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All cases on the calendar this morning.

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A protest case from the Court of Federal Claims to patent cases, one from a district court and one from the patent office.

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And a government employee case from the American Assistance Protection Board that was submitted on the briefs and therefore will not be argued.

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First cases from the claims court.

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Lawson, Environmental Service versus United States, 16-21-46.

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Mr. Watson.

[00:00:44] Speaker 02:
Good morning, Judge Lurie.

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May it please the Court?

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The Court of Federal Claims committed error in this case for a few reasons.

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The first issue

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was deciding that the EPA's corrective action that the agency's determination that the offer's letter of intent was a responsibility issue versus a proposal responsiveness issue.

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We believe that the court erred on that aspect of it.

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Responsiveness means whether they answered the questions.

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Correct, Your Honor.

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Basically, in the proposal or the bidding process, the offers first have to submit a proposal and the first stage of the evaluation is where the technical evaluation panel, in this case, first has to review whether the offers responded to the solicitation requirements.

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That's the first step before they get to the point of

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whether the contractor was responsible to perform the contract.

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So our contention here is that the letter of intent was a solicitation requirement that goes directly to whether the offeror met the stated solicitation requirements versus at the second stage where the agency is using it for a contractor responsibility issue.

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Isn't the problem though that the information was provided, the agency just determined that that information was not sufficient.

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And so because the information was actually provided, it would be responsive, but the problem was on key personnel it wasn't sufficient, so it was a responsibility issue.

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I respectfully disagree.

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I think one of the important things for the court is to realize that before

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this current evaluation, this is a corrective action phase that we're into, that prior to that the agency lost and actually submitted a bid protest to the agency and the agency launched an investigation as a result of that bid protest and then they made the findings through an investigation that Coastal or CAJV failed to submit a valid

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letter of intent.

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That decision was made in the agency protest.

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As a result, they moved into a second phase, a totally new evaluation.

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And it's at that point that the technical evaluation panel, relying on what they found at the bid protest, made an affirmative determination that the letter of intent was invalid.

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And because of that sole reason, they did not get to determine or to evaluate the resume.

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Wasn't the proposal that you submitted, it was complete, correct?

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I mean, all the blanks were filled in and all the information that was solicited was provided.

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That is correct, Judge Raina, but what's critical here is that at the initial submission, the agency, based on the protest, decided they came to a new conclusion.

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and they took a different direction altogether.

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They sustained the loss in protest.

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And our point to the court here is that the new or the corrective action, the evaluation is totally distinct from the prior review.

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This is a totally new evaluation.

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And we believe that's where the court erred because it related back to the prior evaluations, which the corrective action is essentially a

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a line drawn between what has happened before and the totally new evaluation.

[00:04:50] Speaker 00:
Now you rely on the Manus case.

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Correct.

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So isn't that case though distinguished in that in that case the agency specifically said that the bid or proposal was non-responsive but then went ahead and sent it to the SBA.

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Isn't that different than here where the agency went ahead and sent it to the SBA

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but never said that the bid was not responsive.

[00:05:18] Speaker 02:
Well, our position is that if you looked at, I believe it's Appendix 78 and 79, the agency's determination, if you look at the language from the technical evaluation panel, it's flustered with actual language that says that based on our new review of the proposals, we find that

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COSA or CAJV did not meet the solicitation requirements as related to the letter of intent.

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And for that sole reason, we could not get to the second step of evaluating the resume.

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That was the exact decision in Manus.

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What the agency did in Manus was they made a determination that, in fact, the court in Manus

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Isn't this, I'm sorry, I'm looking at this and I'm reading it as saying that they didn't meet the requirements, not that they didn't provide the requested information.

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Not meeting the requirements would seem to go to responsibility.

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I totally respectfully disagree and the reason I disagree is because in Manist they drew a clear distinction in the procurement process of what the agency has to do first before they get to a responsibility issue.

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In the Manus case, the issue was a past performance issue, which, if you look at the language of the COC, certificate of competency regulations, would fall within the responsibility.

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But the distinguishing factor in Manus is that the offer failed to provide a past performance reference list.

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And in that case, the court determined that the agency had it right to begin with.

