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LOMBARD CORP. v. RESOR

November 19, 1970

LOMBARD CORPORATION, Plaintiff,
v.
Stanley R. RESOR, Secretary of the Army, et al., Defendants


Pratt, District Judge.


The opinion of the court was delivered by: PRATT

PRATT, District Judge.

 Plaintiff is an unsuccessful bidder for a contract issued by the Chamberlain Manufacturing Corporation. This matter is before the Court on plaintiff's motion for preliminary injunction, and defendants' motion to dismiss the complaint, or in the alternative, for summary judgment. A hearing was held on these motions on August 21, 1970. Following the hearing the parties submitted supplemental affidavits and memoranda.

 I. THE FACTS.

 In October, 1968, plaintiff was invited to submit a bid for the design and manufacture of two 155 mm. forging press lines, to be installed in the Scranton Army Ammunition Plant, owned by the U.S. Government and operated by Chamberlain on a cost-reimbursable basis for the Army. Plaintiff submitted its proposal on October 25, 1968, quoting a total price of $1,375,000 for the two press lines. Only one other bid was received, that being from Verson All Steel Press Co., for roughly twice the amount of plaintiff's bid. Chamberlain was required under the terms of its cost-reimbursable facilities contract with the Army to have all subcontracts totalling over $100,000 approved before work was begun. In this instance, because of the importance of the project and the large disparity in price, Chamberlain requested that the Defense Contract Administration Services Office (hereinafter referred to as DCASO) conduct a preaward survey of Lombard to determine if it was qualified to do the work. That survey, completed on December 17, 1968, recommended that no award be made to Lombard because it was not a "responsible" bidder. *fn1"

 Chamberlain accordingly canceled the original solicitation and issued a second, to which Lombard was not invited to respond. Through an alleged oversight, plaintiff was never formally notified that its bid had been rejected and that a second solicitation was taking place. Upon learning informally of the resolicitation, Lombard filed a protest with the Comptroller General on March 26, 1969, on the ground that it had submitted the lowest responsive bid, rejection of which would be prejudicial to the interest of the United States. After a conference on July 9, 1969, representatives of the Comptroller's office agreed that mistakes had been committed in the DCASO survey and that exclusion of the plaintiff on the basis of that report was therefore improper, but no finding was made that plaintiff should have been awarded the contract. *fn2" Chamberlain was directed to issue a third solicitation which would include Lombard, although this procedure was objected to, plaintiff taking the position that this would be without prejudice to its protest under the first solicitation. Since the Army apparently felt that the original specifications were subject to wide interpretation, they were supplemented in the third solicitation, and bids were requested on an additional press line.

 Plaintiff submitted a bid on the third solicitation identical to its earlier proposal, in spite of the addition of the third line and the more detailed specifications. Indeed, this was a summary bid, incorporating the earlier papers. After holding standard negotiating conferences with Lombard on its proposal and allowing time for the filing of supplemental papers, Chamberlain determined that the bid of Lombard was nonresponsive and it was rejected. Contracts for the press lines were awarded to Erie Foundry and the E.W. Bliss Company. Plaintiff then filed a written protest with the Comptroller General's office. This was rejected on April 7, 1970, with the statement that the award would not be questioned "in the absence of illegality or a showing that a proposed award is definitely against the interests of the United States."

 Lombard brought this action on July 23, 1970, seeking preliminary and permanent injunctions against any payments by the United States to Chamberlain on the contracts in question, and a declaratory judgment that it was "entitled" to be awarded the contract under the doctrine of Scanwell Laboratories v. Shaffer, 137 U.S. App. D.C. 371, 424 F.2d 859 (1970). Although plaintiff originally sought damages, it deleted this request in an amended complaint filed August 19, 1970.

