Peoples Gas, Light and Coke Co. v. U.S. Postal Service, 81-1366

CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)
Citation658 F.2d 1182
Docket NumberNo. 81-1366,81-1366
PartiesPEOPLES GAS, LIGHT AND COKE COMPANY, Plaintiff-Appellee, v. UNITED STATES POSTAL SERVICE; William F. Bolger, Postmaster General of the United States; John P. Doran, Regional Postmaster General, United States Postal Service; and E. P. Gailmard, Regional Director, Real Estate and Buildings Department, United States Postal Service, Defendants-Appellants.
Decision Date18 August 1981

Dan K. Webb, U. S. Atty., Mary Anne Mason, Nancy K. Needles, Asst. U. S. Attys., Chicago, Ill., for defendants-appellants.

Thomas Campbell, Gardner, Carton & Douglas, Chicago, Ill., for plaintiff-appellee.

Before SWYGERT, Senior Circuit Judge, PELL, Circuit Judge, and CAMPBELL, 1 Senior District Judge.

SWYGERT, Senior Circuit Judge.

This appeal requires us to determine whether procurement decisions of the United States Postal Service are subject to judicial review and, if so, whether the plaintiff had standing to challenge the decision involved in this case.

Defendants-appellants, the United States Postal Service, the Postmaster General of the United States, William F. Bolger, the Regional Postmaster General, John P. Doran and the Regional Director of the Real Estate and Buildings Department, E. P. Gailmard, appeal from a preliminary injunction granted on February 25, 1981 in favor of the Peoples Gas, Light and Coke Company, a Chicago-based public utility. Peoples Gas sought to enjoin the Postal Service from proceeding with an invitation for bids to construct an electrically-powered plant to heat the Chicago Main Post Office. In its complaint for injunctive and declaratory relief, Peoples Gas alleged injury by the Postal Service's failure to comply with the capital investment and contracting requirements of applicable postal regulations. The district court held a hearing in early February 1981 and shortly thereafter granted the preliminary injunction. Defendants' appeal followed.

The Chicago Main Post Office Building, one of the largest buildings in Chicago, has been heated since its construction in 1933 by steam purchased from the Chicago Union Station Company. The Union Station Company generates steam from natural gas purchased from Peoples Gas. In September 1979 the Union Station Company notified the Postal Service of its intention to cancel its steam contract as of September 30, 1982. Postal Service officials therefore commissioned the architectural and engineering firm of Perkins and Will to make an economic analysis and an environmental assessment of available heating sources. As the study progressed, various heating sources were considered, including solar heat, oil, and coal, but all were eliminated from serious consideration for a variety of reasons with the exception of a central high pressure gas plant and a central high pressure electric plant.

The Perkins and Will study concluded that gas was the economically superior alternative but rejected it because of the potential delay that could be caused by environmental considerations. Perkins and Will had been specifically instructed by postal officials that it was essential for the Service to have a replacement plant by September 1982, when its present steam heating contract would terminate. It was further understood that the scheduling requirements of the project would not allow enough time for the filing of an Environmental Impact Statement. Accordingly, the Perkins and Will study noted that although a gas burner plant would present negligible environmental impact, a variance would be required from the City of Chicago to reduce the height of the exhaust stack of a gas plant in order to minimize the possibility of an impact statement. Moreover, developers or residents in the vicinity of the plant might consider a high stack aesthetically unpleasant, or a source of high pollution, which might in turn require an impact statement. Since an electric boiler plant was the only alternative which presented no environmental or aesthetic problems, the Perkins and Will study recommended that an electric heating plant be constructed. 2

The defendant Postal Service officials had reached the same conclusion that the more cost-effective gas heating plant alternative should be eliminated for environmental reasons at a meeting held on May 14-15, 1980, one month prior to the completion of the Perkins and Will study. The officials were concerned that there would be opposition from the City of Chicago or some other interested group on environmental grounds to a plant that would have smoke stack projections or emissions that could be perceived as pollutant. A Draft Decision Analysis Report, dated May 16, 1980, summarized the decision reached by Postal Service officials at the meeting in May and was later put into final form in the Decision Analysis Report issued on June 17, 1980. The final report presented the alternative of a gas fired boiler plant:

Gas-Fired Boiler Plant This option would present a negligible environmental impact, according to the Perkins and Will engineering report; an aesthetic problem would exist with the height of the stack.

