BNUMBER: B-274176; B-274176.2
DATE: November 25, 1996
TITLE: Safety-Kleen Corporation
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Matter of:Safety-Kleen Corporation
File: B-274176; B-274176.2
Date:November 25, 1996
Martin R. Fischer, Esq., Katherine S. Nucci, Esq., and Timothy
Sullivan, Esq., Adduci, Mastriani & Schaumberg, for the protester.
R. J. Frick, Esq., and Lt. Col. David S. Franke, Department of the
Army, for the agency.
Tania L. Calhoun, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest that contracting agency's direction to awardee concerning
its performance of a contract constituted an improper out-of-scope
modification of that contract is denied where the record shows that
the resulting change is not a material one--the nature and purpose of
the contract has not been altered; the magnitude of the change in
relation to the overall effort is minimal; and there is no evidence
that the field of competition would have been materially changed.
2. While in accepting the awardee's proposal, the contracting agency
waived material solicitation requirement that offeror submit insurance
certificate covering a task to be performed under the contract,
General Accounting Office will not sustain protest where the agency
believes that its minimum needs do not require the submission of such
a certificate, and where there is no evidence that the protester has
been prejudiced by the agency's waiver of the requirement.
DECISION
Safety-Kleen Corporation protests the alleged modification of contract
No. DAKF12-96-D-0018, awarded by the Department of the Army pursuant
to request for proposals (RFP) No. DAKF12-95-R-0008 to ChemFree
Corporation for parts cleaner recycling services. Safety-Kleen
primarily argues that the alleged modification constitutes an
impermissible out-of-scope change to the contract. In a supplemental
protest, Safety-Kleen argues that ChemFree's proposal failed to meet
one of the solicitation's material requirements and should have been
found technically unacceptable.
We deny the protests.
BACKGROUND
Army Forces Command (FORSCOM) installations require these services for
degreasing operations, maintenance projects, and related cleaning
activities. The solicitation divided the contiguous United States and
Puerto Rico into 10 geographic regions, each with its own set of
contract line items, and contemplated the award of multiple contracts.
Among those offers determined to be technically acceptable, the Army
would make award to the lowest-priced offeror for each region.
The solicitation's requirements concern circulating parts cleaners;
wheel-mounted adjustable level parts cleaners; immersion parts
cleaners; paint and spray gun cleaners; and government-owned parts
cleaners. Offerors were to provide all of the equipment--save the
government-owned parts cleaners--and cleaning fluid required to
accomplish the solicitation's requirements.
The solicitation was structured based upon the agency's experience
with hazardous solvent-based cleaning systems that required the
contractor to furnish the solvent fluids and to periodically service
the parts cleaners by collecting the contaminated fluids, transporting
them to a recycling facility, and replacing them with clean solvent.
Section C.5.4.3. of the RFP stated:
". . . The [cleaning] solvent shall be capable of degreasing and
decarbonizing applications for maintenance projects and related
cleaning activities. The benchmark cleaning performance shall be
as the performance of PD-680, Type II or equivalent. . . .
"If an equivalent application is offered, it shall be
specifically identified and supported by an independent analysis
to verify the solvent's cleaning capability."
The solicitation contained a number of other requirements related to
the anticipated hazardous nature of the solvent-based cleaning
systems. A provision at issue here, discussed further below, required
the contractor to have minimum environmental impairment liability
(EIL) insurance coverage in the amount of $5 million per incident and
$10 million aggregate, and to submit an insurance certificate of not
less than this amount with its proposal.
Technical acceptability would be determined based upon an evaluation
of each offeror's proposal under two factors, technical excellence and
quality control. One technical excellence subfactor, "License,
Permits, and Certificates," would be rated on a "pass/fail" basis.
Under this subfactor, offerors were required to submit, among other
things, the EIL insurance certificate noted above. All of the
remaining subfactors and factors would be rated "unsatisfactory,"
"needs improvement," or "satisfactory." Offerors were required to
receive a "satisfactory" rating, and a "pass" rating under the
"Licenses, Permits and Certificates" subfactor, in order to be
eligible for award.
