C&E Servs., Inc. v. District of Columbia Water & Sewer Authority

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued October 11, 2002 Decided November 15, 2002

No. 01-7138

C&E Services, Inc. of Washington,

Appellant

v.

District of Columbia Water and Sewer Authority,

Appellee

Appeal from the United States District Court

for the District of Columbia

(No. 00cv01584)

Anthony Thompson argued the cause for appellant. With

him on the briefs was Lynn F. Kaufmann.

Frederick A. Douglas argued the cause for appellee. With

him on the brief were Henderson J. Brown, IV and Tanikia

M. Roberts. Curtis A. Boykin entered an appearance.

Before: Sentelle, Randolph and Tatel, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge: A disappointed bidder for a District

of Columbia government contract argues that the city's refus-

al to award it the contract violated the Due Process Clause of

the Fifth Amendment and the federal Service Contract Act.

Because D.C. law creates no entitlement to a contract before

it is formally awarded, we affirm the district court's dismissal

of the due process claim. And because we agree with the

district court that it lacked jurisdiction over the Service

Contract Act claim, we affirm its dismissal of that claim as

well.

I.

The District of Columbia Procurement Practices Act of

1985, D.C. Code Ann. s 2-301.01 et seq., identifies "competi-

tive sealed bidding" as the "preferred method" for District

agencies to award goods and services contracts. Id.

s 2-303.02(b). Such contracts "shall be awarded to the re-

sponsible and responsive bidder whose bid meets the require-

ments set forth in the [invitation for bids]" and to those who

submit "the lowest bid price or lowest evaluated bid price."

D.C. Mun. Regs. tit. 27, s 1541.1. Responsible and responsive

low bidders, however, are not assured of winning contracts,

for D.C. agencies may cancel the bidding process even after

bids have been opened if cancellation is in the "best interest

of the District government." D.C. Code Ann. s 2-303.07. Ex

post cancellations require agencies to provide "cogent or

compelling reasons to do so ... because of the potentially

serious adverse impact of cancellation on the integrity of the

competitive sealed bidding system after prices have been

exposed." Protest of Singleton Elec. Co., Inc., CAB No.

P-411, 1994 WL 780923 at 5 (D.C.C.A.B. Nov. 15, 1994).

Disappointed bidders may protest the award of a contract to

the District of Columbia Contract Appeals Board (CAB) and

then to the District of Columbia Superior Court. D.C. Code

Ann. ss 2-309.03(a)(1), 2-309.08; Francis v. Recycling Solu-

tions, Inc., 695 A.2d 63, 68-70 (D.C. 1997); Jones & Artis

Constr. Co. v. D.C. Contract Appeals Bd., 549 A.2d 315, 318

(D.C. 1988).

Appellee District of Columbia Water and Sewer Authority

(WASA) "oversee[s] water and sewer operations for the Dis-

trict and surrounding jurisdictions." D.C. Code Ann.

s 34-2201.01(4). Although WASA now has its own procure-

ment regulations, D.C. Mun. Regs. tit. 21, s 5300 et seq., the

Procurement Practices Act governed its activities at the

beginning of the events at issue in this case, D.C. Code Ann.

s 43-1687 (1996).

On July 25, 1999, WASA issued an invitation for bids to

maintain and repair certain instruments at its Blue Plains

Wastewater Treatment Plant. At that time, instrumentation

services were provided by J. Givoo Consultants, Inc. Appel-

lant C&E Services, Inc. of Washington, as well as Givoo,

submitted a bid to furnish the instrumentation services.

Viewed through the lens we employ when reviewing the

dismissal of a complaint pursuant to Federal Rule of Civil

Procedure 12(b)(6)--"we must accept as true all of the factual

allegations contained in the complaint," Swierkiewicz v. Sore-

ma, 534 U.S. 506, 508 n.1 (2002)--the following events then

occurred.

During the bidding process, WASA issued a "Clarification"

permitting prospective bidders to offer wages consistent with

the Service Contract Act, 41 U.S.C. s 351 et seq., which

applies to federal contractors who "furnish services," id.

s 351(b)(1), rather than (as the contract with Givoo had

required) the higher wages mandated by the Davis-Bacon

Act, 40 U.S.C. s 276a et seq., which applies to federal contrac-

tors who provide "construction, alteration, and/or repair, in-

cluding painting and decorating, of public buildings or public

works," id. s 276a(a). Am. Compl. p p 57, 59, 60. After bids

were opened, C&E "received a copy" of the agenda of

WASA's most recent board meeting, revealing that the agen-

cy planned to award the contract to Givoo. Id. p p 19-20.

