Tinton Falls Lodging Realty, LLC v. United States

United States Court of Appeals

for the Federal Circuit

______________________

TINTON FALLS LODGING REALTY, LLC,

Plaintiff-Appellant

v.

UNITED STATES,

DMC MANAGEMENT SERVICES, LLC,

Defendants-Appellees

______________________

2014-5140

______________________

Appeal from the United States Court of Federal

Claims in No. 1:14-cv-00353-EGB, Senior Judge Eric G.

Bruggink.

______________________

Decided: September 2, 2015

______________________

LEE DOUGHERTY, Offit Kurman, Attorneys at Law, Vi-

enna, VA, argued for plaintiff-appellant. Also represented

by KATHERINE AMANDA STRAW.

NATHANAEL YALE, Commercial Litigation Branch, Civ-

il Division, United States Department of Justice, Wash-

ington, DC, argued for defendant-appellee United States.

Also represented by JOYCE R. BRANDA, ROBERT E.

KIRSCHMAN, JR., DEBORAH A. BYNUM; DAVIS YOUNG,

JEFFREY DAVENPORT, Military Sealift Command, United

States Navy, Norfolk, VA.

2 TINTON FALLS LODGING REALTY v. US

JONATHAN TODD WILLIAMS, Piliero Mazza PLLC,

Washington, DC, argued for defendant-appellee DMC

Management Services, LLC. Also represented by

KATHRYN V. FLOOD.

______________________

Before DYK, REYNA, and CHEN, Circuit Judges.

Opinion for the court filed by Circuit Judge CHEN.

Dissenting opinion filed by Circuit Judge REYNA.

CHEN, Circuit Judge.

Tinton Falls Lodging Realty, LLC (Tinton Falls) ap-

peals from a final judgment of the United States Court of

Federal Claims (Claims Court) entered in favor of appel-

lees the government and DMC Management Services,

LLC (DMC) after granting motions on the administrative

record that DMC was eligible for an award of a small

business set-aside contract. See Joint Appendix (J.A.)

3774–75. Tinton Falls claims this was error. We affirm.

BACKGROUND

On February 19, 2013, the United States Department

of the Navy, Military Sealift Command, in Norfolk, Vir-

ginia (MSC), issued contract Solicitation Number N32205-

13-R-6005 (the solicitation). The solicitation involved the

management and coordination of lodging and transporta-

tion services for federal civil service mariners (CIVMARs)

who were completing required training at the MSC Train-

ing Center in Freehold, New Jersey. J.A. 172, 178–79.

MSC issued the solicitation as a total small business set-

aside under North American Industrial Classification

System (NAICS) code 721110 (“Hotels (except Casino

Hotels)”). J.A. 172.

The scope of work for the solicitation required the

winning contractor 1) to provide a sufficient number of

TINTON FALLS LODGING REALTY v. US 3

rooms at lodging facilities (i.e. hotels) in the vicinity of the

MSC Training Center for CIVMARs attending training

throughout the life of the contract, and 2) to provide

transportation to and from those hotels to the MSC Train-

ing Center. J.A. 248–51. The contractor was required to

specify a primary hotel and two or more overflow, or

backup, hotels. J.A. 248. More than half of the CIVMARs

attending training had to be housed at the primary hotel

at all times. Id. The solicitation noted that based on

historical data, MSC would require around 65 hotel rooms

each night. Id. This number of rooms, however, often

varied between 25 and 120, and the contractor was ex-

pected to ensure a sufficient number of rooms were avail-

able to house CIVMARs for the duration of the contract,

regardless of how many hotel rooms MSC might require

each night. Id. The solicitation made clear that MSC

would be responsible only for the actual number of hotel

rooms needed each night to house CIVMARs attending

training. Id.

For transportation services, the solicitation required

the contractor to provide each CIVMAR with daily trans-

portation to and from the MSC Training Center whenever

classes were scheduled, including weekends and holidays.

J.A. 251. The contractor was required to “coordinate

daily” with the MSC point of contact to determine how

many trips between the primary and overflow hotels and

the training center were needed to accommodate each

CIVMAR’s training schedule and to ensure “timely logis-

tical arrangements” for those trips. J.A. 250. As with the

hotel rooms, the solicitation made clear that MSC would

be responsible only for the actual number of trips needed

to transport CIVMARs to and from the training center.

J.A. 251.

The scope of work also required the contractor to per-

form various other services, such as forwarding copies of

any police reports based on illegal acts by, and maintain-

ing plans to provide emergency medical treatment and/or

4 TINTON FALLS LODGING REALTY v. US

transportation to a hospital for, CIVMARs housed at the

primary and overflow hotels. J.A. 249. The contractor

was also required to verify the identity of each CIVMAR

who checked into a primary or overflow hotel, maintain a

daily sign-in record, and transmit this sign-in record to

the MSC point of contact. J.A. 251.

