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Validata Chemical Services v. United States Department of Energy

United States District Court, District of Columbia

March 11, 2016

VALIDATA CHEMICAL SERVICES, Plaintiff,
v.
UNITED STATES DEPARTMENT OF ENERGY, et al., Defendants

MEMORANDUM OPINION AND ORDER

RANDOLPH D. MOSS UNITED STATES DISTRICT JUDGE.

In 2011, Defendant Department of Energy (“DOE”) awarded a contract for environmental remediation services to URS | CH2M Oak Ridge, LLC (“UCOR”). In 2012, Plaintiff Validata Chemical Services (“Validata”) bid on, but did not win, a small business set-aside subcontract for data validation services to support UCOR’s remediation work. Validata then sought to contest the award of the subcontract to its competitor, Portage, Inc., arguing that Portage did not meet the applicable size standard for the small business set-aside subcontract. Validata objected on numerous grounds. It argued that DOE had improperly approved the subcontract award, despite its knowledge that Portage did not meet the applicable requirements, and had improperly made its own size determination, rather than leaving that question to the Small Business Administration (“SBA”). Validata also complained that the subcontract solicitation did not contain a North American Industry Classification System (“NAICS”) code; that the code that UCOR actually used was incorrect; and that had UCOR used the correct code, Portage would not have qualified. After unsuccessfully raising these issues in whole or in part with UCOR and the SBA’s Office of Hearings and Appeals (“SBA-OHA”), Validata brought this suit against DOE and the SBA, asserting claims under the Administrative Procedure Act[1] (“APA”) and the Fifth Amendment Due Process Clause. Dkt. 6 at 12-14 (Amend. Compl. ¶¶ 31-39).

Before considering the merits of Validata’s claims, the Court must consider whether it has jurisdiction to do so. The answer to that question turns on the meaning of the Administrative Dispute Resolution Act of 1996 (“ADRA”), Pub. L. No. 104-320, 110 Stat. 3870, which is codified at 28 U.S.C. § 1491(b). Although at one time ADRA provided concurrent jurisdiction over certain procurement-related disputes in the federal district courts and the U.S. Court of Federal Claims, its grant of jurisdiction to the federal district courts expired in 2001. Accordingly, as the law now stands, the Court of Federal Claims has exclusive jurisdiction over:

an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.

28 U.S.C. § 1491(b)(1).

Validata contends that because a subcontractor is not an “interested party” as that term has been construed by the Federal Circuit and the Court of Federal Claims, § 1491(b)(1) does not oust this Court of jurisdiction to adjudicate its claims. Dkt. 26-1. The government initially disagreed, arguing that the Court of Federal Claims had exclusive jurisdiction over this matter. On further reflection, however, it has come to the view that Validata is right and that § 1491(b)(1) does not apply. As explained below, notwithstanding the parties’ agreement on the matter, the Court concludes that it lacks jurisdiction over Validata’s claims. In the interest of justice, the Court will therefore transfer the case to the Court of Federal Claims, where the action could have been brought at the time it was filed. See 28 U.S.C. § 1631.

I. BACKGROUND

The following facts, derived from the amended complaint and declarations submitted by the parties, are taken as true solely for purposes of determining whether the Court has jurisdiction over this matter. See, e.g., Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C. Cir. 2011) (“We assume the truth of all material factual allegations . . . and upon such facts determine jurisdictional questions.”); see also Fed. R. Civ. P. 12(b)(1).

A. The Subcontract Procurement

On April 28, 2011, DOE awarded UCOR a contract to provide environmental remediation services at the East Tennessee Technology Park in Oak Ridge, Tennessee, until July 2020. Dkt. 6 at 8 (Amend. Compl. ¶ 14); Dkt. 22-1 at 4 (Cloar Decl. ¶ 4). In 2012, UCOR conducted a solicitation for a subcontractor to provide analytical data validation services in support of this prime contract. Dkt. 6 at 2 (Amend. Compl. ¶¶ 1-2); Dkt. 12-2 at 94. Although there is no dispute that the subcontract was set aside for a prequalified small business, Dkt. 12-2 at 1, the parties do not address whether the set-aside was made pursuant to provisions of the prime contract, federal law, or both. The prime contract does not appear in the present record, but 15 U.S.C. § 637(d) requires that “all contracts let by any Federal agency, ” with certain exceptions not relevant here, include a clause stating that “[i]t is the policy of the United States that small business concerns . . . have the maximum practicable opportunity to participate in the performance of contracts let by any Federal agency, including . . . subcontracts, ” and that “[t]he contractor hereby agrees to carry out this policy in the awarding of subcontracts.”

