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Rossetti Contracting Co. v. Brennan

decided: December 30, 1974.


Appeals from the United States District Court for the Northern District of Illinois, Eastern Division - No. 74 C 1934 Joseph Sam Perry, Judge.

Fairchild, Pell and Sprecher, Circuit Judges.

Author: Fairchild

FAIRCHILD, Circuit Judge.

This appeal presents the issue of whether a bidder on a federally assisted construction contract who fails to submit with his bid the appropriate commitment required by the "Chicago Plan" for minority hiring,*fn1 may amend his bid submission subsequent to the opening of the bid so as to qualify as a responsive bidder.

On May 10, 1974, appellant Hinsdale Sanitary District, an Illinois Municipal Corporation of Cook and DuPage counties, solicited bids for the construction of an interceptor sewer, a phase of a project which was to be constructed with the assistance of partial funding from the United States Environmental Protection Agency (EPA). The invitation for bids issued by the Sanitary District fully incorporated the provisions of the Chicago Plan, a regulation promulgated by the Secretary of Labor which requires, as a prerequisite to eligibility for a contract award in certain federally involved construction projects in the Chicago, Illinois SMSA,*fn2 completion and submission prior to bid opening of an "Appendix A" or its equivalent, indicating goals for minority manpower utilization in designated trades on all the bidder's work during the term of performance of the contract, within ranges prescribed by the Secretary of Labor.*fn3

Bids were opened on June 7, 1974 and the apparent low bidder was appellee Rossetti Construction Company, with a bid of $1,988,908.00. The Sanitary District granted Rossetti tentative award of the contract pending approval of the bid's compliance with federal contract regulations, including those imposed by the Chicago Plan, and submitted the bid to the EPA Contract Compliance Office for consideration. On June 28, 1974, the director of the Office for Civil Rights and Urban Affairs of EPA notified the Sanitary District that, due to failure to comply with the Chicago Plan's requirements, Rossetti's bid was considered to be unresponsive. Specifically, he found that by placing brackets around all of the trades designated on Appendix A, Rossetti had failed to indicate which specific trades it intended to utilize on the project; and, by placing the figure of 10% opposite the bracketed trades, it had failed to designate acceptable manpower goals within the prescribed ranges required by the Plan.*fn4

Rossetti protested the rejection and sought an opportunity to appear before that agency and present evidence concerning its bid. On July 2, 1974, a meeting between Rossetti and EPA compliance officials was held during which Rossetti tendered an amended Appendix A, correcting the defects in its prior submission.*fn5 In support of this amendment, a written statement was provided setting forth the circumstances explaining the original Appendix A*fn6 and providing documentation tending to establish a past history of active participation in minority employment programs and actual compliance with the appropriate minority hiring goals for operating engineers set forth in Appendix A for the year 1974.*fn7

The matter was taken under consideration by the EPA and, on July 10, 1974, after consultation with Department of Labor officials, possessing primary authority for interpretation of the Plan, Rossetti was informed that the Chicago Plan provided no authority or discretion to permit amendment of a nonresponsive Appendix A subsequent to bid opening. Accordingly, Rossetti's bid was found to be unresponsive and the Sanitary District prepared to award the contract to the project's second low bidder, intervening defendant appellant Loitz Brothers Construction Company.*fn8

On July 11, 1974, Rossetti filed an action in the United States District Court for the Northern District of Illinois seeking declaratory and injunctive relief. The parties agreed to maintain the status quo pending judicial resolution. After a full hearing, the district court concluded as a matter of law that the error in Rossetti's Appendix A was a good faith inadvertent misstatement which, since Rossetti was in fact in current compliance with the Chicago Plan's utilization goals and since the error did not affect price, quality or quantity of goods or services provided, was minor and could be corrected or waived without violence to the Chicago Plan's purpose or intent. The court rejected the Department of Labor's position that no federal agency had the power to permit such post-bid-opening amendment of Appendix A as being without basis in law and deemed the position clearly contradicted by repeated exercise of discretion in the past. Accordingly, the court issued a decree compelling the Department of Labor to accept Rossetti's amendment and to find its bid responsive, and enjoining the Sanitary District from granting the contract award to any party other than Rossetti. All defendants appeal.

