BNUMBER:  B-278903.2 
DATE:  February 12, 1999
TITLE: Encore Management, Inc., B-278903.2, February 12, 1999
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Matter of:Encore Management, Inc.

File:     B-278903.2

Date:February 12, 1999

J. Patrick McMahon, Esq., McMahon, David & Brody, for the protester.
Wilsie Y. Minor, Esq., Corporation for National and Community Service, 
for the agency.
Henry J. Gorczycki, Esq., and James A. Spangenberg, Esq., Office of 
the General Counsel, GAO, participated in the preparation of this 
decision.

DIGEST

Agency has reasonable basis to cancel solicitation for clerical and 
administrative support services where agency's actual requirement is 
for personal services which the agency intends to satisfy with civil 
service personnel.

DECISION

Encore Management Inc. protests the cancellation of request for 
proposals (RFP) No. 97-PB-05, issued by the Corporation for National 
and Community Service (CNCS) for clerical and administrative support 
services.

We deny the protest.

The RFP, issued on June 3, 1997 as a competitive section 8(a) 
set-aside, contemplated the award of a time-and-materials contract for 
1 year with 4 option years to provide support services at all or most 
of the agency's offices.[1]  RFP at 1, 5, 9, amend. 2, at 2; Agency 
Report at 5.

The agency awarded a contract to Lionel Henderson Corporation on 
December 15.  Agency Report at 2.  Encore protested the award on 
December 23.  On January 22, 1998, the agency proposed to take 
corrective action in response to the protest, which rendered the 
protest allegations academic.  Id. at 2-3.  The agency's corrective 
action included reopening negotiations, conducting additional 
discussions, and making a new source selection decision based on 
revised proposals.  Id. at 3.  Our Office subsequently dismissed the 
protest.[2]

While the agency was proceeding with this corrective action, the 
agency's Office of the Inspector General (OIG) initiated an audit of 
the agency's procurement and contract administration processes.  
Agency Report at 3, Tab 20.  On August 7, the OIG issued report No. 
98-24, which determined that the agency was administering the 
incumbent contract for clerical and administrative services, and other 
contracts, as personal services contracts in violation of Federal 
Acquisition Regulation (FAR)  sec.  37.104 (June 1997), and recommended 
that the agency either cease using personal services contracts or 
obtain authority to issue such contracts.  Agency Report at 4, Tab 23 
at 19-24.  

CNCS's chief operating officer subsequently determined that the agency 
would hire government employees to perform the work covered by the 
RFP, which was being performed under the incumbent clerical and 
administrative services contract.  Agency Report, Contracting 
Officer's Statement at 6, Tab 24.  The incumbent contract with Encore 
was extended to allow sufficient time to hire government employees for 
all necessary positions.  Contracting Officer's Statement at 6.  As a 
result, the RFP was canceled and offerors were so notified by letter 
of October 23.  RFP amend. 3; Agency Report at 4, Tabs 26, 27.  This 
protest followed.

Encore alleges that, although the incumbent contract may have been 
administered as a personal services contract, nothing in the terms of 
that contract or the canceled RFP requires its administration as a 
personal services contract, and thus there is no reasonable basis to 
cancel the RFP.  Protest at 3-4; Comments at 4-7.

In a negotiated procurement, such as this, the contracting officer has 
broad discretion in deciding whether to cancel a solicitation; the 
contracting officer need only have a reasonable basis to do so, as 
opposed to the cogent and compelling reason required for the 
cancellation of a solicitation after sealed bids have been opened.  
G.K.S. Inc., B-235208, Aug. 9, 1989, 89-2 CPD  para.  117 at 3.  An agency 
may properly cancel a solicitation no matter when the information 
precipitating the cancellation first surfaces or should have been 
known, even if the solicitation is not canceled until after offers 
have been submitted and evaluated.  Jack Faucett Assocs., supra.  
Cancellation of a solicitation is proper where award under the 
solicitation would not serve the government's actual needs.  
Constructive Solutions, Inc., B-278227, Jan. 9, 1998, 98-1 CPD  para.  9 at 
2; Waste Management Envtl. Servs., Inc., B-252553, July 12, 1993, 93-2 
CPD  para.  14 at 4-5.  It is the responsibility of the contracting activity 
to determine its requirements, and our Office will defer to the 
activity's judgment in that regard.  Peterson-Nunez Joint Venture, 
B-258788, Feb. 13, 1995, 95-1 CPD  para.  73 at 4.  Here, the agency has a 
reasonable basis to cancel the RFP because its actual needs require 
personal services which must be satisfied by hiring civil service 
employees.

A personal services contract is one that, by its express terms or as 
administered, makes the contractor personnel appear, in effect, 
government employees.  FAR  sec.  37.101, 37.104(a).  The government is 
normally required to obtain its employees by direct hire under 
competitive appointment or other procedures required by the civil 
service laws.  FAR  sec.  37.104(a).  Obtaining personal services by 
contract, rather than by direct hire, circumvents those laws unless 
Congress has specifically authorized acquisition of the services by 
contract.  Id.  Agencies may not award personal services contracts 
unless specifically authorized by statute to do so.  FAR  sec.  37.104(b).

