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GAO-13-162SP:
United States Government Accountability Office:
Washington, DC 20548:
B-158766:
November 13, 2012:
Congressional Committees:
This letter responds to the requirements of the Competition in
Contracting Act of 1984, 31 U.S.C. ง 3554(e)(2) (2006), that the
Comptroller General report to Congress each instance in which a
federal agency did not fully implement a recommendation made by our
Office in connection with a bid protest decided the prior fiscal year.
By letter dated March 30, 2012, a copy of which is enclosed, we
reported three such occurrences involving the Department of Veterans
Affairs (VA), Kingdomware Technologies, B-405727, Dec. 19, 2011, 2011
CPD ถ 283, Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ถ 112, and
Crosstown Courier Service, Inc., B-406262, Mar. 21, 2012, 2012 CPD ถ
119. As explained in the March 30 letter, we sustained the protests
finding that the VA's use of General Services Administration Federal
Supply Schedule (FSS) procedures, without first considering whether
two or more service-disabled veteran-owned small business (SDVOSB) or
veteran-owned small business (VOSB) concerns were capable of meeting
the agency's requirements at a reasonable price, was contrary to the
Veterans Benefits, Health Care, and Information Technology Act of
2006, 38 U.S.C. งง 8127-8128 (2006).
Subsequent to the three occurrences noted above, 15 protests were
filed by Aldevra and Kingdomware Technologies, raising the same issue
reported in our March 30 letter. We sustained these protests as well,
essentially repeating our analysis from our prior decisions addressing
the issue. In each instance, the VA has declined to implement our
recommendation. We have included an attachment identifying our
decisions resolving these 15 additional protests, all of which are
publicly available on GAO's website. If we sustain similar protests in
fiscal year 2013, we will notify the Congress at the end of the year.
We also understand that the issue raised by these cases is currently
pending at the U.S. Court of Federal Claims.
During the 2012 fiscal year, we received 2,339 protests, 47 cost
claims, and 89 requests for reconsideration, for a total of 2,475
cases. Of the 2,339 protests filed, 209 are attributable to GAO's bid
protest jurisdiction over task orders. We closed 2,495 cases during
the fiscal year: 2,371 protests, 40 cost claims, and 84 requests for
reconsideration.
Enclosed for your information is a chart comparing the bid protest
activity for fiscal years 2008-2012.
Signed by:
Lynn H. Gibson:
General Counsel:
Enclosures:
The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Governmental Affairs:
United States Senate:
The Honorable Mary L. Landrieu:
Chair:
The Honorable Olympia J. Snowe:
Ranking Member:
Committee on Small Business and Entrepreneurship:
United States Senate:
The Honorable Harold Rogers:
Chairman:
The Honorable Norman D. Dicks:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Howard P. "Buck" McKeon:
Chairman:
The Honorable Adam Smith:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Honorable Darrell E. Issa:
Chairman:
The Honorable Elijah E. Cummings:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Sam Graves:
Chairman:
The Honorable Nydia M. Velazquez:
Ranking Member:
Committee on Small Business:
House of Representatives:
[End of section]
Cases included in our March 30, 2012 report:
* Kingdomware Technologies, B-405727, Dec. 19, 2011, 2011 CPD ถ 283.
* Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ถ 112.
* Crosstown Courier Service, Inc., B-406262, Mar. 21, 2012, 2012 CPD
11119.
Subsequent cases:
* Aldevra, B-406331, B-406391, Apr. 20, 2012, 2012 CPD ถ 144.
* Kingdomware Technologies, B-406507, May 30, 2012, 2012 CPD ถ 165.
* Aldevra, B-406608, B-406654, B-406655, B-406656, July 13, 2012, 2012
CPD 207.
* Aldevra, B-406774, B-406857, B-406892, B-406912, B-406913, B-406927,
B-406928, B-406942, Aug. 21, 2012, 2012 CPD ถ 240.
