Res-Care, Inc. v. United States

United States Court of Appeals
for the Federal Circuit
______________________
RES-CARE, INC.,
Plaintiff-Appellant,
v.
UNITED STATES,
Defendant-Appellee.
______________________
2013-5035
______________________
Appeal from the United States Court of Federal
Claims in No. 12-CV-0251, Senior Judge Eric G.
Bruggink.
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Decided: November 21, 2013
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JONATHAN D. SHAFFER, Smith Pachter McWhorter
PLC, of Tysons Corner, Virginia, argued for plaintiff-
appellant. With him on the brief was MARY PAT
BUCKENMEYER. Of counsel were JOHN S. PACHTER, and
ARMANI VADIEE, of Vienna, Virginia.
AMANDA L. TANTUM, Trial Attorney, Commercial
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 PATRICIA M. MCCARTHY,
2 RES-CARE, INC. v. US
Assistant Director. Of counsel on the brief were DAVID R.
KOEPPEL, and PETER J. DICKSON, Attorney’s, United
States Department of Labor, of Washington, DC.
______________________
Before NEWMAN, PLAGER, and CHEN, Circuit Judges.
CHEN, Circuit Judge.
This case turns on the interpretation of the phrase
“competitive basis” in the Workforce Investment Act
(“WIA”). See 29 U.S.C. § 2887(a)(2)(A). Res-Care, Inc.
(“Res-Care”) appeals the decision of the United States
Court of Federal Claims (“Claims Court”) interpreting the
statute as permitting the United States Department of
Labor (“DOL”) to select a contractor for the Blue Ridge
Job Corps Center (“Blue Ridge”) program through a set-
aside for small businesses. For the reasons set forth
below, we affirm.
BACKGROUND
Under WIA, DOL administers a national Job Corps
program that provides education, training, and support
services to help at-risk youth obtain employment.
29 U.S.C. §§ 2881, 2884. There are 125 Job Corps
Centers (“JCCs”) across the nation, including Blue Ridge
in Marion, Virginia, which Res-Care has operated since
1998.
In December 2011, DOL published a Sources Sought
Notice for a Request for Information (the “Request”)
seeking information from potential bidders on an
upcoming procurement for the operation of Blue Ridge.
At the time, Res-Care was operating Blue Ridge under a
contract that expired on March 31, 2013. The Request
invited “[a]ll interested parties” to submit a response but
specifically encouraged firms that qualify as small
businesses to respond with a “capabilities statement” that
demonstrated their ability to operate the facility
RES-CARE, INC. v. US 3
successfully. In response to the Request, one large
business and four small businesses submitted capabilities
statements. Res-Care, a large business, did not respond
to the Request.
Based on the responses, a DOL contracting officer
found the large business and two of the four small
businesses capable of operating Blue Ridge. In her
review, the contracting officer considered twelve relevant
areas of experience and the financial resources of each
business. She specifically found that both small
businesses were capable under “all of the capability areas
identified in the [Request].” J.A. 3063. In particular, she
found that, based on the responses from the two capable
small businesses, DOL would likely receive bids (1) from
at least two responsible small businesses and (2) at fair
market prices. Because both of these requirements of
Federal Acquisition Regulation (“FAR”), 38 C.F.R.
§ 19.502-2(b) (the so-called “Rule of Two”), had been met,
the contracting officer recommended conducting the Blue
Ridge contract selection as a small business set-aside.
DOL subsequently issued a presolicitation notice
indicating that the next Blue Ridge contract, with a value
of $25 million, would be solicited as a “100% Set-Aside for
Small Business” for the two-year base period beginning
April 1, 2013, with three unilateral option years.
On April 18, 2012, Res-Care filed its bid protest with
the Claims Court alleging, inter alia, that DOL violated
WIA by setting aside the Blue Ridge contract for small
businesses. 1 Section 2887 of WIA describes how entities
1 Using the North American Industry Classification
System (“NAICS”), the contracting officer designated the
Blue Ridge contract under NAICS code 611519. NAICS
codes are used for classifying economic activities or
industries according to size and revenue. Under NAICS
code 611519, Blue Ridge could be awarded only to
4 RES-CARE, INC. v. US
are selected for managing JCCs. 29 U.S.C.
§ 2887(a)(2)(A). It provides that DOL shall select entities
“on a competitive basis,” but enumerates certain
exceptions set forth in 41 U.S.C. § 3304(a)–(c) of the
Competition in Contracting Act (“CICA”). Id. The
exceptions in § 3304(a)–(c) describe instances in which the
government may award a contract on a noncompetitive
basis. Res-Care argued that setting aside the Blue Ridge
contract for small businesses violated the “competitive
basis” provision in § 2887.
