TITLE:  Metcalf Construction Company, Inc., B-289100, January 14, 2002
BNUMBER:  B-289100
DATE:  January 14, 2002
**********************************************************************
Decision

Matter of: Metcalf Construction Company, Inc.

File: B-289100

Date: January 14, 2002

Robert J. Symon, Esq., Spriggs & Hollingsworth, for the protester.

Stephen D. Tom, Esq., White & Tom, for Lend Lease Actus, an intervenor.

Richard G. Welsh, Esq., and Ron R. Ashlock, Esq., Naval Facilities
Engineering Command, 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

  1. Agency did not act improperly in excluding protester's proposal from
     consideration for award where request for proposals set cost limitation
     on each line item and protester's price for one line item exceeded the
     limitation for that item.
  2. Agency was not required to reopen discussions to permit protester to
     cure defect in pricing introduced in its final proposal revision.

DECISION

Metcalf Construction Company, Inc., a small business concern located in an
historically underutilized business (HUB) zone, protests the rejection of
its proposal and the award of a contract to Lend Lease Actus under request
for proposals (RFP) No. N62742-00-R-1345, issued by the Department of the
Navy for the design and construction of military family housing at the
Marine Corps Base in Kaneohe Bay, Hawaii. Metcalf contends that the agency
improperly excluded its proposal from consideration for award because its
price for one of the RFP's line items was over the budget ceiling specified
in the solicitation for that item.

We deny the protest.

The RFP, which contemplated the award of a fixed-price contract, provided
for award to the responsible offeror whose proposal was determined to be
most advantageous to the government. The solicitation stated that in the
evaluation of proposals, technical factors (which consisted of past
performance, qualifications and experience, small business utilization,
technical approach, and management plans) would be approximately equal in
weight to price.

The solicitation schedule contained three line items relating to three
different projects for the design and construction of family housing on the
Marine Corps Base. Item 0001, which was to be awarded during fiscal year
(FY) 2001, called for the construction of 30 units pursuant to Project
H-570; Option 0001, to be exercised during FY 2002, called for the
construction of 158 units pursuant to Project H-571; and Option 0002, to be
exercised during FY 2003, called for the construction of 24 units pursuant
to Projects H-571 and H-563.

The solicitation, as amended, contained the following paragraph relating to
price limitations on the various items:

1A.7 INFORMATION CONCERNING COST LIMITATIONS: The budget ceiling for the
award of this contract is as follows:

Base Item: $7,300,000 for Project H-570 (30 units)

Option 0001: $35,780,000 for Project H-571 (158 units)

Option 0002: $5,400,000 for Projects H-571 and H-563 (24 units)

Proposals in excess of this amount will not be considered. Offerors should
prepare their proposals so as to permit award at a price within the cost
limitation.

RFP, as amended by Amendment No. 0007. [1]

The solicitation also contained the following paragraph concerning the
evaluation of prices:

1B.8 PRICE EVALUATION. Price proposals will be evaluated in accordance with
FAR 52.217-5, Evaluation of Options. For award purposes, the price for
pre-priced Options 0001 and 0002 will be added to the Item 0001 price. Upon
addition of Item 0001, Option 0001 and Option 0002 prices, prices will be
evaluated in accordance with FAR 52.219-4, Notice of Price Evaluation
Preference for HUBZone Small Business concerns. [2]

RFP, Amendment 0004. After initial proposals had been received, the above
section was amended to substitute the word "evaluation" for the word "award"
in line 2. RFP, Amendment No. 0008.

Three offerors submitted proposals prior to the May 24 closing date. The
agency conducted discussions with, and requested a revised proposal from,
each of the three. The technical evaluation board assigned each of the final
proposals a technical rating of acceptable. Each of the final proposals
complied with each of the line item budget ceilings specified in section
1A.7.

The day after receipt of final proposal revisions (FPR), the agency amended
the RFP to incorporate an updated Davis-Bacon Act wage determination and
requested a second round of FPRs. Prices received were as follows:

              Budget        Lend Lease      Offeror A     Metcalf
              Ceiling       Actus

 Base         $7,300,000    $7,300,000      [Deleted]     [Deleted]

 1st Option   $35,780,000   $34,283,457     [Deleted]     [Deleted]

 2nd Option   $5,400,000    $5,400,000      [Deleted]     [Deleted]

 Total        $48,480,000   $46,983,457     [Deleted]     [Deleted]

 HUBZone                    $51,681,802.70  [Deleted]
 Preference
 Adjusted
 Total [3]

Agency report at 8.

