Judge's Final Order:

Fay Communications, Inc. versus
U.S. Small Business Administration

Judge's Final Order Filed March 16, 1988:
United States District Court for the District of Columbia

Fay Communications, Inc., Plaintiff,
v.
James Abdnor, Administrator, Small Business Administration and UNITED STATES OF AMERICA, Defendants.
Civil Action No. 87-2494-LFO

The agency stated that TRI lacked the "corporate capability" to compete successfully for the 1988 FEMA contract, but did not explain that statement in a meaningful way "sufficient to permit either administrative or judicial review."  Id. at 9.  An award of the contract to TRI was thus found to violate 13 C.F.R. Section 124.301(b)(8)(iii).   However, the Court's decision to enjoin awarding of the contract, was "without prejudice to either a renewed award on the basis of adequate justification for a set-aside, or after competitive bidding."  Order filed on September 24, 1987.

          By a letter dated October 8, 1987, FEMA again requested authorization from SBA to negotiate an 8(a) contract with TRI.  See Plaintiff's Motion for Preliminary and Permanent Injunctive Relief ("Plaintiff's Motion"), Exhibit A, at 3.  In this letter, FEMA Contracting Officer Patricia A. English stated:

Id.    In support of this conclusion, the Contracting Officer elaborated her reasons for deciding that TRI would not win a competitive procurement.

          She stated first that TRI lacked the "corporate expertise" to win a competitive procurement because TRI had submitted proposals recently for several of the Agency's competitive procurements ((Editor:  one of which proposals was Fay's winning, competing proposal against TRI.)) that were not sufficiently well-prepared to put them in the competitive range.  Id.  at 4.

          The Program Officer then offered a number of other specific reasons for concluding that TRI would be unable to compete successfully for the particular 1988 EENET contract at issue here.  She stated, for example, that TRI's experience has largely been in the labor-intensive area of content production, rather than in the "facility-intensive" or "broadcast skill-intensive" portions of the contract.  Id.  ((Editor:  Fay had substantial experience in media facilities and broadcast production.))  She noted further that TRI lacked the "studio and broadcast experience necessary to give them the capability to price that portion of the contract in a way that would allow them to compete against firms with an in-house capability ... "  ((Editor:  Fay has always wondered why TRI couldn't obtain it's pricing data the same way Fay did:  through phone calls and requests for quotations from subcontractors/vendors!))  Id.   Finally, the Program Officer stressed that "[a]ward of this contract under the 8(a) Set-Aside program will enable TRI, Inc. to obtain and build upon the inhouse broadcast capability in order to become competitive on this type of procurement from FEMA, and others, in the future."  Id.  ((Editor:  Neither TRI nor Fay Communications had, or has, "inhouse broadcast capability".  These studio facilities are typically hired under subcontract.)) 

          The Business Opportunity Specialist at the Small Business Administration assigned to this matter, Shirley Berry, concurred in FEMA's determination that TRI does not have the capability to compete successfully for the 1988 EENET procurement.  ((Editor:   The actual, original "Business Opportunity Specialist" on this project was Melvyn Goodman, who was either fired or transferred by the SBA after initiation of Fay's suit.))  She agreed with the reasons cited by FEMA's Program Officer, and noted that TRI still lacks "the necessary experience in pricing and bidding contracts competitively."  Id. at 2.  She concluded that "[p]erforming this 8(a) contract will allow TRI to gain considerable experience in learning to perform and price this type of work so that it will be able to do so competitively in the future."  Id. 

          Plaintiff has filed a motion for a preliminary and permanent injunction, contending, inter alia, that defendants have not provided a reasonable justification for their decision to make a renewed award of the EENET procurement to TRI as a section 8(a) set-aside.  Plaintiff contends that "the 'record' created by the SBA for purposes of this litigation contains no rational basis for the conclusion that TRI would be unable to compete successfully for this contract."  Plaintiff's Memorandum at 3.  It must be stressed, however, that the justification offered by defendants for their renewed decision to award the contract to TRI is not a post hoc rationalization prepared for litigation as plaintiff contends.  On the contrary, defendants have attempted to comply with the requirements of the Court's Order of September 24, 1987 by offering a fuller justification for awarding the contract to TRI under Section 8(a).

          The standard of review of an agency contracting decision is a narrow one, and a procurement decision should not be overturned "unless the aggrieved bidder demonstrates that there was no rational basis for the agency's decision."  M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1301 (D.C. Cir. 1971).  It is not the function of the Court to substitute its judgment for the judgment of the agency if there is a rational basis for the agency's decision:

Id.  

