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.