In the United States Court of Federal Claims

No. 17-1015C

(Filed Under Seal: August 22, 2017)

(Reissued: August 29, 2017)

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VETERANS CONTRACTING 

GROUP, INC.,

Plaintiff,

v.

UNITED STATES,

Defendant.

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Pre-award bid protest; motion for a 

preliminary injunction; protester’s 

qualification as a service-disabled 

veteran-owned small business; 

jurisdiction; standing; differences 

between VA’s and SBA’s regulations; 

likelihood of success on the merits; 

equitable factors

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 Joseph A. Whitcomb, Whitcomb, Selinsky, McAuliffe, PC, Denver, Colorado, for 

plaintiff. 

Kara M. Westercamp, Trial Attorney, Commercial Litigation Branch, Civil Division, 

United States Department of Justice, Washington, D.C., for defendant. With her on the brief 

were Chad A. Readler, Acting Assistant Attorney General, Civil Division, Robert E. Kirschman, 

Jr., Director, and Allison Kidd-Miller, Assistant Director, Commercial Litigation Branch, Civil 

Division, United States Department of Justice, Washington D.C. Of counsel were Steven Devine 

and Mark G. Machiedo, Office of General Counsel, United States Department of Veterans 

Affairs, and Karen Hunter, Office of General Counsel, United States Small Business 

Administration. 

OPINION AND ORDER1

LETTOW, Judge. 

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

injunction and the government’s motion to dismiss. Plaintiff, Veterans Contracting Group 

 

1Because this opinion and order might have contained confidential or proprietary 

information within the meaning of Rule 26(c)(1)(G) of the Rules of the United States Court of 

Federal Claims (“RCFC”) and the protective order entered in this case, it was initially filed under 

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

confidential or proprietary information. After the court held a hearing on proposed redactions, 

no redactions were allowed. 
2

(“Veterans”), previously was verified by the United States Department of Veterans Affairs 

(“VA”) as a service-disabled veteran-owned small business (“SDVOSB”). It has a history of 

bidding on and securing awards of contracts from the VA that are set aside for competition 

among firms qualifying as SDVOSBs. It planned to submit offers on two such solicitations 

announced by VA, but very recently it was disqualified as a SDVOSB as a result of a dispute 

that arose after Veterans received a contract award in January 2017 that was set aside for 

SDVOSBs. After another bidder protested the award, an area office of the Small Business 

Administration (“SBA”) determined in July 2017 that Veterans did not qualify as a SDVOSB 

and was therefore ineligible for the award. Shortly thereafter, the VA informed Veterans that it 

was being removed from the VA database for qualified SDVOSBs. Veterans then filed this bid 

protest with respect to the two SDVOSB procurements that have not yet been awarded, alleging 

that it is a qualified SDVOSB eligible for an award in those procurements and it should not have 

been removed from the VA database. 

 

In seeking a preliminary injunction, Veterans requests that the court set aside the VA’s 

decision to decertify Veterans as a SDVOSB, order the VA to reinstate Veterans into the 

SDVOSB database, and bar the VA from acting on the solicitations for awarding the two 

proposed contracts if and to the extent that Veterans is precluded from participating in the 

competition for those contracts. The government has opposed that motion and moved to dismiss 

Veterans’ complaint. For the reasons stated, Veterans’ motion is granted in part and the 

government’s motion is denied. 

FACTS2

A. Veterans’ Inclusion in the SDVOSB Database 

Veterans is a corporation organized under the laws of New York. Compl. ¶ 24. Ronald 

Montano, a service-disabled veteran, owns 51 percent of the company and Greg Masone owns 

the remaining 49 percent. Compl. ¶¶ 22, 24. On July 17, 2013, the VA, acting through the 

Center for Veterans Enterprise (now known as the Center for Verification and Evaluation) 

(“CVE”), verified Veterans as a qualified SDVOSB on its Vendor Information Pages (“VIP”)

database. See Pl.’s Mem. of Points and Authorities in Support of Pl.’s Appl. for TRO, Prelim. 

Inj., Permanent Inj. and Declaratory Judgment (“Pl.’s Mem.”), Ex. W (Letter from Andrea M. 

Gardner-Ince, Director, CVE, to Mr. Ronald Montano (July 17, 2013)), ECF No. 12-3. A 

business must be included on the VA’s VIP database to qualify as an eligible SDVOSB for a 

contract award. See 38 U.S.C. § 8127(e), (f); 48 C.F.R. § 804.1102. The VA subsequently 

performed site visits and reaffirmed Veterans’ eligibility in 2014, 2015, and 2016. See Pl.’s 

Mem. at 9, ECF No. 12-2. The VA explained that Veterans satisfied the eligibility requirements 

in 38 C.F.R. Part 74, see, e.g., Pl.’s Mem., Ex. EE (Letter from CVE (Aug. 26, 2016)), which are 

distinct from the SDVOSB-eligibility requirements set forth in the SBA regulations, as discussed 

infra. 

