TITLE:  Consortium Argenbright Security-Katrantzos Security, B-288126; B-288126.2, September 26, 2001
BNUMBER:  B-288126; B-288126.2
DATE:  September 26, 2001
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Consortium Argenbright Security-Katrantzos Security, B-288126; B-288126.2,
September 26, 2001

Decision

Matter of: Consortium Argenbright Security-Katrantzos Security

File: B-288126; B-288126.2

Date: September 26, 2001

Thomas P. McLish, Esq., Scott M. Heimberg, Esq., and Michael S. Caldwell,
Esq., Akin, Gump, Strauss, Hauer & Feld, for the protester.

Dennis J. Gallagher, Esq., Department of State, 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

Request for proposals providing for the submission of offers priced in local
currency cannot reasonably be interpreted as prohibiting the submission of
offers priced in euros where the euro has been adopted as a country's
national currency.

DECISION

The consortium of Argenbright Security and Katrantzos Security (AS-KS)
protests the award of a contract to the joint venture of Wackenhut
International Inc. and Wackenhut Security Hellas S.A. under request for
proposals (RFP) No. SGR100-00-R-0002, issued by the Department of State for
guard services for the U.S. Embassy in Athens, Greece. The protester
contends that its proposal was improperly rejected as non-compliant because
it was priced in euros.

We sustain the protest.

The RFP, which was issued on December 11, 2000, contemplated the award of a
time-and-materials contract for a base and 4 option years. The solicitation
advised offerors that, as required by 22 U.S.C. sect. 4864 (1994 and Supp. IV
1998), the government would award the contract to the technically
acceptable, responsible offeror with the lowest evaluated price. The
solicitation further advised that award might be made on the basis of
initial proposals, without discussions. Evaluation factors to be considered
in the determination of technical acceptability were management plan,
experience and past performance, and preliminary transition plan. The RFP
provided for the submission of offers in U.S. dollars or local currency.

Consistent with the terms of 22 U.S.C. sect. 4864(c), the RFP also provided that
for evaluation purposes, the government would reduce the price of each offer
determined to be eligible for U.S. preference by 10 percent.

Six offerors submitted proposals by the April 19, 2001 closing date. AS-KS
and another offeror priced their offers in euros; the other four offerors
priced their offers in Greek drachmas or U.S. dollars. The contracting
officer determined that the euro-priced offers were non-compliant with the
solicitation provision requiring the submission of prices in U.S. dollars or
local currency. Of the remaining four proposals, Wackenhut's was the lowest
in price. It was also technically acceptable. On June 7, the contracting
officer awarded a contract to Wackenhut, without conducting discussions.

AS-KS argues that it was not inconsistent with the requirements of the RFP
for it to have priced its offer in euros. As discussed below, we agree.

Section B.1.1 of the RFP provided as follows with regard to the currency to
be used in the pricing of offers:

Offers and Payment in U.S. Dollars. U.S. firms are eligible to be paid in
U.S. dollars. U.S. firms desiring to be paid in U.S. dollars should submit
their offers in U.S. dollars. A U.S. firm is defined as a company which
operates as a corporation incorporated under the laws of a state within the
United States. NOTE: The definition of U.S. Firm for payment purposes should
not be confused with the definition of U.S. Person for purpose of applying
U.S. preference in the proposal evaluation.

Foreign Firms. Any firm which is not a U.S. firm is a foreign firm. Any firm
that does not meet the above definition of U.S. firm shall submit its prices
and receive payment in local currency.

At the time offers were received, the euro was the official currency of
Greece, the Greek parliament having on September 27, 2000 enacted
legislation providing that:

As from 1 January 2001 the euro shall substitute for the drachma as the
currency of Greece in accordance with the provisions of [governing
regulations of the Council of the European Union]. [1] Banknotes and coins
in drachmas shall continue to have the status of legal tender within the
Greek territory until 28 February 2002.

Law 2842/27/9/2000.

The agency maintains that despite the foregoing legislation establishing the
euro as the currency of Greece as of January 1, 2001, it intended "local
currency" for purposes of this solicitation to mean Greek drachmas only.
According to the agency, it conveyed that intent to offerors in sect. G.2.4 of
the RFP, which stated:

The Government will pay foreign firms (as defined in B.1.1) in Greek
Drachmae. The Government will pay U.S. firms in U.S. dollars if requested.

