SBA regulations require that for any procurement that is set aside for small business, the small business must perform minimum percentage of work with its own employees. This provision, which is included in both SBA's regulations and in the Federal Acquisition Regulation, is known as the "limitations on subcontracting clause." 13 C.F.R sect. 125.6; FAR sect. 19.508(e) and FAR sect. 52.219-14. The clause requires that you perform a minimum of 15% of the cost of the contract with your own employees, not including the cost of materials. Based on the figures provided by Construct Solutions, it proposed to perform about half that, or less than 8%. For that reasons [sic], SBA cannot issue a Certificate of Competency.

Id. (Emphasis added).

The SBA regulation cited in the SBA's June 22 letter, 13 C.F.R sect. 125.6, consists of several distinct provisions. As relevant, 13 C.F.R. sect. 125.6(a), applies to small businesses and requires in part that, "[i]n the case of a contract for general construction, the concern will perform at least 15 percent of the cost of the contract with its own employees (not including the costs of materials)." Id. at sect. 125.6(a)(3) (emphasis added). This provision, the requirements of which were cited in SBA's refusal to issue the COC, does not, however, apply to SDVOSBs. Rather, the subcontracting limitations forth in 13 C.F.R. sect. 125.6(b) apply to SDVOSBs and establish a less stringent subcontracting threshold. Specifically, the regulation states that an SDVOSB prime contractor can subcontract a portion of the work, provided that "[i]n the case of a contract for general construction, the [SDVOSB] spends at least 15% of the cost of contract performance incurred for personnel on the concern's employees or the employees of other [SDVOSBs]." Id. at sect. 125.6(b)(2) (emphasis added). Construct asserts that when analyzed under the appropriate standard, its COC application demonstrates that 26.21 percent of the work will be performed by its employees or the employees of another SDVOSBC.

In sum, the record reflects that SBA incorrectly applied the limitation on subcontracting found at 13 C.F.R. sect. 125.6(a), to Construct, a SDVOSB subject to the limitation on subcontracting at 13 C.F.R. sect. 125.6(b). We therefore sustain the protest where SBA refused to issue a COC to Construct due to failure to properly follow its own regulations.

RECOMMENDATION

Where our Office has sustained a protest of the SBA's refusal to issue a COC, we have recommended that the procuring agency resubmit the matter of the small business firm's responsibility to SBA for further consideration. See COSTAR, B‑240980, Dec. 20, 1990, 90-2 CPD para. 509. In that context, we have also further recommended that, if the SBA should issue a COC on behalf of the firm, that the agency should then take corrective action up to and including changing the award decision. For example, in COSTAR, supra, our Office recommended that, if the SBA issued a COC to the protester, the agency should terminate a previously awarded contract under the solicitation for convenience of the government and make a new award to the protester.

In the current protest, as noted above, the SBA has acknowledged that its initial refusal to issue a COC to the protester was in error, and has issued Construct a COC related to this procurement. SBA Letter, July 25, at 1. Therefore, we conclude that the appropriate remedy in this protest, as in COSTAR, is to recommend that the agency terminate the award to Ironclad and make a new award to Construct. We also find that Construct is entitled to recover its costs of filing and pursuing the protest, including reasonable attorney's fees. 4 C.F.R. sect. 21.8(d)(1). Construct should submit its claim for such costs directly to the VA within 60 days.  (Construct Solutions, Inc.--Protest and Reconsideration, B-405288; B-405288.2, October 11, 2011)  (pdf)

