This disclosure constitutes an obvious and prejudicial violation of procurement regulations. Clearly MVA treated the information as factual when it lowered the cost of its proposal after receiving the information between the first and second BAFO by offering the VA six months free rent. The change from the first to the second BAFO lowered MVA's bid from $ 32.00 per square foot for the fixed term of the lease to $ 30.40, which made its bid lower than that submitted by RPD. Such an advantage blatantly denied RPD its "basic right to be treated fairly in the procurement process," Dynalectron Corp. v. United States, 659 F. Supp. 64, 69 (D.D.C. 1987), and requires that the award to MVA be voided. See Kentron, 480 F.2d at 1169.
This Court is also concerned with a number of other irregularities in the procurement process. MVA did not act truthfully towards the GSA in a number of instances. It did not live up to its obligation to keep the GSA informed as to any material changes in its financial condition. On April 27, 1992 James Purvis, MVA's Project Director for Mission City, certified that MVA would inform the GSA of any material changes in MVA's financial condition. MVA did not disclose to the GSA that at the time of the award, MVA was in default on a $ 9.3 million Home Fed loan. Part of the collateral for this loan was the land on which MVA had proposed to build the VA building. It is clear that GSA considered this information material because the CFD had previously asked MVA about the status of its Home Fed loans after CFD had learned that some were in "technical default."
MVA submitted unaudited financial statements to CFD, which stated that MVA had some $ 121 million in assets, primarily in land. The valuations purport to be of developed property. For example they list a hotel valued at $ 6 million (500 rooms at $ 12,000 per room). In fact, the hotel has not been built. Mark Robinson of GSA's CFD testified that he believed that the valuations were for property that had been developed. He further testified that he would have wanted true information in making his financial capability determination.
The Federal Acquisition Regulations require that the "contracting officer shall make a determination that the prospective offeror is responsible with respect to the lease being considered." 48 C.F.R. § 570.208-5. By failing to fulfill its obligation fully and accurately to inform the GSA of material financial information, MVA made it impossible for the GSA to make a meaningful determination of MVA's financial responsibility.
The government takes the position that this Court cannot consider MVA's improper conduct as a basis for overturning its bid to MVA. Essentially, the government's contention is that a disappointed bidder has no standing to pursue such contentions.
The Court finds that the government's position lacks merit because it contradicts one of the purposes of giving standing to disappointed bidders in government procurements. Finding standing in disappointed bidders serves to protect both the economic interests of disappointed bidders and the public interest. See Orange Park Florida T.V. Inc. v. F.C.C., 258 U.S. App. D.C. 322, 811 F.2d 664, 672 (D.C.Cir. 1987) ("The basis for this recognition [that disappointed bidders have standing] is that a wrongful award of a government contract constitutes a discrete economic injury to unsuccessful bidders, who therefore have an incentive to vindicate the public interest as well as their own by insisting on the integrity of the procurement process."). Because MVA failed to disclose material information and misrepresented material information, it prevented the GSA from making a thorough evaluation of MVA's financial capability and negatively affected the public interest.
RPD has standing to contend that the regulations were violated, and the Court finds that there was not a proper determination of financial responsibility because MVA's improper conduct prevented one from taking place.
This Court finds the procurement was flawed in a number of important respects. First and foremost, it was a violation of the procurement regulations for the GSA to tell MVA that its first BAFO was not the lowest bid and to provide it with the ability to submit a lower second bid based on this information. Second, the Court finds that there was a violation of the Federal Acquisition Regulation concerning the determination of financial capability. Third, the Court believes that the GSA badly mishandled the flood plain issue. Fourth, this Court cannot understand the government's professed lack of concern with MVA's repeated efforts to sell the award before it had even built the building. Fifth, having seen videotapes of the two proposed sites and having heard testimony on their relative merits, the Court is baffled that the GSA could have found the MVA site -- in a rock quarry by Jack Murphy Stadium -- to be even minimally acceptable.
