By Linda Koone on Thursday, January 16, 2003 - 01:34 pm:

Formerfed:

You're right. It would seem unlikely that the procurement would be unrestricted if you have two or more small businesses capable of satisfying the requirement.

During the on-line research that I've been doing, I came across a case where NASA made an award to a large business without applying the PEP and the HUBZone protested. However, since NASA is not covered by the Small Business Act, the protest was dismissed.

With my point being, it could happen. But I'm probably putting too much thought into an unlikely scenario.

By Vern Edwards on Thursday, January 16, 2003 - 01:34 pm:

Linda:

I'm now convinced that in my example the winner would be HBSB, not any of the non-HUBZone small businesses. It's the only thing that makes sense if the HUBZone price evaluation preference is designed to help HUBZone small businesses even under full and open competition.

If a non-HUBZone small business is the first apparent low bidder, then it will not be displaced by the evaluation preference. If a non-HUBZone small business is the first apparent low bidder, but is eliminated due to nonresponsiveness or nonresponsibility, and the second low bidder is a non-HUBZone small business, then it will not be displaced. But if a non-HUBZone small business is positioned between a large business and a HUBZone small business, and if the large business is displaced by the price evaluation preference, then the non-HUBZone small business will also be displaced.

I wish that the FAR explained this clearly.

By Vern Edwards on Thursday, January 16, 2003 - 01:39 pm:

Linda and Formerfed:

I agree with you about set-asides, but we all know that the government sometimes receives proposals from more than one small business in procurements that are not set aside. FAR § 19.1307(a) and (b) seem to make express allowance for the possibility.

By Vern Edwards on Thursday, January 16, 2003 - 01:57 pm:

Linda and Formerfed:

I just thought of something.

In my scenario, what if LB1's bid is nonresponsive? Should the CO apply the price evaluation preference to a nonresponsive bid from a large business?

What if LB1 is nonresponsible? Should the CO even get so far as to consider LB1's responsibility?

By Linda Koone on Thursday, January 16, 2003 - 02:08 pm:

Vern:

The issue of responsibility was one that I had raised. CM and I had different definitions of responsibility.

See my 8:11 post on 1/15 and 9:12 post of today.

By cm on Thursday, January 16, 2003 - 02:32 pm:

I myself am looking at that responsibility thing again....however another interesting thing pops up here. In FAR 52.219-04 take a look at (c) and tell me how this would work and why?

By Vern Edwards on Thursday, January 16, 2003 - 07:25 pm:

Linda and cm:

I think responsibility refers to the process and standards in FAR Subpart 9.1. Why should we think that it means anything else?

By Vern Edwards on Thursday, January 16, 2003 - 07:39 pm:

cm:

With regard to the price evaluation waiver in FAR § 52.219-4(c), if a HUBZone small business waives the preference when it submits its bid or proposal, it gives up the competitive advantage of the price evaluation preference and in return for freedom from the agreement terms in FAR § 52.219-4(d).

By cm on Friday, January 17, 2003 - 10:07 am:

VE
You are quite correct. What I was questioning was that part of (c) that says if a HZ waives the factor the factor is then added to its offer also. Now unless I am reading this all wrong it would mean that in a full and open competition where only two offers are recieved one LB and one HZ who waived..the LB price would not be factored but the HZ price would be increased by ten percent. When I first thought about this I decided it would only be a problem if there were a tie bid......but what if there were several LBs bidding and more than one award might be made. It seems to me that adding the factor to the firm who waived it seems someow grossly unfair.Have I misconstrued this?

By cm on Friday, January 17, 2003 - 10:16 am:

Vern and Linda
Let me clarify what I was trying to say about the responsibility issue. At FAR 52.219-04 it states that the factor will be added to all offers.....with some exceptions. The clause makes no mention of low price,responsiveness or responsibility. What I was talking about was absent fraud or collusion the factor is to be added to all non excepted offers. Do you think this is the appropriate method?

By Linda Koone on Friday, January 17, 2003 - 10:39 am:

CM: I don't know if you are right or not. And in all honesty, I don't think the SBA knows what the correct interpretation is either. All I can say is that I have never used that interpretation for the term 'responsible contractor'.

For some real fun, read the SBA's response to comments made on the SBA's proposed HUBZone rules:
Final Rule-HUBZone

Apparently some commenters had concerns about the application of the PEP and using the terms lowest responsive, responsible offer, but SBA basically dismissed them. I think they really handled the questions about applying both the SDB evaluation factor and HUBZone PEP well, too!

