Decision 

Matter of: Delex Systems, Inc. 

File: B-400403 

Date: October 8, 2008 

Pamela J. Mazza, Esq., Isaias Alba, IV, Esq., and Jonathan T. Williams, Esq., 

PilieroMazza PLLC, for the protester. 

Duncan Butts, Esq., and Julie Griffiths, Esq., Department of the Navy, for the agency. 

John W. Klein, Esq., and Laura M. Eyester, Esq., for the Small Business

Administration. 

Paula A. Williams, Esq., and Ralph O. White, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision. 

DIGEST 

1. The set-aside provisions of Federal Acquisition Regulation (FAR) § 19.502-2(b) 

apply to competitions for task and delivery orders issued under multiple-award

contracts. 

2. Protest is sustained where agency failed to comply with the set-aside provisions 

of FAR § 19.502-2(b), when issuing, on an unrestricted basis, the solicitation for a 

delivery order under multiple-award contracts.

3. Protest alleging that agency erred in concluding that it had no reasonable 

expectation of receiving offers from two small businesses is sustained where the 

record shows that the agency’s set-aside determination is not adequately supported 

by the record. 

DECISION 

Delex Systems, Inc. protests the terms of delivery order proposal request (DOPR) 

No. N61339-08-R-0035, issued by the Department of the Navy, Naval Air Systems 

Command (NAVAIR) for its general aviation training products (GATP) program.

1

 

 

(continued...) 

United States Government Accountability Office

Washington, DC 20548 

Comptroller General

of the United States

DOCUMENT FOR PUBLIC RELEASE

The decision issued on the date below was subject to a

GAO Protective Order. This redacted version has been

approved for public release.

1

 The GATP program is for the production and delivery of technical training products

such as on-line training courses, web-based training, interactive courseware and 
Delex primarily contends that the agency should have issued the solicitation as a 

small business set-aside rather than on an unrestricted basis. 

We sustain the protest.

BACKGROUND 

On August 13, 2003, NAVAIR awarded the training systems contract (TSC) II, a 

multiple-award, indefinite-delivery/indefinite-quantity (ID/IQ) contract to acquire the 

capability to analyze, model and simulate, design, and develop training and 

simulation products and systems with a base ordering period of 8 years and a total 

dollar ceiling of $3 billion.2

 The TSC II solicitation designated North American 

Industry Classification System Code 33319 as the appropriate size standard for small 

business participation. RFP for TSC II Contract, at 35. TSC II contracts were 

awarded to a total of eight firms--four were small businesses, and four were other 

than small, i.e., “large” businesses.3

 All eight TSC II awardees had the right to

compete for the award of delivery orders for trainers and training systems, and 

related technical products. However, the TSC II solicitation stated, at paragraph 

H.4 (a), that the agency reserved “the right to solicit individual delivery orders” on a 

small business set-aside basis “to meet the Command’s small business set-aside 

goal.” Id.

The DOPR, issued on May 22, 2008 and amended several times, contemplated 

issuance of a GATP delivery order for the Naval Center for Aviation Technical 

Training. The solicitation anticipated a 5-year performance period for the order, 

with an estimated value of $75 million. The DOPR was also issued as a set-aside for 

the small business TSC II awardees.4

 AR exh. 14, Acquisition Strategy Plan, at 3-5. 

 

(...continued) 

electronic classrooms. Agency Report (AR) exh. 20, GATP Statement of Objectives, 

at 1. 

2

 TSC II divided the range of services into two functional support areas--Lot I and 

Lot II; only Lot II is at issue here. Under Lot II, delivery orders would be issued for 

technology-based curricula, electronic classrooms, computer laboratories and 

related products. TSC II Statement of Work at 1. 

3

 The small business awardees were Delex, Carley Corporation, AERA Corporation, 

and D.P. Associates, Inc. Contracting Officer’s (CO) Statement at 1. The large 

business awardees were Anteon, American Systems Corp., The Boeing Company, 

and Lockheed Martin Information Systems. Id. 

