United States Government Accountability Office 

Washington, DC 20548 

Comptroller General

of the United States

 

Decision 

Matter of: DGR Associates, Inc. 

File: B-402494 

Date: May 14, 2010 

Darcy Hennessy, Esq., Hennessy and Boe, PA, for the protester. 

S. Lane Tucker, Esq., Stoel Rives LLP; Wayne A. Keup, Esq.; and William K. 

Walker, Esq., Walker Reausaw for the intervenors. 

Christopher S. Cole, Esq., Department of the Air Force, for the agency. 

Cherie J. Owen, Esq., and Edward T. Goldstein, Esq., Office of the General Counsel, 

GAO, participated in the preparation of the decision. 

DIGEST 

Given the unambiguous language of the applicable statutes regarding the Historically 

Underutilized Business Zone (HUBZone) and 8(a) programs, contracting agency, 

before proceeding with an 8(a) set-aside, must first reasonably consider whether the 

conditions for a HUBZone set-aside exist, and, if they do, the agency must proceed 

with a HUBZone set-aside. 

DECISION 

DGR Associates, Inc. of Dallas, Texas, a Historically Underutilized Business Zone 

(HUBZone) small business concern, protests the terms of request for proposals 

(RFP) No. FA5004-10-D-0001, issued by the Department of the Air Force for military 

family housing maintenance. DGR argues that the Air Force should have issued the 

solicitation as a HUBZone set-aside rather than setting it aside under the 8(a) 

program. 

We sustain the protest. 

BACKGROUND 

The Air Force, on December 22, 2009, issued the RFP as a set-aside for 8(a) small 

business concerns. The RFP contemplates the award of a fixed-price requirements 

contract for maintenance, inspection, and repair services for military family housing 
(MFH) at Eielson Air Force Base, Alaska.1

 Specifically, the successful offeror will be 

required to provide all management, supervision, personnel, labor, equipment, 

vehicles, service calls, materials, tools, and other items and services necessary for 

maintenance of the 1,184 MFH units located on the base. 

On January 22, 2010, DGR filed an agency-level protest challenging, among other 

things, the agency’s decision not to set aside the procurement for HUBZone small 

businesses. The agency decided to proceed with the solicitation’s closing date 

without amending the solicitation, and this protest followed. 

DISCUSSION 

DGR argues that the agency’s decision to set aside the procurement for 8(a) small 

businesses was improper, and that the agency instead was required to set aside the 

procurement for HUBZone small businesses. In this regard, DGR cites several 

decisions issued by our Office interpreting the applicable statutes as requiring an 

agency to set aside a solicitation for HUBZone small business concerns where the 

standards of that program are satisfied. As explained in our decisions, the plain 

language of the statute authorizing the HUBZone program is mandatory and requires 

that an agency set aside a procurement when certain criteria are met (specifically, 

where the agency has a reasonable expectation of receiving offers from at least two 

qualified HUBZone small business concerns and where the award can be made at a 

fair market price), whereas the plain language of the authorizing statute for the 8(a) 

program leaves the agency with discretion to set aside the procurement. See Mission 

Critical Solutions, B-401057, May 4, 2009, 2009 CPD ¶ 93 at 3-8, recon. denied, Small

Business Admin.--Recon., B-401057.2, July 6, 2009, 2009 CPD ¶ 148 at 5. 

The Air Force acknowledges our decisions, but contends that its actions are 

consistent with a Memorandum Opinion by the Office of the Deputy Assistant 

Attorney General, Office of Legal Counsel, Department of Justice (DOJ), stating its 

disagreement with our decisions and concluding that the Small Business Act “does 

not compel SBA [the Small Business Administration] to prioritize the HUBZone 

Program in the manner GAO determined to be required.” DOJ Memorandum 

Opinion, Aug. 21, 2009, at 2. This memorandum directs Executive Branch agencies 

to follow SBA’s regulations placing the different categories of small businesses on an 

equal footing for the competition and award of contracts.2

 In this regard, the DOJ 

 

1

 Although services and labor were to be proposed on a fixed-price basis, the 

solicitation provided a cost-reimbursement formula for materials. RFP at 2-15. 

