CESC v. Dept of Commerce

Filed: June 20, 2000

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 99-2432
(CA-98-1837-A)

CESC Plaza Limited Partnership, et al.,

Plaintiffs - Appellants,

versus

United States Department of Commerce, et al.,

Defendants - Appellees.

O R D E R

The court amends its opinion filed June 8, 2000, as follows:

On page 2, section 2, line 2 -- counsel’s name is corrected to

read “Jeri Kaylene Somers.”

For the Court - By Direction

/s/ Patricia S. Connor
Clerk
UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

CESC PLAZA LIMITED PARTNERSHIP;
FIRST CRYSTAL PARK ASSOCIATES
LIMITED PARTNERSHIP; SECOND
CRYSTAL PARK ASSOCIATES LIMITED
PARTNERSHIP; THIRD CRYSTAL PARK
ASSOCIATES LIMITED PARTNERSHIP;
CHARLES E. SMITH REAL ESTATE
SERVICES L.P.,
Plaintiffs-Appellants,

v.
No. 99-2432
UNITED STATES DEPARTMENT OF
COMMERCE, PATENT AND TRADEMARK
OFFICE; BRUCE A. LEHMAN,
Commissioner of Patent and
Trademark; GENERAL SERVICES
ADMINISTRATION; DAVID J. BARRAM,
Administrator, General Services
Administration; UNITED STATES OF
AMERICA,
Defendants-Appellees.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
James C. Cacheris, Senior District Judge.
(CA-98-1837-A)

Argued: May 3, 2000

Decided: June 8, 2000

Before NIEMEYER, TRAXLER, and KING, Circuit Judges.

_________________________________________________________________
Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: John L. Oberdorfer, PATTON BOGGS, L.L.P., Washing-
ton, D.C., for Appellants. Jeri Kaylene Somers, Assistant United
States Attorney, Alexandria, Virginia, for Appellees. ON BRIEF:
Mary Beth Bosco, Benjamin G. Chew, PATTON BOGGS, L.L.P.,
Washington, D.C., for Appellants. Helen F. Fahey, United States
Attorney, Alexandria, Virginia, for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Plaintiffs (the "Smith Companies") brought this action against the
United States and various of its agencies and officials (the Govern-
ment) in the Eastern District of Virginia, seeking declaratory and
injunctive relief based on allegations that the Government procure-
ment process for leasing office space for use by the Patent and Trade-
mark Office ("PTO") violated the Competition in Contracting Act, 41
U.S.C. § 253a, and the Public Buildings Act, 40 U.S.C. § 606. The
district court concluded that no such violations had occurred, and it
granted summary judgment to the Government. The Smith Compa-
nies appeal the summary judgment award. Finding no error, we
affirm.

I.

In June 1996, the General Services Administration ("GSA") issued
a Solicitation for Offers ("SFO") seeking twenty-year lease proposals
to house the PTO. The PTO, one of the largest government agencies

2
in Northern Virginia, is now housed in eighteen separate buildings
located in Arlington and has more than five thousand full-time
employees. The Smith Companies are the PTO's current lessor and
constitute one of the three remaining bidders in the final stage of this
government procurement process.1 The Smith Companies proposed to
house the PTO by renovating existing buildings, unlike the two other
bidders who propose to house the PTO through construction of new
office buildings.

The SFO established generally the Government's needs for approx-
imately two million square feet of occupiable office space for use by
the PTO. As explained in the SFO's Executive Summary, "for a proj-
ect of this scope, several years will elapse between the release of the
SFO and the completion of all necessary construction, [thus] specify-
ing the PTO's detailed space requirements" at that time was impracti-
cal. The Executive Summary consequently noted that the "PTO will
provide a more detailed program of requirements at Lease award, and
will continue to supplement such program" as necessary.

The SFO required the lessor to provide buildings resembling a
"cold, dark shell" (buildings with an unfinished interior and without
distributed heat and power systems). The shell was to be constructed
with at least twenty percent of the occupiable floor bays on each floor
having a specially upgraded loading capacity, with each floor having
space designated for empty "service shafts" and a communications
room. The SFO further instructed the lessor to build into its bid an
$88 million fit-out allowance, to permit the Government to construct
all necessary improvements of the unfinished space.

During the two years following the SFO's issuance, the bidders
submitted general proposals and engaged in extended negotiations
with the Government. In addition, the Government provided a draft
Environmental Impact Statement to the bidders for use in their efforts.
However, the Government did not give the bidders its Program of
Requirements ("POR"), the more specific and detailed designation of
_________________________________________________________________

1 On June 14, 1999, while this proceeding was pending in the district
court, the GSA issued a Record of Final Decision indicating its intention
of awarding its offer to a different bidder. The award has not yet been
made.