4

 In Fiscal Year 2003 (FY 03), the predecessor delivery order was competed on an 

unrestricted basis. Only two small business concerns, AERA and Carley, submitted 

(continued...) 

Page 2 B-400403 
Subsequent to the issuance of the solicitation by the Navy, the Small Business

Administration (SBA) changed its regulations pertaining to small business size status

under existing contracts, such as the TSC II ID/IQ contract. In response, on June 11, 

2008, the Navy amended each TSC II contract to incorporate, among other things, 

Federal Acquisition Regulation (FAR) § 52.219.28, entitled “Post-Award Small 

Business Program Representation,” which implements the new SBA requirement. 

Under the FAR clause, the TSC II small business contract-holders were required to 

recertify their eligibility for set-asides prior to the start of the sixth year of the 

contract.5

 

By letter dated June 16, 2008, the contracting officer requested each of the TSC II 

small business awardees recertify their size status by June 23. AR exh. 11. The next 

day, on June 17, the agency posted a notice on its website stating that the GATP 

competition would be unrestricted, rather than reserved for the small business

awardees. AR exh. 22, Agency’s Info-Share Website Notice (June 17, 2008). 

In the meantime, recertification letters were received by the agency between June 17 

and June 20 which indicated that only two firms, the protester and Carley, recertified 

as small business concerns. AR exh. 11. In a Memorandum for the Record, the CO

states that she considered this information and determined that: 

• The field of “potential” Small Business offerors will be 

narrowed down and there is no guarantee that proposals will

be received from more than one Small Business concern. 

• Previous competition of this requirement in FY03 where all 

contractors under TSC II, Lot II were given a fair opportunity

to compete resulted in receipt of only two proposals from 

Small Businesses. Of those two Small Businesses, only one 

has shown interest in this RFP. 

• The scope and complexity of the requirement, inclusive of 

options, is estimated at $75 [million]. 

 

(...continued) 

proposals and the delivery order was subsequently issued to Carley. CO’s Statement 

at 7. 

5

 This rule is to address instances where a business concern was small at the time of 

initial contract award but over the course of the contract has become other than 

small. 71 Fed. Reg. 66434 (Nov. 15, 2006). Since the TSC II contracts were awarded 

on August 13, 2003, the agency reports that recertification had to be completed by 

August 13, 2008. 

Page 3 B-400403 
AR exh. 25, Memorandum for the Record (June 19, 2008). 

Although the agency had already announced its decision to open this competition to

large as well as small businesses, the CO’s June 19 Memorandum expressly 

concluded that there was not a reasonable expectation of obtaining competitive 

offers “from at least two responsible small business concerns.” Id. In addition, the 

CO noted that the agency’s Small Business Advisor, as well as the local SBA 

specialist, had “no objections” to her decision to withdraw the set-aside. Id. 

Despite this representation of SBA agreement, correspondence between the agency 

and the local SBA specialist, provided as part of the agency’s report on this protest, 

shows that the SBA specialist disagreed with the rationale set forth in the CO’s 

Memorandum, quoted above. The SBA specialist stated that if the CO decided to

proceed without setting aside the delivery order for the small business ID/IQ 

contract-holders, then “a small business participation plan should be incorporated 

into each requirement in an effort to mitigate the impact of changing these 

requirements” to an unrestricted competition. AR exh. 39, Emails from SBA 

Specialist, at 14. The solicitation subsequently was amended to include, among 

other things, an evaluation factor to assess proposed small business participation 

plans. DOPR amend. 4, at 56, 60. 

