BNUMBER:  B-266041; B-266041.2
DATE:  January 25, 1996
TITLE:  HHI Corporation

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Matter of:HHI Corporation

File:     B-266041; B-266041.2

Date:     January 25, 1996

Jack W. Reed, Esq., Peterson, Reed, L.L.C., for the protester.
Vera Meza, Esq., Department of the Army, for the agency.
Mary G. Curcio, Esq., and John M. Melody, Esq., Office of the General 
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest that agency improperly relaxed requirements--(1) that offered 
demisters have emissions certification at time of proposal submission, 
and (2) that manufacturer has had demisters of similar capacity in 
operation for 5 years--by accepting for award a demister that does not 
meet these requirements, is denied where protester has not established 
competitive prejudice as a result of the waiver.

DECISION

HHI Corporation protests the award of a contract to D.L. McLaughlin 
Co., Inc., under request for proposals (RFP) No. DAAC01-95-R-0015, 
issued by the Department of the Army for the repair of two chrome line 
ventilation systems.  HHI asserts that McLaughlin's offered system did 
not meet the material requirements of the solicitation.

We deny the protest.

Offerors were required to supply two demisters, one with a capacity of 
22,500 cubic feet per minute (cfm) and a second with a capacity of 
56,000 cfm.  After receiving and evaluating best and final offers, the 
Army awarded the contract to McLaughlin as the lowest-priced, 
technically acceptable offeror.  (McLaughlin's price was $866,231; 
HHI's was $973,343.)  

The solicitation required offerors to furnish with their offers 
technical literature to show that the demister used for the 
ventilation system and all component parts met or exceeded specified 
federal and California state emission standards.  The solicitation 
further stated that proof of compliance was either the label or 
listing of the Environmental Protection Agency or cognizant California 
agency, or a written certificate from any approved, nationally 
recognized testing organization.  The solicitation also required 
offerors to submit proof that demisters of capacity similar to that 
specified in the RFP had been installed by the manufacturer or its 
representative, and had been in satisfactory use for at least  5 years 
prior to the proposal closing date.

McLaughlin offered demisters manufactured by KCH Services, Inc.  HHI 
maintains that McLaughlin did not submit proof that the KCH demisters 
met the emission standards or that there were KCH demisters with a 
56,000 cfm capacity that had been installed for 5 years.[1]  HHI 
concludes that the Army improperly waived material requirements in 
awarding the contract to McLaughlin, and that the award therefore was 
improper.  

In response, the Army states that, while McLaughlin did not furnish 
the proof of compliance with the emission standards with its proposal, 
the firm will be required to supply this proof of compliance at the 
time of delivery.  The Army further states that McLaughlin has 
submitted information showing that KCH chrome mist eliminator systems 
with capacities of 120,000 cfms and 80,917 cfms had been installed for 
Aviall Incorporated and National Hand Tool, respectively, at least 5 
years ago.  

It appears that McLaughlin's system did not meet the two requirements.  
McLaughlin has not submitted the required proof of compliance with 
emission standards, and the agency's decision to permit McLaughlin to 
comply at the time of delivery constitutes a relaxation of the 
requirement.  Similarly, while the overall systems installed at Aviall 
and National Hand Tool are 120,000 and 80,917 cfm, it appears that 
none of the individual demisters installed at Aviall has a capacity 
greater than 20,000 cfm, and that none of the demisters installed at 
National Hand Tool has a capacity greater than 25,000 cfm.  In this 
regard, despite being given the opportunity to do so, neither the 
Army, KCH, nor McLaughlin has disputed HHI's argument along these 
lines and, following a conference call with representatives of our 
Office, the protester, the agency, the awardee, and KCH, KCH 
acknowledged that the Aviall and National Hand Tool projects are 
comprised of a number of demisters of varying capacity, none of which 
has a capacity of 56,000 cfm.  Also, during that conference call, the 
agency stated its belief that a successfully operating 20,000 cfm 
system was adequate to demonstrate that a 56,000 cfm system would 
operate successfully; in other words, the agency applied a relaxed 
standard (compared to the standard in the RFP) in determining 
McLaughlin's system's compliance with this requirement as well.

