Kwv, Incorporated v. United States ( 2013 )

In the United States Court of Federal Claims
No. 12-882C
(Filed Under Seal: May 2, 2013)
(Reissued: May 9, 2013)
)
KWV, INCORPORATED, ) Pre-award bid protest; challenge to
) agency’s disqualification of veteran-
Plaintiff, ) owned small business from participating
) in VA’s Veterans First Contracting
v. ) Program; application of “control” within
) the meaning of 38 C.F.R. § 74.4UNITED STATES, )
)
Defendant. )
)
)
William M. Weisberg, Law Offices of William Weisberg, PLLC, Tysons Corner, VA, for
plaintiff. With him on the briefs were Joyce L. Tong Oelrich and Liana W. Yung, Bryan Cave
LLP, Washington, D.C.
Alexis J. Echols, United States Department of Justice, Washington, D.C., for defendant.
With her on the briefs were Stuart F. Delery, Principal Deputy Assistant Attorney General, Civil
Division, and Jeanne E. Davidson, Director, and Kenneth M. Dintzer, Assistant Director,
Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington,
D.C. Of counsel were Dennis Foley, Counselor to the Assistant General Counsel, and Aleia
Barlow, General Attorney, Office of the General Counsel, United States Department of Veterans
Affairs.
OPINION AND ORDER1
LETTOW, Judge.
This pre-award bid protest is before the court on plaintiff’s motion for judgment upon the
administrative record and the government’s cross-motion for judgment. On February 7, 2012,
plaintiff, KWV, Inc. (“KWV”) was certified for inclusion on the list of qualified veteran-owned
small businesses (“VOSBs”) eligible to participate in the Veteran’s First Contracting Program.
1
Because this opinion and order might have contained confidential or proprietary
information within the meaning of Rule 26(c)(1)(G) of the Rules of the Court of Federal Claims
(“RCFC”) and the protective order entered in this case, it was initially filed under seal. The
parties were requested to review this decision and to provide proposed redactions of any
confidential or proprietary information. No redactions were requested.
This program designates VOSBs and service-disabled veteran-owned small businesses
(“SDVOSBs”) as priority bidders for certain contracting opportunities. After the Department of
Veterans Affairs’ (“VA’s”) Center for Veterans Enterprise (“CVE”) qualified KWV for listing in
2012, KWV bid on and ostensibly won an award of a contract as a VOSB. Thereafter, a losing
bidder lodged a protest against KWV’s qualifications, which protest resulted in an evaluation by
VA’s Office of Small and Disadvantaged Business Utilization (“OSDBU”). OSDBU ultimately
issued a decision in favor of the protestor, holding that KWV “d[id] not meet the status
requirements of a SDVOSB [sic] concern,” and that it was ineligible for the challenged award
and future awards under the Veterans First Contracting Program. AR 570 (Letter from Thomas
Leney to James Maron (Oct. 24, 2012)).2
On December 14, 2012, KWV filed its complaint in this court, seeking reinstatement onto
the VOSB list and restoration of eligibility for Veterans First projects, as well as an injunction
barring VA from awarding contracts upon solicitations on which KWV had submitted bids. The
court granted a temporary restraining order on December 21, 2012, and extended it on January 4,
2013, temporarily rescinding VA’s delisting of KWV from the VOSB database. Subsequently,
the court granted a preliminary injunction setting aside VA’s delisting of KWV and restoring it
to eligibility for VA’s Veterans First Contracting Program. See KWV, Inc. v. United States, 108
Fed. Cl. 448 (2013). Proceedings on the merits were accelerated, with KWV moving for
judgment on the administrative record, and the government cross-moving for the same. A
hearing was held on these motions on March 27, 2013.
FACTS3
KWV is a Rhode Island close corporation organized under the Rhode Island General
Laws § 7-1.2-1701. Compl. ¶ 17. Ownership of KWV is split between James Maron, who owns
60 percent of the issued and outstanding shares, and his two sons and a granddaughter, who own
the remaining 40 percent. Compl. ¶ 18. Mr. Maron is a veteran of the United States Army Corps
of Engineers who served in the Korean War from 1952 until his honorable discharge in 1954.
