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ELECTRO-NUCLEONICS, INC. v. GOODYEAR AERO. CORP.

February 19, 1980

ELECTRO-NUCLEONICS, INC., Plaintiff,
v.
GOODYEAR AEROSPACE CORP., Defendant.



The opinion of the court was delivered by: BIUNNO

This suit is related to a project of the Department of Energy (DOE) to have constructed for it a plant intended for the production of fuel for use in the operation of electric generating plants. Because the parties are aware that the project data includes highly classified information, the entire record was sealed to avoid any unintentional disclosure of such information. In its discussion here, the court will use material already published generally, together with illustrative material which differs from the record material in actual tenor but sufficiently analogous to it for the purpose of analysis and decision. It is not necessary to deal with the exact numbers and other data as set out in the record. It is adequate to employ another set of numbers and data having the same function.

As has been described in technical articles for the layman, one of which is found at Tab 12 of Goodyear's appendix at the original hearing, the method used for the production of fuel to date, at least in this country, has been one of gaseous diffusion through a membrane. As has long been known, an isotope of the metallic element uranium, known as U-235, is useful for such fuel, while the common element, U-238, is not. The two numbers represent differences in atomic weight. In a compound, it will affect the molecular weight.

 Both U-238 and U-235 are found in nature, but the percentage or concentration of the isotope as found is too small for the combination to be useful. Some process is needed to separate and remove some of the U-238, leaving a mixture of both U-238 and U-235 in which there is enough concentration of the isotope to make the mixture usable.

 The article mentioned above observes that the gaseous diffusion process requires the use of large amounts of electrical energy. In the decades when such energy was plentiful and cheap, this feature was not of great significance when compared to the fact that the technology of the membrane diffusion process was known and reliable, while other potential processes had not been worked out.

 With available electrical energy now becoming scarcer in comparison with demand, and with its cost increasing sharply, DOE has evidently made a judgmental evaluation that some other process should be selected and a processing plant built. The process selected is that of centrifuging the mixture of gases and achieving separation due to the difference in atomic weights. The principle is identical to that of the old cream separator. By spinning milk in a suitable container, the milk (which is denser) will move to the outer circumference by centrifugal force, thus displacing the cream (which is less dense) and forcing it to the center.

 In the fuel process, the heavier gas containing U-238 will move to the outer circumference, while the lighter gas containing the isotope U-235 will be displaced and forced to the center.

 The actual process, even in simplified form, is far more sophisticated than this, but what has been said is enough to understand the principle. The major advantage, no doubt apart from others, is that the electrical energy demands of the centrifuge process are a small fraction of those characteristic of the membrane diffusion process.

 The court does not have before it, and it would probably not be useful if it did, the underlying data, factors and evaluations that led DOE to embark upon this project beyond what has been said. DOE's policy decision is not an issue here. The fact is that the decision was made, and the project has been launched and is under way.

 The project is designed to culminate in the completion of a processing plant at a target date in the future. However, since the technology as applied is evidently new on a production level, the program is designed to proceed in two major steps. From what appears in the record, the inference is clear that DOE has already passed through preliminary stages, such as laboratory operation of the process and probably small scale pilot plant operation, sufficiently for it to invite proposals by interested contractors to manufacture the machinery, equipment, buildings and other plant facilities according to specifications.

 There is also a strong inference that since there has not been extensive (or perhaps any) experience in the function of manufacturing this special purpose machinery, DOE is contracting with three separate prime suppliers, each of whom is to produce some number of the same kind of units, more or less on the same time scale, independently of each other.

 The units so manufactured will then be installed in a small production plant and operated. From this stage, DOE evidently expects to obtain information as to the manufacturing capabilities, quality and other characteristics of the three prime suppliers, including their comparative costs. This latter item evidently will be derived from the fact that the contracts for the first stage are on the basis of cost plus a fixed fee (i. e., the fee will not vary with the cost as finally experienced).

 After the first small production plant has been built, with units made by all three of the prime suppliers, DOE will then take up the question of letting contracts for the manufacture of the larger number of units for the full production plant. At that time, and with the information and experience derived from the first stage production plant, DOE will decide whether to order the remaining units from only one of the three prime contractors or from more than one, or from all. That decision will involve complex considerations. Will it be better to have multiple sources of supply, or will any advantage so gained be outweighed by looking to a single source of supply whose performance was clearly superior and of lower cost? If multiple sources are to be used, will DOE be assured that parts and components made by one will be interchangeable with those made by others for long-term maintenance and repair purposes?

 The question to be decided by DOE at that time will be not unlike that which would be faced if the program were to design and have built a motor vehicle of standard, uniform design and specifications, with initial contracts awarded to GM, Ford and Chrysler to each make a small production run, after which the cars produced by each would be put into actual use for evaluating their performance, reliability, efficiency, and so on, after which a full order would be placed with one, two or all three of the manufacturers.

 All of the foregoing is background context for a clear understanding of the claims made here by Electro-Nucleonics (ENI), and evaluation of the record for deciding ENI's application for preliminary injunctive relief.

 When DOE first published its request for proposals (RFP), a number of potential bidders obtained the documents to consider whether to make a submission. ENI was one of these, and initially gave thought to making a submission for possible selection as one of the three prime suppliers contemplated for the first stage. For whatever reason, it decided instead to solicit a number of other companies known or believed to be interested in making a proposal as a prime supplier, with the object of becoming a sub-contractor for some part of the entire work. It made its interest known to at least 3 of these. Of the 3, Goodyear evidently was the only one that indicated interest in entering into a "teaming agreement" whose ultimate object it was to designate ENI as a subcontractor for some segment of the work. As worked out between the parties, this was defined as the production of what will be called an upper subassembly of centrifuge units. Goodyear's proposal to DOE was thus to comprise the sum of its own production and that of ENI.

 ENI submitted to Goodyear a number of proposals in respect to its proposed subcontract. In each one of the series, the aggregate estimate of ENI for its subcontract, composed of estimated cost plus fixed fee, was reduced. In the last one submitted, the lowest figure was shown. In discussions between the parties, ENI indicated that it might be able to reduce the figure by $ X during final negotiations. Goodyear so informed DOE, along with its own view that the subcontract amount probably could be negotiated for a reduction of $ 4X. The $ X reduction was about 1% of the subcontract figure, while the $ 4X reduction was about 4%.

 The record does not disclose what information DOE had for its evaluation. It may have its own engineers and cost estimators. It may have had comparable cost estimates from the other two proposed prime suppliers (whose data is evidently not disclosed outside DOE). In any event, whatever the information was, DOE took the position that the figures on ENI's subcontract were too high, and asked Goodyear to prepare an estimate of cost to compare the figures for subcontracting the upper subassemblies to ENI against the figures for Goodyear performing the same work itself (in-house). That comparison reflected a potential saving for the upper subassemblies of the order of some 40%. DOE then indicated that it could not approve ENI as a subcontractor. Goodyear then so informed ENI, and ENI proposed to Goodyear that it would accept a subcontract at the estimated in-house Goodyear cost, and also waive the fixed fee. This proposed solution was not formally relayed to DOE by Goodyear, although DOE has been made fully ...


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