Adams and Associates, Inc. v. United States , 741 F.3d 102 ( 2014 )

United States Court of Appeals
for the Federal Circuit
______________________
ADAMS AND ASSOCIATES, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5077
______________________
Appeal from the United States Court of Federal
Claims in No. 12-CV-0731, Senior Judge Eric G. Brug-
gink.
----------------------
ADAMS AND ASSOCIATES, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5080
______________________
Appeal from the United States Court of Federal
Claims in No. 12-CV-0409, Judge Mary Ellen Coster
Williams.
2 ADAMS AND ASSOCIATES, INC. v. US
______________________
Decided: January 27, 2014
______________________
MICHAEL J. SCHRIER, Jackson Kelly PLLC, of Wash-
ington, DC, argued for plaintiff-appellant. On the brief
was G. LINDSAY SIMMONS. Of counsel were KATHERINE A.
CALOGERO and HOPEWELL H. DARNEILLE, III.
PATRICIA M. MCCARTHY, Assistant Director, Commer-
cial Litigation Branch, Civil Division, United States
Department of Justice, of Washington, DC, argued for
defendant-appellee. With her on the brief were STUART F.
DELERY, Acting Assistant Attorney General, JEANNE E.
DAVIDSON, Director, and MATTHEW P. ROCHE, Trial Attor-
ney. Of counsel on the brief were DAVID R. KOEPPEL and
PETER J. DICKSON, Attorneys, Office of the Solicitor
(MALS), United States Department of Labor, of Washing-
ton, DC.
______________________
Before LOURIE, DYK, and WALLACH, Circuit Judges.
WALLACH, Circuit Judge.
Adams and Associates, Inc. (“Adams”) appeals two or-
ders 1 of the United States Court of Federal Claims, each
of which denied Adams’s motion for judgment on the
administrative record and granted the United States’
1 Although filed as two separate cases, the argu-
ments raised in each of these cases are identical. The
only difference is factual: in Adams I, the small business
set-aside determination was for the Shriver Job Corps
Center, while in Adams II it was for the Gadsden Job
Corps Center.
ADAMS AND ASSOCIATES, INC. v. US 3
cross-motion for judgment on the administrative record.
Adams & Assocs., Inc. v. United States (Adams I), 109
Fed. Cl. 340 (Fed. Cl. 2013); Adams & Assocs., Inc. v.
United States (Adams II), No. 12-409C (Fed. Cl. Mar. 27,
2013) (Oral Op. & Order) (J.A. 6–37). 2 Because Adams
fails to establish that the U.S. Department of Labor’s
(“DOL”) decisions to designate the contracts for the opera-
tion of the Gadsden and Shriver Job Corps Centers as
small business set-asides were arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with
law, the Court of Federal Claims is affirmed in both cases.
BACKGROUND
I. The Job Corps Program
The Job Corps program is a national residential train-
ing and employment program administered by the DOL.
In 1998, Congress passed the Workforce Investment Act,
which reformed the Job Corps program and authorized
the Secretary of Labor (“the Secretary”) to enter into
agreements with government agencies or private organi-
zations to operate “Job Corps centers.” 29 U.S.C. § 2887(2006 & Supp. V 2011).
Adams is the incumbent contractor for both the Gads-
den and the Shriver Job Corps Centers. Because of the
small business limitation placed on the contracts for the
follow-on operation of these Centers, Adams cannot
compete for the contracts since it does not qualify as a
small business.
2 In Adams I, the court also denied Adams’s motion
to strike and its motion for leave to notify the court of the
United States’ suspension of all Job Corps Center enroll-
ments. In Adams II, the court denied Adams’s motion to
strike. None of these decisions is on appeal here.
