Justice Department: SBA Parity Rule Stands The Justice Department has directed federal agencies to follow SBA’s parity rule for set-asides, despite the Government Accountability Office’s opinion that the rule is invalid. In a memorandum, Deputy Assistant Attorney General Jeannie S. Rhee wrote that GAO misinterpreted the law when it ruled that HUBZone companies should take priority over all others in set-aside contracts. The Justice Department opinion is binding on executive-branch agencies, while GAO rulings are only advisory. “Congress delegated broad authority to SBA to carry out the policies and purposes of the [Small Business] Act,” Rhee wrote. She said SBA’s parity rule furthers Congress’s policy that service-disabled veteran, HUBZone and small disadvantaged businesses, including 8(a) firms, “shall have the maximum practicable opportunity” to participate in federal procurement. The SBA rule permits agencies to set aside contracts for either 8(a), HUBZone or SDV businesses, depending on the agencies’ needs in reaching their procurement goals, before considering set-asides for other small businesses. The rule sets no order of priority among the three programs. In ruling on two bid protests, GAO declared that HUBZone companies were first in line for set-asides because the law creating the HUBZone program says a contract “shall” be set-aside if two or more HUBZone companies are ready and willing to do the work at a fair price. Laws governing the 8(a) and SDV programs say a contract “may” be set aside in those categories. But the Justice Department memo says the legislative history of the HUBZone law makes clear that Congress did not intend to give HUBZones top priority. During the 1997 debate on the law, several House members said they understood that the HUBZone program would not harm the 8(a) program. Rhee wrote, “The most basic reason we reach this conclusion is that the text of the HUBZone statute, on its own terms, does not clearly direct a contracting officer to reserve any and all procurement contracts for HUBZone small businesses whenever the rule of two is met.” Congress is considering a provision of the 2010 Defense authorization bill that would write the parity rule into law.