SWIFT & STALEY, INC. v. United States
1:21-cv-01279
Fed. Cl.Apr 26, 2022Background
- SSI, an employee-owned company, owns a 38% interest in Portsmouth Mission Alliance, LLC (PMA), a populated joint venture formed to perform a Portsmouth DOE infrastructure contract (PMA’s only contract).
- SSI bid for a Paducah DOE set-aside contract (size standard $41.5M) and self-certified without including PMA’s receipts in its size calculation.
- Akima protested SSI’s size; the SBA Area Office initially required SSI to assume a pro rata share of PMA receipts under the joint-venture rule, then (on remand) concluded PMA was not an affiliate but nevertheless a revenue source to be counted.
- On appeal to OHA after this Court remanded, OHA considered whether SSI and PMA were affiliated via negative control based on PMA’s operating agreement and concluded SSI could prevent a quorum and block several ordinary actions, establishing negative control.
- The negative-control finding meant SSI must include PMA’s receipts (pushing SSI over the size limit), and the Court affirmed OHA’s decision, denied SSI’s motion to supplement the administrative record with a post-hoc declaration, and entered judgment for the government and intervener.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether OHA violated 13 C.F.R. § 134.316(c) by deciding affiliation via negative control on appeal | SSI: OHA impermissibly decided a substantive issue raised first on appeal | Gov/Akima: Affiliation and negative control were raised to the Area Office and are properly before OHA | OHA did not violate § 134.316(c); affiliation/negative-control issues were raised earlier and OHA acted as an appellate body |
| Whether SSI and PMA are affiliated through negative control | SSI: PMA’s operating agreement does not grant SSI power to prevent quorum or block ordinary actions | Gov/Akima: The operating agreement's quorum and approval provisions grant SSI negative-control power | Held: OHA reasonably concluded, based on the operating agreement, SSI can prevent quorum and block ordinary actions; affiliation established |
| Whether OHA’s negative-control finding was arbitrary or capricious | SSI: OHA misapplied precedent, ignored that PMA is a special-purpose entity, and relied on powers not exercised in practice | Gov/Akima: OHA followed its precedent; negative control is assessed by the agreement’s powers, not actual exercise | Held: Finding not arbitrary/capricious; OHA’s interpretation of agreement and precedent is rational and deserves deference |
| Whether the court should supplement the administrative record with SSI President’s declaration | SSI: Declaration explains how PMA operates and fills gaps for review | Gov/Akima: Declaration is extra-record, was not before OHA, and is unnecessary for APA review | Held: Supplementation denied; record adequate for meaningful review and agency may rely on operating agreement itself |
Key Cases Cited
- Swift & Staley, Inc. v. United States, 155 Fed. Cl. 630 (Fed. Cl. 2021) (prior opinion that prompted remand on joint-venture issue)
- Bannum, Inc. v. United States, 404 F.3d 1346 (Fed. Cir. 2005) (standards for judgment on the administrative record)
- Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324 (Fed. Cir. 2001) (APA standard of review in procurement challenges)
- Axiom Res. Mgmt., Inc. v. United States, 564 F.3d 1374 (Fed. Cir. 2009) (limits on supplementing the administrative record)
- Fla. Power & Light Co. v. Lorion, 470 U.S. 729 (U.S. 1985) (review is based on the administrative record)
- Camp v. Pitts, 411 U.S. 138 (U.S. 1973) (administrative record governs judicial review)
- Dell Fed. Sys., L.P. v. United States, 906 F.3d 982 (Fed. Cir. 2018) (injunctive relief requires success on the merits)
- Oracle Am., Inc. v. United States, 975 F.3d 1279 (Fed. Cir. 2020) (harmless-error principle in bid protest review)