[00:00:00] Speaker 01:
Our next case is American relocation, connections versus United States, 19-1245.

[00:00:48] Speaker 01:
Counselor Grossman you reserved four minutes of rebuttal time correct that's correct your honor.

[00:00:54] Speaker 03:
Let's just wait a little bit May it please the court Andrew Grossman for the appellant arc and

[00:01:17] Speaker 03:
The facts of this case demonstrate why agencies are required to consult the Small Business Administration when conducting market research into small business capabilities.

[00:01:26] Speaker 03:
Customs and Border Protection ended a small business set aside because it believed that there were fewer than two potential small business competitors.

[00:01:34] Speaker 03:
Now, if Customs had consulted the SBA's small business experts, they could have almost instantly determined that there were more small businesses that could compete for the contract.

[00:01:44] Speaker 03:
Because they would have seen, among other things, that several small businesses listed under the old contracts, NAICS, satisfied.

[00:01:50] Speaker 01:
I believe that this phase of the case that you're talking about is very important.

[00:01:56] Speaker 01:
But let's move to another phase first.

[00:01:58] Speaker 01:
And that's, how are you prejudiced?

[00:02:00] Speaker 01:
Is there actual prejudice here?

[00:02:03] Speaker 01:
At the end of the day,

[00:02:04] Speaker 01:
Was your client qualified to receive these solicitations or the awards?

[00:02:13] Speaker 03:
Yes, Your Honor.

[00:02:14] Speaker 03:
As the record reflects,

[00:02:18] Speaker 03:
ARC did, in fact, satisfy the size standards for the new NAICS code.

[00:02:23] Speaker 03:
It was not originally listed under that NAICS code due to an administrative error.

[00:02:27] Speaker 03:
But once the new NAICS code was announced, ARC was able to confirm that it was subject to that NAICS code.

[00:02:33] Speaker 03:
And I think that gets to an important point.

[00:02:34] Speaker 02:
But the problem is not that you weren't qualified if it had been a set-aside.

[00:02:38] Speaker 02:
But even with your qualification, there weren't enough to justify a small business set-aside under the NAICS code ultimately chosen.

[00:02:47] Speaker 02:
Is that correct?

[00:02:48] Speaker 03:
Two points, Your Honor.

[00:02:49] Speaker 03:
First is, I don't think that is correct, because the agency ended the set-aside on the basis that there would not be at least two, and if you were to include ARC, there would in fact be two.

[00:02:58] Speaker 03:
So that's the factual point.

[00:02:59] Speaker 03:
But I think that's also the wrong question to ask.

[00:03:02] Speaker 02:
But you didn't qualify until after the fact.

[00:03:06] Speaker 03:
ARK was qualified under the size standards.

[00:03:08] Speaker 03:
The simple checkbox was not checked in the government's database.

[00:03:12] Speaker 03:
So ARK did satisfy the size standards.

[00:03:16] Speaker 03:
But I think that gets to an important point, which is that this consultation requirement with SBA, the whole point is that agencies frequently do not undertake serious market research to determine small business capabilities.

[00:03:26] Speaker 03:
And the SBA can do things like identifying potential small businesses like ARK

[00:03:31] Speaker 03:
that would satisfy the size standards.

[00:03:34] Speaker 03:
And it would make sense that the Small Business Administration, which has access to our size information, could have determined almost instantly the research of the government's SAM database.

[00:03:44] Speaker 03:
that AHRQ, again, the existing incumbent small business contractor, would have been qualified under the NAICS code that the agency had selected.

[00:03:52] Speaker 03:
So that's the reason why the SBA required in its regulation the government agencies when they're undertaking this type of market research.

[00:04:00] Speaker 02:
No, I understand all that.

[00:04:01] Speaker 02:
But the problem you're stuck with here is that ultimately the agency chose a particular NAICS code

[00:04:09] Speaker 02:
You didn't challenge it within a proper time period.

[00:04:11] Speaker 02:
So we're stuck with that next code.

[00:04:14] Speaker 02:
And based upon that next code, their determination was there's not enough competition that was all sent to the SBA.

[00:04:21] Speaker 02:
They ratified it all.

[00:04:22] Speaker 02:
And so how can you show prejudice?

[00:04:24] Speaker 02:
Your prejudice seems to me to be the speculative argument that.

[00:04:28] Speaker 02:
If they had consulted in the first place, SBA might have identified other people.

[00:04:32] Speaker 02:
They might have convinced them to use a different NICS code, all that kind of stuff.

[00:04:36] Speaker 02:
But I don't see how that meets the standard for concrete actual prejudice based on the facts here.