[End of section]
Bid Protest Statistics for Fiscal Years 2008-2012:
Cases Filed[1]:
FY 2012: 2,475[2] (up 5%)[3];
FY 2011: 2,353 (up 26%);
FY 2010: 2,229 (up 16%);
FY 2009: 1,989 (up 20%);
FY 2008: 1,652 (up 17%).
Cases Closed:
FY 2012: 2,495;
FY 2011: 2,292;
FY 2010: 2,226;
FY 2009: 1,920;
FY 2008: 1,582;
FY 2007: 1,394.
Merit (Sustain + Deny) Decisions:
FY 2012: 570;
FY 2011: 417;
FY 2010: 441;
FY 2009: 315;
FY 2008: 291.
Number of Sustains:
FY 2012: 106;
FY 2011: 67;
FY 2010: 82;
FY 2009: 57;
FY 2008: 60.
Sustain Rate:
FY 2012: 18.6%;
FY 2011: 16%;
FY 2010: 19%;
FY 2009: 18%;
FY 2008: 21%.
Effectiveness Rate[4]:
FY 2012: 42%;
FY 2011: 42%;
FY 2010: 42%;
FY 2009: 45%;
FY 2008: 42%.
ADR[5] (cases used):
FY 2012: 106;
FY 2011: 140;
FY 2010: 159;
FY 2009: 149;
FY 2008: 78.
ADR Success Rate[6]:
FY 2012: 80%;
FY 2011: 82%;
FY 2010: 80%;
FY 2009: 93%;
FY 2008: 78%.
Hearings[7]:
FY 2012: 6.17% (56 cases);
FY 2011: 8% (46 cases);
FY 2010: 10% (61 cases);
FY 2009: 12% (65 cases);
FY 2008: 6% (32 cases).
[1] All entries in this chart are counted in terms of the docket
numbers ("B" numbers) assigned by our Office, not the number of
procurements challenged. Where a protester files a supplemental
protest or multiple parties protest the same procurement action,
multiple iterations of the same "B" number are assigned (i.e., .2, .3).
Each of these numbers is deemed a separate protest for purposes of
this chart. Cases include protests, cost claims, and requests for
reconsideration.
[2] Of the 2,475 cases filed in FY 2012, 209 are attributable to GAO's
bid protest jurisdiction over task or delivery orders placed under
indefinite-delivery/indefinite-quantity contracts.
[3] From the prior fiscal year.
[4] Based on a protester obtaining some form of relief from the
agency, as reported to GAO, either as a results of voluntary agency
corrective action or our Office sustaining the protest. This figure is
a percentage of all protests closed this fiscal year.
[5] Alternative Dispute Resolution.
[6] Percentage of cases resolved without a formal GAO decision after
ADR.
[7] Percentage of fully developed decisions in which GAO conducted a
hearing; not all fully-developed cases result in a merit decision.
[End of table]
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
B-405727:
March 30, 2012:
Congressional Committees:
Subject: Kinddomware Technologies, B-405727, Dec. 19, 2011, 2011 CPD ถ
283; Aldevra, B-406205, Mar. 14, 2012, 2012 CPD ถ_; Crosstown Courier
Service, Inc., B-406262, Mar. 21, 2012, 2012 CPD ถ_.
This letter is submitted pursuant to 31 U.S.C. ง 3554(e)(1) (2006),
which requires our Office to report any case in which a Federal agency
fails to fully implement a recommendation of the Comptroller General
in a bid protest decision.
The subject bid protest decisions concerned procurements in which the
Department of Veterans Affairs (VA) used General Services
Administration Federal Supply Schedule (FSS) procedures without first
considering whether two or more service-disabled, veteran-owned small
business (SDVOSB) or veteran-owned small business (VOSB) concerns were
capable of meeting the agency's requirements at a reasonable price.
