BNUMBER: B-279161; B-279162; B-279187; B-279188
DATE: April 20, 1998
TITLE: Ervin and Associates, Inc., B-279161; B-279162; B-279187; B-
279188, April 20, 1998
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Matter of:Ervin and Associates, Inc.
File: B-279161; B-279162; B-279187; B-279188
Date:April 20, 1998
John J. Ervin for the protester.
Shari Weaver, Esq., and Michael J. Farley, Esq., Department of Housing
and Urban Development, for the agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. General Accounting Office will not consider allegation that
Department of Housing and Urban Development's use of the section 8(a)
program to meet its needs for various types of services is
unconstitutional in light of Adarand Constructors, Inc. v. Pe�a and
City of Richmond v. J. A. Croson Co. because neither decision
constitutes clear judicial precedent on the constitutionality or
legality of the contracting agency's use of this program.
2. General Accounting Office will not consider challenge to
contracting agency's use of section 8(a) set-aside solicitations as
part of its procurement strategy where there is no showing that
regulations may have been violated or of possible bad faith on the
part of government officials.
DECISION
Ervin and Associates, Inc. protests the Department of Housing and
Urban Development's (HUD) decision to satisfy its requirements for two
categories of services--due diligence services for HUD's Housing
Programs and comprehensive services for the Assistant Secretary for
Housing-Federal Housing Commissioner--by issuing, for each category of
services, one solicitation set aside for participants in the Small
Business Administration's (SBA) section 8(a) program and one
solicitation subject to full and open competition. Ervin argues that
HUD's use of the section 8(a) program to satisfy its needs is
unconstitutional and that HUD's parallel procurement strategy is
otherwise improper.
We deny the protests.
Section 8(a) of the Small Business Act authorizes SBA to enter into
contracts with government agencies and to arrange for the performance
of such contracts by awarding subcontracts to socially and
economically disadvantaged small business contractors. 15 U.S.C. sec.
637(a) (1994).
HUD has historically obtained due diligence services[1] through
section 8(a) set-aside contracts. HUD's most recent due diligence
contracts recently expired and, in preparing the follow-on
procurement, HUD realized that its need for due diligence services had
significantly increased from the initial needs it identified in late
1995. HUD decided that it was in the government's best interest to
obtain maximum competition to satisfy this increased capacity. To
this end, HUD implemented a parallel procurement strategy that would
enable it to continue sponsoring section 8(a) business development
opportunities by soliciting for due diligence services at the previous
level under the section 8(a) program, and to meet its expanded
requirements for these services by soliciting on a full and open
basis. Request for proposals (RFP) Nos. DU100C000018600 and
DU100C000018561, the set-aside and unrestricted solicitations,
respectively, were issued on November 21, 1997.
Each solicitation anticipates the award of multiple
indefinite-quantity task order contracts, and each contains the same
statement of work. RFPs sec. B-1(b), B-2, I-16, L-4, C. Each
solicitation guarantees a minimum order of $250,000 per contract and a
maximum of $30 million per contract. RFPs sec. B-3. Each solicitation
states that multiple awardees will be provided a fair opportunity to
be considered for award of each task order, pursuant to Federal
Acquisition Regulation (FAR) sec. 16.505
(FAC 97-02),[2] and sets forth the same procedures for such
consideration.
RFPs sec. H-4.
HUD has historically obtained the comprehensive administrative,
professional, accounting, financial, and auditing support services for
overseeing all Federal Housing Administration programs and operations
through separate contracts, each of which was set aside under the
section 8(a) program. The services continue to be a significant
requirement and are now being consolidated. HUD explains that, in
furtherance of its commitment to providing maximum practicable
contracting opportunities to small disadvantaged business contractors,
it planned to procure a portion of the required services under the
section 8(a) program and a portion on a full and open basis. RFP Nos.
DU100C000018601 and DU100C000018597, the set-aside and unrestricted
solicitations, respectively, were issued on November 28.