[00:04:41] Speaker 03:
So, Your Honor, I think the place to look is in the Supreme Court's decision of Lujan, because when the Court is talking about prejudice, what it's talking about is Article III standing.

[00:04:50] Speaker 03:
That's what the prejudice requirement is.

[00:04:52] Speaker 03:
And Lujan discusses at some length an earlier decision by the Supreme Court called Robertson, which involved a challenge to an agency's failure to undertake.

[00:05:01] Speaker 02:
I mean, don't we have more relevant cases of our own on prejudice in the bid protest context?

[00:05:07] Speaker 03:
I don't think in exactly this circumstance, but if I could, let me tell you why.

[00:05:11] Speaker 03:
Robertson involved a procedural requirement to undertake an environmental assessment.

[00:05:14] Speaker 03:
The agency didn't do it.

[00:05:16] Speaker 03:
The Supreme Court made clear that there is standing irrespective of whether or not the plaintiff could show, in that instance, that the environmental assessment would have changed the agency's underlying decision.

[00:05:27] Speaker 03:
In other words, the plaintiff didn't have to show that to demonstrate injury.

[00:05:30] Speaker 02:
I don't think we've ever applied Blue Hen in this context.

[00:05:32] Speaker 02:
And that seems to me a much looser standard

[00:05:35] Speaker 02:
then we have applied and that we've ordered the Court of Federal Claims to apply, which is not that there's just some potential change in the agency's judgment in your favor, but it would actually, with some degree of certainty, given you a chance to get the result.

[00:05:49] Speaker 02:
And I just don't see how that's possible here.

[00:05:51] Speaker 03:
Well, Your Honor, a couple of points.

[00:05:52] Speaker 03:
First of all, I think there is a distinction between agencies procedural violations versus substantive violations.

[00:05:59] Speaker 03:
And most of the court's decisions speak to substantive violations, in other words, where agencies made a mistake in their reasoning or something of that sort.

[00:06:05] Speaker 03:
And that's a different analysis Lujan makes clear.

[00:06:08] Speaker 03:
Second, this court's decisions involving prejudice regularly cite Lujan.

[00:06:12] Speaker 03:
I can recall something like about half a dozen of them that rely on Lujan to flesh out the prejudice requirement.

[00:06:18] Speaker 03:
So we think the standard that's described in Lujan is in fact the right standard.

[00:06:23] Speaker 03:
It's the seminal case that this court has come back to again and again in fleshing out the prejudice requirement.

[00:06:28] Speaker 03:
And Luhan makes clear that it's not our burden to show that there would have been some other competitors or something like that.

[00:06:34] Speaker 03:
What our burden is to show is that there was a procedural requirement that AHRQ was in the zone of interest protected by that procedural requirement, which as a small business it is, and that the decision simply might have been different.

[00:06:46] Speaker 03:
We don't have to prove that it would have been different.

[00:06:48] Speaker 03:
We just have to prove that there's some possibility.

[00:06:50] Speaker 03:
That's what Luhan says.

[00:06:51] Speaker 03:
In other words, the plaintiff and Luhan did not have to demonstrate that the dam wouldn't have been built if the agency had undertaken

[00:06:57] Speaker 01:
The environmental assessment what about the fact that that an SBA?

[00:07:02] Speaker 01:
Representative was consulted in the end and as a result of that it was determined that Didn't qualify under the the nace code so your honor there was a consultation that occurred she didn't qualify, but that that CBP was proceeding properly sure your honor

[00:07:18] Speaker 03:
So that consultation came at a later stage in the procurement.

[00:07:22] Speaker 03:
So if you back up a little bit, there's the market research stage where the procuring agency assesses.

[00:07:28] Speaker 01:
I understand that, and I think that's odd.

[00:07:30] Speaker 01:
That seems to me to be somewhat irregular, but I don't know that had SBA been consulted

[00:07:39] Speaker 01:
prior to the process that anything would have been any different.

[00:07:42] Speaker 03:
Well, I think there's a reason to believe that something would have been different because the regulation specifically applies, this is, provides rather, this is in section 125B, that the SBA will, has a responsibility to attempt to identify

[00:07:56] Speaker 03:
small business capabilities for particular requirements.

[00:08:00] Speaker 03:
That's what the SBA says it's going to do at the market research stage, and we're suggesting here that if the SBA had done that, that might have made a difference here.

[00:08:08] Speaker 03:
If it had done that under this code, would that have changed anything?

[00:08:12] Speaker 03:
Yes, that is the point, Your Honor, is that the

[00:08:15] Speaker 03:
is that the SBA does undertake that type of inquiry.

