883 F.2d 146 (D.C. Cir. 1989), 89-5041, CC Distributors, Inc. v. U.S.

Docket Nº:89-5041, 89-5042
Citation:883 F.2d 146
Party Name:CC DISTRIBUTORS, INC. and Whitman Distributing Company, Appellants, v. UNITED STATES of America, et al.
Case Date:August 22, 1989
Court:United States Courts of Appeals, Court of Appeals for the District of Columbia Circuit

Page 146

883 F.2d 146 (D.C. Cir. 1989)

CC DISTRIBUTORS, INC. and Whitman Distributing Company, Appellants,


UNITED STATES of America, et al.

Nos. 89-5041, 89-5042

United States Court of Appeals, District of Columbia Circuit.

August 22, 1989

Argued May 23, 1989.

Page 147

Appeal from the United States District Court for the District of Columbia (Civil Action Nos. 89-00054 & 88-03663).

George W. Miller, with whom John G. Roberts, Jr., Robert G. Fryling, John W. Fowler, Jr., and Holly A. Brown, Philadelphia, Pa., were on the joint brief, for appellants.

Susan Nellor, Asst. U.S. Atty., with whom Jay B. Stephens, U.S. Atty., John D. Bates, and R. Craig Lawrence, Asst. U.S. Attys., Washington, D.C., were on the brief, for appellees.

Before ROBINSON, D.H. GINSBURG and SENTELLE, Circuit Judges.

Opinion for the Court filed by Circuit Judge D.H. GINSBURG.

D.H. GINSBURG, Circuit Judge:

The Air Force established the Contractor Operated Civil Engineer Supply Stores (COCESS) program in the early 1970s, in the expectation that privately operated stores could supply materials for Air Force civil

Page 148

engineers more efficiently than could the Government's internal supply system. Under the COCESS program, each Air Force base prepared a list of so-called "pre-priced" materials that it expected to need. The Air Force then incorporated this list of materials into the COCESS contract for that base, and the contractor was obligated to supply such items at the specified contract price. "Non-priced" materials, by contrast, were not identified prior to the contract award, due to uncertainty as to whether the particular base would need them. The private contractor would therefore negotiate price and delivery terms with suppliers of such items as the need for them arose.

In April 1988, the Department of Defense determined not to renew existing contracts for the procurement of "non-priced" materials, opting instead to bring this aspect of the COCESS program in-house. With respect to "pre-priced" materials, DOD left it up to individual Air Force base commanders to decide whether a private supply operation would be economically viable.

Plaintiffs-appellants C C Distributors, Inc. (CCD) and Whitman Distributing Co., private firms that each hold several COCESS contracts, sought to enjoin DOD from converting the stores from contractor to in-house operations. The district court dismissed their complaints on the ground that they lack standing or, in the alternative, that the challenged action is committed to the unreviewable discretion of the Secretary of Defense; the court accordingly held that plaintiffs' motions for preliminary injunction are moot.

We conclude that the district court erred in its analyses of both standing and reviewability. Accordingly, we reverse and remand for the district court to consider the plaintiffs' motions for preliminary injunction.


    The impetus for this litigation is a Decision Memorandum, issued by Assistant Secretary of the Air Force Tidal McCoy, announcing change in the COCESS program. Although the Memorandum did not allege any wrongdoing by plaintiffs in particular, it did state that "the COCESS program has been plagued by allegations of fraud and administrative difficulties"--problems confirmed by the Air Force Acquisition Management Review Board as well as by the General Accounting Office. The GAO went so far as to recommend discontinuance of COCESS. Secretary McCoy observed that government employees normally exercise procurement discretion to assure "timely acqui[sition of] goods and services at a fair and reasonable price" but that with respect to nonpriced materials, private contractors under the COCESS program had exercised "procurement discretion normally reserved to government personnel." In order to assure the proper exercise of such discretion by private contractors, the Air Force had been required to review the price and delivery terms of each such purchasing decision.

    The Secretary leveled two criticisms at this review process. First, it "imposes a substantial administrative burden on Air Force contract administrators," forcing the Government, in effect, to "pay[ ] twice to ensure that it obtains a fair and reasonable price.... In accepting this extra cost in the past, [it] has implicitly recognized that the exercise of procurement discretion is a government function." Second, this additional layer of review had been less than fully effective; "excessive prices may have been charged to the Air Force as the result of fraud despite the additional effort expanded [sic ]."

    For these reasons, the Air Force concluded that "the procurement function, i.e., the acquisition of non-priced materials, should not be performed by a contractor"; furthermore, because the Government Operated Civil Engineer Supply Stores (GOCESS) program in effect at some bases had "proven to be an efficient, timely, and cost effective means of exercising the government's procurement discretion," it would replace the COCESS program. The Secretary added that, although government employees "need not necessarily" take over the supply of pre-priced materials, it was unclear

    Page 149

    whether such materials alone, accounting for only about 30 percent of all materials purchased, could support a private contract operation.

    Accordingly, the Secretary directed that:

    [E]xisting COCESS contracts will not be extended. Before the expiration of these contracts, installation commanders will determine whether the requirements for pre-priced materials will support a contract operation [at their particular base]. If not, then the entire COCESS operation [at that base] should be converted to in-house performance. If [so, then] an appropriate solicitation for pre-priced ... material ... should be developed.

    Thus, conversion of COCESS will apparently take place without recompetition amongst private contractors and without studies designed to compare the costs of private performance against in-house performance; the conversions that have occurred so far confirm this inference.

    CCD and Whitman each filed a complaint in the district court, alleging that conversion of COCESS to an in-house operation violates, inter alia, the National Defense Authorization Act for Fiscal Year 1987, DOD procurement regulations, and OMB Circular A-76; they sought both declaratory and injunctive relief. At the time of suit, CCD held nine and Whitman held eighteen COCESS contracts with expiration dates ranging from December 31, 1988 to October 31, 1989.

    The district court granted the Government's motion to dismiss both complaints on two independent grounds. As to standing, the court initially concluded that CCD and Whitman lacked constitutional standing in that neither firm had established "any injury-in-fact or any reasonable likelihood that [they] will ultimately get any contracts" even if "recompetitions occur and cost comparison studies are performed." The court also found that plaintiffs failed the prudential test for standing because they "were not intended beneficiaries of any Congressional action in this area...." In the alternative, the court stated: "Decisions about whether something is a commercial activity or a governmental activity or whether it [i]s feasible to perform [procurement of non-priced materials] in-house are all totally discretionary terms that do not provide any law" for the court to apply and, hence, are unreviewable.


    A plaintiff in federal court must "have 'standing' to challenge the action sought to be adjudicated in the lawsuit," and "[t]he term 'standing' subsumes a blend of constitutional requirements and prudential considerations." Valley Forge Christian College v. Americans United for Separation of Church and State, 454 U.S. 464, 471, 102 S.Ct. 752, 757-58, 70 L.Ed.2d 700 (1982).

    1. Constitutional Standing

      In order to invoke "the judicial Power" provided in Article III of the Constitution, a plaintiff must " 'show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant,' and that the injury 'fairly can be traced to the the challenged action' and 'is likely to be redressed by a favorable decision.' " Id. at 472, 102 S.Ct. at 758-59 (citations omitted; emphases added).

      1. Injury. Plaintiffs allege generally that the Air Force's decision will have dire economic consequences for their businesses--specifically, that the decision "substantially threatens the survival" of plaintiffs as "viable business entit[ies]." For the present purpose of establishing their constitutional...

To continue reading