22nd Century Technologies, Inc. V. United States: The Federal Circuit Limits The Court Of Federal Claims' Jurisdiction Over Size Protests In Connection With Task And Delivery Order Procurements

• Jurisdiction: United States,Federal
• Law Firm: Arnold & Porter
• Subject Matter: Government, Public Sector, Government Contracts, Procurement & PPP
• Author: Mr Craig Holman, Thomas Pettit and Julia Swafford
• Published date: 16 February 2023

A central goal of the federal procurement system is to provide opportunities for small businesses. The government accomplishes this in many ways, including by establishing small business subcontracting goals for federal agencies and reserving procurements for small businesses and certain socioeconomic categories of small businesses, e.g., veteran-owned small businesses (VOSBs), service-disabled veteran-owned small businesses (SDVOSBs), woman-owned small businesses (WOSBs), 8(a) Business Development Program small businesses, and Historically Underutilized Business Zone (HUBZone) small businesses. According to the Small Business Administration (SBA), which administers these programs, small businesses in Fiscal Year 2021 received $154.2 billion from federal contracts (27.2 percent of total federal contract expenditures).¹

A consistent challenge these programs face is ensuring that only qualified small businesses receive contracts set aside for small businesses. One method of enforcement is allowing contracting officers and competitors to challenge the size and socioeconomic statuses of companies that receive such contracts. SBA routes the challenges (also referred to as size and status protests) to the applicable SBA Area Office, which SBA charges with making size and status determinations. Parties to a protest dissatisfied with the SBA Area Office determination can appeal to the SBA Office of Hearings and Appeals (OHA). Parties that are unsuccessful at OHA generally can challenge OHA decisions at the United States Court of Federal Claims (COFC).

However, on January 10, 2023, in 22nd Century Technologies, Inc. v. United States,² the United States Court of Appeals for the Federal Circuit (the Federal Circuit) held that the jurisdictional restrictions in the Federal Acquisition Streamlining Act (FASA) on protests in connection with task and delivery order procurements (which have some exceptions discussed below) apply to size protests. The court's holding, which presumably also will apply to status protests, likely will have several significant implications.

The Small Business Act, Size Status Challenges, and Appeals

The size protest process is distinct from the traditional bid protest process. In traditional bid protests, interested parties may file protests at the US Government Accountability Office (GAO) or COFC. Size protests follow a different process. The Small Business Act and SBA's regulations implementing that statute provide SBA with authority to issue size determinations in response to challenges to an awardee's (or an apparent successful offeror's) size status and, through that determination, declare whether the concern qualifies as small for a particular federal procurement.³ SBA's regulations and the Federal Acquisition Regulation (FAR) refer to those challenges as "size protests."⁴

Size protests can begin in several ways. An offeror competing in a small business set-aside procurement that itself qualifies as small and has not been eliminated from the competition "for any procurement-related reason," can challenge the size status of the apparent successful offeror or awardee.⁵ Contracting officers for set-aside procurements can also file size protests if they are concerned that an apparent successful offeror or awardee might not qualify as small under the applicable size standard.⁶ The SBA Government Contracting Area Director responsible for the area in which the protested offeror is located can file a size protest.⁷ In certain instances, large businesses and offerors determined to be other than small can also file size protests.⁸

After receiving a size protest, the relevant SBA Area Office is responsible for issuing a size determination. The SBA Area Office forwards the size protest to the protested concern. The protested concern must then respond to the allegations, including refuting the protest allegations and providing documents that the Area Office requests (e.g., SBA Form 355 and corporate and financial documents for itself and its affiliates) along with other materials the protested concern believes are relevant. The deadlines for providing initial and supplemental materials are typically quite short (e.g., three working days from when the protested concern receives the initial request for information from SBA). If the protested concern fails to respond, request and receive an extension, or does not provide all of the requested information, SBA may apply an adverse inference finding...