TITLE:  VSE Corporation, B-290452.2, April 11, 2005
BNUMBER:  B-290452.2
DATE:  April 11, 2005
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   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.        

   Decision

   Matter of:   VSE Corporation

   File:            B-290452.2

   Date:           April 11, 2005

   William W. Goodrich, Jr., Esq., Lisa K. Miller, Esq., and Melissa D.
Droller, Esq.,  Arent Fox, for the protester.

   Carmody A. Gaba, Esq., Department of Homeland Security, for the agency.

   Charles W. Morrow, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.

   DIGEST

   Protest against the cancellation of a solicitation for storage,
maintenance, and disposition services to handle personal property seized
by various federal agencies is denied, where the record evidences that the
solicitation no longer accurately reflected the agency requirements and
there are uncertainties as to how the solicitation will be funded that
have not been resolved, and the agency believes that additional sources
may submit proposals, given the almost 5-year period since initial
proposals were submitted on this solicitation.

   DECISION

   VSE Corporation protests the Department of Homeland Security (DHS), Bureau
of Customs and Border Protection*s (CBP) cancellation of request for
proposals (RFP) No. CS-00-007 for storage, maintenance, and disposition
services to handle personal property seized by various federal agencies. 

   We deny the protest.

   A significant resource of the federal government in its effort to prevent
criminal activity has been the moneys derived from the sale of seized and
forfeited property belonging to individuals who violated United States
laws.  To ensure that the moneys derived from the sale of forfeited and
seized property involving criminal activity were specifically applied to
the expenses of law enforcement programs, the government established
several funds, one of which is the Treasury Forfeiture Fund, which is
administered by the Treasury Executive Office for Asset Forfeiture (TEOAF)
in the Department of Treasury.[1]  As agent for the TEOAF, the U.S.
Customs Service managed the contracts administering the seized property
that support the fund.   Since 1985, based on a GAO report and an Office
of Management and Budget Circular Aa**76 study, the Customs Service has
utilized the services of one nationwide prime contractor to manage the
program.  In 1999, the Customs Service split the requirement into two
nationwide contracts separating the real property requirements from the
personal property requirements. 

   In March 2000, the Customs Service (then part of the Department of
Treasury) issued this RFP seeking proposals for a followa**on contract for
nationwide services for the receipt, custody, management and disposition
of seized and forfeited personal property.  These services were to cover
the inventory of seized property, such as vehicles, vessels, aircraft, and
general property, which are covered by the TEOAF as well as property
seized by certain other agencies.

   The RFP contemplated the award of a cost-plus-award-fee contract for a
4-month transition period (from September 19, 2000 to January 18, 2001), a
base period (from January 19 to September 30), and nine 1-year options. 
The RFP provided for award to the offeror representing the best value,
considering the merits and capability of the proposals, determined based
on evaluating the acceptability and cost/price of the proposals as well as
past performance, experience, understanding the requirements, and small
business utilization. 

   Prior to the receipt of initial proposals, the Customs Service issued
amendment Nos.A 0001-0009 to the RFP.  In addition to responding to the
offerors* questions, these amendments made extensive revisions to the RFP
involving such matters as the statement of work, the simulated inventory
of seized property, and the estimated workload projections. 

   Four offerors--VSE; Day and Zimmerman Services, Inc.; Johnson Controls
World Services, Inc.; and EG&G Technical Services, Inc. (the incumbent
contractor)--responded to the RFP by the June 30, 2000 due date for
receipt of proposals.  After conducting oral interviews with each offeror,
the Customs Service issued amendment No. 0010 on March 27, 2001,
announcing that discussions would be held and that final technical
proposal revisions were due to be submitted by April 30.  Prior to the
receipt of these technical proposal revisions, the Customs Service issued
amendment Nos. 0011 and 0012, which made additional changes to the RFP and
answered more questions related to the procurement. 

