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BMY v. UNITED STATES

September 2, 1988

BMY, A Division of HARSCO Corp., Plaintiff,
v.
United States of America, Defendant, and TRAK International, Inc., Defendant-Intervenor



The opinion of the court was delivered by: RICHEY

 INTRODUCTION

 On January 29, 1988, the United States Army Tank Automotive Command ("TACOM") concluded a two-year negotiated procurement process by awarding a contract for variable reach, rough terrain forklift trucks to TRAK International. In this suit, plaintiff, an unsuccessful bidder for that contract, charges that the contract award was unlawful. Plaintiff asks the Court to suspend performance of that contract and to enjoin defendant from acting on it. Plaintiff also asks the Court to declare either that plaintiff was entitled to the contract award or that defendant must cancel the contract award and reopen discussions with all offerors.

 Plaintiff originally moved for a preliminary injunction. Pursuant to Fed. R. Civ. P. 65(a)(2), the parties agreed to combine the hearing on the preliminary injunction with the hearing on the merits of this suit. The Court has had the benefit of that hearing, the extensive legal and evidentiary materials submitted by the parties, and the parties' proposed findings of fact and conclusions of law. After carefully considering these submissions, the arguments advanced in Court, and the underlying law, the Court must conclude that plaintiff is not entitled to relief in this case, and it will enter judgment in favor of defendants and defendant-intervenors. *fn1"

 BACKGROUND

 On October 29, 1985, the Army issued a Request for Proposal ("R.F.P.") for procurement of 6000-pound variable reach rough terrain forklift trucks. Defendant's Exhibit 4. That R.F.P. specified that the Army would pursue a two-phase procurement process in order to

 
. . . develop, test, and competitively procure a reasonably priced, state-of-the-art forklift, which has been comprehensively designed to meet the requirements of the performance specification, and to satisfy the considerations of reliability, availability, and maintainability (RAM), operator compatibility and vehicle productivity.

 Id. at 1.

 The October 29, 1985, R.F.P. also specified that Phase Two of the competition would be open only to successful bidders for the Phase One contracts. On April 18, 1986, plaintiff was awarded a Phase-One contract, as were both defendant-intervenor's predecessor-in-interest and Con Diesel Mobile Equipment. *fn2" Spitzbarth Declaration para. 6. On the basis of its submissions on paper, plaintiff's technical proposal was rated higher than those of the other Phase One contractors. Phillips Affidavit para. 6.

 These paper submissions, however, were not relevant to the final analysis of the vehicles' technical merit. Rather, as the October 29 R.F.P. specified, in the second phase of the procurement the Army would select a production contractor

 
. . . based on the results of the Government's evaluation of 1) Phase-two Multi-Year production proposals; 2) Phase-one prototype vehicle test results; and 3) contractor proposed 'corrections' to vehicle deficiencies identified during prototype testing.

 Id.

 The Army conducted extensive testing of the prototype vehicles over a six-month period beginning in December, 1986. Defendant's Exhibit 3, part IV, at 1. The Army kept the contractors informed of test results in several ways. The Army issued "Test Incident Reports," which described the prototypes' shortcomings in the reliability and productivity tests. The Army also released the performance test results, which revealed the extent to which the prototypes met or failed to meet the contract specifications. Id. In addition to these reports, the Army also notified contractors of vehicle part failures through formal and informal correspondence. Wagner Declaration, para. 8.

 These tests revealed that, despite plaintiff's technical superiority on paper, plaintiff's prototype vehicles were seriously flawed. "Several structural failures occurred in the frame, along with numerous electrical failures and hydraulic leak problems." Defendant's Exhibit 3, Part IV, at 13. Moreover, plaintiff's vehicles failed to comply with gradeability and braking requirements. Id. All told, plaintiff's prototypes failed to meet twenty-eight specification requirements, id., and experienced seventy-one different types of failures, id. at 17, scattered throughout the vehicle, Defendant's Exhibit 2, at 2. As might be expected in a vehicle with so many critical failure "modes," plaintiff's trucks had a mean time between unscheduled maintenance actions of 9.3 hours. Defendant's Exhibit 3, at 17.

 In contrast, defendant-intervenor's prototype vehicles failed to meet twenty-one specification requirements, id. at 3, and had forty-seven different types of failures, id. at 5. These raw figures, however, do not reflect the fact that most of these failures were located in one section of the prototype; because the problems were centralized, the Army found, they could be corrected more successfully. Defendant's Exhibit 2, at 2. The Army also found that, while the mean time between failures of the TRAK prototype was only 6.5 hours during the early portion of the testing period, the TRAK prototypes' performance and time between failures were "superior" once a design correction was made. Defendant's Exhibit 2, at 5.

