Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca13-14-05125/USCOURTS-ca13-14-05125-0/pdf.json

Parties Involved:
Palladian Partners, Inc.
Appellee
United States
Appellant

Document Text:

United States Court of Appeals 

for the Federal Circuit ______________________ 

PALLADIAN PARTNERS, INC.,

Plaintiff-Appellee

v.

UNITED STATES,

Defendant-Appellant

______________________ 

2014-5125

______________________ 

Appeal from the United States Court of Federal 

Claims in No. 14-cv-00317C, Judge Marian Blank Horn.

______________________ 

Decided: April 22, 2015

______________________ 

DANIEL E. CHUDD, Jenner & Block LLP, Washington, 

DC, argued for plaintiff-appellee. Also represented by

DAMIEN C. SPECHT, CHARLES L. CAPITO, III. 

DOMENIQUE GRACE KIRCHNER, Commercial Litigation 

Branch, Civil Division, United States Department of 

Justice, Washington, DC, argued for defendant-appellant. 

Also represented by STUART F. DELERY, ROBERT E.

KIRSCHMAN, JR., DEBORAH A. BYNUM. 

______________________ 

Case: 14-5125 Document: 33-2 Page: 1 Filed: 04/22/2015
2 PALLADIAN PARTNERS, INC. v. US

Before LOURIE, MOORE, and O’MALLEY, Circuit Judges.

O’MALLEY, Circuit Judge.

This case involves a pre-award bid protest. On February 28, 2014, the National Institute on Drug Abuse 

(“NIDA”), an institute within the National Institutes of 

Health (“NIH”), issued Request for Proposal (“RFP”) No. 

N01DA-14-4423 for the “NIH Pain Consortium Centers of 

Excellence in Pain Education Coordination Center” (“the 

solicitation”). NIDA initially issued the solicitation as a 

small business set-aside under North American Industry 

Classification System (“NAICS”) code 541712, “Research 

and Development in the Physical, Engineering, and Life 

Sciences (except Biotechnology),” which limits offerors to 

small businesses with 500 employees or fewer. A prospective offeror appealed the NAICS code designation to the 

United States Small Business Administration (“SBA”) 

Office of Hearings and Appeals (“OHA”), and OHA ordered NIDA’s contracting officer to amend the solicitation 

to change the NAICS code designation to 541611, “Administrative Management and General Management Consulting Services.” 

Palladian Partners, Inc. (“Palladian”) filed suit in the 

Court of Federal Claims seeking declaratory and injunctive relief to enjoin NIDA from accepting and evaluating 

proposals under the new code, which rendered Palladian 

ineligible to compete. The Court of Federal Claims granted Palladian’s motion for judgment on the administrative 

record, finding that the contracting officer’s NAICS code 

amendment was arbitrary and capricious. Specifically,

the court found that NAICS code 541611 did not best 

describe the statement of work for the solicitation. Based 

on this conclusion, the court remanded for NIDA to make 

a “proper NAICS code selection, given the current statement of work, or to determine how otherwise to proceed.” 

Palladian Partners, Inc. v. United States, 119 Fed. Cl. 

417, 459 (2014). 

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PALLADIAN PARTNERS, INC. v. US 3

The United States appeals from the Court of Federal 

Claims’ final judgment which sustained Palladian’s preaward protest and entered a permanent injunction 

against the receipt and review of proposals for the solicitation under NAICS code 541611. Among other things, 

the government argues that the court should have dismissed Palladian’s suit for failure to exhaust administrative remedies with OHA. Because we agree that 

Palladian failed to exhaust its administrative remedies, 

and because this failure warrants dismissal of Palladian’s 

protest, we reverse.

BACKGROUND

The Small Business Act, 15 U.S.C. §§ 631, et seq.,

(“the Act”) was designed to set aside certain contracts for 

the benefit of small business concerns. Congress created 

the Small Business Administration (“SBA”) to carry out 

the policies of the Act, and gave SBA authority to “specify 

detailed definitions or standards by which a business 

concern may be determined to be a small business concern.” 15 U.S.C. § 632(a)(2)(A); see also 15 U.S.C. 

§ 637(b)(6) (SBA is empowered “to determine within any 

industry the concerns, firms, persons, corporations, partnerships, cooperatives, or other business enterprises 

which are to be designated ‘small-business concerns’ for 

the purpose of effectuating the provisions of this chapter”). SBA was authorized to engage in rulemaking and 

its regulations “have the force and effect of law.” Otis 

Steel Prods. Corp. v. United States, 316 F.2d 937, 940 (Ct. 

Cl. 1963) (“Since the Administrator was specifically 

authorized to define a small business concern, these 

regulations have the force and effect of law.”).

SBA uses the North American Industry Classification 

System (“NAICS”) to determine which entities qualify as 

small business concerns. The Office of Management and 

Budget assigns NAICS codes to various industry sectors, 

and SBA determines which firms qualify as small busiCase: 14-5125 Document: 33-2 Page: 3 Filed: 04/22/2015
4 PALLADIAN PARTNERS, INC. v. US

nesses “to assure that a fair proportion of government 

contracts for goods and services are performed by such 

entities in each industry category.” Advanced Sys. Tech., 

Inc. v. United States, 69 Fed. Cl. 474, 476 (2006) (citing 15 

U.S.C. §§ 637(b)(6), 644(a)). To do so, SBA specifies the 

maximum number of employees or maximum annual 

receipts which a company may have in order to qualify as 

a small business within a particular NAICS code. See 13 

C.F.R. § 121.201 (providing size standards for specific 

industries by either annual revenue or number of employees). 

SBA’s regulations instruct that the procuring agency’s

contracting officer “designates the proper NAICS code and 

corresponding size standard in a solicitation, selecting the 

single NAICS code which best describes the principal 

purpose of the product or service being acquired.” 13 

C.F.R. § 121.402(b). The NAICS code assigned to a solicitation limits the small businesses that may submit bids to 

those that qualify under the size standard associated with 

that particular NAICS code. By regulation, the contracting officer’s choice of NAICS code and corresponding size 

standard “is final unless timely appealed” to the SBA’s 

OHA. 13 C.F.R. § 121.402(d). 

The regulations provide that the “OHA appeal is an 

administrative remedy that must be exhausted before 

judicial review of a NAICS code designation may be 

sought in a court.” 13 C.F.R. § 121.1102. OHA’s decision 

in a NAICS code appeal is “final” and “may not be reconsidered.” 13 C.F.R. § 134.316(d) & (f). If OHA grants the 

appeal and changes the NAICS code, “and the contracting 

officer receives OHA’s decision by the date offers are due, 

the contracting officer must amend the solicitation to 

reflect the new NAICS code.” 13 C.F.R. § 134.318(b). 

With this framework in mind, we turn to the solicitation 

at issue. 

