Opinion
No. 03 Civ. 2772 (LTS) (MHD)
June 23, 2003
Alan Lee Frank, Esq., FRANK ROSEN, Elkins Park, PA., Attorneys for Plaintiff.
Kay M. Edwards, Esq., Mark F. Palomino, Esq., MICHAEL A. CARDOZO, ESQ., CORPORATION COUNSEL OF THE CITY OF NEW YORK, New York, New York, Attorney for Defendant.
OPINION AND ORDER
Plaintiff, Parts Distributors, LLC, ("PD" or "Plaintiff"), brings this action against The City of New York (the "City" or "Defendant"), seeking injunctive and declaratory relief and specific performance. The action arises from the City's repudiation of a purported renewal of a contract for the conversion of City agencies' automobile parts supply and repair operations to a centralized system. The Court has jurisdiction of this action pursuant to 28 U.S.C. § 1332, as the citizenship of the parties is diverse.
PROCEDURAL BACKGROUND
The complaint was filed, and an application for an order to show cause was submitted to the Court, on April 22, 2003. On April 29, 2003, the Court heard arguments of counsel and granted a limited Temporary Restraining Order ("TRO"), temporarily enjoining the City of New York's Citywide Administrative Services department (hereinafter referred to as "NYDCAS"), until May 9, 2003, from issuing any final bid solicitation in respect a certain "Automotive Parts: Just in Time" ("JIT") contract. An evidentiary hearing on PD's application for a preliminary injunction was held on May 8, 2003. The Court extended the limited TRO for ten more days and took the preliminary injunction motion under advisement. The parties served and filed with the Court their respective proposed findings of fact and conclusions of law.
The following opinion constitutes the Court's findings of fact and conclusions of law for purposes of Rule 52 of the Federal Rules of Civil Procedure. For the following reasons, PD's motion for a preliminary injunction is denied.
FACTUAL BACKGROUND
The Court finds the relevant material facts, which are largely undisputed, to be as follows:
Plaintiff is in the business of the sale and distribution of automotive parts, supplies and inventory management services to, among others, governmental, municipal and private entities. (T. at 118-123; Aff. of Eric Levy attached to Motion for Preliminary Injunctive Relief, at ¶¶ 1-2.)
Citations to the Transcript of the May 8, 2003 hearing are denoted as "T. at ___."
On September 17, 1997, NYDCAS advertised and solicited for bid (the "1997 Bid Solicitation") a contract under which a sole vendor would supply automotive parts, supplies and inventory management services for the vehicle fleet of the City of New York's Department of Environmental Protection (hereinafter referred to as "DEP") under a JIT program. (Preliminary Injunction Hearing Ex. ("PIX") P9.)
The 1997 Bid Solicitation required that the prospective sole vendor be responsible for, inter alia, "Just-In-Time delivery" of all automotive parts and supplies for all automobiles and light, medium and heavy duty trucks in the DEP fleet and for providing parts and delivery service to all DEP vehicle repair facilities. (PIX P9.) The vendor would also be required to conduct a full inventory of DEP's fleet administrative warehouses to catalog and repurchase from the City any overstocked items for full credit based on the market value of original equipment and after-market pricing. (Ibid.)
The 1997 Bid Solicitation contemplated extensive "Inventory Management Services" that included, among other things: (i) parts deliveries within 24 hours of the vendor's receipt of a perforated order and/or shipping instruction from NYDCAS and four-hour emergency delivery services (PIX P9, first unnumbered page behind the "B" pages), (ii) providing facilities for the pick-up of excess inventory (ibid), (iii) completion of a full inventory and the cataloging of all such vehicles and parts (ibid), (iv) the eventual provision of a computer link between every City agency and maintenance facility and the vendor (ibid), and (v) the building of an extensive database of all included vehicles (PIX P9, second unnumbered page behind the "B" pages). (See also T. at 20-21 and 125-131.)
The 1997 Bid Solicitation also included a provision that, upon successful implementation of the DEP's inventory management system and inventory program, NYDCAS could include into the scope of the bid award the vehicle fleets for all of the City of New York's other departments, which consisted of some 26,000 vehicles and 50 repair shop locations. (PIX P9, at p. B008.)
