BNUMBER: B-275957; B-275957.2
DATE: April 23, 1997
TITLE: Cygnus Corporation, B-275957; B-275957.2, April 23, 1997
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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:Cygnus Corporation
File: B-275957; B-275957.2
Date:April 23, 1997
William M. Rosen, Esq., Hilary S. Cairnie, Esq., and Edward W. Kirsch,
Esq., Dickstein, Shapiro, Morin & Oshinsky, L.L.P., for the protester.
Barbara S. Kinosky, Esq., Bean, Kinney & Korman, and James S.
Phillips, Esq., and Leigh H. Turner, Esq., James S. Phillips, P.C.,
for Palladian Partners, Inc., an intervenor.
Michael Colvin, Department of Health & Human Services, for the agency.
Andrew T. Pogany, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. The presence of vested marital property rights of a government
employee in the assets or income of an offeror controlled by the
employee's spouse does not, by itself, establish that the government
employee possesses substantial ownership or control of the offeror
such that the matter constitutes a conflict of interest precluding a
contract award to the offeror.
2. Contracting agency may properly consider the experience of a
firm's personnel in evaluating its organizational experience even
where the solicitation defines the factor being evaluated in terms of
corporate experience.
3. While an offeror's misrepresentation concerning personnel that
materially influences an agency's consideration of its proposal
generally provides a basis for proposal rejection or termination of a
contract award based upon the proposal, where protest that awardee
misrepresented experience of principals is not supported by the
record, agency's award is not objectionable.
DECISION
Cygnus Corporation, the incumbent contractor, protests the award of a
level-of-effort, cost reimbursement contract to Palladian Partners,
Inc. under request for proposals (RFP) No. N02-BC-66212-82, issued by
the National Cancer Institute (NCI), National Institutes of Health
(NIH), Department of Health & Human Services, as a total small
business set-aside for technical support services for the Division of
Basic Sciences (DBS), a component of NCI. Cygnus principally alleges
that a conflict of interest precluded award by the agency to
Palladian; that Palladian made material and prejudicial
misrepresentations in its proposal; and that both offerors' technical
and cost proposals were misevaluated.
We deny the protest.
BACKGROUND
The RFP, issued July 10, 1996, and as amended, contemplated the award
of the cost-plus-fixed-fee contract for a base period with 4 option
years. The technical support services to be furnished by the
successful contractor to DBS include furnishing all skilled personnel,
facilities, equipment, and supplies, except as otherwise specified,
for editorial services (administrative support for the preparation of
scientific manuscripts and research documents for publication), annual
report preparation, arranging conferences, meetings and workshops,
miscellaneous general support, and records management.
The RFP required the submission of separate technical and business
proposals. The RFP specifically reserved to the agency the right to
"make an award [based on] the best advantage of the [g]overnment, cost
and other factors considered." The RFP stated that the technical
proposals would receive "paramount consideration"; however, the RFP
also stated that "[i]n the event that the technical evaluation reveals
that two or more offerors are approximately equal in technical
capability, then cost may become a significant factor in determining
[award]." The RFP listed the following major technical evaluation
factors: (1) technical approach (35 points); (2) related experience
of company (35 points); and (3) personnel (program manager (15 points)
and other personnel (15 points)).[1]
Concerning cost, the RFP required the offerors to submit a "Breakdown
of Proposed Estimated Cost (Plus Fee) and Labor Hours." For each
separate cost estimate, the offerors were required to provide a
breakdown by cost elements, including direct labor, fringe benefits,
indirect costs, fee, and other costs.[2] "Other Direct Costs"
(defined in the RFP as materials/supply, travel, consultants, postage,
reproduction communications, honoraria and other such costs) were
"normalized" in the RFP at a total "assum[ed]" total cost of $614,477.
Costs were to be evaluated for fairness and reasonableness.
