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S.A. HEALY CO. v. WASHINGTON METRO. AREA TRANSIT A

August 14, 1985

S.A. HEALY COMPANY, and VANESSA GENERAL BUILDERS, INC., Plaintiffs,
v.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY, Defendant



The opinion of the court was delivered by: OBERDORFER

LOUIS F. OBERDORFER, UNITED STATES DISTRICT JUDGE.

 MEMORANDUM

 I.

 Plaintiffs S.A. Healy Company and Vanessa General Builders, Inc., bid as a joint venture on an Invitation to Bid (IFB) issued by the Washington Metropolitan Transit Authority (WMATA) for construction of the Greenbelt Route Shaw Station and Tunnel, extensions of WMATA's subway system funded in part by the Urban Mass Transportation Agency of the Department of Transportation (DOT/UMTA). The IFB, Appendix B, required all bidders to participate in WMATA's Affirmative Action Plan by subcontracting to, or participating in, a joint venture with a disadvantaged business enterprise (DBE), an enterprise owned and controlled by disadvantaged persons, which would be responsible for, and perform, at least 20 percent of the work on the contract. Healy made the low bid of $49.4 million and indicated at the time of its bid its intent to meet its affirmative action obligation by arranging for Vanessa, the minority owned partner, to perform 20 percent of the work on the contract.

 Vanessa had not previously been certified as a DBE. Accordingly, WMATA's Office of Civil Rights (CIVR) held a certification hearing. The chief executive officer of Vanessa, Mr. Ishamel Harps, Sr., and Vanessa's president, Ishamel Harps, Jr., represented the company at the hearing. Information on the record indicated that the biggest jobs done by Vanessa in the last three years ranged from $103,000 to $600,000 undertakings. WMATA Minority Business Enterprise Disclosure Affidavit (Feb. 25, 1985). Mr. Harps, Sr., testified that out of the 35 full time employees listed in his son's affidavit of February 5, 1985, three to four were black, the rest were white. Transcript, In the Matter of: Vanessa Builders Incorporated, before the WMATA Office of Civil Rights Business Enterprise Certification Review Board at 27. As to the company's line of credit, Mr. Harps, Jr., testified:

 
No, [we do not have a line of credit] at this time. Because we can't get a line of credit until the - in the process now of getting our records straight. I mean nobody is going to give you a line of credit.
 
Vanessa Builders is nothing but a broker, if you would, for large corporations trying to satisfy their minority business input. They have 14 jobs and all but one is federally funded.

 Tr. at 90.

 Based on the evidence received at its hearing, the CIVR refused to certify Vanessa as a qualified DBE, and thus Healy-Vanessa as a qualified joint venture, *fn1" on the grounds that (1) the disadvantaged person who purported to be the president of Vanessa did not have independent control of its day-to-day operations, and (2) Vanessa did not have adequate financial structure and resources to support this contract in addition to all the other contracts that it was performing. *fn2" On May 7, 1985, CIVR denied Healy-Vanessa certification as a DBE for a third reason: there was no agreement requiring Vanessa actually to perform any part of the contract work. Letter from Claude Swanson, Director CIVR, to Donald M. Zeier (May 7, 1985).

 After the certification denials, the WMATA Contracting Officer informed Healy-Vanessa that although he found their bid responsive, as part of his responsibility *fn3" determination he would have to conduct an inquiry into whether Healy-Vanessa's bid represented a good faith commitment to the DBE requirement of Appendix B. Healy-Vanessa wrote to the Contracting Officer in defense of its own good faith. Healy-Vanessa also offered to substitute five DBE subcontractors already certified by WMATA to fulfill the 20 percent minority participation requirement. Healy-Vanessa had obtained these commitments prior to bid submission. Affidavit of Donald J. Zeier at 5 (May 30, 1985). The Contracting Officer, however, found Healy-Vanessa's response not sufficient to meet the good faith requirement of Appendix B. According to the Contracting Officer:

 Letter from John S. Egbert, Contracting Officer, to Robert G. Watt (June 10, 1985). Consequently, the Contracting Officer found Healy-Vanessa's bid non-responsible and awarded the contract to Mergentime Corporation and Perini Corporation, the second lowest bidder in the amount of $50,895,000. *fn4" Determination of Contractor Non-Responsibility by John S. Egbert, Contracting Officer (May 15, 1985). Mergentime-Perini has since appeared in these proceedings by leave of Court as amicus curiae. WMATA and Mergentime-Perini represent without contradiction that its contract will be performed with 20 percent participation by certified minority subcontractors. Transcript, Telephone Conference (Aug. 12, 1985).

 On May 30, 1985, both Vanessa, individually, and Healy-Vanessa, as the joint venture, appealed their denials of certification to the Secretary of Transportation pursuant to 49 C.F.R. § 23.55, which sets out the procedure for appeals of denial of certification as a DBE. Healy-Vanessa also filed a protest with DOT/UMTA and, at the same time, filed a Motion For Temporary Restraining Order, Preliminary Injunction, Declaratory Judgment and Other Relief in this Court. By order of June 3, 1985, this Court denied plaintiffs' motion for temporary restraining order, in reliance on the representation by defendant's counsel that it would not immediately award the contract to Mergentime-Perini. An Order of June 27, 1985, stayed all proceedings awaiting initial action by DOT/UMTA. The parties continued, however, to brief the preliminary injunction motion and the summary judgment motions. On July 30, 1985, DOT/UMTA ...


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