Can we set aside this requirement for strictly New York State, and not allow any other States to bid on it? I cannot find the FAR reference, besides one, FAR 6.208, but that is for local firms during a disaster operation.
No. FAR Part 6 – competition requirements does not provide for limiting competition on the basis of geographic location. FAR 6.208 -- Set-asides for Local Firms during a Major Disaster or Emergency can only be used in situations of declared major disaster or emergency in accordance with FAR 6.208(b).
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If response time is a critical requirement it may be best to develop objective evaluation factors and subfactors in accordance with FAR 15.304 -- Evaluation Factors and Significant Subfactors. Be sure to make the factors and subfactors as objective as they can be in order to protect the source selection from successful protest on the basis of it being arbitrary and/or capricious in its determinations. If a geographically described evaluation factor is developed, the contracting officer may want to be prepared to respond to competitors that provide evidence their response times are not related to their geographic location or jurisdiction of incorporation.