Each solicitation anticipates the award of multiple
indefinite-quantity task order contracts, and each contains the same
statement of work. RFPs sec. B-2, I-14, C. Each solicitation
guarantees a minimum order of $250,000 per contract and a maximum of
$20 million per contract. RFPs sec. B-3; Set-Aside RFP Amendment
No. 3, Question and Answer (QA) 7b, QA 8; Unrestricted RFP Amendment
No. 3, QA 11b, QA 12. Each solicitation states that multiple awardees
will be provided a fair opportunity to be considered for award of each
task order, and sets forth the same procedures for such consideration.
RFPs sec. G-4. Each solicitation further states that proposals for task
orders will be solicited on a rotational basis between the set-aside
contracts and the unrestricted contracts; successful awardees under
each contract shall be given a fair opportunity to be considered.
Set-Aside RFP Amendment No. 3, QA 7a, QA 7b; Unrestricted RFP
Amendment No. 3, QA 11a, QA 11b.
Ervin first asserts that HUD's decision to procure both of these
categories of services through the section 8(a) program is
unconstitutional under Adarand Constructors, Inc. v. Pe�a, 515 U.S.
200 (1995). In Adarand, the Supreme Court held that racial
classifications must be subject to strict scrutiny and must serve a
compelling governmental interest and be narrowly tailored to further
that interest. Id. at 224-27. Ervin, which is not a section 8(a)
participant, contends that HUD's procurement of these services through
section 8(a) set-aside contracts cannot pass muster under the strict
scrutiny standard since there is no evidence of specific past racial
discrimination in connection with its procurement of these services.
There must be clear judicial precedent on the precise issue presented
to us before we will consider a protest based on the asserted
unconstitutionality of the procuring agency's actions. Schwegman
Constructors and Eng'rs, Inc., B-272223, Aug. 28, 1996, 96-2 CPD para. 90
at 4; DePaul Hosp. and The Catholic Health Ass'n of the United States,
B-227160, Aug. 18, 1987, 87-2 CPD para. 173 at 6. We have consistently
held that, since the Court in Adarand simply announced the standard
that is to be applied in determining the constitutionality of
programs involving racial classifications in the federal government,
and remanded the case to the lower courts for further consideration in
light of that standard, Adarand did not provide that precedent.
Schwegman Constructors and Eng'rs, Inc., supra; Advanced Eng'g &
Research Assocs., Inc., B-261377.2 et al., Oct. 3, 1995, 95-2 CPD para.
156 at 4 n.3; Elrich Contracting Inc.; The George Byron Co., B-262015,
B-265701, Aug. 17, 1995,
95-2 CPD para. 71 at 2.
Ervin incorrectly asserts that Adarand, in tandem with City of
Richmond v.
J. A. Croson Co., 488 U.S. 469 (1989), provides us with the necessary
clear judicial precedent. Neither Adarand, which concerned a
Department of Transportation program involving financial incentives to
prime contractors awarding subcontracts to small disadvantaged
businesses, nor Croson, which concerned a municipality's minority
set-aside program, constitutes clear judicial precedent on the
constitutionality or legality of HUD's use of section 8(a) set-aside
contracts to meet its need for the services at issue here. These
decisions addressed the particular programs that were before the Court
and, while they indicate what factors need to be considered to
determine the constitutionality of such programs, we are unaware of,
and the protester does not cite to, any dispositive federal court
decisions applying the standards articulated in Adarand and Croson to
any program or procurement which is sufficiently similar to this one
so as to warrant regarding those decisions as clear judicial precedent
here. G.H. Harlow Co., Inc.--Recon.,
B-266144.3, Feb. 28, 1996, 96-1 CPD para. 116 at 1-2; see also Seyforth
Roofing Co., Inc., B-235703, June 19, 1989, 89-1 CPD para. 574 at 1-2.
Ervin next asserts that HUD's contracting department has engaged in
"massive corruption and favoritism" and that its planned award of
"separate but equal" contracts to provide the same services gives HUD
the opportunity for "further corruption and favoritism." In this
regard, Ervin contends that there is nothing to stop HUD from ordering
only the minimum guaranteed amount under the due diligence
unrestricted solicitation and directing the remainder of the task
orders to its "favored" section 8(a) set-aside contractors. Ervin
further contends that the agency's plan to rotate the task orders
between the two sets of comprehensive services contracts does not go
far enough since one group of contractors or the other will still be
excluded from the competition.
