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GAO-11-211SP:  

United States Government Accountability Office: 
Washington, DC 20548:  

B-158766:  

November 23, 2010:  

The Honorable Nancy Pelosi: 
Speaker of the House of Representatives:  

Dear Madam Speaker:  

This letter responds to the requirements of the Competition in 
Contracting Act of 1984, 31 U.S.C. § 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. 
There were three such occurrences in fiscal year 2010, DGR Assocs., 
Inc., B-402494, May 14, 2010, 2010 CPD 111 115, Rice Servs., Inc., B-
402966.2, Sept. 16, 2010, 2010 CPD If 217, and Rice Servs., Inc., B-
403746, Sept. 16, 2010, 2010 CPD If 220. Enclosed is a copy of our 
report on these matters created pursuant to 31 U.S.C. § 3554(e)(1), as 
well as copies of our decisions in the protests explaining in greater 
detail the particulars surrounding the procurements.  

During the fiscal year, we received 2,220 protests (including 52 cost 
claims) and 79 requests for reconsideration, for a total of 2,299 
cases. Of the 2,299 cases filed, 189 are attributable to GAO's 
recently expanded bid protest jurisdiction over task orders. We closed 
2,226 cases during the fiscal year: 2,131 protests (including 64 cost 
claims), 94 requests for reconsideration, and 1 non-statutory 
decision. Enclosed for your information is a chart comparing the bid 
protest activity for fiscal years 2006-2010.  

A copy of this report, with the enclosure, is being furnished to the 
Chairman and Ranking Minority Member of the House Committee on 
Government Reform. A similar report is being furnished to the 
President of the Senate.  

Sincerely yours,  

Signed by:  

Lynn H. Gibson: 
Acting General Counsel:  

Enclosure:  

[End of letter]  

Table: Bid Protest Statistics for Fiscal Years 2006-2010:  

Cases Filed[1]: 
FY 2010: 2,229 (up 16%); 
FY 2009: 1,989[2] (up 20%)[3]; 
FY 2008: 1,652 (up 17%); 
FY 2007: 1,411 (up 6%);
FY 2006: 1,326 (down 2%).  

Cases Closed: 
FY 2010: 2,226; 
FY 2009: 1,920; 
FY 2008: 1,582; 
FY 2007: 1,394; 
FY 2006: 1,275.  

Merit (Sustain + Deny) Decisions: 
FY 2010: 441; 
FY 2009: 315; 
FY 2008: 291; 
FY 2007: 335; 
FY 2006: 251.  

Number of Sustains: 
FY 2010: 82; 
FY 2009: 57; 
FY 2008: 60; 
FY 2007: 91; 
FY 2006: 72.  

Sustain Rate: 
FY 2010: 19%; 
FY 2009: 18%; 
FY 2008: 21%; 
FY 2007: 27%; 
FY 2006: 29%.  

Effectiveness Rate (reported)[4]: 
FY 2010: 42%; 
FY 2009: 45%; 
FY 2008: 42%; 
FY 2007: 38%; 
FY 2006: 39%.  

ADR[5] (cases used): 
FY 2010: 159; 
FY 2009: 149; 
FY 2008: 78; 
FY 2007: 62; 
FY 2006: 91.  

ADR Success Rate[6]: 
FY 2010: 80%; 
FY 2009: 93%; 
FY 2008: 78%; 
FY 2007: 85%; 
FY 2006: 96%.  

Hearings[7]: 
FY 2010: 10% (61 cases); 
FY 2009: 12% (65 cases); 
FY 2008: 6% (32 cases); 
FY 2007: 8% (41 cases); 
FY 2006: 11% (51 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.  

[2] Of the 2,299 cases filed in FY 2010, 189 are attributable to GAO's 
recently expanded bid protest jurisdiction over task orders. These 189 
filings represent 61% of the total increase in filings from FY 2009 to 
FY 2010 (310 filings).  

[3] From the prior fiscal year.  

[4] Based on a protester obtaining some form of relief from the 
agency, as reported to GAO.  

[5] Alternative Dispute Resolution.  

[6] Percentage resolved without a formal GAO decision.  

[7] Percentage of fully developed decisions in which GAO conducted a 
hearing.  

