# In the United States Court of Federal Claims

No. 15

- 673C
BID PROTEST ( Filed Under Seal : August 14, 2015 | Reissued: August 25, 2015) *

IEI

- CITYSIDE JV,

Plaintiff,

v.

THE UNITED STATES OF AMERICA

,

Defendant

. )

) ) ) ) ) ) ) ) ) ) Post

- A ward Bid Protest; Small Business Administration; Joint Venture Agreement; 13 C.F.R. § 124.513; 13 C .F.R. § 121.103(h)(3); Mentor/Protégé;
Affiliation.

Kathryn V. Flood

, with whom were Pamela J. Mazza and Megan C. Connor

, Of Counsel, PilieroMazza PLLC, Washington, DC , for plaintiff.

Joshua Kurland , Trial Attorney, with whom were Douglas K. Mickle, Assistant Director, Robert E. Kirschman, Jr., Director, Benjamin C. Mizer, Principal De puty Assistant Attorney General, Commercial Litigation Branch, Civil Division, United States Department of Justice , for defendant.

OPINION AND ORDER

KAPLAN, Judge.

Plaintiff, IEI

- Cityside

, is a joint venture comprised of Inspection Experts, Inc. and City side Management Corp

. It filed this bid protest to challenge a decision by the Office of Hearings and Appeals of the Sma ll Business Administration (“SBA”) that IEI

- Cityside is not a
“small” business within the meaning of SBA regulations for purposes of a solicitation issued by
the Department of Hous ing and Urban Development (“HUD”) for property and pre servation
services for its s ingle family R eal

- E state O wned properties.

Currently b efore the Court are the parties’ cross

- motions for judgment on the administrative record. For the reasons discussed below, the plaintiff’s motion for judgment on

the admi nistrative record is DENIED and the government’s cross

- motion is GRANTED

.

* This Opinion was previously issued under seal on August 14, 2015, and the Clerk of the Court entered judgment on August 18, 2015. The parties were given the opportunity to propose redactions and indicated on August 24, 2015 that they did not have any sugges ted redactions to the Opinion and Order. Therefore, the Court reissues its decision without redactions.

### 2 BACKGROUND

I. Statutory Background

In accordance with the Small Business Act, the Small Business Administration is charged
with promulgating “detailed definitions or standards by which a business concern may be

determined to be a small business concern f or the purpose of this Chapter or any other Act.” 15 U.S.C. § 632(a)(2)(A) (2012)

. Pursuant to this statutory authority, the SBA has issued regulations that “define whether a business entity is small and, thus, eligible for Government

program s and preferences reserved for ‘small business’ concerns.” 13 C.F.R. §§ 121.101 (a).

T h e SBA uses the North American Industry Classification System (“NAI CS”) to establish these size standards, which are generally based on either the number of employees or annual receipts
of the business concern and its business affiliations. 13 C.F.R. §§ 121.101, 121.201.

With e xcept ions not relevant here, p arties to a joint vent ure are ordinarily considered

“ affiliates ” under SBA regulations, and will be jointly considered for the purposes of determining whether they meet the designated size standard for a procurement . 13 C.F.R. § 121.103(h)(3). There are, h owever, three exceptions to this rule. Id. Of particular r elevan ce to this case , “[t]wo firms approved by the SBA to be a mentor and protégé under [ 13 C.F.R. ] §
124.520 of these regulations may joint venture as a small business for any Federal government [contract]

, provided the protégé qualif ies as small” and the joint venture agreement meets the requirements of 1 3 C.F.R. §§ 124.513(c) and (d). 13 C.F.R. § 121.103(h)(3)(iii). 2

“The mentor/protégé program is designed to encourage approved mentors to p rovide various forms of business developmen t assistance to protégé firms.” 13 C.F.R. § 124.520(a). Its purpose “is to enhance the capabilities of the protégé, [to] assist the protégé with meeting the goals established in its SBA

- approved business plan, a nd to improve its ability to successfully compete for contracts.” Id.

Under SBA regulations, for contracts set aside for 8(a) participants, a joint venture must submit its agreement to the relevant SBA dist rict office prior to contract award to confirm it s compliance with the SBA regulations

. “ If the procurement is to be awarded other than through the 8(a) BD program ( e.g., small business set aside, HUBZone set aside)” as in this case, the

“ SBA need not approve the joint venture prior to award, but if t he size status of the joint venture is protested,” the joint venture agreement “ must meet the requirements of [ 13 C.F.R. ] § §
124.513 (c) and (d) in order to receive the exception to affiliation authorized by [13 C.F.R. § 121.103(h) ] .” 13 C.F.R. § 121.103(h )(3)(iii).

