TITLE: Phil Howry Company, B-291402.3; B-291402.4, February 6, 2003
BNUMBER: B-291402.3; B-291402.4
DATE: February 6, 2003
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Phil Howry Company, B-291402.3; B-291402.4, February 6, 2003
Decision
Matter of: Phil Howry Company
File: B-291402.3; B-291402.4
Date: February 6, 2003
Kathleen C. Little, Esq., and Robert J. Rothwell, Esq., Vinson & Elkins,
for the protester.
Keith S. Francis, Esq., Department of the Army, and Laura Mann Eyester,
Esq., and John Klein, Esq., Small Business Administration, for the
agencies.
Sharon L. Larkin, Esq., and James A. Spangenberg, Esq., Office of the
General Counsel, GAO, participated in the preparation of the decision.
DIGEST
Protest sustained where agency effectively determined small business,
which submitted sole proposal on section 8(a) set-aside, to be
nonresponsible based solely on what amounted to pass/fail evaluation of
the protester's past performance, without referring the matter to the
Small Business Administration under certificate of competency procedures.
DECISION
Phil Howry Company (PHC) protests the United States Army Corps of
Engineers' decision not to award PHC the contract under request for
proposals (RFP) No. DACW64-02-R-0008 for construction of a health care
facility at the Port Isabel Service Processing Center in Los Fresno,
Texas, and the subsequent cancellation of the RFP.
We sustain the protests.
BACKGROUND
The RFP was issued as a section 8(a) set‑aside.[1] It provided for
the award of a fixed‑price contract to the *responsible bona fide
8(a) Offeror Region 6 whose proposal, conforming to the Solicitation, is
fair and reasonable, and has been determined to be the most advantageous
to the Government, Past Performance, price, and other factors
considered.* RFP S: 00120 P: 7.0.
The RFP provided for three phases of evaluation: a proposal compliance
review (to ensure that proposals met all pro forma requirements of the
RFP), a quality evaluation (to evaluate past performance), and a price
evaluation. RFP S: 00120 P: 2.0. Past performance and price were of
equal importance. RFP S: 00120 P: 7.3.
The sole *purpose* of the past performance evaluation was *to make an
overall risk assessment of the Offeror's ability to perform the work
required by the Solicitation. . . . The assessment represents the
evaluation team's judgment of the probability of an Offeror successfully
accomplishing the work required by the solicitation, based on the
Offeror's demonstrated past performance.* RFP S: 00120 P: 2.2.2.1.1; see
RFP S: 00110 P: 2.2.3.2.
For past performance, offerors were required to *[p]rovide a list of at
least five (5), but no more than ten (10), of the most relevant contracts
performed for Government or commercial customers within the last 5 years
involving construction of a 50-100 bed hospital or large clinic.*
*Relevant* contracts were defined as *construction projects that would be
considered similar in scope and magnitude to this project; vertical
construction consisting of buildings with structural steel frame masonry
exteriors and low slope single roofs, and within the range of $5,000,000
to $10,000,000.* RFP S: 00110 P: 2.1.1(a).
Only one offeror, PHC, submitted a proposal. PHC's proposed price of
$6,332,078 was approximately $2 million less than the Government estimate
of $8,487,198. Agency Report (AR), Tab R, Memorandum for Record, at 2.
However, PHC was not awarded the contract because its past performance was
rated as *marginal/little confidence.* By letter dated September 11,
2002, the agency notified PHC that award would not be made to PHC. The
letter explained that:
[PHC's past performance information was for projects that were]
significantly below the estimated range of $5 to $10 million for the cost
of the work as set forth in Sec. 00110, Para. 2.1.1(a), . . . and did not
involve medical construction. Based upon the foregoing, the technical
evaluation panel determined that there is substantial doubt that your
company will successfully perform the required work, and therefore,
assessed the overall risk rating of marginal/little confidence. . . .
Based on the above, the award of this project will not be made to your
company.[2]
AR, Tab T, Agency Letter to Howry (Sept. 11, 2002).
