TITLE:  Rice Services, Ltd., B-284997.5, March 12, 2002
BNUMBER:  B-284997.5
DATE:  March 12, 2002
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Decision

Matter of: Rice Services, Ltd.

File: B-284997.5

Date: March 12, 2002

Kenneth M. Bruntel, Esq., Amy E. Laderberg, Esq., and Daniel R. Foreman,
Esq., Crowell & Moring, for the protester.

Anne R. Davis, Esq., Gregory J. Mullins, Esq., Kathy B. Cowley, Esq., and
Paul W. Knoth, Esq., Department of the Navy, for the agency.

Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO participated in the preparation of the decision.

DIGEST

Agency's decision to cancel solicitation is reasonable where agency's
detailed and documented solicitation evaluation identifies flaws and
internal inconsistencies in the solicitation.

DECISION

Rice Services, Ltd. protests the Department of the Navy's decision to cancel
solicitation No. N000600-99-R-1649, which sought proposals to provide food
service activities at the U.S. Naval Academy in Annapolis, Maryland. Rice
maintains that the decision to cancel the solicitation lacks a reasonable
basis.

We deny the protest.

BACKGROUND

In May 1998, in conjunction with a previously announced commercial
activities study to be conducted pursuant to Office of Management and Budget
(OMB) Circular No. A-76, the Navy published the solicitation at issue here.
[1] The solicitation sought proposals from private-sector offerors to
provide full food service activities at the U.S. Naval Academy in Annapolis,
Maryland. [2]

Section M of the solicitation identified various evaluation factors, and
provided for a "best value" source selection decision based on a trade-off
between price and non-price evaluation factors. Section C of the
solicitation contained the applicable statement of work (SOW) which included
the following provision:

Qualifying Corporate Experience Requirements.

The Service Provider shall have experience in managing and performing a
large-scale, institutional, full food service operation, as described
herein. This experience must have been gained as a result of the Service
Provider being regularly engaged in the business of providing meal
preparation, dining room service, accounting, and maintenance and repair
services in an institutional food service facility. The minimum acceptable
corporate experience is 24 months within the 36 months prior to submission
of the offeror's bid.

RFP, SOW, at 11.

Despite this explicit SOW requirement regarding corporate experience, the
solicitation did not otherwise identify corporate experience as an
evaluation factor for source selection purposes. [3]

In June 1999, proposals were submitted by three offerors, including Rice.
Following oral presentations, the agency evaluated the proposals and, in
performing that evaluation, concluded that none of the offerors complied
with the stated requirements regarding corporate experience. Hearing
Transcript (Tr.) at 314-16. [4] Nevertheless, as compared to the other two
proposals, Rice's proposal was selected as representing the "best value" to
the government.

Thereafter, the agency undertook to perform a comparison of the level and
quality of performance that would be obtained under the MEO and under Rice's
proposal, concluding that the level and quality of performance would be the
same under either. The agency then compared the costs associated with the
MEO and Rice's proposal, concluding that the MEO costs were lower.
Accordingly, the agency notified Rice that it intended to retain performance
of the food service activities in-house.

Upon notification of the agency's intent to retain performance in-house,
Rice filed an appeal with the agency's Administrative Appeal Authority; that
appeal was denied. Rice then filed a protest with our Office challenging
various aspects of the agency's decision. In June 2000, we sustained that
protest based on the existence of flaws in the agency's determination that
the level and quality of performance reflected in the MEO and Rice's
proposal were equivalent. We recommended that the agency review the
solicitation to ensure that it reflected the agency's actual requirements
and, thereafter, to perform a reasonable and meaningful analysis of the
level and quality of performance to be obtained under the MEO, to adjust the
MEO as appropriate, and, finally, to perform another cost comparison. Rice
Servs., Ltd., B-284997, June 29, 2000, 2000 CPD para. 113 at 11-12.

