OMB to GAO: Get lost!

Here is the information I posted to the Wifcon Blog on Sunday morning. It provides access to the decisions and memo for those interested.

Decisions & OMB memo.

I see on the WIFCON site this morning that GAO is standing firm on its original position. I guess everyone hates to admit when they've made a mistake.

Desparado,

What mistake do you think the GAO made?

GAO has read the statutes literally, and their interpretation based on their reading might be correct. The problem is that Congress gave SBA the authority to promulgate regulations and promulgated its regulations in accordance with the the Administrative Procedures Act. The question is whether CICA gives GAO authority to overrule a properly promulgated regulation. I don't think so. I think that only a federal judge can do that. OMB is doing the right thing by telling everyone to ignore GAO until OMB can sort things out. What if a CO complies with a statute that GAO thinks violates the Constitution? Can GAO overrule the statute? It has overstepped its authority.

Vern,

Part of the reconsideration states the following:

...while an agency?s interpretation of a statute it is responsible for implementing is entitled to substantial deference--and, if reasonable, should be upheld--an agency interpretation that is unreasonable is not entitled to deference. Id. (citing Blue Rock Structures, Inc., B‑293134, Feb. 6, 2004, 2004 CPD para. 63 at 8).

Are you saying that GAO should defer to an implementing agency's interpretation of a statute even if that interpretation is unreasonable?

Congress gave SBA authority to promulgate regulations. However, no agency has the authority to promulgate regulations inconsistent with a statute it is trying to implement. When statute and regulation conflict, the statute controls, not the regulation. GAO has not overruled anything as it is not a judicial body and only offers nonbinding legal opinions (albeit opinions that carry a lot of weight). GAO has issued an opinion that, in this case, the regulation does not accurately implement the language of the statute and, therefore, should not be followed. In other words, GAO is recommending that the agency do what it already has the authority to do, ignore a conflicting regulation and follow the statute. If the Agency disagrees with GAO?s decision, they can refuse to follow the opinion and notify Congress of its refusal. If Congress really intends for their to be parity between the socio-economic programs, they shouldn?t have a problem with the agency?s decision and may even pass legislation clarifying that point. People may disagree with GAO?s legal interpretation of the statute and regulation, but I don?t see how it?s an authority issue.

It is an authority issue. Nothing in the protest statute authorizes the GAO to sustain a protest because it does not agree with a regulation promulgated by an agency authorized by Congress to implement a statute. The SBA's regulation was promulgated in accordance with the Administrative Procedures Act. It reflects that agency's interpretation of a statute over which it has executive authority. The GAO had no authority under CICA to sustain the protest because it disagreed with SBA's interpretation of the statute. GAO should have denied the protest and then written to the Administrator of the SBA to offer its opinion about the validity of its regulation.

Mr. Edwards--

I think you are technically correct that GAO does not have authority to "sustain a protest because it does not agree with a regulation promulgated by an agency authorized by Congress to implement a statute."

However, 31 USC 3554((1) does give GAO authority to determine whether a solicitation or contract action "complies with STATUTE and regulation" (emphasis added). In this case, GAO concluded that the protested action did not comply with statute, regardless of whether it complied with the SBA regulations.

That is something the GAO has authority to do.

The protest in International Program Group was based upon a violation of FAR 19.1305, which says that HUBZone set-asides "shall" be made if there are two or more capable and willing HUBZone small businesses. But FAR says "may" with respect to SDVOSB set-asides and sole source awards. Under FAR, the HUBZone program takes priority. It does not appear that the protester was challenging the SBA parity policy.

Here is what GAO said:

With regard to the HUBZone program, the pertinent statutory provision 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 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.

15 U.S.C. ? 657a((2)( (2006) (emphasis added). This provision is implemented in Federal Acquisition Regulation (FAR) Part 19--Small Business Programs. Mirroring the statutory language, the applicable FAR provision states that a contracting officer ?shall set aside acquisitions exceeding the simplified acquisition threshold for competition restricted to HUBZone small business concerns,? FAR ? 19.305(a) (emphasis added), when the contracting officer has a reasonable expectation that offers will be received from two or more HUBZone small business concerns and award will be made at a fair market price. FAR ? 19.1305(. The FAR also provides that a contracting officer may, under certain circumstances, award contracts to HUBZone small business concerns on a sole-source basis, FAR ? 19.306(a), but that the contracting officer ?shall consider HUBZone set-asides before considering HUBZone sole source awards.? FAR ? 19.1305(a).

Why did GAO resort to an analysis of the statute? Why did it contact the SBA and get into the parity issue? It does not appear that the agency relied upon the SBA's regs and the parity policy. Did the agency raise the issue in its defense against the protest? GAO does not say that they did. Thus, GAO could have sustained the protest based on a violation of FAR 19.1305, without any mention of the HUBZone statute and SBA's parity stance. Was GAO looking for an excuse to challenge the SBA parity policy?

ALAL:

I think that when deciding whether an agency conducted its procurement in accordance with statute and regulation, GAO must consider the agency's compliance with statute in light of the implementing regulations. COs do not refer to the United States Code when planning a procurement, they refer to the FAR and other implementing regulations. The GAO should not use its protest authority to challenge implementing regulations.

The Administrative Procedures Act establishes the rules for promulgating regulations. One of those rules is Congressional review. According to 5 USC 801, which says, in part:

(a)(1)(A) Before a rule can take effect, the Federal agency

promulgating such rule shall submit to each House of the Congress and to

the Comptroller General a report containing--

(i) a copy of the rule;

(ii) a concise general statement relating to the rule, including

whether it is a major rule; and

(iii) the proposed effective date of the rule.

( On the date of the submission of the report under subparagraph

(A), the Federal agency promulgating the rule shall submit to the Comptroller General and make

available to each House of Congress--

(i) a complete copy of the cost-benefit analysis of the rule, if

any;

(ii) the agency's actions relevant to sections 603, 604, 605,

607, and 609;

(iii) the agency's actions relevant to sections 202, 203, 204,

and 205 of the Unfunded Mandates Reform Act of 1995; and

(iv) any other relevant information or requirements under any

other Act and any relevant Executive orders.

? Upon receipt of a report submitted under subparagraph (A), each

House shall provide copies of the report to the chairman and ranking

member of each standing committee with jurisdiction under the rules of

the House of Representatives or the Senate to report a bill to amend the

provision of law under which the rule is issued.

(2)(A) The Comptroller General shall provide a report on each major

rule to the committees of jurisdiction in each House of the Congress by

the end of 15 calendar days after the submission or publication date as

provided in section 802((2). The report of the Comptroller General

shall include an assessment of the agency's compliance with procedural

steps required by paragraph (1)(.

( Federal agencies shall cooperate with the Comptroller General by

providing information relevant to the Comptroller General's report under

subparagraph (A).

If we assume that SBA followed that procedure when it promulgated its regulations and Congress did not stop it, then why is GAO getting into it with the SBA over the parity policy, especially since it could have sustained the protests based on FAR alone.

GAO should certainly consider whether a CO followed a regulation. And it may be true that few CO?s consult the US Code during an acquisition. However, if a regulation is contrary to the statute, ignorance of the statute and following the regulation does not make the action legal. The fact that a regulation was promulgated in accordance with the APA does not render it infallible. The statute always controls and is not waived simply because a conflict is not immediately discovered and remedied during the regulatory approval process.

When there are conflicting regulations, as in this case, the proper legal approach is to consult the underlying statute(s) to determine whether the action was appropriate. If GAO had sustained the protest strictly based on a violation of FAR 19.1305, without any mention of the underlying and statute and SBA's parity stance, folks would be skewering GAO for ?ignoring? SBA?s regulations that would support a different outcome. I?m guessing GAO contacted SBA because it was aware that there are conflicting regulations, knew this decision would have larger implications, and wanted to let the reader know that such issues had been considered. I submit it would have been irresponsible to render an opinion that implicitly rejects an SBA regulation without first offering SBA a chance to comment.

But ultimately, none of this goes to the issue of authority. GAO believes an agency conducted a procurement contrary to statute (15 U.S.C. ? 657) and regulation (FAR 19.1305) and said so in an opinion. As part of its analysis it noted there are conflicting regulations and stated it believes FAR 19.1305 more accurately reflects the intent of the statute. That is fully within its authority. GAO?s opinion does nothing, legally, to SBA?s regulation, and, if other agencies believe SBA is correct, they may continue to follow SBA?s reg, as OMB has advised.

Another interesting thing about the OMB memo is that it assumes that agencies have been following, and will now continue to follow, SBA's regulations regarding parity between the HUBZone and SDVOSB programs:

Pending the completion of the legal review of the GAO?s decisions by the Executive Branch, the SBA?s ?parity? regulations should not be disregarded by contracting officers, and Federal agencies should not, as a result of the GAO?s decisions, be compelled to prioritize HUBZone small businesses over 8(a) BD or SDVOSBs. Instead, until the legal review is completed, Federal agencies should continue to give active consideration to each small business program pursuant to their pre-existing contracting practices and ?parity? policies.

There is no acknowledgement that the FAR gives priority to HUBZone set-asides over SDVOSB set-asides and sole source actions. This raises the question: If a contracting officer intended to ignore the HUBZone priority in the FAR, wouldn't they be required to obtain approval of a FAR deviation?

Iron Man:

You wrote:

However, if a regulation is contrary to the statute, ignorance of the statute and following the regulation does not make the action legal. The fact that a regulation was promulgated in accordance with the APA does not render it infallible. The statute always controls and is not waived simply because a conflict is not immediately discovered and remedied during the regulatory approval process.

I agree wholeheartedly, but I do not think that GAO has the authority under CICA to make that determination. That is a matter for judicial review under the APA. If a regulation implementing a statute is promulgated in accordance with established procedure and has been finalized, and if a CO complies with the regulation, then I believe that GAO must deny the protest. GAO should then notify the promulgating agency and the cognizant Congressional committee chair of its opinion.

The CO must comply with FAR. If there is a conflict between FAR and SBA regulations, that matter should be resolved at a level above the CO. In this case, I do not think that there is necessarily a conflict between FAR and the SBA regulations. The SBA regulations establish parity among the programs and leave choice to contracting agencies. If, in light of parity, agencies can decide which program to use, then I see no reason why the Secretary of Defense, the Administrator of NASA, and the Administrator of GSA cannot instruct their their contracting officers to give priority to HUBZone set-asides.

GAO picked a fight with the SBA about a regulation that had no bearing on the protest. The contracting officer failed to follow the FAR, and the protest should have been decided on that basis and that basis alone. There was no need for a statutory analysis.

GAO has engaged in entirely too much rulemaking, and I'm glad to see that OMB has stepped in.

Just to add more fuel to the flame, GAO denied SBA's request for reconsideration:

http://www.gao.gov/decisions/bidpro/4010572.pdf

I agree wholeheartedly, but I do not think that GAO has the authority under CICA to make that determination. That is a matter for judicial review under the APA.

I guess this is where we disagree. I believe every agency has an obligation to ensure that it follows statutes first and regulations second. It need not wait for a judge to strike down a regulation that is contrary to a statute before it refuses to follow the reg. Therefore, DOD had the authority to ignore SBA and follow the FAR and the statute. GAO opined that this is what the agency should have done and, in failing to do so, conducted a flawed procurement.

The CO must comply with FAR. If there is a conflict between FAR and SBA regulations, that matter should be resolved at a level above the CO.

If the statute were silent on the matter or were ambiguous and either regulation were a reasonable interpretation, then I would agree with you, the matter would be susceptible to being resolved internally at a higher level within the Executive Branch. However, if one regulation complies with the statute and one regulation is in conflict with the statute, there is nothing to be resolved. The regulation that is in conflict with the statute is not valid.

