Esterhill Boat Service Corporation (36C24119R0099)

B-418356,B-418356.2 Mar 20, 2020 Jump To FULL REPORT VIEW DECISION RELATED PAGES GAO CONTACTS Highlights Esterhill Boat Service Corporation (Esterhill), a service-disabled veteran-owned small business (SDVOSB), of Franconia, New Hampshire, protests the terms of request for lease proposals (RLP) No. 36C24119R0099, issued by the Department of Veterans Affairs (VA), to lease medical office space for a community-based outpatient clinic (CBOC). The protester contends that the RLP's specifications exceed the agency's minimum needs and unduly restrict competition. The protester also argues that the lease competition should have been reserved for SDVOSBs or veteran-owned small businesses (VOSBs). We deny the protest. View Decision Decision Matter of:  Esterhill Boat Service Corporation File:  B‑418356; B‑418356.2 Date:  March 20, 2020 Darren R. Misenko, Esq., Misenko Construction Law, for the protester. Laetitia C. Coleman, Esq., Department of Veterans Affairs, for the agency. Sarah T. Zaffina, Esq., and Jennifer D. Westfall-McGrail, Esq., Office of the General Counsel, GAO, participated in the preparation of the decision. DIGEST Protest that solicitation for leasing medical office space unduly restricts competition is denied where the agency demonstrates a reasonable basis for requiring contiguous space on one floor. DECISION   Esterhill Boat Service Corporation (Esterhill), a service‑disabled veteran‑owned small business (SDVOSB), of Franconia, New Hampshire, protests the terms of request for lease proposals (RLP) No. 36C24119R0099, issued by the Department of Veterans Affairs (VA), to lease medical office space for a community‑based outpatient clinic (CBOC).  The protester contends that the RLP’s specifications exceed the agency’s minimum needs and unduly restrict competition.  The protester also argues that the lease competition should have been reserved for SDVOSBs or veteran-owned small businesses (VOSBs). We deny the protest. BACKGROUND The VA issued the RLP on November 15, 2019, for between 7,184 and 7,200 usable square feet of contiguous space, on one floor, ground‑level preferred, within the town of Rumford, Maine.[1]  Agency Report (AR), Tab 2, Contracting Officer’s Statement (COS), at 1; AR, Tab 17, RLP § 1.02.  The RLP contemplates the award of a lease for 10 years (5 base years plus five 1-year option terms) based on the lowest‑priced, technically acceptable offer submitted.  RLP §§ 1.02; 4.03.  Prior to issuing the solicitation, the VA conducted market research to determine whether it was reasonable to expect two or more VOSBs or SDVOSBs to submit offers.  The Veterans Benefits, Health Care, and Information Technology Act of 2006, 38 U.S.C. §§ 8127‑8128, requires the VA to set aside procurements for VOSBs or SDVOSBs, whenever it determines that there is a reasonable expectation that two or more offers will be received from VOSB or SDVOSB firms and that award can be made at a fair and reasonable price.  38 U.S.C. § 8127(d).  This has been referred to as the VA “rule of two.”  The VA issued a sources sought notice on May 26, 2019, on www.fbo.gov for 9,700 to 9,800 contiguous square feet, in Rumford, with responses due by June 10.  COS at 1; AR, Tab 16, Sources Sought Notice, at 1.  The VA also published the sources sought notice in two local newspapers.  AR, Tab 20, at 3.[2]  In addition, the contracting officer searched LoopNet, a website listing available commercial real estate, for properties meeting the VA’s requirements.  AR, Tab 27, Suppl. COS, at 1, 3.  Multiple firms submitted responses, including two SDVOSBs, one of which was the protester, the incumbent lessor.  See COS at 1; Suppl. COS at 1, 3.  After reviewing the SDVOSB responses to the sources sought notice, the contracting officer was not confident that setting the solicitation aside for VOSBs or SDVOSBs would provide adequate competition.  Suppl. COS at 2.  In its submission in response to the notice, Esterhill did not identify its available square footage and informed the VA that the intended space would occupy two floors, similar to the current leased space.  Agency Suppl. Briefing Feb. 10, 2020 at 3; see Protest exh. 27; AR, Tab 28.  Therefore, the contracting officer had low confidence in Esterhill’s ability to meet the VA’s basic requirement that the space be contiguous on one floor, and concluded that Esterhill was unlikely to meet the requirement.  Suppl. COS at 2.  The other SDVOSB indicated that it would provide “build to suit” construction for the CBOC.  Id.  Although the VA does not oppose new construction, the contracting officer noted that there is greater cost with “build to suit” space, and more risk with an unknown lessor.  Id.  Thus, the contracting officer determined that this SDVOSB presented a moderate risk of not meeting the requirement.  Id.  Consequently, the contracting officer decided the replacement lease would not be set aside for VOSBs or SDVOSBs.  Id.