Government Contracts Update October 2007

October 2007

From the editors of CCH's government contracts products, here are summaries of the important recent developments in this practice area for the past month. Complete coverage of these issues, and many more, appear in the Government Contracts Reporter and related products.

If you have comments or suggestions concerning the information provided or the format used, please feel free to contact me directly at aaron.broaddus@wolterskluwer.com.

Hot Topic

DHS Reliance on Contractors Comes Under Congressional Spotlight
A report from the Government Accountability Office, released October 17, provides "troubling evidence" that the Department of Homeland Security has not routinely evaluated risks in acquiring services by contract, nor properly monitored those services that are closely related to inherent government functions. Sen. Susan M. Collins, R-Maine, ranking member of the Senate Committee on Homeland Security and Governmental Affairs, told a committee hearing that GAO examples of inadequate DHS oversight of contractor services were particularly troubling since DHS used "billions in taxpayer dollars last year to procure professional and management-support services." The GAO report calls on DHS to improve its oversight of contractors and to better manage the risks associated with relying on contractors. GAO examined 117 statements of work for DHS service contracts and found that over half of those contracts were for services that closely support inherently governmental functions. GAO found that DHS had not revisited its original justification for relying on contractors and had not conducted a comprehensive assessment of the appropriate mix of federal employees and contractors. DHS also did not assess the risk that its decisions may be influenced by, rather than independent from, contractors, the report stated. Furthermore, most of the contract officials and program managers were unaware that federal procurement policy requires heightened oversight when contractors perform these types of services, the report found. GAO also noted that in some cases DHS didn't clearly specify requirements for the contractor, which exposed it to waste, fraud and abuse. In addition, none of the oversight plans reviewed by GAO contained specific measures for assessing contractor performance, the report said. Committee chairman Sen. Joe Lieberman, I-Conn., told the hearing "there is a danger that the department may become so dependent on contractors that it simply has no in-house ability to evaluate the solutions its contractors propose or to develop options on its own accord." Elaine Duke, DHS's chief procurement officer, said her agency shares the committee's concerns with the federal government's increasing reliance on contractor services and the risk associated with contractors providing services that closely support mission critical functions. "For the department, it is not a question of whether we continue to utilize contractor services, but, rather, as the organization matures and evolves, about reaching the optimum balance between requirements being performed by federal employees and contractors, how we capitalize on the energies and solutions industry can offer, and very critically, how we then manage the risks associated with the continued use of contracted services," Duke said. Government Contracts Report Letter No. 1931, October 24, 2007.

DOD Examining Possible Criminal Misconduct
The Defense of Department is examining possible criminal misconduct connected to about $6 billion worth of contracts providing equipment to the security forces in Iraq and Afghanistan since 2005, Congress heard September 20. Thomas F. Gimble, DoD principal deputy Inspector General, told the House Armed Services Committee that his office is also currently conducting 29 audits into contracts and programs valued at $88 billion. Gimble said DoD will continue to work on contracting issues to tighten up controls and strengthen processes, and will also cooperate with law enforcement agencies to identify potential criminal activity for investigation and prosecution. He told members that as the investigations and audits unfold, it will be important to determine the percentage of the so-called bad apples. Gimble added, "I don't think there's a short-term solution to this. I think it's going to take a lot of hard work for an extended period." Committee chairman Ike Skelton, D-Mo., said "there can be no excuse, however, for those who engage in outright fraud or accept bribes, large or small, in the performance of their official duties." Government Contracts Report Letter No. 1928, October 3, 2007.

Legal News

Derivative Sovereign Immunity For Military Contractors Denied
A federal district court's refusal to grant military transportation contractors derivative sovereign immunity from tort claims under the Feres doctrine was affirmed by the Court of Appeals for the Eleventh Circuit because the contractors failed to show one of the policies justifying the government's protection from service-related lawsuits also applied to contractors. After their decedents were killed in an airplane crash, the plaintiffs filed suit against contractors that provided air transportation and operational support services in Afghanistan. The contractors moved to dismiss under Feres v. U.S. (340 US 135), which bars soldiers from suing the government for injuries incurred incident to military service. The district court denied the motion, finding the Feres doctrine only applies to suits against the government or its employees (50 CCF ¶78,662).

