284

Prioritizing Programs to Exempt Small Businesses 

from Competition in Federal Contracts

The Small Business Administration’s regulations governing the interplay among the 

Historically Underutilized Business Zone Program, the 8(a) Business Development 

Program, and the Service-Disabled Veteran-Owned Small Business Concern Program 

constitute a permissible construction of the Small Business Act.

The Small Business Act does not compel the prioritization of awards under the Historically Underutilized Business Zone Program over those under the 8(a) Business Development Program and the Service-Disabled Veteran-Owned Small Business Concern 

Program. The Small Business Administration’s regulations permissibly authorize contracting officers to exercise their discretion to choose among these three programs in 

setting aside contracts to be awarded to qualified small business concerns.

The Office of Legal Counsel’s conclusion that the Small Business Administration’s 

regulations are reasonable is binding on all Executive Branch agencies.

August 21, 2009

MEMORANDUM OPINION FOR THE GENERAL COUNSEL 

SMALL BUSINESS ADMINISTRATION

The Small Business Act (“Act”), as amended, exempts certain classes 

of small businesses from the general requirement that federal contracts 

to procure goods and services be awarded on the basis of full and open 

competition. See Act of July 30, 1953, Pub. L. No. 83-163, 67 Stat. 230 

(codified as amended at 15 U.S.C.A. §§ 631–657p (West 2009)).

1 In 

particular, the Act establishes various programs, administered by the 

Small Business Administration (“SBA”), to assist qualifying small businesses in obtaining federal contracts by exempting them, in certain circumstances, from the degree of competition that would otherwise be 

required. At issue here is the permissibility of SBA’s regulations governing the interplay among three such programs: the Historically Underutilized Business Zone (“HUBZone”) Program, the 8(a) Business Develop-

 

1 ”Full and open competition” in the context of federal procurement means “that all 

responsible sources are permitted to submit sealed bids or competitive proposals on the 

procurement.” 41 U.S.C. § 403(6) (2006); see also 41 U.S.C.A. § 253 (West Supp. 2009) 

(requiring full and open competition in the conduct of procurements for property or 

services, except under certain circumstances as provided).
Prioritizing Programs to Exempt Small Businesses from Competition

285

ment Program, and the Service-Disabled Veteran-Owned (“SDVO”) 

Small Business Concern Program.

Under SBA’s regulations, federal contracting officers are given substantial discretion to consider and designate contracts for either the HUBZone, 8(a), or SDVO Program without having to prioritize one program 

above the others. This aspect of the regulations—which, according to 

SBA, effectively establishes “parity” among the three programs—has 

been called into question by a pair of recent Government Accountability 

Office (“GAO”) bid protest decisions.2 In these decisions, GAO rejected 

SBA’s approach and ruled instead that the Act mandates that priority be 

given to the HUBZone Program when certain statutory conditions are met. 

As a result, according to GAO, contracting officers must set aside federal 

contracts to qualified HUBZone small businesses, when two or more such 

businesses can submit fair market bids, before they can set aside such 

contracts for award to small businesses under the 8(a) or SDVO Programs. 

You have asked for our views on whether GAO was correct to conclude 

that the Act compels such prioritization of the HUBZone Program. See 

Letter for David Barron, Acting Assistant Attorney General, Office of 

Legal Counsel, from Sara D. Lipscomb, General Counsel, Small Business 

Administration, at 2 (July 1, 2009) (“Lipscomb Letter”). You have further 

asked whether, if the Act can be read not to require such prioritization, 

GAO has authority to invalidate SBA’s regulations. See id. Having carefully reviewed the relevant legal materials, including SBA’s own views, 

we conclude that the Act does not compel SBA to prioritize the HUBZone 

Program in the manner GAO determined to be required. In our view, 

SBA’s regulations permissibly authorize contracting officers to exercise 

their discretion to choose among the three programs in setting aside 

contracts to be awarded to qualified small business concerns.3 Further, in 

 

2 See Mission Critical Solutions, B-401057, 2009 WL 1231855 (Comp. Gen. May 4) 

(“MCS”), recons. denied, B-4010572 (Comp. Gen. July 6, 2009); International Program 

Group, Inc., B-400278, B-400308, 2008 WL 4351134 (Comp. Gen. Sept. 19) (“IPG”). 

recons. denied, B-400278.2 et al. (Comp. Gen. Oct. 24, 2008). The Comptroller General’s 

authority to review bid protests concerning alleged violations of a procurement statute or 

regulation is set forth in 31 U.S.C §§ 3551–3557 (2006).

3 Our conclusion regarding these SBA regulations addresses only whether they constitute a permissible interpretation of the Act.
33 Op. O.L.C. 284 (2009)

286

accord with this Office’s longstanding precedent, GAO’s decisions are not 

binding on the Executive Branch.

I.

The underlying legal issue ultimately turns on a relatively straightforward question of statutory interpretation, but it arises out of a complicated 

statutory and regulatory framework. Accordingly, we first review the key 

statutory provisions that establish these three programs.

A.

The term “HUBZone” refers to economically disadvantaged or distressed areas located within one or more qualified census tracts, nonmetropolitan counties, Indian reservations, or base closure areas. See 15 

U.S.C. § 632(p)(1)–(2) (2006). Established by the Small Business Reauthorization Act of 1997, Pub. L. No. 105-135, § 602(b)(1)(B), 111 Stat. 

2592, 2627 (codified as amended at 15 U.S.C. § 657a(a) (2006)), the 

HUBZone Program provides federal contract assistance to qualified 

small business concerns operating within a HUBZone through contracts 

awarded on a sole source basis, contracts awarded on the basis of competition restricted to HUBZone concerns, or a ten-percent bid adjustment for contracts awarded on the basis of full and open competition. Id. 

