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LESLIE & ELLIOTT CO. v. GARRETT

February 12, 1990

LESLIE AND ELLIOTT CO., INC., Plaintiff
v.
HONORABLE H. LAWRENCE GARRETT, III SECRETARY OF THE NAVY, et al., Defendants


John Garrett Penn, United States District Judge.


The opinion of the court was delivered by: PENN

JOHN GARRETT PENN, UNITED STATES DISTRICT JUDGE

 The plaintiff filed this action on October 17, 1989, in which it asked for a temporary restraining order, preliminary injunction, permanent injunction, declaratory judgment and other relief. Plaintiff asserted that it filed the action pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 702-706, and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202. Plaintiff is a disappointed bidder under Department of the Navy's invitation for bids (IFB) Nos. N62472-89-B-3436 and N62472-89-B-3378. The subject solicitations concerned construction work to be performed at the United States Naval Base in Groton, Connecticut.

 The case is now before the Court on the plaintiff's motion for a preliminary injunction. *fn1"

 After giving careful consideration to the motion for preliminary injunction and the opposition thereto, together with the arguments of counsel and the record in this case, the Court concludes that plaintiff's motion for preliminary injunction should be denied as moot, but that a permanent injunction should be entered. The Court further concludes that the hearing on the motion for preliminary injunction should be combined with the hearing on the merits and that the Court should enter a final order in this case. See Fed.R.Civ.P. 65(a)(2). The Court further concludes that judgment should be entered for the plaintiff and the case returned to the agency with the direction that it conduct debarment proceedings.

 I

 Very briefly, the underlying facts are as follows: IFB No. N62472-89-B-3436 was issued by the defendant Department of the Navy (Navy) on or about July 19, 1989, and requested sealed competitive bids to undertake the demolition of a training tank, Building 70. IFB No. N62472-89-B-3378 was issued by the defendant Navy on June 15, 1989 and requested sealed competitive bids to construct the ball field jogging path, Navy Submarine Base. These IFB's were restricted to bidders who are small business concerns and required that sealed bids be submitted in accordance with requirements of the IFB, the Armed Services Procurement Act, 10 U.S.C. § 2305 and the Federal Acquisitions Regulations, 48 CFR, Chapter 1, Part 14. Complaint paragraph 6. Plaintiff submitted a bid of $ 22,850 for IFB N62472-89-B-3378, hereinafter sometimes referred to as the construction contract, on July 27, 1989. The next low bid on that contract was $ 23,750. Plaintiff also submitted a bid of $ 255,444 on IFB No. 62472-89-B-3436, hereinafter sometimes referred to as the demolition contract, on August 24, 1989. The next low bid on that contract was $ 351,000. Complaint paragraph 7.

 On or about August 14, 1989, plaintiff received a letter from the Small Business Administration (SBA) informing plaintiff that the Navy proposed to reject its bid on IFB N62472-89-B-3378 as not responsive for capacity but plaintiff was given the opportunity to apply for a Certificate of Competency (COC) from the SBA. Plaintiff did so by letter dated August 19, 1989. Complaint paragraph 8. On August 29, 1989, plaintiff was sent a letter from the SBA informing the plaintiff that the Navy proposed to reject its bid on the demolition contract as nonresponsive for capacity. The letter stated among other things that "Leslie and Elliott has become an administrative burden requiring the office to spend in (sic) inordinate amount of time responding to extraneous issues raised by Leslie and Elliott in over eighty letters." Complaint paragraph 9, Complaint Exhibit 3. Plaintiff was given an opportunity to apply for a COC from SBA and plaintiff did so by letter dated September 5, 1989.

 On September 25, 1989, the SBA sent two letters (Complaint Exhibits 5 and 6) to plaintiff, one for each solicitation, informing plaintiff that the SBA had "found no sufficient reason for disagreeing with the decision of the procuring agency." Complaint paragraph 10. The justification by SBA for its action was that the plaintiff had three contracts where its performance had been classified as unsatisfactory and the Navy intended to issue unsatisfactory ratings on two other contracts. Id. Plaintiff notes that it had received written notice of only one unsatisfactory rating to date for any of the last five contracts it has performed. Plaintiff also notes that in the past three years the Navy has expressed "great irritation and dissatisfaction" with plaintiff over claims that plaintiff has submitted on contracts performed at the Groton Base. Complaint paragraph 10.

 Plaintiff received the SBA letters dated September 25, 1989 on September 28, 1989, and on that same date plaintiff filed a bid protest with the General Accounting Office (GAO). Complaint paragraph 7, Complaint Exhibits 7 and 8. On or about September 29, 1989, plaintiff was advised that the Navy had already proceeded to award the two subject solicitations to other bidders. Since plaintiff's GAO protests was filed within ten calendar days of the date of the award made by the Navy, performance of the two contracts was automatically stayed pending the protest pursuant to 31 U.S.C. § 3553(d) and 4 CFR § 21.4(b). Id. Plaintiff notes that GAO has ninety working days from the date the protest is filed to render a decision. Plaintiff filed this action on October 17, 1989.

