Opinion
CIVIL ACTION NO. 03-5345
October 14, 2003
MEMORANDUM
I. INTRODUCTION
Plaintiff, Conti Enterprises, Inc., instituted this action on September 23, 2003 seeking immediate injunctive relief on behalf of the taxpayers of the Commonwealth of Pennsylvania and the United States of America against defendants Southeastern Pennsylvania Transportation Authority (SEPTA); Granite Construction, Inc.; Neshaminy Constructors, Inc.; and Market Street Constructors (MSC) (a joint venture between Granite and Neshaminy). Conti contends that MSC is a non-responsive bidder for a SEPTA public works contract related to the Market Street Elevated Reconstruction Project and that SEPTA should therefore be prevented from awarding the contract to MSC.
On October 1, 2003 my colleague Judge Padova, to whom the action originally was assigned, stated that he would not grant the temporary restraining order sought by plaintiff and set the case down for a preliminary injunction hearing on October 6, 2003. The case subsequently was reassigned to me.
For the reasons stated below I will deny plaintiffs motion for a preliminary injunction.
II. FINDINGS OF FACT
In December 2002, SEPTA announced it would seek bids for construction related to a portion of its $560,000,000 Market Street reconstruction project. The overall reconstruction is largely financed by federal funds and funds from the Commonwealth of Pennsylvania. The bid at issue here involves a major overhaul and modernization of the 46th, 52d 56th, and 60th Street stations along the elevated portion of SEPTA's Blue Line in West Philadelphia (the "Stations Project").
SEPTA issued an Invitation for Bids (Stations Package, Bid No. 032638) on January 13, 2003 seeking a general contractor for the Stations Project. The Instructions to Bidders advised that the contractor for the project would be required to comply with the Pennsylvania Steel Products Procurement Act of 1978, 73 P.S. § 1881 et. seq. (West 2003), and the Federal Transit Administration (FTA) regulations, 49 C.F.R. 661 (West 2003), under the federal Buy America Act, 49 U.S.C. § 5323(j) (West 2003) (collectively the "Buy America laws"). Both laws mandate that domestically manufactured steel products are to be used in public works projects subject to certain exceptions. Bidders for the Stations Project were required to submit a certification with their bid as to whether or not they would comply with the Buy America laws.
The Stations Project reconstruction work includes replacing the non-weight bearing rail that transfers an electrical charge to passing train cars. This rail, sometimes known as third rail, is made of a specific type of steel called 150 Ib. contact rail. In order to perform the contract, the bidder would need to supply between 320 and 400 new lineal feet of this rail with a total approximate value of $10,000 to $15,000 (a small fraction of the overall Stations Project contract) (Pi's. Ex. 9). 150 Ib. contact rail has not been manufactured in the United States since at least the late 1990s.
SEPTA received four bids for the Stations Project contract which were opened on Friday May 9, 2003. Conti was the low bidder on the contract, submitting a bid for $138,727,712. MSC's bid of $139,781,500 was the second lowest. Because there is not a current domestic producer of contact rail, three of the four bidders for the Stations Project, including plaintiff, certified that they could not comply with the requirements of the Buy America laws. Defendant MSC, however, indicated that it would comply with Buy America.
Plaintiffs brief lists MSC's bid as being for $139,781,100. SEPTA's brief provides the $139,781,500 figure. The variation maybe due to slight tabulation errors present in the original bids. In either case, MSC's bid was over $1 million more than Conti's.
Because of the unusual discrepancy in the bidders' certifications as part of its due diligence in deciding to whom the contract should be awarded SEPTA launched a post-bid review process to confirm whether MSC could in fact comply with the Buy America requirements. On Monday May 12, SEPTA contacted MSC to confirm its intent to comply with its certification. MSC's officer in charge of the bid was unavailable, but sensing SEPTA wanted a quick reply to its inquiry Raul Arguello, a staff member with less involvement in drawing up the bid, responded to SEPTA. His response letter of that date incorrectly stated that MSC would be able to comply with Buy America because there was "no rail to buy" in order to complete the Stations Project when, in fact, new rail was necessary for the construction (Pi's. Ex. 1). On May 15, Geoff Searle, the officer in charge of the Stations Project Bid, corrected Arguello's misunderstanding in a letter to SEPTA confirming that, in fact, "sufficient quantities of domestically produced contact rail have been confirmed" to be used when new rail is needed for the contract (Pl's. Ex. 13). Searle subsequently informed SEPTA where MSC would acquire the domestically-produced rail necessary to comply with its certification.
