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.