United States Government Accountability Office

Washington, DC 20548

Comptroller General

of the United States

Decision

Matter of: American Medical Equipment Company

File: B-407113; B-407113.2

Date: November 8, 2012

Gerald H. Werfel, Esq., Pompan, Murray & Werfel, PLC, and H. Todd Whay, Esq., 

The Whay Law Firm, for the protester. 

Barton B. Evans, Esq., Department of Veterans Affairs, and Kevin R. Harber, Esq., 

Small Business Administration, for the agencies. 

Brent Burris, Esq., and Edward Goldstein, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision.

DIGEST 

Agency determination not to set aside procurement for small businesses was proper 

where the record shows that the agency conducted broad market research and 

responses from small business firms demonstrated that it was not likely to receive 

proposals from at least two responsible small businesses capable of meeting the 

requirements of the solicitation. 

DECISION

American Medical Equipment Company (AMEC), of Houston, Texas, protests the

terms of request for proposals (RFP) No. VA256-12-R-0059, issued by the 

Department of Veterans Affairs (VA) for home oxygen services for beneficiaries in 

Veterans Integrated Service Network 16 (VISN 16). AMEC, a small business, 

contends that the VA failed to perform adequate market research to ascertain the 

interest and capability of small businesses to perform the solicitation requirements, 

and that the solicitation should have been set-aside, in its entirety, for small business 

concerns. 

We deny the protest.

BACKGROUND

The RFP, issued on May 31, 2012 as a partial small business set-aside, provides for 

the award of two requirements contracts, each with a 1-year base period and four 1-

year options. Agency Report (AR), Exhibit (Exh.) 6, RFP, at 5. The home oxygen 

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.
Page 2 B-407113, B-407113.2 

services required under the RFP are for VA beneficiaries within VISN 16--a 

geographic area that includes all of Louisiana, Arkansas, and Oklahoma as well as 

portions of Mississippi, Texas, Missouri, and Alabama. Id. at 13-16. Within VISN 16 

there are 10 VA Medical Centers which serve approximately 6,000 home oxygen 

patients. Id. The home oxygen services include providing all necessary equipment 

and supplies as well as certified respiratory therapists to ensure proper 

administration of physician-prescribed oxygen. Id. at 16-37. One 

award--representing 8 of the 10 VA Medical Centers and the regions they serve--is 

to be made on an unrestricted basis. Id. The second award includes the remaining 

2 Medical Centers and the regions they serve, and is set aside entirely for small 

businesses. Id. The VA estimates that the combined total value of the 2 

procurements is approximately $[deleted] million per year. Id.

Prior to issuing the solicitation, the Contracting Officer (CO) conducted market 

research to assess the interest and capability of small business concerns with 

respect to the VISN 16 home oxygen requirements. This research included 

consulting with technical and program experts, searching several government 

databases, reviewing the recent procurement history of four other VISNs, and 

issuing a Request for Information (RFI). AR, Exh. 2, CO Narrative of Facts, at 2.

More specifically, the CO contacted the VA program office, which advised the CO, 

among other things, that VISN 16 had experienced performance issues with the 

current and previous small business contractors, which provided home oxygen 

services for a portion of VISN 16. Id. at 2. The CO also contacted the contracting 

officers for VISN 1, VISN 11, VISN 19, and VISN 23, all of which had home oxygen 

requirements similar to that of VISN 16. The CO learned that the current contracts 

for these four VISNs were being performed by large businesses and had been 

solicited on an unrestricted basis. Id. at 4.

On January 5, 2012, the CO issued an RFI in FedBizOpps, indicating that the VA 

was “seeking potential sources capable of providing Home Oxygen services to 

beneficiaries within [VISN 16].” AR, Exh. 4, RFI, at 1. The RFI provided that VISN 

16 served approximately 6,300 oxygen-using patients and listed the 10 VA Medical 

Centers in the network and the corresponding counties served by each facility. Id. 

The RFI advised interested respondents to include, among other information, the 

following: name and address of company, business size, identification of any 

socioeconomic categories the company qualified under, capabilities, an indication if 

the company could provide services for the entire VISN 16 or just a portion of the 

network, and any other pertinent information. Id. at 7. The RFI sought assessments 

of contractor capabilities under the North American Industry Classification System 

(NAICS) code 532291, which is designated for “Home Health Equipment Rental” and 

has a size standard of $7 million in annual receipts. Id. at 1.

