Audit agency reaffirms earlier ruling against HUBZone preference
SBA and OMB contend GAO overreached its authority in ruling that HUBZone businesses have priority
- By Matthew Weigelt
- Jul 14, 2009
The Government Accountability Office today denied Small Business
Administration officials’ request to reconsider recent bid protest
decisions that give some small businesses priority over others.
SBA’s request “is denied where newly raised information fails to
show that our prior decision contains any errors of fact or law,” GAO’s
Acting General Counsel Daniel Gordon wrote in a decision released today.
SBA and the Office of Management and Budget Director Peter Orszag
contended GAO overreached its authority when it ruled that firms in
historically underutilized business zones (HUBZones) should get
priority over small businesses in the SBA’s 8(a) program or
service-disabled, veteran-owned small businesses.
GAO’s rulings are not binding on federal agencies and are contrary to SBA regulations, Orszag wrote in a memo released to agencies July 10.
“If agencies were to follow the GAO decisions, the federal
government’s efforts to procure goods and services from 8(a) small
businesses and from [service-disabled, veteran-owned small businesses] through the other statutory programs may be
negatively impacted,” Orszag wrote.
He also wrote that the rulings remove contracting officers'
discretion to set aside a contract. Until administration attorneys
finish their legal review, Orszag wrote that contracting officers
should continue using SBA's view of the three types of small
businesses. Federal agencies should not “prioritize HUBZone small
businesses over” 8(a) or veteran-owned companies, he wrote.
The administration’s concerns come from a May 4 ruling
on a protest by Mission Critical Solutions, a HUBZone company. GAO
ruled that the Army made a mistake and didn’t consider whether at least
two HUBZone businesses would bid on an information technology contract.
Instead, the Army awarded the one-year, $3.45 million sole-source
contract to Copper River Information Technology, a company owned by
Alaska Natives. Law allows Alaska Native corporations to receive
sole-source contracts of any size.
GAO based its decision on the Small Business Reauthorization Act of
1997. The legislation states that “a contract opportunity shall be
awarded” on the basis of a set-aside competition among HUBZone
companies. Meanwhile, Congress didn’t afford companies in SBA’s 8(a)
program or companies owned by service-disabled veterans the same
mandate. The law only says contracting officers may set aside a
contract to those types of companies.
“We do not think SBA’s regulatory implementation of HUBZone and 8(a)
statutes is reasonable since it fails to give effect to mandatory
language of the HUBZone statute,” the decision in the Mission Critical
Solutions case states.
GAO reached a similar conclusion in September 2008, when it considered a bid protest
from International Program Group, another HUBZone company. The Marine
Corps set aside a contract for service-disabled veterans before
considering whether a HUBZone set-aside would be appropriate. GAO ruled
against the Marines.
Matthew Weigelt is a freelance journalist who writes about acquisition and procurement.