BNUMBER:  B-280430 
DATE:  September 1, 1998
TITLE: SDS Petroleum Products, Inc., B-280430, September 1, 1998
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DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective 
Order.  This redacted version has been approved for public release.

Matter of:SDS Petroleum Products, Inc.

File:B-280430

Date:September 1, 1998

Sandy A. Roberts, Esq., for the protester. 
Phillipa L. Anderson, Esq., Dennis Foley, Esq., and Philip Kauffman, 
Esq., Department of Veterans Affairs; David R. Kohler, Esq., and 
Denise Benjamin-Bibby, Esq., Small Business Administration, for the 
agencies. 
Andrew T. Pogany, Esq., and John M. Melody, Esq., Office of the 
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Exclusion of protester's proposal from competitive range was not 
improper where agency reasonably concluded that the proposal failed to 
demonstrate the ability to purchase and transport natural gas at 
certain rates and terms, as required by the solicitation.

DECISION

SDS Petroleum Products, Inc. protests the exclusion of its proposal 
from the competitive range, and the subsequent award of a contract to 
Tiger Natural Gas, Inc., under request for proposals (RFP) No. 
693-16-98, issued as a competitive section 8(a) set-aside by the 
Department of Veterans Affairs for the supply and delivery of natural 
gas to 91 facilities nationwide.

We deny the protest.

On February 3, 1998, the contracting officer prepared and furnished to 
the Small Business Administration (SBA) an offering letter in which he 
determined that adequate competition existed among 8(a) contractors to 
set aside this national procurement for the 8(a) program.  Previously, 
the agency had procured its gas supplies through four regional 
contracts by means of unrestricted procurements.  By letter dated 
February 4, the SBA accepted the offer for a competitive 8(a) 
procurement.

The RFP was issued on February 24 and, as amended, contemplated award 
of an indefinite-delivery, indefinite-quantity (ID/IQ) contract for a 
base period of 1 year, with four 1-year options.  The RFP stated that, 
following competitive negotiations, award would be made to the offeror 
whose proposal conformed to the solicitation requirements and was most 
advantageous to the government, price and other factors considered.  
Section M of the RFP contained the following evaluation factors, 
listed in descending order of importance:  (1) past performance from 
January 1, 1995 to present; (2) evidence of ability to purchase (a) 
natural gas and transportation below the Inside FERC (Federal Energy 
Regulatory Commission) index[1] price and (b) natural gas 
transportation below tariff rate; (3) quality; and (4) price.[2] 

Seven proposals were received by the May 11 closing time.  The 
evaluators initially found that SDS's proposal was technically 
deficient because it contained no past performance delivery 
information and failed to show an ability to procure natural gas below 
the index price or natural gas transportation below the tariff rate.  
SDS's proposal received 35 of the 90 available technical points (price 
was worth 10 points), and under the index factor, only 3 of 30 
possible points.  In contrast, Tiger's proposal was found to contain 
detailed and extensive documentary evidence of its ability to procure 
gas below the index price and transportation below the tariff rate.  
Tiger's proposal received all 90 available technical points.  (The 
other proposals scored very low technically and are not relevant 
here.)

Despite the serious technical deficiencies in its proposal, SDS's 
proposal was retained in the competitive range for purposes of 
discussions.  By letter dated    May 18, the contracting officer 
advised SDS that its proposal was deficient under the past performance 
and index factors.  Revised proposals were due on May 26.  In the 
meantime, on May 21, amendment No. 7 was issued, making certain 
changes to RFP sections C, G, and H, and clarifying the minimum and 
maximum order quantities.

On May 23, SDS submitted additional information in a revised technical 
proposal, specifically, two signed natural gas contracts containing 
prices below-index price and letters purportedly demonstrating its 
ability to obtain below-tariff rate transportation under similar 
contracts.  On May 28, the evaluators reviewed the revised proposal.  
SDS's score for the past performance factor increased from 12 to 32 
(out of 40 possible points).  However, its score for the index factor 
was unchanged, the evaluators concluding that, although SDS had 
submitted additional information in this area, it was not sufficient 
to establish the ability to obtain gas and gas transportation prices 
below the index price and tariff rate.  The results of the evaluation 
of Tiger's and SDS's revised proposals were as follows:

       Offeror  Technical ScorePrice for Base Load Gas

       Tiger    90             $6.6 million

       SDS      55             [DELETED] million 
Based on these results--SDS's proposal's technical score still was 
considered extremely low and it was the highest-priced--the 
contracting officer determined that SDS had no reasonable chance for 
award.  Consequently, by letter dated June 1, the contracting officer 
advised SDS that its proposal no longer was in the competitive range.  
The contracting officer determined that Tiger was the only offeror 
whose proposal was within the competitive range, provided only that 
firm the opportunity to submit a best and final offer (BAFO), 
evaluated the BAFO, and made award to Tiger.  This protest followed a 
debriefing provided to SDS by the agency.

