Embargoed for Release December 14, 2011 Contact: Advocacy Office (904.347.4726)
GAO PROTEST PLUS TRANSPARENCY INVESTIGATION
MIGHT FINALLY DOOM THE GSA EXEMPTION
Procurement Watchdog Resurrects Huge GAO Case while Demanding Investigation
To Help Free-up $44 Billion in GSA Contracts for Small Businesses
JACKSONVILLE, FL.- DECEMBER 14th, 2011. – Claiming government regulators are being unfairly
influenced by big business lobbyists,1 government Agencies are not to be trusted,2 and small businesses
are not receiving due-process on their protests3, prominent procurement watchdog, Raul Espinosa,
described his latest watchdog experiences involving the GSA Exemption and the government reverse
auctions rules.
The GSA Exemption is a regulation (Part 8.4) on the Federal Acquisition Regulations (FAR) that illegally
excludes the GSA Federal Supply Schedules (FSS) solicitations from the set-aside provisions of The Small
Business Act,4 and from FAR Part 19, which stipulates that ALL procurements between $3,000 and
$150,000 must be reserved for small businesses.
The issues on Espinosa’s latest protest, which GAO had refused to address in 2007 claiming his company
“had no standing to challenge a government reverse auction linked with GSA Schedule Suppliers,’ have
been resurrected on a GAO Case against the Army.5 Espinosa had overcome the 2007 GAO ruling that
had claimed his company was not “an interested party” causing for GAO to address the merits of his case.6
Although GAO will now consider the merits of Espinosa’s protest,7 GAO indicated it will not allow the Small
Business Administration (SBA), whose oversight of GSA Schedule solicitations and reverse auctions
solicitations are been circumvented, to participate. GAO is also not allowing the U.S. Office of Advocacy,
which has confirmed that reverse auction rules circumvent FAR Part 19 and applicable laws to participate.
- MORE -
1
Documenting lobbying against small businesses.‐ - http://youtu.be/ho1gV77_cw4?hd=1
2
The Pew Research Center Report on Lack of trust in Government. - http://bit.ly/ph1XpL
3
Protests do not offer justice. ‐ http://bit.ly/ci95y4
4
Inconsistency with Applicable Laws. - http://uscode.house.gov/cod/t53/exp.pdf
5
Espinosa GAO Protest B‐406075. ‐ http://bit.ly/tNWXFp
6
GAO Denies Army Motion to Dismiss Claiming FitNet is not interested Party. ‐ http://bit.ly/vSEg5l
7
Espinosa Final Pleading Against the Army. ‐ http://bit.ly/rLoyXx
Both SBA and the Office of Advocacy have indicated their desire to offer their views. GAO is only allowing
GSA - which has a vested interest in avoiding a GAO ruling - to submit its views.
Borden Hallowes, Esq., a Jacksonville attorney with The Umbrella Initiative Think Tank and Legal Center
said, “GAO is unfairly restricting the protestor due process and is stacking the colossal Government legal
machinery against a very prominent procurement watchdog whose activities in support of small and
disadvantaged businesses are well known.”
Espinosa resurrected his Case in light of the GAO Delex8 and the GAO Aldevra9 decisions both of which
had confirmed that the Exemptions on the Federal Acquisition Regulations (FAR) were not consistent with
applicable laws and the regulations and therefore were illegal. Additionally, because the Regulators had
unfairly proposed an interim rule, on November 2nd, 2011, that amended the GSA Schedule exemption on
the FAR by making set-asides on the GSA Federal Supply Schedule (FSS) available only “at the discretion
of the Agencies.”10
According to a 2007 SBA Legal Opinion solicited by GAO11 during Espinosa’s original protest, “according to
statute and regulations, small business set asides are mandatory for acquisitions valued from $3,000 to
$150,000 (upgraded in 2011) and take priority over GSA Schedule contracts. This interpretation is
consistent with the declared and unambiguous intent of Congress as it relates to Federal procurement and
small businesses.” In other words, Agencies have no discretion on the matter.
