Set-Asides for Small Businesses: Recent Developments in the Law Regarding Precedence Among the Set-Aside Programs and Set-Asides Under Indefinite-Delivery/Indefinite-Quantity Contracts
Congressional research reportAug 4, 2011
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Set-Asides for Small Businesses: Recent
Developments in the Law Regarding
Precedence Among the Set-Aside Programs
and Set-Asides Under IndefiniteDelivery/Indefinite-Quantity Contracts
(name redacted)
Legislative Attorney
August 4, 2011
Congressional Research Service
7-....
www.crs.gov
R40591
CRS Report for Congress
Prepared for Members and Committees of Congress
Set-Asides for Small Businesses
Summary
In government contracting law, a “set-aside” is a procurement in which only certain businesses
can compete. Set-asides can be exclusive or partial, depending upon whether the entire
procurement, or just part of it, is so restricted. Eligibility for set-asides is typically based on
business size, as well as demographic characteristics of the business owners. Currently, federal
law provides, in various ways, for set-asides for (1) small businesses generally, (2) small
businesses located in Historically Underutilized Business Zones (HUBZones) (HUBZone small
businesses), (3) service-disabled veteran-owned small businesses (SDVOSBs), (4) small
businesses owned and controlled by socially and economically disadvantaged individuals that are
participating in the Minority Small Business and Capital Ownership Development Program
authorized by Section 8(a) of the Small Business Act (8(a) small businesses), and (5) womenowned-and-controlled small businesses.
On September 27, 2010, President Obama signed the Small Business Jobs Act of 2010 (P.L. 111240) which amends several provisions of the Small Business Act pertaining to set-asides. P.L.
111-240 changes certain language in the provisions regarding HUBZone set-asides to make clear
that agencies may—but are not required to—use HUBZone set-asides when there is a reasonable
expectation that at least two qualified HUBZone small businesses will submit offers and the
award can be made at a fair market price. P.L. 111-240 also expressly authorizes agencies to set
aside parts of multiple-award contracts for small businesses; place orders under multiple-award
contracts with small businesses without complying with certain procedures ensuring that firms
holding such contracts generally have a “fair opportunity to be considered” for orders under them;
and “reserve” one or more awards for small businesses under “full and open multiple award
procurements.”
P.L. 111-240 was enacted in response to a series of decisions in 2008-2010 by the U.S. Court of
Federal Claims and the Government Accountability Office (GAO) interpreting the provisions of
the Small Business Act establishing or implementing the set-aside programs for small businesses.
One of these decisions, DGR Associates, Inc. v. United States, issued by the Court of Federal
Claims on August 13, 2010, permanently enjoined the government from using an 8(a) set-aside
when there is a reasonable expectation that at least two qualified HUBZone small businesses will
submit offers and the award can be made at a fair market price. The court did so based, in part, on
the interpretation of the Small Business Act set forth in its March 2, 2010, decision in Mission
Critical Solutions v. United States. In Mission Critical Solutions, the court held that set-asides for
HUBZone small businesses have precedence over those for 8(a) small businesses because
HUBZone set-asides are mandatory while 8(a) set-asides are discretionary, and mandatory agency
actions take precedence over discretionary ones. Another decision, Delex Systems, Inc., issued by
GAO on October 28, 2008, recommended that orders issued under certain multiple-award
contracts be subject to set-asides for small businesses because they are “acquisitions,” and any
acquisition over $150,000 is subject to set-asides for small businesses.
While P.L. 111-240 did not amend the Small Business Act to explicitly provide for “parity”
among the set-aside programs, the Federal Acquisition Regulatory Council amended the Federal
Acquisition Regulation in April and May 2011 to establish that “there is no order of precedence”
among the set-aside programs. Also, in February 2011, a court awarded attorneys’ fees, costs, and
expenses under the Equal Access to Justice Act to a firm that had challenged the government’s
argument that there was parity among the set-aside programs prior to the enactment of P.L. 111240. The court did so because it found that the government’s position in this litigation was not
substantially justified.
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Set-Asides for Small Businesses
Contents
Introduction...................................................................................................................................... 1
Set-Asides Under the Small Business Act ....................................................................................... 2
Set-Aside Programs: Key Definitions ....................................................................................... 2
Specific Set-Aside Programs ..................................................................................................... 5
Small Businesses Generally ................................................................................................ 5
HUBZone Small Businesses ............................................................................................... 6
Service-Disabled Veteran-Owned Small Businesses........................................................... 6
8(a) Small Businesses.......................................................................................................... 7
Women-Owned Small Businesses....................................................................................... 8
Developments in the Law Regarding Set-Asides ............................................................................ 9
Precedence Among Small Business Set-Asides ...................................................................... 10
DGR Associates, Inc. v. United States ............................................................................... 11
Mission Critical Solutions v. United States ....................................................................... 12
GAO Decisions ................................................................................................................. 15
Legislative Response to the Court and GAO Decisions.................................................... 17
Award of Costs in Protests Prior to Enactment of P.L. 111-240........................................ 18
Set-Asides Under Indefinite-Delivery/Indefinite-Quantity Contracts..................................... 19
Legislative Response to the GAO Decision ...................................................................... 20
Tables
Table A-1. An Overview of the Requirements and Components of the Various Set-Aside
Programs..................................................................................................................................... 22
Appendixes
Appendix. Programs for Small Businesses.................................................................................... 22
Contacts
Author Contact Information........................................................................................................... 23
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Set-Asides for Small Businesses
Introduction
This report discusses programs that allow certain government procurement contracts to be set
aside for small businesses; decisions by the U.S. Court of Federal Claims and the Government
Accountability Office (GAO) in 2008-2010 interpreting the laws that authorized or implemented
the set-aside programs; and legislation enacted by the 111th Congress in response to these
decisions.
On September 27, 2010, President Obama signed the Small Business Jobs Act of 2010 (P.L. 111240), which amends several provisions of the Small Business Act pertaining to set-asides. P.L.
111-240 changes certain language in the provisions regarding HUBZone set-asides to make clear
that agencies may—but are not required to—use HUBZone set-asides when there is a reasonable
expectation that at least two qualified HUBZone small businesses will submit offers and the
award can be made at a fair market price. P.L. 111-240 also expressly authorizes agencies to set
aside parts of multiple-award contracts for small businesses; place orders under multiple-award
contracts with small businesses without complying with certain procedures ensuring that firms
holding such contracts generally have a “fair opportunity to be considered” for orders under them;
and “reserve” one or more awards for small businesses under “full and open multiple award
procurements.”
P.L. 111-240 was enacted in response to a series of decisions in 2008-2010 by the U.S. Court of
Federal Claims and the Government Accountability Office (GAO) interpreting the provisions of
the Small Business Act establishing or implementing the set-aside programs for small businesses.
One of these decisions, DGR Associates, Inc. v. United States, issued by the Court of Federal
Claims on August 13, 2010, permanently enjoined the government from using an 8(a) set-aside
when there is a reasonable expectation that at least two qualified HUBZone small businesses will
submit offers and the award can be made at a fair market price.1 The court did so based, in part,
on the interpretation of the Small Business Act set forth in its March 2, 2010, decision in Mission
Critical Solutions v. United States. In Mission Critical Solutions, the court held that set-asides for
HUBZone small businesses have precedence over those for 8(a) small businesses because
HUBZone set-asides are mandatory while 8(a) set-asides are discretionary, and mandatory agency
actions take precedence over discretionary ones.2 Another decision, Delex Systems, Inc., issued by
GAO on October 28, 2008, recommended that orders issued under certain multiple-award
contracts be subject to set-asides for small businesses because they are “acquisitions,” and any
acquisition over $150,000 is subject to set-asides for small businesses.3
While P.L. 111-240 did not amend the Small Business Act to explicitly provide for “parity”
among the set-aside programs, the Federal Acquisition Regulatory Council amended the Federal
Acquisition Regulation in April and May 2011 to establish that “there is no order of precedence”
among the set-aside programs. Also, in February 2011, a court awarded attorneys’ fees, costs, and
expenses under the Equal Access to Justice Act to a firm that had challenged the government’s
argument that there was parity among the set-aside programs prior to the enactment of P.L. 111240. The court did so because it found that the government’s position in this litigation was not
substantially justified.
1
DGR Assocs., Inc. v. United States, 94 Fed. Cl. 189 (2010).
Mission Critical Solutions v. United States, 91 Fed. Cl. 386 (2010).
3
Delex Sys., Inc., B-400403, 2008 U.S. Comp. Gen. LEXIS 170 (October 8, 2008).
2
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This report will not be updated and is superseded by CRS Report R41945, Small Business SetAside Programs: An Overview and Recent Developments in the Law, by (name redacted) and
(name redacted), which discusses related questions about the “priority” of set-aside programs
under the Veterans Benefits, Health Care, and Information Technology Act of 2006, among other
things.
Set-Asides Under the Small Business Act
A “set-aside” is a procurement in which only certain businesses can compete. Set-asides can be
exclusive or partial, depending upon whether the entire procurement, or just part of it, is so
restricted.4 Eligibility for set-asides is typically based on business size, as well as demographic
characteristics of the business’s majority owner(s).5 Set-asides, under the current law, are not the
same as quotas. Although agencies can set aside procurements for certain groups and are required
by statute to set minimum goals for contracting with these groups,6 the set-aside programs and the
goals are not presently coupled. That is, the set-aside programs do not automatically ensure that
certain groups get a share of government contracts corresponding to agencies’ contracting goals.
