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Public Warehousing Co. K.S.C. v. Defense Supply Center Philadelphia

May 22, 2007


The opinion of the court was delivered by: John D. Bates United States District Judge


Plaintiff Public Warehousing K.S.C., through its subsidiary PWC Logistics Services (collectively, "PWC") is a United States government contractor providing food products to the U.S. military in the Middle East pursuant to contracts with the Defense Supply Center Philadelphia ("DSCP"). Plaintiff brings this action against DSCP, the Defense Logistics Agency, and the Department of Defense seeking relief from (1) DSCP's alleged refusal to provide other government procurement agencies with past performance evaluations and information on the DSCP contracts and (2) DSCP's inclusion of allegedly improper information in one recent evaluation. Plaintiff contends that DSCP's actions violate the Federal Acquisition Regulations, 48 C.F.R. §§ 42.1502-.1503, and are arbitrary and capricious in violation of the Administrative Procedure Act, 5 U.S.C. § 706. Plaintiff further contends that DSCP's actions result in constructive debarment of PWC from the government contracting industry in violation of its right to due process.

Plaintiff seeks a preliminary and permanent injunction against DSCP Defendants have moved to dismiss for lack of subject matter jurisdiction or, in the alternative, for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(1) and (b)(6).*fn1 The parties have agreed to consolidate plaintiff's motion for preliminary injunction with plaintiff's request for a permanent injunction and final resolution of this action pursuant to Fed. R. Civ. P. 65(a)(2), and hence a consolidated hearing on the motions was held on April 26, 2007. For the reasons explained below, the Court will grant defendants' motion to dismiss for lack of subject matter jurisdiction, and will deny plaintiff's motion for a preliminary or permanent injunction.


Plaintiff and DSCP have entered into three Subsistence Prime Vendor contracts covering the provision of food products and related services to U.S. military dining facilities in the Middle East. Decl. of Toby Switzer ¶¶ 5-7 (Pl.'s Mem., Ex. B) ("Switzer Decl."). These contracts are referred to as PV1 (Contract No. SPO300-03-D-3061), PV Bridge (Contract No. SPM300-05-D-3119), and PV2 (Contract No. SPM300-05-D-3128). Id. The first contract, PV1, had an estimated value of $1.4 billion, and expired on February 15, 2005. Id. ¶ 6; Contractor Performance Assessment Report for PV1 (Pl.'s Mem., Ex. K). The second contract, PV Bridge --in essence, a "bridge" contract for the continuation of services until the finalization of the next contract -- had an estimated value of $1.5 billion, and expired on December 4, 2005. Switzer Decl. ¶ 2; Contractor Performance Assessment Report for PV Bridge (Defs.' Suppl. Mem., Ex. 2). The third contract, PV2, has an estimated value of $14 billion -- approximately 90 percent of plaintiff's overall revenues from government contracts. Switzer Decl. ¶ 7. Plaintiff is currently providing services pursuant to PV2, which is scheduled to expire in June 2007. Id.; see also Tr. of Mot. Hr'g at 11 (Apr. 26, 2007) ("Hr'g Tr."). DSCP has notified plaintiff, however, that DSCP intends to exercise its option to renew the contract for a period of one year. See Mem. from Dlugokecki to Switzer dated Mar. 22, 2007 (Defs.' Notice of Filing, Ex. 1) ("Notice of Intent Mem.").*fn2

The Federal Acquisition Regulations on "Contractor Performance Information" are set forth at 48 C.F.R. subpart 42.15. Section 42.1502(a) provides that agencies "shall" prepare an evaluation of contractor performance at the time the work under the contract is completed. Id. § 42.1502(a). It further recommends that "interim" evaluations "should" be prepared where the contract exceeds one year, in order to provide current information for source selection purposes. Id. In addition to interim and final evaluations, "past performance information" may be developed in the form of interviews or comment documents to assist in other contracting decisions. Id. § 42.1503(c). By regulation, agencies "shall" share past performance information with other agencies to support future award decisions. Id. Past performance information is weighed as an "indicator of an offeror's ability to perform the contract successfully," 48 C.F.R. § 15.305(a)(2)(i), and is thus "a significant, and often the most significant, factor in the evaluation process." See Decl. of Pamela Cooper ¶ 6 (Pl.'s Mem., Ex. H).

PWC has received very positive feedback from DSCP until quite recently. The final DSCP performance evaluation on the PV1 contract assigned PWC an overall rating of "very good to exceptional," and commented that, if given a choice, DSCP "definitely would award to [PWC] today" given its demonstrated ability to execute the promises made in its proposal.

CPAR for PV Bridge at 5 (Pl.'s Mem., Ex. K). The Defense Logistics Agency awarded PWC the "new contractor of the year" award in 2004, and DSCP has recognized plaintiff for outstanding customer service three years in a row. Switzer Decl. ¶ 8. DSCP also sent PWC a letter of appreciation for its "significant accomplishments" in the performance of the PV Bridge contract (see Letter from Haverstick to Bland dated Nov. 18, 2005) (Pl.'s Mem., Ex. N), and PWC anticipated receiving a positive performance evaluation for its successful completion of that contract, too. However, the issuance of that evaluation was delayed until after this litigation commenced, and fell short of PWC's expectations. See infra at 6.