Conti participated in similar post-bid opening communications with SEPTA upon learning that a bidder had certified compliance with Buy America. Believing that the certification must mean the bidder planned to use salvaged or used rail in order to comply, it wrote to SEPTA indicating it had a source for domestic 150 Ib. contact rail and seeking permission to use this rail instead of the foreign produced rail it had proposed in its bid (MSC Ex. 2; MSC Ex. 3). Testimony at the hearing established that the domestic rail Conti proposed to supply was salvaged used rail.
MSC's source of domestic steel had a supply of contact rail that had never been used that was manufactured by Bethlehem Steel at its Steelton, Pennsylvania plant before domestic production ceased. Because it is not clear exactly when the rail was produced, SEPTA sent an engineer to the yard where the contact rail had been stored to inspect the rails and to take samples for further testing. Both MSC and SEPTA engaged experts to test the rails for electrical resistivity and chemical composition in order to ensure that the age of the rails did not affect their ability to meet SEPTA's contract specifications. Of the three opinions produced on the suitability of the rails for use in the project, two concluded that the material met SEPTA's specifications for contact rail. The third report, produced by a SEPTA staff member without a background in engineering or metallurgy concluded that MSC's proposed rail would not meet contract specifications (Pl.'s Ex. 53). Based on these two determinations, and despite the doubts expressed in the third report, SEPTA determined that MSC would be able to comply with its Buy America certification if it were awarded the Stations Project contract.
Anthony Bohara, SEPTA's Director of Engineering Design, who examined the contact rail in question on several visits to the site where it is stored and also reviewed the laboratory testing results from the samples taken on his visits wrote, "I believe enough of the rail will be found satisfactory for use as contact rail." (Pi's. Ex. 6).
John Martens, an outside metallurgical engineer hired by SEPTA to determine whether MSC's source of contact rail met its contract specifications concluded that,
[i]t is my opinion based upon accepted scientific and engineering principals [sic] and offered with a reasonable degree of scientific and engineering certainty, that the 150 NMC contact rails in question fully meet the requirements of the SEPTA specification for contact rail, Section 02458 and should perform satisfactorily in service.
(MSC Ex. 1, p. 18).
Despite this determination, SEPTA, which is in the midst of a budget crisis, continued to consider how it might be able to accommodate Conti's bid thereby saving the Authority $1 million. SEPTA's Senior Director of Procurement, John Holak, and members of his staff contacted the Federal Transportation Administration's (FTA) Office of Chief Counsel in Washington, D.C. and asked for an informal opinion on whether a waiver of the Buy America requirements could be obtained. A formal waiver application was not made because SEPTA was concerned with the interplay between a lengthy FTA deliberation and its tight deadlines for the completion of the Blue Line project. SEPTA presented the FTA with several hypothetical waiver issues including the question of whether a waiver might be granted where current domestic jobs in the steel industry would not be directly affected by the use of foreign rail because the steel product is not currently manufactured in the United States. FTA's counsel was reluctant to give an informal opinion as it is not standard procedure to do so, but ultimately responded that a waiver would almost certainly be denied where a domestic source of the material was available regardless of whether or not it was currently domestically produced.
Based on this advice, SEPTA advised Conti that it did not intend to apply to the FTA for a Buy America waiver. Conti subsequently filed a formal bid protest on June 19, 2003. SEPTA convened a committee to review the protest. In the course of its review, the Authority considered Conti's submissions and the information it had gathered on its own as discussed above. The bid protest was denied on September 16, 2003. Conti thereafter appealed SEPTA's decision to the FTA and filed this lawsuit seeking to enjoin the award of the Stations Project contract to MSC.
