Miles Constr., LLC v. United States

Decision Date07 February 2013
Docket NumberNo. 12-597C,12-597C
PartiesMILES CONSTRUCTION, LLC, Plaintiff, v. UNITED STATES, Defendant.
CourtCourt of Federal Claims

Pre-award bid protest; disparate intra-

agency decisions regarding the

unconditional nature of a service-disabled

veteran's ownership of a small business;

evidence of "ownership" within the

meaning of 38 C.F.R. § 74.3; prejudice;


Edward T. Delisle, Cohen, Seglias, Pallas, Greenhall & Furman, P.C., Philadelphia, PA, for plaintiff. With him on the briefs was Maria L. Panichelli, Cohen, Seglias, Pallas, Greenhall & Furman, P.C., Philadelphia, PA.

Jeremiah M. Luongo, United States Department of Justice, Washington, D.C., for defendant. With him on the briefs were Stuart F. Delery, Acting Assistant Attorney General, Jeanne E. Davidson, Director, and Franklin E. White, Jr., Assistant Director, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, D.C.


LETTOW, Judge.

This pre-award bid protest is before the court on plaintiff's motion for judgment upon the administrative record and the government's motion to dismiss, or in the alternative, cross-motion for judgment. On March 5, 2012, plaintiff, Miles Construction, LLC ("Miles"), had obtained a determination from the Department of Veterans Affairs' ("VA's") Center for Veterans Enterprise ("CVE") that it was a qualified service-disabled veteran-owned small business ("SDVOSB") concern eligible to participate in VA's Veterans First Contracting Program, which accordspriority to SDVOSBs and veteran-owned small businesses ("VOSBs") for contracting opportunities. Nonetheless, after Miles was the apparent lowest responsive and responsible bidder for a solicitation set aside for SDVOSBs, an agency protest by the second-lowest bidder resulted in a decision by VA's Office of Small and Disadvantaged Business Utilization ("OSDBU") that Miles "d[id] not meet the status requirements of a SDVOSB concern" and was therefore ineligible for awards under the Veterans First Contracting Program. AR 19-267 (Letter from Thomas Leney to Morgan Slizofski (Aug. 27, 2012)). 2 Miles challenges that decision and seeks to be reinstated into the Program and potentially to be awarded the contract from which the protest stemmed.


Miles is a limited liability corporation organized under the laws of the Commonwealth of Pennsylvania. Compl. ¶ 8. Mr. Morgan Slizofski, a service-disabled veteran, owns 51 percent of the company, with [***] owning the remaining 49 percent. Compl. ¶¶ 11-12. On January 19, 2011, Miles first applied for inclusion in the VA VetBiz Vendor Information Pages ("VIP") Verification Program as a SDVOSB. See Pl.'s Mem. . . . in Support of Pl.'s Mot. for Judgment on the Admin. Record ("Pl.'s Mem.") at 4. CVE conducted a thorough investigation of Miles, performing an on-site examination of the company's premises and a review of documents. AR 74-778 to -93 (Report of Harry Armstrong, CVE Examiner (Mar. 21, 2011)). After discussions between representatives for CVE and Miles, Miles altered its operating agreement ("Agreement") by rescinding a supermajority requirement for certain actions and making other changes. Pl.'s Mem. at 4; see also AR 74-778 to 75-794. Notwithstanding these changes, Miles' application was denied on the ground that Mr. Slizofski still did not fully control the company in accord with 38 C.F.R. § 74.4, which sets out the control requirements for a SDVOSB or VOSB. See AR 77-796 to 800 (Letter from Gail Werner, Deputy Director of CVE, to Slizofski (Apr. 6, 2011)). After six months, the requisite waiting period identified in VA's regulations during which a rejected applicant may not file a new application, Miles again sought verified status as a SDVOSB. In the intervening time, Miles revised its corporate documents to adhere to guidance provided by CVE regarding "control." Miles resubmitted its application on November 17, 2011. AR 86-835. On March 5, 2012, CVE approved Miles as a SDVOSB and added it to the databaseof companies eligible for Veterans First Contracting Program projects. AR 93-1003 (SDVOSB Approval (Mar. 5, 2012)).4

On May 21, 2012, VA opened bids for Solicitation Number VA-244-12-B-0455 ("Solicitation"), which involved a contract for the repair of a storm sewer at the Coatesville, Pennsylvania VA Medical Center that was set aside for SDVOSB entities. AR 8-30. Miles submitted a bid in response to the Solicitation and was the apparent lowest bidder. See AR 12-246 to - 47 (Abstract of Offers). On June 25, 2012, the second-lowest bidder, Veteran Construction & Utility Services, Inc. ("Veteran"), challenged Miles' eligibility as a SDVOSB and lodged a protest with the Solicitation's contracting officer. AR 14-249 to -56 (Veteran Protest (June 25, 2012)).5 In the protest letter, Veteran alleged a "[c]ontrol and ownership violation" because it believed Miles and a non-SDVOSB, [***], had common ownership and control, thus rendering Miles ineligible for SDVOSB status. AR 14-250. Veteran alleged that [***] was using the service-disabled veteran status of Miles' owner, Mr. Slizofski, as a "pass thru" from Miles to [***]. Id.

