BNUMBER:  B-278962 
DATE:  April 17, 1998
TITLE: Madison Services, Inc., B-278962, April 17, 1998
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Matter of:Madison Services, Inc.

File:     B-278962

Date:April 17, 1998

Christopher Solop, Esq., and Lynn Hawkins Patton, Esq., Ott & Purdy, 
for the protester.
Christopher M. Bellomy, Esq., George N. Brezna, Esq., and Patrick J. 
Coll, Esq., Department of the Navy, for the agency.
Jeanne W. Isrin, Esq., David A. Ashen, Esq., and John M. Melody, Esq., 
Office of the General Counsel, GAO, participated in the preparation of 
the decision.

DIGEST

Protest that solicitation provision for variable option periods of 1 
to 12 months is unduly restrictive of competition is denied where the 
record indicates that the agency needs the flexibility to extend the 
contract by periods of 1 to 12 months in order to ensure the continual 
provision of maintenance for family housing developments in the face 
of changing circumstances and requirements.

DECISION

Madison Services, Inc. protests the terms of request for proposals 
(RFP) No. N00187-95-R-6050, issued by the Naval Facilities Engineering 
Command (NAVFAC), for maintenance of family housing developments in 
the Tidewater region of Virginia.  The protester alleges that the 
specified provisions either are ambiguous, unduly restrictive of 
competition, or otherwise violate the Federal Acquisition Regulation 
(FAR).

We deny the protest.

The RFP contemplates award of a fixed-price, 
indefinite-delivery/indefinite-quantity contract to the offeror whose 
offer represents the best value to the government, price and other 
factors considered.  The solicitation provides for a contract term 
with a base period of 12 months and the option to extend the term up 
to a total duration of 60 months.  Specifically, the solicitation 
included NAVFAC standard clause 5252.217-9301, "OPTION TO EXTEND THE 
TERM OF THE CONTRACT - SERVICES (JUN 1994)," amended to establish the 
60-month overall term, which provides in relevant part that:
     a.  The Government may extend the term of this contract for a 
     term of one (1) to twelve (12) months by written notice to the 
     Contractor within the performance period specified in the 
     Schedule; provided that the Government shall give the Contractor 
     a preliminary written notice of its intent to extend before the 
     contract expires.  The preliminary notice does not commit the 
     Government to an extension.

Madison objects that the provision for variable option periods of 1 to 
12 months unduly restricts competition because (1) without definite 
option periods, small businesses like Madison will have to load all 
indirect costs into the base year, hence making their prices 
noncompetitive with large businesses that perform numerous other 
government contracts and can spread their overhead costs over a 
greater pool of work; and (2) brief, unpredictable performance periods 
have a greater effect on small businesses, which are less likely to be 
able to hire and retain a dedicated workforce under conditions of 
continual job instability.

In preparing a solicitation for supplies or services, a contracting 
agency must specify its needs and solicit offers in a manner designed 
to achieve full and open competition, and include restrictive 
provisions only to the extent necessary to satisfy the agency's needs.  
10 U.S.C.  sec.  2305(a)(1)(A)(i), B(ii) (1994); Mortara Instrument, Inc., 
B-272461, Oct. 18, 1996, 96-2 CPD  para.  212 at 6.  The contracting agency, 
which is most familiar with its needs and how best to fulfill them, 
must make the determination as to what its needs are in the first 
instance, and we will not question that determination unless it has no 
reasonable basis.  Innovative Refrigeration Concepts, B-272370, Sept. 
30, 1996, 96-2 CPD  para.  127 at 3.

The provision here for variable option periods is unobjectionable.  
Nothing in the FAR prohibits variable option periods nor requires that 
an option period be more than a month in duration.  Nor do we think 
that the provision for variable option periods exceeds the agency's 
needs or unduly restricts competition.  In this regard, the agency 
explains that it needs the flexibility to extend the contract by 
periods of 1 to 12 months in order to ensure the continual provision 
of maintenance for family housing developments in the face of changing 
circumstances and requirements.  To cite one example of many set forth 
by the agency, with respect to the existing procurement, due to a Navy 
initiative to regionalize housing maintenance services, services for 
two additional family housing developments were added to the 
procurement.  One of the additional developments had in place a 
contract for maintenance services which contained clause 
5252.217-9301; in order to provide for continual services at that 
development, and yet have the contract terminate at the anticipated 
start of the contract for the subject procurement, contracting 
officials extended that contract for a period of 6 months, pursuant to 
the clause.  We find the agency's justification as to why it needs the 
variable option periods here to be reasonable.

