Heyer Products Company v. United States, 96-55.

CourtCourt of Federal Claims
Citation140 F. Supp. 409
Docket NumberNo. 96-55.,96-55.
Decision Date01 May 1956

Carl L. Shipley, Washington, D. C., for plaintiff.

Herman Wolkinson, Washington, D. C., with whom was Acting Asst. Atty. Gen. George S. Leonard, for defendant. Francis J. Robinson, Arlington, Va., was on the briefs.

Before JONES, Chief Judge, and LITTLETON, WHITAKER, MADDEN and LARAMORE, Judges.


This case is before the court on defendant's motion to dismiss plaintiff's petition on the ground that it does not state a cause of action.

The material allegations of the petition are as follows: On March 17, 1952, the Ordnance Tank Automotive Center, Ordnance Corps, United States Army (hereinafter referred to as OTAC) advertised for bids on 5,500 low-voltage circuit testers. On April 15, 1952, plaintiff submitted a bid, together with a sample unit and a letter of explanation, a photograph of the completed unit, a schematic diagram showing the circuit connections, and a specification describing the unit in detail. It alleges that its bid of $205,975 was the low bid, and that it was and is a responsible bidder; but that the Government, nevertheless, awarded the contract to a bidder whose bid was higher than the bids of six other bidders, including the plaintiff, and $190,043 higher than plaintiff's low bid of $205,975.

Plaintiff alleges that the failure of defendant to award it the contract "was the result of a deliberate artifice to retaliate against plaintiff for testifying against OTAC at a Senate hearing in 1952; that defendant deliberately and in violation of law wished to favor the successful bidder, and that defendant's action throughout the entire transaction was arbitrary, capricious, and taken in bad faith."

As a result, plaintiff says it not only lost the $7,000 which it spent in preparing its bid, but also lost its anticipated profit on the contract of $38,000, for which amounts it sues.

Defendant moves to dismiss plaintiff's petition on the ground that it does not state a cause of action.

Plaintiff's allegation of arbitrary and capricious action and of bad faith in awarding the contract was not a reckless averment. Facts are alleged that tend to support the allegation. The very fact that the bid was awarded to a bidder whose bid was higher than the bids of six other bidders, and that it was awarded at a price almost twice the low bid, put in by a responsible bidder, makes one strongly suspect discrimination and favoritism and a failure to accept that bid which was most advantageous to the Government, as OTAC was required to do under the Armed Services Procurement Act of 1947, 62 Stat. 21, 41 U.S.C.A. § 151 et seq. This suspicion grows stronger in the light of the further facts alleged.

Three months elapsed between the opening of the bids and the award of the contract. In the meantime, plaintiff's president had appeared before the Select Committee on Small Business of the United States Senate in connection with the rejection of a prior bid of the Heyer Products Company for 3,000 low-voltage circuit testers, and in that hearing he had testified that that contract had been awarded to Weidenhoff Company, who was higher than six other bidders and whose bid was $116,730 higher than plaintiff's low bid of $134,100. It is further alleged that after hearing this testimony, the Committee, to quote from its report (Senate Report 1092, 83d Cong., 2d sess.), which is incorporated in plaintiff's petition,—

"* * * sought to ascertain what procurement policies and procedures in use at OTAC could possibly result in passing up the Heyer low bid to award this contract to the seventh high bidder at almost double the low bid price. This was of particular interest to your committee as the evidence revealed that Heyer had built thousands of low-voltage testers for commercial use, and some 52,000 for military use during World War II, and that Heyer had been a well-known manufacturer of automotive test equipment for 25 years, having built equipment for many of the leading companies in the automotive field, including Ford, Goodyear, Goodrich, Firestone, Willard, Exide, Atlas, Autolite."

After hearing testimony of representatives of the Ordnance Corps, the Select Committee on Small Business made a report (Senate Report 2070, 82d Cong., 2d sess., p. 13), released April 28, 1952, quoted in the petition, in which it said:

"The representatives of Army Ordnance who appeared before your committee to explain * * * why the Heyer bids had been rejected did not give convincing explanations."

After his testimony and the report of the Select Committee, the petitioner alleges that, in retaliation for his appearance before the Select Committee, the award of the present contract in suit was again made to the same Weidenhoff Company, whose bid again was higher than the bid of six other bidders, and $190,043 higher than plaintiff's low bid of $205,975. Plaintiff alleges that this was done in brazen defiance of the provisions of the Armed Services Procurement Act of 1947, requiring the acceptance of that bid which was most advantageous to the Government.

After the rejection of its bid on July 3, 1952, and the award of the contract to Weidenhoff Company, plaintiff alleges he again appeared before the Select Committee on Small Business, which conducted further hearings and made Report No. 1092, 83d Cong., 2d sess., which plaintiffs sets out in its petition. In its report the Committee set out the prior history of plaintiff's dealings with the Ordnance Department, as detailed above, and stated:

"This incredible coincidence that both on November 3, 1950 and on April 16, 1952, the contract should have been awarded to the Weidenhoff Company, whose bid in both instances was higher than the bids of six other bidders and nearly double that of the lowest bidder would seem to indicate that the officials in charge of OTAC have no wish or will to abide by the spirit and purpose of the Armed Services Procurement Act of 1947."

The committee goes on to report further that it called before it the Commanding Officer at OTAC and that this officer testified that the Heyer bid was rejected in favor of Weidenhoff because of "technical evaluation"; but that the Heyer Company "protested to your committee on the ground the technical reasons adduced by OTAC to justify its decision were insubstantial and were merely put forward as an ostensible excuse to deprive Heyer of a contract, to which he was rightly entitled by reason of his low bid, and that this was retaliation against him, for appearing at the first hearing on low-voltage circuit tester procurement."

To resolve this dispute the report states that Mr. Heyer and representatives of the Army "agreed to submit the disputed technical questions to the Detroit Testing Laboratory, an independent engineering laboratory, specializing for 50 years in testing devices to determine whether they comply with specifications;" that such a submission was made; and that the Detroit Testing Laboratory reported, among other things, that the specifications of the Ordnance Corps were not sufficiently clear, that additional requirements were superimposed in considering the bids, that the Army applied improper tests to the models submitted by bidders, and that, whether or not any of the bids met the specifications as drawn, Heyer's bid met them, if Weidenhoff's did.

From all of this the Committee concluded: "Your committee can only conclude that for some reason unknown to it, OTAC wished to favor Weidenhoff, or to eliminate Heyer. The evidence adduced above permits no other inference, unless it be attributed to gross incompetence." And finally the Committee said: "All in all, this is a shameful story."

It will thus be seen that plaintiff's petition contains sufficient allegations to make out a case of discrimination against it, and of favoritism toward Weidenhoff Company, at a loss to the Government of several hundred thousand dollars. If the allegations are true, it would seem impossible to conclude that that bid had been accepted which was most advantageous to the Government.

Notwithstanding all this, defendant says that plaintiff has no legal capacity to sue, and that its petition should be dismissed.

It has been settled beyond controversy that most statutes governing the awarding of bids by governmental agencies are enacted for the benefit of the public who are served by these agencies, and not for the benefit of the bidders, and, therefore, that bidders have no right to sue on the ground that the provisions of such an Act have been violated, in that the contract had not been...

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