The agency received 12 proposals by the closing date, including
proposals from Cygnus and Palladian. The agency convened a technical
evaluation panel (TEP) which evaluated the technical proposals
received. Based on this evaluation of initial proposals, the agency
made a competitive range determination which included only the three
top-ranked offerors. The initial evaluation results concerning these
firms were as follows:
Offeror Technical Score Total Price Adjectival Rating
Palladian 94.8 $1.8 million Acceptable
Cygnus [Deleted] [Deleted] Acceptable
Offeror A [Deleted] [Deleted] Acceptable[3]
The TEP, in its evaluation of initial proposals--upon which, as stated
previously, the competitive range determination was made--found that
Cygnus had submitted an excellent proposal. The TEP noted that Cygnus
was the incumbent and had "demonstrated a full and clear understanding
of the DBS and NCI mission and of services required by this contract."
The TEP also noted that "Cygnus has an excellent understanding of DBS
services [and has] experience with many biomedical support services
[resulting in excellent experience]. The TEP also found Cygnus's
project manager to be excellent with "good capabilities in managing
costs and tasks and show[ing] signs of flexibility in management of
tasks of varying degrees." The TEP noted relatively few "weaknesses"
in Cygnus's otherwise excellent and detailed proposal: [Deleted].
Concerning Palladian, the TEP found as follows:
"[Palladian has] extended the 'average technical approach['] by
making advances in technology with web based interactions.
[Palladian] show[s] extreme capability to perform all tasks even
though the company is new. Palladian presented strong proposals
from each of its subcontractors which are proposed. The proposal
is highly evolved and motivated [and has a] [g]ood understanding
of the biomedical missions of the DBS and NCI. [The project
manager] has worked with one of the key players from Base 10 [a
firm identified in Palladian's proposal] in a previous company
[while employed by Cygnus[4]], so working relationship has
already been established. Technical proposal was complete and
excellent."
The TEP also found that Palladian listed nine references, as well as
its work performance "sources." The TEP specifically noted that
"[a]lthough most of [Palladian's] experience comes from other
companies, the core personnel have worked together as a team for many
years [and] have direct experience with biomedical projects in the
incumbent contract." The TEP also found that the firm's program
manager was very highly qualified and that the key personnel had
"excellent credentials and a large amount of biomedical support
experience." The TEP questioned (as "weaknesses") whether Base 10
would be available as a "subcontractor" since there appeared to be
lack of "clarity of Base [10] in the administrative structure" and
whether multiple subcontractors would be "troublesome." Finally, the
TEP noted that Palladian "is [a new company] and may take a bit of
time to work out experience with ASI [a firm also identified in
Palladian's proposal] and personnel in a new company structure."
In the ensuing competitive range discussions, the agency provided the
following in writing to Cygnus:
[Deleted]
Following oral discussions, which with Cygnus were limited to the
matters set forth above, the agency received BAFOs. These BAFOs were
not scored but were "review[ed by] the Contract Specialist and TEP
Chairperson [who] saw no changes in the BAFO which affected the
initial evaluation."[5] Proposed costs in the BAFOs, as received by
the agency, were $1.8 million from Palladian and [deleted] from
Cygnus. The agency selected Palladian for award because that firm had
"received the highest average technical score from the TEP and
submitted the lowest cost BAFO." The agency also states, and the
protester does not dispute, that the agency had also determined to
award the contract to Palladian, based primarily or exclusively on the
original evaluation scoring, because Palladian had submitted the
[deleted].[6] This protest followed.
