Prioritizing Programs to Exempt Small Businesses from Competition in Federal Contracts

Prioritizing Programs to Exempt Small Businesses
from Competition in Federal Contracts
The Small Business Administration’s regulations governing the interplay among the
Historically Underutilized Business Zone Program, the 8(a) Business Development
Program, and the Service-Disabled Veteran-Owned Small Business Concern Program
constitute a permissible construction of the Small Business Act.
The Small Business Act does not compel the prioritization of awards under the Historical-
ly Underutilized Business Zone Program over those under the 8(a) Business Develop-
ment Program and the Service-Disabled Veteran-Owned Small Business Concern
Program. The Small Business Administration’s regulations permissibly authorize con-
tracting officers to exercise their discretion to choose among these three programs in
setting aside contracts to be awarded to qualified small business concerns.
The Office of Legal Counsel’s conclusion that the Small Business Administration’s
regulations are reasonable is binding on all Executive Branch agencies.

August 21, 2009

MEMORANDUM OPINION FOR THE GENERAL COUNSEL
SMALL BUSINESS ADMINISTRATION

The Small Business Act (“Act”), as amended, exempts certain classes
of small businesses from the general requirement that federal contracts
to procure goods and services be awarded on the basis of full and open
competition. See Act of July 30, 1953, Pub. L. No. 83-163, 67 Stat. 230
(codified as amended at 15 U.S.C.A. §§ 631–657p (West 2009)). 1 In
particular, the Act establishes various programs, administered by the
Small Business Administration (“SBA”), to assist qualifying small busi-
nesses in obtaining federal contracts by exempting them, in certain cir-
cumstances, from the degree of competition that would otherwise be
required. At issue here is the permissibility of SBA’s regulations govern-
ing the interplay among three such programs: the Historically Underuti-
lized Business Zone (“HUBZone”) Program, the 8(a) Business Develop-

1 ”Full and open competition” in the context of federal procurement means “that all
responsible sources are permitted to submit sealed bids or competitive proposals on the
procurement.” 41 U.S.C. § 403(6) (2006); see also 41 U.S.C.A. § 253 (West Supp. 2009)
(requiring full and open competition in the conduct of procurements for property or
services, except under certain circumstances as provided ).

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ment Program, and the Service-Disabled Veteran-Owned (“SDVO”)
Small Business Concern Program.
Under SBA’s regulations, federal contracting officers are given sub-
stantial discretion to consider and designate contracts for either the HUB-
Zone, 8(a), or SDVO Program without having to prioritize one program
above the others. This aspect of the regulations—which, according to
SBA, effectively establishes “parity” among the three programs—has
been called into question by a pair of recent Government Accountability
Office (“GAO”) bid protest decisions. 2 In these decisions, GAO rejected
SBA’s approach and ruled instead that the Act mandates that priority be
given to the HUBZone Program when certain statutory conditions are met.
As a result, according to GAO, contracting officers must set aside federal
contracts to qualified HUBZone small businesses, when two or more such
businesses can submit fair market bids, before they can set aside such
contracts for award to small businesses under the 8(a) or SDVO Pro-
grams.
You have asked for our views on whether GAO was correct to conclude
that the Act compels such prioritization of the HUBZone Program. See
Letter for David Barron, Acting Assistant Attorney General, Office of
Legal Counsel, from Sara D. Lipscomb, General Counsel, Small Business
Administration, at 2 (July 1, 2009) (“Lipscomb Letter”). You have further
asked whether, if the Act can be read not to require such prioritization,
GAO has authority to invalidate SBA’s regulations. See id. Having care-
fully reviewed the relevant legal materials, including SBA’s own views,
we conclude that the Act does not compel SBA to prioritize the HUBZone
Program in the manner GAO determined to be required. In our view,
SBA’s regulations permissibly authorize contracting officers to exercise
their discretion to choose among the three programs in setting aside
contracts to be awarded to qualified small business concerns. 3 Further, in

2 See Mission Critical Solutions, B-401057, 2009 WL 1231855 (Comp. Gen. May 4)

(“MCS”), recons. denied, B-4010572 (Comp. Gen. July 6, 2009); International Program
Group, Inc., B-400278, B-400308, 2008 WL 4351134 (Comp. Gen. Sept. 19) (“IPG ”).
recons. denied, B-400278.2 et al. (Comp. Gen. Oct. 24, 2008). The Comptroller General’s
authority to review bid protests concerning alleged violations of a procurement statute or
regulation is set forth in 31 U.S.C §§ 3551–3557 (2006).
3 Our conclusion regarding these SBA regulations addresses only whether they consti-

tute a permissible interpretation of the Act.

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accord with this Office’s longstanding precedent, GAO’s decisions are not
binding on the Executive Branch.

I.

The underlying legal issue ultimately turns on a relatively straightfor-
ward question of statutory interpretation, but it arises out of a complicated
statutory and regulatory framework. Accordingly, we first review the key
statutory provisions that establish these three programs.

A.

