By: Theodore Watson, Esq.

The Veterans Benefits, Health Care, and Information Technology Act of 2006 requires the Department of Veterans Affairs to determine whether two or more service-disabled veteran-owned small business concerns can meet its requirement at a reasonable price before proceeding with a Federal Supply Schedule acquisition. The VA seemed to believe that it has discretion to decide when, and when not to search for SDVOSB before determining that it would resort to the Federal Supply Schedule.

The protestor, Aldevra filed this protest prior to the closing time for the solicitation, arguing that the agency acted improperly by using FSS procedures without first conducting market research to determine whether the procurement should be set aside for SDVOSB concerns. Aldevra asserts that if the agency had conducted market research, it would have found that at least two SDVOSBs could meet the requirement at a reasonable price.  In an email to GAO, the VA conceded that it did not conduct market research to determine whether two or more SDVOSB concerns could meet the requirement at a reasonable price.

In an attempt to get the protest thrown out, the VA then argued that Aldvera was not an interested party. This is a common tactic by the agency to get a GAO bid protest thrown out in the early stages.

Under the bid protest provisions of the Competition in Contracting Act of 1984, 31 U.S.C. §§ 3551-3556 (2006), only an interested party may protest a federal procurement. That is, a protester must be an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or the failure to award a contract. Bid Protest Regulations, 4 C.F.R. § 21.0(a)(1) (2011). A protester is not an interested party where it would not be in line for contract award were its protest to be sustained. Four Winds Servs., Inc. , B-280714, Aug. 28, 1998, 98-2 CPD ¶ 57. 

GAO disagreed with the agency that Aldevra is not an interested party to pursue this protest. The protest here involves an allegation that the VA is required to conduct set-asides where specific conditions are met under a unique statute applicable only to the VA (i.e., the VA Act), rather than meeting its requirements using the FSS. In addition, the agency here has not contended that there is a reasonable expectation that two or more SDVOSB concerns holding FSS contracts could meet the requirement.

The VA then went on to argue that it was not required to conduct market research in this situation. The VA has addressed this issue before with GAO.  In fact GAO brought this point up. The GAO actual mentioned that  although the agency has defended numerous protests before our Office involving precisely this issue, this is the first time that the agency has raised these arguments. Thus, until this protest, the agency had not suggested that the phrase “for purposes of meeting the goals under subsection (a)” as it appears in 38 U.S.C. § 8127(d) grants the agency discretion to decide that in some procurements the mandate in the statute will apply, and in other procurements it will not.  The VA then attempted to argue how the statute should be now interpreted.

In matters concerning the interpretation of a statute, the purpose is clear: to determine and give effect to the intent of the enacting legislature. Philbrook v. Glodgett, 421 U.S. 707, 713 (1975). In furtherance thereof, the first question is whether the statutory language provides an unambiguous expression of the intent of Congress. If it does, the matter ends there, for the unambiguous intent of Congress must be given effect. Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc. , 467 U.S. 837, 842-43 (1984).

GAO found that the plain language of 38 U.S.C. § 8127(d) mandates that the VA “shall” conduct its procurements using an SDVOSB (or VOSB) set-aside when there is a reasonable expectation that two or more SDVOSB (or VOSB) concerns can meet the requirement at a reasonable price. The phrase “for purposes of meeting the goals” is part of an introductory clause that establishes exceptions to the mandate (those exceptions being when subsections (b) and (c) apply). The phrase explains the purpose for the mandate, which is to meet the goals established under subsection (a); however, the phrase does not create an exception to the mandate.

The problem apparently was credibility. Since the agency dealt with the same issue before, it was questionable as to why only now did it raise these arguments.

In the end, the GAO recommended that the agency conduct reasonable market research regarding its requirement under the solicitation. If it determines that there is a reasonable expectation that two or more SDVOSB (or VOSB) concerns can meet the requirement at a reasonable price, we recommend that the agency cancel the solicitation and re-solicit the requirement as an SDVOSB (or VOSB) set-aside.

GAO also rewarded Adevera’s efforts by recommending that the agency reimburse the protester the costs of filing and pursuing the protest. 4 C.F.R. § 21.8(d)(1). Aldevra’s certified claims for costs, detailing the time expanded and costs incurred, must be submitted to the agency within 60 days after receipt of this decision. 4 C.F.R. § 21.8(f)(1). See full decision here.

The lesson here is that agency’s still must adhere to setting aside projects for small businesses. If the FSS was a mandatory source, then the VA would have a stronger argument. Agencies should be conducting market research to see what capabilities are out there in the commercial marketplace. 

For additional information or representation in a GAO bid protest, contact the government contract attorneys at Watson & Associates, LLC. Call toll free at 1-866-601-5518.

Denver Law Firm Launches Innovative Business Model to Help Government Contractors and Small Businesses Thrive During Economic Downturn

Denver, Colorado – The legal industry isn’t known for its innovative approach to doing business or creating proactive solutions to help clients, but Denver-based Watson & Associates, LLC is seeking to change this perception by adapting its business model to better serve Colorado companies and government contractors across the nation during the economic downturn.