 

2The recitations that follow constitute findings of fact by the court drawn from the 

administrative record of the procurement filed pursuant to RCFC 52.1(a). See Bannum, Inc. v. 

United States, 404 F.3d 1346, 1356 (Fed. Cir. 2005) (explaining that bid protest proceedings 

“provide for trial on a paper record, allowing fact-finding by the trial court”). 
3

B. SBA’s Decision Regarding Veterans’ SDVOSB-Eligibility 

On January 5, 2017, Veterans learned that it was the lowest-priced bidder on an Invitation 

for Bids, solicitation number W912DS-16-B-0017, issued by the United States Army Corps of 

Engineers “for the removal of hazardous materials and demolition of buildings at the St. Albans 

Community Living Center in Jamaica, New York.” Compl. ¶¶ 7, 10. The award was set aside

for SDVOSBs, and Veterans certified itself as such in making its bid. Compl. ¶¶ 8-9. On 

January 11, 2017, Williams Building Company (“Williams”), another bidder that was second in 

line for the award, filed a protest with the contracting officer. See AR 16-126 to -127.3

 Williams 

asserted that Veterans was ineligible because it did not meet the size requirements for the 

procurement or qualify as a SDVOSB. Id. The contracting officer referred the protest to SBA, 

see AR Tabs 14-15, which was an option under the SBA’s and VA’s regulations, see 13 C.F.R. 

§§ 125.2, 125.14(b); 38 C.F.R. § 74.2(e). 

Veterans thereafter provided additional information to SBA, including its shareholder 

agreement. AR Tabs 41-42; see also AR Tabs 43-60. An SBA area office determined that 

Veterans was eligible for the award in February 2017. AR Tab 13. Williams appealed that 

decision to the Office of Hearings and Appeals (“OHA”), AR Tab 11, and submitted 

supplemental briefing regarding Veterans’ status as a SDVOSB, specifically focusing on the 

company’s shareholder agreement, AR Tab 10. Before OHA addressed that appeal, however, 

SBA requested a remand in March 2017 to “reconsider the issues raised on [a]ppeal.” AR 9-76 

to -78. OHA granted that request. AR 8-73. 

On July 18, 2017, the SBA area office determined that Veterans did not satisfy the 

SDVOSB eligibility requirements for the procurement and therefore sustained Williams’ protest. 

AR 2-3. The SBA office explained that Mr. Montano, a service-disabled veteran, did not 

“unconditionally” own at least 51% of Veterans, as required by 13 C.F.R. § 125.12. AR 2-7 to -

8. SBA specifically examined Veterans’ shareholder agreement and found that “upon 

shareholder death, incompetency, or insolvency, all of his or her shares must be purchased by the 

corporation at the Certificate of Value price.” AR 2-7; see also AR 48-450. According to SBA, 

that language restricted Mr. Montano’s and his heirs’ ability “to convey or transfer their 

[Veterans’] stock,” thus placing “impermissible conditions” on Mr. Montano’s ownership 

interest. AR 2-7 (relying upon International Logistics Grp., LLC, SBA No. VET-162, 2009 WL 

5942359 (Oct. 1, 2009); Wexford Group Int’l, Inc., SBA No. SDV-105, 2006 WL 4726737 (June 

29, 2006)). Additionally, SBA found that Veterans’ shareholder agreement prevented Mr. 

 

3Citations to the administrative record refer to the record as filed on August 9, 2017 and 

corrected on August 16, 2017. The record is divided into tabs and paginated sequentially. In 

citing to the record, the court will first designate the tab, followed by the page number. For 

example, AR 16-126 refers to tab 16, page 126 of the administrative record. 
4

Montano from controlling the corporation, as required by 13 C.F.R. § 125.13. See AR 2-8 to -

10. Veterans has stated that it appealed SBA’s decision on August 1, 2017. Pl.’s Mem. at 8 n.2.4

C. The VA’s Removal of Veterans from the VIP Database 

On July 21, 2017, the VA informed Veterans that it was “being removed from the VA 

[VIP] database in accordance with 38 C.F.R. § 74.2(e) based on [the SBA area office 

determination that Veterans did not qualify as a SDVOSB].” AR 4-14; see also AR Tab 1. 

Under 38 C.F.R. § 74.2(e), “[a]ny firm registered in the VetBiz VIP database that is found to be 

ineligible due to an SBA protest decision or other negative finding will be immediately removed 

from the VetBiz VIP database.” Further, “[u]ntil such time as CVE receives official notification 

that the firm has proven that it has successfully overcome the grounds for the determination or 

that the SBA decision is overturned on appeal, the firm will not be eligible to participate in the 

[SDVOSB] program.” Id. 