§ 657a(a)–(b).

The “restricted competition” provision at issue in the GAO decisions 

states that: 

Notwithstanding any other provision of law . . . a contract opportunity shall be awarded pursuant to this section on the basis of competition restricted to qualified HUBZone small business concerns if the 

contracting officer has a reasonable expectation that not less than 2 

qualified HUBZone small business concerns will submit offers and 

that the award can be made at a fair market price.

Id. § 657a(b)(2)(B). The conditions set forth in this provision—“a reasonable expectation that not less than 2 qualified HUBZone small business 

concerns will submit offers” and “that the award can be made at a fair 

market price”—are commonly referred to as “the rule of two.” When the 

rule of two is met, the statute provides that the award must be made on the 
Prioritizing Programs to Exempt Small Businesses from Competition

287

basis of competition restricted to qualified HUBZone small businesses. 

This provision closely resembles in language and structure the restricted 

competition provision found in the earlier-enacted 8(a) Program. See id. 

§ 637(a)(1)(D) (2006). The HUBZone Program also provides, in the 

alternative, that “a contracting officer may award sole source contracts 

under this section to any qualified HUBZone small business concern” 

upon a determination, inter alia, that there is no “reasonable expectation 

that two or more qualified HUBZone small business concerns will submit 

offers for the contracting opportunity.” Id. § 657a(b)(2)(A).

B.

The 8(a) Program, established by amendment to the Act on October 24, 

1978, Pub. L. No. 95-507, § 202, 92 Stat. 1757, 1761 (codified as amended at 15 U.S.C. § 637), “promote[s] the business development of small 

business concerns owned and controlled by socially and economically 

disadvantaged individuals,” id. § 631(f)(2)(A) (2006), defined as “those 

who have been subjected to racial or ethnic prejudice or cultural bias 

because of their identity as a member of a group without regard to their 

individual qualities,” id. § 637(a)(5), and “whose ability to compete in the 

free enterprise system has been impaired due to diminished capital and 

credit opportunities as compared to others in the same business area who 

are not socially disadvantaged.” Id. § 637(a)(6)(A).

The 8(a) Program promotes socially and economically disadvantaged 

small business development by, among other things, reserving certain 

contracts with federal agencies for administration and award by SBA to 

eligible 8(a) Program participants. The 8(a) authorizing statute provides, 

inter alia, that “[i]t shall be the duty of [SBA] and it is hereby empowered, whenever it determines such action is necessary or appropriate,” to 

enter into procurement contracts with the federal government or any 

department, agency, or officer thereof, id. § 637(a)(1)(A), and then “to 

arrange for the performance of such procurement contracts” by awarding 

them to eligible 8(a) participants when certain conditions are met, id. 

§ 637(a)(1)(B)–(C).4 The statute explicitly states that contracting officers 

 

4 SBA has promulgated regulations that permit it to delegate its 8(a) contract execution 

and review authority to procuring departments and agencies. See 13 C.F.R. §§ 124.501(a), 

124.503, 124.512 (2009).
33 Op. O.L.C. 284 (2009)

288

shall retain “discretion to let such procurement contract[s]” to SBA for the 

8(a) Program. Id. § 637(a)(1)(A).

The statute further provides that SBA’s authority to award an 8(a) 

contract is conditioned on the requirement that the award be made as a 

result of an offer submitted in response to a published solicitation 

about “a competition conducted pursuant to subparagraph (D).” Id. 

§ 637(a)(1)(C)(i). Subparagraph (D)(i), in turn, provides:

A contract opportunity offered for award pursuant to this subsection 

shall be awarded on the basis of competition restricted to eligible 

Program Participants if . . . there is a reasonable expectation that at 

least two eligible Program Participants will submit offers and that 

award can be made at a fair market price.

Id. § 637(a)(1)(D)(i)(I).

C.

The SDVO Program was established by the Veterans Benefits Act of 

2003, Pub. L. No. 108-183, § 308, 117 Stat. 2651, 2662 (codified at 15 

U.S.C. § 657f (2006)), and provides for federal contract assistance to 

qualified service-disabled veteran-owned small businesses through sole 

source and restricted competition awards. Id. § 657f.

The conditions set forth in the SDVO statute for the award of sole 

source contracts are the same as in the HUBZone statute. Compare id. 

§ 657f(a) with id. § 657a(b)(2)(A). However, unlike the HUBZone and 

8(a) provisions, the SDVO statute does not mandate the award of contracts through restricted competition even “if the contracting officer has a 

reasonable expectation that not less than 2 small business concerns 

owned and controlled by service-disabled veterans will submit offers and 

that the award can be made at a fair market price.” Id. § 657f(b). Instead 

of requiring that a contract opportunity “shall be awarded” through 

restricted competition in such circumstances, the SDVO statute provides 

that the award “may” be made through such competition if the rule of 

two is met. Compare id. (“a contracting officer may award”) with id. 

§ 637(a)(1)(D)(i) (“a contract opportunity . . . shall be awarded”) and id. 

§ 657a(b)(2)(B) (“a contract opportunity shall be awarded”).
Prioritizing Programs to Exempt Small Businesses from Competition

289

D. 

It is against this legislative background that SBA issued its regulations 

to guide contracting officers in making the determination whether and 

when to set aside a contract for the HUBZone, 8(a), or SDVO Program. 

Congress delegated broad authority to SBA to carry out the policies and 

purposes of the Act. See generally id. §§ 633(a), 634(b), 644(g) (2006). 