By Vern Edwards on Friday, January 17, 2003 - 11:41 am:

cm and Linda:

cm, in response to your 10:07 a.m. post of today, describing a full and open competition in which there are only two offers, one from an LB and one from an HZSB that waived the price evaluation preference, FAR §§ 19.1307(b) and 52.219-4(b) say to add the 10 percent factor to both offers. The effect of the factor in this case would be nil, whether the offers are tied or not. Have I misunderstood your question?

As to the fairness of adding the factor to an offer from an HZSB when there are several LBs and more than one award will be made, I don't think you've misconstrued anything, but what's fairness got to do with it? If the HZSB submits an offer based on waiver of the preference, well, that's that. It was the HZSB's choice and they made it, perhaps to their detriment. Tough break, but there it is.

As to whether you consider responsiveness and responsibility before you apply the price evaluation factor, I frankly don't know the answer. It might make a difference if the 1st low bidder is an LB, the 2d low bidder is a non-HUBZone small business and the 3d low bidder is an HZSB. If the LB is nonresponsive or nonresponsible, and you don't apply the price evaluation factor to its offer, then perhaps the HZSB does not get to displace the 2d low, non-HUBZone SB. But the rule simply is not clear in this regard, at least not to me.

I think the price evaluation preference is designed to give an HZSB a leg up over an LB that would otherwise win the contract. But if the low offer is from an ineligible LB, application of the price evaluation factor to its offer would really give the HZSB a leg up over the non-HUBZone small business that submitted the 2d low offer, since the LB would not receive the contract in any event. I don't think this is the intent of the policy.

I just don't know what is the right approach. Maybe we'll have to wait for a protest decision.

By cm on Friday, January 17, 2003 - 11:56 am:

I think you are right. I have only one other thought....can an otherwise not successful offer from a small business acquire the mantle of "otherwise successful" on the basis of a non responsible lower offer?

By John Ford on Friday, January 17, 2003 - 12:12 pm:

Here is what the HUBZone statute has to say on this issue "in any case in which a contract is to be awarded on the basis of full and open competition, the price offered by a qualified HUBZone small business concern shall be deemed as being lower than the price offered by another offeror (other than another small business concern), if the price offered by the qualified HUBZone small business concern is not more than 10 percent higher than the price offered by the otherwise lowest, responsive, and responsible offeror." It is obvious that the statute does not expressly prohibit a non-HZ SB from benefiting from the PEP. Therefore, I am curious as to the source of that concept in the SBA's procedural guidance.

By Vern Edwards on Friday, January 17, 2003 - 01:16 pm:

John:

I don't understand what you are referring to in your last sentence. Are you referring to the procedural guidance for which Linda provided the link?

Vern

By John Ford on Friday, January 17, 2003 - 02:57 pm:

Vern, yes. In that guidance, which is internal only and is not a part of the HZ regulations, the SBA repeatedly states that a non-HZ SB is not to benefit from the PEP. Because this prohibition is not mentioned in the statute, I am curious as to its origin.

By Vern Edwards on Friday, January 17, 2003 - 06:36 pm:

John:

I don't know its origin. I don't even know if it's really a rule in any legal sense. If you read Part I of this thread, then you know that I originally thought that a non-HUBZone small business could benefit. But then CM made a point that I thought made sense.

In any event, the regulations could certainly be clearer about how the price evaluation preference is to be applied.

By cm on Tuesday, January 21, 2003 - 10:31 am:

If paragraph (b) (1)of FAR 51.219-04 were modified to include the terms "responsive and responsible" before the term "offers" that would fix much of the ambiguity of the overall procedure . Secondly the factor should be added to only those offers not submitted by small firms. Now if we had any of the scenairos Vern provided there would be no confusion. If a low LB were determined not to be R/R an offer from the next in line (in this example a small business)would move ahead but not by dint of the PEP...thus becoming the "otherwise" successful offer. Adding the factor to a non-successful small business offer makes no sense and changes nothing. I think the procedure in para (c) whereby the HZ that waives has the factor added to its offer was designed to equalize the process if another HZ ,higher in price,were also in the competition. However it is unnecessary because the reality is that if a HZ waives he may become an "otherwise successfull small business" against whom the factor cannot be employed in any case. If we did it this way it would still be possible for a non-waiving HZ to win the award from a LB.