Our Office will sustain a protest that an agency improperly relaxed 
its requirements for the awardee only where the protester establishes 
a reasonable possibility that it was prejudiced by the agency's 
actions, that is, where the protester demonstrates that, had it known 
of the changed or relaxed specifications, it would have altered its 
proposal to its competitive advantage.  Laser Diode, Inc., B-249990, 
Dec. 29, 1992, 93-1 CPD  para.  18.

Notwithstanding our conclusion above, the record does not demonstrate 
a reasonable possibility that HHI was prejudiced by the relaxation.  
In attempting to demonstrate that it was prejudiced, HHI argues that 
it is cheaper to provide equipment that is not tested (for emissions 
compliance) and proven; HHI specifically asserts that equipment that 
is neither tested nor proven can be purchased for $150,000 less than 
tested and proven equipment.  First, with respect to the emission 
standards testing, the Army did not waive the requirement for proof of 
compliance, but only delayed the time for submitting the proof from 
proposal submission to when the system is delivered.  Since McLaughlin 
thus will be required to furnish a system meeting the requirement, the 
cost saving suggested by HHI will not be available to McLaughlin.[2]  
Accordingly, HHI has not demonstrated that its competitive position 
was affected by the agency's decision to require the certification at 
the time the demister is delivered rather than at the time proposals 
were submitted.

Second, HHI also has not shown, and there is no reason to believe, 
that it would have offered a different demister at a $150,000 lower 
price (or otherwise changed its proposal) had it known that the agency 
would consider a smaller capacity demister acceptable to meet the 
requirement for proof of successful operation of similar capacity 
demisters for 5 years.  Establishing prejudice generally requires more 
than a mere statement by the protester that it could have lowered its 
price had it known of the relaxed requirements, particularly where, as 
here, the protester presumably has access to more specific information 
bearing on the issue of prejudice.  See Colonial Storage Co.--Recon., 
B-253501.8, May 31, 1994, 94-1 CPD  para.  335.  Despite our specific 
request for an item-by-item explanation of the prejudice it suffered 
as a result of any relaxation of requirements, HHI neither specifies 
the equipment it would have offered under the relaxed requirements, 
nor explains (and it is not apparent) why any alternative demister 
would be significantly less expensive just because the manufacturer 
had a smaller demister in operation for
5 years.  

Since HHI has not established prejudice, there is no basis for 
sustaining the protest.

The protest is denied.

Comptroller General
of the United States

1. HHI also argues that the proof had to show that a vertical demister 
had been installed for 5 years because the solicitation requires a 
vertical demister.  The Army disputes that the solicitation requires a 
vertical demister but, in any case, the RFP did not specify a certain 
system configuration--vertical or horizontal--in connection with this 
requirement.  Therefore, offerors were not required to submit proof 
that vertical systems had been installed.

HHI also argues that the proof had to show that the system that was 
installed for 5 years met the current emission standards specified in 
the solicitation.  We disagree.  The provision which required offerors 
to show proof of compliance with the emission standards and the 
provision which required offerors to submit proof that systems of the 
specified capacity had been installed for 5 years are separate 
provisions.  The first provision is concerned only with the demister 
that will be installed, the second provision is concerned generally 
with ascertaining that demisters of the specified size have been in 
place and working.

2. HHI argues that McLaughlin still had a pricing advantage, since it 
could base its offer on the price of an as yet uncertified demister.  
This argument simply makes no sense.  Since the testing costs would 
have to be incurred before delivery, McLaughlin would either have to 
increase its offered price to cover these costs (just as would any 
other offeror), or purposely omit the testing costs from its price and 
absorb those costs.  This latter option--i.e., omitting certain costs 
from an offered price or pricing an offer below cost--is a pricing 
strategy available to all offerors on all federal procurements.  HHI 
could have made a decision to offer the demister to the government at 
a price that did not include the costs incurred to test and certify 
the demister to comply with the emission standards.