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In that case, a proposal was incomplete on its face.

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I mean, when it was submitted.

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Correct.

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And in this case, the proposal was complete.

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And that's what the government argued here.

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Where we're different with that is that the facial compliance would be used if the agency at, for example, the bid protest stage, would have put its foot down and said, look, we base this proposal on facial compliance, but instead,

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The agency took a totally different direction.

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Well, I don't want to cause any confusion when I said clear on its face.

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I guess what I'm saying is that the proposal contained enough information in it to make an evaluation.

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So it was complete in that respect.

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I would agree with the court on that aspect, but I think what's different here, and I believe where the court of federal claims aired,

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is to give weight to the fact that the new evaluation starts, a totally new evaluation altogether.

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And in that new evaluation, the agency, based on what they have found in the bid growth... At that point, that new evaluation is as to the technical aspects of the proposals, right?

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That is... And not to its responsiveness.

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I mean, we have a responsive proposal.

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additional evaluation, the ones you're talking about, go more to the responsibility.

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I believe that the agency's determination at the reevaluation stage, if you look at the language again, there's two notes.

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And one of the things I want to point out to the court is that appendix... I'm looking at 78.

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Can you direct us to the language?

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I think you did say on page 78 and 79.

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So on appendix 78, there's a resume for the site superintendent.

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Right down to the bottom of that, this is where I wanted to draw the court's attention that this document was actually the old evaluation.

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During the corrective stage, they made an amended note

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All they did is took an amendment at the bottom and it says, amended note, additional information received from the proposed site superintendent revealed that the letter of intent included in this resume was not valid and therefore the SS qualification could not be considered.

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And that was the sole reason for deeming them technically unacceptable.

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The agency never got to review the actual resume, which is our position that the resume itself

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would go to the responsibility had they gotten to that point.

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But they never got there.

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So I believe that the Court of Federal Claims' opinion made a determination that the agency did actually did review the offerors' qualifications.

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I believe that's a factual error because they didn't get to that stage.

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They didn't get to review the actual qualifications.

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they stopped only at the letter of intent, which was a material requirement of the solicitation.

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And the reason why that was a requirement was the key personnel requirement expressly said that either you have a current employee or if you don't, then we require a letter of intent.

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In this case, Coastal did not have a current employee, even though the resume that they submitted

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clearly says that he was a current employee.

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Now, does it make a difference that what you cite to us here on page 78 is a TEP report and not the conclusions of the CO?

[00:11:08] Speaker 02:
Well, did you ask does it make a difference?

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I believe it makes a clear difference because it's a technical evaluation panel that actually reviews

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makes the new evaluation.

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It's that board or that group of people.

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CEO makes the final decision on that.

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Correct.

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And that would go to the issue of where we argued on the second point that the CO failed to give proper and sufficient information to the SBA.

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And we also address that issue as a second point.

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We believe that the court here.

[00:11:46] Speaker 00:
Is this your argument that

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their corrective letter should not have been provided to the SBA, your second issue?

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That's one of the issues in that second argument, yes.

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When it got to the stage where the CO actually developed the COC package and where he actually summarized the reason for it.

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And it's that document where we argued to the court of federal claims that the letter of intent should not have been provided to the SBA

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simply because the affidavit that was in question came after the bid protest decision, which the agency sustained.

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It came after the deadline of the bid protest investigation that gave Coastal a deadline to submit in the affidavit, et cetera.

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This affidavit came six weeks after the fact.

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and actually after the technical evaluation panel had made their formal decision.

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It's our position that the EPA should have rejected that letter because of the tardiness which they admitted on the record six weeks after the investigation.

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They should have rejected it because that document was not a solicitation requirement.

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The affidavit was not a solicitation requirement.

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It only came as a response to the agency's investigation.

[00:13:13] Speaker 01:
Watson, you wanted to save some rebuttal time?

[00:13:16] Speaker 01:
You were into that now.

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Okay.

[00:13:18] Speaker 02:
Yes, Your Honor, I'd like to save at least three minutes if I have it for rebuttal.

[00:13:22] Speaker 01:
Well, you're already into that period, but we'll give you three minutes.

[00:13:28] Speaker 01:
Thanks.

