Res-Care, Inc. v. United States, 12-251C

Decision Date06 November 2012
Docket NumberNo. 12-251C,12-251C
PartiesRES-CARE, INC., Plaintiff, v. THE UNITED STATES, Defendant.
CourtU.S. Claims Court

Bid protest; Job Corps Centers;

Small Business Set-Asides;

Statutory Construction

Jonathan D. Shaffer, Vienna, VA, for plaintiff.

Amanda L. Tantum, Civil Division, Department of Justice, Washington, DC, for defendant.

OPINION

BRUGGINK, Judge.

This is a pre-solicitation protest of the Department of Labor's decision to designate the contract for operation of the Blue Ridge Job Corps Center ("Blue Ridge") as a small business set-aside. Plaintiff, Res-Care Inc., is the incumbent contractor. Because of the small business size limitations placedon this contract, Res-Care is precluded from qualifying for the award. Currently before the court are the parties' cross-motions for judgment on the administrative record, plaintiff's motion for leave to supplement the administrative record with the second declaration of its executive vice-president, and defendant's motion to strike those portions of plaintiff's memorandum in support of its motion for judgment on the administrative record that rely on extra-record evidence. The motions are fully briefed, and we heard oral argument on November 2, 2012. As we announced at the conclusion of oral argument, and for the reasons explained below, we deny plaintiff's motion to file the declaration, we deny its motion for judgment on the administrative record, we grant defendant's motion to strike, and we grant defendant's cross-motion for judgment on the administrative record.

BACKGROUND1

Res-Care currently operates Blue Ridge in Marion, Virginia under contract DOLJ08PA00001, which runs from April 1, 2008 until March 31, 2013. Administrative Record ("AR") 53. Blue Ridge is a job training facility with a capacity of 160 residential female students, 30 non-residential female students, and 10 non-residential male students. AR 2, 6. Before issuing a formal solicitation for a new contract, the Department of Labor ("DOL") published a Sources Sought Notice for Request for Information DOL121RI20442 ("sources sought notice") on December 5, 2011, which was later amended and republished on December 7, 2011.2 AR 1, 5. The sources sought notice explained that "Job Corps is a national residential training and employment program administered . . . to address the multiple barriers to employment faced by at-risk youth throughout the United States." AR 2, 6. Specifically, the services sought included "educational and career technical skills training," operating the residential facility, providing meals and supervision for 160 residential female students, job placement, health services, and center oversight and management. AR 2, 6. The annual cost to run Blue Ridge is roughly $5 million. AR 54. The proposed contract carries a value of $25 million and would run for two years with three unilateral option years. AR 53-54.

Although the sources sought notice was not limited to small businesses, DOL "encourage[d] firms that qualify under the Small Business Programs mentioned in Federal Acquisition Subpart 19, including 8(a), HUBZone and Service Disable Veteran Owned Small Business to respond," AR 1, with a "capabilities statement." AR 4. Potential contractors were asked to include in the capabilities statement their prior experiences running comparable facilities, providing similar services, and operating with comparable financial resources. AR 2-3. DOL also asked potential bidders to indicate on the cover letter of the capabilities statement whether they participate with a small business program. AR 1. DOL reserved "the right to compete any acquisition resulting from this survey among small businesses based on the responses received." AR 1.

DOL received five capabilities statements in response to its sources sought notice. Four of the five responses were from small businesses.3 Res-Care did not respond to the sources sought notice. Based on the capabilities statements received from the five companies, DOL determined that two of the small businesses were unable to perform the contract because they lacked experience or failed to demonstrate sufficient financial wherewithal. AR 52, 56. The large business and two of the small businesses were deemed potentially capable of performing the contract. AR 52. That conclusion was based on a review of eleven areas of experience related to the work and an assessment of whether the businesses had access to financial resources to begin doing the work.

On March 9, 2012, DOL designated the contract for the operation of Blue Ridge as a 100% small business set-aside.4 AR 53. The Division Chief for the Division of Job Corps Procurement determined that both requirements for setting aside the contract for a small business pursuant to Federal Acquisition Regulation ("FAR") part 19.502-2 had been met. Specifically, sheconcluded that two small businesses were "capable under all of the capability areas identified" in the sources sought notice and that "there is a reasonable expectation that award[s] will be made at fair market prices" based on past offers made by the companies that were found to be capable of performing this contract. AR 56.

