TITLE:  SWR, Inc., B-284075; B-284075.2, February 16, 2000
BNUMBER:  B-284075; B-284075.2
DATE:  February 16, 2000
**********************************************************************
SWR, Inc., B-284075; B-284075.2, February 16, 2000

Decision

Matter of: SWR, Inc.

File: B-284075; B-284075.2

Date: February 16, 2000

Benjamin M. Bowden, Esq., Albrittons, Clifton, Alverson & Moody, for the
protester.

A. Neil Stroud, Esq., and Julius Rothlein, Esq., U. S. Marine Corps, for the
agency.

Peter A. Iannicelli, Esq., and Michael R. Golden, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Protest is sustained where the contracting agency awarded contract on the
basis of a proposal that did not conform to several material solicitation
requirements.

DECISION

SWR, Inc. protests the award of a contract to Stephenson's Appliance by the
United States Marine Corps pursuant to request for proposals (RFP) No.
M6700199R0004. The protester contends that the Corps should have rejected
the proposal submitted by Stephenson's Appliance as unacceptable because the
proposal did not meet a number of RFP requirements. The protester also
contends that the agency's past performance evaluation was unreasonable and
that the agency improperly held discussions solely with the awardee.

We sustain the protest.

Issued on May 20, 1999, the RFP solicited proposals for repair services to
appliances (i.e., refrigerators, stoves/ranges, and dishwashers) in family
housing units at Camp Lejeune, North Carolina. The RFP contemplated that the
services would be performed on a fixed-price per repair call basis for a
basic period of 1 year with options for 4 additional years. RFP sect. B. The RFP
stated that the contract would be awarded to the offeror whose proposal was
determined to be most advantageous after evaluation of "past performance,"
"technical proposal," and "price" factors, and that a risk assessment would
be perfomed as part of the evaluation of each factor. [1] RFP sect. M. The
awardee's technical proposal would become part of the contract
specifications. RFP sect. L.6.3.1.

Four proposals were received by the June 29 closing date. The agency reports
that no discussions were held with any offeror but that it twice contacted
Stephenson's Appliance by telephone, once for clarification of a portion of
its technical proposal and once to address a clerical error in its prices.
Supplemental Agency Report at 1-2. After evaluation, each proposal was given
an overall adjectival rating for "past performance," "technical," and "risk
assessment"; and the total price of each proposal for the basic contract and
all four option periods was noted. The two highest rated proposals were
submitted by SWR and Stephenson's Appliance; the agency's best value
analysis summarized their evaluations as follows:

 Offeror         Past           Technical      Risk           Total Price
                 Performance    Evaluation     Assessment
                 Evaluation

 SWR             [Deleted]      [Deleted]      [Deleted]      [Deleted]

 Stephenson's    [Deleted]      [Deleted]      [Deleted]      [Deleted]
 Appliance

Based upon this information, the agency determined that, while there was
very little difference in the technical capability of these two offerors,
Stephenson's Appliance's superior past performance was worth the additional
cost of $116,490. Agency Report, Tab F, Evaluation Summary, at 1. Therefore,
the contract was awarded to Stephenson's Appliance on October 26. After a
debriefing, SWR filed this protest.

SWR primarily protests that Stephenson's Appliance's proposal did not meet a
number of RFP requirements and therefore the Corps should have rejected it
and awarded SWR the contract. Protest at 2-3; Supplemental Protest at 4-5.
SWR asserts that, under the guise of obtaining clarification from
Stephenson's Appliance about its proposal, the agency conducted discussions,
informed the awardee about some of its proposal's shortcomings, and allowed
Stephenson's Appliance to supplement its original proposal. Supplemental
Protest at 2-3; Protester's Supplemental Comments at 1-2. The protester
argues that such discussions gave the awardee a competitive advantage and
that, since no discussions were held with SWR, SWR was deprived of an
opportunity to address certain adverse information that the Corps considered
in the evaluation of SWR on the past performance factor. Protest at 3-4.

