Lloyd Wood Construction Company v. Sandoval

• Decision Date: 13 August 1970
• Docket Number: Civ. A. No. 70-426.
• Citation: 318 F. Supp. 1167
• Parties: LLOYD WOOD CONSTRUCTION COMPANY, Inc., a corporation, Plaintiff, v. Hilary J. SANDOVAL, Administrator, Small Business Adm., Robert C. Seamans, Jr., Secretary of the Air Force, Department of the Air Force, T/Sgt. Jack A. Sockoch, Contracting Officer, Eglin Air Force Base, Florida, and United States of America, Defendants.
• Court: U.S. District Court — Northern District of Alabama

318 F. Supp. 1167

LLOYD WOOD CONSTRUCTION COMPANY, Inc., a corporation, Plaintiff, v. Hilary J. SANDOVAL, Administrator, Small Business Adm., Robert C. Seamans, Jr., Secretary of the Air Force, Department of the Air Force, T/Sgt. Jack A. Sockoch, Contracting Officer, Eglin Air Force Base, Florida, and United States of America, Defendants.

Civ. A. No. 70-426.

United States District Court, N. D. Alabama, W. D.

August 13, 1970.

Zeanah, Donald & Lee, Tuscaloosa, Ala., for plaintiff.

U. S. Atty. Wayman G. Sherrer, Asst. U. S. Atty. B. Don Hale, Birmingham, Ala., Smith, Currie & Hancock, Atlanta, Ga., for defendants.

MEMORANDUM OPINION

McFADDEN, District Judge.

Plaintiff, an Alabama corporation engaged in the general construction business, seeks declaratory and injunctive relief against the defendants in connection with a federal government construction procurement, and bases jurisdiction on 5 U.S.C. §§ 701-706, 28 U.S.C. § 2201, and 15 U.S.C. § 634(b) (1).

Defendant Hilary J. Sandoval is the Administrator of the Small Business Administration, an agency of the federal government. Defendant Robert C. Seamans, Jr., is the Secretary of the United States Air Force. Defendant T/Sgt. Jack A. Sockoch was the contracting officer at Eglin Air Force Base. Since the commencement of this action he has been transferred to Southeast Asia and has been succeeded by T/Sgt. Robert C. Hoffman who has been substituted as a party defendant by stipulation of the parties.

The Air Force issued an invitation for bid for the construction of a 300-unit Family Housing Project at Eglin Air Force Base, Florida, Project No. AF-70-141-5. The invitation specified that the project had been set aside for bidding and construction by small-business concerns in accordance with the Small Business Act, 15 U.S.C. § 631 et seq.

Plaintiff and others submitted bids in response to the invitation. M. Dyson Building Company, Inc. was the lowest bidder; Allen M. Campbell Company was the second lowest bidder; and plaintiff was the third lowest bidder. Plaintiff protested the award to either Dyson or Campbell on the ground that neither was a small-business as defined by law and that it therefore was the lowest qualified bidder. The Air Force submitted this protest to the Small Business Administration which determined that Dyson was not a small-business but that Campbell was. The determination with respect to Campbell was appealed to the Size Appeals Board of the Small Business Administration which affirmed the area administrator's determination. In doing so, the Size Appeals Board held that Allen M. Campbell was an affiliate of Gordon Campbell & Associates, but that the two firms combined still qualified as a small-business. Based on this determination, the Air Force tendered a contract to Campbell who signed and returned it. Prior to signature by the Air Force, this action was commenced and this Court entered a temporary restraining order against the execution thereof.

Allen Campbell was allowed to intervene as a party defendant and the matter came on for a hearing.

A hearing was held on defendants' motion to dismiss, and motion to dissolve the temporary restraining order, and on the Government's and plaintiff's cross-motions for summary judgment. These motions were overruled and the Court received evidence from both parties at the conclusion of which defendants' motions to dismiss were renewed.

The thrust of plaintiff's complaint is that Campbell is not a small-business because that determination was made by the SBA on the basis of a completed contract method of accounting whereas, it contends, the percentage of completion or cash receipts basis of accounting is the only appropriate method for determining size under the SBA regulations. Plaintiff further contends that even if the completed contract method of accounting is used, the determination is in error because it does not include the proceeds of a contract which was, according to plaintiff, substantially complete at the close of the last preceding fiscal year and omits still another contract performed by Gordon Campbell & Associates.

Defendants contend that the case is due to be dismissed on several grounds:

(1) The plaintiff does not have standing to sue.

(2) The SBA cannot be sued.

