FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

CONTRACT MANAGEMENT, INC., 

Plaintiff-Appellant,

v.

No. 04-15049

DONALD RUMSFELD, in his

D.C. No. representative capacity as  CV-03-00232-HG Secretary of Defense; HECTOR V.

BARRETO, JR., in his representative OPINION

capacity as Administrator of the

Small Business Administration,

Defendants-Appellees. 

Appeal from the United States District Court

for the District of Hawaii

Helen Gillmor, District Judge, Presiding

Argued and Submitted

December 6, 2005—San Francisco, California

Filed January 11, 2006

Before: Betty B. Fletcher, David R. Thompson, and

Carlos T. Bea, Circuit Judges.

Per Curiam Opinion

375
COUNSEL

Timothy H. Power, Walnut Creek, California, for the appellant.

Eric D. Miller, U.S. Department of Justice, Washington, D.C.,

for the appellees. 

OPINION

PER CURIAM: 

Appellant Contract Management Industries (“CMI”) brings

this suit challenging the implementation of the Small Business Administration’s (“SBA”) “HUBZone Program.” The

district court granted summary judgment to the Government.

We have jurisdiction under 29 U.S.C. § 1291, and we affirm.

I.

CMI has provided custodial services at the Pearl Harbor

Naval Base and Shipyard (“Pearl Harbor”) since 1985. At the

CONTRACT MANAGEMENT v. RUMSFELD 377
time CMI brought this suit, it held four contracts at Pearl Harbor, all of which were awarded as small-business set-asides

under the Small Business Act. See 15 U.S.C. § 644. Those

contracts were set to expire on September 30, 2003. 

In December 2002, the Navy combined the four contracts

then being performed by CMI with other custodial contracts,

consolidating them into three new contract solicitations. One

such contract, Solicitation No. N62742-03-R-2216, which

includes custodial work from two of CMI’s former contracts,

was re-designated under the Small Business Act’s HUBZone

Program. It excluded CMI because, although it qualifies as a

small business under the Small Business Act, it is not a HUBZone small business. CMI therefore faced the prospect of losing a portion of its custodial work with the Navy and brought

suit to stop the Navy from awarding the solicitation to another

company.1

CMI brought a motion for preliminary injunction, which

the district court granted on June 27, 2003. On September 18,

2003, the district court denied CMI’s motion for summary

judgment and granted the SBA’s motion for summary judgment. In ordering judgment for the SBA, the district court

denied CMI’s request to invalidate the HUBZone Solicitation

at issue or otherwise enjoin the Navy from awarding the contract at issue as a HUBZone Program set-aside. CMI filed a

timely notice of appeal.

II.

We review the district court’s grant of summary judgment

de novo “to determine ‘whether the district court correctly

applied the law and if, viewing the evidence in the light most

favorable to the non-moving party, there are no genuine issues

1During the pendency of this lawsuit, the parties agreed that CMI’s contracts would continue for an additional year — i.e., until September 30,

2004. 

378 CONTRACT MANAGEMENT v. RUMSFELD
of material fact.’ ” Government of Guam v. United States, 179

F.3d 630, 632 (9th Cir. 1999) (citing Margolis v. Ryan, 140

F.3d 850, 852 (9th Cir. 1998)). 

When reviewing an agency’s construction of a statute it is

charged with administering, we look first to the statutory text

to see whether Congress has spoken directly to the question

at hand. “If the intent of Congress is clear, that is the end of

the matter; for the court, as well as the agency, must give

effect to the unambiguously expressed intent of Congress.”

Chevron, U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467

U.S. 837, 842-43 (1984) (footnote omitted). If, however, “the

statute is silent or ambiguous with respect to the specific

issue, the question for the court is whether the agency’s

answer is based on a permissible construction of the statute.”

Id. at 843. If so, we defer to the agency’s interpretation.2

A.

Congress enacted the Small Business Act in 1953 to “aid,

counsel, assist, and protect, insofar as possible, the interests

of small-business concerns . . . .” 15 U.S.C. § 631(a). The purpose of the Act is to ensure the attainment of a “Governmentwide goal for participation by small business concerns [in

Government contracts] . . . [of] not less than 23 percent of the

total value of all prime contracts for each fiscal year.” See 15

U.S.C. § 644(g). 

The SBA is charged with carrying out the policies of the

Act and issuing such rules and regulations as it deems necessary. See 15 U.S.C. §§ 633(a), 634(b). In order to realize this

goal, federal agencies, acting in concert with the SBA, are

empowered to establish small business set-asides for contract

solicitations. 15 U.S.C. § 644(a). 

2Throughout this inquiry, we give “considerable weight . . . to an executive department’s construction of a statutory scheme it is entrusted to consider . . . [and] deference to administrative interpretations.” Id. at 844. 