On appeal, the Court of Appeals held granting contractors Feres immunity would be inappropriate because it would single out soldiers and would not protect sensitive military judgments in suits brought by others. Immunity based solely on the contractors' alleged status as common law agents would have been inconsistent with principles of official immunity, which generally exists only when it is affirmatively justified. The contractors were therefore required to show one of the policies behind Feres supported an extension of the doctrine to private military contractors. Three of the four Feres policy rationales do not apply to private contractors, but the fourth rationale, the need to protect against interference with sensitive military judgments, was a closer call, because concerns related to separation of powers and a court's ability to determine an appropriate standard of care apply to both contractors and the government. However, applying the Feres "incident to service" standard to the contractors would produce a result that was too broad, and the contractors did not suggest a narrower approach. There are many potential service-related injuries, such as food poisoning, that do not implicate sensitive military judgments, as demonstrated by the fact civilians may bring these types of actions against the government. Further, a narrower form of contractor immunity based on Feres would be ineffective and inequitable. Soldiers would be prevented from bringing suit against contractors, while civilians such as reporters or contractor employees would not, a result which would single out soldiers for special disfavor in courts of law. Finally, granting Feres immunity here would be inconsistent with the Supreme Court's decision in Boyle v. United Technologies Corp. (34 CCF ¶75,489). McMahon, et al. v. Presidential Airways, Inc., et al., CA-11, 51 CCF ¶78,824.

Mission Critical Need Justified Combined Acquisition
A defense agency's decision to solicit software and hardware maintenance services from a single contractor was reasonable, according to the Court of Federal Claims, because it demonstrated the lower risk associated with combined maintenance was a minimum requirement. The agency solicited the services to support a supercomputing center that analyzed oceanic and shoreline data and served as a disaster recovery center for five other defense supercomputer centers. The protester contended combining the requirements for hardware and software maintenance services for robotic tape library systems into a single acquisition improperly excluded it from competition in violation of the Competition in Contracting Act. Arguing it should be allowed to compete for only the hardware maintenance requirement, the protester alleged it performed hardware maintenance for robotic tape library systems manufactured by the prospective awardee at over 200 locations and that 16 agencies allowed hardware and software maintenance to be provided by separate contractors.

On cross-motions for summary judgment, the court found the decision to combine the requirements was not arbitrary, capricious, or an abuse of discretion, and declaratory or injunctive relief was therefore inappropriate. As the agency's facility supported fleet operations and combat warfighters on an around-the-clock basis, the increased risk of system failure and downtime associated with splitting the requirements was a reasonable justification for procuring both services from a single contractor. Further, the record showed many defense agencies with mission critical systems do not split their hardware and software procurements, the government had legitimate concerns over potential "finger-pointing" arising from the use of separate contractors and non-OEM parts, and adequate competition was available for obtaining the maintenance services on an undivided basis. The divided approach advocated by the protester was "followed for systems with more routine uses, such as financial and personnel records processing, military and other inductee processing, immigration records processing, supply management and medical records processing," and none of the protester's examples involved a function as important as the disaster recovery center operated by the agency. Although there was no "precise empirical data" on a comparable agency's use of both maintenance approaches, it was "enough to see that a greater likelihood of ["finger-pointing" and increased system downtime] is present when the agency must manage multiple vendors instead of one vendor." CHE Consulting, Inc. v. U.S., et al., FedCl, 51 CCF ¶78,823.

Contractor Not Entitled to Calculate Damages as Lost Volume Seller
A timber contractor was not entitled to compute lost profit damages based on a modified lost volume seller theory, according to the Court of Federal Claims, because the theory depended on proving lost profits from collateral contracts that, as a matter of law, were not remediable in damages, and the contractor did not meet the criteria for recovery as a lost volume seller. The parties disputed the calculation of damages following the CFC's decision entitling the contractor to recover lost profits for the government's suspension of timber contracts (50 CCF ¶78,619). The contractor argued it was akin to a lost volume seller and therefore should not be required to reduce lost profits damages by the profits earned by partially harvesting the suspended sales in the post-suspension period. The contractor also took issue with the CFC's criteria for recovery as a lost volume seller, contending it only needed to demonstrate it was an ordinary dealer in goods who would have entered into profitable timber sale contracts during the post-suspension period.

However, well-established precedent holds lost profits caused by the lost opportunity to enter collateral contracts are not recoverable. A contractor is not entitled to damages affecting its "entire business enterprise" and, more specifically, a contractor may not recover for losses related to collateral contract opportunities "crowded out by the breach of the contract." The contractor's theory of recovery was not viable because it relied on proof of lost profits on contracts that were independent and collateral undertakings not related to the subject matter of the breached contracts. Allowing the contractor "to use these unrecoverable damages to reduce the amount of the deduction required to be made in the lost profits calculus to account for the profits earned on the breached contracts would be the functional equivalent of affirmatively awarding damages for the lost profits on the future additional contracts." In addition, by failing to demonstrate it would have successfully bid on and been awarded additional timber sale contracts that it would have harvested and manufactured in the post-suspension period, it was impossible for the contractor to satisfy the CFC's other criteria for recovery as a lost volume seller (see 50 CCF ¶78,619). In calculating its breach damages, the contractor could only recover for losses that flowed from the specific contracts in dispute, and thus the contractor had to reduce the profits it would have earned on the suspended contracts by the profits actually earned on the contracts in the post-suspension period. Precision Pine & Timber, Inc. v. U.S., FedCl, 51 CCF ¶78,822.