In September 2000, the agency advised us that, "[t]he Navy intends to comply
with GAO's recommendation. It has reviewed the statement of work and
determined that it accurately reflects the Navy's actual requirements."
Letter from Department of the Navy to GAO (Sept. 25, 2000). Thereafter, the
agency performed another evaluation of the level and quality of performance
reflected in the MEO and Rice's proposal, made certain adjustments to the
MEO, and performed a second cost comparison, again concluding that the costs
associated with performance by the MEO were lower. Following notification of
that determination, Rice again filed an appeal with the Navy's
Administrative Appeal Authority. By decision dated September 6, 2001, the
Appeal Authority sustained Rice's appeal, stating: "I find that the
government compared bids not conformed to the same scope of work and so
produced an invalid cost comparison." Administrative Appeal Authority
Decision at 2. The Appeal Authority recommended that the Navy "[c]ommission
an authoritative, exhaustive solicitation evaluation to determine explicitly
whether the solicitation is correct, complete, objectively specific,
internally and externally consistent, postures an objective source
selection, and is otherwise fit to support valid technical leveling; and if
not to detail and recommend needed corrections. Id. at 14.

In September 2001, the agency established an evaluation team to perform the
type of solicitation review recommended by the Appeal Authority, and
directed the evaluation team to document its analysis and submit a report
containing its conclusions. That team issued its report on November 7, in
which it identified and discussed multiple solicitation flaws. Among other
things, the report identified the solicitation's failure to provide for
evaluation of corporate experience; failure to distinguish between "core"
and "non-core" functions; and internal inconsistencies regarding
requirements for full-time or part-time employees. Agency Report, Tab 68,
Evaluation Team Report, Encl. 1, at 1-3. The report summarized the
situation, stating that the solicitation "is not correct, complete,
objectively specific, internally and externally consistent," concluding that
"the issues raised [are considered] to be so significant as to warrant
cancellation of the solicitation." Agency Report, Tab 68, Evaluation Team
Report, at 2.

On November 20, the agency advised our Office that it had cancelled the
solicitation. This protest followed.

DISCUSSION

Rice maintains that the agency's decision to cancel the solicitation is
arbitrary, capricious, and without a reasonable basis. We disagree.

Where an agency determines that a solicitation does not accurately reflect
its needs, cancellation is appropriate. Digicon Corp., B-256620, July 7,
1994, 94-2 CPD para. 12 at 2. Further, in a negotiated procurement, an agency
has broad authority to decide whether cancellation is appropriate, and this
authority extends to the cancellation of solicitations used to conduct A-76
cost comparisons. Lackland 21st Century Servs. Consol., B-285938.7,
B-285938.8, Dec. 4, 2001, 2002 CPD para. 197 at 5. Finally, provided an agency
has a reasonable basis for doing so, it may cancel a solicitation regardless
of when the information precipitating the cancellation first surfaces. Id.

At the hearing conducted in connection with this protest, the Navy Captain
currently serving as the Naval Academy's supply officer, who is responsible
for operation of the dining facility, testified that he believed the
corporate experience requirement contained in the SOW was, and is, a
"critical" and "absolute minimum" Navy requirement. [5] Tr. at 487, 489.

Rice first complains that the perceived solicitation flaw regarding
corporate experience properly relates only to the agency's prior evaluation
of proposals and, thus, does not reflect a solicitation flaw. In this
regard, Rice asserts that "[if] the evaluators [had] actually evaluated
corporate experience, inclusive of key personnel, Rice would have been found
to possess the requisite food service experience," concluding, "[t]hus, any
reliance on the corporate experience requirement as a basis for cancellation
is wholly unwarranted." Rice's Post-Hearing Brief at 16.

We first address the portion of Rice's argument relating to whether Rice was
properly evaluated as lacking the corporate experience described in the
solicitation's SOW. Rice's assertion that, in fact, it should have been
evaluated as possessing the appropriate corporate experience is based on the
premise that the agency must impute to Rice, as an organization, the
individual experience of Rice's proposed key personnel. Contrary to this
premise, our Office has held that, while an agency may properly consider the
experience of key personnel in evaluating an entity's corporate experience,
Technical Resources, Inc., B-253506, Sept. 16, 1993, 93-2 CPD para. 176 at 5,
absent solicitation provisions mandating such consideration, there is no
legal requirement that such experience must be imputed to an otherwise
inexperienced corporate entity. The Project Mgmt. Group, Inc., B-284455,
Apr. 14, 2000, 2000 CPD para. 66 at 4; Hard Bodies, Inc., B-279543, June 23,
1998, 98-1 CPD para. 172 at 4.

