Source: https://casetext.com/case/gull-airborne-instruments-inc-v-weinberger
Timestamp: 2019-01-18 20:17:58
Document Index: 705199885

Matched Legal Cases: ['§ 2', '§ 706', '§ 601', '§ 702', '§ 8', '§ 2301', '§ 2', '§ 7', '§ 8', '§ 7', '§ 8', '§ 26', '§ 418', '§ 2401', '§ 1', '§ 1346']

Gull Airborne Instruments, Inc. v. Weinberger, 694 F.2d 838 | Casetext
694 F.2d 838 (D.C. Cir. 1982)
Gull Airborne Instruments, Inc.
United States Court of Appeals, District of Columbia CircuitNov 30, 1982
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Argued September 10, 1982.
Appeal from the United States District Court for the District of Columbia (D.C. Civil Action No. 81-0464).
Bendix notified the ASO on April 26, 1977, that it had purchased all the assets, open contracts, and proposal commitments of CAS and guaranteed performance of the Navy's contract if awarded to CAS. On October 31, 1977, the contracting officer determined that the equipment involved in the contract was urgently needed and awarded the contract to CAS.
When a written protest is lodged before the award of a contract, the procurement regulations require that the award be withheld until the matter is resolved unless the contracting officer determines that the items to be procured are urgently required, delivery or performance will be unduly delayed by the failure to make an award promptly, or a prompt award will be otherwise advantageous to the government. 32 C.F.R. § 2-407.8(b)(3) (1981).
Gull contends here that it is entitled, as an injured party, to seek review of both the contract award to CAS and the Navy's subsequent administration of the contract as actions in violation of the regulations governing the issuance and administration of government contracts. We agree with the district court that Gull has standing to contest the award of the contract but not its administration.
This contention involves two issues: (1) whether the Navy's actions are subject to judicial review, and (2) whether Gull has standing to protest those actions. Neither Gull nor the government addressed the first issue before the district court or in their briefs to this court. It is well settled, however, that actions of a federal agency alleged to be arbitrary and capricious violations of the statutes and regulations governing the awards of federal contracts are subject to judicial review under § 706(2)(A) of the Administrative Procedure Act (APA). M. Steinthal Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971); Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C. Cir. 1970); Bayou State Security Servs., Inc. v. Dravo Util. Constructors, Inc., 674 F.2d 325 (5th Cir. 1982); Wilke, Inc. v. Department of the Army, 485 F.2d 180 (4th Cir. 1973); Merriam v. Kunzig, 476 F.2d 1233 (3d Cir.), cert. denied, 414 U.S. 911, 94 S.Ct. 233, 38 L.Ed.2d 149 (1973). Because we find that Gull had no standing to seek judicial review of the administration of the contract, we do not decide whether the Navy's actions in administering it are even reviewable under the APA. Cf. Contract Disputes Act of 1978, 41 U.S.C. §§ 601- 613.
Section 702 of the APA gives a right to judicial review to any person "adversely affected or aggrieved by agency action within the meaning of a relevant statute." Control Data Corp. v. Baldrige, 655 F.2d 283, 288-89 (D.C. Cir.), cert. denied, 454 U.S. 881, 102 S.Ct. 363, 70 L.Ed.2d 190 (1981), sets out a three-part test for standing to obtain review of administrative action: (1) the complainant must allege injury in fact; (2) the complainant must assert that arbitrary or capricious agency action injured an interest arguably within the zone of interests to be protected or regulated by the statute or constitutional guarantee in question; and (3) there must be no "clear and convincing" indication of a legislative intent to withhold judicial review. See also Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 38, 96 S.Ct. 1917, 1924, 48 L.Ed.2d 450 (1976); Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 153, 90 S.Ct. 827, 829, 25 L.Ed.2d 184 (1970); Howes Leather Co. v. Carmen, 680 F.2d 818, 820 (D.C. Cir. 1982) (per curiam).
