On August 13, 2010, in DGR Associates, Inc. v. United States, 2010 WL 3199929 (Fed.Cl.), the United States Court of Federal Claims sustained the bid protest of a HUBZone company challenging the Air Force’s decision to set aside for the 8(a) program a procurement of housing maintenance, inspection, and repair services at Eielson Air Force Base, Alaska. Plaintiff DGR argued that the Air Force violated the Small Business Act by not giving priority to HUBZone small business firms when there is a reasonable expectation that two or more such concerns would submit offers and the award could be made at a fair market price.

DGR previously filed a GAO protest and prevailed, but the Air Force refused to follow GAO’s recommendation, so DGR filed for declaratory and injunctive relief in the Court of Federal Claims.

There is an ongoing dispute as to the relative priority of the 8(a) and HUBZone programs. The GAO and Court of Claims have both held that the plain meaning of the Small Business Act mandates a priority to the HUBZone program, but the executive agency has issued memoranda to the contrary. An appeal has been docketed on this issue in the case of Mission Critical Solutions v. United States, 91 Fed. Cl. 386 (2010), appeal No.2010-5099 (Fed.Cir. Apr. 2, 2010).

In the DGR decision, the Court of Federal Claims states “the language of the Small Business Act granting priority to the HUBZone program could not be more clear”, and “Congress established a priority for the HUBZone program over other competing small business concerns.” 15 U.S.C. Section 657a(b)(2)(B). “The executive agency memoranda reflecting disagreement with this interpretation, more than anything, simply express disbelief that Congress could have intended a priority for the HUBZone program.” The memoranda referenced include an OMB July 2009 memo, a DOJ Office of Legal Counsel memo August 2009 memo, and an Office of the Under Secretary of Defense, Director, Defense Procurement and Acquisition Policy memo dated May 2010.

Significantly, in the DGR opinion, the United States Court of Federal Claims “permanently enjoins [the United States] from proceeding with the contract unlawfully awarded to [the 8(a) firm], and from awarding any contract that is not in compliance with the Small Business Act as interpreted herein.”

For further information about HUBZone or 8(a) set asides, or to discuss your government contract bid protest questions, contact Karen S Hindson PC.