TITLE:  Integration  Technologies Group, Inc., B-291657, February 13,  2003
BNUMBER:  B-291657
DATE:  February 13,  2003
**********************************************************************
Integration Technologies Group, Inc., B-291657, February 13, 2003

   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:   Integration Technologies Group, Inc.
    
File:B-291657
    
Date:              February 13, 2003
    
David S. Cohen, Esq., John J. O'Brien, Esq., Rowena E. Laxa, Esq., and
Catherine K. Kroll, Esq., Cohen Mohr, for the protester.
Lee P. Curtis, Esq., and Suzette W. Derrevere, Esq., Perkins Coie, for
Communications Technologies, Inc., an intervenor.
L. Benjamin Young, Jr., Esq., Department of Agriculture, for the agency.
David A. Ashen, Esq., and John M. Melody, Esq., Office of the General
Counsel, GAO, participated in the preparation of the decision.
DIGEST
    
Protest that small business concern awardee, under solicitation for
nationwide computer and printer maintenance, misrepresented status of a
large business firm as a member of its team is sustained where discussions
between the awardee and its proposed large business subcontractor had
consisted of essentially nothing more than the large firm's transmittal of
a proposal to perform nearly all of the work, which the awardee recognized
was unacceptable under the solicitation limitation on subcontracting; and
the misrepresentation regarding the large firm's participation had a
significant impact on the evaluation.
DECISION
    
Integration Technologies Group, Inc. (ITG) protests the Department of
Agriculture's award of a contract to Communications Technologies, Inc.
(COMTek), under request for proposals (RFP) No. FSA-R-003-02DC, for
maintenance of computers and printers.  ITG asserts that the favorable
evaluation of COMTek's proposal was not a proper basis for award, because
it was based in part on a misrepresentation.  
    
We sustain the protest.
    
The RFP provided for award of a fixed-price,
indefinite‑delivery/indefinite-quantity contract to a small business
concern for a base year, with 4 option years, for remedial and preventive
maintenance of an estimated 2,557 Farm Service Agency (FSA) IBM AS/400
Model 170 computers, 3,130 IBM Model 4317 laser printers, and a small
quantity of other laser printers (6 IBM Model 4028 and 12 IBM Model
5262).  The computers and printers are located at approximately 2,370
county Field Service Centers, 50 state FSA offices, 10 Caribbean offices,
and headquarters offices in Washington, D.C., Kansas City, Missouri, and
St. Louis, Missouri.  The RFP established required response times for any
necessary remedial maintenance, with the contractor required to return the
computer or printer to operation within 4 to 18 business
hours‑‑depending on the location of the equipment--of the
government's reporting the problem to the contractor.  RFP S:S: 10.2.1,
16.
    
Award was to be made to an offeror with at least 3 years experience in
maintaining AS/400 computers and laser printers whose conforming proposal
was most advantageous to the government based on three evaluation
factors‑‑technical capability, past performance and price. 
Technical capability and past performance together had a weight of
50 percent, and price had a weight of 50 percent. 
    
The agency received [DELETED] proposals.  Based on the technical/past
performance evaluation, the Technical Evaluation Team (TET) recommended
that [DELETED] offerors, [DELETED] of which proposed teaming or partnering
with IBM (the current maintenance service provider) be considered for
award.  COMTek's proposal was ranked [DELETED] in the technical/past
performance evaluation, with a technical/past performance score of
[DELETED] points, an overall rating of [DELETED] and a [DELETED] risk
assessment; its price ($[DELETED]) was significantly lower than that of
any of the other [DELETED] highest-ranked offerors.  ITG's proposal was
ranked [DELETED] in the technical/past performance evaluation, with a
technical/past performance score of [DELETED] points, an overall rating of
[DELETED] and a [DELETED] risk assessment; its price ($[DELETED]) was the
[DELETED] lowest among the top [DELETED] ranked firms.  The agency
determined that the combination of COMTek's technical score and low price
made its proposal the most advantageous.  Upon learning of the resulting,
October 10 award to COMTek, and after being debriefed, ITG filed this
protest with our Office.
    