D. Veterans’ Current Bid Protest 

Veterans filed this bid protest on July 28, 2017, challenging the VA’s decision to remove 

it from the VIP database and the underlying determination by SBA that it is ineligible to compete 

as a SDVOSB. Compl. ¶ 1. Veterans alleges that the government’s actions have precluded it 

from competing for two upcoming “VA SDVOSB set-aside procurements.” Compl. ¶¶ 1-2. The 

first solicitation, number VA242-17-B-0723, is a roof replacement contract at the Northport VA 

Medical Center in Northport, New York (“roofing solicitation”). See Compl., Ex. 1; Def.’s 

Resp. to Pl.’s Mot. for a Prelim. Inj. and TRO and Def.’s Mot. to Dismiss (“Def.’s Resp.”) at 6, 

ECF No. 17. Veterans submitted its bid on the roofing solicitation before the deadline of July 

28, 2017, see Pl.’s Mem. at 2, but the government now represents that “the contracting officer 

has started the process of cancelling” the solicitation and plans to reissue it, Def.’s Resp. at 11 

n.4.

5

 The second solicitation, number VA242-17-B-0713, is a relocation contract regarding the 

“SPS Castle Point Campus VA Hudson Valley Healthcare System” in Castle Point, New York 

(“relocation solicitation”). See Compl., Ex. 2; Def.’s Resp. at 6. The government has extended 

the proposal deadline for the relocation solicitation from August 2, 2017 to August 23, 2017 at 

1:30 p.m. See Def.’s Notice of Revised Solicitation Deadline, ECF No. 7. 

 

4On July 25, 2017, before filing its OHA appeal, Veterans submitted an amended and 

restated shareholder agreement to SBA and requested reinstatement as a SDVOSB. Pl.’s Mem., 

Ex. S (E-mail from Ron Montano to Amy Kim, SBA (July 25, 2017)). SBA informed Veterans 

that it could either request a re-examination and forgo the OHA appeal, or file an OHA appeal 

and request a re-examination after OHA’s decision. Pl.’s Mem., Ex. T (E-mail from Amy Kim, 

SBA to Joseph Whitcomb (July 28, 2017)). Veterans chose to file the OHA appeal. 

5On August 22, 2017, the government filed a notice advising that “DVA intends to cancel 

the solicitation in its entirety today due to the bids received being over the budget allocated for 

the project, and a new solicitation will be posted.” Def.’s Notice of Solicitation Cancellation, 

ECF No. 21. 

 
5

On August 5, 2017, Veterans moved for a preliminary injunction. See generally Pl.’s 

Mot. for Prelim. Inj. (“Pl.’s Mot.”), ECF No. 12.6 It specifically requests that the court set aside 

CVE’s decision to decertify Veterans as a SDVOSB, order the VA to reinstate Veterans into the 

VIP database, and enable Veterans to compete for the SDVOSB set-aside roofing and relocation 

solicitations. See id. On August 11, 2017, the government opposed that motion and moved to 

dismiss the complaint. See generally Def.’s Resp. Veterans’ motion for a preliminary injunction 

and the government’s motion to dismiss were addressed at a hearing held on August 16, 2017. 

JURISDICTION 

A. Subject-Matter Jurisdiction 

The Tucker Act, as amended, provides this court with jurisdiction to “render judgment on 

an action by an interested party objecting to a solicitation by a Federal agency for bids or 

proposals for a proposed contract or to a proposed award or the award of a contract or any 

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

procurement.” 28 U.S.C. § 1491(b)(1), added by the Administrative Dispute Resolution Act of 

1996, Pub. L. No. 104-320, § 12, 110 Stat. 3870, 3874; see also Systems Application & Techs., 

Inc. v. United States, 691 F.3d 1374, 1380-81 (Fed. Cir. 2012). The court accordingly has 

jurisdiction over three types of bid protests: (1) a pre-award protest, (2) a post-award protest, and 

(3) “any alleged violation of statute or regulation in connection with a procurement or a proposed 

procurement.” 28 U.S.C. § 1491(b)(1); see also OTI Am., Inc. v. United States, 68 Fed. Cl. 108, 

113 (2005) (describing and ruling on the parameters of 28 U.S.C. § 1491(b)). 

Veterans challenges the VA’s decision to remove it from the VIP database, as well as the 

underlying SBA ineligibility determination that led to the VA’s decision, on the grounds that 

those decisions were arbitrary, capricious, and contrary to law. See Compl. ¶¶ 1-2; Pl.’s Mem. at 

13-14. Because Veterans has been declared to be ineligible to compete for the SDVOSB 

solicitations at issue in this case, Compl. ¶¶ 1-2, Veterans’ allegations fall within this court’s 

jurisdiction under the third prong of Paragraph 1491(b)(1), see, e.g., RAMCOR Servs. Grp., Inc. 

v. United States, 185 F.3d 1286, 1289 (Fed. Cir. 1999) (explaining that Subsection 1491(b) of the 

Tucker Act “does not require an objection to the actual contract procurement. . . . As long as a 

statute has a connection to a procurement proposal, an alleged violation suffices to supply 

jurisdiction”); KWV, Inc. v. United States, 108 Fed. Cl. 448, 453 (2013) (finding jurisdiction 

where a bid protester alleged that the “VA contravened its regulations governing [veteran-owned 

small business] eligibility through an unreasonable and inconsistent application of 48 C.F.R. § 

819.307 . . . and 38 C.F.R. Part 74”) (citing cases). 