Gull contends that it has standing under § 702 as a disappointed bidder on the Navy's contract to protest both its award to CAS and its subsequent maladministration. We agree with both Gull and the district court that disappointed bidders have standing to challenge the failure of an administrating agency to follow the applicable statutes and regulations regarding contract awards. See M. Steinthal Co. v. Seamans, 455 F.2d 1289 (D.C. Cir. 1971); Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859 (D.C. Cir. 1970); Airco, Inc. v. Energy Research and Development Administration, 528 F.2d 1294 (7th Cir. 1975) (per curiam); Armstrong Armstrong, Inc. v. United States, 514 F.2d 402 (9th Cir. 1975) (per curiam); Hayes International Corp. v. McLucas, 509 F.2d 247 (5th Cir.), cert. denied, 423 U.S. 864, 96 S.Ct. 123, 46 L.Ed.2d 92 (1975); Wilke, Inc. v. Department of the Army, 485 F.2d 180 (4th Cir. 1973); Merriam v. Kunzig, 476 F.2d 1233 (3d Cir.), cert. denied, 414 U.S. 911, 94 S.Ct. 233, 38 L.Ed.2d 149 (1973).
The first two parts of the test require that the complainant allege injury to an interest arguably within a statute's or regulation's zone of interests. Here, Gull alleges that it suffered economic loss from the illegal entry of a government-funded competitor into its own line of business. It also alleges that it suffered economic loss because it was denied an opportunity to bid on reprocurement of the contract. The government, on the other hand, argues that the only economic injury Gull suffered was the original failure to win the contract. Once a contract is in place, it contends, disappointed bidders on the contract revert to the status of ordinary citizens who have no generalized standing to object to government actions. In addition, the government argues, any economic loss sustained through denial of an opportunity to Gull to bid on the reprocurement is conjectural since Gull may not have been the low bidder on that second contract.
To meet this argument, Gull would have had to demonstrate a substantial probability that the relief it requested regarding the administration of the contract would have benefited it in some perceptible, tangible fashion. Public Citizen v. Lockheed Aircraft Corp., 565 F.2d 708, 715 (D.C. Cir. 1977). Were the contract here to be enjoined for maladministration, however, it would not automatically be awarded to Gull as the second low bidder on the original contract; instead, new bids likely would be taken. See Appellant's Brief at 13, 20; Appellees' Brief at 16-17. Although there is no guarantee that the second low bidder on a government contract will be awarded the contract if the low bid on the contract is rejected, there is far less likelihood that the same bidder on a new contract will be awarded the contract. As a result, Gull's interests in bidding on reprocurement are more speculative than its interests as the second low bidder on a particular contract award and do not support Gull's claim to standing to challenge the administration of the contract.
Unlike the regulations governing the award of contracts, see Merriam v. Kunzig, 476 F.2d at 1242, the regulations governing termination of contracts for default are not designed to foster competition or to protect unsuccessful bidders from illegal injury to their economic interests. The default regulations, see 32 C.F.R. §§ 8-600 to 8-602 (1981), are intended to protect the government against injury from the contractor's inability to perform the contract and the contracting party from the government's premature or unjustified cancellation. As a result, Gull must rely on its protest against the original award of the contract to CAS, not its subsequent administration, to establish that the government has illegally injured its economic interests.
The Armed Services Procurement Regulations, promulgated pursuant to the Armed Services Procurement Act of 1947, 10 U.S.C. §§ 2301- 2315, control contracting decisions of the Army, Navy, Air Force, Coast Guard, and National Aeronautics and Space Administration. The regulations that pertain to the award of government contracts require, in general, that bids comply with the government's invitation for bids (IFB) and that bids be rejected when they fail to conform to the essential requirements or the delivery schedule contained in the IFB, are submitted by nonresponsible concerns, are unreasonable as to price, or contain conditions that would modify the requirements of the IFB. See, especially, 32 C.F.R. §§ 2-301(a), 2-404.2, 2-407.2 (1981).
