TITLE:  Power Connector, Inc., B-285395, August 24, 2000
BNUMBER:  B-285395
DATE:  August 24, 2000
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Power Connector, Inc., B-285395, August 24, 2000

Decision

Matter of: Power Connector, Inc.

File: B-285395

Date: August 24, 2000

James J. McCullough, Esq., and Catherine E. Pollack, Esq., Fried, Frank,
Harris, Shriver & Jacobson, for the protester.

Kevin M. Kordziel, Esq., and Geoffrey A. Barrow, Esq., Jenner & Block, for
Day Leather Corporation, an intervenor.

Michael A. Lewis, Esq., Department of Justice, 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

Protest that agency improperly awarded a small business set-aside contract
to a source offering a foreign product is sustained because such set-asides
are limited to sources supplying domestically-produced products.

DECISION

Power Connector, Inc. (PCI) protests the award of a contract to Day Leather
Corporation under request for proposals (RFP) No. 1PI-R-1579-00, issued by
Federal Prison Industries, Inc., for 1.5 million square feet of leather. PCI
argues that Day Leather's offer of imported leather from Brazil is
ineligible for award because the solicitation required domestic leather.

We sustain the protest.

BACKGROUND

Federal Prison Industries, Inc. is a wholly-owned government corporation
within the Department of Justice that operates under the trade name UNICOR
at various correctional institutions in the federal prison system. RFP at 4.
The leather at issue here will be used by UNICOR's facility at the Federal
Correctional Institution at Sandstone, Minnesota, to manufacture work gloves
for the General Services Administration and the U.S. Forest Service. Agency
Report at 2.

The solicitation anticipated award of an
indefinite-delivery/indefinite-quantity contract for 1 base year, with 1
option year, to the offeror whose proposal was considered most advantageous
to the government. RFP at 4, 32. The following factors, in descending order
of importance, were to be used in evaluating offers: past performance,
compliance with specifications, and price. Id. at 32.

Set forth in full within the solicitation was Federal Acquisition Regulation
(FAR) clause 52.219-6, "Notice of Total Small Business Set-Aside (Jul
1996)," which reserved this requirement for exclusive small business
participation. Id. at 18. In relevant part, this clause states:

Agreement. A small business concern submitting an offer in its own name
agrees to furnish, in performing the contract, only end items manufactured
or produced by small business concerns in the United States.

Id. In addition, the solicitation incorporated by reference the following
FAR clauses: 52.225-9, entitled "Buy American Act--Trade Agreements--Balance
of Payments Program (Jan 1996)"; and 52.225-21, entitled "Buy American
Act--North American Free Trade Agreement Implementation Act--Balance of
Payments Program (Jan 1997)." [1] These clauses--and the statutes and
agreements they implement--permit offerors to provide foreign end items, and
describe whether, and how, an evaluation differential will be applied to the
non-domestic items.

In response to the solicitation, the agency received five proposals from
three offerors. The awardee, Day Leather, and a second offeror both
submitted a single proposal offering foreign leather. In contrast, PCI
submitted three proposals--one offering domestic leather, one offering
foreign leather, and one offering a mixture of foreign leather and domestic
processing that the company urged the agency to evaluate as a domestic end
product. PCI Cover Letter for Proposals, Apr. 11, 2000.

In reviewing the proposals, the agency evaluated past performance using
adjectival ratings, and evaluated compliance with the specifications on a
pass/fail basis, based on a review of bid samples. Since all five proposals
passed the specification review--and were thus equal under this
criterion--we set forth below only the proposed prices and past performance
ratings of the five proposals:

 OFFEROR               PAST PERFORMANCE        PRICE
                       RATING

 Day Leather           [deleted]               $ 4.110 million

 (foreign leather)

 Offeror A             [deleted]               [deleted]

 (foreign leather)

 PCI -- Proposal 1     [deleted]               [deleted]

 (foreign leather)

 PCI -- Proposal 2     [deleted]               [deleted]

 (mixed source)

 PCI -- Proposal 3     [deleted]               [deleted]

 (domestic leather)

Agency Report, at 4.

Based on these results, the contracting officer selected Day Leather's
proposal for award on the basis of the proposal's lowest price and highest
past performance rating. Id. The agency gave no consideration to whether the
proposals offered foreign or domestic leather. This protest followed.

