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.