As relevant here, the record indicates that since the TSC II contracts were awarded 

in 2003, Delex has received a total of seven delivery orders and is currently 

performing a TSC II 5-year delivery order issued in May 2005 with an estimated value 

of $15.3 million including options. AR exh. 32, Delex Delivery Orders (June 20, 

2008). The record also shows that Delex is the prime contractor on an $85 million 

ID/IQ contract for the Navy--on which it manages between 11 and 13 subcontractors, 

including corporations like SAIC and CACI. Protester’s Comments, at 10 (Aug. 11, 

2008). 

After Delex complained to the agency about its decision to conduct this competition 

(and two others) among all of the ID/IQ contract-holders, large and small, and after 

the company received a negative response from the Navy’s Ombudsman for the 

TSC II contract, see AR exh. 28, Letter to Delex (June 27, 2008), Delex protested to 

our Office. 

DISCUSSION 

Delex argues that the Navy should have limited this delivery order competition to the 

small business TSC II contract-holders. In this regard, Delex contends that the Navy 

erred in concluding that it had no reasonable expectation of receiving offers from 

two small business contract-holders. 

Page 4 B-400403 
In answer, the Navy contends that its conclusion was appropriate and within its 

discretion. Moreover, the Navy argues that even though it performed the analysis

anticipated under FAR § 19.502-2(b)--the regulation which sets forth the so-called 

“Rule of Two,” which requires agencies to set aside for small businesses any 

acquisition exceeding $100,000 if there is a reasonable expectation of receiving fair 

market price offers from at least two responsible small business concerns--this rule 

does not apply to the issuance of task orders. In fact, the Navy argues that Congress 

refused to require that agencies apply FAR § 19.502-2(b) to the issuance of task 

orders. Navy Memorandum of Law, at 25 (July 24, 2008). Thus, in the Navy’s view, 

Delex has no basis to argue that the rule must be followed here. 

Because Delex’s and the Navy’s contentions raise legal questions related to the Small 

Business Act, and the FAR provisions implementing it, our Office solicited and 

obtained the views of the SBA on these questions.6

 Contrary to the Navy’s view, the 

SBA contends that FAR § 19.502-2(b) applies to the issuance of task and delivery 

orders and that the Navy was required to set aside the delivery order for the small 

business ID/IQ contract-holders. SBA Report 10 (Sept. 3, 2008). In addition, the SBA 

contends that the Navy unreasonably decided that it could not expect to receive 

offers from at least two responsible small business concerns at fair market prices. 

Applicability of the Rule of Two 

As set forth above, the Navy raises a threshold question, i.e., whether FAR 

§ 19.502-2(b) (the Rule of Two) applies to the placement of task and delivery orders 

under multiple-award contracts. In the Navy’s view, set-aside requirements apply 

only to initial contract awards, and not to orders under multiple-award ID/IQ

contracts. 

The Navy’s argument, in essence, is that an agency’s obligation to follow the 

requirements of FAR Subpart 19.5 springs from, and is driven by, its obligation to

follow the requirements for full and open competition set forth in FAR Part 6. Thus, 

the Navy notes that FAR § 6.203(c) requires contracting agencies to follow FAR 

Subpart 19.5, which governs small business set-asides. When an agency is placing 

task and delivery orders under a multiple-award contract, however, the Navy notes

that FAR § 16.505(b)(1)(ii) advises that “the competition requirement in [FAR] Part 6 

do[es] not apply to the ordering process.” Thus, the Navy contends, since FAR Part 6 

contains the requirement that agencies comply with FAR Subpart 19.5 (which 

contains the Rule of Two, § 19.502-2(b)), and since agencies are exempted from the 

requirements of FAR Part 6 when placing task and delivery orders, there is no 

 6

 We accord substantial weight to the SBA’s analysis. See USA Fabrics, Inc., 

B-295737; B-295737.2, Apr. 19, 2005, 2005 CPD ¶ 82 at 6; SWR, Inc., B-294266, Oct. 6, 

2004, 2004 CPD ¶ 219 at 5 n.4. 

Page 5 B-400403 
requirement for agencies placing such orders to comply with FAR Subpart 19.5. 