Quotas, in contrast, would ensure that certain categories of businesses (e.g., minority-owned) get
fixed percentages of government contracts.7
Although the Competition in Contracting Act (CICA) generally requires “full and open
competition” for government procurement contracts, set-asides are permissible competitive
procedures.8 CICA specifically authorizes competitions excluding all sources other than small
businesses (i.e., set-asides) when such competitions serve, among other things, to assure that a
“fair proportion” of all government purchases and contracts within each category of industry are
placed with small businesses.9
Set-Aside Programs: Key Definitions
Under federal laws and regulations, there are currently five set-aside programs, benefiting (1)
small businesses generally, (2) HUBZone small businesses, (3) SDVOSBs, (4) 8(a) small
businesses, and (5) small businesses owned and controlled by women. A small business is one
that is “independently owned and operated,” is “not dominant in its field of operation,” and meets
any definitions or standards established by the SBA.10 These standards focus primarily upon the
4
See, e.g., 48 C.F.R. § 19.502-2 (total set-asides); 48 C.F.R. § 19.502-3 (partial set-asides).
See 15 U.S.C. § 637(a) (set-asides for 8(a) small businesses); 15 U.S.C. § 637(m) (set-asides for women-owned small
businesses); 15 U.S.C. § 644 (set-asides for small businesses generally); 15 U.S.C. § 647a (set-asides for HUBZone
small businesses); and 15 U.S.C. § 657f (set-asides for SDVOSBs).
6
See 15 U.S.C. § 644(g)(1)-(2).
7
See, e.g., City of Richmond v. J.A. Croson Co., 488 U.S. 469 (1989) (finding unconstitutional a municipal ordinance
that required the city’s prime contractors to award at least 30% of the dollar amount of each contract to minority
subcontractors).
8
41 U.S.C. § 253(b)(1); 41 U.S.C. § 259(b). For more on competition in federal contracting, see CRS Report R40516,
Competition in Federal Contracting: An Overview of the Legal Requirements, by (name redacted).
9
41 U.S.C. § 253(b)(2) (CICA provision authorizing set-asides for small businesses); 15 U.S.C. § 644(a) (describing
when set-asides for small businesses are permissible); 48 C.F.R. §§ 6.203-6.206 (authorizing set-asides for small
business generally, 8(a) small businesses, HUBZone small businesses, and SDVOSBs).
10
15 U.S.C. § 632(a)(1)-(2)(A).
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size of the business, as measured by the number of employees, its annual average gross income,
and the size of other businesses within the same industry.11 The various subcategories of small
businesses, such as HUBZone, service-disabled veteran-owned, 8(a), and women-owned, must
meet the general criteria, as well as specific criteria tied to their subcategory, such as follows:
•
HUBZone small businesses: HUBZone small businesses must typically be at least
51% unconditionally and directly owned and controlled by U.S. citizens and have
their principal office in a HUBZone.12 At least 35% of their employees must also
reside in a HUBZone.13 A HUBZone is a Historically Underutilized Business
(HUB) zone. HUBZone areas include census tracts or non-metropolitan counties
with higher than average unemployment, or lower than average median
household incomes; lands within Indian reservations; and base closure areas.14
•
Service-disabled veteran-owned small businesses: An SDVOSB is a small
business at least 51% unconditionally and directly owned and controlled by one
or more service-disabled veterans, with both “service” and “veteran” carrying the
meanings they have under the statutes governing veterans affairs.15 A veteran is a
person who served “in the active military, naval, or air service, and who was
discharged or released therefrom under conditions other than dishonorable.”16 A
disability is service-related when it “was incurred or aggravated ... in [the] line of
duty in the active military, naval, or air service.”17
•
Small businesses owned and controlled by socially and economically
disadvantaged individuals that are participating in the Minority Small Business
and Capital Ownership Development Program under Section 8(a) of the Small
Business Act:18 “8(a) businesses,” as these businesses are often called, must be
“unconditionally owned and controlled by one or more socially and economically
disadvantaged individuals who are of good character and citizens of the United
States.”19 The business must also “demonstrate[] potential for success,”20 which
generally means that the business must have been in operation for at least two
full years immediately prior to its application to the 8(a) Program.21 Certain racial
and ethnic minorities are presumed to be socially disadvantaged,22 although other
minorities and nonminorities are also eligible for the 8(a) Program if they can
11
13 C.F.R. §§ 121.101-121.108.
13 C.F.R. § 126.200(b)(1) & (3).
13
13 C.F.R. § 126.200(b)(4).
14
15 U.S.C. § 632(p)(1) & (4).
15
15 U.S.C. § 632(q)(1) & (4).
16
38 U.S.C. § 101(2).
17
38 U.S.C. § 101(16).
18
Commonly known as the 8(a) Program, the Minority Small Business and Capital Ownership Development Program
provides technical assistance and training, as well as contracting assistance, to 8(a) small businesses. For more on the
8(a) Program, see CRS Report R40744, The “8(a) Program” for Small Businesses Owned and Controlled by the
Socially and Economically Disadvantaged: Legal Requirements and Issues, by (name redacted) and (name redacted).
19
13 C.F.R. § 124.101.
20
Id.
21
13 C.F.R. § 124.107.
22
15 U.S.C. § 637(a)(5); 13 C.F.R. § 124.103(b)(1). This presumption is rebuttable and “may be overcome with
credible evidence to the contrary.” 13 C.F.R. § 124.103(b)(3).
12
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prove individual social disadvantage by a preponderance of the evidence.23
Alaska Native Corporations and Community Development Corporations are
deemed or presumed to be economically disadvantaged for purposes of Section
8(a),24 but all other applicants must show actual economic disadvantage. This can
be done, in part, by producing evidence of diminished capital and credit
opportunities, as well as personal net worth of no more than $250,000 at the time
of entry into the 8(a) Program.25 Businesses can generally participate in the 8(a)
Program for no more than nine years.26
•
Small businesses owned and controlled by women: Women-owned small
businesses must be at least 51% owned by one or more women, with the
management and daily operations of the business also controlled by one or more
women.27
HUBZone and 8(a) businesses must also be certified by the SBA to be eligible for set-asides.28
SDVOSBs can generally self-certify as to their eligibility,29 while women-owned small
businesses can either (1) be certified by a federal agency, state government, or national certifying
entity approved by the SBA, or (2) self-certify and provide adequate documentation in
accordance with standards set by the SBA.30
The categories of HUBZone, service-disabled veteran-owned, 8(a), and women-owned small
businesses are not mutually exclusive. A business could potentially be both HUBZone and
service-disabled veteran-owned, for example, although there is some variation among the
eligibility requirements for the various programs, as Table A-1 illustrates.
23
13 C.F.R. § 124.103(c)(1). Evidence must include (1) at least one objective distinguishing feature, such as race,
gender, physical handicap, or geographic isolation, that has contributed to social disadvantage; (2) personal experiences
of substantial and chronic social disadvantage in American society; and (3) negative impact on entry into or
advancement in the business world because of the disadvantage. See 13 C.F.R. § 124.103(c)(2)(i)-(iii).
24
See P.L. 102-415, § 10, 106 Stat. 2112 (October 14, 1992) (codified at 43 U.S.C. § 1626(e)); Small Disadvantaged
Business Certification Application: Community Development Corporation (CDC) Owned Concern, OMB Approval
No. 3245-0317 (“A Community Development Corporation (CDC) is considered to be a socially and economically
disadvantaged entity if the parent CDC is a nonprofit organization responsible to residents of the area it serves which
has received financial assistance under 42 U.S.C. 9805, et seq.”).
25
13 C.F.R. § 124.104(c). This amount increases to $750,000 for purposes of continuing eligibility for the program.
See 13 C.F.R. § 124.104(c)(2)(ii).
26
13 C.F.R. § 124.2. Participants may drop out of, or be terminated from, the 8(a) Program at any time before their
ninth year of participation, but neither they nor their firms may participate in the program again after exiting it for any
reason.
27
15 U.S.C. § 632(n).
28
13 C.F.R. § 124.112(b) (certifications for 8(a) small businesses); 13 C.F.R. § 126.200 (certifications for HUBZone
small businesses).
29
13 C.F.R. § 125.15. Veteran-owned and service-disabled veteran-owned small businesses must, however, have their
eligibility verified by the Department of Veterans Affairs (VA) in order to be eligible for certain preferences in VA
contracts. See Veterans Benefits, Health Care, and Information Technology Act of 2006, P.L. 109-461, 120 Stat. 3403
(Dec. 22, 2006).
30
15 U.S.C. § 637(m)(2)(F)(i)-(ii).
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Specific Set-Aside Programs
Small Businesses Generally
The Small Business Act, as amended, gives preference in certain government procurements to
small businesses.31 Under the act, acquisitions whose anticipated values are between $3,000 and
$150,00032 “shall be reserved exclusively for small business concerns” unless the contracting
officer is unable to obtain offers from two or more small business concerns that are competitive
with market prices and with the quality and delivery of the goods and services being purchased.33
Such acquisitions are conducted using “simplified acquisition procedures,” including purchase
orders, blanket purchase agreements, government-wide commercial purchase cards, and other
authorized alternatives to sealed bids or negotiated offers.34 In addition, acquisitions whose
anticipated values exceed $150,000 “shall” be set aside for small businesses if the contracting
office reasonably expects that (1) offers will be obtained from at least two responsible small
businesses offering the products of different small businesses and (2) the award will be made at a
fair market price.35 These requirements—that the contracting officer reasonably expects that
offers will be received from at least two responsible small businesses and that the award will be
made at fair market price—are commonly known as the “rule of two” because of their focus on
there being at least two small businesses.
