Government Contracts Set-Aside Decision Was Based on Incomplete Information
Friday, September 21, 2018

Set-Aside Decision Was Based on Incomplete Information

By Government Contracts Editorial Staff

A protest of the government’s failure to set aside two contract line items for small businesses was sustained because the decision was based on flawed market research and a misapplication of the nonmanufacturer rule. The protester challenged the government’s decision not to set aside the request for proposals for fuel products for small business concerns. Acquisitions of supplies or services with an anticipated dollar value exceeding $3,500, but not over $150,000, are automatically reserved exclusively for small business concerns unless the contracting officer determines there is no reasonable expectation of obtaining offers from two or more responsible small business concerns that are competitive in terms of market prices, quality, and delivery (FAR 19.502-2(a)). Using the aggregated estimated value of all ten CLINs, which was well over $150,000, the government determined “[p]ursuant to FAR 19.502-2(c), this procurement does not meet the criteria for a total small business set-aside because, in accordance with the non-manufacturer rule, any concern proposing to furnish a product that it did not itself manufacture must furnish the product of a small business manufacturer.” The government went on to conclude there was “no reasonable expectation that offers [would] be obtained from at least two (2) small business concerns offering products, at a fair and reasonable price, of small refineries for these line items.”

CLINs Improperly Aggregated. The Comptroller General explained that under SBA 121.406(d), the nonmanufacturer rule does not apply to small business set-aside acquisitions with an estimated value between the micro-purchase threshold ($3,500) and the simplified acquisition threshold ($150,000), and here, the government’s market research failed to consider the fact that two CLINs were valued between $3,500 and $150,000. Instead, the government used the aggregated estimated value of all ten CLINs to support its determination that it was not necessary to set aside any of the CLINs for small businesses. The Comptroller General deferred to the Small Business Administration, which confirmed the nonmanufacturer rule did not apply to the two CLINs and that each of them was subject to the traditional FAR 19.502-2 Rule of Two analysis. Since the contracting agency failed to apply this interpretation, the decision not to set aside the two CLINs for small businesses was based on incomplete information. The Comptroller General recommended the government determine whether the two CLINs should be set aside exclusively for small businesses. (AeroSage, LLC, 33 CGEN ¶116,078)

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