ITG asserts that COMTek's statement in its proposal that IBM was a team
member was a misrepresentation.  According to the protester, IBM was
neither a member of COMTek's team, nor likely to become a member, at the
time COMTek submitted its proposal.  Indeed, notes the protester, COMTek
has still not reached an agreement with IBM on becoming a team member. 
ITG concludes that, because the evaluation was based in significant part
on this misrepresentation, it was flawed and did not provide a reasonable
basis for making award to COMTek.
    
An offeror's material misrepresentation in its proposal can provide a
basis for disqualification of the proposal and cancellation of a contract
award based upon the proposal.  A misrepresentation is material where the
agency relied upon it and it

   likely had a significant impact upon the evaluation.  Sprint
Communications Co. LP; Global Crossing Telecomms., Inc.--Protests and
Recon., B-288413.11, B‑288413.12, Oct. 8, 2002, 2002 CPD P: 171 at
4; AVIATE L.L.C., B-275058.6, B‑275058.7, Apr. 14, 1997, 97-1 CPD
P: 162 at 11.  We find that COMTek made a material misrepresentation
concerning IBM's status as a member of COMTek's team.
    
IBM submitted identical proposals to both ITG and COMTek.  Specifically,
the record indicates that, by cover letters of August 28, 2002, IBM
submitted proposals to ITG and COMTek *for maintenance services in support
of the United States Department of Agriculture's Farm Services Agency, and
for your use as a Federal Systems Integrator (FSI).*  The cover letters
included *a technical response, price table, and contract terms and
conditions that apply to this opportunity,* with the price table including
monthly maintenance prices for all computers and laser printers under the
RFP other than the 6 IBM 4028 laser printers.  The proposals cautioned,
however, that *[t]he attached pricing is valid only upon acceptance of
this proposal in its entirety.  Changes in the inventory being maintained
will require repricing.*  IBM Proposals to ITG and COMTek, Cover Letter.
    
ITG [DELETED].  IBM Proposal to ITG, Aug. 28, 2002; IBM E-mail to ITG,
Sept. 3, 2002.        
    
COMTek proceeded differently.  It is undisputed that accepting IBM's
proposal and using IBM to perform maintenance for all computers and laser
printers (other than the few IBM 4028 laser printers) would place COMTek
in violation of the limitation in the Federal Acquisition Regulation (FAR)
on subcontracting where a solicitation is set aside for small business and
the contract amount is expected to exceed $100,000.  In this regard, under
FAR S: 52.219‑14(b)(1), which was included in the solicitation, in
the case of a contract for services, *[a]t least 50 percent of the cost of
contract performance incurred for personnel shall be expended for
employees of the concern.* [1]
    
However, notwithstanding that (as explained below) COMTek recognized that
IBM's proposal was unacceptable, COMTek did not discuss with IBM, prior to
closing time on September 4, reducing IBM's proposed share of the work (or
any resulting repricing of the effort in the event that the amount of
subcontracted work were reduced).  Nevertheless, COMTek stated in its
proposal, dated September 4, 2002, that:
    
We . . . have IBM, our mentor under the [Department of Defense]
Mentor-Protege program as a Teaming partner on this proposal in order to
provide optimum service regarding this contract.  Throughout this
proposal, the use of the phrase the 'COMTek Team' refers to the combined
professional assets of COMTek and IBM.
COMTek Technical Proposal at 1.  According to COMTek's proposal:
    
Our Teaming partner is the current maintenance contract holder and
[original equipment manufacturer] for the AS/400 equipment.  You can rely
on the largest network of Systems Services Representatives (SSRs) in the
industry.  This extensive network supports every county in every state as
well as Puerto Rico and the Virgin Islands.
.  .  .  .
Our Team's Global Services  employs over [DELETED] SSRs geographically
dispersed throughout the United States, Puerto Rico, and the Virgin
Islands to support FSA's approximately 2,370 Field Service Centers.
.  .  .  .
COMTek Team Service Representatives have access to a $[DELETED] nationwide
parts inventory stocked in over [DELETED] locations.
Id. at 2-3.
    