4 ADAMS AND ASSOCIATES, INC. v. US
II. The Gadsden Center
Adams was awarded the contract to operate the
Gadsden Center in 2004. In April 2011, the DOL declined
to exercise its option to extend Adams’s contract. Prior to
issuing a solicitation for a new contract, the DOL issued a
Request for Information (“RFI”) to conduct market re-
search regarding the businesses, especially small busi-
nesses, that might be willing to compete for the operation
of Gadsden. Based on the results of this research, the
DOL decided to limit the right to compete for the Gadsden
contract to small businesses. Adams filed a pre-award bid
protest, in response to which the DOL cancelled the
Gadsden solicitation. Adams’s protest was then dismissed
without prejudice. Adams & Assocs., Inc. v. United
States, No. 11-665C (Fed. Cl. Oct. 13, 2011) (order dis-
missing protest).
The DOL then issued a second RFI to collect new
market research using a revised set of criteria to evaluate
the respondents. The DOL continued to use this revised
set of criteria in its subsequent RFIs for Job Corps Center
procurements, including for the Shriver Center. Pursuant
to the Federal Acquisition Regulation, 48 C.F.R.
§ 19.303(a) (2012), as part of the RFI, the contract for
Gadsden was assigned an industry category code: North
American Industry Classification System (“NAICS”)
611519, 3 the only code applicable to Job Corps Centers.
3 Each industry category is assigned an NAICS
code. The Small Business Administration then imposes a
corresponding limitation on company size and revenue to
determine which entities will be considered “small” within
any industry category. 13 C.F.R. § 121.201 (2012). Re-
spondents to either an RFI or a solicitation notice are
required to indicate whether they can be considered small
ADAMS AND ASSOCIATES, INC. v. US 5
The small business revenue limit associated with this
code is $35.5 million in annual receipts. 13 C.F.R.
§ 121.201. Therefore, if the contract for the operation of
Gadsden were to be set aside for small businesses, any
business with more than $35.5 million in annual receipts,
including Adams, would not qualify. After conducting its
second RFI, the DOL concluded that there was a reasona-
ble expectation that at least two capable small businesses
would bid on the Gadsden contract. Therefore, on May 8,
2012, the DOL issued a solicitation notice for the Gadsden
contract as a total small business set-aside.
III. The Shriver Center
Adams’s contract to operate the Shriver Center ran
from 2008 to 2013. Before issuing a solicitation for a new
contract, the DOL issued an RFI to conduct market re-
search regarding businesses that might be willing to
compete for the operation of Shriver. This RFI included
the criteria developed in the second RFI for Gadsden, and
the contract was assigned the same industry code (NAICS
611519). Therefore, like Gadsden, if the Shriver contract
were designated for small businesses, any business with
more than $35.5 million in annual receipts, including
Adams, would not qualify. Six businesses responded to
the RFI, four of which were small businesses. Because
the DOL concluded that there was a reasonable expecta-
tion that at least two of these small businesses would be
interested in bidding on the Shriver contract, on October
16, 2012, the DOL issued a solicitation notice for the
Shriver Center as a total small business set-aside.
Adams filed two pre-award bid protests in the Court
of Federal Claims. In each case, the Court of Federal
businesses according to the size and revenue limitations
for the job category.
6 ADAMS AND ASSOCIATES, INC. v. US
Claims denied Adams’s motion for judgment on the ad-
ministrative record and granted the United States’ cross-
motion for judgment on the administrative record. Adams
I, 109 Fed. Cl. at 344; Adams II, J.A. 33. Adams filed a
timely notice of appeal. This court has jurisdiction pursu-
ant to 28 U.S.C. § 1295(a)(3) (2012).
DISCUSSION
I. Standard of Review
This court reviews legal determinations of the Court
of Federal Claims, such as a judgment on the administra-
tive record, without deference, applying the same stand-
ard of review as the Court of Federal Claims. Dysart v.
United States, 369 F.3d 1303, 1310 (Fed. Cir. 2004) (citing
Haselrig v. United States, 333 F.3d 1354, 1355 (Fed. Cir.
2003)). Under that standard, this court will not disturb
the agency’s decision to deny appellant relief unless it is
“arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” 5 U.S.C. § 706(2)(A) (2012);
Bannum, Inc. v. United States, 404 F.3d 1346, 1351 (Fed.
