Southern Packaging and Storage Co. v. US, Civ. A. No. 78-1424.
| Decision Date | 10 October 1978 |
| Docket Number | Civ. A. No. 78-1424. |
| Citation | 458 F. Supp. 726 |
| Court | U.S. District Court — District of South Carolina |
| Parties | SOUTHERN PACKAGING AND STORAGE COMPANY, Incorporated, Plaintiff, v. The UNITED STATES of America, Defendant. |
COPYRIGHT MATERIAL OMITTED
David W. Keller, Jr., Florence, S. C., William W. Goodrich, Jr., Matthew S. Perlman, Washington, D. C., for plaintiff.
Jack L. Marshall, Asst. U. S. Atty., Columbia, S. C., Michael Trovarelli, Asst. Counsel, Defense Personnel Support Center, Philadelphia, Pa., David B. Dempsey, Defense Logistics Agency, Alexandria, Va., Arthur Bolstein and Jack A. Diamond, Dept. of Labor, Mark F. Evens, Dept. of Justice, General Litigation Section, Washington, D. C., for defendant.
FINDINGS OF FACT
CONCLUSIONS OF LAW AND ORDER
The plaintiff in this action, Southern Packaging and Storage Company, Incorporated, first came before this Court on August 24, 1978 seeking a preliminary injunction pursuant to Rule 65 of the Federal Rules of Civil Procedure. On August 28, 1978 this Court granted plaintiff's request and enjoined the United States of America and its agents, the Defense Personnel Support Center (hereinafter D.P.S.C.), the Defense Logistics Agency (hereinafter D.L.A.) and Department of Labor (hereinafter D.O.L.) from awarding any contract in response to Solicitation No. DLA13H-78-R-8947, dated August 1, 1978.
In granting injunctive relief this Court was convicted that Southern Packaging and Storage had met the three pronged test established in Blackwelder Furniture Co. v. Seilig Mfg. Co., Inc., 550 F.2d 189 (4th Cir. 1977). Specifically this Court found that in light of recent Congressional action, grave questions were raised as to the appropriate limits of coverage under the Walsh-Healey Public Contracts Act, 41 U.S.C. § 35 et seq. It was also determined that denial of the requested relief would result in irreparable harm, in that that plaintiff would be put to a Hobson's choice between paying inflated wage rates and thus losing its natural competitive advantage or withdrawing entirely from bidding process for ration assembly contracts. Finally, it was decided that the public interest would be furthered by restraining the bid solicitation due to its inflationary potential. This potential was a direct result of the D.O.L. decision to treat the bid solicitation as one arising under the Service Contract Act, 41 U.S.C. § 351 et seq. The public interest was also threatened by the possibility that the petitioner would withdraw from all D.P.S.C. solicitations. Since the bulk of the petitioner's business is performed pursuant to government contract, withdrawal from the bid process would result in closing the assembly plant or "laying-off" a significant number of employees.
Having granted the temporary restraining order, this Court held a trial on the merits to determine whether this solicitation was subject to the Service Contract Act and whether the D.O.L. determination of "locality" was appropriate. These issues were tried without a jury on September 27, 1978 in Columbia, South Carolina. After hearing the testimony, reviewing the exhibits and briefs, and studying the applicable law, this Court pursuant to Rule 52 of the Federal Rules of Civil Procedure, makes the following:
FINDINGS OF FACT
1. The plaintiff, Southern Packaging and Storage Company, Incorporated, has its principal place of business in Mullins, South Carolina and is incorporated under the laws of South Carolina. Southern Packaging has for the past 34 years been engaged primarily in the business of assembling the component parts of the "Meal Combat Individual" (M.C.I.) field rations (formerly C rations) under contract with the Defense Logistics Agency (D.L.A.), and/or the U. S. Army.
During all these years plaintiff has operated under Walsh-Healey and paid the wages required with no complaints from its employees or any agency of the Government. D.L.A. thought the present bids should be under Walsh-Healey until D.O.L. ruled otherwise.
2. Pursuant to its contracts with D.L.A., Southern Packaging has in the past performed the following functions: (a) inspect component parts while they are on railroad cars, (b) unload conforming goods, (c) mark goods and store them in warehouses, (d) inspect accessory pack components, (e) assemble and seal accessory packs, (f) prepare B-unit cans, (g) seal B-unit cans, (h) place dividers in menu carton, (i) place the additional units into meal cartons, (j) place twelve meal cartons into master shipping container, (k) seal master shipping containers, (l) place sleeve over shipping container, (m) cover container with non-metallic strap, (n) pack 48 cases onto wooden pallets, (o) strap down and cap these cases securely to the pallets. When the plaintiff performed the above list of assembly steps, its obligations under the "Meal Combat Individual" contract were discharged. The food used in M.C.I. is not furnished by plaintiff but shipped to its plant from suppliers under other government contracts.