DISCUSSION

As a preliminary matter, there is no dispute in this case that an agency may
not purchase a foreign product under a small business set-aside. FAR sect.
19.102(f)(1): TRS Research, B-283342, Nov. 4, 1999, 99-2 CPD para. 85 at 3
(protest challenging agency's rejection of quote offering foreign product
under a small business set-aside denied); Kaysam Worldwide, Inc., B-247743,
June 8, 1992, 92-1 CPD para. 500 at 2 (protest challenging award to offeror
proposing a foreign product under a small business set-aside procurement
sustained); General Metals, Inc., B-247560, May 29, 1992, 92-1 CPD para. 486 at
2 (same). Accordingly, UNICOR could not properly award this contract to Day
Leather under the terms of this solicitation.

In response to this protest the agency states that it was not aware of the
domestic product restriction in the Notice of Total Small Business Set-Aside
clause, and that it did not intend to limit offerors to domestic products.
Contracting Officer's (CO) Statement at 3. As discussed further below, the
agency and Day Leather argue that PCI knew that the agency intended to
consider offers of foreign products at the time it prepared its three
proposals--one of which clearly offered foreign leather--and that the
contracting officer orally advised PCI of this intention. Id. at 3-4. For
these reasons, both the agency and Day Leather argue that this protest, in
effect, raises an untimely challenge that the solicitation was ambiguous,
and thus should be dismissed. In addition, the agency and Day Leather argue
that PCI was not prejudiced by the agency's acceptance of a proposal that
offered foreign leather because PCI improperly "gamed" this procurement.

Timeliness

Under our Bid Protest Regulations, protests based upon alleged improprieties
in solicitations which are apparent prior to the time set for receipt of
initial proposals must be raised before the time proposals are due. 4 C.F.R.
sect. 21.2(a)(1) (2000). Here, the agency and Day Leather argue that there is
ample evidence in the record that PCI was aware of a conflict between the
terms of the solicitation and the agency's intent to consider offers of
foreign leather, thus creating an ambiguity PCI was required to protest
before solicitation closing. For example, Day Leather argues that the
presence of the Buy American Act clauses in the solicitation, together with
express statements from the CO about the acceptability of foreign leather,
made the solicitation patently ambiguous. As further evidence that PCI was
aware that the agency would accept foreign leather, Day Leather points out
that previous UNICOR solicitations permitted offers of foreign leather.

We disagree, as a legal matter, with the intervenor's assertion that the
apparent conflict between the domestic source requirement in the small
business set-aside clause and the two Buy American Act clauses creates a
patent ambiguity in the solicitation that renders this protest untimely. Our
Office has held that there is no conflict in a solicitation that includes
both a requirement for a domestic end item and clauses that implement the
Buy American Act. TRS Research, supra, at 4 (despite presence of Buy
American Act clauses, inclusion of the more stringent small business
set-aside restriction to domestic sources put offerors on notice that only
domestic products could be offered); MTS Sys. Corp., B-238137, Apr. 27,
1990, 90-1 CPD para. 434 at 4 (no conflict between Department of Defense clause
restricting offerors to domestic sources and Buy American Act clauses
allowing evaluation of foreign end products). Given these holdings, PCI was
under no obligation to file its challenge here prior to the closing time for
receipt of proposals.

Also, given the conflicting statements in the record, we are unable to
conclude that the CO expressly advised offerors that foreign leather would
be acceptable to the agency. Although the CO states that she gave such
advice to PCI's General Manager, and to each of the other offerors, she also
concedes that she made no written notes of her conversation, and cannot say
when the conversation occurred. CO's Statement at 4. In response, PCI's
General Manager provided our Office with a sworn declaration that he had no
such conversation with the CO prior to the award to Day Leather--rather, he
states that he had one preaward conversation with the CO on an unrelated
matter, and he confirmed the content of that conversation in a facsimile to
the contracting officer that same day. [2] Declaration of PCI's General
Manager, June 26, 2000, at 1-2. Despite making subsequent filings on other
issues, the agency offered no reply to this sworn declaration. Under these
circumstances, we will not conclude that the protest is untimely. [3] See
Precise Constr. Management, B-278144.2, Feb. 24, 1998, 98-1 CPD para. 63 at 2-3
(timeliness dispute resolved in favor of protester where agency offers no
rebuttal to protester's sworn statements offered to establish timeliness of
protest).

