TITLE:  	Chemonics International, Inc., B-282555, July 23, 1999
BNUMBER:  B-282555
DATE:  July 23, 1999
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Chemonics International, Inc., B-282555, July 23, 1999

Decision

Matter of: Chemonics International, Inc.

File: B-282555

Date: July 23, 1999

Robert A. Mangrum, Esq., and Jason I. Hewitt, Esq., Winston & Strawn, for
the protester.

Kenneth A. Martin, Esq., and Jennifer C. Adams, Esq., Martin & Rylander, for
Planning and Development Collaborative International, Inc., an intervenor.

Gary Winter, Esq., and A. Lindsey Crawford, Esq., Agency for International
Development, for the agency.

Glenn G. Wolcott, Esq., and Paul Lieberman, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Where protester and awardee initially proposed comparable levels of effort
for a particular category of key personnel and, during discussions, the
agency provided awardee, but not protester, with detailed advice regarding
the importance of increasing the proposed levels of effort for those
personnel, and also provided only the awardee the opportunity to submit
multiple iterations of its proposal and to receive detailed agency feedback
on each iteration, the agency's conduct improperly favored one offeror over
another.

DECISION

Chemonics International, Inc. protests the U.S. Agency for International
Development's (USAID) award of a contract to Planning and Development
Collaborative International, Inc. (PADCO) under request for proposals (RFP)
No. 263-98-P-011 to assist recently formed water/wastewater utilities in
providing water and wastewater services in Egypt. Chemonics asserts that the
agency conducted discussions in a manner which unreasonably favored PADCO,
applied unstated evaluation criteria, and awarded the contract on the basis
of PADCO's proposal which failed to comply with material RFP requirements.

We sustain the protest.

BACKGROUND

The objective of the protested procurement is to increase access to
sustainable water and wastewater services for the 7.5 million people in the
Egyptian governorates of Fayoum, Beni Suef and Minia, through technical
assistance aimed at strengthening the institutional capabilities of the
recently-formed water/wastewater organizations in those areas. Specifically,
performance of the contract is intended to: increase revenues to recover
operation and management costs; enhance autonomy in managing utility assets;
and expand capacity to deliver services. RFP at 2, 11.

The RFP, issued on March 15, 1998, contemplated the award of a
cost-plus-award-fee contract for a 60-month period. As amended, the RFP
established a May 17 closing date for the submission of initial proposals.

The solicitation identified three phases of contract performance, listed
specific tasks to be performed, and requested that each offeror describe its
proposed technical approach. [1] With regard to personnel, the RFP stated:

USAID will not dictate in the RFP the number and composition of specialists
to be fielded, but will be interested in soliciting creative proposals for
carrying out the scope of work, including proposals regarding the
appropriate mix of specialists, schedule for deploying different members of
the team, and strategy for establishing field offices.

RFP at 38.

Although the RFP did not establish required personnel levels, the RFP did
establish certain minimum requirements applicable to various categories of
personnel that the agency anticipated offerors would propose. Under the
heading "Key Expatriate Positions," the RFP required that the person
proposed to serve as "Chief of Party" [2] must have "extensive overseas
management experience," more specifically stating that "10 years experience
in utility management and/or operations, with 5 years in a supervisory
capacity . . . is required." Id. Regarding other key expatriate personnel
proposed, the RFP provided, among other things, that "[a] minimum of BSc.
[Bachelor of Science] level degrees are required." Id.

Section M of the RFP provided that evaluation of an offeror's "Chief of
Party" and "Other Expatriate Staff" would account for 30 of a possible 100
technical points. [3] RFP at 133-34. Offerors were advised that "technical
proposal merits are considered significantly more important than cost," but
cost was not assigned a numerical weighting. RFP at 132.