The fact that the variable option period provision imposes some risk 
on the contractor does not demonstrate that it exceeds the agency's 
needs or that it is an undue risk precluding the use of an option.  
FAR  sec.  17.202(c)(1).  We note that an agency is not prohibited from 
soliciting offers based upon a proposed contract imposing substantial 
risk upon the contractor and minimum administrative burdens upon the 
agency.  J & J Maintenance, Inc., B-244366, Oct. 15, 1991, 91-2 CPD  para.  
333 at 2-3 (requirement that option period prices be the same as base 
year prices).  As risk inheres in any contract, offerors are expected 
to use their professional expertise and business judgment in 
anticipating a variety of influences affecting performance costs.  Id.  
In particular, to the extent that Madison is relying on the agency's 
exercise of options in pricing its proposal, we note that options are 
generally exercisable at the sole discretion of the government, and a 
contractor thus has no legal right whatsoever to compel the government 
to exercise an option.  Wayne D. Josephson, B-256243, May 12, 1994, 
94-1 CPD  para.  307 at 5; Digital Sys. Group, Inc.--Recon., B-252080.2, 
Mar. 12, 1993, 93-1 CPD  para.  228 at 2.  Furthermore, even if the 
procurement structure or requirements, in fact, placed Madison at a 
competitive disadvantage, this alone does not render them 
unreasonable, since in seeking full and open competition, an agency is 
not required to construct its procurements in a manner that 
neutralizes competitive advantages that some firms may have over 
others by virtue of their own particular circumstances, where the 
advantages did not result from government action.  Mortara Instrument, 
Inc., supra; International Tech. Corp., B-233742.2, May 24, 1989, 89-1 
CPD  para.  497 at 9.

Madison also challenges solicitation provisions with respect to the 
evaluation of offerors' financial stability, one of the five stated 
evaluation factors.  In this regard, the solicitation requires 
offerors to "demonstrate their ability to sustain their financial 
obligations during the first 90 days of this contract" and requires 
them to furnish:  (1) a business credit report, no older than 1 year, 
from a credit reporting agency; (2) a letter from a financial 
institution showing the offeror's available line of credit; and (3) 
audited income/financial statements with notes for the last 2 years.  

Madison argues that the requirement for audited financial statements 
is unduly restrictive because audited statements are expensive and 
typically acquired only by large businesses, and statements which are 
simply "reviewed" by accountants are adequate evidence of an offeror's 
financial capability.  Agencies, however, enjoy broad discretion in 
the selection of evaluation criteria, and we will not object to the 
use of particular evaluation criteria or an evaluation scheme so long 
as they reasonably relate to the agency's needs in choosing a 
contractor that will best serve the government's interests.  Leon D. 
DeMatteis Constr. Corp., B-276877, July 30, 1997, 97-2 CPD  para.  36 at 
3-4.  

Here, the agency reports that since the contractor will be required to 
mobilize, maintain, and pay a workforce that is adequate to maintain 
three separate family housing projects, but the workload can vary 
significantly and payment for work performed can take as long as 60 to 
90 days, the contractor's financial capability will directly affect 
its ability to perform.  In order to evaluate proposals accurately in 
this area, it is reasonable for an agency to require trustworthy and 
accurate financial data on each offeror.  Audited financial statements 
generally disclose a firm's actual financial position and operations, 
Zeiders Enters., Inc., B-251628, Apr. 2, 1993, 93-1 CPD  para.  291 at 5 
n.4, and the cost or burden of obtaining them does not preclude an 
agency from requiring them to evaluate financial strength.  See Allied 
Prod. Management Co., Inc., B-236227.2, Dec. 11, 1989, 89-2 CPD  para.  534 
at 4 (not improper to require audited financial statements from 
proposed individual sureties); Consolidated Indus. Skills Corp., 
B-236239.2, Oct. 6, 1989, 89-2 CPD  para.  328 at 3 (not improper to require 
audited financial statements from proposed individual sureties).  Nor 
do we find merit to Madison's argument that the solicitation provision 
with respect to the line of credit requirement is ambiguous because it 
does not state whether it has to be irrevocable.  As noted by the 
agency, nothing in the wording of the requirement indicates that the 
line of credit must be irrevocable; hence, by implication, it may be 
revocable.[1]

The protest is denied.

Comptroller General
of the United States

1. Although Madison in its protest challenged additional provisions of 
the solicitation, the agency responded in its report to these 
arguments, and the protester in its comments simply stated that it 
"waives none of its bases for protest."  Since Madison has failed to 
substantively rebut the agency's facially reasonable position on these 
issues, we view them as abandoned and will not consider them.   See 
LSS Leasing Corp., B-259551, Apr. 3, 1995, 95-1 CPD  para.  179 at 5 n.6.