the plaintiffs. Furthermore, the SBA Central Office later confirmed that ISN received a $ 23.1 million commitment on January 26, 1988 from the Air Force in support of its business plan.
26. On January 26, 1988, the SBA declined the Navy's offering of the SNAP-II requirement to SBA under the 8(a) program. It released the SNAP-II requirements from the 8(a) program for competitive procurement so that SMA, the plaintiffs and other small and disadvantaged businesses could compete for the contract under the Department of Defense Small and Disadvantaged Business Program, or as a small business set-aside. The SBA concluded that this action was appropriate based on its extensive review of the situation. SMA had expended its line of credit of $ 17 million in anticipation of the contract and made other financial commitments in anticipation of receipt of the SNAP-II contract. SBA determined that TAI and ISN did not require the SNAP-II contract for completion of their business plan objectives, and that they could also compete for the contract against SMA.
27. The Navy followed SBA's recommendation and issued a Commerce Business Daily Notice that was published on February 5, 1988. The notice identified the SNAP-II requirements, stated the Navy's intention to conduct a competitive set-aside for small disadvantaged businesses, and solicited expressions of interest.
28. It is well settled that competition is the preferred method of government contracting. The SBA decision to provide all small and disadvantaged firms with an opportunity to compete for the SNAP-II contract was a rational decision which was based on a consideration of all the relevant factors, after all the interested parties had an opportunity to present their views.
29. The SBA reviews approximately 4,000 8(a) contracts annually and determines whether these contracts will further the interests of small business. In this case, the Small Business Administration conducted a detailed and thorough review of the information necessary to complete its discretionary analysis of the SNAP-II requirement for release from the 8(a) program. The decision to release the requirement was made with the input of the plaintiffs and in accordance with the Small Business Administration's general policy of assisting small businesses.
30. The public interest would be harmed if SBA's operations and decisions pursuant to SOP para. 46(e) were enjoined. The SBA would be significantly impaired in completing its mission to assist small businesses if it were not allowed the discretion to examine, on a case by case basis, whether a specific contract should be released from the 8(a) program for the benefit of small businesses. In addition, the public interest does not warrant the relief requested by plaintiffs.
31. Release of a Request for Proposals (RFP) anticipated. In the event that the Navy is required to return the SNAP-II requirements to the 8(a) program, the competitive RFP would have to be cancelled. Moreover, the time already expended by the Navy in preparing and conducting the small disadvantaged business competition would be lost, making it unlikely that a fully priced SNAP-II contract could be awarded by July.
CONCLUSIONS OF LAW
A. SOP para. 46(e) Was Not A Rule
1. SOP para. 46(e) is exempt from the notice and comment procedures required under § 553(b) of the Administrative Procedure Act as discussed below. 5 U.S.C. § 553(b)(1982).
2. An agency's pronouncement is a general policy statement, as opposed to a binding norm or a rule, if it "genuinely leaves the agency and its decision-makers free to exercise discretion." American Bus Assn v. United States, 201 U.S. App. D.C. 66, 627 F.2d 525, 529 (D.C. Cir. 1980). SOP para. 46(e) is a general statement of policy and procedure. While it sets forth certain policy guidelines, it leaves the SBA decision-makers free to exercise their discretion in deciding whether to reject or retain a contract in the 8(a) program. This is consistent with 13 C.F.R. para. 124.301(b)(5), which specifically provides that the "SBA is not required to make an award of any particular contract, and should it make an award, SBA is not required to award a contract to a particular 8(a) concern."
3. Contrary to plaintiffs' allegations, SOP para. 46(e) is not promulgated based upon 13 C.F.R. para. 124.301(b)(8) which requires an adverse impact determination prior to the acceptance of a new procurement into the 8(a) program. San Antonio General Maintenance v. Abnor, 691 F. Supp. 1462 (D.D.C. 1987), is not to the contrary. In that case the court indicated that:
Section 124.301(b)(8) states: 'SBA will not accept for 8(a) award proposed procurements not previously in the section 8(a) program if any of the following circumstances exist . . . These regulations do not therefore apply to this case.' (emphasis added)
Id. at 15.
4. SOP para. 46(e) is a non-binding general statement of policy, and not a rule. As such, it is exempt from the notice and comment procedures set forth in the Administrative Procedure Act. 5 U.S.C. § 553(b)(A)(1982). See also American Hospital Association v. Bowen, 266 U.S. App. D.C. 190, 834 F.2d 1037, 1053 (D.C. Cir. 1987); American Bus Association v. United States, 201 U.S. App. D.C. 66, 627 F.2d 525, 528 (D.C. Cir. 1980).
