Libby Welding Co., Inc. v. United States

• Decision Date: 19 December 1977
• Docket Number: Civ. A. No. 77-0334.
• Citation: 444 F. Supp. 987
• Parties: LIBBY WELDING COMPANY, INC., Plaintiff, v. UNITED STATES of America, Defendant, and John R. Hollingsworth Co., Defendant-Intervenor.
• Court: U.S. District Court — District of Columbia

444 F. Supp. 987

LIBBY WELDING COMPANY, INC., Plaintiff, v. UNITED STATES of America, Defendant and John R. Hollingsworth Co., Defendant-Intervenor.

Civ. A. No. 77-0334.

United States District Court, District of Columbia.

December 19, 1977.

COPYRIGHT MATERIAL OMITTED

Philip M. Risik, Washington, D. C., for plaintiff.

Dennis Dutterer, Asst. U. S. Atty., Washington, D. C., for defendant.

W. Stanfield Johnson and Dale H. Oliver, Washington, D. C., for defendant-intervenor.

MEMORANDUM

GASCH, District Judge.

In this action, plaintiff Libby Welding Company ("Libby") seeks injunctive relief setting aside the award of a multi-year contract for the production of diesel generators for the Army. On February 28, 1977, plaintiff's request for a temporary restraining order was denied, and on the next day the government awarded the contract to John R. Hollingsworth Company ("Hollingsworth"). The United States is defendant in this action, and Hollingsworth has intervened as a defendant. Pursuant to Rule 65(a)(2), Federal Rules of Civil Procedure, the Court consolidated the hearing of plaintiff's application for a preliminary injunction with the decision on the merits. Presently before the Court are the parties' cross-motions for summary judgment. For the reasons set forth below, the Court concludes that defendant's and intervenor-defendant's motions for summary judgment should be granted and that plaintiff's motion should be denied.

FACTUAL BACKGROUND

The material facts are not in dispute. On April 16, 1976, the Defense General Supply Center issued Invitation for Bids DSA 400-76-B-3610 ("IFB-3610"). The IFB was for the procurement of three varieties of generator sets. Alternative bids were requested; Bid A covered a single-year procurement and Bid B covered a three-year procurement. The original IFB included items 0001-0078, comprising 401 units for the single-year procurement.¹ Specific destinations were listed for most of these items.² The solicitation also designated the quantity of units to be furnished during the second and third years of the multi-year procurement,³ but it did not include line itemizations specifying destinations for these units or providing other detailed information regarding them. The IFB did include, however, a provision for the evaluation of transportation costs for the multi-year procurement.⁴ The parties strongly dispute the proper interpretation of this provision.

On June 3, 1976, the IFB was amended to add line items 0079-0115. Items 0079-0082 were additions to the first-year procurement, while items 0083-0115 listed 1053 units for the entire three-year procurement.⁵ Itemized destinations were not provided in the amendment for 1006 of the 1053 units constituting the multi-year procurement.⁶

The amendment to the IFB also changed the basis for evaluating preservation, packaging, and packing ("PPP") costs. The original solicitation, incorporating section 2(c) of Standard Form 33A, provided that "the unit price for each unit offered . . shall include packing unless otherwise specified."⁷ As amended, however, Section G of the IFB stated that the unit price for PPP would be "in addition to the unit price specified for the generator set."⁸ Moreover, all of the items included in the single-year procurement were specified for either Level A/A or Level B/B PPP. None of the items for the second and third years of the multi-year procurement were given PPP specifications. The June 3 amendment did include a clause, inserted between the amendments to Section E of the IFB and the amendments to Section G, which declared that "all clauses applicable to items 0001-0082 are also applicable to items 0083-0115."⁹ The parties disagree about what effect this clause had on the evaluation of PPP costs for the latter two years of the multi-year contract.

Finally, the IFB provided that first article approval and initial production testing would be prerequisites to acceptance of production units by the Government.¹⁰ The Government reserved the option of waiving first article testing for "those offerors offering a product which has been previously furnished and has been accepted by the Government."¹¹ The solicitation permitted bidders seeking such a waiver to indicate any price reductions resulting from a waiver of the testing.

On June 21, 1976, the bids were opened and Libby and Hollingsworth were the low bidders on a unit price basis. Following the evaluation of additional costs, including transportation and PPP costs, the contracting officer determined that Hollingsworth was the low bidder on the multi-year contract.¹² On June 29, 1976, Libby protested to the General Accounting Office ("GAO") the proposed award to Hollingsworth. Libby raised essentially the same contentions presented in this action, and the GAO denied Libby's protest on February 25, 1977.¹³ Following award of the contract to Hollingsworth on February 28, 1977, Libby brought this action seeking injunctive relief setting aside the award.