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PALLADIAN PARTNERS, INC. v. US 5

A. The Solicitation

The National Institutes of Health (“NIH”) operates 

twelve Centers of Excellence in Pain Education 

(“CoEPEs”) to “develop pain management training and 

educational resources for medical, dental, nursing, and 

pharmacy students to advance the assessment, diagnosis, 

and safe treatment of pain.” Palladian, 119 Fed. Cl. at 

420-21. On February 28, 2014, NIDA published the 

solicitation at issue as a total small business set aside. 

The purpose of the solicitation was to fund a “Coordination Center,” operated by the contractor, “to facilitate the 

activities of the CoEPEs.” Id. at 421.

The solicitation identified seven tasks the contractor 

was required to perform. Specifically, it provided that the 

contractor would: (1) prepare and submit monthly progress reports; (2) “maintain, host and manage an interactive online communication portal” for NIH, the contractor, 

and the CoEPEs to use; (3) “coordinate the process by 

which CoEPEs submit their materials to be used in the

development of cases,” “facilitate NIH Pain Consortium 

evaluation of proposed cases and other materials to be 

produced,” “use the materials submitted by the CoEPEs to 

create” interactive pain treatment scenarios with graphics 

and embedded videos, “proofread, edit, and program” the

scenarios, “advise and suggest ways to improve the cases, 

when applicable,” and “program, format and code” portions of the NIH website; (4) “facilitate the evaluation of 

the impact of these training materials” and the “dissemination of the results of these evaluations;” (5) “organize 

teleconferences,” “summarize these meetings in writing,” 

and post such summaries on the website; (6) post videos 

through a special YouTube channel; and (7) obtain additional content for case studies. Id. at 422-23.

NIDA’s contracting officer, Kenneth E. Goodling, 

selected NAICS code 541712, “Research and Development 

in the Physical, Engineering, and Life Sciences (except 

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6 PALLADIAN PARTNERS, INC. v. US

Biotechnology),” for the solicitation. To qualify under this 

code, a business must have fewer than 500 employees. 

Palladian alleges that it qualified as a small business 

under this code and size standard. 

B. Initial OHA Appeal

SBA’s regulations provide that “[a]ny interested party 

adversely affected by a NAICS code designation may 

appeal the designation to OHA.” 13 C.F.R. 

§ 121.1103(a)(1). “An appeal from a contracting officer’s 

NAICS code or size standard designation must be served 

and filed within 10 calendar days after the issuance of the 

solicitation or amendment affecting the NAICS code or 

size standard.” 13 C.F.R. § 121.1103(b)(1). 

On March 10, 2014, a prospective offeror—

Information Ventures, Inc.—filed a timely OHA Appeal. 

Upon receipt of the appeal, OHA issued a notice and order 

instructing the contracting officer to amend the solicitation to notify potentially interested parties of the appeal. 

The order indicated that any response to the appeal must 

be filed with OHA and received no later than March 25, 

2014. Pursuant to that order, and consistent with SBA 

regulations, NIH amended the solicitation to notify all 

potential offerors—including Palladian—of the OHA 

appeal. Palladian did not respond to or seek to participate in the appeal. 

In its appeal, Information Ventures argued that the 

contracting officer erred in selecting NAICS code 541712, 

because the tasks identified in the solicitation were 

unrelated to research and development. According to 

Information Ventures, “with the exception of Task 3—

which contains some work properly viewed as information 

technology, such as developing a website—all of the tasks 

fit squarely within NAICS code 541611,” “Administrative 

Management and General Management Consulting 

Services.” NAICS Appeal of: Info. Ventures, Inc., SBA No. 

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PALLADIAN PARTNERS, INC. v. US 7

NAICS-5544, 2014 WL 1395651, at *3 (Apr. 2, 2014) (IV 

OHA Appeal).

On March 20, 2014, NIH contracting officer Goodling 

filed a response, defending his selection of NAICS code 

541712. Specifically, he argued that:

The primary purpose of the solicited contract and 

the majority of the anticipated cost of the contract 

will be in the implementation of Task 3 of the 

Statement of Work. The Contractor will use materials researched and submitted by the CoEPEs 

to develop the online case-scenarios. Further, the 

Contractor will perform additional research, program, format and code as needed to develop the 

website on the NIH Pain Consortium page for research support in disseminating health based information. 

Palladian, 119 Fed. Cl. at 427. Goodling explained that 

the contractor would be responsible for the “R&D [Research & Development] creation of the two predominant 

products in the contract:” the case-based scenarios and 

the website to host them. Id. 

On April 2, 2014, OHA granted the appeal, concluding 

that the contracting officer “clearly erred in assigning 

NAICS code 541712” because the solicitation “does not 

call for research and development.” IV OHA Appeal, 2014 

WL 1395651, at *5. OHA found that the contractor would 

have “little, if any, substantive role in any research” and 

would instead be coordinating among entities that were 

engaging in research. Id. OHA agreed with Information 

Ventures that NAICS code 541611 was the most appropriate for the solicitation. In reaching this conclusion, 

OHA noted that it has affirmed use of NAICS code 541611 

“in situations where a contractor will ‘assis[t] with the 

administration and management’ of an important program.” Id. at *7 (citations omitted). OHA found that the 

“instant contractor will perform precisely such work, 

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8 PALLADIAN PARTNERS, INC. v. US

acting as the ‘Coordination Center,’ assisting with administrative matters, and managing communications and 

interactions between NIH and the CoEPEs.” Id. 

Because OHA’s decision issued before the close of the 

solicitation, it informed the contracting officer that he 

“MUST amend the RFP to change the NAICS code designation from 541712 to 541611.” Id. OHA concluded by 

stating that “[t]his is the final decision of the Small Business Administration.” Id. Pursuant to OHA’s decision, 

the contracting officer amended the solicitation to change 

the NAICS code to 541611, “Administrative Management 

and General Management Consulting Services,” which 

has a size standard of $14 million average annual receipts. NIDA issued another amendment to the solicitation, this time extending the due date for offers to April 

22, 2014. 

C. Palladian’s Subsequent OHA Appeal

On April 14, 2014, Palladian appealed the contracting 

officer’s new NAICS code designation to OHA. OHA 

provided notice of the appeal and the contracting officer 

issued an amendment to the solicitation to notify all 

potential offerors of Palladian’s appeal. Palladian argued 

that NAICS code 541611 was inappropriate because it is 

used for “general consulting services in support of an 

agency.” NAICS Appeal of Palladian Partners, Inc., SBA 

No. NAICS-5553, 2014 WL 1924608, at *4 (May 7, 2014) 

(“Palladian OHA Dismissal”). According to Palladian, 

NAICS code 519130, “Internet Publishing and Broadcasting and Web Search Portals,” which has a size standard of 

500 employees, best describes the work to be performed 

because the RFP’s tasks “all relate to the creation of the 

Coordination Center website or to basic contract administration.” Id. Palladian asserted that it would be eligible 

to bid if that code and its accompanying size standard 

were used, but not if the revenue-based NAICS code 

541611 applied, which restricted the solicitation to comCase: 14-5125 Document: 33-2 Page: 8 Filed: 04/22/2015
PALLADIAN PARTNERS, INC. v. US 9

panies with less than $14 million in average annual 

receipts. Notably, Palladian did not defend or seek reinstatement of the original code chosen by the contracting 

officer—NAICS code 541712.

