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Ameron Inc. v. U.S. Army Corps of Engineers

March 27, 1986

AMERON, INC. AND UNITED STATES SENATE, INTERVENOR, THOMAS P. O'NEILL, SPEAKER OF HOUSE OF REPRESENTATIVES AND BIPARTISAN LEADERSHIP GROUP, INTERVENORS, APPELLEE,
v.
U.S. ARMY CORPS OF ENGINEERS; LT. COL. MICHAEL K. COLLMEYER, CONTRACTING OFFICER, UNITED STATES OF AMERICA; AND SPINIELLO CONSTRUCTION COMPANY, UNITED STATES OF AMERICA, APPELLANT



Appeal from the United States District Court for the District of New Jersey (D.C. No. 85-1064).

Author: Garth

BEFORE: GARTH and BECKER, Circuit Judges and HUYETT, District Judge.*fn*

GARTH, Circuit Judge:

This appeal presents, in a rather prosaic setting, a problem of profound constitutional significance concerning the division of power among the three branches of our federal government. At issue is the constitutionality of the automatic stay provisions of the Competition in Contracting Act (CICA), Pub. L. No. 98-369, Subtitle D, 98 Stat. 1199-1201, codified at 31 U.S.C.A. § 3553 et seq. (West Supp. 1985). The United States Army Corps of Engineers and the other executive department defendants [hereinafter referred to collectively as the Army] appeal from a decision of the district court declaring the CICA stay provisions to be constitutional and ordering broad injunctive relief to plaintiff Ameron and the Congressional intervenors.

We now affirm the district court's holding that the Comptroller General, as head of the General Accounting Office, is an independent official with duties involving both the legislative and executive branches of the United States government. As such, he may constitutionally exercise the powers conferred upon him by CICA. We also conclude, however, that the injunction granted by the district court was broader than necessary to grant the full relief to which plaintiffs were entitled, and therefore modify the injunction as specified below.

I.

A.

Congress created the General Accounting Office (GAO) and the Office of the Comptroller General by the Budget and Accounting Act of 1921, Pub. L. No. 13, § 301, 42 Stat. 20, 23. The 1921 Act was the culmination of Congressional efforts over many years to provide accountability for the federal government's finances. The original Comptroller of the Treasury was an executive officer within the Treasury Department. 1 Stat. 65-66 (1789). The Comptroller continued as an executive officer with executive functions under subsequent enactments. See, e.g., Act of March 3, 1817, 3 Stat. 366; Dockery Act of 1894, 28 Stat. 162, 205.

When they were created to replace the Comptroller of Treasury, the GAO and the Comptroller General were initially empowered to report to Congress and assist Congress in the budget process. 1921 Act, §§ 304-312, 42 Stat. 23-26. Even in 1921, however, the Comptroller General, even though created in part to assist Congress, was assigned duties that were not traditionally "legislative": auditing and settling public accounts, countersigning treasury warrants, prescribing "the forms of keeping and rendering all public accounts" -- these and other executive duties were given to the GAO and the Comptroller General by the 1921 Act, which also abolished the Comptroller of the Treasury, §§ 301, 304, 310. The parties do not dispute that the Comptroller General continues to perform significant duties that are both "legislative" and "non-legislative," i.e., executive, in nature.

As an adjunct of its account-settling role, the Comptroller General over the years began to hear protests from disappointed bidders on government contracts. See Wheelabrator Corp. v. Chafee, 147 U.S. App. D.C. 238, 455 F.2d 1306, 1313 (D.C. Cir. 1971). This role was formalized by the Competition in Contracting Act (CICA) in 1984. 31 U.S.C.A. §§ 3351-3356 (West Supp. 1985). CICA was enacted to remedy a major loophole in the long-standing GAO review procedure: by the time the GAO reviewed most bid protests, the protests had become moot because either the contract had been let or the contractor was engaged in performing under the contract. While GAO regulations provided for a stay of either the granting or performance of the contract in some circumstances, see Merriam v. Kunzig, 476 F.2d 1233, 1236 & n. 1 (3d Cir. 1973), this stay was easily overridden by the contracting agency involved. The result was that most procurements became faits accomplis before they could be reviewed. This situation was identified by Congress as a contributing factor to the crisis of waste in federal procurement. In particular, Congress recognized as a problem that of $168 billion in government contracts awarded in fiscal year 1983, only about one-third, $54 billion, was awarded on a competitive basis. Competition in Contracting Act of 1984 : H.R. Rep. No. 1157, 98th Cong., 2d Sess. 12 (1984). In enacting CICA, Congress attempted to provide effective review of bid challenges, and in the process to encourage competition in contracting. See Opinion of District Court, 607 F. Supp. 962, 973-74 (D.N.J. 1985)

In relevant part, CICA permits a potential or actual bidder who disputes the terms or awarding of a government contract to challenge the procurement or the award of the contract by filing a protest with the Comptroller General. Upon receiving the protest, the Comptroller General must "within one working day" notify the agency involved, which must then make a report on the challenged contract, 31 U.S.C. § 3353(b)(1).