CONTRACT MANAGEMENT v. RUMSFELD 379
In addition to its broader goals of aiding small businesses

in general, the Small Business Act also contains special programs favoring certain categories of small businesses. Two

such programs are relevant to this case. First is the Section

8(a) Program, which assists “socially and economically disadvantaged small business concerns.” 15 U.S.C. § 637(a)(1)(B).

Second is the HUBZone Program, 15 U.S.C. § 657(a), which

favors small businesses that are located in economically disadvantaged or distressed areas. In order to qualify as a HUBZone small business, a company must have its principal office

in a HUBZone area and have at least 35 percent of its employees residing in the HUBZone area. 15 U.S.C. § 632(p). See

also 13 C.F.R. §§ 126.304, 126.700. 

The statutory language of the Section 8(a) Program is materially different from that of the HUBZone Program. Under the

Section 8(a) Program, the SBA may, in its discretion, enter

into contracts under the Small Business Act “whenever it

determines such action is necessary or appropriate,” 15 U.S.C.

§ 637(a)(1)(A), and the relevant agency “officer shall be

authorized in his discretion to let such procurement contract

to [the SBA].” Id. Thus, it is up to the agency to determine,

in the first instance, whether to place a contract within the

Section 8(a) Program. If the agency so decides, the statute

requires that the contract opportunity “shall” be competitively

awarded as a Section 8(a) set-aside if certain statutory criteria

are satisfied. See 15 U.S.C. § 637(a)(1)(D). 

The HUBZone Program, by contrast, commands in

unequivocal terms that a contract opportunity be designated as

a HUBZone set-aside when certain criteria are met:

Notwithstanding any other provision of law . . . [a]

contract opportunity shall be awarded pursuant to

this section on the basis of competition restricted to

qualified HUBZone small business concerns if the

contracting officer has a reasonable expectation that

not less than 2 qualified HUBZone small business

380 CONTRACT MANAGEMENT v. RUMSFELD
concerns will submit offers and that the award can

be made at a fair market price. 

15 U.S.C. § 657a(b)(2) (emphasis added).3

Pursuant to this statutory language, the SBA has adopted

regulations mandating that a contracting officer “must set

aside the requirement for competition restricted to qualified

HUBZone [small businesses] if the contracting officer: (1)

Has a reasonable expectation after reviewing SBA’s list of

qualified HUBZone SBCs that at least two responsible HUBZone SBCs will submit offers; and (2) Determines that award

can be made at fair market prices.” 13 C.F.R. § 126.607(c)

(current through Dec. 28, 2005); accord 48 C.F.R. § 19.1305.4

B.

CMI qualifies for certain small-business set-asides but is

neither a Section 8(a) nor a HUBZone designee. Thus, after

the Navy decided to place Solicitation N62742-03-R-2216

within the HUBZone Program, CMI challenged the designation by arguing that the regulatory scheme mistakenly

requires a HUBZone designation when certain criteria are

met. 

The district court found that the SBA correctly interpreted

3

In order to avoid any conflict between the Section 8(a) Program and

the HUBZone Program, the SBA interprets the phrase “[n]otwithstanding

any other provision of law” in 15 U.S.C. § 657a(b)(2) not to include the

other provisions of the Small Business Act. In accordance with that principle, the SBA has promulgated regulations that exempt from the Program

contract solicitations currently preformed by, or designated for, a Section

8(a) small business. See 13 C.F.R. § 126.605. CMI challenged that interpretation in district court but does not do so on appeal. 

4The SBA’s implementing regulations are codified at 13 C.F.R. Part

101 et seq. The Federal Acquisition Regulation, a set of uniform policies

and procedures for the acquisition of supplies and services by executive

agencies, are codified at 48 C.F.R. Part 19. 

CONTRACT MANAGEMENT v. RUMSFELD 381
the language of the Small Business Act and rejected CMI’s

request to invalidate the HUBZone contracting regulations. 

III.

CMI argues that Congress intended for the HUBZone Program — like the 8(a) Program — to be discretionary and that

current regulations run counter to congressional intent. The

basis for CMI’s argument appears to be that any other interpretation would create a conflict between the two programs.

CMI further contends that the Navy would not have chosen to

re-designate Solicitation N62742-03-R-2216 but for the mistaken regulation requiring a HUBZone designation. Thus,

CMI seeks to invalidate the HUBZone regulatory scheme so

that the Navy, in its discretion, can award the contract at issue

to CMI.5

[1] However, as previously noted, the statutory language of

the Section 8(a) Program is materially different from the language creating the HUBZone Program. The statutory language for the HUBZone Program clearly states that a

“contract opportunity shall be awarded” when “the contracting officer has a reasonable expectation that not less than 2

qualified HUBZone small business concerns will submit

offers and that the award can be made at a fair market price.”