Subs ection (c) of 13 C.F.R. § 124.513 sets forth the provisions that must be included in

every joint venture agreement to perform a contract awarded as a small business set aside. Among other things, and most pertinent to this case

, the joint venture agreement must itemize all major equipment, facilities, and other resources to be furnished under the contract by each joint

2 Protégés are participants in the SBA’s 8(a) Business Development program (“BD”) which is designed to “assist eligible small disadvantaged business concerns compete in the American economy through business development.” 13 C.F.R. § 124.1.

### 3

venture partner, with a detailed schedule of its cost or value. 13 C.F.R. § 124.513 (c)(6). In addition, pursua nt to subsection (c)(7), the joint venture agreement must “ specify [] the responsibilities of the parties with regard to negotiation of the contract, source of labor, and contract performance, including ways that the parties to the joint venture will ensur e that the joint venture and the 8(a) partner(s) will meet the performance of work requirements s et forth in paragraph (d) ” of the regulati on. 13 C.F.R. § 124.513(c)(7). Section (d) , in turn, requires that
the small business participant perform at least 40% of the work performed by the joint venture, and that this work consist of “more than administrative or ministerial functions so that [the small
business ] gain [ s ] substantive experience

. ” 13 C.F.R. § 124.513(d).

II. Factual Background

A. The Solicitation

On May 22, 2014, the Department of Housing and Urban Development iss ued Request for Proposals No. DU204SA

- 13

- R

- 0004 (“RFP”)

, for an indefinite delivery, indefinite quantity (“IDIQ”) contract seeking field service manager (“FSM ”) services for HUD’s single family

R eal

- E state O wned ( “ REO ” ) properties. AR 1

- 172. The HUD contracting officer set aside the procurement partially for small businesses and assigned NAICS code 531311, Residential Property Managers, with a corresponding size standard of $7 million average annual receipts, meaning that businesses larger than the size standard would not be eligible to compete. A R 139

- 140. The RFP divided HUD’ s REO properties into eight geographic contract areas, seven of
which were set as ide for small businesses: 1P (Michigan); 3P (Connecticut, Maine, Massachusetts, Vermont, New Hampshire, New Jersey, New York, and Rhode Island); 4P (Ohio); 5P (Delaware, Maryland, Pennsylvania, Virginia, and West Virginia); 1D (Colorado, New Mexico, North Texas, and Utah); 4D (Iowa, Nebraska, Sout h Dakota, and Wisconsin); and
5D (Minnesota, Montana, North Dakota, and Wyoming). AR 152

- 53. In turn, the contract areas are within larger regions administered by two of HUD’s four regional Homeownership Centers ( “ HOC ” ) located in Philadelphia, P ennsylvania and Denver, C olorado . AR 16.

The RFP explained that “HUD has a need to manage and sell a sizable inventory of single

- family homes.” AR 16. For each geographic region in which HUD sought to award a

contract , HUD identified seven major functions to be performed by contractors: (1) Pre

Conveyance Activity; (2) Conveyance Activity; (3) Claim Review Activity; (4) Management Activity; (5) Marketing Activity; (6) Closing Activity; and (7) Oversight Monitoring. A R 17. HUD further specified the purposes and objectives for field service management contractors, including inspecting, securing, repairing, and maintaining the properties. AR 19. The RFP

st ated that HUD would award separate, s ingle

- award IDIQ contracts , each covering one or more geographic regions. AR 150.

B. The IEI

- Cityside Joint Venture Agreement

Inspection Experts, Inc. (“ IEI ”) is a participant in the SBA’s 8(a) BD program and

M entor / P rotégé program. Id. Cityside Management Corp. (“Cityside”) is its SBA

- approved

mentor. Compl. ¶ 10. As a participant in the 8(a) program, IEI is assigned to the Nebraska District Office located in Omaha, Nebraska. Id. See 13 C.F.R. § 124.401.

### 4

On June 9, 2014, IEI and Cityside executed a joint ventu re agreemen t for IEI

- Cityside (“ the agreement”). AR 1312

- 19

. The a greement stated that, in accordance with the Solicitation, “[t]he contractor shall perform inspections, preservation, maintenance, and proper ty management services for HUD

- O wned properties and reconv eyances.” AR 1314 § 1.0. It further specified
that IEI

- Cityside’s responsibilities would include “[i]nitial inspections to confirm whether property meets conveyance conditions,” “[p]reservation of property from conveyance to sale,” “[m]aintenance and pre paration of properties intended for sale,” “[m]anagement of rental properties,” and “[m]anagement and maintenance of properties in the custody of, but not owned by HUD.” Id.

