Government Contracts Monitor

Remember: If SBA Delays in Deciding a Size Protest, It May Mean You Lose Even if You Win

November 12, 2013

In the recent case of TrustComm, Inc., B-408456 (Comp. Gen. Sept. 20, 2103), the Government Accountability Office (GAO) provided another reminder that prevailing on a size protest before the Small Business Administration (SBA) may not alter the contract award if SBA’s size protest decision comes too late.

The case involved a 100% small business set-aside for communications equipment for Coast Guard cutters. On September 7, 2012, about a week after receipt of the Coast Guard’s notice of intent to award a contract to MTN Government Services, Inc. (MTN), TrustComm, Inc. filed a size protest that was appropriately forwarded to the SBA for resolution. Two weeks later, the Coast Guard issued a Determination and Findings justifying award to MTN and making clear that it would go ahead with the award if the SBA did not render a decision in the size protest within ten business days after the size protest was filed (as required by FAR 19.3029g)(1)). Part of its justification for such an action was the fact that the program was already three years behind schedule and further delays would force the agency to incur additional costs and further adversely impact the schedule.

When the appointed day came and went without an SBA decision, the Coast Guard awarded the contract to MTN. Between November 2012 and May 2013, the agency conducted rigorous first article testing on the proposed equipment. The SBA decision did not arrive until May 31, 2013, almost nine months after the size protest was filed. In it, the SBA concluded that MTN was not a small business for the purposes of the subject procurement.

When TrustComm contacted the Coast Guard contracting officer (CO) to determine whether the agency would be terminating the contract now that it knew that MTN was not eligible for award, the CO said that the contract “would not be terminated under any circumstances.” Several days later, the Coast Guard issued another Determination and Findings recommending that the award stand. The Coast Guard provided “several significant countervailing reasons” for its decision including the significant increase in costs associated with cancelling the contract and awarding to TrustComm, as well as the impact on schedule and capabilities for the Coast Guard’s cutter fleet.

TrustComm protested that decision, arguing that since MTN was not a small business, it was ineligible for award and the contract is, therefore, illegal and should be terminated.

GAO disagreed, noting that it generally does not question the propriety of an award made by an agency before an SBA size decision is issued if the ten business day period has expired, even when SBA later decides that the awardee was not small. GAO has recognized that termination may be appropriate where (i) a timely size protest was filed; (ii) there was no appeal of the SBA size ruling in favor of protester; and (iii) there are no countervailing circumstances weighing in favor of allowing a business concern that is not small to continue performance. In this case, GAO found ample countervailing circumstances supporting the agency’s decision to continue working with MTN: the additional costs and significant delays that would necessarily result from new first article testing, as well as the loss of money spent pre-purchasing equipment with 2013 funds. The fact that the delays would adversely impact the Coast Guard’s mission effectiveness was also found to support staying the course.

What does this all mean? If there was ever any doubt concerning the importance of getting a timely size protest decision from SBA, there should be none now. Offerors who believe they have a valid size protest should work hard to do everything in their power to achieve a quick decision from SBA.

Eric Whytsell is the attorney responsible for the content of this article.