This is in reply to your letter asking whether the awarding of the Mid-Connecticut Project contract by the Connecticut Resources Recovery Authority (CRRA) to Combustion Engineering, Inc., complied with statutory requirements. While your question was presented as a request for a legal opinion of the Attorney General, the answer to your question required an extensive investigation by this office into the lengthy factual history of the CRRA award process for that contract.
We have reviewed the minutes of CRRA’s board of directors from April 27, 1976 through March 13, 1985 concerning the Mid-Connecticut project; the file and chronology you provided us; documents furnished by media sources; various inter-office memoranda and other correspondence, documents, memoranda and chronology provided by CRRA; pertinent court decisions, various press clippings and other materials.
We have also interviewed the present President of CRRA, William R. Darcy, the present counsel, Glen A. Gross, and the two past CRRA presidents who participated in the contract procurement, Russell L. Brenneman and Michael C. Cawley.
The work in assembling and examining this evidence spanning a period of almost nine years has taken considerable time.
In the context of your question the issue is whether open or competitive bidding requirements were followed. In 1987 we advised that open or competitive bidding for any construction contract over $25,000 was mandated by Conn. Gen. Stat. § 22a-266(b). Since then, however, this statute has been amended. It now provides that any CRRA contracts shall be made “on the same basis and subject to the same limitations and considerations applicable to municipal and regional resources recovery authorities pursuant to subsection (c) of section 7-273bb. . . .” The latter states that contracts “may be entered into on either a negotiated or an open-bid basis, and the authority in its discretion may select the type of contract it deems most prudent to utilize. . . .” Thus, open or competitive bidding for these contracts is no longer exclusively required.
This change was made by P.A. 87-451, effective July 6, 1987. The contract in question however, was dated December 31, 1984, and ratified by CRRA on March 13, 1985, prior to this amendment. We will therefore review it in light of the statute then in effect, which required open or competitive bidding.
The next question is whether this was a construction contract subject to § 22a-266(b).
The contract was for the “Design And Construction of a Resource Recovery Facility. . .” (emphasis added). Sec. 6.01 of the contract states: “The contractor shall construct the Facility” and “shall procure and/or furnish all services, labor, equipment and materials necessary to construct the Facility in its entirety. . . .” The contract defines construction, for the purpose of subcontracts, at least, as a contract “to build or erect any building, including site improvements, building mechanical and electrical systems. . . .” Contract, sec. 6.02, p.41, and Ex.H. Other services, however, were also to be performed. These included design of the facility and training of personnel to operate the power block and waste processing components. Contract, sec. 6.01, p.39.
In our 1987 opinion we advised that because of its construction aspects, the contract was one for construction under § 22a-266(b), even if it also called for other services. 87 Conn. Op. Atty. Gen. 192 (1987).
Since that opinion the Superior Court has ruled that a CRRA contract to design, construct, operate and maintain a resource recovery facility was a full service contract although “[a]dmittedly there was a construction component” to it. Connecticut Resources Recovery Authority v. Freedom of Information Commission, Super. Ct. No. 328720, Aug. 24, 1988, at 4-5, 16; appeal dismissed, 19 Conn. App. 489 (1989). The Court found that the contract was “properly bid under § 22a-268 and not as a construction contract under § 22a-266.” Memorandum of Decision at 16.
The appeal in that case was dismissed as moot because § 22a-266 had since been amended and because the person who had sought information about the contract was no longer a party. 19 Conn. App. at 494-95.
The Superior Court decision is contrary to the Attorney General’s opinion above. This opinion is entitled to substantial weight, but is not binding on the Court. Cairns v. Shugrue, 186 Conn. 300, 309 (1982). On the other hand, unreported trial court decisions, although given serious consideration, are not binding on other coordinate courts or higher courts. See Connecticut State Federation of Teachers v. Bd. of Ed. Members, 538 F.2d 471, 485 (2d Cir. 1976); Commission on Hospitals & Health Care v. Lakoff, 214 Conn. 321, 333 (1990).
The ultimate issue in Connecticut Resources Recovery Authority was whether a contractor’s proprietary information should have been made public, or whether it was “commercial or financial information given in confidence and not required by statute.” Connecticut Resources Recovery Authority, at 14.
It was not simply whether open or competitive bidding was required, although it would follow from the opinion that it was not required. Id. at 16.
In addition, the Court did not address the legislative history or the differences in the Wisconsin legislation discussed in the Attorney General’s opinion. Nor did it deal with the opinion itself. Nor does it indicate whether that the opinion was disclosed to the Court by CRRA or anyone else.
It is also noted that the Mid-Connecticut contract at issue was narrower than the one in Connecticut Resources Recovery Authority. The latter included operation and maintenance, and not only design and construction. Id., p.4. Operation and maintenance in the present case were covered by other contracts. However, the Mid-Connecticut contract, like the one in Connecticut Resources Recovery Authority, did include design and construction. § 5.01. It also included training the operating personnel. Id., § 6.01.
The fact that a court would nevertheless find that § 22a-266(b), the bidding statute for construction contracts, did not apply means that CRRA could also believe this to be the case. This is true even if the court decision was incorrect on this point.
Because the court decision was not by the highest court and therefore not conclusive, however, and because of the other factors discussed, we have examined CRRA’s files to determine whether the bidding requirements were in fact complied with.
On May 25, 1976, CRRA reviewed an evaluation of four firms which had submitted proposals for the combined Central/Capitol and South Central regions. These firms were Combustion Equipment Associates Inc./Occidental Petroleum (CEA), Combustion Engineering (CE) (to be distinguished from Combustion Equipment Associates), Wheelabrator/Frye (WF) and Carrier Corporation. CRRA minutes, May 25, 1976. All of these companies, except CEA, had been previously selected by representatives of the South Central Connecticut Region and CRRA for the South Central project.
The CRRA decided on a general procurement approach in June 1977. The Staff Procurement Group (SPG), consisting of Mr. Brenneman1and three other CRRA staff members, outlined four options. These were (1) reopening the procurement process completely; (2) accepting WF and CE as the approved contractors because of their prior approval in the New Haven and New Haven/Hartford combined projects and negotiating with both for the best deal; (3) selecting CE and negotiating only with it, “using (WF) as a ‘back up’ in the unlikely event that negotiations breakdown”; and (4) “a thorough in house search and, without advertising or formalities, narrow[ing] the field to however many we feel are qualified. (Perhaps four or five).” CRRA would then negotiate with those firms which had the best ideas on how to approach the problem. Procurement Memorandum #1, Interoffice Mem. by Mr. Brenneman, June 6, 1977, pp.1-4.
The advantages and disadvantages of each option were listed. Option #1, reopening the process, would ensure nothing was overlooked but would also further delay the project and involve substantial consultant expense. Id., p.2. Option #2, negotiating with WF and CE, would be faster, relatively easily accomplished, and less expensive. It would use the analysis that had already occurred. However, “[t]his option would open the Authority to criticism for failure to consider all possible solutions and basing action today on decisions and information many months old.” Id., p.3.
Pros: The Authority has consistently been impressed with Combustion Engineering and enthusiastic about using this Connecticut-based firm. Technology is reliable, financial position good, and management “deep” and (so far) easy to work with. Since CE is the likely choice, anyway, why not go ahead?
Cons: The negative aspects listed under Option #2 [negotiating only with WF and CE] apply with even more strength.
Would save time and money. The Authority already knows a very great deal about virtually every firm that might be qualified. Old information could be updated, and if a firm has changed position or the type of arrangement which it is willing to make, this could be found out without elaborate formalities. Would allow early feed-in to our thinking from these firms.
Id., p.4. The disadvantage, however, was that “[t]he Authority can be criticized for not reopening the matter to all comers.” Id.
It seems unnecessary to go to time and expense of formal procurement procedures outlined in Option #1. It should be remembered that this will delay the project substantially, and we do not feel that there would be a benefit to the Authority sufficient to offset that delay. A timetable for action has been presented to the municipalities at the Cromwell meeting. That has already slipped because of the municipalities’ own slow response, and if it now slips further by such a substantial amount, there is no assurance that either the tonnage or the project itself will be available when needed. Options #2 and #3 are attractive and feasible but we do not feel that we can simply assume that it is safe to foreclose other participants whose position may have changed over the past year or so. There is some reason to feel that the positions of some firms have changed one way or another. Option #4 allows us to look into this situation without getting into the elaborate process described in Option #1.
Id. Other memos also weighed the delays in reopening the procurement process against foreclosing potential contractors and new developments. See Mr. Brenneman’s letter to Director Gilligan, June 1, 1977; Interoffice mem. from Mr. Brenneman to SPG, June 6, 1977; Interoffice mem. from Mr. Brenneman, Addendum to memo #1, June 7, 1977.
The SPG and the CRRA Procurement Committee met June 13, 1977. Committee Chairman Sudarsky and Director Gilligan were present from the latter, together with CRRA Chairman Stroh. Committee Chairman Sudarsky expressed dissatisfaction with the procurement process. Procurement Memorandum #2, Interoffice Mem., by Mr. Brenneman, June 14, 1977, p.1.
1. CRRA would advertise in the Wall Street Journal for potential participants, emphasizing financial capability and a guaranteed, full service contract. The response time would be very brief.
2. CRRA would write to previously qualified parties, requesting them to resubmit financial statements and indicate their interest.
3. CRRA staff would analyze respondents, emphasizing financial capability. This would take no longer than absolutely necessary to ensure that no bona fide opportunity was overlooked.
4. CRRA would discuss the needs of its communities with the potential participants. From that dialogue the precise contours of the project would emerge.
The discussion revealed the tension between the goal of moving forward with a project as soon as possible and the need to be absolutely sure that no opportunity is overlooked which may result in reliable service to the towns at the least expense.
The decision of the Procurement Committee to advertise in the Wall Street Journal and to notify the five former proposers for the combined Central/Capitol-South Central projects was reported to the CRRA board on June 28, 1977. CRRA minutes, June 28, 1977. The board revised the wording of the draft ad, but did not object to the Procurement Committee’s decision. See id.
CRRA notified CE of the procurement approach and some of CE’s people may have been “upset with the Authority for reopening the matter as widely as we are.” Mr. Brenneman’s letter to Director Sudarsky, June 17, 1977. In addition, CRRA was criticized by many towns for delays, apparently because it had reopened the procurement process. Mr. Brenneman’s letter to Director Sudarsky, July 1, 1977; Interoffice mem. from Mr. Brenneman to Chairman Stroh, July 13, 1977.