Compl. ¶ 13. He has more than 50 years of experience in the construction industry, 30 of which
2
“AR __” refers to the administrative record certified by VA and filed with the court in
accord with RCFC 52.1(a).
3
The recitations that follow constitute findings of fact by the court drawn from the
administrative record of the procurement, as well as the parties’ evidentiary submissions
regarding standing, prejudice, and equitable factors. See Bannum, Inc. v. United States, 404
F.3d 1346, 1356 (Fed. Cir. 2005) (bid protest proceedings “provide for trial on a paper
[administrative] record, allowing fact-finding by the trial court”); PGBA, LLC v. United States,
60 Fed. Cl. 567, 568 n.1 (2004) (“It is the responsibility of th[e] [c]ourt, not the administrative
agency [conducting the procurement], to provide for factual proceedings directed toward, and to
find facts relevant to, irreparability of harms or prejudice to any party or to the public interest
through grant or denial of injunctive [or declaratory] relief.”), aff’d, 389 F.3d 1219 (Fed. Cir.
2004); see also Holloway & Co. v. United States, 87 Fed. Cl. 381, 391 n.12 (2009).
2
were spent as a contractor, and studied building construction at the Rhode Island School of
Design for four years. Compl. ¶¶ 15-17; AR 434.
Currently, Mr. Maron’s sole business endeavor is KWV, a company he founded and self-
certified as a VOSB in 2008 as permitted by the Veterans Benefits, Health Care, and Information
Technology Act of 2006 (“Veterans Benefits Act”), Pub. L. No. 109-461, tit. V, 120 Stat. 3403,
3425 (codified at 38 U.S.C. §§ 8127-28). See AR 508-09; AR 513. That Act requires the
Secretary of Veterans Affairs to “give priority to a small business concern owned and controlled
by veterans, if such business concern also meets the requirements of that contracting preference.”
38 U.S.C. § 8128(a). This preference applies only to procurements by VA. See Angelica Textile
Servs., Inc. v. United States, 95 Fed. Cl. 208, 222 (2010). As a self-certified VOSB, KWV won
and performed two or three projects for VA. See AR 508-09. In 2010, VA shifted from a self-
certification scheme to a verification program, and KWV accordingly applied for verification as
a qualified VOSB and inclusion in the VA VetBiz Vendor Information Pages (“VIP”). Compl.
¶ 19. Although KWV’s application was initially denied on September 22, 2011, it was given an
opportunity to cure the perceived defects in the application and request reconsideration, which it
did on October 12, 2011. AR 455-94 (KWV’s Request for Reconsideration). The cited reason
for the original denial of KWV’s application was that KWV’s corporate documents provided for
a controlling board composed of a majority of non-veteran directors. AR 451-52. In its
reconsideration application, KWV demonstrated that the company was, in fact, controlled by
Mr. Maron as the majority shareholder, and that it had amended its corporate documents to
reflect that circumstance. AR 455-94. On February 7, 2012, after reviewing KWV’s revised
documentation, conducting an investigation of the company, and performing a site visit and
interviews, CVE approved KWV’s application for designation as a VOSB and inclusion in the
VIP database for one year. AR 495-515.2, 516-17 (Letter from Dan Friend to Bruce St. John
(Dec. 19, 2011)) (CVE Verification Letter).
At all relevant times during the events underlying this action, Mr. Maron has divided his
time between Florida and Rhode Island, spending just under half of every year in Rhode Island
and the remainder in Florida. AR 540. He is a legal resident of Florida. Id. Mr. Maron was so
situated both during the CVE certification process and previously when KWV was a self-
certified VOSB.
During the period of self-certification, KWV had secured Contract Nos. VA 241-C-1312
and VA523-C07071, AR 508-09, and became eligible to bid on posted solicitations for work on
the Boston Health Care System (“BHS”) project in 2012 after its VOSB certification was granted
by CVE. See Compl. ¶¶ 1, 45. KWV successfully bid on a BHS task order, No. VA241-12-J-
1036 (part of Solicitation No. VA-241-12-R-0563), and was awarded that task order on July 11,
2012. Compl. Ex. 4 (Award Letter from Athena Jackson to Thomas Maron (July 11, 2012)).
Following this award, a competitor, Alares, LLC (“Alares”), filed a formal protest with VA
against KWV. This protest challenged KWV’s status as a VOSB, alleging that Mr. Maron was
not truly in control of the company. AR 518. As evidence of this lack of control, Alares pointed
to Mr. Maron’s Florida residency during the bare majority of each calendar year. AR 519.
