Kwv, Incorporated v. United States

In the United States Court of Federal Claims

No. 12-882C

(Filed Under Seal: May 2, 2013)

(Reissued: May 9, 2013)

)

KWV, INCORPORATED, ) Pre-award bid protest; challenge to

) agency’s disqualification of veteran-

Plaintiff, ) owned small business from participating

) in VA’s Veterans First Contracting

v. ) Program; application of “control” within

) the meaning of 38 C.F.R. § 74.4

UNITED STATES, )

)

Defendant. )

)

)

William M. Weisberg, Law Offices of William Weisberg, PLLC, Tysons Corner, VA, for

plaintiff. With him on the briefs were Joyce L. Tong Oelrich and Liana W. Yung, Bryan Cave

LLP, Washington, D.C.

Alexis J. Echols, United States Department of Justice, Washington, D.C., for defendant.

With her on the briefs were Stuart F. Delery, Principal Deputy Assistant Attorney General, Civil

Division, and Jeanne E. Davidson, Director, and Kenneth M. Dintzer, Assistant Director,

Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington,

D.C. Of counsel were Dennis Foley, Counselor to the Assistant General Counsel, and Aleia

Barlow, General Attorney, Office of the General Counsel, United States Department of Veterans

Affairs.

OPINION AND ORDER1

LETTOW, Judge.

This pre-award bid protest is before the court on plaintiff’s motion for judgment upon the

administrative record and the government’s cross-motion for judgment. On February 7, 2012,

plaintiff, KWV, Inc. (“KWV”) was certified for inclusion on the list of qualified veteran-owned

small businesses (“VOSBs”) eligible to participate in the Veteran’s First Contracting Program.

1

Because this opinion and order might have contained confidential or proprietary

information within the meaning of Rule 26(c)(1)(G) of the Rules of the Court of Federal Claims

(“RCFC”) and the protective order entered in this case, it was initially filed under seal. The

parties were requested to review this decision and to provide proposed redactions of any

confidential or proprietary information. No redactions were requested.

This program designates VOSBs and service-disabled veteran-owned small businesses

(“SDVOSBs”) as priority bidders for certain contracting opportunities. After the Department of

Veterans Affairs’ (“VA’s”) Center for Veterans Enterprise (“CVE”) qualified KWV for listing in

2012, KWV bid on and ostensibly won an award of a contract as a VOSB. Thereafter, a losing

bidder lodged a protest against KWV’s qualifications, which protest resulted in an evaluation by

VA’s Office of Small and Disadvantaged Business Utilization (“OSDBU”). OSDBU ultimately

issued a decision in favor of the protestor, holding that KWV “d[id] not meet the status

requirements of a SDVOSB [sic] concern,” and that it was ineligible for the challenged award

and future awards under the Veterans First Contracting Program. AR 570 (Letter from Thomas

Leney to James Maron (Oct. 24, 2012)).2

On December 14, 2012, KWV filed its complaint in this court, seeking reinstatement onto

the VOSB list and restoration of eligibility for Veterans First projects, as well as an injunction

barring VA from awarding contracts upon solicitations on which KWV had submitted bids. The

court granted a temporary restraining order on December 21, 2012, and extended it on January 4,

2013, temporarily rescinding VA’s delisting of KWV from the VOSB database. Subsequently,

the court granted a preliminary injunction setting aside VA’s delisting of KWV and restoring it

to eligibility for VA’s Veterans First Contracting Program. See KWV, Inc. v. United States, 108

Fed. Cl. 448 (2013). Proceedings on the merits were accelerated, with KWV moving for

judgment on the administrative record, and the government cross-moving for the same. A

hearing was held on these motions on March 27, 2013.

FACTS3

KWV is a Rhode Island close corporation organized under the Rhode Island General

Laws § 7-1.2-1701. Compl. ¶ 17. Ownership of KWV is split between James Maron, who owns

60 percent of the issued and outstanding shares, and his two sons and a granddaughter, who own

the remaining 40 percent. Compl. ¶ 18. Mr. Maron is a veteran of the United States Army Corps

of Engineers who served in the Korean War from 1952 until his honorable discharge in 1954.

Compl. ¶ 13. He has more than 50 years of experience in the construction industry, 30 of which

2

“AR __” refers to the administrative record certified by VA and filed with the court in

accord with RCFC 52.1(a).