CAS 412 Actuarial Assumptions Applied to Closing Adjustment
The government's partial summary judgment motion relating to the calculation, under Cost Accounting Standard 413, of a segment-closing adjustment for pension plan costs was granted by the Court of Federal Claims because the original CAS 413 required the use of actuarial assumptions developed under CAS 412 to determine the "actuarial liability" where there is no plan termination. The dispute centered on the CAS 413 requirement to provide for adjustments to a contractor's pension costs to account for a closed business segment's surplus or deficit. The contracts at issue predated 1995 revisions of CAS 413 and thus the original 1978 version of CAS 413 applied. The parties did not dispute the pension plan had a deficit at the time the contractor sold the segment, but they filed cross motions for summary judgment to contest the amount of the government's share of the deficit.

Each party proposed differing actuarial assumptions for calculating the actuarial liability of the pension plan, resulting in a difference of millions of dollars in the government's share of the closed segment's pension deficit. The contractor contended CAS 413 required the use of actuarial assumptions made by the Pension Benefit Guarantee Corporation to calculate the adjustment because the contractual relationship between the government and the contractor's closed segment ended, and therefore the segment closing was analogous to a plan termination. The government argued CAS 413 required use of the contractor's actuarial assumptions under CAS 412 because the purpose of a segment-closing adjustment is to deal with the end of the amortization process that had been required to correct past over- and under-estimates of pension costs previously charged to the government under CAS 412. The court looked first to the meaning of actuarial liability as the phrase was used in CAS 413.50(c)(12) and determined the plain language of that provision, along with related definitions in CAS 413, the Preamble to CAS 413, and revised CAS 413 required the contractor to use the actuarial assumptions relating to the interest rate and mortality developed under CAS 412.40(b)(2)) to calculate the actuarial liability of a segment's pension plan when the plan has not been terminated, as was the case here.

The court concluded the original CAS 413 defined "actuarial liability" based on the "cost method in use" approach delineated in CAS 412. Accordingly, the contractor was required to use the same cost method, including the same actuarial assumptions, that it had used under CAS 412 for the segment-closing valuation under CAS 413. Furthermore, CAS 413's acknowledgment of actuarial assumptions based on Employee Retirement Income Security Act requirements was limited to a segment closing calculation involving a plan termination. In addition, the purpose of a segment-closing adjustment is to account for the end of the amortization process and therefore an adjustment calculation must focus on the calculation of past pension costs under CAS 412. The CAS 413 Preamble gave no support to the contractor's contention a segment-closing adjustment must account for the fact the government relinquished all risk for future pension costs. Also, CAS 413 did not require a market-based valuation of actuarial liability. CAS 413.50(c)(12) required the contractor to determine the market value of the pension plan assets, but the provision did not refer to a market-rate calculation for actuarial liability. Moreover, the revised CAS 413 confirmed the actuarial assumptions developed under CAS 412 are to be used in a segment-closing adjustment absent a plan termination. Thus, revised CAS 413 supported the court's interpretation that CAS 413 required continuing assumptions to be used in a segment-closing adjustment where a pension plan remains ongoing. Finally, the contractor's references to non-CAS agency determinations, including Defense Contract Audit Agency materials, did not overcome the plain language of the CAS. General Motors Corp. v. U.S., FedCl, 51 CCF ¶78,821.

Allowability of Employment Litigation Costs Not Precluded by FAR
The Armed Services Board of Contract Appeals summarily rejected the government's attempt to disallow a contractor's costs of settling an employee's lawsuit because the case law and regulations relied on by the government were inapplicable to actions brought under Title VII of the Civil Rights Act of 1964. The dispute arose out of a cost-reimbursement contract for military housing maintenance. During the term of the contract, a former contractor employee sued the contractor under Title VII for events that took place while she was performing the contract. The contractor incurred substantial costs defending against the lawsuit, which was ultimately settled. The contractor sought reimbursement of its legal fees and settlement expenses under the contract terms. According to the contractor, the employee's lawsuit lacked merit, but a trial of the case would have cost twice the amount of the settlement expenses, and therefore it acted appropriately in settling the case. The contractor claimed the settlement payment was a direct charge allocable to the contract, and its legal fees were allocable as general and administrative expenses.

The government disallowed the costs, citing Boeing North American, Inc. v. Roche (46 CCF ¶77,930). In Boeing, the Court of Appeals for the Federal Circuit held reimbursement of a contractor's costs incurred in settling a lawsuit are allowable under FAR 31.205-47(b)(4) only if the contractor is able to show that the lawsuit had "very little likelihood of success on the merits." However, Boeing only applies to the types of litigation described in FAR 31.205-47(b), which are limited to criminal proceedings, civil or administrative proceedings involving "fraud or similar misconduct or imposition of a monetary penalty," contractor debarment or suspension, or a contract's rescission or termination for default. None of these circumstances were present in the instant case.

