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AMERON, INC. v. U.S. ARMY CORPS OF ENGRS.

March 27, 1985

AMERON, INC., Plaintiff,
v.
U.S. ARMY CORPS OF ENGINEERS, LT. COL. MICHAEL K. COLLMEYER, CONTRACTING OFFICER UNITED STATES OF AMERICA, and SPINIELLO CONSTRUCTION COMPANY, Defendants



The opinion of the court was delivered by: ACKERMAN

 BEFORE: The Honorable HAROLD A. ACKERMAN, U.S.D.J.

 THE COURT: Had the conscientious secretary who started this controversy with one little dab of correctional fluid known what would ensue, I wonder whether she would have ever taken that first typing course.

 The plaintiff in this action, Ameron, Inc., was the lowest bidder on a pipe-cleaning project for West Point Military Academy. Ameron's bid was $ 1,033,000. The next lowest bid was submitted by Spiniello Construction Company with a bid of $1,255,000. Ameron's bid was, however, rejected by the Army Corps of Engineers as "nonresponsive" and the contract was awarded to Spiniello.

 After filing protests with the Corps and the U.S. General Accounting Office (GAO), Ameron applied to this court for an Order to Show Cause why defendants should not be preliminarily restrained from performing the contract in question until plaintiff's protest is decided by the GAO, and for temporary restraints pending the Order to Show Cause.

 On March 4, 1985, I issued an Order to Show Cause, but denied the restraints. On March 7, 1985, Ameron returned to this court with an amended request for temporary restraints, bringing to the court's attention the newly enacted Competition in Contracting Act, specifically, 31 U.S.C. Section 3553(d)(1) (1984). A temporary restraining order was entered and defendants were ordered to appear on March 18, 1985 for a hearing.

 Following issuance of the TRO, motions to intervene were received from the Speaker and Bipartisan Leadership Group of the House of Representatives and from the U.S. Senate. Leave was also sought by the Comptroller General of the United States to file a brief of amicus curiae. These motions were all granted because of the importance of the issues presented, the interest of those parties therein, and the timeliness of their application. The Supreme Court has also stated "that Congress is the proper party to defend the validity of a statute when [the Executive Branch argues] that the statute is inapplicable or unconstitutional." Immigration and Naturalization Service v. Chadha, 462 U.S. 919, 103 S. Ct. 2764, 2778, 77 L. Ed. 2d 317 (1983). The extensive briefing done by these parties has been a great help to the court.

 FINDINGS OF FACT

 The U.S. Army Corps of Engineers, New York District, invited bids for a project known as Raw Water Line Improvements. The Project entails cleaning and lining underground pipes which feed the reservoir at the United States Military Academy at West Point, New York.

 The bids were opened on January 9, 1985, and, as stated before, Ameron submitted the lowest bid. After the bids were opened, upon request of the Corps, Ameron furnished a letter on January 10th confirming its bid. Ameron also furnished bank references to the Corps and a subcontractor's plan by letter of January 21, 1985. Ameron's subcontract plan was approved by the Corps on January 28th. A letter was drafted for signature of defendant, Michael K. Collmeyer, Deputy District Engineer of the Corps, accepting Ameron's bid for the contract.

 When these bids were reviewed by Lorraine Lee, attorney-advisor with the Office of Counsel, it was determined that plaintiff's bid was defective because the penal sum contained in the bid bond had been altered. The numerals "3" and "000" in the millions and the thousands boxes designating the maximum amount of the bond were typed in over white typing correction fluid.

 Based upon this revelation and her knowledge of the law, this bid was deemed nonresponsive and rejected because the alteration was not accompanied by any indication that the surety had consented to be bound to this change.

 Indeed, in Ms. Lee's affidavit, she stated that a question was raised as to whether the figure in the (millions) box was added before or after the surety's signature. Because of Ameron's failure to submit a responsive bid as required, its bid was rejected and the contract was awarded to Spiniello Construction Company, the next lowest bidder.

 By letter dated February 20, 1985, the U.S. Corps of Engineers articulated its reasons for rejecting plaintiff's bid as follows:

 "The bid bond submitted by your firm has the penal sum of the bond typed over in white typing correction fluid. Since the bond was not accompanied by any evidence that the surety consented to this alteration, your bid is hereby rejected as non-responsive."

 The bond did indeed contain a figure which was later whited out and changed, but this was done by Jan Keating, an employee of Ameron, before the bid bond was signed. When Ms. Keating originally typed the bond, she typed $1.2 million as the maximum amount of the bond. That figure was given to her on her worksheet as the estimated contract price to be submitted by Ameron. Before removing the bid bond from her typewriter, she remembered that she had been asked to type $3,000,000 as the maximum amount of the bond. Therefore, using a small sheet of correct-o-type whiting material, she struck over the "1" and "2" and typed "3" where the "1" was, and typed a "0" where the "2" was. The bond was then signed by Helen Smith, attorney-in-fact for Federal Insurance Co., and by Scott F. Biondi, Eastern Sales Manager of Ameron. Neither of them noticed the alteration in the bond.