          Defendants argue that on the basis of the record before the Court, they have established that SBA had a rational basis for deciding that there was not a "reasonable probability" that TRI could win the 1988 EENET contract competitively.  They contend that the reasons presented by FEMA's Contracting Officer, Patricia English, and by the SBA's Business Opportunity Specialist, Shirley Berry, provide a rational basis for the defendants' decision to award the 1988 EENET contract to TRI under the 8(a) set-aside program.

          The reasons offered by defendants in support of their conclusion that there is not a "reasonable probability" that TRI could compete successfully for the 1988 EENET contract fall into two categories.   First, defendants argue that TRI lacks the expertise to prepare a proposal to bid successfully for the contract.  This first ground is not a rational basis for the agency's conclusion that TRI could not compete for the contract.  The fact that other, recent proposals submitted by TRI were not well-prepared does not provide a rational basis for concluding that TRI could not prepare an adequate proposal for this contract, particularly if TRI were assisted by a consultant in the process of drafting a viable proposal.

          Defendants advance a second and fresh basis for their conclusion that TRI could not win the 1988 EENET contract competitively, namely, that TRI lacks the operating experience with certain aspects of the contract to compete effectively for the procurement.  ((Editor:  This is pure hogwash.  TRI was "selected" by FEMA and SBA as early as 1985 as the "prime contractor" on the FEMA video contracts.  FEMA "assigned" Fay to TRI as a "necessary, key person" (subcontractor) since Fay had been performing this work for FEMA since 1983.  TRI was an administrative convenience for FEMA, since FEMA did not have to compete or justify TRI as a Section 8(a) contractor.  Additionally, from 1985 through 1987, Fay reports that "TRI personnel hovered like 'hawks' over him and his personnel during FEMA studio productions which were subcontracted from TRI; TRI personnel took copious notes and it was obvious that they (TRI) were very competitively interested in learning the ins and outs of the video production business in which Fay was engaged.))  There is substantial evidence in the record to support this finding.  ((Editor:   Yes, and that evidence is laziness, complacency and pure incompetence on the part of TRI!  Why should they expend effort to become "competent" if they were assured of a Section 8(a) "gift" which was contingent upon their incompetence? ))  It is apparent from admissions in plaintiff's complaint and from exhibits attached to it that TRI's experience has been largely in the labor-intensive area of content production, rather than in the facility-intensive or broadcast-skill intensive aspects of the contract.  See Plaintiff's Complaint, filed September 10, 1987 paras. 11-13, 16-18, Exhibit 1 (TRI contract), Exhibit 2 (Fay Communications subcontract); see also Attachment A from Patricia English, FEMA Contracting Officer, October 8, 1987, attached as Exhibit A to Plaintiff's Memorandum.  Defendants' conclusion that TRI does not have a "reasonable probability" of competing for the 1988 EENET contract thus has a rational basis.   Plaintiff's argument that TRI has sufficient experience with the broadcast-skill intensive aspects of the contract because TRI personnel were present while plaintiff performed a previous contract is unpersuasive.  ((Editor:  It would have been persuasive if the Judge had been present during all of TRI's "oversight" and "notetaking" while Fay performed it's work.)) 

          Plaintiff also raises an issue not in the original complaint, namely that the SBA violated the regulation at 13 C.F.R. section 124.301(c)(4)(xii) which provides that "to the extent reasonably available" the SBA shall receive a complete procurement package from the procuring agency which includes "a brief justification" for any particular 8(a) concern nominated for consideration.  Plaintiff's Memorandum at 8-9.  Plaintiff contends that "SBA did not obtain, nor did FEMA offer, any justification for its designation of TRI as the 8(a) firm to receive this set-aside."  Id. at 9.   Defendant responds that it was SBA that first suggested to FEMA that TRI be awarded the 8(a) contract, and that justification from the procuring agency is not necessary or required in such a situation.  ((Editor:   See also "Smoking Guns", TRI's memo which essentially directed the SBA to "set aside" the subject contract for TRI.))  Defendant's Memorandum of Points and Authorities in Opposition to Plaintiff's Motion for Preliminary and Permanent Injunctive Relief at 9.  In the context here, FEMA's statement that an award of this contract to TRI under the 8(a) program "will enable TRI, Inc. to obtain and build upon the inhouse broadcast capability in order to become competitive on this type of procurement from FEMA, and others, in the future" affords a justification from the procuring agency for an award of this particular contract to TRI under the 8(a) program.  See Attachment A from Patricia English, FEMA Contracting Officer, at Plaintiff's Memorandum, Exhibit A, at 4.  Plaintiff's contention must fail.

          Accordingly, the Order filed on March 7, 1988 denied plaintiff's motion for preliminary and permanent injunctive relief and dismissed plaintiff's complaint with prejudice.

(signed) Louis Oberdorfer, U.S. District Judge, March 15, 1988