The government also sought to disallow the costs under FAR 31.205-15(a), arguing the settlement expenses were related to the "fines and penalties" contemplated by the regulation because they were incurred to limit the contractor's risk of liability under Title VII. However, the types of "fines and penalties" referred to in FAR 31.205-15 were not present. The Federal Circuit has held a statute imposes a penalty if the costs are related to a penalized party's conduct, the proceeds are collected by the state, and the statute is designed to remedy a public harm, as opposed to an individual injury (41 CCF ¶77,133). The government failed to show the relevant provision of Title VII was meant to address a public harm rather than an individual injury, and the settlement agreement provided for payment to the employee, not a government entity. Tecom, Inc., ASBCA, 07-2 BCA ¶33,674.

Arbitrary Override Determination Set Aside
The government's determination to override the automatic stay of awards of exclusive-use contracts for helicopter services was arbitrary and not in accordance with law, according to the Court of Federal Claims, because the government failed to demonstrate the contracts were essential to address the challenges of the current firefighting season. After three protests were filed with the Government Accountability Office, the government overrode the Competition in Contracting Act's automatic stay of performance under 31 USC 3553(d)(3)(C), finding the solicited services were "critical aviation resources needed for support of national fire suppression efforts" and alternatives to overriding the stay were not in the government's best interest.

The court concluded the government's rationales did not justify the override. By failing to show the exclusive-use contracts better guaranteed helicopter availability than preexisting exclusive-use and call-when-needed contracts, the government did not demonstrate staying the awards would result in significant adverse consequences. In addition, the government's consideration of alternatives was arbitrary because it did not recognize its ability to pre-position helicopters under CWN contracts, and the record did not show there was a shortage of helicopter operators under CWN contracts or that helicopters available under CWN contracts were inherently local rather than "national" or "strategic" assets. In short, neither the automatic stay nor the override would affect the overall supply of helicopters, and the use of CWN contracts would not impair the government's management of helicopter resources to carry out its mission and objectives.

Having succeeded on the merits of their challenge to the override determination, the protesters were also required to demonstrate the override would cause them irreparable harm. Their position was undermined by the fact that, following the government's override, six of the eight helicopters proposed for the exclusive-use contracts were being used to fight fires under CWN contracts. Moreover, the CWN contracts paid a "daily base rate" typically double the rate earned under exclusive-use contracts. Because the CWN contract premium was compensation for the fact CWN contracts do not guarantee a fixed number of days of work, the short-term benefit of CWN contracts was offset by the lack of a guaranteed return. In addition, trial testimony showed the government's policy was to maximize the use of exclusive-use helicopters, which meant exclusive-use contracts could yield greater revenues if firefighting requirements moderated over the course of the season. On balance, therefore, the protesters suffered irreparable harm by being deprived of guaranteed work and having to accept lower paying state and city fire fighting contracts for two of the helicopters. The court further concluded the protestors were entitled to a declaratory judgment setting aside the override because the harm to the protesters outweighed the government's potential hardship in relying more heavily on CWN contracts, and the government did not demonstrate exclusive-use contracts were the only means of protecting the public from an intense fire season. Superior Helicopter LLC, et al. v. U.S., FedCl, 51 CCF ¶78,811.

SBIR Phase II Program Not a "Procurement"
The Court of Federal Claims concluded it lacked jurisdiction over a self-styled post-award bid protest challenging the award of Small Business Innovative Research Phase II contracts, because the SBIR Phase II program does not involve a procurement or proposed procurement for purposes of the Administrative Disputes Resolution Act. The protester sought declaratory and injunctive relief, contesting the government's ranking of its proposal below 19 propulsion technology proposals selected for SBIR Phase II awards. The government filed a motion to dismiss, raising the issue of whether the SBIR Phase II program involved a procurement for purposes of the court's jurisdiction under 28 USC 1491(b)(1). The protester argued the SBIR program qualified as a competitive procurement solicitation because it involved the "acquisition of research and development." The protester relied on language used in the SBIR grant process that indicated the process was a competitive procurement and contended the "SBIR program follows the traditional competitive procedures typically followed in a negotiated procurement under FAR Part 15."

However, the source selection plan for the program through which the protester sought an award stated the SBIR program "will solicit R&D and not procurement." Moreover, the SBIR program's implementing statute and congressional policy do not refer to procurement or a purpose of obtaining property or services through a competitive contract process. Therefore, the program's procurement language did not result in a procurement, and the use of procedures analogous to those used in competitive procurements did not create a competitive procurement. Even assuming the program was a procurement, the protester could not demonstrate its proposal, which was ranked no higher than 21, had a substantial chance of being ranked as one of the proposals for which the government had funding. The protester had no direct competitors in the SBIR Phase II program, which meant the proposals could not be judged against a single set of standards. R&D Dynamics Corp. v. U.S., FedCl, 51 CCF ¶78,817.

