Labat-Anderson, Inc. v. U.S.
| Decision Date | 22 November 2004 |
| Docket Number | No. CIV.A. 04-1826(JDB).,CIV.A. 04-1826(JDB). |
| Citation | 346 F.Supp.2d 145 |
| Parties | LABAT-ANDERSON, INC., Plaintiff, v. UNITED STATES, et al., Defendants. |
| Court | U.S. District Court — District of Columbia |
Thomas Leo McGovern, III, Hogan & Hartson, L.L.P., Washington, Counsel for plaintiff.
Stratton Christopher Strand, United States Attorney's Office for the District of Columbia, Washington, Counsel for defendants.
Plaintiff LABAT-Anderson, Inc., is a government contractor that provides distribution services at a supply depot operated by defendant Department of Defense. Defendants recently announced that they were not going to exercise the option on plaintiff's contract, and were instead going to convert the distribution services to in-house personnel on a temporary basis until the award of a new contract. In response, plaintiff filed a complaint in this Court and an application for a temporary restraining order or a preliminary injunction, seeking an order preventing defendants from converting to in-house personnel without first performing the cost comparison and full solicitation of bids that plaintiff claims is required under the governing statutes and regulations. Defendants have responded with both an opposition to plaintiff's motion and a motion to dismiss for lack of subject matter jurisdiction arguing that this Court has no authority to hear plaintiff's claims pursuant to the sunset provision of the Administrative Dispute Resolution Act ("ADRA"), 28 U.S.C. § 1491(b)(1) & note.
Upon consideration of the parties' motions and the hearing held on November 10, 2004, the Court hereby grants defendants' motion to dismiss for lack of subject matter jurisdiction, denies plaintiff's application for a temporary restraining order or a preliminary injunction as moot, and transfers this action to the Court of Federal Claims.
The Defense Logistics Agency ("DLA") is an agency of the Department of Defense that provides supply, technical and logistical support to the military services. One of the many responsibilities of the DLA is to provide an integrated pipeline for the distribution of supplies to United States forces throughout the world. Through its Defense Distribution Center ("DDC"), the DLA packs, packages, preserves, and marks the various materials and supplies necessary for the daily functioning of the armed services. The DDC operates through a network of 25 Defense Distribution Depots ("depots") located throughout the United States, Europe, the Pacific, and Southwest Asia.
In March of 1998, the DLA announced that it would initiate public-private competitions pursuant to Office of Management and Budget ("OMB") Circular A-76 to determine whether the distribution services at several of its depots could be performed more efficiently by the private sector. An A-76 competition is a two-step process. In the first phase, private contractors compete against one another to determine the "best value offerer." The bid of this "best value offerer" is then compared to the cost of providing the service with government employees, known as the agency's "most efficient organization" or "MEO." If the bid of the MEO is higher than the "best value offerer" — after the private bid is adjusted upward to ensure that the government does not convert to the private sector for marginal gains — the "best value offerer" wins the contract.
To date, twelve depots have undergone A-76 competitions, with the government's MEO winning six of the contracts, and the other six going to private contractors. On May 11, 2001, LABAT-Anderson, the plaintiff in this matter, won the competition for the depot at Cherry Point, North Carolina ("DDCN"). LABAT-Anderson's bid for the contract was $11.2 million, the lowest of all of the private contractors, and substantially lower than the MEO proposal of $20.8 million. After a two-month period for the resolution of any appeals, and a 120-day transition period, the DDCN contract commenced on December 1, 2001. The contract was for a base period of three years and contained a two-year option exercisable by the government.1
The difficulties the parties would later face regarding the DDCN contract can be traced to the months before the contract was even awarded to LABAT-Anderson. On December 8, 2000, the DLA had ordered DDCN to perform certain "detrash"2 and other tasks for some buildings at Cherry Point that, although similar to other work already done by DDCN, had previously been the responsibility of other agencies in the Department of Defense. The DDC was to begin performing these additional duties in April 2001. Because the A-76 competition was almost complete at that point, the DDC therefore decided that if a private company were to win the contract, it would modify the contract to add the "detrash" and other new responsibilities ("add work") at that time.
