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SUN SHIP, INC. v. WOOLSEY

November 20, 1979

SUN SHIP, INC., Plaintiff, and GENERAL DYNAMICS CORPORATION, QUINCY SHIPBUILDING DIVISION, Intervenor-Plaintiff,
v.
R. JAMES WOOLSEY, et al., Defendants, and NATIONAL STEEL AND SHIPBUILDING COMPANY Intervenor-Defendant



The opinion of the court was delivered by: RICHEY

MEMORANDUM OPINION

I. INTRODUCTION

 This action arises from a complaint for declaratory and injunctive relief under 28 U.S.C. §§ 1331, 1332, 1361, and 2201, et seq., and the Administrative Procedure Act, 5 U.S.C. § 701 et seq. The complaint was filed on October 15, 1979.

 Plaintiff, Sun Ship, Inc., ("Sun Ship"), is a Delaware corporation having its principal place of business in Chester, Pennsylvania, and is engaged primarily in the business of building and repairing ships. The defendants are the Acting Secretary of the Navy, *fn1" several subordinate Navy officials, and the United States (collectively referred to as "the Navy").

 The complaint, as amended on October 19, 1979, seeks a judgment (1) declaring that the Navy unlawfully awarded a contract for the detailed design and construction of a cable repair ship called the "T-ARC 7" to National Steel and Shipbuilding Co. ("NASSCO"), in violation of the Armed Services Procurement Act of 1947, as amended, 10 U.S.C. § 2301 et seq., and Defense Acquisition Regulations ("DAR") promulgated thereunder 32 C.F.R. § 1 et seq., (2) requiring the Navy to terminate the contract, and (3) ordering the Navy to award the contract to Sun Ship. In addition to its complaint, Sun Ship filed motions for a temporary restraining order and a preliminary injunction.

 At the hearing on plaintiff's motion for a temporary restraining order, held October 17, 1979 the Court granted leave to NASSCO to intervene as a defendant. After hearing argument of the parties, the Court denied plaintiff's motion.

 On November 8, 1979, the Court granted leave to intervene as a plaintiff to General Dynamics Corporation, Quincy Shipbuilding Division ("QSD"), another company that had submitted a proposal for the T-ARC 7 contract. Although QSD has joined the motion for a preliminary injunction, QSD only seeks to have the NASSCO contract declared illegal and an order directing re-procurement.

 A hearing on the motion for a preliminary injunction was held on November 9, 1979, at which time the Court heard from all parties. Thus, this case is now before the Court on the motion of Sun Ship and QSD for a preliminary injunction. For the reasons more fully set forth below, the Court denies the motion. The Court will first set forth background information which is relevant to its decision. The Court will then address the issues at bar. Accordingly, pursuant to Fed.R.Civ.P. 52, the following constitutes the Court's findings of fact and conclusions of law.

 II. BACKGROUND

 This action was commenced by Sun Ship, and later joined in by QSD, to enjoin performance of a Navy contract to design and construct an ocean-going vessel which has a target cost in excess of one hundred million dollars. This ship, designated the "T-ARC 7", is to be used for retrieving, repairing and deploying cable on the bottom of the ocean. These cables are part of a major Naval intelligence-gathering network whose function is classified and essential to the national defense. The T-ARC 7 is to be a technological vessel, with sophisticated and complex electrical and mechanical systems. The Navy's existing cable ships are more than thirty years old and do not have the capability to perform the functions envisioned for the T-ARC 7. Due to the inadequacy of the Navy's present cable ships and the T-ARC 7's projected role in aid of monitoring the continued improvement in the operational capabilities of potential opposing naval forces, the Navy has concluded that it is essential to the national defense that the T-ARC 7 be placed in service when projected.

 On July 31, 1978, the Navy held a pre-solicitation briefing for prospective offerors in connection with the T-ARC 7 contract. *fn2" The purpose of the briefing was to facilitate full and free competition for the project by furnishing prospective offerors with information to assist them in preparing proposals.

 On December 29, 1978, the Navy released a "Request For Proposals" ("RFP") for a negotiated cost-plus-incentive-fee contract for the design and construction of the T-ARC 7. *fn3" Such a contract "provides for payment to the contractor of allowable costs incurred in the performance of the contract, to the extent prescribed by the contract." 32 C.F.R. § 3-405.1(a) (1976). Furthermore, such a contract:

 
. . . is suitable for use only when the uncertainties involved in contract performance are of such magnitude that cost of performance cannot be estimated with sufficient reasonableness to permit the use of any type of fixed-price contract.

