TITLE:  Hroma Corporation, B-285053, June 6, 2000
BNUMBER:  B-285053
DATE:  June 6, 2000
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Hroma Corporation, B-285053, June 6, 2000

Decision

Matter of: Hroma Corporation

File: B-285053

Date: June 6, 2000

Fili Deligiannidis for the protester.

Richard Santino, Esq., U.S. Army Corps of Engineers, for the agency.

Jennifer D. Westfall-McGrail, Esq., and Christine S. Melody, Esq., Office of
the General Counsel, GAO, participated in the preparation of the decision.

DIGEST

  1. Under invitation for bids (IFB) set aside for small businesses, bidder
     that is found nonresponsible by contracting agency, but who is eligible
     for, and has applied for, a certificate of competency, remains in line
     for award until the Small Business Administration proceedings are
     resolved; accordingly, such a bidder is an interested party to protest
     cancellation of the IFB.
  2.
  3. Compelling reason exists to cancel IFB after bid opening where IFB
     restricted competition by incorrectly requiring contractor to perform
     60 percent of the work with its own organization.

DECISION

Hroma Corporation protests the cancellation after bid opening of invitation
for bids (IFB) No. DACW33-00-B-0003, issued by the U. S. Army Corps of
Engineers, New England District, for painting and rehabilitation of the Cape
Cod Canal Vertical Lift Railroad Bridge, Buzzards Bay, Massachusetts. The
protester contends that rather than canceling the IFB, the agency should
have awarded it a contract.

We deny the protest.

The IFB, which was issued on November 18, 1999 as a total small business
set-aside, included the following two requirements of relevance to this
protest:

All Contractors and Subcontractors that perform surface preparation or
coating application for this project shall be certified by the Society for
Protective Coatings (formerly Steel Structures Painting Council) (SSPC) to
the requirements of SSPC QP-1 prior to the day of contract award, and shall
remain certified while accomplishing any surface preparation or coating
application.

IFB, Document 00010, at 5, and:

The contractor shall perform on the site, and with its own organization,
work equivalent to at least sixty percent (60%) of the total amount of work
to be performed under the contract.

Federal Acquisition Regulation (FAR) sect. 52.236-1, incorporated into the IFB
at Document 00800, at 4. [1]

Three bids were opened on the January 14, 2000 opening date. Hroma's bid of
$10,149,620 was lowest of the three. The contracting officer determined that
Hroma was not a responsible contractor because it lacked experience on a
project of the given project's magnitude and because it did not have the
ability to perform 60 percent of the work with its own forces and
organization. Letter from Agency to SBA 1 (Feb. 29, 2000). In accordance
with FAR sect. 19.602-1, the Corps referred the contracting officer's
nonresponsibility determination to the SBA for possible issuance of a
certificate of competency (COC).

On March 23, the SBA notified the Corps that it was suspending action on the
COC determination because the IFB contained the wrong subcontracting
limitation clause. The SBA informed the Corps that because the solicitation
was a small business set-aside, it should have included FAR sect. 52.219-14,
requiring the contractor to perform 15 percent of the cost of the contract
with its own employees, [2] rather than FAR sect. 52.236-1, which, as completed
by the Corps, required the contractor to perform 60 percent of the work with
its own organization. In this regard, while
FAR sect. 36.501(b) instructs contracting officers to insert the clause at sect.
52.236-1 in solicitations and contracts when a fixed-price construction
contract is contemplated and the contract amount is expected to exceed $1
million, it exempts those contracts, such as the one here, which are to be
awarded pursuant to a small business set-aside. Instead, FAR sect. 19.508(e)
instructs contracting officers to insert the clause at sect. 52.219-14 in
solicitations and contracts for supplies, services, and construction, if any
portion of the requirement is to be set aside for small business and the
contract amount is expected to exceed $100,000.

Upon learning that the IFB should have incorporated FAR sect. 52.219-14,
requiring the contractor to perform at least 15 percent of the cost of the
contract with its own employees, rather than FAR sect. 52.236-1 as completed by
the Corps, requiring the contractor to perform 60 percent of the total
amount of work with its own organization, the contracting officer determined
that the IFB should be canceled. The contracting officer notified the
bidders of the cancellation on March 24.

Hroma protests the agency decision to cancel the IFB, arguing that
cancellation after bid opening mars the integrity of the bidding process.

As a preliminary matter, the agency argues that Hroma is not an interested
party to maintain this protest because it has been determined
nonresponsible, and, as a consequence, would be ineligible for award if its
protest against cancellation of the IFB were sustained and the solicitation
reinstated.

We disagree. Although we have held that a small business firm that fails to
apply for a COC after being determined nonresponsible by the contracting
agency is not an interested party to maintain a protest before our Office
because it would be ineligible for award if its protest were sustained, The
Swanson Group, Inc., B-249631, Aug. 10, 1992, 92-2 CPD para. 93 at 1-2, that is
not the situation here. Here, the protester has applied for a COC, and the
SBA has suspended its consideration of the application. A bidder that is
eligible for, and has applied for, a COC remains in line

for award until the SBA proceedings are resolved. See Service Contractors,
Inc.,
B-234311, Apr. 3, 1989, 89-1 CPD para. 345 at 3. Accordingly, Hroma is an
interested party to maintain this protest.

The agency argues that cancellation of the IFB was proper because the
requirement that the contractor perform 60 percent of the work with its own
organization had a restrictive effect on competition. As proof that
competition was curtailed, the agency offers a letter that it received from
another prospective bidder, Hercules Painting Company, representing that
although it spent over 2 weeks and incurred considerable cost in preparing
to bid on this project, it ultimately decided not to bid because it was not
QP-1 or QP-2 certified, and "without being able to do the painting, there
was no way [it] could do 60% of the work as [the IFB's] specifications
require." Letter from Hercules Painting Co. to Agency 1 (Jan. 28, 2000).

A contracting agency must have a compelling reason to cancel an IFB after
bid opening because of the potential adverse impact on the competitive
bidding system of resolicitation after bid prices have been exposed. FAR
sect. 14.404-1(a)(1); HDL Research Lab, Inc., B-254863.3, May 9, 1994, 94-1 CPD
para. 298 at 5. An IFB may be cancelled and all bids rejected after opening
where, consistent with the compelling reason standard, cancellation is
clearly in the public's interest. FAR sect. 14.404-1(c)(10). We have held that a
contracting officer's desire to obtain enhanced competition by materially
modifying specifications to make them less restrictive constitutes a valid
reason under this FAR standard. Diversified Energy Sys.; Essex Elec. Eng'rs,
Inc., B-245593.3, B-245593.4, Mar. 19, 1992, 92-1 CPD para. 293 at 3. Similarly,
we have upheld cancellation where undertaken to obtain enhanced competition
through material modification of other restrictive solicitation
requirements. Pride Container Corp., B-224678, B-224679, Jan. 16, 1987, 87-1
CPD para. 66 at 4; see also American Consulting Servs., Inc., B-276149.2,
B-276537.2, July 31, 1997, 97-2 CPD para. 37 at 8 n.9.

Here, the record shows that at least one potential bidder was dissuaded from
submitting a bid in response to the solicitation by the requirement that the
contractor perform at least 60 percent of the work with its own
organization, [3] and we think that the agency could reasonably have
surmised that other prospective bidders were likewise dissuaded, given that
more than 50 contractors requested plans and specifications for the
solicitation, but only 3 submitted bids. Agency Report,
Apr. 21, 2000, at 7. Under such circumstances, we think that the agency
reasonably determined that resolicitation would result in enhanced
competition and, accordingly, that cancellation was in the public's
interest.

The protest is denied.

Comptroller General
of the United States

Notes

1. The "Performance of Work by the Contractor" clause set forth at FAR
sect. 52.236-1 provides as follows:

The Contractor shall perform on the site, and with its own organization,
work equivalent to at least ___________ [insert the appropriate number in
words followed by numerals in parentheses] percent of the total amount of
work to be performed under the contract. . . .

The section instructs contracting officers to complete the clause by
inserting the appropriate percentage "consistent with the complexity and
magnitude of the work and customary or necessary specialty subcontracting."
In this instance, the Corps of Engineers determined that the appropriate
percentage for insertion was 60 percent.

2. FAR sect. 52.219-14 provides in relevant part as follows:

(b) By submission of an offer and execution of a contract, the
Offeror/Contractor agrees that in performance of the contract in the case of
a contract for-

. . . . .

(3) General construction. The concern will perform at least 15 percent of
the cost of the contract, not including the cost of materials, with its own
employees.

3. The protester maintains that Hercules's letter does not indicate that it
was dissuaded from submitting a bid by the requirement that the contractor
perform at least 60 percent of the work with its own organization; rather,
Hroma asserts, the letter indicates that Hercules was dissuaded from
submitting a bid by the requirement for SSPC QP-1 certification. As
previously noted, Hercules stated in its letter that it had ultimately
decided not to bid the job because "[it was] not QP1 and QP2 certified and
without being able to do the painting, there was no way that [it] could do
60% of the work as [the] specifications require." We think that Hercules's
letter clearly indicates that the requirement for 60 percent self
performance played a key role in dissuading the firm from submitting a bid.