supra, at 1242-1243 (reading into Armed Service Procurement Act on intent to protect bidders).
Accordingly, the Court is satisfied that CCTW&M has standing to challenge the EPA's order. A different question arises as to plaintiff Zimpro, however. As a supplier, it did not itself submit a bid, and thus unlike CCTW&M it cannot invoke as injury in fact the costs of submitting a bid proposal.
We may assume, however, that Zimpro must have incurred costs in preparing the bid which it submitted to CCTW&M and that it stands to lose a considerable economic benefit as a result of the EPA order. Moreover, we note the recent decision in Union Carbide v. Russell E. Train and Air Products and Chemicals, Inc., 73 F.R.D. 620 (S.D.N.Y. 1977), which upheld the standing of a supplier who was not itself a bidder to challenge the award of a contract in which it was not named as a supplier. The court there rejected the contention that the "disappointed bidder" doctrine was limited to actual bidders, holding that a supplier may be sufficiently "aggrieved" to challenge the agency's action. It found support for this, and for the proposition that the supplier is within the "zone of interests" sought to be protected by the EPA's regulations, in the EPA's own regulations permitting protests to be filed by any party with an "adversely affected direct financial interest."
Accordingly, the Court finds that Zimpro has standing to join CCTW&M in this lawsuit.
On motion of the EPA to dismiss PVSC's cross-claim, we are next asked to determine whether PVSC has standing to challenge the EPA's order under the APA.
Under Merriam, supra, PVSC has incurred tangible injury based on the costs of advertising the bids, costs which, by order of the EPA, it will now have to duplicate. So too, we believe that PVSC as a grantee is within the zone of interests sought to be protected by the FWCPA and the regulations promulgated thereunder. Indeed, it is one of the express purposes of the Act to protect the rights of state grantees vis-a-vis the federal government. See 33 U.S.C. § 1251(b) ("It is the policy of the Congress to recognize, preserve, and protect the primary responsibilities and rights of States . . . .") See also, 40 C.F.R. § 30.1115 (rights of grantee in disputes with EPA). Furthermore, it would be anomalous to hold that the party against whom an agency order is entered is without standing to challenge that order in a judicial proceeding. And, of course, PVSC has an interest in pursuing the requirement that suppliers possess a certain amount of experience.
Thus, we reject EPA's contention that PVSC lacks standing.
PVSC's Failure to Exhaust Administrative Remedies
EPA further argues that PVSC's cross-claim should be dismissed for failure to exhaust administrative remedies.
The regulations provide that a grantee's dispute with the EPA is to be initially presented to the designated agency officer, 40 C.F.R. § 30.1100, with the right to an intra-agency appeal within thirty days of a decision. Id., at § 30.1105. It is undisputed that PVSC did not invoke these procedures. However, it appears to this Court that this is an appropriate case in which to waive the exhaustion requirement. The agency action, following a bid protest which complied with the regulations, is clearly "final agency action." Id., at § 35.939(e)(3). Thus, the basic purpose of the exhaustion requirement -- deferral to agency expertise -- has been fulfilled. See United States ex rel. Marrero v. Warden, Lewisburg Penitentiary, 483 F.2d 656 (3rd Cir. 1973), rev'd on other grounds, 417 U.S. 653, 41 L. Ed. 2d 383, 94 S. Ct. 2532 (1974); Waddell v. Alldredge, 480 F.2d 1078 (3rd Cir. 1973). Moreover, PVSC was a party to the bid protest proceedings and the EPA was made fully aware of its position at that time; indeed, it expressly rejected PVSC's contentions.
Accordingly, the Court holds that the objectives of the exhaustion requirement have been satisfied and, therefore, denies EPA's motion to dismiss PVSC's cross-claim.
The Challenged EPA Order
We note at the outset that our review is limited in scope; we need only determine whether the EPA order was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law", or "unsupported by substantial evidence . . .", 5 U.S.C. § 706. While the reviewing court is obligated to conduct a "searching and careful" inquiry into the record, "the court is not empowered to substitute its judgment for that of the agency." Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 28 L. Ed. 2d 136, 91 S. Ct. 814 (1971). A particularly heavy burden rests on one who seeks to set aside the actions of procurement agencies; in such cases "the court is obligated to restrict its inquiry to a determination of whether the procurement agency's decision had a reasonable basis." M. Steinthal & Co. v. Seamans, 147 U.S. App. D.C. 221, 455 F.2d 1289, 1301 (1971) (footnote omitted).
The EPA order is challenged both by plaintiffs and by PVSC. Plaintiffs argue that the order was arbitrary and capricious because, prior to the order, the EPA had at least twice approved the experience requirement. They further argue that the effect of the order was to deprive them of a contract to which they were "presumptively entitled."
PVSC argues that EPA's ruling with respect to the form of the experience bond impinges upon PVSC's statutory discretion under state law. Before reaching these arguments, we examine in greater detail the order of Regional Administrator Beck and the administrative record upon which it was based.
The EPA order followed the bid protest of BSP. The basis of that protest may be summarized as follows. The experience clause, in requiring five prior installations of similar "complexity" and "magnitude," was ambiguous; PVSC had refused to clarify this ambiguity; therefore BSP could not ascertain whether it would have to obtain a bond; and, finally, if no bidder could meet the experience requirement, then the required bond was no more than "a five-year mechanical warranty . . . under the guise of an experience bond." (Adm. Record, tab 7). BSP's protest was vigorously opposed by PVSC which argued to EPA that the experience clause had been justified in writing and that the form of the experience bond complied with that used generally in public contracts and, in any event, was a matter of state law. (Adm. Record, tab 10).
By decision and order dated December 10, 1977, Regional Administrator Beck ruled in favor of BSP. (Adm. Record, tab 27). Essentially, he adopted BSP's argument that the combined effect of the experience bond -- which could be met by no one -- and the extensive coverage of the required bond alternative defeated the purpose of the experience requirement, operating:
not [as] a method of insuring that experience [sic] manufacturers will be competing . . . [but] an extended five year warranty . . . which increases the construction bids to cover the bond premium to the total System replacement cost.
Addressing PVSC's argument that the form of the experience bond was a matter of state law, the Administrator stated that while PVSC might be correct "as a general proposition", "it is still within the interest of the EPA if the form of bond is so unusual or so onerous as to effectively preclude potential competitors who lack the requisite experience from obtaining the bond." Of the experience requirement itself, the Administrator indicated that it could not be used to coerce all bidders into providing a bond, that an experience requirement had to take into account the actual experience of at least some of the potential bidders:
The experience requirement is "to protect the user from untried equipment." But the experience bond is a method of allowing untried equipment manufacturers to compete and, thereby, promote competition even at the risk of accepting an inexperienced manufacturer and previously untried equipment. It seems clear that the experience period cannot be arrived at by ignoring the nature and extent of the possible competition.