He sent this letter to Combustion Equipment Associates, CE, Carrier Corporation, American Can Company, and WF. Interoffice Mem. from Mr. Brenneman to CRRA board, June 29, 1977.
CRRA advertised in the Wall Street Journal on July 8, 1977, a “Notice of Intent to Evaluate Qualifications for Design, Construction and Operation of Resource Recovery System.” (Copy enclosed as Exhibit B.) It stated that CRRA was evaluating qualifications of firms to design, construct and operate a resource recovery system to process approximately 3000 tons of municipal solid waste per day. The system would serve the western, central and south-central areas of the State. Exhibit B.
The facility should produce some form of energy, such as steam, or “a refuse derived fuel to produce steam indirectly.” Other systems which were “fully demonstrated and clearly documented” might be considered. Id.
Contracts would require a complete guarantee for the full term of the bond issue used to finance the project, at no risk to CRRA or the municipalities served. “The financial capacity of the successful bidder to stand behind such long-term guarantees [was] of critical importance.” Id.
Firms interested were to submit financial statements and a summary of technical qualifications by July 25, 1977, more than two weeks from the date of the advertisement. Id.
Detailed proposals would be requested from qualified firms. Id.
The release also stated that selection would stress “full service guarantees, reliable technology and the financial integrity and management characteristics of the contractor.” Id.
The release was to be issued at least to trade publications, the New York Times and Connecticut newspapers. Letter from Mr. Brenneman, June 30, 1977, presumably to Director Sudarsky.
A number of radio stations called Mr. Brenneman in response to the release and several newspapers carried the story, according to CRRA records. CRRA Procurement Mem. #3, Interoffice Mem., July 18, 1977.
CRRA records further indicate that an earlier release about this project had also been issued May 20, 1977. Letter from Mr. Brenneman to Associated Press, June 17, 1977.
CRRA had also sent letters about the project to each of the contractors who were qualified at the time. Some responses were received before the letters and advertisement or were the result of continuing contact. Others followed the advertisement. CRRA Procurement Mem. #3, supra.
As of July 13, 1977, formal or informal responses of varying degrees of interest from seven companies were noted in CRRA records. Two of these (Union Carbide and Carrier) were based on information prior to the July 8, 1977, advertisement. Id.
CE expressed concern that CRRA might not analyze comprehensively all significant details, due to staff and time limitations. CRRA assured CE this would not be the case. Id.
The representative of WF, John Kehoe, stated “humorously or not, that it was the understanding in the trade that the decision had already been made and that Combustion Engineering was the selection. I [Mr. Brenneman] assured Kehoe that no selection has been made and that we would not seek to put contractors through an empty exercise.” Id.
Mr. Brenneman reported five or more of the responses he had received thus far from interested firms to the CRRA Board of Directors on July 19, 1977. CRRA minutes, July 19, 1977.
By August 30, 1977, CRRA had received responses from 12 companies. The agency had completed a preliminary technical and financial analysis and would be preparing an information package for potential contractors. There were several contractors who had already demonstrated their qualifications. These were CEA, CE, Americology, Research-Cottrell, Union Carbide, Carrier Corp. and WF. CRRA minutes, August 30, 1977.
There were five other companies, including Envirotech Process Equipment, which CRRA staff believed should provide further financial or technical information. CRRA notified these companies of this on August 29, 1977, and gave them a September 9, 1977, deadline. Id.
At the August 30, 1977, meeting Director Flynn reported that many members of the Solid Waste Management Advisory Council felt that CRRA should not repeat the open procurement process which had already been conducted. Id.
Subsequently, Carrier Corporation informed CRRA that it was withdrawing entirely from the resource recovery field and was no longer interested in qualifying for this project. Mr. Brenneman so reported to the CRRA Board on September 27, 1977. CRRA minutes, September 27, 1977.
Mr. Brenneman stated CRRA staff was preparing a “Request for Approach” (RFA) which would inform interested firms of such matters as markets, service needs, and waste stream characteristics. It would not specify locations or exact technologies, but would instead enable potential contractors to provide CRRA with their various approaches. Contractors would meet with CRRA to present their responses. Mr. Brenneman invited the CRRA board to attend these presentations. Id.
At that meeting Director Sudarsky reported time constraints imposed on CRRA by some communities. Incinerators or landfills had been forced to close. He stated that CRRA should avoid a lengthy procurement process. Id.
He also recommended that a different engineering consultant than the one retained for the Bridgeport project be selected to avoid conjecture that CRRA had already chosen the contractor for the Mid-Connecticut project. Id.
A different consultant, Bechtel, Incorporated, was in fact selected. See CRRA minutes, November 30, 1977.
An RFA dated September 30, 1977, was then issued to contractors who had responded to the Wall Street Journal advertisement and who had also been found “in a very preliminary sense to be qualified.” An in depth analysis had not yet been made. RFA, September 30, 1977, p.1.
Candidates would present their approach to CRRA which would be advised by “a consulting engineer of prominent standing in the resource recovery field.” Id., p.2.
CRRA would then select three or four finalists. Id., p.2.
Mr. Brenneman reported on October 25, 1977 that seven firms had attended an informational meeting. CRRA minutes, October 25, 1977.
Mr. Brenneman and Director Sudarsky stressed that they wanted CRRA board members to attend the actual presentations, which would be made the next month. Id.
By November 2, 1977 five out of the original 11 interested firms had cancelled. CRRA letter to Bechtel, Inc., November 2, 1977.
Mr. Brenneman on January 31, 1978, sought the CRRA board’s opinion about negotiating with individual contractors instead of developing a formal Request for Proposal (RFP). Id. It was the general consensus of the board that the safest way to avoid criticism was to issue a formal RFP, but that this was not the only way to proceed. Id.
On February 28, 1978, Mr. Brenneman reported to the CRRA board that there were some legislative concerns that CRRA was not moving quickly enough while other legislators felt that CRRA was moving much too fast. CRRA minutes, February 28, 1978.
On May 30, 1978, CRRA decided to pursue the project in association with the Metropolitan District Commission (MDC) which would operate part or all of the facility. The plant would be located at South Meadows in Hartford, either at the MDC or Hartford Electric Light Company (HELCO), or both. CRRA minutes, May 30, 1978. Mr. Brenneman and Director Flynn explained that the MDC would strengthen the construction management and operation of the project. Id.
Bechtel, Inc., CRRA’s consulting engineer, would evaluate the South Meadows location to determine the greatest return and lowest cost to the participating towns. Id.
A press release was issued to this effect. Id. The release stated that finalist contractors included CE, Combustion Equipment Associates, Inc., Envirotech Process Equipment, Inc., and WF. Id.
On October 4, 1978, CRRA voted to instruct Bechtel, its consulting engineer, to prepare an RFP for the project to be pursued in association with MDC. CRRA would also develop a working relationship with MDC, but without constraining Bechtel in developing the RFP. CRRA minutes, October 4, 1978.
A land disposal report was distributed to the CRRA board on October 31, 1978. According to the report, if conditions remained unchanged, in 1983 Connecticut would have approximately 2.5 million tons of garbage without a place to dispose of it. CRRA minutes, October 31, 1978.
On March 9, 1979, CRRA and MDC signed a Joint Planning Agreement. Among other things, CRRA would consult with MDC in preparing an RFP which had previously been postponed. Agreement, § 6.1; CRRA minutes, October 4, 1978 and March 9, 1979. CRRA and MDC would together select the project contractor. MDC would also retain its own consulting engineer. Agreement, supra.
In order that the project could be economical, a sufficient amount of municipal solid waste had to be delivered to the project daily. Id., § 1.5. MDC would do all within its power to assure that the towns which it served would participate in the project and guarantee sufficient waste to make it economically viable. Id., § 8.2.
Mr. Brenneman explained to the CRRA board that the agreement intended to establish an “open, orderly and objective” contractor selection process “rather than negotiating with one single contractor.” CRRA minutes, March 9, 1979.
As of October 23, 1979, CRRA and MDC were developing the RFP in detail. The economic information was encouraging for project viability. Both Northeast Utilities (NU) and Hartford Steam Company appeared to be potentially strong energy markets. CRRA minutes, October 23, 1979.
By June 24, 1980, a consensus had been reached regarding the procurement approach for Mid-Connecticut which would allow firmer control without extending risk to CRRA or the municipalities. CRRA minutes, June 24, 1980.
The first was the “Architect/Engineer approach” in which an architectural/ engineering firm would design a system and a contractor would build a facility. Responsibility would be divided. The owner/operator would face a high financial risk. Id.
In the second approach, used for the Bridgeport system, the contractor accepted all risk. However, he also would assume, to an extent deemed inappropriate, control of the design, construction and operation. Id.
The procurement committee had accepted a middle ground. It believed that this would assure technical success without financial risk to CRRA or the towns. Id.
Under what was called “modified turnkey procurement,” prequalified bidders would design a system with the project team’s preliminary participation. A “confirming bid document” would then be prepared. The successful bidder would then operate the system for the life of the bond issue, unless MDC assumed operation after five years. Id.
2. If MDC took over facilities operation after five years, savings could “be gained by having a public organization operating the system at actual cost because there [would be] no built-in profit margin.” Id.
At the October 21, 1980 meeting, Mr. Brenneman outlined the history of the project. CRRA in 1977 had requested NU to retain two turbine generators at NU’s Dutch Point station, evidently for future use for a resource recovery system. MDC had also approached CRRA concerning use of MDC’s South Meadows site for that system. Id.
During this time, there were negotiations with NU, culminating in several documents which “approach[ed]” a letter of intent. Id.
Mr. Brenneman also reported to the CRRA board that in 19783 the authority had issued a Request for Approach to which seven companies had responded. Id.
As a result, four of the seven were prequalified to bid on the Mid-Connecticut project. Of these four, Envirotech had since left the resource recovery business and CEA was financially not in a position to bid. Id.
The latter was seeking an arrangement under Ch. XI of the Federal Bankruptcy Act. Mr. Brenneman’s letter to Mr. Batycki, October 22, 1980, and to CEA, December 8, 1980.
This left CE and WF. Id.
WF utilized “mass burning” where items were not screened for recycling. CE burned processed fuel in dedicated boilers, i.e. boilers specially made for that purpose. Its method was not as complicated as that used in Bridgeport. Id.
Either CE or WF could produce steam desired by the utility.
Mr. Brenneman recommended that a procurement document be released to CE and WF to begin a procedure which would result in a “Confirming Bid Document.” This would be the basis of bids for Mid-Connecticut.
Mr. Brenneman also said that if at any time the project team felt it had unduly limited the responders to the prequalified firms, it was free to reopen the procedure. Id.