5. The case of Misso Services Corporation v. United States Small Business Administration, No. 81-0283 (D.D.C. 1981), relied upon heavily by plaintiffs, is distinguishable from the instant case. This is so because SOP para. 46(e) was a published standard operating procedure known to plaintiffs. It enunciates a purely discretionary policy statement which leaves the SBA and its decision-makers free to exercise their discretion. American Bus Association v. United States, 201 U.S. App. D.C. 66, 627 F.2d 525, 529 (D.C. Cir. 1980). Misso, by contrast, involved an unpublished memorandum articulating a mandatory rule prohibiting broker dealers from receiving 8(a) contracts.
6. In conclusion, SOP para. 46(e) is not a substantive rule requiring notice and comment, because it is a general statement of policy and procedure for the Small Business Administration to use in its discretion to review and determine assistance to small businesses. 5 U.S.C. § 553(b)(A). See also Pacific Gas & Electric Co. v. Federal Power Commission, 164 U.S. App. D.C. 371, 506 F.2d 33, 38 (D.C. Cir. 1974); American Hospital Association v. Bowen, 266 U.S. App. D.C. 190, 834 F.2d 1037, 1052 (D.C. Cir. 1987).
B. Assuming The Validity of SOP para. 46(e) as a Policy Statement, Plaintiffs Have Failed to Prove Any Arbitrary or Capricious Actions
7. SBA records set forth a reasonable basis for the SBA's decision. The actions of the SBA defendants were not, therefore, arbitrary and capricious under 5 U.S.C. § 706(2)(A)(1982), but rather were fully supported by the evidence.
8. The scope of review under the arbitrary and capricious standard "is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Manufacturers Assoc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43, 77 L. Ed. 2d 443, 103 S. Ct. 2856 (1983). See also Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971); M. Steinthal & Co. v. Seamans, 147 U.S. App. D.C. 221, 455 F.2d 1289, 1298 (D.C. Cir. 1971). SBA has examined the relevant data and articulated a satisfactory explanation for its action, including "a rational connection between the facts found and the choice made." State Farm, 463 U.S. at 43 (quoting Burlington Truck Lines Inc. v. United States, 371 U.S. 156, 168, 9 L. Ed. 2d 207, 83 S. Ct. 239 (1962)). See also American Electric Co. v. United States, 270 F. Supp. 689, 691 (D. Hawaii, 1967); Springfield White Castle Co. v. Foley, 230 F. Supp. 77, 78 (W.D. Mo. 1964). The SBA decision to return the SNAP-II requirements to the Navy for competitive bidding was based on a consideration of all relevant factors. Citizens To Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). The SBA decision to release the SNAP-II requirement was not a departure from the established policy and practice.
C. The SBA Did Not Arbitrarily And Capriciously Fail To Approve The Navy's Recommendation Of Plaintiffs For the Snap-II Contract
9. The Small Business Administration was not required to accept the SNAP-II requirements from the Navy for performance in the 8(a) program. 13 C.F.R. § 124.301(b)(5)(1982) provides that the "SBA is not required to make an award of any particular contract, and should it make an award, SBA is not required to award a contract to a particular 8(a) concern." The above-mentioned regulation was not intended to confer substantive or procedural rights on participating 8(a) firms, but rather was designed to aid procuring agencies.
10. The mere offer of a contract to the 8(a) program does not create a binding contract with the Navy because, as noted, the Small Business Administration is not required to accept the contract for the program. 13 C.F.R. § 124.301(b)(5)(1982).
11. The standard method for government procurement as contained in the Competition In Contracting Act (CICA) of 1984, Pub. L. 98-369, is competition.
12. The Small Business Administration can reject a contract offered by a procuring agency in accordance with 13 C.F.R. § 124.301(b)(5).
13. Thus, the Small Business Administration was not required to award the SNAP-II contract to TAI and ISN, even though they were recommended by the procuring agency. Even assuming arguendo that the Small Business Administration was required to accept the SNAP-II contract into the 8(a) program, SBA was not bound to award the contract to TAI and ISN. 13 C.F.R. § 124.301(c)(5).
14. The plaintiffs have failed to demonstrate any binding contract between the United States Navy and the Small Business Administration that was developed for their benefit. Ables v. United States, 2 Cl. Ct. 494, 500 (1983), aff'd 732 F.2d 166 (Fed. Cir. 1984).
