TITLE: B-298201.2, Veteran Enterprise Technology Services, LLC, July 13, 2006
BNUMBER: B-298201.2
DATE: July 13, 2006
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B-298201.2, Veteran Enterprise Technology Services, LLC, July 13, 2006

   Decision

   Matter of: Veteran Enterprise Technology Services, LLC

   File: B-298201.2

   Date: July 13, 2006

   Marc Goldschmitt for the protester.

   Capt. Peter G. Hartman, Department of the Army, for the agency.

   Peter D. Verchinski, Esq., and John M. Melody, Esq., Office of the General
   Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Agency is not required to terminate contract awarded under
   service-disabled veteran-owned (SDVO) small business set-aside, despite
   Small Business Administration's determination in response to SDVO protest
   that awardee was not an SDVO concern, where agency awarded contract after
   making a reasonable urgency determination, as allowed by the Federal
   Acquisition Regulation.

   DECISION

   Veteran Enterprise Technology Services, LLC (VETS) protests the Department
   of the Army's decision to permit Wexford Group International, Inc. (WGI)
   to continue performing a contract awarded under request for proposals
   (RFP) No. W9124Q-06-R-0002, issued as a service-disabled veteran-owned
   (SDVO) small business set-aside, for support services for the Rapid
   Equipping Force (REF). VETS contends that the Army must terminate the
   contract because the Small Business Administration (SBA) has determined
   that WGI is not an SDVO small business concern.

   We deny the protest.

   On February 7, 2006, the Army issued the RFP to acquire various support
   services, including management, operations, logistical, administrative,
   and project support, for the REF, which develops strategies and
   methodologies to swiftly introduce material innovations into the Army. The
   Army received several proposals, including VETS's and WGI's, and
   ultimately selected WGI for award. On March 10, the contracting officer
   determined that award should be made without delay,[1] and thus executed a
   written determination, pursuant to Federal Acquisition Regulation (FAR)
   sect. 15.503(a)(2)(iii), that urgency necessitated award to WGI without
   providing the other offerors the required pre-award notice of the intended
   awardee.[2] Shortly thereafter, the Army made award to WGI. Upon learning
   of the award, VETS filed a protest with the Army (which forwarded the
   allegations to SBA) challenging WGI's SDVO and small business size status.
   On April 26, SBA held that WGI did not qualify as an SDVO small
   business.[3] On the basis of that determination, VETS requests that our
   Office recommend that the Army terminate WGI's contract and make award to
   VETS.[4] The Army takes the position that, since it properly proceeded
   with the award following an urgency determination, and VETS's SDVO status
   protest was not filed until after award, SBA's determination applies to
   future procurements only. We agree with the Army.

   SBA's regulations regarding SDVO small business protests are found at 13
   C.F.R. sect. 125.24-28. Section 125.27(g) of those regulations describes
   the effect of an SBA determination on SDVO status as follows:

     (g) Effect of determination. SBA's determination is effective
     immediately and is final unless overturned by OHA on appeal. If SBA
     sustains the protest, and the contract has not yet been awarded, then
     the protested concern is ineligible for an SDVO SBC [(small business
     concern)] contract award. If a contract has already been awarded, and
     SBA sustains the protest, then the contracting officer cannot count the
     award as an award to an SDVO SBC and the concern cannot submit another
     offer as an SDVO SBC on a future SDVO SBC procurement unless it
     overcomes the reasons for the protest (e.g., it changes its ownership to
     satisfy the definition of an SDVO SBC set forth in sect. 125.8).

   The regulation thus explicitly differentiates between a determination's
   effect when issued before versus after award. Specifically, while the
   regulation expressly states that SBA's determination affects the current
   solicitation if award has not been made at the time of the
   determination--it precludes award to the protested firm--it does not
   similarly provide for termination if award has already been made. Rather,
   the only identified effects of post-award determinations are that the
   contracting officer cannot count the award as an SDVO small business award
   (presumably for purposes of meeting set-aside goals), and that the firm
   determined not to be an SDVO small business cannot compete on future SDVO
   procurements. By separately addressing pre-award and post-award
   determinations, and explicitly making only pre-award determinations
   effective for the current procurement, we think the regulation makes clear
   that post-award determinations do not require termination, and that
   termination therefore is not required here.[5]

   In response to our request for its views, SBA cites section 125.27(e) of
   its regulations, which provides that an agency may proceed with contract
   award, despite a timely SDVO status protest, where the agency determines
   in writing that award is in the public interest.[6] SBA maintains that,
   although this regulation does not by its language apply to the situation
   here--since VETS's protest was filed after award--a public interest
   determination nevertheless should be required of the agency in order for
   the award to WGI to be viewed as proper. We decline to adopt this view
   since, as SBA acknowledges, there simply is no requirement that the agency
   make a public interest determination where award is made prior to an SDVO
   status protest. Accordingly, we find no requirement for the agency to make
   a public interest determination here.

   VETS also asserts that there was no real urgency here, since the agency
   could have avoided any delays caused by the pre-award notice by extending
   the incumbent's contract or by awarding a bridge contract for the
   services. The protester apparently believes that the absence of a proper
   urgency determination would warrant treating the situation here as being
   subject to the pre-award portion of section 125.27(g), which would make
   the determination applicable to the current procurement and require
   termination.