Because Metcalf's final revised price for Option 0002 exceeded the budget
ceiling set forth in the RFP, Metcalf's proposal was eliminated from further
consideration. The agency subsequently determined that the technical
proposals of Lend Lease Actus and Offeror A were essentially equal and
selected the former for award based on its lower price. On or about
September 28, the agency awarded a contract to Lend Lease Actus.

Metcalf argues that the agency unreasonably eliminated its proposal from
further consideration for exceeding the budget ceiling for Option 0002 by
[deleted]. The protester maintains that RFP sect. 1A.7 does not provide for the
elimination of a proposal for exceeding the budget ceiling for a single line
item; rather, Metcalf argues, it provides for the elimination of a proposal
with a total evaluated price in excess of the total obtained by adding
together the three budget ceilings (i.e., $48,400,000). The protester
contends that the correctness of its interpretation is apparent from the
fact that the key language regarding compliance with a budget ceiling is in
the singular rather than the plural, i.e., line 6 of section 1A.7 refers to
"this amount," rather than "these amounts," and line 7 refers to "the cost
limitation," rather than "the cost limitations." Metcalf further argues that
one of the other two offerors originally interpreted the language of section
1A.7 in the manner that Metcalf now proposes, and that the agency
acknowledged the reasonableness of this interpretation.

While we recognize that the language of secton 1A.7 is somewhat confusing,
we nonetheless think that the provision is susceptible of only one
reasonable interpretation: it imposes a separate budget ceiling on each line
item and excludes from consideration any proposal offering a price in excess
of any of the budget ceilings. In our view, the only reasonable inference
that can be drawn from the separate listing of the budget ceilings for the
three line items is that the agency intended to set a separate cost
limitation for each line item. Moreover, given that the initial award price
will cover the Item 0001 work only, the instruction to offerors to prepare
their proposals so as to permit award at a price within the cost limitation
makes sense only if the solicitation is interpreted as imposing separate
line item cost limitations.

The protester's argument that Offeror A interpreted section 1A.7 in the same
manner that Metcalf did--as evidenced by the fact that Offeror A's initial
proposal included prices in excess of the budget ceilings for both Item 0001
and option 0002 [4]--and that the agency acknowledged the reasonableness of
this interpretation, is not supported by the record. The issue Metcalf
raises here concerns language in RFP sect. 1B.8 (quoted above)-not section
1A.7-that subsequently was amended to eliminate any possible
misinterpretation regarding the budget ceilings in the RFP. In this regard,
the contract specialist noted in her price analysis of initial proposals
that Offeror A's prices for Item 0001 and Option 0002 exceeded the stated
budget ceilings for those line items, and thus that strict application of
section 1A.7 would require rejection of the proposal as nonconforming. The
contract specialist further noted, however, that section 1B.8 of the RFP (as
then worded) provided that "[f]or award purposes, the price of pre-priced
Options 0001 and 0002 will be added to the Item 0001 price," (emphasis
added), which, in her view, could be construed as establishing a "total
budget ceiling [rather than] an individual line item budget ceiling."
Memorandum from Contract Specialist to Source Selection Board, June 4, 2001,
para. 6. Accordingly, the contract specialist recommended that Offeror A's
proposal be included in the competitive range and that the RFP be amended to
substitute the word "evaluation" for the word "award" in the foregoing
sentence, which was accomplished via Amendment 0008. Thus, there is no basis
in the record to conclude either that Offeror A's initial prices reflected
that it shared Metcalf's interpretation of RFP sect. 1A.7, or that the agency
found that interpretation reasonable. Further, even assuming that the
language in section 1B.8 was the reason that Offeror A submitted prices
exceeding the individual budget ceilings, any possible ambiguity in the
language was corrected by Amendment 0008, which was issued before Metcalf
submitted its FPR containing a price in excess of the ceiling for Option
0002.

