Old Dominion Dairy Products, Inc. v. Brown, Civ. A. No. 79-981.

• Decision Date: 14 May 1979
• Docket Number: Civ. A. No. 79-981.
• Citation: 471 F. Supp. 300
• Parties: OLD DOMINION DAIRY PRODUCTS, INC., Plaintiff, v. Harold BROWN et al., Defendants.
• Court: U.S. District Court — District of Columbia

471 F. Supp. 300

OLD DOMINION DAIRY PRODUCTS, INC., Plaintiff, v. Harold BROWN et al., Defendants.

Civ. A. No. 79-981.

United States District Court, District of Columbia.

May 14, 1979.

Monroe E. Freeman, Jr., Lucy G. Eliasof, Washington, D. C., for plaintiff.

Lillian McEwen, Ass't U.S. Atty., Washington, D.C. for defendants.

MEMORANDUM OPINION

GESELL, District Judge.

This is a disappointed-bidder case. Plaintiff was the lowest bidder on two separate contracts to supply milk and related products to Air Force bases located at Okinawa and Yokohama, respectively. Each of its bids was, however, rejected on the ground that plaintiff "lacked integrity" and therefore had not established its "responsibility" as required under the pertinent regulations. Plaintiff contends that the two rejections were illegal and asks, with respect to each, for an injunction awarding the contract to it or, alternatively, for a declaration that defendants' refusal to award the contract was improper. Plaintiff also requests that the Air Force be barred from rejecting any future bids made by plaintiff on the basis of the facts that caused the aforementioned rejections. For the reasons set out below, the Court finds that each of the contracting officers involved acted reasonably and in good faith. The challenged rejections will accordingly not be set aside. Moreover, no basis exists for any of the other relief sought.

Plaintiff is in the business of supplying milk and related products primarily to military installations overseas. For several years, it has held contracts to supply the Air Force with these products at Okinawa and certain other bases. When the Okinawa contract came up for renewal (effective July 1, 1979), the Air Force requested plaintiff to bid. Plaintiff viewed the securing of this contract as of major importance and consequently, after the usual preliminary negotiations, bid for selection. After the contracting officer, MSgt. Trevino, determined that plaintiff was the lowest bidder, he undertook to determine whether or not plaintiff was "responsible." Section 1-904.1 of the Defense Acquisition Regulations ("DAR") required that he, as contracting officer, initiate this inquiry. In fact, he was barred from awarding the contract to plaintiff unless plaintiff's responsibility was affirmatively established by the evidence before him. DAR §§ 1-902; 1-904.1. Furthermore, the regulations mandated that the "contracting officer shall make a determination of nonresponsibility if . . . the information . . . obtained does not indicate clearly that the prospective contractor is responsible." DAR § 1-902. In this case, information was requested from within the Air Force, as permitted by DAR §§ 1-905.1(b); 1-905.3(iii), regarding plaintiff's record of performance under its current contracts. This inquiry immediately brought to the contracting officer's attention information which had been recently developed by an audit of plaintiff's head office records relating to plaintiff's performance under the existing Okinawa contract (No. 5016). According to that audit and a related interpretative report ("audit report"), plaintiff had not complied with the contract's terms in several substantial respects. The report stated that plaintiff had purchased an amount of non-fat dry milk solids, sugar and vegetable fat that was substantially below what the military believed plaintiffs should have purchased to satisfy the product specifications contained in the contract. The report reached this conclusion after making certain interpolations into and deductions from the contract's price adjustment clause. The report also maintained that plaintiff had, for apparent cost reasons, substituted whey for non-fat dry milk solids and had submitted price quotations for purchased ingredients even though those quotations substantially exceeded the prices actually paid. On the basis of this information, Trevino concluded that plaintiff had acted fraudulently, had garnered undue profits and had made misrepresentations to the Air Force. He made a formal written finding that a satisfactory record of integrity was lacking in plaintiff's performance under the existing Okinawa contract and attached the detailed documentation on which he was relying.

At about the same time, plaintiff was asked to bid on a similar contract for the Yokohama air base. As to this contract, a different contracting officer, W. P. Barrett, had to determine whether or not plaintiff was responsible. In answer to his inquiries, an official telegram from Okinawa was sent referring to the aforementioned audit and making explicit the same performance deficiencies on which contracting officer Trevino had based his conclusion. Relying on this information, Barrett made the same independent determination of nonresponsibility as had contracting officer Trevino.

Plaintiff strenuously contends that the discrepancies noted in the audit report and on which the two challenged adverse actions were founded resulted from an utter misconception of the existing Okinawa contract's provisions (No. 5016) and in particular its price adjustment clause. Plaintiff argues that the price adjustment clause was not intended to control ingredient quantities but was solely meant to act as a means by which the contractor and...