The filing of a protest freezes, or stays, the awarding of the contract or any action under it until either the Comptroller General makes a decision on the protest or the agency head certifies in writing that "urgent and compelling circumstances which significantly affect interests of the United States" require that the contract be awarded, 31 U.S.C. § 3553(c)(2), or that "the best interests of the United States" require that performance proceed under a contract already awarded by the agency. 31 U.S.C. § 3553(d)(2).

The Act requires the Comptroller General to issue a final decision on the protest within 90 working days unless he determines in writing that the circumstances of the protest require more time. 31 U.S.C. § 3554(a)(1). The Comptroller General may also exercise an "express option" to expedite review of certain cases within 45 calendar days, 31 U.S.C. § 3554(a)(2), and may dismiss patently frivolous or meritless claims on a summary basis. 31 U.S.C. § 3554(a)(3).

The power of the Comptroller General in rendering his decision is limited to a recommendation that the agency, inter alia, terminate or rebid the contract, issue a new solicitation, refrain from exercising options under a contract, or award a different contract consistent with law. 31 U.S.C. § 3554(b)(1). The only affirmative power provided to the Comptroller General is to award a prevailing protestor its bid and proposal preparation costs, as well as its costs and attorneys' fees in filing and pursuing the bid protest. 31 U.S.C. § 3554(c)(1).

President Reagan signed CICA into law as part of the omnibus Deficit Reduction Act of 1984, but he declared the automatic stay provision unconstitutional upon the advice of the Attorney General and ordered the executive department not to observe it. Accordingly, the Office of Management and Budget issued instructions to executive agencies to proceed with the procurement process "as though no such [stay] provisions were contained in the act." OMB Bulletin No. 85-8 at 2 (Dec. 17, 1984).

B.

The mandate facts underlying the present controversy belie the compelling nature of the constitutional question before us. In late 1984, Ameron submitted a bid on a proposed contract to clean and repair sewer lines at West Point, New York. The Army's "Invitation for Bids" required an interested party to submit along with its bid a bond guaranteeing 20 percent of the bid amount. When the sealed bids were opened, Ameron was the apparent low bidder with an offer of $1,033,000, about $200,000 less than the next lowest bidder, defendant Spiniello Construction Company. However, Ameron's bid was rejected because the dollar amount of the bond had been altered without any indication that the surety had agreed to be bound by the change. Although Ameron contended that the change was merely the result of a typist's error,*fn1 the agency rejected Ameron's bid as non-responsive to the terms of the invitation and awarded the contract to Spiniello. See Affidavit of Michael K. Collinger at 1-2.

On March 1, 1985, within ten days of the awarding of the contract, Ameron filed a protest with the Comptroller General, claiming that the Army had wrongfully rejected its bid. Three days later, Ameron filed suit in federal district court claiming that the Army had arbitrarily rejected its bid and seeking a preliminary injunction to restrain the Army and the victorious bidder from proceeding with the contract pending the outcome of Ameron's protest to the Comptroller General. Ameron also sought a temporary restraining order enjoining performance of the contract.

The district court first denied the request for a temporary restraining order, and then granted it on March 7, 1985 when the stay provisions of 31 U.S.C. § 3353(d)(1) were brought to its attention, pending a hearing on the preliminary injunction to be held March 18, 1985. After hearing argument on March 18 and granting the motion of the Senate, the Speaker, and the Bipartisan Leadership Group of the House to intervene as plaintiffs to support the constitutionality of CICA, the district court eventually granted the preliminary injunction on March 27, 1985. 607 F. Supp. 962 (D.N.J. 1985).

In an oral opinion delivered from the bench, the court rejected Ameron's claim that the Army had acted arbitrarily. That ruling is not before us on appeal. The court concluded, however, that Ameron was entitled to a preliminary injunction enforcing a stay because the CICA stay provision was constitutional. The court held that Congress could delegate the non-legislative power to lift the stay to the Comptroller General because he was appointed by the President in accordance with the Appointments Clause of the Constitution, Art. II § 2, C1.2, and therefore was not merely an agent of Congress. Id. at 971-74. The Army filed a timely notice of appeal from the injunction ruling. A month later, on April 29, 1985, the Comptroller General issued a decision denying Ameron's protest on the merits.*fn2 The parties agreed that this did not render the case moot, and proceeded to file cross-motions for summary judgment.