The agency maintains that by pricing its offer in euros, the protester took
exception to the foregoing clause; the agency further argues that the
requirement for payment in drachmas was material because the Embassy's
financial office currently has no mechanism in place to handle euro
transactions. The agency also argues that the protester recognized that the
terms of the solicitation ran contrary to its desire to submit a euro-priced
offer, as demonstrated by its posing of the following question to the
contracting officer prior to submission of its offer:

Question. Ref. Section B1.1 and Section G2.4: Since the base year of the
contract will end sometime in 2002, and in view of the introduction on
January 1, 2001 of the euro as the optional monetary unit in Greece and its
mandatory use beginning January 1, 2002, please confirm:

  a. That price quotations from and payments to foreign firms for the
     base and option years shall be in euros.
  b. That price quotations from and payments to U.S. firms for the base
     and option years shall be either in US dollars or euros.

The agency further maintains that its answer to the protester's question,
noted below, plainly indicated that the Embassy would not amend the
solicitation as the protester wished to provide for pricing and payment in
euros.

Answer. If the European Union (EU) requires that the Euro be used in all
commercial transactions by a mandated date, a one-time currency conversion
to the Euro will be made for a contract priced out in local currency only
(not US Dollars). The rate used to make the conversion will be established
by the European Central Bank on the date conversion is to occur. No exchange
rate adjustments shall be made after the initial conversion. [2]

First, we do not agree with the agency that it was clear from sect. G.2.4 that
it intended "local currency," as that term is used in sect. B.1.1, to mean Greek
drachmas only. Section G.2.4 refers solely to payment and says nothing about
pricing. Since there is a fixed conversion rate between euros and drachmas,
services could be priced in drachmas but paid in euros, or vice versa
(indeed, once the drachma is withdrawn from circulation in a few months,
payments will have to be made in euros, even if the contractor used drachmas
in its pricing). Second, we do not agree that the protester's request for
confirmation that offers from foreign firms should be priced in euros
revealed that it recognized that the terms of the RFP ran contrary to its
desire to submit a euro-priced offer; instead, the protester's request
revealed that it recognized that sect. G.2.4, providing for contract payments in
Greek drachmas, was inconsistent with the Greek legislation discontinuing
use of the drachma and replacing it with the euro. Third, regarding the
agency's argument that its response to the protester's question indicated
that it did not intend to amend the solicitation to provide for pricing and
payment in euros, while the agency's response made clear that the pricing of
offers from foreign firms in euros was not required (since drachma-priced
contracts would be converted to euros once the use of drachmas was
discontinued), it did not prohibit pricing in euros.

Regarding the agency's argument that by pricing in euros, AS-KS took
exception to sect. G.2.4, as modified by sect. B.11, providing for payment to
foreign firms in Greek drachmas until acceptance of the drachma as legal
tender is discontinued, we see no reason that the Embassy would be precluded
from paying in drachmas (until use of the drachma is discontinued in early
2002) a contractor whose offer was priced in euros. Again, the fact that
there is a fixed exchange rate makes the conversion from drachma pricing to
euro payments (or vice versa) a simple matter of arithmetic.

In sum, AS-KS's euro-priced offer was not inconsistent with the requirements
of the solicitation, and the agency acted improperly in rejecting it on that
basis. We reach that conclusion because (1) the RFP provided for the pricing
of offers from foreign firms in local currency; (2) the Greek parliament had
passed legislation providing that the euro would substitute for the drachma
as the national currency of Greece as of January 1, 2001, i.e., prior to the
date proposals were due; (3) the fixed conversion rate between drachmas and
euros meant that the difference between pricing in drachmas and euros was
immaterial; and (4) the protester did not take exception to the solicitation
clause providing for payment in drachmas by pricing its offer in euros.

The agency argues that even had the protester's proposal not been rejected
for its euro pricing, it would not have been in line for award because it
did not establish the protester's entitlement to the U.S.-firm price
evaluation preference of 10 percent, without which it would not have been
lower in price than Wackenhut's offer. [3] In the alternative, the agency
argues that even had AS-KS's proposal not been rejected for its euro
pricing, it would not have been in line for award because it was not
technically acceptable as submitted, and the agency was under no obligation
to conduct discussions. Accordingly, the agency argues that the protester
was not prejudiced by the rejection of its proposal based on its euro
pricing.

To conclude, as the agency argues, that the protester was not prejudiced, we
must conclude that there is no reasonable possibility that the contracting
officer would have decided to hold discussions had he recognized that the
RFP did not prohibit the pricing of offers in euros and that with the 10
percent preference, AS-KS's offer would be low. See McDonald-Bradley,
B-270126, Feb. 8, 1996, 96-1 CPD para. 54 at 3; see also Statistica, Inc. v.
Christopher, 102 F.3d 1577, 1581 (Fed. Cir. 1996). The agency's post-protest
assertion that it was not obligated to conduct discussions, while accurate,
simply does not support this conclusion.