Four proposals, including those of Chemonics and PADCO, were submitted by
the May 17, 1998, closing date. These proposals were evaluated by a
technical evaluation committee (TEC) which assigned the following scores:
 Offeror      Technical Score

 Chemonics    [deleted]

 PADCO        [deleted]

 Offeror A    [deleted]

 Offeror B    [deleted]

TEC Memorandum, July 8, 1998, at 1.

Chemonics' initial proposed cost was [deleted]; PADCO's initial proposal
proposed cost was [deleted]. The agency's independent cost estimate was
approximately [deleted].

Based on the evaluation of initial proposals, the contracting officer
determined that Chemonics' and PADCO's proposals were the most highly rated
and established a competitive range consisting of only those two proposals.
By letters to each offeror dated July 9, the contracting officer advised
Chemonics and PADCO of their inclusion in the competitive range, requested
that each plan to participate in oral discussions with agency personnel in
mid-August, and identified certain concerns regarding their technical
proposals. [4]

By letters to the agency dated July 23 and July 29, respectively, Chemonics
and PADCO each responded by advising the agency that it was preparing for
the mid-August oral discussions. With their responses, each offeror also
provided written responses to the questions and concerns the agency had
raised.

Thereafter, the agency conducted oral discussions with Chemonics on August
23 and with PADCO on August 26. However, prior to these discussions, the
agency sent PADCO another letter, dated August 18, advising PADCO that the
agency was "having difficulty determining [deleted]." Letter from
Contracting Specialist to PADCO (Aug. 18, 1998). That letter specifically
requested that PADCO "construct two new [cost] tables," and gave explicit
instructions as to how each table should be composed and what information
each table should contain." [5] No similar letter was sent to Chemonics, and
the agency's written questions concerning cost issues were not presented to
Chemonics until after oral discussions, at which time additional cost
questions were also presented to PADCO.

Following oral discussions, the TEC summarized its evaluation of the
offerors' proposals in a memorandum dated August 30. In this memorandum, the
TEC recommended that the agency "proceed with cost negotiations only with
Chemonics," noting general approval of Chemonics' proposal. [6] In contrast,
the TEC was highly critical of PADCO's proposal--specifically regarding the
level of effort PADCO proposed for key expatriate personnel--stating:

PADCO's [deleted] indicated to us that we do not share a common
understanding of the best approach to prepare these utilities for USAID's
proposed [deleted] construction program. [Deleted.] We found their answers
to questions regarding their [deleted] unconvincing and unclear, suggesting
that they did not have a well-defined technical basis for their cost
proposal.

Memorandum from TEC to Contracting Officer at 1 (Aug. 30, 1998).

The contracting officer rejected the TEC's recommendation to proceed with
cost negotiations only with Chemonics, determining instead to conduct
further discussions with both offerors. In a letter to PADCO dated October
14, the contracting officer provided PADCO with a detailed summary of the
agency's concerns, specifically focusing on the [deleted] PADCO had proposed
for its [deleted]. The October 14 letter explicitly set forth the agency's
concerns that PADCO had proposed its [deleted] stating:

It is strongly suggested that PADCO have an expatriate Chief of Party (COP)
for the full duration of the contract as COP presence is needed for the full
range of contract phase-down and close-out activities. [Deleted.] The Deputy
Chief of Party may be proposed for a shorter period of time than 60 [person
months] but 3 years is not acceptable. Note that 60 [person months] is
preferred by the TEC. Again, this person should be an expatriate or an
individual fully authorized to represent PADCO's interests in all aspects of
contractor performance.

The TEC feels that the O&M [Operations and Maintenance] Advisor and the
Metering Advisor are the backbone of the program and that the contractor
should propose expats for the full term of the contract. This is an
institutional building program and full time expat advisors are highly
desired by the TEC.

. . . . .

PADCO is requested to fully respond to the above in writing within 7 working
days of receipt of this letter.

Letter from Contracting Officer to PADCO at 1 (Oct. 14, 1998).

