Case: 21-1836 Document: 54 Page: 1 Filed: 12/08/2022
United States Court of Appeals
for the Federal Circuit
______________________
OBSIDIAN SOLUTIONS GROUP, LLC,
Plaintiff-Appellant
v.
UNITED STATES,
Defendant-Appellee
______________________
2021-1836
______________________
Appeal from the United States Court of Federal Claims
in No. 1:20-cv-01602-RAH, Judge Richard A. Hertling.
______________________
Decided: December 8, 2022
______________________
MILTON C. JOHNS, Executive Law Partners, PLLC,
Fairfax, VA, argued for plaintiff-appellant.
STEVEN C. HOUGH, Commercial Litigation Branch,
Civil Division, United States Department of Justice, Wash-
ington, DC, argued for defendant-appellee. Also repre-
sented by BRIAN M. BOYNTON, ERIC P. BRUSKIN, PATRICIA
M. MCCARTHY.
______________________
Before REYNA, HUGHES, and CUNNINGHAM, Circuit Judges.
Case: 21-1836 Document: 54 Page: 2 Filed: 12/08/2022
2 OBSIDIAN SOLUTIONS GROUP, LLC v. US
HUGHES, Circuit Judge.
Obsidian Solutions Group, LLC appeals a decision of
the United States Court of Federal Claims granting judg-
ment on the administrative record. The court held that the
Office of Hearings and Appeals did not act arbitrarily or
capriciously in determining Obsidian was not a small busi-
ness. We affirm.
I
On April 19, 2019, the Department of Energy (DOE)
issued a solicitation for Technical Security, Communica-
tions Security, Cyber, Analysis and Security Administra-
tion. The solicitation was designated as a small business
set-aside, and the size limit for interested businesses was
a maximum of $20.5 million in average annual receipts.
Obsidian submitted a bid proposal on July 18, 2019. At the
time, Obsidian self-certified as a small business based on
its five-year average of annual receipts (roughly $17.5 mil-
lion). On September 2, 2020, the DOE notified Obsidian
that it was the apparent successful offeror but that the
DOE would submit a request to the Small Business Admin-
istration (SBA) to confirm Obsidian’s size status before
making the award.
On September 10, 2020, the SBA determined Obsidian
did not qualify as a small business for the purposes of the
solicitation. Rather than use the five-year average of re-
ceipts, the SBA used Obsidian’s three-year average
(roughly $21.8 million), which exceeded the $20.5 million
limit. Because of the SBA’s adverse size determination, the
DOE did not award the procurement to Obsidian.
After the Office of Hearings and Appeals (OHA) af-
firmed the SBA’s size determination, Obsidian filed a bid
protest in the Court of Federal Claims under the Tucker
Act, 28 U.S.C. § 1491(b). Obsidian argued that the size de-
termination was “arbitrary, capricious, an abuse of discre-
tion, or otherwise not in accordance with law” because the
Case: 21-1836 Document: 54 Page: 3 Filed: 12/08/2022
OBSIDIAN SOLUTIONS GROUP, LLC v. US 3
SBA was required to start using five years of annual re-
ceipts on December 17, 2018, the effective date of the Run-
way Extension Act (REA). Suppl. App. 25–26 (quoting
5 U.S.C. § 706(2)(A)). In addition to bid preparation and
proposal costs, Obsidian requested injunctive relief, includ-
ing that the court set aside the size determination; declare
that Obsidian is a small business; and reinstate Obsidian
as the apparent awardee. Suppl. App. 29–30. The Court of
Federal Claims granted the United States’ motion for judg-
ment on the administrative record and denied Obsidian’s
cross-motion because the REA clearly and unambiguously
did not apply to the SBA. Obsidian Sols. Grp., LLC v.
United States, 153 Fed. Cl. 334, 344–45 (2021). Because
Obsidian did not succeed on the merits, the trial court de-
nied Obsidian’s requested relief. Id. at 345.
Obsidian appeals. We have jurisdiction under
28 U.S.C. § 1295(a)(3).
II
We review judgment on the administrative record in a
bid protest action de novo. Off. Design Grp. v. United
States, 951 F.3d 1366, 1371 (Fed. Cir. 2020). We review de-
nial of injunctive relief for abuse of discretion. Nichia Corp.
v. Everlight Ams., Inc., 855 F.3d 1328, 1340 (Fed. Cir.
2017).
