Law360 - October 6, 2014
By Khadijah M. Britton
Law360, New York (October 06, 2014, 5:31 PM ET) -- A federal judge halted a U.S. Department of Agriculture contract procurement for a shoreline restoration project in an opinion made public Monday, saying the USDA and Small Business Administration were not rational in opening the contract to businesses that were too large.
In his decision, U.S Court of Federal Claims Judge Eric G. Bruggink elaborated on his announcement at the close of oral arguments that he would sustain RLB Contracting Inc.’s protest of the USDA’s contract procurement and award an injunction.
He said both the USDA and the SBA’s Office of Hearings and Appeals had incorrectly determined what type of work would make up the bulk of the contract, which allowed companies that were too big to compete for the work against smaller businesses.
“The size standard decisions by both agencies were flawed,” the court said, “because the record does not show that they gave proper consideration to whether dredging constitutes the primary activity involved, which the regulations instruct is best determined by the relative value of the items of work involved.”
The USDA applied a $33.5 million dollar size standard to this small business set-aside contract procurement for work restoring a stretch of damaged shoreline in Plaquemines Parish, Louisiana, and classified it under North American Industry Classification System code 237990, Other Heavy and Civil Engineering Construction.
The size standard is the threshold below which a business' annual revenue must fall in order to be considered a small business for set-aside contract purposes.
However, the NAICS code requires consideration of a possible exception, for contracts that primarily consist of dredging and surface cleanup, for which a size standard of $25.5 million must be applied, so smaller businesses can compete on that work. The USDA contracting officer failed to apply that exception, finding the procurement description was general enough that it did not apply.
Judge Bruggink granted RLB an injunction because he said it had been irreparably harmed by its inability to compete and that in the context of a bid protest, this loss of opportunity was sufficient in itself to warrant injunctive relief.
He rejected the USDA’s argument that an injunction weighed against public interest, because, he said, “the public interest always favors the correct application of law.”
The case is RLB Contracting Inc. v. U.S., case number 14-651C, in the U.S. Court of Federal Claims.
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