TIDEWATER MGMT. SERVICES, INC. v. US

• Decision Date: 22 March 1978
• Docket Number: No. 103-74.,103-74.
• Citation: 573 F.2d 65
• Parties: TIDEWATER MANAGEMENT SERVICES, INC., v. The UNITED STATES.
• Court: U.S. Claims Court

573 F.2d 65

TIDEWATER MANAGEMENT SERVICES, INC., v. The UNITED STATES.

No. 103-74.

United States Court of Claims.

March 22, 1978.

Monroe E. Freeman, Jr., Washington, D.C., for plaintiff. F. Trowbridge vom Baur, Washington, D.C., attorney of record.

Anthony Thompson, Washington, D.C., with whom was Asst. Atty. Gen. Barbara Allen Babcock. Susan M. Linden, Washington, D.C., of counsel, for the defendant.

Before COWEN, Senior Judge, DAVIS and BENNETT, Judges.

OPINION

PER CURIAM:

This case comes before the court on plaintiff's exceptions to the recommended decision of Trial Judge David Schwartz, filed September 13, 1977, pursuant to Rule 134(h), having been submitted to the court on the briefs and oral argument of counsel. Upon consideration thereof, since the court agrees with the trial judge's recommended decision, as hereinafter set forth,^* it hereby affirms and adopts the decision as the basis for its judgment in this case. It is, therefore, concluded that plaintiff is not entitled to recover and the petition is dismissed.

OPINION OF TRIAL JUDGE

SCHWARTZ, Trial Judge:

Plaintiff, an unsuccessful bidder on a contract awarded by the U.S. Navy, seeks damages in the amount of $1,664, consisting of its bid preparation costs, occasioned by the Government's alleged breach of its obligation to consider plaintiff's reply to a solicitation of bids with fairness and honesty and in compliance with applicable statutes and regulations and the terms of the solicitation. In an unbroken line of cases, this court has recognized its jurisdiction of an action such as this one based on an implied contract which obligates the Government to deal lawfully and in good faith with those who respond to its requests for bids or proposals. See McCarty Corp. v. United States, 499 F.2d 633, 204 Ct.Cl. 768 (1974); Robert F. Simmons & Assocs. v. United States, 360 F.2d 962, 175 Ct.Cl. 510 (1966); Heyer Products Co. v. United States, 140 F.Supp. 409, 135 Ct.Cl. 63 (1956).

In order to recover, a disappointed bidder such as the plaintiff must prove that the Government acted in an arbitrary or capricious manner in awarding the contract to another. Keco Industries (I) v. United States, 428 F.2d 1233, 1238, 192 Ct.Cl. 773, 782 (1970); Excavation Construction Inc. v. United States, 494 F.2d 1289, 1290, 204 Ct.Cl. 299, 302 (1974). As was said in Keco Industries (I), supra, and repeated thereafter, "the standard of proof to be applied in cases where arbitrary and capricious action is charged should be a high one." 428 F.2d at 1240, 192 Ct.Cl. at 784 (1970). See also Continental Business Enterprises, Inc. v. United States, 452 F.2d 1016, 1021, 196 Ct.Cl. 627, 637 (1971); Excavation Construction, Inc. v. United States, supra, 494 F.2d at 1290, 204 Ct.Cl. at 302.

Arbitrary and capricious action on the part of the Government may be shown by proof that there existed no reasonable basis for the award of the contract to another. Continental Business Enterprises, Inc. v. United States, supra, 452 F.2d at 1021, 196 Ct.Cl. at 637-38; Keco Industries (II) v. United States, 492 F.2d 1200, 1203-04, 203 Ct.Cl. 566, 574 (1974). Subjective bad faith on the part of the procuring officials is such proof. Heyer Products Co. v. United States, supra; Keco Industries (II) v. United States, supra. Proof that the procuring officials violated "pertinent statutes or regulations can, but need not necessarily, be a ground for recovery." Keco Industries (II) v. United States, supra, 492 F.2d at 1204, 203 Ct.Cl. at 574.

Plaintiff has disavowed any contention that Government officials acted with subjective bad faith. Plaintiff does contend that there was no reasonable basis for the award to the successful bidder and that a relaxation of the requirements of the Request for Proposals (RFP) resulted in a violation of the law requiring maximum competition and a regulation requiring formal amendment of Government solicitations in certain situations. The same facts are claimed to support both contentions.

