*  Judge Advocate, United States Army.  Presently assigned as the Brigade Judge Advocate, 20th Engineer Brigade, 18th Airborne Corps, United States Army.  J.D., 2006, Seton Hall University School of Law; B.S., 2000, University of Georgia.  Previous assignments include:  Future Concepts Officer, The Judge Advocate General’s Legal Center & School, Charlottesville, Virginia (2014–2015); Contracts Attorney, 410th Contract Support Brigade, Fort Sam Houston, TX (2012–2014); Chief of Operational Law, U.S. Army South, Fort Sam Houston, TX (2010–2012); Operational Law Attorney, 4th Brigade Combat Team, 4th Infantry Division, FOB Fenty, Afghanistan (2009–2010); Trial Counsel, Fort Carson, CO (2008–2009); Legal Assistance Attorney/Tax Center OIC, Fort Carson, CO (2007–2008).  Member of the bar of New Jersey.  This article was submitted in partial completion of the Master of Laws requirements of the 64th Judge Advocate Officer Graduate Course. 

1  The story of Chicken Little is well known all over the world.  The story’s ending changes depending on the storyteller.  One version ends with Chicken Little mustering the courage to face her fears.  The other version ends with Chicken Little and her friends, who Chicken Little has worked into hysteria, meeting Foxy Loxy along the way to tell the king that the sky is falling.  Foxy Loxy eats Chicken Little and her friends.  The moral of the story is to stay calm and not believe everything you hear.  E.L. Easton, The Story of Chicken Little, http://archive.is/Ev1rT (last visited May 30, 2017).

[1]  “U.S. Southern Command leverages rapid response capabilities, partner nation collaboration, and regional cooperation within our Area of Responsibility in order to support U.S. national security objectives, defend the Southern approaches to the United States, and promote regional security and stability.”  U.S. Southern Command, http://www.southcom.mil/About/.

[2]  The Simplified Acquisition Threshold (SAT) is a dollar amount where contracts under that threshold trigger a set of simplified procedures for procuring supplies, services, and items in hopes of lowering costs and providing efficiency.  See FAR Part 13.

[3]  FAR Part 19 implements acquisition related portions of the Small Business Act (The Act) and typically consists of setting aside certain contracts appropriate for small businesses.

[4]  See Don Mansfield, Did the SBA Invalidate FAR 19.000(b)?, Wifcon (Jun 17, 2015), http://www.wifcon.com/discussion/index.php?/blog/6/entry-3081-did-the-sba-invalidate-far-19000b/ (discussing the overseas exception to SBA set-asides).

[5]  “Chevron Deference” is a term derived from a Supreme Court opinion that created a test used to determine whether to give deference to a government agency’s interpretation of a statute they administer.  See Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984).

[6]  Latvian Connection Gen. Trading & Constr. LLC, Comp. Gen. B-408633, 2013 CPD ¶ 224 (Comp. Gen. Sept. 18, 2013).  The quoted language was used by the Government Accountability Office (GAO) as it denied a protestor’s claim that Small Business Administration (SBA) set-asides should be applied extraterritorially. 

[7]  Small Business Administration, https://www.sba.gov/about-sba/what-we-do/history (last visited May 30, 2017).  The Reconstruction Finance Corporation, began by Herbert Hoover, in coordination with other government agencies like the Smaller War Plants Corporation, the Small Defense Plants Administration, and the Office of Small Business found in the Department of Commerce, all worked together to help small businesses participate in war-time production.  Id.

[8]  The Small Business Act of 1953, Pub. L. No. 83-163, § 202, 67 Stat. 230, 232 (codified as amended at 15 U.S.C. § 631(a) (2012)).

[9]  Id.

[10]  Two mechanisms have primarily been used to set aside contracts for small businesses.  The first and primary mechanism is known as the “Rule of Two.”  The rule applies by directing contracting officers to set aside “any acquisition over $150,000 for small business participation when there is a reasonable expectation that:  (1) Offers will be obtained from at least two responsible small business concerns…; and (2) Award will be made at fair market prices.”  FAR. 19.502-2(b) (2016).  The second mechanism is the automatic set-aside, where any action over the micro-purchase threshold and under the simplified acquisition threshold (SAT), is automatically reserved for small business concerns that are competitive in terms of market prices, quality, and delivery.  See FAR 19.203(b) (2016).  Congress has also created other preferences to award contracts to small businesses owned by socially and economically disadvantaged individuals, women-owned small businesses, small businesses in historically underutilized business zones, and small businesses owned by veterans with service-connected disabilities.  See 15 U.S.C. § 637 (2012).  These socio-economic preferences are discretionary set-asides.