Section 2.0 of t he a greement designated Shanthi Dabare, the President of IEI, as the managing director for IEI

- Cityside. The a greement also contained the following provisions
relevant to the issues raised in this case :

6.0 Equipment. Upon award of the contract identified in section 1.0 Purpose, above, the Managing Director will purch ase, in the name of the joint venture, facilities and equipment for the proper operation of this contract.

. . . .

9.0 Negotiating the Contract. Shanthi M. Dabare will be responsible for negotiating the original contract, should negotiations be required by HUD.

. . . .

14.0 Specific Responsibilities. 8(a) IEI shall perform fifty percent (50%) of the total dollar amount of the labor portion of the project, which a lso consists of labor and management personnel staff. Cityside Management Corporation shall perform fifty percent (50%) of the total dollar amount of the labor and management personnel portion of the project.

Pursuant to 13 CFR 124.513(d), IEI the 8(a) pa rticipant shall perform fifty percent (50%) of the work performed by the joint venture. Work is defined as labor portions of the project, beyond and not including subcontracted work, consisting of analytical, technical, and management personnel staff posit ions.

Cityside Management Corporation, the mentor, shall perform fifty percent (50%) of the work performed by the joint venture. Work is defined as labor portions of the project, beyond and not including subcontracted work, consisting of analytical,

tec hnical, administrative or, if waived by the 8(a) participant; management personnel staff positions.

If labor portions cannot be distributed as listed above due to labor allocations which do not support a 40/60 delineation of work IEI the 8(a) participant to the joint venture will have first right of refusal in the final selection of personnel staff positions. Selections shall be made which aid in their ability to gain knowledge

### 5

from performance of the contracts and assists in its business development and m ust consist of analytical, technical, or management personnel staff positions. The joint venture partners agree to maintain the 50/50 delineation of work as closely as the contract staff positions dictate. IEI will not subcontract more than 60% of the wor k to Cityside Management Corporation or any other subcontractor, if necessary IEI will hire employees from Cityside Management Corporation as part of this joint venture in order to meet the percentage of work split.

15.0 SBA must approve this joint ventur e prior to award of the FSM 3.8 contract on behalf of the joint venture.

AR 1315

- 18 §§ 6.0, 9.0, 14.0, 15.0 (grammatical and punctuation errors in the original)

.

On June 9, 2014, IEI

- Cityside submitted the joint venture agreement to the Nebraska District Office for approval

. Compl. ¶ 12. In addition to the agreement, IEI

- Cityside also
submitted a copy of a form provided by the district office titled “ Supplemental Information
Checklist. ” AR 1320

- 26. In that form, IEI

- Cityside included more detailed information about the project , including the number and skills of employees supplied to the j oint v enture by each

venture participant

, a brief description of the hiring and employee management responsibilities
of each ventur er, and an explanation of how project management w ould be handled

. AR 1325. In addition, IEI

- Cityside included information on the breakdown of work tasks to be performed by each joint venturer and the ways th at the small business partner (IEI) would mee t the performance work requirements. AR 1326

. 3

C. Contract Award and Size Protests Before the SBA

On July 5, 2015, IEI

- Cityside timely submitted its proposal in response to the
Solicitation. Compl. ¶ 11. In the meantime, on August 13, 2014, the Nebraska District Office approved the joint venture agreement. 4 Mot. Prelim. Inj. 8

- 15, June 29, 2015, ECF No. 19 [hereinafter “Pl.’s Br.”]. On September 30, 2014, the contracting officer selected IEI

- Cityside
for award of contract areas 1P, 4P, and 5P (all areas within the Philadelphia, Pennsylvania HOC region for which IEI

- Cityside entities were incumbent contractors). AR 407, 531, 656.

3 For example, IEI

- Cityside stated that “IEI will be responsible for the functional oversight and management of the daily operations and contract supplying Key Personnel to meet these required functions.” Id . In addition, “IEI will retain control of finance tracking an d accounting functions as required by the [joint venture] Agreement. All other staff positions will be a mixed group of both IEI and Cityside staff to ensure that all functions and efficiencies are
learned.” Id.

4 As described above, because the procurem ent was not to be awarded through the 8(a) BD program, the district office’s prior approval was not required under the SBA regulations,

and

— given the size protests later filed by IEI

- Cityside’s competitors

— was of no consequence.
See 13 C.F.R. § 121.103(h )(3)(iii).