However, the City of Chicago has advised in a letter (dated May 13, 1980), that construction of a steam generating plant in the vicinity of Harrison and Canal Streets or at almost any other location in that vicinity, must be analyzed carefully in terms of environmental impacts, both actual and potential, attendant to such a facility. Also, the City states, any major projecting structure (such as a stack), and the potential impact on air quality from combustion of fossil fuels on site might collectively indicate a need for an environmental impact analysis.

Although construction of a gas-fired boiler is economically superior to an electric boiler over the analysis period, this alternative was eliminated due to the possibility that an Environmental Impact Statement would be required, and this action would delay the completion of the proposed plant beyond the September 1982 cut-off date for providing a replacement source of steam.

This analysis was based in part upon the mistaken assumption of Regional Director Gailmard, the contracting officer involved in the project, that an applicable Postal Service regulation required the filing of an Environmental Impact Statement whenever a proposed project could be considered environmentally controversial. When the decision was made in May to eliminate the gas alternative, Gailmard was unaware of the fact that the regulation which would have required an impact statement had been superseded six months earlier in November 1979. 39 C.F.R. § 775.4(4) (July 1977). Under the new regulation, if a site-planning environmental assessment indicates that a particular project poses no significant environmental impact, the responsible officials are required to issue a finding to that effect. Pursuant to the amended regulation, Gailmard should have issued a no-impact statement for gas after the Perkins and Will environmental assessment indicated that a gas heating plant would have only a negligible environmental impact.

The defendant Postal Service officials sent the final Decision Analysis Report to the Capital Investment Committee. The Capital Investment Commitee made some modifications to the report and then presented it, together with the Perkins and Will study, to the Board of Governors, an eleven member board consisting of nine presidential appointees, the Postmaster General, and the Deputy Postmaster General, for final approval of the capital investment proposal. The Board of Governors adopted the recommendations of the committee on August 5, 1980.

Following the decision of the Board of Governors, Peoples Gas was in constant contact through its representatives and correspondence with Postal Service officials regarding the selection of electricity over gas. Peoples Gas submitted its own estimate of annual operating costs for a gas heating plant to show that gas was substantially less costly than electricity. At one meeting on October 22, Postal Service representatives confirmed that Perkins and Will had on its own figures recalculated the initial annual fuel cost savings of gas to be over one million dollars as opposed to the $996,500 calculated in its original report. Nonetheless, Postal Service officials repeatedly denied the requests of Peoples Gas for a copy of the Perkins and Will study and related documents. It was not until after those documents were dislodged by two Freedom of Information Act requests filed by Peoples Gas that it became clear to Peoples Gas that environmental considerations were the basis for the rejection of the gas fired alternative. To counter the environmental concerns, Peoples Gas submitted a letter to defendant Regional Postmaster General Doran, dated November 17, 1980, from the City of Chicago, indicating that the city would look favorably upon a request for a variance from the stack height requirement. Peoples Gas sought to demonstrate through subsequent correspondence with Postal Service officials, including the United States Postmaster General Bolger, and during a meeting with Assistant Postmaster General Craig on December 5, 1980, that the Perkins and Will study greatly underestimated the cost advantage of the gas alternative and was mistaken on environmental factors as well.

Meanwhile, on November 21, 1980, the Postal Service issued an invitation for bids for the construction of a steam boiler plant powered by electricity. On December 29, 1980, Peoples Gas filed a protest against the invitation for bids under the Postal Contracting Manual, which governs the Postal Service procurement decisions. The bid opening was delayed by the Postal Service two weeks until January 20, 1981, in order to allow the Office of the General Counsel an opportunity to respond to the protest. The General Counsel's response was issued on February 4, 1981, and addressed each of the claims...

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