Accordingly, since any evaluation of corporate experience would depend on
the manner in which the solicitation established that evaluation factor, we
cannot express an opinion as to how Rice's or any other proposal would be
properly evaluated unless and until the agency revises its RFP to properly
identify corporate experience as an evaluation factor and advises offerors
of the manner in which that evaluation factor will be considered. In short,
since the RFP did not unambiguously identify corporate experience as an
evaluation factor, we reject Rice's assertion that the agency's concern
regarding corporate experience does not reflect a solicitation defect.

Rice next questions the validity of the current supply officer's position
that corporate experience is a critical requirement that should have been
identified as an evaluation factor, asserting that prior Naval Academy
supply officers and their subordinates did not view the matter in the same
light.

At the hearing GAO conducted in connection with this protest, the Navy
Captain currently serving as the Naval Academy supply officer testified as
follows:

  A. I'll refer you to the first subparagraph A where you discuss the
     corporate experience requirement issue. Could you please clarify the
     concerns or comments you raise there?

  A. . . . I just wanted to highlight those issues of the [Evaluation Team]
     report that raised the concern of the Naval Academy. The first one
     being that we've got a very serious responsibility charged with the
     feeding the midshipmen. It is no small task[,] and the fact that the
     vehicle under which this is proceeding could allow someone who doesn't
     meet the experience requirements was amazing to me. I just -- I found
     that shocking that you could conceivably have some . . . allow somebody
     who doesn't have the experience to do the job[,] end up doing the
     job[,] and that was the stress point here. Clearly, I cannot go up to
     the [Naval Academy] [S]uperintendent and endorse something that says[,]
     well, someone may not have the experience to do the job.

* * * * *

  A. . . . I would like to clarify the point that[,] from the customer
     perspective[,] you view the 24 months of relevant background experience
     within the last three years as a critical requirement?

  A. Absolutely. . . . [I]n fact[,] it ought to be more but it is a large
     involved process.

  A. Now, when you say it is a large involved process, if you could, just
     briefly explain why you think it[']s critical?

  A. I can cook soup at home but I can't chop up the meat and vegetables
     that you need to cook 750 gallons of soup at one time and make it come
     out good. We're talking about massive quantities. We're talking about
     timing. It's not just a culinary art; there is also a very large
     logistical aspect of this because it all has to be hot, if it[']s meant
     to be hot, [or] cold if it[']s meant to be cold. It needs to be served
     at the same time to 4200 young men and women who have 35 minutes to
     consume it. It's not like the restaurant down here where they come in
     and out all day long. They come in after they form up, do some military
     things. They sit down, the contractor has a few minutes to get the food
     on the table; it has to be there.

  A. So[,] 4200 folks are eating at the same point in time within about a 35
     minute window?

  A. Yes, sir. . . . Even onboard a carrier, which is the largest thing the
     Navy has, they run all day long -- all day all night long[;] they don't
     do it all in one sitting.

Tr. at 484-89.

A contracting agency has the primary responsibility for determining its
needs and, in doing so, is properly afforded considerable discretion in
determining the best method for meeting its needs. See, e.g., Parcel 47C
LLC, B-286324, B-286324.2, Dec. 26, 2000, 2001 CPD para. 44 at 7. Based on the
record here, including the Naval Academy supply officer's testimony, it is
clear that the agency currently considers the corporate experience
requirement enunciated in the SOW --- which was neither identified as an
evaluation factor nor applied in evaluating proposals --- to be a critical
element in identifying the entity that will best meet the agency's needs. We
find this position to be reasonably supported and well within the scope of
discretion properly afforded to the agency. Accordingly, we find no merit in
Rice's assertion that the corporate experience described in the SOW is not
necessary to meet the agency's actual requirements. [6]