   Discussions were then conducted and amendment Nos. 0013-0018, which made
more changes to the RFP and answered more questions, were issued.  Final
proposal revisions (FPR) (including price) were submitted by the offerors
by October 30, 2001.  Following the receipt of FPRs, the Customs Service
issued amendment No.A 0019 announcing face-to-face discussions to be held
in December.  After these discussions, the Customs Service issued
amendment Nos. 0020-0028, which made further changes to the RFP and
answered more questions.  The Customs Service received the revised FPRs
from the offerors on February 11, 2002 and proceeded with its final
evaluation.  Award was made to Day and Zimmerman on April 23, which led to
a protest to our Office by EG&G.

   In response to the protest, the Customs Service decided to take corrective
action because *the cost realism evaluation of EG&G*s proposal resulting
in EG&G*s projected Most Probable Cost (MPC), was based on some incorrect
assumptions by Customs.*  Among other things, the Customs Service stated
that it would terminate the award to Day and Zimmerman, revise the
statement of work, and reopen the competition.  Agency Report, Tab 3,
Corrective Action Letter. 

   Meanwhile, effective May, 17, 2001, the agency entered into a sole-source
contract extension with EG&G to cover the services while this competition
was being conducted.  This sole-source contract expired on December 16,
2002.  The agency then executed another sole-source contract extension of
EG&G*s contract, which extended the services through October 1, 2003 with
options that have allowed the contract to extend to April 1, 2005.  DHS*s
latest proposal to further extend EG&G*s contract beyond April 1 on a
sole-source basis is the subject of protests by VSE and Johnson Controls,
which we intend to address in a separate decision.

   While the agency was revising the solicitation as part of its corrective
action, Congress passed the Homeland Security Act of 2002, 6 U.S.C. S 101
et seq. (Supp. II 2002), in November 2002, which among other things
transferred the Customs Service from the Department of Treasury to DHS and
established the CBP.  The CBP, which was created by the Act, became the
contracting office for this procurement.  The CBP also took over various
functions transferred to DHS by the Act from the Department of Agriculture
and the Immigration and Naturalization Service (INS) of the Department of
Justice, including the inspection and border protection activities of the
Animal and Plant Health Inspection Service and the Border Patrol.  The
added functions resulted in increased workload projections related to the
property covered by the contract.[2] 

   On March 12, 2003, the CBP issued amendment No. 0029, which replaced the
initial RFP in its entirety and included revised workload estimates.  The
CBP subsequently issued amendment Nos. 0030-0043, in which the CBP again
made changes to the RFP and answered questions.  On August 6, 2003, the
CBP received FPRs from the offerors.  The CBP subsequently decided, based
on an agreement with the TEOAF, the Department of Justice and the U.S.
Marshals Service, to use a government-owned, contractor-operated (GOCO)
facility to store, maintain, and sell property in the San Diego area that
had been used by the Border Patrol.[3]  The agency issued amendment
No.A 0044 on November 14 to notify offerors of this potential change and
to advise that a subsequent amendment incorporating the requirement would
be forthcoming.

   Meanwhile, the CBP met with the DHS Office of Small and Disadvantaged
Business Utilization regarding the concern that the inclusion of the
additional requirements from the INS and the Border Patrol, which had
previously been performed by small businesses, into the nationwide
contract constituted improper bundling.[4]  In response to this concern,
the CBP began trying to develop a plan to address the question of bundling
by breaking out certain of the requirements that had previously been set
aside for small businesses, such as towing, and separately conducting
small business set-aside procurements for these requirements.  While
contemplating this change, the CBP discovered that the TEOAF was reluctant
to fund a contract that was split into various pieces to address this
bundling issue, without the benefit of a study, and that the TEOAF might
consider withdrawing the CBP*s authority to contract on its behalf.  At
the same time, the CBP experienced increased costs associated with seized
vehicles--whose inventory had risen from around 3,000 to 5,000 to over
20,000--under the extended EG&G contract, which caused funding problems;
this, too, was of concern to the TEOAF and highlighted the need to revise
the statement of work to address the problem.[5]   See Agency Report at
10-12. 