Shortly after LABAT-Anderson was awarded the DDCN contract, the government's MEO appealed the award of the contract on the ground that LABAT-Anderson's estimated cost for the contract did not take into account the new "add work." The appeals were denied. After the transition period began on August 1, 2001, the DDC notified LABAT-Anderson of the add work, and the parties began negotiating a price for the new responsibilities. The parties were unable to agree on terms for the add work before the contract was set to begin on December 1, 2001. Nevertheless, LABAT-Anderson agreed to perform the add work while the parties continued to negotiate.
When the parties still had not reached an agreement on a price for the add work by March 2002, the DDC wrote to LABAT-Anderson declaring that the parties were at an impasse. The DDC announced that it would therefore unilaterally modify the contract to incorporate the add work at a unit price specified by the DDC itself. The DDC informed LABAT-Anderson that if it disagreed with the prices that had been set by the government, the parties could continue to negotiate or LABAT-Anderson, if it wished, could file a claim alleging a violation of the contract. See Def. Mem., Ex. D at 2.
The relationship between the parties deteriorated from there. In May of 2002, LABAT-Anderson informed the DDC that it would stop performing the add work unless there was a bilateral modification to the contract. After discussions between the parties, LABAT-Anderson agreed to continue performing the work while the parties attempted to work out their problems. From June 2002 to October 2003, DDC and LABAT-Anderson held a series of negotiation sessions in an effort to resolve the dispute over the add work and other disagreements that had arisen over time regarding the scope and terms of the contract. Even after the parties participated in an ADR session with an Armed Services Board of Contract Appeals judge, and the Commander of DDC and the President of LABAT-Anderson met to attempt to resolve their differences, the parties could not reach an agreement on the various disputes arising out of the contract.
The base period of the DDCN contract is set to expire on December 1, 2004. On September 30, 2004, the DDC contracting officer responsible for oversight of the contract notified LABAT-Anderson that the government would not be exercising the two-year option under the contract. "Considering price and other factors," the contracting officer explained, "exercising this option is not considered to be the most advantageous method of filling the contract." Pl.'s Mem. Supp. Appl. T.R.O. & Prelim. Inj ("Pl. Mem.") at Ex. A. The contracting officer also announced that DDC would convert the DDCN distribution services to an Interim Government Organization ("IGO") in order to "cover these services until a new contract is awarded." Id.
LABAT-Anderson responded to the contracting officer the same day, offering to provide DDC with all of the services it currently performs at DDCN, including the add work, for a price of $425,000 per month. DDC nevertheless moved forward with the conversion to in-house personnel. On October 6, 2004, counsel for LABAT-Anderson wrote to counsel for DDC explaining its view that the conversion was a violation of Department of Defense procurement regulations and other governing law. The next day, the contracting officer for DDC contacted LABAT-Anderson, expressing a desire to enter into negotiations on terms for a possible extension of the contract beyond December 1, 2004. On October 21, 2004, after two weeks of unsuccessful negotiations, LABAT-Anderson filed a complaint in this Court seeking to block the conversion of distribution services at DDCN to in-house personnel.
Presently before the Court is LABAT-Anderson's motion for a temporary restraining order or a preliminary injunction, and the government's motion to dismiss for lack of subject matter jurisdiction. LABAT-Anderson argues that the DDC's conversion to in-house personnel without first issuing a solicitation for bids or conducting a cost comparison study violates the Administrative Procedure Act ("APA") because it is agency action that conflicts with several sources of applicable law, including a federal statute (10 U.S.C. § 2462), Department of Defense regulations (32 C.F.R. §§ 169.4, 169a.10), an executive order (Executive Order 12615), and OMB Circular A-76, and is therefore agency action contrary to law under the APA. LABAT-Anderson argues further that the balancing of the equities favors preliminary injunctive relief.
The government counters that this Court lacks subject-matter jurisdiction under the sunset provision of the Administrative Dispute Resolution Act ("ADRA"), which terminates federal district court jurisdiction on January 1, 2001, and confers exclusive jurisdiction in the United States Court of Federal Claims, over any claim alleging a "violation of statute or regulation in connection with a procurement or proposed procurement." 28 U.S.C. § 1491(b)(1) & note. In the alternative, the government...
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