Descomp, Inc. v. Sampson

• Decision Date: 03 June 1974
• Docket Number: Civ. A. No. 4773.
• Citation: 377 F. Supp. 254
• Parties: DESCOMP, INC., Plaintiff, v. Arthur SAMPSON, Administrator of the General Services Administration, Defendant.
• Court: U.S. District Court — District of Delaware

377 F. Supp. 254

DESCOMP, INC., Plaintiff, v. Arthur SAMPSON, Administrator of the General Services Administration, Defendant.

Civ. A. No. 4773.

United States District Court, D. Delaware.

June 3, 1974.

COPYRIGHT MATERIAL OMITTED

Jacob Kreshtool and John S. Grady of Bader, Dorsey & Kreshtool, Wilmington, Del., for plaintiff.

John H. McDonald, Asst. U. S. Atty., Wilmington, Del., and Harold C. Nystrom, Atty., Dept. of Labor, Washington, D.C., of counsel, for defendant.

OPINION

LATCHUM, Chief Judge.

Descomp, Inc. ("Descomp") is a Delaware corporation with its principal place of business located at Bear, Delaware. Descomp is engaged in the business of gathering information from documents and transcribing it in the form of symbols onto punch cards or magnetic tape, an operation commonly known as keypunching. It has engaged in this business since 1969.

On March 14, 1973, the General Services Administration ("GSA") offered for bid a contract for the transcription of certain data onto punch cards and tape, solicitation number 3FP-A5-N-3473-12-73.

One of the conditions of the soliciation was that bidding parties had to agree to pay their keypunch employees at the prevailing wage rate for keypunch operators in the Washington, D. C. area. This condition was based upon the belief of GSA and the Department of Labor that the provisions of the Service Contract Act of 1965 ("the Act"), 41 U.S.C. §§ 351-358, were applicable. Descomp submitted a bid which included wage rates for its keypunch operators based upon rates prevailing in the Washington, D.C. area. Descomp also filed a protest over the wage provision with the Department of Labor which was disallowed on May 1, 1973. Descomp filed an appeal with the General Accounting Office ("GAO") pursuant to 4 CFR Part 20 and this protest was also disallowed on November 28, 1973.

Descomp then filed a complaint in this court on December 3, 1973, seeking a declaration that the wage determinations to be applied under the Act should have been those of the Wilmington, Delaware area rather than the Washington, D.C. area, and also seeking preliminary injunctive relief to prevent the contract from being awarded on February 4, 1974 as scheduled until the wage determination issue had been settled. Later Descomp amended its complaint to seek a declaration that the Act is inapplicable to a contract for keypunch services and also asked for damages of $3,600 in bid preparation costs, $3,000 for the expenses involved in prosecuting its protests, and $3,000 in attorney fees. Descomp alleged jurisdiction under 5 U.S.C. § 702 and 28 U.S.C. § 1346(a)(2).

After a hearing, the Court on January 18, 1974 denied Descomp's motion for a preliminary injunction, holding that although Descomp had demonstrated a likelihood of success on the merits, the requisite showing of irreparable harm had not been made. Thereafter, the Court set the matter down for trial to the Court on May 6, 1974. Most of the facts in the case are undisputed and were introduced into evidence by stipulation and affidavits. The May 6 hearing was confined for the most part to the question of damages.

The Act establishes standards for minimum compensation and safety and health protection of employees working for contractors and sub-contractors performing service contracts entered into with the Federal Government. Under its provisions, every bid specification subject to the Act must contain a stipulation requiring, inter alia, that specified minimum monetary wages and fringe benefits determined by the Secretary of Labor ("the Secretary") based on wage rates and fringe benefits prevailing in the locality be paid to service employees engaged by the contractor or sub-contractor. By its terms, the Act applies to contracts entered into by the United States, in excess of $2,500, the principal purpose of which is to furnish services in the United States through the use of service employees.

The procedure ordinarily used by GSA in preparing a solicitation for bids is as follows: The Procurement Division of GSA is notified by another GSA division of its requirements.¹ An initial determination is then made as to whether or not the Act is applicable to the prospective contract. If this determination is in the affirmative, GSA sends Standard Form 98, a Notice of Intention to Make a Service Contract and Response to Notice ("SF 98"), to the Department of Labor, Wage and Hour and Public Contract Divisions ("WHPC").² If WHPC agrees that the Act applies to the contract, it returns the SF 98 and attaches wage determinations for the services to be rendered under the contract.³ This procedure is in accord with the guidelines set forth in 41 CFR § 1-12.905-3.