The term “HUBZone” refers to economically disadvantaged or dis-
tressed areas located within one or more qualified census tracts, nonmet-
ropolitan counties, Indian reservations, or base closure areas. See 15
U.S.C. § 632(p)(1)–(2) (2006). Established by the Small Business Reau-
thorization Act of 1997, Pub. L. No. 105-135, § 602(b)(1)(B), 111 Stat.
2592, 2627 (codified as amended at 15 U.S.C. § 657a(a) (2006)), the
HUBZone Program provides federal contract assistance to qualified
small business concerns operating within a HUBZone through contracts
awarded on a sole source basis, contracts awarded on the basis of com-
petition restricted to HUBZone concerns, or a ten-percent bid adjust-
ment for contracts awarded on the basis of full and open competition. Id.
§ 657a(a)–(b).
The “restricted competition” provision at issue in the GAO decisions
states that:
Notwithstanding any other provision of law . . . a contract opportuni-
ty shall be awarded pursuant to this section on the basis of competi-
tion restricted to qualified HUBZone small business concerns if the
contracting officer has a reasonable expectation that not less than 2
qualified HUBZone small business concerns will submit offers and
that the award can be made at a fair market price.
Id. § 657a(b)(2)(B). The conditions set forth in this provision—“a reason-
able expectation that not less than 2 qualified HUBZone small business
concerns will submit offers” and “that the award can be made at a fair
market price”—are commonly referred to as “the rule of two.” When the
rule of two is met, the statute provides that the award must be made on the

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basis of competition restricted to qualified HUBZone small businesses.
This provision closely resembles in language and structure the restricted
competition provision found in the earlier-enacted 8(a) Program. See id.
§ 637(a)(1)(D) (2006). The HUBZone Program also provides, in the
alternative, that “a contracting officer may award sole source contracts
under this section to any qualified HUBZone small business concern”
upon a determination, inter alia, that there is no “reasonable expectation
that two or more qualified HUBZone small business concerns will submit
offers for the contracting opportunity.” Id. § 657a(b)(2)(A).

B.

The 8(a) Program, established by amendment to the Act on October 24,
1978, Pub. L. No. 95-507, § 202, 92 Stat. 1757, 1761 (codified as amend-
ed at 15 U.S.C. § 637), “promote[s] the business development of small
business concerns owned and controlled by socially and economically
disadvantaged individuals,” id. § 631(f )(2)(A) (2006), defined as “those
who have been subjected to racial or ethnic prejudice or cultural bias
because of their identity as a member of a group without regard to their
individual qualities,” id. § 637(a)(5), and “whose ability to compete in the
free enterprise system has been impaired due to diminished capital and
credit opportunities as compared to others in the same business area who
are not socially disadvantaged.” Id. § 637(a)(6)(A).
The 8(a) Program promotes socially and economically disadvantaged
small business development by, among other things, reserving certain
contracts with federal agencies for administration and award by SBA to
eligible 8(a) Program participants. The 8(a) authorizing statute provides,
inter alia, that “[i]t shall be the duty of [SBA] and it is hereby empow-
ered, whenever it determines such action is necessary or appropriate,” to
enter into procurement contracts with the federal government or any
department, agency, or officer thereof, id. § 637(a)(1)(A), and then “to
arrange for the performance of such procurement contracts” by awarding
them to eligible 8(a) participants when certain conditions are met, id.
§ 637(a)(1)(B)–(C). 4 The statute explicitly states that contracting officers

4 SBA has promulgated regulations that permit it to delegate its 8(a) contract execution

and review authority to procuring departments and agencies. See 13 C.F.R. §§ 124.501(a),
124.503, 124.512 (2009).

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shall retain “discretion to let such procurement contract[s]” to SBA for the
8(a) Program. Id. § 637(a)(1)(A).
The statute further provides that SBA’s authority to award an 8(a)
contract is conditioned on the requirement that the award be made as a
result of an offer submitted in response to a published solicitation
about “a competition conducted pursuant to subparagraph (D).” Id.
§ 637(a)(1)(C)(i). Subparagraph (D)(i), in turn, provides:
A contract opportunity offered for award pursuant to this subsection
shall be awarded on the basis of competition restricted to eligible
Program Participants if . . . there is a reasonable expectation that at
least two eligible Program Participants will submit offers and that
award can be made at a fair market price.
Id. § 637(a)(1)(D)(i)(I).

C.

The SDVO Program was established by the Veterans Benefits Act of
2003, Pub. L. No. 108-183, § 308, 117 Stat. 2651, 2662 (codified at 15
U.S.C. § 657f (2006)), and provides for federal contract assistance to
qualified service-disabled veteran-owned small businesses through sole
source and restricted competition awards. Id. § 657f.
The conditions set forth in the SDVO statute for the award of sole
source contracts are the same as in the HUBZone statute. Compare id.
§ 657f (a) with id. § 657a(b)(2)(A). However, unlike the HUBZone and
8(a) provisions, the SDVO statute does not mandate the award of con-
tracts through restricted competition even “if the contracting officer has a
reasonable expectation that not less than 2 small business concerns
owned and controlled by service-disabled veterans will submit offers and
that the award can be made at a fair market price.” Id. § 657f (b). Instead
of requiring that a contract opportunity “shall be awarded” through
restricted competition in such circumstances, the SDVO statute provides
that the award “may” be made through such competition if the rule of
two is met. Compare id. (“a contracting officer may award”) with id.
§ 637(a)(1)(D)(i) (“a contract opportunity . . . shall be awarded”) and id.
§ 657a(b)(2)(B) (“a contract opportunity shall be awarded”).

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D.

