ADAMS AND ASSOCIATES, INC. v. UNITED STATES
2013-5077, 2013-5080
United States Court of Appeals for the Federal Circuit
January 27, 2014
741 F.3d 102
Before LOURIE, DYK, and WALLACH, Circuit Judges.
Appeal from the United States Court of Federal Claims in No. 12-CV-0731, Senior Judge Eric G. Bruggink. Appeal from the United States Court of Federal Claims in No. 12-CV-0409, Judge Mary Ellen Coster Williams.
2013-5077
Appeal from the United States Court of Federal Claims in No. 12-CV-0731, Senior Judge Eric G. Bruggink.
ADAMS AND ASSOCIATES, INC., Plaintiff-Appellant, v. UNITED STATES, Defendant-Appellee.
2013-5080
Appeal from the United States Court of Federal Claims in No. 12-CV-0409, Judge Mary Ellen Coster Williams.
MICHAEL J. SCHRIER, Jackson Kelly PLLC, of Washington, DC, argued for plaintiff-appellant. On the brief was G. LINDSAY SIMMONS. Of counsel were KATHERINE A. CALOGERO and HOPEWELL H. DARNEILLE, III.
PATRICIA M. MCCARTHY, Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With her on the brief were STUART F. DELERY, Acting Assistant Attorney General, JEANNE E. DAVIDSON, Director, and MATTHEW P. ROCHE, Trial Attorney. Of counsel on the brief were DAVID R. KOEPPEL and PETER J. DICKSON, Attorneys, Office of the Solicitor (MALS), United States Department of Labor, of Washington, DC.
Before LOURIE, DYK, and WALLACH, Circuit Judges.
WALLACH, Circuit Judge.
Adams and Associates, Inc. (“Adams”) appeals two orders1 of the United States Court of Federal Claims, each of which denied Adams‘s motion for judgment on the administrative record and granted the United States’
BACKGROUND
I. The Job Corps Program
The Job Corps program is a national residential training and employment program administered by the DOL. In 1998, Congress passed the Workforce Investment Act, which reformed the Job Corps program and authorized the Secretary of Labor (“the Secretary”) to enter into agreements with government agencies or private organizations to operate “Job Corps centers.”
Adams is the incumbent contractor for both the Gadsden and the Shriver Job Corps Centers. Because of the small business limitation placed on the contracts for the follow-on operation of these Centers, Adams cannot compete for the contracts since it does not qualify as a small business.
II. The Gadsden Center
Adams was awarded the contract to operate the Gadsden Center in 2004. In April 2011, the DOL declined to exercise its option to extend Adams‘s contract. Prior to issuing a solicitation for a new contract, the DOL issued a Request for Information (“RFI”) to conduct market research regarding the businesses, especially small businesses, that might be willing to compete for the operation of Gadsden. Based on the results of this research, the DOL decided to limit the right to compete for the Gadsden contract to small businesses. Adams filed a pre-award bid protest, in response to which the DOL cancelled the Gadsden solicitation. Adams‘s protest was then dismissed without prejudice. Adams & Assocs., Inc. v. United States, No. 11-665C (Fed. Cl. Oct. 13, 2011) (order dismissing protest).
The DOL then issued a second RFI to collect new market research using a revised set of criteria to evaluate the respondents. The DOL continued to use this revised set of criteria in its subsequent RFIs for Job Corps Center procurements, including for the Shriver Center. Pursuant to the Federal Acquisition Regulation,
businesses according to the size and revenue limitations for the job category.
III. The Shriver Center
Adams‘s contract to operate the Shriver Center ran from 2008 to 2013. Before issuing a solicitation for a new contract, the DOL issued an RFI to conduct market research regarding businesses that might be willing to compete for the operation of Shriver. This RFI included the criteria developed in the second RFI for Gadsden, and the contract was assigned the same industry code (NAICS 611519). Therefore, like Gadsden, if the Shriver contract were designated for small businesses, any business with more than $35.5 million in annual receipts, including Adams, would not qualify. Six businesses responded to the RFI, four of which were small businesses. Because the DOL concluded that there was a reasonable expectation that at least two of these small businesses would be interested in bidding on the Shriver contract, on October 16, 2012, the DOL issued a solicitation notice for the Shriver Center as a total small business set-aside.