Navy Memorandum of Law, at 25-26 (July 24, 2008). We disagree. 

As a preliminary matter, the requirements addressed in the Navy’s argument, 

synopsized above, are not simply matters of regulation; most of them are matters of

statute. For example, the regulations for using full and open competition set forth in 

FAR Part 6 are implementing the requirements for competition set forth in the 

Competition in Contracting Act of 1984 (CICA). 10 U.S.C. § 2304(a)(1)(A) (2000). 

Likewise, the regulations for using multiple-award ID/IQ contracts in FAR 

Subpart 16.5 are implementing the requirements of the Federal Acquisition 

Streamlining Act of 1994 (FASA). 10 U.S.C. § 2304a(d) (2000). And, of particular 

importance to this discussion, the regulations for awarding contracts to small 

businesses set forth in FAR Subpart 19.5, are implementing the requirements of the 

Small Business Act. 15 U.S.C. § 644(a) (2000).

As the SBA points out in its brief, the oldest of these statutory enactments, the Small 

Business Act, states that small businesses: 

shall receive any award or contract or any part thereof, and be 

awarded any contract for the sale of Government property, as to

which it is determined by the Administration and the 

contracting procurement or disposal agency (1) to be in the 

interest of maintaining or mobilizing the Nation’s full productive 

capacity, (2) to be in the interest of war or national defense 

programs, (3) to be in the interest of assuring that a fair

proportion of the total purchases and contracts for property and 

services for the Government in each industry category are 

placed with small-business concerns, or (4) to be in the interest 

of assuring that a fair proportion of the total sales of

Government property be made to small-business concerns; .... 

15 U.S.C. § 644(a). As is evident from the text quoted above, the Small Business Act 

does not, on its face, enunciate the Rule of Two. Instead, as discussed below, the 

rule was established to implement the Act. 

The origin of the Rule of Two predates the FAR; when the FAR was promulgated, the 

Office of Federal Procurement Policy (OFPP) prepared a Federal Register notice 

seeking comments on the rule’s inclusion in the new government-wide procurement

regulation. 49 Fed. Reg. 40135 (Oct. 3, 1984). This notice explains that the Rule of 

Two is intended to implement the Small Business Act language in 15 U.S.C. § 644(a), 

quoted above, requiring that small businesses receive a “fair proportion of the total 

Page 6 B-400403 
purchases and contracts for property and services for the Government.”7

 Id. In 

addition, the notice advised that, in the view of OFPP, “the FAR language complies 

with current law and reflects the will of the Congress as expressed in the Small 

Business Act.” Id. Thus, while the Rule of Two is not specifically set out in the Small

Business Act, it has been adopted as the FAR’s implementation of the Act’s 

requirements through notice and comment rulemaking. 

We note next that when CICA was enacted in 1984, and when FASA was enacted in 

1994, both statutes expressly recognized that their requirements were to be 

harmonized with existing statutes. See 10 U.S.C. § 2304 (a)(1) (CICA) and 10 U.S.C. 

§ 2304a(a) (FASA).8

 This explains, for example, why the “full and open” competition 

requirements of CICA can be harmonized with the FAR Rule of Two provision 

(which restricts competition, where the Rule of Two is met), since the latter 

implements the Small Business Act. Moreover, nothing in CICA or FASA would 

exempt task or delivery orders--and certainly nothing explicitly exempts them--from

the requirements of FAR § 19.502-2(b). 