Cir. 2005). To the extent an agency’s decision involves
statutory and regulatory construction, these are questions
of law which this court reviews de novo. Billings v. Unit-
ed States, 322 F.3d 1328, 1332 (Fed. Cir. 2003).
II. Legal Framework
The Workforce Investment Act established Job Corps
Centers and the process the DOL must follow in selecting
center operators. 29 U.S.C. § 2887. The statute requires
that the selection process be on a “competitive basis.” Id.§ 2887(a)(2)(A) (“[T]he Secretary shall select on a competi-
tive basis an entity to operate a Job Corps center.” (em-
phasis added)). The statute also articulates criteria the
Secretary should consider in selecting an operator. Id.
§ 2887(a)(2)(B)(i)(I)–(IV).
To transition to the new framework established by the
Workforce Investment Act, including the creation of Job
ADAMS AND ASSOCIATES, INC. v. US 7
Corps Centers, the Secretary was given authority in 20
U.S.C. § 9276(c) to promulgate regulations. 20 U.S.C.
§ 9276 (2006) (“The Secretary . . . shall take such actions
as the Secretary determines to be appropriate to provide
for the orderly transition from any authority under the
Job Training Partnership Act . . . to the workforce in-
vestment systems established under the [Workforce
Investment Act].”). Under this authority, the Secretary
promulgated regulations directing the DOL to apply the
procurement procedures of the Small Business Act, 15
U.S.C. § 644 (2006), and the Competition in Contracting
Act, 41 U.S.C. § 3303 (2006), through the Federal Acquisi-
tion Regulation and the DOL Acquisition Regulations, to
the procurement and selection of Job Corps Center opera-
tors. 20 C.F.R. §§ 670.310–320 (2012).
The Federal Acquisition Regulation establishes proce-
dures for agencies to make small business set-aside
determinations. 48 C.F.R. § 19.502-1 (“Requirements for
setting aside acquisitions”). These regulations provide a
“contracting officer shall set aside an individual acquisi-
tion or class of acquisitions for competition among small
businesses when . . . [a]ssuring that a fair proportion of
Government contracts in each industry category is placed
with small business concerns; and the circumstances
described in 19.502-2 [i.e., the so-called “Rule of Two”] . . .
exist.” Id. § 19.502-1(a)(2). The Rule of Two requires the
“contracting officer shall set aside any acquisition over
$150,000 for small business participation when there is a
reasonable expectation that: (1) Offers will be obtained
from at least two responsible small business concerns . . . ;
and (2) Award will be made at fair market prices.” Id.
§ 19.502-2(b).
8 ADAMS AND ASSOCIATES, INC. v. US
III. The DOL Properly Used Small Business Set-Aside
Procedures for the Procurements
A. The Plain Language of the Workforce Investment Act
The Workforce Investment Act lists as “eligible enti-
ties” for operating Job Corps Centers: “a Federal, State, or
local agency, an area vocational education school or
residential vocational school, or a private organization.”
29 U.S.C. § 2887(a)(1)(A). The Act then states that
“[e]xcept as provided in subsections (a) to (c) of [§ 3304 of
the Competition in Contracting Act pertaining to sole-
source situations], the Secretary shall select on a competi-
tive basis an entity to operate a Job Corps center.” Id.
§ 2887(a)(2)(A) (emphasis added).
To Adams, the plain language of these provisions in-
dicates that Congress intended to establish a “unique
procurement method for selecting [Job Corps Center]
operators, one which requires DOL to maximize competi-
tion among the enumerated eligible entities [in subsection
(a)(1)(A)], except in limited, sole-source situations.”
Appellant’s Br. (Adams I) 23; Appellant’s Br. (Adams II)
20. Thus, Adams argues the “unique procurement meth-
od” envisioned by the Workforce Investment Act requires
full and open competition “among the entire broad pool of
eligible entities” as defined by § 2887(a)(1)(A). Appel-
lant’s Br. (Adams I) 22; Appellant’s Br. (Adams II) 19.