3

The recitations that follow constitute findings of fact by the court drawn from the

administrative record of the procurement, as well as the parties’ evidentiary submissions

regarding standing, prejudice, and equitable factors. See Bannum, Inc. v. United States, 404

F.3d 1346, 1356 (Fed. Cir. 2005) (bid protest proceedings “provide for trial on a paper

[administrative] record, allowing fact-finding by the trial court”); PGBA, LLC v. United States,

60 Fed. Cl. 567, 568 n.1 (2004) (“It is the responsibility of th[e] [c]ourt, not the administrative

agency [conducting the procurement], to provide for factual proceedings directed toward, and to

find facts relevant to, irreparability of harms or prejudice to any party or to the public interest

through grant or denial of injunctive [or declaratory] relief.”), aff’d, 389 F.3d 1219 (Fed. Cir.

2004); see also Holloway & Co. v. United States, 87 Fed. Cl. 381, 391 n.12 (2009).

2

were spent as a contractor, and studied building construction at the Rhode Island School of

Design for four years. Compl. ¶¶ 15-17; AR 434.

Currently, Mr. Maron’s sole business endeavor is KWV, a company he founded and self-

certified as a VOSB in 2008 as permitted by the Veterans Benefits, Health Care, and Information

Technology Act of 2006 (“Veterans Benefits Act”), Pub. L. No. 109-461, tit. V, 120 Stat. 3403,

3425 (codified at 38 U.S.C. §§ 8127-28). See AR 508-09; AR 513. That Act requires the

Secretary of Veterans Affairs to “give priority to a small business concern owned and controlled

by veterans, if such business concern also meets the requirements of that contracting preference.”

38 U.S.C. § 8128(a). This preference applies only to procurements by VA. See Angelica Textile

Servs., Inc. v. United States, 95 Fed. Cl. 208, 222 (2010). As a self-certified VOSB, KWV won

and performed two or three projects for VA. See AR 508-09. In 2010, VA shifted from a self-

certification scheme to a verification program, and KWV accordingly applied for verification as

a qualified VOSB and inclusion in the VA VetBiz Vendor Information Pages (“VIP”). Compl.

¶ 19. Although KWV’s application was initially denied on September 22, 2011, it was given an

opportunity to cure the perceived defects in the application and request reconsideration, which it

did on October 12, 2011. AR 455-94 (KWV’s Request for Reconsideration). The cited reason

for the original denial of KWV’s application was that KWV’s corporate documents provided for

a controlling board composed of a majority of non-veteran directors. AR 451-52. In its

reconsideration application, KWV demonstrated that the company was, in fact, controlled by

Mr. Maron as the majority shareholder, and that it had amended its corporate documents to

reflect that circumstance. AR 455-94. On February 7, 2012, after reviewing KWV’s revised

documentation, conducting an investigation of the company, and performing a site visit and

interviews, CVE approved KWV’s application for designation as a VOSB and inclusion in the

VIP database for one year. AR 495-515.2, 516-17 (Letter from Dan Friend to Bruce St. John

(Dec. 19, 2011)) (CVE Verification Letter).

At all relevant times during the events underlying this action, Mr. Maron has divided his

time between Florida and Rhode Island, spending just under half of every year in Rhode Island

and the remainder in Florida. AR 540. He is a legal resident of Florida. Id. Mr. Maron was so

situated both during the CVE certification process and previously when KWV was a self-

certified VOSB.

During the period of self-certification, KWV had secured Contract Nos. VA 241-C-1312

and VA523-C07071, AR 508-09, and became eligible to bid on posted solicitations for work on

the Boston Health Care System (“BHS”) project in 2012 after its VOSB certification was granted

by CVE. See Compl. ¶¶ 1, 45. KWV successfully bid on a BHS task order, No. VA241-12-J-

1036 (part of Solicitation No. VA-241-12-R-0563), and was awarded that task order on July 11,

2012. Compl. Ex. 4 (Award Letter from Athena Jackson to Thomas Maron (July 11, 2012)).

Following this award, a competitor, Alares, LLC (“Alares”), filed a formal protest with VA

against KWV. This protest challenged KWV’s status as a VOSB, alleging that Mr. Maron was

not truly in control of the company. AR 518. As evidence of this lack of control, Alares pointed

to Mr. Maron’s Florida residency during the bare majority of each calendar year. AR 519.

