Jets Services, Inc. v. Hoffman

• Decision Date: 04 October 1976
• Docket Number: No. 76-456-Civ-J-T.,76-456-Civ-J-T.
• Citation: 420 F. Supp. 1300
• Parties: JETS SERVICES, INC., Plaintiff, v. Martin HOFFMAN et al., Defendants,
• Court: U.S. District Court — Middle District of Florida

420 F. Supp. 1300

JETS SERVICES, INC., Plaintiff, v. Martin HOFFMAN et al., Defendants,

No. 76-456-Civ-J-T.

United States District Court, M. D. Florida, Jacksonville Division.

October 4, 1976.

COPYRIGHT MATERIAL OMITTED

Al Millar, Jacksonville, Fla., for plaintiff.

Ernst D. Mueller, Asst. U. S. Atty., Jacksonville, Fla., for defendants.

MEMORANDUM OPINION DENYING MOTION FOR A PRELIMINARY INJUNCTION

CHARLES R. SCOTT, District Judge.

JURISDICTION

The Court's jurisdiction in this cause is invoked under 15 U.S.C. Secs. 634(b)(1) and 637(a), The Small Business Act (`the Act'), and its implementing regulations; 5 U.S.C. Sec. 551 et seq., and especially Sec. 702, the Administrative Procedure Act (`the APA'); 28 U.S.C. Sec. 1331, federal question jurisdiction; and 28 U.S.C. Secs. 2201-02, declaratory judgment jurisdiction.

STATUS OF THE CASE

Plaintiff has moved the Court for interim relief in the form of a preliminary injunction pending the final outcome of this action. Originally the hearing on the preliminary injunction motion and the final hearing on the merits were consolidated, as provided by Fed.R.Civ.P. 65(a)(2). At the time of hearing, however, plaintiff sought, and defendants consented to, severance of the hearings. Hence, the final hearing in this cause has been continued until a later date.

Because a preliminary injunction is an extraordinary equitable remedy, Sampson v. Murray, 415 U.S. 61, 92 n. 68, 94 S.Ct. 937, 39 L.Ed.2d 166 (1974); Canal Authority of the State of Fla. v. Callaway, 489 F.2d 567, 573 (5th Cir. 1974), warranted only by exceptional circumstances, whether the injunction is issued or denied the Court must make clear and specific findings of fact and conclusions of law. Fed.R.Civ.P. 52(a). Granny Goose Foods, Inc. v. Brotherhood of Teamsters and Auto Truck Drivers, Local 70, 415 U.S. 423, 443, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974); Canal Authority of the State of Fla. v. Callaway, supra at 578. Consequently, as grounds for denying the motion for a preliminary injunction, the Court makes the following findings of fact and conclusions of law.

FINDINGS OF FACT

There are basically three kinds of contracting by the government: general procurement; protective procurement; and negotiated contracts. In the general procurement situation, a federal agency or department issues an invitation for bids ("IFB") from all interested parties. Pursuant to guidelines concerning IFBs, the parties competitively submit their bids and the agency or department accepts the lowest bid by a responsible bidder, in order to execute a contract. In the protective procurement situation, the set of parties invited to submit bids is less than all interested parties. Instead, only those members of a class of persons intended to be the recipients of federal assistance and protection are invited to submit bids. The Small Business Administration ("SBA") was created to assist small businesses, and one of its methods is in securing contracts for small businesses with departments and agencies of the federal government. SBA determines whether a company is in fact a small business entitled to the protection of the act, 15 U.S.C. Sec. 637(b)(6). Further, SBA assists in finding agencies and departments suitable for contracting with small businesses. An agency or department will then invite bids from all and only those small businesses that SBA has certified as competent to perform the work required by the potential contract. This instance of protective procurement is known as "a small business set-aside" because the contract is set aside for bidding by SBA small businesses only. The bidding is competitive within that class of small businesses, with the contracting agency accepting the lowest bid.

In the negotiated contract situation, there is no competitive bidding. Rather, where necessary or warranted, a federal agency or department negotiates a contract directly with a party to obtain performance of the work desired. Ordinarily, other interested parties have no participation unless, upon failure to successfully negotiate a proposed contract with the first party, the contracting agency should then turn to one of them. SBA has a program ("the 8(a) program") designed to assist small businesses owned and controlled by socially or economically disadvantaged persons. The program is established by regulations, 13 C.F.R. Secs. 124.8-1 and 124.8-2, that implement SBA's statutory authority. 15 U.S.C. Sec. 637(a)(2). In the 8(a) program SBA negotiates a contract with a contracting federal agency. In turn, SBA subcontracts its rights and obligations under the contract to a disadvantaged company that had been identified by SBA to the contracting agency at the outset of the negotiations.

