The following is an installment in Crowell & Moring’s Bid Protest Sustain of the Month Series. In this series, Crowell’s Government Contracts Practice keeps you up to date with a summary of one of the most notable bid protest sustain decisions each month. Below, Crowell Consultant (and former GAO Bid Protest Hearing Officer) Cherie Owen discusses GAO’s decision in LJR Solutions, LLC, B-424487, Aug. 14, 2026, where GAO sustained a small business’s challenge to the National Institutes of Health’s decision not to set aside a procurement for small business concerns.
LJR Solutions, LLC, a small business, protested the terms of an RFP, issued by the Department of Health and Human Services, National Institutes of Health (NIH), for professional, scientific, and technical services. This was the second protest challenging NIH’s efforts to conduct this procurement on a full and open basis. The agency had previously conducted market research between March 2023 and April 2024, issuing sources sought notices, conducting an industry day, and convening meetings with potential sources, before issuing a 2024 RFP on a full and open basis with a small business reserve. LJR filed a prior protest in December 2024, arguing the agency unreasonably failed to set aside the procurement for small businesses, after which the agency took corrective action and GAO dismissed that protest as academic. Following a review of its procurement strategy, the agency did not take further action for more than a year, then issued the current RFP on March 26, 2026, again on a full and open basis with a small business reserve.
At the heart of the protest was the Rule of Two – a well-established requirement that agencies set aside procurements for small businesses when at least two responsible small businesses are reasonably expected to submit competitive offers. The Rule of Two has its roots in the Small Business Act, and has been implemented through SBA regulations (13 C.F.R. § 125.2) and the FAR (FAR 19.502-2(b)). In this case, the applicable authority was section 19.104-1(a) of the Revolutionary FAR Overhaul (RFO), which GAO noted is substantively similar to the FAR and SBA provisions. Under the applicable Rule of Two, agencies are required to set aside any procurement valued over the simplified acquisition threshold when there is a reasonable expectation that the agency will receive offers “competitive in terms of fair market prices, quality, and delivery” from at least two responsible small businesses.
GAO sustained the protest because the agency’s determination not to set aside the procurement was unreasonable and internally inconsistent in multiple respects. First, GAO noted that at the time the RFP was issued, the agency had not conducted any market research or documented set-aside consideration that occurred after issuance of the 2024 RFP. However, more than a month after the 2026 RFP was issued, the agency prepared a 2026 market research memorandum purporting to justify the decision not to set aside the procurement. The problem, however, was that while the 2026 memorandum vaguely asserted three small businesses identified as capable in NIH’s 2024 market research would not be able to meet the current RFP’s requirements, this conclusory assertion was unsupported by any basis for reaching that conclusion. GAO noted that this lack of documentation, by itself, supported sustaining the protest. Second, the contracting officer’s analysis was internally inconsistent: to justify not performing updated market research, the contracting officer stated that the marketplace and type of requirement had not changed between 2024 and 2026, yet never explained why the three small businesses previously found capable were no longer considered capable.
Third, NIH had concluded that interested small businesses were considered incapable because they could not independently support the full scope, volume, and range of tasks envisioned by the RFP. However, this conclusion was unreasonable and applied an unfair standard. As an initial matter, GAO noted that NIH had concluded no firm — large or small — was able to independently meet the full scope of the requirements. For this reason, NIH planned to award eight IDIQ awards. Compounding this problem, it was unreasonable for NIH to consider a small business “incapable” merely because the company planned to utilize subcontractors and teammates. As GAO noted, the solicitation did not require IDIQ contract holders to perform the work without the use of subcontractors; to the contrary, the RFP specifically contemplated the use of subcontractors to perform major or critical aspects of the requirement. As a result, relying on a contractor’s potential use of subcontractors to conclude they were “incapable” of performing the contract’s requirements was unreasonable – especially when the agency believed large businesses would need to do the same.
Finally, GAO found that even if the agency had reasonably concluded that a total set-aside was not warranted, NIH failed to analyze (and document) its consideration of whether a partial set-aside was feasible. GAO stressed that under RFO 19.112, a contracting officer may only utilize a small business reserve if both a total and a partial set-aside are not feasible. Here, the agency conceded that “some small businesses demonstrated the capability to perform certain aspects of the requirement,” yet it did not appear NIH ever considered whether a partial set-aside was feasible. The agency simply skipped over the partial set-aside analysis entirely — jumping straight from its conclusion that a total set-aside was not warranted to its decision to proceed with full and open competition.
In sustaining the protest, GAO recommended that NIH conduct new market research if appropriate and determine whether the solicitation should be fully or partially set aside for small business concerns. The LJR Solutions decision serves as an important reminder that agency set-aside determinations must be both adequately documented and internally consistent. Where prior market research identified capable small businesses, an agency must explain why those firms are no longer considered capable and cannot reject small businesses for a purported deficiency that applies equally to large businesses and is permitted under the solicitation’s own terms. Equally important, if a total set-aside is not feasible, before resorting to a small business reserve, agencies must also meaningfully consider whether a partial set-aside is feasible.