In an unsealed opinion on October 30, 2017, U.S. Court of Federal Claims Judge Nancy Firestone held that a company, which should have been deemed ineligible from bidding, was allowed to proceed with a contract award because cancelling the deal would be too harmful to the government.
The dispute arose over a $103 million small business set-aside NASA environmental and health services contract. A Small Business Administration (SBA) ruling incorrectly deemed Integrated Mission Support Services LLC (IMSS) eligible for the small business set-aside contract.
Mentor Protégé Joint Ventures Avoid More Restrictions in Federal Contracts
Under SBA rules, small businesses can pair up with larger businesses in a mentor-protégé joint venture (MPJV). A MPJV is an exception to the usual restrictions on larger businesses participating in small business set-aside federal contracts.
Following the 8(a) MPJV rules, IMSS formed as a MPJV of Herndon Solutions Group LLC with InoMedic Health Application. The Nevada SBA office approved the MPJV in December 2013. Complying with the SBA regulations at the time, the agreement was to expire after a year unless the SBA reviewed the MPJV and approved an extension. This differs from mentor-protégé JVs created post 2016, which now automatically renew each year up to three years without SBA review under 13 C.F.R. § 125.9(e)(5).
When IMSS submitted its bid for the NASA contract in January 2015, the MPJV agreement had not been reviewed by the SBA and therefore, should have been considered expired in December 2014. Without a valid JV agreement, IMSS should have been ineligible from submitting a bid for the potential $103 million, five-year contract.
Bidders Protest IMSS’s Eligibility for Small Business Set-Aside Contracts
Citing to this expiration, Straughan Environmental Inc.—one of the five bidders—filed a protest over IMSS’s eligibility. The protest was stayed until the SBA issued a formal size determination of IMSS at request of the NASA Contracting Officer. After a series of appeals, the SBA issued a ruling in favor of IMSS, prompting further protest. Judge Firestone said this ruling violated SBA’s regulations, precedent, and the language in the relevant mentor-protégé agreement.
Judge Did Not Grant Injunction and Allowed Current Contracts to Stay in Place
In addition, despite the government arguing Straughan’s protest as untimely, Judge Firestone found that Straughan had standing. She ruled—in an issue of first impression for the court—that when a Contracting Officer seeks a size determination, the standard five-day window for a protestor to file a size protest after notification of a likely contract award does not apply.
Nonetheless, Judge Firestone refused to grant an injunction and set aside the original contract award and further allowed a two-year option recently exercised by NASA to remain in place. She justified this by finding that the “balance of hardships” weighed heavily in favor of the government. She deemed that the injunctive relief sought by the protester would cause substantial risk of disruption of the critical services currently provided under the contract—including support for emergency medical responses, treatment of occupational injuries and illnesses, and disposal of hazardous and universal waste. In addition, it would create a significant risk of damages to the workforce, additional costs for reprocurement, a higher-priced bridge contract, and likely, more litigation.
Judge Firestone found that if the injunction was granted, the impact would be detrimental to NASA’s public mission. In contrast, Straughan—not originally even considered to be one of the two strongest bidders—had only made speculative arguments that it would potentially suffer lost profits without an injunction and had also contributed to the government’s harm by failing to renew a 2015 motion for a preliminary injunction. Therefore, despite Straughan proving the ineligibility of the awardee, they still found themselves without relief.