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COMMUNITY ECONOMIC DEV. CORP. v. UNITED STATES

November 30, 1983

COMMUNITY ECONOMIC DEVELOPMENT CORP., INC., Plaintiff,
v.
UNITED STATES, et al., Defendants



The opinion of the court was delivered by: GREENE

This action arises from the rejection by the General Services Administration (GSA) of an offer made by plaintiff Community Economic Development Corporation (CEDC) for the lease of office and related space in Nassau County, New York. The contracting officer at GSA determined that CEDC was a nonresponsible offeror, and awarded the lease to Selo-Weiss Joint Venture (Selo). CEDC filed suit in this Court, claiming that the contracting officer's finding of nonresponsibility was irrational, arbitrary, and capricious, and lacked any rational basis, and that it constituted a de facto debarment of CEDC from future solicitations. CEDC has moved for summary judgment, requesting that this Court find that CEDC was the low, responsible offeror, and that it order GSA to withdraw its award to Selo and award the lease to CEDC. The defendants have filed a cross-motion for summary judgment which seeks a denial of the relief sought by CEDC and a dismissal of the action. Defendants' motion for summary judgment will be granted, and that of plaintiff will be denied.

 I

 During the review process at the Office of Acquisition Policy, it was discovered that the contracting officer had made an error in determining the identity of the low offeror, and that CEDC was, the actual low offeror on the lease. GSA withheld the final approvals required to effectuate the lease with Selo while it considered CEDC's offer. On January 19, 1983, GSA requested CEDC to extend its offer, and CEDC agreed to the extension shortly thereafter. GSA then began to evaluate the CEDC offer for acceptability and to investigate CEDC's responsibility.

 The contracting officer determined that the premises offered by CEDC were capable, after renovation, of meeting all the award criteria. As part of his review of CEDC's responsibility, however, he learned that CEDC had failed to pay property taxes to Nassau County for the preceding four years in an amount totalling $265,635.31, and that the county had commenced foreclosure proceedings on the premises offered by CEDC to GSA. *fn1"

 In February or March, 1983, the contracting officer determined CEDC to be nonresponsible. GSA accordingly notified CEDC by letter of March 9, 1983, that its offer was rejected. While there is some inconsistency as to the number and weight of the various factors on which the contracting officer's determination of nonresponsibility was based, chief among them were the unpaid property taxes and the consequent jeopardy to CEDC's title to the building. In addition, the contracting officer apparently relied upon (1) a General Accounting Office report dated August 15, 1980, which had reviewed CEDC's record with regard to business ventures it has funded, and which revealed a history of enterprises which went bankrupt, ceased operations, or experienced financial difficulties; (2) the high level of debt which would be incurred by CEDC, based upon estimated annual costs and the amount to be spent on renovation; (3) CEDC's low estimate for base cost of services in its lease offer; and (4) the low occupancy level of the building containing the offered office space.

 On March 15, 1983, CEDC protested GSA's rejection of its low offer by letter to the General Accounting Office. After a conference held on July 8, 1983, the GAO issued a decision on August 23, which upheld the GSA decision. *fn2"

 II

 A disappointed bidder seeking to overturn the award of a government contract to one of its competitors bears a very heavy burden of proof. In M. Steinthal & Co. v. Seamans, 147 U.S. App. D.C. 221, 455 F.2d 1289 (D.C. Cir. 1971), the Court of Appeals for this Circuit articulated a policy of restrained and infrequent judicial intervention in awards of government contracts. It identified a

 
strong public interest in avoiding disruptions in procurement, and for withholding judicial interjection unless it clearly appears that the case calls for an assertion of an overriding public interest "in having agencies follow the regulations which control government contract."

 Id. at 1300 (citation omitted). The aggrieved bidder must demonstrate either that there was no rational basis for the agency's decision, or that there was a clear and prejudicial violation of the applicable statutes or regulations. Kentron Hawaii, Inc. v. Warner, 156 U.S. App. D.C. 274, 480 F.2d 1166, 1169 (D.C. Cir. 1973); M. Steinthal & Co. v. Seamans, supra at 1301, 1303.

 Indeed, even in instances where an agency decision lacks a rational basis, "there is reason for sound judicial discretion, in the presence of overriding public interest considerations, to refuse to entertain declaratory or injunctive actions in a preprocurement context." M. Steinthal & Co., supra at 1301. Absent a compelling showing that a contracting official's actions were capricious or arbitrary, or that he abused his discretion, a district court may not vacate a government procurement decision.

 Plaintiff's showing in this case is anything but compelling. CEDC's tax arrearage alone provides a rational basis for the rejection of CEDC's bid. The failure to pay taxes for four years may not unreasonably be viewed as a sign of poor business management. The fact that CEDC had worked out a payout schedule with Nassau County to satisfy its tax liability does not alter this conclusion significantly, for although foreclosure was postponed, title to the premises remained in a precarious state.

 A decision on a prospective contractor's probable ability to perform involves a forecast which must of necessity be a matter of judgment. The contracting official in this instance acted well within the broad administrative discretion accorded to him *fn3" when he decided, in light of CEDC's circumstances, that he did not want to risk accepting a contract the offeror could not perform. The other factors -- the history of business failures, the high level of debt, the low estimate for the cost of services, and the low occupancy of the building in question -- further ...


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