[00:08:18] Speaker 03:
That's what SBA personnel do on a daily basis.

[00:08:21] Speaker 03:
They supplement agencies' market research by looking through government databases to try and determine if there are additional potential competitors that the procuring agency might not have identified such that the agency should then consider whether to institute a set aside for the contract.

[00:08:36] Speaker 03:
That is the bread and butter of how the SBA intervenes in acquisitions at the market research stage.

[00:08:42] Speaker 03:
And it does that across the board.

[00:08:45] Speaker 02:
I'm still confused because this is a bid protest.

[00:08:48] Speaker 02:
So we're reviewing this on the administrator record.

[00:08:51] Speaker 02:
And the administrator record shows that the SBA ultimately agreed with the actions taken by the agency, even despite what may have been a failure here to do something earlier.

[00:09:04] Speaker 02:
And why, under the APA's rules of prejudicial error, is that not harmless error?

[00:09:12] Speaker 02:
So, as a matter, so you want to argue this is standing, but it seems to me, the much more likely way to look at this is the APA rule of prejudicial error.

[00:09:21] Speaker 02:
And if the agency responsible for dealing with small businesses has ratified the contracting agencies actions here, I don't see how you can demonstrate prejudicial error.

[00:09:34] Speaker 03:
I think it's actually quite straightforward, your honor.

[00:09:36] Speaker 03:
There are two separate consultation requirements.

[00:09:38] Speaker 03:
One applies at the market research stage, and that's when the SBA reviews market research.

[00:09:42] Speaker 02:
Look, I get the facts here, but the problem, it seems to me you're arguing that that initial error could never have been cured.

[00:09:49] Speaker 03:
It could have been cured by the agency consulting with SBA regarding its market research.

[00:09:53] Speaker 02:
I would, if I could... No, but that's not a cure, that's just doing it.

[00:09:57] Speaker 02:
So there's a rule for prejudicial error, which allows an error to have occurred to not have been fixed, but otherwise be overcome by other events.

[00:10:06] Speaker 02:
That's the rule of prejudicial error.

[00:10:08] Speaker 02:
If there's an error out there, if other things in the case make it non-prejudicial, then it doesn't matter.

[00:10:14] Speaker 02:
You seem to be arguing that this is a rule that is automatically prejudicial if it's violated.

[00:10:20] Speaker 02:
And I don't see any support in the regulations for that.

[00:10:23] Speaker 03:
Well, Your Honor, I think the thing to look at is that if Your Honor is concerned about the consultation that was made with the SBA at a later stage, look at that consultation.

[00:10:31] Speaker 03:
That's an appendix, page 78.

[00:10:33] Speaker 03:
What that is is a checkbox form, and it reports the conclusions of the agency's market research.

[00:10:39] Speaker 03:
It does not report the market research itself.

[00:10:41] Speaker 03:
And it says, given those conclusions, does the SBA sign off on the proposed acquisition plan?

[00:10:46] Speaker 03:
That's rated Appendix 78.

[00:10:48] Speaker 03:
That's the checkbox form.

[00:10:49] Speaker 03:
So I don't think that's something that somehow ratifies what the agency did, because there was no consideration of the agency's market research as the regulation requires.

[00:11:00] Speaker 03:
That is a separate standalone requirement.

[00:11:01] Speaker 02:
I can imagine... The SBA is ratifying the agency's choice, even though it may have erred in the earlier stages.

[00:11:08] Speaker 02:
Again, it still sounds to me like you're saying that the SBA specifically had to approve of the market research or say that you contacted us and we did this OK to make it non-prejudicial.

[00:11:24] Speaker 02:
And that just isn't the standard in the APA, is it?

[00:11:27] Speaker 03:
Yes, Your Honor.

[00:11:28] Speaker 03:
I believe it is.

[00:11:29] Speaker 03:
When you have a procedural requirement that applies to an agency.

[00:11:31] Speaker 02:
You're saying in the APA, procedural errors are by default prejudicial.

[00:11:37] Speaker 03:
They are prejudicial if a party is within the zone of interest that is protected by that procedure.

[00:11:41] Speaker 02:
Can you cite me a case that says all procedural errors, no matter how minor, are, and I know you don't think this is minor, but all procedural, it's the logic of your argument, all procedural errors

[00:11:52] Speaker 02:
are per se prejudicial in an APA context.

[00:11:56] Speaker 03:
Your Honor, with due respect, I'm an administrative law attorney.

[00:11:58] Speaker 03:
Those are the cases I argue.

[00:12:00] Speaker 03:
I am not aware of this prejudicial error rule.

