64 Fed. Cl. 784 | Fed. Cl. | 2005
OPINION
INTRODUCTION
This case pits the needs of any administrative system against an apparent unfair loss of a contract. Plaintiff was awarded a contract by the Department of Energy (DOE) as qualified under Small Business Administration (SBA) rules. A disappointed bidder filed a challenge with the SBA that Plaintiff did not meet the small business criteria of the agency and its regulations. SBA initially determined that indeed Plaintiff did not meet that criteria and DOE withdrew the contract from Plaintiff, eventually awarding it to the challenger, who is the Intervenor here. Three days after the contract was re-awarded, but before contract performance began, the appellate level of SBA (OHA) overturned the determination that Plaintiff was not a small business and remanded to the initial SBA decision-maker. If this appellate rever
Several things are apparent here. First, there is a presumption that the original award was in the best interest of the Government at the time it was accepted. Second, Congress fully contemplated the potential for this type of dispute when it inserted the SBA into the procurement process. Third, the Government has a legitimate interest in administrative certainty when awarding contracts. Fourth, the Court, and historically other fora, have been given jurisdiction over this type of case in order to ensure fairness to the individual bidder, the integrity of the procurement process, and that the Government makes the best procurement decisions for the tax payer. These interests clash in this case.
If the initial SBA size determination was wrong, then Plaintiff has lost a valuable contract by reason of a Government misjudgment. The taxpayer has also been denied the best deal. However, this problem is inherent where the SBA has a role in government procurement. Of course, Congress found this role to be based on an important national concern; fostering small business. The Court is thus faced with 3 questions it must answer. First, does it have subject matter jurisdiction? Second, does the complaint state a cause upon which this Court has the power to grant relief? And third, did the CO abuse his discretion when he refused to re-award the contract to Plaintiff? The Court believes the first 2 questions should be answered in the affirmative. This means the 12(b)(1) and (6) motions must be DENIED.
The third question is the hardest to answer because the mandates from Congress clash. In order to find that the CO abused his discretion the court must determine that the CO either acted in bad faith (for which there appears to be no evidence) or that his action is so inconsistent with DOE’s actual need for certainty that it can not be justified in light of Plaintiffs small business status at the time of the OHA reversal. This is a tough standard to meet. The Court has not heard specific argument on this point, however, it has some preliminary views that may help the parties. So far, the description of the CO’s decision does sound reasonable. The DOE in this case is faced with a real need for computer services. Reissuing the contract to Plaintiff would add an additional level of uncertainty to the process. If the contract was returned to Plaintiff and the ongoing OHA remand ultimately finds that CNSI was not an 8(a) small business, then DOE would yet again have to terminate the contract with Plaintiff, and presumably the Intervenor would again be given the contract a second time. Thus, after one award and three re-awards the Government would only then get its IT network. The systemic interest in preventing this seems strong indeed.
This would be a harsh result to CNSI if indeed they ultimately prevail in their SBA classification. However, justice is not a free good, as the economists say. In this case it takes time and imposes costs. Unfortunately there is no way to instantly determine the “correct” answer to the SBA dispute. In fact there may be no “correct” answer, just a matter of conflicting regulatory determinations. In light of this situation, the Court is inclined to deny Plaintiff relief on the merits. However, Plaintiff and Defendants should be given an opportunity to focus on this specific issue. The Court is open to their arguments or evidence.
After full briefing and oral arguments, the Court DENIES Defendant’s 12(b)(1) Motion to Dismiss for Lack of Subject Matter Jurisdiction and DENIES Defendant-Intervenor’s 12(b)(1), or alternatively 12(b)(6) Motion to Dismiss.
