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.