After a delay of more than six weeks, VA's contracting officer forwarded the protest to OSDBU's Executive Director. AR 18-262 to -63 (Notice to OSDBU of Veteran Protest (Aug. 9, 2012)). OSDBU notified Miles of the protest on August 15, 2012, asking Miles to "respond directly to the allegations made in the status protest." AR 104-1028 (E-mail from Amy Endicott to Slizofski (Aug. 15, 2012)). In a subsequent e-mail sent the same day, OSDBU noted that it would "review the protest against [Miles] as well as complete another review of . . . company documentation to ensure [Miles] meet[s] the requirements of 38 C.F.R. Part 74 as a valid SDVOSB." AR 104-1027 (E-mail from Endicott to Slizofski (Aug. 15, 2012)). OSDBU gave Miles only one week to respond, "due to the time-sensitive nature of the Status Protest program." Id. Miles timely responded to the allegations of the protest and included supporting documentation. See AR 105-1029 to -35 (Miles' Response to Veteran Protest (Aug. 15, 2012)). On August 27, 2012, OSDBU stated that it had investigated Veteran's claims and did not see evidence that Miles served as a pass through for [***] or that Mr. Slizofski did not possess the requisite control over the company. See AR 19-264 to -68 (Letter from Thomas J. Leney to Slizofski (Aug. 27, 2012)). OSDBU nonetheless advised Miles that it had concluded that Mr. Slizofski did not possess unconditional ownership of the company as required by 38 C.F.R. § 74.3(b) because Articles X, XI, and XII of the company's Operating Agreement allegedly contained restrictions on the transfer of his ownership interest. Id. OSDBU advised that the absence of unconditional ownership rendered Miles ineligible for SDVOSB status under 38C.F.R. Part 74, and thus Miles was ineligible for an award under the Solicitation and would be removed from the VIP database. AR 19-267.6

On September 13, 2012, Miles filed a pre-award bid protest action in this court, alleging that OSDBU's decision was arbitrary and capricious and contrary to law, and seeking reinstatement as a SDVOSB as well as the contractual award. Although Miles sought a preliminary injunction, the government represented that the contract would not yet be awarded, and the court accordingly deferred ruling on Miles' motion for a preliminary injunction and consolidated the proceedings on a preliminary injunction with those on the merits in accord with RCFC 65(a)(2). See Order Deferring Ruling on Mot. for Prelim. Inj. (Sept. 19, 2012), ECF No. 11. On October 24, 2012, Miles filed a motion for judgment on the administrative record, and on November 9, 2012, the government filed a motion to dismiss, or in the alternative, a cross-motion for judgment on the administrative record ("Def.'s Mot."). Briefing of the cross-motions was completed, and a hearing was held on December 4, 2012.7


Under the Tucker Act as amended by the Administrative Dispute Resolution Act, Pub. L. No. 104-320, § 12, 110 Stat. 3870, 3874 (Oct. 19, 1996), this court has jurisdiction over (1) pre-award bid protests, (2) post-award bid protests, and (3) an alleged violation of a statute or regulation in connection with a procurement:

[T]he United States Court of Federal Claims . . . shall have jurisdiction to render judgment on an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement. . . . [T]he United States Court of Federal Claims . . . shall have jurisdiction to entertain such an action without regard to whether suit is instituted before or after the contract is awarded.

28 U.S.C. § 1491(b)(1) (emphasis added); see also Rothe Dev., Inc. v. United States Dep't of Def., 666 F.3d 336, 338 (5th Cir. 2011) ("[T]he Court of Federal Claims now retains exclusive jurisdiction over 'action[s] by an interested party' 'objecting to . . . any alleged violation of statute or regulation in connection with a procurement or a proposed procurement.'" (quoting 28 U.S.C. § 1491(b)(1))).

Miles alleges that VA contravened its regulations governing VOSB eligibility through an improper and inconsistent application of 48 C.F.R. § 819.307 (pertaining to "SDVOSB/VOSB Small Business Status Protests") and 38 C.F.R. Part 74 (setting out VA's "Veterans Small Business Regulations"). Sections 74.3 and 74.4 of 38 C.F.R. Part 74 specify the standards for CVE's evaluation of applicants for VOSB status and the eligibility for inclusion in the Veterans First Contracting Program, and those standards are explicitly incorporated by reference in the VAAR provisions governing SDVOSB and VOSB small business status protests. See 48 C.F.R. §...

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