TITLE:  , B-289134.3;
B-289134.4, April 29,
2002
BNUMBER:  B-289134.3;
B-289134.4
DATE:  April 29,
2002
**********************************************************************
DOCUMENT FOR PUBLIC RELEASE
The decision issued on the date below was subject to a GAO Protective
Order.  This redacted version has been approved for public release.
[Text Box: DOCUMENT FOR PUBLIC RELEASEThe decision issued on the date below was subject to a GAO Protective Order.  This redacted version has been approved for public release.]Decision

Matter of:   Alatech Healthcare, LLC--Protest; Custom Services
International, Inc.--Costs

File:            B-289134.3; B-289134.4

Date:              April 29, 2002

David B. Dempsey, Esq., and Kelly A. Sherrill, Esq., Holland & Knight, and
Robert Sonenthal, Esq., Sonenthal & Overall, for the protester.
John S. Pachter, Esq., and Jonathan D. Shaffer, Esq., Smith Pachter
McWhorter & Allen, and Ron Schlager, Custom Services International, Inc. for
Custom Services International, Inc., an intervenor.
John K. Scales, Esq., Agency for International Development, for the agency.
Scott H. Riback, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.

DIGEST

1.  Protest against agency's post-award corrective action that includes
opportunity to revise cost proposals is denied where record shows that
agency made change to requirements that will affect field of firms that may
be able to meet agency's requirements.

2.  Protest that agency was required under Federal Acquisition Regulation sect.
15.507 to provide original awardee with information relating to unsuccessful
offeror proposal prior to obtaining revised proposals is denied; regulation
requires only that agency provide a successful offeror information relating
to its own proposal in situations where the agency reopens an acquisition as
a consequence of a protest.

3.  Request for protest costs is denied where record shows that agency did
not unduly delay implementation of corrective action proposed prior to
submission of agency report.

DECISION

Alatech Healthcare, LLC, protests the actions of the U.S. Agency for
International Development (AID) in connection with request for proposals
(RFP) No. M/OP-01-1283, issued to acquire a quantity of condoms.  Alatech
maintains that the agency has improperly sought price proposal revisions
after its prices have been exposed.  Custom Services International (CSI)
requests that we recommend that it be reimbursed the costs associated with
an earlier protest filed in connection with this acquisition.

We deny Alatech's protest and CSI's request for costs.

BACKGROUND

The agency originally issued the subject solicitation on August 8, 2001,
calling for fixed-price offers to provide an indefinite quantity of condoms
for a base year, with two 1-year options.[1]  The solicitation provided that
the agency would evaluate proposals to determine technical acceptability and
would make award to the firm submitting the low-priced, technically
acceptable proposal.  After receiving two proposals by the September 17
deadline, the agency made award to Alatech as the firm submitting the
lowest-priced, technically acceptable proposal.

After the award, CSI (the current intervenor) protested to our Office,
maintaining that Alatech was technically unacceptable for several reasons.
Chief among its bases for protest was the assertion that Alatech did not
meet the RFP's requirement for offerors to have, at the time of proposal
submission, a particular U.S. Food and Drug Administration certification for
the condoms to be supplied, as well as International Organization for
Standardization (ISO) 9000 approval for each facility where the condoms
would be manufactured.

Thereafter, AID advised our Office that it would take corrective action in
response to CSI's protest.  Specifically, the agency advised that it would
relax the RFP's terms to require only that offerors provide an ISO 9000
certificate of registration as a general demonstration of the firm's
adoption of quality systems in the manufacture of the condoms; thus,
offerors now would not be required to furnish ISO 9000 certificates of
registration for each facility to be used during contract performance when
submitting their offers.  Agency Letter, Jan. 23, 2002; RFP amend. No. 3.
The agency advised that it would solicit revised technical and price
proposals from Alatech and CSI.

ALATECH'S PROTEST

Revised Prices

Alatech objects to the agency's solicitation of revised price proposals.
According to the protester, providing offerors an opportunity to submit
revised pricing is prejudicial to it, and therefore improper, because its
prices in response to the initial solicitation were revealed to CSI in an
earlier post-award debriefing.  Alatech maintains that obtaining revised
pricing at this point creates an impermissible auction, and asserts that the
agency can cure any deficiency that may have existed in the original
acquisition without obtaining revised pricing.

