Resource Management Concepts, Inc. v. U.S. Small Business Administration

• Court: District Court, District of Columbia
• Decided: March 31, 2022
• Docket: Civil Action No. 2020-3416
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

RESOURCE MANAGEMENT CONCEPTS, INC.,

Plaintiff,

v. Case No. 1 :20-cv-3416-RCL

U.S. SMALL BUSINESS ADMINISTRATION, eta/.,

Defendants.

MEMORANDUM ORDER

Plaintiff Resource Management Co1:1cepts filed the present lawsuit against the,- Small

Business Administration ("SBA") and its Administrator to · challenge SBA regulations that

diminished the value of plaintiffs government contract.· While this litigation was ongoing, the

SBA issued a "correction" to the challenged regulatory framework. Plaintiff believes,that this ..

correction fixes the issue that formed the basis of its suit, so-the ·case is now moot. But even thougli,

plaintiff started this fight, the SBA is determined to keep it going-it contends that this case is not

moot because the challenged regulations still apply. The parties- cross-moved- for summary.-

judgment. Upon consideration of the parties' filings, Pl.'s Mot.· for Summary J. ("PL's Mot.");·

ECF No. 13, Defs.' Cross Mot. for Summary J. ("Defs.' Mot."), ECF Nos. 16 & 17, Pl.'s Reply,

ECF Nos. 22 & 23, Defs' Reply, ECF No. 28, applicable law, and the entire record herein, the

Court will DENY WITHOUT PREJUDICE the parties' cross motions for summary judgment..

I. BACKGROUND

A. Statutory And Regulatory Background

The Small Business Act, codified at 15 U.S.C. §§ 631-57, declares that "[i]t is the policy

of the United States that small business concerns . . . shall have the maximum· practicable

1 opportunity to participate in the performance of contracts let by any Federal agency." 15 U.S.C.

§ 637(d)(l). To further this policy goal, certain contracts are reserved, or "set aside," for small ...._~:~--

business concerns. See id. § 644. The Small Business Act also created the SBA to oversee·

Congress's policy objectives and furnished the SBA's Administrator with broad powers to "make

such rules and regulations as he deems necessary to carry out the authority vested in· him by or

pursuant to" the Small Business Act. Id. § 634(b)(6).

Of course, the first step in achieving the Small Business Act's policy objectives is to

determine which businesses are "small." If a business wants to be eligible for government

contracts reserved for small businesses, it must certify itself as a "small· business· concern," and

qualify under the standards set forth by the Small Business Act and the SBA's regulations. See; ··

e.g., id. § 632(a)(l); 13 C.F.R. § 121. The SBA has also enacted regulations that'establishwhen-·

or at what point in time-a business must satisfy the relevant criteria to receive small business

treatment. See id. § 121.404. These time-focused regulations ar~ at issue in this case.

In 2010, Congress passed the Small Business Jobs Act, ·which· required the SBA to -issue

regulatory guidance under which federal agencies may· set ,aside. orders· for ,multiple-award -• · -

contracts (or "MACs"). See 15 U.S.C. § 644(r). A MAC is a type of indefinite-quantity contract

which is awarded to several contractors from a single solicitation. See generally 13 C.F.R. § 12-5. l. ,

MAC awardees commonly compete for individual task orders involving the delivery of supplies

or the performance of services. These task orders are placed against the MAC.

In 2013, the SBA promulgated its initial regulations for setting aside task and delivery

orders under MACs. These regulations provided that business size would be determined' "at the· · ·

time of the initial offer submitted in response to the solicitation for the contract." 78 Fed~ Reg~·

61,114. The relevant initial regulations stated:

2 SBA determines the size status of a concern, including its affiliates, as of the date the concern submits a written self-certification that it is small to the procuring activity, as part of its initial offer (or other · formal response to a solicitation), which includes price.

( 1) With respect to Multiple Award Contracts and orders issued against a Multiple Award Contract:

(i) [the Agency] determines size at the time of initial offer (or other formal response to solicitation), which includes price, for a Multiple Award Contract ... [i]f a business is small at the time of offer for the Multiple Award Contract, it is small for each order issued against the contract, tinless a contracting officer requests a new size certification in connection with a specific order.

13 C.F.R. § 12 l.404(a) (2014) (emphasis added); see id. § 121.404(g}'(2014).· Accordingly, if a. ,

business was certified as small at the time it submitted an offer for the MAC, it did not need to

recertify its size status for task orders specifically set aside for small businesses under the same

MAC, unless the federal contracting officer requested recertification~. · 1• , 1• i .• • , • • • • , · • • ,

In 2020, the SBA amended these regulations. The new rules (the "2020 Regulations")

provide that for MACs that are open to businesses of an· sizes (''unrestricted MA.Cs'·') and that · · ·

require price at the time of the initial offer, business size is -determined· at the. time the business ,·· ,.

submits its proposal for each task order. See 13 C.F.R. § 121.404(a)(l)(i)(A), (a)(l)(ii)(A)

(effective Nov. 16, 2020). Now, even if a business certified itself as 'small when it submitted a bid ·

for the MAC, it must "recertify its size status and qualify as a small business-at the time it submits.

its initial offer, which includes price, for the particular order." · Id. § 12 l.404(a)(l )(i)(A),

(a)( 1)(ii)(A).