SEPTA asserts that its ability to meet scheduled project deadlines is threatened if an injunction is granted to prevent the immediate award of the contract to MSC. The evidence shows that an additional one month delay in the award of this contract could result in a six month delay in project completion because of the interconnections between the Stations Project, the rest of the Blue Line reconstruction, and other SEPTA construction projects that require rail service outages and the provision of alternate bus service. Any delays would necessarily substantially increase the costs of the project to SEPTA. A delay in the completion of the reconstruction project also would have a potential detrimental effect on the businesses located in the construction area and the average 100,000 passengers per day who ride the Blue Line.
III. CONCLUSIONS OF LAW A. Subject Matter Jurisdiction 1. Diversity Jurisdiction
This court has diversity jurisdiction over this matter pursuant to 28 U.S.C. § 1332 based on diversity of citizenship of the parties and because the amount in controversy exceeds $75,000,000.
2. Standing
Conti does not have standing to contest the award of the Stations Project contract to MSC because its interest in the award of the contract is not sufficiently "substantial, direct, and immediate." In re Biester, 409 A.2d 848, 851 ( Pa. 1979). citing William Penn Parking Garage v. City of Pittsburgh, 346 A.2d 269, 281 (Pa. 1975). Disappointed bidders ordinarily do not have standing in Pennsylvania to enjoin a public contract because they have "no property interest and ha[ve] suffered no injury that would entitle [them] to redress." Black Ash Servs. Inc. v. DuBois Area Sch. Dist., 764 A.2d 672, 674 (Pa.Commw. 2000). See also Indep. Enters. Inc. v. Pittsburgh Water and Sewer Auth., 103 F.3d 1165, 1178 (3d Cir. 1997) ("[C]ompetitive bidding statutes . . . are for the benefit of the public only and do not give the low bidder standing to challenge a municipality's failure to award a contract in accordance with a statute."). A disappointed bidder may, however sue to enjoin the award of a public contract if he can meet the requirements for taxpayer standing.
Conti's Motion for a Preliminary Injunction sought an award of the Stations Project contract to it as the low bidder. Plaintiff conceded that SEPTA would need to obtain a waiver of the Buy America requirements from the FTA before Conti could be named the contractor for the Stations Project. Plaintiff subsequently withdrew this request at the preliminary injunction hearing when I mentioned that seeking that the contract be awarded to it adversely affected Conti's standing as a taxpayer.
Conti does not have a cause of action under the federal Buy America Act. "The sole right of any third party under the Buy America provision is to petition FTA under the provisions of Sec. 661.15 of this part. No third party has any additional right, at law, or equity for any remedy including, but not limited to, injunctions, damages, or cancellation of the Federal grant or contracts of the grantee." 49 C.F.R. § 661.20.
Taxpayers must have a "substantial, direct, and immediate interest" in the subject of the litigation to have standing because:
[t]he prevention of waste of tax revenue [alone] has been correctly held to be an interest which is too remote, since [the taxpayer] is not directly or specifically affected by the loss . . . [That interest] is merely the same interest all citizens have in having others comply with the law or the constitution.Nunemacher v. Borough of Middletown, 759 A.2d 57, 61 ( Pa. Commw. 2000),quoting Biester, 409 A.2d at 851. Under this rationale, a disappointed bidder must generally be "a taxpayer in the contracting jurisdiction . . . to challenge the award of a public contract." C.O. Falter Constr. Corp. v. Towanda Mun. Auth., 614 A.2d 328 (Pa.Commw. 1992).