 On June 12, 1987, the Army released the Phase Two Request for Proposal. Defendant's Exhibit 5. This R.F.P. called for bids on production and delivery of 1,801 forklifts over a four-year period, with options for production of additional vehicles. The R.F.P. clearly stated that:

 
the objective of this acquisition is the award of a Multi-year production contract to that contractor whose combination of Phase-one prototype test results and Phase-two Multi-year proposal . . . have been evaluated and found most advantageous to the Government.

 Id. at 1. The R.F.P. went on to state that the Source Selection Authority would evaluate the proposals on the basis of cost, technical, Logistics/MANPRINT, *fn3" and production capability. Id. at M-2. Of those factors, the R.F.P. stated, cost "is of primary importance and is worth . . . somewhat more" than all other factors combined. Id.

 The R.F.P. also specified the factors that would be used to evaluate the offers. "Cost" would be evaluated in terms of "price reasonableness," which in turn would be evaluated on the basis of several subcriteria. Id. at M-3, M-6-7. The Army also listed a number of criteria by which to judge Logistics/MANPRINT and production capability, and it stated that it would simply determine whether the proposals were acceptable or unacceptable with respect to these two factors.

 The criteria by which the Army would analyze the technical merits of each proposal were a bit more complicated. The Army would evaluate both the results of its extensive testing of the prototype vehicles and the offerors' proposed changes to correct flaws revealed by that testing. Id. at M-01(d), M04.B. The Army would not assume that proposed corrections would solve the problems; instead, it developed seven criteria for analyzing the risk associated with the changes. Wagner Declaration, at para. 10. The R.F.P. specified that the Army would analyze this technical information with an eye toward "specification compliance," "reliability," "productivity," "maintainability," and "availability." Id. at M-3.

 On August 10, 1987, the Army received Phase Two proposals from the three participants in the Phase One testing, BMY, Koehring (now TRAK International), and Con Diesel (now Eagle Picher Industries). These were submitted to Proposal Evaluation Boards ("Boards") whose members were chosen by the Source Selection Authority for their expertise in areas related to the contract. Spitzbarth Declaration, para. 12. The Boards evaluated the proposals in accordance with factors detailed in the Source Selection Plan, a previously adopted comprehensive set of criteria that provided, inter alia, for notifying an offeror of all "deficiencies" in its proposal as well as any need to clarify or substantiate any part of the proposal. Defendant's Exhibit 3, at Parts II, VII.

 From August, 1987, through December, 1987, these Boards conducted comprehensive discussions about the technical deficiencies in plaintiff's proposal. *fn4" Defendant's Exhibit 7. The Boards also quizzed plaintiff on several other aspects of its submission. Id. On December 3, 1987, the Army issued a request for Best and Final Offers, which the offerors submitted on December 11, 1987. Spitzbarth Declaration, para. 13. The Boards then completed their report, which was forwarded to the Source Selection Authority ("S.S.A.") for this contract, Brigadier General Carl W. Tipton, TACOM's Deputy Commanding General for Procurement and Readiness.

 General Tipton asked the Boards to clarify certain aspects of the reports. Among these were the corrective actions proposed by both plaintiff and defendant-intervenor, the "reliability growth" *fn5" and likely contract performance of both plaintiff and defendant-intervenor, and plaintiff's past performance and MANPRINT. Defendant's Exhibit 11. The Boards issued this report on January 15, 1988. Defendant's Exhibit 2.

 The reports documented significant problems with plaintiff's proposal. In addition to plaintiff's "unacceptable" Logistics/MANPRINT and production capabilities, plaintiff's proposal was plagued with technical problems. In contrast to TRAK's prototype, which had a predictable, recurring flaw, plaintiff's prototype exhibited random, new "failure modes" throughout the testing period. Defendant's Exhibit 2, at 1. Indeed, the Army found that plaintiff's prototype had so many different and widely dispersed failures that plaintiff had to "redesign" part of the vehicle and substantially "fix" most of the vehicle, all with methods untested during the Phase One prototype testing. Id. at 4-5. Thus, the Army concluded, plaintiff's many changes rendered the prototype testing irrelevant to any consideration of how well or poorly plaintiff's final vehicle would work. Id. at 4; Defendant's Exhibit 1 at 4.

 Plaintiff's offer was, however, approximately 10 percent cheaper than the other submissions. Nonetheless, the S.S.A. found that the lower initial cost of plaintiff's trucks was "outweighed by the superiority of the TRAK proposal," which he found "most advantageous to the Army" because it "offers the Government the greatest value for the dollars expended." Defendant's Exhibit 1, at 3, 6, 7. Accordingly, he selected TRAK International for award of the multi-year contract at issue, and plaintiff filed this suit challenging the contract award.