Surety's Failure to Notify Precluded Equitable Subrogation Claim
A surety's equitable subrogation claim seeking compensation for alleged overpayments to a defaulted construction contractor was denied by the Court of Federal Claims because the surety failed to notify the government of its belief payments should be withheld, and the payments were reasonable under the circumstances and within the government's discretion to administer the contract. The dispute arose out of a construction project to renovate an electrical distribution system. After the contractor was terminated for default, the government entered into a takeover agreement with the contractor's surety and the surety completed the project. The surety later sought compensation for what it described as contract funds improperly paid to the contractor for defective work and for work performed by the surety. Although it was undisputed the surety failed to provide the government with timely notice of the contractor's default, the surety claimed it was nevertheless entitled to compensation based on exceptions to the notice requirement. The surety argued its failure to notify was excused because the contested payments were made in violation of the contract's payment provisions and constituted an abuse of discretion.

Under the doctrine of equitable subrogation, when a contractor defaults on a construction contract, the government owes no equitable duty to the surety unless and until the surety notifies the government that the contractor is in default and that payments to the contractor should cease. An exception allows a surety that neglects its notice obligations to recover when the government disperses funds in violation of a contractual retainage provision, such as a requirement to withhold a percentage of funds until the contractor's performance schedule is approved. The surety argued this exception applied based on the contract's incorporation of FAR 52.232-5(e), which provides "... if satisfactory progress has not been made, the [c]ontracting [o]fficer may retain a maximum of 10 percent of the amount of the payment until satisfactory progress is achieved." However, the record showed the government's payments to the contractor, including payments for materials purchased and delivered to the site, were a reasonable exercise of the government's discretion under the contract. All the payments were supported by approved progress reports, and any defects in the contractor's work were not known by the government at the time it dispersed the funds. Additionally, the use of the permissive word "may" in FAR 52.232-5(e) indicated the contract's retainage clause was not mandatory. Therefore, even if the government failed to withhold payments for unsatisfactory progress, it would not have violated the contract terms. United States Fire Insurance Co. v. U.S., FedCl, 51 CCF ¶78,818.

Major Contract Awards

Hawker Beechcraft Corp. - $3 Billion. The Hawker Beechcraft Corp. of Wichita, KS is being awarded a contract modification for $3,000,000,000. This contract is the framework that will be used to procure Lot 14 through Lot 20 of the T-6A aircraft used by the Air Force and Navy to train pilots. Lot 14 and part of Lot 15 will be primarily Air Force aircraft where areas the subsequent lots will be Navy aircraft. This contract will also procure related items to the aircraft such as ground-based training systems, field service support, and aircraft change modifications. At this time no funds have been obligated. For more information please call (937) 904-4609. JPATSS/PK, Wright-Patterson Air Force Base Ohio is the contracting activity (FA8617-07-D-6151 P00002). Government Contracts Report Letter No. 1929, October 10, 2007.

Doyan Utilities, LLC - $2.4 Billion. Doyan Utilities, LLC., Fairbanks, AK, is being awarded $2,422,234,728.00 regulated tariff rate, 50-year contract for assumption of ownership, operation and maintenance of the central heat and power plant, heat and electric distribution systems, and potable water distribution and wastewater collection systems at Fort Wainwright, AK. Using service is Army. Contract funds will not expire at the end of the current fiscal year. There were 503 original proposals solicited, including web solicitations, with three responses. Date of performance completion is February 2058. Contracting activity is Defense Energy Support Center, Fort Belvoir, VA (SP0600-07-C-8263). Government Contracts Report Letter No. 1928, October 3, 2007.

AmerisourceBergen Drug Corp. - $1.76 Billion. AmerisourceBergen Drug Corp., Chesterbrook, PA, is being awarded a $1,762,339,290.00 firm fixed price, prime vendor contract for pharmaceuticals. Using services are Army, Navy, Air Force, Marine Corps, and Coast Guard. Contract has a base ordering period of 30 months and three term options of 30-months each. The potential maximum contract term is 120 months or 10 years. This is the first of three 20 month options being exercised. Contract funds will not expire at the end of the current fiscal year. Other locations of performance are Florida, Alabama, Georgia, Mississippi, Texas and Puerto Rico. The original proposal was web solicited with 5 responses. Date of performance completion is March 31, 2010. The contracting activity is Defense Supply Center Philadelphia (DSCP), Philadelphia, PA (SPM200-05-D-2000). Government Contracts Report Letter No. 1929, October 10, 2007.