The protesters, all SDVOSB concerns, argued that the Veterans Benefits
Health Care, and Information Technology Act of 2006, 38 U.S.C. งง 8127-
8128 (2006) (the 2006 VA Act), required VA to conduct such market
research to determine whether the procurements should be set aside for
SDVOSB concerns. The 2006 VA Act states in relevant part:
(d) Use of restricted competition.--Except as provided in subsections
(b) and (c)[Footnote 1] for purposes of meeting the goals under
subsection (a),[Footnote 2] 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. ง 8127(d) (2006); see also VA Acquisition Regulation, 48
C.F.R. ง 819.7005(a) (2011).
In each protest, our Office found that it was improper for the VA to
use FSS procedures without first determining whether the acquisition
should be set aside for SDVOSB concerns. This was consistent with a
prior decision issued by our Office, Aldevra, B-405271, B-405524, Oct.
11, 2011, 2011 CPD 11183, in which we found that the plain language of
the 2006 VA Act requires the VA to conduct market research to
determine whether a VA procurement should be set aside for SDVOSB
concerns.
In each of our protest decisions, we recommended that the VA conduct
market research regarding its requirements. We also recommended that
if, as a result of this research, the VA determines that there is a
reasonable expectation that two or more SDVOSB concerns can meet the
solicited requirement at a reasonable price, the agency should re-
solicit the requirement as a set-aside for SDVOSB concerns. Finally,
we recommended that the VA reimburse the protesters for the costs of
filing and pursuing their protests.[Footnote 3]
By letters dated February 16 (Kingdomware), March 16 (Aldevra), and
March 22, 2012 (Crosstown), the VA notified our Office that it would
not follow our recommendations.[Footnote 4] The VA letters stated that
its reasons for not following the recommendations were set forth in a
January 4 letter to our Office, which responded to the second Aldevra
protest. In the January 4 letter, the VA took the position that
the 2006 VA Act only requires the VA to consider SDVOSB set-asides in
connection with attaining the agency's SDVOSB contracting goals. The
VA's January 4 letter also took the position that where FSS procedures
are used and an SDVOSB is not an FSS contract holder, the SDVOSB is
not entitled to any preference under the 2006 VA Act.
Given that our office has concluded on four recent occasions that the
2006 VA Act requires the VA to conduct market research to determine
whether a procurement should be set aside for SDVOSB concerns before
using FSS procedures, we intend to summarily sustain future protests
which raise this issue.[Footnote 5] If we sustain similar protests
throughout the remainder of this fiscal year, and the VA similarly
declines to follow our recommendations, we will notify the Congress at
the end of the year.
Enclosed for your review are copies of our decisions in the protests
and the VA's letters of January 4, February 16, March 16, and March
22.
Sincerely yours,
Signed by:
Lynn H. Gibson:
General Counsel:
Enclosures:
cc: The Honorable Daniel K. Inouye:
Chairman:
The Honorable Thad Cochran:
Vice Chairman:
Committee on Appropriations:
United States Senate:
The Honorable Joseph I. Lieberman:
Chairman:
The Honorable Susan M. Collins:
Ranking Member:
Committee on Homeland Security and Government Affairs:
United States Senate:
The Honorable Patty Murray:
Chairman:
The Honorable Richard Burr:
Ranking Member:
Committee on Veterans Affairs:
United States Senate:
The Honorable Mary L. Landrieu:
Chairman:
The Honorable Olympia J. Snowe:
Ranking Member:
Committee on Small Business and Entrepreneurship:
United States Senate:
The Honorable Harold Rogers:
Chairman:
The Honorable Norm Dicks:
Ranking Member:
Committee on Appropriations:
House of Representatives:
The Honorable Darrell E. Issa:
Chairman:
The Honorable Elijah Cummings:
Ranking Member:
Committee on Oversight and Government Reform:
House of Representatives:
The Honorable Jeff Miller:
Chairman:
The Honorable Bob Filner:
Ranking Member:
Committee on Veterans Affairs:
House of Representatives:
The Honorable Sam Graves:
Chairman:
The Honorable Nydia M. Velazquez:
Ranking Member:
Committee on Small Business:
House of Representatives:
Footnotes:
[1] Subsections (b) and (c) permit the use, under certain
circumstances, of noncompetitive procedures when VA enters into
contracts with SDVOSB and VOSB concerns.
