Rapides Regional Medical Center v. Secretary, Dept. of Veterans' Affairs

Citation974 F.2d 565
Decision Date24 September 1992
Docket NumberNo. 91-5097,91-5097
Parties, 38 Cont.Cas.Fed. (CCH) P 76,445 RAPIDES REGIONAL MEDICAL CENTER, Plaintiff, Intervenor-Defendant-Appellee, v. SECRETARY, DEPARTMENT OF VETERANS' AFFAIRS, Defendant, Intervenor-Defendant-Appellant, and St. Frances Cabrini Hospital, Movant, Intervenor-Plaintiff-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Joseph S. Cage, Jr., U.S. Atty., John R. Halliburton, Asst. U.S. Atty., Shreveport, La., Jonathan R. Siegel, Anthony J. Steinmeyer, U.S. Dept. of Justice, Civil Div., Appellate Staff, Washington, D.C., for Secretary, Dept. of Veterans' Affairs.

Charles S. Weems, III, Jimmy R. Faircloth, Jr., Kenneth O. Ortego, Dir., Gold, Weems, Bruser, Sues & Rundell, Alexandria, La., for Rapides Regional Medical Center.

Appeals from the United States District Court for the Western District of Louisiana.

Before GOLDBERG, JONES, and DeMOSS, Circuit Judges.

EDITH H. JONES, Circuit Judge:

The centerpiece of this dispute is a dual energy linear accelerator, a sophisticated radiation therapy device used on cancer patients. Two hospitals in Rapides Parish, Louisiana--one private, the other operated by the Department of Veterans Affairs (VA)--entered into a "sharing agreement" for the acquisition and joint use of such an accelerator. Under the agreement, the Alexandria Veterans Affairs Medical Center (VAMC) would procure the accelerator, with nearby St. Frances Cabrini Hospital (Cabrini) donating one-half the cost of the machine to the VAMC. 1 The VAMC-

                owned accelerator would then be housed at Cabrini and available for use by both institutions.   Shortly before negotiations over the sharing agreements had been completed, neighboring Rapides Regional Medical Center (Rapides) got wind of the deal and sought to block it.   Rapides, which operates two linear accelerators of its own, and which currently provides accelerator and related services to the VAMC, 2 charged that the sharing agreement violated the Competition in Contracting Act of 1984 (CICA), 41 U.S.C. § 251 et seq., because it was never subjected to public bidding.   After an administrative appeal dismissed as untimely by the Comptroller General, 3 Rapides won a permanent injunction against the sharing agreement in district court.  Rapides Regional Medical Center v. Derwinski, 783 F.Supp. 1006 (W.D.La.1991).   Both the VA and Cabrini, which had intervened in those proceedings, appealed the district court's decision, and we granted expedited review
                
I. STATUTORY BACKGROUND

Before discussing the merits of this case, it may be helpful to trace its statutory contours. Rapides asserts that the Competition in Contracting Act governs this action. Appellee alleges, and the district court agreed, that the VAMC-Cabrini sharing agreement violates CICA's general requirement that federal procurement contracts be awarded competitively. 4 CICA responded to Congressional findings that many federal procurement contracts were awarded on a sole-source basis, resulting in widespread inefficiencies and wasteful government spending. According to its drafters, the Act's objectives were "to establish a statutory preference for the use of competitive procedures in awarding federal contracts for property or services, to impose restrictions on the awarding of noncompetitive contracts, and to permit federal agencies to use the competitive method most conducive to the conditions of the contract." S.Rep. No. 50, 98th Cong., 2d Sess., reprinted in 1984 U.S.Code Cong. & Admin.News 697, 2174.

The VA does not contend that its sharing agreement with Cabrini falls within any of the seven enumerated exceptions to CICA Congress initially authorized the sharing program set forth in § 8153 "for the exchange of use (or under certain conditions the mutual use) of specialized medical facilities between Veterans' Administration hospitals and other public and private hospitals or medical schools in a medical community." S.Rep. No. 1727, 89th Cong., 2d Sess., reprinted in 1966 U.S.Code Cong. & Admin. News 4210, 4219-20. In 1985, after CICA's enactment, Congress expanded the sharing program to other medical facilities, appropriating up to $10 million for a pilot program in which VA facilities would purchase advanced medical equipment so long as non-federal sources agreed to finance at least fifty percent (50%) of the acquisition costs. Conf.Rep. No. 363, 99th Cong., 1st Sess. 22 (Nov. 8, 1985). According to the Senate Appropriations Committee:

                that permit sole-source procurement. 5  However, both Cabrini and the VA would find refuge in the savings clause to § 253(a)(1), which exempts from CICA "procurement procedures otherwise expressly authorized by statute."   As asserted proof of this authority, appellants cite 38 U.S.C. § 8153, empowering the VA to enter into sharing agreements for the acquisition and joint use of advanced medical technology. 6
                