McDonnell Douglas Corp. - $1.3 Billion. McDonnell Douglas Corp., a wholly owned subsidiary of The Boeing Co., St. Louis, MO, is being awarded a $1,319,574,240 not-to-exceed modification to a previously awarded firm-fixed-price contract (N00019-04-C-0014) for the procurement of 24 F/A-18Fs and Alternate Mission Equipment (AME) for the Government of Australia under the Foreign Military Sales Program. Work will be performed in St. Louis, MO (28.7 percent); El Segundo, CA (25 percent); Goleta, CA (8.6 percent); Clearwater, FL (2.3 percent); Greenlawn, NY (2.1 percent); Burnsville, MN (2.1 percent); Johnson City, NY (2.1 percent); Brooklyn Heights, OH (2 percent); Vandalia, OH (2 percent); Grand Rapids, MI (2 percent); South Bend, IN (2 percent); Mesa, AZ (1.8 percent); Fort Worth, TX (1.8 percent); and at various locations across the United States (17.5 percent), and is expected to be completed in July 2011. Contract funds will not expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, MD, is the contracting activity. Government Contracts Report Letter No. 1928, October 3, 2007.

Alliance Contractor Team - $1 Billion. Alliance Contractor Team c/o AMCS of Leesburg VA, is being awarded an estimated $1,031,154,403 firm fixed-price contract for international airlift services with a minimum guarantee of $123,157,632. Team members include: American Airlines, Inc., of Ft. Worth, TX; Arrow Air, Inc. of Miami, FL; ASTAR Air Cargo, Inc., of Miami, FL; Delta Air Lines, Inc., of Atlanta, GA; Evergreen International Airlines, Inc., of McMinnville, OR; Gemini Air Cargo, Inc., of Dulles, VA; North American Airlines, Inc., of Jamaica, NY; United Airlines, Inc., of Elk Grove Village, IL; US Airways, Inc., of Phoenix, AZ; and World Airways, Inc., of Peachtree City, GA. Work will be performed at worldwide locations, and is expected to be completed September 2008. Contract funds will expire at the end of the current fiscal year. Electronic proposals were solicited and 32 proposals received. The United States Transportation Command Acquisition Directorate, Scott Air Force Base, IL, is the contracting activity (HTC711-07-D-0020). Government Contracts Report Letter No. 1928, October 3, 2007.

Federal Express Charter Programs - $1 Billion. Federal Express Charter Programs Team Arrangement of Memphis, TN, is being awarded an estimated $1,071,854,903 firm fixed-price contract for international airlift services with a minimum guarantee of $158,493,329. Team members include: Air Transport International LLC of, Little Rock, AR; ATA Airlines, Inc., of Indianapolis, IN; Atlas Air, Inc., of Purchase, NY; Federal Express Corporation of Memphis, TN; Northwest Airlines, Inc., of St. Paul, MN; Omni Air International, Inc., of Tulsa, OK; and Polar Air Cargo Worldwide, Inc., of Purchase, NY. Work will be performed at worldwide locations, and is expected to be completed September 2008. Contract funds will expire at the end of the current fiscal year. Electronic proposals were solicited and 32 proposals received. The United States Transportation Command Acquisition Directorate, Scott Air Force Base, IL, is the contracting activity (HTC711-07-D-0021). Government Contracts Report Letter No. 1928, October 3, 2007.

Doyon Utilities, LLC - $939.5 Million. Doyon Utilities, LLC, Fairbanks, AK, is being awarded $939,554,520.00 regulated tariff rate, 50-year contract for assumption of ownership, operation and maintenance of the electric distribution system, natural gas distribution system, potable water distribution system, and the wastewater collection system at Fort Richardson, AK. Using service is Army. Contract funds will not expire at the end of the current fiscal year. There were 503 original proposals solicited, including web solicitations, with seven responses. Date of performance completion is February 2058. Contracting activity is Defense Energy Support Center, Fort Belvoir, VA (SP0600-07-C-8262). Government Contracts Report Letter No. 1928, October 3, 2007.

Rolls-Royce Corp. - $789 Million. The Rolls-Royce Corp. of Indianapolis, Ind. is being awarded a contract modification for $789,000,000. This action provides for contract with Rolls Royce for replenishment spare parts for the T56 engines; 286 items. This contract includes Defense Logistics Agency managed items. At this time no funds have been obligated. For more information please call (405) 734-8103. 748 CBSG/PKB, Tinker Air Force Base OK is the contracting activity (F34601-01-D-0155-P00037). Government Contracts Report Letter No. 1928, October 3, 2007.

Doyon Utilities, LLC - $553.3 Million. Doyon Utilities, LLC, Fairbanks, AK, is being awarded $553,328,568.00 regulated tariff rate, 50-year contract for assumption of ownership, operation and maintenance of the central heat and power plant and heat distribution system, electric distribution system, potable water distribution system, and the wastewater collection system at Fort Greely, AK. Using service is Army. Contract funds will not expire at the end of the current fiscal year. There were 503 original proposals solicited, including web solicitations, with seven responses. Date of performance completion is February 2058. Contracting activity is Defense Energy Support Center, Fort Belvoir, VA (SP0600-07-C-8261). Government Contracts Report Letter No. 1928, October 3, 2007.

