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FAR 19.1405: Service-disabled veteran-owned small business set-aside procedures

Comptroller General - Key Excerpts

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)

Comptroller General - Listing of Decisions

For the Government

For the Protester

DAV Prime, Inc., B-311420, May 1, 2008 (pdf)  
Singleton Enterprises- GMT Mechanical, A Joint Venture, B-311343, April 23, 2008 (pdf)  
In and Out Valet Co., B-311141, April 3, 2008 (pdf)  
IBV, Ltd., B-311244, February 21, 2008 (pdf)  

U. S. Court of Federal Claims - Key Excerpts

Overall, the amplified record generated by the remand shows that GSA had a reasoned basis in experience with other GWACS for its method of structuring CPP2 in this solicitation. GSA’s rationale for focusing on broad experience for CPP2 in the VETS GWAC reflects its general preference as a matter of policy that GWACs should address broad requirements, in contrast to IT 70 Multiple Award Schedules which can be more specific and targeted to particular services. Recognizing that this general policy preference runs counter to OMB’s strategy for avoiding contract bundling, which can operate to the detriment of small businesses, including SDVOSBs, GSA endeavored to ameliorate these potential harms by encouraging the use by SDVOSBs of business teams and joint ventures, even ventures with large businesses. Remand Determination at 13, 22. The decision by GSA in the face of these competing policy considerations belongs to the agency, not the court. “Th[e] court is acutely aware that it may not [substitute] its judgment for that of the agency.” OTI America, Inc. v. United States, 68 Fed. Cl. 646, 657 (2005) (citing Vermont Yankee, 435 U.S. at 557-58; Keeton Corrs., 59 Fed. Cl. at 755)).  GSA’s actions were flawed in one particular respect because the agency structured the VETS GWAC solicitation without consulting meaningfully with the agencies that would be expected to be the prime users of the GWAC, contrary to GSA’s representations to OMB in GSA’s Business Plan. In context, that failing, however, was not “significant error” on GSA’s part, that by itself would render GSA’s actions in the VETS GWAC arbitrary or capricious. See J.C.N. Constr. Co. v. United States, 60 Fed. Cl. 400, 412 (2004), aff’d, 122 Fed. Appx. 514 (Fed. Cir. 2005). Ultimately, the court can not conclude that GSA’s errors were sufficiently material to be “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law” because it structured the CPP2 criteria rationally based upon its prior experience. 5 U.S.C. § 706(2)(A); see RISC Mgmt. Joint Venture v. United States, 69 Fed. Cl. 624, 638 (2006). (Knowledge Connections, Inc., v. U. S. and Catapult Technology, Ltd.,  No. 06-786C, Reissued December 19, 2007) (pdf)  (See Knowledge Connections, Inc., v. U. S. and Catapult Techology, Ltd., No. 06-786C, April 3, 2007 below)

1.  KCI’s first claim in support of its motion for judgment on the administrative record is that GSA artificially limited awards to 43 offerors. Pl.’s Mot. at 7.25 KCI emphasizes that GSA made no representation in the Business Case presented to OMB that the number of VETS GWAC awards would be limited but that GSA ultimately restricted the awardees to 43. Id. at 16-18. The government responds that the number of awards or awardees was not in fact artificially limited. Def.’s Cross-Mot. at 37-38. KCI’s argument in this respect is unavailing. KCI complains that GSA’s Business Case “made no mention of any specific limitation on the number of awards” and that, as a result, GSA obtained the “executive agent” designation “under false pretenses.” Pl.’s Mot. at 15-17. After reviewing the Business Case, however, OMB placed only two restrictions on its grant of the “executive agent” designation: (1) that “the most highly qualified service-disabled veteran owned small businesses” be chosen and (2) that offerors “not be excluded . . . based on their lack of experience as a government contractor.” AR 93 (Letter from Bolten to Perry, Encl. B (July 5, 2005)). Making a finite number of awards did not violate either OMB condition. Neither was GSA’s decision to award 74 VETS GWAC contracts inconsistent with the solicitation, which explicitly stated that GSA anticipated awarding 20 contracts in both Functional Area 1 and Functional Area 2. AR 182-83, 263 (Solicitation §§ C.11.1-C.11.2, L.9). In exceeding by 34 the number of total contracts projected in the solicitation (i.e., 74 contracts, rather than 40), GSA acted consistently with its representation that there was “no predetermined number of awards.” See Awardee List; AR 137 (Frequently Asked Questions, Question 5). As provided in the solicitation, GSA made a series of paired comparisons to evaluate offers’ technical merit and price, cutting off the number awardees at a “natural break” where “the remaining proposals offer[ed] significantly decreased technical capabilities” not warranting a continuation of the trade-off process. AR 1014 (Solicitation § M.6.), 2114 (Trade-off Analysis Documentation, Functional Area 1), 2716 (Trade-off Analysis Documentation, Functional Area 2). The record thus does not support KCI’s claim that GSA artificially limited the number of awards. Instead, the key questions in this case turn on the criteria GSA used in deciding to make the awards.

