Ambuild Co. v. United States

Decision Date10 October 2014
Docket NumberNo. 14-786C,14-786C
PartiesAMBUILD COMPANY, LLC, Plaintiff, v. UNITED STATES, Defendant.
CourtU.S. Claims Court

Post-award bid protest; challenge to decertification of Service-Disabled Veteran-Owned Small Business for eligibility for an award of a construction contract as to which it was the apparent responsible, responsive lowest-cost bidder; protestor's lack of opportunity to address issue treated as dispositive by the agency; procedural due process; 5 U.S.C. § 555; unconditional nature of service-disabled veteran's majority ownership of the business; prejudice; remedy

Thomas K. O'Gara, Ernstrom & Dreste, LLP, Rochester, New York, New York, for plaintiff. With him on the briefs was John W. Dreste, Ernstrom & Dreste, LLP, Rochester, New York.

Lauren S. Moore, Trial Attorney, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C., for defendant. With her on the brief were Joyce R. Branda, Acting Assistant Attorney General, Civil Division, Robert E. Kirschman, Director, and Martin F. Hockey, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C. Of counsel was Steven E. Devine, Staff Attorney, United States Department of Veterans Affairs, Office of the General Counsel, Washington, D.C.


LETTOW, Judge.

This post-award bid protest arises out of a dispute emanating from a Service-Disabled Veteran-Owned Small Business ("SDVOSB") set-aside solicitation, issued by the Department of Veterans Affairs ("VA"). Plaintiff, AmBuild Company, LLC ("AmBuild"), was the apparentresponsible, responsive lowest-cost bidder. The second lowest bidder, Welch Construction, Inc. ("Welch") filed an administrative protest, challenging AmBuild's eligibility as a SDVOSB. The Small Business Administration ("SBA") rejected those aspects of Welch's protest that were within SBA's purview. Based on grounds divorced from Welch's protest, however, VA's Center for Verification and Evaluation ("CVE") and then the Executive Director of VA's Office of Small and Disadvantaged Business Utilization ("OSDBU") disqualified AmBuild as a SDVOSB and awarded Welch the contract. AmBuild challenges that decision on both procedural and substantive grounds, seeking reinstatement as a SDVOSB and award of the contract from which the protest stemmed.

AmBuild has submitted a motion for judgment on the administrative record pursuant to RCFC 52.1(c)(1), and the government has filed a cross-motion for judgment. The motions have been fully briefed and were addressed at a hearing held on September 26, 2014. The case is now ready for disposition.

A. AmBuild's Certification as a SDVOSB

AmBuild is a limited liability company organized under the laws of the State of New York. Compl. ¶ 1. AmBuild's majority owner, Mark DeChick, is a service-disabled veteran of the United States Marine Corps, who was honorably discharged after serving in the first Gulf War. Pl.'s Aff. in Support of Pl.'s Appl. for Inj. Relief ("DeChick Aff.") ¶ 6, ECF No. 4; see also Pl.'s Mem. in Support of Pl.'s Mot. for Judgment on the Admin. Record ("Pl.'s Mem.") at 2, ECF No. 16. Mr. DeChick formed AmBuild in 2011, Compl. ¶ 3, after gaining approximately twenty years of experience as a project manager in the construction industry, DeChick Aff. ¶ 5. From 2011 to 2014, Mr. DeChick was the sole owner and managing member of AmBuild. Compl. ¶¶ 3, 7; see also AR 28-193 (2011 Operating Agreement, Art. I).3 In April 2012, CVE approved AmBuild as a SDVOSB and added the company to the VA VetBiz Vendor Information Pages Verification Program database ("VetBiz VIP database"), rendering it eligible for SDVOSBset-aside contracts. After its verification and certification as a SDVOSB, AmBuild proceeded to bid on and win SDVOSB set-aside contracts. Hr'g Tr. 5:16 to 7:14 (Sept. 26, 2014).4

On March 28, 2014, CVE renewed AmBuild's SDVOSB status. Def.'s Cross-Mot. for Judgment on the Admin. Record & Response to Pl.'s Mot. for Judgment on the Admin. Record ("Def.'s Cross-Mot.") at 4 n.1, ECF No.17.5 CVE's renewal of AmBuild's verification as a SDVOSB was supported by its examination of AmBuild's Operating Agreement ("2011 Operating Agreement"), which provided that Mr. DeChick was the sole owner of AmBuild, and by Mr. DeChick's declaration that there had been no amendments to AmBuild's structure or ownership. Id. Based on CVE's re-verification letter, AmBuild was required to inform CVE of any changes that would affect its SDVOSB status. Id.