International Military and Government LLC - $509 Million. International Military and Government LLC (IMG), Warrenville, IL, is being awarded $509,241,000 for firm-fixed-priced delivery order #0005 under previously awarded contract (M67854-07-D-5032) for 1,000 Mine Resistant Ambush Protected (MRAP) Category I Low Rate Initial Production vehicles. Category I is a MRAP vehicle used by the Marine Corps and other Joint Forces for convoy operations. The MRAP vehicles are required to increase the survivability and mobility of troops operating in hazardous fire areas against known threats such as improvised explosive devices, small arms fire and mines. Work will be performed in West Point, MS, and work is expected to be completed April 2008. Contract funds will not expire at the end of the current fiscal year. This contract was competitively procured. The Marine Corps Systems Command, Quantico, VA, is the contracting activity. Government Contracts Report Letter No. 1931, October 24, 2007.

Bechtel Bettis, Inc. - $450.7 Million. Bechtel Bettis Inc., Bettis Atomic Power Laboratory, West Mifflin, PA, is being awarded a $450,700,000 cost-plus-fixed-fee modification to previously awarded contract (N00024-98-C-4064) for Naval Nuclear Propulsion work at the Bettis Atomic Power Laboratory. Work will be performed in West Mifflin, PA. Contract funds in the amount of $242,200,000 will expire at the end of the current fiscal year. No completion date or other additional information is provided on Naval Nuclear Propulsion Program contracts. The Naval Sea Systems Command, Washington, D.C., is the contracting activity. Government Contracts Report Letter No. 1930, October 17, 2007.

Delta Dental - $421 Million. Delta Dental of California, of Rancho Cordova, CA, is awarded the TRICARE Retiree Dental Program (TRDP) contract. This contract provides for dental insurance coverage to all eligible personnel retired from the Uniformed Services, to unremarried surviving spouses, eligible dependents, former members of the Armed Forces who are Medal of Honor recipients and their immediate dependents. Enrollment in the TRDP is voluntary. The premium costs are paid totally by the enrollee. The TRDP will initially offer coverage for dental services rendered in the United States, the District of Columbia, Puerto Rico, Guam, the U.S. Virgin Islands, American Samoa, the Commonwealth of the Northern Mariana Islands, and Canada. TRDP currently has two programs: Basic, which is closed to new enrollments, and Enhanced, into which all new TRDP enrollees shall be enrolled. TMA anticipates authorization (by amendment to the 32 CFR 199.22) to extend TRDP to other overseas locations through a TRDP ENHANCED-OVERSEAS program that will match to the greatest extent commercially practicable the benefits of the current Enhanced Program. The contractor shall fulfill the objectives of the contract while complying with the scope and structure of TRICARE (benefits and beneficiary liabilities) and technical requirements contained in the contract. The contract provides for customer service activities that support enrollment, network provider locator, claims processing functions, and other administrative services. All services are to be ordered through the exercise of options. The contract is for the base period and five 12-month option periods for a total of nearly six years. If exercised, the estimated delivery order value through the Option period 1 is $421,034,714. The base period for transition is September 21, 2007 through July 31, 2008. Delivery for the TRDP for providing coverage, customer service and administrative services will begin on July 31, 2008. This contract was competitively procured via the TRICARE Management Activity e-solicitation Web site, with four offers received. The Department of Defense, TRICARE Management Activity, is the contracting activity (H94002-07-C-0003). Government Contracts Report Letter No. 1928, October 3, 2007.

The MITRE Corp. - $414.5 Million. The MITRE Corp. of Bedford, MA is being awarded a contract for $414,517,316. This action is for Systems Engineering and Integration Support for Air Force ceiling programs and Air Force non-ceiling programs for FY 2008. Support level is estimated at 870 direct staff years for the Air Force ceiling programs and 252.68 direct staff years for the Air Force non-ceiling program. MITRE is a federally Funded Research and Development Center (FFRDC). At this time $2,376,500 has been obligated. For more information please call (781) 271-3054. ESC/PKE, Hanscom Air Force Base, MA is the contracting activity (FA8721-08-C-0001). Government Contracts Report Letter No. 1929, October 10, 2007.

AmerisourceBergen Drug Corp. - $413.6 Million. AmerisourceBergen Drug Corp., Chesterbrook, PA, is being awarded a $413,604,265.00 firm fixed price, prime vendor contract for pharmaceuticals. Using services are Army, Navy, Air Force, and Marine Corps. Contract has a base ordering period of 30 months and three term options of 30 months each. The potential maximum contract term is 120 months or 10 years. This is the first of three 20 month options being exercised. Contract funds will not expire at the end of the current fiscal year. Other locations of performance are Texas, Massachusetts, Virginia, and North Carolina. The original proposal was web solicited with 5 responses. Date of performance completion is March 31, 2010. The contracting activity is Defense Supply Center Philadelphia (DSCP), Philadelphia, PA (SPM200-05-D-1000). Government Contracts Report Letter No. 1929, October 10, 2007.