B. Standing 

To have standing in a bid protest, the party bringing suit must be an “interested party.” 

See 28 U.S.C. § 1491(b)(1); Systems Application & Techs., 691 F.3d at 1382. A protester is an 

 

6Veterans also concurrently submitted an application for a temporary restraining order, 

see Pl.’s Appl. for TRO, ECF No. 12-1, but that application is superseded by the motion for a 

preliminary injunction. 
6

interested party if it can show that “(1) it was an actual or prospective bidder or offeror, and (2) it 

had a direct economic interest in the procurement or proposed procurement.” Distributed Sols., 

Inc. v. United States, 539 F.3d 1340, 1344 (Fed. Cir. 2008) (citing Rex Serv. Corp. v. United 

States, 448 F.3d 1305, 1307 (Fed. Cir. 2006)). In a pre-award protest, the protester must 

establish that it has a direct economic interest by demonstrating “a non-trivial competitive injury 

which can be addressed by judicial relief.” Systems Application & Techs., 691 F.3d at 1382 

(quoting Weeks Marine, Inc. v. United States, 575 F.3d 1352, 1362 (Fed. Cir. 2009)). 

Regarding the first prong, Veterans has submitted a bid on the roofing solicitation and is 

preparing a bid for the relocation solicitation. See Pl.’s Mem. at 2; Compl. ¶¶ 1-2.7 Thus, 

Veterans’ protest is in a pre-award posture regarding both of the solicitations and it has satisfied 

the first prong as a prospective bidder. 

Regarding the second prong, the government argues that Veterans has failed to show a 

direct economic interest because it is not a qualified SDVOSB. Def.’s Resp. at 9-14. According 

to the government, Veterans cannot claim any direct economic interest because it was de-listed 

from the VIP database and is thus ineligible for the SDVOSB procurements at issue in this case. 

See id. As this court previously explained, however, the government’s “logic is circular and 

would preclude any qualified concern from ever seeking a judicial remedy in response to an 

adverse decision by [the VA].” Miles Constr., LLC v. United States, 108 Fed. Cl. 792, 798

(2013) (finding standing where a bid protester challenged the VA’s determination that the 

protester did not qualify as a SDVOSB). The VA’s alleged error itself has prevented Veterans 

from competing for the solicitations. Thus, “[t]his is not a pre-award case where the alleged 

violation is immaterial.” Weeks Marine, 575 F.3d at 1362 (finding standing where the protester 

had a “definite economic stake in the solicitation being carried out in accordance with applicable 

laws and regulations”) (citing CACI Field Servs., Inc. v. United States, 854 F.2d 464, 466 (Fed. 

Cir. 1988)). Rather, the VA’s alleged error has deprived Veterans of its “opportunity to 

compete” for the roofing and relocation solicitations, and such deprivation presents “sufficient 

economic harm to demonstrate prejudice for purposes of standing.” Magnum Opus Techs., Inc. 

v. United States, 94 Fed. Cl. 512, 533 (2010) (citing Distributed Sols., 539 F.3d at 1345; LABATAnderson, Inc. v. United States, 65 Fed. Cl. 570, 575-76 (2005)).8

 

7Although the deadline for bids on the roofing solicitation has passed, the government has 

not yet made an award for that contract, and it now states it is in the process of cancelling and 

reissuing the solicitation. Def.’s Resp. at 11 n.4; Def.’s Notice of Solicitation Cancellation. 

8For its position on standing, the government relies on CS-360, LLC v. United States, 94 

Fed. Cl. 488 (2010), where a protester submitted a bid for a SDVOSB set-aside procurement but 

was rejected by the contracting officer because it was not listed in the VA’s VIP database. Id. at 

493. The protester filed its bid protest to enjoin the VA from awarding the contract or 

proceeding with contract performance, but the court concluded that the protester lacked standing, 

reasoning that the protester did not have a substantial chance of receiving the contract award 

because it was not a qualified SDVOSB. Id. at 493-94, 500. Here, in contrast, Veterans has 

challenged the VA’s decision to remove it from the VIP database on the ground that such actions 

have effectively prevented it from competing for awards under the solicitations directly at issue 

as well as other such solicitations. See, e.g., Compl. ¶¶ 1-2. These allegations sufficiently 

present a non-trivial injury that can be addressed through judicial relief. 
7

 Additionally, the government asserts that the court lacks jurisdiction over SBA’s 

ineligibility decision because Veterans appealed that decision to OHA and the appeal remains 

pending. Def.’s Resp. at 7-9. The government primarily relies on Palladian Partners, Inc. v. 

