In the world of Federal Government Contracting, it often feels like there are 20 different ways that your business or your business’s awards can be protested. In addition to size protests and bid protests (at both GAO and the COFC), there is also what is commonly referred to as a “status protest.” A status protest, while certainly less common than size protests and bid protests, still presents its own unique factors, procedures, and corresponding risks that contractors should be aware of. In this next installment of our Back to Basics series, we will walk you through a status protest and what impact a status protest may have on a federal contractor’s business.

What is a status protest?

The best place to start with a discussion regarding status protests is simply “what is a status protest?” Status protests are basically protests in which a business (or in some cases the Contracting Officer (“CO”) or Small Business Administration (“SBA”) itself) has the opportunity to protest another business’s socio-economic contracting program status (SDVOSB, WOSB, HUBZone, etc.). We won’t go too far into the weeds of jurisdiction or standing; but generally, for one business to file a status protest against another business, it will need to be in relation to a specific contract award. And the protester will generally need to be an unsuccessful offeror on that same contract.

Basically, the protester will assert that the awardee does not meet the eligibility requirements for a specific socio-economic contracting program set-aside status (importantly, it must be the status the contract is set-aside for), and as such, should not receive the contract award. Often these protests will be confused or lumped in with size protests due to their similarity (and the fact that size protests are often referred to as “size status protests”), but they are completely separate from a size protest.

Which statuses can be protested?

If a business feels that an awardee doesn’t meet the eligibility or status requirements for the following programs (for a specific contract set aside for that program), then a status protest may be filed:

• HUBZone
• WOSB/EDWOSB
• SDVOSB/VOSB

You may have noticed that the SBA’s 8(a) Program is not listed. Well, under 8(a) Program regulations, another business or participant cannot protest the 8(a) status of a business, but it can of course protest the size status of an 8(a) business. However, the SBA or contracting officer (“CO”) can protest the small disadvantaged business (“SDB”) status of a proposed subcontractor or subcontract awardee in certain situations or other businesses can submit information to the SBA or CO trying to persuade them to initiate a SDB status review (discussed further below).

Where are status protests filed and who reviews them?

Status protests are heard by the SBA either through the relevant contracting program office, or the SBA Office of Hearings and Appeals (“OHA”), depending on the status being protested.

For HUBZone status protests, a protester “must submit its written protest to the contracting officer” and “may submit protests by email to hzprotests@sba.gov.”

For WOSB/EDWOSB status protests, a protester would deliver their protest “in person, by facsimile, by express delivery service, e-mail, or by U.S. mail” to the contracting officer “if the protestor is an offeror for the specific contract.”

For protests of SDVOSB/VOSB status, “[a]ll challenges to the inclusion in the certification database of a VOSB or SDVOSB based on the status of the concern as a small business concern or the ownership or control of the concern, shall be heard by the Office of Hearings and Appeals of the Small Business Administration.” However, SBA still directs protesters to send their status protests to the contracting officer.

So in general, to file a status protest, a protester would typically file their status protest with the contracting officer for the contract at issue. That contracting officer then forwards all protests to the appropriate SBA program office within its Office of Government Contracting Business Development, regardless of if the protest was timely or specific–or in the case of an SDVOSB/VOSB status protest, will forward the protest to OHA.

In order for the protest to be timely, in a negotiated acquisition, the protest must be received prior to the close of business on the fifth business day after notification of the award was given by the contracting officer to the offerors. For sealed bid acquisitions, the contracting officer must receive the status protest prior to the close of business on the fifth business day after the bid opening. Interestingly, status protests could also be undertaken by the SBA or contracting officer themselves in certain situations. So, a business may not only be protested by another business, but also by the SBA or contracting officer.

As hinted above, the 8(a) Program regulations state that “[t]he eligibility of a Participant for a sole source or competitive 8(a) requirement may not be challenged by another Participant or any other party, either to SBA or any administrative forum as part of a bid or other contract protest” but the “size status of the apparent successful offeror for a competitive 8(a) procurement may be protested.” So an 8(a) Program participant technically can’t have it’s status as an 8(a) Participant protested, but can have it’s size protested, through typical size protest means (see our blog post on size protests here). That being said, SBA does state that a business could request the SBA review the small disadvantaged business (“SDB”) status of a business, and if SBA feels there is enough credible information calling into question the SDB status of the subject business, SBA may initiate its own review. To file this type of request, protesters would send their request and supporting information to the SBA Associate Administrator for Business Development.

