ICE cited for improper award of small business set-aside contract

The Government Accountability Office late last month ruled that the winner of an Immigration and Customs Enforcement small business set-aside contract was not, in fact, a small business.

GAO recommended that work being performed under the contract be terminated. The decision came in response to a bid protest filed in September by Jamul, Calif.-based Spectrum Security Services Inc.

Spectrum had lodged a complaint with the Small Business Administration as well, following the award of an indefinite-delivery, indefinite-quantity contract to provide detention officer and transportation services to ICE, a bureau within the Homeland Security Department. The initial award, worth up to $45 million over one base and four option years, went to Ahuska Security Corp.

According to GAO's decision, the contracting agent failed to notify unsuccessful bidders before the award was announced -- a Federal Acquisition Regulation requirement that gives other small business contenders a chance to challenge the winner's size status.

Spectrum's protests triggered a "stay of performance" on the contract as called for by the 1984 Competition in Contracting Act, but ICE decided in mid-October that it would allow Ahuska to proceed.

Later that month, SBA determined that Ahuska did not qualify as a small business for the purposes of the contract. John Klein, the agency's associate general counsel for procurement law, said that while Ahuska itself was a small company with just a few employees, much of the work was to be performed by its subcontractor, USProtect, a large security services company.

The SBA reviewers determined that because the subcontractor was performing "primary and vital" aspects of the work, Ahuska and USProtect were joint venturers through an arrangement called an "ostensible subcontract," and thus were ineligible to bid as a small business.

Ahuska unsuccessfully appealed the size determination to SBA's Office of Hearings and Appeals.

Based on the SBA decision, GAO sustained Spectrum's size challenge. It recommended that Ahuska's contract be terminated, describing continuation as "inconsistent with the integrity of the Small Business Act" and noted that ICE had improperly initiated work under the contract, given the ongoing protests.

GAO recommended that ICE award the contract to Spectrum or another company that submitted a bid, and that Spectrum be reimbursed for costs associated with the protest.

In the same decision, GAO denied two additional protests by Spectrum -- one related to whether Ahuska's proposal clearly violated subcontracting limitations in the solicitation, and the other regarding consideration of the company's past performance and experience.

Sam Ersan, Spectrum's chief executive officer, attributed debate over whether Ahuska's improperly initiated contract should be terminated to internal problems at ICE. "Finally, GAO decided a bunch of rules were broken during the decision process and basically what it means is, after so many departures from DHS and ICE offices, there are no experienced people left who know how to score a bid properly," he said.

Ahuska could not be reached for comment, and the company's legal representatives did not return phone and e-mail messages.