Three offerors submitted proposals for Regions 1, 4, and 10. After an
initial evaluation, the Army conducted discussions and requested and
received best and final offers (BAFO). ChemFree offered to provide an
equivalent application in the form of an aqueous-based, bioremediation
technology which does not utilize hazardous solvents. The firm
proposed to utilize this technology in all of the required circulating
parts, cleaners, and adjustable level parts cleaners. For all of the
immersion cleaners, spray and paint gun cleaners, and government-owned
parts cleaners, ChemFree proposed to utilize the traditional
solvent-based cleaners to be wholly serviced by subcontractors. The
Army determined that ChemFree's technology was an equivalent
application, and that the firm had submitted the lowest-priced,
technically acceptable offer for these three regions. ChemFree was
awarded the contract at an estimated value of $3,936,022, on June 20,
1996. Safety-Kleen's offer was also technically acceptable, but its
price was $700,000 higher than ChemFree's price.[1]
One month later, the Army's Mobility Technology Center (MTC), the
PD-680 specification preparing activity, notified the contracting
activity that it did not consider ChemFree's offered product to be a
PD-680 replacement. The contracting activity subsequently received
letters from several installations to be covered under ChemFree's
contract expressing their concerns about the firm's product. Of
particular relevance here, the Aviation and Troop Command stated that
it would not use ChemFree's product because it was not approved for
aviation maintenance use.
By letter to ChemFree dated August 6, the contracting officer directed
the firm to "satisfy the requirement with PD-680, type II, or
equivalent solvent at all aviation maintenance activities through-out
the FORSCOM installations. These procedures shall be in effect until
the approval of the ChemFree fluid for use on aircraft parts is
demonstrated."
Safety-Kleen filed its initial protest on August 16, primarily arguing
that the direction in this letter constituted an impermissible
out-of-scope change to ChemFree's contract. After receiving the
agency report on the initial protest, Safety-Kleen filed a
supplemental protest in which it argued that the Army should have
found ChemFree's proposal technically unacceptable since the firm did
not submit EIL insurance certificates for its transportation
subcontractors.[2]
DISCUSSION
Alleged Out-of-Scope Contract Modification
As a general rule, our Office will not consider protests challenging
contract modifications, as they involve matters of contract
administration that are the responsibility of the contracting agency.
Bid Protest Regulations, section 21.5(a), 61 Fed. Reg. 39039, 39045
(1996) (to be codified at 4 C.F.R. sec. 21.5(a)); American Air Filter
Co., Inc., 57 Comp. Gen. 285 (1978), 78-1 CPD para. 136; Central Texas
College Sys., B-215172, Feb. 7, 1985, 85-1 CPD para. 153. One exception
to this rule exists where, as here, it is alleged that a contract
modification improperly exceeds the scope of the contract and
therefore should have been the subject of a new procurement. Neil R.
Gross & Co., Inc., 69 Comp. Gen. 292 (1990), 90-1 CPD para. 212; Everpure,
Inc., B-226395.4, Oct. 10, 1990, 90-2 CPD para. 275. In determining
whether a modification improperly exceeds the scope of the contract,
we consider whether there is a material difference between the
modified contract and the contract originally competed. CAD Language
Sys., Inc., 68 Comp. Gen. 376 (1989), 89-1 CPD para. 364; Clean Giant,
Inc., B-229885, Mar. 17, 1988, 88-1 CPD para. 281. The materiality of a
modification is determined by examining factors such as whether the
nature and purpose of the contract has been altered by the
modification, Clean Giant, Inc., supra, the magnitude of the change in
relation to the overall effort, CAD Language Sys., Inc., supra, and
whether the field of competition would be materially changed by the
contract modification. Rolm Corp., B-218949, Aug. 22, 1985, 85-2 CPD para.
212.
The Army states that ChemFree has provided 1,054 parts cleaners to the
FORSCOM facilities covered by its contract.[3] As noted above,
ChemFree proposed to utilize bioremediation technology for all
circulating parts cleaners and adjustable level parts cleaners, and to
use solvent-based technology for all remaining parts cleaners.
Pursuant to the contracting officer's August 6 direction, however,
ChemFree has provided 84 solvent-based technology circulating parts
cleaners in the place of its proposed bioremediation technology
circulating parts cleaners. As Safety-Kleen points out, since
ChemFree did not offer to provide any solvent-based circulating parts
cleaners or associated maintenance/servicing, the firm's provision of
such cleaners and servicing is a change.
Our review of the record shows that this change is not material. The
substitution does not alter the fundamental purpose of the
contract--to provide parts cleaner recycling services. Further, while
ChemFree did not propose to utilize solvent-based technology for its
circulating parts cleaners, the firm's use of solvent-based technology
was not a change precipitated by the Army's August 6 letter.
ChemFree's proposal clearly lays out the division of its operations
into bioremediation and solvent-based sectors, and explains its plans
for performing solvent-based technology functions, including the fact
that it has subcontractors in place to provide the services associated
with this technology. Hence, contrary to the protester's view, this
is not a case where the contracting agency has accepted an offer
premised upon one approach and subsequently modified the contract to
obtain a wholly different approach. See Memorex Corp.--Recon.,
B-200722.2, Apr. 16, 1982, 82-1 CPD para. 349.
