BNUMBER: B-271741.2
DATE: August 7, 1996
TITLE: Ann Riley & Associates, Ltd.
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DOCUMENT FOR PUBLIC RELEASE
A protected decision was issued on the date below and was subject to a
GAO Protective Order. This version has been redacted or approved by
the parties involved for public release.
Matter of:Ann Riley & Associates, Ltd.
File: B-271741.2
Date:August 7, 1996
Ronald K. Henry, Esq., and Mark A. Riordan, Esq., Kaye, Scholer,
Fierman, Hays & Handler, LLP, for the protester.
Matthew S. Perlman, Esq., and Tenley A. Carp, Esq., Arent Fox Kintner
Plotkin & Kahn, for Bayley Reporting, Inc., an intervenor.
George C. Brown, Esq., Ilene F. Citrin, Esq., and Valerie G. Preiss,
Esq., Securities and Exchange Commission, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Allegation that agency unreasonably identified five weaknesses in
the protester's proposal is dismissed for failure to state a basis of
protest where the protester did not identify the weaknesses and
offered no specific challenge to the agency's assessment even though
the protester received a debriefing during which the agency explained
its evaluation conclusions.
2. Where circumstances indicate that a small business bidder or
offeror may not comply with the statutorily-mandated requirement in
solicitations for services set aside for small business participation
that at least 50 percent of the cost of personnel incurred must be for
employees of the small business concern, an agency has a duty to
inquire into the likelihood of compliance. This duty is satisfied
when the agency receives explanations and assurances from the bidder
or offeror reasonably indicating that the bidder or offeror will
comply.
DECISION
Ann Riley & Associates, Ltd. protests the award of a contract to
Bayley Reporting, Inc. under request for proposals (RFP) No.
SECHQ1-94-R-0008, issued by the Securities and Exchange Commission
(SEC) for court reporting and transcription services. Ann Riley
contends that the SEC's selection of the Bayley proposal was improper
because: (1) "Bayley could not, would not, and did not intend to
comply" with the mandatory Limitations on Subcontracting clause in the
RFP; (2) the agency unreasonably evaluated the Bayley proposal under
certain evaluation subfactors related to the subcontracting
limitation; (3) the agency unreasonably identified five weaknesses in
Ann Riley's technical proposal; and (4) the agency applied different
evaluation standards in its review of the Ann Riley and Bayley
proposals.
We deny the protest.
BACKGROUND
The RFP, set aside for small business, contemplated award of a
fixed-price requirements contract for a base period with four 1-year
options to the offeror whose proposal was evaluated most advantageous
to the government, price and other factors considered. Section M.3 of
the RFP advised offerors that technical expertise would be weighted at
60 percent and price would be weighted at 40 percent. The RFP
identified two technical evaluation factors--management plan and
evidence of the ability of the prime contractor and proposed
subcontractors to fulfill contract requirements. Within these two
factors were several subfactors, set forth in abbreviated form below:
Management Plan
(i)plan to manage widely fluctuating workloads
(ii)security plan
(iii)plan to monitor subcontractor performance
Evidence of Ability to Fulfill Contract Requirements
(i)ability to manage widely fluctuating workloads
(ii)ability to accurately record proceedings
(iii)experience of key individuals
(iv)ability to record via steno mask or stenotype
The RFP also included the "Limitations on Subcontracting" clause set
forth at Federal Acquisition Regulation (FAR) sec. 52.219.14, required
for all solicitations reserved for exclusive small business
participation, pursuant to the requirements of 15 U.S.C. sec. 644(o)(1)
(1994). The clause provides that:
"[b]y submission of an offer and execution of a contract, the
Offeror/Contractor agrees that in performance of the contract in
the case of a contract for--
"(1) Services (except construction). At least 50 percent of the
cost of contract performance incurred for personnel shall be
expended for employees of the concern."
This requirement exists to prevent small business concerns from
subcontracting to large businesses the bulk of a contract reserved for
small business participation. CSR, Inc., B-260955, Aug. 7, 1995, 95-2
CPD para. 59; Diversified Computer Consultants, B-230313; B-230313.2, July
5, 1988, 88-2 CPD para. 5.
