ATL, Inc. v. U.S.

• Decision Date: 25 May 1984
• Docket Number: Nos. 84-762,84-813,s. 84-762
• Citation: 736 F.2d 677
• Parties: 32 Cont.Cas.Fed. (CCH) 72,528 ATL, INC., Appellee/Cross-Appellant, v. The UNITED STATES, Appellant/Cross-Appellee. Appeal
• Court: U.S. Court of Appeals — Federal Circuit

Page 677

736 F.2d 677

32 Cont.Cas.Fed. (CCH) 72,528

ATL, INC., Appellee/Cross-Appellant, v. The UNITED STATES, Appellant/Cross-Appellee.

Appeal Nos. 84-762, 84-813.

United States Court of Appeals Federal Circuit.

May 25, 1984.

Helene Goldberg, Washington, D.C., for appellant; Richard K. Willard, Acting Asst Atty. Gen. and David M. Cohen, Director, Washington, D.C., on brief.

Herman M. Braude, Washington, D.C., for appellee; Gerson B. Kramer and Douglas L. Patin, Washington, D.C., on brief.

Before MARKEY, Chief Judge, and DAVIS, KASHIWA, BENNETT and SMITH, Circuit Judges.

EDWARD S. SMITH, Circuit Judge.

In this pre-award Government contracts case appellant/cross-appellee, the United States Government, appeals from an order of the United States Claims Court enjoining the United States Department of the Navy (Navy) from awarding to any entity other than appellee/cross-appellant ATL, Inc. (ATL), four Navy contracts on which ATL was low bidder, until the Navy affords ATL a new and proper hearing concerning the Navy's suspension of ATL from all Government procurement action. ATL cross-appeals from the Claims Court order on the grounds that the Claims Court should have ordered award of the four contracts to ATL instead of a new hearing. We affirm in part and reverse in part. In particular, we affirm continuation of the injunction until the Navy affords ATL a proper proceeding, consistent with this opinion.

Issues

We face first the question whether the Claims Court properly exercised jurisdiction over ATL's suit. Secondly, we treat the issue whether the Claims Court correctly determined that the Navy denied ATL due process in its suspension procedure, particularly as regards its denial of a full hearing. Finally, we address the relief which the Claims Court ordered, including ATL's cross-appeal.

Background

1. Events Leading to ATL's Filing Suit

A summary of the many facts material to this appeal is as follows: ¹ ATL is a Hawaiian construction contractor and a small business concern whose work is done almost entirely with the Federal Government. In the first part of 1983 ATL submitted what turned out to be low bids in response to four separate Navy invitations for bids for construction work to be performed in the Honolulu area. The Navy office issuing the bid invitations was the Office in Charge of Construction for the Mid-Pacific Region of the United States Navy (OICC MIDPAC or OICC), the chief of which was Navy Capt. Michael Dallam. The bid opening dates for the contracts were in March and April 1983.

Normally, ATL as low bidder would expect acceptance of its bid within 60 days of its opening. However, OICC twice requested ATL to extend the acceptance period for its first two March bids, ultimately until July 31. Similar extension requests followed concerning ATL's third and fourth bids. ATL also received at least two OICC requests for further information on its technical ability to perform some or all of the bids, which information ATL in each instance promptly provided. Finally, having once already rebuffed ATL's request for a meeting on the delayed awards, OICC scheduled such a meeting on July 6 to address ATL's technical ability to perform all four awards. This meeting was held with favorable results for ATL on three of the four contracts; the Navy retained questions concerning ATL's technical ability to perform one of the contracts. No mention was made at the meeting of Navy concerns about ATL's integrity. On the same day, July 6, 1983, ATL was filing suit in the Claims Court in Washington, D.C.

Meanwhile, unbeknownst to ATL, since early 1983 the Naval Investigating Service (NIS) had been investigating ATL for certain charges alleging misconduct in performance of ongoing and prior contracts. Upon referral by the NIS, both the Federal Bureau of Investigation and the U.S. attorney in Hawaii also began investigating ATL. The charges had originally come to the attention of Captain Dallam, who had referred them to the NIS.

As it became apparent in March and April 1983 that ATL was low bidder on four new Navy contracts, OICC recognized that allegations impugning ATL's integrity were in investigatory hands beyond those of OICC, which was immediately responsible for awarding the bids. Since by law and regulation the Navy is constrained to award bids to "responsible" ² bidders, the results of the U.S. attorney/FBI investigation, which at that point OICC expected in late April, were highly relevant. Accordingly, OICC focused on the "non-integrity" aspects of its routine pre-award surveys conducted to assure the Navy that the low bidder is indeed "responsible." Both April and May came and went, however, and, although OICC learned that the U.S. attorney intended to submit the ATL case to a grand jury, this had still not occurred by mid-June. Meanwhile, OICC's routine pre-award surveys had unearthed no reason for not awarding ATL any of the four bids.

