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SUN SHIP, INC. v. HIDALGO

February 13, 1980

SUN SHIP, INC. Plaintiff, and GENERAL DYNAMICS CORPORATION, QUINCY SHIPBUILDING DIVISION Intervenor-Plaintiff,
v.
EDWARD HIDALGO, et al. Defendants, and NATIONAL STEEL AND SHIPBUILDING CO., Intervenor-Defendant.



The opinion of the court was delivered by: RICHEY

MEMORANDUM OPINION

This case is before the Court on defendants' and intervenor-defendant's joint motion for summary judgment and plaintiff's and intervenor-plaintiff's oppositions thereto. Since there is no genuine dispute as to facts material to the resolution of the claims raised by the plaintiffs, *fn1" summary judgment is appropriate. For the reasons more fully set forth below, the Court grants summary judgment to defendants *fn2" and dismisses this action.

 This action was commenced by Sun Ship, *fn3" and later joined in by QSD, *fn4" to enjoin performance of a Navy contract to design and construct an ocean-going vessel which has a target cost in excess of $ 100 million. This ship, designated the "T-ARC 7", is to be used for retrieving, repairing and deploying cable along the ocean floor.

 On October 17, 1979, after hearing argument of the parties, *fn5" the Court denied plaintiff Sun Ship's motion for a temporary restraining order. A hearing on plaintiffs' motion for a preliminary injunction was held on November 9, 1979, at which time the Court heard from all parties. In a memorandum opinion issued November 20, 1979, the Court denied plaintiffs' motion.

 Plaintiffs have presented various challenges to the Navy's conduct throughout the several stages of the evaluation process involved in the T-ARC 7 procurement. Specifically, plaintiffs claim that the Navy unlawfully and irrationally awarded the contract for the detailed design and construction of the T-ARC 7 to 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.

 The Court will first set forth the appropriate standard of review of a procurement decision by a Government agency and then proceed to consider plaintiffs' challenges in the approximate order in which they are alleged to have occurred.

 I. THE APPROPRIATE STANDARD OF REVIEW.

 A reviewing court may not overturn a procurement decision by a Government agency unless the party challenging the decision overcomes the "heavy burden of showing either (1) the procurement official's decision on matters committed primarily to his own discretion had no rational basis, or (2) the procurement procedure involved a clear and prejudicial violation of applicable statutes or regulations." Kentron Hawaii, Ltd. v. Warner, 156 U.S.App.D.C. 274, 277, 480 F.2d 1166, 1169 (D.C. Cir. 1973) (footnote omitted); See also, M. Steinthal & Co. v. Seamans, 147 U.S.App.D.C. 221, 455 F.2d 1289 (D.C. Cir. 1971). In conducting its review, the Court's inquiry:

 
. . . must fully take into account the discretion that is typically accorded officials in the procurement agencies by statutes and regulations. Such discretion extends not only to the evaluation of bids submitted in response to a solicitation but also to determination by the agency with respect to the application of technical, and often esoteric, regulations to the complicated circumstances of individual procurements.

 Finally, even in instances where the aggrieved bidder demonstrates that there was no rational basis for the agency's decision, a reviewing court, in the exercise of sound judicial discretion and in light of overriding public interest considerations, may properly refuse to grant declaratory or injunctive relief. Id. 147 U.S.App.D.C. at 233, 455 F.2d at 1301.

 II. CONSIDERATIONS OF NATIONAL DEFENSE.

 Defendants contend that considerations of national defense preclude the relief sought by plaintiffs in this action. The Navy has consistently argued that timely completion of the T-ARC 7 is vital to the defense interests of the United States. This "overriding public interest consideration," the defendants contend, by itself compels 1) upholding the award of the T-ARC 7 contract, and 2) granting summary judgment in defendants' favor. The Court agrees with defendants' first contention but disagrees with their second.

 The T-ARC 7, when completed, is to be used for retrieving, repairing and deploying cable along the ocean floor. This cable is part of a major Naval intelligence-gathering network which is clearly essential to the national defense.

 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 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.

