In the United States Court of Federal Claims

                           No. 96-784C

                    (Filed January 30, 1998)


_______________________________
                               )
R.R. DONNELLEY & SONS,         )
COMPANY                        )  Contracts; suit for bid preparation
      Plaintiff,               )  costs; burden of proof of all Keco
                               )  factors; cancellation of bid due to
      v.                       )  changes in estimated requirements.
                               )
THE UNITED STATES,             )
                               )
      Defendant.               )
_______________________________)


Fredric G. Antoun, Jr., Chambersburg, PA., for plaintiff

Steven E. Gordon, Washington, DC, with whom was Assistant
Attorney General Frank W. Hunger, for defendant. Kerry L. Miller,
U.S. Government Printing Office, of counsel.


                             OPINION

Miller, Judge.

In this case before the court after trial, the issues to be
decided are 1) whether the contracting officer was arbitrary and
capricious in canceling an invitation for bids, thereby entitling
plaintiff to bid preparation and related costs; and 2) whether,
under an implied-in-fact contract theory, plaintiff may recover
its pre-award survey and start-up costs incurred during what
plaintiff characterizes as the post-bid proposal negotiation
phase.

FACTS

R.R. Donnelley & Sons, Company ("plaintiff"), challenges the
United States Government Printing Office (the "GPO") for
canceling an invitation for bids related to the printing of
patents, thus entitling it to bid preparation and related costs.

Plaintiff charges that the contracting officer lacked a
reasonable basis for concluding that the printing requirements of
the U.S. Patent and Trademark Office (the "PTO") would drop by
20%. Instead, plaintiff insists that the requirements would drop
by only 7.6%, an insufficient reduction to warrant the
cancellation of the solicitation.

1. Summary of litigation before the Court of Federal Claims

Plaintiff filed suit in the Court of Federal Claims on December
16, 1996. Its complaint contained two counts, breach of implied
contract (Count I) and equitable estoppel (Count II). Plaintiff
sought $336,673.37 in monetary damages for costs incurred in "bid
preparation; formulation and implementation of quality, security
and production plans; pre-award survey and provision of necessary
information to GPO to respond to various protests and preparation
to perform the contract; facilities acquisition cost and
expenses; [and] legal expenses." Defendant moved to dismiss Count
II for lack of subject matter jurisdiction and for summary
judgment on Count I. Following argument on defendant's motion,
the court entered an order on July 28, 1997, denying summary
judgment on Count I and dismissing Count II for lack of subject
matter jurisdiction. See R.R. Donnelley & Sons, Co. v. United
States, 38 Fed. Cl. 518 (1997).

2. The solicitation

On November 15, 1993, the GPO issued a solicitation for the
printing of patents and related documents for the PTO, a program
known as D306-S. 1/ The solicitation, issued in the form of
Invitation for Bids for Program D306-S (the "IFB"), called for a
one-year requirements contract to begin on February 1, 1994, and
to end on January 31, 1995. The specifications of the IFB called
for 45 soft copy 2/ patent sets -- 40 for distribution to foreign
patent offices and five for internal PTO use. The IFB anticipated
that print orders would be placed on a weekly basis, as patents
are issued 3/ on a weekly basis. For each issue the PTO expected
an average of 52 copies of each patent to be ordered, of which 45
copies of each patent would form the 45 sets required for foreign
and PTO distribution. Beyond the 45 copies, the number of copies
ordered of each patent would vary, as some patents would be more
popular than others. Because the PTO knew that it would always
require at least 45 patent sets, the solicitation also called for
a line-item price for the first 45 copies (which form the 45
sets) and a price for each additional five copies or fraction
thereof. In other words, the pricing schedule required the GPO to
pay for at least 45 copies of each patent, regardless of whether
fewer actually were ordered, or needed.

On December 13, 1993, the GPO informed plaintiff that it was the
apparent low bidder. 4/ Soon thereafter, the contracting officer
ordered a full pre-award survey 5/ and began evaluating whether
plaintiff possessed the technical, financial, and production
resources necessary to perform the contract.