Specifically, the 1997 Bid Solicitation included the following language at Page B008:
AFTER SUCCESSFUL IMPLEMENTATION OF DEP'S INVENTORY MANAGEMENT SYSTEM AND INVENTORY ORDERING PROGRAM, THE CITY RESERVES THE RIGHT TO INCLUDE OTHER CITY AGENCY'S FLEETS. THE CITY'S FLEET CONSISTS OF APPROXIMATELY 26,000 VEHICLES AND APPROXIMATELY 50 REPAIR SHOP LOCATIONS. THESE LOCATION[S] COULD REQUEST INCLUSION IN THE INVENTORY MANAGEMENT, THE JUST IN TIME INVENTORY ORDERING AND REPORTING ASPECTS OF THIS CONTRACT. VENDORS ARE TO TAKE NOTICE OF THE POSSIBLE INCLUSION OF THE REST OF THE CITY'S FLEET.
(PIX P8, at p. B008.)
The 1997 Bid Solicitation also provided that the contract to be awarded by NYDCAS ". . . is subject to the Rules of the Procurement Policy Board of the City of New York dated August 1, 1990 [and that] in the event of a conflict between said Rules of a provision of this contract, the Rules shall take precedence." (PIX P8 at ¶ 6 of the "Offer and Acceptance" pages of the proposed contract.)
No option to renew was included in the proposed contract that was let for public bid under the 1997 Bid Solicitation. (PIX 8; T. at 43, 61, 86.)
The proposed contract contained the following additional pertinent provisions:
6. PROCUREMENT POLICY BOARD RULES
This contract is subject to the Rules of the Procurement Policy Board of the City of New York (the PPB Rules) dated August 1, 1990. In the event of a conflict between said Rules and a provision of this contract, the Rules shall take precedence.
(PIX P8; T. at 77.)
GENERAL CONDITIONS
2. BIDS
* * *
2.8(c) Type "C" Contract. (Requirements Contract). A requirement contract is a contract for an indefinite amount of goods. . . . The Agency Chief Contracting Officer may, with the consent of Seller, extend the term of this Contract up to an additional 120 days.
* * *
3. TERMS AND CONDITIONS OF PERFORMANCE* * *
3.5. Termination or Suspension of Contract. Where the Agency Chief Contracting Officer deems it to be in the interest of the City, the Agency Chief Contracting Officer may terminate or suspend the performance of this Contract in whole or in part. partsdistributors.wpd version 062303 5
* * *
9. MODIFICATION
9.2 . . . Contract changes will be made only for work necessary to complete the work included in the original scope of the contract, and for non-material changes to the scope of the contract. Changes are not permitted for any material alteration in the scope of work.
(PIX P16.)
NYDCAS awarded the JIT contract to PD's predecessor in interest, Parts Distributors Inc. ("PDI"), for a five-year term originally running from December 1, 1997 to November 30, 2002.
In submitting its bid and accepting the award of the JIT contract, Plaintiff agreed to be bound to the terms and conditions of the bid, which were contained in the New York City Purchase Contract and Bid Book issued pursuant to the 1997 Bid Solicitation and provided to Plaintiff prior to its October 1997 bid (collectively, the "JIT Agreement").
The JIT Agreement contemplated an initial phase-in period in which the contractor would work solely with DEP. The City's departments, other than the DEP, were prevented by the City from initially participating in the JIT contract arrangement with Plaintiff, until the City evaluated and approved the success of the program with the DEP. (T. at 137-139.)
During the approximately twelve (12) initial months of the JIT Agreement, PDI fulfilled substantially all of its obligations with respect to the JIT Agreement and in all material aspects successfully implemented DEP's inventory management system and inventory ordering program. (PIX P5; T. at 39-41.)
After the initial phase-in with the DEP was under way, Howard Altschuler, who was then the relevant Agency Chief Contracting Officer ("ACCO"), determined that it would be in the best interests of the City to extend the JIT Agreement in order to facilitate the broader implementation of the Just in Time program with other agencies. Such broader implementation was specifically contemplated in the JIT Agreement. (T. at 52-55, 78-80.)