 32 C.F.R. § 3-405.1(b) (1976). Here, the Navy used a negotiated procurement because of the uniqueness of the T-ARC 7 and the uncertainties involved with its design and manufacture. The RFP provided for an incentive fee based on actual costs, but also specified the level of the fee. The target fee was to be 9% of the target costs, and would increase or decrease at a specified rate if the actual costs were less than or greater than the target cost. The RFP required offerors to submit both Technical/Management and Cost proposals for the T-ARC 7. The Technical/Management Proposals were to be submitted on or before March 1, 1979, and the Cost Proposals were to be submitted on or before April 5, 1979.

 Accordingly, on March 1, 1979, six offerors, including Sun Ship, NASSCO and QSD, submitted Technical/Management Proposals in response to the RFP. These proposals were to be reviewed pursuant to the procedure established in the Source Selection Plan ("SSP") adopted by the Navy on November 22, 1978. See Jt.Ex.D. *fn4" The SSP provided for an evaluation and decision process consisting of three levels. The Secretary of the Navy appointed Vice Admiral C. R. Bryan, Commander, Naval Sea Systems Command, as the Source Selection Authority (SSA). Under Department of Defense Directive 4105.62 (January, 1976), the SSA has full responsibility and final authority to select the source for award of the contract. Among other duties and responsibilities of the SSA, the Source Selection Plan indicates that he was to appoint a pre-award survey team, and request and direct necessary audits and cost analysis. Jt.Ex.D. p. 4-1. The Navy conducted pre-award surveys at the facilities of all offerors. Jt.Ex.V., p. 2. In addition, the Navy utilized the resources of the Defense Contract Audit Agency which conducted audits at the facilities of all offerors.

  Admiral Bryan appointed a Source Selection Advisory Council (SSAC) consisting of five members and supported by counsel and the authorized Contracting Officer. The SSAC functions as a staff and principal advisor of the SSA. The SSAC, in turn, appointed a Source Selection Evaluation Board (SSEB) consisting of six members and supported by a team of twenty-two evaluators including engineering, contracting, technical and management personnel. The SSEB was to analyze and evaluate the proposals in all categories, *fn5" except "Cost Realism", to determine the need for clarification of, or the existence of deficiencies in, the proposals. The SSEB also was to prepare evaluation narratives, perform criteria scoring, and submit the results of its analysis to the SSAC. Thus, the proposals underwent a three-level independent and in-depth review and decision process conducted by Navy personnel. In addition, a "Cost Realism Team", under the supervision of the Contracting Officer, evaluated the cost realism of the proposals in detail.

 During its preliminary evaluation of the Technical/Management Proposals, the SSEB determined that additional information was needed to clarify specific areas of each proposal. See Jt.Ex.V. p. 4. Accordingly, on March 8, 1979, the Contracting Officer notified each offeror by letter that the necessary items of information should be submitted by March 15, 1979. See Jt.Exs.E-J. The Navy used the same transmittal letter text for each letter, although the information requested of the specific offeror varied. The information requested dealt primarily with such matters as resumes of key personnel and certain labor and man-day estimates. Each of the offerors supplied the requested information by return letter. See Jt.Exs.K-P. There is no dispute that the SSEB relied on the requested information in its evaluation of the offerors' proposals.

 When the Technical/Management Proposals were submitted, the SSEB assigned two evaluators to each of the sixty-nine elements into which the proposals were divided. Each evaluator, working separately, reviewed the proposals and evaluated them with respect to those elements assigned to him for review. The evaluator determined scores for each element on a scale ranging, in increments of 20, from 0 to 100. See Jt.Ex.D, p. 7-8. Each evaluator also prepared a narrative explaining each score. Jt.Ex.Q.

 The SSEB reviewed the scores given by the evaluators for the various elements, reconciled differences between the evaluators' scores, and adjusted scores it deemed incorrect. The SSEB also prepared a narrative describing the composite scores, and explaining, as to each element reviewed, the adjustments and reconciliations. See Jt.Ex.Q. Finally, the SSEB prepared an Evaluation Report on the Technical/Management Proposals for the SSAC. See Jt.Ex.R. This report was issued on ...


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