In this case, I do not think that there is necessarily a conflict between FAR and the SBA regulations. The SBA regulations establish parity among the programs and leave choice to contracting agencies. If, in light of parity, agencies can decide which program to use, then I see no reason why the Secretary of Defense, the Administrator of NASA, and the Administrator of GSA cannot instruct their their contracting officers to give priority to HUBZone set-asides.

You are assuming the SBA regulations are valid. If the statute says that HUBZones shall be given priority over other concerns, what authority does the SBA have to say HUBZones are merely of equal status?

If a regulation implementing a statute is promulgated in accordance with established procedure and has been finalized, and if a CO complies with the regulation, then I believe that GAO must deny the protest. GAO should then notify the promulgating agency and the cognizant Congressional committee chair of its opinion.

This seems to suggest that because the CO followed properly promulgated SBA regs, GAO should have denied the protest.

The contracting officer failed to follow the FAR, and the protest should have been decided on that basis and that basis alone. There was no need for a statutory analysis.

Whereas this statement seems to suggest that GAO should have upheld the protest based on the CO's failure to follow the FAR.

If you only look at individual parts of the issue you can come to such different conclusions. That is why GAO addressed both regulations and the statute in its decision.

I guess this is where we disagree. I believe every agency has an obligation to ensure that it follows statutes first and regulations second. It need not wait for a judge to strike down a regulation that is contrary to a statute before it refuses to follow the reg. Therefore, DOD had the authority to ignore SBA and follow the FAR and the statute.

That would lead to regulatory anarchy and would be contrary to the interest of sound and efficient governance. That's why we have a rulemaking process.

However, if one regulation complies with the statute and one regulation is in conflict with the statute, there is nothing to be resolved. The regulation that is in conflict with the statute is not valid.

Yes, but who gets to decide which complies and which conflicts? It's not always or even often clear that there is a conflict. We have a rulemaking process and judicial review, mandated by Congress, to resolve those matters. GAO has no role in the rulemaking process other than the one I quoted from statute in my earlier post. And I do not think that FAR 19.1305 necessarily conflicts with the SBA's regulations. I explained why I think that in an earlier post.

You are assuming the SBA regulations are valid. If the statute says that HUBZones shall be given priority over other concerns, what authority does the SBA have to say HUBZones are merely of equal status?

I assume no such thing. I know only that SBA has promulgated its rules in compliance with the APA. I may have an opinion about SBA's rule, but I have not said what my opinion is and my opinion does not matter. If anyone thinks that SBA's rule is contrary to statute they can challenge it in court as provided in the APA.

This seems to suggest that because the CO followed properly promulgated SBA regs, GAO should have denied the protest.

That's not my suggestion. I think that the CO violated FAR 19.1305 and that the GAO should have sustained the protest for that reason and that reason only, without saying anything about SBA's rule. In fact, it does not appear that the CO took SBA's rule into consideration in making the decision to award to a SDVOSB. The decision does not say that the agency invoked the parity rule in its defense.

Too often, the GAO has exceeded its authority when deciding protests. The Executive Branch should have resisted the GAO's rulemaking intrusions decades ago. Words cannot express how happy I am with OMB's course of action.

That would lead to regulatory anarchy and would be contrary to the interest of sound and efficient governance. That's why we have a rulemaking process. ... It's not always or even often clear that there is a conflict. We have a rulemaking process and judicial review, mandated by Congress, to resolve those matters.

No, it does not lead to regulatory anarchy. Here?s how it works. For the purpose of this discussion, we can divide regulations into four categories. Group 1 are regulations that clearly implement and comply with the language of a statute. Group 2 are regulations that implement statutes that are unclear, and the regulation is a reasonable interpretation. Group 3 are regulations that implement a statute that is unclear, and the regulation is a clearly unreasonable interpretation. Group 4 are regulations that clearly conflict with the language of the statute.

The vast majority of regulations fall within groups 1 and 2, i.e., they either clearly comply with the language of the statute, or there is an ambiguity but the agency?s interpretation is reasonable. For Group 1 regulations, the matter is simple, follow the regulation. For Group 2 regulations, you can rely on Supreme Court precedent such as Chevron, which says that if there is ambiguity, the interpretation of agency charged with issuing and implementing the regulation should be given wide deference and therefore followed. If you can?t tell whether there is a conflict, i.e., you can see both sides of the argument, then the agency?s interpretation is not unreasonable and falls within Group 2.

What we are left with are a very small fraction of regulations that fall into Groups 3 and 4, i.e., regulations that are clearly unreasonable or that clearly conflict with statute. Furthermore, some of these regulations only affect the general public and the agency that issue the regulation. In such a case, the agency that implemented the conflicting regulation is not going to ?challenge? its own regulation (it would just change the reg if it wanted) and other agencies are not going to challeng it because the reg doesn?t affect them. In this situation, the APA allows a member of the public with standing to challenge the regulation and have a judicial body overturn the regulation. (Of course, the public can challenge regs in Group 1 and 2 also, but they will be unsuccessful.)

Now we are left with an even smaller subset of regulations that are clearly unreasonable or clearly conflict with the statute and also affect other agencies. In this case, the public could certainly challenge a regulation under the APA, but another agency cannot. DOD is not going to sue the SBA under the APA. What recourse is left for this minute fraction of regulations? Certainly, it is politically wise to try to work it out within the Executive Branch. However, in the meantime, each agency is still obligated to follow the language of the statute, not the regulation.

Sorry for the longwinded explanation, but as you can see we are only dealing with a very small subset of regulations and asking an agency to give priority to statutes over regulations will not cause ?regulatory anarchy? because a genuine patent conflict is so rare.

And I do not think that FAR 19.1305 necessarily conflicts with the SBA's regulations. I explained why I think that in an earlier post.

This issue is not just whether SBA regulations conflict with the FAR, but whether they conflict with that underlying statute. Your interpretation only works if you apply SBA regulations first and then the FAR, i.e., SBA regs establish parity first and then the FAR can further restrict to HUBZones. However, it is the statute that takes precedence and must be applied first, establishing priority for HUBZones. Once HUBZone priority is established by the statute, SBA regulations have no where to fit in this scheme. By trying to establish parity after the statute has given HUBZone's priority, the regs conflict with the statute. If the the statute did not say "shall" I would agree with you that agencies could further refine the priorities. But the statute makes HUBZone priority mandatory, and SBA's regs, no matter how promulgated, cannot preempt the statute.

If anyone thinks that SBA's rule is contrary to statute they can challenge it in court as provided in the APA.

That is not true. In order to challenge the SBA?s rule in court, you must have standing, i.e., you must be directly affected by the rule. Furthermore, as noted above, an agency (or agency employee acting in his or her official capacity) that does not agree with the rule cannot challenge another agency under the APA.

I think that the CO violated FAR 19.1305 and that the GAO should have sustained the protest for that reason and that reason only, without saying anything about SBA's rule. In fact, it does not appear that the CO took SBA's rule into consideration in making the decision to award to a SDVOSB. The decision does not say that the agency invoked the parity rule in its defense.

The agency may or may not have invoked the parity rule in its defense. I don?t know. But the SBA clearly raised the issue in its submissions and as part of the protest process. If SBA thought this was a strictly FAR 19.1305 issue, it could have said so and declined comment on the case. Once raised, however, it was appropriate for GAO to addresses it.

Even if it wasn?t raised by SBA, I know of no rule that restricts GAO opinions only to the issues raised by the parties to the protest. In fact, 31 USC 3554((1) states,

?With respect to a solicitation for a contract, or a proposed

award or the award of a contract, protested under this subchapter, the

Comptroller General may determine whether the solicitation, proposed

award, or award complies with statute and regulation. If the Comptroller

General determines that the solicitation, proposed award, or award does

not comply with a statute or regulation, the Comptroller General shall

recommend that the Federal agency [recomplete, terminate the contract, etc.]?

It does not say the Comptroller General should determine who has raised the better argument. Nor does it say the Comptroller General may only consider arguments raised by the parties. If there is a relevant statute or regulation, GAO should consider it and render an opinion.

Finally, despite protestations to the contrary, GAO has not engaged in rulemaking. No new rules or regulations have been made, and no rules or regulations have been repealed. GAO?s opinion that the language of the statute takes precedence over the language of any conflicting regulations is established law and nothing new. GAO?s decision may have practical consequences with regard to how agencies conduct procurements, but then again that can be said about almost every GAO opinion.

Words cannot express how happy I am with OMB's course of action.

For purely selfish reasons, I?m happy with OMB?s course of action too. I have no direct stake in the matter and think it makes for great drama. I'm interested in how it will play out.

Iron Man:

Sorry for the longwinded explanation... .

No problem, but just to be clear, what you gave me was an explanation of your analysis and opinion. I welcome it, but I don't want other readers to take your explanation as an explanation of how the world really works.

For the purpose of this discussion, we can divide regulations into four categories. Group 1 are regulations that clearly implement and comply with the language of a statute. Group 2 are regulations that implement statutes that are unclear, and the regulation is a reasonable interpretation. Group 3 are regulations that implement a statute that is unclear, and the regulation is a clearly unreasonable interpretation. Group 4 are regulations that clearly conflict with the language of the statute.

The vast majority of regulations fall within groups 1 and 2... .

Well, that's a nice taxonomy. The problem is that what is clear implementation and compliance to you or me may not be so to someone else, in which case someone must decide. My point is that CICA does not authorize GAO to resolve such issues and to overrule an agency that has the authority to promulgate the regulation at issue. I want to make that clear: My issue is GAO's authority under CICA. I am not saying that I agree with SBA's interpretation of statute or its parity policy.

This issue is not just whether SBA regulations conflict with the FAR, but whether they conflict with that underlying statute.

That may be your issue, but it was not an issue raised by the protester in the International Program Group decision and it is not my issue. Nothing in the decision indicates that either the protester or the agency raised the issue of the SBA's parity rule. GAO went to SBA to seek its opinion on the case. Why, I do not know, because the protester accused the agency of violating FAR 19.1305. The fact that the SBA thought that there is parity among the programs should had no bearing and should have made no difference to the outcome of the decision. If I remember correctly, the FAR councils had announced that there were going to change FAR to bring it in line with the GAO's parity policy, but had not yet done so. GAO could have used the public comment period to raise the issue. Instead, it chose to consult SBA needlessly and insert a footnote in its decision that was irrelevant to the case as best we can tell from the text of the decision.

Nor is it my issue. It's true that i mentioned that I do not think that FAR necessarily conflicts with SBA regulations, but I do not think that was an issue in the case and I don't consider it an issue here. SBA's policy may or may not conflict with statute. (I have not said what I think in that regard.) My issue is whether GAO has the authority to decide that issue under its protest jurisdiction, and I say that they do not. Under its protest jurisdiction GAO has the authority to decide whether a procuring agency complied with statute and regulation. I say that in doing so, GAO must rely on the statutory interpretations of executive agencies that have the authority to make such rules. (The Court of Federal Claims, on the other hand, does not.)

QUOTE (Vern Edwards @ Jul 16 2009, 04:38 PM) If anyone thinks that SBA's rule is contrary to statute they can challenge it in court as provided in the APA.

That is not true. In order to challenge the SBA?s rule in court, you must have standing, i.e., you must be directly affected by the rule. Furthermore, as noted above, an agency (or agency employee acting in his or her official capacity) that does not agree with the rule cannot challenge another agency under the APA.

Read my statement again. I wrote "as provided in the APA." I typically don't make the kinds of dumb errors that you attribute to me.

The agency may or may not have invoked the parity rule in its defense. I don?t know. But the SBA clearly raised the issue in its submissions and as part of the protest process.

And why was SBA allowed to raise any issue? It does not appear from the decision that the protester challenged SBA's policy. The protester challenged the agency's failure to comply with FAR. GAO decided to go to SBA. I will wager that it already knew about SBA's parity rule and knew what SBA was going to say, and decided to seek SBA's opinion so it could inject its little footnote. GAO should decide protests based on issues raised by protesters and the agencies that conduct protested procurements.

