Thе United States and COMSAT Corporation (“COMSAT”) seek review of the judgment of the United States Court of Federal Claims,
Stratos Mobile Networks USA, LLC v. United States,
Background
On March 1, 1999, the Department of the Navy’s Space and Naval Warfare Systems Command (Navy) issued a request for proposals (RFP) for an indefinite-delivery, indefinite-quantity (IDIQ) contract to procure leased-channel-mode, high-speed, satellite-based communicаtion services through the International Maritime Satellite (INMARSAT) B high-speed data service. Section V of the RFP, entitled “Evaluation,” informed' bidders that “[t]he Government will award a contract ... to the responsible offeror whose offer conforming to the solicitation ... will be most advantageous to the Government, price and other factors considered,” аnd that the “[ajward will be made to the offeror whose proposal meets the minimum technical requirements and offers the best value to the Government in terms of combination of past performance and price.” The RFP states that “\p]rice will be evaluated using the anticipated order amounts which follow.” However, potential bidders were also informеd that “[ojfferors are cautioned that evaluation of the [anticipated] quantities does NOT obligate the Government to place orders in that manner. The Government is obligated to order only the minimum quantity.... ” The RFP also instructs that “[i]n the price evaluation, the Government will apply any discounts offered as applicable.” Specific examрles of discounts were provided, all of which were “without regard to the number of channels ordered” or “without regard to the number of months funded by the Government.”
In addition to the anticipated quantities, the RFP specified a not-to-exceed quantity and informed bidders that
[p]rices will also be evaluated for reasonableness using the items’ not-to-exceed quantities.... In considering the reasonableness and realism of the price proposals, the Government may determine that an offer is unacceptable if the prices proposed are materially unbalanced between line items. An offer is materially unbalanced' when: one, it is based on prices significantly less in cost for some work and priсes that are significantly overstated in relation to the cost for other work; and two, if there is reasonable doubt that the offer will result in the low overall cost to the Government even though it may be the lowest evaluated offer, or it is so unbalanced as to be tantamount to allowing an advance payment.
Stratos Mobile Networks USA, LLC (“Stratos”) and COMSAT submitted proposals in accordance with the RFP. Both COMSAT and Stratos satisfied the RFP’s technical requirements, and the past performance evaluation resulted in excellent weighted average past performance scores for both companies. Both companies offered discounts in their proposals, and, as the Court of Federal Clаims observed:
These discounts, however, were structured differently. In general terms, Stratos’ per-unit price discounts would become available only after the Navy had built up a specified channel-month ordering total, found by multiplying the number of channels ordered by the months in service. In order to receive credit toward these cumulative totals, the Navy was rеquired to place orders each month for a number of channels that matched or exceeded the number of channels specified for that month in the solicitation’s anticipated order quantities. A failure to order the prescribed minimum quantity in the specifiedmonth resulted in the resetting of the cumulative channel months to zero and thus caused a dеlay in reaching the channel-month level necessary for discount. Stratos’ discount, in other words, was tied to an exact replay of the solicitation’s anticipated order amounts. In contrast, COMSAT, following an example set forth in the solicitation, offered a discount for any channel quantity when ordered for a 12-month period. COM-SAT’s discount .thus depended оnly on the duration of an order, and operated without regard to the number of channels ordered, or to the month of an order’s placement.
Stratos Mobile Networks,
After receiving the initial proposals, the Navy sought clarification of outstanding questions, including some directly related to the Stratos pricing proposal. Stratos was informed that its “proposal’s potential for award could be enhanced if it were more price competitive,” and was later asked to clarify whether discounts would be available if service started in a month with thirty active channels but ended in a month with less than thirty active channels, whether discounts “kick in” after lease months are completed versus ordered, and was informed that the Navy would not prepay for services as initially required by Stratos to earn discounts. After Stratos submitted a revised proposal, the Navy responded with a letter stating that:
... it appears that the discounts you are offering ... apply to the exact anticipated quantities included in the RFP for price evaluation. Although the price evaluation quantities constitute a reasonable estimate of future order quantities, it is impossible to predict exact order quantities over the five-year ordering period. Accordingly, the RFP advised that evaluation of the anticipated order amounts would not obligate the Government to place orders in that manner. Consequently, we are seeking confirmation/clarification with regard to the discounts you have offered in your 21 April 1999 proposal revision.