As discussed in greater detail below, after submission of initial
offers, discussions, submission of two best and final offers (BAFO),
and a preaward survey, the SEC concluded that the Bayley proposal
represented the best value to the government. Although the Bayley
proposal received a lower technical score than Ann Riley's
proposal--i.e., 48.6 points versus 52 (out of 60 possible
points)--Bayley's lower price resulted in more points for Bayley under
the cost factor. Thus, the overall scores were 88.6 for Bayley, and
87.1 for Ann Riley. After notifying Ann Riley of the selection
decision on April 17, 1996, the SEC provided a debriefing to the
company on April 22. This protest followed.
PROCEDURAL ISSUES
The SEC sought dismissal of Ann Riley's protest on the basis that the
agency's conclusion that Bayley would comply with the Limitations on
Subcontracting clause is either an affirmative determination of an
offeror's responsibility, or a matter for resolution by the Small
Business Administration (SBA), not our Office. The SEC also argued
that Bayley's actual compliance with the requirement is a matter of
contract administration, and hence not appropriate for our review.
Under the circumstances here, we denied the SEC's dismissal request.
As a general matter, an agency's judgment as to whether a small
business offeror will comply with the subcontracting limitation is a
matter of responsibility, and the contractor's actual compliance with
the provision is a matter of contract administration. Corvac, Inc.,
B-254757, Jan. 11, 1994, 94-1 CPD para. 14; American Bristol Indus., Inc.,
B-249108.2, Oct. 22, 1992, 92-2 CPD para. 268; Little Susitna, Inc.,
B-244228, July 1, 1991, 91-2 CPD para. 6. However, the protest allegation
here challenges the agency's determination that Bayley's proposal was
acceptable, and contends that the proposal, on its face, should have
led the agency to the conclusion that Bayley could not and would not
comply with the requirement. Where a protester alleges that an offer
or bid indicates that the offeror or bidder will not comply with the
subcontracting limitation, we will consider the matter. See, e.g.,
National Medical Staffing, Inc.; PRS Consultants, Inc., 69 Comp. Gen.
500 (1990), 90-1 CPD para. 530 (proposal indicating noncompliance with the
subcontracting limitation should have been rejected as technically
unacceptable); Vanderbilt Shirt Co., Inc., 69 Comp. Gen. 20 (1989),
89-2 CPD para. 333 (bid taking exception to the subcontracting limitation
was properly rejected as nonresponsive); Diversified Computer
Consultants, supra (contracting officer reasonably inquired into
whether offeror would comply with the subcontracting limitation--and
reasonably concluded that it would--where the offeror's proposal
raised doubts about its compliance).
In addition, although the SEC is correct in its assertion that the SBA
reviews a small business concern's compliance with the subcontracting
limitation, or the "50 percent rule," as part of its responsibility to
determine matters of small business size status, see CSR, Inc., supra,
there is no suggestion that Bayley does not meet the applicable size
standard for this procurement. Thus, the SBA's role as the arbiter of
size status has no application here.
The agency's request for dismissal also challenged Ann Riley's
contention that its proposal was unreasonably evaluated in five areas.
Although Ann Riley complained that five weaknesses were assessed
against its proposal, it did not identify these weaknesses and it
offered no explanation for why the agency was wrong in its assessment.
Instead, Ann Riley states only that the weaknesses "were non-existent,
and if properly scored, would have resulted in a substantially higher
score" for the proposal. According to the SEC, the contention is so
vague that it fails to state a basis for protest.
Our Bid Protest Regulations require protesters to provide a "detailed
statement of the legal and factual grounds of protest including copies
of relevant documents." 4 C.F.R sec. 21.1(c)(4) (1996). Our regulations
further advise that we will summarily dismiss a protest that fails to
include such a statement. 4 C.F.R. sec. 21.5(f). In this regard, a
protester's allegation, at a bare minimum, must be accompanied by an
explanation of why the protester should prevail in its claim of
improper agency action. Federal Computer Int'l Corp.--Recon.,
B-257618.2, July 14, 1994, 94-2 CPD para. 24.