ALLEGED CONFLICT OF INTEREST
Cygnus contends that NCI, a component of NIH, improperly awarded the
contract to Palladian because that firm is effectively controlled by
an NIH official through a substantial and material financial interest
in the firm. Cygnus states that Mrs. Marion Millhouse Barker is the
co-president and co-owner of Palladian and that Cygnus has recently
discovered that she is married to an NIH official, Dr. Jeffrey Barker,
who was one of four guarantors of a line of credit submitted with
Palladian's proposal that was secured by an indemnity deed of trust on
real estate (Dr. and Mrs. Barker's house/private residence).[7]
According to the protester, Dr. Barker "resides in one of Palladian's
offices" (his own house) which he risks losing, will financially
benefit from the income and a share of the profits of Palladian, as
well as the increased value of Palladian, and that Dr. Barker's
"legally cognizable financial interests [under Maryland marital
property law] in income and profits (which will likely exceed
$100,000), provides compelling evidence of control over Palladian to
constitute an actual conflict of interest or at a minimum the
appearance of a conflict." Further, the protester states that absent
the requisite financial resources, including Dr. Barker's guaranty,
Palladian is not a responsible offeror and is not a "viable
business."[8] Finally, Cygnus complains that NCI failed to follow
regulations by not submitting this matter to higher authority to
determine whether award to Palladian under these circumstances would
have been appropriate; Cygnus, from a legal standpoint in support of
this protest ground, principally relies on our decision Revet Envtl. &
Analytical Labs., Inc., B-221002.2; B-221003.2, July 24, 1986, 86-2
CPD para. 102, for its contention that Palladian should have been excluded
from the competition.
The contracting officer responds as follows:
"Dr. Barker's relationship with Palladian is limited to serving
as one of four guarantors for a line of credit. Marion Barker
used the family residence to help secure the line of credit[,]
and it was necessary for both husband and wife to sign as
guarantors because they co-own the house. . . . Dr. Barker is
not an officer or employee of the corporation and does not
participate in its operations [or exercise any control over
corporation matters]. . . . [While] we were not aware that Dr.
Barker was an NIH employee when Palladian was selected for
award[,] . . . had we been aware and pursued the issue, we would
have found that Dr. Barker is employed by NIH's National
Institute of Neurological Disorders and Stroke rather than NCI
(the procuring Institute). The NCI contracting and program staff
involved in this procurement are not acquainted with Dr. Barker
and work in different buildings from him in the Rockville and
Bethesda, Maryland area. Dr. Barker has no involvement with the
NCI programs for [which] the contract services are being procured
and was not involved in developing the contract requirement."[9]
The agency principally relies on our decision, H H & K Builders, Inc.,
B-238095, Feb. 23, 1990, 90-1 CPD para. 219, as authority for its
determination that this matter involves a familial relationship which,
by itself, is not a sufficient basis to find either an actual conflict
of interest or an impermissible appearance of a conflict.
As a general matter, we have recognized that the responsibility for
determining whether a firm competing for a contract should be excluded
from the competition in order to avoid actual or apparent favoritism
or preferential treatment as a result of a conflict of interest rests
primarily with the contracting agency. Revet Envtl. & Analytical
Labs., Inc., supra at 3. Similarly, we have held that whether or not
an agency's established rules of conduct have been violated is a
matter of policy for resolution by the agency, not this Office. Big
Sky Resource Analysts; Paul Ronaldo and Norman Fortunate, B-224888;
B-224888.2, Jan. 5, 1987, 87-1 CPD para. 9, at 3. We will uphold the
agency's judgment in these matters so long as its determination is
reasonable. John Peeples, B-233167, Feb. 21, 1989, 89-1 CPD para. 178, at
2.
We think that the agency's determination that the award to Palladian
does not involve a conflict of interest warranting excluding Palladian
from the competition was reasonable. The record shows that Mrs.
Barker has engaged in her own business career for many years, while
Dr. Barker is a medical doctor and scientist at the National Institute
of Neurological Disorders and Stroke, an institute separate from NCI.
In an affidavit filed with our Office, Dr. Barker states that he "was
requested to be a guarantor on the line of credit . . . because the
bank desired me, as the spouse of one of the two owners of Palladian
Partners, Inc., to agree to the use of the Barker family assets as
part of the collateral for the line of credit." He further stated
that he does not assist in any way in the business of Palladian.
The presence of vested marital property rights of a government
employee in the assets or income of an offeror controlled by the
employee's spouse does not, by itself, establish that the government
employee possesses substantial ownership or control of the offeror,
see B-167036, Feb. 18, 1970, and there is no evidence in the record to
show any control here by Dr. Barker over the corporation's affairs.