Contracting agencies have broad discretion to take corrective action where
they determine that such action is necessary to ensure fair and impartial
competition.
RS Info. Sys., Inc., B-287185.2, B-287185.3, May 16, 2001, 2001 CPD para. 98 at
4.  While agencies generally should not reopen a competition after award,
where the agency determines that a solicitation has overstated its
requirements, it is appropriate for the agency to revise the solicitation to
accurately state its needs.  See MTS Sys. Corp., B-238137, Apr. 27, 1990,
90-1 CPD para. 434 at 5.  Where the change could have had a material effect on
offerors' pricing, it also is reasonable for the agency to permit offerors
to submit revised pricing that takes into account the change in the agency's
requirement, id.; the prior disclosure of information in an offeror's
proposal does not preclude such corrective action.  RS Info. Sys., Inc.,
supra.  (We note that there currently is no regulatory or statutory
proscription against the use of auction techniques.  See Federal Acquisition
Regulation (FAR) sect. 15.306(e)(3).)

We have no basis to object to the agency's corrective action here.  As
noted, AID determined that the ISO 9000 certification requirement originally
included in the RFP overstated its needs and, thus, it relaxed the
requirement.  The agency explains that it has requested revised pricing
because this relaxation of the requirement amounts to a change in the
solicitation's basis for determining technical acceptability that could have
an effect on the competition.  First, the agency notes that the offerors'
differing interpretations of what was required to demonstrate technical
acceptability could have influenced their pricing, noting by way of example
that, if either offeror had thought the other incapable of demonstrating
technical acceptability under the original RFP, their price positioning
could have been affected.  This concern on the part of the agency is
affirmed by CSI's comments on the agency report.  Those comments include an
affidavit from CSI's vice president of quality assurance and regulatory
compliance, in which she represents that, on the basis of reading the
original solicitation, CSI concluded that Alatech could not timely meet the
requirements of the RFP, and thus would not be able to compete; she states
further that the conclusion that Alatech could not compete led directly to
pricing decisions on the part of CSI which would not have been made had they
thought Alatech would be a competitor for the requirement.  CSI's Comments,
Mar. 27, 2002, attach. 1.  In light of the agency's change to the criteria
relating to technical acceptability,[2] CSI's assumptions regarding the
competitive environment are now incorrect; in such a circumstance, it is
reasonable to afford CSI an opportunity to prepare its proposal knowing the
true nature of the competitive environment (which may also benefit the
agency).  MTS Sys. Corp., supra.; see also Power Connector, Inc., B-285395,
Aug. 24, 2000, 2000 CPD para. 152 at 5-6 (protest sustained where record showed
that offeror would have prepared its pricing differently if requirement had
been solicited on an unrestricted basis rather than as a small business set
aside).

The agency's decision to seek revised pricing is further supported by the
fact that, as the agency notes, the original prices are now approximately 7
months old, and therefore may be stale.  Such factors as the component cost
of manufacturing and contracts with other organizations reportedly could
have an effect on prices, and AID maintains that obtaining revised pricing
will allow both firms to make adjustments to reflect the unanticipated delay
in the final award.  (We note that Alatech states in its comments responding
to the agency report that its prices have gone down since it originally
submitted its offer in September.  Protester's Comments, Mar. 27, 2002, at
13.)  We conclude that the agency has reasonably determined to solicit
revised pricing.

CSI's Pricing Information

Alatech maintains that the agency improperly failed to provide it with
information relating to CSI's proposal, including pricing information, as
part of its corrective action.  The record shows that Alatech's overall
price, as well as some of its unit prices, have been disclosed in one manner
or another (AID provided CSI Alatech's overall price during its debriefing
and thereafter published some of Alatech's unit prices as part of a catalog
that it distributes for use by agency field activities).[3]  Alatech
maintains that the agency's disclosure of its pricing information was
improper, and that FAR sect. 15.507 required the agency to disclose CSI's
pricing information to Alatech when it resolicited the requirement in order
to equalize the competition.