Here, the contract is with SEPTA rather than a municipality. The Pennsylvania courts have held that where a contract is with a governmental authority a taxpayer may have standing if it is a taxpayer of the governmental body that created the entity awarding the contract provided that all other standing requirements are met. See Michael Facchiano Contracting. Inc. v. Pennsylvania Turnpike Comm'n, 621 A.2d 1058 (Pa.Commw. 1993). "Merely because a governmental unit has chosen to perform its public functions through an authority rather than directly affords no basis for granting such an authority greater immunity from taxpayer challenge than the body which created the immunity." Faden v. Phila. Hous. Auth., 227 A.2d 619, 622 (Pa. 1967); cited by Facchiano, 621 A.2d at 1060. Faden and Facchiano do not go so far, however, as to grant standing to all taxpayers who hope to sue a governmental authority. The same rationale that supports the argument that governmental authorities should not be immune from suit also supports the proposition that they should not be more vulnerable to taxpayer suits than municipal bodies. Conti must therefore still demonstrate its substantial, direct, and immediate interest as a taxpayer.
Conti's interest in this case is, however, no different from that of all other taxpayers in having SEPTA minimize its expenditures by selecting the lowest bidder. Plaintiff argues that because it is a Pennsylvania and federal taxpayer its interest in preventing the expenditure of an additional $1 million of Pennsylvania and federal funds for the construction of the Stations Project is sufficient to create taxpayer standing. The parties have stipulated that although Conti is a New Jersey enterprise it has paid taxes to and within the Commonwealth of Pennsylvania. By itself, this is not enough to support jurisdiction based on taxpayer standing.
Plaintiffs paid $47,608 in Pennsylvania taxes in 2002, $648 in 2001, $532 in 2000, $14,893 in 1999, and $40,717 in 1998. In the last 12 years, plaintiffs have paid a total of $367,567 in franchise and income taxes to the state of Pennsylvania and $45,145 in local taxes within Pennsylvania. Of those local taxes, plaintiffs tax payments to the City of Philadelphia, the municipality where the construction under the contract in question will take place, were in 1996, for $21,116, and 1997, for $8,590 (Pl's. Ex. 99).
For example, in Towanda, 614 A.2d at 329-30, a disappointed bidder who did business in Pennsylvania and paid Pennsylvania and federal taxes sought to restrain the award of a wastewater contract that was funded in part by the federal Environmental Protection Agency and by a loan from the Pennsylvania Infrastructure Investment Authority, a state authority. Although it was the low bid, plaintiffs proposal did not meet certain bid specifications, resulting in its award to the second lowest bidder. The Court agreed with defendants that plaintiffs payment of federal and state taxes and the use of those funds for a project in Towanda did not create a sufficient nexus between the plaintiff and the funds to be spent on the contract to establish taxpayer standing. Id. at 331 ("If Falter's position as a disappointed bidder is omitted from the picture, we see that the prospective injury to Falter . . . lacks the direct, immediate and substantial interest and the causal connection necessary to provide standing.").
The Commonwealth Court did grant standing to a disappointed bidder who was a Pennsylvania taxpayer and sought to enjoin the award of a Pennsylvania Turnpike Commission contract on the grounds that the lowest responsible bidder was wrongfully denied the contract in Facchiano, 621 A.2d at 1060. However, Facchiano is distinguishable from this case just as it was distinguishable from Nunemacher, where the Commonwealth Court explained that
there existed an additional nexus [in Facchiano] between the plaintiff and the contracting authority that we held stood analagous to the municipality taxpayer relationship. The subject of the contract in Facchiano was Turnpike bridge reconstruction, and we held in that case that the plaintiff, as a toll payer who used the Turnpike, suffered the same effect in the commission's failure to award the contract to the lowest bidder as would a municipal taxpayer challenging the award of a municipal contract.Nunemacher, 759 A.2d at 61-62. Because Conti cannot establish that there is some additional nexus between it and SEPTA that makes its interest more substantial, direct, and immediate than that of the ordinary taxpayer, standing is lacking here.