Ten days later, C&E filed a protest of the "proposed award"

with the CAB. Id. p 25.

While C&E's protest was pending, WASA, acting pursuant

to its powers under the Procurement Practices Act, cancelled

the entire bidding process. Id. p 28. In its written justifica-

tion, WASA concluded that although C&E had "submitted the

lowest evaluated bid," cancellation "is in the best interest of

WASA" because "the specifications as written in the [invita-

tion for bids] were ambiguous and insufficient to cover

WASA's need." Id. p 29. WASA identified the "ambiguous

and insufficient" specifications, but mentioned no deficiencies

concerning wage requirements. Id. p p 33-37.

WASA then opened up a new bid process for the instru-

mentation contract that differed from the old process in two

ways. First, WASA solicited bids under its own procurement

regulations that, unlike the Procurement Practices Act, im-

pose no low-bidder rule. Id. p 42; D.C. Mun. Regs. tit. 21,

s 5323.2. Second, ten days before bids were due, WASA

required all bidders to match the Davis-Bacon-level compen-

sation that a pre-existing union contract obligated Givoo to

provide. Am. Compl. p p 51, 58, 59, 63.

Filing suit in the United States District Court for the

District of Columbia, C&E alleged that WASA, through "a

pattern and practice of wrongful manipulation of the public

procurement process by arbitrary and capricious acts," de-

prived it of property without due process of law in violation of

the Fifth Amendment. Id. p p 121, 126, 132, 138. C&E

sought an injunction awarding it the instrumentation contract,

damages for wrongfully awarding the contract and for bid

preparation, and attorneys' fees. Id. at 34-35. C&E also

requested a declaratory judgment that WASA's wage require-

ment violated the Service Contract Act. On WASA's Rule

12(b)(6) motion, the district court dismissed the entire com-

plaint, finding that (1) C & E failed to state a claim establish-

ing a property right in the instrumentation contract and (2)

the Declaratory Judgment Act does not authorize declaratory

relief under the Service Contract Act. C&E Servs., Inc. of

Wash. v. D.C. Water and Sewer Auth., No. 00-1584, mem. op.

at 9, 11 (D.D.C. May 21, 2001).

C&E appeals. We consider the district court's grant of the

motion to dismiss de novo, Weyrich v. New Republic, Inc.,

235 F.3d 617, 623 (D.C. Cir. 2001), keeping in mind "the

accepted rule that a complaint should not be dismissed for

failure to state a claim unless it appears beyond doubt that

the plaintiff can prove no set of facts in support of his claim

which would entitle him to relief," Conley v. Gibson, 355 U.S.

41, 45-46 (1957).

II.

We begin with C&E's claim that WASA deprived it of

property without due process of law. To determine whether

C&E has stated such a claim, "we first determine whether

... [it] has a property ... interest that triggers Fifth

Amendment due process protection." Reeve Aleutian Air-

ways, Inc. v. United States, 982 F.2d 594, 598 (D.C. Cir. 1993)

(citing Cleveland Bd. of Educ. v. Loudermill, 470 U.S. 532,

538-41 (1985)). "Property interests," the Supreme Court

held in Board of Regents of State Colleges v. Roth, 408 U.S.

564, 577 (1972), "are not created by the Constitution. Rather,

they are created and their dimensions are defined by existing

rules or understandings that stem from an independent

source such as state law--rules or understandings that secure

certain benefits and that support claims of entitlement to

those benefits." As Roth explains, "[t]o have a property

interest in a benefit, a person clearly must have more than an

abstract need or desire for it. He must have more than a

unilateral expectation of it. He must, instead, have a legiti-

mate claim of entitlement to it." Id.

C&E believes that D.C. law gives it "a legitimate claim of

entitlement" to the instrumentation contract because (1) the

Procurement Practices Act imposes a low-bidder rule and (2)

C&E "submitted the lowest evaluated bid," according to

WASA. This entitlement theory, however, ignores the Pro-

curement Practices Act provision permitting cancellation of

the bid process even after bid opening. D.C. Code Ann.

s 2-303.07. WASA's authority to cancel for "cogent or com-

pelling reasons" means that submitting the lowest bid does

not necessarily translate into winning the contract. Instead,

cancellation of the bidding hangs over bidders' heads until

contracts are actually awarded. Because the Constitution's

"procedural protection of property is a safeguard of the

security of interests that a person has already acquired in

specific benefits," Roth, 408 U.S. at 576 (emphasis added), a

Fifth Amendment-protected property interest arises only

upon award.

