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New The crux of the parties’ disagreement is whether, under the terms of the solicitation, a
joint venture possesses a certified CAS in its name when one member has such a CAS and is
contracted to perform accounting for all of the other members. The resolution of this issue
depends on the interpretation of the solicitation provision in which the GSA required that
“[o]fferors submitting as a joint venture . . . provide evidence of the system, certification, or
clearance being in the name of the joint venture or in the name of every member of the joint
venture.” AR 375. Specifically, the pertinent inquiry concerns what it means to have a
credential “in the name of the joint venture.” Id. The court is guided in its analysis of that
provision by the “well-settled principles of contract interpretation,” which “apply with equal
force to the interpretation of government solicitations.” Linc Gov’t Servs., LLC v. United States,
96 Fed. Cl. 672, 708 (2010). Under those principles, the court assesses the “plain and ordinary
meaning” of the relevant terms and then considers that meaning in the context of “the solicitation
as a whole, interpreting [the solicitation] in a manner that harmonizes and gives reasonable
meaning to all of its provisions.” Banknote, 365 F.3d at 1353.
The application of those principles leads to only one reasonable interpretation of the
contract: the credential must be issued to the joint venture—not one member acting on behalf of
the other members. This conclusion follows from a review of the plain meaning and the context
of the disputed provision. Turning first to the plain meaning, the parties present two facially
plausible definitions for the phrase “in the name of.” On the one hand, as advocated for by
MTV, the phrase “in the name of the joint venture” could mean “on behalf of the joint venture”
such that MTV’s subcontracting agreement makes MTV eligible for the points because Metrica
is doing the accounting for MTV. In the name of – –, Oxford English Dictionary (3d ed. 2003)
(“on behalf of”). Alternatively, as urged by defendant, the phrase “in the name of” could require
the credential actually be issued to MTV such that a credential issued only to Metrica would not
make MTV eligible for the points. See id. (“[i]ndicating the assigned or stated ownership of a
thing”).
Given these competing definitions, the context of the disputed provision is critical for
ascertaining the meaning of the phrase “in the name of the joint venture.” See Banknote, 365
F.3d at 1353. The phrase appears in three consecutive clauses in the solicitation—one
addressing relevant experience, another pertaining to past performance, and the last one dealing
with certifications. This fact is important because, unless a contrary intent is evident, the same
meaning must be afforded to a phrase that is used in different clauses of the solicitation. Bunge
Corp. v. Dep’t of Agric., AGBCA No. 86-253-1, 91-2 BCA ¶ 24022; cf. Nike, Inc. v. Wal-Mart
Stores, Inc., 138 F.3d 1437, 1445 (Fed. Cir. 1998) (“[T]here is a natural presumption that
identical words used in different parts of the same act are intended to have the same
meaning . . . .”3
).
In the first two solicitation clauses, the GSA described two options for joint-venture offerors to verify their claimed relevant experience or past performance: submitting projects or
examples “in the name of the joint venture or . . . in the name of an individual member of the
joint venture.” AR 375. Pursuant to the principles of contract interpretation, “[a]n interpretation
that gives meaning to all parts of the contract is to be preferred over one that leaves a portion of
the contract useless, inexplicable, void, or superfluous.” NVT Techs., Inc. v. United States, 370
F.3d 1153, 1159 (Fed. Cir. 2004). Because the GSA permitted a joint-venture offeror to receive
credit for the projects or past performance of one of its members, the preceding portion of the
two clauses allowing joint-venture offerors to submit relevant experience projects or past
performance examples “in the name of the joint venture” would be superfluous if the phrase “in
the name of the joint venture” meant “on behalf of the joint venture.” Indeed, MTV seemingly
acknowledges that the GSA used the phrase “in the name of the joint venture” in these two
clauses to require that the joint venture—not a subcontracted member acting for the joint
venture—performed the relevant work. Consequently, the definition of the phrase “in the name
of” urged by defendant is correct for the first two clauses: the entity (i.e., the joint venture or one
of its members) itself must actually possess the necessary qualifications.
The question, therefore, is whether the aforementioned definition should also be applied
to the phrase as it is used in the third clause. The answer is yes. The first two clauses are
structured similarly to the third clause: all three provide that the required documentation must be
either (1) “in the name of the joint venture” or (2) “in the name of” one or all of the joint
venture’s members. Further, there is no evident reason to assign a meaning to the phrase “in the
name of the joint venture” in the third clause different from the meaning assigned to the phrase
“in the name of the joint venture” in the prior two clauses. It follows that the phrase is afforded
the same meaning in all three clauses. As such, there is no reasonable basis to adopt MTV’s
preferred definition of the phrase “in the name of the joint venture” for the last clause. In short,
under the terms of the solicitation, the CAS certification must be possessed by
(i.e., issued to) the joint venture or each member of the
joint venture—a subcontracting agreement is not
sufficient.