In a negotiated procurement, all offerors must be provided a common basis
for preparation and submission of proposals. CNA Indus. Eng'g, Inc.,
B-271034, June 7, 1996, 96-1 CPD para. 279 at 4. Any proposal that does not
conform to material terms and conditions of the RFP should be considered
unacceptable and may not form the basis for an award. Integrated Sys. Group,
B-272336, B-272336.2, Sept. 27, 1996, 96-2 CPD para. 144 at 6. When an agency
relaxes its requirements, either before or after receipt of proposals, it
must issue a written amendment to notify all offerors of the changed
requirements. CNA Indus. Eng'g, Inc., supra, at 4. We will sustain a protest
where an agency, without issuing a written amendment, relaxes an RFP
specification to the protester's possible prejudice (e.g., where the
protester might have altered its proposal to its competitive advantage had
it been allowed to respond to the relaxed requirements). Id.

Based upon our review of the protest record, including the record of a
hearing conducted by our Office, we are sustaining the protest because we
find that the proposal submitted by Stephenson's Appliance was technically
unacceptable because it did not conform to three of the RFP's material
provisions and, therefore, the agency relaxed the RFP requirements in favor
of Stephenson's Appliance. [2] We will discuss each instance of
noncompliance to a material requirement below. [3]

The first instance of noncompliance concerns the requirement for a quality
control plan. The RFP instructed offerors to:

Provide your quality control plan which shall specifically address all
requirements in Section C. The Quality Control Plan must include specific
provisions for positive validation of services. The plan should also
affirmatively state the level of training of employees. The plan shall be
provided in sufficient detail to ensure the Government of your understanding
and commitment to quality control.

RFP sect. L.6.5.1 (emphasis added). The RFP's statement of work listed the
required elements of an acceptable quality control plan and gave a brief
description of each element. Among other things, the RFP required the
quality control plan to include: (1) an inspection plan covering all
required services, specifying the areas to be inspected, and stating how
often inspections would be conducted; (2) the methods for identifying and
preventing deficiencies; (3) on-site records of all inspections; (4) a work
ticket register; and (5) a records system. RFP sect. C1.10. Moreover, the RFP
stated that "quality control" would be one of five subfactors to be
evaluated as part of the "technical proposal" evaluation and, as noted
above, that the technical proposal would become part of the contract
specifications. RFP sect.sect. M.2.2.5, L.6.3.1.

The proposal submitted by Stephenson's Appliance did not include a quality
control plan or any of the required elements of a quality control plan. In
fact, the only reference to quality control in the proposal was the
following statement:

[Stephenson's Appliance's owner] will be in charge of Quality Control, he
will make sure technicians and delivery person is doing a good job. If a
problem comes up he will do everything possible to fix it.

Agency Report, Tab E, Stephenson's Appliance's Technical Proposal, at 5.

The owner of Stephenson's Appliance testified at the hearing conducted by
our Office that he did not include a quality control plan in the proposal
because he had been told by the contracting office before he submitted the
proposal that this was something that he could "implement" if and when he
was awarded the contract. When asked if the awardee's proposal included a
quality control plan, the contracting officer confirmed: "He did not submit
one." Despite submitting two separate protest reports, as well as comments
on the hearing, the agency's only response to this allegation is that its
evaluation was reasonable because the evaluators only gave Stephenson's
Appliance's proposal ratings ranging from "fair" to "good" on this
subfactor. Agency Report at 2.

We cannot see how the agency evaluators reasonably could have evaluated a
plan that did not exist in order to ensure that Stephenson's Appliance
understood and was committed to providing the required level of quality
control. Indeed, because the proposal did not include a quality control plan
at all, the Corps could not reasonably have concluded that the proposal
demonstrated compliance with the RFP's quality control plan requirements.
Further, there was no quality control plan for incorporation into the
contract as contemplated by RFP sect. L.6.3.1. Thus, the Corps essentially
waived this requirement and improperly accepted a materially

nonconforming proposal for award. Beckman Coulter, B-281030, B-281030.2,
Dec. 21, 1998, 99-1 CPD para. 9 at 6-7; Pacific Consol. Indus., B-260650.2,
Oct. 25, 1995, 95-2 CPD para. 247 at 3-4.