 The Court heard arguments on plaintiff's original motion for a temporary restraining order on October 18, 1989, and thereafter noted that if GAO issued a decision adverse to plaintiff with respect to either contract, the automatic stay authorized under the statute (31 U.S.C. § 3553) would remain in effect for five business days after plaintiff is served with a copy of the decision during which plaintiff may apply for a temporary restraining order from the court. The Court further noted, based upon the representations of counsel at the argument, that the Navy would not override the automatic stay that is currently in effect. Based upon these facts the Court denied plaintiff's motion for a temporary restraining order, directed that the matter be referred to GAO pursuant to 4 CFR § 21.9 for a decision without any change to the schedule required by statute, directed that the plaintiff file a brief in support of its request for expedited discovery and stayed all matters in the litigation subject to further orders of the Court. See Order filed October 24, 1989. The Court thereafter granted plaintiff's motion for leave to conduct expedited discovery with a proviso that discovery was to be completed on or before November 10, 1989. See Order filed November 3, 1989. Discovery was extended pursuant to a joint motion of the parties with a provision that all discovery was to be completed on or before November 15, 1989. See Order filed November 21, 1989, nunc pro tunc. By letter dated January 24, 1990, the General Counsel of the GAO submitted to the Court the Decision of GAO regarding the two administrative matters submitted to that agency by the plaintiff. In that Decision GAO denied plaintiff's protests. Plaintiff then moved for a temporary restraining order and the Court granted that motion in order to allow the Court to consider the pleading filed by the defendants and to maintain the status quo until such time as the Court had an opportunity to consider the matter in full. See Order filed February 2, 1990. Thereafter, defendants filed their opposition to the motion together with the record in the proceedings before the Navy, the SBA and the GAO.

 Plaintiff contends that it has been the victim of a de facto debarment, and further contends that the Navy is biased against the plaintiff and that the SBA review was flawed. Plaintiff also contends that the Court is not bound by GAO's decision and that the GAO did not consider all relevant matters.

 II

 A disappointed bidder who seeks review of a contract award under the APA has the burden of demonstrating that the award was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. See Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App.D.C. 371, 424 F.2d 859 (1970). Such a plaintiff bears a "heavy burden of showing either that (1) the procurement official's decisions on matters committed primarily to his own discretion had no rational basis, or (2) the procurement procedure involved a clear and prejudicial violation of applicable statutes or regulations." Kentron Hawaii Limited v. Warner, 156 U.S.App.D.C. 274, 277, 480 F.2d 1166, 1169 (1973).

 Here, the plaintiff makes three arguments. First, it argues that it is the victim of a de facto debarment by the Navy in that the Navy has attacked plaintiff's integrity and has developed a policy to declare plaintiff nonresponsible on all contracts. Second, plaintiff argues that the Navy has a bias against the plaintiff. Third, it argues that the review by the SBA was flawed. Because the Court determines that this has been a de facto debarment by the Navy, it need not address the remaining issues.

 The plaintiff contends that the Navy has debarred it from receiving contracts at the Groton facility. The Navy contends that debarment was not an issue and that it did no more than to find the plaintiff nonresponsible on the two contracts. The Navy argues that a de facto debarment has not been established because the nonresponsibility determination relates to the two pending contracts only and does not extend beyond the present procurement. Defendants note that the facts in Art-Metal-USA, Inc. v. Solomon, 473 F. Supp. 1, 5 (D.D.C. 1978), are distinguishable from those here since in Art-Metal the defendants "candidly state[d] that they [had] no intention of awarding these or other contracts to Art Metal as long as that company [was] being investigated." Defendants observe that the Navy has made no such representation regarding the plaintiff.

 While it is true that a statement that the agency will not award a contract to the disappointed bidder in the future will support a claim of de facto debarment, the Court can also find de facto debarment based upon the conduct of the agency. In the instant case, Theodore R. Powell, a construction representative who has been with the Navy since 1986, testified that his primary role is to inspect the jobs to ensure compliance with specifications. Motion Exhibit 7, Powell Dep. at 5. He noted that he had never before been involved with a Leslie & Elliott contract, id at 6, and that in the course of inspections he would give approximately 50 noncompliance notices on contracts involving other companies, id at 15. The Navy makes much of the fact that approximately 100 noncompliance notices had been given to the plaintiff on the so-called "waterfront" contract that plaintiff was working on at or about the time it submitted the subject bids in this case. While the number of noncompliance notices given to the plaintiff by Powell amounted to twice the number he normally gives, Powell was assigned to remain with plaintiff during the course of its work on the waterfront project, while such was not the case when he was inspecting other contracts.

 Powell testified that he advised Mr. Minogue, the vice president of plaintiff, at the final inspection of the waterfront contract that the contract "looked good." Powell Dep. at 17. In answering questions concerning the waterfront contract Powell stated:

 
Question: Would it be fair to state that from your point of view that the overall quality of the work on the waterfront project was satisfactory?
 
Powell: At completion, yes.
 
Q: Would it be fair to say that the job was done on time?
 
A: Yes, it was completed within the schedule.
 
Q: Would it be fair to state that Mr. Minogue complied with your directives on the project?
 
A: Personally?
 
Q: Yes.
 
A: ...

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