The relevant parts of the HUBZone regulations that you have asked us to 

review in light of the GAO decisions direct contracting officers first to 

determine whether the contract is a follow on to one already being performed by an 8(a) participant, has already been accepted for the 8(a) 

Program by SBA, or would be performed by a federal prison workshop or 

participating non-profit agency for the blind or severely disabled.5 See 

13 C.F.R. §§ 126.605 and 126.607 (2009). If the contract is still available, 

the regulations state that a contracting officer shall then choose among the 

HUBZone, 8(a), or SDVO Programs and “set aside the requirement for 

HUBZone, 8(a) or SDVO [] contracting before setting aside the requirement as a small business set-aside.” Id. § 126.607.

The SDVO regulations implicated by the GAO decisions are operatively the same as the HUBZone regulations. Compare id. §§ 126.605 & 

126.607 with id. §§ 125.18 & 125.19. A parallel provision also exists in 

the 8(a) regulations.6 See id. § 124.503(j).

 

5 See 18 U.S.C. § 4124 (2006) (requiring purchase of prison-made products by all federal departments and agencies); 41 U.S.C. § 48 (2006) (requiring governmental purchases 

from qualified nonprofit agencies for the blind or severely disabled); see also 15 U.S.C. 

§ 657a(b)(4) (prioritizing procurement awards to prison, blind, and severely-disabled 

entities over HUBZone awards); id. § 657f(c) (prioritizing procurement awards to prison, 

blind, and severely-disabled entities over SDVO awards).

6 The SDVO and 8(a) regulations provide that the contracting officer “should consider

setting aside the requirement” for 8(a), HUBZone, or SDVO participation “before considering” setting it aside for other small business programs. 13 C.F.R. §§ 125.19(b), 

124.503(j) (2009) (emphasis added). Thus, although the SDVO and 8(a) regulations 

contain discretionary language not found in the corresponding HUBZone regulation, they 

nevertheless place the three programs on equal footing and prioritize their consideration 

before small businesses generally. In this way, they are consistent with the HUBZone 

regulations and provide uniform guidance to contracting officers regarding the interplay 

among the programs at issue. See 70 Fed. Reg. 51243, 51245 (Aug. 30, 2005) (“To make 

the HUBZone regulations consistent with SBA’s recently published SDV regulations, 

SBA is . . . revising § 126.607 to incorporate contracting preferences for HUBZone, 8(a) 
33 Op. O.L.C. 284 (2009)

290

The SBA’s regulations do not expressly provide for parity of treatment 

among the 8(a), HUBZone, or SDVO Programs. See id. §§ 124.503(j), 

125.19(b), and 126.607(b). Rather, by their plain terms, the regulations 

require that contracting officers prioritize these programs collectively by 

giving consideration to the group of them before a contracting officer may 

set aside an opportunity for small businesses generally and before the 

contracting officer may make the contract otherwise available. See Lipscomb Letter at 6–7 (“The regulations themselves do not establish an 

order of precedence between an award under the HUBZone, SDVO SBC, 

or 8(a) BD programs.”). The regulations do not, therefore, single out one 

program for the kind of prioritization over the other two that the GAO 

decisions conclude is mandated under the HUBZone statute. It is in this 

sense that, as the SBA puts it, the regulations “provide[] for parity between the HUBZone, SDVO SBC and 8(a) BD programs.” Id. at 7.

II.

Having reviewed the language, context, and history of the relevant portions of the Act, we conclude that SBA’s regulations implementing the 

HUBZone Program are based on a permissible interpretation of the Act. 

See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 

843 (1984); see also Smiley v. Citibank (South Dakota), N.A., 517 U.S. 

735, 740–41 (1996) (“We accord deference to agencies under Chevron . . . 

because of a presumption that Congress, when it left ambiguity in a statute meant for implementation by an agency, understood that the ambiguity 

would be resolved, first and foremost, by the agency.”). The GAO decisions reached the opposite conclusion based on what GAO considered 

the unambiguous language of the HUBZone Program’s restricted competition provision. See MCS, 2009 WL 1231855, at *2–4; IPG, 2008 WL 

4351134, at *4. GAO concluded that “the clear language” of this provision in the HUBZone statute, which uses the term “shall” with respect to 

the award of contracts, stood in marked contrast to the Act’s use of the 

discretionary term “may” in the SDVO Program provision, IPG, 2008 WL 

4351134, at *3–4 (citing 15 U.S.C. § 657f(b)), and its use of other discretionary language in the 8(a) Program, which authorizes a contracting 

 

and SDV over small business set-asides. This change will ensure consistent guidance 

throughout 13 CFR Chapter 1.”).
Prioritizing Programs to Exempt Small Businesses from Competition

291

officer “‘in his discretion to let such procurement contract to [SBA].’” 

MCS, 2009 WL 1231855, at *2 (quoting 15 U.S.C. § 637(a)(1)(A)). 

Because Congress used mandatory language with respect to the award of 

contracts pursuant to the HUBZone Program and discretionary language 

with respect to the other two programs, GAO reasoned that Congress 

intended to give the HUBZone Program priority over these other contract 

assistance programs. The Ninth Circuit, we note, has expressed a similar

view of the “mandatory” versus “discretionary” language in the HUBZone 

and 8(a) Programs. See Contract Mgmt., Inc. v. Rumsfeld, 434 F.3d 1145, 

1149 (9th Cir. 2006) (“CMI ”).7

We conclude that the HUBZone provision does not unambiguously direct contracting officers to reserve every available contract opportunity 

for HUBZone small businesses whenever the rule of two is met. Rather, 

the text of the HUBZone provision may be fairly read as mandating only 

that a contract opportunity—already set aside for HUBZone small businesses in the discretion of a contracting officer—be awarded on the basis 

of restricted competition, and not as a sole source award, if the rule of two 

is met. So read, the provision, instead of simply permitting restricted 

competition for qualified HUBZone bidders, actually mandates such 

 

7 CMI involved a challenge to an earlier HUBZone regulation, no longer in effect, that 

directed contracting officers, inter alia, to give priority to eligible 8(a) participants over 

HUBZone concerns. The regulation provided, however, that contracting officers otherwise “must set aside the requirement for competition restricted to qualified HUBZone” 

small businesses if the rule of two is met. 13 C.F.R. § 126.607(c) (current through Dec. 

