Do All Team Members of a CTA Have To Be Small Businesses When Using a Small Business Set Aside?

Why do all members of the CTA have to be small businesses if an agency uses a small business set aside for their requirement?

It seems that Brad and I are receiving quite a few calls on this subject lately. I guess that is to be expected with the inception of discretionary set asides for the GSA schedules program as of November 2011.  Currently, the Small Business Administration (SBA) is working on developing policies in reference to set asides.

GSA has a web page with Small Business Frequently Asked Questions (FAQs). On that page, one of the questions (Question #13) is in reference to small business set asides when using Contractor Teaming Arrangements (CTA).

Disclaimer: Please keep in mind that this is NOT a FAR Part 9.6 Contractor Teaming Arrangement. FAR Part 9.6 deals with partnerships and joint ventures.

*(Note 1: This is often confused. GSA will be renaming Contractor Teaming Arrangements to Contractor Partnering Arrangements to alleviate the confusion)

**(Note 2: Keep in mind that the Contractor Teaming Arrangement used in GSA schedules cannot be found anywhere in the FAR. It is the COs discretion to accept a quote with a CTA, therefore, make sure to determine the CTA is in the best interest of the Government and that the contract folder is well documented)

Let’s take a look at one of the important traits of a CTA.  Remember that a CTA simply defined is, “two or more schedule contract holders working together to meet the Government’s needs.”   

The first thing I want to touch base on is how we treat CTA Team Members. In essence, the Government treats each team member as a prime contractor. What does that mean to us? It means that the Government has “privity” with each contractor. When awarding the contract, the Government is not just awarding to the team leader of the CTA, but to all team members.  They team members are all individually responsible for providing their portion of the contract. Yes, the Contracting Officer (CO) can only put one contractor on page 1 of the contract. GSA also recommends that the rest of the team members and their schedule contract numbers are somewhere on the contract (normally in the free text edit area of page 2).

IAW FAR Par 19.501(a), “the purpose of small business set asides is to award certain acquisitions exclusively to small business concerns.”  Since the Government has invoked FAR Part 19, the regular set aside rules are applicable and only Small Businesses are eligible to be Prime contractors.

By allowing large businesses to be team members of a CTA that is set aside for small businesses, there is no way of the Government controlling how much of the requirement would be going to the large business. Not only that, but an agency would be artificially inflating small business goals. Keep in mind that subcontracting and CTAs are very different under the schedule program. Think about this for a minute. CTAs are made up of schedule contract holders.  At this point, we have not brought subcontracting into the mix. Meaning, the Limitations on Subcontracting clause, 52.219-14 (the 50% rule), has not been triggered since all team members have schedule contracts. So again, no control on how much of the requirement is being completed by a small business.

Also, IAW clause 52.219-6(b), “Offers are only solicited from small business concerns. Offers received from concerns that are not small business concerns shall be considered non-responsive and will be rejected.”

One of first things I learned when gaining experience as a new contract specialist many moons ago, was a certain level of risk aversion. There are words we try to avoid.  What would one of those words be you might ask?  PROTEST! What could happen if we set aside a requirement for small business and then make an award to a team with a CTA where one or more team members are a large business?  I would have to say……..wait for it……..protest! I have not found a GAO case that has set the precedent in this case, as the small business set aside is so new to the GSA schedule program (I welcome any input and would be glad to add a case if you can find one).  GAO normally reviews the FAR and the precedent set by previous cases. After that, GAO oftentimes consults with GSA.  What would GSA say at this point? Well, I believe that one of the things GSA would do is point to the earlier mentioned post from the GSA website. 

As often is the case, there is not a specific citation in the FAR in regards to this particular paradigm (See **Note 2 above). Acquisition professionals like to have something we can hang our hat on. In this case, we have to make a decision based on what is available to us. I don’t know about you, but I am convinced that once the Government makes a decision to set aside a particular requirement for small business, we have to consider all of FAR Part 19. I would hang my proverbial hat IAW FAR Part 19.501(a) and clause 52.219-6(b). I don’t believe that there is anything supporting any other decision.

Thanks to both Shelley and Stacy for your comments and suggestions! You know who you are!

As always, I look forward to hearing your comments, criticisms, and yes, even your smart remarks.