By this time Captain Dallam, as OICC chief, was personally involved in the ATL matter. Most significantly, on June 16 he visited the U.S. attorney in Honolulu. There he learned that the criminal investigation of ATL would continue for several months and that an indictment was not imminent. The U.S. attorney cautioned Captain Dallam against OICC's prematurely disclosing evidence to ATL which might prove useful in a criminal investigation later. Accordingly, on the same day (June 16), Captain Dallam instructed his staff attorney to prepare the necessary papers for the captain to recommend to his superiors in Washington that ATL be suspended from all Government contract awards for lack of integrity.

Captain Dallam did not forward the ATL suspension recommendation to Washington until July 1. In the interim he weighed whether suspension was the appropriate route, or whether he should instead reject ATL's four bids for nonresponsibility due to lack of integrity. The latter procedure would allow ATL to appeal the rejection to the Small Business Administration (SBA). Captain Dallam met with SBA representatives and confirmed that if he rejected ATL's bids and ATL appealed to the SBA, the SBA would disclose to ATL the reasons and evidentiary record for the rejection so that ATL could respond. ³ Because of this, Captain Dallam decided instead to recommend suspension so as to minimize or eliminate the need to disclose to ATL evidence which the U.S. attorney might later use in a criminal investigation.

2. Events After ATL Filed Suit

ATL's complaint, filed in the Claims Court on July 6, 1983, requested a cut-off date on the Navy's responsibility review of ATL and, if necessary, referral to the SBA. On July 12 the Claims Court denied ATL immediate equitable relief but set a date for trial, July 18, at which ATL was to attempt to prove that the Navy's delays constituted a de facto debarment or suspension. ⁴ Before the trial, however, Adm. J.G. Williams, Jr., chief of Naval Material in Washington, D.C., informed ATL, by letter dated July 15, that the Navy was suspending ATL from further contracting with any Federal Government agency. OICC immediately thereafter awarded contracts on three of the four solicitations on which ATL had been low bidder, to other bidders. On July 18 the Claims Court preliminarily enjoined the Navy from awarding any of these four contracts to entities other than ATL or from permitting work by entities other than ATL to proceed. ⁵ The Claims Court ordered a trial on July 19, the result of which was a detailed opinion of August 9, 1983, continuing the injunction and requiring the Navy to provide ATL with a fair hearing. ⁶

The Navy's suspension letter of July 15 to ATL listed nine items reflecting alleged lack of integrity, but the chief of Naval Material subsequently continued the suspension based on only two items, set forth in the opinion here reviewed. ⁷ Briefly, these concerned (1) knowingly false certifications to the Government that workers on one of the contracts were being paid wages in accordance with the Davis-Bacon Act, and (2) receipt of payment for shaft walls to enclose air conditioning ducts in the women's head, which walls were never installed. As it developed, the first item involved a disgruntled subcontractor and a question whether ATL officials, who had allegedly merely forwarded the supposedly false certification involving that subcontractor's employees to the Government, were aware of the alleged falsehoods. ⁸ The second item turned out to involve such a small sum, as well as various mitigating factors, as to make it unclear whether the Navy would have sustained the suspension on that ground alone. ⁹

The July 15 suspension letter also informed ATL that "no factfinding proceeding will be conducted as the result of a request from the United States Attorney in Hawaii," but that ATL could "present information in opposition to this suspension in person, in writing, or through representation as set forth in DAR [Defense Acquisition Regulation] 1-606.3(c)(5)." ¹⁰ On September 7 ATL did make a presentation to the Navy Debarment Committee, at which the only witnesses were ATL's. Prior to this presentation ATL had requested that the Navy present it with various facts and documents concerning the suspension charges. ¹¹ The Navy refused on the grounds that the suspension letter sufficiently placed ATL on notice of the charges and disclosure of further evidence would be contrary to the U.S. attorney's request. The Navy also informed ATL, pursuant to its request, that the members of the Navy Debarment Committee were the same individuals who had previously recommended ATL's suspension.

After the September 7 proceeding, ATL received letters dated December 2, 1983, from the chief of Naval Material that ATL's suspension would continue, based on two of the original nine charges. ATL amended and filed again its complaint in the Claims Court which, in the decision of January 6, 1984, here under review, ordered that the Navy afford ATL a "new...