Adams finds support for this contention in the structure
of this statutory section: “By setting up the two provisions
in this way—first, expressly listing the eligible entities,
then explaining that such entities shall be chosen on a
competitive basis—Congress expressly and unambiguous-
ly intended for the terms ‘competitive basis’ and ‘eligible
entities’ to be read together.” Appellant’s Br. (Adams I)
24; Appellant’s Br. (Adams II) 21. In addition, Adams
argues that although subsection 2887(a)(1)(A) begins with
an explicit reference to the Competition in Contracting
Act, the Workforce Investment Act does not mention the
ADAMS AND ASSOCIATES, INC. v. US 9
Competition in Contracting Act or other restrictions on
competition elsewhere.
To evaluate the lawfulness of an agency’s statutory
interpretation, courts employ the two-prong test estab-
lished in Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837, 842–45 (1984). The
court first examines “whether Congress has directly
spoken to the precise question at issue,” and if so, the
agency and the court must comply with Congress’s clear
intent. Id. at 842–43. If, however, “the statute is silent or
ambiguous with respect to the specific issue,” a prong-two
analysis is warranted, under which the court must deter-
mine “whether the agency’s answer is based on a permis-
sible construction of the statute.” Id. at 843. As a
question of law involving statutory construction, this
court applies de novo review.
Neither the plain language of the Workforce Invest-
ment Act provisions pertaining to Job Corp Centers, nor
the structure of the provisions, forbids the DOL from
using the procurement procedures of the Competition in
Contracting Act. Indeed, the “competitive basis” provision
itself begins with a reference to the Competition in Con-
tracting Act, 29 U.S.C. § 2887(a)(2)(A), refuting Adams’s
argument that the Workforce Investment Act established
a “unique procurement method” that must be implement-
ed in a vacuum. The Court of Federal Claims found that
the language of § 2887 was not ambiguous, and the plain
meaning of “competitive basis” does not preclude competi-
tion among small businesses. Adams I, 109 Fed. Cl. at
351; Adams II, J.A. 17–19. This court recently agreed
with that interpretation in Res-Care, a case involving a
small business set-aside for another Job Corps Center,
holding that “[a] selection process confined to multiple
small businesses bidding to operate a [Job Corps Center]
. . . satisfies the statutory ‘competitive basis’ require-
ment.” Res-Care, Inc. v. United States, 735 F.3d 1384,
1388 (Fed. Cir. 2013). Notably, Adams does not deny that
10 ADAMS AND ASSOCIATES, INC. v. US
small business set-asides are competitive, nor does it
dispute the ordinary meaning of the word “competitive”
used by the Court of Federal Claims in Adams I and
Adams II, and now by this court in Res-Care.
There is also no indication that by listing the eligible
entities in subsection (a)(1)(A), Congress intended “com-
petitive basis” in subsection (a)(2)(A) to mean that solici-
tation must be open to all such entities, particularly since
the provision divides the list of eligible entities with an
“or.” 29 U.S.C. § 2887(a)(1)(A). As stated in Res-Care,
this court finds “no merit in [the] argument that the list of
‘eligible entities’ for operating a [Job Corps Center] in
§ 2887(a)(1) suggests that DOL must always hold a full
and open competition for selecting an operator to all
entities who are eligible. . . . [T]he ‘selection process’ set
forth in § 2887(a)(2) only requires it to be on ‘a competi-
tive basis.’” Res-Care, 735 F.3d at 1388 n.5. Limiting
competition to small businesses did not contravene the
Workforce Investment Act’s “competitive basis” require-
ment. 4
B. The DOL Properly Exercised Its Rulemaking Authority
Under the Workforce Investment Act
The DOL promulgated regulations applying the pro-
curement procedures of the Competition in Contracting
Act via the Federal Acquisition Regulation. 20 C.F.R.