(3) The decision of the SBA is conclusive and cannot be reviewed.

(4) If the decision of the SBA is to be reviewed, it must be reviewed on the record before SBA and can be set aside only if it is arbitrary, capricious, erroneous as a matter of law, in excess of statutory authority, or not supported by substantial evidence.

"Standing has been called one of the most amorphous concepts in the entire domain of the public law. That this statement is undoubtedly true is evidenced by the mental gymnastics through which the courts have passed in determining standing issues." Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App. D.C. 371, 424 F.2d 859, 861 (1970). Nevertheless, let us begin.

Defendants' assertion that plaintiff has no standing to sue is based principally on Perkins v. Lukens Steel Co., 310 U.S. 113, 60 S.Ct. 869, 84 L.Ed. 1108 (1940). That case held that individual manufacturers had no standing to sue for court review of minimum wage determinations made by the Secretary of Labor under the Walsh-Healy Public Contracts Act. This suit was based on the contention that the determinations by the Secretary resulted from an erroneous statutory interpretation. The Court held that the statute requiring award of contracts by formal advertising was not enacted for the protection of sellers and conferred no enforceable rights on prospective bidders. The Court further held that to have standing, persons must show an injury or threat to a right of their own as distinguished from the public's interest in the administration of the law. The Court was there concerned with the prospect of judicial interference with the orderly procurement process which could seriously hamper the executive branch in carrying out its assigned function of implementing national policies. The Court put it this way:

* * * Courts should not, where Congress has not done so, subject purchasing agencies of Government to the delays necessarily incident to judicial scrutiny at the instance of potential sellers, * * * A like restraint applied to purchasing by private business would be widely condemned as an intolerable business handicap. It is, * * * essential to the even and expeditious functioning of Government that the administration of the purchasing machinery be unhampered. * * *

310 U.S. 113, 130, 60 S.Ct. 869, 878 (1940)

Courts have long used Perkins as ground for denying a forum for protests from unsuccessful bidders for Government contracts. The validity of this rule has been cast into serious doubt by recent cases.

Scanwell Laboratories, Inc. v. Shaffer, supra, held that an unsuccessful bidder did have the right to bring a declaratory judgment action to review agency action. The Court took the position that the Supreme Court has departed from the legal right doctrine and developed a standard to provide a remedy for legitimate grievances where the person suing asserts a position which protected a public rather than a specific private interest. The Court was further of the view that the basic approach of the Supreme Court had been reversed by Congress in an amendment to the Walsh-Healy Act.

Plaintiff herein espouses the same view and contends that Congress in the Fulbright Amendment to the Walsh-Healy Act in 1952 overruled Perkins when it enacted the following language:

* * * any interested person should have the right of judicial review of any legal question which might otherwise be raised, including, but not limited to, wage determinations * * *

41 U.S.C. § 43a (c).

The Court of Claims in Keco Industries, Inc. v. United States, 428 F.2d 1233 (Ct.Cl., 1970), held that an unsuccessful bidder had standing to sue. The Court based its decision partly on Scanwell and said, at p. 1237:

We feel that, as a result of Scanwell, a party, who can make a prima facie showing of arbitrary and capricious action on the part of the Government in the handling of a bid situation, does have standing to sue. * * *

The Court went on to say, at p. 1237:

* * * We find that Heyer Heyer Products Co. v. United States, 140 F. Supp. 409, 135 Ct.Cl. 63 (1956) stated a broad general rule which is that every bidder has the right to have his bid honestly considered by the Government, and if this obligation is breached, then the injured party has the right to come into court to try and prove his cause of action. Thus, even without Scanwell, we feel that plaintiff should be allowed to maintain this action based on the decision in Heyer.

Without trying to guess what the Supreme Court will do or attempting to reconcile Scanwell and Perkins, it seems there are features which distinguish this case from Perkins.

The Small Business Administration was created to implement a public policy of aiding small-business concerns. One of the methods used was to set aside certain federal procurement for small-business. The policy can only be carried out if the procurement is in fact given to concerns which are small as defined by the Act and the regulations. It would seem therefore that a small-business concern has a right under the Small Business Act and regulations that was not present in Perkins, supra. Perkins held that the statute therein was for the Government's benefit and conferred no enforceable right upon prospective bidders. It further held that the Government's agent, the Secretary of Labor, was responsible solely to his principal for erroneous construction of his instructions because, it reasoned, that these instructions were given for the sole benefit of that principal.

The legislation here was for the benefit of the small-business concern and it would appear that whether the legal interest test of Perkins or the public interest test of Scanwell is used a small...