FACTUAL BACKGROUND
Client Network Services, Inc. (CNSI) is an information technology company, which is a participant in the Small Business Administration’s 8(a) Business Development Program, for purposes of federal government contract set-asides. Complaint ¶14. When its Yucca Mountain Project Office of Civilian Radioactive Waste Management needed new
PROCEDURAL HISTORY
Within a week of DOE’s award to CNSI, disappointed bidder Catapult challenged CNSI’s size eligibility with the SBA, arguing the North American Industry Classification System (NAICS) schedule applied. Complaint ¶16. On October 28, 2004, the SBA Philadelphia Area Director concluded that CNSI was other than a small business concern under that standard. Complaint 1123. Seven days later, on November 4, 2004 CNSI exercised its administrative right to appeal that adverse size determination, filing with the OHA. Id. Now operating under the Area Office ruling, on November 8, 2004 DOE terminated it’s award of the Yucca Mountain IT contract with CNSI. While the OHA was considering CNSI’s appeal, DOE then re-awarded the contract to Catapult on February 8, 2005. Three days later, OHA issued its order of remand, vacating the Area Office’s October size determination. Complaint ¶25. After discovering that DOE would stand by its re-award to Catapult even in light of the OHA remand, CNSI lodged a protest first with the agency, and then with GAO on February 17, 2005. Complaint ¶ 27. On March 3, 2005 GAO dismissed CNSI’s protest, finding that DOE had discretion not to abide by an after-award OHA decision correcting an SBA size ruling. Complaint ¶28. On March 18, 2005 Plaintiff CNSI filed in this Court asking us to declare DOE’s decision not to reinstate CNSI as successful bidder as arbitrary and capricious, and to permanently enjoin the Government from performance of the task order under the RFQ awarded to Catapult on February 8, 2005. Plaintiffs Prayer for Relief, (a) and (c). In response, Defendant filed its 12(b)(1) Motion to Dismiss, and Intervenor Catapult filed its Motion to Dismiss arising under RCFC 12(b)(1) or, alternatively, 12(b)(6).
THE 12(b)(1) STANDARD OF REVIEW
Presented in this ease is a post-award bid protest invoking the Court of Federal Claims’ injunctive powers. Defendant argues this Court has no subject matter jurisdiction to entertain a complaint under RCFC 12(b)(1). While a complaint will not be dismissed by a federal court unless it appears to the court that Plaintiff can prove no set of facts warranting relief, the burden of proving jurisdiction to hear the Complaint, rests with the party who seeks relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) and Alder Terrace v. United States, 161 F.3d 1372, 1377 (Fed.Cir.1998). Applying this threshold test, the Court’s examination of the facts alleged in the Complaint, cast against Congress’s enabling statute, is necessarily a limited task where we are “obligated to assume all factual allegations to be true, and to draw all reasonable inferences in plaintiffs favor.” Henke v. United States, 60 F.3d 795, 797 (Fed.Cir.l995)(citing Scheuer v. Rhodes, 416 U.S. 232, 236-37, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)).
DISCUSSION
Defendant argues that, in its Complaint, CNSI does not allege a claim of unreasonable, therefore unlawful, government procurement, but rather protests post-award, administrative action. Relying heavi
Defendant argues that Judge Hewitt’s Chapman decision “rejected the idea that this Court would evaluate such a claim that’s beyond the jurisdiction of this Court.” However the Chapman decision turned on an importantly different time line of events, and Judge Hewitt explained her reasoning, “Because it is undisputed here that plaintiff did not file its appeal prior to the contract award and it is undisputed that OHA did not issue a decision before HUD awarded HMBI the contract, Chapman cannot establish that the procurement procedure for this HUD contract” raised a decisive breach of SBA size appeal regulations. Chapman, at 36 (emphasis added). By first winning the contract, losing it due to a size finding, timely appealing its adverse size determination, and then having it re-awarded to another bidder by virtue of the contracting officer’s exercise his regulatory discretion while that appeal was pending, Plaintiff CNSI presents this Court with a markedly different fact pattern than Chapman. The Chapman language and reasoning are instructive not only for the factual distinction they present, but their recognition of this process as a “procurement procedure.” Id.
Defendant and Intervenor further argue that, because DOE re-awarded to Catapult during the window of time between CNSI’s adverse size determination and its ultimate remand, CNSI was not then an eligible bidder, and therefore is not for purposes of 28 U.S.C. § 1491(b)(1), an “interested party.”