Rossetti seeks judicial review of the Department of Labor's determination that the Chicago Plan precludes post-bid-opening amendment of its unresponsive Appendix A. While the Administrative Procedure Act, 5 U.S.C. § 702, provides a basis for such consideration, Scanwell Laboratories, Inc. v. Shaffer, 137 U.S. App. D.C. 371, 424 F.2d 859, 872 (1970), the applicable standards of review are narrowly circumscribed. It is well established that great deference is due to the interpretation given an administrative regulation by the federal agency entrusted with its promulgation and interpretation. Udall v. Tallman, 380 U.S. 1, 16, 13 L. Ed. 2d 616, 85 S. Ct. 792 (1965); Contractors Ass'n of Eastern Pa. v. Secretary of Labor, 442 F.2d 159, 175 (3rd Cir. 1971), cert denied, 404 U.S. 854, 92 S. Ct. 98, 30 L. Ed. 2d 95. Moreover, when the administrative determination at issue concerns procurement or bid disputes, "if the Court finds a reasonable basis for the agency's [decision], the Court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations." Steinthal v. Seamans, 147 U.S. App. D.C. 221, 455 F.2d 1289, 1301 (1971).

For purposes of decision, we assume the correctness of the district court's findings of fact concerning the circumstances underlying the preparation of the defective Appendix A,*fn9 the good faith of Rossetti's officers in the matter,*fn10 and its actual compliance with the Chicago Plan's minority employment utilization goals at the date of the submission of its bid. Our review of the applicable authority and of the record persuades us, however, that even assuming the facts found, the judgment appealed from is erroneous.

The district court concluded that the Plan must be interpreted so as to permit the Department of Labor to exercise discretion sufficient to approve the filing, after the opening of a bid, of an amended Appendix A, committing the bidder to minority employment goals within the prescribed range for the trade actually involved, where (1) the inadequate commitment originally submitted was an inadvertent error made in good faith and (2) the bidder's current hiring of minority employees is in fact within the prescribed range. The court considered that in the light of the purpose of the Plan, to promote minority hiring in skilled construction trades, no useful purpose would be served by disqualifying a contractor for inadvertent error, when it has proved that its minority hiring practices comply with the goals of the Plan. The court relied on the proposition that a regulation should be interpreted in such a manner as to promote its purpose. The court deemed the error minor under the circumstances, and relied on both state and federal doctrines*fn11 permitting the waiver of minor irregularities and correction of bid defects which do not go to the price, quantity or quality of the goods or services to be performed. The court also relied on several instances in which the Department had previously permitted submissions of an appropriate Appendix A after opening of bids. Evidently, the proofs with respect to Rossetti's good faith and hiring practices satisfied the court that it was an abuse of discretion to refuse permission to amend.

There is, of course, some appeal to the thought that an employer who has demonstrated achievement of the 1974 goal of hiring members of minorities is already serving the purpose of the Plan and that there may be as much or more probability that he will reach the 1975 goal as an employer who merely makes the commitments. The Plan, however, is focussed on the making of the commitment, with its extent increasing year by year, and there is nothing unreasonable in insisting on the commitment as the condition of eligibility.

The Chicago Plan was promulgated by the Secretary of Labor to implement Executive Order 11246, requiring furnishing of equal employment opportunity by federal contractors. It was imposed on December 19, 1973 after two prior attempts to develop "voluntary home town plans" had been deemed "unacceptable." 41 C.F.R. § 60-11.3. To remedy the perceived ineffectiveness of the voluntary plans, the Secretary implemented an imposed plan which sought to obtain an enforceable commitment from contractors in federally sponsored or assisted projects in the Chicago area to utilize in all their work an acceptable percentage of minority workmen in selected skilled and semi-skilled construction trades during the period of their employment on the project. The lynchpin of this scheme is the ability of the government to enforce good faith compliance with the Plan's objectives. To achieve this ...

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