Large Business Ineligible For SDVOSB Verification Protest, Says Court

A large business couldn’t demonstrate that it was eligible to pursue a bid protest challenging a VA SDVOSB sole source contract award.

In a recent decision, the U.S. Court of Federal Claims held that a protester, which was a large business under the NAICS code assigned to the SDVOSB sole source contract, had not demonstrated standing to challenge the contract award. The sole source contract in question wasn’t just any contract, either–but a contract to oversee the VA’s verification process for SDVOSBs and VOSBs.

The matter at issue in Loch Harbour Group, Inc. v. United States, No. 16-1114C (2016) began when the VA issued a solicitation in June 2016, seeking proposals from contractors to oversee the VA’s verification process. After the solicitation was issued, a prospective offeror filed a pre-award protest with the GAO. In August, the VA cancelled the solicitation.

After cancelling the solicitation, the VA awarded a sole source contract to GCC Technologies, LLC, an SDVOSB and one of the incumbent contractors, to perform the verification services.  The VA supported its award by reference to the same federal statute at issue in the Supreme Court’s Kingdomware decision.  That statute, 38 U.S.C. 8127, allows the VA to make a sole source contract award to an SDVOSB when the anticipated price is below $5 million and certain other factors are met.

Loch Harbour Group, Inc. filed a protest with the Court, challenging the SDVOSB sole source award to GCC.  LHG asked the Court to issue a temporary restraining order and a preliminary injunction preventing GCC from performing the contract until LHG’s protest was resolved.

The Court wrote that in order to have standing to bring a viable bid protest, LHG was required to “prove it is either an ‘actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or failure to award the contract.'”  The Court noted that the June 2016 solicitation and the subsequent sole source award to GCC both designated the same NAICS code and size standard, and that “it is undisputed that LHG is not a small business” under that NAICS code.  (The Court’s decision doesn’t specify which NAICS code and size standard were assigned).  The Court continued:

Given this, it is reasonable to assume that this NAICS code would also apply to a new solicitation for this work and that LHG would be ineligible to compete for the award of that contract.  And so, LHG has not demonstrated thus far in the litigation that it has standing to bring its protest.

The Court also held that, even if it had standing to pursue the protest, LHG had not demonstrated that it was likely to succeed on the merits of the case.  The Court wrote that the VA’s justification for its sole source award specifically stated that the award complied with the SDVOSB sole source authority of 38 U.S.C. 8127, and that the record in front of the Court did not support LHG’s contention that the award didn’t comply with the statute.  The Court denied LHG’s request for injunctive relief.

The Court’s decision doesn’t necessary spell an end to LHG’s protest; it is conceivable that LHG could prevail on its case even after losing its motion.  But, should LHG continue to pursue its protest, it would seem to have an uphill battle, as the Court made it very clear that an ineligible large business ordinarily lacks standing to challenge an SDVOSB sole source award.