         In the United States Court of Federal Claims
                                        No. 17-1865C
                                  (E-Filed January 3, 2018)1

                                            )
TEAM WASTE GULF COAST, LLC,                 )
                                            )
                     Plaintiff,             )
                                            )
v.                                          )
                                            )
THE UNITED STATES,                          )      Bid Protest; Review of Small Business
                                            )      Administration’s Determination that
                     Defendant,             )      Plaintiff Is Not a Small Business;
                                            )      Preliminary Injunction Request.
and                                         )
                                            )
MARK DUNNING INDUSTRIES,                    )
INC.,                                       )
                                            )
             Intervenor-Defendant.          )
                                            )

Matthew T. Schoonover, Lawrence, KS, for plaintiff. Steven J. Koprince, Candace M.
Shields, Matthew P. Moriarty, and Ian P. Patterson, Lawrence, KS, of counsel.

David M. Kerr, Trial Attorney, with whom were Chad A. Readler, Principal Deputy
Assistant Attorney General, Robert E. Kirschman, Jr., Director, Douglas K. Mickle,
Assistant Director, Commercial Litigation Branch, Civil Division, United States
Department of Justice, Washington, DC, for defendant. Robert G. Palmer, Naval
Facilities Engineering Command Southeast, Jacksonville, FL, of counsel.

Nicholas T. Solosky, Washington, DC, for intervenor-defendant. Doug P. Hibshman,
Washington, DC, of counsel.


1
       This opinion was issued under seal on December 20, 2017. The parties were
invited to identify source selection, proprietary or confidential material subject to deletion
on the basis that the material was protected/privileged. Brackets ([ ]) identify the
redacted portions of this opinion.
                                 OPINION AND ORDER

CAMPBELL-SMITH, Judge.

       This post-award bid protest is before the court on plaintiff’s motion for a
preliminary injunction, ECF No. 3. The court has before it plaintiff’s memorandum, ECF
No. 5, defendant’s response brief, ECF No. 22, and plaintiff’s reply, ECF No. 24, as well
as the Administrative Record, ECF Nos. 13-3 through 13-6.2 Oral argument was deemed
unnecessary. For the reasons set forth below, plaintiff’s motion is DENIED.

I.     Background

      The procurement that underlies this protest is for solid waste collection services at
a Department of the Navy facility in Gulfport, Mississippi. ECF No. 13-3 at 138. Team
Waste Gulf Coast, LLC (Team Waste GC) is the incumbent contractor for these services,
and continues to perform these services under a bridge contract due to expire on
December 31, 2017. ECF No. 5 at 19; ECF No. 24 at 19. The awardee for these services
must be a small business, because this procurement is a 100% set-aside for small
businesses. ECF No. 13-3 at 138.

       When the Navy announced that Team Waste GC was the apparently successful
offeror for the follow-on contract, another offeror, Mark Dunning Industries, Inc. (MDI),
lodged a size protest with the Small Business Administration (SBA), alleging that Team
Waste GC was not a small business. Id. at 8-9. The SBA determined that Team Waste
GC was not a small business, due to its affiliation with Triangle Capital Corporation
(Triangle). ECF No. 13-6 at 235-37. Team Waste GC appealed that determination to the
SBA’s Office of Hearings and Appeals (OHA). Id. at 205. OHA denied that appeal on
November 6, 2017. Id. at 240, 248.

        On November 13, 2017, Team Waste GC filed a pre-filing notice with this court
for a bid protest it intended to file “on or after November 13, 2017.” Pl.’s Pre-Filing
Notification at 1. On November 30, 2017, the Navy awarded the solid waste collection
contract to MDI. ECF No. 22 at 9. The next day, December 1, 2017, Team Waste GC
filed its bid protest complaint in this court, and MDI intervened. At the initial scheduling
conference held by the court, the parties informed the court that transition activities
between Team Waste GC and MDI had already begun, and therefore proposed a schedule
that required a ruling by December 20, 2017 on plaintiff’s request for a preliminary
injunction of contract performance. The court adopted the parties’ expedited schedule.

       The court turns first to the legal framework governing this type of bid protest. The
court then presents its analysis of the OHA decision which confirmed that, in the SBA’s

2
        All document references and page citations are to the electronic record preserved
in the court’s Case Management/Electronic Case Files (CM/ECF) system.