Even if it wasn?t raised by SBA, I know of no rule that restricts GAO opinions only to the issues raised by the parties to the protest.

The protest statute says:

Under procedures prescribed under section 3555 of this title,

the Comptroller General shall decide a protest submitted to the

Comptroller General by an interested party.

The statute does not say that GAO can raise an issue sua sponte. It says that GAO shall decide "a protest submitted to" the CG. I say that means that it must decide the protest based on issue raised by the protester.

The issue is not whether GAO should consider a relevant statute. The issue is how GAO may interpret the statute under its protest authority. I say that if an executive agency charged by Congress with statutory implementation has interpreted the statute in duly promulgated regulations, then GAO must accept the agency's interpretation when deciding the protest, whether it agrees with the agency's interpretation or not. If it disagrees, it can raise the issue with the agency head, OMB, and with the appropriate congressional committees.

Iron Man:

I want add this. You wrote:

Finally, despite protestations to the contrary, GAO has not engaged in rulemaking. No new rules or regulations have been made, and no rules or regulations have been repealed.

Oh, please! GAO has engaged in de facto rulemaking for decades. Even the Court of Federal Claims thinks so. See, e.g., Judge Lettow's comment in Geo-Seis Helicopters, Inc. v. U.S., 77 Fed. Cl. 633 (Fed. Cl. 2007):

There is simply no basis in the FAR for the view that the Contracting Officer had discretion to render the ?late is late? rule a nullity. Although GAO decisions support the government's position as to the nunc pro tunc effect of post-hoc amendments, see supra at 642, those GAO precedents reflect ?one of those Comptroller-General-created rules that is not reflected in the FAR,? as conceded by Professor Nash, a harsh critic of the ?late is late? rule. Ralph C. Nash & John Cibinic, Late Final Proposal Revisions: The Final Straw!, Nash & Cibinic Report, Vol. 18, No. 4, ? 16 (1997). Those GAO decisions are not persuasive and they will not be adopted.

In the cited article, Nash wrote:

The Contracting Officer could have solved the problem with a minimum of effort by extending the time for proposal submission. See Ivey Mechanical Co., Comp. Gen. Dec. B-272764, 96-2 CPD ? 83, permitting such an extension after the time had passed and Micromass, Inc., Comp. Gen. Dec. B-278869, 98-1 CPD ? 93, permitting an extension before the time had arrived. But we doubt if most COs know that an extension is possible, and the rule is one of those Comptroller General-created rules that is not reflected in the FAR.

The entire history of discussions in source selection is a history of GAO rulemaking. I would go as far as to say that most of the "rules" for the conduct of source selection under FAR Part 15 are GAO-made rules. See Nash, The Rules of the Competitive Negotiation Game: Who Makes Them?, 14 N&CR ? 48 (Sept. 2000). Consider, for example, the cost-realism rule, which did not exist in FAR until fairly recently. Here is Nash:

In Postscript: Negotiation in a Competitive Situation, 13 N&CR ? 19, we reported our amazement at the way the Comptroller General had interpreted the new mandatory discussion rule in Federal Acquisition Regulation 15.306(d). It seemed to us that he had ignored the explicit language of the FAR, as well as the stated intent of its drafters, in concluding that the new FAR language was the same as the old language. We also found it remarkable that he seemed to ignore past Comptroller General decisions in deciding the MCR Federal, Inc., Comp. Gen. Dec. B-280969, 99-1 CPD ? 8 (1998), case. Our conclusion was that the Comptroller General appears to make up the rules of the competitive negotiation game on an ad hoc basis.

In retrospect, we shouldn't have been so surprised because this has been going on for quite awhile. We recently found a decision that lays out as clearly as possible the Comptroller General's rule that a cost realism analysis is mandatory when awarding a cost-reimbursement contract. This rule has now been inserted in FAR 15.404-1(d) as follows:

(2) Cost realism analyses shall be performed on cost-reimbursement contracts to determine the probable cost of performance for each offeror.

(i) The probable cost may differ from the proposed cost and should reflect the Government's best estimate of the cost of any contract that is most likely to result from the offeror's proposal. The probable cost shall be used for purposes of evaluation to determine the best value.

(ii) The probable cost is determined by adjusting each offeror's proposed cost, and fee when appropriate, to reflect any additions or reductions in cost elements to realistic levels based on the results of the cost realism analysis.

Before the FAR Part 15 rewrite in 1997, however, this mandatory rule was not in the FAR. Nonetheless, the Comptroller General imposed it on agencies. This was addressed explicitly in KPMG Peat Marwick, LLP, Comp. Gen. Dec. B-259479.2, 95-2 CPD ? 13, where the Comptroller General stated the rule as follows:

The agency must perform a cost realism analysis, however, whenever a cost reimbursement-type contract is contemplated. The basis for the cost realism analysis rule is that an offeror's estimated costs may not provide valid indications of the final and actual allowable costs that the government is required to pay. FAR ? 15.605(d); T

ecom, Inc.

, B-257947, Nov. 29, 1994, 94-2 CPD ? 212. Consequently, a cost realism analysis must be performed to determine the extent to which an offeror's proposed costs represent what the contract should cost, assuming reasonable economy and efficiency.

CACI, Inc.-

-Fed., 64 Comp. Gen. 71 (1984), 84-2 CPD ? 542. This requirement exists regardless of whether or not an agency is otherwise required to request cost and pricing data.

Please don't tell me that the GAO hasn't engaged in rulemaking through its protest decisions. There are too many examples to write about. Just study the history of its decisions about discussions in source selection. Start with what originating statute, PL 87-653, said about discussions, then follow the decisions. It's incredible!

Apparently, it's an all out turf war!

http://fcw.com/Articles/2009/07/20/WEEK-Sm...ness-rules.aspx

This just in:

http://www.gao.gov/decisions/bidpro/401805.htm

This just in:

http://www.gao.gov/decisions/bidpro/401805.htm

I wish the Army had let the case go to the Court of Federal Claims. The issue hasn't been put to bed, only postponed.

All that work and delay, because of a decision that the GAO should never have made.

Update ?

Pursuant to OMB/DOJ direction, the Army declined to follow GAO?s recommendation. Mission Critical Solutions subsequently filed a protest at the Court of Federal Claims. On Monday, the COFC published its opinion sustaining the protest. The COFC has interpreted the statute as providing a priority in favor of HUBZone small business program over the 8(a) program. The COFC also enjoined the Army's intended sole-source award.

Mission Critical Solutions v. United States. http://www.uscfc.uscourts.gov/sites/defaul...S%20Opinion.pdf

Sen. Olympia Snowe introduced legislation during the last session of Congress, S.1489, that would create parity among the programs in accorndance with SBA's interpretation. The bill has been in the Senate Committee on Small Business and Entrepreneurship since last July. Nothing much has happened.

In the meantime, FAR 19.800(e) needs to be fixed:

Before deciding to set aside an acquisition in accordance with Subpart 19.5, 19.13, or 19.14, the contracting officer should review the acquisition for offering under the 8(a) Program.

The scores tonight (for those of you keeping track at home) are:

Attentive Readers 1

Royalist Bureaucrats 0

Statutory Construction 1

Just makin' stuff up because you have a high-backed chair 0

Reading words to understand meaning 1

"What those old duffers meant to say" 0

HUBZones 1

8(a) BD Program 0

Legislative Branch 1

Executive Branch 0

Poor people in areas with no jobs 1

Fancydan, overpricin' 8(a) contractors 0

Competition 1

"I know a guy" 0

"What section 657a((4) makes very clear is that, if Congress wished to establish the relationship of the HUBZone program to another contracting preference program, it knew how to do so." Love it.

Scam-riddled HUBZone Program 1

Service-disabled veterans 0

On page 29 of the decision, the Court mentions that:

"The HUBZone statute was introduced as part of the Senate version of the Small Business Reauthorization Act. Def.'s Resp. 26 (citing Small Business Reauthorization Act of 1997, S. 1139, 105th Cong., tit. vi (as reported by S. Comm. on Small Bus., Aug. 19, 1997, S. Rep. No. 105-62)). Defendant notes that the original Senate version of the bill contained a "Parity Relationship" provision, 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)." Id. (quoting 143 Cong. Rec. 18,118 (1997)). Defendant also notes that after the House of Representatives removed the entire HUBZone program from the bill, the Senate reinstated the program--but without the parity provision. Id. at 27 (citing 143 Cong. Rec. 24,094-108)." No explanation for the parity provision's omission was provided in the Senate record." Id. (citing 143 Cong. Rec. 24,106). defendant then lists a number of comments by House members, expressing their concern "that the new HUBZone program not harm the existing 8(a) program." Def.'s Resp. 28.

With no explanation from the Senate as to why the parity provision was omitted, the fact that it was omitted is inconclusive."

Apparently, the bill entered what our legislature refers to as a "conference." In truth, it is a shuffling of papers by a bunch of guys and gals who may or may not have a clue about what they have before them. Anyway, it appears that what some learned members of our "legislature" wanted was trashed in conference. Why? Who knows. Maybe some old fuddy-duddy hoping for a defense plant in his state just was being ornery and hid the provision. Anyway, that is the legislative process.

In the latest major piece of "contracting legislation," the National Defense Authorization Act For Fiscal Year 2010, our "legislature," had another shot at removing a "shall" and replacing it with a "may." Maybe that would have provided clarity to this situation. Instead, "our legislature" again omitted the change. You can see it here at the bottom of this page. The provision was deleted in "conference." Why? Who knows? Again there was no explanation. Maybe the provison dropped to the floor and no one picked it up and stuck it back in the pile of paper before it was voted on. Who knows? Anyway, apparently a disappointed congressional staffer decided to try to scold the government into submission by using a Justice Department declaration. Nice try little one. It doesn't work as you can see from the Court's decsion below:

Congress's statements about the proper interpretation of a statute subsequent to the statute's passage are of little persuasive authority. (p. 31 of decision)

Now, we can all anxiously wait for the next piece of garbage contracting legislation to clear everything up.

Legislative intent reminds me of a personal story.

I had been flying around the country visiting contracting offices to review the experience gained under an OFPP contracting test. Before I got down the steps of the contracting office at Rock Island, I found out that a bill incorporating the test's provisions had been signed into law. At the end of my work, I sat down with a congressional staffer explaining our review of the test. There was a problem. One provision of the law scared everybody. I tried my weak explanation of what the legislative intent wanted. The staffer looked at me and said there was no such thing as "legisative intent" since no one knew what they were voting for. Then the staffer said "what have we done." The staffer immediately called OMB and--over the phone--it was agreed that there would be no regulation to implement the troubling provision of law. It worked. In the future, I suppose the legisation was fixed.

Interesting read from 2002 http://www.house.gov/smbiz/democrats/Press...es/Pr032802.htm where there was insistance by Congress that there should not be parity in favor of 8(a). What a tangled web of confusion our bureaucrats have woven.

I forgot to mention that I will be adding the decision this weekend.

Interesting read from 2002 http://www.house.gov/smbiz/democrats/Press...es/Pr032802.htm where there was insistance by Congress that there should not be parity in favor of 8(a). What a tangled web of confusion our bureaucrats have woven.

"The HUBZone Program was designed to benefit low income individuals and welfare recipients by the injection of federal contracting dollars in low income communities, or those communities suffering from high unemployment. The 8(a) Program, on the other hand, promotes individual entrepreneurship by minority business owners through the awarding of federal contracts to these businesses."

This quotation, which identifies well who the primary beneficiaries are for each program, in my view supports the notion that the HUBZone program should have a higher priority than any of the preference programs that are based on who OWNS THE COMPANY. The regulations identify that a purpose of the HUBZone program is to increase EMPLOYMENT in these areas. The program requires that a percentage of the EMPLOYEES reside in a HUBZone, thus adding to the regenerative effect of the program on these areas.

