The federal government must base its acquisition decisions on sufficiently supported facts and data. While acquisition decisions such as set-aside determinations are squarely within the government’s discretion as a matter of business judgment, the underlying data and analysis supporting such decisions must be accurate. Similarly, when the government makes set-aside decisions based on market research, any assumptions on which the market research is based must also be correct. Additionally, the results of the market research must themselves be current, accurate, and complete. When the government relies on flawed market research to support its set-aside determinations, prospective offerors may protest those decisions in the form of pre-award protests that challenge the terms of a solicitation.

In B-422433.2, the Government Accountability Office (GAO) sustained such a pre-award protest challenging the government’s small business set-aside determination based on an outdated market survey, which was conducted under an incorrect assumption. The request for proposal (RFP) subject to the protest was issued by the Navy’s Naval Undersea Warfare Center (Navy) to acquire SONAR sounding sets via a single award indefinite delivery indefinite quantity (IDIQ) contract. The acquisition implicated the “Rule of Two” and the “Nonmanufacturer Rule.” The interplay of these rules with the facts and circumstances surrounding the procurement ultimately rendered the Navy’s set-aside decision unreasonable.

Under the Small Business Act and the Office of Federal Procurement Policy Act, federal agencies must publish notices of proposed contract actions and modifications exceeding $25,000 on the System of Award Management (SAM) unless an exception listed in Federal Acquisition Regulation (FAR) 5.202 applies. In other words, the government must publish all notices, which the FAR requires to be published via the governmentwide point of entry (GPE), SAM.gov. The SAM.gov GPE is the single point where contractors and the public can electronically access government business opportunities. Importantly, once the government publishes the synopses of a procurement action on SAM.gov, contractors are presumed to have “constructive notice” of the action. Under the doctrine of constructive notice, a party is imputed knowledge of a matter, even if it does not have actual knowledge of the matter at issue. Thus, as long as the government publishes the notice of an action via SAM.gov, contractors or interested offerors may not cite a lack of actual notice as prejudicial because they are presumed to have constructive notice of the published procurement action.

Thus, when an offeror fails to find or view a notice or a solicitation posted by the contracting officer (CO) on SAM.gov, that offeror is precluded by the presumption of constructive notice from subsequently filing a protest alleging it was denied a fair opportunity to compete. In B-416623, a small business contractor alleged that it was denied an opportunity to compete for a Department of Agriculture solicitation for the acquisition of foreclosure legal services and related technical support. In its protest filed at the Government Accountability Office (GAO), the protestor contended that the government never provided it with a copy of the solicitation and it could not locate the solicitation on the FedBizOpps website, which was the GPE before SAM.gov. The protestor took the position that it diligently pursued the subject opportunity through the FedBizOpps website by signing up for automatic updates and performing regular searches for relevant key terms. However, despite its best efforts, the protestor was unable to find or view the solicitation and thus failed to respond in a timely manner. In applying the presumption, the GAO charged the contractor with constructive notice and rejected the protestor's argument that the government had denied it a fair opportunity to compete.

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).

At the time of issuance of a federal contract solicitation, the contracting officer (CO) must designate the single North American Industry Classification System (NAICS) code that best describes the principal purpose of the solicitation and specify the corresponding size standard. The Small Business Administration (SBA) establishes the size standard for various NAICS codes. To participate in small business set-aside procurements, contractors must qualify under the relevant size standard based on maximum annual receipts or employee count. The Small Business Act gives the SBA conclusive authority to resolve protests and other matters related to the small-business size status of contractors for federal procurements. Similarly, the SBA Office of Hearings and Appeals (OHA) has the exclusive authority to resolve NAICS code appeals. Accordingly, the Government Accountability Office (GAO), in its bid protest function, does not review protests challenging a contractor’s size status, SBA decisions on whether a contractor is a small business, or whether the procuring agency selected the appropriate NAICS code for a particular procurement.

In B-405417.2, the GAO declined to review a post-award challenge based on the awardee’s size status, along with the SBA’s determination regarding the same. The Army issued a small business set-aside invitation for bid (IFB) for solid waste services at Fort Lee, Virginia. The IFB contemplated an award to the lowest-priced, responsible, and responsive bidder. The awardee had the low bid of roughly $4.5 million, while the incumbent-protester had the second-lowest bid of roughly $4.6 million. The protester filed a size protest with the SBA, which was denied. Next, the incumbent contractor appealed the denial of the size protest to the SBA OHA, which remanded the matter for a new size determination. On remand, almost a year and a half later, the SBA again determined that the awardee qualified as a small business for the subject procurement. The protester again appealed to the OHA, but this time its appeal was denied, and the contract was awarded.