[End of table] 
	
United States Government Accountability Office: 
Washington, DC 20548:  

B-402494, B-402966.2, B-403746:  

November 23, 2010:  

Congressional Committees:  

Subject: DGR Assocs., Inc., B-402494, May 14, 2010, 2010 CPD ¶ 115, 
Rice Servs., Inc., B-402966.2, Sept. 16, 2010, 2010 CPD ¶ 217, and 
Rice Servs., Inc., B-403746, Sept. 16, 2010, 2010 CPD ¶ 220.  

This letter is submitted pursuant to 31 U.S.C. § 3554(e)(1) (2006), 
which requires our Office to report any case in which a Federal agency 
fails to implement fully a recommendation of the Comptroller General 
contained in a bid protest decision. As required by that statute, this 
report includes a comprehensive review of the procurements, including 
the circumstances surrounding the failure of the contracting agency to 
implement the recommendation made in the decision.  

Last fiscal year, on October 23, 2009, we reported to the Committee 
that the Department of the Army had failed to implement the 
recommendation for corrective action in our Office's decision 
sustaining the protest of Mission Critical Solutions, B-401057, May 4, 
2009, 2009 CPD ¶ 148. In that decision, we concluded that the 
Historically Underutilized Business Zone (HUBZone) statute mandated a 
HUBZone set-aside or award where certain enumerated conditions were 
met, and that the Army had failed to reasonably consider whether those 
conditions were met prior to proceeding with a non-HUBZone small 
business award. We recommended that the agency reconsider whether the 
conditions enumerated in the HUBZone statute were met, and if so, 
terminate the award and make a new award to a HUBZone small business.  

The Army initially indicated that it would comply with our 
recommendation, however, the Army subsequently advised our Office that 
it would not follow our recommendation in reliance on an August 21, 
2009 Memorandum Opinion by the Office of the Deputy Assistant Attorney 
General, Office of Legal Counsel, Department of Justice (DOJ), 
disagreeing with our interpretation of the HUBZone statute. For 
further details on the circumstances of the Mission Critical Solutions 
protest and DOJ Memorandum Opinion, please see our Office's October 23 
report to the Committee.  

During fiscal year 2010, there were three further occurrences in which 
an agency declined to consider whether to set aside procurements for 
HUBZone small business firms. contrary to our Office's decisions, in 
reliance or the DOJ Memorandum Opinion: DGR Assocs., Inc.; B-402494, 
May 14, 2010 CDP ¶ 115, Rice Servs., Inc., B-402966.2, Sept. 16, 2010 
CPD ¶ 217, and Rice Servs., Inc., B-403746, Sept. 16, 2010, 2010 CPD ¶ 
220. Our Office sustained each protest, and in each case recommended 
that the agency consider whether the conditions in the HUBZone statute 
were met, and if so, set aside the procurement for competition 
restricted to HUBZone small businesses. In each case, the agency 
declined to follow our recommendation, again citing the DOJ Memorandum 
Opinion.  

As stated in our October 23 report to the Committee, in a September 
14, 2009 letter to various Congressional Committees our Office 
explained that our conclusion regarding the HUBZone statute was 
strictly a legal determination and was not intended to express a 
preference—in one direction or the other—about whether the HUBZone 
program should have priority over other set-aside programs or whether 
there should be parity among the programs; we recognized that the 
foregoing matter is a question of policy to be resolved by Congress. 
We also stated our belief that the acquisition community would benefit 
from statutory guidance clarifying whether Congress intends for there 
to be parity or priority among the various set-aside programs.  

On September 27, 2010, the enactment of the Small Business Jobs Act of 
2010 provided statutory guidance clarifying this matter, providing for 
parity between the various small business programs by striking 
mandatory language in the HUBZone statute and inserting discretionary 
language. See Pub. L. No. 111-240, § 1347(c).  

Enclosed for your review are copies of our decisions in the protests 
and our Office's October 23, 2009 report to the Committee.  

Sincerely yours,  

Signed by:  

Lynn H. Gibson: 
Acting General Counsel:  

Enclosures:  

cc:  

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 David R. Obey: 
Chairman: 
The Honorable Jerry Lewis: 
Ranking Member: 
Committee on Appropriations: 
House of Representatives:  

The Honorable Ike Skelton: 
Chairman: 
The Honorable Howard P. "Buck" McKeon: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives:  

The Honorable Edolphus Towns: 
Chairman: 
The Honorable Darrell Issa: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives:  

The Honorable Nydia M. Velazquez: 
Chairwoman:
The Honorable Sam Graves:
Ranking Member:
Committee on Small Business: 
House of Representatives: 

[End of letter]  

Comptroller General of the United States: 
United States Government Accountability Office: 
Washington, DC 20548:  

Decision:  

Matter of: DGR Associates, Inc.  

