TITLE:  Cox & Associates CPAs--Costs, B-286753.3, June 19, 2001
BNUMBER:  B-286753.3
DATE:  June 19, 2001
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Cox & Associates CPAs--Costs, B-286753.3, June 19, 2001

Decision

Matter of: Cox & Associates CPAs--Costs

File: B-286753.3

Date: June 19, 2001

William E. Slade, Esq., Patton Boggs, for the protester.

Peter F. Pontzer, Esq., Department of Housing & Urban Development, 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

General Accounting Office recommends that protester be reimbursed the costs
of filing and pursuing its protest where the agency unduly delayed taking
corrective action in response to the protests, which were clearly
meritorious; corrective action was not taken until more than 3 months after
the initial protest was filed and only after the GAO attorney handling the
protest conducted "outcome prediction" alternative dispute resolution.

DECISION

Cox & Associates CPAs requests that we recommend that it be reimbursed the
costs of filing and pursuing its protest challenging the issuance of an
order to Deloitte & Touche under Deloitte's federal supply schedule (FSS)
contract. The order was issued pursuant to a request for quotations (RFQ)
issued by the Department of Housing and Urban Development (HUD) to perform
contractor compliance review services related to HUD's management and
marketing (M&M) contractors.

We recommend that HUD reimburse Cox its reasonable protest costs.

Pursuant to the National Housing Act, 12 U.S.C. sect. 1701 et seq., HUD provides
mortgage insurance for low and moderate income home buyers. In the event a
borrower defaults, HUD pays off the insurance and takes title to the home.
After HUD takes title to a home, the property is assigned to one of its M&M
contractors, who becomes responsible for inspecting, maintaining, and
selling the property; HUD retains ongoing responsibility to review the work
performed by its M&M contractors. The protest for which Cox seeks to recover
its costs challenged HUD's placement of an FSS task order to perform the
necessary oversight of HUD's M&M contractors.

On August 10, 2000, HUD sent the RFQ at issue to five FSS contractors,
including Cox and Deloitte. The RFQ provided that quotations must be
submitted in two volumes (a technical volume and a price volume), identified
various technical evaluation factors, [1] and stated that an order would be
placed with the schedule contractor whose quotation was evaluated as
providing the best value to the government.

In describing the technical information to be submitted, the RFQ
specifically required that quotations "Identify the Project Team (Key
Personnel) and demonstrate sufficient, qualified personnel and other
resources, staffing time allocations, subcontracting arrangements, etc."
Agency Report, Tab 7, at 2. Similarly, under the heading "Evaluation
Factors," the RFQ required that quotations must "demonstrate clear lines of
authority and accountabilities, staffing, physical resources and time
schedules for specific tasks." Agency Report, Tab 7, at 9.

On August 21, Cox and Deloitte submitted quotations responding to the RFQ
and, at the agency's request, each firm made an oral presentation on
September 7. Cox's quotation indicated an intent to perform the contract
with the support of two subcontractors--PricewaterhouseCoopers (PwC) and
Soza & Company, Ltd.--and provided specific information regarding staffing
allocation as required by the RFQ. Deloitte's quotation also contemplated
contract performance using two subcontractors--Bert Smith & Company and Fry,
Williams & Company; however, Deloitte's submission did not provide
information from which the agency could reasonably determine Deloitte's
intended staffing allocation and, also, did not identify the key personnel
being proposed to fill certain key manager positions.

Following oral presentations, the quotations were evaluated against the
three technical factors--management experience, conceptual approach and past
performance. Deloitte's quotation was evaluated as "exceptional" under each
of the factors. Cox's quotation was rated as "exceptional" with regard to
management experience and past performance, but only "very good" with regard
to conceptual approach. The basis for downgrading Cox's quotation was the
agency's perception that Cox had not allocated a sufficiently large portion
of contract performance to PwC, and that certain PwC staff were going to be
involved on only a "part-time" basis.

Following the initial evaluation, the agency sought information from each
vendor regarding various agency concerns. Although the primary basis for
downgrading Cox's proposal was the agency's concern that PwC would not be
sufficiently involved in contract performance, the agency did not identify
this concern in any of the questions presented to Cox.

On September 12, both vendors submitted their final quotations and,
thereafter, the agency performed a final evaluation. Consistent with the
earlier evaluation, Deloitte's quotation was rated "exceptional" under all
three factors; again, Cox's quotation was similarly rated "exceptional"
under the management experience and past performance factors, but only "very
good" with regard to conceptual approach. As in the previous evaluation, the
primary discriminator between the two quotations was the agency's
dissatisfaction with the projected amount of involvement by PwC. Although
Deloitte's quoted price was slightly higher than Cox's, the agency concluded
that Deloitte's quotation represented the best value to the government and
issued the task order to Deloitte. [2]

Cox filed its initial protest on November 3 challenging, among other things,
the agency's evaluation of its staffing allocation. On December 5, the
agency submitted its report responding to Cox's protest, maintaining that
the protest was without merit. Upon receipt of the evaluation record, Cox
filed a supplemental protest on December 18, maintaining that Deloitte's
quotation failed to provide the staff allocation information required by the
RFQ and, similarly, that Deloitte's quotation failed to comply with the RFQ
requirement to identify all key personnel. Cox noted that, in light of the
limited information Deloitte provided, the agency could not have reached any
reasonable conclusion regarding Deloitte's intended staffing allocation--the
very issue for which Cox was downgraded. On January 12, 2001, the agency
responded to Cox's supplemental protest, again asserting that all of Cox's
protest allegations were without merit.