Biester provides that where a taxpayer does not have a substantial, direct, and immediate interest, he may still have standing where judicial review would not ordinarily occur. In this instance, a taxpayer would have standing if he can show that:
(1) the government action would otherwise go unchallenged; (2) those directly and immediately affected by the complained of expenditures are beneficially affected and not inclined to challenge the action; (3) judicial relief is appropriate; (4) redress through other channels is unavailable, and; (5) no other persons are better situated to assert the claim.Biester, 409 A.2d at 852, cited by Nunemacher v. Borough of Middletown, 759 A.2d 57, 62-63 (Pa.Commw. 2000). Plaintiff cannot establish that the first, second and fifth factors are met. Although no one other than Conti has filed current litigation challenging SEPTA's decision to award the contract to MSC, the City, Commonwealth, or federal government could decide to challenge the decision based on their direct interests in overseeing the expenditure of tax revenues. Additionally citizens of the Commonwealth who are directly affected by the use of SEPTA funds could bring suit.
The Pennsylvania courts "have developed a restrictive standard with narrow exceptions." Towanda, 614 A.2d at 331. Because Conti has not established it can meet that standard or its exceptions, it is without standing in the instant case.
C. Substantive Issues
Ordinarily I would not consider the merits of a case where I have determined that the plaintiff does not have standing. However, because this is a matter of some urgency with the public interest involved, I will tell the parties how I will decide the merits of plaintiffs motion if it is later determined that I have erred in concluding that plaintiff lacks standing.1. Preliminary Injunction Standard
I must weigh four factors prior to disposing of a motion for a preliminary injunction: (1) whether the movant has demonstrated a reasonable probability of success on the merits; (2) whether the movant will be irreparably injured if the request for relief is not granted; (3) whether granting the preliminary relief will result in even greater harm to the non-movant; and (4) the public interest. See, e.g., Exec. Bd. of Transp. Workers Union of Phila., Local 234 v. Transp. Workers Union of Am., 338 F.3d 166, 170 (3d Cir. 2003); Siemens Med. Solutions Health Servs. Corp. v. Carmelengo, 167 F. Supp.2d 752 (E.D. Pa. 2001); andVector Security. Inc. v. Stewart, 88 F. Supp.2d 395, 399 (E.D. Pa. 2000). Weighing these factors I conclude that preliminary injunctive relief is not warranted in this case.
2. Likelihood of Success on the Merits a. Conti Must Demonstrate That SEPTA Abused its Discretion
Plaintiff is unable to demonstrate a reasonable likelihood of eventual success on the merits of its claim. SEPTA acted within its discretion when it awarded the Stations Project Contract to MSC. Courts grant deference to contracting authorities regarding their decisions. "[I]n the absence of proof to the contrary, the law presumes that a public official's actions were pursuant to proper authority and that the antecedent steps necessary to give validity to his official acts were duly taken." A. Pickett Constr. v. Luzerne County Convention Ctr. Auth., 738 A.2d 20, 25 (Pa.Commw. 1999). quoting Housman v. Int'l Navigation Co., 64 A. 379 (Pa. 1906). In the context of federal purchasing authorities, the Court of Appeals has explained that "a court should not substitute its judgement for that of the contracting agency. Rather the court should determine whether the procurement decision was a rational one; if so, the agency's decision must be upheld."Allis-Chalmers Corp. v. Friedkin, 635 F.2d 248, 253 (3d Cir. 1980). "[T]he burden of proving that the discretion of those authorities who set the terms of the bid and award the contract was abused is on the one asserting such a proposition." Pickett, 738 A.2d at 24. In order to show SEPTA abused its discretion in awarding the contract, plaintiff must demonstrate that the agency acted with "bad faith, fraud, capricious action or abuse of power." City of Scranton v. Bureau of Worker's Comp., 787 A.2d 1094, 1097 ( Pa. Commw. 2001). Plaintiff is not reasonably likely to make this showing at trial.
