TITLE: Farmland National Beef, B-286607; B-286607.2, January 24, 2001
BNUMBER: B-286607; B-286607.2
DATE: January 24, 2001
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Farmland National Beef, B-286607; B-286607.2, January 24, 2001
Decision
Matter of: Farmland National Beef
File: B-286607; B-286607.2
Date: January 24, 2001
James H. Roberts, III, Esq., Manatt Phelps & Phillips, for the protester.
Eliot J. Clark, Jr., Esq., Defense Commissary Agency, for the agency.
Harvey G. Sherzer, Esq., Scott Arnold, Esq., and Mitchel Neurock, Esq.,
Howrey, Simon, Arnold & White, for Excel Corporation, an intervenor
Glenn G. Wolcott, Esq., and Michael R. Golden, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
Where awardee's proposal to provide beef products to Department of Defense
commissaries stated that the awardee was taking "exception" to the
solicitation's mandatory delivery schedule, and the awardee's subsequent
submissions further explained that it was proposing a "flexible" schedule
under which the awardee would determine on a week-by-week basis when
deliveries would be made to the various commissaries, award was improper in
that the awardee's proposal failed to conform to a material solicitation
requirement.
DECISION
Farmland National Beef (FNB) protests the Defense Commissary Agency's
(DeCA) award of a contract to Excel Corporation under request for proposals
(RFP) No. DECA02-00-R-0007 for the sale and delivery of beef to commissaries
in the northern area of DeCA's Eastern Region. FNB protests the award on the
basis that the agency improperly evaluated FNB's and Excel's proposals with
regard to past performance, and that Excel's proposal took exception to the
solicitation's delivery schedule requirements. [1]
We sustain the protest.
BACKGROUND
The solicitation at issue was published on July 6, 2000, and sought
proposals to provide all fresh beef products necessary to support specified
commissaries within DeCA's Eastern Region. [2] The solicitation contemplated
the award of a contract (or contracts) covering each of the four commissary
groups for a 1-year base period with two 1-year option periods. The
estimated value of the total procurement was slightly over $230 million.
Section B of the solicitation lists the various types and estimated
quantities of beef products for which offerors were required to propose
fixed prices by commissary group and contract period. The solicitation
contemplates weekly deliveries to the commissaries and contains a detailed
delivery schedule which lists each commissary and identifies the days of the
week, along with specific times of day, when deliveries are required. [3]
RFP at 95-115. The solicitation expressly provides that "[p]roducts shall be
delivered in accordance with the Delivery Schedule." RFP at 63.
Offerors were advised that proposals would be evaluated on the basis of
technical capability, [4] past performance, [5] and price, that technical
capability and past performance were equally important, and that price was
significantly more important than technical capability and past performance
combined. RFP at 93-94. As amended, the solicitation required that proposals
be submitted by August 4.
Four offerors, including FNB and Excel, submitted proposals by the specified
closing date. Excel's proposal included a letter with the following
statement:
Ladies and Gentlemen:
In regards to solicitation DECA02-00-R-0007 the following exceptions to your
request are brought to your attention. [Emphasis added.]
. . . . .
6. In order to maximize freight rates and coordinate deliveries we would
like to adjust the delivery schedules as needed to make routing of
orders more orderly and economically. We will try to accommodate the
original delivery dates and times whenever possible. By doing this we
will avoid excess cost for delivery and pass this savings on to DECA.
We realize this may take a short time period of adjustment by the
commissaries but we feel the savings will off set the changes.
Agency Report, Tab 8, Letter from Excel to DeCA (Aug. 3, 2000).
