B.K. Instrument, Inc. v. U.S.

Decision Date04 August 1983
Docket NumberD,No. 1546,1546
Citation715 F.2d 713
Parties31 Cont.Cas.Fed. (CCH) P 71,390 B.K. INSTRUMENT, INC., Plaintiff-Appellant, v. UNITED STATES of America, Caspar Weinberger, Secretary of Defense, L.F. Skibbie, Commanding General, U.S. Army CECOM, American Kal Enterprises, Inc., Defendants-Appellees. ocket 83-6124.
CourtU.S. Court of Appeals — Second Circuit

Gregory E. Ronan, New York City (Max E. Greenberg, Cantor & Reiss, Lester E. Rivelis and Robert J. Miletsky, New York City, on the brief), for plaintiff-appellant.

Patrick B. Northup, Asst. U.S. Atty., Brooklyn, N.Y. (Raymond J. Dearie, U.S. Atty., E.D.N.Y., Miles M. Tepper, Asst. U.S. Atty., Brooklyn, N.Y., of counsel), for defendants-appellees.

Before FRIENDLY, OAKES and CARDAMONE, Circuit Judges.

FRIENDLY, Circuit Judge:

This expedited appeal from an order of Chief Judge Weinstein in the District Court for the Eastern District of New York, which comes to us on a meagre record, raises important questions concerning litigation between a disappointed bidder for a Government contract and the United States.

The Facts and the Proceedings in the District Court

The facts, to the extent they are revealed by the complaint and plaintiff's motion for a temporary injunction, are as follows: On November 15, 1982, the Commander, U.S. Army Communications--Electronics Command (CECOM), Tactical Radio Branch, headquartered at Fort Monmouth, N.J., issued Solicitation No. DAAB07-83-B-B026, which sought the submission of bids for a quantity of TK-100/G electronic tool kits. The Solicitation provided that bids would be received until December 20, 1982, and opened on that date.

Plaintiff B.K. Instrument, Inc. (BK) submitted a bid of $479,776. One of the representations in the many page Solicitation was filled out as follows:

K. 1. SMALL BUSINESS (See par. 14 on SF 33-A.)

He (X) is, ( ) is not, a small business concern. If offeror is a small business concern and is not the manufacturer of the supplies offered, he also represents that all supplies to be furnished hereunder ( ) will, (X) will not, be manufactured or produced by a small business concern in the United States, its possessions, or Puerto Rico.

Paragraph 14 of Standard Form (SF) 33-A (Rev. 11-81) reads as follows:

SMALL BUSINESS CONCERN. A small business concern for the purpose of Government procurement is a concern, including its affiliates, which is independently owned and operated, is not dominant in the field of operation in which it is submitting offers on Government contracts, and can further qualify under the criteria concerning number of employees, average annual receipts, or other criteria, as prescribed by the Small Business Administration. (See Code of Federal Regulations, Title 13, Part 121, as amended, which contains detailed industry definitions and related procedures).

The cover sheet to the Solicitation notified bidders that this procurement contract contained a provision for a 100% set-aside for small businesses. Section L. 67, Solicitation at p. L-6, incorporated by reference the definition of this set-aside as contained in Defense Acquisition Regulation (DAR) 7-2003.2, 32 C.F.R. § 7:469 (1982). This regulation explained that a manufacturer or regular dealer [small business concern] submitting offers in his own name must agree to furnish in the performance of the contract end items manufactured or produced by small business concerns.

Authority for restricting invitations for solicitations to small businesses is provided by the Small Business Act, 15 U.S.C. § 631 et seq. (1976 & Supp. V 1981), and the Armed Services Procurement Act, 10 U.S.C. § 2301 et seq. (1976 & Supp. V 1981). See Kinnett Dairies, Inc. v. Farrow, 580 F.2d 1260, 1263 n. 3 (5 Cir.1978).

According to an affidavit by Eugene F. Murphy, BK's executive vice-president and general manager, he was advised by a Mr. Daniels on behalf of the Army on or about March 18, 1983, that in BK's bid the "will not" box concerning subcontractors had been checked. The affidavit avers that Murphy orally advised Daniels that BK intended and agreed to furnish and purchase only end items produced or manufactured by small business concerns. On March 18, Murphy confirmed this in a letter to the Defense Contract Administration in Garden City, N.Y., with a copy sent to Daniels at Fort Monmouth, N.J. The letter concludes, "I trust that this satisfies the immediate question concerning our offer."