 THE COURT MUST GIVE GREAT DEFERENCE TO THE GOVERNMENT'S DECISION.

 A frustrated bidder for a government contract clearly has standing to seek judicial review of the legality of the contract award. See, e.g., National Maritime Union v. Commander, Military Sealift Command, 263 U.S. App. D.C. 248, 824 F.2d 1228, 1237-38 (D.C. Cir. 1987); Gull Airborne Instruments, Inc. v. Weinberger, 224 U.S. App. D.C. 272, 694 F.2d 838, 841 (D.C. Cir. 1982); Scanwell Laboratories v. Shaffer, 137 U.S. App. D.C. 371, 424 F.2d 859 (D.C. Cir. 1970). The role of the Court, however, is more circumscribed than in many other types of actions.

 Most important, the Court may not substitute its own view of how a procurement should be conducted for that of the experienced contracting officer. As the Court of Appeals for this Circuit has noted, "judges are 'ill-equipped to settle the delicate questions involved in procurement decisions, where long and complex factual histories, subtle economic factors, and the need for expeditious buying decisions require assessments 'better left to the expertise of an executive agency."" Delta Data Systems Corp. v. Webster, 240 U.S. App. D.C. 182, 744 F.2d 197, 203 (D.C. Cir. l984) (quoting Kinnett Dairies, Inc. v. Farrow, 580 F.2d 1260, 1271 (5th Cir. 1978) (citation omitted). Accordingly, the Court must afford great discretion to officials in the contracting agency, and must not "'improperly intrude into the agency's decisionmaking process.'" Delta Data Systems Corp. v. Webster, 744 F.2d at 203 (quoting Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense Council, 435 U.S. 519, 525, 55 L. Ed. 2d 460, 98 S. Ct. 1197 (1978).

 Thus, in a challenge to a procurement decision, a disappointed bidder must ". . . bear a heavy burden of showing either that (1) the procurement official's decisions 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, 480 F.2d 1166 (D.C. Cir. 1973). As long as the procurement and the contract award meet these tests, "the court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations." M. Steinthal & Co. v. Seamans, 147 U.S. App. D.C. 221, 455 F.2d 1289, 1301 (D.C. Cir. 1971).

 Plaintiff claims that the procurement fails both of these tests, and it has advanced a host of rationales to support its view. After carefully considering the evidence, however, the Court must conclude that plaintiff has failed to carry its "heavy burden." *fn6"

 THE SOURCE SELECTION AUTHORITY'S DECISION TO AWARD THE CONTRACT TO DEFENDANT-INTERVENORS DID NOT INVOLVE A CLEAR AND PREJUDICIAL VIOLATION OF APPLICABLE STATUTES OR REGULATIONS.

 A. Defendant conducted "meaningful discussions" with plaintiff.

 Plaintiff first asserts that defendant violated the Competition in Contracting Act, 10 U.S.C. § 2301 et seq., and the regulations promulgated thereunder by failing to conduct "meaningful discussions" about the shortcomings of plaintiff's proposal. The focus of plaintiff's argument is defendant's alleged failure to inform plaintiff of all perceived technical inadequacies in plaintiff's trucks as well as the problems with its production capability and "Logistics/MANPRINT" submission. The Court finds that, although plaintiff has shown that the discussions were not exhaustive, plaintiff has not proved that defendants failed to conduct "meaningful discussions" within the meaning of that term.

 Prior to the request for "Best and Final Offers," the offerors for this procurement dealt with a contracting officer who was required to conduct "negotiations concerning cost or price, technical requirements, and other terms and conditions." 48 C.F.R. § 15.604(c)(3). As part of these negotiations, he had to "conduct written or oral discussions with all responsible sources who submit proposals within the competitive range." 10 U.S.C. § 2305(b)(4)(B). These discussions are defined by regulation as

 
. . . any oral or written communication between the Government and an offeror (other than communications conducted for the purpose of minor clarification), whether or not initiated by the Government, that (a) involves information essential for determining the acceptability of a proposal, or (b) provides the offeror an opportunity to revise or modify its proposal.

 48 C.F.R. § 15.601 (1987).

 While "the content and extent of the discussions is a matter of the contracting officer's judgment, based on the particular facts of each acquisition," id. at § 15.610(b), they must include certain elements. Specifically, the contracting officer must "advise the offeror of deficiencies in its proposal so that the offeror is ...


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