The purpose of this funding is to help the VA to acquire costly, advanced state-of-the-art medical equipment more easily and to provide a means of using that equipment to maximum effectiveness by encouraging long-term sharing with community institutions.... The Committee recognizes that there are limits to what medical communities and the Federal Government can individually accomplish, but believes that this proposed arrangement will provide VA beneficiaries and the VA medical centers and community medical institutions with access to prohibitively expensive major medical equipment which would otherwise not be available to either.

S.Rep. No. 99-129, 99th Cong., 1st Sess. 82, 88-89 (Aug. 28, 1985). 7

Shortly after Congress began funding the sharing program, the Veterans Administration (predecessor to the Department of Veterans Affairs) promulgated interim rules to implement CICA. See 51 Fed.Reg. 23065-73 (June 25, 1986). Significantly, the VA stipulated that "[s]haring contracts negotiated under 38 U.S.C. § 5053 are approved for other than full and open competition." Id. at 23066. 8 The VA explained that its "[j]ustification and approval procedures for proposed noncompetitive acquisitions ... are critical in effectively implementing the CICA and will provide the basis for compiling the VA annual report to Congress." Id. at 23065. The VA's interim rules were finalized and implemented in 1987. See 52 Fed.Reg. 28559, 28560 (July 31, 1987). 9

To summarize: Congress first adopted the VA sharing program in 1966. The program as enacted did not address competitive procurement procedures. Congress enacted CICA in 1984, creating a statutory presumption in favor of competition "except in the case of procurement procedures ... expressly authorized by statute." The following year, Congress expanded the sharing program by appropriating funds to finance the acquisition and joint use of advanced medical equipment along the lines of the VAMC-Cabrini agreement. In response, the VA in 1987 implemented regulations providing that despite CICA's enactment, the sharing program did not require full and open competition. Finally, Congress amended the sharing program in 1990 at what is now § 8153, expanding the existing program substantially but making no mention of CICA.

Against this statutory backdrop, the district court permanently enjoined the VAMC-Cabrini agreement after holding that Congress did not explicitly exempt the sharing program from CICA when it amended § 8153 in 1990. While acknowledging the VA regulation set forth at 48 C.F.R. 806.302-5(b), which exempts the sharing program from CICA, the court noted:

48 C.F.R. 806.302-5(b) ... antedates [sic] the rather precise statutory language of "otherwise expressly authorized by statute" as founded in 41 U.S.C. § 253(a). Congress said that the public bid law can be circumvented by express language contained in a statute. The regulation from the Veterans Administration is not a statute. Congress created the measuring stick and retained the power to delete public bid law requirements from contracts for goods and services. The VA is powerless to change the clear procedure set by Congress.

783 F.Supp. at 1008. The district court did not address the pre-CICA legislative history of § 8153, nor did it review the 1985 appropriations legislation expanding the existing sharing program to private hospitals.

Cabrini and the VA argue that Congress never intended the Competition in Contracting Act to apply to a sharing program that has been on the books since 1966. The program is either exempted from the Act by § 8153, they contend, or falls outside CICA because sharing agreements do not involve the "procurement" of equipment. Appellants also challenge Rapides' standing to sue. We address these arguments in reverse order.

II. STANDING

Cabrini and the VA first contend that the district court erred in failing to 'Interested party', with respect to a contract or proposed contract ... means an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract[.]

                enter a specific finding that Rapides has standing to bring this lawsuit.   They insist on a remand or, in the alternative, a ruling that as a matter of law Rapides lacks standing to sue.   Appellants acknowledge that disappointed bidders have prudential standing under the Administrative Procedure Act to challenge agency violations of federal procurement requirements.   See Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859, 873 (D.C.Cir.1970);  Hayes International Corp. v. McLucas, 509 F.2d 247, 257 (5th Cir.), cert. denied, 423 U.S. 864, 96 S.Ct. 123, 46 L.Ed.2d 92 (1975) (adopting Scanwell ).   They maintain, however, that Rapides lacks standing because it is neither an actual nor a prospective bidder on the VA's plan to acquire a linear accelerator. 10
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