BNUMBER:  B-270288
DATE:  February 23, 1996
TITLE:  D. M. & E. of Las Vegas, Inc.

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Matter of:D. M. & E. of Las Vegas, Inc.

File:     B-270288

Date:     February 23, 1996

Jeffrey Taraby for the protester.
Robert C. Miller, Esq., Department of the Army, Corps of Engineers, 
for the agency.
Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., 
Office of the General Counsel, GAO, participated in the preparation of 
the decision.

DIGEST

Completion of acquisition through negotiation after cancellation of 
invitation for bids (IFB) was improper where agency revised material 
solicitation requirement (delivery schedule), which could have 
influenced the scope of original competition, at the time it converted 
acquisition from IFB to request for proposals.

DECISION

D. M. & E. of Las Vegas, Inc. protests the award of a contract for two 
radial drilling machines to NATCO/Carlton under request for proposals 
(RFP) No. DACW62-95-R-0047, issued by the Department of the Army, 
Corps of Engineers.  Award to NATCO/Carlton was made after the 
solicitation was converted from an invitation for bids (IFB) to an 
RFP.  D. M. & E. contends that rather than converting the IFB to an 
RFP and negotiating with NATCO/Carlton, the Corps of Engineers should 
have proceeded with a new acquisition.

We sustain the protest.

BACKGROUND

IFB No. DACW62-95-B-0026, which was issued on July 21, 1995, sought 
bids for one floor mounted radial drilling machine, with an option, 
exercisable by the government at the time of award, for a second 
machine.  The solicitation defined the required characteristics of the 
machine(s) and instructed bidders to submit descriptive literature 
with their bids to enable the agency to verify compliance with the 
enumerated requirements.  The IFB called for delivery of the radial 
drill(s) within 120 days after award.

D. M. & E. and NATCO/Carlton were the only bidders to respond to the 
IFB.  Both indicated that they would furnish drills manufactured by 
NATCO/Carlton.  NATCO/Carlton's bid was $197,000 and D. M. & E.'s bid 
was $257,990.

In a cover letter accompanying its bid, NATCO/Carlton took exception 
to the IFB's delivery requirement, stating that it would require 240 
days for delivery of the optional unit.  The contracting officer 
accordingly rejected NATCO/Carlton's bid as nonresponsive.  The 
contracting specialist then contacted D. M. & E. to begin gathering 
pre-award information.  After she had explained to D. M. & E.'s 
representative her basis for rejecting NATCO/Carlton's bid as 
nonresponsive, the protester's representative stated that D. M. & E. 
could not meet the delivery schedule either.  The contracting 
specialist asked D. M. & E. to confirm this in writing, which it did 
by letter dated August 30.  Upon receipt of this letter, the 
contracting officer determined, in accordance with Federal Acquisition 
Regulation (FAR)  sec.  9.104-1(b), that D. M. & E. was nonresponsible 
because it could not comply with the required delivery schedule.  
Because D. M. & E. is a small business, she then referred the matter 
to the Small Business Administration (SBA) pursuant to FAR  sec.  19.602-1.  
By letter dated September 20, the SBA informed the contracting officer 
that the protester had declined to file an application for a 
certificate of competency and that the SBA was closing its file on the 
matter.

Because the government had failed to receive a responsive bid from a 
responsible bidder, the contracting officer determined that 
cancellation of the IFB and conversion to negotiation was appropriate.  
See FAR  sec.  15.103, 14.404-1(c)(8) and (e)(1).  By amendment dated 
September 26, she converted the IFB to RFP No. DACW62-95-R-0047.  The 
amendment also changed the delivery period for the second drill from 
120 days to 240 days.

Since FAR  sec.  15.103 refers to negotiation with responsible bidders only 
and D. M. & E. had been determined nonresponsible under the IFB, the 
contracting officer transmitted a copy of the amendment to 
NATCO/Carlton only.  NATCO/Carlton proposed a price of $197,000--the 
same price that it had bid under the IFB--and on September 29, the 
Corps of Engineers awarded it a contract.  D. M. & E. learned of the 
award to NATCO/Carlton on October 23 and protested to our Office the 
following day.

D. M. & E. protests the award to NATCO/Carlton, arguing that rather 
than converting from sealed bidding to negotiated procedures and 
changing the delivery period, the agency should have conducted a new 
acquisition.  The protester argues that it could have offered a drill 
other than NATCO/Carlton's meeting the agency's technical requirements 
had the agency given it the opportunity to respond to a solicitation 
providing for a longer delivery period than the one specified in the 
original IFB.

The contracting officer reports that upon receipt of D. M. & E.'s 
protest, she reexamined her decision to convert to negotiated 
procedures and decided that the better course of action would have 
been to cancel the IFB and readvertise with a solicitation providing 
for a longer delivery period.  In this regard, she noted that it 
appeared incongruous for one of the bidders to have been eligible for 
award under the RFP and the other ineligible when both had been 
rejected for the same reason (i.e., inability to comply with the 
required delivery schedule).  The contracting officer further observed 
that canceling and recompeting would have been more protective of the 
competitive bidding system by possibly increasing the number of 
bidders due to the longer delivery schedule.  She therefore considered 
taking corrective action to resolve the protest.

On October 24, a member of the contracting officer's staff contacted 
NATCO/Carlton to determine the status of contract performance and was 
informed that the first drill was 90 percent complete and that the 
second drill was 30 percent complete.  Based on this information, the 
contracting officer concluded that termination of the contract for the 
first drill was not feasible.  The contracting officer further 
determined that termination of the optional drill was not a reasonable 
option either since the government would be required to pay for 
preparation of the small castings and for the mold fabrication of the 
large castings, as well as for a portion of the tooling costs for 
machining the castings--an amount that represented approximately 50 
percent of the cost of the second machine.  Since termination did not 
appear to be a viable option, the contracting officer contacted D. M. 
& E. on October 30 and offered to pay its bid preparation and protest 
costs in resolution of the protest.  D. M. & E. refused to accept the 
proposed resolution.