Additionally, as noted above, the agency evaluation team identified other
solicitation flaws, including a failure to distinguish between what the
agency refers to as "core" and "non-core" functions, and internal
inconsistencies regarding requirements for full-time employees.
Specifically, with regard to "core" and "non-core" functions, the evaluation
team report stated: "It is apparent that the [agency's] intention was that
non-core functions such as procurement, warehousing, pot washing, janitorial
and maintenance would not be evaluated. Yet, the solicitation did not draw a
distinction between the evaluation of core and non-core functions." Agency
Report, Tab 68, Evaluation Team Report, Encl. 1, at 1. Regarding
inconsistent requirements for employees, the report noted that one section
of the solicitation stated that "[a]ll key personnel positions shall be
working on-site a minimum of eight (8) hours each workday," RFP, SOW, at 11;
yet another section of the solicitation provided that the ice cream
production leader, a position identified as "key personnel," could be
staffed as either "full or part-time." Id. at 13.

Rice asserts that these additional matters are not so significant as to, in
and of themselves, warrant cancellation. Our decision today does not address
the individual significance of each of the factors discussed. Rather, we
have reviewed the entire record and, with regard to the issues discussed in
this decision, considered the cumulative impact of those matters.

As noted above, a contracting agency has the primary responsibility for
determining its needs and the best method for accommodating those needs, and
where an agency reasonably determines that continuation of an ongoing
procurement under a particular solicitation will not achieve its
requirements due to flaws and inconsistencies in the solicitation,
cancellation of the solicitation is appropriate. Lackland 21st Century
Servs. Consol., supra; Digicon Corp., supra. Here, we have reviewed the
record, including the testimony of agency personnel responsible for
accomplishing the tasks at issue here. Based on this record, we conclude
that the solicitation flaws related to evaluation of corporate experience,
evaluation of "core" and "non-core" functions, and the inconsistencies
regarding full-time and part-time requirements provide a reasonable basis
for cancellation of the solicitation.

Finally, in various submissions challenging the agency's actions in this
procurement, Rice criticizes the length of time taken by the agency to
determine that cancellation was appropriate. As discussed above, the
solicitation was first published in May 1998, nearly four years ago. Since
that time, Rice has filed various protests and administrative appeals. In
responding to these challenges, the agency never raised any issue regarding
solicitation defects until directed by the Navy's Administrative Appeal
Authority, in September 2002, to perform an "authoritative, exhaustive
solicitation evaluation." Administrative Appeal Authority Decision at 14.

We are troubled by the length of time preceding the Navy's ultimate
determination that the solicitation should be cancelled. In light of that
cancellation, Rice's substantial expenditure of resources preparing a
proposal may well have no value. See COBRO Corp., B-287578.2, Oct. 15, 2001,
2001 CPD para. ___ at 8-9. Nonetheless, our concern with the tardiness of the
Navy's ultimate determination does not alter the overriding principle in
this matter --- that is, that an agency should not proceed with a
procurement when it reasonably believes that the resulting contract will
fail to meet the agency's requirements. See Lackland 21st Century Servs.
Consol., supra. As discussed above, we believe the record reasonably
supports the Navy's conclusion that proceeding with the procurement under
the solicitation here would result in a contract that does not meet the
Navy's requirements. Accordingly, we cannot sustain the protest.

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. Pursuant to OMB Circular No. A-76 and that Circular's Revised
Supplemental Handbook (March 1996), agencies determine whether certain
activities should be performed in-house or by a contractor.

2. Specifically, the solicitation's statement of work contemplated preparing
the food, setting the tables, serving the food, cleaning the dining hall,
catering special events, performing necessary procurements, warehousing, and
managing accounts.

3. In addition to price, the solicitation stated that proposals would be
evaluated on the basis of technical presentation, key personnel and the
quality of an offeror's past performance. RFP sect. M.4.

4. In resolving this protest, GAO conducted a hearing on the record at which
testimony was obtained from the agency's director of contracts, the
contracting officer, the Naval Academy's supply officer, and members of an
evaluation panel convened to review the solicitation.

5. The Captain was appointed to this position, and became responsible for
operation of the dining facility, in July 2001; he had not been involved in
this procurement prior to that time. Tr. at 486-87.

6. In passing, we note that, accepting, arguendo, Rice's assertion that
corporate experience is not a valid requirement, all potential offerors
should have been advised of this material fact, thereby increasing the
potential field of competition.