By Mike Wolff on Wednesday, January 22, 2003 - 09:07 am:

This whole thing is a total mess. We had a full and open solicitation where award was based on best value, had 18 offerors, and both the HUBZone and the SDB price adjustments applied. It was a total nightmare trying to make a best value determination in that environment. In my opinion it is also ridiculous to impose a 20% penalty on a large business concern.

I believe my office has seen a marked decrease in the # of large businesses who even bother to submit offers anymore. I've had a couple firms tell me specifically that they are not competing when both price adjustments are in effect because it is virtually impossible to win.

I'm all for supporting small businesses. However, is this current process really the intent of Congress, and good for the nation as a whole? Clearly the mere fact that this discussion was so long that it had to be split in 2 shows how convoluted this procedure is. Any suggestions on how to fix it? Write our congressmen?

By Anonymous on Wednesday, January 22, 2003 - 01:23 pm:

Write the Supremes

By John Ford on Wednesday, January 22, 2003 - 01:37 pm:

Mike, where did the 20% "penalty" come from?

By Anonymous on Wednesday, January 22, 2003 - 02:08 pm:

Must have been an SDB and a Hubzone offeror

By Linda Koone on Wednesday, January 22, 2003 - 02:17 pm:

Yes. I'm sure the 20% came from the SDB Price Evaluation Adjustment in combination with the HUBZone PEA.

However, it's interesting to note that FAR 19.1103(c) states that you can't use the SDB adjustment if it causes the award price to exceed the fair market value by more than 10% (currently).

I believe this was an issue raised to the SBA when they published the proposed HUBZone rule and they handled it by saying that the FAR would address it. But, of course, the FAR doesn't address this issue at all.

By Mike Wolff on Thursday, January 23, 2003 - 03:04 pm:

Yes - the 20% was the combination of the 2 price adjustments.

By John Ford on Friday, January 24, 2003 - 10:44 am:

What is the authority or requirement to combine the two adjustments?

By Linda Koone on Friday, January 24, 2003 - 11:15 am:

John:

FAR 19.1307(d), for starters (although I believe it was in the SBA regs, too).

"(d) A concern that is both a HUBZone small business concern and a small disadvantaged business concern shall receive the benefit of both the HUBZone small business price evaluation preference and the small disadvantaged business price evaluation adjustment (see Subpart 19.11). Each applicable price evaluation preference or adjustment shall be calculated independently against an offeror's base offer. These individual preference and adjustment amounts shall both be added to the base offer to arrive at the total evaluated price for that offer."

By CM on Friday, January 24, 2003 - 11:19 am:

FAR 19-1307 (D)

By Anonymous on Tuesday, January 28, 2003 - 12:21 pm:

The FAR allows for sole source HZ awards...the question is if we do a sources sought synopsis seeking interested and qualified HZ firms and hear from only one interested source is that a sufficient basis to call it a sole source? In other words if there is a lack of interest in a given action can it still be considered on a sole source basis?

By Anonymous on Tuesday, March 11, 2003 - 08:54 pm:

As long as we're on the subject of FAR 19.1101, is the PEA of 10% applicable to all full and open competitive procedures, i.e., even if there are no HZ contractors involved? For example, there are two LB and one SB competing - does the 10% PEA need to be applied to the two LBs because one SB is involved or does the PEA only apply when a HZ business is participating??? Really would appreciate some clarification on when the 10% PEA needs to be applied - most in my contracting office haven't even heard of this, let alone acted on it.

By Linda Koone on Wednesday, March 12, 2003 - 07:59 am:

I'm a little bit confused . . . FAR 19.1101 deals with the PEA for SDB's, not HZ.

In any event, the answer as to whether either the SDB or HZ PEA/PEP applies in the situation you described is 'no'.

FAR 19.1103(a) states that you "Give offers from small disadvantaged business concerns a price evaluation adjustment by adding the factor determined by the Department of Commerce to all offers, except-..."; and FAR 19.1307(b) states that "The contracting officer shall give offers from HUBZone small business concerns a price evaluation preference by adding a factor of 10 percent to all offers, except-..."

You would include the applicable clauses in solicitations employing full and open competition, but the evaluation preference only comes into play if you get an offer from a HZ or SDB.

By cm on Wednesday, March 12, 2003 - 01:39 pm:

And neither has waived, and if an SDB only if its in an eligible industry and if construction, only if its in a designated state.

By Doug Kornreich on Monday, April 28, 2003 - 02:23 pm: