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November 28, 1994

GRIGSBY BRANDFORD & Co., Inc. and A.H. WILLIAMS & Co., Inc., Plaintiffs,
UNITED STATES OF AMERICA, and RICHARD W. RILEY, Secretary of Education Defendants.

GLADYS KESSLER, United States District Judge

The opinion of the court was delivered by: KESSLER


I. Introduction and Procedural History

 Plaintiffs, joint venture partners Grigsby Brandford and Company, Inc. and A.H. Williams and Company, Inc. ("GB/AHW"), have brought the instant action challenging the Secretary of Education's selection of the firm of Pryor McClendon Counts & Co., Inc. ("PMC") as the Designated Bonding Authority ("DBA") for the Historically Black Colleges and Universities ("HBCU") Capital Financing Program. Plaintiffs claim that the Secretary's decision violates the Administrative Procedure Act ("APA") because it was arbitrary and capricious and an abuse of discretion. Plaintiffs also allege that the decision, and the procedures by which it was ultimately reached, violated the Competition in Contracting Act ("CICA"), the Federal Acquisition Regulations ("FAR"), and the Federal Advisory Committee Act ("FACA").

 On September 19, 1994, Plaintiffs filed Notions for a Temporary Restraining Order and a Preliminary Injunction precluding Defendants the United States of America and the Secretary of Education from implementing the September 2, 1994 selection of PMC as the DBA for the HBCU Capital Financing Program. In particular, Plaintiffs sought to enjoin the award of the Agreement to Insure to PMC, which is the contract actually establishing the DBA. Plaintiffs also requested an injunction requiring the selection of GB/AHW as the DBA and the award of the Agreement to Insure to GB/AHW, or, in the alternative, requiring a reconsideration and selection of the DBA among the three finalists. Who were Plaintiffs, PMC, and M.R. Beal.

 During a hearing before this Court on September 20, 1994, Defendants expressed their willingness to defer signing the Agreement to Insure, and, consequently, Plaintiffs withdrew their Motion for a Temporary Restraining Order without prejudice. On September 27, 1994, the parties submitted a joint briefing schedule, which set the Motion for Preliminary Injunction for bearing on October 31, 1994, and consolidated the hearing on the Preliminary Injunction with the final hearing on the merits of this case. This Court approved the parties' proposed schedule on October 4, 1994. On October 7, 1994, Defendants filed their Motion for Summary Judgment, and on October 17, 1994, Plaintiffs filed their Cross Motion for Summary Judgment. On October 31, 1994, counsel presented lengthy, and helpful, oral arguments. At that time, Defendants agreed that they would take no further action relating to the instant case until issuance of a decision on the pending Motions.

 Accordingly, this matter is now before the Court upon Plaintiffs' Motion for Preliminary Injunction (2-2); Defendants' Motion for Summary Judgment (15-1); and Plaintiffs' Motion for Summary Judgment (27-1).

 For the reasons stated below, Plaintiffs' Motions for Preliminary Injunction and for Summary Judgment shall be denied, and Defendants' Motion for Summary Judgment shall be granted.

 II. Statement of Facts1

 Congress enacted the HBCU Capital Financing Program in 1992 in recognition of the fact that "the Nation's historically Black colleges and universities have played a prominent role in American history and have an unparalleled record of fostering the development of African American youth." 20 U.S.C. § 1132(c)(2). The facilities of these institutions have, however, "suffered from neglect, deferred maintenance and are in need of capital improvements." 20 U.S.C. § 1132c(3). Congress also found that these institutions "often lack access to the sources of funding necessary to undertake the necessary capital improvements through borrowing and bond financing." 20 U.S.C., § 1132c(4). Congress determined that Federal assistance was needed to facilitate capital improvements and enable these institutions to "continue and expand their educational mission and enhance their role in American higher education." 20 U.S.C. § 1132c(6).

 The HBCU Capital Financing Program creates a designated bonding authority (DBA), chosen by the Secretary, to issue bonds and lend the proceeds to eligible institutions for capital improvements projects. Repayment of the bonds will be backed by the full faith and credit of the United States. 20 U.S.C. § 1132c-2. Congress has allocated substantial power and responsibility to the DBA, clearly envisioning that the DBA will play the central role in the development and execution of the HBCU Capital Financing Program. 20 U.S.C. § 1132c-2(b).

 In particular, the DBA will issue bonds and lake loans to credit-worthy institutions. The DBA will undertake a credit review of the institutions, charge an adequate rate of interest to service the bond interest rate, and pay various items, including fees for the services of the DBA, the trustee and any other parties. Security for the bonds issued by the DBA will include investments, program loans, and an escrow account funded with a portion of the loan proceeds, as well as the guarantee from the Secretary, which will obligate the full faith and credit of the United States to insure the payment of interest and principal on the bonds. 20 U.S.C. § 1132c-2(d). The Secretary has authority to issue letters of credit and insurance up to $ 375,000,000.00, but only to the extent provided in advance by appropriations acts. 20 U.S.C. § 1132c-3(a). The DBA will also have construction oversight responsibilities as wall as serving as the focal point of information for the HBCU Capital Financing Program.

 To begin the process of selecting a designated bonding authority, the Department of Education published two separate solicitation notices in The Bond Buyer, a trade publication directed to professionals and others in the bond market, informing those interested that it expected to issue a request for proposals from parties interested in serving as the DBA. Administrative Record (hereinafter, "A.R.") 10001, 10002. The Department asked interested parties to submit requests for the expected solicitation package. Id. The Department received in excess of 60 requests for the solicitation package. A.R. 10003-89. Secretary of Education Richard W. Riley delegated the responsibility for selecting the DBA to David Longanecker, the Assistant Secretary for Postsecondary Education. By letter dated May 31, 1994 the Department sent the solicitation package to the various requesting parties, including Plaintiffs. A.R. 10009, 10090.

