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Glasgow Inc. v. Federal Highway Administration and Manuel A. Marks

argued: March 9, 1988.

GLASGOW, INC., THE NYLEVE CO., GLASGOW, INC. AND THE NYLEVE CO. JOINT VENTURE
v.
FEDERAL HIGHWAY ADMINISTRATION AND MANUEL A. MARKS, INDIVIDUALLY AND IN HIS OFFICIAL CAPACITY, FEDERAL HIGHWAY ADMINISTRATION, APPELLANT



On Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil No. 87-7311.

Author: Greenberg

Opinion OF THE COURT

GREENBERG, Circuit Judge.

This matter comes before the court on appeal pursuant to 28 U.S.C. § 1291 from an order of the district court granting a request for a permanent injunction. The court enjoined the defendant Federal Highway Administration ("FHWA") from withholding concurrence, pursuant to the Federal-Aid Highway Act ("Act"), 23 U.S.C. § 112, to a highway construction contract awarded to plaintiffs, Glasgow, Inc. and The Nyleve Co. ("Glasgow") by the Pennsylvania Department of Transportation ("PennDOT"). However, rather than stating reasons for entering the permanent injunction the district judge incorporated the reasons he gave for entering an interlocutory injunction as the basis for his final order. Even though the standards for issuing permanent and interlocutory injunctions differ, in view of our result this does not matter as we find the judge erred as a matter of law and there was no basis for the issuance of either the interlocutory or permanent injunction.*fn1

In determining that Glasgow was entitled to the interlocutory injunctive relief it sought, the district judge concluded that there was a reasonable probability that Glasgow would succeed on its claim that the FHWA had committed an arbitrary act in refusing to concur in the contract. He so concluded as he held that the FHWA had a nondiscretionary ministerial obligation to award the contract once the positive requirements of the Act were met as, in his view, they were. We, however, conclude that the district judge erred in determining that the FHWA abused its discretion and will therefore reverse the order granting the permanent injunction and will direct that the action be dismissed.

I.

Through the Federal-Aid Highway Act, 23 U.S.C. §§ 101 et seq., Congress has made funds available to the states for highway construction projects. State participation in the funding program under the Act is voluntary. In order to receive the federal funding states are required to follow federally-approved Disadvantaged Business Enterprises (DBE) regulations which require state agencies receiving federal highway funds to create programs to ensure that minority businesses have an equal opportunity to compete for contracts on highway projects. Pennsylvania participates in the program set up under the Act and has adopted a federally-approved DBE Action Plan, which includes numerical goals for DBE participation

Under the DBE requirements a contract is awarded to an apparent low bidder even if it does not meet the DBE goals if the bidder establishes its good faith efforts to do so. The DBE requirements state that when the DBE contract goal is met or exceeded, the apparent low bidder is to submit "Attachment A" forms within 14 days of the bid opening describing the participation of each DBE in the contract. If the apparent low bidder does not meet the DBE contract goal, in addition to submitting all "Attachment A" forms, it must submit documentation of its good faith efforts to meet the contract goal within 14 days of the bid opening.

In the event an apparent low bidder fails to meet the DBE contract goal, PennDOT's DBE Review Committee, also known as the Good Faith Efforts Review Committee, reviews its DBE data and good faith efforts to meet the DBE contract goal. If the good faith efforts are found satisfactory, the DBE Review Committee will recommend awarding of the contract. The state DBE requirements further provide that if the DBE Review Committee cannot accept the contractor's good faith efforts, the bid will be considered non-responsive and PennDOT will notify the unsuccessful bidder that its bid is being rejected. PennDOT will then notify by telephone the next lowest responsible bidder on the project to submit its DBE data. Sometimes PennDOT, through the DBE Review Committee, will award contracts on a conditional basis to low bidders who have not initially met the goal. These "conditional awards" require that the low bidder increase its DBE participation after the award throughout the length of the contract. In all such cases, the Committee has not rejected the contractors good faith efforts.

II.

On or about May 1, 1987, PennDOT invited bids for the completion of a section of Interstate Route I-476 in Delaware County. The state and federal governments were respectively to provide 10% and 90% of the funding for this project. PennDOT determined that bidders on the contract should strive for a goal of 12% of the contract price for DBE participation.

On June 11, 1987, three bids were submitted on the I-476 project. Glasgow tendered the lowest bid at $97,873,515.66. The next lowest bid was offered by a joint venture of Buckley and Company Inc., Driscoll Construction Co., Inc, and IA Construction Corporation for $102,377,501.85. The highest bidder was a third joint venture comprised of Kiewit Eastern Co. and Perini Corporation ("Kiewit-Perini") for $102,742,629.00, nearly $5,000,000 over the Glasgow bid. Glasgow, the low bidder, obtained a DBE participation level of 7.8% but only 7% was initially credited by PennDOT. Glasgow then made timely submissions of the level of participation and the extent of its unsuccessful efforts to meet the contract goal of 12% within 14 days of the bid opening.

On July 15, 1987, the DBE Review Committee met to consider Glasgow's DBE data. The three voting members ultimately rejected Glasgow's good faith efforts as insufficient. On July 17, 1987, PennDOT issued a letter setting forth the reasons for the Committee's decision. It stated that the Committee was rejecting Glasgow's presentation because it believed the efforts which Glasgow had made were less than those a contractor "actively and agressively" seeking to meet the DBE goal would make. Specifically, PennDOT noted that the Committee found Glasgow's efforts lacked good faith for the following reasons: (1) there was an apparent lack of evidence that Glasgow had attempted to negotiate with DBE firms after receiving their quotes; (2) there was insufficient evidence to substantiate the claim that the DBE quotes which were not utilized were unreasonably high; (3) Glasgow's reason for not utilizing trucking for DBE participation was not acceptable.

PennDOT then advised the two other bidders that Glasgow's low bid had been rejected for failure to use good faith efforts and that all of the remaining bids received for the project were being rejected because they exceeded the Department's estimate and accordingly were not in the best interest of the public. On July 16, 1987 PennDOT sought FHWA concurrence in the rejection of all bids on the I-476 project. This was later given.

On July 22, 1987, Glasgow filed a complaint in the Commonwealth Court of Pennsylvania, alleging that PennDOT had abused its discretion and acted arbitrarily and capriciously in rejecting its bid and good faith efforts. Glasgow asked the court preliminarily and permanently to enjoin PennDOT from entering into or executing a contract for the I-476 project with any contractor other that Glasgow, advertising the rebidding or in any way rebidding the I-476 project, and paying any public monies in connection with the I-476 project to any other contractor.

During the ensuing discovery period Glasgow turned up what PennDOT later described as "numerous and sometimes flagrant inconsistencies between Department personnel as to how the DBE program functions, what criteria should be invoked under what circumstances and why [Glasgow's] good faith presentation was deficient." As a result of the discovery, PennDOT determined that a settlement was in its best interests and accordingly it entered into a settlement with Glasgow, in which PennDOT agreed that it would not oppose Glasgow's motion for a preliminary injunction if Glasgow ...


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