General Research Corp. v. United States
| Decision Date | 08 June 1982 |
| Docket Number | Civ. A. No. 81-0979-A. |
| Citation | 541 F. Supp. 442 |
| Parties | GENERAL RESEARCH CORPORATION, Plaintiff, v. UNITED STATES, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Virginia |
Brian P. Gettings, Arlington, Va., for plaintiff.
Thomas K. Berger, First Asst. U. S. Atty., Alexandria, Va., for U. S.
C. Torrence Armstrong, Alexandria, Va., for intervenor defendant System Automation Corp.
This case concerns a military procurement known by the acronym "PERDDIMS," for Personnel Development and Distribution System.1 The Army's Military Personnel Center ("MILPERCEN") intends to use PERDDIMS, which will be a centralized database computer system, to distribute and assign military personnel to its bases.
Defense Supply Service-Washington ("DSS-W") has handled the procurement for MILPERCEN. It has let two contracts for the procurement, "PERDDIMS I" and "PERDDIMS II." Only the award of the second contract is at issue in this case, but the preceding contract is background to the dispute over PERDDIMS II.
DSS-W awarded PERDIMMS I to the plaintiff here, General Research Corporation ("GRC"), on September 29, 1980. On October 16, 1980, the intervenor-defendant here, System Automation Corporation ("SAC"), which bid on but failed to get PERDDIMS I, filed a bid protest. SAC charged that certain GRC employees working in connection with the PERDDIMS project formerly had been MILPERCEN employees with responsibilities relating to PERDDIMS, and that their conduct constituted violations of the federal conflict-of-interest laws. The Army's Criminal Investigative Division ("CID") began an inquiry into the matter, and later a grand jury in the Eastern District of Virginia was convened to examine the allegations. SAC also filed an action in the United States District Court for the District of Columbia, seeking to enjoin GRC from further performance on PERDDIMS I and to get a declaratory judgment that the contract was void. SAC moved for and received voluntary dismissal of this suit on January 29, 1981, because two days earlier the contracting officer at DSS-W responsible for PERDDIMS I, Mr. Bachhuber, terminated PERDDIMS I. He did so under the contract's "termination-for-`convenience'" clause, which permits termination "whenever for any reason the Contracting Officer shall determine that such termination is in the best interest of the Government."
Initially, however, Bachhuber doubted that he should terminate the contract. He requested a legal opinion regarding his alternatives from DSS-W counsel, but remained uncertain after receiving it. He then sent a letter to Mr. Joseph J. Aronica, Assistant United States Attorney for the Eastern District of Virginia, in which he stated that he understood Aronica was supervising an FBI investigation into the allegations against GRC, and he requested "releasable" information resulting from that investigation. Aronica informed Bachhuber by letter that "the allegations and the evidence thus far uncovered are serious and warrant further investigation by a federal grand jury which may result in a criminal indictment in the future." Aronica also pointed out that he was "unable to release any detailed evidence."
Bachhuber was still uncertain after receiving Aronica's letter. He then requested a meeting with Aronica, which took place at the office of the United States Attorney in Alexandria, Virginia. After this meeting Bachhuber drafted a memorandum stating:
I have received verbal information from Mr. Aronica and his colleague Mr. Fisher another assistant United States Attorney in the Eastern District of Virginia that the U.S. Attorney has documentary and testimonial evidence that Messrs. Schinderman and Walker GRC employees assisted GRC in the preparation of its PERDDIMS proposal while still employees of MILPERCEN, clearly fraudulent and illegal acts.
Bachhuber then terminated PERDDIMS I.
At the Pentagon, discussions among higher-level officials ensued concerning the government's next move in relation to the PERDDIMS procurement. In April of 1981, certain officials discussed whether an agency other than DSS-W should handle a second PERDDIMS contract award, or, indeed, whether there should even be a PERDDIMS procurement at all. The officials were clearly concerned about adverse publicity, particularly if GRC turned out to be the superior bidder the second time around. The notion that GRC's "tainted" conduct in relation to the first contract also would taint its eligibility for the second contract was another subject of discussion.
