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SRS TECHS. v. UNITED STATES

January 27, 1994

SRS TECHNOLOGIES, Plaintiff,
v.
UNITED STATES OF AMERICA, ERSKINE BOWLES, Administrator, Small Business Administration, and LES ASPIN, Secretary, Department of Defense, Defendants, SCIENCE & TECHNOLOGY, INC., Intervenor.



The opinion of the court was delivered by: ROYCE C. LAMBERTH

 This case comes before the court on the parties' cross-motions or summary judgment, intervenor's motion to intervene and for dismissal or summary judgment, plaintiff's second motion for a preliminary injunction, plaintiff's motion for leave to file a supplemental complaint, intervenor's motion to dissolve the preliminary injunction this court granted on November 10, 1993, and plaintiff's motion for an extension of time to file its opposition to defendants' motion to dismiss or for summary judgment.

 This court shall grant in part and deny in part plaintiff's and defendants' motions for summary judgment, grant intervenor's motion to intervene, and deny intervenor's motion for dismissal or summary judgment. Further, this court shall deny plaintiff's second motion for a preliminary injunction, plaintiff's motion for leave to file a supplemental complaint, and intervenor's motion to dissolve the original preliminary injunction. This court shall grant, nunc pro tunc, plaintiff's motion for an extension of time to file its opposition to defendants' motion for dismissal or summary judgment.

 I. FACTS

 Plaintiff SRS Technologies ("SRS") has participated in the Small Disadvantaged Business program ("SBD") of the Small Business Administration ("SBA") since the program's inception. To qualify under the regulations of that program, companies must (among other things) be owned and controlled by individuals who are socially and economically disadvantaged. 13 C.F.R. § 124.602(1) (1992). SRS is owned and controlled by Mr. Mohindar S. Sandhu, a businessman who claims that he is socially and economically disadvantaged.

 SRS submitted a proposal to the Department of Defense ("DOD") in response to DOD's Request for Proposals ("RFP") No. DAAH01-93-R-R010. At stake was an SDB set-aside contract, the 1993 Technical Data Management Support Services contract. On July 23, 1993, DOD notified SRS that it was the apparent successful offeror of that contract.

 Seven days later, Science & Technology, Inc. ("SCITEK") intervenor in this case, filed a protest challenging SRS's SDB status. The SBA received SCITEK's protest on August 2, 1993. Because initial SBA SDB decisions are due fifteen working days after the receipt of an SDB protest (48 C.F.R. § 210.302-70(g)), the SBA's initial decision on SCITEK's protest was due on August 23, 1993. Yet it was not until September 3, 1993, that the SBA's Director of the Division of Program Certification and Eligibility found that SRS was not an SDB after all. SRS thereafter filed an administrative appeal of this decision on September 21, 1993, and the decision was finally upheld by the SBA Associate Administrator for Minority Small Business and Capital Ownership Development on September 30, 1993.

 In the meantime, however, DOD had awarded the contract at issue to SRS on August 26, 1993. In light of the SBA's decision, DOD notified SCITEK on October 7, 1993 that DOD intended to award another Technical Data Support Services contract to SCITEK. DOD decided to stop ordering from SRS and to award a new contract to SCITEK, based on the original RFP that led to the August 26 award to SRS. Also on October 7, 1993, DOD notified SRS that DOD did not intend to exercise additional options or increments of options under the August 26 contract. On October 12, 1993, DOD announced that it was awarding a new contract to SCITEK.

 Challenging both the SBA's termination of its SDB status and DOD's awarding of a new contract to another offeror on the same RFP, SRS filed this action. On November 10, 1993, plaintiff won a preliminary injunction preventing performance of the contract by any offeror other than plaintiff.

 On October 27, 1993, defendants filed a motion for dismissal or summary judgment against plaintiff. On November 8, 1993, plaintiff filed a cross-motion for summary judgment, alleging that DOD improperly awarded the contract at issue to a company other than SRS after award had been made to SRS, and that the SBA improperly determined that SRS is not an SDB. In their opposition memorandum and in their original motion for summary judgment, defendants dispute both of these claims. This memorandum opinion addresses each of plaintiff's claims in turn.