Pursuant to Federal Acquisition Regulation (FAR)

clause 52.212-2, MSC evaluated bidders based on their

ability to satisfy the technical requirements of the solici-

tation, past performance on comparable government

contracts (if any), and price. For the solicitation’s tech-

nical requirements, bidders were evaluated based on four

sub-factors: 1) general requirements of the primary and

overflow hotels, 2) fire and safety policies and procedures

of the primary and overflow hotels, 3) health and sanita-

tion of the primary and overflow hotels, and 4) transpor-

tation to and from the primary and overflow hotels to the

MSC Training Center. J.A. 222–24. For past perfor-

mance, bidders had to provide evidence of performance

within the past three years of a government contract with

similar scope, magnitude, and complexity to the require-

ments of the solicitation. J.A. 255. For price, MSC indi-

cated that it would evaluate bid proposals in accordance

with FAR 15.404-1(b). J.A. 256.

MSC received bid proposals from multiple contractors.

For reasons unclear from the record on appeal, MSC

found all of the submitted proposals technically unac-

ceptable, thus precluding award of the contract to any of

the interested bidders. Appellee United States Br. at 9.

MSC’s contract review board then recommended that

MSC establish a “competitive range” of bidders and hold

discussions with those bidders in order to give them an

opportunity to address MSC’s technical concerns and

revise pricing to remain competitive, in accordance with

FAR 15.306(c)–(d). Id. The competitive range consisted

of all the initial bidders, each of which revised and re-

submitted its initial proposal. MSC accepted the bid

TINTON FALLS LODGING REALTY v. US 5

proposal of Mali, Inc. (Mali), whose revised bid was the

lowest-priced, technically acceptable, and otherwise

eligible proposal.

Losing bidder DMC filed a size protest with the Area

Office of the Small Business Administration (SBA). In

evaluating the protest, the SBA Area Office found that

Mali was not a small business. In particular, the Area

Office determined that Mali, along with Tinton Falls and

two other companies that had submitted bid proposals,

were part of the same family of hotels operated under a

parent entity called Hotels Unlimited, Inc. (Hotels Unlim-

ited). J.A. 2745–53. After reviewing Mali’s articles of

incorporation, by-laws, financial statements, and income

tax returns, the Area Office concluded that Mali was

“affiliated” with Hotels Unlimited for purposes of the

solicitation, and that the combined entity—which had

annual receipts of above $30 million—did not qualify as a

“small business concern” under the applicable NAICS

code. J.A. 2752–53, 2770. Mali appealed this determina-

tion to the SBA’s Office of Hearing and Appeals (SBA-

OHA), which affirmed the Area Office’s conclusion. J.A.

2779–83. Because DMC had submitted the next lowest-

priced, technically acceptable bid proposal, it was then

declared as the successful bidder. J.A. 2654.

Tinton Falls then filed a size protest with the MSC

contracting officer. Tinton Falls explained that DMC

intended to subcontract the lodging services portion of the

contract—which accounted for more than 80% of the value

of the contract—to hotels that did not qualify as small

businesses. J.A. 3457, 3459. As a result, Tinton Falls

alleged that DMC was unusually reliant upon its subcon-

tractors and would not itself be performing the “primary

and vital requirements of the contract”—i.e., the provision

of lodging services—and thus had a relationship with the

subcontracted hotels that violated the “ostensible subcon-

tractor rule,” 13 C.F.R. § 121.103(h)(4). J.A. 2830–37.

The Area Office disagreed, concluding that 1) DMC would

6 TINTON FALLS LODGING REALTY v. US

perform the majority of the primary and vital require-

ments of the contract—the management and coordination

of lodging and transportation services to MSC—and 2)

DMC was not unusually reliant on any of its subcontrac-

tors. J.A. 3459–64. Therefore, because DMC qualified as

a small business under the applicable NAICS code and

had no affiliates or ostensible subcontractors, it was an

eligible small business for purposes of the solicitation.

J.A. 3465.

Tinton Falls appealed to the SBA-OHA, arguing that

the Area Office committed clear error in its decision.

While Tinton Falls’ appeal was pending at the SBA-OHA,

the MSC contracting officer filed his own size protest of

Tinton Falls and two other bidders with the Area Office,

urging that these three entities (like Mali, the subject of

the earlier determination) also did not qualify as small

businesses. The protest asserted that the contracting

officer believed the remaining acceptable bidders (other

than DMC) were not small businesses under the applica-

ble NAICS code due to their affiliation with Mali and

Hotels Unlimited. J.A. 2786. The Area Office agreed,

issuing a size determination that due to their affiliation

with Mali, none of the remaining Hotel Unlimited entities

qualified as a small business for purposes of the solicita-

tion. J.A. 2815.

The SBA-OHA then rejected Tinton Falls’ appeal and

upheld the Area Office decision that the primary and vital

requirements of the solicitation were a coordinated pack-

age of rooms, transportation, and other services. J.A.

3560. The SBA-OHA determined that DMC would be

performing a significant portion of the contract’s primary

and vital requirements: coordinating hotel rooms and

transportation services to meet MSC’s needs. J.A. 3560–

61. Thus, the SBA-OHA determined that DMC’s relation-

ship with its subcontracted hotels did not violate the

ostensible contractor rule and that DMC could be consid-

ered a small business concern for purposes of the solicita-

TINTON FALLS LODGING REALTY v. US 7

tion. Id. Tinton Falls then appealed to the Claims Court

by timely filing the bid protest at issue here and seeking

preliminary and injunctive relief. 1 DMC intervened.