The government may, for example, terminate a contract for default if the contractor fails to make delivery or to perform services within the contract's specified time limits or fails to perform any other contract provision or to make sufficient progress on the contract, thereby endangering its performance. 32 C.F.R. §§ 7-103.11(a), 8-602.1 (1981). Id. § 8-602.3 lists the factors the agency's contracting officer must consider in deciding whether to terminate a contract for default.
In the event of default the government is empowered to procure similar supplies or services elsewhere. Id. § 7-103.11(b). It is also allowed to avoid default by continuing the contract under a revised delivery schedule, by permitting performance of the contract through subcontracting, or by executing a no-cost termination settlement agreement. Id. § 8-602.4. Finally, the government is permitted to recognize a successor-in-interest to a federal contract when it is consistent with the government's interests. Id. § 26-402(c).
The government contends and the district court found that Gull's request for equitable relief on the bid award is barred by the doctrine of laches. The laches doctrine, of course, reflects the principle that "equity aids the vigilant, not those who slumber on their rights," and is designed to promote diligence and prevent enforcement of stale claims. Powell v. Zuckert, 366 F.2d 634, 636 (D.C. Cir. 1966); 2 J. Pomeroy, Equity Jurisprudence § 418 (5th ed. 1941). To establish a successful laches defense, the defendant must show that the plaintiff was guilty of unreasonable delay prejudicial to the defendant. Gardner v. Panama Railroad, 342 U.S. 29, 31, 72 S.Ct. 12, 13, 96 L.Ed. 31 (1951) (per curiam); Russell v. Todd, 309 U.S. 280, 287, 60 S.Ct. 527, 530, 84 L.Ed. 754 (1940); Southern Pacific Co. v. Bogert, 250 U.S. 483, 490, 39 S.Ct. 533, 536, 63 L.Ed. 1099 (1919); Powell v. Zuckert, 366 F.2d 634. Whether the doctrine bars an action in a particular case depends upon the circumstances of that case. Burnett v. New York Central Railroad, 380 U.S. 424, 435, 85 S.Ct. 1050, 1058, 13 L.Ed.2d 941 (1965); Goodman v. McDonnell Douglas Corp., 606 F.2d 800, 809 (8th Cir. 1979), cert. denied, 446 U.S. 913, 100 S.Ct. 1844, 64 L.Ed.2d 267 (1980); Concerned About Trident v. Schlesinger, 400 F.Supp. 454, 478 (D.D.C. 1975).
There are, therefore, two factors to be considered in determining whether laches applies: lack of diligence by the plaintiff and injurious reliance thereon by the defendant. Powell v. Zuckert, 366 F.2d at 636; Goodman v. McDonnell Douglas Corp., 606 F.2d at 804; Concerned About Trident v. Schlesinger, 400 F.Supp. at 478. Laches does not depend solely on the time that has elapsed between the alleged wrong and the institution of suit; it is "principally a question of the inequity of permitting the claim to be enforced — an inequity founded upon some change in the condition or relations of the property or the parties." Galliher v. Cadwell, 145 U.S. 368, 373, 12 S.Ct. 873, 875, 36 L.Ed. 738 (1892). See also Holmberg v. Armbrecht, 327 U.S. 392, 396, 66 S.Ct. 582, 584, 90 L.Ed. 743 (1946); Goodman v. McDonnell Douglas Corp., 606 F.2d at 805; Concerned About Trident v. Schlesinger, 400 F.Supp. at 478. It closely tracks the question of whether a defendant suffered prejudice from the delay. Goodman v. McDonnell Douglas Corp., 606 F.2d at 807; Public Administrator v. Angela Compania Naviera, 592 F.2d 58, 64 (2d Cir.), cert. dismissed, 443 U.S. 928, 100 S.Ct. 15, 61 L.Ed.2d 897 (1979); Larios v. Victory Carriers, Inc., 316 F.2d 63, 66-67 (2d Cir. 1963). If only a short period of time elapses between accrual of the claim and suit, the magnitude of prejudice required before suit would be barred is great; if the delay is lengthy, a lesser showing of prejudice is required. Goodman v. McDonnell Douglas Corp., 606 F.2d at 807; Brundage v. United States, 504 F.2d 1382, 1386 (Ct.Cl. 1974), cert. denied, 421 U.S. 998, 95 S.Ct. 2395, 44 L.Ed.2d 665 (1975); Grisham v. United States, 392 F.2d 980, 983, 183 Ct.Cl. 657, cert. denied, 393 U.S. 843, 89 S.Ct. 125, 21 L.Ed.2d 114 (1968).
