Standing to Sue Leaves the Army Standing Where?

• Author: By Captain Morris J. Lent. Jr.
• Pages: 03

In the past war end a half, the eozcrts have rezr'ritten

much of the law concerning standing to challenge 00% erment procurement awards. The author examines the erosion and fall of the "no standing to sue'' doctrine culminating in the 1970 decision in the Scanwell cue. He then studies the initial judicial interpretation of the Scanwell decision. In the concluding section. he suggests that neither legal precedent nor sound public poliw jiStifiE8 judicial intervention in government contracting procedures.

This article will focus on the problems which result when anunsuccessful bidder' on a government contract attempts to redreas an alleged wrong. The wrong may take one of 6evers.I farms. For example, in formally advertised contracts, the unsuccessful bidder may be the low bidder who feels that he has unjustifiably been held non-responaive;2 it may be the second lowest bidder who feels the lowest bidder should have been held nan-re~ponsive~or not

responsible.' In negotiated contracts, where the contracting officer has even wider discretion, the potential litigant may be one who feels that he would have been awarded the contract had thia dis.

'Thrs article was adapted fiom B thesis preaented to The Judge Advoeate General's School, P. S. Army, Charlotteiiille. Virginia, while the author wasB member of the Nineteenth Adwnced Course The opinioni and C D ~ C ~ Y I ~ O ~ S preiented herein are those of the author and do not necessaril) represent the view3 of The Judge Advocate General's School or any other .asernmentalBP'"C3

** JAGC, U. S. Army, Office af the Staff Judge Advocate, Fori Belvoir, S., 1064. United States Military Academy; J D.,1070. University

member of the bars of the Supreme Court of Appeals of Virginis ed States Court of Militsry Appeals.1 To be more precise. this sentence should read ''potential'' ar well as"unsueeeaaful" bidder For in B recent cage, Ballenna Pen Ca. V. Xunzig, 433 F 2d 1204 (D.C.

Cir. 1910), the court granted standing to B cantrsctor who complained that he had been forecloied from having an opportunitr to bid. For a diaeviaian of jwt how far standing mlght be extended. see Seetion 1V.A. mt7a.

2 Sehoanmsker Co. v Resor, 319 F.

Supp. 033 (D.C.D.C. 1070)8 Seanrell Laboratones, Ine. V. Shaffer, 424 F 2d 858 (D.C. Clr. 1970). 6 Lind V. Stssts, 288 F. Supp. 182 (N.D.

Cal. 1968)

cretion not been abused.s In effect, the disappointed bidder is stat-ing that his rights have been violated because a government agency failed to properly interpret and apply procurement law and regulationn.

Until very recently, the only avenue of complaint for this unsuccesaful bidder was to file a protest nith the General Accounting Office.b He could not go into court because it had traditionally been held that he had no standing to sue.' On February 13. 1970, the Court of Appeals for the District of Columbia literally turned the government emtract XTorld upside down when it ruled in Scamdl Laboiatories hie. e. Sliaifer that an unsuccesafui bidder did hare the needed standing ta sue the Government.

This article will analyze this new position to determine if it will and should became a fixed part of our l a w The article \rill trace the historical background of the standing question, discuss recent decisiana and project on future decisions, and consider what the law ought to be with suggeations of how to achieve that end.

I. HISTORICAL BACXGROLSD

Although discussion of standing is found in earlier decisions? the classic case in this area is Pe,lri?is %. Lttiffs mere potential government contractors oho disagreed aith a minimum wage determination made by the Secretary of Labor. The Public Contracts Act ai 1936 authorized the Secretary to determine the prevailing minimum wage in a locality. Any contractor who did not pay this minimum wage was estopped from dealing aith the government, Plainhffs areued that the Secretary had construed "locality" to include a larger geographical area than

5 The eases thus far decided by the court? haw caycerned due p~oeess

contention3 or rnisapplieatian of repulationni in formally advertired contracts complaint base? on abuie at dmrenon ~n a negotiated con. urt B matter of time until the standing mue \w11 arise IF. thia mptroller General ha? alreads, I" sewis1 ~nbranccr. taken B

close look at JYppOIed dircretionari dee16>oni. For exrm~le.

in 4R COVF CEY. 605 (18681, he rtronply quegtions the practice of negotisllng wlth onll one

'D R COIZP. L. REV 1 (19701 [hereinafter cited as aSaa Sectmn 1V.B znfra for a brlef analy~ir of this procedure.7 Perkmi Y Lukenr Steel Ca, 310 U S 113 (181018 Scanwell Laboratories. Inc. Y Shaffer. 424 F 2d 659 (D.C Clr. 19701.