28, 2005). The appellant, a small business concern that did not qualify for either the 8(a) 

or HUBZone Program, challenged this last aspect of the old regulation. In defending this 

regulation, the government advanced a reading of the HUBZone provision as mandatory, 

but inapplicable to the 8(a) Program. Citing legislative history, the government argued the 

HUBZone statute is “reasonably read as showing that Congress intended that there be 

parity between the Section 8(a) Program and the HUBZone Program.” Brief for Appellees 

at 7, Contract Mgmt., Inc. v. Rumsfeld, 434 F.3d 1145 (9th Cir. 2006) (No. 04-15049).

The court ruled in the government’s favor. The court compared what it viewed as the 

“unequivocal” terms of the HUBZone statute with the discretionary terms of the 8(a) setaside provision and concluded that SBA’s old regulation implementing the HUBZone 

Program “properly accord[ed] with congressional intent under the Small Business Act.” 

434 F.3d at 1147. The court noted that such a reading of the HUBZone statute was not 

compelled. See id. at 1149 n.8. In 2005, after establishment of the SDVO Program, SBA 

promulgated the current regulations replacing those reviewed by the CMI court. See 13 

C.F.R. § 126.607.
33 Op. O.L.C. 284 (2009)

292

competition. In other words, a contracting officer who uses discretion to 

set aside a contract for the HUBZone Program has no choice but to award 

a HUBZone contract on the basis of restricted competition once the rule 

of two is met. But, so read, the HUBZone provision does no more than 

compel restricted competition rather than a sole source award. It does not 

go further and require the prioritization of the HUBZone Program itself, 

leaving contracting officers with no discretion to set aside contracts for 

the other SBA programs whenever the HUBZone provision’s rule of two 

is met. 

The most basic reason we reach this conclusion is that the text of the 

HUBZone statute, on its own terms, does not clearly direct a contracting officer to reserve any and all procurement contracts for HUBZone 

small businesses whenever the rule of two is met. See 15 U.S.C. 

§ 657a(b)(2)(B). The statute uses the mandatory phrase “shall be awarded” after the noun “contract opportunity,” but the sentence does not stop 

there. It goes on to say “pursuant to this section”—i.e., under the HUBZone Program. Id. This qualification permits the HUBZone provision to 

be read as stating that contracts awarded “pursuant to this section” are 

subject to the enumerated conditions, but it does not compel a reading that 

all contract opportunities in the government must be awarded to the 

HUBZone Program whenever the enumerated conditions are met. Indeed, 

a contrary reading would implicate the canon of construction that discourages statutory interpretation that would render language mere surplusage. 

See, e.g., Clark v. Arizona, 548 U.S. 735, 755 n.24 (2006) (recognizing 

“usual rule of statutory construction” to “giv[e] effect, if possible, to 

every clause and word of a statute”) (internal quotations and citations 

omitted). In GAO’s interpretation, it is not clear what independent meaning the “pursuant to this section” language would have. 

Our conclusion is also consistent with another important section of the 

HUBZone statute, which provides that contracting officers “may award 

sole source contracts under this section” to any qualified HUBZone small 

business if the rule of two cannot be met. 15 U.S.C. § 657a(b)(2)(A). 

Again, the conditions set forth by this provision need only apply to contracts intended for award “under this section,” i.e., under the HUBZone 

Program. The mandatory “shall” in the restricted competition provision 

can fairly be read, in connection with the discretionary “may” in the sole 

source provision, simply as a direction to contracting officers that within 
Prioritizing Programs to Exempt Small Businesses from Competition

293

the HUBZone Program there is a clear priority given to competition, 

albeit restricted, over sole source contract awards. 

Such a construction of the HUBZone restricted competition provision is 

further supported by consideration of still another provision in the HUBZone statute, which expressly prioritizes the award of contracts to prison 

workshops and nonprofit agencies for the blind and severely-disabled 

over HUBZone small businesses. See 15 U.S.C. § 657a(b)(4) (“A procurement may not be made from a source on the basis of a preference 

[provided in the HUBZone statute], if the procurement would otherwise 

be made from a different source under section 4124 or 4125 of title 18 or 

the Javits-Wagner-O’Day Act (41 U.S.C. 46 et seq.).”). Whereas this 

provision clearly establishes the priority of these other contracting preferences, the HUBZone statute contains no express reference to the HUBZone Program’s priority over SBA’s other contract assistance programs.

Of course, the language of the HUBZone provision should be construed 

in the context of the provisions governing the other two SBA programs at 

issue. For that reason, we have considered whether the discretionary 

language in the 8(a) and SDVO statutes compels the conclusion that the 

HUBZone statute (with its mandatory language) requires that the HUBZone Program be given priority among the three programs. In our view, 

there are several reasons why it does not. 

First, the 8(a) provision actually does contain mandatory language. Indeed, its restricted competition provision employs virtually the same 

mandatory language as the HUBZone provision. Compare 15 U.S.C. 

§ 637(a)(1)(D)(i) (“A contract opportunity offered for award pursuant to 

this subsection shall be awarded on the basis of competition restricted to 

eligible Program Participants if”), with id. § 657a(b)(2)(B) (“[A] contract 

opportunity shall be awarded pursuant to this section on the basis of 

competition restricted to qualified HUBZone small business concerns 

if”).8 In both instances, a contract opportunity “shall be awarded” on the 

 8 The 8(a) restricted competition provision predates the HUBZone provision by nine 

years. Compare Business Opportunity Development Reform Act of 1988, Pub. L. No. 