Indeed, the relationship between DSCP and PWC reached a turning point in or around January 2007 when the Department of Justice ("DOJ") initiated an investigation into PWC's activities. Around that time, DOJ and the U.S. Attorney's Office in Atlanta, Georgia began investigating whether certain "prompt payment" discounts that PWC received from its suppliers had been improperly withheld from DSCP and whether PWC has an affiliation with one of its suppliers, The Sultan Center, that might suggest improper pricing. Switzer Decl. ¶ 12; see also Am. Compl. ¶¶ 11-12. PWC denies that it has engaged in any wrongdoing, and has proffered a detailed explanation to DSCP and the Court in its defense.*fn3 See Switzer Decl. ¶¶ 12-15; Pl.'s Mem. at 7-8.

In the meantime, DSCP has continued to receive requests for past performance information from other federal agencies who are considering PWC's bids for proposed federal contracts. See Pl.'s Opp. to Defs.' Mot. to Dismiss, Ex. A ("Pl.'s Opp."). On February 28, 2007, however, Linda Ford, the DSCP contracting officer, advised PWC that "DSCP will not participate in past performance surveys for other agencies during the period of the DOJ investigation." Email from Ford to Switzer dated Feb. 28, 2007 (Pl.'s Mem., Ex. I). DSCP reiterated this refusal to provide past performance surveys through its Office of Counsel on March 6, 2007. See Email from Surrena to Switzer dated Mar. 6, 2007 (Pl.'s Mem., Ex. A). DSCP also will not provide the final performance evaluation for PV1 to requesting agencies, although it remains available in the Contractor Performance Assessment Reporting System database ("CPARS") for those agencies that initiate a search for it. See Switzer Decl. ¶¶ 11, 19; see also Pl.'s Mem. at 13 n.5 (further explaining that other agencies may rely on DCPS rather than CPARS to provide evaluations). In the absence of past performance evaluations and information, PWC will receive "neutral" ratings on its bids for future government contracts. See Cooper Decl. ¶ 10; 48 C.F.R. § 15.305(a)(2)(iv). Plaintiff has presented credible evidence indicating that the net result of this informational void is that it "has very little chance of winning future contracts." Cooper Decl. ¶ 9.

On March 15, 2007, plaintiff filed this action seeking relief from DSCP's refusals to provide past performance evaluations and information. In Count One, plaintiff contends that DSCP has violated 48 C.F.R. §§ 42.1502(a) and 42.1503(c) by its refusal to provide plaintiff a past performance evaluation for the PV Bridge contract and its refusal to provide past performance information to requesting procurement agencies as to any of the PV contracts. Compl. ¶¶ 28-30, 32-34. Plaintiff further contends that DSCP has acted arbitrarily and capriciously in refusing to provide interim evaluations pursuant to § 42.1502(a) for the PV2 contract. Id. ¶ 31. In Count Two, plaintiff contends that DSCP's refusal to provide contracting officers with past performance evaluations and information constitutes a constructive debarment of PWC from the government contracting industry, thus resulting in the deprivation of property without due process of law. Id. ¶¶ 35-36.

After defendants filed a motion to dismiss, DSCP completed and provided the performance evaluation of PV Bridge. Contractor Performance Assessment Report for PV Bridge (Defs.' Suppl. Mem., Ex. 2). Defendants anticipated that the evaluation would render moot some or all of plaintiff's claims. The evaluation, however, contains a reference to the DOJ investigation that plaintiff regards as inappropriate, speculative, and damaging, and it does not affect DSCP's refusal to provide past performance evaluations and information in response to requesting procurement agencies. Plaintiff thus filed an amended complaint that reiterates the factual allegations and counts in its original complaint, and supplements those allegations to challenge disclosure of the allegedly damaging information in the new PV Bridge evaluation. See Pl.'s Mot. for Leave to Amend Compl. at 3; Am. Compl. ¶¶ 16-18, 20-22, 38, 41 & Request for Relief. Hence, plaintiff's claims are not now significantly different from the original complaint except insofar as plaintiff alleges that the reference to the DOJ investigation in the PV Bridge evaluation is improper because it does not constitute objective, performance-related information. See Am. Compl. ¶¶ 38, 41.

Plaintiff has advised the Court that it is in the process of exhausting its administrative remedies with respect to the PV Bridge evaluation -- that is, preparing a written response as it is entitled to do under 48 C.F.R. § 42.1503(b) and, if necessary, seeking relief from a supervisory contracting officer under that regulation.*fn4 Hr'g Tr. at 8-9. In plaintiff's view, however, its need for expedited relief remains unchanged. Plaintiff has submitted several bids in response to federal solicitations since it was first advised of the DOJ investigation and anticipates submitting about 50 bids in the foreseeable future, worth about $2 billion in annual revenues. See Switzer Decl. ¶ 9. DSCP remains firm in its position that, during the period of the DOJ investigation, it will not provide past performance evaluations or information in response to requesting agencies or in response to PWC's request on behalf of such agencies. Consistent with the parties' supplemental briefs and arguments at the motions hearing, the Court will treat plaintiff's motion for preliminary and permanent injunction, and defendants' motion to dismiss, as applying to the amended complaint.


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