The VA received 14 responses to the RFI, 7 of which were from small businesses. 

AR, Exh. 5, RFI Responses; Exh. 20, Lincare’s RFI Response. Two of the small 
Page 3 B-407113, B-407113.2 

businesses indicated that they were interested in providing services for only a 

portion of VISN 16. AR, Exh. 2, CO Narrative of Facts, at 2. In reviewing the 

capability statements submitted by the small businesses, the CO determined that 

they did not demonstrate the capability to successfully provide home oxygen 

services to the entirety of VISN 16. Id. at 5. Specifically, the CO found that the 

interested small businesses did not demonstrate that they had experience (in terms 

of geographic scope, number of patients, and dollar value) comparable to the VISN 

16 requirements. Id. The CO also noted that none of the small businesses that 

responded to the RFI indicated that they currently had the necessary personnel, 

supplies, equipment, or facilities to serve VISN 16, although some indicated that 

they would acquire them if awarded the contract. Id.

The CO further investigated the small businesses that responded to the RFI using 

the Federal Procurement Data System-Next Generation (FPDS-NG) and Dun & 

Bradstreet (D&B) reports. Id. at 4-5. With regard to the D&B reports, the CO

considered the firm’s Supplier Evaluation Risk (SER) scores. The SER score is an 

indicator that measures the likelihood that a company will seek legal relief from 

creditors or cease operations without paying creditors in full over the next 12 

months. AR, Exh. 14, VA Information Letter 049-08-03, at 1. SER scores are based 

on a scale of 1 to 9, with 9 representing the highest-risk.1 Id. Three of the 

businesses had SER scores of 7 or higher. Id. at 5. 

With regard to the FPDS-NG information, the CO found that the small businesses 

that responded to the RFI did not have any contracts with the VA in the previous 5 

years that were comparable in dollar value to the estimated $[deleted] million per

year for home oxygen services for the entire VISN-16. AR, Exh. 2, CO Narrative of 

Facts, at 5. For example, one of the small businesses had received less than $8 

million in total contract dollars from the VA over the previous 5 years combined, 

while the other small business respondents had received even less. Id.

Based on the above-described market research, the CO determined the VISN 16 

requirements were not suitable for a small business set-aside. Id. The CO did, 

however, conclude that a portion of the solicitation’s requirements could be set aside 

for small businesses. Specifically, the CO decided to set aside the home oxygen 

services requirements for two of the VA Medical Centers and the regions they 

served. Id. at 5-6. After making her determination, the CO sought approval of the 

procurement plan from the Department of Veterans Affairs Office of Small and 

Disadvantaged Business Utilization (OSDBU) Center. Id. at 6. In doing so, the CO 

 

1 The VA maintains that as a matter of policy, if a firm has a SER score of 7 or 

higher, a contracting officer must document additional due diligence to ensure that 

the firm is responsible prior to awarding the firm a contract with a value in excess of

$25,000. Id.
Page 4 B-407113, B-407113.2 

submitted her analysis of the small businesses that responded to the RFI along with 

documentation of her market research. Id. The VA OSDBU representative 

concurred with and approved the CO’s acquisition plan. AR, Exh. 10, Approved VA 

Form 2268.

In April 2012, while further defining the requirements for the upcoming solicitation, 

the CO determined that NAICS code 621610, “Home Health Care Services” was a 

more appropriate categorization of the requirement than 532291, “Home Health 

Equipment Rental.”2

 AR, Exh. 2, CO Narrative of Facts, at 6. In making this 

determination, the CO recognized that the pool of potential small businesses would 

expand as the size standard for 621610 was $13.5 million in annual receipts versus 

$7 million under 532291. AR, Exh. 8, Market Research Documentation and 

Determination, CO’s Memorandum Clarifying NAICS on VA Form 2268, at 1. As 

such, the CO conducted additional market research using the government 

databases previously searched and the new NAICS code. Exh. 28, CO 

Supplemental Protest Narrative, at 2-3. In doing so, the CO noted that many of the 

same companies listed under NAICS 532291 were also listed under NAICS 621610, 

including several of the small businesses that had responded to the RFI. Id. 