Alares posited that Mr. Maron’s two non-veteran sons, David and Thomas Maron, were

effectively in control of KWV. Id.

3

Procedurally, Alares’ agency protest was considered by OSDBU, which initiated an

investigation into KWV based upon the protest allegations. This investigation was conducted

entirely through review of documents; OSDBU did not conduct a site visit, nor did it conduct

any interviews with Mr. Maron or any other employee at KWV. Compl. ¶ 53. KWV was given

notice of the protest and responded by submitting a letter of explanation, Mr. Maron’s tax

statements, a deed to a Rhode Island condominium, recent utility bills in his name, KWV’s By-

Laws and Operating Agreement, a copy of the original VA verification letter, and photographs of

KWV’s headquarters in Rhode Island. AR 538-66. The letter of explanation advised that

Mr. Maron resided just over half the calendar year in Florida, with the remainder of the year

being spent at the condominium in Rhode Island. AR 540. KWV’s response averred that, while

Mr. Maron was in Florida, he continued to manage the day-to-day business of KWV by

telephone, e-mail, and other electronic means, and that he traveled to Rhode Island when

necessary to attend meetings and conferences. Id.

On October 24, 2012, OSDBU issued a decision concluding that Mr. Maron did not

maintain sufficient control over the day-to-day management of KWV, and it disqualified KWV

from participation in the Veterans First Contracting Program. AR 568-71.4 The protested

contractual award to KWV was terminated, and all of KWV’s pending proposals for other VOSB

projects were disqualified. See AR 571 (“[KWV] cannot submit another offer as a VOSB or

SDVOSB on a future VOSB or SDVOSB procurement under [38 C.F.R. Part 74], as applicable,

unless it demonstrates to VA’s Center for Veterans Enterprise that it has overcome the reasons

for the determination of ineligibility, if it is able, by applying for and receiving verified status in

accordance with 38 C.F.R. Part 74.”); see also Compl. ¶¶ 58-74.

On December 14, 2012, KWV filed its pre-award bid protest in this court, characterizing

OSDBU’s determination as unreasonable and contrary to law, and seeking reinstatement to the

VIP database as a VOSB. The court granted a temporary restraining order and then a

preliminary injunction, setting aside OSDBU’s decision rendering KWV ineligible for awards of

contracts as a VOSB and restoring KWV to the VIP database. See KWV, 108 Fed. Cl. at 458.

As part of the preliminary injunctive relief, the court extended KWV’s period of eligibility by 72

days, until April 22, 2013, to account for days lost from the year of eligibility during the period

of disqualification prior to the preliminary injunction. Id.

JURISDICTION

Jurisdictionally, KWV invokes the third prong of 28 U.S.C. § 1491(b)(1), claiming a

violation of statute or regulation in connection with a procurement or a proposed procurement.

The pertinent provision was added to the Tucker Act by the Administrative Dispute Resolution

Act, Pub. L. No. 104-320, § 12, 110 Stat. 3870, 3874 (Oct. 19, 1996), and provides:

4

This decision was framed in terms of KWV’s having been designated a SDVOSB, rather

than a VOSB. AR 568. This reference was apparently a clerical error, as KWV has never

claimed to be (nor did Alares contest its status as) a SDVOSB. OSDBU issued a correction on

November 19, 2012, acknowledging this error and clarifying that KWV had previously been

certified as a VOSB. AR 567.

4

[T]he United States Court of Federal Claims . . . shall have jurisdiction to render

judgment on an action by an interested party objecting to a solicitation by a

Federal agency for bids or proposals for a proposed contract or to a proposed

award or the award of a contract or any alleged violation of statute or regulation

in connection with a procurement or a proposed procurement. . . . [T]he United

States Court of Federal Claims . . . shall have jurisdiction to entertain such an

action without regard to whether suit is instituted before or after the contract is

awarded.

28 U.S.C. § 1491(b)(1) (emphasis added); see also Rothe Dev., Inc. v. United States Dep’t of

Def., 666 F.3d 336, 338 (5th Cir. 2011) (“[T]he Court of Federal Claims now retains exclusive

jurisdiction over ‘action[s] by an interested party’ ‘objecting to . . . any alleged violation of

statute or regulation in connection with a procurement or a proposed procurement.’” (quoting 28

U.S.C. § 1491(b)(1))).

