Aero Corp. v. Department of the Navy

• Citation: 558 F. Supp. 404
• Decision Date: 16 February 1983
• Docket Number: Civ. A. No. 79-2944.
• Parties: AERO CORPORATION, Plaintiff, v. DEPARTMENT OF THE NAVY, Defendant.
• Court: U.S. District Court — District of Columbia

558 F. Supp. 404

AERO CORPORATION, Plaintiff, v. DEPARTMENT OF THE NAVY, Defendant.

Civ. A. No. 79-2944.

United States District Court, District of Columbia.

February 16, 1983.

Jean-Pierre Sweenen, Roger N. Boyd, Crowell & Moring, Washington, D.C., for plaintiff.

Judith Bartnoff, Asst. U.S. Atty., with Barbara A. McBride, NAVAIR System Command, Office of Gen. Counsel U.S. Dept. of the Navy, Washington, D.C., for defendant.

MEMORANDUM

OBERDORFER, District Judge.

This is the final chapter of this protracted litigation¹ in which plaintiff has challenged the Navy's decision to award contracts for the C-130 aircraft Service Life Extension Program (SLEP) to the Lockheed-Georgia Corporation ("Lockheed" or "LGC") without competition.² Plaintiff is an aerospace firm with ten years of experience in performing maintenance on C-130's, as defendant's contractor for Standard Depot Level Maintenance (SDLM) for its C-130 fleet.³ Plaintiff alleges that the Navy was legally obligated to conduct a competition for its SLEP contracts, and that plaintiff would have submitted adequate bids for SLEP if a competition had been held.⁴

I. Overview

Almost six years ago, the Navy formally began planning SLEP for 49 of its C-130's. By mid-1979, defendant had decided to procure SLEP for all 49 planes from Lockheed on a "sole source" basis, that is, without attempting competitive bid solicitation for SLEP service contracts from other firms such as plaintiff or others experienced in the maintenance of C-130 aircraft.⁵

This action was filed on October 30, 1979, after defendant had made its final decision to award the SLEP contracts for all 49 C-130's to Lockheed; contracts for the first 13 planes were actually awarded on November 30, 1979. On March 4, 1980, after obtaining the advice of the General Accounting Office (GAO), C.R. A-35, considering briefs and documentary evidence and holding a hearing, the Court filed a Memorandum (Aero I) finding and concluding that, due to the military urgency of the SLEP induction schedule,⁶ defendant's sole-source award of the initial SLEP contracts was not unreasonable. The Court also concluded, however, that defendant had "not satisfied the GAO or the Court that it now has a reasonable basis for precluding competition for SLEP procurement with respect to the balance of the procurement." 493 F.Supp. at 568. The Court therefore ordered defendant, inter alia, "in good faith to consider the feasibility of competitive procurement for the remaining planes to undergo SLEP, including the use of kits tailored to depot level contractors experienced with the C-130."⁷ Id. at 570 (hereinafter "March 1980 Order").

Thereafter, while defendant ostensibly studied competitive options, the Court invited further GAO consideration of the possibilities and requirements for competition for SLEP procurement.⁸ Meanwhile, plaintiff began to charge that Navy was not complying with the March 1980 Order and was otherwise acting in bad faith. See, e.g., C.R. 2; C.R. 29; C.R. 32. In June and September, 1981, the Acting Comptroller General of the GAO rendered two opinions, concluding that the Navy still had not rationally justified its decision to award the contracts for SLEP service for the remaining 29 C-130's without attempting competition. C.R. 84; C.R. 63 at 2. The GAO advised the Court that the Navy should take specified actions to attempt to compete the remaining SLEP contracts before it decided to award them to Lockheed on a sole-source basis.

Because the GAO's opinion does not bind the parties or the Court, see Wheelabrator Corporation v. Chafee, 455 F.2d 1306, 1316-17 (D.C.Cir.1971), the Court invited further briefs, received further evidence and held further hearings on the merits and on the questions raised by plaintiff about the Navy's good faith compliance with the March 1980 Order. These culminated in a Memorandum filed on February 18, 1982, (Aero II), in which the Court concluded that defendant's decision not to permit competition for the remainder of the SLEP procurement still had no rational support in the record, and that plaintiff would probably prevail on its claim that defendant's decision to contract with Lockheed as the sole-source for SLEP for the remaining C-130's without competition violated the Armed Services Procurement Act, 10 U.S.C. § 2304(g) (1976 & Supp. V 1981),⁹ and Section Three of the Defense Acquisition Regulations, 32 C.F.R., part 1, vol. 1, ¶ 3-101(d) (1981) ("DAR 3-101(d)").¹⁰See 540 F.Supp. at 184, 211. In order to secure compliance with its March 1980 Order, the GAO's subsequent advice, and the requirements of § 2304(g) and DAR 3-101(d), the Court issued a preliminary injunction. This injunction specified procurement actions to be taken by defendant "to foster competitive conditions for subsequent procurements ... and possible breakout of components for competitive procurement." DAR 3-101(d). Specifically, the injunction (hereinafter "1982 Order") ordered defendant to "commence forthwith preparation of such an Engineering Change Proposal (ECP) and Air Frame Change (AFC) as may be needed for C-130 SLEP accomplishment by experienced C-130 Standard Depot Level Maintenance (SDLM) contractors following competitive negotiation limited to LGC and experienced C-130 SDLM contractors,"¹¹ and to "commence to take all other steps necessary to avoid the need for future non-competitive procurement of C-130 SLEP." 540 F.Supp. at 219 (citations omitted). The Court also ordered defendant to file a report on or before May 31, 1982, based on its engineering progress to that date, regarding the possibilities of competition for SLEP contracts for the remaining C-130's. Id.