MTV’s arguments for a different
result are not persuasive. First, MTV’s focus on the FAR
not prohibiting contractors from subcontracting accounting
functions is misplaced because the GSA is not precluded from selecting offerors based on criteria that is more demanding than
what is set forth in the FAR. See FAR 15.303(b)(4); see also Fulcra Worldwide, LLC v. United
States, 97 Fed. Cl. 523, 535 (2011) (explaining that the solicitation is the best source for
determining selection criteria). Second, MTV has not shown any ambiguity in the disputed
clause because, for the reasons explained above, it proffers an interpretation that is not
reasonable. See Metric Constructors, Inc. v. NASA, 169 F.3d 747, 751 (Fed. Cir. 1999)
(explaining that a contract is ambiguous when it is susceptible to more than one reasonable
interpretation). Third, the lack of ambiguity means that MTV’s reliance on the GSA’s actions in
prior solicitations has no bearing on the current dispute. See Banknote, 365 F.3d at 1353
(explaining that extrinsic evidence is not appropriate when the solicitation is not ambiguous); see
also Travelers Cas., 75 Fed. Cl. at 718 (noting that extrinsic evidence cannot create ambiguity).
The court’s analysis, therefore, is guided by the understanding that offerors are only
entitled to points for having a certified CAS if that credential is possessed by the joint venture or
each member of the joint venture. Because neither MTV nor each member possessed a certified
CAS, the CO did not err when he deducted points from the total claimed by MTV for MTV not
substantiating the points it claimed for having such a CAS. Furthermore, MTV’s lack of success
on the merits of its protest precludes it from receiving costs or injunctive relief. See ARxIUM,
Inc. v. United States, 136 Fed. Cl. 188, 198 (2018) (“A lack of success on the merits
. . . obviously precludes the possibility of an injunction.”); Q Integrated Cos. v. United States,
132 Fed. Cl. 638, 642-43 (2017) (“A protestor thus must prevail on the merits at least in part
before the court can grant an award of bid preparation and proposal costs.”).
(Metrica Team Venture v. U. S.,
No. 18-1100C, November 16, 2018)
When bidding on a set-aside contract, the offeror must demonstrate to the SBA
that it is eligible to receive the contract. See Dorado, 128 Fed. Cl. at 385–86; RCD
Cleaning, 97 Fed. Cl. at 588; Mission Critical Sols., 96 Fed. Cl. at 663–64; see also FAR
19.805-2(b)(1) (“In either negotiated or sealed bid competitive 8(a) acquisitions[,] SBA
will determine the eligibility of the apparent successful offeror and advise the contracting
office . . . after receipt of the contracting office’s request for an eligibility
determination.”). Here, the Court concludes that the SBA’s determination that Senter
failed to demonstrate its eligibility had a rational basis in the record.
First, it is clear from the record that the documents Senter submitted to the SBA
contained a dizzying array of inconsistencies and ambiguities pertinent to its status as
populated or unpopulated. Thus, as discussed, the approved JV agreement described
Senter as populated in the “Contract Performance” section but as unpopulated in the
“Purpose” section. See AR Tab 33 at 824, 826. Further, although the agreement’s
“Contract Performance” section specified which JV member would supply certain
employees, there is no indication that it listed all the employees who would perform
substantive work on the contract, leaving open the possibility that the JV itself might
employ some individuals who would perform substantive work.
9 See id. at 826.
Far from offering clarity, the revised addendum compounded the confusion. In
particular, the addendum’s “Purpose” section twice described Senter as populated,
despite Mr. Soares’s direct instruction to take out a line referring to Senter as populated.
See id. Tab 43 at 976, 978; id. Tab 32 at 822. And because the addendum “amend[ed]
and revise[d]” the agreement, these changes also had the effect of removing the
agreement’s sole express reference to Senter as unpopulated. Id. Tab 43 at 978.
The addendum’s “Performance of Work” section further muddied the waters. As
noted, the approved JV agreement traced the sourcing of five employees who would
perform substantive work on the contract: the Project Manager, the Systems Architect,
and the Software Developer (from Sylvain); and the Instructional Designer and the
Curriculum Developer (from Entereza). Id. Tab 33 at 826. But the revised addendum expressly linked just two employees to Sylvain, rather than three, and one of those—the
Instructional Designer—had previously been sourced to Entereza. See id. Tab 43 at 979.
Compared to the equivalent section in the approved JV agreement, these revisions
obscured Senter’s employment structure, rather than making it clearer that Senter itself
would not employ any individuals performing substantive work on the contract.
As noted above, in the September 22, 2017 denial letter, the SBA gave several
reasons for finding that Senter had failed to establish that it was an unpopulated JV,
including that “[t]he initial joint venture approved by SBA on September 1, 2016 was
Populated”; that “the [a]ddendum . . . did not adequately describe the sub-contracting
vehicle that will split performance between the entity members”; and that “[d]ue to
discrepancies and lack of supporting documents,” the addendum was “not legally
sufficient.” See id. Tab 35C at 839 (emphasis omitted). Senter takes issue with the first of
these, arguing that the SBA in fact approved an unpopulated JV agreement in September
2016, not a populated one. See Mot. for J. on the Admin. R. (Pl.’s Mot.) ¶¶ 7, 20, ECF
No. 24.
