[00:00:39] Speaker 04: All right, our final case this morning is number 17-1598, York Telecom Corporation versus United States. [00:00:48] Speaker 04: Mr. Donahue. [00:00:50] Speaker 03: Daniel Donahue for Appellant York Telecom Corporation, Your Honor. [00:00:55] Speaker 03: I thank the court for holding oral argument. [00:00:57] Speaker 03: In our case, we didn't have oral argument below. [00:01:00] Speaker 03: I'd like to simplify this case by asking the panel to assume, for the sake of this argument, that the lower court correctly held [00:01:09] Speaker 03: that the questions and answers in this case amended the solicitation and rendered it patently ambiguous. [00:01:18] Speaker 03: The court's error was in failing to address later solicitation amendments that resolved that ambiguity by repeating the 500 employee size standard that my client meets here [00:01:36] Speaker 04: I'm confused because this is not a case in which an unsuccessful bidder is challenging an award. [00:01:43] Speaker 04: You've got the contract. [00:01:44] Speaker 04: That's right. [00:01:45] Speaker 04: I understand the regulatory structure, which is not very well explained in either one of the briefs, that if the contract was improperly awarded because there was a 150 small business requirement that the government [00:02:04] Speaker 04: is obligated to terminate the contract and that there really isn't any question about that. [00:02:09] Speaker 04: Is that not the case? [00:02:11] Speaker 03: Your Honor, I think you're raising the question of jurisdiction. [00:02:15] Speaker 03: Did the Court of Federal Claims have jurisdiction? [00:02:17] Speaker 04: No, I'm not raising the jurisdiction. [00:02:19] Speaker 04: I'm just saying if, in fact, the government mistakenly awards a contract to somebody who has more than 150 employees, [00:02:28] Speaker 04: and that that was improper and that the regulations say that you had to have fewer than 150 employees, the government is, in fact, obligated to terminate that contract, right? [00:02:40] Speaker 03: Your Honor, if the solicitation limited eligibility for contract award to contractors who have less than 150 employees... No, I'm not saying... Let's say the solicitation mistakenly said 500, but that the regulation... [00:02:57] Speaker 04: requires 150. [00:02:58] Speaker 04: The government is obligated to terminate that contract because it's contrary to the requirements of the Small Business Act. [00:03:07] Speaker 03: I disagree with that, Your Honor. [00:03:08] Speaker 04: What case says that that's the case? [00:03:11] Speaker 04: Because certainly the regulations talk about the government's obligations to terminate a contract which is erroneously awarded, right? [00:03:20] Speaker 03: Your Honor, the Competition and Contracting Act here, 10 USC 2305B1, [00:03:26] Speaker 03: requires a contracting agency to award contracts based solely on the factors stated in the solicitation. [00:03:35] Speaker 03: If the solicitation states a 500 employee size standard, as we contend it does, and that that's not ambiguous, then the Competition and Contracting Act required the agency to award the contract to my client. [00:03:51] Speaker 04: Isn't the government obligated to terminate a contract which was improperly awarded? [00:03:57] Speaker 03: I think that's right. [00:03:58] Speaker 04: Yeah, well that's your problem. [00:03:59] Speaker 04: So the question is then, what's the right size standard here? [00:04:06] Speaker 03: I agree with that. [00:04:07] Speaker 03: I agree with that, Your Honor. [00:04:08] Speaker 04: So why are we talking about patent ambiguity or latent ambiguity? [00:04:13] Speaker 04: That seems to me not to have anything to do with it. [00:04:16] Speaker 04: The real question is what's the size standard for this contract? [00:04:19] Speaker 03: The size standard stated in the instruction to O'Farrars stated that the size standard [00:04:26] Speaker 03: under the NAICS code that was assigned to this solicitation is 150 employees. [00:04:31] Speaker 03: However, the size standard for a non-manufacturer is 500 employees. [00:04:37] Speaker 04: You didn't