In April 1982, plaintiff filed a pleading which charged that the Navy was not complying with the March 1980 and 1982 Orders. C.R. 128. On May 13, 1982, defendant submitted its "Report to the Court." C.R. 129 (hereinafter "May 1982 Report"). On July 8, 1982, after review of more briefs and documentary evidence, the Court filed a third Memorandum (Aero III), ruling that the Navy still had not provided a rational basis for its sole-source SLEP decisions and reiterating that plaintiff would probably prevail on the merits. 549 F.Supp. at 41, 43-44. In exercise of its equitable discretion, however, the Court declined to enjoin sole-source procurement of SLEP service from Lockheed for the balance of the original 49 planes, in light of the military priorities asserted by the Navy for SLEP and the limited and speculative opportunity for competition that remained at that late date. Id. at 45; see M. Steinthal & Sons v. Seamans, 455 F.2d 1289, 1301 (D.C.Cir.1971).¹² The Court noted at that time that plaintiff's requests for collateral relief and contempt citations were still serious issues in the case.

Defendant has not prosecuted appeals of any of the Court's orders issued over the course of this action, nor has it ever sought clarification or modification of them from the Court. See Fed.R.Civ.P. 60(b).

Nothing has occurred since July 1982 to alter the Court's previously stated inclination to hold that the course of defendant's conduct of the C-130 SLEP procurement, at least from March 4, 1980, forward, constituted an arbitrary and capricious refusal to fulfill its statutory obligation to pursue competition. Therefore, after consideration of its earlier findings, conclusions, and orders, and upon the entire record, the Court today ratifies those previous findings and conclusions, and holds that defendant has violated its duty under § 2304(g) and DAR 3-101(d) to pursue competition "to the maximum possible extent." An accompanying Order will grant plaintiff's motion for a declaratory judgment on this ground. In addition, to prevent such violations in the specific context of SLEP procurement from occurring in the future, the Order will require special notice of any future SLEP procurement decisions made by defendant.

In addition, the Court finds and concludes that defendant has failed to comply with the Court's March 1980 Order that it consider "in good faith" the feasibility of competitive procurement of SLEP among experienced C-130 contractors, and has evaded the 1982 Order implementing the requirement of a "good faith" effort. This failure and evasion are not the flagrant violations of clear, crisp orders that would sustain the citation for contempt sought by plaintiff. As more fully demonstrated below, however, the Navy's failure to make the "good faith" effort so plainly called for by statute, regulation, GAO advice and Court orders is, by itself, "bad faith." See McGehee v. C.I.A., 697 F.2d 1095 at 1102 n. 26, 1113 (D.C.Cir.1983) (lack of good faith is "evidence of bad faith"). Moreover, its conduct in this litigation since March 4, 1980, if not earlier, plainly evinces bad faith of defendant (but not its counsel)¹³ toward plaintiff and the Court. The accompanying Order therefore provides for an award to plaintiff for its attorney's fees from March 4, 1980, until the present in its legally successful but practically frustrated pursuit of relief from its elusive adversary. Alyeska Pipeline Service Co. v. Wilderness Society, 421 U.S. 240, 95 S.Ct. 1612, 44 L.Ed.2d 141 (1975).¹⁴

II. Jurisdiction

Recent legislation requires brief re-examination of the Court's jurisdiction over this matter. Jurisdiction has been and is now founded upon 28 U.S.C. § 1331 and Section 702 of the Administrative Procedure Act, 5 U.S.C. §§ 701-06, as applied to procurement decisions alleged to contravene the statutory obligations of competition. See Scanwell Laboratories, Inc. v. Schaffer, 424 F.2d 859 (D.C.Cir.1970) (hereinafter "Scanwell"); see also Gull Airborne Instruments, supra n. 8; Kentron Hawaii v. Warner, 480 F.2d 1166 (D.C.Cir.1973); M. Steinthal & Co., supra p. 408.

While this matter has been in litigation, Congress enacted the Federal Courts Improvement Act of 1982 (FCIA), Pub.L. No. 97-164, 96 Stat. 40 (April 2, 1982) (effective as of October 1,...