When a total set-aside is not appropriate, an acquisition can generally still be partially set aside
for small businesses if (1) the requirement is severable into two or more economic production
runs or reasonable lots, (2) one or more small businesses are expected to have the technical
competence and productive capacity to satisfy the set-aside portion of the requirement at a fair
market price, and (3) the acquisition is not subject to simplified acquisition procedures.36 Partial
set-asides cannot be made when procuring construction work, however.37
If the conditions for a total or partial set-aside are not present, agencies can sometimes make solesource awards to small businesses, or awards entered into or proposed by an agency after
soliciting and negotiating with only one source. However, the Small Business Act does not
authorize sole-source awards to small businesses that are not 8(a) participants or HUBZone or
31
See 15 U.S.C. § 644; 48 C.F.R. § 19.502-2 & § 19.502-3.
$150,000 is currently the “simplified acquisition threshold,” or the maximum dollar value of an acquisition that may
use simplified acquisition procedures. Simplified acquisition procedures allow use of purchase orders, blanket purchase
agreements, government-wide commercial purchase cards, or other authorized methods in place of sealed bids or
negotiated offers. See 41 U.S.C. § 403(11).
33
15 U.S.C. § 644(j)(1) (emphasis added). See also 48 C.F.R. § 19.502-2(a).
34
For more on the simplified acquisition procedures, see generally CRS Report R40516, Competition in Federal
Contracting: An Overview of the Legal Requirements, by (name redacted).
35
48 C.F.R. § 19.502-2(b) (emphasis added). When procuring the same goods or services over time, agencies generally
do not have a legal obligation to award follow-on contracts through a small business set-aside just because a prior
contract for those goods or services was awarded via a set-aside. See, e.g., RhinoCorps Ltd. v. United States, 87 Fed.
Cl. 261 (2009) (finding that the Air Force did not act unreasonably when it determined not to award a follow-on
contract via a small business set-aside because its requirements had changed and it determined that two or more
responsible small businesses would not submit offers). However, set-asides for 8(a) small businesses are somewhat
different than other small business set-asides in that SBA must consent to the “release” of requirements from the 8(a)
Program. See 13 C.F.R. § 124.504(e).
36
48 C.F.R. § 19.502-3(a)(1)-(4).
37
48 C.F.R. § 19.502-3(a).
32
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service-disabled veteran-owned small businesses. Rather, any such awards are generally made
under the authority of the Competition in Contracting Act, which permits sole-source awards
when only one source can supply the goods or services or when other circumstances justify a
sole-source award (e.g., unusual and compelling circumstances; brand-name commercial items
for resale).38
HUBZone Small Businesses
Commonly known as the HUBZone Act, Title VI of the Small Business Reauthorization Act of
1997 established the set-aside program for HUBZone small businesses.39 Initially, the HUBZone
Act provided that
a contract opportunity shall be awarded pursuant to this section on the basis of competition
restricted to qualified HUBZone small business concerns if the contracting officer has a
reasonable expectation that not less than 2 qualified HUBZone small business concerns will
submit offers and that the award can be made at a fair market price.40
However, the 111th Congress amended the HUBZone Act by replacing “shall” with “may” when
describing when HUBZone set-asides are to be used.41
Sole-source awards may also be made to HUBZone small businesses if (1) the business is
determined to be responsible with respect to the performance of the contract and the contracting
officer does not reasonably expect that two or more HUBZone businesses will submit offers; (2)
the anticipated award will not exceed $4 million ($6.5 million for manufacturing contracts); and
(3) in the estimation of the contracting officer, the award can be made at a fair and reasonable
price.42 In addition, HUBZone businesses are eligible for price evaluation adjustments of up to
10% in “full and open competitions,” or competitions not set aside for HUBZone businesses.43
The price evaluation adjustment authority allows an agency to decrease the price of a bid or offer
from a HUBZone small business by up to 10% in determining which bid or offer has the lowest
price or represents the best value for the government.44
Service-Disabled Veteran-Owned Small Businesses
The Veterans Benefits Act (VBA) of 2003 established the set-aside program for SDVOSBs.45
Under the VBA, “a contracting officer may award contracts on the basis of competition restricted
to” SDVOSBs if he or she reasonably expects that no less than two SDVOSBs will submit offers
38
48 C.F.R. §§ 6.302-1 to 6.302-7.
See P.L. 105-135, Title VI, § 602(b)(1)(B), 111 Stat. 2629 (Dec. 2, 1997) (codified at 15 U.S.C. § 657a); 48 C.F.R. §
19.1305.
40
15 U.S.C. § 657a(b)(2)(B) (emphasis added).
41
See infra notes 129-130 and accompanying text.
42
15 U.S.C. § 657a(b)(2)(A)(i)-(iii) (statutory requirements); 48 C.F.R. § 19.1306(a)(1)-(6) (increasing the price
thresholds, among other things).
43
15 U.S.C. § 657a(b)(3).
44
For example, if a non-HUBZone business bid $100,000 and a HUBZone small business bid $110,000, the HUBZone
small business would win because, after its offer is reduced by 10% ($11,000), it is the lower bidder.
45
See P.L. 108-183, Title III, § 308, 117 Stat. 2662 (Dec. 16, 2003) (codified at 15 U.S.C. § 657f); 48 C.F.R. §
19.1405.
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and the award can be made at a fair market price.46 Sole-source awards may also be made to
SDVOSBs, as to HUBZone small businesses, when (1) the contracting officer does not
reasonably expect that two or more SDVOSBs will submit offers; (2) the anticipated award will
not exceed $3.5 million ($6 million for manufacturing contracts); and (3) in the estimation of the
contracting officer, the award can be made at a fair and reasonable price.47 However, SDVOSBs
are not eligible for price evaluation preferences in full and open competitions, like HUBZone
businesses are.
8(a) Small Businesses
Section 8(a) of the Small Business Act, as amended, is the basis for the set-asides for “small
businesses owned and controlled by socially and economically disadvantaged individuals,” which
are also known as “8(a) small businesses.”48 Section 8(a) gives agencies “discretion to [award] ...
contract[s]” for goods or services, or to perform construction work, to the SBA for subcontracting
to 8(a) small businesses.49 Once an agency’s contract has been awarded to the SBA, it “shall be
[subcontracted]” to certified 8(a) businesses.50 This subcontracting must be done via a set-aside,
with eligible 8(a) firms competing for the award, whenever (1) the “rule of two” is satisfied, (2)
the anticipated value of the contract exceeds $4 million ($6.5 million for manufacturing
contracts), and (3) the requirement has not been accepted by the SBA for award on a sole-source
basis to a firm owned by an Indian tribe, Alaska Native Corporation (ANC), or, in the case of
Department of Defense requirements, Native Hawaiian Organization (NHO).51 Subcontracting
may also be done via competitive set-asides for contracts whose anticipated value is less than $4
million ($6.5 million for manufacturing contracts) if the Director of the SBA’s Office of Business
Development approves.52
Awards can be made on a sole-source basis under the 8(a) Program, as under the HUBZone and
SDVOSB programs, when (1) contracting officers determine that the 8(a) business is a
responsible contractor with respect to the performance of the contract opportunity, (2) the award
of the contract would be consistent with the business’s business plan, and (3) the award would not
result in the business exceeding the limits on firm value imposed on 8(a) participants.53 The
anticipated value of the contract must be $4 million or less ($6.5 million or less in the case of
manufacturing contracts) unless the award is being made to a firm owned by an Indian tribe, an
ANC, or, in the case of Department of Defense contracts, an NHO.54 There are no limits on the
anticipated value of contracts awarded on a sole-source basis to firms owned by these entities.
Like SDVOSBs, but unlike HUBZone small businesses, 8(a) small businesses are not eligible for
price evaluation adjustments in full and open competitions. Here, however, unlike with the
46
15 U.S.C. § 657f(b) (emphasis added).
15 U.S.C. § 657f(a)(1)-(3) (statutory requirements); 48 C.F.R. § 19.1406(a) (increasing the price thresholds, among
other things).
48
See 15 U.S.C. § 637(a); 48 C.F.R. §§ 19.800-19.812.
49
15 U.S.C. § 637(a)(1)(A) (emphasis added).
50
15 U.S.C. § 637(a)(1)(D)(i) (emphasis added).
51
Id.; 13 C.F.R. § 124.506(a)(i)-(iii); 48 C.F.R. § 19.805-1(a).
52
13 C.F.R. § 124.506(c).
53
15 U.S.C. § 637(a)(16)(A)(i)-(iii). See 15 U.S.C. § 636(j)(10)(I) (setting out the limits on firm value).
54
13 C.F.R. § 124.506(a)-(b).
47
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SDVOSBs, there is arguably a legal reason that Congress does not presently give agencies the
ability to make price evaluation adjustments to the bids or offers of 8(a) small businesses. Courts
have found that making price evaluation adjustments for “small disadvantaged businesses,”
based, in part, on the presumption that minorities are disadvantaged, unconstitutionally deprives
nonminority contractors of equal protection under the U.S. Constitution.55
Women-Owned Small Businesses
Section 8(m) of the Small Business Act, as amended, provides that the “contracting officer[s] may
restrict competition for any contract for the procurement of goods and services by the Federal
government to small business concerns owned and controlled by women” when certain conditions
are met.56 These conditions require that (1) eligible businesses be at least 51% owned by one or
more women;57 (2) the “rule of two” is satisfied; (3) the anticipated value of the contract will not
exceed $3 million in the case of nonmanufacturing contracts, or $5 million in the case of
manufacturing contracts; and (4) the proposed contract is for the procurement of goods or
services in an industry in which the SBA has determined that women-owned small businesses are
underrepresented.58 Sole-source awards can be made to women-owned small businesses under the
same circumstances as when they can be made to small businesses generally (i.e., only one
responsible source and no other supplies or services will satisfy agency requirements).59
The requirement that the SBA identify industries in which women are underrepresented initially
limited implementation of set-asides for women-owned small businesses. The SBA’s first
proposed rule regarding eligible industries identified only four such industries: (1) intelligence;
(2) engraving and metalworking; (3) furniture and kitchen cabinet manufacturing; and (4) a
limited category of motor vehicle dealers.60 This proposed rule received significant criticism,
including reported criticism from some Members of Congress, and the SBA revised it to include
an additional 27 industries.61 However, before this rule could be finalized, the U.S. Court of
Appeals for the Federal Circuit issued its decision in Rothe Development Corporation v.