The D.C. Court of Appeals agrees with this result. In

Network Technical Services, Inc. v. District of Columbia

Data Co., 464 A.2d 133 (D.C. 1983), another disappointed

bidder challenged a D.C. agency's procurement decision. For

jurisdictional reasons that are irrelevant here, "the only issue

[before the court was] whether a specific statute or the

Constitution entitled [the bidder] to a hearing prior to the

award and execution of the contract." Id. at 135. Answering

no, the court explained that "no property interest exists prior

to execution." Id.

C&E alleges that WASA's cancellation of the bid process

and re-solicitation of bids under conditions favorable to Givoo

demonstrates that WASA's rationale for cancellation was

pretextual and therefore "arbitrary and capricious." Am.

Compl. p 121. This is irrelevant. Whether an agency vio-

lates a well-defined state law standard has no bearing on the

constitutional question of whether the expectations created by

state law rise to the level of a Fifth Amendment property

interest. We may assume that WASA offered no "cogent or

compelling" reason for cancellation in this instance, yet still

conclude that WASA's uncontested authority to cancel by

providing such a reason defeats C&E's claim of a legal

entitlement. Otherwise, every garden variety dispute regard-

ing the D.C. procurement process would become a federal

case.

Our conclusion that C&E lacks a sufficient property inter-

est to maintain its due process claim does not deprive the

company of a remedy. Under the Procurement Practices

Act, C&E may bring abuse of discretion claims before CAB

and, thereafter, before the D.C. Superior Court. We, of

course, express no opinion on whether, as WASA argues,

C&E has waived this right by dismissing its CAB protest,

allegedly in reliance on WASA's intentional misrepresentation

regarding the instrumentation contract's wage requirements.

Am. Compl. p 39. That is a question for the D.C. courts.

III.

Turning to C&E's request for a declaratory judgment that

WASA violated the Service Contract Act (SCA) by requiring

bidders to offer Davis-Bacon Act wages rather than SCA

wages, we begin with the well-established rule that the De-

claratory Judgment Act "is not an independent source of

federal jurisdiction." Schilling v. Rogers, 363 U.S. 666, 677

(1960) (citing Skelly Oil Co. v. Phillips Petroleum Co., 339

U.S. 667, 671 (1950)). Rather, "the availability of [declarato-

ry] relief presupposes the existence of a judicially remediable

right." Id. Thus, the Supreme Court held in Schilling that

federal courts may not declare a plaintiff's rights under a

federal statute that Congress intended to be enforced exclu-

sively through a judicially unreviewable administrative hear-

ing.

This case is nearly identical to Schilling. "[I]t is plain," we

have held, "that the SCA creates no private remedy" in the

federal courts. Danielsen v. Burnside-Ott Aviation Train-

ing Ctr., Inc., 941 F.2d 1220, 1228 (D.C. Cir. 1991). Instead,

disputes arising under the SCA must be resolved, in the first

instance, by "the statutory scheme for administrative relief

set forth by Congress in the SCA" and administered by the

Department of Labor. Id. at 1226. This case differs from

Schilling in only one respect: Under the SCA, the Depart-

ment of Labor's administrative determinations are judicially

reviewable. See, e.g., Ober United Travel Agency, Inc. v.

United States Dep't of Labor, 135 F.3d 822, 823 (D.C. Cir.

1998) (rejecting bidder's claim and affirming Department of

Labor's determination that the SCA applies to U.S. Air

Force-awarded travel management contracts). But the oper-

ative principle remains the same. A judicial declaration

telling WASA how to interpret the SCA would constitute an

end-run around Congress's clear intent that the Department

of Labor interpret and enforce the SCA in the first instance.

Schilling teaches that the Declaratory Judgment Act does not

authorize such a result. Cf. Block v. Cmty. Nutrition Inst.,

467 U.S. 340, 352-53 (1984) (Administrative Procedure Act

action impliedly precluded by federal statute intended to

foreclose private party enforcement); Middlesex County Sew-

erage Auth. v. Nat'l Sea Clammers Ass'n, 453 U.S. 1, 19-21

(1981) (section 1983 action impliedly precluded by federal

statute intended to foreclose private party enforcement).

Thus, plain language of the Declaratory Judgment Act not-

withstanding, we agree with the district court that it lacked

authority to adjudicate C&E's rights under the SCA except

pursuant to the Administrative Procedure Act following a

Department of Labor determination.

IV.

Because C&E has failed to state a claim under either the

due process clause or the Service Contract Act, we affirm in

all respects.

So ordered.