On May 7, 2014, OHA dismissed Palladian’s appeal 

under the doctrine of issue preclusion. Specifically, OHA 

found that Palladian is “barred from relitigating issues 

already decided in NAICS Appeal of Information Ventures,” and that the issue presented there was the same: 

which NAICS code is appropriate for RFP No. N01DA-14-

4423. Id. at *6. OHA emphasized that, in Information 

Ventures, the contracting officer notified Palladian and 

other prospective offerors that a NAICS appeal was 

pending at OHA, that the record would close on March 25, 

2014, and that SBA’s regulations permit interested parties to intervene “at any time until the close of record.” 

Id. at *6 (quoting 13 C.F.R. § 134.210(b)). 

OHA explained that, if Palladian “wished to litigate 

the issue of what NAICS code should apply to this RFP,” 

it “could, and should, have intervened in Information 

Ventures.” Id. OHA rejected Palladian’s suggestion that 

its decision in Information Ventures should have addressed every possible NAICS code, noting that it would 

not be “practicable to specifically comment in the text of a 

decision on every NAICS code theoretically applicable to a 

procurement.” Id. Finally, OHA explained that the 

regulations “specifically preclude reconsideration of a 

NAICS code decision.” Id. (citing 13 C.F.R. § 134.316(f)). 

D. Court of Federal Claims Proceedings 

On April 21, 2014, while its OHA appeal was pending, 

Palladian filed a pre-award bid protest in the Court of 

Federal Claims. Palladian argued that the contracting 

officer’s decision to amend the solicitation was “arbitrary, 

capricious, an abuse of discretion, and lack[ed] a rational 

basis.” Palladian, 119 Fed. Cl. at 420. In its complaint, 

Palladian sought declaratory and injunctive relief, includCase: 14-5125 Document: 33-2 Page: 9 Filed: 04/22/2015
10 PALLADIAN PARTNERS, INC. v. US

ing a finding that NIDA’s use of NAICS code 541611 was 

improper, an injunction preventing NIDA from accepting 

and evaluating proposals under the that code, and a 

declaration that the appropriate NAICS code is 519130, 

“Internet Publishing and Broadcasting and Web Search 

Portals.” Id. at 431. 

The parties filed expedited motions for judgment on 

the administrative record. In relevant part, the government argued that Palladian’s suit should be dismissed for 

failure to exhaust its administrative remedies because it 

did not participate in Information Ventures’ OHA NAICS 

proceeding. The Court of Federal Claims conducted a 

hearing on the parties’ cross-motions and ordered supplemental briefing. During those proceedings, Palladian 

conceded that it had notice of Information Ventures’ OHA 

appeal. 

On May 15, 2014, the court issued an oral decision 

finding that the NIDA contracting officer’s decision to 

change the solicitation’s NAICS code from 541712 to 

541611 was arbitrary and capricious. The court also 

preliminarily enjoined NIDA from proceeding with the 

solicitation under NAICS code 541611. Accordingly, the 

contracting officer issued an amendment to the solicitation indicating that no offers would be accepted or considered. 

The court subsequently issued the written decision at 

issue in this appeal, granting Palladian’s motion for 

judgment on the administrative record. At the outset, the 

court noted that this court “has yet to clarify how [the 

Court of Federal Claims’] bid protest jurisdiction interacts 

with the Small Business Administration’s NAICS code 

review responsibilities.” Palladian, 119 Fed. Cl. at 434. 

The parties agreed that the issue “hasn’t been decided at 

the Circuit.” Id. The court found, however, that it had 

jurisdiction pursuant to the Tucker Act, 28 U.S.C. 

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PALLADIAN PARTNERS, INC. v. US 11

§ 1491(b)(1), to review the contracting officer’s decision to 

amend the solicitation. 

The government argued that, even if the Court of 

Federal Claims had the jurisdiction to do so, the court 

should not reach the merits of Palladian’s appeal because 

Palladian failed to exhaust its administrative remedies at 

the SBA when it declined to participate in Information 

Ventures’ OHA appeal. According to the government, 

Palladian had notice of that proceeding and was required 

to participate in it pursuant to 13 C.F.R. § 121.1102, 

which states that the “OHA appeal is an administrative 

remedy that must be exhausted before judicial review of a 

NAICS code designation may be sought in a court.” 

Palladian, 119 Fed. Cl. at 435. The Court of Federal 

Claims rejected the government’s approach, finding that 

it would require potential small business bidders to 

participate in an OHA NAICS proceeding to preserve 

their right to judicial review, even if they had not yet 

decided to bid, and even if the current NAICS code did not 

negatively affect their ability to bid. 

Turning to the merits, the Court of Federal Claims 

concluded that the contracting officer “blindly accept[ed] 

the NAICS code chosen” by OHA and failed to exercise his 

discretion to determine the proper code for the solicitation. Id. at 443. In doing so, the court noted that the code 

selected must be the one that “best describes the principal 

nature of the product or service being acquired.” Id. 

(citing 13 C.F.R. § 121.402(b)). 

After reviewing the record, the court stated that “it 

appears that Task 3, encompassing the construction of a 

website portal, and the creation and posting online of 

interactive case-based scenarios, will account for the 

‘greatest percentage of the contract price.’” Id. at 445 

(citing Federal Acquisition Regulation (“FAR”) 19.102(d)). 

“Therefore, Task 3 should be most determinative of which 

NAICS code to apply to the solicitation.” Id. Given this 

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12 PALLADIAN PARTNERS, INC. v. US

conclusion, the court found that “NAICS code 541611 does 

not best describe the ‘principal nature’ of the services 

being acquired.” Id. at 457. The court further indicated 

that the “creation of a website and the publishing of 

content online align better with NAICS code 519130’s 

classification of companies ‘publishing and/or broadcasting content on the Internet exclusively.’” Id. at 452. But 

because “the role of the court is not to determine which 

NAICS code best describes the statement of work in the 

solicitation, or to select a NAICS code for insertion into 

the solicitation,” the court declined Palladian’s invitation 

to declare that the solicitation be re-designated under 

NAICS code 519130. Id. at 459. Instead, the court: 

(1) found that selection of NAICS code 541611 was arbitrary and capricious; (2) remanded to NIDA to make a 

proper code selection or otherwise determine how to 

proceed; and (3) entered a permanent injunction against 

receipt and review of proposals for the solicitation under 

NAICS code 541611.1 

The government timely appealed to this court. We 

have jurisdiction under 28 U.S.C. § 1295(a)(3). 