The record, however, does not provide the Court with any definitive insight into
what (if anything) the SBA concluded about Senter’s status as populated or unpopulated
when it approved the JV agreement. Thus, as noted, the September 1, 2016 approval
recommendation does not mention whether Senter is populated or unpopulated. AR Tab
38 at 880–83. And the record lacks any contemporary correspondence between Senter
and the SBA regarding the reasons why Senter submitted the revised JV agreement and
then the approved JV agreement in the run-up to the SBA’s approval.
Senter’s argument thus relies mainly on Ms. Mannion’s October 12, 2017 email
stating that the SBA’s D.C. office “ha[d] a[n] unpopulated joint venture” on file for
Senter. See Pl.’s Mot. ¶ 5 (citing AR Tab 39 at 884–85). But this later-in-time document
neither directly sheds light on the SBA’s thinking in September 2016, when it approved
the JV agreement, nor accounts for the changes made by the revised addendum, which
amended and revised the approved JV agreement. And even assuming that the D.C. office
approved the JV as unpopulated, the SBA was not foreclosed from revisiting that
determination at a later date, particularly given that the record before it now included the
addendum.
Finally, and in any event, the other rationales articulated in the denial decision—
that the addendum “did not adequately describe the sub-contracting vehicle that will split
performance between the entity members,” and that “[d]ue to discrepancies and lack of
supporting documents” the addendum was “not legally sufficient”—are thoroughly
supported by the record. See AR Tab 35C at 839 (emphasis omitted). These grounds
alone provide sufficient reason to uphold the SBA’s denial decision, and Senter
challenges them only obliquely. Thus, it claims that the “Court has not been presented
with any evidence of the standards used by the SBA in determining the insufficiency of
the addendum.” Pl.’s Mot. ¶ 19.
The SBA’s regulations (with which Senter is presumed to be familiar), however,
provide detailed guidance on the information that must be included in a JV agreement and on the issue of differentiating an unpopulated JV from a populated one. See 13
C.F.R. § 125.8(b) (discussing the contents of a joint venture agreement); id. § 121.103(h)
(describing the difference between populated and unpopulated joint ventures). And it is
clear on the addendum’s face that it is intended to “amend and revise” the existing JV
agreement. See AR Tab 43 at 978. Further, any 8(a) contractor should be aware of the
general rule that it must establish its eligibility as of the date of the submission of its
initial offer. See FAR 19.805-2(b). Senter was therefore in a position to know that when
the SBA assessed the addendum, it would necessarily have to ensure that the agreement,
as amended and revised by the addendum, met the SBA’s standards for program
eligibility, including the requirement that the JV be unpopulated.
In summary, the Court concludes that the SBA’s determination that Senter did not
show that it was eligible for the award had a rational basis in the record. Accordingly, the
Court must uphold the SBA’s eligibility determination. (Senter,
LLC v. U. S., No. 17-1752C, May 16, 2018)
On January 30, 2011, ECS Federal, LLC (“ECS”), a 1,000-employee firm providing
“federal customers” with “technical and management services and solutions in support of their
critical needs and mission objectives” acquired Paradigm Technologies, Inc. (“Paradigm”), a
privately-held corporation with 250 employees with roughly $50 million in annual revenues. AR
727, 1777. Paradigm specialized in providing “integrated business and financial management [],
acquisition management, and program management support to the Department of Defense
(“DOD”).” AR 727. “In order to integrate the Paradigm workforce and its contracts and
subcontracts in an orderly manner, Paradigm became a wholly owned subsidiary of ECS during
calendar year 2012, and all Paradigm contracts were subsequently novated to ECS.” AR 728,
2417. The acquisition of Paradigm did not close until January 1, 2012. AR 1860. On or about
December 31, 2011, ECS assumed responsibility for Prime Contract HQ0147-10-D that originally
was awarded to Paradigm on August 9, 2010. AR 2533–34.
On February 10, 2012, Mr. Mark Maguire, Mr. William Walker, Ms. Stephanie Jordan,
and Mr. Lee Dixson formed MDW, a new firm incorporated as a limited liability company under
Virginia state law. AR 1855–56, 2415. At that time, Mr. Maguire and Mr. Dixson were employed
by Paradigm. AR 2413. Shortly after ECS acquired Paradigm, Mr. Maguire and Mr. Dixson
advised ECS they were leaving the company. AR 2413. At that time, Mr. Maguire and Mr. Dixson
were working on a Missile Defense Agency Engineering And Support Services (“MiDAESS”)
Financial Management Task Order DOB-02-10, issued under Prime Contract HQ0147-10-D-0020.