                                             2
view, Team Waste GC does not meet the size standard for this procurement. The court
then briefly addresses the injunctive relief factors that deny plaintiff its requested
preliminary injunction.

II.    Legal Standards

       A.     Bid Protest Standard of Review

        As the United States Court of Appeals for the Federal Circuit has stated, “the
proper standard to be applied in bid protest cases is provided by 5 U.S.C. § 706(2)(A)
[(2012)]: a reviewing court shall set aside the agency action if it is ‘arbitrary, capricious,
an abuse of discretion, or otherwise not in accordance with law.’” Banknote Corp. of
Am. v. United States, 365 F.3d 1345, 1350-51 (Fed. Cir. 2004) (citing Advanced Data
Concepts, Inc. v. United States, 216 F.3d 1054, 1057-58 (Fed. Cir. 2000)). Under this
standard, a procurement decision may be set aside if it lacked a rational basis or if the
agency’s decision-making involved a clear and prejudicial violation of statute, regulation
or procedure. Emery Worldwide Airlines, Inc. v. United States, 264 F.3d 1071, 1085-86
(Fed. Cir. 2001) (citing Impresa Construzioni Geom. Domenico Garufi v. United States,
238 F.3d 1324, 1332 (Fed. Cir. 2001)). “The arbitrary and capricious standard applicable
[in bid protests] is highly deferential.” Advanced Data Concepts, 216 F.3d at 1058.

        De minimis errors in the procurement process do not justify relief. Grumman Data
Sys. Corp. v. Dalton, 88 F.3d 990, 1000 (Fed. Cir. 1996) (citing Andersen Consulting v.
United States, 959 F.2d 929, 932-33, 935 (Fed. Cir. 1992)). The bid protest plaintiff
bears the burden of proving that a significant error marred the procurement in question.
Id. (citing CACI Field Servs., Inc. v. United States, 854 F.2d 464, 466 (Fed. Cir. 1988)).
Examples of arbitrary and capricious agency action include “when the agency ‘entirely
failed to consider an important aspect of the problem, offered an explanation for its
decision that runs counter to the evidence before the agency, or [the decision] is so
implausible that it could not be ascribed to a difference in view or the product of agency
expertise.’” Ala. Aircraft Indus., Inc.-Birmingham v. United States, 586 F.3d 1372, 1375
(Fed. Cir. 2009) (quoting Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co.,
463 U.S. 29, 43 (1983)) (alteration in original). The court will, however, “uphold a
decision of less than ideal clarity if the agency’s path may reasonably be discerned.”
Bowman Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281, 286 (1974)
(citation omitted).

       “‘If the court finds a reasonable basis for the agency’s action, the court should stay
its hand even though it might, as an original proposition, have reached a different
conclusion as to the proper administration and application of the procurement
regulations.’” Honeywell, Inc. v. United States, 870 F.2d 644, 648 (Fed. Cir. 1989)
(quoting M. Steinthal & Co. v. Seamans, 455 F.2d 1289, 1301 (D.C. Cir. 1971)).




                                              3
     B.       Review of Decisions Rendered by SBA’s Office of Hearings and Appeals
(OHA)

        This court may review a decision of the SBA when that decision constitutes an
action “in connection with a procurement.” 28 U.S.C. § 1491(b)(1) (2012); Palladian
Partners, Inc. v. United States, 783 F.3d 1243, 1254 (Fed. Cir. 2015). “In reviewing the
[SBA’s] determination, special deference is given because of the SBA’s ‘quasi-technical
administrative expertise and [its] familiarity with the situation acquired by long
experience with the intricacies inherent in a comprehensive regulatory scheme.’” LB &
B Assocs. Inc. v. United States, 68 Fed. Cl. 765, 771 (2005) (quoting Ceres Envtl. Servs.,
Inc. v. United States, 52 Fed. Cl. 23, 33 (2002)); see also Palladian Partners, 783 F.3d at
1259 (recognizing SBA-OHA’s expertise). Indeed, the “SBA is the best interpreter of its
own regulations.” Mark Dunning Indus., Inc. v. United States, 58 Fed. Cl. 216, 225
(2003) (citing Lyng v. Payne, 476 U.S. 926, 939 (1986); Udall v. Tallman, 380 U.S. 1, 16
(1965)). Reversal is limited to those situations where OHA has acted irrationally or has
erroneously applied relevant procurement law. Eagle Design & Mgmt., Inc. v. United
States, 57 Fed. Cl. 271, 273 (2002).

