Compliance With Contract Terms - Will Comply or Has Complied

The GAO issued a bid protest decision earlier this week that illustrates how small businesses can compete for Government contracts even though they do not currently have the requisite number of employees necessary to perform the contract. In short, companies can always go out and hire more employees.

The issue related to a VA solicitation that included limitations on subcontracting. Specifically, the solicitation required that 15 percent of the cost of the contract performance incurred for personnel will be spent on the concern's employees or the employees of other eligible SDVOSB (Service Disadvantaged Veteran Owned Small Businesses). A contract was ultimately awarded to a company called ISS whereupon one of the unsuccessful bidders, a company called GSZ, appealed, arguing that it is impossible for ISS to spend 15 percent of the cost of the contract performance on its own employees because it had only four employees and would have to spend $1.3 million on those employees resulting in an hourly rate that was not sustainable in the construction industry.

GAO concluded that nothing on the face of ISS's proposal should have led the VA to conclude that ISS would not comply with the subcontracting limitation. There was no indication that ISS would not hire additional personnel as needed to complete the project or to comply with the subcontracting limitations.

The key point for GAO's decision is this. "As a general matter, an agency's judgment as to whether a small business offeror will comply with the subcontracting limitation clause is a matter of responsibility, and the contractor's actual compliance is a matter of contract administration." The agency awarding the contract was satisfied that ISS was responsible and could and would comply with the terms of the contract.

You can read the entire decision here.