Director Gilligan asked if staff suspected that the design would make it less likely for one company than another to bid and win the contract. Mr. Brenneman replied that the CE technology was more compatible with the system than WF’s.
However, he also stated that WF had not indicated dissatisfaction with the procurement procedure. WF might choose to purchase certain equipment needed for a viable project bid, he added. Id.
Mr. Brenneman also emphasized that both CE and WF were capable of producing steam desired by the utility. Id.
Mr. Brenneman further indicated in response to Director Heintz’s question that the utility desired the system to be “baseload[ed],” i.e., able to burn coal as well as waste. Coal would compensate for any waste shortages. This would make the system less sensitive to waste stream size because coal could supply remaining power. This would also improve the economics of the system, especially for the towns. Id.
The CRRA Board at the October 21, 1980, meeting unanimously approved and accepted the procurement committee’s recommendation. Id.
A procurement document was accordingly mailed to CE and WF on November 18, 1980. CRRA minutes, November 18, 1980. Both CE and WF, the finalists, notified CRRA that they intended to bid on the project. CRRA minutes, January 20, 1981.
Then on July 29, 1981, WF withdrew from the procurement process. WF gave as its reason CRRA’s decision to vest operating responsibility in a governmental entity (MDC). WF letter of July 29, 1981, to Mr. Cawley and Bernard A. Batycki (who had become MDC District Manager), enclosed as Exhibit E.
Further discussions on the advantages of the use of coal occurred at the September 30, 1981 CRRA Board meeting. The advantages were (1) flexibility in the facility size and (2) revenue enhancement. CRRA minutes, September 30, 1981. Coal would allow the facility to be “base loaded providing utilization at all times.” See CRRA minutes, October 20, 1981.
Thus the situation as summarized by Mr. Cawley, CRRA President at the CRRA December 22, 1981 board meeting was that CRRA had undergone a formal prequalification process earlier. As a result, four firms had been qualified: WF, CEA, Envirotech and CE. For various reasons, he stated, the only qualified vendor remaining was CE. CRRA minutes, December 22, 1981.
At that meeting Mr. Cawley stated that at some time in the future the question of “sole source procurement” would have to be answered by the [CRRA] board. Id.
Mr. Cawley has stated in a subsequent affidavit that he was referring to the question of the legal notice requirement of Conn. Gen. Stat. § 22a-266(c), for facility management contracts. Affidavit, June 14, 1989, ¶10, p.3. The latter, unlike construction contracts, could be awarded “on other than an open-bid basis” if a resolution to this effect was publicized by a newspaper within a specific time. Furthermore, he stated in 1981 that “[s]ince the successful vendor [would] be asked to operate the facility for sometime (3-5 years), the notice and comment provisions of § 19-524y5 [apply].” Mr. Cawley’s Interoffice Mem. to File, December 14, 1981. This would indicate that he was referring to facility management.
This is consistent with Mr. Cawley’s explanation reported to the CRRA Board on April 17, 1984. CRRA minutes, April 17, 1984.
After a further presentation by CE on March 23, 1982, the CRRA board authorized “a sole source negotiation process” with CE on that date. CRRA minutes, March 23, 1982. The CRRA Chairman, Mr. Stroh, had previously explained that this would not necessarily result in a contract with CE, “but [would] rather indicate that it is the Authority’s serious intent.” Id.
On April 20, 1982, CRRA Director Driscoll reported criticism of lack of progress on the Mid-Connecticut project. The president, Mr. Cawley, also referred to this criticism but stated that a thorough analysis required time. CRRA minutes, April 20, 1982.
The CRRA board was advised that CE type technology was being used in Madison, Wisconsin for the past three years. One Director stated that Madison had done more experimentation with solid waste than had anyone else. CRRA minutes, September 21, 1982.
In addition, the CE-type process was also being used in Dade County, Florida. Id.
The CRRA board would utilize Bechtel to assure that CE would do what it said it would do in its proposal and that its price was reasonable. Bechtel would also advise as to the technical feasibility of the system. CRRA minutes, September 21, 1982.
By July 15, 1983, CRRA had agreed with CE on the price, which was $146 million, subject to limited escalations, as previously defined. CRRA minutes, July 15, 1983, referring to letter from Mr. Cawley to CE, June 23, 1983. The CRRA board approved in principle an agreement with CE. The CRRA resolution referred to “sole source negotiations” previously authorized. Id.
Mr. Cawley described to the CRRA board the advantages of the Mid-Connecticut Project on November 22, 1983. It had “a definite site, a definite contractor, [and] an agreement worked out with an energy purchaser. . . .” CRRA minutes, November 22, 1983.
A Department of Environmental Protection official reported that studies by towns for their own small scale facilities “do not consider the difficulty in finding and acquiring suitable landfill space; a problem which cannot be overstated.” Id.
RESOLVED: That, pursuant to Section 22a-266(c) of the Connecticut General Statutes, revision of 1983, this Authority has determined that a contract to construct this facility should be awarded to Combustion Engineering, Inc. and a contract to operate the resource recovery facility and associated transfer stations and other equipment should be awarded to the MDC and a contract to operate the boilers and turbine-generators should be awarded to The Connecticut Light and Power Company on other than an open-bid basis as provided by such statute. Public notice is hereby given that the directors have passed this resolution expressing their intent to make the award of the foregoing contracts.
Whenever the authority determines that a contract for facility management shall be awarded on other than an open-bid basis, in accordance with applicable provisions of subdivision (16) of subsection (a) of this section, subsection (b) of this section and section 22a-268, the directors shall, at least sixty days prior to the award date, pass a resolution expressing their intent to award and shall within ten days cause a copy of such resolution to be printed in one daily and one weekly newspaper published within the state.
Resolutions for CL&P, MDC & CE Mr. Cawley explained that there is a statutory requirement of the Authority related to facilities management services on a sole source basis. He said that when the Board intends to award a contract of this type it must first pass a resolution identifying that intent and then publish same in the newspaper. Following publication there is a 60 day period for receipt of comments. He said all comments should then be considered by the Board but do not prevent execution of agreements. CRRA minutes, April 17, 1984.
Regardless of how the resolution was worded, however, CRRA had previously advertised the project, issued a press release about it and also notified prequalified vendors about it, as previously discussed.
As of June 19, 1984, certain “‘uncontrollable risk items”‘ remained to be resolved with CE. CRRA minutes, June 19, 1984.
Complex negotiations dealing with security for project risks continued. CRRA minutes, July 17, 1984. The CRRA board on July 17, 1984 directed that the risk and other specified negotiations be completed within one week and that those for remaining commercial issues be finished in two weeks. Id.
The negotiations were substantially completed by September 18, 1984. CRRA minutes, September 18, 1984. On that date the CRRA board directed that the construction contract with CE would be executed. The resolution also stated that CE had been selected by a competitive bidding process that was concluded in December 1982. CRRA minutes, September 18, 1984.
The resolution did not further identify the competitive bidding process. However, as previously indicated, CRRA had publicized the project in 1977 and invited proposals from various vendors.
A contract with MDC to operate the project was also authorized on September 18, 1984.
By December 18, 1984, the CRRA President, Mr. Cawley, reported that the various contracts were essentially complete. CRRA minutes, December 18, 1984.
CRRA minutes, January 17, 1985, consisting of verbatim transcript, p.11, quoting from Bechtel’s letter of January 17, 1985 to CRRA read at the CRRA meeting and attached to transcript. Bechtel would provide an engineer’s feasibility report addressing these and other matters in greater detail. Id.
Bechtel provided such a report in March, 1985. It concluded that the proposed facility was “technically feasible” and that the system was “capable of providing a long term and environmentally sound method of MSW [municipal solid waste] disposal for the System’s service area. Bechtel Civil & Mineral, Inc., Engineering Feasibility Report, March 1985, p.4.
Subject to a possible exception, the facility could “reasonably be expected to meet the acceptance test criteria. . . .” Id. As to that exception, Bechtel could not confirm whether or not at least 91% of the waste energy could be converted into heat in the boilers. Id. This was partly because CE had not provided Bechtel the necessary information which CE considered to be proprietary. Id.
If the facility did not meet this test, CRRA had remedies available to it under the CE contract. Id.
Bechtel also advised that “CE has related experience [in solid waste management projects] and has the technical capability to design and construct” the facility in accordance with the contract. Id., p.6.
The required contracts, including the one for Design and Construction of a Resource Recovery Facility with CE were subsequently executed. The CRRA board ratified and confirmed the contract execution on March 13, 1985. CRRA minutes, March 13, 1985.
Having set forth the overall sequence of events, we will now focus in more detail on specific issues that have been raised.
The UOP Claim and Whether CRRA Was Legally Required to Reopen the Selection Process.
A representative of UOP Incorporated Environmental System expressed interest in being qualified for the project on July 31, 1978. The representative claimed on August 9, 1978, that the solicitation used by advertising in the Wall Street Journal was not fair as far as UOP was concerned. The reasons were not indicated. Interoffice Memorandum from Mr. Bush to Mr. Brenneman, August 9, 1978.
There were probably different and perhaps even more extensive ways in which CRRA could have publicized the project. However, in view of CRRA’s ad in a major business publication and their press release, in addition to other individual notifications, we cannot substantiate UOP’s reported claim. There is no indication UOP appealed to the CRRA board, brought suit, or otherwise lodged a formal protest.
Other than the UOP incident and the initial remark by WF’s Mr. Kehoe, made “humorously or not” in July, 1977, to our knowledge no complaint has been made by any potential competitor that the original notice, or any other aspect of the selection process was unfair or unreasonable. Nor does an exhaustive review of the available evidence show that this process was unfair or unreasonable.
Furthermore, the law did not require CRRA to recommence the bidding, re-advertise and re-notify potential vendors when the other finalists withdrew. CRRA was dealing not with a ready made product, but instead with a pioneering technology involving a very limited field of responsible contractors. It was seeking a process, very specialized, almost unique and certainly custom-designed. See CRRA minutes, October 21, 1980 and September 21, 1982.
The legislature recognized the distinction between the CRRA’s projects and the projects of state agencies by giving the CRRA ample discretion to develop its bidding procedure. Compare Conn. Gen. Stat. § 22a-266(b) with § 4-137(a) et seq. The distinction between the structured bid procedures required of state building projects and the discretion granted the CRRA to determine the bid process for its resource recovery projects is evident.
In this respect, § 22a-266(b) was general in nature and allowed CRRA to determine “the conditions under which bidding shall take place.” The contract award was left to CRRA’s judgment, with price and other factors considered, as we will discuss later. Section 22a-266(b).
