Ensco Environmental Services, Inc. v. United States

• Decision Date: 18 December 1986
• Docket Number: No. 86-1264-CV-W-3.,86-1264-CV-W-3.
• Citation: 650 F. Supp. 583
• Parties: ENSCO ENVIRONMENTAL SERVICES, INC., Plaintiff, v. UNITED STATES of America; United States of America, Department of the Army; John O. Marsh, Jr., Secretary of the Army; and Colonel Robert M. Amrine, Defendants.
• Court: U.S. District Court — Western District of Missouri

650 F. Supp. 583

ENSCO ENVIRONMENTAL SERVICES, INC., Plaintiff, v. UNITED STATES of America; United States of America, Department of the Army; John O. Marsh, Jr., Secretary of the Army; and Colonel Robert M. Amrine, Defendants.

No. 86-1264-CV-W-3.

United States District Court, W.D. Missouri, W.D.

December 18, 1986.

Carl Helmstetter, Mark Thornhill, Spencer, Fane, Britt & Browne, Kansas City, Mo., for plaintiff.

Carlton M. Henson II, Gregg E. Bundschuh, Peterson, Young, Self & Asselin, Atlanta, Ga., for defendants.

MEMORANDUM AND ORDER

ELMO B. HUNTER, Senior District Judge.

The controversy in this case centers around an Army Corps of Engineers' contract to clean up a hazardous waste site in New Jersey. Plaintiff Ensco Environmental Services, Inc. ("EES Inc.") was low bidder on the contract, but was not awarded the contract. The Corps of Engineers felt that its bid was unresponsive to the bid specifications because its bid guarantee was invalid. EES Inc. then filed this action seeking an injunction preventing the Corps of Engineers from allowing the second lowest bidder to proceed and a declaration that EES Inc. is to be awarded the contract. On December 1, 1986, a hearing was held to determine whether Plaintiff was entitled to preliminary relief. At the hearing, counsel on both sides indicated a willingness to go forward on the merits in the near future. Given the urgency in beginning the clean up of the hazardous waste at the project site and since very few important facts seemed to be in dispute, the Court agreed to hold a full trial on the merits during the following week if the parties would attempt to stipulate to as many facts as possible. The parties agreed to do so. The trial was held on December 9, 1986.

JURISDICTION AND VENUE

This Court has jurisdiction pursuant to 28 U.S.C. § 1331 and 5 U.S.C. § 702. Likewise, venue is proper in the Western District of Missouri under 28 U.S.C. § 1391(e).

BACKGROUND

The Army Corps of Engineers, Kansas City District, issued invitation for bid No. DACW41-86-B-0121 on April 22, 1986. The invitation sought bids from companies interested in working on a project described as "The Tank Farm Demolition, Bridgeport Rental Oil Services Site, Logan Township, New Jersey." ("Tank Farm Project"). The Bridgeport Rental Oil Services site consists of over 90 tanks and process vessels, drums and trucks and a twelve acre waste oil and waste water lagoon. The lagoon and many of the tanks contain significant quantities of polychlorinated biphenyls ("PCBs") and a number of other hazardous substances. The site is listed as number 35 on a list of 703 hazardous waste sites prioritized for cleanup under the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq. See 40 C.F.R. § 300 app. B (1986). The work to be done on the Tank Farm Project includes, inter alia, the removal and demolition of all tanks and other structures on the site and the removal of hazardous wastes stored on the site. The Corps of Engineers became involved in the project under an interagency agreement between the EPA and the Corps.

Sealed offers to bid on the project were to be delivered to the Army Corps of Engineers office in Kansas City, Missouri, by 3:00 p.m. Local Time on September 10, 1986. Each bid was to be accompanied by a bid guarantee. The bid solicitation provisions provided that failure to furnish "a bid guarantee in the proper form and amount, by the time set for opening of bids, may be cause for rejection of the bid."¹ Tank Farm Project solicitation Provisions at SP-8. EES Inc. and three other companies submitted bids for the project. When the bids were opened on September 10, 1986, it was announced that EES Inc. had submitted the apparent low bid.

At the bid opening, all bids were given a cursory examination by the Bid Opening Officer, Mr. Ralph E. Yaple, and by an Assistant District Counsel for the Corps, Mr. Mark Collins. They found that EES Inc. had submitted an irrevocable letter of credit as its bid guarantee. Both Mr. Yaple and Mr. Collins considered this to be a somewhat unusual form for a bid guarantee since bidders generally used bid bonds, rather than letters of credit as guarantees. Because of this, Mr. Collins later examined the letter of credit in more detail. He found that the applicant of the letter of credit was a company named Environmental Systems Company of Little Rock, Arkansas ("ESC"), not EES Inc. The bid listed EES Inc. as a New York Corporation² located in North Tonawenda, New York. ENSCO, Inc. ("ENSCO") of Little Rock, Arkansas, was listed as EES Inc.'s parent corporation in the bid document. Thus, ESC, the applicant on the letter of credit was a third company, not otherwise referred to in the bid documents submitted by EES Inc.³

