I-NET, Inc., No. 3822 (September 7, 1993) Docket No. SIZ-93-7-13-84 UNITED STATES OF AMERICA SMALL BUSINESS ADMINISTRATION OFFICE OF HEARINGS AND APPEALS WASHINGTON, D.C. SIZE APPEAL OF: ) ) I-NET, Inc. ) ) Appellant ) ) Docket No. SIZ-93-7-13-84 Solicitation No. ) F19030-90-R-0008 ) Department of the Air Force ) Headquarters Electronic ) Systems Center ) Hanscom AFB, Massachusetts ) DIGEST The proper service of a copy of the Notice of Appeal on parties entitled under 13 CFR 121.1712 is required to initiate a valid Size appeal; and where an appellant serves a redacted copy of its Notice of Appeal upon the protesting party which does not identify and describe the deletions, and does not inform any other party, including this Office, of such deletions, then SBA's regulations have not been complied with, the appeal process has not been validly initiated, and the proceeding will be dismissed. ORDER DISMISSING APPEAL September 7, 1993 COLE, Administrative Judge, Presiding: Jurisdiction This appeal is decided under the Small Business Act of 1958, 15 U.S.C. 631 et seq., and the regulations codified at 13 CFR Part 121. Issue Whether this size appeal was validly initiated. Facts This matter comes on by reason of the request of Technology, Management & Analysis Corporation ("TMA") for a dismissal of the subject appeal on the grounds that the Notice of Appeal is procedurally and substantively defective. 1/ TMA supports its contention by noting that the copy of the Notice of Appeal served upon it (included as Attachment 1 to TMA's motion), consisting of 35 pages, only has nine pages with any information other than a designated page number and the statement at the bottom of each page: "CONTAINS CONFIDENTIAL TRADE INFORMATION." 2/ TMA argues that service of such a Notice of Appeal upon TMA constitutes an abuse and a violation of 13 CFR 121.1712(c), and a violation of the requirements of _121.1712(a). TMA contends that the magnitude of the Appellant's deletions exceeds the redactions contemplated under _121.1712(c) as an exception to the service requirements of _121.1712(a), and that the Appellant's failure to identify and describe the deletions violates 121.1712(c). TMA also asserts that the Appellant failed to comply with the requirement that all parties be advised of the redactions. Such violations, contends TMA, are cause for dismissal of the appeal. In light of the foregoing, TMA also contends the Appellant's "certification," required by 13 CFR 121.1712(d), is invalid. TMA argues that the scope of the redactions, coupled with the refusal to identify and describe the deletions, including exhibits, and to give reasons why the size determination is in error, can only be seen as intended to delay and harass TMA. This circumstance, in TMA's view, renders the Appellant's "certification" false and the purported Notice of Appeal void ab initio. The Appellant, through counsel, requested to file, instanter, a Reply to TMA's motion. This request was granted by the order of the Presiding Judge on July 27, 1993. 3/ In describing why it deleted information from the copy of the notice of Appeal served upon TMA, the Appellant states, in part: There is nothing inherently unreasonable in I-NET's assumption that if the Regional Office thought its processes might be proprietary that I-NET was not required to spread that information on the public record in its initial filing before OHA. Given the abbreviated time period for an appeal provided by 13 CFR _ I21.1603(a), Appellant determined that it was more prudent to err on the side of caution in redacting portions of the Notice of Appeal served on TMA, lest proprietary information be irretrievably lost by premature disclosure. The Appellant continues, respecting its interpretation of the pertinent regulation: OHA's rules provide that confidential data need not initially be served, provided that such deletions are identified and described in all copies served on the parties. 13 CFR 121.1712(c). The rules also provide that at such time the information "is received in evidence by the Presiding Judge," the Appellant must petition for an ln camera order. 13 CFR 121.1717; 121.1712(c). The rules are not a model of clarity as to when such an in camera motion must be filed, i.e. at the time of initial filing or later. Size appeal decisions normally are on a written record, unless the Presiding Judge determines that live testimony is appropriate. 