A HUBZone legal battle erupts over a single word
Duck! There’s a courtroom brawl going on and you could get hit with something.
The Justice Department just threw an appeal at the U.S. Court of Federal Claims because of a recent ruling. That court’s decision flew in the face of the Obama administration. A judge said the administration’s interpretation of a statute regarding the Small Business Administration’s Historically Underutilized Business Zone program is wrong. And the administration doesn't like that.
The court ruled in March that agency contracting officers who consider setting aside a contract must first look for small businesses in the HUBZone program, which helps companies based in poorer areas. If there are none, then they can set aside a contract for another of SBA’s programs, such as the program helping service-disabled, veteran-owned small businesses.
The food fight started because of a single word in the Small Business Administration Act: shall. And this fight has brought out the heavyweights, including the Office of Management and Budget, SBA, Justice Department, the Government Accountability Office and Congress.
The court case was based on a bid protest from Mission Critical Solutions. The HUBZone company protested an Army’s award of a sole-source contract to an Alaska Native-owned technology company. The Army didn't first look for possible HUBZone companies that might compete for the one-year $35 million contract. GAO sustained the protest, but OMB wouldn't take it.
In July 2009 OMB Director Peter Orszag told agencies to ignore any HUBZone decisions GAO might throw at them. They were to consider all small-business programs as equals. No one was more special than any other.
Now with the claims court ruling, SBA asked Justice if all agencies had to give HUBZone's priority.
“By its express terms, the injunction entered by the court applies to the specific procurement decision and to the specific contract at issue in the litigation,” Justice answered.
The ruling doesn’t go beyond that case because of “the nature of the court’s jurisdiction,” it added.
Take that, claims court!
Standing on the sidelines and hoping to avoid being splattered with anything, the Defense Department warned its contracting officers on May 18 about Justice's conclusion that the court’s decision applies to only one case. It said the administration made its decision about HUBZone priority, and it's stickin’ to it. DOD says it is too.
DOD then whispered to its people, “We will advise of any changes or updates.”
As a one who unintentionally helped start the fight, the GAO seems to be getting out. This week it said it would not toss a lot of its resources into settling bid protests centered on this HUBZone issue because the administration isn’t paying attention to what it decides. It was just going to tell Principal Congress.
Amid the ruckus the school principal seems to be coming to the cafeteria to end the fight. Some members of Congress want to remove the “shall” in the statute and replace it with “may.” It would end the fight and make it clear that all programs are equal. But it hasn't worked yet, nor is it an easy fix.
Posted by Matthew Weigelt on May 20, 2010 at 10:46 AM