Mr. Brenneman had considered the merits of reopening the process at various times. See Mr. Brenneman’s Interoffice Mem. to Mr. Cawley and Atty. Silliman, December 21, 1978, requesting their reaction; Mr. Cawley’s response of January 3, 1979, stating that CRRA did not commit itself to a bidder simply because that bidder was a finalist; Mr. Brenneman’s letter to Director Levine, January 24, 1980, again raising the issue. The basic arguments for reopening, as stated by Mr. Brenneman, were the change in the project due to MDC’s involvement and the passage of time, with the entry of new companies. See Mr. Brenneman’s correspondence, supra.
Mr. Brenneman referred to this as “a very critical issue about which something can be said on both sides. . . .” Interoffice Mem. to Mr. Cawley and Mr. Tedone, February 15, 1980.
This was ultimately resolved by inviting bids from CE and WF, the two remaining finalists, but reserving the right to invite other qualified parties to participate should CRRA determine that it would be in the project’s interest to do so. CRRA/MDC, Mid-Connecticut Resource Recovery Project, Two Phase Procurement Procedure, etc., October 1980, p.ii; see also CRRA minutes, October 21, 1980; Mr. Brenneman’s letter to Chairman Stroh, July 3, 1980.
Mr. Brenneman has informed us that this was a very close question and that there was tension between the fact there were already fully qualified finalists and the factors mentioned above. Reopening the process would have taken significant time. Interview with Mr. Brenneman, March 7, 1990. There were time constraints imposed on CRRA by communities in need of relief. The board was informed that incinerators and landfills had been forced to close. See CRRA minutes, September 27, 1977, February 28, 1978 and April 20, 1982. At least some of this was due to DEP action against incinerators and open landfills with no air pollution control. Interview with Mr. Brenneman, id.
CRRA was advised in 1978, by consulting engineers Fuss and O’Neill, that if conditions remained unchanged, in 1983 Connecticut would have 2.5 million tons of garbage without a place for disposal. See CRRA minutes, October 31, 1978.
As of 1979, “the state [was] faced with a critical landfill shortage. . . .” Conn. Gen. Assembly, Legislative Program Review and Investigations Committee, Solid Waste Management in Connecticut, May 1979, p.4.
There was also concern over “the costs of delay in a society with a double-digit inflation. . . .” Interoffice Memorandum by Mr. Brenneman to Mr. Batycki, April 7, 1980, p.2.
The Legislative Program Review and Investigations Committee criticized CRRA in 1979 for delays in this project. See, e.g., Solid Waste Management in Connecticut, supra, p.79.
[I]n order to avoid any additional project delay, the LPR&IC recommends that the CRRA take administrative action to assure that the request for proposal prepared for the second project not be reopened to additional contractors unless the Authority can clearly demonstrate the financial and/or technical need to expand the selection process.
CRRA had previously reopened the procurement process beyond the finalists selected and proposals submitted for the combined Central/Capitol-South Central projects. Procurement Memoranda #1 and 2, June 6, 1977 and June 14, 1977; CRRA minutes, June 28, 1977.
CRRA’s decision not to reopen the selection process further was therefore not unreasonable or otherwise illegal, in view of its discretion under § 22a-266(b).
As the selection progress progressed, it appeared to CRRA that two features would be advantageous. The first was involvement and operation by MDC. This was based on three reasons: (1) The need to attract as many communities as possible to provide the necessary tonnage to make the facility economically feasible. MDC, an established organization in existence for many years and serving a number of towns, was believed to be able to assist in this respect; (2) the need to have an organization directly responsible to the public operate the facility based at least in part on environmental concerns and; (3) savings that would be gained by having a public organization operate the system at actual cost, without profit. Interview with Mr. Brenneman, December 11, 1989; Interview with Mr. Cawley December 12, 1989, and December 27, 1989; CRRA minutes, May 30, 1978 with Discussion paper attached, p.1; CRRA press release May 30, 1978; Joint Planning Agreement of March 9, 1979, between CRRA and MDC, §§ 1.5, 8.1 and 8.2; CRRA minutes, October 21, 1980. As to environmental concerns, privately controlled trucks in the Bridgeport project had occasionally transported waste to unauthorized locations. Interviews with Mr. Brenneman, December 11, 1989 and February 8, 1990.
The second feature that CRRA desired was the capability to burn coal in addition to waste. This would allow the facility to be “base loaded” and provide a constant, dependable output of energy, despite a fluctuating waste supply. Interviews with Mr. Brenneman, December 11, 1984, and Mr. Cawley, December 12, 1989; Interview with William R. Darcy, November 14, 1989; CRRA minutes, October 21, 1980 and October 20, 1981.
It appeared that CE was amenable to these two features, MDC operation and use of coal as a supplemental fuel, while WF was not. Interviews with Mr. Brenneman, December 11, 1989, and Mr. Cawley, supra; Interview with Mr. Darcy, supra, as to CE’s better [electrical power] load-following capabilities. See also WF’s letter of July 29, 1981 to CRRA, supra, withdrawing from the procurement process because a governmental organization would be the operator. This is also consistent with Mr. Brenneman’s report to the CRRA board that CE’s technology was more compatible with the system. CRRA minutes, October 21, 1980.
There is nothing arbitrary or illegal about CRRA’s desire for these features. Mr. Brenneman stated that WF might “choose to purchase certain equipment which would be necessary to adapt their process in order to make a viable bid for the project.” Id. The minutes also state: “He [Mr. Brenneman] emphasized that both Combustion Engineering and Wheelabrator-Frye are capable of producing the steam desired by the utility.” Id.
Furthermore, as previously stated, it was WF which ruled itself out of the competition because CRRA wanted a governmental entity to operate the plant. WF letter of July 29, 1981 to Mr. Cawley and Mr. Batycki, supra.
That the type of system CRRA desired led it to prefer the contractor who could provide it over the one who could not or would not, was not illegal. CRRA was authorized to determine the “stipulations for a contract award,” and to select the contractor, considering not only price but also other factors. Conn. Gen. Stat. § 22a-266(b) (Rev. to 1987). It could award a contract “when, in the judgment of the authority, such award [was] in the best interests of the state.” Id.
According to a handwritten note, evidently by Mr. Brenneman, on the memo, he talked to Mr. (John A.) Cunningham (of CE) about the matter, as well as with Mr. Lee Sillin of NU. Mr. Cunningham would set-up a meeting with CRRA and NU to discuss this soon, according to the note.
Mr. Cunningham, after contacting NU, reported that the equipment might be useful, and unless left in place there would be no opportunity to determine whether it in fact would be useful. It was his impression that NU might leave the equipment in place if some municipal tax relief could be obtained. Interoffice Memorandum from Mr. Brenneman to Mr. Stroh (CRRA Chairman) and Mr. Batycki, March 4, 1977.
In that memo, Mr. Brenneman also stated that leaving the generators in place would benefit the City, CRRA, and the MDC. It would preserve an option during a study period. Id.
On the other hand, removing the equipment would entail “very substantial additional expense” should similar equipment later have to replace it. Id.
The economy in this arrangement, and the reason that Northeast can afford to buy steam from us for a price that might make our tipping fees make sense, lies in the fact that the turbine generators which will be left at the South Meadow site leave a very low book value (perhaps $5 million) as compared to replacement value.
Memorandum to BAB (presumably Bernard A. Batycki) from RLB (Mr. Brenneman), May 9, 1977.
We are unable to ascertain exactly why Mr. Brenneman contacted Mr. Cunningham about the NU generators, due to the difficulty of reconstructing events that occurred 13 years ago. The documents discussed indicate why CRRA considered this matter to be urgent. Mr. Brenneman has since stated that at the time CE had considerably more experience in this area than he had, that he had limited staff, that CE appeared to be the only real candidate, and that CE was also nearby. Interview with Mr. Brenneman, February 8, 1990.
Section 22a-266(b) did not prohibit discussions by CRRA with potential contractors. Nor did it bar soliciting their advice or intervention in this situation.
As previously stated, on July 14, 1977, Mr. Kehoe of WF told Mr. Brenneman, “humorously or not,” that it was the trade understanding that CRRA had already selected CE. Procurement Memorandum #3, July 18, 1977. CE did have features which made it appear more attractive than WF, as indicated previously. See supra, pp. 23-24. CRRA had been consistently impressed with CE and CRRA staff believed it to be the likely choice in 1977. Procurement Memorandum #1, June 6, 1977. However, staff also advised against negotiating only with CE and opted instead for a thorough in house search for qualified firms. Id. CRRA also advertised and otherwise publicized the project and notified other qualified firms. Exhibits A,B and C.
Contractors responded to the Request for Approach in November, 1977, at which time CRRA chose four finalists. WF was one of those finalists. CRRA minutes, November 30, 1977. The following year CRRA decided to associate itself with MDC in pursuing the project and preparing an RFP. CRRA minutes, May 30, 1978 and October 4, 1978. The CRRA – MDC Joint Planning Agreement was signed March 9, 1979. CRRA voted on a procurement approach on October 21, 1980. CRRA minutes, October 21, 1980.
On July 29, 1981, however, WF removed itself from the competition. With a different president, Mr. Cawley, CRRA authorized “sole source” negotiations with CE on March 23, 1982, but this did not necessarily mean that a contract would result. CRRA minutes, March 23, 1982. CRRA did not commit itself to CE until July 15, 1983, at the earliest, when it approved a CE agreement “in principle.” CRRA minutes, July 15, 1983. Even then important negotiations continued. See CRRA minutes, June 19, 1984, July 17, 1984 and September 18, 1984. The final contract was not approved by CRRA until March 13, 1985. CRRA minutes, March 13, 1985.
The records and information that we have reviewed, therefore, show that CE was selected not at the time of Mr. Kehoe’s remarks on July 14, 1977, but instead much later, after competing proposals had been reviewed and after WF had withdrawn.
On July 24, 1978, CRRA drafted a “Continued Technical Services Agreement Request for Services” under which Bechtel, the CRRA consulting engineer, would estimate the cost of the system, assuming that a CE plant was used. The capital cost of the CE technology would be given to CRRA. The total bond costs and other cost data as well as revenues would be determined.
This study had been authorized by CRRA on May 30, 1978. CRRA minutes, May 30, 1978. According to a CRRA press release issued that date, the study would be “undertaken to maximize utilization of the South Meadow location and energy markets, in order to produce the lowest net user charge to participating municipalities.” The study would evaluate the most economical use of the available NU and MDC sites. “If the study reveals that the project is technically or economically unfeasible, CRRA [would] consider other possible projects,” according to the release, which is supported by the May 30, 1978 minutes.