A
At issue is whether the REA’s amendment to Sec-
tion 3(a)(2) of the Small Business Act (15 U.S.C.
§ 632(a)(2)), and in particular, its requirement to use a five-
year average of receipts for purposes of size determina-
tions, was immediately binding on the SBA. Before the
REA was enacted in 2018, Section 3(a)(2) of the Small Busi-
ness Act read, in relevant part:
Case: 21-1836 Document: 54 Page: 4 Filed: 12/08/2022
4 OBSIDIAN SOLUTIONS GROUP, LLC v. US
(A) In general
In addition to the criteria specified in paragraph
(1), the [SBA] Administrator may specify detailed
definitions or standards by which a business con-
cern may be determined to be a small business con-
cern for the purposes of this chapter or any other
Act.
(B) Additional criteria
The standards described in paragraph (1) may uti-
lize number of employees, dollar volume of busi-
ness, net worth, net income, a combination thereof,
or other appropriate factors.
(C) Requirements
Unless specifically authorized by statute, no Fed-
eral department or agency may prescribe a size
standard for categorizing a business concern as a
small business concern, unless such proposed size
standard—
(i) is proposed after an opportunity for public notice
and comment;
(ii) provides for determining—
...
(II) the size of a business concern providing ser-
vices on the basis of the annual average gross re-
ceipts of the business concern over a period of not
less than 3 years;
. . .; [and]
(iii) is approved by the [SBA] Administrator.
15 U.S.C. § 632(a)(2)(A)–(C) (2018).
The SBA has long interpreted subsection (C) as apply-
ing to only non-SBA agency size standards—not to SBA
Case: 21-1836 Document: 54 Page: 5 Filed: 12/08/2022
OBSIDIAN SOLUTIONS GROUP, LLC v. US 5
size standards promulgated under subsections (A) and (B).
Small Business Size Standards: Calculation of Annual Av-
erage Receipts, 84 Fed. Reg. 29399, 29399 (June 24, 2019).
The SBA repeated this interpretation in the Federal Reg-
ister more than 50 times in the two decades before the en-
actment of the REA. 84 Fed. Reg. at 29400. Thus, although
the SBA used a three-year average for size determinations,
it did so pursuant to the authority granted in subsection
(A), not the requirement in (C). E.g., 13 C.F.R. § 121 (1990)
(citing 15 U.S.C. § 632(a) for its authority to set size stand-
ards and using three years of annual receipts).
B
Effective December 17, 2018, Congress passed the
REA, an amendment that made a single change to Section
3(a)(2): it changed “3 years” in subsection (C)(ii)(II) to “5
years.” Small Business Runway Extension Act of 2018,
Pub. L. No. 115-324. The REA did not amend subsections
(A) or (B) or any other language in subsection (C). Id.
After the REA became effective, the SBA restated its
longstanding interpretation that subsection (C) did not ap-
ply to the SBA. 84 Fed. Reg. at 29399. Nonetheless, to pro-
mote consistency between the SBA and non-SBA agencies,
the SBA proposed a rule change on June 24, 2019. Id. at
29400. The proposed rule would change the SBA’s existing
three-year averaging period to a five-year period. Id. The
SBA clarified that, because size is determined as of the
date a firm certifies its size with its initial bid, the three-
year period would continue to apply for all bids submitted
before the effective date of the final rule. Id. at 29401. After
a notice-and-comment period, the final rule took effect on
January 6, 2020. Small Business Size Standards: Calcula-
tion of Annual Average Receipts, 84 Fed. Reg. 66561 (Dec.
5, 2019).
The SBA’s proposed rule was not yet final when Obsid-
ian submitted its proposal in July 2019. In making its size
determination, the SBA explained that Obsidian’s size
Case: 21-1836 Document: 54 Page: 6 Filed: 12/08/2022
6 OBSIDIAN SOLUTIONS GROUP, LLC v. US
must be calculated on a three-year basis rather than a five-
year basis because the governing SBA regulation at the
time of submission was the three-year rule.
C
Effective January 1, 2022, Congress amended Section
3(a)(2) again, this time explicitly stating in subparagraph
(C) that “no Federal department or agency (including the
Administration when acting pursuant to subparagraph (A))
may prescribe a size standard” inconsistent with the five-
year averaging requirement. William M. (Mac) Thornberry
National Defense Authorization Act for Fiscal Year 2021,
Pub. L. No. 116-283, 134 Stat. 3388, 3784 (the “2022
amendment”) (emphasis added). The amendment also ex-
plicitly altered subsection (A), adding that the Administra-
tor is “subject to the requirements specified under
subparagraph (C).” Id. Congress made the 2022 amend-
ment effective one year after the date of enactment and did
not purport to apply this amendment retroactively. Id.