I. The RFP, the Proposals, the Negotiations and the Award

A. The RFP for Mess Attendant Services at Treasure Island. Among the contracts negotiated by installations such as the Naval Regional Procurement Office at Oakland, California ("Oakland") are those for mess attendant services. These contracts require the provision of laborers for food preparation and serving, dishwashing and cleanup in Navy mess halls. The quantity of work to be done at any time depends on the meal hour and the number of meals served, and thus varies during the day and on the different days of the week or month. Sundays, for example, find fewer patrons in the mess halls. An important aspect of successful management of mess attendant contracts, therefore, is the proper scheduling and movement of the regularly fluctuating number of workers needed. Profit on the contract is made by having the smallest number of people on the payroll at a given time of the day while still doing the job sufficiently well to satisfy the Navy.

To ensure that a successful bidder understands this aspect of mess attendant work, the RFPs for such contracts require the aspiring bidder to complete charts which set out the number of workers assigned to each task in the mess hall during each half-hour of the working day. Called "manning charts," they permit a detailed analysis of the bidders' understanding of the intricacies of mess attendant contracting, the variety of jobs required to be performed and the importance of proper scheduling and assignments.

The RFP which is the subject of this case, distributed by Oakland on March 30, 1973, invited proposals for mess attendant services for the year ending June 30, 1974, at the U.S. Naval Station at Treasure Island, California. Offerors were instructed in section B3 of the RFP to submit two manning charts indicating their staffing levels in each half-hour of a representative weekday and a representative weekend day/holiday.¹ The manning charts are the factual center of the plaintiff's case against the award made, and their function must be explained in some detail.

Two charts, modeled after samples attached to the RFP, were to be filled out, one for a representative weekday, and one for the representative weekend day/holiday. The charts divided the day into half-hour segments from 0430 hours (4:30 a.m.) to 2000 hours (8:00 p.m.), and for each half-hour segment listed the jobs to be performed, such as dishwashing, serving line and cleanup. When completed by the bidders, the charts would show the number of workers the contractor intended to employ in each type of job during each half-hour segment of the representative working days and thereby permit judgment on his knowledge and ability to give satisfactory service. This was the stated purpose of the charts.²

In section D1(a),³ the RFP gave a Government estimate of the number of hours of work needed for satisfactory performance on each of the two types of days — 339 on a representative weekday and 235 on a representative weekend day/holiday, or a total of 111,983 hours in a year divided into 252 weekdays and 113 weekend days/holidays (252 x 339 = 85,428; 113 x 235 = 26,555; 85,428 + 26,555 = 111,983). Estimates by an offeror of less than 106,384 hours, 95 percent of the Government's estimate of 111,983, would have to be substantiated with a showing, called "documentation," that satisfactory service would be provided.

A paragraph entitled "Staffing Levels" in section J⁴ of the RFP also concerned the uses of the manning charts: while they were an integral part of the contract and the devotion to the work of the hours indicated could be demanded by the Navy, satisfactory service was required without regard to the manning levels indicated in the charts.

The total dollar price offered by a bidder was required, in section D1(b)(2),⁵ to "support" the annual hours in the manning charts, computed on the assumed basis of 252 weekdays and 113 weekend or holiday/days per annum. That is, the price divided by the hours, called the "dollar/hour ratio," had to be sufficient to show that the hours were realistic — that the contractor would be able to pay for the labor he was undertaking to provide. The contractor's bid price had to be sufficient to cover the costs of wages, fringe benefits and other employee-related expenses for the contract year. Otherwise hours might be inflated, with no intention or ability to defray their costs, in order to obtain a more favorable consideration of the offer.⁶

B. Initial Bids. Tidewater Management Services, Inc., the plaintiff, and Integrity Management International, Inc., the ultimately successful bidder, were among those firms which received an RFP. Plaintiff had been engaged in the business of performing mess attendant contracts for the Armed Forces since 1970, and had performed a number of such contracts for the Navy.

Thirteen bids were submitted initially. Plaintiff's net bid price was $495,488; its proposed annual hours were 94,950, less than the 106,384 hours which were 95 percent of the Government's estimate. As documentation in justification of the less than 95-percent-of-estimate hours, plaintiff stated that its West Coast manager, Mr. Hughes, had been engaged in food service work in the Navy for more than 20 years, and another supervisory employee had operated the same or comparable Navy mess halls in prior years, and that these men believed the 94,950 manhour estimate adequate. Plaintiff's dollar/hour ratio was sufficient to cover its basic labor expenses.

Integrity's net bid price was lowest, at $383,519.07. Its proposed annual hours were 107,603, greater than the 106,384 95-percent-of-estimate. The dollar/hour ratio of Integrity's offer was not sufficient to cover its basic labor expenses.

The price bid and the hours proposed by each bidder were as follows:

                Net Annual
                Evaluated Hours
                Offeror Price Proposed
                1. Integrity Management Int'l, Inc., the ultimately   $383,519    107,603

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