File: B-402494:  

Date: May 14, 2010:  

Darcy Hennessy, Esq., Hennessy and Boe, PA, for the protester.
S. Lane Tucker, Esq., Stoel Rives LLP; Wayne A. Keup, Esq.; and 
William K. Walker, Esq., Walker Reausaw for the intervenors.
Christopher S. Cole, Esq., Department of the Air Force, for the agency.
Cherie J. Owen, Esq., and Edward T. Goldstein, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.  

Digest:  

Given the unambiguous language of the applicable statutes regarding 
the Historically Underutilized Business Zone (HUBZone) and 8(a) 
programs, contracting agency, before proceeding with an 8(a) set-
aside, must first reasonably consider whether the conditions for a 
HUBZone set-aside exist, and, if they do, the agency must proceed with 
a HUBZone set-aside.  

Decision:  

DGR Associates, Inc. of Dallas, Texas, a Historically Underutilized 
Business Zone (HUBZone) small business concern, protests the terms of 
request for proposals (RFP) No. FA5004-10-D-0001, issued by the 
Department of the Air Force for military family housing maintenance. 
DGR argues that the Air Force should have issued the
solicitation as a HUBZone set-aside rather than setting it aside under 
the 8(a) program.  

We sustain the protest.  

Background:  

The Air Force, on December 22, 2009, issued the RFP as a set-aside for 
8(a) small business concerns. The RFP contemplates the award of a 
fixed-price requirements contract for maintenance, inspection, and 
repair services for military family housing (MFH) at Eielson Air Force 
Base, Alaska.[Footnote 1] Specifically, the successful offeror will be 
required to provide all management, supervision, personnel, labor, 
equipment, vehicles, service calls, materials, tools, and other items 
and services necessary for maintenance of the 1,184 MFH units located 
on the base.  

On January 22, 2010, DGR filed art agency-level protest challenging, 
among other things, the agency's decision not to set aside the 
procurement for HUBZone small businesses. The agency decided to 
proceed with the solicitation's closing date without amending the 
solicitation, and this protest followed.  

Discussion:  

DGR argues that the agency's decision to set aside the procurement for 
8(a) small businesses was improper, and that the agency instead was 
required to set aside the procurement for HUBZone small businesses. In 
this regard, DGR cites several decisions issued by our Office 
interpreting the applicable statutes as requiring an agency to set 
aside a solicitation for HUBZone small business concerns where the 
standards of that program are satisfied. As explained in our 
decisions, the plain language of the statute authorizing the HUBZone 
program is mandatory and requires that an agency set aside a 
procurement when certain criteria are met (specifically, where the 
agency has a reasonable expectation of receiving offers from at least 
two qualified HUBZone small business concerns and where the award can 
be made at a fair market price), whereas the plain language of the 
authorizing statute for the 8(a) program leaves the agency with 
discretion to set aside the procurement. See Mission Critical 
Solutions, B-401057, May 4, 2009, 2009 CPD 93 at 3-8, recon. denied, 
Small Business Admin.--Recon., B-401057.2, July 6, 2009, 2009 CPD I 
148 at 5.  

The Air Force acknowledges our decisions, but contends that its 
actions are consistent with a Memorandum Opinion by the Office of the 
Deputy Assistant Attorney General, Office of Legal Counsel, Department 
of Justice (D0J), stating its disagreement with our decisions and 
concluding that the Small Business Act "does not compel SBA [the Small 
Business Administration] to prioritize the HUBZone Program in the 
manner GAO determined to be required." DOJ Memorandum Opinion, Aug. 
21, 2009, at 2. This memorandum directs Executive Branch agencies to 
follow SBA's regulations placing the different categories of small 
businesses on an equal footing for the competition and award of 
contracts.[Footnote 2] In this regard, the DOJ  

Memorandum expressly instructs that "the SBA's regulations ... are 
reasonable [and are] binding on all Executive Branch agencies, 
notwithstanding any GAO decisions to the contrary," and reminds 
agencies that GAO decisions are not binding on the Executive Branch. 
Id. at 13.  

