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Posted on Wednesday, July 19, 2017

GAO Rules that SBIR Awards Do Not Fall Under Protest Timeliness Exemption

Under GAO’s rules, a protest based on grounds other than alleged improprieties in a solicitation must be filed within 10 days of when the protestor knew or should have known of the basis for the protest. An exception for this rule applies to “a procurement conducted on the basis of competitive proposals under which a debriefing is requests and, when requested, is required,” in which case the protest must be filed within 10 days of when the debriefing is held.

GAO has recognized that the FAR identifies “other competitive procedures” distinct from competitive proposals, including “(1) procurements for architecture-engineer contracts conducted pursuant to the Brooks Act, 40 U.S.C. § 1102 et seq.; (2) procurements for basic and applied research conducted pursuant to a BAA under FAR Part 35; and (3) procurements under the Federal Supply Schedule (FSS) pursuant to FAR subpart 8.4.” In a recent bid protest decision, the GAO was tasked with determining whether a Small Business Innovation Research (SBIR) program procurement was conducted on the basis of “competitive proposals” as contemplated by the exception to the standard 10 day rule.

Global Aerospace Corporation protested NASA’s decision not to fund its proposal under the SBIR program. The SBIR program encourages small businesses to engage in Federal Research/Research and Development (R/R&D) that has the potential for commercialization. SBIR procurements are conducted through a three-phased process. First, contractors must apply for a Phase I award to “test the scientific, technical, and commercial merit and feasibility of a certain concept.” Companies that receive Phase I awards may be invited to apply for a Phase II award to perform R/R&D to further develop the concept. Finally, after the completion of Phase II, contractors are expected to obtain separate funding to develop that concept into a product.

Global Aerospace and another firm, Thin Red Line USA (TRLU), received Phase I awards, and were invited to apply for Phase II awards. The request for proposals (RFP) for Phase II included a requirement that the R/R&D be performed in the United States. NASA announced its Phase II award selections on March 8, 2017. TRLU received a Phase II award, but Global Aerospace did not. On March 16, 2017, Global Aerospace received a debriefing.

Global Aerospace filed a protest with GAO on March 27, 2017, which was less than 10 days after the debriefing, but was 19 days after it learned that TRLU received the award. Global Aerospace protested on multiple grounds, including that TRLU was ineligible for a Phase II award because it had performed Phase I work out outside the United States, and thus would likely also perform the R/R&D work outside the United States in violation of the RFP.

GAO determined that the SBIR procurement is not “conducted on the basis of competitive proposals” as that term is used in the FAR and GAO’s rules. GAO explained the distinction between “competitive proposals” and “other competitive procedures,” and held that the SBIR procurement is an “other competitive procedure.” Phase II of the SBIR procurement solicited proposals from contractors to conduct R/R&D across a broad array of potential topic areas, as opposed to requiring contractors to submit proposals responding to a common set of requirements as under FAR Part 15 procurements. Moreover, the selection for award was not premised on a comparison of offerors’ proposals to each other, but rather on a demonstration that the proposal met the agency’s requirements. GAO thus concluded that the exception to the 10 day rule for “a procurement conducted on the basis of competitive proposals under which a debriefing is requests and, when requested, is required,” did not apply.

GAO also questioned whether it was even timely for Global Aerospace to raise this protest after award, when it had knowledge that TRLU was allegedly ineligible for Phase II prior to the closing date for the receipt of proposals. GAO also questioned whether Global Aerospace was an interested party with standing to challenge the award to TRLU, because under this type of procurement, Global Aerospace is not competing against TRLU, but is attempting to demonstrate that its research meets the agency’s requirements. Because GAO ruled that the protest was untimely, it did not reach these two questions.

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 July 2017 Monthly Insights newsletter. To sign up for Monthly Insights, please click here.

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