B-400615, Madison Services, Inc., December 11, 2008
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective Order. This redacted version has been approved for public release.
1. Small Business Administration’s (SBA) decision to accept requirements into its 8(a) program, notwithstanding the fact that the solicitations for the requirements previously had been issued as small business set-asides, is unobjectionable where SBA concluded that the relevant procurement history supported the view that the initial small business set-asides were issued in error and therefore justified the application of the “extraordinary circumstances” provision under SBA’s regulations.
2. SBA properly accepted requirements into the 8(a) program without first determining whether doing so would have an adverse impact on existing small business concerns where the requirements qualified as new under SBA’s regulations.
Madison Services, Inc. of
By way of background, in 2005, FEMA issued two multiple award, fixed-price indefinite-delivery/indefinite-quantity (ID/IQ) contracts for a wide array of services related to the maintenance and deactivation of mobile homes and travel trailers in Mississippi, which had been supplied by FEMA in the wake of Hurricane Katrina. The requirements under the two solicitations were identical, however one was set aside for small business concerns and the other was set aside for small and disadvantaged businesses under section 8(a) of the Small Business Act. Between these two solicitations, FEMA awarded a total of 10 contracts--5 under each solicitation--with Madison receiving an award under the solicitation set aside for small business concerns. Each ID/IQ contract had a 5-year term (with five separate ordering periods), a $50,000 minimum guaranteed value, and a $100 million maximum value.
As it relates to the protest, FEMA’s acquisition plan provided for the award of these four contracts as small business set-asides. Specifically, the acquisition plan stated as follows:
These requirements can be competed on the basis of Full and Open Competition, with a small business set-aside to
vendors . . . . Further setting these requirements aside to local 8(a) contractors was considered, however determined to be unfair to those current [maintenance and deactivation contractors] who are [small businesses], and not 8(a)s. Mississippi
FEMA Acquisition Plan for the Revised
In late August 2008, FEMA issued four solicitations (HSFEMS-08-R-0034, 0038, 0039, and 0040), one for each of the four major requirements noted above. Each of the four solicitations was set aside for small business concerns. As it relates to the protest, 0034 was for travel trailer deactivation services and 0040 was for septic bladder pumping services for travel trailers and mobile homes.
On August 29, the Deputy Chief Procurement Officer for the
Department of Homeland Security (DHS)
informed the contracting officer (CO) that, based on an analysis of “the
program requirements and corresponding contract history” FEMA should select at
least two of the four requirements under solicitations 0034, 0038, 0039, and
0040, and set them aside under the 8(a) program. AR, Tab J, e-mail from DHS Deputy Chief
Procurement Officer to CO,
Accordingly, on September 5, the CO requested that the
Small Business Administration (SBA) accept the travel trailer deactivation and
septic bladder pumping services requirements (solicitation Nos. 0034 and 0040)
into the 8(a) program. In her request,
the CO represented that “[a] public solicitation for this procurement was
previously issued in error and published in FedBizOpps as a small business
set-aside rather than an 8(a) set aside.”
AR, Tab K, Letter from CO to SBA regarding 8(a) set aside,
SBA’s regulations provide that SBA will not accept a requirement into the 8(a) program if the procuring agency previously issued a solicitation as a small business set-aside or expressed its intent to reserve the requirement for small business concerns, except “under extraordinary circumstances”; as an example of such circumstances, the regulation states that SBA may accept a requirement “where a procuring agency made a decision to offer the requirement to the 8(a) BD [business development] program before the solicitation was sent out and the procuring agency acknowledges and documents that the solicitation was in error.” 13 C.F.R. sect. 124.504(a) (2008).
Evidently, in an effort to justify SBA’s acceptance of the
0034 and 0040 requirements into the 8(a) program notwithstanding the prior
announcement of these requirements as small business set-asides, the CO wrote
SBA and explained the procurement history preceding FEMA’s decision to procure
the four major tasks separately.
Specifically, the CO indicated that FEMA had previously awarded an equal
number of ID/IQ small business set-aside contracts and 8(a) contracts to
perform the requirements, which were now divided among the four separate
solicitations, and that FEMA’s announcement of all four contracts as small
business set-asides “was in error” since it was not consistent with “the
principal of the original requirement,” which had been divided between small
business and 8(a) contractors. AR, Tab
L, E-mail from CO to SBA regarding 8(a) set-aside,
Thereafter, SBA accepted the 0034 and 0040 requirements into the 8(a) program. Solicitation Nos. 0034 and 0040 were withdrawn and reissued as 8(a) set-asides with new solicitation numbers (0041 and 0042, respectively). FEMA indicates that the estimated value for 0041 (travel trailer deactivation services) is $2,830,000 and for 0042 (septic bladder pumping services), $1,219,800. AR, Tab P, SBA Letters of Acceptance of Requirements into 8(a) Program.