2

 The SBA regulations in question, 13 C.F.R. §§ 126.605, 126.606, 126.607, essentially 

provide that HUBZone set-asides are not required even where the criteria specified 

in 15 U.S.C. § 657a(b)(2)(B) are satisfied if the requirement has previously been 

performed by an 8(a) contractor or the contracting officer has chosen to offer the 

requirement to the 8(a) program. 

Page 2 B-402494 
Memorandum expressly instructs that “the SBA’s regulations . . . are reasonable [and 

are] binding on all Executive Branch agencies, notwithstanding any GAO decisions 

to the contrary,” and reminds agencies that GAO decisions are not binding on the 

Executive Branch. Id. at 13. 

The DOJ opinion notwithstanding, we continue to read the plain language of the 

HUBZone statute as requiring an agency to set aside an acquisition for competition 

restricted to qualified HUBZone small business concerns where it has a reasonable 

expectation that not less than two qualified HUBZone small business concerns will 

submit offers and that the award can be made at a fair market price. See also

Mission Critical Solutions v. United States, No. 09-864C (Fed. Cl. Mar. 2, 2010), 

appeal docketed, No. 2010-5099 (Fed. Cir. Apr. 2, 2010) (rejecting DOJ’s 

interpretation of the HUBZone statute and concluding, consistent with our decisions 

in Mission Critical Solutions, B-401057, supra, that the language of the HUBZone 

statute is mandatory, such that a contract opportunity must be set aside for 

competition among qualified HUBZone small business concerns whenever the 

criteria set out in 15 U.S.C. § 657a are met). Thus, we conclude that the Air Force 

was required to first consider whether the conditions for setting aside a procurement 

for HUBZone businesses were met, and if so, to set aside the procurement for 

HUBZone small businesses. Because the agency did not perform this mandatory 

step, we conclude that it was improper for the agency to proceed with this 

procurement as an 8(a) set-aside, and we sustain the protest. 

RECOMMENDATION 

We recommend that the agency undertake reasonable efforts to ascertain whether it 

will receive offers from at least two HUBZone concerns and award will be made at a 

fair market price. If the agency’s research indicates that these conditions are met, 

the agency should cancel the current solicitation and reissue it as a HUBZone 

set-aside. We also recommend that the agency reimburse the protester its costs of 

filing and pursuing the protest, including reasonable attorneys’ fees.3

 4 C.F.R. 

§ 21.8(d)(1) (2009). 

In making our recommendation, we recognize, as the Air Force has noted and the 

DOJ memorandum indicates, that the recommendations in our bid protest decisions 

are not binding on Executive Branch agencies. Small Business Admin.--Recon., 

supra, at 5 (citing Bowsher v. Synar, 478 U.S. 714, 727-32 (1986)). This fact, however, 

does not affect our statutory obligation to decide protests concerning alleged 

violations of procurement statutes and regulations. See 31 U.S.C. § 3552 (2006). We 

have clearly stated our view on the proper interpretation of the HUBZone statute, 

and we recognize that the Executive Branch has resolved to apply its own, contrary 

 

3

 DGR challenged other aspects of the RFP which it subsequently withdrew. DGR 

may not recover protest costs associated with the withdrawn issues. 

Page 3 B-402494 
Page 4 B-402494 

interpretation of the HUBZone statute. Accordingly, absent some change in the 

statutory scheme, Executive Branch policy, or a contrary decision by the United 

States Court of Appeals for the Federal Circuit in connection with the Justice 

Department’s appeal of the decision in Mission Critical Solutions v. United States, 

supra, we will decide future protests raising the issue here in an expedited and 

summary manner, in the interest of reducing the costs associated with filing and 

pursuing such protests. 

The protest is sustained. 

Lynn H. Gibson 

Acting General Counsel