The whole idea of parity is a very bad one and would be confusing for contracting offices. The Executive Branch has really worked hard to screw this up, SBA in particular, at least in part because the 8(a) program is easier to administer than the HUBZone program. The number of SBA HUBZone program examinations (Seen 13 CFR 126.401) is not nearly sufficient, which increases the likelihood of fraud and corruption within the program. Why are there so few examinations? Too many fancydan, knownothing office types at SBA who don't like any action that involves honest work on their part.

This kind of laziness and SBA plainly not minding the store is what prompted the old joke, maybe you've heard it:

A young man advised his boss that he had accepted a job with SBA. The boss replied, "Son, you'll be lucky to work there."

It was right about a year ago that the charge to change the HubZone rule was taken up by Congress following two unflattering reports by GAO on HubZone abuses. Here's the story with links to the reports:

http://www.govexec.com/dailyfed/0309/03260...tm?oref=rellink

Mission Critical Solutions v. United States. http://www.uscfc.uscourts.gov/sites/defaul...S%20Opinion.pdf

Sen. Olympia Snowe introduced legislation during the last session of Congress, S.1489, that would create parity among the programs in accorndance with SBA's interpretation. The bill has been in the Senate Committee on Small Business and Entrepreneurship since last July. Nothing much has happened.

Sen. Snowe yesterday urged passage of the bill now. At the same time Sen. Landrieu plans to introduce another stand-alone bill in place of the amendment that establishes parity but was stripped off another bill. Here an article with more details:

http://www.govexec.com/story_page.cfm?arti...oref=todaysnews

The GovExec article also says "The matter also could be resolved through a regulatory change. A proposed FAR rule, filed in March 2008, would have clarified that no order of award preference exists among small business programs. That rule remains under review."

I don't see how a rule can simply "clarify" now with the Court's opinion. The article also says the Administration may appeal the decision as well.

It will be interesting to see if Congress changes the statute. Anybody want to place a bet?

I don't think Congress will change anything. For one reason, Congress has so many other things to deal with which are a higher priority. For example, health care gets forced upon them again in the next couple weeks. Another reason is the issue is both complicated as well as potentially embarrassing because all the HUBZone abuses with no remedy in sight.

federalcontracts previously brought up a good point with this comment:

"The HUBZone Program was designed to benefit low income individuals and welfare recipients by the injection of federal contracting dollars in low income communities, or those communities suffering from high unemployment. The 8(a) Program, on the other hand, promotes individual entrepreneurship by minority business owners through the awarding of federal contracts to these businesses."

This quotation, which identifies well who the primary beneficiaries are for each program, in my view supports the notion that the HUBZone program should have a higher priority than any of the preference programs that are based on who OWNS THE COMPANY. The regulations identify that a purpose of the HUBZone program is to increase EMPLOYMENT in these areas. The program requires that a percentage of the EMPLOYEES reside in a HUBZone, thus adding to the regenerative effect of the program on these areas.

So one could argue HUBZone is the priority. Then you have Sen. Snowe saying it?s only fair that all small businesses have a chance and wants parity

If HUBZone remains a priority, more companies will try and get business improperly and additional stories of abuse occur for the newspapers. SBA will be expected to monitor the program but we know they can't. It's a no win situation.

So the answer for Congress is do nothing.

The reason for parity was to give agencies a chance to meet their program goals. It let them decide which kind of set-aside to make in light of how they stood in terms of each goal.

The reason for parity was to give agencies a chance to meet their program goals. It let them decide which kind of set-aside to make in light of how they stood in terms of each goal.

This reason, in my opinion, loses sight of the priorities that the law has already established for each of these programs in the first place. The current languishing silence from the Army OSBP and the confrontational stance from the SBA with regard to the decision constitutes an embarrassing failure of the Federal Acquisition System to support the attainment of public policy goals adopted by the Congress and the President.

This reason, in my opinion, loses sight of the priorities that the law has already established for each of these programs in the first place. The current languishing silence from the Army OSBP and the confrontational stance from the SBA with regard to the decision constitutes an embarrassing failure of the Federal Acquisition System to support the attainment of public policy goals adopted by the Congress and the President.

Oh, nonsense. The parity policy was an attempt to come to grips with the competing demands of multiple special pleading constituencies banging on the door for a piece of the all-American procurement pie. SBA will be adding women-owned small businesses soon.

The HUBZone program is scandal-ridden. SBA has been overwhelmed by the paperwork associated with the thing and cannot manage it with the resources currently allotted to it. (The agency was created to provide financial assistance, not procurement assistance.) Contracting offices do not have the resources to enforce subcontracting limitations and wouldn't begin to know how.

My bet is that in the face of the court decision Congress will enact parity. There is bi-partisan support for it. If the Department of Justice appeals to the Federal Circuit, Congress will wait for the outcome. Changing the law is the easiest thing in the world to do. Just replace "shall" with "may."

I don't care one way or another. Parity is inevitable. Go call your lobbyist.

The Office of Management and Budget has directed federal agencies to ignore two GAO decisions about priorities among small business programs. OMB is taking the stance, for now, that there is parity among HUBZone, 8(a), and SDVOSB. GAO had ruled that the HUBZone program takes priority.

You can find the OMB memo here: http://www.whitehouse.gov/omb/assets/memor...2009/m09-23.pdf.

This was the right thing for OMB to do. Now they need to tell agencies to ignore the GAO decision applying the rule of two to task and delivery order competitions.

Do you now agree with your earlier self that this was the "right thing" to do? Or, in retrospect, was it the wrong thing?

Absolutely. OMB (and the Department of Justice) did absolutely the right thing in telling agencies to ignore GAO's decision. (Agencies should ignore GAO more often.) The court decision does not change my opinion in that regard.

My beef with the GAO was not over its interpretation of the statute. My beef with GAO was that it went beyond what it needed to do to sustain the protest. It could have sustained the protest based on the FAR, without reference to SBA's rule. GAO had no authority under CICA to get into the issue of SBA's implementation of the statute. (I know that Iron Man disagrees with me. He and I don't need to rehash that argument. We beat it thoroughly to death and I thought that he held his ground quite admirably.)

If Congress does not like Executive Branch rulemaking it can enact legislation to counter it. Alternatively, someone can challenge the regulation in court. I said all along that it was a decision for a Federal court. The court's interpretation of the statute does not surprise me at all. Now, Congress with change the statute or wait for the Federal Circuit if the Department of Justice appeals the Claims Court's decision.

Either way, you can kiss HUBZone priority goodbye. (I hope.) So enjoy it while it lasts.

If we're going to give priority to one of the programs, we should give it to service-disabled veteran-owned small businesses. They earned it.

Either way, you can kiss HUBZone priority goodbye. (I hope.) So enjoy it while it lasts.

The Executive Branch has been wrongfully denying HUBZone SBCs of contract opportunities.

The following provides context to your anti-HUBZone vitriol:

a) You appear to care a great deal when HUBZone SBCs, as independent actors, short the Government a compliance here or a compliance there.

You appear to care little when the Executive Branch, with its enormous resources, undertakes a purposeful, coordinated multi-agency effort to refuse to give effect to a statute, even though the result of that refusal was to short HUBZone SBCs out of billions of procurement dollars intended to improve the prospects of poor areas and the unemployed people who live in them.

c) You then delight in the fact that the program the Executive Branch has been screwing over will now likely be scrapped.

Those three things indicate something about your priorities and the kind of Government you favor.

...

I find the rhetoric of this thread to be equal to that of Congress on this whole matter. I personally find the decision of both GAO and the Court to be exactly on point based on final legislative history that created HUBZone and would add that it seems the whole history of HUBZone creation has been forgotten.

My recollection is that HUBZone actually grew out the Supreme Court case of Croson v Richmond of 1989. Fearing the effect of Croson on 8(a) SBA began looking at ways to salvage a Program for identified groups. At the time neither the President nor Congress was friendly to such and idea. In 1993 with a more friendly administration the idea of HUBZone began to grow and finally hatched in the 1998/1999 time period with efforts that moved away from identified groups to those in economic distress. The hand wringing and efforts resulted in a Program that was intended not to have parity.

I have already provided one reference in support that parity was not intended and offer yet another which is from the April 2, 1998 Federal Register notice by the SBA of the proposed Program. I quote ?

?The legislative history contains many strong indications that

Congress wanted the SBA to implement the program in a manner that

builds on the President's proposed Empowerment Contracting program

(launched by Executive Order, May 21, 1996) and is consistent with the

Federal government's other existing community empowerment programs-most

notably the Empowerment Zone program. The legislative history also

contains many indications that Congress wanted SBA to implement the

HUBZone program without harming SBA's existing 8(a) program.

Furthermore, by increasing the small business contracting goal in this

title, Congress sent a strong signal to SBA that it also should avoid

harm to other Congressionally recognized programs which benefit small

business. SBA is sensitive to these indications of Congressional intent

and believes that this proposal reflects a balanced approach to HUBZone

implementation.?

I also find the implication of the HUBZone Program to be a wholesale scam to be an indictment without basis other than personal opinion. I would agree it does provide opportunity for fraud as any Federal contracting program does yet to suggest that that the major percentage of the some 9200+ firms certified as HUBZone is unfounded. To use GAO findings to support such an argument seems interesting to me when at the same time GAO?s decision regarding the original protest is questioned. I will use my own personal experience to suggest that the majority of HUBZone firms have qualified for the Program legitimately and as in any Federal contracting program are using their designation to their advantage.

Betting on Congress in this day is like playing Powerball, no odds in ones favor and no way to even determine the odds. I do agree the Program should be addressed by Congress but not with regard to parity it should be just done away with. Ten plus years from first implementation and especially in these economic times things have changed , the Program has no value under the basis that it was finally established which in part is questionable purposes based on the entire history of the idea of a program that was not based with regards to members of specific groups .

How does that quote support the notion that parity was not intended? It does not come across that way to me.

I don't know who said "wholesale scam." Not me. I said scam-ridden, and that it is. Read the GAO report. 8(a) is scam-ridden, too. I don't know about SDVOSB. I hope not.

I am not anti-HUBZone. I am pro parity.

Unfortunately, where there is money to be made, there are fraudsters and scams.

See GAO Report, "SERVICE-DISABLED VETERAN-OWNED SMALL BUSINESS PROGRAM Case Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain Millions of Dollars in Contracts"

http://www.gao.gov/new.items/d10108.pdf

Unfortunately, where there is money to be made, there are fraudsters and scams.

See GAO Report, "SERVICE-DISABLED VETERAN-OWNED SMALL BUSINESS PROGRAM Case Studies Show Fraud and Abuse Allowed Ineligible Firms to Obtain Millions of Dollars in Contracts"

http://www.gao.gov/new.items/d10108.pdf

That breaks my heart. It really does. It makes me sad. But I should not be surprised.

The Saga continues:

"B-402494, DGR Associates, Inc., May 14, 2010

http://www.gao.gov/decisions/bidpro/402494.htm

The impudence of the Executive Branch is pronounced.

I'll be hand-writing a note to the Legislative Director and Legislative Assistant (who handles Small Business issues) of each and every Member of Congress.

What do these royalists in the Executive Branch have against the respect for law? What does this Administration have against economically downtrodden areas and the unemployed people who live in them? Sometimes I honestly believe some would rather take advantage of poor people than to do even the smallest thing to help them.

This matter revolves around three issues primarily:

1. In the end, newly employed people (HUBZone program beneficiaries) make very unlikely campaign contributors. Business owners who are permitted a bunch of noncompetitive Government contracts (8(a) program beneficiaries) make very likely campaign contributors.