It is against this legislative background that SBA issued its regulations
to guide contracting officers in making the determination whether and
when to set aside a contract for the HUBZone, 8(a), or SDVO Program.
Congress delegated broad authority to SBA to carry out the policies and
purposes of the Act. See generally id. §§ 633(a), 634(b), 644(g) (2006).
The relevant parts of the HUBZone regulations that you have asked us to
review in light of the GAO decisions direct contracting officers first to
determine whether the contract is a follow on to one already being per-
formed by an 8(a) participant, has already been accepted for the 8(a)
Program by SBA, or would be performed by a federal prison workshop or
participating non-profit agency for the blind or severely disabled. 5 See
13 C.F.R. §§ 126.605 and 126.607 (2009). If the contract is still available,
the regulations state that a contracting officer shall then choose among the
HUBZone, 8(a), or SDVO Programs and “set aside the requirement for
HUBZone, 8(a) or SDVO [] contracting before setting aside the require-
ment as a small business set-aside.” Id. § 126.607.
The SDVO regulations implicated by the GAO decisions are operative-
ly the same as the HUBZone regulations. Compare id. §§ 126.605 &
126.607 with id. §§ 125.18 & 125.19. A parallel provision also exists in
the 8(a) regulations. 6 See id. § 124.503(j).

5 See 18 U.S.C. § 4124 (2006) (requiring purchase of prison-made products by all fed-

eral departments and agencies); 41 U.S.C. § 48 (2006) (requiring governmental purchases
from qualified nonprofit agencies for the blind or severely disabled ); see also 15 U.S.C.
§ 657a(b)(4) (prioritizing procurement awards to prison, blind, and severely-disabled
entities over HUBZone awards); id. § 657f (c) (prioritizing procurement awards to prison,
blind, and severely-disabled entities over SDVO awards).
6 The SDVO and 8(a) regulations provide that the contracting officer “should consider

setting aside the requirement” for 8(a), HUBZone, or SDVO participation “before consid-
ering” setting it aside for other small business programs. 13 C.F.R. §§ 125.19(b),
124.503(j) (2009) (emphasis added ). Thus, although the SDVO and 8(a) regulations
contain discretionary language not found in the corresponding HUBZone regulation, they
nevertheless place the three programs on equal footing and prioritize their consideration
before small businesses generally. In this way, they are consistent with the HUBZone
regulations and provide uniform guidance to contracting officers regarding the interplay
among the programs at issue. See 70 Fed. Reg. 51243, 51245 (Aug. 30, 2005) (“To make
the HUBZone regulations consistent with SBA’s recently published SDV regulations,
SBA is . . . revising § 126.607 to incorporate contracting preferences for HUBZone, 8(a)

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The SBA’s regulations do not expressly provide for parity of treatment
among the 8(a), HUBZone, or SDVO Programs. See id. §§ 124.503(j),
125.19(b), and 126.607(b). Rather, by their plain terms, the regulations
require that contracting officers prioritize these programs collectively by
giving consideration to the group of them before a contracting officer may
set aside an opportunity for small businesses generally and before the
contracting officer may make the contract otherwise available. See Lip-
scomb Letter at 6–7 (“The regulations themselves do not establish an
order of precedence between an award under the HUBZone, SDVO SBC,
or 8(a) BD programs.”). The regulations do not, therefore, single out one
program for the kind of prioritization over the other two that the GAO
decisions conclude is mandated under the HUBZone statute. It is in this
sense that, as the SBA puts it, the regulations “provide[] for parity be-
tween the HUBZone, SDVO SBC and 8(a) BD programs.” Id. at 7.

II.

Having reviewed the language, context, and history of the relevant por-
tions of the Act, we conclude that SBA’s regulations implementing the
HUBZone Program are based on a permissible interpretation of the Act.
See Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837,
843 (1984); see also Smiley v. Citibank (South Dakota), N.A., 517 U.S.
735, 740–41 (1996) (“We accord deference to agencies under Chevron . . .
because of a presumption that Congress, when it left ambiguity in a stat-
ute meant for implementation by an agency, understood that the ambiguity
would be resolved, first and foremost, by the agency.”). The GAO deci-
sions reached the opposite conclusion based on what GAO considered
the unambiguous language of the HUBZone Program’s restricted compe-
tition provision. See MCS, 2009 WL 1231855, at *2–4; IPG, 2008 WL
4351134, at *4. GAO concluded that “the clear language” of this provi-
sion in the HUBZone statute, which uses the term “shall” with respect to
the award of contracts, stood in marked contrast to the Act’s use of the
discretionary term “may” in the SDVO Program provision, IPG, 2008 WL
4351134, at *3–4 (citing 15 U.S.C. § 657f (b)), and its use of other discre-
tionary language in the 8(a) Program, which authorizes a contracting

and SDV over small business set-asides. This change will ensure consistent guidance
throughout 13 CFR Chapter 1.”).

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officer “‘in his discretion to let such procurement contract to [SBA].’”
MCS, 2009 WL 1231855, at *2 (quoting 15 U.S.C. § 637(a)(1)(A)).
Because Congress used mandatory language with respect to the award of
contracts pursuant to the HUBZone Program and discretionary language
with respect to the other two programs, GAO reasoned that Congress
intended to give the HUBZone Program priority over these other contract
assistance programs. The Ninth Circuit, we note, has expressed a similar
view of the “mandatory” versus “discretionary” language in the HUBZone
and 8(a) Programs. See Contract Mgmt., Inc. v. Rumsfeld, 434 F.3d 1145,
1149 (9th Cir. 2006) (“CM I ”). 7
We conclude that the HUBZone provision does not unambiguously di-
rect contracting officers to reserve every available contract opportunity
for HUBZone small businesses whenever the rule of two is met. Rather,
the text of the HUBZone provision may be fairly read as mandating only
that a contract opportunity—already set aside for HUBZone small busi-
nesses in the discretion of a contracting officer—be awarded on the basis
of restricted competition, and not as a sole source award, if the rule of two
is met. So read, the provision, instead of simply permitting restricted
competition for qualified HUBZone bidders, actually mandates such