Ervin's objection here is clearly not to the issuance of the
unrestricted solicitations, but to the issuance of the set-aside
solicitations. However, since the Small Business Act affords SBA and
contracting agencies broad discretion in selecting procurements for
the 8(a) program, we will not consider a protest challenging a
decision to procure under the 8(a) program absent a showing that
regulations may have been violated or of possible bad faith on the
part of government officials. Bid Protest Regulations, 4 C.F.R. sec.
21.5(b)(3) (1997). Ervin has made no such showing.
We know of no regulation that is violated by HUD's parallel
procurement strategy in general or the issue of particular concern to
Ervin, the allocation of task orders under the contracts. Each
solicitation complies with the requirement of
FAR sec. 16.505(b)(1) to provide each awardee a fair opportunity to be
considered for each order, and the solicitations for comprehensive
services go a step further to provide that task orders will rotate
between each set of contracts. While Ervin is correct that there is
no provision to compete the due diligence task orders between the two
sets of contracts, there is no legal requirement for such a provision.
HUD's only legal obligation is to order at least the minimum amount
set forth under each solicitation, FAR sec. 16.504(a)(1), and offerors
are to prepare their proposals accordingly.
Ervin's allegation that HUD will use this parallel procurement
strategy to direct task orders to its "favored" section 8(a)
contractors is supported by various examples of what Ervin
characterizes as HUD's bad faith. However, to show bad faith, the
protester must establish that the procuring agency acted with a
malicious and specific intent to injure the protester. Industrial
Data Link Corp., B-246682, Mar. 19, 1992, 92-1 CPD para. 296 at 4. None
of Ervin's underlying bases for its claim of bad faith--an ongoing
criminal investigation of note sales at HUD, a HUD Inspector General
audit report critical of HUD's procurement practices, and efforts by
HUD to remake its procurement processes--meet this standard.[3]
Ervin's allegation merely anticipates improper agency action and is,
as a result, speculative and premature and will not be considered.
VSE Corp.--Recon. and Entitlement to Costs,
B-258204.3, B-258204.4, Dec. 28, 1994, 94-2 CPD para. 260 at 2. To the
extent that Ervin's request that our Office "focus on what must be
done to clean up HUD" can be construed as a request for investigation
of HUD's procurement practices, our Office does not conduct such
investigations as part of our bid protest function. Stabro Labs.,
Inc., B-256921, Aug. 8, 1994, 94-2 CPD para. 66 at 5.
We deny the protests.
Comptroller General
of the United States
1. Due diligence encompasses a wide range of services that facilitate
the sale or restructuring of HUD-held and/or insured single-family and
multifamily mortgages, as well as Title I home improvement and
manufactured housing loans.
2. As a general matter, for orders issued under multiple task order
contracts, each awardee shall be provided a fair opportunity to be
considered for each order in excess of $2,500. FAR sec. 16.505(b)(1).
3. Ervin has lawsuits pending which include allegations that HUD is
retaliating against Ervin by "blackballing" the firm from competing
for HUD contracts, as well as allegations of bias, bad faith, and
procurement irregularities at HUD, some of which are referenced in
these protests. Ervin and Assocs., Inc. v. Helen Dunlap, Civil Action
No. 96-CV1253 (D.D.C. filed June 5, 1996) and Ervin and Assocs., Inc.
v. United States, No. 96-504C (Fed. Cl. filed Sept. 24, 1997). To the
extent that Ervin's reference to HUD's "bad faith with respect to
Ervin" concerns these allegations, our Office generally will not
consider any protest when the matter involved is the subject of
litigation before a court of competent jurisdiction. 4 C.F.R. sec.
21.11(b); Robinson Enters.--Request for Recon., B-238594.2, Apr. 19,
1990, 90-1 CPD para. 402 at 2.