With respect to the Navy’s contention that FAR § 16.505(b)(1)(ii) exempts task and 

delivery orders from the requirements of FAR Subpart 19.5, we think the Navy 

overreads the provision. When an agency is placing task and delivery orders under 

multiple-award contracts, it cannot, by definition, hold a full and open competition 

as described by FAR Part 6. This is because a contractor’s eligibility for future task 

and delivery orders is established by its receipt of one of the underlying awards; 

once the multiple-award contract is established, contractors who have not received 

an award have no vehicle (i.e., no contract) which they can use to compete for the 

placement of orders. Thus, in our view, the opening sentence of FAR 

§16.505(b)(1)(ii)--i.e., “[t]he competition requirements in Part 6 and the policies in

Subpart 15.3 do not apply to the ordering process”--means only what it says: that the 

competition requirements of Part 6 do not apply to ordering. In short, without an 

express waiver of the requirements of the Small Business Act (implemented here by 

the Rule of Two), we have no basis to conclude that this limited, and appropriate, 

 7

 The Federal Register notice explains that the pre-FAR regulations known as the 

Defense Acquisition Regulation and the NASA Procurement Regulation implemented 

the “fair proportion” language of the Small Business Act with the Rule of Two 

standard, while the Federal Procurement Regulation implemented the same 

statutory language with a “sufficient number” standard. 49 Fed. Reg. 40135 (Oct. 24, 

1984). 

8

 Specifically, the language in CICA limits its reach through the use of the words 

“except in the case of procurement procedures otherwise expressly authorized by 

statute, . . .” 10 U.S.C. § 2304(a)(1)(A). Similarly, the language in FASA states 

“[s]ubject to the requirements of this section, . . . and other applicable law, . . . .” 

10 U.S.C. § 2304a(a). 

Page 7 B-400403 
exemption from the requirements of full and open competition in FAR Part 6 can 

exempt agencies from the requirements of FAR § 19.502-2(b) when placing orders. 

The Navy also argues that Congress has never indicated that the small business 

set-aside requirements apply to the placement of task and delivery orders, despite 

numerous opportunities to do so in the years since the passage of FASA. Navy 

Memorandum of Law at 24-25 (July 24, 2008). In our view, this logic provides no 

basis for concluding that Congress intended that the small business set-aside 

requirements do not apply to FASA’s authorization of the use of task and delivery 

order contracts. In fact, we think the Navy’s argument is not supported by the facts. 

The SBA points out that section 816 of the National Defense Authorization Act for 

FY 2006, Pub. L. No. 109-163, required the Secretary of Defense to issue guidance on

the use of tiered evaluation schemes (sometimes referred to as “cascading set-aside 

clauses”) for assessing offers for contracts and task and delivery orders. We note in 

particular that this enactment prescribes a prohibition on the use of such schemes

unless a contracting officer has 

conducted market research in accordance with part 10 of the 

Federal Acquisition Regulation in order to determine whether or 

not a sufficient number of qualified small businesses are 

available to justify limiting competition for the award of such 

contract or task or delivery order under applicable law and 

regulations. 

Pub. L. No., 109-163, § 816(b)(1). While this provision does not expressly state that 

the small business set-aside requirements of FAR § 19.502-2(b) are applicable to the 

placement of orders under ID/IQ contracts, it clearly indicates that Congress 

recognizes the possibility of limiting competition for task and delivery orders to

small businesses when there is a sufficient number of small businesses to justify 

doing so. This provision also recognizes that there will be instances where the 

number of qualified small businesses will justify limiting competition pursuant to 

applicable law and regulations. 

In our view, the legal question is whether the Rule of Two, which by its terms applies 

to “any acquisition over $100,000,” FAR § 19.502-2(b), applies to individually 

competed task or delivery orders under multiple-award contracts. We conclude that

it does, because, at least for purposes of this analysis, those orders are properly 

viewed as “acquisitions.” We have previously concluded that a delivery order placed 

under an ID/IQ contract is, itself, a “contract,” at least for some purposes, see FAR 

§ 2.101, and contracts are covered by the definition of “acquisition” in FAR § 2.101. 

