Sanford Federal, Inc., the selected awardee for a U.S. Department of Veterans Affairs (the VA) contract, learned the hard way that a contractor simply cannot ignore a size protest, regardless of its actual merit.
On August 8, 2023, the VA issued an RFQ for boiler plant safety device testing, calibration and inspection for one of its facilities in Arizona. The RFQ was set aside entirely for Service-Disabled Veteran-Owned Small Businesses and assigned NAICS code 238290, Other Building Equipment. The corresponding size standard for this code was $22 million in average annual receipts. The VA received two timely quotes and selected Sanford for the award. The non-awardee, Caldaia Controls, Inc., filed a protest with the contracting officer asserting that Sanford was not a small business because it received significant contract awards between 2019 and 2023, which, when averaged, exceeded the procurement’s applicable size standard. The contracting officer forwarded the protest to the cognizant SBA Area Office (Area Office).
The Area Office notified a Sanford representative of the protest and requested that, within three business days, the company provide certain financial information for the five previously completed fiscal years preceding Sanford’s self-certification for the subject procurement. In an accompanying letter, the SBA warned Sanford that if it did not provide the requested information by the specified deadline or request a time extension, the SBA may determine Sanford to be other than small. Sanford did not respond. Nor did Sanford respond to a follow-up notification and request the Area Office sent to the company’s president. Having heard nothing from Sanford, the Area Office concluded that Sanford did not qualify as small under the applicable size standard. In sum, because Sanford failed to respond, the Area Office drew the adverse inference that had the requested information been provided, it would have shown that Sanford was other than small.
Sanford appealed the Area Office’s decision to the SBA’s Office of Hearing and Appeals (OHA). Sanford did not dispute that it received the Area Office’s emails regarding the size protest and request for information. Nevertheless, Sanford claimed that Caldaia’s protest was non-specific because the publicly available financial information it relied on included contracts awarded in 2023, which would not generate any income until fiscal year 2024. Sanford contended that if the area office had disregarded its 2023 contracts, the analysis would have shown that Sanford did not exceed the applicable size standard.
OHA agreed with Sanford that the size protest was non-specific. OHA concluded that because Sanford self-certified as small for the procurement on October 6, 2023, the applicable period for averaging annual receipts was the five most recently completed fiscal years before self-certification. In Sandford’s case, that period would have been 2018 through 2022, not 2019 through 2023, as proposed by Caldaia. Because Caldaia’s protest relied mostly on Sanford contracts awarded in 2023 and because Caldaia did not provide any reason to believe that Sanford exceeded the applicable size standard over the relevant time period (2018-2022), OHA concluded the protest lacked specificity.
But alas, what appeared to be vindication for Sanford took a disappointing turn. OHA observed that notwithstanding the protest’s non-specificity, Sanford did not object to the protest when it was lodged at the Area Office, nor did it claim to be a small business. In fact, as OHA noted, Sanford did not do anything concerning the size protest, even in the face of the Area Office’s requests for information, which Sanford acknowledged receiving. In short, because Sanford had not raised these defenses at the Area Office, Sanford could not raise them at OHA for the first time on appeal. Instead, OHA held that Sanford could have raised the issue of non-specificity at the Area Office or provided the information requested, showing Sanford was a small business during the relevant period. Sanford failed to do so, and as it was too late to raise the issue at OHA, Sandford could not meet its burden to establish it was a small business in response to the protest. Thus, the Area Office justifiably drew an adverse inference that had Sanford produced the information requested, that information would have demonstrated Sanford was not small and thus ineligible for the award.
Sanford teaches contractors a valuable lesson—if you receive a notice of a size protest, do not ignore it and expect the agency to take up your cause and dismiss a meritless protest in your absence. Instead, take action and be prepared to respond promptly to requests for information from the SBA. Put simply, if you see something, say something.
If you have any questions regarding small business-size protests, small business regulations, or any other matters related to contracting with the federal government, our Government Contracting Group is available to assist you on this or any other government contracting matters.