       C.     Injunctive Relief

       As the Federal Circuit has held:

              In deciding whether a permanent injunction should issue, a
              court considers: (1) whether, as it must, the plaintiff has
              succeeded on the merits of the case; (2) whether the plaintiff
              will suffer irreparable harm if the court withholds injunctive
              relief; (3) whether the balance of hardships to the respective
              parties favors the grant of injunctive relief; and (4) whether it
              is in the public interest to grant injunctive relief.

PGBA, LLC v. United States, 389 F.3d 1219, 1228-29 (Fed. Cir. 2004) (citing Amoco
Prod. Co. v. Vill. of Gambell, Alaska, 480 U.S. 531, 546 n.12 (1987)). The standard for a
preliminary injunction is the same, except that likelihood of success on the merits, instead
of actual success on the merits, must be shown by the plaintiff. Id. at 1229.

III.   Analysis

        The focus of this dispute is quite narrow. The SBA found that one of the indirect
owners of Team Waste GC, Energy Hardware Holdings, Inc. (Energy HH), had
“powerful voting rights” pursuant to a foundational agreement governing the operations
of Team Waste GC and related entities. ECF No. 13-6 at 234. Because these voting
rights, along with Energy HH’s ownership share in a parent entity of Team Waste GC,
conferred sufficient control of Team Waste GC to Energy HH, Team Waste GC and
Energy HH were affiliates, for the purpose of determining Team Waste GC’s size.


                                             4
Further, because Energy HH was 100% owned by Triangle, Triangle and Team Waste
GC were also affiliated, through Energy HH. Moreover, because Triangle, on average,
has annual receipts of over $100 million, Team Waste GC and its affiliated entities
exceeded the $38.5 million annual receipts threshold for small businesses eligible for the
follow-on contract. Id. at 232-33, 237. Plaintiff disputes the SBA’s analysis of
affiliation, especially as to the significance of the voting rights held by Energy HH.

       A.     Plaintiff’s Waiver of an Argument Not Presented to OHA

        Many of plaintiff’s arguments before OHA were essentially the same as those
raised in this protest. For this reason, the court will not give a detailed account of Team
Waste GC’s appeal before OHA. Defendant, however, argues that plaintiff’s failure to
raise a particular argument in its OHA appeal waives that argument in its motion
requesting a preliminary injunction from this court. ECF No. 22 at 19-20. The
government’s argument is sound.

        Plaintiff never argued before OHA that two decisions issued by this court
contradicted the SBA’s size determination in this case. Compare ECF No. 5 at 12, 18-19
(citing Veterans Contracting Group, Inc. v. United States, 133 Fed. Cl. 613 (2017)
(Veterans CG) & Miles Constr., LLC v. United States, 108 Fed. Cl. 792 (2013) (Miles),
with ECF No. 13-6 at 205-24. Briefly stated, plaintiff now contends that this court has
held in Veterans CG and Miles that certain “customary business provisions” used to
protect “minority investor[s]” do not constitute control so as to trigger affiliation in the
context of a business size determination. ECF No. 5 at 12, 17-19.

        Although Veterans CG did not issue until after Team Waste GC filed its size
appeal with OHA, Miles issued in 2013 and clearly established the test which plaintiff
urges this court to apply in this case. Even if the court agreed with plaintiff that the
holdings of Veterans CG and Miles are applicable here, which it does not, see infra,
plaintiff’s failure to raise any argument based on Miles before OHA waives this argument
in the subject matter.

       The court’s task in this bid protest is to review OHA’s action under the arbitrary
and capricious standard. By its failure to raise the Miles argument before OHA, plaintiff
has deprived OHA, in the first instance, of a chance to construe its own size
determination regulations in light of the authority of Miles. Further, this court now has
no OHA action responding to such an argument to review. Plaintiff’s litigation strategy,
whether inadvertent or calculated, now raises a supplemental ground for protest regarding
which there is no underlying agency action for this court to review. Given the unique
expertise of the SBA, the court believes that this type of bid protest is compromised when
new arguments, not presented to OHA, are introduced for the first time to this court and
regarding which there is no administrative action to review.