Tinton Falls’ arguments before the Claims Court fo-

cused on one issue: whether the SBA-OHA had a rational

basis for determining that the primary and vital require-

ments of the contract were a coordinated package of

lodging and transportation services. The parties filed

cross-motions for judgment on the administrative record.

After oral argument, the Claims Court granted the gov-

ernment’s and DMC’s motions and denied the relief

requested by Tinton Falls. Specifically, the Claims Court

determined that the SBA-OHA had a rational basis for its

conclusion that the primary purpose of the solicitation

was a coordinated package of rooms, transportation, and

services to meet MSC’s fluctuating needs. J.A. 3774. The

Claims Court entered final judgment for the government

and DMC, and Tinton Falls timely appealed. We have

jurisdiction pursuant to 28 U.S.C. § 1295(a)(3).

DISCUSSION

The Claims Court’s legal determinations, including

interpretations of statutes and regulations, are subject to

de novo review and its factual determinations are re-

viewed for clear error. CMS Contract Mgmt. Serv. v.

Mass. Hous. Fin. Agency, 745 F.3d 1379, 1385 (Fed. Cir.

2014). Accordingly, we review the grant of a motion for

judgment on the administrative record de novo. Glenn

Def. Marine (ASIA), PTE Ltd. v. United States, 720 F.3d

901, 907 (Fed. Cir. 2013). We thus apply the same “arbi-

trary and capricious” standard of review set forth in the

Administrative Procedure Act, 5 U.S.C. § 706(2)(A), as did

1 The government agreed to a voluntary stay of the

contract award to DMC, and the Claims Court dismissed

Tinton Falls’ request for preliminary relief as moot.

8 TINTON FALLS LODGING REALTY v. US

the Claims Court. Weeks Marine, Inc. v. United States,

575 F.3d 1352, 1358 (Fed. Cir. 2009); 28 U.S.C.

§ 1491(b)(4). In applying this standard to bid protests,

our task is to determine whether the procurement offi-

cial’s decision lacked a rational basis or the procurement

procedure involved a violation of a regulation or proce-

dure. Savantage Fin. Servs., Inc. v. United States, 595

F.3d 1282, 1285–86 (Fed. Cir. 2010).

Here, Tinton Falls argues that the SBA-OHA lacked a

rational basis for determining that the primary and vital

requirements of the solicitation were the management

and coordination of a package of lodging and transporta-

tion services. Contracting officers are entitled “to exercise

discretion upon a broad range of issues confronting them

in the procurement process.” Id. at 1286 (internal quota-

tion omitted). “For that reason, procurement decisions

invoke a highly deferential rational basis review.” Id.

(internal quotation omitted). Under this standard, we

must sustain an agency’s action unless the challenger can

prove the agency “entirely failed to consider an important

aspect of the problem, offered an explanation for its

decision that runs counter to the evidence before the

agency, or [issued a decision that] is so implausible that

[the decision] could not be ascribed to a difference in view

or the product of agency expertise.” Ala. Aircraft Indus.,

Inc. – Birmingham v. United States, 586 F.3d 1372, 1375

(Fed. Cir. 2009) (quoting Motor Vehicle Mfrs. Ass’n of the

U.S., Inc. v. State Farm Mut. Auto Ins. Co., 463 U.S. 29,

43 (1983)).

I

While the government does not seriously dispute that

Tinton Falls has standing to pursue its bid protest, DMC

contends that Tinton Falls lacks standing. To establish

standing, Tinton Falls must show that it is an interested

party that will be prejudiced by the award of the contract

to DMC. Info. Tech. & Applications Corp. v. United

TINTON FALLS LODGING REALTY v. US 9

States, 316 F.3d 1312, 1319 (Fed. Cir. 2003). To establish

prejudice, Tinton Falls must show there is a “substantial

chance” it would have received the contract award but for

the alleged error in the procurement process. Id. A party

can establish a “substantial chance” it would have re-

ceived a contract by showing that it was an actual or

prospective bidder whose direct economic interest would

be affected by the award of the contract or by failure to

award the contract. Myers Investigative & Sec. Servs.,

Inc. v. United States, 275 F.3d 1366, 1370 (Fed. Cir. 2002)

(citing Am. Fed’n of Gov’t Emps. v. United States, 258

F.3d 1294, 1302 (Fed. Cir. 2001)). Whether a party has

standing is a question of law we review de novo. Labatt

Food Serv., Inc. v. United States, 577 F.3d 1375, 1379

(Fed. Cir. 2009). The underlying question of prejudice

(“substantial chance”) is a factual question we review for

clear error. Bannum, Inc. v. United States, 404 F.3d

1346, 1354 (Fed. Cir. 2005).

DMC contends that Tinton Falls cannot show preju-

dice because 1) it does not qualify as a small business, and

therefore could not compete in a reopened bid process

unless that bid is solicited on an unrestricted basis, and 2)

it did not intend to win the original contract. To support

the first point, DMC emphasizes that the Area Office

disqualified Mali, Tinton Falls, and their two related

entities from the bidding process because they were not

“small business concerns” for purposes of the solicitation.

