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April 13, 1992

DONALD E. RICE, et al., Defendants.


The opinion of the court was delivered by: LOUIS F. OBERDORFER


This matter is before the Court on plaintiff's Motion for Preliminary Injunction and Cross-Motions for Summary Judgment by the plaintiff, the defendants, and the intervenor. Earlier in the proceedings, the Court granted plaintiff's application for a Temporary Restraining Order, set a bond of $ 185,000 and then vacated the restraining order when a satisfactory bond was not posted. The Motions for Summary Judgment have been fully and ably briefed and argued and are now ripe for decision. Dispositive issues about which no material fact is in dispute can be resolved now in favor of plaintiff by a declaratory judgment.


 For over 40 years plaintiff, Reeve Aleutian Airways, Inc., has furnished passenger and cargo service to the Aleutian Islands, including the Island of Shemya, about 1400 miles from Anchorage, Alaska. Shemya is the site of a United States Air Force Base, and little, if anything, else. There is almost no civilian population except for those employed by the Air Force and its contractors. It does not attract tourists. While the Shemya air base has been, and continues to be, served by carriers under contract with MAC, except for a one month period in 1987, Reeve has been the only civilian carrier serving Shemya Island. During that period MarkAir, Inc., another civilian carrier, served Shemya in addition to rendering service under its contract with MAC.

 Until recently, neither Reeve nor MarkAir, during its brief period of service to Shemya, was a party to any formal contract with the Air Force for the use of the landing facilities of the Shemya air field other than a support agreement embodied in a December 16, 1987 Memorandum of Understanding between Reeve and the Air Base Commander. See Administrative Record (A.R.) at 62-63. Reeve did lease a counter from the Air Force for which it paid rent ranging over time from $ 200 to $ 300 per month, and more recently it has leased a warehouse on the base. Reeve made its rental payments to the United States, and also paid all other charges it incurred for fuel and other ground support services directly to the United States. It paid no fee for landing rights. The passengers and cargo carried by Reeve to and from Shemya were almost exclusively government employees or contractors and cargo space was designated to them. They, apart from some dependents who visited the island, represent all of the passengers that Reeve carried. The freight charges that Reeve earned were paid by the United States, either directly or by reimbursement. The landing field at Shemya belongs to the United States and the ground crew, which serviced the Reeve planes, consisted of military and civilian employees of the United States.

 In 1991, Air Force officers at Shemya determined that the relationship between the base and any civilian carrier serving Shemya air base should be formalized. *fn1" To this end, on October 15, 1991, Major Ronald S. Hadden, on behalf of the Department of the Air Force Specialized Contract Division at Elmendorf AFB in Alaska, published a solicitation for bids for air travel service to Shemya. A.R. at 64. The solicitation was for service from December 1, 1991 through November 30, 1992, for which the successful bidder would pay a concession fee to the Shemya Air Force Morale, Welfare and Recreation Fund. As extended, the solicitation called for bids by January 8, 1992, but incorporated by reference a provision permitting late modification to a bid so long as the late modification made its terms more favorable "to the government." See Solicitation, Part 14, PL-37. The solicitation stated that it "contemplated" multiple awards but that only one contractor would be allowed to serve during any one "block" of days. It did not mention an exclusive contract. After several extensions, a January 8, 1992 deadline was set for bidders responding to the solicitation.

 MarkAir filed a timely bid for an exclusive contract. In consideration for this privilege, MarkAir originally offered to pay 10 percent of its gross revenue derived from the Shemya service to the Shemya Air Force Morale and Welfare Fund. A.R. at 219-21. Reeve responded to the solicitation by telefaxing, late in the day on January 8, 1992, two pages of what was later submitted in hard copy as part of a formal bid. A.R. at 224-54. In the bid, Reeve offered to furnish 10 round trip tickets each month to the Fund, and "evenly spaced service during the week." It conditioned its bid on the understanding that its leasehold interests would not be affected, but Reeve did not expressly seek exclusivity. A.R. at 221.

 In a Memorandum of January 9, 1992, the contracting officer determined and declared both offers to be "non conforming to the proposal." A.R. at 70. The MarkAir bid was not acceptable because it was expressly exclusive. In addition, MarkAir limited its bid to supplying service "commensurate with demand for passenger, freight and mail service" and it did not bid on a block or blocks of time. A.R. at 97. The Reeve bid was deemed to be faulty because, among other things, it came in at the last minute by telefax, an unacceptable method of transmission, bid on evenly spaced service instead of for blocks of time as called for by the solicitation, and, in the opinion of the contracting officer, was conditioned "on [Reeve] being the sole carrier." A.R. at 70. Hadden reached this conclusion by construing Reeve's insistence on preserving its leasehold interests as meaning that it reserved an exclusive right to use its leased counter space, thus making its offer a de facto bid for an exclusive service opportunity. If both bids were rejected Hadden reasoned, however, "the government [would] have no service" to Shemya Island. Therefore, he determined that it would be in "the best interest of the Government" to conduct discussions with both offerors, "to correct proposal deficiencies" and to request Best and Final Offers. A.R. at 70. This he proceeded to do.

 A Proposal Evaluation/Decision Document summarizes the result of these negotiations and the contacting officer's decision to award the contract to MarkAir. A.R. at 77-79. In brief, the contracting officer described Reeve's Best and Final Offer as one for service on two days per week from December to April and three days per week from April through November plus 10 tickets per month. A.R. at 77. He valued the Reeve ticket offer at $ 11,460 per month or a total of $ 137,520 per year. Id. MarkAir, by contrast, reportedly offered service 3 days per week year round. Its concession fee offer was two tickets or $ 121,680 plus 10 percent of the ticket sales from Shemya which he estimated (without much confidence) at $ 1,170 per year. This made MarkAir's Best and Final Offer $ 121,000. A.R. at 78. Thereafter, the document stated that MarkAir had improved its bid as follows: MarkAir in unsolicited letters dated 30 & 31 Jan 92 has clarified the intent of the 10% concession fee. Mr. Bill Weir explained the CEO was out of town when the proposal was submitted and had just returned. The CEO reviewed the proposal and wanted to clarify the intent of the 10% concession fee. As a result the 30 Jan 92 letter was hand delivered to the undersigned. On 31 Jan 92 Mr. Weir called again and explained the CEO was not happy with the 30 Jan 92 clarification and thus the reason for the 31 Jan 92 clarification. MarkAir in their 31 Jan 92 letter has guaranteed a minimum of $ 100,000/year, they have also stated there is no maximum fee payable, it is limited only to the amount of tickets sold at Shemya. Based on legal opinion dated 6 Feb 92 and my reading of FAR 15.411, it is my determination these letters are clarifications within the intent of FAR 14.405 and not a modification of the proposal as stated in FAR 15.412. Therefore the total concession fee offered by MarkAir is as follows: Ticket dollar value $ 121,680 Confession Fee 100,000 Total $ 221,680 x 5 years $ 1,008,400


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