On January 11-12, 1994, a government pre-award survey team --
consisting of three GPO employees and three PTO employees --
conducted an on-site survey of plaintiff's facility. Llewellyn W.
Dortch, a Donnelley employee in the Federal Government Group who
was involved in preparing plaintiff's bid for the Program D306-S
contract, testified that plaintiff's preparedness to perform the
contract within 30 days of award was of some concern to the GPO.
Mr. Dortch understood that a line item of the specification
required preparedness within a month of contract award. At the
end of the pre-award survey, Mr. Dortch testified, GPO
representatives indicated that plaintiff had done a good job and
that there was a high likelihood that it would receive the
contract "shortly."

Similarly, David E. Davis, President, Donnelley Com-Com Division,
who also was involved in preparing the bid, testified that at the
end of the pre-award survey, a

GPO representative, Larry McHugh, told him that the plans looked
fine, although Mr. McHugh questioned the adequacy of the floor
plan and equipment configuration of the building plaintiff
planned to use, and whether plaintiff could make the necessary
renovations within 30 days of award. Consequently, plaintiff
investigated the possibility of leasing another building. The day
after the pre-award survey, Mr. Davis and two or three GPO
representatives inspected this facility, which the GPO deemed
adequate and approved. Pursuant to the GPO's approval, plaintiff
obtained an option to lease the building. After the final
extension of the option, on March 6, 1994 -- well after the
responsibility determination -- plaintiff signed a lease on the
building.

Gayle E. Diehl, former manager of the Demand Print Center,
Donnelley Com-Com Division, was responsible for drafting and
revising the production plans. She testified that the plans were
repeatedly sent to the GPO for approval and that "[w]e had to
prove to the GPO that we were fully capable of fulfill[ing] the
contract." Ms. Diehl explained that this required the
installation of equipment, training of staff, and the ability to
be "up and running in 30 days," as per the contract
specifications.

On January 28, 1994, the GPO's pre-award survey team recommended
to the contracting officer that the GPO award the Program D306-S
contract to plaintiff. On or about this date, plaintiff was
determined to be a responsible bidder.

On March 22, 1994, however, the contracting officer, through the
Contract Review Board, canceled the Program D306-S solicitation
"due to extensive changes in the estimated requirements." The
major impetus for the cancellation was the revelation that the
PTO would not require 40 utility 6/ patent sets for foreign
distribution, but would only require 28 sets. This expected
reduction of 12 patent sets altered the economic feasibility of
the IFB, especially given that the solicitation's pricing
structure was based on 45 patent sets.

3. The 12-patent set reduction

Contrary to the court's findings following the summary judgment
proceedings, trial revealed that the 12-patent set reduction was
not a direct result of a conversion to CD-ROM storage of patents.
See Donnelley, 38 Fed. Cl. at 524. At the time, in early March
1994, some confusion was present among PTO and GPO employees
involved in Program D306-S regarding the effect of foreign
countries' CD-ROM capability on the need for fewer paper patent
sets for foreign distribution. Robert W. Saifer, the PTO's
Director for the Office of International Liaison, testified as to
the policy statement issued by the PTO regarding the exchange of
CD-ROM patent sets with other countries. Although discussions
regarding the Japanese CD-ROM exchange occurred among the PTO,
the European Patent Officer ("EPO"), and the Japanese Patent
Officer ("JPO"), the policy was never implemented.

What was implemented, however, was the Patent Document Exchange
Policy through which, along with a March 16, 1994 Notice from PTO
Commissioner Bruce A. Lehman, the PTO established a policy
whereby, upon request, all foreign patent offices that 1)
maintained a classified search file 7/ and 2) offered at least
one paper set of their patent documents to the PTO would continue
to receive one paper set of U.S. patents from the PTO. This
policy was to take effect on October 1, 1994. The EPO and JPO
would be excluded from this policy and would continue to receive
multiple sets of paper patent sets. Other countries that had
received multiple paper patent sets would receive, under the
policy, only one set; Mr. Saifer testified that this approach
"would save at a minimum, 12 sets. It could be more than that,
because there might be countries that don't need to get any paper
from us, now that we are offering CD-ROM." 8/ Whether particular
countries had CD-ROM capability was of no consequence in that
each country would still receive one paper set, unless a country
wanted the patent set on CD-ROM in lieu of paper. In a March 22,
1994 letter, Richard A. Bawcombe, Director, PTO Office of
Publication and Dissemination, informed the contracting officer
that the 12-patent set reduction would occur because 12 countries
had CD-ROM capability. However, Mr. Saifer testified that,
although a 12-set reduction would take place, Mr. Bawcombe's
"reasoning behind how we got that number 12 is incorrect." Mr.
Bawcombe himself admitted that the explanation for the reduction
"was in error." 9/ At no point, however, did either Mr. Saifer or
Mr. Bawcombe indicate that the 12-set reduction itself was ever
in doubt.