DOL issued a pre-solicitation notice, DOL121RP20489, on April 6, 2012, regarding the operation of the Blue Ridge Job Corps Center. The request was revised on April 25, 2012, to state that "[t]he solicitation for this requirement will be issued on or about May 4, 2012," and that the contract will be solicited as a "100% Set-Aside for Small Business." AR 78-79. Performance of the contract will begin on April 1, 2013. AR 78. The solicitation was subsequently issued on September 11, 2012, and modified on October 17, 2012.

Res-Care is not classified as a small business under the applicable regulations because its annual receipts exceed the limits set by the North American Industry Classification System ("NAICS"). AR 53. NAICS codes are promulgated by the Office of Management and Budget and are used to classify an economic activity or industry for many purposes. Using the already-established NAICS codes, the Small Business Administration then imposes its own limitations on size and revenue. 13 C.F.R. § 121.201 (2012). Thus, when the contracting officer designated a NAICS code for small business set-aside, the effect was to both target the type of institutions solicited and simultaneously to impose size and revenue limitations on those bidders. The revenue limit associated with NAICS code 611519, which is the code for the operation of Blue Ridge, caps awards to firms with no more than $35.5 million in annual receipts. AR 2, 54; 13 C.F.R. § 121.201. Therefore, if the contract for operation of Blue Ridge were designated for small businesses, any business with more that $35.5 million in annual receipts would be prohibited from competing. Res-Care would not qualify.

On April 18, 2012, prior to DOL issuing a formal solicitation, Res-Care filed its complaint before this court seeking injunctive and declaratory relief. Defendant filed the Administrative Record on May 14, 2012. Plaintiff sought to supplement the Administrative Record with a declaration of its Executive Vice-President of Operations, Richard Myers, and with a report ("Rell & Doran Report") entitled "Analysis of Small Business Contracting in Job Corps," written by Peter Rell, the former National Director of Job Corps, and Vince Doran, the former President of Res-Care. The court granted in part anddenied in part plaintiff's request. With respect to the Rell & Doran Report, the court denied plaintiff's motion to supplement the record. As for Mr. Myers' declaration, the court admitted it for the sole purposes of evaluating whether an injunction should issue in the event that plaintiff were to be successful on the merits. Plaintiff again seeks to supplement the administrative record with an additional declaration from its vice-president. Mr. Myers offers information concerning (1) Res-Care's effectiveness in operating Job Corps centers, (2) the harm that Res-Care will experience if it is excluded from the procurement process, (3) the poor performance record of small businesses in this field, and (4) his own qualifications to comment on the above-mentioned subjects. Data is included in the declaration showing Res-Care's performance record.

The parties have filed cross-motions for judgment on the administrative record pursuant to Rule 52.1 of the Rules of the United States Court of Federal Claims ("RCFC"). See RCFC 52.1. In its cross-motion for judgment on the administrative record, defendant asks the court to strike part of plaintiff's memorandum in support of judgment on the administrative record because it refers to the Rell & Doran Report and Mr. Myers' second declaration, which were not admitted into the record.

DISCUSSION

Pursuant to the Tucker Act, we 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 any alleged violation of statute or regulation in connection with a procurement or a proposed procurement." 28 U.S.C. § 1491(b)(1) (2006). Res-Care is an "interested party" because it is a prospective bidder "whose direct economic interest would be affected by the award of the contract." Am. Fed'n of Gov't Employees, ALF-CIO v. United States, 258 F.3d 1294, 1302 (Fed. Cir. 2001) (quoting 31 U.S.C. § 3551(2) (Supp. IV 1998)). DOL's decision to designate the contract as a small business set-aside is made "in connection with" a proposed procurement and plaintiff alleges that the decision was made in violation of applicable statutes. We therefore have jurisdiction.

I. Extra-Record Evidence

We begin with the procedural questions raised by plaintiff's motion to supplement the administrative record with the second declaration of Mr. Myers, and defendant's motion to strike references in plaintif...

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