Letters to the Air Force and Army concerning Valenzuela Engineering, Inc., 98-1 CPD 

¶ 51 (Letter to the Air Force at n.1). Competitions for task and delivery orders are 

the stage when holders of multiple-award ID/IQ contracts offer prices and solutions 

to meet specific agency needs. This is therefore the most meaningful stage for a 

Page 8 B-400403 
Rule of Two analysis, in which the contracting officer needs to judge the likelihood 

of receiving at least two fair-market priced submissions from small businesses for 

the services or supplies being acquired under a specific solicitation. In sum, we 

conclude that individually-competed task and delivery orders are “acquisitions” for 

purposes of FAR § 19.502-2(b), so that the Rule of Two applies.9

As a final matter, we think the Navy has misinterpreted our decision in LBM, Inc., 

B-290682, Sept. 18, 2002, 2002 CPD ¶ 157, and a follow-on decision in that case, 

Department of the Army--Request for Modification of Recommendation, B-290682.2, 

Jan. 9, 2003, 2003 CPD ¶ 23, in its argument that our Office has concluded that there 

is no legal authority to use small business set-asides in placing task and delivery 

orders. In LBM, unlike here, the protester did not hold one of the ID/IQ

multiple-award contracts. Instead, it complained that work it had been performing 

as a small business--i.e., motor pool services at Fort Polk, Louisiana--was improperly 

moved to the Logistical Joint Administrative Management Support Services 

(LOGJAMSS) contract without appropriate notice to the small business incumbent,

and without following the set-aside requirements of FAR § 19.502-2(b). We agreed to 

hear LBM’s contention despite the (then in-place) limitation on our jurisdiction to

hear protests involving the placement of task and delivery orders10 because LBM had 

a right to challenge the placement of this work on the LOGJAMSS contract without

notice; we treated LBM’s complaint as a timely solicitation challenge to the 

LOGJAMSS contract. LBM at 5-6. 

Of relevance to this discussion, after we sustained LBM’s protest, we denied the 

Army’s request to modify our recommendation that the Army consider whether, in 

 9

 Where an agency is legally required to compete an individual order and to afford all 

multiple-award contract-holders an opportunity to submit an offer and have that 

offer fairly considered, it is FAR § 19.502-2(b) that would appear to provide the only 

legal basis for creating a small business set-aside. As the Acquisition Advisory Panel 

pointed out in its report, “voluntary” set asides, which the Navy appears to have 

originally undertaken in this acquisition, would seem to run afoul of the requirement 

(set out in the Defense FAR Supplement at § 216.505-70(b)) that all multiple-award 

contract-holders be given a fair opportunity to submit an offer and have it fairly 

considered. Report of the Acquisition Advisory Panel to the Office of Federal 

Procurement Policy and the United States Congress, Jan. 2007, at 306-07. 

10 From FASA’s enactment until early this year, a bid protest challenge to the 

issuance of a task and delivery order under a multiple-award ID/IQ contract was

expressly not authorized, except in limited conditions. 10 U.S.C. § 2304c(d). In 

section 843 of the National Defense Authorization Act for Fiscal Year 2008, Pub. L. 

110-181, 122 Stat. 3, 237 (2008) (to be codified at 10 U.S.C. § 2304c(e)), Congress 

authorized protests challenging the issuance of such orders valued in excess of $10 

million. 

Page 9 B-400403 
accordance with FAR § 19.502-2(b), the motor pool services at Fort Polk should be 

set aside exclusively for small business participation. Specifically, we disagreed with 

the Army’s view that it could appropriately limit the set-aside to small business 

LOGJAMSS contract-holders. Our disagreement was based on the posture of LBM as

a non-LOGJAMSS contract holder, and on the fact that the protest arose, in our view, 

as a solicitation challenge to the formation of the LOGJAMSS contract. Thus, the 

remedy of limiting the set-aside decision to LOGJAMSS contract-holders would not

have addressed LBM’s underlying complaint that it was never provided notice that

the work it was performing would be included on the original LOGJAMSS contract. 