The contracting officer also prepared a discussion letter to Chemonics dated
October 15. Although the TEC's August 30 memorandum indicated general
approval of Chemonics' proposal, the record shows that Chemonics' proposed
levels of effort for its key expatriate personnel were comparable to
PADCO's. Specifically, Chemonics proposed a Deputy Chief of Party for
[deleted], and that Chemonics proposed only [deleted] to perform the O&M
advisor and metering advisor functions (compared to PADCO's [deleted]). In
this regard, the agency would subsequently state that [deleted]. Memorandum
from TEC to Contracting Officer (Jan. 10, 1999). Nonetheless, the agency
never advised Chemonics-as it had PADCO-that the agency "preferred" that the
Deputy Chief of Party be proposed for the full 60-month period, or that
proposing a Deputy Chief of Party for some reduced period was "not
acceptable." Similarly, the agency's discussions with Chemonics provided no
hint that the agency considered Chemonics' proposed levels of effort for the
O&M advisor and the metering advisor positions to be "well below USAID's
estimate," nor that the agency considered these functions to be "the
backbone of the program" or that offerors "should propose expats [to fill
these positions] for the full term of the contract." On the contrary, the
October 15 letter, consisting of a single page, advised Chemonics generally
that "[your] cost proposal is above the [government] estimate." The only
specific questions presented to Chemonics in the October 15 letter dealt
with three subcontracts, involving local and/or short term staffing, which
the agency viewed as reflecting excessive proposed effort. [7]

Finally, in contrast to the contracting officer's direction that PADCO
"respond . . . in writing within 7 working days," the contracting officer's
October 15 letter to Chemonics stated that it "may address these comments in
a new submission or respond to them in their BAFO."

On October 25, PADCO responded to the contracting officer's October 14
letter with a submission [deleted], [8]which included a revised [deleted],
several revised [deleted], various supplements to the [deleted], and a
revised [deleted]. The contracting officer's October 15 letter to Chemonics
did not state that Chemonics should "respond . . . within 7 days"-as his
letter to PADCO did-and Chemonics did not submit a response to the agency at
that time.

The contracting officer forwarded PADCO's submission to the TEC, requesting
evaluation and feedback. In a memorandum dated November 1, the TEC provided
its assessment of PADCO's proposal, as supplemented by the October 25
submission, stating that, while PADCO had responded to the agency's specific
requests, "PADCO's [deleted] makes us uncertain that their revised strategy
is based on considered understanding of the required effort." Memorandum
from TEC to Contracting Officer at 1 (Nov. 1, 1998). The TEC also noted
"some discrepancies" between the levels of effort indicated in PADCO's
staffing tables and those reflected in its revised budget. Id at 6.

Thereafter, the contracting officer sent yet another discussion letter to
PADCO, dated November 25. That letter outlined the TEC's concerns regarding
PADCO's [deleted], PADCO's [deleted], the [deleted], and PADCO's [deleted].
For each area of concern, the contracting officer identified specific
examples of portions of the proposal that needed to be corrected or revised,
including PADCO's "fail[ure] to [deleted], failure to [deleted], and
discrepancies [deleted]. Again, the contracting officer established a
deadline for PADCO's response, advising it to "address the above in a
written submission no later than December 10, 1998." Letter from Contracting
Officer to PADCO (Nov. 25, 1998).

On December 10, PADCO responded with a submission [deleted], providing
additional responses to the agency's questions and criticisms. With its
submission, PADCO noted: "We have benefited immensely from the TEC's very
thoughtful observations throughout the discussion phase of this
procurement." Letter from PADCO to Contracting Officer (Dec. 10, 1998). The
contracting officer again provided this submission to the TEC for evaluation
and feedback.

By a December 14 e-mail transmission, the TEC advised the contracting
officer that, "PADCO's response to our previous concerns is acceptable, and
we can go ahead with the BAFO now."