J.A. 2802–06. DMC therefore contends that Tinton Falls

cannot show prejudice because it is not a “small business

concern” eligible to compete for the solicitation. Thus,

only one technically acceptable bid proposal remained—

DMC’s. The Claims Court rejected DMC’s argument,

finding that, among other things, there was a “distinct

possibility” that if Tinton Falls were to succeed in proving

that DMC was likewise ineligible, the government might

be required to rebid the contract on an unrestricted basis,

which would place Tinton Falls in the same position as

10 TINTON FALLS LODGING REALTY v. US

any other interested party. J.A. 3774 (Tr. at 67:1–15).

We find no clear error in the Claims Court’s conclusion.

In Impresa Construzioni Geom. Domenico Garufi v.

United States, we held that a bid protester had a “sub-

stantial chance” of receiving a contract—and therefore

standing to challenge the award of that contract—if, as a

result of a successful bid protest, the government would

be obligated to rebid the contract and the protester could

compete for the contract during the reopened bid. 238

F.3d 1324, 1334 (Fed. Cir. 2001). Here, there is no ques-

tion that if Tinton Falls’ bid protest succeeds, MSC would

be obligated to reopen the bidding process. In particular,

if Tinton Falls were to prevail, DMC’s relationship with

its subcontracted hotels would violate the ostensible

subcontractor rule and DMC would no longer qualify as a

small business concern for purposes of the solicitation.

Thus, no eligible small business would have submitted a

technically acceptable proposal during the initial bid

process. With no eligible bidders remaining, MSC would

be required to reopen the bidding process. 2

2 The dissent would reject Tinton Falls’ standing

arguments on the ground that Tinton Falls had no “sub-

stantial chance” of securing the award because certain

companies that were disqualified earlier in the process

qualified as small business concerns, and one of them

would have been awarded the contract. The dissent

states that regulation “obligate[s]” the government to

accept one of these companies’ technically unacceptable

bids or at least to grant the companies an additional

opportunity to remedy their bids. Dissent at 4. But no

party to this case has taken the position that a regulation

requires the government to further consider these rejected

bids. In fact, none of the briefing on appeal even raises

the possibility that the government would give any fur-

ther consideration to a deficient bid. And for good rea-

TINTON FALLS LODGING REALTY v. US 11

What is less clear is whether Tinton Falls could com-

pete for this hypothetical reopened bid. Tinton Falls

concedes that for the purposes of the original solicitation,

it is not a small business concern under the applicable

NAICS code. Oral Argument at 41:10–30, Tinton Falls

Lodging Realty, LLC v. United States, No. 2014-5140

(Fed. Cir. May 6, 2015), available at

http://www.cafc.uscourts.gov/oral-argument-

recordings/14-5140/all. But all parties appear to agree

that MSC would be obligated to evaluate whether it could

still solicit the contract as a small business set-aside, or

whether it would need to reopen the bidding process on an

unrestricted basis. See Oral Arg. at 19:30–53 (Govern-

ment: “If there’s no offerors remaining—which would be

the case if DMC is no longer the [contract] awardee—then

the agency would have the obligation to evaluate, based

upon the market research—which would have to be

conducted—whether or not [the rebid contract] could be

set aside for small businesses.”). And although there is

much speculation as to whether MSC would rebid the

solicitation on an unrestricted basis—thus allowing

Tinton Falls to compete for the contract—none of the

parties disputes the Claims Court’s finding that this is at

least a realistic possibility.

DMC’s allegation that Tinton Falls did not intend to

secure the initial contract is not relevant to this analysis.

In particular, we fail to see how Tinton Falls’ initial bid

strategy would prevent it from competing for the reopened

bid, assuming that the contract were to be solicited on an

unrestricted basis. To establish prejudice, Tinton Falls

need not show it would win the contract in competition

son. Before rejecting these companies’ proposals as

technically unacceptable, the government gave them an

additional chance to correct their deficiencies. These

companies still failed to submit an acceptable proposal.

12 TINTON FALLS LODGING REALTY v. US

with other hypothetical bidders. Myers, 275 F.3d at 1370.

Rather, all a protester must establish to demonstrate

prejudice is that it has a substantial chance of receiving

the contract—that it is a qualified bidder and could com-

pete for the contract. Id. at 1370–71. The fact that Tinton

Falls did not submit the lowest-priced bid of its affiliated

entities during the initial bidding process does not pre-

clude it from having a substantial chance of winning a

hypothetical reopened bid for that contract, so long as the

contract is solicited on an unrestricted basis instead of as

a small business set-aside.

