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Posted on Monday, February 19, 2018

Formerly Small Business Not an Interested Party to Challenge Small Business Set-Aside Award

Occasionally, a bidder’s size status changes during the course of a procurement. What happens if a bidder that was small when it submitted its initial proposal is no longer small when the agency requests size recertifications during the corrective action process? Will that bidder have standing to file a protest? A recent GAO decision addressed this very issue.

GlobalSubmit, Inc. was a small business when it originally submitted an offer in response to a 2016 Food and Drug Administration (FDA) solicitation for software licenses, maintenance, support services, and related activities that was issued as a small business set-aside. The FDA received two offers – one from GlobalSubmit and another from Lorenz International, LLC. The FDA awarded the contract to Lorenz on September 30, 2016, and GlobalSubmit protested. The agency decided to take corrective action, and on April 25, 2017, informed offerors that it was requesting new proposals, including new certifications of the bidders’ small business status.

Although GlobalSubmit was small when it submitted its proposal in 2016, its assets were purchased by Synchrogenix Information Strategies, LLC, a large business, in March 2017. Consequently, the company could no longer qualify as a small business when the agency requested new proposals. Synchrogenix filed a timely protest to GAO, arguing that the agency no longer had a reasonable expectation of satisfying the “Rule of Two,” i.e. receiving two offers from small businesses. The GAO denied that protest.

The FDA then reaffirmed its award to Lorenz. Synchrogenix protested again, arguing that Lorenz should have been found technically unacceptable.

GAO explained that, “as a general rule, a large business is not an interested party to challenge an award under a solicitation set aside for small businesses.” Synchrogenix argued that this general rule should not apply here, because Synchrogenix was “challenging the agency’s award under a small business set-aside where there is only one offeror remaining in the competition.”

GAO noted it has recognized limited exceptions where a large business has been determined to be an interested party to challenge an award under a small business set-aside: (1) “when the agency made award on a sole source basis,” and (2) “when there is only one small business bidder and the large business alleges that award was made at an unreasonable price.” Neither exception applied here.

GAO acknowledged that there were unusual factual circumstances that led to only one small business remaining in the procurement, but concluded that its “timeliness rules regarding solicitation improprieties are based on the principle that challenges which go to the heart of the underlying ground rules by which a competition is conducted, should be resolved as early as practicable during the solicitation process, but certainly in advance of an award decision if possible, not after.” As GAO stated, this rule promotes fundamental fairness and efficiency in the competitive process.

Synchrogenix Information Strategies, LLC, B-414068.6 (Dec. 22, 2017).

Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring upcoming contracts, key protest decisions, legal updates, events, and more. This post was published in the February 2018 Monthly Insights newsletter. To sign up for Monthly Insights, please click here.

Stephanie Wilson is a Partner at Berenzweig Leonard, LLP. She and Terry O’Connor lead the firm’s Government Contracts practice. Stephanie can be reached at swilson@berenzweiglaw.com.