2. The HUBZone program requires the SBA to leave its leather chair and do some honest work. The 8(a) program is very easy to desk-administer, and the SBA can continue to have its collective, lazy posterior cemented to its chair.

3. A drive by the military-industrial complex for parity in order to advantage the SDVOSB program. So long as there is an order of priority, it becomes more difficult to route money through their favorite SDVOSB front companies. The sooner they can take down the "poor area helping unemployment reduction" program, the faster they can get the "route money to your favorite SDVOSB front company" program up and operational. If you think the fraud in that program is bad now, you just wait...

In the end, I don't think this issue is any more complicated than honestly assessing these three issues.

Hogwash. From the Congressional Record (Senate), March 26, 2010, page S2163:

S. 3190. A bill to reaffirm that the Small Business Reauthorization Act of 1997 does not limit a contracting officer's discretion regarding whether to make a contract available for award pursuant to any of the restricted competition programs authorized by the Small Business Act ; to the Committee on Small Business and Entrepreneurship.

Ms. LANDRIEU. Mr. President, I am pleased to introduce the Small Business Parity Programs Act of 2010. As the Chair of the Committee on Small Business and Entrepreneurship, I have held a number of hearings and roundtables on the issues affecting small businesses that contract with the Federal Government. The legislation I am introducing today represents the second of several steps the Committee is taking to address some of the disparities and inequalities that prevent our small businesses from receiving their fair share of government contracts.

As the largest purchaser in the world, the Federal Government is uniquely positioned to offer new and reliable business opportunities for our Main Street businesses. Government contracts are perhaps one of the easiest and most inexpensive ways the government can help immediately increase sales for America's entrepreneurs, giving them the tools they need to keep our economy strong and create jobs. When large businesses get government contracts, they can potentially absorb that new work into their workforce. When small businesses get government work they must ``staff up'' to meet the increased demand. By increasing contracts to small businesses by just 1 percent, we can create more than 100,000 new jobs--and today, we need those jobs more than ever.

But small businesses face significant challenges in competing for these contracts, including a maze of complicated regulations, contract bundling, size standards with loopholes for big businesses and a lack of protections for sub-contractors. Despite the fact that federal agencies have a statutory goal to spend 23 percent of their contract dollars on contracts to small firms, and to ensure fair participation by women-owned firms, small disadvantaged firms, service-disabled veteran firms, and HUBZone businesses, the agencies often fall short of these goals.

The Small Business Parity Programs Act of 2010 is just the second of several steps that I am undertaking to ensure that all small businesses have fair access to government contracting opportunities. This particular legislation will reaffirm Congress's intent that government contracting officers have the discretion to choose among any of the small business development and contracting programs when deciding to make a contract award. This legislation makes clear that small businesses that participate in the 8(a), service-disabled veterans, women, and HUBZone programs all have a fair opportunity to win these contracts.

Two recent decisions by the Government Accountability Office misinterpreted Congress's long-standing intent with regard to the operation of the current laws governing these programs . The decisions stated that the HUBZone program had preference over all other small business contracting programs . The decisions were also relied upon in a recent opinion issued by a judge of the Court of Federal Claims, in a case called Mission Critical Solutions v. United States.

I was disappointed by these decisions because they misinterpret the intent of Congress in passing the Small Business Reauthorization Act of 1997. For this reason, along with the Small Business Committee's Ranking Member, Senator OLYMPIA SNOWE of Maine, I filed an amendment containing the provisions included in this bill to S. 1390, the Department of Defense Authorization Act for Fiscal Year 2010 . The amendment was accepted and passed the full Senate on July 24, 2009 with overwhelming and bipartisan support. To my disappointment, it did not make it through conference Committee with the House and was left out of the final bill. The Conference Report accompanying that bill did include, however, explicit language reaffirming Congress' intent 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'' or any of the other small business procurement programs .

As Chair of the Committee on Small Business and Entrepreneurship****_, I have focused a considerable amount of energy on promoting the interests of small businesses in the federal contracting arena. The legislation I am introducing will, quite simply, make clear that it has always been Congress' intent to allow contracting officers to accord parity to each restricted competition program authorized by the Small Business Act ._

This legislation will have an immediate, positive impact for small businesses seeking fair access to federal contracts. It will reaffirm contracting officers' flexibility to award contracts to HUBZone businesses, which provide important benefits for hard-hit communities. At the same time, it also will reaffirm Congress's intent to ensure robust implementation of the 8(a), SDVO and Women-Owned small business development and procurement programs . Among other things, programs such as these are crucial to enable the government to address the significant discriminatory barriers that evidence submitted to us shows still limit the opportunities available for minority-owned businesses, women-owned businesses, and SDVO businesses to participate in the marketplace.

The language of our bill is intended to make clear that no single restricted competition program has priority over any other, contrary to the misinterpretation of Congress' intent by the GAO and one decision of the Court of Federal Claims. However, nothing in the bill is intended to change the current requirement that, where a contracting officer chooses to make an award pursuant to the HUBZone program, that award must be made on the basis of restricted competition if the contracting officer has a reasonable expectation that at least two qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.

It is well past time to provide greater opportunities for the thousands of small business owners who wish to do business with the Federal Government. I believe that this legislation is a good step toward opening those doors.

I hope my colleagues will join me in supporting this simple yet commonsense bill and I look forward to working with them as we move this legislation forward.

Mr. President, I ask unanimous consent that the text of the bill be printed in the RECORD.

There being no objection, the text of the bill was ordered to be printed in the Record, as follows:

S. 3190

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the ``Small Business Programs Parity Act of 2010 ''.

SEC. 2. SMALL BUSINESS CONTRACTING PROGRAMS PARITY .

Section 31((2)( of the Small Business Act (15 U.S.C. 657a((2)() is amended by striking ``shall'' and inserting ``may''.

Emphasis added. Gee, I wonder if the bill has anything to do with the "impudence" of the Executive Branch.

Hogwash. From the Congressional Record (Senate), March 26, 2010, page S2163:

Emphasis added. Gee, I wonder if the bill has anything to do with the "impudence" of the Executive Branch.

Of course it does. Note how the legislature is having to take affirmative steps to CHANGE the law here.

In the meantime, why is the Executive Branch not following the law as it is written now?

Answer:

1. Royalist impudence and disrespect for the law.

2. Disrespect for dispossessed persons who are unlikely to contribute to their political campaigns.

Congress would say it's changing the text to make its original intentions more clear.

The Executive is following the law as they have interpreted it. They are not bound by the GAO or the Court of Federal Claims, except as a decision of the court applies to a particular contract action. It is my understanding that the Executive is appealing the court's decision in the particular case to the Federal Circuit. Only the Federal Circuit or the Supreme Court can make a binding decision about a generally applicable interpretation of the statute.

Impudence and disrespect are redundant. Either way, the administration respects the law as they interpret it, which they are entitled to do under the Constitution until the Federal Circuit or the Supreme Court make a binding decision. As for respect of "dispossessed" persons (of what, exactly, have they been dispossessed), it is absurd to say that the Obama Administration does not feel for the poor. It almost crashed and burned trying to get health care for the working class and the poor. Why can't you disagree without the polemical rhetoric, which comes across as silly and over-the-top? We can all see that you're mad as hell, but what's that going to get you? I don't think you're winning anyone over with it, but maybe I'm wrong. If all you're doing is using the forum to vent, why not say so and we'll all just ignore you or show your posts to our friends for laughs.

Congress would say it's changing the text to make its original intentions more clear.

Not sure where you are going with all of the personal stuff. This is an interesting issue, and there is room for more than one view of it. I happen not to have any respect for your view, which conflicts with 2 GAO decisions and the Court of Federal Claims, but I will confine my remarks to the issue in controversy.

1. The composition of Congress changes. The priorities change as well. Often, current Members attempt to characterize what past the past Congress "really meant" in this law or that. The best way still to determine that isn't through later-day press releases by current Members, but by reading the law as it was written, passed and signed.

2. My position is consistent with 2 GAO decisions and a COFC decision.

3. There are reasons for this attempted CHANGE. Ignoring the shifting priorities and passing it off as a big misunderstanding between the old congress and the new conflicts with reality. There are policy reasons for the attempted change.

I understand your argument, and I respect it. The problem that I have with you is that you refuse to accept the possibility that people of good will can have a different view. Instead, you attribute the opposing opinion to "royalism" and impudence and a lack of sympathy toward what you call the dispossessed, which is absurd.

Best of luck to you.

This is an interesting issue, and there is room for more than one view of it.

How can this be a clear example of "royalist impudence and disrespect for the law," yet at the same time be an interesting issue with room for more than one view? I guess there is no room for the government's view? Or does that only apply when your view is being challenged?

How can this be a clear example of "royalist impudence and disrespect for the law," yet at the same time be an interesting issue with room for more than one view? I guess there is no room for the government's view? Or does that only apply when your view is being challenged?

Yes, the role of the Courts is to generally interpret the law as written, not necessarily as supposedly originally intended by Congress. Congress can include amendments that change the written, original expressed intent and can slant the record accompanying the bill to further personal opinions and agendas. The names of some laws look similar to slick commercial advertisements. What does "new menu" mean - higher prices, better food - what? What is "new and improved" - cheaper to manufacture? Any bill with "Improvements to ...." or ...Improvement Act" makes me suspicious. Improvements for whom - special interests?

That said, as stated above, the GAO's interpretations are apparently just that - interpretations. We'd only need one judge or lawyer if there was only one way to interpret every law or regulation and if the actual situational applications didn't change over time. If Congress wants to "clarify" the original intent, they ought to pass the pending Legislation.

How can this be a clear example of "royalist impudence and disrespect for the law," yet at the same time be an interesting issue with room for more than one view? I guess there is no room for the government's view? Or does that only apply when your view is being challenged?

I'm not going to get into a Junior High civics class here, but your comment is emblematic of the very royalism of which I wrote. See, it's not the "Government's view." It's the Executive Branch's view. There are two other branches...

I'm not going to get into a Junior High civics class here, but your comment is emblematic of the very royalism of which I wrote. See, it's not the "Government's view." It's the Executive Branch's view. There are two other branches...

Try reading beyond Junior High. I suggest GAO, COFC and CAFC opinions, where you will see an agency's argument is routinely referred to as the government's position or view. If you think use of the phrase "Government's view" is emblamatic of royalism, I don't know what to tell you, other than you are embarrassing yourself.

Try reading beyond Junior High. I suggest GAO, COFC and CAFC opinions, where you will see an agency's argument is routinely referred to as the government's position or view. If you think use of the phrase "Government's view" is emblamatic of royalism, I don't know what to tell you, other than you are embarrassing yourself.

I'm blushing even now, Iron Man.

I prefer to confine the error to as small a group as possible. The GAO will frequently use the term "Agency," which I think is fine and confining. I'm not going to word search it, but I don't remember the COFC referring to the defendant's argument in the MCS case as the "Government's view," but I acknowledge I have not scanned the whole document like some sort of word search puzzle.

Three questions:

1. Do you think the Executive Branch is appealing because the leadership really thinks that's what the law says?

2. How would you handicap the appeal?

I will opine that the appeal will go nowhere, that everybody (including the people filing it) knows it, and that its intent is to serve twin purposes: a ) To give the legislature more time; and b ) As a lobbying effort back to the legislature.

We'll see.

3. Is there anyone in the forum who genuinely believes that any respective program is exactly equally meritorious of preference in Government Contracting based on policy considerations?

An agency should follow whatever priority the law establishes. I do not believe that all of the programs are equally meritorious from a policy/values standpoint. "Parity" is a cop-out, a failure to establish priorities about what is important, or, failing that, a suspicious value declaration.

I imagine it going like this:

"What programs are good?"

"They're all good."

"How good?"

"Really good."

Which one is best?"

"All of them."

"Equally best?"

"Yes."