KWV’s position is that VA’s inconsistent application of 48 C.F.R. § 819.307 (governing

VOSB status protests) and 38 C.F.R. Part 74 (VA’s “Veterans Small Business Regulations”)

amounts to a violation of its own procurement regulations. Section 74.3 of 38 C.F.R. Part 74

details the standards for CVE’s evaluation of VOSB applicants, and these eligibility standards

are explicitly incorporated into the Veterans Affairs Acquisition Regulation System (“VAAR”)

provisions which govern SDVOSB and VOSB status protests with OSDBU. See 48 C.F.R.

§ 819.307(c).5 By noting inconsistencies in VA’s application of identical regulations at different

stages of the procurement process, KWV alleges violation of a regulation in connection with a

procurement, properly invoking this court’s bid protest jurisdiction. See RAMCOR Servs. Group,

Inc. v. United States, 185 F.3d 1286, 1289 (Fed. Cir. 1999) (Ҥ 1491(b) . . . does not require an

objection to the actual contract procurement. . . . As long as a statute has a connection to a

procurement proposal, an alleged violation suffices to supply jurisdiction.”); Angelica Textile

Servs., 95 Fed. Cl. at 215 (“The phrase ‘in connection with’ is very sweeping in scope.”

STANDARDS FOR DECISION

The court reviews a challenge to an agency’s actions in connection with a procurement

under the Administrative Procedure Act, 5 U.S.C. § 706. See 28 U.S.C. § 1491(b)(4) (“In any

action under this [S]ubsection, the courts shall review the agency’s decision pursuant to the

standards set forth in [S]ection 706 of title 5.”). The court may set aside the agency decision if it

is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law,” 5

U.S.C. § 706(2)(A), assuming the criteria for equitable relief are satisfied, see PGBA, LLC v.

United States, 389 F.3d 1219, 1224-28 (Fed. Cir. 2004). “[If] the procurement official’s decision

lacked a rational basis; or . . . the procurement procedure involved a violation of regulation or

procedure,” then the court may rescind the agency’s decision. Impresa Construzioni Geom.

Domenico Garufi v. United States, 238 F.3d 1324, 1332 (Fed. Cir. 2001); see also Superior

Helicopter, LLC v. United States, 78 Fed. Cl. 181, 187 (2007).

5

The VAAR are set out in 48 C.F.R. Parts 801-873.

5

In conducting its review, the court may not “substitute its judgment for that of the

agency,” Keeton Corrs., Inc. v. United States, 59 Fed. Cl. 753, 755 (2004) (quoting Citizens to

Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971), abrogated in part by Califano v.

Sanders, 430 U.S. 99, 105 (1977) (abrogating Overton Park to the extent it recognized the APA

as an independent grant of subject matter jurisdiction)). It may only set aside the agency’s

decision if it determines that the “decision was [not] based on a consideration of the relevant

factors [or] there has been a clear error of judgment.” Overton Park, 401 U.S. at 416.

Upon a showing of such a clear error of judgment, the court may award “declaratory and

injunctive relief” to an injured protestor. 28 U.S. § 1491(b)(2). Monetary relief is “limited to

bid preparation and proposal costs.” Id. The determination of whether a permanent injunction is

appropriate is made by the court after consideration of the four factors traditionally applied

respecting equitable relief. See Centech Grp., Inc. v. United States, 554 F.3d 1029, 1037 (Fed.

Cir. 2009) (citing PGBA, 389 F.3d at 1228-29). The factors are quoted infra, at 9.

ANALYSIS

A. Statutory and Regulatory Framework

At the inception of the Veterans First Contracting Program in 2007, VA allowed VOSB

and SDVOSB entities to self-certify themselves for registration in the VIP database. With the

adoption of statutory amendments now set forth at 38 U.S.C. § 8127(e) and (f), which detail the

Secretary of the Department of Veterans Affairs’ responsibilities for maintaining the VIP

database, self-certification was replaced by a certification process administered by CVE. See

VA Acquisition Regulation: Supporting Veteran-Owned and Service-Disabled Veteran-Owned

Small Businesses, 74 Fed. Reg. 64,619-01 (Dec. 8, 2009) (codified at 48 C.F.R. Parts 802, 804,

808, 809, 810, 813, 815, 817, 819 and 852) (effective Jan. 7, 2010); 75 Fed. Reg. 6098-01 (Feb.