7 CM I involved a challenge to an earlier HUBZone regulation, no longer in effect, that

directed contracting officers, inter alia, to give priority to eligible 8(a) participants over
HUBZone concerns. The regulation provided, however, that contracting officers other-
wise “must set aside the requirement for competition restricted to qualified HUBZone”
small businesses if the rule of two is met. 13 C.F.R. § 126.607(c) (current through Dec.
28, 2005). The appellant, a small business concern that did not qualify for either the 8(a)
or HUBZone Program, challenged this last aspect of the old regulation. In defending this
regulation, the government advanced a reading of the HUBZone provision as mandatory,
but inapplicable to the 8(a) Program. Citing legislative history, the government argued the
HUBZone statute is “reasonably read as showing that Congress intended that there be
parity between the Section 8(a) Program and the HUBZone Program.” Brief for Appellees
at 7, Contract Mgmt., Inc. v. Rumsfeld, 434 F.3d 1145 (9th Cir. 2006) (No. 04-15049).
The court ruled in the government’s favor. The court compared what it viewed as the
“unequivocal” terms of the HUBZone statute with the discretionary terms of the 8(a) set-
aside provision and concluded that SBA’s old regulation implementing the HUBZone
Program “properly accord[ed] with congressional intent under the Small Business Act.”
434 F.3d at 1147. The court noted that such a reading of the HUBZone statute was not
compelled. See id. at 1149 n.8. In 2005, after establishment of the SDVO Program, SBA
promulgated the current regulations replacing those reviewed by the CM I court. See 13
C.F.R. § 126.607.

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competition. In other words, a contracting officer who uses discretion to
set aside a contract for the HUBZone Program has no choice but to award
a HUBZone contract on the basis of restricted competition once the rule
of two is met. But, so read, the HUBZone provision does no more than
compel restricted competition rather than a sole source award. It does not
go further and require the prioritization of the HUBZone Program itself,
leaving contracting officers with no discretion to set aside contracts for
the other SBA programs whenever the HUBZone provision’s rule of two
is met.
The most basic reason we reach this conclusion is that the text of the
HUBZone statute, on its own terms, does not clearly direct a contract-
ing officer to reserve any and all procurement contracts for HUBZone
small businesses whenever the rule of two is met. See 15 U.S.C.
§ 657a(b)(2)(B). The statute uses the mandatory phrase “shall be award-
ed” after the noun “contract opportunity,” but the sentence does not stop
there. It goes on to say “pursuant to this section”— i.e., under the HUB-
Zone Program. Id. This qualification permits the HUBZone provision to
be read as stating that contracts awarded “pursuant to this section” are
subject to the enumerated conditions, but it does not compel a reading that
all contract opportunities in the government must be awarded to the
HUBZone Program whenever the enumerated conditions are met. Indeed,
a contrary reading would implicate the canon of construction that discour-
ages statutory interpretation that would render language mere surplusage.
See, e.g., Clark v. Arizona, 548 U.S. 735, 755 n.24 (2006) (recognizing
“usual rule of statutory construction” to “giv[e] effect, if possible, to
every clause and word of a statute”) (internal quotations and citations
omitted ). In GAO’s interpretation, it is not clear what independent mean-
ing the “pursuant to this section” language would have.
Our conclusion is also consistent with another important section of the
HUBZone statute, which provides that contracting officers “may award
sole source contracts under this section” to any qualified HUBZone small
business if the rule of two cannot be met. 15 U.S.C. § 657a(b)(2)(A).
Again, the conditions set forth by this provision need only apply to con-
tracts intended for award “under this section,” i.e., under the HUBZone
Program. The mandatory “shall” in the restricted competition provision
can fairly be read, in connection with the discretionary “may” in the sole
source provision, simply as a direction to contracting officers that within

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the HUBZone Program there is a clear priority given to competition,
albeit restricted, over sole source contract awards.
Such a construction of the HUBZone restricted competition provision is
further supported by consideration of still another provision in the HUB-
Zone statute, which expressly prioritizes the award of contracts to prison
workshops and nonprofit agencies for the blind and severely-disabled
over HUBZone small businesses. See 15 U.S.C. § 657a(b)(4) (“A pro-
curement may not be made from a source on the basis of a preference
[provided in the HUBZone statute], if the procurement would otherwise
be made from a different source under section 4124 or 4125 of title 18 or
the Javits-Wagner-O’Day Act (41 U.S.C. 46 et seq.).”). Whereas this
provision clearly establishes the priority of these other contracting prefer-
ences, the HUBZone statute contains no express reference to the HUB-
Zone Program’s priority over SBA’s other contract assistance programs.
Of course, the language of the HUBZone provision should be construed
in the context of the provisions governing the other two SBA programs at
issue. For that reason, we have considered whether the discretionary
language in the 8(a) and SDVO statutes compels the conclusion that the
HUBZone statute (with its mandatory language) requires that the HUB-
Zone Program be given priority among the three programs. In our view,
there are several reasons why it does not.
First, the 8(a) provision actually does contain mandatory language. In-
deed, its restricted competition provision employs virtually the same
mandatory language as the HUBZone provision. Compare 15 U.S.C.
§ 637(a)(1)(D)(i) (“A contract opportunity offered for award pursuant to
this subsection shall be awarded on the basis of competition restricted to
eligible Program Participants if”), with id. § 657a(b)(2)(B) (“[A] contract
opportunity shall be awarded pursuant to this section on the basis of
competition restricted to qualified HUBZone small business concerns
if”). 8 In both instances, a contract opportunity “shall be awarded” on the