United States, 783 F.3d 1243 (Fed. Cir. 2015), where a protester filed a pre-award bid protest 

after a decision by an SBA area office affected the solicitation at issue, but did so while an OHA 

appeal of that decision filed by another interested party was still pending. Id. at 1250, 1261. The 

Federal Circuit held that dismissal was required because appellant failed “to participate in the 

pending OHA appeal” and therefore did not exhaust its administrative remedies. See id. at 1254-

61. The government’s reliance on Palladian is misplaced. Unlike in Palladian, where the 

protester did not participate in the appeal of a determination by an SBA area office pursued by a 

different interested party, id. at 1246, Veterans has challenged the VA’s decision to remove it 

from the VIP database, see, e.g., Pl.’s Mem. at 9-10. And, Veterans’ protest is not based upon its 

January 2017 contract award that was considered by SBA and is currently on appeal to OHA, but 

rather is based upon the final action of the VA and the two pre-award solicitations that are 

unrelated to the contract award currently pending before OHA. This court has jurisdiction over 

Veterans’ allegations under the Tucker Act, as discussed supra. Further, because the VA relied 

upon the July decision by an SBA area office in removing Veterans from the database, see AR 4-

14, the reasoning underlying SBA’s ineligibility determination is embedded within the VA’s 

decision and therefore falls within the court’s jurisdiction as well. 

 In sum, the court has jurisdiction over Veterans’ bid protest. 

ANALYSIS 

A. Statutory and Regulatory Framework 

To increase procurement opportunities for “small business concerns owned and 

controlled by veterans with service-connected disabilities,” Congress authorized the VA to set 

aside certain contracts for SDVOSBs through the Veterans Benefits, Health Care, and 

Information Technology Act of 2006 (“Veterans Benefits Act”), Pub. L. No. 109-461, Title V, 

120 Stat. 3403, 3425 (codified at 38 U.S.C. §§ 8127-28). See 38 U.S.C. § 8127(a), (e). To 

qualify as an eligible SDVOSB, the business must be verified by CVE and included on the VA’s 

VIP database. See 38 U.S.C. § 8127(e), (f); 48 C.F.R. § 804.1102. 

Under 38 C.F.R. § 74.3, “[a]n applicant or participant must be at least 51 percent 

unconditionally and directly owned by one or more . . . service-disabled veterans” to receive a 

SDVOSB certification from the VA. With respect to unconditional ownership, Section 74.3 

further states: 

Ownership must not be subject to conditions precedent, conditions subsequent, 

executory agreements, voting trusts, restrictions on assignments of voting rights, 

or other arrangements causing or potentially causing ownership benefits to go to 

another (other than after death or incapacity). The pledge or encumbrance of 

 
8

stock or other ownership interest as collateral, including seller-financed 

transactions, does not affect the unconditional nature of ownership if the terms 

follow normal commercial practices and the owner retains control absent 

violations of the terms. 

38 C.F.R. § 74.3(b). 

 Correlatively, SBA also has regulations that address qualifications for SDVOSBs, albeit 

in different terms. Under 13 C.F.R. § 125.12, a SDVOSB “must be at least 51% unconditionally 

and directly owned by one or more service-disabled veterans. Section 125.12 of the SBA’s 

regulations itself does not elaborate on the definition of “unconditional.” See Miles Constr., 108 

Fed. Cl. at 802 (explaining that the VA’s regulation at 38 C.F.R. § 74.3 includes “an extended 

definition of unconditional ownership” as compared to the SBA’s regulation at 13 C.F.R. § 

125.9, subsequently renumbered to 13 C.F.R. § 125.12, which does not). Even so, a related SBA 

regulation, 13 C.F.R. § 124.105, provides a reasonably detailed definition of unconditional 

ownership with respect to certain “socially and economically disadvantaged individuals.” Under 

that regulation, “[a]n applicant or [p]articipant must be at least 51 percent unconditionally and 

directly owned by one or more socially and economically disadvantaged individuals” to qualify 

for a particular business development program. See 13 C.F.R. § 124.105. That regulation 

contemplates that “unconditional” refers to the effect of current executory arrangements, not 

everything that might happen in the future. For example, with respect to “[s]tock options’ effect 

on ownership,” the regulation explains that “[i]n determining unconditional ownership, SBA will 

disregard any unexercised stock options or similar agreements held by disadvantaged 

individuals.” 13 C.F.R. § 124.105(e).

 If SBA determines that a VA-certified SDVOSB does not satisfy SBA’s eligibility 

requirements, 38 C.F.R. § 74.2(e) requires the VA to remove the entity from the VIP database. 