[00:12:02] Speaker 02:
This is typically discussed as a matter of standing and understanding where perfectly... APA requires you to take account of prejudicial error in reviewing an agency decision.

[00:12:11] Speaker 03:
You're not aware of those cases?

[00:12:13] Speaker 03:
The cases typically apply the standing analysis in cases such as Lujan.

[00:12:16] Speaker 03:
Lujan itself was an APA.

[00:12:18] Speaker 03:
Actually, it was a Clean Air Act, I believe, challenge, but applying the same standard as under the APA.

[00:12:23] Speaker 03:
So I think that is the proper body of law to consult.

[00:12:27] Speaker 03:
I don't think there is some other body of law that addresses prejudice in this area.

[00:12:32] Speaker 02:
You mean like 5 USC 706, which is part of the APA that says, do account, shall be taken to prejudicial air?

[00:12:40] Speaker 03:
And yes, Your Honor, that is in the APA, but I don't think that it gives rise to any type of additional requirements above and beyond Article III standing requirements.

[00:12:51] Speaker 03:
The court has no further questions at this time.

[00:12:52] Speaker 03:
I'll reserve the balance of my time.

[00:12:54] Speaker 03:
Thank you.

[00:13:13] Speaker 00:
Morning, your honor, may it please the court.

[00:13:18] Speaker 00:
I would like to address what our council just previously addressed the podium, which is the consultation with SBA.

[00:13:25] Speaker 00:
Well, we do not believe that as a procedural matter, there was a violation here because this was an order placed against the federal supply schedule.

[00:13:32] Speaker 00:
Simply suggesting that the consultation with SBA was, you know, merely a procedural formality that could have resulted in prejudice.

[00:13:40] Speaker 02:
Do we have to reach that issue if we determine there's no prejudice?

[00:13:44] Speaker 00:
No.

[00:13:46] Speaker 00:
And there was no prejudice.

[00:13:48] Speaker 00:
And in addition to the small business review form that SBA concurred with and filled out as part of the record, there was also an email exchange with SBA representative at appendix 165

[00:14:01] Speaker 01:
So where were you headed with the argument?

[00:14:03] Speaker 01:
Were you saying that you agree that the CBP erred as a matter of law and not consulting with the SBA when they were formulating these marketing strategies?

[00:14:14] Speaker 00:
No, we disagree with that.

[00:14:15] Speaker 00:
There's been no procedural violation here because

[00:14:19] Speaker 00:
This is an order placed against a federal supply schedule, and as such, such orders are exempted from the small business and the preference programs.

[00:14:27] Speaker 01:
Is that consistent with Kingdom War, the Supreme Court decision in Kingdom War?

[00:14:31] Speaker 00:
Yes, it is.

[00:14:32] Speaker 00:
The Supreme Court was interpreting an entirely different statute that was specific to the VA.

[00:14:39] Speaker 01:
But it ordered specific briefing on the issue of whether orders under the FSS were deemed contracts.

[00:14:48] Speaker 01:
And the answer that the Supreme Court arrived at is yes, they are.

[00:14:51] Speaker 00:
They are.

[00:14:52] Speaker 00:
And we don't dispute that.

[00:14:54] Speaker 00:
But that's because the statutory language.

[00:14:56] Speaker 01:
That's what we have here, right?

[00:14:57] Speaker 01:
Yes.

[00:14:57] Speaker 01:
In order under the, why is that not a contract?

[00:15:02] Speaker 00:
It is a contract.

[00:15:03] Speaker 01:
So it's a contract.

[00:15:04] Speaker 01:
And under the regulations, wasn't CBP required to consult with the SBA when the initial marketing or the acquisition strategies were being mapped out?

[00:15:18] Speaker 00:
Not for this order, no.

[00:15:20] Speaker 00:
This is when the agency was setting the federal supply schedule that then resulted in these series of orders.

[00:15:29] Speaker 00:
It was required to engage in the market research and the acquisition planning that ARC is.

[00:15:35] Speaker 01:
And at that point, wasn't consultation also required?

[00:15:38] Speaker 00:
Yes, and that happened as far as we knew.

[00:15:40] Speaker 00:
That happened years ago.

[00:15:42] Speaker 00:
ARC is the incumbent under this contract.

[00:15:44] Speaker 00:
It was given the order, the current order under the contract.

[00:15:49] Speaker 01:
So the initial consultation you're saying suffices for this particular order?

[00:15:56] Speaker 00:
It does, because the FAR is very clear on this, and it speaks to these orders.

[00:16:00] Speaker 01:
Under that initial consultation, wasn't the result that there were set asides available?

[00:16:07] Speaker 00:
No, I think we're confusing two points in time here.