[2] Subsection (a) states that in order to increase contracting
opportunities for SDVOSB and VOSB concerns, VA shall establish a goal
for each fiscal year for participation in VA contracts by SDVOSB and
VOSB concerns.
[3] In Kingdomware, the VA had issued a delivery order under the
protested solicitation. Accordingly, in that protest we additionally
recommended that if the VA determines that two or more SDVOSB concerns
can meet the requirement at a reasonable price, the agency should
cancel the delivery order.
[4] Following our first Aldevra decision )Oct. 11, 2011), the VA
canceled the procurement in its entirety, thereby rendering our
recommendation academic.
[5] If, in responding to future protests, the VA presents arguments
that have not previously been presented, we will, of course, address
such arguments.
[End of section]
Comptroller General of the United States:
United States Government Accountability Office:
Washington, DC 20548:
Decision:
Matter of: Aldevra:
File: B-406205:
Date: March 14, 2012:
Rodney Marshall for the protester.
Dennis Foley, Esq., Department of Veterans Affairs, for the agency.
Matthew T. Crosby, Esq., Glenn G. Wolcott, Esq., and Sharon L. Larkin,
Esq., Office of the General Counsel, GAO, participated in the
preparation of the decision.
Digest:
The Veterans Benefits, Health Care, and Information Technology Act of
2006 requires the Department of Veterans Affairs to determine whether
two or more service-disabled veteran-owned small business concerns can
meet its requirement at a reasonable price before proceeding with a
Federal Supply Schedule acquisition.
Decision:
Aldevra, of Portage, Michigan, a service-disabled veteran-owned small
business (SDVOSB) concern protests the terms of solicitation No. 666-
12-1-992-0002,[Footnote 1] issued by the Department of Veterans
Affairs (VA) for an ice maker/dispenser for shipment to Sheridan,
Wyoming. Aldevra asserts that the agency improperly failed to comply
with an applicable statute and regulation to determine if this
procurement should be set aside for SDVOSB concerns.
We sustain the protest.
Background:
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. See Agency Report (AR) at 1.
In accordance with those regulations, the solicitation was issued on
an unrestricted basis to vendors holding FSS contracts. Id.
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 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 ถ 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),[Footnote 2] 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. ง 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. ง 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. ง
819.7005(a) (2011).[Footnote 3]
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.
Discussion:
Aldevra's Interested Party Status:
As an initial matter, the agency, citing FitNet Purchasing Alliance, B-
309911, Nov. 2, 2007, 2007 CPD ถ 201, asserts that Aldevra is not an
interested party to protest this procurement because the firm does not
hold an FSS contract. AR at 2, 6-7, 11-12.
Under the bid protest provisions of the Competition in Contracting Act
of 1984, 31 U.S.C. งง 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. ง 21.0(a)(1) (2011).
A protester is not an interested party where it would not be in line
for contract award were its protest to be sustained. Four Winds
Servs., Inc., B-280714, Aug. 28, 1998, 98-2 CPD $ 57.
We disagree with the agency that Aldevra is not an interested party to
pursue this protest. The protest here involves an allegation that the
VA is required to conduct set-asides where specific conditions are met
under a unique statute applicable only to the VA (Le., the VA Act),
rather than meeting its requirements using the FSS. In addition, the
agency here has not contended that there is a reasonable expectation
that two or more SDVOSB concerns holding FSS contracts could meet the
requirement.[Footnote 4] For these reasons, and due to Aldevra's
uncontroverted representations that it is a verified SDVOSB concern
that sells the item being procured here, see Protest at 2; Comments at
2, we find that Aldevra is an interested party to pursue this
protest.[Footnote 5]
The Plain Meaning of 38 U.S.C. ง 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. ง 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 ง 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-a-vis attaining
the Secretary's SDVOSBNOSB 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. ง 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. ง 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. ง 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 "provide veteran and service-disabled, veteran-owned
small business 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-disable 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.[Footnote 6]
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.[Footnote 7] 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. ง 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. ง 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. ง 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.