[00:13:29] Speaker 01:
Mr. Snyder.

[00:13:37] Speaker 04:
May I please the court?

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The SBA's issuance of a certificate of competency in this case, as well as its decision regarding coastal and viral works hub zone status, both affirmed by the trial court, were factually and legally sound.

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Turning first to the certificate of competency issue and focusing on the issues that were discussed a few moments ago, the TEP, as the court was just discussing, evaluated the solicitation in this case.

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here is whether this is a responsibility issue or a responsiveness issue.

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The TEP on page 79 of its evaluation report, you were looking at page 78 a moment ago, zero in directly on that.

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There's language on page 79 that explains that the TEP's decision is based upon information provided in the context of the bid protest, new information.

[00:14:34] Speaker 00:
Is that under the summary heading?

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Is that what you're referring to?

[00:14:38] Speaker 04:
It's on page 79 in the summary.

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Yes, your honor.

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And the second sentence is the TEP agreed that review of the new information received following a bid protest disqualified the proposed site superintendent for consideration.

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And so that sentence, I think, encapsulates the issue, which is that the proposal was responsive.

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And after the bid protest, which provided additional information, a decision was made by the technical evaluation panel that they failed on this key personnel issue.

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The case Mannes explains a two-step process that is followed.

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First is responsiveness.

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Second is responsibility.

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Here, we got past the first step, and we're at the second step.

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And at the second step, the agency decided to fail coastal environmental works on this issue.

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Responsibility has to do with whether or not a company or firm is capable of performing the contract.

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And so this is a classic responsibility issue, Your Honor.

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Here's a concern that I have with that.

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We're talking about the August 2 affidavit, correct?

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And it came six weeks after the deadline.

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And it also arrived after the TEP had issued its decision.

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So was it reasonable for the CEO at that point in time to consider the August 2 affidavit?

[00:16:13] Speaker 04:
Yes, Your Honor.

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Not only was it reasonable, it would have been unreasonable.

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And as the trial court said, arbitrary and depreciation.

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Doesn't that kind of render the TEP useless at that point?

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It wasn't useless.

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There was a finding of non-responsibility by the agency, by the TEP, and ultimately by the contracting officer.

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But as the statutes, the Small Business Act contemplates in the implementing regulations as well as the federal acquisition regulations, when a small business is found non-responsible, there's further process.

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The SBA ultimately makes that decision whether they're responsible or not.

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And so here the process worked exactly as it should.

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The agency additional information was provided after the finding of non-responsibility and that is permissible under the regulatory framework.

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The regulations, the SBA regulations provide that a firm is able to provide additional information to the SBA and also

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the SBA is permitted, not only permitted, but should consider all elements of responsibility, not just the elements of responsibility.

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So I agree with that.

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The SBA needs to consider all the elements.

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Yet the SBA only provided a one paragraph for its reasoning.

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And query whether one paragraph is reflective of it having considered all of the elements of the matter.

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Shouldn't it have

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giving us a little bit more of a thorough reasoning?

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Well, in this case, it's a lowest price technically acceptable solicitation.

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And parlance, L-P-T-A is that parlance.

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In that case, the simple question is whether or not the company can meet all these technical requirements.

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There's not, as in other types of protests, a trade-off or comparative analysis.

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If you're the lowest price,

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and you're technically acceptable, then you are awarded the contract.

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And so here, the only question was whether or not they were technically acceptable for the issue of key personnel.

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All the other technical aspects.

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But it's clear.

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You're either technical or you're not.

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Exactly.

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There's no gray area here.

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There is no gray area.

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And all the other technical, there were, I think, other factors, three or four other factors of technical responsibility.

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There was no question.

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that this firm met those factors.

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So the only factor for technical responsibility that was presented to the SBA was the key personnel factor.

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And they wrote a paragraph about that and addressed the issues with the evidence in front of that was presented.

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And that evidence was substantial evidence.

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In the end, the affidavit that was provided by the site superintendent

[00:19:05] Speaker 03:
You say substantial evidence, but our standard of review is a rational basis review, correct?

[00:19:12] Speaker 03:
With respect to the SBA decision.

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It's not substantial evidence.