The second instance of noncompliance concerns the RFP's repair time
requirement. The RFP generally required that repairs to refrigerators and
stove/ranges be completed within 8 work hours of the appointed time, but
stated:

In the event parts have to be ordered and the 8 work hour time frame cannot
be met, the Contractor shall remove the appliance and install a replacement
appliance within 2 hours after removal.

RFP sect. C5.5 (emphasis added). The RFP specifically stated that a proposal's
response to the repair time requirement would be considered in the
evaluation of the "contracts requirements" subfactor in the "technical
proposal" evaluation. RFP sect. M.2.2.1.

Stephenson's Appliance's proposal responded to this requirement as follows:

If the part is ordered by 4pm we usually get it the next day, if for some
reason the part is a factory order we will change out the appliance that day
if before 4pm. If after 4pm we will change it out the next morning if the
resident is home.

Agency Report, Tab E, Stephenson's Appliance's Technical Proposal, at 3. At
the hearing, the owner of Stephenson's Appliance conceded that his proposal
did not meet the 2-hour replacement time and stated that he was not aware of
this "oversight" until it was pointed out to him by the hearing examiner.
The contracting officer admitted that Stephenson's proposal was not
consistent with the RFP's 2-hour replacement requirement and added that it
might cost more to have a contractor meet the 2-hour time requirement if it
was after 4 p.m. because of the need to pay compensation to overtime
workers.

Again, the Corps could not reasonably have determined that the awardee's
proposal complied with the RFP's specific replacement time requirement.
Accordingly, the Corps improperly accepted Stephenson's Appliance's
materially nonconforming proposal.

The third instance of noncompliance concerns the RFP's warranty requirement
for service calls. The RFP stated:

If any malfunctions occur on a piece of equipment within 15 working days
after the service call, the Contractor shall commence reservicing the
equipment according to the allowable repair time at no additional cost to
the Government.

RFP sect. C5.1 [emphasis added]. [4] The RFP specifically stated that a
proposal's response to the service call warranty requirement would be
considered in the evaluation of the "contracts requirements" subfactor in
the "technical proposal" evaluation. RFP sect. M.2.2.1.

Stephenson's Appliance's proposal responded to this requirement as follows:

If a recall should occur within the 15 workday period, promptness to correct
the problem will be established. If the failure is diagnosed to be the
replaced part, then the repair will be at no cost to the government. Should
another part fail during the 15 workday period, then part(s) and labor will
be charged minus service fee.

Agency Report, Tab E, Stephenson's Appliance's Technical Proposal, at 1.

At the hearing, the contracting officer testified that Stephenson's
Appliance's proposal was not consistent with the RFP warranty provision and
therefore a contract specialist telephoned the awardee to obtain
"clarification." According to the contracting officer, the agency
ascertained that, if a new part failed during the warranty period,
Stephenson's Appliance would only charge the government for the new part but
would not charge the government for additional labor or a service fee. Id.
The contract specialist's notes, however, show that the owner of
Stephenson's Appliance stated that the labor charge for repairing a new part
within the warranty period "would never exceed the service fee, which is the
same as price per call charge." These notes also state that "[Stephenson's
Appliance's owner] said normally there will not be an additional charge."
Agency Response to Hearing Request, Jan. 20, 2000, attach. 1, at 1.

The RFP required the initial service call to be performed for a fixed price
and for any subsequent service call within the warranty period to be made
for no additional charge (i.e., the fixed price charge would cover all
services calls within the warranty period). RFP sect.sect. B, C5.1. Stephenson's
Appliance's proposed pricing scheme deviated from the fixed price scheme
required by the RFP because it would allow the firm to charge an unspecified
amount for labor when called upon to service an appliance again because of
the failure of a different part within the warranty period. See Beckman
Coulter, supra, at 6; Harris Corp., B-274566, B-274566.2, Nov. 27, 1996,
96-2 CPD para. 205 at 5-6. During the telephone call, the awardee was allowed to
explain its written proposal in an attempt to remove the exception.

