Remington Arms Company filed a bid protest in the U.S. Court of Federal Claims (COFC) protesting the Army's decision to award a contract to produce M4 and M4A1 carbines to Colt Defense LLC. Remington's bid protest is focused on whether the contracting officer's decision to award a contract to Colt while Colt was still in bankruptcy and was labeled "High Risk" by the Defense Contract Management Agency (DCMA) was arbitrary, capricious, and an abuse of discretion.
As you probably know, DCMA is the agency responsible for performing financial capability reviews of prospective contractors - a function it grabbed away from DCAA (Defense Contract Audit Agency) a number of years ago. DCMA had performed a financial capability review of Colt and noted that Colt had recently filed for Chapter 11 bankruptcy protection and that its liabilities far exceeded it assets. DCMA expressed doubt that Colt would have enough working capital to fulfill the contract. An additional DCMA concern was that at the time of the award, Colt did not have a long-term lease for the facility where it intended to manufacture the M4s.
The contracting officer had the DCMA financial jeopardy report and other information from ongoing bankruptcy proceedings but found Colt "responsible" nevertheless. Remington argued that the contracting officer failed to properly evaluate DCMA's report or evidence she reviewed from the bankruptcy proceeding which showed that Colt faced possible liquidation and that its manufacturing facility lease was about to expire.
Upon receipt of the negative DCMA financial capability report, the contracting officer had a conversation with Colt and determined that Colt "does indeed possess the financial resources to perform under the current contract or will have the ability to obtain those resources. In testimony, the contracting officer explained that the "DCMA report was based on information submitted before Colt had submitted its bankruptcy petition" and so the DCMA report was out of date. The contracting officer also discounted the problematic lease extension based on a conversation where Colt representatives told her they had no intention of moving.
Remington appealed, arguing that the contracting officer's responsibility determination under FAR 9.104 was unsupported and therefore arbitrary and capricious. The COFC agreed with Remington. Although the Court did not call her responsibility determination arbitrary and capricious, the Court did conclude that it was not supported by the record. The contracting officer's stated reasons for disregarding DCMA's report were insufficient in light of the bankruptcy court records she reviewed. The fact that a bankruptcy court was monitoring Colt's finances does not mean that the bankruptcy court would or could ensure Colt's continued viability was highly in doubt at the time of the responsibility determination.
In addition, the Court noted, and equally important, the contracting officer's conclusions regarding Colt's ability to manufacture M4s at its facility are also unsupported. Although Colt informed the contracting officer that it intended to stay in the facility, the bankruptcy record shows that the decision did not appear to be in Colt's control. The contracting officer relied on Colt's stated expectations which were largely contradicted by Colt's filings in the bankruptcy case. This decision, the Court found was arbitrary and capricious.
You can read the entire decision here.