[00:19:16] Speaker 03:
It seems to me that it's even more deferential than substantial evidence.

[00:19:20] Speaker 04:
I would assume, Your Honor, that is both.

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They have to have a rational basis.

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Of course, they have to not violate statute or regulation.

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And the decision here, in addition to those things, was also

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supported by substantial evidence as well.

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And so all of those requirements are met here.

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And the trial court correctly, and the GAO prior to the trial court, came to the same conclusion for the same reasons.

[00:19:51] Speaker 00:
So the really, I think the... How do you respond to the point about that amended note on the bottom of page 78?

[00:20:01] Speaker 00:
The amended note that says specifically.

[00:20:03] Speaker 04:
Yes, Your Honor.

[00:20:06] Speaker 04:
There is language, and that's not the only instance in the technical evaluation panel's amended report, that in the context, the very unique factual circumstances of this case, if you isolate certain words, they're saying this isn't a valid letter of intent.

[00:20:24] Speaker 04:
That's the language they used here.

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But ultimately, that language meant that they were finding them nonresponsible.

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It wasn't that they were finding them nonresponsive, for the reasons we've discussed.

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So this language that says, or the other language that's been used is a false letter of intent.

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Ultimately, the facts, as they ultimately

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formed in the record showed that it wasn't a false letter of intent.

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But at this juncture in the case, when the TEP wrote this report, they had misgivings for good reason at that juncture.

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And as I said, this is why this case sort of exemplifies what the SBA's role worked, as it should here.

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The SBA came in and looked at the full body of evidence, giving the firm the opportunity to provide evidence on its responsibility as the regulations permit.

[00:21:21] Speaker 00:
Earlier you mentioned there's an SBA regulation that allows the SBA to look at later evidence.

[00:21:28] Speaker 00:
I'm not sure if that's exactly what you said.

[00:21:30] Speaker 00:
Which particular regulation were you referring to?

[00:21:33] Speaker 04:
It's 13 CFR 125.5 D2.

[00:21:41] Speaker 04:
And that didn't happen here because the EPA provided the final affidavit to the SBA.

[00:21:47] Speaker 04:
There was no occasion for

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EnviroWorks, Coastal EnviroWorks to provide any additional information because it had been provided by EPA.

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But that regulation just demonstrates that nothing improper happened in this case.

[00:22:05] Speaker 04:
And just to repeat, the trial court stated explicitly that if EPA had not provided the letter of intent, that would have been the final affidavit as Lawson submits they should not have.

[00:22:20] Speaker 04:
that that decision itself would have been arbitrary and capricious to withhold evidence from the SBA when the SBA is the body that's supposed to be making that decision.

[00:22:34] Speaker 04:
Would the court like me to address the subzone issues that wasn't discussed initially?

[00:22:39] Speaker 01:
That would be worthwhile.

[00:22:43] Speaker 04:
This issue essentially ought to be

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eligible for this contract, you had to be HUBZone qualified.

[00:22:53] Speaker 04:
And that means that 35% of your employees reside in what's called a HUBZone, which is a traditionally underutilized business zone.

[00:23:05] Speaker 04:
So the purpose of the HUBZone program is to bring business to those areas.

[00:23:09] Speaker 04:
Here, Coastal EnviroWorks certified, as the regulations require, that it was HUBZone

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qualified.

[00:23:20] Speaker 04:
It provided tax returns, payroll records, written evidence, all under penalty of perjury, that demonstrated that it was HUBZone eligible.

[00:23:34] Speaker 04:
Lawson, through a series of protests to the SBA, argued that coastal environment work should not be determined to be HUBZone qualified, and SBA

[00:23:48] Speaker 04:
found that its arguments were real speculative in nature.

[00:23:54] Speaker 04:
And we agree with that.

[00:23:56] Speaker 04:
The GAO agreed with that.

[00:23:57] Speaker 04:
The trial court agreed with that.

[00:24:00] Speaker 03:
Was Manus a HUBZone case?

[00:24:10] Speaker 04:
I'm not certain.

[00:24:10] Speaker 04:
It was certainly involving a small business, but I don't know if it was a HUBZone case or not.