Murphy's affidavit also alleges that on April 6, 1983, he met with a Government contracting officer, Ms. Maureen E. Cook, advised her that the bid form had been erroneously checked, and further advised that BK "would immediately file a bid protest with the Comptroller General, if her determination of ineligibility were not reversed." Although BK's papers are unclear in this respect as in others, Murphy seems to have left with the contracting officer a new page in which the "will" rather than the "will not" box concerning subcontractors was checked. It is said that despite this the Army, by a letter of April 14, 1983, which is not in the record, ruled that BK was ineligible. Murphy avers that, upon receiving the Army's April 14 letter on April 19, 1983, BK immediately filed a protest with the Comptroller General, 1 and sent a copy to the contracting officer. Despite this, according to Murphy, he learned on April 26, 1983 that the contract had been awarded to American Kal Enterprises, Inc. (Am Kal), whose bid was higher by $14,979. It is undisputed that the award to Am Kal occurred on April 14.

On May 2, 1983, BK instituted this action against the United States, the Secretary of Defense, the Commanding General of U.S. Army CECOM (the U.S. defendants) and Am Kal. There is no indication that process has ever been validly served on Am Kal. The complaint asserted that in refusing to allow BK to correct its bid and in awarding the contract to Am Kal, the U.S. defendants had violated section 724 of the Defense Appropriations Act of 1981, Pub.L. No. 96-527, 94 Stat. 3068, 3085-86 (1980), which requires that contracts let under this statute be awarded to the lowest responsible bidders 2 and had acted arbitrarily, capriciously and without substantial basis in violation of DAR 2-407.8(b), 32 C.F.R. § 2:41 (1982). BK sought an order declaring itself to be a responsive bidder, enjoining the Government from relying on its determination of non-responsiveness, declaring BK to have been the lowest responsive, responsible bidder under Solicitation No. DAABO7-83- B-B026 and directing the award of any contract thereunder to BK, vacating the award to Am Kal, and, presumably in the alternative, awarding BK its bid preparation costs.

BK submitted along with the complaint an order requiring defendants to show cause why injunctive relief should not be granted and restraining the defendants from proceeding under the contract awarded to Am Kal pending the hearing of the motion for an injunction. The district court did not sign the order to show cause but heard counsel for BK and the U.S. defendants on May 2, 1983. No papers seem to have been submitted by the U.S. defendants. Most of the discussion concerned BK's standing and the supposedly exclusive jurisdiction of the Claims Court. The court announced that it would dismiss "on the ground of lack of jurisdiction following what it understands the ruling case law in Edelman", to wit, Edelman v. Federal Housing Administration, 382 F.2d 594 (2 Cir.1967), and also that "[e]ven if there were jurisdiction, the Court would dismiss on the merits since the Government followed its own regulations exactly." An order dismissing the complaint with prejudice was entered on the same day. On May 26, 1983, the Comptroller General dismissed BK's protest without passing on the merits, in accordance with his practice that a judicial dismissal with prejudice constitutes a final adjudication on the merits barring further action by him.

BK appealed from the district court's order of dismissal. It moved in this court for a stay of performance of the contract pending appeal or, in the alternative, for an expedited appeal. On May 24, 1983, another panel denied the former motion but granted the latter. Unhappily the multitude and difficulties of the legal questions and our desire to circulate the opinion to all active judges of the court because our rulings on standing and waiver of sovereign immunity depart from positions previously taken * have prevented an earlier decision.

Standing

In holding that BK lacked standing, the district court relied on a passage in this court's opinion in Edelman v. Federal Housing Administration, supra, 382 F.2d at 597, reading as follows:

[I]t is well established that an unsuccessful bidder has no standing in a suit to challenge the legality of the bidding procedure. Perkins v. Lukens Steel Co., 310 U.S. 113 [60 S.Ct. 869, 84 L.Ed. 1108] (1940); Fulton Iron Co. v. Larson, 171 F.2d 994 ( [D.C.Cir.] 1948); Heyer Products Co. v. United States, [140 F.Supp. 409 (1956) ]. Bidding procedures are for the benefit of the public generally and confer no private rights on the bidder. It avails appellant nothing to assert that he is not an unsuccessful bidder because Tally's bid was void; this is the issue which he is barred from litigating.

Although the quotation was apposite, developments in the law of standing since 1940 have deprived the Lukens case and consequently Edelman of precedential value with respect to a situation like that here at issue.

Lukens was not an action by a low bidder to enjoin an award to a higher one but a suit by seven iron and steel producers to enjoin the Secretary of Labor, five other members of the Cabinet and all government procurement officials from applying regulations which defined the term "locality" in the minimum wage provision of the Public Contracts (Walsh-Healey) Act of 1936, § 1(b), 49 Stat. 2036, 2036-37 (current version at 41 U.S.C. § 35), as dividing the...

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