1 The Court of Federal Claims reached no conclusion regarding the extent to which the originallydesignated code—NAICS code 541712—aligned with the 

tasks outlined in the solicitation. The parties on appeal 

concede that NAICS code 541712 is not an appropriate 

choice for this solicitation, however. There is, thus, no 

contention that it was arbitrary or capricious for the 

contracting officer to choose a code other than that originally designated; the only question is whether it was 

arbitrary or capricious for the contracting officer to 

change the designation to NAICS code 541611, rather 

than to some third NAICS code, such as NAICS code 

519130.

 

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PALLADIAN PARTNERS, INC. v. US 13

DISCUSSION

We review the Court of Federal Claims’ legal determinations de novo and its factual findings for clear error. 

CMS Contract Mgmt. Servs. v. Mass. Hous. Fin. Agency, 

745 F.3d 1379, 1385 (Fed. Cir. 2014). In a bid protest 

case, an agency’s action “must be set aside if it is arbitrary, capricious, an abuse of discretion, or otherwise not 

in accordance with law.” Savantage Fin. Servs. v. United 

States, 595 F.3d 1282, 1285 (Fed. Cir. 2010). The court’s 

task is to determine whether “(1) the procurement official’s decision lacked a rational basis; or (2) the procurement procedure involved a violation of regulation or 

procedure.” Id. at 1285-86 (citation omitted). 

As a threshold matter, the government states that we 

have not yet decided whether the Court of Federal Claims 

has the authority to reverse or vacate an OHA NAICS 

code decision. For the reasons explained below, we conclude that the court had jurisdiction over both OHA’s code 

decision and the contracting officer’s amendment to the 

solicitation implementing that decision. 

Next, the government argues that the Court of Federal Claims erred when it enjoined the agency from proceeding with the solicitation under the NAICS code OHA 

determined should be assigned to it in Information Ventures. Specifically, the government argues that the court: 

(1) erred by not dismissing Palladian’s protest for failure 

to exhaust administrative remedies; (2) improperly concluded that the contracting officer abused his discretion 

by amending the solicitation in light of OHA’s NAICS 

code determination; and (3) improperly engaged in a de 

novo review of OHA’s NAICS code determination. We

agree with the government on its first point, and find that 

Palladian failed to exhaust its administrative remedies. 

Because this failure requires dismissal of Palladian’s 

protest, we need not reach the government’s additional 

arguments on appeal. 

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14 PALLADIAN PARTNERS, INC. v. US

A. Jurisdiction

“We review decisions of the Court of Federal Claims 

on the scope of its jurisdiction without deference.” SRA 

Int’l, Inc. v. United States, 766 F.3d 1409, 1412 (Fed. Cir. 

2014). The Tucker Act, as amended by the Administrative Disputes Resolution Act (“ADRA”), confers jurisdiction to the Court of Federal Claims:

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.

28 U.S.C. § 1491(b)(1). We have acknowledged that this 

statute “provides a broad grant of jurisdiction because 

‘[p]rocurement includes all stages of the process of acquiring property or services, beginning with the process for 

determining a need for property or services and ending 

with contract completion and closeout.’” Sys. Application 

& Techs., Inc. v. United States, 691 F.3d 1374, 1381 (Fed. 

Cir. 2012) (quoting Res. Conservation Grp., LLC v. United 

States, 597 F.3d 1238, 1244 (Fed. Cir. 2010)). 

In this case, pursuant to OHA’s decision in Information Ventures, the contracting officer amended the 

solicitation to change the NAICS code from 541712 to 

541611. Palladian argued that both the agency’s amendment and OHA’s order directing that amendment “are 

actions ‘in connection with a proposed procurement’ that 

lacked a rational basis and were contrary to applicable 

regulatory requirements.” Palladian, 119 Fed. Cl. at 433

(citation omitted). 

The Court of Federal Claims found that it had jurisdiction to review whether the contracting officer’s decision 

to amend the NAICS code was “arbitrary, capricious, an 

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PALLADIAN PARTNERS, INC. v. US 15

abuse of discretion, or otherwise not in accordance with 

law.” Id. The court noted that there was some precedent 

suggesting that it also has jurisdiction to review SBA 

OHA’s final decision, as long as that decision is in connection with a proposed procurement. Id. at 435 n.8 (citing 

Cavalier Clothes, Inc. v. United States, 810 F.2d 1108, 

1112 (Fed. Cir. 1987) (“[N]othing either in the language or 

the legislative history of [the Small Business Act at 15 

U.S.C.] § 634 suggests that Congress intended to grant 

the SBA any greater immunity from injunctive relief than 

that possessed by other governmental agencies.”). But 

because the court found that it had jurisdiction under the 

Tucker Act to review the contracting officer’s decision to 

amend the solicitation, it declined to address whether it 

also had jurisdiction to review OHA’s decision. Id. 

On appeal, Palladian argues that, when the contracting officer “blindly adopts” OHA’s NAICS code determination, both OHA’s decision and the contracting officer’s 

adoption of it are within the Court of Federal Claim’s 

jurisdiction. Appellee Br. 17. Palladian submits that, 

“although the court was correct in asserting jurisdiction 

over the Contracting Officer’s amendment of the solicitation, and properly enjoined the Agency from accepting 

proposals under NAICS code 541611, the court also would 

have been well-within its jurisdiction to directly review 

OHA’s determination.” Id. The government concedes 

that Palladian’s objections to the NAICS code are within 

the Court of Federal Claims’ jurisdiction.2 See Palladian 

2 At oral argument, counsel for the government 

stated that “we have not taken the position that there is a 

lack of jurisdiction. And I believe we have said in our 

briefs that certainly the jurisdictional statute is broad 

enough here. Jurisdiction is determined by whether you 

are challenging the term of a solicitation. They are challenging the term of a solicitation.” Oral Argument at 

 

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16 PALLADIAN PARTNERS, INC. v. US

Partners, 119 Fed. Cl. at 433 (noting that the government 

conceded that both the contracting officer’s designation 

and the OHA decision are “in connection with” a proposed 

procurement). 

“Every federal appellate court has a special obligation 

to ‘satisfy itself not only of its own jurisdiction, but also 

that of the lower courts in a cause under review,’ even 

though the parties are prepared to concede it.” Steel Co. 

v. Citizens for a Better Env’t, 523 U.S. 83, 95 (1998) (citation omitted). This court has not previously addressed 

the scope of the Court of Federal Claims’ jurisdiction over 

OHA’s NAICS code determinations. We have, however, 

recognized that the Tucker Act “expressly waives sovereign immunity for claims against the United States in bid 

protests” and that “this waiver covers a broad range of 

potential disputes arising during the course of the procurement process.” Sys. Application & Techs., 691 F.3d at 

1380. As noted, the statute authorizes the Court of Federal Claims to review an action “in connection with a 

procurement or a proposed procurement.” 28 U.S.C. 

§ 1491(b)(1). In construing this language, we have found 

that the “operative phrase ‘in connection with’ is very 

sweeping in scope.” RAMCOR Servs. Group, Inc. v. United States, 185 F.3d 1286, 1289 (Fed. Cir. 1999) (“As long 

as a statute has a connection to a procurement proposal, 

an alleged violation suffices to supply jurisdiction.”). 