Recommendation:
We recommend that the agency conduct reasonable market research
regarding its requirement under the solicitation. If it determines
that there is a reasonable expectation that two or more SDVOSB (or
VOSB) concerns can meet the requirement at a reasonable price, we
recommend that the agency cancel the solicitation and re-solicit the
requirement as an SDVOSB (or VOSB) set-aside. We also recommend that
the agency reimburse the protester the costs of filing and pursuing
the protest. 4 C.F.R. ง 21.8(d)(1). Aldevra's certified claims for
costs, detailing the time expanded and costs incurred, must be
submitted to the agency within 60 days after receipt of this decision.
4 C.F.R. ง 21.8(0(1).
The protest is sustained.
Lynn H. Gibson:
General Counsel:
Footnotes:
[1] The solicitation also was designated as FedBid Buy No. 311768.
[2] Subsections (b) and (c), permit the use, under certain
circumstances, of noncompetitive procedures when the VA enters into
contracts with SDVOSB and VOSB concerns.
[3] These references to other VA regulations concern the use of other
than competitive procedure to enter into contracts with SDVOSB or VOSB
concerns (48 C.F.R. ง 813.106), and procedures for the award of sole-
source contracts to SDVOSB or VOSB concerns (48 C.F.R. งง 819.7007,
819.7008).
[4] As stated above, the agency admits 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).
[5] The agency's position that Aldevra is not an interested party also
relies on two decisions by the United States Court of Federal Claims:
Mobile Medical Intern Corp. v. United States, 95 Fed. Cl. 706 (2010);
and MED Trends, Inc. v. United States, 101 Fed. Cl. 638 (2011). Mobile
Medical Intern Corp. involved a VA FSS procurement, but there was no
allegation that the VA violated the VA Act. MED Trends did not involve
a VA FSS procurement, but rather a challenge to the award of a
task/delivery order placed under an indefinite delivery/indefinite
quantity contract, the terms of which the protester did not challenge
prior to the solicitation closing date. Accordingly, neither of these
decisions bears on whether Aldevra is an interested party for purposes
of this protest.
[6] We note for the record that the language of 38 U.S.C. ง 8127(d) as
enacted by Congress is identical to the language in the bill described
in the above-referenced House report. Compare H.R. Rep. No. 109-592 at
3, with 38 U.S.C. ง 8127(d).
[7] The Supreme Court has held that where an agency interprets an
ambiguous provision of a statute through a process of rulemaking or
adjudication, unless the resulting regulation or ruling is
procedurally defective, arbitrary or capricious in substance, or
manifestly contrary to the statute, the courts will defer to this
agency interpretation. Chevron, 467 U.S. at 843-45; see also United
States v. Mead Corp. 533 U.S. 218, 227-38 (2001).
[End of section]
Comptroller General of the United States:
United States Government Accountability Office:
Washington, DC 20548:
Decision:
Matter of: Kingdomware Technologies:
File: B-405727:
Date: December 19, 2011:
LaTonya Barton the protester.
Matthew V. Edwards, Esq., Department of Veterans Affairs, for the
agency.
Linda C. Glass, Esq., and Guy R. Pietrovito, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
Digest:
The Department of Veterans Affairs (VA) improperly used non-mandatory
Federal Supply Schedule procedures to procure services, rather than
using a set-aside for service-disabled veteran-owned small businesses,
where the applicable statute--Veterans Benefits, Health Care, and
Information Technology Act of 2006--and implementing regulations
require the VA to use such set-asides where the statutory
prerequisites are met.