Department of Defense, striking down a race-conscious contracting program on the grounds that
there was insufficient evidence of discrimination in the defense industry before Congress when it
55
See, e.g., Rothe Dev. Corp. v. Dep’t of Defense, 545 F.3d 1023 (Fed. Cir. 2008) (finding that Congress lacked
sufficient evidence of racial discrimination in defense contracting when creating the Department of Defense’s Small
Disadvantaged Business Program). Had Congress had a “strong basis in evidence” when resorting to this raceconscious program, the outcome in Rothe could potentially have been different.
56
See 15 U.S.C. § 637(m) (emphasis added).
57
Regulations promulgated by the SBA clarify when set-asides may be made to economically disadvantaged womenowned small businesses and when they may be made to other women-owned small businesses. See U.S. Small Bus.
Admin., Women-Owned Small Business Federal Contract Program: Proposed Rule, 75 Fed. Reg. 10030 , 10031-32
(Mar. 4, 2010).
58
15 U.S.C. § 637(m)(2)(A)-(F) & (m)(4).
59
See 48 C.F.R. § 6.302-1.
60
U.S. Small Bus. Admin., Proposed Rule: Women-Owned Small Business Federal Contract Assistance Procedures, 72
Fed. Reg. 73285 (December 27, 2007).
61
See, e.g., Sens. Snowe, Dole Offer Bill to Overhaul Rule on Women-Owned Small Business Set Asides, 89 Fed.
Conts. Rep. 180 (February 19, 2008) (describing legislation proposed in response to the rule); Robert Brodsky, SBA
Issues New Proposal on Small Business Program, But Same Questions Remain, Government Executive.com, September
30, 2008, available at http://www.govexec.com/dailyfed/0908/093008rb1.htm (noting that the SBA proposed to
increase the number of industries in which women are “substantially underrepresented” from 4 to 31).
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created the program.62 Although gender-conscious programs are subject to “intermediate”
scrutiny, not strict scrutiny like the race-conscious program at issue in Rothe, the SBA extended
the comment period on the proposed rule in order to “review[]” how the evidence underlying its
determinations regarding the industries in which women are underrepresented might fare under
Rothe’s standards for a “strong basis in evidence.”63 Then, on March 11, 2009, Congress enacted
the Omnibus Appropriations Act, 2009, which temporarily prohibited implementation of “the rule
relating to women-owned small business Federal contract assistance procedures published in the
Federal Register on October 1, 2008.”64 However, in March 2010, the Obama Administration
issued proposed regulations establishing the infrastructure for the women-owned small business
set-aside program and identifying additional industries in which women are underrepresented or
substantially underrepresented.65 These regulations identified 83 industries in which women are
underrepresented or substantially underrepresented. They were finalized on October 7, 2010, and
took effect on February 11, 2011.66
Section 8(m) does not authorize special sole-source awards to women-owned small businesses.
Thus, such awards can only be made to women-owned small businesses in the same
circumstances in which they can be made to other businesses under the authority of CICA (e.g.,
unusual and compelling circumstances; brand-name commercial items for resale; national
security).67 Women-owned small businesses are also not eligible for price evaluation preferences
in unrestricted competitions.
Developments in the Law Regarding Set-Asides
In 2008-2010, the Court of Federal Claims and GAO issued a series of decisions in bid protests
that could have significantly affected the law regarding set-asides for small businesses by (1)
giving HUBZone set-asides precedence over 8(a) and, potentially, other set-asides and (2)
subjecting task and delivery orders under multiple-award indefinite-delivery/indefinite-quantity
(ID/IQ) contracts to set-asides. A bid protest is a formal, written objection to an agency’s
solicitation for bids or offers, cancelation of a solicitation, or award or proposed award of a
contract.68 Bid protests can only be made in one of three forums: (1) the procuring agency; (2)
GAO; and (3) the Court of Federal Claims.69 GAO has historically been the largest bid protest
62
Rothe Dev. Corp., 545 F.3d at 1049. See generally CRS Report R40440, Rothe Development Corporation v.
Department of Defense: The Constitutionality of Federal Contracting Programs for Minority-Owned and Other Small
Businesses, by (name redacted) and (name redacted).
63
U.S. Small Bus. Admin., The Women-Owned Small Business Federal Contracting Assistance Procedures: Eligible
Industries, 74 Fed. Reg. 1153 (January 12, 2009).
64
P.L. 111-8, Administrative Provisions—Small Business Administration, § 522, 123 Stat. 673 (Mar. 11, 2009) (“None
of the funds made available under this Act may be used by the Small Business Administration to implement the rule
relating to women-owned small business Federal contract assistance procedures published in the Federal Register on
October 1, 2008 (73 Fed. Reg. 56940 et seq.).”). Similar provisions do not appear to have been included in the
Consolidated Appropriations Act, 2010, P.L. 111-117.
65
75 Fed. Reg. 10030 et seq.
66
Small Bus. Admin., Women-Owned Small Business Federal Contract Program: Final Rule, 75 Fed. Reg. 62258 (Oct.
7, 2010).
67
See supra note 8.
68
31 U.S.C. § 3551(1)(A)-(D).
69
31 U.S.C. § 3551. Certain specific issues relating to the award of federal contracts are protested to other agencies,
rather than the bid-protest forums. Size determinations for small businesses, for example, are protested with the SBA.
(continued...)
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forum. However, because GAO is a legislative-branch agency, the “separation of powers”
doctrine prevents its recommendations from being legally binding upon executive-branch
agencies.70 Rather, agencies must notify GAO within 65 days after receiving its recommendations
if they do not intend to implement them,71 and GAO, in turn, notifies four committees of
Congress.72 In contrast, unless reversed on appeal to the U.S. Court of Appeals for the Federal
Circuit or through a grant of certiorari by the Supreme Court, Court of Federal Claims decisions
are the law, and agencies could be found in contempt if they fail to implement the court’s orders.
However, the 111th Congress has enacted legislation responding to the court and GAO decisions.
The Small Business Jobs Act (P.L. 111-240), signed by President Obama on September 27, 2010,
amends the Small Business Act to remove the language underlying the finding that HUBZone setasides have precedence over other set-aside programs, as well as clarifies that multiple-award
contracts are subject to small business set-asides.
Precedence Among Small Business Set-Asides
Prior to the first GAO decision finding that HUBZone set-asides had precedence, there had long
been uncertainty about which set-aside program agency officials should use in awarding specific
contracts.73 Statutes and the Federal Acquisition Regulation (FAR) provided for certain
precedence in government procurement. Namely:
1. Procurements from prison workshops or severely disabled individuals under 18
U.S.C. §§ 4124-4125 or the Javits-Wagner-O’Day Act take priority over small
business set-aside programs.74
2. HUBZone set-asides “take[] priority” over set-asides for small businesses
generally.75
3. Small business set-asides “do not preclude awards” to SDVOSBs, which must at
least be considered before setting aside the award for small businesses
generally.76
(...continued)
See 13 C.F.R. § 121.1001.
70
See Ameron, Inc. v. U.S. Army Corps of Eng'rs, 809 F.2d 979, 986 (3d Cir. 1986).
71
31 U.S.C. § 3554(b)(3).
72
31 U.S.C. § 3554(b)(3) (Senate Committee on Homeland Security and Governmental Affairs, Senate Committee on
Appropriations, House Committee on Oversight and Government Reform, House Committee on Appropriations).
73
See, e.g., Dep’t of Defense, Gen. Servs. Admin., Nat’l Aeronautics & Space Admin., Federal Acquisition Regulation:
FAR Case 2006-034, Socioeconomic Program Parity: Proposed Rule, 73 Fed. Reg. 12699, 12699 (March 10, 2008) (“It
has been unclear to the acquisition community if there is an order of precedence that applies when deciding whether to
satisfy a requirement through an award to small business, HUBZone small business, service-disabled veteran-owned
small business, or a small business participating in the 8(a) Business Development Program.”).
74
See, e.g., 48 C.F.R. § 19.502-1(b) (set-asides for small businesses generally); 15 U.S.C. § 657a(b)(4) (HUBZone
program); 15 U.S.C. § 657f(c) (SDVOSB program).
75
48 C.F.R. § 19.501(c) (“For acquisitions exceeding the simplified acquisition threshold, the requirement to set aside
an acquisition for HUBZone small business concerns ... takes priority over the requirement to set aside the acquisition
for small business concerns.”); 48 C.F.R. § 19.1305(a) (same).
76
48 C.F.R. § 19.800(e) (“Before deciding to set aside an acquisition in accordance with Subpart 9.5, 19.13, or 19.14,
the contracting officer should review the acquisition for offering under the 8(a) Program.”); 48 C.F.R. § 19.501(d)
(same).
