Ulstein Maritime, Ltd. v. United States
| Decision Date | 17 September 1986 |
| Docket Number | Civ. A. No. 86-0318 P. |
| Citation | 646 F. Supp. 720 |
| Parties | ULSTEIN MARITIME, LTD. and Schottel of America, Inc. v. The UNITED STATES of America, et al. |
| Court | U.S. District Court — District of Rhode Island |
COPYRIGHT MATERIAL OMITTED
Fred T. Polacek, Providence, R.I., Joseph A. Artabane, Washington, D.C., Sarino R. Constazo, Miami, Fla., for plaintiffs.
John Marks, Providence, R.I., Almer W. Beale, II, Jacksonville, Fla., for Thrustmaster Marine.
Lincoln C. Almond, U.S. Atty., Everett C. Sammartino, Asst. U.S. Atty., Providence, R.I., for U.S.
Martin Conlon, Providence, R.I., Raymond J. Sherbill, Washington, D.C., David L. Moseley, Houston, Tex., for Thrustmaster of Texas.
Plaintiffs Ulstein Maritime, Ltd. and Schottel of America, Inc., commenced this action on May 27, 1986, for declaratory judgment and injunctive relief against defendants, the United States Navy ("Navy"), the United States Small Business Administration ("SBA") and the officials in charge of those agencies. Plaintiffs were the third and fourth low bidders on an Invitation for Bids for procurement of six marine thruster units by the Navy. They allege that defendants unlawfully awarded the contract to the first low bidder, Thrustmaster Marine, Inc. ("TMI"), and that the second low bidder, Thrustmaster of Texas ("Texas") is also ineligible for an award under this procurement. They claim that the two low bids are "nonresponsive" because of TMI's and Texas' failure to reveal their status as "affiliated bidders" and their failure to conform to the "Standard Commercial Product" clause in the bid; that the SBA unlawfully disregarded controlling Department of Labor Walsh-Healey regulations in issuing a "certificate of competency" ("COC") to TMI; and that the attempt of Texas to change its bid after bid opening precludes the Navy from further consideration of that bid.
The plaintiffs seek review and reversal of the agencies' actions pursuant to the Armed Services Procurement Act of 1947, 10 U.S.C. § 2301 et seq., regulations codified thereunder at Title 48 of the Code of Federal Regulations (the Federal Acquisition Regulations or "FAR"), the Declaratory Judgment Act, 28 U.S.C. §§ 2201 and 2202, the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq., the Small Business Act, 15 U.S.C. § 631 et seq., and the Walsh-Healey Public Contracts Act, 41 U.S.C. § 35 et seq.
On June 3, 1986, this Court issued a temporary restraining order barring the Navy from expending funds and further proceeding on the contract. Shortly before trial, TMI and Texas were each allowed to intervene in this action. Trial proceedings on the merits of plaintiffs' complaint and on Texas' crossclaim were held from June 30, 1986, through July 2, 1986. I now make the following factual and legal findings.
The plaintiffs, Ulstein and Schottel, both produce marine thruster units. Ulstein is a Canadian corporation with its principal place of business in Burnaby, British Columbia, Canada. Reginald Allen is its president. Schottel is a Florida corporation with its principal place of business in Miami, Florida. Peter Jacobs is executive vice-president.
Defendant United States of America procures goods and services from private sector businesses through its agents and departments, including the Department of the Navy, subject to the laws of the United States. Defendant John F. Lehman, Jr., is Secretary of the Navy and is responsible in his official capacity for the acts complained of by plaintiffs and intervenor Texas. Defendant SBA is authorized under 15 U.S.C. § 637(b)(7) to make determinations binding upon the Navy "with respect to all elements of responsibility" of prospective small business government contractors and to issue a "Certificate of Competency" ("COC") where such determinations are favorable to the prospective contractor. Defendant Charles Heatherly is SBA Acting Administrator and is responsible in his official capacity for the acts complained of in this suit.
Intervenor TMI is a Florida corporation with its principal place of business in Jacksonville, Florida. Bert de Wys is president of the company. Intervenor Texas is a Texas corporation with its principal place of business in Houston, Texas. Both of these companies are also purportedly in the business of manufacturing marine thruster units.
On December 5, 1985, Naval Engineering Facilities Command ("NAVFAC") Contracting Officer Raymond Farrow, through James Morrin, the contract specialist, issued Invitation for Bids No. N62578-86-B-6002 (the "IFB") seeking bids for six 7500 pound marine thruster units and ancillary items. The bids contained two clauses especially relevant to this action. The first is the "Affiliated Bidders" clause, and the second is the "Standard Commercial Product" ("SCP") clause.