The actual change here involves substituting a small quantity of one
type of equipment for another type of equipment, and slightly
expanding the role of the in-place subcontractors. This change is
minimal when viewed in the context of the overall contract effort.
Only 8 percent of the parts cleaners that have been provided are
affected, and there have been no other contractual changes. In
particular, the pricing remains the same. Cf. American Air Filter
Co., Inc., 57 Comp. Gen. 285 (1978), 78-1 CPD para. 136, aff'd, 57 Comp.
Gen. 567 (1978), 78-1 CPD para. 443 (substitution of diesel for gasoline
engines was a modification outside the scope of the original contract
where it resulted in significant changes to the original contract,
including increasing the unit price by 29 percent). Moreover, in
consonance with the August 6 letter, the Army asserts that this is a
temporary change designed to satisfy user concerns while testing is
performed on ChemFree's product. The contracting officer states that,
recognizing that many of the concerns likely stem from lack of
knowledge about ChemFree's system and initial reluctance to change,
she believes that at some point in the near future the equipment at
issue will revert to the proposed bioremediation technology.
Safety-Kleen counters that the magnitude of the change thus far is
simply the "tip of the iceberg." The protester contends that more
parts cleaners will be switched over to the solvent-based technology
since there is no guarantee that user concerns will be satisfied, and
that a pricing adjustment is inevitable.[4] The record does not
support this contention, which essentially anticipates action in the
future that might never arise. Protests that merely anticipate
improper agency action are speculative and premature. See General
Electric Canada, Inc., B-230584, June 1, 1988, 88-1 CPD para. 512.
Consequently, we have no basis to consider this contention at this
time. Id.
Finally, there is no evidence--indeed, no allegation--that the
competition would change as a result of the substitution resulting
from the August 6 letter, i.e., that more firms would have entered the
original competition if the change had been incorporated in the
original solicitation. See Rolm Corp., supra. Under the
circumstances, we have no basis to conclude that the change which
occurred here was material.[5]
EIL Insurance Certificate Requirement
Section C.1.6.7. of the solicitation, "Spill/Environmental Impairment
Liability (EIL) Minimum Contractor Responsibility," stated:
"C.1.6.7.1 The Contractor's minimum environmental Impairment
Liability coverage shall be $5 Million per incident and $10
Million aggregate. The Contractor further agrees to supply an
Insurance Certificate of not less than this amount with offeror's
proposal.
"C.1.6.7.2 In the event a spill or ground or water pollution
results from contractor's transportation, storage, recycling,
reclaiming, re-refining or disposal of the generator's
contaminated solvents, the contractor agrees to pay all costs and
expenses to remedy that pollution or spill related clean-up in
excess of the aforementioned minimum Environmental Impairment
Liability by the utilization of their own assets."
In connection with the "Licenses, Permits and Certificates" subfactor,
the solicitation required offerors to submit certain documentation
with their proposals, including: "Coverage as a minimum for $5
million for each incident and $10 million in aggregate." As discussed
above, this subfactor was rated on a "pass/fail" basis, and offerors
were required to receive a "pass" rating to be eligible for award.
Safety-Kleen argues that ChemFree's proposal should have been found
ineligible for award since the firm did not submit EIL insurance
certificates for the subcontractors it proposed to transport the
hazardous waste generated by the solvent-based parts cleaners called
for under the contract.
The Army concedes that ChemFree did not submit such EIL insurance
certificates, but contends that the solicitation did not require such
certificates for the transporters of the hazardous waste. The Army
interprets the solicitation as requiring these certificates only for
the treatment, storage, and disposal (TSD) facility--the recyclers.
Since ChemFree submitted EIL certificates for its recyclers, the Army
considers that the requirement was fully satisfied. The Army attempts
to buttress its position by citing to a preproposal question and
answer on the matter.[6]
In determining the meaning of particular solicitation provisions, the
solicitation must be read as a whole and in a manner that gives effect
to all of its provisions. Tektronix, Inc., B-244958, B-244958.2, Dec.
5, 1991, 91-2 CPD para. 516. Our review of the provisions in their
entirety shows that section C.1.6.7.2 in effect defines the scope of
the EIL insurance coverage to be provided. That section requires the
contractor to assume liability in excess of the required minimum EIL
insurance coverage if a spill or pollution results from the
contractor's "transportation, storage, recycling, reclaiming,
re-refining or disposal" of the contaminated solvents. The clear
implication is that the contractor's EIL insurance must cover spills
or pollution resulting from the performance of each of these specific
tasks whose clean-up costs do not exceed the minimum. As a result,
offerors were required to submit proof that their EIL insurance
covered all of these tasks, including transporation.