On September 25, PHC filed a protest with this Office, primarily asserting
that the rejection of its proposal constituted a de facto
nonresponsibility determination, which must be referred to the Small
Business Administration (SBA) under its certificate of competency (COC)
procedures. The agency submitted a report responding to the protest, and
the protester filed its comments on the report.[3] Thereafter, the agency
canceled the RFP because *[o]nly one proposal was received and it was
determined not to have met the technical evaluation factors set out in the
[RFP].* Agency's Cancellation Notice (Nov. 12, 2002). On November 25,
PHC filed a timely supplemental protest challenging the cancellation.
By letter dated December 20, the agency provided additional information to
*ensure that the General Accounting Office . . . is fully informed
regarding the status of the solicitation and project,* although it stated
that *the agency's original decision to cancel the solicitation remains in
effect.* This information concerned the agency's stated intent to
re‑design and re-solicit the construction project. Agency's Letter
(Dec. 20, 2002) at 1.
On December 23, PHC challenged the reasonableness of this *new* apparent
basis for the cancellation, which we docketed as a supplemental
protest.[4] The agency filed a report on January 9, 2003, explaining that
its December 20 letter was only an *informational letter* on the project
status and that *the agency's decision to cancel the solicitation, as
communicated in the Corps' 12 November 2002 letter, remained unchanged.*
Agency Supplemental Report (Jan. 9, 2003) at 2. The agency's report
further confirmed that:
[t]he solicitation was cancelled in November 2002 solely for the reason
stated in the 12 November 2002 letter from the Contracting Officer to
[PHC]. His stated reason was *[o]nly one proposal was received and it was
determined not to have met the technical evaluation factors set out in the
Request for Proposals (RFP).* No further reason for the cancellation was
being proffered in the 20 December letter.
Id. at 3.; see also id. at 4 (*agency did not offer the 20 December letter
to the GAO as evidence in support of the cancellation*); id. at 5 (*sole
basis for cancellation of the solicitation was that '[o]nly one proposal
was received and it was determined not to have met the technical
evaluation factors set out in the [RFP]*). Finally, the Corps explained
the purpose of the December 20 *informational letter* was so that this
Office could consider the project status issues in fashioning any
*recommendation* in resolving the protests.[5] Id. at 3.
ANALYSIS
As noted, PHC argues that the agency's decision not to award the contract
to PHC, based solely on its evaluation of past performance, constitutes a
de facto nonresponsibility determination, which must be referred to the
SBA under its COC procedures.[6] The agency contends that it was merely
performing a comparative *best value* evaluation and that PHC's proposal
was not selected for award because it failed to meet the past performance
requirements of the RFP, which is a *matter of relative merit, not
nonresponsibility.* [7] Contracting Officer's Statement P:P: 17, 18.
Under the Small Business Act, agencies may not find a small business
nonresponsible without referring the matter to the SBA, which has the
ultimate authority to determine the responsibility of small businesses
under its COC procedures. 15 U.S.C. S: 637(b)(7) (2000); FAR Subpart
19.6; Federal Support Corp., B-245573, Jan. 16, 1992, 92-1 CPD P: 81 at
4. Past performance traditionally is considered a responsibility factor,
that is, a matter relating to the offeror's ability to perform the
contract. See FAR S: 9.104-1(c); Sanford and Sons Co., B-231607,
Sept. 20, 1988, 88-2 CPD P: 266 at 2. Traditional responsibility factors
may be used as technical evaluation factors in a negotiated procurement,
but only when a comparative evaluation of those areas is to be made. See,
e.g., Medical Info. Servs., B‑287824, July 10, 2002, 2001 CPD P: 122
at 5; Nomura Enter., Inc., B-277768, Nov. 19, 1997, 97‑2 CPD P: 148
at 3. Comparative evaluation in this context means that competing
proposals will be rated on a scale, relative to each other, as opposed to
a pass/fail basis. Ducosort, Inc., B‑254852, Jan. 25, 1994, 94-1
CPD P: 38 at 6. We have cautioned that an agency may not find a small
business nonresponsible under the guise of a relative assessment of
responsibility-based technical factors in an attempt to avoid referral to
the SBA. Federal Support Corp., supra, at 4; Sanford and Sons Co., supra,
at 3. That appears to be what occurred here.