In short, the question of standing hinges on whether

Tinton Falls could compete for a reopened bid if it wins its

protest of the initial contract award. The factual core of

this question is whether, after having not received any

technically acceptable proposals from eligible small busi-

nesses in response to its initial solicitation, MSC would

maintain the contract as a small-business set-aside, or

reopen the bidding process on an unrestricted basis. Both

DMC and Tinton Falls agree that nothing in the record

definitively answers this question, and both parties

merely speculate as to the parameters of the hypothetical

reopened bid for the contract. The government—which

does not appeal the Claims Court’s denial of its motion to

dismiss for lack of standing—conceded at oral argument

there is a sufficient probability MSC would reopen the bid

on an unrestricted basis so that Tinton Falls would have

a “substantial chance” of winning the reopened solicita-

tion. Oral Arg. at 22:35–42 (Court: “If you assume that

this court rules against your position on the merits, then

would [Tinton Falls] have a substantial chance?” Gov-

ernment: “Correct.”). Nevertheless, we need not engage in

further speculative inquiry about what might happen.

Our review of this aspect of the Claims Court’s decision

requires us merely to determine whether the court clearly

erred by finding that Tinton Falls could compete for the

reopened bid if it prevails in its protest of the initial

TINTON FALLS LODGING REALTY v. US 13

contract award. See Bannum, 404 F.3d at 1354. Based on

the record, we are unable to find clear error in the Claims

Court’s factual determination that Tinton Falls has

demonstrated prejudice. 3

II

Proceeding to the merits, at issue here is a narrow

challenge to the Claims Court’s determination that DMC’s

relationships with its subcontracted hotels did not violate

the ostensible contractor rule, and thus did not disqualify

DMC as a small business concern under the solicitation

and preclude award of the contract to DMC. Congress has

given SBA the exclusive authority to establish definitions

and standards for determining whether an entity qualifies

as a “small business concern” for purposes of federal law.

15 U.S.C. § 632(a)(2)(A). Determinations under SBA’s

regulations are binding on federal procurement officers.

15 U.S.C. § 637(b)(6). Qualifying as a “small business

concern” for the purpose of a bid proposal may have

several advantages. See 13 C.F.R. § 121.401. For exam-

ple, solicitations for certain government procurements,

like the solicitation here, are limited to “small business

concerns.”

3 We need not determine whether, in all circum-

stances, a protester can “compete” for a reopened bid for

the purposes of standing under Impresa when the pro-

tester was not a qualified bidder for the initial bid and

would be a qualified bidder for the reopened bid only if

the contract was solicited with substantially different

eligibility requirements. We hold only that under the

particular facts of this case, the Claims Court did not

clearly err in finding that Tinton Falls had a substantial

chance of winning a reopened bid should it prevail in its

bid protest.

14 TINTON FALLS LODGING REALTY v. US

When an agency issues a solicitation for a small busi-

ness set-aside contract, it must select an NAICS code for

that contract, “which best describes the principal purpose

of the product or service being acquired.” 13 C.F.R.

§ 121.402(a)–(b). Each NAICS code is associated with a

number of employees or amount of annual receipts, both

of which limit the size of a business that can qualify as a

small business for purposes of the contract. 13 C.F.R.

§ 121.201. Pertinent to the inquiry here are the regula-

tions relating to affiliated businesses. Even if a business

falls within the employee and annual receipt limits of the

applicable NAICS code, it may fail to qualify as a small

business for purposes of the contract if it is affiliated with

other entities. A business is affiliated with another

business when “one controls or has the power to control

the other.” 13 C.F.R. § 121.103(a)(1). In determining

affiliation, SBA considers factors such as ownership,

common management, previous relationships with or ties

to another concern, contractual relationships, and joint

ventures between entities. 13 C.F.R. § 121.103(a)(2), (c)–

(h). Businesses are treated as joint venturers—and

therefore affiliates—when a subcontractor “performs

primary and vital requirements of a contract . . . or [is] a

subcontractor upon which the prime contractor is unusu-

ally reliant.” 13 C.F.R. § 121.103(h)(4). This is referred to

as the “ostensible subcontractor” rule. See id. (“A contrac-

tor and its ostensible subcontractor are treated as joint

venturers.”).

Here, Tinton Falls does not allege that DMC will be

“unusually reliant” on a subcontractor in order to perform

the contract. Rather, as discussed above, Tinton Falls

challenges only the SBA-OHA’s determination that the

primary and vital requirements of the solicitation are a

coordinated package of hotel and transportation services.

Tinton Falls contends that the primary and vital re-

quirement of the solicitation is the provision of lodging

services itself, and does not include the management and

TINTON FALLS LODGING REALTY v. US 15

coordination of lodging and transportation services to

meet MSC’s needs. According to Tinton Falls, the solici-

tation does not require bidders to provide a management

plan or detail how subcontractors will be managed.

Rather, much of the statement of work in the solicitation

is devoted to criteria relating to minimum requirements

for hotels. See J.A. 248–51, 253–55. Tinton Falls cites to

the chosen NAICS code to support its position that lodg-

ing services are the primary purpose of the solicitation.

Specifically, Tinton Falls notes that the MSC contracting

officer chose NAICS code 721110 (“Hotels (except Casino

Hotels)”), rather than the other NAICS codes that appear

to describe management services, such as NAICS codes

541611 (“Administrative Management & General Man-

agement Consulting Services”) and 561990 (“All Other

Support Services”). Tinton Falls concludes that the SBA-

OHA lacked a rational basis for its determination that

management and coordination of the lodging and trans-

portation services is the primary and vital requirement of

the contract.

