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FLAMINGO INDUSTRIES

May 12, 2005.

FLAMINGO INDUSTRIES (USA) LTD. and ARTHUR WAH, Plaintiffs,
v.
UNITED STATES POSTAL SERVICE, Defendant.



The opinion of the court was delivered by: SUZANNE CONLON, District Judge

MEMORANDUM OPINION AND ORDER

Flamingo Industries (USA) Ltd. and Arthur Wah (collectively, "Flamingo") bring this bid protest action against the United States Postal Service under 28 U.S.C. § 1491(b)(1) arising out of the Postal Service's 1997 and 1998 solicitation for bids to manufacture mail sacks.*fn1 Flamingo claims the bid solicitations and 1997 contract awards violated the Postal Service's purchasing manual and various federal statutes. The Postal Service moves for summary judgment on the administrative record.

BACKGROUND

  In a bid protest action, the court's review is limited to the administrative record before the agency at the time of the challenged procurement decision. Neals Janitorial Service v. United States Dep't of the Navy, 1998 U.S. Dist. LEXIS 465, at * 8 (N.D. Ill. Jan. 6, 1998). The Postal Service filed the administrative record and a statement of undisputed facts with references to the administrative record. Flamingo failed to respond to the Postal Service's statement of facts as required by Local Rule 56.1. Flamingo's failure to respond does not have the usual effect under Local Rule 56.1 because the court must limit its review to the administrative record. See Davis v. Shalala, 1995 U.S. Dist. LEXIS 1419, at **1-2 (N.D. Ill. Jan. 31, 1995). The court must independently examine the administrative record to determine whether the Postal Service's challenged procurement decisions were arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law. See WIT Assoc. v. United States, 62 Fed. Cl. 657, 660 (2004).*fn2 Unless otherwise noted, the following facts are derived from the administrative record.

  I. The 1997 Solicitation

  Flamingo is an Asian-American small business with an office in Elk Grove Village, Illinois. Arthur Wah is Flamingo's president and owner. In the past, Flamingo has supplied mail sacks to the Postal Service. AR Ex. 3, p. 2.*fn3 In March and May 1997, the Postal Service's Mail Transport Equipment ("MTE") office requested additional mail sacks because "sack inventories [had] reached a critical state." AR Ex. 1, 2. MTE's request stated "[i]f we are to have a successful peak mailing season this year, it is imperative we have these shipments begin 9/97." Id. In June 1997, the procurement office prepared a plan to purchase the requested mail sacks. AR Ex. 3. The plan listed Flamingo as a past supplier of mail carrier bags. Id. at p. 2. The plan stated that "proposals will be evaluated for ability to ramp up to meet Sept 97 delivery requirements, past performance, and experience with same or similar production items in similar quantities. Pricing will be secondary to delivery capability." Id. at p. 5.

  On June 11, 1997, the Postal Service issued a solicitation for polyprophylene mail sacks. AR Ex. 4. Several pages of the 1997 solicitation appear to be missing from the administrative record. For example, the table of contents appears incomplete and the section addressing evaluation and award factors appears to be missing. The procurement department evaluated seven offers from six different bidders in response to the 1997 solicitation. AR Ex. 7. Two of the suppliers, General Bag Corporation and the Osterneck Company, submitted offers to manufacture the bags in Mexico. AR Ex. 8, at p. 5-6. The contracting officer added 6% to the Mexican proposals. AR Ex. 8. The Mexican proposals were still lower than the domestic proposals even after the 6% price adjustment was made. AR Ex. 7, 8. The contracts were awarded to General Bag and Osterneck. AR Ex. 8. The contracting officer's evaluation and contract award determinations were reviewed and approved by a team leader and the manager of operational equipment. Id.

  In September 1997, the Postal Service declared Flamingo to be in partial breach of its contract to provide mail carrier bags. AR Ex. 14. The Postal Service modified General Bag's contract to include some of the bags it had purchased from Flamingo. Id. The Postal Service saved $20,000 as a result of the modification. Id.

