The U.S. Department of Justice filed written arguments last week saying a federal appeals court should uphold a lower court’s decision that Swift & Staley failed to meet size limits for a set-aside landlord contract at the Department of Energy’s Paducah Site in Kentucky.
Kentucky-based Swift & Staley, on the other hand, wants the U.S. Court of Appeals for the Federal Circuit to reverse the March ruling by U.S. Federal Claims Judge Thompson Dietz, which said the company exceeded the Small Business Administration (SBA) size limit for a five-year, $160-million services contract at the shuttered Paducah Gaseous Diffusion Plant.
The trial court’s decision hinged on the concept of negative control, and whether such control gave Swift & Staley Inc. (SSI) enough influence over a separate joint-venture DOE contractor that the second company should count against SSI’s size cap for the Paducah work.
Dietz was justified in considering whether SSI and a contractor team made up of North Wind and SSI at the Portsmouth Site in Ohio were affiliated through negative control because incumbent SSI itself raised the issue in an initial filing with the SBA’s Area 3 office, the Justice Department told the federal circuit court last week.
Under the concept of negative control, SSI could, even as the minority partner in Portsmouth Mission Alliance, “prevent a quorum or otherwise block action” by the company’s board or shareholders, according to the brief Justice filed July 11 with the appeals court.
Both the SBA and Judge Dietz ultimately agreed that after the Portsmouth Mission Alliance receipts are taken into account, Swift & Staley is too big to meet the $41-million size limit and should not have been awarded a new contract in December 2020.
The Federal Court of Claims “made four specific findings” that rejected SSI’s argument” the SBA Office of Hearings and Appeals considered negative control for the first time on appeal.
The SBA Office of Hearings and Appeals has found Swift & Staley could block a board quorum and also exert other means of control, such as gumming up “ordinary actions” of a business that can include bringing litigation and entering into leases for more than $12,000 in rent per year.
Also last week, rival Paducah bidder Akima Intra-Data, filed a notice saying it was joining the response brief filed by the Justice Department.
Swift & Staley has held the infrastructure services business under a $298-million existing contract that started in October 2015, making the company’s a sort of town manager for the site, overseeing everything from security to snow-clearing to records management.
Although a DOE Office of Environmental Management contract chart lists a July 30 expiration date for SSI’s Paducah services business, Dietz has effectively ruled the incumbent will stay until the appeals court rules.