challenge the code, right? [00:04:39] Speaker 04: No, we didn't challenge that. [00:04:40] Speaker 04: We're trying to enforce that. [00:04:42] Speaker 04: The question is, what is the code? [00:04:44] Speaker 04: What's the size standard under this code? [00:04:47] Speaker 04: What's the size standard under this code? [00:04:50] Speaker 03: 150 employees under an IT [00:04:53] Speaker 03: value-added reseller exception to that NAICS code. [00:04:57] Speaker 03: It's 150 employees. [00:04:58] Speaker 03: We don't dispute that the NAICS code. [00:05:00] Speaker 04: You don't satisfy the 150 requirement. [00:05:02] Speaker 03: We do not and we never claim that we did. [00:05:04] Speaker 04: So how is it that you can get this contract if you have over 150 employees? [00:05:11] Speaker 03: Because the solicitation said that the small business size standard for a non-manufacturer like my client [00:05:18] Speaker 03: is five hundred employees and the solicitation... But they made a mistake. [00:05:21] Speaker 04: If they made a mistake, the government still is obligated to terminate the contract because it wasn't properly awarded. [00:05:27] Speaker 03: Your Honor, I think it's not a mistake when the government repeatedly sets out the size standard in the instructions to lawful... But it's ambiguous, is it not? [00:05:48] Speaker 03: Well, I don't think it's ambiguous. [00:05:51] Speaker 03: You mean the provision itself, the instructions to offerors? [00:05:54] Speaker 03: The contract itself is ambiguous. [00:05:57] Speaker 03: It's not, Your Honor. [00:05:58] Speaker 03: And that's not what the Court of Federal Claims held. [00:06:03] Speaker 03: The instructions to offerors, the section has two sentences. [00:06:07] Speaker 03: The first sentence says, the size standard for this solicitation is the NAICS code, which here is 150 employees. [00:06:15] Speaker 02: And the next sentence says... So you say without the Q&As, it's unambiguous. [00:06:19] Speaker 03: That's right. [00:06:21] Speaker 03: And assuming that the Q&As rendered it ambiguous, that ambiguity was cured by later amendments which repeated the 500-employee size standard here. [00:06:35] Speaker 03: If the government did not want to impose a 500-employee size standard, it was incumbent on the government to say so in the solicitation. [00:06:44] Speaker 03: But they didn't. [00:06:45] Speaker 03: They repeatedly set it forth, including in the final RFP. [00:06:50] Speaker 04: How is it possible for the government to continue a contract which was improperly awarded? [00:06:57] Speaker 04: FAR Section 121.1009G2 specifically says if there's an award [00:07:06] Speaker 04: that was improper and the OHA determines that it didn't comply with the size requirements. [00:07:12] Speaker 04: It says the contracting officer shall either terminate the contract or not exercise the next option. [00:07:18] Speaker 04: That's it, you know. [00:07:19] Speaker 04: It doesn't make any difference if they made a mistake in describing the size standard in the contract. [00:07:25] Speaker 04: If the size standard is 150 and you don't have 150, they have to terminate the contract. [00:07:32] Speaker 03: No? [00:07:33] Speaker 03: Your Honor, those regulations aren't controlling here. [00:07:36] Speaker 03: The reason is that we brought a bid protest action in the Court of Federal Claims, which has jurisdiction over this kind of exact protest by an awardee under this court's decision and systems application technology 2012 decision. [00:07:50] Speaker 04: I understand that you have a bid protest, but I don't understand why the regulations. [00:07:54] Speaker 04: We're trying to figure out whether the government could properly terminate this contract, right? [00:07:59] Speaker 04: Right. [00:08:00] Speaker 04: And the regulations seem to say, [00:08:02] Speaker 04: If the size standard makes the bidder ineligible, you're supposed to terminate the contract. [00:08:09] Speaker 03: Right. [00:08:09] Speaker 03: Your Honor, what I'm challenging in your question is your statement that the regulations limit the size standard to the NAICS code, which here is 150 