Espinosa, who is the Founder of the Fairness in Procurement Alliance (FPA)12 claims that “both the GSA
exemption along with the government reverse auction rules prevent SBA Procurement Center
Representatives (PCRs) from coordinating small business participation when Agencies select either the
GSA Schedule venue and/or the reverse auction as procurement vehicles.” As a result, GSA has been able
to divert, $44 Billion in contracts annually away from small businesses,13 for over 10 years. FPA has also
submitted a Petition to the Assistant Secretary of the Army to bring transparency to the issues brought up
on the GAO protest by, separately, investigating and reporting on them.14 Members of Congress are
considering elevating the FPA request into a Congressional investigation.
- MORE -
The GAO Delex Decision. - – http://www.gao.gov/decisions/bidpro/400403.pdf
8
9
The GAO Aldevra Decision. ‐ http://www.gao.gov/decisions/bidpro/405271.pdf
10
The Interim Rule on the GSA Exemption. - http://1.usa.gov/s17BOx
11
SBA historic Legal Opinion of 2007.- http://bit.ly/rkHKvg
12
Description of FPA and its Success. - http://bit.ly/cSJHTI.
13
Diversion of Contracts. ‐ http://bit.ly/gfkQoV
14
Petition to the Army for an Investigation of its procurement practices. - http://bit.ly/rtP21m
Senators Olympia Snowe and John Kerry, Chair and Ranking Members of the Senate Committee on Small
Business and Entrepreneurship have gone on record15 as saying, “ the unambiguous Congressional intent
(is) that the (Small Business) Act govern all procurements and Executive departments do not have the
discretion to interpret the law in a manner inconsistent with its plain language.”
“Imagine the Government telling us that one of the three inalienable rights granted by the U.S.
Constitution16 will be offered now, but only at the discretion of the government,” said Attorney
Hallowes. He added, “That is exactly what the regulators are attempting to do by making set-
asides on the GSA Schedule available only at the discretion of the Agencies. A huge injustice that
GAO, if they offer due-protest to the protestors, cannot allow?”
Attorney Hallowes added, “Government regulators are allowing GSA and other Agencies to
illegally exclude small businesses from their contracts; for Agencies to misrepresent their actual
contracting results with small businesses without repercussions and for the rules of ‘reverse-
auctions’ to be used to discriminate against small businesses in direct violation of the statutes.”
Espinosa has said, “GAO must consider ruling on the inconsistency of the GSA Exemption with
applicable laws and regulations and order an overhaul of the reverse auction rules as the U.S.
Office of Advocacy had proposed on their 2008 r3 initiative which list the Nation’s ‘Ten Worst Rules
and Regulations Affecting Small Businesses.’” 17
Roger Campos, President of the Minority Business Roundtable (MBRT) said, “GAO must compel Federal
agencies to let SBA coordinate small business participation on all solicitations. Agencies have never met
their 23% statutory, but, instead, have lied about their results in contracting on the SBA Report Card.” 18 He
added, “The protest raised by Espinosa demonstrates how Agencies are using the GSA Schedule and the
government reverse auctions to circumvent small business coordination.”
Small businesses are urged to file their opposition to the FAR interim rule, by January 3rd, 2012 at
http://www.governmentregulations.gov. When you do, reference FAC 2005-54, Case 2011-024. You will join
national small business leaders who have supported Espinosa’s efforts against the ‘Exemptions’.19
The mission of the Fairness in Procurement Alliance (FPA) is to bring fairness to public procurements so that small
and disadvantaged businesses (SDB) can receive "maximum practicable utilization" (MPU) as prescribed by P.L. 95-507 and thus
compete and prosper at the federal, state and local levels. FPA operates the a Think Tank and Legal Center to involve university
and law professors in bringing transparency to public procurement and in projects that create jobs.. FPA also manages ‘The
Umbrella Initiative' whose goal is "to double the number of small businesses contracting with the governement by the year 2020."
15
Letter to Secretary of State Powell, June 5th, 2005.
16
The inalienable rights. – freedom, justice and the pursue of happiness
17
The Office of Advocacy r3 Initiative case against the reverse auction rules. - http://bit.ly/ruBRwB
18
The Umbrella Initiative Report to the Senate. - http://bit.ly/phUhkN
19
Support against the Exemptions. - http://bit.ly/nJ7ibQ