In this regard, the record shows only that each spouse has had
separate and independent careers. Accordingly, the fact that Dr.
Barker financially assisted his wife by personally guaranteeing a line
of credit with a deed of trust on his own home does not provide a
basis for a finding of a conflict of interest.
We note that in Revet, relied upon by the protester, the government
employee was president of the bidding corporation, was the sole
incorporator of the corporation, was listed in the corporation's
articles of incorporation as president, treasurer and member of the
Board of Directors, and owned all of its stock. The government
employee then transferred all assets to his wife and resigned from the
corporation. The agency excluded the company from the competition
because the circumstances demonstrated the appearance of a conflict of
interest. We upheld the exclusion as reasonable.
We think Revet is inapposite. There has been no showing that Dr.
Barker was ever in control of or even associated with his wife's
business; his financial involvement now reflects no more than what a
spouse reasonably could be expected to do under the circumstances. We
therefore find this protest ground to be without merit.
ALLEGED MISEVALUATION OF PALLADIAN'S COMPANY EXPERIENCE
Cygnus alleges that the agency misevaluated proposals under the
criteria concerning "related experience of company" and "personnel,"
both of which were contained in section M of the RFP. The former
criterion, among other things, required evaluation of the "experience
of the company in work that is related to the proposed work" and
required offerors to "provide examples of documents and materials that
have been prepared by their organization in the recent past on related
projects." The latter criterion required evaluation of "the
qualifications of personnel," including the program manager and other
personnel. Cygnus complains that the agency substituted individual
personnel experience for company experience in the evaluation of
Palladian's proposal that resulted in double counting (under two
separate criteria) the personnel resources proposed by Palladian.
Cygnus also questions whether Palladian, a newly formed company, has
any "related experience" as a viable and functional corporate entity.
The record shows that on July 24, 1996, the agency issued amendment
No. 001, which contained questions from offerors and the agency's
responses, including the following:
"16. Under the evaluation criteri[on], 'Related Experience of
the Company,' can the related experience of the company's staff
be considered along with the related contract experience of the
organization? Newer companies may have experienced staff who
have worked on related contracts, but the 'company' may not
necessarily have a long history of related contract experience. .
. . Would the [g]overnment consider amending the criteria to
also consider the related contract experience of key staff?
"Yes, related experience of the company's staff can be considered
along with the related contract experience of the organization,
however, evidence must be provided showing that the company works
efficiently as a unit. The [g]overnment feels that emphasis on
historical data is important for the immediate function of the
contract upon award. The criteria will not be revised."
We agree with the agency that this amendment reasonably put offerors
on notice that staff experience would be considered under the company
experience criterion. Moreover, a contracting agency may properly
consider the experience of a firm's personnel in evaluating its
organizational experience even where the solicitation defines the
factor in terms of corporate experience. Scipar, Inc., B-220645, Feb.
11, 1986, 86-1 CPD para. 153, at 10; Energy and Resource Consultants,
Inc., B-205636, Sept. 22, 1982, 82-2 CPD para. 258, at 3. The agency,
as previously stated, found as follows:
"Although most of [Palladian's] experience comes from other
companies, the core personnel has worked together as a team for
many years. The company, as comprised of [its] proposed
personnel, has direct experience with biomedical projects in the
incumbent contract. The write-up of relevant experience of staff
is impressive and fulfills the RFP requirement."
Based on the RFP amendment and our precedents, we have no legal basis
to object to the agency's evaluation of Palladian's staff as
fulfilling company experience requirements. Indeed, under the terms
of the RFP, as amended, "double counting" of personnel experience was
reasonable.