B. Standards for Preliminary Injunction 

In a bid protest, the court may award any relief that it considers proper, including 

injunctive relief. 28 U.S.C. § 1491(b)(2). When determining whether to grant a preliminary 

injunction, the court must consider: (1) whether the movant is likely to succeed on the merits; (2) 

whether the movant will suffer from irreparable harm if an injunction is not granted; (3) whether 

the balance of hardships to the parties tips in the movant’s favor; and (4) whether the public 

interest favors injunctive relief. Sciele Pharma Inc. v. Lupin Ltd., 684 F.3d 1253, 1259 (Fed. Cir. 

2012) (citing Amazon.com, Inc. v. Barnesandnoble.com, Inc., 239 F.3d 1343, 1350 (Fed. Cir. 

2001)); see also FMC Corp. v. United States, 3 F.3d 424, 427 (Fed. Cir. 1993). “Although the 

factors are not applied mechanically, a movant must establish the existence of both of the first 

two factors to be entitled to a preliminary injunction.” Altana Pharma AG v. Teva Pharm. USA, 

Inc., 566 F.3d 999, 1005 (Fed. Cir. 2009) (citing Amazon.com, 239 F.3d at 1350). With that 

caveat regarding a preliminary injunction, “[n]o one factor, taken individually, is necessarily 

dispositive. . . . [T]he weakness of the showing regarding one factor may be overborne by the 

strength of the others.” FMC Corp., 3 F.3d at 427. A preliminary injunction is “an extraordinary 

and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries 
9

the burden of persuasion.” Mazurek v. Armstrong, 520 U.S. 968, 972 (1997) (emphasis omitted) 

(citation omitted). 

1. Likelihood of success on the merits. 

To qualify for a preliminary injunction, Veterans must show that it is “more likely than 

not” to succeed on the merits of its claim. See Revision Military, Inc. v. Balboa Mfg. Co., 700 

F.3d 524, 525-26 (Fed. Cir. 2012) (explaining that the standard in the context of a preliminary 

injunction is “more likely than not,” rather than “clear or substantial likelihood,” for matters 

unique to the Federal Circuit). On the merits, Veterans will need to show that the government’s 

decision was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with 

law” under the Administrative Procedure Act, 5 U.S.C. § 706(2)(A). See also 28 U.S.C. § 

1491(b)(4) (“In any action under this subsection, the courts shall review the agency’s decision 

pursuant to the standards set forth in [S]ection 706 of [T]itle 5.”).9

Here, Veterans argues that SBA improperly relied on “erroneous” facts and law when it 

found that Mr. Montano did not unconditionally own 51 percent of Veterans. Pl.’s Mem. at 14. 

Veterans challenges both the VA’s decision to remove it from the VIP database and the 

underlying ineligibility findings of the SBA area office, arguing that such decisions were 

arbitrary, capricious, and contrary to law. Id. at 13-14. The government, in contrast, focuses 

solely on the VA’s decision, contending that CVE properly followed 38 C.F.R. § 74.2(e) when it 

removed Veterans from the VIP database after the SBA area office’s ineligibility determination 

in July 2017. Def.’s Resp. at 19-20. The government’s argument is misguided. Although CVE 

applied 38 C.F.R. § 74.2(e) in decertifying Veterans, the VA’s decision was based upon 

conclusions reached by the SBA area office. See AR 4-14. Thus, as the court explained supra, 

the rationale underlying SBA’s ineligibility determination is embedded within the VA’s decision. 

The court accordingly must look not only at the VA’s removal of Veterans from the VIP 

database, but also at the SBA findings underlying that removal. 

In concluding that Mr. Montano did not unconditionally own at least 51 percent of 

Veterans pursuant to 13 C.F.R. § 125.12, the SBA area office examined Articles 9.01 to 9.03 of 

Veterans’ shareholder agreement. AR 2-7; see also AR 48-450. Those Articles provide that if a 

shareholder dies, is found to be incompetent, or becomes insolvent, that shareholder “shall be 

deemed to have offered all the [s]hares of the [c]orporation owned by such [s]hareholder at the 

time of occurrence of any of the events specified above to the [c]orporation and the [c]orporation 

shall purchase such [s]hares at the Certificate Value and upon the terms and conditions 

hereinafter set forth.” AR 48-450. Relying upon a dictionary definition of “unconditional” that 

formed the basis for two previous SBA decisions, International Logistics Grp., 2009 WL 

5942359, and Wexford, 2006 WL 4726737, the SBA area office stated that Articles 9.01 to 9.03 

placed “impermissible conditions” on Mr. Montano’s ownership interest in Veterans, AR 2-7. 