                                             5
       In sum, plaintiff’s arguments based on Veterans CG and Miles have been waived.
The doctrine of administrative exhaustion discussed in Palladian Partners provides further
support for the application of waiver here. The plaintiff in Palladian Partners had ignored
a proceeding before the SBA which provided the sole opportunity for review of the North
American Industry Classification System (NAICS) code applicable to a procurement for
which Palladian was a prospective bidder.

        The Federal Circuit first held that any interested party, such as Palladian, was
required to protect its interest in the first NAICS code protest because any future protests
of NAICS codes would be barred for failure to exhaust administrative remedies.
Palladian Partners, 783 F.3d at 1257-58. Palladian argued that a failure to exhaust
administrative remedies is sometimes excused. The Federal Circuit disagreed with
Palladian’s contentions, holding that Palladian’s failure to exhaust its remedies at the
SBA could not be excused, and repeatedly emphasized that the SBA has special expertise
which must be applied to such controversies before a protestor turns to this court for
relief. Id. at 1258-60.

      The Federal Circuit noted, in addition, that Palladian raised entirely new
arguments and additional evidence in its bid protest before the Court of Federal Claims
that OHA had never been given the opportunity to consider. Id. at 1261. The
consequence of that failure could not be excused:

              Palladian’s failure to present this argument in the pending
              OHA appeal deprived the agency of “an opportunity to
              correct its own errors, to afford the parties and the court the
              benefit of its experience and expertise, and to compile a
              record which is adequate for judicial review.”

Id. (quoting Weinberger v. Salfi, 422 U.S. 749, 765 (1975)). As in Palladian Partners,
Team Waste GC deprived OHA of the opportunity to address plaintiff’s arguments based
on this court’s holding in Miles, and that failure cannot be excused. Plaintiff’s arguments
based on Veterans CG and Miles have been waived.

       B.     Control and Affiliation, in General

        The size determination in this instance is generally governed by 13 C.F.R.
§ 121.103(a) (2017) (“General Principles of Affiliation”). First, “[c]oncerns and entities
are affiliates of each other when one controls or has the power to control the other, or a
third party or parties controls or has the power to control both. It does not matter whether
control is exercised, so long as the power to control exists.” Id. § 121.103(a)(1). Second,
“[c]ontrol may be affirmative or negative. Negative control includes, but is not limited
to, instances where a minority shareholder has the ability, under the concern’s charter,
by-laws, or shareholder’s agreement, to prevent a quorum or otherwise block action by
the board of directors or shareholders.” Id. § 121.103(a)(3). Third, “[i]n determining


                                             6
whether affiliation exists, SBA will consider the totality of the circumstances, and may
find affiliation even though no single factor is sufficient to constitute affiliation.” Id.
§ 121.103(a)(5).

        More particularly, the affiliation and control issue here is directly addressed by the
regulations titled “Affiliation based on stock ownership,” 13 C.F.R. § 121.103(c) (2017).
First, “[a] person (including any individual, concern or other entity) that owns, or has the
power to control, 50 percent or more of a concern’s voting stock, or a block of voting
stock which is large compared to other outstanding blocks of voting stock, controls or has
the power to control the concern.” Id. § 121.103(c)(1). Second, “[i]f two or more
persons (including any individual, concern or other entity) each owns, controls, or has the
power to control less than 50 percent of a concern’s voting stock, and such minority
holdings are equal or approximately equal in size, and the aggregate of these minority
holdings is large as compared with any other stock holding, SBA presumes that each such
person controls or has the power to control the concern whose size is at issue. This
presumption may be rebutted by a showing that such control or power to control does not
in fact exist.” Id. § 121.103(c)(2).

       Although other types of affiliation were in play in the SBA’s size determination,
the dispositive issue in this protest is governed by the stock ownership regulations and
general rules of affiliation cited here.

