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WEDJ/Three C's, Inc. v. Dep't of Defense

July 24, 2006

WEDJ/THREE C'S, INC., UNITED COOLAIR CORP., NEIL R. TUCKER AND JEFFREY E. KOSER, PLAINTIFFS,
v.
DEPARTMENT OF DEFENSE, DEPARTMENT OF THE ARMY, PROCUREMENT FRAUD BRANCH, DEFENDANT.



The opinion of the court was delivered by: James F. McClure, Jr. United States District Judge

Judge McClure

MEMORANDUM

BACKGROUND

On October 21, 2005 an Army Suspension and Debarment Official decided pursuant to Federal Acquisition Regulation (FAR) section 9.406 to debar the plaintiffs from participating in government contracts until March 10, 2008. On November 21, 2005, plaintiffs filed a complaint in the Middle District of Pennsylvania asserting that the Army's decision was not established by a preponderance of the evidence as to the plaintiffs and as a result the decision of the Army Suspension and Debarment Official was arbitrary, capricious, an abuse of discretion, and otherwise not in accordance with existing law. The plaintiffs request in their complaint that we "set aside the debarment decision and terminate the debarred status of the Plaintiffs." (Rec. Doc. No. 1, at 3.) Plaintiff's complaint is an appeal of the final administrative decision. Defendants filed an answer, and following an initial case management conference, filed a certified copy of the Administrative Record. (Rec. Doc. No. 8.)*fn1 At that conference we set forth a briefing schedule which directed plaintiffs to file a brief in support of their appeal and defendants to file a brief in opposition.

On June 22, 2006, plaintiffs filed their brief in support of their appeal captioned "Brief on Behalf of WEDJ/Three C's Inc., United Coolair Corp., Neil R. Tucker and Jeffery E. Koser in Support of Administrative Review of the Order of Debarment Dated October 21, 2005." (Rec. Doc. No. 12.) On July 17, 2006, defendant filed their brief in opposition captioned "Defendant's Opposition to Plaintiff's Motion for Judgment on the Administrative Record and Defendant's Cross Motion for Judgment Upon the Administrative Record." (Rec. Doc. No. 15.)*fn2 The appeal is now fully briefed and ready for our ruling. For the following reasons we will affirm the decision of the Army Suspension and Debarment Official. Final judgment will be entered in favor of the defendant and against the plaintiff.

DISCUSSION

I. Standard of Review under Administrative Procedure Act

A final decision by the Department of the Army to debar a contractor from participating in government contracts pursuant to Federal Acquisition Regulation section 9.406, is subject to review in a district court under the Administrative Procedures Act. See Shane Meat Co. Inc. v. U.S. Dep't of Defense, 800 F.2d 334, 336 (3d Cir. 1986); 5 U.S.C. § 704. When a district court reviews an agency's decision, the scope of the review is limited, even in the context of summary judgment. Yeboah v. U.S. Dep't of Justice, 345 F.3d 216, 221 (3d Cir. 2003). Under the Administrative Procedures Act the district court reviews the agency's decision to determine whether it was "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A).

When a court reviews an administrative decision it is generally limited to the administrative record. Marshall v. Lansing, 839 F.2d 933, 943-44 (3d Cir. 1988).

"The scope of review under the 'arbitrary and capricious' standard is narrow and a court is not to substitute its judgment for that of the agency." Prometheus Radio Project v. F.C.C., 373 F.3d 372, 389 (3d Cir. 2004) (quoting Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto Ins. Co., 463 U.S. 29, 43 (1983)). The agency still must demonstrate that it has examined relevant evidence and that there is a "rational connection between the facts found and the choice made." Id. at 390 (quoting State Farm, 463 U.S. at 43).

II. Facts

The government provided a statement of material facts supported by citations to the administrative record, which are undisputed by the plaintiffs. We recite those facts here.

WEDJ/Three C's Inc. (WEDJ) builds Environmental Control Units (ECUs) for military applications. Their ECUs function as air conditioners, and are intended to cool military personnel and electronic equipment. WEDJ has built ECUs for Navy LCAC Hovercraft, Army Radar Command and Control Shelters, and Army Patriot Missile Control Shelters. WEDJ is a sister company to United Cool Air. WEDJ Owner/President Neil R. Tucker also owns United Cool Air.

On April 8, 1998, WEDJ was awarded contract #DAAB07-98-C-E502 by the Army. This contract called for WEDJ to build approximately 42 ECUs for use in Patriot Missile System Command and Control Shelters. The ECUs, rated at 24,000 British Thermal Units Per Hour (BTUH) output, were referred to by WEDJ as the "24K units." The 24K units were designed to operate as air conditioners in Patriot Missile Shelters in a desert environment. Mr. James Morrison was the Project Engineer for the Army 24K Project. The Army paid WEDJ $851,693 under this contract.

WEDJ also built ECUs for the Navy, pursuant to numerous contracts/delivery orders issued by the Defense Logistics Agency (DLA). These ECUs were built for use in Navy LCAC Hovercraft. These ECUs were referred to by WEDJ as the "Textron" units.

The governing contracts specifically incorporated a Federal Acquisition Regulation (FAR) clause which expressly obligated WEDJ to obtain Government approval prior to substituting surplus components. WEDJ never received Government permission to utilize surplus parts in any of the ECUS. But, contrary to the FAR, WEDJ ...


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