 

9Ultimately, Veterans must also demonstrate that it was prejudiced by the government’s 

arbitrary or unlawful conduct. See Banknote Corp. of Am., Inc. v. United States, 365 F.3d 1345, 

1353 (Fed. Cir. 2004). Such prejudice is discussed infra in the context of irreparable harm. 
10

 In essence, the shareholder agreement provision cited by SBA is a clause that provides 

the company with the first opportunity to purchase the shareholder’s shares when death,

incompetency, or insolvency arises. This court previously examined a clause calling for an 

optional buy-out in the event of an involuntary withdrawal in the context of 38 C.F.R. § 74.3. In 

AmBuild Co., LLC v. United States, 119 Fed. Cl. 10 (2014), the court held that particular clauses 

within a company’s operating agreement, including a clause calling for involuntary withdrawal 

in the event of bankruptcy and another providing for transfer of ownership by operation of law, 

did not affect the unconditional nature of ownership under 38 C.F.R. § 74.3. Id. at 23-26 

(concluding that [the VA’s Office of Small and Disadvantaged Business Utilization’s 

(“OSDBU”)] decision to decertify AmBuild and remove it from the VetBiz VIP Database was 

arbitrary and capricious and not in accord with VA’s regulations”). Correlatively, in Miles 

Construction, the court addressed a clause providing a right of first refusal on the part of a 

minority shareholder that would arise when a service-disabled veteran owner had a bona fide

offer to sell shares. Miles Constr., 108 Fed. Cl. at 803. The court noted that the right was not 

presently executory and was a customary business provision that did not fall afoul of 38 C.F.R. § 

74.3: 

In sum, the right of first refusal provision in Article XI is not presently executory, 

is a standard provision used in normal commercial dealings, and does not burden 

the veteran’s ownership interest unless he or she chooses to sell some of his or her 

stake. As a result, Article XI, Paragraph 11.01 does not affect the veteran’s 

unconditional ownership with regard to C.F.R. § 74.3(b). The decision by 

OSDBU to the contrary, i.e., that Articles X, XI, and XII of the operating 

agreement rendered Miles ineligible for the VIP database, was arbitrary and 

capricious and contrary to law. 

Id. at 803. 

Although SBA’s decision here was based upon its regulation, 13 C.F.R. § 125.12, not 

those of VA, the rationale underlying the Miles Construction and AmBuild decisions applies to 

this case as well. Significantly, the court in Miles Construction specifically considered 

International Logistics Grp. and Wexford, the two SBA decisions relied upon by SBA in this 

case, and disapproved them in context. See Miles Constr., 108 Fed. Cl. at 801-02. The court

rejected the government’s reliance on those decisions and instead determined that the right-offirst refusal clause was not executory at that time, thus concluding that the clause did not affect 

unconditional ownership. See id. at 801-03; see also AmBuild Co., 119 Fed. Cl. at 25 (relying on 

Miles Constr., 108 Fed. Cl. at 803)). SBA did not address or discuss such findings in reaching 

its decision with respect to Veterans’ eligibility. See generally AR Tab 2. 

Additionally, the definition of “unconditional” set forth in Wexford, 2006 WL 4726737, 

at *6, and adopted by the SBA area office in its decision addressing Veterans’ eligibility, see AR 

2-7, is based upon a dictionary definition of “unconditional,” see Wexford, 2006 WL 4726737, at 

*6; see also International Logistics Grp., 2009 WL 5942359, at *4-5 (quoting Wexford, 2006 

WL 4726737, at *6). Resort to a dictionary definition of “unconditional” is both unnecessary 

and inappropriate. SBA regulations expressly define unconditional ownership in the context of 

“socially and economically disadvantaged individuals.” 13 C.F.R. § 124.105. Such regulatory 
11

guidance relates to eligibility for a business development program, and it provides insight into 

the scope of unconditional ownership for SDVOSB-eligibility. Notably, 13 C.F.R. § 124.105(e) 

states that “SBA will disregard any unexercised stock options or similar agreements held by 

disadvantaged individuals” in determining whether an applicant unconditionally owns the 

company at issue. This provision, which was not addressed by the SBA area office, directly

bears on Veterans’ shareholder agreement and its status as a SDVOSB. 

In sum, based upon the foregoing analysis, the SBA area office’s findings underlying the 

VA’s decision to remove Veterans from the VIP database fail to provide “a coherent and 

reasonable explanation” for SBA’s exercise of discretion, Impresa Construzioni Geom. 

Domenico Garufi v. United States, 238 F.3d 1324, 1333 (Fed. Cir. 2001) (citation omitted), or 

articulate a “rational connection between the facts found and the choice made,” Motor Vehicle 

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

omitted) (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)). The court 

therefore finds that Veterans is more likely than not to succeed in proving that the government’s 

actions were arbitrary and capricious or not in accordance with law. 