Initial proposals were evaluated by a technical review board with the
following results:
Max. Score Excel FNB
Technical
Capabilites
Experience [deleted] [deleted] [deleted]
Quality Control [deleted] [deleted] [deleted]
Distribution Plan [deleted] [deleted] [deleted]
Additional Support [deleted] [deleted] [deleted]
Past Performance
Timeliness of [deleted] [deleted] [deleted]
Deliveries
Conformance with [deleted] [deleted] [deleted]
Specs
Customer [deleted] [deleted] [deleted]
Satisfaction
Total Score [deleted] [deleted] [deleted]
Agency Report, Tab 10, Summary Rating Sheets.
FNB's initial proposal offered a total evaluated price of [deleted]; Excel's
initial proposal offered a total evaluated price of [deleted].
Upon reviewing the proposals, the agency concluded that those submitted by
Excel, FNB, and a third offeror were the most highly rated, established a
competitive range consisting of those three proposals, and prepared written
discussion questions for each competitive range offeror. In a letter
telecopied to Excel on August 14, the agency stated:
This letter opens discussions regarding your proposal. During review of your
offer [deleted] deficiencies and [deleted] clarifications were noted and
require resolution.
Please clarify the following: [identification of [deleted] items for which
clarification was sought].
. . . . .
Please resolve the following deficiencies. . . . In the letter accompanying
your offer ([paragraph] #6), you mention "adjust the delivery schedules as
needed to make routing of orders more orderly and economical." "We will try
to accommodate the original delivery dates and time whenever possible." A
clearer explanation is necessary. Are you accepting the delivery schedule as
stated?
Agency Report, Tab 8, Letter from DeCA to Excel (Aug. 14, 2000).
Excel telecopied its response to DeCA that same day, stating:
Following are clarifications to solicitation DeCA02-00-R-0007 that you faxed
to me. I will try to make all of the clarifications and attempt to take
appropriate action on the deficiencies.
. . . . .
9. The comment on the delivery schedule is an attempt to keep costs as low
as possible for DECA. Whenever possible we propose to [deleted]. Our
proposal is to simply adjust delivery date and time to make it more
efficient for all parties. Every effort will be made to accommodate the
original delivery schedule first. We can notify the commissaries as the
orders are put together when to expect delivery. This would be done
normally on the Thurs. afternoon or Friday morning prior to delivery.
[Emphasis added.]
Agency Report, Tab 8, Letter From Excel to DeCA (Aug. 14, 2000)
After reviewing Excel's response, the contracting officer, contract
specialist, and technical review board members engaged in internal
discussions regarding Excel's proposal to "adjust" the solicitation's
delivery schedule. The contract specialist documented these conversations in
a memorandum to the file, stating in part: "Today, I gave a copy of [Excel's
August 14 response] to all three Technical Review Board Members to review .
. . . [T]hey had a big problem with altering of the delivery schedule."
Agency Report, Tab 8, Contract Specialist's Memorandum to the File (August
15, 2000). One of the technical review board members described his concerns
in an e-mail message to the contract specialist and the other review board
members, stating: "[T]hey [Excel] continue to talk around pre-determined
delivery schedules. I would have expected them to say we will comply with
all delivery schedules." Agency Report, Tab 8, E-mail from Technical Review
Board Member to Contract Specialist (Aug. 15, 2000). At the hearing
conducted by GAO in connection with this protest, [6] the contracting
officer recalled discussing her concerns with the contract specialist and
advising him as follows: "The delivery schedule represents when the
commissaries need the product. That is of paramount importance
operationally." Video Transcript (VT) at 9:20. The contracting officer
further explained that an example of her concerns was that Excel would
"decide[] to deliver on a Tuesday when the commissary needs the delivery on
a Monday." Agency Report, Tab 8, Contract Specialist's Memorandum to the
File (Aug. 15, 2000); VT at 9:20-21.