According to a declaration submitted by Heather Cloar, the DOE contracting officer for the prime contract, she authorized “UCOR to enter into competitive firm-fixed-price subcontracts with dollar values of up to $5, 000, 000 and cost-type subcontracts with dollar values of up to $2, 000, 000 without seeking” further consent. Dkt. 22-1 at 1-2 (Cloar Decl. ¶¶ 1-2). As she further explains, as a result, UCOR “was not required to submit its prequalification criteria, its solicitation, or its award documentation to DOE for consent and it did not submit [them] to [her] or anyone in DOE.” Id. at 2 (Cloar Decl. ¶ 3). UCOR’s “purchasing system, ” including its system for subcontracting, was, however, subject to periodic review and approval. Id. at 1-2 (Cloar Decl. ¶ 1).

Validata competed for, but did not win, the subcontract. Dkt. 6 at 2 (Amend. Compl. ¶ 1). On September 18, 2012, UCOR notified Validata that Portage had won it. Id. at 9 (Amend. Compl. ¶ 18). Validata then attempted to challenge the award to Portage. First, Validata expressed concern to UCOR Subcontract Administrator Cindy Hart that Portage was not a small business. Dkt. 12-2 at 101-105. Hart replied that UCOR no longer accepted or allowed size protests, but that she would check whether anything could be done. Id. at 105. On October 2, Hart informed Validata that, based on offeror-submitted information “gathered through the [Central Contractor Registration (System for Award Management)] CCR(SAM)” and after consulting with UCOR Small Business Program Manager Karen Reeve, UCOR believed that Portage was a small business with fewer than 500 employees. Id. at 11. Hart stated that Validata could nevertheless submit a formal size protest to her. Id. On the present record, it is unclear whether Hart and Reeve were acting as the agents of UCOR, DOE, or both. The two used “doe.gov” e-mail addresses, see Id. at 101, 107, but their titles-UCOR Subcontract Administrator and UCOR Small Business Program Manager-suggest that they worked for UCOR, id. at 11. One letter to Validata appears to refer to Reeve as the “DOE-ORO Small Business Program Manager.” Id. at 118.

Validata submitted a formal size protest to Hart on October 9, 2012. Dkt. 15-1 at 2-5. On October 11, Reeve informed Validata that it must “put [its] formal complaint in writing to the SBA in Boise, I[daho].” Dkt. 12-2 at 107. On October 29, Validata informed Reeve and Hart that it had conferred with various personnel at SBA and learned that the San Francisco SBA office handled size protests for the region; that UCOR or DOE, rather than Validata, should refer the size protest to SBA; and that someone from SBA’s San Francisco office would contact them about it. Id. at 113. Reeve replied, “Sorry we have given the correct information. It is not up to UCOR to do anything else.” Id. On October 30, however, Reeve provided Validata with a list of “what original documents need[ed] to be turned into” her for the size protest and stated that she would in turn submit them to the San Francisco SBA office and to UCOR Corporate. Id. at 115- 16.

On November 6, 2012, Validata sent UCOR a letter, which does not appear in the record, complaining that UCOR had given it erroneous information about the process for filing a size protest and that, as a result, it could no longer file a timely protest under the federal regulations. Dkt. 6 at 10 (Amend. Compl. ¶ 24). At the same time, it expressed concern about whether NAICS code 562910 was appropriate for the subcontract procurement. Dkt. 12-2 at 3. NAICS codes “define establishments based on the activities in which they are primarily engaged.” U.S. Small Bus. Admin., Determine Your NAICS Code, http://tinyurl.com/SBANAICS (last visited Mar. 9, 2016). SBA promulgates “small business size standards on an industry-by-industry basis” and publishes the “size standards matched to industry NAICS codes.” Federal Acquisition Regulation (“FAR”) 19.102(a)(1). As of 2012, NAICS code 562910 for “Environmental Remediation Services” had a size standard of 500 employees. 13 C.F.R. § 121.201 (2012).[2]

On December 3, 2012, UCOR sent Validata a letter stating that it had “re-examined the issues, ” including conferring with the “DOE-ORO Contracting Officer” and the “DOE-ORO Small Business Program Manager, ” and that it reaffirmed its conclusions that NAICS code 562910 was correctly applied, that Portage met the 500-employee size standard for that code, and that “the subcontract was awarded under fair and adequate competition and [UCOR] considers this issue closed.” Dkt. 12-2 at 118.