[00:24:16] Speaker 03:
It was one of these lowest price technical cases.

[00:24:23] Speaker 04:
That's correct, Your Honor.

[00:24:25] Speaker 04:
It was.

[00:24:27] Speaker 04:
And it involved a small competition among small businesses.

[00:24:32] Speaker 04:
But I'm not certain if it was a HUBZone case or some other small business program that was being used.

[00:24:40] Speaker 04:
And so the HUBZone determination here

[00:24:46] Speaker 04:
SBA consistently held in response to two protests and two appeals of each of those protests that there was no evidence presented that demonstrated that EnviroWorks was not HUBZone qualified.

[00:25:02] Speaker 00:
So I understand that Lawson's argument here is that the SBA's decision on the matter suggested they didn't consider

[00:25:13] Speaker 00:
the letter in question, whereas the court of claims decision seems to take that letter into account.

[00:25:20] Speaker 00:
And that's where the error I think is asserted.

[00:25:22] Speaker 00:
How do you respond to that?

[00:25:24] Speaker 04:
The SBA initially said this is new evidence and we don't consider new evidence, but it went on to analyze it anyway and said it's speculative and it doesn't establish anything

[00:25:38] Speaker 04:
regarding Lawson's HUBZone status.

[00:25:41] Speaker 04:
So it did address it, but it was a secondary point.

[00:25:44] Speaker 04:
In the footnote?

[00:25:46] Speaker 04:
Excuse me?

[00:25:46] Speaker 00:
In the footnote of the opinion, is that what you're referring to?

[00:25:50] Speaker 04:
Well, there were four opinions in this case.

[00:25:53] Speaker 04:
And so it wasn't, I think one of them was in a footnote.

[00:25:56] Speaker 04:
It, at some point, was included in the text in the later, I think, the final HUBZone appeal opinion.

[00:26:03] Speaker 04:
It was included in the trial court.

[00:26:08] Speaker 04:
also agreed with the SBA's observation that this evidence, even though it was new evidence, it didn't change the outcome.

[00:26:19] Speaker 04:
Essentially nothing had changed regarding the HUBZone status of this company.

[00:26:25] Speaker 04:
The Department of Homeland Security letter that was sent to Lawson that was provided as evidence, as I said, was sent to Lawson.

[00:26:34] Speaker 04:
It was a letter to Lawson

[00:26:36] Speaker 04:
that said that they had employed three people who were apparently working here illegally.

[00:26:43] Speaker 04:
And Lawson tried to use that to argue that one of EnviroWorks employees was here illegally.

[00:26:51] Speaker 04:
Because they had the same name.

[00:26:52] Speaker 04:
Because they had the same name.

[00:26:54] Speaker 04:
That employee wasn't working for EnviroWorks at the time of the first award, but it wasn't established that he was the same person either, and ultimately

[00:27:06] Speaker 04:
It's not, the regulations don't require you to, what they require is for you to be a resident of a HUBZone.

[00:27:12] Speaker 04:
That's all they require.

[00:27:14] Speaker 04:
And so even just on that basis, if you're paying federal taxes and you're on the payroll records and you live in a HUBZone, that's what the SBA looks at.

[00:27:22] Speaker 04:
And that's what they did here.

[00:27:27] Speaker 01:
If there's nothing further, then that's fine.

[00:27:30] Speaker 04:
Thank you, your honor.

[00:27:31] Speaker 01:
Thank you, Mr. Snyder.

[00:27:32] Speaker 01:
Mr. Watson has some rebuttal time, three minutes.

[00:27:41] Speaker 02:
Thank you, Your Honor.

[00:27:41] Speaker 02:
I want to cover a couple things.

[00:27:44] Speaker 02:
First, a rebuttal to the SBA's position about the HUBZone residency requirements.

[00:27:50] Speaker 02:
13 CFR 126601 requires that the SBA makes a determination for a HUBZone participant both at the time of award and at the time of bid offering, the offer and award, both periods.

[00:28:08] Speaker 03:
It's not discretionary, not A or B, both.

[00:28:11] Speaker 03:
Your opponent will say all they have to do is see if, look at the dress and see if they're paying the payroll taxes, et cetera.