How do status protests work?

In general, the goal of each status protest is to examine the eligibility of the protested company under that specific program. So, for example, if someone protested the WOSB status of a program, the appropriate office within the SBA would review aspects of the protested business for continued eligibility for participation in the WOSB program, such as whether the required amount of ownership is held by a woman, and whether the woman owner has the required amount of control. It would function that same way for each respective program (other than the 8(a) Program, who has a different unique process discussed above).

The SBA gives itself fifteen (15) business days after it receives the protest to issue a decision. Of course, the SBA can request an extension of this deadline from the contracting officer, as many of these status protests can be fairly complex with them looking at ownership structures, and control of businesses. Also, the contracting officer may still complete award of the contract in the meantime if they determine in writing that there is an “immediate need” to award that contract. But that contracting officer must include a written explanation within the contract file justifying this decision and send a copy of the explanation to the SBA Director for Government Contracting.

As these status protests deal with the nature and structure of businesses, they will often involve the SBA requesting intricate business documents like operating agreements, articles of organization, ownership statements, and written responses or explanations to the protest allegations. SBA will analyze these documents, as well as any follow-up communications with the protested business during the fifteen days, compare them with the protest’s allegations and relevant regulations, then decide whether the protested business still meets the eligibility requirements for the respective socio-economic contracting program. Once the SBA comes to its decision, it will notify the contracting officer, protester, and the subject business in writing of its decision.

Why does a status protest even matter?

While the process seems fairly focused on the award of a contract, it doesn’t only put at risk a singular contract award, it also places the status of a business at risk. Obviously, if a business was awarded a set-aside contract, and the status protest resulted in them not being found eligible for the contract’s socio-economic contracting program set-aside designation, then that contract award is no longer awarded to that business. However, on top of that, each program lists further repercussions.

For HUBZone status protests, if a business is found “ineligible” and the status protest is sustained, then “SBA will decertify the concern and remove its designation as a certiied HUBZone small business concern in DSBS.”

For EDWOSB/WOSB status protests, if a business is found to be “ineligible” through a status protest, it “will be decertified from the program and may not submit an offer as a WOSB or EDWOSB on another procurement until it is recertified.”

For SDVOSB/VOSB status protests, a business found not to qualify for this status through a status protest “may not submit an offer on a future VOSB or SDVOSB procurement until the protested concern reapplies to the Veteran Small Business Certification Program and has been designated by SBA as a VOSB or SDVOSB into the certification database.”

While 8(a) Program regulations are not clear on the consequences to a subcontractor not being found to be a SDB, it is likely that similar consequences to the ones articulated in the HUBZone, EDWOSB/WOSB, and SDVOSB/VOSB programs would be incurred by a contractor who represented themselves as an SDB on any prime contract, but was later found not to be an SDB.

While depending on the situation, there may be an appeal option or recertification option for a contractor who is found no longer eligible through a status protest, a negative status protest finding will still turn a contractor’s business upside down, as they can no longer hold-themselves out as the status that was protested, nor bid on contracts that are set-aside for that particular status. A negative status protest finding can have far-reaching effects on any contractor found ineligible, and thus, should be taken very seriously, despite it being less common than other protests.

If a contractor finds themselves having their status protested, much of the success will depend on how well that business complied with their specific contracting program’s regulations. Often, this is something a skilled federal contracting lawyer can assist with before any protest is even filed. So, if you are wondering about whether your business is in compliance with your contracting program’s status requirements, have received a status protest, feel that an awardee doesn’t meet the proper status requirements, or you just have questions on federal government contracting, make sure to reach out to a skilled federal contracting lawyer, as the negative effects of a status protest can be quite impactful on a business.

Questions about this post? Or need help with a government contracting legal issue? Email us.

Looking for the latest government contracting legal news? Sign up for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook.

View the full article