failed to overcome the two initial reasons given for the denial of its application. AR 50. Two officials in the Central Office concurred with this recommendation, id. at 49, and Neuma was informed on December 14, 1988 that its request for reconsideration had been denied. AR 48.
It is clear from this recitation that the SBA's decision was not arbitrary, capricious or unsupported by substantial evidence. Neuma's application for entry into the 8(a) program received a thorough and careful review by a number of officials within the SBA. After examining Neuma's submissions, the agency twice concluded that Neuma lacked financial resources to carry out its business plan and that it was not entitled to a waiver of the two-year rule.
The Court is therefore satisfied that the relevant factors were taken into account and that the agency's decision was supported by the materials in the record.
Neuma attacks each of the grounds asserted for denial of its 8(a) application. With respect to its financial resources, Neuma relies on additional information that the company submitted on October 24, 1988 in support of its reconsideration request which it claims shows that it was financially sound; it contended at oral argument that the SBA's decision is erroneous because that information was not before the District Director when he made his recommendation nor is there any mention of it in the subsequent decisions by Regional and Central Office officials. This argument is unpersuasive. For one thing, the fact that Neuma's supplemental materials were not mentioned does not mean that they were not taken into account by the Regional and Central Office. A presumption of regularity attaches to agency decisions, National Small Shipments Traffic Conference, Inc. v. ICC, 233 U.S. App. D.C. 336, 725 F.2d 1442, 1455 (D.C. Cir. 1984), and Neuma's bare allegation that these materials were ignored does not meet its burden of showing invalid agency action.
Moreover, the material submitted by Neuma does not conclusively establish its financial viability. The October 24, 1988 submission was a revised estimate by Neuma of its contract projections for the years 1989-1994, but it nowhere explains the basis for Neuma's radical downward adjustment (from an original estimate of $ 4.4 million to just under $ 1 million for fiscal year 1989). See AR 109. Moreover, although the District Director had identified other problems with Neuma's application, such as the fact that the firm was relying on one large contract and that it had developed a cash flow problem, the projection sheet does not discuss these other aspects of the company's financial performance. Thus, even if Neuma could somehow show that its submission was not taken into account, it has failed to demonstrate that this material would have altered the agency's original decision.
Neuma's challenge to the SBA's decision on the two-year rule must also be rejected. At the February 8, 1989 scheduling conference the SBA agreed to discovery on this issue, even though discovery is generally unavailable in cases arising under the APA. See, e.g., Camp v. Pitts, 411 U.S. 138, 142, 36 L. Ed. 2d 106, 93 S. Ct. 1241 (1973) (per curiam). Defendant agreed to provide the number of exceptions granted by SBA to the two-year rule during the last two years and the reasons for those exceptions. When filing its dispositive motion on March 9, 1989, however, the SBA attached as Exhibit B the Declaration of Francisco Marrero, Director of the 8(a) program, who noted that time constraints and administrative difficulties had combined to prevent SBA from providing the requested information. Mr. Marrero did provide the exact number of applications submitted and approved for the 8(a) program in general for 1987 and 1988 and he estimated, based on his familiarity with the 8(a) program, that the agency had granted a waiver of its two-year rule only 5% of the time.
Shortly before the March 31, 1989 hearing, the SBA moved for a protective order and to modify the informal discovery sought by Neuma. Defendant reiterated the problems it had encountered and noted that attempts at resolution of the problem had failed. As a compromise, defendant suggested that it would be willing, in addition to the material it had already provided, to determine the precise number of exceptions to the two-year rule during 1988 in SBA Region III (where Neuma is located). Because of the impending hearing and the Easter holiday recess, the Court ordered Neuma to submit an expedited response to the SBA's motion. When Neuma did not timely file its opposition, the Court granted SBA's motion by Order dated March 23, 1989, noting that it "agree[d] with the substantive reasons presented in defendant's motion." On March 24, 1989 SBA filed its response to the modified discovery request. It stated that only one of 80 approved 8(a) applications had been granted in Region III during 1988 in which the applicant had been in business less than two years and it provided the reasons for that ruling.
In its opposition, Neuma argued that summary judgment should not be entered in favor of SBA because, without the discovery that it sought, it could not prove that the agency's decision was arbitrary and capricious. In Pitts, the Supreme Court made clear that in APA cases "the focal point for judicial review should be the administrative record already in existence, not some new record made initially in the reviewing court." 411 U.S. at 142. Discovery is clearly the strictly-limited exception rather than the established rule, and Neuma has not submitted anything -- such as bad faith on the part of SBA officials or inadequate fact-finding procedures -- that would justify discovery in this case. Because Neuma received more in the way of discovery than it would ordinarily be entitled to, this argument must be rejected.
Abandoning this contention, Neuma asserted at oral argument that the denial of a waiver was arbitrary and capricious because no distinction could be drawn between it and the one firm that did receive a waiver of the two-year rule. The Court must disagree. Although Mr. Jones may have possessed similar technical and management expertise as the principal of the firm that received the waiver, that company had received $ 400,000 in financing from sources other than SBA, was performing three contracts and was low bidder on three others. Supplemental Declaration of Francisco Marrero para. 5. Neuma, however, was dependent on only one contract and had received only a $ 150,000 line of credit with its bank. Given that SBA's waiver is limited to "extraordinary circumstances" and that such waivers are in fact rarely granted, the Court cannot say that the SBA's decision was arbitrary or capricious.
C. Twelve-Month Rule
Neuma also contends that the twelve-month waiting period between the denial of its request for reconsideration and its opportunity to file a new application for entry into the 8(a) program is arbitrary and capricious. This requirement is codified in the SBA's regulations at 13 C.F.R. § 124.206 and provides:
The [responsible Associate Administrator] has final authority over approval or declination of applications for admission to the section 8(a) program. If the [Associate Administrator] declines an application, he or she will notify the applicant in writing giving detailed reasons for the decline and informing the applicant of the right to request a reconsideration within 30 days of receipt of the decline letter . . . . If the application is declined by the [Associate Administrator] on reconsideration, no new application will be accepted within one year of the reconsideration decision.
Neuma argued at the hearing that it should not be penalized for seeking reconsideration of the SBA's decision denying its application by being forced to wait an additional 12 months before seeking admission to the program again. The Administrator of SBA, however, is authorized to "make such rules and regulations as he deems necessary to carry out the authority vested in him," 15 U.S.C. § 634(b) (6), and the twelve-month waiting period is an eminently reasonable means of assuring that the agency does not become inundated with repeated applications from disappointed applicants seeking entry to what is undoubtedly a popular program. In addition, no one forced Neuma to move for reconsideration. Rather, after being cautioned about the twelve-month waiting period, see AR 4, Neuma elected a calculated gamble and decided to take its chances with a request for reconsideration rather than reapplying to the program. The gamble did not succeed, and Neuma must now accept the consequences of its decision.
The Court finds no basis on which to disturb the SBA's decision denying Neuma admission to the 8(a) program. Neither the substantive grounds relied on for the denial, nor the twelve-month waiting period, is arbitrary, capricious or unsupported by the record. Summary judgment in favor of SBA is therefore warranted.
For these reasons, it is
ORDERED that defendant's motion for summary judgment be and it hereby is granted and that plaintiff's motion for summary judgment be and it hereby is denied.
A separate Judgment accompanies this Opinion and Order.
April 4, 1989
JUDGMENT - April 4, 1989
In accordance with the Opinion and Order issued this date, judgment is hereby entered in favor of defendant James Abdnor, Administrator of the Small Business Administration, and against plaintiff, Neuma Corporation.
April 4, 1989