Of central importance in this case is the March 15, 1994
memorandum from the GPO Contracting Officer Richard Weiss to the
GPO Contract Review Board, which stated that the conversion to
CD-ROM would result in the reduction of 12 paper patent sets. In
the memorandum Mr. Weiss opined that [t]he initial reduction of
the 12 sets would result in an immediate reduction of
approximately 20% in the soft copy work load. This reduction
would directly [a]ffect the printing line items, the collating
line items (if a charge were entered), and result in a
significant drop in the paper to be used. Further reductions
would result in a workload drop in excess of 50% over what was
originally estimated.

Mr. Weiss admitted that in writing this memorandum he was under a
"misimpression" that the 12-set reduction was related to the
number of countries that have CD-ROM capability. Mr. Weiss
nonetheless testified that only the 12-set reduction mattered;
the source of the reduction was immaterial. When asked what he
meant by the word "immediate," in the passage quoted above, Mr.
Weiss explained that "[t]he reduction in quantity would start
with the October 1 issue [of patents] and would hit the
contractor about the middle of August, about five months into the
contract." He further explained that the reference to a 50%
reduction did not relate to the 20% reduction in soft-copy
workload, which was based on the 12-patent set reduction. Rather,
the 50% referred to the possibility of an additional reduction of
eight patent sets by countries opting for CD-ROM patent sets,
although this called for a degree of speculation.

Mr. Weiss was adamant that he based his calculations and his
memorandum on a reduction of 12 patent sets, a number which came
from both a high-ranking official in the PTO Commissioner's
office and GPO representatives. Mr. Weiss explained at length the
calculations he used to arrive at an overall 25% reduction in the
total impressions (single sides of a page) required by the
contract. Thus, after a page of calculations, the 12-patent set
reduction translated into a reduction from approximately 81
million impressions (the basis of award and the same figure used
by plaintiff) to 60 million impressions, a 25% reduction of
impressions. Mr. Weiss testified that he then lowered the figure
to 20% by "tak[ing] five percent off as a[n] error factor." He
used the 20% figure in his March 15, 1994 memorandum to the
Contract Review Board. This figure is hotly disputed by
plaintiff.

On March 15, 1994, Kerry Miller, counsel for the GPO, informed
plaintiff that the GPO planned to cancel the IFB because the
conversion to CD-ROM would cause a 25% reduction in the PTO's
paper requirements. The GPO formally canceled the Program D306-S
solicitation on March 22, 1994, citing "extensive changes in the
estimated requirements" as the reason for cancellation.

DISCUSSION

1. Standard of review

When an unsuccessful bidder incurs expenses in preparing a bid
for a government contract, these expenses normally are "lost," as
a cost of doing business. Lincoln Servs., Ltd. v. United States,
678 F.2d 157, 158, 230 Ct. Cl. 416 (1980). In soliciting
proposals or inviting bids, the Government enters into an
implied-in-fact contract with offerors to consider their bids
"'fairly and honestly.'" CACI, Inc.-Fed. v. United States, 719
F.2d 1567, 1573 (Fed. Cir. 1983) (quoting United States v. John
C. Grimberg Co., 702 F.2d 1362, 1367 (Fed. Cir. 1983) (en banc));
see also Heyer Prods. Co. v. United States, 135 Ct. Cl. 63, 69,
140 F. Supp. 409 (1956) (dealing with bad faith-inducement of
bids). "'The standards that permit a disappointed competitor to
recover proposal preparation expenses are high and the burden of
proof is heavy.'" E.W. Bliss Co. v. United States, 77 F.3d 445,
447 (Fed. Cir. 1996) (quoting Lincoln Servs., 678 F.2d at 158,
230 Ct. Cl. at 416; and citing, inter alia, CACI, Inc.- Fed., 719
F.2d at 1573; Coastal Corp. v. United States, 713 F.2d 728, 730
(Fed. Cir. 1983)). If the Government's consideration of the
unsuccessful bidder's proposal was arbitrary or capricious, the
Government thereby breaches its implied contract and the bidder
may recoup the costs of preparing the bid or proposal. Keco
Indus., Inc. v. United States, 192 Ct. Cl. 773, 785, 428 F.2d
1233, 1240 (1970) (Keco I) (noting that "plaintiff should be
allowed to recover only those costs incurred in preparing its
technical proposals and bids"); see also AT&T Technologies, Inc.,
v. United States, 18 Ct. Cl. 315 at 321 (finding that damages for
breach of implied contract "are limited exclusively to bid and
proposal preparation costs").