B. Factual And Procedural Background

Plaintiff is the holder of a MAC known as Seaport-NxG, which was awarded on an

unrestricted basis in January 2019. Kevin Cooley Deel. ("Cooley Deel.") ,r,r. 2, 6. Seaport NxG is

3 the Department of the Navy's "mandatory vehicle for procurement of professional services~" Id.

12.. Various agencies within the Navy ~ontract their service requirements to the more than l,870

Seaport-NxG firms. Id. When Plaintiff was awarded its Seaport-NxG contract, it qualified and

was recognized as a small business. Id. 1 3. In anticipation of competing .for the Seaport-NxG

task orders set aside for small businesses, plaintiff invested between $1 and 1.5- million. Id. 1 5.

By January 1, 2021, plaintiff outgrew its size status and could' no longer qualify as a small business.

Id. 1 3. Accordingly, plaintiff would no longer be able to compete for Seaport-NxG task orders

that are set aside exclusively for small businesses.

On November 24, 2020, plaintiff sued the SBA and the Administrator~ -Compl.;-ECF No. 1. ·

In the complaint, plaintiff contends that the SBA promulgated an ·unauthorized retroactive ·

regulation and violated the Regulatory. Flexibility Act. · Id. ,i,r · 26-27,: 33~ Invoking -the

Administrative Procedure Act, plaintiff asks the Court to declare the 2020 Regulations unlawful·

and enjoin their application to task order competitions undeF-previously awarded· Seaport-NxG-

MAC contracts. Id. at 9, 11.

C. The SBA's Regulatory "Correction"

During the parties' summary judgment briefing, the SBA issued, without. notice and- .

comment, what it described as a "correcting amendmenf' to 13 C.F.R. 12L404 (the ·"2021

correction"), where the 2020 Regulations are found. 86 Fed. Reg. 38357-02. The SBA explained

that it when it passed the 2020 Regulations, it "inadvertently removed § l21.404(a)(l )(iv), which

concerned when the size of a concern is determined for multiple-award contracts for which offerors

are not required to submit price as part of the offer." Id. Thus, the regulation now also states:,

(iv) For an indefinite delivery, indefinite quantity (IDIQ), Multiple Award Contract, where concerns are not required to submit price as part of the offer for the IDIQ contract, size will be determined as of the date of initial offer, which may not include price.

4 13 C.F.R. § 121.404(a)(l)(iv).

Plaintiff contends that that the 2021 correction "qualifies" .all the preceding language, so

that "the size of the concern in a MAC task order competition, whether the MAC is restricted or

unrestricted, is determined at the date of the initial IDIQ offer, i.e., at the time of submission of a

proposal for a MAC, at least insofar as the MAC competition did not require prices." Pl.'s Reply.

6. The Seaport-NxG MAC did not require pricing at the time of the MAC. So plaintiff contends

that the 2021 correction either moots this case or "muddles the issue with inconsistent regulatory

language." Id. at 6, 16.

The SBA contends that plaintiff misreads the 2021 correction .. According to the SBA,. the

correction only establishes the timing for determining the size of a business concern for IDIQ·

MACs when the initial MAC competition did not require·price. Def.'s Reply 5. But to determine

when size is determined for task orders under unrestricted MACs, "a business must still look to

the 2020 Regulations' language." Id. The SBA thus argues that there is no·conflicting·language-

in the statute and the case is not moot. Id. at 5-6.

The parties' cross-motions for summary judgment are ripe for review. ,

II. LEGAL STANDARDS

A. Summary Judgment

When a court decides motions for summary judgment in a suit· "seeking teview of an

agency's actions, the standard under Fed. R. Civ. P. 56(a) does not apply." Beyond Nuclear v.

Dep 't ofEnergy, 233 F. Supp. 3d 40, 47 (D.D.C. 2017). In~tead, the court trtust decide as a matter ·

of law "whether the agency action is supported by the administrative .record and otherwise ·

consistent with the APA standard of review." Coe v. McHugh, 968, F. Supp. 2d, 237, 240

(D.D.C. 2013). In these types of APA cases, summary judgment is favored. Zemeka v. Holder,

963 F. Supp. 2d 22, 24 (D.D.C. 2013).

5 B. Mootness

Article III of the United States Constitution limits federal courts' subject-matter

jurisdiction to live "cases" and "controversies," U.S. Const., Art. III, § 2, and thus prevents federal

courts from issuing "advisory opinions" on abstract questions oflaw, Preiser v. Newldrk, 422 U.S.

