Posted on 11/3/2011 10:17 AM

SMALL BUSINESS SET ASIDES ARE MANDATORY

Recently, a large business protested the decision by the Army to set aside a buy for small business competition.  The protester contended the contracting officer unreasonably determined that two responsible  businesses were capable of satisfying the RFP's requirements at fair market prices.

Prior to deciding to set aside the solicitation for small businesses, the Army issued three sources sought notices.  The third notice sought information regarding the capabilities of small businesses' teaming partners, as well as the small businesses themselves.  On the basis of this information, the Army concluded a small business set aside was appropriate.

GAO looked at FAR 19.502-2 for the rule.  Procurements such as this one must be set aside for exclusive small business participation when there is a reasonable expectation that offers will be received from at least two responsible small business concerns and that award will be made at fair market prices.  GAO said it will not question a set aside determination if there is a reasonable basis for the contracting officer's conclusion that small business competition may be expected.

The large business argued the small businesses must be "responsible".  GAO said that does not mean there must be a responsibility determination.  All that is required is an informed business judgment that there are small businesses capable of performing who will likely submit offers.  So, GAO examined the evidence of capabilities and sided with the Army.  GAO determined that the record demonstrated a reasonable basis for the contracting officer's conclusion that two small businesses were capable of performing.  GAO will not question a small business set aside determination where the record demonstrates a reasonable basis for the contracting officer's conclusion that small business competition may be expected.

What are the lessons?  The rule of two is alive and well.  Shall still means shall.  In this context, "two responsible" small businesses means "capable of performing".  Capability is a matter of business judgment for the contracting officer.

bill@spriggsconsultingservices.com

www.spriggsconsultingservices.com

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