TITLE:  Sun Chemical Corporation--Costs, B-288466.4, December 7, 2001
BNUMBER:  B-288466.4
DATE:  December 7, 2001
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Decision

Matter of: Sun Chemical Corporation--Costs

File: B-288466.4

Date: December 7, 2001

David D. DiBari, Esq., Carlos E. Provencio, Esq., and Timothy P. Peterson,
Esq., Clifford Chance Rogers & Wells, for the protester.

Scott Arnold, Esq., and Harvey G. Sherzer, Esq., Greenberg Traurig, for
SICPA Securink Corporation, an intervenor.

Marvin Kent Gibbs, Esq., Department of the Treasury, Bureau of Engraving and
Printing, for the agency.

Tania Calhoun, Esq., and Christine S. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

Request for reimbursement of protest costs is denied where agency decides to
take corrective action in response to supplemental protest allegation but
the issue on which the corrective action was based is not clearly
meritorious.

DECISION

Sun Chemical Corporation requests that our Office recommend that it recover
the costs, including attorneys' fees, incurred in connection with one of its
supplemental protest allegations challenging the award of a contract to
SICPA Securink Corporation under request for proposals (RFP) No. BEP-01-04,
issued by the Department of the Treasury, Bureau of Engraving and Printing
(BEP), to obtain black and green intaglio ink and varnish for application to
new United States paper currency.

We deny the request.

Each offeror was required to submit, as part of its offer, samples of the
black ink, green ink, and varnish it proposed to furnish if awarded the
contract. RFP sect. L at 52. Samples were to be tested and evaluated in
accordance with the factors listed in section M of the RFP to determine
compliance with all of the characteristics listed for examination in the
solicitation. Id. at 53. In this regard, while the solicitation required the
supplier to be responsible for most testing of these materials to ensure
their compliance with the stated performance requirements, RFP Specification

para. 4.2.1, the BEP assumed the responsibility for evaluating the inks and
varnish on BEP equipment for compliance with the requirements of RFP
Specification para. 3.5, "Printing Performance Requirements," and para. 3.6,
"Printed Work Requirements," since these evaluations necessitated the use of
BEP equipment. RFP Specification para. 4.2.4. Press trials were to be conducted
on an I-8 press, which runs at speeds of 8,000 sheets per hour, and on an
I-10 press, which runs at speeds of 10,000 sheets per hour. RFP
Specification para.para. 3.5.4 and 6.2.

Award was to be made to the firm whose proposal was most advantageous to the
government, considering price and other factors. These other factors
included three mandatory technical evaluation criteria against which
offerors' samples were to be evaluated on a pass/fail basis. If a sample
failed to meet any mandatory criterion, the technical evaluation was to
"cease immediately" and "further evaluation [would] not be considered." RFP
sect. M.1.(a)(3)A.I. Two of the three mandatory criteria were applicable to the
inks. The first criterion, "Health and Safety," stated both that the inks
must not emit hazardous substances during printing or any other production
or storage process, and that ink samples causing any adverse effect upon BEP
employees would be rejected as technically unacceptable. [1] The RFP did not
identify a particular test to determine compliance with the health and
safety criteria, but treated compliance as a matter incidental to the entire
evaluation and testing process. The second criterion, "Volatile Organic
Compounds (VOC) Content," stated that inks containing greater than 12.0% by
weight of VOCs would be rejected as technically unacceptable.

Samples that passed all of the mandatory criteria were to be evaluated
against two "gradable" criteria to determine the relative quality of each
offeror's performance with respect to the specification's printing and
processing requirements and its printed work requirements. Hence, while the
BEP was required to evaluate the samples against these requirements to
determine compliance with the minimum standards, for each of these gradable
criteria, the BEP was to evaluate each offeror's sample relative to other
offerors' samples and award the maximum number of points available to the
offeror providing the best overall performance.

SICPA and Sun were the only firms to submit offers by the February 9, 2001
closing date. SICPA, the incumbent supplier of these inks, submitted an
offer for "the same high quality Aqua ink system used today in BEP
production." SICPA Proposal Cover Letter at 1. The BEP's laboratory tests of
both offerors' samples demonstrated that they complied with applicable
requirements, including the mandatory criterion for VOC content of the inks.
The BEP scheduled press trials to evaluate offerors' ink samples against the
remaining technical evaluation criteria.

