IMS, P.C. v. Alvarez

• Decision Date: 30 September 1997
• Docket Number: No. 96-5073,96-5073
• Parties: , 41 Cont.Cas.Fed. (CCH) P 77,177 IMS, P.C., Appellant, v. Aida ALVAREZ, Administrator, United States Small Business Administration, Appellee.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 618

129 F.3d 618

327 U.S.App.D.C. 126, 41 Cont.Cas.Fed. (CCH) P 77,177

IMS, P.C., Appellant, v. Aida ALVAREZ, Administrator, United States Small Business

Administration, Appellee.

No. 96-5073.

United States Court of Appeals, District of Columbia Circuit.

Argued Sept. 8, 1997.

Decided Sept. 30, 1997.

Appeal from the United States District Court for the District of Columbia (No. 96cv00023).

Russell J. Gaspar argued the cause, for appellant, with whom Paralee White, Washington, DC, was on the briefs.

Glenn P. Harris, Trial Attorney, United States Small Business Administration, Washington, DC, argued the cause, for appellee. Eric H. Holder, Jr., United States Attorney, Washington, DC, at the time the brief was filed, John D. Bates, Washington, DC, R. Craig Lawrence, and Wyneva Johnson, Washington, DC, Assistant United States Attorneys, were on the brief.

Before: EDWARDS, Chief Judge, WALD and GARLAND, Circuit Judges.

WALD, Circuit Judge:

IMS, P.C. ("IMS"), a corporation that provides architectural and engineering services, brought an action in the United States District Court for the District of Columbia to challenge the refusal by the Small Business Administration ("SBA") to revise IMS's participation term in the SBA's section 8(a) program for socially and economically disadvantaged businesses. IMS's dispute with the SBA arose after the passage of the Business Opportunity Development Reform Act of 1988, Pub.L. No. 100-656, 102 Stat. 3853 (codified as amended at 15 U.S.C. § 631 et seq. (1994)) ("BODR Act"), which provided for revised participation terms for section 8(a) program participants. Pursuant to the Act, the SBA notified IMS, a participant in the section 8(a) program, that it would be given a revised program term of nine years from its first section 8(a) contract, which the SBA had determined to be a contract performed by IMS in January 1987. IMS objected to the new term, claiming that its participation term should not be calculated from the date of the January 1987 contract because that contract was brought into the section 8(a) program in violation of an agency regulation precluding acceptance of a contract that was previously the subject of specified forms of solicitation. See 13 C.F.R. § 124.301(b)(8) (1987) (subsequently amended and renumbered 13 C.F.R. § 124.309(a) (1997)). The SBA reviewed IMS's claims, concluded that the term had been correctly calculated, and refused IMS's request to revise it.

The district court held that the SBA's decision to include the January 1987 contract in the section 8(a) program did not violate the agency's regulations and dismissed the suit for failing to state a valid claim and, in the alternative, entered summary judgment on behalf of the SBA. See IMS, P.C. v. Lader, No. 96-23 (D.D.C. Feb. 12, 1996) (unpublished bench opinion) ("Bench Op."). Because we find that IMS has failed to establish that the SBA violated 13 C.F.R. § 124.301 (1987) when it accepted IMS's contract with the Veterans Administration ("VA") into the section 8(a) program, we affirm the district court's decision to grant the SBA's motion for summary judgment. ¹

I. BACKGROUND

In December 1985, IMS was accepted into the Small Business Administration's section 8(a) program, which provides "small business concerns owned and controlled by socially and economically disadvantaged individuals" with "contract, financial, technical, and mangement [sic] assistance." See15 U.S.C. § 631(f)(2) (1994) (footnote omitted). The company was initially granted a four-year Fixed Program Participation Term that was to begin on the date of the company's first section 8(a) contract award, subject, under the rules then in effect, to limited extension.

In late August 1986, the Engineering Department of the VA Medical Center in Batvia, New York selected IMS to perform a small project. IMS claims, and the SBA offers no evidence to disprove, that IMS was chosen to perform the project after the VA orally solicited several small disadvantaged businesses to submit proposals. The Medical Center was apparently unaware that IMS was a section 8(a) program participant when it selected the company for the project. Accordingly, it was not until after the solicitation and selection of IMS that the project was designated a section 8(a) project.

In November 1988, Congress enacted the BODR Act, which modified the program term for section 8(a) program participants. The final rules implementing the changes required by the Act provided that program participants as of September 1, 1988, would be given a revised program term of "the greater of nine years from the date of the Participant's first contract pursuant to section 8(a) or the Participant's Fixed Program Participation Term (FPPT) expiration date, including any extension thereof, plus 18 months." 13 C.F.R. § 124.110(c) (1989).