By letters to PADCO and Chemonics dated December 15, the agency requested
the submission of final revised proposals by December 22. The letter to
Chemonics provided no information regarding the content of its final
proposal, other than the advice to "please review previous USAID comments,
specifically the letter dated October 15, 1998 concerning your cost
proposal." The letter to PADCO similarly advised that it should review
previous USAID comments, and also advised that PADCO's [deleted]-as altered
by its submissions following oral discussions-[deleted], and specifically
suggested that PADCO "please review [deleted].

PADCO's final revised proposal reflected the multiple rounds of feedback it
had received in response to the various iterations of its proposal requested
by the agency. For example, PADCO's final proposal offered to provide
[deleted]. In contrast, Chemonics appears to have responded to the agency's
advice that its proposal [deleted], in that its final revised proposal
included a reduction in [deleted].

By memorandum dated January 10, 1999, the TEC summarized its evaluation of
the final revised proposals, stating:

In general, PADCO submitted a much stronger proposal than before, while
Chemonics has made more cuts [deleted] than we regard as appropriate. It is
evident that PADCO has benefited from the several opportunities afforded to
them to respond to our concerns . . . . Since Chemonics has not been given
the same opportunity to refine their proposal as PADCO . . . we request that
you [the contracting officer] allow them to respond to this assessment of
new weaknesses in their proposal.

Rejecting the TEC's recommendation, the contracting officer labeled
Chemonics' proposal as "technically deficient" and "unacceptable,"
Memorandum of Negotiations at 12, and selected PADCO's proposal for award.

PADCO proposed a final cost of [deleted]; Chemonics proposed a final cost
[lower than PADCO's final cost]. Based on the contracting officer's
determination that Chemonics' proposal was unacceptable, no actual
cost/technical tradeoff was performed. The contract with PADCO was awarded
on March 4. This protest followed.

DISCUSSION

Chemonics first protests that the agency conducted discussions in a manner
that unreasonably favored PADCO. We agree.

Federal Acquisition Regulation (FAR) sect. 15.306(d)(3) provides that
contracting officers shall conduct discussions with each competitive range
offeror regarding aspects of its proposal that could, in the opinion of the
contracting officer, be altered or explained to materially enhance the
proposal's potential for award, but expressly makes this requirement subject
to the limitations contained in FAR sect. 15.306(e), which provides that
discussions may not be conducted in a manner which "[f]avors one offeror
over another."

Here, as discussed above, the record shows that Chemonics and PADCO
initially proposed substantially equivalent levels of effort for key
expatriate personnel-specifically, [deleted]. Nonetheless, while advising
PADCO that a specific level of effort proposed for the Deputy Chief of Party
was "not acceptable," that the expatriate metering advisor and O&M advisor
were considered to be "the backbone of the program," and that PADCO "should
propose expats [to fill these positions] for the full term of the contract,"
the agency provided no similar information to Chemonics. Although the agency
has expressly acknowledged that it believed "Chemonics' original estimate of
needed long-term expatriate engineering staff [was] well below USAID's
estimate," the only discussions conducted with Chemonics concerning cost
issues were directed at reducing Chemonics' proposed levels of effort, not
increasing them.

Finally, following submission of initial proposals and oral discussions, the
agency twice requested revisions from PADCO, effectively requiring that
PADCO submit completely revised proposals, each time providing PADCO with
detailed evaluations of those submissions, including specific suggestions
and examples of discrete portions of PADCO's proposal that needed to be
corrected or revised. No similar agency input was provided to Chemonics.

The agency has offered no reasonable explanation regarding the basis for the
facially unequal and misleading discussions that it conducted with
Chemonics. [9]On the record here, as discussed above, we find that the
agency conducted discussions in a manner that unreasonably favored PADCO
over Chemonics and, thus, the agency failed to comply with FAR sect. 15.306(e).
[10] The agency's actions in this regard were particularly prejudicial in
light of the contracting officer's ultimate determination that Chemonics'
proposal was technically unacceptable due, in large part, to evaluation of
the specific portions of Chemonics' proposal that would likely have been
affected, if the agency had conducted discussions with that firm that were
comparable to those conducted with PADCO.