employees. [00:08:22] Speaker 03: They do not. [00:08:23] Speaker 03: The Small Business Administration's regulation at 13 CFR 121.402 is entitled [00:08:30] Speaker 03: What size standards are applicable to federal government contracting programs? [00:08:34] Speaker 04: I understand that. [00:08:35] Speaker 04: And I think you have an argument that the size standard should not be 150 because of the way that regulation is written. [00:08:43] Speaker 04: But I'm just trying to get you to focus on what it seems to me is the correct standard. [00:08:47] Speaker 04: And that is, what was the right size standard for this contract? [00:08:51] Speaker 03: 500 employees, just like the solicitation said. [00:08:54] Speaker 03: Why is that true? [00:08:55] Speaker 03: Because that regulation, what are the size standards, says in paragraph A, [00:08:59] Speaker 03: You're small if you meet the NAICS code. [00:09:01] Speaker 03: In paragraph B2, it says, for a non-manufacturer, a non-manufacturer will be deemed small if it has fewer than 500 employees. [00:09:09] Speaker 03: So why isn't the 500-employee size standard proper here, just like the solicitation said? [00:09:18] Speaker 03: So, Your Honor, have I answered your question? [00:09:22] Speaker 03: Am I missing something? [00:09:24] Speaker 03: No, I think you've answered it. [00:09:28] Speaker 03: OK. [00:09:28] Speaker 03: OK. [00:09:29] Speaker 03: So my first point is that assuming that the questions and answers rendered this solicitation ambiguous as to whether or not the 500-employee size standard applied, that was cured in later amendments, which repeated the 500-employee size standard. [00:09:47] Speaker 03: The second error that the court made was its interpretation of the instructions to offer us the FAR clause, because the court held that [00:09:57] Speaker 03: That clause requires an offeror to meet both the NAICS code and the 500 employee size standard if you're a non-manufacturer. [00:10:06] Speaker 03: And that's contrary to the plain meaning of that. [00:10:10] Speaker 03: It requires us to put in words in that provision that are not there. [00:10:15] Speaker 03: And it leads to an absurd result. [00:10:19] Speaker 03: The court below here said that that provision means that you have to have [00:10:24] Speaker 03: fewer than 500 employees to compete for the contract, but you have to have fewer than 150 employees to be eligible for award. [00:10:32] Speaker 03: Well, that doesn't give meaning to the 500 employees standard in that sentence. [00:10:37] Speaker 03: No one's going to compete for a contract if they're ineligible for award. [00:10:40] Speaker 03: So it doesn't give meaning to it. [00:10:42] Speaker 03: So that's an improper interpretation. [00:10:45] Speaker 03: The government's position here, and I think Judge Dyke, you were getting to this, that the Small Business Act requires that the only size standard [00:10:53] Speaker 03: for a procurement is in the NAICS code is refuted by the SBA's regulations, which I say 121.402, the size standards regulation. [00:11:04] Speaker 03: Paragraph A says you're small if you meet the NAICS code. [00:11:07] Speaker 03: Paragraph B2 says that a non-manufacturer is deemed small if it has fewer than 500 employees. [00:11:15] Speaker 03: The instructions to offer rights here were completely consistent with that. [00:11:21] Speaker 03: And it's undisputed that my client meets that standard. [00:11:25] Speaker 03: So the contract was properly awarded to my client and the court's decision to the contrary should be reversed. [00:11:34] Speaker 03: Your honor, I've reserved five minutes for rebuttal. [00:11:37] Speaker 03: And if you have questions of me, I'd love to answer them. [00:11:40] Speaker 03: Otherwise I'll reserve my remaining time for rebuttal. [00:11:43] Speaker 04: Okay, you can reserve the remainder of your time. [00:11:51] Speaker 04: Ms. [00:11:51] Speaker 04: Speck? [00:11:52] Speaker 00: Good morning, Your Honors. [00:11:53] Speaker 00: May it please the Court? [00:11:55] Speaker 04: We respectfully request that the Court affirm that... Am I right that the government has an obligation