 II. INTERVENTION

 The unopposed motion of SCITEK, the protestor, to intervene shall be granted. SCITEK shall also be granted leave to file its motion to dismiss or for summary judgment, but because the key arguments of its motion are unpersuasive, its motion shall be denied.

 SCITEK's motion argues, first, that this court lacks jurisdiction over this case and that injunctive relief is inappropriate since SRS could sue for damages, and second, that plaintiff lacks standing to bring this case. The first argument is rejected in the jurisdictional section below, and the second argument is rejected in footnote 5 of this opinion.

 III. JURISDICTION

 This court has jurisdiction under the Administrative Procedure Act ("APA"), 5 U.S.C. § 702, to adjudicate these motions. Plaintiff is seeking judicial review of agency actions allegedly in violation of agency regulations, the classic case for APA jurisdiction.

 SCITEK, the protestor and intervenor in this case, contests this court's jurisdiction by arguing that this is a contract case, not a case of regulatory interpretation, and that as a contract case it may only be heard in the United States Court of Federal Claims (or its predecessor, the Court of Claims) or the Armed Services Board of Contract Appeals ("ASBCA"). (SCITEK's Motion to Dismiss or for Summary Judgment, at 5 (citing Contract Disputes Act of 1978, 41 U.S.C. §§ 601 et seq. (1988) and the Tucker Act, 28 U.S.C. § 1346 (a)(2) (1988))).

 SCITEK relies heavily on the two-pronged analysis of Ingersoll-Rand Co. v. United States, 250 U.S. App. D.C. 412, 780 F.2d 74 (D.C. Cir. 1985), in its argument that this court lacks jurisdiction. The Ingersoll-Rand court held that a district court lacked jurisdiction to hear a contractor's complaint against a governmental decision to terminate its contract and resolicit bids. Id. at 74-75. Unlike Ingersoll-Rand, however, this case rests on issues of regulatory law, not contract law. Almost all of the elements of Ingersoll-Rand are distinguishable from this case.

 In the first half of its analysis, the Ingersoll-Rand court found that the case before it could be "entirely contained within the terms of the contract," that "the issues raised by plaintiff's complaint are within the unique expertise of the Court of Claims," and that plaintiff was not a frustrated bidder but a contracting party alleging breach. Id. at 78-79. These three factors cut against district court jurisdiction.

 The present case differs from Ingersoll-Rand in all three respects. First, this case could not possibly have been founded on an alleged violation of any contractual provision. In Ingersoll-Rand, one of the key points of contention was a regulation that had been incorporated into the contract itself, which meant that the entire cause could have been brought under the contract. Here, by contrast, the issue is whether DOD violated its own regulations (never incorporated into the contract), not whether DOD violated some contractual provision. This case is not founded on any contractual provision at all. DOD is simply taking the contract away from SRS by refusing to place further task orders under it, and is awarding the same contract to SCITEK. What makes this DOD action unlawful is not contract law; facially, at least, contract law appears to leave DOD free to do this to SRS, since DOD is not terminating the SRS contract and since there are no guaranteed orders under the contract. SRS does not, and apparently cannot, make a contract claim. SRS's sole available argument that this DOD action is unlawful stems not from contract law, but from DOD regulation.

 Secondly, this case centers on the interpretation of regulations, a skill district courts are particularly well-suited to perform, and not on any specialized or arcane knowledge of government contracts. Significantly, the district court in Ingersoll-Rand was called upon to adjudicate close questions of plaintiff's rights under the contract and regulations; in this case, by contrast, this court need only discover whether there was a clear violation of plaintiff's regulatory (not contractual) rights.

 Thirdly, in this case SRS does not -- indeed cannot -- invoke any contractual provision to claim that DOD's decision to refuse to exercise further task orders constitutes breach of contract. No contractual provision guarantees SRS the right to have all task orders exercised, as SCITEK concedes. (SCITEK's Motion to Dismiss or for Summary Judgment, at 8.) The source of SRS's right to ...


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