       C.     Ownership and Control of Team Waste GC

        The field of battle concerning stock ownership is not actually at Team Waste GC’s
level, but two levels higher up in a chain of wholly-owned subsidiaries. The pertinent
entity is Team Waste, LLC, which is owned by Team Waste Holdings II, LLC (49.88%),
Energy HH (49.88%), and four employees who each own non-voting shares of no real
significance here. ECF No. 13-6 at 241. In essence then, Team Waste, LLC is equally
owned by two entities, Team Waste Holdings II, LLC and Energy HH. Under the
regulations cited above, there is no real dispute that Energy HH is presumed to control
Team Waste, LLC (and, thus, Team Waste GC), although that presumption is rebuttable.
13 C.F.R. § 121.103(c)(2). The relevant date for the size determination is May 10, 2017,
when Team Waste GC submitted its offer which included a certification that it met the
size standard for this procurement. ECF No. 13-6 at 233, 236-37.

        The equal ownership of Team Waste, LLC is expressed through the Third
Amended and Restated Limited Liability Company Agreement (Operating Agreement)
attached to plaintiff’s memorandum, ECF No. 5 at 30-94, and various partial amendments
to that overall Operating Agreement.3 As of May 10, 2017, the Fifth Amendment to the

3
      Plaintiff asserts that there is no evidence that OHA had the full Operating
Agreement before it, because this document was not included in the Administrative
Record filed with the court. ECF No. 24 at 7-9. Plaintiff further argues that this

                                              7
Operating Agreement was in effect. ECF No. 13-5 at 41-45. According to this Fifth
Amendment submitted by Team Waste GC to the SBA, by April 18, 2017 Energy HH
had provided [ ] in capital contributions to Team Waste, LLC, whereas Team Waste
Holdings II, LLC had provided [ ] in capital contributions. Id. at 43-44. Their respective
stock ownership units, however, were [ ]. Team Waste Holdings II, LLC held [ ]
“common units”; Energy HH held [ ] “preferred units.” Id. at 43. According to the Fifth
Amendment, at this point in time Team Waste Holdings II, LLC held 50% of
“Common/Preferred Percentage Interests,” as did Energy HH. Thus, the ownership
structure of Team Waste, LLC, as presented in the Operating Agreement, generally
supports the SBA’s finding, pursuant to 13 C.F.R. § 121.103(c)(2), that Energy HH
controlled Team Waste, LLC.

       It appears to be undisputed that four of the five board members of Team Waste,
LLC are appointed by Team Waste Holdings II, LLC, and serve at the pleasure of [ ], the
CEO of Team Waste, LLC (and other related companies). ECF No. 5 at 6; ECF No. 13-5
at 203-04. The fifth board member is appointed by Energy HH. ECF No. 13-6 at 208.
Each board member has one vote. See ECF No. 5 at 63 (Operating Agreement
Subsection 6.2(c)). Thus, excepting powers specially reserved to Energy HH by the
Operating Agreement, Team Waste Holdings II, LLC generally leads Team Waste, LLC
through its board.

       The dispute, then, is whether the powers specially reserved by the Operating
Agreement to Energy HH, through its unique position as the holder of [ ] preferred units,
constitute control through stock ownership as defined by 13 C.F.R. § 121.103(a)(3):

             Negative control includes, but is not limited to, instances
             where a minority shareholder has the ability, under the
             concern’s charter, by-laws, or shareholder’s agreement, to



documentary flaw impugns the validity of OHA’s decision in this matter. Id. The court
disagrees.

        The Administrative Record contains obvious gaps. For example, MDI’s brief
submitted to OHA, extensively cited by OHA in its decision, ECF No. 13-6 at 245, is also
not in the Administrative Record. Plaintiff concedes that the full Operating Agreement
was submitted to the SBA. ECF No. 24 at 7. Plaintiff’s speculation that OHA did not
review the full Operating Agreement is not supported by OHA’s rational interpretation of
that document. Further, Team Waste GC’s appeal to OHA, and this bid protest, focus
narrowly on the negative control issue, for which OHA cited the relevant provisions of
the Operating Agreement. The rationality of OHA’s decision is not impaired by the cited
gap in the Administrative Record.


                                            8
             prevent a quorum or otherwise block action by the board of
             directors or shareholders.

Id. The court does not approach this dispute de novo. Its review is constrained by the
arbitrary and capricious standard, and defers to the special expertise of the SBA in
construing its own regulations.

