By: Anthony J. Marchese, Esq. and Andrew Campbell
As we noted in our previous blog, the SBA responded to the 2018 Runway Extension Act by asserting that until it promulgates a rule to reflect the new five-year gross receipts size standard, the three-year standard remains the law of the land. Of course, SBA has yet to do so, and a recent U.S. Government Accountability Office (GAO) decision has defaulted to SBA’s interpretation of its rule-making authority, further corroborating that the Runway Extension Act is not yet applicable to federal contractors.
The GAO Decision
In June, TechAnax, LLC and Rigil Corporation filed protests in the GAO against a General Services Administration (GSA) solicitation, alleging that the solicitation was inconsistent with the Runway Extension Act. The protests argued that the Runway Extension Act was in force before the issuance of the request for proposal (RFP) by GSA, and the new five-year standard for calculating gross receipts should, therefore, be controlling. In particular, the protesters argued that Amendment 4 of the RFP, issued on June 6, 2019, was inconsistent with the new five-year standard set by the Runway Extension Act. Amendment 4 stated that the qualification as a small business for purposes of the RFP would be based on the three-year standard, as advanced by SBA’s contention that the Runway Extension Act is not in effect until it promulgates a rule to reflect the new, five-year standard. The RFP thus treated the new law as not in effect. The GAO, weighing on SBA’s rule-making authority, decided that SBA has “conclusive authority” in determining small business matters, particularly the size standard rules that will apply to federal procurement. Accordingly, GAO opted to adhere to SBA’s position on the Act.
TechAnax and Rigil, according to GAO’s decision, never challenged the requirement for SBA to promulgate changes to size standards under 15 U.S.C. § 632(a)(2)(A). Instead, TechAnax and Rigil argued that the effect of the Runway Extension Act was to “automatically revise all existing size standards and SBA regulations, without need for further action by SBA.”
In its decision, GAO side-stepped the issue of whether or not the Runway Extension Act is currently in effect (spoiler alert: it is). Instead, GAO relied on SBA’s interpretation of the Runway Extension Act and decided that because GSA had adhered to SBA’s interpretation of the law, it had not issued flawed solicitations inconsistent with law. However, GAO elected to not decide on the correctness of SBA’s response to the Runway Extension Act, stating that the matter is not for them to decide. In doing so, GAO has essentially agreed with SBA’s position that the Runway Extension Act is not in effect until it promulgates a rule to reflect the five-year standard, thereby adding to the confusion amongst small business contractors.