III
Obsidian relies on three arguments, all of which must
be true for its bid protest to succeed: (1) the REA applied to
the SBA, (2) the REA required a five-year rule to go into
effect immediately upon the REA’s December 2018 effec-
tive date, and (3) no notice-and-comment rulemaking was
required for the SBA to start using the five-year rule. We
need only address the first issue because it is dispositive.
When tasked with interpreting a statute, we start by
exhausting all traditional tools of interpretation to deter-
mine its meaning. The starting point is the text itself.
United States v. Hohri, 482 U.S. 64, 69 (1987). We do not
look at the text in a vacuum, but rather, we must consider
the words “in their context and with a view to their place
in the overall statutory scheme.” King v. Burwell, 576 U.S.
473, 486 (2015) (cleaned up).
Case: 21-1836 Document: 54 Page: 7 Filed: 12/08/2022
OBSIDIAN SOLUTIONS GROUP, LLC v. US 7
The REA changed a single word in Section 3(a)(2). We
consider that change in the overall structure of the entire
provision, which includes three subsections. First, subsec-
tion (A) authorized the SBA Administrator to “specify de-
tailed definitions or standards” for determining size status.
15 U.S.C. § 632(a)(2)(A) (2018). Second, subsection (B)
granted discretion to the SBA—in exercising this author-
ity—to use enumerated “or other appropriate factors” in es-
tablishing size standards. Id. § 632(a)(2)(B). Third,
subsection (C) made the broad authority of the first two
subsections unique to the SBA by prohibiting any other de-
partment or agency from prescribing its own size standards
without first meeting more stringent requirements and
getting approval from the SBA Administrator. The text of
subsection (C) provided: “[u]nless specifically authorized by
statute, no Federal department or agency may prescribe a
size standard” unless it met the more stringent subsection
(C) requirements and was “approved by the [SBA] Admin-
istrator.” Id. § 632(a)(2)(C) (emphases added).
The meaning of this language and structure is clear.
Congress created not one but two subsections discussing
size factors. The SBA was given its own, broader limita-
tions on establishing size standards in subsection (B) than
other agencies were given in subsection (C). Subsection (C)
provided similar categories as subsection (B) but set more
stringent requirements within those categories. If Con-
gress had intended the SBA to be bound by the more strin-
gent requirements applicable to other agencies, it could
have created a single subsection outlining these categories.
Instead, Congress made the broader authority of the SBA
unique by making subsection (B) applicable to the SBA and
by making other agencies subject to the stricter require-
ments of subsection (C).
Obsidian argues that the phrase “no Federal depart-
ment or agency may prescribe a size standard” makes clear
that subsection (C) applies to all agencies, including the
SBA. But this argument reads out the rest of the text. First,
Case: 21-1836 Document: 54 Page: 8 Filed: 12/08/2022
8 OBSIDIAN SOLUTIONS GROUP, LLC v. US
by including the text “[u]nless specifically authorized by
statute,” Congress exempted the SBA from the group of
Federal departments or agencies limited by subsection (C).
The SBA was specifically authorized by statute in subsec-
tion (A) to specify its own standards. Second, subsection (C)
concluded with the additional requirement that any size
standards prescribed by other agencies must be “approved
by the [SBA] Administrator.” The natural reading of this
text, absent language to the contrary, is that subsection (C)
restricts any non-SBA agency from promulgating its own
size standards without first getting approval from the SBA
Administrator.
The REA did not change any of this language. Nor did
the REA change the structure of the provision. To the con-
trary, the REA changed only a single word in subsec-
tion (C)—a subsection Congress should have known did not
apply to the SBA. “Congress is presumed to be aware of an
administrative . . . interpretation of a statute and to adopt
that interpretation when it re-enacts a statute without
change.” Forest Grove Sch. Dist. v. T.A., 557 U.S. 230, 239–
40 (2009) (quoting Lorillard v. Pons, 434 U.S. 575, 580
(1978)). Prior to the enactment of the REA, the SBA pub-
lished repeated and regular notices of its longstanding in-
terpretation that subsection (C) did not apply to the SBA.
