Government Contracts Update
Last week, the United States Court of Appeals for the Federal Circuit affirmed a lower court's dismissal of a complaint challenging the U.S. Department of Veterans Affairs' (VA) revocation of a contractor's status as a Service-Disabled Veteran-Owned Small Business (SDVOSB). The decision is a reminder that the U.S. Court of Federal Claims (COFC) is unlikely to hear size status cases unless they relate to a specific procurement. The fact that a size determination deprives a contractor of the ability to bid on unidentified future or pending procurements set-aside for small businesses is not enough to obtain relief in a bid protest from COFC.
The History of the Case
When Geiler/Schrudde & Zimmerman, A Joint Venture (GSZ) did not receive a contract award for a Request for Proposals set-aside for SDVOSBs, it filed a bid protest at the U.S. Government Accountability Office (GAO) in late 2015. After the GAO denied this protest, GSZ filed its first complaint at the U.S. Court of Federal Claims in February 2016. Both the GAO and COFC protests alleged that the VA had improperly evaluated various aspects of the offerors' proposals.
Following the death of Mr. William R. Geiler, Jr., a service-disabled veteran, in March 2016, the VA revoked the SDVOSB status of GSZ. GSZ appealed this status revocation to the VA's Office of Small and Disadvantaged Business Utilization and Center for Verification and Evaluation (OSDBU) in July 2016. OSDBU denied that administrative appeal in August 2016.
GSZ then filed a supplemental complaint in its bid protest at COFC, which was still pending. GSZ's supplemental complaint contested the VA's decision to cancel GSZ's SDVOSB status, arguing that its due process rights had been violated and that the VA's decision-making process in revoking the SDVOSB status was arbitrary and capricious.
COFC considered the merits of GSZ's original complaint and, like the GAO, denied it. COFC then dismissed GSZ's supplemental complaint, finding that GSZ lacked standing because "the post-award revocation of that SDVOSB status [did] not 'clearly affect' the procurement" under protest.
What the Federal Circuit Held on Appeal
GSZ appealed COFC's decision on its supplemental complaint to the Federal Circuit. There, GSZ argued that the loss of its SDVOSB status "affects the award of all pending and future proposed procurements set aside for SDVOSB entities," as "the VA's award decisions might be different because the agency might have selected" GSZ's bid instead.
The Federal Circuit was not persuaded. Its opinion noted that federal law confers bid protest jurisdiction on COFC "over 'an action by an interested party objecting to . . . any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.'" See 28 U.S.C. § 1491(b)(1) (emphasis added). Although the words "in connection with" are "very sweeping in scope," such that COFC has bid protest jurisdiction whenever "an agency's actions under a statute 'clearly affect the award and performance of a contract,'" the Court nonetheless found that GSZ lacked standing. The Federal Circuit wrote:
Without challenging specific procurements or proposed procurements, a plaintiff cannot prove that its bid would qualify it to receive the contract award. Thus, we decline [GSZ]'s invitation to interpret § 1491(b)'s "in connection with a procurement or a proposed procurement" requirement as satisfied whenever a plaintiff alleges a legal violation that might affect unidentified pending or future procurements.
In other words, a contractor does not have standing to challenge a size status determination merely because it will prevent the contractor from competing for unidentified set-aside procurements.
The Takeaway for Government Contractors
The Federal Circuit indicated that its decision in this case was not binding precedent. Nonetheless, it is consistent with prior case law, and COFC is unlikely to reach a contrary conclusion in future bid protests. Contractors seeking to challenge a size status determination at COFC should ensure that the alleged violation of law was made in connection with a specific procurement to avoid dismissal for want of standing.