### 6

On October 3, 2014, MRAP, LLC d/b/a Market Ready Services, an unsuccessfu l offeror, filed a size protest against IEI

- Cityside with the contra cting officer. AR 791

- 97, 902

- 42. On October 6, 2014, A2Z Field Services and Atlas Field Services, two other unsuccessful offerors, also filed size protests against IEI

- Cityside. AR 797 .1

- 797.44, 836

- 900. The three protests were referred to SBA’s Office of Government Contracting

– Area II in King of Prussia, P ennsylvania (Area Office). AR 836, 860, 902.

On March 12, 2015, the Area Office issued Size Determination Nos. 2

- 2015

- 13/14/15, concluding that IEI and Cityside are affiliated for the procurement at issue, and that therefore

IEI

- Cityside did not qualify as a small business for the procurement. AR 1045

- 59. The Area
Office noted that IEI and Cityside were parties to an SBA

- approve d mentor / protégé agreement,
and that IEI

- Cityside was competing for a procurement outside the 8(a) BD program. AR 1051. The Area Office explained that parties to a joint venture ordinarily are affiliated with each other with regard to the performance of such a contract (which normally prevents the joint venture from being eligible in a case like this one in which one of the joint venture partners is undeniably not small). AR 1051

- 52 (citing 13 C.F.R. § 121.103(h)(3)(iii))

.

The Area Office found that IEI

- Cityside did not qualify for the mentor

- protégé exception
because its joint venture agreement did not comply with 13 C.F.R. § 124.513(c) and (d). AR 1052. In particular, the Area Office determined that the agreement

— which simply stated that “[u]pon a ward of the contract . . ., the Managing Director will purchase, in the name of the joint venture, facilities and equipment for the proper operation of this contract”

— did not comply with the regulato ry requirement that it include an itemiz ation of all majo r equipment, facilities, and other resources to be furnished by each joint venture partner, with a detailed schedule of cost or value of each. AR 1053 (quoting 13 C.F.R. § 124.513(c)( 6)). In that regard, it cited the decision
of the SBA’s Office of Heari ng s and Appeals (“OHA”) , the agency’s highest adjudicative authority, in Kisan

- Pike, a Joint Venture , SBA No. SIZ

- 5618 ( Nov. 24, 2014) , 2014 WL 6904349 (2014) . In Kisan

- Pike , the SBA had r uled that a similarly broad statement lack ed the specificity necess ary to comply with section 124.513(c)(6). 2014 WL 6904 349.

Further, t he Area Office determined that the IEI

- Cityside joint venture agreement did not specify IEI’s and Cityside’s respective responsibilities as required by section 124.513(c)(7). AR
10 53. It observed t hat the joint venture agreement had simply provided that IEI’s president

w ould negotiate the contract, but otherwise was so ambiguous about the respective responsibilities of the parties that it was not clear from the agreement how IEI

- Ci tyside would meet the work requirements se t forth in section 124.513(d). AR 1053.

Citing the IEI

- Cityside joint venture agreement’s failure to meet the section 124.513(c) and (d) criteria, the Area Office conclu ded that IEI and Cityside (1) did not quali fy for the section 121.103(h)(3)(iii) exception from affiliation; (2) were thus affiliated under secti on 121.103(h)(2); and therefore (3) d id not constitute an eligible small business for the procurement.
AR 1053

- 54. The Area Office also determined, base d on an analysis of extensive financial information that IEI, Cityside, and the joint venture had provided, that IEI in any event did not qualify as small based on its receipts and proportionate share of various joint ventures. AR
1054

- 58.

### 7

Subsequently, on March 30, 2015

, IEI

- Cityside filed an appeal of the size determination
with OHA

. AR 4979

- 5015. OHA rendered a decision on June 16, 2015, sustaining the Area Office’s size determination and concluding that the size determination did not contain a cl ear error of fact or law. AR 5064

- 77. OHA’s de cision focused on the issues concerning the alleged
failure of IEI

- Cityside’s joint venture agreement to comply with 13 C.F.R. § 124.513(c) and (d) and did not reach the issue of whether IEI itself would qualify as a small business given its receipts and share in other joint ventures.

Specifically, OHA agreed with the Area Office that IEI

- Cityside’s representation that IEI’s president “will, in the future, purchase facilities and equipment for [IEI

- Cityside] does not suffice to meet the requirement that the agreement ‘[i]temiz[e] all major equipment, facilities, and other resources to be furnished by each party to the joint venture, with a detailed schedule of cost or value of each.’” AR 5075 (quoting 13 C.F.R. § 124.513(c)(6)). OHA further determined that “the statement that IEI and Cityside each will perform 50% of [the] total dollar value of the
labor portion of the contract does not meet the re quirement to ‘[s]pecif y[] the responsibilities of
the parties with regard to . . . contract performance, including way s that the parties to the joint venture will ensure that the joint venture and the 8(a) partner(s) to the joint venture will meet the perf ormance of work requirements set forth in pa ragraph (d) of this section.’” AR 5075 (quoting 13 C.F.R. § 124.513(c)(7)). OHA elaborated that IEI

- Cityside’s joint venture agr eement “does not designate specific tasks or responsibilities to IEI and Cityside, and fails to explain how [IEI

Cityside] will fulfill the performance of work requirements set o ut in 13 C.F.R. § 124.513(d).”

