OSG Product Tankers LLC v. United States

82 Fed. Cl. 570, 2008 U.S. Claims LEXIS 202, 2008 WL 2853234
United States Court of Federal Claims·Decided June 19, 2008·No. No. 07-561C·Published·Cited by 15 cases

Opinion

OPINION

HODGES, Judge.

The Military Sealift Command solicited bids in August 2006 for the long-term charter of two T-5 petroleum tankers for the Defense Energy Support Center. The contract required that bidders comply with the Jones Act2 and obtain a SECRET facility clearance. The Government received six bids in November 2006, three of which were technically acceptable. Plaintiff OSG Product Tankers submitted the lowest acceptable bid. However, the contracting officer had concerns about the integrity and business ethics of Product Tanker’s parent, Overseas Ship-holding Group, and plaintiffs ability to obtain the necessary security clearance. The contracting officer investigated both companies and ruled that plaintiff was not “presently responsible.” See 48 C.F.R. § 9.104-1 (2006) (standards for finding a contractor “presently responsible”). She awarded the contract to USS Product Carriers. Plaintiff filed a post-award protest in July 2007, claiming various defects in the procurement. USS Product Carriers entered the case as intervenor.

The legal issue is whether a contracting officer may disqualify a contractor for reasons of integrity and business ethics despite the decision of a separate government agency declining to debar the contractor’s parent company for similar reasons. That is, does an agency decision not to debar a contractor for admitted legal violations prevent a contracting officer from disqualifying the con-traetor’s subsidiary for similar reasons? We grant defendant’s motion for judgment on the administrative record for the reasons stated below.

I. BACKGROUND

Plaintiff Product Tankers is an indirect subsidiary of Overseas Shipholding Group. OSG organized Product Tankers in 2005 to specialize in Jones Act shipping and to separate it from OSG’s international operations.3 OSG waived indictment and pled guilty in December 2006 to thirty-three felony counts. The charges related to environmental violations that occurred between June 2001 and September 2005 involved twelve of its foreign-flag vessels. Three OSG ships failed to maintain accurate oil record books and nine ships engaged “in deliberate discharges of machinery space bilge water ... oily wastes, and oil residues ... intentionally circumventing] required pollution prevention equipment.” AR 1889.

OSG signed a plea agreement with the Government, which imposed significant fines, a new Environmental Compliance Plan, and organizational probation for three years. The probationary period applies to plaintiff Product Tankers, which is subject to the new Environmental Compliance Plan as well. OSG was subject to debarment because of its felony convictions.

The Government designated the Maritime Administration (MarAd) as the lead agency for debarment proceedings against OSG. The debarring official at MarAd reviewed OSG’s violations and found cause for debarment.4 [573]*573Certain mitigating considerations weighed heavily in OSG’s favor, according to MarAd. These factors included OSG’s acceptance of responsibility for the violations, its cooperation with government investigators, and its implementation of corrective measures. These considerations weighed heavily in OSG’s favor, according to MarAd. OSG agreed to a settlement in lieu of debarment, contingent upon OSG’s compliance with the Plea Agreement described above. If OSG violates the Plea Agreement in the future, MarAd will resume the debarment action.5

Plaintiff argues that the contracting officer lacked authority to issue a non-responsibility determination based on integrity and business ethics. According to Product Tankers, the Government resolved that issue during the debarment proceedings against its parent company, OSG. Plaintiff asserts that MarAd was the appropriate agency to review OSG’s integrity and business ethics and to decide that OSG was presently responsible because it followed the applicable standards of review and considered all relevant factors. Plaintiff claims that MarAd’s decision bound all government agencies and therefore preempted, or estopped, the contracting officer’s finding of non-responsibility based on the same issues of integrity and business ethics.

Plaintiff also claims that the contracting officer (1) abused her discretion by incorrectly deciding that plaintiff could not obtain a facility clearance; (2) confused plaintiff with its parent company and made incorrect factual conclusions; and (3) treated plaintiff unfairly and unequally during the bid process. Defendant contends that the contracting officer is free to decide a bidder’s responsibility. According to the Government, plaintiffs preemption argument is improper because it relates to policy.

After the Government filed the administrative record, plaintiff filed motions for leave to supplement the record and to file an Amended Complaint. We denied both motions and later motions for reconsideration and for interlocutory appeal as well. See OSG Prod. Tankers, LLC v. United States, 81 Fed.Cl. 297, 297 (2008) (Opinion and Order denying certification for interlocutory appeal). This Opinion addresses the parties’ cross-motions for judgment on the administrative record pursuant to RCFC 52.1.

II. LEGAL ISSUES

A. Jurisdiction and Standing

The Tucker Act grants this court jurisdiction to review bid protests and to “render judgment.” 28 U.S.C. § 1491(b)(1) (2006). We review agency decisions pursuant to the standards set forth in the Administrative Procedure Act. Id. at § 1491(b)(4). That Act directs the court to “set aside the agency action if it is arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Banknote Corp. of Am., Inc. v. United States, 365 F.3d 1345, 1350 (Fed.Cir.2004) (internal quotes omitted).

A protesting bidder must prove “that it had a substantial chance of securing the award” to establish standing. Myers Investigative and Sec. Servs., Inc. v. United States, 275 F.3d 1366, 1370 (Fed.Cir.2002). The contractor must be an “actual or prospective bidder[ ] ... whose direct economic [574]*574interest would be affected” by winning or losing the contract. Id. (quoting Am. Fed’n of Gov’t Employees v. United States, 258 F.3d 1294, 1302 (Fed.Cir.2001)). Product Tankers became an “actual bidder” when it submitted a technically acceptable proposal to the Government. The parties agree that if plaintiff can prove the allegations against the Government, it will win the contract because it presented the lowest acceptable bid. Plaintiff has standing to protest this award.

B. Standards of Review

Rule 52.1 establishes procedures for considering motions for judgment on the administrative record.6 A party must meet its burden of proof based on the evidence found in the record. See, e.g. Cygnus Corp. v. United States, 72 Fed.Cl.

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OSG Product Tankers LLC v. United States, 82 Fed. Cl. 570, 2008 U.S. Claims LEXIS 202, 2008 WL 2853234 (uscfc 2008).

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