b. MSC's Bid Proposal Was Responsive to the Bid Specifications
Plaintiffs argument that MSC's bid proposal was defective because it failed to comply with the bid instructions for the Stations Project is not persuasive. SEPTA's Invitation to Bid for the Stations Project required certification with the Pennsylvania Steel Products Procurement Act and the Federal Buy America Act and Regulations (SEPTA Ex. 1, p. IB-5-IB-6). MSC certified compliance with the Buy America laws in its bid and neither plaintiff nor the other bidders made such a certification. MSC was therefore the only bidder SEPTA could deem responsive to the bid requirements. "[I]n the absence of a statutory requirement, a contract must be awarded to the lowest responsible bidder when a public authority elects to use the public bidding process." Shaeffer v. City of Lancaster, 754 A.2d 719, 724 (Pa.Commw. 2000); citing American Totalisator Co. v. Seligman, 414 A.2d 1037 (Pa. 1980); and Statewide Bide. Maint. Inc. v. Pa. Convention Ctr. Auth., 635 A.2d 691 (Pa.Commw. 1993). Here, the statutory requirements of the Buy America laws preempt the requirement that the low bidder prevail. Because MSC certified compliance and Conti did not, SEPTA could not waive Conti's certification of non-compliance in order to take advantage of its lower bid price.
"It is presumed that a bidder who has submitted the required Buy America certificate is complying with the Buy America pro vision." 49 C.F.R. § 661.15. Plaintiff asserts, however, that MSC's certification of Buy America compliance was defective. Conti argues that MSC had to be able to provide concrete evidence of its ability to comply with the Buy America requirements at the time it signed its Buy America certificate and submitted its bid. There is no legal ground for this argument. The Certificate of Compliance that MSC signed in conjunction with its bid states, "[t]his bidder hereby certifies it will comply with the requirements of 49 U.S.C. § 5323(j)(1) . . . and the applicable regulations in 49 C.F.R. Part 661." (SEPTA Ex. 1 BF-6) (emphasis added). See also, 49 C.F.R. § 661.6. Thus MSC did not certify that it complied with the Buy America laws at the time of its bid, but rather that it would comply at the time of contract performance. Indeed, regular SEPTA practices only ask that contractors make required materials available just before they are required for use for confirmation that they comply with specifications. In a multi-year contract such as the Stations Project, bidders are not even expected to provide a precise list of the subcontractors they intend to employ to complete the work. MSC provided a letter to SEPTA listing its proposed subcontractors for the bid which included several instances where more than one possible subcontractor was named for a particular item (PL's Ex. 14). John Holak testified for SEPTA that bidders are not required to identify all subcontractors or material providers and that it would not matter if the contractor/provider changed post-bid so long as their materials or performance complied with the contract specifications.
At the hearing, plaintiff conceded that it was unable to locate any authority supporting this argument.
MSC had no incentive to submit a groundless or false certification of its ability to comply with the Buy America laws. A bidder who fails to comply with the federal regulations must, without changing its bid price, "take the necessary steps in order to achieve compliance. . . . If a bidder does not take the necessary steps . . . it is in breach of contract if a contract has been awarded." 49 C.F.R. § 661.17. Further, "[a] willful refusal to comply with a certification by a successful bidder may lead to the initiation of debarment or suspension proceedings. . . ." 49 C.F.R. § 661.19. While the Stations Project contract was a lucrative opportunity for MSC, it had much more to lose by falsely certifying its ability to comply with the Buy America laws than it stood to gain from being the only responsive bidder, particularly where "[a] false certification is a criminal act in violation of 18 U.S.C. § 1001." 49 C.F.R. § 661.15.
Even if it were the case that bidders must be able to comply with the Buy America certification at the time of their bid submission, plaintiff produced no evidence that MSC would not have been able to comply with its certification then. Although defendant had not yet purchased its domestic supply of contact rail, Geoff Searle testified that at the time of its certification MSC had contacted at least four suppliers of contact rail who confirmed they would have a sufficient quantity of unused domestic material to supply to MSC for the Stations Project.
c. SEPTA Did Not Improperly Allow MSC to Amend its Bid After Bids Were Opened
Plaintiff also argues that SEPTA violated competitive bidding laws by accepting a bid containing a material defect and by allowing MSC to remedy the defect in its bid subsequent to the bid opening. "The use of competitive bidding requires that all bidders begin on equal footing, that is, the bid proposal is intended to uniformly give the bidders the information they need to submit a bid." L.B. Foster Co. v. Southeastern Pa. Transp. Auth., 705 A.2d 164 (Pa.Commw. 1997). All of the Stations Project bidders were aware of the Buy America requirements and of the need to supply new contact rail in order to fulfil the contract.