The court thereafter denied Ameron's motion for summary judgment on the merits of its bid protest, but granted the motion of the intervenors for a permanent injunction ordering the federal government to comply with and implement 31 U.S.C. § 3553. 610 F. Supp. 750 (D.N.J. 1985). We reproduce the full text of the court's order in the appendix.

The court also declared 31 U.S.C. § 3553 to be constitutional, and joined OMB Director David Stockman and Defense Secretary Casper Weinberger as necessary defendants. Although the injunction contains no language limiting its application to less than the entire federal government, it is apparent from the court's oral opinion that it intended its order to have controlling effect only within the District of New Jersey. See id. at 756. The Army appealed again, and the appeals (Nos. 85-5226, 85-5377) were consolidated for review by this court.

II.

At the outset, we must determine if this case was rendered moot by the disposition of Ameron's original bid protest by the Comptroller General. Although the Comptroller General's decision lifted the stay provided by CICA, arguably obviating the need for an injunction, it is urged that this case is not moot. Even when no more relief may be granted to a plaintiff, a case may continue to decision and remain viable on appeal if the problem presents is "capable of repetition yet evading review." See In re Kulp Foundry, 691 F.2d 1125, 1128-29 (3d Cir. 1982). This standard applies if 1) the problem allegedly causing injury is resolved within too short a time period to ever be fully litigated and appealed, and 2) the party seeking relief is likely to be subject to the same injury in the future. Murphy v. Hunt, 455 U.S. 478, 482, 71 L. Ed. 2d 353, 102 S. Ct. 1181 (1982). See also Roe v. Wade, 410 U.S. 113, 125, 35 L. Ed. 2d 147, 93 S. Ct. 705 (1973).

The parties agree that this case is an appropriate one for application of the rule, and we concur. A bid protest will usually be resolved within 90 days, so that by the time a case can be appealed to this court, it will almost always face the prospect of being regarded as moot. Moreover, Ameron, as a company frequently seeking government contracts, represented that it is likely to be faced with a similar situation again: desiring to protest a contract decision but being unable to obtain the statutorily guaranteed stay while its protest is being reviewed. Lest the issue presented evade review, we hold that the present dispute is not moot, and we proceed to consider this case on the merits.

III.

As the Supreme Court observed in Buckley v. Valeo, 424 U.S. 1, 126, 46 L. Ed. 2d 659, 96 S. Ct. 612 (1976), "The principle of separation of powers was not simply an abstract generalization in the minds of the Framers: it was woven into the document that they drafted in Philadelphia in the Summer of 1787." The Constitution creates three distinct branches of government and vest specific powers in each. This design is intended to block tyranny by any one branch by providing a series of checks and balances to diffuse concentrations of power. "The hydraulic pressure inherent within each of the separate Branches to exceed the outer limits of its power, even to accomplish desirable objectives, must be resisted." INS v. Chadha, 462 U.S. 919, 951, 77 L. Ed. 2d 317, 103 S. Ct. 2764 (1983).

Nevertheless, the Court has rejected any notion that the branches are hermetically sealed. "While the Constitution diffuses power the better to secure liberty, it also contemplates that practice will integrate the dispersed powers into a workable government. It enjoins upon the branches separateness but interdependence, autonomy but reciprocity." Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 635, 96 L. Ed. 1153, 72 S. Ct. 863 (1952) (Jackson, J., concurring). See Buckley, 424 U.S. at 121. Moreover, this court has recently emphasized that separation of powers analysis must focus pragmatically on whether the challenged provision actually or potentially interferes with the ability of the affected branch to accomplish its constitutionally assigned functions. In re The President's Commission on Organized Crime Subpoena of Nicodemo Scarfo, 783 F.2d 370, slip op. at 11 (3d Cir. 1986). See also Nixon v. Administrator of General Services, 433 U.S. 425, 443, 53 L. Ed. 2d 867, 97 S. Ct. 2777 (1977).

In applying the separation of powers principle, which is not explicitly mentioned in the Constitution but which undergirds the Constitutional philosophy, the Court has more than once felt compelled to rein in one or another branch of government. The Court has held that Congress, as the legislative branch, may not delegate to itself or its agents executive or judicial power, Hampton & Co. v. United States, 276 U.S. 394, 406, 72 L. Ed. 624, 48 S. Ct. 348 (1928); that the executive may not exercise legislative power belonging only to Congress, Youngstown ; and that executive and administrative duties of a non-judicial nature may not be imposed upon Article III judges. United States v. Ferreira, 54 U.S. (13 How.) 40, 50-51 14 L. Ed. 42 (1852). See generally President's Commission (Scarfo), supra.