8 The 8(a) restricted competition provision predates the HUBZone provision by nine

years. Compare Business Opportunity Development Reform Act of 1988, Pub. L. No.
100-656, § 303, 102 Stat. 3853, 3868, with Small Business Reauthorization Act of 1997,
Pub. L. No. 105-135, § 602(b)(1)(B), 111 Stat. 2592, 2627. When the 8(a) Program was
originally established in 1978, all 8(a) contracts could be awarded on a sole-source basis.
See Amendments to the Small Business Investment Act of 1958, Pub. L. No. 95-507,
§ 202, 92 Stat. 1757, 1761 (1978). As part of a comprehensive reassessment of the 8(a)

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basis of restricted competition if the applicable conditions are met. Where
Congress uses the same language in similarly structured provisions within
the same Act, it may be presumed that the language has the same meaning
in each instance. See, e.g., Estate of Cowart v. Nicklos Drilling Co., 505
U.S. 469, 479 (1992) (recognizing “the basic canon of statutory construc-
tion that identical terms within an Act bear the same meaning”). At the
very least, the use of this mandatory language in both the 8(a) and HUB-
Zone provisions makes it difficult to argue that the HUBZone provision
unambiguously mandates that HUBZone awards be given priority over
8(a) awards.
Second, the 8(a) provision clearly applies only to “[a] contract oppor-
tunity offered for award pursuant to this subsection”—in other words,
under the 8(a) Program. 15 U.S.C. § 637(a)(1)(D)(i). The mandate that
such contracts “shall be awarded” on the basis of restricted competition
does not extend to contract opportunities that exist outside of the 8(a)
Program. Given the similarity just discussed between the 8(a) and HUB-
Zone provisions, it is reasonable to read the phrase “pursuant to this
section” in the HUBZone statute to function the same way as the compa-
rable language contained in 8(a)—to limit the provision’s application only
to a “contract opportunity” already set aside for award pursuant to the
HUBZone Program.
Admittedly, the 8(a) and HUBZone restricted competition provisions
are not phrased in exactly the same way. As noted, the former provides
that “[a] contract opportunity offered for award pursuant to this subsec-
tion shall be awarded on the basis of competition,” id. § 637(a)(1)(D)(i)
(emphasis added ), whereas the latter provides that “a contract opportunity
shall be awarded pursuant to this section on the basis of competition,” id.
§ 657a(b)(2)(B) (emphasis added ). But this slight difference in word order
between the two provisions may fairly be read to reflect the fact that the
8(a) statute, unlike the HUBZone statute, explicitly provides for a means

Program in 1988, Congress amended the Act to require that 8(a) contracts be awarded on
the basis of restricted competition if certain conditions are met. See Pub. L. No. 100-656,
§ 303, 102 Stat. at 3868. Concerned about the success of the 8(a) Program, Congress
provided three principal reasons for introducing competition, albeit restricted, to the
program: “such competition will advance the business development objectives of the
[8(a)] program; improve the distribution of contracts; and help avoid programmatic
abuses.” H.R. Rep. No. 100-460, at 28 (1987).

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by which contracts will be “offered for award pursuant to this subsec-
tion.” Id. § 637(a)(1)(D)(i).
Under the 8(a) statute, SBA is “empowered” to approach contracting
officers in other agencies and certify that an available contract should be
awarded under the 8(a) Program. Id. § 637(a)(1)(A). The discretionary
language included in the 8(a) statute that GAO emphasized appears in this
portion of the statute. Once SBA certifies that it is “competent and re-
sponsible” to perform a contract with a particular agency, the agency
contracting officer “shall be authorized in his discretion to let such pro-
curement contract” to SBA. Id. But this language can reasonably be read
in a way that is consistent with SBA not having to give the HUBZone
Program priority over the 8(a) Program. Because the 8(a) Program is a
business development program to promote the ability of its participants
to succeed as small business concerns, one aspect of this program is that
the statute empowers SBA affirmatively to procure contracts for award to
8(a) participants. The discretionary language found in this same provision
of the 8(a) statute may be read as an offset to this expansive SBA authori-
ty by reserving another agency’s ability not to accede to SBA’s certifica-
tion. Because the HUBZone Program provides contract assistance but is
not a more comprehensive business development program, there is no
such authority provided in the HUBZone statute for SBA to solicit con-
tracts on behalf of HUBZone concerns. Accordingly, the lack of an ex-
press reservation of a contracting officer’s discretion to decline a HUB-
Zone designation need not be construed to compel prioritization of the
HUBZone Program.
There is also no basis for concluding that the discretionary language in
the SDVO provision, see id. § 657f (b), requires the conclusion that the
HUBZone Program must have priority. As noted above, the HUBZone
provision includes discretionary language as well, in the award of sole
source contracts. The inclusion of the discretionary term “may” in both
the sole source and restricted competition provisions of the SDVO statute
can reasonably be read, in contrast to the HUBZone statute, not to require
the statutory prioritization of restricted competition over sole source
awards as the means of contracting assistance to SDVO small business
concerns.
Finally, it is true that the HUBZone provision is prefaced with the
phrase “Notwithstanding any other provision of law,” but the appearance

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of that phrase does not establish a prioritization of its own force. Id.
§ 657a(b)(2). As we have noted previously, such “notwithstanding”
phrases are best read simply to qualify the substantive requirement that
follows. See Memorandum for Andrew J. Pincus, General Counsel,
Department of Commerce, from Randolph D. Moss, Acting Assistant
Attorney General, Office of Legal Counsel, Re: The Effect of 8 U.S.C.A.
§ 1373(a) on the Requirement Set Forth in 13 U.S.C. § 9(a) That Census
Officials Keep Covered Census Information Confidential at 7 (May 18,
1999). Here, as we have noted, the HUBZone provision is at least ambig-
uous as to whether its substantive effect is to mandate that all contracts
be set aside for its program and then subject, pursuant to the rule of two,
to restricted competition; or whether it is instead intended to subject,
pursuant to the rule of two, restricted competition only to those contracts
that have been set aside for the HUBZone Program in the exercise of the
contracting officer’s discretion. If the latter interpretation is a permissible
one, as we believe it is, then the “notwithstanding” clause simply ensures
that no other provision of law countermands a contracting officer’s
discretion to make a sole source, restricted competition, or other contract
award by means of assistance to qualified HUBZone small businesses
pursuant to the requirements contained in the HUBZone statute.