Based on Arguello's misinformed May 12 letter to SEPTA, Conti asserts that MSC failed to understand that the Stations Project required the use of new contact rail when it signed its Buy America Certification. MSC's May 15 follow up letter corrected the misunderstanding the May 12 letter created but did not amend MSC's bid in any way. It merely confirmed that there was no material defect in the company's original bid and Buy America compliance certification. Indeed, MSC could not have amended its bid at this point even if it had wanted to. It was bound by its original certification that it would comply with the Buy America laws. "Whether or not a bidder or offerer certifies that it will comply with the applicable requirement, such bidder or offerer is bound by its original certification and is not permitted to change its certification after bid opening." 49 C.F.R. § 661.13(c).
MSC's post-bid communications with SEPTA were a part of SEPTA's due diligence in making its bid selection. This type of post-bid and pre-award communication is contemplated by 49 C.F.R. § 661.17 which explains "[i]f a bidder does not take the necessary steps [in order to achieve compliance], it will not be awarded the contract if the contract has not yet been awarded. . . ." SEPTA's inquiry of MSC was not intended to disadvantage other bidders, but rather to ensure that other bidders would not be unfairly knocked out of consideration because MSC had misunderstood the contract requirements when it alone certified it could provide domestically manufactured contact rail. "[I]t is important that the bidding process foster confidence among potential bidders that their bids will be considered fairly and that they will not be denied a substantial benefit afforded to their competitors." Marx v. Lake Lehman Sch. Dist., 817 A.2d 1242, 1247 (Pa.Commw. 2003). Given SEPTA's budget crisis, it had every incentive to make sure that it was correct in selecting a bidder who submitted a bid for over $1 million more than plaintiff. SEPTA's investigation confirmed that MSC intended to comply with its original certification and that it had the means to do so.
d. SEPTA Properly Followed the Requirements of the Buy America Laws
SEPTA did not abuse its discretion in declining to formally seek a waiver of the Buy America Regulations. There are three possible grounds for a waiver of the Buy America requirements: 1) public interest, 2) non-availability; and 3) price differential. 49 C.F.R. § 661.7. FTA may grant a public interest waiver where application of the Buy America requirements would be inconsistent with the public interest on a case-by-case basis. 49 C.F.R. § 661.7(b). An unavailability waiver may be granted where "materials for which a waiver is requested are not produced in the United States in sufficient and reasonably available quantities and of a satisfactory quality." 49 C.F.R. § 661.7(c). A waiver may be granted based on price differential where "the inclusion of a domestic item or domestic material will increase the cost of the contract between the grantee and its supplier of that item or material by more than 25 percent." 49 C.F.R. § 661.7(d). MSC and Conti's bids were just one percent apart in cost, not enough to meet the requirements for a price-differential waiver.
SEPTA reasonably concluded it would not be likely to win a public interest waiver from FTA. Although it would be in the public's fiscal interest to award the contract to the lowest bidder, the Buy America laws were enacted to promote the counterbalancing public interest of protecting and creating jobs for American steelworkers. Because it was not clear precisely when FTA would favor one interest over the other, SEPTA sought FTA's advice on the likelihood of obtaining a public interest waiver where one bidder proposed to use a source of domestically manufactured steel. Based on FTA's informal opinion that an application for a public interest waiver would be unsuccessful, SEPTA opted not to file a formal application. SEPTA's decision was also motivated by the absence of a similar public interest waiver in the Pennsylvania Steel Products Procurement Act. 73 P.S. § 1881 et seq. The Authority was concerned that even if an FTA public interest waiver had been granted, the Pennsylvania law would still require the use of domestic steel if the only basis for an exception to the law was the public interest.
Plaintiff argues that 73 P.S. § 1887 serves a function similar to the public interest waiver provision in the federal act. In my view, § 1887 does not provide for such a waiver.
