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Chemung County v. Dole

January 23, 1986


Niagara Frontier Transportation Authority, an intervenor, appeals from July 29, 1985 and August 26, 1985 orders of the United States District Court for the Western District of New York (Telesca, J.) granting summary judgment in an action instituted by Chemung County, New York, appellee, against the Secretary of Transportation and the Federal Aviation Administration, et al., appellees, declaring that a government contract was properly awarded to Chemung County. Reversed and remanded.

Author: Cardamone

Before: NEWMAN, CARDAMONE and MINER, Circuit Judges

CARDAMONE, Circuit Judge:

The novel issue presented on this expedited appeal is whether a district court has subject matter jurisdiction to grant equitable relief to prevent a government agency from denying a successful bidder a government contract. Serious questions are raised regarding the jurisdiction of the district court to review government procurement processes and the court's power to intercede on behalf of parties claiming to have been injured by the arbitrary and capricious actions of government agencies that fail to follow their own regulations. In a previous decision we dealt comprehensively with these questions. The difficulty arises because the rule we set forth earlier does not specifically cover the precise factual situation posed by this case--though the rationale for adopting that rule does apply. To ignore the reasons why a rule exists drains its precedence of meaning, and the rule becomes like a pitcher without water--an empty vessel.


Niagara Frontier Transportation Authority (NFTA) appeals from a July 29, 1985 Decision and Order of the United States District Court for the Western District of New York (Telesca, J.), and from that court's further order of August 26, 1985. These orders granted summary judgment declaring that a government contract was properly awarded to Chemung County (Chemung).

The Federal Aviation Administration (FAA) issued on December 1, 1982 a solicitation for offers (SFO) or solicitation for an Automated Flight Service Station (AFSS or flight station) serving the Western New York-Northwestern Pennsylvania Flight Plan Area. The proposed AFSS is designed to consolidate the flight service flight station is a part of the FAA's overall plan to consolidate over 300 existing flight stations into approximately 61 AFSS's around the country. On the same day the FAA issued its solicitation, its Eastern Regional Contracting Officer explained to potential bidders or offerors the procedures for preparing offers and the criteria by which they would be judged. Bidders were to provide space in a proposed location for the FAA to lease on an annual basis, with the FAA retaining an option to renew (each year up to twenty years). Offerors were to itemize 20 year life cycle costs; the FAA would also consider the costs of certain other factors relating to the construction and operation of the flight station, as to which offerors were not requested to submit estimates. The solicitation did not specifically address the question of telecommunications costs or the manner in which the FAA would compute such costs.

Eleven bids were received. The time for submitting the "best and final" offer elapsed on January 31, 1984. Under the then applicable statute, 41 U.S.C. § 253(b) (1982), the FAA was required to award its contracts to bidders submitting the bid "most advantageous to the Government, prices and other factors considered . . . ." Chemung's bid of $7,451,716 to build and lease a flight station in Elmira, New York was the most advantageous bid. NFTA's bid of $7,526,091 to build and lease a flight station in Buffalo, New York was second. The FAA accepted Chemung's offer on November 30, 1984, but due to subsequent developments the FAA never executed a lease with Chemung. On December 4, 1984 the FAA notified the NFTA by letter, pursuant to statutory requirements, that Chemung had been selected. 48 C.F.R. § 15.1001(c) (1984). Enclosed in the letter was a summary of the FAA's estimated life cycle costs for all offerors. This indicated that the NFTA had a telecommunications cost advantage over Chemung of $10,000. Because the NFTA believed it would enjoy an even greater telecommunications advantage--due to the large number of pilots residing in the Buffalo area who could utilize the service of the flight station within the local telephone calling area--it concluded that an error had occurred in the evaluation of its offer. The NFTA then contacted Congressmen representing the Buffalo area who, in turn, requested the General Accounting Office (GAO) to investigate the FAA decision.

The GAO investigation revealed that the Eastern Regional Office of the FAA had not followed the FAA's national guidelines for computing flight station telecommunications costs. In October 1983, the FAA adopted a national policy for the evaluation of telecommunications costs when assessing offers to construct and lease flight stations. These guidelines applied to "all flight plan areas that have not been selected and announced, regardless of where they are in the selection process." The cost of telecommunications services was to be computed by employing "the most economical mix of lines." In view of the FAA's failure to comply with these guidelines, Buffalo Congressmen requested the FAA to re-evaluate the flight station bids.

During January 1985 FAA officials refused to meet with Chemung's representatives to discuss construction of the Elmira facility. Then, on February 19, 1985 the FAA notified Chemung that due to FAA errors in calculating telecommunications costs, all proposals for the AFSS would be re-evaluated. After re-examining its cost calculations, the FAA concluded that, based on an anticipated major rate increase by the New York Telephone Company, its initial calculations based on all WATS lines for pilot services rather than a mix of services were correct. Hence, Chemung remained the successful bidder. The GAO then instructed the FAA to re-examine its calculations one more time. The parties disagree as to whether the re-examination was to be in light of the FAA's national guidelines or whether it was to include two new variables which Chemung argues were not part of the original solicitation: (1) figures complied by the air traffic division containing revised estimates of the volume of traffic at Buffalo; and (2) figures based on services required for Syracuse, New York.

In April 1985 the FAA completed its second bid re-evaluation and on May 8 FAA officials met with GAO officials who noted in a May 10 memorandum that they would inform the local Congressmen who had intervened on the NFTA's behalf that they had validated the FAA's methodology. On May 24 the FAA published a new report, which found that NFTA's bid was now lowest with a total 20-year discounted price of $6,329,369 and that Chemung was second with a total cost of $6,592,609. Consequently, the FAA announced on May 29 to all Eastern Region Flight Service Station Managers that Buffalo had been selected as the flight station site, and NFTA would be awarded the contract.

In a letter dated May 29th, the same day as the announcement, Chemung modified its bid by $1,160,600 over the 20-year life of the facility. When discounted at four percent, it resulted in a $489,773 reduction in Chemung's bid. Chemung submitted this amendment pursuant to Paragraph 27(C) of the solicitation which states that "a late modification of an otherwise successful offer which makes its terms more favorable to the government will be considered at anytime it is received and may be accepted." If this reduction is considered, Chemung's bid of $6,194,000 would be the lowest. A marginal notation inserted after May 29 on the FAA's May 24 report confirmed that Chemung was the low bidder "with proposed reduction."

On July 9, 1985 Chemung filed suit seeking declaratory and injunctive relief, and the following day the FAA's Regional Contracting Officer rejected Chemung's modification of its offer, stating, in relevant part:

When the FAA corrected the error [in its calculation of telecommunications costs for pilot services] and re-evaluated the offers received for this solicitation, it discovered that Chemung County is [sic] not the successful offeror. Since Chemung is [sic] not the successful offeror the FAA cannot consider Chemung County's proposed late modification.

This was the first notification Chemung received from the FAA advising it that it was no longer the successful bidder.

The district court held a hearing on July 22 and 23, 1985 on Chemung's motion for a preliminary injunction and on a cross-motion by the government seeking dismissal on jurisdictional grounds. As stated by the district court, Chemung sought "a declaratory judgment that the contract was properly awarded to Chemung County; an order in the nature of mandamus requiring defendants to execute the lease with Chemung county for the AFSS; and an injunction prohibiting the defendants from taking any action (such as awarding the contract to the NFTA) inconsistent with the award to Chemung County." At the conclusion of the hearing, counsel for Chemung and the government agreed that Chemung's preliminary injunction motion should be considered as a motion for summary judgment. The trial court's order of July 29, 1985 granted ...

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