AR 5075. Hence, it concluded that the IEI

- Cityside joint venture agreement “contains highly general statements, but lacks the s pecificity required by 13 C.F.R. §§ 124.513(c) and (d).” AR

5075.

In addition, n ot ing that the situation presented in this case wa s analogous to that at issue

in Kisan

- Pike , OHA rejected IEI

- Cityside’s claim that the nature of the contract in this case

m ade it too difficult to provide the information required by the regulations. AR 5074

- 75. First, OHA explained

, there is no exception to the regulatory requirements for “situations where a joint venture may have difficulty providing detailed information.” AR 5075 (quoting Kisan

- Pike

, 2014 WL 6904349, at *9). Second

, and in any event , OHA determined

, the record did not support IEI

- Cityside’s contention that it was impossible for IEI

- Cityside to have met those requirements because the RFP had described the types of work to be performed, and IEI

- Cityside had summarized the types of work in its agreement. AR 5075. Thus, although IEI

- Cityside would not have known which geographic regions or properties it would be managing at the time the agreement was signed it could have complied with § 124.513(c) and (d) “by discussing the types of work each joint venture partner would perform, and the resources each partner would contribute, for each regi on awarded to [IEI

- Cityside].” AR 5075.

D. This Bid Protest

IEI

- Cityside filed a bid protest in this Court on June 29, 2015 to challeng e the SBA’s

decision. It contends that the SBA’s decision was arbitrary

, capricious , and contrary to law, claiming that the joint venture a greement: (1) provided sufficient specificity with regard to the parties’ contributions of major equipment, facilities, and other resources furnished by each ; (2) was adequately specifi c as to the responsibilities of the parties with regard to negotiation of the

### 8

contract, source of labor, and contrac t performance; and (3) specified with certainty that IEI would be performing at least 40% of the joint venture’s work. Pl.’s Br. 8

- 15. According to IEI

Cityside, given the IDIQ nature of the procurement, and the fact that IEI

- Cityside did not know
which geographic regions it would be awarded, it would have been impossible to provide any
greater level of specificity in the agreement. Id. at 12.

To expedite a decision on the merits

, and with the consent of the parties

, the Court issued

an order on July 2, 2015 that it would treat IEI

- Cityside’s motion for a preliminary injunction as a motion for judgment upon the adm inistrative record. The government then filed its response to plaintiff’s brief and its cross

- motion for judgment on the administrative recor d. After additional responsive briefs were filed, o ral argument on the parties’ cross

- motions was held on August 4,
2015.

DISCUSSION

I. Jurisdiction

The Court of Federal Claims has “jurisdiction to render judgment on an action by an interested party objecting 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) (2012). A party is an “interested party” with standing to bring suit under 28 U.S.C. § 1491(b)(1) if the party “is an actual or prospective bidder whose direct economic interest would be affected by the award of the contract.” Orion Tech., Inc. v. United States , 704 F.3d 1344, 1348 (Fed. Cir. 2013). An offeror has a direct economic interest if it suffered a competitive injury or prejudice. Myers Investigative & Sec. Servs., Inc. v. United States , 275 F.3d 1366, 1370 (Fed. Cir. 2002) (holding that “prejudice (or injury) is a necessary element of standing”).

In this case, IEI

- Cityside objects to the SBA’s determination that IEI and Cityside are affiliated, and that, therefore, IEI

- Cityside does not qualify as a small business for the purposes of the HUD procurement. IEI

- Cityside claims that the SBA violated its own regulations in rendering its size determination. Accordingly, this case involves an allegation that there has been a violation of a statute or regulation i n connection with a procurement within the meaning
of 28 U.S.C. § 1491(b)(1). See Palladian Pa rtners, Inc. v. United States , 7 83 F.3d 1243, 1254 (Fed. Cir. 2015) (recognizing CFC’s jurisdiction over challenges to OHA’s NAIC S determination in connection with a procurement).