In conducting this additional research under the more expansive NAICS code, the 

CO did not identify any small businesses with the necessary capabilities to provide 

home-oxygen services for the VISN-wide contract. Id. As such, the CO decided to 

continue with the original acquisition strategy of setting aside approximately 20% of 

the requirement for small businesses, and soliciting the remainder on an unrestricted 

basis. Id. at 2. 

 

2 NAICS 621610 “comprises establishments primarily engaged in providing skilled 

nursing services in the home” including providing medications and medical 

equipment and supplies. AR, Exh. 28, CO Supplemental Protest Narrative, at 1. By 

comparison, NAICS 532291 “comprises establishments primarily engaged in renting 

home-type health and invalid equipment, such as wheel chairs, hospital beds, 

oxygen tanks, walkers, and crutches.” Id. The CO determined that because the 

solicitation called for certified or registered respiratory therapists administering 

physician-prescribed oxygen and supplies and equipment that would not necessarily 

be rented, NAICS 621610 was the more appropriate code. Id. The CO’s initial 

decision to use NAICS 532291 was based on previous solicitations as well as an 

SBA protest decision which had held that NAICS 532291 was more appropriate for 

home oxygen services than NAICS 339112, a manufacturing code for surgical and 

medical instruments. See AR, Exh. 8, Market Research Documentation and 

Determination, CO’s Memorandum Clarifying NAICS on VA Form 2268, at 1; Exh. 8, 

Market Research Documentation and Determination, NAICS Appeals of Medical 

Comfort Systems, Inc., SBA No. NAICS-5106 (2010). 
Page 5 B-407113, B-407113.2 

The CO contacted the VA Small Business Specialist in May 2012 to discuss the 

changed NAICS code and explained her additional research and determination that 

the procurement strategy should not change. Id. The Small Business Specialist 

concurred with this decision. Id. Prior to the closing time for receipt of proposals, 

AMEC filed this protest. 

DISCUSSION

AMEC challenges the VA’s decision to set aside only a portion of the VISN 16 

requirements for home oxygen services. AMEC raises numerous arguments

challenging the adequacy of the agency’s market research, which underlies the VA’s 

determination that there was not a reasonable expectation of receiving offers from 

two or more small business concerns capable of performing the requirement.3 We 

have considered the protester’s arguments and find that none provide a basis to 

object to the VA’s decision not to set-aside the RFP, in its entirety, for small 

businesses.4

The Federal Acquisition Regulation (FAR) requires that acquisitions with an 

anticipated dollar value of more than $150,000 be set aside for small business 

concerns if the agency determines there is a reasonable expectation that offers will 

be received from two or more responsible small business concerns, and that award 

will be made at a fair market price. FAR § 19.502-2(b). Generally, we regard such a 

determination as a matter of business judgment within the contracting officer’s 

discretion, and we will not sustain a protest challenging the determination absent a 

 

3 At this Office’s request, the Small Business Administration (SBA) submitted 

comments in which it concurs with the protester that the CO’s decision not to set 

aside the procurement was unreasonable. SBA Comments, Oct. 4, 2012. SBA’s 

arguments are largely the same as those raised by the protester and for same 

reasons discussed in this decision, we do not find the SBA’s arguments persuasive. 

4 The agency argues that AMEC is not an interested party because even if the entire 

VISN-16 procurement were set aside for small businesses, the protester would not 

be in line for the award (AMEC was among several small business that submitted 

proposals for both the unrestricted and restricted portions of the VISN 16 

requirements). AR, at 21; Thermal Combustion Innovators, Inc., B-279602, July 1, 

1998, 98-2 CPD ¶. 3 at 2 (holding that protester did not have standing to challenge 

agency’s decision not to set aside procurement where award was to be made to 

lowest-priced, technically acceptable offeror and another small business was rated 

acceptable and had a lower price than protester). The record, however, does not 

reflect that any of the small business offerors would necessarily be eligible for award 

if the entire procurement was set aside [deleted]. As such, the reasoning in Thermal 

Combustion is not applicable in this case. 
Page 6 B-407113, B-407113.2 

showing that it was unreasonable. North Shore Medical Labs, Inc., B-310747, Feb. 