III.

We find further support for our position in the larger statutory frame-
work of the Act incorporating all three of the SBA programs at issue.
See FDA v. Brown & Williamson Tobacco Corp., 529 U.S. 120, 132–33
(2000) (in considering the meaning of the statutory text, the particular
statutory provision should not be viewed in isolation; “[t]he meaning—or
ambiguity—of certain words or phrases may only become evident when
placed in context . . . . It is a ‘fundamental canon of statutory construction
that the words of a statute must be read in their context and with a view to
their place in the overall statutory scheme.’”) (quoting Davis v. Mich.
Dep’t of Treasury, 489 U.S. 803, 809 (1989)); see also Proposed Agency
Interpretation of “Federal Means-Tested Public Benefit[s]” Under Per-
sonal Responsibility and Work Opportunity Reconciliation Act of 1996,
21 Op. O.L.C. 21, 23 (1997) (“[I]t is well-established that a provision in
one Act of Congress should be read in conjunction with other relevant
statutory provisions and not in isolation.”). As discussed below, a reading
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of the HUBZone provision that does not compel prioritization comports
with the policies and purposes set forth in the Act and other specific
provisions that were amended with and after the 1997 reauthorization
establishing the HUBZone Program.
First, a construction of the statute that does not mandate HUBZone
Program priority furthers Congress’s stated policy that “small business
concerns owned and controlled by service-disabled veterans, qualified
HUBZone small business concerns, [and] small business concerns
owned and controlled by socially and economically disadvantaged
individuals . . . shall have the maximum practicable opportunity to
participate in the performance of contracts let by any Federal agency.”
15 U.S.C. § 637(d )(1); see also id. §§ 631(f )(1)(E), 637(d )(10). Congress
required that a clause stating this policy “shall be included” in virtually
every government procurement contract. See id. § 637(d )(2). In listing in
the policy all of the covered classes of small business concerns, Congress
did not in any way distinguish among them. Instead, the text does not
disturb the discretion SBA and the agencies have to ensure that all of the
covered small business concerns “have the maximum practicable oppor-
tunity” to secure federal contracts. Had Congress clearly intended to
prescribe some order of priority among these SBA programs, Congress
could have more directly adopted such a policy.
Second, this construction of the HUBZone statute furthers achievement
of government-wide goals required by the Act. See id. § 644(g)(1). The
Act prescribes that the “goal for participation by small business concerns
shall be established at not less than 23 percent of the total value of all
prime contract awards for each fiscal year.” Id. Furthermore, government-
wide participation goals “shall be established” at not less than 3 percent
each for HUBZone and SDVO small business concerns and not less than 5
percent for socially and economically disadvantaged small businesses. Id.
Each agency, in turn, must establish its own goal “that presents . . . the
maximum practicable opportunity” for the small business concerns quali-
fied under the various SBA programs “to participate in the performance of
contracts let by such agency.” Id. In total, the “cumulative annual prime
contract goals for all agencies” must “meet or exceed” the established
minimum annual government-wide goal. Id. Congress did not prescribe
for HUBZone concerns the highest minimum participation goal among the
various SBA programs and it left to agency discretion how to achieve its

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set goals. An interpretation of the HUBZone statute that does not compel
a contract’s award to a qualified HUBZone concern whenever the rule of
two is met advances the achievement of the goals set forth for the other
SBA programs and preserves the balance among the various programs
established by the goaling provision of the Act.

IV.

Such a reading of the HUBZone statute also comports with congres-
sional intent as reflected in legislative history. The legislative history can
fairly be interpreted to show that Congress did not intend, through enact-
ment of the HUBZone statute, to require the award of available contracts
to qualified HUBZone concerns over 8(a) participants.
The HUBZone Program was introduced in 1997 as part of the Senate
version of the Small Business Reauthorization Act. See Small Business
Reauthorization Act of 1997, S. 1139, 105th Cong. tit. VI (as reported
by S. Comm. on Small Business, S. Rep. No. 105-62, Aug. 19, 1997). The
bill that the Senate Committee on Small Business unanimously voted to
report contained an amendment with “parity” language making clear
that the HUBZone Program did not interfere with the discretion of a
contracting officer to designate a procurement contract for the 8(a) Pro-
gram. 9 See S. 1139, 105th Cong. § 31(b)(5) (as reported by S. Comm. on
Small Business, S. Rep. No. 105-62, Aug. 19, 1997). Right after a “Sub-
ordinate Relationship” provision setting forth the priority to be afforded
to the prison industries, blind, and severely-disabled preference programs,
the amendment provided, in a subsection entitled “Parity Relationship,”
that the HUBZone assistance provisions of the bill “shall not limit the

9 At the time the bill was reported, the restricted competition provision of the HUB-

Zone Program tracked even more closely the restricted competition provision in the 8(a)
Program: “Subject to paragraph 3 [the sole source award provision], a contract opportu-
nity offered for award pursuant to this section shall be awarded on the basis of competi-
tion restricted to qualified HUBZone small business concerns, if there is a reasonable
expectation that not less than 2 qualified HUBZone small business concerns will submit
offers and that award can be made at a fair market price.” S. 1139, § 602(b)(1)(B), sec.
31(b)(B)(2) (1997); 143 Cong. Rec. 18,117. There is no explanation in the legislative
history for the subsequent edit to this provision. But as discussed above, accounting for
the substantive differences between the 8(a) and HUBZone Programs as enacted, the two
slightly different formulations can be read functionally to operate the same way.