Accordingly, our decisions in those cases have little application to the situation here. 

For the reasons set forth above, we conclude that FAR § 19.502-2(b) applies to task 

and delivery order competitions among multiple-award contract-holders. 

Accordingly, the Navy is required to limit the competition for these delivery orders to 

small businesses if it concludes that it has a reasonable expectation of receiving 

offers from at least two responsible small business concerns, and concludes that

award can be made at a fair market price. 

Reasonable Expectation of Offers from Two or More Small Businesses

Next, as to the agency’s decision that it does not expect to receive two or more 

offers from small businesses, Delex argues that the decision was unreasonable. Our 

Office generally regards a set-aside determination as a matter of business judgment 

within the CO’s discretion which we will not disturb absent a showing that it was

unreasonable. Neal R. Gross & Co., Inc., B-240924.2, Jan. 17, 1991, 91-1 CPD ¶ 53 

at 2. While the use of any particular method of assessing the availability of firms is

not required, measures such as prior procurement history, market surveys, and 

advice from the appropriate small business specialists may all constitute adequate 

grounds for a CO’s decision to set aside, or not to set aside, a procurement. 

American Imaging Servs., Inc., B-246124.2, Feb. 13, 1992, 92-1 CPD ¶ 188 at 3. The 

assessment must be based on sufficient facts so as to establish its reasonableness. 

Rochester Optical Mfg. Co., B-292247; B-292247.2, Aug. 6, 2003, 2003 CPD ¶ 138 at 5. 

The principal bases for the agency’s set-aside determination was information 

obtained from a review of the TSC II procurement history. The CO explains that the 

agency’s analysis of this information indicated that Delex did not submit a proposal 

for the predecessor GATP requirement; that in fiscal year 2007, while Delex had 

expressed interest in the last five delivery order acquisitions, it submitted proposals 

for only three of the five acquisitions. Moreover, the Navy explains that in a previous 

delivery-order competition under this ID/IQ contract, where only DPA and Delex 

submitted proposals, Delex’s proposal was evaluated as unsatisfactory, leaving the 

agency with only the option of making award to DPA. CO Statement at 7-10. As a 

result, the CO explains that she does not think Delex will submit a viable proposal to 

successfully perform the GATP requirements, which, she explains, have a value five 

times the value of any delivery order Delex has previously performed. Id. at 8, 9. 

Page 10 B-400403 
Delex argues that the agency’s analysis has a number of flaws. First, with respect to 

the predecessor GATP delivery order, Delex points out that the order was not

reserved for small businesses. As a result, Delex explains that it made a business 

decision not to compete with the large business ID/IQ contract-holders for this work. 

Second, with respect to the last five delivery order acquisitions, for which Delex 

responded to only three, the protester (and the SBA) note that multiple solicitations

were issued in a short period of time, so that the company reasonably chose to 

respond to some, but not all, of the solicitations. Finally, with respect to the delivery 

order competition 2 years earlier where Delex’s proposal was evaluated as

unsatisfactory, Delex contends the Navy’s focus on that one proposal, while ignoring 

more current and more relevant information, is unfair. 

We have examined each of the reasons identified by the Navy for withdrawing the 

initial set-aside determination, and we conclude that the Navy has not adequately 

documented the basis for its decision. For example, with respect to the predecessor 

delivery order for this requirement, we agree with Delex that a small business could 

reasonably decide not to compete with the large business contract-holders for this

work, and that an agency should not rely on the results of an unrestricted 

competition to determine the likelihood that a small business will participate in a 

set-aside competition. With respect to the five previous acquisitions, we again agree 

with Delex. We know of no requirement that a small business participate in every 

acquisition for which it is eligible to compete, especially when several of these 

acquisitions are occurring over a short period of time. 