[11]  The “overseas exception,” as it first appeared in the Armed Services Procurement Regulation (ASPR) in 1958, stated, “This subpart applies only in the United States, its Territories, its possessions, and Puerto Rico.”  Armed Services Procurement Regulation, 23 Fed. Reg. 9209, 9209 (Nov. 29, 1958).

[12]  Subpart 19.6 is the SBA’s Certificate of Competency (CoC) program.

[13]  GAO, headed by the Comptroller General, attempts to provide an impartial and independent forum where bid protests can be resolved without the delay and cost associated with formal litigation.  These decisions “have resulted in a uniform body of law applicable to the procurement process upon which the Congress, the courts, agencies, and the public rely.”  Bid Protests at GAO: A Descriptive Guide, 2010. http://www.gao. gov/assets/210/203631.pdf

[14]  Eastern Marine, Inc., 63 Comp. Gen. 551, 551 (1984).

[15]  Id. at 552. 

[16]  Id. at 553.  “The Certificate of Competency (CoC) program allows a small business to appeal a contracting officer's determination that it is unable to fulfill the requirements of a specific government contract on which it is the apparent low bidder.  When the small business applies for a CoC, SBA industrial and financial specialists conduct a detailed review of the firm's capabilities to perform on the contract.  If the business demonstrates the ability to perform, the SBA issues a CoC to the contracting officer requiring the award of that specific contract to the small business.”  See Certificates of Competency, Small Business Administration, https://www.sba.gov/content/certificate-competency-program (last visited May 30, 2017); see also FAR 19.600(a) (2016).

[17]  The protestor pointed to the Federal Procurement Regulations, 41 C.F.R. § 1-1.700(b) (1984)—another precursor to the FAR—which provided that the small business set-aside regulations applied only in the United States.  Id. at 2.

[18]  GAO held “There is nothing in the SBA’s regulations, however, that would limit the application of the CoC program to either contracts awarded or items to be delivered in the United States.  In fact, the SBA has informed us that it believes that the CoC program is not so limited.  We therefore find no basis to object to the CoC referral.”  Id. at 2.

[19]  Discount Mach. & Equip., Inc., 70 Comp. Gen. 108, 109 (1990).

[20]  See id. at 110.

[21]  “The Federal Acquisition Regulatory Council was established to assist in the direction and coordination of Government-wide procurement policy and Government-wide procurement regulatory activities in the Federal Government, in accordance with Title 41, Chapter 7, Section 421 of the Office of Federal Procurement Policy (OFPP) Act.  The Administrator, in consultation with the Council, shall ensure that procurement regulations, promulgated by executive agencies, are consistent with the Federal Acquisition Regulation (FAR) and in accordance with any policies issued pursuant to Section 405 of Title 41.  The Council manages[,] coordinates[,] controls[,] and monitors the maintenance and issuance of changes in the FAR.”  Office of Management and Budget, https://obamawhitehouse.archives.gov/omb/procurement_far_council (last visited May 30, 2017).

[22]  The FAR went through a number of iterations explaining where the SBA applies.  Its current form states, “This part, except for Subpart 19.6, applies only in the United States or its outlying areas. Subpart 19.6 applies worldwide.”  FAR 19.000(b) (2016). 

[23]  Latvian Connection Gen. Trading & Constr. LLC, Comp. Gen. B-408633, 2013 CPD ¶ 224 (Comp. Gen. Sept. 18, 2013).

[24]  Id.

[25]  Id.

[26]  Id.

[27]  Id.

[28]  Id.

[29]  13 C.F.R. § 125.2(a) (2016) (emphasis added); see also 13 C.F.R. § 125.2(c) (describing procuring agency responsibilities to foster small business participation “regardless of the place of performance of the contract”).

[30]  Chevron, 467 U.S. at 839.

[31]  Id. at 866.

[32]  Id. at 842–3.