to terminate the contract under the regulations if the contract states the wrong size standard and the Small Business Administration determines that the correct standard in this case 150, right? [00:12:13] Speaker 00: Yes, Your Honor. [00:12:14] Speaker 04: Okay. [00:12:15] Speaker 04: I don't think you made that very clear in your brief. [00:12:17] Speaker 04: So the question then boils down to whether [00:12:20] Speaker 04: the regulations impose here a 150-size standard or a 500-size standard. [00:12:26] Speaker 04: And I think the regulations are a mess because they seem to be internally contradictory. [00:12:34] Speaker 00: Well, Your Honor, to back up, you correctly explained that there are Section 15A of the Small Business Act permits the SBA to set small business set-asides. [00:12:46] Speaker 00: And then Section 3A for the Act permits the SBA [00:12:49] Speaker 00: to set size standards, and it establishes that only the SBA may set size standards. [00:12:55] Speaker 00: And here the SBA has clearly set a 150 employee size standard for this NACE code. [00:13:02] Speaker 04: They considered if I... Why does it have this reference to the non-manufacturing rule, which would seem to be completely in conflict with the 150? [00:13:11] Speaker 00: Well, Your Honor, the non-manufacturer rule is intended only to be for [00:13:16] Speaker 00: for procurements for supplies. [00:13:19] Speaker 00: This procurement was designated. [00:13:22] Speaker 04: This was a services contract, and yet the regulations seem to say that the non-manufacturing rule has something to do with it, right? [00:13:29] Speaker 00: Yes, Your Honor. [00:13:31] Speaker 00: With the non-manufacturer rule, basically, once something's been set aside for a small business, then there are certain limitations that still govern, and those are the limitations on subcontracting. [00:13:43] Speaker 00: And there are different limitations [00:13:45] Speaker 00: Those are in Section 46 of the Act if it's a procurement for services or for supplies or if you're buying supplies from the person who manufactures it or if you're buying supplies from someone who's reselling a product produced by somebody else. [00:14:00] Speaker 00: And that's what we're dealing with here, reselling a product and providing services for something that is produced by someone else. [00:14:07] Speaker 00: In that case, the non-manufacturer rule would then provide additional restrictions and that you have to provide [00:14:14] Speaker 00: the product of a domestic small business manufacturer. [00:14:16] Speaker 02: So the 150 employee employer has to buy supplies from a supplier that has no more than 500, is that what you're saying? [00:14:30] Speaker 00: Well, Your Honor, our position, I believe under the current regulation that would be the case because this still is designated for services. [00:14:38] Speaker 00: At the time this was the SBA's regulations provide that the size is determined at the date itself certifies as small. [00:14:46] Speaker 00: At the time the regulation didn't apply the non-manufacturer rule. [00:14:53] Speaker 04: At the time the regulation didn't make sense in referring to the non-manufacturer rule, right? [00:15:00] Speaker 04: I'm sorry, Your Honor. [00:15:00] Speaker 04: At the time of this solicitation, the regulation concerning this code, [00:15:08] Speaker 04: in the reference to the non-manufacturer rule made no sense, right? [00:15:13] Speaker 00: I don't know that it made no sense. [00:15:15] Speaker 00: It didn't require, to the extent there was a supply component, which was acknowledged in the 2016 final rule, it said that to the extent there's a supply component for these information. [00:15:26] Speaker 02: Why didn't you just say it was at least ambiguous? [00:15:29] Speaker 00: I do find this whole area of law somewhat confusing. [00:15:31] Speaker 00: I would acknowledge that to the court. [00:15:33] Speaker 00: But I think the bottom line is even if they had ever [00:15:35] Speaker 00: qualified, the federal acquisition 52.212-1 is known as a shorthand for the non-manufacturer rule. [00:15:44] Speaker 00: And the statute