Opinion ID: 186249
Heading Depth: 2
Heading Rank: 4

Heading: Vendor Pricing CLINs

Text: 22 McDonnell Douglas argues the release of prices for certain CLINs composed predominantly of the costs of materials and services it procures from other vendors would enable its competitors to derive the percentage (called the Vendor Pricing Factor) by which McDonnell Douglas marks up the bids it receives from subcontractors. McDonnell Douglas argues release of the disputed CLINs would likely harm its competitive position because Lockheed most likely obtained quotations from the same vendors, with the same or nearly the same pric[es]. 23 In explaining its decision to release those CLINs the Air Force stated it is entirely possible, indeed not uncommon, for a subcontractor to quote different prices ... to different prime contractors. Therefore, the Air Force reasoned, McDonnell Douglas's competitors could not with any degree of certainty derive its Vendor Pricing Factor from disclosure of the Vendor Pricing CLINs and hence McDonnell Douglas is unlikely to suffer substantial competitive harm. 24 The problem with this line of reasoning is its premise, namely, the mere supposition that McDonnell Douglas and Lockheed received — or may well have received — significantly different prices from the same vendors bidding for the same subcontract. The Air Force provided no actual evidence, nor did it claim special knowledge based upon its experience, to support this proposition, apart from the rather casual observations that it was entirely possible and not uncommon. This is tantamount to the Air Force saying it would not be surprised if the rival bidders had received different prices from subcontractors, but it is far short of asserting (let alone substantiating) that it was likely they did so. 4 Nor does it seem probable as a matter of economic theory. In a competitive market for subcontracted work, a rational subcontractor would quote each prime contractor the lowest price consistent with covering its costs. Any difference in the prices it quotes different prime contractors should, in theory, reflect differences in the costs of supplying them. Therefore, it is reasonable to presume, as McDonnell Douglas did in its submissions to the Air Force, that its competitors obtained similar pricing from various vendors to support those tasks. 5 25 Perhaps the Air Force, which we recognize has knowledge of the government contracting industry, McDonnell Douglas, 215 F.Supp.2d at 208, has reason to believe the markets in which its prime contractors purchase goods and services are not effectively competitive. 6 Having failed to explain how its knowledge or experience supports that understanding, however, the decision of the Air Force is neither at least as compelling as McDonnell Douglas's, McDonnell Douglas, 215 F.Supp.2d at 209, nor well-reasoned, logical[,] and consistent, CNA Financial, 830 F.2d at 1155; it is, in short, arbitrary and capricious.