Stay, Inc. v. Cheney, 90-3849

• Decision Date: 04 September 1991
• Docket Number: No. 90-3849,90-3849
• Citation: 940 F.2d 1457
• Parties: 37 Cont.Cas.Fed. (CCH) 76,207 STAY, INC., a Florida Corporation, Plaintiff-Appellant, v. Richard B. CHENEY, Secretary of Defense; Karen A. Lefman, Contracting Officer, Defendants-Appellees, American Mutual Protective Bureau, Intervenor-Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1457

940 F.2d 1457

37 Cont.Cas.Fed. (CCH) 76,207

STAY, INC., a Florida Corporation, Plaintiff-Appellant, v. Richard B. CHENEY, Secretary of Defense; Karen A. Lefman, Contracting Officer, Defendants-Appellees, American Mutual Protective Bureau, Intervenor-Defendant-Appellee.

No. 90-3849.

United States Court of Appeals, Eleventh Circuit.

Sept. 4, 1991.

As Amended Sept. 30, 1991.

D. Lee Roberts, Jr., Karl Dix, Jr. Smith, Currie & Hancock, Atlanta, Ga., for plaintiff-appellant.

Ralph J. Lee, Asst. U.S. Atty., Jacksonville, Fla., Maj. David P. Carey, Office of the Judge Advocate Gen., Dept. of the Army, Alexander J. Pires, Jr., Washington, D.C., James A. Bledsoe, Jr., Bledsoe, Schmidt, Lippes & Adams, Jacksonville, Fla., Janet N. Repka, Real Estate Facilities Directorate, Washington Headquarters, Dept. of Defense, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Middle District of Florida.

Before JOHNSON and COX, Circuit Judges, and ENGEL ^*, Senior Circuit Judge.

ENGEL, Senior Circuit Judge:

This case addresses the validity of a bid for a government contract where the bid contains a technical defect. This court has previously addressed similar issues in Shoals American Indus., Inc. v. United States, 877 F.2d 883 (11th Cir.1989) (deferring to government agency's determination that bid was unacceptable), and Choctaw Mfg. Co. v. United States, 761 F.2d 609 (11th Cir.1985) (reversing government agency's decision to accept a defective bid). Here, the successful bidder failed to comply with a rule requiring appointment of process agents by its bonding company before opening of the bids. We hold that because the bonding company appeared on the Treasury Department's list of approved sureties, the district court properly deferred to the government agency's decision to accept the bid, particularly where the technical defect was cured shortly after the bid was accepted.

The plaintiff-appellant, Stay, Inc., ("Stay"), is in the business of providing security guards for hire. Stay was an unsuccessful bidder for a contract with the Department of Defense ("DOD") to provide security services at the Army Material Command Building in Alexandria, Virginia. The DOD awarded the contract to American Mutual Protective Bureau ("AMPB") in November 1989.

Stay sought injunctive and declaratory relief, arguing that AMPB's bid was defective and that the contract should have been awarded to Stay. The district court granted summary judgment in favor of defendants DOD and AMPB, finding that the defects in AMPB's bid could be waived by DOD, and that these defects did not affect the validity or enforceability of the AMPB bid. We now affirm the summary judgment granted in favor of the defendants.

I.

In May 1989, the DOD issued an invitation for bids on the security services contract at the Alexandria facility. All bidders were required to submit a bond or bid guarantee with their bids in the amount of 20% of the bid price for the initial twelve-month period of the contract. A bid guarantee is a firm commitment from a bidder indicating that if its bid is accepted, it will execute the contractual documents and provide the payment and performance bonds required in the contract. Under the applicable Treasury Department regulations, the surety companies executing these 20% bonds were to be licensed in certain locations, and were to have appointed agents for service of process where the bidding company's offices were located, where the obligation was to be performed, and in the District of Columbia. A copy of this requirement was included with the DOD's invitation for bids.

Seven firms submitted bids for the security services contract. Stay, a Florida corporation, submitted the third lowest bid, while AMPB, a California corporation, submitted the second lowest bid. The H & H Service Company submitted the lowest bid. In August 1989, Stay filed a protest with the DOD's Contracting Officer, Karen Lefman, arguing that the bids filed by H & H and by AMPB were nonresponsive because of various alleged defects. Lefman agreed with Stay's objections to the H & H bid, concluding that it contained mathematical inconsistencies and failed to provide the required financial information for its sureties. However, the DOD found the AMPB bid acceptable, and in accordance with 41 U.S.C. Sec. 253b(c), awarded the contract to AMPB as the lowest qualified bidder.