Tinton Falls contends that when the primary and vi-

tal requirements of the solicitation are properly defined as

lodging services, DMC’s relationships with its subcon-

tracted hotels violate the ostensible contractor rule. The

SBA-OHA estimated that the cost of hotel rooms accounts

for about 80% of the contract value. J.A. 3551. DMC does

not own any hotels and intends to subcontract the provi-

sion of these hotel rooms to several different hotels. J.A.

3550. And because at least the primary hotel subcon-

tracted by DMC does not qualify as a small business for

purposes of the solicitation, J.A. 3452, Tinton Falls con-

cludes that DMC cannot be considered a “small business

concern” for purposes of the solicitation because, pursuant

to 13 C.F.R. § 121.103(h), it is a joint venturer with, and

an affiliate of, the subcontracted hotels.

We disagree with Tinton Falls that the SBA-OHA

lacked a rational basis for determining the primary and

16 TINTON FALLS LODGING REALTY v. US

vital requirements of the solicitation. Contrary to Tinton

Falls’ characterization, the solicitation requires more than

simply a fixed block of hotel rooms for a certain period of

time; rather, the contractor must be able to secure an

unpredictable and widely-varying number of acceptable

hotel rooms on short notice. For example, the solicitation

estimates that MSC will require around 65 hotel rooms

per night, but warns that in the past, MSC’s needs have

fluctuated between 25 and 120 rooms per night. J.A. 248.

And while the contractor is required to “ensure a suffi-

cient number of single rooms are available at all times to

meet the Government’s needs,” MSC will pay only for the

number of rooms each night used to house CIVMARs

attending training. J.A. 248–49. Further, the contractor

is expected to “make every effort” to provide rooms within

one hour of CIVMAR arrivals. Id. And MSC is not re-

quired to provide advance notice of its daily room re-

quirements to the contractor. Id. Thus, even though no

management and coordination tasks are expressly identi-

fied, there is no question that the solicitation requires

management and coordination to supply a potentially

large and varying number of hotel rooms with little or no

notice.

Tinton Falls also minimizes the requirement that the

contractor must provide all transportation to and from the

hotels and the MSC Training Center. J.A. 250. The

number of trips required by MSC is based on CIVMAR

training class schedules, which can vary. Id. And as with

the lodging services, MSC will pay only for the actual

number of trips provided between the hotels and the

training center. J.A. 251. In addition, the contractor

must provide various other services relating to the lodging

and transportation of CIVMARs, such as ensuring that all

CIVMARs check in each night and maintaining logs of all

passengers who use the provided transportation services.

Id. Further, the contractor is required to be the single

point of contact for the MSC, and must be available to be

TINTON FALLS LODGING REALTY v. US 17

contacted by the MSC at all times. J.A. 247. DMC in-

tends to allocate two of its employees to perform the

majority of the labor associated with these management

and coordination tasks. J.A. 3549.

The record supports this interpretation of the solicita-

tion’s requirements. After reviewing the scope of work in

the solicitation, the Area Office explained that the con-

tract involved “more than a place to stay and a bus ride to

and from the [MSC] training facility”—rather, the con-

tract was “for an overall package of rooms, transporta-

tion[,] and services.” J.A. 3459. The Area Office noted

that “[t]he number of CIVMARs that attend [MSC] train-

ings varies constantly and the contract requires the

contractor to monitor, control, record[,] and report the

changing needs of [MSC] for lodging and transportation.”

Id. Thus, it found that the primary and vital element of

the solicitation was the coordination of lodging, transpor-

tation, and other services to MSC. Id.

The SBA-OHA agreed with the Area Office’s identifi-

cation of the primary and vital requirements of the solici-

tation. J.A. 3560. Finding Tinton Falls’ characterization

of the solicitation as “merely a hotel contract [to be] a

gross simplification,” it instead described the coordination

of hotel rooms and transportation to meet MSC’s needs as

the most complex task in the solicitation. J.A. 3561. The

Claims Court agreed with the SBA-OHA, finding that its

characterization of the primary purpose of the contract as

a “coordinated package of rooms, transportation, and

services” was not “irrational,” because the “element of

coordination of hotel and transportation [services] is

vital.” J.A. 3774 (Tr. at 67:20–25). It noted that there

were at least some management functions that “simply

picking up the phone and calling for a taxi or a hotel room

would not furnish,” such as the required coordination

between MSC, the hotels, and the transportation services,

and the daily logs monitoring the whereabouts of the

CIVMARs. Id. (Tr. at 68:12–21). The Claims Court

18 TINTON FALLS LODGING REALTY v. US

concluded that the scope of work in the solicitation made

clear that MSC was “buying the right to send people to a

single point of contact knowing that they [we]re going to

be taken care of in terms of meals, hotel rooms, and

transportation.” Id. (Tr. at 68:22–25).

In short, Tinton Falls fails to meet its high burden of

showing that the SBA-OHA’s determination lacked a

rational basis. The SBA-OHA evaluated the scope of

work and other contract requirements in the solicitation

and provided a coherent and reasonable explanation of

how it determined that the primary and vital require-

ments of the contract were the management and coordi-

nation of a package of lodging and transportation

services.