AR 2413, 2534. When ECS was informed about Mr. Maguire and Mr. Dixson’s plans, ECS
threatened to fire them. AR 2413. “The only reason ECS did not carry out the threat is that the
government lead for the MiDAESS Financial Management Task Order informed ECS leaders that
Mr. Maguire [was] deemed to have critical skills and knowledge essential to the Task Order
execution, and could not be removed on such short notice. Instead, ECS decided to provide MDW
a subcontract to continue the critical skills support required by the Agency.” AR 2413–14.
On April 27, 2015, MDW formed a joint venture with Defense Acquisition, Inc. (“DAI”)
by acquiring 49% of Vet Tech, a limited liability corporation organized under Delaware law.
AR 724, 1795, 1869. The purpose of the joint venture wasto pursue Missile
Defense Agency (“Missile Defense”) contracts, like the one
MDW acquired from Paradigm. AR 724, 1795–96. DAI retained
51% of Vet Tech’s stock and is the joint venture’s
“managing partner.” AR 724, 1773.
(sections deleted)
The Small Business Act defines a “small business” as “one which is independently owned
and operated and is not dominant in its field of operation.” 15 U.S.C. § 632(a)(1). In addition,
“Congress . . . gave SBA authority to ‘specify detailed definitions or standards by which a business
concern may be determined to be a small business concern.” Palladian Partners, Inc., 783 F.3d
1247 (citing 15 U.S.C. § 632(a)(2)(A)); see also 15 U.S.C. § 637(b)(6) (Empowering SBA “to
determine within any industry the concerns, firms, persons, corporations, partnerships,
cooperatives, or other business enterprises which are to be designated small-business concerns for
the purpose of effectuating the provisions of this chapter”) (emphasis added).
Therefore, although the SBA has authority to “specify detailed definitions or standards by
which a business may be determined to be a small business concern,” such definitions and
standards are to take into account the relevant “industry.” 15 U.S.C. § 637(b)(6).
On January 5, 1956, the SBA issued a Notice of Proposed Rulemaking “to establish the
definition of small business.” 21 FED.REG. 79 (Jan. 5, 1956). Therein, “industry” was not defined,
but “field of operation” was as: “sufficient in its scope to include both those enterprises which are
engaged in making or marketing or are ready and able to make or market a product or similar
product which is of a like nature.” Id. at 80. When the first regulations were issued on January 1,
1957, however, neither the definition of “industry” nor “field of operation” were included. Instead,
the SBA took a different tact and defined “a small business for the purposes of Government
procurement” as a “concern that (1) is not dominant in its field of operation and, with its affiliates,
employs fewer than 500 employees, or (2) is certified by as a small business concern by [the]
SBA.” See 21 FED. REG. 9709, 9710 (Dec. 7, 1956) (citing 13 C.F.R. §103.3) (emphasis added).
In 1956, “affiliate” was defined as a “business concern . . . when either directly or indirectly
(1) one firm controls or has the power to control the other, or (2) a third party controls or has the
power to control both. In determining whether control or the power to control exists, consideration
shall be given to all appropriate factors including common ownership, common management and
contractual relationships.” 21 FED. REG. 9709, 9710 (Dec. 7, 1956) (citing 13 C.F.R. § 103.2(e)).
Over the last sixty-one years, however, the definition of “affiliate” has been significantly
expanded, so that original one paragraph description now comprises of forty-two paragraphs or
subparagraphs in the Code of Federal Regulations. See 13 C.F.R. § 121.103(a)–(d).
The relevant SBA rule in this case, as of May 2, 2016, the date Vet Tech submitted an offer
to Missile Defense in response to Solicitation No. HQ 0147-15-R-0019, defines affiliation as:
“Individuals or firms that have identical or substantially identical business or economic interests
(such as . . . firms that are economically dependent through contractual or other relationships) may
be treated as one party with such interest aggregated.” 13 C.F.R. § 121.103(f) (emphasis added).
The point of determining whether the members of a joint venture are economically
dependent on another business concern, however, is to prevent a business that is “dominant in a
field of operation” from being able to obtain a preference under the Small Business Act. See 15 U.S.C. § 632(a)(1). But, without defining the “industry” or “field of operation,” i.e., the relevant
geographic and product market, dominance cannot be ascertained. See, e.g., Fed. Trade Comm’n
and U.S. Dep’t of Justice Horizontal Merger Guidelines (Aug. 19, 2010) at 7–15. In this case,
simply stating that MDW is in the field of the “Department of Defense Advisory and Assistance
Service Industry” (AR 2594, MDW’s definition) or the field of “strategic planning and finance
management,” “cost estimating and analysis,” “earned value management,” “accounting,” and
“informational support and integration” (AR 2598, 2623, SBA Area Office’s definition) provides
no parameters for a fact finder to ascertain any reliable information relevant to whether a business
concern actually is “dominant in the field of operation.” AR 2623. A more robust economic
analysis is required. Id.