8, 2010) (codified at 38 C.F.R. Part 74 (effective Feb. 8, 2010). Certification through CVE

became mandatory, even for VOSBs and SDVOSBs like KWV that had previously self-certified

without incident. VIP eligibility is governed by 38 C.F.R. Part 74, but CVE-approved

certifications may be challenged by way of an agency-level bid protest, as provided in 48 C.F.R.

§ 819.307. Such agency-level protests are handled by OSDBU. Id.

Both the initial certification by CVE and any protest-initiated review by OSDBU are

governed by the same standards respecting ownership and control. Those standards are set out in

Part 74, which in turn are incorporated by reference into Part 819 for “ownership and control

issues.” 48 C.F.R. § 819.307. Section 74.4(a) defines control as “the day-to-day management

and long-term decision-making authority for the VOSB.” Specifically, control “include[es] both

the strategic policy setting exercised by boards of directors and the day-to-day management and

administration of business operations . . . . Individuals managing the concern must have

managerial experience of the extent and complexity needed to run the concern.” 38 C.F.R.

§ 74.4(b).

CVE is empowered to revoke certification of VOSB status if it “believes that a

participant’s verified status should be cancelled prior to expiration of its eligibility term.” 38

C.F.R. § 74.22(a). In revocation proceedings, CVE must provide notice to the concern, which is

6

then allowed thirty days to respond to the issues identified by CVE. 38 C.F.R. § 74.22(a) and

(b). Thereafter, CVE must issue a decision describing the specific facts and reasoning which

drive the result. 38 C.F.R. § 74.22(c). The concern may administratively appeal a decision by

CVE. 38 C.F.R. § 74.22(e).

Consideration of VOSB status through a bid protest, rather than via CVE reconsideration,

is procedurally less defined. The VAAR states that protests “must be in writing and state

specific grounds for the protest.” 48 C.F.R. § 819.307(c)(1). Timing constraints are put on the

protestor (protests must be filed on or before the fifth business day after bid opening, or

notification by the contracting officer of the successful offeror), but no timelines are set for

consideration of the protest by OSDBU or for the protested awardee to respond. See 48 C.F.R.

§ 819.307(c)(2). Indeed, opportunity to respond to a protest is not explicitly provided in the

regulation; however, basic due process considerations must apply, and the protested awardee is

in practice given an opportunity to respond. See Miles Constr., LLC v. United States, 108 Fed.

Cl. 792, 796, 803-05 (2013) (noting that an awardee was given a week by OSDBU to respond to

a protest and approving OSDBU’s discretion to expand the grounds for the protest beyond those

raised by the protestor, but ruling that the awardee had to be given notice of the expanded

grounds under the due process protections afforded by 5 U.S.C. § 555).

B. OSDBU’s Action

KWV contends that OSDBU’s decision to revoke its VOSB status was arbitrary and

contrary to law because of the inconsistent application of functionally identical guidelines by

CVE and OSDBU. See Pl.’s Mem. in Support of Mot. for Judgment on the Admin. Record

(“Pl.’s Mem.”) at 19. The government responds that there is no inconsistency between the CVE

and OSDBU determinations because OSDBU had access to more information than did CVE —

namely, the fact that Mr. Maron spent a significant portion of each year in Florida. Def.’s Mot.

for Judgment upon the Admin. Record and Resp. to Pl.’s Mot. for Judgment upon the Admin.

Record (“Def.’s Cross-Mot.”) at 16.

OSDBU conducted a review which, in comparison to that performed by CVE, was

perfunctory. CVE had analyzed KWV’s corporate and business documentation and conducted a

site visit and an in-person interview with Mr. Maron and other employees. See AR 495-515.2

(Letter from Dan Friend to Bruce St. John (Dec. 19, 2011)); AR 1-159 (Initial Application for

CVE Verification). OSDBU, however, confined its consideration to review of a paper record

consisting of CVE’s result and Alares’ protest, plus Mr. Maron’s response. See Hr’g Tr. 23:8 to

24:3 (Mar. 27, 2013).6

Residency is not identified as an element of “control” for purposes of Part 74.