Before the Claims Court, Res-Care sought to
supplement the administrative record with a declaration
of its Executive Vice-President of Operations, Richard
Myers (the “first Myers declaration”), and with a report
entitled “Analysis of Small Business Contracting in Job
Corps” (the “Rell & Doran Report”). Based on assorted
criteria, the report concluded that large businesses
outperform small businesses in administering JCCs. The
Claims Court denied Res-Care’s request to supplement
the administrative record with the Rell & Doran Report
but admitted the first Myers declaration for the sole
purpose of evaluating whether Res-Care was entitled to
injunctive relief. Res-Care, Inc. v. United States, No. 12-
251 C, slip. op. at 1 (Fed. Cl. July 11, 2012).
On the parties’ cross-motions for judgment on the
administrative record, 2 the Claims Court denied Res-
businesses with annual receipts under $35.5 million. Res-
Care’s annual receipts exceed this cap, and therefore, Res-
Care could not compete for the Blue Ridge contract under
the set-aside.
2 In its motion, Res-Care sought to supplement the
administrative record with a second declaration of
Richard Myers (the “second Myers declaration”), which
the Claims Court denied. Res-Care, Inc. v. United States,
107 Fed. Cl. 136, 138 (2012).
RES-CARE, INC. v. US 5
Care’s motion and granted the government’s motion,
dismissing the case. The court determined that the
phrase “competitive basis” in WIA did not mean “full and
open competition,” reasoning that the ordinary meaning
of the phrase simply requires two or more potential
bidders to seek the contract award. Res-Care, Inc. v.
United States, 107 Fed. Cl. 136, 141–42 (2012). On that
basis, the court concluded that WIA did not preclude
small business set-asides in which two or more small
businesses compete for a JCC contract. 3 Id. The court
also found that the contracting officer did not violate the
Rule of Two in setting aside Blue Ridge for small
businesses. Id. at 142.
Res-Care now appeals to this court, reiterating its
contention that WIA does not permit small business set-
asides. We have jurisdiction under 28 U.S.C. § 1295(a)(3).
DISCUSSION
I
We review the grant of a motion for judgment on the
administrative record without deference. Bannum, Inc. v.
United States, 404 F.3d 1346, 1351 (Fed. Cir. 2005). The
first question before this court is one of pure statutory
interpretation: whether WIA’s “competitive basis”
language permits small business set-asides. Because the
underlying issue is a question of statutory interpretation,
it is also subject to review without deference. Mudge v.
United States, 308 F.3d 1220, 1224 (Fed. Cir. 2002).
3 In the alternative, the court determined that, if
WIA was unclear, DOL was entitled to deference in
construing WIA as permitting small business set-asides
under Chevron, U.S.A., Inc. v. Natural Resource Defense
Council, Inc., 467 U.S. 837, 843–45 (1984). Res-Care, 107
Fed. Cl. at 142. Because we find § 2887 unambiguous, we
do not reach this alternative ground.
6 RES-CARE, INC. v. US
The relevant language of § 2887 states:
Except as provided in subsections (a) to (c) of
section 3304 of Title 41, the Secretary shall select
on a competitive basis an entity to operate a Job
Corps center and entities to provide activities
described in this subchapter to the Jobs Corps
center.
29 U.S.C. § 2887(a)(2)(A) (emphasis added).
When interpreting a statute, we begin our analysis
with the language of the statute itself. Info. Tech. &
Applications Corp. v. United States, 316 F.3d 1312, 1320
(Fed. Cir. 2003). “If the statutory language is plain and
unambiguous, then it controls, and we may not look to the
agency regulation for further guidance.” Id. (citing
Chevron, 467 U.S. at 842–43). The meaning of the
language is determined in the pertinent overall statutory
context. U.S. Nat’l Bank of Or. v. Indep. Ins. Agents, 508
U.S. 439, 455 (1993).
To interpret the term “competitive basis,” we presume
that the term has its ordinary and established meaning.
See Info. Tech., 316 F.3d at 1320. As WIA does not define
“competitive basis,” 4 we may refer to dictionary
definitions to determine the ordinary meaning of an
undefined statutory term. Id. “Competitive” is defined as
“characterized by, arising from, or designated to exhibit
rivalry among two or more equally matched individuals or
forces especially for a particular goal, position or reward,”
and as “involving, or determined by competition.” See
4 CICA also does not define “competitive basis” but
provides a definition for “competitive basis procedures” in
the context of “an individual purchase of property or
services” made under a multiple-award contract. See 41
U.S.C. § 3302(c)(2). That definition sheds no light on the
issue before us, and neither party relies on it.