Gull instituted this action three years from the date the contract was awarded, six months from the GAO's denial of its last protest, and three years before the statute of limitations had run on its claim. Gull pursued its administrative remedies diligently throughout this period. It filed a preaward protest with the Navy one month after the bids on the contract were opened in January 1977. In April of the same year it filed a similar protest with the GAO, a request denied in November. Gull thereupon asked the GAO to reconsider its denial; the GAO affirmed its April decision in March 1978. In April 1979 Gull made FOIA requests regarding the Navy's award and administration of the contract. It received the FOIA documents in May 1979. Two months later Gull again requested the Navy to terminate the contract, alleging that it had been illegally awarded and subsequently maladministered. The Navy refused to do so. In December 1979 Gull once again protested to the GAO, which declined to invalidate the contract in August 1980. In February 1981 Gull filed suit in federal district court.
See 28 U.S.C. § 2401(a).
We are mindful that review by the GAO is permissive and is not a prerequisite to judicial review. Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d at 875. This court has, however, for obvious reasons, encouraged disappointed bidders to pursue their administrative remedies with the GAO. See Wheelabrator Corp. v. Chafee, 455 F.2d 1306, 1313-16 (D.C. Cir. 1971); Morgan, Achieving National Goals Through Federal Contracts: Giving Form to an Unconstrained Administrative Process, 1974 Wis. L.Rev. 301, 340, 340 n. 178. Although we recognize the need for prompt adjudication of bid challenges, it would be an injustice to unsuccessful bidders if we now penalized them merely for exhausting those administrative remedies.
Indeed, we have suggested that, because of the GAO's competence and experience in procurement activities, district courts should consider, under the doctrine of primary jurisdiction, deferring review of the merits of a challenge to a procurement decision pending a GAO ruling. See Wheelabrator Corp. v. Chafee, 455 F.2d 1306, 1316 (D.C. Cir. 1971). The courts have also encouraged district courts to take into consideration GAO decisions upholding procurement awards when deciding whether to grant injunctive relief. See M. Steinthal Co. v. Seamans, 455 F.2d at 1304-05; Textron, Inc., Bell Helicopter Textron Div. v. Adams, 493 F.Supp. 824, 829 (D.D.C. 1980).
Indeed, Gull's many attempts to receive administrative relief served to put the government on notice that it was not sleeping on its rights. See Hurst v. United States Postal Serv., 586 F.2d 1197, 1200 (8th Cir. 1978); Cady v. Morton, 527 F.2d 786, 792 (9th Cir. 1975); Concerned About Trident v. Schlesinger, 400 F.Supp. 454, 479-80 (D.D.C. 1975). See also Etelson v. Office of Personnel Management, 684 F.2d 918, 924 n. 8 (D.C. Cir. 1982) (government attorney challenging method used by government in evaluating candidates for administrative law judge positions had not sat on his rights even though he waited nine years before filing suit since he had been pursuing administrative and legislative remedies during those years).
Neither of these grounds supports a finding of laches in this case. The government's own regulations require documentation of all actions taken with respect to a contract. See 32 C.F.R. § 1-308 (1981). This documentation is sufficient to constitute a full history of the transaction and gives any reviewing body the ability to reconstruct the pertinent events. Thus, the loss of a crucial witness in this case is cured by the documentation required by the government's own regulations.