Nonetheless, OSDBU focused specifically and solely on that fact as being dispositive as a matter

of law, stating that “OSDBU finds that [Mr. Maron is] unable to manage the day-to-day

operations of KWV while residing in Florida.” AR 570. In its decision, OSDBU did not address

6

Mr. Maron’s residency and time in Florida versus Rhode Island are not disputed. For

purposes of this decision, the court will assume without deciding that his residential

circumstances were not known to CVE.

7

any of those factors that 38 C.F.R. § 74.4 does identify as being relevant to control, viz.,

“strategic policy setting,” “day-to-day management and administration of business operations,”

and “managerial experience of the extent and complexity needed to run the concern.” 38 C.F.R.

§ 74.4(b). Apart from addressing residency, OSDBU’s decision largely consists of reciting

regulatory provisions of Parts 819 and 74 and Alares’ allegations. AR 568-71. OSDBU’s

reliance on Mr. Maron’s residency as a basis for revoking VOSB status in effect treats that fact

as requiring a decision as a matter of law, wholly apart from other factors.

As to law, OSDBU cites a decision by the Small Business Administration’s (“SBA’s”)

Office of Hearings and Appeals (“OHA”). See AR 570 (citing Matter of First Capital Interiors,

Inc., SBA No. VET-112, at 8, 2007 WL 2438401 (2007)). OSDBU’s reliance on this case as

support for treating residency to be dispositive is misplaced. First Capital is distinguishable

from the present case in several significant respects: (1) the First Capital veteran did not have

prior management experience, while Mr. Maron does; (2) the First Capital veteran maintained

two other jobs, while KWV is Mr. Maron’s sole business endeavor; (3) the First Capital veteran

permanently resided three time zones away from the company in question, while Mr. Maron

resides at all times in the same time zone, and for almost half of the year, the same state and

locality, as KWV’s sole office. First Capital , 2007 WL 2438401, at *1, **7-8. Instructively,

SBA in First Capital had explicitly rejected the notion that distance alone is determinative of

control. Id. at *7.

In contrast to OSDBU’s approach, the CVE reviewer had addressed a range of

considerations bearing on management and control. He concluded that Mr. Maron was

responsible for “overseeing projects,” “came to the office as needed,” and was “always in

communication” with KWV. AR 515.1-15.2 (Handwritten Notes of CVE Reviewer). Mr.

Maron worked forty hours a week, whereas his non-veteran sons (whom Alares alleged to have

been managing KWV in fact) were both noted as working fewer than ten hours each week for

KWV. Id. In this respect, the CVE reviewer specifically noted that Mr. Maron’s son, David,

had “[n]o bid involvement” and “no day-to-day management” responsibilities. AR 515.2.

Additionally, KWV’s response to the Alares protest reiterated Mr. Maron’s involvement

in the day-to-day management of KWV even while he was present in Florida, citing methods of

communication such as telephone, e-mail, and other electronic means. AR 538-66 (KWV’s

Response to Protest). OSDBU did not take those means of communication and control into

account in focusing solely on residency. During the argument on the pending motions, the

government’s counsel endeavored to address this gap by noting the lack of “any evidence

supporting [KWV’s] position that Mr. Maron used telecommunication to control the day-to-day

operations of the business” during the times he was in Florida rather than Rhode Island. Hr’g Tr.

17:19-22. However, OSDBU did not express any interest in examining the details of

Mr. Maron’s communications. In short, OSDBU never purports in its decision to have

investigated or determined the actual level of control exercised by Mr. Maron.

Aside from OSDBU’s misplaced reliance on Mr. Maron’s residency as the determinative

factor for control, there is nothing in the administrative record to suggest that Mr. Maron was not

exercising sufficient control over KWV. In the circumstances, the court concludes that the

government has not “‘provided a coherent and reasonable explanation of its exercise of

8

discretion,’” Impresa Construzioni Geom. Domenico Garufi, 238 F.3d at 1333 (quoting

Latecoere Int’l, Inc. v. United States Dep’t of the Navy, 19 F.3d 1342, 1356 (11th Cir. 1994)),

nor articulated a “‘rational connection between the facts found and the choice made,’” Motor

Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (quoting

Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). Accordingly, the court finds

that OSDBU’s determination disqualifying KWV was arbitrary and capricious, and not in

accordance with VA’s regulations.