B. SBA-OHA Appeal

After conferring with an SBA procurement analyst based in Washington, D.C., about the appropriate NAICS code for the subcontract, id. at 99, Validata filed a NAICS code appeal with SBA-OHA on January 3, 2013, id. at 53, challenging UCOR’s use of NAICS code 562910 for the subcontract procurement. Validata asserted that the solicitation should have used NAICS code 541620, which covers “Environmental Consulting Services” and, at the time, had an accompanying size standard of $14 million in annual receipts. Id. at 58-63; 13 C.F.R. § 121.201 (2012).[3] It also argued that the requirement in 13 C.F.R. § 134.304(b) that a NAICS code appeal be filed and served within 10 days of the issuance of the solicitation or an amendment to the solicitation affecting the NAICS code or size standard did not apply because the subcontract solicitation never included a NAICS code or size standard. Dkt. 12-2 at 53-58. Although the Request for Proposals (“RFP”) for the subcontract did not contain a NAICS code or size standard, id. at 72, 95-96, that information was provided at two other junctures in the subcontract procurement process: during the prequalification process and in “Questions and Answers” posted on UCOR’s website shortly before the proposal deadline.[4]

Validata also stated in its SBA-OHA appeal that its “size protest [was] not the subject of th[e] submittal, ” but it described its failed efforts to submit a size protest to SBA through UCOR and asked SBA-OHA to “compel UCOR to submit Validata’s previously filed size protest” to the SBA office in San Francisco for processing. Dkt. 12-2 at 63-69. It explained that even if that office held the protest to be untimely, that determination would give Validata the opportunity to appeal to SBA-OHA. Id. at 69; see also 13 C.F.R. §§ 134.301, 134.304 (providing that a size appeal to SBA-OHA must be filed within 15 calendar days after receipt of the formal size determination of an SBA Government Area Contracting Office).

On February 14, 2013, SBA-OHA dismissed the appeal on two grounds: First, it held that the challenge to the NAICS code assigned to the subcontract was moot because SBA-OHA had “no authority to order UCOR to reopen the competition, or to terminate the subcontract with Portage” once it was awarded. Validata Chem. Servs., Inc., SBA No. NAICS-5449 (2013), 2013 WL 795607, at *3. Second, it held that the NAICS code appeal was untimely under 13 C.F.R. § 134.304(b) and FAR 19.303(c)(1). Id. at *4. It did not discuss Validata’s failed efforts to file a size protest.

C. The Present Suit

On November 27, 2013, Validata filed this action. Dkt. 1. The amended complaint, filed on February 24, 2014, asserts two claims against DOE: (1) that DOE violated the APA “in its consent or approval to UCOR’s issuance of the subcontract award” despite “numerous violations during the procurement process, ” such as the failure of the solicitation to contain a NAICS code or size standard and the failure to adjudicate properly Validata’s size protest, Dkt. 6 at 12-13 (Amend. Compl. ¶ 32); and (2) that it violated 15 U.S.C. § 637(b)(6) and FAR 19.301(b) and 19.302(c) by making its own size determination instead of referring the matter to SBA and that it “act[ed] in concert with UCOR to hinder and thwart Plaintiff’s right to file a size protest, ” Dkt. 6 at 14 (Amend. Compl. ¶¶ 38-39). Validata also asserts two claims against the SBA-OHA: (1) that the SBA-OHA violated the APA in dismissing Validata’s NAICS code appeal as untimely and moot, id. at 13 (Amend. Compl. ¶ 34); and (2) that the SBA-OHA violated the Due Process Clause of the Fifth Amendment in dismissing the company’s appeal, id. at 13-14 (Amend. Compl. ¶ 36).

Defendants moved to dismiss or, alternatively, for summary judgment. Dkt. 12. On November 26, 2014, the case was randomly reassigned. Subsequently, the Court ordered the parties to address whether the subcontract at issue had been fully performed and, if so, whether the case was moot. See Nov. 24, 2015 Minute Order. In response, Defendants supplied a declaration explaining that the subcontract’s two-year base period has expired, but that Portage continues to perform under the second and final option to extend the contract, which will not expire until September 2016. Dkt. 22-1 at 2-3 (Cloar Decl. ¶ 4). Then, in December 2015, the Court ordered the parties to file supplemental briefs addressing whether 28 U.S.C. § 1491(b)(1), as modified by ADRA’s sunset provision, vests exclusive jurisdiction over this action in the Court of Federal Claims. Dkt. 20; Dec. 18, 2015 Minute Order. Validata responded that jurisdiction, in its view, was properly asserted in this Court. The government, in contrast, initially took the position that this Court lacks jurisdiction. See Dkt. 24 at 1 n.2. It subsequently reconsidered that position, however, and ultimately agreed with Validata that § 1491(b)(1) does not apply to challenges to subcontract procurements. See Id. For the reasons explained below, the Court concludes that it is without jurisdiction.

II. ANALYSIS

A. Section 1491(b)(1)

At the time it was enacted, in 1996, ADRA granted the federal district courts and the Court of Federal Claims overlapping jurisdiction over covered procurement litigation. 28 U.S.C. § 1491(b)(1). That changed, however, in 2001, when ADRA’s sunset provision eliminated the jurisdiction of the federal district courts and vested the Court of Federal Claims with exclusive jurisdiction over these cases. See Pub. L. No. 104-320, § 12(d), 110 Stat. 3870, 3875 (1996) (codified at 28 U.S.C. § 1491 note). The relevant question, accordingly, is whether the present suit falls within the scope of ADRA-in which case this Court ...


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