### 1999 D e c i sion s O p inion s of the U nit e d

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# R A Gl a nce y & S ons v

. D ept V et e r a n Aff airs

P r e c e de n t i al or N on-P r e c e de n t i al :

D ock e t 99-3188

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. e du/thir dc ir c uit_1999/163Filed June 24, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 99-3188

R.A. GLANCY & SONS, INC.,

Appellant,

v.

UNITED STATES OF AMERICA,

DEPARTMENT OF VETERANS AFFAIRS

v.

POERIO, INC.

Intervenor-Appellee

ON APPEAL FROM THE

UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF PENNSYLVANIA

(Civil Action No. 99-219) District Judge: The Honorable Donald J. Lee

Argued: May 27, 1999

Before: GREENBERG and ALITO, Circuit Judges, and DOWD, Senior District Judge.*

(Opinion Filed: June 24, 1999)

___________________________________________________ ______________

*The Honorable David D. Dowd, Jr., United States Di strict Judge for the Northern District of Ohio, sitting by designation.MEYER, UNKOVIC & SCOTT, LLP

JAMES R. MALL (ARGUED) 1300 Oliver Building Pittsburgh, PA 15222

Counsel for Appellant, R.A. Glancy & Sons, Inc.

DEPARTMENT OF JUSTICE

DOUGLAS HALLIARD-DREIMEIER (ARGUED)

ANTHONY J. STEINMEYER
Civil Division
Room 9113 Washington, D.C. 20530-0001

Counsel for Appellee, United States of America, Department
of Veterans Affairs

ECKERT SEAMANS CHERIN & MELLOTT, LLC JOEL L. LENNEN (ARGUED)

DENNIS L. VERALDI

KEITH L. BAKER 44th Floor, 600 Grant Street Pittsburgh, PA 15219

Counsel for Appellee-Intervenor, Poerio, Inc.

OPINION OF THE COURT

ALITO, Circuit Judge:

R.A. Glancy & Sons, Inc. ("Glancy"), a losing bidde r for a government contract, appeals the District Court's d enial of a request for preliminary injunctive relief. That r equest sought an order enjoining the successful bidder fro m working on the project and reinstating Glancy's put atively successful bid. Because Glancy did not establish th at it was likely to succeed on the merits or that the bal ance of equities favored the issuance of a preliminary inju nction,
we affirm the District Court's decision.

2I.

On June 1, 1998, the Department of Veterans Affairs ("VA") issued an invitation for bids ("IFB") to ren ovate the VA Medical Center in Pittsburgh. The IFB asked for bids on:

ITEM I: GENERAL CONSTRUCTION

ITEM II: ASBESTOS ABATEMENT
ALTERNATE NO. 1
ALTERNATE NO. 2
ALTERNATE NO. 3

UNIT PRICE OF MINE GROUTING

(J.A. 190a). The three alternates under Item II wer e listed
as minor additions to or deletions from the IFB's a sbestos abatement requirements. (J.A. 193-94). The IFB's performance requirements, set forth in S 01010 of t he IFB, elaborated on the work to be performed:

ITEM I. GENERAL CONSTRUCTION: Work includes general new construction, alterations, walks , grading, paving, drainage, mechanical and electrical work, elevators, necessary removal of existing str uctures and
construction and certain other items.

ITEM II. ASBESTOS ABATEMENT: Work includes
abatement of asbestos in the area of the wor k as well as in other selected areas, including the wo rk
described in ALTERNATE 2 below.

(J.A. 193). Alternate 2 requested a break-out price for remediating asbestos-containing floor tiles on the third floor of the building. The IFB form provided separate lin es for each bid item and each alternate line; it contained no explicit indication that Item II was a subset of It em I. (J.A. 188).

On July 1, 1998, the VA issued a clarifying amendme nt to the IFB, which read:

Although the VA has asked for the price of t he Asbestos Abatement work to be listed separat ely (ITEM
II - ASBESTOS ABATEMENT under item 10 of SF 1442) on the bid form, all asbestos abatement work is included in a single prime contract that wil l be the responsibility of the General Contractor.

