BNUMBER: B-281082
DATE: December 22, 1998
TITLE: Omni Corporation, B-281082, December 22, 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:Omni Corporation
File: B-281082
Date:December 22, 1998
Paul Shnitzer, Esq., Kenneth M. Bruntel, Esq., and Jeffrey E. Greene,
Esq., Crowell & Moring, for the protester.
Lynda Troutman O'Sullivan, Esq., and Benjamin D.M. Wood, Esq., Miller
& Chevalier, for Ferguson-Williams, Inc., an intervenor.
Matthew Keiser, Esq., and Charles A. Briggs, Esq., U.S. Army Corps of
Engineers, for the agency.
Ralph O. White, Esq., and Christine S. Melody, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
1. Protest that agency conducted misleading discussions and
improperly evaluated proposals during a competition to select the
private-sector proposal upon which to base a cost comparison pursuant
to Office of Management and Budget Circular No. A-76 is dismissed as
premature where the protester files its challenge prior to the
post-award debriefing offered by the agency at the conclusion of the
administrative appeal process resolving the successful private-sector
offeror's challenge to the agency's in-house cost estimate.
2. Agencies are required to provide offerors who participate in the
private-sector competition portion of the A-76 cost comparison
process--but are not selected for comparison with the in-house
offer--a debriefing on the results of the competition.
DECISION
Omni Corporation protests that the U.S. Army Corps of Engineers
treated Omni unfairly during the competition held pursuant to request
for proposals (RFP) No. DACW66-98-R-0003 for the operation and
maintenance of locks and dams on the Red River Waterway in Louisiana.
The RFP was used to select a private-sector offer for comparison to
the government's in-house cost estimate under Office of Management and
Budget (OMB) Circular No. A-76. Omni argues that, among other things,
the Corps misled it to increase its staffing (and thus its price) for
these services, while the government's in-house estimate used a lower
staffing level than Omni.
We dismiss the protest.
BACKGROUND
The RFP, issued December 29, 1997, contemplates award of a contract
for the operation and maintenance of five lock and dam facilities
located along a 236-mile stretch of the Red River from Shreveport,
Louisiana to the Red River's junction with the Old River. Three of
these lock and dam facilities are currently operated by the
government, while two have been operated by Omni since 1992. To
streamline operations along the river system, the Corps concluded that
either the government or a contractor should operate all five of the
locks and dams along this stretch of waterway.
The procedures for determining whether the government should perform
an activity in-house, or allow the activity to be performed by a
contractor, are set forth in OMB Circular No. A-76, and the Circular
No. A-76 Revised Supplemental Handbook (March 1996) (the "Supplemental
Handbook"). When an activity is considered appropriate for an
in-house versus private-sector cost comparison, the Supplemental
Handbook outlines the process. Supplemental Handbook, Chap. 3, sec. A.3.
Where a negotiated procurement approach is used, the cost comparison
process can be viewed as consisting of three basic steps: (1) a
competition among private-sector offerors, conducted much as any
federal procurement is conducted; (2) a comparison of the winning
private-sector offer with the in-house estimate to ensure that both
are based upon the same scope of work and performance levels--and if
they are not, to adjust the in-house estimate; and (3) a
straightforward cost comparison of the offers to determine which offer
will be most economical for the government. Id. sec. H, J; see NWT,
Inc.; PharmChem Labs., Inc., B-280988, B-280988.2, Dec. 17, 1998, 98-2
CPD para. ___ at 4-5. In addition, the Supplemental Handbook establishes
an A-76 administrative appeals process for parties seeking to
challenge the results of the cost comparison. Id. sec. K.
The RFP used here to conduct the competition among private-sector
offerors--the first step of the three-step process described
above--anticipates selection of the proposal which presents the best
value to the government. RFP sec. M.3. The RFP also contains the clause
found at Federal Acquisition Regulation (FAR) sec. 52.207-2, "Notice of
Cost Comparison (Negotiated)," which advises that the "solicitation is
part of a Government cost comparison to determine whether
accomplishing the specified work under contract or by Government
performance is more economical." RFP sec. L.3.
In response to the RFP, the agency received initial proposals from
four offerors, including Omni and Ferguson-Williams, Inc., the offeror
whose proposal ultimately was selected for comparison with the
in-house estimate. In the Corps's view, none of the initial proposals
was acceptable, and no proposal became acceptable until submission of
the third round of revised proposals. Before each call for revised
proposals, the Corps held discussions with the four offerors and
pointed out the perceived weaknesses and deficiencies in their
proposals. At the conclusion of the evaluation of the third round of
revised proposals, the source selection authority excluded Omni and
another offeror from further consideration, and selected
Ferguson-Williams as the best value offeror for the cost comparison
with the in-house estimate. Source Selection Decision, Aug. 19, 1998,
at 4-5.