Is there anyone in the forum who genuinely believes that any respective program is exactly equally meritorious of preference in Government Contracting based on policy considerations?

That question really asks whether anyone believes the programs to be morally equal. Based on earlier posts, federalcontracts argues that the HUBZone Program is morally superior because it is aimed at helping the "dispossessed."

According to 13 CFR ? 126.100, the purpose of the HUBZone Program is "to provide federal contracting assistance for qualified SBCs located in historically underutilized business zones in an effort to increase employment opportunities, investment, and economic development in such areas."

According to 13 CFR ? 126.200, in order to be a HUBZone firm a company need only (1) be located in a HUBzone or an Indian reservation, (2) be a small business in the applicable NAICS code, and (3) promise to try ensure that 35 percent of its people employed under the contract live in a HUBZone in Indian reservation. The firm need not be owned or controlled by a person in any particular socio-economic category.

The HUBZone program does not require that either the persons who own the firm or that the persons who work for the firm are actually among the "dispossessed." Now, I live in a suburb of Portland, Oregon, and I just checked the HUBZone map for my area, which I accessed at http://map.sba.gov/hubzone/init.asp#address, and I learned that the area in Northwest Portland along the Willamette River is a HUBZone. That HUBZone includes the Pearl District, Zip Code 97209, within which lie the most expensive townhomes and condos, the toniest restaurants, and the most fashionable clothing stores in the Pacific Northwest. It is the home of two expensive doggie day-care businesses. One of my friends bought one of the condos for almost one million dollars and sold it a month later, without ever moving into it, for $1.5 million and a tidy profit. He sold it because he didn't think his dog would be happy there. Maybe the dog is dispossesed, I don't know.

I fail to see any moral superiority in such a program.

My vote is for the SDVOSB Program. Count me among the impudent royalists.

The HUBZone program does not require that either the persons who own the firm or that the persons who work for the firm are actually among the "dispossessed." Now, I live in a suburb of Portland, Oregon, and I just checked the HUBZone map for my area, which I accessed at http://map.sba.gov/hubzone/init.asp#address, and I learned that the area in Northwest Portland along the Willamette River is a HUBZone. That HUBZone includes the Pearl District, Zip Code 97209, within which lie the most expensive townhomes and condos, the toniest restaurants, and the most fashionable clothing stores in the Pacific Northwest. It is the home of two expensive doggie day-care businesses. One of my friends bought one of the condos for almost one million dollars and sold it a month later, without ever moving into it, for $1.5 million and a tidy profit. He sold it because he didn't think his dog would be happy there. Maybe the dog is dispossesed, I don't know.

I fail to see any moral superiority in such a program.

My vote is for the SDVOSB Program. Count me among the impudent royalists.

I'll bet you drive a Subaru, too.

I'll bet you drive a Subaru, too.

Ford F-150. My wife drives a BMW, but she won't let me drive it.

That question really asks whether anyone believes the programs to be morally equal. Based on earlier posts, federalcontracts argues that the HUBZone Program is morally superior because it is aimed at helping the "dispossessed."

My vote is for the SDVOSB Program. Count me among the impudent royalists.

I favor the HUBZone program among the existing programs. You favor the SDVOSB. The point here is: You favor an order of priority, which is antithetical to notions of parity.

The "dispossessed" is a fine term. I don't know why you persist in mocking it, but to each his or her own.

Here is an example of how the term is used:

http://www.newsweek.com/id/213699

If you were to design a program that would meet whatever socioeconomic objectives you hold dear, without confining it to exisiting programs, what would it do and how would it operate?

I know how dispossessed is used. I don't need to read Newsweek, of all things, to understand the usage. Disadvantaged is more appropriate than dispossessed. Appropriate usage of dispossessed is as in the title, Conquest by Law: How the Discovery of America Dispossessed Indigenous Peoples of Their Lands.

If I were to establish a socio-economic program, it would not be based on set-asides. Set-asides guarantee nothing but best efforts. I would establish an an incentive program that would reward firms based on proven contributions to the employment of persons in specific groups or residing in specific regions. Companies would receive a significant cash bonus amounting to a percentage of the dollar value of the verifiable employment that they had provided to such groups and regions under specific contracts and subcontracts. Firms that had made especially significant contributions would also receive annually renewable favorable consideration certificates for use in future source selections. Annual renewal would be based upon continued contribution.

Bonus percentages would be annually determined by Congress, not by the agencies, and would be paid out of a Congressionally appropriated special fund, and not out of agency program funds.

No program admission applications. No status certifications and status protests. All certifications of achievement would be after-the-fact and subject to audit, false claim and fraud prosecution, and severe civil and criminal penalties. No consideration of "proposed" contributions during source selection.

How does that quote support the notion that parity was not intended? It does not come across that way to me.

I don't know who said "wholesale scam." Not me. I said scam-ridden, and that it is. Read the GAO report. 8(a) is scam-ridden, too. I don't know about SDVOSB. I hope not.

I am not anti-HUBZone. I am pro parity.

Vern, why are you pro-parity?

The Executive Branch says it needs the discretion in order to meet their goals.

The Executive Branch says it needs the discretion in order to meet their goals.

And we know who sets those goals...

And we know who sets those goals...

Actually, I don't know. Who sets them? I always thought it was some kind of deal among OMB, SBA, and the cognizant congressional committees. Is that wrong?

Retread: Seeker answered your question for me. I support parity because it lets the Exec allocate set-asides as necessary to meet its goals. With so many special-pleaders trying to get a piece of the pie, it's the only way to keep all of them happy, or at least equally unhappy. I guess federalcontracts thinks the Great Satan sets the goals, so they're evil.

I would do away with all the special-pleader categories and the associated set-asides and focus on actual benefits conferred on the targeted groups and regions. I would reward contractors on the basis of what they actually accomplish, rather than on their status and promises. I'd let SBA go back to making business loans. That's what they really care about.

Never happen.

I just read a GAO report on small business goals. The SBA sets them! The Great Satan!

I just read a GAO report on small business goals. The SBA sets them! The Great Satan!

The establishment of government-wide goals is an Executive Branch responsibility, but the law establishes a floor.

(See 15 U.S.C. 644(g)(1)) )

The establishment of government-wide goals is an Executive Branch responsibility, but the law establishes a floor.

(See 15 U.S.C. 644(g)(1)) )

The flaw in your argument is that you assume there is no possible alternative interpretation of the law and no other possible "floor."

Have you read DOJ's memo supporting SBA's parity regulations as a permissible interpretation of the law?

http://www.justice.gov/olc/2009/sba-hubzon...inion082109.pdf

Personally, I think DOJ's argument is weak and the law as written, whether intentionally or not, provides HUBZone's with priority. However, DOJ's argument is not totally off the wall. I've certainly seen weaker arguments prevail in litigation. The government, or if you prefer the executive branch , has regulations and a long standing practice of parity, and it has a straight-faced legal argument it believes supports that practice and those regulations. An agency loss at GAO or the COFC is not the end of the process and the agency is not required to immediately abandon its position. If at the end of the appellate process MCS is successful, the Executive Branch will comply with the decision. However, there is a process for resolving different legal interpretations. Pursuing rights under that process is not wrong or evil, even when it is a federal agency pursuing those rights.

I don't have a problem with the executive branch pursuing their rights, although I think that we are wrong and that the CAFC will make quick work of us. However, I think that it's irresponsible for policy folks to advise their COs to proceed as if there were parity given the current situation.

Let's say that there is someone trapped in a building that needs your help. There are three different ways to get to them--you can go through Door #1, #2, or #3. Each of the doors opens to a different room that you must pass through in order to get to the person in need. Behind door #1 lurks a hungry tiger, behind Door #2 lurks a hungry bear, and behind Door #3 there is an empty room. If you go through Doors #1 or #2, there's a chance that you might get mauled and won't be able to help the person in need. In fact, one person has already tried Door #1 and has been mauled. Two people have gone through Door #2 and have been mauled. If you go through Door #3, you can simply pass through the room and get to the person in need.

There is someone there to guide you and they tell you that even though there is a tiger behind Door #1 and a bear behind Door #2, you should pretend that they are not there when choosing doors.

What would you think of your guide's advice?

You = CO

Person trapped in building = your customer

Door #1 = The SDVOSB program

Door #2 = The 8(a) Program

Door #3 = HUBZone set-aside

Your guide = Your policy folks

I see we have no students of American history participating.

Government agencies have opinions and policies, but they do not have rights. This is not a matter of the "rights" of the Executive Branch. The Executive Branch must enforce laws and to do that they must interpret them. The Executive Branch has interpreted the small business laws, undoubtedly in cooperation with the cognizant Congressional committees. The GAO is not mentioned in the Constitution. It has an opinion that the Executive Branch is not obliged to credit. The Court of Federal Claims is not mentioned in the constitution, either. It's rulings are binding only in particular instances. I won't hazard a guess as to what the Federal Circuit will say. It has overturned the Court of Federal Claims frequently in recent years. The Executive Branch is pursuing its policy interests in that court. The criticism that is being laid down here is unwarranted. The matter will play itself out in court or in legislation, as it should. The Door 1, Door 2 thing is a lot of bull.

I see we have no students of American history participating.

Government agencies have opinions and policies, but they do not have rights. This is not a matter of the "rights" of the Executive Branch. The Executive Branch must enforce laws and to do that they must interpret them. The Executive Branch has interpreted the small business laws, undoubtedly in cooperation with the cognizant Congressional committees. The GAO is not mentioned in the Constitution. It has an opinion that the Executive Branch is not obliged to credit. The Court of Federal Claims is not mentioned in the constitution, either. It's rulings are binding only in particular instances. I won't hazard a guess as to what the Federal Circuit will say. It has overturned the Court of Federal Claims frequently in recent years. The Executive Branch is pursuing its policy interests in that court. The criticism that is being laid down here is unwarranted. The matter will play itself out in court or in legislation, as it should. The Door 1, Door 2 thing is a lot of bull.

Pursuing policy interests in court is fine. Telling COs that they are free to treat SDVOSB, HUBZone, and 8(a) as equals in the meantime is irresponsible when you know that they will lose protests and delay their procurements.

The Executive Branch must enforce laws and to do that they must interpret them.

Thumbing the President's nose at the courts has always gone so well in the past. Sometimes, I swear, I can't tell if that's Vern Edwards or Andrew Jackson posting.

I keep looking through Article II, and I'm just not seeing the part you reference. I see: "He shall take Care that the Laws be faithfully executed." Then I look in article III, and I read, "The judicial Power of the United States, shall be vested in one supreme Court, and in such inferior Courts as the Congress may from time to time ordain and establish. " I see the power of Congress to establish Article I tribunals.

Alexander Hamilton wrote in the Federalist Papers: "The interpretation of the laws is the proper and peculiar province of the courts."

There's this little 1803 case that's gotten some press called Marbury v. Madison, which states, "It is, emphatically, the province and duty of the judicial department, to say what the law is." Maybe Chief Justice Marshall and the Marshall court would have changed its mind if only it had received the May 2010 "Assad Memo."

If you don't believe this Marbury v. Madison business, no less a source than the White House web page acknowledges, "Federal courts enjoy the sole power to interpret the law." http://www.whitehouse.gov/our-government/judicial-branch (That came straight from the throne, you royalists... )

The course of action being taken has the indicia of Executive Branch nonacquiescence, which I personally loathe. Writes Bradley Canon, "An agency may deliberately interpret the court's decision to find it inapplicable to itself by using convoluted reasoning, citing other authority or invoking unusual circumstances...More often a process of cognitive dissonance will set in and an agency will interpret the decision as inapplicable, or to apply only in minor or limited circumstances." That sounds familiar.

Not surprisingly, the Executive Branch engages in stall tactics, subversion, obfuscation and silliness most often when a decision does not meet its current political aims, as is the case here.