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the space requirements referred to in the SFO. In November 1998, the
three remaining bidders, including the Smith Companies, submitted
Best and Final Offers for the Government's consideration.

In December 1998, apparently with some inkling that its bid would
be unsuccessful, the Smith Companies sued the Government in the
Eastern District of Virginia, alleging that the SFO's requirements
overstate the Government's minimal needs. According to the allega-
tions in its lawsuit, the Smith Companies are disadvantaged in the
competition because their proposal to renovate existing buildings is
uniquely affected by these excess requirements.

II.

The Administrative Procedure Act ("APA"), 5 U.S.C. § 704, gov-
erns our review of this government procurement process. Pursuant
thereto, we, like the district court, must "review the administrative
record de novo and render our own independent judgment, according
no deference to the district court's decision." City of New York v. Sha-
lala, 34 F.3d 1161, 1166 (2d Cir. 1994); see also Brown v. Dep't of
Interior, 679 F.2d 747, 748 (8th Cir. 1982). Under the APA, we must
uphold the agency action unless it was "arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law." 5 U.S.C.
§ 706(2)(A). In making this determination, the court

must consider whether the agency decision was based on a
consideration of the relevant factors and whether there has
been a clear error of judgment. Although this inquiry into
the facts is to be searching and careful, the ultimate standard
of review is a narrow one. The court is not empowered to
substitute its judgment for that of the agency.

Citizens to Preserve Overton Park, Inc. v. Volpe , 401 U.S. 402, 416
(1971) (internal citations omitted), overruled on other grounds by
Califano v. Sanders, 430 U.S. 99, 105, 107 (1977).

A.

Ordinarily, the agency's decision is entitled to a presumption of
regularity. See id. at 415 (citing Pacific States Box & Basket Co. v.

4
White, 296 U.S. 176, 185-86 (1935)). If any state of facts reasonably
can be conceived that would sustain the agency's decision, the exis-
tence of that state of facts is presumed, unless the challenger estab-
lishes contrary facts affirmatively demonstrating that the decision is
arbitrary. See Pacific States Box & Basket Co., 296 U.S. at 185-86.
The Smith Companies contend that the presumption of regularity
should not be applied here because of the following: (1) the adminis-
trative record in this procurement challenge is a fiction, constructed
solely for litigation purposes; (2) even so, the administrative record
compiled by the GSA was incomplete; and (3) because the offerors
were not provided with essential information for their bids, the solici-
tation process was repeatedly revised, rendering it inherently irregu-
lar.

In support of its claim that the administrative record is a fiction, the
Smith Companies rely on court decisions that permit expansion of an
administrative record at the behest of parties other than the agency.
See, e.g., Bar MK Ranches v. Yeutter, 994 F.2d 735, 739 (10th Cir.
1993); Capital Engineering v. Weinberger, 695 F. Supp. 36, 41
(D.D.C. 1988); Lloyd v. Illinois Reg'l Transp. Auth., 548 F. Supp.
575, 590 (N.D. Ill. 1982); Cubic Applications v. United States, 37
Fed. Cl. 345 (Fed. Cl. 1997). In this case, the district court in fact
expanded the administrative record -- at the plaintiffs' request. How-
ever, the Smith Companies provide no authority (and we find none)
supporting the proposition that the lack of a clearly delineated admin-
istrative record is in itself sufficient reason to deny the GSA the usual
presumption of regularity accorded its procurement process.

Nor do the specific documents added to the administrative record
by the district court justify our rejection of the presumption of regu-
larity. In support of their assertion that the GSA improperly withheld
the POR from the bidders, the Smith Companies point to two commu-
nications from GSA to the PTO requesting access to the POR, empha-
sizing the POR's importance in the award process. However, these
communications simply fail to rise to the level of a "smoking gun,"
as the Smith Companies would have us conclude.2 The Smith Compa-
_________________________________________________________________

2 Likewise, while discovery battles between the parties concerning
whether e-mails existed or were retrievable from several years earlier
may raise questions about the efficiency of the Government's search
methodology, such discovery disputes fail to establish bad faith or other
impropriety.

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nies also contend that the GSA's having sought and secured a protec-
tive order as to certain discovery, including a senior officer's
deposition scheduled soon after the lawsuit was filed, should cause us
concern. Although we are not called upon to review the district
court's decision to grant the protective order, we find it contrary to
logic that the request for such an order permits an inference of impro-
priety, especially since the district court's entry of the order suggests
that the GSA's request was not frivolous.