The SBA’s “affiliation rule” also categorically decrees that: “individuals or firms that have
identical or substantially identical businesses,” regardless of any other distinguishing features, ipso
facto “may be treated as one party[.]” 13 C.F.R. § 121.103(f) (emphasis added.) To be sure,
federal courts are obligated to afford an agency’s rule deference, but deference is not required
when the rule, as here, affords an agency absolute discretion, without any apparent substantive
constraints. See Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 414–15 (1971) (holding
that a federal agency’s decision is entitled to a presumption of regularity, but “that presumption is
not to shield [the agency’s] action from a thorough, probing, in-depth review”).
The United States Court of Appeals for the Federal Circuit has held that the United States
Court of Federal Claims has jurisdiction to adjudicate alleged violations of statute or regulation
“in connection with any stage of the federal contracting acquisition process.” Distributed Sols.,
539 F.3d at 1346 (emphasis added). Whether the court has jurisdiction to adjudicate whether the
SBA’s “affiliate rule” violates the APA in the context of a bid protest, has not been considered by
the United States Court of Federal Claims or our appellate court. The court, however, does not
need to reach that issue today, because the SBA Area Office’s May 2, 2016 findings were
superficial, confusing, and likely incorrect, i.e., arbitrary and capricious. See generally Ralph C.
Nash and John Cibinic, “Small Business Programs: Controlled Chaos?” 19 No. 1 NASH & CIBINIC
REPORT ¶ 3 (Jan. 2005) (commenting on “the chaotic rules that . . . implement the small business
initiatives of the Government”).
SBA’s “General Principles of Affiliation” provide that:
Concerns and entities are affiliates of each other when one controls or has the
power to control the other, or a third party or parties controls or has the power
to control both. It does not matter whether control is exercised, so long as the
power to control exists.
13 C.F.R. § 121.103(a)(1).
Under this principle, however, only DAI has the power to control Vet Tech by virtue of
ownership of 51% of Vet Tech’s stock. See 13 C.F.R. § 103(c)(1). MDW does not since it is a
minority shareholder. But, the SBA also considers, not only stock ownership and management,
but “previous relationships with or ties to another concern,10 and contractual relationships, in
determining whether affiliations exists.” 13 C.F.R. § 121.103(a)(2) (emphasis added). The
“contractual relationships” phrase provides at least some context to the scope of the “affiliation,”
but in attempting to be more specific, reverts to generalities. See 13 C.F.R. § 121.103(f)
(describing affiliation based on “identical or substantially identical business or economic
interests”). Of course, most firms have “substantially identical business or economic interests,” in
that they are in business to make a profit. Therefore, this standard is meaningless. As to whether
two (or more) firms have a “substantially identical business or economic interests” through
“contractual or other relationships[,]” the SBA Area Office, in the first instance, has discretion to
determine whether affiliation exists so that “firms . . . may be treated as one party.” 13 C.F.R. §
121.103(f) (emphasis added).
In this case, the SBA Area Office’s May 2, 2016 findings did not discuss why it decided
not to exercise its discretion to find that no “economic dependence” existed between MDW and
ECS. As such, the SBA Area Office’s May 2, 2016 findings provided no reasonable basis on
which the court can review why the SBA Area Office’s decided not to exercise its decision to find
no affiliation. See Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324,
1332–33 (Fed. Cir. 2001) (observing that the reviewing court’s function is to determine whether
“the contracting agency provided a coherent and reasonable explanation of its exercise of
discretion”) (internal quotation marks and citations omitted).
Assuming, however, that SBA Area Office explained why it exercised its discretion not to
find “economic depend[ence] through contractual relationships,” nevertheless the burden of proof
rests on the SBA Area Office to establish dependency. See 13 C.F.R. § 121.102(b) (“As part of its
review of a size standard, the SBA will investigate if any concern . . . would be dominant in the
industry.”) (emphasis added).
In this case, the SBA Area Office found that
Missile Defense awarded ECS three task orders. MDW has served as a
subcontractor on all three task orders. The first Task Order DOB-02-10 was
awarded to MDW on August 1, 2012. The second and third Task Orders DOB-07-
12 and DOB-02-13 respectively were awarded to MDW on February 28, 2013. The
subcontractor agreement is between the prime contractor, Paradigm and MDW for
the period of 7/20/12–9/7/2015 and signed [on] July 20, 2012.
AR 2628.
The record reflects that Missile Defense awarded Paradigm—not ECS—Prime Contract
HQ 0147-10-D-0020 and Task Order DOB-02-10. AR 2533. On December 31, 2011, ECS
acquired Paradigm. AR 2533. And, on August 1, 2012, Missile Defense “directed” ECS to enter
into a subcontract with MDW under Task Order DOB-02-10. AR 2533. Thereafter, ECS was
awarded two subcontracts under Task Orders DOB-07-12 and DOB-02-13. AR 2535.
