BNUMBER: B-276846.2
DATE: February 23, 1998
TITLE: Kongdan Kumnan Restaurant/Good Food Service, B-276846.2,
February 23, 1998
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Matter of:Kongdan Kumnan Restaurant/Good Food Service
File: B-276846.2
Date:February 23, 1998
John E. Gagliano, Esq., Cohen, Gettings, Dunham & Davis, P.C., for the
protester.
Col. Nicholas P. Retson, Maj. Jonathan C. Guden, and Maj. Nathanael
Causey, Department of the Army, for the agency.
Sylvia Schatz, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Agency properly rejected protester's proposal for failure to establish
local (Korean) source status as required by solicitation, where
claimed local status was based on United States firm's consulting
agreement with local Korean company, and agency reasonably determined
that agreement showed U.S. firm, not Korean company, would have
control and principal responsibility for performance of the contract.
DECISION
Kongdan Kumnan Restaurant/Good Food Service (KKR/GFS) protests the
rejection of its proposal, under the Department of the Army request
for proposals (RFP) No. DAJB03-96-R-0098, for food service operations
at Army dining facilities in the Republic of Korea (ROK).
We deny the protest.
The RFP contemplated the award of a fixed-price contract to the
lowest-priced, technically acceptable offeror for a base year, with
four 1-year options. Section L of the RFP, relating to the local
source requirement, provided:
All sources may submit a proposal, however, the ROK-US SOFA
prohibits the U.S. from granting invited Contractor status if a
fair and reasonable, technically acceptable offer is received
from a responsible local source. Should this occur, the
Government would then consider for award only those offerors that
have shown authorization and capability to compete and perform as
a local source. Any U. S. Contractor with capacity to qualify as
a local source must submit such documentation in the initial
proposal. If a U.S. contractor provides such documentation in
the initial proposal, it may submit a price proposal as an
invited contractor and as a local contractor.
Several local source proposals were received, so the contracting
officer set aside all proposals from U.S. firms and did not consider
them further. Since KKR/GFS' proposal cover sheet indicated that it
was submitted by "Kongdan Kumnan Restaurant and Good Food Service,
Inc. (consultant)," the contracting officer initially believed the
proposal was from a local source. However, after evaluating the
proposal, the Army suspected collusion between KKR/GFS and another
offeror, and thus requested it to withdraw the offer. The protester
refused and filed a protest with our Office (B-276846), challenging
the Army's position. The contracting officer ultimately agreed to
retain KKR/GFS in the competition, and the firm withdrew its protest.
Three proposals, including KKR/GFS', were included in the competitive
range. In reevaluating KKR/GFS' proposal, the agency identified
several deficiencies. KKR/GFS attached to its proposal a "consulting
services agreement," executed on March 5, 1997, for purposes of this
solicitation, in which GFS, a U.S. company based in Maryland, with
extensive experience in providing food services to U.S. federal
agencies, was named "consultant," while KKR, a local Korean company
engaged in the food service and restaurant business, was named
"client." During oral discussions with KKR/GFS, the agency pointed
out the deficiencies in the proposal, including its failure to show
the offeror's status as a local source, and confusion and
inconsistencies with regard to the relationship between KKR and GFS.
KKR/GFS submitted with its revised proposal an amended "consulting
agreement" between GFS and KKR. This agreement stated that the two
companies would perform the contract under the name of "KKR/GFS," that
the consultant would have "full authority on all matters pertaining to
this contract including but not limited to Managing, Operating and
Administering the dining facilities," and would be responsible for
"[a]ll invoicing and finance operations," while the Kongdan Kumnan
Restaurant would provide an "understanding of Korean Law as well as
recruitment of a labor force as needed to support this contact."
It appeared to the contracting officer from the terms of this
agreement that the KKR/GFS revised proposal failed to establish local
source status. He therefore requested a legal review by the Chief
Counsel to the Korea Contracting Command (CCK). After reviewing the
consulting agreement, the CCK determined that, while the Korean
restaurant is apparently an established local firm, the KKR/GFS
proposal was not submitted by a local source, since the U.S. firm
appeared to be using KKR to obtain local contractor status, while
having complete authority over and responsibility for performing
essentially the entire contract. Subsequently, the International
Affairs Division, Office of the Judge Advocate, U.S. Forces Korea and
Eighth U.S. Army, which is responsible for interpreting Korean law for
all U.S. military forces within Korea, not only concurred that the
offeror was not a local source, but also found that, since the
consulting agreement gave the consultant virtually total control over
the KKR/GFS relationship, this potentially would be viewed as the U.S.
firm being in violation of Korean law and subject to criminal
penalties for improperly operating a business in Korea. Based on
these legal opinions, the contracting officer concluded that the
KKR/GFS revised proposal did not establish local source status and
eliminated it from further consideration. On November 7, award was
made to Kumbo Products Co. Ltd. as the offeror submitting the
lowest-priced, technically acceptable proposal.
