On 8(a) set-aside exceptions:
Attorney Ralph Thomas responds to SBA
Most of what the Small Business Administration is talking about is not what we are complaining about.
First of all, despite what the SBA position on Federal Supply Schedule exemptions is, the fact is that the FSS exemption has been upheld before the Federal Court of Claims. K-LAK Corp. v. United States, 98 Fed. Cl. 1, 1 (2011), was a case in which the agency resolicited a procurement as an FSS acquisition that it had previously solicited as an 8(a) contract. The court found that the agency (contracting officer) did not abuse his discretion by removing the contract from the 8(a) Program utilizing the FAR FSS exemption. So, if an 8(a) company wanted to file a protest before that Court, the protest would probably be dismissed, because of that precedent.
With regard to GAO bid protests, although agencies have cited the FSS exemption as one of its reasons for eliminating a contract from the 8(a) program, the GAO has not directly ruled on this issue. In fact GAO decisions have not even acknowledged in its decisions it rejects, or has rejected, the FSS exemption justification. No one knows how long that will last. Instead, if the GAO rules in favor of the agency, it usually does so under the “new requirement” exception, which agencies generally add as a justifiable reason for why it should be able to eliminate a requirement from the 8(a) program.
Also, the SBA comment does not address our problem with the “new” requirement exception. Our problem is that it is the agency which makes the sole decision as to whether an 8(a) requirement is “new.” It does not need the concurrence of the SBA. It needs only to notify the SBA at some point that the determination has been made and the SBA has just five (5) days to appeal – to the head of the agency that made the “new requirement” determination in the first place! Moreover, the GAO, in a bid protest, usually gives deference to the SBA as to whether a requirement is “new” or not. And the SBA has gone both ways, thus, allowing agencies to unilaterally eliminate 8(a) requirements from its own program. The SBA comment does not address any of that. Instead it talks about issues that we are not in fact complaining about.
Essentially, I’m saying that nothing in the [SBA’s] Supplementary Information to its final rule of Oct. 16, 2020 is relevant to either of the issues brought up in our column. In our situation, the agency is not justifying its removal of an 8(a) procurement from the 8(a) program by saying that it is not required to abide by the normal follow-on regulations for the release of 8(a) contract because the FSS is going to be an 8(a) restricted procurement anyway. The SBA is saying that even in that situation the agency cannot simply ignore the existing regulations for removing a contract from the 8(a) program and act on its own. Good. But it’s not relevant to the situation we describe in our article.
Rather, our point is that under FAR 8.404 the agencies are using the FSS exemption to reprocure 8(a) contracts without accountability to the SBA or anyone else. The relevant part of the SBA’s comment (the first part) is that the SBA’s position is that it doesn’t support the FSS exemption and does not recognize FAR 8.404 as it applies to 8(a) contracts. That’s a good thing. The GAO, in probable deference to the SBA, has never directly ruled on the legality of applying FAR 8.404 to 8(a) contracts. In those cases, however, it has ruled to uphold the removal of 8(a) contracts for other reasons, like the “new requirement” exception. However, GAO has applied the FSS exemption to non-8(a) small business set-asides. Also, who knows how long the GAO will continue to not rule on the applicability of the FSS exemption to the 8(a) program. One could argue that an SBA position statement does not overrule a FAR and a GAO Attorney agree, arguing that if the FAR is not legal then it should be changed or eliminated under the normal channels. And what about the situations that never get challenged by a bid protest?
More information:
See Thomas’ column & SBA’s comment in Set-Aside Alert’s March 4 edition:click here
Contact him at rthomas@rcttlaw.com