Here, the agency did not, and could not, perform a *comparative
evaluation.* The only technical evaluation factor, past performance, a
traditional responsibility factor, was evaluated for the sole *purpose* of
making an *assessment of the Offeror's ability to perform.*[8] RFP
S: 00120 P: 2.2.2.1.1. As essentially conceded by the agency, PHC's
proposal was rejected because PHC allegedly failed to meet the RFP
requirements that the offeror have past performance experience in medical
construction on projects of 50 to 100 bed hospitals or large clinics
valued at between $5 and $10 million. Because of this, past performance
was clearly evaluated on a *pass/fail* basis. Under the circumstances,
the agency's rejection of PHC's proposal amounted to a determination of
nonresponsibility, which required referral to the SBA for a possible COC.
See Federal Support Corp., supra, at 4 (protest sustained where
*regardless of how the evaluation criteria was characterized in either the
RFP or in the evaluation,* determination of technical unacceptability was
nonresponsibility determination); Modern Sanitation Sys. Corp., B-245469,
Jan. 2, 1992, 92-1 CPD P: 9 at 3 (technical unacceptability based on
*go-no go* evaluation of responsibility criteria, without regard to how
the rest of the proposal was judged, constitutes nonresponsibility
determination that must be referred to the SBA); Clegg Indus., Inc.,
B‑242204.3, Aug. 14, 1991, 91-2 CPD P: 145 at 3 (same).
We also find unreasonable the agency's basis for canceling the RFP, given
that the November 12 cancellation notice provides the same reason as why
the agency rejected PHC's proposal.[9] Moreover, given the timing of the
cancellation, which occurred only after receipt of the agency report and
comments, it would appear that the agency may have canceled the
solicitation in order to avoid referring this matter to the SBA. See
Griffin Servs. Inc., B‑237268.2 et al., June 14, 1990, 90-1 CPD P:
558 at 3 (protest sustained where protester alleged cancellation was
pretext to avoid SBA referral and there was no reasonable basis for
agency's cancellation of solicitation).
In light of the foregoing, we recommend that the agency rescind the
cancellation and refer the matter to the SBA, in accordance with the SBA's
COC procedures, for a determination as to whether PHC is responsible to
perform the contract. FAR Subpart 19.6. If the SBA issues a COC, we
recommend that the agency award PHC the contract; or, if award of the
contract is not appropriate (in light of the agency's project status
concerns[10]), then we recommend that the agency award PHC its proposal
preparation costs. Additionally, we find that PHC is entitled to its
costs incurred in pursuing all four of its protests, including attorneys'
fees. PHC should submit its certified claim for costs, detailing the time
expended and costs incurred, directly to the agency within 60 days of
receipt of this decision. 4 C.F.R. S: 21.8(f)(1).
The protests are sustained.
Anthony H. Gamboa
General Counsel
------------------------
[1] Section 8(a) of the Small Business Act, 15 U.S.C. S: 637(a) (2000),
authorizes the Small Business Administration (SBA) to enter into contracts
with government agencies and to arrange for performance through
subcontracts with socially and economically disadvantaged small business
concerns. These subcontracts may be awarded on a competitive or
noncompetitive basis.
[2] During the course of evaluations, the agency held discussions with PHC
and requested additional information concerning PHC's proposed
subcontractors. The *intent of requesting this additional information was
to give the [evaluators] more confidence in [PHC's] ability to construct a
50-100 bed hospital . . . to allow the offeror every opportunity to
provide evidence of subcontracting capability.* PHC provided the
requested information, as well as additional explanation concerning its
experience (see AR, Tabs O-R), but the evaluators still remained doubtful
over PHC's ability to successfully perform the contract. Contracting
Officer's Statement P: 8.
[3] At the request of this Office, the SBA provided a number of
submissions on the issues presented in the protests.
[4] In addition, we dismissed the initial protest and first supplemental
protest because this *second cancellation notice may render these protests
academic,* although we stated that *[a]ny issues raised during the
preceding protests will be resolved as necessary to render a decision on
this new protest.* B-291402, B-291402.2, Dec. 27, 2002. PHC has also
filed a third supplemental protest asserting, for a different reason, that
PHC was improperly being deprived of the award under the RFP.