For its part, the Court of Federal Claims has held that 

“the SBA OHA’s decision is . . . ‘in connection with’ a 

proposed procurement.” InGenesis, Inc. v. United States, 

1:34-1:55, available at http://www.cafc.uscourts.gov/oralargument-recordings/14-5125/all. Likewise, counsel for 

Palladian indicated that “both parties agreed that the 

term ‘in connection with a procurement’ would include 

both the contracting officer’s action and the OHA action.” 

Id. at 13:52-14:32. 

 

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PALLADIAN PARTNERS, INC. v. US 17

104 Fed. Cl. 43, 48 (2012); see also RLB Contracting, Inc. 

v. United States, 118 Fed. Cl. 750, 756 (2014) (“Decisions 

of SBA’s OHA are reviewable under [the Tucker Act’s] 

grant of authority . . . .”). We agree. Because OHA’s 

NAICS code determination and the contracting officer’s 

amendment to the solicitation are actions “in connection 

with a proposed procurement,” we conclude that they are 

within the scope of jurisdiction granted under the Tucker 

Act. Accordingly, we find that the Court of Federal 

Claims had jurisdiction over OHA’s NAICS code decision 

and the contracting officer’s decision amending the solicitation pursuant to OHA’s directive. 

B. Exhaustion of Administrative Remedies

The government argues that Palladian failed to 

properly exhaust its administrative remedies before filing 

its pre-award bid protest with the Court of Federal 

Claims and that this failure requires dismissal. “The 

doctrine of exhaustion of administrative remedies is well 

established in the jurisprudence of administrative law.” 

McKart v. United States, 395 U.S. 185, 193 (1969). It 

provides that “no one is entitled to judicial relief for a 

supposed or threatened injury until the prescribed administrative remedy has been exhausted.” Sandvik Steel Co. 

v. United States, 164 F.3d 596, 599 (Fed. Cir. 1998) (quoting McKart, 395 U.S. at 193). Exhaustion stems from the 

notion that “‘[s]imple fairness to those who are engaged in 

the tasks of administration, and to litigants, requires as a 

general rule that courts should not topple over administrative decisions unless the administrative body not only 

has erred but has erred against objection made at the time 

appropriate under its practice.’” Mittal Steel Point Lisas 

Ltd. v. United States, 548 F.3d 1375, 1383-84 (Fed. Cir. 

2008) (quoting United States v. L.A. Tucker Truck Lines, 

Inc., 344 U.S. 33, 37 (1952)). 

“Exhaustion of administrative remedies serves two 

main purposes.” Woodford v. Ngo, 548 U.S. 81, 89 (2006). 

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18 PALLADIAN PARTNERS, INC. v. US

First, it protects “administrative agency authority.” Id. 

On this point, the Supreme Court has explained that the 

exhaustion doctrine “recognizes the notion, grounded in 

deference to Congress’ delegation of authority to coordinate branches of Government, that agencies, not the 

courts, ought to have primary responsibility for the programs that Congress has charged them to administer.” 

McCarthy v. Madigan, 503 U.S. 140, 145 (1992). Exhaustion gives an agency “an opportunity to correct its own 

mistakes . . . before it is haled into federal court.” Id. 

Second, exhaustion promotes judicial efficiency. 

Sandvik, 164 F.3d at 600. “Claims generally can be 

resolved much more quickly and economically in proceedings before an agency than in litigation in federal court. 

In some cases, claims are settled at the administrative 

level, and in others, the proceedings before the agency 

convince the losing party not to pursue the matter in 

federal court.” Woodford, 548 U.S. at 89. Even if litigation ensues, however, exhaustion of the administrative 

procedure may narrow the issues and “produce a useful 

record for subsequent judicial consideration.” Id. 

Exhaustion may be required by statute, regulation, or 

judicially-created common law. See Weinberger v. Salfi, 

422 U.S. 749, 766 (1975) (distinguishing between a statutory exhaustion requirement and “judicially developed 

doctrine of exhaustion”); see also Sims v. Apfel, 530 U.S. 

103, 108 (2000) (“[I]t is common for an agency’s regulations to require issue exhaustion in administrative appeals.”). The “fact that the administrative remedy was 

provided by a regulation rather than by a statute does not 

make the exhaustion doctrine inapplicable or inappropriate.” Sandvik, 164 F.3d. at 600. Where a regulation 

requires exhaustion, a party’s failure to exhaust administrative remedies precludes judicial review of its claim. 

See Sims, 530 U.S. at 108 (noting that, when a regulation 

provides for exhaustion, “courts reviewing agency action 

regularly ensure against the bypassing of that requireCase: 14-5125 Document: 33-2 Page: 18 Filed: 04/22/2015
PALLADIAN PARTNERS, INC. v. US 19

ment by refusing to consider unexhausted issues”); see 

also Sandvik, 164 F.3d at 599-600 (finding that the “detailed scope determination procedures that Commerce has 

provided constitute precisely the kind of administrative 

remedy that must be exhausted before a party may litigate the validity of the administrative action”). 

1. SBA Regulations Require Exhaustion 

SBA’s regulations provide that “[t]he OHA appeal is 

an administrative remedy that must be exhausted before 

judicial review of a NAICS code designation may be 

sought in a court.” 13 C.F.R. § 121.1102 (emphasis added). Consistent with this mandatory language, the Court 

of Federal Claims has recognized that a challenge to an 

agency’s assignment of a particular NAICS code “is an 

administrative remedy which must be exhausted before 

judicial review of a code designation is permitted.” Rotech 

Healthcare, Inc. v. United States, 71 Fed. Cl. 393, 407

(2006). Accordingly, if no party had appealed the contracting officer’s NAICS code selection to OHA, it would 

not have been reviewable in court. 

Here, Information Ventures timely appealed the contracting officer’s NAICS code determination for the solicitation and OHA issued a final decision. It is undisputed 

that interested persons, including Palladian, received 

notice of the pending NAICS code appeal, and had an 

opportunity to intervene and participate in that proceeding. See 13 C.F.R. § 134.210(b) (“Any interested person 

may move to intervene at any time . . . .”). Palladian did 

not do so. 

By regulation, when OHA issued its NAICS code determination for the solicitation, it became a final decision. 

13 C.F.R. § 134.316(d) (“The decision is the final decision 

of the SBA and becomes effective upon issuance.”). The 

code selected governs later proceedings concerning the 

same solicitation and is not subject to reconsideration. 