Alares posited that Mr. Maron’s two non-veteran sons, David and Thomas Maron, were
effectively in control of KWV. Id.3
Procedurally, Alares’ agency protest was considered by OSDBU, which initiated an
investigation into KWV based upon the protest allegations. This investigation was conducted
entirely through review of documents; OSDBU did not conduct a site visit, nor did it conduct
any interviews with Mr. Maron or any other employee at KWV. Compl. ¶ 53. KWV was given
notice of the protest and responded by submitting a letter of explanation, Mr. Maron’s tax
statements, a deed to a Rhode Island condominium, recent utility bills in his name, KWV’s By-
Laws and Operating Agreement, a copy of the original VA verification letter, and photographs of
KWV’s headquarters in Rhode Island. AR 538-66. The letter of explanation advised that
Mr. Maron resided just over half the calendar year in Florida, with the remainder of the year
being spent at the condominium in Rhode Island. AR 540. KWV’s response averred that, while
Mr. Maron was in Florida, he continued to manage the day-to-day business of KWV by
telephone, e-mail, and other electronic means, and that he traveled to Rhode Island when
necessary to attend meetings and conferences. Id.On October 24, 2012, OSDBU issued a decision concluding that Mr. Maron did not
maintain sufficient control over the day-to-day management of KWV, and it disqualified KWV
from participation in the Veterans First Contracting Program. AR 568-71.4 The protested
contractual award to KWV was terminated, and all of KWV’s pending proposals for other VOSB
projects were disqualified. See AR 571 (“[KWV] cannot submit another offer as a VOSB or
SDVOSB on a future VOSB or SDVOSB procurement under [38 C.F.R. Part 74], as applicable,
unless it demonstrates to VA’s Center for Veterans Enterprise that it has overcome the reasons
for the determination of ineligibility, if it is able, by applying for and receiving verified status in
accordance with 38 C.F.R. Part 74.”); see also Compl. ¶¶ 58-74.
On December 14, 2012, KWV filed its pre-award bid protest in this court, characterizing
OSDBU’s determination as unreasonable and contrary to law, and seeking reinstatement to the
VIP database as a VOSB. The court granted a temporary restraining order and then a
preliminary injunction, setting aside OSDBU’s decision rendering KWV ineligible for awards of
contracts as a VOSB and restoring KWV to the VIP database. See KWV, 108 Fed. Cl. at 458.
As part of the preliminary injunctive relief, the court extended KWV’s period of eligibility by 72
days, until April 22, 2013, to account for days lost from the year of eligibility during the period
of disqualification prior to the preliminary injunction. Id.
JURISDICTION
Jurisdictionally, KWV invokes the third prong of 28 U.S.C. § 1491(b)(1), claiming a
violation of statute or regulation in connection with a procurement or a proposed procurement.
The pertinent provision was added to the Tucker Act by the Administrative Dispute Resolution
Act, Pub. L. No. 104-320, § 12, 110 Stat. 3870, 3874 (Oct. 19, 1996), and provides:
4
This decision was framed in terms of KWV’s having been designated a SDVOSB, rather
than a VOSB. AR 568. This reference was apparently a clerical error, as KWV has never
claimed to be (nor did Alares contest its status as) a SDVOSB. OSDBU issued a correction on
November 19, 2012, acknowledging this error and clarifying that KWV had previously been
certified as a VOSB. AR 567.
4
[T]he United States Court of Federal Claims . . . shall have jurisdiction to render
judgment on 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. . . . [T]he United
States Court of Federal Claims . . . shall have jurisdiction to entertain such an
action without regard to whether suit is instituted before or after the contract is
awarded.
28 U.S.C. § 1491(b)(1) (emphasis added); see also Rothe Dev., Inc. v. United States Dep’t of
Def., 666 F.3d 336, 338 (5th Cir. 2011) (“[T]he Court of Federal Claims now retains exclusive
jurisdiction over ‘action[s] by an interested party’ ‘objecting to . . . any alleged violation of
statute or regulation in connection with a procurement or a proposed procurement.’” (quoting 28
U.S.C. § 1491(b)(1))).
