American Fed. of Gov. Employees, Loc. 1858 v. Callaway

Decision Date18 June 1975
Docket NumberCiv. A. No. 75-G-652-NE.
PartiesAMERICAN FEDERATION OF GOVERNMENT EMPLOYEES, LOCAL 1858, et al., Plaintiffs, v. Howard CALLAWAY, Secretary of the United States Army, and Major General Bates C. Burnell, Commanding Officer of the United States Army Ballistic Missile Defense Systems Command at Redstone Arsenal, Alabama, Defendants.
CourtU.S. District Court — Northern District of Alabama




David B. Blankenship, and C. Lynwood Smith, Jr., Hornsby, Blankenship, Higgs & Smith, Huntsville, Ala., for plaintiffs.

Wayman G. Sherrer, U. S. Atty., and Jack Rivers, Asst. U. S. Atty., Birmingham, Ala., Robert M. Nutt, Major, JAGC, Asst. Gen. Counsel and Capt. R. Craig Lawrence, Dept. of the Army, for defendants.


GUIN, District Judge.

The plaintiffs came before this court on a motion for a preliminary injunction to prevent the United States Army from effecting a reduction in force (RIF) among the Civil Service personnel at its Ballistic Missile Defense Systems Command (BMDSCOM) at Huntsville, Alabama.

The plaintiffs contend that the defendants in violation of certain Army regulations entered three private contracts for the performance of systems engineering and technical assistance, hereinafter referred to as SETAC, and that these contracts provided jobs for private contractual personnel, positions which could have and which should have been available to the plaintiffs under "bump" and "retreat" rights established by United States Civil Service Commission regulations. The three contracts in question were to Teledyne-Brown Engineering Company, Science Applications, Inc., and M & S Computing, Inc. The plaintiffs contend that all three contracts have adversely affected them, but they contest most strongly the validity of the Teledyne-Brown contract.

Upon consideration of the complaint, motion for preliminary injunction, defendants' motion to dismiss, and supporting briefs, testimony by the parties and exhibits, the court makes the following findings of fact and conclusions of law:


1. The individual named plaintiffs are Civil Service employees at BMDSCOM who will be affected by the proposed reduction in force. Plaintiff American Federation of Government Employees (AFGE), Local 1858, is the recognized bargaining agent for the Civil Service employees at BMDSCOM.

2. The defendants in this case are the Secretary of the Army and the Commanding Officer of BMDSCOM.

3. The plaintiffs allege that this is a proper class action. The allegations are sufficient and the evidence heard so far indicates that Rule 23 requirements probably will be satisfied on a hearing.

4. In December 1974 the defendants informed the BMDSCOM personnel of a reorganization of the Command. On March 10, 1975, some 296 Civil Service personnel were informed of a RIF being brought about by this reorganization. As of May 23, 1975, the proposed class included 67 persons to be separated from government service; 27 persons scheduled for retirement, including 16 involuntary retirements; and about 50 persons to be reduced from one to five grades in pay. The balance had either resigned, been reassigned, or transferred within and without the Army.

5. On August 30, 1967, the Bureau of the Budget made certain revisions in its Circular A-76. The Department of the Army implemented these revisions of the circular under Department of Defense Directive 4100.15, and it consequently revised Army Regulation 235-5 to comply with these revisions.

a. While reasserting the government's general policy of relying on the private enterprise system, the 1967 revision of Circular A-76 announced certain changes in its policies for acquiring commercial or industrial products. In the summary of changes made by the revision, there is to be noted a significant change in paragraph six of the circular, wherein it is stated: ". . . Cost comparison studies should also be made in other cases if there is reason to believe that savings can be realized by the Government providing for its own needs. . . ."