  II. The Limited Competition Solicitation

  In September 1997, the procurement department issued a procurement plan for additional mail sacks to "support mailer demands and replenish inventories." AR Ex. 15. Flamingo was identified as a prior supplier of the bags. Id. at p. 1. The plan stated that "MTE has indicated that available mail sack inventories have reached a critical state. In order to have a successful peak mailing season, it is imperative that delivery of these mail sacks begin in October 1997." Id. at p. 2. The plan stated further that "[l]imited competition will be utilized to meet the October 1997 delivery requirement as requested by MTE for this requirement. Proposals will be requested from the two current contractors . . . (General Bag Corporation and The Osterneck Company)." Id. at p. 4. As to Flamingo, the plan stated "[d]ue to performance problems . . . Flamingo Industries was not included in this process." Id. The plan was reviewed and approved by the contracting officer's team leader and the manager of operational equipment. Id. at p. 8. The plan requested a waiver of the requirement to publicize the solicitation due to an emergency. Id. at p. 7. The manager of "HQ Purchasing" approved the wavier. Id. at p. 8. Osterneck was awarded the business and its July 1997 contract was modified to include the additional bags. AR Ex. 16.

  III. The 1998 Solicitation

  On December 24, 1998, the Postal Service issued a solicitation for bids on additional mail sacks. AR Ex. 21. Certain portions of the 1998 solicitation appear to be missing from the administrative record. For example, the 1998 solicitation refers to attached drawings and specifications. Id. at p. 8. The administrative record does not contain the referenced drawings and specifications. However, Exhibit 24 contains a drawing and specifications from the 1998 solicitation. The specifications require the top edge of the mail bags to be selvedge. AR Ex. 24, Att. 3. A selvedge edge is woven like the cuff of a dress shirt. AR Ex. 37, p. 2. Flamingo and some other domestic producers do not have the flat weave equipment to create a selvedge edge. Flamingo uses a circular weave to create a heat cut edge. AR Ex. 24, 32. The 1998 specification required the contract to be awarded on the basis of initial proposals received and without discussions. Id. at p. 42. It listed several evaluation factors. Although price was paramount, the contracting officer was required to consider each bidder's documented quality control system, plant, facilities and personnel resources, financial resources to support continued production, and acceptable record of past performance. Id. at p. 47. A best value determination was to be made considering all these factors. Id.

  The 1998 specification contained a preference for domestic suppliers provision.*fn4 Under this provision, a 6% "proposal evaluation preference will be given to domestic-source end products. . . ." A domestic-source end product is an unmanufactured end product mined or produced in the United States or an end product manufactured in the United States; the cost of components produced or manufactured in the United States must exceed 50% of the cost of all its components. AR Ex. 21, p. 28. This provision also states:
The contractor agrees that there will be delivered under this contract only domestic-source end products, except end products:
(1) That the Postal Service determines are not mined, produced, or manufactured in the United States in sufficient and reasonably available commercial quantities and of a satisfactory quality;
(2) For which the vice president of Purchasing and Materials determines that domestic preference is inconsistent with the interest of the Postal Service; or
(3) For which the vice president of Purchasing and Materials determines the cost to the Postal Service to be unreasonable.
AR Ex. 21, p. 28. The 1998 solicitation required the contractor to submit a "Buy American Certificate." Id. at p. 46. The 1998 solicitation provided that the maximum period of performance for the contract was through March 31, 2002. Id. at p. 5. There is no evidence a contract has yet been awarded. Under the protest procedures in the Postal Service's procurement manual, the Postal Service delays awarding a contract pending a bid protest. § 3.6.5 of the purchasing manual.

  IV. The Purchasing Manual

  The Postal Service publishes and maintains a purchasing manual that contains the Postal Service's purchasing policies. Some sections of the purchasing manual are included in the administrative record as part of the 1997 and 1998 solicitations. AR Ex. 4, 21. However, other relevant sections of the purchasing manual are referred to, but are not included as part of the administrative record. The 1997 and 1998 solicitations were both governed by the January 1997 purchasing manual. See, e.g., AR Ex. 4, p. 24, Ex. 21, p. 23. The court reviewed the relevant sections of the 1997 purchasing manual on the Postal Service's website.