§§ 670.300–320. When using the small business set-aside
procedures of the Competition in Contracting Act for the
Job Corps Center procurements, the DOL was acting in
compliance with its own regulations.
4 As in Res-Care, because the court finds the Work-
force Investment Act unambiguous as to this issue, a
Chevron prong-two analysis is unnecessary. See Res-
Care, 735 F.3d at 1387 n.3.
ADAMS AND ASSOCIATES, INC. v. US 11
Adams argues, however, that the DOL’s regulations
are “unauthorized and unenforceable” because the “DOL
lacked any delegation of authority to interpret [the Work-
force Investment Act].” Appellant’s Br. (Adams I) 31–32,
36; see Appellant’s Br. (Adams II) 15, 32. Relying on
Chevron, Adams contends that the DOL’s interpretation
of the Workforce Investment Act is not entitled to defer-
ence and the DOL was not permitted to determine that
small business set-asides are permissible under the
Workforce Investment Act.
The DOL derived its authority to promulgate regula-
tions under the Workforce Investment Act from two
statutory sources. First, the Workforce Investment Act
itself provides “[t]he Secretary may . . . prescribe rules
and regulations to carry out this chapter only to the
extent necessary to administer and ensure compliance
with the requirements of this chapter.” 29 U.S.C. § 2939.
Adams believes this language indicates that “Congress
intended to severely limit DOL’s ability to interpret [the
Workforce Investment Act] or in any way alter [the Work-
force Investment Act’s] legislative or policy schemes.”
Appellant’s Br. (Adams I) 33 (citations omitted); Appel-
lant’s Br. (Adams II) 31 (citations omitted). Second,
Congress granted the DOL the authority to promulgate
regulations to facilitate the transition to the new frame-
work established by the Workforce Investment Act. 20
U.S.C. § 9276(c) (“The Secretary . . . shall take such
actions as the Secretary determines to be appropriate to
provide for the orderly transition from any authority
under the Job Training Partnership Act . . . to the work-
force investment systems established under the [Work-
force Investment Act].”). Adams asserts that, to the
extent the DOL’s regulations were promulgated pursuant
to 20 U.S.C. § 9276(c), the regulations are ultra vires
because they were promulgated after the deadline Adams
believes was established by § 9276(c).
12 ADAMS AND ASSOCIATES, INC. v. US
Adams offers no support for its interpretation of the
statutory grant of rulemaking authority to the DOL in the
Workforce Investment Act as one denying substantive
rulemaking authority. This court perceives no ambiguity
in this authority which would require moving beyond a
Chevron prong-one analysis. The Workforce Investment
Act explicitly authorizes the Secretary to prescribe rules
and regulations to administer the Job Corps Center
procurement system. While the provision does state that
the rulemaking authority is limited “only to the extent
necessary to administer and ensure compliance with the
requirements of this chapter,” 29 U.S.C. § 2939, establish-
ing procurement procedures is necessary to administering
the Job Corps Centers. Adams has identified no provision
of the DOL’s regulations that is unnecessary “to adminis-
ter and ensure compliance with the requirements of [the
Workforce Investment Act].” Id. The regulations direct-
ing the DOL to apply the procurement procedures of the
Small Business Act and the Competition in Contracting
Act were properly promulgated.
As to the statutory authority in 20 U.S.C. § 9276, Ad-
ams is correct that the statute says the DOL should
publish its transition regulations by December 31, 1999,
and the DOL did not publish them until August 11, 2000.
See Adams I, 109 Fed. Cl. at 352. The DOL treated the
deadline as a goal, and “not a pre-condition to mainte-
nance of rule-writing authority,” and it provided a rea-
sonable explanation for the delay. Id. The regulations
fully comply with the Workforce Investment Act and
enabled the DOL to transition to its new framework,
including establishing Job Corps Centers. To the extent
the effect of this deadline creates an ambiguity in the
statutory grant of rulemaking authority, under a Chevron
prong-two analysis, the DOL’s interpretation of its au-
thority was reasonable. This is not a case where the
enforcement of a regulation is squarely at odds with the
statutory requirements. See Schism v. United States, 316
ADAMS AND ASSOCIATES, INC. v. US 13
F.3d 1259, 1285 (Fed. Cir. 2002). Accordingly, the DOL
promulgated its regulations within the discretion of its
rulemaking authority.