specifically states that in order to qualify under the non-manufacturer rule, so even assuming that applies, that you have to meet the size standard specified in the NACE code, [00:15:58] Speaker 04: So even setting aside, and the law is well established, to the extent it all conflicts with the... Look at the footnote 18, and unfortunately you did not number the pages of your appendix, but this is in 121.201. [00:16:11] Speaker 04: Yes, Your Honor. [00:16:22] Speaker 04: Okay, the in addition sentence. [00:16:24] Speaker 04: The offeror must comply with the manufacturing performance requirements or comply with non-manufacturing rule, which among other things would require that they be a retailer, right? [00:16:41] Speaker 00: Yes, Your Honor. [00:16:42] Speaker 04: But they don't have to be a retailer. [00:16:43] Speaker 04: It doesn't make any sense. [00:16:47] Speaker 00: I believe the regulation for 406, the one that was in place at the time, [00:16:54] Speaker 00: required that to be, again, we would submit that the regulation, that the statute is clear that you have to meet the NACE code specified for the procurement and whatever is specified in regulations that... You're not addressing the in addition sentence. [00:17:07] Speaker 04: That's the problem here. [00:17:09] Speaker 04: If you stop the footnote before the in addition sentence, it's understandable. [00:17:14] Speaker 04: The in addition sentence makes it not understandable because it talks about compliance with non-manufacturer rule which does not, in fact, [00:17:24] Speaker 04: exist as a requirement with respect to someone in this code. [00:17:41] Speaker 01: Even if Judge Dice is right, doesn't at best this create a patent ambiguity? [00:17:46] Speaker 01: And so the lower court's untimeliness decision would still stand. [00:17:50] Speaker 01: So couldn't you just say, even if you are completely right, [00:17:54] Speaker 01: Judge Dyke about all of this at best that creates an ambiguity of the number of people? [00:17:59] Speaker 00: Yes, Your Honor. [00:18:00] Speaker 00: Certainly we would submit that the SBA has, pardon me, that NASA articulated at least five times that a 150-employee size standard applied. [00:18:10] Speaker 04: But it doesn't make any difference what the solicitation said. [00:18:12] Speaker 04: You said if it's contrary, the question is what the regulation required. [00:18:16] Speaker 00: Oh, I believe the question, Your Honor, is what the statute requires. [00:18:19] Speaker 04: What the statute and the regulation require. [00:18:22] Speaker 04: And if the award was contrary to the statute and regulations, the contract should be terminated. [00:18:27] Speaker 04: If it wasn't contrary to the statute and regulations, it shouldn't be terminated. [00:18:31] Speaker 04: And here, you went to the Small Business Administration. [00:18:35] Speaker 04: You got a ruling as to what was required. [00:18:37] Speaker 04: They said 150. [00:18:38] Speaker 04: So it's not so much patent or latent ambiguity. [00:18:43] Speaker 04: It's a question of our deference, right, to the Small Business Administration's interpretation of the regulation in these circumstances. [00:18:53] Speaker 00: Well, Your Honor, I would again submit that the statute... No, no, no. [00:18:56] Speaker 00: Try to address what I'm saying. [00:18:59] Speaker 00: Your Honor, yes, we... Is there a new hour difference in this case? [00:19:02] Speaker 00: I don't remember it being cited anywhere. [00:19:04] Speaker 00: Your Honor, we articulated it in terms of the statute, because to the extent any regulation conflicts with the statute, then that would be... It's always established that the regulation yield to the statute. [00:19:17] Speaker 00: And here the statute says, even if the non-manufacturer rule applies, they would have to satisfy [00:19:22] Speaker 00: the size standard specified. [00:19:23] Speaker 00: It says in the statute, the standard industrial code, which in the Phoenix decision of the Office of Hearings and Appeals, understood now to be the North American Industrial Classification System, or NACE code. [00:19:36] Speaker 00: So