The summary explained the revision by stating that the purpose of the change was to make it clear that where money could be saved by the government's providing for its own needs, cost studies should be made before deciding to rely upon a commercial source. The circular retained its expression of the basic policy of obtaining commercial or industrial products or services through private enterprise, and the circular limited the circumstances under which the government may provide these products or services through its own agencies. The criteria established to justify performance of these services by the government raised several points which will be mentioned later. The most important such criterion was the one justifying government commercial activity where procurement from a commercial source would result in a higher cost to the government.

b. The plaintiffs contend that Circular A-76 directed government agencies to consider costs in their evaluation of commercial and industrial type activities. However, as promulgated by AR235-5, this directive was somewhat disguised. The court's reading of this regulation indicates that it is a general limitation upon operation by the Army "in house" of commercial or industrial type activities. It establishes certain criteria necessary for a decision to perform such functions "in house." Nonetheless, the plaintiffs contend that the regulation requires three things of the Army in its commercial and industrial function determinations.

(i) The first requirement urged by the plaintiffs is said to arise under AR235-5, subsection 1-2(d), which provides:

1-2(d). This regulation will not be used as authority to enter into contracts if such authority does not otherwise exist, nor will it be used to justify departure from any law or regulation, including regulations of the Civil Service Commission, or other appropriate authority. Further, it will not be used as a basis for contract personnel procurement not authorized by law, nor as a means of avoiding Government personnel or salary limitations.

As to this subsection, the plaintiffs first contend that the defendants have used AR235-5 to justify departure from the Armed Services Procurement Regulation (ASPR) disallowing independent contracts for personal services. This contention will be discussed more fully later in these findings. The plaintiffs contend also that the defendants have used AR235-5 to justify departure from the AR235-5 sections prohibiting contracting out of managerial functions; the court, however, finds that AR235-5 specifically allows contracts for support managerial functions, which the defendants contend this contract involves, and therefore the court defers a determination of this issue until a final hearing on the merits.

Next, as to this subsection the plaintiffs contend that the defendants have used AR235-5 to justify departures from the Civil Service Commission's regulations on "bump" and "retreat" rights as formulated in Federal Personnel Manual (FPM), chapter 351.

Last, as to this section the plaintiffs contend that the defendants have used AR235-5 as a basis for avoiding government personnel limitations placed upon BMDSCOM and the salary limitations of 5 U.S.C. § 5308. The plaintiffs introduced expert testimony from Mr. Glen Sadler to the effect that while a member of the board reviewing the SETAC function, he had personal knowledge that the Army's reason for making the contracts was to avoid the BMDSCOM personnel limitations. This evidence is buttressed by a comment contained in the September 25, 1973, comparative cost analysis performed in accordance with AR235-5, wherein it is noted that the office of the Secretary of Defense in a January 1971 memorandum stressed that the use of the project office of Site Defense should be held to a minimum and a SETAC-type organization utilized in its place as much as possible. This offers a clear indication of an effort to skirt the personnel limitations of an agency. Testimony from the defendants' witness, Mr. Charles Finley, indicates that a compelling reason for the SETAC function was the inability to obtain the personnel required under Civil Service salary limitations and in essence that the contract was a means of avoiding these limitations.

(ii) The second requirement urged by the plaintiffs is said to arise under AR235-5, subsection 1-4(b). The plaintiffs contend that under subsection 1-4(b)(2), the Army had the responsibility to procure products and services from the source least costly to the government; and under 1-4(b) (3) to operate commercial and industrial activities in the most economical manner possible; and under 1-4(b) (4) to make maximum use of interservice/department/agency support. In this regard the plaintiffs contend, and they have demonstrated, that cost analyses performed prior to issuance of the Teledyne-Brown contract, and at subsequent stages preceding renewal of that contract, indicate that the SETAC function could be performed at less cost to the government "in house" than under the contract. This difference in cost varied from 21.63 per cent in July 1973 to 28.85 per cent in September 1973. The plaintiffs argue that the cost analyses performed in February 1974 and August 1974 showing a greater cost for "in house" performance were incorrect and arbitrary for various reasons discussed herein. The plaintiffs contend that the evidence shows, and the defendants concede, that approximately 75 per cent of the SETAC effort was capable of being performed by interservice support (i. e., BMDSCOM), and that maximum use was not made of said interservice support. There is no evidence to indicate what effort was made either prior to, or at subsequent reviews of, the SETAC contract to determine the capabilities of "in house" or interservice activity as...

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