BNUMBER: B-266333
DATE: January 29, 1996
TITLE: Washington Utility Group
**********************************************************************
Matter of:Washington Utility Group
File: B-266333
Date: January 29, 1996
Thomas E. Strait for the protester.
Gena E. Cadieux, Esq., Department of Energy, for the agency.
Aldo A. Benejam, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Agency properly excluded protester from competition for support
services where contracting officer reasonably determined that
professional or business relationships disclosed by the protester and
a proposed subcontractor had the potential for impairing the
protester's ability to provide objective and impartial advice to the
agency.
DECISION
The Washington Utility Group (WUG) protests the rejection of its
proposal under request for proposals (RFP) No. DE-RP01-95EE16102,
issued by the Department of Energy (DOE) for support services. The
contracting officer excluded WUG from further participation in the
procurement based on her conclusion that WUG had an unavoidable
organizational conflict of interest (OCI).[1]
We deny the protest.
BACKGROUND
The Energy Policy Act of 1992 and the Renewable Energy and Energy
Efficiency Technology Competitiveness Act of 1989 require DOE to
implement the "Commercialization Ventures Program." Under that
program, DOE provides financial assistance to firms developing a broad
range of renewable energy technologies, such as solar energy and
biowaste conversion.
The RFP, issued May 19, 1995, contemplated the award of a
cost-plus-fixed-fee, level-of-effort contract for a base year and up
to two 1-year option periods. The successful offeror is to provide
approximately 8,835 direct labor hours per year in support of DOE's
Commercialization Ventures Program. The contractor will provide DOE
with investment advice and managerial services in support of the
program. Contractor responsibilities include assisting DOE in various
capacities, including performing acquisition support functions,
evaluating proposals, brokering, and monitoring of renewable energy
projects. In performing the acquisition support functions
contemplated under the contract, for example, the awardee will draft
and issue solicitations seeking proposals for renewable energy
projects to be funded by DOE. The awardee will conduct discussions
with firms seeking financial assistance regarding their applications;
evaluate both the pre-proposal applications and proposals; and
ultimately recommend to DOE which projects should be funded.
The contracting officer's cover letter to the RFP notified offerors as
follows:
"Award of the contract will be subject to the [OCI] clearance of
the selected offeror in accordance with Department of Energy
Acquisition Regulation (DEAR) sec. 909.570-5. The applicable
clause, DEAR sec. 952.209-72, can be found in [s]ection I,
[p]rovision I.1. All offerors are required to submit the OCI
information using the questionnaire provided [as an attachment to
the RFP]. Each proposer must disclose all potential conflicts of
interest with respect to: (1) being able to render impartial,
technically sound, and objective assistance and advice; and (2)
being given, or having, an unfair competitive advantage."
Six firms, including WUG, responded to the RFP by the June 19 closing
date for receipt of initial proposals. A technical evaluation
committee evaluated proposals in accordance with the evaluation
criteria and provided its report to the contracting officer on August
24. Based on those initial results, the contracting officer decided
to include WUG's proposal within the competitive range and conduct
written discussions with WUG. The discussion items DOE issued to WUG
included extensive questions raised by WUG's OCI disclosure statement.
The contracting officer reviewed WUG's responses to the OCI
questionnaire included in the RFP and the answers to DOE's OCI
discussion items. Based on her review of that information, the
contracting officer determined that WUG's proposal presented an
unavoidable OCI. Specifically, the contracting officer found that
either WUG, its employees, or its proposed subcontractor had
relationships with organizations and individuals directly involved in
various aspects of different types of renewable energy technologies,
which could prejudice WUG's advice to DOE. Accordingly, she
eliminated WUG's proposal from further consideration and awarded the
contract to KPMG Peat Marwick on September 27. This protest followed.
DISCUSSION
DOE contracting officials are required to avoid or mitigate OCIs on
the part of prospective contractors so as to prevent the existence of
conflicting roles that might impair a contractor's capacity to provide
objective assistance and advice, or to prevent an unfair competitive
advantage. See DEAR sec. 909.570-2; 909.570-3; 909.570(a); Meridian
Corp., B-246330.4, Sept. 7, 1993, 93-2 CPD para. 129. The responsibility
for determining whether possible OCIs exist with respect to a
particular offeror or whether there is little or no likelihood that
such conflicts exist, and to what extent the firm should be excluded
from the competition, rests with the contracting agency. DEAR sec.