KWV’s position is that VA’s inconsistent application of 48 C.F.R. § 819.307 (governing
VOSB status protests) and 38 C.F.R. Part 74 (VA’s “Veterans Small Business Regulations”)
amounts to a violation of its own procurement regulations. Section 74.3 of 38 C.F.R. Part 74
details the standards for CVE’s evaluation of VOSB applicants, and these eligibility standards
are explicitly incorporated into the Veterans Affairs Acquisition Regulation System (“VAAR”)
provisions which govern SDVOSB and VOSB status protests with OSDBU. See 48 C.F.R.
§ 819.307(c).5 By noting inconsistencies in VA’s application of identical regulations at different
stages of the procurement process, KWV alleges violation of a regulation in connection with a
procurement, properly invoking this court’s bid protest jurisdiction. See RAMCOR Servs. Group,
Inc. v. United States, 185 F.3d 1286, 1289 (Fed. Cir. 1999) (Ҥ 1491(b) . . . does not require an
objection to the actual contract procurement. . . . As long as a statute has a connection to a
procurement proposal, an alleged violation suffices to supply jurisdiction.”); Angelica Textile
Servs., 95 Fed. Cl. at 215 (“The phrase ‘in connection with’ is very sweeping in scope.”
STANDARDS FOR DECISION
The court reviews a challenge to an agency’s actions in connection with a procurement
under the Administrative Procedure Act, 5 U.S.C. § 706. See 28 U.S.C. § 1491(b)(4) (“In any
action under this [S]ubsection, the courts shall review the agency’s decision pursuant to the
standards set forth in [S]ection 706 of title 5.”). The court may set aside the agency decision if it
is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5
U.S.C. § 706(2)(A), assuming the criteria for equitable relief are satisfied, see PGBA, LLC v.
United States, 389 F.3d 1219, 1224-28 (Fed. Cir. 2004). “[If] the procurement official’s decision
lacked a rational basis; or . . . the procurement procedure involved a violation of regulation or
procedure,” then the court may rescind the agency’s decision. Impresa Construzioni Geom.
Domenico Garufi v. United States, 238 F.3d 1324, 1332 (Fed. Cir. 2001); see also Superior
Helicopter, LLC v. United States, 78 Fed. Cl. 181, 187 (2007).
5
The VAAR are set out in 48 C.F.R. Parts 801-873.
5
In conducting its review, the court may not “substitute its judgment for that of the
agency,” Keeton Corrs., Inc. v. United States, 59 Fed. Cl. 753, 755 (2004) (quoting Citizens to
Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), abrogated in part by Califano v.
Sanders, 430 U.S. 99, 105 (1977) (abrogating Overton Park to the extent it recognized the APA
as an independent grant of subject matter jurisdiction)). It may only set aside the agency’s
decision if it determines that the “decision was [not] based on a consideration of the relevant
factors [or] there has been a clear error of judgment.” Overton Park, 401 U.S. at 416.
Upon a showing of such a clear error of judgment, the court may award “declaratory and
injunctive relief” to an injured protestor. 28 U.S. § 1491(b)(2). Monetary relief is “limited to
bid preparation and proposal costs.” Id. The determination of whether a permanent injunction is
appropriate is made by the court after consideration of the four factors traditionally applied
respecting equitable relief. See Centech Grp., Inc. v. United States, 554 F.3d 1029, 1037 (Fed.
Cir. 2009) (citing PGBA, 389 F.3d at 1228-29). The factors are quoted infra, at 9.
ANALYSIS
A. Statutory and Regulatory Framework
At the inception of the Veterans First Contracting Program in 2007, VA allowed VOSB
and SDVOSB entities to self-certify themselves for registration in the VIP database. With the
adoption of statutory amendments now set forth at 38 U.S.C. § 8127(e) and (f), which detail the
Secretary of the Department of Veterans Affairs’ responsibilities for maintaining the VIP
database, self-certification was replaced by a certification process administered by CVE. See
VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned
Small Businesses, 74 Fed. Reg. 64,619-01 (Dec. 8, 2009) (codified at 48 C.F.R. Parts 802, 804,
808, 809, 810, 813, 815, 817, 819 and 852) (effective Jan. 7, 2010); 75 Fed. Reg. 6098-01 (Feb.