100-656, § 303, 102 Stat. 3853, 3868, with Small Business Reauthorization Act of 1997, 

Pub. L. No. 105-135, § 602(b)(1)(B), 111 Stat. 2592, 2627. When the 8(a) Program was 

originally established in 1978, all 8(a) contracts could be awarded on a sole-source basis. 

See Amendments to the Small Business Investment Act of 1958, Pub. L. No. 95-507, 

§ 202, 92 Stat. 1757, 1761 (1978). As part of a comprehensive reassessment of the 8(a) 
33 Op. O.L.C. 284 (2009)

294

basis of restricted competition if the applicable conditions are met. Where 

Congress uses the same language in similarly structured provisions within 

the same Act, it may be presumed that the language has the same meaning 

in each instance. See, e.g., Estate of Cowart v. Nicklos Drilling Co., 505 

U.S. 469, 479 (1992) (recognizing “the basic canon of statutory construction that identical terms within an Act bear the same meaning”). At the 

very least, the use of this mandatory language in both the 8(a) and HUBZone provisions makes it difficult to argue that the HUBZone provision 

unambiguously mandates that HUBZone awards be given priority over 

8(a) awards.

Second, the 8(a) provision clearly applies only to “[a] contract opportunity offered for award pursuant to this subsection”—in other words, 

under the 8(a) Program. 15 U.S.C. § 637(a)(1)(D)(i). The mandate that 

such contracts “shall be awarded” on the basis of restricted competition 

does not extend to contract opportunities that exist outside of the 8(a) 

Program. Given the similarity just discussed between the 8(a) and HUBZone provisions, it is reasonable to read the phrase “pursuant to this 

section” in the HUBZone statute to function the same way as the comparable language contained in 8(a)—to limit the provision’s application only 

to a “contract opportunity” already set aside for award pursuant to the 

HUBZone Program.

Admittedly, the 8(a) and HUBZone restricted competition provisions 

are not phrased in exactly the same way. As noted, the former provides 

that “[a] contract opportunity offered for award pursuant to this subsection shall be awarded on the basis of competition,” id. § 637(a)(1)(D)(i) 

(emphasis added), whereas the latter provides that “a contract opportunity 

shall be awarded pursuant to this section on the basis of competition,” id. 

§ 657a(b)(2)(B) (emphasis added). But this slight difference in word order 

between the two provisions may fairly be read to reflect the fact that the 

8(a) statute, unlike the HUBZone statute, explicitly provides for a means 

 

Program in 1988, Congress amended the Act to require that 8(a) contracts be awarded on 

the basis of restricted competition if certain conditions are met. See Pub. L. No. 100-656, 

§ 303, 102 Stat. at 3868. Concerned about the success of the 8(a) Program, Congress 

provided three principal reasons for introducing competition, albeit restricted, to the 

program: “such competition will advance the business development objectives of the 

[8(a)] program; improve the distribution of contracts; and help avoid programmatic 

abuses.” H.R. Rep. No. 100-460, at 28 (1987).
Prioritizing Programs to Exempt Small Businesses from Competition

295

by which contracts will be “offered for award pursuant to this subsection.” Id. § 637(a)(1)(D)(i).

Under the 8(a) statute, SBA is “empowered” to approach contracting 

officers in other agencies and certify that an available contract should be 

awarded under the 8(a) Program. Id. § 637(a)(1)(A). The discretionary 

language included in the 8(a) statute that GAO emphasized appears in this 

portion of the statute. Once SBA certifies that it is “competent and responsible” to perform a contract with a particular agency, the agency 

contracting officer “shall be authorized in his discretion to let such procurement contract” to SBA. Id. But this language can reasonably be read 

in a way that is consistent with SBA not having to give the HUBZone 

Program priority over the 8(a) Program. Because the 8(a) Program is a 

business development program to promote the ability of its participants 

to succeed as small business concerns, one aspect of this program is that 

the statute empowers SBA affirmatively to procure contracts for award to 

8(a) participants. The discretionary language found in this same provision 

of the 8(a) statute may be read as an offset to this expansive SBA authority by reserving another agency’s ability not to accede to SBA’s certification. Because the HUBZone Program provides contract assistance but is 

not a more comprehensive business development program, there is no 

such authority provided in the HUBZone statute for SBA to solicit contracts on behalf of HUBZone concerns. Accordingly, the lack of an express reservation of a contracting officer’s discretion to decline a HUBZone designation need not be construed to compel prioritization of the 

HUBZone Program. 

There is also no basis for concluding that the discretionary language in 

the SDVO provision, see id. § 657f(b), requires the conclusion that the 

HUBZone Program must have priority. As noted above, the HUBZone 

provision includes discretionary language as well, in the award of sole 

source contracts. The inclusion of the discretionary term “may” in both 

the sole source and restricted competition provisions of the SDVO statute 

can reasonably be read, in contrast to the HUBZone statute, not to require 

the statutory prioritization of restricted competition over sole source 

awards as the means of contracting assistance to SDVO small business 

concerns. 

Finally, it is true that the HUBZone provision is prefaced with the 

phrase “Notwithstanding any other provision of law,” but the appearance 
33 Op. O.L.C. 284 (2009)

296

of that phrase does not establish a prioritization of its own force. Id.

§ 657a(b)(2). As we have noted previously, such “notwithstanding” 

phrases are best read simply to qualify the substantive requirement that 

follows. See Memorandum for Andrew J. Pincus, General Counsel, 

Department of Commerce, from Randolph D. Moss, Acting Assistant 

Attorney General, Office of Legal Counsel, Re: The Effect of 8 U.S.C.A. 

