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MINNESOTA MINING AND MANUFACTURING COMPANY

February 28, 1984

MINNESOTA MINING AND MANUFACTURING COMPANY, Plaintiff,
v.
George P. SHULTZ and the United States of America, Defendants



The opinion of the court was delivered by: JOHNSON

 NORMA HOLLOWAY JOHNSON, District Judge.

 In this action for declaratory and injunctive relief Minnesota Mining and Manufacturing Company (3M), a disappointed bidder, seeks to enjoin the United States Department of State (State Department) from proceeding with its contract with defendant-intervenor, General Binding Corporation (GBC), for a one-year procurement of laminate sheets to be utilized on United States machine readable passports (MRPs). *fn1" 3M filed an application for a temporary restraining order with its original complaint and on January 12, 1984, this motion was denied. The motion presently under consideration is plaintiff's motion for a preliminary injunction. Defendants and defendant-intervenor oppose the motion. After consideration of the memoranda submitted by the parties and oral argument on the motion, the Court finds that plaintiff made a showing sufficient to entitle it to a preliminary injunction.

 BACKGROUND

 The State Department is the executive agency charged with the statutory authority and responsibility to issue passports to United States citizens and nationals. *fn2" 22 U.S.C. § 211a-18 (1976 ed. & Supp. V), 22 CFR Part 51. In 1976, the State Department implemented a program to improve the security, durability, and overall quality of U.S. passports. *fn3" One component of this systems upgrade was the employment of a laminate to cover that page of the passport containing the photograph and vital data of the holder. These laminated passports, which are capable of being read by Optical Character Readers (OCRs), are necessary for the State Department to convert to the MRP system presently being instituted by governments throughout the world under guidelines established by the International Civil Aviation Organization (IACO). *fn4"

 The State Department began using 3M's Confirm Type P laminate in 1979 pursuant to a sole-source contract awarded to 3M. 3M's Confirm laminate is a security film which utilizes retro-reflective glass beads embedded in a thin laminated sheet. Thus, when a light beam is shone on the laminate at a particular angle, the underlying material cannot be seen and the glass beads depict a logo which stands out sharply from the face of the sheet. The State Department began issuing MRPs with Confirm laminate in February 1981, and by 1983 3M had supplied the Department with more than three million sheets of this laminate.

 On February 12, 1982, the State Department issued a competitive solicitation for a negotiated procurement of laminated sheets for use on MRPs. Three firms, Polaroid Corporation, GBC, and 3M, responded to the Request for Proposals (RFPs) and the Bureau of Consular Affairs evaluated the technical information in each proposal. Thereafter, the State Department informed the three firms by letter dated December 23, 1982, that their initial proposals were technically defective and that failure to correct these defects would result in the rejection of their respective bids. Prior to this letter, however, several officials of the State Department met with Stephen R. Mayer on December 7, 1982. Mayer, who prepared the GBC proposal submitted in response to the RFP, discussed certain defects in GBC's laminate with these officials. The Department officials present at the meeting were John Stever, Contracting Officer, Sheldon Rosen of the Bureau of Consular Affairs, and Frank T. Kubic, the Contracting Officer's Technical Representative for the RFP and author of the RFP.

 On June 16, 1983, Kubic advised the Department that only 3M's Confirm Type S laminate and GBC's laminate met the requirements of the solicitation. *fn5" Shortly thereafter, the Department solicited the best and final offers of these companies and on August 30, 1983, the State Department awarded GBC Contract No. 1044-236012 as the lowest technically acceptable bidder. *fn6"

 3M was notified of the award in September and immediately requested the Department to release a sample of GBC's laminate and copies of the Department's evaluations. Although the State Department refused to release these materials, 3M secured a purported sample of GBC laminate submitted in response to the RFP. On December 9, 1983, 3M met with several officials from the State Department. At that meeting, Dr. Grant, the Technical Manager of the Security Products Group, Safety and Security Systems Division of 3M, used the purported sample to demonstrate the relative ease with which the GBC product could be counterfeited. While none of the Department's officials disputed Dr. Grant's findings, Senior Deputy of Consular Affairs Edward Rowell did state that the Department's decision to award the contract to GBC was based on cost considerations and not on the security features built into the laminate. At the conclusion of the meeting, 3M requested the Department to terminate the contract with GBC and to award the contract to 3M as the sole responsive bidder under the RFP. When the State Department did not reply on December 21, 1983, as requested, 3M instituted this suit.

 DISCUSSION

 A. Legal Standards

 The criteria governing the issuance of preliminary injunctive relief in the District of Columbia are well known. In order to prevail on a motion seeking this extraordinary relief, plaintiff must demonstrate 1) that it is likely to succeed on the ultimate merits of its claim; 2) that it will be irreparably injured if preliminary relief is denied; 3) that the issuance of injunctive relief will not cause significant harm to other interested parties; and 4) that the public interest favors the issuance of a preliminary injunction. Washington Metropolitan Area Transit Comm'n v. Holiday Tours, Inc., 182 U.S. App. D.C. 220, 559 F.2d 841, 843 (D.C.Cir. 1977); Virginia Petroleum Jobbers Association v. Fed. Power Comm'n, 104 U.S. App. D.C. 106, 259 F.2d 921, 925 (D.C.Cir.1958). The basic principles that define the scope of judicial review and intervention in government procurement cases are equally well established in this Circuit. Judicial review of government procurement decisions is governed by the Administrative Procedure Act (APA), 5 U.S.C. §§ 701-06 (1976 ed. & Supp. V 1981). Under the APA, a reviewing court may set aside an agency's final decision only if it determines the agency's decision was arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law. 5 U.S.C. § 706(2)(A). This standard of judicial review, commonly referred to as the "arbitrary and capricious" standard, is highly deferential and thus, it prohibits a court from substituting its judgment for the sound judgment of an agency. See Bowman Transportation v. Arkansas-Best Freight System, Inc., 419 U.S. 281, 285, 95 S. Ct. 438, 441, 42 L. Ed. 2d 447 (1974); Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416, 91 S. Ct. 814, 823, 28 L. Ed. 2d 136 (1971); Environmental Defense Fund, Inc. v. Costle, 211 U.S. App. D.C. 313, 657 F.2d 275, 283 (D.C.Cir.1981). Notwithstanding the deference given to an agency's final determination, a reviewing court has a duty to overturn an agency procurement decision where a disappointed bidder meets its heavy burden of showing that 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, Limited v. Warner, 156 U.S. App. D.C. 274, 480 F.2d 1166, 1169 (D.C.Cir.1973); Accord, Aero Corp. v. Department of the Navy, 493 F. Supp. 558, 566 (D.D.C.1981); Dickey-John Corp. v. Bergland, 444 F. Supp. 451, 455 (D.D.C.1978). As the Court of Appeals admonished in Allis-Chalmers Corp., Hydro-Turbine Division v. Friedkin, 635 F.2d 248 (3d Cir.1980),

 
courts . . . have an obligation to ensure agency compliance with applicable statutes and regulations [in awarding contracts, and] interests that must be weighed [include] practical considerations of efficient procurement of supplies for continuing government operations, the public interest in avoiding excessive costs and bidder's entitlement to fair treatment through adherence to statutes and regulations. . . .

 It is with these sound principles in mind that this Court grants the motion of 3M for a ...


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