8, 2010) (codified at 38 C.F.R. Part 74 (effective Feb. 8, 2010). Certification through CVE
became mandatory, even for VOSBs and SDVOSBs like KWV that had previously self-certified
without incident. VIP eligibility is governed by 38 C.F.R. Part 74, but CVE-approved
certifications may be challenged by way of an agency-level bid protest, as provided in 48 C.F.R.
§ 819.307. Such agency-level protests are handled by OSDBU. Id.Both the initial certification by CVE and any protest-initiated review by OSDBU are
governed by the same standards respecting ownership and control. Those standards are set out in
Part 74, which in turn are incorporated by reference into Part 819 for “ownership and control
issues.” 48 C.F.R. § 819.307. Section 74.4(a) defines control as “the day-to-day management
and long-term decision-making authority for the VOSB.” Specifically, control “include[es] both
the strategic policy setting exercised by boards of directors and the day-to-day management and
administration of business operations . . . . Individuals managing the concern must have
managerial experience of the extent and complexity needed to run the concern.” 38 C.F.R.
§ 74.4(b).
CVE is empowered to revoke certification of VOSB status if it “believes that a
participant’s verified status should be cancelled prior to expiration of its eligibility term.” 38
C.F.R. § 74.22(a). In revocation proceedings, CVE must provide notice to the concern, which is
6
then allowed thirty days to respond to the issues identified by CVE. 38 C.F.R. § 74.22(a) and
(b). Thereafter, CVE must issue a decision describing the specific facts and reasoning which
drive the result. 38 C.F.R. § 74.22(c). The concern may administratively appeal a decision by
CVE. 38 C.F.R. § 74.22(e).
Consideration of VOSB status through a bid protest, rather than via CVE reconsideration,
is procedurally less defined. The VAAR states that protests “must be in writing and state
specific grounds for the protest.” 48 C.F.R. § 819.307(c)(1). Timing constraints are put on the
protestor (protests must be filed on or before the fifth business day after bid opening, or
notification by the contracting officer of the successful offeror), but no timelines are set for
consideration of the protest by OSDBU or for the protested awardee to respond. See 48 C.F.R.
§ 819.307(c)(2). Indeed, opportunity to respond to a protest is not explicitly provided in the
regulation; however, basic due process considerations must apply, and the protested awardee is
in practice given an opportunity to respond. See Miles Constr., LLC v. United States, 108 Fed.
Cl. 792, 796, 803-05 (2013) (noting that an awardee was given a week by OSDBU to respond to
a protest and approving OSDBU’s discretion to expand the grounds for the protest beyond those
raised by the protestor, but ruling that the awardee had to be given notice of the expanded
grounds under the due process protections afforded by 5 U.S.C. § 555).
B. OSDBU’s Action
KWV contends that OSDBU’s decision to revoke its VOSB status was arbitrary and
contrary to law because of the inconsistent application of functionally identical guidelines by
CVE and OSDBU. See Pl.’s Mem. in Support of Mot. for Judgment on the Admin. Record
(“Pl.’s Mem.”) at 19. The government responds that there is no inconsistency between the CVE
and OSDBU determinations because OSDBU had access to more information than did CVE —
namely, the fact that Mr. Maron spent a significant portion of each year in Florida. Def.’s Mot.
for Judgment upon the Admin. Record and Resp. to Pl.’s Mot. for Judgment upon the Admin.
Record (“Def.’s Cross-Mot.”) at 16.
OSDBU conducted a review which, in comparison to that performed by CVE, was
perfunctory. CVE had analyzed KWV’s corporate and business documentation and conducted a
site visit and an in-person interview with Mr. Maron and other employees. See AR 495-515.2
(Letter from Dan Friend to Bruce St. John (Dec. 19, 2011)); AR 1-159 (Initial Application for
CVE Verification). OSDBU, however, confined its consideration to review of a paper record
consisting of CVE’s result and Alares’ protest, plus Mr. Maron’s response. See Hr’g Tr. 23:8 to
24:3 (Mar. 27, 2013).6
Residency is not identified as an element of “control” for purposes of Part 74.
