Veterans Contracting Group, Inc. v. United States
133 Fed. Cl. 613
| Fed. Cl. | 2017Background
- Veterans, a service-disabled veteran-owned small business (SDVOSB), was removed from the VA’s VetBiz VIP database after an SBA area office determined it did not unconditionally own 51% via Mr. Montano because of shareholder agreement buy‑out provisions triggered on death, incompetency, or insolvency.
- SBA relied on prior SBA decisions (International Logistics Group; Wexford) and a dictionary definition of “unconditional” to find impermissible conditions on ownership; VA decertified Veterans under 38 C.F.R. § 74.2(e) based on that SBA determination.
- Veterans filed a pre‑award bid protest challenging the VA removal and SBA’s underlying determination and sought a preliminary injunction to reinstate it so it could compete for two upcoming SDVOSB set‑aside solicitations (roofing and relocation contracts).
- The government argued the court lacked jurisdiction over the SBA determination because an OHA appeal was pending and that Veterans lacked standing because it was not an eligible SDVOSB.
- The court found it had Tucker Act jurisdiction, concluded Veterans had standing (loss of opportunity to compete = economic injury), and treated the VA removal and embedded SBA rationale as reviewable agency action.
- The court granted a partial preliminary injunction: it set aside CVE’s July 21, 2017 decertification, ordered restoration to the VIP database (enabling competition for the relocation solicitation), denied the government’s motion to dismiss, and required Veterans to post a $150,000 security.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Jurisdiction / standing to bring bid protest | Veterans lost opportunity to compete for SDVOSB set‑asides and thus has direct economic interest | Government: Veterans lacks standing because it is not an eligible SDVOSB and SBA/OHA appeal is pending | Court: Tucker Act jurisdiction exists; Veterans is an interested party with standing because the VA action deprived it of the opportunity to compete; OHA pendency does not bar review here |
| Reviewability of VA decertification based on SBA area office findings | VA relied on SBA findings; court should review the VA decision and embedded SBA rationale under APA/Tucker Act | Government: CVE properly applied §74.2(e) and the court should not review SBA’s pending matters | Court: VA decision is reviewable; court must examine SBA findings that underlie VA removal |
| Whether shareholder agreement buy‑out provisions render ownership not "unconditional" | Buy‑out on death/incompetency/insolvency is non‑executory, customary, and does not burden current unconditional ownership | SBA: Such provisions place impermissible conditions on ownership and violate the 51% unconditional ownership requirement | Court: SBA area office failed to provide a coherent, reasoned explanation; precedents (Miles, AmBuild) support that similar buy‑out/right‑of‑first‑ refusal clauses do not defeat unconditional ownership; Veterans likely to succeed on merits |
| Preliminary injunction factors (irreparable harm, balance, public interest) | Denial would irreparably harm Veterans by depriving competition and threatening viability; public interest favors procurement integrity | Government: Injunction would delay procurements and harm VA interests | Court: Veterans shows irreparable harm; balance of hardships and public interest favor injunctive relief; preliminary injunction granted (with bond) |
Key Cases Cited
- Systems Application & Techs., Inc. v. United States, 691 F.3d 1374 (Fed. Cir.) (Tucker Act bid protest jurisdiction principles)
- RAMCOR Servs. Grp., Inc. v. United States, 185 F.3d 1286 (Fed. Cir.) (connection between statutory/regulatory violations and procurement confers jurisdiction)
- Weeks Marine, Inc. v. United States, 575 F.3d 1352 (Fed. Cir.) (standing requires non‑trivial competitive injury in pre‑award protests)
- Palladian Partners, Inc. v. United States, 783 F.3d 1243 (Fed. Cir.) (effect of pending OHA appeals and exhaustion/participation considerations)
- Impresa Construzioni Geom. Domenico Garufi v. United States, 238 F.3d 1324 (Fed. Cir.) (agencies must supply coherent, reasonable explanations for discretionary decisions)
- Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto Ins. Co., 463 U.S. 29 (U.S.) (arbitrary and capricious standard for agency action)