909.570-9(a). Our Office will not overturn the agency's determination
in this regard except where it is shown to be unreasonable. See D.K.
Shifflet and Assocs., Ltd., B-234251, May 2, 1989, 89-1 CPD para. 419.
Based on our review of the record, we conclude that DOE reasonably
found that WUG's proposal presented an unavoidable OCI, and that the
contracting officer's decision to exclude WUG from further
participation in the procurement was reasonable.
WUG proposed to use three of its own employees to provide 3,100 (out
of 8,835) annual direct hours. As relevant to the contracting
officer's OCI determination, WUG also proposed a subcontractor, the
"U.S. Association for Renewable Energy and Energy Efficiency
Development," referred to in the record as USAFREED, which would
provide 3,850 direct labor hours annually, or about 44 percent of the
total effort.
WUG disclosed that its principals "participated as financial and
economic advisors to USAFREED. . . ." Those principals were the same
three employees proposed to perform WUG's portion of the work under
the RFP. WUG further disclosed that Joel B. Stronberg is the
Executive Director of USAFREED and is a principal of the JBS Group.
Mr. Stronberg executed USAFREED's OCI disclosure statement,
identifying himself as "Senior Investment Manager." In response to
one of the OCI questions, Mr. Stronberg stated that "[t]he JBS Group
manages USAFREED as a subcontractor. When USAFREED receives task
orders the JBS Group is involved in carrying out the task orders."
Mr. Stronberg disclosed that all of his income resulted from his
involvement with the JBS Group.
The contracting officer concluded that as a chief executive of the JBS
Group and as the Executive Director of USAFREED, Mr. Stronberg has a
vested interest in, and control over, both organizations. Given this
overlap of responsibilities and control, DOE found that USAFREED and
the JBS Group are virtually one and the same for OCI purposes.
Based on her review of WUG's disclosure, the contracting officer
concluded that she could not make the required finding that WUG's
proposal presented "little or no likelihood" of an OCI. As explained
in greater detail below, the contracting officer specifically
concluded that the protester, through USAFREED and the JBS group, had
relationships with organizations that could potentially bias its
advice to DOE.
The information provided by WUG and its team members in response to
DOE's OCI discussion items revealed several circumstances presenting
clear potential for biased advice. For example, USAFREED disclosed
that it "is currently working with Power Generating Inc. (PGI) in
bringing to market a biowaste converter technology the corporation has
developed." DOE states that biowaste conversion is a type of
technology specifically included for consideration for financial
assistance under the Program. USAFREED admitted in its OCI disclosure
that it would benefit financially from future sales of the technology.
Given USAFREED's relationship with PGI, and in light of USAFREED's
proposed significant contribution to this effort (44 percent), we
think that the contracting officer's conclusion that a potential for
biased advice existed was reasonable, and that USAFREED's
participation presented an unavoidable OCI.
In addition, Mr. Stronberg disclosed a relationship with the American
Solar Energy Society that provided the JBS Group with a substantial
portion of its income. The agency states that solar energy is a type
of technology for which DOE is likely to solicit projects to be
funded. Given Mr. Stronberg's relationship with both the JBS Group
and American Solar, it was not unreasonable for the contracting
officer to conclude that Mr. Stronberg could have preconceived
opinions regarding certain technologies which could result in biased
advice and recommendations provided DOE under the contract. In these
circumstances, we think that the contracting officer was reasonably
concerned with WUG's ability to provide impartial, objective advice
concerning projects that should be funded.
Further, USAFREED disclosed that it was conducting discussions with
two utility companies for the purpose of negotiating an agreement by
which USAFREED would assist them to identify commercial renewable
energy opportunities. The contracting officer concluded that these
relationships have a "great potential" to influence the advice
provided by the WUG-USAFREED team to DOE. The contracting officer
also found that USAFREED's relationship with the utility companies
could present the potential for USAFREED's clientele to benefit from
inadvertently obtaining information about the types of projects that
DOE would fund. For example, USAFREED's clientele could benefit from
learning--albeit inadvertently--that only a few firms in a certain
technology area have indicated interest in applying for financial
assistance, or which geographic regions DOE is considering for funding
allocations. Under these circumstances, we think that the contracting
officer reasonably concluded that the risk of inadvertent disclosure
of this type of sensitive information was too great to allow WUG to
participate in the competition.