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4. Requirements currently being performed by an 8(a) business, or that SBA has
accepted for performance under the authority of the 8(a) Program, are excluded
from the HUBZone and SDVOSB set-aside programs unless the SBA consents to
release the requirements from the 8(a) Program.77
5. “Priority” in set-asides for small businesses generally “shall be given” to small
businesses that perform a substantial portion of the production on the proposed
contracts within areas of concentrated unemployment or underemployment, or
within labor surplus areas.78
However, these provisions did not address which type of set-aside agencies should use when the
conditions for multiple types of set-asides exist (e.g., when there are at least two responsible
HUBZone small businesses and two responsible SDVOSBs offering goods or services at fair
market price). Given the lack of clear precedence among the set-aside programs, the SBA
historically asserted that “[t]here is no order of precedence” among the programs and suggested
that agencies should select among the set-aside programs in order to maximize their performance
on their goals for contracting with small businesses.79 The Court of Federal Claims and GAO,
however, have disagreed with SBA’s interpretation of the Small Business Act, as discussed below.
DGR Associates, Inc. v. United States
In its August 13, 2010, decision in DGR Associates, the Court of Federal Claims permanently
enjoined the government from using an 8(a) set-aside when there is a reasonable expectation that
at least two qualified HUBZone small businesses will submit offers and the award can be made at
a fair market price.80 In so doing, the court relied heavily on the interpretation of the Small
Business Act provided in its earlier decision in Mission Critical Solutions v. United States,81
discussed below, whose key points it summarized as follows:
•
Because the relevant sections of the Small Business Act are “unambiguous,” the
SBA’s interpretation of that act, which provides for parity among the set-aside
programs, is not entitled to deference.82
•
The language in the Small Business Act specifying that “[n]otwithstanding any
other provision of law, a contract opportunity shall be awarded” via a HUBZone
77
48 C.F.R. § 19.1304(d) (HUBZone exclusions); 48 C.F.R. § 19.1404(d) (SDVOSB exclusions).
15 U.S.C. § 644(d).
79
See, e.g., U.S. Small Bus. Admin., Small Business Size Regulations; Government Contracting Programs; HUBZone
Program: Proposed Rule, 67 Fed. Reg. 3826, 3832 (January 28, 2002) (“[I]f the contracting activity has met 0% of its
HUBZone goals and has met its 8(a) goals, then the contracting officer should [set aside the procurement for HUBZone
small businesses]”). On March 10, 2008, the Civil Agency Acquisition Council and Defense Acquisition Regulations
Council proposed amending the FAR so that it reflected the SBA’s view that there is “parity,” not precedence, among
the 8(a), HUBZone, and SDVOSB set-aside programs. 73 Fed. Reg. at 12700. The comment period on this proposed
rule ended May 9, 2008, but a final rule was never promulgated. The SBA itself had previously proposed a rule that
would have established parity between the 8(a) and HUBZone set-aside programs, but never finalized it. 67 Fed. Reg.
at 3832.
80
DGR Assocs., 94 Fed. Cl. at 194 (“With the issuance of this decision, the Court permanently enjoins Defendant from
proceeding with the contract unlawfully awarded to General Trade & Services, and from awarding any contract that is
not in compliance with the Small Business Act as interpreted herein.”).
81
Id. at 205 (“The Court sees no need to modify the detailed, analytical and persuasive reasoning of the Chief Judge [as
articulated in Mission Critical Solutions].”).
82
Id. at 204-06.
78
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set-aside whenever the rule of two is satisfied clearly indicates “Congress’ intent
to supersede all other laws and prioritize the HUBZone program over other Small
Business Act programs.”83
•
The legislative history of the HUBZone Act relied upon by the government is
insufficient to rebut the “presumption that the plain language of the statute
expresses congressional intent.”84
Despite its comparatively brief discussion of the Small Business Act, the court’s decision was
significant because it articulates, more clearly than the decision in Mission Critical Solutions, that
the government was enjoined from making not only the award challenged in this protest but also
other awards based on the same interpretation of the Small Business Act. The court further
suggested that, where “parity” among the set-aside programs is concerned, the executive branch
“would be better served to seek legislative relief from Congress rather than judicial relief in this
Court.”85
Mission Critical Solutions v. United States
A March 2, 2010, decision by the Court of Federal Claims in Mission Critical Solutions had
similarly held that HUBZone set-asides have precedence over 8(a) set-asides,86 but the Obama
Administration had construed this decision as enjoining only the particular award at issue in the
protest.87 Three provisions of the Small Business Act—two in the HUBZone Act and one in
Section 8(a)—were key to the court’s decision. First, the court construed language in the
HUBZone Act regarding set-asides “[n]otwithstanding any other provision of law” to mean that
the “provisions of the ‘notwithstanding’ section override conflicting provisions of any other
section,” including those regarding 8(a) set-asides.88 In so finding, the court rejected the
government’s argument that the phrase “notwithstanding any other provision of law” need not be
construed literally.89 It did so because it found that the cases the government relied upon in
support of this argument involved statutes which clearly indicated that certain provisions were to
be excluded from the application of the “notwithstanding” provisions and were thus
distinguishable from the Small Business Act.90 The court also found that language in 15 U.S.C. §
657a(b)(4) regarding the relationship between the HUBZone program and the Federal Prison
83
Id. at 205-07. The court specifically rejected the argument that the “notwithstanding” language here referred only to
“provisions outside of the Small Business Act that otherwise might frustrate the authority of a contracting officer to
award a contract to a HUBZone concern.” Id. at 206. It further noted that, because the “nothstanding” clause directly
precedes the “shall” clause, the HUBZone Act cannot be construed to give HUBZone set-asides preference over only
HUBZone sole-source awards. Id. at 207-08.
84
Id. at 207-09 (noting that this legislative history provides no explanation for the deletion of a proposed parity
provision from the Senate version of the HUBZone Act and that one Representative’s expressions of concern about the
potential effect of HUBZone set-asides on 8(a) set-asides cannot be construed to mean that Congress wished the
programs to have parity with one another).
85
Id. at 194.
86
Mission Critical Solutions, 91 Fed. Cl. at 410.
87
See U.S. Department of Justice, Civil Division, Re: Mission Critical Solutions v. United States, No. 09-864 (Fed. Cl.)
(Feb. 26, 2010), Mar. 17, 2010 (letter on file with the author). See also infra note 112 and accompanying text.
88
Mission Critical Solutions, 91 Fed. Cl. at 403 (quoting Cisneros v. Alpine Ridge Group, 508 U.S. 10, 18 (1993)).
89
Id. at 396-97 (relying on Or. Natural Res. Council v. Thomas, 92 F.3d 792, 796-97 (9th Cir. 1996) and In re Glacier
Bay, 944 F.2d 577, 582 (9th Cir. 1991)).
90
Id. at 397.
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Industries and Javits-Wagner-O’Day programs indicated that “if Congress wished to establish the
relationship of the HUBZone program to another contracting preference program, it knew how to
do so.”91 Second, the court construed the use of “shall” in the HUBZone Act to indicate
mandatory agency actions, and its absence in Section 8(a) to indicate discretionary agency
actions.92 It rejected the government’s argument that HUBZone set-asides are only mandatory in
comparison to HUBZone sole-source awards and that, notwithstanding the use of “shall” or
“may” in a statute, the court may consider “indications of legislative intent to the contrary or
obvious inferences from the structure or purpose of the statute.”93 Finally, the court construed the
language in Section 8(a) about contracts “offered for award pursuant to this section” as further
indicating that 8(a) awards are discretionary.94 It found similar language—and discretion—
lacking in the HUBZone Act.95
The court gave no weight to the alleged parity accorded to the various set-aside programs under
15 U.S.C. § 637(d) and 15 U.S.C. § 644(g), which, respectively, require certain prime contractors
to agree to plans for subcontracting with small businesses and establish government-wide and
agency-specific goals for the percentage of federal contract and subcontract dollars awarded to
small businesses.96 The court was not persuaded by the government’s argument that the lack of
mention of precedence among the set-aside programs in these sections indicated parity.97 It felt
that these provisions indicated only that Congress did not provide for precedence among the setasides programs in these sections of the Small Business Act.98 The court also gave no weight to
those aspects of the legislative history that the government claimed indicated that Congress
intended there to be parity among the set-aside programs.99 It noted that examination of the
legislative history is not necessary when the statutory language is clear because “[t]he language of
the statute is the best indication of Congress’s intent.”100 However, it also noted that key evidence
in the government’s resort to legislative history did not necessarily carry the significance that the
government attributed to it. For example, it said that deletion of proposed language regarding
parity among the set-aside programs from the HUBZone Act when it was enacted could have
meant that Congress did not intend for the set-aside programs to have parity.101 Its deletion did
91
Id. at 399.
Id. at 402-04.
93
Id. at 403. The government specifically relied upon Ky., Educ. Cabinet, Dep’t for the Blind v. United States, 424 F.3d
1222, 1227 (Fed. Cir. 2005) (“Congress’s use of the two terms ‘may’ or ‘shall’ does not end the analysis. … [The Court
may consider] indications of legislative intent to the contrary or [] obvious inferences from the structure and purpose of
the statute.”).
94
Id. at 404-06.
95
Id.
96
Id. at 395-96.
97
Id. at 396 (“Defendant argues that because § 644(g) ‘demonstrates that Congress intended that the goals of both
programs were to be pursued concurrently’ and § 637(d)(1) ‘treats the programs as co-equal,’ the SBA’s regulations
providing for parity between the HUBZone and 8(a) programs are permissible.”).
98
Id.
99
Id. at 406-10.
100
Id. at 409-10 (quoting Shoshone Indian Tribe of Wind River Reservation v. United States, 364 F.3d 1339, 1345 (Fed.
Cir. 2004)).