The DOJ opinion notwithstanding, we continue to read the plain 
language of the HUBZone statute as requiring an agency to set aside an 
acquisition for competition restricted to qualified HUBZone small 
business concerns where it has a reasonable expectation that not less 
than two qualified HUBZone small business concerns will submit offers 
and that the award can be made at a fair market price. See also 
Mission Critical Solutions v. United States, No. 09-864C (Fed. Cl. 
Mar. 2, 2010), appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010) 
(rejecting DOJ's interpretation of the HUBZone statute and concluding, 
consistent with our decisions in Mission Critical Solutions, B-401057, 
supra, that the language of the HUBZone statute is mandatory, such 
that a contract opportunity must be set aside for competition among 
qualified HUBZone small business concerns whenever the criteria set 
out in 15 U.S.C. § 657a are met). Thus, we conclude that the Air Force 
was required to first consider whether the conditions for setting 
aside a procurement for HUBZone businesses were met, and if so, to set 
aside the procurement for HUBZone small businesses. Because the agency 
did not perform this mandatory step, we conclude that it was improper 
for the agency to proceed with this procurement as an 8(a) set-aside, 
and we sustain the protest.  

Recommendation:  

We recommend that the agency undertake reasonable efforts to ascertain 
whether it will receive offers from at least two HUBZone concerns and 
award will be made at a fair market price. If the agency's research 
indicates that these conditions are met, the agency should cancel the 
current solicitation and reissue it as a HUBZone set-aside. We also 
recommend that the agency reimburse the protester its costs of filing 
and pursuing the protest, including reasonable attorneys' fees. 
[Footnote 3] 4 C.F.R. § 21.8(d)(1) (2009).  

In making our recommendation, we recognize, as the Air Force has noted 
and the DOJ memorandum indicates, that the recommendations in our bid 
protest decisions are not binding on Executive Branch agencies. Small 
Business Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478 
U.S. 714, 727-32 (1986)). This fact, however, does not affect our 
statutory obligation to decide protests concerning alleged violations 
of procurement statutes and regulations. See 31 U.S.C. § 3552 (2006). 
We have clearly stated our view on the proper interpretation of the 
HUBZone statute, and we recognize that the Executive Branch has 
resolved to apply its own, contrary interpretation of the HUBZone 
statute. Accordingly, absent some change in the statutory scheme, 
Executive Branch policy, or a contrary decision by the United States 
Court of Appeals for the Federal Circuit in connection with the 
Justice Department's appeal of the decision in Mission Critical 
Solutions v. United States, supra, we will decide future protests 
raising the issue here in an expedited and summary manner, in the 
interest of reducing the costs associated with filing and pursuing 
such protests.  

The protest is sustained.  

Lynn H. Gibson: 
Acting General Counsel:  

[End of section]  

Comptroller General of the United States: 
United States Government Accountability Office: 
Washington, DC 20548:  

Decision:  

Matter of: Rice Services, Inc.  

File: B-402966.2:  

Date: September 16, 2010:  

William R. Purdy, Esq., Bradley Arant Boult Cummings LLP, for the 
protester. Helen J.S. White, Esq., Defense Commissary Agency, for the 
agency. 
Eric M. Ransom, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.  

Digest:  

In accordance with DGR Assocs., Inc., B-402494, May 14, 2010, 2010 CPD 
11 115, protest is summarily sustained where contracting agency 
declined to consider whether to set aside solicitation for competition 
limited to Historically Underutilized Business Zone small business 
concerns in reliance on the August 21, 2009 Memorandum Opinion by the 
Office of the Deputy Assistant Attorney General, Office of Legal 
Counsel, Department of Justice.  

Decision:  

Rice Services, Inc., of Smithville, Tennessee, a Historically 
Underutilized Business Zone (HUBZone) small business concern, protests 
the terms of solicitation No. HDEC08-10-R-0018, issued as a set-aside 
for service-disabled veteran-owned small business concerns (SDVOSBC) 
by the Defense Commissary Agency (DeCA) for shelf stocking and 
custodial services at the Davis-Monthan Air Force Base Commissary.  

We sustain the protest.  

DeCA issued the solicitation on July 30, 2010, as a total set-aside 
for SDVOSBCs. Rice Services filed this protest on August 16, arguing 
that the procurement should instead be set aside for competition 
limited to HUBZone small business concerns. In this regard, Rice 
Services asserts that the conditions for a mandatory HUBZone set-aside 
exist, citing the HUBZone statute, 15 U.S.C. § 657a, Federal 
Acquisition Regulation (FAR) § 19.1305(a), and our decision in DGR 
Assocs., Inc., B-402494, May 14, 2010, 2010 CPD 1f 115.  

