The Government's Shoddy Market Research Practices

The Government says that it is continuously seeking ways to increase the participation of small businesses in Government contracting (how about streamlining the GSA Schedule process, for starters?). One of Defense's BBP (Better Buying Power) 3.0 initiatives that we discussed last April is to compile a new set of tools that will enhance market research:

The premise here in this initiative is that there is a lot of small businesses out there that could be solicited for work if only Government acquisition personnel had better market research tools. With the proper "tools", the Government could perform market research and ferret out those small businesses that are disengaged or not aware of Government contracting opportunities. With the proper "tools", the Government's acquisition corps could find small businesses to produce "innovative solutions for the Department". So, if some company has a better, more efficient, or more cost effective method of providing goods and services, the Government's market research activities will find them and bring them under contract.

One use of agencies market research is to determine whether there are sufficient number of small businesses available to meet an agency's needs and if so, the solicitation can be set aside (reserved) for small businesses. Sometimes however agencies get rather sloppy in their market research endeavors. Consider a recent GAO bid protest that ruled the VA's (Veteran's Administration) market research did not support a conclusion that at least two small businesses could meet the agency's needs.

The VA needed radiopharmaceuticals so it searched two databases for small businesses operating under a certain NAICS code. It found some and assumed that they were qualified and therefore set aside the solicitation for small businesses only. However, the particular NAICS code included a large array of different types of businesses manufacturing all types of pharmaceuticals, including cold medicines and lip balms.

One company, a competitor that couldn't bid because it wasn't a small business, challenged the adequacy and sufficiency of the VA's market analysis. The GAO sustained the protest, finding that the VA had not adequately focused its market research on radiopharmaceuticals manufacturers, and that the agency did not even consider whether the companies it identified could be considered manufacturers or simply suppliers of the product. Further, there was not indication in the market research report, or otherwise, that any of the identified companies have the required nuclear pharmacy licenses to perform under the contract.

You can read the entire GAO Bid Protest decision here.