Whether a solicitation would result in a personal services contract 
must be judged in the light of its particular circumstances, with the 
key question being whether the government will exercise relatively 
continuous supervision and control over the contractor personnel 
performing the contract.  FAR  sec.  31.104(c)(2); Information Ventures, 
Inc., B-241641, Feb. 14, 1991, 91-1 CPD  para.  173 at 4.  The following 
descriptive elements guide the assessment of whether a proposed 
contract is personal in nature:

     (1) Performance on site;
     (2) Principal tools and equipment furnished by the government;
     (3) Services are applied directly to the integral effort of 
     agencies or an organizational subpart in furtherance of assigned 
     function or mission;
     (4) Comparable services, meeting comparable needs, are performed 
     in the same or similar agencies using civil service personnel;
     (5) The need for the type of service provided can reasonably be 
     expected to last beyond 1 year;
     (6) The inherent nature of the service, or the manner in which it 
     is provided, reasonably requires directly or indirectly, 
     government direction or supervision of contractor employees in 
     order to--
        (i) Adequately protect the Government's interest;
        (ii) Retain control of the function involved; or
        (iii) Retain full personal responsibility for the function 
        supported in a duly authorized Federal officer or employee.

FAR  sec.  37.104(d).

CNCS's analysis of the services actually provided under the incumbent 
contract indicates that they constituted personal services.  Although 
the incumbent contract started off small and included temporary, 
short-term positions for a limited portion of the agency, CNCS's 
requirements quickly grew into requirements for permanent clerical and 
administrative positions throughout the agency.  Contracting Officer's 
Statement at 6-7.  The contractor's personnel in these positions 
worked at the agency's offices alongside CNCS employees performing the 
same or similar work and using CNCS's supplies and equipment.  Agency 
Report at 6-9.  CNCS managers supervised contractor personnel by 
directing, reviewing and approving their work.  Id.  CNCS managers 
interviewed and selected contractor personnel for assignment to 
positions, and routinely requested pay increases and promotions for 
contractor personnel.  Contracting Officer's Statement at 7.  The 
agency states that its managers now expect and require this level of 
supervision and control over contractor personnel in order to perform 
the functions of CNCS.  Id.  Moreover, the agency no longer needs 
temporary personnel for short-term positions; rather, the only purpose 
of this contract is to satisfy the agency's needs for full-time, 
permanent staff.  Id. at 7-8.  The record thus shows that CNCS 
requires continuous supervision and control over the personnel 
performing the work requirements under the RFP, and that contractor 
personnel have been, and would continue to be, in effect, government 
employees.  This is a requirement for personal services.  See FAR  sec.  
37.101, 37.104.

The protester has not directly challenged the reasonableness of the 
agency's stated requirement for personal services, but alleges that a 
contract awarded under this RFP could be administered so as not to be 
a personal services contract.  However, Encore provides no support to 
show that such administration would satisfy the agency's actual 
requirements for permanent clerical and administrative personnel to be 
directly supervised and controlled by CNCS employees.  Since the 
agency's actual needs require personal services, CNCS properly decided 
that it must satisfy its needs through employment of civil service 
personnel.[3]  Therefore, the contract contemplated by the RFP, if it 
did not provide personal services, would not satisfy the agency's 
requirements, and the cancellation of the RFP is reasonable.

The protest is denied.

Comptroller General
of the United States

1. The positions required under the RFP are secretary I, II, III and 
IV, general clerk III, legal assistant, accounting clerk III, 
switchboard operator/receptionist, key entry operator II, and project 
manager.  RFP amend. 2,  sec.  B.2, at 2-5.  The statement of work 
described the duties for all of these positions except project 
manager.  RFP  sec.  C.2, at 9-13.  The RFP did not identify the duties of 
the project manager.  Agency Report at 9. 

2. Alternative to the present protest, Encore requests reimbursement 
of its protest costs on the initial protest because of the agency's 
corrective action.  Comments at 7.  Our Bid Protest Regulations, 4 
C.F.R.  sec.  21.8(e) (1998), provide that where an agency takes corrective 
action in response to a protest, we may recommend that the agency pay 
protest costs, including attorneys' fees; however, we will make such a 
recommendation only where the agency unduly delays taking corrective 
action in the face of a clearly meritorious protest.  Jack Faucett 
Assocs.--Recon., Protest, and Costs, B-278961.2, B-278961.3, Apr. 17, 
1998, 98-1 CPD  para.  116 at 3.  Because our Regulations are designed to 
encourage agencies to take prompt corrective action where appropriate, 
as a general rule, if an agency takes corrective action by the due 
date of its protest report, we will regard such action as prompt and 
decline to consider a request to recommend reimbursement of protest 
costs.  Id.  Here, CNCS notified our Office prior to the report due 
date for the initial protest of the corrective action to be taken.  
(CNCS implemented and nearly completed that corrective action before 
the basis for cancellation became apparent.  Agency Report at 13-14.)  
Accordingly, we decline to recommend reimbursement of protest costs 
here.

3. In fact, CNCS has already began, and substantially completed, the 
hiring process for these employees.  Agency Report at 12, Contracting 
Officer's Statement at 6.