On or about February 24, 1999, at NYDCAS's explicit request, PDI and the City entered into a written modification of the JIT Agreement, adding an option permitting renewal of the contract for an additional five-year term upon mutual consent of the parties. (T. at 61-62, 90.) Such a provision was neither included in the original materials distributed to potential bidders for the JIT contract nor included in the original JIT Agreement. (T. at 86.) At the time the amendment was entered into, Altshuler did not view it as a material change to the scope of the work outlined in the JIT contract. (T. at 92.) Altshuler and the other City officials involved in the insertion of the renewal option and the exercise of that option intended the City to be bound by the modified and renewed contract, viewing the modification and renewal as advantageous to the City and within the scope of the original agreement. (T. at 93.)
The City modified the contract to include the option to renew at this time because it realized the magnitude of the scope of the work outlined in the JIT Agreement and deemed the option necessary to enable Parts Distributors to complete that work for other City agencies that wanted to participate in the JIT program and services. (T. at 73, 75-76, 79, 81, 93.)
The following provision was added to the JIT Agreement on February 24, 1999:
Option for an additional five (5) years. Upon mutual consent of the Division of Municipal Supply Services and the contractor an additional five (5) years can be added to the period of the contract. This option can be exercised at any time before the end of the contract.
(PIX P7.)
As a result of PDI's successful implementation of DEP's inventory management system and inventory ordering program and pursuant to the terms of the JIT Agreement, NYDCAS began to use PDI's supplies and inventory management services for the vehicle fleets of the City of New York's other departments, including but not limited to, the Police Department, the Fire Department and the Sanitation Department. (PIX P5; T. at 39-41.)
Thereafter, on or about May 1, 2002, and again upon the specific request of NYDCAS and with the consent and agreement of PDI, pursuant to the amendment providing for the option for an additional five-year term, the parties exercised the option and extended the Agreement for an additional five-year term from December 1, 2002 to November 30, 2007. (PIX P10.)
On or about June 7, 2002, the exercise of the option, providing for an additional five-year term from December 1, 2002 to November 30, 2007, was "registered" by the Comptroller of the City of New York. (PIX P10; T. at 112-114.)
During the original five-year contract term, all or most of the City's agencies began to enroll in the Just in Time program contemplated by the contract, with varying degrees of completion of that enrollment process as of the Preliminary Injunction hearing date, May 8, 2003. (T. at 33, 38, 131, 134, 137.)
In August 2002, PDI's competitor, Parts Authority, objected to the renewal of the JIT Agreement. (T. at 102, 106.)
In or about the fall of 2002, PD had an opportunity to acquire certain assets of PDI, including the JIT Agreement. (T. at 120-125.) In determining to acquire the assets, PD specifically considered, and sought confirmation of, NYDCAS' intent to honor the five-year extension of the JIT Agreement. (Ibid.)
Prior to acquiring the assets and interests of PDI for approximately $13,000,000.00, PD received and relied upon the explicit representations and assurances of NYDCAS, through its agents and employees, that NYDCAS intended to honor the JIT Agreement, as amended, including the provision providing an additional five-year term, with PD after it acquired the assets and interests of PDI. (Ibid.)
Because activities under the JIT Agreement represented one-third (1/3) of PDI's relevant business, PD would never have acquired the assets and contract interest of PDI in November of 2002 for the aforesaid sum if the right to perform under the extended JIT Agreement had not been part of the transaction. (Ibid.)
Prior to Plaintiff's acquisition of the PDI's interest in the JIT Agreement, PD obtained creditor concessions of substantially in excess of $2,000,000, based at least in part upon representations to such creditors that PD was assuming the JIT Agreement with the City of New York and that the JIT Agreement would expire in November 2007. (T. at 143-144; PIX P14.) These creditor concessions will be at substantial risk if the City is permitted to prematurely terminate the JIT Agreement. (T. at 143-144.)
In Fall 2002, the Comptroller's Office notified DCAS that the renewal clause inserted into the Contract was illegal since it was entered into in violation of the Policy Procurement Board ("PPB") Rules. (T. at 107, 149.)
Thereafter, on or about February 14, 2003, PD was orally advised by NYDCAS, by and through its agents and employees, that NYDCAS did not intend to honor the extension of the JIT Agreement. (Aff. of E. Levy at ¶ 17.)
Upon learning this information, and also on or about February 14, 2003, PD, by and through its Chief Executive Officer, Eric Levy, requested that NYDCAS alter its position and confirm that the provision of the JIT Agreement providing for an additional five-year term would be honored. (PIX P15; T. at 145-146.)
