Ready, Set-Aside, Go

The air force acted properly in awarding Waste Management of Washington (WM) a contract for waste disposal services at Fairchild Air Force Base instead of restricting the bidding to qualified small businesses, according to a ruling by a federal appeals court.

Under federal law, the general rule for government procurement contracts is “full and open competition” under uniform, well-established acquisition regulations. However, the law empowers contract officers to disregard competitive procedures when the products or services needed are available from only one responsible source or, for example, when the contract is suitable to be reserved for small businesses located in the same economically distressed area as the entity seeking services.

The Air Force decided not to set aside the contract for a small business because it found that waste services were available from only one responsible source. Under the Resource Conservation and Recovery Act (RCRA), federal agencies that dispose of solid waste are obliged to comply with state requirements for solid waste control.

Fairchild is located in the state of Washington, where waste collection companies cannot operate without first obtaining a state-issued certificate of necessity for a specific service area. After concluding that the contract could not be performed without such a certificate, the Air Force determined that WM was the only company that held a certificate for the area where the base is located.

In April 2004, Blue Dot Energy Company Inc., which has been awarded contracts set aside for disadvantaged areas, filed a complaint in the U.S. Court of Federal Claims protesting the award of the contract. The Court of Federal Claims is authorized to hear bid protests and other contract disputes involving the federal government. Indeed, more than a third of the court's workload is contract claims.

The company sought an injunction barring the Air Force from awarding a sole source contract to WM as well as an order either awarding the contract to Blue Dot or re-opening the procurement for eligible small businesses only.

The court found that the Air Force's decision to grant the contract to WM instead of setting the bidding aside for disadvantaged small businesses violated federal laws and regulations and also lacked a rational basis. The court enjoined the contract with WM and ordered the Air Force to issue a new solicitation as a set-aside for companies from the surrounding disadvantaged area.

On appeal, the U.S. Court of Appeals for the Federal Circuit reversed the lower court ruling. “[T]he Air Force was within its discretion to decide that a responsible source needed to have a [state] certificate,” the appeals court stated. “[N]othing prevented Blue Dot from applying for such a certificate before or after learning about the … solicitation of the disposal contract.”

Furthermore, the Air Force's decision not to set-aside the contract was based on a key relevant factor: a contracting officer may decline to set aside a contract when the disadvantaged area lacks two or more responsible, qualified small businesses. On this point, the evidence was indisputable.

[Blue Dot Energy Company, Inc. v. United States, No. 05-5058, Fed. Cir., May 2, 2006.]

The legal editor welcomes comments from readers. Contact Barry Shanoff via e-mail: [email protected].

The columnist is a Rockville, Md., attorney and serves as general counsel of the Solid Waste Association of North America.