With regard to the price evaluation preference, the record shows that,
although AS-KS certified that it was a joint venture in the "Statement of
Qualifications for Purposes of Obtaining Preference as a U.S. Person" that
it submitted as part of its proposal, the agency determined that its legal
status was uncertain because elsewhere in its proposal, the protester stated
that it had created the consortium as "a separate entity from [its]
established joint venture." The agency interpreted this reference as raising
the possibility that the consortium was a new corporation chartered under
Greek law, in which case it would not qualify as a U.S. person joint

venture entitled to the evaluation preference. See Wackenhut Int'l,
Inc./Instituto
di Viglanza Citta di Roma S.r.l. (Mettronotte)--a joint venture, B-251398.2,
Jan. 26, 1996, 96-1 CPD para. 25 at 2-3, recon. den., United Mondial Int'l
S.r.l.; Dep't of State--Recon., B-251398.3, B-251398.4, May 21, 1996, 96-1
CPD para. 245. All that would have been required to clarify the uncertainty as
to the protester's legal status would have been the submission of a copy of
its joint venture agreement.

With regard to the technical acceptability of the protester's proposal, the
record shows that the evaluators identified concerns in such areas as the
protester's proposed Guard Force Commander and the prior experience of the
Greek partner. The evaluators clearly regarded the weaknesses in the
proposal as curable, however, given that they found the proposal, while
technically unacceptable, capable of being made acceptable.

Under these circumstances, it is possible that the contracting officer would
have elected to conduct discussions to clarify AS-KS's eligibility for the
10 percent U.S. preference and to resolve the technical weaknesses in its
proposal. Accordingly, we conclude that there is a reasonable possibility
that the protester suffered prejudice as a result of the agency's improper
rejection of its proposal based on its pricing in euros.

We recommend that the contracting officer make a determination as to whether
it would be in the agency's best interest to proceed with discussions with
AS-KS, given that such discussions might result in the protester's offer
becoming the lowest-priced, technically acceptable one. If the contracting
officer does decide to proceed with such discussions, and as a result,
AS-KS's offer is determined to be the lowest-priced, technically acceptable
offer, and AS-KS is otherwise determined to be responsible, we recommend
that the agency terminate the award to Wackenhut and make award to AS-KS. We
also recommend that the agency reimburse the protester

for its costs of filing and pursuing the protest, including attorneys' fees.
Bid Protest Regulations, 4 C.F.R. sect. 21.8(d)(1) (2001). In accordance with
section 21.8(f) of our Regulations, AS-KS's 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 the decision.

The protest is sustained.

Anthony H. Gamboa

General Counsel

Notes

1. Articles 2 and 3 of European Council Regulation No. 974/98 provided that
beginning on January 1, 1999, the currency of the participating member
states would be the euro, and that the euro would be substituted for the
currency of each participating member state at a fixed conversion rate.
Articles 10, 11, and 15 of the regulation further provided that as of
December 31, 2001, only banknotes and coins denominated in euros would have
the status of legal tender in all member states, although banknotes and
coins denominated in a national currency unit could remain legal tender
within their territorial limits for up to 6 months thereafter.

2. The protester's question and the agency's response to it were furnished
to all potential offerors, but were not incorporated into the RFP. The
agency did, however, add the following clause to the RFP to reflect its
response:

B.11 Conversion to EURO – For a contract award priced out in local
currency a one time currency conversion will be made upon the mandated date
for conversion to the EURO. The rate for the conversion will be established
by the European Central Bank on the date conversion is to occur. No exchange
rate adjustments shall be made after the initial conversion.

Amendment No. 001.

3. As noted above, the solicitation provided that the price of each offer
determined to be eligible for U.S. preference would be reduced by 10 percent
for evaluation purposes. RFP sect.sect. M.3, M.4. Wackenhut's offer of
10,805,946,065 drachma, which was equivalent to $28,264,879, was determined
to be eligible for the preference; thus, it was reduced by 10 percent, to
$25,438,388, for evaluation purposes. AS-KS submitted a total price of
[deleted] euros, which, when converted at the applicable rate, equals
[deleted]. If that amount were further reduced by 10 percent, AS-KS's
evaluated price would become [deleted].