KKR/GFS argues that its proposal was from a local source, and
therefore was rejected improperly, since KKR was the prime contractor
under the consulting agreement, and had obtained all the requisite
Korean business licenses and authority to perform the work required in
the solicitation, and GFS was only KKR's consultant. KKR/GFS seems to
assert that KKR, not GFS "would have a substantial role in the
performance of the contract," as KKR would (1) supply the local labor
necessary to fulfill the contract; (2) ensure that the contractor is
in compliance with Korean law; and (3) control the "financial fruits"
of the contract, since government payments under the contract would be
deposited directly into KKR's bank accounts, from which GFS would
merely be paid consulting fees.[1]
In reviewing an evaluation, we will examine the agency's conclusions
to ensure that they are reasonable. See Comarco, Inc., B-249697.2,
Jan. 26, 1993, 93-1 CPD para. 65 at 4. Here, we conclude that the
agency reasonably rejected the KKR/GFS proposal on the basis that it
did not show that the offeror was a local source. Rather, as the
agency found, we think the available information supported the
conclusion that, based on contract responsibilities and control under
the consulting agreement, GFS would in reality be the prime
contractor. The evidence in this regard was extensive. First, while
the offer included references to KKR/GFS, it also referred to Good
Food Service, Inc., and Good Food Service/KKR as the offeror or
contractor. Further, the offer included the following indications
that it actually was being submitted by GFS: (1) all offeror
information in the proposal pertained solely to GFS--the listing of
prior contracts, place of incorporation (the District of Columbia),
and business address for remittance of payments; (2) in the sections
covering independent price determination certification, claims and
requests for contract adjustment or relief, and individuals authorized
to negotiate on behalf of the offeror, only officers or employees of
GFS were listed; (3) the letters of intent submitted by GFS' proposed
employees state that "Good Food Service, Inc. is offering" the
employment and that "[t]his offer is contingent upon Good Food
Service, Inc. becoming the successful bidder" under the solicitation;
(4) the letter of credit and various debt instruments submitted all
show the corporate credit and liabilities of GFS or its president; (5)
only the general manager of GFS signed the certificate of procurement
integrity; and (6) the offer and amendments were signed only by GFS'
president, as "contractor/offeror."
These indicia are reinforced by the absence in the proposal or
consulting agreement of any information to the contrary, and the fact
that the consulting agreement actually supports the interpretation
that GFS is the contracting entity. In this regard, notwithstanding
the protester's argument that the consulting agreement establishes KKR
as the prime contractor, the agreement in fact contains no such
representation; it refers to KKR as the "client," not as the prime
contractor or offeror. Further, although the agreement provides that
KKR would be responsible for supplying the local labor force and
ensuring that the contractor is in compliance with Korean law, the
agreement otherwise appears to vest in GFS complete control of and
responsibility for contract performance, by virtue of the statement
that GFS has "full authority on all matters pertaining to this
contract," including managing, operating and administering the dining
facilities, and responsibility for all invoicing and finance
operations. We also see nothing supporting GFS' contention that KKR
would be in complete control of the "financial fruits" of the
contract, and that payments under the contract would be deposited
directly into KKR's local Korean bank accounts. Indeed, the proposal
supports the opposite conclusion. Specifically, as discussed above,
the proposal cover sheet, signed by the president of GFS, indicates
only the business address of GFS as the address for remittance under
the contract, and the section in the RFP requesting the name, address,
and account number of the bank authorized for delivery of checks due
under the contract was left blank, in which circumstance the RFP
provided that checks would be mailed to the contractor's address
listed on the proposal's cover sheet--that is, GFS'.
We conclude that the agency reasonably determined that the information
in the KKR/GFS proposal did not establish the offeror's local source
status, and therefore properly eliminated the proposal from the
competition.[2]
KKR/GFS raises other arguments which we find to be without merit.
First, KKR/GFS argues that the Army improperly failed to notify it any
time prior to award that the KKR/GFS proposal failed to show the
offeror qualified as a local source. However, the record shows that
KKR/GFS acknowledged to the Army that the agency raised this
deficiency with KKR/GFS during discussions. Specifically, KKR/GFS, in
its electronic mail message to the Army summarizing the contents of
the discussions, stated as follows: "Issue #1: Clarification on
local source status, i.e., consultant, subcontractor, Joint Venture,
etc." Second, KKR/GFS argues that the agency either does not know or
failed to try to learn that KKR and GFS were informed by the Korean
authorities that their business arrangement was acceptable. However,
the KKR/GFS proposal did not include any such information; an offeror
bears the burden of submitting an adequately written proposal
including all relevant information, and such information cannot be
submitted after the fact to establish that the agency's evaluation was
unreasonable. See Wyle Labs., Inc., B-260815.2, Sept. 11, 1995, 95-2
CPD para. 187 at 5. Finally, KKR/GFS argues that award to Kumbo is
improper, because the firm failed to meet the RFP requirement for
offerors to have at least 2 years of food service experience. Even if
we sustained the protest on this ground, the other competitive range
offeror, not KKR/GFS, would be in line for award. Under these
circumstances, KKR/GFS is not an interested party eligible to protest
on this ground. 4 C.F.R. sec. 21.0(a); Monopole, S.A., B-252745, July
23, 1993, 93-2 CPD para. 51 at 7 n.3.
The protest is denied.
The Comptroller General
of the United States
1. In its December 29 comments on the agency report, KKR/GFS argues
that the local source issue is only another attempt by the Army to
improperly eliminate its proposal from the competition. To the extent
that the protester means that the Army is biased against it, this is
an untimely allegation, since KKR/GFS knew of this argument when it
filed its November 17 protest, but failed to raise it within 10 days
of this date. Bid Protest Regulations, 4 C.F.R. sec. 21.2(a)(2) (1997);
OHM Remediation Servs. Corp., B-274644 et al., Dec. 23, 1996, 97-1 CPD para.
4 at 9.
2. Although we need not decide the issue here, we note that the
ambiguity in the KKR/GFS proposal also raises a question as to whether
the identity of the offering entity was sufficiently established in
the proposal. Ambiguity as to the offeror/contractor renders an offer
technically unacceptable, since there is no party
that is clearly bound to perform the obligations of the contract. See
Sunrise Int'l Group, Inc.; Eagle III Knoxville, Inc., B-252735,
B-252735.2, July 27, 1993, 93-2 CPD para. 58 at 2-3; Dick Enters., Inc.,
B-259686.2, June 21, 1995, 95-1 CPD para. 286 at 2, recon. denied,
B-259686.3, Nov. 16, 1995, 95-2 CPD para. 223.