In Order to Succeed, Protests Relying on a Limitation on Subcontracting Clause Must Show a Lack of Compliance on the Face of the Proposal
August 22, 2013
By: Eric Whytsell
In two recent protests at the Government Accountability Office (GAO), the protester alleged that the awardee’s quotation violated the applicable limitation on subcontracting because awardee could not or would not perform the required portion of the contract. In both cases, GAO made clear that such protests cannot succeed unless the protester can demonstrate that the quotation shows, on its face, that awardee will not comply with the clause. In other words, protesters cannot rely solely on arguments about what they think the awardee cannot or will not do during the performance of the contract.
The first case, DBI Waste Systems, Inc., B-408304 (Comp. Gen. Aug. 5, 2013), involved a set-aside for service-disabled, veteran-owned small business (SDVOSB) concerns. The RFQ included the VA Acquisition Regulation’s (VAAR) limitation on subcontracting clause, which requires the prime to perform at least 50% of the personnel costs. The statement of work (SOW) required non-hazardous waste removal and full-service recycling management. The protestor argued that awardee Conquistador Services, Inc. would not perform 50% of the personnel costs because it had subcontracted the entire waste removal function to a non-SDVOSB concern.
As an initial matter, GAO noted that challenges to an agency’s judgment concerning a small business’s ability to comply with the limitation on subcontracting clause generally presents a question of responsibility not subject to GAO review. However, if the contents of a quotation should lead an agency to conclude that the small business has not agreed to comply, the matter instead involves the quotation’s acceptability, which the GAO will review.
In DBI Waste Systems, GAO rejected the protester’s argument because (i) nothing in Conquistador’s quote took exception to the limitation on subcontracting; (ii) the quote instead made clear the awardee would “in no event . . . perform less than the percentage required” by the clause; and (iii) the SOW called for significantly more than subcontracted waste removal services. Reviewing the SOW in detail, GAO recognized the numerous professional and administrative aspects of the recycling management portion of the work, which included data collection, reporting, compliance, and professional services like training and consulting. GAO characterized these tasks as requiring a “significant amount of professional and administrative work,” an observation further supported by the awardee’s detailed breakdown of it expected labor hours and corresponding costs. In light of this evidence, the protester’s argument to the contrary amounts to nothing more than a disagreement with the agency’s determination, which GAO found no reason to question.
Two days later, GAO issued a decision in KAES Enterprises, LLC, B-408366 (Comp. Gen. Aug. 7, 2013), which involved a small business set-aside of an IDIQ contract for emergency generator maintenance. The RFQ included the limitation on subcontractor clause at FAR 52.219-14, which requires the small business awardee to perform at least 50% of the cost of contract performance incurred for personnel. The protester argued that the awardee, Energy Pro OSC, LLC, was ineligible for award because it lacks sufficient staff to perform the required percentage of work on its own.
After noting the distinction between issues of responsibility and those involving a quotation’s acceptability, GAO noted that the solicitation asked offerors to indicate, as a percentage, the “total estimated amount of work under this contract that your firm will complete (excluding subcontractors).” In response, Energy Pro’s quotation stated it would perform 51% of the work itself. When the protester argued that the awardee had not backed up its statement with supporting documentation, GAO pointed out that the burden in this context falls upon the protester, not the awardee – and that the protester had failed to bear it here. Because the protester failed to identify any part of the quotation that, on its face, should have led the agency to conclude that the awardee did not agree to comply with the subcontracting limitation, GAO saw no basis to hold that the agency had acted improperly.
The clear take-away from these decisions is that protests to GAO based on the limitation of subcontracts clause can only succeed if the protester is able to point to aspects of the awardee’s proposal that demonstrate it will not comply with the limitation. The slightly less obvious but potentially more useful lesson relates to what an offeror must do to prevent such a protest: make sure proposals contain nothing that might support a protester trying to make such an argument.
Eric Whytsell is the attorney responsible for the content of this article.