   The urgency determination was reasonable. Support services currently were
   being provided under several existing contracts (the contract awarded here
   consolidated those services under a single contract) that were expiring,
   and at least three of them had no options remaining and therefore could
   not be extended. There is no requirement that agencies award new contracts
   to cover potential delays resulting from the pre-award notice of an
   intended award. See generally Resource Applications, Inc., supra, at 3
   (urgency determination under small business set-aside). Further, there is
   no basis for us to question the need for the services on a continuing
   basis. The agency explains that REF's mission is "to develop strategies
   and methodologies to swiftly introduce material innovations into the U.S.
   Army by taking emerging technologies to operational environments for
   initial field evaluation," and that its "immediate mission is to get these
   innovations and technologies into Iraq." Agency Memorandum for Record,
   June 6, 2006. The Army advises that these innovations already have reduced
   fatalities and injuries to the troops in Iraq, which demonstrates the
   importance of REF's mission and, it follows, of the support services being
   procured. VETS has provided no basis for us to question the Army's
   characterization of REF's mission, and has not shown that the support
   services are not required on a continuing basis in order for REF to
   satisfy that mission, or that any other aspect of the Army's urgency
   determination was unreasonable. Accordingly, we conclude that the
   determination was reasonable--sufficient time was not available to provide
   pre-award notice and still allow the start-up time necessary to ensure the
   continued operation of REF after April 1. See Dawkins Gen. Contractors &
   Supply, Inc., B-243613.11, Sept. 21, 1992, 92-2 CPD para. 190 at 4.[7]

   We conclude that, since the SBA determination that WGI did not qualify as
   an SDVO small business was not issued until after award, that
   determination does not apply to this procurement. Consequently, the Army
   is not required to terminate WGI's contract.

   The protest is denied.

   Gary L. Kepplinger

   General Counsel

   ------------------------

   [1] The agency concluded that WGI would need 3 weeks prior to the April 1
   contract start date to assemble its work force and phase in to full
   performance, and that pre-award notice was not feasible because it could
   delay the phase-in and, thus, contract performance.

   [2] Under FAR sect. 15.503(a)(2)(i)(D), in procurements that have been set
   aside for SDVO small businesses, the contracting agency generally is
   required to inform each unsuccessful offeror, in writing, of the identity
   of the apparent successful offeror prior to making award. However, as
   noted above, FAR sect. 15.503(a)(2)(iii) provides that preaward notice is
   not required where the contracting officer makes a written determination
   that the urgency of the requirement necessitates award without delay. Our
   Office will review such determinations for reasonableness. See Resource
   Applications, Inc., B-271079.6, Aug. 12, 1996, 96-2 CPD para. 61 at 2.

   [3] The protester's size status protest is still pending before SBA; the
   awardee's appeal of SBA's determination that it is not an SDVO small
   business was denied on June 29.

   [4] The Army contends that SBA did not issue its determination within the
   required 15-day period, see FAR sect. 19.307(h), and that the SDVO status
   determination does not apply to the current procurement for this reason.
   The record is not clear on this point, and we need not resolve it in light
   of our conclusion below.

   [5] We note that SBA's small business size protest regulations
   specifically provide that a timely filed protest applies to the
   procurement at issue, even if award has been made. See 13 C.F.R.
   sect. 121.1004(c). We have cited this provision in holding that an agency
   should terminate an awardee's contract, even where no pre-award notice was
   required (and award therefore was permissible), where a size protest was
   timely filed, there is no appeal of SBA's determination, and there are no
   countervailing circumstances that would weigh in favor of allowing the
   large business concern to continue performance. See, e.g., Tiger Enters.,
   Inc., B-292815.3, B-293439, Jan. 20, 2004, 2004 CPD para. 19 at 4. The
   SDVO regulations do not include any similar provision and, conversely, the
   small business protest regulations do not include language similar to that
   in 13 C.F.R. sect. 125.27(g), which we have found gives post-award SDVO
   status determinations only prospective effect.

   [6] The FAR provides that a contracting officer may not make award after
   receiving a an SDVO protest until (1) SBA has made an SDVO status
   determination, (2) 15 business days have expired since SBA's receipt of
   the protest, or (3) the contracting officer determines in writing that an
   award must be made to protect the "public interest." See FAR sect.
   19.307(h).

   [7] VETS raises two further arguments. First, VETS asserts that, since the
   RFP did not require a transition period, the awardee's need for such a
   period should not be permitted to form the basis for an urgency
   determination. However, even absent a provision in the solicitation for a
   transition period, we find nothing unreasonable in an agency's taking into
   consideration the need to award a contract sufficiently in advance of the
   start date to allow the new contractor to prepare for performance. Second,
   VETS challenges the urgency determination on the basis that the Army was
   allegedly aware of the need to procure these services 1 year prior to the
   expiration of the existing contracts. However, VETS has presented no
   evidence in support of its argument and, moreover, has cited no authority
   for the proposition that a delay in initiating a procurement invalidates a
   subsequent urgency determination made under FAR sect. 15.503(a)(2)(iii).