6, 2008, 2009 CPD ¶ 70 at 4. However, an agency must undertake reasonable 

efforts to ascertain whether it is likely that it will receive offers from at least two small 

businesses capable of performing the work. Id. Our Office will review a protest of 

an agency determination not to set aside a procurement to determine whether the

contracting officer has undertaken reasonable efforts to ascertain the availability of 

capable small businesses. Id.

In determining the availability of responsible small business concerns for set-aside 

purposes, the contracting agency’s investigation goes not only to the existence of 

the businesses, but also to their capability to perform the contract. Information 

Ventures, Inc., B-279924, Aug. 7, 1998, 98-2 CPD ¶ 37 at 3. The fact that multiple 

small business responses are received in the course of market research is not 

necessarily determinative. See The Protective Group, Inc., B-310018, Nov. 13, 

2007, 2007 CPD ¶ 208 at 3. 

The protester argues that the RFI was inadequate for the purpose of assessing 

small business capabilities and failed to provide notice that the CO was using the 

RFI to assess the ability of small businesses to meet the VISN-wide requirement. 

Protester’s Comments at 4. This contention is without merit. The RFI stated that the 

VA sought home oxygen services for VISN 16, described in detail the geographic 

scope of the requirement, and identified the approximate number of patients. AR, 

Exh. 4, RFI. The RFI also directed interested businesses to respond with their 

business size and their capability to meet the VISN 16 home oxygen requirements. 

AR, Exh. 4, RFI, at 7. This included a request for information indicating whether the 

respondent was capable of serving the entire VISN 16 or only a portion. Id. Given 

these facts, we have no basis to conclude that it was unreasonable for the CO to 

rely on the RFI responses to assess whether the small businesses that responded 

were capable of providing services to the entirety VISN 16. 

AMEC also asserts that the CO did not conduct adequate market research after 

changing the NAICS code from 532291 to 621601, thereby increasing the size 

standard from $7 million to $13.5 million. Supplemental Protest at 3-4. According to 

the protester, the CO should have reissued the RFI to include the more expansive 

NAICS code, and thus acted unreasonably by not providing additional small 

businesses with the opportunity to submit capability statements. Id. We disagree.

The record reflects that after deciding to change the NAICS code, the CO again 

searched government databases to assess the capability of additional businesses 

which qualified as small under NAICS 621601 but not under NAICS 532291. See

AR, Exh. 8, Market Research Documentation and Determination, Addendum to 

Market Research Report for VISN Home Oxygen Services, at 3; Exh. 33, SBA 

Dynamic Small Business Search (oxygen); Exh. 34, SBA Dynamic Small Business 

Search (home oxygen). Based on her review of this information as well as her prior 

market research, the CO concluded that there was not a reasonable expectation that 
Page 7 B-407113, B-407113.2 

offers would be received from two or more small businesses capable of providing 

home oxygen services to all of VISN 16. AR, Exh. 8, Market Research 

Documentation and Determination, Addendum to Market Research Report for VISN 

Home Oxygen Services, at 3. Moreover, after deciding to change the NAICS code, 

the CO advised a VA small business specialist of the change and explained her 

determination that the procurement approach should remain the same. AR, Exh. 28, 

CO Supplemental Protest Narrative, at 2-3. The small business specialist concurred 

with this decision. Id.; see also MVM, Inc.; Cook International, Inc.; Special 

Investigations, Inc.; and Varicon, Inc., B-237620, March 13, 1990, 90-1 CPD ¶ 270 

at 3 (“[W]e give great weight to the fact that the contracting officer's determination 

was made with the concurrence of the small business program manager.”). 

Accordingly, we have no basis to conclude that the CO acted unreasonably in 

deciding not to reissue the RFI.