By letter to Excel dated August 22, DeCA again raised the issue of Excel's
proposed delivery schedule, requesting that Excel identify the specific
adjustments sought and asking "please provide an alternate delivery
schedule, showing commissaries, days and times of delivery." Agency Report,
Tab 8, Letter from DeCA to Excel (Aug. 22, 2000). Excel never provided the
type of information the agency had requested. Testimony of Contracting
Officer, VT at 9:44. Rather, by letter dated August 22, Excel confirmed
that, rather than binding itself to any pre-determined schedule, Excel was
proposing a "flexible" delivery schedule, under which Excel would, on a
week-by-week basis, make the final determination as to the day and time that
delivery to each commissary would occur, and that, following Excel's weekly
determination, the commissaries would be notified. Specifically, in that
letter Excel stated:
In my letter attached to our final revision, paragraph 9, I mentioned
alternative delivery schedules. As a point of clarification, what I was
proposing was a flexible delivery schedule.
. . . . .
It is EXCEL's intent to deliver orders for the military as close to the
original deliver[y] time as possible. There will be times when that will not
be possible and delivery times and possibly dates will need to be flexible.
By dates, I refer that the shipment may deliver Tues. instead of Mon. We do
this in an effort to give all of our customers the best service available
while keeping the costs as low as possible. When your orders are routed we
will contact the commissaries to confirm the delivery day and approximate
time.[ [7]] [Emphasis added.]
Agency Report, Tab 8, Letter from Excel to DeCA (Aug. 22, 2000).
Finally, Excel elaborated that if its proposal were to include a commitment
to comply with the solicitation's delivery requirements, Excel would have to
alter the manner in which it had proposed to perform the contract and
increase its price. Specifically, Excel stated:
We can guarantee deliver[y] by your schedule but that will add 2 factors
that we are not including in our proposal. One, it would mean [deleted]. . .
. Two, it would add cost to the bases [deleted]. [Emphasis added.]
Id.
During the morning of August 29, the contracting officer, contract
specialist, and technical review board chair placed a telephone call to the
Excel representative responsible for Excel's proposal, during which the
agency personnel, yet again, questioned Excel's proposed delivery schedule.
The Excel representative again discussed its proposal in terms of a
"flexible" schedule. The contract specialist documented that conversation
with another memorandum to the file, stating:
In regards to the delivery schedule, [Excel] said that they would notify
stores of late deliveries. [Excel's representative] also stated that they
would try to adhere to the delivery schedule as best as they possibly can.
He also added that we might have to be flexible on delivery times.
Agency Report, Tab 8, Memorandum for the Record (Aug. 29, 2000).
At the GAO hearing, the contracting officer stated that, following the
telephone call to Excel in the morning of August 29, she initiated a second
call to Excel that afternoon in which the other DeCA personnel did not
participate. VT at 9:58. According to the contracting officer, during her
afternoon call, the Excel representative unconditionally agreed to comply
with the solicitation's delivery schedule. VT at 9:59-10:00. Excel did not
submit any written confirmation of this change to its proposal, nor did the
contracting officer prepare any contemporaneous documentation of the call.
The record is clear that Excel's letter dated August 22 was its final
written submission discussing the delivery schedule requirements.
On the basis of the contracting officer's description of her afternoon
telephone conversation with the Excel representative, the agency concluded
that Excel's proposal was now acceptable. [8] Additionally, based on the
contracting officer's description of this telephone call, the technical
review board chair increased Excel's technical score under the evaluation
subfactor "distribution plan" from [deleted] points to [deleted] points.
Following the agency's adjustment to Excel's technical rating, Excel's total
score for non-price factors was [deleted] and FNB's total score for
non-price factors was [deleted]. The final evaluated prices proposed by FNB
and Excel for each of the four groups were as follows:
Excel FNB
Group 1 [deleted] [deleted]
Group 2 [deleted] [deleted]
Group 3 [deleted] [deleted]
Group 4 [deleted] [deleted]
Agency Report, Tab 12, Source Selection Decision Summary, at 11-12.