INTERESTED PARTY STATUS

The agency reports that while attempting to resolve this protest, the 
contracting officer learned that D. M. & E.'s corporate charter had 
been revoked by the state of Nevada on April 1, 1995, and had not been 
reinstated as of the date of her report to our Office, i.e., November 
21, 1995, meaning that D. M. & E. lacked a charter on the date that it 
submitted a bid in response to the IFB and on the date that the IFB 
was converted to an RFP.   Thus, the agency contends, D. M. & E. was 
not eligible for award while the procurement was ongoing and therefore 
is not an interested party to maintain the protest before our Office.

D. M. & E. responds that it first learned of the revocation of its 
corporate charter in the contracting officer's report and that the 
revocation was attributable to its failure to comply with a Nevada 
statute requiring each corporation organized under the laws of that 
state to file with the secretary of state a list of its officers and 
directors and a designation of its resident agent in the state.  The 
protester explains that the secretary of state's office erred in 
recording the address of its resident agent at the time of its initial 
application for a charter in 1994, and that the agent therefore never 
received either the forms on which the officers and directors were to 
be listed or the notice of revocation.  D. M. & E. further states that 
upon learning of the revocation, it took the steps necessary to have 
the charter reinstated retroactive to the date of revocation, and that 
its corporate charter is in good standing.  Under these circumstances, 
it is not clear that D. M. & E. would not have been eligible for award 
and we see no basis to dismiss the protest on the ground that D. M. & 
E. is not an interested party. 

CONVERSION TO NEGOTIATION

After finding NATCO/Carlton's bid nonresponsive to the delivery 
schedule requirement, and subsequently finding D. M. & E., the only 
other bidder, to be nonresponsible, the contracting officer converted 
the IFB into an RFP, which then was furnished to NATCO/Carlton only.  
Before negotiating with NATCO/Carlton, however, the contracting 
officer relaxed the delivery schedule for the second drill to 
accommodate NATCO/Carlton, which in its bid had taken exception to the 
requirement for delivery of the second drill within 120 days.

While, under certain circumstances, the FAR permits completion of an 
acquisition through negotiation after an IFB has been canceled, see 
FAR  sec.  14.404-1(e); 15.103, we conclude that the agency could not 
properly do so here in light of the material relaxation of the 
delivery schedule.  The Competition in Contracting Act of 1984 
requires agencies to meet their needs through full and open 
competition, which is obtained where all responsible sources are given 
the opportunity to compete.  See 10 U.S.C.  sec.  2304(a)(1)(A) (1994); 41 
U.S.C.  sec.  403(6) (1994).  The agency here failed to carry out that 
mandate by limiting its negotiations to NATCO/Carlton, even after it 
relaxed the delivery schedule for the second drill--the very 
requirement which neither of the two original bidders could meet.  
Although it is unclear whether
D. M. & E. would have submitted a responsive bid for a NATCO/Carlton 
drill under the relaxed delivery schedule (since the schedule still 
required delivery of the first drill within 120 days and D. M. & E. 
stated in its letter of August 30 that it could deliver the first 
machine in "120-150 days"), the protester states that it could submit 
a responsive bid for a different drill meeting the solicitation's 
specifications had the delivery schedule been longer.[1]  Indeed, the 
agency acknowledges that relaxation of the delivery schedule could 
have allowed other bidders, in addition to D. M. & E. and 
NATCO/Carlton, to compete.  By limiting negotiation to NATCO/Carlton, 
the agency prevented D. M. & E. and other potential bidders who could 
meet the relaxed delivery schedule from competing.  Under these 
circumstances, we think that, to be consistent with the statutory 
mandate for full and open competition, the agency was required to 
recompete based on a revised solicitation reflecting the relaxed 
delivery schedule.[2]

RECOMMENDATION

Since we agree that termination of the contract awarded to 
NATCO/Carlton is not feasible due to the status of performance, we 
recommend that the agency pay the protester the costs of filing and 
pursuing its protest.  See Bid Protest Regulations, section 
21.8(d)(1), 60 Fed. Reg. 40,737, 40,743 (Aug. 10, 1995) (to be 
codified at 4 C.F.R. sec.  21.8(d)(1).  The protester is not entitled to 
its bid preparation costs because it was properly determined 
nonresponsible under the IFB and therefore could not have received the 
award.  See Maintenance and Repair, B-251223, Mar. 19, 1993, 93-1 CPD  para.  
247, request for mod. of rec. denied, B-251223.2, July 20, 1993, 93-2 
CPD  para.  39.  D. M. & E.'s certified claim for protest costs, detailing 
the time expended and the costs incurred, must be submitted directly 
to the agency within 90 days after receipt of this decision.

The protest is sustained.

Comptroller General
of the United States 

1. It also appears possible that the agency, which was willing to 
extend the delivery period for the second drill by 120 days to 
accommodate NATCO/Carlton, might have been willing to extend the 
delivery period for the first drill by 30 days to accommodate D. M. & 
E.

2. Even if conversion to negotiated procedures had been appropriate 
here, we do not think that the contracting officer would have been 
required to exclude the protester from negotiations since the basis 
for the determination of nonresponsibility might have been remedied by 
the amendment to the delivery schedule.  See Dutra/AmClyde Joint 
Venture, B-249364.2, Dec. 30, 1992, 92-2 CPD  para.  453.