Delta Data Systems Corporation v. William H. Webster, Director, Federal Bureau of Investigation, and System Development Corporation, (Two Cases)

744 F.2d 197, 32 Cont. Cas. Fed. 73,066, 240 U.S. App. D.C. 182, 1984 U.S. App. LEXIS 18391
CourtCourt of Appeals for the D.C. Circuit
DecidedSeptember 21, 1984
Docket84-5356, 84-5362
StatusPublished
Cited by153 cases

This text of 744 F.2d 197 (Delta Data Systems Corporation v. William H. Webster, Director, Federal Bureau of Investigation, and System Development Corporation, (Two Cases)) is published on Counsel Stack Legal Research, covering Court of Appeals for the D.C. Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Delta Data Systems Corporation v. William H. Webster, Director, Federal Bureau of Investigation, and System Development Corporation, (Two Cases), 744 F.2d 197, 32 Cont. Cas. Fed. 73,066, 240 U.S. App. D.C. 182, 1984 U.S. App. LEXIS 18391 (D.C. Cir. 1984).

Opinion

SCALIA, Circuit Judge:

The district court in this government procurement case concluded that the FBI had acted irrationally and arbitrarily and had violated federal procurement law in awarding a contract for computer terminals and other equipment to System Development Corporation, a subsidiary of Burroughs Corporation (“SDC”). It enjoined the FBI to terminate that contract and to enter into a contract with the disappointed bidder, Delta Data Systems Corporation (“Delta Data”). We denied the Government’s emergency motion for suspension of the injunction, but expedited the appeal. Our judgment was announced by order entered July 16, 1984, 740 F.2d 58, vacating the injunction, permitting the FBI to reinstate its contract with SDC pending further proceedings, and directing the district court to order the FBI to make a nunc pro tunc reselection of contractor if Delta Data so requested. The same order noted that this opinion would follow.

I

In September 1982, the FBI issued solicitation or Request for Proposal (“RFP”) No. 2591, to supply over a period of eight years more than 6,000 computer terminals, in addition to printers and disk devices. The equipment was to form part of the FBI’s’ nationwide information and communications system, and was to be “Tempest-qualified,” i.e., proof against electronic eavesdropping. The RFP called for 240 “baseline” terminals and 5,976 “enhanced” terminals, of which 1,244 were to-have word processing capability.

*199 The RFP provided that award would be made to the offeror meeting all mandatory requirements with the highest total evaluated score based on four weighted factors: (1) cost (55%); (2) vendor considerations (20%); (3) live test demonstration (15%); and (4) desirable features (10%). The RFP defined each of these factors to include a number of subfactors; those pertinent to “vendor considerations” were past performance, soundness of approach (i.e., risk factor), operational reliability, vendor support, and technological evolution. Neither financial condition of the offeror nor any other financial consideration relating to the offeror was expressly identified as an evaluation criterion. The RFP also set forth in detail the scoring methodology to be applied in assessing each factor and in determining each offeror’s total score. The RFP was amended ten times during the seven-month period from September 13, 1982 through April 15, 1983 to reflect changes in the FBI’s requirements.

Initial offers were received on or about May 2, 1983 from four sources: Delta Data, SDC, International Business Machines' Corporation (“IBM”), and Data Products of New England. The last was eliminated at the outset as technically non-responsive. Delta Data submitted alternative proposals. We shall be concerned only with the higher-scored Delta Data proposal and the SDC proposal. The FBI’s Technical Evaluation Committee completed its work on these proposals and submitted the following ratings to the Contracting Officer, William E. Baugh, Jr., in a memorandum dated September 1, 1983:

ITEM SDC DP

Vendor Considerations 18.0723 20.0000

Live Test Demonstration 14.0789 14.8552

Desirable Features 10.0000 9,7211

Total 42.1512 44.5763

In mid-to-late September 1983, the Contracting Officer requested a Dun & Bradstreet Report on the two bidders who had the best chance of being selected for award, namely, Delta Data and SDC. This was standard FBI practice in preparation for the determination of contractor responsibility that must be made before any award is concluded. Dun & Bradstreet gave SDC its second highest rating. It declined to rate Delta Data, reporting that, as of August 1983, that company was in an “unbalanced condition.” No explanation of the term “unbalanced condition” was provided.

On September 22, 1983, in response to an oral request for financial information, Delta Data hand-delivered to the FBI: (1) Delta Data’s 1983 annual report; (2) its first quarterly report for the period March through June 1983; (3) its October 13, 1982 proxy statement; (4) its Securities and Exchange Commission form 10Q Quarterly Report for the quarter ending June 30, 1983; and (5) a letter dated September 22, 1983 from Stephen G. Woodsum of the Boston Investment firm of TA Associates, expressing the support of TA Associates and the Allstate Insurance Companies for Delta Data and saying that under appropriate circumstances they would consider making a large new investment in the company.

On September 26, 1983 the Contracting Officer requested Special Agent Michael Ayers, a certified public accountant, to review the financial information concerning Delta Data’s financial condition. Ayers reported that Delta Data (1) was in default to preferred shareholders; (2) had furnished the FBI with an unaudited financial statement; (3) was in the process of renegotiating long term debts to meet current obligations; and (4) had made sizeable loans to its corporate officers at low or no interest for stock purchases. On the same day, Ayers orally provided the same assessment to the Technical Evaluation Committee. He did not mention TA Associates’ expression of support for Delta Data. The Chairman of the Technical Evaluation Committee inquired whether additional information could be obtained regarding Delta Data’s financial condition, but was told that the FBI had obtained all data available at that time. The Technical Evaluation Committee thereupon reevaluated Delta Data’s “vendor considerations.” It lowered Delta Data’s score for four of the five “vendor *200 considerations” criteria set forth in the RFP: soundness of approach (risk factor); operational reliability; vendor support; and technological evolution. This automatically raised the “vendor considerations” scores of the competing offerors, since the formula required dividing each offeror’s score by the highest score obtained. Thus, the result was a “vendor considerations” score for SDC of 20 (up from 18.0723); and for Delta Data of 11.1273 (down from 20).

These changes produced the following overall technical rankings, based on the reevaluated “vendor considerations” scores and on the unchanged “live test demonstration” and “desirable features” scores: SDC 44.0789 and Delta Data 35.7036. When these were combined with evaluated cost scores, the final rankings were: SDC 92.96 and Delta Data 90.71.

On the basis of these evaluations, the Contracting Officer recommended that the award be made to SDC. On September 28, 1983, the Contract Review Board, which has de novo review authority over major FBI procurements, met to review the recommendation. The presentation to the Contract Review Board included a report on the offerors’ relative financial strength, substantially similar to the information that was reported by Special Agent Ayers to the Contracting Officer and the Technical Evaluation Committee. The board approved the recommendation, and on September 29, 1983, the FBI awarded the contract to SDC. On October 13, Delta Data filed a protest of the award with the General Accounting Office.

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744 F.2d 197, 32 Cont. Cas. Fed. 73,066, 240 U.S. App. D.C. 182, 1984 U.S. App. LEXIS 18391, Counsel Stack Legal Research, https://law.counselstack.com/opinion/delta-data-systems-corporation-v-william-h-webster-director-federal-cadc-1984.