3(J.A. 202).

The VA unsealed the bids on July 15, 1998. The VA determined the lowest bidder by aggregating the bid s for Items I & II to reach a total cost for the project. Pursuant to this calculation, Poerio Inc. ("Poerio"), the Ap pellee, was the lowest bidder, with a bid of $11,401,500. Glanc y was the sixth lowest bidder.

Glancy and another bidder, the Massaro Company ("Massaro"), informed the VA that they had understo od the IFB to have required that total costs be included i n Item I. According to that understanding, both Glancy and Ma ssaro contended that the figure for Item I included the c osts of Item II and that Item II was merely a break-out of Item I. (J.A. 213-14). Even under this understanding of the IFB, however, Glancy was the second lowest bidder after

Massaro.

Pursuant to Massaro and Glancy's protest, the VA examined the bidding materials, noted that the IFB did not contain customary language indicating that the cont ract would be awarded based on the aggregate of all bid items, and determined that the IFB was ambiguous. (J.A. 26 1-62). Based on this conclusion, the VA decided to open a second round of bidding. Massaro, the lowest bidder accord ing to its interpretation of the IFB, and Poerio, the lowe st bidder according to its interpretation of the IFB, eachfil ed a protest with the Comptroller General under the Comp etition in Contracting Act, 31 U.S.C. SS 3551-56 (1994), contending that the IFB unambiguously supported the ir interpretation. The VA submitted briefing in defens e of its position that the IFB was ambiguous and therefore s hould have been canceled. (J.A. 163-68). The VA admitted that the "only interpretation of the [IFB] together with [its specifications] at the time the solicitation was is sued, was that each bid item was to be priced separately." (J .A. 166). The VA contended, however, that "the addition of th e clarification language in Amendment No. 2 created a n ambiguity that can be interpreted in two ways. It c an be interpreted to require, as Poerio did, that bids be presented separately for general construction (Bid Item I) an d for asbestos abatement (Bid Item II) or it can be inter preted to

4require, as did both Massaro and Glancy, that Bid I tem I

contain the bid for all work including asbestos." ( J.A. 166).

While the protest was pending before the Comptrolle r General, the VA conducted a second round of bidding , and in this round Glancy was the lowest bidder. (J.A. 1 97). Because the protest was pending, however, the VA di d not award the contract to Glancy.

The Comptroller General ultimately sustained Poerio 's interpretation of the IFB as the only reasonable on e and rejected the VA's assertion that the IFB was ambigu ous. The Comptroller General stated:

First, the cover page of the solicitation (S tandard Form 1442) identifies two separate bid items for the acquisition, "general construction" and "asb estos
abatement." Each of the two bid items is ide ntified on that page as a free-standing item for acquis ition by the agency -- specifically, there is no indicati on that one of the two identified bid items is encompassed by the other. Second, the IFB's performance require ments . . . expressly define "general construction" and" asbestos abatement" as distinct, separable work effor ts; again, each bid item description follows the separa te title and
item number associated with each of the two separate work categories. The stated item I (general construction) simply does not encompass the separately stated item II specialized work r equirements in the area of asbestos abatement. Third, th e bid schedule itself clearly separates the two bi d items: there is one space for the bidder's price fo r the general construction work, and a separate space for the price for the asbestos abatement work. Finally ame ndment No. 2 that one prime contract would be award ed, to include both the item I and item II work req uirements, simply does not provide any reasonable basis for a bidder to conclude that its item II price sh ould be included in its item I price.

(Comptroller General Op. at 4). After noting that b idders who perceived an ambiguity should have requested a clarification from the VA before submitting their b ids, the Comptroller General concluded that the VA lacked a

5compelling reason for cancelling the first solicita tion, and

the Comptroller General recommended that Poerio be granted the contract pursuant to the first solicita tion. (Id. at 5). After receiving the Comptroller General's op inion, the VA informed the bidders that it was reactivating th efirst round of bidding, and it then awarded the contract to
Poerio.