[00:16:11] Speaker 00:
So the initial consultation, I believe, that Your Honor is referring to is back in June, perhaps, of 2017, when they were going to recompete this order that AHRQ already had the contract for.

[00:16:25] Speaker 00:
That's an order that has been issued and was being recompeted under the federal supply schedule.

[00:16:31] Speaker 00:
The federal supply schedule was set years ago, several years ago.

[00:16:35] Speaker 02:
So you're saying that the SBA requirement only applies to the to the federal supply schedule not the specific orders and correct correct and far part 38 and Make that inconsistent with the SBAs regulations.

[00:16:50] Speaker 00:
No the SBAs regulations when read as a whole Are not inconsistent on that point at all and here's why?

[00:16:57] Speaker 00:
125.2 as a senior start with 125.1 and

[00:17:03] Speaker 00:
Sure, those are definitions.

[00:17:04] Speaker 02:
Right, which says contract has the same definition as set forth in the FAR and includes orders issued against multiple work contracts.

[00:17:13] Speaker 00:
That's true.

[00:17:13] Speaker 02:
Explain to me why an order under the FSS isn't an order against a multiple work contract.

[00:17:19] Speaker 02:
It is an order against a multiple work contract and there is a... So in the definitional section at least, contract includes what we're talking about here today.

[00:17:27] Speaker 00:
Absolutely.

[00:17:28] Speaker 02:
Okay.

[00:17:29] Speaker 00:
And there's a specific provision in the regulation, SBU regulation, that ARC is citing to for its argument here.

[00:17:35] Speaker 02:
And the 125.2A, the next relevant one, said these regulations, presumably the following regulations, apply to all types of federal government contracts, including multiple war contracts.

[00:17:48] Speaker 02:
So are you going to tell me there's an exception, a specific exception, and is it C we're talking about that makes

[00:17:56] Speaker 02:
the consultation non-applicable to federal supply schedule orders but not contracts?

[00:18:03] Speaker 00:
No.

[00:18:04] Speaker 00:
I'm saying there is a specific provision at E 125.2E.

[00:18:10] Speaker 02:
Sure.

[00:18:11] Speaker 02:
That just means that the contracting officer can decide not to do a set-aside or can, but it doesn't get rid of the consultation in the first place, does it?

[00:18:20] Speaker 00:
It does.

[00:18:21] Speaker 00:
And the reason is because that language at E6 parrots

[00:18:25] Speaker 00:
the language from the promulgating statute, section 1331 of the Small Business Jobs Act, which gave the agencies that were promulgating the FAR and SBA regs authority only to grant procuring agencies discretion, notwithstanding the prior interpretations of the FAR and regs, to nonetheless set aside orders against a federal supply schedule.

[00:18:53] Speaker 00:
It did not impose any additional requirements, and it didn't give the agency's authority to mandate anything.

[00:18:58] Speaker 00:
The FAR was amended in several places.

[00:19:00] Speaker 02:
So you're saying that the SBA's regulations, at least to the extent they suggest that consultation is required for authorities, exceed the authority of the agency under the statute?

[00:19:11] Speaker 00:
Well, I don't think the regulation suggests that.

[00:19:13] Speaker 00:
That's how ARC is reading it.

[00:19:15] Speaker 00:
But if that's how ARC reads it, that would be inconsistent with the promulgating statute.

[00:19:19] Speaker 00:
And the reason is because 125.2 seems- Let me ask that again, because I don't think my question was clear enough.

[00:19:27] Speaker 02:
It seems to me you're arguing that the statute governing the SBA and all this kind of stuff

[00:19:36] Speaker 02:
gives discretion to the agencies to set aside things.

[00:19:40] Speaker 02:
And so because of that, there's no consultation requirement.

[00:19:45] Speaker 02:
on these orders.

[00:19:46] Speaker 02:
Is that what you're saying?

[00:19:47] Speaker 00:
Correct.

[00:19:47] Speaker 00:
There's no requirements, period.

[00:19:49] Speaker 02:
Right.

[00:19:50] Speaker 02:
But the SBA, under its regulatory authority, has gone further and at least has arguably imposed that requirement.

[00:20:00] Speaker 02:
If we read them that way, I know you don't want to read them that way, but let's just assume we read C2 as imposing that requirement on specific orders against SS.

[00:20:11] Speaker 02:
Can they permissibly do that?

[00:20:13] Speaker 00:
No.

[00:20:14] Speaker 02:
Really?

[00:20:16] Speaker 00:
Well, we're not arguing.

[00:20:18] Speaker 02:
I mean, where in the statute does it forbid them from doing this?