Mr. Brenneman has informed us that the purpose of the study included whether any project was feasible, which is consistent with the documents discussed. Interview with Mr. Brenneman, February 8, 1990. This depended on the costs. A component of the costs was the technology employed. Id.
CE was chosen because it had readily defined figures. CE had studied the nature of the waste steam, where it was located, and the volume. A minimum amount of waste was required to make the project feasible. Id. WF did not have these figures, he stated. Id.
Although the study agreement referred only to CE, the consultant was also to meet with all previously qualified proposers. CRRA minutes, June 23, 1978.
In fact, the documents show that all four finalists, including WF, were notified about the study and related board action. Their cooperation was requested. All finalists were informed that they could submit questions or comments. Mr. Batycki’s letter to WF, CE, CEA and Envirotech, June 1, 1978.
CRRA also invited all four finalists to meet with Bechtel “for an interview as a prelude to the feasibility study.” Mr. Bush’s letters to WF, CE, CEA and Envirotech, June 19, 1978.
At that meeting on June 28, 1978, “the proposers voiced their objections to assembling the information request[ed] by Bechtel.” Mr. Bush’s Interoffice Mem. to Mr. Brenneman, September 11, 1978. The study was therefore modified to be based only on CE’s technology. Id.
Bechtel was to work through CRRA rather than with CE directly to avoid the claim of special treatment for CE. Id.
The latter memo does not specify that CE also refused to provide the data, although it appears to so indicate. However, prior documents show that CE had given CRRA cost estimates on equipment and construction and various computations. CRRA was to keep these confidential and protected from competitors. Mr. Bush’s Interoffice Mem. to file, May 23, 1978; Mr. Bush’s letter to Bechtel, June 1, 1978.
Use of this information as a model, as you know, does not imply any feeling on anyone’s part that the technology is the most appropriate one for either site. It is simply used for hypothetical purposes.
Mr. Brenneman had previously emphasized that the study should be “complete, objective and fully credible. Decisions will be made not only here but by others as a result of it.” Mr. Brenneman’s letter to Bechtel, June 1, 1978.
Section 22a-266(b) did not prohibit studying the system of one of the contractors for the purpose of this type of study. Furthermore, the other finalists were afforded an opportunity to submit information for the study, but declined to do so.
NU provided certain cost data to CRRA on April 5, 1979, in response to CRRA’s request. CRRA had suggested that NU select one contractor’s system to evaluate with the understanding that the cost estimates would not apply to other systems. Northeast chose to evaluate CE’s system. Mr. Brenneman has stated that the purpose of the study was to determine what NU’s costs would be. NU would own the site, building and turbine generators where the facility would be located. It would lease at least part of this property for the purpose of the system. The feasibility of the project depended on whether NU expected a large rental fee. It also depended on what NU would pay for the energy produced by the system. Interview with Mr. Brenneman, February 8, 1990.
To determine this information, CRRA wanted to know NU’s claimed costs. CRRA also wanted to know how NU proposed to share these costs equitably. Id. See also Mr. Bush’s Interoffice Mem. to File, April 24, 1978; Mr. Brenneman’s letters to Chairman Stroh, April 28, 1978, and to Mr. Don Olson of NU, December 29, 1978.
The type of system used could have an impact on these costs. (E.g., type of structure required, and whether the system could guarantee a certain amount of steam.) Id. NU’s April 5, 1979 letter, supra, indicates that it was NU which chose to evaluate CE’s system. The statute, § 22a-266(b), did not prohibit the purchaser of the energy product to evaluate the system of one of the contractors for the purpose of this type of study.
The writer, at this juncture of the meeting, requested from Mr. DiBella, permission to raise policy issues of the highest magnitude.
The first of these was a growing concern within the Wegman organization that the project in question would not result in an open procurement based on a clear analysis of technical and economic alternatives in the Greater Hartford area. More specifically, the writer raised the point that there could be construed as pressure being applied by Northeast Utilities, CRRA, Bechtel and others, for a directed procurement from Combustion Engineering. The writer stated that it was extremely important that this growing concern be stemmed, or, if it could not, the Wegman Company would be forced to resign its consultant relationship with the MDC. The writer also noted that each member attending the meeting would be personally risking his professional stature by allowing such impressions to go unchecked. In the discussions of this issue that followed, each member attending the meeting repeated both his personal and his agency’s policy opinion that this impression was erroneous. It was the general conclusion of the meeting that Northeast Utilities would very distinctly prefer Combustion Engineering as the Contractor, but that the project study team would ultimately let the chips fall where they may to determine procurement policies. Each participant stated his awareness of the political risk associated with such concerns as improper procurement. Mr. Brenneman probably represented each member’s consensus when he stated that he had worked too long and too hard, at great personal sacrifice, to bring this project to fruition to have any accusations made in such a manner at this late date.
In this respect there was also a prior report that NU, according to Dr. Hayden, wanted to discuss only CE as a potential contractor. Mr. Brenneman’s Interoffice Mem. to Mr. Bush, June 19, 1979. There is no reference in this memo to any complaint against CRRA or MDC.
As to Dr. Hayden’s initial concerns, CRRA staff, although impressed with CE and believing it to be the likely choice, had recommended against negotiating with that company only. Staff suggested instead a thorough search for as many vendors whom it believed were qualified (perhaps four or five). CRRA advertised the project, notified other prequalified vendors about it and otherwise publicized it. CRRA selected four finalists, three of whom either withdrew or became financially unqualified. CRRA devoted considerable time in resolving issues with CE before approving a contract with it, even when CE was the only remaining finalist. Procurement Mem. #1, June 7, 1977, pp.3, 5; Exs. A through E inclusive; CRRA minutes, November 30, 1977, October 21, 1980, March 25, 1982, June 19, 1984 and July 17, 1984. This evidence shows that CRRA afforded other vendors an opportunity to be considered and in fact considered them.
Mr. Brenneman reported to Mr. Batycki on November 7, 1979, a conversation with Mr. Cunningham of CE. “Wegman had asked them [CE] for their perception of a loose RFP versus a ‘tight’ one, purely from a philosophical point of view.” Mr. Cunningham stated that certain aspects of the RFP could be very specific but others should be left more general. Mr. Brenneman’s Interoffice Mem. of November 7, 1979 to Mr. Batycki.
He said that both he and Von Steiger were rather astonished when Wegman representatives got into specifics of design features (boiler tubes, etc.) which Cunningham gathered they intended to incorporate into the RFP as if this were an A & E [Architects and Engineers] type enterprise. Cunningham feels this is entirely inappropriate since it would perhaps, essentially, describe the design of a particular vendor and exclude others as a matter of practice if not explicitly.
Since Wegman is oriented toward A & E-type contracts, I am not sure, from what Cunningham says, that they have grasped fully the fact that the RFP should be performance oriented (while being as specific technically as appropriate) rather than design oriented. If I am wrong in this, I hope that you will tell me, and if I am right, it may be appropriate to talk to Wegman and make sure that a lot of effort is not being wasted or that Wegman envisages this as an A & E-type exercise whereby essentially Wegman will be designing the particulars of the system.
It is interesting that Combustion Engineering, which probably has the most to benefit from that approach, does not think that this would be a good idea, and I certainly agree.
John [Cunningham] was also concerned that the Wegman representatives did not seem to be as sensitive as CE is to seasonal and locational variations in the quality and quantity of the waste stream [which would have argued for coal burning capability to supplement available fuel]. This may only have been an impression on his part, but I do know that both Bechtel and CSI [another consultant] feel that it is very important to take this into consideration.
The memo indicates that it was Wegman which had asked CE for its opinion.
As the Superior Court ruled in Connecticut Resources Recovery Authority, supra, “[t]he distinction between the structured bid procedures required of state building projects and the discretion granted the CRRA to determine the bid process for its resource recovery projects is evident.” Id., p.19.
Later, under CRRA’s two phase procurement process, there would be a collaborative effort between the project and individual contractors during which project needs and contractor capabilities would be fully explored. This would result in a bidding document. Mr. Cawley’s letter to Ms. Charlotte Rine, U.S. Department of Energy, December 31, 1980.
There are a number of possibilities here which should be looked at. If we possibly can solve two vexing municipal waste problems with one blow and achieve our own statutory objectives in the process, it is exciting to think about. . . . Obviously, a great deal of further checking has to be done, but this appears to be an opportunity not previously considered which does offer some promise.
[S]ince the last exercise new technologies and entities may have come into the picture. If any of these are qualified and wish to make a proposal, there probably should be some process enabling them to do so.
The firms discussed above either did not appear for qualification presentations or later withdrew or became financially unqualified. See CRRA minutes, November 30, 1977 and October 21, 1980.
CRRA also gave considerable attention to WF’s system, according to the files. Mr. Brenneman visited WF’s Saugus, Mass., plant and invited Mr. Kehoe of WF to meet with him and discuss matters further. Mr. Brenneman’s letter to Mr. Kehoe, February 23, 1977.
In mid-April, 1977, Mr. Brenneman brought Mr. Kehoe up to date on the project’s progress. Mr. Brenneman’s Interoffice Mem. to Mr. Batycki, May 9, 1977.
Mr. Brenneman informed Mr. Kehoe that he wanted to discuss with proposers such as WF how they saw themselves fitting into the picture. Mr. Brenneman’s letter to Mr. Kehoe, May 31, 1977.
Mr. Brenneman noted that WF’s operating plant seemed to fit well with available facilities at South Meadow and that NU was impressed with what Mr. Kehoe had to say. Mr. Brenneman’s Interoffice Mem. July 28, 1977 to Mr. Batycki.
Mr. Batycki, a CRRA Vice-President, arranged for a presentation by WF at the MDC. Mr. Batycki’s Interoffice Mem. to Mr. Brenneman, June 19, 1978.
In 1978 CE was preparing an analysis of costs confirming CRRA’s judgment that central Connecticut was the logical place for the next plant and that NU was the logical energy user. Mr. Brenneman’s Interoffice Mem. March 23, 1978 to Mr. Batycki. This evidently was the result of a request by Director Flynn of the CRRA policy committee to ask the contractors about the impact of site selection on the tipping fees (user’s costs) for their systems. See CRRA Policy Committee Meeting Summary, March 16, 1978.
In the same March 23, 1978 memo referring to CE’s preparation of the analysis, Mr. Brenneman also asked Mr. Batycki to seek from WF the same kind of letter which CRRA expected from CE and which it already had from Envirotech concerning Director Flynn’s question.