[5] In its comments to the agency report on its supplemental protests, PHC
also requested reconsideration of our earlier dismissal.
[6] PHC also challenges the agency's substantive analysis of its past
performance, as well as that of its subcontractors, and contends that
discussions concerning past performance were misleading and inadequate.
Because these contentions are intertwined with the issue of
responsibility, the determination of which rests with the SBA, we do not
decide these remaining protest issues.
[7] The agency seeks dismissal of the protests because neither the SBA nor
the protester took action under Federal Acquisition Regulation (FAR) S:
19.602-2 to obtain a COC within 15 days of receiving notice from the
agency, which the SBA and the protester interpret as a determination that
PHC was not responsible. According to the agency, the SBA and protester
were required to seek a COC regardless of whether the contracting officer
referred the matter to the SBA and, because they failed to do so, the
protester now lacks standing to raise this issue as a ground of protest.
We disagree. As noted by the SBA, FAR S: 19.602-2 contemplates the agency
first determine that a small business is not responsible before the COC
procedures are invoked. Nothing in FAR Subpart 19.6 or the SBA's COC
regulations require that the SBA or small business contractor seek a COC,
where, as here, the agency denies that it is making a nonresponsibility
determination. Nor do these provisions obviate the agency's absolute
requirement to refer a determination of nonresponsibility to the SBA. See
FAR S: 19.602-1(a)(2) (upon determining that small business lacks elements
of responsibility, contracting officer *shall* refer the matter to the
SBA); 13 C.F.R. S:S: 125.5(a)(2) and (c) (2002) (contracting officer
*must* refer responsibility matters to SBA). Also, contrary to the
agency's assertion, a small business contractor *may* file an application
for a COC, but is not required to do so. 13 C.F.R. S:
125.5(a)(3).
[8] In a supplemental brief, the agency argues that it compared PHC's
proposal to the *examples of relevant experience and capabilities set
forth in the RFP.* Agency Supplemental Brief (Nov. 20, 2002) at 2. This
argument is not supported by the RFP or any other aspect of the record.
[9] As set out above, the agency has repeatedly stated that it did not
cancel the solicitation on the basis of the December 20 letter. Rather,
the November 12 letter was the sole basis for cancellation.
[10] The agency's concerns, as described in its December 20 letter, are
that the work must be re-designed (to combine phases of construction) and
re-solicited due to the delay occasioned by this protest. As noted by the
SBA, there appears to be reason to question the validity of these
concerns. Specifically, the agency has not provided any schedule analysis
to support its allegations of delay, or to demonstrate how re‑design
will eliminate delay, rather than increase it. Indeed, the record reveals
that, for the agency to re-design and re-solicit the project, it must
still complete a number of time-consuming steps, including: (1) identify
funding sources and obtain funding for the re-designed project; (2) obtain
written approval from INS to proceed; (3) obtain (through competition)
architectural and engineering services to re-design the project and have
that work performed; (4) procure temporary facilities to relocate existing
facilities; (5) develop, negotiate, and award a contract for the
demolition work to occur in advance of construction; and (6) develop,
negotiate, and award a contract for the construction work. Agency
Supplemental Report (Jan. 9, 2003), Tab N, Informational Paper, at 2. On
the other hand, the SBA has indicated that it will probably require only a
few weeks to decide on issuance of a COC. Thus, it is not clear how a
re-design effort will save the agency time or lessen the cost impact of
proceeding as originally anticipated, considering that PHC could
immediately commence work if the SBA decides to issue a COC. Furthermore,
the project and program documents provided by the agency appear
inconsistent with the agency's arguments and reveal that phasing may still
be contemplated under any new design, at least insofar as construction of
the health care facility is concerned. See, e.g., id., Tab M,
Architect/Engineer Memo Re: Construction Phases; id., Tab H, Dept. of
Justice *Revised Program* Report Concerning Construction of INS
Facilities, at 5.4 (*The Administration and Processing Facility will be
constructed in phases following the Health Care Facility*).