This bit about "I talked with the current chair of the subcommittee, and she knew a lady who used to be the ranking member of that same committee just a few years after the legislation was originally passed and she said that what the legislation REALLY meant to say was...' argument is classic obfuscation. I see smart people who put too much trust in people's straightforwardness nod along with this kind of "reasoning."

Telling COs that they are free to treat SDVOSB, HUBZone, and 8(a) as equals in the meantime is irresponsible when you know that they will lose protests and delay their procurements.

You don't "know" that they will lose until they lose all the way to the top, which is why we have an appeals process.

There's this little 1803 case that's gotten some press called Marbury v. Madison... .

Yeah, and there's this little 1847 case that's gotten some press called Dred Scott v. Sanford. Don't we know the courts are always right. In any case, Marbury v. Madison stands for the proposition that the Supreme Court has the power to judicially review the acts of the Executive and Legislative branches. We're going through that process of review in the matter at hand. Our democracy is safe at this point.

The Executive has complied with the Court of Federal Claims's ruling in the decided case. The decided case does not bind the Executive to follow the Court of Claim's interpretation in future procurements. As for my friend, the DAU professor, I'm impressed that he knows what's going to happen at the court of appeals. Rather than prognosticate, I will wait for the decision of the court. If filing an appeal in a purely administrative matter in accordance with the law constitutes "stall tactics, subversion, obfuscation and silliness," then I'm all for it.

Andy Jackson lives!

Government agencies have opinions and policies, but they do not have rights.

I'll have to disagree. Government agencies do not have Constitutional civil rights, but that is not the entire spectrum of rights, which can arise out of constitutions, statutes, contracts, etc. The SCOTUS and Fed Circuit often refer to and enforce the Government's rights. See, for example, Caplin & Drysdale, Chartered v. U.S., 491 U.S. 617, 626 (1989), ?First, the property rights given the Government by virtue of the forfeiture statute are more substantial than petitioner acknowledges? and Gaylord v. U.S., 595 F.3d 1364, 1383 (C.A. Fed. 2010), "Whatever this agreement accomplished as between its parties, it cannot constitute a relinquishment of the government's rights under the contract or pursuant to 28 U.S.C. ? 1498(."

Did you quote holdings or dicta?

OMB's guidance is 1) contrary to the FAR and 2) inconsistent with 2 GAO decisions and 1 COFC decision. COs who follow that guidance jeopardize the timely execution of their procurements. The folks at Eielson AFB followed OMB's guidance and the unsurprising result can be read in DGR Associates, Inc., May 14, 2010, B-402494. Until we get a decision from the CAFC, we should expect to see more cases like this.

My advice to COs is to follow the order of priority set forth below until things get sorted out.

For acquisitions exceeding the SAT:

1. HUBZone set-aside

2. 8(a) Program ("should consider" FAR 19.800(e))

3. SDVOSB Program, SB set-aside, or HUBZone sole source

For acquisitions at or below the SAT:

1. 8(a) Program ("should consider" FAR 19.800(e))

2. HUBZone set-aside, SDVOSB Program, or SB set-aside

Note that the latter priority is already reflected in the FAR.

This approach is consistent with law, regulation, and the decisions of the GAO and the COFC. If the folks at Eielson would have followed this advice, their contract would have been awarded by now.

This approach is consistent with law, regulation, and the decisions of the GAO and the COFC. If the folks at Eielson would have followed this advice, their contract would have been awarded by now.

What do you say to Shay Assad? In his May 18 memo he says that the OMB policy on SBA parity regulations "... continues to be Executive Branch policy and components shouild follow the OMB guidance and all applicable regulations."

OMB's guidance is 1) contrary to the FAR and 2) inconsistent with 2 GAO decisions and 1 COFC decision. COs who follow that guidance jeopardize the timely execution of their procurements. The folks at Eielson AFB followed OMB's guidance and the unsurprising result can be read in DGR Associates, Inc., May 14, 2010, B-402494. Until we get a decision from the CAFC, we should expect to see more cases like this.

My advice to COs is to follow the order of priority set forth below until things get sorted out.

For acquisitions exceeding the SAT:

1. HUBZone set-aside

2. 8(a) Program ("should consider" FAR 19.800(e))

3. SDVOSB Program, SB set-aside, or HUBZone sole source

For acquisitions at or below the SAT:

1. 8(a) Program ("should consider" FAR 19.800(e))

2. HUBZone set-aside, SDVOSB Program, or SB set-aside

Note that the latter priority is already reflected in the FAR.

This approach is consistent with law, regulation, and the decisions of the GAO and the COFC. If the folks at Eielson would have followed this advice, their contract would have been awarded by now.

In my opinion, you are out of line in telling people to ignore direction from OMB. Here is that direction:

Pending the completion of the legal review of the GAO?s decisions by the Executive Branch, the SBA?s ?parity? regulations should not be disregarded by contracting officers, and Federal agencies should not, as a result of the GAO?s decisions, be compelled to prioritize HUBZone small businesses over 8(a) BD or SDVOSBs. Instead, until the legal review is completed, Federal agencies should continue to give active consideration to each small business program pursuant to their pre-existing contracting practices and ?parity? policies.

OMB works directly for the president, and if they want agencies to take the risk of delay, that's their choice. According to the entry on OMB in the U.S. Government Manual, one of OMB's functions is to provide "overall direction of procurement policies, regulations, procedures, and forms." SBA's regulations take priority over the FAR in this matter, because SBA has the statutory authority to implement the small business statutes. GAO DECISIONS ARE NOT BINDING ON THE EXECUTIVE BRANCH, and the Source selection is a mess today because of GAO decisional law. Agencies should ignore GAO more often. As for the Court of Federal Claims, the Federal Circuit overrules them regularly. Heck, the judges on that court sometimes disagree with one another, one deciding an issue one way and another deciding the same issue a different way. Until the Federal Circuit or Supreme Court rule, a decision by the Court of Federal Claims is binding only in terms of specific contract actions. If we have more cases like this before the Federal Circuit rules, then so be it.

Napolik,

Here is what the GAO said about Shay Assad's memo:

The DOJ opinion notwithstanding, we continue to read the plain language of the HUBZone statute as requiring an agency to set aside an acquisition for competition restricted to qualified HUBZone small business concerns where it has a reasonable expectation that not less than two qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price. See also Mission Critical Solutions v. United States, No. 09-864C (Fed. Cl. Mar. 2, 2010), appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010) (rejecting DOJ's interpretation of the HUBZone statute and concluding, consistent with our decisions in Mission Critical Solutions, B-401057, supra, that the language of the HUBZone statute is mandatory, such that a contract opportunity must be set aside for competition among qualified HUBZone small business concerns whenever the criteria set out in 15 U.S.C. sect. 657a are met). Thus, we conclude that the Air Force was required to first consider whether the conditions for setting aside a procurement for HUBZone businesses were met, and if so, to set aside the procurement for HUBZone small businesses. Because the agency did not perform this mandatory step, we conclude that it was improper for the agency to proceed with this procurement as an 8(a) set-aside, and we sustain the protest.

The GAO then goes on to recommend:

We recommend that the agency undertake reasonable efforts to ascertain whether it will receive offers from at least two HUBZone concerns and award will be made at a fair market price. If the agency's research indicates that these conditions are met, the agency should cancel the current solicitation and reissue it as a HUBZone set‑aside. We also recommend that the agency reimburse the protester its costs of filing and pursuing the protest, including reasonable attorneys' fees.[3] 4 C.F.R. sect. 21.8(d)(1) (2009).

In making our recommendation, we recognize, as the Air Force has noted and the DOJ memorandum indicates, that the recommendations in our bid protest decisions are not binding on Executive Branch agencies. Small Business Admin.--Recon., supra, at 5 (citing Bowsher v. Synar, 478 U.S. 714, 727-32 (1986)). This fact, however, does not affect our statutory obligation to decide protests concerning alleged violations of procurement statutes and regulations. See 31 U.S.C. sect. 3552 (2006). We have clearly stated our view on the proper interpretation of the HUBZone statute, and we recognize that the Executive Branch has resolved to apply its own, contrary interpretation of the HUBZone statute. Accordingly, absent some change in the statutory scheme, Executive Branch policy, or a contrary decision by the United States Court of Appeals for the Federal Circuit in connection with the Justice Department's appeal of the decision in Mission Critical Solutions v. United States, supra, we will decide future protests raising the issue here in an expedited and summary manner, in the interest of reducing the costs associated with filing and pursuing such protests.

The protest is sustained.

http://www.gao.gov/decisions/bidpro/402494.htm

The Air Force, and everyone else in the DoD Contracting organization, is in the middle of a fight they cannot resolve nor can they add to that fight. Either Shay Assad or the GAO need to square off and resolve their disagreement, or we in Contracting need to ignore the GAO, which may bite us on the tail before this is over.

It's a no win situation: the executives are failing to do their jobs and leaving us to deal with the detrius of that failure. It's shameful, and should be on the front page of the Washington Post. Perhaps I am bit idealistic for expecting them to resolve their differences in less than a year, but they all work in the same town for a Congress and White House of the same party control. Under those circumstances, they should be able to do so.

Note: yet another memo was issued on May 18, 2010 Shay Assad for the Dod which kicks the can down the road yet again "pending a DOJ notice of appeal".

This is not shameful. This is merely one of the disputes that arise in Government from time to time and that will be worked out, one way or another. Either the Federal Circuit will rule, Congress will change the law, or both. Any contracting office that cannot figure out how to deal with this is run by idiots. Shay Assad cannot "square off" with GAO. GAO's disagreement is not with Assad, it is with OMB.

Vern,

If we do what you say and go with the OMB guidance, and the courts find for the GAO, will we then be forced to go back and recompete all those contract actions in favor of Hubzone contractors? I fear that will be the case, which will be a huge problem for many offices.

I agree it should not be Shay Assad, but he should be pushing Peter R. Orszag into the ring since he is the one represent OMB and all of us in this dispute.

Napolik,

Here is what the GAO said about Shay Assad's memo:

Actually, the GAO decision is dated 14 May while the Assad memo is dated 18 May. So, GAO could not have been commenting on his memo.

I am sure there is frustration in dealing with the competing OMB and GAO views on the "parity" of the three socioeconomic programs. But, we are part of the Executive Branch, and we must follow the direction of the Executive Branch leadership.

Speaking of delay and frustration, what happened to action to nullify the October 2008 GAO Delex decision that applies the rule of two to multiple award contracts?

Keep in mind that OMB and DOJ have not said that a procurement cannot be set aside for HUBZones or that they must be set-aside for 8(a)s or SDVOSBs. They merely say that, GAO and COFC decisions notwithstanding, COs have have discretion to decide what kind of set aside they will make. COs need not go looking for trouble, but if the agency needs dollars in a non-HUBZone category in order to meet goals, they can decide what's best to do.

Did you quote holdings or dicta?

I'd have to go back and read the cases more closely. It may well be dicta, but it isn?t always a bright line. For the purposes of an internet discussion board, I?m not sure it makes a difference. Dicta is often relied upon as persuasive authority even if it is not binding on a court. I pointed out two cases (out of hundreds) in which the appellate courts and the Supreme Court refer to and adjudicate the government?s right to do (or not do) something. I?d be surprised to find a case that stands for the position (whether as dictum or a holding) that the government has no rights.

If you?d like a reference that is more clearly a holding, how is this one?

?The right of the government to the duties accrues, in the fiscal sense of the term, when the goods have arrived at the port of entry. The debt for the duties is then due, although it may be payable afterwards according to the regulations of acts of Congress.

The debt due to the United States for duties on imported merchandise, is not extinguished by the giving of bonds, with surety, for the same. The revenue collection act of 1799, ch. 128, requires that the collector should take the bonds for the duties from all the persons who are the importers; whether they be partners, or part owners.