The record here shows that during Ann Riley's debriefing, it was
specifically advised of these five weaknesses, and was given at least
some explanation for the agency's conclusions. Where, as here, a
protester fails to provide any details to support its
challenge--especially after an agency has provided a debriefing to
explain its selection decision--we will not entertain a protest, or a
segregable protest issue, that fails to provide even a minimal
explanation for the basis for the challenge. Id. Accordingly, this
issue was dismissed during a status call early in the protest process,
and the agency was relieved of any requirement to address this issue
in its agency report, or to produce documents related to this issue.
DISCUSSION
Bayley's Capacity to Perform and its Reliance on Subcontractors
As stated above, Ann Riley's protest raises two issues related to the
subcontracting limitation--i.e., whether the agency could reasonably
conclude that Bayley's proposal evidenced its intent to comply with
the mandatory limitations on subcontracting clause, and whether the
agency reasonably evaluated the proposal under the evaluation
subfactors related to the use of subcontractors and the ability to
perform. The protest generally raises the same issues in both areas,
and in both we find that the agency acted reasonably.
The record shows that in reviewing Bayley's proposal, agency
evaluators identified several potential problems in the company's
ability to adequately perform the contract and, at the same time,
comply with the subcontracting limitations requirement. For example,
the evaluators were concerned that Bayley lacked sufficient employees
to handle the workload under this contract without an excessive
reliance on subcontractors. In this regard, the record shows that
Bayley was formed in 1990, and that at the time it submitted its
initial proposal on February 8, 1995, it generally provided financial
information related to the year ending December 31, 1993. According
to the founder of the company, Mr. Brett Bayley, his company employed
three people at this time.[1]
Given Bayley's apparent lack of capacity, the evaluators prepared
discussion questions for the company that clearly indicated concerns
about its ability to perform the contract without violating the
subcontracting limitations clause, and its ability to manage the kind
of growth that would be required for successful performance. Although
we will not quote each question in detail, the record shows that on
the subject of the subcontracting limitation, the agency asked
Bayley[2] the following question:
"Section L.5.3(5), pg. 111 of the RFP, asks for a general
overview of your subcontracting plan in compliance with the
Limitations on Subcontracting Clause found in Section I.1, pg.
77. Please specify how you intend to comply with this clause."
In addition, in discussions Bayley was asked to explain how it would
handle its increased workload if awarded the contract; how it would
assure that proposed subcontractors would perform adequately; how it
would provide coverage for services required in Washington, Los
Angeles, New York City and San Francisco while preparing to open new
offices as promised in its proposal; the number of employees currently
working for Bayley; and how much "start up" time would be required
between the date of award and the start date. Each of these questions
reflects a reasonable concern on the part of the agency about Bayley's
ability to perform the contract requirements without an impermissible
violation of the mandatory limitations on subcontracting.
In response to these questions, Bayley's BAFO indicated that it is
currently performing seven contracts for the federal government and
that each includes the subcontracting limitation at issue here.
Bayley explains that its compliance with the clause has been monitored
by the SBA and that it intends to open additional offices and hire
additional employees to continue to assure that the requirements of
the clause are met. With respect to the specific question quoted
above, Bayley explains that its proposed combination of
"[s]ubcontracting firms and/or [i]ndependent [c]ontractors will
comprise no more than 30 percent of the cost of [c]ontract performance
incurred for personnel." The proposal acknowledged that at the
inception of contract performance this percentage might be higher than
30 percent, but would at no time exceed the 50 percent level.
Finally, Bayley's BAFO states that the company employed 14 people at
that time and intended to engage a number of new hires in the event it
is awarded the contract.[3]
Upon evaluation of the final round of BAFOs, Ann Riley's proposal (and
the proposal of another offeror that did not participate in this
proceeding) continued to receive a higher technical rating than
Bayley's proposal, and the evaluation panel recommended selection of
whichever of the two highest-rated proposals represented the greatest
value to the government. However, the panel recognized that Bayley
also had submitted a strong proposal and expressly concluded that the
company appeared to have a strategy to handle the growth that would
occur if it was awarded the contract. Based on this possibility, the
evaluation panel advised the contracting officer that if, after
receipt of prices, Bayley's proposal received the highest overall
score, the contracting officer should "carefully review [Bayley's]
financial capability to handle the increased workload that would
result from the award of this contract."