The record indicates that the contract resources COMTek cited in its
proposal were in large measure IBM's.  For example, COMTek's proposal
statements that the agency could rely on *the largest network of Systems
Services Representatives (SSRs) in the industry,* *employ[ing] over
[DELETED] SSRs geographically dispersed throughout the United States,
Puerto Rico, and the Virgin Islands,* and that the *COMTek Team Service
Representatives have access to a $[DELETED] nationwide parts inventory
stocked in over [DELETED] locations,* referred to IBM's resources. 
(COMtek itself had only approximately [DELETED] service representatives at
the time it submitted its proposal.  Hearing Transcript (Tr.)
at 87‑88.)  These representations would be accurate only if IBM were
part of COMTek's team.  As discussed below, however, IBM was never a part
of COMTek's team.
    
The record indicates that COMTek understood that IBM's proposal was
unacceptable.  Testimony at the hearing that our Office conducted in
connection with this protest indicated that COMTek was aware that the IBM
proposal was inconsistent with the FAR limitation on subcontracting. 
COMTek indicates that, in fact, it intended, consistent with the
limitation on subcontracting, to subcontract with IBM for a significantly
smaller share of the work than the near 100 percent on which IBM's
proposal was based.  (This was COMTek's intent even in the first year of
the contract, when COMTek intended to rely more heavily on IBM.)  Tr. at
56, 61‑64.  Again, however, despite its awareness that IBM had not
proposed performing a permissible share of the contract work, COMTek did
not discuss with IBM, prior to closing time on September 4, reducing IBM's
proposed share of the work (or any resulting repricing of the effort in
the event that the amount of subcontracted work were reduced.)  Tr. at
57-58, 61, 104; Statement of COMTek Director, Dec. 13, 2002.  Indeed, the
record includes no evidence that COMTek engaged in any substantive
discussions with IBM concerning the scope of any IBM contribution to
contract performance from the time IBM provided its proposal to COMTek
until after award.  In short, while COMTek's proposal stated that IBM was
a team member, COMTek had no agreement with IBM and not even a meeting of
the minds as to one of the most significant features of an
agreement‑‑the amount of work IBM would perform.  Under these
circumstances, we believe it was a misrepresentation for COMTek to state
that IBM was a member of its team, and to include IBM's resources in its
proposal, without at least indicating the status of its negotiations with
IBM.  Failing to do so misled the agency into assuming that IBM would be
performing contract work, when there was a substantial undisclosed
obstacle to an agreement for it to do that.
    
COMTek maintains that its proposal should not be considered misleading
because it reasonably expected that it could reach agreement with IBM
after award on a division of the work that was consistent with the FAR
limitation on subcontracting clause.  COMTek notes in this regard that it
had a pre-existing relationship with IBM under the Department of Defense's
mentor‑protege program‑‑IBM was COMTek's
mentor‑‑and through a 2001 master subcontract agreement. 
COMTek concludes that, given this relationship, the fact that IBM could
not continue to perform the contract as the prime contractor (since the
procurement had been set aside for small business concerns), and the
regulatory restriction on subcontracting, which IBM, as an experienced
government contractor, presumably understood, it was reasonable for COMTek
to assume that it could come to an acceptable agreement with IBM. 
    
However, while COMTek may have hoped that it could negotiate an acceptable
agreement with IBM after award, the fact remains that its proposal
reflected something much different.  Given the status of COMTek's and
IBM's dealings at the time of proposal submission, it was, in our view,
materially misleading for COMTek to state in its proposal that *[w]e . . .
have IBM . . . as a Teaming partner on this proposal in order to provide
optimum service regarding this contract.*[2]
    
COMTek's misrepresentation that IBM was on its team played a significant
role in its proposal.  As noted above, the record indicates that the
contract resources COMTek cited in its proposal were in large measure
IBM's.  Indeed, as COMTek's witnesses testified, *IBM membership on our
team was felt to be critical . . . to the award of the contract*; IBM, the
incumbent contractor for 19 years, was considered to be *the only
choice.*  Tr. at 12, 130. 
    