MERITS

In this action, plaintiff Libby sues as a disappointed bidder, seeking to overturn a government contract award allegedly based on prejudicial illegalities in the procurement process. Plaintiff clearly has standing to bring such a suit. Scanwell Laboratories, Inc. v. Shaffer, 137 U.S.App. D.C. 371, 424 F.2d 859 (1970). To prevail in its effort to have the Court overturn the contract award, plaintiff has the burden of showing

either that (1) the procurement official's decisions on matters committed primarily to his own discretion had no rational basis, or (2) the procurement procedure involved a clear and prejudicial violation of applicable statutes or regulations.

Kentron Hawaii, Ltd. v. Warner, 156 U.S. App.D.C. 274, 277, 480 F.2d 1166, 1169 (1973). In its review, the Court should respect the wide discretion given by procurement regulations to contracting officers in their evaluation of bids and applications of regulations. M. Steinthal & Co. v. Seamans, 147 U.S.App.D.C. 221, 233, 455 F.2d 1289, 1301 (1971). Moreover, in a case such as the one at bar, the Court should give considerable deference to the conclusions of the GAO regarding a particular procurement matter. Wheelabrator Corp. v. Chafee, 147 U.S.App.D.C. 238, 248-49, 455 F.2d 1306, 1316-17 (1971). Of course, a decision by the GAO is not binding on the Court. M. Steinthal & Co. v. Seamans, supra, 147 U.S.App.D.C. at 237, 455 F.2d at 1305.

Plaintiff urges that the contracting officer's evaluation of transportation and PPP costs was illegal and prejudicially caused plaintiff to be displaced as the lowest responsible bidder. Plaintiff also claims that the inclusion of the first article waiver clause was prejudicially illegal; and that even if its inclusion was legal, the contracting officer's decision denying plaintiff first article waiver was without any rational basis.¹⁴ Upon consideration of the applicable laws and regulations and the entire record herein, the Court concludes that plaintiff has failed to show that the challenged actions of the contracting officer were either irrational or illegal and clearly prejudicial.

A. First Article Waiver.

In its bid responding to IFB-3610, plaintiff requested waiver of first article tests. Plaintiff based its request on the similarity between generators to be supplied under IFB-3610 and generators supplied by plaintiff to the Army under a prior contract (Contract No. DAAK02-72-C-0265). Plaintiff estimated a $450,000 reduction in price to the government resulting from a waiver of first article tests. Plaintiff's request was denied by the contracting officer, however, who based his action on serious production deficiencies under plaintiff's earlier contract and on the fact that IFB-3610 was a first-time buy on a new military specification.¹⁵

Plaintiff's primary argument regarding first article waiver is that inclusion of the waiver clause in the solicitation was illegal. Plaintiff relies on a procurement regulation that provides that first article waiver provisions are inapplicable "when it is known that first article approval will be required of all bidders or offerors." 32 C.F.R. § 1.1903(b) (1976) (Armed Services Procurement Regulations). Plaintiff contends that the Government knew, or should have known, that none of the bidders would be granted first article waiver. Plaintiff argues that the Government knew of the facts underlying its refusal of first article waiver for plaintiff prior to the issuance of the solicitation.¹⁶

The Court cannot accept plaintiff's argument; even assuming that the waiver clause was improperly included in the solicitation, plaintiff has not shown that it was prejudiced by this error. Plaintiff claims that if the waiver clause had not been in the solicitation, plaintiff would have otherwise structured its bid to underbid its competitors by a significant margin. This general allegation by itself is insufficient to satisfy plaintiff's burden of showing clear prejudice.¹⁷ Plaintiff has not specified how or for what reason it would have changed its bid if the waiver clause had not been in the solicitation. Moreover, it is undisputed that plaintiff submitted alternative bids depending on whether first article tests would be waived. After the contracting officer decided not to grant a waiver to plaintiff, plaintiff's alternative bid containing first article costs was considered equally with the other submissions. The record shows that plaintiff was in fact not prejudiced by the waiver clause's inclusion in the solicitation.

Plaintiff's prejudice argument also fails because it is based on the erroneous premise that plaintiff's request for a waiver of first article costs entitled it to receive such a waiver. Plaintiff claims that it was prejudiced by having relied on the waiver clause in structuring its bid. Plaintiff asserts that it would have sufficiently lowered its bid to win the award if the waiver clause had not been included in the solicitation. Implicit in pl...