Foul but No Harm? Strict FAR Compliance Can Be a One-Way Street

Albert B. Krachman

Contractors and contractor teams competing for set-aside contracts should internalize the Federal Acquisition Regulation (“FAR”) compliance lesson imparted by a recent Government Accountability Office (“GAO”) protest decision related to small business set-aside procurements. In Kira Training Services, LLC, B-419149.3 (January 4, 2021) GAO illustrated that in the set-aside area, an Agency can violate a mandatory FAR provision, but a contractor cannot complain unless it takes timely proactive steps to protect itself from the government error. In Kira, GAO found that on a set-aside contract, the Navy violated the FAR by not sending the required pre-award list of intended awardees to all offerors, but the small business protester was not competitively prejudiced by the Navy error because it failed to protect itself by filing a post-award size protest.

The purpose of the pre-award notice on small business set aside contracts is to allow competitors to timely file size protests against proposed awardees who may not be an eligible small business. The regulations make it more advantageous for a bidder to challenge a competitor’s size before award, as opposed to post award, when an adverse size or status ruling may not prevent the government from proceeding with the challenged procurement even if the size protest is sustained.

Although a pre-award notice is required by FAR 15.503(a)(2), agencies sometimes fail to issue them. When that occurs, and awards are made, non-selected offerors have lost their right to file a pre-award size protest. While an offeror can still file a post-award size protest, unless that offeror also timely files a GAO bid protest and obtains a Competition in Contracting Act (“CICA”) stay under FAR 33.104(c)(1) that keeps the award open long enough for the SBA to render a size protest decision, a size protest ruling against the awardee may do the protester no good.

The Kira protest involved a Navy contract for transportation and logistics services at Anderson Air Force base in Guam. The Navy awarded the contract to Invicta Defense, LLC, which was an SBA 8(a) approved Mentor Protégé firm. However, the Navy failed to send the FAR-required pre-award notice to all offerors. After receiving a debriefing, Kira filed a post-award protest at GAO challenging multiple technical aspects of the evaluation. In the protest briefing, Kira also asserted that, had the Navy issued the FAR-required pre-award notice of intended awardees, it would have filed a size protest that would have disqualified Invicta.

GAO denied or dismissed all of Kira’s technical challenges to the evaluation. But GAO agreed with Kira that the Navy violated the FAR by failing to send offerors the pre-award notice. However, GAO also found that Kira could not complain about this because it failed to file a separate post-award size protest raising whatever size issue it had seen. GAO stated:

Here, the agency’s failure to notify KIRA of the award until after it had been made was clearly contrary to the FAR requirements. However, the protester does not allege that it ever filed a post-award size protest with the SBA. The Small Business Act, 15 U.S.C. § 637(b)(6), gives the SBA, not our Office, conclusive authority to determine matters of small business size status for federal procurements. 4 C.F.R. § 21.5(b)(1); Randolph Eng’g Sunglasses, B-280270, Aug. 10, 1998, 98-2 CPD ¶ 39 at 3. In the absence of an SBA determination that Invicta is not small for this procurement, our Office sees no basis to find that Kira was competitively prejudiced by the award to Invicta as a result of the Navy’s failure to give pre-award notice of the award. (Citations omitted.)

Kira’s lesson is that if, on a small business set-aside contract, the agency fails to send a pre-award notice, and the first notice received is a Notice of Award, disappointed offerors need to immediately assess whether grounds exist for both a size protest and a GAO bid protest. If grounds for both exist, disappointed offerors should timely file the size protest with the Contracting Officer, and a bid protest at GAO. If no post-award size protest is filed, even if the size protest may be a winner, Kira’s one-way street rule will operate, and the potential benefit of a winning size protest may not be realized on that procurement.

For additional information, please do not hesitate to contact Albert Krachman or anyone in our Government Contracts group.