While it is possible that CSI's possession of Alatech's pricing information
may provide it with a competitive advantage, the agency is not required to
equalize such an advantage unless it is the result of preferential treatment
or other improper action on the part of the agency.  Norvar Health
Servs.--Protest and Reconsideration,
B-286253.2 et al., Dec. 8, 2000, 2000 CPD para. 204 at 4.  Alatech has not
directed our attention to any legal authority to support its assertion that
the agency's disclosure of its pricing information in a post-award setting
was improper, and we are aware of no such authority; in fact, the FAR
expressly contemplates that the successful offeror's pricing information,
including unit prices, will be provided during an ordinary debriefing.  FAR
sect. 15.506(d)(2).  The protester also does not allege (and nothing in the
record shows) that the agency's disclosure of its pricing information
resulted from preferential treatment in favor of CSI.  Accordingly, there is
no basis for our Office to find that the agency is required to equalize any
competitive advantage that may have been afforded to CSI as a result of
Alatech's pricing being revealed.  Norvar Health Servs.--Protest and
Reconsideration, supra.

Further, the protester misinterprets the requirements of FAR sect. 15.507.
Nothing in that provision requires an agency to provide information about an
unsuccessful offeror's proposal to a successful offeror in circumstances
where the agency determines that it is necessary to reopen an acquisition
because of a protest.  Rather, FAR sect. 15.507(c) states only that appropriate
parties (in this case Alatech) shall be provided information regarding the
successful offeror's--Alatech's--proposal, as well as other nonproprietary
information that would have been provided to the other offerors in the
course of a debriefing.  Therefore, CSI's unit prices, the only information
that has not been made available to Alatech (Alatech has been provided CSI's
overall price), are not the type of information that must be disclosed under
the terms of FAR sect. 15.507.[4]

Revised Price Risks

Alatech maintains that it cannot prepare a revised price proposal in light
of the possibility that its prior contract with AID may be terminated for
the convenience of the government.  According to the protester, the possible
costs associated with a termination of its contract, coupled with
uncertainty as to the quantities it may be awarded under a subsequent
solicitation should the agency choose to make multiple awards, make it all
but impossible for it to prepare a revised price.  In a related allegation,
Alatech maintains that the RFP is ambiguous with respect to whether the
agency will make its award decision based on lowest total price or lowest
unit price.

We do not understand--and Alatech has not explained--why the termination of
its contract for the convenience of the government will subject it to
unacceptable risk in preparing a revised price proposal.  In that
circumstance, the firm ordinarily would be compensated for completed work,
costs incurred for preparations taken in contemplation of performance of the
contract and reasonable profit.  See FAR subpart 49.2.  Accordingly, there
is no basis for Alatech to anticipate absorbing costs associated with its
performance to date in preparing its revised price proposal.

As for the possibility that the agency will make multiple awards under the
revised price proposals (thereby reducing the quantity that Alatech
previously was awarded), that possibility has always been present, since the
RFP always permitted the agency to make more than one contract award.  RFP sect.
M.[5]  The risk associated with the award of less than the entire contract
quantity therefore is one that has always been borne by the offerors in this
acquisition.  (Indeed, Alatech submitted alternate price proposals based on
differing quantities during the first round of the competition.  Alatech
Proposal, Sept. 14, 2001, at 4-5.)

Finally, Alatech's assertion that the RFP is ambiguous with respect to how
the agency will make its award determination is untimely.  The record shows
that the terms of the RFP relating to the evaluation of unit versus total
prices have remained unchanged since the RFP was issued.  Since Alatech did
not raise its concern prior to the original deadline for submitting
proposals, it is untimely and therefore not for consideration.  4 C.F.R. sect.
21.2(a)(1).[6]

CSI's REQUEST FOR COSTS

CSI requests that our Office recommend that it be reimbursed the costs
associated with its earlier protest, which resulted in the agency's taking
the corrective action to which Alatech objects.  According to CSI, the
agency unduly delayed taking corrective action in the face of a clearly
meritorious protest.

