Choctaw Mfg. Co., Inc. v. U.S., 84-7485

• Citation: 761 F.2d 609
• Decision Date: 07 May 1985
• Docket Number: No. 84-7485,84-7485
• Parties: 32 Cont.Cas.Fed. (CCH) 73,628 CHOCTAW MANUFACTURING CO., INC., Plaintiff-Appellant, v. UNITED STATES of America; Caspar Weinberger, Sec. of Defense; Frank L. Coccia, Dir., Clothing & Textiles Directorate, Defense Personnel Support Center, and J.H. Rutter Rex Manufacturing Company, Inc., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 609

761 F.2d 609

32 Cont.Cas.Fed. (CCH) 73,628

CHOCTAW MANUFACTURING CO., INC., Plaintiff-Appellant, v. UNITED STATES of America; Caspar Weinberger, Sec. of

Defense; Frank L. Coccia, Dir., Clothing & Textiles

Directorate, Defense Personnel Support Center, and J.H.

Rutter Rex Manufacturing Company, Inc., Defendants-Appellees.

No. 84-7485.

United States Court of Appeals, Eleventh Circuit.

May 7, 1985.

Champ Lyons, Jr., Mobile, Ala., Dennis J. Riley, Donald W. Fowler, Washington, D.C., for plaintiff-appellant.

Molly Houghton Colburn, Philadelphia, Pa., Ginny Granade, Asst. U.S. Atty., Mobile, Ala., for U.S.

Daniel Lund, New Orleans, La., Reggie Copeland, Jr., Mobile, Ala., for Rutter Rex Mfg. Co.

Appeal from the United States District Court for the Southern District of Alabama.

Before TJOFLAT and JOHNSON, Circuit Judges, and DUMBAULD ^*, District Judge.

TJOFLAT, Circuit Judge:

This is a suit by an unsuccessful bidder, Choctaw Manufacturing Co., Inc. (Choctaw), over two Department of Defense contracts the Department had set aside for "small businesses" pursuant to the Small Business Act, 15 U.S.C. Sec. 631 et seq. (1982), and the Armed Services Procurement Act, 10 U.S.C. Sec. 2301 et seq. (1982). In its complaint, Choctaw alleged that the Department's contracting officer violated the law governing the letting of such contracts by awarding the contracts to a firm that was not a small business. It sought a declaration to that effect and an injunctive order requiring the contracting officer to award the contracts to it, as the second lowest bidder. The district court, after granting Choctaw's application for a temporary restraining order, heard the case on the merits and dismissed Choctaw's complaint. ¹ When the court announced its decision, Choctaw took this appeal and requested the district court to enjoin the performance of the contracts pending our resolution of its appeal. The district court granted its request.

I.

A.

To understand the nature of the dispute before us, it is necessary first to set forth in some detail the statutory and regulatory scheme under which contracts set aside for small businesses are bid and ultimately awarded. The Small Business Act and the Armed Services Procurement Act both state that it is the policy of the United States government to set aside a fair proportion of all government contracts for small businesses. 15 U.S.C. Sec. 631(a); 10 U.S.C. Sec. 2301(b). Congress has delegated the responsibility for implementing this policy primarily to the Small Business Administration (SBA), see H.R.Rep. No. 494, 83d Cong., 1st Sess., reprinted in 1953 U.S.Code Cong. & Ad.News 2020, 2021; government agencies must look to the SBA for guidance in determining which contracts should be set aside for small businesses. See 15 U.S.C. Sec. 644; S.Rep. No. 1070, 95th Cong., 2d Sess. 17-29, reprinted in 1978 U.S.Code Cong. & Ad.News 3835, 3851-53. The SBA has the sole responsibility, however, to determine what constitutes a "small business" eligible to bid on a government contract set aside for small businesses, 15 U.S.C. Sec. 637(b)(6) (1982); its determination is binding on all officers of the government having procurement responsibilities. Id.

Pursuant to its broad statutory grant of authority, the SBA has promulgated regulations establishing the criteria to be employed in determining whether, in a particular industry, a business is small. 13 C.F.R. Sec. 121.3-8 (1983) through 13 C.F.R. Sec. 121.3-16 (1983). ² It has also promulgated regulations setting forth the procedure by which it determines whether a firm is a small business. 13 C.F.R. Sec. 121.3-4; 13 C.F.R. Sec. 121.3-5; 13 C.F.R. Sec. 121.3-6. These latter regulations are critical to the dispute here.

The SBA places great reliance on the marketplace to ensure that only small businesses are awarded contracts set aside for small businesses. A firm need not obtain an SBA determination that it is small before bidding on such contracts. See 13 C.F.R. Sec. 121.3-4. Any firm, large or small, can bid on a set aside contract by self-certifying that it is small. The SBA relies on the bidders who are legitimate small businesses and/or the contracting officer responsible for the procurement to expose those firms that are large and thus unqualified to bid on the contract.