3. The performance required of a successful bidder under the solicitation in question (No. DLA13H-78-R-8947) would be identical to that described in the preceding statement.
4. In order to meet its previous M.C.I. contracts, Southern Packaging employed the following mechanized devices: (a) depalletizer, (b) numerous conveyor belts, (c) seaming head, (d) case sealer and (e) case tying machine. Each of these devices is suitable for alternative operations which are unrelated to M.C.I. assembly.
5. Southern Packaging employs 551 workers, 84% of whom live in Marion County, South Carolina. Ninety percent of these employees are black and 87% are female. Many of these employees are illiterate and the vast majority are unskilled. Costs attributable to labor account for 55% of the cost of production. Under previous M.C.I. contract solicited under the Walsh-Healey Act, Southern Packaging produced at a per carton cost of $1.45. The plaintiff's per carton cost under the proposed minimum wage rate, as determined pursuant to the Service Contract Act, would be $3.00. The total contract cost would increase from approximately 3 million dollars to 8 million dollars, if the M.C.I. solicitation is governed by the Service Contract Act and the proposed nationwide minimum wage rate. The proposed minimum wage would increase one-half plaintiff's employees wage by 75% — 100% and the remainder by 50% — 75%.
6. The plaintiff has supplied the following raw materials while performing under prior M.C.I. contracts; (a) adhesive for master shipping containers, (b) non-metallic strap for master shipping container, (c) covering for 48 case pallet, (d) paper bags used to cover one-half of a railroad car load of M.C.I., (e) wooden pallets, (f) ink to cover erroneous container markings. Each of the integral parts of the individual M.C.I. menus, including all food and accessory components, is provided by the Defense Logistics Agency.
7. In calculating the prevailing wage rates as required by the Service Contract Act, representatives of the Department of Labor have used a mean average of wages paid for work comparable to that which is required under the proposed solicitation. As to the geographic "locality" used in arriving at the mean wage rate, the D.O.L. Division of Service Wage Determination has used the "standard metropolitan statistical area" (S.M.S.A.) of the area for contract performance in 98% of the requested determinations. Less than one-half of 1% of these determinations have resulted in a "nationwide" minimum wage rate for bid solicitation purposes. The solicitation in the instant case included a "nationwide" wage rate determination issued by D.O.L. on June 2, 1978.
8. In 1975 an interagency task force recommended that in arriving at minimum wage determinations, a two step process be employed. The first step being an affirmative effort by the contracting agency to discover the geographic location of interested bidders. Under the second step, the agency would request wage rate determinations for the localities of those parties showing interest in the solicitation. The Secretary of Labor rejected this approach. Representatives of D.O.L. now utilize a "competitive" technique to arrive at the prevailing wage rate for each solicitation. This technique depends upon three factors: (a) bidder abstracts from prior solicitations, (b) parties on the present bid solicitation list and (c) multiple geographic awards or specific geographic limitations. Only when it is impossible to determine the location of contract performance is a "nationwide" rate employed.
9. The solicitation at issue was sent to fifty-eight firms. These prospective bidders were located in seventeen states. Before the bid proposal was mailed, D.P.S.C. sent a list of 12 firms to the D.O.L. Division of Service Wage Determination, representing with reasonable certainty the group from which the successful bidder would come. These firms were located in eight states or more specifically, eleven counties. Based on prior historical application of the Service Contract Act and D.O.L agency policy, the Division of Service Wage Determination refused to issue determinations for the geographic areas represented by these prospective bidders. In addition the Director of the Division of Service Wage Determination felt that issuing minimum wage determinations based on D.P.S.C. projections would be inappropriate due to the similarity to the two step bid analysis recommended by the task force in 1975 and later rejected by the Secretary of Labor. The D.O.L. issues approximated 36,000 wage rate determinations each year or roughly 3,000 per month. D.O.L. could have issued wage determinations for the eleven counties requested by D.P.S.C. with little difficulty.
A. This Court has jurisdiction over plaintiff's claim for injunctive and declaratory relief. Jurisdiction exists under 28 U.S.C. § 1331(a), in that this is...
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