2. Irreparable harm. 

Veterans asserts that if it is not granted injunctive relief, it will suffer irreparable harm 

because it will be deprived of the opportunity to compete for SDVOSB procurements. See Pl.’s 

Mem. at 14-15. Upon removal of Veterans from the VIP database, it will be unable to compete 

for the roofing and relocation solicitations at issue in this case, as well as any future SDVOSB 

solicitations respecting which it would otherwise be an eligible competitor. Id. Further, as a 

small business, Veterans represents that its inability to obtain work as a SDVOSB could threaten 

its viability. See id. at 15. 

The “[d]enial of the opportunity to compete for a contract can constitute irreparable 

harm.” Miles Constr., 108 Fed. Cl. at 806 (citing Electronic On-Ramp, Inc. v. United States, 

104 Fed. Cl. 151, 169 (2012); NetStar-1 Gov’t Consulting, Inc. v. United States, 101 Fed. Cl. 

511, 530 (2011), aff’d, 473 Fed. Appx. 902 (Fed. Cir. 2012)); see also United Int’l Investigative 

Servs., Inc. v. United States, 41 Fed. Cl. 312, 323 (1998) (“[T]he opportunity to compete for a 

contract and secure any resulting profits has been recognized to constitute significant harm.”) 

(citing cases). Providing the injunctive relief contemplated here, i.e., setting aside the CVE’s 

removal of Veterans from the VIP database and reinstating Veterans as a qualified SDVOSB, 

would circumvent the potential harm to Veterans by allowing it to compete for the SDVOSB setaside procurements at issue. Thus, the court finds that Veterans will suffer irreparable harm if 

injunctive relief is not provided. 

3. Balance of hardships. 

The government argues that it will be harmed if the relocation solicitation is indefinitely 

stayed. Def.’s Resp. at 21-22. Reinstating Veterans into the VIP database, however, would 

render Veterans eligible for the relocation solicitation without further delay of that contract. 

Given Veterans’ likelihood of success on the merits of its claim and the irreparable harm it will 

suffer if injunctive relief is not provided, the court finds that the balance of hardships weighs in 
12

favor of granting Veterans’ preliminary injunction and temporarily reinstating Veterans into the 

VIP database as a qualified SDVOSB. 

4. Public interest. 

Finally, the government contends that the public interest does not weigh in favor of 

injunctive relief because the upcoming SDVOSB solicitations at issue here have “operate[d] 

within the bounds of the law.” Def.’s Resp. at 22 (citation omitted). Such an argument is 

misplaced. If the government has wrongfully prevented Veterans from competing for a contract 

award that it should be eligible to receive, as Veterans claims, the integrity of that procurement is 

compromised. “The public has a strong interest in preserving the integrity of the procurement 

process.” KWV, 108 Fed. Cl. at 458 (citing Bona Fide Conglomerate, Inc. v. United States, 96 

Fed. Cl. 233, 242-43 (2010); SAI Indus. Corp. v. United States, 60 Fed. Cl. 731, 747 (2004)); see 

also PGBA, LLC v. United States, 60 Fed. Cl. 196, 221 (2004), aff’d, 389 F.3d 1219 (Fed. Cir. 

2004). Thus, the court finds that the public interest will be served by ensuring that Veterans has 

the opportunity to fairly compete for the SDVOSB procurements. 

CONCLUSION 

For the reasons stated, Veterans’ motion for a preliminary injunction is GRANTED IN 

PART and the government’s motion to dismiss is DENIED.

10

 CVE’s decision dated July 21,

2017, rendering Veterans ineligible for contracts awarded to SDVOSBs, is set aside. The VA 

shall restore Veterans to the VIP database of approved SDVOSB entities. Accordingly, Veterans 

shall be allowed to compete for the relocation solicitation.11 The court’s grant of preliminary 

relief will remain in effect until the court resolves Veterans’ claim for permanent relief. Because 

this preliminary relief is structured to ameliorate harm that might arise from delays in the VA’s 

procurement activities, Veterans is required to provide security. Pursuant to RCFC 65(e), 

Veterans shall give security in the amount of $150,000 to pay costs and damages sustained by 

the VA if it is found to have been wrongfully enjoined. Veterans shall provide such security on 

or before August 25, 2017.12

The parties are requested to file a joint status report on or before August 31, 2017, 

addressing proposals for further proceedings in this case. 

 

10 Veterans’ application for a temporary restraining order is superseded and thus 

DENIED as moot. 

11Because the government has stated that the roofing solicitation is in the process of being 

cancelled and reissued, Def.’s Resp. at 11 n.4; Def.’s Notice of Solicitation Cancellation, 

Veterans’ claim with respect to that solicitation is moot and the court need not address it in 

granting relief. 

12A generally applicable form of security bond for a preliminary injunction can be found 

at Form 11 of the court’s rules. For terms and provisions of a satisfactory security, plaintiff is 

encouraged to contact the Clerk of Court. 
13

 It is so ORDERED.

s/ Charles F. Lettow 

Charles F. Lettow

Judge