In the same conversation, you should ask Kehoe to put in motion the same kind of thinking about the wastewater treatment plant site that we have asked CE to undertake. Sound him our[sic] on what selection of the wastewater treatment plant would mean as far as Wheelabrator’s participation, continuing to assume Northeast would be the energy user, either in the form of steam or electricity. If the selection of the wastewater treatment plant as the site has the effect of ruling out bids competitive with Envirotech we have to discuss the implications of this. Above all, we want to be as open as we can be with the finalist contractors who have proposed to construct a plant in Hartford and have considered the HELCO plant as an option open to them.
Mr. Brenneman several times expressed his hope that WF would consider participating in the project. Mr. Brenneman’s letter to Mr. Kehoe, February 27, 1979; Mr. Brenneman’s Interoffice Mem. to Chairman Stroh, February 27, 1979; Mr. Brenneman’s letter to Mr. Kehoe, March 13, 1979. The February 27, 1979 memo states that Mr. Kehoe did not seem very interested in the Hartford project and may have believed that CE would receive the award because of its work and the fact that it was a Connecticut company and employer. “I [Mr. Brenneman] again tried to disabuse him of that notion.” Interoffice Mem. February 27, 1979, supra.
Mr. Brenneman also advised WF of the MDC joint planning agreement, as he did the other finalists. Letter to Mr. Kehoe, March 13, 1979, supra; Mr. Brenneman’s Interoffice Mem., March 21, 1979, to Mr. Cawley; Mr. Brenneman’s letters to CE and to Envirotech, March 15, 1979.
Subsequently, CRRA invited WF, together with CE and CEA, to participate in the “Two-Phase Procurement Procedure.” Mr. Brenneman’s letters to Mr. Kehoe of WF, Mr. Cunningham of CE and Mr. Benningson of CEA, August 29, 1980, signed by Mr. Cawley, then Vice President, Finance. CRRA asked all three vendors to attend a conference on “project sequencing” on October 6, 1980. Id.
The procurement document was sent to WF as well as CE, the two remaining contenders at this point, on November 17, 1980. Mr. Brenneman’s letter to Chairman Stroh and Director Levine, November 19, 1980. The document had been revised “to make it absolutely clear that the project would regard as acceptable a water-wall type technology, such as that offered by Wheelabrator-Frye.” Id.
Both WF and CE were invited to a bidder’s conference. Mr. Cawley’s letters to Mr. Kehoe and Mr. Cunningham, November 25, 1980.
At the bidder’s conference, WF indicated that if the decision were made in favor of the NU option, it would no longer be interested in the project. Mr. Cawley’s Interoffice Mem. December 10, 1980 to Mr. Brenneman.
No further explanation appears in this memo. It is unclear exactly what WF was referring to (e.g., site, energy market, or financial arrangements). According to Mr. Kehoe WF was not, in fact, referring to the site as such, but to technological matters. Interview with John M. Kehoe, Jr. of WF, May 1, 1990. As previously stated, WF withdrew because a governmental entity would operate the project. Exhibit E. This was the only reason it gave for withdrawing. Id. It did not say anything about NU at that time. Id.
Furthermore, had WF not withdrawn, it would have had an additional opportunity to contribute its input. See Two Phase Procurement Procedure, etc., supra, at p. 1-2. Phase 1 included “an intensive program involving communications and liaison between Project Participants and individual pre-qualified Contractor Invitees. . . .” Id., p.1-3.
Following the Contractor Invitees Conference which was held on October 6, 1980, invitees were to make initial submissions. Id., p.1-4. Workshop interviews convened by project representatives with invitees would then take place. Id., p.1-5.
Understandings reached in the course of these interviews would then be confirmed in Phase 2 by a Request for Bid (RFB). Id., p.1-74. Sealed bids would then be submitted in response to the RFB. Id., p.1-75.
CRRA had therefore provided an opportunity for close consultation and communication with both contractors, WF as well as CE.
In summary, the documents indicate that CRRA afforded WF a reasonable opportunity to participate in the procurement process.
We have found nothing in the records which would show that the selection of the site gave anyone an unfair advantage.
Although WF had at one time expressed opposition to the “NU option,” this was not the reason it gave for its withdrawal, as previously stated. Supra, p.36.
The South Meadows location offered the multiple transportation option of rail, road and river barge access. Interview with Mr. Brenneman, December 11, 1989; see also Request for Approach, September 30, 1977, p.16.
It also permitted market flexibility, with possibilities for high and low pressure steam, sludge disposal, refuse-derived fuel, and electricity. “These conditions offer the widest possible range of applications of resource recovery technologies.” Response by CRRA to Mr. Frank Rothammer, Chairman, Solid Waste Task Force, Capitol Region Council of Governments, November 6, 1978.
Both CRRA and MDC determined that land was available there and that there would be minimal impact on existing facilities and minimal encroachment on existing uses. Mr. Brenneman’s and Mr. Batycki’s letter to Mr. Walter F. Fee of NU, August 26, 1980.
“was a problem which cannot be overstated.” CRRA minutes, November 22, 1983.
Concerning the selection of technology, this was a matter requiring technical expertise. The legislation left this decision entirely to “the judgment of the authority.” The legislation provided for a broadly based board, with environmental, state policy and management, economic development, transportation, legislative, municipal and public representation. Two of the members, appointed by the Governor, had to have high-level experience in finance, business or industry. Conn. Gen. Stat. § 22a-261(b) and (c).
It should first be pointed out that there were evidently significant technological constraints, at least at the time finalists were selected in 1977. Some of the plants CRRA had inspected or reviewed processed only a small amount of tonnage per day (11/2 to 20-25 tons). Others suffered shutdowns. Mr. Bush’s Interoffice Mem. to File, August 16, 1977; Mr. Brenneman’s letter to Mr. Kossakoski, July 26, 1977; Mr. Brenneman’s Interoffice Mem. to Mr. Bush, August 11, 1977 and to Procurement Mem. File, August 8, 1977.
Some plants had also experienced explosions and fires, resulting in one case in a fatality and serious injury. Mr. Brenneman’s letter to CRRA board, November 14, 1977; Mr. Brenneman’s Interoffice Mem., May 23, 1977; Mr. Bush’s Interoffice Mem., January 11, 1979.
We have reviewed the two documents which have been cited concerning the technology issue.10 We have done so to decide not whether CRRA made the best possible decision as a matter of hindsight, but instead whether there are any suggestions of capricious or illegal actions.
The first document is an interoffice memorandum by Mr. Brenneman dated February 21, 1978. It discusses a meeting with Mr. Brenneman and Douglas Costle, Administrator of the Federal Environmental Protection Agency [EPA]; Dr. Rocko Petrone, Director of the National Center for Resource Recovery and others, including EPA solid waste staff.
The Saugus system was well proven, at least as of then. Everyone agreed that WF’s method worked. The economics improved with its size. WF wanted to double the size, but could not obtain the necessary solid waste.
Petrone said flatly that you cannot get revenue bond funding for an RDF [refuse derived fuel], plant today. By this he meant a plant (such as Bridgeport) which manufactures a fuel for combustion in a purchaser’s boilers (as opposed to CE, which includes the boiler in the resource recovery package). Much remains to be learned, he said, about the use of boilers not originally designed for solid waste as they are applied to burning RDF. He mentioned the high ash content in Milwaukee (but said that glass separation should be able to correct that).
Thus it appears that Dr. Petrone indicated that CE’s system did not have the same problem that other RDF plants did.
Generally speaking, the next best process to Wheelabrator-Frye seemed to be the Combustion Engineering type since CE boilers have been used for years to burn the same type of materials that are in solid waste. Petrone pointed out that the problem was the cost (presumably largely the boiler). It was pointed out that the CE-type process has better “load following” characteristics than does the Wheelabrator-Frye process. Steve Lewis from MITRE [an engineering consultant] feels that that is the primary reason they were selected in Detroit, since an important requirement there was that the steam output follow the load requirements of the market.
It was the general consensus that resource recovery procurement does not lend itself to the typical public agency A&E [Architects and Engineers] process. It was also felt that the conventional RFP, with the award going to the low bidder, was inappropriate. The “tilt” seemed to be in the direction of negotiations, but within some kind of process which insured that the selection is free of taint. It could be argued that the Authority Board of Directors provides this legitimatizing mechanism.
An interoffice memorandum of February 28, 1978, by Mr. Brenneman reported a discussion he had with Dr. Petrone the previous day. Doctor Petrone confirmed that no utility would wish to buy refuse derived fuel because of uncertainties about boiler corrosion, ash and ash moisture content.
That judgment would not apply, he says, to a system which produces a product other than RDF [refuse derived fuel]. Specifically, a system, such as Wheelabrator-Frye’s or Combustion Engineering’s, which produces steam is giving the customer a product of known characteristics. He sees no reason at all why a utility would not be willing to buy all the steam such a system could produce for “economic dispatch” rates. Petrone’s problem with this type of system, however, is its significantly greater capital cost. He would like to reduce the capital cost, and thereby the user fee, by systems which produce RDF, if at all possible.
The same was true for selling electricity, because the product was known. Id.
Nothing new. Agree from experience. Do we wait until, can we wait, until all uncertainties, risks have been overcome or do we recognize, plan, and act accordingly?
The second item that has been cited concerning technology is an article in Engineering News-Record in 1980. The article stated that WF’s Saugus, Mass. “plant showed a profit in 1979 [and was the first to do so], but revenues included a federal subsidy from DOE’s [U.S. Department of Energy] entitlement program.” The Saugus plant was also the first to have received these funds. Trash Plant Trials Show Huge Market, Vol. 205, Engineering News-Record, June 26, 1989, p.25 (microfilm copy, Hartford Public Library).
The article did state that a refuse derived fuel system in Milwaukee, Wisc. was one of the most seriously troubled plants. It appears, however, that the fuel was to be co-fired with coal at the utility’s power plant, not in specially designed boilers. Id., preceding page. According to the article, furthermore, the plant involved a different company than CE. Id.
Doctor Petrone had reported to Mr. Brenneman problems in Milwaukee. Nevertheless, he further stated that both WF’s and CE’s systems would not involve these difficulties of refuse derived fuel. Both offered steam, not simply processed fuel for boilers not originally designed for it. Interoffice Memoranda of February 21 and 28, 1978, supra.
It is significant that the Engineering News-Record article also stated that there were “technological traumas and institutional project stoppers that add years to the process of getting plants operating smoothly.” Engineering News-Record, supra, p.21.