A boutique law firm specializing in business and government contract law, Watson & Associates is leading the industry by offering comprehensive legal service packages for a flat monthly rate. Even large businesses that used to be able to afford large firm prices and reducing their reliance upon firms simply because they can’t afford it. However, businesses still find themselves at a disadvantage when a legal dispute arises. By developing a new affordable approach, Watson & Associates is bringing additional value to both large and small businesses by providing them immediate access to attorneys with a budgeted plan. These plans consist of a set monthly block of hours that in itself actually cost less than if actual hours were billed to the client.

“We are responding to the current market situation by proactively restructuring our business model to better meet client needs,” said Theodore Watson, founder of Watson & Associates. “Our goal is not merely to help Colorado businesses and contractors nationwide to survive the recession, but to actively grow their business year over year.” There is no question as to the value gained by a corporation.

Small- and medium-sized businesses across the state are feeling the impact of the recent economic crisis. “Identifying opportunities that can directly impact the bottom line is crucial to sustaining your business during a recession,” said Watson.

The firm hopes its innovative approach to helping clients reduce the staggering legal fees typically associated with legal advice will strengthen the firm’s position as a business partner, rather than a line item in the budget. For more information contact Watson & Associates online or call toll free at 1-866-6-1-5518.

Qualifying Information as a Trade Secret

Generally, a “trade secret” is any confidential information held by a business which gives the business an advantage over competitors in the marketplace. Trade secrets are a form of intellectual property. However, they are not offered the same types of protection as patents, copyrights or trademarks. Obligations to refrain from disclosing trade secrets to others arise through contractual or fiduciary relationships.

Trade secrets are defined and regulated by state law. Only information which is held to be a trade secret under state requirements will be protected from infringement under the applicable trade secret laws. Once qualified as a trade secret, the information may not be stolen, copied, misappropriated or disclosed without the consent of the owner.

Trade Secrets in General
Trade secrets are treated as valuable property and the holder of the information is considered the owner. As with other forms of property, trade secrets may be lost, stolen or sold by one business to another. However, unlike other forms of intellectual property, trade secrets may not be registered with the government and are generally only protected if they actually qualify as trade secrets and if affirmative acts are taken by the owner to keep the information confidential.

If the aforementioned requirements are met, the trade secret is protected indefinitely as long as it remains confidential. Should the trade secret ever become available to the public, protection is lost and the information is free for anyone to use.

Information Which Qualifies as a Trade Secret
Whether information qualifies as a trade secret is dependent upon state law. However, a trade secret generally includes any oral or written secret information held by a business that offers the business a commercial advantage. Different courts might consider different factors when determining whether certain information amounts to a trade secret.

Typical factors may include:

• The extent to which the information is known outside of the particular business entity;
• The extent to which the information is known by employees and others involved in the business;
• The extent to which measure have been taken to guard the secrecy of the information;
• The value of the information to the business; and
• The difficulty with which the information could be property acquired or independently duplicated by others.

Examples of trade secrets may include business plans, sales strategies, customer lists, source code listings, methodologies, formulas, patterns, physical devises and/or ideas.

Actions to Protect Trade Secrets
Simply because the information is of a “type” which qualifies as a trade secret under state law does not result in automatic protection. The business or owner of the secret must take action indicating their desire to keep the information from competitors and out of the public domain. If reasonable precautions are not taken to protect the information, a court may find that the information is not a trade secret.

Depending upon state law requirements, the owner may take the following measure to ensure trade secrecy:

• Entering into non-disclosure agreements or contracts;
• Restricting access to information to certain individuals;
• Protecting secrecy through physical security;
• Marking trade secret documents with “Confidential”; and
• Adopting reasonable password policies and other computer security.

An example of an extreme case is the protection measures taken by the Coca-Cola Company. The formula to the Coca-Cola soft drink is one of the best kept trade secrets in the world. The soda’s formula is only known by two employees at any given time, whose identities are unknown to the public and who may not fly on the same plane. Further, the written formula is locked in a vault which may only be opened by a resolution of the Coca-Cola board of directors.

However, even Coca-Cola is not immune from trade secret theft. In February of 2007, a former secretary at Coca-Cola was found guilty of conspiring with two men to steal confidential documents and samples of a new product, which they offered to sell to rival PepsiCo for at least $1.5 million.

Rights of Trade Secret Owners
Trade secrets are intellectual property. Owners of information qualifying as a trade secret are thus entitled to certain property rights. Trade secret may prevent the use, disclosure or copying of the information by certain individuals without permission.

For example, employees of a business are typically considered to be automatically bound by a duty of confidentiality when they come into contact with a trade secret as part of their employment. Also, any individual who breaches a nondisclosure agreement, misuses the information or uses illegal means to obtain it may be liable for trade secret infringement. If infringement exists, the owner of the trade secret may be able to obtain a court order to prevent further disclosure, monetary damages for any loss resulting from the disclosure, and/or punitive damages.

However, if the information was discovered legally and does not otherwise violate any agreement, such as through reverse engineering, the secret is lost and the information is no longer protected.