In Keco Indus., Inc. v. United States, 203 Ct. Cl. 566, 492 F.2d
1200 (1974) (Keco II), the United States Court of Claims,
predecessor to the Federal Circuit, articulated four "criteria"
to determine whether an agency's action is arbitrary and
capricious:

One is that subjective bad faith on the part of the procuring
officials, depriving a bidder of the fair and honest
consideration of his proposal, normally warrants recovery of bid
preparation costs. A second is that proof that there was "no
reasonable basis" for the administrative decision will also
suffice, at least in many situations. The third is that the
degree of proof of error necessary for recovery is ordinarily
related to the amount of discretion entrusted to the procurement
officials by applicable statutes and regulations. The fourth is
that proven violation of pertinent statutes or regulations can,
but need not necessarily, be a ground for recovery. The
application of these four general principles may well depend on
(1) the type of error or dereliction committed by the Government,
and (2) whether the error or dereliction occurred with respect to
the claimant's own bid or that of a competitor.

Id. at 574, 492 F.2d at 1204 (citations omitted); see also
Burroughs Corp. v. United States, 223 Ct. Cl. 53, 65, 617 F.2d
590, 597-98 (1980) (applying Keco II criteria).

2. Application of Keco II criteria

A bidder need not show that all four Keco II factors are present
in order to establish that Government action is arbitrary and
capricious. See Prineville Sawmill Co. v. United States, 859 F.2d
905, 911 n.5 (Fed. Cir. 1988) ("[T]he absence of any allegation
or evidence of bad faith . . . is not determinative.").

With respect to the first Keco II factor, plaintiff does not
suggest bad faith on the part of either the contracting officer
or the Contract Review Board. Rather, plaintiff questions the
reasonableness of the decision to cancel the IFB and argues
vehemently that Mr. Weiss's calculations were, as plaintiff's
counsel put it, "dead wrong" and that the "GPO was shooting in
the dark."

The gravamen of plaintiff's case is the contention that Mr. Weiss
lacked a reasonable basis for predicting a 20% reduction in the
PTO's need for paper patent documents and that his decision to
recommend the cancellation of the IFB therefore was arbitrary and
capricious. A reasonable basis requires a "'rational connection'"
between the facts of the situation and the decision made. Bowman
Transp., Inc. v. Arkansas-Best Freight Sys., Inc., 419 U.S. 281,
285, (1974) (quoting Burlington Truck Lines v. United States, 371
U.S. 156, 168 (1962)). To assess the existence of a rational
connection, the court must first examine whether a 12-patent set
reduction would occur and the effect of this reduction on the
total number of impressions required by the solicitation over the
appropriate period of the contract award. The court then must
determine whether, given this reduction, the cancellation of the
IFB was reasonable. Plaintiff does concede that if the reduction,
in fact, was 20%, then the cancellation would have been
reasonable. The lynchpin is the 20% figure, which plaintiff
maintains was actually 7.6% -not enough reasonably to warrant
canceling the solicitation.

Despite the confusion at the time as to the precise reason for
the PTO's reduction in printing needs, Mr. Weiss nevertheless
relied upon correct information -- that a 12-patent set reduction
would occur as of the October 1 issuance and would affect the
contractor's printing requirements as of August. Mr. Weiss
assumed that the earliest the contract could be awarded plaintiff
would be April 1, given the pending bid protests. Because the
termination date of the contract was January 31, 1995, 10 months
would remain on the contract. Mr. Weiss calculated that, over the
remaining 10 months of the contract, the reduction of 12 utility
patent sets (of 40 sets for foreign distribution) would result in
a 20-25% reduction in the total impressions that the PTO would
require. Plaintiff disputes this calculation on several grounds.

First, plaintiff argues that reduction is not 12 patent sets, but
eleven, because one set was double-counted. However, both Messrs.
Saifer and Weiss testified that the new Patent Document Exchange
Policy would result in a 12-set reduction, and plaintiff was
unable to dislodge this established figure.