[33]  See Maersk Line, Ltd., Comp. Gen. B-410280, 2014 CPD ¶ 359 (Comp. Gen. Dec. 1, 2014).  Military Sealift Command (MSC) had a requirement for multimodal cargo transportation services.  It involved a contracting officer at MSC attempting to promote small business concerns.  Not having the time to do complete market research for the “rule of two,” the contracting officer issued a solicitation with a tiered evaluation of offers that first apply the “rule of two” if two or more small businesses replied.  If the “rule of two” was not satisfied, then large corporations would be considered.  See id.

[34]  Id. at 5.

[35]  Id.  The decision in Maersk came after the SBA had redrafted its regulations to include the language that applied The Act regardless of place of performance.  GAO pointed out that their decision in Latvian was made “prior to the issuance of the SBA’s regulations on the topic.”  Id.  GAO refrained from discussing whether a decision in Latvian would be different today now that the SBA redrafted its regulations.  Id.

[36]  “State argues that the GAO decision of [Latvian] applies here.  In that case, GAO ruled that FAR 19.000(b) limits the application of FAR part 19 . . . to acquisitions conducted in the United States (and its outlying areas).  We believe the basis for GAO’s ruling was the SBA’s regulations were silent on this issue and there, the more specific FAR regulation controlled.  Heeding this advice, SBA recently promulgated regulations to address this issue.  Specifically, SBA made wholesale changes to 13 CFR § 125.2 on October 2, 2013.” Letter from John W. Klein, Associate Gen. Couns. for Procurement L., U.S. Small Bus. Admin., & Laura Mann Eyester, Deputy Associate Gen. Couns. for Procurement L., U.S. Small Bus. Admin., to Gary Allen, Senior Att’y, Procurement L. Division, U.S. Gov’t Accountability Off., RE: B-410081 Protest of Latvian Connection, LLC (Aug. 25, 2014), http://www.wifcon.com/EXHIBIT_18_Latvian.pdf.

[37]  The Department of State Acquisition Regulation (DOSAR) now reads:


“(b) It is the Department’s policy to provide maximum opportunities for U.S. small businesses to participate in the acquisition process.  DOS contracts that are awarded domestically for performance overseas shall be subject to the Small Business Act as a matter of policy.  Contracts that are both awarded and performed overseas should comply on a voluntary basis.” 


DOSAR, 619.000(b) (2015).

[38]  See Latvian Connection, LLC, B-410921, (Comp. Gen. Aug. 11, 2015), http://www.gao.gov/assets/680/671952.pdf .

[39]  Latvian’s protest was dismissed when the 408th CSB cancelled its solicitation.  In its cancellation notice, the 408th CSB included the following language:  “The purpose of this amendment is to cancel the solicitation in its entirety and pursue a revised acquisition strategy considering small business set-aside requirements, without regard to Federal Acquisition Regulation (FAR) Part 19.000(b).”  See Amendment 0004 to W912D1-15-R-0004, http://www.wifcon.com/W912D1.pdf.

[40]  See Letter from Kevin Harber, Att’y Advisor, U.S. Small Bus. Admin., to Peter Verchinski, Off. Of Gen. Couns., U.S. Gov’t Accountability Off., RE: SBA Comments on Protest of Latvian Connection LLC (B-408633) 2 (Aug. 29, 2013), http://www.wifcon.com/EXHIBIT_17_5.pdf [hereinafter Harber Letter].

[41]  Id. (quoting 15 U.S.C. § 633(a) (2012)).

[42]  Id. (quoting Contract Management, Inc. v. Rumsfield, 434 F.3d 1145, 1147 (9th Cir. 2006)).

[43]  See Discount Mach. & Equip., Inc., 70 Comp. Gen. 108, 110 (1990); Eastern Marine, Inc., 63 Comp. Gen. 551, 553 (1984).

[44]  See Harber Letter, supra note 41 at 3.

[45]  This portion of the statute required mandatory language to be included in contracts that required prime contractors to effectuate U.S. policy by subcontracting to small business concerns.  See 15 U.S.C. § 637(d)(1) (2012).  This section specifically stated the required language was not required in “such contracts [which] will be performed entirely outside of any State, territory, or possession of the United States, the District of Columbia, or the Commonwealth of Puerto Rico.”  15 U.S.C. § 637(d)(2)(B) (2012).