Noting that the RFP did not specify that a certain amount of evidence 
was required to meet the index factor requirements, SDS asserts that 
its revised proposal included adequate evidence of its ability to 
purchase natural gas below the index price and transportation below 
the tariff rate.  SDS concludes that, had its proposal been evaluated 
properly, the proposal would have been retained in the competitive 
range, and it would have had the opportunity to submit a BAFO.[3]

In reviewing competitive range determinations, our Office will not 
independently reevaluate proposals; rather, we will examine the record 
to ensure that the evaluation was reasonable and in accordance with 
the solicitation's evaluation criteria.  Cobra Techs., Inc., B-272041, 
B-272041.2, Aug. 20, 1996, 96-2 CPD  para.  73 at 3.

Here, the evaluation and the agency's decision to exclude SDS's 
proposal from the competitive range were reasonable.  The index factor 
was intended to indicate whether an offeror would be able to obtain 
and transport natural gas at favorable prices, which would result in 
savings to the government.  As discussed, SDS initially provided no 
evidence supporting its ability to obtain such favorable prices.  In 
its revised proposal, SDS submitted as evidence two gas purchase 
contracts, one dated 1995 and one dated 1998.  Agency Report (AR), Tab 
19.  The agency determined that two contracts, one from 3 years ago, 
were not sufficient to clearly establish an ability to obtain 
favorable pricing on a large-scale basis (the contract here would 
cover 91 installations).  Further, while these contracts established 
prices of [DELETED] and [DELETED] below the index price, the agency 
noted that they did not specify an actual price, and SDS did not 
provide other evidence of the actual prices paid under the contracts.  
In contrast, Tiger submitted evidence of hundreds of actual prices 
below the index prices, for delivery of natural gas at numerous points 
nationwide.  The rationale underlying the agency's position is a 
reasonable one--if a firm's ability to obtain discounted natural gas 
prices on a large-scale, continuing basis is to be demonstrated 
through prior contracts, then the firm must present substantial 
numbers of contracts with clear evidence of the prices paid.  We find 
the agency reasonably determined that two contracts, with no evidence 
of the prices actually paid, were insufficient to evidence an ongoing 
ability to obtain discounted natural gas on a large-scale basis.

As evidence of its ability to purchase gas transportation below the 
tariff rate, SDS submitted an "example" purportedly showing an 
"approximate" discount from the tariff rate, along with a commercially 
available sample gas transportation report.  AR, Tab 19.  SDS also 
submitted letters from six vendors that would sell gas and/or 
transportation for the contract, but these letters did not specify a 
price or state which pipelines would be used.  Three of the letters 
indicated generally that discounted prices are available--but did not 
detail the terms or state whether SDS would be eligible for such 
discounts--and three of the letters merely referenced the tariff, with 
no indication that discounts would be available.  In its comments on 
the agency report, the protester ignores these weaknesses in its 
submitted information, and does not attempt to explain how its 
submissions adequately met the solicitation requirements; rather, the 
comments are general and merely express disagreement with the agency's 
determination.  Again, we think the agency reasonably concluded that 
the evidence provided--an example showing only an approximate 
discount, and letters from suppliers with no evidence that discounted 
transportation would be obtained--while perhaps relevant to SDS's 
ability to obtain below-tariff rate transportation, simply was 
inadequate to establish an ability to obtain discounted prices in 
performing the contract.

SDS seems to argue that, no matter how low its proposal's evaluation 
rating relative to Tiger's, the agency was required to retain its 
proposal in the competitive range since it was the second-highest 
rated.  We find no merit in this argument, which is apparently based 
on the recent rewrite of Part 15 of the Federal Acquisition Regulation 
(FAR) that changed the language governing competitive range 
determinations.  The earlier language, FAR  sec.  15.609(a) (June 1997), 
stated that the competitive range "shall include all proposals that 
have a reasonable chance of being selected for award" and that "[w]hen 
there is doubt as to whether a proposal is in the competitive range, 
the proposal should be included."  The current language, which governs 
this procurement, states, "Based on the ratings of each proposal 
against all evaluation criteria, the contracting officer shall 
establish a competitive range comprised of all of the most highly 
rated proposals, unless the range is further reduced for purposes of 
efficiency pursuant to paragraph (c)(2) of this section."[4]  FAR  sec.  
15.306(c)(1) (FAC 97-02).  We do not read the revised language to 
require agencies to retain in the competitive range a proposal that 
the agency reasonably concludes has no realistic prospect of award, 
even if that proposal is, as here, the second-highest rated proposal.

The explanatory preamble published at the time the final version of 
the FAR Part 15 rewrite was issued makes clear that the intent of the 
revised language was to permit a competitive range more limited than 
under the prior "reasonable chance of being selected for award" 
standard.  That preamble states that the drafters had elected to 
require contracting officers to retain in the competitive range "only" 
the most highly rated offers rather than include in that range the 
potentially broader range of proposals that could be viewed as having 
a reasonable chance of award.  62 Fed. Reg. 51,224, 51,226 (1997).  
Specifically, the preamble stated that the new language would 
"ensure[] that offerors with little probability of success . . . are 
advised early on that their competitive position does not merit 
additional expense in a largely futile attempt to secure the 
contract."  Id.

