Court of Federal Claims Determines that HUBZone Small Businesses Have Priority over Other SBA Preference Categories

3.16.2010 - Posted in E&B Alerts - Government Contracts

The Court of Federal Claims recently weighed in on the growing conflict between the Executive Branch and the GAO involving a protest filed by Mission Critical Solutions, discussed in the E&B Alerts of May 11 and July 16, 2009. Originally, the Small Business Administration required that Section 8(a) and HUBZone preferences be treated equally. Last summer, however, the GAO determined that federal agencies must analyze whether a HUBZone preference applies before turning to other preference categories, such as Section 8(a) small businesses and service disabled veteran owned small businesses (SDVOSBs).

The Office of Management and Budget (OMB), emphasizing the non-binding nature of GAO decisions, subsequently issued a memorandum instructing federal agencies to disregard the GAO interpretation. Shortly thereafter, the Office of Legal Counsel for the Department of Justice issued an opinion memorandum that contradicted the GAO analysis of preference priorities, and reinforced the OMB instruction to treat the preferences equally.

Consequently, the original protestor filed its protest action with the Court of Federal Claims. The Court held, consistent with the GAO analysis, that "the statutory language implementing the HUBZone and (8a) programs indicate that the HUBZone program takes priority over the 8(a) program whenever the specified criteria found in 15 U.S.C. § 657a(b)(2)(B) are met." Mission Critical Solutions v. United States, No. 09-864C (Fed. Cl. Mar. 2, 2010), available online at http://www.wifcon.com/cofc/09-864c.pdf. The decision is binding upon all federal agencies and shall guide procurements . . . at least until Congress revises the statute to place the two programs on equal footing, as many expect will occur.

For additional information or if you have questions on this topic, contact Dave Laidig at 612-236-0163 or[email protected] .