IV. The DOL Properly Applied the “Fair Proportion”
Determination of the Federal Acquisition Regulation
Adams also argues that, even if the Federal Acquisi-
tion Regulation was applicable to these procurements, the
DOL did not apply the Regulation correctly. To Adams,
“the plain language of [Federal Acquisition Regulation §]
19.502-1 . . . explicitly includes two requirements for
setting aside acquisitions: the ‘fair proportion’ determina-
tion and the Rule of Two.” Appellant’s Br. (Adams I) 19;
Appellant’s Br. (Adams II) 16. As applied to Gadsden and
Shriver, Adams contends that the contracting officer was
required to make a threshold “fair proportion” determina-
tion before applying the Rule of Two.
The Federal Acquisition Regulation provides
(a) The contracting officer shall set aside an indi-
vidual acquisition or class of acquisitions for com-
petition among small businesses when—
(1) It is determined to be in the interest of main-
taining or mobilizing the Nations full productive
capacity, war or national defense programs; or
(2) Assuring that a fair proportion of Government
contracts in each industry category is placed with
small business concerns; and the circumstances
described in 19.502-2 or 19.502-3(a) [i.e., the Rule
of Two] exist.
48 C.F.R. § 19.502-1(a)(1)–(2) (emphases added). Trans-
posing the language of subsection (a)(1) of the Regulation
onto subsection (a)(2), Adams reads the provision as: “a
[contracting officer] shall set aside an individual acquisi-
tion when, and only when, (1) ‘it is determined . . . to be in
the interest of assuring a fair proportion of Government
14 ADAMS AND ASSOCIATES, INC. v. US
contracts in each industry category is placed with small
business concerns;’ and (2) ‘the circumstances described
in 19.502-2 [i.e., the Rule of Two] . . . exist.’” Appellant’s
Br. (Adams I) 39; Appellant’s Br. (Adams II) 36. Adams
grounds its argument in the conjunctive use of and within
subsection (a)(2), which suggests to Adams that each step
must be performed by a contracting officer in sequence.
Adams implies it was improper for the DOL to make the
“fair proportion” determination and the “Rule of Two”
determination at two different agency levels.
To reach its interpretation, Adams had to rephrase
the Federal Acquisition Regulation. That formulation is
refuted by the plain language of the Regulation. Adams’s
interpretation of the Federal Acquisition Regulation also
finds no support in the Small Business Act, from which
the “fair proportion” language originated:
To effectuate the purposes of this chapter, small-
business concerns within the meaning of this
chapter shall receive any award or contract or any
part thereof . . . as to which it is determined by
the Administration and the contracting procure-
ment or disposal agency . . . to be in the interest
of assuring that a fair proportion of the total pur-
chases and contracts for property and services for
the Government in each industry category are
placed with small business concerns. . . . These
determinations may be made for individual
awards or contracts or for classes of awards or
contracts.
15 U.S.C. § 644(a) (emphasis added). The “fair propor-
tion” determination is to be made “by the Administration
and the contracting procurement or disposal agency” and
“may be made for individual awards or contracts or for
classes of awards or contracts.” Id. (emphases added).
The plain language of the statute repudiates Adams’s
suggestion that the “fair proportion” determination is part
ADAMS AND ASSOCIATES, INC. v. US 15
of a two-part process executed by a contracting officer.
There is no indication in the Small Business Act that the
“fair proportion” determination must be made on a con-
tract-specific basis.