Accordingly, we conclude that the Part 15 rewrite does not require 
that agencies retain in the competitive range a proposal that is 
determined to have no reasonable prospect of award simply to avoid a 
competitive range of one.  We have long held that there is nothing 
inherently improper in a competitive range of one, Cobra Techs., Inc., 
supra, at 3, and we do not view the Part 15 rewrite as effecting a 
change in that regard; conducting discussions and requesting BAFOs 
from an offeror with no reasonable chance of award would benefit 
neither the offeror nor the government.  See 62 Fed. Reg. 51,226 
(retaining marginal offers in competitive range imposes additional and 
largely futile effort and cost on government and industry).

SDS also argues that amendment No. 7, issued May 21, 5 days before 
revised proposals were due, on May 26, made such substantial changes 
to the solicitation that cancellation of the RFP and resolicitation 
were required.  In procurements where proposals are requested, alleged 
improprieties which do not exist in the initial solicitation but which 
are subsequently incorporated into the solicitation must be protested 
not later than the next closing time for receipt of proposals 
following the incorporation.  4 C.F.R.  sec.  21.2(a)(1).  If SDS believed 
that the changes made by amendment No. 7 were improper or required 
resolicitation, it was required to protest on this ground prior to the 
next closing date, May 26.  As SDS did not do so, its protest on this 
basis is untimely and will not be considered.[5]

Finally, SDS argues that the agency failed to provide critical 
information in its letter offering this requirement for the 8(a) 
program, which prevented SBA from determining that the placement of 
the procurement in the 8(a) program would have an adverse impact on 
other small business programs or on other individual small businesses, 
such as the incumbent.  Since SDS is an 8(a) firm and the procurement 
was set aside under the competitive 8(a) program, SDS could not have 
been competitively prejudiced by any improper action related to the 
decision to accept this procurement in the 8(a) program, and is not an 
interested party to raise this issue on behalf of non-8(a) small 
business firms.  Stated differently, a protester is not an interested 
party to raise issues affecting other firms in which the protester has 
no direct economic interest.  4 C.F.R.  sec.  21.0(a); see XMCO, Inc., 
B-228357, Jan. 26, 1988, 88-1 CPD  para.  75 at 5.

The protest is denied.

Comptroller General
of the United States

1. Inside FERC is a publication that contains the market prices for 
natural gas for delivery to specific geographical areas.  In this 
decision, all references to the index refer to the Inside FERC index.

2. Price, the least important factor, consisted of a base load gas 
(based on fixed unit prices proposed by offerors) of 2.0 million MMBTU 
(equivalent to 1,000,000 BTU) and an ID/IQ portion of 9.4 million 
MMBTU based on index-priced gas.  Thus, according to the agency, 
approximately 82 percent of the natural gas prices would be affected 
by a firm's ability to purchase gas at below-index rates.  Contracting 
Officer's Statement at 2.  The calculation of savings to the 
government from a below-index purchase was based on a formula 
contained in RFP  sec.  C.

3. In its comments on the agency report, SDS asserts for the first 
time that (1) in assigning Tiger's proposal the maximum score under 
the index factor, the agency improperly considered basic ordering 
agreements--which are not contracts--as evidence of Tiger's ability to 
purchase natural gas below the index price; and (2) the index factor 
should have been evaluated as a price factor rather than a technical 
factor.  SDS was aware of these bases of protest, at the latest, upon 
its receipt of the agency report, yet it did not assert these bases of 
protest within 10 calendar days after its receipt of the report.  In 
this regard, SDS's comments were not received within the normal 
10-calendar-day period, see 4 C.F.R.  sec.  21.3(i) (1998), due to our 
granting an extension request by SDS.  Since a time extension for 
purposes of filing comments does not waive the timeliness rules with 
regard to new grounds of protest, Anchorage Enters., Inc., B-261922, 
Nov. 7, 1995, 95-2 CPD  para.  211 at 3 n.2, we dismiss these bases of 
protest as untimely.

4. Because the ratings are to reflect assessment against "all 
evaluation criteria" and cost (or price) must always be one of those 
criteria, 41 U.S.C.  sec.  253a(c)(1)(B) 
(West Supp. 1998), FAR  sec.  15.304(c)(1) (FAC 97-02), the assessment of 
which are the "most highly rated proposals" must reflect cost (or 
price) as well as other evaluation criteria.

5. The protester also argues that, even if the evidence it furnished 
was deemed inadequate, it still should have received award of the 
fixed-price, base load gas portion of the contract.  However, the RFP 
required a single award and, in any event, the protester's price was 
not low for the base load gas quantity.