Zolon asserts that the agency’s determination that its revised price was unrealistic and risky constituted a finding that the firm was not responsible. In this regard, Zolon notes that, in making the best value determination, the agency found that the firm’s pricing structure would make it very difficult or impossible to transition a large percentage of the incumbent personnel to a new contract, and was highly unlikely to allow the firm to meet the government’s performance standards. Zolon also notes that the agency considered its past performance and experience to be deficiencies that it could not overcome. Zolon concludes that since it is a small business, the agency was required to refer the matter of its responsibility to the Small Business Administration (SBA) for review under its certificate of competency procedures. See Federal Acquisition Regulation sect. 19.602-1(a). Zolon’s assertions are without merit. An agency may use traditional responsibility factors, such as personnel competencies and capabilities, as technical evaluation factors where, as here, a comparative evaluation of those areas is to be performed. Advanced Resources Int’l, Inc.-Recon., B-249679.2, Apr. 29, 1993, 93-1 CPD para. 348 at 2. A comparative evaluation means that competing proposals will be rated on a scale relative to each other rather than on a pass/fail basis. Dynamic Aviation Helicopters, B-274122, Nov. 1, 1996, 96-2 CPD para. 166 at 3. No SBA referral is required where a small business offeror’s proposal, while evaluated as acceptable, is not selected for award because another offeror’s proposal is evaluated as superior under a comparative analysis or because of a cost/technical tradeoff analysis. Capitol CREAG LLC, B-294958.4, Jan. 31, 2005, 2005 CPD para. 31 at 6-8. There was no pass/fail evaluation here; the record shows that evaluation of Zolon’s past performance and experience, as well as the price realism and risk assessment based on the firm’s low proposed labor rates, were all part of a comparative, best value evaluation, not a responsibility determination. Best Value Determination at 00385, 00389-390. (Zolon Tech, Inc., B-299904.2, September 18, 2007) (pdf)

As indicated, JAF’s proposal was not considered for award because its proposed price was considered unreasonably low. However, there was no technical or price evaluation factor under the RFP providing for the evaluation of price realism or the offerors’ understanding of the requirements. The price evaluation provided only for the evaluation of the “reasonableness” of the proposed price, that is, whether the price was unreasonably high. Thus, the agency’s concern that JAF’s price was too low was a matter of the firm’s responsibility. Since JAF is a small business, if the Air Force believed that JAF could not satisfactorily perform the contract at its proposed price, it was required to refer this finding of nonresponsibility to the SBA for that agency’s review under its certificate of competency procedures. Accordingly, we sustain JAF’s protest on this basis. (J.A. Farrington Janitorial Services, B-296875, October 18, 2005) (pdf)

As set forth in the regulations and explained by SBA, until 1998, SBA's regulations specifically provided that the COC procedures did not apply to contracts awarded under SBA's section 8(a) program. 13 C.F.R. 124.313 (1998). SBA's regulations were amended on June 30, 1998, to provide (as they do now) that if, in the conduct of "competitive 8(a) procurements," the "procuring activity contracting officer believes that the apparent successful offeror is not responsible to perform the contract, he or she must refer the concern to the SBA for a possible Certificate of Competency." 63Fed. Reg. 35726, 35758 (1998); 13C.F.R. 124.507(b)(5) (2004). In making this regulatory change, SBA explained that it wanted "to make competitive 8(a)procurements as similar as possible to non8(a) Government contracting procedures." 62 Fed. Reg. 43583, 43592 (1997); SBA Supplemental Report at 1. SBA emphasizes, however, that as provided in the regulatory history of 13 C.F.R. 124.507(b)(5), and as indicated by SBA's current regulations, the availability of the COC process to an 8(a) participant is limited to nonresponsibility determinations made during competitive 8(a) acquisitions. With regard to noncompetitive acquisitions, such as the one here, SBA, in amending its regulations to provide for the applicability of the COC process to nonresponsibility determinations made in the context of competitive 8(a) acquisitions, stated as follows:

COC procedures would not, however, be available for sole source 8(a) procurements. In most cases, the procuring agency would have selected the Participant for the sole source contract by assessing the firm's capabilities prior to offering the procurement to SBA. It is unlikely that the procuring agency would select a Participant, go through negotiations with the firm, and then find the firm not to be responsible. If that does happen, or if the procuring agency determines that a firm nominated by SBA for an open requirement cannot perform the contract, SBA would review the situation to determine whether it agrees with the procuring agency. If SBA agrees, it can nominate another Participant to perform the contract, if one exists that is found to be eligible and responsible for the requirement, or it can permit the agency to withdraw the requirement from the 8(a) program if an eligible and responsible Participant is not found. If SBA does not agree, it can appeal the procuring agency's decision to the head of the procuring agency pursuant to 124.505. 62 Fed. Reg. 43583, 43592 (1997).

