United States Government Accountability Office

Washington, DC 20548

Comptroller General

of the United States

 

Decision

Matter of: Split Rock, Inc.--Costs

File: B-404892.2

Date: June 25, 2012

Milo F. Speranzo for the protester.

JoAnn W. Melesky, Esq., Department of Defense, Defense Information Systems 

Agency, for the agency.

Peter D. Verchinski, Esq., and Guy R. Pietrovito, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision.

DIGEST

Request for reimbursement of protest costs is denied where record fails to establish 

that the agency unduly delayed taking corrective action in the face of clearly 

meritorious protest.

DECISION

Split Rock, Inc. (SRI), of Pittsburgh, Pennsylvania, a service-disabled veteran-owned 

small business (SDVOSB), requests that we recommend that the agency reimburse 

its costs associated with the firm’s protest of the terms of request for proposals 

(RFP) No. HC1028-11-R-2015, issued by the Defense Information Systems Agency

(DISA) for security information manager engineering support services. SRI 

complained that the RFP, which was issued as a small business set-aside, should 

have been set aside for SDVOSBs. After receipt of the protester’s comments, DISA 

took corrective action and we dismissed the protest as academic.

We deny the request.

BACKGROUND

DISA issued the RFP as a small business set-aside on March 4, 2011. Prior to issuing 

the solicitation, the agency conducted market research from which it found that 

there were two or more small businesses that could perform the services. On March 

16, SRI protested to our Office, arguing that the RFP should have been set aside for 

SDVOSBs. On April 15, DISA provided its report in response to the protest, in which 

the agency argued (among other things) that it acted appropriately in setting aside 
Page 2 B-404892.2 

the RFP for small businesses. That same day, the Small Business Administration 

(SBA) submitted its views on the protest. SBA stated, citing (among other things)

our decision in DAV Prime, Inc., B-311420, May 1, 2008, 2008 CPD ¶ 90, that, given 

the discretion provided the procuring agency, the agency was not required to 

conduct market research to determine whether there were two or more SDVSOBs

that could perform the requirements.1

SRI submitted its comments on the agency’s report and SBA’s views, arguing that the 

agency was required to consider whether the requirements could be performed by 

SDVOSBs. DISA responded that it was not required to consider whether to set the 

RFP aside for SDVOSBs. Among other things, DISA stated that its market research 

was limited to “ascertaining if two or more small businesses exist that could perform 

these services . . . [the agency official] did not focus on any more restrictive small 

business categor[ies] such as SDVO SBC [service-disabled veteran-owned small 

business concern] or HUBZone [historically underutilized business zone].” See

Agency’s Response to Protester’s Comments, Apr. 28, 2011, at 5.

In reviewing the record and the parties’ arguments, the GAO attorney noted that 

SRI’s, DISA’s, and SBA’s arguments were all based upon an out-of-date version of 

SBA’s regulations. Specifically, prior to February 4, 2011, one month before the RFP

was issued, SBA’s regulations permitted a contracting officer to consider whether to 

set aside or make a sole source award (if the sole source award is permitted by 

statute or regulation) under the 8(a) Business Development (BD), HUBZone, or 

SDVO SBC programs before setting aside the requirement as a small business 

set-aside. After February 4, 2011, this regulation required a contractor officer to 

consider whether to set-aside or make a sole source award under these programs 

(including the Woman Owned Small Business (WOSB) program) before setting aside 

a requirement for small businesses.2 See

 1

In DAV Prime, Inc., we clarified a number of our prior decisions in this area. We 

found that, while there was no requirement that an agency consider setting aside a 

procurement for SDVOSB concerns prior to proceeding with a small business 

set-aside, if the agency performs an SDVOSB set-aside analysis, the conclusions the 

agency draws from that analysis must be reasonable.