Our Office has considered this issue in several prior protests, 
including DGR Assocs., Inc., supra; Mission Critical Solutions, B-
401057, May 4, 2009, 2009 CPD 93, recon. denied, Small Business 
Admin.--Recon., B-401057.2, July 6, 2009, 2009 CPD 11 148; and 
International Program Group, Inc., B-400278, B-400308, Sept. 19, 2008, 
2008 CPD ¶ 172. In each decision, our Office has concluded that the 
HUBZone statute requires procuring agencies to set aside procurements 
for HUBZone small business concerns when the conditions set forth in 
the statute are met.  

In our most recent decision on this issue, DGR Assocs., Inc., the 
agency explained that it had decided not to set aside the procurement 
for HUBZone small business concerns in reliance on a Memorandum 
Opinion by the Office of the Deputy Assistant Attorney General, Office 
of Legal Counsel, Department of Justice (D0J), stating disagreement 
with our decisions and concluding that the Small Business Act does not 
require the prioritization of the HUBZone program in the manner that 
our Office has determined. See DOJ Memorandum Opinion, Aug. 21, 2009, 
at 2. The DOJ Memorandum states that "the SBA's regulations [creating 
parity between the HUBZone program and other small business set-aside 
programs] ... are reasonable [and are] binding on all Executive Branch 
agencies, notwithstanding any GAO decisions to the contrary." Id. at 
13.  

The DOJ Memorandum notwithstanding, our Office concluded in DGR 
Assocs., Inc., as in prior decisions, that the plain language of the 
HUBZone statute requires an agency to set aside an acquisition for 
competition restricted to qualified HUBZone small business concerns 
where the conditions set forth in the HUBZone statute are met. We also 
advised that, going forward, protests raising the sole issue of 
HUBZone set-aside priority would be addressed in an "expedited and 
summary manner" where the agency acted contrary to our decisions in 
reliance on the DOJ Memorandum Opinion. DGR Assocs., Inc., supra, at 
4.  

Accordingly, after Rice Services filed its current protest, we 
requested that DeCA inform our Office whether it had acted in reliance 
on the DOJ Memorandum Opinion. DeCA responded that "in issuing the 
solicitation for SDVOSBC, the Agency [acted] in reliance on the 
Memorandum Opinion issued by the Office of the Deputy Assistant 
Attorney General, Office of Legal Counsel, Department of Justice, 
which concluded that there is no statutory requirement to prioritize 
the HUBZone program." DeCA Response, Aug. 18, 2010, at 1.  

As explained in our prior decision, we read the plain language of the 
HUBZone statute as requiring an agency to set aside an acquisition for 
competition restricted to qualified HUBZone small business concerns 
where it has a reasonable expectation that not less than two qualified 
HUBZone small business concerns will submit offers and that the award 
can be made at a fair market price. See also Mission Critical 
Solutions v. United States, No. 09-864C (Fed. Cl. Mar. 2, 2010), 
appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010) (rejecting 
D0J's interpretation of the HUBZone statute and concluding, consistent 
with our decision in Mission Critical Solutions, B-401057, supra, that 
the language of the HUBZone statute is mandatory, such that a contract 
opportunity must be set aside for competition among qualified HUBZone 
small business concerns whenever the criteria set out in 15 U.S.C. § 
657a are met). Thus, we conclude that DeCA was required to consider 
whether the conditions for setting aside a procurement for HUBZone 
small business concerns were met, and if so, to set aside the 
procurement for HUBZone small businesses. Because the agency did not 
perform this mandatory step, we conclude that it was improper for the 
agency to proceed with this procurement as an SDVOSBC set-aside.  

Recommendation:  

In making our recommendation, we recognize, as the DOJ Memorandum 
Opinion indicates, that the recommendations in our bid protest 
decisions are not binding on Executive Branch agencies. Small Business 
Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478 U.S. 714, 
727-32 (1986)). This fact, however, does not affect our statutory 
obligation to decide protests concerning alleged violations of 
procurement statutes and regulations. See 31 U.S.C. § 3552 (2006).  

Accordingly, we recommend that the agency undertake reasonable efforts 
to ascertain whether it will receive offers from at least two HUBZone 
concerns and award will be made at a fair market price. If the 
agency's research indicates that these conditions are met, the agency 
should cancel the current solicitation and reissue it as a HUBZone set-
aside. We also recommend that the agency reimburse the protester its 
costs of filing and pursuing the protest, including reasonable 
attorneys' fees. 4 C.F.R. § 21.8(d)(1) (2010). Rice Services should 
submit its claim for protest costs directly to DeCA within 60 days of 
receipt of this decision.  