C. Prejudice

“To prevail in a bid protest, a disappointed offeror must show both significant error in the

procurement process and prejudice to its posture in the process.” PGBA, LLC v. United States,

60 Fed. Cl. 196, 203 (2004) (citing Advanced Data Concepts, Inc. v. United States, 216 F.3d

1054, 1057 (Fed. Cir. 2000)), aff’d, 389 F.3d 1219. KWV must demonstrate a “substantial

chance” that it would have received contractual awards absent the error. Banknote Corp. of Am.

v. United States, 365 F.3d 1345, 1351 (Fed. Cir. 2004). This aspect of the analysis may be

dispatched easily; KWV was, in fact, awarded a task order as a VOSB. Compl. Ex. 4 (Award

Letter from Athena Jackson to Thomas Maron (July 11, 2012)). Moreover, when OSDBU

revoked KWV’s VOSB status, it was disqualified from the Veterans First Contracting Program

and lost the opportunity to bid on other contracts and task orders. See AR 571 (“[KWV] cannot

submit another offer as a VOSB or SDVOSB on a future VOSB or SDVOSB procurement under

[38 C.F.R. Part 74].” KWV has demonstrated sufficient prejudice.

D. Relief

When determining whether to issue a permanent injunction, “the court must consider

whether (1) the plaintiff has succeeded on the merits, (2) the plaintiff will suffer irreparable harm

if the court withholds injunctive relief, (3) the balance of hardships to the respective parties

favors the grant of injunctive relief, and (4) the public interest is served by a grant of injunctive

relief.” Centech Grp., 554 F.3d at 1037. If all four criteria are satisfied, the court may award

declaratory or injunctive relief that is appropriate in the circumstances. See 28 U.S.C.

§ 1491(b)(2).

KWV has succeeded on the merits of its protest, and it has demonstrated that revocation

of its status as a VOSB constitutes irreparable harm by barring it from participation in the

Veterans First Contracting Program. The government counters that VA will be harmed by a

grant of injunctive relief to KWV because setting aside the OSDBU determination will

“compromis[e] the integrity of the VA procurement process” and “frustrate[] the purpose of the

Veterans First set-aside program.” Def.’s Cross-Mot. at 23. To the contrary, however, setting

aside the OSDBU decision will eliminate an arbitrary and capricious precedent and serve the

purpose of the Veterans First set-aside program — that of providing eligible veterans with

priority contracting opportunities. The balance of hardships thus weighs in favor of granting a

permanent injunction. Correlatively, the public has a strong interest in a fair and competitive

procurement process, which is best served by ensuring that the government complies with

regulations governing procurement programs. See Wackenhut Servs. Inc. v. United States, 85

Fed. Cl. 273, 312 (2008); Hunt Bldg. Co. v. United States, 61 Fed. Cl. 243, 280 (2004). By

9

assuring that OSDBU decisions comport with the regulations meant to be applied by VA in

determining VOSB eligibility, that public interest will be served.

CONCLUSION

For the reasons stated, KWV’s motion for judgment on the administrative record is

GRANTED IN PART, and the government’s motion to dismiss or, in the alternative, cross-

motion for judgment on the administrative record is DENIED. OSDBU’s decision dated October

24, 2012, rendering KWV ineligible for awards of contracts as a VOSB, is set aside. VA shall

restore KWV to the VIP database as an eligible VOSB concern for the remainder of its period of

eligibility.7 The clerk shall enter judgment in accord with this disposition.

No costs.

It is so ORDERED.

s/ Charles F. Lettow

Charles F. Lettow

Judge

7

In granting a preliminary injunction, the court extended KWV’s year-long verified

eligibility to April 22, 2013, to account for the days it was wrongfully excluded from the VIP

database. See KWV, 108 Fed. Cl. at 458. Although KWV’s initial certification was granted with

a one-year term, AR 516, the controlling regulation has since been amended to reflect a two-year

duration for all verifications, see 38 C.F.R. § 74.15(a) (effective June 27, 2012). Accordingly,

the court reinstates KWV’s VOSB status and extends eligibility to an expiration date of April 22,

2014.

10