ALLEGED MISREPRESENTATIONS IN PALLADIAN'S PROPOSAL
Cygnus alleges that Palladian's proposal contains numerous
misrepresentations which are material and were relied upon by the
agency in favorably evaluating Palladian's proposal. Specifically,
Cygnus states that Palladian misrepresented the experience of its two
principals, Marion Millhouse Barker and Cate Timmerman Freeza, former
Cygnus employees, with respect to their responsibilities on the
predecessor contract and on other contracts, as well as their
respective responsibilities to Cygnus. Cygnus further states that
"[a]t a minimum, Palladian has overstated in numerous places in its
proposal the qualifications and/or experience of various individuals
which it proposed to work on the contract." We give two examples of
Cygnus's allegations contained in a table submitted with its comments:
"Palladian Misrepresentation
"1. Proven project staff commitment and experience in meeting
the quick turnaround requirements of this contract.
"Actual Facts [according to the protester]
"The commitment and experience referred to was that of [Cygnus],
and not that of any individual employees who performed on behalf
of Cygnus.
"2. Excellent editorial staff with experience . . . preparing
NCI annual reports.
"Actual Facts [according to the protester]
"The majority of persons involved in preparing NCI annual reports
are still with Cygnus. No one individual or subset of people
prepared NCI Annual Reports; those reports were prepared by a
team of Cygnus employees. It would be inaccurate and misleading
to suggest that NCI Annual Reports were prepared by any one
person or group other than the entire team that actually prepared
such reports."
An offeror's misrepresentation concerning personnel that materially
influences an agency's consideration of its proposal generally
provides a basis for proposal rejection or termination of a contract
award based upon the proposal. Prospect Assocs., Inc., B-260696, July
7, 1995, 95-2 CPD para. 53, at 4. A misrepresentation is material where
an agency has relied upon the misrepresentation and that
misrepresentation likely had a significant impact on the evaluation.
Id. at 4-5.
Here, we think the protester's allegation concerns reasonable
judgmental disagreements as to the extent of involvement of
Palladian's principals in Cygnus's prior work as Cygnus employees. At
most, we think Palladian's alleged "misrepresentations" amount to
"puffery" and do not, in our view, constitute material
misrepresentation. As the agency states, "[i]t is neither surprising
nor significant that a former employer would, after the fact, offer a
different view of the duties and accomplishments of two former
employees, when the former employees have become his direct
competitors." We also find it persuasive that Cygnus itself submitted
letters of commendation in Appendix C of its technical proposal that
the firm previously received for prior work; 5 of the 11 letters were
addressed to currently proposed Palladian personnel. In effect,
Cygnus's own proposal showed that the proposed Palladian personnel
previously performed significant work under the predecessor contract
for Cygnus and gained corresponding experience.
MISCELLANEOUS ISSUES
Although we have reviewed the entire record and Cygnus's lengthy
submissions, the protester raises other numerous issues which we will
discuss only in summary fashion. Cygnus contends that the agency
failed to adequately evaluate information contained in Cygnus's BAFO
which would have raised its score and ranking. We agree with the
agency that the discussion items quoted above concerned minor or
relatively minor matters of two excellent proposals. [Deleted]. In
response to other items, Cygnus provided certificates of current cost
or pricing data and a certificate of procurement integrity. In short,
we find reasonable the agency's position that the protester's BAFO did
not involve any major changes whatsoever that could have affected its
evaluation score. Moreover, the agency states that the BAFOs were in
fact reviewed in sufficient detail by competent and qualified
personnel. We have no basis to disagree.
Cygnus also alleges that the agency failed to conduct a proper cost
realism and reasonableness analysis because, for example, the agency
failed to evaluate the cost of Palladian's "high technology approach"
(a new Internet web site resulting in a total initial cost of
$20,000). As to this contention, we think the amount is de minimis to
the overall cost of the contract; moreover, the protester acknowledges
that the government "normalized [in the RFP] the Other Direct Costs
[such as the website]," and we think the agency was required to follow
this solicitation evaluation scheme which called for the normalization
of Other Direct Costs. See, e.g., Quality Sys., Inc., B-235344;
B-235344.2, Aug. 31, 1989, 89-2 CPD para. 197, at 7.