The agency performed a best value analysis for each of the four groups. With
regard to groups 3 and 4, the contracting officer determined that Excel's
proposal offered a better value then FNB's because [deleted]. With regard to
groups 1 and 2, [deleted], the contracting officer determined that
[deleted], but noted that, [deleted]. Agency Report, Tab11, Source Selection
Memorandum, at 1-2. The contracting officer concluded: "[deleted],
therefore, Excel was determined to offer the best value for Groups 1 and 2
also." Agency Report, Tab 12, Source Selection Decision, at 15.
On October 11, the agency awarded a contract to Excel for all four groups.
This protest followed.
DISCUSSION
FNB protests that award to Excel was improper because Excel took specific
exception to the solicitation's stated delivery schedule requirements.
We agree. [9]
It is well settled that, in a negotiated procurement, a proposal that fails
to conform to one or more of the solicitation's material requirements is
technically unacceptable and cannot form the basis for an award. Marine
Pollution Control Corp., B-270172, Feb. 13, 1996, 96-1 CPD para. 73 at 2-3.
Here, the solicitation specifically provided that "[p]roducts shall be
delivered in accordance with the Delivery Schedule," RFP at 63, and there is
no dispute that the delivery schedule provision constituted a material
solicitation requirement. VT at 9:57-58. As discussed above, Excel's initial
proposal stated that it was taking "exception" to the solicitation's
pre-determined delivery schedule, offering instead to perform under a
"flexible" schedule. [10] Excel's subsequent submissions made clear that it
was proposing delivery terms under which Excel would "adjust" the
solicitation's delivery schedule on an "as needed" basis in order to make
the routing of orders more efficient and economical for Excel, and then, on
a weekly basis, would notify the commissaries as to the day and time that
deliveries would occur. In evaluating Excel's initial proposal, the agency
recognized the alternative delivery schedule as one of [deleted]
"deficiencies" in the proposal. Letter from DeCA to Excel (Aug. 14, 2000).
Further, if there could have been any reasonable doubt about whether, in
fact, Excel's proposal offered to comply with the solicitation's
pre-determined delivery schedule, such doubt was expressly removed by Excel
in its submission of August 22, wherein it stated that Excel could perform
as required by the solicitation, but "that will add 2 factors that we are
not including in our proposal." (Emphasis added.) Letter from Excel to DeCA
(Aug. 22, 2000). Excel went on to identify the two aspects of its proposal
that it would have to alter in order to accommodate a commitment to comply
with the solicitation's delivery schedule, stating: "One, it would mean
[deleted]. . . . Two, it would add cost [deleted]." Id.
Excel and the agency have argued that Excel's exceptions to the
solicitation's delivery schedule requirements could reasonably have been
interpreted as relating only to "unforeseen events," that is, "weather [or]
mechanical failure." Supplemental Contracting Officer's Statement at 3; VT
at 9:29-36. This assertion is without merit. As discussed above, Excel's
proposed "flexible" delivery schedule specifically contemplated Excel's
weekly determination regarding which delivery dates and times would be most
efficient, and Excel planned to, following that weekly determination, notify
the commissaries "on Thurs[day] afternoon or Friday morning" as to when the
following week's deliveries would occur. Letter from Excel to DeCA (Aug. 14,
2000). Clearly, Excel's proposed "flexible" schedule was not based on
"unforeseen events" such as weather or mechanical failures. To the contrary,
Excel stated that its "flexible" schedule was based on its proposed
alternative method of contract performance.
In its post-hearing comments, counsel for Excel also asserts that "Excel
resolved any exception to the delivery schedule by orally modifying its
proposal to the Contracting Officer on the afternoon of August 29, 2000."
Excel Post-Hearing Comments at 5. We disagree. Excel could not effectively
"orally modify" the specific, detailed provisions of its written proposal
without timely submitting such modifications to the agency in writing. See,
e.g., Mil-Spec Contractors, Inc. v. U.S., 835 F.2d 865, 869 (Fed. Cir.