The information that we have discussed indicates that the selection of a system was not simple. Different contractors offered different features and drawbacks. Bechtel, CRRA’s consulting engineer, advised CRRA that CE’s resource recovery system was feasible from an engineering standpoint. CRRA minutes, January 17, 1985. Whether CRRA’s ultimate selection was the best possible choice is not the issue. There is no indication that it was based on illegal criteria or sham reasons.
(b) Any contract for construction valued at over twenty-five thousand dollars shall be let by the authority pursuant to the process of open or competitive bidding, provided, the authority shall have power to determine the format, contents and scope of any contract for a waste management project, the conditions under which bidding shall take place and the schedule and stipulations for a contract award. The authority shall also have power to select the contractor deemed to have submitted the lowest qualified bid, price and other factors considered, when, in the judgment of the authority, such award is in the best interests of the state.
(Emphasis added.) No other statutory bidding requirements were contained in this statute. Bidding could be “open” and not strictly competitive. “Open” bidding was not statutorily defined. CRRA was empowered to determine the bidding conditions.
“Open bid,” in contrast to the word “negotiated” in Sec. 22a-268, means that the bidding process is opened to a number of vendors as potential bidders rather than restricted to one or two specific vendors with whom CRRA negotiates details of contracts.
Mem. Decis., at vi n.8.
As previously indicated, the Superior Court has stated, “The legislature recognized the distinction between the CRRA’s projects and the projects of state agencies by giving the CRRA ample discretion to develop its bidding procedure. Compare Conn. Gen. Stat. § 22a-266(b) with § 4-137(a) et seq.” Connecticut Resources Recovery Authority, at p.19.
In 1987 we advised that where CRRA selected a firm based on responses to a Wall Street Journal advertisement, it had complied with open bidding conditions. Advice to Auditors of Public Accounts, April 9, 1987. In that case CRRA had sent requests for qualifications to firms which had responded to that advertisement and also to all firms known by CRRA to be potential contractors.
Of the eleven firms who responded in that matter, CRRA narrowed the field to five, based on financial and technical data. Each of these companies was invited to submit a proposal. Out of the four received, two finalists were selected. Id. 12-13.
In the present case, at the outset of the procurement process, CRRA had been consistently impressed with CE and believed it had reliable technology, a favorable financial position, and good management. It believed CE to be the likely choice. Procurement Memorandum #1, June 6, 1977, p.3.
Notwithstanding this, CRRA staff recommended against negotiating only with CE, or only with CE and WF. Staff recommended conducting a thorough “in-house” search, without advertising to “narrow the field to however many we feel are qualified.” Id., pp.3, 4.
The CRRA Procurement Committee went beyond this and added an advertising requirement, among others. Procurement Memorandum #2, June 14, 1977.
In addition, CRRA notified other qualified contractors. These included not only CE but also WF and three others. Most, including CE, had previously been screened by representatives of the South Central Connecticut region as well as CRRA. Exhibit A; CRRA minutes, May 25, 1976 and June 27, 1977; Mr. Brenneman’s Interoffice Mem. to CRRA board June 29, 1977.
Thus even apart from the ad, from the outset CRRA was not dealing solely with CE. In fact, at least two of the ultimately twelve (12) responses received, those from Union Carbide and Carrier Corp., were based on information prior to the July 8, 1977 advertisement. Procurement Mem. #3, July 18, 1977, pp.2-4.
Although CE was found on August 30, 1977, to have already demonstrated its qualifications, the same finding was also made for six (6) other companies, including WF. Five other firms were given a chance to submit further information. CRRA minutes, August 30, 1977.
The Request for Approach was sent to the companies who had qualified in a very preliminary sense. RFA, p.1.
Five responses were received to this request. Four were qualified by vote of the CRRA board. CRRA minutes, November 30, 1977.
Of these four, by October 21, 1980, Envirotech had left the resource recovery business and Combustion Equipment Associates was financially unfit to bid. Exhibit D.
This left CE and WF. Id. WF withdrew on its own initiative, because CRRA wanted a governmental entity to operate the facility. Exhibit E.
None of the reasons for elimination of these finalists were illegal.
Although CRRA continued to negotiate with CE, CRRA did not commit itself to CE until at least July 15, 1983, when it approved an agreement in principle. CRRA minutes, July 15, 1983. Even then, complex negotiations continued and the contract was not ratified by CRRA until March 13, 1985. CRRA minutes, March 13, 1985. CRRA made its selection after its consulting engineer advised that the facility was feasible. CRRA minutes, January 17, 1985, p.11.
Through the advertisement, press release and other notification to vendors who had been previously screened, CRRA had in fact opened the bidding process and did not restrict itself to one vendor.
CRRA’s reference to “sole source” negotiations (e.g., CRRA minutes, March 23, 1982) does not alter these facts. The issue is what CRRA actually did, not simply how it worded its resolutions. Although CRRA ultimately negotiated a contract with only one vendor, this was a result of a procurement process in which the project had been publicized, various systems reviewed and four finalists selected.
CE was only one of four firms, including WF, which CRRA reviewed in 1976. All but one of these companies (CEA) had previously been selected not only by CRRA, but also by the South Central Connecticut Region for a previous project.
CRRA staff, including Mr. Brenneman, visited other plants. One of these was WF’s. Mr. Brenneman noted positive features of other systems. He kept other vendor finalists, including WF, informed of project developments. This included notifying them of the Mid-Connecticut procurement process in 1977, the Board’s intent to study the South Meadow location and energy markets in 1978, and the MDC Joint Planning Agreement in 1979.
All qualified vendors were given an opportunity to respond to the Request for Approach and make their presentations before CRRA representatives, including board members.
Even prior to WF’s selection as a finalist, Mr. Brenneman communicated with it as he did with other companies.
Mr. Brenneman also directed, in 1978, that WF be given an opportunity to prepare the same type of analysis concerning the impact of site selection on the tipping fees that was being done by CE and which had already been provided by Envirotech.
All finalists, including WF, were also given an opportunity to provide information for the 1978 Bechtel study of the South Meadow location and energy markets. They were also allowed to submit questions and comments about it and related board action.
Mr. Brenneman also directed that WF be consulted on the effect that the selection of the wastewater treatment plant would have on WF’s participation. He was concerned whether the plant selection might rule out bids competitive with Envirotech’s.
He encouraged WF to consider participating in the project.
CRRA invited both WF and CE, as the remaining finalists, to bidders’ conferences in 1980.
CRRA had also revised its procurement document to make it clear that WF’s water-wall type technology would be acceptable.
The 1980 procurement document also provided for close consultation with both finalists. Supra, pp. 4, 7, 28, 33-36.
CRRA, therefore, did not focus exclusively on CE.
Furthermore, CRRA could reasonably view those vendors who were truly qualified, suitable and prepared for this project to be very few in number, at least at that stage of the technology. Supra, pp. 37-38, 41.
This was also true in view of CRRA’s requirements for complete guarantees, fully demonstrated and documented systems, the amounts of solid waste tonnage involved, and other features, all of which were rational and consistent with the legislation, which encouraged maximum resource recovery, appropriate government structures for public benefit, reasonable costs and self-sustaining operations. §§ 22a-259, 22a-262(2) Conn. Gen. Stats. (Rev. to 1989).
Whether every step in CRRA’s contractor selection process was wise or unwise is not the issue in reviewing CRRA’s compliance with the statutes. No inference, favorable or unfavorable, should be drawn in this respect. Sec. 22a-262(1) provided for the planning, design, construction, management, operation and other matters concerning solid waste disposal and resource recovery facilities “considered by the authority to be necessary, desirable, convenient or appropriate” in carrying out its responsibilities.
These statutes vested considerable discretion in CRRA.
The evidence that we have reviewed shows that “the bidding process [was] opened to a number of vendors as potential bidders rather than [being] restricted to one or two specific vendors with whom CRRA negotiat[ed] details of contracts,” in accordance with the definition of open bidding by the Superior Court in Connecticut Resources Recovery Authority, supra, vi at n.8. In fact, Mr. Kehoe of WF, while maintaining that his process was superior to that of CE, acknowledged to this office that CRRA’s procurement procedure was fair, competitive and “on the up and up.” Interview with Mr. Kehoe of WF, May 1, 1990.
Therefore, it is our opinion that CRRA did follow an open bid bidding process under § 22a-266(b) and the Mid-Connecticut project award complied with statutory requirements.
1 Mr. Brenneman had been appointed president effective December 1, 1976. CRRA Executive Session Minutes, October 6, 1976.
2 A Department of Environmental Protection representative believed that Krupp should not be qualified, but that CE, WF and Envirotech should be. The DEP representative also felt that Combustion Equipment Associates (CEA) also should not be qualified because its proposal was not responsive to the RFA. Mr. Brenneman replied that for a variety of reasons it would be inconceivable that CRRA would not qualify CEA as a finalist. Mr. Brenneman’s Interoffice Mem. to RLB File Folder on CRRA Second Project RFP, November 17, 1977.
3 CRRA records show that the RFA was actually issued in 1977. See RFA dated September 30, 1977, CRRA minutes, November 30, 1977.
4 He was appointed acting president, effective January 1, 1981, the date Mr. Brenneman left office. Mr. Cawley’s appointment as president became permanent on April 6, 1981. He served in that capacity until February 14, 1986. CRRA minutes, October 10, 1980 resolution filed January 12, 1981 and minutes of April 6, 1981 and January 21, 1986.
5 Conn. Gen. Stat. § 19-524y became § 22a-266(c).
6 These two elements, public operation and coal-burning capability, were not incorporated in the Bridgeport II project for several reasons. Concerning public operation, the Bridgeport communities were averse to assuming any risk and were willing to have a private organization take complete control and responsibility. Interview with Mr. Cawley, April 6, 1990. There also was no public entity locally available that was comparable to MDC. Id. In addition, the participating towns had already been assembled and organized and it was unnecessary for an MDC-type entity to attract new participants. Id. Regarding coal, the Bridgeport II system again had the benefit of a sufficient number of municipalities. It did not have the problem of Mid-Connecticut, which needed a plant larger than required for existing members in order to accommodate others who joined later. A larger plant required supplemental fuel. Furthermore, Bridgeport II involved a custom-designed turbine to be supplied by the vendor. It would be geared to the amount of steam produced from the waste already assured. Id. Mid-Connecticut, however, would use existing NU turbines. These turbines to be efficient needed more steam than could be created from the waste then anticipated. Coal was needed to compensate for the fuel shortage. Id.