      D.     A Rational Reading of the Operating Agreement Establishes Negative
             Control by Energy HH

        As a threshold matter, the SBA found that Energy HH has voting rights, despite
plaintiff’s protestations to the contrary. ECF No. 13-6 at 234. This finding is supported
by the Operating Agreement. See ECF No. 5 at 62 (“Each Member shall vote all of his,
her or its Units . . . .”). Those voting rights, accorded Energy HH because it holds [ ]
preferred units, underlie the dispute over the control of Team Waste, LLC, although the
control most specifically discussed by the SBA is found in another section of the
Operating Agreement.

       The SBA, in its initial size determination, and then OHA in the size appeal,
focused narrowly on “Investor Approval Rights,” Section 6.5 of the Operating
Agreement. ECF No. 5 at 65-67. The court agrees with OHA that this section of the
Operating Agreement gives sufficient negative control to Energy HH to trigger affiliation
under the SBA’s regulations cited supra. There are fifteen discrete actions that Team
Waste, LLC (and Team Waste GC) cannot take without the consent of Energy HH. See
ECF No. 5 at 65-66 (Subsections 6.5(a)-(o)). Of these fifteen actions, seven are potential
triggers for a forced sale of Energy HH’s units back to Team Waste, LLC, the “Call
Option,” should Energy HH attempt to block said actions. See id. at 77 (Section 8.7).
OHA therefore did not extensively rely on those subsections of Section 6.5, namely
Subsections 6.5(g)-(j) and (l)-(n), in its findings regarding Energy HH’s negative control
of Team Waste, LLC.

       There remain, however, eight specific types of actions which require the consent
of Energy HH and for which no Call Option limits Energy HH’s power. Some of these
company actions are extraordinary in nature, such as the dissolution of the company,
Subsection 6.5(o), or the amendment of the Operating Agreement so as to limit the rights
of Energy HH, Subsection 6.5(a). ECF No. 5 at 65-66. The power to block extraordinary
action, which is of the nature of investment-protection, must be distinguished from the
“power [to] block ordinary actions essential to operating a company,” which constitutes
negative control. ECF No. 13-6 at 246.

        The SBA in its initial size determination, and OHA on appeal, paid particular
attention to three company actions that could be blocked by Energy HH, and cited these
as “examples” of negative control established by Section 6.5 of the Operating Agreement.
ECF No. 13-6 at 235. These may not be the only company actions, as set forth in Section


                                            9
6.5 of the Operating Agreement, over which Energy HH has negative control, but the
court agrees that these three provisions are sufficient to create control and affiliation in
the instant case. The court will address each provision in turn.

              1.     Payment of Distributions (Dividends)

        Subsection 6.5(b) of the Operating Agreement generally prevents the company
from making distributions, or, in other words, from paying dividends, to the members of
the company without the consent of Energy HH. ECF No. 5 at 65. There is some dispute
as to the significance of the statement of a dollar threshold related to the company’s
liquidity. See ECF No. 24 at 13-14. The court agrees with defendant’s interpretation of
the provision. ECF No. 22 at 14-15. The company can only make distributions without
Energy HH’s consent in two excepted circumstances, if the company’s liquidity exceeds
$2,500,000 after the distributions have been paid. See ECF No. 5 at 65 (stating that the
company may make unconsented distributions in two excepted circumstances “provided,
that, Liquidity on the date of any Distribution, after taking into account such Distribution,
is greater than $2,500,00”).

       Although OHA interpreted the dollar threshold differently, both OHA and
defendant have cited persuasive SBA authority that considers the ability to block the
payment of dividends to constitute negative control of a company, at least in certain
circumstances. ECF No. 13-6 at 247; ECF No. 22 at 13. The court agrees with these
authorities and finds that the Operating Agreement, Subsection 6.5(b), can reasonably be
read to confer negative control to Energy HH.

       In Eagle Pharmaceuticals, Inc., SBA No. SIZ-5023 (Jan. 23, 2009), for example,
OHA examined the issues of investment-protection, negative control, and whether the
payment of dividends is an ordinary business activity. OHA specifically distinguished
EA Engineering, Science, & Technology, Inc., SBA No. SIZ-4973 (July 14, 2008), a
decision upon which plaintiff extensively relies. See ECF No. 5 at 16-17; ECF No. 24 at
17-18. OHA held that negative control had been established in Eagle Pharmaceuticals, in
part due to a minority investor’s power to block the payment of dividends.