After receipt of BAFO prices, it became clear that Bayley's proposal
had, in fact, received the highest overall total score (considering
both technical factors and price). The contracting officer followed
the recommendation of the evaluation panel and requested a preaward
survey of Bayley. To this end, an outside accounting firm, M.D.
Oppenheim & Company, P.C., was tasked to review Bayley's financial and
operational capabilities to perform the SEC contract. The March 29
preaward survey report shows, among other things, that the accounting
firm reviewed Bayley's:
"[p]ersonnel staffing plan, including the use of employees vs.
independent contractors; maintenance of the 50% minimum of work
by Bayley (employees vs. contractors), including FAR
requirements; and the staffing of future office locations; use of
independent contractors."
Although Ann Riley correctly points out that the conclusion portion of
the Oppenheim report does not expressly state that Bayley will comply
with the subcontractor limitation, the report, as quoted above, states
that it reviewed this matter before it concluded that "it appears that
Bayley Reporting, Inc. has both the financial and operational
capability to provide the services which the SEC requires." Based on
the recommendation of the evaluators, and the preaward survey, the
contracting officer selected Bayley for award.
In sum, the SEC evaluators identified Bayley's potential problems with
managing the growth required to perform this contract, and took steps
to see that those questions were answered. In addition, Bayley's
responses to the SEC, at each juncture, showed that it understood the
mandatory requirement for subcontracting limitations and that it would
take steps to ensure that its performance was compliant. Under these
circumstances, we find nothing unreasonable about the SEC's review.
Ann Riley, in essence, asks our Office to conclude that the SEC failed
to diligently pursue leads in Bayley's initial and BAFO proposals, in
the evaluations, and in the preaward survey, that would have supported
a conclusion that Bayley lacked the capacity to perform this contract
without violating the mandatory limitation on subcontracting. Ann
Riley complains, for example, that Bayley was less than truthful when
it stated in its BAFO that it had five offices. During the course of
this protest, Bayley admitted that its five offices were, in fact,
residences of two Bayley principals, and the sites of answering
machines located in three other cities. Similarly, Ann Riley
complained that Bayley lacked telephone listings in the cities where
it claimed offices, and Bayley admitted that the telephone numbers
were listed in the names of individuals and not under the company's
name.
Despite these apparent instances of puffery on Bayley's part, the
record shows that during the preaward survey, representatives of
Oppenheim visited Bayley's "facilities"--personal residences all--in
Washington, D.C., New York, and Los Angeles. Also, the record shows
that an SEC auditor accompanied the Oppenheim team on at least one of
these reviews. Under these circumstances, there is no evidence that
the SEC was misled by the proposal, or that it did not recognize the
embryonic nature of the company it was selecting to perform its
reporting requirements.
In our view, while the SEC was presented with a close call in
selecting Bayley, the record shows that the agency adequately
considered Bayley's lack of current capacity, and Bayley's promises to
expand if awarded the contract, as well as the potential difficulties
of managing the growth required of this company to avoid an excessive,
and impermissible reliance on subcontractors. Given that an agency is
permitted wide discretion in this area, we see no basis to conclude
that the SEC abused its discretion in selecting Bayley for award.
Diversified Computer Consultants, supra.
Other Issues
In addition to its challenges related to the subcontracting
limitation, Ann Riley also argues that the SEC applied different
standards in evaluating the Ann Riley and Bayley proposals, and failed
to hold meaningful discussions about perceived weaknesses in Ann
Riley's proposal. We have reviewed each of these contentions in
detail and conclude that none of the issues raised would cause us to
overturn the SEC's selection decision. Set forth below is a sampling
of Ann Riley's issues in each category.[4]
With respect to whether the proposals were evaluated equally--a basic
requirement in any agency evaluation, see RJO Enterprises, Inc.,
B-260126.2, July 20, 1995, 95-2 CPD para. 93--Ann Riley complains that it
was required to produce a written commitment from its proposed
subcontractors, while Bayley was not. However, the record again does
not support Ann Riley's contention. The SEC asked offerors to provide
evidence of subcontractor commitments; the agency did not specify the
form of that evidence. Our review shows that Ann Riley produced
better evidence--written commitments generally--and received a better
score than Bayley. We find nothing unreasonable about this result.