Prejudice

The agency and intervenor also point to PCI's alternate proposal of foreign
leather as evidence that PCI cannot claim it was prejudiced by the agency's
failure to enforce the requirement for a domestic product. For the reasons
below, we disagree.

We recognize that PCI's alternate proposal raises the troubling appearance
that PCI has successfully "gamed" this procurement. We also recognize that,
as a practical matter, a solicitation sends a confusing message when it
states that no foreign products will be accepted, and also states how
foreign products will evaluated using a price differential--even if there is
no legal conflict in a solicitation that includes both a domestic source
requirement and Buy American Act clauses. Faced with the possibility that
the agency might make an unlawful award to an offeror proposing foreign
leather, PCI's alternate proposal strikes us as a strategy designed to
reduce its risk of nonselection. While we share the concerns voiced by the
agency and the intervenor, PCI's actions cannot be termed unlawful, and do
not prevent the company from establishing that it has been prejudiced by the
agency's decision to make an award the solicitation barred it from making.

Our standard of prejudice is that we will not sustain a protest unless the
protester demonstrates a reasonable possibility of prejudice; that is,
unless the protester demonstrates that, but for the agency's actions, it
would have had a substantial chance of receiving the award.
McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see
Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996). Here,
as the only offeror proposing domestic leather in a solicitation barring
acceptance of foreign leather, PCI can appropriately claim that, but for the
agency's waiver of the restriction against proposing foreign leather, it
would have received this award.

In addition, PCI points out that the requirement for domestic products here
is set forth within the standard small business set-aside clause. According
to PCI, if this procurement had not been set aside--i.e., had PCI been
competing with large businesses on a non-set-aside basis--it would have
structured its proposal differently to be competitive. As we concluded in
MTS Sys. Corp., supra, at 5, we have no basis to dispute the contention that
a change in the set-aside status of this procurement might have resulted in
a change in PCI's proposal.

RECOMMENDATION

We recommend that the agency terminate for the convenience of the government
the contract awarded to Day Leather because that firm's proposal could not
be selected for award under the solicitation here. At this juncture,
however, we do not recommend that the agency award a contract under the
solicitation to PCI.

During the course of this protest, the agency indicated that it "mistakenly
included the small business set-aside clause in the solicitation without
realizing that it had a domestic-source provision, which was inconsistent
with UNICOR's needs for this procurement." Agency Report at 5. Since it
appears the agency may wish to revisit the decision to set aside this
procurement for small business, we note the following options available to
UNICOR: (1) conclude that this procurement was appropriately conducted as a
small business set-aside, in which case only offers of domestic leather are
eligible for award, and award should be made to PCI; (2) conclude that the
procurement should be conducted as a small business set aside, but request a
waiver, if appropriate, of the requirement for domestic products from the
Small Business Administration (see FAR sect. 19.102(f)(5); 13 C.F.R.
sect. 121.406(b)(3) (2000)), and resolicit; or (3) conclude that the procurement
should be conducted on a non-restricted basis, and resolicit.

We also recommend that the protester be reimbursed the reasonable costs of
filing and pursing its protest, including attorneys' fees. 4 C.F.R. sect.
21.8(d)(1). In accordance with 4 C.F.R. sect. 21.8(f)(1), PCI's certified claim
for such costs, detailing the time expended and the costs incurred, must be
submitted directly to the agency within 60 days after receipt of this
decision.

The protest is sustained.

Robert P. Murphy

General Counsel

Notes

1. As the protester points out, the above-indicated FAR clauses incorporated
by reference were revised and renumbered effective February 2000. Federal
Acquisition Circular 97-15, Feb. 25, 2000. The solicitation, although issued
in April 2000, referenced the obsolete clauses that were in effect prior to
February 2000.

2. For the record, PCI's General Manager explains that he contacted the CO
about the domestic source requirement after the agency announced its
selection of Day Leather--and he submits copies of written follow-up
questions on this subject that were sent to the CO's supervisor. Id. at 2-3,
attach.

3. We note that Day Leather offered no support for the CO's claim that she
orally advised it that foreign leather would be accepted, but instead
described a similar conversation with a different CO on an earlier
procurement. Intervenor's Comments, June 26, 2000, at 4-5. In addition, we
do not agree that information from earlier procurements can be used to alter
the plain meaning of the solicitation here. See 440 East 62nd St. Co.,
B-276787, July 24, 1997, 97-2 CPD para. 30 at 4 n.5.