Agency Performs Some Procedural Somersaults, Wiggles Out of Adverse OHA Ruling; Appeal of Caduceus Healthcare, Inc., SBA No. NAICS-6074

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Government’s motion to dismiss appeal challenging NAICS code assigned to solicitation is granted. The appellant successfully challenged the NAICS code to a 2020 RFP. Instead of changing the NAICS code, the agency cancelled the 2020 RFP. The agency then issued an amendment reopening a 2015 RFP, which had already been assigned the government’s preferred code. The appellant filed an appeal challenging the reopening of the 2015 RFP. But OHA found the appeal untimely. An appeal challenging an NAICS must be filed within 10 days of when the solicitation is issued or within 10 days of an amendment affecting the NAICS code. The amendment to the 2015 RFP did not affect the NAICS code assigned to that solicitation. Thus, the code appeal, which was filed five years after issuance of the solicitation, was too late.

In 2015, the Transportation Security Administration (TSA) issued an RFP seeking airport security screening services. The RFP contemplated the award of multiple IDIQ contracts. The 2015 RFP was issued as a full and open competition. Nevertheless, the contracting officer had assigned the solicitation an NAICS code for Security Guards and Patrol Services with a size standard of $20.5 million in annual receipts. The 2015 RFP had a rolling admissions provision, which stated that TSA reserved the right to periodically hold new competition to add new IDIQ holders. The provision further stated that the government reserved the right to restrict additional IDIQ awards to small businesses or other socioeconomic categories.

In 2020, the TSA issued a new RFP seeking airport security screening services. The 2020 RFP made no mention of the 2015 RFP. The 2020 RFP was set aside for small business and was assigned the same NAICS code for Security Guards and Patrol Services as the 2015 RFP.

Caduceus Healthcare, Inc filed an appeal with the SBA’s Office of Hearing and Appeals challenging the NAICS code assigned to the 2020 RFP. Caduceus claimed that the procurement should have been assigned a code for Other Support Activities for Air Transportation. OHA granted the appeal, finding that TSA had assigned the appeal the wrong code

But in response to the OHA decision, TSA cancelled the 2020 RFP. The agency then issued an amendment to the 2015 RFP, stating that pursuant to the RFP’s rolling admissions clause, TSA planned to award up to ten additional IDIQ contracts. The amendment provided that these new IDIQ contracts would be set aside for small businesses who qualified under the NAICS code for Security Guard and Patrol Services that had been assigned to the 2015 RFP.

Caduceus filed another NAICS appeal alleging that the amendment was an attempt to skirt OHA’s previous decision invalidating the code assigned to the 2020 RFP. Caduceus asked OHA to once again find that the Other Support Activities applied to the procurement. TSA moved to dismiss Caduceus’s appeal as untimely. TSA contended that any challenge to an NAICS code must be filed within 10 days of the issuance of the solicitation. TSA had issued the 2015 RFP in 2015, so Caduceus’s appeal was five years too late.

OHA found TSA’s reasoning compelling. SBA regulations state that any challenge to an NAICS code must be filed within 10 days after the issuance of a solicitation or within 10 days of an amendment that affects the NAICS code or size standard. Caduceus had filed an appeal within 10 days of TSA issuing the amendment to the 2015 amendment. The problem was that amendment was not the type of amendment that can give rise to a timely NAICS appeal. The amendment did not change the NAICS code or the services sought under the 2015 RFP. Thus, the deadline for an appeal challenging the NAICS began running in 2015 when the solicitation was issued.

Caduceus argued that its appeal should be considered timely because it could not have challenged the NAICS code assigned to the 2015 RFP. Caduceus reasoned that the 2015 RFP was a full and open competition and OHA has long dismissed appeals challenging NAICS codes assigned to a full and open competition. But OHA found that Caduceus was mistaken. The SBA revised it regulations in 2013 to expressly authorize NAICS code appeals against full and open competitions. Thus, Caduceus could have challenged the assigned code in 2015.

Caduceus contended that rollover provision in the 2015 RFP required TSA to conduct a new competition instead of reopening the 2015 RFP. Caduceus also alleged that the code for Other Support Activities would better serve TSA’s goal of expanding competition. But OHA found that these issues were beyond the scope of review for an NAICS appeal.

Caduceus is represented by Katherine S. Nucci of the Thomson Coburn LLP. The government is represented by Michael D Kiffney of the Transportation Security Administration.

SBA - Caduceus Healthcare