AT & T Communications, Inc. v. WilTel, Inc.
| Decision Date | 30 July 1993 |
| Citation | 1 F.3d 1201 |
| Parties | 39 Cont.Cas.Fed. (CCH) 76,547 AT & T COMMUNICATIONS, INC., and Richard G. Austin, Administrator General Services Administration, Appellants, v. WILTEL, INC., and MCI Telecommunications Corporation, Intervenors. 92-1474, 93-1090. |
| Court | U.S. Court of Appeals — Federal Circuit |
C. Stanley Dees, McKenna & Cuneo, Washington, DC, argued, for appellants, AT & T Communications, Inc. With him on the brief was Thomas C. Papson. Of counsel was G. Ridgley Loux. Kirk T. Manhardt, Attorney, Commercial Litigation Branch, Dept. of Justice, of Washington, DC, argued for appellants, Richard G. Austin, Adm'r Gen. Services Admin. With him on the brief were Stuart M. Gerson, Asst. Atty. Gen. and David M. Cohen, Director. Also on the brief was Seth Binstock, General Services Admin.
David W. Burgett, Hogan & Hartson, Washington, DC, argued, for WilTel, Inc. With him on the brief was Jonathan S. Franlin. Also on the brief was Patricia E. Martin, WilTel, Inc., Tulsa, OK.
Robert H. Koehler, Patton, Boggs & Blow, Washington, DC, argued, for intervenors, MCI Telecommunications Corp. With him on the brief were Mary E. Bosco and Michael J. Schaengold. Also on the brief was Robin L. Redfield, Corporate Counsel, MCI Telecommunications Corp., Washington, DC. Of counsel was Douglas R. Duberstein, Hogan & Hartson.
Before NEWMAN, CLEVENGER, and RADER, Circuit Judges.
The General Services Administration Board of Contract Appeals (Board) granted Wiltel, Inc.'s and MCI Telecommunications Corporation's bid protest. Wiltel, Inc. v. General Services Admin., 1992 BPD p 201 1992 WL 189631 (GSBCA 1992). AT & T Communications, Inc. and the General Services
Administration (GSA) appeal. The protest concerns FTS2000, the Federal Government's comprehensive telecommunications contract. GSA and AT & T agreed to modify the FTS2000 contract to add services. Wiltel (and later MCI) protested the modification for exceeding the scope of the FTS2000 contract. Because the Competition in Contracting Act (CICA) does not require a separate competitive procurement for this modification to the FTS2000 contract, this court reverses.
In 1986, GSA solicited bids for FTS2000, a Government-wide telecommunications system. Under the heading Description/Specifications/Work Statement, the FTS2000's request for proposals describes the scope of the contract:
C.1.3 Objectives
The FTS2000 procurement is designed to meet the following government objectives:
a. To obtain a comprehensive set of telecommunications services
b. To obtain telecommunications services through two prime service contractors responsible for providing all services and network management
c. To accurately forecast telecommunications costs over a 10-year contract period
....
e. To adopt an architecture that will provide a smooth transition to an Integrated Services Digital Network (ISDN) environment when it becomes economically attractive
f. To encourage competition between the two FTS2000 services contractors as a means of ensuring continued improvements in FTS2000 services and prices
Some specific requirements to meet these objectives are described below.
C.1.3.1 Telecommunications Services. The government intends to procure the following six telecommunications services: switched voice service, switched data service, switched digital integrated service, packet switched service, video transmission service, and dedicated transmission service. This solicitation describes these services, as well as specific features of these services that the government is likely to procure. It is the government's intent that these services conform as closely as possible with those offered commercially.
GSA Request for Proposals number KET-JW-87-02 p C.1.3-C.1.3.1 (RFP); see also Wiltel, 1992 BPD p 201 at 3. This case features one of the six services mentioned above, namely dedicated transmission services.
The RFP's next paragraph defines "dedicated transmission service":
C.2.1.1 Services. the contractor shall provide the following services:
....
f. Dedicated transmission service for point-to-point private line transmission of voice and data.
RFP at p C.2.1.1.
Dedicated transmission service receives detailed treatment later in the FTS2000 RFP: "Dedicated transmission service includes analog, digital, and T1 transmission service." RFP at p C.2.7. "Analog" includes "(i) voice and analog data at rates up to 4.8 kbps, and (ii) voice and analog data at 9.6 kbps between two FTS2000 service delivery points." RFP at p C.2.7.1. "Digital" includes digital data transmission at 9.6 kbps and at 56 kbps/64 kbps. RFP at p C.2.7.2. T1 is digital data transmission at a rate of 1.544 Mbps. Wiltel at 3, n. 1.; see RFP at p C.2.7.3. The three separate types of dedicated transmission service in the RFP differ primarily in their transmission rates.