The procedures referenced above are implemented through 13 C.F.R. 124.505(a)(2), which provides that the "Administrator of SBA may appeal . . . to the head of the procuring agency" the procuring agency's "decision to reject a specific [8(a)] Participant for award of an 8(a) contract." As such, here, once CNCS determined that UEA was nonresponsible, and informed SBA of that determination, SBA, if it agreed with CNCS, should have allowed for the replacement of UEA with another 8(a) vendor, such as the vendor identified by CNCS, or should have permitted CNCS to withdraw the requirement from the 8(a) program if no qualified 8(a) vendor was available. See DLS Servs., Inc. , supra , at 3. If SBA disagreed with CNCS regarding its determination that UEA was nonresponsible, the Administrator of SBA could have appealed the CNCS contracting officer's responsibility determination to the head of the procuring agency. 13 C.F.R. 124.505(a)(2). In short, we agree with SBA that it erred in considering UEA for a COC because the COC process is not applicable to noncompetitive 8(a) acquisitions. SBA Report at 2; SBA Supplemental Report at 1-2. (United Enterprise & Associates, B-295742, April 4, 2005)  (pdf)

GSA and Pepco assert that Liberty's proposal evidenced a defective commitment to complying with the subcontracting limitation, and that this therefore was a matter of acceptability, and not responsibility. See Ecompex, Inc. , B-292865.4 et al., June 18, 2004, 2004 CPD 149 at 5; Mechanical Equip. Co., Inc.; Highland Eng., Inc.; Etnyre Int'l, Ltd.; Kara Aerospace, Inc. , supra ; KIRA Inc. , B287573.4, B-287573.5, Aug.29, 2001, 2001 CPD 153 at 3. We disagree. As an initial matter, the contracting officer in fact determined that Liberty's proposal was acceptable; the only question was whether Liberty was entitled to the SDB preference. Further, while GSA asserts that the generating asset in [DELETED] for which Liberty submitted an expired letter of intent could not generate sufficient power to meet the 50percent rule, the agency fails to take into account the fact that Liberty stated that it had "been in negotiations with several plant owners in the PJM territory to acquire the necessary manufacturing capability," Letter from Liberty to GSA, Nov.16, 2004, and not merely with the owner of the generating asset in [DELETED]. Consequently, this is not an instance where the offeror's proposal, on its face, reasonably indicated that the offeror would not comply with a subcontracting limitation, see , e.g. , Orincon Corp. , B276704, July 18, 1997, 97-2 CPD 26 at 4; rather, it involves a question of the offeror's capability to comply with a subcontracting limitation and, thus, its responsibility. As such, this was a matter for the SBA. GSA now asserts that Liberty also failed to meet the requirement set forth in FAR 52.21923(d)(2) that states: "A small disadvantaged business concern submitting an offer in its own name shall furnish in performing this contract only end items manufactured or produced by small disadvantaged business concerns in the United States or its outlying areas." The agency notes in this regard that in its November 11 response to the agency's inquiries, Liberty stated that it would obtain supplemental electricity from one or more firms on a list of its existing suppliers, which includes large businesses. However, as noted by the SBA in its comments on this matter, SBA Comments, Feb. 2, 2005, at 3, while the provisions of FAR 52.21923(d)(1) apply to manufacturers, those of FAR 52.21923(d)(2) clearly apply to SDBs that are nonmanufacturers, that is, SDBs that intend to furnish the products of other SDB concerns. See distinction between manufacturer and nonmanufacturer in 15 U.S.C. 637(a)(17)(A); 13 C.F.R. 121.406; FAR 19.001, 19.102(f), 19.601(d). Here, Liberty essentially claimed that it would qualify as a manufacturer under FAR 52.21923(d)(1); thus, FAR 52.21923(d)(2) was irrelevant to determining Liberty's SDB status and entitlement to the preference, and the final determination as to whether that in fact is the case is for the SBA, as discussed above. Accordingly, we sustain the protest. (Liberty Power Corporation, B-295502, March 14, 2005) (pdf)

