The Competition in Contracting Act (CICA) requires full and open competition in federal procurement unless one of the limited exceptions enumerated in the Federal Acquisition Regulation (FAR) part 6 applies. Meanwhile, the General Services Administration (GSA) Federal Supply Schedule (FSS) program provides the government with a streamlined process for acquiring commonly used commercial supplies and services. These simplified procedures notwithstanding, CICA’s competition mandate applies to procurements conducted under the FSS program. In this regard, the Government Accountability Office (GAO) has previously held that following the streamlined FSS procedures satisfies CICA’s competition requirements. It follows that when conflicting interpretations of a regulation governing competition in the FSS program are advanced, the interpretation consistent with the principles of CICA should prevail. One such long-recognized CICA principle provides that when concerns of administrative convenience or expediency are being weighed against ensuring full and open competition, the latter should be favored. Stated another way, mere administrative convenience or expediency should not provide a valid basis for restricting competition.

The rule of two requires that all contracts above the micro-purchase threshold be set-aside for small businesses, provided there is a reasonable expectation that two or more responsible small business concerns would submit offers at fair market prices and those offers are competitive in terms of quality and delivery. Under the recent overhaul of the Federal Acquisition Regulation (FAR), the rule of two was retained for contracts above the simplified acquisition threshold (SAT), in addition to the statutory requirement that the rule apply to contracts between the micro-purchase and simplified acquisition thresholds. Notably, the revised FAR part 19 removes the requirement for the government to consider socioeconomic set-asides before small-business set-asides. Furthermore, the revised FAR 19.104, which was previously located at FAR 19.502-2, clarifies that, while small business set-asides are required at the master contract level under the rule of two, set-asides are encouraged but not mandatory at the order level for multiple-award contracts. It is also within the contracting officer’s (CO) discretion to follow the rule of two for orders issued under the Federal Supply Schedule (FSS).

The government may provide design specifications to the contractor for the performance of a government contract, directing work and implying a warranty that the supplied specifications are free of defects. Under the Spearin doctrine, if the government’s design specifications are then found defective or result in unsatisfactory performance, the contractor is permitted to recover its increased costs of performance attributable to the defective specifications. To obtain such recovery, the contractor must prove a causal connection between the defective specifications and the additional costs incurred to resolve the issue. Significantly, however, to recover under the Spearin doctrine, a contractor must demonstrate that it substantially complied with the government-furnished plans and specifications and that, despite its compliance, the end result was unsatisfactory. On the other hand, if the contractor does not comply with the government’s specifications, it may not recover its increased costs of performance under the Spearin doctrine, even if the government's design specifications are ultimately found defective.

In Armed Services Board of Contract Appeals (ASBCA) No. 62627, a decision issued on February 13, 2024, the Board determined that the contractor could not recover under the Spearin doctrine because it had failed to demonstrate compliance with the government-supplied specifications. The Naval Facilities Engineering Systems Command (NAVFAC) Southwest (SW) awarded a task order for roughly $4.3 million under a previously issued indefinite delivery, indefinite quantity (IDIQ) contract for the renovation of Building 53423 at the Marine Corps Base Camp Pendleton in California. Among other things, the project required the contractor to remove and dispose of all existing hazardous materials, including asbestos, and to perform abatement and cleanup services as necessary. The project also required the removal and replacement of non-load-bearing partition walls to support potential space reconfiguration. The order noted that the removal of any additional walls during construction would be handled as a modification. As relevant to the interior walls, the government stated in RFI 20, a pre-award request for information (RFI), that there may be small amounts of asbestos tiles under the wall framing where interior walls were being demolished.

The Small Business Administration (SBA) Mentor-Protégé Program (MPP) allows small businesses to pair with large contractors to form joint venture (JV) entities that can pursue any small business set-aside contract for which the protégé firm individually qualifies as small. The program is designed to be mutually beneficial for participating firms, allowing the protégé to take advantage of the mentor firm’s business development assistance while simultaneously enabling the mentor firm to perform on certain contracts it would not otherwise have access to. Once the JV has an SBA-approved mentor-protégé agreement, it is not considered affiliated with its mentor or protégé firm. The member firms enter into a joint venture agreement (JVA) that must comply with various SBA regulations to benefit from the exception afforded to the usual requirements regarding affiliations. Under the regulations, the small business protégé firm must be designated as the managing venturer responsible for controlling the day-to-day management and administration of the JV. Additionally, a named employee of the protégé firm must serve as the Responsible Manager and be accountable for contract performance.

Meanwhile, the mentor firm is permitted to participate in all corporate governance activities and decisions of the JV as is commercially customary. However, as the holder of the minority ownership interest in the JV, the mentor firm may not exercise negative control over the JV’s activities unless the provisions of the JVA granting such control are also commercially customary. Negative control is defined as the ability, granted by the JV’s organizing instruments, of a party with a minority interest in the JV to block an action by the JV’s board of directors or shareholders. Notably, the SBA Office of Hearings and Appeals (OHA) has previously held that when a firm with a minority ownership interest in a JV has the ability to exercise negative control over a JV’s activities, the JV does not qualify as an eligible small business for set-aside procurements. In such situations, an interested party may initiate a size protest with the contracting officer (CO), who forwards the protest to the appropriate SBA Area Office (AO) for a formal size determination. The SBA OHA then hears any appeals that follow from the AO’s size determination and issues the final decision of the SBA. As long as the SBA determination is made in connection with a procurement, the Court of Federal Claims (COFC) possesses jurisdiction to conduct judicial review of the OHA decision under the Tucker Act by applying the Administrative Procedure Act (APA) arbitrary and capricious standard.