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discretion of a contracting officer to let any procurement contract to
[SBA] under section 8(a).” 143 Cong. Rec. 18,118 (1997). It further
provided that “[n]otwithstanding section 8(a), [SBA] may not appeal an
adverse decision of any contracting officer declining to let a procurement
contract to the Administration, if the procurement is made to a qualified
HUBZone small business concern on the basis of a preference [set forth in
the bill].” Id. The Committee’s report explained that the proposed HUB-
Zone Program was “not designed to compete with SBA’s 8(a) Program,”
and that the “parity” provision was simply intended to “give[] the procur-
ing agency’s contracting officer the flexibility to decide whether to target
a specific procurement requirement for the HUBZone Program or the 8(a)
Program.” S. Rep. No. 105-62, at 26 (1997). The bill, with its parity
provision intact, passed the Senate. See S. 1139, 105th Cong. § 31(b)(5)
(as passed by Senate, Sept. 9, 1997).
When the bill reached the House of Representatives, the House struck
everything after the enacting clause and substituted the provisions of a
competing House version that omitted the entirety of the HUBZone Pro-
gram. See Small Business Reauthorization and Amendments Act of 1997,
H.R. 2261, 105th Cong. (as passed by House Sept. 29, 1997); 143 Cong.
Rec. 20,662 (1997). Following return of the bill to the Senate, as amended
by the House, the Senate reinstated the HUBZone Program by unanimous
consent, but without the parity provision. 143 Cong. Rec. at 24,094–108.
No explanation for the parity provision’s omission was provided in the
Senate record. See id. at 24,106.
The bill then returned to the House, where the issue of the HUBZone
Program’s relationship to the 8(a) Program was extensively discussed.
See 143 Cong. Rec. at 25,747–66 (1997). Representative John J. LaFalce,
the Ranking Member on the Committee on Small Business, explained that
the Senate had struck the parity provision at the insistence of House
members who were worried that the parity provision would have permit-
ted contracts to be taken from the 8(a) Program; in other words, that the
provision would have precluded the prioritization of 8(a) awards. Rep.
LaFalce stated that “[a]ny proposals which might place [the 8(a)] program
in jeopardy naturally cause concern to those Members who place a high
priority on the development of minority small business.” Id. at 25,760
(1997). Rep. LaFalce indicated that although the Senate prevailed in
establishing the HUBZone Program, the final bill “confers considerable

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discretion on the Administration of the SBA who will implement it.” Id.
(statement of Rep. LaFalce). Indeed, as Rep. LaFalce stated, he resisted
the inclusion of the HUBZone Program until he was “specifically pre-
vailed upon by the Small Business Administration,” which pledged to him
in writing that SBA “will not permit the implementation of the HUB-
Zone’s program to negatively affect the 8(a) program.” Id. 10
Numerous Representatives who spoke on S. 1139 during the floor de-
bate expressed the same concern—that the new HUBZone Program not
harm the existing 8(a) Program. See 143 Cong. Rec. at 25,761 (statement
of Rep. Velázquez); id. (statement of Rep. Talent) (“I yield . . . to say that
that is also my understanding, and I have said from the beginning, that I
did not want this bill to affect the 8(a) program, and as far as I am con-
cerned, it is out of this bill, it is not mentioned in this bill[.]”); id. at
25,762 (statement of Rep. Wynn) (accepting assurances that HUBZone
Program would not harm 8(a) Program); id. at 25,763 (statement of Rep.
Davis) (commending the protection of the 8(a) program); id. at 25,764
(statement of Rep. Weygand ) (“Continued oversight and vigilance about
this HUBZone program is extremely necessary. I know all of my col-
leagues are looking to Administrator Alvarez to be sure that she does not
diminish the 8(a) program and sacrifice monies because of the HUB
program. . . . I am concerned that there may be the unintended conse-
quence of negatively impacting minority small businesses and 8(a)
firms.”); id. at 25,765 (statement of Rep. Jackson-Lee) (“we are not
disturbing the 8(a) programs”); id. at 25,766 (statement of Rep. Mink)
(expressing concern about the HUBZone Program’s effect on the 8(a)
Program and reliance upon SBA’s assurances that “that in administering
the HUBZone program, they would take steps necessary to assure that
8(a) was not adversely impacted”).

10 Indeed, after enactment of the HUBZone Program without inclusion of the explicit
parity provision, SBA originally promulgated regulations directing contracting officers to
preserve existing 8(a) contracts; then to prioritize small business concerns qualified under
both the 8(a) and HUBZone Programs; and then to consider other 8(a) concerns before
being directed to set aside a contract for competition restricted to HUBZone businesses.
See HUBZone Empowerment Contracting Program, 63 Fed. Reg. 31896, 31908 (1998);
13 C.F.R. § 126.607(b) (effective from June 11, 1998 to Aug. 29, 2005). As noted earlier,
the regulations were amended in 2005.