On September 15, 1986, Mr. Yaple called the office of EES Inc. in New York to find out the relationship, if any, between EES Inc. and ESC. He testified that he attempted to talk to Mr. Frederic M. Schwartz, the person who had signed the bid solicitation for EES Inc. However, Mr. Yaple did not reach Mr. Schwartz and instead talked with another person whose name he could not recall.⁴ Mr. Yaple testified that the person he talked with confirmed that EES Inc. was a New York corporation and that ENSCO of Little Rock was the Parent company of EES Inc. He further testified that the person told him that ESC and ENSCO were one and the same company.

On September 15, 1986, Mr. Collins contacted MBank Dallas ("MBank"), the Bank that issued the letter of credit, in order to determine if the applicant on the letter of credit (ESC) and the bidder (EES Inc.) were the same legal entity. He spoke with a Mr. Regan Stewart who informed him that he should contact a Mr. Jim Dawson. The next day, Mr. Collins spoke with Mr. Dawson who informed him that ESC was his customer and that the letter of credit was issued at ESC's request.⁵ Mr. Dawson also told him that ESC was a Delaware corporation headquartered in Little Rock, Arkansas. Mr. Collins further testified that Mr. Dawson told him that he did not know of and was not familiar with a company called ENSCO Environmental Services, Inc. of New York.

On September 18, 1986, Mr. Collins issued a legal opinion recommending that EES Inc.'s bid be rejected as nonresponsive because the applicant on the letter (ESC) of credit was not the same entity as the bidder (EES Inc.). In essence, his opinion stated that when the applicant and bidder are different entities, the bid guarantee would not be effective as against the applicant should the bidder default. He cited several decisions of the Comptroller General of the United States which supported this position. In re S & S Constructing, Comp.Gen. No. B-214927, 84-1 CPD ¶ 670 (1984); In re Future Electric Co., Comp. Gen. No. B-212938, 84-1 CPD ¶ 216 (1984); In re A.D. Roe Co., Inc., Comp.Gen. No. B-181692, 74-2 CPD ¶ 94 (1974).

On September 19, 1986, the Corps received an organizational chart from the bidder. The chart showed that ENSCO, Inc. was the parent company of EES Inc. and ESC was the parent company of ESC.⁶ It is unclear whether Mr. Collins had access to this information prior to issuing his legal opinion. However, the legal opinion makes clear that his recommendation would be the same whether the applicant and bidder were parent-subsidiary corporations or entirely independent entities.

On or around September 23, 1986, the Contracting Officer, Colonal Amrine, signed an internal document entitled "Determination and Findings"⁷ which stated that he had determined that EES Inc.'s bid was nonresponsive because the letter of credit "was not made in favor of the principal which submitted the bid." Thereafter, on September 30, 1986, the Tank Farm contract was awarded to Rollins Environmental Services, F.S., Inc., the second lower bidder.

EES Inc. telephoned the Corps on October 1, 1986, to inquire about the status of the contract and was informed that Rollins had been awarded the contract.⁸ On October 2, 1986, EES Inc. filed a formal protest of the Corps' decision with the General Accounting Office (GAO) asking the GAO to either waive the error or to allow it to submit a corrected letter of credit.⁹

The Comptroller General issued a decision on October 9, 1986, which dismissed the Plaintiff's protest as being without merit. In re ENSCO Environmental Services, Inc., Comp.Gen. No. B-224266 (Oct. 9, 1986). The decision stated that a bid guarantee which names a principal different from the bidder is materially deficient and cannot be waived as a minor error or corrected after opening. Id. Plaintiff then filed a request for reconsideration with the GAO. On October 24, 1986, the Comptroller General denied the Planitiff's request for reconsideration of its earlier decision. The Comptroller noted that the letter of credit indicated that MBank Dallas agreed to be bond "only on behalf of EES Inc.'s parent company." In re ENSCO Environmental Services, Inc., Comp.Gen. No. B-224266.2 (Oct. 24, 1986). Relying on suretyship principles, the decision stated: "it is doubtful whether the Corps could enforce the letter of credit if EES Inc. failed to carry out its obligations and as a result, the letter of credit is deficient." Id. Thereafter, on November 26, 1986, Plaintiff filed the instant action.

STANDARD OF REVIEW

It should first be noted that the Court is reviewing the actions of the Contracting Officer, not those of the Comptroller General. This is because the officer's action is considered the "final action" within the meaning of the Administrative Procedure Act. 5 U.S.C. § 500. See Simpson Electrical Co. v. Seamans, 317 F.Supp. 684, 686 (D.D.C.1970).

The parties seem to be in agreement, and the Court concurs, that the Contracting Officer's decision should not be overturned unless it was "arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). See M. Steinthal & Co. v. Seamans,...