Decision:
Kingdomware Technologies, of Waldorf, Maryland, a service-disabled
veteran-owned small business (SDVOSB) concern, protests the corrective
action taken by the Department of Veterans Affairs (VA) in response to
the firm's protest of the terms of request for quotations (RFQ) No. VA-
261-11-RQ-1514 for subscription and support services at the VA San
Francisco Medical Center. The protester asserts that the VA improperly
failed to comply with applicable statutes and regulations to determine
whether the procurement should be set aside for SDVOSB concerns.
We sustain the protest.
Background:
The RFQ, issued on September 13, 2011, sought quotations by September
15 for a brand name (LiveProcess Enterprise) subscription and support
services for a 1-year term. On September 15, Kingdomware protested to
our Office, arguing that the RFQ was improperly restricted to the
brand name because the protester provided similar subscription
services. The protester also argued that the VA failed to conduct
proper market research, as required by Federal Acquisition Regulation
(FAR) ง 19.1405 (a), (b), to determine whether the requirement should
be set aside for SDVOSBs.
In response to the protest, the agency advised our Office by letter of
September 28 that it would take corrective action. Specifically, the
VA stated that:
VA has determined that its sole source award to Live Process may not
have been in accordance with the Federal Acquisition Regulation and
prior GAO case law. VA will undertake corrective action in the instant
protest by creating a requirement that is broadly defined and re-
solicit it. The new solicitation or request for quote will include a
revised statement of work, and other changes deemed appropriate. Also,
VA will terminate the sole source award to Live Process. However, VA
intends to solicit this requirement under FAR 8.4 which is exempt from
FAR 19 requirements (FAR 8.404(a)). The protester improperly cites FAR
19.1405(a) and (b) as authority for a Service Disabled Veteran Owned
Small Business Set Aside over a "GSA Schedule opportunity." In
addition, FAR 19.1404(c) excludes Federal Supply Schedule acquisitions
from FAR 19.14.
VA's Motion to Dismiss at 1.
On October 5, the protester objected to the proposed corrective
action, arguing that the Veterans Benefits Health Care, and
Information Technology Act of 2006, 38 U.S.C. งง 8127-8128 (2006) (the
2006 VA Act) "enjoins the Department to make reasonable efforts to
ascertain whether a solicitation can be set aside for service disabled
veteran owned small businesses ('SDVOSB'), without regard to whether
or not the SDVOSBs hold a Federal Supply Schedule ('FSS') contract."
Protester's Response to Motion to Dismiss at 1. Kingdomware contends
that the VA should conduct market research to determine whether the
requirement could be set aside for SDVOSBs or Veteran-Owned Small
Business (VOSB) concerns. Id. at 5.
On October 12, in light of our recent decision in Aldevra, B-405271, B-
405524, Oct. 11, 2011, 2011 CPD ถ 183, we asked the VA if it intended
to revise its proposed corrective action. In that decision we found
that the VA improperly used non-mandatory Federal Supply Schedule
procedures to procure items without conducting market research to
determine if the procurements should be set aside for SDVOSBs in
violation of the 2006 VA Act. We noted that the 2006 VA Act in
relevant part, 38 U.S.C. ง 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 statute also sets out an order of priority for the contracting
preferences it establishes, providing that the first priority for
contracts awarded pursuant to 38 U.S.C. ง 8127(d) shall be given to
SDVOSB concerns, followed by VOSBs. 38 U.S.C. ง 8127(i).
On October 19, the VA responded that on the day it informed us of its
proposed corrective action (September 28) the agency had executed the
corrective action due to the expiration of fiscal year 2011 funds.
Specifically, the VA states that on that date it canceled the sole
source award to LiveProcess and issued a revised solicitation under
FSS procedures for procurement of the services on a brand name or
equal basis. The VA further states that it received quotations on
September 29 arid issued a delivery order on September 30. On October
26, the VA submitted its agency report in response to the protest.