84 Fed. Reg. at 29400. Despite being on notice of this inter-
pretation, Congress chose not to extend subsection (C) in
the REA.
This is in stark contrast to Congress’s later amendment
to the Small Business Act. Unlike the REA, the 2022
amendment to subsections (A) and (C) did explicitly change
the language of the statute to make subsection (C) applica-
ble to the SBA. Pub. L. No. 116-283, 134 Stat. 3388, 3784
(2021). Congress added a limitation on the SBA’s authority
in subparagraph (A): “and subject to the requirements
specified under subparagraph (C).” Id. Then, it amended
subparagraph (C) to reflect that change: “(including the
Administration when acting pursuant to subparagraph
Case: 21-1836 Document: 54 Page: 9 Filed: 12/08/2022
OBSIDIAN SOLUTIONS GROUP, LLC v. US 9
(A)).” Id. When Congress amends a statute, it raises a pre-
sumption that the legislature intended to substantively
change, not simply clarify, the law. Ross v. Blake, 578 U.S.
632, 641–42 (2016) (“When Congress amends legislation,
courts must ‘presume it intends [the change] to have real
and substantial effect.’” (alteration in original) (citation
omitted)); Shambie Singer, Sutherland Statutes and Stat-
utory Construction § 22.1 (7th ed. 2021). And that pre-
sumption is strengthened here by the fact that Congress
delayed the effective date by a year to January 1, 2022, and
nowhere suggested that the amendment was retroactive.
Thus, unlike the REA, the 2022 amendment made substan-
tive changes to Section 3(a)(2) that prospectively applied
subparagraph (C) to the SBA. The 2022 amendment there-
fore further supports that Section 3(a)(2)(C) of the REA did
not apply to the SBA.
Finally, we are unpersuaded by Obsidian’s arguments
that the legislative history dictates applying subsection (C)
to the SBA. Although legislative history may be helpful for
statutory interpretation, the history cited by Obsidian does
not sway our decision. Obsidian relies on the fact that, after
passing the REA, the House attempted to pass a clarifica-
tion bill to make the REA applicable to the SBA. H.R. 2345,
Clarifying The Small Business Runway Extension Act
(July 15, 2019). But “subsequent legislative history . . . is a
particularly dangerous ground on which to rest an inter-
pretation of a prior statute when it concerns . . . a proposal
that does not become law.” Pension Benefit Guar. Corp. v.
LTV Corp., 496 U.S. 633, 650 (1990) (emphasis added). The
clarification bill Obsidian relies on only ever passed in the
House. It was not approved by the Senate and does not sug-
gest Congress intended for the REA to apply to the SBA.
The only relevant bill that did ultimately win the approval
of both chambers of Congress was the 2022 amendment
discussed above. Unlike the failed House bill, the 2022
amendment made no mention of being a clarification and
is, as explained above, presumed to have substantively
Case: 21-1836 Document: 54 Page: 10 Filed: 12/08/2022
10 OBSIDIAN SOLUTIONS GROUP, LLC v. US
changed, not simply clarified, the prior meaning of Sec-
tion 3(a)(2).
Moreover, to the extent the REA congressional reports
imply that the bill’s sponsors believed the REA would apply
to the SBA, this does not change our analysis. See H. R.
Rep. No. 115-939, at 2 (2018); S. Rep. 115-431, at 4 (2018).
What a bill’s sponsors think an amendment will do, and
what an amendment actually does, are two separate
things. Here, such ambiguous evidence of the sponsoring
legislators’ mindset does not negate the clear text, struc-
ture, and other evidence that all suggest the REA did not
apply to the SBA.
IV
Having agreed with the Court of Federal Claims that
the SBA’s size determination was not arbitrary or capri-
cious because the REA did not apply to the SBA, we also
hold that the court did not abuse its discretion in denying
injunctive relief. There can be no injunctive relief without
a corresponding prevailing claim. Dell Fed. Sys., L.P. v.
United States, 906 F.3d 982, 999 (Fed. Cir. 2018) (holding
that “proving success on the merits is a necessary element
for a permanent injunction”). Obsidian failed to succeed,
and the Court of Federal Claims was correct to deny Obsid-
ian’s requested relief.
V
We have considered Appellant’s other arguments and
find them unpersuasive or unnecessary to reach. For the
reasons above, we affirm.
AFFIRMED
COSTS
No costs.