But, the SBA Area Office’s May 2, 2016 decision failed to consider that “ECS did not
award subcontracts to MDW. . . to provide revenues or financial assistance[.]” AR 2737. Instead,
ECS awarded the first subcontract to MDW on August 1, 2012, in direct response to intervention
by Missile Defense requiring that Mr. Maguire continue work on Task Order DOB-02-10, despite
the fact that he was leaving the employ of ECS to form a separate and independent company. AR
2727–28. Therefore, it was Missile Defense that established the first contractual relationship or
“affiliation” between ECS and MDW.
In addition, the SBA Area Office’s May 2, 2016 findings do not reflect whether MDW’s
subcontract work for ECS on Task Orders DOB-07-12 or DOB-02-13 also was required by Missile
Defense. But,
[u]nder the ID/IQ rules, once a subcontractor was on a team, that subcontractor
could not be on any other teams without approval of the government and the prime.
Since MDW Associates was added to the existing ECS Federal (Paradigm) contract
to support Task Order DOB-02-10, MDW Associates became a Team Member by
their addition to the ID/IQ contract for Task Order DOB-02-10. Since they were
now a subcontractor Team Member, MDW Associates was included in the DOB- 07-12
and DOB-02-13 proposals based on their skills and
qualifications.
AR 2535 (emphasis added).
Therefore, if Missile Defense required MDW to enter into a subcontracting relationship
with ECS, and subsequently approved of such continuing subcontracting work, it would be unjust
to disqualify Vet Tech from future government contracting opportunities. See Argus & Black, SBA
No. SIZ-5204, 2011 WL 1168302 (Feb. 22, 2011), at * 6 (declining to find economic dependence
when “a mechanical application of the rule . . . would be an injustice”). The SBA Area Office’s
May 2, 2016 decision discussed none of these “important [if not dispositive] aspects of the
problem.” State Farm Mutual Ins. Co., 463 U.S. 29, 43 (1983); see also Overton Park, 401 U.S.
at 416 (holding that the reviewing court must determine whether the agency considered all the
relevant facts and whether there has been an error of judgment);
Finally, the SBA Area Office’s findings did not acknowledge numerous representations
made by MDW that it was not dependent on ECS, because MDW had the requisite experience and
background independently to perform work on Missile Defense Contract No. HQ0147-16-C-0028;
a backlog of other non-ECS pending business; modest revenue needs; no debt; and 51.5% of the
revenue previously received from ECS was from subcontracts subject to open competition with
other firms. AR 1778–79, 1782–84, 2393, 2413, 2416, 2599. Therefore, the SBA OHA’s July 20,
2016 decision, affirming the SBA Area Office’s May 2, 2016 findings, was arbitrary and
capricious. See Princeton Vanguard, LLC v. Frito-Lay North America, Inc., 786 F.3d 960, 970
(Fed. Cir. 2015) (“[S]ubstantial evidence review ‘requires an examination of the record as a whole,
taking into account both the evidence that justifies and detracts from an agency’s opinion.’ Our
review under that standard ‘can only take place when the agency explains its decisions with
sufficient precision, including the underlying factfindings and the agency’s rationale.’”) (citations
omitted); see also Seminole Elec. Coop. v. Fed. Energy Regulatory Comm’n, No. 15-1450, 2017
WL 2818640, at *3 (D.C. Cir. 2017) (“To satisfy [the Administrative Procedure Act’s ‘arbitrary
and capricious’] standard, [the agency] must ‘demonstrate that it has made a reasoned decision
based upon substantial evidence in the record, and the path of its reasoning must be clear.’”)
(citation omitted).
CONCLUSION.
For these reasons, Plaintiffs’ December 21, 2016 Motion For Judgment On The
Administrative Record is granted. The Government’s February 9, 2017 Cross-Motion To Dismiss
is granted, insofar as MDW does not have standing in this case. The Government’ February 9,
2017 Motion For Judgment On The Administrative Record, is denied.
The SBA OHA’s July 20, 2016 decision affirming the May 2, 2016 SBA Area Office
findings is reversed, vacated, and remanded for sixty days to the SBA OHA, at 409 3rd Street,
S.W., Washington, D.C., 20416, to instruct the SBA’s Area Office at 233 Peachtree Street, Suite
1900, Atlanta, Georgia, 30303, to conduct a new size determination specifically to ascertain
whether the actions of DOD and/or Missile Defense were the cause of MDW entering into a
subcontracting relationship with ECS, as well as to consider evidence proffered by MDW that, at
no time, was MDW economically dependent on ECS. See RCFC 52.2(a). (Veterans
Technology, LLC and MDW Associates, LLC v. U. S. No.
16-1489, August 2, 2017)
In this case, IEI-Cityside objects to the SBA’s
determination that IEI and Cityside are affiliated, and
that, therefore, IEI-Cityside does not qualify as a small
business for the purposes of the HUD procurement.
IEI-Cityside claims that the SBA violated its own
regulations in rendering its size determination.
Accordingly, this case involves an allegation that there
has been a violation of a statute or regulation in
connection with a procurement within the meaning of 28
U.S.C. § 1491(b)(1). See Palladian Partners, Inc. v.
