22nd Century Technologies, Inc. v. U.S.: The Federal Circuit Limits COFC 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: 27 March 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, service-disabled veteran-owned small businesses, woman-owned small businesses, 8(a) Business Development Program small businesses, and Historically Underutilized Business Zone (HUBZone) small businesses. According to the Small Business Administration, 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).

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 U.S. Court of Federal Claims.

However, on Jan. 10, 2023, in 22nd Century Techs., Inc. v. U.S., 57 F.4th 993 (Fed. Cir. 2023); 65 GC ' 24, the U.S. Court of Appeals for 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 Government Accountability Office or the 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. 13 CFR ' 121.1002 ('The responsible Government Contracting Area Director or designee makes all formal size determinations in response to either a size protest or a request for a formal size determination.'). SBA's regulations and the Federal Acquisition Regulation refer to those challenges as 'size protests.' Id. ' 121.1001-121.1010; FAR subpt. 19.3.

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. Id. ' 121.1001(a)(1)(i). COs 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. Although COs can file size protests, disappointed offerors should not rely upon COs to do so. In Harmonia Holdings Grp., LLC v. U.S., 999 F.3d 1397 (Fed. Cir. 2021); 63 GC ' 191, the protester tried to challenge the awardee's size status indirectly through a bid protest. The protester argued that the CO should have initiated a size protest challenging the awardee's size status and that the CO's failure to do so was arbitrary, capricious, an abuse of discretion, or otherwise...