***

We have considered the parties’ remaining arguments

and find them unpersuasive.

CONCLUSION

Because there is a rational basis for the SBA-OHA’s

determination that the primary and vital requirements of

the solicitation are the management and coordination of a

package of lodging and transportation services, the

Claims Court’s grant of the government and DMC’s

motion for judgment on the administrative record was not

arbitrary and capricious.

AFFIRMED

United States Court of Appeals

for the Federal Circuit

______________________

TINTON FALLS LODGING REALTY, LLC,

Plaintiff-Appellant

v.

UNITED STATES,

DMC MANAGEMENT SERVICES, LLC,

Defendants-Appellees

______________________

2014-5140

______________________

Appeal from the United States Court of Federal

Claims in No. 1:14-cv-00353-EGB, Senior Judge Eric G.

Bruggink.

______________________

REYNA, Circuit Judge, dissenting.

Because Tinton Falls has not established by prepon-

derant evidence that it has a direct economic interest in

the solicitation, I respectfully dissent from the majority’s

decision to reach the merits of this case.

The standing question in this case is governed by 28

U.S.C. § 1491(b)(1), which “imposes more stringent stand-

ing requirements than Article III.” Weeks Marine, Inc. v.

United States, 575 F.3d 1352, 1359 (Fed. Cir. 2009).

Section 1491(b)(1) allows an “interested party” to object

“to a solicitation . . . for bids or proposals for a proposed

contract” or to “any alleged violation of statute or regula-

tion in connection with a procurement or proposed pro-

2 TINTON FALLS LODGING REALTY v. US

curement.” Standing under § 1491(b)(1) “is limited to

actual or prospective bidders or offerors whose direct

economic interest would be affected by the award of the

contract or by the failure to award the contract.” Am.

Fed’n of Gov’t Emps., AFL-CIO v. United States, 258 F.3d

1294, 1302 (Fed. Cir. 2001).

As the bid protester, Tinton Falls bears the burden of

establishing the elements of standing. See Myers Investi-

gative & Sec. Servs., Inc. v. United States, 275 F.3d 1366,

1369 (Fed. Cir. 2002). Because standing is an “indispen-

sable part of the plaintiff’s case, each element must be

supported in the same way as any other matter on which

the plaintiff bears the burden of proof, i.e., with the man-

ner and degree of evidence required at the successive

stages of the litigation.” Lujan v. Defs. of Wildlife, 504

U.S. 555, 561 (1992). General allegations of standing may

suffice at the pleading stage, but facts supported by

affidavits or other evidence are required at summary

judgment. Id. Those facts must be “supported adequately

by the evidence adduced at trial.” Id. (quoting Gladstone

Realtors v. Vill. of Bellwood, 441 U.S. 91, 115 n.31 (1979)).

Tinton Falls’ bid protest progressed to trial on the

administrative record, and facts establishing standing

should have been adequately supported by the record. See

J.A. 3774. Judgment on the administrative record is the

final stage in a bid protest and requires the Court of

Federal Claims “to make factual findings from the record

evidence as if it were conducting a trial on the record.”

Bannum, Inc. v. United States, 404 F.3d 1346, 1353-54

(Fed. Cir. 2005). Tinton Falls was therefore required to

establish by preponderant evidence that it had a direct

economic interest in the solicitation. Reynolds v. Army &

Air Force Exch. Serv., 846 F.2d 746, 748 (Fed. Cir. 1988)

(Once standing is called into question, the party asserting

TINTON FALLS LODGING REALTY v. US 3

standing “bears the burden of establishing subject matter

jurisdiction by a preponderance of the evidence.”). 1

Tinton Falls could have conceivably met its burden in

one of two ways. As the majority notes, an actual bidder

such as Tinton Falls can demonstrate that it would have

had a “substantial chance” of securing the original con-

tract if not for an alleged error in the procurement pro-

cess. Labatt Food Serv., Inc. v. United States, 577 F.3d

1375, 1378 (Fed. Cir. 2009). Tinton Falls could have also

demonstrated that a successful protest would obligate the

government to rebid the contract and that Tinton Falls

would be qualified to compete on the rebid. Impresa

Construzioni Geom. Domenico Garufi v. United States,

238 F.3d 1324, 1334 (Fed. Cir. 2001).

The record evidence, however, leaves no question that

Tinton Falls would not have secured the original contract.

Tinton Falls is other than small and does not qualify to

compete for a small business set-aside contract. See J.A.

2808–10 (Notice to Tinton Falls that “[t]he Small Busi-

ness Administration (SBA) has made a formal size deter-

mination that your business is other than small”). Even if

the government removed the small business set-aside and

issued a revised, unrestricted solicitation, the record

indicates that two other small businesses submitted lower

bids than Tinton Falls and would have been next in line

to receive the original contract.

1 Tinton Falls had the same burden in the Court of

Federal Claims because “[t]he Court of Federal Claims,

though an Article I court, . . . applies the same standing

requirements enforced by other federal courts created

under Article III.” Weeks Marine, 575 F.3d at 1359 (quot-

ing Anderson v. United States, 344 F.3d 1343, 1350 n.1

(Fed. Cir. 2003)).