AMEC also faults the CO for failing to consider the capability statements of three of 

the small businesses that responded to the RFI--Lincare, Inc., A-Z DME, and 

AeroFlow. Protester’s Comments at 9-10. With regard to Lincare, the record 

demonstrates that the CO had conflicting information as to whether Lincare was in 

fact a small business; thus, it was reasonable for the CO to question Lincare’s status 

as such. See AR, Exh. 8, Market Research Documentation and Determination, D&B 

report for Lincare, at 2; Exh. 20, Lincare’s RFI Response. With regard to A-Z DME, 

although not mentioned in the CO’s Market Research Report dated February 16, 

2012, other contemporaneous documents reflect that the CO considered A-Z DME’s 

RFI response as well as the company’s FPDS-NG data when she made her setaside determination. See AR, Exh. 8, Market Research Documentation and 

Determination, CO’s Determination and Findings, Set-Aside Procedures, at 1; AR, 

Exh. 8, Market Research Documentation and Determination, FPDS-NG report for AZ DME. 

With regard to AeroFlow, AMEC correctly notes that the contemporaneous record 

does not indicate that the CO assessed this firm’s RFI response prior to issuing the 

solicitation. The CO, however, explains that she did in fact consider AeroFlow’s 

response, D&B report, and FPDS-NG information during her initial market research, 

but that her review of this information was inadvertently excluded from the market 

research documentation. Exh. 19, CO’s Supplemental Narrative, at 2. The CO 

states that AeroFlow’s RFI response and FPDS-NG data failed to demonstrate that 

the company could meet the home oxygen requirements for all of VISN-16. Id. We 

have reviewed these documents and find the CO’s assessment to be reasonable. 

For example, AeroFlow’s RFI response demonstrated that it did not currently provide 

home oxygen services in any of the states serviced by VISN-16. See AR, Exh. 5, 

RFI Responses, AeroFlow Response. To the extent the protester argues that we 

should disregard the CO’s representations because they are not reflected in the

contemporaneous record, we disagree. While we give greater weight to 

contemporaneous materials, as compared to statements made in response to a 

protest, we will consider such statements where, as in this case, the agency’s 
Page 8 B-407113, B-407113.2 

representations are credible and consistent with the contemporaneous record. 

Further, even if we were to assume that AeroFlow was a small business capable of 

meeting the requirement at issue, this would not establish that there are two small 

businesses capable of doing so.5

 

 

Finally, the protester argues that it was inappropriate for the CO to consider the SER 

scores from the D&B reports and that the CO improperly found three of the six small 

businesses that responded to the RFI to be not responsible for financial reasons. 

According to AMEC, the CO’s responsibility determinations were inappropriate since 

such determinations are to be made by the SBA, not the VA. Protester’s Comments 

at 7-9. The protester’s arguments in this regard are belied by the factual record, 

which makes plain that the CO did not make a responsibility determination regarding 

any of the small businesses that responded to the RFI. See AR, Exh. 8, Market 

Research Documentation and Determination, Market Research Report, Feb. 16, 

2012. Rather, the record demonstrates that the SER scores were simply one factor 

of many considered by the CO to inform the exercise of her business judgment 

regarding the potential for receiving at least two offerors from small business 

concerns that could reasonably satisfy the agency’s requirements. See id.; EMMES 

Corporation, B-402245, B-402245.2, Feb. 17, 2010, 2010 CPD ¶ 53 at 4 (holding 

that considerations relevant to determining capability “may be similar to 

responsibility standards”). Thus, we have no basis to find unreasonable the CO’s 

exercise of her business judgment in deciding to issue 

 

5 Similarly, the protester argues that the CO’s assertions regarding past performance 

issues with small businesses that performed a portion of the VISN 16 home oxygen 

requirement are undocumented and unsubstantiated. Protester’s Comments at 10-

12. The CO’s market research report dated February 16, 2012 states that the CO 

considered the “history of prior procurements for these services in this area.” AR, 

Exh. 8, Market Research Documentation and Determination, Market Research 

Report, Feb. 16, 2012, at 5. The VA also explains that the information on past 

performance problems was provided verbally to the CO by the program office for 

VISN 16. Exh. 19, CO’s Supplemental Narrative, at 1. While contemporaneous 

documentation of these discussions is preferable, the lack of such documentation 

does not render the CO’s reliance on this information--or her ultimate decision--

unreasonable. Contrary to protester’s assertion, the past performance of prior small 

businesses was just one factor of many that the CO considered when making the 

decision not to set aside the entire procurement.
Page 9 B-407113, B-407113.2 

the RFP as a partial set-aside for small business concerns, rather than issuing the 

solicitation as a total set-aside.

The protest is denied.

Lynn H. Gibson

General Counsel