RES-CARE, INC. v. US 7
Res-Care, 107 Fed. Cl. at 141 (quoting Webster’s II New
Riverside Univ. Dict. 290 (1984)). “Competition” means a
“rivalry between two or more businesses striving for the
same customers or market.” Id. Neither definition
mandates an unencumbered contest open to the entire
realm of all possible bidders. 5 Authorized selection
criteria may circumscribe the range of permitted rivals.
Here, Congress clearly viewed the use of set-asides for
small businesses as “competitive” as indicated by the
CICA. See 41 U.S.C. § 3303(b) (providing that
“competitive procedures” shall be used for small business
set-asides); 41 U.S.C. § 152(4) (defining “competitive
procedures” to include competition limited to further
Small Business Act). A selection process confined to
multiple small businesses bidding to operate a JCC thus
satisfies the statutory “competitive basis” requirement.
Res-Care argues for an alternate construction of this
language. In Res-Care’s view, WIA must be read in
conjunction with CICA, which requires “full and open
competition” in the government procurement process,
“[e]xcept as provided in sections 3303, 3304(a), and 3305”
of Title 41. See 41 U.S.C. § 3301(a)(1). Those three
exceptions contemplate (1) a small business set-aside
exception to CICA’s “full and open competition”
requirement (§ 3303(b)), (2) examples where the
government may use “noncompetitive procedures”
(§ 3304), and (3) simplified procedures for small purchases
(§ 3305). Because WIA’s § 2887 incorporates only one
5 We see no merit in Res-Care’s argument that the
list of “eligible entities” for operating a JCC 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. As explained above, the
“selection process” set forth in § 2887(a)(2) only requires it
to be on “a competitive basis.”
8 RES-CARE, INC. v. US
“exception” from CICA (§ 3304) and no others, such as
§ 3303(b)’s authorization of small business set-asides,
Res-Care argues that the plain meaning of WIA dictates
that § 3304 is the only exception allowed by the statute.
Under that interpretation, DOL would lack the flexibility
and discretion to use small business set-asides in
administering WIA and instead must always hold full,
open, and unfettered competition among all possible
competitors—except in the very special cases when § 3304
applies.
WIA’s plain language, however, requires rejection of
Res-Care’s argument. In § 2887, Congress did not borrow
the “full and open competition” phrase from CICA.
Instead, § 2887 simply states that selection of a JCC
contractor shall occur “on a competitive basis.” A cardinal
doctrine of statutory interpretation is the presumption
that Congress’s “use of different terms within related
statutes generally implies that different meanings were
intended.” 2A Norman Singer, Statutes and Statutory
Construction § 46.06 (7th ed. 2007); see, e.g., Daw Indus.,
Inc. v. United States, 714 F.2d 1140, 1143 (Fed. Cir. 1983)
(“The congressional choice of words has a further and
more significant consequence. . . . Congress’ choice of the
different term suggests an intentional difference in
meaning.”). Here, we must presume that Congress
understood the difference between expressions of a
particularized form of competition, i.e., “full and open,”
versus the broader notion represented by “competitive
basis.” Had Congress intended JCC contractors to be
selected solely by “full and open competition,” it knew how
to use those words and could have done so. It did not.
Res-Care contends that the Claims Court’s—and
our—interpretation of WIA permits all of CICA’s
exception provisions to apply to WIA and, thus, renders
superfluous § 2887’s reference to § 3304 from CICA. That
argument again conflates WIA’s and CICA’s different
structures and language. While it is true that § 2887
RES-CARE, INC. v. US 9
refers to one provision in CICA, there is no reason to read
any other provision of CICA into § 2887 in the way Res-
Care advocates. By its terms, § 2887 is straightforward:
selections shall be made on a “competitive basis,” except
in the special situations where the “noncompetitive
procedures” set forth in § 3304 of CICA apply. The
reference to § 3304 is not mere surplusage. It
demonstrates Congress’s intent to ensure DOL had the
flexibility to use a noncompetitive selection process in
certain defined situations. Without the § 3304 reference,
DOL’s selections under WIA would always have to be
performed through some form of competition. With this
understanding, it becomes apparent that § 2887’s
reference to § 3304 is not at all superfluous.
The legislative history offers no support for Res-Care’s
position. As an initial matter, we note that if the plain
language of the statute is unambiguous, then that is
controlling. Indian Harbor Ins. Co. v. United States, 704
F.3d 949, 950 (Fed. Cir. 2013). To overcome the plain
meaning of a statute, a party must show that the
legislative history demonstrates an “extraordinary
showing of contrary intentions.” Garcia v. United States,
469 U.S. 70, 75 (1984) (cautioning that resort to
legislative history to interpret an unambiguous statute
should only occur in “rare and exceptional
circumstances”). The legislative history of WIA contains
no discussion of any specialized meaning of “competitive
basis,” and Res-Care points to nothing in the history
demanding or even implying as much. We find nothing in
the legislative history that suggests any intent to bar the
widespread, established government practice of small
business set-asides for this particular category of
government contracts.