The protest is sustained.  

Lynn H. Gibson: 
Acting General Counsel:  

[End of section]  

Comptroller General of the United States: 
United States Government Accountability Office: 
Washington, DC 20548:  

Decision:  

Matter of: Rice Services, Inc.  

File: B-403746:  

Date: September 16, 2010:  

William R. Purdy, Esq., Bradley Arant Boult Cummings LLP, for the 
protester. LTC Won K. Lee and Christopher S. Cole, Esq., Department of 
the Air Force, for the agency. 
Eric M. Ransom, Esq., and Christine S. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.  

Digest:  

In accordance with DGR Assocs., Inc., B-402494, May 14, 2010, 2010 CPD 
¶ 115, protest is summarily sustained where contracting agency 
declined to consider whether to set aside solicitation for competition 
limited to Historically Underutilized Business Zone small business 
concerns in reliance on the August 21, 2009 Memorandum Opinion by the 
Office of the Deputy Assistant Attorney General, Office of Legal 
Counsel, Department of Justice.  

Decision:  

Rice Services, Inc., of Smithville, Tennessee, a Historically 
Underutilized Business Zone (HUBZone) small business concern, protests 
the terms of solicitation No. FA4800-10-R-0003, issued by the 
Department of the Air Force for mess attendant services at Langley Air 
Force Base, Virginia.  

We sustain the protest.  

The Air Force issued the solicitation on August 16, 2010, as a set-
aside for competition among section 8(a) small business concerns. Rice 
Services filed this protest on August 31, arguing that the procurement 
should instead be set aside for competition limited to HUBZone small 
business concerns. In this regard, Rice Services asserts that the 
conditions for a mandatory HUBZone set-aside exist, citing the HUBZone 
statute, 15 U.S.C. § 657a, Federal Acquisition Regulation (FAR)
§ 19.1305(a), and our decision in DGR Assocs., Inc., B-402494, May 14, 
2010, 2010 CPD if 115.  

Our Office has considered this issue in several prior protests, 
including DGR Assocs., Inc., supra (which also involved a procurement 
by the Air Force); Mission Critical Solutions, B-401057, May 4, 2009, 
2009 CPD ¶ 93, recon. denied, Small Business Admin.--Recon., B-
401057.2, July 6, 2009, 2009 CPD 148; and International Program Group, 
Inc., B-400278, B-400308, Sept. 19, 2008, 2008 CPD ¶ 172. In each 
decision, our Office has concluded that the HUBZone statute requires 
procuring agencies to set aside procurements for HUBZone small 
business concerns when the conditions set forth in the statute are 
met.  

In our most recent decision on this issue, DGR Assocs., Inc., the Air 
Force explained that it had decided not to set aside the procurement 
for HUBZone small business concerns in reliance on a Memorandum 
Opinion by the Office of the Deputy Assistant Attorney General, Office 
of Legal Counsel, Department of Justice (D0J), stating disagreement 
with our decisions and concluding that the Small Business Act does not 
require the prioritization of the HUBZone program in the manner that 
our Office has determined. See DOJ Memorandum Opinion, Aug. 21, 2009, 
at 2. The DOJ Memorandum states that "the SBA's regulations [creating 
parity between the HUBZone program and other small business set-aside 
programs] ... are reasonable [and are] binding on all Executive Branch 
agencies, notwithstanding any GAO decisions to the contrary." Id. at 
13.  

The DOJ Memorandum notwithstanding, our Office concluded in DGR 
Assocs., Inc., as in prior decisions, that the plain language of the 
HUBZone statute requires an agency to set aside an acquisition for 
competition restricted to qualified HUBZone small business concerns 
where the conditions set forth in the HUBZone statute are met. We also 
advised that, going forward, protests raising the sole issue of 
HUBZone set-aside priority would be addressed in an "expedited and 
summary manner" where the agency acted contrary to our decisions in 
reliance on the DOJ Memorandum Opinion. DGR Assocs., Inc., supra, at 
4.  

