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August 7, 1978

J. E. BRENNEMAN COMPANY, a Pennsylvania Corporation
Jack J. SCHRAMM, Regional Administrator, Environmental Protection Agency, Region III

The opinion of the court was delivered by: BRODERICK


Plaintiff, J. E. Brenneman Company, is a construction company which entered into a contract in 1973 with the Derry Township Municipal Authority (DTMA) to build a wastewater treatment plant (Derry Plant). The Derry Plant is now substantially completed, having been in operation since March 1977. The plaintiff filed this complaint in mandamus against Jack J. Schramm, the Regional Administrator (Administrator) of the Environmental Protection Agency, Region III (EPA), requesting that this Court award the plaintiff "reimbursement for its losses incurred" and enter an order enjoining EPA from disbursing grant monies until there has been an accounting by the General Accounting Office (GAO) in connection with the grant for the construction of the Derry Plant. *fn1" The plaintiff alleges that the Administrator failed to perform two duties mandated by the Federal Water Pollution Control Act Amendments of 1972 (FWPCA), 33 U.S.C. § 1251 Et seq. Specifically, the plaintiff claims that the Administrator (1) approved the Derry Plant grant even though the bid specifications were restrictive, in violation of 33 U.S.C. § 1284(a)(6); and (2) failed to require DTMA to provide for an appropriate industrial cost recovery system prior to approval of the grant, in violation of 33 U.S.C. § 1284(b)(1)(B). Jurisdiction is based on 28 U.S.C. § 1361. *fn2"

Presently before the Court is plaintiff's motion for a preliminary injunction *fn3" to enjoin (1) payment by the Administrator to DTMA of the balance due under the grant for construction of the Derry Plant; and (2) payment by the Administrator to DTMA of the sum of $ 2.8 million authorized by Congress for a collector sewer system in Derry Township. A hearing was held in connection with this motion on July 17, 1978. Having considered the evidence and the arguments presented, for the reasons hereinafter set forth, we have determined that the plaintiff's motion for a preliminary injunction will be denied.

 On March 7, 1973, the EPA offered DTMA a grant which would provide federal funding to cover 75% Of the eligible costs of designing and constructing the wastewater treatment plant (Derry Plant). It is the position of EPA that it approved the grant to DTMA on February 28, 1973. The grant was awarded pursuant to the Federal Water Pollution Contract Act Amendments of 1972 (FWPCA), 33 U.S.C. § 1251, Et seq., to be administered through the EPA. The original amount provided by the grant agreement was $ 14,614,460, which amount was subsequently reduced to $ 11,957,400.

 The plaintiff submitted to DTMA the lowest bid for constructing the Derry Plant. However, on the night of July 26, 1973, following the tabulation of all the bids, a representative of the plaintiff informed DTMA that it had made an error in its bid and asked that it be permitted to withdraw the bid from consideration. DTMA did not permit withdrawal of the bid, taking the position that withdrawal of the bid would constitute a violation of Pennsylvania law, since the bid was less than 10% Lower than the next lowest bid. In an attempt to reduce its bid mistake loss, the plaintiff sought to substitute equipment it considered comparable to the Envirotech equipment which had been specified. Such substitution of equipment was refused by DTMA.

 On December 13, 1973, the plaintiff approached the EPA with its contention that the bid specifications were impermissibly restrictive in violation of § 1284(a)(6) of the FWPCA. The EPA advised the plaintiff that its attack on the specifications was filed too late for consideration. In 1974, the plaintiff instituted a civil action against DTMA, the project's consulting engineers and Envirotech Corporation in the United States District Court for the Middle District of Pennsylvania. This lawsuit was settled by an agreement entered into on April 26, 1976, which included a general release by each party of all claims, causes of action and judgments which had or could have been pursued. The settlement agreement provided that approval by EPA was required, and this resulted in alterations to the Derry Plant with additional federal funding.

 On July 15, 1977, the plaintiff submitted a request for monetary relief to the EPA. On September 16, 1977, the EPA rejected this claim on the ground that no regulatory measures were available through which the relief sought could be afforded.

 The construction of the Derry Plant is now essentially complete, and all but 5% Of the construction grant funds have been paid to DTMA. Payment of the remaining 5% Cannot be made until a final inspection of the plant and a final audit. Final payment is expected in about three or four months.

 Concurrent with the construction of the EPA-funded Derry Plant, DTMA also constructed a system of collector sewers which it financed without any federal participation. In its passage of the Clean Water Act of 1977, Pub.L. 95-217, Congress enacted a special provision authorizing the expenditure of federal funds not to exceed $ 2.8 million for a collector sewer system. The legislative history concerning this provision of the Act indicates that it may have been intended for the sole benefit of Derry Township, Pennsylvania (Conference Report No. 95-830, p. 111, December 6, 1977). At present, however, no application for federal funds has been received by the EPA from Derry Township for a collector sewer system.

 At the July 17, 1978 hearing, the plaintiff presented the testimony of Thomas Glennon, a vice president of the plaintiff and former project manager for the Derry Plant. Mr. Glennon testified that he complained to the EPA in 1976 concerning irregularities in the grant to DTMA. The EPA conducted an investigation and its investigative report was introduced into evidence. The investigative report, dated November 21, 1977, contains a statement *fn4" that the investigation disclosed "evidence of possible procurement irregularities, restrictive specifications which eliminated competitive bidding and patent fraud. In addition, the investigation had disclosed evidence of other irregularities and possible fraud." Mr. Glennon also testified that the plaintiff did not realize that there were restrictive bid specifications prior to submitting its bid in 1973. He stated that the Derry Plant is now substantially complete, and has been in operation since March 1977, and although more than $ 1 million has been spent in modifications of the original design, its performance is still not up to standard.

 In addition to Mr. Glennon's testimony, the plaintiff introduced into evidence five documents, (1) the investigative report heretofore described; (2) the grant agreement between the EPA and DTMA; (3) an EPA mailgram; (4) a letter from EPA to DTMA; and (5) an amendment to the Derry Plant grant. The grant agreement reflects that the EPA offered the grant to DTMA on March 7, 1973, and that DTMA accepted the grant on March 30, 1973. General Condition 3 of the grant agreement provides in relevant part:

Grant payments are subject to the . . . following:
(a) The grantee shall submit in conformance with the Regulations an acceptable . . . industrial cost recovery system . . . for approval prior to final inspection of the completed facilities.
(b) Final payment will be made upon completion of final inspection by the (EPA) and compliance by the grantee with all applicable Regulations and the Grant Agreement.

 Special Condition 2 of the grant agreement provides:

General Condition Number 3(a), industrial cost recovery system, must be in conformance with the Regulations, 40 C.F.R. ...

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