During oral argument before this court, and in a "Suggestion of Mootness" filed shortly thereafter, the government, however, stated that Bendix has now fully performed its contract with the Navy and that the Navy has fully paid for that contract. Gull's request for injunctive relief may therefore very well be moot. Federal courts are "not empowered to decide . . . abstract propositions, or to declare, for the government of future cases, principles or rules of law which cannot affect the result as to the thing in issue in the case before it." California v. San Pablo Tulane Railroad, 149 U.S. 308, 314, 13 S.Ct. 876, 878, 37 L.Ed. 747 (1893); Northwest Airlines, Inc. v. Federal Aviation Administration, 675 F.2d 1303, 1306 (D.C. Cir. 1982); United States v. Ford Motor Co., 574 F.2d 534, 539 (D.C. Cir. 1978). Upon the record before us, we are unable to determine whether injunctive relief on the bid award is still realistically a remedy.
Post- Scanwell courts have considered several factors in exercising their discretion to issue or refuse to issue an injunction. See Note, Judicial Review and Remedies for the Unsuccessful Bidder on Federal Government Contracts, 47 N.Y.U.L.Rev. 496, 513-17 (1972). They have looked carefully at the interests to be affected by injunctive relief, recognizing that substantial harm may accrue to the government and the public when agencies are unable to make necessary procurements without undue delay. Although finding merit in the claims of disappointed bidders, they have struck the balance of equities in favor of the government's interests in the smooth and efficient functioning of the procurement process at the expense of the interests of the unsuccessful bidder in the integrity of the bidding process and equal access to the procurement dollar (and of the public in fairness and competitive bidding). See Simpson Elec. Co. v. Seamans, 317 F.Supp. 684 (D.D.C. 1970). See also Wheelabrator Corp. v. Chafee, 455 F.2d 1306; M. Steinthal Co. v. Seamans, 455 F.2d 1289; A.G. Schoonmaker Co. v. Resor, 445 F.2d 726 (D.C. Cir. 1971); Blackhawk Heating Plumbing Co. v. Driver, 433 F.2d 1137 (D.C. Cir. 1970); Lombard Corp. v. Resor, 321 F.Supp. 687 (D.D.C. 1970).
These courts have also taken into account the availability of a damage remedy in the Court of Claims for bid preparation losses resulting from illegal agency action. See M. Steinthal Co. v. Seamans, 455 F.2d at 1302-03. And partial performance of a contract has been considered to be a substantial factor in the denial of injunctions to unsuccessful bidders. Keco Indus. v. Laird, 318 F.Supp. 1361, 1364 (D.D.C. 1970).
If the test sets have been delivered, and satisfactorily fulfill the government's requirements, there is no justification for reawarding the contract to a more deserving bidder. If, however, the contract has not been fully or satisfactorily performed, then injunctive relief may still be available and appropriate. We therefore remand the case to the district court for a factual determination on the issue of mootness. See Graves v. Walton County Board of Education, 686 F.2d 1135, 1136-37 (11th Cir. 1982); New York Health and Hospitals Corp. v. Blum, 678 F.2d 392 (2d Cir. 1982).
We are mindful that Gull urges that injunctive relief is the only remedy that will compensate it for the losses it allegedly has sustained. Brief for Appellant at 31. We believe, however, that even if the claim for injunctive relief is extinguished by mootness, Gull may retain a viable claim for damages to the extent of its bid preparation costs, Robert F. Simmons Assoc. v. United States, 360 F.2d 962, 175 Ct.Cl. 510 (1966); Heyer Prods. Co. v. United States, 140 F.Supp. 409, 413-14, 135 Ct.Cl. 63 (1956), damages clearly not nominal. If these costs are less than $10,000, Gull can seek recovery in the district court, 28 U.S.C. § 1346(a)(2); otherwise, its remedy lies in the Court of Claims. See Keco Indus. v. United States, 428 F.2d 1233, 192 Ct.Cl. 773 (1970). Because the claim for damages may survive the completion of performance of the contract under challenge, this litigation is not necessarily moot even if no injunctive relief is appropriate.