It is true that the reasons for GSA's concern about CREAG arose in connection with the evaluation under the solicitation (not post-evaluation, when a responsibility review is normally conducted). This, however, is not determinative. We have long recognized that agencies may use responsibility-type factors as evaluation criteria. See , e.g. , Nomura Enters., Inc. , B-277768, Nov. 19, 1997, 97-2 CPD 148 at 3. Here, the evaluation criteria related to management and staffing are at issue, and both can be viewed as "traditional" responsibility factors. See Clegg Indus., Inc. , B242204.3, Aug. 14, 1991, 91-2 CPD 145 at 2. Where a solicitation uses traditional responsibility factors as technical evaluation criteria and where the proposal of a small business concern which otherwise would be in line for award is found ineligible for award based on an agency's evaluation under those criteria, the agency has effectively made a determination that the small business offeror is not a responsible contractor capable of performing the solicitation requirements. In those circumstances, because of the offeror's small business size status, the agency must refer the matter of the firm's responsibility to the SBA for the possible issuance of a COC. Here, however, we conclude that the basis for GSA's ultimate decision not to make award to CREAG was not a responsibility determination. As noted above, management and staffing are sometimes responsibility criteria. In this procurement, though, GSA's concern was not that CREAG lacked adequate management and staffing (which might well have been a responsibility concern), but rather that CREAG's proposed management and staffing plan--CREAG's approach to performing the contract work--created a high risk of unacceptable performance. This was not due to doubt about CREAG's ability or capability to perform (again, potentially a responsibility concern), but rather to the decentralized approach that CREAG proposed to use to perform GSA's requirements. As the SSEB wrote, "The offeror did not present an adequate resolution to adequately managing the scope of the contract." Final SSEB Report to the SSA at 59. Because GSA's negative assessment was based on the way that CREAG proposed to perform, rather than on CREAG's capabilities, we conclude that what occurred was not tantamount to a nonresponsibility determination, and we therefore find that no referral to the SBA was required. (Capitol CREAG LLC, B-294958.4, January 31, 2005) (pdf)

The award to Southern was unobjectionable. The FAR requirement that agencies make award to a concern where SBA issues a COC presumes that the COC referral will occur after the concern has been determined to be otherwise in line for the award. FAR 9.104-3(d). The record in this case shows that, at the time of the referral, the contracting specialist had not yet determined that Tenderfoot was in line for the award; she had determined only that Tenderfoot was one of several firms that could receive the award. Contracting Officers Statement at1. Nevertheless, apparently not fully understanding the COC process, and having questions about Tenderfoots financial capability, the contracting specialist (prematurely) submitted the matter to SBA for a COC review. AR at 3. Although SBA acted on the referral and issued a COC to Tenderfoot, VA was not required to make award to Tenderfoot at that juncture, since it had not yet determined that Tenderfoot was otherwise in line for the award. The agency could not deny Tenderfoot the award based on matters of responsibility, but nothing prohibited it from selecting another offeror for award based on a price/technical tradeoff in accordance with the RFPs evaluation scheme. See The Gerard Co. , B274051, Nov. 8, 1996, 962 CPD 177 at 3 (agency properly obtained best and final offers--due to issuance of amendment--after COC was issued to protester).  (Tenderfoot Sock Company, Inc., B-293088.2, July 30, 2004)

Under the Small Business Act, agencies may not find a small business nonresponsible without referring the matter to the SBA, which has the ultimate authority to determine the responsibility of small businesses under its COC procedures. 15 U.S.C. § 637(b)(7) (2000); FAR Subpart 19.6; Federal Support Corp., B-245573, Jan. 16, 1992, 92-1 CPD ¶ 81 at 4. Past performance traditionally is considered a responsibility factor, that is, a matter relating to the offeror's ability to perform the contract. See FAR § 9.104-1(c); Sanford and Sons Co., B-231607, Sept. 20, 1988, 88-2 CPD ¶ 266 at 2. Traditional responsibility factors may be used as technical evaluation factors in a negotiated procurement, but only when a comparative evaluation of those areas is to be made. See, e.g., Medical Info. Servs., B‑287824, July 10, 2002, 2001 CPD ¶ 122 at 5; Nomura Enter., Inc., B-277768, Nov. 19, 1997, 97‑2 CPD ¶ 148 at 3. Comparative evaluation in this context means that competing proposals will be rated on a scale, relative to each other, as opposed to a pass/fail basis. Ducosort, Inc., B‑254852, Jan. 25, 1994, 94-1 CPD ¶ 38 at 6. We have cautioned that an agency may not find a small business nonresponsible under the guise of a relative assessment of responsibility-based technical factors in an attempt to avoid referral to the SBA. Federal Support Corp., supra, at 4; Sanford and Sons Co., supra, at 3. That appears to be what occurred here.  Here, the agency did not, and could not, perform a “comparative evaluation.” The only technical evaluation factor, past performance, a traditional responsibility factor, was evaluated for the sole “purpose” of making an “assessment of the Offeror's ability to perform.”[8] RFP § 00120 ¶ 2.2.2.1.1. As essentially conceded by the agency, PHC's proposal was rejected because PHC allegedly failed to meet the RFP requirements that the offeror have past performance experience in medical construction on projects of 50 to 100 bed hospitals or large clinics valued at between $5 and $10 million. Because of this, past performance was clearly evaluated on a “pass/fail” basis. Under the circumstances, the agency's rejection of PHC's proposal amounted to a determination of nonresponsibility, which required referral to the SBA for a possible COC. See Federal Support Corp., supra, at 4 (protest sustained where “regardless of how the evaluation criteria was characterized in either the RFP or in the evaluation,” determination of technical unacceptability was nonresponsibility determination); Modern Sanitation Sys. Corp., B-245469, Jan. 2, 1992, 92-1 CPD ¶ 9 at 3 (technical unacceptability based on “go-no go” evaluation of responsibility criteria, without regard to how the rest of the proposal was judged, constitutes nonresponsibility determination that must be referred to the SBA); Clegg Indus., Inc., B‑242204.3, Aug. 14, 1991, 91-2 CPD ¶ 145 at 3 (same).  (Phil Howry Company, B-291402.3; B-291402.4, February 6, 2003)  (txt version)