the statute is clear that they would, under no circumstances, be entitled to the protection of the non-manufacturer rule because they do not meet the size standard established for the solicitation, which the size standards are established in the statute [00:19:49] Speaker 00: through 15A and through 3A, which says that only the SBA can set size standards. [00:19:54] Speaker 00: So to the extent anything in the regulation conflicts with the statute, it has to yield to the statute, which says that they have to meet the size standards specified by the NACE code. [00:20:07] Speaker 04: Right. [00:20:08] Speaker 04: And the footnote 18 is part of the NACE code. [00:20:20] Speaker 00: I don't... The NACE code as the SBA established is that... It's not a footnote 18 part of the NACE code. [00:20:26] Speaker 04: It's a footnote to that NACE code provision. [00:20:31] Speaker 00: Your Honor, the NACE code that the SBA has articulated, again, in both rules, that it was establishing a 150-employee size standard. [00:20:39] Speaker 00: It actually had wanted to establish a 500-employee... Answer my question. [00:20:43] Speaker 04: Is not footnote 18 a footnote concerning the NACE code? [00:20:48] Speaker 00: It's an explanation to the NACE code, but I think the SBA has specified 150, 541, 519 says 150 employees. [00:20:58] Speaker 00: And that is understood as been expressed in the rule and the subsequent rule to be the size standard for this solicitation. [00:21:05] Speaker 00: And that is what OHA upheld. [00:21:08] Speaker 00: Certainly, as the court explained in the Palladian Partners decision and is established in the regulation, it is the SBA and the Office of Hearing and Appeals [00:21:16] Speaker 00: that's required to set size standards. [00:21:18] Speaker 00: And the only size standard the SBA has repeatedly reiterated for this is 150 employees. [00:21:29] Speaker 00: Your Honor, I guess I don't understand which sentence that you're citing to that you believe would change this to be a different size standard. [00:21:40] Speaker 04: I'm not saying it changes it. [00:21:41] Speaker 04: I'm saying it's self-contradictory and confusing. [00:21:44] Speaker 04: to have this explanation of the NACE code to talk about the non-manufacturer rule. [00:21:56] Speaker 04: You have that footnote 18 there? [00:21:58] Speaker 00: And you're looking at the one that I attached to my brief at page 135 from the version from 2015. [00:22:06] Speaker 04: My copy doesn't have any pages. [00:22:09] Speaker 00: The version from 2013. [00:22:10] Speaker 00: I'm just looking at the top from docket 25-2. [00:22:12] Speaker 00: We attached the version. [00:22:14] Speaker 04: I'm looking at the page for 2 attached, which has 121.201. [00:22:20] Speaker 00: Yes, Your Honor. [00:22:21] Speaker 04: And it has a footnote 18 to this NAICS code. [00:22:26] Speaker 00: Yes, Your Honor. [00:22:27] Speaker 00: And the sentence that you're looking at is? [00:22:29] Speaker 04: The in addition sentence. [00:22:55] Speaker 00: I'm sorry, I don't see a sentence beginning with in addition under footnote 18. [00:23:06] Speaker 04: It says NACE code 541519. [00:23:09] Speaker 04: That's the one we're dealing with here, right? [00:23:12] Speaker 04: Yes. [00:23:14] Speaker 04: And it's footnote 18. [00:23:15] Speaker 04: It begins NACE code 541-519, information technology value area reseller, blah, blah, blah. [00:23:25] Speaker 04: Yes, Your Honor. [00:23:26] Speaker 04: And toward the end of that, there's a sentence that begins, in addition. [00:23:35] Speaker 00: I believe the intent of complying with the non-manufacturing performance requirements is merely to say that there, I guess, is to be in addition, the offeror must comply with the manufacturing performance requirements or require with... That's the new reg, Your Honor? [00:23:55] Speaker 00: The reg that was in place in that changed in 2016. [00:24:00] Speaker 00: The reg that was in place in 2013 to 2014 says, for purposes of government procurement and information technology procurement, I don't think it contains that in addition sentence, Your Honor. [00:24:16] Speaker 02: There