Adams filed two pre-award bid protests in the Court of Federal Claims. In each case, the Court of Federal
DISCUSSION
I. Standard of Review
This court reviews legal determinations of the Court of Federal Claims, such as a judgment on the administrative record, without deference, applying the same standard of review as the Court of Federal Claims. Dysart v. United States, 369 F.3d 1303, 1310 (Fed. Cir. 2004) (citing Haselrig v. United States, 333 F.3d 1354, 1355 (Fed. Cir. 2003)). Under that standard, this court will not disturb the agency‘s decision to deny appellant relief unless it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”
II. Legal Framework
The Workforce Investment Act established Job Corps Centers and the process the DOL must follow in selecting center operators.
To transition to the new framework established by the Workforce Investment Act, including the creation of Job
The Federal Acquisition Regulation establishes procedures for agencies to make small business set-aside determinations.
III. The DOL Properly Used Small Business Set-Aside Procedures for the Procurements
A. The Plain Language of the Workforce Investment Act
The Workforce Investment Act lists as “eligible entities” for operating Job Corps Centers: “a Federal, State, or local agency, an area vocational education school or residential vocational school, or a private organization.”
To Adams, the plain language of these provisions indicates that Congress intended to establish a “unique procurement method for selecting [Job Corps Center] operators, one which requires DOL to maximize competition among the enumerated eligible entities [in subsection (a)(1)(A)], except in limited, sole-source situations.” Appellant‘s Br. (Adams I) 23; Appellant‘s Br. (Adams II) 20. Thus, Adams argues the “unique procurement method” envisioned by the Workforce Investment Act requires full and open competition “among the entire broad pool of eligible entities” as defined by
To evaluate the lawfulness of an agency‘s statutory interpretation, courts employ the two-prong test established in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842-45 (1984). The court first examines “whether Congress has directly spoken to the precise question at issue,” and if so, the agency and the court must comply with Congress‘s clear intent. Id. at 842–43. If, however, “the statute is silent or ambiguous with respect to the specific issue,” a prong-two analysis is warranted, under which the court must determine “whether the agency‘s answer is based on a permissible construction of the statute.” Id. at 843. As a question of law involving statutory construction, this court applies de novo review.
Neither the plain language of the Workforce Investment Act provisions pertaining to Job Corp Centers, nor the structure of the provisions, forbids the DOL from using the procurement procedures of the Competition in Contracting Act. Indeed, the “competitive basis” provision itself begins with a reference to the Competition in Contracting Act,
There is also no indication that by listing the eligible entities in subsection (a)(1)(A), Congress intended “competitive basis” in subsection (a)(2)(A) to mean that solicitation must be open to all such entities, particularly since the provision divides the list of eligible entities with an “or.”
B. The DOL Properly Exercised Its Rulemaking Authority Under the Workforce Investment Act
The DOL promulgated regulations applying the procurement procedures of the Competition in Contracting Act via the Federal Acquisition Regulation.
The DOL derived its authority to promulgate regulations under the Workforce Investment Act from two statutory sources. First, the Workforce Investment Act itself provides “[t]he Secretary may . . . prescribe rules and regulations to carry out this chapter only to the extent necessary to administer and ensure compliance with the requirements of this chapter.”
As to the statutory authority in
IV. The DOL Properly Applied the “Fair Proportion” Determination of the Federal Acquisition Regulation
Adams also argues that, even if the Federal Acquisition Regulation was applicable to these procurements, the DOL did not apply the Regulation correctly. To Adams, “the plain language of [Federal Acquisition Regulation §] 19.502-1 . . . explicitly includes two requirements for setting aside acquisitions: the ‘fair proportion’ determination and the Rule of Two.” Appellant‘s Br. (Adams I) 19; Appellant‘s Br. (Adams II) 16. As applied to Gadsden and Shriver, Adams contends that the contracting officer was required to make a threshold “fair proportion” determination before applying the Rule of Two.