United States, 783 F.3d 1243, 1254 (Fed. Cir. 2015)
(recognizing CFC’s jurisdiction over challenges to OHA’s
NAICS determination in connection with a procurement).
(sections deleted)
The SBA concluded that the joint
venture agreement between IEI and Cityside did not meet
the requirements of 13 C.F.R. § 124.513 (c)(6), (c)(7) or
(d) and that therefore the joint venture did not qualify
for the exception to affiliation set forth in 13 C.F.R. §
121.103(h)(3)(iii).
See also 13 C.F.R. §
124.520(d)(1)(ii) (“In order to receive the exclusion from
affiliation for both 8(a) and non-8(a) procurements, the
joint venture must meet the requirements set forth in §
124.513(c).”). This conclusion—which concerns matters that
are squarely within the scope of the SBA’s discretion and
expertise—was plainly reasonable and consistent with the
regulations.
Section 124.513(c)(6) required that
IEI-Cityside’s joint venture agreement contain a provision
“[i]temizing all major equipment, facilities, and other
resources to be furnished by each party to the joint
venture, with a detailed schedule of cost or value of
each.” With respect to this requirement, IEI’s joint
venture agreement stated that “[u]pon award of the
contract identified in section 1.0 Purpose, above, the
Managing Director will purchase, in the name of the joint
venture, facilities and equipment for the proper operation
of this contract.” AR 1315. According to plaintiff, this
clause satisfied the criterion set forth in 13 C.F.R. §
124.513 (c)(6) by providing that “all equipment and
resources essentially would be contributed or ‘furnished’
by IEI, the Managing Director.” Pl.’s Br. 10.
This contention is not persuasive.
First, the joint venture agreement does not state that IEI
will furnish all equipment, facilities and resources;
instead, it states that IEI, as managing director, will
purchase such materials “in the name of the joint
venture.” But more importantly, even assuming it were
reasonable to read the agreement to mean that IEI would be
supplying all equipment, facilities, and resources,
IEI-Cityside does not deny that the agreement did not
include the other information required by the regulation:
an itemization and detailed schedule of the costs of such
equipment, facilities, and resources. Accordingly, OHA’s
determination that IEI-Cityside’s agreement did not meet
the requirements of 13 C.F.R. § 124.513(c)(6) is clearly
reasonable.
Similarly, the OHA’s conclusion that
IEI Cityside’s joint venture agreement did not comply with
13 C.F.R. § 124.513(c)(7) was also entirely reasonable.
That regulation required that IEI-Cityside’s joint venture
agreement to contain a provision “[s]pecifying the
responsibilities of the parties with regard to negotiation
of the contract, source of labor, and contract
performance, including ways that the parties to the joint
venture will ensure that the joint venture and the 8(a)
partner(s) to the joint venture will meet the performance
of work requirements set forth in paragraph (d) of this
section” (which delineates the percentage of work that
each joint venture partner must complete in the course of
contract performance).
The IEI-Cityside joint venture
agreement did not contain any of this specific
information, with the exception of stating that IEI’s
President would negotiate the contract. Beyond that, as
set forth above, the agreement stated only in very general
and conclusory terms that IEI and Cityside would each
perform fifty percent of the labor under the contract, and
that IEI would have a right of first refusal as needed to
meet the minimum work requirements set forth in the
regulations. OHA reasonably concluded that these general
statements were inadequate to meet regulatory requirements
because the agreement “does not designate specific tasks
or responsibilities to IEI and Cityside and fails to
explain how [IEI-Cityside] will fulfill the performance of
work requirements of 13 C.F.R. § 124.513(d).” AR 5075.
Notwithstanding the foregoing,
IEI-Cityside argues that at the time it entered the
agreement it could not have provided greater specificity
with respect to facilities, equipment and other resources,
or as to the allocation of the parties’ responsibilities
with respect to contract performance. It contends that
“[n]o specific ‘itemization’ of the equipment and
facilities was possible at the time of proposal
submission” because of the IDIQ nature of the procurement
and because it did not know the geographic regions to
which it would be assigned. Pl.’s Br. 10, 14; see Pl.’s
Reply 6-11. Indeed, it argues, “the very language of the
Solicitation itself provides for lengthy transition,
during which the contract awardee is charged with the
responsibility of furnishing the materials and facilities
necessary for contract performance.” Pl.’s Reply 8.