Stay protested to the General Accounting Office ("GAO"), contending that the corporate surety which had provided AMPB's 20% bid guarantee, the Merchants Bonding Company, an Iowa corporation, was not licensed to do business in Virginia, the state where the contract was to be performed. The GAO denied Stay's protest in December 1989, concluding that Treasury Department policy only required the bonding company to be licensed in the state where the bond was executed, not where the contract was to be performed. Since the Merchants Bonding Company was licensed in California where the bond was executed, the GAO agreed with the DOD's Contracting Officer that the AMPB bid was not defective.

In its request for reconsideration filed with the GAO in January 1990, Stay added the argument that AMPB's bid was also defective because Merchants Bonding Company had not appointed agents for service of process in Virginia, where the contract was to be performed, nor in California, where AMPB is located. Citing Treasury Circular 570, Stay argued that federal regulations required such appointment of agents for service of process before the bids were opened by the DOD. Merchants Bonding Company had appointed agents for service of process in the District of Columbia before the bids were opened in June 1989, but had not appointed agents in Virginia or California before that date. In February 1990, the GAO concluded that these procedural omissions did not render the AMPB bid defective.

Stay then sought injunctive and declaratory relief in the U.S. District Court for the Middle District of Florida. In July 1990, the district judge concluded that GAO's approval of the AMPB bid was not arbitrary or capricious, and that even if the failure to appoint agents for service of process was a "technical violation of the law", Stay was not prejudiced by this omission. (Order Granting Summary Judgment, 7/13/90, at 6). Stay's requested relief was denied, and summary judgment granted in favor of the defendants. Stay has appealed the decision on the appointment of agents for service of process, but does not challenge the DOD's or GAO's decision on the failure of AMPB's surety to obtain a Virginia license.

II.

We note as a preliminary matter that the GSA's authority in this case arises under the Federal Property and Administrative Services Act of 1949, Ch. 288, 63 Stat. 377 (now codified as amended in various sections of the U.S. Code). This statute provides the GSA with the authority to administer federal government property and to contract with private companies. 40 U.S.C. Sec. 481. The Act further authorizes the Administrator of the GSA to delegate specific functions to other executive agencies, 40 U.S.C. Sec. 486, and to employ personnel for the protection of federal property, 40 U.S.C. Sec. 490. By specific delegation dated September 23, 1987, the responsibility for the provision of security guard services at the Army Material Building in Alexandria, Virginia was delegated to the DOD. ¹

An economically interested party may protest to the GAO the proposed awarding of a government contract. 31 U.S.C. Secs. 3551-3556; 4 C.F.R. Sec. 21.1(a). Any interested party is also entitled to seek reconsideration of the GAO's decision, as Stay did here. 4 C.F.R. Sec. 21.12. Stay's action for relief in the district court arises under federal law as prescribed in the jurisdictional statute codified at 28 U.S.C. Sec. 1331, and Stay's legal standing to appeal the GAO's decision lies in those portions of the Administrative Procedure Act codified at 5 U.S.C. Secs. 701-706. The latter statute states that:

A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof.

5 U.S.C. Sec. 702. As a disappointed bidder on the contract, Stay clearly had standing to challenge the awarding of the contract to AMPB. See Choctaw Mfg. Co. v. United States, 761 F.2d 609, 616 (11th Cir.1985); Scanwell Laboratories, Inc. v. Shaffer, 424 F.2d 859, 872 (D.C.Cir.1970).

The district court's legal conclusions are subject to de novo review. Brown v. Crawford, 906 F.2d 667, 669 (11th Cir.1990). In reviewing a district court's decision to grant summary judgment this court must apply the same legal standards that bound the district court. Earley v. Champion Intern. Corp., 907 F.2d 1077, 1080 (11th Cir.1990).

Under the applicable regulation, a copy of which was included in the DOD's invitation for bids on the contract at issue here, the surety companies supplying the 20% bid guarantees were to have appointed agents for service of process as follows:

(1) In the district where the principal resides; (2) in the district where the obligation is to be undertaken and performed; and (3) also in the District of Columbia where the bond is returnable and filed.

31 C.F.R. Sec. 224.2. See also Note (d) of Treasury Circular 570, 55 Fed.Reg. 27,332 (7/2/90). This Treasury Department regulation is promulgated under authority of 31 U.S.C. Sec. 9306.

The parties to this case agree that AMPB's bid failed to fully comply with this rule because AMPB's surety did not appoint process agents in California or Virginia before the bids were opened or before AMPB's bid was accepted. AMPB has now apparently complied with the requirements of the regulation, but Stay argues that at the time of submission, the AMPB bid was nonresponsive and should have been rejected. It is undisputed that AMPB's surety company, the Merchants...