2.  KCI also alleges that GSA contravened the conditions on the authority OMB granted the agency under its “executive agent” designation by excluding KCI based on its lack of government contract experience. Pl.’s Mot. at 7; see AR 93 (Letter from Bolten to Perry, Encl. B (July 5, 2005)). The government denies KCI’s allegation, citing the absence of such a restriction in the solicitation and evidence in the administrative record of offerors receiving credit for nongovernment contract experience. Def.’s Cross-Mot. at 32-36. KCI’s argument in this regard is also unavailing. Both parties agree that KCI’s scores on CPP2 – in Functional Areas 1 and 2 – were the primary factor leading to its non-selection. Pl.’s Mot. at 16; Def.’s Cross-Mot. at 36. Based on this fact, KCI concludes that CPP2, under which GSA evaluated the offeror’s depth of experience in each of the identified work-scope elements of a given Functional Area, AR 1009 (Solicitation § L.2.e.), was “purely a measure of ‘experience as a government contractor.’” Pl.’s Mot. at 16. This claim finds no support in the administrative record. First, KCI’s proposal included its non-governmental (i.e., commercial) experience as a contractor, and GSA credited that experience. See, e.g., AR 1090 (KCI Proposal) (noting experience of KCI’s subcontractor in a contract for [***], 1095 (noting experience of KCI’s subcontractor in a contract for [***], 1103-04 (noting experience of KCI’s subcontractor on two contracts for [***], 1169 (noting experience of KCI’s subcontractor on a contract for [***], 1182 (same), 1211 (noting experience of KCI’s subcontractor on two contracts for [***], 17177-78 (GSA’s providing credit for aforementioned commercial contracting experiences), 17187-88 (same). Second, GSA similarly credited other offerors’ commercial contracting experiences. See, e.g., AR 3466 (noting experience of offeror [***] on a contract for [***], 3573 (GSA’s providing credit for [***] work for [***], 3602 (noting experience of subcontractor of [***] on a contract for [***], 3715 (GSA’s providing credit for this work). KCI’s non-selection was not based on its lack of government contract experience, but rather on its overall lack of breadth of experience as measured under CPP2. KCI was not precluded from citing its experience as a commercial contractor, and KCI and other offerors in fact received credit for such experience. Thus, GSA did not eliminate KCI based on a lack of government contract experience in contravention of OMB’s grant of the “executive agent” designation. AR 93 (Letter from Bolten to Perry, Encl. B (July 5, 2005)).

3.  KCI also argues that the monetary tiering arrangement of CPP2 violated the conditions on OMB’s grant of the “executive agent” designation. Pl.’s Resp. to Def.’s Supplemental Br. at 1-2. KCI alleges that KCI and other offerors were excluded because of a lack of “experience in Tiers 1 and 2,” the two lower-monetary-value tiers. Id. at 2. CPP2’s monetary tiers as applied to each of the numerous work-scope elements raise questions about whether CPP2’s evaluation scheme was consistent with Executive Order 13360 and OMB’s “executive agent” designation.26 Executive Order 13360 declared that agencies “shall more effectively implement” certain statutory provisions that set a government-wide goal of three percent for the participation in federal procurement contracts of service-disabled, veteran-owned small businesses and permitted certain set-aside and restricted-competition procurements for such businesses. 69 Fed. Reg. at 62,549; 15 U.S.C. §§ 644(g)(1), 657f. In seeking to implement the executive order, OMB’s grant to GSA of the “executive agent” designation provided that awardees be “the most highly qualified service-disabled veteran owned small businesses.” AR 93 (Letter from Bolten to Perry, Encl. B (July 5, 2005)). As explained supra at 7-8, the VETS GWAC solicitation required offerors’ proposals to explain under CPP2 the bidder’s depth of experience in each work-scope element for a given Functional Area. AR 1009-11 (Solicitation § L.2.e.), 1246 (Executive Summary of VETS GWAC Source Selection (undated)). CPP2 limited offerors to providing three examples of prior contract experience within each of three monetary tiers: $25,000.00 - $100,000.00 (Tier I), $100,000.01 - $250,000.00 (Tier II), and $250,000.01 - unlimited (Tier III). AR 1009 (Solicitation § L.2.e.). Functional Area 1 had 38 work-scope elements, and Functional Area 2 had 26. AR 182-84 (Solicitation §§ C.11.1-C.11.2).CPP2’s tiering arrangement coupled with the numerous work-scope elements operated as a significant constraint on the solicitation. Offerors that could have been “the most highly qualified” in some of the work-scope elements, but not in most or all of them, fared less well then those with broad experience. See AR 1009-11 (Solicitation § L.2.e.), 1246 (Executive Summary of VETS GWAC Source Selection (undated)). The breadth of experience CPP2 required suggests that GSA preferred offerors that were a mile wide and an inch deep in terms of experience, such that the awardees were simply “qualified” firms across a broad spectrum of information technology areas, rather than a pool of “the most highly qualified” offerors in a narrower class of work-scope elements, as seemingly contemplated by OMB. In short, GSA ostensibly emphasized breadth of experience at the expense of “the most highly qualified” criterion that OMB mandated. In addition, the breadth of experience required by CPP2’s high number of work-scope elements – and the likely resulting reduction in the number of awardees – seems inconsistent with the command of Executive Order 13360 that agencies attempt to meet the government-wide goal of three percent for the participation in federal contracts of servicedisabled, veteran-owned small businesses. 69 Fed. Reg. at 62,549; 15 U.S.C. § 644(g)(1). The limitation to three experiences per tier per work-scope element also posed an impediment to specialized offerors. For example, if an offeror had previously performed ten contracts under a given work-scope element and had received $500,000 for each of these contracts, CPP2 precluded the contractor from receiving credit for seven of those experiences because (1) all ten of the contractor’s experiences would fall under Tier 3 and (2) CPP2 limited to three the experiences for which the contractor would receive credit. See AR 1009-11 (Solicitation § L.2.e.), 1246 (Executive Summary of VETS GWAC Source Selection (undated)). On the other hand, if a contractor had three experiences in each monetary tier under a particular work scope element, the contractor would receive credit for all nine experiences. See id. Certain sections of the solicitation stressed that the VETS GWAC’s objective was to provide government agencies with the ability to obtain a broad range of information technology services. See AR 152 (Solicitation § B.3) (“requirements may range from simple to highly complex”), 178 (Solicitation § C.2) (VETS GWAC intended “to provide civilian agencies and the Department of Defense (DoD) the ability to obtain a broad range of [c]omprehensive IT support services”), 179 (Solicitation § C.4) (“The anticipated services require a diversity of skills suitable to a multitude of information technology environments in support of a variety of IT support areas.”); see also AR 142 (Frequently Asked Questions, Question 29) (rigorous evaluation methodology necessary to ensure well-qualified awardees who could perform “the breadth of the work”).27 The government points to these sections as justification for CPP2’s criteria. Def.’s Supplemental Br. at 1-2. However, the solicitation does not tie the objective of selecting broadly qualified awardees to the overreaching goal of the VETS GWAC and OMB’s executive designation. The lack of such linkage in the administrative record precludes this court from determining whether CPP2’s focus on experience in multiple monetary tiers for each of the numerous work scope elements was consistent with Executive Order 13360 and OMB’s “executive agent” designation. 