Q See, q., Masssehuietts V. Mellon and Frathlngham V. lellon, 262 US

1.1

,."-",

103310 U.S. I13 (1940)74

STANDING TO SUE

the Act contemplated and that they could not effectively compete for government contracts if resuired to abide by the wage determination. The district court dismissed the suit for lack of jurisdiction. The circuit court decided that plaintiffa' allegatiom were essentially correct, reversed the decision, and ordered a host of government officials concerned not to abide by the Secretarfs determination."

The Supreme Court held that the plaintiffs did not have standing to sue the government .The deciaion nas based on tno distinct lines of argument. From a strictly legal point of view, the Courtsaid that for parties to have standing, they "must show an injury or threat to a particular right of their own, as distinguished from the pubiic's interest in the administration of the lau."12 In other a orda, the statutes regulating the contractine procedures of offieera of the government are enacted solely for the benefit of the government and confer "no enforceable rights" upon persons deal- The Court streased just a3 strongly the policy considerations involved. For example:

[The Public Contraeti] Act does not depart from but instead embod-i e ~ the traditional principle of leaving purchases necessary to the operatian of OUT Gorernment to admmrtratm by the executlle branch of Goiernmenl, rlth adequate r a n ~ e of dmretm free from rexatms and dilatory rertlalnts at the sum af prospeetlre or potentla1 SelleTi.ll

In even stronger language: It 11, as bath Conereis snd the courts haw always cecnenllpd.essential to the elen and expedltmus functioning of golrrnment that the admimstration of purchasmg machmer) be unhampered.16

As indicated above, until Scantcell, the reasoning of Pevkim had generally been followed. However, in the interim, several cases presaged a new direction of thought.

The first case in which the standing issue vas decided to any extent in favor of the contractor W.S Heyer Products Co. u. Cnited States.lb The plaintiff claimcd that even though he was the low responsible bidder, the contract was arbitrarily awarded to

$1 It may be of lnterert that the emuir emyt rhieh Srantod stsndlnp m this caie _as the Court of Appeals for the Dlstrlct of Calumbm, the %erne court which would take B similar position thirty yesrr later ~n Seanivell.

11 Perkinr 3 Lukens Steel Co.. 310 U S. 113, 125 (1940).

18 Id. at 126

Lild at 12716 Id at 130.18 140 F. Supp. 408 (Ct. GI. 1966).

another firm. He further alleged that there were six other bids which were lower than the successful bidder and that he was personally discriminated againat because af his anti-government teatimany before a Senate Committee. Heyer sought both the costs of preparing his bid and the profits he nouid have made had he gotten the contract. In discussing the claim for anticipatory profits, the Court of Claims indicated that even if the award nac not made in accordance with procurement regulations,'. "[Ilt is only the public aha has cause for complaint, and not an unsuccessful bidder."LJ But in speaking of the costs of bid preparation, the court announced that the bidder did hare certain rights and that one of these rights was to have hi3 bid honestly canaidered. The opinion then defined the government action that would be violati\-e of this right.

Recovery can be had only I" thole C B I ~ J where I t can be rhoun by

clear and eoniineing proof that there >.as been a fraudulent Induce- ment for blds, isith the Intentmn, before the bids bier@ Invited or later canceiied. to disregard them all except the ones fiom bidders ta m e of whom it was intended to let the contract, whether he was the lcwesl rsiponaible bidder or not $0

Utilizing this standard three years later the Court af Claims de-cided that Heyer was not entitled to recover anything.ro

The next eroaion of Perkins occurred in George v. .t4itchell.2' At the heart of the dispute was the Wdsh-Healy Act under which the Secretary of Labor acted I" Peykins. The Act states the general principle that th? Federal Government should procure and use only those goods pvduced under safe and fair working conditions. Plaintiff sought a declaratory judgment that the contracts he had made with the Atomic Energy Commission were not within the purview of the Act. He further sought ta enjoin the Secretary of Labor from blacklisting him for violations of the Act.2l

The initial isme in the case was whether the contractors had standing to sue. This question was different than the one faced by the Perkins Court because, in 1952, Congress had enacted the

1- The pronnan I" question II found an Armed Services Procurement Reg. 5 2-407-1 (1 Jan 1969). If read-. "Vnlein all bids are rejected, award shall be made by the contracting officer. wthin the time for acceptance apeeified ~n the bld or extension thereof, to that responsible bidder whose bid, conforming to the invitations far bids. -111 be mart advantageous to the Gorernment, price and other factors considered "

I6 Heyer Products Ca. v United Stater, 140 F Supp 409, 412 ICt. Cl. 19563 IS Id at 414.20 Heyer Produets Co. Y. United States. 177 F Supp 251 (Ct CI. 1919).*I 282 F.2d 486 (D.C.

Clr. 1960)11 The term is commonly used fo mean placing B contractor's name on a...