Task and Delivery Orders Are Subject to Small Business Set-Aside Requirements
Using its new authority to hear protests of task and delivery orders involving procurements over $10 million, GAO sustained the protest of Delex Systems, Inc. (“Delex”) of the Department of Navy, Naval Air Systems’ (“NAVAIR”) issuance of a delivery order under a multiple award contract as unrestricted. Delex argued, and GSA agreed, that task and delivery orders issued under multiple-award schedule contracts are subject to the small business set-aside provisions of FAR § 19.502-2(b) and that the contracting officer’s determination that the agency had no reasonable expectation of receiving offers from two responsible small businesses was unreasonable.
The Small Business Set-Aside Provisions Apply to Task and Delivery Orders Issued Under Multiple Award Schedule Contracts
The Navy argued that task and delivery orders were exempt from the requirements of FAR Subpart 19.5 because that Subpart only applies when the full and open competition requirements of FAR Part 6 apply, and FAR Part 6, by its own terms, does not apply to task and delivery orders. GAO rejected this argument, finding that the small business set-aside requirements are not merely requirements of the regulations but also of the Small Business Act.
GAO went on to explain that the “rule of two,” a rule designed to implement the requirement of the Small Business Act according to GAO, applies to task and delivery orders issued under multiple award schedule contracts. GAO reasoned that this was the case because a task or delivery order is an “acquisition” and the rule of two applies to “acquisitions.” The rule of two requires that all procurements over $100,000 be set aside for small businesses so long as there is a reasonable expectation that offers will be obtained from at least two responsible offerors at reasonable prices.
Agency’s Determination That it Would Not Receive Two or More Small Business Offers Was Unreasonable
Recognizing that an agency is entitled to great deference in determining whether it expects to receive offers from at least two responsible small business contractors, GAO found that the contracting officer’s decision here was unreasonable. Here, the original multiple award contracts had been awarded to eight contractors -- four small business contractors and four large business contractors. After SBA’s realignment of small business size status, two of the four small business contractors were reclassified as other than small businesses. The contracting officer determined that Delex likely either would not bid on this procurement because it had not bid on the last delivery order, or that Delex was not a responsible contractor because it had previously submitted an unsatisfactory proposal. GAO ultimately rested its conclusion that the contracting officer had acted unreasonably on a finding that the Navy had not adequately documented the basis for its decision.
Delex Systems, Inc., B-440403, Oct 8, 2008, 2008 CPD.