§ 1373(a) on the Requirement Set Forth in 13 U.S.C. § 9(a) That Census 

Officials Keep Covered Census Information Confidential at 7 (May 18, 

1999). Here, as we have noted, the HUBZone provision is at least ambiguous as to whether its substantive effect is to mandate that all contracts 

be set aside for its program and then subject, pursuant to the rule of two, 

to restricted competition; or whether it is instead intended to subject, 

pursuant to the rule of two, restricted competition only to those contracts 

that have been set aside for the HUBZone Program in the exercise of the 

contracting officer’s discretion. If the latter interpretation is a permissible 

one, as we believe it is, then the “notwithstanding” clause simply ensures 

that no other provision of law countermands a contracting officer’s 

discretion to make a sole source, restricted competition, or other contract 

award by means of assistance to qualified HUBZone small businesses 

pursuant to the requirements contained in the HUBZone statute.

III.

We find further support for our position in the larger statutory framework of the Act incorporating all three of the SBA programs at issue. 

See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132–33 

(2000) (in considering the meaning of the statutory text, the particular 

statutory provision should not be viewed in isolation; “[t]he meaning—or 

ambiguity—of certain words or phrases may only become evident when 

placed in context . . . . It is a ‘fundamental canon of statutory construction 

that the words of a statute must be read in their context and with a view to 

their place in the overall statutory scheme.’”) (quoting Davis v. Mich. 

Dep’t of Treasury, 489 U.S. 803, 809 (1989)); see also Proposed Agency 

Interpretation of “Federal Means-Tested Public Benefit[s]” Under Personal Responsibility and Work Opportunity Reconciliation Act of 1996, 

21 Op. O.L.C. 21, 23 (1997) (“[I]t is well-established that a provision in 

one Act of Congress should be read in conjunction with other relevant 

statutory provisions and not in isolation.”). As discussed below, a reading 
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of the HUBZone provision that does not compel prioritization comports 

with the policies and purposes set forth in the Act and other specific 

provisions that were amended with and after the 1997 reauthorization 

establishing the HUBZone Program.

First, a construction of the statute that does not mandate HUBZone 

Program priority furthers Congress’s stated policy that “small business 

concerns owned and controlled by service-disabled veterans, qualified 

HUBZone small business concerns, [and] small business concerns 

owned and controlled by socially and economically disadvantaged 

individuals . . . shall have the maximum practicable opportunity to 

participate in the performance of contracts let by any Federal agency.” 

15 U.S.C. § 637(d)(1); see also id. §§ 631(f )(1)(E), 637(d)(10). Congress 

required that a clause stating this policy “shall be included” in virtually 

every government procurement contract. See id. § 637(d)(2). In listing in 

the policy all of the covered classes of small business concerns, Congress 

did not in any way distinguish among them. Instead, the text does not 

disturb the discretion SBA and the agencies have to ensure that all of the 

covered small business concerns “have the maximum practicable opportunity” to secure federal contracts. Had Congress clearly intended to 

prescribe some order of priority among these SBA programs, Congress 

could have more directly adopted such a policy.

Second, this construction of the HUBZone statute furthers achievement 

of government-wide goals required by the Act. See id. § 644(g)(1). The 

Act prescribes that the “goal for participation by small business concerns 

shall be established at not less than 23 percent of the total value of all 

prime contract awards for each fiscal year.” Id. Furthermore, governmentwide participation goals “shall be established” at not less than 3 percent 

each for HUBZone and SDVO small business concerns and not lessthan 5 

percent for socially and economically disadvantaged small businesses. Id. 

Each agency, in turn, must establish its own goal “that presents . . . the 

maximum practicable opportunity” for the small business concerns qualified under the various SBA programs “to participate in the performance of 

contracts let by such agency.” Id. In total, the “cumulative annual prime 

contract goals for all agencies” must “meet or exceed” the established 

minimum annual government-wide goal. Id. Congress did not prescribe 

for HUBZone concerns the highest minimum participation goal among the 

various SBA programs and it left to agency discretion how to achieve its 
33 Op. O.L.C. 284 (2009)

298

set goals. An interpretation of the HUBZone statute that does not compel 

a contract’s award to a qualified HUBZone concern whenever the rule of 

two is met advances the achievement of the goals set forth for the other 

SBA programs and preserves the balance among the various programs 

established by the goaling provision of the Act.

IV.

Such a reading of the HUBZone statute also comports with congressional intent as reflected in legislative history. The legislative history can 

fairly be interpreted to show that Congress did not intend, through enactment of the HUBZone statute, to require the award of available contracts 

to qualified HUBZone concerns over 8(a) participants.

The HUBZone Program was introduced in 1997 as part of the Senate 

version of the Small Business Reauthorization Act. See Small Business 

Reauthorization Act of 1997, S. 1139, 105th Cong. tit. VI (as reported 

by S. Comm. on Small Business, S. Rep. No. 105-62, Aug. 19, 1997). The 

bill that the Senate Committee on Small Business unanimously voted to 

report contained an amendment with “parity” language making clear 

that the HUBZone Program did not interfere with the discretion of a 

contracting officer to designate a procurement contract for the 8(a) Program.9 See S. 1139, 105th Cong. § 31(b)(5) (as reported by S. Comm. on 

Small Business, S. Rep. No. 105-62, Aug. 19, 1997). Right after a “Subordinate Relationship” provision setting forth the priority to be afforded 

to the prison industries, blind, and severely-disabled preference programs, 

the amendment provided, in a subsection entitled “Parity Relationship,” 

that the HUBZone assistance provisions of the bill “shall not limit the 

 

9 At the time the bill was reported, the restricted competition provision of the HUBZone Program tracked even more closely the restricted competition provision in the 8(a) 

Program: “Subject to paragraph 3 [the sole source award provision], a contract opportunity offered for award pursuant to this section shall be awarded on the basis of competition restricted to qualified HUBZone small business concerns, if there is a reasonable 

expectation that not less than 2 qualified HUBZone small business concerns will submit 

offers and that award can be made at a fair market price.” S. 1139, § 602(b)(1)(B), sec. 