   After considering and attempting to resolve these issues, on December 20,
2004, the CBP eventually issued amendment No.A 0045 canceling the
solicitation.  The CBP explained in the letter to the offerors enclosing
the amendment that:

   After careful consideration and a lengthy review process, the government
has determined that the requirement has changed substantially from the
initial issuance of the solicitation in March 2000 and the [corrective
action] taken in June 2002.

   The determination has been made that the subject solicitation no longer
meets the government*s requirement.  The government anticipates
rea**evaluating the acquisition strategy and resoliciting the requirement
possibly utilizing multiple procurement methods.

   This protest from VSE followed.

   VSE contends that the CBP*s action of canceling the RFP to address changes
in the requirements was arbitrary, capricious, and unreasonable because
during the course of the procurement the agency had previously addressed
significant changes to the RFP, including replacing the RFP in its
entirety, by issuing amendments.  VSE argues that the agency*s action was
a pretext to rid itself of a burdensome procurement process and to
preserve the sole-source arrangement with EG&G.

   In response, the CBP explains that the decision to cancel the solicitation
was made because the solicitation, as amended, no longer accurately
reflected its requirements.  The agency explains that it decided to cancel
the RFP due to unresolved questions related to the scope of the contract
involving the requirements to be severed for small businesses, funding,
and significant increases in the estimated workload, as well as a belief
that if the requirement were resolicited there would be increased
competition because of the almost 5-year period from when initial
proposals were received and the extensive changes that have already been
made to the solicitation.

    

   With respect to the decision to remove certain requirements for small
business contracts that are now being performed under the nationwide
contract, the CBP explains the agency is still grappling with the question
of what services can be legitimately severed from the nationwide contract
without affecting the efficiency of the nationwide contract.  With respect
to funding, the CBP explains that the agency has to resolve its status as
executive agent for the TEOAF, which may reclaim ownership of some aspects
of the requirements, such that the CBP would no longer be responsible. 

   The CBP further advises that because of the various changes that have
already been made to the solicitation and which are anticipated to take
place, it is likely that more firms will be able to compete.  In this
regard, the CBP explains that, besides the numerous amendments already
made that changed the RFP*s requirements, certain elements of the
nationwide contract that were solicited may be removed, and that under the
new solicitation, as a result of the agency*s decision to use the GOCO for
storage, offerors no longer will be required to include storage facility
costs in their proposals, as under the initial solicitation. 

   In a negotiated procurement, an agency has broad authority to decide
whether to cancel a solicitation, and to do so need only establish a
reasonable basis.  A reasonable basis for cancellation exists and
cancellation is appropriate when a solicitation does not accurately
reflect the agency*s requirements, particularly where cancellation of the
solicitation and the issuance of a revised solicitation would present the
potential for increased competition.  If a reasonable basis exist to
cancel a solicitation, an agency may cancel the solicitation regardless of
when the information first surfaces or should have been known, even if the
solicitation is not canceled until after proposals have been submitted and
evaluated, or even if discovered during the course of a protest.  See Rice
Servs., Inc.; Watson Servs., Inc., Ba**293861 et al., June 15, 2004, 2004
CPD P 167 at 4; Global Solutions Network, Inc., Ba**289342.4, Mar. 26,
2002, 2002 CPD P 64 at 3.

   Here, we find that the record demonstrates that the agency reasonably
decided to cancel this RFP.  The reduced scope of work associated with
severing certain requirements to avoid possibly improper bundling and the
removal of the requirement to provide a storage facility, due to the GOCO,
meant that the current RFP did not reflect the agency*s requirements.   In
addition, because of the time which has elapsed from the initial issuance
of the solicitation in March 2000 until the cancellation in December 2004,
and the numerous changes made to the RFP during that period, we find that
the agency*s assumption that additional firms may well be interested in
participating in a competition based on a solicitation reflecting the
agency*s current requirement, with the result that competition may be
increased, is reasonable.  Where, as here, a solicitation no longer
accurately reflects an agency*s requirements, and resolicitation could
result in increased competition, the cancellation of the solicitation is
appropriate.  See Global Solutions Network, Inc., supra.