 II. THE GOVERNMENT'S MOTION TO DISMISS.

 The Government by way of response filed a motion to dismiss the complaint and has advanced five different reasons in support thereof: (1) plaintiff lacks standing to bring the action; *fn3" (2) Chamberlain is an indispensable party; (3) plaintiff has no legally protected interest which would allow it the relief it requests; (4) the suit is unconsented and hence is impermissible because of sovereign immunity; and (5) the action is barred by laches. It is the judgment of the Court that none of these arguments is viable.

 (1) Plaintiff's standing to sue.

 The Government contends that Chamberlain is not a purchasing agent for the Army, but rather is an independent contractor, and hence any contract between Chamberlain and another firm would be a private one, to which the United States is not a party. Under this analysis the Armed Services Procurement Act, 10 U.S.C. ยง 2301 et seq. would not apply to the procurement in this case, although the Government does admit to applying a general standard of fairness in evaluating Lombard's proposals and complaints. Taking all of this into account, the Government urges that plaintiff lacks standing to challenge the award under the Scanwell doctrine.

 While the record indicates clearly that Chamberlain is not a procurement agent for the Army in the usual sense, just as clearly it possesses something more than the status of an independent contractor. The Government and Chamberlain are intimately involved in every aspect of the operation of the Scranton plant. The Government owns the factory and manufacturing equipment; title to new "facilities" such as the press lines in question passes directly to the Government upon delivery by the vendor to Chamberlain; Army personnel work closely with Chamberlain's engineers in drawing up the specifications for a solicitation; the cost-reimbursable contract between the Army and Chamberlain contains many provisions incorporating various sections of the Armed Services Procurement Regulations (ASPR); inter-firm correspondence indicates that Chamberlain considered itself an agent for at least some purposes while making the procurement (for example, so far as application of the Government regulation pertaining to gratuities is concerned); Mr. Bill Defee, Manager of the Modernization Engineering Department of the Scranton plant, indicated that Chamberlain considered ASPR applicable to its contracts (Exhibit G-1 in the Administrative Record, P. 6); finally, in the first solicitation Chamberlain stated:

 
1. This purchase order is issued under a United States Government contract and must contain certain terms and conditions required by U.S. statutes and regulations. Seller agrees that the contract clauses in the following Armed Services Procurement Regulations, and other Government regulations effective as of the date of this purchase order, are hereby incorporated herein by reference. * * *
 
2. DEFINITIONS -- Wherever the following words appear in the various sections of the Armed Services Procurement Regulations or other Government regulations cited or incorporated herein by reference, such words shall be defined as follows: * * * (c) "Government" shall mean "Government and/or CHAMBERLAIN MANUFACTURING CORP."

 Even the Comptroller General noted in his letter of April 7, 1970 to the Secretary of the Army that the "frame of reference guiding such determinations should be the Federal norm that is embodied in the procurement statutes and implementing regulations," although "every detail of the Federal norm is not for application. (This is not to say, however, that where, as a result of Government intervention, the prime contractor's procurement practices and procedures mirror Federal procurement procedures, the Federal norm should not be applied. * * *") Further in that letter it is stated that in the instant case, "the Government directly participated in the decision to reject Lombard's proposal and to exclude it from participation in the resolicitation."

 
"When the Congress has laid down guidelines to be followed in carrying out its mandate in a specific area, there should be some procedure whereby those who are injured by the arbitrary or capricious action of a governmental agency or official in ignoring those procedures can vindicate their very real interests, while at the same time furthering the public interest. These are the people who will really have the incentive to bring suit against illegal government action, and they are precisely the plaintiffs to insure a genuine adversary case or controversy." 424 F.2d at 864.
 
"It is indisputable that the ultimate grant of a contract must be left to the discretion of a government agency; the courts will not make contracts for the parties. It is also incontestible that that discretion may not be abused. Surely there are criteria to be taken into consideration other than price; contracting officers may properly evaluate those criteria and base their final decisions upon the result of their analysis. They may not base decisions on arbitrary or capricious abuses of discretion, however, and our holding here is that one makes a prima facie showing alleging such action on the part of an agency or contracting officer has standing to sue under section 10 of the Administrative Procedure Act." (Emphasis added.) 424 F.2d at 869.

