Q&A with Michael H. Payne
Q: Cohen Seglias’ Government Contracting Group represents a number of interesting niche contractors that our readers may not be familiar with. Can you tell us more about that?
A: In addition to our federal construction and small business practices, we also work with marine contractors and contractors that work on environmental remediation. We recently had a big win for RLB Contracting, Inc. (RLB), a dredging contractor.
Q: What happened?
A: In September, Bob Ruggieri and I won a bid protest before the United States Court of Federal Claims (COFC) on behalf of RLB. The project is in Louisiana and involves marsh creation and shoreline protection, primarily accomplished by dredging. The project was set aside for small businesses by the Natural Resource Conservation Service (NRCS). However, the NRCS applied the wrong small business size standard. The size standards applied determine whether a business is small for that particular procurement. The size standards are either determined by average annual revenue or by a number of employees. In this case, the NRCS applied a $33.5 million dollar size standard, which applies to general civil construction projects. Because the project was primarily a dredging project, it should have invoked a specific exception applicable to dredging projects which, at the time, carried a lower $25.5 million size standard. The dredging size standard also carries with it a requirement that the prime contractor performs 40% of the dredging volume with its own dredge or the dredge of another small business. Accordingly, the $25.5 million dredging size standard is more favorable to small dredging contractors in an industry typically dominated by large players.
Q: So the NRCS failed to apply an exception that would have made RLB more competitive in the bidding process?
A: Exactly. At first, we appealed the NRCS’s decision to the Small Business Administration’s Office of Hearings and Appeals (OHA). RLB presented evidence that the NRCS had internally estimated that more than half of the work involved dredging and also that the agency had made an improper size standard designation based on an incorrect calculation that only 10% of the labor was attributable to dredging work. Despite this evidence, OHA denied the appeal.
Q: Rather than go ahead and bid on the project under the larger size standard, you decided to file a bid protest?
A: We felt we had a very strong case and RLB had a lot to lose, not just on this project, but on future projects, if agencies were allowed to circumvent the application of the dredging exception. In a big win for our client, the COFC ruled that the NRCS’ size standard designation, and the OHA’s decision to uphold the designation, were incorrect as a matter of law. The Court was critical of the agency for not considering that the dredging work accounted for the greatest percentage of contract value, more than 75% according to its own internal estimate. The Court was further critical of OHA for concluding that the project did not predominantly involve dredging. As a result, the Court entered a permanent injunction and sent the matter back to the agency with instructions “to make a new determination of whether the dredging exception applies based on all available current information.”