1987); SCM Corp. v. U.S., 595 F.2d 595, 597 (Ct. Cl. 1979).
In summary, it is clear that Excel did not offer to comply with a material
term of the solicitation and, thus, award on the basis of that nonconforming
proposal was improper. Further, in our view, FNB was prejudiced by the award
to Excel. As Excel specifically stated, if it were to agree to meet the
solicitation's stated delivery schedule requirements, it would have to
increase its price and [deleted]. Conversely, if FNB had been aware that it
could propose a "flexible" delivery schedule, it is reasonable to assume
that it could have lowered its proposed price. On this record, it is clear
that, but for the agency's improper award on the basis of Excel's
non-conforming proposal, FNB would have had a substantial chance of
receiving an award. See McDonald-Bradley, B-270126, Feb. 8, 1996, 96-1 CPD para.
54 at 3; Statistica, Inc. v. Christopher, 102 F.3d 1577, 1581 (Fed. Cir.
1996).
Finally, the agency and Excel assert that, in any event, FNB expressed a
similar exception to the solicitation requirements. We disagree. The
agency's and Excel's assertions in this regard are based entirely on an
exchange of letters between the agency and FNB concerning FNB's past
performance. Specifically, by letter dated September 14, 2000, the agency
advised FNB that "we have received adverse past performance information
regarding timeliness of deliveries," and stated, "[t]his provides you an
opportunity to respond to this past performance information." Agency Report,
Tab 5, Letter from DeCA to FNB (Sept. 14, 2000). By letter dated September
18, FNB responded, stating:
I would like to address the past performance items mentioned in your [Sept.
14] letter.
. . . . .
DECA's method of direct purchase from the packers has provided the
[commissaries] with fresh product of excellent quality at very competitive
prices. The system, however, requires [less than load] deliveries of minimum
quantities from 2000 miles away. Unlike a local distributor, no packer can
guarantee that they will have no late deliveries or occasional shortages.
DECA is a highly preferred customer and [FNB] puts strong emphasis on
delivering all orders on time and with no shortages. Our record during the
current Northeast contract and over the last 25 years will bear this out.
Agency Report, Tab 5, Letter from FNB to DeCA (Sept. 18, 2000).
Clearly, FNB's explanation responding to critical past performance
information does not constitute a qualification of its commitment to be
prospectively bound to the solicitation's stated delivery schedule
requirements. The record reflects that the agency believed FNB's proposal
committed to meet the RFP's delivery schedule. Indeed, in explaining the
agency's rationale for discussing the delivery issue with Excel some four
separate times, but never raising this matter with the other competitive
range offerors, the contracting officer states that "there was no reason to
ask the same question of [FNB and the third competitive range offeror]. They
both apparently accepted the delivery schedule without reservation or
comment." Supplemental Contracting Officer's Statement at 3. Unlike Excel's
unambiguous statements that it was proposing to alter the solicitation's
stated requirements, FNB's explanation in response to questions concerning
past performance did not qualify its proposal.
The protest is sustained.
RECOMMENDATION
Based on the record, it appears the solicitation's pre-determined delivery
schedule may not reflect the agency's actual requirements. Accordingly, we
recommend that the agency review its needs and determine if the
solicitation's stated delivery requirements reflect its actual needs. In the
event they do not, the agency should amend the solicitation to reflect its
actual requirements, reopen negotiations with all competitive range
offerors, and award a contract or contracts on the basis of the final
revised proposal or proposals offering the best value to the government,
consistent with the amended solicitation. If an offeror other than Excel is
selected for award of one or more of the commissary groups, the agency
should terminate Excel's contract in whole or in part.