A contracting officer must accept a firm's self-certification as valid unless he has reason to question the truthfulness of such certification or receives a timely protest from "another bidder" ³ contesting the firm's small size status. See 13 C.F.R. Sec. 121.3-5. If neither questions the firm's size, an unqualified "large" firm could be awarded a contract set aside exclusively for small businesses. This is unlikely, though, because those competing in the set aside contract market have a strong interest in seeing that only small companies receive the contracts and are quick to lodge protests against bidders they believe are large. This threat of protest probably minimizes the number of large businesses that bid on set aside contracts.

There is a class of bidders not eligible to certify themselves as small without first obtaining from the SBA an explicit determination that they are such. These are bidders whom the SBA has previously determined, as a result of an earlier size protest, not to be small. ⁴ 13 C.F.R. Sec. 121.3-4. A contracting officer receiving a bid from such a business must reject its bid as nonresponsive. See 32 C.F.R. Sec. 1-703(b).

The regulations specify the course of action a contracting officer must follow when a bidder's size is questioned. If the SBA has previously found the bidder not to be small, the officer must reject its bid as nonresponsive, as we have indicated above. Otherwise, the officer must forward the matter to the SBA for a size determination. 13 C.F.R. Sec. 121.3-5. ⁵ The SBA's determination of the firm's size is binding on the officer, and he must either accept or reject the firm's bid in accordance with that determination. 15 U.S.C. Sec. 637(b)(6).

To allow government contracts to be let as quickly as possible and to bring certainty and finality to the contracting process, the SBA's regulations provide strict time limits for the lodging of size protests and the SBA's resolution thereof. For example, a bidder protesting a competitor's size must file his protest with the contracting officer within five working days after the bid is opened. 13 C.F.R. Sec. 121.3-5; 32 C.F.R. Sec. 1-703(b)(1). The SBA will decide a protest filed beyond this period, but its decision will apply prospectively only. An SBA size determination is made at two levels. The regional director, to whom the contracting officer forwards a size protest, ⁶ makes the initial decision; the Size Appeals Board (Appeals Board) ⁷ decides any appeal that may be taken from that decision. If there is no appeal, the regional director's decision is final. 13 C.F.R. Sec. 121.3-5; 32 C.F.R. Sec. 1-703(b)(3).

The regional director has ten working days within which to decide a size protest. If he does not do so within that time period, the contracting officer may presume that the "protested concern" is small, and thus eligible to bid on the contract, 32 C.F.R. Sec. 1-703(b)(3), and award the contract to such concern if he believes that it would be disadvantageous to the government to await the regional director's final decision. Id.

Once the regional director makes a final decision, a party has five days to appeal that decision to the Appeals Board. 13 C.F.R. Sec. 121.3-6(b)(3); 32 C.F.R. Sec. 1-703(b)(3). The SBA will entertain an appeal taken after this time, but its decision will not apply to the procurement in question. 13 C.F.R. Sec. 121.3-6(b)(3). The appellant is deemed to have "waived its rights of appeal " with respect to that procurement, and the contracting officer must treat the regional director's decision as final. Id. (emphasis added); 32 C.F.R. Sec. 1-703(b)(4).

If the appeal is timely, however, the contracting officer must wait another twenty days (from the date the appeal is filed) before taking any action. If the Appeals Board does not decide the case within that period, the contracting officer must accept the regional director's decision as final and award the contract accordingly. 32 C.F.R. Sec. 1-703(b)(3). Thus, any Appeals Board decision handed down after the twenty-day period has prospective effect only.

B.

On February 2, 1984, the Department of Defense opened bidding on a small business set aside contract for 143,808 pairs of men's white trousers. (Solicitation No. 315.) Rutter Rex was the low bidder on this contract; Choctaw was next. To comply with the solicitation requirements, both Rutter Rex and Choctaw certified in their bids that they were small businesses. On February 6, Choctaw wrote a letter to the contracting officer, Melvyn Suplee, contending that he should award the contract to Choctaw, even though it was the second lowest bidder, because Rutter Rex had improperly certified itself as a small business. Choctaw informed Suplee that the SBA, in a previous size determination proceeding, had declared Rutter Rex to be not small, thus disqualifying Rutter Rex from self-certifying. 13 C.F.R. Sec. 121.3-4; 32 C.F.R. Sec. 1-703(b). Choctaw advised the contracting officer that he "need not refer Rutter-Rex's size status to the SBA because Rutter-Rex has the burden of obtaining certification of its small size status before it can self-certify as a small business." (Emphasis in original.)

On February 8, 1984, the Department of Defense opened bidding on a contract for 186,510 pairs of men's white dress trousers. (Solicitation No. 314.) This contract had also been set aside by the Department of Defense for small businesses. Both Rutter Rex and Choctaw had submitted bids, certifying that they were small business concerns. Again Rutter Rex was the low bidder, and Choctaw was second. When Choctaw learned that Rutter Rex had submitted the low bid, it...