We therefore conclude that the Claims Court properly
construed § 2887(a)(2)(A) to provide DOL the flexibility to
use small business set-asides for selecting JCC operators.
10 RES-CARE, INC. v. US
II
Res-Care also argues that the DOL contracting officer
violated the Rule of Two when setting aside Blue Ridge,
and thus the Claims Court erred in granting judgment to
the government. When reviewing a contracting officer’s
decision in a pre-award bid protest, the Claims Court
applies the standards established by the Administrative
Procedure Act to decide whether the agency’s decision was
“arbitrary, capricious, an abuse of discretion, or otherwise
not in accordance with law.” See 5 U.S.C. § 706; see also
Advanced Data Concepts, Inc. v. United States, 216 F.3d
1054, 1057 (Fed. Cir. 2000).
On appeal of the Claims Court’s judgment on the
administrative record, we reapply the deferential
“arbitrary or capricious” standard to the agency’s decision.
Advanced Data, 216 F.3d at 1057. This standard requires
us to sustain DOL’s set-aside if it evinces rational
reasoning and consideration of relevant factors. See id. at
1057–58.
Before setting aside a contract for small business
participation under the Rule of Two, the Federal
Acquisition Regulations require that a contracting officer
shall determine that a reasonable expectation exists that
“at least two responsible small business concerns” will
submit offers and that an “award will be made at fair
market prices.” 38 C.F.R. § 19.502-2(b).
DOL, as a federal procurement entity, has “broad
discretion to determine what particular method of
procurement will be in the best interests of the United
States in a particular situation.” Tyler Const. Grp. v.
United States, 570 F.3d 1329, 1334 (Fed. Cir. 2009). A
contracting officer’s decision to set aside a contract for
small businesses invokes “highly deferential rational
basis review.” Weeks Marine, Inc. v. United States, 575
F.3d 1352, 1368–69 (Fed. Cir. 2009).
RES-CARE, INC. v. US 11
Here, the contracting officer reviewed the submissions
from potential contractors against twelve “capability
requirements” identified in the Request. 6 Applying the
first factor of the Rule of Two, she determined that two
responding small businesses were “capable under all of
the capability criteria identified in the [Request],” and no
documentation indicated that either business had
“questionable past performance or capacity issues.” J.A.
3063. The contracting officer also noted that both
businesses had submitted past offers at fair market prices
for similar work operating other JCCs and had continued
to perform those contracts under the fair market prices
offered. Id. Based on these findings, she concluded that a
6 Those criteria included: (1) experience providing a
comprehensive academic and career technical training
program, (2) experience providing food services, medical,
dental, and mental health care, (3) experience managing
and ensuring data integrity, (4) experience protecting
personally identifiable information, (5) experience with
facility and construction management, (6) experience
providing property management, (7) experience providing
residential management, supervision, and meals, (8)
experience operating a program that is integrated with
the local workforce development systems, employers, and
the business community, (9) experience operating a job-
training program that reflects the local labor market
conditions of the place of contract performance, (10)
experience operating a job-training program that is
reflective of the workforce investment plans of the state
where the program is located and experience taking part
in the local workforce investment system of the program’s
locale, (11) access to financial resources sufficient to
satisfy requirements of operating the Blue Ridge JCC for
the first 45 days of operation or the ability to obtain them,
and (12) experience with the financial management of a
cost reimbursement type contract. J.A. 3003.
12 RES-CARE, INC. v. US
reasonable expectation existed that the Blue Ridge award
would be made at fair market prices. We find no abuse of
discretion in the contracting officer’s thorough analysis of
the submitted materials or her application of the Rule of
Two.
Finally, Res-Care contends that it should have been
able to supplement the administrative record with
declarations and the Rell & Doran Report. The ability to
supplement the administrative record before the Claims
Court is a limited one. Axiom Res. Mgmt., Inc. v. United
States, 564 F.3d 1374, 1378 (Fed. Cir. 2009). In this
particular instance, we simply note that none of the
opaque and overly generalized extra-record evidence helps
Res-Care’s cause. It does not contain any negative
performance data about the two small businesses that
satisfied the Rule of Two. As the Claims Court stated,
whether other small businesses, as a general class,
performed at lower levels than larger firms has no
bearing on the question of whether the contracting officer
used appropriate criteria or properly assessed the
capabilities of the identified small businesses against
those criteria. See Res-Care, 107 Fed. Cl. at 142.
For the foregoing reasons, the decision of the United
States Court of Federal Claims is affirmed.
AFFIRMED
COSTS
No costs.