In the event the agency concludes that the solicitation's stated delivery
requirements do reflect its actual needs, we see no basis for seeking
revisions to the final proposals submitted by the two remaining competitive
range offerors. Accordingly, the agency should select the proposal that
represents the best value to the government for each of the four commissary
groups from the two proposals remaining in the competitive range and award a
contract or contracts consistent with those determinations. [11] We also
recommend that the agency reimburse the protester for its costs of filing
and pursuing the protest regarding Excel's compliance with the delivery
schedule requirements, including reasonable attorneys' fees. Bid Protest
Regulations, 4 C.F.R. sect. 21.8(d)(1) (2000). In accordance with section 21.8
of our Regulations, FNB's certified claims for such costs, detailing the
time expended and the costs incurred, must be submitted directly to the
agency within 60 days after receipt of the decision.
Anthony H. Gamboa
Acting General Counsel
Notes
1. FNB's initial protest challenged the past performance evaluations. Upon
reviewing the agency report, FNB protested Excel's exception to the delivery
requirements.
2. The commissaries were divided into four geographical groups. Group 1
consisted of specified commissaries in Pennsylvania, Kentucky, Missouri,
Illinois, Indiana, Michigan and Ohio. Group 2 consisted of specified
commissaries in Virginia and Keflavik, Iceland (with deliveries to be made
to a point in Norfolk, Virgina). Group 3 consisted of specified commissaries
in Maryland and Northern Virginia. Group 4 consisted of specified
commissaries in Maine, New York, New Jersey, Maine, Pennsylvania,
Connecticut and Rhode Island.
3. For example, the solicitation's delivery schedule requires that
deliveries to Fort Myer, Virginia must occur on Mondays between 7:00 a.m.
and 11:00 a.m., that deliveries to Rock Island, Illinois occur on Wednesdays
between 9:30 a.m. and 11:30 a.m., and that deliveries to Fort Monroe,
Virginia occur on Thursdays between 7:00 a.m. and 2:00 p.m. RFP at 95, 101,
106.
4. Under the technical capability factor, the solicitation identified the
following subfactors: experience, quality control, distribution plan and
additional support. RFP at 94.
5. Under the past performance factor, the solicitation identified the
following subfactors: timeliness of deliveries, conformance with
specifications and contract terms, and customer satisfaction. RFP at 94.
6. In resolving this protest, GAO conducted a hearing, recorded by
videotape, at which testimony was obtained from the contracting officer and
the technical review board chair.
7. This response essentially echoed Excel's August 14 submission, quoted
above, wherein it advised the agency as follows: "We can notify the
commissaries as the orders are put together when to expect delivery. This
would be done normally on the Thurs[day] afternoon or Friday morning prior
to delivery." Agency Report, Tab 8, Letter from Excel to DeCA (Aug. 14,
2000).
8. At the GAO hearing, the contracting officer testified that, following
Excel's August 22 submission, she viewed Excel's proposal as taking
exception to the solicitation's delivery schedule requirements. VT at 10:15.
9. FNB also protests the agency's evaluation with regard to the past
performance of FNB and Excel. In short, FNB complains that FNB's score of
[deleted] under the past performance subfactor "timeliness of deliveries"
(which fell within the range of scores the agency's evaluation scheme
describes adjectivally as "[deleted]") should have been higher, and that
Excel's score of [deleted] under that subfactor (which fell within the range
of scores the evaluation scheme identifies as "[deleted]") should have been
lower. We have reviewed the significant amount of past performance data
which the agency considered in its evaluation and find no merit in this
portion of FNB's protest.
10. In its initial proposal, Excel expressly recognized that it was
proposing to alter the solicitation requirements, stating: "[T]his may take
a short time period of adjustment by the commissaries[,] but we feel the
savings will off set the changes." Letter from Excel to DeCA (Aug. 3, 2000).
11. DeCA has expressed concern that our Office's sustaining the protest
could effectively leave the agency without any supplier of beef products for
its commissaries for a period of time. Either of our alternative
recommendations should be understood to permit the agency to take whatever
steps are reasonable and necessary to provide for an uninterrupted supply of
beef for its commissaries while expeditiously implementing the
recommendations.