 The hearings on appropriations for the T-ARC 7 highlight the importance of the vessel to the national defense. Vice Admiral James H. Doyle, Jr., Deputy Chief of Naval Operations for Surface Warfare, told the House Committee on Armed Services: "The systems of underwater surveillance and communications which the Navy maintains for both the Navy and Air Force require four cable repair ships to insure system operability in the face of cable breaks imposed by fishing trawler equipment or natural causes in far-flung areas of the world." Hearings on Military Posture and H.R. 10929 Department of Defense Authorization for Appropriations for Fiscal Year 1979 before the House Committee on Armed Services, 95th Cong., 2d Sess., Part 4, at 202 (1978) ("Hearings"). In addition, Admiral Doyle stated that "the new cable repair ship is vital to maintaining and improving the undersea surveillance capability which is a prerequisite to effective anti-submarine warfare." Hearings at 369. Rear Admiral Bruce Kenner, III, Director of Ship Acquisitions Division, Office of the Chief of Naval Operations, testified that the T-ARC 7 is "extremely important to our continued ability to control the seas to the extent necessary to support our forces overseas." Hearings at 1039. Finally, Congressman Bennett, Chairman of the Seapower and Strategic and Critical Materials Subcommittee of the House Armed Services Committee, noted that "in a year of austere funding for naval shipbuilding by the administration, the Secretary of the Navy has among his highest priorities the procurement of the T-ARC and T-AGOS ships." Hearings at 1008.

 In his affidavit, Secretary Hidalgo has certified to the Court that the delay caused by overturning the award of the T-ARC 7 contract to NASSCO would "have a significant adverse impact on the national security of the United States." Moreover, the Secretary states that "(t)he importance of the T-ARC 7's mission and thus the need for prompt acquisition has been dramatically heightened by recent international developments."

 The Court concludes that timely completion of the T-ARC 7 is an "overriding public interest consideration" which compels upholding the award of the contract to NASSCO. M. Steinthal & Co. v. Seamans, supra 147 U.S.App.D.C. at 233, 455 F.2d at 1301; Pace Co. v. Resor, 453 F.2d 890, 891 (6th Cir. 1971) (per curiam), cert. denied, 405 U.S. 974, 92 S. Ct. 1192, 31 L. Ed. 2d 248 (1972). See also, Curran v. Laird, 136 U.S.App.D.C. 280, 287, 420 F.2d 122, 129 (D.C.Cir.1969). It is not within the province of the Court to determine exactly where the interests of the national defense lie. Such a determination, by its very nature, is not judicial, but within the executive and legislative spheres. Rather, the Court accepts the determination of the highest official of the Navy, Secretary Hidalgo. The Secretary has certified to the Court, based in part on classified information, that it is "vital to the national defense that the Navy not be required to terminate its present contract with National Steel . . ." The Court has no reason to question the veracity, good faith or expertise of Secretary Hidalgo in this sensitive area. Accordingly, the Court finds that considerations of national defense preclude the injunctive relief which plaintiffs seek.

 Plaintiffs strenuously challenge Secretary Hidalgo's determination on several grounds. Plaintiffs characterize the Navy's determination that the T-ARC 7 is vital to the national defense as a "last-minute" effort to uphold the NASSCO contract and as totally inconsistent with the history of the T-ARC 7 procurement and the history of this case. Such a characterization is simply unfounded as statements of the witnesses before the House Committee on Armed Services indicate. It cannot be disputed that since at least 1975 the Navy has consistently claimed that the T-ARC 7 is a "critical" item. Furthermore, a review of the record of this case clearly illustrates that the Navy's claim that national defense interests are involved is not a "last-minute" effort to uphold the contract awarded to NASSCO. See, e.g., the Court's memorandum opinion denying plaintiffs' motions for a preliminary injunction, filed November 20, 1979, at 2-3, 11.

 In sum, plaintiffs' disagreement with the Secretary's judgment does not, and cannot, create a triable issue of fact. Decisions as to what is or is not in the interest of national defense lie outside the judicial domain. Such decisions are properly within the domain of the legislative and executive branches of the Government.

 While national defense considerations preclude the injunctive relief which plaintiffs seek, such consideration cannot preclude the declaratory relief also sought. As the Supreme Court made clear in Powell v. McCormack, 395 U.S. 486, 517-18, 89 S. Ct. 1944, 1962, 23 L. Ed. 2d 491 (1969): "The Declaratory Judgment Act, 28 U.S.C. § 2201, provides that a district court may "declare the rights * * * of any interested party * * * whether or not further relief is or could be sought.' . . . (A) request for declaratory relief may be considered independently of whether other forms of relief are appropriate." See also Atchison, Topeka and Santa Fe Railway Company v. Alexander, 480 F. Supp. 980 at 1002 (D.D.C.1979).

