase “or any other provision of law” by its terms encompasses the JWOD. Thus, where a product or service is on the List and ordinarily would result in the contract being awarded to a nonprofit qualified under the JWOD, the VBA unambiguously demands that priority be given to veteran-owned small businesses. While we are mindful of Appellants’ policy arguments, we must give effect to the policy choices made by Congress. We find that by passing the VBA, Congress increased employment opportunities for veteran-owned businesses in a narrow category of circumstances, while leaving intact significant mechanisms to protect such opportunities for the disabled.

III. CONCLUSION

Considering the plain language of the more specific, later-enacted VBA, as well as the legislative history and Congress’s intention in enacting it, we affirm. (PDS Consultants, Inc. v. United States, Winston-Salem Industries For The Blind, Nos. 2017-2379, 2017-2512, October 17, 2018)

It is a bedrock principle of statutory interpretation that each word in a statute should be given effect. See Qi-Zhuo v. Meissner, 70 F.3d 136, 139 (D.C. Cir. 1995) (“An endlessly reiterated principle of statutory construction is that all words in a statute are to be assigned meaning, and that nothing therein is to be construed as surplusage.”); see also Ariad Pharms., Inc. v. Eli Lilly & Co., 598 F.3d 1336, 1345 (Fed. Cir. 2010) (concluding that a party’s proposed statutory interpretation “violat[ed] the rule of statutory construction that Congress does not use unnecessary words.”).

Kingdomware’s interpretation of subsection (d) assigns dispositive weight to the command term “shall,” but ignores additional statutory language stating that this mandate is “for purposes of meeting the goals under subsection (a).” Under Kingdomware’s interpretation, the statute’s mandate requiring the VA to conduct a Rule of Two analysis would apply to every competitive contract contemplated by the VA without any regard for the VOSB contracting goals set under subsection (a), despite the provision’s explicit reference to these goals. Indeed, Kingdomware conceded at oral argument that under its interpretation of 38 U.S.C. § 8127(d), the VA must continue to apply a Rule of Two analysis for every contract even after it has met the goals set under § 8127(a). Oral Argument at 4:05–5:20. Further, as the VA points out, if § 8127(d) requires the agency to conduct a Rule of Two analysis for every contract irrespective of the goals set under subsection (a), this goal-setting provision is itself made superfluous. Because Kingdomware’s plain meaning interpretation of § 8127(d) reads the words “for purposes of meeting the goals under subsection (a)” out of the statute and makes the mandatory goal-setting statutory provision unnecessary, it cannot stand.

The statutory scheme as a whole links the Rule of Two mandate (denoted by the word “shall”) in subsection (d) to the goals set under subsection (a). The mandate is, therefore, the required procedure for meeting these goals. It is fully consistent with subsection (a), which requires the VA to set goals for contracting with VOSBs, but grants the VA considerable discretion to set the value of these goals. Accordingly, the agency need not perform a VOSB Rule of Two analysis for every contract, as long as the goals set under subsection (a) are met. The correct reading of the statute according to its plain meaning puts the “shall” in subsection (d) in harmonious context with the discretionary “may” provisions of subsections (b) and (c), and assures that the goals of subsection (a) will be set by the Secretary, not the success or failure of the Rule of Two in the marketplace.

Congress enacted § 8127 out of frustration with the failure of agencies Government-wide to achieve the aspirational goals of 3% for SDVOSBs. In hearings leading up to the 2006 Veterans Act, the prime reason for failure to achieve the Government-wide goals was “the discretionary, not mandatory, nature of the goals.” H.R. REP., at 15. As Rep. Boozman observed, § 8127 changed what had been a “may” to a “shall” in terms of goals. Congress chose the VA to set the example among Government agencies by imposing on it the obligation to meet the goals set by the Secretary for both categories of veteran-owned small businesses. Id. Indeed, Congress anticipated that with the contracting tools provided in § 8127, the VA would be able to “meet, if not exceed” its contracting goals, id., while at the same time fulfilling the goals it has set for other small business entities. 152 Cong. Rec. S11609-03, S11616 (“The goals for veteran and service-disabled veteran owned businesses are not in any way intended to prevent attainment of other set-aside goals.”).

As it stands, there is no reason to compel the Secretary to set aside any contract for a Rule of Two inquiry before using the FSS notwithstanding his goals, as Kingdomware requests. The VA has consistently met the mandatory goals for procurement from SDVOSBs and VOSBs in each year since the Veterans Act of 2006 went into force, and Kingdomware does not contend otherwise. The Secretary has complied with his statutory mandate to both set goals and meet them, and, accordingly, the VA contracting officer’s decision not to set aside the contracts at issue was not arbitrary, capricious, or contrary to the law.

CONCLUSION

For the reasons provided above, we affirm the final decision of the Court of Federal Claims in favor of the VA.  (Kingdomware Techs., Inc. v. United States, No 13-5042, June 3, 2014)  (pdf)  Also See Kingdomware Technologies, Inc. v. U. S. No. 12-173C, November 27, 2012  (pdf) and Kingdomware Technologies, B-406507, May 30, 2012  (pdf))

In this case, we consider whether the Department must use the Rule of Two every time it awards contracts or whether it must use the Rule of Two only to the extent necessary to meet annual minimum goals for contracting with veteran-owned small businesses. We conclude that the Department must use the Rule of Two when awarding contracts, even when the Department will otherwise meet its annual minimum contracting goals. (Kingdomware Technologies, Inc., v. U. S., 579 U. S. ____ (2016), June 16, 2016)  (pdf)