Second, plaintiff contends that the basis of award should be the
full 12 months of the contract, not the remaining ten months
predicated on a contract award date of April 1. The solicitation
anticipated that the PTO would place print orders for patent
documents on a weekly basis, corresponding with the PTO's weekly
issuance (or granting) of patents. Although the IFB was a
requirements contract, the incumbent contractor would continue to
print patent documents until plaintiff was awarded the contract
(likely not until April 1). Only if the PTO ceased asking the
incumbent to print patents -- creating a two-month backlog for
plaintiff to fill once awarded the contract -- would it make
sense to base the award on 12 months. The court must focus on the
beginning of the contract award rather than the
end, because it is sheer speculation whether the contracting
officer would have extended the contract an additional two
months.

Third, plaintiff asserts that Mr. Weiss selectively applied the
12-patent set reduction to "different aspects of the contract."
Although true, this is not problematic. The 12-patent set
reduction applied only to the 40 patent sets earmarked for
foreign distribution. The five patent sets for internal PTO use
would not be reduced, nor would other line items of the
specifications, such as patent copies ordered by a private
company or the weekly Official Gazette. Similarly, plaintiff
argues that the alleged eleven-set reduction is taken from an
average run of 52 patent copies, not 45. Thus, the 41 remaining
patent sets would only be four less than the 45-set pricing
structure and should not have troubled Mr. Weiss (to the extent
that a reduction from 45 to 33 patent sets did). In his
calculations Mr. Weiss did account for the average of 52 copies,
but he computed the 12-set reduction on only the sets slated to
be reduced -- the 40 sets for foreign distribution.

In short, after closely scrutinizing and replicating Mr. Weiss's
calculations, the court agrees that a 12-patent set reduction, to
affect soft-copy patents for foreign distribution and to occur in
the last six months of a ten-month contract, would reasonably
result in a 25% reduction in printing needs. Mr. Weiss based his
calculations on reasonable assumptions. That he accounted for an
error factor of 5% by trimming the reduction to "approximately
20%" is also sensible.

The court must now turn to the nexus between the 20% reduction
and the cancellation of the IFB. Mr. Weiss testified that he had
three reasons to recommend that the Contract Review Board cancel
the solicitation:

Number one was a reduction in the quantity. Number two was a
change in the pricing structure, that I had no way to pay for the
product. Number three was, I now had a completely revised spec
and didn't know how it would affect the rest of the commercial
community, who else could have bid on this with the reduced
quantity that wasn't able to before. The quantity was much
higher, but it was the first two that were primarily in my mind.
I had no way to pay for the product that was being reduced, based
on the current pricing structure. I could not negotiate, I could
not meet with the contractor to find out what we could do.

Q [By plaintiff's counsel] So, you had to pay for 45 no matter
how many you used?

A [Mr. Weiss] I had to pay for 45 no matter how few we ordered.

Q Your expectation was that you might be ordering as few as how
many?

A Thirty-three as a base number. [10/]

The GPO Printing Procurement Regulation, ch. XI,  2(1)(a)-(b)
(Oct. 1990), entitled, "Cancellation of Invitation After
Opening," governs awards to the responsible bidder with the
lowest responsive bid, "unless there is a compelling reason to
reject all bids and cancel the invitation." The regulation lists
numerous examples of circumstances that may justify canceling an
IFB after opening. Three examples apply here: "(i) Inadequate,
ambiguous, or otherwise deficient specifications were cited in
the IFB[;] (ii) The supplies or services are no longer required .
. . [; and] (vii) For other reasons cancellation is clearly in
the Government's interest." Mr. Weiss explained how each example
applied to the changed circumstances of the IFB. First, the
pricing structure no longer fit the reduced requirements of the
contract, creating an inadequate specification. Second, the
requirements had changed from 45 to 33 patent sets. Third,
because the specifications had changed, other bidders might be
able to submit bids for the reduced quantity of patent sets. The
court finds Mr. Weiss' analysis consistent with the procurement
regulations and therefore reasonable.