Bindley Western Drug Co. - $413.6 Million. Bindley Western Drug Co., Indianapolis, IN, is being awarded a $413,604,265.00 firm fixed price prime vendor contract for pharmaceuticals. Using services are Army, Navy, Air Force, and Marine Corps., Contract has a base ordering period of 24 months and three term options of 24 months each. The potential maximum contract term is 96 months or 8 years. This is the third option period being exercised. Contract funds will not expire at the end of the current fiscal year. Other location of performance is North Carolina. The original proposal was web solicited with 5 responses. Date of performance completion is September 29, 2009. The contracting activity is Defense Supply Center Philadelphia (DSCP), Philadelphia, PA (SPM200-05-D-1606). Government Contracts Report Letter No. 1929, October 10, 2007.

Force Protection Industries, Inc. - $376.6 Million. Force Protection Industries, Inc., Ladson, SC, is being awarded $376,644,117 for firm-fixed-priced delivery order #0006 under previously awarded contract (M67854-07-D-5031) for the purchase of 553 Mine Resistant Ambush Protected (MRAP) Category I vehicles and 247 MRAP Category II vehicles and vehicle sustainment Integrated Logistic Support. Work will be performed in Ladson, SC, and work is expected to be completed April 2008. Contract funds will not expire at the end of the current fiscal year. This contract was competitively procured. The Marine Corps Systems Command, Quantico, VA, is the contracting activity. Government Contracts Report Letter No. 1931, October 24, 2007.

General Electric Co. - Awarded $339.7 Million. General Electric Co., Aircraft Engines Business Group, Lynn, MA, is being awarded a $339,759,829 modification to definitize a previously awarded advance acquisition contract (N00019-06-C-0088) to a firm-fixed-price contract. In addition, this modification provides for the Fiscal Year 2007-2008 Full Rate Production of 84 F-414-GE-400 engines for the F/A-18E/F and EA-18G, 84 devices, 10 fan modules, 30 HPT modules and 18 LPT modules. Work will be performed in Lynn, MA (46 percent); Hooksett, NH (18 percent); Rutland, VT (14 percent); Albuquerque, NM (9 percent); Madisonville, KY (9 percent); and Wilmington, NC (.01 percent), and is expected to be completed in January 2009. Contract funds will not expire at the end of the current fiscal year. The Naval Air Systems Command, Patuxent River, MD is the contracting activity. Government Contracts Report Letter No. 1928, October 3, 2007.

Cardinal Health, Inc. - $315.5 Million. Cardinal Health, Inc., Dublin, Ohio, is being awarded a $315,552,575 firm fixed price, prime vendor contract for pharmaceutical distribution. Using services are Army, Navy, and Air Force. Contract has a 30 month option period. Contract funds will not expire at the end of the current fiscal year. Other locations of performance are Minnesota, Missouri, Arizona, California, Colorado, Utah, and Washington. There were 6 proposals originally solicited with 4 responses. Date of performance completion is March 31, 2010. The contracting activity is Defense Supply Center Philadelphia (DSCP), Philadelphia, PA (SPM200-05-D-3000). Government Contracts Report Letter No. 1929, October 10, 2007.

McDonnell Douglas Corp. - $291.9 Million. The McDonnell Douglas Corp., A Wholly Owned Subsidiary of the Boeing Company of Long Beach, CA, is being awarded a contract modification for $291,906,400. This action exercises the FY08 options for the continued performance of the Globemaster III Sustainment Partnership. These options will be funded by separate funding actions as the FY08 funds are received. C-17 fleet sustainment and product support will be managed through a long term performance-based partnership between Boeing and the Air Force, which places performance risk on the contractor to provide sustainment support at continuously raised benchmarked levels. At this time no funds have been obligated. For more information please call (937) 656-9310. 516 AESG/PKS, Wright-Patterson Air Force Base OH is the contracting activity (FA8614-04-C-2004, P00203). Government Contracts Report Letter No. 1928, October 3, 2007.

Bechtel Plant Machinery Inc. - $282.3 Million. Bechtel Plant Machinery Inc., Pittsburgh, PA, is being awarded a $282,347,840 cost-plus-fixed fee contract for Naval Nuclear Propulsion Components. Work will be performed in Pittsburgh, PA (62 percent) and Schenectady, NY (38 percent). Contract funds will not expire at the end of the current fiscal year. The contract was not competitively procured. No work completion date or additional information is provided on Naval Nuclear Propulsion Program contracts. The Naval Sea Systems Command, Washington Navy Yard, D.C., is the contracting activity (N00024-08-C-2118). Government Contracts Report Letter No. 1931, October 24, 2007.