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3 min read

Bid Protester Loses Claim Regarding Small Business Set Aside

American Relocation Connections L.L.C. (ARC) appealed a decision by the Court of Federal Claims (COFC) granting judgment in favor of the U.S. government. The decision was based on ARC’s pre-award bid protest to a Customs and Border Protection (CBP) solicitation for employee relocation services. ARC claimed that CBP violated the Small Business Administration (SBA) regulations by not consulting with the SBA during its market research for the solicitation. This October, the United States Court of Appeals for the Federal Circuit (COA) decided ARC did not show it was prejudiced by CBP’s failure to consult with the SBA and reaffirmed the COFC's decision.

Small Business Jobs Act

The Small Business Jobs Act (SBA) was passed in 2010 to provide more incentives for small businesses. Section 1331 of the SBA sets aside “multiple award contracts for small business concerns. Under these directions, the SBA is required to conduct market research “to determine the type and extent of foreseeable small business participation in the acquisition."

Events Leading To The Protest

In 2017, CBP cancelled a Request for Quotations (RFQ) because the solicitation referred to an outdated Statement of Work. The RFQ originally stated the procurement was set aside for small businesses. CBP’s market research indicated only one certified small business was available to compete under the new North American Industry Classification System (NAICS) code. NAICS is a classification system developed by the Federal Statistical Agencies for the collection, analysis and publication of statistical data related to the US Economy. It is used in government contracting to identify the classifications eligible for the contract.  Because only one small business met the competition threshold under the new NAICS code, CBP issued an unrestricted RFQ. ARC investigated as to why the 2018 RFQ was not set aside for small businesses. CBP further explained to the Department of Homeland Security Office of Small & Disadvantaged Business Utilization agreed with CBP’s decision for ARC’s unrestricted RFQ based on its explanation it would be designated as a large business under the NAICS code and not enough small business vendors met the competition threshold.

ARC’s Protest

ARC, a nationally recognized small business,  won the initial 2014 CBP contract for relocation services.  In 2017, CBP decided to rebid the contract and changed the NAICS code. ARC filed a protest to the 2018 RFQ with the Government Accountability Office (GAO) in February 2018. GAO dismissed the protest and determined that the decision to set aside orders against the Federal Supply Schedule (FSS) was within the agency’s discretion. The Federal Supply Schedule, also known as the GSA Schedules program or the Multiple Award Schedule Program “provides Federal agencies . . . with a simplified process for obtaining commercial supplies and services at prices associated with volume buying.”   The  ARC responded to its failed attempt at protest by filing a protest with the Court of Federal Claims. It claimed CBP failed to set aside the 2018 RFQ for small businesses and argued that CBP failed to consult with the SBA during its market research. ARC was dealt another loss with the Court of Federal Claims granting judgment in favor of the government, dismissing ARC’s protest, and denying its request for preliminary injunction.

U.S. Court of Federal Appeals Decision

The United States Court of Appeals heard ARC’s appeal on the decision from the Court of Federal Claims. The Court of Appeals noted protesters must show a prejudicial error in the procurement process to be successful in its protest. The Court of Appeals disagreed with ARC’s belief that it only needed to establish standing to protest the 2018 RFQ. The Court noted the case, Ass'n of Data Processing Serv. Organizations, Inc. v. Camp, 397 U.S. 150, 153, 90 S. Ct. 827, 830, 25 L. Ed. 2d 184 (1970), and indicated it shows whether a person alleged prejudice to establish Article III standing is different from whether that party can prove prejudicial error. To establish standing, protestors must demonstrate they are interested parties. This can be done by showing they are an actual or prospective bidder and possess a direct economic interest. As the Court of Appeals noted in the case, post-award bid protests require prospective bidders to show there was a ‘substantial chance’ it would have received the contract award “but for the alleged error in the procurement process.” The Court sided with ARC’s argument for standing, but it most importantly held that ARC did not demonstrate CBP’s failure to consult with the SBA was prejudicial. The Court of Appeals sided with ARC’s assertion for standing because ARC would have been in a better position to secure the contract if it were successful on the merits of its claims.

The Court of Federal Appeals however sided with the Court of Federal Claims in its holding that ARC could not show “that CBP might have issued the 2018 RFQ as a set-aside for small businesses even if it had consulted with the SBA.” CBP’S choice of NAICS code 531210 made ARC’s claim of prejudice challenging to argue. Because only two businesses were listed as a small business certified under code 531210, there wouldn’t be enough vendors to meet the competition threshold. The RFQ must be provided “to as many schedule contractors as practicable” to ensure that at least three contractors fulfill the requirements.

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