Approximately two months after the renewal of AmBuild's verification, on June 3, 2014, Mr. DeChick sold two ten-percent segments of his membership interest in an effort to increase the company's bonding limits. Compl. ¶ 7. AmBuild's Vice President, Andrew Claus, and a non-employee insurance agent, Matthew Riedinger, each acquired a ten-percent ownership interest in AmBuild, Compl. ¶ 2, and the Operating Agreement was amended and revised to reflect AmBuild's new ownership structure, AR 38-368 (AmBuild's 2014 Operating Agreement). After this capital infusion, Mr. DeChick owns 80 percent of the company, remains "the highest-ranking officer in [AmBuild], and maintain[s] 100 [percent] control of the day-to day management and long-term decision making." DeChick Aff. ¶ 12.

B. VA's Solicitation and Action on an Administrative Protest

On March 26, 2014, VA sought bids under Solicitation No. VA-528-14-B-0132 ("Solicitation"), which involved the renovation of revolving doors at the Veterans Affairs Medical Center located in Syracuse, New York. AR 9-17 to -59 (Solicitation). A public bid opening for the Solicitation was subsequently held on June 10, 2014. AR 10-60 (Pre-Bid Conference Agenda). AmBuild submitted a bid in response to the Solicitation and was the apparent lowest-cost bidder. See AR 14-90 to -93 (AmBuild's Offer (June 10, 2014)). Welch was the second lowest bidder. See AR 15-103 to-07 (Welch's Offer (June 10, 2014)). On June 17, 2014, Welch filed a formal protest with VA's contracting officer for the Solicitation, alleging that Mr. DeChick did not control AmBuild as required by 38 C.F.R. § 74.4(e) and that AmBuild did not meet the size requirements for a SDVOSB. AR 30-214 to -16 (Welch's Protest).6 Theprotest posited that AmBuild was closely affiliated with and receiving financial assistance from Christa Construction or its owners, evidenced in part by the fact that Mr. DeChick was a previous employee of Christa Construction and by the fact that AmBuild was currently involved in "multi[-]million dollar projects." Id.; see also AR 30-212 (E-mail from Carly Scott to Dennis Foley, transmitting protest (June 18, 2014)) ("Welch alleges AmBuild is ineligible because AmBuild is affiliated with another business, Christa Construction, and relies on it for the support necessary to bid, bond, manage, and perform projects."). Welch requested that the contracting officer forward the following two protest letters:

1. One letter with attachment[s] to the VA OSDBU Office for determination that the SDVOSB is NOT "Controlled by the Owner[;]"
2. A second letter with attachment[s] to Small Business Administration to determine (1) size AND (2) if the SDVOSB firm is in violation of 13 C[.]F[.]R[. § ] 121.103(h)(4)[,] the Ostensible Subcontractor Rule.

AR 30-216.

The protest consequently was forwarded to both SBA and OSDBU. OSDBU gave notice to AmBuild of this protest and requested additional information from AmBuild regarding how it obtained its necessary bonding and whether Mr. DeChick was employed by any other companies. AR 31-244 to -45 (E-mail from VA OSDBU Status Protest to DeChick (June 26, 2014)). That same day, AmBuild responded that its attorney would file a response in "a day or two." AR 31-244 (E-mail from DeChick to VA OSDBU Status Protest (June 26, 2014)). On the following day, AmBuild's counsel sent to SBA and OSDBU the company's response to the allegations of the protest and provided supporting documentation, AR 38-348 (E-mail from Thomas O'Gara to SBA and OSDBU (June 27, 2014)), which included AmBuild's 2014 Operating Agreement indicating the change in the company's ownership structure, see AR 38-362 to -85.7

SBA reviewed AmBuild's supporting documentation and rejected Welch's contentions that AmBuild did not meet the size standard applicable to the procurement and that AmBuild was affiliated with other firms. AR 32-252 to -54 (SBA Size Determination Mem. (July 11, 2014)). Notably, SBA found "[AmBuild] to be a small business for [its] referenced sizestandard," and concluded that "AmBuild has never subcontracted with or received financial assistance from Christa. . . . There [is] no common ownership or common management." Id.8

CVE similarly concluded that AmBuild met the size requirement for the applicable procurement and that AmBuild was neither affiliated with nor receiving financial assistance from other firms. AR 33-256 to -57 (CVE Final Determination (July 21, 2014)). The grounds for Welch's protest consequently were not accepted. CVE, however, sua sponte initiated consideration of an additional issue related to ownership that was not previously raised by Welch or the contracting officer. Specifically, upon an examination of AmBuild's 2011 Operating Agreement,9 CVE determined that Mr. DeChick was not an unconditional owner as required by 38 C.F.R. § 74.3(b) because the "Involuntary Withdrawal" provision of that agreement "include[s] numerous conditions, that are outside of [Mr. DeChick's] control, which would force [Mr. DeChick] to sell his ownership interest to the [c]ompany or remaining [m]embers . . . . Mr. Claus and Mr. Ried[ing]er[, the two persons who had each acquired a ten percent interest in AmBuild,] would have an opportunity to take possession of [Mr. DeChick's] ownership interest should [Mr. DeChick] be involuntarily withdrawn." AR 33-258. AmBuild was never informed that CVE was investigating, sua sponte, an...

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