THE SITUATION
An experienced small business defense contractor which is a long-standing manufacturer of a unique technical product for the United States Navy sought Fluet's assistance when the Navy sought to eliminate it from competition by changing the product sourcing requirements in the solicitation after offers had been submitted. When the Navy put out the solicitation as a small business set-aside it erroneously believed that nonmanufacturer small business concerns were eligible for award because the Navy misapplied a Small Business Administration waiver. The Navy later discovered its error and amended the solicitation, after offerors had responded, to include Federal Acquisition Regulation (FAR) clause 52.219-33 (Nonmanufacturer Rule). Instead of fixing the original error, the amendment compounded the error by effectively eliminating all but one offeror from competition.
OUR APPROACH
Fluet helped the small business contractor consider the legal and business implications of the contracting officer's error for this procurement and future procurements.
Fluet filed a post-award protest on behalf of its small business defense contractor challenging the Navy's evaluation of offers and application of terms not contained in the original solicitation. In response to this protest, the Navy acknowledged its error and opted to take corrective action to fix the error in the procurement.
When the Navy issued an amendment to the solicitation (as part of the corrective action) it compounded its original error instead of fixing it. Before the period for offers expired, Fluet filed a new protest on behalf of its small business defense contractor. This time challenging the terms of the Navy's amendment to the solicitation which had the effect of limiting competition to one offeror. Fluet argued that the Navy failed to conduct proper market research to support its continued small business set-aside decision in light of the newly added Nonmanufacturer Rule requirement.
THE OUTCOME
The Government Accountability Office (GAO) sustained Fluet's second protest, holding that:
- The Navy's market research was insufficient to conclude that the Navy could satisfy the “Rule of Two” i.e. that it would receive offers from at least two responsible small business concerns capable of meeting the amended solicitation requirements at fair market prices.
- The Navy's decision to restrict the solicitation to small businesses was unreasonable, given the flawed market research.
The GAO recommended that the Navy:
- Conduct proper market research in accordance with the procurement requirements and the GAO's decision.
- Reassess whether there is a reasonable expectation that at least two or more responsible small business concerns will submit proposals at fair market prices.
- Reimburse the protester for costs associated with filing and pursuing the protest, including reasonable attorneys' fees.
LESSONS LEARNED
This case underscores the importance of a comprehensive and strategic approach to bid protests. A truly successful protest often stems from not just winning the initial post-award protest, but also from carefully monitoring the agency's corrective action and swiftly challenging new issues through a pre-award protest. A deep understanding of procurement rules, particularly the Nonmanufacturer Rule and the Rule of Two, was crucial in identifying and arguing against the Navy's compounding errors in this case. Moreover, the case highlights the value of persistence, timely action, and effective storytelling in government contracting protests. By challenging both the initial award and the subsequent amendment, Fluet ensured the client had a genuine opportunity to compete, rather than accepting a superficial "win" that didn't address underlying issues. This strategic approach, combined with regulatory expertise and compelling narrative presentation to the GAO, was key to securing a favorable outcome in this complex bid protest case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