15. Thus, the Small Business Administration owed no contractual obligations to TAI or ISN, in connection with the Navy's offer letter or otherwise.
D. The Navy Did Not Act In An Arbitrary And Capricious Manner
16. The September 30, 1987 tripartite agreements between SMA, Navy and SBA provided only for an agreement to definitize (i.e., "price") the SNAP-II options before SMA's graduation date of October 21, 1987. The agreements did not bind SBA and the Navy through 1991, as plaintiffs allege.
17. The plaintiffs have failed to prove that they are third party beneficiaries of a government contract because they have not demonstrated the government's promises were made for their direct and specific benefit. ATC Petroleum Inc. v. Sanders, 661 F. Supp. 182 (D.D.C. 1987).
18. "Before an individual who is not a party to an agreement may sue for a breach of that agreement 'he must at least show that it was intended for his direct benefit'." Ables v. United States, 2 Cl. Ct. 494, 500 (1983).
19. The plaintiffs have no entitlement to precontract costs because they have not demonstrated that the actions of the defendants induced them to incur these costs, or that the SBA and Navy employees had authority to do so. Contractors who deal with government employees have a duty to ascertain accurately the employees' actual authority as granted by applicable statute and regulations and may not rely upon the actions of employees who lack such authority. Inter-Tribal Council Nevada Inc., IBCA1234-12-78, 83-1 BCA16 433.
E. Plaintiffs Were Not Denied Their Due Process Rights
20. The Plaintiffs were not denied due process as they allege. They had knowledge of the published standard operating procedure, and were given an ample opportunity to present their views and be heard.
21. The plaintiffs were not denied due process when the SBA failed to respond within 10 working days to the offer letter of the United States Navy. "The fundamental requirement of due process is the opportunity to be heard at a meaningful time and in a meaningful manner." Mathews v. Eldridge, 424 U.S. 319, 333, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1976)(quoting Armstrong v. Manzo, 380 U.S. 545, 552, 14 L. Ed. 2d 62, 85 S. Ct. 1187 (1965)). The additional time was utilized by the Small Business Administration for the benefit of the plaintiffs, as well as other interested parties. The additional time permitted plaintiffs to make repeated detailed submissions to the Small Business Administration, and to meet with Small Business Administration officials. Moreover, plaintiffs stated that they "understood" the policy behind SOP para. 46(e). Plaintiffs were provided with ample opportunity to present their views before the SBA reached its final decision.
F. Defendants Are Not Liable For Harm
22. The federal officials acting in accordance with SOP para. 46(e) are not liable for any harm or damages that plaintiffs may have suffered. The conduct of the SBA officials in reviewing the SNAP-II contract was clearly "discretionary" in nature and "within the outer perimeters" of their official duties. Westfall v. Erwin, 484 U.S. 292, 108 S. Ct. 580, 98 L. Ed. 2d 619 (1988). Thus, defendants Abdnor, Webber and Gonzalez are not liable under the analysis set forth in Westfall, 108 S. Ct. at 585.
G. Plaintiffs Were Not De Facto Suspended From The 8(a) Program
23. Plaintiffs' allegation that TAI has been " de facto " suspended from the 8(a) program lacks merit. Plaintiffs assert that TAI is entitled to an extension of its graduation date pursuant to 13 C.F.R. § 124.113(c). That provision states in relevant part that:
If all program assistance to a section 8(a) business concern has been suspended under these regulations, and that concern's participation in the program is not terminated, an amount of time equal to the duration of the suspension will be added to the concern's fixed program participation term (emphasis added).
TAI has failed to offer any evidence that "all" program assistance to it has been suspended or terminated.
H. SBA Did Not Violate The National Defense Authorization Act for FY 1989 & 1990, Pub. Law 100-180, Section 806(b)(f) or DOD Policy
24. The plaintiffs have not shown that the Small Business Administration violated either the Department of Defense (DOD) policy to retain the level of 8(a) contracts, or the National Defense Authorization Act for FY 1989 & 1990, Pub. Law 100-180, by allowing competitive bidding on the SNAP-II contract under the Navy's small and disadvantaged business program. In any case, SBA is not bound by DOD policy.
Thus, plaintiffs are not entitled to judgment pursuant to any of their eight (8) counts.
An order consistent with the foregoing has been entered this day.
ORDER - April 21, 1988, Filed
In accordance with the Findings of Fact and Conclusions of Law issued this 21st day of April 1988, it is
ORDERED that this case be dismissed with prejudice.