Status Protest Precluded Under Doctrine of Collateral Estoppel; CVE Protest of Superior Optical Labs, Inc., RE: PDS Consultants, SBA No. CVE-163


Protest challenging awardee’s status as SDVOSB is denied under doctrine of collateral estoppel. The protester alleged that the awardee of contract set aside for SDVOSBs was ineligible because the awardee (1) was not controlled by the SDOSBs, and (2) was unusually reliant on its subcontractor in violation of the ostensible subcontractor rule. OHA found that it had already resolved a related protest, brought by the same protester, that asserted the same arguments. The new protest, which raised identical issues, was barred under the doctrine of issue preclusion/collateral estoppel.

The Department of Veterans Affair posted a solicitation seeking prescription eyeglasses. The procurement was set aside for service-disabled, veteran-owned small businesses. The VA awarded the contract to PDS Consultants.

An unsuccessful offeror, Superior Optical, filed a status protest alleging that PDS was not controlled by a service disabled veteran and thus did not qualify as an SDVOSB. Superior contended that while PDS was owned by service-disabled veterans, those owners had delegated management and daily operations of the company to non-service-disabled persons. Additionally, Superior argued that PDS was unusually reliant on its subcontractor to produce the eyeglasses and thus was in violation of the ostensible subcontractor rule.

SBA’s Office of Hearing and Appeals found that that appeal was barred under the doctrine of issue preclusion or collateral estoppel. The issue preclusion doctrine prevents re-litigation of issues that were decided in a prior case involving the same parties. The doctrine is satisfied when four conditions are met: (1) the issue is identical to one decided in the first action, (2) the issue was actually litigated in the first action, (3) resolution of the issues was essential to final judgment in the first action, and (4) the plaintiff had the opportunity to litigate the issue in the first action.

Here, Superior had filed two protests challenging PDS’s status as an SDVOSB and alleging that PDS was in violation of the ostensible subcontractor rule. Indeed, other than challenging procurements for different geographic areas, the protests were identical. OHA issued a final decision on the merits denying the first protest. In that case, OHA concluded that PDS was controlled by SDVOSBs and that it was not in violation of the ostensible subcontractor rule. Under the doctrine of issue preclusion that decision was binding on the present protest.

Superior Optics is represented by Elizabeth H. Connally of Connally Law, PLLC. PDS is represented by David S. Gallacher and Emily Theriault of Sheppard Mullin Richter & Hampton LLP.

SBA - Superior Optical Labs, Inc.