We do not see how the oral "clarification" had any legal effect on
Stephenson's Appliance's written proposal that took exception to the RFP
warranty terms since Stephenson's Appliance never revised its written
proposal in this regard. [5] See Universal Bldg. Maintenance, Inc.,
B-282456, July 15, 1999, 99-2 CPD para. 32 at 7 n.2. Thus, from the express
language of Stephenson's Appliance's proposal it is clear that the Corps
improperly accepted a nonconforming proposal.

In sum, we find that the Corps improperly relaxed material terms of the RFP
when it awarded the contract to Stephenson's Appliance based upon a proposal
that did not comply with the RFP's quality control plan, appliance
replacement time, and service call warranty requirements.

We recommend that the Corps: (1) amend the RFP to represent its actual needs
concerning a quality control plan, appliance replacement, and service call
warranty requirements; (2) accept and evaluate revised proposals consistent
with the amended RFP; and (3) conduct discussions and obtain final revised
proposals, if deemed appropriate, and make a new best value determination.
[6] If, after evaluating revised proposals, the agency determines that the
contract should be awarded to an offeror other than Stephenson's Appliance,
then the contract with Stephenson's Appliance should be terminated for the
convenience of the government and the contract awarded to the offeror
selected. We also recommend that the protester 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 costs, detailing the time expended and the costs incurred, directly to
the contracting agency within 60 days after receipt of this decision. 4
C.F.R. sect. 21.8(f)(1).

The protest is sustained.

Comptroller General
of the United States

Notes

1. The agency states that it conducted this negotiated acquisition under
Federal Acquisition Regulation (FAR) part 15. Contracting Officer's
Statement at 1. The RFP stated the agency's intent to award a contract
without discussions. RFP sect. L.2(g).

2. The hearing was conducted by telephone conference and included testimony
from the awardee's owner and the contracting officer.

3. While we reviewed the entire record in light of all of the allegations
and arguments presented by the protester and the agency, we will discuss
only the most significant issues in this decision. In particular, we
compared Stephenson's Appliance's proposal with each RFP requirement that
was cited by the protester as not being met, but will not discuss instances
where we found the allegations to have no merit or where, in our opinion,
the RFP requirement was not material and noncompliance would not affect
price or quality of the services to be provided. For example, the pages of
Stephenson's Appliance's proposal were not numbered and dated as required by
the RFP, but this minor deviation provides no basis for overturning the
award decision.

4. When called to repair an appliance, the contractor is required to
evaluate the problem reported and any other problems or necessary repairs.
RFP sect. C5.3.1.

5. From a reading of the contract specialist's notes, it is still not clear
that Stephenson's Appliance was proposing to perform reservicing within the
warranty period "at no additional cost" since Stephenson's Appliance's owner
apparently stated that "normally there will not be an additional charge" and
did not indicate what he meant by "normally" or how much the firm would
charge in other than "normal" situations.

6. Since we are recommending that the Corps amend the RFP and evaluate
revised proposals, we need not resolve SWR's contention that the agency held
discussions with the awardee alone or its challenges to the past performance
evaluation and cost/technical tradeoff. However, after reviewing the
evaluation record, we have two concerns. First, Stephenson's Appliance did
not provide all of the information that the agency specifically requested on
the Commercial Contract Reference Forms provided to offerors and there is
nothing in the record to show that the Corps focused on or gave any weight
to "size and complexity" of prior contracts in the past performance
evaluation as required by the RFP. Agency Report, Tab E, Stephenson's
Appliance's Past Performance Data, at 3-5; RFP sect.sect. L.6.2.9, M.2.1. Second,
the cost/technical tradeoff was apparently based upon SWR's having been
given a "moderate" rating on risk assessment, when, in fact, the evaluators
rated the proposal "low" risk. Agency Report, Tab F, Evaluation Summary,
at 1-2. Despite this error having been raised in the supplemental protest
and again at the hearing, the agency has not responded to or explained the
discrepancy.