 III. PLAINTIFFS' CHALLENGES TO THE T-ARC 7 PROCUREMENT.

 A. The Technical Evaluation by the Source Selection Evaluation Board (SSEB).

 The SSEB consisted of six members who were supported by a team of twenty-two evaluators including engineering, contracting, technical and management personnel. The SSEB was to analyze and evaluate the T-ARC 7 proposals in all categories, *fn6" 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 result of its analysis to the Source Selection Advisory Council (SSAC).

 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, pp. 7-8. *fn7" Each evaluator also prepared a narrative explaining each score. See Jt.Ex. Q. The evaluator's narratives were submitted to the SSEB via category leaders (who were members of the SSEB).

 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 April 25, 1979, and the results of the SSEB's evaluations were presented to the SSAC on May 2-4, 1979. See Jt.Ex. V, p. 4.

 Plaintiffs challenge the power and authority of the SSEB to adjust the scores of the evaluators. In support of the challenge, plaintiffs rely on § 7.5 of the Source Selection Plan for the T-ARC 7 (SSP):

 
The category leaders and the SSEB shall screen the subcategory evaluation narratives for conformance to the Source Selection Plan and this Supplement and for conflicts in the evaluation. The SSEB shall attempt to resolve differences in the evaluations by discussion with the evaluators, but shall have no authority to change or direct a change in the evaluation narratives without voluntary concurrence by the evaluator.

 Jt.Ex. D, § 7.5. Plaintiffs' reliance on this section of the SSP is misplaced. This section does not limit the SSEB's authority to review and adjust evaluators' scores where it finds such adjustments appropriate. It merely limits the SSEB's authority unilaterally to rewrite the evaluator's narratives. This, the SSEB did not do. The evident purpose of this requirement is not to prevent the SSEB from applying its own judgment, but rather merely to document disagreements between the SSEB and the evaluators, such as those of which plaintiffs now complain. As indicated above, the SSEB prepared a narrative describing the composite scores, and explaining, as to each element reviewed, the adjustments and reconciliations. See Jt.Ex. Q. The Court finds such a procedure rational and consistent with the SSP.

 B. The Navy's Cost Evaluation

 Defendants contend that the cost evaluation of the T-ARC 7 proposals was proper in all respects and seek summary judgment on all five issues. There is no genuine dispute as to any fact material to the questions of law regarding plaintiffs' challenges to the Navy's cost evaluation. The Court concludes defendants are entitled to summary judgment on these issues as a matter of law. The Court will consider plaintiffs' challenges seriatim below.

 In reviewing the Navy's cost realism determination the Court is keenly aware of the deference owed to agency determinations on cost realism. In Kentron Hawaii, Ltd. v. Warner, supra, 156 U.S.App.D.C. at 280, 480 F.2d at 1172, the Court of Appeals for this Circuit noted that "decisions on cost realism and feasibility are squarely within the area of the contracting officer's expertise." Furthermore, the Court of Appeals stated that it wholeheartedly agreed with the following statement of the Comptroller General as to the degree of deference owed an agency's determination of cost realism in cases such as the one at bar, Id. at n.16:

 
(T)he award of cost reimbursement contracts requires exercise by procurement personnel of informed judgments whether submitted proposals are realistic as to proposed costs as well as to technical approach . . . . Further, we believe that such judgments properly should be left to the discretion of the contracting agencies concerned since they are in the best position to assess "realism' of costs . . . and must bear the major criticism for any difficulties or expense experienced by reason of a defective cost analysis.

 Trans World Airline, B-171291, 50 Comp.Gen. 592, 600 (1971).

 Moreover, the Defense Acquisition Regulations ("DAR") indicate the procuring agency has substantial discretion in determining the method and scope of cost analysis to be used in any given procurement. See DAR 3-807.1(d); 3-801.5(b) (1).

 The Court has conducted a careful review of the procurement record with regard to the Navy's cost evaluation of the T-ARC 7 proposals. The Court can neither conclude that the Navy's evaluation had no rational basis, nor perceive any ...


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