13 CFR 121.1714(a). In this case, focusing on the complex computer workstation marketplace, I-NET requested an oral hearing, with witnesses. As set forth below, I-NET's view of the rules was that if the Presiding Judge determined an oral hearing was appropriate, I-NET would move for an in camera order. If the Presiding Judge determined an oral hearing was not appropriate, I-NET would move to admit its submission into evidence and move for a protective order. The other parties presumably would take whatever action they felt was necessary depending on what motion I-NET filed. In further justification of its action, the Appellant states: I-NET's brief, as filed with OHA, contained information that it considered proprietary. For example, it provided a list of its manufacturing contacts; a breakdown of the costs of manufacturing versus component costs; the configuration of its system; and a list of subcomponent parts. Notice of Appeal at 8; 2728 and Ex.4, Tabl. Specific figures also were furnished. Id. at 22 and Ex.4, Tabs 4-5. Such material and data, in I-NET's assessment, fit within the commonly accepted understanding of protectible information, whether under a "trade secrets" theory or as one seeking legitimately to protect "confidential commercial information" from being unfairly exploited by a competitor. [Citations omitted.] Having concluded that adequate grounds justified initial withholding, I-NET determined that it could file for an in camera order at any seasonable time prior to the time at which the information is "received in evidence by the Presiding Judge," that is, whenever the Presiding Judge determined what evidence it was appropriate to receive, written or oral. 13 CFR 121.1712(c). I-NET understood that TMA would be entitled to notice of its motion and would have the opportunity to argue its position on a fully developed record. Review of the Notice of Appeal discloses, inter alia, that in pages 2 through 4, the Appellant formulates its challenge to the size determination around the alleged failure of the Regional Office to distinguish between the mere assembly of computer "workstation" components and the manufacture of "Database Machines," the end item being procured. Arguing that the "issue of whether the end item was a Database Machine or a computer workstation was never raised in the protest," the Appellant contends that, pursuant to cited OHA precedent, it is permitted to submit new evidence and testimony on appeal. (Notice of Appeal, p. 4, footnote 3.) Pages 5 through 9 of the Notice of Appeal are characterized by the Appellant as "Facts," wherein the Appellant quotes or para phrases from portions of the solicitation at issue. These pages also contain the Appellant's bid price, references to one or more of its suppliers, and a brief description of how it approached the "design and systems engineering" to "create" a Database Machine which would meet the requirements of the Air Force. The aggregate of such information, which can reasonably be considered confidential business information, accounts for approximately one of the aforesaid five pages. Pages 9 through 33 of the Notice of Appeal are presented by the Appellant as "Argument." The first argument asserts that the Appellant changes the nature or purpose of the computer worksta tion components in order to assemble the end item being procured, namely, the Database Machine. In support of the Appellant's position that the Regional Office has erroneously equated Database Machines with computer workstations, the Appellant quotes Mr. Thomas W. Bragg, represented as "a computer expert familiar with the industry." 4/ The quoted portions, which nowhere refer to the Appellant, describe the development of the Database Machine and how it differs from computer workstations. (Notice of Appeal, pp.11-13, 14.) The Appellant also quotes a June 1989 article entitled "All About Data Base Machines," for a definition of the "data base machine." 5/ (Notice of Appeal, pp.13-14, and Exhibit 7.) The Appellant proceeds to describe OHA case precedent cited in the size determination, and to argue that the Regional Office's reliance thereon is misplaced. In comparing its "manufacture" of the Database Machine with the facts in the cited cases, 6/ the Appellant does refer to its principal supplier by name; however, its description of its manufacturing process is brief, vague, and hardly "news" to TMA. (Notice of Appeal, pp.15-18.) Next the Appellant contends that the SBA should have acceded to the Contracting Officer's acceptance of the Appellant's representation that it is a "manufacturer" under the Walsh-Healey Public Contracts Act, which employs a stricter qualifying standard than does the SBA. Moreover, the Appellant points out that the SBA is without jurisdiction to overturn a determination that the Appellant is qualified under the Walsh-Healey Act. No confidential details are presented, only references to federal statute and regulations, and published case opinions. (Notice of Appeal, pp.18-19.) The Appellant then proceeds to quote SBA regulations and to summarize published OHA precedent in support of its argument that the "Appellant's Assembly of the Database Machine Constitutes Manufacturing." (Notice of Appeal, pp.19-22.) At page 22 of this discussion the Appellant refers to the percentage of the