 On Friday, March 1, Ameron's attorneys filed a protest with the United States General Accounting Office. The protest was sent by electronic means and was received by GAO on March 1. A copy of the protest was also sent by telecopier to the Corps in New York City on March 1, 1985. Despite this notice and notice given verbally to Ms. Lee on March 1 of Ameron's protest and request that the Notice to Proceed not issue, the Corps issued its Notice to Proceed to Spiniello on March 4.

 On March 7, 1985, plaintiff applied for and obtained an Amended Order to Show Cause stating that pursuant to 31 U.S.C. Section 3553(d)(1), the U.S. Army Corps of Engineers was required to suspend activities related to that contract during the pendency of the protest before the General Accounting Office. Ameron contends that the court's rejection of its bid was arbitrary, unreasonable and contrary to law and applicable regulations. It further asserts that the public will suffer irreparable injury if the contract to Spiniello is not enjoined or set aside.

 The United States contends that the decision of the U.S. Army Corps of Engineers rejecting plaintiff's bid as nonresponsive was clearly rational and lawful, and must therefore not be disturbed by this court. It also contends that the stay provisions of 31 U.S.C. Section 3553 relied upon by this court in issuing its restraining order are unconstitutional.

 I now turn to these contentions.

 Before any discussion of the numerous issues briefed by the parties, I note that this case is presently before me on a motion for a preliminary injunction.

 In order to prevail in its request for preliminary injunctive relief, Ameron must meet its burden of showing the following: (1) that there is a reasonable likelihood of success on the merits of this litigation; (2) that it will suffer irreparable injury unless the requested relief is granted; (3) that the granting of relief will not substantially harm other interested parties; and (4) that, if the relief is granted, the public interest will not be harmed. Cerro Metal Products v. Marshall, 620 F.2d 964, 972 (3d Cir. 1980); Continental Group, Inc. v. Amoco Chemicals Corp., 614 F.2d 351, 356-57 (3d Cir. 1980).

 Plaintiff's first argument is that the Army Corps of Engineers erred as a matter of law in rejecting their bid based on a typographical correction. They contend that the legal principle is firmly established that a typographical correction of a contract made before its execution and delivery does not invalidate the contract. Plaintiffs also contend that the typographical correction did not violate any rule, regulation, law or bid requirement.

 This court's role in this matter is, however, not that of a court seeking to review a contract, nor is it a determination of whether I would have awarded the bid to Ameron or not. This court's role in reviewing agency procurement decisions is extremely limited. The Third Circuit stated in Princeton Combustion Laboratories v. McCarthy, 674 F.2d 1016 at 1021 (3d Cir. 1982):

 "We hold that as a matter of law, once the district court . . . determines that an agency's procurement decision is rational, its inquiry is at an end: the district court must deny the motion for a preliminary injunction. . . ."

 Ameron must make a threshold showing that an agency's decision is clearly illegal, or at least irrational, before a court can interfere with the decision-making process. As the Third Circuit has stated:

 "A showing of clear illegality is an appropriate standard to impose on an aggrieved bidder who seeks judicial relief." Sea-Land Service, Inc. v. Brown, 600 F.2d 429, 434 (3d Cir. 1979).

 Thus, I turn to an examination of the basis for defendant's decision to reject Ameron's bid. The Corps deemed plaintiff's bid nonresponsive because the alteration of the bid bond was not accompanied by any indication that the surety had consented to be bound by the change. The regulations of the Corps, and decisions of the Comptroller General, consider the bid bond to be a material part of a bid. Case authority from the office of the Comptroller General states that a bid is nonresponsive where it is accompanied by an altered bid bond without evidence of the surety's consent to be bound by the change. See, e.g., Montgomery Elevator Co., B-210782, 83-1 CPD para. 400 (1983); Baucom Janitorial Service, Inc., 82-1 CPD para. 356 (1982).

 The Comptroller General in Montgomery Elevator explained the reasons for such a regulation:

 "An invitation's requirement for a submission of a bid bond involves a matter of responsiveness with which there must be compliance at bid opening and not later. The reason, in part, is that if the situation were otherwise, a bidder who failed to submit a valid bond could decide after bid opening whether or not to cause its bid to be rejected by submitting or refusing to submit the bond. See 38 Comp. Gen. 532 (1959).

 "The submission of a materially altered bond can have the same effect as the failure to submit a bond altogether, because under surety law no one incurs a liability to pay a debt or to perform a duty for another unless expressly agreeing to be bound. An alteration in the bond thus raises a question whether the surety agreed to the altered terms. See 44 Comp. Gen. 495 (1965). A material alteration to a bond, such as in the penal amount, made without the surety's consent, discharges the surety from liability, 3A C.J.S. Alteration of ...


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