[46]  See Harber Letter, supra note 41 at 3 (quoting 15 U.S.C. § 637(d)(1)).

[47]  See id. at 4-6.

[48]  See C&G Excavating, Inc. v. U.S., 32 Fed. Cl. 231, 239 (1994).  In C&G, the Court of Federal Claims reviewed a protest where claimant argued the FAR improperly limited the SBA’s review of portions for applications within the CoC program when the SBA’s regulations were silent.  The court stated,


With regard to the direct conflict between 13 C.F.R § 125.5(e) and FAR § 19.602-2(a)(2), the court finds that the restrictive language in the FAR concerning the scope of SBA’s site investigation cannot be interpreted to limit the scope of SBA’s general review authority.  The clear intendment of 13 C.F.R. § 125.5 is that the SBA may perform a site investigation examining all elements of responsibility.  This interpretation is consistent with the [Small Business Act] and shall be given deference.


Id.  In another conflict between the FAR and SBA regulations, GAO held,


While FAR Sec. 19.302(j) treats size status protests received after award of a contract as having no applicability to that contract, SBA’s regulations, which we view as controlling in this area, provide that “[a] timely filed protest applies to the procurement in question even though the contracting officer awarded the contract prior to receipt of the protest.”


Adams Indus. Services, Inc., B-280186, 98-2 CPD ¶ 56, (Comp. Gen. Aug. 28, 1998).

[49]  Latvian Connection Gen. Trading & Constr. LLC, Comp. Gen. B-408633, 2013 CPD ¶ 224 (Comp. Gen. Sept. 18, 2013).

[50]  Chevron, 467 U.S. at 842-43.

[51]  Id. at 843.

[52]  Latvian Connection Gen. Trading & Constr. LLC, Comp. Gen. B-408633, 2013 CPD ¶ 224 (Comp. Gen. Sept. 18, 2013).

[53]  “The Office of Federal Procurement Policy (OFPP) in the Office of Management and Budget plays a central role in shaping the policies and practices federal agencies use to acquire the goods and services they need to carry out their responsibilities.  OFPP was established by Congress in 1974 to provide overall direction for government-wide procurement policies, regulations and procedures and to promote economy, efficiency, and effectiveness in acquisition processes.  OFPP is headed by an Administrator who is appointed by the President and confirmed by the Senate.”  OFPP, https://obamawhitehouse.archives.gov/omb/procurement_default (last visited May 30, 2017).

[54]  See C & G, 32 Fed. Cl. 231, 242 (“[T]he Government has been on notice since 1989 . . . that the conflict exists and poses problems.  The Government’s regulatory machinery has perpetuated a conflict that should have been resolved to avert future litigation.”).

[55]  Latvian Connection Gen. Trading & Constr. LLC, Comp. Gen. B-408633, 2013 CPD ¶ 224 (Comp. Gen. Sept. 18, 2013).

[56]  National Defense Authorization Act for Fiscal Year 2006, S. 1042, 109th Cong. (2005).

[57]  Small Business Fairness in Contracting Act, H.R. 1873, 110th Cong. (2007).

[58] See 15 U.S.C. § 631(a) (2012) (“The essence of the American economic system of private enterprise is free competition.  Only through full and free competition can free markets, free entry into business, and opportunities for the expression and growth of personal initiative and individual judgment be assured.  The preservation and expansion of such competition is basic not only to the economic well-being but to the security of this Nation.  Such security and well-being cannot be realized unless the actual and potential capacity of small business is encouraged and developed.  It is the declared policy of the Congress that the Government should aid, counsel, assist, and protect, insofar as is possible, the interests of small-business concerns in order to preserve free competitive enterprise, to insure that a fair proportion of the total purchases and contracts or subcontracts for property and services for the Government (including but not limited to contracts or subcontracts for maintenance, repair, and construction) be placed with small business enterprises, to insure that a fair proportion of the total sales of Government property be made to such enterprises, and to maintain and strengthen the overall economy of the Nation.”).

[59]  That is assuming the status quo is good enough.  A good argument could be made that the SBA should focus first on attaining its goals in the United States before trying to extend its reach overseas.  Only twice since 2007 has the Government met the goal set by the SBA. Contracting—See Agency Small Business Scorecards, U.S. Small Bus. Admin., https://www.sba.gov/contracting/finding-government-customers/see-agency-small-business-scorecards (last visited May 31, 2017).