[00:20:20] Speaker 02:
It seems to me that that's a permissible agency interpretation of a statute.

[00:20:25] Speaker 00:
Well, the statute is clear on its face in that it grants discretion.

[00:20:31] Speaker 00:
So going beyond that and allowing or

[00:20:35] Speaker 00:
promulgating mandates would exceed that scope.

[00:20:40] Speaker 00:
And it's also inconsistent with the FAR.

[00:20:42] Speaker 00:
And the FAR was amended currently with SBA regs to address this statute.

[00:20:50] Speaker 00:
And the FAR, which had always included car votes for orders placed against federal supply schedules, included to that.

[00:20:57] Speaker 00:
Sure.

[00:20:58] Speaker 02:
I mean, I understand.

[00:20:59] Speaker 02:
I mean, the government has long argued that these orders from the FSS are not really contracts.

[00:21:04] Speaker 02:
But I mean, you've been consistently losing most of those positions.

[00:21:08] Speaker 02:
And I think the press and the court has been generally to treat orders in the same way as contracts for almost all purposes.

[00:21:16] Speaker 02:
And I just don't understand why we would do that differently here.

[00:21:19] Speaker 00:
We're not asking that orders be treated differently as contracts, but there are specific provisions in at least three parts of the FAR and in the SBA reg itself that treats orders issued against federal supply schedules differently.

[00:21:35] Speaker 00:
What AHRQ is arguing here are more general components of this regulation, which don't need to apply here because they don't apply at this order stage.

[00:21:45] Speaker 00:
So the market research requirement, C2,

[00:21:49] Speaker 00:
which requires consultation with SBA, applies at the master award level.

[00:21:55] Speaker 00:
So when this federal supply schedule was set, that consultation was required.

[00:22:00] Speaker 01:
If that's the case, then why at the master level the requirement to consult didn't, or the finding of that consultation that they originally did, apply to this contract?

[00:22:13] Speaker 00:
Because it was bid openly.

[00:22:18] Speaker 00:
It wasn't set aside.

[00:22:20] Speaker 00:
The whole schedule wasn't set aside.

[00:22:24] Speaker 00:
But there was a set aside.

[00:22:25] Speaker 01:
Well, why didn't that apply in this case?

[00:22:28] Speaker 00:
So under the current contract, the incumbent, it was set aside because the agency exercises discretion to do so.

[00:22:37] Speaker 00:
The agency also has contracting goals to set aside.

[00:22:41] Speaker 01:
You seem to equate the

[00:22:43] Speaker 01:
the discretion to make a set aside with the requirement to consult.

[00:22:47] Speaker 01:
And it seems to me that there's a very clear line of difference between the two.

[00:22:54] Speaker 00:
Well, there isn't a clear line.

[00:22:58] Speaker 00:
The FAR treats all the SBA requirements and the implementations of the contract.

[00:23:05] Speaker 01:
Is that your argument that they're the same thing?

[00:23:07] Speaker 00:
They are wrapped up into the same package because all the SBA requirements are addressed under part 19 of the FAR.

[00:23:15] Speaker 00:
And it's clear that none of those apply to orders placed under the federal supply schedule except by agency discretion.

[00:23:24] Speaker 00:
And those requirements apply at the master contract level only.

[00:23:30] Speaker 01:
Explain to me why your argument that this is an order

[00:23:37] Speaker 01:
and that the rule of two doesn't apply here.

[00:23:41] Speaker 01:
And how is that consistent with Kingdom Where, the Supreme Court decision in Kingdom Where?

[00:23:48] Speaker 00:
A totally different statute, Your Honor.

[00:23:49] Speaker 00:
So the statute that the Supreme Court was interpreting in Kingdom Where applied to the VA specifically and included language of mandate.

[00:23:58] Speaker 00:
So the language was that the VA shall set aside.

[00:24:01] Speaker 01:
The Supreme Court considered on a separate basis whether an order under the FSS is a contract.

[00:24:07] Speaker 01:
Correct, because... Under the FAR.

[00:24:11] Speaker 00:
That's correct, because in that case, the party had argued that because they were talking about an order, it couldn't possibly be considered a contract under the statutory language.

[00:24:21] Speaker 01:
So the Supreme Court says, well, we're not going to decide the case in Kingdom War, the rule of two, until we first decide whether an order under the FSS is a contract.

[00:24:30] Speaker 01:
And the answer to that was yes.

[00:24:32] Speaker 01:
And you seem to be arguing, no, that's not.

[00:24:36] Speaker 02:
Is your argument that in kingdom where the mandate is for everything in the VA, there's no discretion.

[00:24:43] Speaker 00:
There's no discretion.