The Federal Acquisition Regulation provides
(a) The contracting officer shall set aside an individual acquisition or class of acquisitions for competition among small businesses when—
(1) It is determined to be in the interest of maintaining or mobilizing the Nations full productive capacity, war or national defense programs; or
(2) Assuring that a fair proportion of Government contracts in each industry category is placed with small business concerns; and the circumstances described in 19.502-2 or 19.502-3(a) [i.e., the Rule of Two] exist.
To reach its interpretation, Adams had to rephrase the Federal Acquisition Regulation. That formulation is refuted by the plain language of the Regulation. Adams‘s interpretation of the Federal Acquisition Regulation also finds no support in the Small Business Act, from which the “fair proportion” language originated:
To effectuate the purposes of this chapter, small-business concerns within the meaning of this chapter shall receive any award or contract or any part thereof . . . as to which it is determined by the Administration and the contracting procurement or disposal agency . . . to be in the interest of assuring that a fair proportion of the total purchases and contracts for property and services for the Government in each industry category are placed with small business concerns. . . . These determinations may be made for individual awards or contracts or for classes of awards or contracts.
Here, the DOL conducted market research to assess the interest among small businesses in bidding on the contracts, applied the appropriate NAICS size standard, and received the endorsement of the Office of Small and Disadvantaged Business Utilization as part of its “fair proportion” determination. The Court of Federal Claims correctly concluded that the DOL had satisfied the “fair proportion” determination. Adams I, 109 Fed. Cl. at 355 (“The mechanisms contemplated by [15 U.S.C. §] 644—goal setting by the Executive Branch, input from the [Office of Small and Disadvantaged Business Utilization], and the industry specific application of size standards by [the Office of Management and Budget] and the [Small Business Administration]—were implemented. . . . [N]othing more was required to satisfy the ‘fair proportion’ requirement.”). It was then left to the Contracting Officer to perform the Rule of Two analysis based on the results of the RFIs.
Notably, Adams has not articulated a means by which an individual contracting officer would make a “fair proportion” determination in the context of a specific procurement. While Adams is correct that the DOL must make a “fair proportion” determination prior to designating a contract as a small business set-aside, the method it proposes for doing so is without support. The DOL properly employed a method that comports with the Small Business Act; therefore, its decision was not arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law, and must be sustained.
V. The DOL Properly Applied the Rule of Two Analysis
Finally, Adams argues that, if it was permissible for the DOL to use the “Rule of Two” framework, the DOL did not apply it correctly to these procurements. As noted, the Rule of Two states that the “contracting officer shall set aside any acquisition over $150,000 for small business participation when there is a reasonable expectation that: (1) Offers will be obtained from at least two responsible small business concerns . . . ; and (2) Award will be made at fair market prices.”
Adams‘s reading of the Rule of Two ignores that “a reasonable expectation” that at least two responsible small businesses will submit bids at fair market prices is all that is required. Here, through the RFI process, the DOL performed market research about the level of interest from small businesses in bidding on the Shriver and Gadsden contracts. It then determined from the responses that there was a reasonable expectation that at least two responsible small businesses would make offers for the operation of each of the Centers.
To Adams, “the issue here is that the market research . . . must generate the information necessary to address the expressly required responsibility and price reasonableness legal elements of the Rule of Two.” Appellant‘s Br. (Adams I) 51; Appellant‘s Br. (Adams II) 46. According to Adams, the required information is identified in another part of the Federal Acquisition Regulation pertaining to determining whether a prospective contractor is
Adams conflates a set-aside determination with a responsibility determination made pursuant to
CONCLUSION
Accordingly, the Court of Federal Claims’ decisions are affirmed.
AFFIRMED
