Request for Reconsideration of Navy Withdrawal of Small Business Set-Aside

A firm requested reconsideration of a GAO decision which held that the withdrawal of a small business set-aside specification without notifying the Small Business Administration (SBA) was contrary to regulation. GAO had recommended that the matter be referred to SBA to allow the opportunity for appeal. SBA did appeal, and its appeal was denied by the procuring agency. The protester then protested the refusal by SBA to further appeal the agency's denial, protested the contracting officer's refusal to award it the contract, and requested the cancellation of the contract award. GAO concluded that there was no error in the decision of the contracting officer to withdraw the small business set-aside. Defense acquisition regulations authorize the withdrawal of a small business set-aside based upon a proper determination that the bids received from small business concerns are unreasonable. In the absence of a showing of arbitrary or capricious conduct, GAO will not disagree with a contracting officer's judgment on this issue. The protester argued that its bid price was lower than the Government's estimated price and, therefore, was reasonable. Although the determination that a price is reasonable usually involves a comparison with the Government estimate or with a prior contract price, a Government estimate may be faulty. In this case, the Government estimate appeared to be high. A courtesy bid from a concern ineligible to bid on a small business set-aside, while nonresponsive, may also be considered as part of the comparison. As the protester's bid price was 9.6 percent above the courtesy bid price, GAO could not say that the contracting officer's action in finding the protester's price unreasonable was arbitrary or capricious. While SBA is permitted to appeal the withdrawal of a small business set-aside to a procuring agency, it is not required to do so. Therefore, this portion of the protester's allegation was without merit. Since GAO did not find that the withdrawal of the set-aside was unreasonable nor the contract award objectionable, the request for reconsideration was denied.