Accordingly, after Rice Services filed its current protest, we 
requested that the Air Force inform our Office whether it had acted in 
reliance on the DOJ Memorandum Opinion. The Air Force responded that 
"[consistent] with our prior position, the Air Force intends to follow 
the Memorandum Opinion issued by the Office of the Deputy Assistant 
Attorney General, Office of Legal Counsel, Department of Justice, 
concluding that there is no statutory requirement to prioritize the 
HUBZone small business program." Air Force Letter to GAO, Sept. 10, 
2010, at 1.  

As explained in our prior decisions, we read the plain language of the 
HUBZone statute as requiring an agency to set aside an acquisition for 
competition restricted to qualified HUBZone small business concerns 
where it has a reasonable expectation that not less than two qualified 
HUBZone small business concerns will submit offers and that the award 
can be made at a fair market price. See also Mission Critical 
Solutions v. United States, No. 09-864C (Fed. Cl. Mar. 2, 2010), 
appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010) (rejecting 
DOJ's interpretation of the HUBZone statute and concluding, consistent 
with our decision in Mission Critical Solutions, B-401057, supra, that 
the language of the HUBZone statute is mandatory, such that a contract 
opportunity must be set aside for competition among qualified HUBZone 
small business concerns whenever the criteria set out in 15 U.S.C. § 
657a are met). Thus, we conclude that the Air Force was required to 
consider whether the conditions for setting aside a procurement for 
HUBZone small business concerns were met, and if so, to set aside the 
procurement for HUBZone small businesses. Because the agency did not 
perform this mandatory step, we conclude that it was improper for the 
agency to proceed with this procurement as an 8(a) set-aside.  

Recommendation:  

In making our recommendation, we recognize, as the DOJ Memorandum 
Opinion indicates, that the recommendations in our bid protest 
decisions are not binding on Executive Branch agencies. Small Business 
Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478 U.S. 714, 
727-32 (1986)). This fact, however, does not affect our statutory 
obligation to decide protests concerning alleged violations of 
procurement statutes and regulations. See 31 U.S.C. § 3552 (2006).  

Accordingly, we recommend that the agency undertake reasonable efforts 
to ascertain whether it will receive offers from at least two HUBZone 
concerns and award will be made at a fair market price. If the 
agency's research indicates that these conditions are met, the agency 
should cancel the current solicitation and reissue it as a HUBZone set-
aside. We also recommend that the agency reimburse the protester its 
costs of filing and pursuing the protest, including reasonable 
attorneys' fees. 4 C.F.R. § 21.8(d)(1) (2010). Rice Services should 
submit its claim for protest costs directly to the Air Force within 60 
days of receipt of this decision.  

The protest is sustained.  

Lynn H. Gibson: 
Acting General Counsel:  

[End of section]  

United States Government Accountability Office: 
Washington, DC 20548:  

B-401057:  

October 23, 2009:  

Congressional Committees:  

Subject: Mission Critical Solutions, B-401057, May 4, 2009, 2009 CPD 5 
93, recon. denied, Small Business Administration—Recon., B401057.2, 
July 6, 2009, 2009 CPD ¶ 148.  

This letter is submitted pursuant to 31 U.S.C. § 3554(e)(1) (2006), 
which, requires our Office to report any case in which a Federal 
agency fails to implement fully a recommendation of the Comptroller 
General contained in a bid protest decision. As required by that 
statute, this report includes a comprehensive review of the 
procurement, including the circumstances surrounding the failure of 
the contracting agency to implement the recommendation made in the 
decision, as well as a recommendation for further Congressional 
action.  

The decision in question concerned the Department of the Army's 
selection of Copper River Information Technology, TALC of Anchorage, 
Alaska, an 8(a) Alaska Native Corporation, for the award of a sole-
source contract for information technology support for the Office of 
the Judge Advocate General. The protester, Mission Critical Solutions 
of Tampa, Florida, which is a qualified Historically Underutilized 
Business Zone (HUBZone) small business, argued that rather than 
awarding to Copper River on a sole-source basis, the agency should 
have set the requirement aside for competition among HUBZone small 
businesses.  

Our Office found that it was improper for the agency to proceed with a 
sole-source award to Copper River without considering whether a set-
aside for HUBZone concerns was required. We based our conclusion on 
the plain language of the HUBZone statute, which provides in relevant 
part that "notwithstanding any other provision of law," "a contract 
opportunity shall be awarded pursuant to this section on the basis of 
competition restricted to qualified HUBZone small business concerns if 
the contracting officer has a reasonable expectation that not less 
than 2 qualified Zone small business concerns will submit offers and 
that the award can be made at a fair market price." 15 U.S.C. § 657a. 
We recommended that the agency undertake reasonable efforts to 
determine whether two or more qualified	HUBZone small business 
concerns would submit offers and whether award could be made at, a
reasonable price if the contract opportunity were set aside for 
competition among HUBZone firms, and that if there were such an 
expectation, that the requirement be resolicited on the basis of 
competition restricted to HUBZone small business concerns. We also 
recommended that the agency reimburse the protester the costs of 
filing and pursuing its protest, including reasonable attorneys' fees.  