As for the third Keco II factor, the Government must not have
abused its discretion in canceling the IFB for Program D306-S.
"The court should not substitute its judgment on such matters for
that of the agency, but should intervene only when it is clearly
determined that the agency's determinations were irrational or
unreasonable." CACI Field Servs., Inc. v. United States, 13 Cl.
Ct. 718, 725 (1987) (citations omitted), aff'd, 854 F.2d 464
(Fed. Cir. 1988); see also United States Fidelity & Guar. Co. v.
United States, 230 Ct. Cl. 355, 369, 676 F.2d 622, 630 (1982)
(treating this factor as a tool to determine "the degree of proof
necessary to prove arbitrary and capricious conduct"). In a
formal procurement, such as this solicitation, procurement
officials are allowed less discretion to perform their duties, as
evidenced by the above

GPO Printing Procurement Regulation. The court finds that Mr.
Weiss did not abuse his discretion, as there were several
compelling reasons to cancel the solicitation.

3. Attorney's fees incurred in defending bid protest

On December 27, 1993, the incumbent contractor, GraphicData,
filed a pre-award bid protest before the General Accounting
Office. 11/ Although the protest was dismissed, plaintiff
incurred legal fees defending itself, which it now seeks to
recoup. Plaintiff cites Crux Computer Corp. v. United States, 24
Cl. Ct. 223, 225 (1991), in which the court asserted jurisdiction
to grant bid protest costs, as well as bid preparation costs. But
see AT&T Technologies, 18 Cl. Ct. at 323 (suggesting that bid
protest costs are not recoverable). The court in Crux Computer
noted that it "must thus look to Keco II for guidance" to
determine whether the Government breached its implied-in-fact
contract. Crux Computer, 18 Cl. Ct. at 226. Therefore, even
assuming, arguendo, that bid protest costs are recoverable,
plaintiff must still prove liability, i.e., that the Government
acted in an arbitrary and capricious manner when it canceled the
IFB. 12/ Because plaintiff has failed to make this showing, the
court need not determine whether bid protest attorneys' fees are
recoverable and whether AT&T Technologies or Crux Computer
supplies the correct rule of law.

4. Costs incurred in the post-bid proposal "negotiation" phase

Plaintiff contends that in addition to bid preparation costs, it
is also entitled to compensation for "costs incurred during the
post bid proposal negotiation phase." This period begins with the
low bid determination and culminates in January 1994, when
plaintiff was deemed a responsible bidder. Plaintiff argues that
this is not a typical IFB; rather, it was a "unique procurement"
which combined the requirements of an IFB with those of a Request
for Proposal, thus necessitating numerous "proposal" costs for
"quality assurance, production planning, security, dedicated
staffing, dedicated facilities, quantity, layoff and connection
of required equipment, staff training, etc. prior to GPO's
[responsibility determination]." Plf's Br. filed Dec. 8, 1997, at
7-8. Plaintiff notes that "[p]erhaps most importantly, the
contract gave the contracting officer the option to have a pre-
award pre-production test at the vendor's site." Id. at 3. The
specification, notes, however, that "[n]o charges will be allowed
for costs incurred in the performance of the pre-award test."

Both parties cite Coflexip & Servs., Inc., v. United States, 961
F.2d 951, 953 (Fed. Cir. 1992), in which the court held that
in a negotiated procurement, the costs a contractor incurs
pursuant to ongoing negotiations with the [G]overnment and in
support of a revised proposal, i.e., post-submission costs, can
be proposal preparation costs. However, costs which do not
support an initial or revised proposal are costs which a
contractor incurs in an effort to better position itself to
perform any contract it should be awarded. These latter costs,
incurred in anticipation of contract award are not proposal
preparation costs. The contractor assumes the risk that it will
not be awarded the contract, and, accordingly, these contract
preparation costs will not be recoverable.

While plaintiff argues that it incurred "proposal costs" and
engaged in ongoing negotiations with the Government as part of
the pre-award survey on January 11 and 12, 1994, defendant
contends that plaintiff incurred these costs in order to place it
in a position to perform the contract. Defendant is correct, as
this was a classic IFB with sealed bids, not a negotiated
procurement or an otherwise "hybrid" procurement. The
solicitation expressly required a pre-award survey in order to
make a responsibility determination; plaintiff's costs following
its low-bid submission were incurred pursuant to the
responsibility determination and in anticipation of a contract
award. Therefore, these costs are not compensable.

To further support its claim, plaintiff cites the GPO's Contract
Cost Principles and Procedures, GPO Procurement Directive 306.2,
GPO PRA 306.2,  3,  26 (Apr. 1, 1988), which states, in
pertinent part: "Bid and Proposal (B&P) costs, as used in this
subdivision means the costs incurred in preparing, submitting and
supporting bids and proposals (whether or not solicited) on
potential Government or non-Government contracts." 13/ The
directive does not further define the word "supporting," so it is
unclear whether it includes the sort of post-bid submission costs
incurred by plaintiff.

