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CCTW&M v. UNITED STATES EPA

June 2, 1978

CCTW&M, a Joint Venture; and ZIMPRO, Inc., Plaintiffs,
v.
UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Region II; ECKARDT C. BECK, Regional Administrator of the United States Environmental Protection Agency, Region II; BSP DIVISION OF ENVIROTECH CORPORATION; and PASSAIC VALLEY SEWERAGE COMMISSIONERS, Defendants



The opinion of the court was delivered by: STERN

 The uncontested facts of record are as follows. On June 30, 1976, Region II of the EPA awarded to defendant Passaic Valley Sewerage Commission (PVSC) *fn1" a grant for the construction of a secondary waste water treatment facility. The estimated cost of the project is $387,788,929.00, of which 75%, or $290,841,697.00, is to be provided by EPA. The facility when completed is expected to have a daily capacity of approximately 300 million gallons. (Complaint, paras. 3 and 4).

 An essential part of the project is Contract 492, the subject of this lawsuit. That contract calls for the construction of a Thermal Sludge Conditioning System which is to employ a wet air oxidation process. At the outset, EPA was concerned that because of patents held by Zimpro, Zimpro would be the only potential supplier of the equipment called for in the specifications. Accordingly, early in 1976, at the request of EPA, PVSC agreed to employ non-proprietary specifications to encourage use of suppliers other than Zimpro. (Supp. Adm. Record, tab 1). This was achieved by permitting the systems supplier leeway in designing the process. (P's Exh. NN).

 Because of the importance of the system and the discretion afforded the supplier, PVSC deemed it necessary that the supplier possess a requisite amount of experience or, in lieu thereof, that it post an experience bond. (Adm. Record, tab 18, encl. 3). In compliance with the EPA regulation governing experience clauses, *fn2" PVSC furnished a written justification for the experience bond, indicating that:

 
It is felt to be essential because of the unique nature of the heat treatment process to be used. The high pressures and temperatures involved in the process require that the heat treatment equipment be provided by an experienced manufacturer in order to assure safe operation. It is our opinion that equipment or processes which have not been operated heretofore should be excluded. The equipment required for the thermal conditioning system is housed in a structure specifically designed to suit the system configuration. In the event of failure of the systems to perform, not only would it be necessary to replace or modify the equipment, but it might in addition be necessary to make major changes to the enclosing structure.

 (Adm. Record, tab 4, encl. 2). Thereafter, the specifications for Contract 492, which included the experience requirement, were forwarded by PVSC for approval by EPA. By letter dated April 18, 1977, these specifications were approved by EPA's project engineer, Mark Savedoff. (Adm. Record, tab 4, encl. 3).

 Following EPA's approval of the specifications, in July, 1977, defendant BSP Division of Envirotech Corporation (BSP), a competitor of Zimpro, protested with PVSC, arguing in essence that the specifications were necessarily proprietary to Zimpro, that is, that they had been drawn so that only Zimpro could qualify. (Adm. Record, tab 1). *fn3" On August 3, 1977, a conference was held at PVSC's offices. Among those present were Peter B. Devine, Regional Counsel to EPA Region II; Mr. Savedoff of EPA and representatives of PVSC, BSP and CCTW&M. *fn4" At the conference, the specifications were modified to meet most of BSP's objections. By letter dated August 16, 1977 to PVSC's engineer, Mr. Savedoff reiterated that the specifications had the EPA's approval. (Adm. Record, tab 4, encl. 1).

 Thereafter, BSP focused its objections on the experience requirement and the form of the experience bond. This requirement, as ultimately promulgated, required that the supplier demonstrate that it had installed at least five similar processes over the past five years or that it post an experience bond guaranteeing the replacement of all parts of the system -- with certain limited exceptions not relevant here -- no matter what the cause of the failure for a period of five years. *fn5" BSP argued that the experience requirement had been drawn so that only Zimpro could qualify, *fn6" and that the bond alternative was not economically feasible. (Adm. Record, tab 1).

 On September 2, 1977, PVSC held a formal protest hearing *fn7" (Adm. Record, tab 10, encl. 6), and ultimately denied BSP's protest. The opening of the bids was scheduled, after a number of adjournments, for September 8, 1977.

 On September 6, 1977, BSP filed with the EPA an appeal from PVSC's denial of its protest, again focusing on the experience requirement and the form of the experience bond. At the same time, it instituted an action in the Superior Court of New Jersey, Chancery Division, to enjoin the opening of the bids. Under 40 C.F.R. § 35.939(h), filing an appeal with the EPA automatically defers for ten days "the protested procurement action." In addition, by letter dated September 8, 1977, Regional Director Eckardt Beck specifically requested PVSC not to open the bids until resolution of BSP's protest. (Adm. Record, tab 8). Nevertheless, on September 9, 1977, PVSC opened the bids. *fn8" Of the five contractors -- all of whom named Zimpro as their systems supplier -- CCTW&M's bid of $79,995,000 was the lowest. *fn9"

 Subsequently, BSP's appeal was taken under consideration by EPA's Regional Counsel, Peter Devine. On November 9, 1977, he held a conference on the appeal, at which BSP, PVSC and the plaintiffs were represented. (Adm. Record, tab 24).

 On December 10, 1977, acting on the recommendation of Regional Counsel Devine, Regional Administrator Beck issued a decision on BSP's appeal. In essence, he held that the form of the experience bond was so onerous, and the experience requirement so difficult to meet, that their inclusion in the specifications was anticompetitive and violative of the spirit of the EPA regulations. Accordingly, he directed that Contract 492 be rebid under specifications deleting these requirements. (Adm. Record, tab 27).

 This lawsuit followed. On motion of the plaintiffs for summary judgment, we are asked to set aside the EPA order; on the government's motion for summary judgment, we are asked to enforce it. ...


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