It appears that COMTek's inclusion of IBM in its proposed team in fact had
a significant impact on the evaluation.  In this regard, the agency's
Technical Evaluation Team (TET) explained its recommendation [DELETED] for
award consideration as follows:
    
[DELETED].
TET Report at 11.  Likewise, the agency's negotiation memorandum explained
the selection of COMTek for award, in part, on the basis that COMTek *is
proposing to partner with IBM, the original Equipment Manufacturer and
current service provider.*  Negotiation Memorandum at 4.  Since the record
indicates that the agency relied upon COMTek's misrepresentation
concerning IBM's status as a member of COMTek's team, and that the
misrepresentation had an apparently significant impact on the evaluation,
we sustain ITG's protest on this ground.
    
We recommend that the agency open negotiations with offerors in the
competitive range so that it can fully consider in the evaluation the
extent to which any proposed subcontractors or team members will be
available to support contract performance, request revised proposals, and
make a new determination as to which proposal is most advantageous to the
government.  In the event that a proposal other than COMTek's is found to
be most advantageous, the agency should terminate COMTek's contract and
make award on the basis of that proposal.  We also recommend that the
protester be reimbursed the reasonable costs of filing and pursuing the
protest, including attorneys' fees.  4 C.F.R. S: 21.8(d)(1) (2002).  The
protester should submit its certified claim for such costs, detailing the
time expended and the costs incurred, directly to the contracting agency
within 60 days after the receipt of this decision.
    
The protest is sustained.
    
Anthony H. Gamboa
General Counsel
    
    
    

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

   [1] In a footnote in its final submission to our Office, COMTek suggested
that ITG might not comply with the FAR subcontracting limitation.  COMTek
Comments, Jan. 6, 2003, at 12 n.1.  (The agency has not made this
argument.)  COMTek suggests that IBM's proposed division of effort in its
revised proposal to ITG is inconsistent with the subcontracting
limitation, but offers no analysis beyond generally referring to the fact
that IBM's price [DELETED] may total as much as $[DELETED], or
approximately [DELETED] percent of ITG's contract price ($[DELETED]).  We
note, however, that IBM's pricing included the cost of parts, which is not
included in the subcontracting limitation calculation under FAR S:
52.219‑14(b)(1).  Thus, IBM's [DELETED] subcontract pricing does not
establish noncompliance with the subcontract limitation.  
[2] Agriculture asserts that our view in this regard is inconsistent with
the holding in our decision Airwork Ltd.-Vinnell Corp. (A Joint Venture),
B-285247,  B-285247.2, Aug. 8, 2000, 2000 CPD P: 150 at 5, where we denied
a protest that the awardee had proposed specific individuals as key
personnel that it did not, and could not reasonably, expect to use.  We
disagree.  We concluded in Airwork that the fact that the awardee had not
discussed employment details (including salary, benefits and positions)
with the individuals before proposing them did not warrant a finding of
misrepresentation on the awardee's part.  Id.; see Potomac Research Int'l,
Inc., B‑270697, B-270697.2, Apr. 9, 1996, 96-1 CPD P: 183 at 5; cf.
Aerospace Design & Fabrication, Inc., B-278896.2 et al., May 4, 1998, 98-1
CPD P: 139 at 7 (an agreement to work for an offeror if it prevails in the
competition‑‑assuming successful salary and benefit
negotiations‑‑is no more than a promise to negotiate for
employment, and not a binding commitment).  We see no inconsistency in our
holdings, since the operative facts are materially different.  In Airwork,
unlike the circumstances here with respect to IBM's offer to COMTek, there
was no indication that the proposed employees had conditioned their offer
to work on the contract on the acceptance of unacceptable terms.