Global argues that, since it is a small business, the agency was required to refer the rejection of its proposal to the Small Business Administration (SBA) for Certificate of Competency (COC) review. Protester's Comments at 6. However, traditional responsibility factors, such as experience, may be used for the comparative evaluation of proposals in relevant areas; where a proposal is determined to be deficient pursuant to such an evaluation, the matter is one of relative technical merit, not responsibility, and does not require a referral to the SBA. See Advanced Resources Int'l, Inc.--Recon., B-249679.2, Apr. 29, 1993, 93-1 CPD ¶ 348 at 2. The agency here found that Global lacked adequate required expertise, and downgraded its proposal in the technical evaluation. Since this was not a nonresponsibility determination, no referral to SBA was required. See Micronesia Media Distributors, Inc., B-222443, July 16, 1986, 86-2 CPD ¶ 72 at 2.  (Global Business and Legal Services, B-290381.2, December 26, 2002)  (pdf)

Here, since the SBA has declined to issue a COC and since none of the limited exceptions exist for our Office to review the SBA's decision, the essential issue for our consideration raised by this protest is whether new information requiring reversal of the nonresponsibility determination was presented to the contracting officer after the denial of the COC. The information presented by the protester following the SBA's denial of a COC was not new information.  (Quality Trust, Inc., B-289445, February 14, 2002)

In considering the applicable standard here, we note first that despite DLC's status as a small business concern, this nonresponsibility determination was not required to be referred to the Small Business Administration (SBA) for review under that agency's certificate of competency procedures, as GPO is not subject to the referral requirements of the Small Business Act, 15 U.S.C. sect. 637(b)(7) (1994).  (Downtown Legal Copies, B-289432, January 7, 2002)

A proposal found deficient following a comparative evaluation of proposals (rather than on a pass/fail basis) under traditional responsibility factors such as experience, past performance, and personnel qualifications is not a matter of responsibility subject to the Small Business Administration's certificate of competency procedures.  (Medical Information Services, B-287824, July 10, 2001)

Our Office will review the SBA's determinations regarding the issuance of, or failure to issue, a COC, only where there is a showing of possible bad faith on the part of government officials or a failure to consider vital information bearing on the firm's responsibility. 4 C.F.R. sect. 21.5(b)(2). Where, as here, one offeror protests the issuance of a COC to a competitor on the ground that the SBA failed to consider "vital information," we will consider the protest only where the solicitation contains definitive responsibility criteria and the issue raised concerns the competitor's compliance with those criteria. [3] Eastern Marine, Inc., B-212444.2, Aug. 28, 1984, 84-2 CPD para. 232 at 4; Surgical Instrument Co. of Am., B-212653, Nov. 30, 1983, 83-2 CPD para. 628 at 2; Uniflite, Inc., B-197365, Jan. 23, 1980, 80-1 CPD para. 67 at 2. Here, since neither bad faith nor a failure to comply with a definitive responsibility criterion has been alleged, we will not consider the matter.  (Integrity Management Services, Inc., B-283094.2, May 3, 2000)