[00:24:43] Speaker 02:
Whenever VA goes out for contracting, it has to consider set asides for veterans first.

[00:24:48] Speaker 00:
Yes.

[00:24:48] Speaker 02:
And in this case, your argument is based upon not so much the discretion of the order versus contracting or the difference, but the fact that

[00:24:59] Speaker 02:
These aren't mandatory, and the discretion goes to the agency to do something to set aside.

[00:25:05] Speaker 02:
So therefore, the burden to consult is not automatic for everything.

[00:25:11] Speaker 02:
It's only when there is a contract or the agency determines to do it as a contract.

[00:25:15] Speaker 00:
That's correct.

[00:25:16] Speaker 00:
It's when the agency exercises its discretion to do so.

[00:25:19] Speaker 02:
I mean, I get that argument, but it's still an awful hard one to make under the way the SBA has promulgated their regulations, unless we declare the regulations inconsistent with the statute.

[00:25:30] Speaker 00:
Well, the regulations, as Arc has read them, would also be inconsistent with three parts of the federal acquisition regulations, because those were also amended after the statute was promulgated.

[00:25:44] Speaker 02:
But you're almost out of your time.

[00:25:45] Speaker 02:
Can I just ask you to respond to the prejudice questions?

[00:25:47] Speaker 02:
Because frankly, I'm thoroughly confused after your friend's argument about how prejudice works in the bid protest situation.

[00:25:56] Speaker 00:
Well, if prejudice goes to the merits, we don't dispute standing, but we don't believe that our could be prejudiced here because there was a consultation with SBA after the solicitation went out, but before offers were due, SBA concurred.

[00:26:12] Speaker 00:
So even if the court believes that... Isn't that like all after the fact?

[00:26:16] Speaker 01:
I mean, you're looking at prejudice and you're saying, well, we did consult, but how do you know that if the consultation had taken place before?

[00:26:25] Speaker 01:
that things would have been different?

[00:26:28] Speaker 00:
Because there's really only one thing that SBA could have done differently or could have said that would have changed, that could have changed the outcome here, and that is the selection of the NAICS code.

[00:26:39] Speaker 00:
They agreed though with, and they didn't raise any issue with that when they were consulted, and the issue of what NAICS code was chosen

[00:26:48] Speaker 00:
Cannot be adjudicated here.

[00:26:51] Speaker 01:
It's not here's a problem.

[00:26:52] Speaker 01:
So so ARC notes that there is a solicitation out They also note that they go to SBA There's no consultation that has taken place and there's no code at that point in time that applies to this particular solicitation then

[00:27:14] Speaker 01:
After they contact CBP about this, not the SBA, sorry, the CBP about this, then the consultation takes place with the SBA, which seems to me should have taken place before.

[00:27:28] Speaker 01:
As a result of that meeting, they come out with a NACE code and then say at that point, you don't qualify under this NACE code.

[00:27:39] Speaker 01:
That seems highly irregular.

[00:27:41] Speaker 00:
There's actually record support for the back and forth between the agency and GSA as to whether or not prior to the solicitation going out, any, this could be set aside because there weren't enough small business contractors that could have competed to, you know, to justify a small business set aside.

[00:28:05] Speaker 02:
Is this A9092?

[00:28:06] Speaker 02:
Correct.

[00:28:06] Speaker 02:
A165 is emails?

[00:28:10] Speaker 00:
A172, correct.

[00:28:13] Speaker 02:
And what's the takeaway from these emails?

[00:28:18] Speaker 00:
There was a decision by the agency prior to the solicitation going out that they could not set this aside.

[00:28:25] Speaker 00:
And even though it was only brought up to the SBA's attention after the solicitation was issued, ultimately that whole reasoning was shared with SBA and they agreed.

[00:28:36] Speaker 02:
Because there couldn't be two or more small businesses that could compete?

[00:28:42] Speaker 01:
Correct.

[00:28:42] Speaker 00:
At the time, that's correct.

[00:28:45] Speaker 00:
In fact, I believe there were.

[00:28:46] Speaker 01:
How did they know that without the consultation with the SBA?

[00:28:50] Speaker 00:
Because the agency has access to the database of vendors who are listed on the federal supply schedule for the services they've identified, and they have to register as being large or small.

[00:29:03] Speaker 00:
It's the same database that GSA uses.

[00:29:09] Speaker 00:
There are no further questions.

[00:29:11] Speaker 00:
We respectfully request that this court uphold the trial court's opinion and dismiss the protest.

[00:29:20] Speaker 01:
Thank you.

[00:29:20] Speaker 01:
Counsel, you have a little over three minutes.