The protest is sustained.

RECOMMENDATION

We recommend that the agency reopen negotiations, conduct meaningful
discussions with both offerors, request final revised proposals, and
evaluate those proposals consistent with the stated solicitation
requirements. In the event the RFP does not reflect the agency's actual
requirements or the evaluation factors on which the agency intends to rely,
the solicitation should be appropriately modified prior to these recommended
actions. If, as a result of this reevaluation, Chemonics' proposal is
selected for award, the agency should terminate PADCO's contract for the
convenience of the government and make award to Chemonics. We also recommend
that Chemonics be reimbursed the reasonable costs of filing and pursuing the
protest, including attorneys' fees. 4 C.F.R. sect. 21.8(d)(1) (1999). The
protester should submit its certified claim for such costs, detailing the
time expended and the costs incurred, directly to the contracting agency
within 60 days after receipt of this decision.

Comptroller General of the United States

Notes

1. The RFP's required tasks included: development of water metering
programs, strengthening of operations and maintenance capabilities,
development of capabilities to reduce water losses and waste, and
strengthening of finance and revenue capabilities.

2. The RFP described the functions of this position as that of a project
manager, requiring that the Chief of Party "shall be the senior and official
representative of the Contractor in communicating with USAID/Cairo and the
three authorities . . . [and] shall be responsible for conceptualizing the
overall technical approach and implementation strategy." RFP at 38.

3. The RFP stated that evaluation of all proposed personnel, including
Egyptian staff, would account for 40 points; evaluation of the proposed
technical approach would account for another 40 points; evaluation of firm
capabilities and management would account for 10 points; and evaluation of
past performance would account for the final 10 points. RFP at 133-34.

4. Each offeror was asked to confirm the availability of, and provide
references for, certain personnel it had proposed. Additionally, PADCO was
advised of the agency's concern with PADCO's [deleted] and PADCO's
[deleted]. Letter from Contracting Officer to PADCO at 1-2 (July 9, 1998).

5. The letter stated: [deleted].

6. The TEC did suggest that Chemonics could make minor cost reductions in
connection with certain specified subcontracts.

7. The contracting officer expressly acknowledged in his negotiation
memorandum justifying the subsequent selection of PADCO that the October 15
written discussions with Chemonics "only dealt with the costs of their
subcontracts." Contracting Officer's Memorandum of Negotiations at 7.

8. As initially issued, section L.14 of the RFP provided that: "The
Technical Proposal in response to this solicitation should not exceed forty
(40) pages (exclusive of C.V.s and Annexes). C.V.s are limited to three (3)
pages per C.V. Annexes should not exceed thirty pages (30)." RFP at 127. RFP
Amendment No. 1 deleted the 30-page limitation on annexes.

9. Chemonics complains that the agency was improperly motivated by unstated
evaluation criteria, noting that agency's documentation of its initial
evaluation of proposals listed the following "weakness" attributed to
Chemonics' proposal:

Chemonics is already implementing two long-term contracts for USAID/Cairo's
Water/Wastewater Division . . . . Lack of competition could raise costs and
limit USAID's management flexibility.

Memorandum from TEC to Contracting Officer at 2 (July 8, 1998).

In light of our determination that the agency's discussions were conducted
in a manner contrary to the FAR requirements, we need not reach any
conclusion as to whether the agency's concerns about Chemonics' other
contracts were improperly considered in the source selection decision.

10. The record also shows that the agency waived the RFP requirement that
proposed key expatriate personnel possess, at a minimum, a degree at the
"BSc. level." Prior to reopening negotiations, the agency should determine
whether this requirement is consistent with its minimum needs and, if not,
amend the RFP.