TITLE:  Royal Hawaiian Movers, Inc., B-288653, October 31, 2001
BNUMBER:  B-288653
DATE:  October 31, 2001
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Decision

Matter of: Royal Hawaiian Movers, Inc.

File: B-288653

Date: October 31, 2001

Marjorie A. Stender, Esq., Luce, Forward, Hamilton & Scripps, for the
protester.

Elizabeth Rivera, Esq., and Lori W.L. Chang, Esq., Department of the Navy,
for the agency.

Guy R. Pietrovito, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

DIGEST

Notwithstanding a provision in a request for proposals that price revisions
could only be made during a reverse auction, the agency reasonably
determined to request revised price proposals after the end of the auction,
in response to an agency-level protest, where the solicitation was ambiguous
concerning when the auction would end and the agency reasonably believed
that offerors may have been misled.

DECISION

Royal Hawaiian Movers, Inc. protests the agency's decision to obtain revised
proposals under request for proposals (RFP) No. N00604-01-R-A014, issued by
the Department of the Navy for drayage services in Hawaii. Royal Hawaiian
contends that it was entitled to award on the basis of its low price under a
reverse auction conducted by the agency prior to the request for revised
proposals.

We deny the protest.

The RFP, issued as a total small business set-aside, provided for the award
of fixed-price, requirements contract to perform drayage services (movement
of containers) between points on Oahu, Hawaii for a base year with 4 option
years. Offerors were informed that award would be made to the offeror
submitting the lowest-priced, technically acceptable offer.

The RFP provided for a reverse auction after the submission of initial price
proposals. Detailed instructions, including a "Bidder's Guide," were
provided for the conduct of the reverse auction. RFP amend. 5, at 2-21.
Among other things, offerors were informed that price revisions could be
made only during the reverse auction, which would last for 60 minutes. The
RFP also stated that the receipt of a revised offer within the last 5
minutes of the auction would extend the auction for an additional 5 minutes.
Id. After an extension of the auction period, the auction would continue
until either no revised offer was received during the last 5 minutes of the
auction as extended or all the available extensions were exhausted. Agency
Report at 5. The RFP stated that there would not be more than 50 extensions
available and that the auction would be conducted "from 9:00 AM through [no
later than] 2:00 PM Hawaii Standard Time (HST)." [1] RFP amend. No. 5, at 2.
Notwithstanding that the RFP stated that the auction would end at 2 p.m., as
the agency noted in its report, if all 50 extensions were employed, the
auction would actually not end until 2:10 p.m. Offerors were also informed
that the conduct of the reverse auction constituted discussions with the
offerors, and that the end of the last 5-minute period during which revised
offers were permitted was considered to be the close of the auction. Id. at
2-3.

The Navy received five proposals in response to the RFP. Only four offerors,
including Royal Hawaiian and Pacific Express, attended the required training
for the reverse auction and participated in the auction, however. Agency
Report at 4. The reverse auction began at the appointed time with a message
to the four offerors that the auction had begun. Agency Report, Tab 8,
Reverse Auction Messages and Prices, at 14.

Offers and revised offers were received through the first hour, and the
first extension was triggered by a revised offer made at 9:55:41 a.m.
(within the then last 5 minutes of the auction, that is, within the 9:55 to
10:00 a.m. period), which extended the auction to 10:05 a.m. As each
extension was triggered, the offerors received a message that the auction
had been extended by 5 minutes. See, e.g., id. at 12. Also, as the auction
progessed and was extended, offerors were periodically informed of the
number of extensions remaining.

In the final minutes prior to 2 p.m., several developments of relevance here
occurred. At 1:48:21 p.m. (prior to which event the auction was scheduled to
end at 1:50 p.m.), the agency received a revised offer that extended the
auction to 1:55 p.m. After the receipt of that offer, offerors were informed
that there were three extensions remaining. At 1:52:29 p.m., the Navy
received a revised offer from Pacific Express, which extended the auction
period to 2:00 p.m. At 1:55:21 p.m., the Navy received another revised offer
from Pacific Express, which extended the auction to 2:05 p.m. At 1:56:00
p.m., offerors were informed that one extension remained. At 2:00:50 p.m.
(that is, within the final 5 minutes of the extended auction), the Navy
received a revised offer from Royal Hawaiian that triggered the last
extension, thus extending the auction to 2:10 p.m. In the last 5 minutes
prior to 2:10 p.m., the Navy received a revised offer from Pacific Express
at 2:08:39 p.m., a revised offer from from Royal Hawaiian at 2:09:49 p.m.,
and a revised offer from another offeror at 2:10:00 p.m. Id. at 1-2.

The Navy found that when the auction concluded at 2:10 p.m., Royal Hawaiian
had submitted the overall lowest-priced offer. Agency Report at 6. Pacific
Express objected to the agency that its offer at 1:52 p.m. was the
lowest-priced overall, if offers after 2 p.m. were not considered. [2]
Pacific Express then filed an agency-level protest, arguing that offers
received after 2 p.m. should be disregarded because the RFP stated that the
auction would end no later than 2 p.m.

In response, the Navy determined that the RFP contained an "anomaly . . .
that needed to be fixed." Agency Report at 6. That is, the RFP stated that
the auction would end at 2 p.m., but provided for extensions that, if
triggered, would extend the auction to 2:10 p.m. Accordingly, the Navy
amended the RFP to request "final proposal revisions" from the four offerors
that competed in the reverse auction. RFP amend. No. 7, at 2.