[00:29:23] Speaker 03:
Thank you, Your Honor.

[00:29:24] Speaker 03:
If I could, three points, Your Honors.

[00:29:27] Speaker 03:
The first, simply regarding the merits of the application of the regulation, I would note in addition to the premises of the questions that Your Honors asked,

[00:29:35] Speaker 03:
that the SBA's regulatory preambles also make clear that the market research requirements of subsection C2 apply to FSS orders that's discussed at length.

[00:29:43] Speaker 03:
And in other provisions where the SBA did want to limit a particular regulatory requirement solely to multiple award contracts, in other words, the parent contracts, it said that specifically.

[00:29:53] Speaker 03:
For example, subsection E, there are about a half dozen other places where it did that too.

[00:29:56] Speaker 01:
Go back to the prejudice.

[00:29:58] Speaker 01:
Yes.

[00:29:59] Speaker 01:
It seems to me that assume that I believe that there was error in the consultation issue.

[00:30:07] Speaker 01:
But I'm having a difficulty in seeing how you were prejudiced at the end of the day, how you were prejudiced.

[00:30:13] Speaker 03:
Well, so I think the point here is to give weight to SBA's views as to how it is that this ought to work.

[00:30:20] Speaker 03:
And let me unpack that a little bit.

[00:30:23] Speaker 01:
The SBA... Assuming that that whole process was flawed, and here's the problem that I have, it just seems to me that you never did qualify or you didn't qualify for the solicitation.

[00:30:35] Speaker 03:
I want to be very clear about what could have happened here.

[00:30:38] Speaker 03:
If the S if this, if customs had reached out to SBA, SBA could have called up arc and said, arc, why aren't you registered for this NACE code?

[00:30:46] Speaker 03:
You fit the size.

[00:30:47] Speaker 03:
And if they had done that, that would have been too.

[00:30:49] Speaker 03:
And that would undermine the entire rationale.

[00:30:52] Speaker 03:
for ending the set-aside.

[00:30:54] Speaker 03:
We also did the same research for several of the other six companies that were listed under the old NAICS code.

[00:31:00] Speaker 03:
It took about two minutes.

[00:31:01] Speaker 03:
We found that one of those was also qualified on a size basis under the new NAICS code.

[00:31:06] Speaker 03:
So there's without changing the NAICS code or anything like that.

[00:31:09] Speaker 03:
Again, the SBA could have made that inquiry.

[00:31:11] Speaker 03:
That is the kind of thing that the SBA does on an everyday basis.

[00:31:14] Speaker 03:
They call up small businesses.

[00:31:16] Speaker 03:
They assess capabilities.

[00:31:17] Speaker 03:
They see who can do what.

[00:31:18] Speaker 03:
They determine what size standards apply and how they apply to particular companies.

[00:31:22] Speaker 03:
That's how it works.

[00:31:23] Speaker 03:
And that's what the SBA envisioned itself as doing under this particular regulatory provision when it is consulted by an acquiring.

[00:31:30] Speaker 01:
What about your friend's argument that the consultation did take place before they sent out the solicitation?

[00:31:38] Speaker 03:
Well, first of all, my friend conceded that the required consultation, the C2 consultation regarding market research, did not occur.

[00:31:46] Speaker 03:
That's reflected in the decision of the court below.

[00:31:48] Speaker 03:
It's also reflected in my friend's brief, which concedes that that consultation did not take place.

[00:31:54] Speaker 03:
As for the consultation that took place later, I think the form speaks for itself.

[00:31:58] Speaker 03:
I would ask the court to look at the form because the form there reflects that it assumes the factual basis of the agency's market research.

[00:32:06] Speaker 03:
If you take as a given that there was only one potential small business competitor, well then of course there wasn't going to be a set aside and of course the SBA signed off on that.

[00:32:14] Speaker 03:
There couldn't possibly be another result.

[00:32:17] Speaker 03:
But that's why the SBA instituted a separate stage

[00:32:21] Speaker 03:
where the SBA would review agencies market research and supplement that research because the SBA knows that agencies often don't take that task seriously, which is what happened here.

[00:32:31] Speaker 03:
And the SBA knows that that's the time, that's the opportunity that it has to intervene and to make sure that agencies do properly identify potential small business competitors so that when appropriate they're able to set aside contracts.

[00:32:45] Speaker 03:
In closing, we would ask the court to reverse the decision of the court below.

[00:32:50] Speaker 03:
Thank you, Your Honor.

[00:32:51] Speaker 01:
Thank you.

[00:32:51] Speaker 01:
We thank all the parties for their arguments this morning.

[00:32:53] Speaker 01:
This court is adjourned.