Superior Optical Labs v. The United States

• Decision Date: 01 February 2022
• Docket Number: 21-cv-01580
• Parties: SUPERIOR OPTICAL LABS, INC., Plaintiff, v. THE UNITED STATES, Defendant, and PDS CONSULTANTS, INC., Defendant-Intervenor.
• Court: U.S. Claims Court

SUPERIOR OPTICAL LABS, INC., Plaintiff,
v.
THE UNITED STATES, Defendant,

and PDS CONSULTANTS, INC., Defendant-Intervenor.

No. 21-cv-01580

United States Court of Federal Claims

February 1, 2022

Reissued: February 11, 2022 ^[*]

OPINION AND ORDER

KATHRYN C. DAVIS JUDGE

This post-award bid protest challenges the decision of the Small Business Administration's ("SBA") Office of Hearings and Appeals ("OHA") finding Plaintiff Superior Optical Labs, Inc. ineligible for award under Department of Veterans Affairs Solicitation No. 36C24820R0087 ("Solicitation"). The Solicitation was set aside entirely for a Service-Disabled Veteran-Owned Small Business ("SDVOSB") to provide prescription eyeglasses and related services in Veterans Integrated Services Network ("VISN") 8 in central Florida. After Superior was awarded the contract, Defendant-Intervenor PDS Consultants, Inc. protested Superior's status as a SDVOSB. Based on a Services and Supply Agreement between Superior and its former owner, which OHA

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found to be in effect at the time Superior submitted its offer in response to the Solicitation, OHA held that Superior did not qualify as a SDVOSB for purposes of the procurement.

Before the Court are Superior's Motion for Judgment on the Administrative Record, the Government's Cross-Motion for Judgment on the Administrative Record, and PDS's combined Motion to Dismiss pursuant to Rule 12(b)(1) of the Rules of the United States Court of Federal Claims ("RCFC") and Cross-Motion for Judgment on the Administrative Record. For the reasons discussed below, the Court finds that it has jurisdiction over Superior's bid protest claims and that OHA rationally determined that Superior failed to qualify as a SDVOSB. Consequently, PDS's Motion to Dismiss is DENIED, the Government's and PDS's Cross-Motions for Judgment are GRANTED, and Superior's Motion for Judgment is DENIED.

I. BACKGROUND

A. Statutory and Regulatory Background

Under the Veterans Benefits, Health Care, and Information Technology Act of 2006, 120 Stat. 3431-3436 (codified, as amended, at 38 U.S.C. §§ 8127-28), the Secretary of the Department of Veterans Affairs ("VA") is required to set annual goals for contracting with service-disabled and other veteran-owned small businesses. 38 U.S.C. § 8127(a). The VA is obligated to restrict competition for procurements to veteran-owned small businesses, including SDVOSBs, if the contracting officer ("CO") for the procurement reasonably expects that at least two such businesses will submit offers and that "the award can be made at a fair and reasonable price that offers best value to the United States." Id. § 8127(d); see Kingdomware Techs., Inc. v. United States, 579 U.S. 162, 164-65 (2016).

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To qualify as a SDVOSB eligible to compete for these types of procurements, a business must be "at least 51% unconditionally and directly owned by one or more service-disabled veterans." 13 C.F.R. § 125.12.^[1]

A service-disabled veteran is defined by regulation as a veteran who has a valid disability rating letter issued by the VA that shows a service-connected rating between 0 and 100 percent, a valid disability determination from the Department of Defense, or is registered as a service-disabled veteran in the Beneficiary Identification and Records Locator Subsystem maintained by the VA's Veterans Benefits Administration. Id. § 125.11. A business that is principally owned by another business entity that is itself not owned and controlled by one or more service-disabled veterans does not qualify as a SDVOSB. Id. § 125.12(a).

The eligibility requirements further mandate that both the management and daily business operations of a SDVOSB must be controlled by one or more service-disabled veterans. Id. § 125.13(a). This "means that both the long-term decision[] making and the day-to-day management and administration of the business operations must be conducted by one or more service-disabled veterans." Id. There is a rebuttable presumption that someone other than a service-disabled veteran has control, or the power to control, the business where "[b]usiness relationships exist with non-service-disabled veteran individuals or entities which cause such dependence that the applicant or concern cannot exercise independent business judgment without great economic risk." Id. § 125.13(i)(7). An exception exists "where a service-disabled veteran does not have the unilateral power and authority to make decisions in 'extraordinary circumstances.'" Id. § 125.13(m). Such extraordinary circumstances are solely limited to: "(1) Adding a new equity

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stakeholder; (2) Dissolution of the company; (3) Sale of the company; (4) The merger of the company; and (5) Company declaring bankruptcy." Id. § 125.11.