See 13 C.F.R. § 134.316(f) (“The decision in a NAICS code 

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20 PALLADIAN PARTNERS, INC. v. US

appeal may not be reconsidered.”); see also Integrated 

Lab. Sys., Inc., SBA No. NAICS-4733, 2005 WL 5714171, 

at *3 n.4 (Oct. 6, 2005) (noting that OHA precedent “holds 

that a decision which determines the correct code for a 

solicitation controls in the case of later-filed appeals 

concerning the same solicitation”). According to OHA, 

“[t]o hold otherwise would permit constant re-litigation of 

a solicitation’s NAICS code, as successive potential offerors expressed their unhappiness with the codes determined by this Office’s decisions.” Advanced Sys., 69 Fed. 

Cl. at 480-81. 

Consistent with these regulations, in Palladian’s subsequent appeal of the same issue, OHA refused to depart 

from or reconsider its NAICS code decision in Information 

Ventures. OHA explained that, if Palladian “wished to 

litigate the issue of what NAICS code should apply to this 

RFP,” then it should have intervened in the pending 

appeal. Palladian OHA Dismissal, 2014 WL 1924608, at 

*6. In Palladian’s bid protest, however, the Court of 

Federal Claims rejected the government’s argument that 

Palladian was required to participate in the pending OHA 

appeal. Specifically, the court found it would be burdensome to require potential small business offerors to intervene in every SBA NAICS code challenge to the 

solicitation to preserve the possibility of judicial review. 

The court noted that, in many instances, intervention 

would require litigants to file “useless motions in order to 

preserve their rights.” Palladian, 119 Fed. Cl. at 437.3 

3 The futility exception to the exhaustion requirement applies “in situations in which enforcing the exhaustion requirement would mean that parties ‘would be 

required to go through obviously useless motions in order 

to preserve their rights.’” Corus Staal BV v. United 

States, 502 F.3d 1370, 1379 (Fed. Cir. 2007) (quoting 

Bendure v. United States, 554 F.2d 427, 431 (Ct. Cl. 

 

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PALLADIAN PARTNERS, INC. v. US 21

The court was also concerned that small businesses would 

“be forced to expend significant time and money to involve 

themselves in potentially costly litigation, in some cases, 

even before having made the decision of whether or not to 

submit a proposal.” Id. 

On appeal, the government maintains that Palladian 

was “required to either address the merits in the pending 

OHA NAICS proceeding or accept OHA’s ruling on the 

appropriate code as dispositive.” Appellant Br. 21. According to the government, the court “undermined the 

administrative scheme established by SBA and erroneously excused Palladian from exhausting administrative 

remedies and thereby deprived OHA of a principal purpose of administrative exhaustion, i.e., ‘an opportunity to 

correct its own [potential] errors.’” Id. at 34 (quoting 

Weinberger v. Salfi, 422 U.S. 749, 765 (1975)). The government argues that it “reasonably interprets OHA 

regulations as requiring that an interested party participate in the solicitation’s OHA NAICS code appeal, or be 

barred from suit.” Appellant Reply Br. 4. 

In response, Palladian concedes that a “party adversely affected by a NAICS code determination must first file 

at OHA within 10 days of that determination.” Appellee 

1977)). We apply the exception narrowly, however. “The 

mere fact that an adverse decision may have been likely 

does not excuse a party from a statutory or regulatory 

requirement that it exhaust administrative remedies.” 

Id. As the government notes, Palladian does not attempt 

to defend the Court of Federal Claims’ suggestion that 

exhaustion was not required because it would be “useless” 

or “futile.” Palladian’s suggestion of a different alternative to the original code designation than NAICS code 

541611 could have been made to OHA in the context of 

that appeal, and might well have been deemed persuasive. 

 

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22 PALLADIAN PARTNERS, INC. v. US

Br. 35. But when a contractor is “adversely affected by a 

NAICS code determination resulting from an OHA appeal,” Palladian submits that the proper venue is the 

Court of Federal Claims. Id. at 35-36. Otherwise, as the 

court observed, the new code “could become completely 

unreviewable.” Palladian, 119 Fed. Cl. at 437. 

According to Palladian, as long as any interested party filed an OHA NAICS appeal and OHA rendered a final 

decision identifying the most appropriate NAICS code, the 

administrative exhaustion requirement is satisfied. In 

particular, Palladian argues that the regulation is written 

in passive voice—“The OHA appeal is an administrative 

remedy that must be exhausted before judicial review of a 

NAICS code designation may be sought in a court”—and 

nothing contained therein provides that “the ability to 

seek judicial review vests only in those parties that participated in the OHA appeal.” Appellee Br. at 20-21 

(quoting 13 C.F.R. § 121.1102). As explained below, on 

the record here, we disagree. 

First, Palladian’s argument that the regulations do 

not specify which parties must exhaust the administrative 

remedies lacks merit; the regulations do identify the 

parties that can either initiate or participate in an OHA 

NAICS code appeal. The regulations provide that “[a]ny 

person adversely affected by a NAICS code designation” 

may file an appeal with OHA. 13 C.F.R. § 134.302(b). 

When a NAICS code appeal is filed, the contracting officer 

must advise the public of the existence of the appeal and 

“the procedures and deadline for interested parties to file 

and serve arguments concerning the appeal.” 13 C.F.R. 

§ 121.1103(c)(1)(ii). And, once the appeal is filed, “[a]ny 

interested person may move to intervene at any time until 

the close of record by filing and serving a motion to intervene containing a statement of the moving party’s interest in the case and the necessity for intervention to 

Case: 14-5125 Document: 33-2 Page: 22 Filed: 04/22/2015
PALLADIAN PARTNERS, INC. v. US 23

protect such interest.” 13 C.F.R. § 134.210(b).4 An “interested person” is defined as “any individual, business 

entity, or governmental agency that has a direct stake in 

the outcome of the appeal.” Id. 

By regulation, “[a]ny person served with an appeal 

petition, any intervenor, or any person with a general 

interest in an issue raised by the appeal may file and 

serve a response supporting or opposing the appeal.” 13 

C.F.R. § 134.309(a). Accordingly, any interested party 

can present evidence and arguments for OHA to consider. 

The regulations make clear that OHA’s decision is the 

final decision on the NAICS code applicable to a particular solicitation and is not subject to reconsideration by 

OHA. See 13 C.F.R. § 134.316(d); see also 13 C.F.R. 

§ 134.316(f). 

We agree with the government that SBA’s regulations, taken together, identify the parties who must 

participate in a pending OHA proceeding if they want to 

challenge OHA’s NAICS code designation in court. And, 

by regulation, any interested party who participated in 

the pending OHA appeal for the solicitation can seek 

judicial review of OHA’s NAICS code determination. See

13 C.F.R. § 121.1102. 

The facts of this case underline the importance of assuring that any appeal taken to OHA be all encompassing. As noted, Palladian is not urging a return to the 

4 Although the Court of Federal Claims found that 

requiring intervention would be burdensome on small 

businesses, there is no indication that the regulations 

contemplate an onerous procedure. Indeed, at oral argument, the government explained that a party can preserve 

its right to judicial review by filing a letter with OHA 

stating whether or not it supports the contracting officer’s 

original decision. Oral Argument at 5:58-7:20.