[00:28:18] Speaker 03:
It's not up to, I think his argument is that it's not up to the SBA to make immigration type decisions.

[00:28:30] Speaker 02:
And our position is that's what the SBA says.

[00:28:33] Speaker 02:
But when you look at the congressional intent given to the SBA to oversee the program,

[00:28:38] Speaker 02:
There's a couple things that come into play.

[00:28:40] Speaker 02:
First of all, those 35% employees have to reside in the HUBZone.

[00:28:47] Speaker 02:
What the SBA is saying, and even given the letter from another federal agency, the SBA admitted in that footnote that I believe the court referred to, this is on the second protest,

[00:29:01] Speaker 02:
that they acknowledge that one of the same individuals with the same name in the letter actually worked for Coastal at the time of award.

[00:29:10] Speaker 03:
Even if that's true and you take that one person out of the equation, the remaining number of employees still satisfies that residential requirement, doesn't it?

[00:29:19] Speaker 02:
That's incorrect.

[00:29:20] Speaker 02:
At the award stage, which the SBA admitted that they saw at least one of the names and they did nothing, they determined at the initial

[00:29:29] Speaker 02:
the HUBZone protests that four out of 11 employees met the HUBZone requirement.

[00:29:36] Speaker 02:
If the SBA had taken the investigation further, one of those employees would have brought it down to three and that would have been less than the 35% requirement.

[00:29:47] Speaker 00:
I have to say, I disagree with your characterization of that footnote.

[00:29:51] Speaker 00:
I think that that footnote simply says that an individual with the same name as one of the three alleged unauthorized workers

[00:29:58] Speaker 00:
worked for EnviroWorks at the time.

[00:30:00] Speaker 00:
It just means that there was someone with the same name, right?

[00:30:04] Speaker 00:
It doesn't say it's the same person.

[00:30:06] Speaker 00:
It says someone with the same name.

[00:30:08] Speaker 02:
And I think that highlights our point.

[00:30:10] Speaker 02:
The SBA has an obligation that when issues come up, and you can look at the tools given to them on this 126503 and 900, that when a HUBZone participant doesn't meet the requirements,

[00:30:24] Speaker 02:
My position is that there's more that's required from the SBA to simply look at an address, especially when another federal agency gives them information to look at.

[00:30:34] Speaker 02:
They have to go further to make sure that none of these participants are violative of the program.

[00:30:40] Speaker 02:
Who makes the HUBZone decision?

[00:30:42] Speaker 02:
It's the CEO.

[00:30:44] Speaker 02:
Your Honor, the SBA makes the determination.

[00:30:49] Speaker 02:
Congress has given the SBA explicit authority

[00:30:53] Speaker 02:
to run the hub zone program.

[00:30:55] Speaker 02:
So by the SBA acknowledging our position is they were required to do more, even if it's to pass on to the agency that does investigate these things.

[00:31:06] Speaker 03:
It's the CO that makes the final determination as to whether hub zone criteria are satisfied or not.

[00:31:16] Speaker 03:
I respectfully disagree.

[00:31:17] Speaker 03:
That's the SBA's sole decision.

[00:31:19] Speaker 02:
However,

[00:31:20] Speaker 02:
That's not even the reason why this was referred to the SBA.

[00:31:25] Speaker 02:
And our position is, and one of the points that we're saying that the CO failed to give credible evidence to the SBA, Court of Federal Claims looked at FAR 19602 in its decision to make the determination of what needs to go into a package.

[00:31:42] Speaker 02:
However, the Court of Federal Claims, in the language of 602 itself, expressly has a requirement for 9104G

[00:31:51] Speaker 02:
in that requirement, and this is at the stage where the CO is making the package to send to the SBA, the CO has to make a determination whether the offer is eligible under other regulations.

[00:32:04] Speaker 02:
And that's part of the SBA referral.

[00:32:06] Speaker 02:
Our petition here is, even though the fact that Lawson provided information to the CO, the COC referral never mentioned anything that's required under 9104G.

[00:32:19] Speaker 02:
Thank you, Mr. Watson.

[00:32:20] Speaker 01:
Time has expired.

[00:32:23] Speaker 01:
We'll take the case under advisement.