 The solicitation package provided a description of the HBCU Capital Financing Program, the services that the DBA would be expected to perform, the required contents of a proposal, and the selection criteria. A.R. 10090-99. The package informed proposers that "the Secretary will select the DBA based on the selection criteria outlined in Exhibit B." A.R. 100923. That exhibit listed and described 13 factors:


1) Minority ownership;


2) Existence of trained staff to perform the various duties of the DBA;


3) Capacity to manage the issuance of a large offering of debt securities;


4) Financial position and stability relative to industry norms;


5) Approach in performing the requirements of the program;


6) Experience and resources available and commitment to providing business development services;


7) Past performance on previous government contracts;


8) Ability in addressing the special needs of minority business and prior record in using minority business;


9) Proposal with respect to cost, including the approach of the cost proposal;


10) Ability to comply with for-profit requirement;


11) Cohesiveness of the DBA and any subcontractors;


12) Senior management stability; and


13) No conflict of interest.

 A.R. 10098-99. The package explained that the proposals would be graded on a scale of 1 to 10 for each of the 13 criteria and then "quantitatively ranked." The package further advised that "it is possible that oral interviews may be held to fully develop a qualitative recommendation." A.R. 10099. Further, the package noted at least twice that "the selection of the DBA will be made on the basis of . . . utilization of minority personnel," and that "it shall be a positive factor if the proposer is a minority owned business." A.R. 10096.

 The Department received eleven proposals, eight of which were found to be responsive to the Request. A.R. 10099. Among the proposals was a joint venture proposal from Plaintiffs Grigsby, Brandford & Co., Inc. and A.H. Williams & Co., Inc.. A.R. 20415-715, 2001A-411. The Grigsby Brandford/A.H. Williams venture would be 55 percent owned by Grigsby, Brandford, a minority-owned firm, and 45 percent by A.H. Williams, a majority owned firm. A.R. 20419, 30389. PMC, the firm ultimately selected by the Department of Education, is entirely minority owned. A.R. 20002.

 The Department established a Technical Evaluation Panel of seven people (two of whom could not participate in full) for the sole purpose of reviewing the eight responsive proposals. A.R. 30023-27H. Six panelists completed evaluations tracking the selection criteria announced in the solicitation package. *fn2" A.R. 30023-27H, 30370, 30031-318. The top three proposals in terms of cumulative points were: (1) M.R. Beal (628 points); (2) PMC (597 points); and (3) Grigsby, Brandford/A.H. Williams (592.5 points). A.R. 30370, 30387.

 The Department invited the three top-scoring finalists for oral interviews with the panel members on August 11, 1994. The Department provided each finalist with the opportunity to make a 15-20 minute presentation, and specifically asked the proposers to explain how their teams would function and interrelate. A.R. 30524-7. Five panelists heard the presentations of the three finalists on August 11, 1994. *fn3" after the conclusion of the interviews, two of the panelists ranked PMC as their first choice, and three of the panelists ranked GB/AHW as their first choice. A.R. 30370, 30391.

 The panelists prepared narrative summaries of their post-interview comments and recommendations. A.R. 30388, 30389. Despite their recommendation of GB/AHW, the three panelists noted the significant negative factor that A.H. Williams was majority-owned and would control 45 percent of the DBA created by the GB/AHW proposal. A.R. 30388-389.

 A financial advisor from the firm of Smith Barney Inc. also separately rated the written proposals and observed the oral interviews. A.R. 30319-361, 30393. This financial advisor rated all of the proposals of the finalists as acceptable. A.R. 30333, 30347, 30361. Although the advisor initially gave PMC a higher numerical score than its two primary competitors (97 as opposed to 84 for GB/AHW and for M.R. Beal) (A.R. 30363) on the basis of the written proposals, after the oral presentations he rated the GB/AHW Team as the best for the program. A.R. 30364.

 On Monday August 29, 1994, Assistant Secretary Longanecker, Claudo R. Prieto, the Deputy Assistant Secretary for Higher Education Programs, Ernest G. Green, Billy Webster and Leslie Thornton met with Secretary Riley. Declaration of Richard W. Riley, P 2. Mr. Green is Chairman of the Advisory Board of the Historically Black Colleges and Universities Capital Financing Program, and was appointed to that Board by the Secretary. *fn4" Mr. Webster was the Secretary's Chief of Staff. Ms. Thornton is his Deputy Chief of Staff; as a lawyer, she also regularly provides him with legal advice. Id.

 The purpose of the August 29 meeting was to inform the Secretary of the results of the Department's process for evaluating proposals submitted by the various interested parties and to allow him to consult with his advisors regarding final selection of a DBA. At the Secretary's request, those present gave him their individual views. This was the only time that this group of individuals net to discuss the matter. Id., P 3.

 During the meeting, Assistant Secretary Longanecker and the others informed the Secretary of the results of the panel review process and discussed final selection of the DBA. n5 After the briefing, the Secretary took under advisement the various views and information presented to him and on September 2, 1994 made his final selection of a DBA. Id., PP 4, 5. n5 The Secretary's handwritten notes of the August 29 meeting were produced by Plaintiffs and state the following: Meeting with Ernie Green Monday, August 29, 1994 10:00 - 10:45 Design. Bonding Authority -- Advis. Comm. & Staff rec. - Looked at 8 who bid - Interviewed final 3 - maj. but not unanimous (higher ed. work) Grigsby, Brandford & Co. -- & A.H. Williams & Co. (45% non-minority) Prior, McLendon, Count Co. -- (Minority owned to core) (N.Y. & Atla.) Howard Tugaloo) bond work for them) M.R. Bealle - N.Y.


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