31(b)(B)(2) (1997); 143 Cong. Rec. 18,117. There is no explanation in the legislative 

history for the subsequent edit to this provision. But as discussed above, accounting for 

the substantive differences between the 8(a) and HUBZone Programs as enacted, the two 

slightly different formulations can be read functionally to operate the same way.
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discretion of a contracting officer to let any procurement contract to 

[SBA] under section 8(a).” 143 Cong. Rec. 18,118 (1997). It further 

provided that “[n]otwithstanding section 8(a), [SBA] may not appeal an 

adverse decision of any contracting officer declining to let a procurement 

contract to the Administration, if the procurement is made to a qualified 

HUBZone small business concern on the basis of a preference [set forth in 

the bill].” Id. The Committee’s report explained that the proposed HUBZone Program was “not designed to compete with SBA’s 8(a) Program,” 

and that the “parity” provision was simply intended to “give[] the procuring agency’s contracting officer the flexibility to decide whether to target 

a specific procurement requirement for the HUBZone Program or the 8(a) 

Program.” S. Rep. No. 105-62, at 26 (1997). The bill, with its parity 

provision intact, passed the Senate. See S. 1139, 105th Cong. § 31(b)(5) 

(as passed by Senate, Sept. 9, 1997).

When the bill reached the House of Representatives, the House struck 

everything after the enacting clause and substituted the provisions of a 

competing House version that omitted the entirety of the HUBZone Program. See Small Business Reauthorization and Amendments Act of 1997, 

H.R. 2261, 105th Cong. (as passed by House Sept. 29, 1997); 143 Cong. 

Rec. 20,662 (1997). Following return of the bill to the Senate, as amended 

by the House, the Senate reinstated the HUBZone Program by unanimous 

consent, but without the parity provision. 143 Cong. Rec. at 24,094–108. 

No explanation for the parity provision’s omission was provided in the 

Senate record. See id. at 24,106.

The bill then returned to the House, where the issue of the HUBZone 

Program’s relationship to the 8(a) Program was extensively discussed. 

See 143 Cong. Rec. at 25,747–66 (1997). Representative John J. LaFalce, 

the Ranking Member on the Committee on Small Business, explained that 

the Senate had struck the parity provision at the insistence of House 

members who were worried that the parity provision would have permitted contracts to be taken from the 8(a) Program; in other words, that the 

provision would have precluded the prioritization of 8(a) awards. Rep. 

LaFalce stated that “[a]ny proposals which might place [the 8(a)] program 

in jeopardy naturally cause concern to those Members who place a high 

priority on the development of minority small business.” Id. at 25,760 

(1997). Rep. LaFalce indicated that although the Senate prevailed in 

establishing the HUBZone Program, the final bill “confers considerable 
33 Op. O.L.C. 284 (2009)

300

discretion on the Administration of the SBA who will implement it.” Id.

(statement of Rep. LaFalce). Indeed, as Rep. LaFalce stated, he resisted 

the inclusion of the HUBZone Program until he was “specifically prevailed upon by the Small Business Administration,” which pledged to him 

in writing that SBA “will not permit the implementation of the HUBZone’s program to negatively affect the 8(a) program.” Id.

10

Numerous Representatives who spoke on S. 1139 during the floor debate expressed the same concern—that the new HUBZone Program not 

harm the existing 8(a) Program. See 143 Cong. Rec. at 25,761 (statement 

of Rep. Velázquez); id. (statement of Rep. Talent) (“I yield . . . to say that 

that is also my understanding, and I have said from the beginning, that I 

did not want this bill to affect the 8(a) program, and as far as I am concerned, it is out of this bill, it is not mentioned in this bill[.]”); id. at

25,762 (statement of Rep. Wynn) (accepting assurances that HUBZone 

Program would not harm 8(a) Program); id. at 25,763 (statement of Rep. 

Davis) (commending the protection of the 8(a) program); id. at 25,764 

(statement of Rep. Weygand) (“Continued oversight and vigilance about 

this HUBZone program is extremely necessary. I know all of my colleagues are looking to Administrator Alvarez to be sure that she does not 

diminish the 8(a) program and sacrifice monies because of the HUB 

program. . . . I am concerned that there may be the unintended consequence of negatively impacting minority small businesses and 8(a) 

firms.”); id. at 25,765 (statement of Rep. Jackson-Lee) (“we are not 

disturbing the 8(a) programs”); id. at 25,766 (statement of Rep. Mink) 

(expressing concern about the HUBZone Program’s effect on the 8(a) 

Program and reliance upon SBA’s assurances that “that in administering 

the HUBZone program, they would take steps necessary to assure that 

8(a) was not adversely impacted”).

 

10 Indeed, after enactment of the HUBZone Program without inclusion of the explicit 

parity provision, SBA originally promulgated regulations directing contracting officers to 

preserve existing 8(a) contracts; then to prioritize small business concerns qualified under 

both the 8(a) and HUBZone Programs; and then to consider other 8(a) concerns before 

being directed to set aside a contract for competition restricted to HUBZone businesses. 

See HUBZone Empowerment Contracting Program, 63 Fed. Reg. 31896, 31908 (1998); 

13 C.F.R. § 126.607(b) (effective from June 11, 1998 to Aug. 29, 2005). As noted earlier, 

the regulations were amended in 2005.
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301

Accordingly, the legislative history comports with the conclusion reflected in SBA’s regulations that the HUBZone statute need not be read to 

compel the prioritization of awards under the HUBZone Program over 

those under the 8(a) and SDVO Programs.11 Our review of the text, structure and legislative record all support the conclusion that the HUBZone 

statute may fairly be read to mandate only that contract opportunities set 

aside for HUBZone concerns be awarded on the basis of restricted competition if the rule of two is met.