Here, the DOL conducted market research to assess
the interest among small businesses in bidding on the
contracts, applied the appropriate NAICS size standard,
and received the endorsement of the Office of Small and
Disadvantaged Business Utilization as part of its “fair
proportion” determination. The Court of Federal Claims
correctly concluded that the DOL had satisfied the “fair
proportion” determination. Adams I, 109 Fed. Cl. at 355
(“The mechanisms contemplated by [15 U.S.C. §] 644—
goal setting by the Executive Branch, input from the
[Office of Small and Disadvantaged Business Utilization],
and the industry specific application of size standards by
[the Office of Management and Budget] and the [Small
Business Administration]—were implemented. . . .
[N]othing more was required to satisfy the ‘fair propor-
tion’ requirement.”). It was then left to the Contracting
Officer to perform the Rule of Two analysis based on the
results of the RFIs.
Notably, Adams has not articulated a means by which
an individual contracting officer would make a “fair
proportion” determination in the context of a specific
procurement. While Adams is correct that the DOL must
make a “fair proportion” determination prior to designat-
ing a contract as a small business set-aside, the method it
proposes for doing so is without support. The DOL
properly employed a method that comports with the Small
Business Act; therefore, its decision was not arbitrary,
capricious, an abuse of discretion, or otherwise not in
accordance with law, and must be sustained. 5 U.S.C.
§ 706(2)(A).
16 ADAMS AND ASSOCIATES, INC. v. US
V. The DOL Properly Applied the Rule of Two Analysis
Finally, Adams argues that, if it was permissible for
the DOL to use the “Rule of Two” framework, the DOL did
not apply it correctly to these procurements. As noted,
the Rule of Two states that the “contracting officer shall
set aside any acquisition over $150,000 for small business
participation when there is a reasonable expectation that:
(1) Offers will be obtained from at least two responsible
small business concerns . . . ; and (2) Award will be made
at fair market prices.” 48 C.F.R. § 19.502-2(b) (emphases
added). To Adams, this Rule “requires two separate, but
inter-related, decisions—one as to responsibility, and one
as to a form of price reasonableness.” Appellant’s Br.
(Adams I) 50; Appellant’s Br. (Adams II) 45. Adams
argues that the DOL eliminated the responsibility and
fair market price requirements because the contracting
officer did not perform the depth of research Adams
contends is required.
Adams’s reading of the Rule of Two ignores that “a
reasonable expectation” that at least two responsible
small businesses will submit bids at fair market prices is
all that is required. Here, through the RFI process, the
DOL performed market research about the level of inter-
est from small businesses in bidding on the Shriver and
Gadsden contracts. It then determined from the respons-
es that there was a reasonable expectation that at least
two responsible small businesses would make offers for
the operation of each of the Centers.
To Adams, “the issue here is that the market research
. . . must generate the information necessary to address
the expressly required responsibility and price reasona-
bleness legal elements of the Rule of Two.” Appellant’s
Br. (Adams I) 51; Appellant’s Br. (Adams II) 46. Accord-
ing to Adams, the required information is identified in
another part of the Federal Acquisition Regulation per-
taining to determining whether a prospective contractor is
ADAMS AND ASSOCIATES, INC. v. US 17
“responsible” before awarding a contract to that contrac-
tor. These factors include capability, capacity, and past
performance. 48 C.F.R. § 9.104-1. Adams contends that
only by collecting information related to these factors can
the DOL meet the requirements of the Rule of Two.
Adams conflates a set-aside determination with a re-
sponsibility determination made pursuant to § 9.104-1;
the former determines whether there is a reasonable
expectation that at least two responsible small businesses
will make an offer at fair market prices, while the latter
determines whether an individual contractor is responsi-
ble in the context of awarding a contract. As the lower
court noted, a set-aside determination requires only that
the contracting officer have a reasonable expectation that
likely small business offerors will survive a future respon-
sibility determination. The DOL was not required to
impose the requirements of the contractor-selection
process onto the small business set-aside determination,
and it properly applied the Rule of Two. Because its
decision was not arbitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with law, it will not
be disturbed. 5 U.S.C. § 706(2)(A).
CONCLUSION
Accordingly, the Court of Federal Claims’ decisions
are affirmed.
AFFIRMED