        As in the decisions cited by OHA, Energy HH, an investor in Team Waste GC,
possesses negative control over the payment of distributions. Team Waste GC is thus
affiliated through Energy HH with Triangle, and is not a small business eligible for the
procurement. The OHA decision was rational in this regard.

              2.     Termination of CEO Carter or Compensating Him above Agreed
                     Levels

        Subsection 6.5(e) of the Operating Agreement prevents the company from
terminating its CEO [ ] or increasing his compensation above the annual amounts set
forth in an Employment Agreement dated June 1, 2015 without the consent of Energy


                                              10
HH. ECF No. 5 at 39, 65. OHA noted that SBA size determinations have held that the
ability to block an executive’s removal or changes to the executive’s compensation is a
form of negative control. ECF No. 13-6 at 247. The court finds these cited authorities to
be persuasive. As defendant notes, it was not irrational for OHA to find that Energy
HH’s power in this instance “crosses the line” from investment-protection to negative
control. ECF No. 22 at 17.

       In Firewatch Contracting of Florida, LLC, SBA No. SIZ-4994 (Sept. 8, 2008), for
example, OHA described how a company’s operating agreement provided that a minority
shareholder could block decisions on the hiring, firing and compensation of the officers
of the company. Again, OHA specifically distinguished EA Engineering, and noted that
the “identification of the kind of power that constitutes negative control has been the
subject of development over many years by OHA.” SBA No. SIZ-4994. In Firewatch,
the ability of an investor to block changes to executive compensation and the company’s
hiring and firing of those executives was sufficient to establish negative control. The
court finds that the Team Waste, LLC’s Operating Agreement, Subsection 6.5(e), can
reasonably be read to confer negative control to Energy HH, under OHA precedent
interpreting SBA regulations. The OHA decision reviewed here was not irrational in this
regard.

              3.     Any Change in Strategic Direction or Lines of Business

        Subsection 6.5(f) of the Operating Agreement prevents the company from
“effect[ing] any changes in the strategic direction or lines of business of the Company’s
landfill, waste hauling and related businesses” without the consent of Energy HH. ECF
No. 5 at 65. Although plaintiff characterizes this power as Energy HH’s ability to
“prevent Team Waste from blazing an unforeseen, reckless path,” ECF No. 5 at 17, OHA
reasonably concluded that Energy HH could block innovation in the company’s
fundamental business operations, ECF No. 13-6 at 247. It is true that veto power over
substantial changes in lines of business did not rise to the level of negative control, in EA
Engineering, particularly, but the broad power to block “any changes in the [company’s]
strategic direction” in the Operating Agreement offered Energy HH negative control over
Team Waste, LLC. ECF No. 13-6 at 247.

       OHA’s interpretation of Subsection 6.5(f) is reasonable, as is its interpretation of
its own precedent. Plaintiff condemns OHA for failing to counter the precedent of EA
Engineering with other OHA precedent. See ECF No. 5 at 17 (stating that OHA
“ignore[d] the clear weight of authority established by EA Engineering”). It is clear to
the court, however, that OHA has the power to distinguish the ruling in EA Engineering
in other appeals, where appropriate, such as in Eagle Pharmaceuticals and Firewatch.
Because OHA has rationally found that the Operating Agreement allowed Energy HH to
block essential, ordinary business operations, and thus gave Energy HH negative control
over Team Waste GC, OHA’s decision must be sustained on this ground as well.
Because there were three types of negative control afforded Energy HH by the Operating

                                             11
Agreement, and because of the affiliation between Triangle and Team Waste GC, OHA
rationally found that Team Waste GC did not meet the size standard for this procurement.

       E.     The Test Applied in Veterans CG and Miles Is Not Sufficiently Analogous
              to the Size Determination Here

       Finally, the court turns to plaintiff’s reliance on Veterans CG and Miles. Miles
examined whether “unconditional ownership” required by 38 C.F.R. § 74.3 was not
present due to a “right of first refusal” provision in a company agreement. 108 Fed. Cl. at
802-03. The court in Miles thus interpreted a different type of provision in a company
agreement, as well as different regulatory language in an entirely different set-aside
program, than the regulation and circumstances at issue in this case. Miles is therefore
not sufficiently analogous to be considered here.

