Opinion ID: 382661
Heading Depth: 2
Heading Rank: 1

Heading: The Okinawa Contract

Text: 7 On April 8, 1974, the Government awarded ODDPI a contract (hereinafter contract 5016) to deliver milk products on the island of Okinawa (Tr. 25). The contract had an original term of one year, with provisions for annual one-year renewals for a total of four years. 3 The contract was set to finally expire on June 30, 1979. 4 8 In October of 1978, the Pacific Air Force (PACAF) Contracting Center on Okinawa requested an audit of ODDPI's home office in Virginia Beach, Virginia. 5 An audit was conducted by the Defense Contract Audit Agency (DCAA) beginning in late January 1979 (Tr. 186). In February of 1979, the contract price analyst at the PACAF Contracting Center in Okinawa, Ms. Rita L. Wells, was sent to assist with the audit of the ODDPI home office (Tr. 186). 9 Following the compilation of the audit data, Ms. Wells prepared a report analyzing and evaluating the information obtained. App. F, exhibit 5, item 2. The report noted three irregularities in the performance of contract 5016. Each one of the alleged irregularities involved what later proved to be seriously disputed interpretations of certain complex provisions in the contract between ODDPI and the Government. 6 Ms. Wells concluded that the alleged irregularities indicate an unsatisfactory record of integrity. App. F, exhibit 5, item 2, p. 1. More specifically, Ms. Wells stated in the report that these discrepancies show a lack of business integrity. The only reason the contractor would have for the above discrepancies would be to recoup undue monies under the contract. App. F, exhibit 5, item 2, p. 4. 10 In light of the impending termination of contract 5016 on June 30, 1979, in November of 1978 the PACAF Contracting Center in Okinawa solicited bids for a new contract to run for three years beginning July 1, 1979 (Tr. 138). Old Dominion was one of nine contractors solicited and, in January of 1979, ODDPI submitted an initial price proposal (Tr. 141). Two other bidders responded to the solicitation (Tr. 239). Following receipt of the initial proposals, negotiations were scheduled with each contractor. Negotiations with ODDPI were scheduled for March 19-21, 1979 (Tr. 143). Final bids were due on March 26, 1979 (Tr. 153). 11 Senior Master Sergeant Juan B. Trevino was chosen as contracting officer for the new Okinawa milk contract (Tr. 239). In order to fulfill his duty under applicable regulations to award a contract only to a contractor whom he determined to be responsible, 7 Sergeant Trevino requested information on ODDPI's performance under the old contract from the administrative contracting officer, Mr. Fred Artibee (Tr. 241). 8 On March 21, 1979, Mr. Artibee provided Sergeant Trevino with a copy of Ms. Wells' audit report (Tr. 242). Sergeant Trevino reviewed the report and concluded that Old Dominion was not dealing honestly with the Government and was fraudulently receiving undue profits under the current contract (Tr. 247, 249). On that same day, a determination was made that ODDPI lacked integrity within the meaning of Defense Acquisition Regulation 1-903.1 (32 C.F.R. 1-903.1) and was thus not responsible. See App. G, exhibit 6, item 2. Although Sergeant Trevino had a number of telephone conversations with Old Dominion executives between March 21 and March 26, he did not at any point notify Old Dominion of the charges against it or indicate that the responsibility of ODDPI was in question (Tr. 253-254). 12 On March 26, 1979, best and final offers were submitted by ODDPI and two other contractors. Old Dominion's final proposed price was $8,746,378 (Tr. 147). On that day, Trevino placed a written determination of nonresponsibility, with supporting documents (including the audit report), in the contract file (Tr. 243; App. F). On the following day, Trevino awarded the contract to Foremost Blue Seals, a Japanese contractor, for 2,085,167,081 yen (Tr. 147, 251; App. D, exhibit 6). At the dollar/yen ratio quoted for March 28, 1979, the contract award to Foremost was for $10,122,169, or approximately $1,375,000 higher than ODDPI's best and final offer. App. D, exhibit 11. 13 Upon receiving notice that it had been denied the contract, Old Dominion requested a statement of reasons for the determination of nonresponsibility, a cancellation of the award to Foremost, an award of the contract to ODDPI, and removal of the determination of nonresponsibility from the contract file. App. D, exhibit 7. Sergeant Trevino responded simply that the finding of nonresponsibility was based on the lack of a satisfactory record of integrity. He refused to cancel the award to Foremost, and stated that since a determination of nonresponsibility is required to be maintained in the file, removal of that determination is not possible. App. D, exhibit 8. 14 In so doing, Sergeant Trevino admitted that, but for the determination of nonresponsibility, Old Dominion would have otherwise received the contract. Defense Acquisition Regulation 1-904.1 (32 C.F.R. 1-904.1) provides that when a bid or offer on which an award would otherwise be made is rejected because the prospective contractor is found to be nonresponsible, a determination of nonresponsibility shall be made, signed, and placed in the file (emphasis supplied). More importantly, the Government has never denied that, but for the determination that Old Dominion lacked integrity, ODDPI would have otherwise received the contract. No other reason has ever been suggested.