Finally, we are concerned about the Navy’s reliance on Delex’s submission of an 

unsatisfactory proposal 2 years ago, as opposed to other more recent, and perhaps

more relevant events. In addition, the Navy apparently offers this information to 

suggest that Delex may lack the ability to submit an acceptable proposal, and 

presumably to adequately perform.

The record here shows that Delex has received a total of seven TSC II delivery 

orders since 2003, and that the company is currently performing a 5-year delivery 

order issued in May 2005 with an estimated value of $15.3 million including options. 

AR exh. 32, Delex Delivery Orders (June 20, 2008). We think information about 

Delex’s actual performance of these ongoing orders should receive some weight in 

this deliberation. In addition, to the extent that the Navy is suggesting that Delex 

lacks capacity or ability, there is evidence in the record to the contrary. Not only is

there information about Delex’s performance of delivery orders under the TSC II

ID/IQ contract, but Delex also advised, in its comments in answer to the agency 

report, that it is currently the prime contractor on an $85 million ID/IQ contract for 

the Navy--on which it manages between 11 and 13 subcontractors, including 

corporations like SAIC and CACI. Protester’s Comments at 10 (Aug. 11, 2008). In 

addition, Delex pointed out in its initial protest filing that it has performed 

Page 11 B-400403 
approximately $265 million in Defense Department and Foreign Military Sales 

awards in the past 10 years. Protest at 6 (June 30, 2008). 

When the Navy contends that this order will be larger by a magnitude of five than 

any order Delex has previously performed under this ID/IQ contract, we note first

that this order is for $75 million over 5 years. Thus, if the value of the work is evenly 

spread across the life of the contract, this work will be valued at approximately 

$15 million per year. Given Delex’s other Navy business, we think the Navy has not 

reasonably supported its conclusion that the company will not be able to submit a 

competitive proposal because the magnitude of the work is too great. 

Finally, the SBA reviewed the agency’s analysis as well as the protester’s multiple 

submissions on this issue, and arrives at basically the same conclusion--that “the 

contracting officer has [not] based her decision on sufficient facts to establish its 

reasonableness.” SBA Report at 13. 

In this regard, the SBA noted that 

the contracting officer could not rely solely on the fact that 

Delex had not submitted offers on previous requirements when 

making her determination. Further, the fact that the 

competition has decreased since there are now fewer [small 

business concerns] competing may increase Delex’s desire to 

compete for this award.

In addition, it is not clear what information the contracting 

officer used to form her decision that Delex can not perform a 

five year, $75 million requirement. . . . Further, the contracting 

officer’s market research does not appear to be recent . . . and 

relies on assumptions based upon the quality of a previously 

submitted proposal rather than actual contractor performance. 

SBA Report at 12-13. Based on this record, we think that the agency’s determination 

to withdraw the initial set-aside and, to open the requirement to all TSC II awardees 

is not adequately supported. 

RECOMMENDATION 

We sustain the protest because we conclude that the agency has not adequately 

supported its determination that it could not expect to receive offers from the two 

TSC II small business concerns at fair market prices; in other words, the agency 

failed to adequately assess Delex’s capability and interest before reversing its

decision to set aside this order for the small business awardees. Accordingly, we 

recommend that the agency make a new determination of whether there is a 

reasonable expectation that it will receive offers from the two remaining TSC II 

small businesses, and whether award will be made at a fair market price. If the 

Page 12 B-400403 
agency’s research indicates that these conditions are met, the agency should cancel 

the current solicitation and reissue it as a small business set-aside. We also 

recommend that Delex be reimbursed the reasonable costs of filing and pursuing its

protest, including reasonable attorneys’ fees. Bid Protest Regulations, 4 C.F.R. 

§ 21.8(d)(1) (2008). The protester’s certified claim for costs, detailing the time 

expended and the costs incurred, must be submitted to the agency within 60 days of 

receiving this decision. 4 C.F. R. § 21.8(f)(1). 

The protest is sustained. 

Gary L. Kepplinger 

General Counsel 

Page 13 B-400403