Further, IEI

- Cityside is clearly an interested party. It is an actual bidd er whose direct
economic interest has been affecte d by the SBA’s decision. IEI

- Cityside was awarded HUD
contracts for three of the areas for which it submitted offers. As a result of the SBA’s decision, however, IEI

- Cityside has been excluded from the competition. It has therefore suffered competitive injury or prejudice for purposes of establishing its standing under 28 U.S.C. § 1491(b)(1).

### 9

II. Motion for Judgment on the Administrative Record

A. Standard for Granting Judgment on the Administrative Record

Pursuant to RCFC 52.1, the court reviews an agency’s procurement decision based on the
administrative record. Axiom Res. Mgmt., Inc. v. United States , 564 F.3d 1374, 1379 (Fed. Cir. 2009). Thus, to resolve a motion for judgm ent on the administrate record, the court conducts an expedited trial on the paper record, making fact findings where necessary. Bannum, Inc. v. United States , 404 F.3d 1346, 1354 (Fed. Cir. 2005) . The court’s inquiry is “whether, given all the disputed and undisputed facts, a party has met its burden of proof based on the evidence in
the record.” A&D Fire Prot., Inc. v. United States , 72 Fed. Cl. 126, 131 (2006) (citing Bannum,

Inc. , 404 F.3d at 1356). Unlike a summary judgment proceeding, genuine issu es of material fact will not foreclose judgment on the administrative record. Bannum, Inc. , 404 F.3d at 1356.

B. Standard of Review in Bid Protest Cases

The standard of review used to evaluate agency decisions in bid protest cases is the same
as the standa rd used to evaluate agency action under the Administrative Procedure Act (“APA”), 5 U.S.C. § 706 (2012). See 28 U.S.C. § 1491(b)(4) (stating that “[i]n any action under this subsection, the courts shall review the agency’s decision pursuant to the standar ds set forth in section 706 of title 5”). To successfully challenge an agency’s procurement decision, a plaintiff must show that the decision was “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)( A); Bannum, Inc. , 404 F.3d at 1351. “The arbitrary and capricious standard applicable here is highly deferential. This standard requires a reviewing court to sustain an agency action evincing rational reasoning and consideration of relevant
factors.” Ad vanced Data Concepts, Inc. v. United States , 216 F.3d 1054, 1058 (Fed. Cir. 2000) (citing Bowman Transp., Inc. v. Arkansas

- Best Freight Sys., Inc. , 419 U.S. 281, 285 (1974)).

In this case, the agency decision under review is that of the SBA, speaking through its
O ffice of H earings and A ppeals

. See 13 C.F.R. § 134.316(d) (decision of the OHA is the final decision of the SBA). Further, the issue under review involves the SBA’s interpretation and application of its own regulations , which it promulgated pursuant to statutory authority

. IEI

Cityside’s burden to secure reversal of the OHA’s determination is therefore a particularly difficult one, as an agency’s interpretation of its own regu lations is “controlling unless ‘plainly

erroneous or in consistent with the regulation.’ ” Auer v. Robbins , 519 U.S. 452, 461 (1997) ( citing Robertson v. Methow Valley Citizens Council

, 490 U.S. 332, 359 (1989) (quoting Bowles
v. Seminole Rock & Sand Co. , 325 U.S. 410, 414 (1945)) )

. For the reasons set forth below, the
Court concludes that IEI

- Cityside has failed to meet that burden or otherwise show that the agency’s decision was arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law

.

C. Application of the Legal Standards

Th e SBA concluded that the joint venture agreement between IEI and Cityside did not

me e t the requirements of 13 C.F.R. § 124.513 (c)(6), (c)(7) or (d) and that therefore the joint
venture did not qualify for the exception to affiliation set forth in 13 C.F.R. § 12 1.103(h)(3)(iii)

.

### 10

S ee also 13 C.F.R. § 124.520(d)(1)(ii) (“In order to receive the exclusion from affiliation for both 8(a) and non

- 8(a) procurements, the joint venture must meet the requirements set forth in § 124.513(c).”). Th is conclusion

— which conce rn s matters that are squarely within the scope of the SBA’s discretion and expertise

— w as plainly reasonable and consistent with the regulations.

Section 124.513 (c)(6) require d that IEI

- Cityside’s joint venture agreement contain a provision “[i]temizing all major equipment, facilities, and other resources to be furnished by each party to the joint venture, with a detailed schedule of cost or value of each.” With respect to this requirement , IEI’s joint venture agreement stated that “[u]pon award of the contract identified in section 1.0 Purpose, above, the Managing Director will purchase, in the name of the joint venture, facilities and equipment for the proper operation of this contract.” AR 1315. According to plaintiff, this clause satisfied the crit erion set forth in 13 C.F.R. § 124.513 (c)(6) by providing that “all equipment and resources essentially would be contributed or ‘furnished’ by IEI, the Managing Director .” Pl.’s Br. 10.