The VA Center for Verification and Evaluation ("CVE") is responsible for certifying contractors as SDVOSBs. See 38 C.F.R. §§ 74.1, 74.11. OHA has authority to adjudicate protests filed by interested parties challenging a business's SDVOSB status. See 38 U.S.C. § 8127(f)(8)(B); 13 C.F.R. § 134.1007.

B. Findings of Fact

1. Superior's Certification as a SDVOSB

Superior is headquartered in Ocean Springs, Mississippi. Admin. R. 417, ECF No. 22 ("AR"). It was founded in 1991 by a decorated Vietnam Veteran, employs roughly 191 individuals, and manufactures prescription eyeglasses. AR 2984. Superior is presently owned and controlled by Mr. Derek Bodart, who is a service-disabled veteran of the United States Navy. AR 512, 2932, 2985. Mr. Bodart obtained a controlling interest in Superior from its former owner, Essilor of America, Inc. ("Essilor"), in 2017 through an existing SDVOSB that he owned, StatSource Medical, LLC ("StatSource"). AR 421-30.

On January 29, 2018, StatSource sold Superior to Mr. Bodart and four minority shareholders. AR 2932. Since 2017, Mr. Bodart has served as Superior's President and CEO. AR 512. At all relevant times, he has owned and controlled more than 50 percent of Superior. AR 2932. At the time Superior submitted a proposal in response to the Solicitation, Mr. Bodart had a 51 percent interest in Superior, owning [. . .] of its [. . .] shares. AR 422, 2932. Two service-disabled veterans and one other individual each owned a 9 percent interest in Superior, and a fifth non-veteran/non-service-disabled individual who acted as Superior's Vice President and Chief Operating Officer had a 22 percent interest. AR 2932.

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The VA CVE certified Superior as a SDVOSB on April 10, 2018. AR 2469. Since that time, Superior has performed multiple VA contracts, providing prescription eyeglasses and related services to veterans. AR 2982. In fact, Superior avers that it and PDS "have been the VA's two primary SDVOSB providers" for such services. Pl.'s Compl. ¶ 14, ECF No. 1.

2. Superior's Services and Supply Agreement

As part of Mr. Bodart's obtaining a controlling interest in Superior through StatSource, Superior, Essilor, and StatSource entered into a Services and Supply Agreement ("Agreement") on November 1, 2017. AR 650; see AR 649-944. Among its provisions, the Agreement included purchase requirements for Superior's existing VISN and other VA contracts. Specifically, Superior was obligated to purchase from Essilor "the majority of the volume of Superior's purchases of lenses, frames, contact lenses and consumables . . . [if] offered by Essilor" and 15 percent of ophthalmic laboratory services. AR 651, § 3(b). The Agreement provided, however, that "if such amounts are not permitted under any given VISN or other Veterans Affairs' contract," Superior was required to purchase "the maximum volumes that can be sourced from Essilor without jeopardizing Superior's status as a [SDVOSB] entity and as required to maintain compliance with the SBA and Federal Acquisition Regulations [("FAR")]." Id.

The Agreement had similar provisions for all future VISN and VA contracts awarded to Superior, which required Superior to source from Essilor "the majority of the volume of Superior's purchases of lenses, frames, contact lenses and consumables . . . [if] offered by Essilor" and "the maximum permitted dollar volume of Superior's ophthalmic laboratory services." Id. § 3(c). Like the existing-contracts provision, if those amounts were not permitted by any given contract, the Agreement capped Superior's purchase requirements (notwithstanding the quotas) at "the maximum volumes that can be sourced from Essilor without jeopardizing Superior's [SDVOSB]

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status" and in compliance with the SBA and FAR. Id. The Agreement further required Superior to provide Essilor with monthly reports reflecting Superior's sales under VISN contracts and other data to ensure compliance with these purchase requirements. Id. § 3(d).

In addition, pricing for the Lab Products/Services acquired from Essilor were outlined in price lists attached to the Agreement. See AR 662-944. Essilor could at any time increase the prices charged under the Agreement due to circumstances outside of its direct control if the price increase was permitted under any government contract. AR 651-52, § 3(e). If Superior intended to bid on a fixed-price government contract involving the Lab Products/Services, the Agreement further required Superior to notify Essilor in writing prior to bidding and obtain Essilor's agreement in writing for any fixed pricing offered in the bid if Superior was requesting that Essilor also commit to fixed pricing. AR 652, § 3(e).

Other provisions of the Agreement also obligated Superior to obtain Essilor's written approval. Such approval was required prior to Superior's assigning all or part of the Agreement. AR 656, § 9(a). Any attempt to do otherwise would result in Superior's defaulting on the Agreement. AR 653-54, § 6(b)(iii). The Agreement also required Superior to "obtain Essilor's written approval prior to any 'Change of Control.'" AR 656, § 9(b). This was defined by the Agreement as any (i) "change in possession...