was an added clarification. [00:24:20] Speaker 00: What happened in 2016 was that the SBA became concerned that they wanted, they were concerned that this has a supply component, although it still requires there to be a 15 to 15 percent value added services. [00:24:33] Speaker 00: In 2016, which would not be applicable to this procurement, the SBA determined that given that there was a supply component, that they would have to comply with [00:24:43] Speaker 00: the requirement of the non-manufacturer rule that you provide the product of a domestic small business manufacturer, something that they were not required to do before. [00:24:52] Speaker 00: So even though it was still a service's NACE code, they were establishing this additional requirement. [00:24:57] Speaker 00: Again, at that point when they promulgated the rule in 2016, they reiterated the 150 employee size standard. [00:25:06] Speaker 04: So even though... Where is the provision that applies to this procurement? [00:25:10] Speaker 00: The provision that applies to this procurement was attached to my brief. [00:25:15] Speaker 00: It's at page 135. [00:25:16] Speaker 00: I didn't number it because it was not part of our appendix. [00:25:19] Speaker 00: But I filed an addendum with our brief that... That's what I'm looking at. [00:25:25] Speaker 04: My copy does not have any page numbers on it. [00:25:28] Speaker 00: I'm just looking at the top under what I filed. [00:25:30] Speaker 04: Your Honor, I... The first page of this addendum that I have here. [00:25:39] Speaker 00: I believe I also, Your Honor, pardon me, included two copies of the regulations. [00:25:43] Speaker 00: So the page that I believe, Your Honor, is looking at is the effective December 21st, 2016. [00:25:50] Speaker 04: I'm asking where the provision is. [00:25:52] Speaker 00: Yes, Your Honor, it's two pages before that. [00:25:55] Speaker 00: So there is the note 18, and that is from the section that was applicable to this procurement. [00:26:03] Speaker 00: If you turn a prior page, you'll see that there was a 121.201 and that it was effective from November 27, 2013 to January 21, 2014. [00:26:13] Speaker 00: And then you will see the NACE code there that does not have the in addition language. [00:26:23] Speaker 00: And I believe even York Telecom has acknowledged in its, and again, the shift in 2016 was just to [00:26:30] Speaker 00: to the extent they are supplying products to ensure that they're supplying the product for the supply component to ensure that it was the product of a small business manufacturer. [00:26:40] Speaker 00: I apologize for the confusion, Your Honor. [00:26:48] Speaker 00: And finally, we would submit that there are SPA decisions and court decisions that would establish that as long as the subsequent amendments to the extent that the court accepts our [00:26:57] Speaker 00: patent late in the ambiguity argument. [00:27:00] Speaker 00: The subsequent amendments did not change the size standard. [00:27:03] Speaker 04: The engineering consulting decision versus late in the ambiguity argument under your theory is irrelevant. [00:27:09] Speaker 04: The only question is, did the contract state the right size standard under the statute of regulations, right? [00:27:18] Speaker 00: We've argued it both ways, Your Honor. [00:27:20] Speaker 00: We've argued that we've argued under the blue and gold argument. [00:27:24] Speaker 00: We've also argued that if the court determined it's not waived, [00:27:27] Speaker 00: Then the size standard is 150 employees. [00:27:29] Speaker 04: But is not your position that regardless of what the contract said, if the contract made an award that was improper under the size standards, it has to be terminated, right? [00:27:41] Speaker 04: Yes, Your Honor. [00:27:42] Speaker 02: Or not renewed? [00:27:44] Speaker 00: Yes. [00:27:44] Speaker 00: Or the option not exercised. [00:27:48] Speaker 04: OK. [00:27:48] Speaker 04: Thank you. [00:27:56] Speaker 04: Mr. Donahue, you've got almost five minutes. [00:27:59] Speaker 03: Your Honor, I tried to simplify this for the court and I obviously failed. [00:28:04] Speaker 