The officials decided to go forward with the procurement. They also decided to have DSS-W handle it, with the proviso that it use a "clean slate," i.e., DSS-W employees unconnected with PERDDIMS I. DSS-W appointed a Mr. Reppert to serve as contracting officer for PERDDIMS II. MILPERCEN, which supplied technical evaluations of proposals to DSS-W, also was to use a "clean slate," but inexplicably did not do so.
On June 18, 1981, DSS-W issued a request for proposals for PERDDIMS II. The contract contemplated by the request for proposals contained substantially the same technical and functional requirements as PERDDIMS I. GRC then informed Reppert, by letter, that it wished to use Schinderman and Walker for PERDDIMS II, and it requested that DSS-W go on record as not "condoning prejudice against GRC ... as a result of allegations made in connection with the previous protest." A DSS-W attorney, Major Cathey, advised Reppert's superior, Miller, not to respond to the letter, and no letter was sent. Reppert did tell GRC that DSS-W would treat it fairly, and did not object to the proposed use of Schinderman and Walker. Curiously, around the same time DSS-W advised a third bidder, Computer Sciences Corporation, that its proposed PERDDIMS project manager, Lt. Colonel William Green, might have a conflict-of-interest problem, because he formerly had been project manager of PERDDIMS at MILPERCEN. Computer Sciences Corporation did not solicit this advice; DSS-W volunteered it. Moreover, upon request, Computer Sciences Corporation received a formal written opinion on the propriety of using Lt. Colonel Green for PERDDIMS from the Judge Advocate General.
GRC believes that the Army decided in advance not to award GRC PERDDIMS II due to possible adverse publicity; however, because the Army needed as many bidders as possible in order to encourage competition, it tricked GRC into bidding. By GRC's lights, the Army also tricked GRC into presenting its proposal in such a way that the Army would have an excuse to deny GRC the contract. Because DSS-W made no objection to GRC's stated intent to use Schinderman in connection with PERDDIMS II, GRC had Schinderman represent it at technical negotiations. DSS-W later was to use this conduct as a reason for denying GRC the PERDDIMS II contract.
Until September 25, 1981, Reppert intended to award PERDDIMS II to GRC, because it submitted the lowest bid and its proposal was technically superior to the other proposals. However, on that day CID briefed him regarding its investigation, and he examined CID reports that rather mysteriously appeared on his desk. The CID reports stated that there was evidence of conflicts of interest and fraud in connection with GRC's effort to obtain the PERDDIMS I contract, including evidence that (a) the two former MILPERCEN employees passed information to GRC regarding PERDDIMS while they were still in the government's employ; (b) GRC could not have successfully bid on PERDDIMS I without this inside information; and (c) GRC offered one MILPERCEN employee a bonus of $200 per month for an indefinite period if GRC were successful in obtaining the PERDDIMS contract.
A contractor cannot be responsible within the meaning of the DAR unless it has "a satisfactory record of integrity." DAR § 1-903.1(iv) (32 C.F.R. 1-903.1(iv))
Major Cathey earlier had discussed the "taint" theory with higher officials. (He was also the person who advised Miller not to write GRC any letter addressing GRC's concerns stemming from PERDDIMS I.) In his memorandum to Reppert, Cathey advanced the "taint" theory:
The taint theory is sufficient for a nonresponsibility determination if the contracting officer believes that the Termination for Convenience of the PERDDIMS I contract was proper. The circumstances and evidence which led to that decision by the contracting officer, Mr. Bachhuber, remain unchanged and are set out in numerous documents and memos contained in the files of this office, as well as that of Mr. Bachhuber. ... Furthermore, the contracting officer must also determine that PERDDIMS I and PERDDIMS II are essentially the same project for the taint of one to pass to the other.... If the contracting officer accepts the taint theory, and independently determines that there is a taint, and if he accepts the fact that the two PERDDIMS projects are essentially the same, then the only remaining element is met when Mr. Shinderman actively negotiated for GRC on 25 August 1981—a fact within the personal knowledge of the contracting officer.
On September 29, 1981, Reppert signed a written determination of "nonresponsibility." Pursuant to DAR 1-904.1, he set forth the basis of the determination:
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