Royal Hawaiian timely protested amendment No. 7 (the Navy's request for
"final proposal revisions") complaining that reopening the competition after
the reverse auction was not required to ensure fair competition. [3] Protest
at 4. Specifically, Royal Hawaiian asserts that there is no evidence that
any offeror was misled by the solicitation language and that, in fact, given
the messages sent during the auction all offerors knew that the auction
would continue past 2 p.m. Protester's Comments at 2. In this regard, Royal
Hawaiian notes that Pacific Express, which filed the agency-level protest,
submitted an offer after 2 p.m. Finally, Royal Hawaiian complains that
reopening the competition "results in a fundamental unfairness to Royal
[Hawaiian], who is now placed in the position of bidding against itself."
Protest at 4.

The Navy responds that reopening the competition was necessary because the
RFP contained an ambiguity that was potentially misleading to offerors. In
this regard, the Navy notes that Royal Hawaiian and Pacific Express had
different understandings of the rules governing the auction. In the agency's
view, the solicitation ambiguity caused "the procurement process [to be]
inherently unfair, as offerors could not compete fairly with each other."
The Navy contends that, under the unique circumstances of a reverse auction
(wherein offerors agree to full disclosure of offered prices), requesting
"final proposal revisions" was an appropriate means of remedying the
solicitation ambiguity and placed all offerors on an equal footing. Agency
Report at 9.

An agency has broad discretion in a negotiated procurement to take
corrective action where the agency determines that such action is necessary
to ensure fair and impartial competition. Pacific Island Movers, B-287643.2,
July 19, 2001, 2001 CPD para. 126 at 3. Where an agency has reasonable concerns
that there were errors in a procurement, the agency may take corrective
action, even if it is not certain that a protest of the procurement would be
sustained. Main Bldg. Maint., Inc., B-279191.3, Aug. 5, 1998, 98-2 CPD para. 47
at 3. We will not object to the specific proposed corrective action, so long
as it is appropriate to remedy the concern that caused the agency to take
corrective action. Id.

In this case, we cannot find unreasonable the agency's concern that offerors
may have been misled to their detriment as to when the auction would
conclude. The fact is that the RFP was patently ambiguous, given that the
solicitation stated that the auction would end no later than 2 p.m. but
provided for extensions, which if all 50 were used, would extend the auction
past 2 p.m. The circumstances of this case, in our view, highlight the
importance of having unambiguous ground rules in reverse auctions. [4] Here,
Pacific Express and Royal Hawaiian apparently interpreted the solicitation
differently, each believing that it was the low-priced offeror at the end of
the auction (that is, either 2 p.m. or 2:10 p.m., as argued by the
respective firms). We recognize, as argued by Royal Hawaiian, that Pacific
Express submitted a revised offer at 2:08 p.m., but we are not willing to
conclude that this meant that Pacific Express understood prior to 2 p.m.
that the auction would continue past 2 p.m. Rather, it is reasonable to
believe, as the Navy does, that Pacific Express was surprised that the
auction was continuing; under the time pressure of a reverse auction, even a
firm believing it was improper for the auction to continue would be
understandably reluctant to refrain from continuing to participate. We also
note that another competing offeror did not submit a revised offer after 2
p.m., which suggests the possibility that that firm may have been misled by
the RFP impropriety.

We do not agree with Royal Hawaiian that the solicitation impropriety was
corrected during the auction when offerors were informed that there were
remaining extensions, which, if triggered, would extend the auction beyond 2
p.m. Until 2 p.m., an offeror could not know that the agency would not close
the auction at 2 p.m., as was plainly provided for by the RFP. That is,
Pacific Express could reasonably believe that at 2 p.m. the Navy would close
the auction, despite the fact that there were remaining extensions that had
not yet been triggered.

We are mindful of the harm that may occur to the integrity of the
procurement process when the ground rules for the conduct of a procurement,
or in this case, the reverse auction, are changed after offerors have
submitted their proposals on the basis of what they believed were the rules.
It is for this reason that we have found that a competition should not be
reopened unless there is a reasonable basis to believe that an impropriety
in the procurement process may have prevented offerors from competing on an
equal basis. See, e.g., Hawaii Int'l Movers, Inc., B-248131, Aug. 3, 1992,
92-2 CPD para. 67 at 6. Here, the agency reasonably believed that offerors may
have formulated differing auction strategies based upon different
understandings as to when the auction would end. Given this concern, the
Navy reasonably concluded that it needed to take corrective action to ensure
that offerors were competing on an equal basis.

We also find that obtaining revised price proposals from the offerors was
appropriate corrective action to correct the solicitation impropriety. Once
the agency determined after the auction that a solicitation impropriety may
have prevented offerors from competing on an equal basis, obtaining revised
price proposals placed all offerors in an equal competitive position. See
Pacific Island Movers, supra, at 4 (requesting proposal revisions to remedy
an inept reverse auction was appropriate corrective action).

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. All references in this decision to time are to HST.

2. The record confirms that Pacific Express had submitted the low-priced
offer as of 2 p.m.

3. Pacific Express also protested to our Office the issuance of amendment
No. 7 and the Navy's decision to request "final proposal revisions." We
dismissed Pacific Express's protest as untimely, in response to the Navy's
request, because Pacific Express had not filed its protest within 10
calendar days of initial adverse agency action on its agency-level protest.

4. This decision does not address the more general question of the propriety
of reverse auctions, since that is not at issue in the protest.