Plaintiff is a small business under the Small Business Act, 15 U.S.C. Sec. 631 et seq., incorporated under the laws of Florida, with its principal place of business in Jacksonville. Through competitive bidding on a small business set-aside, plaintiff obtained a contract with the Department of Army ("the Army") to provide mess attendant services ("K-P services") at Fort Carson, Colorado. In previous years, a different contractor had held the K-P contract at Fort Carson each year. In fiscal 1973, the contract had been awarded to a contractor as the result of competitive bidding under a small business set-aside. In fiscal 1974, the Army and SBA had negotiated a contract that was subcontracted out under the 8(a) program to a disadvantaged subcontractor; but it was not renewed because of unsatisfactory performance. In fiscal 1975, the Fort Carson contract was once again a small business set-aside, reserved for competitive bidding among qualified small businesses. A different contractor won the bidding and was awarded that contract. Plaintiff's contract at Fort Carson, for fiscal 1976, ran from July 1, 1975 through May 31, 1976.

In late 1975, SBA learned that the Army intended to reduce the number of mess attendant service contracts that would be available for the 8(a) program in fiscal 1977. In fiscal 1976 there had been 29 contracts under the 8(a) program. The Army wanted to limit the number to 10 for fiscal 1977. In December, 1975, SBA and Army officials met to discuss the Army's plans. Among the 19 installations' contracts that the Army wanted to remove from the 8(a) program were those at Fort Riley and Fort Leonard Wood. After urging by SBA officials that more Army contracts be made available to disadvantaged companies under the 8(a) program, the Army urged to increase the total number to 12 by substituting Fort Campbell, Kentucky, and Fort Carson, Colorado, for the 8(a) programs being terminated at Forts Riley and Leonard Wood. SBA officials agreed to accept the substitution and to formally request that officials at Fort Campbell and Carson reserve the contracts in fiscal 1977 for negotiation with SBA under its 8(a) program. Those formal requests, required under Armed Services Procurement Regulations ("ASPR"), are known as "ASPR letters". On January 9, 1976, the acting director of SBA's office of business development sent the required ASPR letter to the chief procurement officer at Fort Carson, Colorado.

On January 20, 1976, an officer in SBA's office of business development wrote to the assistant regional director of the SBA's region IV, requesting a size determination concerning plaintiff's business. That determination was needed in order to prepare an impact statement assessing the effect upon plaintiff of removing the Fort Carson contract from competitive bidding as a small business set-aside, and placing it in the 8(a) program. On January 22, 1976, the region IV assistant director wrote to plaintiff's vice-president, requesting him to complete and return a form concerning plaintiff's size and annual receipts. On January 28, 1976, after receipt of the completed form from plaintiff, the assistant director notified the SBA business development officer that plaintiff continued to qualify as a small business under the act.

On February 2, 1976, a new SBA standard operating procedure, SOP 60-41-2, became effective. SOP 60-41-2 provides that before a proposed contract is selected for the 8(a) program, a determination must be made that none of the following circumstances would result.

(1) The percentage of procurements considered for 8(a) contracting in the judgment of SBA is excessive in relation to the total purchases of like or similar products, or services procured by the Federal Government.

(2) Public solicitation has already been issued under a small business set aside for the specific procurement in question in the form of an Invitation for Bid (IFB), Request For Proposal (RFP), or Request for Quotation (RFQ). Procurement Information Notices (PIN), annual procurement forecasts and other methods of disseminating information of general intention to procure are not sufficient reasons, in and of themselves, to preclude a procurement from 8(a) consideration. Past procurement actions and future probabilities (including the appearance of products in catalogs) do not preclude prospective procurement actions from 8(a) consideration.

(3) The procuring activity can make an award directly to a small business concern owned by an eligible disadvantaged person(s) or there is reasonable probability that a competitive award can be won by such a disadvantaged small business concern.

(4) It is determined by the SBA that a small business concern may suffer a major hardship if the procurement is removed from competition, thereby denying the concern, otherwise historically dependent on such recurring procurement(s), the opportunity to compete. In establishing this determination, the affected firm should be a regular producer receiving one or more awards within the past year, and be dependent upon such recurring award(s) for a significant part of its overall sales.

Those four circumstances are the same four factors listed for consideration in SBA's regulation, ...