Moreover, the power of appointment and removal must be exercised in conformity with the separation of powers. Congress may not curtail the power of the President to remove purely executive officials. Myers v. United States, 272 U.S. 52, 47 S. Ct. 21, 71 L. Ed. 160 (1926), but may create agencies which exercise mixed duties whose members may be protected from removal by the executive without cause. Humphrey's Executor v. United States, 295 U.S. 602, 629, 79 L. Ed. 1611, 55 S. Ct. 869 (1935). Congress may not, however, retain for itself the power to appoint officials of the government who exercise executive power. Buckley, 424 U.S. at 126.

While disputing the application of these rules to the case at hand, the parties do appear to agree on one point: the key issue in this case is the characterization of the Office of the Comptroller General. If the Comptroller General, as the Army argues, is deemed to be an agent of Congress, then his possession of executive powers and duties is arguably unconstitutional. On the other hand, if he is an executive agent, then the performance of executive duties by the Comptroller would arguably create no constitutional problem.

The only other court that has addressed the question whether the Comptroller General may constitutionally exercise the powers granted under CICA concluded, following the reasoning of the district court in the present case, that the Comptroller could constitutionally exercise mixed powers. See Lear Siegler, Inc. v. Lehman, No. CV 85-1125-KN, slip op. at 7-11 (C.D. Cal. Nov. 21, 1985).

In a recent decision, a three-judge panel in the United States District Court for the District of Columbia*fn3 held that certain provisions of the Balanced Budget and Emergency Deficit Control Act of 1985, popularly known as the Gramm-Rudman-Hollings Act, were unconstitutional because they vested executive powers in the Comptroller General. Synar v. United States, 626 F. Supp. 1374 (D.D.C. 1986). Under the Synar analysis, the Comptroller General was not permitted to exercise these powers under the Constitution. The court did not reach a firm conclusion regarding the characterization of the Comptroller General as an agent or member of a particular branch of the government, but concluded that executive power to mandate branch cuts could not be delegated to "an officer removable by Congress." Id. slip op. at 48.

In resolving the central question of characterization as it is presented on this appeal, we confront plausible arguments on both sides. Several factors weigh in favor of considering the Comptroller General to be an executive officer. Foremost among these factors is that the Comptroller General exercises significant executive functions in managing the accounts of the federal government and is appointed by the President -- factors which, in and of themselves, arguably render the Comptroller an "Officer of the United States" under Buckley, 424 U.S. at 126. The historic roots of the Comptroller's functions in the Treasury Department also militate against finding that the Comptroller is merely a legislative agent.

Against these factors, the Army marshals a great welter of dicta and conclusory statements to the effect that the Comptroller General is not an executive officer but rather an agent or member of the legislative branch. Several courts, first of all, have stated without extensive analysis that the GAO is an arm of the Congress. See, e.g., McDonnell Douglas Corp. v. United States, 754 F.2d 365, 368 (Fed. Cir. 1985); United States v. McDonnell Douglas Corp., 751 F.2d 220, 224 (8th Cir. 1984); M. Steinthal & Co. v. Seamans, 147 U.S. App. D.C. 221, 455 F.2d 1289, 1305 (D.C. Cir. 1964). The Army also cites to numerous points in the legislative history of the 1921 Act and in other statutes where the GAO is characterized or labelled as a "legislative" agency. See, e.g., 61 Cong. Rec. 1080 (Comptroller General "is to be the arm of the Congress": Rep. Good); id. at 1081 (Comptroller General is "representative of Congress" unlike Director of the Bureau of the Budget "who serves the President and is the personal representative of the President": Rep. Byrns); 2 U.S.C. § 701(e) (Comptroller General listed as within the "Legislative Branch" in the Ethics in Government Act); 59 Stat. 616 (1945) (GAO stated to be part of legislative branch of Reorganization Act of 1945).

While we recognize the authority cited by the Army, we nevertheless cannot resolve the issue before us merely on the basis of the quantity of citation. We must beware of what Justice Cardozo described as "the tyranny of labels." Snyder v. Massachusetts, 291 U.S. 97, 114, 78 L. Ed. 674, 54 S. Ct. 330 (1934). Indeed, in Buckley, the Supreme Court specifically noted that "irrespective of Congress' designation [of the Comptroller General as a "Legislative Officer"], cf. 31 U.S.C. § 65(d), the Comptroller General is appointed by the President in conformity with the Appointments Clause [and therefore may exercise executive functions]." 424 U.S. at 128 n. 165.

Instead of "decision of label," we must focus on function and reality. Clearly, the GAO and the Comptroller General perform legislative and non-legislative duties. Indeed, they also perform quasi-judicial functions. In that respect, they resemble the modern regulatory agency. Therefore, the mere recital by the Army of the Comptroller General's legislative functions, which involve ...


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