101
Id. at 408-09. The Senate version of the Small Business Reauthorization Act of 1997, which included the HUBZone
Act, originally contained a provision titled “Parity Relationship,” which stated that the HUBZone provisions “shall not
limit the discretion of a contracting officer to let any procurement contract to [SBA] under section 8(a).” 143 Cong.
Rec. 18118 (1997). The House removed the entirety of the HUBZone Act from its version of the Small Business
Reauthorization Act of 1997. The Senate reinstated the HUBZone Act, but without the parity provision, and this
version of the Small Business Reauthorization Act was eventually enacted. 143 Cong. Rec. 24094-108.
92
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not necessarily mean that Congress construed the statute as providing for parity, in the court’s
view.102
The court also rejected the government’s argument that Congress “acquiesced to the SBA’s parity
regulations, and has affirmatively adopted the OLC legal opinion” because of language included
in the conference report on the National Defense Authorization Act (NDAA) for FY2010.103 The
version of the NDAA passed by the Senate would have substituted “may” for “shall” in the
HUBZone Act,104 but this language was omitted by the conferees because
… the Department of Justice has concluded that no change to the Small Business Act is
required to ensure that contracting officers of the Department of Defense and other federal
agencies have the discretion whether or not to award contracts pursuant to the HUBZone
program. The conferees direct the Secretary of Defense to continue to administer the
HUBZone program in a manner consistent with the Department of Justice opinion.105
The court did not find this purported “acquiescence” determinative. Instead, it noted that
congressional statements about the proper interpretation of a statute made subsequent to its
enactment are “of little persuasive authority.”106 Further, the court gave no deference to SBA
regulations providing for parity among the set-aside programs107 because it found these
regulations were not entitled to deference under Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc.108 According to the court, because the statute’s plain meaning is apparent
and “Congress has directly spoken to the precise question at issue,” the SBA’s interpretation of
the statute is given no deference, especially when it is at variance with the statutory language.109
Based upon this analysis, the court enjoined the Army from making the proposed award to an 8(a)
firm and ordered it to determine whether a HUBZone set-aside is required.110 However, it did not
explicitly enjoin the government from making future awards based on the SBA’s “parity rule,”111
102
Mission Critical Solutions, 91 Fed. Cl. at 408. The court also noted that statements of Members of the House of
Representatives expressing concerns about possible precedence of HUBZone set-asides over 8(a) set-asides “at most
offered evidence of the intent of the House, not of Congress.” Id.
103
Id. at 408-09.
104
S. 1390, 111th Cong., § 838, as engrossed.
105
H.Rept. 111-288, at 789 (2009). See also Matthew Weigelt, Congress Keeps HUBZone Priority—for Now, Wash.
Tech., October 9, 2009, available at http://washingtontechnology.com/blogs/acquisitive-mind/2009/10/hubzone-shallstands-its-ground.aspx?s=wtdaily_131009 (“The fiscal 2010 National Defense Authorization Act conference report
didn’t include the one-sentence provision that would have put small businesses in historically underutilized business
zones, or economically depressed areas, on the same level as small businesses in the Small Business Administration’s
8(a) program and those owned by service-disabled veterans.”).
106
Mission Critical Solutions, 91 Fed. Cl. at 409 (relying on Chevron, 467 U.S. 837 (1984)). Under Chevron, when a
court reviews an agency’s formal interpretation of a statute that the agency administers, and when the statute has not
removed agency discretion by compelling a particular disposition of the matter at issue, courts defer to any reasonable
agency interpretation.
107
The SBA regulations then in effect provided for parity among the set-aside programs only implicitly in that they
treated the various set-aside programs the same and did not provide for precedence. The SBA had previously proposed,
but never finalized, a regulation that would have expressly provided for parity among the set-aside programs. See supra
note 79.
108
Mission Critical Solutions, 91 Fed. Cl. at 410-12.
109
Id. at 412.
110
Id.
111
On the other hand, nothing in Part III of the court’s decision suggested its application of principles of statutory
construction to the Small Business Act was limited to the procurement in question. Moreover, language in Part IV of its
(continued...)
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and the Director of the Commercial Litigation Branch of the Civil Division at the U.S.
Department of Justice (DOJ) subsequently stated that the court’s injunction “applie[d] only to the
specific contract at issue in this case and not to operation of the SBA’s parity rule more
generally.”112 Agencies were thus instructed to continue applying the parity rule in their other
procurements.
The Obama Administration also appealed the Court of Federal Claims decision to the U.S. Court
of Appeals for the Federal Circuit.113
GAO Decisions
Prior to and concurrent with the Court of Federal Claims decisions, GAO also issued a series of
decisions in which it construed the Small Business Act in the same way as the Court of Federal
Claims. The first of these was its May 4, 2009, decision in Mission Critical Solutions, wherein it
recommended that HUBZone set-asides be given precedence over 8(a) set-asides.114 The Obama
Administration declined to implement this recommendation, in part, because the Office of Legal
Counsel (OLC) at the DOJ found that the provisions of the Small Business Act regarding the setaside programs are ambiguous and the SBA regulations providing for parity among the set-aside
programs constituted reasonable interpretations of the governing statute.115 The Army thus
(...continued)
decision, providing the “remedy” of injunctive relief, arguably suggested the court intended its interpretation of the
Small Business Act to apply outside the procurement in question. See Mission Critical Solutions, 91 Fed. Cl. at 411
(“Plaintiff has succeeded on the merits of this case. The court has examined the statutory language of the Small
Business Act and concluded that the mandatory language of the HUBZone statute requires that a contracting officer
first determine whether the specified criteria are met before awarding a contract under another small business program
or on a sole-source basis.”).
112
See Re: Mission Critical Solutions, supra note 87.
113
Mission Critical Solutions v. United States, No. 2010-5099 (appeal docketed Apr. 2, 2010).
114
Mission Critical Solutions, 2009 U.S. Comp. Gen. LEXIS 86 at *15. GAO specifically contrasted the language of 15
U.S.C. § 657a(b)(2), which states that “[n]otwithstanding any other provision of law … a contract opportunity shall be
awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if
the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns
will submit offers and that the award can be made at a fair market price,” with that of 15 U.S.C. § 637(a)(1)(A), which
states that:
[i]t shall be duty of the [SBA] and it is hereby empowered, whenever it determines such action is
necessary or appropriate … to enter into contracts with the United States Government and any
department, agency, or officer thereof having procurement powers obligating the [SBA] to furnish
articles, equipment, supplies, services, or materials to the Government or to perform construction
work for the Government. In any case in which the [SBA] certifies to any officer of the
Government having procurement powers that the [SBA] is competent and responsible to perform
any specific Government procurement contract to be let by any such officer, such officer shall be
authorized in his discretion to let such procurement contract to the [SBA] upon such terms and
conditions as may be agreed upon between the [SBA] and the procurement officer.
GAO denied SBA’s request for reconsideration of this decision. See Small Business Administration—Reconsideration,
B-401057.2 (July 6, 2009), available at http://www.gao.gov/decisions/bidpro/4010572.pdf.
115
Office of Legal Counsel, Department of Justice, Permissibility of Small Business Administration Regulations
Implementing the Historically Underutilized Business Zone, 8(a) Business Development, and Service-Disabled
Veteran-Owned Small Business Concern Programs, Aug. 21, 2009, at 5-6, 13, available at http://www.usdoj.gov/olc/
2009/sba-hubzone-opinion082109.pdf. In reaching the conclusion that the Small Business Act was ambiguous as to
whether all contracts must be awarded via HUBZone set-asides when the rule of two is met or whether only contracts
designated for the HUBZone program must be awarded via a set-aside when the rule of two is met, OLC focused on the
phrase “pursuant to this section” used in the HUBZone Act. Id. at 6-7. It concluded that this phrase, which GAO
(continued...)
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Set-Asides for Small Businesses
proposed to proceed with the contract award that Mission Critical Solutions had challenged in its
GAO protest,116 prompting Mission Critical Solutions to file suit in federal court.117
GAO later issued other decisions recommending that HUBZone set-asides be given precedence
over 8(a) set-asides. The earliest of these decisions, a November 4, 2009, decision in All Seasons
Apparel, Inc., evidenced some sympathy for procuring agencies that have received “conflicting
guidance” from OLC, the Office of Management and Budget, and GAO regarding precedence
among the set-aside programs.118 However, its May 14, 2010, decision in DGR Associates
indicated that it would decide future protests raising the issue of HUBZone precedence “in an
expedited and summary manner.”119 GAO also awarded the protester in DGR Associates its fees
and costs in filing the protest,120 which are not routinely awarded to prevailing protesters.121 When
the Obama Administration declined to follow the recommendations GAO made in this protest,
DGR Associates filed suit in federal court, leading to the decision by the Court of Federal Claims
that was previously discussed. Most recently, in Rice Services, Inc., GAO reaffirmed its
recommendation that agencies give HUBZone set-asides precedence over other set-asides and
awarded the protester filing fees and attorney costs.122
In its September 19, 2008, decision in International Program Group, Inc., GAO had also
recommended that HUBZone set-asides be given precedence over set-asides for SDVOSBs for
the same reason.123 The Obama Administration also declined to implement this
(...continued)
apparently did not consider in its decision meant that set-asides are only mandatory as compared to sole-source awards
within the HUBZone program. Id. at 7 (referencing Clark v. Arizona, 548 U.S. 735, 755 n.24 (2006) (recognizing the
“usual rule of statutory construction” to “giv[e] effect, if possible, to every clause and every word of a statute”)).