Nonetheless, OSDBU focused specifically and solely on that fact as being dispositive as a matter
of law, stating that “OSDBU finds that [Mr. Maron is] unable to manage the day-to-day
operations of KWV while residing in Florida.” AR 570. In its decision, OSDBU did not address
6
Mr. Maron’s residency and time in Florida versus Rhode Island are not disputed. For
purposes of this decision, the court will assume without deciding that his residential
circumstances were not known to CVE.
7
any of those factors that 38 C.F.R. § 74.4 does identify as being relevant to control, viz.,
“strategic policy setting,” “day-to-day management and administration of business operations,”
and “managerial experience of the extent and complexity needed to run the concern.” 38 C.F.R.
§ 74.4(b). Apart from addressing residency, OSDBU’s decision largely consists of reciting
regulatory provisions of Parts 819 and 74 and Alares’ allegations. AR 568-71. OSDBU’s
reliance on Mr. Maron’s residency as a basis for revoking VOSB status in effect treats that fact
as requiring a decision as a matter of law, wholly apart from other factors.
As to law, OSDBU cites a decision by the Small Business Administration’s (“SBA’s”)
Office of Hearings and Appeals (“OHA”). See AR 570 (citing Matter of First Capital Interiors,
Inc., SBA No. VET-112, at 8, 2007 WL 2438401 (2007)). OSDBU’s reliance on this case as
support for treating residency to be dispositive is misplaced. First Capital is distinguishable
from the present case in several significant respects: (1) the First Capital veteran did not have
prior management experience, while Mr. Maron does; (2) the First Capital veteran maintained
two other jobs, while KWV is Mr. Maron’s sole business endeavor; (3) the First Capital veteran
permanently resided three time zones away from the company in question, while Mr. Maron
resides at all times in the same time zone, and for almost half of the year, the same state and
locality, as KWV’s sole office. First Capital , 2007 WL 2438401, at *1, **7-8. Instructively,
SBA in First Capital had explicitly rejected the notion that distance alone is determinative of
control. Id. at *7.
In contrast to OSDBU’s approach, the CVE reviewer had addressed a range of
considerations bearing on management and control. He concluded that Mr. Maron was
responsible for “overseeing projects,” “came to the office as needed,” and was “always in
communication” with KWV. AR 515.1-15.2 (Handwritten Notes of CVE Reviewer). Mr.
Maron worked forty hours a week, whereas his non-veteran sons (whom Alares alleged to have
been managing KWV in fact) were both noted as working fewer than ten hours each week for
KWV. Id. In this respect, the CVE reviewer specifically noted that Mr. Maron’s son, David,
had “[n]o bid involvement” and “no day-to-day management” responsibilities. AR 515.2.
Additionally, KWV’s response to the Alares protest reiterated Mr. Maron’s involvement
in the day-to-day management of KWV even while he was present in Florida, citing methods of
communication such as telephone, e-mail, and other electronic means. AR 538-66 (KWV’s
Response to Protest). OSDBU did not take those means of communication and control into
account in focusing solely on residency. During the argument on the pending motions, the
government’s counsel endeavored to address this gap by noting the lack of “any evidence
supporting [KWV’s] position that Mr. Maron used telecommunication to control the day-to-day
operations of the business” during the times he was in Florida rather than Rhode Island. Hr’g Tr.
17:19-22. However, OSDBU did not express any interest in examining the details of
Mr. Maron’s communications. In short, OSDBU never purports in its decision to have
investigated or determined the actual level of control exercised by Mr. Maron.
Aside from OSDBU’s misplaced reliance on Mr. Maron’s residency as the determinative
factor for control, there is nothing in the administrative record to suggest that Mr. Maron was not
exercising sufficient control over KWV. In the circumstances, the court concludes that the
government has not “‘provided a coherent and reasonable explanation of its exercise of
8
discretion,’” Impresa Construzioni Geom. Domenico Garufi, 238 F.3d at 1333 (quoting
Latecoere Int’l, Inc. v. United States Dep’t of the Navy, 19 F.3d 1342, 1356 (11th Cir. 1994)),
nor articulated a “‘rational connection between the facts found and the choice made,’” Motor
Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting
Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). Accordingly, the court finds
that OSDBU’s determination disqualifying KWV was arbitrary and capricious, and not in
accordance with VA’s regulations.
