PRECISE SYSTEMS, INC. v. United States, 1:14-cv-01174

Precise Systems, Inc., a small aviation management company, was the apparent awardee on a Department of State procurement set aside for service-disabled veteran-owned small business concerns (SDVO SBCs).
Founder and majority owner John T. Curtis is a service-disabled veteran; in 2011 he sold a minority interest to an Employee Stock Ownership Plan (ESOP). At the time of the offer Curtis held >51% of issued shares (Series A Common); the ESOP held Series B Convertible Preferred shares.
The Amended Articles treated Series A and Series B shares as having identical vote-per-share and voting together on shareholder matters, but they differed in dividend, conversion, and redemption rights; the Board structure gave Curtis enhanced director voting weight.
Four offerors protested Precise’s SDVO SBC status to the contracting officer; the SBA Acting Director of Government Contracting (AD/GC) found Curtis did not own 51% of each class of voting stock under 13 C.F.R. §125.9(d).
The SBA Office of Hearings and Appeals (OHA) affirmed, concluding Series A and Series B were separate “classes” because they were “sufficiently dissimilar.” Precise sued in the Court of Federal Claims seeking review.
The court found the OHA’s “sufficiently dissimilar” standard inadequately explained, set aside the OHA decision, and remanded to the SBA for a clearer, reasoned determination applying an articulated standard.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Meaning of “each class of voting stock” in 13 C.F.R. §125.9(d)	Series A and B are two series within a single class; label and voting practice show one class and Curtis owns >51%	Series differences (dividend, conversion, redemption) create distinct classes of voting stock	OHA’s broad “sufficiently dissimilar” conclusion is inadequately explained; remand required for clearer standard and application
Whether non-voting or form-only differences should count	Only differences that materially affect ownership/control should matter; substance over form	SBA may consider a range of characteristics beyond pure voting mechanics	Court criticized OHA for failing to tie its test to materiality or statutory purpose; remand for clarified analysis
Role of state corporate law (Maryland) in defining “class”	Organizational documents and Maryland law support treating Series as series within one class	Maryland law supports treating classes/series distinctions; OHA permissibly referenced it	Court found OHA’s reliance on Maryland law inadequately reasoned and insufficiently tied to §125.9(d) purposes
Adequacy of agency explanation under APA standard	OHA decision lacks coherent justification showing why differences were “sufficient”	OHA and SBA applied reasonable interpretation meriting deference	Court held agency failed to provide reasoned explanation; decision set aside and remanded for clearer rationale

Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983) (agency must provide a reasoned explanation for its decisions)
Nat'l Ass'n of Home Builders v. Defenders of Wildlife, 551 U.S. 644 (2007) (agency must examine relevant factors and articulate rational connection between facts and choice)
Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324 (2001) (bid protest review requires coherent, reasonable explanation of exercise of discretion)
Cavalier Clothes, Inc. v. United States, 810 F.2d 1108 (1987) (Court of Federal Claims jurisdiction over SBA decisions affecting contract awards)
Tesoro Haw. Corp. v. United States, 405 F.3d 1339 (2005) (regulations are construed using their plain meaning)