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DynaLantic Corp. v. United States Dep't of Defense

August 23, 2007


The opinion of the court was delivered by: Emmet G. Sullivan United States District Judge


Plaintiff, the DynaLantic Corporation ("DynaLantic"), brings this suit against the United States Department of Defense ("DoD"), the United States Department of the Navy ("the Navy"), and the United States Small Business Administration ("SBA") in order to challenge DoD's utilization of the SBA's Section 8(a) Business Development Program in the awarding of contracts. Pending before the Court are the parties' cross-motions for summary judgment. For the reasons stated herein, the Court finds that the record before the Court is insufficient to decide the pending motions because there is no information regarding Congress's 2006 reauthorization of the program in question. Therefore, both motions for summary judgment are DENIED without prejudice, and the parties are directed to propose future proceedings that will fully supplement the record.


I. Statutory Overview

In order to explain the need for supplementing the record, a limited overview of the statutory framework and procedural history is necessary. The Small Business Act sets a "Government-wide goal" that "not less than 5 percent of the total value of all prime [federal] contract and subcontract awards for each fiscal year" be awarded to socially and economically disadvantaged small business concerns. 15 U.S.C. § 644(g)(1). Notwithstanding the Government-wide goal, each agency, through negotiation with the SBA, is obligated to establish its own goal for contracting with disadvantaged small businesses. Id. § 644(g). These goals are not mandatory and the Act provides no sanction if an agency fails to meet its goal.

Under Section 8(a) of the Act, small businesses owned and controlled by disadvantaged individuals may apply to the SBA and, if admitted into the program, are eligible to receive technological, financial, and practical assistance, as well as support through preferential awards of government contracts. See id. § 636(j)(10)-(16). The program allows the SBA to enter into contracts with other government agencies and then subcontract with qualified program participants. It should be noted, however, that admission into the 8(a) program does not guarantee that a participant will receive 8(a) contracts. 13 C.F.R. § 124.501(c).

In order for a firm to participate in the Section 8(a) program, the SBA must certify that the firm is a disadvantaged small business under specific criteria. See 15 U.S.C. § 636(j)(11)(E)-(F); 13 C.F.R. § 124.101. A small business is "disadvantaged" if at least 51 percent of the firm is unconditionally owned and controlled by one or more individuals who are both socially and economically disadvantaged. See 15 U.S.C. § 637(a)(4)(A)-(B); 13 C.F.R. § 124.105. "Socially disadvantaged" individuals are persons who have been "subjected to racial or ethnic prejudice or cultural bias within American society because of their identities as members of groups without regard to their individual qualities." 13 C.F.R. § 124.103(a); see 15 U.S.C. § 637(a)(5). Individuals who are members of certain racial and ethnic groups are presumptively socially disadvantaged. 13 C.F.R. § 124.103(b); see 15 U.S.C. § 631(f)(1).

The DoD program was established by Section 1207 of the National Defense Authorization Act for Fiscal Year 1987, and was later codified at 10 U.S.C. § 2323. The DoD program was initially enacted as a three-year pilot program. Rothe Dev. Corp. v. U.S. Dep't of Def., 262 F.3d 1306, 1313 (Fed. Cir. 2001) ("Rothe I"). The program was subsequently extended through Congressional reauthorization in 1989, 1992, 1999, and 2002.

Id.; Rothe Dev. Corp. v. U.S. Dep't of Def., 413 F.3d 1327, 1330 (Fed. Cir. 2005) ("Rothe II"). The program was most recently reauthorized on January 6, 2006. Rothe Dev. Corp. v. U.S. Dep't of Def., __ F. Supp. 2d __, 2007 WL 2302376, at *4 (W.D. Tex. Aug. 10, 2007) ("Rothe III") (citing Nat'l Def. Authorization Act for Fiscal Year 2006, Pub. L. No. 109-163, § 842, 119 Stat. 3136 (Jan. 6, 2006)). The program is currently set to expire after the 2009 fiscal year. Id.; see 10 U.S.C. § 2323(k).

As currently codified, the program sets a "goal" that five percent of the total dollar amount obligated for defense contracts and subcontracts for each fiscal year be awarded to small businesses that are owned and controlled by socially and economically disadvantaged individuals as defined by the Small Business Act. 10 U.S.C. § 2323(a)(1).*fn1 The statute authorizes several approaches to attain the five percent goal, including technical assistance, the issuance of contracts through the Section 8(a) program, set-asides for small disadvantaged businesses, and price evaluation adjustments. Id. § 2323 (c), (e)(3)(A)-(B); see Rothe III, 2007 WL 2302376, at *5. The Section 8(a) program has in recent years been the primary preferential contracting program that DoD uses to meet its five percent goal. See Rothe III, 2007 WL 2302376, at *12 (describing suspension of price evaluation adjustment program since 1999).

II. Procedural History

This case originally arose from a decision by the Navy to award a contract for the development of a UH-1N Aircrew Procedures Trainer ("APT"), a mobile flight simulator for the UH-1N "Huey" helicopter, exclusively through the Section 8(a) program. Plaintiff, a small company that had previously designed and manufactured flight simulators for the military, would have competed for this procurement but for the fact that it was not a participant in the Section 8(a) program. Plaintiff filed an administrative protest with the contracting officer contesting the decision to procure the contract through the Section 8(a) program. After plaintiff's administrative claim and subsequent administrative appeal were denied, plaintiff filed its original complaint in this Court, claiming that the Navy's decision to procure the APT through the Section 8(a) program was unconstitutional and violated the Administrative Procedures Act. Plaintiff sought declaratory and injunctive relief.

In May 1996, this Court denied plaintiff's motion for a preliminary injunction. The Court held that plaintiff lacked standing to bring its action and had otherwise failed to establish a sufficient factual and legal basis for the issuance of a preliminary injunction. See DynaLantic Corp. v. Dep't of Def., 937 F. Supp. 1 (D.D.C. 1996). Subsequently, in August 1996, the Court dismissed the entire case on standing grounds.

Plaintiff appealed from both the denial of its motion for preliminary injunction and the dismissal order. The D.C. Circuit dismissed the appeal from the denial of the motion for preliminary injunction as moot in light of the dismissal of the entire action, but granted plaintiff's motion to enjoin the APT procurement during the pendency of the appeal from the dismissal order. DynaLantic Corp. v. Dep't of Def., 115 F.3d 1012, 1014 (D.C. Cir. 1997). A few weeks later, ...

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