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Accordingly, the legislative history comports with the conclusion re-
flected in SBA’s regulations that the HUBZone statute need not be read to
compel the prioritization of awards under the HUBZone Program over
those under the 8(a) and SDVO Programs. 11 Our review of the text, struc-
ture and legislative record all support the conclusion that the HUBZone
statute may fairly be read to mandate only that contract opportunities set
aside for HUBZone concerns be awarded on the basis of restricted compe-
tition if the rule of two is met.

V.

Our conclusion that the SBA’s regulations we have reviewed are rea-
sonable is binding on all Executive Branch agencies, notwithstanding any
GAO decisions to the contrary.
First, the statute that authorizes the Comptroller General to decide bid
protests provides the Comptroller General with the power only to make
“recommendations” as to how an Executive Branch agency should resolve
bid protests submitted to the Comptroller General. See 31 U.S.C. § 3554
(2006); see also id. § 3556 (2006) (“This subchapter does not give the
Comptroller General exclusive jurisdiction over protests, and nothing
contained in this subchapter shall affect the right of any interested party to
file a protest with the contracting agency or to file an action in the United
States Court of Federal Claims.”). Neither that statute nor GAO’s regula-
tions implementing it provide GAO with the authority to overrule or
invalidate the properly-promulgated regulations of an Executive Branch

11 Since enactment of the HUBZone Program in 1997, Congress has on other occasions

considered whether to prescribe the relationship among the small business programs and
has not done so. In 2002, Senator John F. Kerry introduced legislation that would have
created a priority for small business concerns that were both 8(a) participants and HUB-
Zone concerns. See Combined 8(a) and HUBZone Priority Preference Act, S. 1994, 107th
Cong. (as introduced, Mar. 6, 2002). In 2003, when the House considered the Veterans
Entrepreneurship and Benefits Improvement Act, an early version of the bill would have
prioritized the various SBA assistance programs in the order of 8(a), SDVO, and then
HUBZone. See H.R. 1460, 108th Cong. sec. 3(a), § 37(a)–(b) (as passed by the House,
June 24, 2003). After a short debate that did not include any significant discussion of the
priority provision, the bill was passed by the House. See 108 Cong. Rec. 15,741 (2003).
On the Senate side, however, the provision was struck without debate or explanation. See
Veterans Benefits Act of 2003, Pub. L. No. 108-183, 117 Stat. 2662; 108 Cong. Rec.
29,614–15 (2003).

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agency. See id. § 3554; 4 C.F.R. § 21.8 (2009) (implementing 31 U.S.C.
§§ 3551–3556 (2006)).
Second, the Comptroller General is an officer of the Legislative
Branch. See Bowsher v. Synar, 478 U.S. 714, 727–32 (1986) (holding
Comptroller General is subject to the control of Congress and therefore
may not exercise non-legislative power). “Because GAO is part of the
Legislative Branch, Executive Branch agencies are not bound by GAO’s
legal advice.” Whether Appropriations May Be Used for Informational
Video News Releases, 29 Op. O.L.C. 74, 74 (2005) (“Bradbury Memo”)
(citing Bowsher, 478 U.S. at 727–32).
Our Office has on many occasions issued opinions and memoranda
concluding that GAO decisions are not binding on Executive Branch
agencies and that the opinions of the Attorney General and of this Office
are controlling. See Bradbury Memo, 29 Op. O.L.C. at 74 (“This memo-
randum is being distributed to ensure that general counsels of the Execu-
tive Branch are aware that the Office of Legal Counsel (‘OLC’) has
interpreted this same appropriations law in a manner contrary to the views
of GAO, and to provide a reminder that it is OLC that provides authorita-
tive interpretations of law for the Executive Branch.”); Memorandum for
Lois J. Schiffer, Assistant Attorney General, Environment and Natural
Resources Division and for John D. Leshy, Solicitor, Department of the
Interior, from Todd David Peterson, Deputy Assistant Attorney General,
Re: Administrative Settlement of Royalty Determinations at 6 n.7 (July 28,
1998) (“Although the opinions and legal interpretations of the GAO and
the Comptroller General often provide helpful guidance on appropriations
matters and related issues, they are not binding upon departments, agen-
cies, or officers of the executive branch.”); Statutory Authority to Con-
tract with the Private Sector for Secure Facilities, 16 Op. O.L.C. 65, 68
n.8 (1992) (“We note that while GAO reports are often persuasive in
resolving legal issues, they, like opinions of the Comptroller General, are
not binding on the Executive branch.”); Memorandum for Donald B.
Ayer, Deputy Attorney General, from J. Michael Luttig, Principal Deputy
Assistant Attorney General, Office of Legal Counsel, Re: Department of
Energy Request to Use the Judgment Fund for Settlement of Fernald
Litigation at 8 (Dec. 18, 1989) (“This Office has never regarded the legal
opinions of the Comptroller General as binding upon the Executive.”);
Memorandum for Joe D. Whitley, Acting Associate Attorney General,

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from William P. Barr, Assistant Attorney General, Office of Legal Coun-
sel, Re: Detail of Judge Advocate General Corps Personnel to the United
States Attorney’s Office for the District of Columbia and the Require-
ments of the Economy Act (31 U.S.C. §§ 1301, 1535) at 2 n.2 (June 27,
1989) (“The Comptroller General is an officer of the legislative branch,
and historically, the executive branch has not considered itself bound by
the Comptroller General’s legal opinions if they conflict with the opinions
of the Attorney General and the Office of Legal Counsel.” (internal cita-
tion omitted )).

VI.

We accordingly conclude that SBA’s regulations regarding the relation-
ship among the 8(a), HUBZone, and SDVO Programs constitute a permis-
sible construction of the Act.

JEANNIE S. RHEE
Deputy Assistant Attorney General
Office of Legal Counsel

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