Court Opinion

ID: 3035658
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:53:00.884768+00
Date Added: 2024-06-11T12:31:07.993371
License: Public Domain

FOR PUBLICATION
  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT

CONTRACT MANAGEMENT, INC.,              
                 Plaintiff-Appellant,
                 v.
                                             No. 04-15049
DONALD RUMSFELD, in his
representative capacity as                    D.C. No.
                                            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
             CONTRACT MANAGEMENT v. RUMSFELD             377

                        COUNSEL

Timothy H. Power, Walnut Creek, California, for the appel-
lant.

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 Busi-
ness 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
378             CONTRACT MANAGEMENT v. RUMSFELD
time CMI brought this suit, it held four contracts at Pearl Har-
bor, 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 HUB-
Zone small business. CMI therefore faced the prospect of los-
ing 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 judg-
ment. 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 con-
tract 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
  1
    During the pendency of this lawsuit, the parties agreed that CMI’s con-
tracts would continue for an additional year — i.e., until September 30,
2004.
                CONTRACT MANAGEMENT v. RUMSFELD                        379
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 pur-
pose of the Act is to ensure the attainment of a “Government-
wide 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 neces-
sary. 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).
  2
    Throughout this inquiry, we give “considerable weight . . . to an execu-
tive department’s construction of a statutory scheme it is entrusted to con-
sider . . . [and] deference to administrative interpretations.” Id. at 844.
380            CONTRACT MANAGEMENT v. RUMSFELD
   In addition to its broader goals of aiding small businesses
in general, the Small Business Act also contains special pro-
grams 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 disad-
vantaged 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 dis-
advantaged or distressed areas. In order to qualify as a HUB-
Zone small business, a company must have its principal office
in a HUBZone area and have at least 35 percent of its employ-
ees 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 mate-
rially 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
                CONTRACT MANAGEMENT v. RUMSFELD                       381
      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 HUB-
Zone 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 designa-
tion 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 princi-
ple, 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 inter-
pretation in district court but does not do so on appeal.
   4
     The 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.
382             CONTRACT MANAGEMENT v. RUMSFELD
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 Pro-
gram — 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 inter-
pretation 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 mis-
taken 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 lan-
guage creating the HUBZone Program. The statutory lan-
guage for the HUBZone Program clearly states that a
“contract opportunity shall be awarded” when “the contract-
ing 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
  5
   The only evidence CMI offers in support of its contention that the
Navy would award it Solicitation N62742-03-R-2216 under a discretion-
ary 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.
                CONTRACT MANAGEMENT v. RUMSFELD                       383
“whenever [the SBA] determines such action is necessary or
appropriate.” 15 U.S.C. § 637(a)(1)(A). Under such circum-
stances, 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 competi-
tion restricted to HUBZone small businesses. With regard to
the 8(a) Program . . . Congress has . . . le[ft] to agency discre-
tion 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) Pro-
gram is materially different from that of the HUBZone Pro-
gram. 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 Pro-
gram.6

   CMI further argues that the SBA’s regulations thwart con-
gressional 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 indica-
tion in the statutory text that HUBZone contracts must be
awarded exclusively within HUBZone areas. Rather, Con-
gress requires a HUBZone business to have its principal
office in a HUBZone area, with at least 35 percent of its
  6
    We 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 inter-
pretation of the HUBZone Program. See New Haven Bd. of Educ. v. Bell,
456 U.S. 512, 535 (1982).
384             CONTRACT MANAGEMENT v. RUMSFELD
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 vol-
ume of contracts would be found within them. We therefore
reject CMI’s overly narrow interpretation of the HUBZone Pro-
gram.7

   [4] In short, we agree that the SBA’s regulations imple-
menting the HUBZone Program properly accord with con-
gressional 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 Har-
bor.8

                                   IV.

  For the foregoing reasons, we affirm the district court’s
decision to deny CMI’s request for summary judgment and to
  7
     CMI’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 per-
cent 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.
   8
     Of course, even if we did see tension or ambiguity between the statu-
tory text and the regulations at issue, our analysis would not be complete.
Under such a circumstance (not apparent here), we would apply the sec-
ond 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 demon-
strated that an alternate reading was not only permissible, but compelled.
            CONTRACT MANAGEMENT v. RUMSFELD           385
grant the Government’s motion for summary judgment.

  AFFIRMED.