       Veterans CG is also far afield from the issues in this case. The court interpreted,
relying in part on Miles, a “first opportunity to purchase” provision in a company
agreement through the lens of the “unconditional ownership” requirement in 13 C.F.R.
§ 125.12. Veterans CG, 133 Fed. Cl. at 620-22. The court in Veterans CG thus
interpreted a different type of provision in a company agreement, as well as different
regulatory language in an entirely different set-aside program, than the regulation and
circumstances at issue in this case. Veterans CG is therefore not sufficiently analogous to
be considered here. Even if plaintiff had not waived any argument based on this line of
precedent, there is nothing in Miles or Veterans CG which would invalidate the OHA
decision under review here.

       F.     Preliminary Injunctive Relief Not Warranted

        Plaintiff has not shown likelihood of success on the merits of its protest. This
weighs heavily against the issuance of a preliminary injunction. See, e.g., FMC Corp. v.
United States, 3 F.3d 424, 427 (Fed. Cir. 1993) (“Absent a showing that a movant is
likely to succeed on the merits, we question whether the movant can ever be entitled to a
preliminary injunction unless some extraordinary injury or strong public interest is also
shown.”). Indeed, the Federal Circuit has held that a failure to show likelihood of success
on the merits is dispositive. See Nat’l Steel Car, Ltd. v. Canadian Pac. Ry., Ltd., 357
F.3d 1319, 1325 (Fed. Cir. 2004) (stating that “a movant is not entitled to a preliminary
injunction if he fails to demonstrate a likelihood of success on the merits”) (citation and
footnote omitted). The court briefly discusses the other injunctive relief factors.

       The court does not see how the public interest would be served by delaying this
procurement so that the Navy could re-examine its award decision, where Team Waste
GC was reasonably removed from eligibility by OHA. See Wind Tower Trade Coal. v.
United States, 741 F.3d 89, 101 (Fed. Cir. 2014) (agreeing with the lower court that “no
strong public interest [in the issuance of a preliminary injunction] was demonstrated” in
that case when the movant had failed to show likelihood of success on the merits).


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Further, irreparable harm to plaintiff is not established because the protestor has not
shown likelihood of success on the merits. See Akal Sec., Inc. v. United States, 87 Fed.
Cl. 311, 319-20 (2009) (stating that the “strength or weakness of [the protestor’s] merits
arguments largely determines the court’s view of irreparable injury”).

         Finally, there is more harm to the Navy flowing from an injunction of contract
performance than there is to plaintiff in the absence an injunction, where plaintiff has not
shown likelihood of success on the merits. The Navy faces the financial consequences of
the cost of an extended transition to a new contractor. ECF No. 22 at 23. Plaintiff’s
renewed attack on OHA’s decision in this court, which has been shown to be unlikely to
prevail, would merely buy plaintiff additional time before Team Waste GC would likely,
again, be ruled ineligible for contract award. Thus, only very limited economic harm
could be avoided by a preliminary injunction. The court notes, too, that plaintiff delayed
the filing of its protest; this delay weighs in favor of the government on the balance of
hardships factor. See Aircraft Charter Sols., Inc. v. United States, 109 Fed. Cl. 398, 417
(2013) (“This court has repeatedly held that a protestor’s delay in bringing a protest must
be accounted for in the balance of hardships inquiry.”) (citations omitted). When all four
of the injunctive relief factors are considered, plaintiff’s request for a preliminary
injunction must be denied.

IV.    Conclusion

       Accordingly, plaintiff’s motion for a preliminary injunction, ECF No. 3, is
DENIED. On or before January 11, 2018, the parties shall CONFER and FILE a
Proposed Redacted Version of this opinion, with any competition-sensitive or otherwise
protectable information blacked out and enclosed in brackets. Also on or before January
11, 2018, the parties shall CONFER and FILE a Joint Status Report proposing a
schedule for further proceedings in this matter.

       IT IS SO ORDERED.



                                               s/ Patricia Campbell-Smith
                                               PATRICIA CAMPBELL-SMITH
                                               Judge




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