BNUMBER: B-275783
DATE: March 27, 1997
TITLE: Matter of:T. Head and Company, Inc.
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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 approved for public
release.
Matter of:T. Head and Company, Inc.
File: B-275783
Date:March 27, 1997
Laura L. Hoffman, Esq., and Michael A. Hordell, Esq., Gadsby & Hannah,
for the protester.
Dennis J. Gallagher, Esq., Department of State, for the agency.
Marie Penny Ahearn, Esq., and John M. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Elimination of small business firm's offer from competitive range as
unacceptable under past performance evaluation factor, without
referring matter to Small Business Administration (SBA) for
certificate of competency review, was proper where unacceptable rating
was consistent with comparative evaluation scheme set forth in RFP and
did not result from pass/fail evaluation.
DECISION
T. Head and Company, Inc. (THI), a small business, protests the
rejection of its proposal as technically unacceptable under Department
of State (DOS) request for proposals (RFP) No. S-OPRAQ-96-R-0600. The
solicitation sought proposals to provide mail processing and handling
services for DOS's Diplomatic Pouch and Mail Division.
We deny the protest.
The RFP, issued as a total small business set-aside, sought proposals
on a fixed-price basis, with some indefinite quantity line items.[1]
It provided for award on a best value basis, with price equal in
weight to the two technical factors, technical approach and corporate
experience/past performance. There were three corporate
experience/past performance subfactors: (1) "performance history-how
well offeror has performed on previous contracts," (2) "cost
management-whether offeror has provided quality services at reasonable
prices," and (3) "termination history-whether offeror has had previous
contracts terminated for default or otherwise terminated due to
customer dissatisfaction." Proposals were to be rated exceptional,
acceptable, marginal, or unacceptable.
Nine proposals were received. THI's offered price was low and,
initially, the agency evaluated THI's proposal as exceptional under
the technical factor and acceptable under past performance. The past
performance rating was based on past performance surveys for four of
THI's past contracts, including DOS contract No. 1026-950172 for
mail and messenger services, performed from March 1, 1989 to August
31, 1994. Based on this initial evaluation, THI's proposal would have
been ranked third. However, the agency subsequently received an
offset notice from the Department of Justice (DOJ) requesting that DOS
liabilities to THI under the DOS contract be paid to DOJ to offset a
civil judgment and criminal fine against the firm. In this regard,
DOJ advised DOS that THI had been convicted of 39 counts of false
claims under 18 U.S.C. sec. 287 (1994) (the False Claims Act)[2] and was
subject to a $256,546.56 civil judgment (entered October 3, 1995 in
favor of the United States) and a $9,750 criminal fine/special
assessment (imposed April 19, 1996). Specifically, THI was found
guilty of inflating time records and labor costs under an
Environmental Protection Agency (EPA) contract. In light of this
information, the contracting officer requested a reevaluation of THI's
past performance, including a resurvey of THI's performance under the
DOS contract and a Dun & Bradstreet supplier evaluation.
Based on the reevaluation, the evaluators determined that THI's past
performance was unacceptable; under the performance history subfactor,
they noted that THI's actions under the EPA contract reflect a history
of "mismanagement of contract administration requirements"; under the
cost management subfactor, they noted the false claims under the EPA
contract and the Dun & Bradstreet supplier evaluation rating of high
risk;[3] and under the termination history subfactor, they noted that
THI's DOS contract for courier messenger services "is in dispute for
cost/inconsistencies." In this last regard, the cognizant DOS
contract specialist noted that "[f]inal invoice payments were rejected
due to insufficient obligations because of cost overruns," and that
certain disputed contract costs were the subject of an audit
report.[4] The contracting officer concluded that THI's past
performance was unacceptable, and that this warranted excluding the
firm's proposal from the competitive range.
THI asserts that the rejection of its proposal based on unacceptable
past performance was improper because this determination amounted to a
finding that THI was not a responsible prospective contractor, and the
matter thus had to be referred to the Small Business Administration
(SBA) for review under the certificate of competency procedures.
This argument is without merit. THI is correct that the Small
Business Act, 15 U.S.C. sec. 637(b)(7)(A) (1994), provides that
the SBA has conclusive authority to determine the responsibility of a
small business concern, and that when a procuring agency finds a small
business concern nonresponsible it must refer the matter to the SBA
for a final determination. Flight Int'l Group, Inc., 69 Comp. Gen.