03: I'm going to try again. [00:28:08] Speaker 03: The government's position here is that the non-manufacturer rule, that regulation and this solicitation provision for 500 employees, that that all applies if this is a supply contract. [00:28:23] Speaker 03: And Judge Dyke, you were saying this NAICS code [00:28:26] Speaker 03: is a services NAICS code. [00:28:29] Speaker 03: And that's why the non-manufacturer rule and its 500 employee size standard doesn't apply here. [00:28:37] Speaker 03: I want to try to persuade you that this footnote 18 that the court was addressing with my opponent says that this ITVAR exception [00:28:55] Speaker 02: Are you talking about the one that was in effect? [00:28:57] Speaker 03: I'm talking about the one that was in effect at the time. [00:29:02] Speaker 04: And the government correctly identified which one was in effect at the time, right? [00:29:07] Speaker 03: I agree with that. [00:29:09] Speaker 03: Judge, the size standard regulation, this is 121-406-B-2, 406-B, says that the contracting officer has to choose the NAICS code [00:29:24] Speaker 03: that's appropriate for the principal purpose of the contract. [00:29:27] Speaker 03: If the principal purpose is supplies, then it should provide a supplies NAICS code. [00:29:33] Speaker 03: This exception to NAICS code 541.519 says in the sentence right before the one that you were asking about, the in addition one, in the appellee's appendix to its brief page, [00:29:53] Speaker 03: 135. [00:29:54] Speaker 03: The sentence I want to focus on, it says, for purposes of government procurement and information technology procurement classified under this industry category, that is this NAICS code, must consist of at least 15% and not more than 50% of value added services as measured by the total contract price. [00:30:19] Speaker 03: And then in the last sentence, [00:30:23] Speaker 03: It again says that the value-added services have to be less than 50% of the total contract price. [00:30:43] Speaker 03: Here, that means that this ITVAR exception to 541.519 [00:30:50] Speaker 03: The contracting officer had to determine that the principal purpose of this was supplies and that services counted for less than 50%. [00:30:58] Speaker 03: And so this is a supply NAICS code. [00:31:03] Speaker 04: Even though it's... But you never challenged the code. [00:31:07] Speaker 04: And under the regulations, you're supposed to challenge the code. [00:31:09] Speaker 03: We are not challenging the code, Your Honor. [00:31:12] Speaker 03: And I didn't... I'm sorry for interrupting you. [00:31:14] Speaker 03: We're trying to enforce this solicitation. [00:31:17] Speaker 03: This solicitation stated a size standard that my client meets, 500 employees. [00:31:21] Speaker 03: The argument is that the FAR got it wrong and that the contracting officer got it wrong, but the burden was on my client to know all that and to not bid the contract or object about it. [00:31:34] Speaker 03: And that's not only unfair, it's incorrect because the 500 employee size standard stated in the solicitation applies, and the government admits this, if this NAICS code [00:31:46] Speaker 03: The SIFAR exception is a supply code NAICS code. [00:31:51] Speaker 03: And because it says it's only appropriate where services are less than 50%, it says that it is a supply NAICS code. [00:32:00] Speaker 03: In other words, the IT equipment accounts for more than 50% of the contract price. [00:32:05] Speaker 03: And so it's a supply NAICS code. [00:32:08] Speaker 03: And thus, there's no reason why the 500 employee size standards stated in the solicitation doesn't apply. [00:32:15] Speaker 03: under the regulations, both the size standards and the non-manufacturer rule. [00:32:21] Speaker 04: OK. [00:32:21] Speaker 04: Thank you, Mr. Donahue. [00:32:22] Speaker 04: Thank both counsels. [00:32:23] Speaker 04: The case is submitted. [00:32:24] Speaker 04: That concludes our session. [00:32:26] Speaker 03: Thank you very much, Your Honor. [00:32:28] Speaker 01: All rise. [00:32:30] Speaker 01: The Honorable Court is adjourned until tomorrow morning at 10 o'clock AM.