The SBA’s conclusion that
IEI-Cityside’s “impossibility” argument was unavailing was
reasonable for two independent reasons. First, as OHA
observed, the regulations do not include an exception
based on the nature of the procurement involved. See 13
C.F.R. § 124.513(c); Kisan-Pike, 2014 WL 6904349, at *9
(noting that the applicable regulations do not authorize
an exception for situations where a joint venture may have
difficulty providing detailed information). Indeed,
carving out exceptions on this basis could undermine the
SBA’s purposes for imposing mandatory provisions on joint
venture agreements and for requiring SBA approval of such
agreements: to ensure that the 8(a) (or other small
business) concern is bringing sufficient value to the
joint venture relationship and that the relationship is
genuine. See 13 C.F.R. § 124.513(a)(2) (providing that a
“joint venture agreement is permissible only where an 8(a)
concern lacks the necessary capacity to perform the
contract on its own, and the agreement is fair and
equitable and will be of substantial benefit to the 8(a)
concern,” but cautioning that “where SBA concludes that an
8(a) concern brings very little to the joint venture
relationship in terms of resources and expertise other
than its 8(a) status, SBA will not approve the joint
venture arrangement”); see also 76 Fed. Reg. 8222
(“Receiving an exclusion from affiliation for any non-8(a)
contract is a substantial benefit that only SBA-approved
mentor/protégé relationships can receive. The intent
behind the exclusion generally is to promote business
development assistance to protégé firms from their
mentors. Without [the requirements of section (c)], the
entire small business contract could otherwise be
performed by an otherwise large business.”).
Second, and in any event, as OHA
discerned, the fact that this matter involves an IDIQ
contract and that IEI-Cityside did not know the geographic
region to which it might be assigned did not preclude
IEI-Cityside from providing more specificity regarding the
equipment, facilities, and other resources that each party
would contribute, or adequate information about
allocations of responsibility. The “indefinite” aspect of
this procurement was the number of properties that the
contractor would manage. As OHA observed, notwithstanding
this uncertainty about the number of properties or the
geographic region for which the award would be made,
IEI-Cityside “might nevertheless have complied with 13
C.F.R. § 124.513(c) and (d) by discussing the types of
work each joint venture partner would perform, and the
resources each partner would contribute, for each region
awarded to Appellant.” AR 5075.
Indeed, the record in this matter
reveals that IEI-Cityside could readily have provided
additional specificity in its agreement. According to the
administrative record, both IEI and Cityside are incumbent
HUD contractors with experience in performing field
service management contracts. AR 383. IEI-Cityside
emphasized in the past performance portion of its proposal
that it is comprised of “two experienced HUD FSM
contractors” and noted the tens of thousands of HUD
properties its member entities have managed across
multiple states. Id. IEI-Cityside also stated that “[a]s
current FSM contractors, both Cityside and IEI have the
infrastructure and personnel that can be assigned to the
joint venture to perform the services required in areas
1D, 4D, 5D, 1P, 3P, 4P, 5P.” Id. IEI-Cityside elaborated
that “IEI currently has an active pool of subcontractors
in area 1P. Cityside currently maintains a pool of
subcontractors in area[s] 1P, 3P, 4P and 5P.” Id.
IEI-Cityside then went on to explain its plans for
acquiring additional infrastructure based on its extensive
experience, culminating in its assertion that “[i]f it is
awarded the FSM 3.8 contract IEI-Cityside JV will be ready
to perform from day one and will not require a lengthy
transition period.” AR 383; But cf. Pl.’s Br. 11, 14
(claiming that the transition period establishes
impossibility of complying with regulations). Given these
representations, and each of the joint partners’
experience, IEI-Cityside necessarily would have had a much
greater appreciation of what each partner would be
contributing in terms of equipment, facilities, labor and
other resources at the time it entered its agreement.
IEI-Cityside’s impossibility claims
are also contradicted by its technical proposal, in which
IEI-Cityside asserted that “the Firm has existing fully
staffed and equipped offices located within the Denver and
Philadelphia HOC geographic area” aswell as overarching
computer systems for the contracts. AR 358. The technical
proposal also included a lengthy “Property Management Work
Flow,” complete with detailed charts and narratives that
specified the types of work that IEI-Cityside would
perform if it were awarded the contracts. AR 360-77.
IEI-Cityside claimed that its pre-existing resources and
coverage “will allow the Firm to provide timely and
efficient services to HUD from day one.” AR 360.
In addition, in submitting the joint
venture agreement to the SBA district office in Nebraska,
IEI-Cityside provided additional information on a form
checklist—not included in the agreement itself—stating
that it had existing personnel, equipment, and “facilities
already in use that will be used for this contract with
several other offices ready to perform the contract.” AR
1323. IEI-Cityside also provided “[a] breakdown of work
tasks to be performed by each joint venturer.” See AR
1326.
The record, in short, demonstrates
that IEI-Cityside was capable of providing specifics that
it did not include in the agreement. OHA fully considered
this record, as well as IEI-Cityside’s arguments. OHA’s
interpretation of SBA’s regulations and the application of
those regulations to the specific circumstances of this
case is entitled to substantial deference. OHA provided a
reasoned and logical explanation for why the Area Office
determination did not constitute clear error. Accordingly,
the SBA’s decision that the joint venture agreement failed
to meet the requirements of 13 C.F.R. § 124.513(c) and (d)
was neither arbitrary, capricious, nor contrary to law.
(Inspection Experts, Inc. and
Cityside Management Corp., No. 15-673C, August 25,
2015) (pdf)
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