The BEP subjected both offerors' inks to press trials on an I-8 press. Sun's
green ink passed the preliminary evaluation notwithstanding some evidence
that it had adverse effects on BEP employees; the press trial logs for Sun's
black ink showed no evidence of adverse effects. The press trial log sheets
for both of SICPA's inks show that they performed in a manner consistent
with the production standards and mention no adverse effects on BEP
employees. The BEP commenced press trials on an I-10 press with Sun's green
ink. As explained in our decision denying the bulk of Sun's protest, Sun
Chemical Corp., B-288461 et al., Oct. 17, 2001, 2001 CPD para. __, the BEP found
that Sun's green ink had adverse effects on BEP employees. In accordance
with the RFP's terms, the BEP stopped further technical evaluation and
eliminated Sun's proposal from further consideration.

After Sun's ink was found technically unacceptable, the BEP waived further
testing and evaluation on SICPA's inks and found its proposal technically
acceptable. The basis for this finding was the conclusion that SICPA's
proposed inks were identical to those SICPA was currently providing BEP as
production inks for both presses, for which there had been no reports of
adverse effects. The contracting officer explained that SICPA's inks and
varnish met all of the mandatory criteria and performance requirements in
the initial phase of the press trials and that, as a result, the project
manager--who also served as chair of the technical evaluation panel--asked
that laboratory tests be performed on SICPA's samples. The contracting
officer stated that the results of these tests established that SICPA's
samples had the identical physical and chemical properties and VOC content
of the current production inks and varnish supplied by SICPA, which were
fully compliant with the specification requirements.

After it received the agency report on its initial protest, Sun filed a
supplemental protest in which it alleged that the BEP improperly failed to
subject SICPA's inks to the testing required to evaluate the inks and
varnish against all of the solicitation's technical evaluation criteria. In
its supplemental report, the BEP's position that SICPA's proposed inks were
"identical" to the production inks appeared to change. In her supplemental
statement, the contracting officer stated that she relied on SICPA's
statement that it was offering "the same high quality Aqua ink system used
today in BEP production," SICPA Proposal Cover Letter at 1, and that
analytical tests confirmed that SICPA's proposed ink met the physical
characteristics outlined in the specification and was technically
acceptable. Sun's supplemental comments pointed out this apparent change in
position, and we asked the agency for an explanation.

In response to our request, the BEP stated that the project manager
concluded SICPA's proposed inks were the same as the production inks SICPA
was providing under the prior contract for both presses based on a variety
of factors, including the fact that the formulation numbers for the samples
and the production inks were the same, the fact that the evaluations
conducted on the I-8 press showed that the sample inks performed
consistently with SICPA's production inks, and various laboratory tests. The
BEP nonetheless stated that it had decided to take corrective action by
completing the testing and evaluation of SICPA's ink samples in accordance
with the solicitation's terms. The BEP explained that, while the project
manager stood behind his belief that SICPA's sample ink was the same as its
production ink, the analytical tests conducted by the agency to confirm this
belief were inconclusive and reasonable experts could differ as to what the
results showed. We dismissed the allegation as academic based on the
agency's proposed corrective action. Sun asks that we recommend it recover
the costs incurred in connection with this supplemental protest allegation.

When an agency takes corrective action prior to our issuing a decision on
the merits, we may recommend that the protester recover the reasonable costs
of filing and pursuing the protest. 4 C.F.R. sect. 21.8(e) (2001). Under this
provision, we will recommend recovery of protest costs where, based on the
circumstances of the case, we conclude that the agency unduly delayed taking
corrective action in the face of a clearly meritorious protest.
Griner's-A-One Pipeline Servs., Inc.--Entitlement to Costs, B-255078.3, July
22, 1994, 94-2 CPD para. 41 at 5. For a protest to be clearly meritorious, the
issue involved must not be a close question. J.F. Taylor, Inc.--Entitlement
to Costs, B-266039.3, July 5, 1996, 96-2 CPD para. 5 at 3. Rather, the record
must establish that the agency prejudicially violated a procurement statute
or regulation. Millar Elevator Serv. Co.--Costs, B-281334.3, Aug. 23, 1999,
99-2 CPD para. 46 at 2. The fact that an agency decides to take corrective
action does not establish that a statute or regulation clearly has been
violated. J.F. Taylor, Inc.--Entitlement to Costs, supra. As explained
below, the circumstances of this case lead us to conclude that it is
inappropriate to recommend that the protester recover its protest costs.