By letter dated June 24, 2009, the Department of the Army notified our 
Office that it would be fully implementing the corrective action that 
we had recommended. In a subsequent letter dated September 28, 2009, 
the agency advised us that it had reversed its decision, and that 
rather than implementing our recommendation, it intended to make an 
award consistent with its original intent (i.e., as a sole-source 
award to an 8(a) firm). The agency explained that it was taking this 
action in response to an August 21, 2009 Memorandum Opinion by the 
Office of the Deputy Assistant Attorney General, Office of Legal 
Counsel, Department of Justice, which in effect directed executive 
branch agencies to follow the Small Business Administration's (SBA) 
regulations placing the different categories of small businesses on an 
equal footing for the competition and award of contracts. (The SBA 
regulations in question, 13 C.F.R. §§ 126.605, 126.606, 126.607, 
essentially provide that HUBZone set-asides are not required even 
where the criteria specified in 15 U.S.C. § 657a(b)(2)(B) are 
satisfied if the requirement has previously been performed by an 8(a) 
contractor or the contracting officer has chosen to offer the 
requirement to the 8(a) program.)  

The Department of Justice opinion notwithstanding, we continue to read 
the plain language of the HUBZone statute as requiring an agency to 
set aside an acquisition for competition restricted to qualified 
HUBZone small business concerns where it has a reasonable expectation 
that not less than two qualified HUBZone small business concerns will 
submit offers and that the award can be made at a fair market price. 
As we explained in a September 14, 2009 letter to various 
Congressional Committees, this is strictly a legal determination on 
the part of our Office and is not intended to express a preference—in 
one direction or the other—about whether the HUBZone program should 
have priority over other set-aside programs, or whether there should 
be parity among the programs; we recognized that the foregoing matter 
is a question of policy to be resolved by Congress. In our September 
14 letter, we stated our belief that the acquisition community would 
benefit from statutory guidance clarifying whether Congress intends 
for there to be parity or priority among the various set-aside 
programs. We continue to believe that such guidance would be helpful 
and recommend that Congress enact legislation clarifying its intent.  

Enclosed for your review are copies of our decision on the protest and 
our September 14 letter to the Committees, as well as the Department 
of the Army's letters dated June 24 and September 28.  

Sincerely yours,  

Signed by:  

Lynn H. Gibson: 
Acting General Counsel:  

Enclosures:  

cc:  

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 M.L. Landrieu: 
Chair: 
The Honorable Olympia J. Snowe: 
Ranking Member: 
Committee on Small Business and Entrepreneurship: 
United States Senate:  

The Honorable David R. Obey: 
Chairman: 
The Honorable Jerry Lewis: 
Ranking Member: 
Committee on Appropriations: 
House of Representatives:  

The Honorable Ike Skelton: 
Chairman: 
The Honorable Howard P. "Buck" McKeon: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives:  

The Honorable Edolphus Towns: 
Chairman: 
The Honorable Darrell Issa: 
Ranking Member: 
Committee on Oversight and Government Reform: 
House of Representatives:  

The Honorable Nydia M. Velazquez: 
Chairwoman: 
The Honorable Sam Graves: 
Ranking Member: 
Committee on Small Business: 
House of Representatives:  

[End of section]  

Footnotes:  

[1] Although services and labor were to be proposed on a fixed-price 
basis, the solicitation provided a cost-reimbursement formula for 
materials. RFP at 2-15.  

[2] The SBA regulations in question, 13 C.F.R. §§ 126.605, 126.606, 
126.607, essentially provide that HUBZone set-asides are not required 
even where the criteria specified in 15 U.S.C. § 657a(b)(2)(B) are 
satisfied if the requirement has previously been performed by an 8(a) 
contractor or the contracting officer has chosen to offer the 
requirement to the 8(a) program.  

[3] DGR challenged other aspects of the RFP which it subsequently 
withdrew. DGR may not recover protest costs associated with the 
withdrawn issues.  

[End of section]  

[End of document]