4 TINTON FALLS LODGING REALTY v. US

Nor has Tinton Falls established through preponder-

ant evidence that a successful protest would obligate the

government to rebid the contract as unrestricted or that

Tinton Falls is qualified to compete on rebid. Cf. Impresa,

238 F.3d at 1333. To the contrary, the record suggests

that the government would not be obligated to rebid.

Excluding DMC and the four other than small businesses

associated with Hotels Unlimited, the record indicates

that three proposals remained in the competitive range.

Those three proposals were submitted by offerors that

self-certified as small businesses. Given that two or more

offers from small businesses remained in competitive

range, the government would have been obligated to

award the contract to the next small business in line, or

at least obligated to request revised proposals from the

three offerors that remained in competitive range. See

FAR § 19.502-2 (requiring an acquisition such as the one

at issue here to be set aside for small business absent “a

reasonable expectation” of obtaining offers from responsi-

ble small businesses).

Court of Federal Claims precedent should have guided

the standing question in this case. In International Man-

agement Services, Inc. v. United States, the Court of

Federal Claims held that a bid protestor lacked standing

to challenge a small business set-aside contract because

the protester had been deemed other than small. 80 Fed.

Cl. 1, 4–8 (2007). On those facts, “there is no chance,

much less a substantial chance, that plaintiff could be

awarded the contract in the event that the [government’s]

contract with defendant-intervenor is set aside.” Id. at 6.

The protester made an argument identical to the one

Tinton Falls makes here, arguing the defendant-

intervenor and the remaining offerors were themselves

unqualified. Id. The protester thus argued that if the

Court of Federal Claims sustained its protest and found

that “no offeror was small, . . . the government would be

obligated to rebid the contract (using full and open compe-

TINTON FALLS LODGING REALTY v. US 5

tition), and [it] could compete for the contract once again.”

Id. (quoting Pl.’s Opp’n Def.’s Mot. Dismiss at 22) (altera-

tions in original). The Court of Federal Claims rejected

that argument because, like here, there remained a small

business in competitive range. Id. at 6–7; see also Taylor

Consultants, Inc. v. United States, 90 Fed. Cl. 531, 541–43

(2009). Under International Management Services, the

Court of Federal Claims should have found that Tinton

Falls lacked standing.

The fact that the three remaining small businesses in

competitive range originally submitted technically unac-

ceptable proposals is insufficient to establish Tinton Falls’

standing. The technical unacceptability of an otherwise

qualified offer in competitive range does not limit the

offeror’s ability to establish a substantial chance of win-

ning a contract. See Allied Tech. Grp., Inc. v. United

States, 94 Fed. Cl. 16, 37–38 (2010), aff’d, 649 F.3d 1320

(Fed. Cir. 2011). Even if the technical unacceptability of

the remaining small business offers required the govern-

ment to reassess whether two or more technically ac-

ceptable small businesses remained, the record indicates

that seven additional vendors were interested in the

solicitation. We cannot presume from the record that

those seven additional vendors are other than small or

that those vendors would submit technically unacceptable

offers in the future. Nor can we presume that the three

remaining small businesses in competitive range would be

incapable of submitting technically acceptable proposals

on rebid. As far as the record reveals, Tinton Falls failed

to make any allegation to the contrary. See J.A. 3566–67

(Complaint). It had the burden to do so.

Only in a future hypothetical world in which the gov-

ernment found no two eligible small businesses could

Tinton Falls compete on rebid. Yet Article III standing,

and by extension the more demanding standard provided

by § 1491(b)(1), requires more than speculation or ab-

stract hypotheticals. Article III standing requires an

6 TINTON FALLS LODGING REALTY v. US

“alleged (and ultimately proved) . . . ‘injury in fact’—a

harm suffered by the plaintiff that is ‘concrete’ and ‘actual

or imminent, not conjectural or hypothetical.’” Steel Co. v.

Citizens for a Better Env’t, 523 U.S. 83, 103 (1998) (inter-

nal quotation marks omitted) (quoting Whitmore v. Ar-

kansas, 495 U.S. 149, 155 (1990)). Nothing in the record

suggests that a future rebid or Tinton Falls’ competition

on such a rebid is even a possibility, much less a substan-

tial chance. The Court of Federal Claims’ finding to the

contrary is clearly erroneous.

The majority rests its analysis of standing in part on

the fact that the government does not “seriously dispute”

that Tinton Falls has standing, Maj. Op. at 8–9, and that

“none of the parties disputes the Claims Court’s finding

that [Tinton Falls’ future competition] is at least a realis-

tic possibility,” id. at 11. Yet a party’s lack of argument or

concession regarding standing is irrelevant. Standing is a

nonwaivable jurisdictional requirement. Citizens for a

Better Env’t, 523 U.S. at 102–04; Myers, 275 F.3d at 1369

(“standing is a threshold jurisdictional issue”). Because

the record is void of preponderant evidence establishing

this jurisdictional requirement, I respectfully dissent.