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EASTERN CANVAS PRODS. v. BROWN

May 25, 1977

EASTERN CANVAS PRODUCTS, INC., Plaintiff
v.
HAROLD BROWN, et al., Defendants and WELMETCO, LTD. Intervenor-Defendant



The opinion of the court was delivered by: WADDY

 This is an action by a disappointed bidder seeking to enjoin the award to intervenor of two Defense Supply Agency (DSA) contracts under Solicitation Nos. DSA 100-76-B-0998 and DSA 100-76-B-1008, for the production of field pack frames and straps, and to require the defendants to award the contracts to plaintiff. Following this Court's denial of plaintiff's motion for preliminary injunction, the award of the contracts was stayed by our Court of Appeals pending disposition of the case on the merits. The action is now before the Court on defendants' motion to dismiss, treated pursuant to Federal Rule of Civil Procedure 12(b) as a motion for summary judgment, and plaintiff's cross-motion for summary judgment.

 Plaintiff is Eastern Canvas Products, Inc. (Eastern), a Massachusetts corporation and a "small business" at the time of the filing of this action as defined in the Small Business Act, 15 U.S.C. § 632 and its implementing regulations, 13 C.F.R. § 121.3 et seq.1 Eastern was the second lowest bidder on the two DSA solicitations.

 Defendants are the Secretary of Defense, and officials at the DSA and the Small Business Administration (SBA), the agencies involved in the disputed contract awards. Each is sued in his official capacity.

 Defendant-intervenor is Welmetco, Ltd. (Welmetco), a competitor of plaintiff and also a "small business" within the meaning of the Small Business Act. Welmetco was the low bidder on both DSA solicitations.

 On December 14, 1975, the SBA determined that Welmetco was qualified to participate in and receive assistance under the SBA's section 8(a) Minority Subcontracting Program (the 8(a) program). *fn2" Pursuant to SBA regulations governing the 8(a) program, "[an] applicant concern must be owned and controlled by one or more persons who have been deprived of the opportunity to develop and maintain a competitive position in the economy because of social or economic disadvantage." 13 C.F.R. § 124.8-1(c)(1). The purpose of the 8(a) program is "to assist small business concerns owned and controlled by socially and economically disadvantaged persons to become competitive in the market place." 13 C.F.R. § 124.8-1(b).

 Under the section 8(a) program, the SBA negotiates with other departments and agencies of the Federal Government for procurement contracts which the SBA determines are suitable for performance by participating small businesses. An agreement is reached between the SBA and the department or agency as to the terms of the contract, including the price, and a prime contract entered into. The SBA then subcontracts with the participating small business. Such subcontracts may be awarded, as here, on a non-competitive basis.

 Shortly after Welmetco was certified to participate in the 8(a) program, the SBA began negotiations with DSA and Welmetco for an 8(a) program subcontract award to Welmetco for the production of field pack frame and strap assembly units.

 On April 15, 1976, an invitation for bids, DSA Solicitation No. 100-76-B-0998, was issued for procurement of 270,000 units of the same DSA field pack frame and strap units that were the subject of the Welmetco 8(a) program procurement negotiations. On April 19, 1976, an invitation for bids, DSA Solicitation No. 100-76-B-1008, was issued for delivery of some 303,566 pack strap units. Bids on these two solicitations were to be opened on May 5, and May 10, 1976, respectively.

 The record indicates that Welmetco conveyed to the SBA its desire to bid competitively on the DSA 0998 solicitation, and urged the SBA to award to it the 8(a) program subcontract prior to the bid opening on May 5th.

 On April 30, 1976, the SBA accepted DSA's estimated current fair market price of $21.88 per field pack frame and strap unit for the section 8(a) program subcontract.

 An oral agreement was reached between the SBA and Welmetco, either on April 29 or April 30, 1976, that the unit price under the 8(a) subcontract would be $25.00. That agreement also provided that if Welmetco became the successful low bidder on the DSA 0998 competitive solicitation, the 8(a) subcontract unit price was to be reduced to either $21.88, or Welmetco's competitive bid, whichever was the higher.

 On that same day, in the afternoon, when the DSA 0998 solicitation bids were opened, Welmetco was found to have submitted the low bid at $18.13 per unit less two percent discount. *fn3" Eastern submitted ...


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