In its protest, Madison argues that SBA’s acceptance of
the travel trailer deactivation services and septic bladder pumping services
requirements under the 8(a) program was contrary to 13 C.F.R. sect. 124.504(a)
since they had been initially issued as small business set-asides. In this regard,
Section 8(a) of the Small Business Act, 15 U.S.C. sect. 637(a) (2000),
authorizes SBA to enter into contracts with government agencies and to arrange
for performance through subcontracts with socially and economically
disadvantaged small business concerns.
Federal Acquisition Regulation sect. 19.800. The Act affords SBA and contracting agencies
broad discretion in selecting procurements for the 8(a) program; accordingly, we will not
consider a protest challenging a decision to procure under the 8(a) program absent a
showing of possible bad faith
on the part of government officials or that regulations may have been violated. 4 C.F.R. sect. 21.5(b)(3) (2008); Rothe Computer Solutions LLC d/b/a
Rohmann J.V., B-299452,
As noted above, 13 C.F.R. sect. 124.504(a) precludes SBA from
accepting into the 8(a) program a procurement for which the contracting agency
had previously issued, or expressed the intent to issue, the solicitation as a
small business set-aside except under “extraordinary circumstances.”
SBA maintains that after considering all the relevant
facts, it properly concluded that FEMA’s initial small business set-asides were
erroneous and did not reflect the agency’s intentions. In this regard, SBA highlights the fact that
not placing any of the work under the 8(a) program was inconsistent with FEMA’s
previously awarded contracts encompassing the same services, which had been
equally divided between small business set-aside awards and awards under the
8(a) program. Based on these facts, SBA
concluded that the case fell within the extraordinary circumstances exception
provided in its regulations. As a general matter, we accord SBA’s
interpretations of regulations which it promulgates, such as those regarding
the 8(a) program, great weight. Singleton
Enters.--GMT Mech., A Joint Venture, B-310552,
Madison also argues that SBA’s acceptance of the requirements for award under the 8(a) program was improper because SBA failed to consider, as required by 13 C.F.R. sect. 124.504(c), the “adverse impact” on small businesses presently performing the requirements under the previously awarded ID/IQ contracts. The adverse impact concept is designed to protect small business concerns that are performing government contracts awarded outside the 8(a) program.
SBA argues that an adverse impact determination was not required because the requirements at issue were considered to be new as compared to the ID/IQ contracts previously awarded by FEMA to small business concerns. In this regard, the regulations explicitly provide that the “SBA need not perform an impact determination where a new requirement is offered to the 8(a) BD [business development] program.” 13 C.F.R. sect. 124.504(c)(1)(ii)(D). The regulations further explain that “[t]he expansion or modification of an existing requirement will be considered a new requirement where the magnitude of change is significant enough to cause a price adjustment of at least 25 percent (adjusted for inflation) or to require significant additional or different types of capabilities or work.” 13 C.F.R. sect. 124.504(c)(1)(ii)(C).
In determining whether there has been a price change of at
least 25 percent where an agency has decided to essentially modify the
requirements to unbundle previously consolidated requirements, SBA has
reasonably interpreted its own regulations as providing for a comparison of the
value of the requirement to be solicited (the unbundled requirement) with the
overall value of the existing contract encompassing the requirement (the
consolidated requirement). Rothe
Computer Solutions LLC d/b/a Rohmann J.V., supra, at 10. Here, as explained above, FEMA previously
awarded consolidated small business set-aside contracts for septic tank
pumping, trailer and mobile home maintenance, travel trailer deactivation, and
mobile home deactivation services, with values up to $100 million. FEMA is now separately procuring those
services and SBA has accepted, under the 8(a) program, the travel trailer
deactivation services requirement, with an estimated value of approximately
$2.8 million, and the septic tank pumping requirement, with an estimated value
of approximately $1.2 million. The
change in value of the travel trailer deactivation services requirement and
septic tank pumping services requirement, as compared to the value of the
consolidated contracts, is, for each contract, greater than 25 percent. As a consequence, the argument advanced by
As a final matter,
The protest is denied.
Gary L. Kepplinger
 FEMA is a component of DHS.
Our Office provided SBA with an opportunity to comment on issues raised by
 To the extent Madison argues that the case here is not factually identical to the example of an extraordinary circumstance identified in SBA’s regulations since SBA initially had documented a decision not to set aside the requirement under the 8(a) program, Madison’s argument is misplaced since the example cited in the regulation represents only one situation where SBA may apply the extraordinary circumstances exception and does not preclude SBA’s application of this exception under other facts.