GSA did follow its general procedure in the instant case. It made an initial determination that a contract for keypunching would be covered by the Act. On the SF 98 sent to WHPC on March 6, 1973, GSA listed the services to be performed as "keypunching and verifying of `IBM' Cards for the period July 1, 1973 through June 30, 1974," listed the service employees as "keypunchers" and "verifiers," and listed the place of performance as "D.C. Metropolitan area; Va., Portsmouth, Arl., Fairfax; Md., Montgomery, Prince Georges & Frederick Counties."⁴ In its Response to Notice, WHPC attached a list of wage determinations for keypunch operators in the above listed areas. Thereafter GSA issued the invitation to bid which stipulated that the wages to be paid to keypunch operators were those prevailing in the greater Washington, D.C. area.

Descomp contends that the Act is not applicable for two reasons. First, because the contractor will be producing materials, namely punched cards, the service involved in this contract is merely incidental to the manufacture and furnishing of materials. Second, keypunch operators are not "service employees" within the meaning of the Act in that the Act was intended to be limited to "blue-collar" employees while keypunch operators are in the nature of clerical or "white collar" employees. Descomp further argues that even if the Act were applicable to the contract in question, the wage determination for keypunch operators should have been based upon wages prevailing in the area of Wilmington, Delaware rather than Washington, D.C.

Before addressing the substantive issues, the Court must consider two procedural issues raised by the Government, first, that Descomp lacks standing to challenge the determination of wage rates, and second, that the Secretary has been vested with the responsibilities of determining the applicability of the Act to Government contracts and his determination is either not judicially reviewable or the scope of review is quite limited.

1. Standing.

It is the Government's position that:

"The history and language of the Service Contract Act indicate that Congress was exclusively concerned with protection of the wage rates of service employees and did not contemplate any right on the part of aggrieved bidders. Thus, Descomp, not being within the zone of interest protected by the statute, is not entitled to recover damages for failure to adhere to the provisions of the statute."⁵

The Court does not agree with this analysis. Two Supreme Court opinions, Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 90 S.Ct. 827, 25 L.Ed.2d 184 (1970) and Barlow v. Collins, 397 U.S. 159, 90 S.Ct. 832, 25 L.Ed.2d 192 (1970), establish a two-fold test for determining standing to challenge action of a governmental agency. First, the plaintiff must allege injury in fact, economic or otherwise, and second, the plaintiff must establish that he falls within the zone of interest protected by the statute or regulation upon which he relies.

Descomp has clearly met the first criterion by its allegation that it has suffered monetary damages in bid preparation costs and in lost profits it allegedly would have received had it been able to submit a bid which reflected Wilmington, Delaware wage levels for keypunch operators. As for the second criterion, Judge Gibbons writing for the Third Circuit Court of Appeals in Merriam v. Kunzig, 476 F.2d 1233 (C.A. 3, 1973), cert. den. Gateway Center Corp. v. Merriam, 414 U.S. 911, 94 S.Ct. 233, 38 L.Ed.2d 149 (1973), stated that a bidder is within the zone of interest provided by the procurement statute, 41 U. S.C. § 253, which provides:

"Whenever advertising is required—

(a) The advertisement for bids shall be made a sufficient time previous to the purchase or contract, and specifications and invitations for bids shall permit such full and free competition as is consistent with the procurement of types of property and services necessary to meet the requirements of the agency concerned.

(b) All bids shall be publicly opened at the time and place stated in the advertisement. Award shall be made with reasonable promptness by written notice to that responsible bidder whose bid, conforming to the invitation for bids, will be most advantageous to the Government, price and other factors considered: Provided, That all bids may be rejected when the agency head determines that it is in the public interest so to do."

Judge Gibbons stated a reading of both subsections evinces a clear legislative policy to invite as wide and free a competition as possible, and because of this policy "the statute protects not only the Government's interest in securing advantageous contracts, but also the interests of those responding to the Government's invitation to do business with it." Id. at 1242. See also Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App.D.C. 371, 424 F.2d 859 (1970) and Keco Industries, Inc. v. United States, 428 F.2d 1233, 192 Ct.Cl. 773 (1970). In light of the above authorities the Court concludes that Descomp has standing to allege that it suffered injury when it was forced to submit a non-competitive bid by GSA's requirement that the wages to be paid to Descomp's employees must be those prevailing in the...