Because the Code of Federal Regulation provision Defendant would use to foreclose this Court to Plaintiff, sets out a discretionary scheme for the contracting officer to whom it applies,
Intervenor’s objection to this Court exercising subject matter jurisdiction is slightly more nuanced than the Government’s. Intervenor characterizes Plaintiffs Complaint as a “challenge to the decision not to terminate the Catapult task order contract, not to the original decision to award that contract to Catapult.” Intervenor’s Motion to Dismiss, pg. 5. In its response to the two Rule 12 motions filed by Defendant and Intervenor, CNSI points to its Complaint, H45 reiterating, “CNSI asserts that DOE’s decision to proceed with award to Catapult was arbitrary, capricious, and an abuse of discretion.” Plaintiffs Reply Memorandum, pg. 4. In light of the 12(b)(1) obligation of construing all factual allegations made in favor of Plaintiff, the Court finds Intervenor’s argument here unavailing.
THE 12(b)(6) STANDARD OF REVIEW
The Intervenor moved this Court to alternatively construe its dispositive motion as arising under RCFC 12(b)(6), arguing that because CNSI is seeking relief that this Court cannot, by law, fashion, its Complaint must be dismissed. Granting a 12(b)(6) Motion is appropriate only when, based on the facts alleged in the Complaint, the law eoun
As referred to above regarding its survival under RCFC 12(b)(1), the Plaintiff’s Complaint alleges that the regulatory discretion exercised by DOE in not waiting for an OHA decision after several months moratorium on proceeding with the contract for IT services for the Yucca Mountain Project division, was irrational. By offering a set of facts that, if true and standard-attaining, could translate in into legal relief from the Court of Federal Claims, Plaintiff also survives Intervenor’s alternative 12(b)(6) challenge.
CONCLUSION
For the foregoing reasons, the Court DENIES Defendant’s 12(b)(1) Motion to Dismiss and also DENIES Defendant-Intervenor’s 12(b)(1), or alternatively, 12(b)(6) Motion to Dismiss.
IT IS SO ORDERED.
. While the RFQ itself did not expressly limit bidders to 8(a) qualified small businesses, instead insisting on GSA Federal Supply Schedule contract holders, the accompanying email from the contracting officer read, ‘Your firm has been selected to participate in a competitive 8(a) award.” Complaint at ¶13, 19 and Pl. Appendix, Tab 1.
. "We are a small business. We should have had the award. We have an adverse decision because we were knocked out of the running.” John Marcotte, for Plaintiff Transcript of April 1, 2005 Oral Argument.
. "To have standing to sue in a bid protest, CNSI must be deemed an interested party within the meaning of the Tucker Act.....A protester lacks a direct economic interest, and thus lacks standing, if it was incapable of receiving the award at the time the award was made.” Defendant’s Motion to Dismiss, pg. 10 (citations omitted).
. In restating the Government’s argument in that case, the IBM Court identified a distance in economic directness, "The first [argument] is that IBM could not receive the contract even if its protest were granted, because, its bid ranked fourth-lowest......IBM therefore had, at best, a trivial interest in the award.” IBM, 892 F.2d, at 1011.
. The Code of Federal Regulation reads, "Results of an SBA Size Determination: (1) A formal size determination becomes effective immediately and remains in full force and effect unless and until reversed by OHA. (2) A contracting officer may award a contract based on SBA’s formal size determination. (3) If the formal size determination is appealed to OHA, the OHA decision on appeal will apply to the pending procurement or sale if the decision is received before award. OHA decisions received after contract award will not apply to that procurement or sale but will have future effect, unless the contracting officer agrees to apply the OHA decision to the procurement or sale." 13 C.F.R. § 121.1009(g)(1)-(3) (emphasis added).
. By contrast, in Chapman, the Plaintiff had not yet appealed the Area Office’s size determination to OHA when the Agency (in that case, HUD) moved forward with a renewed bidder. Chapman v. United States, 63 Fed.Cl. 25, 28 (2004).