Relatedly, OLC noted that the mandatory language regarding set-asides for HUBZone businesses in 15 U.S.C. §
657a(b)(2)(B) should be read in contrast with discretionary language regarding sole-source awards to HUBZone
businesses in 15 U.S.C. § 657a(b)(2)(A), not in contrast to language in the statutes establishing the 8(a) or SDVOSB
set-aside programs. Id. OLC also concluded that the language in the HUBZone Act giving prison workshops and
nonprofit agencies for the blind and “severely disabled” priority over HUBZone small businesses highlights the
absence of a similar provision preferring HUBZone set-asides over set-asides for other small businesses. Id. Finally,
OLC noted that the statute establishing the 8(a) set-aside program (15 U.S.C. § 637(a)) included similar mandatory
language, as well as the phrase “pursuant to this section,” which “makes it difficult to argue that the HUBZone
provision unambiguously mandates that HUBZone awards be given priority over 8(a) awards.” Id. at 8. OLC
discounted the phrase “notwithstanding any other provision of law,” found at the beginning of the statutory provision
addressing HUBZone set-asides, as “best read to qualify the substantive requirement that follows.” Id. at 9. It
concluded that this phrase did not, in itself, establish the precedence of HUBZone set-asides. Id. Prior to the issuance of
the OLC opinion, the Office of Management and Budget had directed agencies to maintain parity among the set-aside
programs pending an “Executive Branch review of the legal basis underlying the GAO’s decisions.” Executive Office
of the President, Office of Mgmt. & Budget, Recent Government Accountability Office Decisions Concerning Small
Business Programs, July 10, 2009, available at http://www.whitehouse.gov/omb/assets/memoranda_fy2009/m0923.pdf.
116
Mission Critical Solutions, 91 Fed. Cl. at 391.
117
Id.
118
All Seasons Apparel, Inc., B-401805, B-401805.2, 2009 U.S. Comp. Gen. LEXIS 206, at * 2 (Nov. 4, 2009)
(finding the Army’s decision to cancel the solicitation was not unreasonable “[g]iven the conflicting views expressed in
GAO’s legal decisions and the Executive Branch directives, the threat of litigation from competing small business
interests, and the availability of another procurement vehicle to meet at least some of the agency’s requirements”).
119
DGR Associates, Inc., B-402494, 2010 U.S. Comp. Gen. LEXIS 95 (May 14, 2010).
120
DGR Assocs., 94 Fed. Cl. at 193.
121
See 4 C.F.R. § 21.8(d)(1)-(2).
122
B-403746, B-403746.2 (Sept. 16, 2010).
123
International Program Group, Inc., B-400278; B-400308, 2008 U.S. Comp. Gen. LEXIS 193 (September 19, 2008).
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recommendation,124 but no litigation appears to have challenged whether HUBZone set-asides
had precedence over SDVOSB set-asides.
Legislative Response to the Court and GAO Decisions
Had agencies been required to give HUBZone set-asides precedence over 8(a) or other set-asides,
certain small businesses could have had decreased opportunities to obtain federal contracts, while
agencies could have experienced difficulties in meeting their goals for contracting with certain
types of small businesses.125 Currently, the government-wide goal is that 3% of federal contract
and subcontract dollars go to HUBZone small businesses, while 5% of federal contract and
subcontract dollars go to 8(a) small businesses and 3% go to SDVOSBs.126 Achieving the 8(a)
and SDVOSB goals, in particular, could have been difficult if agencies had to use a HUBZone
set-aside whenever the contract officer reasonably expected that at least two qualified HUBZone
small businesses would submit offers and the award could be made at a fair market price.
Moreover, HUBZone set-asides could also potentially have been found to have similar
precedence over set-asides for women-owned small businesses once these set-asides were
implemented, because the Small Business Act uses “may” when talking about setting aside
procurements for women-owned small businesses.127
Given these potential effects of the court and GAO decisions, which some Members and
commentators viewed as contrary to Congress’s intent,128 the 111th Congress amended the Small
Business Act to remove the language that the courts and GAO relied upon in finding that
HUBZone set-asides have precedence over other set-asides. The Small Business Jobs Act of 2010
(P.L. 111-240), which President Obama signed on September 27, 2010, amends the HUBZone Act
so that it states that “[a] contracting opportunity may be awarded pursuant to this section on the
basis of competition restricted to qualified HUBZone small business concerns if the contracting
officer has a reasonable expectation that not less than 2 qualified HUBZone small business
concerns will submit offers and the award can be made at a fair market price.”129 The act also
deleted the words “[n]othwithstanding any other provision of law,” which had formerly
introduced the provisions authorizing contracting officers to make awards to HUBZone small
businesses on a sole-source or set-aside basis.130
124
Permissibility of Small Business Administration Regulations, supra note 115.
Commentators made these points regarding the earlier GAO decisions recommending that HUBZone set-asides have
precedence over 8(a) and SDVOSB set-asides. See, e.g., HUBZone Council, GAO Gives HUBZone Program Priority
over Service Disabled Veteran Owned Firms, November 6, 2008, available at http://www.ppi-timezero.com/resourcedocuments/hubzonerelease.pdf (hailing the decision’s potential impact on HUBZone small businesses); SBA Warns of
Turmoil without Parity Rule, Entrepreneur.com, November 7, 2008, available at http://www.entrepreneur.com/
tradejournals/article/189159380.html (warning that HUBZone companies “could receive a disproportionate share of
set-aside contracts, squeezing out other groups”).
126
15 U.S.C. § 644(g)(1). There are also agency-specific goals, which tend to be set at 3% and 5% of contract dollars
for HUBZone and 8(a) small businesses, respectively. See U.S. Small Bus. Admin., FY2008 Goals and Achievements,
available at http://www.sba.gov/idc/groups/public/documents/sba_homepage/fy2008goals_and_achievements.html.
127
See 15 U.S.C. § 637(m) (“In accordance with this subsection, a contracting officer may restrict competition for any
contract for the procurement of goods or services by the Federal Government to small business concerns owned and
controlled by women if ...”) (emphasis added).
128
See H.Rept. 111-288, at 789 (2009).
129
P.L. 111-240, § 1347(b)(1) (emphasis added).
130
Id. at § 1347(c).
125
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However, because the act only applies to procurements conducted on or after its date of
enactment, the government could potentially still be found to have improperly failed to give
precedence to HUBZone set-asides in procurements conducted prior to September 27, 2010.
Additionally, although the act is widely described as “ensuring” parity among set-aside
programs,131 it does not amend the Small Business Act so that it expressly provides for parity.132
Nonetheless, the act, as amended, can be construed as allowing for parity by failing to provide for
precedence, and the Federal Acquisition Regulatory Council promulgated regulations in 2011 that
explicitly establish that there is parity among the various set-aside programs. These regulations
provide that
There is no order of precedence among the 8(a) Program (subpart 19.8), HUBZone Program
(subpart 19.13), Service-Disabled Veteran-Owned Small Business (SDVOSB) Procurement
Program (subpart 19.14), or the Women-Owned Small Business (WOSB) Program (subpart
19.15).133
They also establish that “small business set-asides have priority over acquisitions using full and
open competition.”134
Award of Costs in Protests Prior to Enactment of P.L. 111-240
At least one court has awarded attorneys’ fees, costs, and expenses under the Equal Access to
Justice Act (EAJA) to a protester who challenged the government’s interpretation of the Small
Business Act, as it existed prior to the enactment of P.L. 111-240. In its February 15, 2011,
decision in DGR Associates, Inc. v. United States, the U.S. Court of Federal Claims awarded the
protester its costs because the government’s position in the prior litigation “was not substantially
justified.”135 The fact that the government does not prevail in litigation does not necessarily mean
that its position was not substantially justified.136 However, the court found that the government
position here was “not reasonable” because the “statutory language was unambiguous,” and
“multiple courts and the GAO uniformly had held that” set-asides for HUBZone small businesses
had precedence over those for 8(a) small businesses.137
131
See, e.g., Senate Passes Bill Meant to Increase Small Business Access to Federal Contracts, 94 Fed. Cont. Rep. 269
(Sept. 21, 2010).
132
The word “parity” is not among those added to the Small Business Act by P.L. 111-240. Rather, “parity” is used
only in the title of that section of P.L. 111-240 that introduces the amendments made to the Small Business Act (i.e.,
the substitution of “may” for “shall” and the deletion of the “notwithstanding” clause).
133
48 C.F.R. § 19.203(a).
134
48 C.F.R. § 19.203(d).
135
97 Fed. Cl. 214, 217 (2011).
136
See, e.g., Schock v. United States, 254 F.3d 1, 5 (1st Cir. 2001). The Government bears the burden of showing that
its position was substantially justified. See, e.g., Infiniti Info. Solutions, LLC v. United States, 94 Fed. Cl. 740, 748
(2010).
137
97 Fed. Cl. at 219.
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Set-Asides Under Indefinite-Delivery/Indefinite-Quantity
Contracts
In its decision in Delex Systems, Inc., issued on October 8, 2008, GAO determined that task and
delivery orders issued under multiple-award indefinite-delivery/indefinite-quantity (ID/IQ)
contracts are subject to set-asides for small businesses generally.138 Unlike with other contracts,
the government does not commit to purchasing a specific quantity of goods or services when
entering an ID/IQ contract.139 Rather, under an ID/IQ contract, the government and the
contractor(s) agree that the government will issue orders for the delivery of supplies or services to
the contractor(s) during the period of the contract.140 ID/IQ contracts are said to be “multipleaward” when the government awards the contract to multiple contractors, which are then able to
compete for task or delivery orders under the contract. An ID/IQ contract that is not multipleaward is single-award, meaning that only one firm is eligible for task or delivery orders under it.
