BNUMBER: B-277923.2
DATE: December 29, 1997
TITLE: Montage, Inc., B-277923.2, December 29, 1997
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Matter of:Montage, Inc.
File: B-277923.2
Date:December 29, 1997
David M. Nadler, Esq., and Tina M. Ducharme, Esq., Dickstein, Shapiro,
Morin & Oshinsky, for the protester.
Kimberly L. Frye, Esq., Vicki O'Keefe, Esq., and George Brezna, Esq.,
Naval Facilities Engineering Command, for the agency.
Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
An agency may properly exclude a defaulted contractor from a
reprocurement for the remaining work in the defaulted contract; to the
extent that PRB Uniforms, Inc., 56 Comp. Gen. 976, 978 (1977), 77-2
CPD para. 213, and cases following that decision, state that a contracting
officer may not automatically exclude a defaulted contractor from the
competition for a reprocurement, those cases will not be followed.
DECISION
Montage, Inc. protests the Department of the Navy's failure to solicit
it in the agency's reprocurement of the replacement of the heating,
air conditioning, and ventilation (HVAC) system in the PFC Curtis B.
Schooley U.S. Army Reserve Center, Galax, Virginia.
We deny the protest.
On March 13, 1996, the Navy awarded to Montage contract No.
N68925-96-C-A100, an indefinite delivery, indefinite quantity,
multi-trade construction contract. On November 14, Montage received
delivery order No. 0009 under this contract to replace the HVAC system
at the Schooley Center within 180 days of the order. On June 12,
1997, the Navy terminated delivery order No. 0009 for default "due to
[Montage's] failure to make progress in the work and for default in
performance."
On June 17, the Navy offered this requirement as a sole source to
Capitol Contractors, Inc. through the Small Business Administration's
section 8(a) program. After Montage protested this intended
noncompetitive award to our Office, the Navy cancelled its request for
a section 8(a) award and decided to obtain competition to the maximum
extent practicable by soliciting three sources, but not Montage.
Montage challenges its exclusion from the Navy's competition of the
reprocurement and argues that limiting the competition to three
sources does not satisfy the requirement that competition be obtained
to the maximum extent practicable.
Generally, the statutes and regulations governing federal procurements
are not strictly applicable to reprocurements of defaulted
requirements. E. Huttenbauer & Son, Inc., B-239142.2 et al., Aug. 17,
1990, 90-2 CPD para. 140 at 2. Rather, the contracting officer may use
any terms and acquisition method deemed appropriate for the
repurchase; however, the contacting officer must repurchase at as
reasonable a price as practicable and must obtain competition to the
maximum extent practicable. Federal Acquisition Regulation (FAR) sec.
49.402-6(a), (b). The FAR provision allows the agency to purchase
needed supplies and services as expeditiously as possible while
preserving the government's right to seek excess reprocurement costs
from the defaulted contractor.
There have been no cases where our Office has sustained a protest
against a contracting officer's failure to solicit the defaulted
contractor. However, we have stated that a defaulted contractor may
not automatically be excluded from a competition for the defaulted
requirement because such an exclusion prior to the submission of bids
or proposals would constitute an improper premature determination of
nonresponsibility. See PRB Uniforms, Inc., 56 Comp. Gen. 976, 978
(1977), 77-2 CPD para. 213 at 3. More recently, however, we have
concluded that whether a defaulted contractor should be solicited
depends on the circumstances of each case and that the contracting
officer has a wide degree of discretion in this regard. For example,
we have upheld a contracting officer's determination not to solicit
the defaulted contractor where the defaulted contractor declined to
perform the contract requirements, such that the contracting officer
reasonably concluded that the defaulted contractor could not and would
not perform the contract. E. Huttenbauer & Son, Inc., supra, at 3.
Also, we have found that a contracting officer need not solicit a
defaulted contractor where a competitive reprocurement was reasonably
not conducted. See ATA Defense Indus., Inc., B-275303, Feb. 6, 1997,
97-1 CPD para. 61 at 3 (sole source order under the Federal Supply
Schedule).
Our earlier statement that the automatic exclusion of a defaulted
contractor from a reprocurement constitutes an improper premature
determination of nonresponsibility reflected the regulations then in
effect, which generally provided for reprocurement competitions within
the context of general procurement statutes and regulations.
Specifically, Armed Services Procurement Regulation (ASPR) sec.
8-602.6(b) (1976) provided that:
the PCO may use formal advertising procedures [although not
required to do so]. If the PCO decides to negotiate the
repurchase contract, he may either (1) use any authority listed
in [ASPR] 3-201 through 3-217 (10 U.S.C. 2304(a)(1)-(17)), as
appropriate, or (2) if none of those authorities to negotiate is
used, the contract shall identify the procurement as a repurchase
in accordance with the provisions of the Default clause in the
defaulted contract.