The City rejected Mr. Levy's request and, on or about April 10, 2003, NYDCAS sent out to all prospective bidders a Notice of Pre-Solicitation Conference scheduled for May 7, 2003 for the commodity of "Automotive Parts: Just-In-Time." (PIX P11.)
Attached to the April 10th was the new Bid Book for Bid No. 300452, for a sole vendor to supply automotive parts, supplies and inventory management services for the vehicle fleets of the City of New York (the "2003 Bid Solicitation"). (PIX P11.) The term of the proposed contract contained in the May 7, 2003 Bid Book is five years, with an option for an additional five (5) years. (PIX P11; See also, Aff. of E. Levy at ¶ 18.)
PD is eligible to bid for the new contract. (T. at 141.)
Based on feedback received at a pre-solicitation meeting held in May 2003, the City believes that it will be in a position to put out final bid materials by mid-summer and intends to allow a 6-week period for preparation of the bid responses. (T. at 100-09)
Bidders responding to the 2003 Bid Solicitation will, among other things, be required to submit detailed pricing information for voluminous items of inventory. (T. at 111-12). Preparation of such information requires a significant investment of time and resources and disclosure of the information has competitive implications. (Ibid.)
The JIT Agreement provides that it is governed by the 1990 PPB Rules. Section 621 of those Rules, relating to the amendment and modification of contracts, reads in pertinent part as follows:
(a) Policy.
(1) Changes may be made to existing contracts by the Agency Chief Contracting Officer or those to whom the Agency Chief Contracting Officer has delegated such authority.
* * *
(c) Types of Changes Permitted.(1) Contract changes may include:
(i) Specification changes to account for design errors or omissions;
(ii) Changes in contract amount due to additional or omitted work;
(iii) Change in delivery location;
(iv) Change in equipment method; and
(v) Any other revision deemed necessary by the Contracting Officer.
(2) Changes Not Permissible for Material Alterations of Scope. Contract changes are permitted only for work necessary to complete the work included in the original scope of the contract, and for non-material changes to the scope of the contract. Changes are not permitted for material alterations in the scope of the work. Material alterations to the scope of the work may be made only by a new procurement, to be made by one of the methods of source selection set forth in Chapter 3 of these rules, including, where applicable, negotiated acquisition with the existing contractor.
(d) Authority to Approve Changes.
(1) Non-construction.
(i) Except in the case of requirements contracts any contract increases which cumulatively exceed the greater of 10% or $50,000 must be approved in writing by the City Chief Procurement Officer.
. . . .
(iii) The City Chief Procurement Officer shall monitor all contracts that cumulatively exceed 5% in change orders as set forth in subparagraph (g) below.
. . . .
(e) Adjustments of Price or Time for Performance.
The contractor shall be entitled to a price adjustment for extra work pursuant to a written change order. If any part of the contract work is necessarily delayed by a change order, the contractor will be entitled to an extension of time for performance. Adjustments to price shall be computed in one or more of the following ways:
(1) By agreement of a fixed price;
(2) By unit prices specified in the contract;
(3) By time and material record; and/or
(4) In any other manner approved by the City Chief Procurement Officer.
(PIX P9.)
The 1990 and PPB Rules address extensions of time for performance. Section 631 of the 1990 PPB Rules reads in pertinent part as follows:
EXTENSIONS OF TIME FOR PERFORMANCE
(a) Application. If performance by the contractor is delayed for a reason set forth in the contract, reasonable extension of time for performance may be allowed.
(b) Goods and Non-Construction Related Services.
(1) An extension of time may be granted only by the Agency Chief Contracting Officer of the agency that awarded the contract, upon written application by the contractor.
(2) The ruling of the Agency Chief Contracting officer shall be final and binding as to the allowance of an extension, and the number of days allowed.
(3) The application for extension must detail each cause for delay, the date it occurred, and the resulting total delay in days attributed to such cause.
(PIX P9.)
The 1990 PPB Rules deal with "renewals," at Section 636, as follows:
RENEWALS.
(a) Defined. Renewals are defined as re-registration of previous contracts with the same vendor or service provider, with substantially unchanged terms and conditions, but possibly revised quantities, lists, or schedules of items to be supplied.