The Army's reliance on the preproposal question and answer to argue
that EIL insurance was not required is puzzling, as they do not
support its interpretation. In answer to ChemFree's question
concerning the applicability of the various hazardous waste-related
requirements to an offeror that would not use hazardous materials, the
Army responded:
". . . In response to permits, license, and insurance
requirements that are specifically required due to the fact the
offeror WILL handle or transport hazardous waste, then (1) the
TSD permit to transport hazardous material does not apply if
hazardous material is not transported, (2) EIL insurance to cover
the receiving facility of hazardous waste does not apply if the
offeror does not transport hazardous material to a receiving
facility. In those instances that permits, licenses, and
insurance requirements are to cover liability for transporting
hazardous materials and that event does not happen, the
requirement would not apply." (Emphasis added.)
The inartful phrasing of this response cannot disguise the fact that
it does not state, as the Army suggests, that the EIL insurance
certificate requirement applies only to the receiving facility. It
merely states that if the offeror does not intend to transport
hazardous materials, the EIL insurance requirement does not apply.
Here, ChemFree did propose to transport hazardous materials, and the
requirement does apply.
The record shows that ChemFree did not meet this requirement, the
materiality of which is not disputed by the Army. In negotiated
procurements, a proposal that fails to conform to a solicitation's
material terms and conditions should be considered unacceptable and
may not form the basis for an award. Martin Marietta Corp., 69 Comp.
Gen. 214 (1990), 90-1 CPD para. 132. Hence, Safety-Kleen is correct that
the agency effectively and improperly waived the requirement for
ChemFree when it found its proposal technically acceptable and awarded
the firm this contract.
We cannot conclude, however, that the agency's waiver of the
requirement placed Safety-Kleen at a competitive disadvantage.
Despite the firm's reference to the cost of EIL insurance,
Safety-Kleen does not assert that it would not have offered this
coverage for the transportation aspect of its operations if it had
known that the agency did not consider it necessary. Even if it had
made such an assertion, there is no evidence that its dropping of such
coverage would have afforded it sufficient savings to overcome the
price difference here. Nor is there anything in the record to suggest
that additional firms would have entered the competition if the agency
had clearly communicated its less restrictive needs to the
marketplace. Tektronix, Inc., supra.
We will not sustain a protest in which an agency relaxed its
requirements for one offeror absent some evidence in the record that
the protester was prejudiced. HHI Corp., B-266041; B-266041.2, Jan.
25, 1996, 96-1 CPD para. 21; Tektronix, Inc., supra. Here, despite its
reference to a decision which included an extensive discussion of the
issue of prejudice, AT&T, B-250516.3, Mar. 30, 1993, 93-1 CPD para. 276,
aff'd, Dept. of Energy--Recon.; Sprint Communications Co.--Recon.,
B-250516.4; B-250516.5, Aug. 20, 1993, 93-2 CPD para. 111, Safety-Kleen
has not even alleged that it was prejudiced in formulating its offer.
We therefore conclude that the agency's waiver of the requirement here
did not affect the protester's competitive position and thus provides
no basis to disturb the award to ChemFree. Tektronix, Inc., supra.
The protests are denied.
Comptroller General
of the United States
1. Safety-Kleen, which offered the traditional solvent-based cleaner
technology, had been the incumbent contractor providing these services
to all FORSCOM installations. The firm submitted the only proposal
for the other seven regions, and was awarded a contract for those
regions. The third offeror withdrew its proposal during discussions.
2. Safety-Kleen's supplemental protest also alleged that the Army
unreasonably found ChemFree's product to be an equivalent application.
We summarily dismissed this basis of protest as untimely.
3. ChemFree's contract indicates that the firm is to provide a total
of 1,169 parts cleaners to FORSCOM facilities.
4. ChemFree's pricing for its bioremediation technology is premised
upon service once a year, but solvent-based technology requires more
frequent servicing and, presumably, a higher price.
5. Citing our decision in KPMG Peat Marwick, LLP, B-259479.2, May 9,
1995, 95-2 CPD para. 13, Safety-Kleen also argues that the August 6 letter
is evidence of improper post-BAFO discussions since it improperly
allowed ChemFree to materially modify its proposal. Our analysis and
conclusion above that this change is not material applies equally
here, and we need not consider this matter further.
6. While the Army also argues that the EIL insurance certificate could
not have applied to the transporters because federal law does not
require them to carry such coverage, we are unaware of any prohibition
on an agency's requiring more than the minimum demanded by law.