Eagle Construction Corp. v. United States

31 Cont. Cas. Fed. 72,046, 4 Cl. Ct. 470, 1984 U.S. Claims LEXIS 1509
CourtUnited States Court of Claims
DecidedJanuary 24, 1984
DocketNo. 39-83C
StatusPublished
Cited by27 cases

This text of 31 Cont. Cas. Fed. 72,046 (Eagle Construction Corp. v. United States) is published on Counsel Stack Legal Research, covering United States Court of Claims primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Eagle Construction Corp. v. United States, 31 Cont. Cas. Fed. 72,046, 4 Cl. Ct. 470, 1984 U.S. Claims LEXIS 1509 (cc 1984).

Opinion

OPINION

MAYER, Judge.

Plaintiff Eagle Construction Corporation (Eagle) brought this case to enjoin the award of a government contract for the manufacture and installation of hydraulic turbines. The case is before the court on intervenor’s motion to dismiss and defendant’s and intervenor’s motions for summary judgment.

BACKGROUND

In 1979, the Department of Defense (DOD) proposed modifying the Defense Acquisition Regulations (DAR) to implement Memoranda of Understanding between the United States and its NATO allies, see DAR § 6-1401, 32 C.F.R. § 6-1401, exempting those countries from the price differentials of the Buy American Act, 41 U.S.C. §§ 10a-10d, for defense acquisitions. Under the Act, a 6%, 12%, or 50% price differential is applied in evaluating foreign bids unless the offeror has proposed a product whose domestic component costs exceed 50%. See DAR §§ 1-6.104.-4(b) and 6-1403.1(c); Executive Order 10582, 19 Fed.Reg. 8,723 (1954), reprinted in 41 U.S.C. § lOd; see also DAR § 6-0001.1(c).

In comments submitted to DOD in July of that year, intervenor Allis-Chalmers expressed concern that the proposed revision of the DARs might “result in acutely unfair and possibly illegal advantages to foreign suppliers” in civil works procurements by the Army Corps of Engineers (Corps). To alleviate this concern, Allis-Chalmers suggested that the proposed revision be modified to expressly exclude civil works procurements and that DOD continue to follow a modified Buy American policy using a 50% differential factor for evaluating these procurements. If DOD did not follow its recommendations, Allis-Chalmers predicted that the United States would lose its only remaining domestic hydraulic turbine manufacturer.

Allis-Chalmers’ recommendations were reviewed by John Osterday, an official in the Office of the Deputy Undersecretary of Defense for Acquisition Management. He recommended to the then Acting Deputy Undersecretary that DOD not exclude civil works procurements as requested by Allis-Chalmers, but add hydraulic turbines to the [472]*472DAR § 6-1405 list of defense-related items whose acquisition is not subject to the policies and procedures of part 14 of DAR § 6 because the United States must preserve a domestic capability to produce this item to maintain its defense mobilization base. Osterday said the Army, the Department of Commerce, and DAR Committee representatives concurred. He added that this would be consistent with the intent of agreements between the United States and foreign countries covering the protection of United States production capability for critical national defense items.

So in September of 1979, contrary to Allis-Chalmers’ proposal, DOD added hydraulic turbines to the DAR § 6-1405 list. Three months later, the Swiss ambassador formally protested the listing. In the weeks that followed, representatives from the Swiss embassy met on several occasions with DOD personnel to discuss the matter. On the other hand, a United States Senator sent DOD a letter in support of the listing at the request of Allis-Chalmers, one of his constituents.

Between 1980 and 1982, a representative of Allis-Chalmers met with Osterday over lunch to discuss the listing of hydraulic turbines and the impact that listing would have on the proposed procurement for the Richard B. Russell hydro-electric project in Georgia. Allis-Chalmers, like Eagle and many other companies, knew the general requirements for this procurement months before it was issued because the Corps had sought comments from the hydro-equipment industry on proposed technical specifications for the project. Osterday offered to pay for his lunches during these meetings at a restaurant near the Pentagon, but the Allis-Chalmers representative picked up the tab.

In March of 1982, Allis-Chalmers submitted a report to DOD on its current status as a critical defense supplier pursuant to Defense Acquisition Circular 76-25, ¶ 6-1405. In the report, Allis-Chalmers urged that foreign competition be excluded until its backlog of sales reached the minimum rate to sustain its position as a viable supplier of hydraulic turbines. On August 5, 1982, the new Deputy Undersecretary of Defense for Acquisition Management (Deputy Undersecretary for Acquisition) issued a memorandum addressing the need to preserve a domestic capability for hydraulic turbines. The memorandum defined a domestically produced turbine as follows:

a. All of the costs related to providing the material, engineering, manufacturing, maintenance and repair including labor costs must be domestic. This should not include costs generated at the installation site except when the manufacture or maintenance must be accomplished at the site.
. b. The only exception allowed to “a” above is when the material or services are not available in sufficient quantity from domestic sources (U.S. and Canada) to meet National defense requirements.

On August 17, 1982, the Savannah District of the Corps issued step one of a two-step solicitation, No. DACW21-82-R0040, inviting technical proposals for the manufacture and installation of four reversible hydraulic pump turbines for the Richard B. Russell Project. The solicitation provided in part:

5. FOREIGN SOURCE COMPETITION. In accordance with Section 6, Paragraph 6-1405, Defense Acquisition Regulations, it has been determined that this procurement is not to be supplied from any foreign source, with the exception of Canada. Therefore, technical proposals will be accepted from United States and Canadian sources only. This restriction is considered necessary for reasons of national interest.
Technical proposals received from foreign sources, with the exception of Canada, will be rejected.
5.1 Bids or proposals for this procurement are being solicited from Canada. If a bid or proposal from such a source would be acceptable from the standpoint of price and other factors, the Department of Defense 50% International Balance of Payments evaluation factor will be waived. Application of either the 6% [473]*473or 12% factor in evaluating Canadian bids remains in force.

The contracting officer for the procurement did not receive a copy of the August 5 memorandum until September 7, 1982. Sixteen days later, he issued Amendment 0001 to the solicitation making several changes in the technical requirements not pertinent here, revising paragraph 5.1 of the solicitation which was later deleted by Amendment 0002, and adding a new paragraph 5.2 to define “Domestically Produced Products,” quoting the August 5 memorandum defining a domestically produced turbine.

On October 28, 1982, step one of the solicitation closed. The Corps received technical proposals from Eagle, Allis-Chalmers, and Dominion Bridge-Sulzer, Inc. While these proposals were being evaluated, Eagle filed a bid protest with the General Accounting Office (GAO) over the listing of hydraulic turbines on DOD’s critical defense item list.

In January of 1983, the Deputy Undersecretary for Acquisition issued a memorandum explaining that the domestic cost requirement of his August 5,1982, memorandum did not apply to basic research and development costs.

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Bluebook (online)
31 Cont. Cas. Fed. 72,046, 4 Cl. Ct. 470, 1984 U.S. Claims LEXIS 1509, Counsel Stack Legal Research, https://law.counselstack.com/opinion/eagle-construction-corp-v-united-states-cc-1984.