Cygnus also alleges that various additional evaluation errors
(concerning cost and technical issues) were committed by the agency,
such as alleged misevaluation of Palladian's indirect rate, unequal
treatment of offerors [deleted] and other numerous arguments. NCI has
responded to each argument, justifying its actions; the awardee
responded as well. We have reviewed the entire record, including all
relevant evaluation and award decision documents, and find no merit to
these protest grounds.
Finally, the protester alleges that the selection decision was faulty.
The agency determined that Palladian was the low offeror [deleted] in
order to prevail on this final allegation, Cygnus must show that its
proposal was so technically superior to Palladian's proposal that the
agency was required to pay a [deleted] to Cygnus based on such
technical superiority. We find no such technical superiority from
this record. That being so, cost here became the determinative factor
when the agency effectively determined that the protester and
Palladian were essentially equal technically. Ogilvy, Adams &
Rinehart, B-246172.2, Apr. 1, 1992, 92-1 CPD para. 332, at 5; Lockheed
Corp., B-199741.2, July 31, 1981, 81-2 CPD para. 71, at 8-9. Accordingly,
the award to Palladian is unobjectionable.
The protest is denied.
Comptroller General
of the United States
1. Thus, the maximum number of possible technical points attainable
was 100 points. In addition to the evaluation criteria listed above,
the RFP contained a mandatory qualification criterion that the
contractor be located within 60 minutes ground transportation travel
time from the agency for "fast turnaround" requirements. Both Cygnus
and Palladian met this criterion.
2. The RFP also provided for evaluation of each offeror's "Total
Compensation Plan" (salary and fringe benefits of professional
employees) to ensure that this compensation reflected a "sound
management approach and an understanding of the requirements to be
performed."
3. The fourth ranked offeror had a technical score of [deleted] with a
cost of [deleted]. We
will henceforth limit
our discussion to the
proposals submitted by
Cygnus and Palladian.
4. The principals of Palladian are former employees of Cygnus.
5. According to the protester, the contracting officer informed the
firm at the debriefing that technical rescoring of BAFOs was not
required since the discussion questions were related to areas which
the TEP knew the firms either understood or were capable of performing
so that the original scoring had already taken these factors into
account. The agency states that "[i]t should be readily apparent to
an outside observer that the [discussion questions] were relatively
minor and, consequently, unlikely to have a major impact on the
relative standing of offerors."
6. The contracting officer states that "[a]fter review of BAFOs all
offerors in the competitive range were determined to be technically
equal [and] therefore, cost became the determining factor in
compliance with the RFP." The protester states that "to make a
determination of technical equivalency based upon initial proposals
and in advance of receiving responses to technical questions" was
improper without properly and thoroughly reviewing and evaluating [the
protester's] BAFO and properly increasing its score because it
submitted a "perfect BAFO." According to the protester, since "the
[a]gency determined that Cygnus and Palladian were technically equal
and then conducted oral and written negotiations [with subsequent
BAFOs,] it was obligated [to] rescore proposals in those instances
where Cygnus addressed and resolved the basis of any weakness assigned
by the [g]overnment."
7. The line of credit was also secured by the cash value of Mr.
Barker's life insurance policy.
8. Cygnus states that:
"Mr. Barker may be more likely to become involved during
times of stress rather than at the present time where
Palladian has just received its first contract award. . .
. Should Palladian receive a show cause letter and be
threatened with a termination for default, Mr.
Barker may find the temptation great--and possibly
irresistible--to contact his compatriots and lunch-room
buddies [at] NIH in view of the fact that his home and the
cash value of his life insurance are at risk."
9. The contracting officer states that the NCI and NIH Ethics Offices
orally informed her after the fact that "there are no actual or
apparent conflicts of interest or any other grounds resulting from Dr.
Barker's guarantorship of the line of credit and/or his marriage to
Marion Millhouse Barker for excluding Palladian from the competition."