The contracting officer considered whether appropriate conditions
could be included in the contract to avoid the conflict and concluded
that the OCI was unavoidable without significant changes to WUG's
proposal, particularly with respect to USAFREED. The agency was
particularly concerned that WUG did not propose a meaningful conflict
avoidance plan and apparently did not recognize that several of the
relationships it had disclosed in response to the OCI questionnaire
presented a potential OCI. For instance, USAFREED stated that any
potential conflicts that may occur as a result of PGI's seeking
assistance through the program would be avoided by recusing USAFREED
and its consultants from reviewing proposals; however, the record is
devoid of any mitigating plan explaining how WUG could review such
proposals without involving USAFREED. Nor did USAFREED state that it
would recuse itself from reviewing proposals from competitors of PGI.
More importantly, the contracting officer concluded that there was no
realistic means to avoid the conflicts identified in the protester's
submissions. Given that the contractor will be providing advice on
several technologies, the contracting officer concluded that
"[r]ecusal cannot assure that those technologies in which USAFREED has
an interest, whether directly or indirectly, or technologies in which
it may develop an interest due to its commercial activities under the
above agreements, will be evaluated in an unbiased manner."
The contracting officer concluded that since USAFREED was to provide a
significant portion of the work, it was imperative that WUG propose a
different team member if it were to remain in the competition. The
record shows that during the competition WUG did not offer to replace
USAFREED, and the protester did not suggest that it could maintain a
viable proposal without USAFREED. Even after being notified of its
exclusion for OCI reasons, and after discussing those reasons
extensively with DOE, WUG did not identify any acceptable solutions in
its responses to the OCI discussion items that it would have
implemented to address the agency's OCI concerns.
In sum, WUG's proposal presented numerous and substantial potentials
for providing biased advice to DOE. WUG did not identify any OCI and
did not propose a conflict avoidance plan to address the agency's
concerns to its satisfaction. Further, recusal of USAFREED was
neither proposed by WUG nor realistic. In our view, the contracting
officer reasonably determined that WUG had several past, present, or
currently planned interests that are inextricably related to the work
to be performed under the contemplated contract, and that such
interests could impair the firm's capacity to provide DOE with
impartial advice. Accordingly, we find that the contracting officer's
decision to exclude WUG from further participation in this competition
was reasonable. See ICF, Inc., B-241372, Feb. 6, 1991, 91-1 CPD 124.
The protester also argues that given the limited number of firms
involved in renewable energy technologies, and given the nature of the
services sought, the RFP itself created the potential for OCIs.[2]
Our Bid Protest Regulations specifically require that protests based
upon alleged improprieties in a solicitation that are apparent prior
to the closing time for receipt of initial proposals be filed before
that time. 4 C.F.R. sec. 21.2(a)(1) (1995); Engelhard Corp., B-237824,
Mar. 23, 1990, 90-1 CPD para. 324. If WUG believed that DOE could have
written the RFP differently so as to avoid or mitigate potential OCIs,
WUG should have raised its objections and suggestions prior to the
closing time for receipt of initial proposals. Since the firm failed
to do so, this allegation is untimely and will not be considered.
The protest is denied.
Comptroller General
of the United States
1. The contracting officer also excluded the protester's proposal from
further consideration on the basis that WUG had gained an unfair
competitive advantage in the procurement. Since we conclude that the
agency properly excluded the protester's proposal due to the
unavoidable OCI, we need not address the protester's contention that
it did not have access to any information in this procurement that was
not publicly available.
2. In its comments on the agency report, WUG asserts that DOE provided
the awardee with a greater opportunity to propose an OCI mitigating or
avoidance plan. Offerors were clearly informed of the requirement to
identify all potential OCIs and to propose mitigating or avoidance
plans where appropriate. WUG's contention that offerors were treated
differently in this regard is simply not supported by the record.