Local 2855, AFGE (AFL-CIO) v. U.S., AFL-CIO

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Citation602 F.2d 574
Docket NumberNo. 78-2402,AFL-CIO,78-2402
Parties26 Cont.Cas.Fed. (CCH) 83,570 LOCAL 2855, AFGE () President, Local 2855 James P. Riley, Sol E. Mortner, Joseph Belmonte, Vincent J. Bonner, William N. King, Crescenzo J. Campanelli, Michael J. Vitale, and Gene J. Spampani, Appellants, v. UNITED STATES of America, Martin Hoffman, Secretary of the Army, Col. Joseph Torsani, Jr., Commanding Officer, Robert E. Hampton, Chairman, U.S. Civil Service Comm., Georgiana H. Sheldon, Commissioner, U.S. Civil Service Commission, Ludwig J. Andolsek, Commissioner of U.S. Civil Service Commission.
Decision Date11 July 1979

Joseph Meehan (argued), Meehan & Kenney, Long Branch, N.J., for appellants.

Robert J. Del Tufo, U.S. Atty., Anne C. Singer, Asst. U.S. Atty., Newark, N.J., for appellees; James K. Jackson, Michael J. Wentink (argued), Washington, D.C., of counsel.

Before ADAMS and ROSENN, Circuit Judges, and LAYTON, * District Judge.


ADAMS, Circuit Judge.

This class action was instituted by Local 2855 of the American Federation of Government Employees and by civilian employees of the Department of the Army to contest the decision of the Army to contract out to a private concern the stevedoring and terminal services previously performed by government employees at the Military Ocean Terminal in Bayonne, New Jersey. The district court dismissed the suit for lack of subject matter jurisdiction. In an opinion delivered from the bench, it justified this result on the ground that the decision to contract out involved the exercise of discretionary, managerial prerogatives that were based upon an evaluation of cost factors. 1 Although our approach differs somewhat from that adopted by the district court, its judgment will be affirmed.


It is a stated policy of the federal government to rely on the private enterprise system to supply its needs except when the national interest requires that the government provide directly the products and services it uses. This policy is outlined in Office of Management and Budget (OMB) Circular No. A-76, which is addressed to the heads of executive departments and agencies, and is detailed with greater specificity in the directives and regulations issued by them to facilitate its implementation.

Among the limited situations in which the government is permitted to provide a commercial or industrial product or service for its own use is one that obtains when comparative cost analysis indicates that procurement from a private source will result in significantly higher costs to the government. Systematic cost evaluations of existing government activities must be scheduled at least once every three years to determine whether continued reliance on the government to supply the product or service is justified.

Pursuant to the obligations imposed on it by the OMB Circular, by Department of Defense Directive 4100.15, and by Army Regulation 235-5, the Military Traffic Management Command (MTMC) conducted a survey of terminal operation functions at its Military Ocean Terminal in Bayonne, New Jersey (MOTB), in early 1975. Until then, the practice at MOTB was to process cargo both by a private contractor and by civil service personnel. As a result of its cost analysis, MTMC recommended that the Army utilize a private contractor to perform the stevedoring and terminal services then being performed by the plaintiff civil service employees. After various cost projections were updated and additional information compiled, the Army Audit Agency, which studied the MTMC's recommendation, concluded that a substantial cost saving would be realized over a 10-year period if these functions were contracted out. 2

Based on these analyses, the Secretary of the Army decided to terminate all in-house performance of stevedoring and terminal services. Reduction in force notices (RIFs), effective June 15, 1976, were sent to the government employees who had been rendering the stevedoring and terminal services, 3 and a private contractor was engaged to perform the work.


In this suit the affected employees and their union essentially launch a three-pronged attack on the decision by the Army to contract out the services in question. First, they contend that the cost-analysis studies were faulty on a number of grounds, and that had the available options and their costs been properly evaluated, the use of civil service labor would have been found to be less costly to the government than contracting out. Second, plaintiffs maintain that the RIFs abrogated statutory and regulatory provisions that specify the circumstances in which RIFs may be issued and that grant the plaintiffs preferences as veterans, thereby depriving them of a due process property interest. Finally, plaintiffs argue that the contracting out in this case constitutes an illegal personal service contract, designed to circumvent the government's obligations to civil service employees.