 (2) Failure to join Chamberlain as an indispensable party.

 The Government next suggests that even if Lombard has standing to challenge the award, its suit is doomed for failure to join Chamberlain as an indispensable party. It suggests that the case be dismissed or transferred to a district where Chamberlain is subject to service. The presence of Chamberlain would, no doubt, be helpful in elucidating the reasons for plaintiff not receiving the contract in question. But the Government has experienced no difficulty in obtaining from Chamberlain information necessary to the defense of this suit. Indeed, the Government has relied extensively on affidavits of key officers of Chamberlain, and there is no question that Chamberlain is fully aware of everything occurring in this action. The suit, moreover, is in effect one on behalf of the Government as a whole, with the disappointed bidder acting as a private attorney general. The purpose of the suit is not just to transfer the contract from one firm to another, but rather to maintain the integrity of the competitive bidding process and to save the taxpayers money by ensuring that proper procedures are followed in the letting of contracts.

 Whether Chamberlain is considered to be a de facto procurement agent for the Army, see U.S. v. Livingston, 179 F. Supp. 9, 22 (E.D.S.C. 1959) aff'd 364 U.S. 281, 80 S. Ct. 1611, 4 L. Ed. 2d 1719; City of New Orleans v. United States, 371 F.2d 21, 23 (5th Cir. 1967); 39 Compt. Gen. 459 (1959) or only some form of hybrid agent-contractor, there are persuasive reasons for not finding it to be indispensable. The Court cannot award the contract to a particular party or make a contract for the parties. All that it has the power to do is enjoin the payment of money on the contract if the relevant regulations have not been complied with. The Government is paying for the presses in question, and it is the Government's regulations which allegedly have been violated. Plaintiff could not have sued as a disappointed bidder at all, absent Government ties to this contract. While a judgment in favor of plaintiff would unquestionably prejudice Chamberlain, since it would remain liable on its subcontracts, that prejudice could be completely eliminated by intervention, a step which plaintiffs have invited. Moreover, a judgment entered in Chamberlain's absence would be viable; it would accord complete relief to the parties presently before the Court. A determination of indispensability is not jurisdictional, but is largely discretionary with the Court. For all the reasons set forth above, "equity and good conscience" dictate that Chamberlain not be found to be indispensable. The Court holds that Chamberlain is a necessary party, not an indispensable one.

 3. Plaintiff's legally protected interest.

 The Government's contention that plaintiff has no legally protected interest, citing Perkins v. Lukens Steel Co., 310 U.S. 113, 126-130, 60 S. Ct. 869, 84 L. Ed. 1108 (1940) is insubstantial. Plaintiff, and others like it, have a litigable interest in attempting to protect the public interest in the integrity of the competitive bidding process, including the very real interest in having contracts awarded to the lowest responsive bidder whenever appropriate. As discussed above, many of the provisions of ASPR are applicable to the facilities contract between Chamberlain and the Government. A contracting officer has no authority to enter into contracts which are prejudicial to the interest of the United States, see 22 Compt. Gen. 367, 371; 41 Compt. Gen. 424, 427. If Chamberlain does not comply with ASPR, thus possibly making an award contrary to the best interest of the Government, then it would be illegal for the United States to expend funds pursuant to that contract.

 The holding in Perkins clearly seems to have been overruled by the passage of the Administrative Procedure Act, especially as that Act has been elucidated in Scanwell and succeeding cases. The Government raised this litigable interest theory in Scanwell itself by applying for a petition for rehearing in light of the Supreme Court's decision in Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184 (March 3, 1970). In that petition the Government argued at page 3,

 
"that, since this Court did not find that a disappointed bidder possesses any 'legal right' which is invaded by an allegedly unlawful award of a contract to a competitor * * * the claim of the plaintiff here -- which the Supreme Court has just held depends, on the merits, on ...

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