An award of attorneys' fees and costs under the Equal Access to Justice Act was reversed by the Court of Appeals for the Federal Circuit because the government's actions and litigation position supporting compliance with the Small Business Administration's parity regulations were substantially justified. After holding the government violated the Small Business Act by not giving priority to historically underutilized business zone small business concerns ( 54 CCF ¶79,397), the Court of Federal Claims ruled the government's position in the bid protest was not substantially justified ( 55 CCF ¶79,534).

Genuine Dispute

However, the government's actions at the agency level were substantially justified. The SBA's parity regulations were binding unless declared invalid by a court of competent jurisdiction. In addition, Department of Justice, Office of Management and Budget, and Department of Defense memoranda obligated the government to comply with the regulations and place HUBZone and 8(a) programs on an equal footing despite contrary positions of the Government Accountability Office and the CFC. The government's litigation position in the bid protest consisted of its merits-based argument and a jurisdictional argument. The merits-based argument was substantially justified because there was a genuine dispute among all three branches of government as to whether the HUBZone program was entitled to priority. Moreover, before Congress amended the Small Business Act to clarify the HUBZone program did not take priority (PL 111-240), the Senate noted the DOJ's memorandum and affirmed the SBA's parity regulations. The government's jurisdictional argument—that the protester waived its right to bring a protest in the CFC despite prior agency level and GAO protests—was less defensible. Nevertheless, viewing the government's conduct in the case in its entirety, the CFC abused its discretion when it concluded the government's position was not substantially justified. ( DGR Associates, Inc. v. U.S., et al., CA-FC, 56 CCF ¶79,865)