V.

Our conclusion that the SBA’s regulations we have reviewed are reasonable is binding on all Executive Branch agencies, notwithstanding any 

GAO decisions to the contrary. 

First, the statute that authorizes the Comptroller General to decide bid 

protests provides the Comptroller General with the power only to make 

“recommendations” as to how an Executive Branch agency should resolve 

bid protests submitted to the Comptroller General. See 31 U.S.C. § 3554 

(2006); see also id. § 3556 (2006) (“This subchapter does not give the 

Comptroller General exclusive jurisdiction over protests, and nothing 

contained in this subchapter shall affect the right of any interested party to 

file a protest with the contracting agency or to file an action in the United 

States Court of Federal Claims.”). Neither that statute nor GAO’s regulations implementing it provide GAO with the authority to overrule or 

invalidate the properly-promulgated regulations of an Executive Branch 

 

11 Since enactment of the HUBZone Program in 1997, Congress has on other occasions 

considered whether to prescribe the relationship among the small business programs and 

has not done so. In 2002, Senator John F. Kerry introduced legislation that would have 

created a priority for small business concerns that were both 8(a) participants and HUBZone concerns. See Combined 8(a) and HUBZone Priority Preference Act, S. 1994, 107th 

Cong. (as introduced, Mar. 6, 2002). In 2003, when the House considered the Veterans 

Entrepreneurship and Benefits Improvement Act, an early version of the bill would have 

prioritized the various SBA assistance programs in the order of 8(a), SDVO, and then 

HUBZone. See H.R. 1460, 108th Cong. sec. 3(a), § 37(a)–(b) (as passed by the House, 

June 24, 2003). After a short debate that did not include any significant discussion of the 

priority provision, the bill was passed by the House. See 108 Cong. Rec. 15,741 (2003). 

On the Senate side, however, the provision was struck without debate or explanation. See 

Veterans Benefits Act of 2003, Pub. L. No. 108-183, 117 Stat. 2662; 108 Cong. Rec. 

29,614–15 (2003).
33 Op. O.L.C. 284 (2009)

302

agency. See id. § 3554; 4 C.F.R. § 21.8 (2009) (implementing 31 U.S.C. 

§§ 3551–3556 (2006)).

Second, the Comptroller General is an officer of the Legislative 

Branch. See Bowsher v. Synar, 478 U.S. 714, 727–32 (1986) (holding 

Comptroller General is subject to the control of Congress and therefore 

may not exercise non-legislative power). “Because GAO is part of the 

Legislative Branch, Executive Branch agencies are not bound by GAO’s 

legal advice.” Whether Appropriations May Be Used for Informational 

Video News Releases, 29 Op. O.L.C. 74, 74 (2005) (“Bradbury Memo”) 

(citing Bowsher, 478 U.S. at 727–32). 

Our Office has on many occasions issued opinions and memoranda 

concluding that GAO decisions are not binding on Executive Branch 

agencies and that the opinions of the Attorney General and of this Office 

are controlling. See Bradbury Memo, 29 Op. O.L.C. at 74 (“This memorandum is being distributed to ensure that general counsels of the Executive Branch are aware that the Office of Legal Counsel (‘OLC’) has 

interpreted this same appropriations law in a manner contrary to the views 

of GAO, and to provide a reminder that it is OLC that provides authoritative interpretations of law for the Executive Branch.”); Memorandum for 

Lois J. Schiffer, Assistant Attorney General, Environment and Natural 

Resources Division and for John D. Leshy, Solicitor, Department of the 

Interior, from Todd David Peterson, Deputy Assistant Attorney General, 

Re: Administrative Settlement of Royalty Determinations at 6 n.7 (July 28, 

1998) (“Although the opinions and legal interpretations of the GAO and 

the Comptroller General often provide helpful guidance on appropriations 

matters and related issues, they are not binding upon departments, agencies, or officers of the executive branch.”); Statutory Authority to Contract with the Private Sector for Secure Facilities, 16 Op. O.L.C. 65, 68 

n.8 (1992) (“We note that while GAO reports are often persuasive in 

resolving legal issues, they, like opinions of the Comptroller General, are 

not binding on the Executive branch.”); Memorandum for Donald B. 

Ayer, Deputy Attorney General, from J. Michael Luttig, Principal Deputy 

Assistant Attorney General, Office of Legal Counsel, Re: Department of 

Energy Request to Use the Judgment Fund for Settlement of Fernald 

Litigation at 8 (Dec. 18, 1989) (“This Office has never regarded the legal 

opinions of the Comptroller General as binding upon the Executive.”); 

Memorandum for Joe D. Whitley, Acting Associate Attorney General, 
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303

from William P. Barr, Assistant Attorney General, Office of Legal Counsel, Re: Detail of Judge Advocate General Corps Personnel to the United 

States Attorney’s Office for the District of Columbia and the Requirements of the Economy Act (31 U.S.C. §§ 1301, 1535) at 2 n.2 (June 27, 

1989) (“The Comptroller General is an officer of the legislative branch, 

and historically, the executive branch has not considered itself bound by 

the Comptroller General’s legal opinions if they conflict with the opinions 

of the Attorney General and the Office of Legal Counsel.” (internal citation omitted)).

VI.

We accordingly conclude that SBA’s regulations regarding the relationship among the 8(a), HUBZone, and SDVO Programs constitute a permissible construction of the Act.

JEANNIE S. RHEE

Deputy Assistant Attorney General

Office of Legal Counsel