The BEP contends that the allegation was not clearly meritorious because the
contracting officer had the discretion to waive completion of the testing
for SICPA after it was determined that it met the mandatory technical
criteria and after Sun's proposal was eliminated from the competitive range.
As support for its position that the contracting officer "has the authority
to avoid conducting evaluations," Opposition to Request for Costs at 2, the
BEP relies upon cases where we have held that agencies may reasonably waive
first article testing for firms that successfully produced the same or
similar items under prior agency contracts with materially similar
specifications. See, e.g., Marine Instrument Co., B-241292.3, Mar. 22, 1991,

91-1 CPD para. 317; Baird Corp., B-213233, Dec. 20, 1983, 84-1 CPD para. 8. The
agency's reliance on these cases is misplaced.

Unlike in solicitations contemplating first article testing, this
solicitation did not permit the government to waive the requirement to test
and evaluate samples under any scenario. The ink and varnish samples
submitted for testing and evaluation here were, for all practical purposes,
the offerors' technical proposals. The RFP required their submission as part
of the offer and provided for the conduct of specific tests--in the form of
both press trials and certain laboratory tests--for the purpose of
establishing compliance with the specifications and the mandatory technical
evaluation criteria. RFP sect. L at 53. Failure of the samples to meet the
mandatory technical criteria would result in the offeror's proposal being
determined technically unacceptable. Id. Hence, the evaluation and testing
of the samples was critical to the evaluation process and the determination
of technical acceptability. See Diverstech Co., B-270840, May 1, 1996, 96-1
CPD para. 209 at 2-3; Panasonic Communications & Sys. Co., B-239917, Oct. 10,
1990, 90-2 CPD para. 279 at 2-3.

The BEP correctly points out, however, that we will sustain a protest
objecting to a waiver of test requirements only where the protester
demonstrates that it was prejudiced thereby. McRae Indus., B-287609.2, July
20, 2001, 2001 CPD para. 127 at 5; SCI Sys., Inc., B-258786, Feb. 13, 1995, 95-1
CPD para. 80 at 6, recon. denied,

B-258786.2, July 17, 1995, 95-2 CPD para. 35. We concluded in our prior decision
that the BEP properly found Sun's proposal technically unacceptable. As a
result, for the agency's actions to be prejudicial, Sun must show that had
the BEP completed its testing and evaluation of SICPA's inks--that is, had
it run the press trials on an I-10 press and conducted a complete evaluation
to determine SICPA's compliance with the stated requirements for
examination, including the incidental health and safety criteria--it would
have found SICPA's proposal technically unacceptable, thereby compelling the
BEP to resolicit the requirement. Sun has made no such showing.

Again, the BEP waived complete testing and evaluation of SICPA's inks and
found its proposal technically acceptable because it concluded that SICPA's
proposed inks were identical to those SICPA was currently providing BEP as
production inks for both presses, for which there had been no reports of
adverse effects, and which were fully compliant with the specification
requirements. If the BEP's conclusion is correct, there is no basis to
conclude that SICPA's proposal would have been found technically
unacceptable had testing and evaluation been completed. However, whether or
not SICPA's proposed inks were the same as the production inks is not
readily apparent, but instead would require substantial further analysis, as
indicated, in part, by our Office's request for clarification during the
pendency of the protest. In other words, balancing the substantial evidence
in the record that the inks were the same against unanswered questions
regarding the interpretation of the BEP's analytical tests and the
similarity between the specifications applicable to this solicitation and
the prior contract, whether or not SICPA's inks would have been found
technically unacceptable was a close question.

Given that the existence of prejudice to Sun is, at a minimum, not readily
apparent, we conclude that the issue that prompted the corrective action was
a close question, and thus that the protest was not clearly meritorious on
this ground. Millar Elevator Serv. Co.--Costs, supra, at 3. Since a
prerequisite to a recommendation for the recovery of costs is that the
corrective action be taken in response to a clearly meritorious protest,
there is no basis on which to recommend that Sun recover its protest costs
in this case.

Anthony H. Gamboa

General Counsel

Notes

1. The third mandatory criterion imposed a similar health and safety
requirement for the varnish.