Ann Riley also alleges that the agency failed to hold meaningful
discussions with it to identify weaknesses within its proposal. In
this regard, Ann Riley argues that it was unfair for Bayley to receive
more discussion questions than Ann Riley, and sets forth every
negative comment found in the evaluator scoresheets and claims that
discussions should have included each of these items.
We review the adequacy of agency discussions to ensure that agencies
point out weaknesses that, unless corrected, would prevent an offeror
from having a reasonable chance for award. Department of the
Navy--Recon., 72 Comp. Gen. 221 (1993), 93-1 CPD para. 422. There is no
requirement that an agency advise an offeror of a minor weakness that
is not considered significant, even where the weakness subsequently
becomes a determinative factor when two closely-ranked proposals are
compared. Volmar Constr., B-270364; B-270364.2, Mar. 4, 1996, 96-1
CPD para. 139. Ann Riley's listing of every less than favorable comment
written by the evaluators during their review is an ineffective
substitute for a substantive analysis of the adequacy of discussions.
Our review of the evaluation materials shows that the list of
evaluator comments includes minor concerns that need not have been
pointed out during discussions. The questions that were
raised--related to the subcontractor limitation, timely delivery,
subcontractor availability, proofreading, and Ann Riley's default on a
prior contract--were related to more substantive concerns. In our
view, these questions--and not whether Ann Riley got five questions
and Bayley got eight--reflect a meaningful attempt to alert Ann Riley
to the areas of its proposal of greatest concern to the evaluators.
With respect to the actual number of discussion questions asked of
Bayley, there is no requirement that all offerors receive the same
number or type of questions. Textron Marine Systems, B-255580.3, Aug.
2, 1994, 94-2 CPD para. 63. Here, the record shows that the Bayley
proposal received more questions because it had a significantly
greater number of weaknesses than Ann Riley's initial proposal.
In conclusion, nothing in the record suggests that Ann Riley was
unfairly evaluated, or that Bayley was given an unfair helping hand.
In fact, our review shows that agency evaluators probably expected Ann
Riley to prevail in this protest until consideration of Bayley's
second BAFO price.
The protest is denied.
Comptroller General
of the United States
1. This information is corroborated by accompanying documents such as
Bayley's application to the SBA for a Certificate of Competency, dated
September 21, 1993, and appended to the Management Plan portion of
Bayley's proposal as Attachment F.
2. The record also shows that this question was asked of Ann Riley.
3. In a sworn statement prepared during the course of this protest and
dated July 2, Mr. Bayley identifies 64 Bayley employees. He explains
that 42 new employees have been hired to perform the SEC contract, and
that he anticipates hiring 8 to 10 more.
4. As stated earlier, Ann Riley also argues that the agency
unreasonably evaluated Bayley's proposal under certain evaluation
subfactors when the agency concluded that Bayley's proposal
demonstrated the ability and capacity to perform the requirements of
this contract. The issues raised therein are generally the same
issues raised with respect to Ann Riley's complaint that Bayley's
proposal was unacceptable. We need not repeat each of these
arguments. For the same reasons we conclude that the SEC properly
discharged its obligation to investigate Bayley's capacity to perform
the contract, we conclude that the SEC's evaluation of these issues
was reasonable as well. For the record, however, we note that many of
Ann Riley's claims throughout this protest are simply not supported by
the record. For example, despite Ann Riley's contention that "Bayley
utterly failed to designate any capacity to perform in . . .
Washington," Bayley identified potential subcontractors in Woodbridge,
Fairfax, Reston, and Alexandria, Virginia, and in Rockville and
College Park, Maryland.