(b) Renewals Not Permitted. Unless specifically contracted for, as in contracts containing an option to renew and multi-year contracts, renewals shall not be permitted. Where additional quantities of goods or a continuation of types of services are required, the procurements shall be made by new solicitations and the goods and services acquired under the rules set forth in Chapter 3 of these rules.
(PIX P9.)
DISCUSSION
In this Circuit, a grant of preliminary injunctive relief is generally appropriate only upon the movant's showing:
(a) that it will suffer irreparable harm in the absence of an injunction and (b) either (i) a likelihood of success on the merits or (ii) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly in the movant's favor.
Tom Doherty Assoc. v. Saban Entertainment, Inc., 60 F.3d 27, 33 (2d Cir. 1995). The moving party has the burden of establishing entitlement to injunctive relief, including the prospect of irreparable harm. See International Brotherhood of Teamsters v. Local Union, No. 810, 19 F.3d 786, 789 (2d Cir. 1994).
Irreparable Harm
PD's evidence indicates that, if the City is permitted to re-bid the JIT Agreement and PD is not the new winning bidder, it is likely to suffer the loss of a substantial portion, if not the majority, of its business and in addition lose the benefit of financial concessions important to its economic health. The Court assumes for purposes of this analysis that this evidence suffices to demonstrate the prospect of irreparable harm in the event PD loses the contract. PD may not, however, lose the contract. There is no reason to expect that it is in any worse position than any other potential vendor to submit a competitive bid. It is entirely possible that PD will ultimately be able to win a potential 10-year continuation term (5-year principal contract with 5-year renewal option provision) under the 2003 Bid Solicitation if the current process is allowed to go forward, albeit possibly on economic terms less favorable to PD than those currently in place. PD has not demonstrated that it will suffer irreparable harm in that event. Furthermore, PD's performance under the current contract has been well received, although it is not clear how its incumbancy will weigh in the bid process. Nor has PD demonstrated that it will suffer irreparable harm simply by reason of having to prepare a new bid, or by reason of the terms of its bid being disclosed when all of the bids are opened and the winning (low) bidder announced. Accordingly, the Court finds that PD has failed to carry its burden of demonstrating that it will suffer irreparable harm in the absence of the requested injunction.
Likelihood of Success on the Merits
Nor has PD demonstrated a likelihood of success on the merits. The JIT Agreement was, by its terms, governed by 1990 PPB Rules. The New York City Policy Procurement Board periodically issues rules governing the City's procurement policies and procedures, pursuant to authority granted under section 311 of the New York City Charter.
The period of the contract that was publicly bid under the 1997 Bid Solicitation extended from December 1, 1997 to November 30, 2002. (See PIX P8, at B002.) The estimated value of the contract that was bid was $3,000,000.00. (Id.; T. at 59.) However, as part of this five-year contract, the City reserved the right to include other City agency fleets in addition to DEP within the terms of the contract, and advised prospective vendors to take note of the possible inclusion of the rest of the City's fleet within the scope of the five-year contract. Specifically, page B008 of the 1997 Bid Book provides:
After successful implementation of DEP's inventory management system and inventory ordering program, the City reserves the right to include other City Agency's Fleets. The City's Fleet consists of approximately 26,000 vehicles and approximately 50 repair shop locations. These location could request inclusion in the inventory management, the Just In Time Inventory ordering and reporting aspects of this contract. Vendors are to take notice of the possible inclusion of the rest of the City's fleet.
(PIX P8.)
Thus, the scope of the proposed contract, which was to run for a term of five years, contemplated the possibility that the services required would extend beyond DEP and that the City's entire fleet could potentially be serviced pursuant to the five-year Contract. (Id.; T. at 24-26, 46, 74, 101.)
In addition, it was clear that, should the City exercise the option to include other City agency's fleets beside DEP under the terms of the JIT contract, the value of the contract would be significantly increased from its original estimated amount of $3,000,000, which estimate pertained solely to DEP. (T. at 59-60.)
The JIT Agreement that was put out for bid in 1997 did not, however, contain a provision for renewal for a further term. (PIX P8; T. at 43, 61, 86.)