Delex Systems had protested the Department of the Navy’s request for delivery orders under a
multiple-award ID/IQ contract.141 The Navy proposed to allow all firms awarded the contract to
compete for task orders, a course of action that Delex said was improper given the requirements
in Section 19.502-2(b) of the FAR.142 Section 19.502-2(b) provides that:
[t]he contracting officer shall set aside any acquisition over [$150,000] for small business
participation when there is a reasonable expectation that (1) offers will be obtained from at
least two responsible small business concerns offering the products of different small
business concerns ... and (2) award will be made at fair market prices. Total small business
set-asides shall not be made unless such a reasonable expectation exists.143
The Navy countered, in part, that Section 19.502-2(b) does not apply to ID/IQ contracts because
of language in Section 16.505(b)(1)(ii) of the FAR specifying that the competition requirements
of Part 6 of the FAR—which include the requirement that agencies comply with Section 19.5022(b)—do not apply to the ordering process.144 Set-asides are part of the competition requirements
because the Competition in Contracting Act of 1984, in part, authorizes them.145
GAO disagreed. It found that Section 16.505(b)(1)(ii), which purportedly exempts task and
delivery orders from the competition requirements, means only that agencies do not need to
engage in full and open competition when issuing orders.146 Outside of this exemption, agencies
must comply with the rest of the competition requirements, including set-asides for small
businesses. This is, in part, because Section 19.502-2(b) applies to “any acquisition over
138
Delex Sys., Inc., B-400403, 2008 U.S. Comp. Gen. LEXIS 170 (October 8, 2008).
48 C.F.R. § 16.501-1. A certain minimum quantity must be guaranteed in an ID/IQ contract for there to be the
“consideration,” or bargained-for-exchange, necessary for a binding contract between the government and the
contractor. Some ID/IQ contracts also provide for maximum quantities.
140
Id.
141
Delex Sys., 2008 U.S. Comp. Gen. LEXIS 170 at *8.
142
Id.
143
48 C.F.R. § 19.505-2(b).
144
Delex Sys., 2008 U.S. Comp. Gen. LEXIS 170 at *10-*11.
145
See supra notes 8-9.
146
Delex Sys., 2008 U.S. Comp. Gen. LEXIS 170 at *15.
139
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$150,000,” and orders under ID/IQ contracts are acquisitions.147 Thus, assuming they are over
$150,000, as the Navy’s task and delivery orders were, task and delivery orders are subject to setasides for small businesses generally.148
Legislative Response to the GAO Decision
The Small Business Jobs Act of 2010 (P.L. 111-240) also amended the Small Business Act in
response to this GAO decision, granting agencies explicit authority to set aside multiple-award
contracts, or orders thereunder, for small businesses in a manner consistent with GAO’s decision.
Under P.L. 111-240, agencies may
(1) set aside part or parts of a multiple award contract for small business concerns, including
the subcategories of small business concerns …;
(2) notwithstanding the fair opportunity requirements under section 2304c(b) of title 10,
United States Code, and section 303J(b) of the Federal Property and Administrative Services
Act of 1949 (41 U.S.C. 253j(b)), set aside orders placed against multiple award contracts for
small business concerns, including the subcategories of small business concerns …; and
(3) reserve 1 or more contract awards for small business concerns under full and open
multiple award procurements, including the subcategories of small business concerns.149
The “fair opportunity requirements” mentioned here generally require that all contractors holding
a multiple-award contract have a “fair opportunity to be considered” for orders issued under it.
The effects of this legislation, along with the earlier GAO decision, on the percentage of federal
contract dollars awarded to small businesses generally are hard to assess, largely because it is
presently unclear whether and how agencies might restructure their procurements in response to
it. On its face, the legislation, like the Delex decision, might give small businesses “a new edge in
government contracting” because it would ensure that at least some orders under multiple-award
ID/IQ contracts are set aside for competitions in which only small businesses may compete.150
Small businesses would not have to compete with medium-sized or large businesses for these
orders, and a small business would be assured of winning the order. However, some
commentators predict that these changes could be less beneficial to small businesses than they
initially appear because they “could stress the relationships between [small businesses] and
agencies,” and they might lead agencies to abandon multiple-award ID/IQ contracts in favor of
other contracting vehicles.151 These commentators fear that agencies could come to view
multiple-award ID/IQ contracts as less desirable because such contracts would require multiple
competitions, one for the award of the contract and another for each task or delivery order under
the contract, with each competition creating the possibility of bid protests and concomitant delays
147
Id. at *18.
Id. at *21-*22.
149
P.L. 111-240, § 1331 (codified at 15 U.S.C. § 644(r)).
150
Matthew Weigelt, Ruling Buttresses Small Businesses; Yet Favorable “Rule of Two” Decision Could Come at a
High Cost, Wash. Tech., December 8, 2008, available at http://washingtontechnology.com/Articles/2008/12/04/Rulingbuttresses-small-businesses.aspx.
151
Id. (“Agencies will reassess the advantages of multiple-award contracts because of the GAO’s ruling. ... They might
ask themselves why they should go through the hassle of awarding an ID/IQ and then go through another competition
for task orders.”) (quoting Ray Bjorklund, senior vice president and chief knowledge officer at FedSources Inc.).
148
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in agency activities.152 Such perceptions could potentially cause agencies to rely on single-award
ID/IQs, where possible; the Federal Supply Schedule, assuming it is not also subject to small
business set-asides;153 or other contract types.
152
There could also be delays occasioned by agencies’ conducting market research to determine whether the “rule of
two” is satisfied (i.e., that there are at least two responsible small businesses offering goods or services at fair market
price).
153
GSA responded to the Delex decision, in part, by asserting that contracts under its Federal Supply Schedule are not
subject to set-asides for small businesses. See GSA Memorandum from David A. Drabkin, Senior Procurement
Executive, to All GSA Contracting Activities, October 28, 2008), quoted in Arnold & Porter LLP, GAO’s Delex
Decision and GSA’s Response: The Clash of Titans, available at http://www.arnoldporter.com/resources/documents/
CA_GAOsDelexDecision&GSAsResponse_012609.pdf.
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Appendix. Programs for Small Businesses
Table A-1. An Overview of the Requirements and Components
of the Various Set-Aside Programs
General Requirements
Small
businesses
generally
(15 U.S.C.
§ 644; 48
C.F.R. §§
19.502-2
& 19.5023)
Price Eval.
Adjustment
Set-Asides
Sole-Source Awards
Independently owned and
operated
$3,000-$150,000: exclusively
reserved for small businesses
n/a
Not dominant in its field of
operations
≥ $150,000: set-asides for
small businesses where rule of
two met
Only one responsible source
and no other supplies or
services will satisfy agency
requirements
Business responsible and
two or more HUBZones
not reasonably expected to
submit offers
Up to 10%
Meets size standards
HUBZone
small
businesses
51% unconditionally and
directly owned and controlled
by US citizens
(15 U.S.C.
§ 657a; 48
C.F.R. §
19.1305)
Principal office in HUBZone
≥ $150,000
Rule of two satisfied
≤ $4 million (nonmanufacturing contracts) or
≤ $6.5 million
(manufacturing contracts)
At least 35% of employees
reside in HUBZone
Award can be made at fair
and reasonable price
Servicedisabled
veteran
owned
small
businesses
51% unconditionally and
directly owned and controlled
by service-disabled veteran
≥ $150,000
Rule of two satisfied
(15 U.S.C.
§637(a);
48 C.F.R.
§§ 19.80019.812)
n/a
≤ $3.5 million (nonmanufacturing contracts) or
≤ $6 million (manufacturing
contracts)
(15 U.S.C.
§ 657f; 48
C.F.R. §
19.1405)
8(a) small
businesses
Two or more SDVOSBs not
reasonably expected to
submit offers
Award can be made at a fair
and reasonable price
Unconditionally owned and
controlled by one or more
socially and economically
disadvantaged individuals of
good character and US
citizens
Demonstrated potential for
success → generally in
operation for at least two
years prior to applying to 8(a)
Program
Accepted into 8(a) Program;
time limits on 8(a)
participation (9 yrs.)
Rule of two satisfied
Competition generally required
when contract ≥ $ 4 million
(non-manufacturing contracts),
or ≥ $ 6.5 million
(manufacturing contracts)
unless the contract; may be
used with contracts at lower
prices
Business a responsible
contractor with respect to
the performance of the
contract opportunity
n/a
Award of the contract
consistent with the
business’s business plan
Award would not result in
the business exceeding limits
on firm value
No other supplies or
services will satisfy agency
requirements
Contract ≤ $4 million
(non-manufacturing
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Set-Asides for Small Businesses
General Requirements
Set-Asides
Sole-Source Awards
Price Eval.
Adjustment
contracts), or ≤ $6.5
million (manufacturing
contract), unless an Indian
Tribe, Alaska Native
Corporation, or, in the case
of DOD contracts, Native
Hawaiian Organization is
involved
Womenowned
small
businesses
51% owned by women, with
management and daily
operations also controlled by
women
(15 U.S.C.
§ 637(m))
≥ $150,000
Rule of two satisfied
Eligible business at least 51%
owned by one or more women
who are economically
disadvantaged
Only one responsible source
and no other supplies or
services will satisfy agency
requirements
n/a
≤ $3 million (nonmanufacturing contracts), or ≤
$5 million (manufacturing
contracts)
Proposed contract for an
industry where SBA has
determined that women are
substantially underrepresented
Source: Congressional Research Service.
Author Contact Information
(name redacted)
Legislative Attorney
[redacted]@crs.loc.gov, 7-....
Congressional Research Service
23
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