13 C.F.R. § 125.19(b) (2012).

2

In pertinent part, the current regulation provides:

after conducting market research, the contracting officer shall first 

consider a set-aside or sole source award (if the sole source award 

is permitted by statute or regulation) under the 8(a) BD, HUBZone, 

SDVO SBC or WOSB programs before setting aside the requirement 

as a small business set-aside. There is no order of precedence 

among the 8(a) BD, HUBZone, SDVO SBC or WOSB programs. The 

contracting officer must document the contract file with the 

(continued...)
Page 3 B-404892.2 

On May 19, we asked the SBA to review its position in light of SBA’s current 

regulation. On May 25, SBA responded, noting that its earlier statements had 

erroneously relied upon regulations that were out-of-date and that the GAO 

decisions, to which SBA cited, were interpreting SBA’s old regulations. SBA stated 

that its current regulations (specifically 13 C.F.R. § 125.19(b)(2)(i)) require 

contracting officers to consider set asides for, as relevant here, SDVOSBs. Given 

that DISA admitted that it had not considered whether the RFP should be set aside 

under these other small business programs prior to setting aside the RFP for small 

businesses, SBA concluded that DISA had violated SBA’s regulations. 

The next day, on May 26, DISA informed our Office that it would take corrective 

action in response to SBA’s views by conducting proper market research and making 

the appropriate set-aside determination. We dismissed SRI’s protest as academic on 

May 27. SRI requests that we recommend that the agency reimburse the firm its 

costs associated with filing and pursuing the protest.

DISCUSSION

When a procuring agency takes corrective action in response to a protest, our Office 

may recommend reimbursement of protest costs where, based on the circumstances 

of the case, we determine that the agency unduly delayed taking corrective action in 

the face of a clearly meritorious protest, thereby causing the protester to expend 

unnecessary time and resources to make further use of the protest process in order 

to obtain relief. Bid Protest Regulations, 4 C.F.R. § 21.8(e) (2012); AAR Aircraft 

Servs.--Costs, B-291670.6, May 12, 2003, 2003 CPD ¶ 100 at 6. Thus, as a prerequisite 

to our recommending that costs be reimbursed where a protest has been settled by 

corrective action, not only must the protest have been meritorious, but it also must 

have been clearly meritorious, i.e., not a close question. J.F. Taylor, Inc.--Entitlement 

to Costs, B-266039.3, July 5, 1996, 96-2 CPD ¶ 5 at 3; Baxter Healthcare Corp.--

Entitlement to Costs, B-259811.3, Oct. 16, 1995, 95-2 CPD ¶ 174 at 4-5; GVC Cos.--

Entitlement to Costs, B-254670.4, May 3, 1994, 94-1 CPD ¶ 292 at 3. A protest is 

clearly meritorious where a reasonable agency inquiry into the protester’s allegations 

would reveal facts showing the absence of a defensible legal position. Overlook Sys. 

Techs., Inc.--Costs, B-298099.3, Oct. 5, 2006, 2006 CPD ¶ 184 at 6. The mere fact that 

an agency decides to take corrective action does not also establish that a statute or 

regulation clearly has been violated. Id. 

 

(...continued)

rationale used to support the specific set-aside, including the type 

and extent of market research conducted. 

13 C.F.R. § 125.19(b)(2)(i).
Page 4 B-404892.2 

SRI asserts that reimbursement of its protest costs is warranted because the agency 

unduly delayed taking corrective action in response to its initial protest, which

raised issues that were clearly meritorious. In this regard, SRI cites SBA’s May 25 

legal opinion, which recommended that GAO sustain SRI’s protest.

DISA responds that it did not unduly delay taking corrective action and that SRI’s 

protest was not clearly meritorious because, at the time the RFP was released, the 

Federal Acquisition Regulation (FAR) had not yet implemented the changes made in 

the SBA’s regulations, and thus the agency’s actions were consistent with the FAR. 

We conclude that reimbursement is not appropriate in this case. As an initial matter, 

we note that SRI’s protest did not argue that the agency had acted improperly under

the SBA’s new regulation; rather, SRI itself relied upon the SBA’s out-of-date 

regulation and a prior decision from our Office applying the old regulation.

Significantly, we have not as yet decided any protest under SBA’s current 

regulations, and therefore this protest presented an issue of first impression. In this 

regard, we note that the agency acted promptly after receiving SBA’s interpretation 

of its new regulation. Under these circumstances, we cannot say DISA unduly 

delayed taking corrective action in the face of a clearly meritorious protest. 

The request is denied.

Lynn H. Gibson

General Counsel