By: Eric Whytsell
As previously noted in this blog, GAO has repeatedly made clear that protests alleging that the awardee’s proposal violates the applicable limitation on subcontracting cannot succeed unless the protester can demonstrate that the quotation shows, on its face, that awardee will not comply with the clause. In the recent case of Archer Western Federal JV, B-410168.2/B-410168.3 (November 12, 2014), the GAO went further to explain that the required showing of facial noncompliance cannot be met by simply showing that the agency felt the need to ask an offeror questions about its intent to comply with a subcontracting limitation.
The protest involved the award of a contract for construction services to SGS, LLC (SGS) under a request for proposals incorporating by reference Federal Acquisition Regulation (FAR) clause 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns. Protester, Archer Western Federal JV (Archer Western) alleged, among other things, that SGS failed to comply with the subcontracting limitation in FAR 52.219-4. In addition to providing for a 10% price preference for HUBZone small business concerns, that clause imposes certain subcontracting limitations in the performance of general construction contracts on HUBZone concerns that do not waive the preference.
Archer Western contended that SGS’s proposal showed a violation of the solicitation’s subcontracting limitation on its face because SGS’s primary subcontractors were two large businesses. Archer Western also claimed that the agency was aware of the violation because the contracting officer asked SGS during discussions whether it intended to waive the HUBZone price evaluation preference.
After explaining that challenges to an agency’s judgment concerning a small business’s ability to comply with the limitation on subcontracting clause generally present a question of responsibility not subject to GAO review, the GAO noted the exception where the contents of a quotation lead the agency to conclude that the small business has not agreed to comply, which creates an issue of the proposal’s acceptability that the GAO will review. Here, the GAO dismissed Artcher Western’s allegations and concluded “there is nothing on the face of SGS’s proposal that should have led the agency to the conclusion that SGS did not agree to comply with the subcontracting limitation.”
More particularly, the GAO found that, despite the statement that SGS was teamed with two large businesses, “there is nothing in SGS’s proposal that demonstrates that it will not comply with the subcontracting limitation.” GAO rejected the notion that the agency’s communications with SGS demonstrate that the offeror did not agree to comply with the subcontracting limitation. Indeed, in response to the agency’s questions about whether SGS intended to waive the price evaluation preference and whether it understood that it would be held to the subcontracting limitations if not, SGS replied that it did not waive the price preference and that it was “well aware” of the subcontract limitations under FAR 52.219-4 and would “fully comply” with those requirements. SGS also made clear that, while the two subcontractors were not HUBZone firms, they would perform “far less than 50 percent of the cost of contract performance incurred for personnel,” and that SGS’s team included other HUBZone subcontractors that “were chosen to ensure that SGS will satisfy” the necessary requirements.
On this record, the GAO concluded that the agency’s communications were for the limited purpose of verifying SGS’s intent to comply with the subcontracting limitation and did not establish that the agency had a basis to conclude that SGS would not comply with the limitation. Significantly, it also explained, “[t]he fact that the awardee’s proposal did not contain sufficient information to demonstrate compliance does not show that the proposal should have led the agency to the conclusion that SGS did not agree to comply with the subcontracting limitation.”
Instead, the GAO requires “clear evidence that [an offeror] would not meet the requirement” before it will find a basis in a proposal to question the agency’s conclusion that the offeror has agreed to meet subcontracting limitations as required. This decision further underscores something we have noted previously: offerors need to make sure their proposals clearly demonstrate their intent to comply with subcontracting limitations and contain nothing that might support a protester trying to make an argument to the contrary.
Eric Whytsell is responsible for the contents of this article.
© Jackson Kelly PLLC 2014