value added by its efforts in producing the Database Machine. The Appellant continues the argument, including another quote from Mr. Bragg's report, supra, but without any details personal to the Appellant. (Notice of Appeal, pp.22-24.) The Notice of Appeal presents more arguments as to why the size determination is in error, including: (1) that the SBA, motivated by its view that the procurement was incorrectly classified by the Contracting Officer, has mischaracterized the Appellant as a mere systems integrator; (2) that the SBA ignored the evidence that the Appellant was the "one manufacturer" of the end item; and (3) that the SBA used a criterion to judge who manufactured the end item which is not provided for in the regulation. Although there is no dispute that a timely SIC code appeal was not filed, and is not at issue here, the Appellant proceeds to quote regulations respecting the selection of a SIC code and to argue why the SIC code designation was correct and the Regional Office's choice would have been wrong. The discussion includes extensive quotes from Mr. Bragg's report, supra, a small portion of which (two-thirds of a page) refers to the Appellant and why its should be deemed the manufacturer of the Database Machine. (Notice of Appeal, pp.24-31.) 7/ The Appellant alleges that the SBA was influenced by the fact that the Appellant's supplier of components "could have" manu factured the end item. The Appellant argues that the facts show otherwise and that such a standard goes beyond the regulatory definition of "manufacturing." (Notice of Appeal, pp.32-33.) A review of the Appellant's exhibits, included with the Notice of Appeal filed in this Office but not served upon TMA, reveals the following: Exhibits 1,2, and 3 consist of, respectively, the Size Determination, the "Executive Summary Notice" portion of the solicitation, and the SBA's notice to the Appellant of the size investigation, including a copy of TMA's protest. Exhibit 4 consists of the Appellant's response to the protest and includes its corporate organizational and financial information as well as other confidential data. Exhibit 5 consists of the Appellant's description of its manufacturing process which was submitted to the Regional Office, and includes product literature. Exhibits 6 and 7 were earlier described. The certificate of service accompanying the Notice of Appeal filed in this Office notes only, respecting service upon TMA: "(Notice of Appeal-Redacted)." Nowhere in the body of the Notice of Appeal itself, or elsewhere, is there any indication of what information was withheld from TMA. Discussion The Appellant, responding to TMA's request for dismissal, has argued that we do not have the discretion to "sanction" the Appellant by dismissing its appeal. The cases cited by the Appellant (but omitted here) do lend support to that position. They do not, however, prevent our enforcement of the federal regulations at issue here. 13 CFR 121.1706 provides, in pertinent part, as follows: Initiation of Appeal (a) The appeal is initiated by filing the Notice of Appeal. No particular form is prescribed for the Notice of Appeal. The appellant shall file the Notice of Appeal with the Office of Hearings and Appeals, in writing. A telegraphic or telefaxed notice shall be confirmed by next day mailing of a written Notice. In accordance with _ 121.1712, the Notice of Appeal shall be certified and a copy shall be concurrently served by the appellant upon those parties and persons specified in paragraph (a)(6) of this subsection. * * * * * * * (6) a statement certifying that copies of the Notice of Appeal have been served upon the following, as applicable: * * * * * * * (iv) all persons, other than the appellant, who filed protests at the SBA Regional Office level.... We interpret the foregoing to require, inter alia, the service of a copy of the Notice of Appeal upon the protesting party, here TMA, in order to validly initiate the appeal process. We also consider it clear that this regulation contemplates that such party will receive precisely the same information as this Office, unless information is withheld pursuant to the provisions of 13 CFR 121.1712, to-wit: Filing and Service of Pleadings The following rules apply to all pleadings (including the Notice of Appeal), motions, responses, and other documents filed pursuant to these sections. (a) Except as provided in paragraph (c) of this section, all pleadings, motions, and other documents filed with the Office of Hearings and Appeals pursuant to these sections shall be served upon all parties to the proceeding or their respective counsel or other representative in the proceeding, personally or by registered or certified mail, and shall be accompanied by certification of such service. (b) Any pleading, motion, response, and other document filed with the Office of Hearings and Appeals