A. General Considerations Regarding the Reviewability of the Army's Decision

Whether and to what extent we may entertain the plaintiffs' challenges to the Army's decision is controlled by the Administrative Procedure Act (APA), 4 which contemplates that judicial review be available at the behest of any person adversely affected or aggrieved by agency action 5 "except to the extent that (1) statutes preclude judicial review; or (2) agency action is committed to agency discretion by law." 6

The Supreme Court has emphasized repeatedly that the APA's " 'generous review provisions' must be given a 'hospitable' interpretation," 7 and that "only upon a showing of 'clear and convincing evidence' of a contrary legislative intent should the courts restrict access to judicial review." 8 Thus, in the absence of a specific statutory preclusion of review, agency action may be determined to be "committed to agency discretion by law" only when a fair appraisal of the entire legislative scheme, including a weighing of the practical and policy implications of reviewability, persuasively indicates that judicial review should be circumscribed. 9 Examination of those cases in which matters have been held nonreviewable yields a number of criteria that bear upon the reviewability of the Army's decision in the present case.

A predicate to nonreviewability is that the agency have Broad discretionary powers, not merely that its action involve Some discretion. For, as the Ninth Circuit put it, "(a)lmost every agency action involves some degree of discretion of judgment. Yet it cannot be said that, for this reason, every agency action is unreviewable." 10 In the same vein, the legislative history of the APA, referred to in Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 410, 91 S.Ct. 814, 821, 28 L.Ed.2d 136 (1971), indicates that the committed to agency discretion exception to judicial review is intended to be "applicable in those rare instances where 'statutes are drawn in such broad terms that in a given case there is no law to apply.' S.Rep.No.752, 79th Cong. 1st Sess., 26 (1945)."

The existence of broad discretionary power in an agency often suggests that the challenged decision is the product of political, military, economic, or managerial choices that are not really susceptible to judicial review. Indeed, given the separation of powers between the judiciary and the other branches of government, it would appear unseemly in such circumstances for a court to substitute its judgment for that of an executive or agency official. 11 Judge Hastie summed up the lesson of earlier cases in this regard in the following manner:

A mere difference of judgment between a person disadvantageously affected by agency action and the responsible head of the agency over the merits of particular administration action as a means of achieving a legislative objective, when Congress has assigned authority to make and act upon such determinations to the agency, is not judicially reviewable. (Citations omitted) . . . (This is so when) the statutory standard is expressed in such general concepts that it requires and must contemplate the exercise of discretion in choice among various rational alternatives none of which can fully satisfy all demands of competing interests. (Citation omitted). Moreover, the absence of any provision in the (pertinent statute) for judicial review of the Secretary's determination suggests that Congress recognized that the (agency head) is at least as competent as a court to achieve such an accommodation of diverse and often conflicting social and economic interests as must be made . . . . We are concerned here with a type of determination that "does not present questions of an essentially legal nature in the sense that legal education and lawyers' learning afford peculiar competence for their adjustment". Frankfurter, J., concurring in Driscoll v. Edison Light & Power Co., 1939, 307 U.S. 104, 122, 59 S.Ct. 715, 724, 83 L.Ed. 1134. 12

In addition, we note that courts have been especially inclined to regard as unreviewable those aspects of agency decisions that involve a considerable degree of expertise or experience, or that are based upon economic projections and cost analyses, at least when the agency has broad leeway to devise the formula to be applied in any particular situation and when there are no discernible guidelines against which the agency decision may be measured. Thus, in Panama Canal Co. v. Grace Line, Inc., 356 U.S. 309, 78 S.Ct. 752, 2 L.Ed.2d 788 (1958), the Supreme Court held that the ratemaking procedure and the tolls established for the Panama Canal fell within the "committed to agency discretion" exception to judicial review. The Court explained:

As we have seen, the present conflict rages over questions that at heart involve problems of statutory construction and cost accounting: whether an operating deficit in the auxiliary or supporting activities is a legitimate cost in...

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