Five companies submitted bids to the Navy in response to the IFB as follows:
Thrustmaster Marine, Inc. $480,900.00
Thrustmaster of Texas, Inc. $499,590.00
Schottel of America, Inc. $666,300.00
Ulstein Maritime, Ltd. $667,400.00
Harbormaster Division of
Mathewson Corp. $795,300.00
NAVFAC's cost estimate for the IFB was $749,400.00.
Senior personnel at NAVFAC then reviewed the bids. Since the two low bids were in excess of 30 percent below the government's estimate, on January 13, 1986, NAVFAC requested that TMI and Texas confirm their bids given the possibility a mistake had occurred. TMI confirmed its bid, but Texas requested the opportunity to modify its bid by $60,000 because of clerical error. The request for modification was considered "not technically supportable" by NAVFAC engineering personnel, Exhibit 9, however, and therefore was rejected.
The Navy determined that the bid of TMI, the putative low bidder, as a matter of written form alone, conformed with the requirements of the IFB, i.e., all the information, including signatures and certifications, required by the IFB was supplied, and no exceptions to any of the terms and conditions appeared on the bid. Therefore, the Navy considered TMI's bid to be "responsive" within the meaning of FAR 14.301.1
The Navy is also required by federal regulation to determine whether or not a prospective contractor is "responsible" before awarding a contract. FAR § 9.104-1. As the Navy had done no previous business with TMI when its bid was submitted, the Navy referred TMI's bid to the Defense Contract Administration Services ("DCAS") for performance of a pre-award survey so as to determine the "responsibility" of TMI to fulfill its bid if accepted by the Navy. This referral was made in accord with established practice and the applicable regulations.2
Meanwhile, on January 20, 1986, Ulstein filed a bid protest with the Navy pursuant to FAR § 33.103(a). Schottel filed a similar protest on January 27, 1986. Both protests alleged that the bids of TMI and Texas were nonresponsive and must be rejected because the companies had failed to disclose their relationship as affiliated bidders as required by the IFB "Affiliated Bidders" clause and had in fact collusively bid on the contract. This claim of affiliation and collusion rested on the deposition of Bert de Wys, taken during the bankruptcy proceedings of his former company, Thrustmaster, Inc. of Mississippi. Based on that deposition, Ulstein and Schottel alleged that: de Wys, the president of TMI, did consulting work for a firm by the name of International IMS, Inc., located in Houston, Texas; Texas was a wholly owned subsidiary of IMS; de Wys was involved in the formation of Texas; thrusters provided by Texas are virtually identical to those of TMI; and Texas and de Wys' bankrupt company had shared the same chief engineer, Frank Van Bentem.
Both Ulstein and Schottel further claimed that TMI lacked the manufacturing and design capacity to complete the contract. Schottel also alleged that Texas was physically and financially incapable of concluding the contract, in particular, that its production costs were not covered by its bid package, and that it lacked the experience necessary for building 7500 pound Thruster units. Schottel urged NAVFAC to disqualify both TMI and Texas, and Ulstein requested that award of the contract not be made pending investigation of its protest.
On March 5, 1986, DCAS advised the Navy's Contract Specialist, James Morrin, that it had completed the preaward survey and that it recommended no award should be made to TMI because TMI was not a responsible bidder. Specifically, DCAS found that although TMI had satisfactory technical, quality assurance, and financial capabilities, it had unsatisfactory production capability and failed to meet the requirements of the Walsh-Healey Public Contracts Act, 41 U.S.C. §§ 35-45. The preaward survey report indicated that TMI lacked adequate facilities and personnel and that it did not qualify as a "manufacturer" in accordance with Walsh-Healey.
TMI had certified in its bid that it was a "small business" within the meaning of the Small Business Act. Therefore, after the DCAS determination of nonresponsibility and recommendation of no award, the Navy referred its file on TMI to the SBA as required by 15 U.S.C. § 637(b) and FAR §§ 9.104-3(e), 19.601. TMI then petitioned the SBA for a Certificate of Competency ("COC") that TMI was indeed a responsible bidder and thus eligible for the contract award. Billie L. Seacrest, an Industrial Specialist in Atlanta, Georgia, was assigned the matter and instructed to investigate TMI's qualifications.
In investigating TMI's competency, Seacrest proceeded by requesting necessary information by letter and making a site visit in March. TMI's technical background, resumes, quality assurance arrangements, material quotes, and production plans, including leased facilities, were reviewed, as were its engineering capabilities for preparing manuals, drawings, and design of the unit. Based upon his investigation,...
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