The RFP encourages offerors to propose additional features:
L.37.4.4 Additional Features/Items. The offeror is encouraged to offer additional features and items not identified in the price schedules provided in the RFP, but which the offeror normally supplies to its other customers....
Certain general rules apply to what features/items may be offered, as listed below:
d. They shall be items that can be included under the general scope of this solicitation.
RFP p L.37.4.4.
The RFP also incorporates by reference a standard changes clause and a "Service Improvements" clause:
H.16 Service Improvements
a. After contract award, the Government may solicit, and the Contractor is encouraged to propose independently, improvements to the services, features, or other requirements of the contract. These improvements may be proposed to save money, to improve performance, or for any other purpose which presents a service advantage to the Government.... Those proposed service improvements that are acceptable to the government will be processed as modifications to the contract.
....
e. If a proposal submitted pursuant to this clause is accepted and applied to this contract, the equitable adjustment increasing or decreasing the contract price shall be in accordance with the procedures of the "Changes" clause. The resulting contract modification will state that it is made pursuant to this clause.
RFP p H.16.
The RFP requires the contractor to present "an annual service plan for approval by the service oversight center." RFP at p C.3.2.10. The plan must assess "areas of growth requiring new access arrangements, the opening of new locations ... forecasting of new telecommunications applications and services, and the like." Id.
Congress required GSA to award the FTS2000 contract to two providers in a 60%-40% division. Wiltel, 1992 BPD p 201 at 2. After four and seven years of contract performance, the FTS2000 contract permits the two providers to compete for a larger share of the services. See RFP p H.14. Three companies submitted bids on the FTS2000 RFP--AT & T, Sprint, and Martin Marietta (with whom MCI participated as a subcontractor). In late 1988, GSA awarded the contracts to AT & T and Sprint, with the 60% share to AT & T. Id. at 4-5.
The contract awarded to AT & T had a guaranteed value of 270 million dollars over the first four years. Id. at 5. The contract price depends principally on the volume of use by the government. The stated maximum value of the AT & T contract is 15 billion dollars. The current estimated total value of the AT & T contract is 5 to 8 billion dollars. Id. at 10.
On March 4, 1992, AT & T submitted a proposal under the Service Improvements clause of the FTS2000 contract. AT & T proposed to modify the contract by adding "T3" circuits as a fourth type of dedicated transmission service. T3 circuits provide digital data transmission at 44.736 Mbps, a rate 28 times faster than T1, the fastest pre-modification dedicated transmission service circuit. GSA evaluated the proposal and determined that federal agencies needed T3 service. GSA also concluded that the proposal was within the scope of the FTS2000 contract.
On March 31, 1992, GSA and AT & T entered into Modification PS95, a "bilateral modification to incorporate an enhancement feature to the Dedicated Transmission Service." See Wiltel, 1992 BPD p 201 at 9-10. The modification provides for procurement of twenty-one T3 circuits joining pairs of locations from among a set of thirty. Id. at 19. The total value of the modification is approximately 100 million dollars. See id. at 10.
This court upholds the Board's decision on a question of fact "unless the decision is fraudulent, or arbitrary, or capricious, or so grossly erroneous as to necessarily imply bad faith, or if such decision is not supported by substantial evidence." 41 U.S.C. Sec. 609(b) (1988). This court reviews the Board's legal conclusions de novo. Id.
ModificationThe Competition in Contracting Act (CICA) requires executive agencies when procuring property or services, to "obtain full and open competition through the use of competitive procedures." 41 U.S.C. Sec. 253(a)(1)(A) (1988). CICA, however, does not prevent modification of a contract by requiring a new bid procedure for every change. 1 Rather only modifications outside the scope of the original competed contract fall under the statutory competition requirement. CICA sets forth no standard for determining when modification of an existing contract requires a new competition or falls within the scope of the original competitive procurement.
This court's predecessor, the Court of Claims, set forth a standard for determining whether a contract modification is within the scope of the underlying contract:
Under established case law, a cardinal change is a breach. It occurs when the government effects an alteration in the work so drastic that it effectively requires the contractor to perform duties materially different from...
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