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Centech Group, Inc. v. United States

February 3, 2009

THE CENTECH GROUP, INC., PLAINTIFF-APPELLANT,
v.
UNITED STATES, DEFENDANT-APPELLEE, AND TYBRIN CORPORATION, DEFENDANT-APPELLEE.



Appeal from the United States Court of Federal Claims in 07-CV-513, Judge Mary Ellen Coster Williams.

The opinion of the court was delivered by: Schall, Circuit Judge

Published opinion

Before RADER, SCHALL, and PROST, Circuit Judges.

Centech Group, Inc. ("Centech") brought suit in the United States Court of Federal Claims seeking declaratory and injunctive relief in connection with the decision by the Department of the Air Force ("Air Force") to solicit revised proposals for the services contract previously awarded to Centech. The Court of Federal Claims denied Centech's request. In so doing, it held that the Air Force's action was not arbitrary, capricious, or an abuse of discretion. It arrived at that holding after concluding that Centech's original proposal for the contract was not acceptable because it did not comply with a statutory requirement for award and a material provision of the solicitation. Centech Group, Inc. v. United States, 79 Fed. Cl. 562, 577 (2007). Centech now appeals the court's decision. We affirm.

BACKGROUND

I.

The pertinent facts are not in dispute. On February 28, 2005, the Air Force issued a request for proposals ("RFP") for advisory and assistance services to support the Aerospace Research, Development, Test, and Evaluation Activities ("ARDTEAS") at the Air Force Flight Test Center at Edwards Air Force Base in California. Id. at 564--65.

The ARDTEAS procurement was a small business set aside. Id.at 565.Under the Small Business Act, 15 U.S.C. §§ 631--657f, 657i--657o, a party may not be awarded a contract as a small business concern unless it agrees that, "in the case of a contract for services (except construction), at least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern."

15 U.S.C. § 644(o)(1)(A) (2006). The Limitation on Subcontracting ("LOS") clause, set forth at 48 C.F.R. § 52.219-14 (2008), implements the mandate of the Act. The LOS clause requires an offeror to agree that at least 50 percent of its personnel costs under the contract will be based upon work of its own employees. 48 C.F.R. § 52.219-14. The clause states:

(b) By submission of an offer and execution of a contract, the Offeror/Contractor agrees that in performance of the contract in the case of a contract for- (1) Services (except construction). At least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern.

Id. The RFP incorporated the LOS clause by reference. Centech, 79 Fed. Cl. at 565.

The Air Force disclosed to prospective offerors for the ARDTEAS contract that it would interpret the LOS clause in accordance with Air Force Policy Memorandum 2004-PK-007 (the "Policy Memorandum"). Id. at 566. Accordingly, prior to issuing the RFP, on August 20, 2004, the Air Force electronically transmitted the Policy Memorandum to prospective offerors. Id. The transmission stated in pertinent part as follows:

1. FAR Clause 52.219-14, Limitations on Subcontracting (Dec. 1996), which applies to . . . small business set-aside contracts, states the small business prime contractor must perform specified minimum amounts of work, when the contract has been set aside for [a] small business. . . .

2. [W]ithin [Air Force Material Command], we interpret the clause at 52.219-14 to mean that the minimum amounts of work can be performed by the collective efforts of either small business members of a formal joint venture or a small business prime contractor together with the first tier small business subcontractor(s), when the circumstances outlined in attachment 1 are present.

Id. at 566--67 (quoting the Policy Memorandum (footnotes omitted)). Attachment 1 to the Policy Memorandum stated that "[p]rime-subcontractor teams could be a mix of large business and small business subcontractors [so long as] performance of work requirements [was] met by the cooperative efforts of the small prime contractor and the small business members of the subcontractor group." Id. at 567 n.7 (quoting Attachment 1). In short, according to the Policy Memorandum, a small business prime contractor could meet the requirements of the LOS clause if at least 50 percent of the cost of contract performance incurred for personnel was based upon the work of employees of the small business prime contractor alone, or in combination with the work of employees of small business subcontractors with which the prime contractor entered into a cooperative effort.

Four offerors, including Centech and the incumbent contractor, Tybrin Corporation ("Tybrin"), submitted proposals in response to the RFP. Id. Centech proposed to apportion the work between its own employees and those of subcontractors, including a large and a small business. Id. More specifically, relying on the Policy Memorandum in structuring its proposed cost/price model, Centech planned to incur itself 43.2 percent of the total cost of contract personnel using its own employees. The proposal indicated, however, that Centech would combine the efforts of its own employees and small business ...


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