from the United States Court of Federal Claims in Nos.
2:17-cv-1015C, 1:17-cv-01015-CFL Judge Charles F. Lettow.
Anthony Whitcomb, Whitcomb, Selinsky, McAuliffe, PC, Denver,
CO, argued for plaintiff-appellant. Also represented by
Andrew R. Newell.
Michael Mager, Commercial Litigation Branch, Civil Division,
United States Department of Justice, Washington, DC, argued
for defendant-appellee. Also represented by Joseph H. Hunt,
Robert E. Kirschman, Jr., Allison Kidd-Miller, Kara M.
Lourie, Dyk, and Hughes, Circuit Judges.
HUGHES, CIRCUIT JUDGE.
Contracting Group, Inc., appeals from a decision of the
United States Court of Federal Claims holding that the
Department of Veterans Affairs did not act arbitrarily or
capriciously when it cancelled a roof replacement
solicitation set aside for service-disabled veteran-owned
small businesses. Because the contracting officer acted
rationally in requesting cancellation based on the record
before him, we affirm.
government sets aside certain contracting opportunities for
service-disabled veteran-owned small businesses (SDVOSBs).
See Kingdomware Techs., Inc. v. United States, 136
S.Ct. 1969, 1973 (2016). Two agencies are responsible for
managing procurements on SDVOSB set-aside contracts: the
Department of Veterans Affairs (VA) and the Small Business
Administration (SBA). The VA regulates its own procurements,
while the SBA regulates the procurements of all other
agencies. Although the VA and the SBA systems overlap in many
respects, they are governed by different statutory
provisions. See 38 U.S.C. § 8127 (VA); 15
U.S.C. § 657f (SBA). This appeal concerns the system run
by the VA.
VA regulations, a business may only compete for SDVOSB
set-aside contracts if it has registered with the VA's
Center for Verification and Evaluation. See 38
U.S.C. §§ 8127(e)-(f); 38 C.F.R. §§
74.11, 74.20. If the Center determines that a business
qualifies as an SDVOSB, it adds that business to a
centralized database called VetBiz. See 38 U.S.C.
§§ 8127(e)-(f); 48 C.F.R. § 804.1102; 38
C.F.R. §§ 74.11, 74.20. During procurement,
contracting officers can only consider bids submitted by
businesses listed on VetBiz. See 38 U.S.C. §
8127(e); 48 C.F.R. § 804.1102. If the business is not in
the database when bidding closes, the contracting officer
cannot consider its bid. See 38 U.S.C. §
8127(e); 48 C.F.R. § 804.1102.
business is eligible to compete for SDVOSB contracts if one
or more veterans "unconditionally" own a majority
interest in the company. See 38 C.F.R. §
74.2(a) (VA); see also 13 C.F.R. § 125.12
(SBA). In 2017, the VA and the SBA applied different
definitions of "unconditional"
owner-ship. According to the VA, ownership was
unconditional if it was free from "arrangements causing
or potentially causing ownership benefits to go to
another." See 38 C.F.R. § 74.3(b) (2017).
The VA exempted arrangements conditioned "after death or
incapacity" from this limitation. See id. The
SBA, on the other hand, disallowed any limitations on a
veteran's ownership interest-including those premised on
death or incapacity. See Matter of The Wexford Grp.,
Int'l, Inc., SBA No. SDV-105, 2006 WL 4726737, at
*6, *9-10 (June 29, 2006).
after the Center makes the initial determination that a
business qualifies as an SDVOSB, eligibility continues to
remain relevant. Verified businesses have an ongoing
obligation to maintain their status, and the Center may
remove any business which fails to comply with this
obligation. See 38 C.F.R. §§ 74.15(b),
(e). Generally, a business is entitled to notice and an
opportunity to respond before the Center effects removal.
See id. § 74.22. The regulations existing in
2017, however, provided for one narrow circumstance under
which the VA had to immediately remove a business
from VetBiz: upon notice from the SBA that it has found the
business ineligible to compete in its system. See
id. § 74.2(e) (2017). The regulation provided the
Center with no discretion with respect to removal in this
scenario. See id.
Montano, a service-disabled veteran, owns 51% of Veterans
Contracting Group, Inc. (VCG). His ownership interest is
subject to limitations in the event of his death or
incapacity. In 2013, the Center determined that VCG qualified
as an SDVOSB under the VA system and added VCG to VetBiz. The
Center reaffirmed VCG's status each year until 2017.
January 5, 2017, VCG learned that it was the lowest bidder on
an SDVOSB set-aside contract issued by an agency working with
the SBA. The second lowest bidder filed a bid protest
challenging VCG's eligibility to compete for the
contract. The SBA ultimately determined that, because of the
limitations on his ownership interest in the event of his
death or incapacity, Mr. Montano did not
"unconditionally" own his interest in VCG. As a
result, VCG did not qualify as an SDVOSB under the SBA
system. The SBA informed the VA of its decision on July 18,
2017. Because VA regulations required the Center to remove
any business found ineligible in an SBA proceeding,
see 38 C.F.R. § 74.2(e) (2017), the VA removed
VCG from Vet-Biz on July 21, 2017.
VCG's removal from VetBiz, the VA had issued
solicitations for bids in two SDVOSB set-aside contracts, one
for a roof replacement and one for a relocation effort. The
application deadline for the roof replacement solicitation
was July 28, 2017. The application deadline for the
relocation contract was August 2, 2017. Realizing that
bidding might close on these solicitations before it finished
litigating its status as an SDVOSB, VCG sent the VA a letter
on July 26, 2017, expressing its intent to seek a preliminary
injunction. Although VCG's letter repeatedly referenced
the relocation solicitation, it failed to mention the roof
28, 2017, hours before the 9:00 am deadline on the roof
replacement solicitation, VCG filed a bid protest in the
Court of Federal Claims. VCG did not request a temporary
restraining order or injunctive relief in its complaint.
same day, the contracting officer opened bids for the roof
replacement solicitation. The lowest responsive bidder had
proposed a cost 30% higher than the government's
estimate. VCG had submitted a bid closer to the
government's projected cost, but the contracting officer
could not consider its bid because VCG was not listed in the
VetBiz database on the day bidding closed. See 38
U.S.C. § 8127(e). Given the absence of any reasonable