Discussion:
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. งง 3551-3556 (2006)
and our Bid Protest Regulations, 4 C.F.R. ง 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., B0242945, June 24, 1991 CPD ถ
593 at 4-5.
We also do not agree with the VA that Kingdomware has not been
prejudiced by the agency's actions. As note 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. ง 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.[Footnote 1]
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.
Recommendation:
We recommend that the agency conduct reasonable market research
regarding its requirements. If as a result of this research the VA
determines that there are two or more SDVOSB concerns capable of
performing the requirement, the agency should cancel the award and re-
solicit its requirement as a set aside for SDVOSBs. We also recommend
that the agency reimburse the protester the costs of filing and pursuing
the protest. 4 C.F.R. ง 21.8(d)(1) (2011). Kingdomware's certified
claims for costs, detailing the time expended and costs incurred, must
be submitted to the agency within 60 days after receipt of this
decision. Id. ง 21.8(f)(1).
The protest is sustained.
Lynn H. Gibson:
General Counsel:
Footnote:
[1] Although the VA contends that Kingdomware has not proven that
there are two or more SDVOSBs that can perform the requirements, the
agency does not assert that there are not two or more eligible SDVOSBs
that could perform.
[End of section]
Comptroller General of the United States:
United States Government Accountability Office:
Washington, DC 20548:
Decision:
Matter of: Crosstown Courier Service, Inc.
File: B-406262:
Date: March 21, 2012:
Christopher Noyes, Crosstown Courier Service, Inc., for the protester.
Kate Gorney, Esq., and Dennis Foley, Esq., Department of Veterans
Affairs, for the agency.
Jacqueline Maeder, Esq., Scott H. Riback, Esq., and David A. Ashen,
Esq., Office of the General Counsel, GAO, participated in the
preparation of the decision.
Digest:
The Veterans Benefits, Health Care, and Information Technology Act of
2006 requires the Department of Veterans Affairs to determine whether
two or more service-disabled veteran-owned small business concerns can
meet its requirement at a reasonable price before proceeding with a
Federal Supply Schedule acquisition.
Decision:
Crosstown Courier Service, Inc. of Chicopee, Massachusetts, a service-
disabled veteran-owned small business (SDVOSB) concern, protests the
terms of request for quotations (RFQ) No. VA261-11-RQ-1653, issued by
the Department of Veterans Affairs (VA) for commercial courier
services to transport diagnostic blood and urine specimens on a set
schedule from outlying VA laboratories to the main VA laboratories in
Palo Alto and Livermore, California. Crosstown asserts that the agency
improperly failed to comply with the requirement of the Veterans
Benefits, Health Care, and Information Technology Act of 2006, 38
U.S.C. งง 8127-8128 (2006) (the VA Act), and its implementing
regulations to determine whether this procurement should be set aside
for SDVOSB (or veteran-owned small business (VOSB)) concerns.
We sustain the protest.
This procurement is being conducted pursuant to General Services
Administration Federal Supply Schedule (FSS) procedure 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 ง 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, 2012
CPD ถ__, 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.
Recommendation:
We recommend that the agency conduct reasonable market research
regarding its requirement under the solicitation. If it determines
that there is a reasonable expectation that two or more SDVOSB (or
VOSB) concerns can meet the requirement at a reasonable price, we
recommend that the agency cancel the solicitation and re-solicit the
requirement as an SDVOSB (or VOSB) set-aside. We also recommend that
the agency reimburse the protester the costs of filing and pursuing
the protest. 4 C.F.R. ง 21.8(d)(1) (2001). Crosstown's certified claim
for costs, detailing time expended and costs incurred, must be
submitted to the agency within 60 days after receipt of this decision.
4 C.F.R. ง 21.8(f)(1).
[End of document]