Metcalf further argues that the agency should have reopened discussions with
it after submission of its FPR to permit it to eliminate the defect in its
pricing.

The decision whether to reopen discussions and request a new round of
revised proposals is largely within the discretion of the contracting
officer. Mine Safety Appliances, Co., B-242379.5, Aug. 6, 1992, 92-2 CPD para.
76 at 6. Where an offeror introduces material ambiguities or defects into
its proposal in its FPR, it runs the risk that the agency will exercise its
discretion not to reopen discussions. Logicon RDA, B-261714.2, Dec. 22, 1995
95-2 CPD para. 286 at 5.

Here, we see no evidence that the contracting officer abused her discretion
in determining not to reopen discussions with Metcalf. As the agency points
out, it had already gone through two rounds of FPRs, and we see no basis to
require the reopening of discussions here.

Metcalf also argues that the agency conducted unequal discussions by
advising Offeror A that it should review its proposal to ensure that its
pricing for each line item did not exceed the specified budget limitation
for that line item, while failing to so advise Metcalf.

In discussions here, the agency informed Offeror A of the fact that two of
its prices exceeded the applicable budget ceilings. At the time discussions
were held, none of Metcalf's prices exceeded the budget ceilings, so there
was no reason for the agency to have discussed the ceilings with Metcalf.
Contrary to the protester's assertion, the agency did not inform Offeror A
of any "conflicting interpretations regarding the application of the budget
ceiling." Protester's Comments, Nov. 15, 2001, at 7. Rather, as Metcalf
notes, the agency advised Offeror A that its costs should not exceed the
budget ceilings established for each project, Agency Report, Tab 18, thereby
advising the offeror of the specific deficiency in its proposal by reference
to the pertinent provisions of the RFP. In Metcalf's view, the agency's use
of the plural-"budget ceilings"-in the discussions letter to Offeror A
unfairly communicated the agency's interpretation of the RFP only to that
offeror. We disagree. Given that RFP sect. 1A.7 advised offerors that they had
to comply with the individual budget ceilings for each project, there simply
was no reason for the agency to reiterate this requirement or otherwise to
discuss the budget ceilings during discussions with Metcalf, when its prices
were below each of the individual budget ceilings.

Finally, Metcalf argues that the contracting officer should have waived its
noncompliance with the RFP's budget ceilings as a minor informality or
irregularity. In this regard, Metcalf maintains that the contracting officer
could have circumvented the funding limitation on Option 0002 by obtaining
additional funding, carrying over funding from one fiscal year to the next,
deleting work from the option, or not exercising the option. Protester's
Comments, supra, at 10.

An agency may waive compliance with a material solicitation requirement in
awarding a contract only if the award will meet the agency's actual needs
without prejudice to other offerors. Safety-Kleen (TS), Inc., B-284125, Feb.
23, 2000, 2000 CPD para. 30 at 2-3. Here, there is no evidence that the agency
has concluded that its needs will be met by an award at a price in excess of
the stated budget ceiling for Option 0002. Moreover, either of the other
offerors might have altered the pricing in its offer had it been aware that
the agency did not intend to enforce the stated cost limitations;
accordingly, we have no basis upon which to conclude that other offerors
would not be prejudiced by waiver of the cost limitation on Option 0002 for
Metcalf.

Because we conclude that the agency had an adequate basis for rejecting
Metcalf's proposal for exceeding the cost limitation for Option 0002, we
need not address the protester's additional argument that the agency
misevaluated its technical proposal.

The protest is denied.

Anthony H. Gamboa

General Counsel

Notes

1. Amendment No. 0007 inserted the word "will" in place of the word "may" in
line 6.

2. Federal Acquisition Regulation (FAR) sect. 52.219-4 provides in relevant part
that where an offer is received from a HUBZone small business concern that
has not waived the evaluation preference, other offers will be evaluated by
adding a factor of 10 percent to their prices.

3. Because Metcalf is a HUBZone small business concern, the prices of the
other offerors were increased by 10 percent for evaluation purposes.

4. In its initial offer, Offeror A proposed a price of [deleted] for Item
0001, which exceeded the budget ceiling of $7,300,000 set forth in the RFP,
and a price of [deleted] for Option 0002, which exceeded the budget
limitation of $5,400,000.