The GSA has stated one of the reasons why RPD's proposal was not chosen was that it was located in a zone-A floodplain. The deficiency letter sent to RPD made no mention of the floodplain issue. The GSA Contracting Officer Penelope Barron testified that this problem should have been mentioned in the deficiency letter. The omission is especially troubling since it was clear that the floodplain issue had been resolved because the RPD site was no longer in a zone A floodplain due to engineering work done in the area. In addition, RPD had been previously advised by Cashman of the GSA that the floodplain issue was not a problem. The handling of this issue and the failure to provide RPD the opportunity to respond to questions concerning the proposed financing of the project is obvious evidence of bias against RPD.
There is clear evidence in the record that MVA made a number of attempts to sell or "flip" the award before it even had built the building. At all stages of the proceeding, the GSA has attempted to minimize the importance of this fact. First, GSA witnesses have asserted that assignment of leases is common in the real estate industry. Second, they have said that since GSA must approve any assignment, they do not need to know of a bidder's efforts to market an award. See Anti-Assignment Act, 41 U.S.C. § 15.
Neither of these rationales is convincing. Penelope Barron, a contracting officer with 10 years experience, testified that although it may be common for an awardee to lease or sell to a new company a building inhabited by a government agency after the building has been built, she had never heard of an attempt to flip an award before the awardee had built the building.
To allow a company that has no intention of performing on the award to be the awardee would seem to undercut much of the rationale of the procurement process. The government spends time, money and resources to determine whether a potential awardee is both technically and financially capable of performance. If a bidder has no intention of performing under the contract, the time and money spent investigating the bidder is simply wasted. The anti-assignment provisions do not adequately protect the government against an awardee that is only interested in flipping the award.
Once the contract has been awarded, the government has much less leverage over an awardee that announces that it has no intention of building the project and proposes to assign it than it has over bidders in the initial bidding stage.
Since the GSA does not consider "flipping" a problem in its procurement process, the Court does not find that MVA's nondisclosure of its efforts to assign the award constitutes fraud sufficient to void the award. This award was flawed in other respects sufficient to require a new procurement, however, and it is urged that the GSA take this factor into consideration in the new procurement process.
The plaintiff has proposed that the Court award the contract to RPD on the basis of the record before it. This the Court will not do. Such an award to a disappointed bidder is an extraordinary remedy to be applied only if it is clear that the disappointed bidder would have won the contract absent the flawed nature of the bidding process. Delta Data Systems Corp. v. Webster, 240 U.S. App. D.C. 182, 744 F.2d 197, 204 (D.C. Cir. 1984). This Court does not desire to become a GSA contracting officer. What's more, the record is not clear that RFD would be an appropriate awardee. There were problems with RPD's proposal, including a failure to provide adequate financial information.
The defendants, relying on Delta Data Systems Corp. v. Webster, 244 U.S. App. D.C. 39, 755 F.2d 938 (D.C. Cir. 1985) (Delta Data II), have argued that even if the procurement process was flawed, equitable relief is not appropriate and that the plaintiff's only remedy is for damages under the Tucker Act. The Court is unpersuaded by defendant's argument. Unlike in Delta Data II, there has not already been "considerable performance . . . under the . . . contract." Id. at 939.
The proper remedy in this case is for the GSA to conduct the procurement again. The Court requests that within thirty days the government submit a proposal for a new procurement that will eliminate the possibility that the irregularities that infected this procurement process will not recur. An appropriate order follows.
DATE: December 5, 1994
United States District Court
Having read the submissions of the parties and heard the testimony presented at trial, this Court hereby
ORDERS that the award to MVA to build the VA building in San Diego, California be voided. It is hereby further
ORDERED that the GSA conduct the procurement again. It is further hereby
ORDERED that the GSA submit for the approval of this Court within thirty days a proposal for the new procurement that will prevent the recurrence of the failures elaborated in the opinion above.
United States District Court