SEPTA reasonably believed FTA would not be likely to grant a waiver based on unavailability. Conti argues that FTA would grant a waiver because MSC's steel is not "of a satisfactory quality," or at least that there is not a sufficient quantity of steel of a satisfactory quality to complete the Stations Project. Conti further alleges that the rail in question fails to meet SEPTA's contract specifications because it is not newly manufactured. As mentioned above, SEPTA verified that MSC has a source of unused domestically manufactured contact rail and has tested samples of MSC's supply to confirm that the material meets its contract specifications. SEPTA was satisfied that while not newly manufactured MSC's supply of contact rail had not been previously used and MSC would be able to comply with its certification. Where SEPTA can confirm an acceptable domestic source of contact rail, FTA is unlikely to grant an unavailability waiver. Further, under the Pennsylvania Act, a waiver is only granted "where the head of the public agency, in writing, determines that steel products . . . are not produced in the United States in sufficient quantities to meet the requirements of the contract." 73 P.S. § 1884(b). SEPTA, through its own investigation, confirmed that a sufficient quantity of 150 Ib. contact rail had been manufactured in the United States to meet its requirements. It could not then attest to its unavailability under the Act.
e. SEPTA Did Not Abuse Its Discretion
Conti has not shown that SEPTA acted with "bad faith, fraud, capricious action or abuse of power." SEPTA did not accept an unresponsive bid in violation of competitive bidding laws and did not improperly allow MSC to amend its bid subsequent to the bid opening. The Authority acted reasonably in declining to formally seek a waiver of the Buy America laws. Plaintiff has therefore failed to demonstrate a likelihood of success on the merits.
3. Harm if Injunctive Relief is Granted
I have considered defendant's argument that plaintiff comes to the table with "unclean hands" because of its undisclosed contingent-fee agreement with PKF-Mark III regarding the provision of PKF's intellectual property on the Stations Project to Conti and PKF's proposed start-up assistance on the contract in the event Conti were the successful bidder. I find there was nothing improper about this arrangement between Conti and PKF.
The balance of equities, including harm to the taxpayers, SEPTA, SEPTA riders, and the residents and business owners who live along the Blue Line dictates that I deny injunctive relief here. Conti is correct that the taxpayers will be harmed if the contract is awarded to MSC because its bid is $1 million more expensive than Conti's bid. However, where an additional one month delay in the award of this contract could result in a six month delay in project completion and an associated increase in construction costs and inconveniences to neighboring residents, businesses and SEPTA riders, the public will benefit if the Stations Project is not delayed by further litigation. "Judicial intrusion into government purchases necessarily delays completion of the contract and increases costs, with little measurable benefit to the public."Allis-Chalmers, 635 F.2d at 252-53. The same rationale applies to SEPTA's decision regarding which bidder should receive the Stations Project contract.
In a similar case, the Superior Court of Massachusetts denied a preliminary injunction in a case where an unsuccessful bidder attempted to enjoin the issuance of a railroad construction project, reasoning that:
the granting of this preliminary injunction would significantly affect the timing and completion of the overall . . . restoration project. The contract at issue here relates to a critical "link" in that project. Delay in permitting the contract of work to go forward would have a significant negative impact on the time schedule of the completion of this important public project. Therefore, even assuming that the plaintiff could make a sufficient showing of probability of success on the merits, the granting of a preliminary injuncion in this case appears to be an unwise use of the court's equity powers.Middlesex Corp. v. Mass. Bay Transp. Auth, 1994 WL 878834, at *2 (Mass.Super. Dec. 28, 1994).
Any further delay in the award of the Stations Project contract may cause serious injury to SEPTA. Conti has not shown that the irreparable injury to the taxpayer if an injunction is not granted is more serious than the injury which would result if SEPTA and MSC are not allowed to proceed with the Stations Project contract immediately. Because of this and for all of the aforementioned reasons I conclude that a preliminary injunction is not warranted in this case.
ORDER
AND NOW, this ___ day of October, 2003, after considering plaintiffs and defendants' briefs, and the evidence adduced at the hearing, and for the reasons set forth in the accompanying memorandum, plaintiffs motion for a preliminary injunction is DENIED.