shall include a signed certificate which states how and when service was made. (c) Tax returns, confidential data on SBA Form 355 and any other document that constitutes proprietary information need not initially be served, so long as such deletions are identified and described in the copies served upon all parties to the proceeding pursuant to paragraph (a) of this section. In addition, if such proprietary information is received in evidence by the Presiding Judge, the offering party must petition for an in camera order, pursuant to _ 121.1717, in order to withhold such information from the public and from other parties. (d) Any pleading, motion, response, or other document filed pursuant to these sections shall be signed by an authorized person, who shall certify as follows: "I have read this document and, under penalty of perjury and the sanctions imposed under 18 U.S.C. 1001, of which I am aware, I certify that, to the best of my knowledge, the statements made herein are true and correct, and that this document is not being filed for the purpose of delay or harassment." The Appellant acknowledges the requirement that deletions are to be identified and described. Yet, we find no such identification nor description of the information redacted from the copy of the Notice of Appeal served upon TMA. The apparently boilerplate statement at the bottom of each page: "CONTAINS CONFIDENTIAL TRADE INFORMATION," does not fulfill the regulatory requirement. It identifies and describes nothing. As may be seen from our description of the content of the Notice of Appeal, that notation is not even true with respect to the majority of the pages which comprise the Notice of Appeal. Our review, partially summarized above, suggests that only a very small percent of the information withheld from TMA could legitimately qualify for initial exclusion under 121.1712(c), and that all such information was susceptible to identification and description. Furthermore, the Appellant's certificate of service fails to inform this Office, or any other party listed under 121.1706(a)(6), of the information it has withheld from TMA. Consequently, we find that the Appellant's actions here do not conform with the requirements of the above cited regulations, rendering the purported appeal fatally defective. Compare, Size Appeal of PCT Services Inc., No. 3588 (1992); Size Appeal of Virginia Manufacturing Company Inc., No. 3420 (1991). In light of our forgoing conclusion, we need not further consider the argument advanced by the Appellant concerning the time at which an appellant must seek an in camera order pursuant to 121.1712(c) and 121.1717. Similarly, the Appellant's request for an oral hearing is rendered moot, and is denied. Conclusion For the reasons stated above, TMA's motion is GRANTED, the record is herewith closed, and this proceeding is DISMISSED due to the Appellant's failure to initiate its appeal in accordance with the applicable regulations. ________________________________ Michael S. Cole (Presiding) Administrative Judge __________________________________ Gloria E. Blazsik (Concurring) Administrative Judge __________________________________ G. Stephen Wright (Concurring) Administrative Judge _______________ 1/ TMA's filing is entitled "Response To The Appellant's Notice Of Appeal;" however, it is, in substance, a motion to dismiss the appeal, and we are treating it as such. 2/ This is the same statement appearing at the bottom of the Notice of Appeal filed with the Office of Hearings and Appeals (OHA). TMA's "Attachment 1" reflects wholesale deletions, without other explanation, of the text of this original filed with OHA. For instance, pages 8 through 33 are entirely void of text, containing only the aforesaid page numbers and statement of confidentiality. 3/ On the same date, TMA's motion for enlargement of time to respond was granted by the Presiding Judge. The record was ordered to remain open until further notice and order. 4/ Exhibit 6 to the Notice of Appeal consists of a eight page "paper" or report by Mr. Bragg which discusses the back ground and development of the Database Machine, how it differs from standard computer systems, and how the Appellant "manufactures" it. 5/ This excerpt is from a four page article, included as Exhibit 7 to the Notice of Appeal, described as "Datapro Research, McGraw-Hill, Inc., Report 70D6-OOlLB-103, Memory and Storage." Nothing in the Exhibit 7, or the quote therefrom, indicates that the information contained therein is not available to the public. 6/ The cases referred to are: Size Appeal of Pharma-Tek. Inc., No. 1786 (1983); Size Appeal of Environmental Technology Corporation, No. 2819 (1988); and Size Appeal of Ferro Mechanical Corporation, No. 1021 (1977). All of these cases are in the public domain. 7/ On page 30 the Appellant's bid price for the Database Machine is reiterated.