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A. & M. GREGOS, INC. v. HEAD

October 25, 1974

A. & M. GREGOS, INC.
v.
ROBERT J. ROBERTORY, Head, Contract Procedure Branch, Naval Facilities Engineering Command and A. D. HORNE, JR., Director, Contract Division, for Commanding Officer, Naval Facilities Engineering Command and CAPTAIN CHARLES HEID, U.S.C., Commanding Officer, Naval Facilities Engineering Command Northern Division and JOHN W. WARNER, Secretary of the Navy



The opinion of the court was delivered by: LORD, III

 On May 14, 1974, plaintiff A. & M. Gregos, Inc. filed this action against Robert J. Robertory, head of the Contract Procedure Branch of the Naval Facilities Engineering Command, A. D. Horne, Jr., director of the Contract Division of the Command, Captain Charles Heid, commander of the Northern Division of the Command, and John W. Warner, Secretary of the Navy. The complaint charges violations of the Armed Services Procurement Act, *fn1" the regulations adopted pursuant to that Act, and the due process clause of the Fifth Amendment as a result of alleged improprieties in the acceptance of bids for alteration and repair work to be performed at the Naval Air Station, located at Lakehurst, New Jersey. *fn2" Gregos claims that its bids on the two relevant projects were lowest and that the acts of defendants in awarding the contracts to the second lowest bidders were arbitrary and without reasonable basis. Jurisdiction is asserted under 28 U.S.C. § 1331, *fn3" 28 U.S.C. §§ 2201-02, *fn4" 28 U.S.C. § 1361, *fn5" and the Administrative Procedure Act, 5 U.S.C. § 702. *fn6" Specifically, injunctive relief was sought requiring defendants to approve plaintiff's bids and restraining them from interfering with its asserted rights as low bidder. *fn7"

 Defendants have moved to dismiss the complaint on five grounds: (1) failure to exhaust administrative remedies; (2) the controversy is moot; (3) plaintiff has an adequate remedy at law making injunctive relief inappropriate; (4) the relief sought is inappropriate because it would compel federal officers to perform a discretionary act; (5) failure to join a party.

 For the reasons which follow, we have concluded that there is no basis for dismissal of the complaint. However, we shall order that plaintiff join as defendants in this action the two companies awarded the disputed contracts.

 I

 At the outset, one preliminary matter warrants attention. Defendants, in a supplemental memorandum, have argued that a motion to dismiss may be treated as a motion for summary judgment where there are no genuine issues of fact in dispute. Defendants have cited Standard Oil Co. of Texas v. Lopeno Gas Co., 240 F.2d 504 (C.A. 5, 1957), for the proposition that:

 
"It is settled beyond controversy that if, at the hearing on an application for preliminary injunction, the evidence shows clearly that the plaintiff has not stated a claim upon which relief can be granted and cannot state such a claim, the court should dismiss the plaintiff's complaint. * * * That long established practice is akin to the more modern practice of granting a summary judgment when there is no genuine issue as to any material fact." Id. at 510.

 Defendants claim that the hearing on the preliminary injunction demonstrated that there is no issue of fact to be determined and that, therefore, the case is ripe for summary judgment. They argue that one of our findings at that hearing necessitates the conclusion that plaintiff has failed to state a claim upon which relief can be granted and that summary judgment should accordingly be entered in defendants' favor. Defendants rely on our statement at the time we denied plaintiff's motion for a preliminary injunction that "it is impossible to say that the two reports [which the government reviewed in determining whether Gregos was a 'responsible' bidder] did not provide a rational basis for determining that the plaintiff did not fulfill the satisfactory performance standard." *fn9"

 Defendants have misconstrued our finding. At the hearing on the motion for a preliminary injunction, we were concerned only with whether plaintiff had met its burden in establishing irreparability of harm and the likelihood of prevailing on the merits at the final hearing. We concluded, on the basis of the evidence then before us, that plaintiff had failed to fulfill the heavy burden of persuading us that it would be likely to prove at the final hearing that the defendants' refusal to award the contracts had "no rational basis." *fn10" Our statement was meant solely to express our feeling at that time that we could not say that plaintiff was likely to succeed on the merits at trial. We did not intend to foreclose from plaintiff the opportunity at a later date to present all its evidence in an effort to persuade us of the illegality of defendants' actions. Indeed, it would have been inappropriate for us to draw such a conclusion on the basis of the limited record then available.

 II

 Turning now to the specific defenses outlined in defendants' motion to dismiss the complaint, we are faced first with the argument that plaintiff should be compelled to pursue its administrative remedies before seeking relief in the district court. We have concluded that there is no requirement that plaintiff exhaust administrative remedies nor shall we, in our discretion, impose one in this case.

 The Armed Services Procurement Regulations *fn11" suggest two possible channels through which a disappointed bidder may protest an award. First, he may file a protest with the contracting officer who shall notify the protestor "in writing of the final decision on the written protest." Alternatively, he may protest to the Comptroller General of the United States in accordance with General Accounting Office Regulations. *fn12" While it is uncertain whether the first remedy was pursued by plaintiff in this case, it does seem clear that the second avenue for review was ignored. Thus, we are squarely presented with the issue of whether exhaustion of administrative remedies is a prerequisite for a disappointed bidder to maintain suit in the district court.

 We begin by noting that nowhere in the relevant regulations are these procedures made mandatory. The Armed Services Procurement Regulations employ mandatory language only in describing the procedure necessary to lodge the protest and the procedure required of the reviewing officer. There is no suggestion in the regulations themselves that failure to file a protest with the ...


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