The Navy then asked a series of questions to determine whether discounts would be available for additional service requested in a month beyond the number of channels specified in the price evaluation quantities, for orders placed in a different month than specified in the price evaluation quantities, and for channels ordered for less than a twelve month period. The Navy also questioned when the volume discounts based on the number of channel months would become effective and whether discounts were dependent on the order being placed in the month specified in the price evaluation quantities. Stratos submitted a final proposal which responded that (1) discounts are not available for quantities above the anticipated amount, (2) ordering service one month later than the anticipated evaluation schedule would reset the discount level to zero channel months, (3) the discount schedule is tied to both the month of order and the aggregate number of channel months ordered and cannot be accelerated by ordering additional services before they are scheduled in the anticipated evaluation schedule, (4) obligating for six month periods versus one year periods does not affect the discount schedule so long as the number of leases planned to be procured in any month under the anticipated evaluation schedule is met, and (5) the discount plan is based on completed months of service and not the month of order.
Based on the final proposals submitted by each company, the prices for the evaluated quantity were $65,254,030 for COM-SAT and $64,221,920 for Stratos, while COMSAT bid $111,951,000 compared to $126,100,800 for Stratos for the not-to-exceed value. The Navy awarded the contract to COMSAT based on the its percep
Stratos challenged both aspects of the Navy’s evaluation process in the United States Court of Federal Claims, arguing that COMSAT’s past performance did not warrant an excellent rating and, further,that the Navy did not follow the RFP’s direction to evaluate prices strictly based on the anticipated order amounts set out in the RFP for price evaluation purposes. COMSAT intervened. The Navy and COMSAT argued that the award of the contract to COMSAT was appropriаte because the RFP provided that the Navy would also evaluate price reasonableness and realism and the likelihood that the evaluated price would be the most advantageous to the government.
Based on these conflicting interpretations of the price evaluation criteria, the Court of Federal Claims granted summary judgment for Stratos, holding that the procurement was illegal because the RFP contained a latent ambiguity as to the method of evaluating bids. The Navy emphasized the potential risks to national security that would be posed if it were forced to rebid the contract and. if it had to transition service from COMSAT to Stratos in the middle of the five-year contract periоd. The trial court concluded that it was in the interest of national security that the Navy have both continuous, uninterrupted access to the INMARSAT-B high speed data communications and guaranteed access to the “requisite number of communications channels. Nevertheless, it issued an injunction requiring the Navy to rewrite the RFP, rebid the contract, and transition the contract to Stratos by January 1, 2001 if Stratos won the rebid. 1 In formulating the injunction, the court discounted the national security threat posed by a forced service transition, but sought to mitigate any such harm by delaying any transition to permit an expedited appeal, which is now before us.
Discussion
We review the grant of summary judgment
de novo. Prineville Sawmill Co., Inc. v. United States,
The RFP, like any contract, must be read in light of its purpose and consistently with common sense.
See Dalton v. Cessna Aircraft Co.,
The RFP warned that the anticipated order amounts were for evaluation purposes only and did not bind the Navy to order more than the minimum requirements. These terms of the RFP provided substantial guidance that would put the reasonable contraсtor on notice that the evaluation would include more than a simple comparison of price calculations at a single data point, would “apply any discounts offered as applicable,” and would consider whether the offer would be most advantageous to the government. Stratos’ interpretation unreasonably expects the Navy to look no further than the single data entry for evaluated price and to ignore the fact that its discount scheme, in the Navy’s words, provides lower prices “under very limited conditions which place restrictions that are so arduous that the pricing offered by Stratos for the evaluation quantity is likely to never materialize due to the discount terms.” Thе Navy’s evaluation of the competing bids shows that “there is reasonable doubt that [Stratos’] offer will result in the lowest overall cost to the Government even though it may be the low evaluated offer....” The very purpose of an IDIQ contract is to provide flexibility for requirements that cannot be accurately anticipated.
The government did not intend that the evaluated pricing schedule be the exclusive means of evaluation. Stratos points to no provision in the RFP that expressly mandates the use of the anticipated evaluation schedule to the exclusion of other factors. Even assuming the reasonableness of Stratos’ interpretation that it is an exclusive provision, COMSAT’s contrary interрretation is at least equally reasonable. The solicitation would then at most be ambiguous.
Grumman Data,
The Court of Federal Claims said that “[ijnsistence upon a literal application of the price evaluation clause, ... is complicated by other seemingly contradictоry aspects of the solicitation.”
Stratos Mobile Networks,
The Navy’s award of the contract to COMSAT was not arbitrary, capricious, an abuse of discretion, or otherwise not in aсcordance with law, considering its $14,-189,800 lower not-to-exceed quantity price point and greater flexibility in offering discounts not tied to a specific number of
Conclusion
Accordingly, the judgment of the United States Court of Federal Claims is reversed, and the injunction is vacated.
COSTS
COMSAT Corporation shall have their costs.
REVERSED AND VACATED.
Notes
. Stratos was awarded the IDIQ contract from January 2001 to June 2004 under the second round of price evaluations conducted in accordance with the injunction.