741 (1990), 90-2 CPD para. 257. In a negotiated procurement, however, SBA
referral is mandatory only where a traditional responsibility-type
factor, such as past performance, is evaluated on a pass/fail basis
and the contracting agency has determined that a small business's
proposal should be rejected for failure to "pass" that factor; this is
so because the agency is viewed as having made a nonresponsibility
determination notwithstanding its use of and reliance on a technical
evaluation criterion. Docusort, Inc., B-254852, Jan. 25, 1994, 94-1
CPD para. 38.
The agency's rejection of THI's proposal was not tantamount to a
nonresponsibility determination that had to be referred to the SBA.
While the past performance factor did encompass traditional
responsibility considerations, the RFP provided for a comparative
(i.e., best value)--rather than a pass/fail--evaluation under this
factor, and the record shows that the agency evaluated THI's proposal
in accordance with this scheme. Specifically, the agency did not
automatically reject THI's proposal but, rather, considered the effect
of the new information on the proposal in the context of the three
past performance subfactors. The proposal ultimately was assigned the
lowest of the four available adjectives--unacceptable--based on the
agency's conclusion that the substantive problems revealed in
connection with the EPA (primarily) and DOS contracts, as well as the
Dun & Bradstreet rating, were substantial. The agency then eliminated
the proposal from the competitive range based on its conclusion that,
with the unacceptable past performance rating, THI's overall
evaluation rating was too low for the firm to have a reasonable chance
for the award. As this conclusion was reached precisely in accordance
with the best value evaluation scheme set forth in the RFP, there is
no basis for concluding that it amounted to a pass/fail determination.
See Dynamic Aviation--Helicopters, B-274122, Nov. 1, 1996, 96-2 CPD para.
166; Smith of Galeton Gloves, Inc., B-271686, July 24, 1996, 96-2 CPD para.
36.
There also is no basis for questioning the agency's finding that THI's
proposal was unacceptable under the corporate experience/past
performance factor, since the considerations that led the agency to
this conclusion clearly were encompassed by the factor. In this
regard, we will review a proposal evaluation only to ensure that it
was reasonable and consistent with the RFP. Professional Software
Eng'g, Inc., B-272820, Oct. 30, 1996, 96-2 CPD para. 193. The performance
history subfactor encompassed how well an offeror had performed on
prior contracts; THI's performance under the EPA contract, including
its fraudulent overbilling, therefore properly was considered under
this subfactor. The cost management subfactor encompassed whether the
offeror had provided quality services at reasonable prices. THI's
fraudulent overbilling was directly related to the reasonableness of
its prices under the EPA contract, and also indicated that THI's cost
management controls had been deficient. Indeed, the fraudulent
overbilling was particularly relevant given that THI's proposed
project manager, Mr. Head was found personally responsible for the
intentional false overbilling, and the subject solicitation includes
indefinite quantity items that could be overbilled. The Dun &
Bradstreet high risk rating also was encompassed by the subfactor
since it indicated late payments to suppliers under prior contracts,
which, again, could suggest lax cost management.[5]
As for the termination history subfactor, we agree with THI that
because the concerns relating to the DOS contract did not involve an
actual termination, as contemplated by the subfactor, THI's
performance under that contract technically should not have been
considered under this subfactor. However, since it is clear that
THI's performance under the DOS contract properly could be considered
under the performance history and cost management subfactors (i.e.,
since it was a prior contract and the problems uncovered concerned
undocumented claimed costs), these concerns properly were factored
into the agency's reevaluation conclusion. Nothing in the record
suggests, and there is no reason to believe, that consideration of the
DOS contract under different subfactors would have led the agency to
reach a different conclusion regarding the acceptability of THI's past
performance.
The protest is denied.
Comptroller General
of the United States
1. The basic services required during normal hours of operation were
to be priced on a monthly basis, with after-hours services and
seasonal services separately priced on a labor hours basis for
estimated hours. The RFP also called for a fixed price to cover
phase-in.
2. Additionally, Mr. Toney Head, president and sole owner of THI, was
individually convicted of the same false claims under 18 U.S.C. sec. 287.
3. The Dun & Bradstreet high risk supplier rating appears primarily to
be based on average payments to suppliers being 25 days beyond terms,
in contrast to an industry average of 9 days beyond terms.
4. The record indicates that the disputed contract costs on THI's DOS
contract pertain to inadequate documentation of claimed costs, notably
transportation costs unsupported by usage logs.
5. While the protester argues that unspecified sections of the Dun &
Bradstreet supplier evaluation are based on data several years old, it
does not dispute that its average payments were past due considerably
more days than the industry average.