Glancy brought this action in the District Court. G lancy
asked the Court to declare that the VA's decision w as arbitrary and capricious and that Glancy was the lo w bidder and was entitled to the contract. Glancy als o requested, among other things, injunctive relief or dering the VA not to award the contract to any other parties. At Glancy's request, the District Court issued a tempo rary restraining order on February 24, 1999. (J.A. 3). T he District Court scheduled a hearing on whether a preliminary injunction should issue, and this heari ng was held before a Magistrate Judge on March 3, 1999. On March 5, 1999, the Magistrate Judge issued her Repo rt and Recommendation, concluding that Glancy had not show n that it was likely to succeed on the merits of its challenge to the VA's decision or that it would suffer irrepa rable injury in the absence of preliminary injunctive rel ief. The Magistrate Judge, accordingly, recommended that the request for a preliminary injunction be denied. The District Court adopted the Magistrate Judge's recommendation s, found that granting a preliminary injunction would not be in the public interest because of the delays that s uch relief would cause in needed renovations to the hospital, and denied the motion for a preliminary injunction. Thi s expedited appeal followed.

II.

The District Court's denial of a preliminary injunc tion is reviewed for abuse of discretion. Cleary v. Waldman , 167 F.3d 801, 804 (3d Cir. 1999). The District Court di d not abuse its discretion, and we therefore affirm.

Under 28 U.S.C. S 1491(b)(4) (1994),1 the VA's deci sion is

___________________________________________________ ______________

1. The jurisdiction of the District Court rested ex clusively on 28 U.S.C. S 1491(b). Although Glancy's complaint involved 28 U.S.C. S 1346(a)(2), Glancy subsequently disavowed any reliance on that provision.

6subject to review under the standards set forth in the

Administrative Procedures Act, 5 U.S.C. S 706 (1994 ), and thus Glancy could not prevail in this case without showing that the VA's decision was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. S 706 (1994). Applying this standard in prio r procurement cases, we have observed that "[j]udicia l intervention in procurement disputes necessarily re sults in delay and the expenditure of funds on behalf of all parties, usually without measurable benefit to the public," Sea-Land Serv., Inc. v. Brown, 600 F.2d 429, 434 (3d Cir. 19 79), and we have held that discretion to award injunctive re lief in
such cases "is restricted to circumstances where th e governmental agency's action is illegal or irration al." Coco Bros. v. Pierce, 741 F.2d 675, 679 (3d Cir. 1984); see also Sea-Land, 600 F.2d at 434 (only where agency action has "no rational basis" or upon a showing of "clear ill egality" may federal court enjoin government procurement decision).

Further, while irrationality or illegality is a nec essary condition to the issuance of an injunction in the government procurement context, "[e]ven when that showing has been made, prudent judicial discretion may still refuse declaratory or injunctive relief becau se of overriding public interests." Sea-Land, 600 F.2d at 434; see also Coco, 741 F.2d at 680; Princeton Combustion Re search Lab., Inc. v. McCarthy, 674 F.2d 1016, 1021-22 (3d Cir. 1982); Allis-Chalmers Corp. v. Friedkin, 635 F.2d 2 48, 253 (3d Cir. 1980). Thus, in determining whether injunc tive relief is proper, a court must also weigh "the prac tical considerations of efficient government operation; t he public interest in avoiding excessive costs; and the bidde rs' entitlement to fair treatment through agency adhere nce to statutes and regulations." Sea-Land, 600 F.2d at 43 4.