 

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24 PALLADIAN PARTNERS, INC. v. US

contracting officer’s original code determination; it seeks 

use of an altogether different code. Palladian, thus, does 

not contend that it failed to participate because it felt the 

contracting officer would represent its interests. If Palladian were correct that any code change following an OHA 

appeal could give rise to a court challenge by third parties, it would seem that, after a remand like that authorized by the Court of Federal Claims here, some other 

third party could file a protest relying on yet another code 

designation. The process could be endless. 

Consistent with SBA regulations, in a recent decision, 

the Court of Federal Claims held that judicial review was 

not available where a protester “failed to comply with the 

specific procedures for challenging a NAICS code or size 

standard designation.” Lawrence Battelle, Inc. v. United 

States, 117 Fed. Cl. 579, 588 (2014). Specifically, the 

court found that, because the protestor “failed to appeal 

the NAICS code or size standard to SBA within the time 

allotted, it may not seek review of the NAICS code or size 

determination in this proceeding.” Id. In reaching that 

decision, the court recognized that it “does not have 

authority to ignore the process set forth in the regulations 

for challenging NAICS code designations.” Id. at 588 

n.11. We agree. Where, as here, Congress has specifically 

delegated rulemaking authority to an agency, courts 

“lack[] authority to undermine the regime established . . . 

unless [the] regulation is ‘arbitrary, capricious, or manifestly contrary to the statute.’” See Sebelius v. Auburn 

Reg. Med. Ctr., 133 S. Ct. 817, 826 (2013) (quoting Chevron U.S.A. Inc., v. Natural Res. Def. Council, Inc., 467 

U.S. 837, 844 (1984)). 

Given these circumstances, we conclude that SBA’s 

regulations require an interested party to participate in a 

pending OHA NAICS code appeal, or be precluded from 

filing suit. As such, Palladian’s failure to participate in 

the pending OHA appeal was a failure to exhaust its

administrative remedies. 

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PALLADIAN PARTNERS, INC. v. US 25

2. Exhaustion is Not Excused 

Palladian contends that, even if exhaustion by it is 

required under the regulations, the Court of Federal 

Claims had the authority to decline to require it in these 

circumstances. According to Palladian, OHA had the 

opportunity and obligation during Information Ventures

to consider all potentially applicable NAICS codes before 

selecting the one that best describes the services required. 

Palladian cites the Supreme Court’s decision in McKart 

for the proposition that, when “the administrative process 

is at an end,” and the government is seeking dismissal of 

a case for failure to exhaust administrative remedies at 

the agency, “the proper inquiry for the court is whether 

‘judicial review may be hindered by the failure of the 

litigants to allow the agency to make a factual record, or 

to exercise or apply its expertise.’” Appellee Br. 22 (quoting McKart, 395 U.S. at 194). The government responds 

that “McKart does not support waiver of the requirement 

that Palladian exhaust the administrative remedy in Part 

134.” Appellant Reply Br. 10. For the reasons explained 

below, we agree with the government. 

In McKart, the Court explained that “it is normally 

desirable to let the agency develop the necessary factual 

background upon which decisions should be based.” 395 

U.S. at 194. Because “agency decisions are frequently of a 

discretionary nature or frequently require expertise, the 

agency should be given the first chance to exercise that 

discretion or to apply that expertise.” Id. McKart was a 

criminal case where the defendant was indicted for willfully and knowingly failing to report for and submit to 

induction into the Armed Forces. Id. at 186. His defense 

was that he should have been exempt as the “sole surviving son” whose father had been killed in action while 

serving in the Armed Forces. Id. The district court held 

that he could not raise that defense because he failed to

exhaust the Selective Service System’s administrative 

remedies. The court of appeals affirmed, and the SuCase: 14-5125 Document: 33-2 Page: 25 Filed: 04/22/2015
26 PALLADIAN PARTNERS, INC. v. US

preme Court reversed. Specifically, the Court held that

the “petitioner’s failure to appeal his classification and 

failure to report for his pre-induction physical do not bar a 

challenge to the validity of his classification as a defense 

to his criminal prosecution for refusal to submit to induction.” Id. at 203. 

The Court declined to apply the exhaustion doctrine 

to the circumstances presented in McKart. First, the 

Court explained that “use of the exhaustion doctrine in 

criminal cases can be exceedingly harsh. The defendant 

is often stripped of his only defense; he must go to jail 

without having any judicial review of an assertedly invalid order.” Id. at 197. Second, the applicable “statute as 

it stood when petitioner was reclassified said nothing 

which would require registrants to raise all their claims 

before the appeal boards.” Id. In fact, the “Notice of 

Classification form . . . inform[ed] the registrant of his 

right to appeal, but d[id] not inform him that failure to 

appeal may bar a subsequent challenge to the validity of 

his classification.” Id. at 195 n.11. 

In McKart, the Court explained that exhaustion is appropriate “where the function of the agency and the 

particular decision sought to be reviewed involve exercise 

of discretionary powers granted the agency by Congress, 

or require application of special expertise.” Id. at 194. 

Because the question of whether the defendant was 

entitled to an exemption as a “sole surviving son” was one 

of statutory interpretation, no agency expertise or discretion was required. Id. at 197-98. Accordingly, the Court 

concluded that there was “no overwhelming need . . . to 

have the agency finally resolve this question in the first 

instance, at least not where the administrative process is 

at an end and the registrant is faced with criminal prosecution.” Id. at 198.

While it is true that there are circumstances under 

which some types of exhaustion could be waived, the 

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PALLADIAN PARTNERS, INC. v. US 27

circumstances before us do not fall into that category.

McKart is distinguishable from this case on multiple 

grounds. Not only was McKart a criminal case, but, 

unlike SBA’s regulations which require exhaustion, there 

was no statute or regulation requiring McKart to exhaust 

his administrative remedies before asserting wrongful 

classification. See McKart, 395 U.S. at 193 (noting that 

common law exhaustion “is, like most judicial doctrines, 

subject to numerous exceptions”). And, the issue in 

McKart was “solely one of statutory interpretation” requiring no agency expertise. Id. at 198. In contrast, a 

NAICS code decision requires that SBA-OHA exercise its 

expertise. See Baird Corp. v. United States, 1 Cl. Ct. 662, 

666 (1983) (SBA’s determination “is entitled to considerable weight since it ‘incorporates quasi-technical . . . intricacies inherent in a comprehensive regulatory scheme.’”). 

These many factual differences render Palladian’s reliance on McKart unpersuasive. 