"Supporting" just as easily could refer to costs incurred before
bid submission as those incurred after. This provision also could
merely concern the bid preparation costs sought by plaintiff
rather than the more involved "proposal" costs.

Plaintiff also argues that Crux Computer, 24 Cl. Ct. at 225, and
AT&T Technologies, 18 Cl. Ct. at 323, recognize as compensable
"the exact efforts that Donnelley expended in order to receive
the award." Plf's Br. filed Dec. 8, 1997, at 8. The reasoning
behind this statement is unclear in that Crux Computer concerned
bid protest costs and the court in AT&T Technologies noted that
"B & P costs . . . are the only pre-contract costs recoverable
for the government's breach of its implied duty to fairly and
honestly consider proposals." 18 Cl. Ct. at 323. Indeed, Crux
Computer, AT&T Technologies, and Coflexip & Servs. all link the
recovery of bid protest, bid preparation, or proposal costs to
arbitrary and capricious government conduct. Having failed to
prove one or more Keco II factors, plaintiff is not entitled to
compensation for bid preparation, attorneys' fees for bid
protest, or proposal costs.

5. Implied-in-fact contract theory

Based on an implied-in-fact contract theory, plaintiff maintains
its entitlement to recover the costs incurred in designing and
setting up a production environment, producing pre-production
samples, and conducting a pre-award production system test
pursuant to the responsibility determination requirements.

Regarding the evidence generally required to support an implied-
in-fact contract, the Court of Claims stated:

A contract implied in fact requires a showing of the same mutual
intent to contract as that required for an express contract. The
fact that an instrument was not executed is not essential to
consummation of the agreement. It is essential, however, that the
acceptance of the offer be manifested by conduct that indicates
assent to the proposed bargain. The requirements of mutuality of
intent and the lack of ambiguity in offer and acceptance are the
same for an implied-in-fact contract as for an express contract;
only the nature of the evidence differs.

Russell Corp. v. United States, 210 Ct. Cl. 596, 609, 537 F.2d
474, 482 (1976) (footnotes omitted). "Mutuality is inferred 'from
conduct of the parties showing, in the light of the surrounding
circumstances, their tacit understanding.'" Sperry Corp. v.
United States, 13 Cl. Ct. 453, 458 (1987) (quoting Baltimore &
Ohio R.R. v. United States, 261 U.S. 592, 597 (1923)).

Plaintiff argues that the GPO urged it to proceed as quickly as
possible to ensure that the new production facility was ready to
take printing orders within 30 days of contract award. The GPO
made a responsibility determination on or around January 28,
1994, and plaintiff argues that contract award was conditioned on
its readiness to produce under the approved plans and in the
approved facility within 30 days of award. Plaintiff likens this
case to Sperry, where the defendant agency requested accelerated
production and delivery of the subject of the contract absent a
follow-on contract. Here, however, the pre-award survey did not
require plaintiff to perform more work than that anticipated by
the specifications, nor did the GPO pre-award survey team or the
contracting officer's requirement of readiness relate to a
separate contract. Rather, plaintiff understood that the 30-day
readiness requirement was part and parcel of the IFB.

CONCLUSION

Accordingly, based on the foregoing, the Clerk of the Court shall
enter judgment for defendant.

IT IS SO ORDERED.

No costs.
__________________________________

Christine Odell Cook Miller
Judge

The average run per patent is 52 copies, of which 40 (of each
patent) are allocated to create full patent sets. Forty of the 45
patent sets are sent to foreign patent offices and 5 are used
internally by the PTO. The other 12 sets represent individual
patent copies for other purposes and are not reduced. First, Mr.
Weiss calculated the total impressions allocated for full patent
sets, for the 4-month period before the reduction would take
effect. Second, he calculated the remaining impressions for the
10 month duration of the contract that would not be affected by
the change because they did not comprise copies for full patent
sets. Third, he calculated total impressions for full sets,
beginning with the October 1 issue -- when the 12-set reduction
(or 30% reduction of the 40 sets) took effect. Next, he added the
number impressions for the above 3 calculations to arrive at a
figure of 44,439,032, the total soft-set impressions (before and
after the reduction) and remaining impressions (not affected by
the reduction). To this figure, he added the number of hard-set
impressions (total impression comprise soft- and hard-set
impressions) for the 10 month duration of the contract, to arrive
at 60,324,358. Of the approximately 80 million total original
impressions, 60 million would remain, for a 25% reduction.


