Rotech Healthcare Inc. v. United States
118 Fed. Cl. 408
| Fed. Cl. | 2014Background
- Rotech challenges VA's Solicitation No. VA259-14-R-0107 for home oxygen supplies in VISN 19 as noncompliant with applicable statutes/regulations.
- Solicitation was issued as a 100% small business set-aside under NAICS 532291 (Home Health Equipment Rental); Rotech is not a small business under this or likely any code.
- Rotech alleges the Solicitation fails to implement the Nonmanufacturing Rule (NMR), LOS/Subcontracting rules, and proper LOS-related information requirements.
- VA argued NMR does not apply because the contract is a service contract under a service NAICS code with a mixed supply component.
- The case includes cross-motions on the administrative record; the court must determine NMR applicability and remedy.
- The court ultimately finds the NMR applies to the VISN 19 solicitation because it includes a substantial supply component.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does the NMR apply to the VISN 19 solicitation regardless of NAICS code? | Rotech asserts NMR applies to all supply contracts, regardless of NAICS label. | The NMR does not apply to contracts classified as services; SBA regulation 13 C.F.R. § 121.406(b)(3) shortens scope. | NMR applies to all supply contracts, unambiguously. |
| Is the VISN 19 contract a contract for supplies even if NAICS code is service-oriented? | NAICS code is not dispositive; majority value lies in supplies. | Code 532291 is service-focused; contract is primarily services. | Contract includes supplies; NMR applies. |
| Should the NAICS code be dispositive in determining NMR applicability? | NAICS code is not determinative; contract terms control. | NAICS classification helps distinguish supplies vs services. | NAICS code is non-determinative; contract terms govern. |
| Are Counts 1 and 3 moot after NMR finding? | If NMR applies, those challenges remain relevant. | NMR finding moots LOS and specific clause challenges. | Counts 1 and 3 moot; focus on NMR compliance. |
| Should injunctive relief be granted for violation of the NMR? | Irreparable harm from loss of bid opportunity; public interest favors compliance. | Injunctive relief is extraordinary and unwarranted here. | Permanent injunction granted; VA enjoined from proceeding with the solicitation. |
Key Cases Cited
- Rotech United States, 71 Fed. Cl. 393 (Fed. Cl. 2006) (NMR applies to service contracts with a substantial supplies component)
- Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (Supreme Court 1984) (ambiguities delegate into agency to fill statutory gaps)
- Brand X Internet Services, 545 U.S. 967 (Supreme Court 2005) (prior judicial construction can trump agency deference when statute unambiguous)
- PGBA, LLC v. United States, 389 F.3d 1219 (Fed. Cir. 2004) (irreparable harm and bid protest injunctive standards)
- Centech Group, Inc. v. United States, 554 F.3d 1029 (Fed. Cir. 2009) (injunctive relief factors in bid protests)
- Transatlantic Lines LLC v. United States, 68 F.Cl. 48 (Fed. Cl. 2005) (public interest in procurement and compliance with procurement laws)