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James Luterbach Construction Co. v. Adamkus

January 13, 1986


Appeal from the United States District Court for the Eastern District of Wisconsin. No. 81 C 1121 -- Terence T. Evans, Judge.

Author: Eschbach

Before ESCHBACH and COFFEY, Circuit Judges, and SWYGERT, Senior Circuit Judge.

ESCHBACH, Circuit Judge.

James Luterbach Construction Co. appeals from a summary judgment for the United States Environmental Protection Agency ("EPA"). The district court held that the EPA properly instructed the Village of East Troy, Wisconsin, to award a contract for a waste-water treatment facility to another bidder. Because Luterbach sought only declaratory and injunctive relief and construction of the facility was substantially completed when the district court entered judgment, we vacate the district court's judgment and remand with directions to dismiss as moot.


In February 1981 the EPA, pursuant to Title II of the Clean Water Act of 1977, 33 U.S.C. § 1281(g)(1), awarded the Village of East Troy, Wisconsin, grant for 75 percent of the construction cost of a waste-water treatment facility. In March 1981 the Village invited construction firms to bid on the project.

The Village informed bidders that the EPA's Minority Business Enterprises ("MBE") policy, see 43 Fed. Reg. 60220 (1978), set as a goal participation by minority businesses in ten percent of the cost of the work under the contract. The Village instructed bidders to strive to comply with the ten percent goal, to state in the bid whether the goal would be met, and, if the goal could not be met, to document efforts taken by the bidder to encourage minority participation and reasons for failing to meet the goal. The bidding instructions, which the Village adopted from those recommended by the EPA's regional office, stated in pertinent part:

Failure to submit such [MBE] information shall be deemed, relative to MBE compliance, nonresponsive.

Failure to submit such [MBE] information may cause rejection of the bid as nonresponsive.

Instructions to Bidders § 21(B)(1), (C)(1) (emphasis added).

The Village opened the bids for the waste-water treatment facility in April 1981. Joseph Lorenz, Inc. ("Lorenz") submitted the low bid. However, Lorenz listed minority participation as zero percent and did not document efforts taken to encourage minority participation or reasons that the goal was not met. The bid submitted by James Luterbach Construction Co. ("Luterbach") was the second lowest. It listed minority participation as 0.009 percent and documented efforts to encourage minority participation and reasons for not meeting the MBE goal. Following the opening of the bids, both Lorenz and Luterbach informed the Village of errors in their statements of MBE participation. Lorenz's should have been 0.9 percent, rather than 0.009 percent.

In May 1981 the Village rejected Lorenz's bid as "non-responsive" for failure to comply with the MBE participation requirements. "Bid responsiveness" and "bidder responsibility" are terms of art used in government procurement contracts. A bid is responsive if the bidder promises to do exactly what the bidding instructions demand. A bidder is responsible if it can perform the contract as promised. Whereas bidder responsibility is determined on the basis of information available before or after submission of the bid, bid responsiveness is determined only by facts available prior to or at the opening of the bid. Lorenz filed a protest to this decision with the Village pursuant to 40 C.F.R. 35.939. After a public hearing, the Village affirmed its decision that Lorenz's bid was non-responsive and denied the protest.

Lorenz and its proposed minority business enterprise subcontractor then filed requests for review of the Village's decision with the EPA's Regional Administrator. Valdas Adamkus, then the Acting and now the Regional Administrator, adopted the report and recommendation of the EPA Regional Counsel and reversed the Village's decision in July 1981. Adamkus decided that the bidding instructions were ambiguous as to whether compliance with the MBE reporting requirements was a matter of bid responsiveness or of bidder responsibility. The Regional Administrator reasoned that the bidding instructions created this ambiguity by stating that noncompliance "may cause rejection," rather than stating that noncompliance shall cause rejection of the bid. EPA regulations provide that the "grantee shall not reject a bid as nonresponsive for failure to list or otherwise indicate the selection of a subcontractor(s) or equipment, unless the grantee has unambiguously stated in the solicitation document that such failure to list shall render a bid nonresponsive and shall cause rejection of the bid." 40 C.F.R. 35-938-4(h)(6) (emphasis added). The Regional Administrator, however, did not address the additional language in the bidding instructions that "failure to submit such information shall be deemed, relative to MBE compliance, nonresponsive." He noted that bidders may provide postbid documentation on matters of bidder responsibility, but cannot supplement matters of bidder responsibility, but cannot supplement matters of bid responsiveness. Lorenz supplemented its bid in the reasonable belief that MBE documentation was a matter of bidder responsibility, rather than bid responsiveness. He therefore concluded that the Village improperly rejected Lorenz's bid as nonresponsive. The Regional Administrator thus instructed the Village, pursuant to 40 C.F.R. § 35.939(e)(5), to award the contract to Lorenz.

Having learned that the Village would abide by the Regional Administrator's determination, Luterbach filed suit in August 1981 against Adamkus, the Environmental Protection Agency, the Village and the President of the Village Board, Kenneth Pluess. In its complaint Luterbach sought a declaratory judgment that it should be awarded the contract, and requested preliminary and permanent injunctions enjoining the award of the contract and the payment of any public funds to Lorenz. Luterbach did not, however, seek damages. The district court dismissed the Village and Pluess as defendants in January 1982. Luterbach does not now appeal from that dismissal order. In January 1984, two years later, the district court granted the remaining federal defendants' motion for summary judgment. James ...

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