The City's procurement activities are subject to section 103 of the New York State General Municipal Law, which provides in relevant part that,
Except as otherwise expressly provided by an act of the legislature or by a local law adopted prior to [September 1, 1953], all contracts for public work involving an expenditure of more than twenty thousand dollars and all purchase contracts involving an expenditure of more than ten thousand dollars, shall be awarded . . . to the lowest responsible bidder furnishing the required security after advertisement for sealed bids. . . .
N.Y. Gen. Mun. Law § 103 (McKinney 1999). It is undisputed that the value of the JIT Agreement well exceeds the statutory threshold amount, and the parties have cited no express provision of state, or pre-1953 local, law exempting the JIT Agreement from this general bidding requirement.
The general procurement provisions of the City's Charter require that, with certain specific exceptions, "contracts shall be awarded by competitive sealed bidding under such rules as shall be made by the procurement policy board." N.Y.C. Charter § 312 (2002). Neither party contends that any of the enumerated exceptions is applicable in this case, to either the original JIT Agreement or to the current bidding process.
The parties' dispute centers on the legality of the 1999 modification and 2002 renewal of the JIT Agreement, specifically, whether the City had the power to modify the contract to include a five-year renewal option, and to exercise that option, outside of a competitive bid solicitation process. Neither the Charter nor the General Municipal Law addresses directly this issue. Accordingly the Court, and the parties, have focused on the provisions of the 1990 PPB Rules, which are invoked as governing authority in the JIT Agreement.
In entering into the JIT Agreement, the City and PDI agreed that the contract would be subject to the 1990 PPB Rules, to the exclusion of all later editions of the PPB Rules, and that in the event of a conflict between the Rules and a provision of the contract, the Rules would take precedence. (See PIX P8 at ¶ 6 of the "Offer and Acceptance" pages; Tr. of Temporary Restraining Order Hearing, dated April 29, 2003, at 27 (Statement of Kay Edwards, counsel for Defendant).)
PD argues that the 1990 PPB Rules authorized modification of the JIT Agreement to insert an option to renew. Section 621 of the 1990 PPB Rules, titled "Contract Changes," provides in relevant part:
(c) Types of Changes Permitted.
(1) Contract changes may include:
(i) Specification Changes to account for design errors or omissions;
(ii) Changes in contract amount due to additional or omitted work;
(iii) Change in delivery location;
(iv) Change in shipment method; and
(v) Any other contract revision deemed necessary by the Contracting Officer.
(2) Changes not Permissible for Material Alterations of Scope.
Contract changes are permitted only for work necessary to complete the work included in the original scope of the contract, and for non-material changes to the scope of the contracts. Changes are not permitted for material alterations in the scope of the work. Material alterations to the scope of the work may be made only by a new procurement, to be made by one of the methods of source selection set forth in Chapter 3 of these rules, including, where applicable, negotiated acquisition with the existing contractor.
(PIX P9, § 621) (emphasis supplied).
PD argues that section 621 permitted the ACCO to insert an option for renewal of the JIT Agreement without competitive bidding, and that neither the option nor the renewal upon exercise of the option was outside the scope of the original JIT Agreement because that contract had contemplated expansion of the JIT program to all city agency fleets, a task that could not be completed within the original five-year contract term.
While PD's evidence demonstrates that the JIT Agreement did indeed contemplate eventual expansion to the City's entire motor fleet and that the City officials involved in the JIT Agreement modification and renewal viewed the changes at the time as reasonably within the substantive scope of the initial work called for under the JIT Agreement, PD's arguments ignore both the breadth of the potential substantive scope of the original contract and the significance of the temporal limit set in that contract. When the amendment and renewal are viewed in this broader factual context and in the context of the strong competitive bidding policies expressed in state law, the City Charter and the 1990 PPB Rules and the restrictions on contract renewals and extensions imposed by the 1990 PPB Rules, the Court cannot conclude that PD has demonstrated a likelihood of success on the merits.
The JIT Agreement called not only for the conversion of agency fleets to the centralized "Just in Time" system, but also for the ongoing administration and upkeep of that system. Thus, if the "scope" of the contract were viewed purely from the perspective of the type of work contemplated, its scope could easily be construed as co-extensive with the life of the Just in Time program, which appears to be intended to be permanent. Such a view of the scope of the contract would, on PD's reading of section 621 of the 1990 PPB Rules, authorize perpetual renewals of the original five-year contract, as the work contemplated could never be completed as long as the program remained in place. This suggests that the agreement's original temporal scope, as well as the work contemplated thereunder, should be considered in determining whether the insertion of a renewal option change was a material alteration of the scope of the JIT Agreement.
