GAO Disagrees with SBA About SBA Rule

A recent GAO decision got me thinking about Thor. In Avengers: Infinity War—spoiler alert, I guess, for those of you waiting to see a two-year-old movie—Thor says: “Families can be tough. Before my father died, he told me I had a half-sister that he imprisoned in hell. Then she returned home and stabbed me in the eye.”

GAO and the SBA are kind of like family. And like any family, they don’t always agree. I’m not suggesting that one stab the other in the eye, but as a recent case shows, there may be some sibling rivalry.

In UpSlope Advisors, Inc., the issue boiled down to the proper interpretation of one of the SBA’s 8(a) business development program regulations. GAO asked SBA to weigh in but then rejected SBA’s interpretation, sustaining the protest.

Much like a Marvel movie, we join the story in medias res. The procurement in question had been through a series of protests before GAO took up the current one.

The United States Transportation Command was seeking IT work in support of the the military surface deployment and distribution command. It offered the work as a competitive 8(a) procurement as a task order competition through the GSA’s STARS II vehicle. It named a company called TekSynap the awardee in September 2019.

Another offeror filed a protest and the agency took corrective action. The corrective action still resulted in award to TekSynap, which led to another protest filed in December 2019. GAO sustained that protest in March. While the agency was licking its wounds, GSA announced that STARS II was bumping up against its total value and GSA would limit its use, meaning the agency could not rely on STARS as a procurement vehicle for this work. Meanwhile, another protest was filed.

So the agency notified GAO that it had cancelled the solicitation and asked for dismissal of the protest as moot. Guess what happened then—a protest! The same protester challenged the decision to cancel the procurement. GAO denied that one in August.

Ten days later, the agency sent the SBA a letter offering a sole source 8(a) award to a tribally-owned company, which naturally was met with a protest. That brings us up to date.

The question then, was whether an agency can offer work as an 8(a) competition and then turn around and award it as a sole source. The regulation allows a sole source award to a tribal entity if the contract is worth more than a certain threshold and “if SBA has not accepted the requirement into the 8(a) BD program as a competitive procurement.” It also states: “a procurement may not be removed from competition to award it . . . on a sole source basis.”

The protester said that the sole source award violated this regulation. The agency responded that the cancellation of the previous solicitation under STARS rendered this a “new” procurement.

GAO asked SBA for its opinion and SBA sided with the agency. It said that when an agency reasonably concludes that a competitive 8(a) solicitation is “no longer feasible or would not longer meet the agency’s needs” it may make an 8(a) sole source award.

GAO didn’t buy it. It said, “We do not find the SBA’s interpretation of 13 C.F.R. § 124.506(b) to be reasonable. The plain language of the regulatory provisions at issue does not discuss any consideration to be given to the basis on which a requirement has been removed from a competitive procurement.”

GAO also dug up SBA’s comments from a 2017 case in which it said the opposite: “The only relevant inquiry is whether the specific requirement was previously offered to and accepted by the SBA as a competitive 8(a) procurement. If so, that solicitation cannot be converted to a sole-source award.”

GAO did agree with SBA that if this were “new” work, a sole source award would be totally proper. The problem, however, is that GAO didn’t see this as new work. SBA’s rules do not care whether a government-wide acquisition contract (like STARS, for example) is canceled prior to bringing a contractor on, GAO said, they care whether the work itself was competed or not, regardless of the contracting vehicle used.

Here, GAO applied the test used to determine whether an offering is new or not and found that it was not. (It didn’t help that agency’s sole-source offer letter called the contract the same thing as it had before.)

Thus, the protest was sustained with GAO ruling directly against SBA’s interpretation of the rule. As a wise man once said, families can be tough.