C. Prejudice
“To prevail in a bid protest, a disappointed offeror must show both significant error in the
procurement process and prejudice to its posture in the process.” PGBA, LLC v. United States,
60 Fed. Cl. 196, 203 (2004) (citing Advanced Data Concepts, Inc. v. United States, 216 F.3d
1054, 1057 (Fed. Cir. 2000)), aff’d, 389 F.3d 1219. KWV must demonstrate a “substantial
chance” that it would have received contractual awards absent the error. Banknote Corp. of Am.
v. United States, 365 F.3d 1345, 1351 (Fed. Cir. 2004). This aspect of the analysis may be
dispatched easily; KWV was, in fact, awarded a task order as a VOSB. Compl. Ex. 4 (Award
Letter from Athena Jackson to Thomas Maron (July 11, 2012)). Moreover, when OSDBU
revoked KWV’s VOSB status, it was disqualified from the Veterans First Contracting Program
and lost the opportunity to bid on other contracts and task orders. See AR 571 (“[KWV] cannot
submit another offer as a VOSB or SDVOSB on a future VOSB or SDVOSB procurement under
[38 C.F.R. Part 74].” KWV has demonstrated sufficient prejudice.
D. Relief
When determining whether to issue a permanent injunction, “the court must consider
whether (1) the plaintiff has succeeded on the merits, (2) the plaintiff will suffer irreparable harm
if the court withholds injunctive relief, (3) the balance of hardships to the respective parties
favors the grant of injunctive relief, and (4) the public interest is served by a grant of injunctive
relief.” Centech Grp., 554 F.3d at 1037. If all four criteria are satisfied, the court may award
declaratory or injunctive relief that is appropriate in the circumstances. See 28 U.S.C.
§ 1491(b)(2).
KWV has succeeded on the merits of its protest, and it has demonstrated that revocation
of its status as a VOSB constitutes irreparable harm by barring it from participation in the
Veterans First Contracting Program. The government counters that VA will be harmed by a
grant of injunctive relief to KWV because setting aside the OSDBU determination will
“compromis[e] the integrity of the VA procurement process” and “frustrate[] the purpose of the
Veterans First set-aside program.” Def.’s Cross-Mot. at 23. To the contrary, however, setting
aside the OSDBU decision will eliminate an arbitrary and capricious precedent and serve the
purpose of the Veterans First set-aside program — that of providing eligible veterans with
priority contracting opportunities. The balance of hardships thus weighs in favor of granting a
permanent injunction. Correlatively, the public has a strong interest in a fair and competitive
procurement process, which is best served by ensuring that the government complies with
regulations governing procurement programs. See Wackenhut Servs. Inc. v. United States, 85
Fed. Cl. 273, 312 (2008); Hunt Bldg. Co. v. United States, 61 Fed. Cl. 243, 280 (2004). By
9
assuring that OSDBU decisions comport with the regulations meant to be applied by VA in
determining VOSB eligibility, that public interest will be served.
CONCLUSION
For the reasons stated, KWV’s motion for judgment on the administrative record is
GRANTED IN PART, and the government’s motion to dismiss or, in the alternative, cross-
motion for judgment on the administrative record is DENIED. OSDBU’s decision dated October
24, 2012, rendering KWV ineligible for awards of contracts as a VOSB, is set aside. VA shall
restore KWV to the VIP database as an eligible VOSB concern for the remainder of its period of
eligibility.7 The clerk shall enter judgment in accord with this disposition.
No costs.
It is so ORDERED.
s/ Charles F. Lettow
Charles F. Lettow
Judge
7
In granting a preliminary injunction, the court extended KWV’s year-long verified
eligibility to April 22, 2013, to account for the days it was wrongfully excluded from the VIP
database. See KWV, 108 Fed. Cl. at 458. Although KWV’s initial certification was granted with
a one-year term, AR 516, the controlling regulation has since been amended to reflect a two-year
duration for all verifications, see 38 C.F.R. § 74.15(a) (effective June 27, 2012). Accordingly,
the court reinstates KWV’s VOSB status and extends eligibility to an expiration date of April 22,
2014.
10