In a letter dated December 14, 1988, the SBA informed Iqbal Singh, the president of IMS, that the BODR Act provided IMS with a revised term of participation in the section 8(a) program of nine years from IMS's first contract under the program, which the SBA had determined to be IMS's January 1987 contract with the VA. The letter requested that Mr. Singh sign and return the letter, which he did without objection.

Between 1989 and 1994, IMS contacted the SBA several times in an effort to change its program term. IMS claimed then, as it does now, that the VA contract was not the proper starting point of IMS's section 8(a) program term because the contract was brought into the program only after the VA had engaged in a public solicitation for offers and selected IMS. The SBA maintained in each of its responses that it had found no basis for IMS's contention that the VA contract was inappropriately brought into the program.

In August 1995, IMS submitted additional materials to the SBA in support of its continuing request to change its program term. ² The SBA's District Counsel, Mollie Gaughan, reviewed the material presented by IMS and concluded that "[t]here is no evidence in the contract file to support the premise that solicitation was previously published" and, therefore, "the program participation date was properly established." Memorandum from Mollie B. Gaughan, District Counsel, to Michael McHale, Deputy Administrator Minority Enterprise Development (Oct. 4, 1995). In response to Ms. Gaughan's memorandum, the SBA's Acting Deputy Associate Administrator, Michael McHale, wrote a memorandum in which he outlined his decision to reject IMS's request to extend its program term. In his memorandum, he noted: "The documentation provided by your office indicates that proper offer acceptance procedure was followed in taking the requirement into the 8(a) program." Memorandum from Michael P. McHale, Acting Deputy Associate Administrator, to Millie B. Gaughan, District Counsel (Oct. 31, 1995). On November 1, 1995, Franklin Sciortino, SBA's District Director for Buffalo, New York, wrote to Mr. Singh at IMS advising him that the Central Office had denied IMS's request for a new participation term expiration date. See Letter from Frank J. Sciortino, District Director, to Iqbal Singh, President, IMS, P.C. (Nov. 1, 1995).

In January 1996, IMS filed a complaint seeking judicial review of the SBA's refusal to amend its section 8(a) program term and requesting injunctive relief to prevent the expiration of its term. On February 12 1996, the district court dismissed the suit for failing to state a valid claim and, in the alternative, entered summary judgment on behalf of the SBA. This appeal ensued.

II. ANALYSIS

A. SBA's Interpretation of the Regulations

IMS claims that SBA's acceptance of the 1987 VA contract into the section 8(a) program violated the SBA's own rules and regulations, and therefore IMS's term expiration dates based upon that contract must be set aside by this court. In particular, IMS alleges that the SBA's decision to accept the contract into the section 8(a) program was contrary to its own regulation precluding acceptance of a contract that was previously the subject of a public solicitation. See 13 C.F.R. § 124.301(b)(8) (1987). The district court rejected IMS's claims, noting that "the reading of 13 C.F.R. 124.301 (1987) and the language therein is exclusive language. That is ... the regulation limited public solicitations to those in the form of an invitation to bid, a request for proposal, or a request for a quotation." See Bench Op. We agree with the district court that IMS has failed to establish that the SBA's acceptance of the 1987 contract into the section 8(a) program violated 13 C.F.R. § 124.301 (1987).

This court has previously noted that it is a "well-settled rule that an agency's failure to follow its own regulations is fatal to the deviant action." Mine Reclamation Corp. v. Federal Energy Regulatory Comm'n, 30 F.3d 1519, 1524 (D.C.Cir.1994) (citations omitted) (internal quotation marks omitted); see Vitarelli v. Seaton, 359 U.S. 535, 539-40, 79 S.Ct. 968, 972-73, 3 L.Ed.2d 1012 (1959); Service v. Dulles, 354 U.S. 363, 372-73, 77 S.Ct. 1152, 1156-58, 1 L.Ed.2d 1403 (1957); Union of Concerned Scientists v. Atomic Energy Comm'n, 499 F.2d 1069, 1082 (D.C.Cir.1974). If the SBA failed to follow its own regulations in designating the 1987 VA contract as a section 8(a) program project, this could be fatal to the SBA's designation of the contract as a section 8(a) project and, therefore, depending on the circumstances, to its decision to establish IMS's participation term on the basis of that contract. ³

13 C.F.R. § 124.301(b)(8)(i) (1987) was promulgated as a regulation in late 1986. It read:

(8) SBA will not accept for 8(a) award proposed procurements not previously in the section 8(a) program if any of the following circumstances exist:

(i) Public solicitation has already been issued for the procurement as a small business set-aside in the form of an Invitation for Bid (IFB), Request for Proposal (RFP) or a Request for...