In this case, the administrative record contains insufficient evidence for the court to determine whether the large number of work-scope elements and the tiering arrangement GSA used in CPP2 to focus on breadth of experience was inconsistent with Executive Order 13360 or OMB’s “executive agent” designation. As the administrative record shows and as the government concedes, GSA’s evaluation under CPP2 was critical to its selection of awardees because so many offerors had similar scores in CPP1 and CPP3. AR 1248 (Executive Summary of VETS GWAC Source Selection (undated)), 2742-49 (Technical Rankings, Functional Areas 1 and 2); Def.’s Reply at 12; Tr. 78:19-25 (Jan. 26, 2007). This case accordingly is remanded to GSA to determine whether the large number of work-scope elements and the tiering arrangement specified in CPP2 limited the number of awardees in a way that was inconsistent with Executive Order 13360 or OMB’s “executive agent” designation. In making this determination, GSA should address (1) the requirement in Executive Order 13360 that agencies “more effectively implement” Sections 644(g)(1) and 657f of Title 15, which set a government-wide goal of three percent for the participation in federal procurement contracts of service-disabled, veteran-owned small businesses and permitted agencies to establish certain set-aside and restricted-competition procurements for suchbusinesses, 69 Fed. Reg. at 62,549; 15 U.S.C. §§ 644(g)(1), 657f, and (2) the condition that OMB placed on its grant to GSA of the “executive agent” designation for the VETS GWAC: that GSA must select “the most highly qualified service-disabled veteran owned small businesses.” AR 93 (Letter from Bolten to Perry, Encl. B (July 5, 2005)). GSA shall proceed expeditiously, making the determinations noted supra within 120 days of the entry of this Opinion and Order. See RCFC 52.2(a)(2)(B). During the remand period, proceedings in this case shall be stayed. See RCFC 52.2(a)(2)(C). “The results of the proceedings on remand are subject to this court’s review.” Diversified Maint. Sys., 74 Fed. Cl. at 128 (quoting Santiago v. United States, 71 Fed. Cl. 220, 230 n.17 (2006)).  (Knowledge Connections, Inc., v. U. S. and Catapult Techology, Ltd., No. 06-786C, April 3, 2007) (pdf)

U. S. Court of Federal Claims - Listing of Decisions

For the Government For the Protester
Knowledge Connections, Inc., v. U. S. and Catapult Technology, Ltd.,  No. 06-786C, Reissued December 19, 2007) (pdf).  Also, see Knowledge Connections, Inc., v. U. S. and Catapult Techology, Ltd., No. 06-786C, April 3, 2007, that was remanded back to the awarding agency (pdf)  
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