395,401 (1975). A litigant invoking Article III jurisdiction "must have suffered, or be threatened

with, an actual injury traceable to the defendant and likely to be redressed by a favorable judicial

decision." United States v. Juvenile Male, 564 U.S. 932, 938(2011) (per curiam) (quoting Spencer

v. Kemna, 523 U.S. 1, 7 (1998)). But "[e]ven where litigation poses a live controversy when filed,"

a federal court must "refrain from deciding it if events have so transpired that the decision· will

neither presently affect the parties' rights nor have a more-than-speculative chance. of affecting

them in the future." Am. Bar Ass 'n v. FTC, 636 F.3d 641~ 645 (D.C. Cir. 2011). A plaintiffs

concrete and redressable injury-in-fact must persist throughout the life of the lawsuit; if the injury

vanishes, so too does jurisdiction. Spencer, 523 U.S. at 7~

III. ANALYSIS

The Court will DENY WITHOUT PREJUDICE the parties' cross-motions for summary

judgment. In plaintiffs telling, the 2020 regulations do not apply to Seaport-NxG task orders

because of the 2021 correction. See Pl.'s Reply 17. Stated differently~ plaintiff argues that its

concrete interest in this case no longer exists. This case comes before the Court in an unusual

posture; plaintiff argues that the case is moot, the SBA argues that it is not. But mootness goes to

the Court's subject matter jurisdiction and is a threshold determination that the Court must reach

before addressing the parties' other arguments. Because this case might be moot, neither party has, ·

established that they are entitled to judgment as a matter oflaw.

Whether this case is moot turns on the meaning of the 2021 correction. The SBA contends

that while the 2021 correction provides the standard for determining business size for ID IQ MACs

6 that do not include price, the relevant standard for determining size at the task-order stage comes

from the preceding provisions in the 2020 Regulations. See Def.' s Reply at 5-6. The Court is not

persuaded.

The SBA's interpretation has no basis in the regulatory text and structure. See Huashan

Zhang v. U.S. Citizenship & lmmigr. Servs., 978 F.3d 1314,.1322 (D.C. Cir. 2020) ("[W]e cannot

disregard the plain meaning of a regulation based on policy consjderations."). The , 2020 ..

Regulations do not apply to the MACs identified in the 2021 correction-Le., IDIQ MACs that do

not include price. Instead, the 2020 Regulations apply only to unrestricted MACs that include-. ·

price. See 13 C.F.R. § 121.404(a)(l)(i), (a)(l)(ii). This follows from the '"scope-of-subpartsr

canon, pursuant to which, at least as a general proposition, '[m]aterial within an indented subpart

relates only to that subpart."' Callahan v. U.S. Dep't of Health & Hum.- Servs., 939 F.3d 1251,

1260 (11th Cir. 2019) (quoting Antonin Scalia & Bryan A. Garner, Reading Law: The

Interpretation of Legal Texts 156 (2012)). After identifying different types ofMACs atissue~:the

2020 Regulations restate the rule that a business must recertify its-size-status for task orders,under.;

unrestricted MACs. See 13 C.F.R. § 121.404(a)(l)(i)(A), (a)('l)(ii)(B)~ These rule statements'·'

placement within their respective subsections indicate that they "go[] with, relate[] to, and [are] .

limited by the other sentences in that subsection"-like the language ''which· includes ·price."-

Ca/lahan., 939 F.3d at 1260. But the 2021 correction contains no similar task order guidance for

IDIQ MACs that do not include price. See 13 C.F.R. § 121.404(a)(l)(iv). Stated simply, the text

of the 2020 Regulations does not naturally apply to IDIQ MACs that do not include price.

So are businesses free to avoid recertifying their size status. for subsequent task orders

placed against IDIQ MACs that do not include price? Maybe. The·2021 correction contains-no·· ·

recertification requirement. But nor does it state that businesses shall be treated as small for ·an .

7 task orders placed against the MAC. Plaintiff suggests that its small-business treatment for task

orders persists if the challenged 2020 Regulations- that is, 13 C.F.R. l 2 I .404(a)(l )(i)(A) and

(a)( l )(ii)(B)- do not apply. But in other contexts, task orders are treated as separate or new

contracts. See, e.g., Kingdomware Techs., Inc. v. United States, 579 U.S. 162, 174 (2016). Should

the Court look elsewhere to determine whether recertification is required? The parties have not

briefed a default rule in the absence of a regulation addressing this issue. · The Court will not

speculate without additional briefing.

To summarize, the Court rejects the SBA's interpretation of the regulation. This case may

be moot if plaintiff is not required to recertify its size status because its IDIQ MAC did not include

price. If this case is moot, presumably plaintiff will dismiss this case because its interests are no

longer threatened by the SBA's 2020 Regulations. And plaintiff does not argue that the SBA will

apply the 2020 Regulations despite the 2021 correction- that theory of harm is different from the

theory reflected in the summary judgment briefing and the complainb. In light of the eurrent .

procedural posture, neither party has demonstrated their entitlement to summary judgment. But

for now, the Court wi ll refrain from dismissing this case.'

IV. CONCLUSION

Based on the foregoing, the Court DENIES WITHOUT PREJUDICE the patties' cross-

motions [ 13], [17], for summary judgment. Within thirty (30) days ·of this•order, the parties shall

submit a joint status report detailing a proposed schedule for this litigation.

IT IS SO ORDERED.

Date: - - - - - - - - - Royce C. Lamberth United States District Judge