Finally, where as here the Comptroller General has made a recommendation that the procuring officer follows , that
recommendation must be taken into account in review ing the Executive's decision. In the Competition in Con tracting Act ("CICA"), 31 U.S.C. SS 3551-56 (1994), Congress strengthened the Comptroller General's role in the government procurement process. Honeywell, Inc. v. United

7States, 870 F.2d 644, 648 (Fed. Cir. 1989). We have noted

that while the CICA does not "compel procuring agen cies to obey the recommendation of the Comptroller General, "2 its effect "is to compel procurement officials to make purchase decisions in light of what the Comptroller General recommends the government do in that case." Ameron v. United States Army Corps of Eng'rs, 809 F.2d 979, 9 86 (3d Cir. 1986); see Honeywell, 870 F.2d at 648 (in ligh t of CICA, "a procurement agency's decision to follow th e Comptroller General's recommendation, even though t hat recommendation differed from the contracting office r's initial decision, [is] proper unless the Comptrolle r General's decision itself was irrational").

Applying these standards,3 we can discern no abuse of
discretion in the District Court's determination th at Glancy is unlikely to succeed on the merits. The GAO first noted that, under applicable law, only a compelling reaso n will justify reopening a closed bidding process. (Comptr oller General's Op. at 3). The reason for this is to disc ourage "auction type" bidding at which a disappointed bidd er, armed with knowledge of the prior bids, artificiall y lowers its bid in order to win the contract. Chemung Count y v. Dole, 781 F.2d 963, 972 (2d Cir. 1986). While an am biguity in a bid solicitation can be a sufficiently compell ing reason to reopen the bidding process, the Comptroller Gene ral concluded in this case that the IFB was not "suscep tible to

___________________________________________________ ______________

2. In Ameron v. United States Army Corps of Eng'rs, 809 F.2d 979 (3d Cir. 1986), the government argued unsuccessfully th at the CICA is unconstitutional insofar as it authorizes the Compt roller General to shorten or lengthen the stay of the execution of a contract that automatically occurs when a bid protest is filed wi th the Comptroller General. However, the government did not challenge the Comptroller General's authority to investigate procurement deci sions or to make recommendations on the basis of his investigation. See 809 F.2d at 988.

3. Glancy's attempt to distinguish Sea-Land , Princ eton Combustion and Coco is unavailing. Glancy argues that these cases do not apply because they did not involve sealed bids (as here) or did n ot involve a situation where the procuring agency reversed itself on the b asis of the GAO's recommendation. These are distinctions without sign ificance in this context. In any event, Glancy does not even attempt to distinguish Honeywell, a case squarely on point, and that clear ly supports the deferential standard of judicial review the Distric t Court employed.

8more than one reasonable interpretation when read i n the

context of the solicitation as a whole." (Comptroll er General Op. at 3) (emphasis added). This decision is ration al for the reasons identified by the Comptroller General-- the IFB contained two separate items upon which bidders wer e to submit bids, separate lines were provided for the b ids on these items, and the clarifying amendment's admonit ion that one prime contract would be awarded was not a reasonable basis upon which to base a conclusion th at Item
II was a break-out of Item I. Mindful that courts a re not to substitute their judgment for that of the Executive , we agree with the District Court's assessment of the m erits and with its conclusion that preliminary injunctive relief was inappropriate.

The District Court's alternate basis for denying re lief -- that the delays associated with bringing in a new g eneral contractor if preliminary injunctive relief were gr anted would not be in the public interest because it woul d further delay the renovation of a vital liver transplant ce nter -- is based on factual findings amply supported by the re cord. (Supp. Findings of Fact P 2 et seq.). We agree with the District Court that the equities here do not lie wi th Glancy, especially in light of the fact that even under its understanding of the first solicitation, Glancy was not the low bidder. (See Gov't Br. at 40-41 ("Glancy's clai med interest in fair procurement procedures rings hollo w. Glancy was not the low bidder in the initial round of bidding even under its own reading of the original solicitation.").)

III.

Accordingly, we affirm the District Court's March 1 0, 1999, Order denying Glancy's motion for preliminary injunctive relief.

A True Copy:

Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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