By Holly Powell, Federal Procurement Analyst, NCMBC
A recent decision by the US Government Accountability Office (GAO) in response to a protest, B-401057, Mission Critical Solutions, May 4, 2009, has clarified the order in which federal agencies must consider application of the various small business socioeconomic programs. This is an important decision as it affects how an agency determines what type of firm will be eligible to compete for each federal contract. This is exciting news for many North Carolina firms because so many areas of the state qualify as federal HUBZones!
Basically, the Contracting Officer (KO) makes a determination before each solicitation is issued regarding what type of competition will be conducted. See the article entitled “Market Research: How To Influence Your Competitive Edge” for a description of part of the process used by the government to gather the necessary information. After determining that there is no mandatory government supply source, the KO uses the information gleaned from market research to consider whether to conduct a small business set aside of some type or to conduct a full and open competition under which any type of firm can respond. (Of course, the KO may solicit a sole source or conduct a limited competition if one of the exceptions at FAR 6.3 is met.)
There has been much debate about the competing interests of the three main socioeconomic programs (#1-3 below) and which takes precedence when making the decision about how to conduct an acquisition. In the past, the KO would generally consider the programs in the following order:
- Offering the procurement to the US Small Business Administration (SBA) for the 8(a) Program
- Conducting a HUBZone set-aside
- Conducting a Service-disabled Veteran-owned Small Business (SDVOSB) set-aside
- Conducting a total Small Business (SB) set-aside
- Conducting a partial SB set-aside
- Conducting a full and open competition
(Note that the Department of Veterans Affairs has programs that emphasize SDVOSB and Veteran-owned Small Business over the other socioeconomic programs. Click here for that information. The discussion in this article applies to the other federal agencies.)
The crux of the GAO decision hinges on the mandatory language in the statute concerning the HUBZone Program. In other words, a KO must consider whether the conditions are met that will lead to a HUBZone set-aside before they may consider using the 8(a) Program or a SDVOSB set-aside. Therefore, the appropriate order appears to be as follows:
- Conducting a HUBZone set-aside
- Offering the procurement to the SBA for the 8(a) Program
- Conducting a SDVOSB set-aside
- Conducting a total SB set-aside
- Conducting a partial SB set-aside
- Conducting a full and open competition
In the past, many large acquisitions have been awarded on a sole source basis to Alaska Native Corporations (ANCs) because SBA’s 8(a) regulations had been interpreted as allowing (or even mandating) such actions before consideration of any of the other set-aside programs. Even SBA submitted comments to GAO arguing that the 8(a) Program takes precedence over the HUBZone Program, but GAO ruled otherwise. Now, agencies must consider whether they can conduct a HUBZone set-aside and rule it out before they can offer the project for the 8(a) Program even if the project has been in the 8(a) Program in the past. This is true regardless of whether the last acquisition was an 8(a) competition or an 8(a) sole source, including sole sources to ANCs.
Note that there are also provisions that allow for sole source awards to HUBZone and SDVOSB firms if certain conditions are met. These provisions are permissive rather than mandatory and are not addressed in the instant GAO decision.
What are the requirements for conducting a HUBZone set-aside? Per FAR 19.1305, the contracting officer shall set aside acquisitions exceeding the simplified acquisition threshold (currently $100,000) for competition restricted to HUBZone small business concerns when the contracting officer has a reasonable expectation that—
(1) Offers will be received from two or more HUBZone small business concerns; and
(2) Award will be made at a fair market price.
Therefore, for each acquisition, the KO must evaluate whether it is likely that offers will be received from at least two HUBZone firms that will allow for award at a fair market price. If the acquisition exceeds $100,000 and the KO reaches a positive conclusion, the procurement must be conducted as a HUBZone set aside!
So, what does this mean for your firm?
- First, if your firm is a small business, check to see if your principal place of business and at least 35% of your employees reside in a HUBZone. If you qualify, and you have not yet done so, apply for HUBZone certification on-line. (Click here to see details.)
- Once you are certified by SBA, market yourself as a HUBZone firm to the federal agencies to which you want to sell your products and/or services. Ask them to conduct HUBZone set-asides when they buy what you sell. Learn who your HUBZone competitors are and help them market themselves so that, together, you can convince KOs that there are at least two HUBZone firms that can fulfill their needs. Under a HUBZone set-aside, your competition is limited to other HUBZone-certified firms thereby increasing your chances for winning the contract.
- Be sure your firm is registered as a HUBZone firm at www.MatchForce.org, North Carolina’s FREE database that matches you to federal prime contracts and subcontracts.
- Respond to Sources Sought notices posted at www.fbo.gov when you feel you are qualified to fill the need described by the government and request that the acquisition be conducted as a HUBZone set-aside. Note that if you are the only qualified HUBZone firm that responds, the KO may decide to negotiate a sole source contract with your firm if the acquisition is less than $5.5 million for products or less than $3.5 million for any type of service. (See FAR 19.1306.)
Take advantage of the HUBZone Program if at all possible—it can help you win federal contracts!
Questions about this article may be referred to Holly Powell at powellh@ncmbc.us.
[Information in this article shall not be construed as legal advice. Any opinions expressed in this article are those of the author.]
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