Th is contention is not persuasive. First, the joint venture agre ement does not state that IEI will furnish all equipment, facilities and resources; instead

, it states that IEI, as managing director, will purchase such materials “in the name of the joint venture.” But more importantly, even assuming it were reasonable to read the agreement to mean that IEI would be supplying all equipment, facilities, and resources , IEI

- Cityside does not deny that the agreement did not include the other information required by the regulation : an itemization and detailed schedule of
the costs of such equipment , facilities, and resources

. Accordingly, OHA’s determination that

IEI

- Cityside’s agreement did not meet the requirements of 13 C.F.R. § 124.513 (c)(6) is clearly
reasonable

.

Similarly, the OHA’s conclusion that IEI Cityside’s joint venture agreement did not comply with 13 C.F.R. § 124.513(c)(7) was a lso entirely reasonable . That regulation required
that IEI

- Cityside’s joint venture agreement to contain a provision “[s]pecifying the responsibilities of the parties with regard to negotiation of the contract, source of labor, and contract performance, including ways that the parties to the joint venture will ensure that the joint venture and the 8(a) partner(s) to the joint venture will meet the performance of work requirements s et forth in paragraph (d) of this section” ( which delineat es the percentage of work that each joint venture partner must complete in the course of contract performance )

.

T he IEI

- Cityside joint venture agreement did not contain any of this specific informa tion, with the exception of stating that IEI’s President would negotiate the contract . Beyond that , as set forth above, the agreement stated only in very general and conclusory terms that IEI and Cityside would each perform fifty percent of the labor unde r the contract, and that IEI would have a right of first refusal as needed to meet the minimum work requiremen t s set forth in the regulations. OHA reasonably concluded that these general statements were inadequate to meet regulatory requirements because t he agreement “does not designate specific tasks or responsibilities to IEI and Cityside and fails to explain how [IEI

- Cityside] will fulfill the performance of work requirements of 13 C.F.R. § 124.513(d).” AR 5075.

Notwithstanding the foregoing, IEI

- Cityside argues that at the time it entered the agreement it could not have provided greater specificity with respect to facilities, equipment and

### 11

other resources , or as to the allocation of the parties’ responsibilities with respect to contract performanc e. It contends that “ [ n ] o specific ‘itemization’ of the equipment and facilities was possible at the tim e of proposal submission ” because of the IDIQ nature of the procurement and
because it did not know the geographic regions to which it would be assigne d

. Pl.’s Br. 10, 14;

s ee Pl. ’s Reply 6

- 11

. Indeed, it argues, “the very language of the Solicitation itself provides for lengthy transition, during which the contract awardee is charged with the responsibility of furnishing the materials and facilities n ecessary for contract performance.” Pl. ’s Reply 8.

The SBA ’s conclusion that IEI

- Cityside’s “impossibility” argument was unavailing was reasonable for two independent reasons. F irst, as OHA observed, the regulations do not include an exception based on the nat ure of the procurement involved. See 13 C.F.R. § 124.513(c);
Kisan

- Pike , 2014 WL 6904349, at *9 (noting that the applicable regulations do not authorize an exception for situations where a joint venture may hav e difficulty providing detailed information)

. Indeed, carving out exceptions on this basis c ould undermine the SBA’s purpose s for imposing mandatory provisions on joint venture agreements and for requiring SBA approval of such agreements : to ensure that th e 8(a) (or other small business) concern is bringing
sufficient value to the joint venture relationship and that the relationship is genuine. See 13 C.F.R. § 124.513(a)(2) (providing that a “joint venture agreement is permissible only where an 8(a) conc ern lacks the necessary capacity to perform the contract on its own, and the agreement is fair and equitable and will be of substantial benefit to the 8(a) concern,” but cautioning that “where SBA concludes that an 8(a) concern brings very little to the jo int venture relationship in terms of resources and expertise other than its 8(a) status, SBA will not approv e the joint venture
arrangement ”); see also 76 Fed. Reg. 8222 (“Receiving an exclusion from affiliation for any non

8(a) contract is a substantial b enefit that only SBA

- approved mentor/protégé relationships can
receive. The intent behind the exclusion generally is to promote business development assistance to protégé firms from their mentors. Without [the requirements of section (c)], the
entire sma ll business contract could otherwise be performed by an otherwise large business.”).