The government of the United States have a right to retain money in their hands belonging to a surety in a bond given for duties which is unpaid, until a suit shall be terminated for the recovery of the amount of the duties on the goods due by the importers. The government is not obliged to appropriate the money of the surety to the satisfaction of the bond, but may hold it as a security until the suit is determined.

Mr. Justice STORY delivered the opinion of the Court.?

Meredith v. U.S., 38 U.S. 486, 491 (1839).

Or how about a statute?

?Any mortgage, lien, or encumbrance created under the provisions of this section shall be subject to the rights of the Government to compel the enforcement of the terms of the lease or contract of the mortgagor, and any purchaser under a foreclosure of such encumbrance shall take subject to all the conditions assumed by the original lessee or contractor.?

16 U.S.C.A. ? 33

Okay, so the government has rights (although "powers" seems more appropriate, but whatever), which means that the Executive Branch has the right to disagree with the GAO and reject its bid protest decisions and to appeal a decision of the COFC.

I'm happy.

Ha ha. That was exactly the point I was making in my post about the government's right to appeal the COFC. Did you get so caught up in my use of the word "rights" that you didn't notice that I was agreeing with you?

An agency loss at GAO or the COFC is not the end of the process and the agency is not required to immediately abandon its position. If at the end of the appellate process MCS is successful, the Executive Branch will comply with the decision. However, there is a process for resolving different legal interpretations. Pursuing rights under that process is not wrong or evil, even when it is a federal agency pursuing those rights.

What do you say to Shay Assad? In his May 18 memo he says that the OMB policy on SBA parity regulations "... continues to be Executive Branch policy and components shouild follow the OMB guidance and all applicable regulations."

My approach is consistent with Shay Assad's memo. Shay Assad would have no beef with a CO who follows my advice.

In my opinion, you are out of line in telling people to ignore direction from OMB.

I didn't tell people to ignore OMB's guidance. OMB says that COs have choices in how to proceed. I'm advocating one such choice--the choice fraught with the least peril.

I didn't tell people to ignore OMB's guidance. OMB says that COs have choices in how to proceed. I'm advocating one such choice--the choice fraught with the least peril.

Don, Here is OMB's direction:

Pending the completion of the legal review of the GAO?s decisions by the Executive Branch, the SBA?s ?parity? regulations should not be disregarded by contracting officers, and Federal agencies should not, as a result of the GAO?s decisions, be compelled to prioritize HUBZone small businesses over 8(a) BD or SDVOSBs. Instead, until the legal review is completed, Federal agencies should continue to give active consideration to each small business program pursuant to their pre-existing contracting practices and ?parity? policies.

Emphasis added. Here is what you said:

OMB's guidance is 1) contrary to the FAR and 2) inconsistent with 2 GAO decisions and 1 COFC decision. COs who follow that guidance jeopardize the timely execution of their procurements... My advice to COs is to follow the order of priority set forth below until things get sorted out.

For acquisitions exceeding the SAT:

1. HUBZone set-aside

2. 8(a) Program ("should consider" FAR 19.800(e))

3. SDVOSB Program, SB set-aside, or HUBZone sole source

Emphasis added. Now, you may want to split hairs about what you said, but I say that you advised COs to ignore OMB's memo, which tells them to adhere to the parity policy, and to apply the priorities prescribed by GAO instead. But I won't argue it with you. I will let the other readers decide for themselves what you advised. I will believe you if say that what you said is not what you meant.

I'm not quarreling with your opinion about OMB's advice. I'm quarreling with the advice your opinion prompted you to offer.

http://www.govexec.com/story_page.cfm?arti...oref=todaysnews

Uncertainty looms over procurement parity dispute

By Robert Brodsky rbrodsky@govexec.com June 11, 2010

Obama administration officials fear that small businesses could begin losing out on millions of dollars in federal contracts unless lawmakers move quickly to restore parity to socioeconomic procurement programs.

My friend John Krieger sent me a copy of page 789 from the Conference Report for HR 2647, the National Defense Authorization Act for Fiscal Year 2010, dated October 7, 2009. The following appears at the bottom of the page:

Small business contracting programs parity

The Senate amendment contained a provision (sec. 838) that would amend section 31((2)( of the Small Business Act (15 U.S.C. Section 657a((2)(), relating to the HUBZone small business program, to clarify that when a contract could be awarded pursuant to more than one small business program, the Department of Defense and other federal agencies have discretion as to which program to apply.

The House bill contained no similar provision.

The Senate recedes.

The conferees note that 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.

My friend John Krieger sent me a copy of page 789 from the Conference Report for HR 2647, the National Defense Authorization Act for Fiscal Year 2010, dated October 7, 2009. The following appears at the bottom of the page:

I hope John found it on wifcon.com. Its been here since last October.

/legacy/reg/a43e3ba0a03fd2b8.html

The latest in the saga:

http://www.govexec.com/story_page.cfm?arti...oref=todaysnews

Facing a July 15 termination of its contract, DGR took its case to the Court of Federal Claims, whose decisions are binding. In his decision, Judge Thomas C. Wheeler said the statute was unambiguous.

"The language of the Small Business Act granting priority to the HUBZone program could not be more clear," Wheeler wrote. "By using the phrases 'notwithstanding any other provision of law . . . a contract opportunity shall be awarded on the basis of competition to qualified HUBZone small business concerns,' Congress established a priority for the HUBZone program over other competing small business programs. . . . If Congress intended something different from what it stated, Congress alone must enact an appropriate amendment."

Read these. Note the dates on the letters.

http://www.pubklaw.com/hi/hubzone22.pdf

http://www.pubklaw.com/hi/hubzone21.pdf

That's conclusive proof that everyone wanted parity. Wonder what happened with the language appearing in the statue? There are lots of instances where staffers that draft legislation don't get it right and often after many renditions of bills, the wrong one slips through.

That's conclusive proof that everyone wanted parity. Wonder what happened with the language appearing in the statue? There are lots of instances where staffers that draft legislation don't get it right and often after many renditions of bills, the wrong one slips through.

Who is this "everyone?"

Oh-oh. He's back. Rested and ready to fight for the dispossessed.

Read these. Note the dates on the letters.

http://www.pubklaw.com/hi/hubzone22.pdf

http://www.pubklaw.com/hi/hubzone21.pdf

I couldn't connect to either of these links on either my Blackberry or my computer. Are the links good?

"Not Found

The requested URL /hi/hubzone22.pdf"]http://www.pubklaw.com/hi/hubzone22.pdf[/url was not found on this server.

Apache/2.2.3 (CentOS) Server at www.pubklaw.com Port 80"

I couldn't connect to either of these links on either my Blackberry or my computer. Are the links good?

"Not Found

The requested URL /hi/hubzone22.pdf"]http://www.pubklaw.com/hi/hubzone22.pdf[/url was not found on this server.

Apache/2.2.3 (CentOS) Server at www.pubklaw.com Port 80"

They were good when posted (I read the files) but now I am getting an HTTP 404 error.

Oh-oh. He's back. Rested and ready to fight for the dispossessed.

You persist in mocking either the term "dispossessed" or the actual dispossessed, though I don't know which or why.

You're like the Johnny Friendly of the parity issue. What's in it for you? Why do you care so much?

Actually, I was mocking you.

Why do I care so much? I explained that in Post #5, Post #8, and Post #10 of this thread, and in following posts. I started this thread, and my issue was GAO's protest authority, not the parity policy.

The COFC is probably right in its plain language approach to statutory interpretation, although we won't know that for sure until the Federal Circuit rules.

As for the "dispossessed" genus, by which you mean HUBZoners--cheats seem to be evenly dispersed among the small business family. I don't see any reason to give priority to one species over the others. If anybody has earned special treatment, it's the service disabled vets, but I've learned that there are many cheats in that species as well. I understand the objective, and it's a noble one, I suppose. But the creation of special categories with special privileges seems to naturally give rise to zealots, liars and crooks.

.

Oh. Expert on contracting, and knows a little about human nature, too ?

.

Every human knows a little about human nature.

COFC Awards Attorneys' Fees; Air Force

Unreasonably Interpreted Small Business Act

The U.S. Court of Federal Claims Feb. 15 awarded a contractor $37,227 in attorneys' fees and costs under the Equal Access to Justice Act (EAJA) in connection with the Air Force's violation of the Small Business Act (DGR Associates Inc. v. United States, Fed. Cl., No. 10-396C, 2/15/11).

Judge Thomas C. Wheeler found that the Air Force's position was not substantially justified in the underlying litigation, holding that DGR Associates Inc. did not waive its right to bring suit and rejecting the argument that the Air Force was not required to give priority to Historically Underutilized Small Business Zone (HUBZone) small business concerns.

DGR prevailed in its bid protest against the Air Force's award of housing maintenance, inspection, and repair services at Eielson Air Force Base, Alaska.

The court's injunction required the Air Force to terminate the contract award and apply the statutory HUBZone preference in a new or revised solicitation (94 FCR 206, 8/24/10). DGR then applied for attorneys' fees under the EAJA.

The court said DGR satisfied the EAJA's timeliness and net worth and size requirements for receiving an award. It also held that DGR was a prevailing party under the EAJA because it succeeded on all of its arguments concerning the Air Force's failure to apply the statutory preference for HUBZone small business concerns.

The court then said the Air Force's litigation position was not substantially justified.

Waiver Argument Was ?Patently Unreasonable.'

The Air Force argued that DGR had waived its right to bring suit by not filing its action prior to the closing date for receipt of proposals. The court held, however, that because DGR followed applicable protest procedures, diligently pursued its challenge, and prevailed at the Government Accountability Office, it would be unjust to dismiss DGR's protest.

?By any measure, Defendant's waiver argument was patently unreasonable and not substantially justified,? the court held.

Small Business Act Requirement is Unambiguous

The Air Force also argued that the interpretation of the Small Business Act and its implementing regulations was a novel issue, and therefore its position was substantially justified.

However, the court found the statute's wording and existing case law precedent to be unambiguous. When DGR filed suit in June 2010, multiple courts and the GAO uniformly had held the Small Business Act unambiguously required the HUBZone program to receive preference over other small business programs.

In addition, the court explained that had the Air Force simply chose to follow GAO's decision, DGR's lawsuit would have been unnecessary. The Air Force was unreasonable in putting DGR to additional effort and expense given the clear statutory language, the court said.

Finally, the court said the government's position was unreasonable due to the lack of any legislative history contrary to the statute's plain language.

As a result, the court awarded DGR attorneys' fees and costs.

http://op.bna.com/fcr.nsf/r?Open=dsen-8e7pjh.

The AF tried.

Read these. Note the dates on the letters.

http://www.pubklaw.com/hi/hubzone22.pdf

http://www.pubklaw.com/hi/hubzone21.pdf

I still can't access these URL's and don't know what they contained. Vern, do you or anyone else know

Where they can be viewed? What were the subjects or jist?

If I understand this long thread correctly, the issue was about whom in the federal government has the authority to 1) Interpret a law and 2) Tell that "interpreter" when they are incorrect. That is an interesting issue. It appears the subject interpretation was (is?) broad enough to where the contracting officer could decide what they wanted to do anyway. Does anyone know the current status for the subject interpretation? I wonder if the GAO will challenge other interpretations where even the FAR appears to go beyond the statutory provision (e.g. "of-a-type" stand-alone commercial services).

I learned long ago that statutes, regulations and contracts mean what the courts say they mean. GAO is not a court. Its decisions are only recommendations. However, the Court of Federal Claims later issued a bid protest decision agreeing with the GAO on the preference accorded HUBZone contracts. Congress then got in on the act and amended the HUBZone statute changing "shall" to "may" and established parity among the small business contracting programs. This is reflected in FAR 19.203.

Thank You, Retreadfed.

All I can say is... it is about time OMB finally pushed back GAO. Better late than never.