The record shows that the agency proposed its initial corrective action
(obtaining proposal revisions without any amendment to the terms of the RFP)
on November 20, prior to submitting its agency report.  In response to that
proposal, CSI filed a supplemental protest, maintaining that the agency
should instead simply terminate the contract awarded to Alatech and make
award to CSI.  CSI Supplemental Protest, Nov. 27, 2001, at 8-9.  Thereafter,
the agency pursued a course of negotiations with both CSI and Alatech in an
effort to arrive at a course of corrective action that would be satisfactory
to all parties and prevent additional protests.  This effort culminated in
the agency, CSI and Alatech engaging in alternative dispute resolution
procedures with our Office in an attempt to either arrive at a suitable
corrective action plan or otherwise settle the dispute.  These efforts
proved unsuccessful in the final analysis, and the agency advised our Office
of its current corrective action plan by letter dated January 23, 2002.  On
the basis of that letter, our Office dismissed CSI's protests.  (Alatech
then filed the current protest.)

Under our Bid Protest Regulations, we may recommend that a protester be
reimbursed the reasonable costs of filing and pursuing its protest,
including attorneys' fees, where the contracting agency decides to take
corrective action in response to a protest.  4 C.F.R. sect. 21.8(e).  We will do
so, however, only where the contracting agency unduly delayed taking
corrective action in response to a clearly meritorious protest.  Veda,
Inc.--Entitlement to Costs, B-265809.2, July 19, 1996, 96-2 CPD para. 27 at 2.
Generally, we consider agency corrective action prompt where it is announced
before the agency's administrative report is due.  Id.

We find that the agency proceeded sufficiently promptly here.  The agency
announced corrective action prior to submitting its report in response to
CSI's initial protest.  While there was some delay in the ultimate
implementation of the corrective action, that delay was due entirely to the
agency's good faith effort to arrive at a comprehensive solution to the
apparent infirmities in the original acquisition, as well as the concerns of
all parties; indeed, the initial delay in implementing the corrective action
was occasioned by CSI's supplemental protest objecting to the agency's first
proposal of corrective action.  Given that the delay in AID's implementation
of its corrective action arose as a consequence of the agency's efforts to
arrive at a comprehensive solution that would satisfy all parties and
advance the acquisition, we find that the agency's actions did not
constitute undue delay.

The protest and request for costs are denied.

Anthony H. Gamboa
General Counsel

-------------------------

[1] The RFP provided that the agency could order a base quantity of up to
250 million condoms and an option quantity of up to 400 million during each
of the 3 years of performance.  RFP amend. No. 1 at 2.
[2] Alatech maintains that a recent decision from the Court of Federal
Claims, MCII Generator & Elec., Inc. v. United States, COFC No. 02-85C (Mar.
13, 2002), in which the Court found that an agency improperly proposed to
reopen an acquisition is controlling in this case.  We disagree.  MCII did
not involve, as this case does, a revision to the terms and conditions of
the RFP; accordingly, there was no valid reason to reopen the competition in
that case.  See id. at 6.
[3] The catalog includes Alatech's unit prices based on the agency's
ordering 250 million condoms per year for each contract year.  The catalog
does not include Alatech's unit prices for quantities above or below 250
million units.
[4] We note as well that Alatech has not explained--and it is not
apparent--how having CSI's pricing information would advance its competitive
position, given that Alatech, not CSI, was the low offeror during the
original competition.
[5] We note that Alatech's concern relating to the possibility that it will
be awarded less than the entire quantity further highlights the
reasonableness of the agency's solicitation of revised pricing since,
apparently, the possibility that the firm might be awarded less than the
entire quantity will lead the firm to change its proposed prices.  We also
note that, to the extent that Alatech is protesting the RFP provision
relating to the possibility of multiple awards, its protest is untimely
since it was not filed prior to the original deadline for submitting
proposals.  4 C.F.R. sect. 21.2(a)(1) (2002).
[6] Alatech maintains that the agency should find CSI nonresponsible for
activities which allegedly occurred under a prior contract.  However, since
the agency has made no responsibility detemination with respect to CSI,
Alatech's assertion in this regard is, at best, premature.  In any event,
our Office does not generally consider challenges to an agency's affirmative
determinations of responsibility.  4 C.F.R.
sect. 21.5(c).