7 The July 24, 1978 draft that we have reviewed is unsigned and we have been unable to locate either a signed copy or the completed study. It is also possible that the agreement was revised. See Mr. Bush’s Interoffice Mem. to file, January 29, 1979. However, it appears that Bechtel had already begun work on the study by June 23, 1978. CRRA minutes, June 23, 1978. The study is also referred to in Legislative Program Review and Investigations Committee Report, Solid Waste Management in Connecticut, May 1979, p.81.
8 We contacted Dr. Hayden on March 5, 1990. He could not recall the specifics that prompted his comments. He stated that there was a period afterwards when he did not receive further assignments, but did not indicate he resigned as he had stated he would if his concerns remained. He also stated this matter arose near the end of Wegman’s involvement, but did not remember any further complaints.
9 Another change had been made to consider not only steam production but also generation of electricity. The utility was not expected to be enthusiastic about this, because the electrical option would provide a standard to determine whether full value was received for steam. Id.
10 The Hartford Courant, April 30, 1989.


text:
1. FDA has jurisdiction in an administrative proceeding to determine whether a drug product is a "new drug" within the meaning of 201 (p) of the Act. Weinberger v. Bentex Pharmaceuticals, Inc., post, p. 645. Pp. 643-644.
2. While the Act provides FDA with sanctions, such as civil injunction proceedings, criminal penalties, and in rem seizure and condemnation, to enforce the prohibition against sale in commerce of any article in violation of 505, the Act does not create a dual system, one administrative and the other judicial. P. 644.
3. Where petitioner had an opportunity to litigate the "new drug" issue before FDA and to raise the issue on appeal to [412 U.S. 640, 641] a court of appeals, it may not relitigate the issue in another proceeding. P. 644.
DOUGLAS, J., delivered the opinion of the Court, in which all Members joined, except BRENNAN, J., who took no part in the consideration or decision of the case, and STEWART, J., who took no part in the decision of the case.
Clyde A. Szuch argued the cause and filed a brief for petitioner.
[ Footnote * ] Briefs of amici curiae urging reversal were filed by Lloyd N. Cutler, Daniel Marcus, and William T. Lake for Pharmaceutical Manufacturers Assn., and by Thomas D. Finney, Jr., Thomas Richard Spradlin, and Daniel F. O'Keefe. Jr., for the Proprietary Assn. Bruce J. Terris, Joseph Onek, and Peter H. Schuck filed a brief for American Public Health Assn. et al. as amici curiae urging affirmance.
Petitioner manufactures a drug called Ritonic CapsulesFn for which it filed a new drug application (NDA) that became effective in 1959. Under the Act then in force, an NDA for a "new drug" required the manufacturer to submit to the Food and Drug Administration (FDA) adequate proof of the drug's safety. This [412 U.S. 640, 642] particular NDA became effective on the basis of the drug's safety. As we have noted in the companion cases, the 1962 amendments to the Federal Food, Drug, and Cosmetic Act of 1938, 52 Stat. 1040, as amended, 76 Stat. 780, directed FDA to withdraw approval for NDA's which became effective prior to that time if, after notice and opportunity for hearing, it found a lack of "substantial evidence" that the drug involved was effective as claimed in its labeling. And, as we have noted, "substantial evidence" as used in the Act, 505 (d) and 505 (e) (3), 21 U.S.C. 355 (d) and 355 (e) (3), means "adequate and well-controlled investigations" from which experts may conclude that the drug will have the claimed effect.
A panel of the National Academy of Sciences-National Research Council (NAS-NRC) reviewed the claims made for Ritonic Capsules and found it "ineffective" for each of the claims. FDA concluded there was a lack of substantial evidence of its efficacy and gave notice of its intent to withdraw the NDA, offering petitioner an opportunity to submit the required kind of data bearing on the efficacy of the drug and stating that withdrawal of approval of the NDA would cause the Ritonic Capsules to be a "new drug" for which no NDA was in effect, thereby making future sales unlawful.
Petitioner responded, submitting data on the issue of efficacy and maintained that Ritonic Capsules was not a "new drug" for purposes of the Act as amended. FDA concluded that petitioner's evidence was insufficient to establish effectiveness and gave notice of a hearing on the withdrawal of the NDA. Petitioner responded, contested FDA's authority to proceed further, and claimed that the product was not a "new drug" under the 1962 Act. It reserved the right to establish its position in the administrative proceedings, in judicial proceedings, or in both. Petitioner filed no more data to support its [412 U.S. 640, 643] position; and accordingly FDA withdrew approval of the NDA on the ground that there was no substantial evidence that the drug was effective as claimed. Petitioner sought review of the withdrawal order in the Court of Appeals for the Second Circuit, as provided in 505 (h), 21 U.S.C. 355 (h). The Court of Appeals affirmed the withdrawal order. CIBA-Geigy Corp. v. Richardson, 446 F.2d 466.
Meanwhile, and prior to the issuance of the withdrawal order, petitioner brought suit in the District Court for the District of New Jersey seeking declaratory and injunctive relief. After hearing, the District Court granted the Government's motion to dismiss the complaint for lack of jurisdiction. On appeal, the Court of Appeals for the Third Circuit affirmed, 463 F.2d 225, holding that FDA was authorized to decide the jurisdictional question as an incident of its power to approve or withdraw approval for NDA's, that its decision on that issue was reviewable on direct appeal by a court of appeals, and since the Court of Appeals for the Second Circuit had ruled against petitioner on that appeal, the jurisdictional question could not be relitigated in a separate suit for a declaratory judgment. We affirm the Court of Appeals.
We have stated in Weinberger v. Bentex Pharmaceuticals, Inc., post, p. 645, our reasons for concluding that FDA has jurisdiction in an administrative proceeding to determine whether a drug product is a "new drug" within the meaning of 201 (p) of the Act, 21 U.S.C. 321 (p). A decision that FDA lacks authority to determine in its own proceedings the coverage of the Act it administers, subject of course to judicial review, would seriously impair FDA's ability to discharge the responsibilities placed on it by Congress. As we said in Weinberger v. Hynson, Westcott & Dunning, Inc., ante, p. 609, and the Bentex case, supra, the definition of "new drug" as used in 201 (p) (1) involves [412 U.S. 640, 644] a determination of technical and scientific questions by experts. The agency is therefore appropriately the arm of Government to make the threshold determination of the issue of coverage. Cf. Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 210 -211, n. 47.
It is, of course, true that the Act gives FDA a second line of defense - civil injunction proceedings, criminal penalties, and in rem seizure and condemnation. See 302 (a), 303, 304, 21 U.S.C. 332 (a), 333, 334. Those are sanctions to enforce the prohibition of the Act against the sale in commerce of any article in violation of 505. But the Act does not create a dual system of control - one administrative, and the other judicial. Cases may arise where there has been no formal administrative determination of the "new drug" issue, it being first tendered to a district court. Even then, however, the district court might well stay its hand, awaiting an appropriate administrative determination of the threshold question. See the Bentex case, supra. Where there is, however, an administrative determination, whether it be explicit or implicit in the withdrawal of an NDA, the tactic of "reserving" the threshold question (the jurisdictional issue) for later judicial determination is not tolerable. There is judicial review of FDA's ruling. But petitioner, having an opportunity to litigate the "new drug" issue before FDA and to raise the issue on appeal to a court of appeals, may not relitigate the issue in another proceeding. Yakus v. United States, 321 U.S. 414, 444 -446.
MR. JUSTICE BRENNAN took no part in the consideration or decision of this case. MR. JUSTICE STEWART took no part in the decision of this case.

matches: v. v. v. v. v. v.


text: 210 WATER RIGHTS SYSTEMS PERTAINING TO WATERCOURSES still entitled to compensation for any substantial deprivation of his riparian right, or to a physical solution-a valid exercise of the State's police power.239 Kansas The doctrine of riparian rights was recognized and applied in early decisions of the Kansas Supreme Court, which agreed that it might exist in the same State with the doctrine of prior appropriation. The appropriation doctrine, however, could not operate to the destruction of previously vested common law rights.240 Following a period of uncertainty resulting from a supreme court decision,241 and attempted corrective legislation,242 another supreme court decision resulted in rendering the legislation completely ineffective.243 239 In Joslin v. Marin Mun. Water Dist., 67 Cal. (2d) 132, 142-143, 429 Pac. (2d) 889, 60 Cal. Rptr. 377 (1967), the California Supreme Court said "... since there was and is no property right in an unreasonable use, there has been no taking or damaging of property by the deprivation of such use and, accordingly, the deprivation is not compensable." The court said that in view of the State's constitutional amendment limiting the use of water only to beneficial uses "to the fullest extent of which they are capable," and providing that "waste or unreasonable use" shall be prevented and that conservation shall be exercised "in the interest of the people and for the public welfare," "in the instant case the use of such waters as an agent to expose or to carry and deposit sand, gravel and rocks, is as a matter of law unreasonable within the meaning of the constitutional amendment. (See Peabody v. City of Vallejo, supra, 2 Cal. 2d 351, 369, 40 P. 2d 486.)" 67 Cal. (2d) at 141. The court held that a riparian landowner could not require that an upstream appropriator pass along the streamflow to serve "the amassing of mere sand and gravel which for aught that appears subserves no public policy . .. ." Id. The court said that "unlike the unanimous policy pronouncements relative to the use and conservation of natural waters, we are aware of none relative to the supply and availability of sand, gravel and rocks in commercial quantities." 67 Cal. (2d) at 140-141. The court noted that in Peabody v. Vallejo a lower riparian had asserted a right as against an upstream appropriator to have all the waters flow without interruption since by normally overflowing his land they not only deposited silt thereon but also washed out salt deposits on portions of his land. 67 Cal. (2d) at 139. In that case the court said: "So far as we are advised, this asserted right does not inhere in the riparian right at common law, and as a natural right cannot be asserted as against the police powers of the State in the conservation of its waters. This asserted right involves an unreasonable use-as contemplated by the Constitution." 2 Cal. (2d) at 369, quoted in 67 Cal. (2d) at 139. In the instant case, at 429 Pac. (2d) 898, the court distinguished United States v. Gerlach Live Stock Co., 339 U. S. 725 (1950), discussed at note 215 supra, as a case involving the use of the natural overflow for irrigation, a recognized reasonable use. 240Clark v.Allaman, 71 Kans. 206, 237-239, 241, 80 Pac. 571 (1905). 241 Frizell v. Bindley, 144 Kans. 84, 91-93, 58 Pac. (2d) 95 (1936). 242 Kans. Laws 1941, ch. 261. 243 State ex rel. Peterson v. State Board of Agriculture, 158 Kans. 603, 605-614,149 Pac. (2d) 604 (1944).