Unlike the ASPR, the current regulation does not require the use of
any particular procurement process but "authorizes the contracting
officer to use any terms and acquisition method deemed appropriate for
the repurchase." FAR sec. 49.402-6(b). Although agencies are required
to "obtain competition to the maximum extent practicable for the
repurchase," there is no requirement for full and open competition.
Id.
Thus, contracting officers are invested with wide latitude to
determine how needed supplies or services are to be reprocured after
the default of a contract. In the absence of a countervailing law or
regulation, such a broad grant of discretion necessarily includes
determining, in view of the circumstances of the default, whether or
not to solicit or allow the defaulted contractor to compete in the
reprocurement. The agency, with its particularized knowledge of the
contractor's past performance (or failure to perform) on the
requirement being reprocured, is clearly in the best position to make
that determination. Although "competition to the maximum extent
practicable" must be obtained in the reprocurement, that standard does
not, in our view, mean that an agency must consider an offer from a
defaulted contractor for the reprocurement of the very work for which
it was defaulted. Accordingly, and in light of the broad authority
accorded contracting officers by FAR sec. 49.402-6, we will not review an
agency's decision not to solicit a defaulted contractor.
Our current view is consistent with that expressed in various board of
contract appeals decisions reviewing agency's default terminations,
which have long held that the contracting officer's broad discretion
in conducting reprocurements includes the exclusion of the defaulted
contractor from the repurchase.[1] See, e.g., Zan Machine Co., Inc.,
ASBCA No. 39462, June 4, 1991, 91-3 BCA para. 24,085 at 120,542; Morton
Mfg., Inc., ASBCA No. 30716, Oct. 31, 1988, 89-1 BCA para. 21,326 at
107,553; see also Edwards v. U.S., 22 Cl. Ct 411, 417 note 6
(1991).[2]
[T]he "general rule is that the Government is not required to
invite bids on repurchase solicitations from a defaulted
contractor." [Citations omitted.] The reasoning underlying this
rubric would seem to be obvious: If the defaulted contractor had
originally complied with its contractual obligations, the need to
reprocure would never have arisen.
Morton Mfg., Inc., supra, at 107,553.
In sum, the agency did not abuse its discretion in excluding Montage
from the competition of the delivery order for which it had been
defaulted. To the extent that PRB Uniforms, Inc., supra, and other
decisions citing that case state that a defaulted contractor may not
be automatically excluded from the competition for the reprocurement
of the requirement as to which it defaulted, those cases will not be
followed.
Montage also complains that the Navy has failed to obtain competition
to the maximum extent practicable as required by FAR sec. 49.402-6.
Given our conclusion that the Navy properly excluded Montage from the
reprocurement, Montage is not an interested party to raise this issue
because, even if Montage's protest were sustained on this ground, the
protester would not be eligible to compete for award. Bid Protest
Regulations, 4 C.F.R. sec. 21.0(a) (1997); King Nutronics Corp.,
B-259846, May 3, 1995, 95-2 CPD para. 112 at 4. In any event, soliciting
three sources, as was done here, would appear to satisfy the
requirement for competition to the maximum extent practicable. See
FAR sec. 13.106-2(a)(4).
The protest is denied.
Comptroller General
of the United States
1. Although a contracting officer may need to consider soliciting a
defaulted contractor, under certain circumstances, to preserve the
agency's right to seek excess reprocurement costs under the Contract
Disputes Act, whether excess reprocurement costs were properly
mitigated is not a matter for consideration by our Office. See VCA
Corp., B-219305.2, Sept. 19, 1985, 85-2 CPD para. 308 at 2.
2. The protester cites Tom W. Kaufman Co., GSBCA No. 4623, June 6,
1978, 78-2 BCA para. 13,288, for the proposition that "an agency must
solicit the defaulted contractor where, as here, that contractor is
the most suitable and readily available source for reprocurement."
(Emphasis in original.) That decision specifically recognized,
however, that generally the "Government is not required to invite bids
on repurchase solicitations from a defaulted contractor." Id. at
60,020. Rather, and as recognized by other boards of contract
appeals, although an agency desiring to preserve its right to seek
excess reprocurement costs against a defaulted contractor may have to
solicit a defaulted contractor where the contractor will be able to
deliver conforming supplies or services without delay, there is no
absolute requirement that the defaulted contractor be solicited or
awarded the reprocurement. Id.; see also Spectrum Leasing Corp.,
ASBCA Nos. 25724, 26049, Dec. 18, 1984, 85-1 BCA para. 17,822 at 89,200;
Proven Profit Sys., Inc., GSBCA No. 5752-TD, July 31, 1981, 81-2 BCA para.
15,258 at 75,525-75,526.