Upon review of the record, this Office conducted various telephone
conference calls with counsel for the parties expressing concern regarding
various issues, including the fact that Deloitte's quotation failed to
identify all key personnel [3] and did not appear to provide a reasonable
basis for evaluating the staff allocation Deloitte intended to employ. On
February 2, the GAO attorney handling the protest conducted a telephone
conference with counsel for the parties during which the attorney engaged in
"outcome prediction" alternative dispute resolution, advising the parties
that it was his view that Cox's protests would be sustained. [4]

By letter dated February 5, HUD advised our Office that it intended to take
corrective action, specifically stating:

[HUD] will take corrective action . . . [including] the following actions:

  1. Allow both [Cox and Deloitte] to provide revised proposals that will
     address pricing and include all discounts, if any;
  2. Allow Cox the opportunity to address its weaknesses in Conceptual
     Approach;
  3. Allow Deloitte the opportunity to address staffing allocations; and
  4. Allow Deloitte the opportunity to identify managers for the Home
     Ownership Centers ("HOCs") and clarify its proposal as it relates to
     the HOCs.

Letter from HUD to GAO (Feb. 5, 2001).

Based on this statement of its proposed corrective action we dismissed the
protest as academic. Cox & Assocs. CPAs, B-286753, B-286753.2, Feb. 5, 2001.
Thereafter, Cox submitted this request that we recommend reimbursement of
its protest costs.

Where a procuring agency takes corrective action in response to a protest,
our Office may recommend that the agency reimburse the protester its protest
costs where, based on the circumstances of the case, we determine that the
agency unduly delayed taking correction action in the face of a clearly
meritorious protest, thereby

causing a protester to expend unnecessary time and resources to make further
use of the protest process and in order to obtain relief. Pemco Aeroplex,
Inc.--Recon. and Costs, B-275587.5, B-275587.6, Oct. 14, 1997, 97-2 CPD para.102
at 5. A protest is clearly meritorious when a reasonable agency inquiry into
the protest allegations would show facts disclosing the absence of a
defensible legal position. The Real Estate Ctr.--Costs, B-274081.7, Mar. 30,
1998, 98-1 CPD para. 105 at 3. Regarding the promptness of an agency's
corrective action, we generally do not consider corrective action to be
prompt where it is taken after the due date for the agency report. See CDIC,
Inc.--Entitlement to Costs, B-277526.2, Aug. 18, 1997, 97-2 CPD para.52 at 2.

Here, Deloitte's failure to identify all key personnel and to provide staff
allocation information, as required by the RFQ, resulted in the agency
having no basis for reaching any reasonable conclusion regarding the actual
staff allocation that Deloitte intended to employ. Nonetheless, the agency
relied on this very type of information provided by Cox to distinguish
between the two quotations, and concluded that, notwithstanding its higher
price, Deloitte's quotation represented the better value to the government.
On this record, Cox's protests were clearly meritorious and a reasonable
agency inquiry into the protest allegations should have disclosed the
absence of a defensible legal position. [5]

Regarding the promptness of the agency's corrective action, the agency
submitted reports responding to both Cox's initial and supplemental
protests, in each case asserting that the protest allegations were wholly
without merit. Cox was required to submit comments rebutting each of the
agency's reports on these protests. In short, although HUD ultimately took
corrective action, it declined to do so until more than 3 months after the
initial protest was filed. As noted above, we generally do not consider
corrective action to be prompt where it is taken after the due date for
submission of the agency report. CDIC, Inc.--Entitlement to Costs, supra.

In sum, on the basis of the record discussed above, we conclude that the
agency failed to take reasonably prompt corrective action despite Cox's
clearly meritorious protests. Accordingly, we recommend that Cox be
reimbursed the reasonable costs

of filing and pursuing its protests. Cox should submit its claim for costs,
detailing and certifying the time expended and costs incurred, directly to
HUD within 60 days of receipt of this decision.

Anthony H. Gamboa

General Counsel

Notes

1. The RFQ provided that the technical portion of the quotations would be
evaluated on the basis of management experience, conceptual approach, and
past performance.

2. After determining that Deloitte's quotation was most advantageous to the
government, the agency conducted further price negotiations with Deloitte.
These negotiations resulted in an additional price reduction by Deloitte,
which resulted in the task order being placed at a lower price than that
quoted by Cox.

3. The agency's final evaluation report specifically noted that: "The
[Deloitte] proposal did not name a key manager responsible for interfacing
with each [of the four] HOCs [home ownership centers]." Agency Report, Tab
12, at 9.

4. In outcome prediction ADR, the GAO attorney handling a protest convenes
the parties, at their request or at GAO's initiative, and informs the
parties what the GAO attorney believes the likely outcome will be, and the
reasons for that belief. A GAO attorney will engage in this form of ADR only
if she or he has a high degree of confidence regarding the outcome. Where
the party predicted to lose the protest takes action obviating the need for
a written decision (either the agency taking corrective action or the
protester withdrawing the protest), our Office closes the case. Although the
outcome prediction reflects the view of the GAO attorney, and generally that
of a supervisor as well, it is not an opinion of our Office, and it does not
bind our Office, should issuance of a written decision remain appropriate.

5. As noted above, the agency's own evaluation record expressly recognized
Deloitte's failure to comply with the RFQ requirement regarding key
personnel. The agency argues that Cox's protest should not be considered
"clearly meritorious" because it raised various issues which related to FSS
contracts--an area of federal procurement law which the agency maintains is
"in flux," "not clear", "unsettled," and "not clearly established." Agency
Motion Opposing Entitlement to Legal Fees, at 13-18. We disagree. As
discussed above, the bases for determining that Cox's protest was clearly
meritorious were not dependent upon issues unique to FSS contracts.