Lockheed Missiles & Space Co., Inc. v. Bentsen

The Department of the Treasury (defendant), through the Internal Revenue Service (IRS), issued a Request for Proposals (RFP) for a contract to acquire automation systems, technical support, and software. The RFP stated that technical factors would be given greater weight than price in the government’s evaluation of the submitted proposals but that the government would not pay significantly more in order to receive marginally better technical features. The technical features of each proposal would be evaluated independently of price, and then the government would assess whether the technical features justified the proposed contract price. Lockheed Missiles & Space Co., Inc. (Lockheed) (plaintiff) submitted a $900 million proposal, and AT&T Federal Systems (AT&T) submitted a $1.4 billion proposal. The IRS awarded the contract to AT&T. Lockheed protested the award of the contract to AT&T, arguing that the IRS failed to consider price when evaluating AT&T’s and Lockheed’s competing proposals. The General Services Administration Board of Contract Appeals (the Board) agreed, holding that the IRS failed to properly analyze whether the technical benefits that AT&T’s proposal offered justified the far-greater cost. The Board ordered the IRS to prepare a price/technical tradeoff analysis and, based on that analysis, either confirm the award to AT&T or make a new award. The IRS conducted a price/technical tradeoff analysis and determined that AT&T’s technical proposal would result in far-greater productivity value than Lockheed’s and that the greater productivity value justified the higher cost of AT&T’s proposal. The IRS confirmed the award of the contract to AT&T. Lockheed protested again, but the Board approved the award, holding that the IRS’s price/technical tradeoff analysis proved that the AT&T contract was the most advantageous choice. Lockheed appealed to the Federal Circuit, arguing that (1) the areas in which AT&T’s proposal was technically superior to Lockheed’s represented only a small fraction of the total scope of the contract; and (2) the IRS’s evaluation process effectively disregarded price in favor of technical advantages.