The Smith Companies also maintain that GSA's provision to the
prospective bidders of a draft -- rather than a final -- Environmental
Impact Statement, and its failure to submit the POR to the bidders
until the district court ordered it to do so, raises an inference of impro-
priety. We again disagree. A procurement project of this magnitude,
to provide the Government with approximately two million square
feet of office space with substantial technological capabilities (and
which has a time horizon of at least twenty years) requires enormous
planning and revision. As the Smith Companies acknowledge, this
procurement is "the largest real estate lease project ever undertaken
by the United States," with a value of approximately $1.3 billion. Sig-
nificantly, there is no contention that GSA differentiated between the
prospective bidders in withholding the disputed documents. Indeed,
the SFO indicated that the POR would not be available to the bidders
until late in the decision-making process. We accordingly must con-
clude that our review of the GSA's conduct is circumscribed by the
presumption of regularity ordinarily applicable to agency actions.

B.

The Smith Companies also assert that the SFO contains unneces-
sarily restrictive requirements that contravene the terms Congress
approved for this lease procurement and violate the "full and open
competition" mandate of 41 U.S.C. § 253a. GSA obtained the
required Congressional approval in 1995, based on its prospectus rep-
resenting that GSA would "provide for maximum competition by
allowing for the possible construction or renovation of the required
space." Likewise, to ensure "full and open competition," the solicita-
tion was to "include restrictive specifications only to the extent neces-
sary to satisfy the needs of the executive agency or as authorized by
law." 41 U.S.C. § 253a(a)(2)(A), (B). The Smith Companies main-

6
tain that certain SFO requirements, discussed more specifically
below, unfairly prejudice bids from those who propose to renovate
existing buildings rather than to construct new ones.

First, the Smith Companies contend that the requirements of a
"cold, dark shell" and an $88 million fit-out allowance artificially
inflate their bid price, by requiring them to destroy their existing
buildings' interiors and then rebuild them. They argue that they could
save a substantial amount of money by simply renovating interiors
directly to the needed layout. The Smith Companies maintain that
their bid price should reflect those savings, and they are prejudiced
by their bid's inability to do so. On the other hand, the Government
asserts that these requirements are entirely necessary to permit its
planners the flexibility to organize the PTO's operations in response
to its interior design needs, such as implementing standardized dis-
tributed space plans on each floor throughout the buildings and
assigning the most appropriate location to each of the PTO's special-
ized divisions.

Next, the Smith Companies maintain that the requirements for
increased load capacity in at least twenty percent of each floor's space
is also unnecessary, as such capacity in only six percent of the floor
space will serve the PTO's needs. They argue that increased capacity
beyond six percent, if needed, can be provided for through renovation
over the course of the twenty-year lease. The Government asserts,
however, that over the course of the twenty-year lease, the PTO must
have the flexibility to relocate heavy files, equipment, and libraries as
needs arise, without incurring additional construction cost and incon-
venience.

Finally, the Smith Companies argue that it is unnecessary for each
floor to possess empty service shafts and communications rooms.
They claim that there is no present need for these requirements, and
they are "useless" items that simply require "costly retrofitting" of
existing space. The Government indicates that the service shaft
requirement will enhance access to secondary distribution in the
building in remote locations in each floor, thus eliminating the need
for longer and more problematic cable and other piping runs. Accord-
ing to the Government, both operating and cost efficiencies are likely
to result. The multiple communications rooms were responsive to the

7
PTO's specific request for ensuring efficient voice and data commu-
nications with needed redundancy for reliable functioning.

On careful review, we must agree that the Government has shown
proper justification for these requirements, particularly in its need for
flexibility in the extensive long-term space design and planning of
this major project. We are not empowered, on this record, to substi-
tute our judgment for that of the agency. See Overton Park, 401 U.S.
at 416. We accordingly conclude that the Government's specifically
identified needs, although contested by the Smith Companies, are not
"arbitrary, capricious, an abuse of discretion, or otherwise not in
accordance with law."

III.

We have carefully considered the briefs and oral argument in this
appeal and, for the foregoing reasons, find ourselves in agreement
with the decision of the district court. See CESC Plaza Ltd. Partner-
ship v. United States Dep't of Commerce, CA No. 98-1837 (E.D. Va.
July 29, 1999). We therefore affirm its award of summary judgment
in favor of the Government.

AFFIRMED

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