Furthermore, the contract itself, as publicly bid, provided explicitly for extension of its terms for no more than 120 days. (PIX P16 at § 2.8(c).)
A review of the provisions of the 1990 PPB Rules relating specifically to extensions and renewals further indicates that the temporal provisions of contracts are treated as significant. Section 431(j) of the 1990 PPB Rules, relating to the solicitation and award of "multi-term" contracts (i.e., those "whose duration is typically in excess of one year"), permits such contracts only under specified types of circumstances, requires specific findings by the contracting officer, and requires special approvals for such contracts exceeding three years. Section 631 of the 1990 PPB Rules, relating to "Extensions of Time for Performance," permits certain extensions, upon application of the contractor, "[i]f performance by the contractor is delayed for a reason set forth in the contract." The section appears to contemplate an extension capable of expression in terms of a number of days.
These include (i) when "[i]t is in the best interest of the City to obtain uninterrupted services extending over more than one fiscal period; (ii) [w]here the performance of such services includes high start-up costs; and (iii) [w]here a changeover of service contractors involves high phase-in/phase-out costs during a transition period." (1990 PPB Rules (PIX P9A) § 431(j)(1).)
Section 631(b)(2) provides that, "[t]he ruling of the Agency Chief Contracting officer shall be final and binding as to the allowance of an extension, and the number of days allowed." (Emphasis supplied.) (PIX P9.)
"Renewals," defined as "re-registration of previous contracts with the same vendor or service provider, with substantially unchanged terms and conditions," are specifically addressed in section 636 of the 1990 PPB Rules. That section provides that renewals "shall not be permitted" unless they are "specifically contracted for, as in contracts containing an option to renew and multi-year contracts." The section further provides that, "[w]here additional quantities of goods or a continuation of types of services are required, the procurements shall be made by new solicitations and services acquired under the rules set forth in Chapter 3 of these rules." Chapter 3 of the rules requires the award of contracts by sealed competitive bidding except as specifically provided in the relevant rules. (See 1990 PPB Rules (PIX P9A) § 311(b).)
These provisions, read in light of the statutory, Charter and PPB Rule provisions requiring competitive bidding as the norm, indicate that the durational provisions of procurement contracts are not ordinarily immaterial. Indeed, the fact that the JIT Agreement itself contained a very limited extension provision is facially inconsistent with the notion that a renewal doubling the effective period of the contract would be an immaterial change. It is thus doubtful, at best, that the post-award addition of the renewal option at issue here can be characterized either as a change tailored to facilitate "work necessary to complete the work included in the original scope of the contract," or as a "non-material chang[e] to the scope of the contract" within the meaning of section 621(c) of the 1990 PPB Rules. PD therefore has not demonstrated that it is likely to succeed on the merits.
Serious Questions/Balance of Hardships
Even if it could be said, in light of the introduction at the evidentiary hearing of the full text of the 1990 PPB Rules, that PD has raised sufficiently serious questions going to the merits to make them a fair ground for litigation, PD has failed to demonstrate that the balance of hardships tips decidedly in its favor. While, as noted above, PD faces a potentially devastating reduction of its business should it lose the contract, the prospect of such a loss in the absence of an injunction has by no means been shown to be probable. Furthermore, the City has demonstrated that the injunction sought by PD, at least insofar as it would prohibit the City from pursuing the current bidding process through the solicitation of bids and designation and investigation of a low bidder, would cause serious hardship by impairing the City's ability to ensure that its agencies will have continuity of quality motor support services through the centralized "Just in Time" program. Notwithstanding PD's assertion that any award process could be accomplished in a short period of time, the evidence presented at the hearing demonstrated that a substantial period of time is needed for the solicitation of appropriate bids and that, should PD be unsuccessful in bidding for the new contract, further substantial periods could be required for investigation of the winning bidder and the preparation of a new vendor to take over the program. Thus, the balance of hardships does not tip decidedly in PD's favor.
CONCLUSION
For the foregoing reasons, PD's motion for a preliminary injunction is denied in all respects.
SO ORDERED.