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Follow-on Work Was Not a “New Requirement”, Must Stay in the 8(a) program

by | Aug 18, 2020 | Government Contracts

Keeping 8(a) procurements in the 8(a) program is procurement policy. Follow-on work must stay within the 8(a) program unless the Small Business Administration (SBA) concludes that the follow-on work is a “new requirement.” The term “new requirement” includes: “[t]he expansion or modification of an existing requirement … where the magnitude of change is significant enough to cause a price adjustment of at least 25 percent (adjusted for inflation) or to require significant additional or different types of capabilities or work.” 13 C.F.R. § 124.504(c)(1)(ii)(C).

In Eminent IT, LLC, B-418570, June 23, 2020, a recent decision of the Government Accountability Office (GAO) agreed with a protester that a follow-on contract had to stay within the 8(a) program because the follow-on work was basically the same as the initial 8(a) work and was, therefore, not a “new requirement.” The fact that the value of the follow-on work was almost double turned out to be irrelevant under SBA rules for applying the 25% test.

In 2015, the U.S. Department of State (DOS) awarded an 8(a) task order to Buchanan & Edwards (B & E) to provide, maintain, operate, and manage PeopleSoft v9.1 for a DOS bureau.

In 2020, DOS needed a follow-on contract for this work so it issued a small business set-aside solicitation for a blanket purchase agreement to maintain, operate, and manage PeopleSoft v9.x or later in a production environment, including any follow-on functional requirements and application support using SAFe methodology. This solicitation was similar to the B & E’s 2015 task order in that it too required the awardee to provide, maintain, operate, and manage PeopleSoft v9.1 for the same DOS bureau.  The main difference between the two solicitations was that the 2020 DOS solicitation referenced the use of the Scaled Agile Framework (SAFe).

Because the solicitation was not issued as an 8(a) opportunity, an 8(a) vendor, Eminent IT, LLC protested the solicitation to GAO, arguing that the IT work had to stay in the 8(a) program because the DOS follow-on work was not a new requirement.

  1. No “new requirement”

GAO sustained Eminent IT’s protest, focusing on the word “requirement” in the “new requirement” test. DOS claimed that one reason the work was a new requirement was that it required use of a different methodology; the 2015 task order required the use of a “standard waterfall systems development life cycle,” but the 2020 solicitation required the use of the SAFe methodology.

GAO’s review of the solicitations concluded that the 2020 solicitation did not require the use of a different methodology and thus was not a “new requirement.” First, the requirements of both solicitations were “virtually identical.” In addition, DOS could not show that the 2015 task order required the use of the “waterfall” methodology; the 2015 solicitation never mentioned the word “waterfall.” In fact, B & E was actually using the SAFe methodology under its 2015 task order, according to an affidavit Eminent IT provided GAO.

  1. No “25% increase.”

In addition, although the estimated value of the 2020 work was approximately twice the value of the 2015 work, this huge increase did not satisfy “the 25% increase” test of a follow-on new requirement. According to the SBA’s comments to GAO, simply comparing the value of the two procurements is irrelevant. The real issue is the cause of the huge increase in value. Here, it was not due to the introduction of the SAFe methodology – the relevant focus – but rather to DOS’s “addition of services that are ancillary to the primary and vital requirements under the contract” which were irrelevant.

This decision highlights a potential ground for protest that often goes overlooked by 8(a) participants. If work was previously set-aside for the 8(a) program, the agency must obtain SBA’s permission before removing the requirement from the 8(a) program.

Terry O’Connor is a Partner and Director of Government Contracts at Berenzweig Leonard.