Defense Technology, Inc. v. United States

99 Fed. Cl. 103, 2011 WL 2419874
CourtUnited States Court of Federal Claims
DecidedJune 14, 2011
DocketNo. 11-111C
StatusPublished
Cited by29 cases

This text of 99 Fed. Cl. 103 (Defense Technology, Inc. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Federal Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Defense Technology, Inc. v. United States, 99 Fed. Cl. 103, 2011 WL 2419874 (uscfc 2011).

Opinion

OPINION AND ORDER

GEORGE W. MILLER, Judge.

Defense Technology, Inc. (“DTI”) filed this bid protest challenging (1) the cancellation of a Naval Air Systems Command (“NAVAIR”) solicitation for the procurement of 21 Mi-17 helicopters for the Afghan National Army Air Force (“ANAAF”) and (2) the subsequent proposed sole-source procurement by the U.S. Army of the same helicopters from a Russian state-owned enterprise. DTI seeks injunctive relief as well as bid preparation and proposal costs. For the reasons set forth below, the Court denies injunctive relief but grants plaintiffs request for bid preparation and proposal costs, with the amount of such costs to be determined in subsequent proceedings.

I. Background

A. Defense Technology, Inc.

Based in Huntsville, Alabama, DTI is a government contractor that supplies the United States Department of Defense (“DoD”) with military and dual-use hardware, much of which DTI procures from Russia and other members of the Commonwealth of Independent States. Administrative Record at 198-202 (docket entry 16, Mar. 8, 2011) (“AR”). DTI also has offices in Russia, Afghanistan, and the United Arab Emirates. Sec. Am. Compl. ¶ 5. DTI has previously secured and performed NAVAIR contracts to provide Mi-17 helicopters, spare parts, and maintenance services. AR 201.

B. Rosoboronexport

Rosoboronexport, also known as “Russian Defense Export” (“RDE”), is a Russian state-owned enterprise based in Moscow. AR 484. RDE serves as an intermediary for Russia’s military defense-related hardware trade and enjoys the exclusive right to sell Russian military hardware that requires a military End Use Certificate (“EUC”).1 AR 483. According to DTI, this exclusive right of sale extends only to hardware configured for military use — i.e., equipped with weapons — or sold directly to a foreign military entity with a military EUC and does not cover the sale of civil equipment not purchased in a military configuration. Sec. Am. Compl. ¶ 11.

On August 4, 2006, the U.S. Department of State imposed sanctions on RDE based on the Department’s determination that RDE had provided Iran with materials prohibited [108]*108under the Iran Nonproliferation Act of 2000. 71 Fed.Reg. 44345 (Aug. 4, 2006). The sanctions provided in part that “[n]o department or agency of the United States Government may procure, or enter into any contract for the procurement of, any goods, technology, or services from [RDE].” Id. Based on RDE’s having supplied certain covered materials to Syria and Iran, the State Department imposed similar sanctions on RDE in 2007 and again in 2008. 72 Fed.Reg. 606 (Jan. 5, 2007); 73 Fed.Reg. 63226-27 (Oct. 23, 2008).

On May 18, 2010, the United States confirmed that Russia had agreed to a draft resolution on the imposition of sanctions on Iran by the United Nations.2 Hearing on the New START Treaty before the S. Foreign Relations Comm., 111th Cong (2010) (statement of Hillary R. Clinton, Secretary of State). Three days later, on May 21, 2010, the sanctions against RDE were terminated. 75 Fed.Reg. 28673-74 (May 21, 2010). As a result, RDE again became eligible to supply military and other hardware to United States agencies.

C. The NAVAIR Solicitation and Cancellation

1. The Solicitation

On July 8, 2010, NAVAIR issued Solicitation No. N00019-10-R-0032 (“NAVAIR solicitation”). AR Tab 16. The solicitation called for 21 new Mi-17 helicopters,3 along with accessory tools, spare parts, and pre-acceptance testing. AR 147-48. The NA-VAIR solicitation required the contractor to deliver the Mi-17s to the Combined Airpower Transition Force at Kabul Airport for transfer to the ANAAF. AR 149-50. The NAVAIR solicitation required offerors to:

Demonstrate that the Offeror can deliver Mi-17 variant aircraft in the time frame specified in Section F of this solicitation by providing documentation demonstrating proof of ownership, contingent sale contract, or a contractual relationship that grants the offeror the exclusive right to the aircraft (Provide the serial numbers of each aircraft, if available)

AR 180.

On August 4, 2010, DTI submitted a proposal in response to the NAVAIR solicitation. AR Tab 19. In preparing its proposal, DTI obtained the permission of what it believed to be the relevant authorities in the Russian Ministry of Defense to export the Mi-17 aircraft from Russia to Afghanistan. AR 342-44.

2. Initial Notifications Regarding RDE’s Involvement in the Export of Military Equipment

During 2010, RDE took the position that it was the sole entity that could export Mi-17s from Russia, but the parties disagree on the exact time at which the Government learned of RDE’s position. At oral argument, plaintiff stated that the administrative record indicates that the Government may have been aware of RDE’s position as early as February 2010. Transcript of May 9,2011 Hearing at 12 (docket entry 92, May 17, 2011) (“Tr.”). A briefing prepared by Colonel Norbert Ver-gez, Project Manager of the Army’s NonStandard Rotary Wing Aircraft Project Office (“NSRWPO”), on August 16, 2010, indicates that an Mi-17 User’s Conference took place during July 19-22, 2010. AR 2239. Colonel Vergez’s briefing further states, “State Department [terminated [sanctions [a]gainst the OEM, clearing the way to establish the business relationship.” AR 2241. As part of establishing that relationship, representatives of the NSRWPO met with officials of the Russian Government in August 2010 in Moscow. AR 2241.

At oral argument, the Government quoted from an email from Colonel Vergez in which he stated that he became aware that RDE maintained that it was the sole enterprise that could export Mi-17s from Russia when an official of RDE explained RDE’s position at the Farnborough Air Show in England on [109]*109July 25, 2010. Def.’s Hearing Ex. 1. At this time, the NAVAIR solicitation had been pub-lically available for over two weeks. AR Tab 16.

On August 2, 2010, Colonel Vergez received a letter from Mr. M. Petruhov, an official of RDE, Pl.’s Reply at 13, regarding the acquisition of Mi-17s. The letter stated that the helicopters were a “product of military type,” and therefore RDE was the “sole organization [in Russia] which is allowed to ... export” the helicopters. AR 196.

On August 9, 2010, Colonel Vergez received a letter from Mr. Vyacheslav Dzirkali, an official of RDE and Deputy Director of the Russian Federal Service for Military-Technical Cooperation (“FSMTC”), Pl.’s Reply at 13, in which Mr. Dzirkali noted that several companies were attempting to supply “21 Mi-17s for Afghanistan” without having an agreement with RDE. AR 668. Mr. Dzirkali’s letter stated that the supply of the helicopters will be “forbidden (not possible) in accordance with Russian law.” AR 668.

3. The Moscow Conference

Between August 30 and September 2, 2010, U.S. Army officials met with RDE officials in Moscow regarding military-technical cooperation (“Moscow Conference”).4 The delegations were headed by the United States Deputy Assistant Secretary of the Army for Defense Exports and Cooperation, Mr. Keith B. Webster, and Mr. Dzirkali. AR 706.

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99 Fed. Cl. 103, 2011 WL 2419874, Counsel Stack Legal Research, https://law.counselstack.com/opinion/defense-technology-inc-v-united-states-uscfc-2011.