_______________

1/ Specifically, the program buys hard copy patents, printed on
ledger stock, and soft copy patents, printed on offset stock.

2/ The IFB defines a "soft copy set" as "[o]ne copy of each
utilities, plants, reissues, reexam[ination]s, Certificate of
Correction and SIRs patent for a given issue, printing on White
offset Book (or as specified under STOCK/PAPER)." The patent sets
transmitted to foreign countries' patent offices are soft copies.
Patent sets consist of all patents issued each week, whereas
patent copies refer to duplicates of a single patent.

3/ "Issue" is defined by the IFB as "[t]hose allowed patents,
related indices, and other printed matter which constitute an
Official Gazette for a given week."

4/ The GPO had received two bids, one from plaintiff in the
amount of $2,887,812.39 and one from GraphicData, Inc., the
incumbent Program D306-S contractor, in the amount of
$2,933,925.23.

5/ The IFB stated that a pre-award survey was necessary to make a
responsibility determination. If deemed necessary by the
contracting officer, the contractor would also be required to
perform a pre-award test involving the production of copies in
accordance with the specifications.

6/ Utility patents, for inventions, comprise the vast majority
(approximately 95%) of all issued patents. Other types of patents
include design patents, for non-functional features of an item,
e.g., its look or shape, and plant patents, e.g., asexually
reproduced plants or grafted plants.

7/ A classified search file is a set of patents that is divided
into numerous categories based on different technologies. It is
relied upon by a given patent office's examining corps and
independent patent searchers to search for relevant patents.
While CD-ROM storage of patents is compatible with numerical
patent sets, used for retrieval purposes, it is incompatible with
a classified patent set because searching necessitates categories
that contain all issued patents. A single CD-ROM, e.g., for all
patents issued each year, would not allow a searcher to search
all issued patents within a single category.

8/ According to Mr. Saifer's memorandum of May 31, 1994, the 12-
set reduction -- a result of sending each country only one paper
set -- would be accomplished by savings from the following
countries (paper set savings in parentheses): Austria (1); China
(1); Germany (4); Denmark (1); Great Britain (2); Sweden (2); and
the Russian Federation (1). Testimony of the contracting officer,
Richard Weiss, confirmed these countries and numbers by examining
the specifications' delivery requirements and subtracting all but
one set.

9/ It is easy to understand the confusion surrounding the CD-ROM
capability issue. Commissioner Lehman's Notice explains that in
order to save money, the PTO "would like to substitute CD-ROM
U.S. patent documents for those currently provided in paper or
microfilm under our exchange agreements." The PTO offered to
provide two CD-ROM subscriptions for each paper patent set
replaced. However, given that not all countries may have CD-ROM
reading capability, the PTO would continue to send a single paper
patent set, assuming the country maintained a classified search
file and offered one of their paper patent sets to the PTO.
Therefore, although this new policy was not a direct result of
countries' capability to read or use CD-ROM patents, or a
conversion to CD-ROM patent storage per se, it was certainly
related to encouraging the use of CD-ROM.

10/ This number represents the minimum number of patent sets
required. The 40 patent sets for foreign distribution were
reduced by 12 sets, leaving 28 patent sets, which, when added to
the five patent sets for internal PTO use, yield the 33-patent
set figure.

11/ GraphicData alleged that 1) plaintiff's bid was not signed by
an authorized official and thus was not responsive and 2)
plaintiff lacked the necessary facilities to perform the
contract.

12/ As plaintiff notes, in Finley v. United States, 31 Fed. Cl.
704 (1994), the court reasserted its position in Crux Computer
regarding bid protest costs. While it may be possible to recoup
bid protest costs, at least under these cases, recovery still
requires that plaintiff "demonstrate[] [that] the government did
not treat his bid honestly and fairly." Id. at 707. This showing
is precisely plaintiff's deficiency here.

13/ This is the same definition for Bid and Proposal costs as
that given by the cost principles in the Federal Acquisition
Regulation. 48 C.F.R. 31.205-18(a) (1996).

Reported at 40 Fed. Cl. 277 (1998)