[60]  The SBA negotiates its goals with each agency.  At the beginning of every fiscal year, agencies propose goals to the SBA and the SBA’s Office of Government Contracting evaluates the proposals.  The SBA then notifies the agency of their official goal.  See Contracting—Goaling, U.S. Small Bus. Admin., https://www.sba.gov/content/small-business-goaling (last visited May 31, 2017).

[61]  U.S. Small Bus. Admin., 2007 Department of Defense Scorecard, https://www.sba.gov/sites/default/files/files/dod_assessment_07.pdf.  See also U.S. Small Bus. Admin., 2008 Department of Defense Scorecard, https://www.sba.gov/sites/default/files/files/goals_08_dod.pdf.

[62]  For the first time, in 2014, DoD met its goal, spending 23.47% with American small business.  See U.S. Small Bus. Admin., Department of Defense FY2014 Small Business Procurement Scorecard (2015), https://www.sba.gov/sites/default/files/files/ FY14_DoD_SB_Procurement_Scorecard_Public_View_2015-04-29.pdf.

[63]  Just because an agency did not meet its percentage goal does not mean less money is being spent with small business.  For instance, in 2007, although DoD was short 2.5%, they still increased spending with small businesses by $3 billion.  In 2008, again falling short of the percentage goal, DoD increased spending by $7 billion.  See 2007 and 2008 DoD Scorecards, supra note 63.

[64]  The 2012 SBA scorecard mentions how the percentages are essentially skewed, noting that there are some procurements that no small business would ever compete for (i.e. prime contracts for jets and ships).  If those contracts were excluded, DoD’s percentage goals would be much higher.  See U.S. Small Bus. Admin., Department of Defense FY2013 Small Business Procurement Scorecard (2014), https://www.sba.gov/sites/ default/files/files/FY13_DoD_SB_Procurement_Scorecard_Public_View_2014-04-28.pdf

[65]  In an attempt to correct this, the Transparency in Small Business Goaling Act of 2016 was submitted on January 6, 2016.  This would amend The Act to apply to all contracts, regardless of where the contract is awarded or performed.  Transparency in Small Business Goaling Act of 2016, H.R. 4329, 114th Cong. (2016).  The reason for its proposal being that “exclusions allow for an over inflation of small business participation in the federal marketplace.”  Press Release, Judy Chu, U.S. Congresswoman, Reps. Chu and Kelly Introduce Bill to Help Small Businesses Earn More Government Contracts (Jan. 6, 2016), http://chu.house.gov/press-release/reps-chu-and-kelly-introduce-bill-help-small-businesses-earn-more-government-contracts.  The press release for the bill makes the SBA position very clear; if the exclusions are removed, then the federal government will be forced to use overseas contracts to meet its goals.  Id. 

[66]  Powerpoint slide, Dina Jeffers, Senior Procurement Analyst, Deputy Secretary of the Army (Procurement), Small Business Prime Contracting FY 2016 Overseas Exclusion Comparison (on file with author).

[67]  The SBA consults with 24 government agencies (as outlined in the Chief Financial Officers Act of 1990) and sets a small business contracting goal for each.  https://www. sba.gov/sites/default/files/FY2015_Final_Agency_Goals_Spreadsheet_20150313.pdf.

[68]  10 U.S.C. § 3062(a) (2012) (enumeration omitted).

[69]  Mission, U.S. Dep’t of Housing & Urb. Dev., http://portal.hud.gov/hudportal/HUD? src=/about/mission (last visited June 1, 2017).

[70]  An example of how procurement is a strategic tool used by commanders is seen in a document created to assist in the counter-insurgency operations of Iraq and Afghanistan. “Money As A Weapon’s System” (MAAWS), a document designed to help attorneys, contracting officers, and Soldiers navigate the complicated contract/fiscal law world in a deployed environment, by its very name highlights the importance of, and recognition of, the role procurement and contracting play in the fight itself.  Department of Defense overseas contracting involves strategic aspects that far outweigh the SBA’s attempt to increase American small business.