   As detailed above, the CBP found that cancellation of the RFP was more
feasible than issuing another amendment because it was still trying to
resolve its responsibilities, as well as to determine the best method for
procuring the requirement, given its reorganization and its failure to
resolve with the TEOAF how this evolving requirement should be procured. 
Although VSE suggests otherwise, the numerous prior amendments to the RFP
do not preclude the CBP from canceling the RFP.  The only pertinent
inquiry here is whether there existed a reasonable basis to cancel, since
an agency may cancel at any time when such a basis is present.  Since the
record here reflects that there was a reasonable basis to cancel the RFP,
we do not find that the agency abused its discretion, even though it may
have taken a different course by further amending the RFP.  See PBSI
Corp., B-227897, Oct. 5, 1987, 87-2 CPD P 333 at 2.  In this regard, the
CBP advises that it *initially believed the changes could be addressed via
amendments . . . since CBP and the offerors had already put so much effort
into the solicitation* but *instead of continuing to try to force the
agency*s developing needs into the old solicitation with the full
knowledge that scope-changing modifications and/or a termination for
convenience are inevitable, the agency decided to cancel and re-evaluate
the work.*  See Agency Report at 24-25.

   In any case, Federal Acquisition Regulation (FAR) S 15.206(e) specifically
advises that if, in the judgment of the contracting officer, based on
market research or otherwise, an amendment proposed for issuance after
offers have been received is so substantial as to exceed what prospective
offerors reasonably could have anticipated, so that additional sources
likely would have submitted offers had the substance of the amendment been
known to them, the contracting officer shall cancel the original
solicitation and issue a new one, regardless of the stage of the
acquisition.  Consistent with this regulation, and in light of the many
significant amendments since initial proposals were obtained, the agency*s
decision to cancel and resolicit was the appropriate course to take.

   We find VSE*s arguments that the cancellation was a pretext for the CBP to
rid itself of a burdensome procurement process and to preserve the
sole-source arrangement with EG&G are not supported by the record.  To the
contrary, the record substantiates that the agency canceled the
solicitation because the scope of work under the solicitation had changed,
and was undergoing further refinement, and that increased competition
could reasonably be expected, given that the original solicitation was
solicited in March 2000, and many of the changes could not have been
anticipated by the initial field of competition.  Accordingly, we find
that the cancellation decision was proper.

   The protest is denied.

   Anthony H. Gamboa

   General Counsel 

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

   [1] The fund also covers seizures by the U.S. Secret Service, Bureau of
Alcohol, Tobacco and Firearms, and the Internal Revenue Service.

   [2] At the time of the award to Day and Zimmerman, the estimated workload
for the base period was 3,931 vehicles, 79 vessels, 8 aircraft, and 8,324
line items of general property.  After gathering additional information
regarding its added functions, the CBP estimated the workload for the
recompetition at 9,240 vehicles, 114 vessels, 8A aircraft, and 8,060 line
items of general property.  See Agency Report at 6.

   [3] Some of the seizure functions assumed by the CBP included functions
being performed by the Border Patrol and the INS that were being managed
by the U.S. Marshals Service under various small business contracts that
included using a GOCO to handle storage, maintenance, and conveyances. 
Approximately 500 small business contracts associated with this work were
transferred to the CBP after its reorganization.  The CBP modified EG&G*s
nationwide contract to include the services that had been performed by
these small businesses. 

   [4] Bundling of contract requirements can be found to arise where two or
more procurement requirements for goods or services previously provided or
performed under separate smaller contracts are consolidated into a
solicitation of offers for a single contract that is likely to be
unsuitable for award to a small-business concern.  See 15 U.S.C. S 632(o)
(2000).

   [5] The CBP reports that that these costs primarily were caused by DHS*s
adoption of the Border Patrol*s practice of advertising for the sale of
seized vehicles valued under $2,500.   The CBP advises that this practice
is under review to determine whether it would be more cost effective to
destroy or otherwise dispose of these vehicles.