15 U.S.C. § 657a(b)(2) (emphasis added). 

[2] By contrast, in the Section 8(a) Program, Congress has

conferred discretion on the SBA to determine in the first

instance whether a contract should be placed in the program.

The statutory language allows the subletting of contracts

5The only evidence CMI offers in support of its contention that the

Navy would award it Solicitation N62742-03-R-2216 under a discretionary regime is a rather terse (and unclear) e-mail exchange between a Navy

contract administrator and a representative of the SBA. Although we

doubt whether this proves CMI’s contention, we need not resolve this

question because we agree that the current HUBZone regulations accord

with congressional intent. 

382 CONTRACT MANAGEMENT v. RUMSFELD
“whenever [the SBA] determines such action is necessary or

appropriate.” 15 U.S.C. § 637(a)(1)(A). Under such circumstances, the “officer [of the contracting agency] shall be

authorized in his discretion to let such procurement contract

to [the SBA].” Id. Thus, only if the SBA invokes its discretion

under the statute must a contract opportunity be awarded as

a Section 8(a) set-aside. See 15 U.S.C. § 637(a)(1)(D). 

[3] CMI, in short, would import the discretionary nature of

the Section 8(a) Program into the HUBZone Program in spite

of the differences in statutory text. However, as the district

court noted, “Congress has used the term ‘shall’ to mandate

that certain contracting opportunities be set aside for competition restricted to HUBZone small businesses. With regard to

the 8(a) Program . . . Congress has . . . le[ft] to agency discretion the initial offer and acceptance of contracts into the 8(a)

Program.” Contract Management v. Rumsfeld, 291 F.Supp.2d

1166, 1176 (D. Haw. 2003). The text of the Section 8(a) Program is materially different from that of the HUBZone Program. Accordingly, the discretionary nature of the Section

8(a) Program cannot be imported into the HUBZone Program

thereby eliminating the mandatory aspect of the HUBZone Program.6

CMI further argues that the SBA’s regulations thwart congressional intent because they allow HUBZone businesses to

bid on contracts nationwide rather than in the limited areas

occupied by HUBZone residents. However, there is no indication in the statutory text that HUBZone contracts must be

awarded exclusively within HUBZone areas. Rather, Congress requires a HUBZone business to have its principal

office in a HUBZone area, with at least 35 percent of its

6We note, as well, that the SBA’s regulations are presumptively correct

given that Congress amended the Small Business Act in 2000 without

altering the statutory language in a way that would affect the SBA’s interpretation of the HUBZone Program. See New Haven Bd. of Educ. v. Bell,

456 U.S. 512, 535 (1982). 

CONTRACT MANAGEMENT v. RUMSFELD 383
employees residing in such areas as well. See 15 U.S.C.

§ 632(p); 13 C.F.R. §§ 126.304 and 126.700. There is no

requirement of any sort that the contract be performed in a

HUBZone area. Indeed, the very nature of such historically

underutilized zones makes it unlikely that a significant volume of contracts would be found within them. We therefore

reject CMI’s overly narrow interpretation of the HUBZone Program.7

[4] In short, we agree that the SBA’s regulations implementing the HUBZone Program properly accord with congressional intent under the Small Business Act. Consequently,

we see no reason to disturb the Navy’s decision to deny CMI

the opportunity to bid on the contract in question at Pearl Harbor.8

IV.

For the foregoing reasons, we affirm the district court’s

decision to deny CMI’s request for summary judgment and to

7CMI’s suggestion that all small business set-asides will eventually

become HUBZone contracts under the existing regulations is far-fetched.

At the outset, CMI agrees that HUBZone contracts cannot interfere with

contracts already designated part of the Section 8(a) Program, see 13

C.F.R. § 126.605. Moreover, such a scenario is unlikely, as the three percent goal established for HUBZone businesses has yet to be attained: the

current representation of HUBZone contracts stands at one percent. And

Congress can certainly intervene and amend the statute at any time if the

HUBZone Program ever does begin to encroach on the broader purposes

of the Small Business Act. 

8Of course, even if we did see tension or ambiguity between the statutory text and the regulations at issue, our analysis would not be complete.

Under such a circumstance (not apparent here), we would apply the second part of the Chevron test to determine whether the regulations at issue

were a permissible construction of the statute. See Chevron, 467 U.S. at

843. Were we to engage that inquiry, CMI could prevail only if it demonstrated that an alternate reading was not only permissible, but compelled.

384 CONTRACT MANAGEMENT v. RUMSFELD
grant the Government’s motion for summary judgment.

AFFIRMED.

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