The Government Accountability Office is considering a bid protest that could lead to billions of dollars in new set-aside contracts.

SBA is supporting the protest by FitNet Purchasing Alliance of St. Augustine, FL, asking that all GSA schedule orders between $3,000 and $150,000, the simplified acquisition threshold, be set aside for small businesses.

FitNet and SBA say the Small Business Act requires that all contracts below the simplified acquisition threshold be set aside under the rule of two. GSA contends that the law creating the schedules program exempted them from set-aside requirements.

The Small Business Act says contracts in that price range “shall be reserved exclusively for small business concerns” under the rule of two.

“There is nothing in the Small Business Act that provides for a statutory exception of this automatic reservation for small businesses for acquisitions conducted using the GSA Schedule or reverse auctions,” SBA Associate General Counsel John Klein wrote to GAO.

GAO has previously ruled that set-asides are not required for schedule orders above the simplified acquisition threshold. In 2010 Congress acted to allow set-asides on the schedules, but not require them.

GSA schedule sales totaled $39 billion last year, about 8% of all federal procurement, with more than one-third of the dollars going to small businesses.

FitNet and SBA cited two recent GAO protest decisions that they say support their position. In the Aldevra case last year, GAO said the Veterans First contracting law requires VA to consider set-asides for service-disabled veteran-owned businesses and other veteran-owned firms before buying through GSA schedules. (The Department of Veterans Affairs rejected that ruling, but later said the Obama administration was considering whether to follow it.)

In the Mission Critical Solutions case in 2010, both GAO and the U.S Court of Federal Claims ruled that HUBZone companies were first in line for set-asides. Congress has overturned that ruling and established parity for all socioeconomic categories.

In those cases GAO’s decision turned on the word shall. The Veterans First law and the HUBZone law said contracts shall be set aside, not may be set aside.

SBA says the word shall in the Small Business Act “is clear and unambiguous, and there is no discretion to interpret the statutory requirement as anything other than mandatory.”

FitNet and its president, Raul Espinosa, filed a similar protest in 2007, but it was dismissed on procedural grounds. At the time GSA said most schedule orders were worth less than $100,000, and argued that large companies would drop their schedule contracts if set-asides were required.

In the current case, Espinosa protested the Army Mission and Installation Contracting Command’s decision to buy fitness equipment through a reverse auction, with only GSA schedule holders eligible to bid. He said the contract, worth an estimated $32,000, should have been set aside for small businesses.