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SUPERIOR SERVS. v. DALTON

April 21, 1994

SUPERIOR SERVICES, INC., an Alaska corporation, and LUIS E. GARCIA, INC., a California Corporation, Plaintiff,
v.
JOHN H. DALTON, Secretary of the Navy, Defendant.



The opinion of the court was delivered by: MARILYN L. HUFF

 On April 18, 1994, the court heard the plaintiff's motion for preliminary injunctive relief. Grant Clark and Lisa Damiani appeared on behalf of the plaintiffs, and Mark Dawson appeared on behalf of the defendant. After considering the papers submitted and oral argument, the court denies the plaintiffs' motion. The plaintiffs have not demonstrated a fair chance of success on the merits. The reasons set forth in the Determination and Findings justify the lifting of the automatic stay on the original contract, and the defendant did not act arbitrarily or contrary to law in entering into an interim contract with Cabaco. The plaintiffs also have not demonstrated a significant threat of irreparable injury because the asserted damages are speculative and/or may be compensated with money damages.

 BACKGROUND

 On November 1, 1989, plaintiff Louis E. Garcia, Inc. ("LEG") was initially awarded a government contract for the maintenance and operation of approximately 2,300 Naval housing units in Murphy Canyon Heights. The contract requires that LEG perform refuse collection and disposal, pest control, and general maintenance and repair services for the public housing. The contract was awarded under a "minority set-aside," pursuant to the Small Business Association's 8(a) program. 15 U.S.C. § 637. This program requires a business to be owned 51% by a minority and to have limited capital, as defined by regulations. At the time LEG was initially awarded the contract, LEG qualified as a "small and disadvantaged" business under the 8(a) program.

 The term of the original contract expired on April 30, 1993. It appears that LEG was no longer a qualified business under 8(a) as of April 1993. However, the Navy extended the contract on two occasions, with a final expiration set for October 31, 1993. The defendant asserts the extension was necessary due to delays in the pre-award process.

 The Navy then granted a final extension, until March 31, 1994, to LEG. The defendant asserts this extension was necessary due to delays resulting from a protest filed by plaintiff Superior Services, Inc. ("SSI") and the need to provide the health and safety services. The defendant further asserts the Small Business Association would not agree to further extensions on the contract because LEG was no longer a qualified business under the 8(a) program.

 On July 29, 1993, the Navy had solicited bids for the Murphy Canyon contract. The defendant asserts LEG was ineligible to submit a bid because LEG was no longer "small and disadvantaged" within the meaning of the 8(a) program. The plaintiffs do not dispute that LEG was ineligible. Eleven entities, including SSI, submitted bids.

 The bid submitted by SSI was dependent upon a "teaming agreement" entered into between SSI and LEG. The parties entered into the agreement for the purposes of competing for and performing the Murphy Canyon contract. SSI's submitted proposal utilized LEG, as subcontractor, in the performance of the contract. Although not clear, it appears that LEG would perform the labor and SSI would oversee performance of the contract.

 On February 25, 1994, the Navy awarded the contract to another bidder, Cabaco, Inc. ("Cabaco"). The defendant asserts that, with regard to technical factors, Cabaco ranked first and SSI ranked second. However, Cabaco's bid ranked first at $ 18,800,000 while SSI's bid ranked seventh out of eleven bids at $ 23,400,000.

 On March 3, 1994, SSI timely filed a protest with the United States General Accounting Office ("GAO"), pursuant to 4 C.F.R. § 21.2(a)(3). In this protest, the plaintiffs assert Cabaco's bid is below cost and this was undetected by the defendant due to the defendant's failure to perform a meaningful price realism analysis. The plaintiffs also contend the defendant made harmful errors in the technical evaluations and failed to conduct meaningful discussions as required by the Federal Acquisition Regulation. As provided under statute, the protest automatically stayed the contract award to Cabaco during the pendency of the protest. See 31 U.S.C. § 3553(c).

 The Navy requested the GAO expeditiously review the matter, but the plaintiffs opposed an expeditious review. SSI submitted a letter to the GAO stating that the complex legal and factual matters involved rendered inappropriate an expeditious review of forty-five days. Thus, the defendant now states that review by the GAO will not be completed until July 1994.

 On March 23, 1994, Garrett L. Ressing, Assistant Counsel of the Naval Facilities Engineering Command, issued a letter to the GAO informing it that the Agency had made a determination that "urgent and compelling circumstances exist which significantly effect [sic] the interest of the United States and will not permit awaiting a decision by GAO in the subject protest." The defendant also has provided the court with "Determination and Findings" issued by Rear Admiral Jack Buffington on March 22, 1994. These Findings served to lift the automatic stay. In these Findings, Admiral Buffington states the following:

 
Any further extension [of LEG's contract] would require sole source justification. The conditions do not warrant such action. The awarded contract is an 8(a) set-aside for which [LEG] was not eligible.
 
. . .
 
The services provided under this contract are essential to the health, safety, and morale of military personnel and their dependents. The scope of the work to be performed includes refuse collection and disposal, pest control, change of occupancy services, and general maintenance and repair. Any lapse in these services would have a detrimental effect on the health and safety of the individuals residing in these units.

 Cabaco was scheduled to begin work under the contract on April 1, 1994. On March 30, 1994, SSI and LEG filed a complaint for declaratory and injunctive relief. The plaintiffs sought a declaration that the defendant's override of the stay was improper and an injunction prohibiting the defendant from permitting Cabaco to commence performance until the GAO renders a decision on SSI's protest. The plaintiffs sought a temporary restraining order prohibiting the defendant from overriding the automatic stay.

 On March 31, 1994, Judge Brewster heard the plaintiffs' motion for a temporary restraining order. After extensive oral argument, Judge Brewster granted the plaintiffs' request for a temporary restraining order. Specifically, Judge Brewster enjoined the defendant from allowing performance to commence on the original contract entered into between the defendant and Cabaco. Judge Brewster, however, did not enjoin the ...


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