Second, and in any event, as OHA discerned, the fact that this matter involves an IDIQ

contract and that IEI

- Cityside did not know the geographic region to which it might be assigned did not preclude IEI

- Cityside from providing more specific ity regarding the equipment, facilities,
and other resources that each party would contribute , or adequate information about allocations of responsibility

. The “indefinite” aspect of th is procurement was the number of properties that the contractor would manage. As OHA observed, notwithstanding this u ncertainty about the number of properties or the geographic region for which the award would be made , IEI

- Cityside “might nevertheless h ave complied with 13 C.F.R. § 124.513(c) and (d) by discussing the types of work each joint venture partner would perform, and the resources each partner would contribute, for each region awarded to Appellant.” AR 5075. 5

Indeed, the record in this matter reveals that IEI

- Cityside could readily have provided additional specificity in its agreement. According to the administrative record, both IEI and

5 It also bears noting that IEI

- Cityside’s complaint that specificity was impossible because it did not know in advance which of several geographic areas it might be awarded would apply to any procurement (IDIQ or not) in which an agency was a warding more than one contract in different geographic areas

— a very common occurrence.

### 12

Cityside are incumbent HUD contractors with experience in performing field service
management contracts. AR 383. IEI

- Cityside emphasized in the past performance portion of its proposal that it is comprised of “two experienced HUD FSM c ontractors” and noted th e tens of thousands of HUD properties its member entities have managed across multiple states. Id. IEI

Cityside also stated that “[a]s current FSM contractors, both Cityside and IEI have the infrastructure and personnel that can be assigned to the joint venture to perform the services required in area s 1D, 4D, 5D, 1P, 3P, 4P, 5P.” Id. IEI

- Cityside elaborated that “IEI currently has an active pool of subcontractors in area 1P. Cityside currently maintains a pool of subcontractors in area[s] 1P, 3P, 4P and 5P.” Id. IEI

- Cityside then went on to explain its plans for acquiring additional infrastruct ure based on its extensive experience, culminating in its assertion that “[i]f it is awarded the FSM 3.8 contract IEI

- Cityside JV will be ready to perform from day one and will not require a length y transition period.” AR 383 ; But cf. Pl. ’s Br. 11, 14 (cl aiming that the transition period establishes impossibility of complying with regulations). Given these representations, and each of the joint partners’ experience, IEI

- Cityside necessarily would have had a much greater appreciation of what each partner w ould be contributing in terms of equipment, facilities, labor and other resources at the time it entered its agreement.

IEI

- Cityside’s impossibility claims are also contradicted by its technical proposal, in
which IEI

- Cityside asserted that “the Firm ha s existing fully staffed and equipped offices located within the Denver and Philadelphia HOC geographic area” a s well as overarching computer systems for the con tracts. AR 358 . The technical proposal also included a lengthy “Property Management Work Flow, ” complete with detailed charts and narratives that specified the types
of work that IEI

- Cityside would perform if it were awarded the contracts. AR 360

- 77. IEI

Cityside claimed that its pre

- existing resources and coverage “will allow the Firm to provide timely and efficient services to HUD from day one.” AR 360.

In addition, in submitting the joint venture agreement to the SBA district office in Nebraska, IEI

- Cityside provided additional information on a form checklist

— not included in the agreement its elf

— stating that it had existing personnel, equipment, and “facilities already in use that will be used for this contract with several other offices ready to perform the contract.” AR

1323. IEI

- Cityside also provided “[a] breakdown of work tasks to be pe rformed by each joint

venture r

. ” See AR 1326.

The record, in short , demonstrates that IEI

- Cityside was capable of providing specifics
that it di d not include in the agreement. OHA fully considered th is record, as well as IEI

Cityside’s arguments. OHA’s interpretation of SBA ’s regulations and the application of those regulations to the specific circumstances of this case is entitled to substantial deference. OHA provided a reasoned and logical explanation for why the Area Office determination did n ot
constitute clear error. Accordingly, t he SBA’s decision that the joint venture agreement failed to

meet the requirements of 13 C.F.R. § 124.513(c) and (d) was neither arbitrary, capricious, nor contrary to law

.

CONCLUSION

On the basis of the foregoi ng, the government’s motion for judgment on the
administrative record is GRANTED and the plaintiff’s motion is DENIED

. Pursuant to the

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joint status report filed on August 24, 2015, ECF No. 27, the briefs filed in this matter shall be released as the publi c versions of those filings except for the exhibits filed as attachments to plaintiff’s complaint (ECF No. 1) and motion for a preliminary injunction (ECF Nos. 2 and 3)

.

IT IS SO ORDERED.

s/ Elaine D. Kaplan

ELAINE D. KAPLAN Judge