By: Edward T. DeLisle

On August 13th, the Court of Federal Claims temporarily ended a controversy regarding how agencies go about setting aside contracts for certain qualified small businesses. DGR Associates, Inc. v. United States involved a decision by the Air Force to issue a set aside contract for qualified 8(a) companies. The project involved housing maintenance, inspection services and repairs at Eielson Air Force Base in Alaska. The solicitation was challenged by a HUBZone contractor who claimed that the Air Force violated the Small Business Act by failing to give priority to HUBZone contractors. Specifically, the protesting contractor claimed that when the HUBZone program was established in 1997, the legislation required agencies to consider setting aside contracts for HUBZone contractors prior to considering any other small and/or disadvantaged companies for such contracts.

The enabling statute for the HUBZone program states the following:

Notwithstanding any other provision of law … a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if the contracting officer has a reasonable expectation that not less than 2 qualified HUBZone small business concerns will submit offers and that the award can be made at a fair market price.

Given this language, the protesting contractor took the position that Congress intended to give priority to HUBZones over other small and small, disadvantaged businesses, where government agencies make the decision to issue set aside contracts. The GAO agreed. In May of 2010, the GAO issued a recommendation to the Air Force that it follow clear Congressional authority and set aside the solicitation for HUBZone contractors, if further research suggested that two or more HUBZone contractors could perform the work at a reasonable price.  The Air Force refused to follow this recommendation, taking the position that Congress did not intend such a result. The protesting contractor then took action in the Court of Federal Claims.

Considering the same arguments made before the GAO, the Court of Federal Claims agreed with the conclusion reached in that forum. In rendering its decision, the Court stated as follows:

On the issue of statutory interpretation, the language of the Small Business Act granting priority to the HUBZone program could not be more clear. By using the phrases "notwithstanding any other provision of law … a contract opportunity shall be awarded on the basis of competition to qualified HUBZone small business concerns," Congress established a priority for the HUBZone program over other competing small business programs.

The Court went on to state that "Congress must alone enact an appropriate amendment" if its intent was something other than to provide priority to HUBZones.

Based upon this decision, until such time as Congress acts, if a contracting officer is prepared to set aside a contract, he or she must determine whether two or more HUBZone contractors can perform the work for a fair price. If the answer to that query is "yes", then the contract must be set aside for HUBZone contractors to the detriment of other small and small, disadvantaged businesses. While one can reasonably expect Congress to take action at some point in the near future, in the short term this could mean more opportunities for HUBZone contractors.

Edward T. DeLisle is a Partner in the firm and a member of the Federal Contracting Practice Group.