The various constituencies that comprise the U.S. Government’s socioeconomic program are difficult to track and report.  Just off the top of our heads, contractors subject to socioeconomic program reporting requirements need to track awards made to general Small Businesses, Small Disadvantaged Businesses, Woman-Owned Small Businesses, Veteran-Owned Small Businesses, and Service-Disabled Veteran-Owned Small Businesses.  Not to mention HUBZone area businesses, Labor Surplus area businesses, 8(a) businesses, and ANCs.  Naturally, socioeconomic reports generally contain numerous inaccuracies, mostly made inadvertently.  But sometimes there is a knowing failure to report accurately, which leads to legal and financial problems.

Even more difficult is navigating the procurement rules that apply to each “flavor” of socioeconomic program.  For example, contracts can be set aside for only 8(a) firms to bid on, but only if the contracting officer’s market research indicates that two or more responsible entities are available to compete for the work—unless, of course, one of the prospective bidders is an Alaska Native Corporation (ANC) in which case the contract need not be competed and can be awarded on a “sole-source” basis to the ANC. 

If you are a Contracting Officer in the employ of the Federal government, figuring out which program has priority over the others is a non-trivial challenge.  Recently, there has been significant controversy in the socioeconomic program prioritization, with GAO determining that the SBA’s interpretation of socioeconomic program statutory language was flawed, and the OMB directing Contracting Officers to ignore the GAO’s interpretation in favor of the SBA’s interpretation.  Over at the WIFCON Blogsite, “Don Acquisition” had this to say on the subject, back in November 2009—

There has been a considerable amount of controversy over the last year or so in the area of small business programs. In International Program Group, Inc., (B—400278, B—400308, 19 September 2008) the Government Accountability Office (GAO) held that HUBZone set-asides took priority over service-disabled veteran-owned small business (SDVOSB) set-asides and SDVOSB sole source acquisitions. This was unsurprising given the clear language in the FAR. In Mission Critical Solutions (B—401057, 4 May 2009) (also see reconsideration), the GAO held that the HUBZone set-asides took precedence over the 8(a) program. This was surprising given the clear language of the FAR. Of note in both cases was that the GAO solicited and rejected the Small Business Administration's (SBA's) interpretation of the applicable statutes, which was that there was parity among the 8(a), HUBZone, and SDVOSB programs. It was after the latter case that the Office of Management and Budget (OMB) stepped in with a memorandum advising agencies to disregard the two GAO decisions and providing the following guidance:

Pending the completion of the legal review of the GAO's decisions by the Executive Branch, the SBA's ‘parity’ regulations should not be disregarded by contracting officers, and Federal agencies should not, as a result of the GAO's decisions, be compelled to prioritize HUBZone small businesses over 8(a) BD or SDVOSBs. Instead, until the legal review is completed, Federal agencies should continue to give active consideration to each small business program pursuant to their pre-existing contracting practices and ‘parity’ policies.

Remarkably, this guidance 1) assumes that contracting officers had been following the parity policies implemented in SBA's regulations and 2) implies that, henceforth, contracting officers are free to treat HUBZone, SDVOSB, and 8(a) contractors as equals. There is no acknowledgement of the fact that there were no pre-existing "parity" policies in the FAR. Prior to the GAO decisions, the FAR Council issued a proposed rule that would have implemented parity among the three programs—something that clearly did not exist in the FAR. See 73 FR 12699. As of today, the FAR Case dealing with Socioeconomic Program Parity (2006-034) has been tabled. As such, any contracting officer subject to the FAR that thinks that they have been given the green light to disregard the FAR and treat all three programs the same should think again.

Whew.  If you got all that, then you are indeed impressive.  In any case, “Don Acquisition’s” advice proved prescient, because the U.S. Court of Federal Claims just ruled on the matter over here.  The plaintiff, once again, was Mission Critical Solutions, taking “another bite at the apple.”  We’ll skip over the detailed legalese and discussion of statutory interpretation, deference to agency interpretation, the true meaning of the phrase “notwithstanding any other provision of law,” and all that.  We’ll cut directly to the chase.  Here’s what Chief Judge Hewitt said on March 2, 2010—

Plaintiff has succeeded on the merits of this case. The court has examined the statutory language of the Small Business Act and concluded that the mandatory language of the HUBZone statute requires that a contracting officer first determine whether the specified criteria are met before awarding a contract under another small business program or on a sole-source basis. … The Army’s award of the contract to Copper River on a sole-source basis without first determining whether there was ‘a reasonable expectation that not less than [two] qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price’ was not in accordance with law--in particular, the contract award did not comply with the plain meaning of the HUBZone statute.

It’s likely that the decision will be appealed but, in the meantime, “Don Acquisition” should be congratulated for his discernment.

In other news, the Small Business Administration announced proposed rule changes to the “Woman-Owned Small Business Federal Contract Program.”  As far as we can tell, the rule retains some of a prior final rule’s language, withdraws language associated with a previous proposed rule, and proposes new language for comment.  See the announcement here.  We could discuss some of the proposed changes but—quite frankly—if you thought the foregoing was dense and headache-inducing, you should see the content of the 30-page Federal Register notice.  We’ll pass on that, thank you very much.