By letter dated August 31, the Corps advised Omni that
Ferguson-Williams's proposal had been selected for comparison with the
in-house estimate, and that the Corps anticipated performing the cost
comparison that day. This letter also advised that Omni would be
notified of the final decision and given an opportunity to request a
debriefing in accordance with FAR sec. 15.506 (post-award debriefings) at
the end of the A-76 administrative appeals process.
By letter dated September 1, the Corps advised Omni that the cost
comparison had been completed, and that the initial decision was that
performance by in-house government personnel was more economical than
performance by Ferguson-Williams. In response, by letter dated
September 2, Omni stated that it considered the Corps's September 1
letter to be an award notice, and requested a post-award debriefing in
accordance with FAR sec. 15.506.
By letter dated September 3, the Corps answered that the September 1
decision was an initial decision, as opposed to a final decision; that
the letter advising of the decision was not an award notice; and that
Omni would be given an opportunity to request a debriefing in
accordance with FAR sec. 15.506 after completion of the A-76
administrative appeals process.
On September 8, Omni received information regarding the staffing
levels used by the Corps to prepare the in-house cost estimate, and
concluded that the Corps had conducted misleading discussions, without
which Omni's proposal might have been considered to have offered the
best value of the private-sector proposals. In response, Omni filed a
protest with our Office 10 days later, arguing that the competition
was flawed, and claiming, in essence, that Omni's proposal, not
Ferguson-Williams's, should have been selected for comparison with the
in-house estimate. On September 30, Ferguson-Williams filed a
challenge to the cost comparison under the A-76 administrative appeals
process.
DISCUSSION
Omni's protest raises two challenges to the conduct of discussions,
and two challenges to the evaluation of its proposal. With respect to
discussions, Omni protests that the Corps acted improperly by
repeatedly advising Omni that its proposal lacked sufficient personnel
to perform the services required here, when the Corps based its
estimate on [deleted]. Specifically, Omni complains that its initial
proposal offered to perform these services using [deleted] full-time
personnel, but in response to repeated agency admonitions during
discussions that Omni had not proposed sufficient staffing, Omni
increased its staffing to [deleted] full-time personnel--while the
Corps's proposal to perform this work was based on 33 full-time
personnel [deleted]. Omni also claims that during discussions the
Corps improperly induced Omni to add additional costs for tools to its
proposal, although Omni's initial proposed tool list was [deleted].
With respect to the evaluation, Omni argues that the Corps
misevaluated the qualifications of its proposed personnel, and wrongly
assigned a cost deficiency over a relatively trivial deviance in
Omni's proposed general and administrative rate in the fourth year of
performance.
In response to this protest, Ferguson-Williams requested that Omni's
challenge be dismissed for failure to exhaust its administrative
remedies. In this regard, Ferguson-Williams contends that Omni is, in
essence, challenging the agency's cost estimate, and was first
required to raise its challenge under the A-76 administrative appeals
process.
As an initial matter, we disagree with Ferguson-Williams's contention
that Omni's protest is a challenge to the agency's cost estimate.
With respect to the two evaluation challenges, Ferguson-Williams's
contention is wrong on its face. With respect to the two discussions
challenges, Omni is not arguing that the staffing levels (or the tool
list) used to prepare the cost estimate are incorrect. Rather, Omni
is accepting those levels, and claiming that the conduct of
discussions was improper given the Corps's own apparent belief that
the Corps could operate and maintain these five locks and dams in
accordance with the requirements of the solicitation with 33 full-time
personnel (and with a less extensive tool list). Thus, Omni is
contending that its proposal should have been evaluated as meeting the
requirements of the RFP, and that the Corps wrongly induced Omni to
increase its price by adding additional personnel and additional costs
for tools.
In addition, Ferguson-Williams is mistaken in its apparent belief that
Omni is required to pursue evaluation challenges like these under the
A-76 administrative appeals process. The Supplemental Handbook
expressly explains that the A-76 administrative appeal procedures do
not apply to questions concerning the selection of a contractor for
comparison with the government's cost estimate. Supplemental
Handbook, Chap. 3, sec. K.6.a. Rather, the administrative appeals
process is reserved for questions regarding the agency's compliance
with the rules of the A-76 process, decisions to waive a cost
comparison, or costs used to perform the comparison. Id. sec. K.1.c.
See also FAR sec. 7.307 ("the appeals procedure shall be used only to
resolve questions concerning the calculation of the cost comparison
and shall not apply to questions concerning selection of one
contractor in preference to another, which shall be treated as
prescribed in Subpart 33.1, Protests").
