For example, SBA might decide to give the contract to a smaller 8(a) firm which needs the support more than a larger one, or in accordance with a plan to wean a relatively successful concern from the 8(a) program, SBA may decide that it has already supplied enough contract support to that firm for the year. Until June of this year, SBA practiced this policy, and plaintiffs remained eligible, and in some cases received, new 8(a) contracts even after their adverse size determinations. On June 16, 1982 the General Accounting Office (GAO) rendered a decision concerning the protest of the award of a contract to plaintiff Systems and Applied Sciences Corporation (SASC). In the Matter of Computer Data Systems, Inc., File B-205521. The GAO found that although SASC was entitled to a hearing on the record prior to termination from the 8(a) program due to size, it should not receive the contract which was the subject of the protest, and should be suspended from further 8(a) contracting unless the adverse size determination were formally reversed. In response to this decision, which SBA felt constrained to follow, despite its continuing contrary position, all regional directors and procuring agencies were notified by SBA that 8(a) concerns which had been the subject of adverse size determinations should not be considered for further contracts.
Plaintiff SASC brought the first of these actions. On July 1, 1982 this Court entered a temporary restraining order requiring SBA to treat plaintiff as a full participant in the 8(a) program unless and until the procedures required by 13 C.F.R. Part 124 for completion or termination were completed. At that time, the Court had before it two parties with essentially the same legal position, except as to the propriety of SBA's actions to comply with the GAO decision. Subsequently, two parties with an adverse legal position to both plaintiff and SBA sought to intervene. Computer Data Systems, Inc. (CDSI), the protestant in the GAO decision, was granted intervention as a party defendant as of right. Planning Research Corporation, (PRC), the incumbent contractor on the contract which was the subject of the GAO decision, was granted status as amicus curiae. Plaintiffs in the other two consolidated cases, although in basic agreement with plaintiff SASC's legal position, have filed additional papers to expound their reasoning. All parties agreed that all pleadings, however denominated, would be considered arguments on the merits, and a final hearing on the merits was held July 16, 1982.
To summarize the positions of the parties, plaintiffs and SBA argue that 8(a) concerns remain full participants in the program until termination or completion pursuant to the procedures provided at 13 C.F.R. 124 or until the expiration of their fixed terms. Defendant-intervenor and amicus argue that plaintiffs, as businesses which have been found to be other than small, do not qualify for any assistance under the 8(a) program, for which status as a small business is a prerequisite. According to their analysis, 15 U.S.C. § 637(a)(9) providing for a hearing on the record prior to denial of assistance applies only to the determinations concerning social and economic disadvantage outlined in § 637(a), which are eligibility factors peculiar to the 8(a) program. Questions concerning size are to be decided by the same procedures as are applicable to non-8(a) concerns provided at 13 C.F.R. 121. In accordance with those regulations, a concern found to be other than small in a formal determination by the regional director is immediately ineligible for any assistance under the Small Business Act or Small Business Investment Act of 1958 under the relevant size standard. 13 C.F.R. § 121.3-4(d). The regulations also provide that decisions of the Size Appeals Board shall be "final." 13 C.F.R. § 121.3-6(a). Defendant-intervenor and amicus argue that SBA has exceeded its authority in promulgating the regulation at 13 C.F.R. § 121.3-17, which provides that in the case of 8(a) firms, "size determinations under Part 121 on initial entry into the 8(a) program or on program completion or termination are advisory to the ASMSB-COD; and/or to the Administrative Law Judge in 8(a) proceedings under Part 124," because the regulation as currently interpreted allows continued 8(a) contract support to firms found other than small under the Part 121 procedures. Alternatively, defendant-intervenor and amicus urge the conclusion reached by GAO, that although plaintiffs are entitled to a hearing on the record on the issue of size before they can be completely excluded from the program, they may not be awarded contracts after an adverse size determination under Part 121. Under this theory, 13 C.F.R. § 121.3-17 means that the Associate Administrator retains discretion, and a hearing on the record is available, only upon, as the regulation states, initial entry or program completion or termination, and not with regard to the denial of particular contracts because of an adverse size determination. In this situation, it is argued, plaintiffs have not been denied total participation in the 8(a) program without a hearing in violation of § 637(a)(9), because they can still receive technical assistance under the program, perform existing contracts and options thereon, and remain eligible for contracts whose size standard they do not exceed.
If their adverse size determinations are ultimately reversed, they will resume eligibility for contracts in the category for which they were found other than small.
Unfortunately, Congress has not made its intent regarding the question presented here explicit, which appears to have resulted in a somewhat self-contradictory stance on the part of SBA. On the one hand it asserts that 8(a) participants must meet the size standards applicable to all concerns under the Small Business Act set forth in Part 121. On the other hand, SBA has taken the position that size determinations under part 121 are only advisory to the AAMSB-COD, and that it need not institute termination proceedings against a firm subject to an adverse size determination at all if factors other than size counsel that the concern should remain in the program. See Defendant's Motion for Summary Judgment at 4-5; In the Matter of Computer Data Systems, Inc. -- Reconsideration, File B-204421.3, B-205521.4 at 3 (July 26, 1982); Cal Western Packaging Corp. v. Collins, Civil Action No. 80-2548 (D.D.C., Defendant's Memo in Response to the Court's Order of July 28, 1981 at 3-6, filed September 28, 1981; Letter from Donald W. Farrell, Associate General Counsel, SBA, to Charles Kratzer, Office of General Counsel, GAO Re: Computer Data Systems, Inc. B-205521, dated March 15, 1982 and filed March 23, 1982). Further, while size determinations by regional directors are effective immediately, and decisions of the Size Appeals Board are final with regard to non-8(a) small businesses, 8(a) concerns are afforded additional procedural safeguards, during the pendency of which they remain eligible for contract assistance. Judging by the example of plaintiff SASC, whose petition for reconsideration of the Size Appeals Board was pending for ten months, and for whom an administrative hearing has not yet been scheduled, the interim time pending final determination can be substantial.
Neither the statutory language nor the legislative history resolves explicitly whether § 637(a)(9) was meant to apply to size determinations. However, without any indication in the legislative history whatsoever that it was not intended to apply to size determinations, we cannot interpret its broad language, providing that "no such firm shall be denied total participation in any program conducted under the authority of this subsection without first being afforded a hearing on the record . . .", to exclude any considerations of program eligibility, including size.
Moreover, there is language in the legislative history supporting this view. The Conference Report to the 1978 bill which enacted § 637(a)(9) states:
Finally, the conference substitute gives due process guarantees to all firms in the program. Once a firm is certified as eligible it cannot be terminated, graduated, or in any other way removed from participation in the program, without the opportunity for a full hearing on the record according to the terms of the Administrative Procedure Act at the option of the firm.