  The January 1997 purchasing manual contains policies that apply to "all purchases of supplies, or services that involve the furnishing of supplies. Deviations may be authorized by the VP, Purchasing and Materials." § 1.7.12.b of the purchasing manual. The purchasing manual contains the following Buy American policy, which is at the heart of this dispute:
1.7.12 Buy American Policy
1.7.12.a Policy. Postal Service policy is to give preference to domestic-source products and materials when purchasing supplies and services. This policy is based on the Buy American Act (41 U.S.C. 10a-d). . . .
1.7.12.b. Supplies
* * * 2. Definitions
(a) End Products. Articles, materials and supplies to be purchased for Postal Service use.
(b) Components. Articles, materials and supplies directly incorporated in end products.
(c) Domestic Source End Products. An unmanufactured end product mined or produced in the United States or an end product manufactured in the United States, if the cost of its components mined, produced, or manufactured in the United States exceeds 50 percent of the cost of all its components. . . .
(d) Foreign End Product. An end product other than a domestic-source end product.
(e) Domestic Proposal. A proposed price for a domestic-source end product, including transportation to destination.
(f) Foreign Proposal. A proposed price for a foreign-end product, including transportation to destination and duty. . . .
3. Requirement. Only domestic-source end products may be purchased, except when the VP, Purchasing and Materials determines that:
(a) The articles, materials or supplies are of a class or kind not mined, produced or manufactured in the United States in sufficient and reasonable available commercial quantities or satisfactory quality . . .; or
(b) Purchases of domestic-source end products would be inconsistent with the interest of the Postal Service, or that its cost would be unreasonable, as when the price comparison procedures described in 1.7.12.b.5 result in the purchase of a foreign end product.
4. Proposal Evaluation
(a) If award is to be based solely on price, the procedures discussed in 1.7.12.b.5 are used for price comparison.
(b) If performance evaluation factors will have a significant weight in proposal evaluation, domestic-source end products receive a preference in the case of closely ranked proposals, but no price comparison should be made.
5. Price Comparison. Each foreign price proposal must be adjusted for purposes of evaluation by adding to the foreign proposal (inclusive of duty) a factor of six percent of that proposal. If a tie results between a foreign proposal and a domestic proposal, the domestic proposal must be selected for award. When more than one line item is involved, the six percent evaluation factor is applied on an item-by-item basis. . . .
6. Solicitation Provision. Solicitations must include Provision 1-4, Buy American Certificate — Supplies.
  7. Clause. Contracts must include Clause 1-9, Preference for Domestic Supplies. (Emphasis added). Other relevant sections in the purchasing manual include:

  1.7.1 Competition

 
1.7.1.a Purchases valued at more than $10,000 (the competitive threshold) must be made on the basis of adequate competition whenever appropriate. Adequate competition means the solicitation and participation of a sufficient number of qualified suppliers to ensure that the required quality and quantity of goods and services is obtained when needed, and that the price is fair and reasonable.
1.7.1.b Contracting officers, supported by such assistance as is necessary, must determine that adequate competition has been obtained in any instance in which it is required. In making that determination, contracting officers must act with reasoned discretion, taking into account both the business requirements of the particular purchase and the Postal Service's general interest in identifying new suppliers and in providing opportunities for its supplier base.
1.7.2 Best Value
It is the policy of the Postal Service to award all of its contracts to the supplier offering the best value to the Postal Service. The best value depends on the item being purchased, and is determined by the comparative analysis of proposals in accordance with the evaluation criteria of the solicitation and the business judgment of the contracting officer, with the assistance of the purchasing team. In establishing and evaluating best value criteria, contracting officers and purchase teams make trade-offs among such matters as past performance, supplier capability, price, quality, life-cycle costs, risk, delivery terms and warranty terms.
3.2.1 Policy
3.2.1.a General. It is the policy of the Postal Service to establish and maintain a strong, competitive supplier base that reflects the diversity of the American supplier community. The Postal Service focuses on the entire business community for quality supplies and services that meet or exceed operational needs. . . .
3.2.1.b Supplier Diversity. Supplier Diversity is the proactive business process that seeks to provide suppliers with equal access to purchasing opportunities. It promotes supplier participation reflective of the American supplier community and encourages economic development. . . .
  Postal Service supply ...

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