[71]  To highlight the importance of strategic contracting, one can look to the missions of the various Army contracting commands.  Army Contracting Command’s mission is “[d]elivering readiness through contracting solutions in support of the Army and Unified Land Operations, anytime, anywhere.”  Army Contracting Command, U.S. Army, http://www.army.mil/info/organization/unitsandcommands/commandstructure/acc/ (last visited June 1, 2017).  The Expeditionary Contracting Command’s mission is to “[p]lan and execute effective and agile contracting support for U.S. Army Service Component Commanders in support of Army and Joint Operations.  Provide effective and responsive contracting support for OCONUS installation operations.”  ECC: U.S. Army Expeditionary Contracting Command, U.S. Army, https://www.army.mil/ECC (last visited June 1, 2017). 

[72]  The Army Operating Concept is a document that “describes how future Army forces will prevent conflict, shape security environments, and win wars while operating as part of the Joint Force and working with multiple partners.”  General Raymond Odierno, Foreword to U.S. Dep’t of Army, TRADOC Pam. 525-3-1, The U.S. Army Operating Concept: Win in a Complex World i (31 Oct. 2014).

[73]  Id.

[74]  Id.

[75] Many countries already have restrictive laws that essentially prohibit American businesses from operating in their country.  For instance, Kuwait only allows foreign business to operate under either Article 23 or 24 of its commercial code, which allow a foreigner to conduct business if his/her business has a majority Kuwaiti stake or through a Kuwaiti agent.  See Law Decree No. 68 of 1980 (“Commercial Law”), arts. 23, 24 (Kuwait).  As restrictive as this seems, imagine what steps Kuwait would take if they learned we were automatically excluding Kuwaiti businesses from possible contracts. 

[76]  This scenario, a Humanitarian Assistance/Disaster Relief operation (HA/DR), is exactly the kind of event for which the Army has planned, and was the subject of 2014’s Unified Quest.  “Unified Quest (UQ) is the Chief of Staff of the Army’s Title 10 future study plan designed to explore enduring strategic and operational challenges to identify issues and explore solutions critical to current and future development.”  Unified Quest, Army Capabilities Integration Ctr., http://www.arcic.army.mil/Initiatives/UnifiedQuest (last visited June 1, 2017).

[77]  Strategic contracting is often implemented through various means at levels well above the commander.  The SBA’s interpretation of the Act would conflict with a number of these implementing mechanisms.  These mechanisms take the form of class deviations (decisions by the Director of Defense Procurement that allow organizations to deviate from the FAR), Status of Forces Agreements (SOFA), and other bilateral agreements between the executive branch and other nations.  For instance, a strategic procurement decision recently made in the form of a class deviation regarding Djibouti, where “[e]ffective immediately, contracting officers shall use the attached deviation to limit competition to, or provide preference for, products or services of Djibouti for procurements in support of DoD operations in the Republic of Djibouti (Djibouti).”  Memorandum from the Office of the Under Secretary on Defense on Class Deviation—Enhanced Authority to Acquire Products and Services of Djibouti, DARS Tracking No. 2016-O0005 (Feb. 4, 2016), http://www.acq.osd.mil/dpap/policy/policyvault/USA000269-16-DPAP.pdf.  DoD should not have its ability to strategically contract like this limited by the SBA’s interpretation.

[78]  Small businesses will protest each contract they are not awarded, searching for the contracting officer’s explanation.  This could be further compounded by the SBA stepping in and issuing a CoC each time only one small business bids on a contract.

[79]  GAO dismissed yet another of Latvian’s protests on the ground that the contract was under the micro-purchase threshold and not subject to small business set-asides.  Latvian Connection Gen. Trading and Constr., LLC, B-412777.1 (Comp. Gen. May 23, 2016) (on file with author).  The decision included language, yet again, that deferred to the FAR’s interpretation that FAR Part 19 applied only in the United States and its outlying territories.  Id.

[80]  See Greater Opportunities for Small Business Act of 2014, H.R. 4093, 113th Cong. (2014) (attempting to raise the total goal to 25%).

[81]  The Defense Acquisition Regulation Council (DAR Council) is authorized to make changes to the FAR and likely provides the best forum to create a rule change that could satisfy both DoD and the SBA.  It consists of a director (the Deputy Director of Defense Procurement and Acquisition Policy) along with council members from each branch of the military, Defense Logistics Agency, Defense Contract Management Agency, and National Aeronautics and Space Administration (NASA).