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GE v. SEAMANS

March 24, 1972

GENERAL ELECTRIC COMPANY, Plaintiff,
v.
Robert C. SEAMANS, Jr., Defendant, and Philco-Ford Corporation, Intervenor


Richey, District Judge.


The opinion of the court was delivered by: RICHEY

In this case the Court has enjoined the United States Air Force and the Philco-Ford Corporation (Philco) from taking any further action to effectuate or implement the award of Contract FO4701-72-C-003, dated December 15, 1971, to Philco, until the General Accounting Office has rendered a decision on plaintiff's protest against that award and action by the Air Force in accordance with that decision.

 Basically, the procurement in question involves the operation and maintenance of six remote tracking stations which are considered an integral part of the Department of Defense satellite systems. The original procurement of these services was on a sole source basis without competition. Four of the tracking stations have been operated and maintained by Philco-Ford, and the remaining two stations were serviced by Lockheed Missile and Space Company. In early 1971, as a result of the stabilization of the growth and complement of equipment of these stations and a study, the Air Force decided to obtain these services by competitive procurement. See, Rosen Supp. Aff. paras 3-5; Norman Supp. Aff. paras 4-5. Under the terms of the proposal and the applicable regulations, the procurement was carried out in two phases. The first phase involved a determination as to which contractor's proposal fell within a competitive range for negotiations. The second phase was the negotiations. On October 6, 1971, General Lewis S. Norman, Jr., the Source Selection Authority, decided that three of the seven proposers were not within a competitive range. On October 8, 1971, the fourth finalists, who included General Electric, Philco-Ford and Lockheed, were notified that their original proposals fell within a competitive range and that they were therefore selected for further negotiation. On October 20, 1971, each of the four proposers within the competitive range was sent a letter which included a list of deficiencies which the offeror would have an opportunity to correct. See, Defendant's Exhibits C, D and E. This letter was the only "negotiation" conducted by the Air Force with respect to this procurement. On November 8, 1971, all of the finalists submitted their revised proposals for consideration by the Source Selection Evaluation Board, the Source Selection Advisory Council, and finally the Source Selection Authority. See, Rosen Supp. Aff. paras 17, 18, 22A. In its revised proposal GE reduced its price by $1,200,000 while Philco-Ford reduced its cost by approximately $7,100,000. On or about November 9, 1971, the Defense Contracts Audit Agency audited GE's revised proposal, but it never advised GE that there were any problems in relation to its proposed costs. On December 2, 1971, the Source Selection Advisory Council made its report to the Source Selection Authority, where it "concluded that there were serious deficiencies in several key areas when the technical proposal, as revised, was analyzed in context with the cost proposal." See, Norman Supp. Aff., Exh. N, at 6. On December 2, 1971, the Source Selection Authority issued a decision to award the contract to Philco-Ford. See, Norman Supp. Aff., para 30, Exh. O. In this decision, the Authority recognized that GE "submitted a bid significantly lower than [Philco]," however, it was stated that "the significantly lower price proposed by [GE] is determined to be unrealistically low." See, Norman Supp. Aff., Exh. O, at 2. On December 16, 1971, upon receipt of the telegram advising it of the award of the contract to Philco-Ford, GE requested an immediate debriefing. This debriefing was held on January 4, 1972, at which time GE was informed for the first time that its cost proposal was considered to have been unrealistically low. See, Holloway Aff. para 7. On or about January 19, 1972, GE filed its protest with the General Accounting Office, and on February 8, 1972 it filed this action for injunctive relief pursuant to 28 U.S.C. §§ 1331, 1361 (1970); 11 D.C. Code § 501 (1967 ed., Supp. IV); and Section 10 of the Administrative Procedure Act, 5 U.S.C. § 702 (1970).

 After hearing oral arguments by counsel for all parties and giving full consideration to the extensive record, affidavits and memoranda filed herein with respect to the plaintiff's Motion for a Preliminary Injunction, this Court granted plaintiff's motion on March 6, 1972, in accordance with its Findings of Fact and Conclusions of Law (incorporated herein by reference) entered on that date, and ordered a bond for Security for Costs to be posted in the amount of $100.00. The purpose of this opinion is to discuss some of the highlights of the case and the various issues raised in this proceeding.

 In Virginia Petroleum Jobbers Association v. Federal Power Commission, 104 U.S. App. D.C. 106, 259 F.2d 921 (1958), the United States Court of Appeals for the District of Columbia defined the criteria which must be taken into consideration prior to the issuance of a preliminary injunction. They are as follows:

 
(a) That the petitioner has a strong likelihood of prevailing upon the merits;
 
(b) That the petitioner would be irreparably injured without such relief;
 
(c) That a stay or injunction would not substantially harm other interested persons;
 
(d) That the public interest will not be significantly harmed.

 In addition to these four criteria for issuing a preliminary injunction, the United States Court of Appeals for the District of Columbia in Steinthal and Co., Inc. v. Robert C. Seamans, Jr., 147 U.S. App. D.C. 221, 455 F.2d 1289, opinion filed October 14, 1971, stated that the following two interrelated principles must be taken into consideration where determinations of procurement officials are challenged:

 
"(1) courts should not overturn any procurement determination unless the aggrieved bidder demonstrates that there was no rational basis for the agency's decision; and (2) even in instances where such a determination is made, there is room for sound judicial discretion, in the presence of overriding public interest considerations, to refuse to entertain declaratory or injunctive actions in a pre-procurement context." Steinthal and Co., Inc. v. Robert C. Seamans, Jr., supra at 1301.
 
"Of course it is true that the grant of standing must be carefully controlled by the exercise of judicial discretion in order that completely frivolous lawsuits will be averted. There must be a practical separation of the meritorious sheep from the capricious goats -- a recognition that cucullus non facit monachum. However, responsible federal judges will be able to discern a case in which there is injury in fact, a sufficient adversary interest to constitute a case or controversy under Article III, and an otherwise reviewable subject matter to prevent the dockets from becoming overcrowded. The Court should have discretion to grant standing, provided the other criteria listed above are properly met." 424 F.2d at 872.

 This Court's Findings of Fact and Conclusions of Law clearly demonstrate that the case at bar is one of the "meritorious sheep" as described by the Court of Appeals in Scanwell, supra 424 F.2d at 872. After carefully examining the extensive record with respect to the negotiation of the contract, this Court concluded that the Air Force transgressed the statutory boundaries set by the Armed Services Procurement Regulations (ASPR) and that the defendant arrived at a determination which was not reasonable. Furthermore, the Court concluded that the ...


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