Indeed, the Supreme Court emphasized the importance of certain of these factual distinctions in McGee 

v. United States, 402 U.S. 479 (1971). There, the defendant was convicted of failing to submit to induction and his 

defense was that he was classified incorrectly by the local 

Selective Service board. Id. at 480. Although McGee 

contended that he was exempt from the draft as a ministerial student, he never requested classification as a 

ministerial student and refused to respond to questionnaires about his educational plans. Id. at 481. The Court 

explained that, “[u]nlike the dispute about statutory 

interpretation involved in McKart, McGee’s claims to 

exempt status—as a ministerial student or a conscientious objector—depended on the application of expertise 

by administrative bodies in resolving underlying issues of 

fact.” Id. at 486. Because McGee’s defenses were factbased, his failure to file an administrative appeal deprived the appeal board of the opportunity to apply its 

expertise in factfinding. Id. at 490-91. The Court conCase: 14-5125 Document: 33-2 Page: 27 Filed: 04/22/2015
28 PALLADIAN PARTNERS, INC. v. US

cluded that McGee’s “failure to exhaust administrative 

remedies bars the defense of erroneous classification,” and

it refused to excuse exhaustion, despite the criminal 

context in which the issue arose. Id. at 491. 

As noted, NAICS code selection is a fact-specific determination that requires agency expertise. Accordingly, 

McGee’s emphasis on presenting fact-based issues to the 

agency supports the government’s position that interested 

parties must exhaust their administrative remedies with 

SBA-OHA prior to seeking judicial review. 

Finally, Palladian argues that a purported failure to 

exhaust administrative remedies should not result in 

dismissal where it is clear that the agency considered the 

issues raised in the plaintiff’s suit. In support of this 

proposition, Palladian relies on two decisions from our 

sister circuits involving common law exhaustion: Natural 

Resources Defense Council, Inc. v. U.S. Environmental

Protection Agency, 824 F.2d 1146, 1151 (D.C. Cir. 1987) 

(en banc) (“NRDC”), and American Forest & Paper Association v. United States Environmental Protection Agency, 

137 F.3d 291, 295-96 (5th Cir. 1998). Both cases involved 

review of a final agency rule where the plaintiff failed to 

participate during the notice and comment period, and 

neither case is particularly helpful for Palladian. 

In NRDC, the D.C. Circuit indicated that it generally 

requires participation in rulemaking proceedings during 

the comment period “as a prerequisite to a petition for 

direct review of the resulting regulations.” NRDC, 824 

F.2d at 1150. It explained, however, that courts have 

waived exhaustion where the agency “‘has had an opportunity to consider the identical issues [presented to the 

court] . . . but which were raised by other parties,’” or if 

the agency’s decision indicates that it “had ‘the opportunity to consider’ ‘the very argument pressed’ by the petitioner on judicial review.” Id. at 1151 (internal citations 

omitted). Because there was evidence that the agency 

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PALLADIAN PARTNERS, INC. v. US 29

“actually did consider the issue raised by the NRDC in its 

petition for review,” the court excused the exhaustion 

requirement. Id. 

Likewise, in American Forest & Paper Association, the 

Fifth Circuit indicated that it had “never held that failure 

to raise an objection during the public notice and comment period estops a petitioner from raising it on appeal.” 

137 F.3d at 295. The court further noted that the concerns underlying the exhaustion doctrine were not implicated because the public comments from other interested 

parties were “sufficiently specific” such that “the agency 

cannot reasonably claim that it has been denied the 

opportunity to consider the issue.” Id. at 295-96. 

Palladian’s reliance on these cases is misplaced. Neither case involved a statutory or regulatory exhaustion

requirement, both cases were discussing rules that affected all matters and all parties appearing before the respective agencies, and both cases involved issues of statutory 

interpretation rather than fact-specific inquiries. See 

NRDC, 824 F.2d at 1151 (the NRDC argued that the EPA 

“in fact considered the statutory issue raised in the petition”); Am. Forest & Paper Assoc., 137 F.3d at 295 (“During the public comment period, EPA was presented with 

detailed objections concerning the scope of endangered 

species protection under Louisiana’s proposed program.”). 

There is, moreover, no evidence that Palladian’s nowurged code designation was discussed during Information 

Ventures’ OHA appeal. 

Applying the exhaustion doctrine here “serves the 

twin purposes of protecting administrative agency authority and promoting judicial efficiency.” McCarthy, 503 U.S. 

at 145. As outlined above, SBA-OHA “is vested with 

exclusive jurisdiction to review the [contracting officer’s] 

determination of the appropriate NAICS code designation.” Ceres Envt’l Servs. v. United States, 52 Fed. Cl. 23, 

33 (2002) (citing 13 C.F.R. § 121.1102). Although PalladiCase: 14-5125 Document: 33-2 Page: 29 Filed: 04/22/2015
30 PALLADIAN PARTNERS, INC. v. US

an contends that the issue it presented in court was the 

same as that presented in the Information Ventures’ OHA

appeal, Palladian raised additional evidence and arguments in its protest that the contracting officer did not 

present to OHA. Specifically, Palladian argued in its bid 

protest that NAICS code 519130, “Internet Publishing 

and Broadcasting and Web Search Portals”—and not the 

code suggested by the contracting officer—best described 

the principal purpose of the solicitation. Palladian’s 

failure to present this argument in the pending OHA 

appeal deprived the agency of “an opportunity to correct 

its own errors, to afford the parties and the courts the 

benefit of its experience and expertise, and to compile a 

record which is adequate for judicial review.” Weinberger, 

422 U.S. at 765. 

Palladian had notice of Information Ventures’ appeal 

and knew, or should have known, that the appeal could 

result in a final decision changing the code and rendering 

Palladian ineligible to compete. Palladian’s mere belief 

that it was not required to participate in the OHA proceeding does not excuse its obligation to do so. As noted 

previously, we agree with OHA that, to hold otherwise 

“would potentially create endless cycles of NAICS code 

litigation, whereby any concern disappointed by an OHA 

decision could file a new NAICS code appeal, and thereby 

re-litigate the matter.” Palladian OHA Dismissal, 2014 

WL 1924608, at *6. 

We have considered Palladian’s remaining arguments 

with respect to exhaustion and conclude that they are 

without merit. Palladian’s failure to participate in the 

pending OHA appeal was a failure to exhaust its administrative remedies and we decline Palladian’s invitation to 

read an exception into or otherwise excuse the SBA’s 

regulatory exhaustion requirement. Because Palladian 

failed to exhaust its administrative remedies, dismissal is 

required. See Deseado Int’l, Ltd. v. United States, 600 

F.3d 1377, 1380 (Fed. Cir. 2010) (affirming dismissal of a 

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PALLADIAN PARTNERS, INC. v. US 31

litigant’s suit for failure to participate in a pending administrative proceeding which could affect its interests).

CONCLUSION

We conclude that the Court of Federal Claims had jurisdiction pursuant to 28 U.S.C. § 1491(b)(1) over both 

OHA’s NAICS code decision and the contracting officer’s 

amendment to the solicitation reflecting that decision. 

But because Palladian was required by regulation to 

participate in the pending OHA proceeding challenging 

the applicable NAICS code for the solicitation and failed 

to do so, we reverse the Court of Federal Claims’ decision 

and permanent injunction, and remand with instructions 

to dismiss Palladian’s protest for failure to exhaust its 

administrative remedies. 

REVERSED

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