Thus, we conclude that our Office is the appropriate place for Omni to
pursue its challenge to the private-sector competition portion of the
A-76 process; however, we also conclude that the protest is premature
at this juncture.
The Supplemental Handbook describes the initial comparison of a
selected offeror's price with the in-house estimate--the third step in
the three-step process described above--as a tentative decision.
Supplemental Handbook, supra, sec. J.1, K.1, K.1.b, K.2.b, K.5. The
Handbook explains that the decision rendered by the appeal authority
is the final decision. Id. sec. K.8. Consistent with this scheme, when
Omni asked on September 2 for a post-award debriefing pursuant to FAR sec.
15.506, the Corps advised Omni that the September 1 cost comparison
decision was an initial decision, and that Omni would be given an
opportunity to receive a post-award debriefing after completion of the
A-76 administrative appeals process. Letter from Memphis District,
Army Corps of Engineers, to Omni (Sept. 3, 1998).
We agree with the Corps's view that offerors who participate in the
private-sector competition portion of the A-76 process, but are not
selected for comparison with the in-house offer, should be given a
debriefing on the results of the competition, and the reasons the
unsuccessful offeror was not selected. Such offerors, who are
competing for a contract conducted pursuant to the FAR, see
Supplemental Handbook, supra, sec. G(3), H(1), have been "excluded from
the competition before award" and therefore "may request a debriefing
before award." FAR sec. 15.505. See 10 U.S.C. sec. 2305(b)(6)(A) (Supp. II
1996). The contracting officer may delay the debriefing, but not
later than the time for post-award debriefings. FAR sec. 15.505(b).
While there is no award at the conclusion of the private-sector
competition (and, if the government's in-house offer is selected,
there will technically be no award in the procurement at all), we find
reasonable the Corps's interpretation of the Supplemental Handbook
equating the final decision--after the completion of any challenge to
the cost comparison by the appeal authority--with an "award" decision,
and the Corps's view that this decision is the appropriate trigger for
a post-award debriefing.[1] On the other hand, we recognize that, in
some sense, both the selection of the winner in the private-sector
competition and the initial selection in favor of the in-house offer
could be viewed as "award" decisions. For that reason, we believe
that, if the Corps had decided to provide the debriefing at any point
after completion of the private-sector competition, Omni's debriefing
could have been treated, in terms of content, as a post-award
debriefing, see FAR sec. 15.506(d), rather than as a pre-award one. See
FAR sec. 15.505(f) (prohibiting disclosure at a pre-award debriefing of,
for example, the number of offerors).
In terms of our process, where, as here, an offeror has been
eliminated from consideration in an A-76 competition and a debriefing
has been properly requested (i.e., timely and in writing), a protest
filed before the debriefing (even if the protest basis was known
before the debriefing) will be dismissed as premature, and should be
filed not later than 10 days after the date on which the debriefing is
held. See 4 C.F.R. sec. 21.2(a)(2) (1998); cf. The Real Estate Ctr.,
B-274081, Aug. 20, 1996, 96-2 CPD para. 74 at 2 (same, in context of
protest filed after award, but before required debriefing).
The protest is dismissed.
Comptroller General
of the United States
1. Omni's protest illustrates the unique uncertainties surrounding an
A-76 challenge that could cause an agency to reasonably decline to
provide a debriefing until the administrative appeals process is
completed. For Omni to prevail in its challenge, it must demonstrate
not only that the agency failed to follow established procedures, but
also that it was prejudiced in that the failure could have materially
affected the outcome of the cost comparison. Tecom, Inc., B-253740.3,
July 7, 1994, 94-2 CPD para. 11 at 3. Here, Omni could not establish
prejudice at the time it filed its protest because even if its
challenge were upheld--and its proposal considered without the changes
Omni made in response to the allegedly misleading discussions--Omni's
initial proposed price was higher than the in-house estimate, as
calculated at that time.
However, during the course of this protest, the administrative appeals
decision upheld portions of Ferguson-Williams's challenge, and
increased the amount of the in-house estimate. The appeal decision is
currently under review by the Corps, and is also the subject of a
protest to our Office by Ferguson-Williams, which argues that other
elements of the in-house estimate should be increased as well. Thus,
even at this juncture, the final amount of the in-house estimate--and
the extent of Omni's prejudice--is subject to change. Further, the
administrative appeals decision suggested, as an alternative to
increasing the in-house estimate in certain areas, that the Corps
consider whether the RFP should be amended to delete certain
requirements, a step which would have great impact on Omni as it would
require reopening the competition among the private-sector offerors.